What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-14 compared with 2024-08-13 · 189 added, 313 removed, 349 unchanged (59% of the section changed)

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that it owns, develops and leases.

As of June 30, 2024, the Company leases land and/or building space at the six properties in its portfolio

to licensed and regulated cannabis tenants in areas with established cannabis regulations and zoning procedures.

Four of the leased properties

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

cannabis cultivation and processing facilities.

The Company considers the two cultivation sites in its portfolio as legacy properties,

and may consider selling or leveraging those properties to unlock equity and create capital availability in the future.

The Zoned Properties

investment thesis has evolved over the years as the cannabis industry has emerged, and is currently focused on investing capital into

direct-to-consumer properties, located in state-markets with robust cannabis consumer demand in the industry.

As of June 30, 2024, a summary of rental properties

owned by us consisted of the following:

As of September 30, 2024, the Company leases land and/or building space at the six properties in its

portfolio to licensed and regulated cannabis tenants in areas with established cannabis regulations and zoning procedures.

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

as regulated cannabis cultivation and processing facilities.

The Company considers the two cultivation sites in its portfolio as legacy

properties, and may consider selling or leveraging those properties to unlock equity and create capital availability in the future.

Zoned Properties investment thesis has evolved over the years as the cannabis industry has emerged, and is currently focused on investing

capital into direct-to-consumer properties, located in state-markets with robust cannabis consumer demand in the industry.

As of September 30, 2024, a summary of rental

properties owned by us consisted of the following:

Chino Valley,

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Lease End Date

Land Area (Acres)

Land Area (Sq.

Undeveloped Land Area (Sq.

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Vacant Rentable (Sq.

rented as of June 30,

rented as of September 30, 2024

Annual Base Rent (*,**)

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

three and six months ended June 30, 2024 and 2023, which are included elsewhere in this quarterly report on Form 10-Q.

The results discussed

below are for the three and six months ended June 30, 2024 and 2023.

Comparison of Results of Operations for the Three and Six Months

Ended June 30, 2024 and 2023

For the three and six months ended June 30, 2024

three and nine months ended September 30, 2024 and 2023, which are included elsewhere in this quarterly report on Form 10-Q.

discussed below are for the three and nine months ended September 30, 2024 and 2023.

Comparison of Results of Operations for the Three and Nine Months

Ended September 30, 2024 and 2023

For the three and nine months ended September

30, 2024 and 2023, revenues by reportable business segments were as follows:

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Property investment portfolio

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Total revenues

For the three months ended June 30, 2024, total

revenues amounted to $692,326, including property investment portfolio revenues $679,326, which consists of rental revenues, as compared

to total revenues of $772,617, including property investment portfolio revenues of $609,591, for the three months ended June 30, 2023,

For the three months ended September 30, 2024,

total revenues amounted to $1,029,630, including property investment portfolio revenues $750,926, which consists of rental revenues, as

compared to total revenues of $720,450, including property investment portfolio revenues of $637,143, for the three months ended September

30, 2023, an overall decrease of $309,180, or 42.9%.

This decrease was attributable to a net decrease in real estate services revenues of $150,026,

or 92.0%, attributable to a decrease in commissions earned on real estate listings and a decrease in advisory fees, offset by an increase

in rental revenues of $69,735, or 11.4%.

For the six months ended June 30, 2024, total

revenues amounted to $1,529,378, including property investment portfolio revenues $1,370,618, which consists of rental revenues, as compared

to total revenues of $1,460,641, including property investment portfolio revenues of $1,220,065, for the six months ended June 30, 2023,

an overall increase of $68,737, or 4.7%.

This increase was attributable to an increase in rental revenues of $150,553, or 12.3%.

by a net decrease in real estate services revenues of $81,816, or 34.0%, attributable to a decrease in commissions earned on real estate

This increase was attributable to a net increase in real estate services revenues

of $195,397, or 234.6%, attributable to an increase in commissions earned on real estate listings and a decrease in advisory fees, and

an increase in rental revenues of $113,783, or 17.9%, primarily attributable to an increase in rental revenue from our recently acquired

property in Chicago, IL and Surprise, AZ.

For the nine months ended September 30, 2024,

total revenues amounted to $2,559,008, including property investment portfolio revenues $2,121,544, which consists of rental revenues,

as compared to total revenues of $2,181,091, including property investment portfolio revenues of $1,857,208, for the nine months ended

September 30, 2023, an overall increase of $377,917, or 17.3%.

This increase was attributable to an increase in rental revenues of $264,336,

or 14.2%, primarily attributable to an increase in rental revenue from our recently acquired property in Chicago, IL and Surprise, AZ,

and a net increase in real estate services revenues of $113,581, or 35.1%, attributable to an increase in commissions earned on real estate

listings and a decrease in advisory fees.

The increase in property investment portfolio

revenues was primarily due to the signing of a new lease with a new tenant at our recently acquired property located in Chicago, Illinois

which began in January 2024.

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

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

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

revenues was primarily due to the signing of a new lease with new tenants at our recently acquired properties located in Chicago, Illinois

which began in January 2024 and Surprise, AZ which began in July 2024.

All of the Company’s real estate properties are leased under

absolute-net or triple-net leases with our tenants.

Operating expenses

For the three months ended June 30, 2024, operating

expenses amounted to $589,188 as compared to $707,812 for the three months ended June 30, 2023, a decrease of $118,624, or 16.8%.

the six months ended June 30, 2024, operating expenses amounted to $1,297,331 as compared to $1,419,222 for the six months ended June

30, 2023, a decrease of $121,891, or 8.6%.

For the three and six months ended June 30, 2024 and 2023, operating expenses consisted of

the following:

For the three months ended September 30, 2024,

operating expenses amounted to $584,442 as compared to $671,338 for the three months ended September 30, 2023, a decrease of $86,896,

For the nine months ended September 30, 2024, operating expenses amounted to $1,881,773 as compared to $2,090,560 for the nine

months ended September 30, 2023, a decrease of $208,787, or 10.0%.

For the three and nine months ended September 30, 2024 and 2023, operating

expenses consisted of the following:

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Compensation and benefits

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Business development costs

For the three months ended June 30, 2024, compensation and benefit expense decreased by $89,867, or 24.7%, as compared to the three months ended June 30, 2023.

For the three months ended September 30, 2024, compensation and benefit expense decreased by $86,639, or 25.1%, as compared to the three months ended September 30, 2023.

The decrease was attributable to a decrease in stock-based compensation of $20,468 related to a decrease in accretion of stock option expense, a decrease in health insurance expense of $10,434, and a decrease in other compensation and benefits of $55,737.

For the six months ended June 30, 2024, compensation and benefit expense decreased by $170,198, or 24.0%, as compared to the six months ended June 30, 2023.

For the nine months ended September 30, 2024, compensation and benefit expense decreased by $256,837, or 24.3%, as compared to the nine months ended September 30, 2023.

The decrease was attributable to a decrease in stock-based compensation of $71,403 related to a decrease in accretion of stock option expense, a decrease in health insurance expense of $37,894, and a decrease in other compensation and benefits of $147,540.

For the three months ended June 30, 2024, professional fees increased by $28,944, or 48.3%, as compared to the three months ended June 30, 2023.

This increase was primarily attributable to an increase in consulting fees of $19,000, an increase in accounting fees of $6,546, and an increase in other professional fees of $3,398.

For the six months ended June 30, 2024, professional fees increased by $8,552, or 4.2%, as compared to the six months ended June 30, 2023.

This increase was primarily attributable to an increase in consulting fees of $24,000, and an increase in accounting fees of $5,473, offset by a decrease in other public relations fees of $14,901, and a decrease in legal fees of $6,076.

For the three months ended June 30, 2024 and 2023, we recorded brokerage fees amounting to $0 and $50,571, respectively, representing a decrease of $50,571, or 100.0%.

For the six months ended June 30, 2024 and 2023, we recorded brokerage fees amounting to $103,330 and $50,571, respectively, representing an increase of $52,759, or 104.3%.

For the three months ended September 30, 2024, professional fees decreased by $20,861, or 24.2%, as compared to the three months ended September 30, 2023.

This decrease was primarily attributable to a decrease in consulting fees of $23,919.

For the nine months ended September 30, 2024, professional fees decreased by $12,309, or 4.3%, as compared to the nine months ended September 30, 2023.

This decrease was primarily attributable to a decrease in consulting fees of $16,910, and a decrease in legal fees of $2,658, offset by an increase in accounting fees of $6,447.

For the three months ended September 30, 2024 and 2023, we recorded brokerage fees amounting to $19,033 and $0, respectively, representing an increase of $19,033, or 100.0%.

For the nine months ended September 30, 2024 and 2023, we recorded brokerage fees amounting to $122,363 and $50,571, respectively, representing an increase of $71,792, or 142.0%.

Brokerage fees occur as the result of various percentage-based commission splits we pay to our licensed brokerage team members who participate in various real estate listing transactions.

General and administrative expenses consist of expenses such as rent expense, insurance expense, insurance expense, travel expenses, office expenses, telephone and internet expenses, advertising and marketing expense, and other general operating expenses.

For the three months ended June 30, 2024, general and administrative expenses decreased by $56, or 0.06%, as compared to the three months ended June 30, 2023.

For the six months ended June 30, 2024, general and administrative expenses decreased by $203, or 0.11%, as compared to the six months ended June 30, 2023.

For the three months ended June 30, 2024, depreciation expense decreased by $12,178, or 11.9%, as compared to the three months ended June 30, 2023.

For the six months ended June 30, 2024, depreciation expense decreased by $20,113, or 10.1%, as compared to the six months ended June 30, 2023.

For the three months ended June 30, 2024, real estate taxes increased by $3,829, or 12.0%, as compared to the three months ended June 30, 2023.

For the six months ended June 30, 2024, real estate taxes decreased by $563, or 0.9%, as compared to the six months ended June 30, 2023

For the three months ended June 30, 2024, business development costs increased by $1,275, or 100.0%, as compared to the three months ended June 30, 2023.

For the six months ended June 30, 2024, business development costs increased by $7,875, or 52.5%, as compared to the six months ended June 30, 2023.

For the three months ended September 30, 2024, general and administrative expenses decreased by $11,103, or 11.6%, as compared to the three months ended September 30, 2023.

For the nine months ended September 30, 2024, general and administrative expenses decreased by $11,306, or 4.1%, as compared to the nine months ended September 30, 2023.

For the three months ended September 30, 2024, depreciation expense decreased by $1,523, or 1.7%, as compared to the three months ended September 30, 2023.

For the nine months ended September 30, 2024, depreciation expense decreased by $21,636, or 7.4%, as compared to the nine months ended September 30, 2023.

For the three months ended September 30, 2024, real estate taxes decreased by $2,803, or 5.4%, as compared to the three months ended September 30, 2023.

For the nine months ended September 30, 2024, real estate taxes decreased by $3,366, or 2.9%, as compared to the nine months ended September 30, 2023

For the three months ended September 30, 2024, business development costs increased by $17,000, or 100.0%, as compared to the three months ended September 30, 2023.

For the nine months ended September 30, 2024, business development costs increased by $24,875, or 165.8%, as compared to the nine months ended September 30, 2023.

Business development costs are costs related to forfeited escrow deposits and the write off of costs related to projects which we decided not to pursue.

Income (loss) from operations

Income from operations

As a result of the factors described above, for

the three months ended June 30, 2024, income from operations amounted to $103,138 as compared to income from operations of $64,805 for

the three months ended June 30, 2023, an increase of $38,333, or 59.1%.

For the six months ended June 30, 2024, income from operations

amounted to $232,047 as compared to income from operations of $41,419 for the six months ended June 30, 2023, an increase of $190,628,

the three months ended September 30, 2024, income from operations amounted to $445,188 as compared to income from operations of $49,112

for the three months ended September 30, 2023, an increase of $396,076, or 806.5%.

For the nine months ended September 30, 2024, income

from operations amounted to $677,235 as compared to income from operations of $90,531 for the nine months ended September 30, 2023, an

increase of $586,704, or 648.1%.

Other (expenses) income, net

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expense incurred on debt with third parties and also includes other income (expense).

For the three months ended June 30, 2024, total

other expenses, net amounted to $135,421 as compared to total other expenses, net of $17,005, respectively, representing an increase of

$118,416, or 696.4%.

This increase was attributable to a decrease in interest expense of $526 primarily related to a decrease in notes

payable, offset by a decrease in income in fair value from an interest rate swap of $118,942.

For the six months ended June 30, 2024,

total other expenses, net amounted to $167,857 as compared to total other expenses, net of $301,798, respectively, representing a decrease

For the three months ended September 30, 2024, total

other expenses, net amounted to $(386,316) as compared to total other income, net of $65,411, respectively, representing a negative change

of $(451,727), or 690.1%.

This decrease was attributable to an increase in interest expense of $3,013 primarily related to an increase in

notes payable, offset by an increase in income in fair value from an interest rate swap of $136,954.

This change was attributable to an increase in interest expense of $31,791 primarily related to an increase

in notes payable, and an increase in loss in fair value from an interest rate swap of $419,936.

For the nine months ended September 30,

2024, total other expenses, net amounted to $554,173 as compared to total other expenses, net of $236,387, respectively, representing

an increase of $317,786, or 134.4%.

This increase was attributable to an increase in interest expense of $34,804 primarily related to

an increase in notes payable, and an increase in loss in fair value from an interest rate swap of $282,982.

Equity method loss

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

we incurred an equity method loss of $0 and $5,641, respectively, a decrease of $5,641, or 100.0%.

For the six months ended June 30, 2024

and 2023, we incurred an equity method loss of $0 and $7,110, respectively, a decrease of $7,110, or 100.0%.

For the three months ended September 30, 2024

and 2023, we incurred an equity method loss of $0.

For the nine months ended September 30, 2024 and 2023, we incurred an equity method

loss of $0 and $7,110, respectively, a decrease of $7,110, or 100.0%.

Net income (loss)

As a result of the foregoing, for the three months

ended June 30, 2024 and 2023, net income (loss) amounted to $(32,283), or $(0.00) per common share (basic and diluted), and $42,159, or

ended September 30, 2024 and 2023, net income amounted to $58,872, or $0.00 per common share (basic and diluted), and $114,523, or $0.01

per common share (basic and diluted), respectively.

For the six months ended June 30, 2024 and 2023, net income (loss) amounted

For the nine months ended September 30, 2024 and 2023, net income (loss) amounted

to $123,062, or $0.01 per common share (basic and diluted), and $(152,966), or $(0.01) per common share (basic and diluted), respectively.

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adequate amounts of cash to meet its needs for cash requirements.

We had cash of $1,528,553 and $3,099,795 as of June 30, 2024 and December

31, 2023, respectively.

We had cash of $1,152,090 and $3,099,795 as of September 30, 2024 and

December 31, 2023, respectively.

Our primary uses of cash have been for the acquisition

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

East West Bank Swap and Amended Note

On December 7, 2022, Zoned Arizona and the Bank

entered into a First Amendment to Loan Agreement (the “First Amendment”).

Pursuant to the terms of the First Amendment, Zoned

Arizona has elected to make its Early Amortization Election (defined in the First Amendment and Loan Agreement), which election requires

Zoned Arizona to commence paying principal and interest on the MAL as set forth in the Amended Note (defined below).

Except as provided

in the First Amendment, the terms of the Loan Agreement remain in full force and effect.

Pursuant to the terms of the Loan Agreement and

First Amendment, on December 7, 2022, Zoned Arizona issued an Amended and Restated Promissory Note (the “Amended Note”) to

The Amended Note has an original principal amount of $4,500,000, a 50% loan-to-value as determined by the bank-ordered appraisal

completed on the Tempe Property.

The Amended Note requires Zoned Arizona to pay monthly principal and interest payments to the Bank at

an interest rate equal to the prime rate plus 0.75% (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.

Zoned Arizona may prepay the outstanding principal

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

Also as previously disclosed, on July 11, 2022

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

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

any of the loan documents.

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

“Reaffirmation”) in favor of the Bank.

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

the First Amendment and Swap Note.

On December 7, 2022, Zoned Arizona and the Bank

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

The Confirmation incorporates by reference

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

as if the parties to the Confirmation

executed such agreement in such form.

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

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

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

sheets with changes in fair value recorded contemporaneously in earnings.

The Company has entered into an interest rate swap to mitigate

variability in interest payments on its variable-rate debt.

On June 30, 2024, principal and interest due on

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

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

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

23616 Land Contract Note Payable

On December 5, 2022, in connection with the acquisition

of the Woodward Property located in Pleasant Ridge, Michigan, the Company entered into a land contract note in the amount of $1,425,000

(the “Woodward Property Note Payable”).

The Woodward Property Note Payable bears interest at 9% per annum and is due in full

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

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

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.

23634 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.

Our future operations are dependent on our ability

to manage our current cash balance, on the collection of rental and real estate services revenues and the attainment of new advisory and

brokerage clients.

Our real estate properties are leased to Significant Tenants and other tenants under triple-net leases for which terms

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

We monitor tenant credit by (1)

reviewing financial statements and related metrics and information that are publicly available or that are provided to us upon request,

and (2) monitoring the timeliness of rent collections.

As of June 30, 2024 and December 31, 2023, we had an asset concentration related

to our Significant Tenant leases.

As of June 30, 2024 and December 31, 2023, these Significant Tenants represented approximately 73.7%

and 69.4% of total assets, respectively.

If our Significant Tenants are prohibited from operating due to federal or state regulations

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

out new tenants at rental rates per square less than our current rate per square foot.

Recent Property Acquisition and Related Note

Recent Property Acquisitions and Related Note

On July 8, 2024 (the “Closing”), ZP

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

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

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

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.

In connection with the Surprise Property Closing,

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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.”

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,

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The remaining loan proceeds will

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

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 the Sunday Goods Work:

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

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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”), pursuant to which Sunday Goods will construct

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

PMF has approved the Contingent 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 tenant.

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.

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.

We may secure additional financing to acquire

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may restrict our ability to grow our business operations.

For the Six Months Ended June 30, 2024 and

For the Nine Months Ended September 30, 2024

Net cash flow provided by operating activities

was $246,788 for the six months ended June 30, 2024, as compared to net cash flow provided by operating activities of $143,784 for the

six months ended June 30, 2023, representing an increase of $101,729.

Net cash flow provided by operating activities for the six months ended June 30, 2024 primarily reflected net income of $64,190, adjusted for the add-back of non-cash items consisting of depreciation of $179,517, amortization of debt discount of $9,230, accretion of stock-based stock option expense of $29,511, a loss on forfeited escrow deposit of $22,875, and income from the changes in fair value from an interest rate swap of $146,518, offset by changes in operating assets and liabilities primarily consisting of a decrease in accounts receivable of $57,783, an increase in deferred rent of $145,518 attributable to rent abatement on our new tenant lease at our Chicago, Illinois Property, a decrease in accounts payable of $31,733, an increase in accrued expenses of $157,157, an increase in contract liabilities of $19,201, and an increase in security deposits payable of $17,730.

Net cash flow provided by operating activities for the six months ended June 30, 2023 primarily reflected a net loss of $267,489 adjusted for the add-back of non-cash items consisting of depreciation of $199,630, amortization of debt discount of $9,229, accretion of stock-based stock option expense of $80,447, a loss on forfeited escrow deposit of $15,000, a loss from unconsolidated joint ventures of $8,370, and a gain from the changes in fair value from an interest rate swap of $9,692, offset by changes in operating assets and liabilities primarily consisting of an increase in deferred rent of $124,013 attributable to rent abatement on our new tenant lease at our Woodward Properties, a decrease in prepaid expenses and other assets of $32,248, an increase in contract liabilities of $148,394, and an increase in security deposits payable of $56,100 attributable to the collection of additional security deposit on our Woodward Properties.

During the six months ended June 30, 2024, net

cash flow used in investing activities amounted to $1,772,344 as compared to net cash used in investing activities of $1,165,450, an increase

During the six months ended June 30, 2024, net cash used in investing activities was attributable to the purchase of rental

property of $1,587,476 primarily in connection with the acquisition of property in Chicago, Illinois, a purchase of property and equipment

of $6,480, an increase in capitalized permit costs of $58,720, and an increase in escrow deposits of $119,668 in connection with escrow

deposits made on other potential acquisitions of rental properties.

During the six months ended June 30, 2023, net cash used in investing

activities was attributable to the purchase of rental property of $998,821 primarily in connection with the acquisition of property in

Pleasant Ridge, Michigan, an increase in capitalized permit costs of $11,081, and an increase in escrow deposits of $155,548 in connection

with escrow deposits made on other potential acquisitions of rental properties.

During the six months ended June 30, 2024 and

2023, net cash used in financing activities amounted to $44,411 and $38,399, respectively, and consisted of the repayment of notes payable.

was $455,363 for the nine months ended September 30, 2024, as compared to net cash flow provided by operating activities of $28,325 for

the nine months ended September 30, 2023, representing an increase of $427,038.

Net cash flow provided by operating activities for the nine months ended September 30, 2024 primarily reflected net income of $123,062, adjusted for the add-back of non-cash items consisting of depreciation of $269,218, amortization of debt discount of $15,648, accretion of stock-based stock option expense of $39,133, a loss on forfeited escrow deposit of $22,875, an increase in bad debt expense of $10,000, and loss from the changes in fair value from an interest rate swap of $52,503, offset by changes in operating assets and liabilities primarily consisting of an increase in deferred rent of $252,884 attributable to rent abatement on our new tenant leases at our Chicago, Illinois and Surprise, AZ properties, a decrease in accounts payable of $73,098, an increase in accrued expenses of $174,818, and an increase in security deposits payable of $62,645.

Net cash flow provided by operating activities for the nine months ended September 30, 2023 primarily reflected a net loss of $152,966 adjusted for the add-back of non-cash items consisting of depreciation of $290,854, amortization of debt discount of $13,845, accretion of stock-based stock option expense of $110,537, a loss on forfeited escrow deposit of $15,000, a loss from unconsolidated joint ventures of $8,370, and a gain from the changes in fair value from an interest rate swap of $230,479, offset by changes in operating assets and liabilities primarily consisting of an increase in accounts receivable of $28,611, an increase in deferred rent of $145,704 attributable to rent abatement on our new tenant lease at our Woodward Properties, a decrease in prepaid expenses and other assets of $23,790, a decrease in lease incentive receivable of $20,642, a decrease in accounts payable of $11,121, an increase in contract liabilities of $38,871, and an increase in security deposits payable of $71,060 attributable to the collection of additional security deposit on our Woodward Properties.

During the nine months ended September 30, 2024,

net cash flow used in investing activities amounted to $3,318,916 as compared to net cash used in investing activities of $1,297,306,

an increase of $2,021,610.

During the nine months ended September 30, 2024, net cash used in investing activities was attributable to

the purchase of rental properties of $3,290,956 primarily in connection with the acquisition of properties in Chicago, IL and Surprise,

AZ, a purchase of property and equipment of $6,480, an increase in capitalized permit costs of $18,484, and an increase in escrow deposits

During the nine months ended September 30, 2023, net cash used in investing activities was attributable to the purchase of

rental property of $1,011,340 primarily in connection with the acquisition of property in Pleasant Ridge, Michigan, an increase in capitalized

permit costs of $25,418, and an increase in escrow deposits of $260,548 in connection with escrow deposits made on other potential acquisitions

of rental properties.

During the nine months ended September 30, 2024

and 2023, net cash provided by (used in) financing activities amounted to $915,848 and $(59,803), respectively.

During the nine months

ended September 30, 2024, net cash provided by financing activities consisted of net proceeds from a note payable of $983,940 used to

acquire our Surprise, AZ property, offset by cash used for the repayment of notes payable of $66,107 and the purchase of treasury stock

During the nine months ended September 30, 2023, net cash used in financing activities consisted of the repayment of notes

payable of $59,803.

Contractual Obligations and Off-Balance Sheet

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The following tables summarize our contractual

obligations as of June 30, 2024 (dollars in thousands), and the effect these obligations are expected to have on our liquidity and cash

flows in future periods.

obligations as of September 30, 2024 (dollars in thousands), and the effect these obligations are expected to have on our liquidity and

cash flows in future periods.

Payments Due by Period

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swap payments utilizing cash flows from operations.

As of June 30, 2024, the notional amount of our interest rate swaps was $4,450,642.

As of September 30, 2024, the notional amount of our interest rate swaps was $4,429,704.

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

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We continually evaluate our estimates, including the critical ones related to an interest rate swap, the allowance for

accounts receivable, impairment of rental properties, the valuation of our investments in unconsolidated joint ventures, and valuation

of equity transactions.

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

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

that are not readily apparent from other sources.

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

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

Actual results may differ from these estimates under different

assumptions or conditions.

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

used in the preparation of the financial statements.

accounts receivable, impairment of rental properties, and the valuation of equity transactions.

We base our estimates on historical experience

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

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

Any future changes to

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

results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting estimates

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

Interest rate swap

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The estimated fair value of the interest rate

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

expense in the accompanying statements of operations.

The Company uses derivative financial instruments only to manage interest rate risks

and not as investment vehicles.

swap agreement is reflected as a derivative liability on the accompanying balance sheets with changes in the fair value reflected in income

(loss) from derivative - interest rate swap on the accompanying statements of operations.

The Company uses derivative financial instruments

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

Information regarding the interest rate swap is as follows:

September 30,

Fair Value of

September 30,

Fair Value of

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December 10, 2032

Accounts receivable and notes receivable

Accounts receivable

We recognize an allowance for losses on accounts

receivable and notes receivable in an amount equal to the estimated probable losses net of recoveries under the current expected credit

The allowance is based on an analysis of historical bad debt experience, current receivables aging and expected future write-offs,

as well as an assessment of specific identifiable customer accounts and notes receivable considered at risk or uncollectible.

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

In accordance with ASC 326, an allowance is maintained

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

The amount of the allowance is determined principally on the basis of past collection experience and known financial factors regarding

specific customers.

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

administrative expenses.

receivable in an amount equal to the estimated probable losses net of recoveries under the current expected credit loss method.

The allowance

is based on an analysis of historical bad debt experience, current receivables aging and expected future write-offs, as well as an assessment

of specific identifiable customer accounts receivable considered at risk or uncollectible.

On January 1, 2023, we adopted ASC 326, “Financial

Instruments - Credit Losses”.

In accordance with ASC 326, an allowance is maintained for estimated forward-looking losses resulting

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

The amount of the allowance is determined

principally on the basis of past collection experience and known financial factors regarding specific customers.

The expense associated

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

Rental properties

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to depreciation.

Investment in joint ventures

We have equity investments in various privately

held entities.

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

interest and level of influence.

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

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

Investments are reviewed for changes in circumstance or

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

We evaluate our investments

in these entities for consolidation.

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

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

an unconsolidated investment under either the equity method of accounting.

If an investment qualifies for the equity method of accounting,

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

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

agreement of the entity.

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

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

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

These items are reported as a single line item

in the statements of operations as income or loss from investments in unconsolidated affiliated entities.

Stock-based compensation

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

Assumptions used in the estimation of stock-based grants

may include the volatility of our common stock, expected term of exercise, our discount rate and our dividend rate.

Recent Accounting Pronouncements

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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 2. Management’s Discussion and Analysis