What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-26 compared with 2023-03-28 · 539 added, 639 removed, 52 unchanged (96% of the section changed)

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking

Information and Factors That May Affect Future Results

This annual report on Form 10-K contains forward-looking

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

The Securities and Exchange Commission (the

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

future prospects and make informed investment decisions.

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

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

assumptions regarding future events or performance.

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

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

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

In particular, these include statements relating to future actions, future performance or results of current and anticipated

sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results.

Factors that could cause our

actual results of operations and financial condition to differ materially are set forth in the “Risk Factors” section of

this annual report on Form 10-K.

We caution that these factors could cause our

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

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

Further, any forward-looking statement speaks

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

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

or circumstances.

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

Further, we cannot

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

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

The following discussion should be read in conjunction

with our audited financial statements and the related notes that appear elsewhere in this annual report on Form 10-K.

Zoned Properties, Inc.

(“Zoned Properties”

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

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

the Company’s Property Technology, Advisory Services, Commercial Brokerage, and Investment Portfolio collectively cross-pollinate

within the model to drive project value associated with complex real estate projects.

With national experience and a team of experts

devoted to the emerging cannabis industry, Zoned Properties is addressing the specific needs of a modern market in highly regulated industries.

Zoned Properties is an accredited member of the Better Business Bureau, the 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”).

We operate our business in two reportable segments

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

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

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

division, a commercial brokerage division, and a property investment portfolio division focused on acquisitions to expand our property

Each of these operating divisions is an important element of the overall business development strategy for long-term growth.

We believe in the value of building relationships with clients and local communities to position the Company for long-term portfolio

and revenue growth backed by sophisticated, safe, and sustainable assets and clients.

The core of our business involves identifying

and developing commercial properties that intend to operate within highly regulated industries, including the regulated and legalized

cannabis industry.

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

permitting requirements related to commercial real estate, that dictate the specific locations and parameters under which regulated properties

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

for example, restricting a regulated property or facility from operating within a certain distance of any parks, schools, churches, or

residential districts, or restricting a regulated property from operating outside a defined set of hours of operation.

When an organization

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

of both the regulated operators and the local community.

The Company currently maintains a portfolio of

properties that we own, develop, and lease.

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

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

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

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

Each regulated property

may undergo a non-standard development process.

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

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

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

As of March 28, 2023, a summary of rental properties owned by us consisted

of the following:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

annual report on Form 10-K contains forward-looking statements regarding our business, financial condition, results of operations and

The Securities and Exchange Commission (the “SEC”) encourages companies to disclose forward-looking information

so that investors can better understand a company’s future prospects and make informed investment decisions.

This annual report

on Form 10-K and other written and oral statements that we make from time to time contain such forward-looking statements that set out

anticipated results based on management’s plans and assumptions regarding future events or performance.

We have tried, wherever

possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,”

“project,” “intend,” “plan,” “believe,” “will” and similar expressions in

connection with any discussion of future operating or financial performance.

In particular, these include statements relating to future

actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal

proceedings, and financial results.

Factors that could cause our actual results of operations and financial condition to differ materially

are set forth in the “Risk Factors” section of this annual report on Form 10-K.

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

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

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

update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect

the occurrence of anticipated or unanticipated events or circumstances.

New factors emerge from time to time, and it is not possible

for us to predict all of such factors.

Further, we cannot assess the impact of each such factor on our results of operations or the extent

to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking

following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere

in this annual report on Form 10-K.

Properties, Inc.

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

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.

Zoned Properties is a technology-driven property investment company

focused on acquiring value-add real estate within the regulated cannabis industry in the United States.

The Company aspires to innovate

within the real estate development sector, focusing on direct-to-consumer real estate that is leased to the best-in-class cannabis retailers.

Headquartered in Scottsdale, Arizona, Zoned Properties is redefining the approach to commercial real estate investment through its standardized

investment model backed by its proprietary property technology.

Zoned Properties has developed a national ecosystem of real estate services

to support its real estate development model, including a commercial real estate brokerage and a real estate advisory practice.

Company operates in two organized segments;

(1) the operations, leasing and management of its commercial properties, herein known as

the “Property Investment Portfolio” segment, and (2) the advisory, brokerage and technology services related to commercial

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

The Company targets commercial properties that face unique

zoning or development challenges, identifies solutions that can potentially have a major impact on their commercial value, and then works

to acquire the properties while securing long-term, absolute-net leases.

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”).

core of our business operations involves identifying, securing, acquiring, and leasing commercial properties that intend to operate within

highly regulated industries, including the legalized cannabis industry.

Within highly regulated industries, local municipalities typically

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

locations and parameters under which regulated properties can operate, including cannabis properties.

We often refer to these requirements

as cannabis approvals.

These regulations often include complex permitting processes that require longer development timelines than traditional

commercial real estate and can include non-standard codes governing each location;

for example, restricting a regulated property or facility

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

from operating outside a defined set of hours of operation.

When an organization can collaborate with local representatives, a proactive

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

to the complex nature of the Company’s core business operations and target investment properties, the Company may secure dozens

of potential property candidates for acquisition and prospective tenant candidates for leasing at any given time, all in the normal course

The process of securing a potential property candidate may include completing contractual agreements such as an option agreement

or a purchase agreement, which may include various contingencies and conditions precedent related to the ultimate consummation of the

acquisition, investment, or transaction.

Simultaneously with the securing of potential property candidates, the Company will advertise

and market a property to prospective tenant candidates for a long-term, absolute-net lease agreement, which may include various contingencies

and conditions precedent related to the ultimate commencement of the lease and tenancy.

In order to deliver a successful investment property

transaction, the Company must collectively receive all cannabis approvals from state and local governing authorities that may be required

at a given property, secure a qualified tenant to lease and operate the property, and complete the acquisition of the property.

Company’s current investment properties are located in Arizona, Illinois, and Michigan with 100% occupancy and a weighted average

lease term over 10 years.

Each of the Company’s leased properties is occupied by a commercial cannabis tenant.

Properties maintains a portfolio of properties that it owns, develops and leases.

As of March 2024, the Company leases land and/or building

space at the six properties in its portfolio to licensed and regulated cannabis tenants in areas with established cannabis regulations

and zoning procedures.

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

leased properties are zoned and permitted as regulated cannabis cultivation and processing facilities.

The Company considers the two

cultivation sites in its portfolio as legacy properties, and may consider selling or leveraging those properties to unlock equity and

create capital availability in the future.

The Zoned Properties investment thesis has evolved over the years as the cannabis industry

has emerged, and is currently focused on investing capital into direct-to-consumer properties, located in state-markets with robust cannabis

consumer demand in the industry.

of March 26, 2024, a summary of rental properties owned by us consisted of the following:

Chino Valley,

Green Valley,

Pleasant Ridge,

(special use)

1 unchanged sentence

(special use)

Date Acquired

5 unchanged sentences

Land Area (Sq.

Undeveloped Land Area (Sq.

Developed Land Area (Sq.

4 unchanged sentences

base rent represents amount of cash payments due from tenants.

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

Annualized $ per Rented Sq.

For Tempe, AZ, table includes

rental income generated from the lease of parking lot space used by a third party as an antenna location.

$ per Rented Sq.

Chino Valley,

1 unchanged sentence

Pleasant Ridge,

The Company focused heavily on the growth of

a diversified revenue stream in 2022 and is moving to take advantage of new opportunities in 2023 and beyond.

We intend to accomplish

this by prospecting new real estate services across the country for private, public, and municipal clients.

We believe that strategic

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

Pursuant to lease agreements with a Significant

Tenant, from the period from May 31, 2020 through September 30, 2022, a Significant Tenant invested a combined total of at least $8,000,000

improvements in and to the properties in Chino Valley.

The increase in the rentable area of the leased premises resulted in an increase

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

Results of Operations

The following comparative analysis on results

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

below and should be read in conjunction with the consolidated financial statements and the notes to those statements for the years ended

December 31, 2022 and 2021, which are included elsewhere in this annual report on Form 10-K.

The results discussed below are for the

years ended December 31, 2022 and 2021.

Comparison of Results of Operations for the Years Ended December

31, 2022 and 2021

For the years ended December 31, 2022 and 2021,

revenues by reportable business segments were as follows:

of Operations

following comparative analysis on results of operations was based primarily on the comparative financial statements, footnotes and related

information for the periods identified below and should be read in conjunction with the consolidated financial statements and the notes

to those statements for the years ended December 31, 2023 and 2022, which are included elsewhere in this annual report on Form 10-K.

The results discussed below are for the years ended December 31, 2023 and 2022.

of Results of Operations for the Years Ended December 31, 2023 and 2022

the years ended December 31, 2023 and 2022, revenues by reportable business segments were as follows:

Property investment portfolio

Rental revenues

Real estate services

Advisory revenues

Brokerage revenues

Total real estate services revenues

Total revenues

For the year ended December 31, 2022, total revenues

amounted to $2,660,090, including Significant Tenants revenues of $1,776,284, as compared to $1,820,485, including Significant Tenant

revenues of $1,255,130, for the year ended December 31, 2021, an increase of $839,605, or 46.1%.

For the year ended December 31, 2022, the increase

in revenues was attributable to an increase in rental revenue from our tenant of $534,660, an increase in brokerage revenue of $206,226

related to commission earned on real estate listings, and an increase in advisory revenues of $98,719.

For the year ended December 31,

2022, the increase in rental revenues as compared to the year ended December 31, 2021 was attributable to an increase in rental revenue

from our Chino Valley property related to a fourth amendment to our lease agreement in connection with an increase in rentable square

footage, and due to the signing of a new lease with our new tenant at our recently acquired property located in Pleasant Ridge, Michigan

which began on December 1, 2022.

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

Operating expenses

For the year ended December 31, 2022, operating

expenses amounted to $2,769,041 as compared to $1,775,785 for the year ended December 31, 2021, an increase of $993,256, or 55.9%.

the years ended December 31, 2022 and 2021, operating expenses consisted of the following:

the year ended December 31, 2023, total revenues amounted to $2,886,991, including property investment portfolio revenues $2,481,892,

which consists of rental revenues, as compared to total revenues of $2,660,090, including rental revenues of $1,795,719, for the year

ended December 31, 2022, an overall increase of $226,901, or 8.5%.

This increase was attributable to an increase in rental revenues of

$686,173, or 38.2%, offset by a net decrease in real estate services revenues of $459,272, or 53.1%, attributable to a decrease in commissions

earned on real estate listings of $518,522, offset by an increase in advisory services revenues of $59,250.

increase in property investment portfolio revenues was primarily due to an amendment to the Company’s leased property in Chino

Valley, Arizona in March 2022, and the signing of a new lease with a new tenant at our recently acquired property located in Pleasant

Ridge, Michigan which began on December 1, 2022.

All of the Company’s real estate properties are leased under absolute-net or triple-net

leases with the Significant Tenants.

Additionally, beginning in August 2023, we began receiving additional rental revenue of $3,500 per

month in connection with a Sublease Agreement with CJK and a subtenant in connection with our Kingman property.

the year ended December 31, 2023, operating expenses amounted to $2,717,804 as compared to $2,769,041 for the year ended December 31,

2022, a decrease of $51,237, or 1.8%.

For the years ended December 31, 2023 and 2022, operating expenses consisted of the following:

Compensation and benefits

4 unchanged sentences

Real estate taxes

Business development costs

Gain on sale of rental property

the year ended December 31, 2022, compensation and benefit expense increased by $743,807, or 152.2%, as compared to the year ended

December 31, 2021.

The increase was attributable to an increase in compensation and benefits of $515,232 and an increase in stock-based

compensation of $228,575, related to the addition of multiple new full-time and part-time team members.

The increase in stock-based

compensation was from the accretion of stock option expense offset by a decrease in the value of common shares issued for services.

During the second quarter of 2022, we began to hire additional staff related to the diversification of our real estate services for

the expansion of both advisory services and brokerage services.

the year ended December 31, 2022, professional fees decreased by $45,234, or 11.4%, as compared to the year ended December 31, 2021.

This decrease was primarily attributable to a decrease in consulting fees of $87,366 due to the hiring of certain consultants that

are now employees, offset by an increase in accounting fees of $5,763, an increase in legal fees of $13,942, and an increase in public

relations fees of $22,255.

For the years ended December 31, 2022 and 2021, we recorded brokerage

fees amounting to $431,029 and $265,208, respectively, representing an increase of $165,821, or 62.5%, from 2021 to 2022.

Brokerage fees

occur as the result of various percentage-based commission splits we pay to our licensed brokerage team members who participate in various

real estate listing transactions.

and administrative expenses consist of expenses such as rent expense, insurance expense, insurance expense, travel expenses, office

expenses, telephone and internet expenses, advertising and marketing expense, and other general operating expenses.

ended December 31, 2022, general and administrative expenses increased by $74,237, or 36.8%, as compared to the year ended December

These increases were primarily attributable to an increase in operating activities related to our real estate services

the year ended December 31, 2022, depreciation expense decreased by $26,150, or 6.8%, as compared to the year ended December 31, 2021.

This decrease was related to the decrease in amortization of intangible assets which were fully amortized.

the year ended December 31, 2022, real estate taxes increased by $29,143, or 33.2%, as compared to the year ended December 31, 2021.

This increase was attributable to an increase in assessed real taxes associated with improvements made on our Chino Valley property,

the year ended December 31, 2022, we recorded a gain from sale of property and equipment of $312.

year ended December 31, 2023, compensation and benefit expense increased by $94,071, or 7.6%, as compared to the year ended December

The increase was attributable to an increase in compensation and benefits of $314,183 related to the addition of multiple

new full-time and part-time team members, and an increase in health insurance expense, offset by a decrease in stock-based compensation

The decrease in stock-based compensation was from a decrease in accretion of stock option expense.

During the second

quarter of 2022, we began to hire additional staff related to the diversification of our real estate services for the expansion of

both advisory services and brokerage services.

For the year ended December

2021, we recorded a gain from sale of our Gilbert property of $51,944.

(Loss) income from operations

As a result of the factors described above, for

the year ended December 31, 2022, loss from operations amounted to $(108,951) as compared to income from operations of $44,700 for the

year ended December 31, 2021, a negative change of $153,651, or 343.7%.

Other (expenses) income

Other (expense) income primarily includes interest expense incurred

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

For the year ended December 31, 2022, total other

expenses, net amounted to $465,404 as compared to total other expenses, net of $210,519, respectively, representing an increase of $254,885,

This increase was attributable to the recording of a loss on note receivable investment of $210,756 that was deemed uncollectible,

the recording of a change in fair value loss from an interest rate swap of $90,237 in connection with our bank note payable, and an increase

in interest expense of $39,950 primarily related to an increase in notes payable.

These increases were offset by a decrease in loss from

unconsolidated joint ventures of $11,215 and a decrease in impairment loss from unconsolidated joint venture of $73,970 which was recorded

As a result of the foregoing, for the years ended

December 31, 2022 and 2021, net loss amounted to $574,355, or $0.05 per common share (basic and diluted), and $165,819, or $0.01 per

common share (basic and diluted), respectively.

Liquidity and Capital Resources

Liquidity is the ability of an enterprise to generate adequate amounts

of cash to meet its needs for cash requirements.

We had cash of $4,335,840 and $1,191,940 as of December 31, 2022 and 2021, respectively.

Our primary uses of cash have been for compensation

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

of rental properties and other lines of business.

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

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

The following trends are reasonably likely to result in changes

in our liquidity over the near to long term:

increase in working capital requirements to finance our current business,

of administrative and sales personnel as the business grows,

cost of being a public company,

increase in investments in joint ventures and other projects, and

increase in investments in rental property.

We may need to raise additional funds, particularly

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

We estimate that based on current plans and assumptions,

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

months from the date of this annual report on Form 10-K.

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

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

We have used these funds to fund our operating

expenses, pay our obligations, acquire and develop rental properties, invest in joint ventures and notes receivable, and to grow our

We may need to raise significant additional capital or debt financing to acquire new properties, to develop existing properties,

to assure we have sufficient working capital for our ongoing operations and debt obligations, and to invest in new joint venture and

other projects.

As discussed elsewhere, during the year ended

December 31, 2021, we contributed $86,000 to the Beakon joint venture and we contributed $90,000 to the Zoneomics Green joint venture.

Additionally, on December 31, 2021, we recorded an other-than-temporary impairment loss of $73,970 because it was determined that the

fair value of our equity method investment in Beakon was less than its carrying value.

Based on management’s evaluation, it was

determined that due to market conditions and lack of committed funding, our ability to recover the carrying amount of the investment

in Beakon was impaired as of December 31, 2021.

East West Bank Swap and Amended 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

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.

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.

The Loan Agreement contains representations,

warranties and covenants customary for a transaction of this type.

Among other things, the Loan Agreement provides as follows:

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;

coverage ratio of 1.50 to 1.0;

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

the sum of all tenant securities deposits under leases, plus $350,000 in operating reserves.

All advances under the MAL bear interest at a

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

2022 plus 2.25%.

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

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

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

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

Zoned Arizona may prepay the outstanding principal

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

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

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

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 Swap 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 “Swap Note”)

The Swap 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 Swap 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 Swap Note matures 10 years after its effective date and payments are calculated

based on a 30-year amortization schedule.

In connection with the Swap Note, Zoned Arizona received net proceeds of $4,315,404 which is

net of 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.

On December 31, 2022, principal and interest

due on the East West Bank Swap Note amounted to $4,485,808 and $28,324, respectively.

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 as follows:

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.

Our future operations are dependent on our ability

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

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

We monitor the credit of these

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

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

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

of rent collections.

As of December 31, 2022 and 2021, we had an asset concentration related to our Significant Tenant leases.

of December 31, 2022 and 2021, these Significant Tenants represented approximately 59.8% and 79.2% of total assets, respectively.

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

we may not have enough working capital to support our operations and we would have to seek out new tenants at rental rates per square

less than our current rate per square foot.

We may secure additional financing to acquire

and develop additional and existing properties.

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

credit facilities, or other financing mechanisms.

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

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

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

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

The inability to obtain additional capital

may restrict our ability to grow our business operations.

For the Years Ended December 31, 2022 and

Net cash flow provided by operating activities

was $871,901 for the year ended December 31, 2022, as compared to net cash flow provided by operating activities of $489,257 for the

year ended December 31, 2021, representing an increase of $382,644.

cash flow provided by operating activities for the year ended December 31, 2022 primarily reflected a net loss of $574,355 adjusted

for the add-back of non-cash items consisting of depreciation of $351,043, amortization expense of $9,450, accretion of stock-based

31, 2023, professional fees increased by $36,164, or 10.3%, as compared to the year ended December 31, 2022.

This increase was primarily

attributable to an increase in accounting fees of $15,740, an increase in consulting fees of $97,739, and an increase in other professional

fees of $1,022, offset by a decrease in legal fees of $11,782, and a decrease in public relations fees of $66,555.

For the years ended December

31, 2023 and 2022, we recorded brokerage fees amounting to $64,680 and $431,029, respectively, representing a decrease of $366,349,

or 85.0%, from 2022 to 2023.

Brokerage fees occur as the result of various percentage-based commission splits we pay to our licensed

brokerage team members who participate in various real estate listing transactions.

General and administrative

expenses consist of expenses such as rent expense, insurance expense, insurance expense, travel expenses, office expenses, telephone

and internet expenses, advertising and marketing expense, and other general operating expenses.

For the year ended December 31, 2023,

general and administrative expenses increased by $91,313, or 33.1%, as compared to the year ended December 31, 2022.

These increases

were primarily attributable to an increase in operating activities related to attendance at various industry-related conferences,

an increase in technology services, and an increase in travel expense.

year ended December 31, 2023, depreciation expense increased by $20,268, or 5.6%, as compared to the year ended December 31, 2022.

This increase was related to an increase depreciation of rental properties associated with the purchase of the Pleasant Ridge, MI

property, offset by a decrease in amortization of intangible assets which were fully amortized.

For the year ended December

31, 2023, real estate taxes increased by $46,984, or 40.2%, as compared to the year ended December 31, 2022.

This increase was attributable

to an increase in assessed real taxes associated with improvements made on our Chino Valley property and the purchase of the Pleasant

Ridge, MI property.

For the year ended December

31, 2023, business development costs increased by $26,000, or 100.0%, as compared to the year ended December 31, 2022.

This increase

was attributable to an increase in business development activities and includes costs related to forfeited escrow deposits and the

write off of costs related to projects which we decided not to pursue.

For the year ended December

31, 2022, we recorded a gain from sale of property and equipment of $312 as compared to $0 for the year ended December 31, 2023.

(loss) from operations

a result of the factors described above, for the year ended December 31, 2023, income from operations amounted to $169,187 as compared

to a loss from operations of $(108,951) for the year ended December 31, 2022, a positive change of $278,138, or 255.3%.

(expenses) income, net

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

income (expense).

For the year ended December 31, 2023, total other expenses, net amounted to $657,335 as compared to total other expenses,

net of $449,143, respectively, representing an increase of $208,192, or 46.3%.

This increase was attributable to an increase in interest

expense of $463,543 primarily related to an increase in notes payable and a decrease in interest income of $13,000, offset by a decrease

in loss in fair value from an interest rate swap of $57,595 and a decrease in loss on note receivable investment of $210,756 due to the

impairment of such investment.

the years ended December 31, 2023 and 2022, we incurred an equity method loss of $52,110 and $16,261, respectively, an increase of $35,849,

During the year ended December 31, 2023, we recorded an impairment loss from unconsolidated joint ventures of $45,000 and

a loss from unconsolidated joint ventures of $7,110.

During the year ended December 31, 2022, we recorded a loss from unconsolidated

joint ventures of $16,261.

On December 31, 2023, we recorded an other-than-temporary impairment loss of $45,000 because it was determined

that the fair value of our equity method investment in Zoneomics was less than its carrying value.

Based on management’s evaluation,

it was determined that due to market and regulatory conditions, implementing our Zoneomics business model was at risk and that our ability

to recover the carrying amount of the investment in Zoneomics was impaired.

a result of the foregoing, for the years ended December 31, 2023 and 2022, net loss amounted to $540,258, or $0.04 per common share (basic

and diluted), and $574,355, or $0.05 per common share (basic and diluted), respectively.

and Capital Resources

is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements.

We had cash of $3,099,795

and $4,335,840 as of December 31, 2023 and 2022, respectively.

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

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

All funds received have been

expended in the furtherance of growing the business.

We receive funds from the collection of rental income, and real estate services,

which primarily includes advisory fees and brokerage fees.

The following trends are reasonably likely to result in changes in our liquidity

over the near to long term:

in working capital requirements to finance our current business,

Addition of administrative

and sales personnel as the business grows,

The cost of being a public

An increase in investments

in joint ventures and other projects, and

An increase in investments

in rental properties.

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

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

our present operating expectations for the next 12 months from the date of this annual report on Form 10-K.

Other than revenue received

from the lease of our rental properties and real estate services, and from a bank note, we presently have no other significant alternative

source of working capital.

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

and notes receivable, and to grow our company.

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

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

invest in new joint venture and other projects.

West Bank Swap and Amended Note

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

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.

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;

all times maintain a minimum debt service coverage ratio of 1.50 to 1.0;

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.

advances under the MAL bear interest at a variable rate equal to the greater of (a) the prime rate plus 2%, or (b) a floor rate equal

to the sum of the prime rate as of July 11, 2022 plus 2.25%.

From July 11, 2022 to July 11, 2023, Zoned Arizona agreed to make interest

payments on the outstanding principal balance of the MAL.

From and after July 11, 2023 and continuing until July 11, 2028 (the “Maturity

Date”), Zoned Arizona will pay principal together with interest on the MAL in 60 monthly installments based on the interest rate

set forth in the Note and a principal amortization schedule of 25 years from July 11, 2023 (or if Zoned Arizona makes the Early Amortization

Election, from the date such election is made).

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.

December 7, 2022, Zoned Arizona and the Bank entered into a First Amendment to Loan Agreement (the “First Amendment”).

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.

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 Bank.

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% (9.25% as of December 31, 2023).

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, in 2022, Zoned Arizona received gross proceeds of $4,500,000 and paid fees of $184,596.

Arizona may prepay the outstanding principal under the Swap Note, at any time, subject to the provisions of the Swap Note.

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.

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,

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.

December 31, 2023, principal and interest due on the East West Bank Swap Note amounted to $4,447,068 and $8,861, respectively.

31, 2022, principal and interest due on the East West Bank Swap Note amounted to $4,485,808 and $28,324, respectively.

Land Contract Note Payable

December 5, 2022, in connection with the acquisition of the Woodward Property located in Pleasant Ridge, Michigan, the Company entered

into a land contract 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 as follows:

payments of principal and interest of $12,821 beginning on January 1, 2023, and

A balloon payment of $1,274,117

including the remaining principal and interest on or before December 1, 2028.

December 31, 2023, principal and interest due on the Woodward Property Note Payable amounted to $1,408,962 and $0, respectively.

31, 2022, principal and interest due on the Woodward Property Note Payable amounted to $1,425,000 and $10,687, respectively.

Land Contract Note Payable

February 24, 2023, in connection with the 23634 Land Contract dated February 24, 2023 (see Note 4), the Company entered into a land contract

note payable of $430,000 (the “23634 Land Contract Note Payable”).

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.

On December 31, 2023,

principal and interest due on the 23634 Land Contract Note Payable amounted to $420,269 and $0, respectively.

future operations are dependent on our ability to manage our current cash balance, on the collection of rental and real estate services

revenues and the attainment of new advisory and brokerage clients.

Our real estate properties are leased to Significant Tenants under

triple-net leases for which terms vary.

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

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

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

As of December 31, 2023 and 2022, we had

an asset concentration related to our Significant Tenant leases.

As of December 31, 2023 and 2022, these Significant Tenants represented

approximately 69.4% and 68.7% of total assets, respectively.

If our Significant Tenants are prohibited from operating due to federal

or state regulations or due to COVID-19, or cannot pay their rent, we may not have enough working capital to support our operations and

we would have to seek out new tenants at rental rates per square less than our current rate per square foot.

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

Financing transactions may include the issuance

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

Even if we are able to raise the funds required,

it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek

alternative financing.

Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution

or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock.

inability to obtain additional capital may restrict our ability to grow our business operations.

the Years Ended December 31, 2023 and 2022

cash flow provided by operating activities was $82,547 for the year ended December 31, 2023, as compared to net cash flow provided by

operating activities of $871,901 for the year ended December 31, 2022, representing a decrease of $789,354.

flow provided by operating activities for the year ended December 31, 2023 primarily reflected a net loss of $540,258 adjusted for

the add-back of non-cash items consisting of depreciation of $380,761, amortization of debt discount of $18,460, accretion

of stock-based stock option expense of $116,643, a loss on forfeited escrow deposit of $15,000, a loss from unconsolidated joint

ventures of $8,370, a non-cash impairment loss from unconsolidated joint ventures of $45,000, and a loss from the changes in fair

value from an interest rate swap of $32,642, offset by changes in operating assets and liabilities primarily consisting of an increase

in deferred rent of $167,393 attributable to rent abatement on our new tenant lease at our Woodward Properties, a decrease in prepaid

expenses and other assets of $31,653, a decrease in lease incentive receivable of $27,523, an increase in accounts payable of $9,576,

a decrease in accrued expenses of $11,698, an increase in contract liabilities of $42,861, and an increase in security deposits payable

of $71,060 attributable to the collection of additional security deposit on our Woodward Properties.

flow provided by operating activities for the year ended December 31, 2022 primarily reflected a net loss of $574,355 adjusted for

the add-back of non-cash items consisting of depreciation of $351,043, amortization expense of $9,450, accretion of stock-based

stock option expense of $336,755, a loss on note receivable investments of $210,756 attributable to the recording of an allowance

5 unchanged sentences

deposit on our Tempe property.

cash flow provided by operating activities for the year ended December 31, 2021 primarily reflected a net loss of $165,819 adjusted

for the add-back of non-cash items consisting of depreciation of $358,294, amortization expense of $28,350, stock-based compensation

expense of $52,000, accretion of stock-based stock option expense of $56,180, a gain on sale of rental property of $(51,944), and

a loss and impairment loss from unconsolidated joint ventures of $101,446, offset by changes in operating assets and liabilities

primarily consisting of an increase in accounts receivable of $2,921, a decrease in prepaid expenses of $71,712, an increase in accounts

payable of $11,244, an increase in accrued expenses of $16,278, and a decrease in deferred rent receivable of $8,987.

During the year ended December 31, 2022, net

cash flow used in investing activities amounted to $2,009,213 as compared to net cash provided by investing activities of $3,348, a change

of $2,012,561.

During the year ended December 31, 2022, net cash used in investing activities was attributable to an increase in lease

incentive receivables related to the disbursement of $500,000 to a Significant Tenant to be used for leasehold improvements, the purchase

of rental property of $867,549 in connection with the acquisition of property in Pleasant Ridge, Michigan, the purchase of property and

equipment of $3,764, an increase in escrow deposits of $590,000 in connection with the acquisition of additional property in Pleasant

Ridge, Michigan which closed in February 2023, and cash used to invest in equity securities of $50,000.

These uses of cash in investing

activities were offset by proceeds from the sale of property and equipment of $2,100.

During the year ended December 31, 2021, cash provided

by investing activities was attributable to proceeds from the sale of rental property of $322,332, offset by cash used for an investment

in a convertible note receivable of $100,000, cash used in the improvement of rental properties of $40,360, cash used for the purchase

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

During the year ended December 31, 2022, net

cash provided by financing activities amounted to $4,281,212 and consisted of net proceeds from notes payable of $4,315,404, offset by

the repayment of notes payable of $14,192 and the repayment of notes payable – related party of $20,000.

We did not have any cash

flows from financing activities during the year ended December 31, 2021.

Contractual Obligations and Off-Balance Sheet

Contractual Obligations

We have certain fixed contractual obligations

and commitments that include future estimated payments.

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

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

We cannot provide certainty regarding the timing and amounts

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

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

operations, and cash flows.

The following tables summarize our contractual

obligations as of December 31, 2022 (dollars in thousands), and the effect these obligations are expected to have on our liquidity and

cash flows in future periods.

the year ended December 31, 2023, net cash flow used in investing activities amounted to $1,239,084 as compared to net cash used in investing

activities of $2,009,213, a decrease of $770,129.

During the year ended December 31, 2023, net cash used in investing activities was

attributable to the purchase of rental property of $1,007,941 primarily in connection with the acquisition of property in Pleasant Ridge,

Michigan, an increase in capitalized permit costs of $38,016, and an increase in escrow deposits of $192,048 in connection with escrow

deposits made on other potential acquisitions of rental properties.

During the year ended December 31, 2022, net cash used in investing

activities was attributable to an increase in lease incentive receivables related to the disbursement of $500,000 to a Significant Tenant

to be used for leasehold improvements, the purchase of rental property of $867,549 in connection with the acquisition of property in

Pleasant Ridge, Michigan, the purchase of property and equipment of $3,764, an increase in escrow deposits of $590,000 in connection

with the acquisition of additional property in Pleasant Ridge, Michigan which closed in February 2023, and cash used to invest in equity

securities of $50,000.

These uses of cash in investing activities were offset by proceeds from the sale of property and equipment of

the year ended December 31, 2023, net cash used in financing activities amounted to $79,508 and consisted of the repayment of notes payable

of $64,508 and the purchase of treasury stock of $15,000.

During the year ended December 31, 2022, net cash provided by financing activities

amounted to $4,281,212 and consisted of net proceeds from notes payable of $4,315,404, offset by the repayment of notes payable of $14,192

and the repayment of notes payable – related party of $20,000.

Obligations and Off-Balance Sheet Arrangements

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

Changes in our business needs, cancellation

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

We cannot provide

certainty regarding the timing and amounts of payments.

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

our determination of amounts presented in the tables, in order to assist in the review of this information within the context of our

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

following tables summarize our contractual obligations as of December 31, 2023 (dollars in thousands), and the effect these obligations

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

Payments Due by Period

3 unchanged sentences

Notes payable

Off-balance Sheet Arrangements

Other than discussed below, we have not entered

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

We have not entered

into any derivative contracts that are indexed to our shares and classified as shareholders’ equity.

Furthermore, we do not have

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

support to such entity.

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

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

Our off-balance sheet arrangement

includes the notional amount of our interest rate swaps which we use to hedge a portion of our exposure to interest rate fluctuations.

Sheet Arrangements

than discussed below, we have not entered into any other financial guarantees or other commitments to guarantee the payment obligations

of any third parties.

We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’

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

as credit, liquidity or market risk support to such entity.

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

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

Our off-balance sheet arrangement includes the notional amount of our interest rate swaps which we use to hedge a portion of our exposure

to interest rate fluctuations.

Currently, our interest rate swap fixes the variable rate interest on our bank swap note payable.

We intend to fund our interest rate

swap payments utilizing cash flows from operations.

As of December 31, 2022, the notional amount of our interest rate swaps was

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial

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

with accounting principles generally accepted in the United States.

The preparation of these consolidated financial statements requires

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

of contingent assets and liabilities.

We continually evaluate our estimates, including those related to income taxes, and the valuation

of equity transactions.

We base our estimates on historical experience and on various other assumptions that we believed to be reasonable

under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities

that are not readily apparent from other sources.

Any future changes to these estimates and assumptions could cause a material change

to our reported amounts of revenues, expenses, assets and liabilities.

Actual results may differ from these estimates under different

assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates

used in the preparation of the audited consolidated financial statements.

Fair value of financial instruments

The carrying amounts reported in the consolidated

balance sheets for cash, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses, and other payables

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

The 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.

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

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 ASC Topic 820.

Interest rate swap

In 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.

to fund our interest rate swap payments utilizing cash flows from operations.

As of December 31, 2023, the notional amount of our interest

rate swaps was $4,461,260.

In interest rate swaps, the notional amount is the specified value upon which interest rate payments will

be exchanged.

The notional amount in interest rate swaps is used to come up with the amount of interest due.

Accounting Estimates

discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which

have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these consolidated

financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and

expenses, and related disclosure of contingent assets and liabilities.

We continually evaluate our estimates, including the critical

ones related to an interest rate swap, the allowance for accounts receivable, impairment of rental properties, the valuation of our investments

in unconsolidated joint ventures, and valuation of equity transactions.

We base our estimates on historical experience and on various

other assumptions that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments

about the carrying values of assets and liabilities that are not readily apparent from other sources.

Any future changes to these estimates

and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities.

Actual results may

differ from these estimates under different assumptions or conditions.

We believe the following critical accounting estimates affect

our more significant judgments and estimates used in the preparation of the financial statements.

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

The Company 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 liability.

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 credit risk.

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

as a derivative liability on the accompanying balance sheet with changes in the fair value reflected in interest expense in the accompanying

statements of operations.

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

Information regarding the interest rate swap is as follows:

The Company 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.

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 credit risk.

estimated fair value of the interest rate swap agreement is reflected as a derivative liability on the accompanying balance sheet with

changes in the fair value reflected in interest expense in the accompanying statements of operations.

The Company uses derivative financial

instruments only to manage interest rate risks and not as investment vehicles.

regarding the interest rate swap is as follows:

Amount on December 31, 2023

Fair Value of

2 unchanged sentences

December 10, 2032

Rental properties

Rental properties are carried at cost less accumulated

depreciation and amortization.

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

are capitalized.

receivable and notes receivable

recognize an allowance for losses on accounts receivable and notes receivable in an amount equal to the estimated probable losses net

of recoveries under the current expected credit loss method.

The allowance is based on an analysis of historical bad debt experience,

current receivables aging and expected future write-offs, as well as an assessment of specific identifiable customer accounts and notes

receivable considered at risk or uncollectible.

On January 1, 2023, we adopted ASC 326, “Financial Instruments - Credit Losses”.

In accordance with ASC 326, an allowance is maintained for estimated forward-looking losses resulting from the possible inability of

customers to make required payments (current expected losses).

The amount of the allowance is determined principally on the basis of

past collection experience and known financial factors regarding specific customers.

The expense associated with the allowance for doubtful

accounts on accounts receivable is recognized in general and administrative expenses.

properties are carried at cost less accumulated depreciation and amortization.

Betterments, major renovations and certain costs directly

related to the improvement of rental properties are capitalized.

Maintenance and repair expenses are charged to expense as incurred.

Depreciation is recognized on a straight-line basis

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

Tenant improvements are amortized on a straight-line basis

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

Upon the acquisition of real estate, we assess

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

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

based on these assessments.

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

and capitalization rates and available market information.

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

historical operating results, known trends, and market/economic conditions.

Our properties are individually reviewed for

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

An impairment

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

an undiscounted basis.

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

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

the analyses are prepared.

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

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

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

and capital requirements that could differ materially from actual results.

We have capitalized land, which is not subject

to depreciation.

Lease accounting

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 the lessee.

This classification will determine whether lease expense is recognized based on an effective interest method

or on a straight-line basis over the term of the lease.

A lessee is also required to recognize a right-of-use asset and a lease liability

for all leases with a term of greater than 12 months regardless of their classification.

Leases with a term of 12 months or less will

be accounted for similar to existing guidance for operating leases today.

The new standard requires lessors to account for leases using

an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases.

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

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 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

date, where the Company is the lessee, at the inception of a contract, the Company assesses whether the contract is, or contains, a lease.

The Company’s assessment is based on:

(1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain

the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right

to direct the use of the asset.

The Company allocates the consideration in the contract to each lease component based on its relative

stand-alone price to determine the lease payments.

For leases where the Company is a lessee, primarily for the Company’s administrative

office lease, the Company analyzed if it would be required to record a lease liability and a right of use asset on its consolidated balance

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

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.

Investment in joint ventures

We have equity investments in various privately

held entities.

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

interest and level of influence.

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

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

Investments are reviewed for changes in circumstance or

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

We evaluate our investments

in these entities for consolidation.

We consider our percentage interest in the joint venture, evaluation of control and whether a variable

interest entity exists when determining whether or not the investment qualifies for consolidation or if it should be accounted for as

an unconsolidated investment under either the equity method of accounting.

If an investment qualifies for the equity method of accounting,

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

The net income or loss of an unconsolidated investment is allocated to its investors in accordance with the provisions of the operating

agreement of the entity.

The allocation provisions in these agreements may differ from the ownership interest held by each investor.

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

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

These items are reported

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

Revenue recognition

We follow ASC Topic 606, Revenue from Contracts

with Customers (“ASC 606”).

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

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

ASC 606 requires an entity

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

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

Rental income includes base rents that each tenant

pays in accordance with the terms of its respective lease and is reported on a straight-line basis over the non-cancellable term of the

lease, which includes the effects of rent abatements under the leases.

The Company commences rental revenue recognition when the tenant

takes possession of the leased space or controls the physical use of the leased space and the leased space is substantially ready for

its intended use.

Currently, the Company’s leases provide

for payments with fixed monthly base rents over the term of the leases.

The leases also require the tenant to remit estimated monthly

payments to the Company for property taxes.

These payments are recorded as rental income and the related property tax expense reflected

separately on the statements of operations.

Revenues from advisory services is recognized

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

Brokerage revenues primarily consists of real

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

escrow closes.

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

ASC Topic 606, the Company records commission revenues and expenses on a gross basis.

Of the criteria listed in ASC Topic 606, the Company

is the primary obligor in the transaction, does not have inventory risk, performs all or part of the service, has credit risk, and has

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

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

of such events.

Stock-based compensation

Stock-based compensation is accounted for based

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

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

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

the vesting period).

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

for an award based on the grant-date fair value of the award.

The Company has elected to recognize forfeitures as they occur as permitted

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

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No.

Depreciation is recognized on a straight-line basis over estimated useful lives of the assets, which range from 5 to 39 years.

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

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

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

allocate the purchase price based on these assessments.

The Company assesses fair value based on estimated cash flow projections that

utilize appropriate discount and capitalization rates and available market information.

Estimates of future cash flows are based on a

number of factors including historical operating results, known trends, and market/economic conditions.

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

an asset may not be recoverable.

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

flows over the anticipated holding period on an undiscounted basis.

An impairment loss is measured based on the excess of the property’s

carrying amount over its estimated fair value.

Impairment analyses are based on our current plans, intended holding periods and available

market information at the time the analyses are prepared.

If our estimates of the projected future cash flows, anticipated holding periods,

or market conditions change, our evaluation of impairment losses may be different and such differences could be material to our consolidated

financial statements.

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

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

occurs when the carrying amount of our rental properties exceeds its recoverable amount.

For our rental property, we considered the recoverable

amount to be the respective properties fair value less costs to sell (FVLCS) plus its value in use (VIU).

The recoverable amount is the

higher of the asset’s fair value less costs to sell (FVLCS) and its value in use (VIU).

FVLCS and VIU as defined as follows:

Value Less Costs to Sell (FVLCS):

value is typically determined by market prices or appraisals or tax value.

any costs that would be incurred to sell the asset (like commissions).

in Use (VIU):

is the present value of the future cash flows the asset is expected to generate.

flows should be based on leases in place.

have capitalized land, which is not subject to depreciation.

in joint ventures

have equity investments in various privately held entities.

We account for these investments either under the equity method or cost method

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

Investments accounted for under the equity method are recorded

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

Investments are

reviewed for changes in circumstance or the occurrence of events that suggest an other than temporary event where our investment may

not be recoverable.

We evaluate our investments in these entities for consolidation.

We consider our percentage interest in the joint

venture, evaluation of control and whether a variable interest entity exists when determining whether or not the investment qualifies

for consolidation or if it should be accounted for as an unconsolidated investment under either the equity method of accounting.

investment qualifies for the equity method of accounting, our investment is recorded initially at cost, and subsequently adjusted for

equity in net income (loss) and cash contributions and distributions.

The net income or loss of an unconsolidated investment is allocated

to its investors in accordance with the provisions of the operating agreement of the entity.

The allocation provisions in these agreements

may differ from the ownership interest held by each investor.

Differences, if any, between the carrying amount of our investment in the

respective joint venture and our share of the underlying equity of such unconsolidated entity are amortized over the respective lives

of the underlying assets as applicable.

These items are reported as a single line item in the statements of operations as income or loss

from investments in unconsolidated affiliated entities.

compensation is accounted for based on the requirements of ASC 718 – “Compensation –Stock Compensation ”,

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

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

for the award (presumptively, the vesting period).

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

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

The Company has elected to recognize forfeitures

as they occur as permitted under ASU 2016-09 Improvements to Employee Share-Based Payment Accounting .

2022, the fair value of stock option grants was estimated on the date of grant using the Black-Scholes option-pricing model with the

following weighted-average assumptions:

dividend yield of 0%;

expected volatility of 109.83%;

risk-free interest rate of 2.88%;

estimated holding period of 10 years.

We did not grant any stock options in 2023.

Accounting Pronouncements

June 2016, the FASB issued ASU No.

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

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

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

The measurement

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

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

An entity must use judgment in determining

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

ASU 2016-13 is effective for annual reporting

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

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

guidance is effective.

In November of 2019, the FASB issued ASU 2019-10, which delayed the implementation of ASU 2016-13 to fiscal years

beginning after December 15, 2022 for smaller reporting companies which applies to the Company.

The Company is currently evaluating the

impact of ASU 2016-13 on its future consolidated financial statements.

Management does not believe that any other recently

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

Not applicable.

FINANCIAL STATEMENTS AND SUPPLEMENTARY

See Index to Consolidated Financial Statements

and Consolidated Financial Statement Schedules appearing on pages F-1 to F-40 of this annual report on Form 10-K.

CHANGES IN AND DISAGREEMENTS WITH

ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Measurement of Credit Losses on

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

ASU 2016-13 requires financial assets measured at amortized cost to be presented

at the net amount expected to be collected.

The measurement of expected credit losses is based on relevant information about past events,

including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported

An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances.

ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal

years, and a modified retrospective approach is required, with a cumulative-effect adjustment to retained earnings as of the beginning

of the first reporting period in which the guidance is effective.

In November of 2019, the FASB issued ASU 2019-10, which delayed the

implementation of ASU 2016-13 to fiscal years beginning after December 15, 2022 for smaller reporting companies which applies to the

The adoption of ASU 2016-13 had no financial impact on our consolidated financial statements.

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

on the accompanying consolidated financial statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

applicable to smaller reporting companies.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements and Consolidated Financial Statement Schedules appearing on pages F-1 to F-31 of this annual

report on Form 10-K.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 7. Management’s Discussion and Analysis