What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-13 compared with 2020-11-12 · 867 added, 820 removed, 773 unchanged (69% of the section changed)

Financial Statements

PROPERTIES, INC.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

CONDENSED 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 (Note 9)

STOCKHOLDERS’

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)

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

2,000,000 shares issued and outstanding at March 31, 2021 and December 31, 2020 ($1.00 per share liquidation preference)

Common stock:

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

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

2020 and December 31, 2019, respectively

paid-in capital

12,141,548 and 12,011,548 issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated deficit

(15,004,383 )

(14,933,048 )

Stockholders’

Liabilities and Stockholders’

Total Stockholders’

Total Liabilities and Stockholders’

accompanying notes to unaudited condensed consolidated financial statements.

PROPERTIES, INC.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months

For the Nine Months

and administrative expenses

and amortization

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

Rental revenues

Advisory revenues

Total revenues

OPERATING EXPENSES:

Compensation and benefits

Professional fees

General and administrative expenses

Real estate taxes

Total operating expenses

LOSS FROM OPERATIONS

(EXPENSES) INCOME:

expenses - related party

other (expenses) income, net

OTHER (EXPENSES) INCOME:

Interest expenses

Interest expenses - related party

Interest income

Total other expenses, net

LOSS BEFORE INCOME TAXES

FOR INCOME TAXES

INCOME (LOSS)

INCOME (LOSS) PER COMMON SHARE:

AVERAGE COMMON SHARES OUTSTANDING:

PROVISION FOR INCOME TAXES

NET LOSS PER COMMON SHARE:

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

accompanying notes to unaudited condensed consolidated financial statements.

PROPERTIES, INC.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

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

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

Preferred Stock

Stockholders’

December 31, 2019

$ (14,854,710 )

stock issued for services

of stock based compensation related to stock options issued

March 31, 2020

(14,951,480 )

of stock based compensation related to stock options issued

June 30, 2020

Balance, December 31, 2019

$ (14,854,710 )

of stock based compensation related to stock options issued

September 30, 2020

Common stock issued for services

Accretion of stock-based compensation related to stock options issued

Balance, March 31, 2020

$ (14,951,480 )

Preferred Stock

Stockholders’

December 31, 2018

$ (14,842,429 )

redemption and cencellation

stock issued for services

of stock based compensation related to stock options issued

March 31, 2019

(14,849,216 )

of stock based compensation related to stock options issued

June 30, 2019

Balance, December 31, 2020

$ (14,933,048 )

of stock based compensation related to stock options issued

September 30, 2019

Common stock issued for services

Accretion of stock-based compensation related to stock options issued

Balance, March 31, 2021

(15,004,383 )

accompanying notes to unaudited condensed consolidated financial statements.

PROPERTIES, INC.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net loss 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

Purchase of rental property improvements

NET CASH USED IN INVESTING ACTIVITIES

NET INCREASE (DECREASE) IN CASH

CASH, beginning of period

CASH, end of period

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest paid

accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

ORGANIZATION AND NATURE OF OPERATIONS

15 unchanged sentences

Company has the following wholly owned subsidiaries:

Gilbert Property

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

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

Chino Valley Properties,

14 unchanged sentences

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

The Company is 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 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

changes to its operations from COVID-19.

The Company’s 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 the Company does not anticipate an impact on its operations, it cannot

estimate the duration of the pandemic and potential impact on its 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 the Company’s business, including weakened demand for its 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.

Zoned Properties

Brokerage, LLC.

(“Zoned Brokerage”) State of Arizona on March 17, 2021.

ZP Data Platform

(“ZP Data”) State of Arizona on April 14, 2021.

In March 2020, the World Health Organization declared

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

The Company is 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 the Company’s portfolio

are open to its Significant Tenants and their customers and have remained open pursuant to state and local government requirements.

this time, the Company does not foresee any material changes to its operations from COVID-19.

The Company’s 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 the Company does not anticipate an impact

on its operations, it cannot estimate the duration of the pandemic and potential impact on its 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 the Company’s business, including weakened demand for its 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.

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of presentation and principles of consolidation

accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles

generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly

owned subsidiaries.

accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally

accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries.

All intercompany balances and transactions have been eliminated upon consolidation.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 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.

unaudited condensed consolidated financial statements for the three months ended March 31, 2021 and 2020 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 our consolidated financial position, results of operations,

and cash flows as of March 31, 2021 and 2020, 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

and notes necessary for a comprehensive presentation of our consolidated financial position and consolidated results of operations

and should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2019 included

in our Annual Report on form 10-K filed with the SEC on March 26, 2020.

January 1, 2019, the Company and certain beneficial shareholders entered into a Stock Redemption Agreement.

Pursuant to SEC rules,

each of these beneficial shareholders was deemed to be a “related person”

due solely to their status as significant

stockholders of the Company.

Pursuant to the terms of the Stock Redemption Agreement, these beneficial shareholders would no longer

be significant stockholders of the Company and are no longer deemed to be “related persons”

under SEC rules.

as of January 1, 2019, the Company no longer reflects transactions and balances related to these beneficial shareholders as related

party transactions.

preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates

and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities

at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

and notes necessary for a comprehensive presentation of our financial position and results of operations and should be read in

conjunction with the audited financial statements of the Company for the year ended December 31, 2020 included in our Annual Report

on Form 10-K filed with the SEC on March 31, 2021.

preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions

that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of

the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Actual results could differ from those estimates.

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

Significant estimates for the three months ended March 31, 2021 and 2020 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

1 unchanged sentence

and uncertainties

Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks

including the potential risk of business failure.

The Company’s operations are subject to

risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure.

The Company conducts a significant portion of its business in Arizona.

Additionally,

the Company’s tenants operate in the medical marijuana industry.

Consequently, any significant economic downturn in the

Arizona market or any changes in the federal government’s enforcement of current federal laws or changes in state laws could

potentially have a negative effect on the Company’s business, results of operations and financial condition.

Additionally,

substantially all of the Company’s real estate properties are leased under triple-net leases to tenants that are controlled

by one entity (each, a “Significant Tenant”

and collectively, the “Significant Tenants”).

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).

Additionally, the Company’s tenants operate in the medical

marijuana industry.

Consequently, any significant economic downturn in the Arizona market or any changes in the federal government’s

enforcement of current federal laws or changes in state laws could potentially have a negative effect on the Company’s business,

results of operations and financial condition.

Additionally, substantially all of the Company’s real estate properties are leased

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

and collectively, the “Significant

Tenants”).

For the three months ended March 31, 2021 and 2020, rental and advisory revenue associated with the Significant Tenants

amounted to $296,480 and $286,903, respectively, which represents 85.7% and 94.4% of the Company’s total revenues, respectively

(see Note 3).

value of financial instruments

carrying amounts reported in the unaudited condensed consolidated balance sheets for cash, accounts receivable, prepaid expenses

and other assets, accounts payable, accrued expenses, and other payables approximate their fair market value based on the short-term

maturity of these instruments.

carrying amounts reported in the condensed consolidated balance sheets for cash, accounts receivable, prepaid expenses and other

assets, accounts payable, accrued expenses, and other payables approximate their fair market value based on the short-term maturity

of these instruments.

The carrying amount of the convertible note receivable approximates fair value based on the current interest

rates for instruments with similar characteristics.

Company analyzes all financial instruments with features of both liabilities and equity under the Financial Accounting Standard

4 unchanged sentences

with Accounting Standards Codification (“ASC”) Topic 820.

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

is carried at cost and represents cash on hand, demand deposits placed with banks or other financial institutions and all highly

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

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

had no cash equivalents on March 31, 2021 and December 31, 2020.

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.

On March 31, 2021 and December 31, 2020, the Company had approximately $507,000

and $449,000, respectively, of cash in excess of FDIC limits of $250,000.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries.

The allowance is based on an analysis of historical bad debt experience, current receivables aging and expected future write-offs,

as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible.

The expense associated

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

For the nine months ended September

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

and convertible notes receivable

Company recognizes an allowance for losses on accounts and notes receivable in an amount equal to the estimated probable losses

net of recoveries.

The allowance is based on an analysis of historical bad debt experience, current receivables aging and expected

future write-offs, as well as an assessment of specific identifiable customer accounts and notes receivable considered at risk

or uncollectible.

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

For the three months ended March 31, 2021 and 2020, the Company did not record any allowances for doubtful accounts.

properties are carried at cost, less accumulated depreciation and amortization.

20 unchanged sentences

the Company’s estimates of the projected future cash flows, anticipated holding periods, or market conditions change, the

Company’s evaluation of impairment losses may be different and such differences could be material to its consolidated financial

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.

For the nine months ended September 30,

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

Company’s evaluation of impairment losses may be different and such differences could be material to its condensed 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.

For the three months ended

March 31, 2021 and 2020, the Company did not record any impairment losses.

Company has capitalized land, which is not subject to depreciation.

and equipment

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

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.

The Company 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.

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.

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.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

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.

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

(“ASC 606”).

This standard 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.

ASC 606 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.

income includes base rents that each tenant pays in accordance with the terms of its respective lease and is reported on a straight-line

7 unchanged sentences

and the related property tax expense reflected separately on the statements of operations.

below for the adoption of ASU 2016-02, “Leases (Topic 842)”

and its impact on our consolidated financial statements

upon adoption.

from advisory services is recognized when the Company performs services pursuant to its agreements with clients and collectability

is reasonably assured.

and diluted (loss) income per share

and diluted income (loss) per share

(loss) income per share is computed by dividing net (loss) income available to common shareholders by the weighted average number

13 unchanged sentences

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 nine months ended September 30, 2020 and 2019.

be anti-dilutive for the three months ended March 31, 2021 and 2020.

Convertible debt

2 unchanged sentences

The Company has determined that its properties have similar economic

characteristics to be aggregated into one reportable segment (operating, leasing and managing commercial properties).

The Company’s

determination was based primarily on its method of internal reporting.

characteristics to be aggregated into one reportable segment (operating, leasing and managing commercial properties, and advisory

services related to commercial properties).

The Company’s determination was based primarily on its method of internal reporting.

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

income tax assets and liabilities arise from temporary differences between the financial statements and tax basis of assets and

12 unchanged sentences

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.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 .

positions as of March 31, 2021 and December 31, 2020 that would require either recognition or disclosure in the accompanying condensed

consolidated financial statements.

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 Accounting

Standards Update (“ASU”) 2016-09 Improvements to Employee Share-Based

adopted accounting pronouncements

January 1, 2019, the Company adopted ASU 2016-02, “

Leases (Topic 842)”

using a modified retrospective method.

On adoption the Company also applied the package of practical expedients to leases, where the Company is the lessee or lessor,

that commenced before the effective date whereby the Company 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;

and (iii) initial direct

costs for any existing leases.

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.

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.

leases entered into on or after the effective date, where we are the lessor, at the inception of the contract the Company 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.

As disclosed in Note 3, on January 1, 2019, the Chino Valley lease was

modified to increase the monthly base rent from $35,000 to $40,000.

Additionally, on May 31, 2020, the Chino Valley lease was

modified to decrease the monthly base rent from $40,000 to $32,800 and the Tempe lease was modified to increase the monthly base

rent from $33,500 to $49,200.

At the commencement of the modified terms, the Company reassessed its lease classification and concluded

it remained properly classified as an operating lease.

adoption of ASU 2016-02 did not have a material impact on the operating leases where the Company is a lessor.

The Company will

continue to record revenues from rental properties for its operating leases on a straight-line basis.

Any revenue on the straight-line

basis exceeding the monthly payment amount required on the operating lease is reflected as a deferred rent receivable.

May 31, 2020, the Company amended its leases for which it is the lessor on its Chino Valley, Tempe, Kingman and Green Valley properties.

The amendments resulted in an abatement of rent for the months of June and July 2020.

This rent abatement resulted in a deferred

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

would be required to record a lease liability and a right of use asset on its condensed 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, the Company determined that the lease meets the definition of a short-term lease and the Company did not

recognize a right-of use asset and lease liability arising from this lease.

June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses

on Financial Instruments”

(“ASU 2016-13”).

ASU 2016-13 requires financial assets measured at amortized cost

to be presented at the net amount expected to be collected.

The measurement of expected credit losses is based on relevant information

about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the

collectability of the reported amounts.

An entity must use judgment in determining the relevant information and estimation methods

that are appropriate in its circumstances.

ASU 2016-13 is effective for annual reporting periods beginning after December 15,

2019, including interim periods within those fiscal years, and a modified retrospective approach is required, with a cumulative-effect

adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.

of 2019, the FASB issued ASU 2019-10, which delayed the implementation of ASU 2016-13 to fiscal years beginning after December

15, 2022 for smaller reporting companies which applies to the Company.

The Company is currently evaluating the impact of ASU 2016-13

on its future consolidated financial statements.

issued accounting pronouncements

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AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

CONCENTRATIONS AND RISKS

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the base rent which would have been earned after termination for the balance of the term.

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

May 1, 2018, Zoned Arizona and CJK, Inc.

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

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 September 30, 2020

consists of the following:

annual base rent:

(remainder of year)

and advisory revenue and receivable –Significant Tenants

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.

of March 31, 2021 and December 31, 2020, security deposits payable to the Significant Tenants amounted to $71,800 in both periods.

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.

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

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

minimum lease payments primarily consist of minimum base rent payments from Significant Tenants and the Commercial Lease Agreement

executed by Gilbert.

Future minimum lease payments to be received, on all leased properties, for each of the five succeeding calendar

years and thereafter as of March 31, 2021 consists of the following:

Future annual base rent:

2021 (remainder of year)

and advisory revenue and receivable –Significant Tenants

the three months ended March 31, 2021 and 2020, rental and advisory revenue with the Significant Tenants described above amounted

to $296,480 and $286,903, which represents 85.7% and 94.4% of the Company’s total revenues, respectively.

March 31, 2021 and December 31, 2020, accounts receivable from advisory services provided to the Significant Tenants amounted

to $3,562 and $2,375, respectively.

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

Further, as of March 31, 2021 and December 31, 2020 a deferred rent receivable of $171,510

and $173,757 is due from Significant Tenants due to the abatement of rent in the months of June and July 2020 under the amendments

executed effective May 31, 2020 discussed above, respectively.

concentration

majority of the Company’s real estate properties are leased to the Significant Tenant under triple-net leases that terminate

majority of the Company’s real estate properties are leased to the Significant Tenants under triple-net leases that terminate

in April 2040.

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

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.

of March 31, 2021 and December 31, 2020, the Company had an asset concentration related to the Significant Tenants.

31, 2021 and December 31, 2020, the Significant Tenants represented approximately 81.9% and 83.2% of the Company’s total

assets, respectively.

Through March 31, 2021, all rental payments have been made on a timely basis.

As of March 31, 2021, 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

May 1, 2018, the Company entered into that certain Confidential Advisory Services Agreement by and between the Company and Broken

Arrow (the “Broken Arrow CASA”), with a term expiring on April 30, 2040, unless earlier terminated as provided in

the Broken Arrow CASA.

Additionally, on May 1, 2018, the Company entered into that certain Confidential Advisory Services Agreement

by and between the Company and CJK (the “CJK CASA”), with a term expiring on April 30, 2040, unless earlier terminated

as provided in the CJK CASA.

These Agreements may be terminated prior to the expiration of the Term upon the occurrence of any

of the following:

(a) by the Company for any reason at any time upon thirty calendar days’

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;

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

the First Amendment to Confidential Advisory Services Agreement (the “Broken Arrow CASA Amendment”).

The Broken Arrow

CASA Amendment amended the Broken Arrow CASA to (i) reduce the gross revenue fee payable by Broken Arrow from 10% to 0%, and (ii)

add a $250 hourly advisory fee payable by Broken Arrow.

Except as set forth herein, the terms of the Broken Arrow CASA remain

in full force and effect.

January 1, 2019, as part of the Stock Redemption Agreement, the Company, on behalf of Zoned Arizona, and CJK entered into the

First Amendment to Confidential Advisory Services Agreement (the “CJK CASA Amendment”).

The CJK CASA Amendment amended

the CJK CASA to (i) reduce the gross revenue fee payable by CJK from 10% to 0%, and (ii) add a $250 hourly advisory fee payable

Except as set forth herein, the terms of the CJK CASA remain in full force and effect.

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

Agreement (See Note 6).

RENTAL PROPERTIES

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

September 30,

and building improvements

properties, at cost

March 31, 2021 and December 31, 2020, rental properties, net consisted of the following:

Building and building improvements

Rental properties, at cost

accumulated depreciation

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

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

Rental properties, net

the three months ended March 31, 2021 and 2020, depreciation of rental properties amounted to $89,297 and $89,041, respectively.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

CONVERTIBLE NOTE RECEIVABLE

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elapsed and shall be payable annually due by the first day of each calendar anniversary following the Issuance Date.

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

However, if KCB elects

to prepay the KCB Debenture prior to the Maturity Date or prior to any conversion as provided in the KCB Debenture in whole or

in part, the Company 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.

KCB may prepay

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

However, if KCB elects to prepay

the KCB Debenture prior to the Maturity Date or prior to any conversion as provided in the KCB Debenture in whole or in part,

the Company 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.

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

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

February 19, 2021 (the “Amendment Date”), the Company made an additional investment of $100,000 into KCB (the “Additional

Investment”).

In exchange, KCB issued to the Company an amended and restated convertible debenture (the “A&R Debenture”)

on the Amendment Date.

The A&R Debenture amends and restates in its entirety the KCB Debenture.

Pursuant to the A&R Debenture,

the Company and KCB agreed to certain new terms that did not exist in the KCB Debenture, which are described below.

Accrual Commencement :

Pursuant to the A&R Debenture, interest on the Initial Investment begins accruing as of March

19, 2020, while interest on the Additional Investment begins accruing on February 19, 2021.

In the A&R Debenture, the parties acknowledge that each time that KCB sells one of its franchise locations,

KCB earns a fee (an “Initial Fee”), and that KCB also earns a fee when one of its franchise locations renews its

franchise with KCB (a “Renewal Fee”).

Pursuant to the A&R Debenture, the Company and KCB agreed that, as additional

consideration for the Additional Investment, KCB will pay to the Company, in perpetuity, 5% of any Initial Fee received by

KCB after the Amendment Date, as well as 5% of any Renewal Fee received by KCB related to any franchise locations sold after

the Amendment Date, in each case to be paid within five (5) days of receipt of KCB thereof.

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

addition, following the Amendment Date, KCB agreed not to decrease the amount it charges its franchise locations for an Initial

Fee or any Renewal Fee as in effect on the Amendment Date without the prior written consent of the Company, or to take any other

actions that would reduce the value of KCB’s obligation to the Company with respect to these franchise fee payments.

obligation to pay the Company the franchise fees listed above will survive any termination, repayment or conversion of the A&R

Failure by KCB to pay the Company the franchise fees in the manner described above will result in an event of default,

and, among other things, any due and unpaid franchise fees will accrue interest at 12% per year from the date the obligation was

from the terms described above, the terms of the A&R Debenture are substantially identical to the terms of the KCB Debenture.

convertible note receivable has been accounted for at amortized cost and is evaluated for collectability at each reporting date.

As of March 31, 2021 and December 31, 2020, an allowance was not deemed necessary.

March 31, 2021, convertible note receivable and interest receivable amounted to $200,000 and $962, respectively.

On December 31,

2020, convertible note receivable and interest receivable amounted to $100,000 and $5,129, 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.

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.

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

of March 31, 2021 and December 31, 2020, the principal balance due under the Abrams Debenture is $2,000,000.

of March 31, 2021 and December 31, 2020, accrued interest payable due under the Abrams Debenture was $30,000 which is included

in accrued expenses on the accompanying condensed consolidated balance sheets.

the three months ended March 31, 2021 and 2020, interest expense related to the Abrams Debenture amounted to $30,000.

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

RELATED PARTY TRANSACTION

notes payable –

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in the McLaren Debenture and proceed to enforce the

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,

of March 31, 2021 and December 31, 2020, the principal balance due under the McLaren Debenture is $20,000.

of March 31, 2021 and December 31, 2020, accrued interest payable due under the McLaren Debenture was $4,500 and $4,200, respectively,

which is included in accrued expenses –

related party on the accompanying unaudited condensed consolidated balance sheets.

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

related party amounted to $300.

For the nine months

ended September 30, 2020 and 2019, interest expense –

related party amounted to $900.

related party on the accompanying condensed consolidated balance sheets.

the three months ended March 31, 2021 and 2020, interest expense –

related parties amounted to $300.

STOCKHOLDERS’

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will be entitled to receive $1.00 per share plus redemption provision before assets distributed to other shareholders.

holders of the shares of preferred stock are entitled to dividends equal to common share dividends.

Once any shares of preferred

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

Alter or change

the rights, preferences or privileges of the preferred stock.

of the shares are entitled to dividends equal to common share dividends.

Once any shares of Preferred 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.

Create any new class

of stock having preferences over the Preferred Stock.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Repurchase any of

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

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

Common stock issued for services

January 14, 2019, the Company issued an aggregate of 100,000 shares of common stock to the members of the Company’s board

of directors for services rendered.

The shares were valued at their fair value of $31,100 using the quoted share price on the

date of grant of $0.311 per common share.

January 6, 2020, the Company issued an aggregate of 110,000 shares of common stock to members of the Company’s board of

directors for services rendered.

The shares were valued at their aggregate fair value of $24,200 using the quoted per share price

on the date of grant of $0.22.

In connection with these grants, in January 2020, the Company recorded stock-based compensation

expense of $31,100 which is included in compensation and benefits on the unaudited condensed consolidated statements of operations.

expense of $24,200 which is included in compensation and benefits on the condensed consolidated statements of operations.

January 31, 2021, the Company issued an aggregate of 130,000 shares of common stock to members of the Company’s board of

3 unchanged sentences

In connection with these grants, in January 2021, the Company recorded stock-based compensation

expense of $24,200 which is included in compensation and benefits on the unaudited condensed consolidated statements of operations.

expense of $52,000 which is included in compensation and benefits on the condensed consolidated statements of operations.

Equity incentive plans

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

As of December 31,

As of March 31, 2021,

200,000 stock option awards are outstanding and 100,000 options are exercisable under the 2016 Plan.

As of September 30, 2020,

As of December 31, 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.

As of March 31, 2021 and December

31, 2020, 9,800,000 and 9,925,000 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 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.

As of March 31, 2021 and December 31, 2020, options to purchase 1,250,000 shares

of common stock are outstanding and 1,150,000 options are exercisable pursuant to the 2014 Plan.

Stock options

January 6, 2020, the Company granted an employee an option, pursuant to the 2016 Plan, to purchase 125,000 of the Company’s

January 1, 2021, the Company granted a consultant an option, pursuant to the 2016 Plan, to purchase 125,000 of the Company’s

common stock at an exercise price of $1.00 per share.

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over the vesting period.

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.

the three months ended March 31, 2021 and 2020, in connection with the accretion of stock-based option expense, the Company recorded

stock-based compensation expense of $15,822 and $12,292, respectively.

As of March 31, 2021, there were 1,450,000 options outstanding

and 1,250,000 options vested and exercisable.

As of March 31, 2021, there was $63,017 of unvested stock-based compensation expense

to be recognized through December 2030.

The aggregate intrinsic value on March 31, 2021 was nil and was calculated based on the

difference between the quoted share price on March 31, 2021 of $0.625 and the exercise price of the underlying options.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

option activities for the three months ended March 31, 2021 are summarized as follows:

Weighted Average

Balance Outstanding December 31, 2020

Balance Outstanding March 31, 2021

Exercisable, March 31, 2021

Balance Non-vested at December 31, 2020

Vested during the period

Balance Non-vested at March 31, 2021

COMMITMENTS AND CONTINGENCIES

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In April 2016, the Company paid a refundable deposit of $45,000 into escrow in connection with

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

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 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

May 1, 2018, the Company entered into that certain Confidential Advisory Services Agreement by and between the Company and Broken

Arrow (the “Broken Arrow CASA”), with a term expiring on April 30, 2040, unless earlier terminated as provided in

the Broken Arrow CASA.

Additionally, on May 1, 2018, the Company entered into that certain Confidential Advisory Services Agreement

by and between the Company and CJK (the “CJK CASA”

and together with the Broken Arrow CASA, the “CASAs”),

with a term expiring on April 30, 2040, unless earlier terminated as provided in the CJK CASA.

The CASAs may be terminated prior

to the expiration of their respective term upon the occurrence of any of the following:

(a) by the Company for any reason at any

time upon thirty calendar days’

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

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.

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

of December 31, 2020.

In January 2021, the Parachute Agreement was mutually terminated, and the refundable deposit was returned

to the Company.

agreement and related purchase option

March 3, 2021, Gilbert entered into that certain Commercial Lease Agreement (the “Lease”), dated as of February 26,

2021, between Gilbert and AZ2CAL Enterprises, LLC (the “Tenant”).

Pursuant to the terms of the Lease, Gilbert agreed

to rent its vacant land in Gilbert, AZ (the “Property”) to the Tenant for a term of 24 months, from April 1, 2021

to March 31, 2023, for monthly rent of $2,750;

provided, however, that no rent is due for the month of April 2021.

pursuant to the terms of the Lease, the Tenant has an option to purchase the Property (the “Option”) that can be exercised

any time after the fourth month of the lease term, but no later than the end of the 12 th month of the lease term.

purchase price of the Property would be $335,000.

If the Tenant exercises its Option, $750 of each lease payment made prior to

close of escrow, along with the security deposit will be credited toward the purchase price of the Property.

If the Tenant exercises

its Option, close of escrow will occur no later than 30 days after opening of escrow.

The parties agreed to make every reasonable

attempt to fully execute a purchase contract within seven business days of the Tenant’s notice of its desire to exercise

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

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 March 31, 2021 and December 31, 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.

and Related Golden Parachute Agreement

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in any of the following circumstances:

immediately, if

McLaren dies;

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

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

purposes of the Golden Parachute Agreement, “Good Reason”

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

a material diminution

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

of the Company;

diminution in Mr.

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;

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

a material change

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

a material diminution

in the budget over which Mr.

diminution in the budget over which Mr.

McLaren retains authority;

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will be entitled to the following benefits:

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

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

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.

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’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.

Good Reason, Mr.

McLaren will be entitled to benefits provided below:

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notice of Termination given in respect of them.

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

The Company will

14 unchanged sentences

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

SUBSEQUENT EVENTS

On April 1, 2021, the Company’s subsidiary,

Zoned Brokerage, entered in an engagement letter for real estate brokerage services with a consultant for a guaranteed term of one year

(the “Guaranteed Term”).

During the Guaranteed Term, neither party may terminate the engagement letter, except for “Cause”

as defined in the engagement letter.

In connection with the engagement letter, the Company issued 60,000 shares of its common stock for

the acquisition of brokerage materials and active real estate listings.

In the event of termination of the engagement letter due to Cause

with respect to the consultant, the consultant must return to the Company a portion of the stock equal to the remaining portion of the

Guaranteed Term.

The shares were valued at their fair value of $37,800 using the quoted per share price on the date of grant of $0.63.

In connection with these shares, on April 1, 2021, the Company recorded an intangible asset of $37,800 which is amortized over the one-year

term of the engagement letter.

On April 22, 2021, ZP Data Platform 1 LLC, a wholly

owned subsidiary of the Company (“ZP Data”), entered into a Limited Liability Company Operating Agreement (the “Beakon

Operating Agreement”) with a non-affiliated joint venture partner in connection with the formation of Beakon, LLC (“Beakon”),

a Delaware limited liability company formed on April 16, 2021.

Beakon signed a licensing agreement for the licensing of a consumer data/marketing

software platform that Beakon will white-label for the cannabis industry.

Beakon’s goal is to develop and leverage the platform

to help drive foot traffic to brick and mortar retail (i.e.

dispensaries), and thus enhance the value of the real estate and mitigate

Pursuant to the Beakon Operating Agreement, ZP Data purchased 50 units of Beakon for $50, which represent 50% of the membership

interests of Beakon.

Each unit represents, with respect to any member, such member’s:

(i) interest in Beakon’s capital, (ii)

share of Beakon’s net profits and net losses (and specially allocated items of income, gain, and deduction), and the right to receive

distributions of net cash flow from Beakon, (iii) right to inspect Beakon’s books and records, and (iv) right to participate in

the management of and vote on matters coming before the members as provided in the Beakon Operating Agreement.

The transactions discussed

above resulted in a joint venture, in accordance with ASC 323-10 –

Investments- Equity and Joint Ventures, between ZP Data

and the non-affiliated party.

Each of the entities has 50% equity ownership and voting rights, and joint control in Beakon.

account for its investment in Beakon under the equity method of accounting in accordance with ASC 323.

On April 28, 2021, the Company

contributed $50,000 to Beakon.

On May 1, 2021, the Company entered into a Limited

Liability Company Operating Agreement (the “Zoneomics Operating Agreement”) with a non-affiliated joint venture partner in

connection with the formation of Zoneomics Green, LLC (“Zoneomics Green”), a Delaware limited liability company formed on

Zoneomics Green’s goal is to utilize advanced property technology to provide solutions for property identification

in regulated industries such as regulated cannabis.

Pursuant to the Zoneomics Operating Agreement, the Company purchased 50 units of Zoneomics

Green for a capital contribution of $90,000, which represent 50% of the membership interests of Zoneomics Green.

Each unit represents,

with respect to any member, such member’s:

(i) interest in Zoneomics Green’s capital, (ii) share of Zoneomics Green’s

net profits and net losses (and specially allocated items of income, gain, and deduction), and the right to receive distributions of net

cash flow from Zoneomics Green, (iii) right to inspect Zoneomics Green’s books and records, and (iv) right to participate in the

management of and vote on matters coming before the members as provided in the Zoneomics Operating Agreement.

The transactions discussed

above resulted in a joint venture, in accordance with ASC 323-10 –

Investments- Equity and Joint Ventures, between the Company

and the non-affiliated party.

Each of the entities has 50% equity ownership and voting rights, and joint control in Zoneomics Green.

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

34 unchanged sentences

our annual report on Form 10-K as filed with the SEC on March 29, 2021.

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.

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

Zoned Properties is a strategic real estate development

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

positioning the company for real estate investments and revenue growth .

We intend to pioneer sustainable development for emerging

industries, including the regulated cannabis industry.

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

Green Building

Council, and the Forbes Real Estate Council.

We focus 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.

We provide development

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

We do 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.

are in the process of developing and expanding multiple business divisions;

including an advisory services division, a licensed

commercial real estate brokerage division, a real estate division focused on franchise services, a real estate division focused

on real estate data, 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.

We believe 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 assets and clients.

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

industries, including the regulated cannabis industry.

Within highly regulated industries, local municipalities typically develop

strict regulations, including zoning and permitting requirements related to commercial real estate, that dictate the specific

locations and parameters under which regulated properties can operate.

These regulations often include complex permitting processes

and can include non-standard codes governing each location;

for example, restricting a regulated property or facility from operating

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

operating outside a defined set of hours of operation.

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 months ended March 31, 2021 and 2020, 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.

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:

We currently lease land and/or building

space at all five of the properties in our portfolio.

Four of the properties are leased to licensed and regulated cannabis tenants

and are located in areas with established zoning and permitting procedures.

Two of the leased properties are zoned and permitted

as licensed and regulated cannabis dispensaries, and two of the leased properties are zoned and permitted as licensed and regulated

cannabis cultivation facilities.

Each regulated property may undergo a non-standard development process.

Various development requirements

in this process may include initial property identification, zoning authorization, and permitting guidance in order to qualify

a commercial property for subsequent architectural design, utility installation, construction and development, property management,

facilities management systems, and security system installation.

of March 31, 2021, a summary of rental properties owned by us consisted of the following:

Chino Valley,

Green Valley,

Mixed-use warehouse /office

Greenhouse/ Nursery

(special use)

Business Park

Medical Marijuana Cultivation Facility

Future Development

Medical Marijuana Dispensary

Date Acquired

Lease Start Date

Lease End Date

Land Area (Sq.

1 unchanged sentence

Rentable Building Sq.

rented as of September 30, 2020

(remainder per year)

Annual base rent

represents amount of cash payments due from tenants.

rented as of March 31, 2021

Base Rent *,**

(remainder of year)

Annual base rent represents amount of cash payments due from tenants.

For Tempe, AZ, table includes rental income generated from the

lease of parking lot space used by a third party as an antenna location.

$ 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.

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;

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.

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.”

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.

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.

Chino Valley,

Green Valley,

- rented vacant land only.

Supreme Court has ruled that it is the federal government that has the right to regulate and criminalize cannabis, even for

medical purposes.

Therefore, federal law criminalizing the use of marijuana preempts state laws that legalize its use for medicinal

federal government regulates drugs through the CSA, which places controlled substances, including cannabis, in a schedule.

Cannabis is classified as a Schedule I controlled substance.

A Schedule I controlled substance is defined as a substance

that has no currently accepted medical use in the United States, a lack of safety for use under medical supervision and a high

potential for abuse.

The DOJ defines Schedule I drugs, substances or chemicals as “drugs with no currently accepted medical

use and a high potential for abuse.”

However, the FDA has approved Epidiolex, which contains a purified form of the drug

CBD, a non-psychoactive ingredient in the cannabis plant, for the treatment of seizures associated with two epilepsy

The FDA has not approved cannabis or cannabis compounds as a safe and effective drug for any other condition.

pursuant to the Farm Bill, 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%.

Company maintains its operations to remain in compliance with the CSA.

Even in those jurisdictions in which the manufacture and

use of medical marijuana has been legalized at the state level, the possession, use and cultivation all remain violations of federal

law that are punishable by imprisonment and substantial fines, and the prescription of marijuana is a violation of federal law.

Moreover, individuals and entities may violate federal law if they intentionally aid and abet another in violating these federal

controlled substance laws or conspire with another to violate them.

inconsistencies between federal and state regulation of cannabis were addressed in the Cole Memo, which then-Deputy Attorney General

James Cole sent to all U.S.

District Attorneys in 2013 outlining certain priorities for the DOJ relating to the prosecution of

cannabis offenses.

The Cole Memo acknowledged that, notwithstanding the designation of cannabis as a Schedule I controlled substance

at the federal level, several states had enacted laws authorizing the use of cannabis for medical purposes.

The Cole Memo noted

that jurisdictions that have enacted laws legalizing cannabis in some form have also implemented strong and effective regulatory

and enforcement systems to control the cultivation, processing, distribution, sale, and possession of cannabis.

As such, conduct

in compliance with those laws and regulations is less likely to implicate the Cole Memo’s enforcement priorities.

did not provide (and has not provided since) specific guidelines for what regulatory and enforcement systems would be deemed sufficient

under the Cole Memo.

In light of limited investigative and prosecutorial resources, the Cole Memo concluded that the DOJ should

be focused on addressing only the most significant threats related to cannabis, such as distribution of cannabis from states where

cannabis is legal to those where cannabis is illegal, the diversion of cannabis revenues to illicit drug cartels and sales of

cannabis to minors.

January 4, 2018, former U.S.

Attorney General Jeff Sessions issued the Sessions Memo, which rescinded the Cole Memo.

Sessions Memo stated, in part, that current law reflects “Congress’

determination that cannabis is a dangerous drug

and cannabis activity is a serious crime,”

Sessions directed all U.S.

Attorneys to enforce the laws enacted

by Congress by following well-established principles when pursuing prosecutions related to cannabis activities.

The Company is

not aware of any prosecutions of investment companies doing routine business with licensed marijuana related businesses in light

of the DOJ position following issuance of the Sessions Memo.

However, there can be no assurance that the federal government will

not enforce federal laws relating to cannabis in the future.

As a result of the Sessions Memo, federal prosecutors are now free

to utilize their prosecutorial discretion to decide whether to prosecute cannabis activities, despite the existence of state-level

laws that may be inconsistent with federal prohibitions.

No direction was given to federal prosecutors in the Sessions Memo as

to the priority they should ascribe to such cannabis activities, and thus it is uncertain how active U.S.

federal prosecutors

will be in relation to such activities.

prosecutors appear to continue to use the Cole Memo’s priorities as an enforcement guide.

Merrick Garland, who became Attorney

General on March 10, 2021 has indicated that he would deprioritize enforcement of low-level cannabis crimes such

as possession and has shared his view that the government should focus on large-scale criminal enterprises that circumvent state

legalization laws instead of going after people who abide by local cannabis policies.

The Company believes it is too soon to determine

what prosecutorial effects will be created by the rescission of the Cole Memo or any replacement thereof and when or if the Sessions

Memo will be rescinded.

President Joseph R.

Biden, who assumed office in January 2021, has not yet indicated whether and when

he will decriminalize or legalize cannabis and has previously stated that he is opposed to legalization.

The sheer size of the

cannabis industry, in addition to participation by state and local governments and investors, suggests that a large-scale federal

enforcement operation would more than likely create unwanted political backlash for the DOJ and the current administration.

is also possible that the change of Congressional leadership in January 2021 could change the priorities of Congress and encourage

reconciliation of federal and state laws.

Regardless, at this time, cannabis remains a Schedule I controlled substance at

the federal level.

federal government has always reserved the right to enforce federal law regarding the sale and disbursement

of medical or adult use cannabis, even if state law authorizes such sale and disbursement.

It is unclear whether the risk of enforcement

has been altered.

legislative safeguard for the medical cannabis industry, appended to the federal budget bill, remains in place following the rescission

of the Cole Memo.

For fiscal years 2015, 2016, 2017 and 2018, Congress adopted the Rohrabacher-Blumenauer Amendment to prevent

the federal government from using congressionally appropriated funds to enforce federal cannabis laws against regulated medical

cannabis actors operating in compliance with state and local law.

The Rohrabacher-Blumenauer Amendment was included in the fiscal

year 2018 budget passed on March 23, 2018.

The Rohrabacher-Blumenauer Amendment was included in the consolidated appropriations

bill signed into legislation by former President Trump in February 2019.

In signing the Rohrabacher-Blumenauer Amendment, former

President Trump issued a signing statement noting that the Rohrabacher-Blumenauer Amendment “provides that the Department

of Justice may not use any funds to prevent implementation of medical marijuana laws by various States and territories,”

and further stating “I will treat this provision consistent with the President’s constitutional responsibility to

faithfully execute the laws of the United States.”

On June 20, 2019, the House approved a broader amendment that, in

addition to protecting state medical cannabis programs, would also protect state adult use programs.

On September 26, 2019,

the Senate Appropriations Committee declined to take up the broader amendment but did approve the Rohrabacher-Blumenauer Amendment

for the fiscal year 2020 spending bill.

On September 27, 2019, the Rohrabacher-Blumenauer Amendment was renewed as part of

a stopgap spending bill, in effect through November 21, 2019, and was then renewed through a series of stopgap spending bills

passed in 2020.

On December 27, 2020, the amendment was renewed through the signing of the fiscal year 2021 omnibus spending

bill, effective through September 30, 2021.

Despite the rescission of the Cole Memo, the DOJ appears to continue to adhere

to the enforcement priorities set forth in the Cole Memo.

Cole Memo and the Rohrabacher-Blumenauer Amendment gave licensed cannabis operators (particularly medical cannabis operators)

and investors in states with legal regimes greater certainty regarding the DOJ’s enforcement priorities and the risk of

operating cannabis businesses.

While the Sessions Memo has introduced some uncertainty regarding federal enforcement, the cannabis

industry continues to experience growth in legal medical and adult use markets across the United States.

Vice President Kamala

Harris is the lead sponsor of the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act, which seeks to end the federal

prohibition of marijuana, among other things, but in March 2020, it was reported that Vice President Harris has adopted the same

position as President Biden, who opposes legalization.

Currently, there is no guarantee that state laws legalizing and regulating

the sale and use of cannabis will remain in place or that local governmental authorities will not limit the applicability of state

laws within their respective jurisdictions.

Unless and until the U.S.

Congress amends the CSA with respect to cannabis (and as

to the timing or scope of any such potential amendments there can be no assurance), there is a risk that federal authorities may

enforce current U.S.

federal law criminalizing cannabis.

Supreme Court has ruled that it is the federal government that has the right to regulate and criminalize cannabis, and

federal law criminalizing the use of marijuana preempts state laws that legalize its use, cannabis is largely regulated at the

laws that permit and regulate the production, distribution and use of cannabis for adult use or medical purposes are in direct

conflict with the CSA, which makes cannabis use and possession federally illegal.

Although certain states and territories of the

authorize medical and/or adult use cannabis production and distribution by licensed or registered entities, under U.S.

law, the possession, use, cultivation and transfer of cannabis and any related drug paraphernalia is illegal, and any such acts

are criminal acts under federal law under any and all circumstances under the CSA.

Although the Company’s activities are

believed to be compliant with applicable state and local laws, strict compliance with state and local laws with respect to cannabis

may neither absolve the Company of liability under U.S.

federal law, nor may it provide a defense to any federal proceeding which

may be brought against the Company.

of December 31, 2020, 35 states, plus the District of Columbia (and the territories of Guam, Puerto Rico, the U.S.

Islands and the Northern Mariana Islands), have legalized the cultivation and sale of cannabis for medical purposes.

those states, the sale and possession of cannabis is legal for both medical and adult use, and the District of Columbia has legalized

adult use but not commercial sale.

In November 2020, voters in Arizona, Montana, New Jersey, and South Dakota voted by referendum

to legalize cannabis for adult use, and voters in Mississippi and South Dakota voted to legalized cannabis for medical use, and

in February 2021, the Virginia legislature approved a bill that would legalize cannabis for adult use beginning in 2024.

bill is awaiting signature by the governor, and if signed, Virginia will be the first southern state to legalize cannabis for

Also in February 2021, New Jersey Governor Phil Murphy signed three bills into law that legalize cannabis for adult

Company will focus heavily on the growth of a diversified revenue stream in 2021.

5 unchanged sentences

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 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.

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

year ended December 31, 2020 by $179,000.

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

our 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, 2022.

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.

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.

Currently, all of the properties in our portfolio are open to our

Significant Tenants and their customers and have remained open pursuant to state and local government requirements.

We did not experience

in 2020, and we do not foresee in 2021, 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’

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, we are unable to estimate the impact of this event on our 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,

The following comparative analysis on results

of operations was based primarily on the comparative unaudited 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 months ended March 31, 2021 and 2020, which are included elsewhere in this quarterly report on

The results discussed below are for the three months ended March 31, 2021 and 2020.

of Results of Operations for the Three Months ended March 31, 2021 and 2020

the three months ended March 31, 2021 and 2020, revenues consisted of the following:

Three Months Ended

Rent revenues

1 unchanged sentence

Total revenues

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

the three months ended March 31, 2021, total revenues amounted to $345,845, including Significant Tenants revenues of $296,480,

as compared to $303,869, including Significant Tenant revenues of $286,903, for the three months ended March 31, 2020, an increase

of $41,976, or 13.8%.

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%.

Substantially all of the Company’s real estate properties are

leased under triple-net leases to the Significant Tenants.

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,

This increase in revenues was primarily attributable to an increase in rent revenues from the Significant

Tenant of $23,702, or 9.0% and an increase in advisory revenues from third parties of $40,406 offset by a decrease in advisory

revenues from our Significant Tenant of $14,125, and a decrease in third party rental revenues of $8,007.

Substantially all of

the Company’s real estate properties are leased under triple-net leases to the Significant Tenants.

the three months ended March 31, 2021, operating expenses amounted to $389,213 as compared to $370,571 for the three months ended

March 31, 2020, an increase of $18,642, or 5.0%.

For the three months ended March 31, 2021 and 2020, operating expenses consisted

of the following:

Three Months Ended

Compensation and benefits

1 unchanged sentence

General and administrative expenses

Depreciation and amortization

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.

Real estate taxes

the three months ended March 31, 2021, compensation and benefit expense increased by $630, or 0.5%, as compared to the three

months ended March 31, 2020.

This increase was attributable to an increase in stock-based compensation of $31,330, offset

by a decrease in compensation and benefits of $30,700.

The increase in stock-based compensation related to an increase in

stock-based compensation from the accretion of stock option expense and an increase in the value of shares issued for services.

the three months ended March 31, 2021, professional fees increased by $23,007, or 32.2%, as compared to the three months ended

March 31, 2020.

This increase was primarily attributable to an increase in consulting fees of $22,229 and an increase in public

relations fees of $6,500 offset by a decrease in accounting fees of $242, a decrease in legal fees of $5,230, and a decrease

in other professional fees of $250.

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 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.

ended March 31, 2021, general and administrative expenses decreased by $5,618, or 9.8%, as compared to the three months ended

March 31, 2020.

This decrease was primarily attributable to a decrease in insurance expense of $2,377, a decrease in travel

expenses of $1,553, and a decrease in other general and administrative expense of $1,688.

the three months ended March 31, 2021, depreciation expense increased by $163, or less than 1%, as compared to the three months

ended March 31, 2020.

the three months ended March 31, 2021, real estate taxes increased by $460, or 2.2%, as compared to the three months ended

March 31, 2020.

from operations

a result of the factors described above, for the three months ended March 31, 2021, loss from operations amounted to $43,368 as

compared to loss from operations of $66,702 for the three months ended March 31, 2020, a decrease of $23,334, or 35.0%.

(expense) income

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

other income (expense).

For the three months ended March 31, 2021, total other expenses, net amounted to $27,967 as compared

to total other expenses, net of $30,068, respectively, representing a decrease of $2,101, or 7.0%.

This decrease was attributable

to an increase in interest income of $2,101 attributable to interest earned on the convertible note receivable.

a result of the foregoing, for the three months ended March 31, 2021 and 2020, net loss amounted to $71,335, or $(0.01) per common

share (basic and diluted), and $96,770, or $(0.01) per common share (basic and diluted), respectively.

and Capital Resources

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We had cash of $757,235

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

and $699,335 of cash as of March 31, 2021 and December 31, 2020, 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,

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

All funds received

have been expended in the furtherance of growing the business.

We receive funds from the collection of rental income and advisory

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

in working capital requirements to finance our current business,

Addition of administrative

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

February 19, 2021, we made an additional investment of $100,000 into KCB (the “Additional Investment”).

the KCB issued to the Company an amended and restated convertible debenture (the “A&R Debenture”) on the Amendment

The A&R Debenture amends and restates in its entirety the Original Debenture.

Pursuant to the A&R Debenture, the

Company and KCB agreed to certain new terms that did not exist in the Original Debenture, which are described below.

Accrual Commencement :

Pursuant to the A&R Debenture, interest on the Initial Investment begins accruing as of March

19, 2020, while interest on the Additional Investment begins accruing on February 19, 2021.

In the A&R Debenture, the parties acknowledge that each time that KCB sells one of its franchise locations,

KCB earns a fee (an “Initial Fee”), and that KCB also earns a fee when one of its franchise locations renews its

franchise with KCB (a “Renewal Fee”).

Pursuant to the A&R Debenture, the Company and KCB agreed that, as additional

consideration for the Additional Investment, KCB will pay to the Company, in perpetuity, 5% of any Initial Fee received by

KCB after the Amendment Date, as well as 5% of any Renewal Fee received by KCB related to any franchise locations sold after

the Amendment Date, in each case to be paid within five (5) days of receipt of KCB thereof.

addition, following the Amendment Date, KCB agreed not to decrease the amount it charges its franchise locations for an Initial

Fee or any Renewal Fee as in effect on the Amendment Date without the prior written consent of the Company, or to take any other

actions that would reduce the value of KCB’s obligation to the Company with respect to these franchise fee payments.

obligation to pay the Company the franchise fees listed above will survive any termination, repayment, or conversion of the A&R

Failure by KCB to pay the Company the franchise fees in the manner described above will result in an event of default,

and, among other things, any due and unpaid franchise fees will accrue interest at 12% per year from the date the obligation was

from the terms described above, the terms of the A&R Debenture are substantially identical to the terms of the Original Debenture.

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

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

As of September 30, 2020 and December

As of March 31, 2021 and December 31,

2020, 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.

As of March 31, 2021 and December 31, 2020, these

Significant Tenants represented approximately 81.9% and 83.2% 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 Exhibit 99.1 to our Annual Report on Form 10-K, as filed with the SEC on March 31, 2021, 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.

8 unchanged sentences

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.

the Three Months Ended March 31, 2021 and March 31, 2020

cash flow provided by operating activities was $165,035 for the three months ended March 31, 2021, as compared net cash flow provided

by operating activities of $98,625 for the three months ended March 31, 2020, representing an increase of $66,410.

cash flow provided by operating activities for the three months ended March 31, 2021 primarily reflected net loss of $71,335

adjusted for the add-back of non-cash items consisting of depreciation of $90,746, stock-based compensation expense of $52,000

and accretion of stock-based stock option expense of $15,822, offset by changes in operating assets and liabilities primarily

consisting of a decrease in prepaid expenses of $56,555 and an increase in accounts payable of $26,095.

cash flow provided by operating activities for the three months ended March 31, 2020 primarily reflected net loss of $96,770 adjusted

for the add-back of non-cash items consisting of depreciation and amortization of $90,584, stock-based compensation expense of

$24,200 and accretion of stock-based stock option expense of $12,292, offset by changes in operating assets and liabilities primarily

consisting of a decrease in prepaid expenses of $22,282, an increase in accounts payable of $19,728 and an increase in accrued

expenses of $25,696.

the three months ended March 31, 2021, net cash flow used in investing activities amounted to $107,135 as compared to $109,565,

a decrease of $2,430.

For the three months ended March 31, 2021, cash used in investing activities 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

For the three months ended March 31, 2020, net cash flow used in investing activities 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

Obligations and Off-Balance Sheet Arrangements

6 unchanged sentences

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

following tables summarize our contractual obligations as of March 31, 2021 (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

Payments Due by Period

Contractual obligations:

Convertible notes

Interest on convertible notes

Sheet Arrangements

6 unchanged sentences

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

Accounting Policies

Accounting Policies and Estimates

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

42 unchanged sentences

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

We follow the Financial Accounting Standards Board’s

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

This standard 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.

ASC 606 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.

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

commences 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.

the Company’s leases provide for payments with fixed monthly base rents over the term of the leases.

The leases also require

the tenant to remit estimated monthly payments to the Company for property taxes.

These payments are recorded as rental income

and the related property tax expense reflected separately on the statements of operations.

from advisory services is recognized when the Company performs services pursuant to its agreements with clients 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 .

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 Accounting Standards Update (“ASU”) 2016-09 Improvements to Employee Share-Based Payment Accounting.

Accounting Pronouncements

January 1, 2019, we adopted ASU 2016-02, “

Leases (Topic 842)”

using a modified retrospective method.

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;

lease classification for any expired or existing leases;

and (iii) initial direct costs for any existing leases.

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.

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.

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.

June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses

on Financial Instruments”

(“ASU 2016-13”).

ASU 2016-13 requires financial assets measured at amortized cost

to be presented at the net amount expected to be collected.

The measurement of expected credit losses is based on relevant information

about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the

collectability of the reported amounts.

An entity must use judgment in determining the relevant information and estimation methods

that are appropriate in its circumstances.

ASU 2016-13 is effective for annual reporting periods beginning after December 15,

2019, including interim periods within those fiscal years, and a modified retrospective approach is required, with a cumulative-effect

adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.

of 2019, the FASB issued ASU 2019-10, which delayed the implementation of ASU 2016-13 to fiscal years beginning after December

15, 2022 for smaller reporting companies which applies to the Company.

The Company is currently evaluating the impact of ASU 2016-13

on its future consolidated financial statements.

Accounting Pronouncements

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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