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Item 9A. Controls and Procedures

2023-03-28 compared with 2022-03-24 · 1573 added, 912 removed, 1522 unchanged (62% of the section changed)

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CORPORATE GOVERNANCE

On January 21, 2022,

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

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

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

on Form 10-K.

Our Board of Directors currently has six members.

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

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

On January 21, 2022, pursuant to the power granted

to the Board in the Company’s articles of incorporation, as amended, and the Company’s bylaws, the Board increased the size

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

Our Board of Directors currently has six members and there is one vacancy.

The following table sets forth the names, positions

and ages of our directors and executive officers as of the date of this annual report on Form 10-K.

All of the current directors’

terms expire as of the Annual Meeting and will serve until their successors are duly elected and qualified.

Set forth below is certain information regarding our executive officers

and directors.

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

Operating Officer

Chief Executive Officer, Chief Financial Officer, and Treasurer

and Chief Operating Officer

Legal Officer, Chief Compliance officer, and Corporate Secretary

Overstreet, PhD.

Bryan McLaren is the

Bryan McLaren is the son of Dr.

Alex McLaren.

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service to our company and our board of directors.

Bryan McLaren.

McLaren has a dedicated

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

Prior to his appointment as President, CEO and a director

of our company in 2014, Mr.

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

Before joining the Company,

from 2013 to 2014, Mr.

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

for the Arizona State University account.

Prior to 2013, Mr.

McLaren worked as a Sustainability Manager for Northern Arizona University

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

McLaren has a Master’s Degree in Sustainable Community

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

emphasis on Sustainable Development.

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

As Chief Executive

Officer and President, Mr.

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

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

McLaren’s business development experience,

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

a director and in his current roles.

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

Since September 2020, Mr.

Blackwell served

as our Director of Business Development.

Bryan McLaren, MBA.

McLaren has served

as Chairman and Chief Executive Officer of the Company since 2014 and as Chief Financial Officer of the Company since 2018.

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

Prior to joining the Company, McLaren worked

as a sustainable development expert for both large corporations such as Waste Management, Inc., and for institutions of higher education

such as Northern Arizona University.

McLaren has a Masters of Business Administration Degree with an emphasis on Sustainable Development,

a Master’s Degree in Sustainable Community Development, and an Executive Master’s Degree in Sustainability Leadership.

Chief Executive Officer and Chief Financial Officer, Mr.

McLaren is able to provide our Board with valuable insight regarding the Company’s

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

Berekk Blackwell.

Blackwell has served

as our Chief Operating Officer since July 1, 2021, and as our President since July 1, 2022.

Prior to his appointment to these positions

and since September 2020, Mr.

Blackwell served as our Director of Business Development.

From December 2018 until June 2021, Mr.

Blackwell also served as President of Daily Jam Holdings

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

also served as President of Daily Jam Holdings LLC.

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

Prior to joining the Company, Mr.

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

in over a dozen countries.

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

franchise space.

Blackwell developed domestic and international markets for Kahala Brands, a global franchise organization

with more than 3,000 retail locations in over a dozen countries.

He also led emerging brand and portfolio operations for several private

equity groups investing in the restaurant franchise space.

Blackwell earned his B.A.

in Finance from Fort Lewis College.

Blackwell and his spouse filed for bankruptcy

and his spouse filed for bankruptcy in the U.S.

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

Daniel Gauthier, JD.

served as our Chief Legal Officer, Chief Compliance Officer, and Corporate Secretary since July 1, 2022.

Gauthier has an extensive

background in a range of real estate transactions, including acquisition, development, financing, leasing, and syndication, and business

transactions, including mergers and acquisitions, joint ventures, corporate governance, general counsel and regulated cannabis.

to joining the Company, Mr.

Gauthier’s private practice included representation of a broad range of real estate developers, private

and public homebuilders, businesses of all sizes, banks and lending institutions, and more.

Gauthier holds a Juris Doctor degree from

the Sandra Day O’Connor College of Law, Arizona State University, where he was a Pedrick Scholar and an articles editor of Jurimetrics:

The Journal of Law, Science, and Technology.

Gauthier is the founder and former president of the American Constitution Society, ASU

Chapter and the former president of the ASU Disability Law Project.

Gauthier also holds a bachelor’s degree in psychology from

the University of Arizona.

Art Friedman.

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for the alcoholic beverage industry.

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

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

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

and increased EBITDA by more than five-fold.

Friedman was most recently President and CEO of Gold Coast Beverage Distributors, a position

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

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

revenue and increased EBITDA by more than five-fold.

Over the same period, Mr.

Friedman led significant market share gains through organic growth

as well as consolidating wholesaler acquisitions.

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

Friedman led significant market share gains through organic

growth as well as consolidating wholesaler acquisitions.

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

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

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

Friedman’s service as a director

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

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

Friedman’s service as a director at

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

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

Alex McLaren, MD.

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

Our Board currently has three committees:

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

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

Board committees were:

Our Board currently has four committees:

the Audit Committee, the Strategic

Committee, the Compensation Committee, and the Nominating and Governance Committee.

As of March 28, 2023, the members and Chairs of our

standing Board committees were:

Independent Directors

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Compensation Committee

All Compensation Committee members (except for

All Compensation Committee members other than

McLaren are “independent” under applicable NASDAQ listing standards.

The Compensation Committee assists the Board in

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

leadership development and succession planning.

The Compensation Committee assists the Board in fulfilling

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

development and succession planning.

In addition, the Compensation Committee is responsible for:

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Strategic Committee

All Strategic Committee members (except for Dr.

All Strategic Committee members other than Dr.

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

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ended December 31, 2022, there were no material changes to the procedures by which stockholders may recommend nominees to the Board.

Nominating and Governance Committee

All Nominating and Governance members (except

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

The Nominating and Governance Committee assists

the Board in fulfilling its oversight responsibilities relating to Company and Board policies, and in relation to the nomination and

election of Board Members.

In addition, the Nominating and Governance Committee is responsible for:

and reviewing the Nominating and Governance Committee Charter;

establishing and reviewing various Company policies, such as the Company’s

Insider Trading Policy and Code of Ethics.

The responsibilities of the Nominating and Governance

Committee are more fully described in the Nominating and Governance Committee’s charter.

The Nominating and Governance Committee held

two meetings during the fiscal year ended December 31, 2022.

Officer and Director Indemnification Agreements

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Summary Compensation

The following table summarizes all compensation

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

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

The following 2022 Summary Compensation Table

(the “SCT”) summarizes all compensation recorded by us for the years ended December 31, 2022 and 2021 for our “named

executive officers” as such term is defined in Item 402(m)(2) of Regulation S-K (each, an “NEO” and collectively, the

2022 Summary Compensation Table

Name and principal position

Option Awards

Incentive Plan

Compensation $

Bryan McLaren,

Chief Executive Officer, President,

and Chief Financial Officer

Chief Executive Officer and Chief Financial Officer

Berekk Blackwell,

Chief Operating

Blackwell was appointed as our Chief

Operating Officer on July 1, 2021.

On January 1, 2021, we granted the Mr.

Blackwell an option

pursuant to our 2016 Equity Compensation Plan, to purchase 125,000 of the Company’s

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

The grant date of the Option was January

1, 2021 and the Options expire on January 1, 2031.

President and Chief Operating Officer (1)

Daniel Gauthier

Chief Legal Officer and Chief Compliance Officer (2)

was appointed as our Chief Operating Officer on July 1, 2021.

On January 1, 2021, we granted Mr.

Blackwell an option, pursuant to

our 2016 Equity Compensation Plan, to purchase 125,000 of the Company’s common stock at an exercise price of $1.00 per share.

The grant date of the Option was January 1, 2021 and the Options expire on January 1, 2031.

The options vest as to 25,000 of such

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

through January 1, 2031.

In connection with these options, the Company valued these options

at a fair value of $48,677 and will record stock-based compensation expense over the vesting

Amounts reflected under “All Other Compensation” related to consulting

fees paid to Mr.

shares on January 1, 2021, 10,000 options vest on January 1, 2022 and for each year thereafter through January 1, 2031.

In connection

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

over the vesting period.

On January 21, 2022, we granted Mr.

Blackwell a stock option pursuant to our 2016 Equity Compensation Plan

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

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,

and (ii) as to 7,500 of such shares on January 21, 2023 and each year thereafter through January 21, 2030.

The fair value of

this option grant was $55,334 and will record stock-based compensation expense over the vesting period.

Amounts reflected under “All

Other Compensation” related to consulting fees paid to Mr.

Blackwell prior to him becoming our Chief Operating Officer.

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

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

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

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

On July 1, 2022, we granted

Gauthier a stock option, pursuant to our 2016 Equity Compensation Plan, to purchase 125,000 of the Company’s common stock

at an exercise price of $1.00 per share.

The grant date of the 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.

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

expense over the vesting period.

As required by SEC rules,

the amounts in this column reflect the grant date or modification date fair value as required by FASB ASC Topic 718.

of the assumptions and methodologies used to calculate these amounts, are contained in the notes to our financial statements under

“Note 11 – Shareholders’ Equity”.

Narrative Disclosure to Summary Compensation Table

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

McLaren Employment Agreement & Golden Parachute

On May 23, 2018, we entered into an employment

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McLaren will be entitled to the following benefits:

During any period that Mr.

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

McLaren will continue to receive his base salary at the rate in effect at the commencement of any such period, together with all amounts payable to Mr.

McLaren under any compensation plan of the Company during such period, until the Golden Parachute Agreement is terminated.

any period that Mr.

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

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

with all amounts payable to Mr.

McLaren under any compensation plan of the Company during such period, until the Golden Parachute

Agreement is terminated.

McLaren’s employment is terminated by the Company for Cause or by Mr.

McLaren other than for Good Reason, disability, death or retirement, the Company will pay Mr.

McLaren his full base salary through the date of Termination at the rate in effect at the time notice of Termination is given, plus all other amounts and benefits to which Mr.

McLaren is entitled under any compensation plan of the Company at the time such payments are due.

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

McLaren for Good Reason, Mr.

McLaren other than for Good Reason, disability, death

or retirement, the Company will pay Mr.

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

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

McLaren is entitled under any compensation

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

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

for Good Reason, Mr.

McLaren will be entitled to benefits provided below:

The Company will pay Mr.

McLaren his full base salary through the date of Termination at the rate in effect at the time notice of Termination is given, plus all other amounts and benefits to which Mr.

Company will pay Mr.

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

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

McLaren is entitled under any compensation plan of the Company.

In lieu of any further salary payments to Mr.

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

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

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

The Company will pay to Mr.

lieu of any further salary payments to Mr.

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

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

times the sum of Mr.

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

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

Company will pay to Mr.

McLaren any deferred compensation allocated or credited to Mr.

McLaren or his account as of the date of Termination.

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

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

McLaren will receive an amount in cash equal to the product of (i) the excess of the closing price of the Company’s common stock as reported on or nearest the date of Termination (or, if not so reported, on the basis of the average of the lowest asked and highest bid prices on or nearest the date of Termination), over the per share exercise price of each option held by Mr.

McLaren (whether or not then fully exercisable) plus the amount of any applicable cash appreciation rights, times (ii) the number of the Company’s common stock covered by each such option.

The Company will also pay to Mr.

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

McLaren under

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

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

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

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

McLaren (whether

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

common stock covered by each such option.

Company will also pay to Mr.

McLaren all legal fees and expenses incurred by Mr.

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the event that Mr.

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

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

McLaren under any other agreements or arrangements with any persons

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

maximum limit.

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

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

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

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

McLaren under any other agreements or arrangements

with any persons which constitute “parachute payments” within the meaning of Section 280G of the Code are collectively

subject to an overall maximum limit.

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

such payments to be considered a “parachute payment” within the meaning of Section 280G of the Code, as determined by

Blackwell Employment Agreement

On July 26, 2022, the Company entered into an

employment agreement, effective July 1, 2022, with Mr.

Blackwell (the “Blackwell Employment Agreement”).

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 hereinafter defined).

For purposes of the Blackwell Employment Agreement, Cause, with respect to Mr.

Blackwell, means:

(i) a material violation of any material written rule or policy of the Company applicable to Mr.

Blackwell and which Mr.

Blackwell fails

to correct within 10 days after notice;

(ii) misconduct by Mr.

Blackwell to the material and demonstrable detriment of the Company;

Blackwell’s conviction of, or pleading guilty to, a felony;

Blackwell’s material failure to perform his obligations and fulfill the covenants and agreements in the Blackwell Employment

Agreement, after notice and failure to cure, as provided in the Blackwell Employment Agreement.

With respect to the Company, “Cause”

means the Company’s material failure to perform the Company’s obligations and fulfill the covenants and agreements in the

Blackwell Employment Agreement, after notice and failure to cure, as provided in the Blackwell Employment Agreement.

The Blackwell Employment Agreement will continue

to be in full force and effect after July 1, 2023, except that either party may terminate the Blackwell Employment Agreement for any reason

upon 30 days’ written notice.

The Blackwell Employment Agreement contains representations,

warranties and covenants customary for an agreement of this type.

Gauthier Employment

On May 27, 2022, the

Company entered into the Employment Agreement, dated as of June 1, 2022, by and between the Company and Mr.

Gauthier (the “Gauthier

Employment Agreement”).

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

Gauthier a base

annual salary of $135,000 for his services.

The Company may also award Mr.

Gauthier with cash and/or equity bonuses, determined at the

discretion of the Company’s executive management.

The Gauthier Employment

Agreement has a term of one year, unless sooner terminated or extended pursuant to the terms of the Gauthier Employment Agreement.

During the initial one-year

term, the Gauthier Employment Agreement may only be terminated for Cause.

For purposes of the Gauthier Employment Agreement, “Cause,”

with respect to Mr.

Gauthier, means:

(i) a material violation of any material written rule or policy

of the Company applicable to Mr.

Gauthier and which Mr.

Gauthier fails to correct within 10 days after Mr.

Gauthier receives written

notice from the Company;

(ii) misconduct by Mr.

Gauthier to the material and demonstrable

detriment of the Company;

Gauthier’s conviction (by a court of competent

jurisdiction, not subject to further appeal) of, or pleading guilty to, a felony;

Gauthier’s material failure to perform his obligations

and fulfill his covenants and agreements as described in the Gauthier Employment Agreement, after written notice from the Company and

failure to cure such material failure within 10 days following receipt of such notice.

After expiration of the

initial one-year term, the Gauthier Employment Agreement will continue to be in full force and effect, except that either party may terminate

the Gauthier Employment Agreement for any reason upon 30 days’ written notice to the other party.

Outstanding Equity Awards at 2022 Fiscal Year-End

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Incentive Plan

that have not

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Berekk Blackwell

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

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

Berekk Blackwell

Daniel Gauthier

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

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

annually at 7,500 options per year through January 21, 2030.

annually at 10,000 options per year through July 1, 2032.

Pay Versus Performance (PVP)

In accordance with the SEC’s disclosure requirements regarding

pay versus performance (“PVP”), this section presents the SEC-defined “Compensation Actually Paid,” or “CAP”.

Also required by the SEC, this section compares CAP to various measures used to gauge performance at Company.

Pay versus Performance Table - Compensation

Salary, Bonus, Stock Awards, and All Other Compensation

are each calculated in the same manner for purposes of both CAP and SCT values.

The primary difference between the calculation of CAP

and SCT total compensation is “Stock Awards.”

Grant date fair value of stock and option awards granted during the year

Year over year change in the fair value of stock and option awards that are unvested as of the end of the year, or vested or were forfeited during the year

2022 Pay Versus Performance Table

In accordance with the SEC’s new PVP rules,

the following table sets forth information concerning the compensation of our NEOs for each of the fiscal years ended December 31, 2022

and 2021, and our financial performance for each such fiscal year:

Actually Paid

Initial Fixed

(1) The principal executive officer (“PEO”) in 2022 and 2021

is Bryan McLaren, our Chief Executive Officer and Chief Financial Officer.

The non-PEO NEOs in the 2022 reporting year are Berekk Blackwell

and Dan Gauthier.

The non-PEO NEO in the 2021 reporting year was Berekk Blackwell.

(2) The CAP was calculated beginning with the PEO’s SCT total.

following amounts were deducted from and added to the applicable SCT total compensation:

Deducted from

Average Non-PEO NEO

(3) The fair value of stock options reported for CAP purposes in columns

(C) and (E) above was estimated using a Black-Scholes option pricing model for the purposes of this PVP calculation in accordance with

the SEC rules.

This model uses both historical data and current market data to estimate the fair value of options and requires several

The assumptions used in estimating fair value for awards granted during 2022 and 2021 were as follows:

106.66 – 112.26%

108.73 – 117.03

Expected life (in years)

Expected dividend yield

Risk-free rate

Securities Authorized for Issuance under Equity Compensation Plans

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As of December 31, 2022, 1,102,500 stock option awards have been granted under the 2016 Plan.

At December 31, 2021, 9,675,000

On December 31, 2022, 8,897,500

shares are available for future issuance.

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exercise price of

outstanding options,

warrants and rights

available for

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statements under “Shareholders’ Deficit”.

In January 2021, Mr.

Freidman received 30,000 shares of restricted stock,

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

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

received 35,000 shares of restricted stock.

In January 2022, each director listed above received 105,000 stock options

to purchase 105,000 shares of restricted stock at $0.78 per share.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL

OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information

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

The following table sets forth certain information regarding beneficial

ownership of our common stock and preferred stock as of March 28, 2023, by:

director and each of our Named Executive Officers,

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

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

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

As of March 28, 2023, there were 12,201,548 shares of our common stock

outstanding and 2,000,000 shares of Preferred Stock outstanding.

The number of shares of common stock beneficially

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Name and Address of Beneficial Owner

Beneficial Ownership

Percent of Class

2 unchanged sentences

Berekk Blackwell

Daniel Gauthier

Alex McLaren, MD

1 unchanged sentence

Derek Overstreet, PhD

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

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

2,618,542 (9)

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Greg Johnston

16912 61 st Dr.

Stanwood, WA 98292

c/o Zoned Properties, Inc.

Raintree Drive #230

Scottsdale, AZ 85260

Melinda Jay Johnston

915 Stitch Rd.

Lake Stevens, WA 98258

c/o Zoned Properties, Inc.

Raintree Drive #230

Scottsdale, AZ 85260

Joseph Bartonek

949 Durham Rd.

Edison, NJ 08817

c/o Zoned Properties, Inc.

Raintree Drive #230

Scottsdale, AZ 85260

200,000 vested stock options.

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45,000 vested stock options.

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

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

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

50% owner of Diamond Bridge Capital, LP.

35,000 vested stock options and 13,175 shares owned by Diamond Bridge Capital, LP, which is 50% owned by Mr.

shares voting and dispositive power over these shares with the other 50% owner of Diamond Bridge Capital, LP.

25,000 vested stock options.

490,000 vested stock options.

Preferred Stock

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Preferred Stock

Percent of Class

Greg Johnston

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

As of December 31, 2021 and 2020, the principal

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

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

As of December 31, 2021, the principal balance

due under the McLaren Debenture was $20,000.

As of December 31, 2022 and 2021, accrued interest

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For the years ended December 31, 2022 and 2021,

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

On January 9, 2022, the Company repaid the note

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

interest expense – related party amounted to $600 and $1,200, respectively.

Director Independence

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Bryan McLaren was not considered an independent

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

Treasurer, Secretary and Chairman of the Board.

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

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

director during his service on the Board during the fiscal year ended December 31, 2022 because of his employment as our Chairman of

the Board, CEO, CFO, and Treasurer.

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

the fiscal year ended December 31, 2022 because Dr.

McLaren is the father of Bryan .

PRINCIPAL ACCOUNTANT FEES AND SERVICES

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EXHIBIT INDEX

Exhibit Number

Description of Exhibit

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

(incorporated by reference to exhibit to Registration Statement on Form S-1 (File No.

333-208226) filed by the

Company on November 25, 2015).

Bylaws of Zoned Properties, Inc.

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

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

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

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

and Derek Overstreet.

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

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

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

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

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

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

Group, LLC and CJK, Inc.

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

Stock Option Grant Notice and Agreement between registrant

and Newbridge Financial, Inc.

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

Exchange Services, Inc.

covering Tempe, AZ property.

Stock Option Grant Notice and Agreement dated December 20,

2015 between Zoned Properties, Inc.

and Bryan McLaren.

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

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

Second Amendment to Commercial Lease by and between Zoned Properties,

Inc., C3C3 Group, LLC and Alan Abrams.

Third Amendment to Commercial Lease by and between Chino Valley

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

Commercial Real Estate Purchase Contract dated December 22,

2016 by and between Zoned Properties, Inc.

and Big Lake Estates, LLC.

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

in Favor of Alan Abrams.

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

in Favor of Bryan McLaren.

Fourth Amendment to Commercial

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

Third Amendment to Commercial

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

Licensed Medical Marijuana Facility Triple Net (NNN) Lease

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

Licensed Medical Marijuana Facility Triple Net (NNN) Lease

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

Licensed Medical Marijuana Facility Triple Net (NNN) Lease

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

Licensed Medical Marijuana Facility Triple Net (NNN) Lease

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

Exhibit Number

Description of Exhibit

Confidential Advisory Services Agreement dated May 1, 2018

by and between Zoned Properties, Inc.

and Broken Arrow Herbal Center, Inc.

Confidential Advisory Services Agreement dated May 1, 2018

by and between Zoned Properties, Inc.

and CJK, Inc.

Employment Agreement by and between the registrant and Bryan

McLaren dated May 23, 2018.

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

Stock Redemption Agreement effective January 1, 2019 by and

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

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

First Amendment to Confidential Advisory Services Agreement

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

First Amendment to Confidential Advisory Services Agreement

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

Amendment to Convertible

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

and Alan Abrams.

First Amendment to Licensed Medical Marijuana Facility Triple

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

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

First Amendment to Licensed

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

Second Amendment to Licensed

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

Broken Arrow Herbal Center, Inc.

First Amendment to Licensed

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

Broken Arrow Herbal Center, Inc.

First Amendment to Licensed Medical Marijuana Facility Triple

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

Amended and Restated Convertible Debenture issued February

19, 2021 from KCB Jade Holdings, LLC.

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

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

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

(incorporated by reference to exhibit to Registration Statement on Form S-1 (File No.

333-208226) filed by the

Company on November 25, 2015).

Description of registrant's securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.

Member Agreement dated as of October 1, 2014 by and between the registrant and Alex McLaren (incorporated by reference to exhibit to Registration Statement on Form S-1 (File No.

333-208226) filed by the

Company on November 25, 2015) .

Board Member Agreement dated as of October 1, 2014 by and between the registrant and Art Friedman (incorporated by reference to exhibit to Registration Statement on Form S-1 (File No.

333-208226) filed by the

Company on November 25, 2015).

Board Member Agreement dated as of September 26, 2016 by and between the registrant and David G, Honaman (incorporated by reference to exhibit to Annual Report on Form 10-K filed with the SEC by the Company on March 27, 2017).

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

and Derek Overstreet (incorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on April

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

(incorporated by reference to exhibit to Registration Statement on Form S-1 (File No.

333-208226) filed by the

Company on November 25, 2015).

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

covering Tempe, AZ property (incorporated by reference to exhibit to Registration Statement on Form S-1 (File No.

333-208226) filed by the

Company on November 25, 2015).

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

and Bryan McLaren (incorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on January

Amendment to Commercial Lease by and between Zoned Properties, Inc., C3C3 Group, LLC and Alan Abrams (incorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on August

Amendment to Commercial Lease by and between Chino Valley Properties, LLC, C3C3 Group, LLC and Alan Abrams (incorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on October

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

in Favor of Alan Abrams (incorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on January

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

in Favor of Bryan McLaren (incorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on January

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

LLC, dated as of October 1, 2017 (incorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on October

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

Arrow Herbal Center, Inc.

(incorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on May

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

Herbal Center, Inc.

(incorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on May

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

(incorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on May

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

(incorporated by reference to exhibit to Current Report on Form 8-K

filed with the SEC by the Company on May 3, 2018).

Agreement by and between the registrant and Bryan McLaren dated May 23, 2018 (incorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on May

Parachute Agreement by and between the registrant and Bryan McLaren dated May 23, 2018 (incorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on May

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

and Alan Abrams (i ncorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on January 3, 2019).

First Amendment to Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated January 1, 2019 by and between Chino Valley Properties, LLC and Broken Arrow Herbal Center, Inc.

(incorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on January 3, 2019).

Convertible Debenture issued March 19, 2020 from KCB Jade Holdings, LLC (i ncorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on March 23, 2020).

First Amendment to Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated as of May 31, 2020, by and between Zoned Arizona Properties, LLC and CJK, Inc.

(i ncorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on June 4, 2020).

Second Amendment to Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated as of May 31, 2020, by and between Chino Valley Properties, LLC and Broken Arrow Herbal Center, Inc.

(i ncorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on June 4, 2020).

First Amendment to Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated as of May 31, 2020, by and between Green Valley Properties, LLC and Broken Arrow Herbal Center, Inc.

(i ncorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on June 4, 2020).

First Amendment to Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated as of May 31, 2020, by and between Kingman Property Group, LLC and CJK, Inc.

(incorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on June 4, 2020).

Amended and Restated Convertible Debenture issued February 19, 2021 from KCB Jade Holdings, LLC (i ncorporated by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on February 19, 2021).

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

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

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

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

Exhibit Number

Description of Exhibit

Second Amended and Restated Convertible Debenture issued by KCB Jade Holdings, LLC in favor of the registrant (Incorporated by reference to exhibit 10.1 to Current Report on Form 8-K filed with the SEC by the Company on August 4, 2021).

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

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

Second Amendment to the Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated November 30, 2022 between Zoned Arizona Properties, LLC and VSM AZ LLC (Incorporated by reference to exhibit 10.1 to Current Report on Form 8-K filed with the SEC by the Company on December 2, 2022).

Guaranty of Payment and Performance, dated November 30, 2022, by GDL Inc.

in favor of Zoned Arizona Properties, LLC (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the SEC by the Company on December 2, 2022).

Second Amendment to the Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated November 30, 2022 between Kingman Property Group, LLC and CJK, Inc.

(Incorporated by reference to exhibit 10.3 to Current Report on Form 8-K filed with the SEC by the Company on December 2, 2022).

Option Agreement, dated as of December 1, 2022, by and between ZP RE MI Woodward, LLC and FL MI RE 22, LLC.

(Incorporated by reference to exhibit 10.1 to Current Report on Form 8-K filed with the SEC by the Company on December 5, 2022).

Master Agreement for Purchase and Sale, dated as of November 29, 2022, by and among ZP RE MI Woodward, LLC, FL MI RE 22, LLC, Thomas Nafso and Ammar Kattoula (Incorporated by reference to exhibit 10.2 to Current Report on Form 8-K filed with the SEC by the Company on December 5, 2022).

Licensed Cannabis Facility Absolute Net Lease Agreement, dated as of November 29, 2022, by and between ZP RE MI Woodward, LLC and Rapid Fish 2 LLC.

(Incorporated by reference to exhibit 10.3 to Current Report on Form 8-K filed with the SEC by the Company on December 5, 2022).

Real Estate Repurchase Agreement, dated as of November 29, 2022, by and among ZP RE MI Woodward, LLC, FL MI RE 22, LLC, Thomas Nafso and Ammar Kattoula (incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K filed with the SEC by the Company on December 5, 2022).

Loan Agreement, dated as of July 11, 2022, by and between Zoned Arizona Properties, LLC and East West Bank.

(Incorporated by reference to exhibit 10.1 to Current Report on Form 8-K filed with the SEC by the Company on July 12, 2022).

Variable Rate Note, dated as of July 11, 2022, issued by Zoned Arizona Properties, LLC in favor of East West Bank.

(Incorporated by reference to exhibit 10.2 to Current Report on Form 8-K filed with the SEC by the Company on July 12, 2022).

Guaranty, dated as of July 11, 2022, executed by Zoned Arizona Properties, LLC in favor of East West Bank.

(Incorporated by reference to exhibit 10.3 to Current Report on Form 8-K filed with the SEC by the Company on July 12, 2022).

Employment Agreement, entered into on July 26, 2022 and effective as of July 1, 2022, by and between the registrant and Berekk Blackwell (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the SEC by the Company on July 27, 2022).

Purchase and Sale Agreement and Joint Escrow Instructions, dated October 5, 2022, by and between ZP RE Holdings, LLC a wholly owned subsidiary of the registrant, and Neal Bradley Starr (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the SEC by the Company on October 12, 2022).

Employment Agreement, entered into on May 27, 2022 and dated as of June 1, 2022, by and between the registrant and Daniel Gauthier (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed with the SEC by the Company on May 31, 2022).

Stock Option Agreement, entered into on May 27, 2022 and dated as of July 1, 2022, by and between the registrant and Mr.

Gauthier (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed with the SEC by the Company on May 31, 2022).

First Amendment Loan Agreement, dated as of December 7, 2022, by and between Zoned Arizona Properties, LLC and East West Bank (Incorporated by reference to exhibit 10.1 to Current Report on Form 8-K filed with the SEC by the Company on December 9, 2022).

Amended and Restated Promissory Note, dated as of December 7, 2022, issued by Zoned Arizona Properties, LLC in favor of East West Bank (Incorporated by reference to exhibit 10.2 to Current Report on Form 8-K filed with the SEC by the Company on December 9, 2022).

Acknowledgement of Amendment and Reaffirmation of Guaranty, dated as of December 7, 2022, executed by Zoned Arizona Properties, LLC in favor of East West Bank (Incorporated by reference to exhibit 10.3 to Current Report on Form 8-K filed with the SEC by the Company on December 9, 2022).

Interest Rate Swap Transaction Confirmation, dated as of December 7, 2022, by and between Zoned Arizona Properties, LLC and East West Bank (Incorporated by reference to exhibit 10.4 to Current Report on Form 8-K filed with the SEC by the Company on December 9, 2022).

Assignment and Assumption Agreement dated as of December 2, 2022, by and between FL MI RE 22, LLC and ZP RE MI Woodward, LLC.

(Incorporated by reference to exhibit 10.1 to Current Report on Form 8-K filed with the SEC by the Company on March 2, 2023).

Land Contract, dated as of November 30, 2022, by and between The Thomas A.

Pearlman Revocable Trust U/A/D 6/13/2005 and FL MI RE 22, LLC.

(Incorporated by reference to exhibit 10.2 to Current Report on Form 8-K filed with the SEC by the Company on March 2, 2023).

Land Contract, dated as of February 24, 2023, by and between Gangnier Investments LLC and ZP RE MI Woodward, LLC.

(Incorporated by reference to exhibit 10.3 to Current Report on Form 8-K filed with the SEC by the Company on March 2, 2023).

List of Subsidiaries.

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

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

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

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Furnished herewith

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

by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on January 7, 2016.

by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on April 22, 2016.

by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on August 25, 2016.

by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on October 13, 2016.

by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on December 29, 2016.

by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on January 12, 2017.

by reference to exhibit to Annual Report on Form 10-K filed with the SEC by the Company on March 27, 2017.

by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on April 4, 2017.

by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on October 3, 2017.

by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on May 3, 2018.

by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on May 24, 2018.

by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on January 3, 2019.

by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on March 23, 2020.

by reference to exhibit to Current Report on Form 8-K filed with the SEC by the Company on June 4, 2020.

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

As permitted, the registrant has elected not

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Bryan McLaren

Chief Executive Officer, President and

Chief Executive Officer and

Chief Financial Officer

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on the dates indicated.

/s/ Bryan McLaren

Chairman, Chief Executive Officer, Chief Financial Officer, And Treasurer

March 28, 2023

Bryan McLaren

Chief Executive Officer, Chief Financial Officer,

President, Treasurer, Secretary and Director

executive officer, principal financial officer and

accounting officer)

(principal executive officer, principal financial officer and principal accounting officer)

/s/ Derek Overstreet

March 28, 2023

Derek Overstreet

/s/ Art Friedman

March 28, 2023

/s/ Alex McLaren

March 28, 2023

/s/ Jody Kame

March 28, 2023

ZONED PROPERTIES, INC.

6 unchanged sentences

DECEMBER 31, 2022 and 2021

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB Firm ID:

Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31, 2021 and 2020

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

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

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

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

Consolidated Balance Sheets as of December 31, 2022 and 2021 F-3

Consolidated Statements of Operations – For the Years Ended December 31, 2022 and 2021 F-4

Consolidated Statements of Changes in Stockholders’ Equity - For the Years Ended December 31, 2022 and 2021 F-5

Consolidated Statements of Cash Flows – For the Years Ended December 31, 2022 and 2021 F-6

Notes to Consolidated Financial Statements F-7 to F-40

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Zoned Properties, Inc.

Opinion on the Financial Statements

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated

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Brooks and Associates CPAs, P.A.

We have served as the Company’s auditor since

We have served as the Company’s auditor

Palm Beach Gardens, Florida

PCAOB Firm ID:

March 28, 2023

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Deferred rent receivable

Lease incentive receivable

Rental properties, net

Prepaid expenses and other assets

Escrow deposits

Convertible note receivable

Property and equipment, net

Right of use asset, net

Intangible asset, net

Investment in unconsolidated joint ventures

Investment in equity securities

Security deposits

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Convertible note payable - related party

Notes payable, net

Accounts payable

Accrued expenses

Lease liability

Accrued interest - related party

Deferred revenues

Contract liabilities

Derivative liability - interest rate swap, at fair value

Security deposits payable

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

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

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

Additional paid-in capital

Accumulated deficit

( 15,673,222 )

( 15,098,867 )

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

See accompanying notes to consolidated financial

accompanying notes to consolidated financial statements.

ZONED PROPERTIES, INC.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF OPERATIONS

the Year Ended

For the Year Ended

Property investment portfolio revenues:

Rental revenues

Real estate services revenues:

Advisory revenues

Brokerage revenues

Total real estate services revenues

Total revenues

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General and administrative expenses

Depreciation and amortization

Real estate taxes

Gain on sale of rental property

Total operating expenses

INCOME FROM OPERATIONS

Gain on sale of property and equipment

Total operating expenses, net

(LOSS) INCOME FROM OPERATIONS

OTHER (EXPENSES) INCOME:

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Interest income

Change in fair value of interest rate swap

Loss on note receivable investment

Impairment loss from unconsolidated joint ventures

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PROVISION FOR INCOME TAXES

$ ( 574,355 )

$ ( 165,819 )

NET LOSS PER COMMON SHARE:

Basic and diluted

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

See accompanying notes to consolidated

financial statements.

Basic and diluted

See accompanying notes to consolidated financial statements.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

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Balance, December 31, 2020

$ ( 14,933,048 )

Common stock issued for services

Common stock issued for intangible asset

Accretion of stock-based compensation related to stock options issued

Balance, December 31, 2021

Common stock issued for services

Common stock issued for intangible asset

( 15,098,867 )

Accretion of stock-based compensation related to stock options issued

Balance, December 31, 2022

See accompanying notes to consolidated financial

$ ( 15,673,222 )

See accompanying notes to consolidated financial statements.

ZONED PROPERTIES, INC.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

the Year Ended

For the Year Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

$ ( 574,355 )

$ ( 165,819 )

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

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Amortization expense

Amortization of debt discount

Stock-based compensation

Stock option expense

Gain on sale of rental property

Loss on note receivable investment

Impairment loss from unconsolidated joint ventures

Loss from unconsolidated joint ventures

Gain on sale of rental property and equipment

Change in fair value of interest rate swap

Change in operating assets and liabilities:

1 unchanged sentence

Deferred rent receivable

Lease incentive receivable

Prepaid expenses and other assets

Security deposit

Accounts payable

1 unchanged sentence

Accrued expenses - related parties

Deferred revenues

Contract liabilities

Security deposits payable

2 unchanged sentences

Purchase of convertible note receivable

Purchases of rental property improvements

Lease incentive provided to tenant

Purchases of rental properties and improvements

Purchases of property and equipment

Net proceeds from sale of rental property

Investment in joint ventures

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

Increase in escrow deposits

Proceeds from sale of property and equipment

Investment in joint ventures and equity securities

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

( 2,009,213 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from notes payable

Payment of deferred financing fees

Repayment of notes payable

Repayment of note payable - related party

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET INCREASE IN CASH

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Common stock issued for intangible asset

See accompanying notes to consolidated financial

Increase in right of use asset and lease liability

Acquisition of rental properties financed through note payable

See accompanying notes to consolidated financial statements.

ZONED PROPERTIES, INC.

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

The Company renamed the corporation, Zoned

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

The Company is now a real estate development firm for

emerging and highly regulated industries, including regulated cannabis.

The Company is redefining the approach to commercial real estate

investment through its integrated growth services.

Headquartered in Scottsdale, Arizona, Zoned Properties has developed a full spectrum

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

Advisory Services, Brokerage Services, Franchise

Services, and Property Technology (“PropTech”) Data Services each cross-pollinate within the model to drive project value associated

with complex real estate projects.

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

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

Zoned Properties is an accredited member of the Better

Business Bureau, the U.S.

Green Building Council, and the Forbes Real Estate Council.

The Company 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”).

In October 2013, the Company changed its name

to Zoned Properties, Inc.

and in April 2014, the Company shifted its business model to address commercial real estate in the regulated

cannabis industry.

The Company is a real estate development firm for emerging and highly regulated industries, including legalized 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;

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 U.S.

Green Building Council, and the Forbes Business Council.

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

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

The Company has the following wholly owned subsidiaries:

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

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

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

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

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

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

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

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

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

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

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

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

with the formation of Beakon, LLC (“Beakon”), a Delaware limited liability company formed on April 16, 2021 (See Note 7).

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

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

connection with the formation of Zoneomics Green, LLC (“Zoneomics Green”), a Delaware limited liability company formed on

May 1, 2021 (See Note 7).

In March 2020, the World Health Organization declared

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

The Company is monitoring this closely, and

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

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

Currently, all of the properties in the Company’s portfolio

are open to its Significant Tenants pursuant to state and local government requirements.

At this time, the Company does not foresee any

material changes to its operations from COVID-19.

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

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

to cover its expected rental obligations.

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

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

or unwilling to make rental payments.

In addition, a severe or prolonged economic downturn could result in a variety of risks to the Company’s

business, including weakened demand for its properties and a decreased ability to raise additional capital when needed on acceptable terms,

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

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

ZP Data Platform 1, LLC

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

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

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

ZP RE AZ Stone, LLC (“ZP Stone”) 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.

ZP RE MI Woodward, LLC (“ZP Woodward”) was organized in the State of Michigan on November 22, 2022

ZP Brokerage MO, LLC (“Missouri Brokerage”) was organized in the State of Missouri on November 30, 2022.

The Company also maintains a 50 % equity interest in two joint ventures

(see Note 7).

ZONED PROPERTIES, INC.

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DECEMBER 31, 2022 AND 2021

During 2022, the Company has closed 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.

This subsidiary was dissolved on December 13, 2022.

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

This subsidiary was dissolved on November 4, 2022.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING

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

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

valuation allowances for deferred tax assets, the fair value of derivative liability related to interest rate swap liability, and the

fair value of non-cash equity transactions, including options and stock-based compensation.

Risks and uncertainties

The Company’s operations are subject to

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

The Company conducts a significant portion of its business in Arizona.

Additionally, the Company’s tenants operate in the medical

marijuana industry.

Consequently, any significant economic downturn in the Arizona market or any changes in the federal government’s

enforcement of current federal laws or changes in state laws could potentially have a negative effect on the Company’s business,

results of operations and financial condition.

Additionally, substantially all of the Company’s real estate properties are leased

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

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

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

The Company’s operations are subject to risk and uncertainties

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

The Company conducts a

significant portion of its business in Arizona.

Additionally, the Company’s tenants operate in the legalized and regulated cannabis

Consequently, any significant economic downturn in the Arizona market or any changes in the federal government’s enforcement

of current federal laws or changes in state laws could potentially have a negative effect on the Company’s business, results of

operations and financial condition.

Additionally, substantially all of the Company’s real estate properties are leased under triple-net

leases to tenants (each, a “Significant Tenant” and collectively, the “Significant Tenants”).

For the years ended

December 31, 2022 and 2021, revenues associated with Significant Tenants amounted to $ 1,776,284 and $ 1,255,130 , respectively, which represents

66.8 % and 68.9 % of the Company’s total revenues, respectively (see Note 3).

Fair value of financial instruments

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approximate their fair market value based on the short-term maturity of these instruments.

The carrying amount of the convertible note

receivable approximates fair value based on the current interest rates for instruments with similar characteristics.

The Company analyzes all financial instruments

with features of both liabilities and equity under the Financial Accounting Standard Board’s (the “FASB”) accounting

standard for such instruments.

Under this standard, financial assets and liabilities are classified in their entirety based on the lowest

level of input that is significant to the fair value measurement.

The Company did not identify any assets or liabilities that are required

to be presented on the balance sheet at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 820.

Cash is carried at cost and represents cash on

hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of

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

The Financial Accounting Standards Board (“FASB”)

Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (“ASC 820”), requires companies

to determine fair value based on the price that would be received to sell the asset or paid to transfer the liability to a market participant.

ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

The guidance requires that

assets and liabilities carried at fair value be classified and disclosed in one of the following categories:

Quoted market prices in active markets for identical assets or liabilities.

Observable market-based inputs or unobservable inputs that are corroborated by market data.

Unobservable inputs that are not corroborated by market data.

Other than the interest rate swap, the Company

did not identify any other assets or liabilities that are required to be presented on the balance sheets at fair value, on a recurring

basis, in accordance with Accounting Standards Codification (“ASC”) Topic 820.

The following table represents the Company’s

fair value hierarchy of its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2022.

Company did not have any financial assets and liabilities measured at fair value on December 31, 2021.

December 31, 2022

Interest rate swap liability

Interest Rate Swap

connection with a bank loan executed in 2022, the Company entered into an interest rate swap agreement to management interest rate risk

related to debt that accrues interest at variable rates The Company accounts for its interest rate swap agreement in accordance with the

guidance related to derivatives and hedging activities.

The Company is exposed to market risk from changes in interest rates.

agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed

upon notional principal amount.

Interest payments receivable and payable under the terms of the interest rate swap agreement are accrued

over the period to which the payment relates and the net difference is treated as an adjustment of interest expense related to the underlying

Because the variable interest rates used to calculate payments under the terms of the swap agreement are calculated using different

benchmarks than those included in the Company’s variable rate debt agreement, the swap agreement is not considered an effective

cash flow hedge .

Accordingly, changes in the underlying market

value of the remaining swap payments are recognized into income as an increase or decrease to other income (expense) each reporting period.

In accordance with ASC 820, Fair Value Measurements and Disclosures , the Company believes values provided by its counterparty represent

the fair value of its swap agreement.

The Company believes that the quality of the counterparty to its swap agreement mitigates the counterparty

The estimated fair value of the interest rate swap agreement is determined

using an internal valuation model based on market data obtained from East West Bank and is reflected as a derivative liability on the

accompanying consolidated balance sheet with changes in the fair value reflected in change in fair value of interest rate swap on the

accompanying statements of operations.

The Company uses derivative financial instruments only to manage interest rate risks and not as

investment vehicles.

Information regarding the interest rate swap is

Fair Value of

December 7, 2022 interest rate swap

December 10, 2032

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

Cash is carried at cost and represents cash on hand, demand deposits

placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less

as of the purchase date of such investments.

The Company had no cash equivalents on December 31, 2022 and 2021.

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

(“FDIC”) limit.

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

On December 31, 2021 and 2020, the

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

The Company’s cash

is held at major commercial banks, which may at times exceed the Federal Deposit Insurance Corporation (“FDIC”) limit.

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

On December 31, 2022 and 2021, the Company had approximately $ 3,586,000

and $ 942,000 , respectively, of cash in excess of FDIC limits of $ 250,000 .

Any loss incurred or a lack of access to such funds above the

FDIC limit could have a significant adverse impact on the Company’s financial condition, results of operations and cash flows.

Accounts and convertible notes receivable

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is recognized in general and administrative expense.

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

for doubtful accounts.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

As of December 31, 2022, in connection with the Company’s investment

in convertible notes receivable, the Company recorded a loss on note receivable investment of $ 210,756 which is included in other income

(expenses) on the accompanying consolidated statement of operations and consisting of convertible notes receivable and interest receivable

amounting to $ 200,000 and $ 10,756 , respectively.

In connection with management’s analysis, the Company considered the current financial

position of KCB Jade Holdings, LLC (“KCB”), cash on hand, probability of obtaining additional capital or cash flows from working

capital in the near term and industry headwinds from macro-industry factors.

Based on this analysis, the Company concluded that deriving

any future benefit more this investment was highly uncertain.

During the year ended December 31, 2021, the Company did not record any

allowances for doubtful accounts.

Investment in joint ventures

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in unconsolidated affiliated entities.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

Long-term investments

Long-term investments include investments in equity

securities of entities over which the Company does not have a controlling financial interest or significant influence and are accounted

for at fair value.

Equity investments without readily determinable fair values are measured at cost with adjustments for observable changes

in price or impairments (referred to as the “measurement alternative”).

In applying the measurement alternative, the Company

performs a qualitative assessment on a quarterly basis and recognizes an impairment if there are sufficient indicators that the fair value

of the equity investments is less than carrying values.

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

On December 31,

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.

Rental properties

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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

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

Rental income includes base rents that each tenant

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its intended use.

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

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.

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.

for payments with fixed monthly base rents over the term of the leases or annual percentage increases in base rent over the term of the

The leases also require the tenant to remit estimated monthly payments to the Company for property taxes and common area maintenance.

These payments are recorded as rental income and the related property tax expense is reflected separately on the consolidated statements

of operations.

Revenues from advisory services is recognized

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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.

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

ASU 2016-02, “ Leases (Topic 842)”

sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e.,

lessees and lessors).

The standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases

based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

This classification will determine

whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease.

is also required to recognize a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless

of their classification.

Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases

The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance

for sales-type leases, direct financing leases and operating leases.

The FASB’s 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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

For leases entered into on or after the effective

date, where the Company is the lessor, at the inception of the contract, the Company assesses whether the contract is a sales-type, direct

financing or operating lease by reviewing the terms of the lease and determining if the lessee obtains control of the underlying asset

implicitly or explicitly.

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

new lease or a modified lease.

A new lease results when a modification provides additional right of use.

The new lease or modified lease

is then reassessed to determine its classification based on the modified terms.

As disclosed in Note 3, on January 1, 2019, the Chino

Valley lease was modified to increase the monthly base rent from $ 35,000 to $ 40,000 .

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.

On 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 the 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 ASC 842 which does not require lease classification reassessment.

The Company excludes short-term leases having initial terms of 12-months or less as an accounting policy election

and recognizes rent expense on a straight-lines basis over the lease term.

The Company records revenues from rental properties

for its operating leases where it is the lessor on a straight-line basis.

Any revenue on the straight-line basis exceeding the monthly

payment amount required on the operating lease is reflected as a deferred rent receivable.

Effective May 31, 2020, the Company amended

its leases for which it is the lessor on its Chino Valley, Tempe, Kingman and Green Valley properties.

The amendments resulted in an abatement

of rent for the months of June and July 2020.

Additionally, in connection with an operating lease on the Company’s Michigan property

acquired in December, 2022, the Company abated certain lease payments for the period from December 2022 to March 2023.

These rent abatements

resulted in an aggregate deferred rent receivable as of December 31, 2022 and 2021 of $ 204,079 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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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.

Operating 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 consolidated statements of operations.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2022 AND 2021

For leases entered into on or after the effective

date, where the Company is the lessor, at the inception of the contract, the Company assesses whether the contract is a sales-type, direct

financing or operating lease by reviewing the terms of the lease and determining if the lessee obtains control of the underlying asset

implicitly or explicitly.

If a change to a pre-existing lease occurs, the

Company evaluates if the modification results in a separate new lease or a modified lease.

A new lease results when a modification provides

additional right of use.

The new lease or modified lease is then reassessed to determine its classification based on the modified terms.

As disclosed in Note 3, on January 1, 2019, the Chino Valley lease was modified to increase the monthly base rent from $ 35,000 to $ 40,000 .

Additionally, on May 31, 2020, the Chino Valley lease was modified to decrease the monthly base rent from $ 40,000 to $ 32,800 and the Tempe

lease was modified to increase the monthly base rent from $ 33,500 to $ 49,200 .

On August 23, 2021 and effective September 1, 2021, the

Chino Valley lease was amended, and the monthly base rent was increased to $55,195 due to additional space of 27,312 square feet being

leased to the lessee.

The increase in monthly rent was commensurate with the additional space being leased;

therefore, this modification

qualifies as a separate contract under ASC 842.

At the commencement of the modified terms, the Company reassessed its lease classification

and concluded it remained properly classified as an operating lease.

The Company records revenues from rental properties

for its operating leases on a straight-line basis.

Any revenue on the straight-line basis exceeding the monthly payment amount required

on the operating lease is reflected as a deferred rent receivable.

Effective May 31, 2020, the Company amended its leases for which it

is the lessor on its Chino Valley, Tempe, Kingman and Green Valley properties.

The amendments resulted in an abatement of rent for the

months of June and July 2020.

This rent abatement resulted in a deferred rent receivable as of December 31, 2021 and 2020 of $ 164,770

and $ 173,757 , respectively (see Note 3).

For leases where the Company is a lessee, primarily

for the Company’s administrative office lease, the Company analyzed if it would be required to record a lease liability and a right

of use asset on its consolidated balance sheets at fair value upon adoption of ASU 2016-02.

Since the terms of the Company’s operating

lease for its office space was 12 months or less, pursuant to ASC 842, the Company determined that the lease meets the definition of a

short-term lease and the Company did not recognize a right-of use asset and lease liability arising from this lease.

Basic and diluted loss per share

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Stock options

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

Segment reporting

The Company’s business is comprised of one

reportable segment.

The Company has determined that its properties have similar economic characteristics to be aggregated into one reportable

segment (operating, leasing and managing commercial properties, and advisory and brokerage services related to commercial properties).

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

Prior to January 1, 2022, the Company determined

that its properties had similar economic characteristics to be aggregated into one reportable segment (operating, leasing and managing

commercial properties, and advisory and brokerage services related to commercial properties).

The Company’s determination was based

primarily on its method of internal reporting.

Beginning on January 1, 2022, the Company changed its method of internal reporting and

determined that the Company operates in two reportable segments which consists of (1) the operations, leasing and management of its leased

commercial properties, herein known as the “Property Investment Portfolio” segment, and (2) advisory and brokerage services

related to commercial properties, herein known as the “Real Estate Services” segment.

The Company has determined that these

reportable segments were strategic business units that offered different products.

Currently, these reportable segments are being managed

separately based on the fundamental differences in their operations.

Deferred income tax assets and liabilities arise

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recognition or disclosure in the accompanying consolidated financial statements.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

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.

Stock-based compensation is accounted for

based on the requirements of ASC 718 – “Compensation – Stock Compensation ”, which requires

recognition in the financial statements of the cost of employee, director, and non-employee services received in exchange for an

award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange

for the award (presumptively, the vesting period).

The ASC also requires measurement of the cost of employee, director, and

non-employee services received in exchange for an award based on the grant-date fair value of the award.

The Company has elected to

recognize forfeitures as they occur as permitted under Accounting Standards Update (“ASU”) 2016-09 Improvements to

Employee Share-Based Payment Accounting.

Recently issued accounting pronouncements

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ASU 2016-13 on its future consolidated financial statements.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

In August 2020, the FASB issued ASU 2020-06, Accounting

for Convertible Instruments and Contracts in an Entity’s Own Equity.

The ASU simplifies the accounting for certain convertible instruments,

amends the guidance on derivative scope exceptions for contracts in an entity’s own equity and requires the use of the if-converted

method for calculating diluted earnings per share.

The ASU removes separation models for convertible debt with a cash conversion feature.

Such convertible instruments will be accounted for as a single liability measured at amortized cost.

The ASU is effective for interim

and annual periods beginning after December 15, 2021, with early adoption permitted after December 15, 2020, which can either be on a

modified retrospective or full retrospective basis.

Adoption of the ASU is not expected to have a material impact on the Company's financial

condition and results of operations.

Management does not believe that any other recently

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Lease Agreements with Significant Tenants

The Company considers tenants whose annual base

rent exceeds over 10% of the Company’s annual rental income to be a significant tenant.

The Company’s properties located in Chino

Valley and Green Valley are leased by Broken Arrow Herbal Center, Inc.

(“Broken Arrow”).

The Company’s properties located in Tempe

(through November 30, 2022) and Kingman are leased by CJK, Inc.

On November 30, 2022, Zoned Arizona, CJK, and

VSM LLC (“VSM”) entered into the Tempe Second Amendment to the Tempe Lease, as amended.

Concurrently with the execution of

the Tempe Second Amendment, CJK assigned all its interest in the Tempe Lease to VSM.

On December 1, 2022, the Company entered into

a lease agreement with its tenant for the lease of its recently acquired property located in Pleasant Ridge, Michigan (the “Woodward

The Tempe Lease, Kingman Lease, Chino Valley Lease,

Green Valley Lease, and the Woodward Lease are considered significant and the tenants are referred to as the Significant Tenants.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

Chino Valley, AZ

On May 1, 2018, Chino Valley and Broken Arrow

Herbal Center, Inc.

(“Broken Arrow”) agreed to terminate the prior Chino Valley Lease dated April 6, 2015, as amended, in

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

Chino Valley and Broken Arrow (the “2018 Chino Valley Lease”), with a term of 22 years, expiring April 30, 2040, and (ii)

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

The 2018 Chino Valley

Lease provided for payment by Broken Arrow of a fixed monthly base rent of $ 35,000 , as well as real property taxes, personal property

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

In addition, pursuant to the terms of the 2018 Chino Valley Lease, Broken Arrow agreed to maintain insurance in full force during

the term of the 2018 Chino Valley Lease and any other period of occupancy of the premises by Broken Arrow.

On January 1, 2019, Chino Valley

and Broken Arrow entered into that the First Amendment to the 2018 Chino Valley Lease (the “2019 Chino Valley Lease Amendment”),

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

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

2018 Chino Valley Lease remain in full force and effect.

terminated the prior Chino Valley Lease dated April 6, 2015, as amended, in consideration of (i) entry into that certain Licensed Medical

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

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

month of April 2018 under the prior Chino Valley Lease.

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

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

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

In addition, pursuant to the terms of the 2018 Chino

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

of occupancy of the premises by Broken Arrow.

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

to the 2018 Chino Valley Lease (the “2019 Chino Valley Lease Amendment”), pursuant to which the monthly base rent was increased

from $ 35,000 to $ 40,000 .

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

On May 29, 2020, Chino Valley and Broken Arrow

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

In addition, the parties agreed that from the

period from the Effective Date to June 30, 2022 (the “Improvement Period”), Broken Arrow will and/or Broken Arrow will cause

its affiliate, CJK, Inc.

(“CJK”), to invest a combined total of at least $ 8,000,000 of improvements (“Investment by

Tenants”) in and to the property that is the subject of the Chino Valley Lease and the property that is the subject of the Tempe

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

As of December 31, 2021, the Company’s Significant

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

related to the same.

In addition, the parties agreed that from the period

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

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

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

referred to as the “Facilities”).

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

entered into the Third Amendment (the “Third Chino Valley Amendment”) to the Licensed Medical Marijuana Facility Triple Net

(NNN) Lease Agreement dated May 1, 2018, between Chino Valley and CJK, as amended (the “Chino Valley Lease”), effective September

entered into the Third Amendment (the “Third Chino Valley Amendment”) to the 2018 Chino Valley Lease, as amended (the “Chino

Valley Lease”), effective September 1, 2021.

The parties previously agreed that the base rental payments under the Chino Valley

Lease would increase commensurate to any and all expanded and operational square footage on the premises by calculating the fixed rate

of $ 0.82 per square foot per month by the new operational square footage.

Accordingly, in the Third Chino Valley Amendment, the parties

agreed that, as of September 1, 2021, the rental payment is increased to $ 55,195 per month base rental payment, plus additional rental

payments, as a result of the increase in the square footage to 67,312 square feet of operational space.

This lease modification qualifies

as a separate contract as the modification grants the tenant additional right of use not included in the original lease, as amended, and

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

On January 24, 2022 and effective on March 1,

2022, Chino Valley and Broken Arrow entered into the Fourth Amendment (the “Fourth Chino Valley Amendment”) to the Chino Valley

Lease, as amended.

Pursuant to the terms of the Fourth Chino Valley Amendment, the parties acknowledge that an additional 30,000 square

feet have become operational, increasing the premises to a total of 97,312 square feet of operational space.

In connection with the Fourth

Chino Valley Amendment, the Company paid $ 500,000 to 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.

Pursuant to the terms of the Fourth Chino Valley Amendment, effective March 1, 2022, the monthly base

rent was increased to $ 87,581 , representing an increase from $ 0.82 per square foot to $ 0.90 per square foot, for all current and future

operational square footage that may be developed as the premises continues to expand.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2022 AND 2021

Pursuant to the terms of the Chino Valley Lease,

the parties previously agreed that between May 31, 2020 and May 31, 2022 (the “Improvement Period”), Broken Arrow would and/or

Broken Arrow would cause its affiliate, CJK, to invest a combined total of at least $ 8,000,000 of improvements in and to the property

that is the subject of the Chino Valley Lease.

The parties also previously agreed that the base rental payments under the Chino Valley

Lease would increase commensurate to any and all expanded and operational square footage on the premises by calculating the fixed rate

of $ 0.82 per square foot per month by the new operational square footage.

Broken Arrow has now satisfied its contractual obligation regarding

these capital improvements.

Accordingly, in the Third Chino Valley Amendment,

the parties agreed that, as of September 1, 2021, the rental payment is increased to $ 55,195 per month base rental payment, plus additional

rental payments, as a result of the increase in the square footage of the operational space.

This lease modification qualifies as a separate

contract as the modification grants the tenant additional right of use not included in the original lease, as amended, and the increase

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

In addition, on January

24, 20022 and effective on March 1, 2022, Chino Valley and Broken Arrow entered into the Fourth Amendment to the Licensed Medical Marijuana

Facility Triple Net (NNN) Lease Agreement dated May 1, 2018.

Pursuant to the terms of the Fourth Chino Valley Amendment, the parties acknowledge

an additional 30,000 square feet have become operational, increasing the premises to a total of 97,312 square feet of operational space

(see Note 13).

Green Valley, AZ

On May 1, 2018, Green Valley and Broken Arrow

agreed to terminate the prior Green Valley Lease dated October 1, 2014, in consideration of (i) entry into that certain Licensed Medical

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

terminated the prior Green Valley Lease dated October 1, 2014, in consideration of (i) entry into that certain Licensed Medical Marijuana

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

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

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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 CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

On May 1, 2018, Zoned Arizona and CJK agreed to

terminate the prior Tempe Leases dated August 15, 2015, as amended, and June 15, 2017, in consideration of (i) entry into that certain

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

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

month of April 2018 under the prior Tempe Leases.

The Tempe Lease provided for payment by CJK of a fixed monthly base rent of $ 33,500 ,

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

estate taxes) levied upon or assessed against Zoned Arizona.

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

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

On May 1, 2018, Zoned Arizona and CJK terminated

the prior Tempe Leases dated in 2015 and 2017 in consideration of (i) entry into that certain Licensed Medical Marijuana Facility Triple

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

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

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

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

In addition, pursuant to the terms of the Tempe Lease, CJK agreed to maintain insurance in full force during the term of the

Tempe Lease and any other period of occupancy of the premises by CJK.

On May 29, 2020, Zoned Arizona and CJK entered

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Arrow and CJK will be in default under the Chino Valley Lease and Tempe Lease, as amended.

As of December 31, 2021, the Company’s

Significant Tenants have completed improvements to the Facilities totaling in excess of $ 8,000,000 and have satisfied the contractual

obligations related to the same.

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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

In connection with a promissory note, (See Note

8), on July 11, 2022 and reaffirmed on December 7, 2022, the Company entered into a Deed of Trust Agreement that secures the Company’s

performance under the promissory note.

The Deed of 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 promissory note.

On November 30, 2022, Zoned Arizona, CJK, and

VSM LLC (“VSM”) entered into that Second Amendment (the “Tempe Second Amendment”) to the Tempe Lease, as amended.

Concurrently with the execution of the Tempe Second Amendment:

(i) CJK assigned all its interest in the Tempe Lease to VSM (the “Assignment”),

and (ii) VSM subleased a portion of the Premises (as defined in the Tempe Lease), pursuant to that certain Sublease dated November 30,

2022 between VSM, as sublessor, and CJK, as sublessee.

Pursuant to the terms of the Tempe Second Amendment,

among other things, and in consideration of Zoned Arizona’s agreement to enter into the Tempe Second Amendment:

(i) VSM paid Zoned

Arizona $300,000 (the “Assignment Price”), (ii) VSM agreed to commit at least $3,000,000 to be spent toward capital improvements

to the Premises within two years after the effective date of the Tempe Second Amendment (the “Capital Commitment”), (iii)

VSM agreed to deposit an additional security deposit (the “Additional Security Deposit”) of $147,600 to be held by Zoned Arizona

per the terms of the Tempe Lease, and (iv) VSM agreed to cause its affiliate, GDL Inc.

(doing business as Green Dot Labs) (“GDL”)

to execute and deliver to Zoned Arizona that Guaranty of Payment and Performance dated on the same date as the Tempe Amendment, which

Guaranty of Payment and Performance requires GDL to guarantee and be liable for VSM’s compliance with and performance under the

The Guaranty of Payment and Performance was entered into on November 30, 2022.

If VSM fails to deliver to Zoned Arizona invoices

or other documentation acceptable to Zoned Arizona showing the Capital Commitment has been satisfied in a timely manner, VSM will be in

default under the Tempe Lease.

No other terms of the Tempe Lease were modified.

Therefore, the Company’s accounting for the lease

remained unchanged subsequent to the Tempe Second Amendment and Assignment.

Accordingly, the Company will amortize the $ 300,000

assignment fees into rental revenue on a straight-line basis over the remaining term of the lease through April 2040.

On December 31,

2022, contract liability related to this lease modification amount to $ 298,565 which has been presented on the accompanying consolidated

balance sheet.

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

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for the balance of the term.

CJK and Broken Arrow, together, operate under

the company brand, “Hana Meds” or “Hana”, and are referred to as the Company’s Significant Tenants.

The Tempe Lease, Kingman Lease, Chino Valley Lease

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

and the Company’s Significant Tenants.

Abrams guarantee is collateralized by the convertible debt of $ 2,000,000 owed to him

(see Note 8).

As of December 31, 2021 and 2020, security deposits

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

On November 30, 2022, Kingman and CJK entered

into the Second Amendment (the “Kingman Second Amendment”) to the Licensed Medical Marijuana Facility Triple Net (NNN) Lease

Agreement dated May 1, 2018 between Kingman and CJK.

Pursuant to the terms of the Kingman Second Amendment, CJK agreed to grant Kingman

a right to terminate the Kingman Lease upon 15 days’ prior written notice in Kingman’s sole discretion, without any obligation

to do so, provided that Kingman may not exercise this right to terminate if CJK is operating its business as a going concern at the premises

which is the subject of the Kingman Lease.

ZONED PROPERTIES, INC.

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DECEMBER 31, 2022 AND 2021

Future minimum lease payments primarily consist

of minimum base rent payments from Significant Tenants.

Future minimum lease payments to be received, on all leased properties, for each

of the five succeeding calendar years and thereafter as of December 31, 2021 consists of the following:

Pleasant Ridge, MI

On November 29, 2022, ZP Woodward, as landlord,

entered into a Licensed Cannabis Facility Absolute Net Lease Agreement (the “Woodward Lease”) with Rapid Fish 2 LLC, as tenant

(“Woodward Tenant”), whereby ZP Woodward leased the Woodward Property located in Pleasant Ridge, Michigan to the Woodward

The Woodward Lease commenced on December 1, 2022 and has a term of 14 years and 4 months through March 1, 2037, with two 5 -year

options to extend the term, exercisable by the Woodward Tenant pursuant to the terms and conditions of the Woodward Lease.

Lease contains customary obligations of the Woodward Tenant consistent with an absolute triple net lease agreement, including (i) the

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

estate taxes), (ii) payment of insurance premiums and operating costs of ZP Woodward related to the operation of the Woodward Property,

and (iii) maintenance and repair obligations to maintain the Woodward Property in first-class retail condition.

The Woodward Lease includes

a Guaranty of Payment and Performance by Ammar Kattoula and Thomas Nafso.

The Woodward Lease contains an abatement of the full or partial

rent that would otherwise have been due for the months from December 2022 to March 2023.

Subsequent to the abatement period, the Woodward

Lease provides for payment by the tenant of monthly base rent beginning at $ 40,319 per month and increasing by 3 % per year over the term

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

income or estate taxes) levied upon or assessed against the Company.

In addition, pursuant to the terms of the Woodward Lease, the Woodward

Tenant agreed to maintain insurance in full force during the term of the Woodward Lease and any other period of occupancy of the premises

by the tenant.

The tenant shall have the option, exercisable by written notice to ZP Woodward given not later than 180 days prior to the

expiration of the then current term, to extend the term for two further terms of five years each on the same terms and conditions as provided

in this Lease.

As of December 31, 2022 and 2021, security deposits

payable to the collective Significant Tenants amounted to $ 219,400 and $ 71,800 , respectively.

Future minimum lease payments primarily

consist of minimum base rent payments from the collective 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 December 31, 2022, consists

of the following:

Future annual base rent:

* Future annual base rent does not include the Fourth Chino Valley Amendment,

effective March 1, 2022 which increased the monthly base rent to $87,581, or an annual base rent to $1,050,972 (See Note 13).

Rental and advisory revenue and receivable

–Significant Tenants

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

Revenues – Significant

For the years ended December 31, 2022 and 2021,

rental and advisory revenue associated with the Significant Tenant leases described above amounted to $ 1,255,130 and $ 1,176,666 , which

represents 68.9 % and 96.8 % of the Company’s total revenues, respectively.

On December 31, 2021 and 2020, accounts receivable

from advisory services provided to the Significant Tenants amounted to $ 2,813 and $ 2,375 , respectively.

Further, as of December 31, 2021

and 2020 a deferred rent receivable of $ 164,770 and $ 173,757 is due from Significant Tenants due to the abatement of rent in the months

of June and July 2020 under the amendments executed effective May 31, 2020 discussed above, respectively.

revenues associated with Significant Tenant leases described above are summarized as follows:

For the Year Ended

Woodward Tenant *

* Revenues from these Significant Tenants began in December 2022

and will amount to over 10 % of the Company’s rental revenue in future periods.

Further, as of December 31, 2022 and 2021, a deferred

rent receivable of $ 204,079 and $ 164,770 is due collectively from the Significant Tenants due to the abatement of rent under the lease

agreements discussed above, respectively, and as of December 31, 2022, a lease incentive receivable of $ 477,064 is due from one of the

Significant Tenants, in connection with the $ 500,000 tenant improvement allowance provided to tenant pursuant to the Chino Valley amendment

executed during the year ended December 31, 2022 (see above).

Additionally, as discussed above, VSM paid Zoned Arizona the $ 300,000 Assignment

The Company considers the assignment fee paid as a part of the lease payments for the modified lease and shall amortize the $ 300,000

assignment fees into rental revenue on a straight-line basis over the remaining term of the modified lease through April 2040.

31, 2022, deferred revenue related to this lease modification amounted to $ 298,565 and is included in contract liabilities on the accompanying

consolidated balance sheet.

Asset concentration

The majority of the Company’s real estate

properties are leased to the Significant Tenants under triple-net leases that terminate in April 2040.

The Company monitors the credit

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

The Company monitors tenant credit by (1) reviewing financial

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

the timeliness of rent collections.

The Company’s real estate properties are

leased to Significant Tenants under triple-net leases that terminate through March 2037 and April 2040, respectively.

The Company monitors

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

The Company monitors tenant credit by (1) reviewing

financial statements and related metrics and information that are publicly available or that are provided to us upon request, and (2)

monitoring the timeliness of rent collections.

As of December 31, 2022 and 2021, the Company

had an asset concentration related to the Significant Tenants.

As of December 31, 2021 and 2020, the Significant Tenants leased approximately

79.2 % and 83.2 % of the Company’s total assets, respectively.

Through December 31, 2021, all rental payments have been made on a

timely basis.

As of December 31, 2021 and 2020, the lease agreements with the Significant Tenants were personally guaranteed by Alan Abrams

and are collateralized by convertibles notes of $ 2,000,000 owed to Mr.

Abrams (see Note 8).

On March 1, 2018, the Company and Alan Abrams

entered into a Reaffirmation Agreement (See Note 8).

As of December 31, 2022 and 2021, the Significant Tenants collectively

leased approximately 59.8 % and 79.2 % of the Company’s total assets, respectively.

Through December 31, 2022, all rental payments

have been made on a timely basis.

ZONED PROPERTIES, INC.

16 unchanged sentences

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

On December 1, 2022, ZP Woodward entered into

an Exclusive Option Agreement for the Purchase of Real Property (the “Option Agreement”), dated December 1, 2022 between ZP

Woodward and FL MI RE 22, LLC (the “Woodward Assignor”).

Pursuant to the terms of the Option Agreement and subject to the

conditions therein, ZP Woodward was granted the exclusive option (the “Option”) to assume all of the Woodward Assignor’s

rights and obligations under certain purchase agreements and other definitive documents as described in the Option Agreement (collectively,

“Assigned Rights”), all related to real property located in Pleasant Ridge, Michigan and as more particularly described in

the Option Agreement (the “Woodward Property”).

In December 2022, the Company exercised its rights to acquire the properties

located at 23616 and 23622 Woodward Avenue, Pleasant Ridge, Michigan for a purchase price of $ 2,292,549 including cash of $ 867,549 , and

a land contract promissory note of $ 1,425,000 (see Note 8).

The properties consist of approximately 9,060 square feet of land with approximately

6,192 square feet of rentable buildings space.

Simultaneously, the Company paid cash of $ 590,000 to the Woodward Assignor in assignment

fees and deposits for the rights to acquire two adjacent properties (the “Parking Lots”), which is reflected as escrow deposits

on the accompanying consolidated balance sheets as of December 31, 2022.

Subsequent to year-end 2022, in February 2023, ZP Woodward exercised

its rights and acquired the adjacent Parking Lots (See Note 16).

On November 29, 2022, the Woodward Properties and the Parking Lots were

leased to the Woodward Tenant pursuant to the Woodward Lease (See Note 3).

Repurchase Agreement

On November 29, 2022, ZP Woodward, the Woodward

Assignor, Ammar Kattoula and Thomas Nafso (the Woodward Assignor, Mr.

Kattoula and Mr.

Nafso collectively referred to as the “Repurchasers”)

entered into a Real Estate Repurchase Agreement (the “Repurchase Agreement”).

The Repurchase Agreement required the Repurchasers

to purchase the Woodward Property from ZP Woodward upon ZP Woodward’s election in its sole discretion for a period ending 30 days

after the earlier of (i) the date (y) the applicable governmental authority rejects approval of the pending Marijuana Facility Application

by the Woodward Tenant, or (z) ZP Woodward has actual notice of any breach of Woodward Assignor’s representations, warranties or

covenants under the Master Agreement, or (ii) March 15, 2023 or such later date mutually agreed upon by ZP Woodward and the Repurchasers.

On February 14, 2023, the Marijuana Facility Application was approved by Pleasant Ridge.

Subsequent to December 31, 2022, in February

2023, ZP Woodward exercised its rights and completed the purchase of the two adjacent Parking Lots, therefore no repurchase was required

by the Repurchasers.

For the years ended December 31, 2022 and 2021,

depreciation of rental properties amounted to $ 345,878 and $ 352,529 , respectively.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

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,

7 unchanged sentences

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

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

10 unchanged sentences

due will bear interest at the rate of 12 % per annum from the due date thereof until paid.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

On February 19, 2021 (the “Amendment Date”),

28 unchanged sentences

terms in the A&R Debenture, as follows.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

Right of Prepayment .

23 unchanged sentences

Percentage”).

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

Right of Maturity Units .

10 unchanged sentences

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

As of December 31, 2021 and 2020, an allowance was not

deemed necessary.

On December 31, 2021, convertible note receivable

and interest receivable amounted to $ 200,000 and $ 10,756 , respectively.

On December 31, 2020, convertible note receivable and interest

As of December 31, 2022, based on management’s

analysis, the Company recorded a loss on note receivable investment of $ 210,756 which consisted of convertible notes receivable and interest

receivable amounted to $ 200,000 and $ 10,756 , respectively.

NOTE 6 – INTANGIBLE ASSETS

In connection with management’s analysis, the Company considered the

current financial situation of KCB and an assessment of KCB’s franchising opportunity in the cannabis industry from a macro-industry

Based on this analysis, management concluded that realizing any future benefits from this investment was uncertain;

the loss on the note receivable investment was recorded which has been reflected in other (income) expenses on the consolidated statements

of operations.

On December 31, 2022, convertible note receivable

and interest receivable amounted to $ 0 .

On December 31, 2021, convertible note receivable and interest receivable amounted to $ 200,000

and $ 10,756 , respectively.

NOTE 6 – INTANGIBLE ASSET

On April 1, 2021, the Company’s subsidiary,

Zoned Brokerage, entered in an engagement letter for real estate brokerage services with a consultant for a guaranteed term of one year

Arizona Brokerage, entered in an engagement letter for real estate brokerage services with a consultant for a guaranteed term of one year

(the “Guaranteed Term”).

7 unchanged sentences

The shares were valued at their fair value of $ 37,800 using the quoted per share price on the date of grant of $ 0.63 .

In connection with these shares, on April 1, 2021, the Company recorded an intangible asset of $ 37,800 which is amortized over the one-year

In connection with these shares, on April 1, 2021, the Company recorded an intangible asset of $ 37,800 which was amortized over the one-year

term of the engagement letter.

3 unchanged sentences

accumulated amortization

For the year ended December 31, 2021, amortization

of intangible assets amounted to $ 28,350 , respectively.

For the year ended December 31, 2022 and 2021,

amortization of intangible assets amounted to $ 9,450 and $ 28,350 , respectively.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2022 AND 2021

NOTE 7 – INVESTMENT IN JOINT VENTURES

NOTE 7 – INVESTMENT IN UNCONSOLIDATED

JOINT VENTURES AND EQUITY SECURITIES

Investment in unconsolidated joint ventures

On December 31, 2022 and 2021, the Company

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

The entities listed below are partially owned by the

The entities listed below are partially owned by

The Company accounts for these investments under the equity method of accounting as the Company exercises significant influence

9 unchanged sentences

Total investments in unconsolidated joint venture entities

On April 22, 2021, ZP Data

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

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

April 16, 2021.

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

white-label for the cannabis industry.

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

and mortar retail (i.e.

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

Pursuant to the Beakon Operating

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

Each unit represents,

with respect to any member, such member’s:

(i) interest in Beakon’s capital, (ii) share of Beakon’s net profits and

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

Beakon, (iii) right to inspect Beakon’s books and records, and (iv) right to participate in the management of and vote on matters

coming before the members as provided in the Beakon Operating Agreement.

The transactions discussed above resulted in a joint venture,

in accordance with ASC 323-10 – Investments- Equity and Joint Ventures, between ZP Data and the non-affiliated party.

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

ZP Data will account for its investment in Beakon

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

During the year ended December 31, 2021, the Company contributed $ 86,000

Currently, the licensing company and Beakon have completed the creation of the foundational design, technology platform, and

market positioning for Beakon to launch in the cannabis industry.

However, in order to successfully launch, the technology platform relies

upon a required merchant banking component.

This was the primary risk for the Company in its financial investment and for Beakon in moving

to a successful launch.

While Company management knew this risk was a major factor going into the investment, it was not foreseen exactly

when an appropriate merchant banking solution would be available given the federal status of regulated cannabis and specifically the federal

banking status as it relates to regulated cannabis, even for ancillary services such as Beakon.

During the fourth quarter of 2021, a negative

open memo was published and distributed by Visa regarding merchant banking in regulated industries.

The Company believes that this occurrence

has unexpectedly and significantly increased the risk to the Beakon project and must be remedied prior to the launch of Beakon.

The uncertainty

related to cannabis banking reform and regulation at the federal level, which the Beakon platform relies upon, is now so uncertain that

the Company believes it is most appropriate to cause an impairment of the Beakon investment at this time, while also understanding that

Beakon may still very well create material value for the Company in the future.

The Company has no further financial or investment obligations

at this time.

Accordingly, on December 31, 2021, the Company recorded an other-than-temporary impairment loss of $ 73,970 because it was

determined that the fair value of its equity method investment in Beakon was less than its carrying value.

Based on management’s

evaluation, it was determined that due to market and regulatory conditions, implementing the Company’s business model was at risk

and that the Company’s ability to recover the carrying amount of the investment in Beakon was impaired.

On April 22, 2021, ZP Data 1 entered into a Limited Liability Company

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

formation of Beakon, LLC (“Beakon”), a Delaware limited liability company formed on April 16, 2021.

Beakon signed a licensing

agreement for the licensing of a consumer data/marketing software platform that Beakon will white label for the cannabis industry.

goal is to develop and leverage the platform to help drive foot traffic to brick and mortar retail (i.e.

dispensaries), and thus enhance

the value of the real estate and mitigate risk.

Pursuant to the Beakon Operating Agreement, ZP Data 1 purchased 50 units of Beakon for

$ 50 , which represent 50 % of the membership interests of Beakon.

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

(i) interest in Beakon’s capital, (ii) share of Beakon’s net profits and net losses (and specially allocated items of income,

gain, and deduction), and the right to receive distributions of net cash flow from Beakon, (iii) right to inspect Beakon’s books

and records, and (iv) right to participate in the management of and vote on matters coming before the members as provided in the Beakon

Operating Agreement.

The transactions discussed above resulted in a joint venture, in accordance with ASC 323-10 – Investments-

Equity and Joint Ventures, between ZP Data 1 and the non-affiliated party.

Each of the entities has 50 % equity ownership and voting

rights, and joint control in Beakon.

ZP Data 1 accounts for its investment in Beakon under the equity method of accounting in accordance

with ASC 323.

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

Currently, the licensing company and

Beakon have completed the creation of the foundational design, technology platform, and market positioning for Beakon to launch in the

cannabis industry.

However, in order to successfully launch, the technology platform relies upon a required merchant banking component.

This was the primary risk for the Company in its financial investment and for Beakon in moving to a successful launch.

While Company management

knew this risk was a major factor going into the investment, it was not foreseen exactly when an appropriate merchant banking solution

would be available given the federal status of regulated cannabis and specifically the federal banking status as it relates to regulated

cannabis, even for ancillary services such as Beakon.

During the fourth quarter of 2021, a negative open memo was published and distributed

by Visa regarding merchant banking in regulated industries.

The Company believes that this occurrence has unexpectedly and significantly

increased the risk to the Beakon project and must be remedied prior to the launch of Beakon.

The uncertainty related to cannabis banking

reform and regulation at the federal level, which the Beakon platform relies upon, is now so uncertain that the Company believes it is

most appropriate to cause an impairment of the Beakon investment at this time, while also understanding that Beakon may still very well

create material value for the Company in the future.

The Company has no further financial or investment obligations at this time.

on December 31, 2021, the Company recorded an other-than-temporary impairment loss of $ 73,970 because it was determined that the fair

value of its equity method investment in Beakon was less than its carrying value.

Based on management’s evaluation, it was determined

that due to market and regulatory conditions, implementing the Company’s business model was at risk and that the Company’s

ability to recover the carrying amount of the investment in Beakon was impaired.

Beacon is currently inactive.

For the year ended December 31, 2021, the $ 73,970 impairment loss is included in impairment loss from unconsolidated joint ventures

on the consolidated statement of operations.

For the year ended December 31,

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

ZONED PROPERTIES, INC.

9 unchanged sentences

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

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

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

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

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

of net cash flow from Zoneomics Green, (iii) right to inspect Zoneomics Green’s books and records, and (iv) right to participate

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

The transactions

discussed above resulted in a joint venture, in accordance with ASC 323-10 – Investments- Equity and Joint Ventures, between

the Company and the non-affiliated party.

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

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

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

other joint venture partner received 50 % of the membership interests for no capital contributions.

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 Green.

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

The following represents summarized financial

information derived from the financial statements of the Beakon and Zoneomics Green Joint Ventures, respectively, as of December 31, 2022

and for the year ended December 31, 2021.

Balance sheet

and for the years ended December 31, 2022 and 2021.

Balance sheets (Unaudited):

Current assets:

Licensing agreement

Total liabilities and equity

Statement of operations

Statement of operations (Unaudited)

For the Year Ended

2 unchanged sentences

Company’s share of loss from unconsolidated joint ventures

During the year ended December 31, 2021, the Company

recorded a loss from joint venture of $101,446 which represents the Company’s proportionate share of losses from its joint ventures

of $27,476 and a loss on impairment of $73,970.

During the years ended December 31, 2022 and 2021,

the Company recorded a loss from unconsolidated joint ventures of $ 16,261 and $ 27,476 , respectively, which represents the Company’s

proportionate share of losses from its joint ventures.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2022 AND 2021

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 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 December 31, 2022, investment in equity securities amounted to $ 50,000 .

NOTE 8 – NOTES PAYABLE

On December 31, 2022 and 2021, notes payable consisted

of the following:

Note payable - East West Bank

Note payable - Woodward Property

Total principal due on notes payable

debt discount

Notes payable, net

East West Bank Swap note

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 could request advances under a multiple access loan (“MAL”) during the MAL.

On July 11, 2022, in connection with the

Loan Agreement, Zoned Arizona paid loan and other fees of $ 176,472 , and in connection with the First Amendment to the Loan Agreement discussed

below, paid additional fees of $ 8,124 .

These loan and other fees aggregating $ 184,596 are reflected as a debt discount and are being 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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

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.

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.

Prior to First Amendment executed on

December 7, 2022 in which the Company exercised its Early Amortization (see below), all advances under the MAL were to 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 was to make interest payments on the outstanding

principal balance of the MAL.

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

Zoned Arizona would 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 is made).

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.

On December 7, 2022, Zoned Arizona and the Bank

entered into a First Amendment to Loan Agreement (the “First Amendment”).

Pursuant to the terms of the First Amendment, Zoned

Arizona has elected to make its Early Amortization Election (defined in the First Amendment and Loan Agreement), which election requires

Zoned Arizona to commence paying principal and interest on the MAL as set forth in the Amended Note (defined below).

Except as provided

in the First Amendment, the terms of the Loan Agreement remain in full force and effect.

Pursuant to the terms of the Loan Agreement and

First Amendment, on December 7, 2022, Zoned Arizona issued an Amended and Restated Promissory Note (the “Amended Note”) to

The Amended Note has an original principal amount of $ 4,500,000 , a 50 % loan-to-value as determined by the bank-ordered appraisal

completed on the Tempe Property.

The Amended Note requires Zoned Arizona to pay monthly principal and interest payments to the Bank at

an interest rate equal to the prime rate plus 0.75% .

The Amended Note matures 10 years after its effective date and payments are calculated

based on a 30-year amortization schedule.

In connection with the Amended Note, Zoned Arizona received gross proceeds of $ 4,500,000 and

paid fees of $ 184,596 .

Zoned Arizona may prepay the outstanding principal

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

Also as previously disclosed, on July 11, 2022

and pursuant to the terms of the Loan Agreement, the Company executed a Guaranty (the “Guaranty”) in favor of the Bank, pursuant

to which the Company agreed to guarantee all indebtedness of Zoned Arizona to the Bank arising under or in connection with the MAL or

any of the loan documents.

On December 7, 2022, the Company executed an Acknowledgement of Amendment and Reaffirmation of Guaranty (the

“Reaffirmation”) in favor of the Bank.

The Reaffirmation reaffirms the Guaranty and provides the Company’s consent to

the First Amendment and Swap Note.

On December 7, 2022, Zoned Arizona and the Bank

entered into an Interest Rate Swap Transaction Confirmation (the “Confirmation”).

The Confirmation incorporates by reference

the 2002 ISDA Master Agreement as published by the International Swaps and Derivatives Association, Inc.

as if the parties to the Confirmation

executed such agreement in such form.

The Confirmation provides the terms and conditions governing the interest rate swap transaction

afforded to Zoned Arizona, including a fixed interest rate of 7.65 %.

The Company recorded the swap at fair value in the consolidated balance

sheets with changes in fair value recorded contemporaneously in earnings.

The Company has entered into an interest rate swap to mitigate

variability in interest payments on its variable-rate debt.

During the year ended December 31, 2022, amortization

of debt discount amounted to $ 1,538 .

On December 31, 2022, principal and interest due

on the East West Bank Swap Note amounted to $ 4,485,808 and $ 28,324 , respectively.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

Woodward Property Note Payable

On December 5, 2022, in connection with the acquisition

of the Woodward Property located in Pleasant Ridge, Michigan, the Company entered into a land contact note in the amount of $1,425,000

(the “Woodward Property Note Payable “).

The Woodward Property Note Payable bears interest at 9% per annum and is due in full

1) 60 monthly payments of principal and interest of $12,821

beginning on January 1, 2023, and

2) A balloon payment of $1,274,117 including the remaining principal

and interest on or before December 1, 2028.

On December 31, 2022, principal and interest due

on the Woodward Property Note Payable amounted to $ 1,425,000 and $ 10,687 , respectively.

On December 31, 2022, future principal payments

under the notes payable are as follows:

Years ending December 31,

Total principal payments due on December 31, 2022

NOTE 9 – CONVERTIBLE NOTE PAYABLE

27 unchanged sentences

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

On March 1, 2018, the Company and Alan Abrams

entered into a Reaffirmation Agreement whereby Mr.

Abrams reaffirmed his personal guarantee of his obligations under certain of the Company’s

commercial leases.

Additionally, Mr.

Abrams affirmed that the principal of the Abrams Debenture in the principal amount of $ 2,000,000

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

As of December 31, 2022 and 2021, the principal

2 unchanged sentences

Debenture amounted to $ 30,000 , which is included in accrued expenses on the accompanying consolidated balance sheets.

For the years ended December 31, 2021 and 2020,

interest expense related to the Abrams Debenture amounted to $ 120,000

For the years ended

December 31, 2022 and 2021, interest expense related to the Abrams Debenture amounted to $ 120,000 .

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

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.

As of December 31, 2021 and 2020, the principal

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

As of December 31, 2021 and 2020, accrued interest

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

on the accompanying consolidated balance sheets.

For the years ended December 31, 2021 and 2020,

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

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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

As of December 31, 2022 and 2021, the principal

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

As of December 31, 2022 and 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

consolidated balance sheets.

For the years ended December 31, 2022 and 2021,

interest expense – related party amounted to $ 600 and $ 1,200 , respectively.

Indemnification agreements

7 unchanged sentences

In August 2021, the Company did not renew its officers and directors insurance.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

NOTE 11 – STOCKHOLDERS’ EQUITY

17 unchanged sentences

Merge or consolidate with any other company, except our wholly owned subsidiaries.

Sell, convey or otherwise dispose of, or create or incur any mortgage, lien, or charge or encumbrance or security interest in or pledge of, or sell and leaseback, in all or substantially all of our property or business.

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

7 unchanged sentences

consolidated statements of operations.

On January 31, 2021, the Company issued an aggregate

of 130,000 shares of common stock to members of the Company’s board of directors for services rendered.

The shares were valued at

their aggregate fair value of $ 52,000 using the quoted per share price on the date of grant of $ 0.40 .

In connection with these grants,

in January 2021, the Company recorded stock-based compensation expense of $ 52,000 which is included in compensation and benefits on the

consolidated statements of operations.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

On April 1, 2021, the Company’s subsidiary,

Zoned Brokerage, entered in an engagement letter for real estate brokerage services with a consultant for a guaranteed term of one year

Arizona Brokerage, entered in an engagement letter for real estate brokerage services with a consultant for a guaranteed term of one year

(the “Guaranteed Term”).

7 unchanged sentences

The shares were valued at their fair value of $ 37,800 using the quoted per share price on the date of grant of $ 0.63 .

In connection with these shares, on April 1, 2021, the Company recorded an intangible asset of $ 37,800 which is amortized over the one-year

In connection with these shares, on April 1, 2021, the Company recorded an intangible asset of $ 37,800 which was amortized over the one-year

term of the engagement letter.

17 unchanged sentences

As of December 31, 2021,

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

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

As of December 31, 2022 and 2021,

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

The Company also continues to maintain its 2014

4 unchanged sentences

As of December

31, 2021 and 2020, options to purchase 1,250,000 shares of common stock are outstanding and 1,175,000 options are exercisable pursuant

to the 2014 Plan.

31, 2022, options to purchase 1,250,000 shares of common stock are outstanding and 1,200,000 options are exercisable pursuant to the 2014

(E) Stock options

On January 6, 2020, the Company granted an employee

an option, pursuant to the 2016 Plan, to purchase 125,000 of the Company’s common stock at an exercise price of $ 1.00 per share.

The grant date of the option was January 6, 2020 and the option expires on January 6, 2030.

The option vests as to (i) 35,000 of such

shares on January 6, 2020;

and (ii) as to 10,000 of such shares on January 6, 2021 and each year thereafter through January 6, 2029.

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

dividend yield of 0%;

expected volatility of 110%;

risk-free interest rate of 1.81%;

and an estimated holding period of 10

In connection with these options, the Company valued these options at a fair value of $23,388 and will record stock-based compensation

expense over the vesting period.

In July 2020, this employee was terminated and 90,000 unvested options were cancelled.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

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.

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.

In January 2022, the Company’s Board of

Directors unanimously agreed to stop receiving any direct stock issuance or cash payments related to their compensation for services on

the Company’s Board of Directors.

The Company and its Directors believe it is in the Company’s best interest to transition

Directors compensation to a multi-year stock option plan.

Accordingly, on January 21, 2022, the Company granted stock options to purchase

an aggregate of 525,000 of the Company’s common stock at an exercise price of $ 0.78 per share to members of the Company’s

board of directors pursuant to the 2016 Plan.

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

The stock option shall vest in equal quarterly installments, with the first installment of 43,750 stock options vesting on January

20, 2022, and 43,750 stock options vesting each quarter through October 21, 2024.

The fair value of this option grant was estimated on

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

dividend yield of 0%;

expected volatility of 108.7%;

risk-free interest rate of 1.54%;

and an estimated holding period of 6 years.

In connection with these

options, the Company valued these stock options at a fair value of $345,173 and will record stock-based compensation expense over the

vesting period.

On January 21, 2022, the Company granted a stock

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;

and (ii) as to 7,500 of such shares on January

21, 2023 and each year thereafter through January 21, 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 112.3%;

risk-free interest rate of 1.75%;

and an estimated holding period of 10 years.

In connection with these options, the Company valued these

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

On April 1, 2022, the Company granted a stock

option to purchase 52,500 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 April 1, 2022 and the option expires on October 1, 2031.

The option vests as

to (i) 2,500 of such shares on April 1, 2022;

and (ii) as to 5,000 of such shares on October 1, 2022 and each year thereafter through

October 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 110.76%;

risk-free interest rate of 2.39%;

an estimated holding period of 10 years.

The Company valued this stock option at a fair value of $37,660 and will record stock-based compensation

expense over the vesting period.

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 years ended December 31 2022 and 2021,

in connection with the accretion of stock-based option expense, the Company recorded stock option expense of $ 56,180 and $ 24,231 , respectively.

in connection with the accretion of stock-based option expense, the Company recorded stock option expense over the vesting period of $ 336,755

and $ 56,180 , respectively.

As of December 31, 2022, there were 2,352,500 options outstanding and 1,567,500 options vested and exercisable.

As of December 31, 2021,

there was $ 92,335 of unvested stock-based compensation expense to be recognized through June 2031.

The aggregate intrinsic value on December

31, 2021 was $ 1,400 and was calculated based on the difference between the quoted share price on December 31, 2021 of $ 0.775 and the exercise

price of the underlying options.

As of December 31, 2022, there was $ 276,167 of unvested stock-based compensation expense to be recognized through September 2031.

aggregate intrinsic value on December 31, 2022 was $ 400 and was calculated based on the difference between the quoted share price on December

31, 2022 of $ 0.75 and the exercise price of the underlying options.

Stock option activities for the years ended December

9 unchanged sentences

Balance non-vested on December 31, 2022

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

NOTE 11 - INCOME TAXES

The Company maintains deferred tax assets and

liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial

reporting purposes and the amounts used for income tax purposes.

The deferred tax assets on December 31, 2021 and 2020 consist of net

operating loss carryforwards.

The net deferred tax asset has been fully offset by a valuation allowance because of the uncertainty of

the attainment of future taxable income.

The items accounting for the difference between

income taxes at the effective statutory rate and the provision for income taxes for the years ended December 31, 2021 and 2020 were as

Income tax benefit at U.S.

statutory rate

Income tax benefit – state

Non-deductible expenses

Change in valuation allowance

Total provision for income tax

The Company’s approximate net deferred tax

asset as of December 31, 2021 and 2020 was as follows:

Deferred Tax Asset:

Net operating loss carryforward

Net deferred tax assets before valuation allowance

Valuation allowance

Net deferred tax asset

The net operating loss carryforward was approximately

$ 1,871,200 on December 31, 2021.

The Company provided a valuation allowance equal to the net deferred income tax asset as of December

31, 2021 and 2020 because it was not known whether future taxable income will be sufficient to utilize the loss carryforward.

Additionally,

the future utilization of the net operating loss carryforward to offset future taxable income is subject to an annual limitation as a

result of ownership changes that may occur in the future.

The 2017 estimated loss carry forward of approximately $ 1,488,189 expires on

December 31, 2037 .

Subsequent to 2017, all estimated loss carry forwards may be carried forward indefinitely subject to annual usage limitations.

Based on the Company’s analysis to determine the limitation on the utilization of its net operating loss carryforward amounts, in

2018, the deferred tax asset was reduced by any carryforward that cannot be utilized or expires prior to utilization as a result of such

limitations, with a corresponding reduction of the valuation allowance.

In 2021, the valuation allowance increased by $ 29,408 .

The potential

tax benefit arising from certain loss carryforwards will expire in 2041 .

The Company does not have any uncertain tax positions

or events leading to uncertainty in a tax position.

The Company’s 2021, 2020, 2019 and 2018 Corporate Income Tax Returns are subject

to Internal Revenue Service examination.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Rental property acquisition

On April 22, 2016, Zoned Colorado, a wholly owned

subsidiary of the Company, entered into a Contract to Buy and Sell Real Estate (the “Parachute Agreement”) with Parachute

Development Corporation (“Seller”) pursuant to which Zoned Colorado agreed to purchase, and Seller agreed to sell, property

in Parachute, Colorado (the “Property”) for a purchase price of $ 499,857 .

In April 2016, the Company paid a refundable deposit

of $ 45,000 into escrow in connection with the Parachute Agreement which is included in prepaid expenses and other assets on the consolidated

balance sheet as of December 31, 2020.

In January 2021, the Parachute Agreement was mutually terminated, and the refundable deposit was

returned to the Company.

Legal matters

4 unchanged sentences

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

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”).

18 unchanged sentences

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

In the event of a Termination for any reason or

11 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 6 of Schedule 14A of Regulation 14A promulgated under

the Securities Exchange Act of 1934, as amended.

4 unchanged sentences

injurious to the Company, monetarily or otherwise.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

For purposes of the Golden Parachute Agreement,

20 unchanged sentences

McLaren was provided with such an automobile or allowance in lieu of it at the time of the change of control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive him of any material fringe benefit enjoyed by him at the time of the change in control of the Company, or the failure by the Company to provide him with the number of paid vacation days to which he is entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of the change in control of the Company;

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

Following a change in control of the Company,

7 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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

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

5 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.

6 unchanged sentences

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

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

of directors adopted the Zoned Properties 401(k) Plan (the “Plan”) effective January 1, 2021.

The Company will contribute

a matching contribution to the Plan for each employee in an amount equal to 100 % of the matched employee contributions that are not in

excess of 4 % of the employee’s plan compensation.

During the year ended December 31, 2021, contributions into the Plan amounted

The Company contributes a matching

contribution to the Plan for each employee in an amount equal to 100 % of the matched employee contributions that are not in excess of

4 % of the employee’s plan compensation.

For the years ended December 31, 2022 and 2021, the Company contributed $ 22,317 and $ 907

to the Plan, respectively.

Real Property Purchase

Effective October 5, 2022, ZPRE Holdings, 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 Holdings 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”).

The Purchase Agreement contains

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

Effective January 17, 2023, pursuant to the terms

of the Purchase Agreement, ZPRE Holdings elected to terminate the Purchase Agreement and the Purchase Agreement is of no further

force or effect, except for those obligations and rights which survive its termination.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2022 AND 2021

NOTE 13 – SUBSEQUENT EVENTS

Stock options

The Company’s Board of Directors unanimously

agreed to stop receiving any direct stock issuance or cash payments related to their compensation for services on the Company’s

Board of Directors.

The Company and its Directors believe it is in the Company’s best interest to transition Directors compensation

to a multi-year stock option plan.

Accordingly, on January 21, 2022, the Company granted stock options to purchase an aggregate of 525,000

of the Company’s common stock at an exercise price of $ 0.78 per share to members of the Company’s board of directors pursuant

to the 2016 Plan.

The grant date of the stock options was January 21, 2022 and the options expire on January 21, 2032.

The stock option

shall vest in equally quarterly installments, with the first installment of 43,750 stock options vesting on January 20, 2022, and 43,750

stock options vesting each quarter through October 21, 2024.

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

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

dividend yield of 0 %;

expected volatility of

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 $ 391,185 and will record stock-based compensation expense over the vesting period.

On January 21, 2022, the Company granted a stock

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

chief operating officer pursuant to the 2016 Plan.

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

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

and (ii) as to 7,500 of such shares on January 21, 2023

and each year thereafter through January 21, 2030.

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

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

dividend yield of 0 %;

expected volatility of 112.3 %;

risk-free interest

rate of 1.75 %;

and an estimated holding period of 10 years.

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

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

Lease amendment

Effective January 24,

2022, Chino Valley and Broken Arrow entered into the Fourth Amendment (the “Fourth Chino Valley Amendment”) to the Licensed

Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018, between Chino Valley and CJK, as amended.

Pursuant to the

terms of the Fourth Chino Valley Amendment, the parties acknowledge that an additional 30,000 square feet have become operational, increasing

the premises to a total of 97,312 square feet of operational space.

In connection with the Fourth Chino Valley Amendment, the Company

paid $500,000 to CJK as a tenant improvement allowance for investment into the premises, which shall be capitalized as a lease incentive

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

Pursuant to the terms

of the Fourth Chino Valley Amendment, effective March 1, 2022, the monthly base rent was increased to $87,581, representing an increase

from $0.82 per square foot to $0.90 per square foot, for all current and future operational square footage that may be developed as the

premises continues to expand.

In addition, Broken Arrow agreed that it would provide audited financial statements to Chino Valley on an

annual basis no later than March 20 th of each calendar year.

Note payable – related party

On January 7, 2022, the Company repaid the note

payable – related party in the principal amount of $ 20,000 and all accrued and unpaid interest due (See Note 9).

Assumption of office lease

Master Agreement

On November 29, 2022, ZP Woodward, the Woodward

Assignor, Ammar Kattoula and Thomas Nafso entered into a Master Agreement for the rights for the Purchase and Sale (the “Master

Agreement”) of the Woodward Property.

To the extent not superseded by the Option Agreement, the Master Agreement sets forth the

terms and conditions upon which ZP Woodward would acquire the Woodward Property.

The Master Agreement provides for the discretionary

and mandatory purchase by the Woodward Assignor of a minority interest in ZP Woodward, where (i) for a period of 1 year following the

closing of the Master Agreement, the Woodward Assignor or an entity controlled by its principals may acquire 25 % membership interest in

ZP Woodward for the price, in cash, of $ 600,000 plus interest at a rate of 12 % per annum starting on the closing date of the Master Agreement

and ending on the date of closing of the discretionary purchase;

and (ii) if at any time following the closing date of the Master Agreement,

ZP RE Holdings, LLC or another entity controlled by the Company acquires certain real property located in Grand Rapids, Michigan owned

by the Woodward Assignor’s affiliate, more particularly described in the Master Agreement, for a purchase price of not more than

$ 1,160,000 , then following such closing ZP Woodward will grant the Woodward Assignor (or its permitted designee) 25 % membership interest

in ZP Woodward.

NOTE 13 – SEGMENT REPORTING

Prior to January 1, 2022, the Company determined

that its properties had similar economic characteristics to be aggregated into one reportable segment (operating, leasing and managing

commercial properties, and advisory and brokerage services related to commercial properties).

The Company’s determination was based

primarily on its method of internal reporting.

Beginning on January 1, 2022, the Company changed its method of internal reporting and

determined that the Company operates in two reportable segments which consists of (1) the operations, leasing and management of its leased

commercial properties, herein known as the “Property Investment Portfolio” segment, and (2) advisory and brokerage services

related to commercial properties, herein known as the “Real Estate Services” segment.

The Company has determined that these

reportable segments were strategic business units that offer different products.

Currently, these reportable segments are being managed

separately based on the fundamental differences in their operations.

Information with respect to these reportable business

segments for the years ended December 31, 2022 and 2021 was as follows:

For the Years Ended

Property investment portfolio

Real estate services

Depreciation and amortization:

Property investment portfolio

Real estate services

Interest expense:

Property investment portfolio

Real estate services

Loss from unconsolidated joint ventures:

Property investment portfolio

Real estate services

Property investment portfolio (a)

Real estate services

$ ( 574,355 )

$ ( 165,819 )

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

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

Property investment portfolio

Real estate services

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

(“ROU”) ASSETS AND OPERATING LEASE LIABILITY

On March 15, 2022, the Company entered to an Assumption

5 unchanged sentences

2021, $ 3,005 from December 1, 2022 through November 30, 2023, and $ 3,078 from December 1, 2023 through November 30, 2024.

In adopting ASC Topic 842, Leases (Topic 842)

on January 1, 2019, the Company had elected the ‘package of practical expedients’, which permitted it not to reassess under

the new standard its prior conclusions about lease identification, lease classification and initial direct costs (see Note 2).

the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less.

Since the terms of the Company’s

operating lease for its office space prior to March 15, 2022 was 12 months or less on the date of adoption, pursuant to ASC 842, the Company

determined that the lease met the definition of a short-term lease, and the Company did not recognize the right-of use asset and lease

liability arising from this lease.

Upon signing of the Assumption of Lease and Consent Agreement on March 15, 2022, the Company analyzed

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

For the years ended December 31, 2022 and 2021,

in connection with its operating leases, the Company recorded rent expense of $ 33,708 and $ 17,455 , respectively.

which is included in

operating expenses on the accompanying consolidated statements of operations.

The significant assumption used to determine the

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 December 31, 2022, right-of-use asset (“ROU”)

is summarized as follows:

Office lease right of use asset

accumulated amortization

Balance of ROU assets

On December 31, 2022, future minimum base lease

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

Year ended December 31,

Total minimum non-cancelable operating lease payments

discount to fair value

Total lease liability on December 31, 2022

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

NOTE 15 - INCOME TAXES

The Company maintains deferred tax assets and

liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial

reporting purposes and the amounts used for income tax purposes.

The deferred tax assets on December 31, 2022 and 2021 consist of net

operating loss carryforwards.

The net deferred tax asset has been fully offset by a valuation allowance because of the uncertainty of

the attainment of future taxable income.

The items accounting for the difference between

income taxes at the effective statutory rate and the provision for income taxes for the years ended December 31, 2022 and 2021 were as

Income tax benefit at U.S.

statutory rate

$ ( 120,615 )

Income tax benefit – state

Non-deductible expenses

Change in valuation allowance

Total provision for income tax

The Company’s approximate net deferred tax

asset as of December 31, 2022 and 2021 was as follows:

Deferred Tax Asset:

Net operating loss carryforward

Net deferred tax assets before valuation allowance

Valuation allowance

Net deferred tax asset

The net operating loss carryforward was approximately

$ 2,106,000 on December 31, 2022.

The Company provided a valuation allowance equal to the net deferred income tax asset as of December

31, 2022 and 2021 because it was not known whether future taxable income will be sufficient to utilize the loss carryforward.

Additionally,

the future utilization of the net operating loss carryforward to offset future taxable income is subject to an annual limitation as a

result of ownership changes that may occur in the future.

The 2017 estimated loss carry forward of approximately $ 1,488,189 expires on

December 31, 2037 .

Subsequent to 2017, all estimated loss carry forwards may be carried forward indefinitely subject to annual usage limitations.

Based on the Company’s analysis to determine the limitation on the utilization of its net operating loss carryforward amounts, in

2018, the deferred tax asset was reduced by any carryforward that cannot be utilized or expires prior to utilization as a result of such

limitations, with a corresponding reduction of the valuation allowance.

In 2022, the valuation allowance increased by $ 64,614 .

The potential

tax benefit arising from certain loss carryforwards will expire in 2042 .

The Company does not have any uncertain tax positions

or events leading to uncertainty in a tax position.

The Company’s 2022, 2021, 2020 and 2019 Corporate Income Tax Returns are subject

to Internal Revenue Service examination.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

NOTE 16 – SUBSEQUENT EVENTS

As previously disclosed

in the Current Report on Form 8-K filed on October 12, 2022 (the “Prior 8-K”) by the Company, effective October 5, 2022, ZP

RE Holdings, LLC (“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.

January 17, 2023, pursuant to the terms of the Purchase Agreement, ZPRE elected

to terminate the Purchase Agreement and the Purchase Agreement is of no further force or effect, except for those obligations and rights

which survive its termination.

On February 24, 2023, ZP Woodward entered into

a Land Contract, dated February 24, 2023, by and between Gangnier Investments LLC (the “Gangnier”) and ZP Woodward (the “23634

Land Contract”).

Pursuant to the terms of the 23634 Land Contract, Gangnier agreed to sell to ZP Woodward certain real property

located at 23634 Woodward Avenue, Pleasant Ridge, Michigan (“23634 Woodward”) for the purchase price of $ 755,984 , comprised

of $ 85,894 of cash, $ 240,000 of previously paid escrow deposits and a land contract note payable of $ 430,000 (the “23634 Land Contract

The 23634 Land Contract Note Payable accrues interest at the rate of 7 % and is payable in 48 monthly installments of $ 3,865 ,

beginning April 1, 2023, until the purchase price and interest are fully paid, provided that such purchase price and all interest will

be fully paid on or before March 31, 2027.

There is no prepayment penalty.

The 23634 Land

Contract contains terms and conditions typically stated in similar land contract or installment sale contracts.

On February 27, 2023,

ZP Woodward acquired a fee interest in 23600 Woodward Avenue, Pleasant Ridge, Michigan for the purchase price of $ 1,253,070 , comprised

of $ 903,070 of cash and $ 350,000 of previously paid deposits and assignment fees and, as of such date, ZP Woodward has acquired the property

interests in the Woodward Property contemplated in the Option Agreement and Master Agreement.

The Parking Lots properties

consist of approximately 15,246 square feet of land with approximately 3,463 square feet of rentable buildings space and approximately

7,872 square feet of covered parking.

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

What changed 10-K

Item 9A. Controls and Procedures