PRESIDIO PROPERT(SQFTP) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements for Presidio Property Trust, Inc. and its subsidiaries, including balance sheets, statements of operations, changes in equity, and cash flows, along with detailed notes explaining the company's organization, accounting policies, recent transactions, asset composition, debt structure, equity, and segment performance for the periods ended June 30, 2024, and December 31, 2023 Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (June 30, 2024 vs. December 31, 2023) | Metric | June 30, 2024 (Unaudited) | December 31, 2023 | | :------------------------------------------ | :-------------------------- | :------------------ | | ASSETS | | | | Real estate assets, net | $130,892,231 | $144,155,784 | | Cash, cash equivalents and restricted cash | $8,534,881 | $6,510,428 | | Investment in Conduit Pharmaceuticals marketable securities | $4,413,989 | $18,318,521 | | Total Assets | $150,538,283 | $175,962,638 | | LIABILITIES | | | | Mortgage notes payable, total net | $101,125,386 | $107,713,273 | | Total Liabilities | $105,931,108 | $114,640,568 | | EQUITY | | | | Total equity | $44,607,175 | $61,322,070 | - Total assets decreased by approximately $25.4 million from December 31, 2023, to June 30, 2024, primarily due to a decrease in real estate assets and a significant reduction in the value of investment in Conduit Pharmaceuticals marketable securities[13] - Total liabilities decreased by approximately $8.7 million, mainly driven by a reduction in mortgage notes payable[13] - Total equity decreased by approximately $16.7 million, reflecting the overall reduction in assets not offset by a proportional decrease in liabilities[13] Condensed Consolidated Statements of Operations This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and net loss Condensed Consolidated Statements of Operations (Three Months Ended June 30) | Metric | 2024 | 2023 | | :-------------------------------------------------- | :----------- | :----------- | | Total revenue | $4,586,541 | $4,543,872 | | Total costs and expenses | $5,148,026 | $4,581,172 | | Interest expense - mortgage notes | $(1,525,845) | $(1,336,415) | | Gain on sales of real estate, net | $811,903 | $1,119,952 | | Net change in Conduit Pharmaceuticals marketable securities | $(10,027,433) | $0 | | Net loss attributable to Presidio Property Trust, Inc. stockholders | $(11,848,040) | $(1,299,604) | | Net loss per share (Basic & Diluted) | $(1.00) | $(0.15) | Condensed Consolidated Statements of Operations (Six Months Ended June 30) | Metric | 2024 | 2023 | | :-------------------------------------------------- | :----------- | :----------- | | Total revenue | $9,376,603 | $8,665,364 | | Total costs and expenses | $10,242,619 | $9,454,356 | | Interest expense - mortgage notes | $(3,041,051) | $(2,204,182) | | Gain on sales of real estate, net | $2,829,998 | $1,537,289 | | Net change in Conduit Pharmaceuticals marketable securities | $(13,888,667) | $0 | | Net loss attributable to Presidio Property Trust, Inc. stockholders | $(17,089,703) | $(2,295,144) | | Net loss per share (Basic & Diluted) | $(1.47) | $(0.28) | - The company experienced a significant increase in net loss for both the three and six months ended June 30, 2024, primarily due to a substantial net change in Conduit Pharmaceuticals marketable securities, which resulted in a loss of $10.0 million for the quarter and $13.9 million for the six-month period[15] - Total revenue increased for both periods, with a 0.9% increase for the three months and an 8.2% increase for the six months, driven by rental income and fees[15] - Interest expense on mortgage notes increased significantly, by 14.2% for the quarter and 38.0% for the six months, reflecting higher interest rates[15] Condensed Consolidated Statements of Changes in Equity This section details the changes in the company's equity over time, reflecting net income/loss, dividends, and stock transactions Condensed Consolidated Statements of Changes in Equity (June 30, 2024 vs. December 31, 2023) | Metric | December 31, 2023 | June 30, 2024 | | :-------------------------------- | :------------------ | :------------------ | | Total Equity (beginning of period) | $61,322,070 | $61,322,070 | | Net (loss) income | $(5,241,663) (Q1 2024) | $(11,848,040) (Q2 2024) | | Dividends to Series D preferred stockholders | $(522,032) (Q1 2024) | $(543,331) (Q2 2024) | | Issuance of preferred stock Series D, net | $0 | $1,195,855 | | Repurchase of Series A Common Stock | $0 | $(7,613) | | Total Equity (end of period) | $56,000,807 (March 31, 2024) | $44,607,175 (June 30, 2024) | - Total equity decreased from $61.3 million at December 31, 2023, to $44.6 million at June 30, 2024, primarily due to net losses and distributions[17] - The company issued 109,054 shares of Series D Preferred Stock, generating $1.2 million in net proceeds during the six months ended June 30, 2024[17] - Repurchased 10,446 shares of Series A Common Stock at a cost of $7,613 during the six months ended June 30, 2024[17] Condensed Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30) | Metric | 2024 | 2023 | | :------------------------------------------ | :----------- | :----------- | | Net cash used in operating activities | $(1,863,486) | $(1,603,709) | | Net cash provided by investing activities | $13,168,408 | $105,255,550 | | Net cash used in financing activities | $(9,280,469) | $(111,467,775) | | Net change in cash, cash equivalents and restricted cash | $2,024,453 | $(7,815,934) | | Cash, cash equivalents and restricted cash - end of period | $8,534,881 | $8,700,791 | - Net cash used in operating activities increased to $1.9 million in 2024 from $1.6 million in 2023[20] - Net cash provided by investing activities significantly decreased from $105.3 million in 2023 to $13.2 million in 2024, primarily due to the absence of large SPAC redemptions seen in the prior year[20] - Net cash used in financing activities decreased substantially from $111.5 million in 2023 to $9.3 million in 2024, also largely influenced by the SPAC redemption activities in 2023[20] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements Note 1. Organization and Liquidity This note describes the company's structure, operations, and its strategies for managing short-term and long-term cash needs - Presidio Property Trust, Inc. is an internally-managed REIT with holdings in office, industrial, retail, and model home properties, operating through various subsidiaries and partnerships[22] - The company maintains REIT qualification by distributing at least 90% of its taxable income and is subject to federal and state income taxes on its taxable REIT subsidiaries (TRSs)[24][25] - Anticipated future liquidity sources include existing cash, cash flows from operations, refinancing, real estate sales, new borrowings, and equity/debt sales. Short-term needs include operating costs, debt service, tenant improvements, and dividends[26][28] - Future principal payments on mortgage notes payable for the next two quarters of 2024 total approximately $12.5 million, with management expecting to sell model homes or refinance other mortgage notes[28] Note 2. Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements - The financial statements are prepared in accordance with GAAP for interim reporting, with certain information condensed or excluded per SEC rules[32] - The company consolidates its subsidiaries and partnerships, including NetREIT Advisors, LLC, Dubose Advisors LLC, NetREIT Dubose Model Home REIT, Inc., NetREIT Partnerships, and Model Home Partnerships[33] - Impairment charges of approximately $0.1 million and $0.2 million were recognized for model homes during the three and six months ended June 30, 2024, respectively, due to shorter-than-expected hold periods and builder product style changes[48][49] - The company's investment in Conduit Pharmaceuticals marketable securities, including Private CDT Warrants, totaled $4.4 million as of June 30, 2024, measured using Level 1 and Level 3 fair value measurements[52] - An immaterial error correction was made in Q2 2024 to reclassify restricted compensation expense from a liability to additional paid-in capital, affecting prior period balance sheets and equity statements but not net income or cash flows[61][62] Note 3. Recent Real Estate Transactions This note details the company's recent acquisitions and dispositions of real estate properties Real Estate Acquisitions (Six Months Ended June 30) | Metric | 2024 | 2023 | | :-------------------------------- | :----------- | :----------- | | Model homes acquired | 12 | 23 | | Acquisition cost | ~$5.7 million | ~$12.9 million | | Cash payments | ~$1.7 million | ~$3.9 million | | Mortgage notes | ~$4.0 million | ~$9.0 million | Real Estate Dispositions (Six Months Ended June 30) | Metric | 2024 | 2023 | | :-------------------------------- | :----------- | :----------- | | Model homes sold | 42 | 10 | | Sales proceeds | ~$20.1 million | ~$4.6 million | | Recognized gain | ~$2.8 million | ~$1.5 million | Note 4. Real Estate Assets This note provides a breakdown of the company's real estate portfolio, including property types and net values - As of June 30, 2024, the company owned 12 commercial properties (8 office, 1 industrial, 3 retail) totaling approximately 823,417 rentable square feet, and 80 model home residential properties totaling approximately 241,309 square feet[74][76] Real Estate Assets, Net (June 30, 2024 vs. December 31, 2023) | Property Type | June 30, 2024 | December 31, 2023 | | :-------------------------------- | :-------------- | :------------------ | | Presidio Property Trust, Inc. properties | $92,638,454 | $93,365,637 | | Model Home properties | $38,253,777 | $50,790,147 | | Total real estate assets and lease intangibles, net | $130,892,231 | $144,155,784 | - Model home properties' net value decreased significantly from $50.8 million to $38.3 million, reflecting recent dispositions and impairment charges[75][79] Note 5. Lease Intangibles This note details the net value and amortization schedule of the company's lease-related intangible assets Net Value of Lease Intangibles (June 30, 2024 vs. December 31, 2023) | Lease Intangibles | June 30, 2024 (Net) | December 31, 2023 (Net) | | :------------------ | :------------------ | :---------------------- | | In-place leases | $15,356 | $20,248 | | Leasing costs | $13,183 | $17,055 | | Above-market leases | $0 | $0 | | Total | $28,539 | $37,303 | - The net value of lease intangibles decreased from $37,303 at December 31, 2023, to $28,539 at June 30, 2024[78] Future Aggregate Amortization Expense for Lease Intangible Assets | Year | Amortization Expense | | :--- | :------------------- | | 2024 | $8,763 | | 2025 | $15,669 | | 2026 | $4,107 | | Total | $28,539 | Note 6. Other Assets This note provides a breakdown of other non-real estate assets held by the company Other Assets (June 30, 2024 vs. December 31, 2023) | Other Assets | June 30, 2024 | December 31, 2023 | | :------------------------------------------ | :------------ | :------------------ | | Deferred rent receivable | $2,069,489 | $1,973,887 | | Prepaid expenses, deposits and other | $513,373 | $349,160 | | Notes receivable | $316,374 | $316,374 | | Accounts receivable, net | $312,015 | $694,869 | | Deferred offering costs | $0 | $5,000 | | Right-of-use assets, net | $0 | $15,649 | | Investment in marketable securities (not including Conduit) | $0 | $45,149 | | Total other assets | $3,211,251 | $3,400,088 | - Total other assets decreased from $3.4 million at December 31, 2023, to $3.2 million at June 30, 2024, primarily due to the sale of marketable securities (excluding Conduit) and a reduction in accounts receivable[82][83] Note 7. Mortgage Notes Payable This note details the company's mortgage debt, including balances, interest rates, and payment schedules Mortgage Notes Payable (June 30, 2024 vs. December 31, 2023) | Category | June 30, 2024 | December 31, 2023 | | :------------------------------------ | :------------ | :------------------ | | Presidio Property Trust, Inc. Properties | $75,744,998 | $73,651,207 | | Model Home mortgage notes | $26,274,481 | $34,815,699 | | Total Mortgage Notes Payable | $102,019,479 | $108,466,906 | | Unamortized loan costs | $(894,093) | $(753,633) | | Mortgage Notes Payable, net | $101,125,386 | $107,713,273 | - Total mortgage notes payable, net, decreased by approximately $6.6 million from December 31, 2023, to June 30, 2024[85] - The loan on Dakota Center matured on July 6, 2024, and management is negotiating with the special servicer for modification, extension, or sale[86] - The company refinanced the West Fargo Industrial properties mortgage loan for $5.75 million at a 7.14% interest rate, maturing in July 2029[88] Scheduled Principal Payments of Mortgage Notes Payable (as of June 30, 2024) | Year | Presidio Property Trust, Inc. Notes Payable | Model Homes Notes Payable | Total Principal Payments | | :------------------------ | :---------------------------------------- | :------------------------ | :----------------------- | | 2024 | $9,635,272 | $2,898,031 | $12,533,303 | | 2025 | $28,645,113 | $9,525,273 | $38,170,386 | | 2026 | $16,521,064 | $932,102 | $17,453,166 | | 2027 | $157,739 | $465,084 | $622,823 | | 2028 | $168,907 | $9,110,909 | $9,279,816 | | Thereafter | $20,616,903 | $3,343,082 | $23,959,985 | | Total | $75,744,998 | $26,274,481 | $102,019,479 | Note 8. Notes Payable This note describes other outstanding promissory notes and loans held by the company - The company holds an Economic Injury Disaster Loan (EIDL) of $150,000 from the SBA, received in August 2020, with principal and interest deferred for twelve months and a 3.75% annual interest rate, maturing in August 2050[90] - A promissory note of approximately $0.3 million was issued to a majority-owned subsidiary for refinancing a model home property, with a 5.55% interest rate and maturity date of August 15, 2024; this note is eliminated through consolidation[91] Note 9. Investment in Conduit Pharmaceuticals This note details the company's investment in Conduit Pharmaceuticals, including its valuation and related transactions - The company sponsored a SPAC, Murphy Canyon Acquisition Corp., which completed its business combination with Conduit Pharma on September 22, 2023, resulting in the company owning approximately 6.3% of Conduit's common stock[92][99] - Upon deconsolidation of Conduit on September 22, 2023, the company recognized a gain of approximately $40.3 million, including $34.1 million from remeasurement of retained investment and $6.2 million from deconsolidation of assets and liabilities[100] - As of June 30, 2024, the investment in Conduit's common stock, public warrants, and Private CDT Warrants totaled approximately $4.4 million, measured at fair value, with a cost basis of approximately $7.5 million[102] - On April 22, 2024, the company entered a lockup agreement for 2.7 million Conduit shares and received Private CDT Warrants to purchase 540,000 shares, valued at $156,600 as of June 30, 2024[103] Note 10. Commitments and Contingencies This note outlines the company's future obligations, potential liabilities, and ongoing legal or environmental matters - Approximately $1.0 million is estimated for capital expenditures on existing properties, net of construction financing, for the remainder of 2024[104] - The company resolved a stockholder activist proxy contest by appointing Elena Piliptchak to its board of directors on May 9, 2024, with the activist group agreeing to standstill provisions[105] - No material litigation or environmental liabilities are currently known, but the company monitors economic and geopolitical factors that could impact its real estate portfolio[106][107][108] Note 11. Stockholders' Equity This note details changes in the company's equity, including stock issuances, repurchases, and dividend policies - On June 20, 2024, the company issued 109,054 shares of Series D Preferred Stock in an underwritten public offering at $16.00 per share, generating approximately $1.74 million in gross proceeds for general corporate and working capital purposes[111] - Holders of Series D Preferred Stock are entitled to cumulative cash dividends at 9.375% per annum ($2.34375 per share annually) and have limited voting rights, primarily if dividends are unpaid for 18 or more months[112][113] - In the event of liquidation, Series D Preferred Stockholders have a liquidation preference of $25.00 per share plus accumulated unpaid dividends[115] - The Board authorized a stock repurchase program in November 2023 for up to $6.0 million of Series A Common Stock and $4.0 million of Series D Preferred Stock, expiring in November 2024. During the six months ended June 30, 2024, 10,446 shares of Series A Common Stock were repurchased for $7,613[122] Cash Dividends Declared Per Share | Stock Type | Period | 2024 | 2023 | | :------------------ | :---------------- | :--- | :--- | | Series A Common Stock | Six Months Ended June 30 | $0 | $0.045 | | Series D Preferred Stock | Six Months Ended June 30 | $1.17186 | $1.17186 | Note 12. Share-Based Incentive Plan This note describes the company's equity compensation plans and related share activity - The 2017 Incentive Award Plan was amended in June 2023 to increase available shares for issuance from 2.5 million to 3.5 million and include an evergreen provision to automatically increase shares to 15% of outstanding common stock semi-annually[125] Restricted Stock Activity (December 31, 2023 to June 30, 2024) | Activity | Common Shares | | :------------------------ | :-------------- | | Balance at December 31, 2023 | 760,995 | | Granted | 1,437,746 | | Vested | (164,078) | | Balance at June 30, 2024 | 2,034,663 | - Share-based compensation expense was approximately $0.9 million for the six months ended June 30, 2024, compared to $0.5 million for the same period in 2023[127] Note 13. Segments This note provides financial information broken down by the company's operating segments, including NOI and assets - The company operates in three reportable segments: Office/Industrial Properties, Model Home Properties, and Retail Properties, with performance evaluated based on Net Operating Income (NOI)[128][129] Net Operating Income (NOI) by Segment (Six Months Ended June 30) | Segment | 2024 | 2023 | | :------------------------ | :----------- | :----------- | | Office/Industrial Properties | $3,246,450 | $3,219,132 | | Model Home Properties | $2,144,641 | $1,799,364 | | Retail Properties | $732,647 | $672,719 | | Total NOI | $6,123,738 | $5,691,215 | Assets by Reportable Segment (June 30, 2024 vs. December 31, 2023) | Segment | June 30, 2024 | December 31, 2023 | | :------------------------ | :-------------- | :------------------ | | Office/Industrial Properties | $77,076,636 | $78,140,372 | | Model Home Properties | $39,538,041 | $51,456,292 | | Retail Properties | $16,541,354 | $16,539,399 | | Total assets for reportable segments | $133,156,031 | $146,136,063 | Capital Expenditures by Reportable Segment (Six Months Ended June 30) | Category | 2024 | 2023 | | :------------------------------------ | :----------- | :----------- | | Acquisition of operating properties, model home | $5,740,918 | $12,932,128 | | Capital expenditures and tenant improvements | $1,213,936 | $1,001,836 | | Total real estate investments | $6,954,854 | $13,933,964 | Note 14. Income Tax Provision This note details the company's income tax expenses, REIT status, and taxable REIT subsidiary activities - The company maintains its REIT status, requiring annual distribution of at least 90% of REIT taxable income, and its taxable REIT subsidiaries (TRSs) are subject to federal, state, and local income taxes[134] - A current income tax provision of $160,586 was recorded for TRS activities during the six months ended June 30, 2024, compared to $497,527 in the prior year[135] - The company is evaluating the impact of ASU 2023-09, 'Improvements to Income Tax Disclosures,' effective for fiscal years beginning after December 15, 2024, but does not expect a material impact[137] Note 15. Related Party Transactions This note describes transactions between the company and its related entities or individuals - The company leased portions of its corporate headquarters to Puppy Toes, Inc. and Centurion Counsel, Inc. (owned by Puppy Toes, Inc., which is owned by the CEO and his wife), billing $5,376 in rent for the six months ended June 30, 2024 and 2023[138] - Full payroll reimbursement for employee services provided to these related entities totaled approximately $75,715 for the six months ended June 30, 2024, and $77,349 for the same period in 2023[139] Note 16. Subsequent Events This note reports significant events that occurred after the balance sheet date but before the financial statements were issued - The loan on the Dakota Center matured on July 6, 2024, and management is in negotiations with the special servicer for modification, extension, or sale of the building[141] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition, highlighting key operational results, significant transactions, and liquidity management strategies for the three and six months ended June 30, 2024 and 2023. It also discusses the company's real estate portfolio, strategic alternatives, and outlook on capital resources and market conditions Overview This section provides a general description of the company's business, real estate portfolio, and strategic initiatives - Presidio Property Trust, Inc. operates as an internally managed, diversified REIT, holding office, industrial, retail, and triple-net leased model home properties across multiple states[145][146] - As of June 30, 2024, the portfolio included 8 office buildings, 1 industrial property (758,175 sq ft), 3 retail shopping centers (65,242 sq ft), and 80 model home residential properties (241,309 sq ft)[145] - A Special Committee was established in September 2023 to explore strategic alternatives to maximize stockholder value, including business combinations, asset sales, or joint ventures[149] Significant Transactions This section highlights major real estate acquisitions and dispositions that impacted the company's financial position Real Estate Acquisitions (Six Months Ended June 30) | Metric | 2024 | 2023 | | :-------------------------------- | :----------- | :----------- | | Model homes acquired | 12 | 23 | | Acquisition cost | ~$5.7 million | ~$12.9 million | | Cash payments | ~$1.7 million | ~$3.9 million | | Mortgage notes | ~$4.0 million | ~$9.0 million | Real Estate Dispositions (Six Months Ended June 30) | Metric | 2024 | 2023 | | :-------------------------------- | :----------- | :----------- | | Model homes sold | 42 | 10 | | Sales proceeds | ~$20.1 million | ~$4.6 million | | Recognized gain | ~$2.8 million | ~$1.5 million | Results of Operations (Three Months Ended June 30, 2024 and 2023) This section analyzes the company's financial performance for the three-month periods, detailing revenue, expenses, and key drivers Key Financials (Three Months Ended June 30) | Metric | 2024 | 2023 | Change (%) | | :------------------------------------------ | :----------- | :----------- | :--------- | | Total revenues | $4,586,541 | $4,543,872 | 0.9% | | Rental operating costs | $1,492,495 | $1,399,159 | 6.7% | | General and administrative expenses | $2,202,916 | $1,813,184 | 21.5% | | Depreciation and amortization | $1,351,370 | $1,368,829 | -1.3% | | Asset impairment charges | $101,245 | $0 | N/A | | Interest expense - mortgage notes | $1,525,845 | $1,336,415 | 14.2% | | Gain on sale of real estate, net | $811,903 | $1,119,952 | -27.5% | | Loss on Conduit remeasurement | $10,027,433 | $0 | N/A | - Total revenues increased slightly by 0.9% to $4.6 million, while rental operating costs increased by 6.7% to $1.5 million[158][159] - General and administrative expenses rose by 21.5% to $2.2 million, mainly due to costs related to the 2024 annual meeting and settlement with Zuma Capital[160] - A significant loss of $10.0 million was recorded on Conduit Pharmaceuticals marketable securities due to fair value adjustments[166] Results of Operations (Six Months Ended June 30, 2024 and 2023) This section analyzes the company's financial performance for the six-month periods, detailing revenue, expenses, and key drivers Key Financials (Six Months Ended June 30) | Metric | 2024 | 2023 | Change (%) | | :------------------------------------------ | :----------- | :----------- | :--------- | | Total revenues | $9,376,603 | $8,665,364 | 8.2% | | Rental operating costs | $3,056,072 | $2,974,149 | 2.8% | | General and administrative expenses | $4,287,366 | $3,777,804 | 13.5% | | Depreciation and amortization | $2,702,388 | $2,702,403 | 0.0% | | Asset impairment charges | $196,793 | $0 | N/A | | Interest expense - mortgage notes | $3,041,051 | $2,204,182 | 38.0% | | Gain on sale of real estate, net | $2,829,998 | $1,537,289 | 84.1% | | Loss on Conduit remeasurement | $13,888,667 | $0 | N/A | - Total revenues increased by 8.2% to $9.4 million, with model home gross revenue representing 25.9% of total revenue in 2024, up from 21.6% in 2023[167][168][169] - General and administrative expenses increased by 13.5% to $4.3 million, primarily due to higher consulting, proxy solicitation, legal fees, and De-SPAC success bonuses[170] - Interest expense on mortgage notes surged by 38.0% to $3.0 million, with the weighted average interest rate increasing to 5.38% from 4.83%[173] - A net loss of $13.9 million was recorded on Conduit Pharmaceuticals marketable securities due to fair value adjustments[176] Liquidity and Capital Resources This section discusses the company's ability to meet its financial obligations and fund operations, including cash position and debt structure - Cash and restricted cash totaled approximately $8.5 million at June 30, 2024[178] - Short-term liquidity needs include $12.5 million in principal payments on mortgage notes payable in 2024, with $25.8 million in commercial property loans maturing within the next 12 months[179] - The Board authorized a stock repurchase program in November 2023 for up to $6.0 million of Series A Common Stock and $4.0 million of Series D Preferred Stock, expiring in November 2024[181] - Net cash used in operating activities was $1.9 million for the six months ended June 30, 2024, while net cash provided by investing activities was $13.2 million, and net cash used in financing activities was $9.3 million[191][192][194] - As of June 30, 2024, commercial properties had $75.7 million in fixed-rate mortgage notes (weighted-average interest rate of 4.97%), and model homes had $26.3 million (weighted-average interest rate of 6.58%)[189][190] Inflation This section addresses the potential impact of inflation on the company's operations, revenues, and expenses - Leases generally include provisions for limited rent increases (fixed, CPI-linked, or sales-volume based), which are expected to result in rent increases over time[201] - The use of triple-net lease agreements helps mitigate exposure to rising property expenses due to inflation, as tenants are responsible for these costs[202] ITEM 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Presidio Property Trust, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company[203] ITEM 4. Controls and Procedures Management evaluated the effectiveness of disclosure controls and procedures, identifying a material weakness in internal control over financial reporting related to the annual income tax provision and monitoring controls. Remediation efforts are underway, but the weakness has not been fully remediated as of the filing date - A material weakness was identified in internal control over financial reporting, specifically concerning the formal review and approval process for the annual income tax provision (REIT and non-REIT subsidiaries, and Conduit shares)[205] - The company lacked adequate internal controls under an appropriate financial reporting framework, including monitoring and entity-level controls for income tax provision[205] - Remediation measures are being implemented, including adding controls around income tax provision calculation and engaging third-party experts, but the material weakness is not yet fully remediated[206][208] PART II. OTHER INFORMATION ITEM 1. Legal Proceedings There are no material legal proceedings to report for the period - The company is not currently subject to any material litigation or threatened litigation[209] ITEM 1A. Risk Factors No new material risk factors have been identified for this reporting period - No new risk factors are reported in this quarterly filing[210] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds The company continued its stock repurchase program, buying back Series A Common Stock during the six months ended June 30, 2024, as part of its strategy to return capital to stockholders - The Board of Directors authorized a stock repurchase program in November 2023 for up to $6.0 million of Series A Common Stock and $4.0 million of Series D Preferred Stock, expiring in November 2024[211] Series A Common Stock Repurchases (Six Months Ended June 30, 2024) | Month | Total Number of Shares Purchased | Average Price Paid Per Share | | :------------ | :------------------------------- | :--------------------------- | | January 2024 | — | — | | February 2024 | — | — | | March 2024 | — | — | | April 2024 | — | — | | May 2024 | — | — | | June 2024 | 10,446 | $0.73 | | Total | 10,446 | $0.73 | - As of June 30, 2024, approximately $5,992,387 remained available for repurchases under the Series A Common Stock program[213] ITEM 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported[214] ITEM 4. Mine Safety Disclosures No mine safety disclosures are applicable or required for the company - No mine safety disclosures are applicable[215] ITEM 5. Other Information No other material information is reported in this section - No other information is reported[216] ITEM 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including articles supplementary, cooperation agreements, underwriting agreements, and certifications from the CEO and CFO - Key exhibits include Articles Supplementary for Series D Preferred Stock, a Cooperation Agreement with Zuma Capital Management, LLC, and an Underwriting Agreement with The Benchmark Company, LLC[217] - Certifications from the CEO and CFO (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act) are included[217] SIGNATURES The report is duly signed on behalf of Presidio Property Trust, Inc. by its Chief Executive Officer, Jack K. Heilbron, and Chief Financial Officer, Ed Bentzen, on August 14, 2024 - The report was signed by Jack K. Heilbron, Chief Executive Officer, and Ed Bentzen, Chief Financial Officer, on August 14, 2024[220]