What changed in this filing

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Item 9A. Controls and Procedures

2025-03-25 compared with 2024-03-26 · 1817 added, 1670 removed, 1216 unchanged (74% of the section changed)

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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.

in Internal Control

were no changes in our internal control over financial reporting during the quarter ended December 31, 2024 that have materially affected,

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

OTHER INFORMATION

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Chair of the Nominating and Governance Committee

Cole Stevens.

Independent Director

McLaren is the son of Dr.

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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.

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

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

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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.

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

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

He was also the program director

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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.

provide 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.

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

Stevens, who has served as a director since November 2024, brings over a decade of experience in capital markets advisory,

corporate finance, and strategic growth leadership.

He has a proven track record of driving value creation and expansion across diverse

industries, including technology, healthcare, and real estate.

Since 2019, Mr.

Stevens has served as President of AllAccess Capital Markets,

a prominent North American capital markets advisory firm.

In this capacity, he has consistently demonstrated exceptional leadership and

financial acumen, successfully guiding organizations through periods of growth, transformation, and strategic evolution.

expertise has earned him recognition on leading broadcast platforms, including appearances on CBC’s Lang & O’Leary

Exchange and multiple features on BNN (Business News Network).

has a Bachelor of Commerce from the Ted Rogers School of Management at Toronto Metropolitan University (formerly Ryerson University),

with a focus on Global Management.

The Company believes that Mr.

Stevens’ strategic experience will be invaluable to the Company

as it pursues its mission to deliver innovative, value-driven real estate solutions in emerging regulated markets

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:

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

any bankruptcy

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

of our six board members are independent.

of our seven 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 us).

Friedman, Honaman, Kane, Dr.

Overstreet, and

Stevens 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

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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.

of the directors to questions in a questionnaire regarding employment, business, family, 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, 2024 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, 2024 and

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In addition, the Audit Committee is responsible for:

the scope, results, timing and costs of the audit with our independent accountants and reviewing the results of the annual audit

examination and any accompanying management letters;

reviewing the

scope, results, timing and costs of the audit with our independent accountants and reviewing the results of the annual audit examination

and any accompanying management letters;

assessing the independence

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In addition, the Compensation Committee is responsible

the performance of our Chief Executive Officer;

reviewing the

performance of our Chief Executive Officer;

determining the compensation

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In addition, the Strategic Committee is responsible for:

the Company’s current business strategies.

Company’s current business strategies.

Explore new business strategies

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analyses to the Board.

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

Strategic Committee held two meetings during the fiscal year ended December 31, 2024.

and Governance Committee

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President and Chief Operating Officer (2)

Daniel Gauthier

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

On July 1, 2022, we granted

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

at an exercise price of $1.00 per share.

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

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

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

thereafter through July 1, 2032.

We valued this stock option at a fair value of $82,420 and 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’

August 16, 2024, the Company’s Compensation Committee approved a Compensation Memo whereby project team members may receive up

to 80% bonus splits of project fees generated by transactions.

Project fees may include Acquisition Fees, Management Fees, Disposition

Fees, or Promote Fees.

Each transaction may vary significantly in the types of fees generated and the amount of fees generated depending

on project terms and conditions.

Such amounts are included in bonus above.

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”.

Disclosure to Summary Compensation Table

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will be entitled to the following benefits:

any period that Mr.

period that Mr.

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

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McLaren is entitled under any compensation plan of the Company.

of any further salary payments to Mr.

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

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

times the sum of Mr.

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

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

The Company will pay to

any further salary payments to Mr.

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

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

the sum of Mr.

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

the notice of Termination given in respect of them.

The Company will pay Mr.

McLaren any deferred compensation allocated or credited to Mr.

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

Additionally,

on August 16, 2024, the Company’s Compensation Committee approved a Compensation Memo whereby brokerage project team members shall

receive up to 80% bonus splits of the fees generated by transactions.

In connection with such a bonus, in 2024, the Company paid Mr.

McLaren a bonus of $56,473.

Employment Agreement

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cash and/or equity bonuses.

In April 2023, Mr.

Blackwells base annual salary was increased in $190,000.

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

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

Additionally,

on August 16, 2024, the Company’s Compensation Committee approved a Compensation Memo whereby brokerage project team members shall

receive up to 80% bonus splits of the fees generated by brokerage transactions.

In connection with such a bonus, in 2024, the Company

Blackwell a bonus of $57,473.

Equity Awards at 2024 Fiscal Year-End

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Incentive Plan

Number of Shares

Incentive Plan

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Berekk Blackwell

Vest annually

Vested annually

at 25,000 options per year through December 2024.

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options per year through January 1, 2031.

Vest annually at 7,500

options per year through January 21, 2030.

15,000 options vested in

2022 and remainder vest annually at 7,500 options per year through January 21, 2030.

Versus Performance (PVP)

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

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

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

Grant date fair value of

stock and option awards granted during the year

Year over year change in

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

Pay Versus Performance Table

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Initial Fixed

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.

Net Income (Loss)

The principal

executive officer (“PEO”) in 2024, 2023, and 2022 is Bryan McLaren, our Chief Executive Officer and Chief Financial Officer.

The non-PEO NEOs in 2024 is Berekk Blackwell, and in 2023 and 2022 was Berekk Blackwell and Dan Gauthier.

The CAP was calculated

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Average Non-PEO NEO

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%

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 assumptions.

The assumptions used in estimating fair value for awards

granted during 2024, 2023 and 2022 were as follows:

52.2 – 106.7%

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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.

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 2016 Plan has superseded the 2014 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

As of December 31, 2024, options to purchase 1,250,000 shares of common stock are outstanding and 1,250,000 options are exercisable

pursuant to the 2014 Plan.

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.

table below sets forth information as of December 31, 2024.

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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 Topic

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

financial statements under “Shareholders’ Deficit”.

On November 25, 2024, the director listed above received 105,000

stock options to purchase 105,000 shares of restricted stock with an exercise price of $0.49 per share.

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

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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.

of March 25, 2025, there were 12,087,861 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

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Scottsdale, AZ 85260

Less than 1%.

Includes 250,000 vested

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

Includes 8,750 vested stock

Includes 1,013,750 vested

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1,000,000 (3)

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

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

Johnston and Dr.

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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,

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.

of our seven 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 us).

Friedman, Honaman, Kane, Dr.

Overstreet, and

Stevens 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

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& Company, P.A.

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

Brooks and Associates CPAs, P.A.

for the year ended December 31, 2022:

for the years ended December 31, 2024 and 2023:

Audit-Related Fees

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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

Description of Exhibit

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

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

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

of Zoned Properties, Inc.

Bylaws 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).

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.

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

Board 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 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 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.

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).

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.

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).

Board 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 4, 2017).

Stock 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).

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 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 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 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 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 3, 2018).

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

Herbal Center, Inc.

Deed 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).

Stock 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 7, 2016).

Second 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).

Third 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).

Convertible 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 12, 2017).

Fourth 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).

Third Amendment to Commercial Lease by and between Zoned Properties, Inc., C3C3 Group, LLC and Alan Abrams, and Zoned Arizona Properties, LLC, dated as of October 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).

Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 by and between Chino Valley Properties, LLC and Broken Arrow Herbal Center, Inc.

(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 Zoned Arizona Properties, LLC and CJK,

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

(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 Kingman Property Group, LLC and CJK,

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

(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).

Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 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 May 3, 2018).

Employment 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).

Golden 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.

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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).

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

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

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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).

First Amendment to Licensed Cannabis Facility Absolute Net Lease Agreement, dated as of May 3, 2024, by and between ZP RE MI Woodward, LLC and Rapid Fish LLC (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on May 6, 2024).

Construction Loan Agreement, dated as of July 8, 2024, by and between ZP RE AZ DYSART, LLC and Private Money Funding, LLC (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on July 10, 2024).

Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing made as of July 8, 2024, by and among ZP RE AZ DYSART, LLC to Premier Title Agency, for the benefit of Private Money Funding, LLC (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on July 10, 2024).

Promissory Note, dated July 8, 2024, issued by ZP RE AZ DYSART, LLC in favor of Private Money Funding, LLC (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on July 10, 2024).

Unconditional Repayment Guaranty, dated as of July 8, 2024, by the registrant in favor of Private Money Funding, LLC (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the SEC on July 10, 2024).

Stock Option Agreement, dated November 25, 2024, by and between the registrant and Cole Stevens

(incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the

SEC on November 27, 2024).

Insider Trading Policy.

List of Subsidiaries.

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.

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.

INLINE XBRL INSTANCE DOCUMENT

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Cover Page Interactive

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

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

Management contract or compensatory

25 unchanged sentences

Derek Overstreet

PROPERTIES, INC.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

1 unchanged sentence

YEARS ENDED DECEMBER 31, 2024 and 2023

PROPERTIES, INC.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

2 unchanged sentences

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Financial Statements:

9 unchanged sentences

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

balance sheets of Zoned Properties, Inc.

and Subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated

statements of operations, changes in stockholders’ equity and cash flows for each of the two years in the period ended December

31, 2024, 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, 2024 and 2023, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December

31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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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

statements based on our audits.

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 audits 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

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether due to error or fraud.

1 unchanged sentence

engaged to perform, an audit of internal control over financial reporting.

As part of our audit, we are required to obtain an understanding

As part of our audits, 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

1 unchanged sentence

Accordingly, we express no such opinion.

Our audit included performing procedures to assess

Our audits included performing procedures to assess

the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

2 unchanged sentences

consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by

Our audits 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

We believe that our audits provide

a reasonable basis for our opinion.

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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 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

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our

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 audits 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 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 its internal control over financial reporting.

As part of our audits, 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 audits included performing procedures to assess

the risks of material misstatement of the 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 financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

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 and

that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective, or complex judgments.

We determined that there were no critical audit matters.

We served as the Company’s auditor from

2018 to 2023.

Palm Beach Gardens, FL

March 28, 2023

Member CPAConnect with Affiliated Offices Worldwide ● Member AICPA

Center for Audit Quality

ZONED PROPERTIES, INC.

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Escrow deposits

Capitalized permit costs

Capitalized project costs

Property and equipment, net

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Investment in equity securities

Interest rate swap asset

Security deposits

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

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

12,201,516 and 12,201,548 shares issued on December 31, 2024 and 2023, respectively, and 12,087,829 and 12,101,548 shares outstanding on December 31, 2024 and 2023, respectively

Additional paid-in capital

Treasury stock, at cost ( 100,000 and no shares on December 31, 2023 and 2022, respectively)

Treasury stock, at cost ( 113,687 and 100,000 shares on December 31, 2024 and 2023, respectively)

Accumulated deficit

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Property portfolio business development costs

Gain on sale of property and equipment

Total operating expenses, net

INCOME (LOSS) FROM OPERATIONS

INCOME FROM OPERATIONS

OTHER INCOME (EXPENSES):

Interest expenses

Interest expenses - related party

Interest income

Loss from derivative - interest rate swap

Loss on note receivable investment

Income (loss) from derivative - interest rate swap

Total other income (expenses), net

LOSS BEFORE EQUITY METHOD LOSSES

INCOME (LOSS) BEFORE EQUITY METHOD LOSSES

EQUITY METHOD LOSS:

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Total equity method loss

$ ( 540,258 )

NET INCOME (LOSS)

$ ( 540,258 )

NET LOSS PER COMMON SHARE:

Basic and diluted

NET INCOME (LOSS) PER COMMON SHARE:

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic and diluted

accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

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Stockholders’

Paid-in Capital

Balance, December 31, 2022

$ ( 15,673,222 )

Purchase of treasury stock

Accretion of stock based compensation related to stock options issued

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CASH FLOWS FROM OPERATING ACTIVITIES:

$ ( 540,258 )

Net income (loss)

$ ( 540,258 )

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

Depreciation expense

Amortization expense

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

Depreciation and amortization expense

Amortization of debt discount

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Loss on forfeited escrow deposit

Loss on note receivable investment

Bad debt expense

Impairment of investment in unconsolidated joint ventures

Loss from unconsolidated joint ventures

Loss from interest rate swap

Gain on sale of rental property and property and equipment

(Income) loss from interest rate swap

Change in operating assets and liabilities:

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Prepaid expenses and other assets

Security deposit

Accounts payable

Accrued expenses

Accrued expenses - related parties

Contract liabilities

2 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES:

Lease incentive provided to tenant

Purchases of rental properties and improvements

( 3,336,763 )

( 1,007,941 )

Purchases of property and equipment

Proceeds from sale of property and equipment

Investment in joint ventures and equity securities

Increase in capitalized permit costs

Increase in escrow deposits

Increase in capitalized project costs

Decrease (increase) in escrow deposits

NET CASH USED IN INVESTING ACTIVITIES

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CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from notes payable

Deferred financing fees paid

Purchase of treasury stock

Net proceeds from note payable

Repayment of notes payable

Repayment of note payable - related party

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

NET (DECREASE) INCREASE IN CASH

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

NET DECREASE IN CASH

( 2,079,815 )

( 1,236,045 )

CASH, beginning of year

5 unchanged sentences

Reclassification of escrow deposits for acquisition of rental properties

Increase in right of use asset and lease liability

accompanying notes to consolidated financial statements.

Increase in operating lease right of use asset and lease liability

See accompanying notes to consolidated financial

ZONED PROPERTIES, INC.

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DECEMBER 31, 2024 AND 2023

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.

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.

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.

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.

The Company operates in two organized segments;

(1) the operations, leasing and management of its commercial properties, herein known as the “Property Investment Portfolio”

segment, and (2) the advisory, brokerage and technology services related to commercial properties, herein known as the “Real Estate

Services” segment.

The Company targets commercial properties that face unique zoning or development challenges, identifies solutions

that can potentially have a major impact on their commercial value, and then works to acquire the properties while securing long-term,

absolute-net leases.

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

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

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 (inactive).

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 Brokerage MS, LLC (“Mississippi Brokerage”) was organized in the State of Mississippi on October 4, 2022 (inactive and dissolved on January 13, 2025)

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 (inactive and dissolved on January 9, 2025).

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 (inactive and dissolved on January 13, 2025.)

ZP RE IL Ashland, LLC (“ZP Ashland”) was organized in the State of Illinois on February 14, 2024.

ZP RE AZ DYSART.

LLC (“ZP Dysart”) was organized in the State of Arizona on May 24, 2024.

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

(see Note 5).

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

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DECEMBER 31, 2024 AND 2023

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:

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.

As reflected in the accompanying consolidated

financial statements, the Company generated net income of $ 573,958 and cash provided by operations of $ 578,218 during the year ended December

Additionally, as of December 31, 2024, the Company had cash of $ 1,019,980 and stockholders’ equity of $ 5,860,514 .

The 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.

Use of estimates

The 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 estimates.

Significant estimates for

the years ended December 31, 2024 and 2023 include the collectability of accounts 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.

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 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 or absolute-net leases to tenants

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

For the years ended December 31, 2024

and 2023, revenues associated with Significant Tenants amounted to $ 2,366,645 and $ 2,394,029 , respectively, which represents 62.4 % and

82.9 % 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, capitalized project costs, escrow deposits, 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.

The guidance requires that assets and liabilities

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

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

1 unchanged sentence

Unobservable inputs that are not corroborated by market data.

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.

Other than the interest rate swap, the Company

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

basis, in accordance with ASC Topic 820.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2024 AND 2023

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.

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, 2024 and

December 31, 2024

December 31, 2023

Interest rate swap asset

Interest rate swap liability

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.

Interest rate swap

In 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

The Company accounts for its interest rate swap agreement in accordance with the guidance related to derivatives and hedging activities.

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

The Company agrees

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

upon notional principal amount.

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

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

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

The Company agrees to exchange, at specified intervals, the difference

between fixed and variable interest amounts calculated by reference to an agreed upon notional principal amount.

Interest payments receivable

and payable under the terms of the interest rate swap agreement are accrued over the period to which the payment relates and the net difference

is treated as an adjustment of interest expense related to the underlying liability.

Because the variable interest rates used to calculate

payments under the terms of the swap agreement are calculated using different benchmarks than those included in the Company’s variable

rate debt agreement, the swap agreement is not considered an effective cash flow hedge.

Accordingly, changes in the underlying market

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

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

The 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.

Information regarding the interest rate swap is

Description Notional

2024 Interest

Rate Maturity Fair Value of

2024 Fair Value of

1 unchanged sentence

7.65 % December 10, 2032 $ 44,581 $ 122,879

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.

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, 2024 and 2023.

Company’s cash is held at major commercial banks, which may at times exceed the Federal Deposit Insurance Corporation (“FDIC”)

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

On December 31, 2024 and 2023, the Company had approximately

$ 510,000 and $ 2,555,000 , 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

Accounts receivable

The Company recognizes an allowance for losses

on accounts 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 considered at risk or uncollectible.

On January 1, 2023, the Company

adopted ASC 326, “Financial Instruments - Credit Losses”.

In accordance with ASC 326, an allowance is maintained for estimated

forward-looking losses resulting from the possible inability of customers to make required payments (current expected losses).

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.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2024 AND 2023

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.

Investment in unconsolidated 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 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.

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,

2024 and 2023, long-term investments consisted of an investment in convertible preferred stock that does not have a readily determinable

fair value (see Note 5).

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.

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

Depreciation is recognized on a straight-line basis

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

Tenant 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.

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 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.

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, 2024 and 2023, the Company did not record any impairment losses.

The Company has land which is not subject to depreciation.

Escrow deposits

The 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 deposits.

Escrow deposits include cash

deposits made by the Company for the future acquisition of properties or for the option to acquire a property.

In most cases, upon closing

of the acquisition of a property, the escrow deposit will be applied to the purchase price.

In 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 years ended December 31, 2024 and 2023, the Company forfeited escrow deposits of $ 53,875

and $ 26,000 , respectively, which is reflected in operating expenses as part of property portfolio business development costs on the accompanying

consolidated statements of operations.

4 unchanged sentences

DECEMBER 31, 2024 AND 2023

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.

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.

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.

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

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.

Revenue recognition

Property Investment Portfolio Revenues

Rental 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

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 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 by the Company 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 accompanying consolidated

statements of operations.

Real Estate Services Revenues

The 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 disclosures.

Revenues from advisory services is recognized

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

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.

Contract liabilities

Contract 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, 2024 and 2023, contract liabilities

activities were as follows:

Balance at beginning of period

Rental payments received in advance

1 unchanged sentence

Customer refund

Balance at end of year

Balance at end of period

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2024 AND 2023

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).

The standard requires lessees to apply a dual approach, classifying

leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by

This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line

basis over the term of the lease.

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

a term of greater than 12 months regardless of their classification.

Leases with a term of 12 months or less will be accounted for similar

to existing guidance for operating leases today.

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

equivalent to 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).

Lease accounting

The 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).

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

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

This classification will determine

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

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

of their classification.

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

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

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

For leases entered into on or after the effective

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

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

implicitly or explicitly.

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

new lease or a modified lease.

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

The new lease or modified lease

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

As disclosed in Note 3, on January 24, 2022 and effective

on March 1, 2022, the Chino Valley lease was amended and the monthly 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 deferred rent.

In prior years, the Company has amended certain leases

which resulted in the abatement of rent.

Additionally, in connection with operating leases on various properties, the Company abated

certain lease payments.

These rent abatements and the effect of recording rent on a straight-line basis resulted in aggregate deferred

rent as of December 31, 2024 and 2023 of $ 747,504 and $ 371,472 , respectively (see Note 3).

Additionally, if the lease provides for tenant

5 unchanged sentences

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.

For contracts entered into on or after the effective

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

The Company’s assessment is based on:

(1) whether the contract involves the use

of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout

the period, and (3) whether we have the right to direct the use of the asset.

The Company allocates the consideration in the contract

to each lease component based on its relative stand-alone price to determine the lease payments.

For leases where the Company is a lessee,

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

and a right of use asset on its consolidated balance sheets at fair value upon adoption of 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

(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.

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.

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,

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.

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.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2024 AND 2023

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.

The following table presents a reconciliation

of basic and diluted net income (loss) per common share:

Net income (loss) per common share - basic:

Net income (loss)

$ ( 488,148 )

undistributed (earnings) loss allocated to participating securities

Net income (loss) allocated to common stockholders

$ ( 540,258 )

Weighted average common shares outstanding – basic

Net income (loss) per common share – basic

Net income (loss) per common share - diluted:

Net income (loss) allocated to common shareholders – basic

$ ( 540,258 )

interest of convertible debt

Numerator for income (loss) per common share – basic

$ ( 540,258 )

Weighted average common shares outstanding – basic

dilutive shares related to:

Stock options

Convertible debt

Weighted average common shares outstanding – diluted

Net income (loss) per common share – diluted

The following potentially dilutive shares have

been excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive for the years ended December 31,

2024 and 2023.

Convertible debt

Stock options

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.

Segment reporting

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

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 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

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.

In November 2023, the FASB issued ASU 2023-07,

Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires entities to report incremental information

about significant segment expenses included in a segment’s profit or loss measure as well as the title and position of the chief operating

decision maker (“CODM”).

The new standard also requires interim disclosures related to reportable segment profit or loss and

assets that had previously only been disclosed annually.

The Company adopted ASU 2023-07 effective December 31, 2024 on a retrospective

As a result, the Company has enhanced its segment disclosures in this report to include the presentation of depreciation and amortization,

interest and joint venture expenses by segment and the disclosure of its CODM.

The adoption of this ASU only affects the Company’s disclosures

with no impact to its financial condition or results of operations

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2024 AND 2023

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.

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, 2024 and 2023 that would require either

recognition or disclosure in the accompanying consolidated financial statements.

Stock-based compensation

Stock-based compensation is accounted for based

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

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

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

the vesting period).

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

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

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

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

Recently issued accounting pronouncements

In December 2023, the FASB issued ASU 2023-09,

Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which focuses on the rate reconciliation and income taxes paid.

2023-09 requires a public business entity (PBE) to disclose, on an annual basis, a tabular rate reconciliation using both percentages

and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction

to the extent those items exceed a specified threshold.

In addition, all entities are required to disclose income taxes paid, net of refunds

received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5 % of total income tax payments,

net of refunds received.

This pronouncement is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company does not expect the adoption of this new guidance to have a material impact on the consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03,

Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires entities

to provide more detailed disaggregation of expenses in the income statement, focusing on the nature of the expenses rather than their

The new disclosures will require entities to separately present expenses for significant line items, including but not limited

to, depreciation, amortization, and employee compensation.

Entities will also be required to provide a qualitative description of the

amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, disclose the total amount of selling

expenses and, in annual reporting periods, provide a definition of what constitutes selling expenses.

This pronouncement is effective

for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early

adoption permitted.

The Company does not expect the adoption of this new guidance to have a material impact on the consolidated financial

NOTE 3 – CONCENTRATIONS AND RISKS

Lease Agreements with Significant Tenants

Our properties located in Chino Valley and Green

Valley are 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

Our property located in Kingman is leased by CJK,

Our property located in Tempe is leased by VSM,

LLC (“VSM”), doing business as Green Dot Labs.

Our property located in Pleasant Ridge is leased

by Rapid Fish, LLC (“Rapid Fish”), doing business as NOXX Cannabis.

Our property located in Chicago is leased by JG

IL LLC (“Justice Grown”), doing business as Justice Cannabis Co.

Our land located in Surprise, AZ is leased by

The Pharma, LLC (“Sunday Goods”), doing business as Sunday Goods.

The Company considers a tenant whose annual base

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

The Tempe Lease (leased by VSM), the Chino

Valley Lease and Green Valley Lease (leased by Broken Arrow), and the Woodward Lease (leased by Rapid Fish) are considered significant

and the tenants are referred to as the Significant Tenants.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2024 AND 2023

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

Chino Valley, AZ

On 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 .

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.

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, 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 or its affiliate, CJK, will 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.

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 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.

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.

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.

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.

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 revenue.

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.

Green Valley, AZ

On 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 .

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.

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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024 AND 2023

On May 1, 2018, and amended on May 29, 2020, 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 .

The Tempe Lease provided for

payment by CJK of a fixed monthly base rent of $ 33,500 , as well as real property taxes, personal property taxes, privilege, sales, rental,

excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed against Zoned Arizona.

In addition, pursuant

to the terms of the Tempe Lease, CJK agreed to maintain insurance in full force during the term of the Tempe Lease and any other period

of occupancy of the premises by CJK.

On May 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.

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.

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.

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

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 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 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.

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

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

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

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

If VSM fails to deliver to Zoned Arizona invoices or other documentation acceptable to Zoned Arizona showing the Capital Commitment has

been satisfied in a timely manner, VSM will be in default under the Tempe Lease.

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.

the Company’s accounting for the lease remained unchanged subsequent to the Tempe Second Amendment and Assignment.

Therefore, the Company’s accounting for the lease

remained unchanged subsequent to the Tempe Second Amendment and Assignment.

Pursuant to ASC 842-10-25, the lease modification

was not accounted for as a separate contract and the Company accounted 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, 2024 and 2023, contract liability related to this lease modification amounted

to $ 264,115 and $ 281,340 , respectively, which has been included in contract liabilities on the accompanying consolidated balance sheets.

As of March 01, 2025, the Company’s new

tenant, VSM, has completed more than $ 10,000,000 worth of improvements to the Tempe property.

Additionally, on the Tempe property, the Company

leases parking lot space for an antenna location to a third party.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2024 AND 2023

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.

On 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 .

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.

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.

On 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.

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 had two options to extend the Sublease Term

by one-year periods each (each a “Sublease Term Extension” and collectively the “Sublease Term Extensions”), which

were exercisable by Subtenant no later than 90 days prior to the expiration of the Sublease Term, as may be extended.

In August 2024,

the Sublease was not renewed and the Sublease expired.

Pursuant 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 by CJK.

Accordingly, the Company

receives additional rent of $ 3,500 per month during the term of the sublease.

Additionally, the subtenant paid 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 was included in security deposits payable on the accompanying consolidated balance sheet

as of December 31, 2023.

Upon expiration of the Sublease, the Security Deposit of $ 14,960 was refunded to the subtenant.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2024 AND 2023

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:

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 had 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 by written notice to ZP Woodward given not later than 180 days prior to

the expiration of the then current term on the same terms and conditions as provided in this 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.

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 provided 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.

On 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.

On May 1, 2024, ZP Woodward and Rapid Fish, LLC

(the “Parties”), with individual Guarantors, Thomas Nafso and Ammar Kattoula (the “Guarantors”), entered into

a First Amendment to the Absolute Net Lease Agreement (the “First Amendment”) pertaining to premises located at 23600-23634

Woodward Ave, Pleasant Ridge MI 48069.

The Parties also agreed to a fully executed Reaffirmation of Guaranty from the Guarantors.

According to the terms of the First Amendment,

the following changes have been agreed to by the Parties:

Amended Rental Payment

The First Amendment provides that as long as the

Company’s Conditions, as outlined in this First Amendment, are satisfied including a Renovation Completion Commitment, the Rental

Payment Schedule of the Lease will be amended to the schedule set forth in the First Amendment.

Capital Commitment

The First Amendment provides for the inclusion

of the Capital Commitment as follows:

Tenant shall cause a total of at least $ 850,000 to be spent toward capital improvements to the Premises

(the “Commitment Improvements” and/or the “Capital Commitment”).

Any such Commitment Improvements shall be made

in accordance with the Lease as amended.

Commitment Improvements to be counted toward satisfying the Capital Commitment shall include

capital improvements to the Premises and any part thereof, as well as other improvements approved in advance in writing by the Company,

and shall exclude soft costs, permit, design, architectural and engineering fees, and legal fees.

Tenant acknowledges that the Capital

Commitment is material to the Company and the Company would not have agreed to enter into this First Amendment but for Tenant’s

obligations in this paragraph.

If the Capital Commitment is not completed in the prescribed time period, as evidenced by invoices or similar

documentation reasonably acceptable to the Company, Tenant’s failure shall constitute an Event of Default under the Lease.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024 AND 2023

Renovation Completion Commitment

The First Amendment provides for the inclusion

of the Renovation Completion Commitment as follows:

Tenant shall cause its Capital Commitment at the Premises (the “Renovation Completion

Commitment”) to be completed within three (3) months after the First Amendment Effective Date (the “Renovation Completion

Commitment Date”).

In order to satisfy the Renovation Completion Commitment, Tenant must satisfy the following prior to the Renovation

Completion Commitment Date (i) deliver to the Company the appropriate deliverables evidencing renovation completion (the “Renovation

Completion Deliverables”) (as defined below) (ii) open for business to the public for its intended Use of the Premises (the “Store

Opening”), (iii) and complete its first bona fide sale to the public.

The Renovation Completion Deliverables include the following:

(x) Tenant has furnished to the Company a copy of a commercially reasonably detailed final cost breakdown for Tenant’s Work and

the Company has inspected the Premises to confirm that Tenant’s Work has been completed in a good and workmanlike manner according

to the Tenant’s Approved Plans;

(y) Tenant has furnished to the Company commercially reasonable final affidavits and final lien

releases from Tenant’s general contractor, if any, all subcontractors and all material suppliers for all labor and materials performed

or supplied as part of Tenant’s Work (whether or not the Allowance is applicable thereto);

(z) a copy of the certificate of occupancy

from the governmental authority having jurisdiction has been delivered to the Company.

Tenant acknowledges that the Renovation Completion

Commitment is material to the Company and the Company would not have agreed to enter into this First Amendment but for Tenant’s

obligations in this paragraph.

If the Renovation Completion Commitment is not completed in the prescribed time period, Tenant’s

failure shall constitute an Event of Default under the Lease.

the Company shall grant Tenant up to two (2) additional 30-day extension

upon request, so long as at the time of the extension the site is conducting inspections toward certificate of occupancy.

The First Amendment also provides that if within

18 months of the date of this First Amendment, Tenant is able to complete all of the following related to 23634 Woodward Ave, Pleasant

Ridge MI 48069 with an APN of 25-27-181-003 (the “North Lot”):

(i) obtain authorization from all required jurisdictions (including

the City of Pleasant Ridge) that the use of the North Lot parking spaces is no longer required and releases the Company from all obligations

related to the North Lot under the Declaration of Restrictions and Parking Easement (the “Parking Agreement”), and (ii) confirm

that the Tenant is able to continue to use the lot for purposes of ingress and egress, and (iii) Tenant is able to arrange a deal with

the seller of the North Lot, which is currently under a Land Contract with outstanding installment payments, that (x) provides the Company

with indemnity from Tenant that completely releases the Company of any operational obligations or liabilities related to the North Lot,

(y) provides the Company with indemnity from Tenant that completely release the Company of any financial obligations or liabilities related

to the North Lot, and (z) does not cause any encumbrance or legal liability to the remaining properties at the Premises;

then within 30

days of the Company’s receipt of written confirmation from all appropriate parties that all requirements noted above have been satisfied,

at the Company sole discretion, the Company agrees that the parties shall enter into a Lease Amendment acknowledging the same and modifying

Tenant’s lease base rental rate to be reduced by $ 3,846 for the Lease.

Reaffirmation of Guarantee

In consideration of the First Amendment, the Guarantors

executed and delivered a Reaffirmation of Guaranty (the “Reaffirmation of Guaranty”) effective as of the First Amendment Effective

Date, May 3, 2024.

Related to the Guaranty and the Original Guarantors, the Company agreed, that so long as there are no uncured Events

of Default and Tenant remains in good standing under the Lease, then the Original Guarantors shall be released of their guarantees following

the original lease term of fourteen and a half (14.5) years.

The Company also agreed that, provided the Company has given written approval,

at its discretion, which shall not be unreasonably withheld, then the Original Guarantors may be permitted to transfer the obligations

under their Guarantees in the event of a Permitted Transfer, on to a new Guarantor(s) that are of at least equal or greater credit than

the Original Guarantors, to be determined by the Company in its discretion, which shall not be unreasonably withheld.

On December 15, 2023, ZPRE Holdings entered into

an Agreement Regarding Purchase and Sale Contract (the “Agreement”), effective as of December 15, 2023, by and between Keystone,

as assignor, and ZPRE Holdings as assignee.

Pursuant 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 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”).

Pursuant to the terms of the Agreement, ZPRE Holdings

agreed 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 .

On 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.

On 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 fee payable.

On 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”), as tenant.

Pursuant to the terms of

the Lease, ZPRE Holdings agreed to lease the Ashland Avenue Property located in Chicago, IL 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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024 AND 2023

On January 2, 2024, ZPRE Holdings entered into

a contingent Licensed Cannabis Facility Absolute Net Ground Lease Agreement (the “Sunday Goods Lease”), with a commencement

date contingent upon the satisfaction of various contingencies to the Sunday Goods Lease, by and between ZPRE Holdings, as landlord, and

Sunday Goods, as tenant.

Pursuant to the terms of the Sunday Goods Lease, ZPRE Holdings agreed to lease the Surprise Property to Sunday

Goods for use as a licensed medical and adult use marijuana retail dispensary in accordance with the laws of Arizona.

The Sunday Goods

Lease has a term of 15 years, with four five-year renewal terms.

Pursuant to the Sunday Goods Lease, ZPRE Holdings has agreed to provide

a tenant improvement allowance for up to $ 1,000,000 to Sunday Goods to be reimbursed in tranches following completion of tenant’s

Pursuant to the terms of the Contingent Lease, on February 27, 2024, Sunday Goods executed a guaranty (the “Guaranty”)

in favor of ZP Holdings, guaranteeing the prompt and complete payment and performance of all of Sunday Goods’ obligations to ZPRE

Holdings arising under the Contingent Lease.

As of July 8, 2024, all contingencies were satisfied and the Contingent Lease commenced on

July 13, 2024.

Pursuant to the Sunday Goods Lease, beginning in July 2025, Sunday Goods shall pay monthly base rent of $ 25,000 through

June 2026, with an annual increase of 3 % per annum through June 2040.

As of December 31, 2024 and 2023, security deposits

payable to the Company’s tenants amounted to $ 361,677 and $ 290,460 , respectively.

Future minimum lease payments primarily consist

of minimum base rent payments from the Company’s tenants.

Future minimum lease payments to be received,

on all leased properties, for each of the five succeeding calendar years and thereafter as of December 31, 2024, 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:

Revenues – Significant Tenants

For the years ended December 31, 2024 and 2023,

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

For the Year Ended

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Woodward lease *

* Revenues from these Significant Tenants began in December 2022.

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.

Further, as of December 31, 2024 and 2023, deferred

rent of $ 747,504 and $ 371,472 is due collectively from the tenants due to the abatement of rent under the lease agreements discussed above,

respectively, and as of December 31, 2024 and 2023, a lease incentive receivable of $ 422,018 and $ 449,541 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

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, 2024 and 2023, deferred revenue related to this lease modification amounted to $ 264,115 and $ 281,340 , respectively, and is included

in contract liabilities on the accompanying consolidated balance sheets.

Asset concentration

The Company’s real estate properties are

leased to the Company’s 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 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, 2024 and 2023, the Company

had an asset concentration related to its Significant Tenants.

As of December 31, 2024 and 2023, the Significant Tenants collectively

leased approximately 55.4 % and 69.4 % of the Company’s total assets, respectively.

Additionally, the Company had an asset concentration

related its Surprise, AZ property, which leased approximately 10.6 % of the Company’s total assets of the Company.

Through December

31, 2024, all rental payments have been made on a timely basis.

ZONED PROPERTIES, INC.

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DECEMBER 31, 2024 AND 2023

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:

Industry risk

Downturns 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

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 square foot.

NOTE 4 – RENTAL PROPERTIES

On December 31, 2024 and 2023, rental properties,

net consisted of the following:

Building and building improvements

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Rental properties, net

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

Date Acquired

Beakon, LLC (the “Beakon Joint Venture”)

April 22, 2021

Zoneomics Green, LLC (the “Zoneomics Green Joint Venture”)

Total investments in unconsolidated joint venture entities

Property Acquisitions

Pursuant to the terms of the Agreement Regarding

Purchase and Sale Contract and an Assignment and Assumption Agreement, on January 19, 2024, ZPRE Holdings completed the acquisition of

its Ashland Avenue Property located in Chicago, Illinois for an aggregate cash purchase price of $ 1,585,878 , including (i) $ 1,250,000 ,

representing the Purchase Price, (ii) an assignment fees of $ 185,000 , and (iii) closing costs, commissions, and fees customary to the

acquisition of real estate of $ 150,878 , which includes a $ 65,000 commission expense, a $ 79,634 sponsor fee, and other costs of $ 6,244 .

On July 8, 2024 (the “Closing”), ZP

Dysart acquired a property in Surprise AZ (the “Surprise Property”) from NWC Dysart & Bell LLC (“NWC”).

Property is a tract or parcel of land containing approximately 1.114 acres, together with all improvements, buildings, leases, rights,

easements, and appurtenances pertaining thereto.

The Surprise Property was acquired for an aggregate purchase price of $ 1,712,541 , which

included (i) $ 1,100,000 , representing the Purchase Price, (ii) reimbursement to NWC for onsite and offsite improvements of $ 492,022 , and

(iii) closing costs, commissions, and fees customary to the acquisition of real estate of $ 120,519 .

For the years ended December 31, 2024 and 2023,

depreciation of rental properties amounted to $ 352,351 and $ 375,553 , respectively.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2024 AND 2023

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 ,

which represents 50 % of the membership interests of Beakon.

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

interest in Beakon’s capital, (ii) share of Beakon’s net profits and net losses (and specially allocated items of income,

gain, and deduction), and the right to receive distributions of net cash flow from Beakon, (iii) right to inspect Beakon’s books

and records, and (iv) right to participate in the management of and vote on matters coming before the members as provided in the Beakon

Operating Agreement.

The transactions discussed above resulted in a joint venture, in accordance with ASC 323-10 – Investments-

Equity and Joint Ventures, between ZP Data 1 and the non-affiliated party.

Each of the entities has 50 % equity ownership and voting

rights, and joint control in Beakon.

ZP Data 1 accounts for its investment in Beakon under the equity method of accounting in accordance

with ASC 323.

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

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.

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):

NOTE 5 – INVESTMENT IN UNCONSOLIDATED

JOINT VENTURE AND EQUITY SECURITIES

Investment in unconsolidated joint venture

On December 31, 2024 and 2023, the Company held

an investment with carrying values of $ 4,923 and $ 4,923 , respectively, in Zoneomics Green, LLC (“Zoneomics Green”), a Delaware

limited liability company formed on May 1, 2021 and owned 50 % by the Company.

The Company accounts for this investment under the equity

method of accounting as the Company exercises significant influence but does not exercise financial and operating control over this entity.

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.

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 component.

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.

The following represents summarized financial

information derived from the financial statements of the Zoneomics Green Joint Venture and Beakon, LLC (inactive), as of December 31,

2024 and 2023 and for the years ended December 31, 2024 and 2023.

Balance sheets:

December 31, 2024

December 31, 2023

Current assets:

Total liabilities and equity

Statement of operations

Year Ended December 31, 2024

Year Ended December 31, 2023

Operating expenses, net

Company’s share of loss from unconsolidated joint ventures

During the years ended December 31, 2024 and 2023,

the Company recorded a loss from unconsolidated joint ventures of $0 and $ 7,110 , respectively, which represents the Company’s proportionate

share of losses from its joint venture, respectively.

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, 2024 and 2023, investment in equity securities amounted to $ 50,000 .

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2024 AND 2023

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 6 – NOTES PAYABLE

On September 30, 2024 and 2023, notes payable

consisted of the following:

Note payable - East West Bank

Notes payable - Woodward Properties

Notes payable - 23616 Land Contract

Note payable – 23634 Land Contract

Note payable - Surprise, AZ property

Total principal due on notes payable

1 unchanged sentence

Notes payable, net

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.

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 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 are reflected as a debt discount and are

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

At any time before July 11, 2023, Zoned Arizona

could 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”).

When Zoned Arizona made the Early Amortization Election, (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 made 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 ;

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.

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 % ( 8.25 % as of December 31, 2024 and 9.25 % as of December 31, 2023).

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

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2024 AND 2023

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).

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 Arizona may prepay the outstanding principal

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

Also as previously disclosed, on July 11, 2022

and pursuant to the terms of the Loan Agreement, the Company executed a Guaranty (the “Guaranty”) in favor of the Bank, pursuant

to which the Company agreed to guarantee all indebtedness of Zoned Arizona to the Bank arising under or in connection with the MAL or

any of the loan documents.

On December 7, 2022, the Company executed an Acknowledgement of Amendment and Reaffirmation of Guaranty (the

“Reaffirmation”) in favor of the Bank.

The Reaffirmation reaffirms the Guaranty and provides the Company’s consent to

the First Amendment and Swap Note.

On December 7, 2022, Zoned Arizona and the Bank

entered into an Interest Rate Swap Transaction Confirmation (the “Confirmation”).

The Confirmation incorporates by reference

the 2002 ISDA Master Agreement as published by the International Swaps and Derivatives Association, Inc.

as if the parties to the Confirmation

executed such agreement in such form.

The Confirmation provides the terms and conditions governing the interest rate swap transaction

afforded to Zoned Arizona, including a fixed interest rate of 7.65 %.

The Company recorded the swap at fair value in the consolidated balance

sheets with changes in fair value recorded contemporaneously in earnings.

The Company has entered into an interest rate swap to mitigate

variability in interest payments on its variable-rate debt.

On December 31, 2024, principal and interest due

on the East West Bank Swap Note amounted to $ 4,404,279 and $ 1,896 , respectively.

On December 31, 2023, principal and interest due on the

East West Bank Swap Note amounted to $ 4,447,068 and $ 8,861 , respectively.

23616 Land Contract 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 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:

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

balloon payment of $ 1,274,117 including the remaining principal and interest on or before December 1, 2028.

On December 31, 2024, principal and interest due

on the 23616 Land Contract Note Payable amounted to $ 1,367,262 and $ 0 , On December 31, 2023, principal and interest due on the 23616 Land

Contract Note Payable amounted to $ 1,408,962 and $ 0 , respectively.

23634 Land Contract Note Payable

On February 24, 2023, in connection with the 23634

Land Contract dated February 24, 2023, 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, 2024, principal and interest due on the 23634 Land Contract Note Payable

amounted to $ 398,726 and $ 0 , respectively.

On December 31, 2023, principal and interest due on the 23634 Land Contract Note Payable amounted

to $ 420,270 and $ 0 , respectively.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2024 AND 2023

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:

Surprise, AZ Construction Loan Agreement

In connection with the Surprise Property Closing,

ZP Dysart entered into the Construction Loan Agreement (the “PMF Loan Agreement”), dated as of July 8, 2024, by and between

ZP Dysart and Private Money Funding, LLC (“PMF”).

Pursuant to the terms of the PMF Loan Agreement, PMF agreed to loan up to

$ 1,620,000 to ZP Dysart, which loan is evidenced by a promissory note (the “PMF Note”).

ZP Dysart’s obligations under

the PMF Note and the PMF Loan Agreement are secured by a Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture

Filing (the “PMF Deed”).

The PMF Loan Agreement, the PMF Note, any guaranties, and all other related documents executed and

delivered concurrently with the PMF Loan Agreement are referred to herein as the “PMF Loan Documents.” Pursuant to the terms

of the PMF Loan Agreement, on July 8, 2024, ZP Dysart issued the PMF Note with the maximum principal amount of $ 1,620,000 to PMF (the

“Maximum Amount”).

Interest accrues at the rate of 12 % per annum, with ZP Dysart paying interest only in arrears, in monthly

installment payments, beginning on August 1, 2024 through July 1, 2029 (the “Maturity Date”).

ZP Dysart may prepay the PMF

Loan in full or in part at any time.

However, during the first 48 months of the term of the loan, if ZP Dysart pays any principal payment,

ZP Dysart will pay to PMF a prepayment premium equal to (i) 5% of the amount of principal prepaid in months 1-24;

(ii) 2% of the amount

of principal prepaid in months 25-36;

and (iii) 1% of the amount of principal prepaid in months 36-48, which amount will be due and payable

at the time ZP Dysart pays the principal payment.

During the year ended December 31, 2024, the Company borrowed $ 1,020,000 of the Maximum

Amount and received net proceeds of $ 983,940 , net of origination fees and costs of $ 36,060 .

As of December 31, 2024, the principal amount

of the loan is $ 1,020,000 and accrued interest payable amounted to $ 0 .

During the existence of any event of default,

PMF may, at its option, exercise any one or more of the remedies described in the PMF Loan Documents or otherwise available, including

declaring all unpaid indebtedness then evidenced by the Note (including any late charges that are then due and payable, any advances thereafter

made from the loan and any accruing costs and reasonable attorneys’ fees which are the obligation of ZP Dysart under the PMF Loan

Documents) to become immediately due and payable.

Unless PMF otherwise elects, such acceleration will occur automatically upon the occurrence

of any event of default described in PMF Loan Agreement or PMF Deed.

After maturity or during the existence of any

event of default, or at any time that ZP Dysart is more than 10 days delinquent in the payment of money as required by the Note or the

other Loan Documents (whether or not Holder has given any notice of default or any cure period has expired), then all amounts outstanding

thereunder will thereafter bear interest at the default rate of 18 % per annum from the date such payment became due until paid, but in

no event to exceed the highest rate lawfully collectible under applicable law.

Pursuant to the terms of the PMF Loan Agreement,

following ZP Dysart’s satisfaction of the conditions to funding the PMF Loan and recordation of the PMF Deed, the loan proceeds

will be disbursed in multiple advances through escrow, first in the form of an initial advance in the amount of $ 1,020,000 for the purpose

of contributing funding towards acquiring the Surprise Property (the “Acquisition Advance”).

The remaining loan proceeds will

be used for the purpose of financing for the completion of Sunday Goods’ Work (as hereinafter defined) (the “Construction

Following the Acquisition Advance, subject to satisfying the conditions set forth in the PMF Loan Agreement, ZP Dysart

will be entitled to request the Construction Advances from the remaining loan proceeds at the following stages of completion of the construction

of Sunday Goods’ Work:

(i) first advance in the amount of $300,000 at 50% completion, and (ii) final advance in the amount of $300,000

at 100% completion and issuance of certificate of occupancy.

The PMF Loan Agreement contains representations,

warranties and covenants customary for a transaction of this type.

Pursuant to the terms of the Unconditional Repayment

Guaranty (the “PMF Guaranty”), dated as of July 8, 2024, by Zoned Properties, Inc.

in favor of PMF, the Company guaranteed

to PMF the full and prompt payment of the principal sum of the PMF Note or so much thereof that may be outstanding at any one time or

from time to time in accordance with its terms when due, by acceleration or otherwise, together with all interest accrued thereon, and

the full and prompt payment of all other sums, together with all interest accrued thereon, when due under the terms of the PMF Loan Agreement,

the PMF Note, and in any deed of trust, security agreement, lease assignment and other assignment or agreement referred to in the PMF

Loan Agreement or the PMF Note and/or now or hereafter securing the PMF Note or setting forth any obligations of ZP Dysart in connection

with the loan.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024 AND 2023

During the years ended December 31, 2024 and 2023,

amortization of debt discount related to notes payable amounted to $ 22,066 and $ 18,460 , respectively, which is included in interest expense

on the accompanying consolidated statements of operations.

On December 31, 2024, future annual principal

payments under the above notes payable are as follows:

Years ending December 31,

Total principal payments due on December 31, 2024

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.

NOTE 7 – 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 Mr.

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, 2024 and 2023, the principal

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

As of December 31, 2024 and 2023, accrued interest payable due under the Abrams

Debenture amounted to $ 0 and $ 30,000 , respectively, which is included in accrued expenses on the accompanying consolidated balance sheets.

For the years ended December 31, 2024 and 2023, interest expense related to the Abrams Debenture amounted to $ 120,000 .

NOTE 8 – RELATED PARTY TRANSACTION

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.

2 unchanged sentences

DECEMBER 31, 2024 AND 2023

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 .

Pursuant to the terms of the McLaren Debenture, Mr.

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.

NOTE 9 – 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, $ .001 par

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

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.

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, 2024 and 2023, 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 redemption

On 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 as of December 31, 2024 and 2023, is reflected as treasury stock on the consolidated balance sheet until such time as

the shares are cancelled.

On April 23, 2024, following approval by the Company’s

Board of Directors, stockholders holding all of the Company’s outstanding preferred stock approved a stock repurchase program (the

“Repurchase Program”), pursuant to which the Company is authorized to purchase up to $ 1 million of its common stock over an

unlimited time period.

During the year ended December 31, 2024, the Company

purchased a total of 13,687 shares of its common stock for $ 8,010 or an average of $ 0.59 per share, which as of December 31, 2024, is

reflected as treasury stock on the consolidated balance sheet until such time as the shares are cancelled.

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, 2024, 1,117,500 stock option awards are outstanding and 826,250 options are exercisable 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, 2024 and 2023,

8,882,500 and 8,987,500 shares, respectively, were available for future issuance.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2024 AND 2023

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 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, 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 %;

expected volatility of 108.7 %;

risk-free interest rate of 1.54 %;

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.

January 21, 2022, the Company granted a stock option to purchase 75,000 of the Company’s common stock at an exercise price of $ 1.00

per share to the Company’s President and Chief Operating Officer pursuant to the 2016 Plan.

The grant date of the stock option

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

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

and (ii) as to 7,500 of such shares on January 21, 2023 and each year thereafter through January 21, 2032.

The fair value of this option

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

dividend yield of 0 %;

expected volatility of 112.3 %;

risk-free interest rate of 1.75 %;

and an estimated holding period of 10 years.

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.

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, 2024, options to purchase 1,250,000 shares of common stock are outstanding and 1,250,000 options are exercisable pursuant to the 2014

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.

(D) Stock options

On November 25, 2024, the Company granted a stock

option to purchase 105,000 of the Company’s common stock at an exercise price of $ 0.49 per share to a board of director pursuant

to the 2016 Plan.

The grant date of the stock option was November 25, 2024 and the option expires on November 25, 2034.

The option shall

vest evenly on a quarterly basis over 36 months ( 8,750 options quarterly), beginning immediately.

The fair value of this option grant

5 unchanged sentences

valued this stock option at a fair value of $ 35,506 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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

option activities for the year ended December 31, 2023 and 2022 are summarized as follows:

Weighted Average

For the year ended December 31, 2024 and 2023,

in connection with the accretion of stock-based option expense, the Company recorded stock option expense over the vesting period of $ 54,883

and $ 116,643 , respectively.

As of December 31, 2024, there were 2,367,500 options outstanding and 2,051,250 options vested and exercisable.

As of December 31, 2024, there was $ 80,805 of unvested stock-based compensation expense to be recognized through September 2031.

The aggregate

intrinsic value on December 31, 2024 was $0 and was calculated based on the difference between the quoted share price on December 31,

2024 of $ 0.54 and the exercise price of the underlying options.

On 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

Stock option activities for the year ended December

31, 2024 and 2023 are summarized as follows:

Options Weighted

Price Weighted Average

(Years) Aggregate

Balance Outstanding December 31, 2022 2,352,500 $ 0.95 5.46 $ 1,400

Forfeited ( 90,000 ) 1.00 - -

Balance Outstanding December 31, 2023 2,262,500 0.94 5.46

Granted 105,000 0.49 9.91 -

Balance Outstanding December 31, 2024 2,367,500 $ 0.92 3.63 $ -

1 unchanged sentence

Balance non-vested on December 31, 2023 452,500 $ 0.91 7.47 $ -

Forfeited during the period

Granted 105,000 0.49 9.91 -

Vested during the period ( 241,250 ) 0.82 - -

Balance non-vested on December 31, 2024 316,250 $ 0.84 7.54 $ -

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, 2024 AND 2023

2018 Employment Agreement has a term of 10 years.

NOTE 10 – 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, 2024,

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

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

Employment and Related Golden Parachute

Bryan McLaren

On May 23, 2018, the Company and Bryan McLaren

McLaren”), the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors,

entered into an employment agreement (the “2018 Employment Agreement”).

Pursuant to 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

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:

immediately, if Mr.

McLaren dies;

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.

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’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 defined in the 2018 Employment Agreement) upon the Company’s provision of written notice

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.

McLaren of the basis for such Termination;

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;

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;

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, 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.

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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024 AND 2023

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:

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.

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 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 Mr.

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 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 Mr.

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 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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

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

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 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.

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 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.

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

McLaren for Good Reason, Mr.

McLaren will be entitled to benefits provided below:

4 unchanged sentences

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.

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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024 AND 2023

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.

McLaren under the

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

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.

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

Additionally, on August 16, 2024, the Company’s

Compensation Committee approved a Compensation Memo whereby project team members may receive up to 80 % bonus splits of project fees generated

by transactions.

Project fees may include Acquisition Fees, Management Fees, Disposition Fees, or Promote Fees.

Each transaction may vary

significantly in the types of fees generated and the amount of fees generated depending on project terms and conditions.

In connection

with such a bonus, in 2024, the Company paid Mr.

McLaren a bonus of $ 56,473 .

Berekk Blackwell

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 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).

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.

Additionally, on August 16, 2024, the Company’s

Compensation Committee approved a Compensation Memo whereby project team members may receive up to 80 % bonus splits of project fees generated

by transactions.

Project fees may include Acquisition Fees, Management Fees, Disposition Fees, or Promote Fees.

Each transaction may

vary significantly in the types of fees generated and the amount of fees generated depending on project terms and conditions.

In connection

with such a bonus, in 2024, the Company paid Mr.

Blackwell a bonus of $ 57,473 .

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, 2024 and 2023, the Company contributed $ 28,109 and $ 27,016

to the Plan, respectively.

NOTE 11 – SEGMENT REPORTING

The Company operates in two operating and 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

2 unchanged sentences

Currently, these reportable segments are being managed separately based on the fundamental differences in their operations.

The Company’s Property Investment Portfolio

segment generates revenues from its operating leases with its tenants.

Rental 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’s Real Estate Services segment

generates revenues which includes brokerage revenues consisting of real estate sales commissions and assignment fees, and revenues from

advisory services for services performed pursuant to its consulting agreements with clients.

Corporate and unallocated amounts that do not

relate to a reportable segment have been allocated to “Corporate & Unallocated.”

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2024 AND 2023

with respect to these reportable business segments for the years ended December 31, 2023 and 2022 was as follows:

For the Years Ended

The Company’s chief operating decision maker (“CODM”)

is its Chief Executive Officer.

The decisions concerning the allocation of the Company’s resources are made by the CODM with oversight

by the Board of Directors.

The CODM evaluates the performance of each segment and makes decisions concerning the allocation of resources

based upon segment operating profit (loss), generally defined as income or loss before interest expense and income taxes.

The CODM assesses

segment performance by using each segments’ operating income (loss) and considers budget-to-actual variances on a periodic basis

(at least quarterly) when making decisions about operational planning, including whether to invest resources into the segments or into

other parts of the Company.

Segment assets are reviewed by the Company’s CODM and are disclosed below.

The accounting policies of the

Property investment portfolio and Real estate services segment are the same as those described in Note 2 of the Notes to Consolidated

Financial Statements.

Information with respect to these reportable business

segments for the years ended December 31, 2024 and 2023 was as follows:

Year Ended 2024

Property Investment Portfolio

Real Estate Services

Corporate and Unallocated

Operating expenses (excluding depreciation and amortization)

Depreciation and amortization

Property investment portfolio

Real estate services

Income (loss) from operations

Interest expense

Property investment portfolio

Real estate services

Loss from unconsolidated joint ventures:

Income (loss) before provision for income taxes

( 1,034,616 )

Provision for income taxes

Net income (loss)

$ ( 1,034,616 )

Year Ended 2023

Property Investment Portfolio

Real Estate Services

Property investment portfolio (a)

Real estate services

Corporate and Unallocated

Operating expenses (excluding depreciation and amortization)

Depreciation and amortization

Income (loss) from operations

( 1,174,331 )

Interest expense

Other expenses

Loss from unconsolidated joint ventures:

Income (loss) before provision for income taxes

( 1,346,441 )

Identifiable long-lived tangible assets on December 31, 2023 and 2022 by segment:

Provision for income taxes

Net income (loss)

$ ( 471,265 )

$ ( 1,346,441 )

$ ( 540,258 )

Total assets by segment on December 31, 2024 and 2023 was as follows:

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.

Corporate and unallocated

All assets are located in the United States.

ZONED PROPERTIES, INC.

2 unchanged sentences

DECEMBER 31, 2024 AND 2023

December 31, 2023 and 2022, right-of-use asset (“ROU”) is summarized as follows:

NOTE 12 – 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 began on March 15, 2022 and expired on November 30, 2024 , provided the Company has

the option to extend the lease for an additional five years.

On June 3, 2024 the Company extended the lease for an additional 24 months

through November 30, 2026.

Effective December 1, 2024, the monthly base rent shall be $ 3,665 per month through November 30, 2025, $ 3,775

from December 1, 2025 through November 30, 2026, $ 3,887 from December 1, 2026 through November 30, 2027, and $ 4,004 from December 1, 2027

through November 30, 2028.

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 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

In connection with June 3, 2024 Lease, in December 2024, the Company increased its right of use assets and lease liabilities

by $ 81,974 and removed all remaining right of use assets and lease liabilities associated with the March 2022 lease, which amounted to

For the years ended December 31, 2024 and 2023, in connection with

its operating leases, the Company recorded rent expense of $ 37,771 and $ 37,039 , 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, 2024 and 2023, right-of-use asset

(“ROU”) is summarized as follows:

Office lease right of use asset

1 unchanged sentence

Balance of ROU assets

December 31, 2023, future minimum base lease payments due under a non-cancelable operating lease are as follows:

Year ended December 31,

On December 31, 2024, future minimum base lease

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

Year ending December 31,

Total minimum non-cancelable operating lease payments

1 unchanged sentence

Total lease liability on December 31, 2024

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.

NOTE 13 - 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, 2024 and 2023 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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024 AND 2023

The 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, 2024 and 2023

were as follows:

Income tax expense (benefit) at U.S.

statutory rate

$ ( 113,454 )

$ ( 120,615 )

Income tax benefit – state

Non-deductible expenses

Income tax expense (benefit) – state

Permanent differences

Change in valuation allowance

Total provision for income tax

Company’s approximate net deferred tax asset as of December 31, 2023 and 2022 was as follows:

The Company’s approximate net deferred tax

asset as of December 31, 2024 and 2023 was as follows:

Deferred Tax Asset:

3 unchanged sentences

Net deferred tax asset

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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

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.

The net operating loss carryforward was approximately

$ 2,033,000 on December 31, 2024.

The Company provided a valuation allowance equal to the net deferred income tax asset as of December

31, 2024 and 2023 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 $ 1,026,401 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 2024, the valuation allowance decreased by $ 126,991 .

The potential

tax benefit arising from certain loss carryforwards will expire in 2038.

The Company does not have any uncertain tax positions

or events leading to uncertainty in a tax position.

The Company’s 2024, 2023, 2022 and 2021 Corporate Income Tax Returns are subject

to Internal Revenue Service examination.

NOTE 14 – SUBSEQUENT EVENTS

On January 21, 2025, the Company granted an aggregate

of 525,000 stock options to purchase 525,000 of the Company’s common stock at an exercise price of $ 0.44 per share to certain members

of the board of directors pursuant to the 2016 Plan ( 105,000 stock options each).

The grant date of the stock options was January 21,

2025 and the options expire on January 21, 2035.

The options shall vest evenly on a quarterly basis over 36 months ( 8,750 options quarterly),

beginning immediately.

The fair value of these options grants was estimated on the date of grant using the Black-Scholes option-pricing

model with the following weighted-average assumptions:

dividend yield of 0 %;

expected volatility of 82.1 %;

risk-free interest rate of

and an estimated holding period of 6.5 years.

The Company valued these stock options at a fair value of $ 176,504 and will record

stock-based compensation expense over the vesting period.

On March 03, 2025, ZP Dysart entered into a First

Amendment with its tenant related to the Sunday Goods Lease at the Surprise Property.

The First Amendment clarifies and defines the process

by which the tenant improvement Allowance for the Tenant Work at the Surprise Property would be completed.

Subject to the terms and conditions

of the Sunday Goods Lease, and so long as there is no default ongoing beyond any notice and/or cure period, partial payments of the Allowance

(the “Allowance Payments”) provided by Landlord shall be made to Tenant as follows:

(#1) $ 300,000 to be paid upon the full

execution of the First Amendment to the Lease;

(#2) $ 150,000 to be paid on April 01, 2025 (#3) $ 150,000 to be paid on May 01, 2025, and

(#4) the remaining $ 400,000 of the Allowance shall be withheld by Landlord until completion of the Tenant’s Work on the Property;

provided however, Landlord’s obligation to disburse the final $ 400,000 (Payment #4 of the Allowance Payments) is expressly conditioned

upon Landlord’s receipt of the following “ Allowance Deliverables ”:

(i) Tenant has furnished to Landlord a copy

of a commercially reasonably detailed final cost breakdown for Tenant’s Work and Landlord has inspected the Premises to confirm that Tenant’s

Work has been completed in a good and workmanlike manner according to the Tenant’s Approved Plans;

(ii) Tenant has furnished to

Landlord commercially reasonable final affidavits and final lien releases from Tenant’s general contractor, and if any, all subcontractors

and all material suppliers for all labor and materials performed or supplied as part of Tenant’s Work (whether or not the Allowance is

applicable thereto);

and (iii) a copy of the certificate of occupancy from the governmental authority having jurisdiction has been delivered

Throughout the project, Tenant shall be required to provide Landlord with ongoing accounting reflecting a commercially reasonable

breakdown of the Tenant’s Work paid for with the Allowance Payments, and also a current Form W-9, Request for Taxpayer Identification

Number and Certification, executed by Tenant.

On March 12, 2025, ZP OH Antwerp, LLC (“ZP

Antwerp”), an affiliated entity of the Company, and Jonestown Bank & Trust Co.

(“Jonestown”) entered into a Loan

Agreement (the “Loan Agreement”) pursuant to which Jonestown agreed to lend to ZP Antwerp $ 300,000 (the “Loan”)

for purchase of commercial real estate located at 503 W.

River Street, Antwerp, OH (the “Antwerp Property”), to be evidenced

by the Mortgage Note, dated as of March 12, 2025, in the principal amount of $ 300,000 , issued by ZP Antwerp in favor of Jonestown (the

Pursuant to the terms of the Loan Agreement, ZP Antwerp agreed to pay to Jonestown a $ 7,500 loan origination fee

and a $ 1,500 loan enhancement fee.

The Antwerp Property will be used as collateral for the Loan.

The Company and ZP RE Holdings, LLC,

a wholly owned subsidiary of the Company, guaranteed the Loan Agreement pursuant to that certain Guaranty dated March 12, 2025, by ZP

RE Holdings, LLC, and that certain Guaranty dated March 12, 2025, by the Company, respectively.

The Company believes that the fair value of the guarantee is nominal since

the fair value of the property exceeds the loan amount,

On March 12, 2025, ZP Antwerp entered into an

Assignment of Rents and Leases (“Assignment”) with Jonestown.

Pursuant to the terms of the Assignment, ZP Antwerp agreed to

grant to Jonestown all of ZP Antwerp’s right, title and interest in and to all of the rents, revenues, issues, profits, proceeds,

royalties, bonuses, rights, benefits, receipts, income accounts and other receivables arising out of or from the Antwerp Property to secure

the payment by ZP Antwerp when due of indebtedness evidenced by the Note, and any and all other indebtedness and obligations that may

be due and owing to Jonestown by ZP Antwerp under or with respect to the Loan Agreement, the Guaranty and certain other transaction documents.

The Loan Agreement, Note and Assignment contain

customary representations, warranties, covenants and events of defaults for a transaction of this type.

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