What changed in this filing

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Item 1A. Risk Factors

2022-03-24 compared with 2021-03-31 · 482 added, 479 removed, 78 unchanged (92% of the section changed)

in our common stock involves a high degree of risk.

You should not invest in our stock unless you are able to bear the complete

loss of your investment.

You should carefully consider the risks described below, as well as other information provided to you

in this annual report on Form 10-K, including information in “Management’s Discussion and Analysis of Financial Condition

and Results of Operations—Cautionary Note Regarding Forward-Looking Information and Factors That May Affect Future Results”

before making an investment decision.

You should not invest in our stock unless you are able to bear the complete loss

of your investment.

You should carefully consider the risks described below, as well as other information provided to you in this annual

report on Form 10-K, including information in “Management’s Discussion and Analysis of Financial Condition and Results of

Operations—Cautionary Note Regarding Forward-Looking Information and Factors That May Affect Future Results” before making

an investment decision.

The risks and uncertainties described below are not the only ones facing Zoned Properties.

Additional risks and uncertainties not presently known to us or that we currently believe are immaterial may also impair our business

If any of the following risks actually occur, our business, financial condition or results of operations could be

materially adversely affected, the value of our common stock could decline, and you may lose all or part of your investment.

Additional risks and

uncertainties not presently known to us or that we currently believe are immaterial may also impair our business operations.

the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected,

the value of our common stock could decline, and you may lose all or part of your investment.

Related to Our Business and Our Industry

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medical marijuana grow facilities, or with respect to any other activity in the cannabis industry.

Moreover, we are subject to

all risks inherent in a developing a new business enterprise.

Our likelihood of success must be considered in light of the problems,

expenses, difficulties, complications, and delays frequently encountered in connection with establishing a new business and the

competitive and regulatory environment in which we operate.

For example, the regulated cannabis industry is new and may not succeed,

particularly should the federal government change course and decide to prosecute those dealing in medical marijuana.

If that happens

there may not be an adequate market for our properties or other activities we propose to engage in.

should further consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by

companies that, like us, are in their early stages.

For example, unanticipated expenses, delays and or complications with build

outs, zoning issues, legal disputes with neighbors, local governments, communities and or tenants.

We may not successfully address

these risks and uncertainties or successfully implement our operating strategies.

If we fail to do so, it could materially harm

our business to the point of having to cease operations and could impair the value of our common stock to the point investors

may lose their entire investment.

Moreover, we are subject to all risks

inherent in a developing a new business enterprise.

Our likelihood of success must be considered in light of the problems, expenses,

difficulties, complications, and delays frequently encountered in connection with establishing a new business and the competitive and

regulatory environment in which we operate.

For example, the regulated cannabis industry is new and may not succeed, particularly should

the federal government change course and decide to prosecute those dealing in medical marijuana.

If that happens there may not be an

adequate market for our properties or other activities we propose to engage in.

should further consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies

that, like us, are in their early stages.

For example, unanticipated expenses, delays and or complications with build outs, zoning issues,

legal disputes with neighbors, local governments, communities and or tenants.

We may not successfully address these risks and uncertainties

or successfully implement our operating strategies.

If we fail to do so, it could materially harm our business to the point of having

to cease operations and could impair the value of our common stock to the point investors may lose their entire investment.

may be unable to continue as a going concern if we do not successfully raise additional capital.

may need to raise additional funds through public or private debt or equity financings, as well as obtain credit from vendors

to be able to fully execute our business plan.

If we cannot raise additional capital, we may be otherwise unable to achieve our

goals or continue our property development.

While we believe that we will be able to raise the capital we need to continue our

operations, there can be no assurances that we will be successful in these efforts or will be able to resolve any liquidity issues

or eliminate our operating losses.

In addition, any additional capital raised through the sale of equity may dilute your ownership

We may not be able to raise additional funds on favorable terms, or at all.

If we are unable to obtain additional funds

or credit from our vendors, we may be unable to execute our business plan and you could lose your investment.

we may be unable to identify and or successfully acquire properties which are suitable for our business, our financial condition

may be negatively affected.

may need to raise additional funds through public or private debt or equity financings, as well as obtain credit from vendors to be able

to fully execute our business plan.

If we cannot raise additional capital, we may be otherwise unable to achieve our goals or continue

our property development.

While we believe that we will be able to raise the capital we need to continue our operations, there can be

no assurances that we will be successful in these efforts or will be able to resolve any liquidity issues or eliminate our operating

In addition, any additional capital raised through the sale of equity may dilute your ownership interest.

We may not be able

to raise additional funds on favorable terms, or at all.

If we are unable to obtain additional funds or credit from our vendors, we may

be unable to execute our business plan and you could lose your investment.

we may be unable to identify and or successfully acquire properties which are suitable for our business, our financial condition may

be negatively affected.

business plan involves the identification and the successful acquisition of properties, which are zoned for medical cannabis businesses,

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The properties we acquire will be leased to regulated cannabis operators.

Local governments

must approve and adopt zoning ordinances for medical cannabis facilities and retail dispensaries.

A lack of properly zoned real

estate may reduce our prospects and limit our opportunity for growth and or increase the cost at which suitable properties are

available to us.

Conversely a surplus of real estate zoned for medical cannabis establishments may reduce demand and prices we

are able to charge for properties we may have previously acquired.

addition, some jurisdictions, such as Arizona, impose limits on the number of medical cannabis dispensaries that will be permitted

to operate within designated geographic areas.

Such limitations inherently place constraints on the number of properties we acquire

for lease to operators in the cannabis industry.

we fail to diversify our property portfolio or advisory and real estate services offered, downturns relating to certain industries

or business sectors or the financial stability of our significant tenants may have a significant adverse impact on our assets

and our ability to pay our operating expenses or pay dividends than if we had a diversified property portfolio and service offerings.

Local governments must approve

and adopt zoning ordinances for medical cannabis facilities and retail dispensaries.

A lack of properly zoned real estate may reduce

our prospects and limit our opportunity for growth and or increase the cost at which suitable properties are available to us.

a surplus of real estate zoned for medical cannabis establishments may reduce demand and prices we are able to charge for properties

we may have previously acquired.

addition, some jurisdictions, such as Arizona, impose limits on the number of medical cannabis dispensaries that will be permitted to

operate within designated geographic areas.

Such limitations inherently place constraints on the number of properties we acquire for

lease to operators in the cannabis industry.

we fail to diversify our property portfolio or advisory and real estate services offered, downturns relating to certain industries or

business sectors or the financial stability of our significant tenants may have a significant adverse impact on our assets and our ability

to pay our operating expenses or pay dividends than if we had a diversified property portfolio and service offerings.

we intend to diversify our portfolio of properties, we are not required to observe specific diversification criteria.

our total assets are concentrated into a limited number of tenants who were considered related parties through December 31, 2018

and are considered Significant Tenets thereafter.

To the extent that our total assets are concentrated in a limited number of

tenants that are in the regulated cannabis industry, downturns relating generally to such industry or business sector, or a decline

in the financial stability of our Significant Tenants may result in defaults on all of our leases within a short time period,

which may reduce our net income and the value of our common stock and accordingly, limit our ability to pay or operating expenses

or pay dividends to our stockholders.

As of December 31, 2020 and 2019, we had an asset concentration related to our Significant

Tenant leases at our Tempe, Chino Valley, Green Valley and Kingman, Arizona properties.

As of December 31, 2020 and 2019, these

Significant tenants represented approximately 83.2% and 87.1% of total assets, respectively.

If our tenants are prohibited from

operating 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 foot that may be less than our current rate per square foot.

adverse economic or real estate developments in the medical cannabis industry could adversely affect our operating results and

our ability to collect rent from out tenants, pay our operating expenses or pay dividends to our stockholders.

included in exhibit 99.1 and 99.2 to this report, we have included audited financial statements of our Significant Tenants since

they represent material information and are necessary for the protection of investors.

our business is dependent upon continued market acceptance by our tenants’

consumers, any negative trends will adversely

affect our business operations.

Therefore, our

total assets are concentrated into a limited number of tenants who were considered significant tenants.

To the extent that our total

assets are concentrated in a limited number of tenants that are in the regulated cannabis industry, downturns relating generally to such

industry or business sector, or a decline in the financial stability of our Significant Tenants may result in defaults on all of our

leases within a short time period, which may reduce our net income and the value of our common stock and accordingly, limit our ability

to pay or operating expenses or pay dividends to our stockholders.

As of December 31, 2021 and 2020, we had an asset concentration related

to our Significant Tenant leases at our Tempe, Chino Valley, Green Valley and Kingman, Arizona properties.

As of December 31, 2021 and

2020, these Significant tenants represented approximately 79.2% and 83.2% of total assets, respectively.

If our tenants are prohibited

from operating 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 foot that may be less than our current rate per square foot.

adverse economic or real estate developments in the medical cannabis industry could adversely affect our operating results and our ability

to collect rent from out tenants, pay our operating expenses or pay dividends to our stockholders.

As included in exhibit 99.1 to this Annual Report on Form 10-K, we

have included audited financial statements of our Significant Tenants since they represent material information and are necessary for

the protection of investors.

our business is dependent upon continued market acceptance by our tenants’ consumers, any negative trends will adversely affect

our business operations.

tenants are substantially dependent on continued market acceptance and proliferation of consumers of regulated cannabis.

that as cannabis becomes more accepted, the stigma associated with cannabis use will diminish and as a result, consumer demand

will continue to grow.

And while we believe that the market and opportunity in the cannabis space continues to grow, we cannot

predict the future growth rate and size of the market.

Any negative outlook on the cannabis industry will adversely affect our

tenants’

business operations and their ability to pay rent to us.

We believe that

as cannabis becomes more accepted, the stigma associated with cannabis use will diminish and as a result, consumer demand will continue

And while we believe that the market and opportunity in the cannabis space continues to grow, we cannot predict the future growth

rate and size of the market.

Any negative outlook on the cannabis industry will adversely affect our tenants’ business operations

and their ability to pay rent to us.

addition, it is believed by many that large well-funded businesses may have a strong economic opposition to the cannabis industry.

We believe that the pharmaceutical industry clearly does not want to cede control of any product that could generate significant

For example, medical cannabis will likely adversely impact the existing market for the current “marijuana pill”

sold by the mainstream pharmaceutical industry, should cannabis displace other drugs or encroach upon the pharmaceutical industry’s

The pharmaceutical industry is well funded with a strong and experienced lobby that eclipses the funding of the medical

cannabis movement.

Any inroads the pharmaceutical could make in halting the impending cannabis industry could have a detrimental

impact on our proposed business.

believe that the pharmaceutical industry clearly does not want to cede control of any product that could generate significant revenue.

For example, medical cannabis will likely adversely impact the existing market for the current “marijuana pill” sold by the

mainstream pharmaceutical industry, should cannabis displace other drugs or encroach upon the pharmaceutical industry’s products.

The pharmaceutical industry is well funded with a strong and experienced lobby that eclipses the funding of the medical cannabis movement.

Any inroads the pharmaceutical could make in halting the impending cannabis industry could have a detrimental impact on our proposed

we buy and lease property, we will be subject to general real estate risks.

will be subject to risks generally incident to the ownership of real estate, including:

(a) changes in general economic or local

(a) changes in general economic or local conditions;

(b) changes in supply of, or demand for, similar or competing properties in the area;

difficulties or defaults by tenants or other parties;

by tenants or other parties;

(d) increases in operating costs, such as taxes and insurance;

(e) the inability

to achieve full stabilized occupancy at rental rates adequate to produce targeted returns;

(f) periods of high interest rates

and tight money supply;

(g) excess supply of rental properties in the market area;

(h) liability for uninsured losses resulting

from natural disasters or other perils;

(e) the inability to achieve full stabilized

occupancy at rental rates adequate to produce targeted returns;

(f) periods of high interest rates and tight money supply;

supply of rental properties in the market area;

(h) liability for uninsured losses resulting from natural disasters or other perils;

(i) liability for environmental hazards;

and (j) changes in tax, real estate, environmental,

zoning or other laws or regulations.

For these and other reasons, no assurance can be given that we will be profitable.

and (j) changes in tax, real estate, environmental, zoning or other laws or regulations.

these and other reasons, no assurance can be given that we will be profitable.

growth depends on external sources of capital, which may not be available on favorable terms or at all.

In addition, banks and

other financial institutions may be reluctant to enter into lending transactions with us, including secured lending, because our

properties are used in the cannabis industry.

If this source of funding is unavailable to us, our growth may be limited and our

business may be materially adversely affected.

In addition, banks and other

financial institutions may be reluctant to enter into lending transactions with us, including secured lending, because our properties

are used in the cannabis industry.

If this source of funding is unavailable to us, our growth may be limited and our business may be

materially adversely affected.

ability to acquire, operate and sell properties, engage in the business activities that we have planned and achieve positive financial

performance depends, in large measure, on our ability to obtain financing in amounts and on terms that are favorable.

markets in the United States in general, and in the cannabis sector in particular, have undergone a turbulent period in which

lending was severely restricted.

Although there appear to be signs that financial institutions are resuming lending, the market

has not yet returned to its pre-2008 state.

The cannabis sector experienced significant volatility in 2019 and 2020 and such volatility

is expected to continue in 2021.

The capital markets

in the United States in general, and in the cannabis sector in particular, have undergone a turbulent period in which lending was severely

Although there appear to be signs that financial institutions are resuming lending, the market has not yet returned to its

pre-2008 state.

The cannabis sector experienced significant volatility in 2019 and 2020 and such volatility is expected to continue in

Obtaining favorable financing in the current environment remains challenging.

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We may not be in a position to take advantage

of attractive investment opportunities for growth if we are unable, due to global or regional economic uncertainty, changes in

the state or federal regulatory environment relating to the medical-use cannabis industry, changes in market conditions for the

regulated cannabis industry, our own operating or financial performance or otherwise, to access capital markets on a timely basis

and on favorable terms, or at all.

access to capital will depend upon a number of factors over which we have little or no control, including general market conditions

and the market’s perception of our current and potential future earnings.

If general economic instability or downturn, or

volatility within the cannabis sector, leads to an inability to borrow at attractive rates or at all, our ability to obtain capital

could be negatively impacted.

In addition, banks and other financial institutions may be reluctant to enter into lending transactions

with us, particularly secured lending, because our properties are used in the cultivation, production or dispensing of medical-use

If this source of funding is unavailable to us, our growth may be limited and our business may be materially adversely

we are unable to obtain capital on terms and conditions that we find acceptable, we likely will have to curtail operations and

reduce the number of properties we purchase in the future.

In addition, our ability to refinance all or any debt we may incur

in the future, on acceptable terms or at all, is subject to all of the above factors, and will also be affected by our future

financial position, results of operations and cash flows, which additional factors are also subject to significant uncertainties,

and therefore we may be unable to refinance any debt we may incur in the future, as it matures, on acceptable terms or at all.

All of these events would have a material adverse effect on our business, financial condition, liquidity and results of operations.

addition, securities clearing firms may refuse to accept deposits of our securities, which may negatively impact the trading of

our securities and have a material adverse impact on our ability to obtain capital.

we will compete with others for suitable properties, competition will result in higher costs that could materially affect our

financial condition.

will experience competition for real estate investments from individuals, corporations and other entities engaged in real estate

investment activities, many of whom have greater financial resources than us.

Competition for investments may have the effect

of increasing costs and reducing returns to our investors.

of attractive investment opportunities for growth if we are unable, due to global or regional economic uncertainty, changes in the state

or federal regulatory environment relating to the medical-use cannabis industry, changes in market conditions for the regulated cannabis

industry, our own operating or financial performance or otherwise, to access capital markets on a timely basis and on favorable terms,

access to capital will depend upon a number of factors over which we have little or no control, including general market conditions and

the market’s perception of our current and potential future earnings.

If general economic instability or downturn, or volatility

within the cannabis sector, leads to an inability to borrow at attractive rates or at all, our ability to obtain capital could be negatively

In addition, banks and other financial institutions may be reluctant to enter into lending transactions with us, particularly

secured lending, because our properties are used in the cultivation, production or dispensing of medical-use cannabis.

If this source

of funding is unavailable to us, our growth may be limited and our business may be materially adversely affected.

we are unable to obtain capital on terms and conditions that we find acceptable, we likely will have to curtail operations and reduce

the number of properties we purchase in the future.

In addition, our ability to refinance all or any debt we may incur in the future,

on acceptable terms or at all, is subject to all of the above factors, and will also be affected by our future financial position, results

of operations and cash flows, which additional factors are also subject to significant uncertainties, and therefore we may be unable

to refinance any debt we may incur in the future, as it matures, on acceptable terms or at all.

All of these events would have a material

adverse effect on our business, financial condition, liquidity and results of operations.

addition, securities clearing firms may refuse to accept deposits of our securities, which may negatively impact the trading of our securities

and have a material adverse impact on our ability to obtain capital.

we will compete with others for suitable properties, competition will result in higher costs that could materially affect our financial

will experience competition for real estate investments from individuals, corporations and other entities engaged in real estate investment

activities, many of whom have greater financial resources than us.

Competition for investments may have the effect of increasing costs

and reducing returns to our investors.

we are liable for hazardous substances on our properties, environmental liabilities are possible and can be costly.

state and local laws impose liability on a landowner for releases or the otherwise improper presence on the premises of hazardous

state and local laws impose liability on a landowner for releases or the otherwise improper presence on the premises of hazardous substances.

This liability is without regard to fault for, or knowledge of, the presence of such substances.

A landowner may be

held liable for hazardous materials brought onto a property before it acquired title and for hazardous materials that are not

discovered until after it sells the property.

A landowner may be held liable for hazardous

materials brought onto a property before it acquired title and for hazardous materials that are not discovered until after it sells the

Similar liability may occur under applicable state law.

Sellers of properties may

make only limited representations as to the absence of hazardous substances.

If any hazardous materials are found within our properties

in violation of law at any time, we may be liable for all cleanup costs, fines, penalties and other costs.

This potential liability

will continue after we sell the properties and may apply to hazardous materials present within the properties before we acquire

the properties.

If losses arise from hazardous substance contamination, which cannot be recovered from a responsible party, the

financial viability of the properties may be adversely affected.

It is possible that we will purchase properties with known or

unknown environmental problems, which may require material expenditures for remediation.

Sellers of properties may make only limited representations as to the

absence of hazardous substances.

If any hazardous materials are found within our properties in violation of law at any time, we may be

liable for all cleanup costs, fines, penalties and other costs.

This potential liability will continue after we sell the properties and

may apply to hazardous materials present within the properties before we acquire the properties.

If losses arise from hazardous substance

contamination, which cannot be recovered from a responsible party, the financial viability of the properties may be adversely affected.

It is possible that we will purchase properties with known or unknown environmental problems, which may require material expenditures

for remediation.

we may not be adequately insured, we could experience significant liability for uninsured events.

our tenants currently carry comprehensive insurance on our properties, including fire, liability and extended coverage insurance,

there are certain risks that may be uninsurable or not insurable on terms that management believes to be economical.

management may not obtain insurance against floods, terrorism, mold-related claims, or earthquake insurance.

If such an event

occurs to, or causes the damage or destruction of, a property, we could suffer financial losses.

our tenants currently carry comprehensive insurance on our properties, including fire, liability and extended coverage insurance, there

are certain risks that may be uninsurable or not insurable on terms that management believes to be economical.

For example, management

may not obtain insurance against floods, terrorism, mold-related claims, or earthquake insurance.

If such an event occurs to, or causes

the damage or destruction of, a property, we could suffer financial losses.

we are found non-compliance with the Americans with Disabilities Act, we will be subject to significant liabilities.

any of our properties are not in compliance with the Americans with Disabilities Act of 1990, as amended (the “ADA”),

we may be required to pay for any required improvements.

Under the ADA, public accommodations must meet certain federal requirements

related to access and use by disabled persons.

The ADA requirements could require significant expenditures and could result in

the imposition of fines or an award of damages to private litigants.

We cannot assure that ADA violations do not or will not exist

at any of our properties.

inability to effectively manage our growth could harm our business and materially and adversely affect our operating results and

financial condition .

any of our properties are not in compliance with the Americans with Disabilities Act of 1990, as amended (the “ADA”), we

may be required to pay for any required improvements.

Under the ADA, public accommodations must meet certain federal requirements related

to access and use by disabled persons.

The ADA requirements could require significant expenditures and could result in the imposition

of fines or an award of damages to private litigants.

We cannot assure that ADA violations do not or will not exist at any of our properties.

inability to effectively manage our growth could harm our business and materially and adversely affect our operating results and financial

strategy envisions growing our business.

Any growth in or expansion of our business is likely to continue to place a strain on

our management and administrative resources, infrastructure and systems.

As with other growing businesses, we expect that we will

need to further refine and expand our business development capabilities, our systems and processes and our access to financing

We also will need to hire, train, supervise and manage new employees.

These processes are time consuming and expensive,

will increase management responsibilities and will divert management attention.

Any growth in or expansion of our business is likely to continue to place a strain on our management

and administrative resources, infrastructure and systems.

As with other growing businesses, we expect that we will need to further refine

and expand our business development capabilities, our systems and processes and our access to financing sources.

We also will need to

hire, train, supervise and manage new employees.

These processes are time consuming and expensive, will increase management responsibilities

and will divert management attention.

We cannot assure you that we will be able to:

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incorporate the components of any business or product line that we may acquire in our effort to achieve growth.

inability or failure to manage our growth and expansion effectively could harm our business and materially and adversely affect

our operating results and financial condition.

inability or failure to manage our growth and expansion effectively could harm our business and materially and adversely affect our operating

results and financial condition.

global economic, business or political conditions could adversely affect our business, financial condition or results of operations.

results of operations could be adversely affected by general conditions in the global economy and in the global financial markets,

including conditions that are outside of our control, including the impact of health and safety concerns, such as those relating

to the current COVID-19 outbreak.

The most recent global financial crisis caused extreme volatility and disruptions in the capital

and credit markets.

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

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

A weak or declining

economy could strain our tenants, possibly resulting in delays in tenant payments.

Any of the foregoing could harm our business

and we cannot anticipate all the ways in which the current economic climate and financial market conditions could adversely impact

our business.

results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including

conditions that are outside of our control, including the impact of health and safety concerns, such as those relating to the current

COVID-19 outbreak.

The most recent global financial crisis caused extreme volatility and disruptions in the capital and credit markets.

A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for our properties

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

A weak or declining economy could strain our

tenants, possibly resulting in delays in tenant payments.

Any of the foregoing could harm our business and we cannot anticipate all the

ways in which the current economic climate and financial market conditions could adversely impact our business.

will be required to attract and retain top quality talent to compete in the marketplace.

believe our future growth and success will depend in part on our ability to attract and retain highly skilled managerial, sales

and marketing, and finance personnel.

believe our future growth and success will depend in part on our ability to attract and retain highly skilled managerial, sales and marketing,

and finance personnel.

There can be no assurance of success in attracting and retaining such personnel.

in qualified personnel could limit our ability to compete in the marketplace.

are dependent on Bryan McLaren, our Chief Executive Officer, President, Chief Financial Officer and Chairman of the Board, and

the loss of this officer could harm our business and prevent us from implementing our business plan in a timely manner.

view of his direct relationships with industry partners that directly contribute to our business development strategy, our success

depends substantially upon the continued services of Mr.

In January 2019, we purchased a one-year key person life insurance

policy on Mr.

McLaren with a base coverage amount of $8,000,000 renewable annually at a 10-year fixed guaranteed premium.

policy was renewed in January 2021.

Shortages in qualified personnel

could limit our ability to compete in the marketplace.

are dependent on Bryan McLaren, our Chief Executive Officer, President, Chief Financial Officer and Chairman of the Board, and the loss

of this officer could harm our business and prevent us from implementing our business plan in a timely manner.

In view of his direct relationships with industry

partners that directly contribute to our business development strategy, our success depends substantially upon the continued services

We previously purchased a one-year key person life insurance policy on Mr.

McLaren with a base coverage amount of $8,000,000

renewable annually at a 10-year fixed guaranteed premium.

The policy was renewed in January 2022.

The loss of Mr.

McLaren’s services could have a material adverse effect on our business

and operations.

McLaren’s services

could have a material adverse effect on our business and operations.

Related to Government Regulation

remains illegal under federal law, and therefore, strict enforcement of federal laws regarding marijuana would likely result in

our inability and the inability of our tenants to execute our respective business plans.

remains illegal under federal law, and therefore, strict enforcement of federal laws regarding marijuana would likely result in our inability

and the inability of our tenants to execute our respective business plans.

is a Schedule I controlled substance under 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.

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.

Supreme Court has ruled in United States v.

Oakland Cannabis Buyers’

and Gonzales v.

Raich that it is the federal government that has the right to regulate and criminalize marijuana,

even for medical purposes.

We would likely be unable to execute our business plan if the federal government were to strictly enforce

federal law regarding marijuana.

January 4, 2018, then-U.S.

Attorney General Jeff Sessions issued the Sessions Memo, rescinding the Cole Memo and related internal

guidance issued by the DOJ regarding federal law enforcement priorities involving marijuana.

The Sessions Memo instructs federal

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

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

Attorneys’

Manual governing all

federal prosecutions.

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

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

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

community.”

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

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

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

Attorney General Merrick Garland

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, however, 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

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 in regard to 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.

is unclear at this time what impact the Sessions Memo will have on the medical-use marijuana industry.

One legislative safeguard

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

For fiscal years 2015, 2016, 2017 and 2018, Congress adopted a so-called “rider”

provision to the Consolidated

Appropriations Acts (formerly referred to as the Rohrabacher-Farr Amendment and currently referred to as 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.

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.

prosecutors have significant discretion, however, and no assurance can be given that the federal prosecutor in each judicial district

where we own a property will not choose to strictly enforce the federal laws governing marijuana production or distribution.

change in the federal government’s enforcement posture with respect to state-licensed cultivation of medical-use cannabis,

including the enforcement postures of individual federal prosecutors in judicial districts where we own or may purchase properties,

would result in our inability to execute our business plan, and we would likely suffer significant losses with respect to our

investment in marijuana facilities in the United States, which would adversely affect the trading price of our securities.

following any such change in the federal government’s enforcement position, we could be subject to criminal prosecution,

which could lead to imprisonment and/or the imposition of penalties, fines, or forfeiture.

of properties located in close proximity to our properties may assert claims against us regarding the use of the property as a

marijuana dispensary or marijuana cultivation and processing facility, which if successful, could materially and adversely affect

our business.

of properties located in close proximity to our properties may assert claims against us regarding the use of our properties as

cannabis dispensaries or for cannabis cultivation and processing, including assertions that the use of the property constitutes

a nuisance that diminishes the market value of such owner’s nearby property.

Such property owners may also attempt to assert

such a claim in federal court as a civil matter under the Racketeer Influenced and Corrupt Organizations Act.

If a property owner

were to assert such a claim against us, we may be required to devote significant resources and costs to defending ourselves against

such a claim, and if a property owner were to be successful on such a claim, our tenants may be unable to continue to operate

their business in its current form at the property, which could materially adversely impact the tenant’s business and the

value of our property, our business and financial results and the trading price of our securities.

Oakland Cannabis Buyers’ Coop.

Raich that it is the federal government that has the right to regulate and criminalize marijuana, even for medical purposes.

would likely be unable to execute our business plan if the federal government were to strictly enforce federal law regarding marijuana.

January 4, 2018, former U.S.

Attorney General Jeff Sessions issued a new memorandum (the “Sessions Memo”) which rescinded

the Cole Memo.

The Sessions Memo stated, in part, that current law reflects “Congress’ determination that cannabis is a dangerous

drug and cannabis activity is a serious crime,” and Mr.

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.

Federal 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.

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.

One legislative safeguard for the medical cannabis

industry, appended to the federal budget bill, remains in place following the rescission of the Cole Memo.

For several years, Congress

has adopted a so-called “rider” provision to the Consolidated Appropriations Act (formerly referred to as the Rohrabacher-Farr

Amendment and currently referred to as 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

Despite the rescission of the Cole Memo, the DOJ appears to continue to adhere to the enforcement priorities set forth in the Cole

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.

When she was a U.S.

Senator, Vice President Kamala Harris was

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 state level.

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 U.S.

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

federal 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

federal law, nor may it provide a defense to any federal proceeding which may be brought against the Company.

of December 31, 2021, 39 states, plus the District of Columbia (and the territories of Guam, Puerto Rico, the U.S.

Virgin Islands and

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

In 18 of 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

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.

In July 2021, Virginia became the first southern

state to legalize cannabis for adult use.

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

cannabis for adult use.

will continue to monitor compliance on an ongoing basis in accordance with our compliance program and standard operating procedures.

While our operations are in full compliance with all applicable state laws, regulations and licensing requirements, such activities remain

illegal under federal law.

There are significant risks associated with our business.

of properties located in close proximity to our properties may assert claims against us regarding the use of the property as a marijuana

dispensary or marijuana cultivation and processing facility, which if successful, could materially and adversely affect our business.

of properties located in close proximity to our properties may assert claims against us regarding the use of our properties as cannabis

dispensaries or for cannabis cultivation and processing, including assertions that the use of the property constitutes a nuisance that

diminishes the market value of such owner’s nearby property.

Such property owners may also attempt to assert such a claim in federal

court as a civil matter under the Racketeer Influenced and Corrupt Organizations Act.

If a property owner were to assert such a claim

against us, we may be required to devote significant resources and costs to defending ourselves against such a claim, and if a property

owner were to be successful on such a claim, our tenants may be unable to continue to operate their business in its current form at the

property, which could materially adversely impact the tenant’s business and the value of our property, our business and financial

results and the trading price of our securities.

and our tenants may have difficulty accessing the services of banks, which may make it difficult to contract for real estate needs.

transactions involving proceeds generated by cannabis and cannabis-related conduct can form the basis for prosecution under the

federal money laundering statutes, unlicensed money transmitter statute and the Bank Secrecy Act.

Previous guidance issued by

FinCEN clarifies how financial institutions can provide services to marijuana-related businesses consistent with their obligations

under the Bank Secrecy Act.

Prior to the DOJ’s announcement in 2018 of the rescission of the Cole Memo and related memoranda,

supplemental guidance from the DOJ directed federal prosecutors to consider the federal enforcement priorities enumerated in the

Cole Memo when determining whether to charge institutions or individuals with any of the financial crimes described above based

upon marijuana-related activity.

It is unclear what impact the rescission of the Cole Memo will have, but federal prosecutors

may increase enforcement activities against institutions or individuals that are conducting financial transactions related to

marijuana activities.

The increased uncertainty surrounding financial transactions related to marijuana activities may also result

in financial institutions discontinuing services to the marijuana industry.

transactions involving proceeds generated by marijuana-related conduct can form the basis for prosecution under the federal money laundering

statutes, unlicensed money transmitter statute and the Bank Secrecy Act.

Previous guidance issued by the Financial Crimes Enforcement

Network, a division of the U.S.

Department of the Treasury (“FinCEN”), clarifies how financial institutions can provide services

to marijuana-related businesses consistent with their obligations under the Bank Secrecy Act.

Prior to the DOJ’s announcement in

2018 of the rescission of the Cole Memo and related memoranda, supplemental guidance from the DOJ directed federal prosecutors to consider

the federal enforcement priorities enumerated in the Cole Memo when determining whether to charge institutions or individuals with any

of the financial crimes described above based upon marijuana-related activity.

Consequently,

those businesses involved in the marijuana industry continue to encounter difficulty establishing banking relationships, which

may increase over time.

Our inability to maintain our current bank accounts would make it difficult for us to operate our business,

increase our operating costs, and pose additional operational, logistical and security challenges and could result in our inability

to implement our business plan.

inability of our current and potential tenants to open accounts and continue using the services of banks will limit their ability

to enter into triple-net lease arrangements with us or may result in their default under our lease agreements, either of which

could materially harm our business and the trading price of our securities.

and regulations affecting the regulated cannabis and marijuana industry are constantly changing, which could materially adversely

affect our operations, and we cannot predict the impact that future regulations may have on us.

state and federal marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require

us to incur substantial costs associated with compliance or alter our business plan.

In addition, violations of these laws, or

allegations of such violations, could disrupt our business and result in a material adverse effect on its operations.

it is possible that regulations may be enacted in the future that will be directly applicable to our proposed business.

predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional

governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.

regulation of marijuana and the possible registration of facilities where medical marijuana is grown could negatively affect the

marijuana industry, which would directly affect our financial condition.

the federal government legalize marijuana for medical use, it is possible that the FDA would seek to regulate it under the Food,

Drug and Cosmetics Act of 1938.

Additionally, the FDA may issue rules and regulations including cGMPs (certified good manufacturing

practices) related to the growth, cultivation, harvesting and processing of medical marijuana.

Clinical trials may be needed to

verify efficacy and safety.

It is also possible that the FDA would require that facilities where medical marijuana is grown be

registered with the FDA and comply with certain federally prescribed regulations.

In the event that some or all of these regulations

are imposed, we do not know what the impact would be on the medical marijuana industry, what costs, requirements and possible

prohibitions may be enforced.

If we or our tenants are unable to comply with the regulations and or registration as prescribed

by the FDA, we and or our tenants may be unable to continue to operate their and our business in its current form or at all.

those businesses involved in the marijuana industry continue to encounter difficulty establishing banking relationships, which may increase

Our inability to maintain our current bank accounts would make it difficult for us to operate our business, increase our operating

costs, and pose additional operational, logistical and security challenges and could result in our inability to implement our business

inability of our current and potential tenants to open accounts and continue using the services of banks will limit their ability to

enter into triple-net lease arrangements with us or may result in their default under our lease agreements, either of which could materially

harm our business and the trading price of our securities.

and regulations affecting the regulated cannabis and marijuana industry are constantly changing, which could materially adversely affect

our operations, and we cannot predict the impact that future regulations may have on us.

state and federal marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require us to

incur substantial costs associated with compliance or alter our business plan.

In addition, violations of these laws, or allegations

of such violations, could disrupt our business and result in a material adverse effect on its operations.

In addition, it is possible

that regulations may be enacted in the future that will be directly applicable to our proposed business.

We cannot predict the nature

of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations

or administrative policies and procedures, when and if promulgated, could have on our business.

regulation of marijuana and the possible registration of facilities where medical marijuana is grown could negatively affect the marijuana

industry, which would directly affect our financial condition.

the federal government legalize marijuana for medical use, it is possible that the FDA would seek to regulate it under the Food, Drug

and Cosmetics Act of 1938.

Additionally, the FDA may issue rules and regulations including cGMPs (certified good manufacturing practices)

related to the growth, cultivation, harvesting and processing of medical marijuana.

Clinical trials may be needed to verify efficacy

It is also possible that the FDA would require that facilities where medical marijuana is grown be registered with the FDA

and comply with certain federally prescribed regulations.

In the event that some or all of these regulations are imposed, we do not know

what the impact would be on the medical marijuana industry, what costs, requirements and possible prohibitions may be enforced.

or our tenants are unable to comply with the regulations and or registration as prescribed by the FDA, we and or our tenants may be unable

to continue to operate their and our business in its current form or at all.

Related to Our Common Stock

common stock is quoted on the OTCQB, which may limit the liquidity and price of our common stock more than if our common stock

were listed on The NASDAQ Stock Market or another national exchange.

common stock is quoted on the OTCQB, which may limit the liquidity and price of our common stock more than if our common stock were listed

on The NASDAQ Stock Market or another national exchange.

securities are currently quoted on the OTCQB, an inter-dealer automated quotation system for equity securities.

Quotation of our

securities on the OTCQB may limit the liquidity and price of our securities more than if our securities were listed on The NASDAQ

Stock Market (“NASDAQ”) or another national exchange.

As an OTCQB company, we do not attract the extensive analyst

coverage that accompanies companies listed on national securities exchanges.

Further, institutional and other investors may have

investment guidelines that restrict or prohibit investing in securities traded on the OTCQB.

These factors may have an adverse

impact on the trading and price of our common stock.

Quotation of our securities

on the OTCQB may limit the liquidity and price of our securities more than if our securities were listed on The NASDAQ Stock Market (“NASDAQ”)

or another national exchange.

As an OTCQB company, we do not attract the extensive analyst coverage that accompanies companies listed

on national securities exchanges.

Further, institutional and other investors may have investment guidelines that restrict or prohibit

investing in securities traded on the OTCQB.

These factors may have an adverse impact on the trading and price of our common stock.

trading price of our common stock may decrease due to factors beyond our control.

stock market from time to time has experienced extreme price and volume fluctuations, which have particularly affected the market

prices for smaller reporting companies and which often have been unrelated to the operating performance of the companies.

broad market fluctuations may adversely affect the market price of our common stock.

If our shareholders sell substantial amounts

of their common stock in the public market, the price of our common stock could fall.

These sales also might make it more difficult

for us to sell equity, or equity-related securities, in the future at a price we deem appropriate.

market price of our common stock may also fluctuate significantly in response to the following factors, most of which are beyond

stock market from time to time has experienced extreme price and volume fluctuations, which have particularly affected the market prices

for smaller reporting companies and which often have been unrelated to the operating performance of the companies.

These broad market

fluctuations may adversely affect the market price of our common stock.

If our shareholders sell substantial amounts of their common

stock in the public market, the price of our common stock could fall.

These sales also might make it more difficult for us to sell equity,

or equity-related securities, in the future at a price we deem appropriate.

market price of our common stock may also fluctuate significantly in response to the following factors, most of which are beyond our

in our quarterly operating results,

2 unchanged sentences

announcements

by us or our competitors of significant new contracts, acquisitions, strategic partnerships or joint ventures, or capital

by us or our competitors of significant new contracts, acquisitions, strategic partnerships or joint ventures, or capital commitments,

of a major customer, partner or joint venture participant and

1 unchanged sentence

such fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance.

a result, stockholders may be unable to sell their shares, or may be forced to sell them at a loss.

market price for our common shares is particularly volatile given our status as a relatively unknown company with a small and

thinly traded public float, limited operating history and lack of profits which could lead to wide fluctuations in our share price.

You may be unable to sell your common shares at or above your purchase price, which may result in substantial losses to you.

market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect

that our share price will continue to be more volatile than a seasoned issuer for the indefinite future.

The volatility in our

share price is attributable to a number of factors.

stockholders may be unable to sell their shares, or may be forced to sell them at a loss.

market price for our common shares is particularly volatile given our status as a relatively unknown company with a small and thinly

traded public float, limited operating history and lack of profits which could lead to wide fluctuations in our share price.

be unable to sell your common shares at or above your purchase price, which may result in substantial losses to you.

market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our

share price will continue to be more volatile than a seasoned issuer for the indefinite future.

The volatility in our share price is

attributable to a number of factors.

First, as noted above, our common shares are sporadically and thinly traded.

As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately

influence the price of those shares in either direction.

The price for our shares could, for example, decline precipitously in

the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned

issuer which could better absorb those sales without adverse impact on its share price.

Secondly, we are a speculative or “risky”

investment due to our limited operating history and lack of profits to date.

As a consequence of this enhanced risk, more risk-adverse

investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be

more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of

a seasoned issuer.

Many of these factors are beyond our control and may decrease the market price of our common shares, regardless

of our operating performance.

We cannot make any predictions or projections as to what the prevailing market price for our common

shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what

effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.

As a consequence of

this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the

price of those shares in either direction.

The price for our shares could, for example, decline precipitously in the event that a large

number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb

those sales without adverse impact on its share price.

Secondly, we are a speculative or “risky” investment due to our limited

operating history and lack of profits to date.

As a consequence of this enhanced risk, more risk-adverse investors may, under the fear

of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on

the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.

Many of these factors are

beyond our control and may decrease the market price of our common shares, regardless of our operating performance.

We cannot make any

predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether

our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common

shares for sale at any time will have on the prevailing market price.

preferred stockholders together have voting control, which will limit your ability to influence the outcome of important transactions,

1 unchanged sentence

of our preferred stockholders beneficially owns 1,000,000 shares of our preferred stock.

Each share of preferred stock entitles

the holder to 50 votes per share.

Each share of preferred stock entitles the holder

to 50 votes per share.

In contrast, each share of our common stock has one vote per share.

Each of our two preferred

stockholders holds approximately 46.1% and 45.7% of the voting power of our outstanding capital stock, respectively.

the 50-to-1 voting ratio between our preferred stock and our common stock, our preferred stockholders together control a majority

of the combined voting power of our capital stock and therefore are able to control all matters submitted to our stockholders

for approval.

The preferred stockholders may also have interests that differ from yours and may vote in a way with which you disagree

and which may be adverse to your interests.

This concentrated control may have the effect of delaying, preventing or deterring

a change in control of our company, could deprive our stockholders of an opportunity to receive a premium for their capital stock

as part of a sale of our company and might ultimately affect the market price of our common stock.

may face continuing challenges in complying with the Sarbanes-Oxley Act, and any failure to comply or any adverse result from

management’s evaluation of our internal control over financial reporting may have an adverse effect on our stock price.

a smaller reporting company as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange

Act”), we are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley

Act of 2002 (“Section 404”).

Section 404 requires us to include an internal control report with our Annual Report

on Form 10-K.

The report must include management’s assessment of the effectiveness of our internal control over financial

reporting as of the end of the fiscal year.

This report must also include disclosure of any material weaknesses in internal control

over financial reporting that we have identified.

to comply, or any adverse results from such evaluation, could result in a loss of investor confidence in our financial reports

and have an adverse effect on the trading price of our equity securities.

Management concluded that our internal controls and

procedures as of December 31, 2020 were not effective.

Management realizes there are deficiencies in the design or operation of

our internal control that adversely affect our internal controls, and management considers such deficiencies to be material weaknesses.

As of the end of our fiscal year, management had identified the following material weaknesses:

Each of our two preferred stockholders holds

approximately 46.1% and 45.7% of the voting power of our outstanding capital stock, respectively.

Because of the 50-to-1 voting ratio

between our preferred stock and our common stock, our preferred stockholders together control a majority of the combined voting power

of our capital stock and therefore are able to control all matters submitted to our stockholders for approval.

The preferred stockholders

may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests.

This concentrated control may have the effect of delaying, preventing or deterring a change in control of our company, could deprive

our stockholders of an opportunity to receive a premium for their capital stock as part of a sale of our company and might ultimately

affect the market price of our common stock.

may face continuing challenges in complying with the Sarbanes-Oxley Act, and any failure to comply or any adverse result from management’s

evaluation of our internal control over financial reporting may have an adverse effect on our stock price.

a smaller reporting company as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),

we are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section

Section 404 requires us to include an internal control report with our Annual Report on Form 10-K.

The report must include

management’s assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year.

This report must also include disclosure of any material weaknesses in internal control over financial reporting that we have identified.

Failure to comply, or any adverse results from

such evaluation, could result in a loss of investor confidence in our financial reports and have an adverse effect on the trading price

of our equity securities.

Management concluded that our internal control over financial reporting as of December 31, 2021 were not effective.

Management realizes there are deficiencies in the design or operation of our internal control that adversely affect our internal controls,

and management considers such deficiencies to be material weaknesses.

As of the end of our 2021 fiscal year, management identified the

following material weaknesses:

had not implemented comprehensive entity-level internal controls;

2 unchanged sentences

continued compliance with Section 404 may require us to incur significant costs and expend significant time and management resources.

We cannot assure you that we will be able to fully comply with Section 404 or that we will be able to conclude that our internal

control over financial reporting is effective at fiscal year-end.

As a result, investors could lose confidence in our reported

financial information, which could have an adverse effect on the trading price of our securities.

We cannot assure you that we will be able to fully comply with Section 404 or that we will be able to conclude that our internal control

over financial reporting is effective at fiscal year-end.

As a result, investors could lose confidence in our reported financial information,

which could have an adverse effect on the trading price of our securities.

have never paid dividends on our common stock and cannot guarantee that we will pay dividends to our stockholders in the future.

have never paid dividends on our common stock.

For the foreseeable future, we intend to retain our future earnings, if any, in

order to reinvest in the development and growth of our business and, therefore, do not intend to pay dividends on our common stock.

However, in the future, our board of directors may declare dividends on our common stock.

Any future determination to pay dividends

will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital

requirements, and such other factors as our board of directors deems relevant.

Accordingly, investors may need to sell their shares

of our common stock to realize a return on their investment, and they may not be able to sell such shares at or above the price

paid for them.

We cannot guarantee that we will pay dividends to our stockholders in the future.

common stock is a “penny stock”

under SEC rules.

It may be more difficult to resell securities classified as “penny

stock.”

common stock is considered a “penny stock”

under applicable SEC rules (generally defined as non-exchange traded stock

with a per-share price below $5.00).

Unless we maintain a per-share price above $5.00, these rules impose additional sales practice

requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as

“established customers”

or “accredited investors.”

For example, broker-dealers must determine the appropriateness

for non-qualifying persons of investments in penny stocks.

Broker-dealers must also provide, prior to a transaction in a penny

stock not otherwise exempt from the rules, a standardized risk disclosure document that provides information about penny stocks

and the risks in the penny stock market.

The broker-dealer also must provide the customer with current bid and offer quotations

for the penny stock, disclose the compensation of the broker-dealer and its salesperson in the transaction, furnish monthly account

statements showing the market value of each penny stock held in the customer’s account, provide a special written determination

that the penny stock is a suitable investment for the purchaser, and receive the purchaser’s written agreement to the transaction.

remedies available to an investor in “penny stocks”

may include the following:

a “penny stock”

is sold to the investor in violation of the requirements listed above, or other federal or states

securities laws, the investor may be able to cancel the purchase and receive a refund of the investment.

a “penny stock”

is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and

firms that committed the fraud for damages.

For the foreseeable future, we intend to retain our future earnings, if any, in order

to reinvest in the development and growth of our business and, therefore, do not intend to pay dividends on our common stock.

in the future, our board of directors may declare dividends on our common stock.

Any future determination to pay dividends will be at

the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and

such other factors as our board of directors deems relevant.

Accordingly, investors may need to sell their shares of our common stock

to realize a return on their investment, and they may not be able to sell such shares at or above the price paid for them.

guarantee that we will pay dividends to our stockholders in the future.

common stock is a “penny stock” under SEC rules.

It may be more difficult to resell securities classified as “penny

common stock is considered a “penny stock” under applicable SEC rules (generally defined as non-exchange traded stock with

a per-share price below $5.00).

Unless we maintain a per-share price above $5.00, these rules impose additional sales practice requirements

on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as “established customers”

or “accredited investors.” For example, broker-dealers must determine the appropriateness for non-qualifying persons of investments

in penny stocks.

Broker-dealers must also provide, prior to a transaction in a penny stock not otherwise exempt from the rules, a standardized

risk disclosure document that provides information about penny stocks and the risks in the penny stock market.

The broker-dealer also

must provide the customer with current bid and offer quotations for the penny stock, disclose the compensation of the broker-dealer and

its salesperson in the transaction, furnish monthly account statements showing the market value of each penny stock held in the customer’s

account, provide a special written determination that the penny stock is a suitable investment for the purchaser, and receive the purchaser’s

written agreement to the transaction.

remedies available to an investor in “penny stocks” may include the following:

a “penny stock” is sold to the investor in violation of the requirements listed above, or other federal or states securities

laws, the investor may be able to cancel the purchase and receive a refund of the investment.

a “penny stock” is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms

that committed the fraud for damages.

investors who have signed arbitration agreements may have to pursue their claims through arbitration.

requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that

is or becomes subject to the penny stock rules.

The additional burdens imposed upon broker-dealers by such requirements may discourage

broker-dealers from effecting transactions in our securities, which could severely limit the market price and liquidity of our

These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability

to resell our common stock.

requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that is or

becomes subject to the penny stock rules.

The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers

from effecting transactions in our securities, which could severely limit the market price and liquidity of our securities.

These requirements

may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.

brokerage firms will discourage or refrain from recommending investments in penny stocks.

Most institutional investors will not

invest in penny stocks.

In addition, many individual investors will not invest in penny stocks due, among other reasons, to the

increased financial risk generally associated with these investments.

Most institutional investors will not invest

in penny stocks.

In addition, many individual investors will not invest in penny stocks due, among other reasons, to the increased financial

risk generally associated with these investments.

these reasons, penny stocks may have a limited market and, consequently, limited liquidity.

We can give no assurance that our

common stock will not be classified as a “penny stock”

in the future.

We can give no assurance that our common

stock will not be classified as a “penny stock” in the future.

144 Related Risks

to Rule 144, a person who has beneficially owned restricted shares of our common stock for at least six months is entitled to

sell his or her securities provided that:

(i) such person is not deemed to have been one of our affiliates at the time of, or

at any time during the three months preceding, a sale, (ii) we are subject to the Exchange Act periodic reporting requirements

for at least 90 days before the sale and (iii) if the sale occurs prior to satisfaction of a one-year holding period, we provide

current information at the time of sale.

who have beneficially owned restricted shares of our common stock for at least six months but who are our affiliates at the time

of, or at any time during the three months preceding a sale, would be subject to additional restrictions, by which such person

would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either

of the following:

to Rule 144, a person who has beneficially owned restricted shares of our common stock for at least six months is entitled to sell his

or her securities provided that:

(i) such person is not deemed to have been one of our affiliates at the time of, or at any time during

the three months preceding, a sale, (ii) we are subject to the Exchange Act periodic reporting requirements for at least 90 days before

the sale and (iii) if the sale occurs prior to satisfaction of a one-year holding period, we provide current information at the time

who have beneficially owned restricted shares of our common stock for at least six months but who are our affiliates at the time of,

or at any time during the three months preceding a sale, would be subject to additional restrictions, by which such person would be entitled

to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:

of the total number of securities of the same class then outstanding;

average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144

with respect to the sale;

average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with

respect to the sale;

in each case that we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale.

Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.

sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.

addition, as a former shell company, we are subject to additional restrictions.

Historically, the SEC staff has taken the position

that Rule 144 is not available for the resale of securities initially issued by companies that are, or previously were, shell

companies, such as Zoned Properties.

Rule 144 is not available for resale of securities issued by any shell companies (other than

business combination related shell companies) or any issuer that has been at any time previously a shell company.

provided an exception to this prohibition, however, if the following conditions are met:

Historically, the SEC staff has taken the position that

Rule 144 is not available for the resale of securities initially issued by companies that are, or previously were, shell companies, such

as Zoned Properties.

Rule 144 is not available for resale of securities issued by any shell companies (other than business combination

related shell companies) or any issuer that has been at any time previously a shell company.

The SEC has provided an exception to this

prohibition, however, if the following conditions are met:

issuer of the securities that was formerly a shell company has ceased to be a shell company,

1 unchanged sentence

issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding

12 months (or such shorter period that the issuer was required to file such reports and materials), other than current reports

on Form 8-K, and

least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its

status as an entity that is not a shell company.

12 months (or such shorter period that the issuer was required to file such reports and materials), other than current reports on

Form 8-K, and

least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its status

as an entity that is not a shell company.

UNRESOLVED STAFF COMMENTS

1B is not applicable to smaller reporting companies.

Item 1B is not applicable to smaller reporting companies.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors