Presidio Property Trust, Inc.: Form 10-Q for the period ended Jun 30, 2026

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto appearing in Item 1 of this report and the more detailed information contained in our 2025 year end Annual Report.

We may refer to the three months ended June 30, 2026 and June 30, 2025, as the "2026 Quarter" and the "2025 Quarter," respectively.

Forward-Looking Statements

This Form 10-Q contains forward-looking statements which involve risks and uncertainties. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" and/or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and also of which do not relate solely to historical matters. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Moreover, investors are cautioned to interpret many of the risks identified in the risk factors discussed in this 10-Q and our 2025 year end Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 27, 2026. Additional factors which may cause the actual results, performance, or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements include, but are not limited to, the risks associated with the ownership of real estate in general and our real estate assets in particular; the economic health of the metro regions where we conduct business; the risk of failure to enter into/and or complete contemplated acquisitions and dispositions, within the price ranges anticipated and on the terms and timing anticipated; changes in the composition of our portfolio; fluctuations in interest rates; reductions in or actual or threatened changes to the timing of federal government spending; the risks related to the use of third-party providers and joint venture partners; the ability to control our operating expenses; the economic health of our tenants; the supply of competing properties; shifts away from brick and mortar stores to e-commerce; the availability and terms of financing and capital and the general volatility of securities markets; compliance with applicable laws, including those concerning the environment and access by persons with disabilities; terrorist attacks or actions and/or risks relating to information technology and cybersecurity attacks, loss of confidential information and other related business disruptions; weather conditions, natural disasters and pandemics; ability to maintain key personnel; failure to qualify and maintain our qualification as a REIT and the risks of changes in laws affecting REITs; and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2025 year end Annual Report. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We undertake no obligation to update our forward-looking statements or risk factors to reflect new information, future events, or otherwise.

OVERVIEW

The Company operates as an internally managed, diversified REIT, with primary holdings in office, industrial, retail, and triple-net leased model home properties. In October 2017, we changed our name from "NetREIT, Inc." to "Presidio Property Trust, Inc." The Company acquires, owns, and manages a geographically diversified portfolio of real estate assets, including office, industrial, retail and model home residential properties leased to homebuilders located in the United States. As of June 30, 2026, the Company owned or had an equity interest in:

• Seven Office buildings and an industrial property ("Office/Industrial Properties"), which total approximately 638,620 rentable square feet;
• One retail building (“Retail Property”) with approximately 10,500 rentable square feet; and
• 71 Model home residential properties ("Model Homes" or "Model Home Properties"), totaling approximately 211,432 square feet, leased back on a triple-net basis to homebuilders that are owned by four affiliated limited partnerships and one wholly-owned corporation, all of which we control.

We own three commercial properties located in Colorado, three in North Dakota, one in Southern California, one in Texas and one in Maryland. Our model home properties are located in four states. While geographical clustering of real estate enables us to reduce our operating costs through economies of scale by servicing several properties with less staff, it makes us susceptible to changing market conditions in these discrete geographic areas. We do not develop properties but acquire properties that are stabilized or that we anticipate will be stabilized within two or three years of acquisition. We consider a property to be stabilized once it has achieved an 80% occupancy rate for a full year as of January 1 of such year or has been operating for three years.

Most of our office and retail properties are leased to a variety of tenants ranging from small businesses to large public companies, many of which are not investment grade. We have, in the past, entered into, and intend in the future to enter into, purchase agreements for real estate having net leases that require the tenant to pay all of the operating expenses or pay increases in operating expenses over specific base years. Most of our office leases are for terms of three to five years with annual rental increases. Our model homes are typically leased back for two to three years to the home builder on a triple-net lease. Under a triple-net lease, the tenant is required to pay all operating, maintenance and insurance costs and real estate taxes with respect to the leased property.

We seek to diversify our portfolio by commercial real estate segments, including office, industrial, retail and model home properties to reduce the adverse effect of a single under-performing segment and/or tenant. We further mitigate risk at the tenant level through our credit review process, which varies by tenant class. For example, our commercial and industrial tenants tend to be corporations or individually owned businesses. In these cases, we typically obtain financial records, including financial statements and tax returns (depending on the circumstance), and run credit reports for any prospective tenant to support our decision to enter into a rental arrangement. We also typically obtain security deposits from these commercial tenants. Our Model Home commercial tenants are well-known homebuilders with established credit histories. These tenants are subjected to financial review and analysis prior to us entering into a sales-leaseback transaction.

In June 2024, the Board of Directors established the Strategic Planning and Cyber Committee (the "Strategic Committee"). The purpose of the Strategic Committee is to: assist the Board in carrying out its responsibilities of oversight over the Company's business strategy, make recommendations to the Board on the Company's strategic direction and objectives and serve as a liaison between the Board and management, and assist the Board in fulfilling its responsibilities of oversight with regard to the Company's identification, assessment, and management of the Company's cybersecurity risks. There can be no assurance that the work of the Strategic Committee will result in any transaction being pursued or consummated. In addition, there is no formal timetable for the Strategic Committee's exploration of potential strategic alternatives, and the Company does not intend to disclose any developments with respect to the Strategic Committee's activities unless and until the Company determines that further disclosure is appropriate or required by law or regulation.

For additional information regarding our Common Stock activity, see Footnote 11. Stockholders' Equity in the Notes to the Consolidated Financial Statements in "Part I, Item 1. Financial Statements" of this Quarterly Report.

SIGNIFICANT TRANSACTIONS IN 2026 AND 2025

Acquisitions during the six months ended June 30, 2026

• The Company acquired no model homes or commercial properties.

Acquisitions during the six months ended June 30, 2025

• The Company acquired 22 model homes for approximately $9.4 million. The purchase price was paid through cash payments of approximately $2.8 million and mortgage notes of approximately $6.6 million.

Dispositions during the six months ended June 30, 2026:

• On January 14, 2026, the Company sold one commercial property, Dakota Center, to a single buyer for approximately $4.7 million, net of selling costs, and recognized a net gain on the disposition of the assets and liabilities of approximately $3.4 million.
• The Company sold nine model homes for approximately $4.0 million, net of sales costs, and recognized a gain of approximately $0.2 million.

Dispositions during the six months ended June 30, 2025:

• The Company sold 13 model homes for approximately $5.9 million, net of sales costs, and recognized a gain of approximately $0.6 million.
• On February 6, 2025, the Company sold two commercial properties, Union Town Center and Research Parkway, to a single buyer for approximately $15.9 million, net of selling costs, and recognized a net gain of approximately $4.5 million net of closing costs.

CRITICAL ACCOUNTING POLICIES

There have been no material changes to our critical accounting policies as previously disclosed in our 2025 year-end Annual Report.

MANAGEMENT EVALUATION OF RESULTS OF OPERATIONS

Management’s evaluation of operating results includes an assessment of our ability to generate the cash flow necessary to pay operating expenses, general and administrative expenses, debt service and to fund distributions to our stockholders. As a result, management’s assessment of operating results gives less emphasis to the effects of unrealized gains and losses and other non-cash charges, such as depreciation and amortization and impairment charges, which may cause fluctuations in net income for comparable periods but have no impact on cash flows. Management’s evaluation of our potential for generating cash flow includes assessments of our recently acquired properties, our non-stabilized properties, long-term sustainability of our real estate portfolio, our future operating cash flow from anticipated acquisitions, and the proceeds from the sales of our real estate assets.

In addition, management evaluates the results of the operations of our portfolio and individual properties with a primary focus on increasing and enhancing the value, quality and quantity of properties in our real estate holdings. Management focuses its efforts on improving underperforming assets through re-leasing efforts, including negotiation of lease renewals and rental rates. Properties are regularly evaluated for potential added value appreciation and cashflow and, if lacking such potential, are sold with the equity reinvested in new acquisitions or otherwise allocated in a manner we believe is accretive to our stockholders. Our ability to increase assets under management is affected by our ability to raise borrowings and/or capital, coupled with our ability to identify appropriate investments.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED June 30, 2026 and 2025

Revenues. Total revenues were approximately $3.8 million for the three months ended June 30, 2026, compared to approximately $4.4 million for the same period in 2025. As of June 30, 2026, we had approximately $95.0 million in net real estate assets including 71 model homes, compared to approximately $114.6 million in net real estate assets, including 87 model homes at June 30, 2025. The average number of model homes held during the three months ended June 30, 2026 and 2025 was approximately 73 and 85, respectively. Additionally, the change in revenue is directly related to the decrease in commercial real estate rental income during the current period from the sale of Dakota Center.

Rental Operating Costs. Rental operating costs totaled approximately $1.3 million for the three months ended June 30, 2026, compared to approximately $1.5 million for the same period in 2025. Rental operating costs as a percentage of total revenue was approximately 33.0% and 33.4% for the three months ended June 30, 2026 and 2025, respectively.

General and Administrative Expenses. G&A expenses for the three months ended June 30, 2026 and 2025 totaled approximately $1.3 million and $1.2 million, respectively. G&A expenses as a percentage of total revenue was 35.2% and 27.9% for the three months ended June 30, 2026 and 2025, respectively. G&A expenses for the three months ended June 30, 2026 were slightly up compared to the same period ending in 2025 due to costs associated with downsizing our staff; however, the Company is still actively looking to reduce G&A expenses during the year. There has been a reduction of employee headcount during the first and second quarters of 2026 with more expected this year. Starting in April 2026, the Chief Executive Officer has agreed to a voluntary 5% reduction in his annual salary. Additionally, the size of the Board of Directors was reduced by one director starting in June 2026, which will provide additional G&A savings.

Depreciation and Amortization. Depreciation and amortization expense was approximately $0.9 million and $1.2 million for the three months ended June 30, 2026 and 2025, respectively. The decrease in depreciation and amortization expense is directly related to the decrease in commercial real estate rental income during the current period, from the sale of Dakota Center and Shea Center listed as held for sale.

Asset Impairments. We review the carrying value of each of our real estate properties regularly to determine if circumstances indicate an impairment in the carrying value of these investments exists. During the three months ended June 30, 2026 and 2025, we recognized non-cash impairment charges of approximately $3.0 million and $4.3 million, respectively. Approximately $2.6 million and $0.9 million of the impairment charges for the three months ended June 30, 2026 and 2025, was related to the Shea Center II. Additionally, during the three months ended June 30, 2025, we recorded an impairment charge on the Dakota Center property for approximately $3.3 million.

Interest Expense - mortgage notes. Interest expense, including amortization of deferred finance charges, was approximately $1.2 million for the three months ended June 30, 2026, compared to approximately $1.5 million for the same period in 2025. The weighted average interest rate on our outstanding debt was 6.28% and 5.44% as of June 30, 2026 and 2025, respectively. Mortgage notes payable totaled approximately $80.9 million and $92.9 million as of June 30, 2026 and 2025, respectively. Management expects future interest expenses to continue to decrease going forward for the year ending 2026 with the loss of the Shea Center II property on July 1, 2026 and related mortgage.

Gain (Loss) on Sale of Real Estate Assets, net. The change in gain or loss on the sale of real estate assets is dependent on the mix of properties sold and the market conditions at the time of the sale. See "Significant Transactions in 2026 and 2025" above for further detail.

Income allocated to non-controlling interests. Income allocated to non-controlling interests for the three months ended June 30, 2026 and 2025 totaled approximately $40,230 of expense and $0.2 million of income, respectively. This was directly related to the gain on sales of model homes held by our affiliated limited partnerships.

Loss on Conduit remeasurement. As of June 30, 2026, we held 709,000 public common stock warrants of CDTTW, and 540,000 private common stock warrants, with a combined value of approximately $11,628. Conduit's public common stock warrants (CDTTW) and Private CDT Warrants presented on the consolidated balance sheets were measured at fair value using Level 1 and Level 3 market prices, taking into account the adoption of ASU 2022-03 Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.

RESULTS OF OPERATIONS FOR THE six MONTHS ENDED June 30, 2026 and 2025

Revenues. Total revenues were approximately $7.6 million for the six months ended June 30, 2026, compared to approximately $8.5 million for the same period in 2025. As of June 30, 2026, we had approximately $95.0 million in net real estate assets including 71 model homes, compared to approximately $114.6 million in net real estate assets, including 87 model homes at June 30, 2025. The average number of model homes held during the six months ended June 30, 2026 and 2025 was approximately 75 and 83, respectively. The change in revenue is directly related to the decrease in commercial real estate rental income during the current period from the sale of Dakota Center in January 2026, as well as the sale of two commercial properties on February 7, 2025.

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Rental Operating Costs. Rental operating costs totaled approximately $2.8 million for the six months ended June 30, 2026, compared to approximately $3.1 million for the same period in 2025. Rental operating costs as a percentage of total revenue was approximately 36.9% and 36.2% for the six months ended June 30, 2026 and 2025, respectively.

General and Administrative Expenses. G&A expenses for the six months ended June 30, 2026 and 2025 totaled approximately $3.0 million and $2.9 million, respectively. G&A expenses as a percentage of total revenue was 39.7% and 33.9% for the six months ended June 30, 2026 and 2025, respectively. G&A expenses for the six months ended June 30, 2026 were up compared to the same period ending in 2025; however, the Company is actively looking to reduce G&A expenses during the year. There has been a reduction of employee headcount during the first and second quarter of 2026 with more expected this year. Starting in April 2026, the Chief Executive Officer has agreed to a voluntary 5% reduction in his annual salary. Additionally, the Board of Directors have approved the reduction of the size of the Board of Directors by one Director starting in June 2026, which will provide additional G&A savings.

Depreciation and Amortization. Depreciation and amortization expense was approximately $1.9 million and $2.5 million for the six months ended June 30, 2026 and 2025, respectively. The decrease in depreciation and amortization expense is directly related to the decrease in commercial real estate rental income during the current period, from the sale of Dakota Center and the placement of Shea Center into receivership and listed as held for sale.

Asset Impairments. We review the carrying value of each of our real estate properties regularly to determine if circumstances indicate an impairment in the carrying value of these investments exists. During the six months ended June 30, 2026 and 2025, we recognized non-cash impairment charges of approximately $3.5 million and $4.3 million, respectively. Approximately $3.1 million and $0.9 million of the impairment charge for the six months ended June 30, 2026 and 2025, was related to the Shea Center II.

Interest Expense - mortgage notes. Interest expense, including amortization of deferred finance charges, was approximately $3.2 million for the six months ended June 30, 2026, compared to approximately $3.0 million for the same period in 2025. The weighted average interest rate on our outstanding debt was 6.28% and 5.44% as of June 30, 2026 and 2025, respectively. Mortgage notes payable totaled approximately $80.9 million and $94.4 million as of June 30, 2026 and 2025, respectively. While mortgage interest expenses increased over the six months ended June 30, 2026 and 2025, approximately $0.2 million of the interest expense attributed to the six months ended June 30, 2026 was related to one-time charge for the default interest on the loan for Dakota Center. Management expects future interest expenses to continue to decrease going forward for the year ending 2026. Additionally, during the six months ended June 30, 2026, we recorded defaulted interest expense of approximately $0.1 million related to the Shea Center II loan.

Gain (Loss) on Sale of Real Estate Assets, net. The change in gain or loss on the sale of real estate assets is dependent on the mix of properties sold and the market conditions at the time of the sale. See "Significant Transactions in 2026 and 2025" above for further detail.

Income allocated to non-controlling interests. Income allocated to non-controlling interests for the six months ended June 30, 2026 and 2025 totaled approximately $0.1 million and $0.3 million, respectively. This was directly related to the gain on sales of model homes held by our affiliated limited partnerships.

Loss on Conduit remeasurement. As of June 30, 2026, we held 709,000 public common stock warrants of CDTTW, and 540,000 private common stock warrants, with a combined value of approximately $11,628. Conduit's public common stock warrants (CDTTW) and Private CDT Warrants presented on the consolidated balance sheets were measured at fair value using Level 1 and Level 3 market prices, taking into account the adoption of ASU 2022-03 Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. During the six months ended June 30, 2026, we recorded a gain on Conduit's marketable securities connected to the CDT warrants of $7,728, compared to a loss of approximately $184,459 during the six months ended June 30, 2025.

The following table shows a list of our commercial properties owned by the Company grouped by state and geographic region as of June 30, 2026:

The following table shows a list of our Model Home properties by state and geographic region as of June 30, 2026:

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our anticipated future sources of liquidity may include existing cash and cash equivalents, cash flows from operations, refinancing of existing mortgages, future real estate sales, new borrowings from our model home lines of credit, and the sale of our equity or issuance of debt securities or bonds. Our cash and restricted cash at June 30, 2026 was approximately $5.9 million. Our future capital needs include paying down existing borrowings, maintaining our existing properties, funding tenant improvements, paying lease commissions (to the extent they are not covered by lender-held reserve deposits), and the payment of dividends to our stockholders. We also are actively seeking model home 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.

Our short-term liquidity needs include paying our current operating costs, satisfying the debt service requirements of our existing mortgages, completing tenant improvements, paying leasing commissions, and funding dividends to stockholders. Future principal payments due on mortgage notes payable, during the last three months of 2026 and in the year ending December 31, 2026 total approximately $19.3 million and $2.6 million, respectively, of which $2.7 million in 2025 and $2.2 million in 2026 are related to model home properties. The non-recourse loan for Shea Center matured on January 5, 2026. On January 14, 2026, the Dakota Center property sold to an unrelated third-party for approximately $4.7 million, net of selling costs. The lender received approximately $4.3 million from the sale of the property, which was applied to settle the net loan balance of approximately $8.9 million. The Company was not responsible for the remaining balance on this non-recourse loan, and the transaction resulted in a net gain of approximately $3.4 million. No other commercial property loans mature during 2026.

On January 21, 2026, the Company and NetREIT SC II, LLC, a subsidiary of the Company (the “Borrower” or "Shea Center"), received a notice (the “Default Notice”) from Wells Fargo Bank, National Association (the “Lender”) alleging that the Borrower’s failure to repay in full by January 5, 2026 the indebtedness owed under that certain promissory note dated as of December 24, 2015 issued to The Bancorp Bank (the “Original Lender”) in the original principal amount of $17,727,500 (the “Note”), the related loan agreement, dated as of December 24, 2015 by and between Borrower and the Original Lender (the “Loan Agreement”) and other related agreements (together with the Note and the Loan Agreement, the “Loan Documents”), constituted an event of default under the Loan Documents.

As a result of the alleged event of default, the entire unpaid amounts shall bear interest at the default interest rate equal to the lesser of (i) the maximum rate permitted by applicable law, or (ii) 5% above the original interest rate of 4.92% per annum.

In addition, the Lender has the right to foreclose or partially foreclose certain real and personal property that the Borrower had pledged as security for the Note located in Douglas County, Colorado, known as the “Shea Center II” (the “Property”). The Default Notice further states that the Lender revoked the Borrower’s license under the Loan Documents to receive, collect and make use of rents, profits and income from the Property.

On February 13, 2026, in connection with an ex parte motion brought by the Lender, the Borrower entered into a stipulation with the Lender to appoint Trigild IVL (the “Receiver”) as receiver over the Property and for the entry of an Order for Appointment of Receiver (the “Order”). Pursuant to the Order, the Borrower, and certain defendant parties, which included the Company (the “Borrower Parties”) were enjoined and restrained from collecting any rents or fees from or incident to the Property and from interfering with the Property. The Borrower Parties agreed to turn over to the Receiver all sums in existence as of the date of entry of the Order that are related or pertain to, or are derived from, the Property. In addition, the Receiver was given possession of the Property and has full power and authority to operate, manage, and preserve the Property. In the case of our non-recourse loan for Shea Center II, our obligation will be settled through the foreclosure process with the lender. On July 1, 2026, the foreclosure for Shea Center II took place with the property going to Argentic Services Company LP, who acquired the property by placing a minimum credit bid valued at $12.0 million, and no cash consideration was exchanged.

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. In December 2024, 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 the Board of Directors did not renew in December 2025. During the year ended December 31, 2025, we repurchased 16,080 shares of our Series A Common Stock, with an average price of $4.79 per share, including a commission of $0.025 per share, for a total cost of $77,092 for the Series A Common Stock. This does not include the shares repurchased in the fixed price self-tender offer (the "Tender Offer") during April-May 2025. During the year ended December 31, 2025, the Company repurchased 23,346 shares of our Series D Preferred Stock at an average price of approximately $14.76 per share, including a commission of $0.035 per share, for a total cost of $344,503 for the Series D Preferred Stock. Any repurchased shares are treated as authorized and unissued in accordance with Maryland law and shown as a reduction of stockholders’ equity at cost. There were no repurchases of Series A Common Stock or Series D Preferred Stock during six months ended June 30, 2026 as there were no repurchase plans in place.

There can be no assurance that the Company will refinance loans, take out additional financing or that capital will be available to the Company on acceptable terms, if at all. If events or circumstances occur such that the Company does not obtain additional funding, it will most likely be required to reduce its plans, reduce certain discretionary spending or even sell properties, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives. We believe that cash on hand, cash flow from our existing portfolio, distributions from joint ventures in Model Home Partnerships and property sales during 2025 and 2026 will be sufficient to fund our operating costs, planned capital expenditures and required dividends for at least the next twelve months. If our cash flow from operating activities is not sufficient to fund our short-term liquidity needs, we plan to fund a portion of these needs from additional borrowings of secured or unsecured indebtedness, from real estate sales, issuance of debt instruments, additional investors, or we may reduce or suspend the rate of dividends to our stockholders.

Our long-term liquidity needs include the capital necessary to grow and maintain our portfolio of investments. We believe that the potential financing capital available to us in the future is sufficient to fund our long-term liquidity needs. We are continually reviewing our existing portfolio to determine which properties have met our short- and long-term goals and while seeking to reinvest the proceeds in properties with better potential to increase performance. We expect to obtain additional cash in connection with refinancing of maturing mortgages and assumption of existing debt collateralized by some or all of our real property in the future to meet our long-term liquidity needs. If we are unable to arrange a line of credit, borrow on properties, privately place securities or sell securities to the public, we may not be able to acquire additional properties to meet our long-term objectives.

For the six months ended June 30, 2026, the Company did not declare a cash dividend on shares of Series A Common Stock. For the six months ended June 30, 2026, the Company did not declare and did not pay dividends on shares of Series D Preferred Stock. As of January 28, 2026, the Board of Directors has suspended the Company’s monthly dividend on its Series D Preferred Stock commencing with the January 2026 monthly dividend that would have been paid on February 15, 2026. Since the Company’s Board of Directors did not declare a dividend during the six months ended June 30, 2026, an accrual was not recorded on the balance sheet. However, undeclared preferred stock dividends are reflected in earnings per share as discussed in ASC 260-10-45-11. In accordance with the terms of the Series D Preferred Stock, preferred stock dividends that are not declared accumulate and are added to the liquidation preference as of the scheduled payment date for the respective series of the preferred stock. No interest, or sum of money in lieu of interest, is payable in respect of any dividend payments on the Series D Preferred Stock that are in arrears. As of June 30, 2026 and December 31, 2025, the cumulative preferred dividends in arrears on the Series D preferred stock was $1.1 million and $0, respectively.

The Board and the Company intend to reassess, on a quarterly basis, when accrued dividends on the Series D Preferred Stock may be paid and when the monthly dividend payments can be reinstated. Under the guidance of ASC 260-10-45-11, if the Company's Board of Directors does not declare a dividend in a given period, an accrual is not recorded on the balance sheet, however; undeclared preferred stock dividends are reflected in earnings per share. Preferred stock dividends that are not declared accumulate and are added to the liquidation preference as of the scheduled payment date for the respective series of the preferred stock. Cash permitting, the Company intends to continue to pay dividends on a monthly basis to holders of our Series D Preferred Stock going forward, but there can be no guarantee the Board of Directors will approve any future dividends. The Company has not decided when it will resume dividends to our common stockholders on a quarterly basis.

Series D Preferred Stock:

Cash Equivalents and Restricted Cash

At June 30, 2026 and December 31, 2025, we had approximately $5.9 million and $7.4 million in cash equivalents, respectively, including $4.4 million and $5.7 million of restricted cash, respectively. Our cash equivalents and restricted cash consist of invested cash, cash in our operating accounts, short-term bonds and cash held in bank accounts at third-party institutions. During 2026 and 2025, we did not experience any loss or lack of access to our cash or cash equivalents. Including any cash committed to current capital expenditures on our properties, the Company may spend approximately $1.6 million on capital expenditures, net of any construction financing (some of which is held in deposits reserve accounts by our lenders) during the rest of the year. We intend to use the remainder of our existing cash and cash equivalents for asset/property acquisitions, reduction of principal debt, general corporate purposes, common stock repurchases (if market conditions are met), or dividends to our stockholders.

On July 14, 2025, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an institutional investor (the “Purchaser”) for the purpose of raising approximately $2.05 million in gross proceeds for the Company. Pursuant to the terms of the Purchase Agreement, the Company agreed to sell in a registered direct offering (the “Offering”), (i) 140,000 shares (the “Public Shares”) of its Series A Common Stock and (ii) pre-funded warrants to purchase up to 30,830 shares (the “Pre-Funded Warrant Shares”) of Series A Common Stock (the “Pre-Funded Warrants”). Each Public Share and accompanying Pre-Funded Warrant were sold together at a combined offering price of $12.00. The Pre-Funded Warrants were immediately exercisable at a nominal exercise price of $0.0001 and were exercised on July 14, 2025 in full.

The closing of the sales of the Securities pursuant to the Purchase Agreement occurred on July 15, 2025. The net proceeds to the Company after deducting the Placement Agent’s fees and the Company’s offering expenses were approximately $1.7 million. The Company has used and intends to use the net proceeds from the offering for working capital and for other general corporate purposes including to potentially acquire additional properties.

In addition, in connection with the Purchase Agreement, the Company and the Purchaser entered into an Amendment to Series A Common Stock Purchase Warrants (the “Amendment”). The Amendment amends certain warrants to purchase 200,000 shares of Series A Common Stock purchased by the Purchaser on July 14, 2021 to (i) reduce the exercise price to $12.00 per share from $55 per share and (ii) extend the termination date to July 16, 2030 from July 16, 2026. Pursuant to the Stock Purchase Agreement, the Company filed a resale registration statement to register the shares of Series A Common Stock underlying such warrants, which registration statement went effective on August 22, 2025.

Secured Debt

As of June 30, 2026, all our commercial properties, except 300 N.P. which has no debt, had fixed-rate mortgage notes payable in the aggregate principal amount of $58.4 million, collateralized by a total of seven commercial properties with loan terms at issuance ranging from 5 to 10 years. The weighted-average interest rate on these mortgage notes payable as of June 30, 2026, was approximately 5.93% , and our debt to estimated market value for our commercial properties was approximately 69.2%. During the next 12 months, none of our commercial property loans will mature. The non-recourse loan on the Dakota Center property matured on July 6, 2024. In the month of

July 2025, the lender approved a purchase offer from a third party for $5,125,000, and as of January 14, 2026, Dakota Center had sold for a value of $5,125,000. During January 2026, the Company received notice that the Company's failure to repay in full by January 5, 2026 the indebtedness related to the loan agreement governing Shea Center II had triggered a default event. On February 13, 2026 the Company received notification that the Shea Center II property governed by the loan agreement was moved into receivership.

The foreclosure sale for Shea Center II took place on July 1, 2026, with the property awarded to Argentic Services Company LP, who acquired the property by placing a minimum credit bid valued at $12.0 million. No cash consideration was exchanged.

As of June 30, 2026, the Company had fixed-rate mortgage notes payable related to model homes in the aggregate principal amount of $22.5 million, collateralized by a total of 71 Model Homes. These loans generally have a term at issuance of three to five years. As of June 30, 2026, the average loan balance per home outstanding and the weighted-average interest rate on these mortgage loans are approximately $316,844 and 7.18%, respectively. Our debt to estimated market value on all our model home properties is approximately 62.4%. We have been able to refinance maturing mortgages to extend maturity dates and we have not experienced any notable difficulties financing our acquisitions. The Company anticipates that any new mortgages used to acquire commercial properties or model homes in the near future will be at rates higher than our currently weighted average interest rate.

Cash Flow for the six months ended June 30, 2026, and June 30, 2025

Operating Activities: Net cash used in operating activities for the six months ended June 30, 2026, totaled approximately $24,839, as compared to cash used in operating activities of $1.0 million for the six months ended June 30, 2025. The change in net cash used in operating activities is primarily due to the sale of Dakota Center, combined with other changes in net income, which fluctuates due to new leases, leasing renewals, tenant move outs and model home sales and acquisitions, as well as changes in non-cash addbacks or subtractions such as straight-line rent, are the primary drivers of the increase in cash used in operating activities.

Investing Activities: Net cash provided by investing activities for the six months ended June 30, 2026, was approximately $8.3 million compared to approximately $11.4 million used in investing activities during the same period in 2025. The change from each period was primarily related to the sale of our commercial and model home properties, totaling approximately $8.7 million during the six months ended June 30, 2026, compared to approximately $21.5 million during the six months ended June 30, 2025. Cash used in real estate acquisition and capital improvement totaled approximately $0.5 million, for the six months ended June 30, 2026 compared to $10.2 million for the same period in 2025.

We currently project that we could spend up to $1.6 million (some of which is held in deposits reserve accounts by our lenders) on capital improvements, tenant improvements and leasing costs for properties within our portfolio during the next 12 months. Capital expenditures may fluctuate in any given period subject to the nature, extent, and timing of improvements required to the properties. We may spend more on capital expenditures in the future due to rising construction costs. Tenant improvements and leasing costs may also fluctuate in any given year depending upon factors such as the property, the term of the lease, the type of lease, the involvement of external leasing agents and overall market conditions.

Financing Activities: Net cash used in financing activities during the six months ended June 30, 2026, was $9.8 million compared to $11.1 million provided by financing activities for the same period in 2025 and was primarily due to the following activities for the six months ended June 30, 2026:

• Repayment of mortgage notes payable totaled approximately $9.3 million for the six months ended June 30, 2026, compared to $14.0 million during the same period in 2025.
• Distributions to noncontrolling interest of approximately $0.3 million for the six months ended June 30, 2026, compared to $0.4 million during the same period in 2025.
• During the six months ended June 30, 2025, we received approximately $6.6 million in mortgage notes proceeds. None were received during the six months ended June 30, 2026.
• Dividend payments to Series D Preferred Stockholders during the six months ended June 30, 2025, totaled approximately $1.1 million, compared to approximately $0.2 million during six months ended June 30, 2026.
• Additionally, during the six months ended June 30, 2025, we repurchased approximately $1.5 million worth of Series A Common Stock. No such purchases were made during the six months ended June 30, 2026.

Off-Balance Sheet Arrangements

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 100,000 shares of its Series A Common Stock, Common Stock Warrants to purchase up to 200,000 shares of Series A Common Stock and Pre-Funded Warrants to purchase up to 200,000 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 $50.00, and each share of Common Stock and accompanying Pre-Funded Warrant were sold together at a combined offering price of $49.90. The Pre-Funded Warrants were exercised in full during August 2021 at a nominal exercise price of $0.10 per share. The Common Stock Warrants had an exercise price of $55.00 per share, exercisable upon issuance and will expire five years from the date of issuance. In July 2025 the exercise price was adjusted to $12.00 per share and the term of the warrants extended to July 16, 2030.

In connection with Series A Common Stock offering in July 2021, we agreed to issue the Placement Agent Warrants to purchase up to 8,000 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 Warrants. The Placement Agent Warrants were issued in August 2021, post exercise of the Pre-Funded Warrants with an exercise price of $62.50 and will expire five years from the date of issuance.

Common Stock Warrants:

If all the potential Common Stock Warrants outstanding at June 30, 2026, were exercised at the price of $12 per share, gross proceeds to us would be approximately $2.4 million and we would as a result issue an additional 200,000 shares of common stock.

Placement Agent Warrants:

If all the potential Placement Agent Warrants outstanding at June 30, 2026, were exercised at the price of $62.50 per share, gross proceeds to us would be approximately $0.5 million and we would as a result issue an additional 8,000 shares of common stock.

January 14, 2022, was the record date with respect to the distribution of five-year listed warrants (the “Series A Warrants”). The Series A Warrants and the shares of common stock issuable upon the exercise of the Series A Warrants were registered on a registration statement that was filed with the SEC and was declared effective January 21, 2022. The Series A Warrants commenced trading on the Nasdaq Capital Market under the symbol “SQFTW” on January 24, 2022 and were distributed on that date to persons who held shares of common stock and existing outstanding warrants as of the January 14, 2022 record date, or who acquired shares of common stock in the market following the record date, and who continued to hold such shares at the close of trading on January 21, 2022. The Series A Warrants give the holder the right to purchase one share of common stock at $70.00 per share, for a period of five years. Should warrant holders not exercise the Series A Warrants during that holding period, the Series A Warrants will automatically convert to 1/100 of a common share at expiration, rounded down to the nearest number of whole shares.

Series A Warrants:

If all the potential Series A Warrants outstanding at June 30, 2026, were exercised at the price of $70.00 per share, gross proceeds to us would be approximately $101.2 million and we would as a result issue an additional 1,445,007 shares of common stock.

Inflation

Leases generally provide for limited increases in rent as a result of fixed increases, increases in the consumer price index (typically subject to ceilings), or increases in the clients’ sales volumes. We expect that inflation will cause these lease provisions to result in rent increases over time. During times when inflation is greater than increases in rent, as provided for in the leases, rent increases may not keep up with the rate of inflation.

However, our use of net lease agreements tends to reduce our exposure to rising property expenses due to inflation because the client is responsible for property expenses. Inflation and increased costs may have an adverse impact on our clients if increases in their operating expenses exceed increases in revenue.

During January 2026, the Company received notice that the Company's failure to repay in full by January 5, 2026 the indebtedness related to the loan agreement governing Shea Center II had triggered a default event. On February 13, 2026, the Company received notification that the Shea Center II property governed by the non-recourse loan agreement was moved into receivership and the lender has started the foreclosure process. The foreclosure sale and public auction is scheduled for July 1, 2026. The lender held approximately $2.4 million in restricted cash, some of which was utilized by the receiver to operate the property. Additionally, during the three March 31, 2026, Shea Center II was listed as held for sale, related to the foreclosure sale and impaired approximately $2.6 million. On July 1, 2026, the foreclosure for Shea Center II took place with the property going to Argentic Services Company LP, who acquired the property by placing a minimum credit bid valued at $12.0 million, and no cash consideration was exchanged. Given the non-recourse nature of the loan and the outstanding principal balance of approximately $15.4 million dollars, roughly $3.4 million of the outstanding debt was forgiven as a result of the non-cash transaction.

As of January 28, 2026, the Board of Directors has suspended the Company’s monthly dividend on its Series D Preferred Stock commencing with the January 2026 monthly dividend that would have been paid on February 15, 2026. Since the Company’s Board of Directors did not declare a dividend during the six months ended June 30, 2026, an accrual was not recorded on the balance sheet. However, undeclared preferred stock dividends are reflected in earnings per share as discussed in ASC 260-10-45-11. In accordance with the terms of the Series D Preferred Stock, Preferred stock dividends that are not declared accumulate and are added to the liquidation preference as of the scheduled payment date for the respective series of the preferred stock. No interest, or sum of money in lieu of interest, is payable in respect of any dividend payments on the Series D Preferred Stock that are in arrears. As of June 30, 2026 and December 31, 2025, the cumulative preferred dividends in arrears on the Series D preferred stock was approximately $1.1 million and $0, respectively.

The Board and the Company intend to reassess, on a quarterly basis, when accrued dividends on the Series D Preferred Stock may be paid and when the monthly dividend payments can be reinstated. The Company has not decided when it will resume dividends to our common stockholders on a quarterly basis. As of the date of filing this quarterly report, $0.8 million in dividends are in arrears.

On August 7, 2026, the Company filed a Registration Statement on Form S-4 and a Tender Offer Statement on Schedule TO with the SEC with respect to a proposed offer (the "Exchange Offer") to exchange each validly tendered and accepted outstanding share of the Company's Series D Preferred Stock for five and one-half (5.5) newly issued shares of the Company's Common Stock (the "Exchange Ratio"), upon the terms and subject to the conditions described in the preliminary prospectus/offer to exchange included in such filings. As of the date of this Quarterly Report on Form 10-Q, the Registration Statement on Form S-4 has not been declared effective by the SEC, and the Exchange Offer has not yet commenced. The Exchange Offer will not commence until the Registration Statement is declared effective by the SEC, and there can be no assurance that the Registration Statement will be declared effective or that the Exchange Offer will be commenced or consummated on the terms described herein or at all. The commencement date and expiration date of the Exchange Offer have not yet been determined and will depend on, among other things, the timing of the SEC's review of the Registration Statement and Schedule TO. If the Exchange Offer is commenced and consummated, holders of Series D Preferred Stock who validly tender their shares on or prior to the expiration date and time of the Exchange Offer, and do not validly withdraw such shares, will receive the Exchange Ratio of shares of Common Stock for each share of Series D Preferred Stock accepted by the Company for exchange.

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-14(c). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

If we are unable to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock could be delisted, which could affect our common stock's market price and liquidity and reduce our ability to raise capital.

We are required to meet certain qualitative and financial tests to maintain the listing of our securities on Nasdaq. As of the date of this report, we are in compliance with all of Nasdaq's continued listing requirements. There can be no assurance that we will be able to maintain compliance with the minimum bid price requirement, the market value of listed securities requirement, or will otherwise be in compliance with other Nasdaq listing criteria.

On July 22, 2026, the SEC's Division of Trading and Markets, acting under delegated authority, approved new Nasdaq Rules 5450(a)(3) and 5550(a)(6), which would require all Nasdaq-listed companies, including those listed on the Nasdaq Capital Market, to maintain a minimum Market Value of Listed Securities ("MVLS") of at least $5,000,000. Under amended Nasdaq Rule 5810(c)(1), if a company's MVLS remains below $5,000,000 for 30 consecutive business days, Nasdaq would issue an immediate Staff Delisting Determination, and the company's securities would become immediately subject to suspension and delisting. Unlike most other continued listing deficiencies, Nasdaq would not provide any compliance period, cure period, or opportunity to submit a compliance plan before issuing the Staff Delisting Determination. In addition, under the rule as approved, a timely request for a hearing before a Nasdaq Hearings Panel would not stay the suspension of trading, meaning a company's securities would generally trade in the over-the-counter market while any appeal is pending. Although the Hearings Panel would have limited discretion to grant an exception period of up to 180 days, any such relief would require the company to demonstrate compliance with Nasdaq's more stringent initial listing standards, rather than merely regaining compliance with continued listing standards, which represents a materially higher bar.

However, on July 29, 2026, the SEC's approval order was automatically stayed after Cemtrex, Inc. and the Small Public Company Coalition filed notices of their intent to petition the full Commission for review of the delegated action. Under Rule 431(e) of the SEC's Rules of Practice, the filing of such notices automatically stays an action taken under delegated authority. As a result, the new $5,000,000 MVLS continued listing requirement is not presently effective, and Nasdaq-listed companies remain subject to the continued listing rules that were in effect prior to the July 22 approval order. The Commission must decide whether to review the Division's approval and, if it does, whether to affirm, modify, reverse, set aside, or remand the matter for further proceedings. There is no prescribed timeline for the Commission to reach a decision, and if the petitioners subsequently seek judicial review, the rule could remain stayed for a significant additional period.

Separately, pursuant to amendments to Nasdaq Listing Rule 5810(c)(3)(A) that became effective in January 2026, Nasdaq may immediately issue a Staff Delisting Determination, without providing any compliance period, if a company's listed security has a closing bid price of $0.10 or less for ten consecutive business days, regardless of whether the company is currently within a compliance period for the minimum bid price requirement.

If the new $5,000,000 MVLS requirement becomes effective, either through Commission affirmance or the lifting of the current stay, and we are unable to maintain an MVLS of at least $5,000,000, we could face immediate suspension and delisting proceedings with no compliance period and no automatic stay of suspension during any appeal. Even if the new MVLS requirement does not become effective, we remain subject to Nasdaq's existing continued listing requirements, including the minimum bid price requirement, and we can provide no assurance that we will maintain compliance with those requirements. If we are unable to maintain compliance with the continued listing requirements of Nasdaq, our securities could be delisted, making it more difficult to buy or sell our securities and to obtain accurate quotations, and the price of our securities could suffer a material decline. Delisting could also impair our ability to raise capital.