What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-12 compared with 2021-11-10 · 601 added, 764 removed, 64 unchanged (96% of the section changed)

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Information

and Factors That May Affect Future Results

This quarterly report on Form 10-Q contains forward-looking

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

The Securities and Exchange Commission (the

“SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s

future prospects and make informed investment decisions.

This annual report on Form 10-K and other written and oral statements that we

make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and

assumptions regarding future events or performance.

We have tried, wherever possible, to identify such statements by using words such

as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,”

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

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

This quarterly report on Form 10-Q contains

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

The Securities and Exchange

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

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

This quarterly report on Form 10-Q and other written and

oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s

plans and assumptions regarding future events or performance.

We have tried, wherever possible, to identify such statements by using words

such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,”

“believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance.

3 unchanged sentences

of operations and financial condition to differ materially are set forth in the “Risk Factors” section of our annual report

on Form 10-K as filed on March 31, 2021.

We caution that these factors could cause our

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

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

Further, any forward-looking statement speaks

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

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

or circumstances.

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

Further, we cannot

assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause

actual results to differ materially from those contained in any forward-looking statements.

on Form 10-K as filed on March 24, 2022, as the same may be updated from time to time.

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

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

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

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

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

New factors emerge from time to

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

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

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

from those contained in any forward-looking statements.

The following discussion should be read in conjunction

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

Zoned Properties is a leading real estate development

firm for emerging and highly regulated industries, including regulated cannabis.

The company is redefining the approach to commercial

real estate investment through its integrated growth services.

Headquartered in Scottsdale, Arizona, Zoned Properties has developed a

full spectrum of integrated growth services to support its real estate development and investment model;

Advisory Services, Brokerage

Services, Franchise Services, and PropTech Data Services each cross-pollinate within the model to drive project value associated with

complex real estate projects.

With national experience and a team of experts devoted to the emerging cannabis industry, Zoned Properties

is addressing the specific needs of a modern market in highly regulated industries.

Zoned Properties is an accredited member of the Better

Business Bureau, the U.S.

with our unaudited condensed consolidated financial statements and the related notes that appear elsewhere in this quarterly report on

Properties, Inc.

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

The Company is 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 model;

the Company’s Property Technology, Advisory Services, Commercial Brokerage, and Investment Portfolio

collectively 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

Green Building Council, and the Forbes Real Estate Council.

We do not grow, harvest, sell or distribute cannabis

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”).

We are in the process of developing and expanding

multiple business divisions;

including an advisory services division, a licensed commercial real estate brokerage division, a real estate

division focused on franchise services, a real estate division focused on real estate data, and a nonprofit charitable organization to

focus on community prosperity.

Each of these operating divisions are important elements of the overall business development strategy for

long-term growth.

We believe in the value of building relationships with clients and local communities in order to position the Company

for long-term portfolio and revenue growth backed by sophisticated, safe, and sustainable assets and clients.

The core of our business involves identifying

and developing commercial properties that intend to operate within highly regulated industries, including the regulated cannabis industry.

Within highly regulated industries, local municipalities typically develop strict regulations, including zoning and permitting requirements

related to commercial real estate, that dictate the specific locations and parameters under which regulated properties can operate.

regulations often include complex permitting processes and can include non-standard codes governing each location;

for example, restricting

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

restricting a regulated property from operating outside a defined set of hours of operation.

When an organization can collaborate with

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

operators and the local community.

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

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

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

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

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

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

Beakon’s goal is to develop and leverage the platform

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

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

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

interests of Beakon.

We operate our business in two reportable segments

consisting of (i) the operations, leasing and management of its leased commercial properties (the “Property Investment Portfolio”

segment), and (ii) advisory and brokerage services related to commercial properties (the “Real Estate Services” segment).

We are in the process of developing and expanding multiple business divisions, including a property technology division, and a property

investment portfolio division focused on acquisitions to expand our property holdings.

Each of these operating divisions is an important

element of the overall business development strategy for long-term growth.

We believe in the value of building relationships with clients

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

assets and clients.

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

industries, including the regulated cannabis industry.

Within highly regulated industries, local municipalities typically develop

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

locations and parameters under which regulated properties can operate.

These regulations often include complex permitting processes

and can include non-standard codes governing each location;

for example, restricting a regulated property or facility from operating

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

operating outside a defined set of hours of operation.

When an organization can collaborate with local representatives, a proactive

set of rules and regulations can be established and followed to meet the needs of both the regulated operators and the local community.

April 22, 2021, ZP Data Platform 1 LLC, a wholly owned subsidiary of the Company (“ZP Data”), entered into a

Limited Liability Company Operating Agreement (the “Beakon Operating Agreement”) with a non-affiliated joint venture

partner in connection with the formation of Beakon, LLC (“Beakon”), a Delaware limited liability company formed on

April 16, 2021.

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

Beakon will white-label for the cannabis industry.

Beakon’s goal is to develop and leverage the platform to help drive foot

traffic to brick and mortar retail (i.e.

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

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

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 the Financial Accounting Standards Board’s (the “FASB”) Accounting

Standards Codification (“ASC”) 323-10 – Investments- Equity and Joint Ventures, between ZP Data and the non-affiliated

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

ZP Data will account for its investment

in Beakon under the equity method of accounting in accordance with ASC 323.

During the nine months ended September 30, 2021, we contributed

$86,000 to Beakon.

On May 1, 2021, we entered into a Limited Liability

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

with the formation of Zoneomics Green, LLC (“Zoneomics Green”), a Delaware limited liability company formed on May 1, 2021.

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

industries such as regulated cannabis.

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

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

Each unit represents, with

respect to any member, such member’s:

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

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

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

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

The transactions discussed above resulted

in a joint venture, in accordance with ASC 323-10 – Investments- Equity and Joint Ventures, between the Company and the non-affiliated

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

In June 2021, we contributed

$90,000 to Zoneomics.

For the three and nine months ended September

30, 2021 and 2020, substantially all of our revenues were generated from triple-net leases to tenants that are controlled by one entity

(each, a “Significant Tenant” and collectively, the “Significant Tenants”), which is located in the State of Arizona.

On June 1, 2021, we closed on the sale of our

Gilbert, AZ property with a third party (the “Purchaser”) pursuant to which we 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, we received

net proceeds of $322,332 and recorded a gain on sale of rental property of $51,944.

The Company currently maintains a portfolio of

properties that we own, develop, and lease.

We currently lease land and/or building space at all five of the properties in our portfolio.

Four of the properties are leased to licensed and regulated cannabis tenants and are located in areas with established zoning and permitting

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

properties are zoned and permitted as licensed and regulated cannabis cultivation facilities.

Each regulated property may undergo a non-standard

development process.

Various development requirements in this process may include initial property identification, zoning authorization,

and permitting guidance in order to qualify a commercial property for subsequent architectural design, utility installation, construction

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

As of September 30, 2021, a summary of rental

properties owned by us consisted of the following:

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 the Financial Accounting Standards Board’s

(the “FASB”) Accounting Standards Codification (“ASC”) 323-10 – Investments- Equity and Joint

Ventures, between ZP Data and the non-affiliated party.

Each of the entities has 50% equity ownership and voting rights, and

joint control in Beakon.

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

with ASC 323.

During the year ended December 31, 2021, we contributed $86,000 to Beakon.

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

conditions and lack of committed funding, the Company’s ability to recover the carrying amount of the investment in Beakon

was impaired.

For the year ended December 31, 2021, the $73,970 impairment loss is included in other expenses on the consolidated

statement of operations.

May 1, 2021, we 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.

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

(i) interest in Zoneomics Green’s capital, (ii) share of Zoneomics Green’s net profits and net losses (and specially

allocated items of income, gain, and deduction), and the right to receive distributions of net cash flow from Zoneomics Green,

(iii) right to inspect Zoneomics Green’s books and records, and (iv) right to participate in the management of and vote

on matters coming before the members as provided in the Zoneomics 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, we contributed $90,000 to Zoneomics Green.

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

to which we 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, we received net proceeds of $322,332 and recorded a gain on sale of rental property

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

We lease land and/or building space at

all four of the properties in our portfolio.

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

are located in areas with established zoning and permitting procedures.

Two of the leased properties are zoned and permitted as

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

cannabis cultivation facilities.

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

Various development requirements

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

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

facilities management systems, and security system installation.

For the three months ended March 31, 2022

and 2021, substantially all of our Property Investment Portfolio segment revenues were generated from triple-net leases to tenants that

are controlled by one entity (each, a “Significant Tenant” and collectively, the “Significant Tenants”), which

is located in the State of Arizona.

For the three months ended March 31, 2022 and 2021, Real Estate Services segment revenues included

$0 and $9,250, respectively, that were generated from the Significant Tenants.

of March 31, 2022, a summary of rental properties owned by us consisted of the following:

Chino Valley,

Green Valley,

Greenhouse/ Nursery

(special use)

9 unchanged sentences

Vacant Rentable Sq.

rented as of September 30, 2021

rented as of March 31, 2022

Annual Base Rent (*,**)

2022 (remainder of year)

* Annual base rent represents amount of cash payments due from

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

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

Annualized $ per Rented Sq.

base rent represents amount of cash payments due from tenants.

Tempe, AZ, table includes rental income generated from the lease of parking lot space used by a third party as an antenna

$ per Rented Sq.

Chino Valley,

Supreme Court has ruled that it is the

federal government that has the right to regulate and criminalize cannabis, even for medical purposes.

Therefore, federal law criminalizing

the use of marijuana preempts state laws that legalize its use for medicinal purposes.

federal government regulates drugs through

the CSA, which places controlled substances, including cannabis, in a schedule.

Cannabis is classified as a Schedule I controlled

A Schedule I controlled substance is defined as a substance that has no currently accepted medical use in the United States,

a lack of safety for use under medical supervision and a high potential for abuse.

Department of Justice (the “DOJ”)

defines Schedule I drugs, substances or chemicals as “drugs with no currently accepted medical use and a high potential for abuse.”

However, the U.S.

Food and Drug Administration (the “FDA”) has approved Epidiolex, which contains a purified form of the drug

cannabidiol (“CBD”), a non-psychoactive ingredient in the cannabis plant, for the treatment of seizures associated

with two epilepsy conditions.

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

Moreover, pursuant to the Agriculture Improvement Act of 2018 (the “Farm Bill”), CBD remains a Schedule I controlled substance

under the CSA, with a narrow exception for CBD derived from hemp with a tetrahydrocannabinol (“THC”) concentration of less

The Company maintains its operations so as to

remain in compliance with the CSA.

Even in those jurisdictions in which the manufacture and use of medical marijuana has been legalized

at the state level, the possession, use and cultivation all remain violations of federal law that are punishable by imprisonment and substantial

fines, and the prescription of marijuana is a violation of federal law.

Moreover, individuals and entities may violate federal law if

they intentionally aid and abet another in violating these federal controlled substance laws or conspire with another to violate them.

The inconsistencies between federal and state

regulation of cannabis were addressed in a memorandum (the “Cole Memo”) which then-Deputy Attorney General James Cole sent

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

Cole Memo acknowledged that, notwithstanding the designation of cannabis as a Schedule I controlled substance at the federal level, several

states had enacted laws authorizing the use of cannabis for medical purposes.

The Cole Memo noted that jurisdictions that have enacted

laws legalizing cannabis in some form have also implemented strong and effective regulatory and enforcement systems to control the cultivation,

processing, distribution, sale, and possession of cannabis.

As such, conduct in compliance with those laws and regulations is less likely

to implicate the Cole Memo’s enforcement priorities.

The DOJ did not provide (and has not provided since) specific guidelines for

what regulatory and enforcement systems would be deemed sufficient under the Cole Memo.

In light of limited investigative and prosecutorial

resources, the Cole Memo concluded that the DOJ should be focused on addressing only the most significant threats related to cannabis,

such as distribution of cannabis from states where cannabis is legal to those where cannabis is illegal, the diversion of cannabis revenues

to illicit drug cartels and sales of cannabis to minors.

On January 4, 2018, former U.S.

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

The Sessions Memo stated,

in part, that current law reflects “Congress’ determination that cannabis is a dangerous drug and cannabis activity is a serious

crime,” and Mr.

Sessions directed all U.S.

Attorneys to enforce the laws enacted by Congress by following well-established

principles when pursuing prosecutions related to cannabis activities.

The Company is not aware of any prosecutions of investment companies

doing routine business with licensed marijuana related businesses in light of the DOJ position following issuance of the Sessions Memo.

However, there can be no assurance that the federal government will not enforce federal laws relating to cannabis in the future.

result of the Sessions Memo, federal prosecutors are now free to utilize their prosecutorial discretion to decide whether to prosecute

cannabis activities, despite the existence of state-level laws that may be inconsistent with federal prohibitions.

No direction was given

to federal prosecutors in the Sessions Memo as to the priority they should ascribe to such cannabis activities, and thus it is uncertain

how active U.S.

federal prosecutors will be in relation to such activities.

Federal prosecutors appear to continue to use

the Cole Memo’s priorities as an enforcement guide.

Merrick Garland, who became Attorney General on March 10, 2021, has indicated

that he would deprioritize enforcement of low-level cannabis crimes such as possession, and has shared his view that the government

should focus on large-scale criminal enterprises that circumvent state legalization laws instead of going after people who abide by local

cannabis policies.

The Company believes it is too soon to determine what prosecutorial effects will be created by the rescission of the

Cole Memo or any replacement thereof and when or if the Sessions Memo will be rescinded.

President Joseph R.

Biden, who assumed office

in January 2021, has not yet indicated whether and when he will decriminalize or legalize cannabis and has previously stated that he is

opposed to legalization.

The sheer size of the cannabis industry, in addition to participation by state and local governments and investors,

suggests that a large-scale federal enforcement operation would more than likely create unwanted political backlash for the DOJ and the

current administration.

It is also possible that the change of Congressional leadership in January 2021 could change the priorities of

Congress and encourage reconciliation of federal and state laws.

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

substance at the federal level.

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

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

It is unclear whether the risk

of enforcement has been altered.

One legislative safeguard for the medical cannabis

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

For fiscal years 2015, 2016,

2017 and 2018, Congress adopted a so-called “rider” provision to the Consolidated Appropriations Act (formerly referred to

as the Rohrabacher-Farr Amendment and currently referred to as the Rohrabacher-Blumenauer Amendment) to prevent the federal government

from using congressionally appropriated funds to enforce federal cannabis laws against regulated medical cannabis actors operating in

compliance with state and local law.

The Rohrabacher-Blumenauer Amendment was included in the fiscal year 2018 budget passed on March 23,

The Rohrabacher-Blumenauer Amendment was included in the consolidated appropriations bill signed into legislation by former President

Trump in February 2019.

In signing the Rohrabacher-Blumenauer Amendment, former President Trump issued a signing statement noting that

the Rohrabacher-Blumenauer Amendment “provides that the Department of Justice may not use any funds to prevent implementation of

medical marijuana laws by various States and territories,” and further stating “I will treat this provision consistent with

the President’s constitutional responsibility to faithfully execute the laws of the United States.” On June 20, 2019,

the House approved a broader amendment that, in addition to protecting state medical cannabis programs, would also protect state adult

use programs.

On September 26, 2019, the Senate Appropriations Committee declined to take up the broader amendment but did approve

the Rohrabacher-Blumenauer Amendment for the fiscal year 2020 spending bill.

On September 27, 2019, the Rohrabacher-Blumenauer Amendment

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

spending bills passed in 2020.

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

spending bill, effective through September 30, 2021.

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

to the enforcement priorities set forth in the Cole Memo.

The Cole Memo and the Rohrabacher-Blumenauer Amendment

gave licensed cannabis operators (particularly medical cannabis operators) and investors in states with legal regimes greater certainty

regarding the DOJ’s enforcement priorities and the risk of operating cannabis businesses.

While the Sessions Memo has introduced

some uncertainty regarding federal enforcement, the cannabis industry continues to experience growth in legal medical and adult use markets

across the United States.

When she was a U.S.

Senator, Vice President Kamala Harris was the lead sponsor of the Marijuana Opportunity,

Reinvestment, and Expungement (MORE) Act, which seeks to end the federal prohibition of marijuana, among other things, but in March 2020,

it was reported that Vice President Harris has adopted the same position as President Biden, who opposes legalization.

Currently, there

is no guarantee that state laws legalizing and regulating the sale and use of cannabis will remain in place or that local governmental

authorities will not limit the applicability of state laws within their respective jurisdictions.

Unless and until the U.S.

Congress amends

the CSA with respect to cannabis (and as to the timing or scope of any such potential amendments there can be no assurance), there is

a risk that federal authorities may enforce current U.S.

federal law criminalizing cannabis.

Although the U.S.

Supreme Court has ruled that

it is the federal government that has the right to regulate and criminalize cannabis, and federal law criminalizing the use of marijuana

preempts state laws that legalize its use, cannabis is largely regulated at the state level.

State laws that permit and regulate the production,

distribution and use of cannabis for adult use or medical purposes are in direct conflict with the CSA, which makes cannabis use and possession

federally illegal.

Although certain states and territories of the U.S.

authorize medical and/or adult use cannabis production and distribution

by licensed or registered entities, under U.S.

federal law, the possession, use, cultivation and transfer of cannabis and any related

drug paraphernalia is illegal, and any such acts are criminal acts under federal law under any and all circumstances under the CSA.

the Company’s activities are believed to be compliant with applicable state and local laws, strict compliance with state and local

laws with respect to cannabis may neither absolve the Company of liability under U.S.

federal law, nor may it provide a defense to any

federal proceeding which may be brought against the Company.

As of September 30, 2021, 39 states, plus the

District of Columbia (and the territories of Guam, Puerto Rico, the U.S.

Virgin Islands and the Northern Mariana Islands), have legalized

the cultivation and sale of cannabis for medical purposes.

In 18 of those states, the sale and possession of cannabis is legal for both

medical and adult use, and the District of Columbia has legalized adult use but not commercial sale.

In November 2020, voters in Arizona,

Montana, New Jersey, and South Dakota voted by referendum to legalize cannabis for adult use, and voters in Mississippi and South Dakota

voted to legalized cannabis for medical use.

In July 2021, Virginia became the first southern state to legalize cannabis for adult use.

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

In addition, in November 2010, Arizona voters

passed the Arizona Medical Marijuana Act (“AMMA”).

The AMMA designates the Arizona Department of Health Services (“ADHS”)

as the licensing authority for the program.

ADHS is tasked with issuing Registry Identification Cards (“RIC”) to qualifying

patients, designated caregivers, and dispensary agents, as well as selecting, registering, and providing oversight for nonprofit medical

marijuana dispensaries.

With permission from ADHS, qualifying patients or their caregivers may cultivate marijuana if the patient lives

more than 25 miles from a dispensary.

Qualifying patients can legally possess and purchase

medical marijuana under Arizona law as long as they hold a RIC.

They acquire their medicine from non-profit medical marijuana dispensaries.

These dispensaries acquire, possess, cultivate, manufacture, deliver, transfer, transport, supply, sell, and dispense medical marijuana.

Arizona is divided into 126 Community Health Assessment Areas (each, a “CHAA”) and each CHAA may only have one dispensary

located within it.

Dispensaries are the only place patients are legally allowed to purchase medical marijuana in Arizona.

permits the number of CHAAs to change based on the number of registered pharmacies in Arizona.

In order to operate, a dispensary must

have a Dispensary Registration Certificate and Approval to Operate Certificate from ADHS.

The first dispensaries began operation in 2012,

and it is anticipated that at maturity, there will be about 112 dispensaries statewide - one in each CHAA not part of one of Arizona’s

Native American Indian Reservations.

We will continue to monitor

compliance on an ongoing basis in accordance with our compliance program and standard operating procedures.

While our operations are in

full compliance with all applicable state laws, regulations and licensing requirements, such activities remain illegal under federal law.

For the reasons described above and the risks further described in our Annual Report for the year ended December 31, 2020, as filed with

the SEC, there are significant risks associated with our business.

Financial transactions involving proceeds generated

by marijuana-related conduct can form the basis for prosecution under the federal money laundering statutes, unlicensed money transmitter

statute and the Bank Secrecy Act.

Previous guidance issued by the Financial Crimes Enforcement Network, a division of the U.S.

of the Treasury (“FinCEN”), clarifies how financial institutions can provide services to marijuana-related businesses consistent

with their obligations under the Bank Secrecy Act.

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

related memoranda, supplemental guidance from the DOJ directed federal prosecutors to consider the federal enforcement priorities enumerated

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

upon marijuana-related activity.

Consequently, those businesses involved in the

marijuana industry continue to encounter difficulty establishing banking relationships, which may increase over time.

Our inability to

maintain our current bank accounts would make it difficult for us to operate our business, increase our operating costs, and pose additional

operational, logistical and security challenges and could result in our inability to implement our business plan.

The inability of our current and potential tenants

to open accounts and continue using the services of banks will limit their ability to enter into triple-net lease arrangements with us

or may result in their default under our lease agreements, either of which could materially harm our business and the trading price of

our securities.

Local, state and federal marijuana laws and regulations

are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance

or alter our business plan.

In addition, violations of these laws, or allegations of such violations, could disrupt our business and result

in a material adverse effect on its operations.

In addition, it is possible that regulations may be enacted in the future that will be

directly applicable to our proposed business.

We cannot predict the nature of any future laws, regulations, interpretations or applications,

nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated,

could have on our business.

Green Valley,

The Company will focus heavily on the growth of

a diversified revenue stream in 2021.

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

public, and municipal clients.

We believe that strategic real estate and sustainability services are likely to emerge as the growth engine

for Zoned Properties.

We are moving to take advantage of new opportunities.

Pursuant to the terms of the several lease amendments

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

Tenant leases, which decreased our cash flow from operations during the year ended December 31, 2020 by $179,000.

In addition, the parties

agreed that from the period from May 31, 2020 to June 30, 2022, our Significant Tenants will invest a combined total of at least $8,000,000

in improvements in and to the properties in Chino Valley and Tempe prior to June 30, 2022.

Any increase in the rentable area of the leased

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

As of September

30, 2021, the Company’s Significant Tenants have completed improvements to the facilities totaling in excess of $8,000,000 and have

satisfied the contractual obligations related to the same.

Effective September 1, 2021, the Company and Broken Arrow completed amendments

to the Chino Valley Lease Agreement.

Also, in the Third Chino Valley Amendment, the

parties acknowledged that the premises had received approval for a plan that authorizes additional operational square footage that can

be constructed.

If built to currently approved capacity, the rental payments would increase to $128,995 base rental payment monthly, plus

additional rental payments.

However, Broken Arrow is under no contractual obligation to complete this additional expansion.

In March 2020, the World Health Organization declared

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

We are monitoring this closely, and although

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

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

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

Significant Tenants pursuant to state and local government requirements.

We did not experience in 2020, and we do not foresee in 2021,

any material changes to our operations from COVID-19.

Our tenants are continuing to generate revenue at these properties, and they have

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

expected rental obligations.

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

pandemic and potential impact on our business if the properties must close or if the tenants are otherwise unable or unwilling to make

rental payments.

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

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

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

Results of Operations

The following comparative analysis on results

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

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

notes to those statements for the three and nine months ended September 30, 2021 and 2020, which are included elsewhere in this quarterly

a diversified revenue stream in 2022 and is moving to take advantage of new opportunities.

We intend to accomplish this by prospecting

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

We believe that strategic real estate and sustainability

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

Pursuant to lease agreements with our Significant

Tenant, from the period from May 31, 2020 through March 31, 2022, our Significant Tenants invested a combined total of at least

$8,000,000 in improvements in and to the properties in Chino Valley.

The increase in the rentable area of the leased premises resulted

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

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

measures worldwide.

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

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

is uncertain.

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

open pursuant to state and local government requirements.

The Company did not experience in 2020 or 2021 and does not foresee

in 2022, 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.

of Operations

The following comparative analysis of results

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

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

the notes to those statements for the three months ended March 31, 2022 and 2021, which are included elsewhere in this quarterly

report on Form 10-Q.

The results discussed below are for the three and nine months ended September 30, 2021 and 2020.

Comparison of Results of Operations for

the Three and Nine Months Ended September 30, 2021 and 2020

For the three and nine months ended September 30, 2021 and 2020, revenues

consisted of the following:

The results discussed below are for the three months ended March 31, 2022 and 2021.

of Results of Operations for the Three Months Ended March 31, 2022 and 2021

the three months ended March 31, 2022 and 2021, revenues consisted of the following:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Rent revenues

Rental revenues

Advisory revenues

Brokerage revenues

Franchise fees

Total revenues

For the three months ended September 30, 2021,

total revenues amounted to $387,365, including Significant Tenants revenues of $311,065, as compared to $302,772, including Significant

Tenant revenues of $297,793, for the three months ended September 30, 2020, an increase of $84,593, or 27.9%.

For the nine months ended

September 30, 2021, total revenues amounted to $1,283,274, including Significant Tenants revenues of $899,525, as compared to $906,465,

including Significant Tenant revenues of $878,759, for the nine months ended September 30, 2020, an increase of $376,809, or 41.6%.

the three months ended September 30, 2021, the increase in revenues was attributable to an increase in rental revenue from our Significant

Tenant of $29,780 and an increase in brokerage revenue of $69,500 related to commission earned on a real estate listing, offset by a decrease

in advisory revenues of $14,687.

For the nine months ended September 30, 2021, the increase in revenues was attributable to an increase

in rental revenue from our Significant Tenant of $68,231, an increase in brokerage revenue of $306,092 related to commission earned on

real estate listings, and an increase in advisory revenues of $2,486.

Substantially all of the Company’s real estate properties

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

Operating expenses

For the three months ended September 30, 2021,

operating expenses amounted to $440,816 as compared to $249,021 for the three months ended September 30, 2020, an increase of $191,795,

For the nine months ended September 30, 2021, operating expenses amounted to $1,240,440 as compared to $909,663 for the nine

months ended September 30, 2020, an increase of $330,777, or 36.4%.

For the three and nine months ended September 30, 2021 and 2020, operating

Revenues by reportable business segments for the

three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended

Property investment portfolio

Real estate services

For the three months ended March 31, 2022,

total revenues amounted to $938,701, including Significant Tenant revenues of $385,294, as compared to $345,845, including Significant

Tenant revenues of $296,480, for the three months ended March 31, 2021, an increase of $592,856, or 171.4%.

For the three months

ended March 31, 2022, the increase in revenues as compared to the 2021 comparable period was attributable to an increase in rental

revenue from our Significant Tenants of $89,365 due to an increase in rental revenue at our Chino Valley facility related to a fourth

amendment to our lease agreement in connection with an increase in rentable square footage, an increase in brokerage revenue of $511,104

related to commission earned on real estate listings, and an increase in franchise fees earned of $6,250, offset by a decrease in advisory

revenues of $22,406.

Substantially all of the Company’s real estate properties are leased under triple-net leases to the Significant

the three months ended March 31, 2022, operating expenses amounted to $929,183 as compared to $389,213 for the three months

ended March 31, 2021, an increase of $539,970, or 138.70%.

For the three months ended March 31, 2022 and 2021, operating

expenses consisted of the following:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Compensation and benefits

Professional fees

Brokerage fees

General and administrative expenses

1 unchanged sentence

Real estate taxes

Gain on sale of rental property

For the three months ended September 30, 2021, compensation and benefit expense increased by $67,450, or 113.5%, as compared to the three months ended September 30, 2020.

This increase was primarily attributable to an increase in stock-based compensation of $22,329 related to stock options issued and an increase in compensation and benefits of $45,121 related to the hiring of additional personnel.

For the nine months ended September 30, 2021, compensation and benefit expense increased by $44,495, or 16.0%, as compared to the nine months ended September 30, 2020.

This increase was attributable to an increase in stock-based compensation of $54,002, offset by a decrease in compensation and benefits of $9,507.

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

For the three months ended September 30, 2021, professional fees increased by $112,209, or 314.3%, as compared to the three months ended September 30, 2020.

This increase was primarily attributable to an increase in consulting fees of $36,330, an increase in public relations fees of $18,410, an increase in legal fees of $12,556, and an increase in commission fees of $44,913 primarily related to commission paid on brokerage revenues.

For the nine months ended September 30, 2021, professional fees increased by $319,537, or 213.6%, as compared to the nine months ended September 30, 2020.

This increase was primarily attributable to an increase in consulting fees of $96,122, an increase in public relations fees of $41,410, an increase in legal fees of $16,408, and an increase in commission fees of $169,653 primarily related to commission paid on brokerage revenues, offset by a decrease in accounting fees of $4,042.

General and administrative expenses consist of expenses such as rent expense, directors’ and officers’ liability insurance, travel expenses, office expenses, telephone and internet expenses and other general operating expenses.

For the three months ended September 30, 2021, general and administrative expenses increased by $4,570, or 10.8%, as compared to the three months ended September 30, 2020.

For the nine months ended September 30, 2021, general and administrative expenses increased by $865, or 0.6%, as compared to the nine months ended September 30, 2020.

For the three months ended September 30, 2021, depreciation expense increased by $7,553, or 8.3%, as compared to the three months ended September 30, 2020.

For the nine months ended September 30, 2021, depreciation expense increased by $17,064, or 6.3%, as compared to the nine months ended September 30, 2020.

For the three months ended September 30, 2021, real estate taxes increased by $13, or less than 1.0%, as compared to the three months ended September 30, 2020.

For the nine months ended September 30, 2021, real estate taxes increased by $760, or 1.2%, as compared to the nine months ended September 30, 2020.

For the nine months ended September 30, 2021, we recorded a gain from the sale of our Gilbert property of $51,944.

We did not record any gain or loss from the sale of rental property during the 2020 periods.

Loss from operations

As a result of the factors described above, for

the three months ended September 30, 2021, loss from operations amounted to $(53,451) as compared to income from operations of $53,751

for the three months ended September 30, 2020, a decrease of $107,202, or 199.4%.

For the nine months ended September 30, 2021, income

from operations amounted to $42,834 as compared to a loss from operations of $(3,198) for the nine months ended September 30, 2020, an

increase of $46,032, or 1,439.4%.

Other (expense) income

Other (expense) income primarily includes interest

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

For the three months ended September

30, 2021, total other expenses, net amounted to $42,044 as compared to total other expenses, net of $28,662, respectively, representing

an increase of $13,382, or 46.7%.

This increase was attributable to an increase in loss from joint ventures of $15,021, offset by an increase

in interest income of $1,639 attributable to interest earned on the convertible note receivable.

For the nine months ended September

30, 2021, total other expenses, net amounted to $97,070 as compared to total other expenses, net of $87,410, respectively, representing

an increase of $9,660, or 11.1%.

This increase was attributable to an increase in loss from joint ventures of $15,021, offset by an increase

in interest income of $5,361 attributable to interest earned on the convertible note receivable.

Net (loss) income

As a result of the foregoing, for the three months

ended September 30, 2021 and 2020, net (loss) income amounted to $(95,495), or $(0.01) per common share (basic and diluted), and $25,089,

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

For the nine months ended September 30, 2021 and 2020, net loss amounted

to $(54,236), or $(0.00) per common share (basic and diluted), and $(90,608), or $(0.01) per common share (basic and diluted), respectively.

Liquidity and Capital Resources

For the three months ended March 31, 2022, compensation and benefit expense increased by $140,986, or 107.5%, as compared to the three months ended March 31, 2022.

This increase was attributable to an increase in stock-based compensation of $49,094 and an increase in compensation and benefits of $91,892.

The increase in stock-based compensation related to an increase in stock-based compensation from the accretion of stock option expense, offset by shares issued for services during the three months ended March 31, 2021.

Additionally, subsequent to the first quarter of 2021, we began to hire additional staff related to the diversification of our services into brokerage services and the expansion of our advisory services which caused an increase in compensation and benefit expense during the first quarter of 2022.

For the three months ended March 31, 2022, professional fees increased by $21,899, or 23.2%, as compared to the three months ended March 31, 2021.

This increase was primarily attributable to an increase in accounting fees of $1,268, an increase in consulting fees of $6,039 related to an increase in consultants used in our brokerage business, an increase in public relations fees of $10,625, and an increase in legal fees of $3,968.

For the three months ended March 31, 2022, we recorded brokerage fees amounting to $356,547.

We did not record brokerage fees during the three months ended March 31, 2021.

Brokerage fees occur as the result of various percentage-based commission splits we pay to our licensed brokerage team members who participate in various real estate listing transactions.

General and administrative expenses consist of expenses such as rent expense, insurance expense, insurance expense, travel expenses, office expenses, telephone and internet expenses, advertising and marketing expense, and other general operating expenses.

For the three months ended March 31, 2022, general and administrative expenses increased by $13,630, or 26.5%, as compared to the three months ended March 31, 2021.

the three months ended March 31, 2022, depreciation expense increased by $6,570, or 7.2%, as compared to the three months

ended March 31, 2021.

the three months ended March 31, 2022, real estate taxes increased by $338, or 1.6%, as compared to the three months

ended March 31, 2021.

Income (loss) from operations

a result of the factors described above, for the three months ended March 31, 2022, income from operations amounted to $9,518

as compared to a loss from operations of $(43,368) for the three months ended March 31, 2021, a positive change of decrease

of $52,886, or 121.9%.

(expense) income

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

(expense) income.

For the three months ended March 31, 2022 and 2021, total other expenses, net amounted to $35,214 as compared

to total other expenses, net of $27,967, respectively, representing an increase of $7,247, or 25.9%.

This increase was attributable

to an increase in loss from unconsolidated joint ventures of $7,819 and an increase in interest expense of $300, offset by an

increase in interest income of $872 attributable to interest earned on the convertible note receivable.

a result of the foregoing, for the three months ended March 31, 2022 and 2021, net loss amounted to $25,696, or $(0.00) per

common share (basic and diluted), and $71,335, or $(0.01) per common share (basic and diluted), respectively.

and Capital Resources

Liquidity is the ability of an enterprise to generate

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

We had cash of $1,090,682 and $699,335 of cash as of September 30, 2021

and December 31, 2020, respectively.

Our primary uses of cash have been for compensation

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

of rental properties and other lines of business.

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

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

The following trends are reasonably likely to result in changes

in our liquidity over the near to long term:

We had $787,918 and $1,191,940 of cash as of March 31, 2022 and

December 31, 2021, respectively.

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

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

All funds received

have been expended in the furtherance of growing the business.

We receive funds from the collection of rental income and advisory

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

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

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

Addition of administrative and sales personnel as the business grows,

The cost of being a public company,

An increase in investments in joint ventures and other projects.

We may need to raise additional funds, particularly

if we are unable to continue to generate positive cash flows from our operations.

We estimate that based on current plans and assumptions,

that our available cash will be sufficient to satisfy our cash requirements under our present operating expectations for the next 12 months

from the date of this quarterly report on Form 10-Q.

Other than revenue received from the lease of our rental properties, from advisory

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

We have used these funds to fund our operating

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

We need to raise significant additional capital or debt

financing to acquire new properties, to develop existing properties, to assure we have sufficient working capital for our ongoing operations

and debt obligations, and to invest in new joint venture and other projects.

An increase in investments in joint ventures and other projects, and

An increase in funds used for lease incentives paid to our Significant Tenant.

may need to raise additional funds, particularly if we are unable to continue to generate positive cash flows from our operations.

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

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

than revenue received from the lease of our rental properties, from advisory fees, from brokerage revenues, and from franchise

services, we presently have no other significant alternative source of working capital.

have used these funds to fund our operating expenses, pay our obligations, develop rental properties, invest in joint ventures

and notes receivable, and to grow our company.

We may need to raise significant additional capital or debt financing to acquire

new properties, to develop existing properties, to assure we have sufficient working capital for our ongoing operations and debt

obligations, and to invest in new joint venture and other projects.

On March 19, 2020, we made an initial investment

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

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

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

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

Interest on the

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

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

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

However, if KCB elects

to prepay the Debenture prior to the Maturity Date or prior to any conversion as provided in the Debenture in whole or in part, we will

be entitled to receive a number of KCB units, in addition to such prepayment amount, constituting 10% of the total outstanding units and

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

On or after six months from the Issuance

Date, we may convert all or a portion of the principal balance and all accrued and unpaid interest due into a number of units equal to

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

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

If KCB defaults on payment

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

payment in full of all amounts due under the Debenture.

Conversion rights terminate upon acceptance by the Company of payment in full

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

If (i) KCB does not elect to exercise its rights of prepayment

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

principal and interest accrued and due under the terms of the Debenture on the Maturity Date, we will still be entitled to receive a number

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

such issuance and at the time of such issuance.

On February 19, 2021, we made an additional investment

of $100,000 into KCB (the “Additional Investment”).

In exchange, the 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 Original

Pursuant to the A&R Debenture, the Company and KCB agreed to certain new terms that did not exist in the Original Debenture,

which are described below.

of $100,000 into KCB Jade Holdings, LLC (“KCB”), an entity founded by an individual related to the Company’s COO.

doing business as Open Dør Dispensaries, provides services to cannabis dispensary license holders utilizing the Open Dør

Dispensaries retail model as franchisee partners..

In exchange for the investment, KCB issued to us a convertible debenture (the “Debenture”)

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

The Debenture bears interest

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

Interest on the outstanding principal

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

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

KCB may prepay the

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

However, if KCB elects to prepay the Debenture

prior to the Maturity Date or prior to any conversion as provided in the Debenture in whole or in part, we will be entitled to receive

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

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

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

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

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

of the total percentage interest (the “Conversion Percentage”).

If KCB defaults on payment of the Debenture, we may, at its

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

due under the Debenture.

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

and any other amounts due under the Debenture.

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

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

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

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

at the time of such issuance.

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

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

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

Pursuant to the A&R Debenture, the

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

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 Original 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 described below.

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 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.

As discussed in the Overview section and elsewhere,

during the three months ended September 30, 2021, we contributed $86,000 to the Beakon joint venture and we contributed $90,000 to the

Zoneomics joint venture.

Our future operations are dependent on our ability

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

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

We monitor the credit of these

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

We monitor tenant credit by (1) reviewing financial statements and

related metrics and information that are publicly available or that are provided to us upon request, and (2) monitoring the timeliness

of rent collections.

As of September 30, 2021 and December 31, 2020, we had an asset concentration related to our Significant Tenant

As of September 30, 2021 and December 31, 2020, these Significant Tenants represented approximately 79.2% and 84.3% of total assets,

respectively.

If our Significant Tenants are prohibited from operating due to federal or state regulations or due to COVID-19, or cannot

pay their rent, we may not have enough working capital to support our operations and we would have to seek out new tenants at rental rates

per square less than our current rate per square foot.

We included audited financial statements of our

Significant Tenants as Exhibit 99.1 to our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on March

31, 2021, since such audited financial statements represent material information and are necessary for the protection of investors.

We may secure additional financing to acquire

and develop additional and existing properties.

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

credit facilities, or other financing mechanisms.

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

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

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

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

The inability to obtain additional capital

may restrict our ability to grow our business operations.

For the Nine Months ended September 30, 2021

and September 30, 2020

Net cash flow provided by operating activities

was $387,999 for the nine months ended September 30, 2021, as compared net cash flow provided by operating activities of $48,470 for the

nine months ended September 30, 2020, representing an increase of $339,529.

Net cash flow provided by operating activities for the nine months ended September 30, 2021 primarily reflected a net loss of $54,236 adjusted for the add-back of non-cash items consisting of depreciation of $270,250, amortization expense of $18.900, stock-based compensation expense of $52,000, accretion of stock-based stock option expense of $46,012, a gain on sale of rental property of $(51,944), and a loss from joint ventures of $15,021, offset by changes in operating assets and liabilities primarily consisting of an increase in accounts receivable of $18,587, a decrease in prepaid expenses of $68,910, an increase in accounts payable of $8,148, an increase in accrued expenses of $16,447, an increase in deferred revenues of $6,687.

Net cash flow provided by operating activities for the nine months ended September 30, 2020 primarily reflected net loss of $90,608 adjusted for the add-back of non-cash items consisting of depreciation and amortization of $272,086, stock-based compensation expense of $24,200 and accretion of stock-based stock option expense of $19,810, offset by changes in operating assets and liabilities primarily consisting of an increase in deferred rent receivable of $176,004 attributable to the abatement of May and June 2020 rent as part of lease amendments effective on May 31, 2020.

During the nine months ended September 30, 2021,

net cash flow provided by investing activities amounted to $3,348 as compared to net cash used in investing activities of $110,488, a

positive change of $113,836.

During the nine months ended September 30, 2021, cash provided by investing activities was attributable to

proceeds from the sale of rental property of $322,332, offset by cash used for an investment in a convertible note receivable of $100,000

as discussed above, cash used in the improvement of rental properties of $40,360, cash used for the purchase of property and equipment

of $2,624, and cash used for investment in joint ventures of $176,000.

During the nine months ended September 30, 2020, net cash flow

used in investing activities was attributable to cash used for an investment in a convertible note receivable of $100,000 as discussed

above, cash used in the improvement of rental properties of $9,565 and cash used for the purchase of property and equipment of $923.

Contractual Obligations and Off-Balance Sheet

Contractual Obligations

We have certain fixed contractual obligations

and commitments that include future estimated payments.

Changes in our business needs, cancellation provisions, changing interest rates,

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

We cannot provide certainty regarding the timing and amounts

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

tables, in order to assist in the review of this information within the context of our consolidated financial position, results of operations,

and cash flows.

The following tables summarize our contractual

obligations as of September 30, 2021 (dollars in thousands), and the effect these obligations are expected to have on our liquidity and

cash flows in future periods.

Pursuant to the A&R Debenture, interest on the Initial Investment began accruing as of March 19, 2020, while interest on the Additional Investment began accruing on February 19, 2021.

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

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

franchise with KCB (a “Renewal Fee”).

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

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

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

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

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

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

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

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

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

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

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

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

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 described below.

of Prepayment .

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

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

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

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

Limited Liability Company Operating Agreement (the “Operating Agreement”)), for the avoidance of doubt, being 10%

of the total of KCB’s Class A units (“Class A Units”) and the Class B Units together, and 10% of the total Percentage

Interest (as defined in the Operating Agreement) following such issuance and at the time of such issuance.

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

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

a number of Class B Units equal to the proportion of the Outstanding Amount being converted multiplied by the Conversion Percentage,

as defined below).

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

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

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

amounts due under the Second A&R Debenture.

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

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

of the total Percentage Interest (the “Conversion Percentage”).

of Maturity Units .

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

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

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

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

of doubt, being 8% of the total of the Class A Units and the Class B Units together) and 8% of the total Percentage Interest (as

such term is defined in the Second A&R Debenture) following such issuance and at the time of such issuance.

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

discussed in the Overview section and elsewhere, during the year ended December 31, 2021, we contributed $86,000 to the Beakon

joint venture and we contributed $90,000 to the Zoneomics Green joint venture.

Additionally, on December 31, 2021, we recorded

an other-than-temporary impairment loss of $73,970 because it was determined that the fair value of our equity method investment

in Beakon was less than its carrying value.

Based on management’s evaluation, it was determined that due to market conditions

and lack of committed funding, our ability to recover the carrying amount of the investment in Beakon was impaired as of December 31,

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

and the attainment of new advisory clients.

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

for which terms vary.

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

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

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

As of March 31, 2022 and December 31,

2021, we had an asset concentration related to our Significant Tenant leases.

As of March 31, 2022 and December 31,

2021, these Significant Tenants represented approximately 82.3% and 79.2% of total assets, respectively.

If our Significant Tenants

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

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

our current rate per square foot.

included audited financial statements of our Significant Tenants as Exhibit 99.1 to our Annual Report on Form 10-K as filed

with the SEC on March 24, 2022 since such audited financial statements represent material information and are necessary for

the protection of investors.

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

Financing transactions may include

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

Even if we are able to

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

that would force us to seek alternative financing.

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

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

existing holders of our common stock.

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

the Three Months Ended March 31, 2022 and 2021

cash flow provided by operating activities was $119,742 for the three months ended March 31, 2022, as compared to net cash

flow provided by operating activities of $165,035 for the three months ended March 31, 2021, representing a decrease of $45,293.

cash flow provided by operating activities for the three months ended March 31, 2022 primarily reflected a net loss of $25,696 adjusted

for the add-back of non-cash items consisting of depreciation of $87,867, amortization expense of $9,450, accretion of stock-based stock

option expense of $116,916, and a loss from unconsolidated joint ventures of $7,819, offset by changes in operating assets and liabilities

primarily consisting of an increase in accounts receivable of $311,877 attributable to an increase in brokerage commissions receivable,

a decrease in prepaid expenses of $10,881, an increase in accounts payable of $248,067 attributable to an increase in brokerage fees

payable, a decrease in accrued expenses of $25,802, and a decrease in deferred rent receivable of $2,247.

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

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

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

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

the three months ended March 31, 2022, net cash flow used in investing activities amounted to $503,764 as compared to net

cash used in investing activities of $107,135, an increase of $396,629.

During the three months ended March 31, 2022, net

cash used in investing activities was attributable to an increase in lease incentive receivables related to the disbursement of

$500,000 to our Significant Tenant to be used for leasehold improvements, and the purchase of property and equipment of $3,764.

For the three months ended March 31, 2021, cash used in investing activities was attributable to cash used for an investment

in a convertible note receivable of $100,000 and cash used in the improvement of rental properties of $7,135.

the three months ended March 31, 2022, net cash flow used in financing activities amounted to $20,000 as compared to net

cash used in financing activities of $0, an increase of $20,000.

During the three months ended March 31, 2022, net cash used

in financing activities was attributable to the repayment of notes payable – related party of $20,000.

Obligations and Off-Balance Sheet Arrangements

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

Changes in our business needs,

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

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

We have presented below a summary of the most significant

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

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

following tables summarize our contractual obligations as of March 31, 2022 (dollars in thousands), and the effect these

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

Payments Due by Period

2 unchanged sentences

Interest on convertible notes

Off-balance Sheet Arrangements

We have not entered into any other financial guarantees

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

We have not entered into any derivative contracts that

are indexed to our shares and classified as shareholders’ equity or that are not reflected in our consolidated financial statements.

Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit,

liquidity or market risk support to such entity.

We do not have any variable interest in any unconsolidated entity that provides financing,

liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition

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

with accounting principles generally accepted in the United States.

The preparation of these consolidated financial statements requires

Sheet Arrangements

We have not entered into any other financial guarantees or other commitments

to guarantee the payment obligations of any third parties.

We have not entered into any derivative contracts that are indexed to our shares

and classified as stockholders’ equity or that are not reflected in our consolidated financial statements.

Furthermore, we do not

have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market

risk support to such entity.

We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market

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

Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results

of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting

principles generally accepted in the United States.

The preparation of these unaudited condensed consolidated financial statements requires

us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure

11 unchanged sentences

in the preparation of the unaudited condensed consolidated financial statements.

Rental Properties

Rental properties are carried at cost less accumulated

depreciation and amortization.

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

are capitalized.

Maintenance and repair expenses are charged to expense as incurred.

Depreciation is recognized on a straight-line basis

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

Tenant improvements are amortized on a straight-line basis

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

Upon the acquisition of real estate, we assess

the fair value of acquired assets (including land, buildings and improvements, identified intangibles, such as acquired above-market leases

and acquired in-place leases) and acquired liabilities (such as acquired below-market leases) and allocate the purchase price based on

these assessments.

The Company assesses fair value based on estimated cash flow projections that utilize appropriate discount and capitalization

rates and available market information.

Estimates of future cash flows are based on a number of factors including historical operating

results, known trends, and market/economic conditions.

Our properties are individually reviewed for impairment

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

An impairment exists

when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted

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

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

If our estimates of the projected future cash flows, anticipated holding periods, or market conditions change, our evaluation of impairment

losses may be different and such differences could be material to our consolidated financial statements.

The evaluation of anticipated

cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that

could differ materially from actual results.

We have capitalized land, which is not subject

to depreciation.

Investment in Joint Ventures

We have equity investments in various privately

held entities.

We account for these investments either under the equity method or cost method of accounting depending on our ownership

interest and level of influence.

Investments accounted for under the equity method are recorded based upon the amount of our investment

and adjusted each period for our share of the investee’s income or loss.

Investments are reviewed for changes in circumstance or the occurrence

of events that suggest an other than temporary event where our investment may not be recoverable.

We evaluate our investments in these

entities for consolidation.

We consider our 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, our investment

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

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.

properties are carried at cost less accumulated depreciation and amortization.

Betterments, major renovations and certain costs

directly related to the improvement of rental properties are capitalized.

Maintenance and repair expenses are charged to expense

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

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

the useful lives of the assets.

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

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

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

The Company assesses fair value based on estimated cash flow

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

Estimates of future cash

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

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

of an asset may not be recoverable.

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

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

An impairment loss is measured based on the excess

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

Impairment analyses are based on our current plans, intended

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

If our estimates of the projected future

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

such differences could be material to our consolidated financial statements.

The evaluation of anticipated cash flows is subjective

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

from actual results.

have capitalized land, which is not subject to depreciation.

Accounting Standards Board’s (the “FASB”) Accounting Standards Update (“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

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.

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.

a change to a pre-existing lease occurs, the Company evaluates if the modification results in a separate new lease or a modified

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.

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.

January 24, 2022 and effective on March 1, 2022, the Chino Valley lease was amended and the monthly base rent was increased

to $87,581 due to additional space of 30,000 square feet being leased to the lessee, increasing the premises to a total of 97,312

square feet of operational space.

In connection with this lease amendment, the Company paid $500,000 to tenant as a tenant improvement

allowance or lease incentive for investment into the premises, which was capitalized as a lease incentive receivable and is recognized

on a straight-line basis over the remaining lease term as a reduction to the lease income.

The increase in monthly rent was commensurate

with the additional space being leased;

therefore, this modification qualifies as a separate contract under the FASB’s Accounting

Standards Codification (“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.

Company records revenues from rental properties for its operating leases on a straight-line basis where it is the lessor.

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 March 31, 2022 and December 31, 2021 of $162,523 and

$164,770, respectively.

Additionally, if the lease provides for tenant improvements, the Company determines whether the tenant

improvements, for accounting purposes, are owned by the tenant or the Company.

When the Company is the owner of the tenant improvements,

the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the

tenant improvements are substantially completed.

When the tenant is the owner of the tenant improvements, any tenant improvement

allowance (including amounts that can be taken in the form of cash or a credit against the tenant’s rent) that is funded

is treated as a lease incentive receivable and amortized as a reduction of revenue over the lease term.

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.

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.

lease right of use asset represents the right to use the leased asset for the lease term and operating lease liability is recognized

based on the present value of the future minimum lease payments over the lease term at commencement date.

As most leases do not

provide an implicit rate, the Company used its incremental borrowing rate of 6% based on the information available at the adoption

date or execution of a lease agreement in determining the present value of future payments.

Lease expense for minimum lease payments

is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the condensed

consolidated statements of operations.

in joint ventures

have equity investments in various privately held entities.

We account for these investments either under the equity method or

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

Investments accounted for under the equity

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

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

event where our investment may not be recoverable.

We evaluate our investments in these entities for consolidation.

our 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, our investment is recorded

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

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.

if any, between the carrying amount of our investment in the respective joint venture and our 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.

Revenue recognition

We follow the Financial Accounting Standards Board’s

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

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

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

ASC 606 requires an entity to recognize revenue to depict

the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be

entitled in exchange for those goods or services and also requires certain additional disclosures.

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 consists of real

estate sales commissions and are recognized upon the successful completion of all required services have been performed which is when

escrow closes.

In accordance with the guidelines established for Reporting Revenue Gross as a Principal versus Net as an Agent in the

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 revenue that are payable upon payment of rent or other events beyond the Company’s control are recognized upon the occurrence

of such events.

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 .

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No.

Differences, if any, between the carrying amount of our investment in the respective joint venture and our share of the underlying

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

are reported as a single line item in the statements of operations as income or loss from investments in unconsolidated affiliated

follow 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.

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.

If the lease provides for tenant improvements, we determine

whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company.

When we are the owner of the

tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the

leased asset until the tenant improvements are substantially completed.

When the tenant is the owner of the tenant improvements,

any tenant improvement allowance (including amounts that can be taken in the form of cash or a credit against the tenant’s

rent) that is funded is treated as a lease incentive receivable and amortized as a reduction of revenue over the lease term.

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 condensed consolidated statements of operations.

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

is reasonably assured.

revenues primarily consists of real estate sales commissions and are recognized upon the successful completion of all required

services have been performed which is when escrow closes.

In accordance with the guidelines established for Reporting Revenue

Gross as a Principal versus Net as an Agent in the ASC Topic 606, the Company records commission revenues and expenses on a gross

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 revenue that are payable upon payment

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

Franchise fee revenues consist of fees earned each

time that KCB Jade Holdings, LLC sells one of its franchise locations.

Franchise fee revenues are recognized when earned and collectability

is reasonably assured.

Stock-based compensation is accounted for based on the requirements

of ASC 718 – “Compensation –Stock Compensation ”, which requires recognition in the financial statements

of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments over the period the

employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period).

The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based

on the grant-date fair value of the award.

The Company has elected to recognize forfeitures as they occur as permitted under ASU 2016-09

Improvements to Employee Share-Based Payment Accounting .

Accounting Pronouncements

June 2016, the FASB issued ASU No.

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

Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”).

ASU 2016-13 requires financial assets measured at amortized cost to be presented at the net amount expected to be collected.

The measurement

of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and

reasonable and supportable forecasts that affect the collectability of the reported amounts.

An entity must use judgment in determining

the relevant information and estimation methods that are appropriate in its circumstances.

ASU 2016-13 is effective for annual reporting

periods beginning after December 15, 2019, including interim periods within those fiscal years, and a modified retrospective approach

is required, with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance

is effective.

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.

Recent Accounting Pronouncements

Management does not believe that any other recently

issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial

Quantitative and Qualitative Disclosures

about Market Risk

Not applicable to smaller reporting companies.

Measurement of Credit

Losses on Financial Instruments” (“ASU 2016-13”).

ASU 2016-13 requires financial assets measured at amortized

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

The measurement of expected credit losses is based on relevant

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

affect the collectability of the reported amounts.

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

methods that are appropriate in its circumstances.

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

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

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

of 2019, the FASB issued ASU 2019-10, which delayed the implementation of ASU 2016-13 to fiscal years beginning after December 15,

2022 for smaller reporting companies which applies to the Company.

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

on its future consolidated financial statements.

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

effect on the accompanying consolidated financial statements.

Quantitative and Qualitative Disclosures about Market Risk

applicable to smaller reporting companies.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis