What changed in this filing

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Item 9A. Controls and Procedures

2023-03-28 compared with 2022-03-30 · 471 added, 719 removed, 1000 unchanged (54% of the section changed)

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Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal year ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Although we have modified our workplace practices due to the COVID-19 pandemic, resulting in most of our employees working remotely, this has not materially affected our internal controls over financial reporting.

We continue to monitor and assess the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

There were no changes in our internal control over financial reporting that occurred during the fiscal year ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Furthermore, we do not believe that these controls have been impacted by COVID-19 related circumstances, including remote work arrangements with our employees.

Management’s Report on Internal Control over Financial Reporting

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OTHER INFORMATION

On March 28, 2022, Larry Dubose notified the Company that he is resigning from his positions with NetREIT Advisors, LLC and Dubose Advisors, LLC in 2022 and will not stand for re-election at the Annual Meeting, due to his other professional commitments and demands on his time.

However, he will continue to remain an employee of our model home division.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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and “Executive Officers of the Company”

and “Section 16(a) B eneficial Ownership Reporting Compliance”

and “Section 16(a) Beneficial Ownership Reporting Compliance”

in our definitive Proxy Statement for the 2022 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

The Annual Meeting of Stockholders is presently scheduled to be held on May 26, 2022.

The Annual Meeting of Stockholders is estimated to be held on June 1, 2023.

EXECUTIVE COMPENSATION

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The information required by this item is set forth under the caption “Related Party Transactions”

in our definitive Proxy Statement for the 2022 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

in our definitive Proxy Statement for the 2023 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A, and is incorporated herein by reference.

PRINCIPAL ACCOUNT ING FEES AND SERVICES

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Articles Supplementary filed on August 4, 2014 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on August 8, 2014).

Articles of Amendment effecting the reverse stock split (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on July 31, 2020).

Articles Supplementary classifying and designating the Series C Common Stock (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on July 31, 2020).

Articles of Amendment of Presidio Property Trust, Inc.

(incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on October 19, 2017).

Articles Supplementary classifying and designating the Series C Common Stock (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on July 31, 2020).

Articles of Amendment effecting the reverse stock split (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on July 31, 2020).

Articles Supplementary classifying and designating 805,000 shares of the Series D Preferred Stock (incorporated by reference to the Company’s Form 8-A12B filed on June 9, 2021).

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Form of Series A Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form 10-12B filed on May 6, 2008).

Description of Securities*

Description of Securities 

(incorporated by reference to Exhibit 4.2 of the Company ’

s Annual Report on Form 10-K filed on March 30, 2022).

Form of Common Stock Warrant (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on July 14, 2021).

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Form of Indemnification Agreement entered into between the Company and each of its directors and executive officers (incorporated by reference to Exhibit 10.10 of the Company’s Registration Statement on Form S-11 filed on September 18, 2017).

Tenth Amendment to Loan Agreement signed October 12, 2022  

(incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on October 14, 2022).

Tenth Amendment to Guaranty Agreement signed October 12, 2022 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on October 14, 2022).

Code of Ethics (incorporated by reference to Exhibit 14 of the Company’s Annual Report on Form 10-K filed on March 30, 2021).

Subsidiaries of the Registrant*

Subsidiaries of the Registrant  (incorporated by reference to Exhibit 21.1 of the Company’s Annual Report on Form 10-K filed on March 30, 2022).

Consent of Independent Registered Public Accounting Firm *

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Presidio Property Trust, Inc.

To the shareholders and the board of directors of

Presidio Property Trust, Inc.

and Subsidiaries

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We have audited the accompanying consolidated balance sheets of Presidio Property Trust, Inc.

and Subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, equity and cash flows for the years then ended, the related notes to the consolidated financial statements, and schedule in Item 15 (2), Schedule III –

Real Estate and Accumulated Depreciation and Amortization (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

and Subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, equity and cash flows, for the years then ended, and the related notes to the consolidated financial statements and schedule in Item 15 (2), Schedule III –

Real Estate and Accumulated Depreciation and Amortization (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S.

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

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Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(i) relates to accounts or disclosures that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

REAL ESTATE ASSETS AND LEASE INTANGIBLES IMPAIRMENT ASSESSMENT

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Real Estate Asset and Lease Intangible Impairment Assessment

Critical Audit Matter Description

As described in Notes 4 and 12, to the  financial statements, the Company’s consolidated real   estate assets balance (including real estate properties and lease intangibles) was approximately $138 million at December 31, 2021.

Real estate assets and lease intangibles are tested for impairment at least annually at the individual real estate property level.

As described in Notes 4 and 12, to the consolidated financial statements, the Company’s consolidated real estate assets balance (including real estate properties and lease intangibles) was approximately $131 million at December 31, 2022.

Real estate asset are tested for impairment at least annually at the individual real estate property level.

Management continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate assets may not be recoverable or realized.

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In some instances, there may be various potential outcomes for an investment and its potential future cash flows.

In these instances, the undiscounted future cash flows used to assess recoverability are based on several assumptions and are probability‐

weighted based on management’s best estimates as of the date of evaluation.

These assumptions include, among others, cash flow projections, discount rates, market capitalization rates, and recent sales data for comparable properties.

In these instances, the undiscounted future cash flows used to assess recoverability are based on several assumptions and are probability‐weighted based on management’s best estimates as of the date of evaluation.

These assumptions include, among others, cash flow projections, discount rates, and market capitalization rates.

The assumptions are generally based on management’s experience and assessment of market participants in its local real estate markets, and the effects of current market conditions, which are subject to economic and market uncertainties.

As disclosed by management, changes in these assumptions could have a significant impact on either the cash flows or fair value of the real estate assets, the amount of any impairment charge, or both.

We identified the real estate asset and lease intangibles impairment assessment of the Company as a critical audit matter.

Changes in these assumptions could have a significant impact on either the cash flows or fair value of the real estate assets, the amount of any impairment charge, or both.

We identified the real estate asset impairment assessment as a critical audit matter.

The Company experienced fluctuations in tenant occupancy and related cash flows from the real estate properties based on rental demand, completion of tenant improvements, and other economic factors.

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The primary procedures we performed to address this critical audit matter included:

Testing management’s process for determining the fair value of real estate assets including testing the completeness and accuracy of underlying data used in management’s model.

Evaluating the reasonableness of management’s fair value estimates which are based on Argus models that include rental revenues per executed lease agreements, occupancy, and expected renewal rates, and on broker opinions of value which utilize historical listing and sale prices for comparable real estate properties.

Independently comparing current fair values to trends in fair value of each property over time and for consistency with evidence obtained in other areas of the audit.

Evaluating whether the assumptions used were reasonable by considering the past performance of real estate properties, management’s assumptions about market demand and market leasing rates and lease terms, and whether such assumptions were consistent with evidence obtained in other areas of the audit.

Obtaining marketing materials or letters of intent for specific real estate properties deemed by management to qualify for held‐for‐sale treatment and comparing estimated sales prices to current property book values.

/s/ Baker Tilly US, LLP   

We have served as the Company’s auditor since 2009.

Obtaining an understanding of management’s process and related controls for estimating the undiscounted cash flows of real estate assets, including management’s identification of significant assumptions and sensitivity analysis.

Testing the completeness, accuracy, relevance, and reliability of underlying data used in management’s undiscounted cash flow model.

Evaluating the reasonableness of management’s assessment of events and changes in circumstances that are indicators of impairment related to performance of the investment and general market conditions indicating that the carrying amounts of its real estate investments may not be recoverable by considering the consistency with the current and past performance of the real estate investment and the consistency with external market and industry data.

Evaluating the reasonableness of management’s significant assumptions used in the undiscounted future cash flows of real estate investments with potential impairment by considering the consistency of the significant assumptions with the current and past performance of the real estate investments, the consistency with external market and industry data, and whether these significant assumptions were consistent with evidence obtained in other areas of the audit.

Baker Tilly US, LLP   

We have served as the Company's auditor since 2009.

Irvine, California

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2,423,000  

Other assets, net

Other assets, net (see Note 6)

3,511,681  

4,658,504  

Total other assets

23,968,241  

23,131,827  

Investments held in Trust (see Notes 2 & 9)

136,871,183  

$ 291,351,654  

$ 161,196,763  

LIABILITIES AND EQUITY

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88,859,832  

Note payable, net

7,500,086  

Accounts payable and accrued liabilities

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4,569,537  

Accounts payable and accrued liabilities of SPAC (see Notes 2 & 9)

5,046,725  

15,499  

Accrued real estate taxes

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178,511  

179,685  

Lease liability, net

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Commitments and contingencies (Note 2 & 9)

SPAC Class A common stock subject to possible redemption;

13,225,000 shares (at $ 10.34 per share), net of issuance cost of approximately $ 6,400,000

130,411,135  

Series D Preferred Stock, $ 0.01 par value per share;

1,000,000 shares authorized;

920,000 and 0 shares issued and outstanding (liquidation preference $ 25.00 per share) as of December 31, 2021 and December 31, 2020, respectively

916,061 shares issued and outstanding (liquidation preference $ 25.00 per share) as of December 31, 2022 and December 31, 2021, respectively

Series A Common Stock, $ 0.01 par value per share, shares authorized:

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608,000  

1,730,851  

Total costs and expenses

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Interest expense - note payable

Gain on sale of marketable securities, net

2,018,847  

( 2,715,233 )

Interest and other income (expense), net

39,428  

Interest and other (expense), net

21,075  

Gain on sales of real estate, net

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10,000  

Income tax (expense) credit

( 1,215,873 )  

Deferred offering costs

Income tax credit (expense)

47,620  

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( 2,280,354 )

Net income (loss)

1,485,528  

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( 2,152,740 )  

( 1,173,948 )

Series A Warrant dividend

( 2,456,512 )  

Net loss attributable to Presidio Property Trust, Inc.

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$ ( 0.57 )  

Weighted average number of common shares outstanding - basic and diluted

$ ( 0.57 )  

Weighted average number of common shares outstanding - basic & diluted

11,753,041  

10,340,975  

See Notes to Consolidated Financial Statements

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( 3,625,582 )  

2,162,140  

( 1,463,442 )

Shares issued, initial public offering

Dividends paid to Series A Common Stockholders

( 4,473,399 )  

Dividends to Series D Preferred Stockholders

( 1,173,948 )  

Dividends paid to Series A Common Stockholders

( 1,173,948 )

Issuance of Common Stock, net of issuance costs, including warrants exercised with offering *

2,000,000  

20,000  

Distributions in excess of contributions received

8,851,879  

( 2,366,009 )

Repurchase of common stock

8,871,879  

Issuance of Series D Preferred Stock, net of issuance costs

920,000  

20,480,603  

Share reconciliation adjustment

20,489,803  

Issuance of stock for Limited Partnership interests

Distributions in excess of contributions received

( 7,588,197 )  

Repurchase of Common Stock, at cost

( 29,721 )  

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( 110,379 )  

( 110,631 )  

Vesting of restricted Series A Common Stock

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( 2,127,119 )  

( 1,463,442 )

Dividends paid to Series A Common Stockholders

( 2,127,119 )  

3,612,647  

( 4,473,399 )

Dividends to Series D Preferred Stockholders

1,485,528  

Vesting of restricted stock

404,804  

( 1,173,948 )

Issuance of Common Stock, net of issuance costs, including warrants exercised with offering *

1,884,945  

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1,888,993  

Dividends paid to Series A Common Stockholders

( 3,114,456 )  

Issuance of Series D Preferred Stock, net of issuance costs

( 3,114,456 )

Dividends to Series D Preferred Stockholders

( 2,152,741 )  

Remeasurement of SPAC common stock subject to possible redemption upon IPO, Public Warrants and Private Placement Units, net of offering costs

( 4,023,113 )  

Remeasurement of SPAC shares to redemption value

( 1,876,183 )  

Distributions in excess of contributions received

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( 4,412,046 )

Repurchase of Common Stock, at cost

Repurchase of Series A Common Stock, at cost

( 196,631 )  

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( 313,389 )  

Vesting of restricted Series A Common Stock

Repurchase of Series D Preferred Stock, at cost

( 6,013 )  

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$ 43,829,626  

$ 9,013,446  

$ 52,843,072  

* See Additional Offerings & Warrants 

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Cash flows from operating activities:

Net income (loss)

$ 1,485,528  

$ ( 1,463,442 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

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Gain on extinguishment of government debt

Net change in fair value marketable securities

( 42,664 )  

Net change in fair value of marketable securities

Net change in fair value SPAC Trust Account

( 1,976,183 )  

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608,000  

1,730,851  

Accretion of original issue discount

1,013,405  

Amortization of financing costs

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42,064  

50,682  

Amortization of below-market leases

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( 252,759 )  

108,998  

Changes in operating assets and liabilities:

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( 61,038 )  

Net cash provided by operating activities

Net cash provided operating activities

928,817  

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( 1,762,095 )  

( 3,819,882 )

Proceeds from sale of marketable securities

2,363,063  

2,380,476  

Investment of SPAC IPO proceeds into Trust Account

( 134,895,000 )  

Additions to deferred leasing costs

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49,583,445  

Net cash provided by investing activities

Net cash (used in) provided by investing activities

( 126,377,667 )  

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11,703,440  

Proceeds from government debt relief

451,785  

Repayment of mortgage notes payable

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Repayment of note payable

( 7,675,598 )  

Payment of extension costs, note payable

Payment of deferred offering costs

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( 7,588,197 )

Issuance of stock for Initial Public Offering, net of underwriters fees

Proceeds from initial public offering of SPAC

134,024,416  

Issuance of Common Stock Series A and warrants, net of offering costs

SPAC offering non-controlling interest adjustment

( 1,774,416 )  

Issuance of Preferred Stock Series D, net of offering costs

Issuance of Series A Common Stock, net of offering costs

8,871,879  

Repurchase of common stock

Issuance of Series D Preferred Stock, net of offering costs

20,489,803  

Repurchase of Series A Common Stock, at cost

( 313,389 )  

Repurchase of Series D Preferred Stock, at cost

( 122,141 )  

Dividends paid to Series D Preferred Stockholders

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( 3,114,456 )  

Net cash used in financing activities

( 4,473,399 )

Net cash provided by (used in) financing activities

127,263,486  

( 23,418,736 )

Net increase in cash equivalents and restricted cash

Net increase in cash, cash equivalents and restricted cash

1,814,636  

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$ 103,861  

$ 778,414  

Unpaid deferred financing costs

$ 15,449  

$ 83,659  

Non-cash financing activities:

Issuance of stock for limited partnership interests

Unpaid deferred financing costs

$ 15,449  

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$ 178,511  

$ 179,685  

See Notes to Consolidated Financial Statements

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Through Presidio Property Trust, Inc., its subsidiaries, and its partnerships, we own 

13  commercial properties in fee interest, two  of which we own as a partial interest in various affiliates, in which we serve as general partner, member and/or manager.

The Company or one of its affiliates operate the following partnerships during the periods covered by these consolidated financial statements:

The Company is the sole general partner and limited partner in two limited partnerships (NetREIT Palm Self-Storage LP and NetREIT Casa Grande LP), all with ownership in real estate income producing properties.

The Company refers to these entities collectively, as the “NetREIT Partnerships”.

The Company is the general partner and/or limited partner in six limited partnerships that purchase model homes and lease them back to homebuilders (Dubose Model Homes Investors #202, LP, Dubose Model Homes Investors #203, LP, Dubose Model Homes Investors #204, LP, Dubose Model Homes Investors #205, LP, Dubose Model Homes Investors #206, LP and NetREIT Dubose Model Home REIT, LP).

12  commercial properties in fee interest, two  of which we own as a partial interest in various affiliates, in which we serve as general partner, member and/or manager, and a special purpose acquisition company as noted below.

The Company or one of its affiliates operates the following partnerships during the periods covered by these consolidated financial statements:

The Company is the sole general partner and limited partner in two limited partnerships (NetREIT Palm Self-Storage LP and NetREIT Casa Grande LP), both of which, at 

December 31, 2022 , had ownership interests in an entity that owns income producing real estate.

The Company refers to these entities collectively as the "NetREIT Partnerships".

The Company is the general and limited partner in five limited partnerships that purchase model homes and lease them back to homebuilders (Dubose Model Home Investors #202, LP, Dubose Model Home Investors #203, LP, Dubose Model Home Investors #204, LP, Dubose Model Home Investors #205, LP, and Dubose Model Home Investors #206, LP).

The Company refers to these entities collectively as the “Model Home Partnerships”.

The Company has determined that the limited partnerships in which it owns less than 100%, should be included in the Company’s consolidated financial statements as the Company directs their activities and holds a variable interest in these limited partnerships for which the Company is the primary beneficiary.

The Company has determined that the limited partnerships in which it owns less than 100% should be included in the Company’s consolidated financial statements as the Company directs their activities and has control of such limited partnerships.

Unit-based information used herein (such as references to square footage or property occupancy rates) is unaudited.

We have elected to be taxed as a REIT under Sections

860 of the Code, for federal income tax purposes.

860 of the Internal Revenue Code (the "Code"), for federal income tax purposes.

To maintain our qualification as a REIT, we are required to distribute at least

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Neither the Company nor its subsidiaries have been assessed any significant interest or penalties for tax positions by any tax jurisdictions.

Reverse Stock Split .

2020,  we amended our charter to effect a 

one -for- two  reverse stock split of every outstanding share of our Series A Common Stock.

The financial statements and accompanying footnotes have been retroactively restated to reflect the reverse stock split.

Initial Public Offering .

October 6, 2020, 

we completed an initial public offering ("IPO"), selling 

500,000  shares of Series A Common Stock at $ 5.00  per share.

Proceeds from our IPO were $ 2.0  million after deducting approximately $ 0.5  million in underwriting discounts, commissions and fees and before giving effect to $ 0.5 million in other expenses relating to the IPO.

Incremental costs of $ 0.5 million that were directly attributable to issuing new shares were deducted from equity in the Consolidated Statements of Equity, while costs that were not directly related to issuing new shares of $ 0.5 million were expensed in deferred offering costs in the Consolidated Statements of Operations. We utilized the net proceeds of this offering for general corporate and working capital purposes.

Additional Offerings & Warrants .

Our Form S- 3 Registration Statement was declared effective by the SEC on April 27, 2021. 

Additional Offerings & Warrants . Our Form S- 3 Registration Statement was declared effective by the SEC on April 27, 2021. 

Under this registration statement, we may offer and sell from time to time, in one or more series, subject to limitation that may apply (such as under Rule 415 of the Securities Act of 1933 ) various securities of the Company for total gross proceeds of up to $ 200,000,000 .

On July 12, 2021, we entered into a securities purchase agreement with a single U.S.

institutional investor for the purchase and sale of 1,000,000 shares of our Series A Common Stock (“Common Stock”), warrants (“Common Stock Warrants”) to purchase up to 2,000,000 shares of Series A Common Stock and pre-funded warrants (“Pre-Funded Warrants”) to purchase up to 1,000,000 shares of Series A common stock.

The Common Stock, Pre-Funded Warrants and Common Stock issuable upon exercise of the Pre-Funded Warrants were issued pursuant to a prospectus supplement to the Form S- 3 Registration Statement, with the Common Stock Warrants issued in a concurrent private placement. 

Each share of Common Stock and accompanying Common Stock Warrants were sold together at a combined offering price of $ 5.00 , and each share of Common Stock and accompanying Pre-Funded Warrants were sold together at a combined offering price of $ 4.99 .

institutional investor for the purchase and sale of 1,000,000 shares of our Series A Common Stock, warrants (“Common Stock Warrants”) to purchase up to 2,000,000 shares of Series A Common Stock and pre-funded warrants (“Pre-Funded Warrants”) to purchase up to 1,000,000 shares of Series A Common Stock.

The shares of Series A Common Stock, Pre-Funded Warrants and shares of Series A Common Stock issuable upon exercise of the Pre-Funded Warrants were issued pursuant to a prospectus supplement to the Form S- 3 Registration Statement, with the Common Stock Warrants issued in a concurrent private placement. 

Each share of Series A Common Stock and accompanying Series A Common Stock Warrants were sold together at a combined offering price of $ 5.00 , and each share of Common Stock and accompanying Pre-Funded Warrants were sold together at a combined offering price of $ 4.99 .

The Pre-Funded Warrants were exercised in full during August 2021 at a nominal exercise price of $ 0.01 per share.

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The Company registered for resale Series A Common Stock issuable upon exercise of Common Stock Warrants and Placement Agent Warrants issued in the July 2021 offering pursuant to a registration statement on Form S- 11 that was declared effective by the SEC on September 14, 2021. 

The Company evaluated the accounting guidance in ASC 480 and ASC 815 regarding the classification of the Pre-Funded Warrant, Common Stock Warrants, and Placement Agent Warrants as equity or a liability and determined that they should be classified as permanent equity.  As of December 31, 2021, none of the Common Stock Warrants and Placement Agent Warrants have been exercised.

The Company evaluated the accounting guidance in ASC 480 - Distinguishing Liabilities from Equity and ASC 815 - Derivatives and Hedging  regarding the classification of the Pre-Funded Warrant, Common Stock Warrants, and Placement Agent Warrants as equity or a liability and ultimately determined that it should be classified as permanent equity.  As of December 31, 2022 , none of the Common Stock Warrants and Placement Agent Warrants have been exercised.

Preferred Stock Series D .  On June 15, 2021, the Company completed its secondary offering of 800,000 shares of our 

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In total, the Company issued 920,000 shares of Series D Preferred Stock with net proceeds of approximately $ 20.5 million, after deducting the underwriting discounts and commissions and the offering expenses paid by the Company and deferred offering costs.

The Company intends to use these proceeds for general corporate and working capital purposes and to potentially acquire additional properties.  

On September 17, 2019, the Company issued a Promissory Note (the “Polar Note”) pursuant to which Polar Multi-Strategy Master Fund ("Polar"), provided a loan in the principal amount of $ 14.0 million to the Company.

The Polar Note bore interest at a fixed rate of 8 % per annum and required monthly interest-only payments.

On September 1, 2020, 

we extended the maturity of the Polar Note from October 

1, 2020 to March 31, 2021, at which time the entire outstanding principal balance of $ 8.8 million and accrued and unpaid interest was to be due and payable.

On September 30, 2020, we paid a renewal fee of 4 % on the unpaid principal balance of the Polar Note. The Company used the proceeds of the Polar Note to redeem all the outstanding shares of Series B Preferred Stock. 

As of December 31, 2020, the outstanding principal balance of the Polar Note was approximately $ 7.7 million.

During the first quarter of 2021, prior to maturity, the Polar Note was paid in full primarily from available cash on hand and proceeds of property sales.

 The Company's anticipated future sources of liquidity may include existing cash and cash equivalents, cash flows from operations, refinancing of existing mortgages, future real estate sales, new borrowings, financial aid from government programs instituted as a result of COVID- 19, and the sale of equity or debt securities.  Future capital needs include paying down existing borrowings, maintaining our existing properties, funding tenant improvements, paying lease commissions (to the extent they are not covered by lender-held reserve deposits), and the payment of dividends to our stockholders.

The Company seeks investments that are income producing and help achieve long-term gains in order to pay dividends to our stockholders and may we may seek a revolving line of credit to provide short-term liquidity.

The Company has used these proceeds for general corporate and working capital purposes, including acquiring additional properties.  

Warrant Dividend.

  In January 2022, we distributed 

five -year listed warrants (the “Series A Warrants”) to holders of our Series A Common Stock. 

The Series A Warrants and the shares of Series A Common Stock issuable upon the exercise of the Series A Warrants were registered on a registration statement that was filed with the SEC and was declared effective January 21, 2022.

The Series A Warrants commenced trading on the Nasdaq Capital Market under the symbol “SQFTW”

on January 24, 2022 and were distributed on that date to persons who held Series A Common Stock and existing outstanding warrants as of the January 14, 2022 record date, or who acquired Series A Common Stock in the market following the record date, and who continued to hold such shares at the close of trading on January 21, 2022. 

The Series A Warrants give the holder the right to purchase one share of common stock at $ 7.00 per share, for a period of five years.

Should warrantholders not exercise the Series A Warrants during that holding period, the Series A Warrants will automatically convert to 1/10 of a common share at expiration, rounded down to the nearest number of whole shares. 

On the first day of trading SFQTW closed at $ 0.17 per warrant with 14,450,069 warrants in the public market.

The Company's anticipated future sources of liquidity may include existing cash and cash equivalents, cash flows from operations, refinancing of existing mortgages, future real estate sales, new borrowings, and the sale of equity or debt securities.  Future capital needs include paying down existing borrowings, maintaining our existing properties, funding tenant improvements, paying lease commissions (to the extent they are not covered by lender-held reserve deposits), and the payment of dividends to our stockholders.

The Company is also seeking investments that are likely to produce income and achieve long-term gains in order to pay dividends to our stockholders and may seek a revolving line of credit to provide short-term liquidity.

To ensure that we can effectively execute these objectives, we routinely review our liquidity requirements and continually evaluate all potential sources of liquidity.

We have 

$ 4.4 million of mortgage notes payable maturing in 2022  related to the model home properties and $ 1.4 million of mortgage notes payable maturing in 2022  related to the commercial properties. 

Management expects certain model homes and commercial properties can be sold, and that the underlying mortgage notes will be paid off with sales proceeds while other mortgage notes can be refinanced, as the Company has historically been able to do in the past. Additional principal payments will be made with cash flows from ongoing operations.

Short-term liquidity needs include paying our current operating costs, satisfying the debt service requirements of existing mortgages , completing tenant improvements, paying leasing commissions, and funding dividends to stockholders. 

Future principal payments due on mortgage notes payables, during the year ended December 31, 2023, total approximately $ 8.3 million , of which 

$ 6.8 million  is related to model home properties. 

Management expects certain model home properties can be sold, and that the underlying mortgage notes will be paid off with sales proceeds while other mortgage notes can be refinanced, as the Company has historically been able to do in the past.

Additional principal payments will be made with cash flows from ongoing operations.  The mortgage note payable for 300 N.P.

was an amortizing loan with a balloon payment of $ 2.2 million due at maturity, on June 11, 2022.  

The Company paid this note in full on May 11, 2022 with available cash on hand. 

Additionally, the Company has committed to provide additional funds, or obtain financing, if needed to a special purpose acquisition company, or "SPAC", for which we serve as the financial sponsor (as described below in Note 2.

Significant Account Policies).

As the Company continues its operations, it may 

re-finance or seek additional financing; however, there can be no assurance that any such re-financing or additional financing will be available to the Company on acceptable terms, if at all.

re-finance or seek additional financing. 

However, there can be no assurance that any such re-financing or additional financing will be available to the Company on acceptable terms, if at all.

If events or circumstances occur such that the Company does not obtain additional funding, it will most likely be required to reduce its plans and/or certain discretionary spending, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives.

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Concentration of credit risk with respect to tenant receivables is limited due to the large number of tenants comprising the Company’s rental revenue.

We had one tenant account for 

8.0 % of total rental income for the year ended December 31, 2021  and one  tenant accounted for 6.2 % of total rental income for the year ended December 31, 2020 .

We had one tenant, Halliburton Energy Services, Inc, that account for 

8.57 % of total rental income for the year ended December 31, 2022  and approx imately 

8.0 % of total rental income for the year ended December 31, 2021 .  On December 31, 2022, the lease for our largest tenant, Halliburton Energy Services, Inc., expired. 

Halliburton Energy Services, Inc.

was located in our Shea Center II property in Colorado and did 

not  renew the lease. 

We placed approximately $ 1.1 million in a reserve account with our lender to cover future mortgage payments, if necessary, in connection with Halliburton's vacant space.

This reserve amount is included in "C ash, cash equivalents and restricted cash" on the balance sheet.

Our management team is working to fill the 45,535 square foot space as quickly as possible, and has leased approximately 20% of the space to a tenant during 

January 2023.

SIGNIFICANT ACCOUNTING POLICIES

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Principles of Consolidation . The accompanying consolidated financial statements include the accounts of Presidio Property Trust and its subsidiaries, NetREIT Advisors, LLC and Dubose Advisors LLC (collectively, the “Advisors”), and NetREIT Dubose Model Home REIT, Inc.

The consolidated financial statements also include the results of the NetREIT Partnerships, the Model Home Partnerships. 

The consolidated financial statements also include the results of the NetREIT Partnerships, and the Model Home Partnerships. 

As used herein, references to the “Company”

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All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated financial statements also include the accounts of (a) Murphy Canyon Acquisition Corp.

("Murphy Canyon"), which is a SPAC, for which we serve as the financial sponsor (as described below), and which is deemed to be controlled by us as a result of our 

23.5 % equity ownership stake, the overlap of three of our executive officers as executive officers of Murphy Canyon, and significant influence and operati onal control that we currently exercise over the funding and acquisition of new operations for an initial business combination ("IBC").

(see Note 2,  Variable Interest Entity).

All intercompany balances have been eliminated in consolidation.

The Company classifies the noncontrolling interests in the NetREIT Partnerships as part of consolidated net income (loss) in 

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The Company capitalizes any expenditure that replaces, improves, or otherwise extends the economic life of an asset, while ordinary repairs and maintenance are expensed as incurred.

The Company allocates the purchase price of acquired properties between the acquired tangible assets and liabilities (consisting of land, building, tenant improvements, and long-term debt) and identified intangible assets and liabilities (including the value of above-market and below-market leases, the value of in-place leases, unamortized lease origination costs and tenant relationships), based in each case on their respective fair values.

The Company allocates the purchase price to tangible assets of an acquired property based on the estimated fair values of those tangible assets assuming the building was vacant.

The Company allocates the purchase price of acquired properties between the acquired tangible assets and liabilities (consisting of land, buildings, tenant improvements, and long-term debt) and identified intangible assets and liabilities (including the value of above-market and below-market leases, the value of in-place leases, unamortized lease origination costs and tenant relationships), in each case based on their respective fair values.

The Company allocates the purchase price to tangible assets of an acquired property based on the estimated fair values of those tangible assets, assuming the property was vacant.

Estimates of fair value for land, building and building improvements are based on many factors, including, but not limited to, comparisons to other properties sold in the same geographic area and independent third -party valuations.

The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair values of the tangible and intangible assets and liabilities acquired.

In estimating the fair values of the tangible assets, intangible assets, and liabilities acquired, the Company also considers information obtained about each property as a result of its pre‑acquisition due diligence, marketing and leasing activities.

The value allocated to acquired lease intangibles is based on management’s evaluation of the specific characteristics of each tenant’s lease.

Characteristics considered by management in allocating these values include the nature and extent of the existing business relationships with the tenant, growth prospects for developing new business with the tenant, the remaining term of the lease and the tenant’s credit quality, among other factors.

The value allocable to the above-market or below-market component of an acquired in-place lease is determined based upon the present value (using a market discount rate) of the difference between (i) the contractual rents to be paid pursuant to the lease over its remaining term, and (ii) management’s estimate of rents that would be paid using fair market rates over the remaining term of the lease.

Characteristics considered by management in allocating these values include, but are not limited, to the nature and extent of the existing business relationships with the tenant, growth prospects for developing new business with the tenant, the remaining term of the lease, the tenant’s credit quality, and other factors.

The value allocable to the above-market or below-market component of an acquired in-place lease is determined based upon the present value (using a market discount rate) of the difference between (i) the contractual rents to be paid pursuant to the lease over its remaining term, and (ii) management’s estimate of rents that would be paid using fair market rates over the remaining term of the lease.

The amounts allocated to above or below-market leases are amortized on a straight-line basis as an increase or reduction of rental income over the remaining non-cancelable term of the respective leases.

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Real Estate Held for Sale and Discontinued Operations.

Real estate sold during the current period is classified as “real estate held for sale”

 We generally reclassify assets to held for sale when the disposition has been approved, it is available for immediate sale in its present condition, we are activity seeing a buyer, and the disposition is considered probable within one year. 

Additionally, real estate sold during the current period is classified as “real estate held for sale”

for all prior periods presented in the accompanying condensed consolidated financial statements.

Mortgage notes payable related to the real estate sold during the current period is classified as “notes payable related to real estate held for sale”

for all periods presented if the operations have been eliminated and represent a strategic shift and we will not have any significant continuing involvement in the operations of the property following the sale.

for all prior periods presented in the accompanying condensed consolidated financial statements. Additionally, we record the operating results related to real estate that has been disposed of as discontinued operations for all periods presented if the operations have been eliminated and represent a strategic shift and we will not have any significant continuing involvement in the operations of the property following the sale.

Impairments of Real Estate Assets.

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These estimates have a direct impact on net income because recording an impairment charge results in a negative adjustment to net income.

Properties held for sale are recorded at the lower of the carrying amount or the expected sales price less costs to sell.

The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods.  Properties held for sale are recorded at the lower of the carrying amount or the expected sales price less costs to sell.

Although our strategy is to hold our properties over the long-term, if our strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized to reduce the property to fair value and such loss could be material.

During the year ended December 31, 2020 , the Company determined that an impairment existed in two of its properties (Waterman Plaza and Highland Court) and, as a result, recorded a non-cash asset impairment charge of approximately $ 1.3 million and $ 0.4 million, respectively.  During the fourth quarter of 2020, the Company recorded its Highland Court property (“Highland Court”) as held for sale and subsequently entered into a purchase and sale agreement (“PSA”) with an unrelated third -party. 

During the fourth quarter of 2020, the Company recorded its Highland Court property (“Highland Court”) as held for sale and subsequently entered into a purchase and sale agreement (“PSA”) with an unrelated third -party. 

Highland Court had a book value of approximately $ 10.5 million prior to entering into the PSA. The final selling price as agreed upon in the PSA was approximately $ 10.2 million.

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The sale was completed in May 2021. 

During the three months ended December 31, 2021, the Company recorded an impairment of 300 N.P.

totaling approximately $ 0.3 million in connection with an updated appraisal.

During the year ended December 31, 2021, the Company recorded an impairment of 300 N.P.

totaling approximately $ 0.3 million in connection with an updated appraisal. 

There were no impairments recorded during the year ended December 31, 2022 .

Intangible Assets . 

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Indefinite-lived assets are not amortized.

Amortization expense of intangible assets that are not deemed to have an indefinite useful life was approximately $ 0.2  million, for each of the years ended December 31, 2021  and 2020  and is included in depreciation and amortization in the accompanying consolidated statements of operation.

Amortization expense of intangible assets that are not deemed to have an indefinite useful life was approximately $ 0.1 million and $ 0.2  million, respectively, for the years ended December 31, 2022  and 2021  and is included in depreciation and amortization in the accompanying consolidated statements of operation.

The Company is required to perform a test for impairment of goodwill and other definite and indefinite lived assets at least annually, and more frequently as circumstances warrant.

Impairment is recognized only if the carrying amount of the intangible asset is considered to be unrecoverable from its undiscounted cash flows and is measured as the difference between the carrying amount and the estimated fair value of the asset.

Based on the review, no impairment was deemed to exist at December 31, 2021  and 2020 .

No impairment was deemed to exist at December 31, 2022  and 2021 .

Depreciation and Amortization.

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The costs of buildings are depreciated over estimated useful lives of 39 years, the costs of improvements are amortized over the shorter of the estimated life of the asset or term of the tenant lease (which range from 1 to 10 years), the costs associated with acquired tenant intangibles over the remaining lease term and the cost of furniture, fixtures and equipment are depreciated over 4 to 5 years.

Depreciation and amortization expense for the years ended December 31, 2021  and 2020  was approximately $ 5.4  million and $ 6.3  million, respectively, and is included in depreciation and amortization in the accompanying consolidated statements of operations.

Cash, Cash Equivalents and Restricted Cash.

Depreciation and amortization expense for the years ended December 31, 2022  and 2021  was approximately $ 5.5 million and $ 5.4 million, respectively, and is included in depreciation and amortization in the accompanying consolidated statements of operations.

Cash, Cash Equivalents and Restricted Cash.  

At December 31, 2022 and December 31, 2021 , we had approximately $ 16.5 million and $ 14.7 million in cash, cash equivalents and restricted cash, respectively. 

The Company considers all short-term, highly liquid investments that are both readily convertible to cash and have an original maturity of three months or less at the date of purchase to be cash equivalents.

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No losses have been experienced related to such accounts.

At December 31, 2021 , the Company had approximately $ 7.3 million in deposits in financial institutions that exceeded the federally insurable limits.

At December 31, 2022 , the Company had approximately $ 8.8 million in deposits in financial institutions that exceeded the federally insurable limits.

Restricted cash consists of funds held in escrow for Company lenders for properties held as collateral by the lenders.

The funds in escrow are for payment of property taxes, insurance, leasing costs and capital expenditures.

As of December 31, 2022 , the Company has approximately $ 4.4 million of restricted cash. 

At December 31, 2021 , the Company had approximately $ 7.3 million in deposits in financial institutions that exceeded the federally insurable limits.

Restricted cash consists of funds held in escrow for Company lenders for properties held as collateral by the lenders.

The funds in escrow are for payment of property taxes, insurance, leasing costs and capital expenditures.

As of December 31, 2021 , the Company has approximately $ 4.7 million of restricted cash.

Accounts Receivables.

The Company periodically evaluates the collectability of amounts due from tenants and maintains an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements.

The Company periodically evaluates the collectability of amounts

due from tenants and maintains an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements.

In addition, the Company maintains an allowance for deferred rent receivable that arises from straight lining of rents.

The Company exercises judgment in establishing these allowances and considers payment history and current credit status of its tenants in developing these estimates.

As of December 31, 2021  and 2020 , the balance of allowance for possible uncollectable tenant receivables included in other assets, net in the accompanying consolidated balance sheets was approximately $ 70,000 and $ 70,000 , respectively.

December 31, 2022

, the balance of allowance for possible uncollectable tenant receivables included in other assets, net in the accompanying consolidated balance sheets was approximately $ 138,000  and $ 70,000 , respectively.

Deferred Leasing Costs.

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If management determines the estimated remaining life of the respective lease has changed, the amortization period is adjusted.

At December 31, 2021  and 2020 , the Company had net deferred leasing costs of approximately $ 1.4 million and $ 1.9 million, respectively.

Total amortization expense for the years ended December 31, 2021  and 2020  was approximately $ 0.3  million and $ 0.4 million, respectively.

December 31, 2022

, the Company had net deferred leasing costs of approximately $ 1.5 million and $ 1.3 million, respectively.

Total amortization expense for the years ended

December 31, 2022

 was approximately $ 0.4  million and $ 0.3  million, respectively.

Deferred Financing Costs.

Costs incurred, including legal fees, origination fees, and administrative fees, in connection with debt financing are capitalized as deferred financing costs, are amortized using the straight line method, which approximates the effective interest method, over the contractual term of the respective loans and recorded as an offset to the carrying value of the debt.

At December 31, 2021  and 2020 , unamortized deferred financing costs related to mortgage notes payable were approximately $ 0 and $ 0.2 million.

At December 31, 2022  and 2021 , unamortized deferred financing costs related to mortgage notes payable were approximately $ 0.9 million and $ 0.6 million.

For the years ended December 31, 2022  and 2021 , total amortization expense related to the mortgage notes payable deferred financing costs was approximately $ 0.2  million and $ 0.9 million, respectively.

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Deferred offering costs represent legal, accounting and other direct costs related to our offerings.

As of December 31, 2021 , we have incurred an aggregate of $ 0.1 million in direct costs related to our offering of common and preferred stock in connection with the 

sponsorship, through our wholly-owned subsidiary Murphy Canyon Acquisition Sponsor, LLC (the “Sponsor”), of a special purpose acquisition company (“SPAC”) initial public offering.

 These costs were deferred and recorded as a long-term asset at December 31, 2021 .  

December 31, 2020, we had incurred an aggregate of $ 0.1  million in direct costs related to our offering of common and preferred stock in connection with the S- 3  filed on 

December 29, 2020. 

These costs were deferred and recorded as a long-term asset at 

December 31, 2020.

Approximately $ 0.5  million in previously deferred costs were expensed in our Consolidated Statement of Operations upon effectiveness of our IPO in October 2020.

As of December 31, 2022 and December 31, 2021, we have incurred approximately $ 117,000  and $ 135,000 , at the end of each period. 

These costs are related to various registration statements and our offering of common and preferred stock in connection with the sponsorship, through our wholly-owned subsidiary Murphy Canyon Acquisition Sponsor, LLC (the “Sponsor”), of a special purpose acquisition company (“SPAC”) initial public offering as of December 31, 2021. 

As of December 31, 2022 , the costs related to the preparation of a registration statement for the Company have gone stale and were fully expensed during the year ended December 31, 2022. 

As of December 31, 2022, there were no deferred offering costs. 

Income Taxes.

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Neither the Company nor its subsidiaries have been assessed any significant interest or penalties for tax positions by any major tax jurisdictions.

Fair Value Measurements.

Certain assets and liabilities are required to be carried at fair value, or if long-lived assets are deemed to be impaired, to be adjusted to reflect this condition.

Fair Value Measurements .  Certain assets and liabilities are required to be carried at fair value, or if long-lived assets are deemed to be impaired, to be adjusted to reflect this condition.

The guidance requires disclosure of fair values calculated under each level of inputs within the following hierarchy:

Level 1 –

Quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 –

Inputs other than quoted process that are observable for the asset or liability, either directly or indirectly.

Level 3 –

Unobservable inputs for the asset or liability.

Fair value is defined as the price at which an asset or liability is exchanged between market participants in an orderly transaction at the reporting date.

Cash equivalents, mortgage notes receivable, tenant receivable and payables and accrued liabilities all approximate fair value due to their short-term nature.

During the year ended December 31, 2021 , the Company measured the fair value of two of its real estate properties on a nonrecurring basis using Level 3 inputs.

The Company estimated the fair value for the impaired real estate asset held for investment based on an estimated sales price, less estimated costs to sell.  Management believes that the recorded and fair values of notes payable are approximately the carrying value as of December 31, 2021  and 2020 .

unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets;

prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

When available, we utilize quoted market prices from independent third -party sources to determine fair value and classify such items in Level 1 or Level 2 .

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When we determine the market for a financial instrument owned by us to be illiquid or when market transactions for similar instruments do not  appear orderly, we use several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and establish a fair value by assigning weights to the various valuation sources. 

As of December 31, 2021  and 2020 ,our marketable securities presented on the balance sheet were measured at fair value using Level 1 market prices and totaled approximately $ 1.5 million (cost basis of approximately $ 1.6 million) and $ 0.1 million (cost basis of approximately $ 0.1 million), respectively.  There were no  financial liabilities measured at fair value as of 

December 31, 2021  and 2020 .

Additionally, when determining the fair value of a liability in circumstances in which a quoted price in an active market for an identical liability is not  available, we measure fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach.  Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values.

In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not  be realized in an immediate settlement of the instrument.

As of December 31, 2022  and December 31, 2021 , our marketable securities presented on the balance sheet were measured at fair value using Level 1 market prices and totaled approximately $ 0.8 million and $ 1.5 million, respectively, with a cost basis of approximately $ 0.9 million and $ 1.6 million, respectively.  There were no  financial liabilities measured at fair value as of December 31, 2022  and December 31, 2021 .

Additionally, when determining the fair value of a liability in circumstances in which a quoted price in an active market for an identical liability is not available, we measure fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach.  Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values.

In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

Sales of Real Estate Assets . 

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Generally, our sales of real estate would be considered a sale of a nonfinancial asset as defined by ASC 610 - 20.

ASC 610 - 20 refers to the revenue recognition principles under ASU No.

ASC 610 - 20 refers to the revenue recognition principles un der ASU No.

Under ASC 610 - 20, if we determine we do not have a controlling financial interest in the entity that holds the asset and the arrangement meets the criteria to be accounted for as a contract, we would derecognize the asset and recognize a gain or loss on the sale of the real estate when control of the underlying asset transfers to the buyer.

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If the lease provides for tenant improvements, we determine whether the tenant improvements, for accounting purposes, are owned by the tenant or by us.

When we are the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed.

When we are the owner of the tenant improvements, rental revenue begins when the tenant takes possession or has control of the physical us e of the leased space and any tenant improvement allowance, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed.

When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that the tenant can take in the form of cash or a credit against its rent) that is funded is treated as a lease incentive and amortized as a reduction of revenue over the lease term.

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When a tenant is in bankruptcy, we will record a bad debt reserve for the tenant’s receivable balance and generally will not recognize subsequent rental revenue until cash is received or until the tenant is no longer in bankruptcy and has the ability to make rental payments. 

Variable Interest Entity.

 We determine whether an entity is a Variable Interest Entity ("VIE") and, if so, whether it should be consolidated by utilizing judgments and estimates that are inherently subjective.

Our determination of whether an entity in which we hold a direct or indirect variable interest is a VIE is based on several factors, including whether we participated in the design of the entity and the entity’s total equity investment at risk upon inception is sufficient to finance the entity’s activities without additional subordinated financial support.

We make judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, and then a quantitative analysis, if necessary.

We analyze any investments in VIEs to determine if we are the primary beneficiary.

In evaluating whether we are the primary beneficiary, we evaluate our direct and indirect economic interests in the entity.

A reporting entity is determined to be the primary beneficiary if it holds a controlling financial interest in the VIE.

Determining which reporting entity, if any, has a controlling financial interest in a VIE is primarily a qualitative approach focused on identifying which reporting entity has both:

(i) the power to direct the activities of a VIE that most significantly impact such entity’s economic performance;

and (ii) the obligation to absorb losses or the right to receive benefits from such entity that could potentially be significant to such entity.

Performance of that analysis requires the exercise of judgment.

We consider a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance, including, but not limited to, the ability to direct operating decisions and activities.

In addition, we consider the rights of other investors to participate in those decisions.

We determine whether we are the primary beneficiary of a VIE at the time we become involved with a variable interest entity and reconsider that conclusion continually. 

We consolidate any VIE of which we are the primary beneficiary.

The Company is involved in the formation of an entity considered to be a VIE.

The Company evaluates the consolidation of this entity as required pursuant to ASC Topic 810 relating to the consolidation of such VIE.

The Company’s determination of whether it is the primary beneficiary of the VIE is based in part on an assessment of whether or not the Company and its related parties have the power to direct activities of the VIE and are exposed to the majority of the risks and rewards of the entity.  

Following the completion of the Murphy Canyon IPO, we determined that Murphy Canyon is a VIE in which we have a variable interest because we participated in its formation and design, manage the significant activities, and Murphy Canyon does not have enough equity at risk to finance its activities without additional subordinated financial support.

We have also determined that Murphy Canyon's public stockholders do not have substantive rights, and their equity interest constitutes temporary equity, outside of permanent equity, in accordance with ASC 480 - 10 - S99 - 3A.

As such, we have concluded that we are currently the primary beneficiary of Murphy Canyon as a VIE, as we have the right to receive benefits or the obligation to absorb losses of the entity, as well as the power to direct a majority of the activities that significantly impact Murphy Canyon's economic performance.

Since we are the primary beneficiary, Murphy Canyon is consolidated into our consolidated financial statements.  See Note 9  Commitments and Contingencies for additional details regarding Murphy Canyon.

Shares Subject to Possible Redemption . 

The Company accounts for common stock issued by the SPAC (which is consolidated in our condensed consolidated financial statements), that is subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.”

Under ASC 480, shares of common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value.

Conditionally redeemable shares of common stock (including shares of common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity.

At all other times, shares of common stock are classified as shareholders’

equity. 

All of the Public Shares of Murphy Canyon SPAC (Class A Common Shares) contain a redemption feature which allows for the redemption of such Public Shares in connection with the SPAC's liquidation, if there is a stockholder vote or tender offer in connection with the SPAC's initial business combination and in connection with certain amendments to the SPAC's amended and restated certificate of incorporation.

In accordance with SEC and its guidance on redeemable equity instruments, which has been codified in ASC 480 - 10 - S99, redemption provisions not solely within the control of a company require common stock subject to redemption to be classified outside of permanent equity. 

Accordingly, as of 

December 31, 2022 , the Public Shares are presented as temporary equity, outside the shareholder's equity section of the Company's 

December 31, 2022  consolidated balance sheet.

Given that the Public Shares were issued with other freestanding instruments (i.e., public warrants which were classified as permanent equity as described below), the proceeds and initial carrying value of Class A common stock classified as temporary equity was allocated in accordance with ASC 470 - 20.

The Murphy Canyon Class A common stock is subject to ASC 480 - 10 - S99.

In addition, because it is probable that the equity instrument will become redeemable, we have the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period.

We have elected to recognize the accretion resulting from changes in redemption value immediately during the year ended December 31, 2022. 

See Note 9  Commitments and Contingencies for additional details regarding Murphy Canyon.

Warrant Instruments SPAC.

 The Company and Murphy Canyon account for warrants in accordance with the guidance contained in ASC 480 and FASB ASC 815, “Derivatives and Hedging”.

Under ASC 815 - 40 and ASC 840 warrants that meet the criteria for equity treatment are recorded in stockholder’s equity.

The warrants are subject to re-evaluation of the proper classification and accounting treatment at each reporting period.

If the warrants no longer meet the criteria for equity treatment, they will be recorded as a liability and remeasured each period with changes recorded in the statement of operations. The warrants meet the criteria for classification as equity because they are not exercisable until after the SPAC business combination is completed, at which point the common shares are no longer redeemable and because they are indexed to Murphy Canyon's common stock and meet the other criteria for equity classification.   See Note 9  Commitments and Contingencies for additional details regarding Murphy Canyon.

Income (Loss) per Common Share.

Basic income (loss) per common share (Basic EPS) is computed by dividing net income (loss) available to common shareholders (Numerator) by the weighted average number of common shares outstanding (Denominator) during the period.

Diluted loss per common share (Diluted EPS) is similar to the c

omputation of Basic EPS except that the Denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued.

Diluted loss per common share (Diluted EPS) is similar to the computation of Basic EPS except that the Denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued.

In addition, in computing the dilutive effect of convertible securities, the Numerator is adjusted to add back the after-tax amount of interest recognized in the period associated with any convertible debt.

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December 31, 2022

, the basic and diluted net loss per share are equivalent at 

 per share becau se the Company had incurred a net loss causing any potentially dilutive securities to be anti-dilutive.

Recently Issued Accounting Pronouncements.

 In June 2017, the FASB issued ASU No.

2016 - 13,  

, the basic and diluted net loss per share are equivalent at $ 0.57  and $ 0.46

 per share because the Company had incurred a net loss attributable to common stockholders causing any potentially dilutive securities to be anti-dilutive.

Subsequent Events.

We evaluate subsequent events up until the date the condensed consolidated financial statements are issued.

Recently Issued and Adopted Accounting Pronouncements.

June 2017, the FASB issued ASU

Financial Instruments –

Credit Losses, amended in February 2020 with ASU No.

Credit Losses, amended

February 2020 with ASU

Financial Instruments —

Credit Losses (Topic 326 ) and Leases (Topic 842 ) . ASU 2016 - 13 introduces a new model for estimating credit losses for certain types of financial instruments, including loans receivable, held-to-maturity debt securities, and net investments in direct financing leases, amongst other financial instruments.

ASU 2016 - 13 also modifies the impairment model for available-for-sale debt securities and expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for losses.

While ASU 2016 - 13 was effective for periods beginning after December 15, 2019, the issuance of ASU 2020 - 02 has allowed for the delay in adoption for certain smaller public companies and is now effective for fiscal periods beginning after December 15, 2022.

Retrospective adjustments shall be applied through a cumulative-effect adjustment to retained earnings. The Company is continuing to evaluate the impact of this guidance on its financial statements and does not believe it will have a material impact on the financial statements.

Credit Losses (Topic 326 ) and Leases (Topic 842 ) . ASU

13 introduces a new model for estimating credit losses for certain types of financial instruments, including loans receivable, held-to-maturity debt securities, and net investments in direct financing leases, amongst other financial instruments.

13 also modifies the impairment model for available-for-sale debt securities and expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for losses.

13 was effective for periods beginning after

December 15, 2019, the issuance of ASU

02 has allowed for the delay in adoption for certain smaller public companies and is now effective for fiscal periods beginning after

December 15, 2022.

Retrospective adjustments shall be applied through a cumulative-effect adjustment to retained earnings. The adoption did

not have an impact to our financial statements as this was effective

January 1, 2023.

In August 2020, the FASB issued ASU No.

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Early adoption is permitted, but no earlier than fiscal years beginning after 

December 15, 2020, including interim periods within those fiscal years.  The Company is continuing to evaluate the impact of this guidance on its financial statements and does not believe it will have a material impact on the financial statements.

December 15, 2020, including interim periods within those fiscal years.  The Company has adopted this guidance with no material impact on our financial statements.

In March 2020, the FASB issued Accounting Standards Update No.

2020 - 04 - 

Reference Rate Reform (Topic 848 ):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting  (“ASU 2020 - 04”

), which provides optional expedients and exceptions in order to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting as it relates to contracts, hedging relationships and other transactions by allowing companies to modify contracts that previously contained LIBOR rates without evaluating whether the modification constituted a new contract.

The expedients and exceptions provided by the amendments do 

not  apply to contract modifications made and hedging relationships entered into or evaluated after 

December 31, 2022 

and are used on a prospective basis upon adoption. 

In December 2022, the FASB issued Accounting Standards Update No.

2022 - 06  - 

Reference Rate Reform (Topic 848 ):

Deferral of the Sunset Date of Topic 848  (“ASU 2022 - 06”

), which deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024 

after which entities will no longer be permitted to apply the relief in Topic 848.

  The Company adopted this guidance of ASU 2020 - 04 as of 

March 31, 2020 

no material impact to the financial statements and does not expect the update in ASU 2022 - 06 to have a material impact to our financial statements.

RECENT REAL ESTATE TRANSACTIONS

Acquisitions during the year ended December 31, 2022:

On August 17, 2021, the Company, through its 61.3 % owned subsidiaries NetREIT Palm Self Storage, LP and NetREIT Highland LLC, acquired a single story newly constructed 10,500 square foot building in Houston, Texas for a purchase price of approximately $ 4.9 million, in connection with a like-kind exchange transaction pursued under Section 1031 of the Code. 

The building is 100 % occupied under a 15 -year triple net lease, and purchased with all cash.

On December 22, 2021, the Company purchased a 31,752 square foot building in Baltimore, Maryland for a purchase price of approximately $ 8.9 million. 

The building is 100 % occupied under a five  year triple net lease to Johns Hopkins’

University’s Bloomberg School of Public Health, and purchased with all cash.

We acquired 18  Model Home Properties and leased them back to the home builders under triple net leases during the year ended December 31, 2021 .

The purchase price for the properties was $ 8.4 million.

The purchase price consisted of cash payments of $ 2.7 million and mortgage notes of $ 5.7 million.

We acquired 31  Model Home Properties and leased them back to the homebuilders under triple net leases during the year ended December 31, 2022 .

The purchase price for these properties was $ 15.6 million.

The purchase price consisted of cash payments of $ 4.8 million and mortgage notes of $ 10.8 million.

Acquisitions during the year ended December 31, 2021:

The building is 100 % occupied under a 15 -year triple net lease and was purchased with all cash.

On December 22, 2021, the Company purchased a 31,752 square foot building in Baltimore, Maryland for a purchase price of approximately $ 8.9 million. 

The building is 100 % occupied under a 5 year triple net lease to Johns Hopkins University’s Bloomberg School of Public Health and was purchased with all cash.

We acquired 18  Model Home Properties and leased them back to the homebuilders under triple net leases during the year ended December 31, 2021 .

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The proceeds from any such property sale, after repayment of any associated mortgage or repayment of secured or unsecured indebtedness, are available for investing in properties that we believe will have a greater likelihood of future price appreciation. 

During year ended December 31, 2021  we disposed of the following properties:

During year ended December 31, 2022 , we disposed of the following properties:

World Plaza, which was sold on March 11, 2022, for approximately $ 10.0 million and the Company recognized a loss of approximately $ 0.3 million.

31 model homes for approximately $ 17.5 million and the Company recognized a gain of approximately $ 5.4 million.

Dispositions during the year ended December 31, 2021:

During year ended 

December 31, 2021 , we disposed of the following properties:

Waterman Plaza, which was sold on January 28, 2021, for approximately $ 3.5 million and the Company recognized a loss of approximately $ 0.2 million.

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for approximately $ 8.1  million and the Company recognized a gain of approximately $ 2.5 million.

During the year ended December 31, 2021 , we disposed of 

44  model homes for approximately $ 20.7 million and recognized a gain of approximately $ 3.2 million.

Dispositions during the year ended December 31, 2020

During year ended 

December 31, 2020 we disposed of the following properties:

Centennial Tech Center, which was sold on 

February 5, 2020 

for approximately $ 15.0  million and the Company recognized a loss of approximately $ 913,000 .

Union Terrace, which was sold on 

March 13, 2020  

for approximately $ 11.3  million and the Company recognized a gain of approximately $ 688,000 .

One of four Executive Office Park buildings, which was sold on December 2, 2020 

for approximately $ 2.3 million and the Company recognized a loss of approximately $ 75,000 .

During the year ended December 31, 2020 , we disposed of 

46 model homes for approximately $ 18.1 million and recognized a gain of approximately $ 1.6 million.

44 model homes for approximately $ 20.7 million and the Company recognized a gain of approximately $ 3.2 million.

 REAL ESTATE ASSETS

The Company owns a diverse portfolio of real estate assets.

The primary types of properties the Company invests in are office, industrial, retail, and NNN leased model home properties located primarily in Southern California and Colorado, with four properties located in North Dakota.

Our model home properties are located in four states.

The primary types of properties the Company invests in are office, industrial, retail, and triple-net leased model home properties. 

We have five commercial properties located in Colorado, four in North Dakota, 

one in Southern California, one in Texas and one in Maryland.

Our model home properties are located in three states.

As of December 31, 2022 , the Company owned or had an equity interest in:

Eight  office buildings and one  industrial buildings (“Office/Industrial Properties”) which total approximately rentable 

Eight office buildings and one  industrial building (“Office/Industrial Properties”) which total approximately rentable 

756,265  square feet;

Four  retail shopping centers (“Retail Properties”) which total approximately 

Three retail shopping centers (“Retail Properties”) which total approximately 

65,242 rentable square feet;

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or “Model Home Properties”) leased back on a triple-net basis to homebuilders that are owned by 

six  affiliated limited partnerships and 

five affiliated limited partnerships and 

one  wholly-owned corporation.

The Company’s real estate assets consisted of the following as of December 31, 2021  and 2020 :

A summary of the properties owned by the Company as of December 31, 2022  and 2021  is as follows:

Real estate assets, net

Property Name

Garden Gateway Plaza (1)

Colorado Springs, CO

$ 11,464,531  

December 31, 2022

December 31, 2021

World Plaza (1)

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San Bernardino, CA

9,272,213  

Executive Office Park (1)

Colorado Springs, CO

5,105,831  

Waterman Plaza (1)

San Bernardino, CA

3,500,002  

Genesis Plaza (2)

San Diego, CA

8,310,803  

8,651,177  

Dakota Center

8,607,360  

8,597,493  

Grand Pacific Center (6)

5,457,447  

5,683,823  

Arapahoe Center

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Centennial, CO

8,821,278  

9,233,078  

Union Town Center

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Colorado Springs, CO

9,169,387  

9,344,563  

West Fargo Industrial

7,025,325  

7,061,122  

2,929,563  

3,279,522  

Research Parkway

Colorado Springs, CO

2,375,943  

2,438,594  

One Park Center

Westminster, CO

7,992,420  

8,586,309  

Highland Court (1)(4)

Centennial, CO

10,500,001  

Shea Center II (5)

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Highlands Ranch, CO

20,246,645  

21,026,112  

4,875,696  

December 2021

Baltimore, MD

8,891,810  

Presidio Property Trust, Inc.

103,975,890  

123,744,371  

Model Home properties (4)

2014 - 2021  

AZ, FL, IL, PA, TX, WI

34,089,046  

42,509,596  

Total real estate assets and lease intangibles, net

$ 138,064,936  

$ 166,253,967  

This property was sold during the year ended December 31, 2022 .

( 2 ) This property is held for sale as of December 31, 2021 .

Genesis Plaza is owned by two tenants-in-common, each of which own 57 % and 43 %, respectively, and we beneficially own an aggregate of 76.4 %, based on our ownership percentages of each tenant-in-common.

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Includes six  Model Homes listed as held for sale as of December 31, 2022 .

( 6 ) Property was listed as held for sale in February 2022.

The Company’s commercial properties are leased to tenants under non-cancelable operating leases for which terms and expirations vary.  Future minimum rental revenues under existing leases on Office/Industrial and Retail Properties as of December 31, 2021  are expected to be as follows:

$ 3,362,188  

1,990,408  

1,136,825  

1,210,653  

2,218,671  

1,540,799  

$ 11,459,544  

The Company generally rents Model Home Properties to homebuilders under non-cancelable lease agreements with a term of 18 months with an option to extend in six months increments.

Future minimum rental revenues under existing leases on Model Home Properties as of December 31, 2021  are expected to be as follows:

$ 2,121,864  

540,504  

$ 2,662,368  

On December 31, 2022, the lease for our largest tenant, Halliburton Energy Services, Inc., expired. 

Halliburton Energy Services, Inc.

was located in our Shea Center II property in Colorado, and made up approximately 8.57 % of our annual base rent. 

The tenant did not  renew the lease and we placed approximately $ 1.1 million in a reserve account with our lender to cover future mortgage payments, if necessary. 

Our management team is working to fill the 45,535 square foot space as quickly as possible, and has already leased approximately 20% of the space to a tenant during 

January 2023.

Grand Pacific Center, Bismarck, ND, was removed from held for sale after signing a major lease with KLJ Engineering on December 7, 2022 for approximately 33,296 usable square feet, a term of 122 months, starting annualized rent of $ 532,736 , and a commencement date estimated to be between November 1, 2023 and March 1, 2024.

LEASE INTANGIBLES

Lease intangibles consist of the following:

The following table summarizes the net value of other intangible assets acquired and the accumulated amortization for each class of intangible asset:

December 31, 2022

December 31, 2021

Intangibles, net

Lease Intangibles

Accumulated Amortization

Lease Intangibles, net

Lease Intangibles

Accumulated Amortization

Lease Intangibles, net

In-place leases

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$ 257,171  

$ 641,218  

As of December 31, 2021  and 2020 , gross lease intangible assets of $ 0.0 million and $ 1.1 million, respectively, were included in real estate assets held for sale.

As of December 31, 2021  and 2020 , accumulated amortization related to the lease intangible assets of $ 0.0 million and $ 1.1 million, respectively, were included in real estate assets held for sale.

The net value of acquired intangible liabilities was approximately $73,000 and $139,000  relating to below-market leases as of December 31, 2021  and 2020 , respectively.

Aggregate approximate amortization expense for the Company's lease intangible assets is as follows:

$ 202,342  

December 31, 2022  and 2021 , there were no gross lease intangible assets and accumulated amortization related to the lease intangible assets included in real estate assets held for sale.

The net value of acquired intangible liabilities was approximately $ 18,240 and $ 73,130 relating to below-market leases at 

December 31, 2022  and 

December 31, 2021, respectively.

Future aggregate approximate amortization expense for the Company's lease intangible assets is as follows:

$ 17,526  

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$ 54,829  

The weighted average amortization period for the intangible assets as of December 31, 2021  was approximately 1.35  years.

Lease intangible assets are amortized over the term of the related lease and included as a reduction of rental income in the Statement of Operations.

Other assets consist of the following:

Deferred rent receivable

$ 1,660,197  

$ 1,912,048  

Prepaid expenses, deposits and other

473,554  

215,946  

Investment in marketable securities, at fair value

1,514,483  

83,241  

Investment in marketable securities

Accounts receivable, net

401,927  

541,885  

Right-of-use assets, net

74,643  

102,144  

Other intangibles, net

82,483  

142,483  

Notes receivable

316,374  

Deferred offering costs

134,843  

108,660  

Total other assets

$ 4,658,504  

$ 3,422,781  

Periodically, the Company may sell an option in the marketable securities it holds to unrelated third parties for the right to purchase certain securities held within its investment portfolios (“covered call options”).

These option transactions are designed primarily to increase the total return associated with holding the related securities as earning assets by using fee income generated from these options.

These transactions are not designated as hedging relationships pursuant to accounting guidance ASC 815 and, accordingly, changes in fair values of these contracts, are reported in other non-interest income. 

There are several risks associated with transactions in options on securities.

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The writer of an option has no control over the time when it may be required to fulfill its obligation before the sold option expires, and once an option writer has received an exercise notice, it must deliver the underlying security in exchange for the strike price.

As of December 31, 2021 , we owned common shares of 19 different publicly traded REITs and an immaterial amount of covered call options in 10 of those same REITs. 

The gross fair market value on our publicly traded REIT securities was $ 1,522,137 , with covered call options totaling $ 2,254 . 

As of December 31, 2022 , we owned common shares of 18  different publicly traded REITs and an immaterial amount of covered call options in three  of those same REITs. 

The gross fair market value on our publicly traded REIT securities was $ 798,206 , with covered call options totaling $ 457 . 

As of December 31, 2022 , the net fair value of our publicly traded REIT securities was $ 797,749  based on the December 31, 2022 closing price. 

As of December 31, 2020, we owned common shares and options of two different publicly traded REITs and a money market account with a closing market value of approximately $ 83,000 . 

These shares are presented at fair value as “marketable securities”

on our consolidated balance sheets and the gains and losses resulting from the mark-to-market of these securities are recognized in current period earnings.

As of December 31, 2021 , we owned common shares and options of 19  different publicly traded REITs and an immaterial amount of covered call options in 

ten of those same REITs. 

The gross fair market value on our publicly traded REIT securities was $ 1,529,185 , with covered call options totaling $ 14,702 . 

As of December 31, 2021 , the net fair value of our publicly traded REIT securities was $ 1,514,483  based on the 

December 31, 2021  closing price.

 MORTGAGE NOTES PAYABLE

Mortgage notes payable consisted of the following:

Mortgage notes payable consist of the following:

Principal as of

Mortgage note property

Waterman Plaza (2)

$ 3,207,952  

World Plaza (3) (4)

5,802,568  

Garden Gateway Plaza (2)

5,861,523  

2,232,923  

2,273,478  

4.95 %  

Highland Court (2)

6,274,815  

3.82 %  

Dakota Center

9,677,108  

9,900,279  

4.74 %  

Research Parkway

1,705,438  

1,760,432  

3.94 %  

Arapahoe Service Center

7,770,887  

7,932,255  

4.34 %  

Union Town Center

8,173,568  

8,315,550  

4.28 %  

One Park Centre

6,276,849  

6,385,166  

4.77 %  

Genesis Plaza

6,168,604  

6,276,273  

4.71 %  

Shea Center II

17,494,527  

17,727,500  

4.92 %  

Executive Office Park (2)

2,985,998  

4.83 %  

West Fargo Industrial (6)

4,148,405  

4,262,718  

3.27 %  

Grand Pacific Center (3)

3,619,695  

3,738,142  

4.02 %  

Subtotal, Presidio Property Trust, Inc.

$ 67,268,004  

$ 92,704,649  

Model Home mortgage notes (4) (5)

22,154,128  

28,083,356  

2022 - 2024  

Mortgage Notes Payable

$ 89,422,132  

$ 120,788,005  

Unamortized loan costs

( 562,300 )  

( 758,309 )  

Mortgage Notes Payable, net

$ 88,859,832  

$ 120,029,696  

Interest rates as of December 31, 2022 .

( 2 ) Waterman Plaza and Garden Gateway Plaza were sold during the first quarter of 2021, while Highland Court and Executive Office Park were sold in the second quarter of 2021.

( 3 ) Properties held for sale as of 

December 31, 2021 . Five model homes were included as held for sale.

( 4 ) During June 2021, this loan was paid in full with cash from the sale of other properties and excess cash on hand.

( 5 ) Interest rate is subject to reset on September 1, 2023.

( 6 ) Each Model Home has a stand-alone mortgage note at interest rates ranging from 2.5 % to 4.33 % at December 31, 2021 . 

( 7 ) Property was listed as held for sale in February 2022.

( 8 ) The mortgage note payable for 300 N.P. is an amortizing loan with a balloon payment of $ 2.2 million due at maturity, on June 11, 2022, 

and is no longer subject to defeasance or yield maintenance. 

The Company expects to pay this note in full at or before maturity with proceeds from property sales, property financing and other available cash on hand.  

The mortgage note payable for 300 N.P. is an amortizing loan with a balloon payment of $ 2.2 million due at maturity, on June 11, 2022.  

The Company paid this note in full on May 11, 2022 with available cash on hand.  

Interest rate is subject to possible reset on September 1, 2023.  

The lender may, upon not less than sixty ( 60 ) days prior written notice to the Company, increase the interest rate effective on September 1, 2023 and September 1, 2030 to the rate then being quoted by the Lender for new seven -year commercial mortgage loans of similar size and quality with like terms and security (provided that in no event shall the new rate be less than the initial rate).

As of December 31, 2022, there were six  model homes included as real estate assets held for sale.

Our model homes have stand-alone mortgage notes at interest rates ranging from 2.50 % to 6.70 % per annum as of 

December 31, 2022 .

The lender may, upon not less than sixty ( 60 ) days prior written notice to the Company, increase the interest rate effective on the August 5, 2023 and August 5, 2026, to the rate then being quoted by the lender for new three -year commercial mortgage loans of similar size and quality with like terms and security (provided that in no event shall the new rate be less than the initial rate).

The Company is in compliance with all material conditions and covenants of its mortgage notes payable.

Scheduled principal payments of mortgage notes payable are as follows:

Scheduled principal payments of mortgage notes payable were as follows as of December 31, 2022 :

Presidio Property

Total Principal

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Notes Payable

3,577,700  

8,633,455  

$ 12,211,155  

1,406,466  

4,376,107  

5,782,573  

10,379,660  

9,144,566  

19,524,226  

28,782,401  

16,644,046  

6,477,731  

$ 67,268,004  

$ 22,154,128  

$ 89,422,132  

On September 

17, 2019, the Company executed a Promissory Note pursuant to which Polar, extended a loan in the principal amount of $ 14.0 million to the Company (the “Polar Note”).

The Polar Note bore interest at a fixed rate of 8 % per annum and required monthly interest-only payments.

September 1, 2020 ,  we extended the maturity of the Polar Note from 

October 

2020  to 

March 31, 2021 ,  at which time the entire outstanding principal balance of $ 8.8  million and accrued and unpaid interest was to be due and payable. On 

September 30, 2020 ,  we paid the extension or renewal fee, which was 

4 % of the unpaid principal balance.  The principal balance of the Polar Note as of December 31, 2020, consisted of cash received, less cash repayments from property sales of $ 6.3 million and Original Issue Discount (“OID”) of $ 1.4 million.

The OID was recorded on the accompanying condensed consolidated balance sheets as a direct deduction from the principal of the Polar Note and was recognized as interest expense over the term of the Polar Note commencing on September 

17, 2019 through October 

There was 

no  unrecognized OID as of 

September 30, 2021 

December 31, 2020.  

The Company incurred approximately $ 1.1 million in legal and underwriting costs related to the transaction.

These costs were recorded as debt issuance costs on the accompanying consolidated balance sheets as a direct deduction from the principal of the Polar Note and were amortized over the term of the Polar Note.   During the first quarter of 2021, prior to maturity, the Polar Note was paid in full, primarily from available cash on hand and proceeds of property sales and all unamortized debt issuance costs were expensed.

On April 22, 2020, the Company received an Economic Injury Disaster Loan of $ 10,000 from the Small Business Administration ("SBA") to provide economic relief during the COVID- 19 pandemic.

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We have used the funds for general corporate purposes to alleviate economic injury caused by the COVID- 19 pandemic, which economic injury included abating or deferring rent to certain tenants (primarily retail tenants).

April 30, 2020, 

the Company received a Paycheck Protection Program ("PPP") loan of $ 0.5 million from the SBA to provide additional economic relief during the COVID- 19  pandemic.

The PPP loan, less the $ 10,000 related to the EIDL received on April 22, 2020, was forgiven by the SBA prior to December 31, 2020, and the remaining $ 10,000 was fully forgiven in January 2021, upon repeal of the EIDL holdback requirements.

June 5, 2020, 

the period in which the loan could be utilized was extended to 

24  weeks.

The unforgiven portion of the PPP loan was recorded in accounts payable and accrued liabilities on the Consolidated Balance Sheet as of 

December 31, 2020. 

During the quarter ended March 31, 2021, the forgiven amount totaling $ 10,000 was recorded as a gain on extinguishment of debt in the Consolidated Statement of Operations. 

We have used the funds received from the PPP loan to cover payroll related costs.

April 1, 2021, 

our wholly-subsidiary, Dubose Model Homes Investors 

#203 LP ("DMH 203" ) ,  issued an unsecured promissory note with LGD Investments Ltd ("LGD") for $ 330,000  with an interest rate of 

4 % per annum and a maturity date of 

April 30, 2022 .

  LGD Investments is owned and controlled by 

one  of our directors at the time, Larry Dubose. 

During April and May 2021, DMH 203 paid LGD $ 2,200 in interest related to the promissory note. 

On June 1, 2021, the Company assumed the promissory note from LGD a face value for $ 330,000 with no other changes in the terms of the note. 

The note payable and note receivable, including interest expense and interest income related to this promissory note during June 2021 were eliminated through consolidation. 

There are no future plans to issue additional promissory notes to LGD.

On September 3, 2021, we issued promissory notes to our majority owned subsidiary Dubose Model Home Investors 202 LP and Dubose Model Home Investors 204 LP for the refinancing of four model home properties in Texas and Wisconsin, for $ 0.9 million with an interest rate of 3.0 % per annum and a maturity date of November 15, 2022.  

These notes payable and note receivable, including interest expense and interest income related to this promissory note, are eliminated through consolidation on our financial statements.

As of December 31, 2022, we have issued six promissory notes to our majority owned subsidiaries, Dubose Model Home Investors 202 LP and Dubose Model Home Investors 204 LP, for the refinancing of six model home properties in Texas and Wisconsin, for approximately $ 1.36  million with interest rates ranging from 

3.0 % to 5.76 % per annum. 

These loans were issued between September 3, 2021 through December 15, 2022, with terms of 12 months, and are fully eliminated in consolidation.

On August 17, 2021, we issued a promissory note to our majority owned subsidiary, NetREIT Highland, for the acquisition of the Mandolin property in Houston, Texas, for $ 1.56 million with an interest rate of 4.0 % per annum and a maturity date of August 17, 2022. 

This note payable and note receivable, including interest expense and interest income related to this promissory note, are eliminated through consolidation on our financial statements.

On December 20, 2021, we issued a promissory note to our majority owned subsidiary PPT Baltimore for the acquisition of the Baltimore property in Baltimore, MD, for $ 5.65 million with an interest rate of 4.5 % per annum and a maturity date of December 20, 2022. 

This note payable and note receivable, including interest expense and interest income related to this promissory note, are eliminated through consolidation on our financial statements.

This note payable and note receivable, including interest expe nse and interest income related to this promissory note, were eliminated through consolidation on our financial statements. 

During April 2022, this loan was refinanced with a loan from a third -party bank totaling $ 3.7 million, with the proceeds being used to pay back our $ 1.56 million promissory note.

On December 20, 2021, we issued a promissory note to our majority owned subsidiary, PPT Baltimore, for the acquisition of the Baltim ore property in Baltimore, Maryland, for $ 5.65 million with an interest rate of 4.5 % per annum and a maturity date of December 20, 2022. 

This note payable and note receivable, including interest expense and interest income related to this promissory note, were eliminated through consolidation on our financial statements.  During March 2022, this loan was refinanced with a loan from a third -party lender totaling $ 5.67  million, with the proceeds being used to pay back our $ 5.65 million promissory note.

 COMMITMENTS AND CONTINGENCIES

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The Company monitors concerns over economic recession, the COVID- 19 pandemic, interest rate increases, policy priorities of the U.S.

presidential administration, trade wars, labor shortages, or inflation may contribute to increased volatility and diminished expectations for the economy and markets.

presidential administration, trade wars, labor shortages, and inflation, any of which 

may contribute to increased volatility and diminished expectations for the economy and markets.

Additionally, concern over geopolitical issues may also contribute to prolonged market volatility and instability.

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however, we will continue to monitor the financial markets for events that could impact our commercial real estate properties.

Sponsorship of Special Purpose Acquisition Company . 

On January 7, 2022, we announced our sponsorship, through our wholly-owned subsidiary, Murphy Canyon Acquisition Sponsor, LLC (the “Sponsor”), of a special purpose acquisition company (“SPAC”) initial public offering.

The SPAC raised $132,250,000 in capital investment to acquire businesses in the real estate industry, including construction, homebuilding, real estate owners and operators, arrangers of financing, insurance, and other services for real estate, and adjacent businesses and technologies targeting the real estate space, which we may refer to as “Proptech”

We, through our wholly-owned subsidiary, owned approximately 19 % of the issued and outstanding stock in the entity upon the initial public offering being declared effective and consummated (excluding the private placement units described below), and that following the completion of its initial business combination that the SPAC will operate as a separately managed, publicly traded entity.

The SPAC offered $ 132,250,000 units, with each unit consisting of one share of common stock and three -quarters of one redeemable warrant.

The Sponsor purchased an aggregate of 828,750 units (the “placement units”) of the SPAC at a price of $ 10.00 per unit, for an aggregate purchase price of $ 8,287,500 .

The placement units were sold in a private placement that closed simultaneously with the closing of the SPAC initial public offering. The Sponsor has agreed to transfer an aggregate of 45,000  placement units ( 15,000 each) to each of Murphy Canyon’s independent directors.

The SPAC's ability to complete a business combination may be extended in additional increments of three months up to a total of six ( 6 ) additional months from the closing date of the offering, subject to the payment into the Trust Account by the Sponsor (or its designees or affiliates) of the sum of 

$1,322,500, representing the sum of $0.10 per share of Common Stock sold to Public Stockholders, and which extension payments, if any, shall be added to the Trust Account. 

The Company has committed to provide additional funds if need to make such a deposit for the extension.

Sponsorship of Special Purpose Acquisition Company . On January 7, 2022, we announced our sponsorship, through our wholly-owned subsidiary, Murphy Canyon Acquisition Sponsor, LLC (the “Sponsor”), of a special purpose acquisition company (“SPAC”) initial public offering.

The registration statement and prospectus relating to the initial public offering (“IPO”) of the SPAC, Murphy Canyon Acquisition Corp.

(“M urphy Canyon”), was declared effective by the Securities and Exchange Commission (the “SEC”) on February 2, 2022 and SPAC units, consisting of one share of Class A common stock, par value $ 0.0001 per share, of Murphy Canyon and one redeemable warrant, with each whole warrant entitling the holder thereof to purchase one share of common stock at a price of $ 11.50 per share, began trading on the Nasdaq Global Market on February 3, 2022.

The Murphy Canyon IPO closed on February 7, 2022, raising gross proceeds for Murphy Canyon of $ 132,250,000 , including the exercise in full by the underwriters of their over-allotment option.

In connection with the IPO, we purchased, through the Sponsor, 754,000 placement units (the “placement units”) at a price of $ 10.00 per unit, for an aggregate purchase price of $ 7,540,000 . 

The Sponsor has agreed to transfer an aggregate of 45,000  placement units ( 15,000 each) to each of Murphy Canyon’s independent directors.  In connection with the initial public offering, Murphy Canyon incurred $ 7,738,161 in issuance costs, including $ 2,645,000 of underwriting discounts and commission, $ 4,628,750 of deferred underwriting fees and $ 464,411 of other offering costs. 

These costs were allocated to temporary and permanent equity and offset against the proceeds.

We, through our wholly-owned subsidiary, owned approximately 23.5 % of the issued and outstanding stock in the entity upon the initial public offering being declared effective and consummated (excluding the private placement units described below). Following the completion of its initial public offering, the SPAC has operated as a separately managed, publicly traded entity.

The SPAC offered 132,250,000 units, with each unit consisting of one share of common stock and three -quarters of one redeemable warrant. 

The warrants were evaluated using the guidance in ASC 480 "Distinguishing Liabilities from Equity" and we concluded that the warrants are indexed to Murphy Canyon's common stock and meet the criteria to be classified in stockholders' equity.

On November 8, 2022, the SPAC entered into an agreement and plan of merger with Conduit Pharmaceuticals Limited, a Cayman Islands exempted company (“Conduit”), and Conduit Merger Sub, Inc., a Cayman Islands exempted company and the SPAC’s wholly owned subsidiary.

If the merger agreement is approved by the SPAC’s stockholders and the transactions under the merger agreement  are consummated, the SPAC’s Cayman Island subsidiary will merge with and into Conduit, with Conduit surviving the merger as the SPAC’s wholly owned subsidiary.

Pursuant to the merger agreement, the outstanding ordinary shares (including the shares issued upon conversion of all outstanding convertible debt, which conversion shall have occurred prior to the consummation of the merger) of Conduit will be converted into an aggregate of 65,000,000 shares of the SPAC’s newly issued common stock, with each such outstanding Conduit ordinary share (including the ordinary shares issued upon conversion of all outstanding convertible debt, which conversion shall have occurred prior to the consummation of the merger) converted into newly issued shares of the SPAC’s common stock on a pro rata basis.

Initially, the SPAC was required to complete its initial business combination transaction by 12 months from the consummation of its initial public offering or up to 18 months if it extended the period of time to consummate a business combination in accordance with its Certificate of Incorporation. 

On January 26, 2023, at a special meeting of the stockholders, the stockholders approved a proposal to amend the SPAC’s certificate of incorporation to extend the date by which it has to consummate a business combination up to 12 times, each such extension for an additional one month period, from February 7, 2023, to February 7, 2024.  

The stockholders also approved a related proposal to amend the trust agreement allowing the SPAC to deposit into the trust account, for each one -month extension, one - third of 1% of the funds remaining in the trust account following the redemptions made in connection with the approval of the extension proposal at the special meeting.  The Company has committed to provide additional funds if needed to make such a deposit for the extension.

In connection with the stockholders’

vote at the special meeting, 11,037,272 shares of common stock were tendered for redemption, which were redeemed in February 2023.

After the redemptions, there were 2,187,728 shares SPAC Class A common stock subject to possible redemption.

On March 3, 2023 we loaned Murphy Canyon $ 300,000 to fund its trust account and for operating expenses, and may lend up to $ 1.5 million in total. 

 The loan is non-interest bearing, unsecured and will be repayable in full upon the earlier of (i) the date on which the SPAC consummates its initial business combination and (ii) the date that its winding up is effective.

 STOCKHOLDERS’

EQUITY  

Preferred Stock.

The Company is authorized to issue up to 1,000,000 shares of Preferred Stock (the “Preferred Stock”).

The Preferred Stock may be issued from time to time in one or more series.

The Board of Directors is authorized to fix the number of shares of any series of the Preferred Stock, to determine the designation of any such series, and to determine or alter the rights granted to or imposed upon any wholly unissued series of Preferred Stock including the dividend rights, dividend rate, conversion rights, voting rights, redemption rights (including sinking fund provisions), redemption price, and liquidation preference.

The Preferred Stock may be issued from time to time in one or more series.  The Board of Directors is authorized to fix the number of shares of any series of the Preferred Stock, to determine the designation of any such series, and to set the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each series of Preferred Stock.

On June 15, 2021, the Company completed its secondary offering of 800,000 shares of our Series D Preferred Stock for cash consideration of $ 25.00 per share to a syndicate of underwriters led by Benchmark, as representative, resulting in approximately $ 18.1  million in net proceeds, after deducting the underwriting discounts and commissions and the offering expenses paid by the Company.

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The Series D Preferred Stock is listed and trading on The Nasdaq Capital market under the symbol SQFTP.   The Company intends to use these proceeds for general corporate and working capital purposes, including to potentially acquire additional properties. 

The Series D Preferred Stock is listed for trading on The Nasdaq Capital Market under the symbol SQFTP.   The Company has used these proceeds for general corporate and working capital purposes, including acquiring additional properties. 

Below are some of the key terms of the Series D Preferred Stock:

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The Series D Preferred Stock has no stated maturity, will not be subject to any sinking fund or other mandatory redemption, and will not be convertible into or exchangeable for any of our other securities.

The Company evaluated the accounting guidance in ASC 480 regarding the classification of the Series D Preferred Stock as equity or a liability and determined that it should be classified as permanent equity.  On June 24, 2021, the Board of Directors of the Company declared the first dividend on its Series D Preferred Stock for the initial period from the issue date of June 15, 2021 to June 30, 2021. 

In accordance with the terms of the Series D Preferred Stock, the Series D monthly dividend has been approved by the Board of Directors through December 2021 in the amount of $ 0.10417 per share payable on the 15th  of every month to stockholders of record of Series D Preferred Stock as of the last day of the prior month. 

Total dividends paid to holders of Series D Preferred Stock as of 

December 31, 2021 was approximately $ 1.0 million. 

In accordance with the terms of the Series D Preferred Stock, the Series D monthly dividend has been approved by the Board of Directors through Decemb er 2022 in the amount of $ 0.19531 per share payable on the 15th  of every month to stockholders of record of Series D Preferred Stock as of the last day of the prior month. 

Total dividends paid to Series D Preferred stockholders during the year ended December 31, 2022  

and 2021 was approximately $ 2.2 million and $ 1.2 million, respectively. 

Common Stock.

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Each share of Common Stock entitles the holder to one vote.

Shares of our Common Stock are not subject to redemption and do not have any preference, conversion, exchange, or preemptive rights.

The articles of incorporation contain a restriction on ownership of the Common Stock that prevents one person from owning more than 9.8 % of the outstanding shares of common stock.

Shares of our Common Stock are not subject to redemption and do not have any preference, conversion, exchange, or preemptive rights. 

The Company’s charter contains restrictions on the ownership and transfer of the Common Stock that prevents one person from owning more than 9.8 % of the outstanding shares of common stock.

On July 12, 2021, the Company entered into a securities purchase agreement with a single U.S.

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The Pre-Funded Warrants were exercised in full during August 2021 at a nominal exercise price of $ 0.01 per share.

The Common Stock Warrants have an exercise price of $ 5.50 per share, were exercisable upon issuance and will expire five years from the date of issuance. 

In connection with thi s additional offering, we agreed to issue the Placement Agent Warrants to purchase up to 80,000 shares of Series A Common Stock, representing 4.0 % of the Series A Common Stock and shares of Series A Common Stock issuable upon exercise of the Pre-Funded Warrant. 

The Common Stock Warrants have an exercise price of $ 5.50 per share, were exercisable upon issuance and will expire five years from the date of issuance.  In connection with this additional offering, we agreed to issue the Placement Agent Warrants to purchase up to 80,000 shares of Series A Common Stock, representing 4.0 % of the Series A Common Stock and shares of Series A Common Stock issuable upon exercise of the Pre-Funded Warrant. 

The Placement Agent Warrants were issued in August 2021, post exercise of the Pre-Funded Warrants with an exercise price of $ 6.25 and will expire five years from the date of issuance.

The Company evaluated the accounting guidance in ASC 480 and ASC 815 regarding the classification of the Pre-Funded Warrant, Common Stock Warrants, and Placement Agent Warrants as equity or a liability and determined that it should be classified as permanent equity.  As of December 31, 2021 , none of the Common Stock Warrants and Placement Agent Warrants have been exercised.

Stock Repurchase Program .  On September 17, 2021, the Board of Directors authorized a stock repurchase program of up to $ 10 million outstanding shares of our Series A Common Stock. 

During September 2021, the Company was able to purchase 18,133 shares at an average price of $ 3.73692 per share, plus commission of $ 0.035 per share, for a total cost of $ 68,396 . 

During December 2021, the Company was able to purchase 11,588 shares at an average price of $ 3.6097  per share, plus commission of $ 0.035 per share, for a total cost of $ 42,235 . 

These shares will be treated as unissued in accordance with Maryland law and shown as a reduction of stockholders' equity at cost. 

While we will continue to pursue value creating investments, the Board believes there is significant embedded value in our assets that is yet to be realized by the market.

Therefore, returning capital to shareholders through a repurchase program is an attractive use of capital currently.

The Company evaluated the accounting guidance in ASC 480 and ASC 815 regarding the classification of the Pre-Funded Warrant, Common Stock Warrants, and Placement Agent Warrants as equity or a liability and ultimately determined that it should be classified as permanent equity.  As of

December 31, 2022

, none of the Common Stock Warrants and Placement Agent Warrants have been exercised. 

Stock Repurchase Program

September 17, 2021, the Board of Directors authorized a stock repurchase program of up

to $ 10 million of outstanding shares of our Series A Common Stock, which expired in September 2022.

On September 15, 2022, the Board of Directors authorized a stock repurchase program of up to $ 6.0 million of outstanding shares of our Series A Common Stock and up to $ 4.0 million of our Series D Preferred Stock. 

During the year ended December 31, 2021, the Company repurchased 29,721 shares of our Series A Common Stock at an average price of approximately $ 3.7223 per share, including a commission of $ 0.035 per share, for a total cost of $ 110,631 . 

During the year ended

December 31, 2022

, the Company repurchased 196,631 shares of our Series A Common Stock at an average price of approximately $ 1.59  per share, including a commission of $ 0.035 per share, and 6,013  shares of our Series D Preferred Stock at an average price of approximately $ 20.31 per share, including a commission of $ 0.035 per share, for a total cost of $ 313,578 for the Series A Common Stock and $ 122,141 for the Series D Preferred Stock. The repurchased shares will be treated as authorized and unissued in accordance with Maryland law and shown as a reduction of stockholders' equity at cost. 

While we will continue to pursue value creating investments, the Board of Directors believes there is significant embedded value in our assets that is yet to be realized by the market.

Therefore, returning capital to stockholders through a repurchase program is an attractive use of capital currently.

Cash Dividends.

For the year ended December 31, 2021 , the Company declared and paid cash dividends of approximately $ 4.5 million.

For the year ended 

December 31, 2020 the Company declared and paid 

$ 1.1 million.  

For the years ended December 31, 2022  and 

December 31, 2021 the Company declared and paid Series A Common Stock cash dividends of approximately $ 3.1 million and $ 4.5 million, respectively.  For the years ended December 31, 2022  and 

December 31, 2021 the Company declared and paid Series D Preferred Stock cash dividends of approximately $ 2.2 million and $ 1.2 million, respectively. 

The following is a summary of distributions declared per share of our Series A Common Stock and for our Series D Preferred Stock for the years ended December 31, 2022  and 2021 . 

The Company intends to continue to pay dividends to our common stockholders on a quarterly basis, and on a monthly basis to holders of our Series D Preferred Stock going forward, but there can be no guarantee the Board of Directors will approve any future dividends.

The following is a summary of distributions declared per share of our Series A Common Stock and for our Series D Preferred Stock for the years ended December 31, 2022  and 

December 31, 2021 .

Series A Common Stock

Cash Dividend

$ 0.101  

$ 0.410  

$ 0.100  

Quarter Ended

Distributions Declared

Series D Preferred Stock

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Distributions Declared

0.10417  

0.19531  

$ 1.27603  

Partnership Interests. 

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The Company is a limited partner in five partnerships and sole stockholder in one corporation, which entities purchase and leaseback model homes from homebuilders.

Dividend Reinvestment Plan.

Warrant Dividend.

In January 2022, we distributed the Series A Warrants to holders of our Series A Common Stock. 

The Series A Warrants and the shares of Series A Common Stock issuable upon the exercise of the Series A Warrants were registered on a registration statement that was filed with the SEC and was declared effective January 21, 2022.

The Series A Warrants commenced trading on the Nasdaq Capital Market under the symbol “SQFTW”

on January 24, 2022 and were distributed on that date to persons who held shares of common stock and existing outstanding warrants as of the January 14, 2022 record date, or who acquired shares of Series A Common Stock in the market following the record date, and who continued to hold such shares at the close of trading on January 21, 2022. 

The Series A Warrants give the holder the right to purchase one share of Series A Common Stock at $ 7.00 per share, for a period of five years.

Should warrantholders not exercise the Series A Warrants during that holding period, the Series A Warrants will automatically convert to 1/10 of a share of Series A Common Stock at expiration, rounded down to the nearest number of whole shares.

Dividend Reinvestment Plan. 

The Company adopted a distribution reinvestment plan (the “DRIP”) that allowed stockholders to have dividends and other distributions otherwise distributable to them invested in additional shares of the Company’s Common Stock.

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and adopted on October 6, 2020 in connection with our IPO, and updated to reflect a change in transfer agent and registrar.

As of December 31, 2021 , approximately $ 17.4 million or approximately 917,074 shares of Common Stock have been issued under the DRIP.

No shares were issued under the DRIP during the years ended December 31, 2021  and 2020 . 

December 31, 2022 , approximately $ 17.4 million or approximately 917,074 shares of Common Stock have been issued under the DRIP. 

There have been no shares issued under the DRIP since it was suspended in 2018.

SHARE-BASED INCENTIVE PLAN

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Prior to our IPO, the value of non-vested shares was calculated based on the offering price of the shares in the most recent private placement offering of $ 20.00 , adjusted for stock dividends since granted and assumed selling costs, which management believed approximated fair market value as of the date of grant.

Upon our IPO, the value of non-vested shares granted is typically calculated based on the closing price of our common stock on the date of the grant.

Upon our IPO, the value of non-vested shares granted is generally calculated based on the closing price of our common stock on the date of the grant. 

During our Annual Stockholders meeting, held on May 26, 2022, the Company's 2017 Incentive Award Plan was amended to increase the available shares for issuance from 1.1 million to 2.5 million.

A summary of the activity for the Company’s restricted stock was as follows:

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349,042  

The non-vested restricted shares outstanding as of December 31, 2021  will vest over the next one to six years.

Share-based compensation expense for the years ended December 31, 2021  and 2020  was approximately $ 1.6 million and $ 1.1 million , respectively. 

As of December 31, 2021 and December 31, 2020, future unrecognized stock compensation related to unvested shares totaled approximately $ 1.6 million and $ 1.2 million, respectively.

The non-vested restricted shares outstanding as of

December 31, 2022

 will vest over the next one to five  years.

Share-based compensation expense for the years ended

December 31, 2022

 was approximately $ 1.2 million and

$ 1.6 million

, respectively. 

December 31, 2022

, future unrecognized stock compensation related to unvested shares totaled approximately $ 1.5  million and $ 1.6 million, respectively.

 SEGMENTS

The Company’s reportable segments consist of the three types of commercial real estate properties for which the Company’s decision-makers internally evaluate operating performance and financial results:

Office/Industrial Properties, Model Homes and Retail Properties.

The Company also has certain corporate level activities including accounting, finance, legal administration and management information systems which are not considered separate operating segments. The accounting policies of the reportable segments are the same as those described in Note 2.

 There is no significant intersegment activity.

The Company’s reportable segments consist of three types of real estate properties for which the Company’s decision-makers internally evaluate operating performance and financial results:

Office/Industrial Properties, Model Home Properties and Retail Properties.

The Company also has certain corporate-level activities including accounting, finance, legal administration, and management information systems which are not considered separate operating segments. 

There is no material inter-segment activity.

The Company evaluates the performance of its segments based upon net operating income (“NOI”), which is a non-GAAP supplemental financial measure.

The Company defines NOI for its segments as operating revenues (rental income, tenant reimbursements and other operating income) less property and related expenses (property operating expenses, real estate taxes, insurance, asset management fees, impairments and provision for bad debt).

NOI excludes certain items that are not considered to be controllable in connection with the management of an asset such as non-property income and expenses, depreciation and amortization, real estate acquisition fees and expenses and corporate general and administrative expenses.

The Company uses NOI to evaluate the operating performance of the Company’s real estate investments and to make decisions regarding allocation of resources.

The Company evaluates the performance of its segments based upon net operating income (“NOI”), which is a non-GAAP supplemental financial measure.

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The Company uses NOI to evaluate the operating performance of the Company’s real estate investments and to make decisions about resource allocations.

The following tables reconcile the Company’s segment activity to its results of operations and financial position as of and for the years ended December 31, 2021  and 2020 , respectively.

For the Year Ended December 31,

The following tables compare the Company’s segment activity to its results of operations and financial position as of and for the years ended December 31, 2022  and 2021 , respectively.

Year Ended December 31,

Office/Industrial Properties:

Rental, fees and other income

$ 13,161,268  

$ 17,128,687  

Property and related expenses

( 5,769,843 )  

( 7,977,561 )

Net operating income, as defined

7,391,425  

9,151,126  

Model Home Properties:

Rental, fees and other income

3,211,149  

4,251,980  

Property and related expenses

( 129,389 )  

Net operating income, as defined

3,081,760  

4,049,313  

Retail Properties:

Rental, fees and other income

3,023,316  

2,971,125  

Property and related expenses

( 1,056,581 )  

( 2,368,906 )

Net operating (loss) income, as defined

1,966,735  

602,219  

Reconciliation to net loss:

Net operating income, as defined

Reconciliation to net income (loss):

Total net operating income, as defined, for reportable segments

12,439,920  

13,802,658  

General and administrative expenses

( 6,225,510 )  

( 5,751,754 )

Depreciation and amortization

( 5,397,498 )  

( 6,274,321 )

Interest expense

( 4,822,085 )  

( 8,813,067 )

Deferred offering costs

Gain on extinguishment of government debt

10,000  

451,785  

Other income (expense), net

( 3,417 )  

Income tax expense

47,620  

Gain on sale of real estate

2,487,528  

1,245,460  

$ ( 1,463,442 )  

$ ( 6,261,398 )

Net income (loss)

Assets by Reportable Segment:

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Land, buildings and improvements, net (1)

$ 78,240,086  

$ 99,120,649  

Total assets (2)

$ 76,453,436  

$ 100,046,782  

Model Home Properties:

Land, buildings and improvements, net (1)

$ 34,089,046  

$ 42,509,596  

Total assets (2)

$ 31,047,202  

$ 42,246,022  

Retail Properties:

Land, buildings and improvements, net (1)

$ 25,693,239  

$ 24,555,371  

Total assets (2)

$ 27,579,469  

$ 26,108,109  

Reconciliation to Total Assets:

Total assets for reportable segments

$ 135,080,107  

$ 168,400,913  

Other unallocated assets:

Cash, cash equivalents and restricted cash

6,738,345  

2,149,088  

Other assets, net

19,378,311  

15,018,615  

$ 161,196,763  

$ 185,568,616  

Includes lease intangibles and the land purchase option related to property acquisitions.

Includes land, buildings and improvements, current receivables, deferred rent receivables and deferred leasing costs and other related intangible assets, all shown on a net basis.

Includes land, buildings and improvements, cash, cash equivalents, and restricted cash, current receivables, deferred rent receivables and deferred leasing costs and other related intangible assets, all shown on a net basis.

For the Year Ended December 31,

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Acquisition of operating properties

$ 8,891,810  

Capital expenditures and tenant improvements

1,513,362  

2,825,169  

Model Home Properties:

Acquisition of operating properties

8,426,750  

10,161,613  

Retail Properties:

Acquisition of operating properties

4,906,266  

Capital expenditures and tenant improvements

83,824  

Acquisition of operating properties, net

22,224,826  

10,161,613  

Capital expenditures and tenant improvements

1,597,186  

2,834,373  

Total real estate investments

$ 23,822,012  

$ 12,995,986  

 SUBSEQUENT EVENTS

Sponsorship of Special Purpose Acquisition Company

The registration statement and prospectus relating to the initial public offering (“IPO”) of the SPAC, Murphy Canyon Acquisition Corp.

(“Murphy Canyon”), was declared effective by the Securities and Exchange Commission (the “SEC”) on February 2, 2022 and SPAC units, consisting of one share of Class A common stock, par value $ 0.0001 per share, of Murphy Canyon and one redeemable warrant, with each whole warrant entitling the holder thereof to purchase one share of common stock at a price of $ 11.50 per share, began trading on the Nasdaq Global Market on February 3, 2022.

Once the securities comprising the units begin separate trading, the common stock and the warrants are expected to be traded on the Nasdaq Global Market under the symbols “MURF”

and “MURFW,”

respectively.

The Murphy Canyon IPO closed on February 7, 2022, raising gross proceeds for Murphy Canyon of $ 132,250,000 , including the exercise in full by the underwriters of their over-allotment option.

In connection with the IPO, we purchased, through the Sponsor, 754,000 placement units (the “placement units”) at a price of $ 10.00 per unit, for an aggregate purchase price of $ 7,540,000 . 

The Sponsor has agreed to transfer an aggregate of 45,000  placement units ( 15,000 each) to each of Murphy Canyon’s independent directors.

Immediately following the IPO, Murphy Canyon began to evaluate acquisition candidates in the real estate industry, including construction, homebuilding, real estate owners and operators, arrangers of financing, insurance, and other services for real estate, and adjacent businesses and technologies targeting the real estate space with an aggregate combined enterprise value of approximately

$ 300 million to

$ 1.2 billion.

Murphy Canyon’s goal is to complete its initial business combination (“IBC”) within

one year of its IPO. 

We expect Murphy Canyon to operate as a separately managed, publicly traded entity following the completion of the IBC, or “De-SPAC”. 

$ 7,540,000 to purchase the placement units was funded with the use of our unrestricted cash on hand, which totaled approximately

$ 10 million as of

December 31, 2021. 

The Company is currently evaluating the consolidation treatment for our investment in the SPAC after the IPO on

February 7, 2022. 

While we have

not concluded our review it is possible that we will continue to consolidate Murphy Canyon into the Company’s financial statements after its IPO. 

If we ultimately consolidate Murphy Canyon into our financial statements, they would include approximately

$ 134 million in restricted cash held in trust.

Warrant Dividend

We set a record date of January 14, 2022 with respect to the distribution of five -year listed warrants (the “Series A Warrants”). 

The Series A Warrants and the shares of common stock issuable upon the exercise of the Series A Warrants were registered on a registration statement that was filed with the SEC and was declared effective January 21, 2022.

The Series A Warrants commenced trading on the Nasdaq Capital Market under the symbol “SQFTW”

on January 24, 2022 and were distributed on that date to persons who held shares of common stock and existing outstanding warrants as of the January 14, 2022 record date, or who acquired shares of common stock in the market following the record date, and who continued to hold such shares at the close of trading on January 21, 2022. 

The Series A Warrants give the holder the right to purchase one share of common stock at $ 7.00 per share, for a period of five years.

During January, February and March 2022, the Company has continued to announce and pay the monthly dividend on its 9.375 % Series D Cumulative Redeemable Perpetual Preferred Stock in the amount of $ 0.19531 per share for each month, respectively.

On March 1, 2022, the Company announced that its Board of Directors has declared a cash dividend of $ 0.105 per share on its Series A Common Stock for the first quarter of 2022.

The dividend will be payable on March 28, 2022, to all stockholders of record as of the close of business on March 16, 2022.

In February 2022, the Company listed our property in Bismarck, ND, Grand Pacific Center, for sale at approximately $ 7.5 million. 

As of December 31, 2021, Grand Pacific Center had a book value of approximately $ 5.5 million.

On March 11, 2022, the Company completed the sale our property World Plaza, located in San Bernardino, CA, for $ 10 million to an unrelated third party.   

However, he will continue to remain an employee of our model home division.

Sponsorship of Special Purpose Acquisition Company and Trust Extension

At the special meeting the stockholders also approved a proposal to amend the SPAC’s certificate of incorporation to expand the methods that it may employ to not become subject to the “penny stock”

rules of the SEC. 

In connection with the stockholders’

vote at the special meeting, 11,037,272 shares of common stock were tendered for redemption for a redemption price of approximately $ 10.33 per share, leaving 2,187,728 shares of Class A common stock outstanding and subject to possible redemption in connection with a business combination.

On March 3, 2023 we loaned Murphy Canyon $ 300,000 to fund its trust account and for operating expenses, and may lend up to $ 1.5 million in total. 

On March 7, 2023, 

the Company, though it subsidiary, entered into a $ 1.5 million promissory note with Murphy Canyon Acquisition Corp to fund their trust account and operating expenses. 

On March 7, 2023 we advanced $300,000 and will provide additional funds as necessary under the promissory note.

These loans are non-interest bearing, unsecured and will be repayable in full upon the earlier of (i) the date on which Murphy Canyon Acquisition Corp consummate their initial business combination and (ii) the date that their winding up is effective.

Presidio Property Trust, Inc.

14 unchanged sentences

Genesis Plaza, San Diego, CA

$ 6,169  

$ 1,400  

$ 8,600  

$ 10,000  

$ 2,661  

$ 1,400  

$ 11,261  

$ 12,661  

$ 4,350  

$ 8,311  

Dakota Center, Fargo, ND

11,619  

12,451  

Grand Pacific Center, Bismarck, ND

Arapahoe Center, Centennial, CO

10,430  

11,850  

11,022  

12,442  

West Fargo Industrial, Fargo, ND

1 unchanged sentence

One Park Centre, Westminster, CO

10,548  

Shea Center II, Highlands Ranch, CO

17,495  

23,747  

25,961  

26,028  

28,241  

20,247  

Baltimore, Baltimore, MD

McElderry, Baltimore, MD

Total Office/ Industrial properties

57,389  

11,981  

80,536  

92,517  

12,556  

11,981  

93,092  

105,073  

26,482  

78,283  

World Plaza , San Bernardino, CA (2)

10,521  

12,219  

Union Town Center, Colorado Springs, CO

11,212  

11,279  

Research Parkway, Colorado Springs, CO

( 50 )  

Mandolin, Houston, TX

Total Retail properties

21,698  

26,884  

26,018  

31,203  

25,693  

Model Homes-DMH LP #202

2017 - 2018  

Model Homes-DMH LP #203

2016 - 2019  

Model Homes-DMH LP #204

2018 - 2020  

Model Homes-DMH LP #205

2019 - 2020  

Model Homes-DMH LP #206

2020 - 2021  

Model Homes-NMH Inc.

10,920  

12,801  

10,920  

12,801  

12,413  

2017 - 2021  

Total Model Home properties

22,154  

29,917  

35,746  

29,917  

35,746  

34,089  

CONSOLIDATED TOTALS:

$ 89,422  

$ 22,995  

$ 132,151  

$ 155,146  

$ 16,876  

$ 22,995  

$ 149,028  

$ 172,022  

$ 32,949  

$ 1,008  

$ 138,065  

(1)     Depreciation is computed on a straight-line basis using useful lives up to 39 years.

( 2 )     Property held for sale as of December 31, 2021 .

( 3 )     Property was listed as held for sale in February 2022.

Presidio Property Trust, Inc.

4 unchanged sentences

Balance at the beginning of the year

$ 208,641,166  

$ 244,320,582  

22,224,826  

10,161,613  

1,598,105  

2,834,367  

( 608,000 )  

( 1,730,851 )

Dispositions of real estate

( 60,842,404 )  

( 46,944,545 )

Balance at the end of the year

$ 171,013,693  

$ 208,641,166  

Accumulated depreciation and amortization

Balance at the beginning of the year

$ ( 42,387,199 )  

$ ( 44,113,962 )

Depreciation and amortization expense

( 5,029,579 )  

( 5,938,958 )

Dispositions of real estate

14,468,021  

7,665,721  

Balance at the end of the year

$ ( 32,948,757 )  

$ ( 42,387,199 )

Real estate assets, net

$ 138,064,936  

$ 166,253,967  

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures