Presidio Property Trust Inc

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 (until deconsolidation in September 2023)*as noted below.

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

The Company has determined that the limited partnerships in which it owns less than100% 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 Sections856 through860 of the Internal Revenue Code of1986, as amended (the “Code”), for federal income tax purposes. To maintain our qualification as a REIT, we are required to distribute at least90% 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 generallynot 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 withone of our entities, have elected to treat certain 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 areno 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.

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Liquidity. The Company's anticipated future sources of liquidity* mayinclude 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 arenot* 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. To ensure that we can effectively execute these objectives, we routinely review our liquidity requirements and continually evaluate all potential sources of liquidity. If necessary, the Company* may*seek other short-term liquidity alternatives, such as bridge loans, refinancing an unencumbered property or a bank line of credit depending on the credit environment.

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, 2024,*total approximately$23.5 million, of which$13.1 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.

As the Company continues its operations, it* mayre-finance, seek additional financing or restructure. However, there can beno* 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 doesnot 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 nexttwelve months from the date of the issuance of these audited financial statements.

***Segments.*The Company acquires and operates income producing properties inthree business segments including Office/Industrial Properties, Model Home Properties and Retail Properties. See Note14. “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 hadone tenant account for 6.43% of total rental income for the year ended December 31, 2023 andone tenant accounted for 8.57% of total rental income for the year ended December 31, 2022. On December 31, 2022,the lease for our largest tenant at that time, Halliburton Energy Services, Inc. ("Halliburton"), expired. Halliburton was located in our Shea Center II property in Colorado and didnot 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,none of which has been used as of* December 31, 2023.This reserve amount is included in "Cash, cash equivalents and restricted cash" on the balance sheet. Our management team is working to fill the 45,535 square foot space and has leased approximately20%* of the space to a tenant during2023 and has reviewed various proposals for the remaining80%. As of* December 31, 2023,*none of thethird party proposals have fit into our long-term plans. We will continue to work on filling the space during2024.

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, Inc. 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, Inc., its subsidiaries, and the partnerships. All significant intercompany balances and transactions have been eliminated in consolidation.

The consolidated financial statements also include the accounts of (a) Murphy Canyon up until* September 22, 2023,when they completed their business combination. Murphy Canyon was a SPAC for which we served as the financial sponsor (as described herein), and which was deemed to be controlled by us as a result of our 65% equity ownership stake, the overlap ofthree* of our executive officers as executive officers of Murphy Canyon, and significant influence that we could exercise over the funding and acquisition of new operations for an initial business combination ("IBC") (see Note2, Variable Interest Entity). All intercompany balances, prior to deconsolidation and loss of control on* September 22, 2023,*have been eliminated in consolidation.

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The Company classifies the noncontrolling interests in the NetREIT Partnerships as part of consolidated net (loss) income in2023 and2022 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 consolidated statements of operations. Management has evaluated the noncontrolling interests and determined that they donot* contain any redemption features.

******Use of Estimates. The financial statements were prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. 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 could 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, butnot limited to, comparisons to other properties sold in the same geographic area and independentthird-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 arenot 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 attributable 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 appr oximately $5,000 and $55,000 for the years ended* December 31, 2023* and2022, 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 toten 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 athird-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 $18,000 and $0.2 million for years ended* December 31, 2023* and2022, 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 actively seeking a buyer, and the disposition is considered probable withinone 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 consolidated financial statements. Mortgage notes payable related to the real estate sold during the current period are classified as “notes payable related to real estate held for sale” for all prior periods presented in the accompanying 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 willnot have any significant continuing involvement in the operations of the property following the sale. As of December 31, 2023, no commercial property met the criteria to be classified as "held for sale" and 15 model homes were classified as held for sale.

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**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 butnot 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 maybe recognized to reduce the property to fair value and such loss could be material.

We review the carrying value of each of our real estate properties annually to determine if circumstances indicate an impairment in the carrying value of these investments exists. During the year ended* December 31, 2023* , we recognized a non-cash impairment charge of approximately $2.0 million on One Park Center and approximately $0.4 million was related toeight model homes. The impairment charges for One Park Center reflects management’s revised estimate of the fair market value based on sales comparable of like property in the same geographical area as well as an evaluation of future cash flows or an executed purchase sale agreement. The impairment charge for theeight model homes reflects the estimated sales prices for these specific model homes in2024 as a result of an abnormally short hold period, less thantwo years, on model homes purchased in2022, where the builder changed their product type in these neighborhoods after we had purchased the homes. We donot believe these losses are indicative of our overall model home portfolio. As noted above in the Overview section, during the year ended* December 31, 2023*, we sold 22 model homes for approximately $11.7 million and the Company recognized a gain of approximately $3.2 million. We expect to record a net gain on model home sales in thefirst quarter of2024 as well. The Company didnot recognize a non-cash impairment during the year ended* December 31,*2022 to our real estate assets.

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 arenot deemed to have an indefinite useful life are amortized over their estimated useful lives. Indefinite-lived assets arenot amortized. Amortization expense of intangible assets that arenot deemed to have an indefinite useful life was approximately $10,000 and $0.1 million, respectively, for the years ended* December 31, 2023* and2022 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.

As of* December 31, 2023,prior to any adjustment, the carrying value of the goodwill for NTR Property Management was $1.3 million. As par to the annual testing for goodwill impairment the fair value of NTR Property Management using the Capitalized Cash Flow method and Merger and Acquisition method show an indication of impairment to the goodwill. Management expects to hold this business for the foreseeable future; however, in2023* we experienced increasing payroll costs, and increasing operating expenses along with increased interest rates. The current market outlook for the Office sector of commercial real estate has been depressed. All of these factors have led to lower than historical expected future cash flows, resulting in the impairment indication and concluded an enterprise value of NTR Property Management at $451,000. With an assumed fair market value of $451,000 for NTR Property Management, in accordance with ASC350 and ASC820, we have recorded an impairment to goodwill for approximately $0.8 millionas of* December 31, 2023*. No other impairment was deemed to exist to goodwill at* December 31, 2023* and2022. SeeFair Value Measurements below for additional information.

********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, 2023 and2022 was approximately $5.4 million and $5.5 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, 2023 and December 31, 2022, we had approximately $6.5 million and $16.5 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 ofthree 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 mayexceed 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, 2023, the Company had approximately $0.7 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, mortgage payment reserves, and capital expenditures. As of* December 31, 2023*, the Company has approximately $3.7 million of restricted cash. 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.

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********Accounts Receivables.The Company periodically evaluates the collectability of amountsdue 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, 2023 and2022, the balance of allowance for possible uncollectable tenant receivables included in other assets, net in the accompanying consolidated balance sheets was approximately $92,000 and $138,000, 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 fromone tofive years. Deferred leasing costs consist ofthird-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, 2023* and2022, the Company had net deferred leasing costs of approximately $1.7 million and $1.5 million, respectively. Total amortization expense for the years ended* December 31, 2023* and2022 was approximately $0.5 million and $0.4 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, 2023 and2022, unamortized deferred financing costs related to mortgage notes payable were approximately $0.8 million and $0.9 million. For the years ended December 31, 2023 and2022, total amortization expense related to the mortgage notes payable deferred financing costs was approximately $0.3 million and $0.2 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 and as of December 31, 2023 we have incurred approximately $5,000. These costs are related to an amendment to a registration statement for the sale of our common stock that hasnot been finalized. As of December 31, 2022,*there wereno deferred offering costs.

Income Taxes. We have elected to be taxed as a REIT under Sections856 through860 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 generallynot 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, 2023, we have estimated appr oximately $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.

We, together withone of our entities, have elected to treat certain 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 areno 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.

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:

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When available, we utilize quoted market prices from independentthird-party sources to determine fair value and classify such items in Level1 or Level2**. In instances where the market for a financial instrument isnot active, regardless of the availability of a nonbinding quoted market price, observable inputs mightnot 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 independentthird-party* mayrely more on models with inputs based on information available only to that independentthird*-party. When we determine the market for a financial instrument owned by us to be illiquid or when market transactions for similar instruments donot 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, 2023* and* December 31, 2022*, our marketable securities (excluding our investments in Conduit's common stock and common stock warrants), held at athird party broker, presented on the balance sheet were measured at fair value using Level1 market prices and totaled approximately $45,149 and $0.8 million, respectively, with a cost basis of approximately $40,315 and $0.9 million, respectively. Additionally, the funds held in the Trust Account for the SPAC Class A common stockholders included a money market portfolio that was comprised of U.S. Treasury securities, considered cash equivalent, which were measured at fair value using Level1 and totaled approximately $0 million and $136.9 million as of* December 31, 2023* and* December 31, 2022*, respectively. Our investments in Conduit's common stock and common stock warrants presented on the consolidated balance sheets were measured at fair value using Level1 market prices, which are currently held at Conduit's transfer agent, taking into account the adoption of ASU2022-03 Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, and totaled approximately $18.3 million as of* December 31, 2023*, with a cost basis of approximately $7.5 million. The Company entered into a lock-up agreement with Conduit regarding the common stock held by the Company, for180 days from the closing of the business combination which ended* March 20, 2024.There wereno financial liabilities measured at fair value as of December 31, 2023* and* December 31, 2022**.*

The following table presents as of* December 31, 2023*the Company’s assets subject to measurement at fair value on a nonrecurring basis (in thousands):

The following table presents as of* December 31, 2022*the Company’s assets subject to measurement at fair value on a nonrecurring basis (in thousands):

Earnings per share (“EPS”).The EPS on common stock has been computed pursuant to the guidance in FASB ASC Topic260, Earnings Per Share. The guidance requires the classification of the Company’s unvested restricted stock, which contains rights to receive non-forfeitable dividends, as participating securities requiring thetwo-class method of computing net income per share of common stock. In accordance with thetwo-class method, earnings per share have been computed by dividing the net income less net income attributable to unvested restricted shares by the weighted average number of shares of common stock outstanding less unvested restricted shares. Diluted earnings per share is computed by dividing net income by the weighted average shares of common stock and potentially dilutive securities outstanding in accordance with the treasury stock method.

Dilutive common stock equivalents include the dilutive effect of in-the-money stock equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any common stock equivalents if their effect would be anti-dilutive. In periods in which a net loss has been incurred, all potentially dilutive common stock shares are considered anti-dilutive and thus are excluded from the calculation. Securities that are excluded from the calculation of weighted average dilutive common stock, because their inclusion would have been antidilutive, are:

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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) issimilar 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 doesnot assume exercise or conversion of securities that would have an anti-dilutive effect on net earnings per share. For the year ended December 31, 2023 the basic and diluted net earnings per share was $0.68, since all potentially dilutive securities were determined to be anti-dilutive, and for the year ended December 31, 2022 the basic and diluted net loss per share are equivalent at $0.57 per share because the Company had incurred a net loss attributable to common stockholders causing any potentially dilutive securities to be anti-dilutive.

Sales of Real Estate Assets. Effective* January 1, 2018,we adopted the guidance of ASC610*-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC610-20”), which applies to sales or transfers to noncustomers of nonfinancial assets or in substance nonfinancial assets that donot meet the definition of a business. Generally, our sales of real estate would be considered a sale of a nonfinancial asset as defined by ASC610-20.

ASC610-20 refers to the revenue recognition principles under ASUNo. 2014-9. Under ASC610-20, if we determine we donot 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 use of the leased space and any tenant improvement allowance, the tenant isnot 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, butnot limited to:

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 exceedone year. When a tenant is in bankruptcy, we will record a bad debt reserve for the tenant’s receivable balance and generally willnot recognize subsequent rental revenue until cash is received or until the tenant isno 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 basedfirst on a qualitative analysis, and then a quantitative analysis, if necessary.

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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, butnot 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 was involved in the formation of an entity considered to be a VIE, prior to* September 22, 2023,when Murphy Canyon completed its business combination. The Company evaluated the consolidation of this entity as required pursuant to ASC Topic810* 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 ornot 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 in* January 2022,we determined that Murphy Canyon was a VIE in which we had a variable interest because we participated in its formation and design, manage the significant activities, and Murphy Canyon didnot* have enough equity at risk to finance its activities without additional subordinated financial support. We have also determined that Murphy Canyon's public stockholders didnot have substantive rights, and their equity interest constituted temporary equity, outside of permanent equity, in accordance with ASC480-10-S99-3A. As such, we have concluded that, prior to the Business Combination, we were the primary beneficiary of Murphy Canyon as a VIE, as we had 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 impacted Murphy Canyon's economic performance. Since we were the primary beneficiary, Murphy Canyon was consolidated into our consolidated financial statements. See Note9 Commitments and Contingencies for additional details regarding Murphy Canyon.

Shares Subject to Possible Redemption. 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 ASC470-20. The Murphy Canyon Class A common stock is subject to ASC480-10-S99. In addition, because it was probable that the equity instrument will become redeemable, we had 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 became 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 occurred and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. We elected to recognize the accretion resulting from changes in redemption value immediately during thethree months ended* March 31, 2022,and every quarter since then, until September 22, 2023as noted above. See Note9* Commitments and Contingencies for additional details regarding Murphy Canyon.

Excise Tax. In accordance with the Inflation Reduction Act of2022, the Company accrues the expected excise tax obligation at the end of each reporting period as a cost of redeeming any shares as of that date. In connection with the vote to approve the Charter Amendment Proposal for the SPAC, holders of 11,037,272 shares of SPAC Class A Common Stock properly exercised their right to redeem their shares of Class A Common Stock for the aggregate redemption amount of $114,068,280. As such the SPAC had recorded a 1% excise tax liability in the amount of $1,140,683 during* January 2023.The liability didnot* impact the statements of operations or statement cash flows and is an offset against additional paid in capital, to the extent available, and accumulated deficit. On* September 22, 2023,Murphy Canyon completed its business combination with Conduit Pharma and shareholders and debtholders of Conduit Pharma were issued 65,000,000 shares of Conduit common stock. The excise tax liability recorded in connection with the January 2023redemptions was reversed in full by the issuance of Conduit shares on September 22, 2023.***

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Warrant Instruments SPAC. Murphy Canyon accounted for warrants in accordance with the guidance contained in ASC480 and FASB ASC815, “Derivatives and Hedging”. Under ASC815-40 and ASC840 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 warrantsno longer meet the criteria for equity treatment, they will be recorded as a liability and remeasured each period with changes recorded in the statements of operations. The warrants meet the criteria for classification as equity because they werenot exercisable until after the SPAC business combination, which occurred on* September 22, 2023,at which point the common shares areno* longer redeemable and because they are indexed to Murphy Canyon's common stock and meet the other criteria for equity classification. See Note9 Commitments and Contingencies for additional details regarding Murphy Canyon / Conduit.

*********Subsequent Events.***We evaluate subsequent events up until the date the consolidated financial statements are issued.

Recently Issued and Adopted Accounting Pronouncements.In June 2022,the FASB issued ASUNo. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions,to (1) clarify the guidance in Topic820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic820. The update clarifies that a contractual restriction on the sale of an equity security isnot considered part of the unit of account of the equity security and, therefore, isnot considered in measuring fair value. It also requires the following disclosures for equity securities subject to contractual sale restrictions:

For public business entities, the amendments in this ASU are effective for fiscal years beginning after* December 15, 2023,and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2024,and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that havenot* yet been issued or made available for issuance. The Company has adopted this guidance during thethree months ended* September 30, 2023and will apply it to fair value measurements as of September 30, 2023.*

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In* December 2023,the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")2023-09, Income Taxes, to enhance income tax disclosures, provide more information about tax risks and opportunities present in worldwide operations, and to disaggregate existing income tax disclosures. The guidance is effective for annual periods beginning after December 15, 2024on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. We havenot* yet adopted ASU2023-09 and are currently evaluating the impact on our financial statement disclosures.

In* November 2023,FASB issued Accounting Standards Update ASU2023*-07, Segment Reporting, establishing improvements to reportable segments disclosures to enhance segment reporting under Topic280. This ASU aims to change how public entities identify and aggregate operating segments and apply quantitative thresholds to determine their reportable segments. This ASU also requires public entities that operate as a single reportable segment to provide all segment disclosures in Topic280, not just entity level disclosures. The guidance will be effective for fiscal years beginning after* December 15, 2023and interim periods within fiscal years beginning after December 15, 2024and the amendments should be applied retrospectively to all periods presented in the financial statements. We havenot* yet adopted ASU2023-07 and are currently evaluating the impact on our financial statement disclosures.

3. RECENT REAL ESTATE TRANSACTIONS

Significant Transactions in*2023*** and2022**

Acquisitions during the year ended December 31, 2023:**

Acquisitions 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 thatno 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.

Dispositions during the year ended December 31, 2023:**

During year ended* December 31, 2023*, we disposed of the following properties:

Dispositions during the year ended December 31, 2022:**

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

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 andone in Maryland. Our model home properties are located inthree states. As of* December 31, 2023*, the Company owned or had an equity interest in:

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A summary of the properties owned by the Company as of* December 31, 2023* and2022 is as follows:

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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:

At* December 31, 2023* and2022, there wereno 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 $13,266 and $18,240 relating to below-market leases at* December 31, 2023* and* December 31,*2022, respectively.

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

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6. OTHER ASSETS

Other assets consist of the following:

Periodically, the Company* maysell an option in the marketable securities it holds to unrelatedthird* 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 arenot designated as hedging relationships pursuant to accounting guidance ASC815 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 transactionnot to achieve its objectives. A transaction in options or securities* maybe 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 hasno* 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, 2023*, we owned common shares of 3 different publicly traded REITs andno written covered call options in any of those same REITs. The fair market value on our publicly traded REIT securities was $45,149, based on the* December 31, 2023* closing prices. As of* December 31, 2022*, we owned common shares and options of 18 different publicly traded REITs and an immaterial amount of covered call options inthree 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 prices.

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7. MORTGAGE NOTES PAYABLE

Mortgage notes payable consist of the following:

The loan agreement between NetREIT Model, Homes, Inc. (“NRMH”) and their Lender has a covenant for a Fixed Charge Coverage Ratio, (“FCCR”) as defined for NRMH as of any date (a) the sum of (i) EBITDA for the period ended as of such date minus (ii) Distributions for the period ended as of such date divided by (b) the sum of (ii) Principal Payments Paid for the period ended as of such date plus (iii) Interest Expense for period ended as of such date. The FCCR is to beno less than 1.10 to1.00, tested at the end of each fiscal quarter. As of* December 31, 2023*, NRMH was in compliance with this covenant. The Company and stand along subsidiaries have other various quarterly and annual reporting requirements to the individual property lenders and is in compliance with all material conditions and covenants on those mortgage notes payable as of* December 31, 2023*.

Scheduled principal payments of mortgage notes payable were as follows as of* December 31, 2023*:

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8. NOTES 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 isnot* required to be repaid, hasno stipulations on use, and has been recorded as fees and other income in the consolidated statements of operations during fiscal2020. On* August 17, 2020,we received an additional Economic Injury Disaster Loan ("EIDL") of $150,000, for which principal and interest payments are deferred fortwelve* months from the date of issuance, and interest accrues at3.75% 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, 2023,we had issuedtwo* promissory notes to our majority owned subsidiaries, Dubose Model Home Investors202 LP and Dubose Model Home Investors204 LP, for the refinancing oftwo model home properties in Texas and Wisconsin, for approximately $0.5 million with interest rates ranging from 3.0% to 5.55% per annum and maturity dates between* August 2024and November 2025.*These notes payable and notes receivable, including interest expense and interest income related to these promissory notes, are eliminated through consolidation on our financial statements.

On* August 17, 2021,we issued a promissory note to our majority owned subsidiary, NetREIT Highland, for the acquisition of the Mandolin property in Houston, Texas, for $1.56 million with an interest rate of 4.0% per annum and a maturity date of August 17, 2022.This note payable and note receivable, including interest expense and interest income related to this promissory note, were eliminated through consolidation on our financial statements. During April 2022,this loan was refinanced with a loan from athird*-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 Baltimore 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 athird*-party lender totaling $5.67 million, with the proceeds being used to pay back our $5.65 million promissory note.

9. COMMITMENTS AND CONTINGENCIES

The Company is obligated under certain tenant leases to fund tenant improvements and the expansion of the underlying leased properties. As of* December 31, 2023*, approximately $1.2 million is estimated for such capital expenditures on existing properties, net of any construction financing, during the rest of2024.

On* March 13, 2024,a stockholder announced that it intends to file a preliminary proxy statement and accompanying WHITE universal proxy card with the Securities and Exchange Commission to be used to solicit votes for the election of director nominees at our next annual meeting of stockholders. Activist stockholder activities could adversely affect our business because responding to proxy contests and reacting to other actions by activist stockholders can be costly and time-consuming, disrupt our operations and divert the attention of management and our employees. We have or in the future mayretain the services of various professionals to advise us on activist stockholder matters, including legal, financial, strategic and communication advisors, the costs of which maynegatively impact our future financial results. In addition, perceived uncertainties as to our future direction, strategy or leadership created as a consequence of activist stockholders’ initiatives mayresult in the loss of potential business opportunities, harm our ability to attract new investors, business partners, and employees, and cause our stock price to experience periods of volatility or stagnation. We have evaluated this contingency and have determined a material loss isnot* probable or estimable at this time. The Company and the Board of Directors will review all legal means necessary to defend the company from actions by activist stockholders.

***Litigation.*From time to time, we maybecome 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 beno assurance that a material environmental liability doesnot exist, the Company isnot 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 isnot 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.

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**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 maycontribute to increased volatility and diminished expectations for the economy and markets. Additionally, the economic and geopolitical ramifications of the military conflicts in the Middle East and Ukraine, including sanctions, retaliatory sanctions, nationalism, supply chain disruptions and other consequences, could impact commercial real estate fundamentals and result in lower occupancy, lower rental rates, and declining values in our real estate portfolio and in the collateral securing our loan investments. We havenot 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 SPAC raised $132,250,000 in capital investment to acquireone* or more businesses. 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). The SPAC offered 132,250,000 units, with each unit consisting ofone share of common stock andthree-quarters ofone redeemable warrant. The warrants were evaluated using the guidance in ASC480 "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.

The Murphy Canyon IPO of 13,225,000 units of common stock and warrants, 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. These proceeds were deposited in a trust account established for the benefit of the Murphy Canyon public shareholders and are included in Investments held in Trust. 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.

On* November 8, 2022,*the SPAC entered into an agreement and plan of merger with Conduit Pharmaceuticals Limited, a Cayman Islands exempted company (“Conduit Pharma”), and Conduit Merger Sub, Inc., a Cayman Islands exempted company and the SPAC’s wholly owned subsidiary. The merger agreement provided that the SPAC’s Cayman Island subsidiary will merge with and into Conduit Pharma, with Conduit Pharma surviving the merger as the SPAC’s wholly owned subsidiary and the public company renamed “Conduit Pharmaceuticals Inc.” (“Conduit”).

Initially, the SPAC was required to complete its initial business combination transaction by12 months from the consummation of its initial public offering or up to18 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 to12* times, each such extension for an additionalone-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 eachone*-month extension,one-third of1% 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 providing 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.*Approximately $114.1 million in cash was removed from the Trust Account to pay such stockholders and, accordingly, after giving effect to such redemptions, income tax withdraws of $200,050 and adding $155,403 in extension payments, the balance in the Trust Account was approximately $23.3 million. After the redemptions, there were 2,187,728 shares of SPAC Class A common stock subject to possible redemption.

On* January 27, 2023,the merger agreement was amended to provide for onlyone* class of authorized common stock of the SPAC following the business combination, instead of both authorized Class A common stock and Class B common stock as set forth in the original merger agreement. On* May 11, 2023the merger agreement was further amended to provide for (i) removal of the provision that indicates thatno* tax opinion would be delivered in connection with the closing, (ii) a closing obligation that that the SPAC either (a) be exempt from the provisions of Rule419 promulgated under the Securities Act of1933, as amended other than through its net tangible assets or (b) have at least $5,000,001 of net tangible assets either immediately prior to or upon consummation of the merger, and (iii) extension of the outside date for the closing of the merger from* May 31, 2023,to February 7, 2024.*

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The investments held in Trust for the SPAC Class A common stockholders generated approximately $1.2 million of income during thenine months ended* September 30, 2023,and was included in interest and other income (expense), net on our consolidated statement of operations. During thenine* months ended* September 30, 2022,the trust investment generated approximately $0.8 million of income. Although the Trust held approximately $135.1 million as of September 30, 2022,income generated from the interest on the funds was much less for thefirst* nine months of that year, with an annual expected yield of 0.97%. Also, the deposits werefirst added to the Trust in* February 2022,so the account wasnot* earning interest for all thenine months ended* September 30, 2022.As of September 22, 2023,*the Trust account balance had been deconsolidated along with the other Conduit assets and liabilities.

As of immediately prior to the consummation of the SPAC's business combination, which occurred on* September 22, 2023,the Company, through its subsidiary, had loaned the SPAC $1.0 million to fund its trust account and for operating expenses. The loan was non-interest bearing, unsecured and was repaid in full upon the SPAC's business combination on September 22, 2023.*This notes payable and notes receivable related to the SPAC were eliminated through consolidation on our financial statements.

On* September 22, 2023,*the SPAC completed its business combination with Conduit Pharma and changed its name to Conduit Pharmaceuticals Inc. (“Conduit”). Immediately prior to the business combination the Company owned approximately 65% of the SPAC’s outstanding common stock. Upon consummation of the business combination, the SPAC’s shares of Class B common stock were converted into shares of its Class A common stock and the shares of Class A common stock were then reclassified as a single class of Conduit common stock. As a result of the business combination, the Company was issued (i)3,306,250 shares of Conduit’s common stock due to the conversion of the shares of the SPAC’s Class B common stock into shares of the SPAC’s Class A common stock and then reclassification into shares of Conduit common stock, (ii)754,000 shares of Conduit common stock, which prior to the business combination were shares of the SPAC’s Class A common stock and (iii) private warrants to purchase 754,000 shares of Conduit common stock, which prior to the business combination were warrants to purchase 754,000 shares of the SPAC’s Class A common stock. Also in the business combination, shareholders and debtholders of Conduit Pharma were issued 65,000,000 shares of Conduit common stock. Immediately following the consummation of the business combination, the Company transferred 45,000 shares of Conduit common stock and warrants to purchase 45,000 shares of Conduit common stock to the SPAC’s independent directors as compensation for their services. As a result, the Company owned approximately 6.5% of Conduit’s common stock immediately following the business combination and currently owns approximately 6.3% of Conduit’s common stock. In connection with the business combination, the Company’s officers and directors who also served as officers and directors of the SPAC resigned from the SPAC, with the exception of the Company’s former Chief Financial Officer who resigned from the Company.

Following the completion of the Murphy Canyon IPO in* February 2022,we determined that Murphy Canyon is a Variable Interest Entity ("VIE") in which we had a variable interest because Murphy Canyon didnot* have enough equity at risk to finance its activities without additional subordinated financial support. Since the business combinations with Conduit on* September 22, 2023,we have determined that Conduit’s (formally Murphy Canyon) public stockholders have substantive rights and weno* longer have control of Conduit’s activity. Since we areno longer the controlling party, or have a majority of the issued and outstating common stock, the Company deconsolidated Conduit from our consolidated financial statements. In connection with the deconsolidation we recorded a gain of approximately $40.3 million. Of the total gain recognized on deconsolidation, approximately $34.1 million relates to the remeasurement of our retained investment in Murphy Canyon via the Sponsor shares which converted into shares of Conduit's common stock on* September 22, 2023,and approximately $6.2 million relates to the deconsolidation of Murphy Canyon's assets and liabilities as of September 22, 2023.*

Since deconsolidating Conduit, on* September 22, 2023,our investments in Conduit's common stock and common stock warrants presented on the consolidated balance sheets were measured at fair value using Level1* market prices, taking into account the adoption of ASU2022-03 Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, and totaled approximately $18.3 million as of* December 31, 2023*, with a cost basis of approximately $7.5 million. The Company entered into a lock-up agreement with Conduit regarding the common stock held by the Company, for180 days from the closing of the business combination which ended on* March 20, 2024.*

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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 maybe issued from time to time inone 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 the15th day of each month (each, a “Dividend Payment Date”), provided that if any Dividend Payment Date isnot 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 haveno voting rights. However, if the Company doesnot pay dividends on the Series D Preferred Stock foreighteen or more monthly dividend periods (whether ornot 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 oftwo 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 leasttwo-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.

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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* mayissue 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, butnot 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 mayredeem, 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, butnot* including the redemption date. Prior to* June 15, 2026,upon a Change of Control (as defined in the Articles Supplementary), the Company mayredeem, 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, butnot including the redemption date. The Series D Preferred Stock hasno stated maturity, willnot be subject to any sinking fund or other mandatory redemption, and willnot 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* March 2024in the amount of $0.19531 per share payable on the15th* 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, 2023* and2022 were approximately $2.1 million and $2.2 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 arenot 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 toone vote. Shares of our Common Stock arenot subject to redemption and donot have any preference, conversion, exchange, or preemptive rights. The Company’s charter contains restrictions on the ownership and transfer of the Common Stock that preventsone 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 2021at 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.

The Company evaluated the accounting guidance in ASC480 and ASC815 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, 2023*, none of the Common Stock Warrants and Placement Agent Warrants have been exercised.

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Stock Repurchase Program. 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. 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, which expired in September 2023.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. In November 2023,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 which shall expire in November 2024.During the year ended December 31, 2023*, the Company repurchased 23,041 shares of our Series D Preferred Stock at an average price of approximately $15.97 per share, including a commission of $0.035 per share, andno shares of our Series A Common Stock, for a total cost of $0.2 million 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.

Cash Dividends.For the years ended December 31, 2023 and December 31, 2022 the Company declared and paid Series A Common Stock cash dividends of approximately $1.2 million and $3.1 million, respectively. For the years ended December 31, 2023 and* December 31, 2022* the Company declared and paid Series D Preferred Stock cash dividends of approximately $2.1 million and $2.2 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, 2023* and2022. 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 beno 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, 2023* and* December 31, 2022*.

Series A Common Stock

Series D Preferred Stock

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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 (generallyfive years from the date theyfirst invested in the entity’s real property), the occurrence of a specified event or a combination thereof. The Company is a limited partner infive partnerships and sole stockholder inone 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, 2022and were distributed on that date to persons who held shares of common stock and existing outstanding warrants as of the January 14, 2022record 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 purchaseone share of Series A Common Stock at $7.00 per share, for a period offive years. Should warrant holdersnot 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. On thefirst day of trading SFQTW closed at $0.17 per warrant with 14,450,069 warrants in the public market.

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 mayamend, 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 leastthirty (30) days prior to such record date. The DRIP became effective on January 23, 2012,was suspended on December 7, 2018and adopted on* October 6, 2020in connection with our IPO, and updated to reflect a change in transfer agent and registrar. As of December 31, 2023*, approximately $17.4 million or approximately 917,074 shares of Common Stock have been issued under the DRIP. There have beenno shares issued under the DRIP since it was suspended in2018.

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 athree toten 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's2017* Incentive Award Plan was amended to increase the available shares for issuance from 1.1 million to 2.5 million and at our Annual Stockholders meeting, held on* June 1, 2023,the Company's2017* Incentive Award Plan was amended to increase the available shares for issuance from 2.5 million to 3.5 million add an evergreen provision to, on* April 1st and October 1st of each year, automatically increase the maximum number of shares of common stock available under the plan to15%* of the Company’s outstanding shares of common stock, if on such date 3,500,000 (as adjusted for any reverse splits) is less than15% of the Company’s then-outstanding shares of common stock.

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

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The non-vested restricted shares outstanding as of * December 31, 2023* will vest over the nextone tofive years.

Share-based compensation expense for the years ended * December 31, 2023* and 2022 was approximately $1.0 million and $1.2 million, respectively. As of * December 31, 2023* and 2022 , future unrecognized stock compensation related to unvested shares totaled approximately $1.5 million and $1.5 million, respectively.

12. SEGMENTS

The Company’s reportable segments consist ofthree 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 arenot considered separate operating segments. There isno 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) excluding interest expense. NOI excludes certain items that arenot 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, 2023* and2022, respectively.

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13. INCOME TAX PROVISION

The Company accounts for income taxes under the asset and liability method under which it recognizes deferred income taxes, net of valuation allowances, if any, for the estimated future tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and its tax bases and net operating loss and tax credit carryforwards. The Company* may,from time to time, be assessed interest or penalties by tax jurisdictions, although any such assessments historically have been minimal and immaterial to its financial results. In the event the Company has such an assessment from a taxing authority, it is its accounting policy to recognize any interest and penalties as a component of income tax. We, together withone* of our entities, have elected to treat certain 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 areno 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.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The provision (benefit) for income taxes consists of the following for the years ended* December 31, 2023* and2022:

Income tax provision differed from the amount computed by applying the U.S. federal income tax rate of 21% to income (loss) before taxes, as follows:

The tax effects of temporary differences which give rise to significant portions of deferred tax assets are as follows as of* December 31:*

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In2022, the Company recognized a valuation allowance of $211,627 against the deferred tax assets generated by the Murphy Canyon Acquisition Company. As of* September 23, 2023,the Company deconsolidated with Murphy Canyon Acquisition Company, andno* longer have a valuation allowance recorded to the company's deferred tax asset. Management assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective positive evidence evaluated was the history of cumulative income for Model Homes Inc. incurred over thethree-year period ended* December 31, 2023.Such objective evidence provides support forno valuation allowance to be recorded for the year ended December 31, 2023.*

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company isno longer subject to U.S. federal, state, and local or non-U.S. income tax examinations by tax authorities for years before2019.

In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic740): Improvements to Income Tax Disclosures, which improves income tax disclosures through enhanced disaggregation within the rate reconciliation table and disaggregation of income taxes paid by jurisdiction. The amendment is effective for fiscal years beginning after* December 15, 2024*and early adoption is permitted. The amendments should be applied on a prospective basis, however, retrospective application is permitted. We are currently evaluating the impact of adopting this ASU on our disclosures.

14. RELATED PARTY TRANSACTIONS

During the years ended* December 31, 2023* and2022, the Company leased a portion of its corporate headquarters to a company that is owned 100% by the CEO, which is Puppy Toes, Inc. Note that Centurion Counsel is another entity that pays rent to the Company and it is consolidated into Puppy Toes, Inc. This is a continuation of the same related party transaction from2020, which began in2019 when we moved our corporate headquarters to Genesis Plaza. Puppy Toes, Inc has leased space from the Company since* November 2008.Rent billed to these entities from the Company totaled $10,752, in both years ended December 31, 2023and2022,* and is included in the rent paid by Presidio Property Trust to Genesis Plaza.

Additionally, we received full payroll reimbursement for employee services relate to Centurion Counsel and Puppy Toes, Inc. during the years ended* December 31, 2023* and2022., which totaled approximately $154,895 and $143,984, respectively. These reimbursements were at cost and werenot marked up or discounted. As of* December 31, 2023and2022,* we had a reimbursement receivable balance of approximately $52,879 and $12,967, which were paid in full during* January 2024and January 2023,*respectively.

15. SUBSEQUENT EVENTS

The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date the financial statements were issued. Based upon this review, except as disclosed below, the Company didnot identify any subsequent events that would have required adjustment or disclosure in the financial statements other than disclosed below.

On* December 31, 2023,our investments in Conduit's common stock ("CDT") and common stock warrants ("CDTTW") presented on the consolidated balance sheets were measured at fair value using Level1* market prices, which closed at $4.55 per share and $0.069 per warrant. As of* April 12, 2024,*CDT and CDTTW closed at $3.18 per share and $0.08 per warrant, respectively.

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