What changed in this filing

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Item 1. Financial Statements

2021-08-12 compared with 2021-05-13 · 967 added, 1424 removed, 216 unchanged (92% of the section changed)

9 unchanged sentences

Property and equipment, net

Intangible asset, net

Investment in joint ventures

Security deposits

LIABILITIES AND STOCKHOLDERS’

LIABILITIES AND STOCKHOLDERS’ EQUITY

Convertible note payable

7 unchanged sentences

Commitments and Contingencies (Note 11)

STOCKHOLDERS’

STOCKHOLDERS’ EQUITY:

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)

2,000,000 shares issued and outstanding at June 30, 2021 and December 31, 2020 ($ 1.00 per share liquidation preference)

Common stock:

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

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

12,201,548 and 12,011,548 issued and outstanding at June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

2 unchanged sentences

( 14,933,048 )

Total Stockholders’

Total Liabilities and Stockholders’

accompanying notes to unaudited condensed consolidated financial statements.

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

See accompanying notes to unaudited condensed consolidated

financial statements.

ZONED PROPERTIES, INC.

2 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Rental revenues

Advisory revenues

Brokerage revenues

Total revenues

4 unchanged sentences

Real estate taxes

Gain on sale of rental property

Total operating expenses

LOSS FROM OPERATIONS

INCOME (LOSS) FROM OPERATIONS

OTHER (EXPENSES) INCOME:

3 unchanged sentences

Total other expenses, net

LOSS BEFORE INCOME TAXES

INCOME (LOSS) BEFORE INCOME TAXES

PROVISION FOR INCOME TAXES

NET LOSS PER COMMON SHARE:

NET INCOME (LOSS)

$ ( 115,697 )

NET INCOME (LOSS) PER COMMON SHARE:

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

accompanying notes to unaudited condensed consolidated financial statements.

See accompanying notes to unaudited condensed consolidated

financial statements.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30,

2021 AND 2020

Preferred Stock

Stockholders’

Balance, December 31, 2020

4 unchanged sentences

( 15,004,383 )

Common stock issued for intangible asset

Accretion of stock based compensation related to stock options issued

Balance, June 30, 2021

$ ( 14,891,789 )

Preferred Stock

Stockholders’

Balance, December 31, 2019

4 unchanged sentences

( 14,951,480 )

accompanying notes to unaudited condensed consolidated financial statements.

Accretion of stock based compensation related to stock options issued

Balance, June 30, 2020

$ ( 14,970,407 )

See accompanying notes to unaudited condensed consolidated

financial statements.

ZONED PROPERTIES, INC.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

For the Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net loss to net cash provided by operating activities:

Net income (loss)

$ ( 115,697 )

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

Depreciation expense

Amortization expense

Stock-based compensation

Stock option expense

Gain on sale of rental property

Change in operating assets and liabilities:

11 unchanged sentences

Purchase of rental property improvements

NET CASH USED IN INVESTING ACTIVITIES

Purchase of property and equipment

Net proceeds from sale of rental property

Investment in joint ventures

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

NET INCREASE (DECREASE) IN CASH

3 unchanged sentences

Interest paid

accompanying notes to unaudited condensed consolidated financial statements.

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Common stock issued for intangible asset

See accompanying notes to unaudited condensed consolidated

financial statements.

PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

JUNE 30, 2021

1 – ORGANIZATION AND NATURE OF OPERATIONS

Properties, Inc.

(“Zoned Properties”

or the “Company”), was incorporated in the State of Nevada on August

The Company is a strategic real estate development firm whose primary mission is to provide real estate and sustainability

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

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

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

(“Zoned Properties” or the “Company”), was incorporated in the State of Nevada on August 25,

The Company is a leading real estate development firm for emerging and highly regulated industries, including regulated cannabis.

The Company is redefining the approach to commercial real estate investment through its integrated growth services.

Headquartered in

Scottsdale, Arizona, Zoned Properties has developed a full spectrum of integrated growth services to support its real estate development

and investment model;

Advisory Services, Brokerage Services, Franchise Services, and PropTech Data Services each cross-pollinate within

the model to drive project value associated with complex real estate projects.

With national experience and a team of experts devoted

to the emerging cannabis industry, Zoned Properties is addressing the specific needs of a modern market in highly regulated industries.

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

Green Building Council, and the Forbes Real Estate Council.

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

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

The Company provides development strategies

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

The Company does not grow, harvest,

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

as amended (the “CSA”).

The Company does not grow, harvest, sell or distribute cannabis or any substances regulated under United States law such as the Controlled

Substance Act of 1970, as amended (the “CSA”).

Company has the following wholly owned subsidiaries:

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

Gilbert Property Management,

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

Chino Valley Properties,

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

Kingman Property

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

Green Valley Group,

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

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

Kingman Property Group,

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

Green Valley Group, LLC

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

Zoned Oregon Properties,

1 unchanged sentence

Zoned Colorado Properties,

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

Zoned Illinois Properties,

1 unchanged sentence

Zoned Arizona Properties,

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

Zoned Advisory Services,

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

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.

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

Zoned Properties Brokerage,

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

ZP Data Platform 1, LLC

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

April 22, 2021, 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 (See Note 7).

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 May 1, 2021 (See Note 7).

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.

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.

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.

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.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

JUNE 30, 2021

2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of presentation and principles of consolidation

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.

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 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.

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.

unaudited condensed consolidated financial statements for the three and six months ended June 30, 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”).

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

cash flows as of June 30, 2021 and 2020, and for the periods then ended, have been made.

Those adjustments consist of normal and recurring

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

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

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 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

equity transactions, including options and stock-based compensation.

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 six months ended June 30, 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 equity transactions, including options and stock-based

compensation.

and uncertainties

The Company’s operations are subject to

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

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”).

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).

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 six months ended June 30, 2021 and 2020, rental and advisory revenue

associated with the Significant Tenants amounted to $ 588,462 and $ 580,946 , respectively, which represents 65.7 % and 95.6 % of the Company’s

total revenues, respectively (see Note 3).

value of financial 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

Board’s (the “FASB”) accounting standard for such instruments.

Under this standard, financial assets and liabilities

are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

did not identify any assets or liabilities that are required to be presented on the balance sheet at fair value in accordance

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

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

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 Board’s

(the “FASB”) accounting standard for such instruments.

Under this standard, financial assets and liabilities are classified

in their entirety based on the lowest level of input that is significant to the fair value measurement.

The Company did not identify

any assets or liabilities that are required to be presented on the balance sheet at fair value in accordance with Accounting Standards

Codification (“ASC”) Topic 820.

PROPERTIES, INC.

1 unchanged sentence

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 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.

JUNE 30, 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.

The Company had no cash equivalents

on June 30, 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 June 30, 2021 and December 31, 2020, the Company had approximately $ 781,000 and $ 449,000 , respectively, of cash in

excess of FDIC limits of $ 250,000 .

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.

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

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.

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

For the six months ended June

30, 2021 and 2020, the Company did not record any allowances for doubtful accounts.

in Joint Ventures

Company has equity investments in various privately held entities.

The Company accounts for these investments either under the equity

method or cost method of accounting depending on our ownership interest and level of influence.

Investments accounted for under the equity

method are recorded based upon the amount of the Company’s investment and adjusted each period for its share of the investee’s

income or loss.

Investments are reviewed for changes in circumstance or the occurrence of events that suggest an other than temporary

event where our investment may not be recoverable.

The Company evaluates its investments in these entities for consolidation.

its percentage interest in the joint venture, evaluation of control and whether a variable interest entity exists when determining whether

or not the investment qualifies for consolidation or if it should be accounted for as an unconsolidated investment under either the equity

method of accounting.

If an investment qualifies for the equity method of accounting, the Company’s investment is recorded initially

at cost, and subsequently adjusted for equity in net income (loss) and cash contributions and distributions.

The net income or loss of

an unconsolidated investment is allocated to its investors in accordance with the provisions of the operating agreement of the entity.

The allocation provisions in these agreements may differ from the ownership interest held by each investor.

Differences, if any, between

the carrying amount of our investment in the respective joint venture and the Company’s share of the underlying equity of such

unconsolidated entity are amortized over the respective lives of the underlying assets as applicable.

These items are reported as a single

line item in the statements of operations as income or loss from investments in unconsolidated affiliated entities.

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

Betterments, major renovations and certain costs

directly related to the improvement of rental properties are capitalized.

Maintenance and repair expenses are charged to expense

Depreciation is recognized on a straight-line basis over estimated useful lives of the assets, which range from 5

Tenant improvements are amortized on a straight-line basis over the lives of the related leases, which approximate

the useful lives of the assets.

the acquisition of real estate, the Company assesses the fair value of acquired assets (including land, buildings and improvements,

identified intangibles, such as acquired above-market leases and acquired in-place leases) and acquired liabilities (such as acquired

below-market leases) and allocate the purchase price based on these assessments.

The Company assesses fair value based on estimated

cash flow projections that utilize appropriate discount and capitalization rates and available market information.

future cash flows are based on a number of factors including historical operating results, known trends, and market/economic conditions.

Company’s rental properties are individually reviewed for impairment whenever events or changes in circumstances indicate

that the carrying amount of an asset may not be recoverable.

An impairment exists when the carrying amount of an asset exceeds

the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis.

An impairment loss is

measured based on the excess of the property’s carrying amount over its estimated fair value.

Impairment analyses are based

on our current plans, intended holding periods and available market information at the time the analyses are prepared.

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 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 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.

Betterments, major renovations and certain costs directly

related to the improvement of rental properties are capitalized.

Maintenance and repair expenses are charged to expense as incurred.

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

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

the acquisition of real estate, the Company assesses the fair value of acquired assets (including land, buildings and improvements, identified

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

leases) and allocate the purchase price based on these assessments.

The Company assesses fair value based on estimated cash flow projections

that utilize appropriate discount and capitalization rates and available market information.

Estimates of future cash flows are based

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

Company’s rental properties are individually reviewed for impairment whenever events or changes in circumstances indicate that

the carrying amount of an asset may not be recoverable.

An impairment exists when the carrying amount of an asset exceeds the aggregate

projected future cash flows over the anticipated holding period on an undiscounted basis.

An impairment loss is measured based on the

excess of the property’s carrying amount over its estimated fair value.

Impairment analyses are based on our current plans, intended

holding periods and available market information at the time the analyses are prepared.

PROPERTIES, INC.

1 unchanged sentence

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.

JUNE 30, 2021

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 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 six months ended June 30, 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 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 incurred.

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.

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

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.

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.

The Company 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.

Brokerage revenues primarily consist of real estate sales commissions

and are recognized upon the successful completion of all required services which is when escrow closes.

In accordance with the guidelines

established for reporting revenue gross as a principal versus net as an agent in ASC Topic 606, the Company records commission revenues

and expenses on a gross basis.

Of the criteria listed in ASC Topic 606, the Company is the primary obligor in the transaction, does not

have inventory risk, performs all or part of the service, has credit risk, and has wide latitude in establishing the price of services

rendered and discretion in selection of agents and determination of service specifications.

Brokerage revenues that are payable upon payment

of rent or other events beyond the Company’s control are recognized upon the occurrence of such events.

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

of shares of common stock outstanding during each period.

Diluted (loss) income per share is computed by dividing net (loss) income

available to common shareholders by the weighted average number of shares of common stock, common stock equivalents and potentially

dilutive securities outstanding during the period using the treasury stock method and as-if converted method.

Potentially dilutive

common shares and participating securities are excluded from the computation of diluted shares outstanding if they would have

an anti-dilutive impact on the Company’s net losses.

The Company’s preferred stock is considered a participating security

since the preferred shares are entitled to dividends equal to common share dividends and accordingly, are included in the computation

of earnings per share pursuant to the two-class method.

The two-class method of computing (loss) income per share is an earnings

allocation formula that determines (loss) income per share for common stock and any participating securities according to dividends

declared (whether paid or unpaid) and participation rights in undistributed earnings.

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

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

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

shares of common stock outstanding during each period.

Diluted (loss) income per share is computed by dividing net (loss) income available

to common shareholders by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities

outstanding during the period using the treasury stock method and as-if converted method.

Potentially dilutive common shares and participating

securities are excluded from the computation of diluted shares outstanding if they would have an anti-dilutive impact on the Company’s

The Company’s preferred stock is considered a participating security since the preferred shares are entitled to dividends

equal to common share dividends and accordingly, are included in the computation of earnings per share pursuant to the two-class method.

The two-class method of computing (loss) income per share is an earnings allocation formula that determines (loss) income per share for

common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021

following table presents a reconciliation of basic and diluted net income (loss) per share:

(loss) per common share - basic:

income (loss)

$ ( 115,697 )

undistributed (earnings) loss allocated to participating securities

income (loss) allocated to common stockholders

$ ( 115,697 )

average common shares outstanding – basic

income (loss) per common share – basic

(loss) per common share - diluted:

income (loss) allocated to common shareholders – basic

$ ( 115,697 )

interest of convertible debt

for income (loss) per common share – diluted

$ ( 115,697 )

average common shares outstanding – diluted

income (loss) per common share – diluted

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 six months ended June 30, 2021 and 2020.

Convertible debt

Stock options

Company’s business is comprised of one reportable segment.

The Company has determined that its properties have similar economic

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.

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

brokerage services related to commercial properties).

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

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

as measured by the enacted tax rates, which are expected to be in effect when these differences reverse.

Deferred tax assets and liabilities

are classified as current or non-current, depending upon the classification of the asset or liabilities to which they relate.

tax assets and liabilities not related to an asset or liability are classified as current or non-current depending on the periods in

which the temporary differences are expected to reverse.

Valuation allowances are established when necessary to reduce deferred tax assets

to the amount expected to be realized.

Company follows the provisions of FASB ASC 740-10, “Uncertainty in Income Taxes”.

Certain recognition thresholds must be

met before a tax position is recognized in the financial statements.

An entity may only recognize or continue to recognize tax positions

that meet a “more-likely-than-not” threshold.

The Company does not believe it has any uncertain tax positions as of June

30, 2021 and December 31, 2020 that would require either recognition or disclosure in the accompanying condensed consolidated financial

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

PROPERTIES, INC.

1 unchanged sentence

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

liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences reverse.

tax assets and liabilities are classified as current or non-current, depending upon the classification of the asset or liabilities

to which they relate.

Deferred tax assets and liabilities not related to an asset or liability are classified as current or non-current

depending on the periods in which the temporary differences are expected to reverse.

Valuation allowances are established when

necessary to reduce deferred tax assets to the amount expected to be realized.

Company follows the provisions of FASB ASC 740-10, “Uncertainty in Income Taxes”.

Certain recognition thresholds must

be met before a tax position is recognized in the financial statements.

An entity may only recognize or continue to recognize

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

The Company does not believe it has any uncertain tax

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

JUNE 30, 2021

adopted accounting pronouncements

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.

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

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.

In November 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

The Company is currently evaluating the impact of ASU 2016-13 on its future consolidated financial statements.

issued accounting pronouncements

does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material

effect on the accompanying condensed consolidated financial statements.

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect

on the accompanying condensed consolidated financial statements.

3 – CONCENTRATIONS AND RISKS

1 unchanged sentence

May 1, 2018, Chino Valley and Broken Arrow Herbal Center, Inc.

(“Broken Arrow”) agreed to terminate the prior Chino

Valley Lease dated April 6, 2015, as amended, in consideration of (i) entry into that certain Licensed Medical Marijuana Facility

Triple Net (NNN) Lease Agreement dated May 1, 2018 between Chino Valley and Broken Arrow (the “2018 Chino Valley Lease”),

with a term of 22 years, expiring April 30, 2040, and (ii) abatement of rent that would otherwise have been due for the month

of April 2018 under the prior Chino Valley Lease.

The 2018 Chino Valley Lease provided for payment by Broken Arrow of a fixed

monthly base rent of $35,000, as well as real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or

other taxes (excluding income or estate taxes) levied upon or assessed against Chino Valley.

In addition, pursuant to the terms

of the 2018 Chino Valley Lease, Broken Arrow agreed to maintain insurance in full force during the term of the 2018 Chino Valley

Lease and any other period of occupancy of the premises by Broken Arrow.

On January 1, 2019, Chino Valley and Broken Arrow entered

into that the First Amendment to the 2018 Chino Valley Lease (the “2019 Chino Valley Lease Amendment”), pursuant to

which the monthly base rent was increased from $35,000 to $40,000.

Except for the increase in base rent, the terms of the 2018

Chino Valley Lease remain in full force and effect.

May 29, 2020, Chino Valley and Broken Arrow entered into a second amendment to the 2018 Chino Valley Lease, as amended (the “2020

Chino Valley Amendment”), effective May 31, 2020 (“Effective Date”).

Pursuant to the terms of the 2020 Chino

Valley Amendment, among other things, the base rent was adjusted to $32,800 per month, and the base rent was abated from June

1, 2020 to July 31, 2020.

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.

Pursuant to the terms of the 2020 Chino Valley Amendment, the parties

agreed that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited

or materially and adversely affected as mutually and reasonably determined by Chino Valley and Broken Arrow, Broken Arrow may

terminate the 2018 Chino Valley Lease, as amended, by delivering written notice to Chino Valley, together with a termination payment

which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned after termination

for the balance of the term.

addition, the parties agreed that from the period from the Effective Date to June 30, 2022 (the “Improvement Period”),

Broken Arrow will and/or Broken Arrow will cause its affiliate, CJK, to invest a combined total of at least $8,000,000 of improvements

(“Investment by Tenants”) in and to the property that is the subject of the Chino Valley Lease and the property that

is the subject of the Tempe Lease (discussed below, and collectively referred to as the “Facilities”).

If Broken Arrow

and/or CJK fails to deliver to the Company receipted bills for hard and soft costs of improvements to the Facilities totaling

at least $8,000,000 on or before June 30, 2022, Broken Arrow will be in default under the Chino Valley Lease and Tempe Lease,

May 1, 2018, Green Valley and Broken Arrow agreed to terminate the prior Green Valley Lease dated October 1, 2014, in consideration

of (i) entry into that certain Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between

Green Valley and Broken Arrow (the “Green Valley Lease”), with a term of 22 years, expiring April 30, 2040, and (ii)

abatement of rent that would otherwise have been due for the month of April 2018 under the prior Green Valley Lease.

Valley Lease provided for payment by Broken Arrow of a fixed monthly base rent of $3,500, as well as real property taxes, personal

property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed

against Chino Valley.

In addition, pursuant to the terms of the Green Valley Lease, Broken Arrow agreed to maintain insurance

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

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

Green Valley Lease, effective May 31, 2020.

Pursuant to the terms of the Green Valley Amendment, among other things, the parties

agreed to abate the fixed base rent of $3,500 from June 1, 2020 to July 31, 2020.

In addition, the Green Valley Amendment provides

that any increase in the rentable area of the leases premises will result in an increase in all amounts calculated based on the

(“Broken Arrow”) agreed to terminate the prior Chino Valley

Lease dated April 6, 2015, as amended, in consideration of (i) entry into that certain Licensed Medical Marijuana Facility Triple Net

(NNN) Lease Agreement dated May 1, 2018 between Chino Valley and Broken Arrow (the “2018 Chino Valley Lease”), with a term

of 22 years, expiring April 30, 2040, and (ii) abatement of rent that would otherwise have been due for the month of April 2018 under

the prior Chino Valley Lease.

The 2018 Chino Valley Lease provided for payment by Broken Arrow of a fixed monthly base rent of $ 35,000 ,

as well as real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or

estate taxes) levied upon or assessed against Chino Valley.

In addition, pursuant to the terms of the 2018 Chino Valley Lease, Broken

Arrow agreed to maintain insurance in full force during the term of the 2018 Chino Valley Lease and any other period of occupancy of

the premises by Broken Arrow.

On January 1, 2019, Chino Valley and Broken Arrow entered into that the First Amendment to the 2018 Chino

Valley Lease (the “2019 Chino Valley Lease Amendment”), pursuant to which the monthly base rent was increased from $ 35,000

to $ 40,000 .

Except for the increase in base rent, the terms of the 2018 Chino Valley Lease remain in full force and effect.

May 29, 2020, Chino Valley and Broken Arrow entered into a second amendment to the 2018 Chino Valley Lease, as amended (the “2020

Chino Valley Amendment”), effective May 31, 2020 (“Effective Date”).

Pursuant to the terms of the 2020 Chino Valley

Amendment, among other things, the base rent was adjusted to $ 32,800 per month, and the base rent was abated from June 1, 2020 to July

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.

The parties also agreed that if there is any change in laws such that the dispensing,

sale or cultivation of marijuana upon the premises is prohibited or materially and adversely affected as mutually and reasonably

determined by Green Valley and Broken Arrow, Broken Arrow may terminate the Green Valley Lease by delivering written notice to

Green Valley, together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of

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

Pursuant to the terms of the 2020 Chino Valley Amendment, the parties agreed that if

there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially

and adversely affected as mutually and reasonably determined by Chino Valley and Broken Arrow, Broken Arrow may terminate the 2018 Chino

Valley Lease, as amended, by delivering written notice to Chino Valley, together with a termination payment which shall be the sum of

(i) any unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned after termination for the balance of the

In addition, the parties agreed that from the period from the Effective

Date to June 30, 2022 (the “Improvement Period”), Broken Arrow will and/or Broken Arrow will cause its affiliate, CJK, to

invest a combined total of at least $ 8,000,000 of improvements (“Investment by Tenants”) in and to the property that is the

subject of the Chino Valley Lease and the property that is the subject of the Tempe Lease (discussed below, and collectively referred

to as the “Facilities”).

If Broken Arrow and/or CJK fails to deliver to the Company receipted bills for hard and soft costs

of improvements to the Facilities totaling at least $ 8,000,000 on or before June 30, 2022, Broken Arrow will be in default under the Chino

Valley Lease and Tempe Lease, as amended.

As of June 30, 2021, the Company’s Significant Tenants have completed improvements to

the Facilities totaling in excess of $ 8,000,000 and have satisfied the contractual obligations related to the same.

As soon as the improved,

rentable areas have received all required approvals for occupancy and commencement of operations, the Company and Broken Arrow expect

to complete any appropriate amendments to the Lease Agreement.

PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

JUNE 30, 2021

May 1, 2018, Green Valley and Broken Arrow agreed to terminate the prior Green Valley Lease dated October 1, 2014, in consideration of

(i) entry into that certain Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Green Valley

and Broken Arrow (the “Green Valley Lease”), with a term of 22 years, expiring April 30, 2040, and (ii) abatement of rent

that would otherwise have been due for the month of April 2018 under the prior Green Valley Lease.

The Green Valley Lease provided for

payment by Broken Arrow of a fixed monthly base rent of $ 3,500 , as well as real property taxes, personal property taxes, privilege, sales,

rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed against Chino Valley.

pursuant to the terms of the Green Valley Lease, Broken Arrow agreed to maintain insurance in full force during the term of the Green

Valley Lease and any other period of occupancy of the premises by Broken Arrow.

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

Valley Lease, effective May 31, 2020.

Pursuant to the terms of the Green Valley Amendment, among other things, the parties agreed to

abate the fixed base rent of $ 3,500 from June 1, 2020 to July 31, 2020.

In addition, the Green Valley Amendment provides that any increase

in the rentable area of the leases premises will result in an increase in all amounts calculated based on the same, including, without

limitation, base rent.

The parties also agreed that if there is any change in laws such that the dispensing, sale or cultivation of marijuana

upon the premises is prohibited or materially and adversely affected as mutually and reasonably determined by Green Valley and Broken

Arrow, Broken Arrow may terminate the Green Valley Lease by delivering written notice to Green Valley, together with a termination payment

which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned after termination

for the balance of the term.

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

(“CJK”) agreed to terminate the prior Tempe Leases dated August 15, 2015,

as amended, and June 15, 2017, in consideration of (i) entry into that certain Licensed Medical Marijuana Facility Triple Net

(NNN) Lease Agreement dated May 1, 2018 between Zoned Arizona and CJK (the “Tempe Lease”), with a term of 22 years,

expiring April 30, 2040, and (ii) abatement of rent that would otherwise have been due for the month of April 2018 under the prior

Tempe Leases.

The Tempe Lease provided for payment by CJK of a fixed monthly base rent of $33,500, as well as real property taxes,

personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon

or assessed against Zoned Arizona.

In addition, pursuant to the terms of the Tempe Lease, CJK agreed to maintain insurance in

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

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

May 31, 2020.

Pursuant to the terms of the Tempe Amendment, among other things, the base rent was increased to $49,200 per month,

and the base rent was abated from June 1, 2020 to July 31, 2020.

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.

Pursuant to the terms

of the Tempe Amendment, the parties agreed that if there is any change in laws such that the dispensing, sale or cultivation of

marijuana upon the premises is prohibited or materially and adversely affected as mutually and reasonably determined by Zoned

Arizona and CJK, CJK may terminate the Tempe Lease by delivering written notice to Zoned Arizona, together with a termination

payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned

after termination for the balance of the term.

addition, under the Tempe Amendment the parties agreed to an Investment by Tenant (as defined above in the subheading Chino

Valley ) to the property that is the subject of the Chino Valley Lease and the property that is the subject of the Tempe Lease.

If Broken Arrow and/or CJK fails to deliver to the Company receipted bills for hard and soft costs of improvements to the Facilities

totaling at least $8,000,000 on or before June 30, 2022, Broken Arrow and CJK will be in default under the Chino Valley Lease

and Tempe Lease, as amended.

May 1, 2018, Kingman and CJK agreed to terminate the prior Kingman Lease dated October 1, 2014, in consideration of (i) entry

into that certain Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Kingman and CJK

(the “Kingman Lease”), with a term of 22 years, expiring April 30, 2040, and (ii) abatement of rent that would otherwise

have been due for the month of April 2018 under the Prior Kingman Lease.

The Kingman Lease provides for payment by CJK of a fixed

monthly base rent of $4,000, as well as real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or

other taxes (excluding income or estate taxes) levied upon or assessed against Kingman.

In addition, pursuant to the terms of

the Kingman Lease, CJK agreed to maintain insurance in full force during the term of the Kingman Lease and any other period of

occupancy of the premises by CJK.

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

(“CJK”) agreed to terminate the prior Tempe Leases dated August 15, 2015, as amended,

and June 15, 2017, in consideration of (i) entry into that certain Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement

dated May 1, 2018 between Zoned Arizona and CJK (the “Tempe Lease”), with a term of 22 years, expiring April 30, 2040, and

(ii) abatement of rent that would otherwise have been due for the month of April 2018 under the prior Tempe Leases.

The Tempe Lease provided

for payment by CJK of a fixed monthly base rent of $ 33,500 , as well as real property taxes, personal property taxes, privilege, sales,

rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed against Zoned Arizona.

pursuant to the terms of the Tempe Lease, CJK agreed to maintain insurance in full force during the term of the Tempe Lease and any other

period of occupancy of the premises by CJK.

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

May 31, 2020.

Pursuant to the terms of the Kingman Amendment, among other things, the parties agreed to abate the $4,000 base

rent from June 1, 2020 to July 31, 2020.

In addition, the Kingman Amendment provides that any increase in the rentable area of

the leases premises will result in an increase in all amounts calculated based on the same, including, without limitation, base

The parties also agreed that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon

the premises is prohibited or materially and adversely affected as mutually and reasonably determined by Kingman and CJK, CJK

may terminate the Kingman Lease by delivering written notice to Kingman, together with a termination payment which shall be the

sum of (i) any unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned after termination for the

balance of the term.

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

Significant Tenants.

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

a Guarantee of Payment and Performance by Mr.

Abrams and the Company’s Significant Tenants.

Abrams guarantee is collateralized

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

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

Pursuant to the terms of the Tempe Amendment, among other things, the base rent was increased to $ 49,200 per month, and

the base rent was abated from June 1, 2020 to July 31, 2020.

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.

Pursuant to the terms of the Tempe

Amendment, the parties agreed that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the

premises is prohibited or materially and adversely affected as mutually and reasonably determined by Zoned Arizona and CJK, CJK may terminate

the Tempe Lease by delivering written notice to Zoned Arizona, together with a termination payment which shall be the sum of (i) any

unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned after termination for the balance of the term.

In addition, under the Tempe Amendment the parties agreed to an Investment

by Tenant (as defined above in the subheading Chino Valley ) to the property that is the subject of the Chino Valley Lease and the

property that is the subject of the Tempe Lease.

If Broken Arrow and/or CJK fails to deliver to the Company receipted bills for hard and

soft costs of improvements to the Facilities totaling at least $ 8,000,000 on or before June 30, 2022, Broken Arrow and CJK will be in

default under the Chino Valley Lease and Tempe Lease, as amended.

As of June 30, 2021, the Company’s Significant Tenants have completed

improvements to the Facilities totaling in excess of $ 8,000,000 and have satisfied the contractual obligations related to the same.

soon as the improved, rentable areas have received all required approvals for occupancy and commencement of operations, the Company and

Broken Arrow expect to complete any appropriate amendments to the Lease Agreement.

May 1, 2018, Kingman and CJK agreed to terminate the prior Kingman Lease dated October 1, 2014, in consideration of (i) entry into that

certain Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Kingman and CJK (the “Kingman

Lease”), with a term of 22 years, expiring April 30, 2040, and (ii) abatement of rent that would otherwise have been due for the

month of April 2018 under the Prior Kingman Lease.

The Kingman Lease provides for payment by CJK of a fixed monthly base rent of $ 4,000 ,

as well as real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or

estate taxes) levied upon or assessed against Kingman.

In addition, pursuant to the terms of the Kingman Lease, CJK agreed to maintain

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

PROPERTIES, INC.

1 unchanged sentence

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 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.

JUNE 30, 2021

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

May 31, 2020.

Pursuant to the terms of the Kingman Amendment, among other things, the parties agreed to abate the $ 4,000 base rent from

June 1, 2020 to July 31, 2020.

In addition, the Kingman Amendment provides that any increase in the rentable area of the leases premises

will result in an increase in all amounts calculated based on the same, including, without limitation, base rent.

The parties also agreed

that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially

and adversely affected as mutually and reasonably determined by Kingman and CJK, CJK may terminate the Kingman Lease by delivering written

notice to Kingman, together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the

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

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

The Tempe Lease, Kingman Lease, Chino Valley Lease and Green Valley

Lease (together referred to as the “New Leases”) includes a Guarantee of Payment and Performance by Mr.

Abrams and the Company’s

Significant Tenants.

Abrams guarantee is collateralized by the convertible debt of $ 2,000,000 owed to him (see Note 8).

of June 30, 2021 and December 31, 2020, security deposits payable to the Significant Tenants amounted to $ 71,800 in both periods.

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

Future minimum lease payments to be

received, on all leased properties, for each of the five succeeding calendar years and thereafter as of June 30, 2021 consists of the

annual base rent:

2021 (remainder

and advisory revenue and receivable –Significant Tenants

the three months ended June 30, 2021 and 2020, rental and advisory revenue associated with the Significant Tenant leases described above

amounted to $ 291,982 and $ 294,043 , which represents 53.1 % and 98.1 % of the Company’s total revenues, respectively.

months ended June 30, 2021 and 2020, rental and advisory revenue associated with the Significant Tenant leases described above amounted

to $ 588,462 and $ 580,946 , which represents 65.7 % and 96.2 % of the Company’s total revenues, respectively.

June 30, 2021 and December 31, 2020, accounts receivable from advisory services provided to the Significant Tenants amounted to $ 4,750

and $ 2,375 , respectively.

Further, as of June 30, 2021 and December 31, 2020 a deferred rent receivable of $ 169,264 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 Tenants under triple-net leases that terminate

in April 2040.

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

The Company monitors the credit of all tenants to stay abreast of any material changes in credit quality.

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

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

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.

The Company monitors

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

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

As of June 30, 2021 and December 31, 2020, the Company had an asset

concentration related to the Significant Tenants.

As of June 30, 2021 and December 31, 2020, the Significant Tenants represented approximately

78.7 % and 83.2 % of the Company’s total assets, respectively.

Through June 30, 2021, all rental payments have been made on a timely

As of June 30, 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 8).

1 unchanged sentence

Agreement (See Note 8).

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021

4 – RENTAL PROPERTIES

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

Building and building improvements

June 30, 2021 and December 31, 2020, rental properties, net consisted of the following:

building improvements

Rental properties, at cost

accumulated depreciation

Rental properties, net

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

( 1,694,899 )

( 1,516,302 )

properties, net

June 1, 2021, the Company closed on the sale of its Gilbert, AZ property with a third party (the “Purchaser”) pursuant to

which the Company agreed to sell, and the Purchaser agreed to purchase, the property located in Gilbert, Arizona, for an aggregate purchase

price of $ 335,000 .

In connection with the sale, the Company received net proceeds of $ 322,332 and recorded a gain on sale of rental property

of $ 51,944 .

the three months ended June 30, 2021 and 2020, depreciation of rental properties amounted to $ 89,299 and $ 89,297 , respectively.

six months ended June 30, 2021 and 2020, depreciation of rental properties amounted to $ 178,596 and $ 178,338 , respectively.

5 – CONVERTIBLE NOTE RECEIVABLE

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

In exchange for the

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

Date”) in the original principal amount of $ 100,000 .

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

on March 19, 2025 (the “Maturity Date”).

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

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

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

KCB may prepay the 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 and unpaid

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

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

Percentage”).

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

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

Conversion rights

terminate upon acceptance by the Company of payment in full of principal, accrued interest and any other amounts due under the KCB Debenture.

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

rights of conversion, and (iii) KCB pays to the Company all outstanding principal and interest accrued and due under the terms of the

KCB Debenture on the Maturity Date, the Company will still be entitled to receive a number of units, in addition to such payment amount,

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

the occurrence of an Event of Default, as defined in the KCB Debenture, the entire principal balance and accrued and unpaid interest

outstanding under the KCB Debenture, and all other obligations of KCB under the KCB Debenture, will be immediately due and payable and

the Company may exercise any and all rights, power and remedies available to it at law or in equity or other appropriate proceeding,

whether for the specific performance of any covenant or agreement contained in the KCB Debenture and proceed to enforce the payment thereof

or any other legal or equitable right of the Company.

PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

CONVERTIBLE NOTE RECEIVABLE

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

for the investment, KCB issued to the Company a convertible debenture (the “KCB Debenture”) dated March 19, 2020 (the

“Issuance Date”) in the original principal amount of $100,000.

The KCB Debenture bears interest at the rate of 6.5%

per annum and matures on March 19, 2025 (the “Maturity Date”).

Interest on the outstanding principal sum of the KCB

Debenture commences accruing on the Issuance Date and is computed on the basis of a 365-day year and the actual number of days

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

KCB may prepay

the 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

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

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

(the “Conversion Percentage”).

If KCB defaults on payment of the KCB Debenture, the Company may, at its option, extend

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

the KCB Debenture.

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

and any other amounts due under the KCB Debenture.

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

its rights of conversion, and (iii) KCB pays to the Company all outstanding principal and interest accrued and due under the terms

of the KCB Debenture on the Maturity Date, the Company will still be entitled to receive a number of units, in addition to such

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

and at the time of such issuance.

the occurrence of an Event of Default, as defined in the KCB Debenture, the entire principal balance and accrued and unpaid interest

outstanding under the KCB Debenture, and all other obligations of KCB under the KCB Debenture, will be immediately due and payable

and the Company may exercise any and all rights, power and remedies available to it at law or in equity or other appropriate proceeding,

whether for the specific performance of any covenant or agreement contained in the KCB Debenture and proceed to enforce the payment

thereof or any other legal or equitable right of the Company.

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

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”)

JUNE 30, 2021

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 paid.

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.

2 unchanged sentences

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

Interest 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.

● Franchise Fees .

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.

KCB’s obligation

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

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 due.

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.

June 30, 2021 and December 31, 2020, an allowance was not deemed necessary.

June 30, 2021, convertible note receivable and interest receivable amounted to $ 200,000 and $ 4,203 , respectively.

On December 31, 2020,

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

August 4, 2021, the A&R Debenture was amended (See Note 12).

6 – INTANGIBLE ASSETS

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.

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.

June 30, 2021 and December 31, 2020, intangible assets consisted of the following:

Real estate brokerage

materials and listing

accumulated amortization

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021

the three and six months ended June 30, 2021 and 2020, amortization of intangible assets amounted to $ 9,450 and $ 0 , respectively.

7 – INVESTMENT IN JOINT VENTURES

entities listed below are partially owned by the Company.

The Company accounts for these investments under the equity method of accounting

as the Company exercises significant influence but does not exercise financial and operating control over these entities.

the Company’s investments in the unconsolidated affiliated entities is as follows:

LLC (the “Beakon Joint Venture”)

April 22, 2021

Green, LLC ( the “Zoneomics Green Joint Venture”)

investments in unconsolidated joint venture entities

On April 22, 2021, 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.

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 risk.

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:

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.

ZP Data will account for its investment in Beakon under the equity method of accounting in accordance

with ASC 323.

During the three months ended June 30, 2021, the Company contributed $ 75,000 to Beakon.

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 May 1, 2021.

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.

In June 2021, the Company contributed $ 90,000 to Zoneomics.

following represents summarized financial information derived from the financial statements of the Beakon and Zoneomics Joint Ventures

as of June 30, 2021.

Current assets:

Current liabilities

Non-current liabilities

liabilities and equity

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021

the Three and Six Months

Ended June 30,

Operating expenses

of June 30, 2021, no loss from joint venture has been recorded since the Joint Ventures have just begun to operate and any loss was insignificant.

8 – CONVERTIBLE NOTE PAYABLE

January 9, 2017, the Company issued a convertible debenture (the “Abrams Debenture”) in the aggregate principal amount

of $2,000,000 in favor of Alan Abrams, who was a significant stockholder of the Company through December 31, 2018, in exchange

for cash from Mr.

January 9, 2017, the Company issued a convertible debenture (the “Abrams Debenture”) in the aggregate principal amount of

$ 2,000,000 in favor of Alan Abrams, who was a significant stockholder of the Company through December 31, 2018, in exchange for cash

Abrams of $ 2,000,000 .

The Abrams Debenture accrues interest at the rate of 6% per annum payable quarterly by

the 1 st of each quarter and was originally due on January 9, 2022.

On January 2, 2019, as part of a Stock Redemption

Agreement, the Company and Mr.

Abrams entered into an amendment of the Abrams Debenture (the “Debenture Amendment”),

pursuant to which the parties agreed to extend the maturity date of the Abrams Debenture from January 9, 2022 to January 9, 2030.

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

The Abrams Debenture accrues interest at the rate of 6 % per annum payable quarterly by the 1 st

of each quarter and was originally due on January 9, 2022.

On January 2, 2019, as part of a Stock Redemption Agreement, the Company and

Abrams entered into an amendment of the Abrams Debenture (the “Debenture Amendment”), pursuant to which the parties agreed

to extend the maturity date of the Abrams Debenture from January 9, 2022 to January 9, 2030.

Except as set forth herein, the terms of

the Abrams Debenture remain in full force and effect.

Company may prepay the Abrams Debenture at any point after nine months, in whole or in part.

Pursuant to the terms of the Abrams

Debenture, Mr.

Abrams is entitled to convert all or a portion of the principal balance and all accrued and unpaid interest due

under the Abrams Debenture into shares of the Company’s common stock at a conversion price of $5.00 per share.

Pursuant to the terms of the Abrams Debenture,

Abrams is entitled to convert all or a portion of the principal balance and all accrued and unpaid interest due under the Abrams

Debenture into shares of the Company’s common stock at a conversion price of $ 5.00 per share.

the Company defaults on payment, Mr.

Abrams may at his option, extend all conversion rights, through and including the date the

Company tenders or attempts to tender payment in full of all amounts due under the Abrams Debenture.

Any amount of principal or

interest, which is not paid when due shall bear interest at the rate of 12% per annum.

Upon an Event of Default (as defined in

the Abrams Debenture), Mr.

Abrams may (i) declare the entire principal amount and all accrued and unpaid interest under the Abrams

Debenture immediately due and payable, and (ii) exercise any and all rights, powers and remedies available to Mr.

Abrams at law

or in equity or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in the

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

Abrams may at his option, extend all conversion rights, through and including the date the Company

tenders or attempts to tender payment in full of all amounts due under the Abrams Debenture.

Any amount of principal or interest, which

is not paid when due shall bear interest at the rate of 12 % per annum.

Upon an Event of Default (as defined in the Abrams Debenture),

Abrams may (i) declare the entire principal amount and all accrued and unpaid interest under the Abrams Debenture immediately due

and payable, and (ii) exercise any and all rights, powers and remedies available to Mr.

Abrams at law or in equity or other appropriate

proceeding, whether for the specific performance of any covenant or agreement contained in the Abrams Debenture and proceed to enforce

the payment thereof or any other legal or equitable right of Mr.

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

Abrams reaffirmed his personal guarantee

of his obligations under certain of the Company’s commercial leases.

Additionally, Mr.

Abrams affirmed that the principal

of the Abrams Debenture in the principal amount of $2,000,000 was acknowledged as collateral within the scope of the guaranty

included in the commercial lease agreements.

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.

Abrams affirmed that the principal of the

Abrams Debenture in the principal amount of $ 2,000,000 was acknowledged as collateral within the scope of the guaranty included in the

commercial lease agreements.

of June 30, 2021 and December 31, 2020, the principal balance due under the Abrams Debenture is $ 2,000,000 .

of June 30, 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 June 30, 2021 and 2020, interest expense related to the Abrams Debenture amounted to $ 30,000 .

For the six months

ended June 30, 2021 and 2020, interest expense related to the Abrams Debenture amounted to $ 60,000 .

9 – RELATED PARTY TRANSACTION

notes payable – related party

January 9, 2017, the Company issued a convertible debenture (the “McLaren Debenture”) in the principal amount of $ 20,000

in favor of Bryan McLaren, the Company’s Chief Executive Officer, President, Chief Financial Officer, and a member of the Company’s

Board of Directors, in exchange for cash from Mr.

McLaren of $ 20,000 .

The McLaren Debenture accrues interest at the rate of 6 % per annum

payable quarterly by the 1 st of each quarter and matures on January 9, 2022 .

The Company may prepay the McLaren Debenture

at any point after nine months, in whole or in part.

Pursuant to the terms of the McLaren Debenture, Mr.

McLaren is entitled to convert

all or a portion of the principal balance and all accrued and unpaid interest due under this McLaren Debenture into shares of the Company’s

common stock at a conversion price of $ 5.00 per share.

PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

RELATED PARTY TRANSACTION

notes payable –

related party

January 9, 2017, the Company issued a convertible debenture (the “McLaren Debenture”) in the principal amount of $20,000

in favor of Bryan McLaren, the Company’s Chief Executive Officer, President, Chief Financial Officer, and a member of the

Company’s Board of Directors, in exchange for cash from Mr.

McLaren of $20,000.

The McLaren Debenture accrues interest at

the rate of 6% per annum payable quarterly by the 1 st of each quarter and matures on January 9, 2022.

The Company may

prepay the McLaren Debenture at any point after nine months, in whole or in part.

Pursuant to the terms of the McLaren Debenture,

McLaren is entitled to convert all or a portion of the principal balance and all accrued and unpaid interest due under this

McLaren Debenture into shares of the Company’s common stock at a conversion price of $5.00 per share.

JUNE 30, 2021

the Company defaults on payment, Mr.

McLaren may at his option, extend all conversion rights, through and including the date the

Company tenders or attempts to tender payment in full of all amounts due under the McLaren Debenture.

Any amount of principal

or interest, which is not paid when due shall bear interest at the rate of 12% per annum.

Upon an Event of Default (as defined

in the McLaren Debenture), Mr.

McLaren may (i) declare the entire principal amount and all accrued and unpaid interest under the

McLaren Debenture immediately due and payable, and (ii) exercise any and all rights, powers and remedies available to Mr.

at law or in equity or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained

in the McLaren Debenture and proceed to enforce the

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 condensed consolidated balance sheets.

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

related parties amounted to $300.

STOCKHOLDERS’

McLaren may at his option, extend all conversion rights, through and including the date the Company

tenders or attempts to tender payment in full of all amounts due under the McLaren Debenture.

Any amount of principal or interest, which

is not paid when due shall bear interest at the rate of 12 % per annum.

Upon an Event of Default (as defined in the McLaren Debenture),

McLaren may (i) declare the entire principal amount and all accrued and unpaid interest under the McLaren Debenture immediately due

and payable, and (ii) exercise any and all rights, powers and remedies available to Mr.

McLaren at law or in equity or other appropriate

proceeding, whether for the specific performance of any covenant or agreement contained in the McLaren Debenture and proceed to enforce

the payment thereof or any other legal or equitable right of the Holder.

of June 30, 2021 and December 31, 2020, the principal balance due under the McLaren Debenture is $ 20,000 .

of June 30, 2021 and December 31, 2020, accrued interest payable due under the McLaren Debenture was $ 4,800 and $ 4,200 , respectively,

which is included in accrued expenses – related party on the accompanying condensed consolidated balance sheets.

the three months ended June 30, 2021 and 2020, interest expense – related party amounted to $ 300 .

For the six months ended June

30, 2021 and 2020, interest expense – related party amounted to $ 600 .

10 – STOCKHOLDERS’ EQUITY

Preferred Stock

December 13, 2013, the Board of Directors of the Company authorized and approved the creation of a new class of Preferred Stock

consisting of 5,000,000 shares authorized, $.001 par value.

The preferred stock is not convertible into any other class or series

The holders of the preferred stock are entitled to fifty (50) votes for each share held.

Voting rights are not subject

to adjustment for splits that increase or decrease the common shares outstanding.

Upon liquidation, the holders of the shares

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

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.

Repurchase any of

our common stock.

Merge or consolidate

with any other company, except our wholly owned subsidiaries.

Sell, convey or

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

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

Incur, assume or

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

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

December 13, 2013, the Board of Directors of the Company authorized and approved the creation of a new class of Preferred Stock consisting

of 5,000,000 shares authorized, $.001 par value.

The preferred stock is not convertible into any other class or series of stock.

holders of the preferred stock are entitled to fifty (50) votes for each share held.

Voting rights are not subject to adjustment for

splits that increase or decrease the common shares outstanding.

Upon liquidation, the holders of the shares will be entitled to receive

$ 1.00 per share plus redemption provision before assets distributed to other shareholders.

The holders of the shares are entitled to

dividends equal to common share dividends.

As of June 30, 2021 and December 31, 2020, there were 2,000,000 shares of preferred stock

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.

Create any new class of

stock having preferences over the Preferred Stock.

Repurchase any of our common

Merge or consolidate with

any other company, except our wholly owned subsidiaries.

Sell, convey or otherwise

dispose of, or create or incur any mortgage, lien, or charge or encumbrance or security interest in or pledge of, or sell and leaseback,

in all or substantially all of our property or business.

Incur, assume or guarantee

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

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

Common stock issued for services

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 $ 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 directors

for services rendered.

The shares were valued at their aggregate fair value of $ 52,000 using the quoted per share price on the date of

grant of $ 0.40 .

In connection with these grants, in January 2021, the Company recorded stock-based compensation expense of $ 52,000 which

is included in compensation and benefits on the condensed consolidated statements of operations.

PROPERTIES, INC.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

Common stock issued for services

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 $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

directors for services rendered.

The shares were valued at their aggregate fair value of $52,000 using the quoted per share price

on the date of grant of $0.40.

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

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

JUNE 30, 2021

Shares issued for intangible assets

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.

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.

Equity incentive plans

August 9, 2016, the Company’s Board of Directors authorized the 2016 Equity Incentive Plan (the “2016 Plan”)

and reserved 10,000,000 shares of common stock for issuance thereunder.

August 9, 2016, the Company’s Board of Directors authorized the 2016 Equity Incentive Plan (the “2016 Plan”) and reserved

10,000,000 shares of common stock for issuance thereunder.

The 2016 Plan was approved by shareholders on November 21, 2016.

The 2016 Plan’s purpose is to encourage ownership in the Company by employees, officers, directors and consultants

whose long-term service the Company considers essential to its continued progress and, thereby, encourage recipients to act in

the stockholders’

interest and share in the Company’s success.

The 2016 Plan authorizes the grant of awards in the

form of options intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended,

options that do not qualify (non-statutory stock options) and grants of restricted shares of common stock.

Restricted shares granted

pursuant to the 2016 Plan are amortized to expense over the vesting period.

Options vest and expire over a period not to exceed

If any share of common stock underlying a stock option that has been granted ceases to be subject to a stock option,

or if any shares of common stock that are subject to any other stock-based award granted are forfeited or terminate, such shares

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

As of March 31, 2021,

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

As of December 31, 2020,

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

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

previously awarded stock options are outstanding.

Plan’s purpose is to encourage ownership in the Company by employees, officers, directors and consultants whose long-term service

the Company considers essential to its continued progress and, thereby, encourage recipients to act in the stockholders’ interest

and share in the Company’s success.

The 2016 Plan authorizes the grant of awards in the form of options intended to qualify as

incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended, options that do not qualify (non-statutory

stock options) and grants of restricted shares of common stock.

Restricted shares granted pursuant to the 2016 Plan are amortized to

expense over the vesting period.

Options vest and expire over a period not to exceed seven years.

If any share of common stock underlying

a stock option that has been granted ceases to be subject to a stock option, or if any shares of common stock that are subject to any

other stock-based award granted are forfeited or terminate, such shares shall again be available for distribution in connection with

future grants and awards under the 2016 Plan.

As of June 30, 2021, 200,000 stock option awards are outstanding and 100,000 options are

exercisable under the 2016 Plan.

As of December 31, 2020, 75,000 stock option awards are outstanding and 75,000 options are exercisable

under the 2016 Plan.

As of June 30, 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 previously

awarded stock options are outstanding.

The 2014 Plan has been superseded by the 2016 Plan.

Accordingly, no additional

shares subject to the existing 2014 Plan will be issued and the 1,250,000 shares issuable upon exercise of stock options will

be issued pursuant to the 2014 Plan, if exercised.

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.

Accordingly, no additional shares subject

to the existing 2014 Plan will be issued and the 1,250,000 shares issuable upon exercise of stock options will be issued pursuant to

the 2014 Plan, if exercised.

As of June 30, 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 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.

The grant date of the option was January 1, 2021 and the option expires

on January 1, 2031.

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.

The grant date of the option was January 1, 2021 and the option expires on January 1,

The option vests as to (i) 25,000 of such shares on January 1, 2021;

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

on January 1, 2022 and each year thereafter through January 1, 2031.

The fair value of this option grant was estimated on the

date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

and (ii) as to 10,000 of such shares on January 1, 2022 and

each year thereafter through January 1, 2031.

The fair value of this option grant was estimated on the date of grant using the Black-Scholes

option-pricing model with the following weighted-average assumptions:

dividend yield of 0%;

expected volatility of 117%;

risk-free interest rate of 0.93%;

risk-free interest

rate of 0.93%;

and an estimated holding period of 10 years.

In connection

with these options, the Company valued these options at a fair value of $48,677 and will record stock-based compensation expense

over the vesting period.

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

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

In connection with these options, the Company valued these options at a fair

value of $48,677 and will record stock-based compensation expense over the vesting period.

the six months ended June 30, 2021 and 2020, in connection with the accretion of stock-based option expense, the Company recorded stock

option expense of $ 21,909 and $ 18,036 , respectively.

As of June 30, 2021, there were 1,450,000 options outstanding and 1,250,000 options

vested and exercisable.

As of June 30, 2021, there was $ 56,930 of unvested stock-based compensation expense to be recognized through

December 2030.

The aggregate intrinsic value on June 30, 2021 was nil and was calculated based on the difference between the quoted share

price on June 30, 2021 of $ 0.625 and the exercise price of the underlying options.

option activities for the six months ended June 30, 2021 are summarized as follows:

Exercise Price

Balance Outstanding December 31,

Balance Outstanding March 31, 2021

Exercisable, March 31, 2021

Balance Outstanding June

Exercisable, June 30, 2021

Balance Non-vested at December 31, 2020

Vested during the period

Balance Non-vested at March 31, 2021

COMMITMENTS AND CONTINGENCIES

property acquisition

April 22, 2016, Zoned Colorado, a wholly owned subsidiary of the Company, entered into a Contract to Buy and Sell Real Estate

(the “Parachute Agreement”) with Parachute Development Corporation (“Seller”) pursuant to which Zoned

Colorado agreed to purchase, and Seller agreed to sell, property in Parachute, Colorado (the “Property”) for a purchase

price of $499,857.

Of the total purchase price, $274,857, or 55%, will be paid in cash at closing and $225,000, or 45%, will be

financed by Seller at an interest rate of 6.5%, amortized over a five-year period, with a balloon payment at the end of the fifth

Payments will be made monthly and there will be no pre-payment penalty.

Pursuant to the terms of the Parachute Agreement,

the parties will cooperate in good faith to complete due diligence during a period of 45 days following execution of the Parachute

The closing is subject to certain contingencies, including that Zoned Colorado must obtain acceptable financing for

the purchase and development of the Property, the grant of a special use permit by the Town of Parachute, approval of a protected

development deal or equivalent agreement by the Town of Parachute, execution of a lease agreement by a prospective tenant and

the prospective tenant’s obtaining a license to cultivate on the Property.

to the terms of the Parachute Agreement, Zoned Colorado will have a right of first refusal on eleven additional lots owned by

Seller in Parachute, Colorado.

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 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

during the period

Balance Non-vested at June

PROPERTIES, INC.

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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.

JUNE 30, 2021

11 – COMMITMENTS AND CONTINGENCIES

property acquisition

April 22, 2016, Zoned Colorado, a wholly owned subsidiary of the Company, entered into a Contract to Buy and Sell Real Estate (the “Parachute

Agreement”) with Parachute Development Corporation (“Seller”) pursuant to which Zoned Colorado agreed to purchase,

and Seller agreed to sell, property in Parachute, Colorado (the “Property”) for a purchase price of $ 499,857 .

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 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.

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

As of June 30, 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

May 23, 2018, the Company and Mr.

McLaren, the Company’s President, Chief Executive Officer, Chief Financial Officer and

Chairman of the Board, agreed to replace Mr.

McLaren’s 2014 employment agreement with a new employment agreement dated May

23, 2018 (the “2018 Employment Agreement”).

Pursuant to the terms of the 2018 Employment Agreement, the Company agreed

to continue to pay Mr.

McLaren, the Company’s President, Chief Executive Officer, Chief Financial Officer and Chairman

of the Board, agreed to replace Mr.

McLaren’s 2014 employment agreement with a new employment agreement dated May 23, 2018 (the

“2018 Employment Agreement”).

Pursuant to the terms of the 2018 Employment Agreement, the Company agreed to continue to pay

McLaren his then-current base annual salary of $215,000, and to award Mr.

McLaren with an annual and/or

quarterly bonus payable in either cash and/or equity of no less than 2% of the Company’s net income for the associated period.

McLaren with an annual and/or quarterly bonus payable in

either cash and/or equity of no less than 2% of the Company’s net income for the associated period.

2018 Employment Agreement has a term of 10 years .

The term and Mr.

McLaren’s employment will terminate (a “Termination”)

in any of the following circumstances:

McLaren dies;

immediately, if

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

insurance is in effect, upon Mr.

McLaren’s disability;

on the expiration

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

at the option of

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

McLaren of the basis for such Termination;

at the option of

the Company, without Cause;

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

prior written notice to the Company

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

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

prior written notice to the Company.

immediately, if Mr.

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

McLaren’s disability;

on the expiration date,

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

at the option of the Company

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

McLaren of the

basis for such Termination;

at the option of the Company,

without Cause;

McLaren at any time

with Good Reason (as defined in the 2018 Employment Agreement), upon 30 days’ prior written notice to the Company delivered

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

McLaren at any time

without Good Reason, upon not less than three months’ prior written notice to the Company.

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

whichever comes first, all rights and obligations under the 2018 Employment Agreement shall cease (i) as to the Company, except

for the Company’s obligations for the payment of applicable severance benefits thereunder, and for indemnification thereunder,

and (ii) as to Mr.

whichever comes first, all rights and obligations under the 2018 Employment Agreement shall cease (i) as to the Company, except for the

Company’s obligations for the payment of applicable severance benefits thereunder, and for indemnification thereunder, and (ii)

McLaren, except for his obligation under the restrictive covenants in the 2018 Employment Agreement.

Company and Mr.

McLaren also entered into a Golden Parachute Agreement (the “Golden Parachute Agreement”) on May 23,

No benefits shall be payable under the Golden Parachute Agreement unless there shall have been a change in control of the

Company, as set forth below.

For purposes of the Golden Parachute Agreement, amongst other terms in the Golden Parachute Agreement,

a “change in control of the Company”

shall mean a change of control of a nature that would be required to be reported

in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended.

purposes of the Golden Parachute Agreement, “Cause”

means termination upon (a) the willful and continued failure to

substantially perform duties with the Company after a written demand for substantial performance is delivered by the Board, which

demand specifically identifies the manner in which the Board believes that duties have not substantially been performed, or (b)

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

McLaren also entered into a Golden Parachute Agreement (the “Golden Parachute Agreement”) on May 23, 2018.

No benefits shall be payable under the Golden Parachute Agreement unless there shall have been a change in control of the Company, as

set forth below.

For purposes of the Golden Parachute Agreement, amongst other terms in the Golden Parachute Agreement, a “change

in control of the Company” shall mean a change of control of a nature that would be required to be reported in response to Item

6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended.

purposes of the Golden Parachute Agreement, “Cause” means termination upon (a) the willful and continued failure to substantially

perform duties with the Company after a written demand for substantial performance is delivered by the Board, which demand specifically

identifies the manner in which the Board believes that duties have not substantially been performed, or (b) the willful engaging in conduct,

which is demonstrably and materially injurious to the Company, monetarily or otherwise.

PROPERTIES, INC.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

purposes of the Golden Parachute Agreement, “Good Reason”

means, without express written consent, the occurrence after

a change in control of the Company of any of the following circumstances unless, such circumstances are fully corrected prior

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

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;

a material change

in the geographic location at which Mr.

JUNE 30, 2021

purposes of the Golden Parachute Agreement, “Good Reason” means, without express written consent, the occurrence after a

change in control of the Company of any of the following circumstances unless, such circumstances are fully corrected prior to the date

of Termination specified in the notice of Termination:

a material diminution in

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

a material diminution in

McLaren’s base compensation;

a material change in the

geographic location at which Mr.

McLaren performs his duties;

a material diminution

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

McLaren is required to report, including a requirement

a material diminution in

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

McLaren is required to report, including a requirement that

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

diminution in the budget over which Mr.

a material diminution in

the budget over which Mr.

McLaren retains authority;

a material breach

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

McLaren was entitled, or any compensation

plan in which Mr.

a material breach under

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

McLaren was entitled, or any compensation plan in which

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

McLaren’s total compensation;

a material breach

under any agreement with the Company to provide Mr.

McLaren benefits substantially similar to those enjoyed by him under any

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

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

McLaren with a Company automobile

or allowance in lieu of it, if Mr.

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

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

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

of the Company, or the failure by the Company to provide him with the number of paid vacation days to which he is entitled

on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect

at the time of the change in control of the Company;

McLaren’s total

compensation;

a material breach under

any agreement with the Company to provide Mr.

McLaren benefits substantially similar to those enjoyed by him under any of the Company’s

life insurance, medical, health and accident, or disability plans in which he was participating at the time of the change in control

of the Company, the failure to continue to provide Mr.

McLaren with a Company automobile or allowance in lieu of it, if Mr.

was provided with such an automobile or allowance in lieu of it at the time of the change of control of the Company, the taking of

any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive him of any material

fringe benefit enjoyed by him at the time of the change in control of the Company, or the failure by the Company to provide him with

the number of paid vacation days to which he is entitled on the basis of years of service with the Company in accordance with the

Company’s normal vacation policy in effect at the time of the change in control of the Company;

a change in control of the Company, upon termination of Mr.

McLaren’s employment or during a period of disability, Mr.

will be entitled to the following benefits:

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

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

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

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.

Good Reason, Mr.

McLaren will be entitled to benefits provided below:

The Company will

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

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

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, Mr.

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.

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 Reason, Mr.

will be entitled to benefits provided below:

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.

In lieu of any further

salary payments to Mr.

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

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

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

notice of Termination given in respect of them.

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

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

annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the notice of Termination given

in respect of them.

PROPERTIES, INC.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

The Company will

JUNE 30, 2021

The Company will pay to

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

In lieu of shares

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

McLaren under the Company’s

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

McLaren will receive

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

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

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

McLaren (whether

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

common stock covered by each such option.

The Company will

also pay to Mr.

In lieu of shares of common

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

McLaren under the Company’s stock

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

McLaren will receive an amount

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

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

the date of Termination), over the per share exercise price of each option held by Mr.

McLaren (whether or not then fully exercisable)

plus the amount of any applicable cash appreciation rights, times (ii) the number of the Company’s common stock covered by

each such option.

The Company will also pay

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

12 – 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

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

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

and prospects.

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

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

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

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

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

“estimate,”

“expect,”

“project,”

“intend,”

“plan,”

“believe,”

“will”

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

In particular, these include

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

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

Factors that could cause our actual results of operations

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

section of our annual report on Form

10-K as filed on March 29, 2021.

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

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

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

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

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

New factors emerge from time to

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

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

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

from those contained in any forward-looking statements.

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

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

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”).

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.

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.

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,

(special use)

Land Area (Sq.

Rentable Building Sq.

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.

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.

We intend to accomplish this by prospecting

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

We believe that strategic real estate and

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

We are moving to take advantage of new

opportunities.

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

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

Advisory revenues

Total revenues

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%.

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

Professional fees

General and administrative expenses

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 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

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

We had cash of $757,235

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 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

and sales personnel as the business grows, and

The cost of being

a public company.

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

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

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

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

source of working capital.

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

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

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

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

In exchange for the

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

in the original principal amount of $100,000.

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

19, 2025 (the “Maturity Date”).

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

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

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

KCB may prepay the Debenture at any point after

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

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

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

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

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

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

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

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

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

If KCB defaults on payment

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

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

Conversion rights terminate upon acceptance by the Company of

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

If (i) KCB does not elect to exercise

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

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

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

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

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

and the attainment of new advisory clients.

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

for which terms vary.

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

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

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

As of March 31, 2021 and December 31,

2020, we had an asset concentration related to our Significant Tenant leases.

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.

Financing transactions may include

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

Even if we are able to

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

that would force us to seek alternative financing.

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

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

existing holders of our common stock.

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

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

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

Changes in our business needs,

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

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

We have presented below a summary of the most significant

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

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

following tables summarize our contractual obligations as of March 31, 2021 (dollars in thousands), and the effect these obligations

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

Payments Due by Period

Contractual obligations:

Convertible notes

Interest on convertible notes

Sheet Arrangements

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

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

or that are not reflected in our consolidated financial statements.

Furthermore, we do not have any retained or contingent interest

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

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

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

Accounting Policies and Estimates

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

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

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

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

We continually

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

We base our estimates

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

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

from other sources.

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

of revenues, expenses, assets and liabilities.

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

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation

of the unaudited condensed consolidated financial statements.

properties are carried at cost less accumulated depreciation and amortization.

Betterments, major renovations and certain costs

directly related to the improvement of rental properties are capitalized.

Maintenance and repair expenses are charged to expense

Depreciation is recognized on a straight-line basis over estimated useful lives of the assets, which range from 5

Tenant improvements are amortized on a straight-line basis over the lives of the related leases, which approximate

the useful lives of the assets.

the acquisition of real estate, we assess the fair value of acquired assets (including land, buildings and improvements, identified

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

leases) and allocate the purchase price based on these assessments.

The Company assesses fair value based on estimated cash flow

projections that utilize appropriate discount and capitalization rates and available market information.

Estimates of future cash

flows are based on a number of factors including historical operating results, known trends, and market/economic conditions.

properties are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount

of an asset may not be recoverable.

An impairment exists when the carrying amount of an asset exceeds the aggregate projected

future cash flows over the anticipated holding period on an undiscounted basis.

An impairment loss is measured based on the excess

of the property’s carrying amount over its estimated fair value.

Impairment analyses are based on our current plans, intended

holding periods and available market information at the time the analyses are prepared.

If our estimates of the projected future

cash flows, anticipated holding periods, or market conditions change, our evaluation of impairment losses may be different and

such differences could be material to our consolidated financial statements.

The evaluation of anticipated cash flows is subjective

and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially

from actual results.

have capitalized land, which is not subject to depreciation.

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.

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.

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

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

does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material

effect on the accompanying consolidated financial statements.

Quantitative and Qualitative Disclosures about Market Risk

applicable to smaller reporting companies.

July 1, 2021, the Board of Directors of Zoned Properties, Inc.

(the “Company”) appointed Berekk Blackwell to serve as the

Company’s Chief Operating Officer, effective immediately.

Initially, the Company will pay Mr.

Blackwell an annual base salary of

$ 120,000 for his services as Chief Operating Officer.

July 1, 2021, the Company entered into a 12-month engagement with an individual to act as the Company’s Director of Real Estate.

In connection with this engagement letter, on July 1, 2021, the Company granted the 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.

The grant date of the option was July

1, 2021 and the option expires on July 1, 2031.

The option vests as to (i) 25,000 of such shares on July 1, 2021;

and (ii) as to 10,000

of such shares on July 1, 2022 and each year thereafter through July 1, 2031.

The fair value of this option grant was estimated on the

date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

dividend yield of 0 %;

volatility of 119 %;

risk-free interest rate of 1.48 %;

and an estimated holding period of 10 years.

In connection with these options,

the Company valued these options at a fair value of $69,677 and will record stock-based compensation expense over the vesting period.

August 2, 2021, KCB issued to the Company a second amended and restated convertible debenture (the “Second A&R Debenture”).

The Second A&R Debenture amends and restates in its entirety the A&R Debenture (see Note 5).

Pursuant to the Second A&R Debenture,

the Company and KCB agreed to revise certain terms in the A&R Debenture, as described below.

of Prepayment .

KCB may prepay the Second A&R Debenture at any point after 18 months following the Issue Date, in whole or in

However, if KCB elects to prepay the Second A&R Debenture prior to March 19, 2025 (the “Maturity Date”) or prior

to any conversion in whole or in part, the Company will be entitled to receive a number of KCB Class B units (“Class B Units”),

in addition to such prepayment amount, constituting 10% of the total outstanding KCB Units (as defined in KCB’s Limited Liability

Company Operating Agreement (the “Operating Agreement”)), for the avoidance of doubt, being 10% of the total of KCB’s

Class A units (“Class A Units”) and the Class B Units together, and 10% of the total Percentage Interest (as defined in the

Operating Agreement) following such issuance and at the time of such issuance.

On or after six months from the Issue Date, the Company is entitled to convert all or a portion of the principal balance

and all accrued and unpaid interest due under the Second A&R Debenture (the “Outstanding Amount”) into a number of Class

B Units equal to the proportion of the Outstanding Amount being converted multiplied by the Conversion Percentage, as defined below).

Should KCB default on payment hereof, the Company may, at its option, extend all conversion rights, through and including the date KCB

tenders or attempts to tender payment in full of all amounts due under the Second A&R Debenture.

Conversion rights will terminate

upon acceptance by the Company of payment in full of principal, accrued interest and any other amounts due under the Second A&R Debenture.

The Conversion Percentage will be 33 % of the total number of Units (for the avoidance of doubt, being 33% of the total

of the Class A Units and the Class B Units together), issued and outstanding at the time of conversion, constituting 33% of the total

Percentage Interest (the “Conversion Percentage”).

of Maturity Units .

If (i) KCB does not elect to exercise its prepayment rights prior to the Maturity Date, and (ii) the Company does

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

under the terms of the Second A&R Debenture on the Maturity Date, then the Company will still be entitled to receive a number of

Class B Units, in addition to such payment amount, constituting 8% of the total outstanding Units (for the avoidance of doubt, being

8% of the total of the Class A Units and the Class B Units together) and 8% of the total Percentage Interest (as such term is defined

in the Second A&R Debenture) following such issuance and at the time of such issuance.

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

which are described in Note 5.

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