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Item 9A. Controls and Procedures

2022-03-24 compared with 2021-03-31 · 2143 added, 1800 removed, 291 unchanged (93% of the section changed)

CONTROLS AND PROCEDURES

controls and procedures

maintain “disclosure controls and procedures,”

as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant

to the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Disclosure controls and procedures include

controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under

the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and

forms, and that such information is accumulated and communicated to our management, including our principal executive officer

and principal financial officer, to allow timely decisions regarding required disclosure.

Our management, with the participation

of our principal executive officer and principal financial officer, evaluated our company’s disclosure controls and procedures

as of the end of the period covered by this annual report on Form 10-K.

Based on this evaluation, our principal executive officer

and principal financial officer concluded that as of December 31, 2020, our disclosure controls and procedures were not effective.

The ineffectiveness of our disclosure controls and procedures was due to material weaknesses, which we identified in our report

on internal control over financial reporting.

Disclosure controls and procedures

We maintain “disclosure controls and procedures,”

as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange

Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed

in our company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified

in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal

executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Our management, with the

participation of our principal executive officer and principal financial officer, evaluated our company’s disclosure controls and

procedures as of the end of the period covered by this annual report on Form 10-K.

Based on this evaluation, our principal executive

officer and principal financial officer concluded that as of December 31, 2021, our disclosure controls and procedures were not effective.

The ineffectiveness of our disclosure controls and procedures was due to material weaknesses, which we identified in our report on internal

control over financial reporting.

Management’s

annual report on internal control over financial reporting

management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining

adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act).

Our management, with

the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our internal

control over financial reporting as of December 31, 2020.

Our management’s evaluation of our internal control over financial

reporting was based on the 2013 framework in Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations

of the Treadway Commission.

Based on this evaluation, our management concluded that as of December 31, 2020, our internal control

over financial reporting was not effective.

ineffectiveness of our disclosure controls and procedures was due to the following material weaknesses which we identified in

our internal control over financial reporting:

(1) the lack of multiples levels of management review on complex accounting and

financial reporting issues, (2) we had not implemented adequate system and manual controls, and (3) a lack of adequate segregation

of duties and necessary corporate accounting resources in our financial reporting process and accounting function as a result

of our limited financial resources to support hiring of personnel and implementation of accounting systems.

Until such time as

we expand our staff to include additional accounting personnel and hire a full time chief financial officer, it is likely we will

continue to report material weaknesses in our internal control over financial reporting.

material weakness is a deficiency or a combination of control deficiencies in internal control over financial reporting such that

there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented

or detected on a timely basis.

on Effectiveness of Controls

principal executive officer and principal financial officer does not expect that our disclosure controls or our internal control

over financial reporting will prevent all errors and all fraud.

A control system, no matter how well conceived and operated, can

provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Further, the design of a control

system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance

that all control issues and instances of fraud, if any, within our company have been detected.

These inherent limitations include

the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake.

Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management

override of the controls.

The design of any system of controls also is based in part upon certain assumptions about the likelihood

of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential

future conditions;

over time, controls may become inadequate because of changes in conditions, or the degree of compliance with

the policies or procedures may deteriorate.

Because of the inherent limitations in a cost-effective control system, misstatements

due to error or fraud may occur and not be detected.

in internal control over financial reporting

were no changes in our internal control over financial reporting during the fourth quarter of our fiscal year ended December 31,

2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Internal control over financial reporting

Management’s annual report on internal

control over financial reporting

Our management, including our principal executive

officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting

(as defined in Rule 13a-15(f) under the Exchange Act).

Our management, with the participation of our principal executive officer and

principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2021.

management’s evaluation of our internal control over financial reporting was based on the 2013 framework in Internal Control-Integrated

Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, our management concluded

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

The ineffectiveness of our disclosure controls

and procedures was due to the following material weaknesses which we identified in our internal control over financial reporting:

the lack of multiples levels of management review on complex accounting and financial reporting issues, (2) we had not implemented adequate

system and manual controls, and (3) a lack of adequate segregation of duties and necessary corporate accounting resources in our financial

reporting process and accounting function as a result of our limited financial resources to support hiring of personnel and implementation

of accounting systems.

Until such time as we expand our staff to include additional accounting personnel and hire a full time chief financial

officer, it is likely we will continue to report material weaknesses in our internal control over financial reporting.

A material weakness is a deficiency or a combination

of control deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement

of our annual or interim financial statements will not be prevented or detected on a timely basis.

Limitations on Effectiveness of Controls

Our principal executive officer and principal

financial officer does not expect that our disclosure controls or our internal control over financial reporting will prevent all errors

and all fraud.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that

the objectives of the control system are met.

Further, the design of a control system must reflect the fact that there are resource constraints,

and the benefits of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems,

no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have

been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns

can occur because of a simple error or mistake.

Additional controls can be circumvented by the individual acts of some persons, by collusion

of two or more people, or by management override of the controls.

The design of any system of controls also is based in part upon certain

assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated

goals under all potential future conditions;

over time, controls may become inadequate because of changes in conditions, or the degree

of compliance with the policies or procedures may deteriorate.

Because of the inherent limitations in a cost-effective control system,

misstatements due to error or fraud may occur and not be detected.

Changes in internal control over financial

There were no changes in our internal control

over financial reporting during the fourth quarter of our fiscal year ended December 31, 2021 that have materially affected, or are reasonably

likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

following table sets forth the names, positions and ages of our directors and executive officers as of the date of this annual

report on Form 10-K.

Our Board of Directors currently has five members.

All of the current directors’

terms expire as of

the Annual Meeting and will serve until their successors are duly elected and qualified.

forth below is certain information regarding our executive officers and directors.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND

CORPORATE GOVERNANCE

On January 21, 2022,

pursuant to the power granted to the Board in the Company’s articles of incorporation, as amended, and the Company’s bylaws,

the Board increased the size of the Board by two persons, to be a total of seven persons.

following table sets forth the names, positions and ages of our directors and executive officers as of the date of this annual report

on Form 10-K.

Our Board of Directors currently has six members.

All of the current directors’ terms expire as of the Annual Meeting

and will serve until their successors are duly elected and qualified.

Set forth below is certain information regarding our executive officers

and directors.

Executive Officer, Chief Financial Officer, President, Treasurer, Secretary and Chairman

Operating Officer

Overstreet, PhD.

McLaren is the son of Dr.

Bryan McLaren is the

Alex McLaren.

Information about our Officers and Directors

information concerning the directors and executive officers listed above is set forth below.

The information presented includes

information each individual has given us about all positions they hold and their principal occupation and business experience

for the past five years.

In addition to the information presented below regarding each director’s specific experience, qualifications,

attributes and skills that led our board to conclude that he should serve as a director, we also believe that each of our directors

has a reputation for integrity, honesty and adherence to high ethical standards.

Each has demonstrated business acumen and an

ability to exercise sound judgment, as well as a commitment of service to our company and our board of directors.

McLaren has a dedicated history of work in the sustainability industry and in business development.

his appointment as President, CEO and a director of our company in 2014, Mr.

McLaren was recruited as our Chief Sustainability

Officer and VP of Operations.

Before joining the Company, from 2013 to 2014, Mr.

McLaren worked as a sustainability consultant

for Waste Management, Inc., where he served as a Project Manager for the Arizona State University account.

Background Information about our Officers and Directors

Biographical information concerning the directors

and executive officers listed above is set forth below.

The information presented includes information each individual has given us about

all positions they hold and their principal occupation and business experience for the past five years.

In addition to the information

presented below regarding each director’s specific experience, qualifications, attributes and skills that led our board to conclude

that he should serve as a director, we also believe that each of our directors has a reputation for integrity, honesty and adherence

to high ethical standards.

Each has demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of

service to our company and our board of directors.

Bryan McLaren.

McLaren has a dedicated

history of work in the sustainability industry and in business development.

Prior to his appointment as President, CEO and a director

of our company in 2014, Mr.

McLaren was recruited as our Chief Sustainability Officer and VP of Operations.

Before joining the Company,

from 2013 to 2014, Mr.

McLaren worked as a sustainability consultant for Waste Management, Inc., where he served as a Project Manager

for the Arizona State University account.

Prior to 2013, Mr.

McLaren worked as a Sustainability Manager for Northern Arizona University and as a Sustainability Commissioner for the City of

Flagstaff, Arizona.

McLaren has a Master’s Degree in Sustainable Community Development, and Executive Master’s

Degree in Sustainability Leadership, and a Masters of Business Administration Degree with an emphasis on Sustainable Development.

McLaren worked as a Sustainability Manager for Northern Arizona University

and as a Sustainability Commissioner for the City of Flagstaff, Arizona.

McLaren has a Master’s Degree in Sustainable Community

Development, and Executive Master’s Degree in Sustainability Leadership, and a Masters of Business Administration Degree with an

emphasis on Sustainable Development.

McLaren has served as the Chairman of our board of directors since 2014.

As Chief Executive Officer and President, Mr.

is able to provide our Board with valuable insight regarding the Company’s operations, its management team and associates

as a result of his day-to-day involvement with the Company.

McLaren’s business development experience, academic achievements,

and knowledge of our business, has led our board of directors to conclude that he should continue to serve as a director and in

his current roles.

Friedman, who was appointed as a director in 2014, has served as Owner/Principal of Triple J Management Services,

which specializes in consulting and professional services for the alcoholic beverage industry.

Art was most recently President

and CEO of Gold Coast Beverage Distributors, a position he held for the last 10 years of his 23 years with the company.

his tenure as President/CEO, Gold Coast more than tripled sales revenue and increased EBITDA by more than five-fold.

same period, Mr.

Friedman led significant market share gains through organic growth as well as consolidating wholesaler acquisitions.

As Chief Executive

Officer and President, Mr.

McLaren is able to provide our Board with valuable insight regarding the Company’s operations, its management

team and associates as a result of his day-to-day involvement with the Company.

McLaren’s business development experience,

academic achievements, and knowledge of our business, has led our board of directors to conclude that he should continue to serve as

a director and in his current roles.

Blackwell has served as our Chief Operating Officer since July 1, 2021.

Since September 2020, Mr.

Blackwell served

as our Director of Business Development.

From December 2018 until June 2021, Mr.

Blackwell also served as President of Daily Jam Holdings

From January 2016 to December 2018, he served as Vice President of Due North Holdings LLC.

Prior to joining the Company, Mr.

developed domestic and international markets for Kahala Brands, a global franchise organization with more than 3,000 retail locations

in over a dozen countries.

He also led emerging brand and portfolio operations for several private equity groups investing in the restaurant

franchise space.

Blackwell earned his B.A.

in Finance from Fort Lewis College.

Blackwell and his spouse filed for bankruptcy

Bankruptcy Court, District of Arizona on November 13, 2020.

Art Friedman.

Friedman, who has served

as a director since 2014, is the Owner/Principal of Triple J Management Services, which specializes in consulting and professional services

for the alcoholic beverage industry.

Art was most recently President and CEO of Gold Coast Beverage Distributors, a position he held

for the last 10 years of his 23 years with the company.

During his tenure as President/CEO, Gold Coast more than tripled sales revenue

and increased EBITDA by more than five-fold.

Over the same period, Mr.

Friedman led significant market share gains through organic growth

as well as consolidating wholesaler acquisitions.

Friedman began his career with General Foods Corporation, now part of Kraft Foods.

He has served on the distributor advisory

councils of Diageo-Guinness, Heineken USA, InBev and Miller-Coors.

Friedman graduation Cum Laude with a Bachelor of Science

in Business Management from the University of Florida, Warrington School of Business.

We believe that Mr.

Friedman’s background

as an advisor in the area of business management and his experience in operating, growing and advising companies provides us with

the requisite skills and qualifications to serve on our board.

Friedman’s service as a director at the Company since

2014 together with his business background, provides business, governance, organizational and strategic planning expertise to

our Board and makes him a valued member of the Audit Committee, the Compensation Committee, which he chairs, and the Strategic

McLaren, who has served as a director since 2014, is an accomplished and well-known orthopedic surgeon, professor

and researcher.

He joined SharedClarity, LLC as Vice President of Clinical Outcomes in 2016.

He has served on the distributor advisory councils of Diageo-Guinness, Heineken USA, InBev and Miller-Coors.

Friedman graduation

Cum Laude with a Bachelor of Science in Business Management from the University of Florida, Warrington School of Business.

Friedman’s background as an advisor in the area of business management and his experience in operating, growing and advising

companies provides us with the requisite skills and qualifications to serve on our board.

Friedman’s service as a director

at the Company since 2014 together with his business background, provides business, governance, organizational and strategic planning

expertise to our Board and makes him a valued member of the Audit Committee, the Compensation Committee, which he chairs, and the Strategic

Alex McLaren, MD.

McLaren, who has

served as a director since 2014, is an accomplished and well-known orthopedic surgeon, professor and researcher.

Alex was most recently

Vice President of Clinical Outcomes for Shared Clarity, LLC from 2016-2019.

From 2006 until 2016, Dr.

served as program director of the Banner University Medical Center-Phoenix (Ariz.) Residency Program in Orthopaedic Surgery.

is the former director of Orthopaedic Education for Banner Good Samaritan Medical Center in Phoenix.

He was also the program director

of the Phoenix Orthopedic Residency Program at Maricopa County Medical Center between 1998 and 2000.

He has been in private orthopedic

surgery practice twice during his career in Phoenix.

After graduating from Queen’s University School of Medicine, Kingston,

Ontario, Canada in 1977, Dr.

McLaren completed an orthopedic residency at the University of Western Ontario in 1982 and a fellowship

at the University of Southern California in 1983.

McLaren is first and foremost an orthopedic educator and researcher

whose career has included teaching, research and administration of educational programs.

His clinical interest includes orthopedic

infections, revision arthroplasty and complex musculoskeletal trauma.

With hundreds of publications, numerous grand-funded projects,

and medical association postings, Dr.

McLaren has established a prized reputation in his field.

McLaren served as program director

of the Banner University Medical Center-Phoenix (Ariz.) Residency Program in Orthopaedic Surgery.

He is the former director of Orthopaedic

Education for Banner Good Samaritan Medical Center in Phoenix.

He was also the program director of the Phoenix Orthopedic Residency Program

at Maricopa County Medical Center between 1998 and 2000.

He has been in private orthopedic surgery practice twice during his career in

After graduating from Queen’s University School of Medicine, Kingston, Ontario, Canada in 1977, Dr.

McLaren completed

an orthopedic residency at the University of Western Ontario in 1982 and a fellowship at the University of Southern California in 1983.

McLaren is first and foremost an orthopedic educator and researcher whose career has included teaching, research and administration

of educational programs.

His clinical interest includes orthopedic infections, revision arthroplasty and complex musculoskeletal trauma.

With hundreds of publications, numerous grand-funded projects, and medical association postings, Dr.

McLaren has established a prized

reputation in his field.

We believe that Dr.

McLaren’s

services provided to numerous organizations provides us with the requisite skills and qualifications to serve on our board and

as a member of the Compensation Committee and the Strategic Committee, which he chairs.

Honaman, who has served as a director since 2016, has served as Principal and CFO of Advanced Benefit Solutions,

(d/b/a 44 North), an insurance agent and consultant, since 2010.

McLaren’s services provided to numerous organizations provides us with the requisite

skills and qualifications to serve on our board and as a member of the Compensation Committee and the Strategic Committee, which he chairs.

Honaman, who has

served as a director since 2016, is the Principal and CFO of Advanced Benefit Solutions, Inc.

(d/b/a 44 North), an insurance agent and

consultant, since 2010.

From 2008 to 2009, Mr.

Honaman served as an independent

financial consultant.

Honaman served as an independent financial consultant.

Prior to that time, Mr.

Honaman spent seven years at Wilcox Associates, Inc., a civil engineering firm,

most recently as CFO and Treasurer.

Honaman also served in several capacities at Wolohan Lumber Co.

for over 20 years, including

as Vice President of Merchandising, Senior Vice President of Finance and CFO.

Honaman began his career as a CPA on the audit

staff at Ernst & Young LLP.

Honaman brings to the Board extensive experience dealing with and overseeing the implementation

of accounting principles and financial reporting rules and regulations.

With his substantial business and management experience

for five years as a certified public accountant and an auditor at Ernst & Young LLP serving numerous public companies

in various business sectors, including insurance agencies, Mr.

Honaman provides relevant expertise on accounting, investment and

financial matters.

spent seven years at Wilcox Associates, Inc., a civil engineering firm, most recently as CFO and Treasurer.

Honaman also served in

several capacities at Wolohan Lumber Co.

for over 20 years, including as Vice President of Merchandising, Senior Vice President of Finance

Honaman began his career as a CPA on the audit staff at Ernst & Young LLP.

Honaman brings to the Board extensive

experience dealing with and overseeing the implementation of accounting principles and financial reporting rules and regulations.

his substantial business and management experience for five years as a certified public accountant and an auditor at Ernst & Young

LLP serving numerous public companies in various business sectors, including insurance agencies, Mr.

Honaman provides relevant expertise

on accounting, investment and financial matters.

His service as a chief financial officer at Advanced Benefit Solutions, Inc.

(d/b/a 44 North), Wilcox Associates,

and Wolohan Lumber Co., together with his accounting and management experience, make him a valued member of our Board, Compensation

Committee and Strategic Committee, and an effective Non-Executive Chair of the Audit Committee.

Honaman meets the definition

of an “audit committee financial expert”

as established by the SEC.

Overstreet, PhD.

Overstreet has served as a director since April 2017.

Overstreet co-founded Sonoran Biosciences,

and has served as its CEO since that time.

44 North), Wilcox Associates, Inc.

and Wolohan Lumber Co., together with his accounting and management experience, make him a valued

member of our Board, Compensation Committee and Strategic Committee, and an effective Non-Executive Chair of the Audit Committee.

Honaman meets the definition of an “audit committee financial expert” as established by the SEC.

Derek Overstreet, PhD.

who has served as a director since 2017, is the co-founder and CEO of Sonoran Biosciences, Inc.

Sonoran Biosciences, Inc.

develops new sustained-release pharmaceutical formulations

for applications including orthopedic infection and postoperative pain management.

Overstreet holds a Bachelor’s degree

in Biomedical Engineering from Case Western Reserve University and a Doctoral degree in Biomedical Engineering from Arizona State

His expertise is in the development of novel polymer-based materials for medical applications including drug delivery.

sustained-release pharmaceutical formulations for applications including orthopedic infection and postoperative pain management.

Overstreet holds a Bachelor’s degree in Biomedical Engineering from Case Western Reserve University and a Doctoral degree in Biomedical

Engineering from Arizona State University.

His expertise is in the development of novel polymer-based materials for medical applications

including drug delivery.

He has authored 11 peer-reviewed scientific publications and two patent applications.

We believe that Dr.

Overstreet’s experience

navigating the scientific field of pharmaceuticals and drug delivery can be instrumental in assisting the strategic development

and implementation of the Zoned Properties’

business model.

experience navigating the scientific field of pharmaceuticals and drug delivery can be instrumental in assisting the strategic development

and implementation of the Zoned Properties’ business model.

Prior to 2012, Dr.

Overstreet was a post-doctoral fellow at

the Laboratory for Nanomedicine at the Barrow Neurological Institute.

in Certain Legal Proceedings

directors and executive officers have not been involved in any of the following events during the past 10 years:

bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either

at the time of the bankruptcy or within two years prior to that time;

conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other

minor offenses);

Overstreet was a post-doctoral fellow at the Laboratory

for Nanomedicine at the Barrow Neurological Institute.

Kane, who has served as a director since January

21, 2022, is the co-founder and Managing Partner of Diamond Bridge Capital, an investment firm, where he has managed a portfolio of public

and private investments primarily focused on the small cap sector since 2008.

In addition, since May 2021, Mr.

Kane has served as an

advisor to Harbor Access LLC, a U.S.

and Canadian based investor relations firm.

In this role, he advises companies on corporate strategy

and investor awareness.

In addition, Mr.

Kane owns and manages a real estate portfolio in the New York and Connecticut regions.

August 2014 to July 2020, he served as a research analyst for Wooster Capital Management, LLC, a hedge fund.

Kane has a long history

in the investment management business, previously working at the multi-billion dollar Schonfeld Group hedge fund, serving as a published

analyst at Sidoti & Co.

and working for the billion dollar Michael Steinhardt family office.

Kane was one of the first investors

in GrowGeneration Corp.

GRWG) and served on its board of directors from May 2014 to January 2018.

He graduated from Troy University,

Involvement in Certain Legal Proceedings

Except as noted above, our directors and executive

officers have not been involved in any of the following events during the past 10 years:

bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the

time of the bankruptcy or within two years prior to that time ;

conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor

subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,

1 unchanged sentence

or banking activities;

found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have

violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated

a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently

reversed, suspended or vacated, relating to an alleged violation of:

(i) any federal or state securities or commodities law

or regulation;

or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited

to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent

cease- and-desist order, or removal or prohibition order;

or (iii) any law or regulation prohibiting mail or wire fraud or

fraud in connection with any business entity;

the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory

organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of

the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority

over its members or persons associated with a member.

have adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including those

employees responsible for financial reporting.

The code of business conduct and ethics is available on our corporate website,

www.zonedproperties.com.

We intend to disclose any amendments to our code of business conduct and ethics, or waivers of its requirements,

on our website or in filings under the Exchange Act to the extent required by applicable rules and exchange requirements.

of our five board members are independent.

(i) any federal or state securities or commodities law or regulation;

or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary

or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease- and-desist order,

or removal or prohibition order;

or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business

the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization

(as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange

Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons

associated with a member.

Code of Ethics

We have adopted a code of business conduct and

ethics that applies to all of our employees, officers and directors, including those employees responsible for financial reporting.

code of business conduct and ethics is available on our corporate website, www.zonedproperties.com.

We intend to disclose any amendments

to our code of business conduct and ethics, or waivers of its requirements, on our website or in filings under the Exchange Act to the

extent required by applicable rules and exchange requirements.

Director Independence

Four of our six board members are independent.

The Board has determined that each of Messrs.

Friedman and Honaman and Dr.

is an independent director pursuant to the NASDAQ listing standards.

Under the NASDAQ rules, no director qualifies as independent

unless the Board affirmatively determines that the director has no material relationship with us (directly, or as a partner, stockholder

or officer of an organization that has a relationship with us).

assessing the independence of our directors, the Board considers all of the business relationships between the Company and our

directors and their respective affiliated companies.

This review is based primarily on the Company’s review of its own records

and on responses of the directors to questions in a questionnaire regarding employment, business, familial, compensation and other

relationships with the Company and our management.

Where relationships exist, the Board determines whether the relationship between

the Company and the directors or the directors’

affiliated companies impairs the directors’

independence.

After consideration

of the directors’

relationships with the Company, the Board has affirmatively determined that none of the individuals serving

as non-employee directors during the fiscal year ended December 31, 2020 had a material relationship with us and that each of

such non-employee directors is independent.

McLaren was not considered an independent director during his service on the Board during the fiscal year ended December 31, 2020

because of his employment as our CEO, President, Treasurer, Secretary and Chairman of the Board.

Alex McLaren, MD was not considered

an independent director during his service on the Board during the fiscal year ended December 31, 2020 because Bryan McLaren is

the son of Dr.

of Directors and Board Committees

of our directors and director nominees are encouraged to attend the annual meetings of our stockholders.

Board of Directors held one meeting during the fiscal year ended December 31, 2020.

Each of our current directors attended 100%

of the aggregate number of the meetings of the Board and meetings of the committees on which he or she served.

Board currently has three committees:

the Audit Committee, the Strategic Committee, and the Compensation Committee.

30, 2021, the members and Chairs of our standing Board committees were:

Friedman, Honaman, Kane, and Dr.

Overstreet is an independent director pursuant to the

NASDAQ listing standards.

Under the NASDAQ rules, no director qualifies as independent unless the Board affirmatively determines that

the director has no material relationship with us (directly, or as a partner, stockholder or officer of an organization that has a relationship

In assessing the independence of our directors,

the Board considers all of the business relationships between the Company and our directors and their respective affiliated companies.

This review is based primarily on the Company’s review of its own records and on responses of the directors to questions in a questionnaire

regarding employment, business, familial, compensation and other relationships with the Company and our management.

Where relationships

exist, the Board determines whether the relationship between the Company and the directors or the directors’ affiliated companies

impairs the directors’ independence.

After consideration of the directors’ relationships with the Company, the Board has

affirmatively determined that none of the individuals serving as non-employee directors during the fiscal year ended December 31, 2021

had a material relationship with us and that each of such non-employee directors is independent.

Bryan McLaren was not considered an independent

director during his service on the Board during the fiscal year ended December 31, 2021 because of his employment as our CEO, President,

Treasurer, Secretary and Chairman of the Board.

Alex McLaren, MD was not considered an independent director during his service on the

Board during the fiscal year ended December 31, 2021 because Bryan McLaren is the son of Dr.

Board of Directors and Board Committees

All of our directors and director nominees are

encouraged to attend the annual meetings of our stockholders.

The Board of Directors held two meetings during

the fiscal year ended December 31, 2021.

Each of our current directors attended 100% of the aggregate number of the meetings of the Board

and meetings of the committees on which he or she served.

Our Board currently has three committees:

Audit Committee, the Strategic Committee, and the Compensation Committee.

As of March 24, 2022, the members and Chairs of our standing

Board committees were:

Independent Directors

Derek Overstreet

Non-Independent

Non-Independent Director

Alex McLaren, MD

Audit Committee members are “independent”

Audit Committee

All Audit Committee members are “independent”

under the NASDAQ listing standards and SEC rules and regulations.

of Directors has determined that one of the members of the Audit Committee, Mr.

Honaman, meets the definition of an “audit

committee financial expert”

as established by the SEC, and that Mr.

Our Board of Directors has determined that one of the members of the

Audit Committee, Mr.

Honaman, meets the definition of an “audit committee financial expert” as established by the SEC, and

Friedman and Dr.

Overstreet, the two other members of

the Audit Committee, meet the definition of “financially literate”

Overstreet, the two other members of the Audit Committee, meet the definition of “financially literate”

as established by the SEC.

The Audit Committee

provides assistance to the Board in fulfilling its oversight responsibilities relating to the quality and integrity of the financial

reports of the Company.

The Audit Committee has the sole authority to appoint, review and discharge our independent accountants,

and has established procedures for the receipt, retention, response to and treatment of complaints regarding accounting, internal

controls and audit matters.

The Audit Committee provides assistance to the Board in fulfilling its oversight responsibilities relating

to the quality and integrity of the financial reports of the Company.

The Audit Committee has the sole authority to appoint, review and

discharge our independent accountants, and has established procedures for the receipt, retention, response to and treatment of complaints

regarding accounting, internal controls and audit matters.

In addition, the Audit Committee is responsible for:

the scope, results, timing and costs of the audit with our independent accountants and reviewing the results of the annual

audit examination and any accompanying management letters;

the independence of the outside accountants on an annual basis, including receipt and review of a written report from the

independent accountants regarding their independence consistent with the independence standards of the board;

the scope, results, timing and costs of the audit with our independent accountants and reviewing the results of the annual audit

examination and any accompanying management letters;

the independence of the outside accountants on an annual basis, including receipt and review of a written report from the independent

accountants regarding their independence consistent with the independence standards of the board;

and approving the services provided by the independent accountants;

the internal audit function;

our significant accounting policies, financial results and earnings releases, and the adequacy of our internal controls and

responsibilities of the Audit Committee are more fully described in the Audit Committee’s charter.

Audit Committee held four meetings during the fiscal year ended December 31, 2020.

Compensation Committee members (except for Dr.

McLaren) are “independent”

under applicable NASDAQ listing standards.

The Compensation Committee assists the Board in fulfilling its oversight responsibilities relating to executive compensation,

employee compensation and benefit programs and plans, and leadership development and succession planning.

In addition, the Compensation

Committee is responsible for:

our significant accounting policies, financial results and earnings releases, and the adequacy of our internal controls.

The responsibilities of the Audit Committee are

more fully described in the Audit Committee’s charter.

The Audit Committee held four meetings during

the fiscal year ended December 31, 2021.

Compensation Committee

All Compensation Committee members (except for

McLaren) are “independent” under applicable NASDAQ listing standards.

The Compensation Committee assists the Board in

fulfilling its oversight responsibilities relating to executive compensation, employee compensation and benefit programs and plans, and

leadership development and succession planning.

In addition, the Compensation Committee is responsible for:

the performance of our Chief Executive Officer;

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administering

our incentive compensation and stock plans (except for the issuance of securities to non-employee directors for services which

is administered by the Board);

our incentive compensation and stock plans (except for the issuance of securities to non-employee directors for services which is

administered by the Board);

the adoption of material changes to or the termination of our benefit plans.

Compensation Committee reviews and discusses with management the disclosures regarding executive compensation to be included in

our annual proxy statement.

The responsibilities of the Compensation Committee are more fully described in the Compensation Committee’s

Compensation Committee held one meeting during the fiscal year ended December 31, 2020.

Strategic Committee members (except for Dr.

McLaren) are “independent”

under the applicable NASDAQ listing standards.

The Strategic Committee assists the Board in developing and maintaining the Company’s business strategies and any related

matters required by federal securities laws.

In addition, the Strategic Committee is responsible for:

the Company’s current business strategies.

The Compensation Committee reviews and discusses

with management the disclosures regarding executive compensation to be included in our annual proxy statement.

The responsibilities of

the Compensation Committee are more fully described in the Compensation Committee’s charter.

The Compensation Committee held two meetings

during the fiscal year ended December 31, 2021.

Strategic Committee

All Strategic Committee members (except for Dr.

McLaren) are “independent” under the applicable NASDAQ listing standards.

The Strategic Committee assists the Board in developing

and maintaining the Company’s business strategies and any related matters required by federal securities laws.

In addition, the

Strategic Committee is responsible for:

the Company’s current business strategies.

new business strategies for the Company.

business strategy analyses to the Board.

The Strategic Committee held one meeting during the fiscal year ended December 31, 2020.

the fourth quarter of the fiscal year ended December 31, 2020, there were no material changes to the procedures by which stockholders

may recommend nominees to the Board.

The Strategic Committee held two meetings during the fiscal year ended December 31, 2021.

During the fourth quarter of the fiscal year

ended December 31, 2021, there were no material changes to the procedures by which stockholders may recommend nominees to the Board.

Officer and Director Indemnification Agreements

The Company entered into an Indemnification Agreement

(each, an “Indemnification Agreement” and collectively, the “Indemnification Agreements”) with each of the Company’s

officers and directors.

The Indemnification Agreements supplement the indemnification provisions provided in the Company’s articles

of incorporation and bylaws and any resolutions adopted pursuant thereto and generally provide that the Company shall indemnify the indemnitees

to the fullest extent permitted by applicable law, subject to certain exceptions, against expenses, judgments, fines and other amounts

actually and reasonably incurred in connection with their service as a director or officer and also provide for rights to advancement

of expenses and contribution.

EXECUTIVE COMPENSATION

following table summarizes all compensation recorded by us for the years ended December 31, 2020 and 2019 for our “named

executive officers”

as such term is defined in Item 402(m)(2) of Regulation S-K.

Summary Compensation

The following table summarizes all compensation

recorded by us for the years ended December 31, 2021 and 2020 for our “named executive officers” as such term is defined

in Item 402(m)(2) of Regulation S-K.

2021 Summary Compensation Table

and principal position

Name and principal position

Option Awards

Incentive Plan

Compensation $

Chief Executive Officer,

President and Chief Financial Officer (1)

Disclosure to Summary Compensation Table

as otherwise described below, there are no compensatory plans or arrangements, including payments to be received from the Company

with respect to any executive officer, that would result in payments to such person because of his or her resignation, retirement

or other termination of employment with the Company, or our subsidiaries, any change in control, or a change in the person’s

responsibilities following a change in control of the Company.

May 23, 2018, we entered into an employment agreement with Mr.

McLaren (the “2018 Employment Agreement”).

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

McLaren a base annual salary of $214,500,

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.

2018 Employment Agreement has a term of 10 years.

Bryan McLaren,

Chief Executive Officer, President,

and Chief Financial Officer

Berekk Blackwell,

Chief Operating

Blackwell was appointed as our Chief

Operating Officer on July 1, 2021.

On January 1, 2021, we granted the Mr.

Blackwell an option

pursuant to our 2016 Equity Compensation 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 Options expire on January 1, 2031.

The options vest as to 25,000 of such

shares on January 1, 2021, 10,000 options vest on January 1, 2022 and for each year thereafter

through January 1, 2031.

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

Amounts reflected under “All Other Compensation” related to consulting

fees paid to Mr.

Blackwell prior to him becoming our Chief Operating Officer.

(2) As required by SEC rules, the amounts in this column reflect the

grant date or modification date fair value as required by FASB ASC Topic 718.

of the assumptions and methodologies used to calculate these amounts, are contained in the

notes to our financial statements under “Note 10 – Shareholders’ Equity”.

Narrative Disclosure to Summary Compensation Table

Except as otherwise described below, there are

no compensatory plans or arrangements, including payments to be received from the Company with respect to any executive officer, that

would result in payments to such person because of his or her resignation, retirement or other termination of employment with the Company,

or our subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of the Company.

On May 23, 2018, we entered into an employment

agreement with Mr.

McLaren (the “2018 Employment Agreement”).

Pursuant to the terms of the 2018 Employment Agreement, the

Company agreed to continue to pay Mr.

McLaren a base annual salary of $214,500, 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.

The 2018 Employment Agreement has a term of 10

The term and Mr.

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

in any of the following circumstances:

McLaren’s employment will terminate (a “Termination”) in any of the following circumstances:

McLaren dies;

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by the Company or, if no such insurance is in effect, upon Mr.

McLaren’s disability;

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

to the occasion thereof;

the option of the Company for Cause (as hereinafter defined) upon the Company’s provision of written notice to Mr.

McLaren’s disability;

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

occasion thereof;

the option of the Company for Cause (as hereinafter defined) upon the Company’s provision of written notice to Mr.

of the basis for such Termination;

the option of the Company, without Cause;

McLaren at any time with Good Reason (as hereinafter defined), 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.

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, 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 (the “Exchange Act”), whether or not the Company

is in fact required to comply with that regulation, provided that, without limitation, such a change in control shall be deemed

to have occurred if (A) any “person”

(as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other

than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned, directly

or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company,

is or becomes the “beneficial owner”

(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of

securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities;

McLaren at any time with Good Reason (as hereinafter defined), 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.

In 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.

McLaren, except for his obligation under

the restrictive covenants in the 2018 Employment Agreement.

The Company and Mr.

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, 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 (the “Exchange

Act”), whether or not the Company is in fact required to comply with that regulation, provided that, without limitation, such a

change in control shall be deemed to have occurred if (A) any “person” (as such term is used in Sections 13(d) and 14(d)

of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation

owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of

the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,

of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities;

or (B) during any period of two consecutive years (not including any period prior to the execution of the Golden Parachute Agreement),

individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by

a person who has entered into an agreement with the Company to effect a transaction described in clauses (A) or (D) of this paragraph)

whose election by the Board or nomination for election by the Company’s shareholders was approved by a vote of at least

two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or

nomination for election was previously so approved, cease for any reason to constitute a majority;

an agreement, the consummation of which would result in the occurrence of a change in control of the Company;

or (D) the shareholders

of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation

which would result in the voting securities of the Company outstanding immediately prior to it continuing to represent (either

by remaining outstanding or by being converted into voting securities of the surviving entity) of more than 50% of the combined

voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation,

or the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition

by the Company of all or substantially all the Company’s assets.

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.

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:

individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person

who has entered into an agreement with the Company to effect a transaction described in clauses (A) or (D) of this paragraph) whose election

by the Board or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds of the directors

then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously

so approved, cease for any reason to constitute a majority;

result in the occurrence of a change in control of the Company;

or (D) the shareholders of the Company approve a merger or consolidation

of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company

outstanding immediately prior to it continuing to represent (either by remaining outstanding or by being converted into voting securities

of the surviving entity) of more than 50% of the combined voting power of the voting securities of the Company or such surviving entity

outstanding immediately after such merger or consolidation, or the shareholders of the Company approve a plan of complete liquidation

of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company’s assets.

For 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.

For 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:

material diminution in Mr.

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

change in control of the Company;

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

in control of the Company;

material diminution in Mr.

McLaren’s base compensation;

material change in the geographic location at which Mr.

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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;

McLaren is required to report, including

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

material diminution in the budget over which Mr.

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

McLaren was entitled, or

any compensation plan in which Mr.

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

material to Mr.

McLaren’s total compensation;

McLaren was entitled, or any compensation

plan in which Mr.

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

total compensation;

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

McLaren benefits substantially similar to those enjoyed

McLaren 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.

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 Mr.

McLaren benefits substantially similar to those enjoyed by Mr.

McLaren 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 Mr.

McLaren of any material fringe benefit enjoyed by Mr.

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 Mr.

McLaren fails to perform his full-time duties with the Company as a result of incapacity due to physical

or mental illness, Mr.

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 Mr.

McLaren 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 Mr.

McLaren is entitled under

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

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

for Good Reason, Mr.

McLaren 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;

Following a change in control of the Company,

upon termination of Mr.

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

McLaren will be entitled to the following benefits:

During any period that Mr.

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

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 Mr.

McLaren 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 Mr.

McLaren 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.

McLaren will be entitled to benefits provided below:

Company will pay Mr.

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

of Termination is given, plus all other amounts and benefits to which Mr.

McLaren is entitled under any compensation plan

of the Company.

lieu of any further salary payments to Mr.

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

as severance pay to Mr.

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

equal to five times the sum of Mr.

McLaren’s annual base salary in effect immediately prior to the occurrence of the

circumstance giving rise to the notice of Termination given in respect of them.

Company will pay to Mr.

The Company will 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 Mr.

McLaren 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 Mr.

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

McLaren’s annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the notice of Termination given in respect of them.

The Company will pay to Mr.

McLaren any deferred compensation allocated or credited to Mr.

McLaren or his account as of the date

of Termination.

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

under the Company’s stock option plans (which options shall be cancelled upon the making of the payment referred to

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

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.

Company will also pay to Mr.

McLaren 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.

McLaren all legal fees and expenses incurred by Mr.

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the event that Mr.

McLaren is a “disqualified individual”

within the meaning of Section 280G of the Code, the

parties expressly agree that the payments described herein and all other payments to Mr.

McLaren under any other agreements

or arrangements with any persons which constitute “parachute payments”

within the meaning of Section 280G of the

Code are collectively subject to an overall maximum limit.

Such maximum limit shall be $1 less than the aggregate amount which

would otherwise cause any such payments to be considered a “parachute payment”

within the meaning of Section 280G

of the Code, as determined by the Company.

Equity Awards at 2020 Fiscal Year-End

following table sets forth information as options outstanding on December 31, 2020.

EQUITY AWARDS AT 2020 FISCAL YEAR-END

McLaren is a “disqualified individual” within the meaning of Section 280G of the Code, the parties expressly

agree that the payments described herein and all other payments to Mr.

McLaren under any other agreements or arrangements with any persons

which constitute “parachute payments” within the meaning of Section 280G of the Code are collectively subject to an overall

maximum limit.

Such maximum limit shall be $1 less than the aggregate amount which would otherwise cause any such payments to be considered

a “parachute payment” within the meaning of Section 280G of the Code, as determined by the Company.

Outstanding Equity Awards at 2021 Fiscal Year-End

The following table sets forth information as options outstanding

on December 31, 2021.

OUTSTANDING EQUITY AWARDS AT 2021 FISCAL YEAR-END

OPTION AWARDS

Incentive Plan

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Bryan McLaren

annually at 25,000 options per year through December 2024.

Authorized for Issuance under Equity Compensation Plans

August 9, 2016, our Board of Directors authorized the 2016 Plan and reserved 10,000,000 shares of common stock for issuance thereunder.

Berekk Blackwell

Vest annually at 25,000 options per year through December 2024.

Vest annually at 10,000 options per year through January 1, 2031.

Securities Authorized for Issuance under Equity Compensation Plans

On August 9, 2016, our Board of Directors authorized

the 2016 Plan and reserved 10,000,000 shares of common stock for issuance thereunder.

The 2016 Plan was approved by shareholders on November

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

shares granted pursuant to the 2016 Plan are amortized to expense over the three-year 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

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 Code, 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 three-year 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

As of December 31, 2021, 325,000 stock option awards have been granted under the 2016 Plan.

1 unchanged sentence

shares are available for future issuance.

Company also continues to maintain its 2014 Plan, pursuant to which 1,250,000 previously awarded stock options are outstanding.

The Company also continues to maintain its 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 December 31, 2020, options to purchase 1,325,000 shares of common stock are outstanding pursuant to the 2014 Plan.

table below sets forth information as of December 31, 2020.

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 December 31, 2021, options to purchase 1,250,000 shares of

common stock are outstanding pursuant to the 2014 Plan.

The table below sets forth information as of

December 31, 2021.

Plan Category

securities to

6 unchanged sentences

future issuance

compensation plans approved by security holders

compensation plans not approved by security holders

following table sets forth compensation paid, earned or awarded during 2020 to each of our directors, other than Bryan McLaren,

whose compensation is described above in the “2020 Summary Compensation Table”.

Equity compensation plans approved by security holders

Equity compensation plans not approved by security holders

Director Compensation

Compensation ($)

The following table sets forth compensation paid,

earned or awarded during 2021 to each of our directors, other than Bryan McLaren, whose compensation is described above in the “2021

Summary Compensation Table”.

2021 Director Compensation

Alex McLaren, MD

Derek Overstreet

required by SEC rules, the amounts in this column reflect the grant date or modification date fair value as required by FASB

ASC Topic 718.

A discussion of the assumptions and methodologies used to calculate these amounts is contained in the notes

to our financial statements under “Shareholders’

Deficit”.

required by SEC rules, the amounts in this column reflect the grant date or modification date fair value as required by FASB ASC

A discussion of the assumptions and methodologies used to calculate these amounts is contained in the notes to our financial

statements under “Shareholders’ Deficit”.

In January 2021, Mr.

Freidman received 30,000

shares of restricted stock, Dr.

Freidman received 30,000 shares of restricted stock,

Overstreet received 30,000 shares of restricted stock, Dr.

McLaren received 35,000 shares

of restricted stock and Mr.

Honaman received 25,000 shares of restricted stock.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

following table sets forth certain information regarding beneficial ownership of our common stock and preferred stock as of March

30, 2021, by:

McLaren received 35,000 shares of restricted stock and Mr.

received 35,000 shares of restricted stock.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL

OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information

regarding beneficial ownership of our common stock and preferred stock as of March 30, 2021, by:

director and each of our Named Executive Officers,

1 unchanged sentence

person known by us to be the beneficial owner of more than 5% of our outstanding common stock.

of March 30, 2021, there were 12,141,548 shares of our common stock outstanding and 2,000,000 shares of Preferred Stock outstanding.

number of shares of common stock beneficially owned by each person is determined under the rules of the SEC and the information

is not necessarily indicative of beneficial ownership for any other purpose.

Under such rules, beneficial ownership includes any

shares as to which such person has sole or shared voting power or investment power and also any shares which the individual has

the right to acquire within 60 days after the date hereof, through the exercise of any stock option, warrant or other right.

otherwise indicated, each person has sole investment and voting power (or shares such power with his or her spouse) with respect

to the shares set forth in the following table.

The inclusion herein of any shares deemed beneficially owned does not constitute

an admission of beneficial ownership of those shares.

and Address of Beneficial Owner

As of March 24, 2022, there were 12,201,548 shares

of our common stock outstanding and 2,000,000 shares of Preferred Stock outstanding.

The number of shares of common stock beneficially

owned by each person is determined under the rules of the SEC and the information is not necessarily indicative of beneficial ownership

for any other purpose.

Under such rules, beneficial ownership includes any shares as to which such person has sole or shared voting power

or investment power and also any shares which the individual has the right to acquire within 60 days after the date hereof, through the

exercise of any stock option, warrant or other right.

Unless otherwise indicated, each person has sole investment and voting power (or

shares such power with his or her spouse) with respect to the shares set forth in the following table.

The inclusion herein of any shares

deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.

Name and Address of Beneficial Owner

Beneficial Ownership

Named Executive Officers and

Alex McLaren,

Derek Overstreet,

All executive

officers and directors as a group (five persons)

Stockholders:

Percent of Class

Named Executive Officers and Directors:

Bryan McLaren

Berekk Blackwell

Alex McLaren, MD

1,685,417 (4)

Derek Overstreet, PhD

All executive officers and directors as a group (seven persons)

2,356,891 (8)

Other 5% Stockholders:

Greg Johnston

7 unchanged sentences

Edison, NJ 08817

175,000 vested stock options.

of 40,000 vested stock options.

8,750 vested stock options.

1,501,667 shares held by McLaren Family LLLP.

McLaren is the general partner of McLaren Family LLLP and has voting and

dispositive power over such shares and includes 15,000 vested stock options.

McLaren is the general partner of McLaren Family LLLP and has voting and dispositive

power over such shares and includes 23,750 vested stock options.

23,750 vested stock options.

18,750 vested stock options.

Includes 8,750 vested stock options and 13,175 shares owned by Diamond

Bridge Capital, LP, which is 50% owned by Mr.

Kane’s shares voting and dispositive power over these shares with the other

50% owner of Diamond Bridge Capital, LP.

298,750 vested stock options.

and Address of Beneficial Owner

Preferred Stock

Name and Address of Beneficial Owner

Preferred Stock

Percent of Class

1 unchanged sentence

c/o Zoned Properties, Inc.

Raintree Drive #230

Scottsdale, AZ 85260

c/o Zoned Properties, Inc.

Raintree Drive #230

Scottsdale, AZ 85260

2 unchanged sentences

Johnston and Dr.

have the ability to control the outcome of all matters submitted to a vote of stockholders, including the election of directors.

The percent of voting power in the table gives effect to the holder’s beneficial ownership of common stock and preferred

Johnston’s common stockholdings, Mr.

the ability to control the outcome of all matters submitted to a vote of stockholders, including the election of directors.

of voting power in the table gives effect to the holder’s beneficial ownership of common stock and preferred stock.

Johnston’s common stockholdings, Mr.

Johnston holds 45.7% of the voting power of the Company.

are held by McLaren Family LLLP.

McLaren is the general partner of McLaren Family LLLP and has voting and dispositive

power over such shares.

McLaren’s common stockholdings, Dr.

McLaren is the general partner of McLaren Family LLLP and has voting and dispositive power over

McLaren’s common stockholdings, Dr.

McLaren holds 46.0% of the voting power of the Company.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

do not have a written policy for the review, approval or ratification of transactions with related parties or conflicted transactions.

When such transactions arise, they are referred to the audit committee for consideration for referral to our board of directors

for its consideration.

Notes 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, a significant stockholder of the Company, in exchange for cash from Mr.

Abrams of $2,000,000.

Also on January 9, 2017, the Company issued a convertible debenture (the “McLaren Debenture”

and together with the

Abrams Debenture, the “Debentures”) in the aggregate principal amount of $20,000 in favor of Bryan McLaren, the Company’s

then Chief Executive Officer and President and a member of the Company’s Board of Directors (effective May 23, 2018, Mr.

McLaren also assumed the title of Chief Financial Officer), in exchange for cash from Mr.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

We do not have a written policy for the review,

approval or ratification of transactions with related parties or conflicted transactions.

When such transactions arise, they are referred

to the audit committee for consideration for referral to our board of directors for its consideration.

Convertible Notes Payable

On 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

McLaren of $20,000.

McLaren is referred to herein as a “Holder.”

Each of the Debentures accrues interest at the rate of 6% per

annum payable quarterly by the first of each quarter and matures on January 9, 2022.

The Company may prepay the Debentures at

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

Pursuant to the terms of each of the Debentures, the Holder is entitled to convert

all or a portion of the principal balance and all accrued and unpaid interest due under the respective Debenture into shares of

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

If the Company defaults on payment, the Holder 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 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 each Debenture), the Holder may (i) declare the entire principal

amount and all accrued and unpaid interest under the Debenture immediately due and payable, and (ii) exercise any and all rights,

powers and remedies available to the Holder at law or in equity or other appropriate proceeding, whether for the specific performance

of any covenant or agreement contained in the Debenture and proceed to enforce the payment thereof or any other legal or equitable

right of the Holder.

to a Stock Redemption Agreement, effective January 1, 2019, the Company and Mr.

Abrams amended the Abrams Debenture to extend

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

of our five board members are independent.

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

each quarter and matured on January 9, 2022.

Pursuant to the terms of the McLaren Debenture, Mr.

McLaren was 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.

As of December 31, 2021 and 2020, the principal

balance due under the McLaren Debenture was $20,000.

As of December 31, 2021 and 2020, accrued interest

payable due under the McLaren Debenture was $5,400 and $4,200, respectively, which is included in accrued expenses – related party

on the accompanying consolidated balance sheets.

For the years ended December 31, 2021 and 2020,

interest expense – related party amounted to $1,200.

On January 9, 2022, the Company repaid the note

payable – related party in the principal amount of $20,000 and all accrued and unpaid interest due.

Director Independence

Four of our six board members are independent.

The Board has determined that each of Messrs.

Friedman and Honaman and Dr.

is an independent director pursuant to the NASDAQ listing standards.

Under the NASDAQ rules, no director qualifies as independent

unless the Board affirmatively determines that the director has no material relationship with us (directly, or as a partner, stockholder

or officer of an organization that has a relationship with us).

assessing the independence of our directors, the Board considers all of the business relationships between the Company and our

directors and their respective affiliated companies.

This review is based primarily on the Company’s review of its own records

and on responses of the directors to questions in a questionnaire regarding employment, business, familial, compensation and other

relationships with the Company and our management.

Where relationships exist, the Board determines whether the relationship between

the Company and the directors or the directors’

affiliated companies impairs the directors’

independence.

After consideration

of the directors’

relationships with the Company, the Board has affirmatively determined that none of the individuals serving

as non-employee directors during the fiscal year ended December 31, 2020 had a material relationship with us and that each of

such non-employee directors is independent.

McLaren was not considered an independent director during his service on the Board during the fiscal year ended December 31, 2020

because of his employment as our CEO, President, Treasurer, Secretary and Chairman of the Board.

Alex McLaren, MD was not considered

an independent director during his service on the Board during the fiscal year ended December 31, 2020 because Bryan McLaren is

the son of Dr.

Friedman, Honaman, Kane and Dr.

Overstreet is an independent director pursuant to the NASDAQ

listing standards.

Under the NASDAQ rules, no director qualifies as independent unless the Board affirmatively determines that the director

has no material relationship with us (directly, or as a partner, stockholder or officer of an organization that has a relationship with

In assessing the independence of our directors,

the Board considers all of the business relationships between the Company and our directors and their respective affiliated companies.

This review is based primarily on the Company’s review of its own records and on responses of the directors to questions in a questionnaire

regarding employment, business, familial, compensation and other relationships with the Company and our management.

Where relationships

exist, the Board determines whether the relationship between the Company and the directors or the directors’ affiliated companies

impairs the directors’ independence.

After consideration of the directors’ relationships with the Company, the Board has

affirmatively determined that none of the individuals serving as non-employee directors during the fiscal year ended December 31, 2021

had a material relationship with us and that each of such non-employee directors is independent.

Bryan McLaren was not considered an independent

director during his service on the Board during the fiscal year ended December 31, 2021 because of his employment as our CEO, President,

Treasurer, Secretary and Chairman of the Board.

Alex McLaren, MD was not considered an independent director during his service on the

Board during the fiscal year ended December 31, 2021 because Bryan McLaren is the son of Dr.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

following table sets forth the fees that were billed or that will be billed to our company for the years ended December 31, 2020

and 2019 for professional services rendered by D.

The following table sets forth the fees that

were billed or that will be billed to our company for the years ended December 31, 2021 and 2020 for professional services rendered by

Brooks and Associates CPAs, P.A.:

Audit-Related Fees

fees were for professional services rendered for the audits of our financial statements and for review of our quarterly financial

Audit-Related

2020 and 2019, our independent registered public accountants did not provide any assurance and related services that are reasonably

related to the performance of the audit or review or our financial statements that are not reported under the caption “Audit

our independent registered public accountants did not provide any services to us for tax compliance, tax advice and tax planning

during 2020 and 2019, no tax fees were billed or paid during those fiscal years.

independent registered public accountants did not provide any products and services not disclosed in the table above during 2020

As a result, there were no other fees billed or paid during 2020 and 2019.

Policies and Procedures

Audit Committee pre-approves all services provided by our independent auditors.

All of the above services and fees were reviewed

and approved by our Audit Committee before the respective services were rendered.

board of directors has considered the nature and amount of fees billed by our independent registered public accounting firm and

believe that the provision of services for activities unrelated to the audit is compatible with maintaining their respective independence.

Audit fees were for professional services rendered

for the audits of our financial statements and for review of our quarterly financial statements.

Audit-Related Fees

During 2021 and 2020, our independent registered

public accountants did not provide any assurance and related services that are reasonably related to the performance of the audit or

review or our financial statements that are not reported under the caption “Audit Fees” above.

As our independent registered public accountants

did not provide any services to us for tax compliance, tax advice and tax planning during 2021 and 2020, no tax fees were billed or paid

during those fiscal years.

All Other Fees

Our independent registered public accountants

did not provide any products and services not disclosed in the table above during 2021 and 2020.

As a result, there were no other fees

billed or paid during 2021 and 2020.

Pre-Approval Policies and Procedures

Our Audit Committee pre-approves all services

provided by our independent auditors.

All of the above services and fees were reviewed and approved by our Audit Committee before the

respective services were rendered.

Our board of directors has considered the nature

and amount of fees billed by our independent registered public accounting firm and believe that the provision of services for activities

unrelated to the audit is compatible with maintaining their respective independence.

EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

required by Item 601 of Regulation S-K:

of Incorporation, as amended, of Zoned Properties, Inc.

of Zoned Properties, Inc.

Member Agreement dated as of October 1, 2014 by and between the registrant and Alex McLaren.

Member Agreement dated as of October 1, 2014 by and between the registrant and Art Friedman.

Member Agreement dated as of September 26, 2016 by and between the registrant and David G, Honaman.

Member Agreement effective April 1, 2017 by and between Zoned Properties, Inc.

Exhibits required by Item 601 of Regulation S-K:

EXHIBIT INDEX

Exhibit Number

Description of Exhibit

Articles of Incorporation, as amended, of Zoned Properties, Inc.

Bylaws of Zoned Properties, Inc.

Board Member Agreement dated as of October 1, 2014 by and between the registrant and Alex McLaren.

Board Member Agreement dated as of October 1, 2014 by and between the registrant and Art Friedman.

Board Member Agreement dated as of September 26, 2016 by and between the registrant and David G, Honaman.

Board Member Agreement effective April 1, 2017 by and between Zoned Properties, Inc.

and Derek Overstreet.

dated as of August 6, 2015 by and between Chino Valley Properties, LLC and CCC Holdings, LLC.

Amendment to Commercial Lease Agreement dated September 25, 2015 by and among Chino Valley Properties, LLC, CCC Holdings,

LLC and Alan Abrams.

dated as of August 15, 2015 by and between the registrant and CCC Holdings, LLC.

Amendment to Commercial Lease Agreement dated September 25, 2015 by and among the registrant, CCC Holdings, LLC and Alan Abrams.

Agreement dated as of October 1, 2014 by and between Green Valley Group, LLC and Broken Arrow Herbal Center, Inc.

dated as of October 1, 2014 by and between Kingman Property Group, LLC and CJK, Inc.

dated as of October 1, 2015 by and between the registrant and CFO Oncall, Inc.

Option Grant Notice and Agreement between registrant and Newbridge Financial, Inc.

of Trust dated March 7, 2015 in favor of Investment Property Exchange Services, Inc.

Lease dated as of August 6, 2015 by and between Chino Valley Properties, LLC and CCC Holdings, LLC.

First Amendment to Commercial Lease Agreement dated September 25, 2015 by and among Chino Valley Properties, LLC, CCC Holdings, LLC and

Lease dated as of August 15, 2015 by and between the registrant and CCC Holdings, LLC.

First Amendment to Commercial Lease Agreement dated September 25, 2015 by and among the registrant, CCC Holdings, LLC and Alan Abrams.

Lease Agreement dated as of October 1, 2014 by and between Green Valley Group, LLC and Broken Arrow Herbal Center, Inc.

Lease dated as of October 1, 2014 by and between Kingman Property

Group, LLC and CJK, Inc.

Agreement dated as of October 1, 2015 by and between the registrant and CFO Oncall, Inc.

Stock Option Grant Notice and Agreement between registrant

and Newbridge Financial, Inc.

Deed of Trust dated March 7, 2015 in favor of Investment Property

Exchange Services, Inc.

covering Tempe, AZ property.

Option Grant Notice and Agreement dated December 20, 2015 between Zoned Properties, Inc.

Stock Option Grant Notice and Agreement dated December 20,

2015 between Zoned Properties, Inc.

and Bryan McLaren.

to Buy and Sell Real Estate (Commercial) entered into on April 21, 2016 between Zoned Colorado Properties, LLC and Parachute

Development Corporation.

Amendment to Commercial Lease by and between Zoned Properties, Inc., C3C3 Group, LLC and Alan Abrams.

Amendment to Commercial Lease by and between Chino Valley Properties, LLC, C3C3 Group, LLC and Alan Abrams.

Real Estate Purchase Contract dated December 22, 2016 by and between Zoned Properties, Inc.

Contract to Buy and Sell Real Estate (Commercial) entered into

on April 21, 2016 between Zoned Colorado Properties, LLC and Parachute Development Corporation.

Second Amendment to Commercial Lease by and between Zoned Properties,

Inc., C3C3 Group, LLC and Alan Abrams.

Third Amendment to Commercial Lease by and between Chino Valley

Properties, LLC, C3C3 Group, LLC and Alan Abrams.

Commercial Real Estate Purchase Contract dated December 22,

2016 by and between Zoned Properties, Inc.

and Big Lake Estates, LLC.

Debenture dated January 9, 2017 Issued by Zoned Properties, Inc.

Convertible Debenture dated January 9, 2017 Issued by Zoned Properties, Inc.

in Favor of Alan Abrams.

Debenture dated January 9, 2017 Issued by Zoned Properties, Inc.

Convertible Debenture dated January 9, 2017 Issued by Zoned Properties, Inc.

in Favor of Bryan McLaren.

Amendment to Commercial Lease by and between Chino Valley Properties, LLC, C3C3 Group, LLC and Alan Abrams.

Amendment to Commercial Lease by and between Zoned Properties, Inc., C3C3 Group, LLC and Alan Abrams, and Zoned Arizona Properties,

LLC, dated as of October 1, 2017.

Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 by and between Chino Valley Properties, LLC

and Broken Arrow Herbal Center, Inc.

Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 by and between Green Valley Group, LLC and Broken

Arrow Herbal Center, Inc.

Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 by and between Zoned Arizona Properties, LLC

and CJK, Inc.

Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 by and between Kingman Property Group, LLC and

Advisory Services Agreement dated May 1, 2018 by and between Zoned Properties, Inc.

Fourth Amendment to Commercial

Lease by and between Chino Valley Properties, LLC, C3C3 Group, LLC and Alan Abrams.

Third Amendment to Commercial

Lease by and between Zoned Properties, Inc., C3C3 Group, LLC and Alan Abrams, and Zoned Arizona Properties, LLC, dated as of October

Licensed Medical Marijuana Facility Triple Net (NNN) Lease

Agreement dated May 1, 2018 by and between Chino Valley Properties, LLC and Broken Arrow Herbal Center, Inc.

Licensed Medical Marijuana Facility Triple Net (NNN) Lease

Agreement dated May 1, 2018 by and between Green Valley Group, LLC and Broken Arrow Herbal Center, Inc.

Licensed Medical Marijuana Facility Triple Net (NNN) Lease

Agreement dated May 1, 2018 by and between Zoned Arizona Properties, LLC and CJK, Inc.

Licensed Medical Marijuana Facility Triple Net (NNN) Lease

Agreement dated May 1, 2018 by and between Kingman Property Group, LLC and CJK, Inc.

Exhibit Number

Description of Exhibit

Confidential Advisory Services Agreement dated May 1, 2018

by and between Zoned Properties, Inc.

and Broken Arrow Herbal Center, Inc.

Advisory Services Agreement dated May 1, 2018 by and between Zoned Properties, Inc.

Confidential Advisory Services Agreement dated May 1, 2018

by and between Zoned Properties, Inc.

and CJK, Inc.

Agreement by and between the registrant and Bryan McLaren dated May 23, 2018.

Parachute Agreement by and between the registrant and Bryan McLaren dated May 23, 2018.

Redemption Agreement effective January 1, 2019 by and among Zoned Properties, Inc., Christopher Carra, Alan B.

Abrams, Clayton

Abrams Revocable Trust and Kyle Abrams Revocable Trust.

Amendment to Confidential Advisory Services Agreement dated January 1, 2019 by and between Zoned Properties, Inc., on behalf

of Chino Valley Properties, LLC and Broken Arrow Herbal Center, Inc.

Amendment to Confidential Advisory Services Agreement dated January 1, 2019 by and between Zoned Properties, Inc., on behalf

of Zoned Arizona Properties, LLC and CJK, Inc.

to Convertible Debenture entered into as of January 2, 2019 by and between Zoned Properties, Inc.

Employment Agreement by and between the registrant and Bryan

McLaren dated May 23, 2018.

Golden Parachute Agreement by and between the registrant and Bryan McLaren dated May 23, 2018.

Stock Redemption Agreement effective January 1, 2019 by and

among Zoned Properties, Inc., Christopher Carra, Alan B.

Abrams, Clayton Abrams Revocable Trust and Kyle Abrams Revocable Trust.

First Amendment to Confidential Advisory Services Agreement

dated January 1, 2019 by and between Zoned Properties, Inc., on behalf of Chino Valley Properties, LLC and Broken Arrow Herbal Center,

First Amendment to Confidential Advisory Services Agreement

dated January 1, 2019 by and between Zoned Properties, Inc., on behalf of Zoned Arizona Properties, LLC and CJK, Inc.

Amendment to Convertible

Debenture entered into as of January 2, 2019 by and between Zoned Properties, Inc.

and Alan Abrams.

Amendment to Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated January 1, 2019 by and between Chino

Valley Properties, LLC and Broken Arrow Herbal Center, Inc.

Debenture issued March 19, 2020 from KCB Jade Holdings, LLC.

Amendment to Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated as of May 31, 2020, by and between

Zoned Arizona Properties, LLC and CJK, Inc.

Amendment to Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated as of May 31, 2020, by and between

Chino Valley Properties, LLC and Broken Arrow Herbal Center, Inc.

Amendment to Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated as of May 31, 2020, by and between

Green Valley Properties, LLC and Broken Arrow Herbal Center, Inc.

Amendment to Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated as of May 31, 2020, by and between

Kingman Property Group, LLC and CJK, Inc.

and Restated Convertible Debenture issued February 19, 2021 from KCB Jade Holdings, LLC.

Lease Agreement entered into on March 3, 2021, and dated as of February 26, 2021, between Gilbert Property Management, LLC

and AZ2CAL Enterprises, LLC.

First Amendment to Licensed Medical Marijuana Facility Triple

Net (NNN) Lease Agreement dated January 1, 2019 by and between Chino Valley Properties, LLC and Broken Arrow Herbal Center, Inc.

Convertible Debenture issued March 19, 2020 from KCB Jade Holdings,

First Amendment to Licensed

Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated as of May 31, 2020, by and between Zoned Arizona Properties, LLC and

Second Amendment to Licensed

Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated as of May 31, 2020, by and between Chino Valley Properties, LLC and

Broken Arrow Herbal Center, Inc.

First Amendment to Licensed

Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated as of May 31, 2020, by and between Green Valley Properties, LLC and

Broken Arrow Herbal Center, Inc.

First Amendment to Licensed Medical Marijuana Facility Triple

Net (NNN) Lease Agreement dated as of May 31, 2020, by and between Kingman Property Group, LLC and CJK, Inc.

Amended and Restated Convertible Debenture issued February

19, 2021 from KCB Jade Holdings, LLC.

Commercial Lease Agreement entered into on March 3, 2021, and

dated as of February 26, 2021, between Gilbert Property Management, LLC and AZ2CAL Enterprises, LLC (Incorporated by reference to exhibit

to Current Report on Form 8-K filed with the SEC by the Company on March 8, 2021).

Vacant Land/Lot Purchase Contract between AZ2CAL Enterprises, LLC (as Buyer) and Gilbert Property Management, LLC (as Seller) dated April 15, 2021 (Incorporated by reference to exhibit 99.1 to Current Report on Form 8-K filed with the SEC by the Company on June 9, 2021)

Amendment to Vacant Land/Lot Purchase Contract between AZ2CAL Enterprises, LLC (as Buyer) and Gilbert Property Management, LLC (as Seller) dated May 17, 2021 (Incorporated by reference to exhibit 99.2 to Current Report on Form 8-K filed with the SEC by the Company on June 9, 2021).

Amended and Restated Convertible Debenture issued by KCB Jade Holdings, LLC in favor of the registrant (Incorporated by reference to

exhibit 10.1 to Current Report on Form 8-K filed with the SEC by the Company on August 4, 2021).

Exhibit Number

Description of Exhibit

Third Amendment to the Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018, between Chino Valley and CJK, Inc.

(“CJK”), as amended, entered into on August 23, 2021 and effective September 1, 2021 (Incorporated by reference to exhibit 10.1 to Current Report on Form 8-K filed with the SEC by the Company on August 24, 2021).

Form of Indemnification Agreement (Incorporated by reference to exhibit 10.2 to Current Report on Form 8-K filed with the SEC by the Company on August 24, 2021).

Fourth Amendment to Regulated Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018, between Chino Valley and CJK, Inc., as amended, entered into on January 24, 2022 (Incorporated by reference to exhibit 10.1 to Current Report on Form 8-K filed with the SEC by the Company on January 25, 2022).

List of Subsidiaries.

Consent of Independent Registered Public Accounting Firm –

D, Brooks and Associates CPA’s P.A.

Certification

of Chief Executive Officer pursuant to Rule 13(a)-14(a) under the Securities Exchange Act of 1934, as amended.

Certification

of Chief Financial Officer pursuant to Rule 13(a)-14(a) under the Securities Exchange Act of 1934, as amended.

Certification

of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section

906 of the Sarbanes-Oxley Act of 2002.

Consent of Independent Registered Public Accounting Firm – D, Brooks and Associates CPA’s P.A.

Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a) under the Securities Exchange Act of 1934, as amended.

Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a) under the Securities Exchange Act of 1934, as amended.

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Audited financial statements of AC Management Group, LLC for the year ended December 31, 2021.

XBRL INSTANCE

XBRL TAXONOMY

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Management contract

or compensatory plan or arrangement.

INLINE XBRL INSTANCE DOCUMENT

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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

contract or compensatory plan or arrangement.

Filed herewith

Furnished herewith

by reference to exhibit to Registration Statement on Form S-1 filed by the Company on November 25, 2015.

14 unchanged sentences

by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on February 19, 2021.

by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on March 8, 2021.

permitted, the registrant has elected not to supply a summary of information required by Form 10-K.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report

to be signed on its behalf by the undersigned, thereunto duly authorized.

As permitted, the registrant has elected not

to supply a summary of information required by Form 10-K.

Pursuant to the requirements

of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf

by the undersigned, thereunto duly authorized.

Zoned Properties,

2 unchanged sentences

Bryan McLaren

Chief Executive Officer, President

Chief Executive Officer, President and

Chief Financial Officer

person whose signature appears below hereby appoints Bryan McLaren as attorney-in-fact with full power of substitution to execute

in the name and on behalf of the registrant and each such person, individually and in each capacity stated below, one or more

amendments to the annual report on Form 10-K, which amendments may make such changes in the report as the attorney-in-fact acting

deems appropriate and to file any such amendment to the annual report on Form 10-K with the Securities and Exchange Commission.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons

on behalf of the registrant and in the capacities and on the dates indicated.

Bryan McLaren

Executive Officer, Chief Financial Officer,

President, Treasurer, Secretary and

POWER OF ATTORNEY

Each person whose signature

appears below hereby appoints Bryan McLaren as attorney-in-fact with full power of substitution to execute in the name and on behalf

of the registrant and each such person, individually and in each capacity stated below, one or more amendments to the annual report on

Form 10-K, which amendments may make such changes in the report as the attorney-in-fact acting deems appropriate and to file any such

amendment to the annual report on Form 10-K with the Securities and Exchange Commission.

Pursuant to the requirements of the Securities

Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and

on the dates indicated.

Bryan McLaren

Chief Executive Officer, Chief Financial Officer,

President, Treasurer, Secretary and Director

executive officer, principal financial officer and

1 unchanged sentence

Derek Overstreet

PROPERTIES, INC.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

YEARS ENDED DECEMBER 31, 2021 AND 2020

PROPERTIES, INC.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

of Independent Registered Public Accounting Firm

Financial Statements:

Balance Sheets as of December 31, 2020 and 2019

Statements of Operations –

For the Years Ended December 31, 2020 and 2019

Statements of Changes in Stockholders’

Equity - For the Years Ended December 31, 2020 and 2019

Statements of Cash Flows –

For the Years Ended December 31, 2020 and 2019

to Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31, 2021 and 2020

Consolidated Statements of Operations – For the Years Ended December 31, 2021 and 2020

Consolidated Statements of Changes in Stockholders’ Equity - For the Years Ended December 31, 2021 and 2020

Consolidated Statements of Cash Flows – For the Years Ended December 31, 2021 and 2020

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Board of Directors and

Stockholders of Zoned Properties, Inc.

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheets of Zoned Properties, Inc.

(the Company) as of December 31, 2020 and

2019, and the related consolidated statements of operations, stockholders’

equity, and cash flows for the years ended December

31, 2020 and 2019, and related notes (collectively referred to as the consolidated financial statements)

our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company

as of December 31, 2020 and 2019 the results of its operations and its cash flows for the years ended December 31, 2020 and 2019

in conformity with accounting principles generally accepted in the United States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on

the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company

Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance

with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but

not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheets of Zoned Properties, Inc.

(the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations,

stockholders’ equity, and cash flows for the years ended December 31, 2021 and 2020, and related notes (collectively referred to

as the consolidated financial statements)

In our opinion, the consolidated financial statements

present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020 the results of its operations

and its cash flows for the years ended December 31, 2021 and 2020 in conformity with accounting principles generally accepted in the United

States of America.

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are

required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding

of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Audit Matters

audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required

to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements

and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there were no critical audit

Critical Audit Matters

Critical audit matters are matters arising from

the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and

that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective, or complex judgments.

We determined that there were no critical audit matters.

Brooks and Associates CPAs, P.A.

have served as the Company’s auditor since 2018.

Beach Gardens, Florida

PROPERTIES, INC.

We have served as the Company’s auditor since

Palm Beach Gardens, Florida

PCAOB Firm ID:

March 24, 2022

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

rent receivable

properties, net

expenses and other assets

note receivable

and equipment, net

AND STOCKHOLDERS’

note payable - related party

expenses - related party

deposits payable

and Contingencies (Note 11)

STOCKHOLDERS’

Preferred stock,

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

2,000,000 shares issued and outstanding at December 31, 2020 and 2019 ($1.00

per share liquidation preference)

Accounts receivable

Deferred rent receivable

Rental properties, net

Prepaid expenses and other assets

Convertible note receivable

Property and equipment, net

Intangible asset, net

Investment in unconsolidated joint ventures

Security deposits

LIABILITIES AND STOCKHOLDERS’ EQUITY

Convertible note payable

Convertible note payable - related party

Accounts payable

Accrued expenses

Accrued interest - related party

Deferred revenues

Security deposits payable

Total Liabilities

Commitments and Contingencies (Note 11)

STOCKHOLDERS’ EQUITY:

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

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

Common stock:

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

12,011,548 and 11,901,548 issued and outstanding at December 31, 2020

and 2019, respectively

paid-in capital

(14,933,048 )

(14,854,710 )

Stockholders’

Liabilities and Stockholders’

accompanying notes to consolidated financial statements.

PROPERTIES, INC.

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

Additional paid-in capital

Accumulated deficit

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

See accompanying notes to consolidated financial

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

STATEMENTS OF OPERATIONS

OPERATING EXPENSES:

and administrative expenses

and amortization

CONSOLIDATED STATEMENTS OF OPERATIONS

the Year Ended

Rental revenues

Advisory revenues

Brokerage revenues

Total revenues

OPERATING EXPENSES:

FROM OPERATIONS

Compensation and benefits

Professional fees

Brokerage fees

General and administrative expenses

Real estate taxes

Gain on sale of rental property

Total operating expenses

INCOME FROM OPERATIONS

OTHER (EXPENSES) INCOME:

expenses - related party

other expenses, net

Interest expenses

Interest expenses - related party

Interest income

Impairment loss from unconsolidated joint ventures

Loss from unconsolidated joint ventures

Total other expenses, net

LOSS BEFORE INCOME TAXES

FOR INCOME TAXES

PROVISION FOR INCOME TAXES

NET LOSS PER COMMON SHARE:

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

accompanying notes to consolidated financial statements.

PROPERTIES, INC.

See accompanying notes to consolidated

financial statements.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

Stockholders’

December 31, 2018

$ (14,842,429 )

redemption and cencellation

stock issued for services

of stock based compensation related to stock options issued

December 31, 2019

(14,854,710 )

stock issued for services

of stock based compensation related to stock options issued

December 31, 2020

$ (14,933,048 )

accompanying notes to consolidated financial statements.

PROPERTIES, INC.

Preferred Stock

Stockholders’

Balance, December 31, 2019

Common stock issued for services

Accretion of stock based compensation related to stock options issued

Balance, December 31, 2020

Common stock issued for services

Common stock issued for intangible asset

Accretion of stock based compensation related to stock options issued

Balance, December 31, 2021

See accompanying notes to consolidated financial

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOWS

the Year Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to

reconcile net loss to net cash provided by operating activities:

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

Depreciation expense

Amortization expense

Stock-based compensation

Stock option expense

Change in operating

assets and liabilities:

Gain on sale of rental property

Impairment loss from unconsolidated joint ventures

Loss from unconsolidated joint ventures

Change in operating assets and liabilities:

Accounts receivable

Deferred rent

Prepaid expenses

and other assets

Security deposits

Deferred rent receivable

Prepaid expenses and other assets

Accounts payable

Accrued expenses

Accrued expenses -

related parties

Accrued expenses - related parties

Deferred revenues

deposits payable

NET CASH PROVIDED

BY OPERATING ACTIVITIES

Security deposits payable

NET CASH PROVIDED BY OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of convertible

note receivable

rental property improvements

of property and equipment

NET CASH USED

IN INVESTING ACTIVITIES

Purchase of convertible note receivable

Purchases of rental property improvements

Purchases 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 IN CASH

CASH, beginning

CASH, beginning of year

CASH, end of year

SUPPLEMENTAL DISCLOSURE OF CASH FLOW

SUPPLEMENTAL DISCLOSURE OF NON-CASH

INVESTING AND FINANCING ACTIVITIES:

Reclassification

of convertible note payable - related party to convertible note payable

Reclassification

of security deposits - related party to security deposits

Reclassification

of accrued expenses - related party to accrued expenses

accompanying notes to consolidated financial statements.

PROPERTIES, INC.

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest paid

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Common stock issued for intangible asset

See accompanying notes to consolidated financial

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

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.

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

Zoned Properties, Inc.

(“Zoned Properties”

or the “Company”), was incorporated in the State of Nevada on August 25, 2003.

The Company renamed the corporation, Zoned

Properties, Inc., and shifted its business model during the first quarter of 2014.

The Company is now a 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 Property Technology (“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”).

Company has the following wholly owned subsidiaries:

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

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

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

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

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

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

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

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

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

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

The Company is monitoring this closely, and although operations have not been materially affected by the COVID-19 outbreak

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

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

will remain open pursuant to state and local government requirements.

At this time, the Company does not foresee any material

changes to its operations from COVID-19.

The Company’s tenants are continuing to generate revenue at these properties, and

they have continued to make rental payments in full and on time and we believe the tenants’

liquidity position is sufficient

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 has the following wholly owned subsidiaries:

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

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

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

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

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

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

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

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

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

Zoned Properties Brokerage, LLC (“Zoned Brokerage”) was organized in the State of Arizona on March 17, 2021.

ZP Data Platform 1, LLC (“ZP Data”) was organized in the State of Arizona on April 14, 2021.

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 (See Note 7).

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

May 1, 2021 (See Note 7).

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 pursuant to state and local government requirements.

At this time, the Company does not foresee any

material changes to its operations from COVID-19.

The Company’s tenants are continuing to generate revenue at these properties,

and they have continued to make rental payments in full and on time and we believe the tenants’ liquidity position is sufficient

to cover its expected rental obligations.

Accordingly, while the Company does not anticipate an impact on its operations, it cannot

estimate the duration of the pandemic and potential impact on its business if the properties must close or if the tenants are

otherwise unable or unwilling to make rental payments.

In addition, a severe or prolonged economic downturn could result in a

variety of risks to the Company’s business, including weakened demand for its properties and a decreased ability to raise

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

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

event on its operations.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of presentation and principles of consolidation

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

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

All intercompany balances and transactions have been eliminated upon consolidation.

PROPERTIES, INC.

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,

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

January 1, 2019, the Company and certain beneficial shareholders entered into a Stock Redemption Agreement (See Note 8).

to Securities and Exchange Commission (“SEC”) rules, each of these beneficial shareholders was deemed to be a “related

person”

due solely to their status as significant stockholders of the Company.

Pursuant to the terms of the Stock Redemption

Agreement, these beneficial shareholders would no longer be significant stockholders of the Company and would no longer be deemed

to be “related persons”

under SEC rules.

Accordingly, as of January 1, 2019, the Company will no longer reflect transactions

and balances related to these beneficial shareholders as related party transactions.

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

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

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

Actual results

could differ from those estimates.

Significant estimates for the years ended December 31, 2020 and 2019 include the collectability

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

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

including options and stock-based compensation.

and uncertainties

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

including the potential risk of business failure.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING

Basis of presentation and principles of consolidation

The accompanying 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.

Use of estimates

The preparation of consolidated financial statements

in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities

and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue

and expenses during the reporting period.

Actual results could differ from those estimates.

Significant estimates for the years ended

December 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 including rental property and investment in joint ventures,

valuation allowances for deferred tax assets, and the fair value of non-cash equity transactions, including options and stock-based compensation.

Risks 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.

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 years

ended December 31, 2020 and 2019, rental and advisory revenue associated with the Significant Tenants amounted to $1,176,666 and

$1,146,654, which represents 96.8% and 91.0% of the Company’s total revenues, respectively (see Note 3).

value of financial instruments

carrying amounts reported in the 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.

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.

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 December 31, 2020 and 2019.

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

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

To date, the Company has not experienced

any losses on its invested cash.

On December 31, 2020 and 2019, the Company had approximately $449,000 and $390,000, respectively,

of cash in excess of FDIC limits of $250,000.

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

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

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

The expense associated

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

For the years ended December 31,

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

PROPERTIES, INC.

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

For the years ended December 31, 2021 and 2020, rental and advisory revenue associated with the Significant Tenants amounted

to $ 1,255,130 and $ 1,176,666 , respectively, which represents 68.9 % and 98.6 % of the Company’s total revenues, respectively (see

Fair value of financial instruments

The carrying amounts reported in the 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.

The 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.

Cash 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 December 31, 2021 and 2020.

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 December 31, 2021 and 2020, the

Company had approximately $ 942,000 and $ 449,000 , respectively, of cash in excess of FDIC limits of $ 250,000 .

Accounts and convertible notes receivable

The 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 expense.

For the years ended December 31, 2021 and 2020, the Company did not record any allowances

for doubtful accounts.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

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 consolidated financial

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

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

For the years ended December 31, 2020

and 2019, 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.

Company examines the possibility of decreases in the value of these assets when events or changes in circumstances reflect the

fact that their recorded value may not be recoverable.

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

(“ASC 606”).

This standard establishes a single comprehensive model for entities to use in accounting for revenue

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

ASC 606 requires an entity

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

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

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

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.

PROPERTIES, INC.

Investment in joint ventures

The 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 the Company’s 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.

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.

It considers 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.

Rental properties

Rental properties are carried at cost, less accumulated

depreciation and amortization.

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

are capitalized.

Maintenance and repair expenses are charged to expense as incurred.

Depreciation is recognized on a straight-line basis

over estimated useful lives of the assets, which range from 5 to 39 years.

Tenant improvements are amortized on a straight-line basis

over the lives of the related leases, which approximate the useful lives of the assets.

Upon the acquisition of real estate, 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.

The 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

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

the analyses are prepared.

If the Company’s estimates of the projected

future cash flows, anticipated holding periods, or market conditions change, the Company’s evaluation of impairment losses may be

different and such differences could be material to its consolidated financial 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 years ended December 31, 2021 and 2020, the Company did not record any impairment losses.

The Company has capitalized land, which is not

subject to depreciation.

Property and equipment

Property 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

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.

The Company examines the possibility of decreases

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

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

and its impact on our consolidated financial statements

upon adoption.

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

is reasonably assured.

and diluted 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

Revenue recognition

The Company follows 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.

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

Rental income includes base rents that each tenant

pays in accordance with the terms of its respective lease and is reported on a straight-line basis over the non-cancellable term of the

lease, which includes the effects of rent abatements under the leases.

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.

Currently, 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.

Revenues 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.

Lease accounting

ASU 2016-02, “ Leases (Topic 842)”

sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e.,

lessees and lessors).

The standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases

based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

This classification will determine

whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease.

is also required to recognize a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless

of their classification.

Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases

The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance

for sales-type leases, direct financing leases and operating leases.

For contracts entered into on or after the effective

date, where the Company is the lessee, at the inception of a contract, the Company assess whether the contract is, or contains, a lease.

The Company’s assessment is based on:

(1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain

the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right

to direct the use of the asset.

The Company allocates the consideration in the contract to each lease component based on its relative

stand-alone price to determine the lease payments.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

For leases entered into on or after the effective

date, where the Company is the lessor, at the inception of the contract, the Company assesses whether the contract is a sales-type, direct

financing or operating lease by reviewing the terms of the lease and determining if the lessee obtains control of the underlying asset

implicitly or explicitly.

If a change to a pre-existing lease occurs, the

Company evaluates if the modification results in a separate new lease or a modified lease.

A new lease results when a modification provides

additional right of use.

The new lease or modified lease is then reassessed to determine its classification based on the modified terms.

As disclosed in Note 3, on January 1, 2019, the Chino Valley lease was modified to increase the monthly base rent from $ 35,000 to $ 40,000 .

Additionally, on May 31, 2020, the Chino Valley lease was modified to decrease the monthly base rent from $ 40,000 to $ 32,800 and the Tempe

lease was modified to increase the monthly base rent from $ 33,500 to $ 49,200 .

On August 23, 2021 and effective September 1, 2021, the

Chino Valley lease was amended, and the monthly base rent was increased to $55,195 due to additional space of 27,312 square feet being

leased to the lessee.

The increase in monthly rent was commensurate with the additional space being leased;

therefore, this modification

qualifies as a separate contract under ASC 842.

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

and concluded it remained properly classified as an operating lease.

The Company records revenues from rental properties

for its operating leases on a straight-line basis.

Any revenue on the straight-line basis exceeding the monthly payment amount required

on the operating lease is reflected as a deferred rent receivable.

Effective May 31, 2020, the Company amended its leases for which it

is the lessor on its Chino Valley, Tempe, Kingman and Green Valley properties.

The amendments resulted in an abatement of rent for the

months of June and July 2020.

This rent abatement resulted in a deferred rent receivable as of December 31, 2021 and 2020 of $ 164,770

and $ 173,757 , respectively (see Note 3).

For leases where the Company is a lessee, primarily

for the Company’s administrative office lease, the Company analyzed if it would be required to record a lease liability and a right

of use asset on its consolidated balance sheets at fair value upon adoption of ASU 2016-02.

Since the terms of the Company’s operating

lease for its office space was 12 months or less, pursuant to ASC 842, the Company determined that the lease meets the definition of a

short-term lease and the Company did not recognize a right-of use asset and lease liability arising from this lease.

Basic and diluted loss per share

Basic loss per share is computed by dividing net

loss available to common shareholders by the weighted average number of shares of common stock outstanding during each period.

loss per share is computed by dividing net loss 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

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 years ended December 31, 2020 and 2019.

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.

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 December 31, 2020 and 2019 that would require either recognition or disclosure in the accompanying consolidated

financial statements.

compensation is accounted for based on the requirements of ASC 718 –

“Compensation –Stock Compensation ”,

which requires recognition in the financial statements of the cost of employee, director, and non-employee services received in

exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the

services in exchange for the award (presumptively, the vesting period).

The ASC also requires measurement of the cost of employee,

director, and non-employee services received in exchange for an award based on the grant-date fair value of the award.

has elected to recognize forfeitures as they occur as permitted under ASU 2016-09 Improvements to Employee Share-Based Payment .

PROPERTIES, INC.

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.

The 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 years ended December 31, 2021 and 2020.

Convertible debt

Stock options

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

adopted accounting pronouncements

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

Leases (Topic 842)”

using a modified retrospective method.

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

that commenced before the effective date whereby the Company elected to not reassess the following:

(i) whether any expired or

existing contracts contain leases;

(ii) the lease classification for any expired or existing leases;

and (iii) initial direct

costs for any existing leases.

2016-02, “

Leases (Topic 842)”

sets out the principles for the recognition, measurement, presentation and disclosure

of leases for both parties to a contract (i.e., lessees and lessors).

The new standard requires lessees to apply a dual approach,

classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed

purchase by the lessee.

This classification will determine whether lease expense is recognized based on an effective interest

method or on a straight-line basis over the term of the lease.

A lessee is also required to recognize a right-of-use asset and

a lease liability for all leases with a term of greater than 12 months regardless of their classification.

Leases with a term

of 12 months or less will be accounted for similar to existing guidance for operating leases today.

The new standard requires

lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct

financing leases and operating leases.

contracts entered into on or after the effective date, where we are the lessee, at the inception of a contract the Company assess

whether the contract is, or contains, a lease.

Our assessment is based on:

(1) whether the contract involves the use of a distinct

identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout

the period, and (3) whether we have the right to direct the use of the asset.

We allocate the consideration in the contract to

each lease component based on its relative stand-alone price to determine the lease payments.

Leases entered into prior to January

1, 2019, are accounted for under ASC 840 and were not reassessed.

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

whether the contract is a sales-type, direct financing or operating lease by reviewing the terms of the lease and determining

if the lessee obtains control of the underlying asset implicitly or explicitly.

a change to a pre-existing lease occurs, we evaluate if the modification results in a separate new lease or a modified lease.

A new lease results when a modification provides additional right of use.

The new lease or modified lease is then reassessed to

determine its classification based on the modified terms.

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

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

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

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

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

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

it remained properly classified as an operating lease.

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

The Company will

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

Any revenue on the straight-line

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

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

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

This rent abatement resulted in a deferred

rent receivable as of December 31, 2020 of $173,757 (see Note 3).

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

would be required to record a lease liability and a right of use asset on its consolidated balance sheets at fair value upon adoption

of ASU 2016-02.

Since the terms of the Company’s operating lease for its office space is 12 months or less, pursuant to

ASC 842, the Company determined that the lease meets the definition of a short-term lease and the Company did not recognize a

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

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 consolidated financial statements.

PROPERTIES, INC.

Segment reporting

The 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 and brokerage services related to commercial properties).

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

Deferred 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.

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

Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The 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 December 31, 2021 and 2020 that would require either

recognition or disclosure in the accompanying consolidated financial statements.

Stock-based compensation

Stock-based compensation is accounted for based

on the requirements of ASC 718 – “Compensation –Stock Compensation ”, which requires recognition in the

financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments

over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively,

the vesting period).

The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange

for an award based on the grant-date fair value of the award.

The Company has elected to recognize forfeitures as they occur as permitted

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

Recently issued accounting pronouncements

In June 2016, the FASB issued ASU No.

“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.

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 Company.

The Company is currently evaluating the impact of

ASU 2016-13 on its future consolidated financial statements.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

CONCENTRATIONS AND RISKS

Agreements with Significant Tenants

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.

In August 2020, the FASB issued ASU 2020-06, Accounting

for Convertible Instruments and Contracts in an Entity’s Own Equity.

The ASU simplifies the accounting for certain convertible instruments,

amends the guidance on derivative scope exceptions for contracts in an entity’s own equity and requires the use of the if-converted

method for calculating diluted earnings per share.

The ASU removes separation models for convertible debt with a cash conversion feature.

Such convertible instruments will be accounted for as a single liability measured at amortized cost.

The ASU is effective for interim

and annual periods beginning after December 15, 2021, with early adoption permitted after December 15, 2020, which can either be on a

modified retrospective or full retrospective basis.

Adoption of the ASU is not expected to have a material impact on the Company's financial

condition and results of operations.

Management does not believe that any other recently

issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial

NOTE 3 – CONCENTRATIONS AND RISKS

Lease Agreements with Significant Tenants

On 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

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

On 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.

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, Inc.

(“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”).

As of December 31, 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.

On August 23, 2021, Chino Valley and Broken Arrow

entered into the Third Amendment (the “Third Chino Valley Amendment”) to the Licensed Medical Marijuana Facility Triple Net

(NNN) Lease Agreement dated May 1, 2018, between Chino Valley and CJK, as amended (the “Chino Valley Lease”), effective September

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

Pursuant to the terms of the Chino Valley Lease,

the parties previously agreed that between May 31, 2020 and May 31, 2022 (the “Improvement Period”), Broken Arrow would and/or

Broken Arrow would cause its affiliate, CJK, to invest a combined total of at least $ 8,000,000 of improvements in and to the property

that is the subject of the Chino Valley Lease.

The parties also previously agreed that the base rental payments under the Chino Valley

Lease would increase commensurate to any and all expanded and operational square footage on the premises by calculating the fixed rate

of $ 0.82 per square foot per month by the new operational square footage.

Broken Arrow has now satisfied its contractual obligation regarding

these capital improvements.

Accordingly, in the Third Chino Valley Amendment,

the parties agreed that, as of September 1, 2021, the rental payment is increased to $ 55,195 per month base rental payment, plus additional

rental payments, as a result of the increase in the square footage of the operational space.

This lease modification qualifies as a separate

contract as the modification grants the tenant additional right of use not included in the original lease, as amended, and the increase

in monthly rent payments is commensurate with the standalone price for the additional square footage being leased.

In addition, on January

24, 20022 and effective on March 1, 2022, Chino Valley and Broken Arrow entered into the Fourth Amendment to the Licensed Medical Marijuana

Facility Triple Net (NNN) Lease Agreement dated May 1, 2018.

Pursuant to the terms of the Fourth Chino Valley Amendment, the parties acknowledge

an additional 30,000 square feet have become operational, increasing the premises to a total of 97,312 square feet of operational space

(see Note 13).

On 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.

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.

On 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.

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.

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

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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

On May 1, 2018, Zoned Arizona and 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.

On 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.

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 December 31, 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.

On 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.

On 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.

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

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.

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

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.

PROPERTIES, INC.

CJK and Broken Arrow, together, operate under

the company brand, “Hana Meds” or “Hana”, and are referred to as the Company’s Significant Tenants.

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.

and the Company’s Significant Tenants.

Abrams guarantee is collateralized by the convertible debt of $ 2,000,000 owed to him

(see Note 8).

As of December 31, 2021 and 2020, security deposits

payable to the Significant Tenants amounted to $ 71,800 in both periods.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

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

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

Future 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 December 31, 2021 consists of the following:

Future annual base rent *:

* Future annual base rent does not include the Fourth Chino Valley Amendment,

effective March 1, 2022 which increased the monthly base rent to $87,581, or an annual base rent to $1,050,972 (See Note 13).

Rental and advisory revenue and receivable

–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 7).

PROPERTIES, INC.

For the years ended December 31, 2021 and 2020,

rental and advisory revenue associated with the Significant Tenant leases described above amounted to $ 1,255,130 and $ 1,176,666 , which

represents 68.9 % and 96.8 % of the Company’s total revenues, respectively.

On December 31, 2021 and 2020, accounts receivable

from advisory services provided to the Significant Tenants amounted to $ 2,813 and $ 2,375 , respectively.

Further, as of December 31, 2021

and 2020 a deferred rent receivable of $ 164,770 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.

Asset concentration

The majority of the Company’s real estate

properties are leased to the Significant Tenants under triple-net leases that terminate in April 2040.

The Company monitors the credit

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

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 December 31, 2021 and 2020, the Company

had an asset concentration related to the Significant Tenants.

As of December 31, 2021 and 2020, the Significant Tenants leased approximately

79.2 % and 83.2 % of the Company’s total assets, respectively.

Through December 31, 2021, all rental payments have been made on a

timely basis.

As of December 31, 2021 and 2020, the lease agreements with the Significant Tenants were personally guaranteed by Alan Abrams

and are collateralized by convertibles notes of $ 2,000,000 owed to Mr.

Abrams (see Note 8).

On March 1, 2018, the Company and Alan Abrams

entered into a Reaffirmation Agreement (See Note 8).

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

of December 31, 2020 and 2019, 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 and the Commercial Lease Agreement

executed by Gilbert subsequent to December 31, 2020 (see Note 12).

Future minimum lease payments to be received, on all leased

properties, for each of the five succeeding calendar years and thereafter as of December 31, 2020 consists of the following:

annual base rent:

and advisory revenue and receivable –Significant Tenants

the years ended December 31, 2020 and 2019, rental and advisory revenue associated with the Significant Tenant leases described

above amounted to $1,176,666 and $1,146,654, which represents 96.8% and 91.0% of the Company’s total revenues, respectively.

December 31, 2020 and 2019, accounts receivable from advisory services provided to the Significant Tenant amounted to $2,375 and

$8,188, respectively.

Further, as of December 31, 2020 a deferred rent receivable of $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

concentration

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

in April 2040.

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

As of December 31, 2020

and 2019, the Significant Tenants represented approximately 83.2% and 87.1% of the Company’s total assets, respectively.

Through December 31, 2020, all rental payments have been made on a timely basis.

As of December 31, 2020, the lease agreements

with the Significant Tenants were personally guaranteed by Alan Abrams and are collateralized by convertibles notes of $2,000,000

Abrams (see Note 7).

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

advisory services agreements

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

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

the Broken Arrow CASA.

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

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

as provided in the CJK CASA.

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

of the following:

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

written notice to the other party;

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

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

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

Pursuant to the terms of the Broken Arrow CASA and

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

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

PROPERTIES, INC.

NOTE 4 – RENTAL PROPERTIES

On December 31, 2021 and 2020, rental properties,

net consisted of the following:

Building and building improvements

Rental properties, at cost

accumulated depreciation

( 1,868,831 )

( 1,516,302 )

Rental properties, net

On 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 .

For the years ended December 31, 2021 and 2020,

depreciation of rental properties amounted to $ 352,529 and $ 356,934 , respectively.

NOTE 5 – CONVERTIBLE NOTE RECEIVABLE

On March 19, 2020, the Company made an initial

investment of $ 100,000 into KCB Jade Holdings, LLC (“KCB”), an entity founded by an individual related to the Company’s

KCB, doing business as Open Dør Dispensaries, is committed to guiding retailers through the chaos of cannabis.

KCB is interested

in cannabis dispensary license holders who want to elevate the experience of regulated cannabis utilizing the Open Dør Dispensaries

retail model as franchisee partners.

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.

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.

On 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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

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

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

The Broken Arrow

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

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

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

in full force and effect.

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

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

The CJK CASA Amendment amended

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

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

RENTAL PROPERTIES

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

and building improvements

properties, at cost

accumulated depreciation

properties, net

the years ended December 31, 2020 and 2019, depreciation of rental properties amounted to $356,934 and $355,280, respectively.

PROPERTY AND EQUIPMENT

December 31, 2020 and 2019, property and equipment consisted of the following:

and site trailers

furniture and equipment

accumulated depreciation

and equipment, net

the years ended December 31, 2020 and 2019, depreciation expense amounted to $5,899 and $6,660, respectively.

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.

If (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.

Upon 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.

Any 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.

On February 19, 2021 (the “Amendment Date”),

the Company made an additional investment of $ 100,000 into KCB (the “Additional Investment”).

In exchange, KCB issued to the

Company an amended and restated convertible debenture (the “A&R Debenture”) on the Amendment Date.

The A&R Debenture

amends and restates in its entirety the KCB Debenture.

Pursuant to the A&R Debenture, the Company and KCB agreed to certain new terms

that did not exist in the KCB Debenture, which are described below.

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.

In 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.

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 due.

Apart from the terms described above, the terms

of the A&R Debenture are substantially identical to the terms of the KCB Debenture.

On 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.

Pursuant to the Second A&R Debenture, the Company and KCB agreed to revise certain

terms in the A&R Debenture, as follows.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

Right of Prepayment .

KCB may prepay the

Second A&R Debenture at any point after 18 months following the Issue 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.

PROPERTIES, INC.

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.

Voluntary Conversion .

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.

Conversion Percentage.

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”).

Right 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.

Apart from the terms described above, the terms

of the Second A&R Debenture are substantially identical to the terms of the A&R Debenture.

The convertible note receivable has been accounted

for at amortized cost and is evaluated for collectability at each reporting date.

As of December 31, 2021 and 2020, an allowance was not

deemed necessary.

On December 31, 2021, convertible note receivable

and interest receivable amounted to $ 200,000 and $ 10,756 , respectively.

On December 31, 2020, convertible note receivable and interest

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

NOTE 6 – INTANGIBLE ASSETS

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 December 31, 2021 and 2020, intangible assets

consisted of the following:

Real estate brokerage materials and listing

accumulated amortization

For the year ended December 31, 2021, amortization

of intangible assets amounted to $ 28,350 , respectively.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

(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

December 31, 2020, convertible note receivable and interest receivable amounted to $100,000 and $5,129, respectively.

February 19, 2021, the Company made an additional investment of $100,000 into KCB.

In exchange, the KCB issued to the Company

an amended and restated convertible debenture (the “A&R Debenture”) on February 19, 2021 (the “Amendment

Date”).

(See Note - 12 –

Subsequent Events).

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.

NOTE 7 – INVESTMENT IN JOINT VENTURES

On December 31, 2021 and 2020, the Company

held investments with aggregate carrying values of $ 74,554 and $ 0 , respectively.

The entities listed below are partially owned by the

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.

Investments are reviewed for changes in circumstance or the

occurrence of events that suggest an other than temporary event where the Company’s investment may not be recoverable.

of the Company’s original investments in the unconsolidated affiliated entities and net carrying value amount is as follows:

Net Carrying Value

Date Acquired

Beakon, LLC (the “Beakon Joint Venture”)

April 22, 2021

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

Total 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.

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 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:

(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.

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 year ended December 31, 2021, the Company contributed $ 86,000

Currently, the licensing company and Beakon have completed the creation of the foundational design, technology platform, and

market positioning for Beakon to launch in the cannabis industry.

However, in order to successfully launch, the technology platform relies

upon a required merchant banking component.

This was the primary risk for the Company in its financial investment and for Beakon in moving

to a successful launch.

While Company management knew this risk was a major factor going into the investment, it was not foreseen exactly

when an appropriate merchant banking solution would be available given the federal status of regulated cannabis and specifically the federal

banking status as it relates to regulated cannabis, even for ancillary services such as Beakon.

During the fourth quarter of 2021, a negative

open memo was published and distributed by Visa regarding merchant banking in regulated industries.

The Company believes that this occurrence

has unexpectedly and significantly increased the risk to the Beakon project and must be remedied prior to the launch of Beakon.

The uncertainty

related to cannabis banking reform and regulation at the federal level, which the Beakon platform relies upon, is now so uncertain that

the Company believes it is most appropriate to cause an impairment of the Beakon investment at this time, while also understanding that

Beakon may still very well create material value for the Company in the future.

The Company has no further financial or investment obligations

at this time.

Accordingly, on December 31, 2021, the Company recorded an other-than-temporary impairment loss of $ 73,970 because it was

determined that the fair value of its equity method investment in Beakon was less than its carrying value.

Based on management’s

evaluation, it was determined that due to market and regulatory conditions, implementing the Company’s business model was at risk

and that the Company’s ability to recover the carrying amount of the investment in Beakon was impaired.

Beacon is currently inactive.

For the year ended December 31, 2021, the $ 73,970 impairment loss is included in impairment loss from unconsolidated joint ventures

on the consolidated statement of operations.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

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

Liability Company Operating Agreement (the “Zoneomics Green 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 Green 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.

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 Green 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

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

The following represents summarized financial

information derived from the financial statements of the Beakon and Zoneomics Green Joint Ventures, respectively, as of December 31, 2021

and for the year ended December 31, 2021.

Balance sheet

Current assets:

Licensing agreement

Total liabilities and equity

Statement of operations

For the Year Ended

December 31, 2021

Operating expenses

Company’s share of loss from unconsolidated joint ventures

During the year ended December 31, 2021, the Company

recorded a loss from joint venture of $101,446 which represents the Company’s proportionate share of losses from its joint ventures

of $27,476 and a loss on impairment of $73,970.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

NOTE 8 – CONVERTIBLE NOTE PAYABLE

On 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.

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.

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.

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.

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.

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.

The 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.

If the Company defaults on payment, Mr.

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

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

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

expenses on the accompanying consolidated balance sheets.

the years ended December 31, 2020 and 2019, interest expense related to the Abrams Debenture amounted to $120,000.

PROPERTIES, INC.

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.

As of December 31, 2021 and 2020, the principal

balance due under the Abrams Debenture is $ 2,000,000 .

As of December 31, 2021 and 2020, accrued interest payable due under the Abrams

Debenture amounted to $ 30,000 , which is included in accrued expenses on the accompanying consolidated balance sheets.

For the years ended December 31, 2021 and 2020,

interest expense related to the Abrams Debenture amounted to $ 120,000

NOTE 9 – RELATED PARTY TRANSACTION

Convertible notes payable – related

On 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

McLaren of $ 20,000 .

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

each quarter and matured on January 9, 2022 .

Pursuant to the terms of the McLaren Debenture, Mr.

McLaren was 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.

As of December 31, 2021 and 2020, the principal

balance due under the McLaren Debenture was $ 20,000 .

As of December 31, 2021 and 2020, accrued interest

payable due under the McLaren Debenture was $ 5,400 and $ 4,200 , respectively, which is included in accrued expenses – related party

on the accompanying consolidated balance sheets.

For the years ended December 31, 2021 and 2020,

interest expense – related party amounted to $ 1,200 .

On January 7, 2022, the Company repaid this debt

and all accrued and unpaid interest due.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

RELATED PARTY TRANSACTIONS

notes payable –

related parties

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.

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

of December 31, 2020 and 2019, accrued interest payable due under the McLaren Debenture was $4,200 and $3,000, respectively, which

is included in accrued expenses –

related parties on the accompanying consolidated balance sheets.

the years ended December 31, 2020 and 2019, interest expense –

related parties amounted to $1,200.

redemption agreement

January 1, 2019, the Company and certain beneficial shareholders entered into a Stock Redemption Agreement (See Note 3 and 9).

Pursuant to SEC rules, each of these beneficial shareholders was deemed to be a “related person”

due solely to their

status as significant stockholders of the Company.

Pursuant to the terms of the Stock Redemption Agreement, these beneficial shareholders

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

Accordingly, as of January 1, 2019, the Company will no longer reflect transactions and balances related to these beneficial

shareholders as related party transactions.

Prior to January 1, 2019, transactions with these beneficial shareholders were reflected

as related party transactions on the Company’s consolidated financial statements.

STOCKHOLDERS’

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.

Indemnification agreements

On August 23, 2021, the Company entered into indemnification

agreements with each of its directors and executive officers.

In general, these indemnification agreements require the Company to indemnify

a director and officer to the fullest extent permitted by law against liabilities that may arise in connection with that director’s

service as a director and officer for the Company.

Additionally, the Company shall advance expenses incurred as a result of any proceeding

against them as to which they could be indemnified.

In August 2021, the Company did not renew its officers and directors insurance.

NOTE 10 – STOCKHOLDERS’ EQUITY

(A) Preferred Stock

On 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, $.

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

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

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 December

31, 2021 and 2020, there were 2,000,000 shares of preferred stock outstanding.

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.

any new class of stock having preferences over the Preferred Stock.

any of our common stock.

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

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

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

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

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

PROPERTIES, INC.

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 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.

(B) Common stock issued for services

On 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

consolidated statements of operations.

On 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

consolidated statements of operations.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

Common stock issued for services

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

of directors for services rendered.

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

date of grant of $0.311 per common share.

In connection with these grants, in January 2019, the Company recorded stock-based compensation

expense of $31,100.

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 consolidated statements of operations.

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.

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.

(D) Equity incentive plans

On 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

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.

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.

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

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 December

1 unchanged sentence

As of December 31, 2020,

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

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

As of December 31, 2021 and 2020,

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

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

previously awarded stock options are outstanding.

9,675,000 and 9,925,000 shares, respectively, were available for future issuance.

The 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 December 31, 2020 and 2019, options to purchase 1,250,000 shares of common

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

Stock options

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

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

The grant date of the option was January 6, 2020 and the option expires

on January 6, 2030.

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

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

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

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:

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 December

31, 2021 and 2020, options to purchase 1,250,000 shares of common stock are outstanding and 1,175,000 options are exercisable pursuant

to the 2014 Plan.

(E) Stock options

On January 6, 2020, the Company granted an employee

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 6, 2020 and the option expires on January 6, 2030.

The option vests as to (i) 35,000 of such

shares on January 6, 2020;

and (ii) as to 10,000 of such shares on January 6, 2021 and each year thereafter through January 6, 2029.

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

dividend yield of 0%;

1 unchanged sentence

risk-free interest rate of 1.81%;

and an estimated holding period of 10 years.

In connection

with these options, the Company valued these options at a fair value of $23,388 and will record stock-based compensation expense

over the vesting period.

and an estimated holding period of 10

In connection with these options, the Company valued these options at a fair value of $23,388 and will record stock-based compensation

expense over the vesting period.

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

the years ended December 31, 2020 and 2019, in connection with the accretion of stock-based option expense, the Company recorded

stock-based compensation expense of $24,231 and $23,612, respectively.

As of December 31, 2020, there were 1,325,000 options outstanding

and 1,225,000 options vested and exercisable.

As of December 31, 2020, there was $34,582 of unvested stock-based compensation

expense to be recognized through December 2024.

The aggregate intrinsic value on December 31, 2020 was nil and was calculated

based on the difference between the quoted share price on December 31, 2020 of $0.43 and the exercise price of the underlying

PROPERTIES, INC.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

option activities for the years ended December 31, 2020 and 2019 are summarized as follows:

On January 1, 2021, the Company granted a consultant,

now Chief Operating Officer of the Company as of July 1, 2021, 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

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:

dividend yield of 0%;

expected volatility of 117%;

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.

On 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.

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 vesting of the Option pursuant to the Vesting Schedule hereof is earned only by continuing as a service provider at

the will of the Company.

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 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.

For the years ended December 31, 2021 and 2020,

in connection with the accretion of stock-based option expense, the Company recorded stock option expense of $ 56,180 and $ 24,231 , respectively.

As of December 31, 2021, there were 1,575,000 options outstanding and 1,300,000 options vested and exercisable.

As of December 31, 2021,

there was $ 92,335 of unvested stock-based compensation expense to be recognized through June 2031.

The aggregate intrinsic value on December

31, 2021 was $ 1,400 and was calculated based on the difference between the quoted share price on December 31, 2021 of $ 0.775 and the exercise

price of the underlying options.

Stock option activities for the years ended December

31, 2021 and 2020 are summarized as follows:

Exercise Price

Weighted Average

Balance Outstanding December 31, 2019

2 unchanged sentences

Exercisable, December 31, 2021

Balance Non-vested at December 31, 2019

Vested during

Balance Non-vested at December 31,

Stock redemption agreement

January 1, 2019, the Company, Christopher Carra, Alan Abrams, Clayton Abrams Revocable Trust (the “Clayton Abrams Trust”),

and Kyle Abrams Revocable Trust (the “Kyle Abrams Trust”

and together with the Clayton Abrams Trust, the “Trusts”)

entered into the Stock Redemption Agreement.

Prior to entry into the Stock Redemption Agreement, (i) Mr.

Carra was the owner 2,028,335

shares of the Company’s common stock, representing approximately 11.6% of the Company’s outstanding shares as of January

1, 2019, and (ii) Mr.

Abrams, together with the Trusts (collectively, the “Abrams Affiliates”), owned 3,611,669 shares

of the Company’s common stock, representing approximately 20.7% of the Company’s outstanding common stock as of January

Pursuant to SEC rules, each of Messrs.

Carra and Abrams was deemed to be a “related person”

due solely to

their status as significant stockholders of the Company.

Pursuant to the terms of the Stock Redemption Agreement, the parties

agreed that the Company would redeem an aggregate of 5,640,004 owned by Mr.

Carra and the Abrams Affiliates (the “Stock

Redemption”) such that Messrs.

Carra and Abrams would no longer be significant and stockholders of the Company and would

no longer be deemed to be “related persons”

under SEC rules.

In exchange for the Stock Redemption, the parties agreed

Company and Broken Arrow, which was owned at the time of the transaction, in whole or in part, directly or indirectly, by

Abrams and Carra, amended the Broken Arrow CASA to reduce the gross revenue fee payable by Broken Arrow from 10% of

gross revenue to 0% of gross revenue, and added a $250 an hour advisory fee.

Company and CJK, which is owned at the time of the transaction, in whole or in part, directly or indirectly, by Messrs.

and Carra, amended the CJK CASA to reduce the gross revenue fee payable by CJK from 10% of gross revenue to 0% of gross revenue,

and added a $250 an hour advisory fee.

Company and Mr.

Abrams amended the convertible debenture dated January 9, 2017 (the “Abrams Debenture”) to extend

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

Valley and Broken Arrow amended the Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018

(the “New Chino Valley Lease”) to increase the monthly base rent payable by Broken Arrow from $35,000 to $40,000.

PROPERTIES, INC.

Balance Non-vested on December 31, 2020

Vested during the period

Balance Non-vested on December 31, 2021

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

effectiveness of the Stock Redemption and the transactions set forth above:

Carra and Abrams will no longer beneficially own any shares of the Company’s common stock.

Accordingly, they will no

longer be significant stockholders of the Company or “related persons”

under the SEC rules.

transactions between the Company and Carra or Abrams or entities related in whole or in part, directly or indirectly, to Carra

and Abrams have not been reflected as related party transactions in these consolidated financial statements after the effectiveness

of the Stock Redemption.

Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Chino Valley and Broken Arrow

will continue in full force and effect, except as amended by the Chino Valley Lease Amendment to increase the monthly base

rent payable by Broken Arrow from $35,000 to $40,000.

Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Green Valley and Broken Arrow

will continue in full force and effect.

Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement (concerning the Company’s Tempe, Arizona property)

dated May 1, 2018 between Zoned Arizona and CJK will continue in full force and effect.

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

in full force and effect.

10 - INCOME TAXES

Company maintains deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying

amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

tax assets on December 31, 2020 and 2019 consist of net operating loss carryforwards.

The net deferred tax asset has been fully

offset by a valuation allowance because of the uncertainty of the attainment of future taxable income.

items accounting for the difference between income taxes at the effective statutory rate and the provision for income taxes for

the years ended December 31, 2020 and 2019 were as follows:

tax benefit at U.S.

NOTE 11 - INCOME TAXES

The Company maintains deferred tax assets and

liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial

reporting purposes and the amounts used for income tax purposes.

The deferred tax assets on December 31, 2021 and 2020 consist of net

operating loss carryforwards.

The net deferred tax asset has been fully offset by a valuation allowance because of the uncertainty of

the attainment of future taxable income.

The items accounting for the difference between

income taxes at the effective statutory rate and the provision for income taxes for the years ended December 31, 2021 and 2020 were as

Income tax benefit at U.S.

statutory rate

tax benefit –

Non-deductible

in valuation allowance

provision for income tax

Company’s approximate net deferred tax asset as of December 31, 2020 and 2019 was as follows:

operating loss carryforward

deferred tax assets before valuation allowance

Income tax benefit – state

Non-deductible expenses

Change in valuation allowance

Total provision for income tax

The Company’s approximate net deferred tax

asset as of December 31, 2021 and 2020 was as follows:

Deferred Tax Asset:

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 AND 2019

net operating loss carryforward was approximately $1,764,000 on December 31, 2020.

The Company provided a valuation allowance

equal to the net deferred income tax asset as of December 31, 2020 and 2019 because it was not known whether future taxable income

will be sufficient to utilize the loss carryforward.

Additionally, the future utilization of the net operating loss carryforward

to offset future taxable income is subject to an annual limitation as a result of ownership changes that occurred in 2014 and

may occur in the future.

Based on the Company’s analysis to determine the limitation on the utilization of its net operating

loss carryforward amounts, in 2018, the deferred tax asset was reduced by any carryforward that cannot be utilized or expires

prior to utilization as a result of such limitations, with a corresponding reduction of the valuation allowance.

valuation allowance increased by $14,740.

The potential tax benefit arising from the loss carryforward will expire in 2040.

Company does not have any uncertain tax positions or events leading to uncertainty in a tax position.

The Company’s 2020,

2019 and 2018 Corporate Income Tax Returns are subject to Internal Revenue Service examination.

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 consolidated balance sheets as of December

31, 2020 and 2019.

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

the Company (See Note 12).

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 December 31, 2020 and 2019, 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

Advisory Services Agreements

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

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

the Broken Arrow CASA.

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

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

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

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

The CASAs may be terminated prior

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

(a) by the Company for any reason at any

time upon thirty calendar days’

written notice to the other party;

(b) by either party immediately upon the mutual agreement

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

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

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

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

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

Effective January

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

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

PROPERTIES, INC.

Net operating loss carryforward

Net deferred tax assets before valuation allowance

Valuation allowance

Net deferred tax asset

The net operating loss carryforward was approximately

$ 1,871,200 on December 31, 2021.

The Company provided a valuation allowance equal to the net deferred income tax asset as of December

31, 2021 and 2020 because it was not known whether future taxable income will be sufficient to utilize the loss carryforward.

Additionally,

the future utilization of the net operating loss carryforward to offset future taxable income is subject to an annual limitation as a

result of ownership changes that may occur in the future.

The 2017 estimated loss carry forward of approximately $ 1,488,189 expires on

December 31, 2037 .

Subsequent to 2017, all estimated loss carry forwards may be carried forward indefinitely subject to annual usage limitations.

Based on the Company’s analysis to determine the limitation on the utilization of its net operating loss carryforward amounts, in

2018, the deferred tax asset was reduced by any carryforward that cannot be utilized or expires prior to utilization as a result of such

limitations, with a corresponding reduction of the valuation allowance.

In 2021, the valuation allowance increased by $ 29,408 .

The potential

tax benefit arising from certain loss carryforwards will expire in 2041 .

The Company does not have any uncertain tax positions

or events leading to uncertainty in a tax position.

The Company’s 2021, 2020, 2019 and 2018 Corporate Income Tax Returns are subject

to Internal Revenue Service examination.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

January 1, 2019, the Company and Messrs.

Abrams and Carra or entities controlled by Messrs.

Abrams and Carra entered into Stock

Redemption Agreements (see Note 9).

Prior to entry into the Stock Redemption Agreement, pursuant to the terms of the Stock Redemption

Agreement, the parties agreed that the Company would redeem an aggregate of 5,640,004 owned by such related party shareholders’

in exchange for the Stock Redemption.

In addition to other terms, the parties agreed to amend the May 1, 2018 leases to reduce

the gross revenue fee payable by these related party tenants from 10% of gross revenue to 0% of gross revenue (See Note 3).

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 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.

2018 Employment Agreement has a term of 10 years.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Rental property acquisition

On 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 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.

Legal matters

From 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 December 31, 2021 and 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.

Employment and Related Golden Parachute

On May 23, 2018, the Company and Mr.

the Company’s President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board, agreed to replace Mr.

2014 employment agreement with a new employment agreement dated May 23, 2018 (the “2018 Employment Agreement”).

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

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.

The 2018 Employment Agreement has a term of 10

The term and Mr.

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

in any of the following circumstances:

McLaren’s employment will terminate (a “Termination”) in any of the following circumstances:

immediately, if Mr.

McLaren dies;

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;

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

to the occasion thereof;

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

notice to Mr.

immediately, if Mr.

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 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;

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.

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.

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:

material diminution in Mr.

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

change in control of the Company;

material diminution in Mr.

McLaren’s base compensation;

material change in the geographic location at which Mr.

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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

In 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.

McLaren, except for his obligation under the restrictive

covenants in the 2018 Employment Agreement.

The Company and Mr.

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.

For 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.

For 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 Mr.

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

a material diminution in Mr.

McLaren’s base compensation;

a material change in the geographic location at which Mr.

McLaren performs his duties;

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

McLaren is required to report,

including a requirement that Mr.

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

McLaren is required to report, including a requirement that Mr.

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

PROPERTIES, INC.

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.

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;

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

material diminution in the budget over which Mr.

McLaren retains authority;

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

McLaren was entitled, or

any compensation plan in which Mr.

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

material to Mr.

McLaren’s total compensation;

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

McLaren benefits substantially similar to those enjoyed

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

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

McLaren with a Company

automobile or allowance in lieu of it, if Mr.

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

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

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.

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

for Good Reason, Mr.

Following a change in control of the Company,

upon termination of Mr.

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

McLaren will be entitled to the following benefits:

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

McLaren will continue to receive his base salary at the rate in effect at the commencement of any such period, together with all amounts payable to him under any compensation plan of the Company during such period, until the Golden Parachute Agreement is terminated.

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

McLaren other than for Good Reason, disability, death or retirement, the Company will pay Mr.

McLaren his full base salary through the date of Termination at the rate in effect at the time notice of Termination is given, plus all other amounts and benefits to which he is entitled under any compensation plan of the Company at the time such payments are due.

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

McLaren for Good Reason, Mr.

McLaren will be entitled to benefits provided below:

Company will pay Mr.

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

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

lieu of any further salary payments to Mr.

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

as severance pay to Mr.

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

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

rise to the notice of Termination given in respect of them.

Company will pay to Mr.

The Company will pay Mr.

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 Mr.

McLaren a lump sum severance payment (together with the payments provided in clauses (c) and (d) below) equal to five times the sum of his annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the notice of Termination given in respect of them.

The Company will pay to Mr.

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

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

under the Company’s stock option plans (which options shall be cancelled upon the making of the payment referred to

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

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.

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 (whether or not then fully exercisable) plus the amount of any applicable cash appreciation rights, times (ii) the number of the Company’s common stock covered by each such option.

The Company will also pay to Mr.

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

PROPERTIES, INC.

On September 29 2021, the Company’s board

of directors adopted the Zoned Properties 401(k) Plan (the “Plan”) effective January 1, 2021.

The Company will contribute

a matching contribution to the Plan for each employee in an amount equal to 100 % of the matched employee contributions that are not in

excess of 4 % of the employee’s plan compensation.

During the year ended December 31, 2021, contributions into the Plan amounted

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021 AND 2020

SUBSEQUENT EVENTS

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.

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:

NOTE 13 – SUBSEQUENT EVENTS

Stock options

The Company’s Board of Directors unanimously

agreed to stop receiving any direct stock issuance or cash payments related to their compensation for services on the Company’s

Board of Directors.

The Company and its Directors believe it is in the Company’s best interest to transition Directors compensation

to a multi-year stock option plan.

Accordingly, on January 21, 2022, the Company granted stock options to purchase an aggregate of 525,000

of the Company’s common stock at an exercise price of $ 0.78 per share to members of the Company’s board of directors pursuant

to the 2016 Plan.

The grant date of the stock options was January 21, 2022 and the options expire on January 21, 2032.

The stock option

shall vest in equally quarterly installments, with the first installment of 43,750 stock options vesting on January 20, 2022, and 43,750

stock options vesting each quarter through October 21, 2024.

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 %;

2 unchanged sentences

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.

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 will be included in compensation and benefits on the consolidated statements of operations.

January 2021, the Parachute Agreement was mutually terminated, and the refundable deposit was returned to the Company (see Note

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

Investment”) (See Note 6).

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

Debenture”) on the Amendment Date.

The A&R Debenture amends and restates in its entirety the KCB Debenture (see Note

Pursuant to the A&R Debenture, the Company and KCB agreed to certain new terms that did not exist in the KCB Debenture,

which are described below.

Accrual Commencement :

Pursuant to the A&R Debenture, interest on the Initial

Investment begins accruing as of March 19, 2020, while interest on the Additional Investment

begins accruing on February 19, 2021.

In the A&R Debenture, the parties acknowledge that each time that KCB sells

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

KCB also earns a fee when one of its franchise locations renews its franchise with KCB

(a “Renewal Fee”).

Pursuant to the A&R Debenture, the Company and KCB

agreed that, as additional consideration for the Additional Investment, KCB will pay

to the Company, in perpetuity, 5% of any Initial Fee received by KCB after the Amendment

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

sold after the Amendment Date, in each case to be paid within five (5) days of receipt

of KCB thereof.

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

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

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

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

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

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

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

(See Note 6).

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

March 17, 2021, the Company formed a new wholly-owned subsidiary, Zoned Brokerage, LLC.

that was organized in the State of Arizona.

In connection with these options, the Company

valued these stock options at a fair value of $ 391,185 and will record stock-based compensation expense over the vesting period.

On January 21, 2022, the Company granted a stock

option to purchase an aggregate of 75,000 of the Company’s common stock at an exercise price of $ 1.00 per share to the Company’s

chief operating officer pursuant to the 2016 Plan.

The grant date of the stock option was January 21, 2022 and the options expire on January

The option vests as to (i) 15,000 of such shares on January 21, 2022;

and (ii) as to 7,500 of such shares on January 21, 2023

and each year thereafter through January 21, 2030.

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 112.3 %;

risk-free interest

rate of 1.75 %;

and an estimated holding period of 10 years.

In connection with these options, the Company valued these stock options at

a fair value of $ 55,334 and will record stock-based compensation expense over the vesting period.

Lease amendment

Effective January 24,

2022, Chino Valley and Broken Arrow entered into the Fourth Amendment (the “Fourth Chino Valley Amendment”) to the Licensed

Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018, between Chino Valley and CJK, as amended.

Pursuant to the

terms of the Fourth Chino Valley Amendment, the parties acknowledge that an additional 30,000 square feet have become operational, increasing

the premises to a total of 97,312 square feet of operational space.

In connection with the Fourth Chino Valley Amendment, the Company

paid $500,000 to CJK as a tenant improvement allowance for investment into the premises, which shall be capitalized as a lease incentive

receivable and recognized on a straight-line basis over the remaining lease term as a reduction to the lease income.

Pursuant to the terms

of the Fourth Chino Valley Amendment, effective March 1, 2022, the monthly base rent was increased to $87,581, representing an increase

from $0.82 per square foot to $0.90 per square foot, for all current and future operational square footage that may be developed as the

premises continues to expand.

In addition, Broken Arrow agreed that it would provide audited financial statements to Chino Valley on an

annual basis no later than March 20 th of each calendar year.

Note payable – related party

On January 7, 2022, the Company repaid the note

payable – related party in the principal amount of $ 20,000 and all accrued and unpaid interest due (See Note 9).

Assumption of office lease

On March 15, 2022, the Company entered to an Assumption

of Lease and Consent Agreement with a landlord, whereby the landlord consented to the assignment of an office lease, as amended, from

the original tenant to the Company.

The lease term shall begin on March 15, 2022 and expire on November 30, 2024, provided the Company

has the option to extend the lease for an additional five years.

The monthly base rent shall be $2,932 per month through November 30,

2021, $3,005 from December 1, 2022 through November 30, 2023, and $3,078 from December 1, 2023 through November 30, 2024.

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 9A. Controls and Procedures