What changed in this filing

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Item 1. Financial Statements

2020-11-12 compared with 2020-08-13 · 818 added, 840 removed, 775 unchanged (68% of the section changed)

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CONSOLIDATED BALANCE SHEETS

Accounts receivable

Deferred rent receivable

Rental properties, net

Prepaid expenses and other assets

Convertible note receivable

Property and equipment, net

Security deposits

LIABILITIES AND STOCKHOLDERS’

Convertible note payable

Convertible note payable - related party

Accounts payable

Accrued expenses

Accrued expenses - related party

Deferred revenues

Security deposits payable

Total Liabilities

Commitments and Contingencies

September 30,

rent receivable

properties, net

expenses and other assets

note receivable

and equipment, net

AND STOCKHOLDERS’

note payable - related party

expenses - related party

deposits payable

and Contingencies

STOCKHOLDERS’

Preferred stock, $0.001 par value, 5,000,000 shares authorized;

2,000,000 shares issued and outstanding at June 30, 2020 and December 31, 2019 ($1.00 per share liquidation preference)

Common stock:

stock, $0.001 par value, 5,000,000 shares authorized;

2,000,000 shares issued and outstanding at September 30, 2020 and December

31, 2019 ($1.00 per share liquidation preference)

$0.001 par value, 100,000,000 shares authorized;

12,011,548 and 11,901,548 issued and outstanding at June 30, 2020 and December 31, 2019, respectively

Additional paid-in capital

Accumulated deficit

12,011,548 and 11,901,548 issued and outstanding at September 30,

2020 and December 31, 2019, respectively

paid-in capital

(14,945,318 )

(14,854,710 )

Total Stockholders’

Total Liabilities and Stockholders’

Stockholders’

Liabilities and Stockholders’

accompanying notes to unaudited condensed consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

For the Six Months Ended

Rental revenues

Advisory revenues

Total revenues

For the Three Months

For the Nine Months

and administrative expenses

and amortization

operating expenses

Compensation and benefits

Professional fees

General and administrative expenses

Depreciation and amortization

Real estate taxes

Total operating expenses

INCOME (LOSS) FROM OPERATIONS

OTHER (EXPENSES) INCOME:

Interest expenses

Interest expenses - related party

Interest income

Total other (expenses) income, net

(LOSS) INCOME BEFORE INCOME TAXES

PROVISION FOR INCOME TAXES

NET (LOSS) INCOME

NET (LOSS) INCOME PER COMMON SHARE:

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

(LOSS) FROM OPERATIONS

(EXPENSES) INCOME:

expenses - related party

other (expenses) income, net

(LOSS) BEFORE INCOME TAXES

FOR INCOME TAXES

INCOME (LOSS)

INCOME (LOSS) PER COMMON SHARE:

AVERAGE COMMON SHARES OUTSTANDING:

accompanying notes to unaudited condensed consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

Preferred Stock

THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

Stockholders’

Balance, December 31, 2018

December 31, 2019

$ (14,854,710 )

Stock redemption and cencellation

Common stock issued for services

Accretion of stock based compensation related to stock options issued

Balance, March 31, 2019

stock issued for services

of stock based compensation related to stock options issued

March 31, 2020

(14,951,480 )

Accretion of stock based compensation related to stock options issued

Balance, June 30, 2019

of stock based compensation related to stock options issued

June 30, 2020

(14,970,407 )

Preferred Stock

of stock based compensation related to stock options issued

September 30, 2020

$ (14,945,318 )

Stockholders’

Balance, December 31, 2019

December 31, 2018

$ (14,842,429 )

Common stock issued for services

Accretion of stock based compensation related to stock options issued

Balance, March 31, 2020

redemption and cencellation

stock issued for services

of stock based compensation related to stock options issued

March 31, 2019

(14,849,216 )

Accretion of stock based compensation related to stock options issued

Balance, June 30, 2020

of stock based compensation related to stock options issued

June 30, 2019

(14,839,538 )

of stock based compensation related to stock options issued

September 30, 2019

$ (14,835,551 )

accompanying notes to unaudited condensed consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

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

Depreciation expense

Stock-based compensation

Stock option expense

Change in operating assets and liabilities:

Accounts receivable

Deferred rent receivable

Prepaid expenses and other assets

Accounts payable

Accrued expenses

Accrued expenses - related parties

Deferred revenues

Security deposits payable

NET CASH PROVIDED BY OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of convertible note receivable

Purrchase of rental property improvements

NET CASH USED IN INVESTING ACTIVITIES

NET (DECREASE) INCREASE IN CASH

CASH, beginning of period

CASH, end of period

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest paid

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Reclassification of convertible note payable - related party to convertible note payable

Reclassification of security deposits - related party to security deposits

Reclassification of accrued expenses - related party to accrued expenses

the Nine Months Ended

September 30,

FLOWS FROM OPERATING ACTIVITIES:

(loss) income

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

option expense

in operating assets and liabilities:

rent receivable

expenses and other assets

expenses - related parties

deposits payable

CASH PROVIDED BY OPERATING ACTIVITIES

FLOWS FROM INVESTING ACTIVITIES:

of convertible note receivable

of rental property improvements

of property and equipment

CASH USED IN INVESTING ACTIVITIES

(DECREASE) INCREASE IN CASH

CASH, beginning

DISCLOSURE OF CASH FLOW INFORMATION

DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Reclassification

of convertible note payable - related party to convertible note payable

Reclassification

of security deposits - related party to security deposits

Reclassification

of accrued expenses - related party to accrued expenses

accompanying notes to unaudited condensed consolidated financial statements.

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Company has the following wholly owned subsidiaries:

Property Management, LLC (“Gilbert”) was organized in the State of Arizona on February 10, 2014.

Valley Properties, LLC (“Chino Valley”) was organized in the State of Arizona on April 15, 2014.

Property Group, LLC (“Kingman”) was organized in the State of Arizona on April 15, 2014.

Valley Group, LLC (“Green Valley”) organized in the State of Arizona on April 15, 2014.

Oregon Properties, LLC was organized in the State of Oregon on June 16, 2015.

Colorado Properties, LLC (“Zoned Colorado”) was organized in the State of Colorado on September 17, 2015.

Illinois Properties, LLC was organized in the State of Illinois on July 15, 2015.

Arizona Properties, LLC (“Zoned Arizona”) was organized in the State of Arizona on June 2, 2017.

Advisory Services, LLC (“Zoned Advisory”) was organized in the State of Arizona on July 27, 2018.

Gilbert Property

Management, LLC (“Gilbert”) was organized in the State of Arizona on February 10, 2014.

Chino Valley Properties,

LLC (“Chino Valley”) was organized in the State of Arizona on April 15, 2014.

Kingman Property

Group, LLC (“Kingman”) was organized in the State of Arizona on April 15, 2014.

Green Valley Group,

LLC (“Green Valley”) organized in the State of Arizona on April 15, 2014.

Zoned Oregon Properties,

LLC was organized in the State of Oregon on June 16, 2015.

Zoned Colorado Properties,

LLC (“Zoned Colorado”) was organized in the State of Colorado on September 17, 2015.

Zoned Illinois Properties,

LLC was organized in the State of Illinois on July 15, 2015.

Zoned Arizona Properties,

LLC (“Zoned Arizona”) was organized in the State of Arizona on June 2, 2017.

Zoned Advisory Services,

LLC (“Zoned Advisory”) was organized in the State of Arizona on July 27, 2018.

March 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures

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to date, the ultimate duration and severity of the outbreak and its impact on the economic environment and our business is uncertain.

As of August 13, 2020, all of the properties in the Company’s portfolio are open to its Significant Tenants and their customers

and will remain open pursuant to state and local government requirements.

Currently, all of the properties in the Company’s portfolio are open to its Significant Tenants and their customers and

will remain open pursuant to state and local government requirements.

At this time, the Company does not foresee any material

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TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

unaudited condensed consolidated financial statements for the six months ended June 30, 2020 and 2019 have been prepared by the

Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

unaudited condensed consolidated financial statements for the nine months ended September 30, 2020 and 2019 have been prepared

by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

In the opinion of management, all adjustments necessary to present fairly the consolidated financial position, results of operations,

and cash flows as of June 30, 2020 and 2019, and for the periods then ended, have been made.

Those adjustments consist of normal

and recurring adjustments.

Operating results for interim periods are not necessarily indicative of results that may be expected

for the fiscal year as a whole.

and cash flows as of September 30, 2020 and 2019, and for the periods then ended, have been made.

Those adjustments consist of

normal and recurring adjustments.

Operating results for interim periods are not necessarily indicative of results that may be

expected for the fiscal year as a whole.

Accordingly, the condensed consolidated financial statements do not include all the information

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Actual results could differ from those estimates.

Significant estimates for the six months ended June 30, 2020 and 2019 include

the collectability of accounts receivable, the useful life of rental properties and property and equipment, assumptions used in

assessing impairment of long-term assets, valuation allowances for deferred tax assets, and the fair value of non-cash equity

transactions, including options and stock-based compensation.

Significant estimates for the nine months ended September 30, 2020 and 2019

include the collectability of accounts and note receivable, the useful life of rental properties and property and equipment, assumptions

used in assessing impairment of long-term assets, valuation allowances for deferred tax assets, and the fair value of non-cash

equity transactions, including options and stock-based compensation.

and uncertainties

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and collectively, the “Significant Tenants”).

months ended June 30, 2020 and 2019, rental and advisory revenue associated with the Significant Tenants amounted to $492,196

months ended September 30, 2020 and 2019, rental and advisory revenue associated with the Significant Tenants amounted to $878,759

and $855,659, which represents 96.9% and 91.0% of the Company’s total revenues, respectively (see Note 3).

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liquid investments with an original maturity of three months or less as of the purchase date of such investments.

had no cash equivalents at June 30, 2020 and December 31, 2019.

The majority of the Company’s cash is held at major commercial

banks, which may at times exceed the Federal Deposit Insurance Corporation (“FDIC”) limit.

To date, the Company has

not experienced any losses on its invested cash.

At June 30, 2020 and December 31, 2019, the Company had approximately $352,000

had no cash equivalents at September 30, 2020 and December 31, 2019.

The majority of the Company’s cash is held at major

commercial banks, which may at times exceed the Federal Deposit Insurance Corporation (“FDIC”) limit.

Company has not experienced any losses on its invested cash.

At September 30, 2020 and December 31, 2019, the Company had approximately

$328,000 and $390,000, respectively, of cash in excess of FDIC limits of $250,000.

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with the allowance for doubtful accounts is recognized in general and administrative expense.

For the six months ended June 30,

For the nine months ended September

30, 2020 and 2019, the Company did not record any allowances for doubtful accounts.

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rental rates and capital requirements that could differ materially from actual results.

For the six months ended June 30, 2020

For the nine months ended September 30,

2020 and 2019, the Company did not record any impairment losses.

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and equipment

and equipment is stated at cost, less accumulated depreciation.

Depreciation of property and equipment is provided utilizing the

straight-line method over the estimated useful lives.

The Company uses a five-year life for office equipment, seven years for

furniture and fixtures, and five to ten years for vehicles.

Expenditures for maintenance and repairs are charged to expense as

Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the

accounts and any gain or loss is reflected in statements of operations.

The Company examines the possibility of decreases in the

value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

and equipment are stated at cost, less accumulated depreciation.

Depreciation of property and equipment is provided utilizing

the straight-line method over the estimated useful lives.

The Company uses a five-year life for office equipment, seven years

for furniture and fixtures, and five to ten years for vehicles.

Expenditures for maintenance and repairs are charged to expense

Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from

the accounts and any gain or loss is reflected in statements of operations.

The Company examines the possibility of decreases

in the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 and ASC Topic 606, Revenue from

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following potentially dilutive shares have been excluded from the calculation of diluted net loss per share as their effect would

be anti-dilutive for the three and six months ended June 30, 2020 and 2019.

be anti-dilutive for the nine months ended September 30, 2020 and 2019.

Convertible debt

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tax positions that meet a “more-likely-than-not”

The Company does not believe it has any uncertain

tax positions as of June 30, 2020 and December 31, 2019 that would require either recognition or disclosure in the accompanying

The Company does not believe it has any uncertain tax

positions as of September 30, 2020 and December 31, 2019 that would require either recognition or disclosure in the accompanying

unaudited condensed consolidated financial statements.

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This rent abatement resulted in a deferred

rent receivable as of June 30, 2020 of $88,750 (see Note 3).

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

rent receivable as of September 30, 2020 of $176,004 (see Note 3).

leases where the Company is a lessee, primarily for the Company’s administrative office lease, the Company analyzed if it

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effect on the accompanying condensed consolidated financial statements.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONCENTRATIONS AND RISKS

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in full force during the term of the Green Valley Lease and any other period of occupancy of the premises by Broken Arrow.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 29, 2020, Green Valley and Broken Arrow entered into the First Amendment (the “Green Valley Amendment”) to the

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full force during the term of the Tempe Lease and any other period of occupancy of the premises by CJK.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 29, 2020, Zoned Arizona and CJK entered into the First Amendment (the “Tempe Amendment”) to the Tempe Lease, effective

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occupancy of the premises by CJK.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 29, 2020, Kingman and CJK entered into the First Amendment (the “Kingman Amendment”) to the Kingman Lease, effective

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balance of the term.

and Broken Arrow were owned at the time of the transactions, in whole or in part, directly or indirectly, by Messrs.

Carra, each of whom was a significant stockholder of the Company through December 31, 2018.

CJK and Broken Arrow, together, are

referred to as the Company’s Significant Tenants.

and Broken Arrow, together, operate under the company brand, “Hana Meds”, and are referred to as the Company’s

Significant Tenants.

Tempe Lease, Kingman Lease, Chino Valley Lease and Green Valley Lease (together referred to as the “New Leases”) includes

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by the convertible debt of $2,000,000 owed to him (see Note 6).

of June 30, 2020 and December 31, 2019, security deposits payable to the Significant Tenants amounted to $71,800.

of September 30, 2020 and December 31, 2019, security deposits payable to the Significant Tenants amounted to $71,800 in both

minimum lease payments primarily consist of minimum base rent payments from Significant Tenants.

Future minimum lease payments

to be received, on all leased properties, for each of the five succeeding calendar years and thereafter as of June 30, 2020 consists

of the following:

Future annual base rent:

to be received, on all leased properties, for each of the five succeeding calendar years and thereafter as of September 30, 2020

consists of the following:

annual base rent:

(remainder of year)

and advisory revenue and receivable –Significant Tenants

the three months ended June 30, 2020 and 2019, rental and advisory revenue associated with the Significant Tenant leases described

above amounted to $294,043 and $291,475, which represents 98.1% and 95.4% of the Company’s total revenues, respectively.

For the six months ended June 30, 2020 and 2019, rental and advisory revenue associated with the Significant Tenant leases described

the three months ended September 30, 2020 and 2019, rental and advisory revenue associated with the Significant Tenant leases

described above amounted to $297,793 and $299,324, which represents 98.4% and 88.5% of the Company’s total revenues, respectively.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the nine months ended September 30, 2020 and 2019, rental and advisory revenue associated with the Significant Tenant leases described

above amounted to $878,759 and $855,659, which represents 96.9% and 91.0% of the Company’s total revenues, respectively.

At June 30, 2020 and December 31, 2019, accounts receivable from advisory services provided to the Significant Tenant amounted

September 30, 2020 and December 31, 2019, accounts receivable from advisory services provided to the Significant Tenant amounted

to $9,393 and $8,188, respectively.

Further, as of June 30, 2020 a deferred rent receivable of $88,750 is due from Significant

Tenants due to the abatement of rent in the month of June 2020 under the amendments executed effective May 31, 2020 discussed

Further, as of September 30, 2020 a deferred rent receivable of $176,004 is due from Significant

Tenants due to the abatement of rent in the month of June and July 2020 under the amendments executed effective May 31, 2020 discussed

concentration

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that are provided to us upon request, and (2) monitoring the timeliness of rent collections.

As of June 30, 2020 and December

31, 2019, the Company had an asset concentration related to the Significant Tenants.

As of June 30, 2020 and December 31, 2019,

the Significant Tenants represented approximately 85.8% and 87.1% of the Company’s total assets, respectively.

30, 2020, all rental payments have been made on a timely basis.

As of June 30, 2020, the lease agreements with the Significant

Tenants were personally guaranteed by Alan Abrams and are collateralized by convertibles notes of $2,000,000 owed to Mr.

(see Note 6).

On March 1, 2018, the Company and Alan Abrams entered into a Reaffirmation Agreement (See Note 6).

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of September 30, 2020 and December 31, 2019, the Company had an asset concentration related to the Significant Tenants.

September 30, 2020 and December 31, 2019, the Significant Tenants represented approximately 84.3% and 87.1% of the Company’s

total assets, respectively.

Through September 30, 2020, all rental payments have been made on a timely basis.

As of September

30, 2020, the lease agreements with the Significant Tenants were personally guaranteed by Alan Abrams and are collateralized by

convertibles notes of $2,000,000 owed to Mr.

Abrams (see Note 6).

On March 1, 2018, the Company and Alan Abrams entered into a

Reaffirmation Agreement (See Note 6).

advisory services agreements

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(b) by either party immediately upon the mutual agreement of the parties, evidenced by a writing signed by the parties;

negligence or willful misconduct of the other party in connection with these Agreements.

Pursuant to the terms of the Broken Arrow

CASA and CJK CASA, Broken Arrow and CJK engaged the Company to perform certain advisory services in exchange for a fee equal to

10% of Broken Arrow’s and CJK’s gross revenues (the (“Revenue Fee”), commencing January 2019.

immediately by either party in the event of an actual finding, by a court of competent jurisdiction, of fraud, gross negligence

or willful misconduct of the other party in connection with these Agreements.

Pursuant to the terms of the Broken Arrow CASA and

CJK CASA, Broken Arrow and CJK engaged the Company to perform certain advisory services in exchange for a fee equal to 10% of

Broken Arrow’s and CJK’s gross revenues (the (“Revenue Fee”), commencing January 2019.

January 1, 2019, as part of a Stock Redemption Agreement, the Company, on behalf of Chino Valley, and Broken Arrow entered into

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RENTAL PROPERTIES

June 30, 2020 and December 31, 2019, rental properties, net consisted of the following:

Building and building improvements

Rental properties, at cost

September 30, 2020 and December 31, 2019, rental properties, net consisted of the following:

September 30,

and building improvements

properties, at cost

accumulated depreciation

Rental properties, net

the three months ended June 30, 2020 and 2019, depreciation and amortization of rental properties amounted to $89,297 and $88,820,

properties, net

the three months ended September 30, 2020 and 2019, depreciation and amortization of rental properties amounted to $89,298 and

$88,820, respectively.

For the six months ended June 30, 2020 and 2019, depreciation and amortization of rental properties amounted to

$178,338 and $177,640, respectively.

For the nine months ended September 30, 2020 and 2019, depreciation and amortization of rental properties

amounted to $267,636 and $266,460, respectively.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONVERTIBLE NOTE RECEIVABLE

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of the total outstanding units and 10% of the total percentage interest following such issuance and at the time of such issuance.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

or after six months from the Issuance Date, the Company may convert all or a portion of the principal balance and all accrued

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amount of principal or interest not paid when due will bear interest at the rate of 12% per annum from the due date thereof until

June 30, 2020, convertible note receivable and interest receivable amounted to $100,000 and $1,852, respectively.

September 30, 2020, convertible note receivable and interest receivable amounted to $100,000 and $3,490, respectively.

CONVERTIBLE NOTE PAYABLE

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Abrams Debenture and proceed to enforce the payment thereof or any other legal or equitable right of Mr.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 1, 2018, the Company and Alan Abrams entered into a Reaffirmation Agreement whereby Mr.

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included in the commercial lease agreements.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of June 30, 2020 and December 31, 2019, the principal balance due under the Abrams Debenture is $2,000,000.

of June 30, 2020 and December 31, 2019, accrued interest payable due under the Abrams Debenture was $30,000 which is included

of September 30, 2020 and December 31, 2019, the principal balance due under the Abrams Debenture is $2,000,000.

of September 30, 2020 and December 31, 2019, accrued interest payable due under the Abrams Debenture was $30,000 which is included

in accrued expenses on the accompanying unaudited condensed consolidated balance sheets.

For the three months ended June 30, 2020

and 2019, interest expense related to the Abrams Debenture amounted to $30,000.

For the six months ended June 30, 2020 and 2019,

interest expense related to the Abrams Debenture amounted to $60,000.

the three months ended September 30, 2020 and 2019, interest expense related to the Abrams Debenture amounted to $30,000.

the nine months ended September 30, 2020 and 2019, interest expense related to the Abrams Debenture amounted to $90,000.

RELATED PARTY TRANSACTIONS

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in the McLaren Debenture and proceed to enforce the

of June 30, 2020 and December 31, 2019, the principal balance due under the McLaren Debenture is $20,000.

of June 30, 2020 and December 31, 2019, accrued interest payable due under the McLaren Debenture is $3,600 and $3,000, respectively,

of September 30, 2020 and December 31, 2019, the principal balance due under the McLaren Debenture is $20,000.

of September 30, 2020 and December 31, 2019, accrued interest payable due under the McLaren Debenture was $3,900 and $3,000, respectively,

which is included in accrued expenses –

related party on the accompanying unaudited condensed consolidated balance sheets.

For the three months ended June 30, 2020 and 2019, interest expense –

the three months ended September 30, 2020 and 2019, interest expense –

related party amounted to $300.

For the six months

ended June 30, 2020 and 2019, interest expense –

For the nine months

ended September 30, 2020 and 2019, interest expense –

related party amounted to $900.

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stock are outstanding, at least 51% of the total number of shares of preferred stock outstanding must approve the following transactions:

or change the rights, preferences or privileges of the preferred stock.

any new class of stock having preferences over the preferred stock.

any of our common stock.

Alter or change

the rights, preferences or privileges of the preferred stock.

Create any new class

of stock having preferences over the preferred stock.

PROPERTIES, INC.

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TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

or consolidate with any other company, except our wholly owned subsidiaries.

convey or otherwise dispose of, or create or incur any mortgage, lien, or charge or encumbrance or security interest in or

pledge of, or sell and leaseback, in all or substantially all of our property or business.

assume or guarantee any indebtedness maturing more than 18 months after the date on which it is incurred, assumed or guaranteed

by us, except for operating leases and obligations assumed as part of the purchase price of property.

Repurchase any of

our common stock.

Merge or consolidate

with any other company, except our wholly owned subsidiaries.

Sell, convey or

otherwise dispose of, or create or incur any mortgage, lien, or charge or encumbrance or security interest in or pledge of,

or sell and leaseback, in all or substantially all of our property or business.

Incur, assume or

guarantee any indebtedness maturing more than 18 months after the date on which it is incurred, assumed or guaranteed by us,

except for operating leases and obligations assumed as part of the purchase price of property.

Common stock issued for services

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shall again be available for distribution in connection with future grants and awards under the 2016 Plan.

As of March 31, 2020,

165,000 stock option awards are outstanding and 75,000 options are exercisable under the 2016 Plan.

As of December 31,

2019, 40,000 stock option awards are outstanding and 40,000 options are exercisable under the 2016 Plan.

As of June 30, 2020 and December 31,

2019, 9,835,000 and 9,960,000 shares are available for future issuance.

As of September 30, 2020,

75,000 stock option awards are outstanding and 75,000 options are exercisable under the 2016 Plan.

As of September 30, 2020 and

December 31, 2019, 9,925,000 and 9,960,000 shares are available for future issuance.

Company also continues to maintain its 2014 Equity Compensation Plan (the “2014 Plan”), pursuant to which 1,250,000

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be issued pursuant to the 2014 Plan, if exercised.

As of June 30, 2020 and December 31, 2019, options to purchase 1,250,000 shares

of common stock are outstanding and 1,125,000 options are exercisable pursuant to the 2014 Plan.

As of September 30, 2020 and December 31, 2019, options to purchase 1,250,000

shares of common stock are outstanding and 1,125,000 options are exercisable pursuant to the 2014 Plan.

Stock options

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on January 6, 2030.

The option vests as to (i) 35,000 of such shares on January 6, 2020, and (ii) as to 10,000 of such shares

The option vests as to (i) 35,000 of such shares on January 6, 2020;

and (ii) as to 10,000 of such shares

on January 6, 2021 and each year thereafter through January 6, 2029.

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over the vesting period.

In July 2020, this employee was terminated and these options shall be cancelled.

In July 2020, this employee was terminated and 90,000 unvested options were cancelled.

the nine months ended September 30, 2020 and 2019, in connection with the accretion of stock-based option expense, the Company

recorded stock-based compensation expense of $19,810 and $17,709, respectively.

As of September 30, 2020, there were 1,325,000

options outstanding and 1,200,000 options vested and exercisable.

As of September 30, 2020, there was $34,582 of unvested stock-based

compensation expense to be recognized through December 2024.

The aggregate intrinsic value at September 30, 2020 was nil and was

calculated based on the difference between the quoted share price on September 30, 2020 of $0.34 and the exercise price of the

underlying options.

PROPERTIES, INC.

1 unchanged sentence

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the six months ended June 30, 2020 and 2019, in connection with the accretion of stock-based option expense, the Company recorded

stock-based compensation expense of $18,036 and $11,806, respectively.

As of June 30, 2020, there were 1,415,000 options outstanding

and 1,200,000 options vested and exercisable.

As of June 30, 2020, there was $53,195 of unvested stock-based compensation expense

to be recognized through December 2028.

The aggregate intrinsic value at June 30, 2020 was nil and was calculated based on the

difference between the quoted share price on June 30, 2020 of $0.13 and the exercise price of the underlying options.

option activities for the six months ended June 30, 2020 are summarized as follows:

Balance Outstanding December 31, 2019

Balance Outstanding June 30, 2020

Exercisable, June 30, 2020

Balance Non-vested at December 31, 2019

Vested during the period

Balance Non-vested at June 30, 2020

option activities for the nine months ended September 30, 2020 are summarized as follows:

Outstanding December 31, 2019

Outstanding September 30, 2020

September 30, 2020

Non-vested at December 31, 2019

during the period

Non-vested at September 30, 2020

COMMITMENTS AND CONTINGENCIES

17 unchanged sentences

the Parachute Agreement which is included in prepaid expenses and other assets on the unaudited condensed consolidated balance

sheets as of June 30, 2020 and December 31, 2019.

As of June 30, 2020, the Company and Seller have yet to complete the purchase.

sheets as of September 30, 2020 and December 31, 2019.

As of September 30, 2020, the Company and Seller have yet to complete the

time to time, the Company may be involved in litigation related to claims arising out of its operations in the normal course of

As of June 30, 2020, the Company is not involved in any pending or threatened legal proceedings that it believes could

reasonably be expected to have a material adverse effect on its financial condition, results of operations, or cash flows.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2020, the Company is not involved in any pending or threatened legal proceedings that it believes

could reasonably be expected to have a material adverse effect on its financial condition, results of operations, or cash flows.

Advisory Services Agreements

11 unchanged sentences

written notice to the other party;

(b) by either party immediately upon the mutual

agreement of the parties, evidenced by a writing signed by the parties;

or (c) immediately by either party in the event of

an actual finding, by a court of competent jurisdiction, of fraud, gross negligence or willful misconduct of the other party in

connection with the CASAs.

Pursuant to the terms of the CASAs, Broken Arrow and CJK engaged the Company to perform certain advisory

services in exchange for a fee equal to 10% of Broken Arrow’s and CJK’s gross revenues (the (“Revenue Fee”).

Effective January 1, 2019, the parties agreed to amend the May 1, 2018 leases to reduce the Revenue Fee payable pursuant to each

of the CASAs from 10% of gross revenue to 0% of gross revenue.

(b) by either party immediately upon the mutual agreement

of the parties, evidenced by a writing signed by the parties;

or (c) immediately by either party in the event of an actual finding,

by a court of competent jurisdiction, of fraud, gross negligence or willful misconduct of the other party in connection with the

Pursuant to the terms of the CASAs, Broken Arrow and CJK engaged the Company to perform certain advisory services in exchange

for a fee equal to 10% of Broken Arrow’s and CJK’s gross revenues (the “Revenue Fee”).

Effective January

1, 2019, the parties agreed to amend the May 1, 2018 leases to reduce the Revenue Fee payable pursuant to each of the CASAs from

10% of gross revenue to 0% of gross revenue.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

and Related Golden Parachute Agreement

13 unchanged sentences

in any of the following circumstances:

(i) immediately,

immediately, if

McLaren dies;

(ii) immediately,

immediately, if

McLaren receives benefits under the long-term disability insurance coverage then provided by the Company or, if no such

1 unchanged sentence

McLaren’s disability;

the expiration date, as the same may be extended by the parties by written amendment to the 2018 Employment Agreement prior to

the occasion thereof;

the option of the Company for Cause (as defined in the 2018 Employment Agreement) upon the Company’s provision of written

notice to Mr.

on the expiration

date, as the same may be extended by the parties by written amendment to the 2018 Employment Agreement prior to the occasion

at the option of

the Company for Cause (as defined in the 2018 Employment Agreement) upon the Company’s provision of written notice to

McLaren of the basis for such Termination;

the option of the Company, without Cause;

McLaren at any time with Good Reason (as defined in the 2018 Employment Agreement), upon 30 days’

prior written notice

to the Company delivered not later than within 90 days of the existence of the condition therefor;

McLaren at any time without Good Reason, upon not less than three months’

at the option of

the Company, without Cause;

any time with Good Reason (as defined in the 2018 Employment Agreement), upon 30 days’

prior written notice to the Company

delivered not later than within 90 days of the existence of the condition therefor;

any time without Good Reason, upon not less than three months’

prior written notice to the Company.

the event of a Termination for any reason or for no reason whatsoever, or upon the expiration date of the 2018 Employment Agreement,

16 unchanged sentences

the willful engaging in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

purposes of the Golden Parachute Agreement, “Good Reason”

2 unchanged sentences

to the date of Termination specified in the notice of Termination:

material diminution in Mr.

McLaren’s authority, duties or responsibility from those in effect immediately prior to the

change in control of the Company;

material diminution in Mr.

a material diminution

McLaren’s authority, duties or responsibility from those in effect immediately prior to the change in control

of the Company;

a material diminution

McLaren’s base compensation;

material change in the geographic location at which Mr.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

a material change

in the geographic location at which Mr.

McLaren performs his duties;

material diminution in the authority, duties, or responsibilities of the supervisor to whom Mr.

McLaren is required to report,

including a requirement that Mr.

a material diminution

in the authority, duties, or responsibilities of the supervisor to whom Mr.

McLaren is required to report, including a requirement

McLaren report to a corporate officer or employee instead of reporting directly to the Board;

material diminution in the budget over which Mr.

a material diminution

in the budget over which Mr.

McLaren retains authority;

material breach under any agreement with the Company to continue in effect any bonus to which Mr.

McLaren was entitled, or

any compensation plan in which Mr.

McLaren participates immediately prior to the change in control of the Company which is

material to Mr.

a material breach

under any agreement with the Company to continue in effect any bonus to which Mr.

McLaren was entitled, or any compensation

plan in which Mr.

McLaren participates immediately prior to the change in control of the Company which is material to Mr.

McLaren’s total compensation;

material breach under any agreement with the Company to provide Mr.

McLaren benefits substantially similar to those enjoyed

by him under any of the Company’s life insurance, medical, health and accident, or disability plans in which he was

participating at the time of the change in control of the Company, the failure to continue to provide Mr.

McLaren with a Company

automobile or allowance in lieu of it, if Mr.

McLaren was provided with such an automobile or allowance in lieu of it at the

time of the change of control of the Company, the taking of any action by the Company which would directly or indirectly materially

a material breach

under any agreement with the Company to provide Mr.

McLaren benefits substantially similar to those enjoyed by him under any

of the Company’s life insurance, medical, health and accident, or disability plans in which he was participating at

the time of the change in control of the Company, the failure to continue to provide Mr.

McLaren with a Company automobile

or allowance in lieu of it, if Mr.

McLaren was provided with such an automobile or allowance in lieu of it at the time of

the change of control of the Company, the taking of any action by the Company which would directly or indirectly materially

reduce any of such benefits or deprive him of any material fringe benefit enjoyed by him at the time of the change in control

5 unchanged sentences

will be entitled to the following benefits:

any period that he fails to perform his full-time duties with the Company as a result of incapacity due to physical or mental

McLaren will continue to receive his base salary at the rate in effect at the commencement of any such period,

together with all amounts payable to him under any compensation plan of the Company during such period, until the Golden Parachute

During any period

that he fails to perform his full-time duties with the Company as a result of incapacity due to physical or mental illness,

McLaren will continue to receive his base salary at the rate in effect at the commencement of any such period, together

with all amounts payable to him under any compensation plan of the Company during such period, until the Golden Parachute

Agreement is terminated.

McLaren’s employment is terminated by the Company for Cause or by Mr.

McLaren other than for Good Reason, disability,

death or retirement, the Company will pay Mr.

McLaren his full base salary through the date of Termination at the rate in

effect at the time notice of Termination is given, plus all other amounts and benefits to which he is entitled under any compensation

plan of the Company at the time such payments are due.

employment by the Company shall be terminated (a) by the Company other than for Cause, death or disability or (b) by Mr.

for Good Reason, Mr.

McLaren’s

employment is terminated by the Company for Cause or by Mr.

McLaren other than for Good Reason, disability, death or retirement,

the Company will pay Mr.

McLaren his full base salary through the date of Termination at the rate in effect at the time notice

of Termination is given, plus all other amounts and benefits to which he is entitled under any compensation plan of the Company

at the time such payments are due.

If employment by

the Company shall be terminated (a) by the Company other than for Cause, death or disability or (b) by Mr.

McLaren for Good

McLaren will be entitled to benefits provided below:

Company will pay Mr.

McLaren his full base salary through the date of Termination at the rate in effect at the time notice of

Termination is given, plus all other amounts and benefits to which he is entitled under any compensation plan of the Company.

lieu of any further salary payments to Mr.

McLaren for periods subsequent to the date of Termination, the Company will pay as

severance pay to Mr.

McLaren a lump sum severance payment (together with the payments provided in clauses (c) and (d) below) equal

to five times the sum of his annual base salary in effect immediately prior to the occurrence of the circumstance giving rise

to the notice of Termination given in respect of them.

Company will pay to Mr.

The Company will

McLaren his full base salary through the date of Termination at the rate in effect at the time notice of Termination

is given, plus all other amounts and benefits to which he is entitled under any compensation plan of the Company.

In lieu of any further

salary payments to Mr.

McLaren for periods subsequent to the date of Termination, the Company will pay as severance pay to

McLaren a lump sum severance payment (together with the payments provided in clauses (c) and (d) below) equal to five

times the sum of his annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the

notice of Termination given in respect of them.

The Company will

McLaren any deferred compensation allocated or credited to him or his account as of the date of Termination.

lieu of shares of common stock of the Company issuable upon exercise of outstanding options, if any, granted to Mr.

McLaren under

the Company’s stock option plans (which options shall be cancelled upon the making of the payment referred to below), Mr.

McLaren will receive an amount in cash equal to the product of (i) the excess of the closing price of the Company’s common

stock as reported on or nearest the date of Termination (or, if not so reported, on the basis of the average of the lowest asked

and highest bid prices on or nearest the date of Termination), over the per share exercise price of each option held by Mr.

(whether or not then fully exercisable) plus the amount of any applicable cash appreciation rights, times (ii) the number of the

Company’s common stock covered by each such option.

Company will also pay to Mr.

In lieu of shares

of common stock of the Company issuable upon exercise of outstanding options, if any, granted to Mr.

McLaren under the Company’s

stock option plans (which options shall be cancelled upon the making of the payment referred to below), Mr.

McLaren will receive

an amount in cash equal to the product of (i) the excess of the closing price of the Company’s common stock as reported

on or nearest the date of Termination (or, if not so reported, on the basis of the average of the lowest asked and highest

bid prices on or nearest the date of Termination), over the per share exercise price of each option held by Mr.

McLaren (whether

or not then fully exercisable) plus the amount of any applicable cash appreciation rights, times (ii) the number of the Company’s

common stock covered by each such option.

The Company will

also pay to Mr.

McLaren all legal fees and expenses incurred by him as a result of such Termination.

Management’s Discussion

and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking

Information and Factors That May Affect Future Results

This quarterly report on Form 10-Q contains

forward-looking statements regarding our business, financial condition, results of operations and prospects.

The Securities and

Exchange Commission (the “SEC”) encourages companies to disclose forward-looking information so that investors can

better understand a company’s future prospects and make informed investment decisions.

This annual report on Form 10-K and

other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated

results based on management’s plans and assumptions regarding future events or performance.

We have tried, wherever possible,

to identify such statements by using words such as “anticipate,”

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Note Regarding Forward-Looking Information and Factors That May Affect Future Results

quarterly report on Form 10-Q contains forward-looking statements regarding our business, financial condition, results of operations

and prospects.

The Securities and Exchange Commission (the “SEC”) encourages companies to disclose forward-looking

information so that investors can better understand a company’s future prospects and make informed investment decisions.

This annual report on Form 10-K and other written and oral statements that we make from time to time contain such forward-looking

statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance.

We have tried, wherever possible, to identify such statements by using words such as “anticipate,”

“estimate,”

5 unchanged sentences

“will”

and similar expressions in connection with

any discussion of future operating or financial performance.

In particular, these include statements relating to future actions,

future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings,

and financial results.

Factors that could cause our actual results of operations and financial condition to differ materially are

set forth in the “Risk Factors”

section of our annual report on Form 10-K as filed on March 26, 2020.

We caution that these factors could cause

our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements

we make and that investors should not place undue reliance on any such forward-looking statements.

Further, any forward-looking

statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking

statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated

or unanticipated events or circumstances.

New factors emerge from time to time, and it is not possible for us to predict all of

such factors.

Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any

factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

The following discussion should be read

in conjunction with our audited financial statements and the related notes that appear in our annual report on Form 10-K as filed

with the SEC on March 26, 2020.

Zoned Properties is a strategic real estate

development firm whose primary mission is to provide real estate and sustainability services for clients in the regulated cannabis

industry, positioning the company for real estate acquisitions and revenue growth.

The Company intends to pioneer sustainable development

for emerging industries, including the regulated cannabis industry.

The Company is an accredited member of the Better Business

Bureau, the U.S.

and similar expressions in connection with any discussion of future operating or financial performance.

In particular, these include

statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome

of contingencies, such as legal proceedings, and financial results.

Factors that could cause our actual results of operations

and financial condition to differ materially are set forth in the “Risk Factors”

section of our annual report on Form

10-K as filed on March 26, 2020.

caution that these factors could cause our actual results of operations and financial condition to differ materially from those

expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking

Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake

no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement

is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

New factors emerge from time to

time, and it is not possible for us to predict all of such factors.

Further, we cannot assess the impact of each such factor on

our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially

from those contained in any forward-looking statements.

following discussion should be read in conjunction with our audited financial statements and the related notes that appear in

our annual report on Form 10-K as filed with the SEC on March 26, 2020.

Properties is a strategic real estate development firm whose primary mission is to provide real estate and sustainability services

for clients in the regulated cannabis industry, positioning the company for real estate acquisitions and revenue growth.

intends to pioneer sustainable development for emerging industries, including the regulated cannabis industry.

The Company is

an accredited member of the Better Business Bureau, the U.S.

Green Building Council, and the Forbes Real Estate Council.

The Company focuses on investing capital to acquire

and develop commercial properties to be leased on a triple-net basis, and engaging clients that face zoning, permitting, development,

and operational challenges.

The Company provides development strategies and advisory services that could potentially have a major

impact on cash flow and property value.

The Company does not grow, harvest, sell or distribute cannabis or any substances regulated

under United States law such as the Controlled Substance Act of 1970, as amended (the “CSA”).

The Company intends to develop and expand

multiple business divisions, including a commercial real estate brokerage team, an advisory services division, and a nonprofit

charitable organization to focus on community prosperity.

Each of these operating divisions are important elements of the overall

business development strategy for long-term growth.

The Company believes in the value of building relationships with clients and

local communities in order to position the Company for long-term portfolio and revenue growth backed by sophisticated, safe, and

sustainable business practices.

The core of our business involves identifying

and developing properties that intend to operate within highly regulated zoning and permitting regions, including the regulated

cannabis industry.

Within highly regulated industries, local municipalities typically develop strict planning and zoning regulations

that dictate the specific locations at which regulated properties can operate.

These regulations often create complex permitting

processes and can include non-standard setbacks for each location;

for example, restricting a regulated property or facility from

operating within a certain distance of any parks, schools, churches, or residential districts.

When an organization can collaborate

with local representatives, a proactive set of rules and regulations can be established and followed to meet the needs of both

the regulated operators and the local community.

For the three and six months ended June

30, 2020 and 2019, substantially all of our revenues were generated from triple-net leases to tenants that are controlled by one

entity (each, a “Significant Tenant”

and collectively, the “Significant Tenants”), which is located in

the State of Arizona.

The Company currently maintains a portfolio

of properties that we own, develop, and lease.

In addition, we may provide on-going advisory services at each property that is

leased to operating tenants.

focuses on investing capital to acquire and develop commercial properties to be leased on a triple-net basis, and engaging clients

that face zoning, permitting, development, and operational challenges.

The Company provides development strategies and advisory

services that could potentially have a major impact on cash flow and property value.

The Company does not grow, harvest, sell

or distribute cannabis or any substances regulated under United States law such as the Controlled Substance Act of 1970, as amended

(the “CSA”).

Company intends to develop and expand multiple business divisions, including a commercial real estate brokerage team, an advisory

services division, and a nonprofit charitable organization to focus on community prosperity.

Each of these operating divisions

are important elements of the overall business development strategy for long-term growth.

The Company believes in the value of

building relationships with clients and local communities in order to position the Company for long-term portfolio and revenue

growth backed by sophisticated, safe, and sustainable business practices.

core of our business involves identifying and developing properties that intend to operate within highly regulated zoning and

permitting regions, including the regulated cannabis industry.

Within highly regulated industries, local municipalities typically

develop strict planning and zoning regulations that dictate the specific locations at which regulated properties can operate.

These regulations often create complex permitting processes and can include non-standard setbacks for each location;

restricting a regulated property or facility from operating within a certain distance of any parks, schools, churches, or residential

When an organization can collaborate with local representatives, a proactive set of rules and regulations can be established

and followed to meet the needs of both the regulated operators and the local community.

the three and nine months ended September 30, 2020 and 2019, substantially all of our revenues were generated from triple-net

leases to tenants that are controlled by one entity (each, a “Significant Tenant”

and collectively, the “Significant

Tenants”), which is located in the State of Arizona.

Company currently maintains a portfolio of properties that we own, develop, and lease.

In addition, we may provide on-going advisory

services at each property that is leased to operating tenants.

Each property undergoes a development life cycle.

Areas of development that may require advisory services

can range from initial property identification and zoning authorization to complete architectural design, utility installation,

property management protocol, facilities management systems, and security system installation.

During the six months ended June

30, 2020, improvements made to rental properties amounted to $9,565.

No improvements were made during the six months ended June

As of June 30, 2020, a summary of rental

properties owned by us consisted of the following:

Areas of development

that may require advisory services can range from initial property identification and zoning authorization to complete architectural

design, utility installation, property management protocol, facilities management systems, and security system installation.

the nine months ended September 30, 2020, improvements made to rental properties amounted to $9,565.

No improvements were made

during the nine months ended September 30, 2019.

of September 30, 2020, a summary of rental properties owned by us consisted of the following:

Chino Valley,

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Lease End Date

Land Area (Acres)

Land Area (Sq.

Undeveloped Land Area (Sq.

Developed Land Area (Sq.

Total Rentable Building Sq.

Vacant Rentable Sq.

rented as of June 30, 2020

Annual Base Rent:

Land Area (Sq.

Rentable Building Sq.

rented as of September 30, 2020

(remainder per year)

* Annual base rent represents amount of cash payments due

from tenants.

Annualized $ per Rented Sq.

Chino Valley,

Green Valley,

rent is for land only and annualized $ per rented square foot is not presented.

Currently, 33 U.S.

states plus the District

of Columbia have passed laws permitting their citizens to use medical cannabis.

Additionally, 11 states and the District have legalized

cannabis for recreational use by adults.

Marijuana remains classified as a Schedule I controlled substance by the U.S.

Drug Enforcement

Agency (the “DEA”), and the U.S.

Department of Justice (the “DOJ”), and therefore it is illegal to grow,

possess and consume cannabis under federal law.

On September 27, 2018, however, the DEA announced that drugs, including “finished

dosage formulations”

of cannabidiol (“CBD”) and tetrahydrocannabinol (“THC”) below 0.1%, will be

considered Schedule 5 drugs as long as the medications have been approved by the U.S.

Annual base rent

represents amount of cash payments due from tenants.

$ per Rented Sq.

states plus the District of Columbia have passed laws permitting their citizens to use medical cannabis.

Additionally,

16 states and the District have legalized cannabis for recreational use by adults.

Marijuana remains classified as a Schedule

I controlled substance by the U.S.

Drug Enforcement Agency (the “DEA”), and the U.S.

Department of Justice (the “DOJ”),

and therefore it is illegal to grow, possess and consume cannabis under federal law.

On September 27, 2018, however, the DEA announced

that drugs, including “finished dosage formulations”

of cannabidiol (“CBD”) and tetrahydrocannabinol (“THC”)

below 0.1%, will be considered Schedule 5 drugs as long as the medications have been approved by the U.S.

Food and Drug Administration.

are two natural compounds found in cannabis plants.

THC is the main psychoactive compound in marijuana, while CBD is an antagonist

to, and inhibits the physiological action to, THC.

Also, under the 2018 Farm Bill or Agriculture Improvement Act of 2018, CBD remains

a Schedule I controlled substance under the CSA, with a narrow exception for CBD derived from hemp with a THC concentration of

less than 0.3%.

THC and CBD are two natural compounds found in cannabis plants.

THC is the main psychoactive compound in marijuana, while CBD

is an antagonist to, and inhibits the physiological action to, THC.

Also, under the 2018 Farm Bill or Agriculture Improvement

Act of 2018, CBD remains a Schedule I controlled substance under the CSA, with a narrow exception for CBD derived from hemp with

a THC concentration of less than 0.3%.

The CSA bans cannabis-related businesses;

the possession, cultivation and production of cannabis-infused products;

the possession, cultivation and production of

cannabis-infused products;

and the distribution of cannabis and products derived from it.

Furthermore, the U.S.

Supreme Court has confirmed that the federal

government has the right to regulate and criminalize cannabis, including for medical purposes, and that federal law criminalizing

the use of cannabis preempts state laws that legalize its use.

Under the Obama Administration, the DOJ

previously issued memoranda, including the so-called “Cole Memo”

on August 29, 2013, providing internal guidance to

federal prosecutors concerning enforcement of federal cannabis prohibitions under the CSA.

This guidance essentially characterized

use of federal law enforcement resources to prosecute those complying with state laws allowing the use, manufacture and distribution

of cannabis as an inefficient use of such federal resources when state laws and enforcement efforts are effective with respect

to specific federal enforcement priorities under the CSA.

On January 4, 2018, then-U.S.

General Jeff Sessions issued a written memorandum rescinding the Cole Memo and related internal guidance issued by the DOJ regarding

federal law enforcement priorities involving marijuana (the “Sessions Memo”).

The Sessions Memo instructs federal prosecutors

that when determining which marijuana-related activities to prosecute under federal law with the DOJ’s finite resources,

prosecutors should follow the well-established principles set forth in the U.S.

Supreme Court

has confirmed that the federal government has the right to regulate and criminalize cannabis, including for medical purposes,

and that federal law criminalizing the use of cannabis preempts state laws that legalize its use.

the Obama Administration, the DOJ previously issued memoranda, including the so-called “Cole Memo”

on August 29, 2013,

providing internal guidance to federal prosecutors concerning enforcement of federal cannabis prohibitions under the CSA.

guidance essentially characterized use of federal law enforcement resources to prosecute those complying with state laws allowing

the use, manufacture and distribution of cannabis as an inefficient use of such federal resources when state laws and enforcement

efforts are effective with respect to specific federal enforcement priorities under the CSA.

January 4, 2018, then-U.S.

Attorney General Jeff Sessions issued a written memorandum rescinding the Cole Memo and related internal

guidance issued by the DOJ regarding federal law enforcement priorities involving marijuana (the “Sessions Memo”).

The Sessions Memo instructs federal prosecutors that when determining which marijuana-related activities to prosecute under federal

law with the DOJ’s finite resources, prosecutors should follow the well-established principles set forth in the U.S.

Attorneys’

Manual governing all federal prosecutions.

The Sessions Memo states that “these principles require federal prosecutors deciding which cases to prosecute to weigh all

relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime,

the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community.”

Memo went on to state that given the DOJ’s well-established general principles, “previous nationwide guidance specific

to marijuana is unnecessary and is rescinded, effective immediately.”

It is unclear at this time what impact

the Sessions Memo will have on the regulated cannabis and marijuana industry.

During the January 2018 confirmation hearings of

current Attorney General William Barr, Mr.

Barr commented that he would not prosecute marijuana businesses operating within state

The Sessions Memo states that “these principles require federal prosecutors deciding

which cases to prosecute to weigh all relevant considerations, including federal law enforcement priorities set by the Attorney

General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes

on the community.”

The Sessions Memo went on to state that given the DOJ’s well-established general principles, “previous

nationwide guidance specific to marijuana is unnecessary and is rescinded, effective immediately.”

is unclear at this time what impact the Sessions Memo will have on the regulated cannabis and marijuana industry.

During the January

2018 confirmation hearings of current Attorney General William Barr, Mr.

Barr commented that he would not prosecute marijuana

businesses operating within state law.

Also, in April 2019, Mr.

Barr stated that he would prefer that Congress enact legislation allowing states to legalize marijuana,

rather than continuing the current approach under the which a growing number of states have ended cannabis prohibition in conflict

with federal law.

In addition, pursuant to the current omnibus

spending bill previously approved by Congress, the DOJ was prohibited from using funds appropriated by Congress to prevent states

from implementing their medical-use cannabis laws.

This provision, however, will expire on September 30, 2020.

There is no assurance

that Congress will approve inclusion of a similar prohibition on DOJ spending in the appropriations bill for future years.

we are not engaged in the purchase, sale, growth, cultivation, harvesting, or processing of medical-use marijuana products, we

lease our properties to tenants who engage in such activities, and therefore strict enforcement of federal prohibitions regarding

marijuana could irreparably harm our business, subject us to criminal prosecution and/or adversely affect the trading price of

our securities.

The Company will focus heavily on the growth

of a diversified revenue stream in 2020.

We intend to accomplish this by prospecting new advisory services across the country for

private, public, and municipal clients.

We believe that strategic real estate and sustainability services are likely to emerge

as the growth engine for Zoned Properties.

We are moving to take advantage of new opportunities.

Barr stated that he would prefer that Congress enact legislation

allowing states to legalize marijuana, rather than continuing the current approach under the which a growing number of states

have ended cannabis prohibition in conflict with federal law.

addition, pursuant to the current omnibus spending bill previously approved by Congress, the DOJ was prohibited from using funds

appropriated by Congress to prevent states from implementing their medical-use cannabis laws.

There is no assurance that Congress

will approve inclusion of a similar prohibition on DOJ spending in the appropriations bill for future years.

Although we are not

engaged in the purchase, sale, growth, cultivation, harvesting, or processing of medical-use marijuana products, we lease our

properties to tenants who engage in such activities, and therefore strict enforcement of federal prohibitions regarding marijuana

could irreparably harm our business, subject us to criminal prosecution and/or adversely affect the trading price of our securities.

Company will focus heavily on the growth of a diversified revenue stream in 2020.

We intend to accomplish this by prospecting

new advisory services across the country for private, public, and municipal clients.

We believe that strategic real estate and

sustainability services are likely to emerge as the growth engine for Zoned Properties.

We are moving to take advantage of new

opportunities.

Pursuant to the terms of the several lease

amendments our Significant Tenants, among other things, base rent base rent was abated from June 1, 2020 to July 31, 2020 on all

of our Significant Tenant leases which decreased our cash flow from operation during the six months ended June 30, 2020 by $89,500.

In addition, the parties agreed that from the period from May 31, 2020 to June 30, 2022, Significant Tenants will invest a combined

total of at least $8,000,000 improvements in and to the properties in Chino Valley and Tempe prior to June 30, 2020.

in the rentable area of the leased premises will result in an increase in all amounts calculated based on the same, including,

without limitation, base rent.

In March 2020, the World Health Organization

declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide.

We are monitoring this closely,

and although operations have not been materially affected by the COVID-19 outbreak to date, the ultimate duration and severity

of the outbreak and its impact on the economic environment and our business is uncertain.

As of August 13, 2020, all of the properties

in our portfolio are open to our Significant Tenants and their customers and will remain open pursuant to state and local government

requirements.

At this time, we do not foresee any material changes to our operations from COVID-19.

Our tenants are continuing

to generate revenue at these properties and they have continued to make rental payments in full and on time and we believe the

tenants’

of our Significant Tenant leases which decreased our cash flow from operation during the nine months ended September 30, 2020

In addition, the parties agreed that from the period from May 31, 2020 to June 30, 2022, Significant Tenants will

invest a combined total of at least $8,000,000 improvements in and to the properties in Chino Valley and Tempe prior to June 30,

Any increase in the rentable area of the leased premises will result in an increase in all amounts calculated based on the

same, including, without limitation, base rent.

March 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures

We are monitoring this closely, and although operations have not been materially affected by the COVID-19 outbreak

to date, the ultimate duration and severity of the outbreak and its impact on the economic environment and our business is uncertain.

Currently, all of the properties in our portfolio are open to our Significant Tenants and their customers and will remain open

pursuant to state and local government requirements.

At this time, we do not foresee any material changes to our operations from

Our tenants are continuing to generate revenue at these properties and they have continued to make rental payments in

full and on time and we believe the tenants’

liquidity position is sufficient to cover its expected rental obligations.

Accordingly, while we do not anticipate

an impact on our operations, we cannot estimate the duration of the pandemic and potential impact on our business if the properties

must close or if the tenants are otherwise unable or unwilling to make rental payments.

In addition, a severe or prolonged economic

downturn could result in a variety of risks to our business, including weakened demand for our properties and a decreased ability

to raise additional capital when needed on acceptable terms, if at all.

At this time, the Company is unable to estimate the impact

of this event on its operations.

Results of Operations

The following comparative analysis on results

of operations was based primarily on the comparative consolidated financial statements, footnotes and related information for the

periods identified below and should be read in conjunction with the unaudited condensed consolidated financial statements and the

notes to those statements for the three and six months ended June 30, 2020 and 2019, which are included elsewhere in this quarterly

report on Form 10-Q.

The results discussed below are for the three and six months ended June 30, 2020 and 2019.

Comparison of Results of Operations for the Three and

Six Months ended June 30, 2020 and 2019

For the three and six months ended June 30, 2020 and 2019, revenues

consisted of the following:

Three Months Ended

Six Months Ended

Accordingly, while we do not anticipate an impact on our operations, we cannot estimate the duration of the pandemic and potential

impact on our business if the properties must close or if the tenants are otherwise unable or unwilling to make rental payments.

In addition, a severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand

for our properties and a decreased ability to raise additional capital when needed on acceptable terms, if at all.

At this time,

the Company is unable to estimate the impact of this event on its operations.

of Operations

following comparative analysis on results of operations was based primarily on the comparative consolidated financial statements,

footnotes and related information for the periods identified below and should be read in conjunction with the unaudited condensed

consolidated financial statements and the notes to those statements for the three and nine months ended September 30, 2020 and

2019, which are included elsewhere in this quarterly report on Form 10-Q.

The results discussed below are for the three and nine

months ended September 30, 2020 and 2019.

of Results of Operations for the Three and Nine Months ended September 30, 2020 and 2019

the three and nine months ended September 30, 2020 and 2019, revenues consisted of the following:

September 30,

Rent revenues

1 unchanged sentence

Total revenues

For the three months ended June 30, 2020,

total revenues amounted to $299,824, including Significant Tenants revenues of $294,043, as compared to $324,441, including Significant

Tenant revenues of $291,475, for the three months ended June 30, 2019, a decrease of $24,617, or 7.6%.

For the six months ended

June 30, 2020, total revenues amounted to $603,693, including Significant Tenants revenues of $580,946, as compared to $602,177,

including Significant Tenant revenues of $556,335, for the six months ended June 30, 2019, an increase of $1,516, or 0.3%.

the three months ended June 30, 2020, the decrease in revenues was attributable to a decrease in advisory revenues of $18,619,

the three months ended September 30, 2020, total revenues amounted to $302,772, including Significant Tenants revenues of $297,793,

as compared to $338,339, including Significant Tenant revenues of $299,324, for the three months ended September 30, 2019, a decrease

of $35,567, or 10.5%.

the three months ended September 30, 2020, the decrease in revenues was attributable to a decrease in advisory revenues of $42,191,

or 70.2%, offset by an increase in rent revenues of $6,624, or 2.4%.

Substantially all of the Company’s real estate properties

are leased under triple-net leases to the Significant Tenants.

the nine months ended September 30, 2020, total revenues amounted to $906,465, including Significant Tenants revenues of $878,759,

as compared to $940,516, including Significant Tenant revenues of $834,223, for the nine months ended September 30, 2019, a decrease

of $34,051, or 3.6%.

the nine months ended September 30, 2020, the decrease in revenues was attributable to a decrease in advisory revenues of $33,435,

or 31.5%, and a decrease in rent revenues of $616, or 0.07%.

1 unchanged sentence

leased under triple-net leases to the Significant Tenants.

Operating expenses

For the three months ended June 30, 2020,

operating expenses amounted to $290,071 as compared to $284,463 for the three months ended June 30, 2019, an increase of $5,608,

For the six months ended June 30, 2020, operating expenses amounted to $660,642 as compared to $646,890 for the six months

ended June 30, 2019, an increase of $13,752, or 2.1%.

For the three and six months ended June 30, 2020 and 2019, operating expenses

consisted of the following:

Three Months Ended

Six Months Ended

the three months ended September 30, 2020, operating expenses amounted to $249,021 as compared to $304,052 for the three months

ended September 30, 2019, a decrease of $55,031, or 18.1%.

the nine months ended September 30, 2020, operating expenses amounted to $909,663 as compared to $950,942 for the nine months

ended September 30, 2019, a decrease of $41,279, or 4.3%.

For the three and nine months ended September 30, 2020 and 2019, operating

expenses consisted of the following:

September 30,

Compensation and benefits

2 unchanged sentences

Depreciation and amortization

Real estate taxes

For the three months ended June 30, 2020, compensation and benefit expense increased by $853, or 1.0%, as compared to the three months ended June 30, 2019.

For the six months ended June 30, 2020, compensation and benefit expense increased by $9,298, or 4.5%, as compared to the six months ended June 30, 2019, and was primarily attributable to an increase in stock-based compensation related to the accretion of stock option expense.

For the three months ended June 30, 2020, professional fees decreased by $8,934, or 17.4%, as compared to the three months ended June 30, 2019.

This decrease in professional fees was primarily attributable to a decrease in public relations fees of $2.479, a decrease in legal fees of $8,717, and a decrease in other professional fees of $5,938, offset by an increase in accounting fees of $8,200.

For the six months ended June 30, 2020, professional fees decreased by $20,999, or 15.6%, as compared to the six months ended June 30, 2019.

This decrease in professional fees was primarily attributable to a decrease in public relations fees of $12,383 a decrease in legal fees of $4,348, and a decrease in other professional fees of $4,268.

General and administrative expenses consist of expenses such as rent expense, directors’

and officers’

liability insurance, travel expenses, office expenses, telephone and internet expenses and other general operating expenses.

For the three months ended June 30, 2020, general and administrative expenses increased by $15,102, or 45.9%, as compared to the three months ended June 30, 2019.

This increase was primarily attributable in an increase in advertising and promotion expense of $2,061 related to attending conferences, an increase in technology fees of $4,158.

and an increase in insurance expense of $4,159.

Additionally, in the 2019 period, we received a tax refund of $8,704 which we did not receive in the 2020 period.

For the six months ended June 30, 2020, general and administrative expenses increased by $28,596, or 37.8%, as compared to the six months ended June 30, 2019.

This increase was primarily attributable in an increase in advertising and promotion expense of $6,461 related to attending conferences, an increase in technology fees of $7,062.

and an increase in insurance expense of $6,272.

Additionally, in the 2019 period, we received a tax refund of $8,704 which we did not receive in the 2020 period.

For the three and six months ended June 30, 2020, depreciation and amortization expense increased by $343, or 0.4%, and $369, or 0.2%, as compared to the three and six months ended June 30, 2019, respectively.

For the three and six months ended June 30, 2020, real estate taxes decreased by $1,756, or 7.7%, and $3,512, or 7.7% as compared to the three and six months ended June 30, 2019, respectively.

Income (Loss) from operations

As a result of the factors described above,

for the three months ended June 30, 2020, income from operations amounted to $9,753 as compared to income from operations of $39,978

for the three months ended June 30, 2019, a decrease of $30,225, or 75.6%.

For the six months ended June 30, 2020, loss from operations

amounted to $56,949 as compared to a loss from operations of $44,713 for the six months ended June 30, 2019, an increase of $12,236,

Other (expenses) income

Other (expenses) income primarily includes

interest expense incurred on debt with third parties and a related party and also includes other income (expenses).

For the three

months ended June 30, 2020, total other expenses, net amounted to $(28,680) as compared to $(30,300), respectively, a decrease

of $1,620, or 5.3%.

For the six months ended June 30, 2020, total other expenses, net amounted to $(58,748) as compared to total

other income, net of $47,604, respectively, a change of $(106,352), or 223.4%.

During the six months ended June 30, 2019, we recognized

other income of $108,204 related to a cash rebate received from the utility company as compared to nil during the six months ended

June 30, 2020.

As a result of the foregoing, for the three

months ended June 30, 2020 and 2019, net (loss) income amounted to $(18,927), or $(0.00) per common share (basic and diluted),

and $9,678, or $0.00 per common share (basic and diluted), respectively.

For the six months ended June 30, 2020 and 2019, net (loss)

income amounted to $(115,697), or $(0.01) per common share (basic and diluted), and $2,891, or $0.00 per common share (basic and

diluted), respectively.

Liquidity and Capital Resources

Liquidity is the ability of an enterprise

to generate adequate amounts of cash to meet its needs for cash requirements.

We had cash of $602,448 and $639,781 of cash as of

June 30, 2020 and December 31, 2019, respectively.

Our primary uses of cash have been for

compensation and benefits, fees paid to third parties for professional services, real estate taxes, general and administrative

expenses, and the development of rental properties.

All funds received have been expended in the furtherance of growing the business.

For the three months

ended September 30, 2020, compensation and benefit expense decreased by $20,037, or 25.2%, as compared to the three months

ended September 30, 2019.

For the nine months ended September 30, 2020, compensation and benefit expense decreased by $10,739,

or 3.7%, as compared to the nine months ended September 30, 2019, and was primarily attributable to a decrease in stock-based

compensation related to the accretion of stock option expense and the value of shares issued for services, and a decrease

in salary paid due to the reduction of one employee.

For the three months

ended September 30, 2020, professional fees decreased by $14,955, or 29.2%, as compared to the three months ended September

This decrease in professional fees was primarily attributable to a decrease in public relations fees of $1,525,

a decrease in legal fees of $4,069, and a decrease in other professional fees of $9,361.

For the nine months ended September

30, 2020, professional fees decreased by $35,954, or 19.4%, as compared to the nine months ended September 30, 2019.

decrease in professional fees was primarily attributable to a decrease in public relations fees of $13,908, a decrease in

legal fees of $8,418, and a decrease in other professional fees of $13,628 related to the decrease in advisory fees.

For the three months

ended September 30, 2020, general and administrative expenses consist of expenses such as rent expense, directors’

officers’

liability insurance, travel expenses, office expenses, telephone and internet expenses and other general operating

For the three months ended September 30, 2020, general and administrative expenses decreased by $18,444, or 30.4%,

as compared to the three months ended September 30, 2019.

This decrease was primarily attributable in a decrease in advertising

and promotion expense of $4,095, a decrease in a decrease in filing fees of $4,204, a decrease in dues and subscriptions of

$4,210, a decrease in travel expenses of $2,736, and a reduction in other general and administrative expenses of $3,199.

the nine months ended September 30, 2020, general and administrative expenses increased by $10,152, or 7.4%, as compared to

the nine months ended September 30, 2019.

This increase was primarily attributable in an increase in advertising and promotion

expense of $7,461 related to attending conferences, an increase in technology fees of $6,808.

and an increase in insurance

expense of $5,364.

Additionally, in the 2019 period, we received a tax refund of $8,704 which we did not receive in the 2020

These increases were offset by a decrease in filing fees of $7,326 and other general and administrative expenses of

For the three and

nine months ended September 30, 2020, depreciation and amortization expense increased by $161, or 0.2%, and $530, or 0.2%,

as compared to the three and nine months ended September 30, 2019, respectively.

For the three and

nine months ended September 30, 2020, real estate taxes decreased by $1,756, or 7.7%, and $5,268, or 7.7% as compared to the

three and nine months ended September 30, 2019, respectively.

(Loss) from operations

a result of the factors described above, for the three months ended September 30, 2020, income from operations amounted to $53,751

as compared to income from operations of $34,287 for the three months ended September 30, 2019, an increase of $19,464, or 56.8%.

For the nine months ended September 30, 2020, loss from operations amounted to $3,198 as compared to a loss from operations of

$10,426 for the nine months ended September 30, 2019, a decrease of $7,228, or 69.3%.

(expenses) income

(expenses) income primarily includes interest expense incurred on debt with third parties and a related party and also includes

other income (expenses).

For the three months ended September 30, 2020, total other expenses, net amounted to $(28,662) as compared

to $(30,300), respectively, a decrease of $1,638, or 5.4%.

For the nine months ended September 30, 2020, total other expenses,

net amounted to $(87,410) as compared to total other income, net of $17,304, respectively, a change of $(104,714), or 605.1%.

During the nine months ended September 30, 2019, we recognized other income of $108,204 related to a cash rebate received from

the utility company as compared to nil during the nine months ended September 30, 2020.

income (loss)

a result of the foregoing, for the three months ended September 30, 2020 and 2019, net income amounted to $25,089, or $0.00 per

common share (basic and diluted), and $3,987, or $0.00 per common share (basic and diluted), respectively.

a result of the foregoing, for the nine months ended September 30, 2020 and 2019, net (loss) income amounted to $(90,608), or

$(0.01) per common share (basic and diluted), and $6,878, or $0.00 per common share (basic and diluted), respectively.

and Capital Resources

is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements.

We had cash of $577,763

and $639,781 of cash as of September 30, 2020 and December 31, 2019, respectively.

primary uses of cash have been for compensation and benefits, fees paid to third parties for professional services, real estate

taxes, general and administrative expenses, and the development of rental properties.

All funds received have been expended in

the furtherance of growing the business.

We receive funds from the collection of rental income and advisory fees.

The following trends are reasonably likely to result in

changes in our liquidity over the near to long term:

An increase in working capital requirements to finance our current business,

Addition of administrative and sales personnel as the business grows, and

The cost of being a public company.

We may need to raise additional funds,

particularly if we are unable to generate positive cash flow as a result of our operations.

We estimate that based on current plans

and assumptions, that our available cash will be sufficient to satisfy our cash requirements under our present operating expectations

for the next 12 months from the date of this quarterly report on Form 10-Q.

Other than revenue received from the lease of our rental

properties and from advisory fees, we presently have no other significant alternative source of working capital.

We have used these funds to fund our operating

expenses, pay our obligations, develop rental properties, and grow our company.

We need to raise significant additional capital

or debt financing to acquire new properties, to develop existing properties, and to assure we have sufficient working capital for

our ongoing operations and debt obligations.

On March 19, 2020, we made an initial investment

of $100,000 into KCB Jade Holdings, LLC (“KCB”).

In exchange for the investment, KCB issued to us a convertible debenture

(the “Debenture”) dated March 19, 2020 (the “Issuance Date”) in the original principal amount of $100,000.

The Debenture bears interest at the rate of 6.5% per annum and matures on March 19, 2025 (the “Maturity Date”).

on the outstanding principal sum of the Debenture commences accruing on the Issuance Date and is computed on the basis of a 365-day

year and the actual number of days elapsed, and shall be payable annually due by the first day of each calendar anniversary following

the Issuance Date.

KCB may prepay the Debenture at any point after 18 months following the Issuance Date, in whole or in part.

However, if KCB elects to prepay the Debenture prior to the Maturity Date or prior to any conversion as provided in the Debenture

in whole or in part, we will be entitled to receive a number of KCB units, in addition to such prepayment amount, constituting

10% of the total outstanding units and 10% of the total percentage interest following such issuance and at the time of such issuance.

On or after six months from the Issuance Date, we may convert all or a portion of the principal balance and all accrued and unpaid

interest due into a number of units equal to the proportion of the outstanding amount being converted multiplied by 33% of the

total number of units issued and outstanding at the time of conversion, constituting 33% of the total percentage interest (the

“Conversion Percentage”).

If KCB defaults on payment of the Debenture, we may, at its option, extend all conversion

rights, through and including the date KCB tenders or attempts to tender payment in full of all amounts due under the Debenture.

Conversion rights terminate upon acceptance by the Company of payment in full of principal, accrued interest and any other amounts

due under the Debenture.

If (i) KCB does not elect to exercise its rights of prepayment prior to the Maturity Date, (ii) we do

not elect to exercise its rights of conversion, and (iii) KCB pays to the Company all outstanding principal and interest accrued

and due under the terms of the Debenture on the Maturity Date, we will still be entitled to receive a number of units, in addition

to such payment amount, constituting 8% of the total outstanding units and 8% of the total percentage interest following such issuance

and at the time of such issuance.

Our future operations are dependent on

our ability to manage our current cash balance, on the collection of rental and advisory revenues and the attainment of new advisory

Our real estate properties are leased to Significant Tenants under triple-net leases for which terms vary.

the credit of these tenants to stay abreast of any material changes in credit quality.

We monitor tenant credit by (1) reviewing

financial statements and related metrics and information that are publicly available or that are provided to us upon request, and

(2) monitoring the timeliness of rent collections.

As of June 30, 2020 and December 31, 2019, we had an asset concentration

related to our Significant Tenant leases.

As of June 30, 2020 and December 31, 2019, these Significant Tenants represented approximately

85.8% and 87.1% of total assets, respectively.

If our Significant Tenants are prohibited from operating due to federal or state

regulations or due to COVID-19, or cannot pay their rent, we may not have enough working capital to support our operations and

we would have to seek out new tenants at rental rates per square less than our current rate per square foot.

We included audited

financial statements of our Significant Tenants as Exhibits 99.1 and 99.2 to our Annual Report on Form 10-K, as filed with the

SEC on March 26, 2020, since such audited financial statements represent material information and are necessary for the protection

of investors.

We may secure additional financing to acquire

and develop additional and existing properties.

Financing transactions may include the issuance of equity or debt securities, obtaining

credit facilities, or other financing mechanisms.

Even if we are able to raise the funds required, it is possible that we could

incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek alternative financing.

Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity

securities may have rights, preferences or privileges senior to those of existing holders of our common stock.

The inability to

obtain additional capital may restrict our ability to grow our business operations.

For the Six Months Ended June 30, 2020 and 2019

Net cash flow provided by operating activities

was $72,232 for the six months ended June 30, 2020, as compared net cash flow provided by operating activities of $142,662 for

the six months ended June 30, 2019, representing a decrease of $70,430.

Net cash flow provided by operating activities for the six months ended June 30, 2020 primarily reflected net loss of $115,697 adjusted for the add-back of non-cash items consisting of depreciation and amortization of $181,424, stock-based compensation expense of $24,200 and accretion of stock-based stock option expense of $18,036, offset by changes in operating assets and liabilities primarily consisting of a decrease in prepaid expenses of $52,397, and an increase in accounts payable of $8,152, offset by an increase in deferred rent receivable of $88,750 attributable to the abatement of May and June 2020 rent as part of lease amendments effective on May 31, 2020.

Net cash flow provided by operating activities for the six months ended June 30, 2019 primarily reflected net income of $2,891 adjusted for the add-back of non-cash items consisting of depreciation and amortization of $181,056, stock-based compensation expense of $31,100, and accretion of stock-based stock option expense of $11,806, offset by changes in operating assets and liabilities primarily consisting of a decrease in prepaid expenses of $41,974 and an increase in accrued expenses of $11,346 offset by an increase in accounts receivable of $30,017, and a decrease in accounts payable of $106,994 which was primarily attributable to the payment of outstanding amounts due for property improvements made in 2018.

For the six months ended June 30, 2020,

net cash flow used in investing activities amounted to $109,565.

This use of cash was attributable to cash used for an investment

in a convertible note receivable of $100,000 as discussed above and as used in the improvement of rental properties of $9,565.

We did not have any investing activities for the six months ended June 30, 2019.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

We have certain fixed contractual obligations

and commitments that include future estimated payments.

Changes in our business needs, cancellation provisions, changing interest

rates, and other factors may result in actual payments differing from the estimates.

We cannot provide certainty regarding the

timing and amounts of payments.

We have presented below a summary of the most significant assumptions used in our determination

of amounts presented in the tables, in order to assist in the review of this information within the context of our consolidated

financial position, results of operations, and cash flows.

The following tables summarize our contractual

obligations as of June 30, 2020 (dollars in thousands), and the effect these obligations are expected to have on our liquidity

and cash flows in future periods.

Payments Due by Period

Contractual obligations:

Convertible notes

Interest on convertible notes

Off-balance Sheet Arrangements

We have not entered into any other financial

guarantees or other commitments to guarantee the payment obligations of any third parties.

We have not entered into any derivative

contracts that are indexed to our shares and classified as shareholders’

equity or that are not reflected in our consolidated

financial statements.

Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated

entity that serves as credit, liquidity or market risk support to such entity.

We do not have any variable interest in any unconsolidated

entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development

services with us.

Critical Accounting Policies

Our discussion and analysis of our financial

condition and results of operations are based upon our audited and unaudited consolidated financial statements, which have been

prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these consolidated

financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues

and expenses, and related disclosure of contingent assets and liabilities.

We continually evaluate our estimates, including those

related to income taxes, and the valuation of equity transactions.

We base our estimates on historical experience and on various

other assumptions that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments

about the carrying values of assets and liabilities that are not readily apparent from other sources.

Any future changes to these

estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities.

The following

trends are reasonably likely to result in changes in our liquidity over the near to long term:

An increase in working

capital requirements to finance our current business,

Addition of administrative

and sales personnel as the business grows, and

The cost of being

a public company.

may need to raise additional funds, particularly if we are unable to generate positive cash flow as a result of our operations.

We estimate that based on current plans and assumptions, that our available cash will be sufficient to satisfy our cash requirements

under our present operating expectations for the next 12 months from the date of this quarterly report on Form 10-Q.

revenue received from the lease of our rental properties and from advisory fees, we presently have no other significant alternative

source of working capital.

have used these funds to fund our operating expenses, pay our obligations, develop rental properties, and grow our company.

need to raise significant additional capital or debt financing to acquire new properties, to develop existing properties, and

to assure we have sufficient working capital for our ongoing operations and debt obligations.

March 19, 2020, we made an initial investment of $100,000 into KCB Jade Holdings, LLC (“KCB”).

In exchange for the

investment, KCB issued to us a convertible debenture (the “Debenture”) dated March 19, 2020 (the “Issuance Date”)

in the original principal amount of $100,000.

The Debenture bears interest at the rate of 6.5% per annum and matures on March

19, 2025 (the “Maturity Date”).

Interest on the outstanding principal sum of the Debenture commences accruing on the

Issuance Date and is computed on the basis of a 365-day year and the actual number of days elapsed, and shall be payable annually

due by the first day of each calendar anniversary following the Issuance Date.

KCB may prepay the Debenture at any point after

18 months following the Issuance Date, in whole or in part.

However, if KCB elects to prepay the Debenture prior to the Maturity

Date or prior to any conversion as provided in the Debenture in whole or in part, we will be entitled to receive a number of KCB

units, in addition to such prepayment amount, constituting 10% of the total outstanding units and 10% of the total percentage

interest following such issuance and at the time of such issuance.

On or after six months from the Issuance Date, we may convert

all or a portion of the principal balance and all accrued and unpaid interest due into a number of units equal to the proportion

of the outstanding amount being converted multiplied by 33% of the total number of units issued and outstanding at the time of

conversion, constituting 33% of the total percentage interest (the “Conversion Percentage”).

If KCB defaults on payment

of the Debenture, we may, at its option, extend all conversion rights, through and including the date KCB tenders or attempts

to tender payment in full of all amounts due under the Debenture.

Conversion rights terminate upon acceptance by the Company of

payment in full of principal, accrued interest and any other amounts due under the Debenture.

If (i) KCB does not elect to exercise

its rights of prepayment prior to the Maturity Date, (ii) we do not elect to exercise its rights of conversion, and (iii) KCB

pays to the Company all outstanding principal and interest accrued and due under the terms of the Debenture on the Maturity Date,

we will still be entitled to receive a number of units, in addition to such payment amount, constituting 8% of the total outstanding

units and 8% of the total percentage interest following such issuance and at the time of such issuance.

future operations are dependent on our ability to manage our current cash balance, on the collection of rental and advisory revenues

and the attainment of new advisory clients.

Our real estate properties are leased to Significant Tenants under triple-net leases

for which terms vary.

We monitor the credit of these tenants to stay abreast of any material changes in credit quality.

tenant credit by (1) reviewing financial statements and related metrics and information that are publicly available or that are

provided to us upon request, and (2) monitoring the timeliness of rent collections.

As of September 30, 2020 and December

31, 2019, we had an asset concentration related to our Significant Tenant leases.

As of September 30, 2020 and December 31, 2019,

these Significant Tenants represented approximately 84.3% and 87.1% of total assets, respectively.

If our Significant Tenants

are prohibited from operating due to federal or state regulations or due to COVID-19, or cannot pay their rent, we may not have

enough working capital to support our operations and we would have to seek out new tenants at rental rates per square less than

our current rate per square foot.

included audited financial statements of our Significant Tenants as Exhibits 99.1 and 99.2 to our Annual Report on Form 10-K,

as filed with the SEC on March 26, 2020, since such audited financial statements represent material information and are necessary

for the protection of investors.

may secure additional financing to acquire and develop additional and existing properties.

Financing transactions may include

the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.

Even if we are able to

raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements

that would force us to seek alternative financing.

Furthermore, if we issue additional equity or debt securities, stockholders

may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of

existing holders of our common stock.

The inability to obtain additional capital may restrict our ability to grow our business

in our cash balance are summarized as follows:

September 30,

cash provided by operating activities

cash used in investing activities

(decrease) increase in cash

Cash Provided by Operating Activities:

cash flow provided by operating activities was $48,470 for the nine months ended September 30, 2020, as compared net cash flow

provided by operating activities of $219,433 for the nine months ended September 30, 2019, representing a decrease of $170,963.

Net cash flow provided

by operating activities for the nine months ended September 30, 2020 primarily reflected net loss of $90,608 adjusted for

the add-back of non-cash items consisting of depreciation and amortization of $272,086, stock-based compensation expense of

$24,200 and accretion of stock-based stock option expense of $19,810, offset by changes in operating assets and liabilities

primarily consisting of an increase in deferred rent receivable of $176,004 attributable to the abatement of May and June

2020 rent as part of lease amendments effective on May 31, 2020.

Net cash flow provided

by operating activities for the nine months ended September 30, 2019 primarily reflected net income of $6,878 adjusted for

the add-back of non-cash items consisting of depreciation and amortization of $271,555, stock-based compensation expense of

$31,100, and accretion of stock-based stock option expense of $17,709, offset by changes in operating assets and liabilities

primarily consisting of a decrease in accounts payable of $111,809 which was primarily attributable to the payment of outstanding

amounts due for property improvements made in 2018.

Cash Used in Investing Activities:

the nine months ended September 30, 2020, net cash flow used in investing activities amounted to $110,488.

This use of cash was

attributable to cash used for an investment in a convertible note receivable of $100,000 as discussed above and cash used in the

improvement of rental properties of $9,565.

We did not have any investing activities for the nine months ended September 30, 2019.

Obligations and Off-Balance Sheet Arrangements

have certain fixed contractual obligations and commitments that include future estimated payments.

Changes in our business needs,

cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates.

We cannot provide certainty regarding the timing and amounts of payments.

We have presented below a summary of the most significant

assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information

within the context of our consolidated financial position, results of operations, and cash flows.

following tables summarize our contractual obligations as of September 30, 2020 (dollars in thousands), and the effect these obligations

are expected to have on our liquidity and cash flows in future periods.

Due by Period

on convertible notes

Sheet Arrangements

have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties.

We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’

or that are not reflected in our consolidated financial statements.

Furthermore, we do not have any retained or contingent interest

in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.

not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support

to us or engages in leasing, hedging or research and development services with us.

Accounting Policies

discussion and analysis of our financial condition and results of operations are based upon our audited and unaudited consolidated

financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported

amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

We continually

evaluate our estimates, including those related to income taxes, and the valuation of equity transactions.

We base our estimates

on historical experience and on various other assumptions that we believed to be reasonable under the circumstances, the results

of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent

from other sources.

Any future changes to these estimates and assumptions could cause a material change to our reported amounts

of revenues, expenses, assets and liabilities.

Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting

policies affect our more significant judgments and estimates used in the preparation of the unaudited condensed consolidated financial

Rental Properties

Rental properties are carried at cost less

accumulated depreciation and amortization.

Betterments, major renovations and certain costs directly related to the improvement

of rental properties are capitalized.

Maintenance and repair expenses are charged to expense as incurred.

Depreciation is recognized

on a straight-line basis over estimated useful lives of the assets, which range from 5 to 39 years.

Tenant improvements are amortized

on a straight-line basis over the lives of the related leases, which approximate the useful lives of the assets.

Upon the acquisition of real estate, we

assess the fair value of acquired assets (including land, buildings and improvements, identified intangibles, such as acquired

above-market leases and acquired in-place leases) and acquired liabilities (such as acquired below-market leases) and allocate

the purchase price based on these assessments.

The Company assesses fair value based on estimated cash flow projections that utilize

appropriate discount and capitalization rates and available market information.

Estimates of future cash flows are based on a number

of factors including historical operating results, known trends, and market/economic conditions.

Our properties are individually reviewed

for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated

holding period on an undiscounted basis.

An impairment loss is measured based on the excess of the property’s carrying amount

over its estimated fair value.

Impairment analyses are based on our current plans, intended holding periods and available market

information at the time the analyses are prepared.

If our estimates of the projected future cash flows, anticipated holding periods,

or market conditions change, our evaluation of impairment losses may be different and such differences could be material to our

consolidated financial statements.

The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions

regarding future occupancy, rental rates and capital requirements that could differ materially from actual results.

We have capitalized land, which is not subject to depreciation.

Revenue recognition

Effective on January 1, 2018, we adopted

the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) 2014-09 and

Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”).

ASU 2014-09, as amended by subsequent ASUs on the topic, establishes a single comprehensive model for entities to use in accounting

for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance.

This standard

requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects

the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain

additional disclosures.

We adopted this standard using the modified retrospective approach, which requires applying the new standard

to all existing contracts not yet completed as of the effective date and recording a cumulative-effect adjustment to retained earnings

as of the beginning of the fiscal year of adoption.

The adoption of ASU 2014-09 did not have any impact on the process for, timing

of, and presentation and disclosure of revenue recognition from contracts with tenants.

Rental income includes base rents that

each tenant pays in accordance with the terms of its respective lease and is reported on a straight-line basis over the non-cancellable

term of the lease, which includes the effects of rent abatements under the leases.

We commence rental revenue recognition when

the tenant takes possession of the leased space or controls the physical use of the leased space and the leased space is substantially

ready for its intended use.

Revenues from advisory services is recognized

when the Company performs services pursuant to its agreements with customers and collectability is reasonably assured.

Stock-based compensation

Stock-based compensation is accounted for

based on the requirements of ASC 718 –

“Compensation –Stock Compensation ”, which requires recognition

in the financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity

instruments over the period the employee, director , or non-employee is required to perform the services in exchange for the award

(presumptively, the vesting period).

The ASC also requires measurement of the cost of employee, director, and non-employee services

received in exchange for an award based on the grant-date fair value of the award.

The Company has elected to recognize forfeitures

as they occur as permitted under ASU 2016-09 Improvements to Employee Share-Based Payment .

Recent Accounting Pronouncements

Effective January 1, 2019, we adopted ASU

2016-02, “

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation

of the unaudited condensed consolidated financial statements.

properties are carried at cost less accumulated depreciation and amortization.

Betterments, major renovations and certain costs

directly related to the improvement of rental properties are capitalized.

Maintenance and repair expenses are charged to expense

Depreciation is recognized on a straight-line basis over estimated useful lives of the assets, which range from 5

Tenant improvements are amortized on a straight-line basis over the lives of the related leases, which approximate

the useful lives of the assets.

the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, identified

intangibles, such as acquired above-market leases and acquired in-place leases) and acquired liabilities (such as acquired below-market

leases) and allocate the purchase price based on these assessments.

The Company assesses fair value based on estimated cash flow

projections that utilize appropriate discount and capitalization rates and available market information.

Estimates of future cash

flows are based on a number of factors including historical operating results, known trends, and market/economic conditions.

properties are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount

of an asset may not be recoverable.

An impairment exists when the carrying amount of an asset exceeds the aggregate projected

future cash flows over the anticipated holding period on an undiscounted basis.

An impairment loss is measured based on the excess

of the property’s carrying amount over its estimated fair value.

Impairment analyses are based on our current plans, intended

holding periods and available market information at the time the analyses are prepared.

If our estimates of the projected future

cash flows, anticipated holding periods, or market conditions change, our evaluation of impairment losses may be different and

such differences could be material to our consolidated financial statements.

The evaluation of anticipated cash flows is subjective

and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially

from actual results.

have capitalized land, which is not subject to depreciation.

on January 1, 2018, we adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update

(“ASU”) 2014-09 and Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with

Customers (“ASC 606”).

ASU 2014-09, as amended by subsequent ASUs on the topic, establishes a single comprehensive

model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing

revenue recognition guidance.

This standard requires an entity to recognize revenue to depict the transfer of promised goods or

services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for

those goods or services and also requires certain additional disclosures.

We adopted this standard using the modified retrospective

approach, which requires applying the new standard to all existing contracts not yet completed as of the effective date and recording

a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.

The adoption of ASU 2014-09

did not have any impact on the process for, timing of, and presentation and disclosure of revenue recognition from contracts with

income includes base rents that each tenant pays in accordance with the terms of its respective lease and is reported on a straight-line

basis over the non-cancellable term of the lease, which includes the effects of rent abatements under the leases.

rental revenue recognition when the tenant takes possession of the leased space or controls the physical use of the leased space

and the leased space is substantially ready for its intended use.

from advisory services is recognized when the Company performs services pursuant to its agreements with customers and collectability

is reasonably assured.

compensation is accounted for based on the requirements of ASC 718 –

“Compensation –Stock Compensation ”,

which requires recognition in the financial statements of the cost of employee, director, and non-employee services received in

exchange for an award of equity instruments over the period the employee, director , or non-employee is required to perform the

services in exchange for the award (presumptively, the vesting period).

The ASC also requires measurement of the cost of employee,

director, and non-employee services received in exchange for an award based on the grant-date fair value of the award.

has elected to recognize forfeitures as they occur as permitted under ASU 2016-09 Improvements to Employee Share-Based Payment .

Accounting Pronouncements

January 1, 2019, we adopted ASU 2016-02, “

Leases (Topic 842)”

using a modified retrospective method.

On adoption we also applied the package

of practical expedients to leases, where we are the lessee or lessor, that commenced before the effective date whereby we elected

to not reassess the following:

we also applied the package of practical expedients to leases, where we are the lessee or lessor, that commenced before the effective

date whereby we elected to not reassess the following:

(i) whether any expired or existing contracts contain leases;

(ii) the lease classification for

any expired or existing leases;

lease classification for any expired or existing leases;

and (iii) initial direct costs for any existing leases.

ASU 2016-02, “

2016-02, “

Leases (Topic 842)”

sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract

(i.e., lessees and lessors).

The new standard requires lessees to apply a dual approach, classifying leases as either finance or

operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

This classification

will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term

of the lease.

A lessee is also required to recognize a right-of-use asset and a lease liability for all leases with a term of greater

than 12 months regardless of their classification.

Leases with a term of 12 months or less will be accounted for similar to existing

guidance for operating leases today.

The new standard requires lessors to account for leases using an approach that is substantially

equivalent to existing guidance for sales-type leases, direct financing leases and operating leases.

For contracts entered into on or after

the effective date, where we are the lessee, at the inception of a contract the Company assess whether the contract is, or contains,

sets out the principles for the recognition, measurement, presentation and disclosure

of leases for both parties to a contract (i.e., lessees and lessors).

The new standard requires lessees to apply a dual approach,

classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed

purchase by the lessee.

This classification will determine whether lease expense is recognized based on an effective interest

method or on a straight-line basis over the term of the lease.

A lessee is also required to recognize a right-of-use asset and

a lease liability for all leases with a term of greater than 12 months regardless of their classification.

Leases with a term

of 12 months or less will be accounted for similar to existing guidance for operating leases today.

The new standard requires

lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct

financing leases and operating leases.

contracts entered into on or after the effective date, where we are the lessee, at the inception of a contract the Company assess

whether the contract is, or contains, a lease.

Our assessment is based on:

(1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain

the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the

right to direct the use of the asset.

We allocate the consideration in the contract to each lease component based on its relative

stand-alone price to determine the lease payments.

Leases entered into prior to January 1, 2019, are accounted for under ASC 840

and were not reassessed.

For leases entered into on or after the

effective date, where we are the lessor, at the inception of the contract we assess whether the contract is a sales-type, direct

financing or operating lease by reviewing the terms of the lease and determining if the lessee obtains control of the underlying

asset implicitly or explicitly.

If a change to a pre-existing lease occurs,

we evaluate if the modification results in a separate new lease or a modified lease.

A new lease results when a modification provides

additional right of use.

The new lease or modified lease is then reassessed to determine its classification based on the modified

The adoption of ASU 2016-02 did not have

a material impact on the operating leases where we are the lessor.

We will continue to record revenues from rental properties for

our operating leases on a straight-line basis.

For leases where we are a lessee, primarily for our administrative office lease,

we analyzed if it would be required to record a lease liability and a right of use asset on our consolidated balance sheets at

fair value upon adoption of ASU 2016-02.

Since the terms of the Company’s operating lease for its office space is 12 months

or less, pursuant to ASC 842, we determined that the lease meets the definition of a short-term lease and we did not recognize

the right-of use asset and lease liability arising from this lease.

Recent Accounting Pronouncements

Management does not believe that any other

recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying

consolidated financial statements.

Quantitative and Qualitative

Disclosures about Market Risk

Not applicable to smaller reporting companies.

(1) whether the contract involves the use of a distinct

identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout

the period, and (3) whether we have the right to direct the use of the asset.

We allocate the consideration in the contract to

each lease component based on its relative stand-alone price to determine the lease payments.

Leases entered into prior to January

1, 2019, are accounted for under ASC 840 and were not reassessed.

leases entered into on or after the effective date, where we are the lessor, at the inception of the contract we assess whether

the contract is a sales-type, direct financing or operating lease by reviewing the terms of the lease and determining if the lessee

obtains control of the underlying asset implicitly or explicitly.

a change to a pre-existing lease occurs, we evaluate if the modification results in a separate new lease or a modified lease.

A new lease results when a modification provides additional right of use.

The new lease or modified lease is then reassessed to

determine its classification based on the modified terms.

adoption of ASU 2016-02 did not have a material impact on the operating leases where we are the lessor.

We will continue to record

revenues from rental properties for our operating leases on a straight-line basis.

For leases where we are a lessee, primarily

for our administrative office lease, we analyzed if it would be required to record a lease liability and a right of use asset

on our consolidated balance sheets at fair value upon adoption of ASU 2016-02.

Since the terms of the Company’s operating

lease for its office space is 12 months or less, pursuant to ASC 842, we determined that the lease meets the definition of a short-term

lease and we did not recognize the right-of use asset and lease liability arising from this lease.

Accounting Pronouncements

does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material

effect on the accompanying consolidated financial statements.

Quantitative and Qualitative Disclosures about Market Risk

applicable to smaller reporting companies.

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

What changed 10-Q

Item 1. Financial Statements