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Item 9A. Controls and Procedures

2024-03-26 compared with 2023-03-28 · 2245 added, 2454 removed, 641 unchanged (88% of the section changed)

CONTROLS AND PROCEDURES

Disclosure controls and procedures

We maintain “disclosure controls and procedures,”

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

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

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

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

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

Our management, with the

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

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

Based on this evaluation, our principal executive

officer and principal financial officer concluded that as of December 31, 2022, our disclosure controls and procedures were not effective.

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

controls and procedures

maintain “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant

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

Disclosure controls and procedures include controls

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

is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information

is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow

timely decisions regarding required disclosure.

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

financial officer, evaluated our company’s disclosure controls and procedures as of the end of the period covered by this annual

report on Form 10-K.

Based on this evaluation, our principal executive officer and principal financial officer concluded that as of December

31, 2023, our disclosure controls and procedures were not effective.

The ineffectiveness of our disclosure controls and procedures was

due to material weaknesses, which we identified in our report on internal control over financial reporting.

control over financial reporting

Internal control over financial reporting

Management’s annual report on internal

annual report on internal control over financial reporting

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

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

Our management, with the participation

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

reporting as of December 31, 2023.

Our management’s evaluation of our internal control over financial reporting was based on the

2013 framework in Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, our management concluded that as of December 31, 2023, our internal control over financial reporting was not

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

control over financial reporting:

Our management, including our principal executive

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

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

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

principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2022.

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

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

Based on this evaluation, our management concluded

that as of December 31, 2022, our internal control over financial reporting was not effective.

The ineffectiveness of our disclosure controls

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

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

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

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

of accounting systems.

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

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

A material weakness is a deficiency or a combination

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

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

Limitations on Effectiveness of Controls

Our principal executive officer and principal

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

and all fraud.

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

the objectives of the control system are met.

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

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

Because of the inherent limitations in all control systems,

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

been detected.

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

can occur because of a simple error or mistake.

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

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

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

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

goals under all potential future conditions;

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

of compliance with the policies or procedures may deteriorate.

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

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

Changes in internal control over financial

There were no changes in our internal control

over financial reporting during the fourth quarter of our fiscal year ended December 31, 2022 that have materially affected, or are reasonably

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

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

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

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

to support hiring of personnel and implementation of accounting systems.

Until such time as we expand our staff to include additional

accounting personnel and hire a full-time chief financial officer, it is likely we will continue to report material weaknesses in our

internal control over financial reporting.

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

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

on a timely basis.

on Effectiveness of Controls

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

financial reporting will prevent all errors and all fraud.

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

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

Further, the design of a control system must reflect

the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Because of the

inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances

of fraud, if any, within our company have been detected.

These inherent limitations include the realities that judgments in decision-making

can be faulty, and that breakdowns can occur because of a simple error or mistake.

Additional controls can be circumvented by the individual

acts of some persons, by collusion of two or more people, or by management override of the controls.

The design of any system of controls

also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will

succeed in achieving its stated goals under all potential future conditions;

over time, controls may become inadequate because of changes

in conditions, or the degree of compliance with the policies or procedures may deteriorate.

Because of the inherent limitations in a

cost-effective control system, misstatements due to error or fraud may occur and not be detected.

in internal control over financial reporting

were no changes in our internal control over financial reporting during the fourth quarter of our fiscal year ended December 31, 2023

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

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND

CORPORATE GOVERNANCE

On January 21, 2022, pursuant to the power granted

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

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

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

The following table sets forth the names, positions

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

All of the current directors’

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

Set forth below is certain information regarding our executive officers

and directors.

Chief Executive Officer, Chief Financial Officer, and Treasurer

and Chief Operating Officer

Legal Officer, Chief Compliance officer, and Corporate Secretary

Overstreet, PhD.

Bryan McLaren is the son of Dr.

Alex McLaren.

Background Information about our Officers and Directors

Biographical information concerning the directors

and executive officers listed above is set forth below.

The information presented includes information each individual has given us about

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

In addition to the information

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

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

to high ethical standards.

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

service to our company and our board of directors.

Bryan McLaren, MBA.

McLaren has served

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

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

Prior to joining the Company, McLaren worked

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

such as Northern Arizona University.

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

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

Chief Executive Officer and Chief Financial Officer, Mr.

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

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

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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

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

on Form 10-K.

All of the current directors’ terms expire as of the Annual Meeting and will serve until their successors are duly

elected and qualified.

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

Bryan McLaren

Chairman, Chief Executive

Officer, Chief Financial Officer, Treasurer, and Secretary

Berekk Blackwell

Blackwell has served

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

Prior to his appointment to these positions

and since September 2020, Mr.

President and Chief

Operating Officer

Independent Director,

Chair of the Compensation Committee

Alex McLaren, MD

Director, Chair of the

Strategic Committee

Independent Director,

Chair of the Audit Committee

Derek Overstreet, PhD.

Independent Director

Independent Director,

Chair of the Nominating and Governance Committee

McLaren is the son of Dr.

Alex McLaren.

Information about our Officers and Directors

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

The information presented includes information

each individual has given us about all positions they hold and their principal occupation and business experience for the past five years.

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

that led our board to conclude that he should serve as a director, we also believe that each of our directors has a reputation for integrity,

honesty and adherence to high ethical standards.

Each has demonstrated business acumen and an ability to exercise sound judgment, as

well as a commitment of service to our company and our board of directors.

McLaren, MBA.

McLaren has served as Chairman and Chief Executive Officer of the Company since 2014 and as Chief Financial Officer

of the Company since 2018.

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

to joining the Company, McLaren worked as a sustainable development expert for both large corporations such as Waste Management, Inc.,

and for institutions of higher education such as Northern Arizona University.

McLaren has a Masters of Business Administration Degree

with an emphasis on Sustainable Development, a Master’s Degree in Sustainable Community Development, and an Executive Master’s

Degree in Sustainability Leadership.

As Chief Executive Officer and Chief Financial Officer, Mr.

McLaren is able to provide our Board

with valuable insight regarding the Company’s operations, its management team and associates as a result of his day-to-day involvement

with the Company.

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

to his appointment to these positions and since September 2020, Mr.

Blackwell served as our Director of Business Development.

From December 2018 until June 2021, Mr.

also served as President of Daily Jam Holdings LLC.

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

From December

2018 until June 2021, Mr.

Blackwell also served as President of Daily Jam Holdings LLC.

From January 2016 to December 2018, he served

as Vice President of Due North Holdings LLC.

Prior to joining the Company, Mr.

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

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

He also led emerging brand and portfolio operations for several private

equity groups investing in the restaurant franchise space.

Blackwell earned his B.A.

Blackwell developed domestic and international markets

for Kahala Brands, a global franchise organization with more than 3,000 retail locations in over a dozen countries.

He also led emerging

brand and portfolio operations for several private equity groups investing in the restaurant franchise space.

Blackwell earned his

in Finance from Fort Lewis College.

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

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

Daniel Gauthier, JD.

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

Gauthier has an extensive

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

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

to joining the Company, Mr.

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

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

Gauthier holds a Juris Doctor degree from

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

The Journal of Law, Science, and Technology.

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

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

Gauthier also holds a bachelor’s degree in psychology from

the University of Arizona.

Art Friedman.

Friedman, who has served

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

for the alcoholic beverage industry.

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

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

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

revenue and increased EBITDA by more than five-fold.

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

Bankruptcy Court, District of

Arizona on November 13, 2020.

Friedman, who has served as a director since 2014, is the Owner/Principal of Triple J Management Services, which specializes

in consulting and professional services for the alcoholic beverage industry.

Friedman was most recently President and CEO of Gold

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

During his tenure as President/CEO,

Gold Coast more than tripled sales revenue and increased EBITDA by more than five-fold.

Over the same period, Mr.

Friedman led significant market share gains through organic

growth as well as consolidating wholesaler acquisitions.

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

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

Friedman graduation

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

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

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

Friedman’s service as a director at

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

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

Alex McLaren, MD.

McLaren, who has

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

Alex was most recently

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

From 2006 until 2016, Dr.

McLaren served as program director

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

He is the former director of Orthopaedic

Education for Banner Good Samaritan Medical Center in Phoenix.

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

at Maricopa County Medical Center between 1998 and 2000.

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

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

McLaren completed

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

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

of educational programs.

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

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

McLaren has established a prized

reputation in his field.

Friedman led significant

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

Friedman began his career with General

Foods Corporation, now part of Kraft Foods.

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

and Miller-Coors.

Friedman graduation Cum Laude with a Bachelor of Science in Business Management from the University of Florida,

Warrington School of Business.

We believe that Mr.

Friedman’s background as an advisor in the area of business management and his

experience in operating, growing and advising companies provides us with the requisite skills and qualifications to serve on our board.

Friedman’s service as a director at the Company since 2014 together with his business background, provides business, governance,

organizational and strategic planning expertise to our Board and makes him a valued member of the Audit Committee, the Compensation Committee,

which he chairs, and the Strategic Committee.

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

and researcher.

Alex was most recently Vice President of Clinical Outcomes for Shared Clarity, LLC from 2016-2019.

From 2006 until 2016,

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

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

He was also the program director

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

He has been in private orthopedic

surgery practice twice during his career in Phoenix.

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

Canada in 1977, Dr.

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

of Southern California in 1983.

McLaren is first and foremost an orthopedic educator and researcher whose career has included

teaching, research and administration of educational programs.

His clinical interest includes orthopedic infections, revision arthroplasty

and complex musculoskeletal trauma.

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

McLaren has established a prized reputation in his field.

We believe that Dr.

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

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

Honaman, who has

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

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

consultant, since 2010.

McLaren’s services provided to numerous organizations

provides us with the requisite skills and qualifications to serve on our board and as a member of the Compensation Committee and the

Strategic Committee, which he chairs.

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

44 North), an insurance agent and consultant, since 2010.

From 2008 to 2009, Mr.

1 unchanged sentence

Prior to that time, Mr.

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

Honaman also served in

several capacities at Wolohan Lumber Co.

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

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

Honaman also served in several capacities at Wolohan Lumber Co.

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

Senior Vice President of Finance and CFO.

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

Honaman brings to the Board extensive

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

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

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

Honaman provides relevant expertise

on accounting, investment and financial matters.

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

44 North), Wilcox Associates, Inc.

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

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

Honaman brings to the Board extensive experience dealing with and overseeing the implementation of accounting principles and financial

reporting rules and regulations.

With his substantial business and management experience for five years as a certified public accountant

and an auditor at Ernst & Young LLP serving numerous public companies in various business sectors, including insurance agencies,

Honaman provides relevant expertise on accounting, investment and financial matters.

His service as a chief financial officer at

Advanced Benefit Solutions, Inc.

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

and Wolohan Lumber Co., together with his accounting and management

experience, make him a valued member of our Board, Compensation Committee and Strategic Committee, and an effective Non-Executive Chair

of the Audit Committee.

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

Derek Overstreet, PhD.

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

Overstreet, PhD.

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

Sonoran Biosciences, Inc.

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

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

Engineering from Arizona State University.

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

including drug delivery.

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

develops new sustained-release pharmaceutical formulations for applications including orthopedic infection

and postoperative pain management.

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

University and a Doctoral degree in Biomedical Engineering from Arizona State University.

His expertise is in the development of novel

polymer-based materials for medical applications including drug delivery.

He has authored 11 peer-reviewed scientific publications and

two patent applications.

We believe that Dr.

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

and implementation of the Zoned Properties’ business model.

Overstreet’s experience navigating the scientific field of pharmaceuticals and drug

delivery can be instrumental in assisting the strategic development and implementation of the Zoned Properties’ business model.

Prior to 2012, Dr.

Overstreet was a post-doctoral fellow at the Laboratory

for Nanomedicine at the Barrow Neurological Institute.

Kane, who has served as a director since January

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

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

Overstreet was a post-doctoral fellow at the Laboratory for Nanomedicine at the Barrow Neurological Institute.

Kane, who has served as a director since January 21, 2022, is the co-founder and Managing Partner of Diamond Bridge Capital,

an investment firm, where he has managed a portfolio of public and private investments primarily focused on the small cap sector since

In addition, since May 2021, Mr.

Kane has served as an

advisor to Harbor Access LLC, a U.S.

and Canadian based investor relations firm.

In this role, he advises companies on corporate strategy

and investor awareness.

Kane has served as an advisor to Harbor Access LLC, a U.S.

and Canadian based investor relations

In this role, he advises companies on corporate strategy and investor awareness.

In addition, Mr.

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

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

Kane has a long history

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

analyst at Sidoti & Co.

and working for the billion dollar Michael Steinhardt family office.

Kane was one of the first investors

in GrowGeneration Corp.

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

He graduated from Troy University,

Involvement in Certain Legal Proceedings

Except as noted above, our directors and executive

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

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

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

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

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

permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities

or banking activities;

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

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

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

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

Kane owns and manages a real

estate portfolio in the New York and Connecticut regions.

From August 2014 to July 2020, he served as a research analyst for Wooster

Capital Management, LLC, a hedge fund.

Kane has a long history in the investment management business, previously working at the multi-billion

dollar Schonfeld Group hedge fund, serving as a published analyst at Sidoti & Co.

and working for the billion dollar Michael Steinhardt

family office.

Kane was one of the first investors in GrowGeneration Corp.

GRWG) and served on its board of directors from

May 2014 to January 2018.

He graduated from Troy University, with a B.S.

in Certain Legal Proceedings

as noted above, our directors and executive officers have not been involved in any of the following events during the past 10 years:

any bankruptcy

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

bankruptcy or within two years prior to that time;

any conviction in a criminal

proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

being subject to any order,

judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily

enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;

being found by a court

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

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

being the subject of, or

a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended

or vacated, relating to an alleged violation of:

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

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

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

or removal or prohibition order;

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

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

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

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

associated with a member.

Code of Ethics

We have adopted a code of business conduct and

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

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

We intend to disclose any amendments

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

extent required by applicable rules and exchange requirements.

Director Independence

Four of our six board members are independent.

law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent

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

or prohibition order;

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

being the subject of, or

a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined

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

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

with a member.

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

responsible for financial reporting.

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

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

filings under the Exchange Act to the extent required by applicable rules and exchange requirements.

of our six board members are independent.

The Board has determined that each of Messrs.

Friedman, Honaman, Kane, and Dr.

Overstreet is an independent director pursuant to the

NASDAQ listing standards.

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

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

In assessing the independence of our directors,

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

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

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

Where relationships

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

impairs the directors’ independence.

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

affirmatively determined that none of the individuals serving as non-employee directors during the fiscal year ended December 31, 2022

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

Bryan McLaren was not considered an independent

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

Treasurer, Secretary and Chairman of the Board.

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

Board during the fiscal year ended December 31, 2022 because Bryan McLaren is the son of Dr.

Board of Directors and Board Committees

All of our directors and director nominees are

encouraged to attend the annual meetings of our stockholders.

The Board of Directors held two meetings during

the fiscal year ended December 31, 2022.

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

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

Our Board currently has four committees:

the Audit Committee, the Strategic

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

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

standing Board committees were:

Overstreet is

an independent director pursuant to the NASDAQ listing standards.

Under the NASDAQ rules, no director qualifies as independent unless

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

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

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

and their respective affiliated companies.

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

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

the Company and our management.

Where relationships exist, the Board determines whether the relationship between the Company and the

directors or the directors’ affiliated companies impairs the directors’ independence.

After consideration of the directors’

relationships with the Company, the Board has affirmatively determined that none of the individuals serving as non-employee directors

during the fiscal year ended December 31, 2023 had a material relationship with us and that each of such non-employee directors is independent.

McLaren was not considered an independent director during his service on the Board during the fiscal year ended December 31, 2023 and

2022because of his employment as our Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Treasurer, and Secretary.

Alex McLaren, MD was not considered an independent director during his service on the Board during the fiscal years ended December 31,

2023 and 2022 because Bryan McLaren is the son of Dr.

of Directors and Board Committees

of our directors and director nominees are encouraged to attend the annual meetings of our stockholders, as may be applicable.

Board of Directors held two meetings during the fiscal year ended December 31, 2023.

Each of our current directors attended 100% of the

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

Board currently has four committees:

the Audit Committee, the Strategic Committee, the Compensation Committee, and the Nominating and

Governance Committee.

As of March 26, 2024, the members and Chairs of our standing Board committees were:

Independent Directors

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Alex McLaren, MD

Audit Committee

All Audit Committee members are “independent”

under the NASDAQ listing standards and SEC rules and regulations.

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

Audit Committee, Mr.

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

Friedman and Dr.

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

as established by the SEC.

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

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

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

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

regarding accounting, internal controls and audit matters.

Audit Committee members are “independent” under the NASDAQ listing standards and SEC rules and regulations.

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

Honaman, meets the definition of an “audit committee

financial expert” as established by the SEC, and that Mr.

Friedman, Dr.

Overstreet, and Mr.

Kane as the three other members of

the Audit Committee, meet the definition of “financially literate” as established by the SEC.

The Audit Committee provides

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

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

procedures for the receipt, retention, response to and treatment of complaints regarding accounting, internal controls and audit matters.

In addition, the Audit Committee is responsible for:

1 unchanged sentence

examination and any accompanying management letters;

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

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

and approving the services provided by the independent accountants;

the internal audit function;

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

The responsibilities of the Audit Committee are

more fully described in the Audit Committee’s charter.

The Audit Committee held four meetings during

the fiscal year ended December 31, 2022.

Compensation Committee

All Compensation Committee members other than

assessing the independence

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

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

reviewing and approving

the services provided by the independent accountants;

overseeing the internal

audit function;

reviewing our significant

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

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

Audit Committee held four meetings during the fiscal year ended December 31, 2023.

Compensation Committee members other than Dr.

McLaren are “independent” under applicable NASDAQ listing standards.

The Compensation Committee assists the Board in fulfilling

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

development and succession planning.

In addition, the Compensation Committee is responsible for:

The Compensation

Committee assists the Board in fulfilling its oversight responsibilities relating to executive compensation, employee compensation and

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

In addition, the Compensation Committee is responsible

the performance of our Chief Executive Officer;

the compensation and benefits for our Chief Executive Officer and other executive officers;

our compensation policies and practices;

administering

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

administered by the Board);

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

The Compensation Committee reviews and discusses

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

The responsibilities of

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

The Compensation Committee held two meetings

during the fiscal year ended December 31, 2022.

Strategic Committee

All Strategic Committee members other than Dr.

determining the compensation

and benefits for our Chief Executive Officer and other executive officers;

establishing our compensation

policies and practices;

administering our incentive

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

by the Board);

approving the adoption

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

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

proxy statement.

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

Compensation Committee held two meetings during the fiscal year ended December 31, 2023.

Strategic Committee members other than Dr.

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

The Strategic Committee assists the Board in developing

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

In addition, the

Strategic Committee is responsible for:

The Strategic

Committee assists the Board in developing and maintaining the Company’s business strategies and any related matters required by

federal securities laws.

In addition, the Strategic Committee is responsible for:

the Company’s current business strategies.

new business strategies for the Company.

business strategy analyses to the Board.

Explore new business strategies

for the Company.

Report business strategy

analyses to the Board.

The Strategic Committee held two meetings during the fiscal year ended December 31, 2023.

During the fourth quarter of the fiscal year

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

Nominating and Governance Committee

All Nominating and Governance members (except

and Governance Committee

Nominating and Governance members (except for Dr.

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

The Nominating and Governance Committee assists

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

election of Board Members.

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

Nominating and Governance Committee assists the Board in fulfilling its oversight responsibilities relating to Company and Board policies,

and in relation to the nomination and election of Board Members.

In addition, the Nominating and Governance Committee is responsible

and reviewing the Nominating and Governance Committee Charter;

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

Insider Trading Policy and Code of Ethics.

The responsibilities of the Nominating and Governance

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

The Nominating and Governance Committee held

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

Officer and Director Indemnification Agreements

The Company entered into an Indemnification Agreement

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

officers and directors.

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

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

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

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

of expenses and contribution.

establishing and reviewing

various Company policies, such as the Company’s Insider Trading Policy and Code of Ethics.

responsibilities of the Nominating and Governance Committee are more fully described in the Nominating and Governance Committee’s

Nominating and Governance Committee held two meetings during the fiscal year ended December 31, 2023.

the fourth quarter of the fiscal year ended December 31, 2023, there were no material changes to the procedures by which stockholders

may recommend nominees to the Board.

and Director Indemnification Agreements

Company entered into an Indemnification Agreement (each, an “Indemnification Agreement” and collectively, the “Indemnification

Agreements”) with each of the Company’s officers and directors.

The Indemnification Agreements supplement the indemnification

provisions provided in the Company’s articles of incorporation and bylaws and any resolutions adopted pursuant thereto and generally

provide that the Company shall indemnify the indemnitees to the fullest extent permitted by applicable law, subject to certain exceptions,

against expenses, judgments, fines and other amounts actually and reasonably incurred in connection with their service as a director

or officer and also provide for rights to advancement of expenses and contribution.

EXECUTIVE COMPENSATION

Summary Compensation

The following 2022 Summary Compensation Table

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

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

following 2023 Summary Compensation Table (the “SCT”) summarizes all compensation recorded by us for the years ended December

31, 2023 and 2022 for our “named executive officers” as such term is defined in Item 402(m)(2) of Regulation S-K (each, an

“NEO” and collectively, the “NEOs”).

Summary Compensation Table

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Daniel Gauthier

Chief Legal Officer and Chief Compliance Officer (2)

Former Chief Legal Officer and Chief Compliance Officer

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

On January 21, 2022, we granted Mr.

Blackwell an option, pursuant to

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

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

The options vest as to 25,000 of such

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

In connection

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

over the vesting period.

On January 21, 2022, we granted Mr.

Blackwell a stock option pursuant to our 2016 Equity Compensation Plan

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

The grant date of the stock option

was January 21, 2022 and the options expire on January 21, 2032.

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

Blackwell a stock option pursuant

to our 2016 Equity Compensation Plan to purchase 75,000 of the Company’s common stock at an exercise price of $1.00 per share.

The grant date of the stock option was January 21, 2022 and the options expire on January 21, 2032.

The option vests as to (i) 15,000

of such shares on January 21, 2022;

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

The fair value of

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

Amounts reflected under “All

Other Compensation” related to consulting fees paid to Mr.

Blackwell prior to him becoming our Chief Operating Officer.

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

On July 1, 2022, we granted

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thereafter through July 1, 2032.

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

expense over the vesting period.

As required by SEC rules,

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

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

“Note 11 – Shareholders’ Equity”.

Narrative Disclosure to Summary Compensation Table

Except as otherwise described below, there are

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

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

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

McLaren Employment Agreement & Golden Parachute

On May 23, 2018, we entered into an employment

agreement with Mr.

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

over the vesting period.

Amounts reflected under “All Other Compensation” related to consulting fees paid to Mr.

prior to him becoming our Chief Legal Officer.

In September 2023, Mr.

Gauthier resigned as Chief Legal Officer and Chief Compliance

Officer to pursue other business opportunities.

As required by SEC rules, the amounts in this column

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

A discussion of the assumptions and methodologies

used to calculate these amounts, are contained in the notes to our financial statements under “Note 11 – Shareholders’

Disclosure to Summary Compensation Table

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

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

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

following a change in control of the Company.

Employment Agreement & Golden Parachute Agreement

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

McLaren (the “2018 Employment Agreement”).

Pursuant to the terms of the 2018 Employment Agreement, the

Company agreed to continue to pay Mr.

McLaren a base annual salary of $214,500, and to award Mr.

McLaren with an annual and/or quarterly

bonus payable in either cash and/or equity of no less than 2.5% of the Company’s net income for the associated period.

The 2018 Employment Agreement has a term of 10

Pursuant to the

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

McLaren a base annual salary of $214,500, and to award

McLaren with an annual and/or quarterly bonus payable in either cash and/or equity of no less than 2.5% of the Company’s net

income for the associated period.

2018 Employment Agreement has a term of 10 years.

The term and Mr.

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

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

in any of the following circumstances:

McLaren dies;

McLaren receives benefits under the long-term disability insurance coverage then

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

immediately, if Mr.

receives benefits under the long-term disability insurance coverage then

provided by the Company

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

McLaren’s disability;

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

occasion thereof;

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

of the basis for such Termination;

the option of the Company, without Cause;

McLaren at any time with Good Reason (as hereinafter defined), upon 30 days’ prior written notice to the Company delivered

not later than within 90 days of the existence of the condition therefor;

McLaren at any time without Good Reason, upon not less than three months’ prior written notice to the Company.

In the event of a Termination for any reason

or for no reason whatsoever, or upon the expiration date of the 2018 Employment Agreement, whichever comes first, all rights and obligations

under the 2018 Employment Agreement shall cease (i) as to the Company, except for the Company’s obligations for the payment of

applicable severance benefits thereunder, and for indemnification thereunder, and (ii) as to Mr.

McLaren, except for his obligation under

the restrictive covenants in the 2018 Employment Agreement.

The Company and Mr.

McLaren also entered into

a Golden Parachute Agreement (the “Golden Parachute Agreement”) on May 23, 2018.

No benefits shall be payable under the Golden

Parachute Agreement unless there shall have been a change in control of the Company, as set forth below.

For purposes of the Golden Parachute

Agreement, a “change in control of the Company” shall mean a change of control of a nature that would be required to be reported

in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

For purposes of the Golden Parachute Agreement,

“Cause” means termination upon (a) the willful and continued failure to substantially perform duties with the Company after

a written demand for substantial performance is delivered by the Board, which demand specifically identifies the manner in which the

Board believes that duties have not substantially been performed, or (b) the willful engaging in conduct which is demonstrably and materially

injurious to the Company, monetarily or otherwise.

For purposes of the Golden Parachute Agreement,

“Good Reason” means, without express written consent, the occurrence after a change in control of the Company of any of the

following circumstances unless, such circumstances are fully corrected prior to the date of Termination specified in the notice of Termination:

material diminution in Mr.

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

in control of the Company;

material diminution in Mr.

on the expiration date,

as the same may be extended by the parties by written amendment to the 2018 Employment Agreement prior to the occasion thereof;

at the option of the Company

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

McLaren of the basis for such Termination;

at the option of the Company,

without Cause;

McLaren at any time

with Good Reason (as hereinafter defined), upon 30 days’ prior written notice to the Company delivered not later than within

90 days of the existence of the condition therefor;

McLaren at any time

without Good Reason, upon not less than three months’ prior written notice to the Company.

the event of a Termination for any reason or for no reason whatsoever, or upon the expiration date of the 2018 Employment Agreement,

whichever comes first, all rights and obligations under the 2018 Employment Agreement shall cease (i) as to the Company, except for the

Company’s obligations for the payment of applicable severance benefits thereunder, and for indemnification thereunder, and (ii)

McLaren, except for his obligation under the restrictive covenants in the 2018 Employment Agreement.

Company and Mr.

McLaren also entered into a Golden Parachute Agreement (the “Golden Parachute Agreement”) on May 23, 2018.

No benefits shall be payable under the Golden Parachute Agreement unless there shall have been a change in control of the Company, as

set forth below.

For purposes of the Golden Parachute Agreement, a “change in control of the Company” shall mean a change

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

the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the Company is in fact required to comply

with that regulation, provided that, without limitation, such a change in control shall be deemed to have occurred if (A) any “person”

(as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under

an employee benefit plan of the Company or a corporation owned, directly or indirectly, by the shareholders of the Company in substantially

the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule

13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the combined voting

power of the Company’s then outstanding securities;

or (B) during any period of two consecutive years (not including any period

prior to the execution of the Golden Parachute Agreement), individuals who at the beginning of such period constitute the Board and any

new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction

described in clauses (A) or (D) of this paragraph) whose election by the Board or nomination for election by the Company’s shareholders

was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the

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

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

(D) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger

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

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

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

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

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

purposes of the Golden Parachute Agreement, “Cause” means termination upon (a) the willful and continued failure to substantially

perform duties with the Company after a written demand for substantial performance is delivered by the Board, which demand specifically

identifies the manner in which the Board believes that duties have not substantially been performed, or (b) the willful engaging in conduct

which is demonstrably and materially injurious to the Company, monetarily or otherwise.

purposes of the Golden Parachute Agreement, “Good Reason” means, without express written consent, the occurrence after a

change in control of the Company of any of the following circumstances unless, such circumstances are fully corrected prior to the date

of Termination specified in the notice of Termination:

diminution in Mr.

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

of the Company;

a material diminution in

McLaren’s base compensation;

material change in the geographic location at which Mr.

a material change in the

geographic location at which Mr.

McLaren performs his duties;

material diminution in the authority, duties, or responsibilities of the supervisor to whom Mr.

McLaren is required to report, including

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

material diminution in the budget over which Mr.

a material diminution in

the authority, duties, or responsibilities of the supervisor to whom Mr.

McLaren is required to report, including a requirement that

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

a material diminution in

the budget over which Mr.

McLaren retains authority;

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

McLaren was entitled, or any compensation

plan in which Mr.

a material breach under

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

McLaren was entitled, or any compensation plan in which

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

total compensation;

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

McLaren’s total

compensation;

a material breach under

any agreement with the Company to provide Mr.

McLaren benefits substantially similar to those enjoyed by Mr.

McLaren under any of the Company’s life insurance, medical, health and accident, or disability plans in which he was participating

at the time of the change in control of the Company, the failure to continue to provide Mr.

McLaren with a Company automobile or

allowance in lieu of it, if Mr.

McLaren was provided with such an automobile or allowance in lieu of it at the time of the change

of control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such

benefits or deprive Mr.

McLaren under any of

the Company’s life insurance, medical, health and accident, or disability plans in which he was participating at the time of

the change in control of the Company, the failure to continue to provide Mr.

McLaren with a Company automobile or allowance in lieu

of it, if Mr.

McLaren was provided with such an automobile or allowance in lieu of it at the time of the change of control of the

Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive

McLaren of any material fringe benefit enjoyed by Mr.

McLaren at the time of the change in control of the

Company, or the failure by the Company to provide him with the number of paid vacation days to which he is entitled on the basis

of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of the change

in control of the Company;

Following a change in control of the Company,

upon termination of Mr.

McLaren at the time of the change in control of the Company, or the failure

by the Company to provide him with the number of paid vacation days to which he is entitled on the basis of years of service with

the Company in accordance with the Company’s normal vacation policy in effect at the time of the change in control of the Company;

a change in control of the Company, upon termination of Mr.

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

McLaren will be entitled to the following benefits:

will be entitled to the following benefits:

any period that Mr.

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Agreement is terminated.

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

McLaren other than for Good Reason, disability, death

or retirement, the Company will pay Mr.

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

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

McLaren is entitled under any compensation

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

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

for Good Reason, Mr.

McLaren will be entitled to benefits provided below:

employment is terminated by the Company for Cause or by Mr.

McLaren other than for Good Reason, disability, death or retirement,

the Company will pay Mr.

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

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

McLaren is entitled under any compensation plan of the Company

at the time such payments are due.

If employment by the Company

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

McLaren for Good Reason, Mr.

will be entitled to benefits provided below:

Company will pay Mr.

2 unchanged sentences

McLaren is entitled under any compensation plan of the Company.

lieu of any further salary payments to Mr.

of any further salary payments to Mr.

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

3 unchanged sentences

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

Company will pay to Mr.

The Company will pay to

McLaren any deferred compensation allocated or credited to Mr.

McLaren or his account as of the date of Termination.

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

McLaren under

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

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

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

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

McLaren (whether

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

common stock covered by each such option.

Company will also pay to Mr.

In lieu of shares of common

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

McLaren under the Company’s stock

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

McLaren will receive an amount

in cash equal to the product of (i) the excess of the closing price of the Company’s common stock as reported on or nearest

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

the date of Termination), over the per share exercise price of each option held by Mr.

McLaren (whether or not then fully exercisable)

plus the amount of any applicable cash appreciation rights, times (ii) the number of the Company’s common stock covered by

each such option.

The Company will also pay

McLaren all legal fees and expenses incurred by Mr.

1 unchanged sentence

the event that Mr.

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

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

McLaren under any other agreements or arrangements

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

subject to an overall maximum limit.

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

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

Blackwell Employment Agreement

On July 26, 2022, the Company entered into an

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

Blackwell (the “Blackwell Employment Agreement”).

Pursuant to the terms

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

Blackwell a base annual salary of $150,000 for his services as President

and Chief Operating Officer.

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

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

McLaren under any other agreements or arrangements with any persons

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

maximum limit.

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

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

Employment Agreement

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

Blackwell (the “Blackwell Employment

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

Blackwell a base annual

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

The Company may also award Mr.

Blackwell discretionary cash and/or equity bonuses.

The Blackwell Employment Agreement has a term

of one year, expiring on July 1, 2023.

During the initial term, neither party may terminate the Blackwell Employment Agreement except

for Cause (as hereinafter defined).

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

Blackwell discretionary

cash and/or equity bonuses.

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

During the initial term, neither party may terminate

the Blackwell Employment Agreement except for Cause (as hereinafter defined).

For purposes of the Blackwell Employment Agreement, Cause,

with respect to Mr.

Blackwell, means:

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

material violation of any material written rule or policy of the Company applicable to Mr.

Blackwell and which Mr.

Blackwell fails

to correct within 10 days after notice;

(ii) misconduct by Mr.

Blackwell fails to

correct within 10 days after notice;

(ii) misconduct

Blackwell to the material and demonstrable detriment of the Company;

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

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

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

With respect to the Company, “Cause”

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

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

The Blackwell Employment Agreement will continue

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

upon 30 days’ written notice.

The Blackwell Employment Agreement contains representations,

warranties and covenants customary for an agreement of this type.

Gauthier Employment

On May 27, 2022, the

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

Gauthier (the “Gauthier

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

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

respect to the Company, “Cause” means the Company’s material failure to perform the Company’s obligations and

fulfill the covenants and agreements in the Blackwell Employment Agreement, after notice and failure to cure, as provided in the Blackwell

Employment Agreement.

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

Gauthier a base

annual salary of $135,000 for his services.

The Company may also award Mr.

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

discretion of the Company’s executive management.

The Gauthier Employment

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

During the initial one-year

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

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

with respect to Mr.

Gauthier, means:

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

of the Company applicable to Mr.

Gauthier and which Mr.

Gauthier fails to correct within 10 days after Mr.

Gauthier receives written

notice from the Company;

(ii) misconduct by Mr.

Gauthier to the material and demonstrable

detriment of the Company;

Gauthier’s conviction (by a court of competent

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

Gauthier’s material failure to perform his obligations

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

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

After expiration of the

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

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

Outstanding Equity Awards at 2022 Fiscal Year-End

The following table sets forth information as options outstanding

on December 31, 2022.

Blackwell Employment Agreement will continue to be in full force and effect after July 1, 2023, except that either party may terminate

the Blackwell Employment Agreement for any reason upon 30 days’ written notice.

Blackwell Employment Agreement contains representations, warranties and covenants customary for an agreement of this type.

Equity Awards at 2023 Fiscal Year-End

following table sets forth information as options outstanding on December 31, 2023.

OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END

8 unchanged sentences

Berekk Blackwell

Daniel Gauthier

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

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

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

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

Pay Versus Performance (PVP)

In accordance with the SEC’s disclosure requirements regarding

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

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

Pay versus Performance Table - Compensation

Salary, Bonus, Stock Awards, and All Other Compensation

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

The primary difference between the calculation of CAP

and SCT total compensation is “Stock Awards.”

Vest annually

at 25,000 options per year through December 2024.

Vest annually at 10,000

options per year through January 1, 2031.

Vest annually at 7,500

options per year through January 21, 2030.

Versus Performance (PVP)

accordance with the SEC’s disclosure requirements regarding pay versus performance (“PVP”), this section presents the

SEC-defined “Compensation Actually Paid,” or “CAP”.

Also required by the SEC, this section compares CAP to various

measures used to gauge performance at Company.

versus Performance Table - Compensation Definitions

Bonus, Stock Awards, and All Other Compensation are each calculated in the same manner for purposes of both CAP and SCT values.

difference between the calculation of CAP and SCT total compensation is “Stock Awards.”

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

1 unchanged sentence

Pay Versus Performance Table

In accordance with the SEC’s new PVP rules,

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

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

accordance with the SEC’s new PVP rules, the following table sets forth information concerning the compensation of our NEOs for

each of the fiscal years ended December 31, 2023, 2022 and 2021, and our financial performance for each such fiscal year:

Actually Paid

1 unchanged sentence

Initial Fixed

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

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

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

and Dan Gauthier.

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

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

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

The principal executive

officer (“PEO”) in 2023, 2022 and 2021 is Bryan McLaren, our Chief Executive Officer and Chief Financial Officer.

non-PEO NEOs in the 2023 and 2022 reporting year are Berekk Blackwell and Dan Gauthier.

The non-PEO NEO in the 2021 reporting year

was Berekk Blackwell.

The CAP was calculated

beginning with the PEO’s SCT total.

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

Deducted from

Average Non-PEO NEO

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

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

the SEC rules.

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

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

value of stock options reported for CAP purposes in columns (C) and (E) above was estimated using a Black-Scholes option pricing

model for the purposes of this PVP calculation in accordance with the SEC rules.

This model uses both historical data and current

market data to estimate the fair value of options and requires several assumptions.

The assumptions used in estimating fair value

for awards granted during 2023, 2022 and 2021 were as follows:

52.2 – 106.66%

106.66 – 112.26%

108.73 – 117.03%

Expected life (in years)

1 unchanged sentence

Risk-free rate

Securities Authorized for Issuance under Equity Compensation Plans

On August 9, 2016, our Board of Directors authorized

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

Authorized for Issuance under Equity Compensation Plans

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

The 2016 Plan was approved by shareholders on November 21, 2016.

The 2016 Plan’s purpose is to encourage ownership in the Company by employees, officers, directors and consultants whose

long-term service the Company considers essential to its continued progress and, thereby, encourage recipients to act in the stockholders’

interest and share in the Company’s success.

The 2016 Plan authorizes the grant of awards in the form of options intended to qualify

as incentive stock options under Section 422 of the Code, options that do not qualify (non-statutory stock options) and grants of restricted

shares of common stock.

Restricted shares granted pursuant to the 2016 Plan are amortized to expense over the three-year vesting period.

The 2016 Plan’s purpose is to encourage ownership in the Company

by employees, officers, directors and consultants whose long-term service the Company considers essential to its continued progress and,

thereby, encourage recipients to act in the stockholders’ interest and share in the Company’s success.

The 2016 Plan authorizes

the grant of awards in the form of options intended to qualify as incentive stock options under Section 422 of the Code, options that

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

Restricted shares granted pursuant to the

2016 Plan are amortized to expense over the three-year vesting period.

Options vest and expire over a period not to exceed seven years.

If any share of common stock underlying a stock option that has been

granted ceases to be subject to a stock option, or if any shares of common stock that are subject to any other stock-based award granted

are forfeited or terminate, such shares shall again be available for distribution in connection with future grants and awards under the

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

On December 31, 2022, 8,897,500

shares are available for future issuance.

The Company also continues to maintain its 2014

Plan, pursuant to which 1,250,000 previously awarded stock options are outstanding.

The 2014 Plan has been superseded by the 2016 Plan.

Accordingly, no additional shares subject to the existing 2014 Plan will be issued and the 1,250,000 shares issuable upon exercise of

stock options will be issued pursuant to the 2014 Plan, if exercised.

As of December 31, 2022, options to purchase 1,250,000 shares of

common stock are outstanding pursuant to the 2014 Plan.

The table below sets forth information as of

December 31, 2022.

If any share of common stock underlying a stock option that has been granted ceases to be subject to a stock option, or if any shares

of common stock that are subject to any other stock-based award granted are forfeited or terminate, such shares shall again be available

for distribution in connection with future grants and awards under the 2016 Plan.

As of December 31, 2023, 1,012,500 stock option awards

have been granted under the 2016 Plan.

On December 31, 2023, 8,987,500 shares are available for future issuance.

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

Plan has been superseded by the 2016 Plan.

Accordingly, no additional shares subject to the existing 2014 Plan will be issued and the

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

As of December 31, 2023,

options to purchase 1,250,000 shares of common stock are outstanding pursuant to the 2014 Plan.

table below sets forth information as of December 31, 2023.

Plan Category

7 unchanged sentences

Equity compensation plans not approved by security holders

Director Compensation

The following table sets forth compensation paid,

earned or awarded during 2022 to each of our directors, other than Bryan McLaren, whose compensation is described above in the “2022

Summary Compensation Table”.

following table sets forth compensation paid, earned or awarded during 2023 to each of our directors, other than Bryan McLaren, whose

compensation is described above in the “2023 Summary Compensation Table”.

Director Compensation

1 unchanged sentence

Derek Overstreet

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

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

statements under “Shareholders’ Deficit”.

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

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

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL

OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding beneficial

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

director and each of our Named Executive Officers,

executive officers and directors as a group, and

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

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

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

The number of shares of common stock beneficially

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

for any other purpose.

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

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

exercise of any stock option, warrant or other right.

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

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

The inclusion herein of any shares

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

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

following table sets forth certain information regarding beneficial ownership of our common stock and preferred stock as of March 26,

Each director

and each of our Named Executive Officers,

All executive officers

and directors as a group, and

Each person known by us

to be the beneficial owner of more than 5% of our outstanding common stock.

of March 26, 2024, there were 12,101,548 shares of our common stock outstanding and 2,000,000 shares of Preferred Stock outstanding.

number of shares of common stock beneficially owned by each person is determined under the rules of the SEC and the information is not

necessarily indicative of beneficial ownership for any other purpose.

Under such rules, beneficial ownership includes any shares as to

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

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

Unless otherwise indicated, each

person has sole investment and voting power (or shares such power with his or her spouse) with respect to the shares set forth in the

following table.

The inclusion herein of any shares deemed beneficially owned does not constitute an admission of beneficial ownership

of those shares.

Name and Address of Beneficial Owner

3 unchanged sentences

Berekk Blackwell

Daniel Gauthier

Alex McLaren, MD

1 unchanged sentence

Derek Overstreet, PhD

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

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

2,792,029 (8)

12 unchanged sentences

Scottsdale, AZ 85260

200,000 vested stock options.

of 50,000 vested stock options.

35,000 vested stock options.

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

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

power over such shares and includes 50,000 vested stock options.

50,000 vested stock options.

45,000 vested stock options.

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

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

25,000 vested stock options.

490,000 vested stock options.

Preferred Stock

Includes 225,000 vested

stock options.

Includes 67,500 vested

stock options.

Includes 70,000 vested

stock options.

Includes 1,501,667 shares

held by McLaren Family LLLP.

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

such shares and includes 85,000 vested stock options.

Includes 85,000 vested

stock options.

Includes 80,000 vested

stock options.

Includes 70,000 vested

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

Kane’s shares voting

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

Includes 682,500 vested

stock options.

Name and Address of Beneficial Owner

8 unchanged sentences

1,000,000 (3)

a result of the multiple votes accorded to holders of the preferred stock (50 votes per share), Mr.

of the multiple votes accorded to holders of the preferred stock (50 votes per share), Mr.

Johnston and Dr.

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

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

Johnston’s common stockholdings, Mr.

McLaren have the ability

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

The percent of voting

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

Combined with Mr.

common stockholdings, Mr.

Johnston holds 45.5% of the voting power of the Company.

are held by McLaren Family LLLP.

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

McLaren’s common stockholdings, Dr.

Shares are held by McLaren

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

Combined with Dr.

common stockholdings, Dr.

McLaren holds 45.8% of the voting power of the Company.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

We do not have a written policy for the review,

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

When such transactions arise, they are referred

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

Convertible Notes Payable

On January 9, 2017, the Company issued a convertible

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

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

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

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

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

consideration.

Notes Payable

January 9, 2017, the Company issued a convertible debenture (the “McLaren Debenture”) in the principal amount of $20,000

in favor of Bryan McLaren, the Company’s Chief Executive Officer, President, Chief Financial Officer, and a member of the Company’s

Board of Directors, in exchange for cash from Mr.

McLaren of $20,000.

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

each quarter and matured on January 9, 2022.

Pursuant to the terms of the McLaren Debenture, Mr.

McLaren was entitled to convert all

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

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

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

As of December 31, 2021, the principal balance

due under the McLaren Debenture was $20,000.

As of December 31, 2022 and 2021, accrued interest

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

on the accompanying consolidated balance sheets.

For the years ended December 31, 2022 and 2021,

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

Director Independence

Four of our six board members are independent.

The McLaren Debenture accrued interest at the rate of 6% per annum

payable quarterly by the 1 st of each quarter and matured on January 9, 2022.

Pursuant to the terms of the McLaren Debenture,

McLaren was entitled to convert all or a portion of the principal balance and all accrued and unpaid interest due under this McLaren

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

On January 7, 2022, the Company repaid

this debt and all accrued and unpaid interest due.

the years ended December 31, 2023 and 2022, interest expense – related party amounted to $0 and $600, respectively.

of our six board members are independent.

The Board has determined that each of Messrs.

Friedman, Honaman, Kane and Dr.

Overstreet is an independent director pursuant to the NASDAQ

listing standards.

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

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

In assessing the independence of our directors,

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

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

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

Where relationships

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

impairs the directors’ independence.

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

affirmatively determined that none of the individuals serving as non-employee directors during the fiscal year ended December 31, 2022

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

Bryan McLaren was not considered an independent

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

the Board, CEO, CFO, and Treasurer.

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

the fiscal year ended December 31, 2022 because Dr.

Overstreet is

an independent director pursuant to the NASDAQ listing standards.

Under the NASDAQ rules, no director qualifies as independent unless

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

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

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

and their respective affiliated companies.

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

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

the Company and our management.

Where relationships exist, the Board determines whether the relationship between the Company and the

directors or the directors’ affiliated companies impairs the directors’ independence.

After consideration of the directors’

relationships with the Company, the Board has affirmatively determined that none of the individuals serving as non-employee directors

during the fiscal year ended December 31, 2022 had a material relationship with us and that each of such non-employee directors is independent.

McLaren was not considered an independent director during his service on the Board during the fiscal year ended December 31, 2022 because

of his employment as our Chairman of the Board, CEO, CFO, and Treasurer.

Alex McLaren, MD was not considered an independent director

during his service on the Board during the fiscal year ended December 31, 2022 because Dr.

McLaren is the father of Bryan.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth the fees that

were billed or that will be billed to our company for the years ended December 31, 2022 and 2021 for professional services rendered by

following table sets forth the fees that were billed or that will be billed to our company for professional services rendered by Salberg

& Company, P.A.

for the year ended December 31, 2023, and for professional services rendered by D.

Brooks and Associates CPAs, P.A.

Audit-Related Fees

Audit fees were for professional services rendered

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

for the year ended December 31, 2022:

Audit-Related Fees

During 2022 and 2021, our independent registered

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

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

As our independent registered public accountants

did not provide any services to us for tax compliance, tax advice and tax planning during 2022 and 2021, no tax fees were billed or paid

during those fiscal years.

All Other Fees

Our independent registered public accountants

did not provide any products and services not disclosed in the table above during 2022 and 2021.

As a result, there were no other fees

billed or paid during 2022 and 2021.

Pre-Approval Policies and Procedures

Our Audit Committee pre-approves all services

provided by our independent auditors.

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

respective services were rendered.

Our board of directors has considered the nature

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

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

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

Audit-Related

2023 and 2022, our independent registered public accountants did not provide any assurance and related services that are reasonably related

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

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

2023 and 2022, no tax fees were billed or paid during those fiscal years.

independent registered public accountants did not provide any products and services not disclosed in the table above during 2023 and

As a result, there were no other fees billed or paid during 2023 and 2022.

Policies and Procedures

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

All of the above services and fees were reviewed and

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

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

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

EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

Exhibits required by Item 601 of Regulation S-K:

EXHIBIT INDEX

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

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

333-208226) filed by the

Company on November 25, 2015).

Bylaws of Zoned Properties, Inc.

required by Item 601 of Regulation S-K:

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

(incorporated by reference to exhibit to Registration Statement on Form S-1

333-208226) filed by the Company on November 25, 2015).

of Zoned Properties, Inc.

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

333-208226) filed by the

Company on November 25, 2015).

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

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

333-208226) filed by the

Company on November 25, 2015) .

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

333-208226) filed by the

Company on November 25, 2015).

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

333-208226) filed

by the Company on November 25, 2015).

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

Member Agreement dated as of October 1, 2014 by and between the registrant and Alex McLaren (incorporated by reference to exhibit

to Registration Statement on Form S-1 (File No.

333-208226) filed by the Company on November 25, 2015).

Member Agreement dated as of October 1, 2014 by and between the registrant and Art Friedman (incorporated by reference to exhibit

to Registration Statement on Form S-1 (File No.

333-208226) filed by the Company on November 25, 2015).

Member Agreement dated as of September 26, 2016 by and between the registrant and David G, Honaman (incorporated by reference to

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

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

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

and Derek Overstreet (incorporated by reference to

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

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

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

333-208226) filed by the

Company on November 25, 2015).

(incorporated by reference to exhibit to Registration

Statement on Form S-1 (File No.

333-208226) filed by the Company on November 25, 2015).

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

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

333-208226) filed by the

Company on November 25, 2015).

covering Tempe, AZ property (incorporated by

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

333-208226) filed by the Company on November 25, 2015).

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

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

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

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

and Bryan McLaren (incorporated by reference

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

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

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

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

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

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

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

in Favor of Alan Abrams (incorporated by reference to exhibit to

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

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

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

in Favor of Bryan McLaren (incorporated by reference to exhibit

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

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

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

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

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

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

on October 3, 2017).

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

Arrow Herbal Center, Inc.

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

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

May 3, 2018).

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

4 unchanged sentences

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

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

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

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

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

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

Agreement by and between the registrant and Bryan McLaren dated May 23, 2018 (incorporated by reference to exhibit to Current Report

on Form 8-K filed with the SEC by the Company on May 24, 2018).

Parachute Agreement by and between the registrant and Bryan McLaren dated May 23, 2018 (incorporated by reference to exhibit to Current

Report on Form 8-K filed with the SEC by the Company on May 24, 2018).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

38 unchanged sentences

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

Agreement Regarding Purchase and Sale Contract, dated as of December 15, 2023, by and between Keystone Ventures, LLC and ZP RE Holdings, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC by the Company on January 22, 2024).

Purchase and Sale Agreement, dated as of May 5, 2022, by and between Lakeside Bank, as Trustee under Trust Agreement dated October 7, 2004 and known as Trust Number 10-2749 and Daniel Kravetz and Keystone Ventures, LLC as assignee, as amended through January 12, 2024 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC by the Company on January 22, 2024).

Assignment and Assumption Agreement, dated as of January 19, 2024, by and between Keystone Ventures, LLC and ZP RE Holdings, LLC (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC by the Company on January 22, 2024).

Licensed Cannabis Facility Absolute Net Lease Agreement dated as of January 18, 2024, by and between ZP RE Holdings, LLC and JG IL LLC (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed with the SEC by the Company on January 22, 2024).

Guaranty of Payment and Performance, dated as of January 18, 2024, by JG Holdco LLC in favor of ZP RE Holdings, LLC (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed with the SEC by the Company on January 22, 2024).

Security Agreement, dated as of January 18, 2024, made by and among JG IL LLC in favor of ZP RE Holdings, LLC (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed with the SEC by the Company on January 22, 2024).

Purchase and Sale Agreement and Joint Escrow Instructions, dated as of January 23, 2023, by and between NWC Dysart & Bell, LLC and ZP RE Holdings, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC by the Company on February 29, 2024).

Licensed Cannabis Facility Absolute Net Lease Agreement dated as of January 2, 2024, by and between ZP RE Holdings, LLC and The Pharm, LLC (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC by the Company on February 29, 2024).

Guaranty of Payment and Performance, dated as of February 27, 2024, by The Pharm, LLC in favor of ZP RE Holdings, LLC (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC by the Company on February 29, 2024).

List of Subsidiaries.

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

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

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

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

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

Consent of Independent Registered Public Accounting Firm – Salberg & Company PA

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

Certification

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

Certification

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

Certification

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

Section 1350, as adopted pursuant to Section 906 of

the Sarbanes-Oxley Act of 2002.

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contract or compensatory plan or arrangement.

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Cover Page Interactive

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

Management contract or compensatory

plan or arrangement.

Filed herewith

Furnished herewith

As permitted, the registrant has elected not

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

Pursuant to the requirements

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

by the undersigned, thereunto duly authorized.

Zoned Properties,

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

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

on its behalf by the undersigned, thereunto duly authorized.

Zoned Properties, Inc.

March 26, 2024

Bryan McLaren

Executive Officer and

Financial Officer

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

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

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

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

Pursuant to the requirements

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

the capacities and on the dates indicated.

Bryan McLaren

Chief Executive Officer and

Chief Financial Officer

POWER OF ATTORNEY

Each person whose signature

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

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

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

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

Pursuant to the requirements of the Securities

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

on the dates indicated.

/s/ Bryan McLaren

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

March 28, 2023

Chairman, Chief Executive

Officer, Chief Financial Officer, And Treasurer

Bryan McLaren

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

/s/ Derek Overstreet

March 28, 2023

(principal executive officer,

principal financial officer and principal accounting officer)

Derek Overstreet

/s/ Art Friedman

March 28, 2023

/s/ Alex McLaren

March 28, 2023

/s/ Jody Kame

March 28, 2023

ZONED PROPERTIES, INC.

Derek Overstreet

PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

YEARS ENDED DECEMBER 31, 2023 and 2022

ZONED PROPERTIES, INC.

PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2023 and 2022

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

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Financial Statements:

4 unchanged sentences

Notes to Consolidated Financial Statements F-8 to F-31

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting

To the Stockholders and the Board of Directors

Zoned Properties, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheet of Zoned Properties, Inc.

and Subsidiaries (the “Company”) as of December 31, 2023, the related consolidated

statements of operations, changes in stockholders’ equity and cash flows for the year then ended, and the related notes (collectively

referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly,

in all material respects, the consolidated financial position of the Company as of December 31, 2023, and the consolidated results of

its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States

Basis for Opinion

These consolidated financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial

statements based on our audit.

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

(“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws

and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the

standards of the PCAOB.

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

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

The Company is not required to have, nor were we

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

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

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

internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess

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

that respond to those risks.

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

consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides

a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters are matters arising

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

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

challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ Salberg &

Company, P.A.

SALBERG & COMPANY,

We have served as the

Company’s auditor since 2023 .

Boca Raton, Florida

March 26, 2024

2295 NW Corporate Blvd., Suite 240 ● Boca

Raton, FL 33431-7326

(561) 995-8270 ● Toll Free:

(866) CPA-8500

(561) 995-1920

www.salbergco.com ● info@salbergco.com

Member National Association of Certified Valuation

Analysts ● Registered with the PCAOB

Member CPAConnect with Affiliated Offices Worldwide

● Member AICPA Center for Audit Quality

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Zoned Properties, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated

balance sheets of Zoned Properties, Inc.

(the Company) as of December 31, 2022 and 2021, and the related consolidated statements of operations,

stockholders’ equity, and cash flows for the years ended December 31, 2022 and 2021, and related notes (collectively referred to

as the consolidated financial statements)

In our opinion, the consolidated financial statements

present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021 the results of its operations

and its cash flows for the years ended December 31, 2022 and 2021 in conformity with accounting principles generally accepted in the United

States of America.

Opinion on the Financial Statements

We have audited the accompanying balance sheet

of Zoned Properties, Inc.

(the Company) as of December 31, 2022 and the related consolidated statement of operations, stockholders’

equity, and cash flow for year ended December 31, 2022 and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present

fairly, in all material respects, the financial position of the Company as of December 31, 2022 and the results of its operations and

its cash flows for the year ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of

Basis for Opinion

29 unchanged sentences

We determined that there were no critical audit matters.

Brooks and Associates CPAs, P.A.

We have served as the Company’s auditor

Palm Beach Gardens, Florida

We served as the Company’s auditor from

2018 to 2023.

Palm Beach Gardens, FL

March 28, 2023

3 unchanged sentences

Accounts receivable

Deferred rent receivable

Deferred rent

Lease incentive receivable

2 unchanged sentences

Escrow deposits

Convertible note receivable

Capitalized permit costs

Property and equipment, net

Right of use asset, net

Intangible asset, net

Operating lease right of use asset, net

Investment in unconsolidated joint ventures

3 unchanged sentences

Convertible note payable

Convertible note payable - related party

Notes payable, net

2 unchanged sentences

Lease liability

Accrued interest - related party

Contract liabilities

5 unchanged sentences

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

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

2,000,000 shares issued and outstanding on December 31, 2023 and 2022 ($ 1.00 per share liquidation preference or $ 2,000,000 )

Common stock:

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

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

12,201,548 shares issued on December 31.

2023 and 2022, and 12,101,548 and 12,201,548 shares outstanding December 31, 2023 and 2022, respectively

Additional paid-in capital

Treasury stock, at cost ( 100,000 and no shares on December 31, 2023 and 2022, respectively)

Accumulated deficit

3 unchanged sentences

Total Liabilities and Stockholders’ Equity

accompanying notes to consolidated financial statements.

See accompanying notes to

consolidated financial statements.

ZONED PROPERTIES, INC.

3 unchanged sentences

Property investment portfolio revenues

Rental revenues

Real estate services revenues

Advisory revenues

Brokerage revenues

Total real estate services revenues

Total revenues

6 unchanged sentences

Real estate taxes

Property portfolio business development costs

Gain on sale of property and equipment

Total operating expenses, net

(LOSS) INCOME FROM OPERATIONS

OTHER (EXPENSES) INCOME:

INCOME (LOSS) FROM OPERATIONS

OTHER INCOME (EXPENSES):

Interest expenses

1 unchanged sentence

Interest income

Change in fair value of interest rate swap

Loss from derivative - interest rate swap

Loss on note receivable investment

Impairment loss from unconsolidated joint ventures

Loss from unconsolidated joint ventures

Total other expenses, net

LOSS BEFORE INCOME TAXES

PROVISION FOR INCOME TAXES

Total other income (expenses), net

LOSS BEFORE EQUITY METHOD LOSSES

EQUITY METHOD LOSS:

Impairment of investment in unconsolidated joint ventures

Equity method loss from unconsolidated joint ventures

Total equity method loss

$ ( 540,258 )

4 unchanged sentences

Basic and diluted

See accompanying notes to consolidated financial statements.

accompanying notes to consolidated financial statements.

ZONED PROPERTIES, INC.

3 unchanged sentences

Preferred Stock

Treasury Stock

Stockholders’

Paid-in Capital

Balance, December 31, 2021

$ ( 15,098,867 )

Common stock issued for services

Common stock issued for intangible asset

Accretion of stock based compensation related to stock options issued

1 unchanged sentence

( 15,673,222 )

Purchase of treasury stock

Accretion of stock based compensation related to stock options issued

13 unchanged sentences

Amortization of debt discount

Stock-based compensation

Stock option expense

Loss on forfeited escrow deposit

Loss on note receivable investment

Impairment loss from unconsolidated joint ventures

Impairment of investment in unconsolidated joint ventures

Loss from unconsolidated joint ventures

Gain on sale of rental property and equipment

Change in fair value of interest rate swap

Loss from interest rate swap

Gain on sale of rental property and property and equipment

Change in operating assets and liabilities:

11 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of convertible note receivable

Lease incentive provided to tenant

Purchases of rental properties and improvements

( 1,007,941 )

Purchases of property and equipment

Net proceeds from sale of rental property

Increase in escrow deposits

Proceeds from sale of property and equipment

Investment in joint ventures and equity securities

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

Increase in capitalized permit costs

Increase in escrow deposits

NET CASH USED IN INVESTING ACTIVITIES

( 1,239,084 )

( 2,009,213 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from notes payable

Payment of deferred financing fees

Deferred financing fees paid

Purchase of treasury stock

Repayment of notes payable

Repayment of note payable - related party

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET INCREASE IN CASH

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

NET (DECREASE) INCREASE IN CASH

( 1,236,045 )

CASH, beginning of year

3 unchanged sentences

NON-CASH INVESTING AND FINANCING ACTIVITIES

Common stock issued for intangible asset

Increase in right of use asset and lease liability

Acquisition of rental properties financed through note payable

See accompanying notes to consolidated financial statements.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

Zoned Properties, Inc.

(“Zoned Properties”

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

In October 2013, the Company changed its name

to Zoned Properties, Inc.

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

cannabis industry.

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

The Company is redefining the approach to commercial real estate investment through its integrated growth services.

Headquartered in Scottsdale,

Arizona, Zoned Properties has developed a full spectrum of integrated growth services to support its real estate development model;

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

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

With national experience and a team of experts devoted

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

Zoned Properties is an accredited member of the Better Business Bureau, the U.S.

Green Building Council, and the Forbes Business Council.

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

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

The Company has the following wholly owned subsidiaries:

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

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

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

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

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

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

ZP Data Platform 1, LLC

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

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

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

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

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

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

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

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

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

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

(see Note 7).

Reclassification of escrow deposits for acquisition of rental properties

Increase in right of use asset and lease liability

accompanying notes to consolidated financial statements.

ZONED PROPERTIES, INC.

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DECEMBER 31, 2023 AND 2022

During 2022, the Company has closed the following

wholly owned subsidiaries:

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

This subsidiary was dissolved on July 5, 2022.

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

This subsidiary was dissolved on July 22, 2022.

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

This subsidiary was dissolved on December 13, 2022.

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

1 – ORGANIZATION AND NATURE OF OPERATIONS

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.

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”).

Company has the following wholly owned subsidiaries:

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

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

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

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

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

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

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

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

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

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

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

Brokerage AL, LLC (“Alabama Brokerage”) was organized in the State of Alabama on October 20, 2022 (inactive).

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

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

Company also maintains a 50 % equity interest in two joint ventures (see Note 5).

2023 and 2022, the Company dissolved the following wholly owned subsidiaries:

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

This subsidiary was

dissolved on July 5, 2022.

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

This subsidiary

was dissolved on July 22, 2022.

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

This subsidiary was dissolved

on December 13, 2022.

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

This subsidiary was dissolved on November 4, 2022.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING

Basis of presentation and principles of consolidation

The accompanying consolidated financial statements

have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and

include the accounts of the Company and its wholly owned subsidiaries.

All intercompany balances and transactions have been eliminated

upon consolidation.

Use of estimates

The preparation of consolidated financial statements

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

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

and expenses during the reporting period.

Actual results could differ from those estimates.

Significant estimates for the years ended

December 31, 2022 and 2021 include the collectability of accounts and note receivable, the useful life of rental properties and property

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

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

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

Risks and uncertainties

The Company’s operations are subject to risk and uncertainties

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

The Company conducts a

significant portion of its business in Arizona.

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

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

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

operations and financial condition.

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

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

For the years ended

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

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

Fair value of financial instruments

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.

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

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

This subsidiary was dissolved

on March 28, 2023.

ZONED PROPERTIES, INC.

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DECEMBER 31, 2023 AND 2022

The guidance requires that

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

2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of presentation and principles of consolidation

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

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

All intercompany

balances and transactions have been eliminated upon consolidation.

reflected in the accompanying consolidated financial statements, the Company generated a net loss of $ 540,258 and cash provided by operations

of $ 82,547 during the year ended December 31, 2023.

Additionally, as of December 31, 2023, the Company had cash of $ 3,099,795 and stockholders’

equity of $ 5,239,683 .

cash balance and positive net cash provided by operating activities serves to mitigate the conditions that historically raised substantial

doubt about the Company’s ability to continue as a going concern.

The Company believes that the Company has sufficient cash and

positive cash flows to meet its obligations for a minimum of twelve months from the date of this filing.

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

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

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

Actual results could differ from those

Significant estimates for the years ended December 31, 2023 and 2022 include the collectability of accounts and note receivable,

valuation of investment in equity securities, the useful life of rental properties and property and equipment, assumptions used in assessing

impairment of long-term assets including rental property and investment in unconsolidated joint ventures, valuation allowances for deferred

tax assets, the fair value of derivative asset or liability related to interest rate swap, and the fair value of non-cash equity transactions,

including options and stock-based compensation.

and uncertainties

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

the potential risk of business failure.

The Company conducts a significant portion of its business in states that have legalized and

regulated cannabis.

Additionally, the Company’s tenants operate in the state-legalized and state-regulated cannabis industry.

Consequently,

any significant economic downturn in the state markets in which the Company operates or any changes in the federal government’s

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

results of operations and financial condition.

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

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

For the years ended December 31, 2023 and 2022, revenues associated with Significant Tenants amounted to $ 2,462,068 and $ 1,776,284 , respectively,

which represents 85.3 % and 66.8 % of the Company’s total revenues, respectively (see Note 3).

value of financial instruments

carrying amounts reported in the consolidated balance sheets for cash, accounts receivable, prepaid expenses and other assets, capitalized

permit costs, escrow deposits, accounts payable, accrued expenses, and other payables approximate their fair market value based on the

short-term maturity of these instruments.

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value

Measurement (“ASC 820”), requires companies to determine fair value based on the price that would be received to sell

the asset or paid to transfer the liability to a market participant.

ASC 820 emphasizes that fair value is a market-based measurement,

not an entity-specific measurement.

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.

1 unchanged sentence

Unobservable inputs that are not corroborated by market data.

Other than the interest rate swap, the Company

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

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

The following table represents the Company’s

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

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

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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

following table represents the Company’s fair value hierarchy of its financial assets and liabilities measured at fair value on

a recurring basis as of December 31, 2023 and 2022.

December 31, 2023

December 31, 2022

Interest rate swap liability

Interest Rate Swap

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

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

guidance related to derivatives and hedging activities.

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.

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

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.

1 unchanged sentence

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

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

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

cash flow hedge .

Accordingly, changes in the underlying market

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

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

the fair value of its swap agreement.

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

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

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

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

accompanying statements of operations.

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

investment vehicles.

Information regarding the interest rate swap is

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 East West Bank (the “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 determined by the Counterparty based on market data used by Counterparty

and is reflected as a derivative asset or liability on the accompanying consolidated balance sheet with changes in the fair value reflected

in change in fair value of interest rate swap on the accompanying consolidated 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

is carried at cost and represents cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid

investments with an original maturity of three months or less as of the purchase date of such investments.

The Company had no cash equivalents

on December 31, 2023 and December 31, 2022.

The Company’s cash is held at major commercial banks, which may at times exceed the

Federal Deposit Insurance Corporation (“FDIC”) limit.

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

On December 31, 2023 and 2022, the Company had approximately $ 2,555,000 and $ 3,586,000 , respectively, of cash in excess of FDIC

limits of $ 250,000 .

Any loss incurred or a lack of access to such funds above the FDIC limit could have a significant adverse impact

on the Company’s financial condition, results of operations and cash flows.

receivable and convertible notes receivable

Company recognizes 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, the Company adopted ASC 326, “Financial Instruments - Credit

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.

December 31, 2022, in connection with the Company’s investment in convertible notes receivable, the Company recorded a loss on

note receivable investment of $ 210,756 which is included in other income (expenses) on the accompanying consolidated statement of operations

and consisting of convertible notes receivable and interest receivable amounting to $ 200,000 and $ 10,756 , respectively.

In connection

with management’s analysis, the Company considered the current financial position of KCB Jade Holdings, LLC (“KCB”),

cash on hand, probability of obtaining additional capital or cash flows from working capital in the near term and industry headwinds

from macro-industry factors.

Based on this analysis, the Company concluded that deriving any future benefit more this investment was

highly uncertain.

During the year ended December 31, 2023, the Company did not record any allowances for doubtful accounts.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

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

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

as of the purchase date of such investments.

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

The Company’s cash

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

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

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

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

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

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

Accounts and convertible notes receivable

The Company recognizes an allowance for losses

on accounts and notes receivable in an amount equal to the estimated probable losses net of recoveries.

The allowance is based on an analysis

of historical bad debt experience, current receivables aging and expected future write-offs, as well as an assessment of specific identifiable

customer accounts and notes receivable considered at risk or uncollectible.

The expense associated with the allowance for doubtful accounts

is recognized in general and administrative expense.

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

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

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

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

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

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

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

Based on this analysis, the Company concluded that deriving

any future benefit more this investment was highly uncertain.

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

allowances for doubtful accounts.

Investment in joint ventures

The Company has equity investments in various

privately held entities.

The Company accounts for these investments either under the equity method or cost method of accounting depending

on the Company’s ownership interest and level of influence.

Investments accounted for under the equity method are recorded based

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

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

not be recoverable.

The Company evaluates its investments in these entities for consolidation.

It considers its percentage interest in

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

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

If an investment qualifies for the equity method

of accounting, the Company’s investment is recorded initially at cost, and subsequently adjusted for equity in net income (loss)

and cash contributions and distributions.

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

with the provisions of the operating agreement of the entity.

The allocation provisions in these agreements may differ from the ownership

interest held by each investor.

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

the Company’s share of the underlying equity of such unconsolidated entity are amortized over the respective lives of the underlying

assets as applicable.

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

in unconsolidated affiliated entities.

in unconsolidated joint ventures

Company has equity investments in various privately held entities.

The Company accounts for these investments either under the equity

method or cost method of accounting depending on the Company’s ownership interest and level of influence.

Investments accounted

for under the equity method are recorded based upon the amount of the Company’s investment and adjusted each period for its share

of the investee’s income or loss.

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.

The Company evaluates its investments in these entities for

consolidation.

It considers its percentage interest in the joint venture, evaluation of control and whether a variable interest entity

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

investment under the equity method of accounting.

an investment qualifies for the equity method of accounting, the Company’s investment is recorded initially at cost, and subsequently

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

The net income or loss of an unconsolidated investment

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

The allocation provisions in

these agreements may differ from the ownership interest held by each investor.

Differences, if any, between the carrying amount of our

investment in the respective joint venture and the Company’s share of the underlying equity of such unconsolidated entity are amortized

over the respective lives of the underlying assets as applicable.

These items are reported as a single line item in the statements of

operations as income or loss from investments in unconsolidated affiliated entities.

investments include investments in equity securities of entities over which the Company does not have a controlling financial interest

or significant influence and are accounted for at fair value.

Equity investments without readily determinable fair values are measured

at cost with adjustments for observable changes in price or impairments (referred to as the “measurement alternative”).

applying the measurement alternative, the Company performs a qualitative assessment on a quarterly basis and recognizes an impairment

if there are sufficient indicators that the fair value of the equity investments is less than carrying values.

Changes in value are recorded

in non-operating income (loss).

On December 31, 2023 and 2022, long-term investments consisted of an investment in convertible preferred

stock that does not have a readily determinable fair value (see Note 5).

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.

improvements paid for by the Company are amortized on a straight-line basis over the lives of the related leases, which approximate the

useful lives of the assets.

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

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

leases) and allocates 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.

Company’s rental properties are individually reviewed for impairment whenever events or changes in circumstances indicate that

the carrying amount of an asset may not be recoverable.

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

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

An impairment loss is measured based on the

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

Impairment analyses are based on our current plans, intended

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

the Company’s estimates of the projected future cash flows, anticipated holding periods, or market conditions change, the Company’s

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

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

capital requirements that could differ materially from actual results.

For the years ended December 31, 2023 and 2022, the Company did

not record any impairment losses.

Company has land which is not subject to depreciation.

Company is in the business of pursuing real estate acquisitions and investments that may include various contractual instruments to secure

a property, such as an Option Agreement or a Purchase and Sale Agreement.

These agreements often include the requirement to make escrow

Escrow deposits include cash deposits made by the Company for the future acquisition of properties or for the option to acquire

In most cases, upon closing of the acquisition of a property, the escrow deposit will be applied to the purchase price.

some cases, the Company may discontinue pursuit of an acquisition of a property and therefore terminate an existing agreement, which

can cause forfeiture of escrow deposits if those deposits are non-refundable.

During the year ended December 31, 2023, the Company forfeited

escrow deposits of $ 15,000 which is reflected in operating expenses as part of property portfolio business development costs on the accompanying

consolidated statements of operations.

On December 31, 2023 and 2022, escrow deposits amounted to $ 177,048 and $ 590,000 , respectively.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

Long-term investments

Long-term investments include investments in equity

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

for at fair value.

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

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

In applying the measurement alternative, the Company

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

of the equity investments is less than carrying values.

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

On December 31,

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

(see Note 7).

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

Rental properties

Rental properties are carried at cost, less accumulated

depreciation and amortization.

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

are capitalized.

Maintenance and repair expenses are charged to expense as incurred.

Depreciation is recognized on a straight-line basis

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

Tenant improvements are amortized on a straight-line basis

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

Upon the acquisition of real estate, the Company

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

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

on these assessments.

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

rates and available market information.

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

results, known trends, and market/economic conditions.

The Company’s rental properties are individually

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

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

period on an undiscounted basis.

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

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

the analyses are prepared.

If the Company’s estimates of the projected

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

different and such differences could be material to its consolidated financial statements.

The evaluation of anticipated cash flows is

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

from actual results.

For the years ended December 31, 2022 and 2021, the Company did not record any impairment losses.

The Company has capitalized land, which is not

subject to depreciation.

Property and equipment

Property and equipment is stated at cost, less

accumulated depreciation.

Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful

The Company uses a five-year life for office equipment, seven years for furniture and fixtures, and five to ten years for vehicles.

and equipment

and equipment is stated at cost, less accumulated depreciation.

Depreciation of property and equipment is provided utilizing the straight-line

method over the estimated useful lives.

The Company uses a five -year life for office equipment, seven years for furniture and fixtures,

and five to ten years for vehicles.

Expenditures for maintenance and repairs are charged to expense as incurred.

Upon sale or retirement of property and equipment, the related

cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations.

The Company examines the possibility of decreases

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

Upon sale or retirement

of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected

in statements of operations.

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

their recorded value may not be recoverable.

Investment Portfolio Revenues

income is accounted for pursuant to ASC Topic 842 “Leases” and 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.

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.

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 by the Company is treated as a lease incentive receivable and amortized

as a reduction of revenue over the lease term.

the Company’s leases provide for payments with fixed monthly base rents over the term of the leases or annual percentage increases

in base rent over the term of the lease.

The leases also require the tenant to remit estimated monthly payments to the Company for property

taxes and common area maintenance.

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

on the accompanying consolidated statements of operations.

Estate Services Revenues

Company follows ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), except for revenues from lease contracts

within the scope of ASC 842, which are excluded from 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 requires certain additional

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

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

which is likely to occur upon a lease commencement, when escrow closes on the sale of a property, or as otherwise negotiated between

the Brokerage and its clients.

In accordance with the guidelines established for reporting revenue gross as a principal versus net as

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

Of the criteria listed in ASC Topic

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

risk, and has wide latitude in establishing the price of services rendered and discretion in selection of agents and determination of

service specifications.

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

recognized upon the occurrence of such events.

liabilities include advisory fees received in advance that are deferred and recognized when the services are complete or over the actual

or expected contract term, rental revenue received in advance, and other deferred revenue for when the Company receives consideration

from an agreement before certain criteria have been met for revenue to be recognized in conformity with GAAP.

During the years ended

December 31, 2023 and 2022, contract liabilities activities were as follows:

Year Ended December 31,

Balance at beginning of year

Rental payments received in advance

Accretion of contract liabilities to revenue

Customer refund

Balance at end of year

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

Revenue recognition

The Company follows ASC Topic 606, Revenue

from Contracts with Customers (“ASC 606”).

This standard establishes a single comprehensive model for entities to use

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

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

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

If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting

purposes, are owned by the tenant or the Company.

When the Company is the owner of the tenant improvements, the tenant is not considered

to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially

When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that can be taken

in the form of cash or a credit against the tenant’s rent) that is funded is treated as a lease incentive receivable and amortized

as a reduction of revenue over the lease term.

Currently, the Company’s leases provide

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

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

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

of operations.

Revenues from advisory services is recognized

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

Brokerage revenues primarily consist of real estate

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

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

In accordance with the

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

revenues and expenses on a gross basis.

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

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

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

Brokerage revenues that are payable

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

Lease accounting

The FASB’s Accounting Standards Update (“ASU”)

2016-02, “ Leases (Topic 842)” sets out the principles for the recognition, measurement, presentation and disclosure

FASB’s ASC Topic 842, “Leases” sets out the principles for the recognition, measurement, presentation and disclosure

of leases for both parties to a contract (i.e., lessees and lessors).

8 unchanged sentences

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

equivalent to existing guidance for sales-type leases, direct financing leases and operating leases.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

For leases entered into on or after the effective

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

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

implicitly or explicitly.

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

new lease or a modified lease.

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

The new lease or modified lease

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

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

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

On May 31, 2020, the Chino Valley lease was modified

to decrease the monthly base rent from $ 40,000 to $ 32,800 and the Tempe lease was modified to increase the monthly base rent from $ 33,500

to $ 49,200 .

On August 23, 2021 and effective September 1, 2021, the Chino Valley lease was amended, and the monthly base rent was increased

to $ 55,195 due to additional space of 27,312 square feet being leased to the lessee.

On January 24, 2022 and effective on March 1, 2022,

the Chino Valley lease was amended and the monthly base rent was increased to $ 87,581 due to additional space of 30,000 square feet being

leased to the lessee, increasing the premises to a total of 97,312 square feet of operational space.

In connection with this lease amendment,

the Company paid $ 500,000 to the tenant as a tenant improvement allowance or lease incentive for investment into the premises, which was

capitalized as a lease incentive receivable and is recognized on a straight-line basis over the remaining lease term as a reduction to

the lease income.

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

therefore, this modification qualifies

as a separate contract under ASC 842 which does not require lease classification reassessment.

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

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

The Company records revenues from rental properties

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

Any revenue on the straight-line basis exceeding the monthly

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

Effective May 31, 2020, the Company amended

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

The amendments resulted in an abatement

of rent for the months of June and July 2020.

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

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

These rent abatements

resulted in an aggregate deferred rent receivable as of December 31, 2022 and 2021 of $ 204,079 and $ 164,770 , respectively (see Note 3).

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

are owned by the tenant or the Company.

When the Company is the owner of the tenant improvements, the tenant is not considered to have

taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed.

When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that can be taken in the

form of cash or a credit against the tenant’s rent) that is funded is treated as a lease incentive receivable and amortized as a

reduction of revenue over the lease term.

For contracts entered into on or after the effective

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

equivalent to previous guidance for sales-type leases, direct financing leases and operating leases.

leases entered into on or after the effective date, where the Company is the lessor, at the inception of the contract, the Company assesses

whether the contract is a sales-type, direct financing or operating lease by reviewing the terms of the lease and determining if the

lessee obtains control of the underlying asset implicitly or explicitly.

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.

in Note 3, on January 24, 2022 and effective on March 1, 2022, the Chino Valley lease was amended and the monthly base rent was increased

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

feet of operational space.

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

or lease incentive for investment into the premises, which was capitalized as a lease incentive receivable and is recognized on a straight-line

basis over the remaining lease term as a reduction to the lease income.

The increase in monthly rent was commensurate with the additional

space being leased;

therefore, this modification qualifies as a separate contract under ASC 842 which does not require lease classification

reassessment.

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

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

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

on the straight-line basis exceeding the monthly payment amount required on the operating lease is reflected as deferred rent.

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 and the effect of recording rent on a straight-line basis resulted in aggregate deferred rent

as of December 31, 2023 and 2022 of $ 371,472 and $ 204,079 , 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

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.

(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 ASC 842.

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.

and diluted loss per share

loss per share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock

outstanding during each period.

Diluted loss per share is computed by dividing net loss available to common shareholders by the weighted

average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period

using the treasury stock method and as-if converted method.

Potentially dilutive common shares and participating securities are excluded

from the computation of diluted shares outstanding if they would have an anti-dilutive impact on the Company’s net losses.

Company’s preferred stock is considered a participating security since the preferred shares are entitled to dividends equal to

common share dividends and accordingly, are included in the computation of earnings per share pursuant to the two-class method.

The two-class

method of computing (loss) income per share is an earnings allocation formula that determines (loss) income per share for common stock

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

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

Basic and diluted loss per share

Basic loss per share is computed by dividing net

loss available to common shareholders by the weighted average number of shares of common stock outstanding during each period.

loss per share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock,

common stock equivalents and potentially dilutive securities outstanding during the period using the treasury stock method and as-if converted

Potentially dilutive common shares and participating securities are excluded from the computation of diluted shares outstanding

if they would have an anti-dilutive impact on the Company’s net losses.

The Company’s preferred stock is considered a participating

security since the preferred shares are entitled to dividends equal to common share dividends and accordingly, are included in the computation

of earnings per share pursuant to the two-class method.

The two-class method of computing (loss) income per share is an earnings allocation

formula that determines (loss) income per share for common stock and any participating securities according to dividends declared (whether

paid or unpaid) and participation rights in undistributed earnings.

The following potentially dilutive shares have been excluded from the

calculation of diluted net loss per share as their effect would be anti-dilutive for the years ended December 31, 2022 and 2021.

following potentially dilutive shares have been excluded from the calculation of diluted net loss per share as their effect would be

anti-dilutive for the years ended December 31, 2023 and 2022.

Convertible debt

Stock options

Segment reporting

Prior to January 1, 2022, the Company determined

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

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

The Company’s determination was based

primarily on its method of internal reporting.

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

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

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

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

The Company has determined that these

reportable segments were strategic business units that offered different products.

Currently, these reportable segments are being managed

separately based on the fundamental differences in their operations.

Deferred income tax assets and liabilities arise

from temporary differences between the financial statements and tax basis of assets and liabilities, as measured by the enacted tax rates,

which are expected to be in effect when these differences reverse.

Deferred tax assets and liabilities are classified as current or non-current,

depending upon the classification of the asset or liabilities to which they relate.

Deferred tax assets and liabilities not related to

an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected

Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company follows the provisions of FASB ASC

740-10, “Uncertainty in Income Taxes”.

Certain recognition thresholds must be met before a tax position is recognized in the

financial statements.

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

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

recognition or disclosure in the accompanying consolidated financial statements.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

Stock-based compensation

Stock-based compensation is accounted for

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

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

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

on January 1, 2022, the Company changed its method of internal reporting and determined that the Company operates in two reportable segments

which consist of (1) the operations, leasing and management of its leased commercial properties, herein known as the “Property

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

Estate Services” segment.

The Company has determined that these reportable segments were strategic business units that offered

different products.

Currently, these reportable segments are being managed separately based on the fundamental differences in their operations.

income tax assets and liabilities arise from temporary differences between the financial statements and tax basis of assets and liabilities,

as measured by the enacted tax rates, which are expected to be in effect when these differences reverse.

Deferred tax assets and liabilities

are classified as current or non-current, depending upon the classification of the asset or liabilities to which they relate.

tax assets and liabilities not related to an asset or liability are classified as current or non-current depending on the periods in

which the temporary differences are expected to reverse.

Valuation allowances are established when necessary to reduce deferred tax assets

to the amount expected to be realized.

Company follows the provisions of FASB ASC 740-10, “Uncertainty in Income Taxes”.

Certain recognition thresholds must be

met before a tax position is recognized in the financial statements.

An entity may only recognize or continue to recognize tax positions

that meet a “more-likely-than-not” threshold.

The Company does not believe it has any uncertain tax positions as of December

31, 2023 and 2022 that would require either recognition or disclosure in the accompanying consolidated financial statements.

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

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

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

for the award (presumptively, the vesting period).

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

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

The Company has elected to

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

Employee Share-Based Payment Accounting.

Recently issued accounting pronouncements

In June 2016, the FASB issued ASU No.

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.

issued 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

NOTE 3 – CONCENTRATIONS AND RISKS

Lease Agreements with Significant Tenants

The Company considers tenants whose annual base

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

The Company’s properties located in Chino

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

(“Broken Arrow”).

The Company’s properties located in Tempe

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

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

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

Concurrently with the execution of

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

On December 1, 2022, the Company entered into

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

The Tempe Lease, Kingman Lease, Chino Valley Lease,

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

Chino Valley, AZ

On May 1, 2018, Chino Valley and Broken Arrow

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

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

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

month of April 2018 under the prior Chino Valley Lease.

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

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

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

In addition, pursuant to the terms of the 2018 Chino

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

of occupancy of the premises by Broken Arrow.

On January 1, 2019, Chino Valley and Broken Arrow entered into that the First Amendment

to the 2018 Chino Valley Lease (the “2019 Chino Valley Lease Amendment”), pursuant to which the monthly base rent was increased

from $ 35,000 to $ 40,000 .

Except for the increase in base rent, the terms of the 2018 Chino Valley Lease remain in full force and effect.

On May 29, 2020, Chino Valley and Broken Arrow

entered into a Second Amendment to the 2018 Chino Valley Lease, as amended (the “2020 Chino Valley Amendment”), effective

May 31, 2020 (“Effective Date”).

Pursuant to the terms of the 2020 Chino Valley Amendment, among other things, the base rent

was adjusted to $ 32,800 per month, and the base rent was abated from June 1, 2020 to July 31, 2020.

Any increase in the rentable area

of the leased premises will result in an increase in all amounts calculated based on the same, including, without limitation, base rent.

Pursuant to the terms of the 2020 Chino Valley Amendment, the parties agreed that if there is any change in laws such that the dispensing,

sale or cultivation of marijuana upon the premises is prohibited or materially and adversely affected as mutually and reasonably determined

by Chino Valley and Broken Arrow, Broken Arrow may terminate the 2018 Chino Valley Lease, as amended, by delivering written notice to

Chino Valley, together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the base

rent which would have been earned after termination for the balance of the term.

In addition, the parties agreed that from the period

from the Effective Date to June 30, 2022 (the “Improvement Period”), Broken Arrow will and/or Broken Arrow will cause its

affiliate, CJK, to invest a combined total of at least $ 8,000,000 of improvements (“Investment by Tenants”) in and to the

property that is the subject of the Chino Valley Lease and the property that is the subject of the Tempe Lease (discussed below, and collectively

referred to as the “Facilities”).

The Company’s Significant Tenants have completed the Investment by Tenants to the

Facilities totaling in excess of $ 8,000,000 and have satisfied the contractual obligations related to the same.

On August 23, 2021, Chino Valley and Broken Arrow

entered into the Third Amendment (the “Third Chino Valley Amendment”) to the 2018 Chino Valley Lease, as amended (the “Chino

Valley Lease”), effective September 1, 2021.

The parties previously agreed that the base rental payments under the Chino Valley

Lease would increase commensurate to any and all expanded and operational square footage on the premises by calculating the fixed rate

of $ 0.82 per square foot per month by the new operational square footage.

Accordingly, in the Third Chino Valley Amendment, the parties

agreed that, as of September 1, 2021, the rental payment is increased to $ 55,195 per month base rental payment, plus additional rental

payments, as a result of the increase in the square footage to 67,312 square feet of operational space.

This lease modification qualifies

as a separate contract as the modification grants the tenant additional right of use not included in the original lease, as amended, and

the increase in monthly rent payments is commensurate with the standalone price for the additional square footage being leased.

On January 24, 2022 and effective on March 1,

2022, Chino Valley and Broken Arrow entered into the Fourth Amendment (the “Fourth Chino Valley Amendment”) to the Chino Valley

Lease, as amended.

Pursuant to the terms of the Fourth Chino Valley Amendment, the parties acknowledge that an additional 30,000 square

feet have become operational, increasing the premises to a total of 97,312 square feet of operational space.

In connection with the Fourth

Chino Valley Amendment, the Company paid $ 500,000 to Tenant as a tenant improvement allowance or lease incentive for investment into the

premises, which was capitalized as a lease incentive receivable and is recognized on a straight-line basis over the remaining lease term

as a reduction to the lease income.

Pursuant to the terms of the Fourth Chino Valley Amendment, effective March 1, 2022, the monthly base

rent was increased to $ 87,581 , representing an increase from $ 0.82 per square foot to $ 0.90 per square foot, for all current and future

operational square footage that may be developed as the premises continues to expand.

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 on January 1, 2023 did not have any effect on the Company’s 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.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

Green Valley, AZ

On May 1, 2018, Green Valley and Broken Arrow

terminated the prior Green Valley Lease dated October 1, 2014, in consideration of (i) entry into that certain Licensed Medical Marijuana

Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Green Valley and Broken Arrow (the “Green Valley Lease”),

with a term of 22 years, expiring April 30, 2040 , and (ii) abatement of rent that would otherwise have been due for the month of April

2018 under the prior Green Valley Lease.

The Green Valley Lease provided for payment by Broken Arrow of a fixed monthly base rent of $ 3,500 ,

as well as real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or

estate taxes) levied upon or assessed against Chino Valley.

In addition, pursuant to the terms of the Green Valley Lease, Broken Arrow

agreed to maintain insurance in full force during the term of the Green Valley Lease and any other period of occupancy of the premises

by Broken Arrow.

On May 29, 2020, Green Valley and Broken Arrow

entered into the First Amendment (the “Green Valley Amendment”) to the Green Valley Lease, effective May 31, 2020.

to the terms of the Green Valley Amendment, among other things, the parties agreed to abate the fixed base rent of $ 3,500 from June 1,

2020 to July 31, 2020.

In addition, the Green Valley Amendment provides that any increase in the rentable area of the leases premises

will result in an increase in all amounts calculated based on the same, including, without limitation, base rent.

The parties also agreed

that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially

and adversely affected as mutually and reasonably determined by Green Valley and Broken Arrow, Broken Arrow may terminate the Green Valley

Lease by delivering written notice to Green Valley, together with a termination payment which shall be the sum of (i) any unpaid rent

and interest, plus (ii) 5% of the base rent which would have been earned after termination for the balance of the term.

On May 1, 2018, Zoned Arizona and CJK terminated

the prior Tempe Leases dated in 2015 and 2017 in consideration of (i) entry into that certain Licensed Medical Marijuana Facility Triple

Net (NNN) Lease Agreement dated May 1, 2018 between Zoned Arizona and CJK (the “Tempe Lease”), with a term of 22 years, expiring

April 30, 2040 , and (ii) abatement of rent that would otherwise have been due for the month of April 2018 under the prior Tempe Leases.

The Tempe Lease provided for payment by CJK of a fixed monthly base rent of $ 33,500 , as well as real property taxes, personal property

taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed against Zoned

In addition, pursuant to the terms of the Tempe Lease, CJK agreed to maintain insurance in full force during the term of the

Tempe Lease and any other period of occupancy of the premises by CJK.

On May 29, 2020, Zoned Arizona and CJK entered

into the First Amendment (the “Tempe Amendment”) to the Tempe Lease, effective May 31, 2020.

Pursuant to the terms of the

Tempe Amendment, among other things, the base rent was increased to $ 49,200 per month, and the base rent was abated from June 1, 2020

to July 31, 2020.

Any increase in the rentable area of the leased premises will result in an increase in all amounts calculated based

on the same, including, without limitation, base rent.

Pursuant to the terms of the Tempe Amendment, the parties agreed that if there

is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially and adversely

affected as mutually and reasonably determined by Zoned Arizona and CJK, CJK may terminate the Tempe Lease by delivering written notice

to Zoned Arizona, together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the

base rent which would have been earned after termination for the balance of the term.

In addition, under the Tempe Amendment the parties

agreed to an Investment by Tenant (as defined above in the subheading Chino Valley ) to the property that is the subject of the

Chino Valley Lease and the property that is the subject of the Tempe Lease.

If Broken Arrow and/or CJK fails to deliver to the Company

receipted bills for hard and soft costs of improvements to the Facilities totaling at least $ 8,000,000 on or before June 30, 2022, Broken

Arrow and CJK will be in default under the Chino Valley Lease and Tempe Lease, as amended.

The Company’s Significant Tenants have

completed the Investment by Tenants to the Facilities totaling in excess of $ 8,000,000 and have satisfied the contractual obligations

3 – CONCENTRATIONS AND RISKS

Agreements with Significant Tenants

Company considers a tenant whose annual base rent exceeds over 10 % of the Company’s annual rental income to be a significant tenant.

property located in Chino Valley is leased by Broken Arrow Herbal Center, Inc.

(“Broken Arrow”), doing business as Hana Dispensaries.

property located in Green Valley is leased by Broken Arrow, doing business as Hana Dispensaries.

property located in Kingman is leased by CJK, Inc.

(“CJK”), and subleased by Helping Camo LLC, doing business as Story Cannabis.

property located in Tempe is leased by VSM, LLC (“VSM”), doing business as Green Dot Labs.

On November 30, 2022, Zoned Arizona

Properties, CJK, and VSM LLC (“VSM”) entered into the Tempe Second Amendment to the Tempe Lease, as amended.

with the execution of the Tempe Second Amendment, CJK assigned all its interest in the Tempe Lease to VSM.

property located in Pleasant Ridge is leased by Rapid Fish, LLC (“Rapid Fish”), doing business as NOXX Cannabis.

property located in Chicago is leased by JG IL LLC (“Justice Grown”), doing business as Justice Cannabis Co.

Tempe Lease (leased by VSM), the Kingman Lease (leased on CJK), the Chino Valley Lease and Green Valley Lease (leased by Broken Arrow),

and the Woodward Lease are considered significant and the tenants are referred to as the Significant Tenants.

May 1, 2018, Chino Valley and Broken Arrow entered into a Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated

May 1, 2018 between Chino Valley and Broken Arrow (the “2018 Chino Valley Lease”), with a term of 22 years, expiring April

30, 2040 , and the abatement of rent that would otherwise have been due for the month of April 2018 under the prior Chino Valley Lease.

The 2018 Chino Valley Lease provided for payment by Broken Arrow of a fixed monthly base rent of $ 35,000 , as well as real property taxes,

personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed

against Chino Valley.

In addition, pursuant to the terms of the 2018 Chino Valley Lease, Broken Arrow agreed to maintain insurance in

full force during the term of the 2018 Chino Valley Lease and any other period of occupancy of the premises by Broken Arrow.

1, 2019, Chino Valley and Broken Arrow entered into that the First Amendment to the 2018 Chino Valley Lease (the “2019 Chino Valley

Lease Amendment”), pursuant to which the monthly base rent was increased from $ 35,000 to $ 40,000 .

Except for the increase in base

rent, the terms of the 2018 Chino Valley Lease remain in full force and effect.

May 29, 2020, Chino Valley and Broken Arrow entered into a Second Amendment to the 2018 Chino Valley Lease, as amended (the “2020

Chino Valley Amendment”), effective May 31, 2020 (“Effective Date”).

Pursuant to the terms of the 2020 Chino Valley

Amendment, among other things, the base rent was adjusted to $ 32,800 per month, and the base rent was abated from June 1, 2020 to July

Any increase in the rentable area of the leased premises will result in an increase in all amounts calculated based on the

same, including, without limitation, base rent.

Pursuant to the terms of the 2020 Chino Valley Amendment, the parties agreed that if

there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially

and adversely affected as mutually and reasonably determined by Chino Valley and Broken Arrow, Broken Arrow may terminate the 2018 Chino

Valley Lease, as amended, by delivering written notice to Chino Valley, together with a termination payment which shall be the sum of

(i) any unpaid rent and interest, plus (ii) 5 % of the base rent which would have been earned after termination for the balance of the

In addition, the parties agreed that from the period from the Effective Date to June 30, 2022 (the “Improvement Period”),

Broken Arrow will and/or Broken Arrow will cause its affiliate, CJK, to invest a combined total of at least $ 8,000,000 of improvements

(“Investment by Tenants”) in and to the property that is the subject of the Chino Valley Lease and the property that is the

subject of the Tempe Lease (discussed below, and collectively referred to as the “Facilities”).

The Company’s Significant

Tenants completed the Investment by Tenants to the Facilities totaling in excess of $ 8,000,000 and have satisfied the contractual obligations

related to the same.

August 23, 2021, Chino Valley and Broken Arrow entered into the Third Amendment (the “Third Chino Valley Amendment”) to the

2018 Chino Valley Lease, as amended (the “Chino Valley Lease”), effective September 1, 2021.

The parties previously agreed

that the base rental payments under the Chino Valley Lease would increase commensurate to any and all expanded and operational square

footage on the premises by calculating the fixed rate of $ 0.82 per square foot per month by the new operational square footage.

in the Third Chino Valley Amendment, the parties agreed that, as of September 1, 2021, the rental payment is increased to $ 55,195 per

month base rental payment, plus additional rental payments, as a result of the increase in the square footage to 67,312 square feet of

operational space.

This lease modification qualified as a separate contract as the modification grants the tenant additional right of

use not included in the original lease, as amended, and the increase in monthly rent payments is commensurate with the standalone price

for the additional square footage being leased.

January 24, 2022 and effective on March 1, 2022, Chino Valley and Broken Arrow entered into the Fourth Amendment (the “Fourth Chino

Valley Amendment”) to the Chino Valley Lease, as amended.

Pursuant to the terms of the Fourth Chino Valley Amendment, the parties

acknowledge that an additional 30,000 square feet have become operational, increasing the premises to a total of 97,312 square feet of

operational space.

In connection with the Fourth Chino Valley Amendment, the Company paid $ 500,000 to Tenant as a tenant improvement

allowance or lease incentive for investment into the premises, which was capitalized as a lease incentive receivable and is recognized

on a straight-line basis over the remaining lease term as a reduction to the lease income.

Pursuant to the terms of the Fourth Chino

Valley Amendment, effective March 1, 2022, the monthly base rent was increased to $ 87,581 , representing an increase from $ 0.82 per square

foot to $ 0.90 per square foot, for all current and future operational square footage that may be developed as the premises continues

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

In connection with a promissory note, (See Note

8), on July 11, 2022 and reaffirmed on December 7, 2022, the Company entered into a Deed of Trust Agreement that secures the Company’s

performance under the promissory note.

The Deed of Trust Agreement transfers and assigns to the lender the right to sell the assets of

Tempe and rights to rental income in case of default under the promissory note.

On November 30, 2022, Zoned Arizona, CJK, and

VSM LLC (“VSM”) entered into that Second Amendment (the “Tempe Second Amendment”) to the Tempe Lease, as amended.

May 1, 2018, Green Valley and Broken Arrow entered into a Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated

May 1, 2018 between Green Valley and Broken Arrow (the “Green Valley Lease”), with a term of 22 years, expiring April 30,

2040 , and the abatement of rent that would otherwise have been due for the month of April 2018 under the prior Green Valley Lease.

Green Valley Lease provided for payment by Broken Arrow of a fixed monthly base rent of $ 3,500 , as well as real property taxes, personal

property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed against

Chino Valley.

In addition, pursuant to the terms of the Green Valley Lease, Broken Arrow agreed to maintain insurance in full force during

the term of the Green Valley Lease and any other period of occupancy of the premises by Broken Arrow.

May 29, 2020, Green Valley and Broken Arrow entered into the First Amendment (the “Green Valley Amendment”) to the Green

Valley Lease, effective May 31, 2020.

Pursuant to the terms of the Green Valley Amendment, among other things, the parties agreed to

abate the fixed base rent of $ 3,500 from June 1, 2020 to July 31, 2020.

In addition, the Green Valley Amendment provides that any increase

in the rentable area of the leases premises will result in an increase in all amounts calculated based on the same, including, without

limitation, base rent.

The parties also agreed that if there is any change in laws such that the dispensing, sale or cultivation of marijuana

upon the premises is prohibited or materially and adversely affected as mutually and reasonably determined by Green Valley and Broken

Arrow, Broken Arrow may terminate the Green Valley Lease by delivering written notice to Green Valley, together with a termination payment

which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5 % of the base rent which would have been earned after termination

for the balance of the term.

May 1, 2018, Zoned Arizona and CJK entered into that certain Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated

May 1, 2018 between Zoned Arizona and CJK (the “Tempe Lease”), with a term of 22 years, expiring April 30, 2040 , and the

abatement of rent that would otherwise have been due for the month of April 2018 under the prior Tempe Leases.

The Tempe Lease provided

for payment by CJK of a fixed monthly base rent of $ 33,500 , as well as real property taxes, personal property taxes, privilege, sales,

rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed against Zoned Arizona.

pursuant to the terms of the Tempe Lease, CJK agreed to maintain insurance in full force during the term of the Tempe Lease and any other

period of occupancy of the premises by CJK.

May 29, 2020, Zoned Arizona and CJK entered into the First Amendment (the “Tempe Amendment”) to the Tempe Lease, effective

May 31, 2020.

Pursuant to the terms of the Tempe Amendment, among other things, the base rent was increased to $ 49,200 per month, and

the base rent was abated from June 1, 2020 to July 31, 2020.

Any increase in the rentable area of the leased premises will result in

an increase in all amounts calculated based on the same, including, without limitation, base rent.

Pursuant to the terms of the Tempe

Amendment, the parties agreed that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the

premises is prohibited or materially and adversely affected as mutually and reasonably determined by Zoned Arizona and CJK, CJK may terminate

the Tempe Lease by delivering written notice to Zoned Arizona, together with a termination payment which shall be the sum of (i) any

unpaid rent and interest, plus (ii) 5 % of the base rent which would have been earned after termination for the balance of the term.

addition, under the Tempe Amendment the parties agreed to an Investment by Tenant (as defined above in the subheading Chino Valley )

to the property that is the subject of the Chino Valley Lease and the property that is the subject of the Tempe Lease.

If Broken Arrow

and/or CJK fails to deliver to the Company receipted bills for hard and soft costs of improvements to the Facilities totaling at least

$ 8,000,000 on or before June 30, 2022, Broken Arrow and CJK will be in default under the Chino Valley Lease and Tempe Lease, as amended.

The Company’s Significant Tenants have completed the Investment by Tenants to the Facilities totaling in excess of $ 8,000,000 and

have satisfied the contractual obligations related to the same.

connection with a promissory note (See Note 8), on July 11, 2022 and reaffirmed on December 7, 2022, the Company entered into a Deed

of Trust Agreement that secures the Company’s performance under the promissory note.

The Deed of Trust Agreement transfers and

assigns to the lender the right to sell the assets of Tempe and rights to rental income in case of default under the promissory note.

November 30, 2022, Zoned Arizona, CJK, and VSM entered into that Second Amendment (the “Tempe Second Amendment”) to the Tempe

Lease, as amended.

Concurrently with the execution of the Tempe Second Amendment:

(i) CJK assigned all its interest in the Tempe Lease to VSM (the “Assignment”),

and (ii) VSM subleased a portion of the Premises (as defined in the Tempe Lease), pursuant to that certain Sublease dated November 30,

2022 between VSM, as sublessor, and CJK, as sublessee.

Pursuant to the terms of the Tempe Second Amendment,

among other things, and in consideration of Zoned Arizona’s agreement to enter into the Tempe Second Amendment:

(i) VSM paid Zoned

Arizona $300,000 (the “Assignment Price”), (ii) VSM agreed to commit at least $3,000,000 to be spent toward capital improvements

to the Premises within two years after the effective date of the Tempe Second Amendment (the “Capital Commitment”), (iii)

VSM agreed to deposit an additional security deposit (the “Additional Security Deposit”) of $147,600 to be held by Zoned Arizona

per the terms of the Tempe Lease, and (iv) VSM agreed to cause its affiliate, GDL Inc.

(doing business as Green Dot Labs) (“GDL”)

to execute and deliver to Zoned Arizona that Guaranty of Payment and Performance dated on the same date as the Tempe Amendment, which

Guaranty of Payment and Performance requires GDL to guarantee and be liable for VSM’s compliance with and performance under the

(i) CJK assigned all its interest in the Tempe Lease

to VSM (the “Assignment”), and (ii) VSM subleased a portion of the Premises (as defined in the Tempe Lease), pursuant to

that certain Sublease dated November 30, 2022 between VSM, as sublessor, and CJK, as sublessee.

to the terms of the Tempe Second Amendment, among other things, and in consideration of Zoned Arizona’s agreement to enter into

the Tempe Second Amendment:

(i) VSM paid Zoned Arizona $ 300,000 (the “Assignment Fee”), (ii) VSM agreed to commit at least

$ 3,000,000 to be spent toward capital improvements to the Premises within two years after the effective date of the Tempe Second Amendment

(the “Capital Commitment”), (iii) VSM agreed to deposit an additional security deposit (the “Additional Security Deposit”)

of $ 147,600 to be held by Zoned Arizona per the terms of the Tempe Lease, and (iv) VSM agreed to cause its affiliate, GDL Inc.

business as Green Dot Labs) (“GDL”) to execute and deliver to Zoned Arizona that Guaranty of Payment and Performance dated

on the same date as the Tempe Amendment, which Guaranty of Payment and Performance requires GDL to guarantee and be liable for VSM’s

compliance with and performance under the Tempe Lease.

The Guaranty of Payment and Performance was entered into on November 30, 2022.

If VSM fails to deliver to Zoned Arizona invoices

or other documentation acceptable to Zoned Arizona showing the Capital Commitment has been satisfied in a timely manner, VSM will be in

default under the Tempe Lease.

If VSM fails to deliver to Zoned Arizona invoices or other documentation acceptable to Zoned Arizona showing the Capital Commitment has

been satisfied in a timely manner, VSM will be in default under the Tempe Lease.

No other terms of the Tempe Lease were modified.

Therefore, the Company’s accounting for the lease

remained unchanged subsequent to the Tempe Second Amendment and Assignment.

Accordingly, the Company will amortize the $ 300,000

assignment fees into rental revenue on a straight-line basis over the remaining term of the lease through April 2040.

On December 31,

2022, contract liability related to this lease modification amount to $ 298,565 which has been presented on the accompanying consolidated

balance sheet.

On May 1, 2018, Kingman and CJK agreed to terminate

the prior Kingman Lease dated October 1, 2014, in consideration of (i) entry into that certain Licensed Medical Marijuana Facility Triple

Net (NNN) Lease Agreement dated May 1, 2018 between Kingman and CJK (the “Kingman Lease”), with a term of 22 years, expiring

April 30, 2040 , and (ii) abatement of rent that would otherwise have been due for the month of April 2018 under the Prior Kingman Lease.

The Kingman Lease provides for payment by CJK of a fixed monthly base rent of $ 4,000 , as well as real property taxes, personal property

taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed against Kingman.

In addition, pursuant to the terms of the Kingman Lease, CJK agreed to maintain insurance in full force during the term of the Kingman

Lease and any other period of occupancy of the premises by CJK.

On May 29, 2020, Kingman and CJK entered into

the First Amendment (the “Kingman Amendment”) to the Kingman Lease, effective May 31, 2020.

Pursuant to the terms of the Kingman

Amendment, among other things, the parties agreed to abate the $ 4,000 base rent from June 1, 2020 to July 31, 2020.

In addition, the Kingman

Amendment provides that any increase in the rentable area of the leases premises will result in an increase in all amounts calculated

based on the same, including, without limitation, base rent.

The parties also agreed that if there is any change in laws such that the

dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially and adversely affected as mutually and reasonably

determined by Kingman and CJK, CJK may terminate the Kingman Lease by delivering written notice to Kingman, together with a termination

payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned after termination

for the balance of the term.

On November 30, 2022, Kingman and CJK entered

into the Second Amendment (the “Kingman Second Amendment”) to the Licensed Medical Marijuana Facility Triple Net (NNN) Lease

Agreement dated May 1, 2018 between Kingman and CJK.

Pursuant to the terms of the Kingman Second Amendment, CJK agreed to grant Kingman

a right to terminate the Kingman Lease upon 15 days’ prior written notice in Kingman’s sole discretion, without any obligation

to do so, provided that Kingman may not exercise this right to terminate if CJK is operating its business as a going concern at the premises

which is the subject of the Kingman Lease.

the Company’s accounting for the lease remained unchanged subsequent to the Tempe Second Amendment and Assignment.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

Pleasant Ridge, MI

On November 29, 2022, ZP Woodward, as landlord,

entered into a Licensed Cannabis Facility Absolute Net Lease Agreement (the “Woodward Lease”) with Rapid Fish 2 LLC, as tenant

(“Woodward Tenant”), whereby ZP Woodward leased the Woodward Property located in Pleasant Ridge, Michigan to the Woodward

The Woodward Lease commenced on December 1, 2022 and has a term of 14 years and 4 months through March 1, 2037, with two 5 -year

options to extend the term, exercisable by the Woodward Tenant pursuant to the terms and conditions of the Woodward Lease.

Lease contains customary obligations of the Woodward Tenant consistent with an absolute triple net lease agreement, including (i) the

payment of real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or

estate taxes), (ii) payment of insurance premiums and operating costs of ZP Woodward related to the operation of the Woodward Property,

and (iii) maintenance and repair obligations to maintain the Woodward Property in first-class retail condition.

The Woodward Lease includes

a Guaranty of Payment and Performance by Ammar Kattoula and Thomas Nafso.

The Woodward Lease contains an abatement of the full or partial

rent that would otherwise have been due for the months from December 2022 to March 2023.

Subsequent to the abatement period, the Woodward

Lease provides for payment by the tenant of monthly base rent beginning at $ 40,319 per month and increasing by 3 % per year over the term

of the lease, as well as real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding

income or estate taxes) levied upon or assessed against the Company.

In addition, pursuant to the terms of the Woodward Lease, the Woodward

Tenant agreed to maintain insurance in full force during the term of the Woodward Lease and any other period of occupancy of the premises

by the tenant.

The tenant shall have the option, exercisable by written notice to ZP Woodward given not later than 180 days prior to the

expiration of the then current term, to extend the term for two further terms of five years each on the same terms and conditions as provided

in this Lease.

As of December 31, 2022 and 2021, security deposits

payable to the collective Significant Tenants amounted to $ 219,400 and $ 71,800 , respectively.

Future minimum lease payments primarily

consist of minimum base rent payments from the collective Significant Tenants.

Future minimum lease payments to be received,

on all leased properties, for each of the five succeeding calendar years and thereafter as of period ended December 31, 2022, consists

of the following:

Future annual base rent:

to ASC 842-10-25, the lease modification was not accounted for as a separate contract and the Company shall account for the modification

as if it were a termination of the existing lease and the creation of a new lease that commenced on the effective date of the modification.

Accordingly, the Company recorded the $ 300,000 as a contract liability and will amortize the $ 300,000 Assignment Fees into rental revenue

on a straight-line basis over the remaining term of the lease through April 2040.

On December 31, 2023 and 2022, contract liability related

to this lease modification amounted to $ 281,340 and $ 298,565 , respectively, which has been included in contract liabilities on the accompanying

consolidated balance sheets.

Additionally,

on the Tempe property, the Company leases parking lot space for an antenna location to a third party.

May 1, 2018, Kingman and CJK entered into a Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between

Kingman and CJK (the “Kingman Lease”), with a term of 22 years, expiring April 30, 2040 , and the abatement of rent that would

otherwise have been due for the month of April 2018 under the Prior Kingman Lease.

The Kingman Lease provides for payment by CJK of a

fixed monthly base rent of $ 4,000 , as well as real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or

other taxes (excluding income or estate taxes) levied upon or assessed against Kingman.

In addition, pursuant to the terms of the Kingman

Lease, CJK agreed to maintain insurance in full force during the term of the Kingman Lease and any other period of occupancy of the premises

May 29, 2020, Kingman and CJK entered into the First Amendment (the “Kingman Amendment”) to the Kingman Lease, effective

May 31, 2020.

Pursuant to the terms of the Kingman Amendment, among other things, the parties agreed to abate the $ 4,000 base rent from

June 1, 2020 to July 31, 2020.

In addition, the Kingman Amendment provides that any increase in the rentable area of the leases premises

will result in an increase in all amounts calculated based on the same, including, without limitation, base rent.

The parties also agreed

that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially

and adversely affected as mutually and reasonably determined by Kingman and CJK, CJK may terminate the Kingman Lease by delivering written

notice to Kingman, together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5 % of the

base rent which would have been earned after termination for the balance of the term.

November 30, 2022, Kingman and CJK entered into the Second Amendment (the “Kingman Second Amendment”) to the Licensed Medical

Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Kingman and CJK.

Pursuant to the terms of the Kingman Second

Amendment, CJK agreed to grant Kingman a right to terminate the Kingman Lease upon 15 days’ prior written notice in Kingman’s

sole discretion, without any obligation to do so, provided that Kingman may not exercise this right to terminate if CJK is operating

its business as a going concern at the premises which is the subject of the Kingman Lease.

August 2, 2023, the Company entered into a Sublease Agreement (the “Sublease”) with CJK and a subtenant in connection with

the Company’s Kingman property.

Pursuant to the Sublease, the Sublease shall be effective on August 2, 2023 and end on the one

year anniversary, or (ii) the last day of the Term of the Master Lease (whether due to expiration or termination thereof by the Company,

whichever is earlier (the “Sublease Expiration Date”), such period being referred to herein as the “Sublease Term”,

unless terminated earlier pursuant to the terms of this Sublease or otherwise by consent of the Company, CJK and Subtenant.

The subtenant

shall have two options to extend the Sublease Term by one year periods each (each a “Sublease Term Extension” and collectively

the “Sublease Term Extensions”), which shall be exercisable by Subtenant no later than 90 days prior to the expiration of

the Sublease Term, as may be extended.

to the Kingman Lease, if pursuant to any assignment or sublease, CJK receives rent, either initially or over the Term of the assignment

or sublease, in excess of the Rent called for hereunder, or in the case of this sublease of a portion of the Premises in excess of such

Rent fairly allocable to such portion, after appropriate adjustments to assure that all other payments called for hereunder are appropriately

taken into account, CJK shall pay to the Company, as Additional Rent hereunder, 50 % of the excess of each such payment of rent received

Accordingly, the Company shall receive additional rent of $ 3,500 per month during the term of the sublease.

Additionally,

the subtenant will pay a security deposit of $ 22,000 per the terms of the sublease.

The Company and CJK have agreed to split the Security

Deposit at 68 % (the Company received $ 14,960 of the $ 22,000 Security Deposit, which $ 14,960 is included in security deposits payable

on the accompanying consolidated balance sheet).

November 29, 2022, ZP Woodward, as landlord, entered into a Licensed Cannabis Facility Absolute Net Lease Agreement (the “Woodward

Lease”) with Rapid Fish 2 LLC, as tenant (“Woodward Tenant”), whereby ZP Woodward leased the Woodward Property located

in Pleasant Ridge, Michigan to the Woodward Tenant.

The Woodward Lease commenced on December 1, 2022 and has a term of 14 years and 4

months through March 1, 2037, with two 5-year options to extend the term, exercisable by the Woodward Tenant pursuant to the terms and

conditions of the Woodward Lease.

The Woodward Lease contains customary obligations of the Woodward Tenant consistent with an absolute

triple net lease agreement, including (i) the payment of real property taxes, personal property taxes, privilege, sales, rental, excise,

use and/or other taxes (excluding income or estate taxes), (ii) payment of insurance premiums and operating costs of ZP Woodward related

to the operation of the Woodward Property, and (iii) maintenance and repair obligations to maintain the Woodward Property in first-class

retail condition.

The Woodward Lease includes a Guaranty of Payment and Performance by Ammar Kattoula and Thomas Nafso.

Lease contains an abatement of the full or partial rent that would otherwise have been due for the months from December 2022 to March

Subsequent to the abatement period, the Woodward Lease provides for payment by the tenant of monthly base rent beginning at $ 40,319

per month and increasing by 3 % per year over the term of the lease, as well as real property taxes, personal property taxes, privilege,

sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed against the Company.

pursuant to the terms of the Woodward Lease, the Woodward Tenant agreed to maintain insurance in full force during the term of the Woodward

Lease and any other period of occupancy of the premises by the tenant.

The tenant shall have the option, exercisable by written notice

to ZP Woodward given not later than 180 days prior to the expiration of the then current term, to extend the term for two further terms

of five years each on the same terms and conditions as provided in this Lease.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

Revenues – Significant

For the years ended December 31, 2022 and 2021,

revenues associated with Significant Tenant leases described above are summarized as follows:

May 14, 2023, ZP Woodward entered into an Assignment and Assumption of Lease (“Assignment”) whereby the Woodward Lease was

assigned from Rapid Fish 2 LLC (“Old Tenant”) to Rapid Fish LLC (“New Tenant”).

Old Tenant and New Tenant share

common ownership.

The assignment of the Woodward Lease is conditioned upon issuance by the City of Pleasant Ridge, Michigan of a final

cannabis business license to New Tenant and ZP Woodward’s receipt of a fully executed Reaffirmation of Guaranty from the guarantors

of the Woodward Lease.

The Assignment contains other terms as are customary for a document of this type.

of December 31, 2023 and 2022, security deposits payable to the collective Significant Tenants amounted to $ 290,460 and $ 219,400 , respectively.

Future minimum lease payments primarily consist of minimum base rent payments from the collective Significant Tenants.

minimum lease payments to be received, on all leased properties, for each of the five succeeding calendar years and thereafter as of

December 31, 2023, consists of the following:

Future annual base rent:

– Significant Tenants

the years ended December 31, 2023 and 2022, revenues associated with Significant Tenant leases described above are summarized as follows:

For the Year Ended

Woodward Tenant *

Woodward lease *

* Revenues from these Significant Tenants began in December 2022.

and will amount to over 10 % of the Company’s rental revenue in future periods.

Further, as of December 31, 2022 and 2021, a deferred

rent receivable of $ 204,079 and $ 164,770 is due collectively from the Significant Tenants due to the abatement of rent under the lease

agreements discussed above, respectively, and as of December 31, 2022, a lease incentive receivable of $ 477,064 is due from one of the

Significant Tenants, in connection with the $ 500,000 tenant improvement allowance provided to tenant pursuant to the Chino Valley amendment

executed during the year ended December 31, 2022 (see above).

Additionally, as discussed above, VSM paid Zoned Arizona the $ 300,000 Assignment

The Company considers the assignment fee paid as a part of the lease payments for the modified lease and shall amortize the $ 300,000

assignment fees into rental revenue on a straight-line basis over the remaining term of the modified lease through April 2040.

31, 2022, deferred revenue related to this lease modification amounted to $ 298,565 and is included in contract liabilities on the accompanying

consolidated balance sheet.

Asset concentration

The Company’s real estate properties are

leased to Significant Tenants under triple-net leases that terminate through March 2037 and April 2040, respectively.

The Company monitors

the credit of all tenants to stay abreast of any material changes in credit quality.

The Company monitors tenant credit by (1) reviewing

financial statements and related metrics and information that are publicly available or that are provided to us upon request, and (2)

monitoring the timeliness of rent collections.

As of December 31, 2022 and 2021, the Company

had an asset concentration related to the Significant Tenants.

As of December 31, 2022 and 2021, the Significant Tenants collectively

leased approximately 59.8 % and 79.2 % of the Company’s total assets, respectively.

Through December 31, 2022, all rental payments

have been made on a timely basis.

as of December 31, 2023 and 2022, deferred rent of $ 371,472 and $ 204,079 is due collectively from the Significant Tenants due to the

abatement of rent under the lease agreements discussed above, respectively, and as of December 31, 2023 and 2022, a lease incentive receivable

of $ 449,541 and $ 477,064 is due from one of the Significant Tenants, respectively, in connection with the $ 500,000 tenant improvement

allowance provided to tenant pursuant to the Chino Valley amendment executed during the year ended December 31, 2022 (see above).

Additionally,

as discussed above, VSM paid Zoned Arizona the $ 300,000 Assignment Price.

The Company considers the assignment fee paid as a part of

the lease payments for the modified lease and shall amortize the $ 300,000 assignment fees into rental revenue on a straight-line basis

over the remaining term of the modified lease through April 2040.

On December 31, 2023 and 2022, deferred revenue related to this lease

modification amounted to $ 281,340 and $ 298,565 , respectively, and is included in contract liabilities on the accompanying consolidated

balance sheets.

concentration

Company’s real estate properties are leased to Significant Tenants under absolute-net and triple-net leases that terminate through

March 2037 and April 2040, respectively.

The Company monitors the credit of all tenants to stay abreast of any material changes in credit

The Company monitors tenant credit by (1) reviewing financial statements and related metrics and information that are publicly

available or that are provided to us upon request, and (2) monitoring the timeliness of rent collections.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

NOTE 4 – RENTAL PROPERTIES

On December 31, 2022 and 2021, rental properties,

net consisted of the following:

of December 31, 2023 and 2022, the Company had an asset concentration related to the Significant Tenants.

As of December 31, 2023 and

2022, the Significant Tenants collectively leased approximately 69.4 % and 59.8 % of the Company’s total assets, respectively.

December 31, 2023, all rental payments have been made on a timely basis.

relating to certain industries or business sectors or the financial stability of the Company’s significant tenants may have a significant

adverse impact on the Company’s assets and its ability to pay its operating expenses or pay dividends than if the Company had a

diversified property portfolio and service offerings.

The Company’s total assets are concentrated into a limited number of tenants

who were considered significant tenants.

To the extent that the Company’s total assets are concentrated in a limited number of

tenants that are in the regulated cannabis industry, downturns relating generally to such industry or business sector, or a decline in

the financial stability of the Company’s Significant Tenants may result in defaults on all of the Company’s leases within

a short time period, which may reduce the Company’s net income and the value of the Company’s common stock and accordingly,

limit the Company’s ability to pay our operating expenses or pay dividends to its stockholders.

If the Company’s tenants

are prohibited from operating or cannot pay their rent, the Company may not have enough working capital to support its operations and

the Company would need to consider seeking out new tenants at rental rates per square foot that may be less than its current rate per

4 – RENTAL PROPERTIES

December 31, 2023 and 2022, rental properties, net consisted of the following:

Building and building improvements

Construction in progress

Rental properties, at cost

3 unchanged sentences

Rental properties, net

On June 1, 2021, the Company closed on the sale

of its Gilbert, AZ property with a third party (the “Purchaser”) pursuant to which the Company agreed to sell, and the Purchaser

agreed to purchase, the property located in Gilbert, Arizona, for an aggregate purchase price of $ 335,000 .

In connection with the sale,

the Company received net proceeds of $ 322,332 and recorded a gain on sale of rental property of $ 51,944 .

On December 1, 2022, ZP Woodward entered into

an Exclusive Option Agreement for the Purchase of Real Property (the “Option Agreement”), dated December 1, 2022 between ZP

Woodward and FL MI RE 22, LLC (the “Woodward Assignor”).

Pursuant to the terms of the Option Agreement and subject to the

conditions therein, ZP Woodward was granted the exclusive option (the “Option”) to assume all of the Woodward Assignor’s

rights and obligations under certain purchase agreements and other definitive documents as described in the Option Agreement (collectively,

“Assigned Rights”), all related to real property located in Pleasant Ridge, Michigan and as more particularly described in

the Option Agreement (the “Woodward Property”).

In December 2022, the Company exercised its rights to acquire the properties

located at 23616 and 23622 Woodward Avenue, Pleasant Ridge, Michigan for a purchase price of $ 2,292,549 including cash of $ 867,549 , and

a land contract promissory note of $ 1,425,000 (see Note 8).

The properties consist of approximately 9,060 square feet of land with approximately

6,192 square feet of rentable buildings space.

Simultaneously, the Company paid cash of $ 590,000 to the Woodward Assignor in assignment

fees and deposits for the rights to acquire two adjacent properties (the “Parking Lots”), which is reflected as escrow deposits

on the accompanying consolidated balance sheets as of December 31, 2022.

Subsequent to year-end 2022, in February 2023, ZP Woodward exercised

its rights and acquired the adjacent Parking Lots (See Note 16).

On November 29, 2022, the Woodward Properties and the Parking Lots were

leased to the Woodward Tenant pursuant to the Woodward Lease (See Note 3).

Repurchase Agreement

On November 29, 2022, ZP Woodward, the Woodward

Assignor, Ammar Kattoula and Thomas Nafso (the Woodward Assignor, Mr.

Kattoula and Mr.

Nafso collectively referred to as the “Repurchasers”)

entered into a Real Estate Repurchase Agreement (the “Repurchase Agreement”).

The Repurchase Agreement required the Repurchasers

to purchase the Woodward Property from ZP Woodward upon ZP Woodward’s election in its sole discretion for a period ending 30 days

after the earlier of (i) the date (y) the applicable governmental authority rejects approval of the pending Marijuana Facility Application

by the Woodward Tenant, or (z) ZP Woodward has actual notice of any breach of Woodward Assignor’s representations, warranties or

covenants under the Master Agreement, or (ii) March 15, 2023 or such later date mutually agreed upon by ZP Woodward and the Repurchasers.

On February 14, 2023, the Marijuana Facility Application was approved by Pleasant Ridge.

Subsequent to December 31, 2022, in February

2023, ZP Woodward exercised its rights and completed the purchase of the two adjacent Parking Lots, therefore no repurchase was required

by the Repurchasers.

For the years ended December 31, 2022 and 2021,

depreciation of rental properties amounted to $ 345,878 and $ 352,529 , respectively.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

NOTE 5 – CONVERTIBLE NOTE RECEIVABLE

On March 19, 2020, the Company made an initial

investment of $ 100,000 into KCB Jade Holdings, LLC (“KCB”), an entity founded by an individual related to the Company’s

President and Chief Operating Officer.

KCB, doing business as Open Dør Dispensaries, is committed to guiding retailers through

the chaos of cannabis.

KCB is interested in cannabis dispensary license holders who want to elevate the experience of regulated cannabis

utilizing the Open Dør Dispensaries retail model as franchisee partners.

In exchange for the investment, KCB issued to the Company

a convertible debenture (the “KCB Debenture”) dated March 19, 2020 (the “Issuance Date”) in the original principal

amount of $ 100,000 .

The KCB Debenture bears interest at the rate of 6.5 % per annum and matures on March 19, 2025 (the “Maturity

Interest on the outstanding principal sum of the KCB Debenture commences accruing on the Issuance Date and is computed on

the basis of a 365-day year and the actual number of days elapsed and shall be payable annually due by the first day of each calendar

anniversary following the Issuance Date.

KCB may prepay the KCB Debenture at any point after 18 months following the Issuance Date, in

whole or in part.

However, if KCB elects to prepay the KCB Debenture prior to the Maturity Date or prior to any conversion as provided

in the KCB Debenture in whole or in part, the Company will be entitled to receive a number of KCB units, in addition to such prepayment

amount, constituting 10 % of the total outstanding units and 10 % of the total percentage interest following such issuance and at the time

of such issuance.

On or after six months from the Issuance Date,

the Company may convert all or a portion of the principal balance and all accrued and unpaid interest due into a number of units equal

to the proportion of the outstanding amount being converted multiplied by 33 % of the total number of units issued and outstanding at the

time of conversion, constituting 33 % of the total percentage interest (the “Conversion Percentage”).

If KCB defaults on payment

of the KCB Debenture, the Company may, at its option, extend all conversion rights, through and including the date KCB tenders or attempts

to tender payment in full of all amounts due under the KCB Debenture.

Conversion rights terminate upon acceptance by the Company of payment

in full of principal, accrued interest and any other amounts due under the KCB Debenture.

If (i) KCB does not elect to exercise its rights

of prepayment prior to the Maturity Date, (ii) the Company does not elect to exercise its rights of conversion, and (iii) KCB pays to

the Company all outstanding principal and interest accrued and due under the terms of the KCB Debenture on the Maturity Date, the Company

will still be entitled to receive a number of units, in addition to such payment amount, constituting 8 % of the total outstanding units

and 8 % of the total percentage interest following such issuance and at the time of such issuance.

Upon the occurrence of an Event of Default, as

defined in the KCB Debenture, the entire principal balance and accrued and unpaid interest outstanding under the KCB Debenture, and all

other obligations of KCB under the KCB Debenture, will be immediately due and payable and the Company may exercise any and all rights,

power and remedies available to it at law or in equity or other appropriate proceeding, whether for the specific performance of any covenant

or agreement contained in the KCB Debenture and proceed to enforce the payment thereof or any other legal or equitable right of the Company.

Any amount of principal or interest not paid when

due will bear interest at the rate of 12 % per annum from the due date thereof until paid.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

On February 19, 2021 (the “Amendment Date”),

the Company made an additional investment of $ 100,000 into KCB (the “Additional Investment”).

In exchange, KCB issued to the

Company an amended and restated convertible debenture (the “A&R Debenture”) on the Amendment Date.

The A&R Debenture

amends and restates in its entirety the KCB Debenture.

Pursuant to the A&R Debenture, the Company and KCB agreed to certain new terms

that did not exist in the KCB Debenture, which are described below.

Interest Accrual Commencement :

Pursuant to the A&R Debenture, interest on the Initial Investment begins accruing as of March 19, 2020, while interest on the Additional Investment begins accruing on February 19, 2021.

● Franchise Fees .

In the A&R Debenture, the parties acknowledge that each time that KCB sells one of its franchise locations, KCB earns a fee (an “Initial Fee”), and that KCB also earns a fee when one of its franchise locations renews its franchise with KCB (a “Renewal Fee”).

Pursuant to the A&R Debenture, the Company and KCB agreed that, as additional consideration for the Additional Investment, KCB will pay to the Company, in perpetuity, 5 % of any Initial Fee received by KCB after the Amendment Date, as well as 5 % of any Renewal Fee received by KCB related to any franchise locations sold after the Amendment Date, in each case to be paid within five (5) days of receipt of KCB thereof.

In addition, following the Amendment Date, KCB

agreed not to decrease the amount it charges its franchise locations for an Initial Fee or any Renewal Fee as in effect on the Amendment

Date without the prior written consent of the Company, or to take any other actions that would reduce the value of KCB’s obligation

to the Company with respect to these franchise fee payments.

KCB’s obligation to pay the Company the franchise fees listed above

will survive any termination, repayment or conversion of the A&R Debenture.

Failure by KCB to pay the Company the franchise fees in

the manner described above will result in an event of default, and, among other things, any due and unpaid franchise fees will accrue

interest at 12 % per year from the date the obligation was due.

Apart from the terms described above, the terms

of the A&R Debenture are substantially identical to the terms of the KCB Debenture.

On August 2, 2021, KCB issued to the Company a

second amended and restated convertible debenture (the “Second A&R Debenture”).

The Second A&R Debenture amends and

restates in its entirety the A&R Debenture.

Pursuant to the Second A&R Debenture, the Company and KCB agreed to revise certain

terms in the A&R Debenture, as follows.

Right of Prepayment .

KCB may prepay the

Second A&R Debenture at any point after 18 months following the Issue Date, in whole or in part.

However, if KCB elects to prepay

the Second A&R Debenture prior to March 19, 2025 (the “Maturity Date”) or prior to any conversion in whole or in part,

the Company will be entitled to receive a number of KCB Class B units (“Class B Units”), in addition to such prepayment amount,

constituting 10% of the total outstanding KCB Units (as defined in KCB’s Limited Liability Company Operating Agreement (the “Operating

Agreement”), for the avoidance of doubt, being 10% of the total of KCB’s Class A units (“Class A Units”) and the

Class B Units together, and 10% of the total Percentage Interest (as defined in the Operating Agreement) following such issuance and at

the time of such issuance.

Voluntary Conversion .

On or after six months

from the Issue Date, the Company is entitled to convert all or a portion of the principal balance and all accrued and unpaid interest

due under the Second A&R Debenture (the “Outstanding Amount”) into a number of Class B Units equal to the proportion of

the Outstanding Amount being converted multiplied by the Conversion Percentage, as defined below).

Should KCB default on payment hereof,

the Company may, at its option, extend all conversion rights, through and including the date KCB tenders or attempts to tender payment

in full of all amounts due under the Second A&R Debenture.

Conversion rights will terminate upon acceptance by the Company of payment

in full of principal, accrued interest and any other amounts due under the Second A&R Debenture.

Conversion Percentage.

The Conversion Percentage

will be 33% of the total number of Units (for the avoidance of doubt, being 33% of the total of the Class A Units and the Class B Units

together), issued and outstanding at the time of conversion, constituting 33% of the total Percentage Interest (the “Conversion

Percentage”).

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

Right of Maturity Units .

If (i) KCB does

not elect to exercise its prepayment rights prior to the Maturity Date, and (ii) the Company does not elect to exercise its conversion

rights, and (iii) KCB pays to the Company all outstanding principal and interest accrued and due under the terms of the Second A&R

Debenture on the Maturity Date, then the Company will still be entitled to receive a number of Class B Units, in addition to such payment

amount, constituting 8% of the total outstanding Units (for the avoidance of doubt, being 8% of the total of the Class A Units and the

Class B Units together) and 8% of the total Percentage Interest (as such term is defined in the Second A&R Debenture) following such

issuance and at the time of such issuance.

Apart from the terms described above, the terms

of the Second A&R Debenture are substantially identical to the terms of the A&R Debenture.

The convertible note receivable has been accounted

for at amortized cost and is evaluated for collectability at each reporting date.

As of December 31, 2022, based on management’s

analysis, the Company recorded a loss on note receivable investment of $ 210,756 which consisted of convertible notes receivable and interest

receivable amounted to $ 200,000 and $ 10,756 , respectively.

In connection with management’s analysis, the Company considered the

current financial situation of KCB and an assessment of KCB’s franchising opportunity in the cannabis industry from a macro-industry

Based on this analysis, management concluded that realizing any future benefits from this investment was uncertain;

the loss on the note receivable investment was recorded which has been reflected in other (income) expenses on the consolidated statements

of operations.

On December 31, 2022, convertible note receivable

and interest receivable amounted to $ 0 .

On December 31, 2021, convertible note receivable and interest receivable amounted to $ 200,000

and $ 10,756 , respectively.

NOTE 6 – INTANGIBLE ASSET

On April 1, 2021, the Company’s subsidiary,

Arizona Brokerage, entered in an engagement letter for real estate brokerage services with a consultant for a guaranteed term of one year

(the “Guaranteed Term”).

During the Guaranteed Term, neither party may terminate the engagement letter, except for “Cause”

as defined in the engagement letter.

In connection with the engagement letter, the Company issued 60,000 shares of its common stock for

the acquisition of brokerage materials and active real estate listings.

In the event of termination of the engagement letter due to cause

with respect to the consultant, the consultant must return to the Company a portion of the stock equal to the remaining portion of the

Guaranteed Term.

The shares were valued at their fair value of $ 37,800 using the quoted per share price on the date of grant of $ 0.63 .

In connection with these shares, on April 1, 2021, the Company recorded an intangible asset of $ 37,800 which was amortized over the one-year

term of the engagement letter.

On December 31, 2022 and 2021, intangible assets

consisted of the following:

Real estate brokerage materials and listing

accumulated amortization

For the year ended December 31, 2022 and 2021,

amortization of intangible assets amounted to $ 9,450 and $ 28,350 , respectively.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

NOTE 7 – INVESTMENT IN UNCONSOLIDATED

JOINT VENTURES AND EQUITY SECURITIES

Investment in unconsolidated joint ventures

On December 31, 2022 and 2021, the Company

held investments with aggregate carrying values of $ 58,293 and $ 74,554 , respectively.

The entities listed below are partially owned by

The Company accounts for these investments under the equity method of accounting as the Company exercises significant influence

but does not exercise financial and operating control over these entities.

Investments are reviewed for changes in circumstance or the

occurrence of events that suggest an other than temporary event where the Company’s investment may not be recoverable.

of the Company’s original investments in the unconsolidated affiliated entities and net carrying value amount is as follows:

December 1, 2022, ZP Woodward entered into an Exclusive Option Agreement for the Purchase of Real Property (the “Option Agreement”),

dated December 1, 2022 between ZP Woodward and FL MI RE 22, LLC (the “Woodward Assignor”).

Pursuant to the terms of the Option

Agreement and subject to the conditions therein, ZP Woodward was granted the exclusive option (the “Option”) to assume all

of the Woodward Assignor’s rights and obligations under certain purchase agreements and other definitive documents as described

in the Option Agreement (collectively, “Assigned Rights”), all related to real property located in Pleasant Ridge, Michigan

and as more particularly described in the Option Agreement (the “Woodward Property”).

In December 2022, the Company exercised

its rights to acquire the properties located at 23616 and 23622 Woodward Avenue, Pleasant Ridge, Michigan for a purchase price of $ 2,292,549

including cash of $ 867,549 , and a land contract promissory note of $ 1,425,000 (see Note 8).

The properties consist of approximately 9,060

square feet of land with approximately 6,192 square feet of rentable buildings space.

Simultaneously, the Company paid cash of $ 590,000

to the Woodward Assignor in assignment fees and deposits for the rights to acquire two adjacent properties (the “Parking Lots”),

which was reflected as escrow deposits on the accompanying consolidated balance sheets as of December 31, 2022.

In February 2023, ZP

Woodward exercised its rights and acquired the adjacent Parking Lots.

On November 29, 2022, the Woodward Properties and the Parking Lots

were leased to the Woodward Tenant pursuant to the Woodward Lease (See Note 3).

the years ended December 31, 2023 and 2022, depreciation of rental properties amounted to $ 375,553 and $ 345,878 , respectively.

5 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURES AND EQUITY SECURITIES

in unconsolidated joint ventures

December 31, 2023 and 2022, the Company held investments with aggregate carrying values of $ 4,923 and $ 58,293 , respectively.

listed below are partially owned by the Company.

The Company accounts for these investments under the equity method of accounting as

the Company exercises significant influence but does not exercise financial and operating control over these entities.

Investments are

reviewed for changes in circumstance or the occurrence of events that suggest an other than temporary event where the Company’s

investment may not be recoverable.

A summary of the Company’s original investments in the unconsolidated affiliated entities and

net carrying value amount is as follows:

Net Carrying Value

4 unchanged sentences

Total investments in unconsolidated joint venture entities

On April 22, 2021, ZP Data 1 entered into a Limited Liability Company

Operating Agreement (the “Beakon Operating Agreement”) with a non-affiliated joint venture partner in connection with the

formation of Beakon, LLC (“Beakon”), a Delaware limited liability company formed on April 16, 2021.

Beakon signed a licensing

agreement for the licensing of a consumer data/marketing software platform that Beakon will white label for the cannabis industry.

goal is to develop and leverage the platform to help drive foot traffic to brick and mortar retail (i.e.

dispensaries), and thus enhance

the value of the real estate and mitigate risk.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

April 22, 2021, ZP Data 1 entered into a Limited Liability Company Operating Agreement (the “Beakon Operating Agreement”)

with a non-affiliated joint venture partner in connection with the formation of Beakon, LLC (“Beakon”), a Delaware limited

liability company formed on April 16, 2021.

Pursuant to the Beakon Operating Agreement, ZP Data 1 purchased 50 units of Beakon for $ 50 ,

$ 50 , which represent 50 % of the membership interests of Beakon.

which represents 50 % of the membership interests of Beakon.

Each unit represents, with respect to any member, such member’s:

(i) interest in Beakon’s capital, (ii) share of Beakon’s net profits and net losses (and specially allocated items of income,

interest in Beakon’s capital, (ii) share of Beakon’s net profits and net losses (and specially allocated items of income,

gain, and deduction), and the right to receive distributions of net cash flow from Beakon, (iii) right to inspect Beakon’s books

8 unchanged sentences

During the year ended December 31, 2021, the Company contributed $ 86,000 to Beakon.

Currently, the licensing company and

Beakon have completed the creation of the foundational design, technology platform, and market positioning for Beakon to launch in the

cannabis industry.

However, in order to successfully launch, the technology platform relies upon a required merchant banking component.

This was the primary risk for the Company in its financial investment and for Beakon in moving to a successful launch.

While Company management

knew this risk was a major factor going into the investment, it was not foreseen exactly when an appropriate merchant banking solution

would be available given the federal status of regulated cannabis and specifically the federal banking status as it relates to regulated

cannabis, even for ancillary services such as Beakon.

During the fourth quarter of 2021, a negative open memo was published and distributed

by Visa regarding merchant banking in regulated industries.

The Company believes that this occurrence has unexpectedly and significantly

increased the risk to the Beakon project and must be remedied prior to the launch of Beakon.

The uncertainty related to cannabis banking

reform and regulation at the federal level, which the Beakon platform relies upon, is now so uncertain that the Company believes it is

most appropriate to cause an impairment of the Beakon investment at this time, while also understanding that Beakon may still very well

create material value for the Company in the future.

The Company has no further financial or investment obligations at this time.

on December 31, 2021, the Company recorded an other-than-temporary impairment loss of $ 73,970 because it was determined that the fair

value of its equity method investment in Beakon was less than its carrying value.

Based on management’s evaluation, it was determined

that due to market and regulatory conditions, implementing the Company’s business model was at risk and that the Company’s

ability to recover the carrying amount of the investment in Beakon was impaired.

On December 31, 2021, the Company recorded

an other-than-temporary impairment loss of $ 73,970 , its remaining net carrying value, because it was determined that the fair value of

its equity method investment in Beakon was less than its carrying value.

Based on management’s evaluation, it was determined that

due to market and regulatory conditions, implementing the Company’s business model was at risk and that the Company’s ability

to recover the carrying amount of the investment in Beakon was impaired.

Beacon is currently inactive.

For the year ended December 31,

2021, the $ 73,970 impairment loss is included in impairment loss from unconsolidated joint ventures on the consolidated statement of operations.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

On May 1, 2021, the Company entered into a Limited

Liability Company Operating Agreement (the “Zoneomics Green Operating Agreement”) with a non-affiliated joint venture partner

in connection with the formation of Zoneomics Green, LLC (“Zoneomics Green”), a Delaware limited liability company formed

on May 1, 2021.

Zoneomics Green’s goal is to utilize advanced property technology to provide solutions for property identification

in regulated industries such as regulated cannabis.

Pursuant to the Zoneomics Green Operating Agreement, the Company purchased 50 units

of Zoneomics Green for a capital contribution of $ 90,000 , which represents 50 % of the membership interests of Zoneomics Green and the

other joint venture partner received 50 % of the membership interests for no capital contributions.

Each unit represents, with respect

to any member, such member’s:

(i) interest in Zoneomics Green’s capital, (ii) share of Zoneomics Green’s net profits

and net losses (and specially allocated items of income, gain, and deduction), and the right to receive distributions of net cash flow

from Zoneomics Green, (iii) right to inspect Zoneomics Green’s books and records, and (iv) right to participate in the management

of and vote on matters coming before the members as provided in the Zoneomics Green Operating Agreement.

The transactions discussed above

resulted in a joint venture, in accordance with ASC 323-10 – Investments- Equity and Joint Ventures, between the Company

and the non-affiliated party.

Each of the entities has 50 % equity ownership and voting rights, and joint control in Zoneomics Green.

June 2021, the Company contributed $ 90,000 to Zoneomics Green.

The following represents summarized financial

information derived from the financial statements of the Beakon and Zoneomics Green Joint Ventures, respectively, as of December 31, 2022

and for the years ended December 31, 2022 and 2021.

May 1, 2021, the Company entered into a Limited Liability Company Operating Agreement (the “Zoneomics Green Operating Agreement”)

with a non-affiliated joint venture partner in connection with the formation of Zoneomics Green, LLC (“Zoneomics Green”),

a Delaware limited liability company formed on May 1, 2021.

Zoneomics Green’s goal is to utilize advanced property technology to

provide solutions for property identification in regulated industries such as regulated cannabis.

Pursuant to the Zoneomics Green Operating

Agreement, the Company purchased 50 units of Zoneomics Green for a capital contribution of $ 90,000 , which represents 50 % of the membership

interests of Zoneomics Green and the other joint venture partner received 50 % of the membership interests for the contribution of its

intellectual property and a number of non-monetary contributions.

identified in the Zoneomics Green Operation Agreement but provided

no capital contributions.

Each unit represents, with respect to any member, such member’s:

(i) interest in Zoneomics Green’s

capital, (ii) share of Zoneomics Green’s net profits and net losses (and specially allocated items of income, gain, and deduction),

and the right to receive distributions of net cash flow from Zoneomics Green, (iii) right to inspect Zoneomics Green’s books and

records, and (iv) right to participate in the management of and vote on matters coming before the members as provided in the Zoneomics

Green Operating Agreement.

The transactions discussed above resulted in a joint venture, in accordance with ASC 323-10 – Investments-

Equity and Joint Ventures, between the Company and the non-affiliated party.

Each of the entities has 50 % equity ownership and voting

rights, and joint control in Zoneomics Green.

In June 2021, the Company contributed $ 90,000 to Zoneomics Green.

Currently, the Zoneomics

Green team has completed the creation of the foundational design, technology platform, and market positioning for Zoneomics Green to

launch in the cannabis industry.

However, in order to successfully launch, the technology platform relies upon a required merchant banking

While Company management knew this risk was a major factor going into the investment, it was not foreseen exactly when an

appropriate merchant banking solution would be available given the federal status of regulated cannabis and specifically the federal

banking status as it relates to regulated cannabis, even for ancillary services such as Zoneomics Green.

The regulatory status related

to cannabis banking reform and regulation at the federal level, which the Zoneomics platform relies upon, is uncertain and the Company

believes it is appropriate to cause an impairment of the Zoneomics Green investment at this time, while also understanding that Company

believes Zoneomics Green may still create material value for the Company in the future.

Additionally, the Company is using the Zoneomics

Green technology within its own business to generate leads for new projects.

The Company has no further financial or investment obligations

at this time.

Accordingly, on December 31, 2023, the Company recorded an other-than-temporary impairment loss of $ 45,000 because it was

determined that the fair value of its 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 the Company’s business model was at risk

and that the Company’s ability to recover the carrying amount of the investment in Zoneomics was impaired.

following represents summarized financial information derived from the financial statements of the Beakon and Zoneomics Green Joint Ventures,

respectively, as of December 31, 2023 and for the year ended December 31, 2023.

Balance sheets (Unaudited):

1 unchanged sentence

Total liabilities and equity

Statement of operations (Unaudited)

For the Year Ended

December 31, 2022

Operating expenses

Company’s share of loss from unconsolidated joint ventures

During the years ended December 31, 2022 and 2021,

the Company recorded a loss from unconsolidated joint ventures of $ 16,261 and $ 27,476 , respectively, which represents the Company’s

proportionate share of losses from its joint ventures.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

Investment in equity securities

On June 24, 2022, the Company’s wholly-owned

subsidiary, ZP Data Platform 2 LLC, purchased 875 shares of Series A convertible preferred stock of Anami Technology, Inc., a California

corporation, for $ 50,000 , or $ 57.14 per share.

The Company’s ownership percentage is less than 20 % and it does not have the ability

to exercise significant influence as described in ASC 323-10-15-6.

This equity instrument does not have a readily determinable fair value.

Accordingly, the Company elected to measure this equity security at its cost minus impairment, if any.

If the Company identifies observable

price changes in orderly transactions for the identical or a similar investment of the same issuer, the Company shall measure the equity

security at fair value as of the date that the observable transaction occurred.

If the Company subsequently elects to measure this equity

security at fair value, the Company shall measure all identical or similar investments of the same issuer, including future purchases

of identical or similar investments of the same issuer, at fair value.

The election to measure this equity security at fair value shall

be irrevocable.

Any resulting gains or losses on the securities for which that election is made shall be recorded in earnings at the time

of the election.

On December 31, 2022, investment in equity securities amounted to $ 50,000 .

NOTE 8 – NOTES PAYABLE

On December 31, 2022 and 2021, notes payable consisted

of the following:

For the Year Ended

December 31, 2023

Statement of operations (Unaudited)

Operating recovery (expenses)

Net income (loss)

Company’s share of income (loss) from unconsolidated joint ventures

the year ended December 31, 2023 and 2022, the Company recorded a loss from unconsolidated joint ventures of $ 7,110 and $ 16,261 , respectively,

which represents the Company’s proportionate share of losses from its joint ventures, and a loss on impairment of $ 45,000 and $ 0 ,

respectively.

in equity securities

June 24, 2022, the Company’s wholly-owned subsidiary, ZP Data Platform 2 LLC, purchased 875 shares of Series A convertible preferred

stock of Anami Technology, Inc., a California corporation, for $ 50,000 , or $ 57.14 per share.

The Company’s ownership percentage

is less than 20 % and it does not have the ability to exercise significant influence as described in ASC 323-10-15-6.

This equity instrument

does not have a readily determinable fair value.

Accordingly, the Company elected to measure this equity security at its cost minus impairment,

If the Company identifies observable price changes in orderly transactions for the identical or a similar investment of the same

issuer, the Company shall measure the equity security at fair value as of the date that the observable transaction occurred.

If the Company

subsequently elects to measure this equity security at fair value, the Company shall measure all identical or similar investments of

the same issuer, including future purchases of identical or similar investments of the same issuer, at fair value.

The election to measure

this equity security at fair value shall be irrevocable.

Any resulting gains or losses on the securities for which that election is made

shall be recorded in earnings at the time of the election.

On December 31, 2023 and December 31, 2022, investment in equity securities

amounted to $ 50,000 .

6 – INTANGIBLE ASSET

December 31, 2023 and 2022, intangible assets consisted of the following:

Real estate brokerage materials and listing

accumulated amortization

the year ended December 31, 2022, amortization of intangible assets amounted to $ 9,450 .

7 – NOTES PAYABLE

December 31, 2023 and 2022, notes payable consisted of the following:

Note payable - East West Bank

Note payable - Woodward Property

Notes payable - Woodward Properties

Total principal due on notes payable

1 unchanged sentence

Notes payable, net

East West Bank Swap note

On July 11, 2022, Zoned Arizona entered into a

Loan Agreement (the “Loan Agreement”), dated as of July 11, 2022, by and between Zoned Arizona and East West Bank (the “Bank”).

Pursuant to the terms of the Loan Agreement, subject to and upon the satisfaction of the terms and conditions of the Loan Agreement, Zoned

Arizona could request advances under a multiple access loan (“MAL”) during the MAL.

On July 11, 2022, in connection with the

Loan Agreement, Zoned Arizona paid loan and other fees of $ 176,472 , and in connection with the First Amendment to the Loan Agreement discussed

below, paid additional fees of $ 8,124 .

These loan and other fees aggregating $ 184,596 are reflected as a debt discount and are being amortized

ratably and charged to interest expense over the term of the related debt.

The proceeds of each advance under the MAL may

be used by Zoned Arizona to refinance the real property at 410 S.

Madison Drive, Tempe, AZ 85251 (the “Property”) or to conduct

certain acts related to the acquisition, improvement and maintenance of real property.

On termination of the MAL, all unpaid principal,

unpaid and accrued interest, and all other amounts due under the MAL will be immediately due and payable.

West Bank Swap 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 term of 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 were reflected as a debt discount and are being amortized ratably and charged to interest expense over the

term of the related debt.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

At any time before July 11, 2023, Zoned Arizona

may elect to commence paying principal together with interest on the MAL (the “Early Amortization Election”) in accordance

with the repayment terms set forth in the variable rate note initially evidencing the MAL, executed by Zoned Arizona in favor of the Bank

(the “Note”).

If Zoned Arizona makes the Early Amortization Election, then (i) Zoned Arizona will not be entitled to any further

advances under the MAL, and (ii) the 25-year amortization schedule referenced in the Note will be from the date Zoned Arizona makes the

Early Amortization Election.

The Loan Agreement contains representations, warranties

and covenants customary for a transaction of this type.

Among other things, the Loan Agreement provides as follows:

(a) upon the occurrence

of an event of default, the outstanding principal balance of the MAL will not at any time exceed 65% of the Property’s most recent

appraised value;

(b) upon the occurrence of an event of default, Zoned Arizona will maintain a minimum Non-Cannabis Debt Service Coverage

Ratio (as hereinafter defined) of 1.40 to 1.00;

and (d) Zoned Arizona and the Company, collectively, will maintain at all times, liquid assets of at least the sum of all

tenant securities deposits under leases, plus $350,000 in operating reserves.

Prior to First Amendment executed on

December 7, 2022 in which the Company exercised its Early Amortization (see below), all advances under the MAL were to bear interest

at a variable rate equal to the greater of (a) the prime rate plus 2 %, or (b) a floor rate equal to the sum of the prime rate as of

July 11, 2022 plus 2.25 %.

From July 11, 2022 to July 11, 2023, Zoned Arizona was to make interest payments on the outstanding

principal balance of the MAL.

From and after July 11, 2023 and continuing until July 11, 2028 (the “Maturity Date”),

Zoned Arizona would pay principal together with interest on the MAL in 60 monthly installments based on the interest rate set forth

in the Note and a principal amortization schedule of 25 years from July 11, 2023 (or if Zoned Arizona makes the Early Amortization

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.

any time before July 11, 2023, Zoned Arizona may elect to commence paying principal together with interest on the MAL (the “Early

Amortization Election”) in accordance with the repayment terms set forth in the variable rate note initially evidencing the MAL,

executed by Zoned Arizona in favor of the Bank (the “Note”).

If Zoned Arizona makes the Early Amortization Election, then

(i) Zoned Arizona will not be entitled to any further advances under the MAL, and (ii) the 25-year amortization schedule referenced in

the Note will be from the date Zoned Arizona makes the Early Amortization Election.

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.

to First Amendment executed on December 7, 2022 in which the Company exercised its Early Amortization Election (see below), all advances

under the MAL were to bear interest at a variable rate equal to the greater of (a) the prime rate plus 2 %, or (b) a floor rate equal

to the sum of the prime rate as of July 11, 2022 plus 2.25 %.

From July 11, 2022 to July 11, 2023, Zoned Arizona was to make interest

payments on the outstanding principal balance of the MAL.

From and after July 11, 2023 and continuing until July 11, 2028 (the “Maturity

Date”), Zoned Arizona would pay principal together with interest on the MAL in 60 monthly installments based on the interest rate

set forth in the Note and a principal amortization schedule of 25 years from July 11, 2023 (or if Zoned Arizona makes the Early Amortization

Election, from the date such election is made).

Zoned Arizona may prepay the outstanding principal

under the Note, at any time, subject to the provisions of the Note.

If Zoned Arizona prepays all, but not less than all, of the outstanding

principal balance of the MAL at any time until July 11, 2023, then Zoned Arizona will also pay a premium equal to 1 % of the amount prepaid.

On December 7, 2022, Zoned Arizona and the Bank

entered into a First Amendment to Loan Agreement (the “First Amendment”).

Pursuant to the terms of the First Amendment, Zoned

Arizona has elected to make its Early Amortization Election (defined in the First Amendment and Loan Agreement), which election requires

Zoned Arizona to commence paying principal and interest on the MAL as set forth in the Amended Note (defined below).

Except as provided

in the First Amendment, the terms of the Loan Agreement remain in full force and effect.

Pursuant to the terms of the Loan Agreement and

First Amendment, on December 7, 2022, Zoned Arizona issued an Amended and Restated Promissory Note (the “Amended Note”) to

The Amended Note has an original principal amount of $ 4,500,000 , a 50 % loan-to-value as determined by the bank-ordered appraisal

completed on the Tempe Property.

The Amended Note requires Zoned Arizona to pay monthly principal and interest payments to the Bank at

an interest rate equal to the prime rate plus 0.75% .

The Amended Note matures 10 years after its effective date and payments are calculated

based on a 30-year amortization schedule.

In connection with the Amended Note, Zoned Arizona received gross proceeds of $ 4,500,000 and

paid fees of $ 184,596 .

Zoned Arizona may prepay the outstanding principal

under the Swap Note, at any time, subject to the provisions of the Swap Note.

Also as previously disclosed, on July 11, 2022

and pursuant to the terms of the Loan Agreement, the Company executed a Guaranty (the “Guaranty”) in favor of the Bank, pursuant

to which the Company agreed to guarantee all indebtedness of Zoned Arizona to the Bank arising under or in connection with the MAL or

any of the loan documents.

On December 7, 2022, the Company executed an Acknowledgement of Amendment and Reaffirmation of Guaranty (the

“Reaffirmation”) in favor of the Bank.

The Reaffirmation reaffirms the Guaranty and provides the Company’s consent to

the First Amendment and Swap Note.

On December 7, 2022, Zoned Arizona and the Bank

entered into an Interest Rate Swap Transaction Confirmation (the “Confirmation”).

The Confirmation incorporates by reference

the 2002 ISDA Master Agreement as published by the International Swaps and Derivatives Association, Inc.

as if the parties to the Confirmation

executed such agreement in such form.

The Confirmation provides the terms and conditions governing the interest rate swap transaction

afforded to Zoned Arizona, including a fixed interest rate of 7.65 %.

The Company recorded the swap at fair value in the consolidated balance

sheets with changes in fair value recorded contemporaneously in earnings.

The Company has entered into an interest rate swap to mitigate

variability in interest payments on its variable-rate debt.

During the year ended December 31, 2022, amortization

of debt discount amounted to $ 1,538 .

On December 31, 2022, principal and interest due

on the East West Bank Swap Note amounted to $ 4,485,808 and $ 28,324 , respectively.

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.

the years ended December 31, 2023 and 2022, amortization of debt discount amounted to $ 18,460 and $ 1,538 , respectively, which is included

in interest expense on the accompanying consolidated statements of operations.

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.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

Woodward Property Note Payable

On December 5, 2022, in connection with the acquisition

of the Woodward Property located in Pleasant Ridge, Michigan, the Company entered into a land contact note in the amount of $1,425,000

(the “Woodward Property Note Payable “).

The Woodward Property Note Payable bears interest at 9% per annum and is due in full

1) 60 monthly payments of principal and interest of $12,821

beginning on January 1, 2023, and

2) A balloon payment of $1,274,117 including the remaining principal

and interest on or before December 1, 2028.

On December 31, 2022, principal and interest due

on the Woodward Property Note Payable amounted to $ 1,425,000 and $ 10,687 , respectively.

On December 31, 2022, future principal payments

under the notes payable are as follows:

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 “23616 Land Contract Note Payable”).

The 23616 Land Contract 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.

December 31, 2023, principal and interest due on the 23616 Land Contract Note Payable amounted to $ 1,408,962 and $ 0 , respectively.

December 31, 2022, principal and interest due on the 23616 Land Contract 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 $ 420,270 and $ 0 , respectively.

December 31, 2023, future principal payments under the above notes payable are as follows:

Years ending December 31,

Total principal payments due on December 31, 2023

NOTE 9 – CONVERTIBLE NOTE PAYABLE

On January 9, 2017, the Company issued a convertible

debenture (the “Abrams Debenture”) in the aggregate principal amount of $ 2,000,000 in favor of Alan Abrams, who was a significant

stockholder of the Company through December 31, 2018, in exchange for cash from Mr.

Abrams of $ 2,000,000 .

The Abrams Debenture accrues

interest at the rate of 6 % per annum payable quarterly by the 1 st of each quarter and was originally due on January 9, 2022.

On January 2, 2019, as part of a Stock Redemption Agreement, the Company and Mr.

Abrams entered into an amendment of the Abrams Debenture

(the “Debenture Amendment”), pursuant to which the parties agreed to extend the maturity date of the Abrams Debenture from

January 9, 2022 to January 9, 2030.

Except as set forth herein, the terms of the Abrams Debenture remain in full force and effect.

The Company may prepay the Abrams Debenture at

any point after nine months, in whole or in part.

Pursuant to the terms of the Abrams Debenture, Mr.

Abrams is entitled to convert all

or a portion of the principal balance and all accrued and unpaid interest due under the Abrams Debenture into shares of the Company’s

common stock at a conversion price of $ 5.00 per share.

If the Company defaults on payment, Mr.

may at his option, extend all conversion rights, through and including the date the Company tenders or attempts to tender payment in full

of all amounts due under the Abrams Debenture.

Any amount of principal or interest, which is not paid when due shall bear interest at

the rate of 12 % per annum.

Upon an Event of Default (as defined in the Abrams Debenture), Mr.

Abrams may (i) declare the entire principal

amount and all accrued and unpaid interest under the Abrams Debenture immediately due and payable, and (ii) exercise any and all rights,

powers and remedies available to Mr.

Abrams at law or in equity or other appropriate proceeding, whether for the specific performance

of any covenant or agreement contained in the Abrams Debenture and proceed to enforce the payment thereof or any other legal or equitable

As of December 31, 2022 and 2021, the principal

balance due under the Abrams Debenture is $ 2,000,000 .

As of December 31, 2022 and 2021, accrued interest payable due under the Abrams

Debenture amounted to $ 30,000 , which is included in accrued expenses on the accompanying consolidated balance sheets.

For the years ended

December 31, 2022 and 2021, interest expense related to the Abrams Debenture amounted to $ 120,000 .

8 – CONVERTIBLE NOTE PAYABLE

January 9, 2017, the Company issued a convertible debenture (the “Abrams Debenture”) in the aggregate principal amount of

$ 2,000,000 in favor of Mr.

The Abrams Debenture accrues interest at the rate of 6 % per annum payable quarterly by the 1 st

of each quarter and was originally due on January 9, 2022.

On January 2, 2019, as part of a Stock Redemption Agreement, the Company

Abrams entered into an amendment of the Abrams Debenture (the “Debenture Amendment”), pursuant to which the parties

agreed to extend the maturity date of the Abrams Debenture from January 9, 2022 to January 9, 2030.

Except as set forth herein, the terms

of the Abrams Debenture remain in full force and effect.

Company may prepay the Abrams Debenture at any point after nine months, in whole or in part.

Pursuant to the terms of the Abrams Debenture,

Abrams is entitled to convert all or a portion of the principal balance and all accrued and unpaid interest due under the Abrams

Debenture into shares of the Company’s common stock at a conversion price of $ 5.00 per share.

the Company defaults on payment, Mr.

Abrams may at his option, extend all conversion rights, through and including the date the Company

tenders or attempts to tender payment in full of all amounts due under the Abrams Debenture.

Any amount of principal or interest, which

is not paid when due shall bear interest at the rate of 12 % per annum.

Upon an Event of Default (as defined in the Abrams Debenture),

Abrams may (i) declare the entire principal amount and all accrued and unpaid interest under the Abrams Debenture immediately due

and payable, and (ii) exercise any and all rights, powers and remedies available to Mr.

Abrams at law or in equity or other appropriate

proceeding, whether for the specific performance of any covenant or agreement contained in the Abrams Debenture and proceed to enforce

the payment thereof or any other legal or equitable right of Mr.

of December 31, 2023 and 2022, the principal balance due under the Abrams Debenture is $ 2,000,000 .

As of December 31, 2023 and 2022,

accrued interest payable due under the Abrams Debenture amounted to $ 30,000 , which is included in accrued expenses on the accompanying

consolidated balance sheets.

For the years ended December 31, 2023 and 2022, interest expense related to the Abrams Debenture amounted

to $ 120,000 and $ 120,000 , respectively.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

NOTE 10 – RELATED PARTY TRANSACTION

Convertible notes payable – related

On January 9, 2017, the Company issued a convertible

debenture (the “McLaren Debenture”) in the principal amount of $ 20,000 in favor of Bryan McLaren, the Company’s Chief

Executive Officer, Chief Financial Officer, and Chairman of the Board of Directors, in exchange for cash from Mr.

9 – RELATED PARTY TRANSACTION

notes payable – related party

January 9, 2017, the Company issued a convertible debenture (the “McLaren Debenture”) in the principal amount of $ 20,000

in favor of Bryan McLaren, the Company’s Chief Executive Officer, Chief Financial Officer, and Chairman of the Board of Directors,

in exchange for cash from Mr.

McLaren of $ 20,000 .

The McLaren Debenture accrued interest at the rate of 6 % per annum payable quarterly by the 1 st of each quarter and matured

on January 9, 2022 .

The McLaren Debenture accrued interest at the rate of 6 % per annum payable quarterly

by the 1 st of each quarter and matured on January 9, 2022 .

Pursuant to the terms of the McLaren Debenture, Mr.

McLaren was entitled to convert all or a portion of the principal

balance and all accrued and unpaid interest due under this McLaren Debenture into shares of the Company’s common stock at a conversion

price of $ 5.00 per share.

On January 7, 2022, the Company repaid this debt

and all accrued and unpaid interest due.

As of December 31, 2022 and 2021, the principal

balance due under the McLaren Debenture was $ 0 and $ 20,000 , respectively.

As of December 31, 2022 and 2021, accrued interest payable due

under the McLaren Debenture was $ 0 and $ 5,400 , respectively, which is included in accrued expenses – related party on the accompanying

consolidated balance sheets.

For the years ended December 31, 2022 and 2021,

interest expense – related party amounted to $ 600 and $ 1,200 , respectively.

Indemnification agreements

On August 23, 2021, the Company entered into indemnification

agreements with each of its directors and executive officers.

In general, these indemnification agreements require the Company to indemnify

a director and officer to the fullest extent permitted by law against liabilities that may arise in connection with that director’s

service as a director and officer for the Company.

Additionally, the Company shall advance expenses incurred as a result of any proceeding

against them as to which they could be indemnified.

In August 2021, the Company did not renew its officers and directors insurance.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

NOTE 11 – STOCKHOLDERS’ EQUITY

(A) Preferred Stock

On December 13, 2013, the Board of Directors of

the Company authorized and approved the creation of a new class of Preferred Stock consisting of 5,000,000 shares authorized, $.

entitled to convert all or a portion of the principal balance and all accrued and unpaid interest due under this McLaren Debenture into

shares of the Company’s common stock at a conversion price of $ 5.00 per share.

January 7, 2022, the Company repaid this debt and all accrued and unpaid interest due.

the year ended December 31, 2022, interest expense – related party amounted to $ 600 .

Indemnification

August 23, 2021, the Company entered into indemnification agreements with each of its directors and executive officers.

In general, these

indemnification agreements require the Company to indemnify a director and officer to the fullest extent permitted by law against liabilities

that may arise in connection with that director’s service as a director and officer for the Company.

Additionally, the Company

shall advance expenses incurred as a result of any proceeding against them as to which they could be indemnified.

In August 2021, the

Company did not renew its officers and directors insurance.

10 – STOCKHOLDERS’ EQUITY

Preferred Stock

December 13, 2013, the Board of Directors of the Company authorized and approved the creation of a new class of Preferred Stock consisting

of 5,000,000 shares authorized, $ .001 par value.

The preferred stock is not convertible into any other class or series of stock.

The holders of the preferred stock are entitled

to fifty (50) votes for each share held.

Voting rights are not subject to adjustment for splits that increase or decrease the common shares

Upon liquidation, the holders of the shares will be entitled to receive $ 1.00 per share plus redemption provision before

assets distributed to other shareholders.

The holders of the shares are entitled to dividends equal to common share dividends.

As of December

31, 2022 and 2021, there were 2,000,000 shares of preferred stock outstanding.

Once any shares of Preferred Stock are outstanding, at

least 51% of the total number of shares of Preferred Stock outstanding must approve the following transactions:

Alter or change the rights, preferences or privileges of the Preferred Stock.

Create any new class of stock having preferences over the Preferred Stock.

Repurchase any of our common stock.

Merge or consolidate with any other company, except our wholly owned subsidiaries.

Sell, convey or otherwise dispose of, or create or incur any mortgage, lien, or charge or encumbrance or security interest in or pledge of, or sell and leaseback, in all or substantially all our property or business.

Incur, assume or guarantee any indebtedness maturing more than 18 months after the date on which it is incurred, assumed or guaranteed by us, except for operating leases and obligations assumed as part of the purchase price of property.

(B) Common stock issued for services

On January 31, 2021, the Company issued an aggregate

of 130,000 shares of common stock to members of the Company’s board of directors for services rendered.

The shares were valued at

their aggregate fair value of $ 52,000 using the quoted per share price on the date of grant of $ 0.40 .

In connection with these grants,

in January 2021, the Company recorded stock-based compensation expense of $ 52,000 which is included in compensation and benefits on the

consolidated statements of operations.

On April 1, 2021, the Company’s subsidiary,

Arizona Brokerage, entered in an engagement letter for real estate brokerage services with a consultant for a guaranteed term of one year

(the “Guaranteed Term”).

During the Guaranteed Term, neither party may terminate the engagement letter, except for “Cause”

as defined in the engagement letter.

In connection with the engagement letter, the Company issued 60,000 shares of its common stock for

the acquisition of brokerage materials and active real estate listings.

In the event of termination of the engagement letter due to Cause

with respect to the consultant, the consultant must return to the Company a portion of the stock equal to the remaining portion of the

Guaranteed Term.

The shares were valued at their fair value of $ 37,800 using the quoted per share price on the date of grant of $ 0.63 .

In connection with these shares, on April 1, 2021, the Company recorded an intangible asset of $ 37,800 which was amortized over the one-year

term of the engagement letter.

(D) Equity incentive plans

On August 9, 2016, the Company’s Board of

Directors authorized the 2016 Equity Incentive Plan (the “2016 Plan”) and reserved 10,000,000 shares of common stock for issuance

The 2016 Plan was approved by shareholders on November 21, 2016.

The 2016 Plan’s purpose is to encourage ownership in

the Company by employees, officers, directors and consultants whose long-term service the Company considers essential to its continued

progress and, thereby, encourage recipients to act in the stockholders’ interest and share in the Company’s success.

Plan authorizes the grant of awards in the form of options intended to qualify as incentive stock options under Section 422 of the Internal

Revenue Code of 1986, as amended, options that do not qualify (non-statutory stock options) and grants of restricted shares of common

Restricted shares granted pursuant to the 2016 Plan are amortized to expense over the vesting period.

Options vest and expire over

a period not to exceed seven years.

If any share of common stock underlying a stock option that has been granted ceases to be subject

to a stock option, or if any shares of common stock that are subject to any other stock-based award granted are forfeited or terminate,

such shares shall again be available for distribution in connection with future grants and awards under the 2016 Plan.

As of December

31, 2022, 1,102,500 stock option awards are outstanding and 367,500 options are exercisable under the 2016 Plan.

As of December 31, 2021,

325,000 stock option awards are outstanding and 125,000 options are exercisable under the 2016 Plan.

As of December 31, 2022 and 2021,

8,897,500 and 9,675,000 shares, respectively, were available for future issuance.

holders of the preferred stock are entitled to fifty ( 50 ) votes for each share held.

Voting rights are not subject to adjustment for

splits that increase or decrease the common shares outstanding.

Upon liquidation, the holders of the shares will be entitled to receive

$ 1.00 per share plus redemption provision before assets distributed to other shareholders.

The holders of the shares are entitled to

dividends equal to common share dividends.

As of December 31, 2023 and 2022, there were 2,000,000 shares of preferred stock outstanding.

Once any shares of Preferred Stock are outstanding, at least 51 % of the total number of shares of Preferred Stock outstanding must approve

the following transactions:

or change the rights, preferences or privileges of the Preferred Stock.

any new class of stock having preferences over the Preferred Stock.

any of our common stock.

or consolidate with any other company, except our wholly owned subsidiaries.

convey or otherwise dispose of, or create or incur any mortgage, lien, or charge or encumbrance or security interest in or pledge

of, or sell and leaseback, in all or substantially all our property or business.

assume or guarantee any indebtedness maturing more than 18 months after the date on which it is incurred, assumed or guaranteed by

us, except for operating leases and obligations assumed as part of the purchase price of property.

Common stock redemption

October 10, 2023, the Company entered into a Stock Redemption Agreement, whereby the Company purchased 100,000 shares of its common stock

from a shareholder for $ 15,000 , or $ 0.15 per share, which are reflected as treasury stock on the consolidated balance sheet until such

time as the shares are cancelled.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

The Company also continues to maintain its 2014

Equity Compensation Plan (the “2014 Plan”), pursuant to which 1,250,000 previously awarded stock options are outstanding.

Equity incentive plans

August 9, 2016, the Company’s Board of Directors authorized the 2016 Equity Incentive Plan (the “2016 Plan”) and reserved

10,000,000 shares of common stock for issuance thereunder.

The 2016 Plan was approved by shareholders on November 21, 2016.

Plan’s purpose is to encourage ownership in the Company by employees, officers, directors and consultants whose long-term service

the Company considers essential to its continued progress and, thereby, encourage recipients to act in the stockholders’ interest

and share in the Company’s success.

The 2016 Plan authorizes the grant of awards in the form of options intended to qualify as

incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended, options that do not qualify (non-statutory

stock options) and grants of restricted shares of common stock.

Restricted shares granted pursuant to the 2016 Plan are amortized to

expense over the vesting period.

Options vest and expire over a period not to exceed seven years.

If any share of common stock underlying

a stock option that has been granted ceases to be subject to a stock option, or if any shares of common stock that are subject to any

other stock-based award granted are forfeited or terminate, such shares shall again be available for distribution in connection with

future grants and awards under the 2016 Plan.

As of December 31, 2023, 1,012,500 stock option awards are outstanding and 585,000 options

are exercisable under the 2016 Plan.

As of December 31, 2022, 1,102,500 stock option awards are outstanding and 367,500 options are exercisable

under the 2016 Plan.

As of December 31, 2023 and 2022, 8,987,500 and 8,897,500 shares, respectively, were available for future issuance.

Company also continues to maintain its 2014 Equity Compensation Plan (the “2014 Plan”), pursuant to which 1,250,000 previously

awarded stock options are outstanding.

The 2014 Plan has been superseded by the 2016 Plan.

Accordingly, no additional shares subject to the existing 2014 Plan will be issued

and the 1,250,000 shares issuable upon exercise of stock options will be issued pursuant to the 2014 Plan, if exercised.

As of December

31, 2022, options to purchase 1,250,000 shares of common stock are outstanding and 1,200,000 options are exercisable pursuant to the 2014

(E) Stock options

On January 1, 2021, the Company granted a consultant,

now President and Chief Operating Officer, of the Company as of July 1, 2021, an option, pursuant to the 2016 Plan, to purchase 125,000

of the Company’s common stock at an exercise price of $ 1.00 per share.

The grant date of the option was January 1, 2021 and the

option expires on January 1, 2031.

The option vests as to (i) 25,000 of such shares on January 1, 2021;

and (ii) as to 10,000 of such

shares on January 1, 2022 and each year thereafter through January 1, 2031.

The fair value of this option grant was estimated on the date

of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

dividend yield of 0%;

volatility of 117%;

risk-free interest rate of 0.93%;

and an estimated holding period of 10 years.

In connection with these options, the

Company valued these options at a fair value of $48,677 and will record stock-based compensation expense over the vesting period.

On July 1, 2021, the Company entered into a 12-month

engagement with an individual to act as the Company’s Director of Real Estate.

In connection with this engagement letter, on July

1, 2021, the Company granted the consultant an option, pursuant to the 2016 Plan, to purchase 125,000 of the Company’s common stock

at an exercise price of $ 1.00 per share.

The grant date of the option was July 1, 2021 and the option expires on July 1, 2031.

vests as to (i) 25,000 of such shares on July 1, 2021;

and (ii) as to 10,000 of such shares on July 1, 2022 and each year thereafter through

July 1, 2031.

The vesting of the Option pursuant to the Vesting Schedule hereof is earned only by continuing as a service provider at

the will of the Company.

The fair value of this option grant was estimated on the date of grant using the Black-Scholes option-pricing

model with the following weighted-average assumptions:

Accordingly, no additional shares subject

to the existing 2014 Plan will be issued and the 1,250,000 shares issuable upon exercise of stock options will be issued pursuant to

the 2014 Plan, if exercised.

As of December 31, 2023, options to purchase 1,250,000 shares of common stock are outstanding and 1,225,000

options are exercisable pursuant to the 2014 Plan.

As of December 31, 2022, options to purchase 1,250,000 shares of common stock

are outstanding and 1,200,000 options are exercisable pursuant to the 2014 Plan.

Stock options

January 2022, the Company’s Board of Directors unanimously agreed to stop receiving any direct stock issuance or cash payments

related to their compensation for services on the Company’s Board of Directors.

The Company and its Directors believe it is in

the Company’s best interest to transition Directors compensation to a multi-year stock option plan.

Accordingly, on January 21,

2022, the Company granted stock options to purchase an aggregate of 525,000 of the Company’s common stock at an exercise price

of $ 0.78 per share to members of the Company’s board of directors pursuant to the 2016 Plan.

The grant date of the stock options

was January 21, 2022 and the options expire on January 21, 2032.

The stock option shall vest in equal quarterly installments, with the

first installment of 43,750 stock options vesting on January 20, 2022, and 43,750 stock options vesting each quarter through October

The fair value of this option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the

following weighted-average assumptions:

dividend yield of 0 %;

1 unchanged sentence

risk-free interest rate of 1.54 %;

and an estimated holding period of 10 years.

In connection with these options, the Company valued these options at a fair value of $69,677

estimated holding period of 6 years.

In connection with these options, the Company valued these stock options at a fair value of $ 345,173

and will record stock-based compensation expense over the vesting period.

In January 2022, the Company’s Board of

Directors unanimously agreed to stop receiving any direct stock issuance or cash payments related to their compensation for services on

the Company’s Board of Directors.

The Company and its Directors believe it is in the Company’s best interest to transition

Directors compensation to a multi-year stock option plan.

Accordingly, on January 21, 2022, the Company granted stock options to purchase

an aggregate of 525,000 of the Company’s common stock at an exercise price of $ 0.78 per share to members of the Company’s

board of directors pursuant to the 2016 Plan.

The grant date of the stock options was January 21, 2022 and the options expire on January

The stock option shall vest in equal quarterly installments, with the first installment of 43,750 stock options vesting on January

20, 2022, and 43,750 stock options vesting each quarter through October 21, 2024.

The fair value of this option grant was estimated on

the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

January 21, 2022, the Company granted a stock option to purchase 75,000 of the Company’s common stock at an exercise price of $ 1.00

per share to the Company’s President and Chief Operating Officer pursuant to the 2016 Plan.

The grant date of the stock option

was January 21, 2022 and the options expire on January 21, 2032.

The option vests as to (i) 15,000 of such shares on January 21, 2022;

and (ii) as to 7,500 of such shares on January 21, 2023 and each year thereafter through January 21, 2032.

The fair value of this option

grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

dividend yield of 0 %;

2 unchanged sentences

and an estimated holding period of 10 years.

In connection with these

options, the Company valued these stock options at a fair value of $345,173 and will record stock-based compensation expense over the

vesting period.

On January 21, 2022, the Company granted a stock

option to purchase 75,000 of the Company’s common stock at an exercise price of $ 1.00 per share to the Company’s President

and Chief Operating Officer pursuant to the 2016 Plan.

The grant date of the stock option was January 21, 2022 and the options expire

on January 21, 2032.

The option vests as to (i) 15,000 of such shares on January 21, 2022;

and (ii) as to 7,500 of such shares on January

21, 2023 and each year thereafter through January 21, 2032.

The fair value of this option grant was estimated on the date of grant using

the Black-Scholes option-pricing model with the following weighted-average assumptions:

connection with these options, the Company valued these stock options at a fair value of $ 55,334 and will record stock-based compensation

expense over the vesting period.

April 1, 2022, the Company granted a stock option to purchase 52,500 of the Company’s common stock at an exercise price of $ 1.00

per share to an employee of the Company pursuant to the 2016 Plan.

The grant date of the stock option was April 1, 2022 and the option

expires on October 1, 2031.

The option vests as to (i) 2,500 of such shares on April 1, 2022;

and (ii) as to 5,000 of such shares on

October 1, 2022 and each year thereafter through October 1, 2031.

The fair value of this option grant was estimated on the date of grant

using the Black-Scholes option-pricing model with the following weighted-average assumptions:

dividend yield of 0 %;

expected volatility

risk-free interest rate of 2.39 %;

and an estimated holding period of 10 years.

The Company valued this stock option at a

fair value of $ 37,660 and will record stock-based compensation expense over the vesting period.

July 1, 2022, the Company granted a stock option to purchase 125,000 of the Company’s common stock at an exercise price of $ 1.00

per share to the Company’s then Chief Legal Officer and Chief Compliance Officer pursuant to the 2016 Plan.

The grant date of the

stock option was July 1, 2022 and the option expires on July 1, 2032.

The option vests as to (i) 25,000 of such shares on July 1, 2022;

and (ii) as to 10,000 of such shares on July 1, 2023 and each year thereafter through July 1, 2032.

The fair value of this option grant

was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

yield of 0 %;

expected volatility of 109.83 %;

1 unchanged sentence

and an estimated holding period of 10 years.

In connection with these options, the Company valued these

stock options at a fair value of $55,334 and will record stock-based compensation expense over the vesting period.

valued this stock option at a fair value of $ 82,420 and will record stock-based compensation expense over the vesting period.

the year ended December 31, 2023 and 2022, in connection with the accretion of stock-based option expense, the Company recorded stock

option expense over the vesting period of $ 116,643 and $ 336,755 , respectively.

As of December 31, 2023, there were 2,262,500 options

outstanding and 1,810,000 options vested and exercisable.

As of December 31, 2023, there was $ 100,181 of unvested stock-based compensation

expense to be recognized through September 2031.

The aggregate intrinsic value on December 31, 2023 was $ 0 and was calculated based on

the difference between the quoted share price on December 31, 2023 of $ 0.50 and the exercise price of the underlying options.

October 1, 2023, the Company cancelled 90,000 non-vested stock options that were forfeited due to the resignation of an executive officer

of the Company.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

On April 1, 2022, the Company granted a stock

option to purchase 52,500 of the Company’s common stock at an exercise price of $ 1.00 per share to an employee of the Company pursuant

to the 2016 Plan.

The grant date of the stock option was April 1, 2022 and the option expires on October 1, 2031.

The option vests as

to (i) 2,500 of such shares on April 1, 2022;

and (ii) as to 5,000 of such shares on October 1, 2022 and each year thereafter through

October 1, 2031.

The fair value of this option grant was estimated on the date of grant using the Black-Scholes option-pricing model with

the following weighted-average assumptions:

dividend yield of 0%;

expected volatility of 110.76%;

risk-free interest rate of 2.39%;

an estimated holding period of 10 years.

The Company valued this stock option at a fair value of $37,660 and will record stock-based compensation

expense over the vesting period.

On July 1, 2022, the Company granted a stock option

to purchase 125,000 of the Company’s common stock at an exercise price of $ 1.00 per share to the Company’s Chief Legal Officer

and Chief Compliance Officer pursuant to the 2016 Plan.

The grant date of the stock option was July 1, 2022 and the option expires on

July 1, 2032.

The option vests as to (i) 25,000 of such shares on July 1, 2022;

and (ii) as to 10,000 of such shares on July 1, 2023 and

each year thereafter through July 1, 2032.

The fair value of this option grant was estimated on the date of grant using the Black-Scholes

option-pricing model with the following weighted-average assumptions:

dividend yield of 0%;

expected volatility of 109.83%;

interest rate of 2.88%;

and an estimated holding period of 10 years.

The Company valued this stock option at a fair value of $82,420 and

will record stock-based compensation expense over the vesting period.

For the years ended December 31 2022 and 2021,

in connection with the accretion of stock-based option expense, the Company recorded stock option expense over the vesting period of $ 336,755

and $ 56,180 , respectively.

As of December 31, 2022, there were 2,352,500 options outstanding and 1,567,500 options vested and exercisable.

As of December 31, 2022, there was $ 276,167 of unvested stock-based compensation expense to be recognized through September 2031.

aggregate intrinsic value on December 31, 2022 was $ 400 and was calculated based on the difference between the quoted share price on December

31, 2022 of $ 0.75 and the exercise price of the underlying options.

Stock option activities for the years ended December

31, 2022 and 2021 are summarized as follows:

Exercise Price

option activities for the year ended December 31, 2023 and 2022 are summarized as follows:

Weighted Average

4 unchanged sentences

Balance non-vested on December 31, 2022

Forfeited during the period

Vested during the period

Balance non-vested on December 31, 2023

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Legal matters

From time to time, the Company may be involved

in litigation related to claims arising out of its operations in the normal course of business.

As of December 31, 2022 and 2021, the

Company is not involved in any pending or threatened legal proceedings that it believes could reasonably be expected to have a material

adverse effect on its financial condition, results of operations, or cash flows.

11 – COMMITMENTS AND CONTINGENCIES

time to time, the Company may be involved in litigation related to claims arising out of its operations in the normal course of business.

As of December 31, 2023 and 2022, the Company is not involved in any pending or threatened legal proceedings that it believes could reasonably

be expected to have a material adverse effect on its financial condition, results of operations, or cash flows.

Regarding Purchase and Sale Contract - Keystone

December 15, 2023, ZPRE Holdings entered into an Agreement Regarding a Purchase and Sale Contract (the “Agreement”), effective

as of December 15, 2023, by and between Keystone Ventures, LLC (“Keystone”) as assignor and ZPRE Holdings as assignee.

to the terms of the Agreement, Keystone agreed to assign to ZPRE Holdings its right, title and interest in that certain Purchase and

Sale Agreement dated May 5, 2022, by and between Lakeside Bank as Trustee under a Trust Agreement dated October 7, 2004 and known as

Trust Number 10-2749, Daniel Kravetz (together, the “Seller”) and Keystone, as amended (the “Original PSA”).

Pursuant to the terms of the Original PSA, the Seller agreed to sell to Keystone certain real property located at 3499, 3451, and 3455

South Ashland Avenue, Chicago, Illinois, 60608 (the “Ashland Avenue Property”) in exchange for a purchase price of $ 1,250,000 ,

to be paid by Keystone (the “Purchase Price”).

of the transactions contemplated by the Agreement was subject to several conditions, including payment of the sums indicated in the prior

paragraph, execution of an Assignment and Assumption Agreement, and execution of an absolute net lease agreement by ZPRE Holdings (as

landlord) and JG-IL, LLC (as tenant), in form and substance acceptable to ZPRE Holdings.

to the terms of the Agreement, ZPRE Holdings agree to deposit the following amounts into escrow:

(i) $ 40,000 , representing reimbursement

to Keystone or its designee for the earnest money deposit paid under the terms of the Original PSA, (ii) assignment fees of $ 185,000 ,

and (iii) $ 1,210,000 , representing the Purchase Price less the $ 40,000 earnest money payment.

On January 19, 2024, the Company paid these

funds in the aggregate amount $ 1,435,000 .

January 19, 2024, ZPRE Holdings and Keystone entered into that certain Assignment and Assumption Agreement, dated as of January 19, 2024,

by and between Keystone and ZP Holdings (the “Assignment Agreement”).

Pursuant to the terms of the Assignment Agreement,

Keystone assigned to ZP Holdings all of Keystone’s right, title and interest in and to the Original PSA to purchase the Ashland

Avenue Property.

January 19, 2024, the transactions contemplated by the Agreement and Assignment and Assumption Agreement closed and ZPE Holdings completed

the acquisition of the Ashland Avenue Property under the Original PSA, as assigned.

The completed transactions were subject to closing

costs, commissions, and fees customary to the acquisition of real estate, including a $ 65,000 commission payable and a $ 79,634 sponsor

and Related Golden Parachute Agreement

May 23, 2018, the Company and Mr.

McLaren, the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board

of Directors, agreed to replace Mr.

McLaren’s 2014 employment agreement with a new employment agreement dated May 23, 2018 (the

“2018 Employment Agreement”).

Pursuant to the terms of the 2018 Employment Agreement, the Company agreed to continue to pay

McLaren his then-current base annual salary of $ 215,000 , and to award Mr.

McLaren with an annual and/or quarterly bonus payable in

either cash and/or equity of no less than 2 % of the Company’s net income for the associated period.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

Employment and Related Golden Parachute

On May 23, 2018, the Company and Mr.

the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors, agreed to replace Mr.

2014 employment agreement with a new employment agreement dated May 23, 2018 (the “2018 Employment Agreement”).

the terms of the 2018 Employment Agreement, the Company agreed to continue to pay Mr.

McLaren his then-current base annual salary of $ 215,000 ,

and to award Mr.

McLaren with an annual and/or quarterly bonus payable in either cash and/or equity of no less than 2 % of the Company’s

net income for the associated period.

The 2018 Employment Agreement has a term of 10

2018 Employment Agreement has a term of 10 years.

The term and Mr.

McLaren’s employment will terminate (a “Termination”) in any of the following circumstances:

immediately, if Mr.

McLaren’s employment will terminate (a “Termination”)

in any of the following circumstances:

McLaren dies;

immediately, if Mr.

McLaren receives benefits under the long-term disability insurance coverage then provided by the Company or, if no such insurance is in effect, upon Mr.

McLaren receives benefits under the long-term disability insurance coverage then provided by the Company or, if no such insurance

is in effect, upon Mr.

McLaren’s disability;

on the expiration date, as the same may be extended by the parties by written amendment to the 2018 Employment Agreement prior to the occasion thereof;

at the option of the Company for Cause (as defined in the 2018 Employment Agreement) upon the Company’s provision of written notice to Mr.

the expiration date, as the same may be extended by the parties by written amendment to the 2018 Employment Agreement prior to the

occasion thereof;

the option of the Company for Cause (as defined in the 2018 Employment Agreement) upon the Company’s provision of written notice

McLaren of the basis for such Termination;

at the option of the Company, without Cause;

McLaren at any time with Good Reason (as defined in the 2018 Employment Agreement), upon 30 days’ prior written notice to the Company delivered not later than within 90 days of the existence of the condition therefor;

the option of the Company, without Cause;

McLaren at any time with Good Reason (as defined in the 2018 Employment Agreement), upon 30 days’ prior written notice

to the Company delivered not later than within 90 days of the existence of the condition therefor;

McLaren at any time without Good Reason, upon not less than three months’ prior written notice to the Company.

In the event of a Termination for any reason or

for no reason whatsoever, or upon the expiration date of the 2018 Employment Agreement, whichever comes first, all rights and obligations

under the 2018 Employment Agreement shall cease (i) as to the Company, except for the Company’s obligations for the payment of applicable

severance benefits thereunder, and for indemnification thereunder, and (ii) as to Mr.

McLaren, except for his obligation under the restrictive

covenants in the 2018 Employment Agreement.

The Company and Mr.

McLaren also entered into

a Golden Parachute Agreement (the “Golden Parachute Agreement”) on May 23, 2018.

No benefits shall be payable under the Golden

Parachute Agreement unless there shall have been a change in control of the Company, as set forth below.

For purposes of the Golden Parachute

Agreement, amongst other terms in the Golden Parachute Agreement, a “change in control of the Company” shall mean a change

of control of a nature that would be required to be reported in response to Item 6 of Schedule 14A of Regulation 14A promulgated under

the Securities Exchange Act of 1934, as amended.

For purposes of the Golden Parachute Agreement,

“Cause” means termination upon (a) the willful and continued failure to substantially perform duties with the Company after

a written demand for substantial performance is delivered by the Board, which demand specifically identifies the manner in which the Board

believes that duties have not substantially been performed, or (b) the willful engaging in conduct, which is demonstrably and materially

injurious to the Company, monetarily or otherwise.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

For purposes of the Golden Parachute Agreement,

“Good Reason” means, without express written consent, the occurrence after a change in control of the Company of any of the

following circumstances unless, such circumstances are fully corrected prior to the date of Termination specified in the notice of Termination:

a material diminution in Mr.

McLaren’s authority, duties or responsibility from those in effect immediately prior to the change in control of the Company;

a material diminution in Mr.

the event of a Termination for any reason or for no reason whatsoever, or upon the expiration date of the 2018 Employment Agreement,

whichever comes first, all rights and obligations under the 2018 Employment Agreement shall cease (i) as to the Company, except for the

Company’s obligations for the payment of applicable severance benefits thereunder, and for indemnification thereunder, and (ii)

McLaren, except for his obligation under the restrictive covenants in the 2018 Employment Agreement.

Company and Mr.

McLaren also entered into a Golden Parachute Agreement (the “Golden Parachute Agreement”) on May 23, 2018.

No benefits shall be payable under the Golden Parachute Agreement unless there shall have been a change in control of the Company, as

set forth below.

For purposes of the Golden Parachute Agreement, amongst other terms in the Golden Parachute Agreement, a “change

in control of the Company” shall mean a change of control of a nature that would be required to be reported in response to Item

6 of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended.

purposes of the Golden Parachute Agreement, “Cause” means termination upon (a) the willful and continued failure to substantially

perform duties with the Company after a written demand for substantial performance is delivered by the Board, which demand specifically

identifies the manner in which the Board believes that duties have not substantially been performed, or (b) the willful engaging in conduct,

which is demonstrably and materially injurious to the Company, monetarily or otherwise.

purposes of the Golden Parachute Agreement, “Good Reason” means, without express written consent, the occurrence after a

change in control of the Company of any of the following circumstances unless, such circumstances are fully corrected prior to the date

of Termination specified in the notice of Termination:

material diminution in Mr.

McLaren’s authority, duties or responsibility from those in effect immediately prior to the change

in control of the Company;

material diminution in Mr.

McLaren’s base compensation;

a material change in the geographic location at which Mr.

material change in the geographic location at which Mr.

McLaren performs his duties;

a material diminution in the authority, duties, or responsibilities of the supervisor to whom Mr.

McLaren is required to report, including a requirement that Mr.

material diminution in the authority, duties, or responsibilities of the supervisor to whom Mr.

McLaren is required to report, including

a requirement that Mr.

McLaren report to a corporate officer or employee instead of reporting directly to the Board;

a material diminution in the budget over which Mr.

material diminution in the budget over which Mr.

McLaren retains authority;

a material breach under any agreement with the Company to continue in effect any bonus to which Mr.

McLaren was entitled, or any compensation plan in which Mr.

material breach under any agreement with the Company to continue in effect any bonus to which Mr.

McLaren was entitled, or any compensation

plan in which Mr.

McLaren participates immediately prior to the change in control of the Company which is material to Mr.

McLaren’s total compensation;

a material breach under any agreement with the Company to provide Mr.

McLaren benefits substantially similar to those enjoyed by him under any of the Company’s life insurance, medical, health and accident, or disability plans in which he was participating at the time of the change in control of the Company, the failure to continue to provide Mr.

McLaren with a Company automobile or allowance in lieu of it, if Mr.

McLaren was provided with such an automobile or allowance in lieu of it at the time of the change of control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive him of any material fringe benefit enjoyed by him at the time of the change in control of the Company, or the failure by the Company to provide him with the number of paid vacation days to which he is entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of the change in control of the Company;

Following a change in control of the Company,

upon termination of Mr.

McLaren’s employment or during a period of disability, Mr.

McLaren will be entitled to the following benefits:

During any period that he fails to perform his full-time duties with the Company as a result of incapacity due to physical or mental illness, Mr.

McLaren will continue to receive his base salary at the rate in effect at the commencement of any such period, together with all amounts payable to him under any compensation plan of the Company during such period, until the Golden Parachute Agreement is terminated.

McLaren’s employment is terminated by the Company for Cause or by Mr.

McLaren other than for Good Reason, disability, death or retirement, the Company will pay Mr.

McLaren his full base salary through the date of Termination at the rate in effect at the time notice of Termination is given, plus all other amounts and benefits to which he is entitled under any compensation plan of the Company at the time such payments are due.

total compensation;

material breach under any agreement with the Company to provide Mr.

McLaren benefits substantially similar to those enjoyed by him

under any of the Company’s life insurance, medical, health and accident, or disability plans in which he was participating

at the time of the change in control of the Company, the failure to continue to provide Mr.

McLaren with a Company automobile or

allowance in lieu of it, if Mr.

McLaren was provided with such an automobile or allowance in lieu of it at the time of the change

of control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such

benefits or deprive him of any material fringe benefit enjoyed by him at the time of the change in control of the Company, or the

failure by the Company to provide him with the number of paid vacation days to which he is entitled on the basis of years of service

with the Company in accordance with the Company’s normal vacation policy in effect at the time of the change in control of

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

If employment by the Company shall be terminated (a) by the Company other than for Cause, death or disability or (b) by Mr.

McLaren for Good Reason, Mr.

a change in control of the Company, upon termination of Mr.

McLaren’s employment or during a period of disability, Mr.

will be entitled to the following benefits:

any period that he fails to perform his full-time duties with the Company as a result of incapacity due to physical or mental illness,

McLaren will continue to receive his base salary at the rate in effect at the commencement of any such period, together with

all amounts payable to him under any compensation plan of the Company during such period, until the Golden Parachute Agreement is

McLaren’s employment is terminated by the Company for Cause or by Mr.

McLaren other than for Good Reason, disability, death

or retirement, the Company will pay Mr.

McLaren his full base salary through the date of Termination at the rate in effect at the

time notice of Termination is given, plus all other amounts and benefits to which he is entitled under any compensation plan of the

Company at the time such payments are due.

employment by the Company shall be terminated (a) by the Company other than for Cause, death or disability or (b) by Mr.

for Good Reason, Mr.

McLaren will be entitled to benefits provided below:

The Company will pay Mr.

In lieu of any further salary payments to Mr.

McLaren for periods subsequent to the date of Termination, the Company will pay as severance pay to Mr.

McLaren a lump sum severance payment (together with the payments provided in clause I(c) and (d) below) equal to five times the sum of his annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the notice of Termination given in respect of them.

The Company will pay to Mr.

Company will pay Mr.

McLaren his full base salary through the date of Termination at the rate in effect at the time notice of Termination

is given, plus all other amounts and benefits to which he is entitled under any compensation plan of the Company.

lieu of any further salary payments to Mr.

McLaren for periods subsequent to the date of Termination, the Company will pay as severance

McLaren a lump sum severance payment (together with the payments provided in clause I(c) and (d) below) equal to five

times the sum of his annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the notice

of Termination given in respect of them.

Company will pay to Mr.

McLaren any deferred compensation allocated or credited to him or his account as of the date of Termination.

In lieu of shares of common stock of the Company issuable upon exercise of outstanding options, if any, granted to Mr.

McLaren under the Company’s stock option plans (which options shall be cancelled upon the making of the payment referred to below), Mr.

McLaren will receive an amount in cash equal to the product of (i) the excess of the closing price of the Company’s common stock as reported on or nearest the date of Termination (or, if not so reported, on the basis of the average of the lowest asked and highest bid prices on or nearest the date of Termination), over the per share exercise price of each option held by Mr.

McLaren (whether or not then fully exercisable) plus the amount of any applicable cash appreciation rights, times (ii) the number of the Company’s common stock covered by each such option.

The Company will also pay to Mr.

lieu of shares of common stock of the Company issuable upon exercise of outstanding options, if any, granted to Mr.

McLaren under

the Company’s stock option plans (which options shall be cancelled upon the making of the payment referred to below), Mr.

will receive an amount in cash equal to the product of (i) the excess of the closing price of the Company’s common stock as

reported on or nearest the date of Termination (or, if not so reported, on the basis of the average of the lowest asked and highest

bid prices on or nearest the date of Termination), over the per share exercise price of each option held by Mr.

McLaren (whether

or not then fully exercisable) plus the amount of any applicable cash appreciation rights, times (ii) the number of the Company’s

common stock covered by each such option.

Company will also pay to Mr.

McLaren all legal fees and expenses incurred by him as a result of such Termination.

On July 23, 2022, the Board of Directors of the

Company appointed Berekk Blackwell, the Company’s Chief Operating Officer, as President of the Company, effective immediately.

July 26, 2022, the Company entered into an employment agreement, effective July 1, 2022, with Mr.

Blackwell (the “Blackwell Employment

Pursuant to the terms of the Blackwell Employment Agreement, the Company agreed to pay Mr.

Blackwell a base annual

salary of $ 150,000 for his services as President and Chief Operating Officer.

The Company may also award Mr.

Blackwell discretionary cash

and/or equity bonuses.

The Blackwell Employment Agreement has a term of one year , expiring on July 1, 2023.

During the initial term, neither

party may terminate the Blackwell Employment Agreement except for Cause (as defined in the Blackwell Employment Agreement).

On September 29, 2021, the Company’s board

of directors adopted the Zoned Properties 401(k) Plan (the “Plan”) effective January 1, 2021.

The Company contributes a matching

contribution to the Plan for each employee in an amount equal to 100 % of the matched employee contributions that are not in excess of

4 % of the employee’s plan compensation.

For the years ended December 31, 2022 and 2021, the Company contributed $ 22,317 and $ 907

to the Plan, respectively.

Real Property Purchase

Effective October 5, 2022, ZPRE Holdings, a wholly owned subsidiary

of the Company, and Neal Bradley Starr (the “Stone Property Seller”) entered into the Purchase and Sale Agreement and Joint

Escrow Instructions (the “Purchase Agreement”).

Pursuant to the terms of the Purchase Agreement and subject to the conditions

therein, ZPRE Holdings agreed to buy from the Stone Property Seller certain real property and improvements thereon located in Tucson,

Arizona, as more particularly described in the Purchase Agreement (the “Stone Property”).

The Purchase Agreement contains

terms and conditions customary to commercial real estate transactions in Arizona.

Effective January 17, 2023, pursuant to the terms

of the Purchase Agreement, ZPRE Holdings elected to terminate the Purchase Agreement and the Purchase Agreement is of no further

force or effect, except for those obligations and rights which survive its termination.

July 23, 2022, the Board of Directors of the Company appointed Berekk Blackwell, the Company’s Chief Operating Officer, as President

of the Company, effective immediately.

On July 26, 2022, the Company entered into an employment agreement, effective July 1, 2022, with

Blackwell (the “Blackwell Employment Agreement”).

Pursuant to the terms of the Blackwell Employment Agreement, the Company

agreed to pay Mr.

Blackwell a base annual salary of $ 150,000 for his services as President and Chief Operating Officer.

The Company may

also award Mr.

Blackwell discretionary cash and/or equity bonuses.

The Blackwell Employment Agreement had a term of one year , expiring

on July 1, 2023.

During the initial term, neither party may terminate the Blackwell Employment Agreement except for Cause (as defined

in the Blackwell Employment Agreement).

After the initial term that expired July 1, 2023, the Blackwell Employment Agreement continued

to be in full force and effect, unaffected by the expiration, except that either party may terminate the Blackwell Employment Agreement

for any reason upon 30 days’ written notice to the other party.

September 29, 2021, the Company’s board of directors adopted the Zoned Properties 401(k) Plan (the “Plan”) effective

January 1, 2021.

The Company contributes a matching contribution to the Plan for each employee in an amount equal to 100 % of the matched

employee contributions that are not in excess of 4 % of the employee’s plan compensation.

For the year ended December 31, 2023 and

2022, the Company contributed $ 27,016 and $ 22,317 to the Plan, respectively.

12 – SEGMENT REPORTING

on January 1, 2022, the Company changed its method of internal reporting and determined that the Company operates in two reportable segments

which consists of (1) the operations, leasing and management of its leased commercial properties, herein known as the “Property

Investment Portfolio” segment, and (2) advisory and brokerage services related to commercial properties, herein known as the “Real

Estate Services” segment.

The Company has determined that these reportable segments were strategic business units that offer different

Currently, these reportable segments are being managed separately based on the fundamental differences in their operations.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

Master Agreement

On November 29, 2022, ZP Woodward, the Woodward

Assignor, Ammar Kattoula and Thomas Nafso entered into a Master Agreement for the rights for the Purchase and Sale (the “Master

Agreement”) of the Woodward Property.

To the extent not superseded by the Option Agreement, the Master Agreement sets forth the

terms and conditions upon which ZP Woodward would acquire the Woodward Property.

The Master Agreement provides for the discretionary

and mandatory purchase by the Woodward Assignor of a minority interest in ZP Woodward, where (i) for a period of 1 year following the

closing of the Master Agreement, the Woodward Assignor or an entity controlled by its principals may acquire 25 % membership interest in

ZP Woodward for the price, in cash, of $ 600,000 plus interest at a rate of 12 % per annum starting on the closing date of the Master Agreement

and ending on the date of closing of the discretionary purchase;

and (ii) if at any time following the closing date of the Master Agreement,

ZP RE Holdings, LLC or another entity controlled by the Company acquires certain real property located in Grand Rapids, Michigan owned

by the Woodward Assignor’s affiliate, more particularly described in the Master Agreement, for a purchase price of not more than

$ 1,160,000 , then following such closing ZP Woodward will grant the Woodward Assignor (or its permitted designee) 25 % membership interest

in ZP Woodward.

NOTE 13 – SEGMENT REPORTING

Prior to January 1, 2022, the Company determined

that its properties had similar economic characteristics to be aggregated into one reportable segment (operating, leasing and managing

commercial properties, and advisory and brokerage services related to commercial properties).

The Company’s determination was based

primarily on its method of internal reporting.

Beginning on January 1, 2022, the Company changed its method of internal reporting and

determined that the Company operates in two reportable segments which consists of (1) the operations, leasing and management of its leased

commercial properties, herein known as the “Property Investment Portfolio” segment, and (2) advisory and brokerage services

related to commercial properties, herein known as the “Real Estate Services” segment.

The Company has determined that these

reportable segments were strategic business units that offer different products.

Currently, these reportable segments are being managed

separately based on the fundamental differences in their operations.

Information with respect to these reportable business

segments for the years ended December 31, 2022 and 2021 was as follows:

with respect to these reportable business segments for the years ended December 31, 2023 and 2022 was as follows:

For the Years Ended

14 unchanged sentences

$ ( 574,355 )

Identifiable long-lived tangible assets on December 31, 2023 and 2022 by segment:

Property investment portfolio

Real estate services

(a) Operating expenses and other expenses of the Company’s holding company that were not allocated to the real estate services segment are included in the property investment portfolio segment.

13 – OPERATING LEASE RIGHT-OF-USE (“ROU”) ASSETS AND OPERATING LEASE LIABILITY

March 15, 2022, the Company entered to an Assumption of Lease and Consent Agreement with a landlord, whereby the landlord consented to

the assignment of an office lease, as amended, from the original tenant to the Company.

The lease term shall begin on March 15, 2022

and expire on November 30, 2024 , provided the Company has the option to extend the lease for an additional five years .

The monthly base

rent shall be $ 2,932 per month through November 30, 2021, $ 3,005 from December 1, 2022 through November 30, 2023, and $ 3,078 from December

1, 2023 through November 30, 2024.

adopting ASC Topic 842, Leases (Topic 842) on January 1, 2019, the Company had elected the ‘package of practical expedients’,

which permitted it not to reassess under the new standard its prior conclusions about lease identification, lease classification and

initial direct costs (see Note 2).

In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12

months or less.

Since the terms of the Company’s operating lease for its office space prior to March 15, 2022 was 12 months or

less on the date of adoption, pursuant to ASC 842, the Company determined that the lease met the definition of a short-term lease, and

the Company did not recognize the right-of use asset and lease liability arising from this lease.

Upon signing of the Assumption of Lease

and Consent Agreement on March 15, 2022, the Company analyzed the new lease and determined it is required to record a lease liability

and a right of use asset on its consolidated balance sheet, at fair value.

the year ended December 31, 2023 and 2022, in connection with its operating leases, the Company recorded rent expense of $ 37,039 and

$ 33,708 , respectively, which is included in operating expenses on the accompanying consolidated statements of operations.

significant assumption used to determine the present value of the lease liability in March 2022 was a discount rate of 6 % which was based

on the Company’s incremental borrowing rate.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

Identifiable long-lived tangible assets on December 31, 2022 and 2021 by segment

Property investment portfolio

Real estate services

Operating expenses and other expenses of the Company’s holding company that were not allocated to the real estate services segment are included in the property investment portfolio segment.

NOTE 14 – OPERATING LEASE RIGHT-OF-USE

(“ROU”) ASSETS AND OPERATING LEASE LIABILITY

On March 15, 2022, the Company entered to an Assumption

of Lease and Consent Agreement with a landlord, whereby the landlord consented to the assignment of an office lease, as amended, from

the original tenant to the Company.

The lease term shall begin on March 15, 2022 and expire on November 30, 2024 , provided the Company

has the option to extend the lease for an additional five years .

The monthly base rent shall be $ 2,932 per month through November 30,

2021, $ 3,005 from December 1, 2022 through November 30, 2023, and $ 3,078 from December 1, 2023 through November 30, 2024.

In adopting ASC Topic 842, Leases (Topic 842)

on January 1, 2019, the Company had elected the ‘package of practical expedients’, which permitted it not to reassess under

the new standard its prior conclusions about lease identification, lease classification and initial direct costs (see Note 2).

the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less.

Since the terms of the Company’s

operating lease for its office space prior to March 15, 2022 was 12 months or less on the date of adoption, pursuant to ASC 842, the Company

determined that the lease met the definition of a short-term lease, and the Company did not recognize the right-of use asset and lease

liability arising from this lease.

Upon signing of the Assumption of Lease and Consent Agreement on March 15, 2022, the Company analyzed

the new lease and determined it is required to record a lease liability and a right of use asset on its consolidated balance sheet, at

For the years ended December 31, 2022 and 2021,

in connection with its operating leases, the Company recorded rent expense of $ 33,708 and $ 17,455 , respectively.

which is included in

operating expenses on the accompanying consolidated statements of operations.

The significant assumption used to determine the

present value of the lease liability in March 2022 was a discount rate of 6 % which was based on the Company’s incremental borrowing

On December 31, 2022, right-of-use asset (“ROU”)

is summarized as follows:

December 31, 2023 and 2022, right-of-use asset (“ROU”) is summarized as follows:

Office lease right of use asset

1 unchanged sentence

Balance of ROU assets

On December 31, 2022, future minimum base lease

payments due under a non-cancelable operating lease are as follows:

December 31, 2023, future minimum base lease payments due under a non-cancelable operating lease are as follows:

Year ended December 31,

2 unchanged sentences

Total lease liability on December 31, 2023

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

NOTE 15 - INCOME TAXES

The Company maintains deferred tax assets and

liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial

reporting purposes and the amounts used for income tax purposes.

The deferred tax assets on December 31, 2022 and 2021 consist of net

operating loss carryforwards.

The net deferred tax asset has been fully offset by a valuation allowance because of the uncertainty of

the attainment of future taxable income.

The items accounting for the difference between

income taxes at the effective statutory rate and the provision for income taxes for the years ended December 31, 2022 and 2021 were as

14 - INCOME TAXES

Company maintains deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying

amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The deferred tax assets

on December 31, 2023 and 2022 consist of net operating loss carryforwards.

The net deferred tax asset has been fully offset by a valuation

allowance because of the uncertainty of the attainment of future taxable income.

items accounting for the difference between income taxes at the effective Federal statutory rate and the provision for income taxes for

the years ended December 31, 2023 and 2022 were as follows:

Income tax benefit at U.S.

1 unchanged sentence

$ ( 113,454 )

$ ( 120,615 )

Income tax benefit – state

2 unchanged sentences

Total provision for income tax

The Company’s approximate net deferred tax

asset as of December 31, 2022 and 2021 was as follows:

Company’s approximate net deferred tax asset as of December 31, 2023 and 2022 was as follows:

Deferred Tax Asset:

3 unchanged sentences

Net deferred tax asset

The net operating loss carryforward was approximately

$ 2,106,000 on December 31, 2022.

The Company provided a valuation allowance equal to the net deferred income tax asset as of December

31, 2022 and 2021 because it was not known whether future taxable income will be sufficient to utilize the loss carryforward.

Additionally,

the future utilization of the net operating loss carryforward to offset future taxable income is subject to an annual limitation as a

result of ownership changes that may occur in the future.

The 2017 estimated loss carry forward of approximately $ 1,488,189 expires on

December 31, 2037 .

Subsequent to 2017, all estimated loss carry forwards may be carried forward indefinitely subject to annual usage limitations.

Based on the Company’s analysis to determine the limitation on the utilization of its net operating loss carryforward amounts, in

2018, the deferred tax asset was reduced by any carryforward that cannot be utilized or expires prior to utilization as a result of such

limitations, with a corresponding reduction of the valuation allowance.

In 2022, the valuation allowance increased by $ 64,614 .

The potential

tax benefit arising from certain loss carryforwards will expire in 2042 .

The Company does not have any uncertain tax positions

or events leading to uncertainty in a tax position.

The Company’s 2022, 2021, 2020 and 2019 Corporate Income Tax Returns are subject

to Internal Revenue Service examination.

net operating loss carryforward was approximately $ 2,495,000 on December 31, 2023.

The Company provided a valuation allowance equal to

the net deferred income tax asset as of December 31, 2023 and 2022 because it was not known whether future taxable income will be sufficient

to utilize the loss carryforward.

Additionally, the future utilization of the net operating loss carryforward to offset future taxable

income is subject to an annual limitation as a result of ownership changes that may occur in the future.

The 2017 estimated loss carry

forward of approximately $ 1,488,189 expires on December 31, 2037 .

Subsequent to 2017, all estimated loss carry forwards may be carried

forward indefinitely subject to annual usage limitations.

Based on the Company’s analysis to determine the limitation on the utilization

of its net operating loss carryforward amounts, in 2018, the deferred tax asset was reduced by any carryforward that cannot be utilized

or expires prior to utilization as a result of such limitations, with a corresponding reduction of the valuation allowance.

the valuation allowance increased by $ 106,906 .

The potential tax benefit arising from certain loss carryforwards will expire in 2037.

Company does not have any uncertain tax positions or events leading to uncertainty in a tax position.

The Company’s 2023, 2022,

2021 and 2020 Corporate Income Tax Returns are subject to Internal Revenue Service examination.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2023 AND 2022

NOTE 16 – SUBSEQUENT EVENTS

As previously disclosed

in the Current Report on Form 8-K filed on October 12, 2022 (the “Prior 8-K”) by the Company, effective October 5, 2022, ZP

RE Holdings, LLC (“ZPRE”), a wholly owned subsidiary of the Company, and Neal Bradley Starr (the “Stone Property Seller”)

entered into the Purchase and Sale Agreement and Joint Escrow Instructions (the “Purchase Agreement”).

Pursuant to the terms

of the Purchase Agreement and subject to the conditions therein, ZPRE agreed to buy from the Stone Property Seller certain real property

and improvements thereon located in Tucson, Arizona, as more particularly described in the Purchase Agreement.

January 17, 2023, pursuant to the terms of the Purchase Agreement, ZPRE elected

to terminate the Purchase Agreement and the Purchase Agreement is of no further force or effect, except for those obligations and rights

which survive its termination.

On February 24, 2023, ZP Woodward entered into

a Land Contract, dated February 24, 2023, by and between Gangnier Investments LLC (the “Gangnier”) and ZP Woodward (the “23634

Land Contract”).

Pursuant to the terms of the 23634 Land Contract, Gangnier agreed to sell to ZP Woodward certain real property

located at 23634 Woodward Avenue, Pleasant Ridge, Michigan (“23634 Woodward”) for the purchase price of $ 755,984 , comprised

of $ 85,894 of cash, $ 240,000 of previously paid escrow deposits and a land contract note payable of $ 430,000 (the “23634 Land Contract

The 23634 Land Contract Note Payable accrues interest at the rate of 7 % and is payable in 48 monthly installments of $ 3,865 ,

beginning April 1, 2023, until the purchase price and interest are fully paid, provided that such purchase price and all interest will

be fully paid on or before March 31, 2027.

There is no prepayment penalty.

The 23634 Land

Contract contains terms and conditions typically stated in similar land contract or installment sale contracts.

On February 27, 2023,

ZP Woodward acquired a fee interest in 23600 Woodward Avenue, Pleasant Ridge, Michigan for the purchase price of $ 1,253,070 , comprised

of $ 903,070 of cash and $ 350,000 of previously paid deposits and assignment fees and, as of such date, ZP Woodward has acquired the property

interests in the Woodward Property contemplated in the Option Agreement and Master Agreement.

The Parking Lots properties

consist of approximately 15,246 square feet of land with approximately 3,463 square feet of rentable buildings space and approximately

7,872 square feet of covered parking.

15 – SUBSEQUENT EVENTS

Regarding Purchase and Sale Contract – Ashland Property

to the terms of the Agreement Regarding Purchase and Sale Contract (See Note 11), ZPRE Holdings agreed to deposit the following amounts

(i) $ 40,000 , representing reimbursement to Keystone or its designee for the earnest money deposit paid under the terms of

the Original PSA, (ii) assignment fees of $ 185,000 , and (iii) $ 1,210,000 , representing the Purchase Price less the $ 40,000 earnest money

On January 19, 2024, the Company paid these funds in the aggregate amount $ 1,435,000 .

January 19, 2024, ZPRE Holdings and Keystone entered into that certain Assignment and Assumption Agreement, dated as of January 19, 2024,

by and between Keystone and ZP Holdings (the “Assignment Agreement”).

Pursuant to the terms of the Assignment Agreement,

Keystone assigned to ZP Holdings all of Keystone’s right, title and interest in and to the Original PSA to purchase the Ashland

Avenue Property.

January 19, 2024, the transactions contemplated by the Agreement and Assignment and Assumption Agreement closed and ZPE Holdings completed

the acquisition of the Ashland Avenue Property under the Original PSA, as assigned.

The completed transactions were subject to closing

costs, commissions, and fees customary to the acquisition of real estate, including a $ 65,000 commission payable and a $ 79,634 sponsor

Cannabis Facility Absolute Net Lease Agreement, Guaranty and Security Agreement – Ashland Property

January 18, 2024, ZPRE Holdings entered into a Licensed Cannabis Facility Absolute Net Lease Agreement (the “Justice Grown Lease”),

with a commencement date of January 19, 2024, by and between ZPRE Holdings, as landlord, and JG IL LLC (“Justice Grown”),

Pursuant to the terms of the Lease, ZPRE Holdings agreed to lease the Ashland Avenue Property to Justice Grown for use as

a licensed recreational adult-use (and, if permitted, medical) cannabis dispensary in accordance with Illinois law.

The Justice Grown

Lease has a term of 15 years, with four five-year renewal terms.

and Sale Agreement and Joint Escrow – Surprise Property

February 23, 2024, ZPRE Holdings provided an approval notice to the Seller (as hereinafter defined) of the Surprise Property (as hereinafter

defined), related to the Company’s intent to consummate the purchase of the Surprise Property, following notice from the City of

Surprise that the Company had received final approvals of its cannabis entitlements, after satisfaction of the appeal period (the “Cannabis

Approvals”), related to a use-permit for a cannabis retail dispensary to be developed at the Surprise Property.

As used herein,

the “Surprise Property” refers to that certain property commonly known as Bella Fiesta Pad B in Surprise, Arizona, which

property is a certain tract or parcel of land containing approximately 1.114 acres, together with all improvements, buildings, leases,

rights, easements, and appurtenances pertaining thereto.

Previously, on January 23, 2023, ZPRE Holdings entered into a Purchase and Sale

Agreement and Joint Escrow Instructions, by and between NWC Dysart & Bell LLC (the “Seller”) and ZPRE Holdings as the

Such agreement was subsequently amended on May 12, 2023, October 25, 2023, and December 20, 2023 (as amended, the “Agreement”).

Pursuant to the terms of the Agreement, the Seller agreed to sell to ZPRE Holdings, and ZPRE Holdings agreed to purchase, the Surprise

Property in exchange for a purchase price of $ 1,100,000 (the “Purchase Price”).

Pursuant to the terms of the Agreement, the

Seller also agreed to complete a number of on-site and off-site improvements to the Surprise Property (the “Seller’s Work”)

in exchange for ZPRE Holdings’ reimbursement of up to $ 250,000 for the off-site work and reimbursement of up to $ 350,000 for the

on-site work (collectively, the “Reimbursements”).

The obligation to complete the Reimbursements is conditioned upon the

closing of the sale of the Surprise Property to ZPRE Holdings.

Pursuant to the terms of the Agreement, ZPRE Holdings deposited the following

amounts into escrow:

(i) $ 50,000 , for the initial earnest money deposit, and (ii) $ 47,500 , for additional earnest money deposited related

to extensions to the Agreement (collectively, the “Earnest Money”).

The Earnest Money will be applied as a credit upon closing.

The closing of the transactions contemplated by the Agreement is subject to several conditions, including the successful receipt of the

Cannabis Approvals, and the successful completion of the Seller’s Work.

In addition, ZPRE Holdings has the right to conduct inspections

on the Surprise Property.

Pursuant to the terms of the Agreement, if, during the inspection period, ZPRE Holdings determines, in its

sole and absolute discretion, that the Surprise Property is not suitable for ZPRE Holdings’ purchase and use for any reason or

no reason, ZPRE Holdings may terminate the Agreement.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures