Presidio Property Trust, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES   We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-14(c). In designing and evaluating the disclosure controls and procedures, Management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and Management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.   As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.   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, 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   Our Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our Management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on our evaluation under the framework in Internal Control — Integrated Framework, our Management concluded that our internal control over financial reporting was effective as of December 31, 2022.   This annual report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding our internal control over financial reporting as such report is not required for the Company.     ITEM 9B. OTHER INFORMATION   None.     ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS   None.   63 Table of Contents   ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE   The information required by this item is set forth under the captions “Board of Directors” and “Executive Officers of the Company” 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 estimated to be held on June 1, 2023.     ITEM 11. EXECUTIVE COMPENSATION   The information required by this item is set forth under the caption “Executive Compensation” 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.     ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS   The information required by this item will be set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” 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.     ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE   The information required by this item is set forth under the caption “Related Party Transactions” 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.     ITEM 14. PRINCIPAL ACCOUNT ING FEES AND SERVICES   The information required by this item is set forth under the caption “Independent Registered Public Accounting Firm Fees and Services” 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.       PART IV   ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES   (1) Financial Statements - the following documents are filed as part of this report:     • Report of Independent Registered Public Accounting Firm   • Consolidated Balance Sheets as of December 31, 2022 and 2021   • Consolidated Statements of Operations for the years ended December 31, 2022 and 2021   • Consolidated Statements of Equity for the years ended December 31, 2022 and 2021   • Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021   • Notes to Consolidated Financial Statements   (2) Financial Statement Schedules - the following documents are filed as part of this report:     • Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization as of December 31, 2022   All other financial statement schedules have been omitted for the reason that the required information is presented in the financial statements or notes thereto, the amounts involved are not significant or the schedules are not applicable.   64 Table of Contents   (3) Exhibits - an index to the Exhibits as filed as part of this Form 10-K is set forth below.   Number   Description           3.1   Articles of Merger filed with the Maryland State Department of Assessments and Taxation and the California Secretary of State on August 4, 2010 (incorporated by reference to Exhibit 3.03 of the Company’s Current Report on Form 8-K filed on August 10, 2010).           3.2   Articles of Amendment and Restatement of the Articles of Incorporation, dated as of July 30, 2010 (incorporated by reference to Exhibit 3.01 of the Company’s Current Report on Form 8-K filed on August 10, 2010).           3.3   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).           3.4   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).           3.5   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).           3.6   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).           3.7   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).           3.8   Articles Supplementary classifying and designating an additional 115,000 shares of the Series D Preferred Stock (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on June 15, 2021).           3.9   Second Amended and Restated Bylaws of Presidio Property Trust, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on October 19, 2017).           4.1   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).           4.2   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).           4.3   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).           4.4   Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on July 14, 2021).           4.5   Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.3 of the Company’s Current Report on Form 8-K filed on July 14, 2021).           4.6   Form of Warrant (incorporated by reference to Exhibit 4.5 of the Company’s Registration Statement on Form S-11 filed on November 9, 2021).           4.7   Form of Warrant Agent Agreement (incorporated by reference to Exhibit 4.6 of the Company’s Registration Statement on Form S-11 filed on November 9, 2021).           10.1+   1999 Flexible Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Registration Statement on Form 10-12B filed on May 6, 2008).           10.2   Dividend Reinvestment Plan (incorporated by reference to Exhibit 10.2 of the Company ’ s Registration Statement on Form 10-12B filed on May 6, 2008).           10.3   Promissory Note, dated as of September 17, 2019, by and between Presidio Property Trust, Inc. and Polar Multi-Strategy Master Fund (incorporated by reference to Exhibit 1.1 of the Company’s Current Report on Form 8-K filed on September 23, 2019).           10.4   Agreement, dated as of September 17, 2019, by and between Presidio Property Trust, Inc. and Polar Multi-Strategy Master Fund (incorporated by reference to Exhibit 1.2 of the Company’s Current Report on Form 8-K filed on September 23, 2019).           10.5+   Employment Agreement for Mr. Heilbron, effective as of October 18, 2017 (incorporated by reference to Exhibit 10.2 of the Company’s Annual Report on Form 10-K filed on March 30, 2021).           10.7   Purchase and Sale Agreement and Joint Escrow Instructions among NetREIT Highland, LLC, NetREIT Joshua, LLC, NetREIT Casa Grande, LP, NetREIT Sunrise, LLC, NetREIT, Inc. and Sparky’s Storage 18 (CA) LP, dated as of February 6, 2015; as amended by the First Amendment dated February 25, 2015, and the Second Amendment dated April 2, 2015 (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on April 15, 2015).           10.8   Form of Restricted Stock Agreement under 1999 Flexible Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Registration Statement on Form 10-12B filed on May 6, 2008).           10.9+   Presidio Property Trust, Inc. 2017 Incentive Award Plan (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on October 19, 2017).           10.10+   Form of Restricted Stock Agreement under 2017 Incentive Award Plan (incorporated by reference to Exhibit 10.25 of the Company’s Registration Statement on Form S-11/A filed on January 17, 2018).           10.11   Form of Placement Agency Agreement, dated as of July 12, 2021, by and between the Company and the Placement Agent (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on July 14, 2021).           10.12   Form of Securities Purchase Agreement, dated as of July 12, 2021, by and between the Company and the Purchaser (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on July 14, 2021).           10.13   At-The-Market Offering Agreement dated November 8, 2021, by and between Presidio Property Trust, Inc. and The Benchmark Company, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on November 9, 2021).           10.14   Ninth Amendment to Loan Agreement signed August 19, 2021 (incorporated by reference to Exhibit 1.1 of the Company’s Current Report on Form 8-K filed on August 25, 2021).           10.15   Loan Agreement dated February 26, 2016, together with Second Amendment to Loan Agreement dated as of June 29, 2016, Third Amendment to Loan Agreement dated as of April 11, 2017, Joinder and Fourth Amendment to Loan Agreement dated as of February 20, 2018, Fifth Amendment to Loan Agreement dated as of April 11, 2018, Joinder and Sixth Amendment to Loan Agreement dated as of April 11, 2019, Joinder and Seventh Amendment to Loan Agreement dated as May 22, 2020 and Eighth Amendment to Loan Agreement dated as of June 26, 2020 (incorporated by reference to Exhibit 1.2 of the Company’s Current Report on Form 8-K filed on August 25, 2021).           10.16   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).           10.17   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).           10.18   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).           14   Code of Ethics (incorporated by reference to Exhibit 14 of the Company’s Annual Report on Form 10-K filed on March 30, 2021).           21.1   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).           23.1   Consent of Independent Registered Public Accounting Firm *           31.1   Certificate of the Company’s Chief Executive Officer (Principal Executive Officer) pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *           31.2   Certification of the Company’s Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *           31.3   Certification of the Company’s Principal Accounting Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *           32.1   Certification of Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *           101.INS   Inline XBRL Instance Document (the I nstance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)     65 Table of Contents   101.SCH   Inline XBRL Taxonomy Extension Schema Document        101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document        101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document        101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document        101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document        104            Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)   ____________________________________________________   ∗ Filed herewith   + Denotes a compensatory plan or arrangement   66 Table of Contents   Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.     Signature   Title   Date           /s/ Jack K. Heilbron   Director, Chairman of the Board and Chief Executive Officer   March 28, 2023 Jack K. Heilbron   (Principal Executive Officer)               /s/ Adam Sragovicz   Chief Financial Officer   March 28, 2023 Adam Sragovicz                   /s/ Ed Bentzen   Chief Accounting Officer   March 28, 2023 Ed Bentzen   (Principal Accounting Officer)               /s/ Jennifer A. Barnes   Director   March 28, 2023 Jennifer A. Barnes                   /s/ David T. Bruen   Director   March 28, 2023 David T. Bruen                   /s/ James R. Durfey   Director   March 28, 2023 James R. Durfey                   /s/ Sumner J. Rollings   Director   March 28, 2023 Sumner J. Rollings           67 Table of Contents         INDEX TO CONSOLIDATED FINANCIAL STATEMENTS     Page     REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  (PCAOB ID 23 ) F-1     FINANCIAL STATEMENTS:   Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization F-31     Table of Contents     Report of Independent Registered Public Accounting Firm   To the shareholders and the board of directors of   Presidio Property Trust, Inc. and Subsidiaries   Opinion on the Financial Statements   We have audited the accompanying consolidated balance sheets of Presidio Property Trust, Inc. 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 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 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. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.   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 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: (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.   F-1 Table of Contents   Real Estate Asset and Lease Intangible Impairment Assessment   Critical Audit Matter Description   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. When indicators of potential impairment suggest that the carrying value of real estate assets may not be recoverable, management assesses the recoverability by estimating whether the Company will recover the carrying value of its real estate assets through the undiscounted future cash flows and the eventual disposition of the investment. 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, 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. 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. In turn, auditing management’s judgments regarding forecasts of future revenue and cash flows, and the resulting fair value of real estate assets compared to their carrying value involved a high degree of judgement and subjectivity.   How We Addressed the Matter in Our Audit   The primary procedures we performed to address this critical audit matter included:     ● 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.     /s/  Baker Tilly US, LLP      We have served as the Company's auditor since 2009.   Irvine, California   March 28, 2023   F-2 Table of Contents   Presidio Property Trust, Inc. and Subsidiaries Consolidated Balance Sheets       December 31,     December 31,       2022     2021                   ASSETS                 Real estate assets and lease intangibles:                 Land   $ 19,189,386     $ 21,136,379   Buildings and improvements     125,979,374       119,224,375   Tenant improvements     13,861,839       12,752,518   Lease intangibles     4,110,139       4,110,139   Real estate assets and lease intangibles held for investment, cost     163,140,738       157,223,411   Accumulated depreciation and amortization     ( 34,644,511 )     ( 30,589,969 ) Real estate assets and lease intangibles held for investment, net     128,496,227       126,633,442   Real estate assets held for sale, net     2,016,003       11,431,494   Real estate assets, net     130,512,230       138,064,936   Other assets                 Cash, cash equivalents and restricted cash     16,516,725       14,702,089   Deferred leasing costs, net     1,516,835       1,348,234   Goodwill     2,423,000       2,423,000   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       —   TOTAL ASSETS   $ 291,351,654     $ 161,196,763   LIABILITIES AND EQUITY                 Liabilities:                 Mortgage notes payable, net   $ 95,899,176     $ 87,324,319   Mortgage notes payable related to properties held for sale, net     999,523       1,535,513   Mortgage notes payable, total net     96,898,699       88,859,832   Accounts payable and accrued liabilities     4,028,564       4,569,537   Accounts payable and accrued liabilities of SPAC (see Notes 2 & 9)     5,046,725       15,499   Accrued real estate taxes     1,879,875       1,940,913   Dividends payable preferred stock     178,511       179,685   Lease liability, net     46,833       75,547   Below-market leases, net     18,240       73,130   Total liabilities     108,097,447       95,714,143   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       —   Equity:                 Series D Preferred Stock, $ 0.01 par value per share; 1,000,000 shares authorized; 916,061 shares issued and outstanding (liquidation preference $ 25.00 per share) as of December 31, 2022 and December 31, 2021, respectively     9,140       9,200   Series A Common Stock, $ 0.01 par value per share, shares authorized: 100,000,000 ; 11,655,583 shares and 11,599,720 shares were issued and outstanding at December 31, 2022 and December 31, 2021, respectively     118,079       115,997   Additional paid-in capital     182,044,157       186,492,012   Dividends and accumulated losses     ( 138,341,750 )     ( 130,947,434 ) Total stockholders' equity before noncontrolling interest     43,829,626       55,669,775   Noncontrolling interest     9,013,446       9,812,845   Total equity     52,843,072       65,482,620   TOTAL LIABILITIES AND EQUITY   $ 291,351,654     $ 161,196,763       See Notes to Consolidated Financial Statements   F-3 Table of Contents     Presidio Property Trust, Inc. and Subsidiaries Consolidated Statements of Operations       For the Year Ended December 31,       2022     2021   Revenues:                 Rental income   $ 17,203,310     $ 18,420,257   Fees and other income     560,971       810,852   Total revenue     17,764,281       19,231,109   Costs and expenses:                 Rental operating costs     5,841,396       6,183,189   General and administrative     6,163,816       6,225,510   Depreciation and amortization     5,465,015       5,397,498   Impairment of real estate assets     —       608,000   Total costs and expenses     17,470,227       18,414,197   Other income (expense):                 Interest expense - mortgage notes     ( 4,712,487 )     ( 4,542,712 ) Interest expense - note payable     —       ( 279,373 ) Gain on sale of marketable securities, net     2,018,847       39,428   Interest and other (expense), net     21,075       ( 42,845 ) Gain on sales of real estate, net     5,079,912       2,487,528   Gain on extinguishment of government debt     —       10,000   Income tax (expense) credit     ( 1,215,873 )     47,620   Total other income (expense), net     1,191,474       ( 2,280,354 ) Net income (loss)     1,485,528       ( 1,463,442 ) Less: Income attributable to noncontrolling interests     ( 3,612,647 )     ( 2,162,140 ) Net loss attributable to Presidio Property Trust, Inc. stockholders   $ ( 2,127,119 )   $ ( 3,625,582 ) Less: Preferred Stock Series D dividends     ( 2,152,740 )     ( 1,173,948 ) Less: Series A Warrant dividend     ( 2,456,512 )     —   Net loss attributable to Presidio Property Trust, Inc. common stockholders   $ ( 6,736,371 )   $ ( 4,799,530 )                   Net loss per share attributable to Presidio Property Trust, Inc. common stockholders:                 Basic & Diluted   $ ( 0.57 )   $ ( 0.46 ) Diluted   $ ( 0.57 )   $ ( 0.46 )                   Weighted average number of common shares outstanding - basic & diluted     11,753,041       10,340,975     See Notes to Consolidated Financial Statements   F-4 Table of Contents     Presidio Property Trust, Inc. and Subsidiaries Consolidated Statements of Equity                                       Additional     Dividends and     Total     Non-               Preferred Stock Series D     Common Stock     Paid-in     Accumulated     Stockholders ’     controlling     Total       Shares     Amount     Shares     Amount     Capital     Losses     Equity     Interests     Equity   Balance, December 31, 2020     —     $ —       9,508,363     $ 95,038     $ 156,463,146     $ ( 121,674,505 )   $ 34,883,679     $ 15,238,902     $ 50,122,581   Net loss     —       —       —       —       —       ( 3,625,582 )     ( 3,625,582 )     2,162,140       ( 1,463,442 ) Dividends paid to Series A Common Stockholders     —       —       —       —       —       ( 4,473,399 )     ( 4,473,399 )     —       ( 4,473,399 ) Dividends to Series D Preferred Stockholders     —       —       —       —       —       ( 1,173,948 )     ( 1,173,948 )     —       ( 1,173,948 ) Issuance of Common Stock, net of issuance costs, including warrants exercised with offering *     —       —       2,000,000       20,000       8,851,879       —       8,871,879       —       8,871,879   Issuance of Series D Preferred Stock, net of issuance costs     920,000       9,200       —       —       20,480,603       —       20,489,803       —       20,489,803   Distributions in excess of contributions received     —       —       —       —       —       —       —       ( 7,588,197 )     ( 7,588,197 ) Repurchase of Common Stock, at cost     —       —       ( 29,721 )     ( 252 )     ( 110,379 )     —       ( 110,631 )     —       ( 110,631 ) Vesting of restricted Series A Common Stock     —       —       121,078       1,211       806,763       —       807,974       —       807,974   Balance, December 31, 2021     920,000     $ 9,200       11,599,720     $ 115,997     $ 186,492,012     $ ( 130,947,434 )   $ 55,669,775     $ 9,812,845     $ 65,482,620   Net income     —       —       —       —       —       ( 2,127,119 )     ( 2,127,119 )     3,612,647       1,485,528   Vesting of restricted stock     —       —       404,804       4,048       1,884,945       —       1,888,993       —       1,888,993   Dividends paid to Series A Common Stockholders     —       —       —       —       —       ( 3,114,456 )     ( 3,114,456 )     —       ( 3,114,456 ) Dividends to Series D Preferred Stockholders     —       —       —       —       —       ( 2,152,741 )     ( 2,152,741 )     —       ( 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 )     —       ( 4,023,113 )     —       ( 4,023,113 ) Remeasurement of SPAC shares to redemption value     —       —       —       —       ( 1,876,183 )     —       ( 1,876,183 )     —       ( 1,876,183 ) Distributions in excess of contributions received     —       —       —       —       —       —       —       ( 4,412,046 )     ( 4,412,046 ) Repurchase of Series A Common Stock, at cost     —       —       ( 196,631 )     ( 1,966 )     ( 311,423 )     —       ( 313,389 )     —       ( 313,389 ) Repurchase of Series D Preferred Stock, at cost     ( 6,013 )     ( 60 )     —       —       ( 122,081 )     —       ( 122,141 )     —       ( 122,141 ) Balance, December 31, 2022     913,987     $ 9,140       11,807,893     $ 118,079     $ 182,044,157     $ ( 138,341,750 )   $ 43,829,626     $ 9,013,446     $ 52,843,072                                                   )                                                                         )                            * See Additional Offerings & Warrants  in Note 1. ORGANIZATION AND BASIS OF PRESENTATION   See Notes to Consolidated Financial Statements.   F-5 Table of Contents   Presidio Property Trust, Inc. and Subsidiaries Consolidated Statements of Cash Flows       For the Year Ended December 31,       2022     2021   Cash flows from operating activities:                 Net income (loss)   $ 1,485,528     $ ( 1,463,442 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities:                 Depreciation and amortization     5,465,015       5,397,498   Stock compensation     1,204,106       1,614,228   Bad debt expense     73,055       164,623   Gain on sale of real estate assets, net     ( 5,079,912 )     ( 2,487,528 ) Gain on extinguishment of government debt     —       ( 10,000 ) Net change in fair value marketable securities     ( 42,664 )     ( 39,429 ) Net change in fair value SPAC Trust Account     ( 1,976,183 )     —   Impairment of real estate assets     —       608,000   Amortization of financing costs     240,090       479,853   Amortization of above-market leases     —       42,064   Amortization of below-market leases     ( 54,890 )     ( 60,203 ) Straight-line rent adjustment     ( 252,759 )     ( 231,577 ) Changes in operating assets and liabilities:                 Other assets     1,050,221       190,354   Accounts payable and accrued liabilities     ( 1,121,752 )     ( 1,221,725 ) Accrued real estate taxes     ( 61,038 )     ( 607,773 ) Net cash provided operating activities     928,817       2,374,943   Cash flows from investing activities:                 Real estate acquisitions     ( 15,673,575 )     ( 22,224,826 ) Additions to buildings and tenant improvements     ( 2,107,505 )     ( 1,597,186 ) Investment in marketable securities     ( 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     ( 70,889 )     ( 117,062 ) Proceeds from sales of real estate, net     25,768,334       49,583,445   Net cash (used in) provided by investing activities     ( 126,377,667 )     24,204,965   Cash flows from financing activities:                 Proceeds from mortgage notes payable, net of issuance costs     20,288,093       11,703,440   Repayment of mortgage notes payable     ( 11,958,568 )     ( 43,069,312 ) Repayment of note payable     —       ( 7,675,598 ) Payment of deferred offering costs     ( 3,201,266 )     ( 572,458 ) Distributions to noncontrolling interests, net     ( 4,412,046 )     ( 7,588,197 ) Proceeds from initial public offering of SPAC     134,024,416       —   SPAC offering non-controlling interest adjustment     ( 1,774,416 )     —   Issuance of Series A Common Stock, net of offering costs     —       8,871,879   Issuance of Series D Preferred Stock, net of offering costs     —       20,489,803   Repurchase of Series A Common Stock, at cost     ( 313,389 )     ( 110,631 ) Repurchase of Series D Preferred Stock, at cost     ( 122,141 )     —   Dividends paid to Series D Preferred Stockholders     ( 2,152,741 )     ( 994,263 ) Dividends paid to Series A Common Stockholders     ( 3,114,456 )     ( 4,473,399 ) Net cash provided by (used in) financing activities     127,263,486       ( 23,418,736 ) Net increase in cash, cash equivalents and restricted cash     1,814,636       3,161,172   Cash, cash equivalents and restricted cash - beginning of period     14,702,089       11,540,917   Cash, cash equivalents and restricted cash - end of period   $ 16,516,725     $ 14,702,089   Supplemental disclosure of cash flow information:                 Interest paid-mortgage notes payable   $ 4,110,288     $ 4,320,174   Interest paid-notes payable   $ —     $ 103,861   Non-cash financing activities:                 Unpaid deferred financing costs   $ —     $ 15,449   Dividends payable - Preferred Stock Series D   $ 178,511     $ 179,685     See Notes to Consolidated Financial Statements   F-6 Table of Contents   Presidio Property Trust, Inc. and Subsidiaries Notes to Consolidated Financial Statements     1. ORGANIZATION AND BASIS OF PRESENTATION   Organization . Presidio Property Trust, Inc. (“we”, “our”, “us” or the “Company”) is an internally-managed real estate investment trust (“REIT”), with holdings in office, industrial, retail and model home properties. We were incorporated in the State of California on September  28, 1999, and in August 2010, we reincorporated as a Maryland corporation. In October 2017, we changed our name from “NetREIT, Inc.” to “Presidio Property Trust, Inc.” Through Presidio Property Trust, Inc., its subsidiaries, and its partnerships, we own  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 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 856 through 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 90% of our REIT taxable income to our stockholders and meet the various other requirements imposed by the Code relating to such matters as operating results, asset holdings, distribution levels, and diversity of stock ownership. Provided we maintain our qualification for taxation as a REIT, we are generally not subject to corporate-level income tax on the earnings distributed currently to our stockholders that we derive from our REIT qualifying activities. If we fail to maintain our qualification as a REIT in any taxable year and are unable to avail ourselves of certain savings provisions set forth in the Code, all our taxable income would be subject to federal income tax at regular corporate rates, including any applicable alternative minimum tax. We are subject to certain state and local income taxes.   We, together with one of our entities, have elected to treat our subsidiaries as a taxable REIT subsidiary (a “TRS”) for federal income tax purposes. Certain activities that we undertake must be conducted by a TRS, such as non-customary services for our tenants, and holding assets that we cannot hold directly. A TRS is subject to federal and state income taxes. The Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. Neither the Company nor its subsidiaries have been assessed any significant interest or penalties for tax positions by any tax jurisdictions.   F- 7 Table of Contents   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, 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. 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 (the “Placement Agent Warrants”) 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 Warrants.  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 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 - 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  9.375 % Series D Cumulative Redeemable Perpetual Preferred Stock ("Series D Preferred Stock") for cash consideration of $ 25.00 per share to a syndicate of underwriters led by The Benchmark Company, LLC, 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. The Company granted the underwriters a 45 -day option to purchase up to an additional 120,000 shares of Series D Preferred Stock to cover over-allotments, which they exercised on June 17, 2021, resulting in approximately $ 2.7 million in net proceeds, after deducting the underwriting discounts and commissions and the offering expenses paid by the Company.  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 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.   Liquidity.   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.   F- 8 Table of Contents   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. 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. Management believes that the combination of working capital on hand and the ability to refinance commercial and model home mortgages will fund operations through at least the next twelve months from the date of the issuance of these audited financial statements.   Segments. The Company acquires and o perates income producing properties in three business segments including Office/Industrial Properties, Model Home Properties and Retail Properties. See Note 14. “Segments”.   Customer Concentration. 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, 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.     2. SIGNIFICANT ACCOUNTING POLICIES   Basis of Presentation. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).   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, and the Model Home Partnerships.  As used herein, references to the “Company” include references to Presidio Property Trust, its subsidiaries, and the partnerships. 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  2022  and  2021  and has included the accumulated amount of noncontrolling interests as part of equity since inception in February 2010. If a change in ownership of a consolidated subsidiary results in loss of control and deconsolidation, any retained ownership interest will be remeasured, with the gain or loss reported in the statement of operations. Management has evaluated the noncontrolling interests and determined that they do not contain any redemption features.   F- 9 Table of Contents   Use of Estimates . The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include the allocation of purchase price paid for property acquisitions between land, building and intangible assets acquired including their useful lives; valuation of long-lived assets, and the allowance for doubtful accounts, which is based on an evaluation of the tenants’ ability to pay. Actual results may differ from those estimates.   Real Estate Assets and Lease Intangibles. Land, buildings and improvements are recorded at cost, including tenant improvements and lease acquisition costs (including leasing commissions, space planning fees, and legal fees). 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, 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. 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, 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. Amortization of above and below-market rents resulted in a net increase in rental income of approximately $ 55,000 and $ 18,000 for the years ended December 31, 2022  and 2021 , respectively.   The value of in-place leases and unamortized lease origination costs are amortized to expenses over the remaining term of the respective leases, which range from less than a year to ten years. The amount allocated to acquired in-place leases is determined based on management’s assessment of lost revenue and costs incurred for the period required to lease the “assumed vacant” property to the occupancy level when purchased. The amount allocated to unamortized lease origination costs is determined by what the Company would have paid to a third -party to secure a new tenant reduced by the expired term of the respective lease. The amount allocated to tenant relationships is the benefit resulting from the likelihood of a tenant renewing its lease. Amortization expense related to these assets was approximately $ 0.2  million and $ 0.3  million for years ended December 31, 2022  and 2021 , respectively.   Real Estate Held for Sale and Discontinued Operations.  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 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.   F- 10 Table of Contents   Impairments of Real Estate Assets. We regularly review for impairment on a property-by-property basis. Impairment is recognized on a property held for use when the expected undiscounted cash flows for a property are less than the carrying amount at which time the property is written-down to fair value. The calculation of both discounted and undiscounted cash flows requires management to make estimates of future cash flows including but not limited to revenues, operating expenses, required maintenance and development expenditures, market conditions, demand for space by tenants and rental rates over long periods. Since our properties typically have a long life, the assumptions used to estimate the future recoverability of carrying value requires significant management judgment. Actual results could be significantly different from the estimates. These estimates have a direct impact on net income because recording an impairment charge results in a negative adjustment to net income. 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 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. As such, the Company recorded a $ 0.3 million non-cash impairment in the accompanying condensed consolidated statement of operations at  March 31,  2021. The sale was completed in May 2021.  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 .  Intangible assets, including goodwill and lease intangibles, are comprised of finite-lived and indefinite-lived assets. Lease intangibles represents the allocation of a portion of the purchase price of a property acquisition representing the estimated value of in-place leases, unamortized lease origination costs, tenant relationships and land purchase options. Intangible assets that are not deemed to have an indefinite useful life are amortized over their estimated useful lives. Indefinite-lived assets are not amortized. 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. No impairment was deemed to exist at December 31, 2022  and 2021 .   Depreciation and Amortization. The Company records depreciation and amortization expense using the straight-line method over the useful lives of the respective assets. 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, 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. Items classified as cash equivalents include money market funds. Cash balances in individual banks may exceed the federally insured limit of $250,000 by the Federal Deposit Insurance Corporation (the "FDIC"). No losses have been experienced related to such accounts. 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.   F- 11 Table of Contents   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. 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, 2022  and 2021 , 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. Costs incurred in connection with successful property leases are capitalized as deferred leasing costs and amortized to leasing commission expense on a straight-line basis over the terms of the related leases which generally range from one to five years. Deferred leasing costs consist of third -party leasing commissions. Management re-evaluates the remaining useful lives of leasing costs as the creditworthiness of the tenants and economic and market conditions change. If management determines the estimated remaining life of the respective lease has changed, the amortization period is adjusted. At December 31, 2022  and 2021 , 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  and 2021  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, 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.   Amortization of deferred financing costs are included in interest expense in the accompanying consolidated statements of operations.   Deferred Offering Costs.  Deferred offering costs represent legal, accounting and other direct costs related to our offerings.   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.   We have elected to be taxed as a REIT under Sections 856 through 860 of the Code, for federal income tax purposes. To maintain our qualification as a REIT, we are required to distribute at least 90 % of our REIT taxable income to our stockholders and meet the various other requirements imposed by the Code relating to such matters as operating results, asset holdings, distribution levels and diversity of stock ownership. Provided we maintain our qualification for taxation as a REIT, we are generally not subject to corporate level income tax on the earnings distributed currently to our stockholders that we derive from our REIT qualifying activities. If we fail to maintain our qualification as a REIT in any taxable year, and are unable to avail ourselves of certain savings provisions set forth in the Code, all of our taxable income would be subject to federal income tax at regular corporate rates, including any applicable alternative minimum tax. We are subject to certain state and local income taxes. As of December 31, 2022 , we have estimated approximately $ 18.0 million of Federal net operating loss (NOLs) carryforwards to offset potential future federal tax obligations. We may not generate sufficient taxable income in future periods to be able to realize fully the tax benefits of our NOL carry-forwards.   F- 12 Table of Contents   We, together with our subsidiary, NetREIT Dubose, have elected to treat such subsidiary as taxable REIT subsidiary (a “TRS”) for federal income tax purposes. Certain activities that we undertake must be conducted by a TRS, such as non-customary services for our tenants, and holding assets that we cannot hold directly. A TRS is subject to federal and state income taxes.   The Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. 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. The guidance requires disclosure of fair values calculated under each level of inputs within the following hierarchy:     • Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;     • Level 2: 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; and     • Level 3: 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 .  In instances where the market for a financial instrument is not  active, regardless of the availability of a nonbinding quoted market price, observable inputs might not  be relevant and could require us to make a significant adjustment to derive a fair value measurement.   Additionally, in an inactive market, a market price quoted from an independent third -party may  rely more on models with inputs based on information available only to that independent third -party. 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, 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.   F- 13 Table of Contents   Sales of Real Estate Assets .  Effective January 1, 2018, we adopted the guidance of ASC 610 - 20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610 - 20” ), which applies to sales or transfers to noncustomers of nonfinancial assets or in substance nonfinancial assets that do not meet the definition of a business. 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 un der ASU No. 2014 - 9. 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.   Revenue Recognition and Accounts Receivables . We recognize minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectability is reasonably assured and record amounts expected to be received in later years as deferred rent receivable. 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, 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. Tenant improvement ownership is determined based on various factors, including, but not limited to:     • whether the lease stipulates how a tenant improvement allowance may be spent;     • whether the amount of a tenant improvement allowance is in excess of market rates;     • whether the tenant or landlord retains legal title to the improvements at the end of the lease term;     • whether the tenant improvements are unique to the tenant or general-purpose in nature; and     • whether the tenant improvements are expected to have any residual value at the end of the lease.   We record property operating expense reimbursements due from tenants for common area maintenance, real estate taxes, and other recoverable costs in the period the related expenses are incurred.   We make estimates of the collectability of our tenant receivables related to base rents, including deferred rent receivable, expense reimbursements and other revenue or income. We specifically analyze accounts receivable, deferred rent receivable, historical bad debts, customer creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In addition, with respect to tenants in bankruptcy, management makes estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable. In some cases, the ultimate resolution of these claims can exceed one year. 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.   F- 14 Table of Contents   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.   F- 15 Table of Contents   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 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. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net earnings per share.  For the years ended December 31, 2022  and 2021 , 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.  In June 2017, the FASB issued ASU No. 2016 - 13,   Financial Instruments – Credit Losses, amended in February 2020 with ASU No. 2020 - 02, 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 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. 2020 - 06, Debt — Debt with Conversion and Other Options   (Subtopic 470 - 20 ) and Derivatives and Hedging - Contracts in Entity ’ s Own Equity   (Subtopic 815 - 40 ).  This ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas.  The amendments in ASU No. 2020 - 06 are effective for public business entities that meet the definition of a SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after  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  noting  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.   F- 16 Table of Contents       3. RECENT REAL ESTATE TRANSACTIONS   Acquisitions during the year ended December 31, 2022:     • 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:     • 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 Internal Revenue Code of 1986, as amended (the "Code").  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 . 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.   Dispositions during the year ended December 31, 2022:   We review our portfolio of investment properties for value appreciation potential on an ongoing basis, and dispose of any properties that no longer satisfy our requirements in this regard, taking into account tax and other considerations. 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, 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.     • Garden Gateway, which was sold on February 19, 2021, for approximately $ 11.2  million and the Company recognized a loss of approximately $ 1.4 million.     • Highland Court, which was sold on May 20, 2021, for approximately $ 10.2  million and the Company recognized a loss of approximately $ 1.6 million.     • Executive Office Park, which was sold on May 21, 2021,  for approximately $ 8.1  million and the Company recognized a gain of approximately $ 2.5 million.     • 44 model homes for approximately $ 20.7 million and the Company recognized a gain of approximately $ 3.2 million.     F- 17 Table of Contents     4.  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 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 building (“Office/Industrial Properties”) which total approximately rentable  756,265  square feet;     • Three retail shopping centers (“Retail Properties”) which total approximately  65,242 rentable square feet;     • 92 homes owned by our affiliated limited partnerships and one corporation (“Model Homes” or “Model Home Properties”) leased back on a triple-net basis to homebuilders that are owned by  five affiliated limited partnerships and  one  wholly-owned corporation.   A summary of the properties owned by the Company as of December 31, 2022  and 2021  is as follows:       Date       Real estate assets, net   Property Name   Acquired   Location   December 31, 2022     December 31, 2021   World Plaza (1)   September 2007   San Bernardino, CA   $ —     $ 9,272,213   Genesis Plaza (2)   August 2010   San Diego, CA     7,995,980       8,310,803   Dakota Center   May 2011   Fargo, ND     8,569,537       8,607,360   Grand Pacific Center (6)   March 2014   Bismarck, ND     5,228,006       5,457,447   Arapahoe Center   December 2014   Centennial, CO     8,664,604       8,821,278   Union Town Center   December 2014   Colorado Springs, CO     9,039,039       9,169,387   West Fargo Industrial   August 2015   Fargo, ND     6,893,292       7,025,325   300 N.P.   August 2015   Fargo, ND     2,899,694       2,929,563   Research Parkway   August 2015   Colorado Springs, CO     2,319,588       2,375,943   One Park Center   August 2015   Westminster, CO     7,991,809       7,992,420   Shea Center II (5)   December 2015   Highlands Ranch, CO     19,501,998       20,246,645   Mandolin (3)   August 2021   Houston, TX     4,783,985       4,875,696   Baltimore   December 2021   Baltimore, MD     8,690,874       8,891,810   Presidio Property Trust, Inc. properties               92,578,406       103,975,890   Model Home properties (4)   2017 - 2022   FL, TX, WI     37,933,824       34,089,046   Total real estate assets and lease intangibles, net             $ 130,512,230     $ 138,064,936     ( 1 ) This property was sold during the year ended December 31, 2022 . ( 2 ) 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. ( 3 ) A portion of the proceeds from the sale of Highland Court were used in like-kind exchange transactions pursued under Section 1031 of the Code for the acquisition of our Mandolin property. Mandolin is owned by NetREIT Palm Self-Storage LP, through its wholly owned subsidiary NetREIT Highland LLC, and the Company is the sole general partner and owns 61.3 % of NetREIT Palm Self-Storage LP. ( 4 ) Includes six  Model Homes listed as held for sale as of December 31, 2022 . ( 5 ) 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. ( 6 ) 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.   F- 18 Table of Contents       5. LEASE INTANGIBLES   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       Lease Intangibles     Accumulated Amortization     Lease Intangibles, net     Lease Intangibles     Accumulated Amortization     Lease Intangibles, net   In-place leases   $ 2,515,264     $ ( 2,485,234 )   $ 30,030     $ 2,515,264     $ ( 2,353,782 )   $ 161,482   Leasing costs     1,261,390       ( 1,236,591 )     24,799       1,261,390       ( 1,165,701 )     95,689   Above-market leases     333,485       ( 333,485 )     —       333,485       ( 333,485 )     —       $ 4,110,139     $ ( 4,055,310 )   $ 54,829     $ 4,110,139     $ ( 3,852,968 )   $ 257,171     At  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:     2023   $ 17,526   2024     17,526   2025     15,670   2026     4,107   2027     —   Thereafter     —   Total   $ 54,829         F- 19 Table of Contents     6. OTHER ASSETS   Other assets consist of the following:       December 31,     December 31,       2022     2021   Deferred rent receivable   $ 1,641,831     $ 1,660,197   Prepaid expenses, deposits and other     619,621       473,554   Investment in marketable securities     797,749       1,514,483   Accounts receivable, net     67,780       401,927   Right-of-use assets, net     45,843       74,643   Other intangibles, net     22,483       82,483   Notes receivable     316,374       316,374   Deferred offering costs     -       134,843   Total other assets   $ 3,511,681     $ 4,658,504     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 income (expense).  There are several risks associated with transactions in options on securities. For example, there are significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives. A transaction in options or securities may be unsuccessful to some degree because of market behavior or unexpected events. When we write a covered call option, we forgo, during the option’s life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the strike price of the call, but retain the risk of loss should the price of the underlying security decline. 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, 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, 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.   F- 20 Table of Contents     7.  MORTGAGE NOTES PAYABLE   Mortgage notes payable consist of the following:       Principal as of                             December 31,     December 31,     Loan     Interest           Mortgage note property   2022     2021     Type     Rate (1)     Maturity   300 N.P. (2)     -       2,232,923     Fixed       4.95 %   6/11/2022   Dakota Center     9,442,976       9,677,108     Fixed       4.74 %   7/6/2024   Research Parkway     1,648,237       1,705,438     Fixed       3.94 %   1/5/2025   Arapahoe Service Center     7,602,273       7,770,887     Fixed       4.34 %   1/5/2025   Union Town Center     8,025,300       8,173,568     Fixed       4.28 %   1/5/2025   One Park Centre     6,163,177       6,276,849     Fixed       4.77 %   9/5/2025   Genesis Plaza     6,055,682       6,168,604     Fixed       4.71 %   9/6/2025   Shea Center II     17,229,573       17,494,527     Fixed       4.92 %   1/5/2026   West Fargo Industrial (6)     4,030,297       4,148,405     Fixed       3.27 %   8/5/2029   Grand Pacific Center (3)     3,496,330       3,619,695     Fixed       4.02 %   8/1/2037   Baltimore     5,670,000       —     Fixed       4.67 %   4/6/2032   Mandolin     3,635,362       —     Fixed       4.35 %     4/20/2029   Subtotal, Presidio Property Trust, Inc. Properties   $ 72,999,207     $ 67,268,004                         Model Home mortgage notes (4) (5)     24,752,448       22,154,128     Fixed               2022 - 2025   Mortgage Notes Payable   $ 97,751,655     $ 89,422,132                         Unamortized loan costs     (852,956 )     (562,300 )                       Mortgage Notes Payable, net   $ 96,898,699     $ 88,859,832                           ( 1 ) Interest rates as of December 31, 2022 . ( 2 ) 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.   ( 3 ) 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). ( 4 ) As of December 31, 2022, there were six  model homes included as real estate assets held for sale. ( 5 ) 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 . ( 6 ) 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 were as follows as of December 31, 2022 :   F- 21 Table of Contents       Presidio Property     Model               Trust, Inc.     Homes     Total Principal   Years ending December 31:   Notes Payable     Notes Payable     Payments   2023   $ 1,470,877     $ 6,799,272     $ 8,270,149   2024     10,453,347       10,694,954       21,148,301   2025     28,851,691       7,258,222       36,109,913   2026     16,717,516       —       16,717,516   2027     364,407       —       364,407   Thereafter     15,141,369       —       15,141,369   Total   $ 72,999,207     $ 24,752,448     $ 97,751,655       8. NOTE PAYABLE   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. This loan advance is not required to be repaid, has no stipulations on use, and has been recorded as fees and other income in the condensed consolidated statements of operations during fiscal 2020. On  August 17, 2020, we received an additional Economic Injury Disaster Loan ("EIDL") of $ 150,000 , for which principal and interest payments are deferred for twelve months from the date of issuance, and interest accrues at 3.75% per year. The loan matures on August 17, 2050.  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).   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 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.   F- 22 Table of Contents     9.  COMMITMENTS AND CONTINGENCIES   The Company is obligated under certain tenant leases to fund tenant improvements and the expansion of the underlying leased properties.   Litigation. From time to time, we may become involved in various lawsuits or legal proceedings which arise in the ordinary course of business. Neither the Company nor any of the Company’s properties are presently subject to any material litigation nor, to the Company’s knowledge, is there any material threatened litigation.   Environmental Matters. The Company monitors its properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist, the Company is not currently aware of any environ mental liability with respect to the properties that would have a material effect on the Company’s financial condition, results of operations and cash flow. Further, the Company is not aware of any environmental liability or any unasserted claim or assessment with respect to an environmental liability that the Company believes would require additional disclosure or recording of a loss contingency.   Financial Markets.   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, 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. For example, the conflict between Russia and Ukraine could lead to disruption, instability and volatility in global markets and industries. The U.S. government and other governments in jurisdictions have imposed severe economic sanctions and export controls against Russia and Russian interests, have removed Russia from the SWIFT system, and have threatened additional sanctions and controls. The impact of these measures, as well as potential responses to them by Russia, is unknown. We have not currently experienced a direct material impact to our Company or operations; 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 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.   F- 23 Table of Contents   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.   10.  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 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. The Company granted the underwriters a 45 -day option to purchase up to an additional 120,000 shares of Series D Preferred Stock to cover over-allotments, which they exercised on June 17, 2021, resulting in approximately $ 2.7 million in net proceeds, after deducting the underwriting discounts and commissions and the offering expenses paid by the Company.  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 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:   Dividends: Holders of shares of the Series D Preferred Stock are entitled to receive cumulative cash dividends at a rate of 9.375 % per annum of the $ 25.00 per share liquidation preference (equivalent to $ 2.34375 per annum per share). Dividends will be payable monthly on the 15th day of each month (each, a “Dividend Payment Date”), provided that if any Dividend Payment Date is not a business day, then the dividend that would otherwise have been payable on that Dividend Payment Date may be paid on the next succeeding business day without adjustment in the amount of the dividend.   Voting Rights: Holders of shares of the Series D Preferred Stock will generally have no voting rights. However, if the Company does not pay dividends on the Series D Preferred Stock for eighteen or more monthly dividend periods (whether or not consecutive), the holders of the Series D Preferred Stock (voting separately as a class with the holders of all other classes or series of the Company’s preferred stock it may issue upon which like voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series D Preferred Stock in the election referred to below) will be entitled to vote for the election of two additional directors to serve on the Company’s  Board of Directors until the Company pays, or declares and sets apart funds for the payment of, all dividends that it owes on the Series D Preferred Stock, subject to certain limitations.   In addition, the affirmative vote of the holders of at least two -thirds of the outstanding shares of Series D Preferred Stock (voting together as a class with all other series of parity preferred stock the Company may issue upon which like voting rights have been conferred and are exercisable) is required at any time for the Company to (i) authorize or issue any class or series of its stock ranking senior to the Series D Preferred Stock with respect to the payment of dividends or the distribution of assets on liquidation, dissolution or winding up or (ii) to amend any provision of the Company charter so as to materially and adversely affect any rights of the Series D Preferred Stock or to take certain other actions.    F- 24 Table of Contents   Liquidation Preference : In the event of the Company’s voluntary or involuntary liquidation, dissolution or winding up, the holders of shares of Series D Preferred Stock will be entitled to be paid out of the assets the Company has legally available for distribution to its stockholders, subject to the preferential rights of the holders of any class or series of its stock the Company may issue ranking senior to the Series D Preferred Stock with respect to the distribution of assets upon liquidation, dissolution or winding up, a liquidation preference of $25.00 per share, plus any accumulated and unpaid dividends to, but not including, the date of payment, before any distribution of assets is made to holders of the Company’s common stock or any other class or series of the Company’s stock it may issue that ranks junior to the Series D Preferred Stock as to liquidation rights.   In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the Company’s available assets are insufficient to pay the amount of the liquidating distributions on all outstanding shares of Series D Preferred Stock and the corresponding amounts payable on all shares of other classes or series of the Company’s stock that it issues ranking on parity with the Series D Preferred Stock in the distribution of assets, then the holders of the Series D Preferred Stock and all other such classes or series of stock shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled.    Redemption: Commencing on or after June 15, 2026, the Company may redeem, at its option, the Series D Preferred Stock, in whole or in part, at a cash redemption price equal to $ 25.00 per share, plus any accumulated and unpaid dividends to, but not including the redemption date. Prior to June 15, 2026, upon a Change of Control (as defined in the Articles Supplementary), the Company may redeem, at its option, the Series D Preferred Stock, in whole or part, at a cash redemption price of $25.00 per share, plus any accumulated and unpaid dividends to, but not including the redemption date. 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.   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. The Company is authorized to issue up to 100,000,000 shares of Series A Common Stock, 1,000 shares of Series B Common Stock, and 9,000,000 shares of Series C Common Stock (collectively, the "Common Stock") each with $ 0.01 par value per share. Each class of Common Stock has identical rights, preferences, terms, and conditions except that the holders of Series B Common Stock are not entitled to receive any portion of Company assets in the event of the Company's liquidation. No shares of Series B or Series C Common Stock have been issued. 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 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. institutional investor for the purchase and sale of 1,000,000 shares of its Series A Common Stock, Common Stock Warrants to purchase up to 2,000,000 shares of Series A Common Stock and Pre-Funded Warrants to purchase up to 1,000,000 shares of Series A Common Stock. 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 . 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 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.   F- 25 Table of Contents   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 .   On 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 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 Quarter Ended   2022     2021       Distributions Declared     Distributions Declared   March 31   $ 0.105     $ 0.101   June 30     0.106       0.102   September 30     0.020       0.103   December 31     0.021       0.104   Total   $ 0.252     $ 0.410     Series D Preferred Stock Month   2022     2021       Distributions Declared     Distributions Declared   January   $ 0.19531     $ —   February     0.19531       —   March     0.19531       —   April     0.19531       —   May     0.19531       —   June     0.19531       0.10417   July     0.19531       0.19531   August     0.19531       0.19531   September     0.19531       0.19531   October     0.19531       0.19531   November     0.19531       0.19531   December 31     0.19531       0.19531   Total   $ 2.34372     $ 1.27603     F- 26 Table of Contents   Partnership Interests.  Through the Company, its subsidiaries, and its partnerships, we own  12  commercial properties in fee interest,  two of which we own partial interests in through our holdings in various affiliates in which we serve as general partner, member and/or manager. Each of the limited partnerships is referred to as a “DownREIT.” In each DownREIT, we have the right, through put and call options, to require our co-investors to exchange their interests for shares of our Common Stock at a stated price after a defined period (generally five years from the date they first invested in the entity’s real property), the occurrence of a specified event or a combination thereof. The Company is a limited partner in five partnerships and sole stockholder in one corporation, which entities purchase and leaseback model homes from homebuilders.   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. The Company registered 3,000,000 shares of Common Stock pursuant to the DRIP. The purchase price per share used in the past was 95 % of the price the Company sold its shares, or $ 19.00 per share. No sales commission or dealer manager fees were paid on shares sold through the DRIP. The Company may amend, suspend or terminate the DRIP at any time. Any such amendment, suspension or termination is effective upon a designated dividend record date and notice of such amendment, suspension or termination is sent to all participants at least thirty ( 30 ) days prior to such record date. The DRIP became effective on January 23, 2012,  was suspended on December 7, 2018  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, 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.     11. SHARE-BASED INCENTIVE PLAN   The Company maintains a restricted stock incentive plan for the purpose of attracting and retaining officers, employees, and non-employee board members. Share awards generally vest in equal annual installments over a three to ten year period from date of issuance. Non-vested shares have voting rights and are eligible for any dividends paid to common shares. The Company recognized compensation cost for these fixed awards over the service vesting period, which represents the requisite service period, using the straight-line method. 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 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:   Outstanding shares:   Common Shares             Balance at December 31, 2021     295,471   Granted     407,245   Forfeited     ( 57,371 ) Vested     ( 296,303 ) Balance at December 31, 2022     349,042       F- 27 Table of Contents   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  and 2021  was approximately $ 1.2 million and $ 1.6 million , respectively.  As of December 31, 2022  and 2021 , future unrecognized stock compensation related to unvested shares totaled approximately $ 1.5  million and $ 1.6 million, respectively.       12.  SEGMENTS   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. 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) excluding interest expense. 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 about resource allocations.   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,       2022     2021   Office/Industrial Properties:                 Rental, fees and other income   $ 12,702,986     $ 13,161,268   Property and related expenses     ( 5,148,110 )     ( 5,769,843 ) Net operating income, as defined     7,554,876       7,391,425   Model Home Properties:                 Rental, fees and other income     2,909,871       3,211,149   Property and related expenses     ( 102,660 )     ( 129,389 ) Net operating income, as defined     2,807,211       3,081,760   Retail Properties:                 Rental, fees and other income     2,224,479       3,023,316   Property and related expenses     ( 663,681 )     ( 1,056,581 ) Net operating income, as defined     1,560,798       1,966,735   Reconciliation to net income (loss):                 Total net operating income, as defined, for reportable segments     11,922,885       12,439,920   General and administrative expenses     ( 6,163,816 )     ( 6,225,510 ) Depreciation and amortization     ( 5,465,015 )     ( 5,397,498 ) Interest expense     ( 4,712,487 )     ( 4,822,085 ) Gain on extinguishment of government debt     —       10,000   Other income (expense), net     2,039,922       ( 3,417 ) Income tax expense     ( 1,215,873 )     47,620   Gain on sale of real estate     5,079,912       2,487,528   Net income (loss)   $ 1,485,528     $ ( 1,463,442 )   F- 28 Table of Contents       December 31,     December 31,   Assets by Reportable Segment:   2022     2021   Office/Industrial Properties:                 Land, buildings and improvements, net (1)   $ 76,400,983     $ 78,240,086   Total assets (2)   $ 79,057,998     $ 76,453,436   Model Home Properties:                 Land, buildings and improvements, net (1)   $ 37,933,824     $ 34,089,046   Total assets (2)   $ 35,274,545     $ 31,047,202   Retail Properties:                 Land, buildings and improvements, net (1)   $ 16,142,613     $ 25,693,239   Total assets (2)   $ 16,810,627     $ 27,579,469   Reconciliation to Total Assets:                 Total assets for reportable segments   $ 131,143,170     $ 135,080,107   Other unallocated assets:                 Cash, cash equivalents and restricted cash     8,570,121       6,738,345   Other assets, net     151,638,363       19,378,311   Total Assets   $ 291,351,654     $ 161,196,763     ( 1 ) Includes lease intangibles and the land purchase option related to property acquisitions. ( 2 ) 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,   Capital Expenditures by Reportable Segment   2022     2021   Office/Industrial Properties:                 Acquisition of operating properties   $ —     $ 8,891,810   Capital expenditures and tenant improvements     1,994,371       1,513,362   Model Home Properties:                 Acquisition of operating properties     15,673,575       8,426,750   Retail Properties:                 Acquisition of operating properties     —       4,906,266   Capital expenditures and tenant improvements     113,134       83,824   Totals:                 Acquisition of operating properties, net     15,673,575       22,224,826   Capital expenditures and tenant improvements     2,107,505       1,597,186   Total real estate investments   $ 17,781,080     $ 23,822,012     F- 29 Table of Contents       13.  SUBSEQUENT EVENTS   Sponsorship of Special Purpose Acquisition Company and Trust Extension   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.  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.   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.   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.     F- 30 Table of Contents     Presidio Property Trust, Inc. and Subsidiaries Schedule III - Real Estate and Accumulated Depreciation and Amortization – as of December 31, 2022   All amounts are in thousands           Initial Cost             Total Cost       (1 )                                 Property Name/ Location   Encumbrances     Land Cost     Building & Improvements     Acquisition Price     Capitalized Improvements     Land Cost     Building & Improvements     Total Cost     Accumulated Depreciation & Amortization     Reserve for Impairment     NBV Real Estate     Date Acquired     Year Built/ Renovated   Genesis Plaza, San Diego, CA   $ 6,056     $ 1,400     $ 8,600     $ 10,000     $ 2,976     $ 1,400     $ 11,576     $ 12,976     $ 4,980     $ —     $ 7,996     08/10       1989   Dakota Center, Fargo, ND     9,443       832       8,743       9,575       3,199       832       11,942       12,774       4,205       —       8,570     05/11       1982   Grand Pacific Center, Bismarck, ND     3,496       413       4,926       5,339       2,165       413       7,091       7,504       2,276       —       5,228     03/14       1976   Arapahoe Center, Centennial, CO     7,602       1,420       10,430       11,850       675       1,420       11,105       12,525       3,860       —       8,665     12/14       2000   West Fargo Industrial, Fargo, ND     4,030       1,693       6,207       7,900       462       1,693       6,669       8,362       1,469       —       6,893     08/15     1998/2005   300 N.P., Fargo, ND     —       135       3,715       3,850       363       135       4,078       4,213       1,006       308.0       2,899     08/15       1922   One Park Centre, Westminster, CO     6,163       1,206       7,944       9,150       1,927       1,206       9,871       11,077       3,085       —       7,992     08/15       1983   Shea Center II, Highlands Ranch, CO     17,230       2,214       23,747       25,961       2,754       2,214       26,501       28,715       9,213       —       19,502     12/15       2000   McElderry, Baltimore, MD     5,670       215       8,677       8,892       29       215       8,705       8,920       230             8,691     12/20       2006   Total Office/ Industrial properties     59,690       9,528       82,989       92,517       14,551       9,528       97,539       107,067       30,323       308.0       76,436                                                                                                                             Union Town Center, Colorado Springs, CO     8,025       1,750       9,462       11,212       174       1,750       9,636       11,386       2,347       —       9,039     12/14       2003   Research Parkway, Colorado Springs, CO     1,648       408       2,442       2,850       ( 44 )     408       2,398       2,806       486       —       2,320     08/16       2003   Mandolin, Houston, TX     3,635       1,330       3,562       4,892       15       1,330       3,577       4,907       122       —       4,784     08/21       2021   Total Retail properties     13,309       3,488       15,466       18,954       145       3,488       15,611       19,099       2,955       —       16,143                                                                                                                     Model Homes-DMH LP #202     178       189       918       1,107       —       189       918       1,107       113       —       994       2017 - 2018       2017 - 2018   Model Homes-DMH LP #203     1,870       564       2,490       3,055       —       564       2,490       3,055       247       —       2,808       2017 - 2019       2017 - 2019   Model Homes-DMH LP #204     1,169       542       2,799       3,340       —       542       2,799       3,340       251       —       3,089       2018 - 2020       2018 - 2020   Model Homes-DMH LP #205     3,655       1,115       4,719       5,834       —       1,115       4,719       5,834       371       —       5,463       2019 - 2020       2019 - 2020   Model Homes-DMH LP #206     1,471       289       2,002       2,292       —       289       2,002       2,292       107       —       2,184       2020 - 2021       2020 - 2021   Model Homes-NMH Inc.     16,410       3,475       20,357       23,831       —       3,475       20,357       23,831       436       —       23,396       2018 - 2022       2018 - 2022   Total Model Home properties     24,752       6,174       33,285       39,459       —       6,174       33,285       39,459       1,525       —       37,934                                                                                                                             CONSOLIDATED TOTALS:   $ 97,752     $ 19,190     $ 131,739     $ 150,930     $ 14,695     $ 19,190     $ 146,435     $ 165,625     $ 34,804     $ 308     $ 130,513                     (1)     Depreciation is computed on a straight-line basis using useful lives up to 39 years.   F- 31 Table of Contents     Presidio Property Trust, Inc. and Subsidiaries Schedule III - Real Estate and Accumulated Depreciation and Amortization (continued) – as of December 31, 2022       For the Year Ended December 31,       2022     2021   Real estate                 Balance at the beginning of the year   $ 171,013,693     $ 208,641,166   Acquisitions     15,673,575       22,224,826   Improvements     2,107,503       1,598,105   Impairments     -       ( 608,000 ) Dispositions of real estate     ( 23,478,763 )     ( 60,842,404 ) Balance at the end of the year   $ 165,316,008     $ 171,013,693   Accumulated depreciation and amortization                 Balance at the beginning of the year   $ ( 32,948,757 )   $ ( 42,387,199 ) Depreciation and amortization expense     ( 5,015,491 )     ( 5,029,579 ) Dispositions of real estate     3,160,470       14,468,021   Balance at the end of the year   $ ( 34,803,778 )   $ ( 32,948,757 )                   Real estate assets, net   $ 130,512,230     $ 138,064,936       F-32