What changed in this filing

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Item 1. Financial Statements

2024-08-13 compared with 2024-05-14 · 452 added, 354 removed, 1334 unchanged (38% of the section changed)

29 unchanged sentences

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

2,000,000 shares issued and outstanding on March 31, 2024 and December 31, 2023 ($ 1.00 per share liquidation preference or $ 2,000,000 )

2,000,000 shares issued and outstanding on June 30, 2024 and December 31, 2023 ($ 1.00 per share liquidation preference or $ 2,000,000 )

Common stock:

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

12,201,548 shares issued on March 31, 2024 and December 31, 2023, and 12,101,548 shares outstanding on March 31, 2024 and December 31, 2023, respectively

12,201,548 shares issued on June 30, 2024 and December 31, 2023, and 12,101,548 shares outstanding on June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

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

Treasury stock, at cost ( 100,000 shares on June 30, 2024 and December 31, 2023, respectively)

Accumulated deficit

8 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Property investment portfolio revenues

10 unchanged sentences

Total operating expenses, net

INCOME (LOSS) FROM OPERATIONS

INCOME FROM OPERATIONS

OTHER INCOME (EXPENSES):

Interest expenses

Income (loss) from derivative - interest rate swap

Total other income (expenses), net

INCOME (LOSS) BEFORE EQUITY METHOD LOSSES

Income from derivative - interest rate swap

Total other expenses, net

(LOSS) INCOME BEFORE EQUITY METHOD LOSSES

EQUITY METHOD LOSS:

3 unchanged sentences

$ ( 267,489 )

NET INCOME (LOSS) PER COMMON SHARE:

NET (LOSS) INCOME PER COMMON SHARE:

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

2 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31,

2024 AND 2023

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

Preferred Stock

6 unchanged sentences

( 16,117,007 )

Accretion of stock based compensation related to stock options issued

Balance, June 30, 2024

( 16,149,290 )

Preferred Stock

6 unchanged sentences

( 15,982,870 )

See accompanying notes to unaudited consolidated

financial statements.

Accretion of stock based compensation related to stock options issued

Balance, June 30, 2023

$ ( 15,940,711 )

See accompanying notes to unaudited consolidated financial statements.

ZONED PROPERTIES, INC.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

For the Six Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

7 unchanged sentences

Loss from unconsolidated joint ventures

(Income) loss from interest rate swap

Income from interest rate swap

Change in operating assets and liabilities:

3 unchanged sentences

Prepaid expenses and other assets

Security deposit

Accounts payable

4 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES:

Lease incentive provided to tenant

Purchases of rental properties and improvements

1 unchanged sentence

Purchases of property and equipment

Proceeds from sale of property and equipment

Increase in capitalized permit costs

16 unchanged sentences

Reclassification of escrow deposits for acquisition of rental properties

See accompanying notes to unaudited consolidated

financial statements.

See accompanying notes to unaudited consolidated financial statements.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

JUNE 30, 2024

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

40 unchanged sentences

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).

During 2023, the Company dissolved the following

wholly owned subsidiary:

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

This subsidiary was dissolved on March 28, 2023.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING

6 unchanged sentences

The unaudited consolidated financial statements

for the three months ended March 31, 2024 and 2023 have been prepared by the Company without audit, pursuant to the rules and regulations

for the three and six months ended June 30, 2024 and 2023 have been prepared by the Company without audit, pursuant to the rules and regulations

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

In the opinion of management, all adjustments necessary to present

fairly our consolidated financial position, results of operations, and cash flows as of March 31, 2024 and 2023, and for the periods then

fairly our consolidated financial position, results of operations, and cash flows as of June 30, 2024 and 2023, and for the periods then

ended, have been made.

6 unchanged sentences

our Annual Report on Form 10-K filed with the SEC on March 26, 2024.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

As reflected in the accompanying unaudited consolidated

financial statements, the Company generated net income of $ 96,473 and cash provided by operations of $ 207,218 during the three months

ended March 31, 2024.

Additionally, as of March 31, 2024, the Company had cash of $ 1,519,903 and stockholders’ equity of $ 5,352,650 .

financial statements, the Company generated net income of $ 64,190 and cash provided by operations of $ 246,788 during the six months ended

June 30, 2024.

Additionally, as of June 30, 2024, the Company had cash of $ 1,528,553 and stockholders’ equity of $ 5,333,384 .

The cash balance and positive net cash provided

10 unchanged sentences

Significant estimates

for the three months ended March 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.

for the six months ended June 30, 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

7 unchanged sentences

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 three months ended March 31, 2024 and 2023, revenues associated

with Significant Tenants amounted to $ 596,707 and $ 592,848 , respectively, which represents 71.3 % and 86.1 % of the Company’s total

revenues, respectively (see Note 3).

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 six months ended June 30,

2024 and 2023, revenues associated with Significant Tenants amounted to $ 1,181,412 and $ 1,210,235 , respectively, which represents 77.2 %

and 82.9 % of the Company’s total revenues, respectively (see Note 3).

Fair value of financial instruments

6 unchanged sentences

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

The guidance requires that assets and liabilities

7 unchanged sentences

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 March 31, 2024 and December

March 31, 2024

fair value hierarchy of its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2024 and December

June 30, 2024

December 31, 2023

1 unchanged sentence

$ ( 122,879 )

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

Interest rate swap

24 unchanged sentences

Information regarding the interest rate swap is

Amount on March 31, 2024

Fair Value of

Description Notional

Amount on June 30,

2024 Interest

Rate Maturity Fair Value of

2024 Fair Value of

December 7, 2022 interest rate swap

December 10, 2032

December 7, 2022 interest rate swap $ 4,439,798 7.65 % December 10, 2032 $ 23,767 $ 122,879

Cash is carried at cost and represents cash on

1 unchanged sentence

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

The Company had no cash equivalents on March 31, 2024 and December 31,

The Company had no cash equivalents on June 30, 2024 and December 31,

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

1 unchanged sentence

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

On March 31, 2024 and December 31,

On June 30, 2024 and December 31,

2023, the Company had approximately $ 1,009,000 and $ 2,555,000 , respectively, of cash in excess of FDIC limits of $ 250,000 .

2 unchanged sentences

results of operations and cash flows.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

Accounts receivable

34 unchanged sentences

in unconsolidated affiliated entities.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

Long-term investments

8 unchanged sentences

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

On March 31, 2024

On June 30, 2024

and December 31, 2023, long-term investments consisted of an investment in convertible preferred stock that does not have a readily determinable

18 unchanged sentences

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

The Company’s rental properties are individually

11 unchanged sentences

from actual results.

For the three months ended March 31, 2024 and 2023, the Company did not record any impairment losses.

For the six months ended June 30, 2024 and 2023, the Company did not record any impairment losses.

The Company has land which is not subject to depreciation.

11 unchanged sentences

those deposits are non-refundable.

During the three months ended March 31, 2024 and 2023, the Company forfeited escrow deposits of $ 21,600

During the six months ended June 30, 2024 and 2023, the Company forfeited escrow deposits of $ 22,875

and $ 15,000 , respectively, which is reflected in operating expenses as part of property portfolio business development costs on the accompanying

unaudited consolidated statements of operations.

On March 31, 2024 and December 31, 2023, escrow deposits amounted to $ 278,716 and $ 177,048 ,

On June 30, 2024 and December 31, 2023, escrow deposits amounted to $ 275,116 and $ 177,048 ,

respectively.

9 unchanged sentences

in the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

Revenue recognition

18 unchanged sentences

consolidated statements of operations.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

Real Estate Services Revenues

25 unchanged sentences

have been met for revenue to be recognized in conformity with GAAP.

During the three months ended March 31, 2024 and 2023, contract liabilities

During the six months ended June 30, 2024 and 2023, contract liabilities

activities were as follows:

17 unchanged sentences

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

For leases entered into on or after the effective

18 unchanged sentences

straight-lines basis over the lease term.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

The Company records revenues from rental properties

11 unchanged sentences

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

as of March 31, 2024 and December 31, 2023 of $ 459,520 and $ 371,472 , respectively (see Note 3).

as of June 30, 2024 and December 31, 2023 of $ 516,990 and $ 371,472 , respectively (see Note 3).

Additionally, if the lease provides for

37 unchanged sentences

paid or unpaid) and participation rights in undistributed earnings.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

The following table presents a reconciliation

1 unchanged sentence

Three Months Ended

Six Months Ended

Net income (loss) per common share - basic:

Net income (loss)

$ ( 267,489 )

undistributed (earnings) loss allocated to participating securities

Net income (loss) allocated to common stockholders

8 unchanged sentences

$ ( 267,489 )

Weighted average common shares outstanding – diluted

Weighted average common shares outstanding – basic

dilutive shares related to:

3 unchanged sentences

Net income (loss) per common share – diluted

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

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 three months ended March

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

30, 2024 and 2023.

21 unchanged sentences

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

The Company does not believe it has any uncertain tax positions as of March 31, 2024 and December 31, 2023 that would require

The Company does not believe it has any uncertain tax positions as of June 30, 2024 and December 31, 2023 that would require

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

Stock-based compensation

19 unchanged sentences

by Broken Arrow, doing business as Hana Dispensaries.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

Our property located in Kingman is leased by CJK,

38 unchanged sentences

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.

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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

On August 23, 2021, Chino Valley and Broken Arrow

10 unchanged sentences

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

On January 24, 2022 and effective on March 1,

56 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

JUNE 30, 2024

In addition, under the Tempe Amendment the parties

42 unchanged sentences

remaining term of the lease through April 2040.

On March 31, 2024 and December 31, 2023, contract liability related to this lease modification

On June 30, 2024 and December 31, 2023, contract liability related to this lease modification

amounted to $ 272,727 and $ 281,340 , respectively, which has been included in contract liabilities on the accompanying unaudited consolidated

11 unchanged sentences

during the term of the Kingman Lease and any other period of occupancy of the premises by CJK.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

On May 29, 2020, Kingman and CJK entered into

17 unchanged sentences

which is the subject of the Kingman Lease.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

On August 2, 2023, the Company entered into a

22 unchanged sentences

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

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

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 pursuant to the terms and conditions of the Woodward Lease.

8 unchanged sentences

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

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

6 unchanged sentences

in this Lease.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

On May 14, 2023, ZP Woodward entered into an Assignment

7 unchanged sentences

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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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.

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, attached to the First Amendment as Addendum B (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 agrees,

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 agrees 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 January 18, 2024, ZPRE Holdings entered into

6 unchanged sentences

with four five-year renewal terms.

As of March 31, 2024 and December 31, 2023, security

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

As of June 30, 2024 and December 31, 2023, security

deposits payable to the collective Significant Tenants amounted to $ 308,190 and $ 290,460 , respectively.

2 unchanged sentences

Future minimum lease payments to be received,

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

on all leased properties, for each of the five succeeding calendar years and thereafter as of June 30, 2024, consists of the following:

Future annual base rent:

1 unchanged sentence

Revenues – Significant Tenants

For the three months ended March 31, 2024 and

For the six months ended June 30, 2024 and 2023,

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

For the Three

Further, as of March 31, 2024 and December 31,

Further, as of June 30, 2024 and December 31,

2023, deferred rent of $ 516,990 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 March 31, 2024 and December 31, 2023, a lease incentive receivable of $ 442,661 and $ 449,541 is

discussed above, respectively, and as of June 30, 2024 and December 31, 2023, a lease incentive receivable of $ 435,780 and $ 449,541 is

due from one of the Significant Tenants, respectively, in connection with the $ 500,000 tenant improvement allowance provided to tenant

5 unchanged sentences

of the modified lease through April 2040.

On March 31, 2024 and December 31, 2023, deferred revenue related to this lease modification

On June 30, 2024 and December 31, 2023, deferred revenue related to this lease modification

amounted to $ 272,727 and $ 281,340 , respectively, and is included in contract liabilities on the accompanying unaudited consolidated balance

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

Asset concentration

5 unchanged sentences

upon request, and (2) monitoring the timeliness of rent collections.

As of March 31, 2024 and December 31, 2023, the

As of June 30, 2024 and December 31, 2023, the

Company had an asset concentration related to the Significant Tenants.

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

As of June 30, 2024 and December 31, 2023, the Significant Tenants

collectively leased approximately 73.7 % and 69.4 % of the Company’s total assets, respectively.

Through March 31, 2024, all rental

Through June 30, 2024, all rental

payments have been made on a timely basis.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

Industry risk

12 unchanged sentences

NOTE 4 – RENTAL PROPERTIES

On March 31, 2024 and December 31, 2023, rental

On June 30, 2024 and December 31, 2023, rental

properties, net consisted of the following:

6 unchanged sentences

Rental properties, net

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

Agreement Regarding Purchase and Sale Contract

– Ashland Property

Property Acquisition

Pursuant to the terms of the Agreement Regarding

Purchase and Sale Contract (See Note 11), 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) an 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 for $ 185,000 , as discussed above.

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

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 .

For the three months ended March 31, 2024 and

For the three months ended June 30, 2024 and 2023,

depreciation of rental properties amounted to $ 88,202 and $ 100,757 , respectively.

For the six months ended June 30, 2024 and 2023,

depreciation of rental properties amounted to $ 176,288 and $ 197,048 , respectively.

NOTE 5 – INVESTMENT IN UNCONSOLIDATED

1 unchanged sentence

Investment in unconsolidated joint ventures

On March 31, 2024 and December 31, 2023, the Company

On June 30, 2024 and December 31, 2023, the Company

held investments with aggregate carrying values of $ 4,923 and $ 4,923 , respectively.

5 unchanged sentences

of the Company’s original investments in the unconsolidated affiliated entities and net carrying value amount is as follows:

Net Carrying Value

Date Acquired

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

Original Net Carrying Value

Entity Date Acquired Ownership

Amount June 30,

2024 December 31,

Zoneomics Green, LLC (the “Zoneomics Green Joint Venture”) May 1, 2021 50.0 % 90,000 4,923 4,923

Total investments in unconsolidated joint venture entities $ 90,000 $ 4,923 $ 4,923

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

40 unchanged sentences

investment in Zoneomics was impaired.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

The following represents summarized financial

information derived from the financial statements of the Zoneomics Green Joint Venture, as of March 31, 2024 and for the three months

ended March 31, 2024.

information derived from the financial statements of the Zoneomics Green Joint Venture, as of June 30, 2024 and for the six months ended

June 30, 2024.

Balance sheets (Unaudited):

5 unchanged sentences

Company’s share of income (loss) from unconsolidated joint ventures

During the three months ended March 31, 2024 and

During the six months ended June 30, 2024 and

2023, the Company recorded a loss from unconsolidated joint ventures of $0 and $ 7,110 , respectively, which represents the Company’s

18 unchanged sentences

of the election.

On March 31, 2024 and December 31, 2023, investment in equity securities amounted to $ 50,000 .

On June 30, 2024 and December 31, 2023, investment in equity securities amounted to $ 50,000 .

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

NOTE 6 – NOTES PAYABLE

On March 31, 2024 and December 31, 2023, notes

On June 30, 2024 and December 31, 2023, notes

payable consisted of the following:

4 unchanged sentences

Notes payable, net

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

East West Bank Swap note

39 unchanged sentences

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 March 31, 2024 and December 31, 2023).

an interest rate equal to the prime rate plus 0.75 % ( 9.25 % as of June 30, 2024 and December 31, 2023).

The Amended Note matures 10 years

24 unchanged sentences

mitigate variability in interest payments on its variable-rate debt.

During the three months ended March 31, 2024 and

During the six months ended June 30, 2024 and

2023, amortization of debt discount amounted to $ 9,230 and $ 9,229 , respectively, which is included in interest expense on the accompanying

3 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

On March 31, 2024, principal and interest due

on the East West Bank Swap Note amounted to $ 4,436,449 and $ 7,520 , respectively.

JUNE 30, 2024

On June 30, 2024, principal and interest due on

the East West Bank Swap Note amounted to $ 4,425,606 and $ 5,482 , respectively.

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

7 unchanged sentences

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

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

On March 31, 2024, principal and interest due

on the 23616 Land Contract Note Payable amounted to $ 1,402,071 and $ 0 , On December 31, 2023, principal and interest due on the 23616 Land

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

On June 30, 2024, principal and interest due on

the 23616 Land Contract Note Payable amounted to $ 1,394,682 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.

6 unchanged sentences

and all interest will be fully paid on or before March 31, 2027.

On March 31, 2024, principal and interest due on the 23634 Land Contract

On June 30, 2024, principal and interest due on the 23634 Land Contract

Note Payable amounted to $ 411,602 and $ 0 , respectively.

1 unchanged sentence

Payable amounted to $ 420,270 and $ 0 , respectively.

On March 31, 2024, future principal payments under

the above notes payable are as follows:

Years ending March 31,

Total principal payments due on March 31, 2024

On June 30, 2024, future annual principal payments

under the above notes payable are as follows:

Years ending June 30,

Total principal payments due on June 30, 2024

NOTE 7 – CONVERTIBLE NOTE PAYABLE

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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.

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.

4 unchanged sentences

of any covenant or agreement contained in the Abrams Debenture and proceed to enforce the payment thereof or any other legal or equitable

As of June 30, 2024 and December 31, 2023, the

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

As of June 30, 2024 and December 31, 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 unaudited

consolidated balance sheets.

For the three months ended June 30, 2024 and 2023, interest expense related to the Abrams Debenture amounted

to $ 30,000 .

For the six months ended June 30, 2024 and 2023, interest expense related to the Abrams Debenture amounted to $ 60,000 .

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

As of March 31, 2024 and December 31, 2023, the

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

As of March 31, 2024 and December 31, 2023, accrued interest payable due

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

For the three months ended March 31, 2024 and 2023, interest expense related to the Abrams Debenture amounted to $ 30,000 and $ 30,000 ,

respectively.

JUNE 30, 2024

NOTE 8 – RELATED PARTY TRANSACTION

31 unchanged sentences

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 March 31, 2024 and December 31, 2023, is reflected as treasury stock on the unaudited consolidated balance sheet

per share, which as of June 30, 2024 and December 31, 2023, is reflected as treasury stock on the unaudited consolidated balance sheet

until such time as the shares are cancelled.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

13 unchanged sentences

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

As of March 31,

As of June 30,

2024, 1,012,500 stock option awards are outstanding and 690,000 options are exercisable under the 2016 Plan.

1 unchanged sentence

1,012,500 stock option awards are outstanding and 585,000 options are exercisable under the 2016 Plan.

As of March 31, 2024 and December

As of June 30, 2024 and December

31, 2023, 8,987,500 and 8,987,500 shares, respectively, were available for future issuance.

4 unchanged sentences

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

As of March 31,

As of June 30,

2024, options to purchase 1,250,000 shares of common stock are outstanding and 1,225,000 options are exercisable pursuant to the 2014

1 unchanged sentence

pursuant to the 2014 Plan.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(D) Stock options

For the year ended December 31, 2023 and 2022,

For the six months ended June 30, 2024 and 2023,

in connection with the accretion of stock-based option expense, the Company recorded stock option expense over the vesting period of $ 29,511

and $ 80,447 , 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.

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.

As of June 30, 2024, there were 2,262,500 options outstanding and 1,915,000 options vested and exercisable.

As of June 30, 2024, there was $ 70,670 of unvested stock-based compensation expense to be recognized through September 2031.

The aggregate

intrinsic value on June 30, 2024 was $ 0 and was calculated based on the difference between the quoted share price on June 30, 2024 of

$ 0.62 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 three months ended

March 31, 2024 are summarized as follows:

Weighted Average

Stock option activities for the six months ended

June 30, 2024 are summarized as follows:

Options Weighted

Price Weighted

(Years) Aggregate

Balance Outstanding December 31, 2023 2,262,500 $ 0.94 4.34 $ -

Balance Outstanding March 31, 2024

Exercisable, March 31, 2024

Balance Outstanding June 30, 2024 2,262,500 $ 0.94 3.84 $ -

Exercisable, June 30, 2024 1,915,000 $ 0.94 3.30 $ -

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

1 unchanged sentence

Vested during the period ( 105,000 ) 0.82 - -

Balance non-vested on March 31, 2024

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

Balance non-vested on June 30, 2024 347,500 $ 0.94 6.82 $ -

NOTE 10 – COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

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

As of March 31, 2024, the Company is not

As of June 30, 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

21 unchanged sentences

at the option of the Company, without Cause;

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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;

20 unchanged sentences

injurious to the Company, monetarily or otherwise.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

For purposes of the Golden Parachute Agreement,

24 unchanged sentences

McLaren 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 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.

Good Reason, Mr.

McLaren will be entitled to benefits provided below:

Company will pay Mr.

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

is given, plus all other amounts and benefits to which he is entitled under any compensation plan of the Company.

lieu of any further salary payments to Mr.

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

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

the sum of his annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the notice of Termination

given in respect of them.

Company will pay to Mr.

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

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.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

JUNE 30, 2024

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.

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:

The Company will pay Mr.

In lieu of any further salary payments to Mr.

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

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

The Company will pay to Mr.

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

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

25 unchanged sentences

4 % of the employee’s plan compensation.

For the three months ended March 31, 2024 and 2023, the Company contributed $ 5,697 and $ 7,885

For the six months ended June 30, 2024 and 2023, the Company contributed $ 12,178 and $ 14,725

to the Plan, respectively.

20 unchanged sentences

The obligation to complete the Reimbursements is conditioned upon the closing of the sale of the Surprise Property to ZPRE Holdings.

to the terms of the Agreement, as of March 31, 2024 and December 31, 2023, 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”).

to the terms of the Agreement, as of June 30, 2024, 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”).

as of December 31, 2023, 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.

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

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 transactions contemplated by the Agreement

closed on July 8, 2024 (see Note 13).

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

NOTE 11 – SEGMENT REPORTING

The Company operates in two reportable segments

which consists of (1) the operations, leasing and management of its leased commercial properties, herein known as the “Property

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

Estate Services” segment.

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 offer different

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

Information with respect to these reportable business

segments for the three months ended March 31, 2024 and 2023 was as follows:

segments for the three and six months ended June 30, 2024 and 2023 was as follows:

For the Three Months Ended

For the Six Months Ended

Property investment portfolio

9 unchanged sentences

Real estate services

Net income (loss):

Property investment portfolio (a)

Net (loss) income:

Property investment portfolio

Real estate services

$ ( 267,489 )

Identifiable long-lived tangible assets on March 31, 2024 and December 31, 2023 by segment:

Identifiable long-lived tangible assets on June 30, 2024 and December 31, 2023 by segment:

Property investment portfolio

Real estate services

(a) Operating expenses and other expenses of the Company’s holding company that were not allocated to the real estate services segment are included in the property investment portfolio segment.

(a) Operating

expenses and other expenses of the Company’s holding company that were not allocated to the real estate services segment are included

in the property investment portfolio segment.

NOTE 12 – OPERATING LEASE RIGHT-OF-USE

3 unchanged sentences

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 lease term began on March 15, 2022 and expires 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,

13 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

For the three months ended March 31, 2024 and

2023, in connection with its operating leases, the Company recorded rent expense of $ 9,264 and $ 9,259 , respectively, which is included

in operating expenses on the accompanying unaudited consolidated statements of operations.

JUNE 30, 2024

For the six months ended June 30, 2024 and 2023,

in connection with its operating leases, the Company recorded rent expense of $ 18,529 and $ 18,519 , respectively, which is included in

operating expenses on the accompanying unaudited 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 March 31, 2024 and December 31, 2023, right-of-use

On June 30, 2024 and December 31, 2023, right-of-use

asset (“ROU”) is summarized as follows:

2 unchanged sentences

Balance of ROU assets

On March 31, 2024, future minimum base lease payments

On June 30, 2024, future minimum base lease payments

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

Year ended March 31,

Year ending June 30,

Total minimum non-cancelable operating lease payments

discount to fair value

Total lease liability on March 31, 2024

Total lease liability on June 30, 2024

NOTE 13 – SUBSEQUENT EVENTS

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 (See Note 3).

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.

On July 8, 2024 (the “Closing”), ZP

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

As previously disclosed, on February 23, 2024,

the Company, through ZPRE Holdings provided an approval notice to NWC 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.

Also as previously disclosed, on January 23, 2023,

ZPRE Holdings entered into a Purchase and Sale Agreement and Joint Escrow Instructions, by and between NWC, as the seller, and ZPRE Holdings,

as the buyer.

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, NWC 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, NWC also agreed

to complete a number of on-site and off-site improvements to the Surprise Property (the “NWC’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 was conditioned upon the closing of the sale of the Surprise

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 was to be applied

as a credit upon closing.

Subsequent to entry into the Agreement and as

approved by NWC under the terms of the Agreement, ZPRE Holdings designated ZP Dysart as the named buyer for the Closing.

PMF 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.”

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

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.