What changed in this filing

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Item 1. Financial Statements

2024-11-14 compared with 2024-08-13 · 552 added, 577 removed, 1209 unchanged (48% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

Accounts receivable

Deferred rent

Lease incentive receivable

Rental properties, net

Prepaid expenses and other assets

Escrow deposits

Capitalized permit costs

Property and equipment, net

Operating lease right of use asset, net

Investment in unconsolidated joint ventures

Investment in equity securities

Interest rate swap asset

Security deposits

LIABILITIES AND STOCKHOLDERS’ EQUITY

Convertible note payable

Notes payable, net

Accounts payable

Accrued expenses

Lease liability

Contract liabilities

Derivative liability - interest rate swap, at fair value

Security deposits payable

Total Liabilities

Commitments and Contingencies (Note 11)

September 30,

incentive receivable

properties, net

expenses and other assets

and equipment, net

lease right of use asset, net

in unconsolidated joint ventures

in equity securities

LIABILITIES AND STOCKHOLDERS’

liability - interest rate swap, at fair value

deposits payable

Commitments and Contingencies

STOCKHOLDERS’ EQUITY:

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

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 )

2,000,000 shares issued and outstanding on September 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 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 June 30, 2024 and December 31, 2023, respectively)

Accumulated deficit

12,201,516 shares issued on September 30, 2024 and December 31, 2023, and 12,098,420 and 12,101,548 shares outstanding on September 30, 2024 and December 31, 2023, respectively

paid-in capital

Treasury stock, at cost ( 103,096 and 100,000 shares on September 30, 2024 and December 31, 2023, respectively)

( 16,090,418 )

( 16,213,480 )

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

See accompanying notes to unaudited consolidated financial statements.

Stockholders’ Equity

Liabilities and Stockholders’ Equity

See accompanying notes to unaudited consolidated

financial statements.

ZONED PROPERTIES, INC.

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For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Property investment portfolio revenues

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Interest expenses

Income from derivative - interest rate swap

Total other expenses, net

(LOSS) INCOME BEFORE EQUITY METHOD LOSSES

Income (loss) from derivative - interest rate swap

Total other income (expenses), net

INCOME (LOSS) BEFORE EQUITY METHOD LOSSES

EQUITY METHOD LOSS:

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$ ( 152,966 )

NET (LOSS) INCOME PER COMMON SHARE:

NET INCOME (LOSS) PER COMMON SHARE:

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

See accompanying notes to unaudited consolidated financial statements.

See accompanying notes to unaudited consolidated

financial statements.

ZONED PROPERTIES, INC.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

Preferred Stock

Treasury Stock

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

Stockholders’

1 unchanged sentence

$ ( 16,213,480 )

Accretion of stock based compensation related to stock options issued

Accretion of stock based

compensation related to stock options issued

Balance, March 31, 2024

( 16,117,007 )

Accretion of stock based compensation related to stock options issued

Accretion of stock based

compensation related to stock options issued

Balance, June 30, 2024

( 16,149,290 )

Preferred Stock

Treasury Stock

Purchase of treasury stock

Accretion of stock based

compensation related to stock options issued

Balance, September 30,

( 16,090,418 )

Stockholders’

1 unchanged sentence

$ ( 15,673,222 )

Accretion of stock based compensation related to stock options issued

Accretion of stock based

compensation related to stock options issued

Balance, March 31, 2023

( 15,982,870 )

Accretion of stock based compensation related to stock options issued

Accretion of stock based

compensation related to stock options issued

Balance, June 30, 2023

( 15,940,711 )

Accretion of stock based

compensation related to stock options issued

September 30, 2023

$ ( 15,826,188 )

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Ended

For the Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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

Depreciation expense

Depreciation and amortization expense

Amortization of debt discount

1 unchanged sentence

Loss on forfeited escrow deposit

Bad debt expense

Loss from unconsolidated joint ventures

Income from interest rate swap

Loss (income) from interest rate swap

Change in operating assets and liabilities:

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( 3,290,956 )

( 1,011,340 )

Purchases of property and equipment

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CASH FLOWS FROM FINANCING ACTIVITIES:

Purchase of treasury stock

Net proceeds from note payable

Repayment of notes payable

NET CASH USED IN FINANCING ACTIVITIES

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

NET DECREASE IN CASH

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

SEPTEMBER 30, 2024

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

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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.

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

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

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upon consolidation.

The unaudited consolidated financial statements

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 June 30, 2024 and 2023, and for the periods then

ended, have been made.

Those adjustments consist of normal and recurring adjustments.

Operating results for interim periods are not necessarily

indicative of results that may be expected for the fiscal year as a whole.

Accordingly, the unaudited consolidated financial statements

do not include all the information and notes necessary for a comprehensive presentation of our financial position and results of operations

and should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2023 included in

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

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

SEPTEMBER 30, 2024

The unaudited consolidated financial statements

for the three and nine months ended September 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 September 30, 2024 and 2023, and for

the periods then ended, have been made.

Those adjustments consist of normal and recurring adjustments.

Operating results for interim periods

are not necessarily indicative of results that may be expected for the fiscal year as a whole.

Accordingly, the unaudited consolidated

financial statements do not include all the information and notes necessary for a comprehensive presentation of our financial position

and results of operations and should be read in conjunction with the audited financial statements of the Company for the year ended December

31, 2023 included in our Annual Report on Form 10-K filed with the SEC on March 26, 2024.

As reflected in the accompanying unaudited consolidated

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 .

financial statements, the Company generated net income of $ 123,062 and cash provided by operations of $ 455,363 during the nine months

ended September 30, 2024.

Additionally, as of September 30, 2024, the Company had cash of $ 1,152,090 and stockholders’ equity of

$ 5,399,893 .

The cash balance and positive net cash provided

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Significant estimates

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.

for the nine months ended September 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

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

For the six months ended June 30,

For the nine months ended September

30, 2024 and 2023, revenues associated with Significant Tenants amounted to $ 1,779,227 and $ 1,842,381 , respectively, which represents

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Unobservable inputs that are not corroborated by market data.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

Other than the interest rate swap, the Company

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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 June 30, 2024 and December

June 30, 2024

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

December 31, 2023.

Interest rate swap asset (liability)

$ ( 122,879 )

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

September 30, 2024

December 31, 2023

Interest rate swap liability

Interest rate swap

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Description Notional

Amount on June 30,

Amount on September 30,

2024 Interest

Rate Maturity Fair Value of

September 30,

2024 Fair Value of

3 unchanged sentences

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

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

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

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

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

On June 30, 2024 and December 31,

On September 30, 2024 and December

31, 2023, the Company had approximately $ 631,000 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 flows.

incurred or a lack of access to such funds above the FDIC limit could have a significant adverse impact on the Company’s financial

condition, results of operations and cash flows.

Accounts receivable

9 unchanged sentences

The expense associated with the allowance for doubtful accounts on accounts receivable is recognized in general and administrative expenses.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

Investment in unconsolidated joint ventures

23 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 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

fair value (see Note 5).

On September 30,

2024 and December 31, 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

6 unchanged sentences

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.

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

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from actual results.

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

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

The Company has land which is not subject to depreciation.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

Escrow deposits

10 unchanged sentences

those deposits are non-refundable.

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

respectively.

During the nine months ended September 30, 2024 and 2023, the Company forfeited escrow deposits of

$ 39,875 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 September 30, 2024 and December 31, 2023, escrow deposits amounted

to $ 157,169 and $ 177,048 , respectively.

Property and equipment

8 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

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upon payment of rent or other events beyond the Company’s control are recognized upon the occurrence of such events.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

Contract liabilities

3 unchanged sentences

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

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

activities were as follows:

During the nine months ended September 30, 2024 and 2023, contract

liabilities activities were as follows:

September 30,

Balance at beginning of period

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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

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

In 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, and in connection with an operating lease

on the Company’s Chicago property acquired in January 2024, the Company abated certain lease payments for the period from January

2024 to August 2024.

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

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

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 September 30, 2024 and December 31, 2023 of $ 624,356 and $ 371,472 , respectively (see Note 3).

Additionally, if the lease provides for

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

For contracts entered into on or after the effective

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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

September 30,

Nine Months Ended

September 30,

Net income (loss) per common share - basic:

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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 six months ended June

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

30, 2024 and 2023.

September 30,

Convertible debt

Stock options

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

Segment reporting

18 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 June 30, 2024 and December 31, 2023 that would require

The Company does not believe it has any uncertain tax positions as of September 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

9 unchanged sentences

Recently issued accounting pronouncements

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

Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosure, or ASC 280, which is intended to improve reportable segment

disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly

provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss.

The update also

requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for

entities with a single reportable segment to provide all the disclosures required by ASC 280, including the significant segment expense

This update requires public companies to adopt the new disclosures for fiscal years starting after December 15, 2023, with

quarterly interim disclosures required in fiscal years starting after December 15, 2024, with early adoption permitted.

The Company does

not expect this standard to have a material impact on its results of operations, financial position or cash flows.

Management does not believe that any other recently

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Lease Agreements with Significant Tenants

Our property located in Chino Valley is leased

by Broken Arrow Herbal Center, Inc.

Our properties located in Chino Valley and Green

Valley are leased by Broken Arrow Herbal Center, Inc.

(“Broken Arrow”), doing business as Hana Dispensaries.

Our property located in Green Valley is leased

by Broken Arrow, doing business as Hana Dispensaries.

Our property located in Kingman is leased by CJK,

6 unchanged sentences

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

3 unchanged sentences

and the tenants are referred to as the Significant Tenants.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

Chino Valley, AZ

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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

18 unchanged sentences

premises, which was capitalized as a lease incentive receivable and is recognized on a straight-line basis over the remaining lease term

as a reduction to the lease income.

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

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

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

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

20 unchanged sentences

and interest, plus (ii) 5 % of the base rent which would have been earned after termination for the balance of the term.

On May 1, 2018, Zoned Arizona and CJK 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.

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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

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

10 unchanged sentences

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

In addition, under the Tempe Amendment the parties

1 unchanged sentence

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.

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

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Pursuant 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

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.

2 unchanged sentences

remaining term of the lease through April 2040.

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

balance sheets.

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

modification amounted to $ 268,421 and $ 281,340 , respectively, which has been included in contract liabilities on the accompanying unaudited

consolidated balance sheets.

Additionally, on the Tempe property, the Company

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

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 , 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 by CJK.

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.

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.

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

5 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

4 unchanged sentences

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.

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

14 unchanged sentences

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.

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.

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.

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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

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

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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

13 unchanged sentences

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

Renovation Completion Commitment

Renovation Completion

The First Amendment provides for the inclusion

38 unchanged sentences

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

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.

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 January 18, 2024, ZPRE Holdings entered into

6 unchanged sentences

with four five-year renewal terms.

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.

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 September 30, 2024 and December 31, 2023,

security deposits payable to the Company’s tenants amounted to $ 353,105 and $ 290,460 , respectively.

Future minimum lease payments

primarily consist of minimum base rent payments from the collective Significant Tenants.

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 June 30, 2024, consists of the following:

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

Future annual base rent:

2024 (remainder of year)

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

Revenues – Significant Tenants

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

For the nine months ended September 30, 2024 and

2023, revenues associated with Significant Tenant leases described above are summarized as follows:

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

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Further, as of September 30, 2024 and December

31, 2023, deferred rent of $ 624,356 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 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

discussed above, respectively, and as of September 30, 2024 and December 31, 2023, a lease incentive receivable of $ 428,899 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).

4 unchanged sentences

of the modified lease through April 2040.

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

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

amounted to $ 268,421 and $ 281,340 , respectively, and is included in contract liabilities on the accompanying unaudited consolidated balance

1 unchanged sentence

The 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.

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.

2 unchanged sentences

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

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

Company had an asset concentration related to 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 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

As of September 30, 2024 and December 31, 2023,

the Company had an asset concentration related to its Significant Tenants.

As of September 30, 2024 and December 31, 2023, the Significant

Tenants collectively leased approximately 57.6 % and 69.4 % of the Company’s total assets, respectively.

Through September 30, 2024,

all rental payments have been made on a timely basis.

Industry risk

12 unchanged sentences

NOTE 4 – RENTAL PROPERTIES

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

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

properties, net consisted of the following:

September 30,

Building and building improvements

5 unchanged sentences

Rental properties, net

Property Acquisition

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

Property Acquisitions

Pursuant to the terms of the Agreement Regarding

3 unchanged sentences

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 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,

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) reimburse 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 .

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 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 Property.

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.

For the three months ended September 30, 2024

and 2023, depreciation of rental properties amounted to $ 88,032 and $ 89,934 , respectively.

For the nine months ended September 30, 2024 and

2023, depreciation of rental properties amounted to $ 264,320 and $ 286,982 , respectively.

NOTE 5 – INVESTMENT IN UNCONSOLIDATED

JOINT VENTURES AND EQUITY SECURITIES

Investment in unconsolidated joint ventures

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

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

The entities listed below are partially owned by the

The Company accounts for these investments under the equity method of accounting as the Company exercises significant influence

but does not exercise financial and operating control over these entities.

Investments are reviewed for changes in circumstance or the

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

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

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

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.

June 2021, the Company contributed $ 90,000 to Zoneomics Green.

JOINT VENTURE AND EQUITY SECURITIES

Investment in unconsolidated joint venture

On September 30, 2024 and December 31, 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

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

19 unchanged sentences

The following represents summarized financial

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.

information derived from the financial statements of the Zoneomics Green Joint Venture, as of September 30, 2024 and for the nine months

ended September 30, 2024.

Balance sheets (Unaudited):

1 unchanged sentence

Total liabilities and equity

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

Statement of operations (Unaudited)

2 unchanged sentences

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

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

proportionate share of losses from its joint ventures, respectively.

During the nine months ended September 30, 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

16 unchanged sentences

of the election.

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

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

NOTE 6 – NOTES PAYABLE

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

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

payable consisted of the following:

September 30,

Note payable - East West Bank

Notes payable - Woodward Properties

Note payable - Surprise, AZ property

Total principal due on notes payable

9 unchanged sentences

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.

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

may elect to commence paying principal together with interest on the MAL (the “Early Amortization Election”) in accordance

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”).

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

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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

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.

the occurrence of an event of default, the outstanding principal balance of the MAL will not at any time exceed 65 % of the Property’s

most recent appraised value;

(b) upon the occurrence of an event of default, Zoned Arizona will maintain a minimum Non-Cannabis Debt

Service Coverage Ratio (as hereinafter defined) of 1.40 to 1.00 ;

coverage ratio of 1.50 to 1.0 ;

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

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

On December 7, 2022, Zoned Arizona and the Bank

10 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 June 30, 2024 and 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 .

an interest rate equal to the prime rate plus 0.75 % ( 8.75 % as of September 30, 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 Arizona may prepay the outstanding principal

20 unchanged sentences

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

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

unaudited consolidated statements of operations.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

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

On September 30, 2024, principal and interest

due on the East West Bank Swap Note amounted to $ 4,415,512 and $ 2,908 , 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

6 unchanged sentences

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.

On September 30, 2024, principal and interest

due on the 23616 Land Contract Note Payable amounted to $ 1,387,464 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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

Land Contract Note Payable

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

Note Payable amounted to $ 411,602 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.

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

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 September 30, 2024, principal and interest due on the 23634 Land Contract Note Payable

amounted to $ 407,218 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.

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 nine months ended September 30, 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 September 30, 2024, the

principal amount of the loan is $ 1,020,000 and accrued interest payable amounted to $ 10,200 .

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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

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.

During the nine months ended September 30, 2024

and 2023, amortization of debt discount related to notes payable amounted to $ 15,648 and $ 13,845 , respectively, which is included in interest

expense on the accompanying unaudited consolidated statements of operations.

On September 30, 2024, future annual principal

payments under the above notes payable are as follows:

Years ending September 30,

Total principal payments due on September 30, 2024

NOTE 7 – CONVERTIBLE NOTE PAYABLE

26 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

As of September 30, 2024 and December 31, 2023,

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

As of September 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

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

amounted to $ 30,000 .

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

to $ 90,000 .

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

JUNE 30, 2024

SEPTEMBER 30, 2024

NOTE 8 – RELATED PARTY TRANSACTION

19 unchanged sentences

The holders of the shares are entitled to dividends equal to common share dividends.

As of September

30, 2024 and December 31, 2023, there were 2,000,000 shares of preferred stock outstanding.

10 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 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.

per share, which as of September 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.

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.

In September 2024, the Company purchased 3,096

shares of its common stock for $ 1,985 , or an average of $ 0.64 per share, which as of September 30, 2024, 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

SEPTEMBER 30, 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 June 30,

As of September

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 June 30, 2024 and December

As of September 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 June 30,

As of September

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 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 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.

For the nine months ended September 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 $ 39,133 and $ 110,537 , respectively.

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

and exercisable.

As of September 30, 2024, there was $ 61,048 of unvested stock-based compensation expense to be recognized through September

The aggregate intrinsic value on September 30, 2024 was $0 and was calculated based on the difference between the quoted share price

on September 30, 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 six months ended

June 30, 2024 are summarized as follows:

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

Stock option activities for the nine months ended

September 30, 2024 are summarized as follows:

Options Weighted

2 unchanged sentences

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

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

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

Balance Outstanding September 30, 2024 2,262,500 $ 0.94 3.59 $ -

Exercisable, September 30, 2024 1,968,750 $ 0.94 3.30 $ -

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

1 unchanged sentence

Vested during the period ( 158,750 ) 0.82 - -

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

Balance non-vested on September 30, 2024 293,750 $ 0.97 6.46 $ -

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 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

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

As of September 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 on its financial condition, results of operations, or cash flows.

Employment and Related Golden Parachute

18 unchanged sentences

McLaren of the basis for such Termination;

at the option of the Company, without Cause;

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

SEPTEMBER 30, 2024

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;

32 unchanged sentences

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

a material diminution in the budget over which Mr.

14 unchanged sentences

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.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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

4 unchanged sentences

McLaren will be entitled to benefits provided below:

The Company will pay Mr.

McLaren his full base salary through the date of Termination at the rate in effect at the time notice of Termination is given, plus all other amounts and benefits to which he is entitled under any compensation plan of the Company.

In lieu of any further salary payments to Mr.

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

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

The Company will pay to Mr.

Company will pay Mr.

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

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

lieu of any further salary payments to Mr.

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

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

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

given in respect of them.

Company will pay to Mr.

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

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

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

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

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

The Company will also pay to Mr.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

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.

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.

20 unchanged sentences

4 % of the employee’s plan compensation.

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

For the nine months ended September 30, 2024 and 2023, the Company contributed $ 12,178 and

$ 21,585 to the Plan, respectively.

Purchase and Sale Agreement and Joint Escrow

– Surprise Property

On 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

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 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,

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.

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.

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

5 unchanged sentences

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

SEPTEMBER 30, 2024

Information with respect to these reportable business

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

segments for the three and nine months ended September 30, 2024 and 2023 was as follows:

For the Three Months Ended

For the Six Months Ended

September 30,

For the Nine Months Ended

September 30,

Property investment portfolio

13 unchanged sentences

$ ( 152,966 )

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

September 30,

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

Property investment portfolio

12 unchanged sentences

$ 3,005 from December 1, 2022 through November 30, 2023, and $ 3,078 from December 1, 2023 through November 30, 2024.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

In adopting ASC Topic 842, Leases (Topic 842)

8 unchanged sentences

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

For the nine months ended September 30, 2024 and

2023, in connection with its operating leases, the Company recorded rent expense of $ 27,793 and $ 27,778 , 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 June 30, 2024 and December 31, 2023, right-of-use

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

asset (“ROU”) is summarized as follows:

September 30,

Office lease right of use asset

1 unchanged sentence

Balance of ROU assets

On June 30, 2024, future minimum base lease payments

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

Year ending June 30,

On September 30, 2024, future minimum base lease

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

Year ending September 30,

Total minimum non-cancelable operating lease payments

discount to fair value

Total lease liability on June 30, 2024

Total lease liability on September 30, 2024

NOTE 13 – SUBSEQUENT EVENTS

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.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

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.

ZP Dysart agreed to pay PMF through escrow on

or before the date of the Closing a nonrefundable 2 % loan fee.

The PMF Loan Agreement contains representations,

warranties and covenants customary for a transaction of this type.

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.

August 13, 2024, the principal amount of the loan is $ 1,020,000 .

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

(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 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.

Unconditional Repayment Guaranty

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.

In anticipation of the Closing, ZP Dysart and

The Pharm, LLC (“Sunday Goods”) entered into a Licensed Cannabis Facility Absolute Net Ground Lease Agreement, effective as

of December 20, 2023, and having commenced as of July 13, 2024 (the “Sunday Goods Lease”), pursuant to which Sunday Goods

will construct certain improvements on the Surprise Property (the “Sunday Goods Work”).

PMF has approved the Sunday Goods

Lease and the construction of such improvements.

Licensed Cannabis Facility Absolute Net Lease

Agreement, Guaranty and Security Agreement

On January 2, 2024, ZP Holdings entered into a

contingent Licensed Cannabis Facility Absolute Net Lease Agreement (the “Contingent Lease”), with a commencement date contingent

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

Pursuant to the terms of the Contingent Lease, ZP 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 Contingent Lease has a term of

15 years, with four five-year renewal terms.

Pursuant to the Contingent Lease, ZP 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 work.

The rental payment

terms pursuant to the Contingent Lease begin with a monthly base rent of $ 25,000 per month in year one, subject to an annual base rent

increase of 3 % each year.

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 ZP

Holdings arising under the Contingent Lease.

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

July 13, 2024.

In October and November 2024, the Company purchased 10,591 shares of its

common stock for $ 6,025 , or an average of $ 0.57 per share, which will be reflected as treasury stock on the unaudited consolidated balance

sheet until such time as the shares are cancelled.

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-Q

Item 1. Financial Statements