What changed in this filing

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Item 1. Financial Statements

2022-11-10 compared with 2022-08-11 · 517 added, 409 removed, 1219 unchanged (43% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Accounts receivable

23 unchanged sentences

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

2,000,000 shares issued and outstanding at June 30, 2022 and December 31, 2021 ($ 1.00 per share liquidation preference or $ 2,000,000 )

2,000,000 shares issued and outstanding at September 30, 2022 and December 31, 2021 ($ 1.00 per share liquidation preference or $ 2,000,000 )

Common stock:

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

12,201,548 and 12,201,548 issued and outstanding at June 30, 2022 and December 31, 2021, respectively

12,201,548 shares issued and outstanding at September 30, 2022 and December 31, 2021

Additional paid-in capital

4 unchanged sentences

Total Liabilities and Stockholders’ Equity

See accompanying notes to unaudited condensed consolidated financial

accompanying notes to unaudited condensed consolidated financial statements.

ZONED PROPERTIES, INC.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

For the Six Months Ended

For the Three Months

For the Nine Months

September 30,

Property investment portfolio revenues:

Rental revenues

Advisory revenues

Real estate services revenues:

Advisory and franchise revenues

Brokerage revenues

Franchise fees

Total real estate services revenues

Total revenues

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Total other expenses, net

(LOSS) INCOME BEFORE INCOME TAXES

LOSS BEFORE INCOME TAXES

PROVISION FOR INCOME TAXES

NET (LOSS) INCOME

NET (LOSS) INCOME PER COMMON SHARE:

$ ( 142,087 )

NET LOSS PER COMMON SHARE:

Basic and diluted

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic and diluted

See accompanying notes to unaudited condensed consolidated financial

1 unchanged sentence

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS

AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER

30, 2022 AND 2021

Preferred Stock

8 unchanged sentences

( 15,163,626 )

Accretion of stock based compensation related to stock options issued

Balance, September 30, 2022

$ ( 15,240,954 )

Preferred Stock

10 unchanged sentences

( 14,891,789 )

See accompanying notes to unaudited condensed consolidated financial statements.

Accretion of stock based compensation related to stock options issued

Balance, September 30, 2021

$ ( 14,987,284 )

See accompanying notes to unaudited condensed consolidated

financial statements.

ZONED PROPERTIES, INC.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

For the Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

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

$ ( 142,087 )

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

Depreciation expense

3 unchanged sentences

Loss from unconsolidated joint ventures

Gain on sale of rental property and property and equipment

Gain on sale of rental property and equipment

Change in operating assets and liabilities:

9 unchanged sentences

Security deposits payable

NET CASH PROVIDED BY OPERATING ACTIVITIES

CASH PROVIDED BY OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES:

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Investment in joint ventures and equity securities

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES:

Deferred financing fees paid

Repayment of note payable - related party

5 unchanged sentences

Interest paid

Income taxes paid

NON-CASH INVESTING AND FINANCING ACTIVITIES

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

SEPTEMBER 30, 2022

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

5 unchanged sentences

The Company is now a real estate development firm for

emerging and highly regulated industries, including regulated cannabis.

emerging and highly regulated industries, including legalized cannabis.

The Company is redefining the approach to commercial real estate

9 unchanged sentences

Bureau, the U.S.

Green Building Council, and the Forbes Real Estate Council.

Green Building Council, and the Forbes Business Council.

The Company does not grow, harvest, sell or distribute cannabis

1 unchanged sentence

The Company has the following wholly owned subsidiaries:

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

This subsidiary was dissolved on July 5, 2022.

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

1 unchanged sentence

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

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

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

This subsidiary was dissolved on July 22, 2022.

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

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

3 unchanged sentences

ZP Data Platform 2, LLC (“ZP Data 2”) was organized in the State of Arizona on June 21, 2022.

ZP RE Holdings, LLC (“ZPRE”) was organized in the State of Arizona on September 20, 2022.

ZP RE AZ Stone, LLC (“Stone Property Owner”) was organized in the State of Arizona on October 19, 2022.

ZP Brokerage MS, LLC (“Mississippi Brokerage”) was organized in the State of Mississippi on October 4, 2022.

ZP Brokerage FL, LLC (“Florida Brokerage”) was organized in the State of Florida on October 20, 2022.

ZP Brokerage AL, LLC (“Alabama Brokerage”)

was organized in the State of Alabama on October 20, 2022.

The Company has closed or is planning to close

the following wholly owned subsidiaries:

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

This subsidiary was dissolved on July 5, 2022.

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

This subsidiary was dissolved on July 22, 2022.

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

The Company is in the process of dissolving this subsidiary.

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

The Company is in the process of dissolving this subsidiary.

In March 2020, the World Health Organization declared

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

SEPTEMBER 30, 2022

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING

6 unchanged sentences

The unaudited condensed consolidated financial

statements for the three and six months ended June 30, 2022 and 2021 have been prepared by the Company without audit, pursuant to the

rules and regulations of the Securities and Exchange Commission (the “SEC”).

statements for the three and nine months ended September 30, 2022 and 2021 have been prepared by the Company without audit, pursuant to

the rules and regulations of the Securities and Exchange Commission (the “SEC”).

In the opinion of management, all adjustments

necessary to present fairly our consolidated financial position, results of operations, and cash flows as of June 30, 2022 and 2021, and

for the periods then ended, have been made.

necessary to present fairly our consolidated financial position, results of operations, and cash flows as of September 30, 2022 and 2021,

and for the periods then ended, have been made.

Those adjustments consist of normal and recurring adjustments.

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Significant estimates for

the six months ended June 30, 2022 and 2021 include the collectability of accounts and note receivable, the useful life of rental properties

and property and equipment, assumptions used in assessing impairment of long-term assets including rental property and investment in joint

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

stock-based compensation.

the nine months ended September 30, 2022 and 2021 include the collectability of accounts and note receivable, the useful life of rental

properties and property and equipment, assumptions used in assessing impairment of long-term assets including rental property and investment

in joint ventures, valuation allowances for deferred tax assets, and the fair value of non-cash equity transactions, including stock options

and stock-based compensation.

Risks and uncertainties

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

For the six months ended June 30, 2022 and 2021, rental and advisory revenue associated with the Significant Tenants

For the nine months ended September 30, 2022 and 2021, rental and advisory revenue associated with the Significant Tenants

amounted to $ 1,276,249 and $ 899,525 , respectively, which represents 62.2 % and 70.1 % of the Company’s total revenues, respectively

16 unchanged sentences

three months or less as of the purchase date of such investments.

The Company had no cash equivalents on June 30, 2022 and December 31,

The Company had no cash equivalents on September 30, 2022 and December

The majority of the Company’s cash is held at major commercial banks, which may at times exceed the Federal Deposit Insurance

Corporation (“FDIC”) limit.

To date, the Company has not experienced any losses

on its invested cash.

On June 30, 2022 and December 31, 2021, the Company had approximately $ 641,000 and $ 942,000 , respectively, of cash

in excess of FDIC limits of $ 250,000 .

To date, the Company has not experienced any losses on its invested cash.

On September 30, 2022

and December 31, 2021, the Company had approximately $ 592,000 and $ 942,000 , respectively, of cash in excess of FDIC limits of $ 250,000 .

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

SEPTEMBER 30, 2022

Accounts and convertible notes receivable

6 unchanged sentences

is recognized in general and administrative expense.

During the six months ended June 30, 2022 and 2021, the Company did not record any

allowances for doubtful accounts.

During the nine months ended September 30, 2022 and 2021, the Company did not record

any allowances for doubtful accounts.

Investment in joint ventures

23 unchanged sentences

in unconsolidated affiliated entities.

Deferred financing costs

Deferred financing costs represent costs incurred

in the connection with obtaining debt financing (See Note 8).

These costs shall be amortized ratably and charged to interest expense over

the term of the related debt.

Deferred financing costs are included in prepaid expenses and other current assets on the accompanying unaudited

condensed consolidated balance sheet.

Long-term investments

8 unchanged sentences

Changes in value are recorded in non-operating income (loss).

On June 30, 2022,

equity investments consist of an investment in convertible preferred stock that does not have a readily determinable fair value (see Note

On September 30,

2022, long-term investments consist of an investment in convertible preferred stock that does not have a readily determinable fair value

(see Note 7).

On December 31, 2021, the Company did not have any investment in equity securities.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

SEPTEMBER 30, 2022

The Company’s rental properties are individually

12 unchanged sentences

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

During the six months ended

June 30, 2022 and 2021, the Company did not record any impairment losses.

During the nine months ended

September 30, 2022 and 2021, the Company did not record any impairment losses.

Property and equipment

36 unchanged sentences

when the Company performs services pursuant to its agreements with clients and collectability is reasonably assured.

Brokerage revenues primarily consist of real estate

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

In accordance

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

commission revenues and expenses on a gross basis.

Of the criteria listed in ASC Topic 606, the Company is the primary obligor in the

transaction, does not have inventory risk, performs all or part of the service, has credit risk, and has wide latitude in establishing

the price of services rendered and discretion in selection of agents and determination of service specifications.

Brokerage revenues that

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

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

SEPTEMBER 30, 2022

Brokerage revenues primarily consist of real estate

sales commissions and are recognized upon the successful completion of all required services which is likely to occur upon a lease commencement,

when escrow closes on the sale of a property, or as otherwise negotiated between the Brokerage and its clients.

In accordance with the

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

revenues and expenses on a gross basis.

Of the criteria listed in ASC Topic 606, the Company is the primary obligor in the transaction,

does not have inventory risk, performs all or part of the service, has credit risk, and has wide latitude in establishing the price of

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

Brokerage revenues that are payable

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

Lease accounting

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of rent for the months of June and July 2020.

This rent abatement resulted in a deferred rent receivable as of June 30, 2022 and December

31, 2021 of $ 160,276 and $ 164,770 , respectively (see Note 3).

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.

This rent abatement resulted in a deferred rent receivable as of September 30, 2022 and

December 31, 2021 of $ 158,029 and $ 164,770 , respectively (see Note 3).

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.

For contracts entered into on or after the effective

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sheets at fair value upon adoption of ASU 2016-02.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

Operating lease right of use asset represents

6 unchanged sentences

and is included in general and administrative expenses in the condensed consolidated statements of operations.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

Basic and diluted (loss) income per share

12 unchanged sentences

securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings.

The following table presents a reconciliation of basic

and diluted net (loss) income per share:

Three Months Ended

Six Months Ended

Net (loss) income per common share - basic:

Net (loss) income

undistributed (earnings) loss allocated to participating securities

Net (loss) income allocated to common stockholders

Weighted average common shares outstanding – basic

Net (loss) income per common share – basic

Net (loss) income (loss) per common share - diluted:

Net (loss) income allocated to common shareholders – basic

interest of convertible debt

Numerator for (loss) income per common share – diluted

Weighted average common shares outstanding – diluted

Net (loss) income per common share – diluted

The following potentially dilutive shares have been excluded from the

calculation of diluted net loss per share as their effect would be anti-dilutive for the six months ended June 30, 2022 and 2021.

The following potentially dilutive shares have

been excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive for the nine months ended September

30, 2022 and 2021.

September 30,

Convertible debt

27 unchanged sentences

An entity may only recognize or continue to recognize tax positions that meet a “more-likely-than-not”

The Company does not believe it has any uncertain tax positions as of June 30, 2022 and December 31, 2021 that would require

The Company does not believe it has any uncertain tax positions as of September 30, 2022 and December 31, 2021 that would require

either recognition or disclosure in the accompanying unaudited condensed consolidated financial statements.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

Stock-based compensation

8 unchanged sentences

under ASU 2016-09 Improvements to Employee Share-Based Payment Accounting.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

Recently issued accounting pronouncements

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Lease remain in full force and effect.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

On May 29, 2020, Chino Valley and Broken Arrow

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below, and collectively referred to as the “Facilities”).

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.

The Company’s Significant Tenants have completed the Investment

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

On August 23, 2021, Chino Valley and Broken Arrow

10 unchanged sentences

the increase in monthly rent payments is commensurate with the standalone price for the additional square footage being leased.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

On January 24, 2022 and

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

On May 1, 2018, Zoned Arizona and CJK terminated

27 unchanged sentences

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

completed the Investment by Tenants to the Facilities totaling in excess of $ 8,000,000 and have satisfied the contractual obligations

related to the same.

In connection with a line of credit (See Note 8), on July 11, 2022,

the Company entered into a Deed of Trust Agreement with secures the Company’s performance under the line of credit.

Trust Agreement transfers and assigns to the lender the right to sell the assets of Tempe and rights to rental income in case of default

under the line of credit.

On May 1, 2018, Kingman and CJK agreed to terminate

18 unchanged sentences

for the balance of the term.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

Significant Tenants

6 unchanged sentences

owed to him (see Note 9).

As of June 30, 2022 and December 31, 2021, security

deposits payable to the Significant Tenants amounted to $ 71,800 in both periods.

Future minimum lease payments primarily consist of minimum

base rent payments from Significant Tenants.

As of September 30, 2022 and December 31, 2021,

security deposits payable to the Significant Tenants amounted to $ 71,800 in both periods.

Future minimum lease payments primarily consist

of minimum base rent payments from Significant Tenants.

Future minimum lease payments to be received,

on all leased properties, for each of the five succeeding calendar years and thereafter as of period ended June 30, 2022, consists of

the following:

on all leased properties, for each of the five succeeding calendar years and thereafter as of period ended September 30, 2022, consists

of the following:

Future annual base rent:

2 unchanged sentences

–Significant Tenants

For the three months ended June 30, 2022 and 2021,

rental and advisory revenue associated with the Significant Tenant leases described above amounted to $ 445,479 and $ 291,982 , which represents

89.5 % and 53.1 % of the Company’s total revenues, respectively.

For the six months ended June 30, 2022 and 2021, rental and advisory

revenue associated with the Significant Tenant leases described above amounted to $ 830,773 and $ 588,462 , which represents 57.8 % and 65.7 %

of the Company’s total revenues, respectively.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

On June 30, 2022 and December 31, 2021, accounts

For the three months ended September 30, 2022

and 2021, rental and advisory revenue associated with the Significant Tenant leases described above amounted to $ 445,476 and $ 311,065 ,

which represents 72.4 % and 80.3 % of the Company’s total revenues, respectively.

For the nine months ended September 30, 2022 and

2021, rental and advisory revenue associated with the Significant Tenant leases described above amounted to $ 1,276,249 and $ 899,525 , which

represents 62.2 % and 70.1 % of the Company’s total revenues, respectively.

On September 30, 2022 and December 31, 2021, accounts

receivable from advisory services provided to the Significant Tenants amounted to $ 0 and $ 2,813 , respectively.

Further, as of June 30,

2022 and December 31, 2021 a deferred rent receivable of $ 160,276 and $ 164,770 is due from Significant Tenants due to the abatement of

rent in the months of June and July 2020 under the amendments executed effective May 31, 2020 discussed above, respectively, and as of

June 30, 2022, a lease incentive receivable of $ 490,826 is due from the Significant Tenant, in connection with the $ 500,000 tenant improvement

allowance provided to tenant pursuant to the Chino Valley amendment executed during the six months ended June 30, 2022 (see above)

Further, as of September

30, 2022 and December 31, 2021 a deferred rent receivable of $ 158,029 and $ 164,770 is due from Significant Tenants due to the abatement

of rent in the months of June and July 2020 under the amendments executed effective May 31, 2020 discussed above, respectively, and as

of September 30, 2022, a lease incentive receivable of $ 483,945 is due from the Significant Tenant, in connection with the $ 500,000 tenant

improvement allowance provided to tenant pursuant to the Chino Valley amendment executed during the nine months ended September 30, 2022

Asset concentration

6 unchanged sentences

the timeliness of rent collections.

As of June 30, 2022 and December 31, 2021, the

Company had an asset concentration related to the Significant Tenants.

As of June 30, 2022 and December 31, 2021, the Significant Tenants

leased approximately 73.3 % and 79.2 % of the Company’s total assets, respectively.

Through June 30, 2022, all rental payments have

been made on a timely basis.

As of June 30, 2022 and December 31, 2021, the lease agreements with the Significant Tenants were personally

guaranteed by Alan Abrams and are collateralized by a convertible note payable of $ 2,000,000 owed to Mr.

As of September 30, 2022 and December 31, 2021,

the Company had an asset concentration related to the Significant Tenants.

As of September 30, 2022 and December 31, 2021, the Significant

Tenants leased approximately 71.5 % and 79.2 % of the Company’s total assets, respectively.

Through September 30, 2022, all rental

payments have been made on a timely basis.

As of September 30, 2022 and December 31, 2021, the lease agreements with the Significant Tenants

were personally guaranteed by Mr.

Abrams and are collateralized by a convertible note payable of $ 2,000,000 owed to Mr.

Abrams (see Note

1, 2018, the Company and Alan Abrams entered into a Reaffirmation Agreement (See Note 8).

On March 1, 2018, the Company and Mr.

Abrams entered into a Reaffirmation Agreement (See Note 9).

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

NOTE 4 – RENTAL PROPERTIES

On June 30, 2022 and December 31, 2021, rental

On September 30, 2022 and December 31, 2021, rental

properties, net consisted of the following:

September 30,

Building and building improvements

4 unchanged sentences

Rental properties, net

For the three months ended June 30, 2022 and 2021,

depreciation of rental properties amounted to $ 85,517 and $ 89,299 , respectively.

For the six months ended June 30, 2022 and 2021,

depreciation of rental properties amounted to $ 172,091 and $ 178,596 , respectively.

For the three months ended September 30, 2022

and 2021, depreciation of rental properties amounted to $ 86,003 and $ 87,316 , respectively.

For the nine months ended September 30,

2022 and 2021, depreciation of rental properties amounted to $ 258,094 and $ 265,912 , respectively.

NOTE 5 – CONVERTIBLE NOTE RECEIVABLE

1 unchanged sentence

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

KCB, doing business as Open Dør Dispensaries, is committed to guiding retailers through the chaos of cannabis.

KCB is interested

in cannabis dispensary license holders who want to elevate the experience of regulated cannabis utilizing the Open Dør Dispensaries

retail model as franchisee partners.

In exchange for the investment, KCB issued to the Company a convertible debenture (the “KCB

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

The KCB Debenture

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

Interest on the outstanding

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

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

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

However, if KCB elects to

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

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

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

President and Chief Operating Officer.

KCB, doing business as Open Dør Dispensaries, is committed to guiding retailers through

the chaos of cannabis.

KCB is interested in cannabis dispensary license holders who want to elevate the experience of regulated cannabis

utilizing the Open Dør Dispensaries retail model as franchisee partners.

In exchange for the investment, KCB issued to the Company

a convertible debenture (the “KCB Debenture”) dated March 19, 2020 (the “Issuance Date”) in the original principal

amount of $ 100,000 .

The KCB Debenture bears interest at the rate of 6.5 % per annum and matures on March 19, 2025 (the “Maturity

Interest on the outstanding principal sum of the KCB Debenture commences accruing on the Issuance Date and is computed on

the basis of a 365-day year and the actual number of days elapsed and shall be payable annually due by the first day of each calendar

anniversary following the Issuance Date.

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

whole or in part.

However, if KCB elects to prepay the KCB Debenture prior to the Maturity Date or prior to any conversion as provided

in the KCB Debenture in whole or in part, the Company will be entitled to receive a number of KCB units, in addition to such prepayment

amount, constituting 10% of the total outstanding units and 10% of the total percentage interest following such issuance and at the time

of such issuance.

On or after six months from the Issuance Date,

12 unchanged sentences

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

Upon the occurrence of an Event of Default, as

3 unchanged sentences

or agreement contained in the KCB Debenture and proceed to enforce the payment thereof or any other legal or equitable right of the Company.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

Any amount of principal or interest not paid when

50 unchanged sentences

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”).

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

SEPTEMBER 30, 2022

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.

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

2 unchanged sentences

for at amortized cost and is evaluated for collectability at each reporting date.

As of June 30, 2022 and December 31, 2021, an allowance

As of September 30, 2022 and December 31, 2021, an allowance

was not deemed necessary.

On June 30, 2022, convertible note receivable

On September 30, 2022, convertible note receivable

and interest receivable amounted to $ 200,000 and $ 7,479 , respectively.

15 unchanged sentences

term of the engagement letter.

On June 30, 2022 and December 31, 2021, intangible

On September 30, 2022 and December 31, 2021, intangible

assets consisted of the following:

September 30,

Real estate brokerage materials and listing

accumulated amortization

For the three months ended June 30, 2022 and 2021,

For the three months ended September 30, 2022

and 2021, amortization of intangible assets amounted to $ 0 and $ 9,450 , respectively.

For the nine months ended September 30, 2022 and

2021, amortization of intangible assets amounted to $ 9,450 and $ 18,900 , respectively.

For the six months ended June 30, 2022 and 2021, amortization

of intangible assets amounted to $ 9,450 and $ 9,450 , respectively.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

NOTE 7 – INVESTMENT IN UNCONSOLIDATED

1 unchanged sentence

Investment in unconsolidated joint ventures

On June 30, 2022 and December 31, 2021, the

Company held investments with aggregate carrying values of $ 63,634 and $ 74,554 , respectively.

On September 30, 2022 and December 31, 2021,

the Company held investments with aggregate carrying values of $ 58,293 and $ 74,554 , respectively.

The entities listed below are partially

7 unchanged sentences

Date Acquired

September 30,

Beakon, LLC (the “Beakon Joint Venture”)

2 unchanged sentences

Total investments in unconsolidated joint venture entities

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

On April 22, 2021, ZP Data entered into a Limited

46 unchanged sentences

2021, the $ 73,970 impairment loss is included in impairment loss from unconsolidated joint ventures on the consolidated statement of operations.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

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

19 unchanged sentences

The following represents unaudited summarized

financial information derived from the financial statements of the Beakon and Zoneomics Green Joint Ventures, respectively, as of June

30, 2022 and for the six months ended June 30, 2022 and 2021.

financial information derived from the financial statements of the Beakon and Zoneomics Green Joint Ventures, respectively, as of September

30, 2022 and for the nine months ended September 30, 2022 and 2021.

Balance sheets (Unaudited):

Current assets:

Licensing agreement

Total liabilities and equity

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

Statement of operations (Unaudited)

For the Six Months Ended

June 30, 2022

For the Nine Months Ended

September 30, 2022

Operating expenses

Company’s share of loss from unconsolidated joint ventures

During the six months ended June 30, 2022 and

2021, the Company recorded a loss from unconsolidated joint ventures of $ 10,920 and $ 0 , respectively, which represents the Company’s

During the nine months ended September 30, 2022

and 2021, the Company recorded a loss from unconsolidated joint ventures of $ 16,261 and $ 15,021 , respectively, which represents the Company’s

proportionate share of losses from its joint ventures.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

Investment in equity securities

On June 24, 2022, the Company’s wholly-owned subsidiary, ZP Data Platform 2 LLC, purchased 875 shares of Series A convertible preferred

stock of Anami Technology, Inc., a California corporation, for $ 50,000 , or $ 57.14 per share.

The Company’s ownership percentage

is less than 20 % and it does not have the ability to exercisable significant influence as described in ASC 323-10-15-6.

This equity instrument

does not have a readily determinable fair value.

Accordingly, the Company elected to measure this equity security at its cost minus impairment,

If the Company identifies observable price changes in orderly transactions for the identical or a similar investment of the same

issuer, the Company shall measure the equity security at fair value as of the date that the observable transaction occurred.

If the Company

subsequently elects to measure this equity security at fair value, the Company shall measure all identical or similar investments of the

same issuer, including future purchases of identical or similar investments of the same issuer, at fair value.

The election to measure

this equity security at fair value shall be irrevocable.

Any resulting gains or losses on the securities for which that election is made

shall be recorded in earnings at the time of the election.

On June 30, 2022, investment in equity securities amounted to $ 50,000 .

On June 24, 2022, the Company’s wholly-owned

subsidiary, ZP Data Platform 2 LLC, purchased 875 shares of Series A convertible preferred stock of Anami Technology, Inc., a California

corporation, for $ 50,000 , or $ 57.14 per share.

The Company’s ownership percentage is less than 20 % and it does not have the ability

to exercise significant influence as described in ASC 323-10-15-6.

This equity instrument does not have a readily determinable fair value.

Accordingly, the Company elected to measure this equity security at its cost minus impairment, if any.

If the Company identifies observable

price changes in orderly transactions for the identical or a similar investment of the same issuer, the Company shall measure the equity

security at fair value as of the date that the observable transaction occurred.

If the Company subsequently elects to measure this equity

security at fair value, the Company shall measure all identical or similar investments of the same issuer, including future purchases

of identical or similar investments of the same issuer, at fair value.

The election to measure this equity security at fair value shall

be irrevocable.

Any resulting gains or losses on the securities for which that election is made shall be recorded in earnings at the time

of the election.

On September 30, 2022, investment in equity securities amounted to $ 50,000 .

NOTE 8 – LINE OF CREDIT

On July 11, 2022, Zoned Arizona entered into a

Loan Agreement (the “Loan Agreement”), dated as of July 11, 2022, by and between Zoned Arizona and East West Bank (the “Bank”).

Pursuant to the terms of the Loan Agreement, subject to and upon the satisfaction of the terms and conditions of the Loan Agreement, Zoned

Arizona may request advances under a multiple access loan (“MAL”) during the MAL Advance Period (as hereinafter defined) in

an aggregate outstanding amount not to exceed $ 4,500,000 .

The “MAL Advance Period” means the shorter of (i) a period of one

year from July 11, 2022, or (ii) a period commencing on July 11, 2022 and ending on the date that Zoned Arizona makes the Early Amortization

Election (as hereinafter defined).

Amounts borrowed under the MAL may not be re-borrowed.

On July 11, 2022, Zoned Arizona paid loan and

other fees of $ 176,472 in connection with the Loan Agreement, which have been capitalized as deferred financing costs and included in

prepaid expenses and other current assets on the accompanying consolidated balance sheet as of September 30, 2022.

These costs shall be

amortized ratably and charged to interest expense over the term of the related debt.

The proceeds of each advance under the MAL may

be used by Zoned Arizona to refinance the real property at 410 S.

Madison Drive, Tempe, AZ 85251 (the “Property”) or to conduct

certain acts related to the acquisition, improvement and maintenance of real property.

On termination of the MAL, all unpaid principal,

unpaid and accrued interest, and all other amounts due under the MAL will be immediately due and payable.

At any time before July 11, 2023, Zoned Arizona

may elect to commence paying principal together with interest on the MAL (the “Early Amortization Election”) in accordance

with the repayment terms set forth in the variable rate note initially evidencing the MAL, executed by Zoned Arizona in favor of the Bank

(the “Note”).

If Zoned Arizona makes the Early Amortization Election, then (i) Zoned Arizona will not be entitled to any further

advances under the MAL, and (ii) the 25-year amortization schedule referenced in the Note will be from the date Zoned Arizona makes the

Early Amortization Election.

Provided that Zoned Arizona has previously drawn

one or more advances equal to or greater than $ 1 million under the MAL, at any time during the MAL Advance Period, Zoned Arizona may elect

to reset as to such advances from the variable interest rate set forth in the Note to a fixed interest rate for the remaining term of

the MAL (the “Fixed Rate Option”).

In the event Zoned Arizona elects the Fixed Rate Option for any advances, such advances

will become subject to a new SWAP note (a “SWAP Note”) in a principal amount of at least $ 1 million based on an interest rate

equal to the prime rate then in existence as of the effective date of the new SWAP Note plus 0.75% .

The Loan Agreement contains representations, warranties

and covenants customary for a transaction of this type.

Among other things, the Loan Agreement provides as follows:

(a) upon the occurrence

of an event of default, the outstanding principal balance of the MAL will not at any time exceed 65% of the Property’s most recent

appraised value;

(b) upon the occurrence of an event of default, Zoned Arizona will maintain a minimum Non-Cannabis Debt Service Coverage

Ratio (as hereinafter defined) of 1.40 to 1.00;

and (d) Zoned Arizona and the Company, collectively, will maintain at all times, liquid assets of at least the sum of all

tenant securities deposits under leases, plus $350,000 in operating reserves.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

All advances under the MAL bear interest at a

variable rate equal to the greater of (a) the prime rate plus 2 %, or (b) a floor rate equal to the sum of the prime rate as of July 11,

2022 plus 2.25 %.

From July 11, 2022 to July 11, 2023, Zoned Arizona agreed to make interest payments on the outstanding principal balance

From and after July 11, 2023 and continuing until July 11, 2028 (the “Maturity Date”), Zoned Arizona will pay

principal together with interest on the MAL in 60 monthly installments based on the interest rate set forth in the Note and a principal

amortization schedule of 25 years from July 11, 2023 (or if Zoned Arizona makes the Early Amortization Election, from the date such election

Zoned Arizona may prepay the outstanding principal

under the Note, at any time, subject to the provisions of the Note.

If Zoned Arizona prepays all, but not less than all, of the outstanding

principal balance of the MAL at any time until July 11, 2023, then Zoned Arizona will also pay a premium equal to 1 % of the amount prepaid.

As of September 30, 2022, the Company has not

utilized the line of credit and $ 4,500,000 is available to borrow under the line of credit.

NOTE 9 – CONVERTIBLE NOTE PAYABLE

34 unchanged sentences

was acknowledged as collateral within the scope of the guaranty included in the commercial lease agreements.

As of June 30, 2022 and December 31, 2021, the

principal balance due under the Abrams Debenture is $ 2,000,000 .

As of June 30, 2022 and December 31, 2021, accrued interest payable due

under the Abrams Debenture amounted to $ 30,000 , which is included in accrued expenses on the accompanying condensed consolidated balance

For the three months ended June 30, 2022 and 2021,

As of September 30, 2022 and December 31, 2021,

the principal balance due under the Abrams Debenture is $ 2,000,000 .

As of September 30, 2022 and December 31, 2021, accrued interest payable

due under the Abrams Debenture amounted to $ 30,000 , which is included in accrued expenses on the accompanying condensed consolidated balance

For the three months ended September 30, 2022

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

For the nine months ended September 30, 2022 and 2021,

interest expense related to the Abrams Debenture amounted to $ 90,000 .

For the six months ended June 30, 2022 and 2021, interest expense

related to the Abrams Debenture amounted to $ 60,000

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

SEPTEMBER 30, 2022

NOTE 10 – RELATED PARTY TRANSACTION

2 unchanged sentences

debenture (the “McLaren Debenture”) in the principal amount of $ 20,000 in favor of Bryan McLaren, the Company’s Chief

Executive Officer, President, Chief Financial Officer, and a member of the Company’s Board of Directors, in exchange for cash from

Executive Officer, Chief Financial Officer, and Chairman of the Board of Directors, in exchange for cash from Mr.

McLaren of $ 20,000 .

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

each quarter and matured on January 9, 2022 .

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

on January 9, 2022 .

Pursuant to the terms of the McLaren Debenture, Mr.

McLaren was entitled to convert all or

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

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

On January 7, 2022, the Company repaid this debt

and all accrued and unpaid interest due.

As of June 30, 2022 and December 31, 2021, the

principal balance due under the McLaren Debenture was $ 0 and $ 20,000 , respectively.

As of June 30, 2022 and December 31, 2021, accrued

interest payable due under the McLaren Debenture was $ 0 and $ 5,400 , respectively, which is included in accrued expenses – related

party on the accompanying condensed consolidated balance sheets.

For the three months ended June 30, 2022 and 2021,

interest expense – related party amounted to $ 0 and $ 300 , respectively.

For the six months ended June 30, 2022 and 2021, interest

expense – related party amounted to $ 600 .

McLaren was entitled to convert all or a portion of the principal

balance and all accrued and unpaid interest due under this McLaren Debenture into shares of the Company’s common stock at a conversion

price of $ 5.00 per share.

On January 7, 2022, the Company repaid this debt and all accrued and unpaid interest due.

As of September 30, 2022 and December 31, 2021,

the principal balance due under the McLaren Debenture was $ 0 and $ 20,000 , respectively.

As of September 30, 2022 and December 31, 2021,

accrued interest payable due under the McLaren Debenture was $ 0 and $ 5,400 , respectively, which is included in accrued expenses –

related party on the accompanying condensed consolidated balance sheets.

For the three months ended September 30, 2022

and 2021, interest expense – related party amounted to $ 0 and $ 300 , respectively.

For the nine months ended September 30, 2022 and

2021, interest expense – related party amounted to $ 600 and $ 900 .

Indemnification agreements

10 unchanged sentences

On December 13, 2013, the Board of Directors of

the Company authorized and approved the creation of a new class of Preferred Stock consisting of 5,000,000 shares authorized, $ .001 par

the Company authorized and approved the creation of a new class of Preferred Stock consisting of 5,000,000 shares authorized, $.

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

5 unchanged sentences

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

As of September

30, 2022 and December 31, 2021, there were 2,000,000 shares of preferred stock outstanding.

7 unchanged sentences

Incur, assume or guarantee any indebtedness maturing more than 18 months after the date on which it is incurred, assumed or guaranteed by us, except for operating leases and obligations assumed as part of the purchase price of property.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(B) Common stock issued for services

6 unchanged sentences

consolidated statements of operations.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

27 unchanged sentences

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

As of June 30,

As of September

30, 2022, 1,102,500 stock option awards are outstanding and 318,750 options are exercisable under the 2016 Plan.

1 unchanged sentence

325,000 stock option awards are outstanding and 125,000 options are exercisable under the 2016 Plan.

As of June 30, 2022 and December 31, 2021,

As of September 30, 2022 and December

31, 2021, 8,897,500 and 9,675,000 shares, respectively, were available for future issuance.

4 unchanged sentences

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

As of June 30,

As of September

30, 2022 and December 31, 2021, options to purchase 1,250,000 shares of common stock are outstanding and 1,175,000 options are exercisable

2 unchanged sentences

On January 1, 2021, the Company granted a consultant,

now Chief Operating Officer of the Company as of July 1, 2021, an option, pursuant to the 2016 Plan, to purchase 125,000 of the Company’s

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

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

now President and Chief Operating Officer, of the Company as of July 1, 2021, an option, pursuant to the 2016 Plan, to purchase 125,000

of the Company’s common stock at an exercise price of $ 1.00 per share.

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

option expires on January 1, 2031.

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

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

and each year thereafter through January 1, 2031.

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

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

and (ii) as to 10,000 of such

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

The fair value of this option grant was estimated on the date

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

dividend yield of 0%;

expected volatility of 117%;

risk-free interest

rate of 0.93%;

volatility of 117%;

risk-free interest rate of 0.93%;

and an estimated holding period of 10 years.

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

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

In connection with these options, the

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

On July 1, 2021, the Company entered into a 12-month

17 unchanged sentences

and will record stock-based compensation expense over the vesting period.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

In January 2022, the Company’s Board of

19 unchanged sentences

On January 21, 2022, the Company granted a stock

option to purchase an aggregate of 75,000 of the Company’s common stock at an exercise price of $ 1.00 per share to the Company’s

chief operating officer pursuant to the 2016 Plan.

The grant date of the stock option was January 21, 2022 and the options expire on January

option to purchase 75,000 of the Company’s common stock at an exercise price of $ 1.00 per share to the Company’s President

and Chief Operating Officer pursuant to the 2016 Plan.

The grant date of the stock option was January 21, 2022 and the options expire

on January 21, 2032.

The option vests as to (i) 15,000 of such shares on January 21, 2022;

1 unchanged sentence

21, 2023 and each year thereafter through January 21, 2030.

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

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

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

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

dividend yield of 0%;

expected volatility of 112.3%;

risk-free interest

rate of 1.75%;

risk-free interest rate of 1.75%;

and an estimated holding period of 10 years.

In connection with these options, the Company valued these stock options at

a fair value of $55,334 and will record stock-based compensation expense over the vesting period.

In connection with these options, the Company valued these

stock options at a fair value of $55,334 and will record stock-based compensation expense over the vesting period.

On April 1, 2022, the Company granted a stock

14 unchanged sentences

expense over the vesting period.

For the three months ended June 30 2022 and 2021,

in connection with the accretion of stock-based option expense, the Company recorded stock option expense of $ 81,096 and $ 6,087 , respectively.

For the six months ended June 30 2022 and 2021, in connection with the accretion of stock-based option expense, the Company recorded stock

option expense of $ 198,012 and $ 21,909 , respectively.

As of June 30, 2022, there were 2,227,500 options outstanding and 1,415,000 options

vested and exercisable.

As of June 30, 2022, there was $ 332,490 of unvested stock-based compensation expense to be recognized through

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

The aggregate intrinsic value on June 30, 2022 was $ 0 and was calculated based on the difference between the quoted share

price on June 30, 2022 of $ 0.715 and the exercise price of the underlying options.

Stock option activities for the six months ended

June 30, 2022 are summarized as follows:

On July 1, 2022, the Company granted a stock option

to purchase 125,000 of the Company’s common stock at an exercise price of $ 1.00 per share to the Company’s Chief Legal Officer

and Chief Compliance Officer pursuant to the 2016 Plan.

The grant date of the stock option was July 1, 2022 and the option expires on

July 1, 2032.

The option vests as to (i) 25,000 of such shares on July 1, 2022;

and (ii) as to 10,000 of such shares on July 1, 2023 and

each year thereafter through July 1, 2032.

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

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

dividend yield of 0%;

expected volatility of 109.83%;

interest rate of 2.88%;

and an estimated holding period of 10 years.

The Company valued this stock option at a fair value of $82,420 and

will record stock-based compensation expense over the vesting period.

For the three months ended September 30, 2022

and 2021, in connection with the accretion of stock-based option expense over the vesting period, the Company recorded stock option expense

of $ 84,523 and $ 24,103 , respectively.

For the nine months ended September 30 2022 and 2021, in connection with the accretion of stock-based

option expense, the Company recorded stock option expense over the vesting period of $ 282,535 and $ 46,012 , respectively.

As of September

30, 2022, there were 2,352,500 options outstanding and 1,493,750 options vested and exercisable.

As of September 30, 2022, there was $ 330,387

of unvested stock-based compensation expense to be recognized through September 2031.

The aggregate intrinsic value on September 30, 2022

was $ 0 and was calculated based on the difference between the quoted share price on September 30, 2022 of $ 0.63 and the exercise price

of the underlying options.

Stock option activities for the nine months ended

September 30, 2022 are summarized as follows:

Exercise Price

1 unchanged sentence

Balance Outstanding December 31, 2021

Balance Outstanding June 30, 2022

Exercisable, June 30, 2022

Balance Outstanding September 30, 2022

Exercisable, September 30, 2022

Balance Non-vested on December 31, 2021

Vested during the period

Balance Non-vested on June 30, 2022

Balance Non-vested on September 30, 2022

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

SEPTEMBER 30, 2022

NOTE 12 – COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

in litigation related to claims arising out of its operations in the normal course of business.

As of June 30, 2022 and December 31, 2021,

the Company is not involved in any pending or threatened legal proceedings that it believes could reasonably be expected to have a material

adverse effect on its financial condition, results of operations, or cash flows.

As of September 30, 2022 and December

31, 2021, the Company is not involved in any pending or threatened legal proceedings that it believes could reasonably be expected to

have a material adverse effect on its financial condition, results of operations, or cash flows.

Employment and Related Golden Parachute

On May 23, 2018, the Company and Mr.

the Company’s President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board, agreed to replace Mr.

the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors, agreed to replace Mr.

2014 employment agreement with a new employment agreement dated May 23, 2018 (the “2018 Employment Agreement”).

31 unchanged sentences

Agreement, amongst other terms in the Golden Parachute Agreement, a “change in control of the Company” shall mean a change

of control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under

of control of a nature that would be required to be reported in response to Item 6I of Schedule 14A of Regulation 14A promulgated under

the Securities Exchange Act of 1934, as amended.

7 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

SEPTEMBER 30, 2022

For purposes of the Golden Parachute Agreement,

29 unchanged sentences

McLaren his full base salary through the date of Termination at the rate in effect at the time notice of Termination is given, plus all other amounts and benefits to which he is entitled under any compensation plan of the Company at the time such payments are due.

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

If employment by the Company shall be terminated

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

McLaren for Good Reason, Mr.

McLaren will be entitled to benefits provided below:

McLaren will be entitled to benefits

provided below:

The Company will pay Mr.

2 unchanged sentences

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

McLaren a lump sum severance payment (together with the payments provided in clauses (c) and (d) below) equal to five times the sum of his annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the notice of Termination given in respect of them.

McLaren a lump sum severance payment (together with the payments provided in clause I(c) and (d) below) equal to five times the sum of his annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the notice of Termination given in respect of them.

The Company will pay to Mr.

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

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

4 unchanged sentences

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

On July 23, 2022, the Board of Directors of the

Company appointed Berekk Blackwell, the Company’s Chief Operating Officer, as President of the Company, effective immediately.

July 26, 2022, the Company entered into an employment agreement, effective July 1, 2022, with Mr.

Blackwell (the “Blackwell Employment

Pursuant to the terms of the Blackwell Employment Agreement, the Company agreed to pay Mr.

Blackwell a base annual

salary of $ 150,000 for his services as President and Chief Operating Officer.

The Company may also award Mr.

Blackwell discretionary cash

and/or equity bonuses.

The Blackwell Employment Agreement has a term of one year , expiring on July 1, 2023.

During the initial term, neither

party may terminate the Blackwell Employment Agreement except for Cause (as defined in the Blackwell Employment Agreement).

On September 29, 2021, the Company’s board

3 unchanged sentences

4 % of the employee’s plan compensation.

For the three and six months ended June 30, 2022, the Company contributed $ 4,388 and $ 8,527

For the three and nine months ended September 30, 2022, the Company contributed $ 6,474 and

$ 15,001 to the Plan.

NOTE 13 – SEGMENT REPORTING

13 unchanged sentences

Information with respect to these reportable business

segments for the three and six months ended June 30, 2022 and 2021 was as follows:

segments for the three and nine months ended September 30, 2022 and 2021 was as follows:

For the Three Months Ended

For the Six Months Ended

September 30,

For the Nine Months

September 30,

Property investment portfolio

10 unchanged sentences

Net (loss) income:

Property investment portfolio

Property investment portfolio (a)

Real estate services

$ ( 142,087 )

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

Identifiable long-lived tangible assets on June 30, 2022 and December 31, 2021 by segment

SEPTEMBER 30, 2022

September 30,

Identifiable long-lived tangible assets on September 30, 2022 and December 31, 2021 by segment

Property investment portfolio

Real estate services

(a) Operating expenses and other expenses of the Company’s holding company that were not allocated to

the real estate services segment are included in the property investment portfolio segment.

NOTE 14 – OPERATING LEASE RIGHT-OF-USE

17 unchanged sentences

the new lease and determined it is required to record a lease liability and a right of use asset on its consolidated balance sheet, at

During the three months ended June 30, 2022 and

2021, in connection with its operating leases, the Company recorded rent expense of $ 10,801 and $ 4,395 , respectively.

For the six months

ended June 30, 2022 and 2021, in connection with its operating leases, the Company recorded rent expense of $ 15,197 and $ 8,663 , respectively.

During the three months ended September 30, 2022

and 2021, in connection with its operating leases, the Company recorded rent expense of $ 9,254 and $ 4,396 , respectively.

months ended September 30, 2022 and 2021, in connection with its operating leases, the Company recorded rent expense of $ 24,451 and $ 13,059 ,

respectively.

which is included in operating expenses on the accompanying condensed consolidated statements of operations.

1 unchanged sentence

present value of the lease liability in March 2022 was a discount rate of 6 % which was based on the Company’s incremental borrowing

On June 30, 2022, right-of-use asset (“ROU”)

On September 30, 2022, right-of-use asset (“ROU”)

is summarized as follows:

September 30,

Office lease right of use asset

1 unchanged sentence

Balance of ROU assets

On June 30, 2022, future

minimum base lease payments due under a non-cancelable operating lease are as follows:

On September 30, 2022,

future minimum base lease payments due under a non-cancelable operating lease are as follows:

Year ended December 31,

2 unchanged sentences

discount to fair value

Total lease liability on June 30 2022

NOTE 14 – SUBSEQUENT EVENTS

Employment Agreement

On July 23, 2022, the Board of Directors of the

Company appointed Berekk Blackwell, the Company’s Chief Operating Officer, as President of the Company, effective immediately.

July 26, 2022, the Company entered into an employment agreement, effective July 1, 2022, with Mr.

Blackwell (the “Blackwell Employment

Pursuant to the terms of the Blackwell Employment Agreement, the Company agreed to pay Mr.

Blackwell a base annual

salary of $ 150,000 for his services as President and Chief Operating Officer.

The Company may also award Mr.

Blackwell discretionary cash

and/or equity bonuses.

The Blackwell Employment Agreement has a term of one year, expiring on July 1, 2023.

During the initial term, neither

party may terminate the Blackwell Employment Agreement except for Cause (as defined in the Blackwell Employment Agreement).

Total lease liability on September 30 2022

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

Stock Options

On July 1, 2022, the Company granted a stock option

to purchase 125,000 of the Company’s common stock at an exercise price of $ 1.00 per share to an employee of the Company pursuant

to the 2016 Plan.

The grant date of the stock option was July 1, 2022 and the option expires on July 1, 2032.

The option vests as to (i)

25,000 of such shares on July 1, 2022;

and (ii) as to 10,000 of such shares on July 1, 2023 and each year thereafter through July 1, 2032.

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

weighted-average assumptions:

dividend yield of 0 %;

expected volatility of 109.83 %;

risk-free interest rate of 2.88 %;

and an estimated

holding period of 10 years.

The Company valued this stock option at a fair value of $ 82,420 and will record stock-based compensation expense

over the vesting period.

Line of Credit

On July 11, 2022, Zoned Arizona entered into a

Loan Agreement (the “Loan Agreement”), dated as of July 11, 2022, by and between Zoned Arizona and East West Bank (the “Bank”).

Pursuant to the terms of the Loan Agreement, subject to and upon the satisfaction of the terms and conditions of the Loan Agreement, Zoned

Arizona may request advances under a multiple access loan (“MAL”) during the MAL Advance Period (as hereinafter defined) in

an aggregate outstanding amount not to exceed $ 4,500,000 .

The “MAL Advance Period” means the shorter of (i) a period of one

year from July 11, 2022, or (ii) a period commencing on July 11, 2022 and ending on the date that Zoned Arizona makes the Early Amortization

Election (as hereinafter defined).

On July 11, 2022, Zoned Arizona paid the Bank a $ 45,000 loan fee.

Amounts borrowed under the MAL may

not be re-borrowed.

The proceeds of each advance under the MAL may

be used by Zoned Arizona to refinance the real property at 410 S.

Madison Drive, Tempe, AZ 85251 (the “Property”) or to conduct

certain acts related to the acquisition, improvement and maintenance of real property.

On termination of the MAL, all unpaid principal,

unpaid and accrued interest, and all other amounts due under the MAL will be immediately due and payable.

At any time before July 11, 2023, Zoned Arizona

may elect to commence paying principal together with interest on the MAL (the “Early Amortization Election”) in accordance

with the repayment terms set forth in the variable rate note initially evidencing the MAL, executed by Zoned Arizona in favor of the Bank

(the “Note”).

If Zoned Arizona makes the Early Amortization Election, then (i) Zoned Arizona will not be entitled to any further

advances under the MAL, and (ii) the 25 -year amortization schedule referenced in the Note will be from the date Zoned Arizona makes the

Early Amortization Election.

Provided that Zoned Arizona has previously drawn

one or more advances equal to or greater than $ 1 million under the MAL, at any time during the MAL Advance Period, Zoned Arizona may elect

to reset as to such advances from the variable interest rate set forth in the Note to a fixed interest rate for the remaining term of

the MAL (the “Fixed Rate Option”).

In the event Zoned Arizona elects the Fixed Rate Option for any advances, such advances

will become subject to a new SWAP note (a “SWAP Note”) in a principal amount of at least $ 1 million based on an interest rate

equal to the prime rate then in existence as of the effective date of the new SWAP Note plus 0.75 %.

The Loan Agreement contains representations, warranties

and covenants customary for a transaction of this type.

Among other things, the Loan Agreement provides as follows:

(a) upon the occurrence

of an event of default, the outstanding principal balance of the MAL will not at any time exceed 65% of the Property’s most recent

appraised value;

(b) upon the occurrence of an event of default, Zoned Arizona will maintain a minimum Non-Cannabis Debt Service Coverage

Ratio (as hereinafter defined) of 1.40 to 1.00;

and (d) Zoned Arizona and the Company, collectively, will maintain at all times, liquid assets of at least the sum of all

tenant securities deposits under leases, plus $350,000 in operating reserves.

All advances under the MAL bear interest at a

variable rate equal to the greater of (a) the prime rate plus 2 %, or (b) a floor rate equal to the sum of the prime rate as of July 11,

2022 plus 2.25 %.

From July 11, 2022 to July 11, 2023, Zoned Arizona agreed to make interest payments on the outstanding principal balance

From and after July 11, 2023 and continuing until July 11, 2028 (the “Maturity Date”), Zoned Arizona will pay

principal together with interest on the MAL in 60 monthly installments based on the interest rate set forth in the Note and a principal

amortization schedule of 25 years from July 11, 2023 (or if Zoned Arizona makes the Early Amortization Election, from the date such election

Zoned Arizona may prepay the outstanding principal

under the Note, at any time, subject to the provisions of the Note.

If Zoned Arizona prepays all, but not less than all, of the outstanding

principal balance of the MAL at any time until July 11, 2023, then Zoned Arizona will also pay a premium equal to 1 % of the amount prepaid.

Dissolution of Subsidiaries

In July 2022, the Company dissolved its subsidiaries Gilbert and Zoned Colorado (See Note 1).

SEPTEMBER 30, 2022

15 – SUBSEQUENT EVENTS

New Subsidiaries

Subsequent to September

30, 2022, the Company formed the following subsidiaries:

ZP RE AZ Stone, LLC (“Stone Property Owner”)

was organized in the State of Arizona on October 19, 2022.

ZP Brokerage MS, LLC (“Mississippi Brokerage”)

was organized in the State of Mississippi on October 4, 2022.

ZP Brokerage FL, LLC (“Florida Brokerage”)

was organized in the State of Florida on October 20, 2022.

ZP Brokerage AL, LLC (“Alabama Brokerage”)

was organized in the State of Alabama on October 20, 2022.

Rental Properties

Effective October 5, 2022, ZPRE, a wholly owned

subsidiary of the Company, and Neal Bradley Starr (the “Stone Property Seller”) entered into the Purchase and Sale Agreement

and Joint Escrow Instructions (the “Purchase Agreement”).

Pursuant to the terms of the Purchase Agreement

and subject to the conditions therein, ZPRE agreed to buy from the Stone Property Seller certain real property and improvements thereon

located in Tucson, Arizona, as more particularly described in the Purchase Agreement (the “Stone Property”).

Agreement contains terms and conditions customary to commercial real estate transactions in Arizona.

The purchase price for the Stone Property is $ 1,500,000 ,

subject to adjustment for the apportionment of real estate taxes, utility charges and other customary prorations.

Upon the opening of

escrow, ZPRE agreed to deposit earnest money of $ 25,000 (the “Deposit”) into a neutral escrow account, which Deposit is refundable

for the period of 30 days after the Effective Date (the “Inspection Period”), and subject to the terms of the Purchase Agreement,

non-refundable thereafter.

The closing of the transaction contemplated by the Purchase Agreement is scheduled to occur 15 days after the

expiration of the Inspection Period, subject to certain conditions to closing for the benefit of ZPRE (the “Contingencies”),

including that either (i) ZPRE has secured a tenant for the Stone Property, which tenant owns or controls a nonprofit medical marijuana

license (so called “dual use” license), or (ii) state and local law allow for the use of the Stone Property by an entity owning

or controlling a marijuana establishment license (so called “adult use” license), regardless of whether ZPRE has secured a

The Contingencies required for closing are material and require certain regulatory and/or transactional events to occur, which

are likely to extend closing of the transaction contemplated by the Purchase Agreement beyond the 15-day period following the Inspection

ZPRE and the Company intend to identify a licensed

operating tenant for the Stone Property and enter into a long-term, investment-grade, absolute NNN Lease Agreement.

At the closing of the transaction contemplated

by the Purchase Agreement, ZPRE will deposit the sum of $ 300,000 minus the Deposit into escrow, to be credited to the purchase price.

The balance of the purchase price, $ 1,200,000 , will be paid pursuant to a promissory note under a customary seller financing arrangement.

At the closing contemplated in the Purchase Agreement, the escrow agent will release the sum of $300,000, less the Deposit and subject

to credits and prorations, to the Stone Property Seller.

If the Purchase Agreement is terminated prior to closing due to a failure of

a condition of closing, the Deposit (less $ 5,000 for every 30 days the Purchase Agreement is in effect) will be returned to ZPRE unless

the Purchase Agreement is terminated by the Stone Property Seller as a result of the ZPRE’s breach of the Purchase Agreement, in

which case the Deposit will be paid to the Stone Property Seller, or unless the Purchase Agreement is terminated by ZPRE as a result of

the Stone Property Seller’s breach of the Purchase Agreement, in which case the Deposit (including any portion thereof released

to the Stone Property Seller) will be refunded to ZPRE, together with up to $ 25,000 of ZPRE’s out of pocket costs arising from the

Purchase Agreement.

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

What changed 10-Q

Item 1. Financial Statements