What changed in this filing

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Item 1. Financial Statements

2025-05-14 compared with 2024-11-14 · 698 added, 528 removed, 1233 unchanged (50% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

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

Accounts receivable

Deferred rent

Lease incentive receivable

Rental properties, net

Prepaid expenses and other assets

Escrow deposits

Capitalized project costs

Property and equipment, net

Operating lease right of use asset, net

Investment in unconsolidated joint ventures and cost-method investee

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 10)

STOCKHOLDERS' EQUITY:

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

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 )

2,000,000 shares issued and

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

Common stock:

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

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)

12,201,516 and 12,201,516 shares issued on March 31, 2025 and

December 31, 2024, respectively, and 12,087,829 and 12,087,829 shares outstanding on March 31, 2025 and December 31, 2024, respectively

Additional paid-in capital

Treasury stock, at cost ( 113,687 and 113,687 shares on March 31, 2025 and December 31, 2024, respectively)

Accumulated deficit

( 15,493,664 )

( 15,639,522 )

Stockholders’ Equity

Liabilities and Stockholders’ Equity

Total Stockholders' Equity

Total Liabilities and Stockholders' Equity

See accompanying notes to unaudited consolidated

4 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

September 30,

Property investment portfolio revenues

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Income (loss) from derivative - interest rate swap

Total other income (expenses), net

INCOME (LOSS) BEFORE EQUITY METHOD LOSSES

EQUITY METHOD LOSS:

Equity method loss from unconsolidated joint ventures

Total equity method loss

NET INCOME (LOSS)

$ ( 152,966 )

Total other expenses, net

NET INCOME (LOSS) PER COMMON SHARE:

2 unchanged sentences

financial statements.

ZONED PROPERTIES, INC.

PROPERTIES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND

Preferred Stock

Treasury Stock

Stockholders'

1 unchanged sentence

$ ( 15,639,522 )

Accretion of stock based

compensation related to stock options issued

Accretion of stock based compensation related to stock options issued

Balance, March 31, 2025

$ ( 15,493,664 )

Accretion of stock based

compensation related to stock options issued

Balance, June 30, 2024

( 16,149,290 )

Purchase of treasury stock

Accretion of stock based

compensation related to stock options issued

Balance, September 30,

( 16,090,418 )

Preferred Stock

Treasury Stock

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

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 Nine Months Ended

September 30,

For the Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$ ( 152,966 )

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

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

Depreciation and amortization expense

2 unchanged sentences

Loss on forfeited escrow deposit

Bad debt expense

Loss from unconsolidated joint ventures

Loss (income) from interest rate swap

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( 1,585,878 )

( 1,011,340 )

Purchases of property and equipment

Increase in capitalized permit costs

Increase in capitalized project costs

Investment in cost-method investees

Increase in escrow deposits

1 unchanged sentence

( 1,771,916 )

( 1,297,306 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Purchase of treasury stock

Net proceeds from note payable

3 unchanged sentences

( 1,579,892 )

( 1,328,784 )

CASH, beginning of period

3 unchanged sentences

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Acquisition of rental properties financed through note payable

Reclassification of escrow deposits for acquisition of rental properties

Reclassification of capitalized project costs to prepaid expenses and other assets

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

23 unchanged sentences

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

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

such as the Controlled Substance Act of 1970, as amended.

The Company has the following wholly owned subsidiaries:

8 unchanged sentences

ZP RE Holdings, LLC (“ZPRE Holdings”) was organized in the State of Arizona on September 20, 2022.

ZP Brokerage MS, LLC (“Mississippi Brokerage”) was organized in the State of Mississippi on October 4, 2022 (inactive).

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

ZP Brokerage FL, LLC (“Florida Brokerage”) was organized in the State of Florida on October 20, 2022.

ZP Brokerage AL, LLC (“Alabama Brokerage”) was organized in the State of Alabama on October 20, 2022 (inactive).

ZP Brokerage AL, LLC (“Alabama Brokerage”) was organized in the State of Alabama on October 20, 2022 (inactive and dissolved on January 9, 2025).

ZP RE MI Woodward, LLC (“ZP Woodward”) was organized in the State of Michigan on November 22, 2022

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

ZP Brokerage MO, LLC (“Missouri Brokerage”) was organized in the State of Missouri on November 30, 2022 (inactive and dissolved on January 13, 2025.)

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

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

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.

for the three months ended March 31, 2025 and 2024 have been prepared by the Company without audit, pursuant to the rules and regulations

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

In the opinion of management, all adjustments necessary to present

fairly our consolidated financial position, results of operations, and cash flows as of March 31, 2025 and 2024, 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.

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, 2024 included in

our Annual Report on Form 10-K filed with the SEC on March 25, 2025.

As reflected in the accompanying unaudited consolidated

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 .

financial statements, the Company generated net income of $ 145,858 and cash provided by operations of $ 330,632 during the three months

ended March 31, 2025.

Additionally, as of March 31, 2025, the Company had cash of $ 993,918 and stockholders’ equity of $ 6,062,978 .

The cash balance and positive net cash provided

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Significant estimates

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.

for the three months ended March 31, 2025 and 2024 include the collectability of accounts and other receivables, 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 of the lease liability and related right-of-use

asset, 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 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

69.5 % and 84.5 % of the Company’s total revenues, respectively (see Note 3).

For the three months ended March 31,

2025 and 2024, revenues associated with Significant Tenants amounted to $ 587,418 and $ 596,707 , respectively, which represents 60.3 % and

71.3 % of the Company’s total revenues, respectively (see Note 3).

Fair value of financial instruments

The carrying amounts reported in the unaudited

consolidated balance sheets for cash, accounts receivable, prepaid expenses and other assets, capitalized permit costs, escrow deposits,

accounts payable, accrued expenses, and other payables approximate their fair market value based on the short-term maturity of these instruments.

The carrying amounts reported in the consolidated

balance sheets for cash, accounts receivable, prepaid expenses and other assets, capitalized project costs, escrow deposits, accounts

payable, accrued expenses, and other payables approximate their fair market value based on the short-term maturity of these instruments.

The Financial Accounting Standards Board (“FASB”)

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

Other than the interest rate swap, the Company

2 unchanged sentences

The following table represents the Company’s

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

December 31, 2023.

September 30, 2024

fair value hierarchy of its financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2025 and December

March 31, 2025

December 31, 2024

Interest rate swap asset

Interest rate swap liability

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swap agreement is determined by the Counterparty based on market data used by Counterparty and is reflected as a derivative asset or liability

on the accompanying unaudited consolidated balance sheet with changes in the fair value reflected in change in fair value of interest

on the accompanying unaudited consolidated balance sheets with changes in the fair value reflected in change in fair value of interest

rate swap on the accompanying unaudited consolidated statements of operations.

3 unchanged sentences

Description Notional

Amount on September 30,

2025 Interest

Rate Maturity Fair Value of

September 30,

2025 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 September 30, 2024 and December

The Company had no cash equivalents on March 31, 2025 and December 31,

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

1 unchanged sentence

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

On September 30, 2024 and December

On March 31, 2025 and December 31,

2024, the Company had approximately $ 482,000 and $ 510,000 , respectively, of cash in excess of FDIC limits of $ 250,000 .

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.

Any loss incurred

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

results of operations and cash flows.

Accounts receivable

8 unchanged sentences

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.

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

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

Investment in unconsolidated joint ventures

and cost method investments

The Company has equity investments in various

22 unchanged sentences

in unconsolidated affiliated entities.

The Company accounts for its interests in entities

where the Company has virtually no influence over operating and financial policies under the cost method of accounting.

In such cases,

the Company’s original investments are recorded at the cost to acquire the interest and any distributions received are recorded

During the three months ended March 31, 2025, through its wholly-owned subsidiary ZPRE Holdings, the Company invested $ 84,110

in ZP Ohio B, LLC for a 5 % ownership interest in ZP Ohio B LLC, which is being accounted for under the cost method and reflected on the

accompanying consolidated balance sheet under “investment in unconsolidated joint ventures and cost-method investee.” ZP Ohio

B LLC plans on developing several projects.

All investments are subject to the Company’s

impairment review policy.

Long-term investments

Long-term investments include investments in equity

securities of entities over which the Company does not have a controlling financial interest or significant influence and are accounted

for at fair value.

Equity investments without readily determinable fair values are measured at cost with adjustments for observable changes

in price or impairments (referred to as the “measurement alternative”).

In applying the measurement alternative, the Company

performs a qualitative assessment on a quarterly basis and recognizes an impairment if there are sufficient indicators that the fair value

of the equity investments is less than carrying values.

securities of entities over which the Company does not have a controlling financial interest or significant influence.

Equity investments

without readily determinable fair values are measured at cost with adjustments for observable changes in price or impairments (referred

to as the “measurement alternative”).

This equity instrument does not have a readily determinable fair value.

the Company elected to measure this equity security at its cost minus impairment, if any.

In applying the measurement alternative, the

Company performs a qualitative assessment on a quarterly basis and recognizes an impairment if there are sufficient indicators that the

fair value of the equity investments is less than carrying values.

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

On 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).

31, 2025 and December 31, 2024, long-term investments consisted of an investment in convertible preferred stock with a value of $ 50,000

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

For the three months ended March 31, 2025 and 2024, the Company did not record any impairment losses.

The Company has land which is not subject to depreciation.

2 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

Escrow deposits

10 unchanged sentences

those deposits are non-refundable.

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.

During the three months ended March 31, 2025 and 2024 the Company forfeited escrow deposits of $0 and

$ 21,600 , respectively, which is reflected in operating expenses as part of property portfolio business development costs on the accompanying

unaudited consolidated statements of operations.

On March 31, 2025 and December 31, 2024, escrow deposits amounted to $ 178,556 and $ 169,875 ,

respectively.

Property and equipment

53 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

Contract liabilities

3 unchanged sentences

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

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

liabilities activities were as follows:

September 30,

During the three months ended March 31, 2025 and 2024, contract liabilities

activities were as follows:

Balance at beginning of period

1 unchanged sentence

Accretion of contract liabilities to revenue

Customer refund

Balance at end of period

22 unchanged sentences

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

on March 1, 2022, the Chino Valley lease was amended and the monthly base rent was increased to $ 87,581 due to additional space of 30,000

square feet being leased to the lessee, increasing the premises to a total of 97,312 square feet of operational space.

In connection with

this lease amendment, the Company paid $ 500,000 to the tenant as a tenant improvement allowance or lease incentive for investment into

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

term as a reduction to the lease income.

The increase in monthly rent was commensurate with the additional space being leased;

this modification qualifies as a separate contract under ASC 842 which does not require lease classification reassessment.

excludes short-term leases having initial terms of 12-months or less as an accounting policy election and recognizes rent expense on a

straight-lines basis over the lease term.

on March 1, 2022, the Chino Valley lease was amended and the monthly rent was increased to $ 87,581 due to additional space of 30,000 square

feet being leased to the lessee, increasing the premises to a total of 97,312 square feet of operational space.

The increase in monthly

rent was commensurate with the additional space being leased;

therefore, this modification qualifies as a separate contract under ASC

842 which does not require lease classification reassessment.

In connection with this lease amendment, the Company paid $ 500,000 to the

tenant as a tenant improvement allowance or lease incentive for investment into the premises.

These lease incentives were capitalized

as a lease incentive receivable and are recognized on a straight-line basis over the remaining respective lease term as a reduction to

property investment portfolio revenues.

Additionally, during the three months ended March 31, 2025, the Company paid $ 450,000 to the tenant

of ZP Dysart as a tenant improvement allowance for investment into the premises.

The $ 450,000 payment to the tenant will be used by the

tenant to construct a building on the land as well as for the buildout of the property.

Since ZP Dysart will own the building and related

improvements at the end of the lease, the $ 450,000 tenant improvement allowance was capitalized to rental properties and will be depreciated

on a straight-line basis over the useful life of the building and related improvements beginning when the building and related improvements

is placed in service.

The Company excludes short-term leases having initial terms of 12-months or less as an accounting policy election

and recognizes rent expense on a straight-lines basis over the lease term.

The Company records revenues from rental properties

7 unchanged sentences

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

tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company.

of March 31, 2025 and December 31, 2024 of $ 870,650 and $ 747,504 , respectively (see Note 3).

Additionally, if the lease provides for tenant

improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company.

When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control

3 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

9 unchanged sentences

sheets at fair value upon adoption of ASC 842.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

Operating lease right of use asset represents

6 unchanged sentences

and is included in general and administrative expenses in the unaudited consolidated statements of operations.

Basic and diluted loss per share

Basic loss per share is computed by dividing net

loss available to common shareholders by the weighted average number of shares of common stock outstanding during each period.

loss per share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock,

common stock equivalents and potentially dilutive securities outstanding during the period using the treasury stock method and as-if converted

Potentially dilutive common shares and participating securities are excluded from the computation of diluted shares outstanding

if they would have an anti-dilutive impact on the Company’s net losses.

The Company’s preferred stock is considered a participating

security since the preferred shares are entitled to dividends equal to common share dividends and accordingly, are included in the computation

of earnings per share pursuant to the two-class method.

The two-class method of computing (loss) income per share is an earnings allocation

formula that determines (loss) income per share for common stock and any participating securities according to dividends declared (whether

paid or unpaid) and participation rights in undistributed earnings.

Basic and diluted net income per share

Basic net income per share is computed by dividing

net income available to common shareholders by the weighted average number of shares of common stock outstanding during each period.

net income per share is computed by dividing net income available to common shareholders by the weighted average number of shares of common

stock, common stock equivalents and potentially dilutive securities outstanding during the period using the treasury stock method and

as-if converted method.

Potentially dilutive common shares and participating securities are excluded from the computation of diluted shares

outstanding if they would have an anti-dilutive impact on the Company’s net income.

The Company’s preferred stock is considered

a participating security since the preferred shares are entitled to dividends equal to common share dividends and accordingly, are included

in the computation of earnings per share pursuant to the two-class method.

The two-class method of computing income per share is an earnings

allocation formula that determines income per share for common stock and any participating securities according to dividends declared

(whether paid or unpaid) and participation rights in undistributed earnings.

The following table presents a reconciliation

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

of basic and diluted net income per common share:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Net income (loss) per common share - basic:

Net income (loss)

$ ( 152,966 )

Net income per common share - basic:

undistributed (earnings) loss allocated to participating securities

Net income (loss) allocated to common stockholders

$ ( 152,966 )

Net income allocated to common stockholders

Weighted average common shares outstanding – basic

Net income (loss) per common share – basic

Net income (loss) per common share - diluted:

Net income (loss) allocated to common shareholders – basic

$ ( 152,966 )

Net income per common share – basic

Net income per common share - diluted:

Net income allocated to common shareholders – basic

interest of convertible debt

Numerator for income (loss) per common share – basic

$ ( 152,966 )

Numerator for net income per common share – basic

Weighted average common shares outstanding – basic

3 unchanged sentences

Weighted average common shares outstanding – diluted

Net income (loss) per common share – diluted

The following potentially dilutive shares have

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

Net income per common share – diluted

Segment reporting

5 unchanged sentences

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

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

Segment Reporting (Topic 280):

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

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

operating decision maker (“CODM”).

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

or loss and assets that had previously only been disclosed annually.

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

retrospective basis.

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

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

The adoption of this ASU only affects

the Company’s disclosures with no impact to its financial condition or results of operations.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

Deferred income tax assets and liabilities arise

11 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 September 30, 2024 and December 31, 2023 that would require

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

The Company does not believe it has any uncertain tax positions as of March 31, 2025 and December 31, 2024 that would require

either recognition or disclosure in the accompanying consolidated financial statements.

Stock-based compensation

9 unchanged sentences

Recently issued accounting pronouncements

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

Income Taxes (Topic 740):

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

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

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

to the extent those items exceed a specified threshold.

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

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

net of refunds received.

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

The adoption of this new guidance had no impact on the accompanying unaudited consolidated financial statements.

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

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.

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

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

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

to, depreciation, amortization, and employee compensation.

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

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

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

This pronouncement is effective

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

adoption permitted.

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

Management does not believe that any other recently

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Our property located in Kingman is leased by CJK,

(“CJK”), and subleased by Helping Camo LLC, doing business as Story Cannabis.

Our property located in Tempe is leased by VSM,

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

Chino Valley, AZ

1 unchanged sentence

entered into a Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Chino Valley and Broken

Arrow (the “2018 Chino Valley Lease”), with a term of 22 years, expiring April 30, 2040 , and the abatement of rent that would

otherwise have been due for the month of April 2018 under the prior Chino Valley Lease.

The 2018 Chino Valley Lease provided for payment

by Broken Arrow of a fixed monthly base rent of $ 35,000 , as well as real property taxes, personal property taxes, privilege, sales, rental,

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

In addition, pursuant

to the terms of the 2018 Chino Valley Lease, Broken Arrow agreed to maintain insurance in full force during the term of the 2018 Chino

Valley Lease and any other period of occupancy of the premises by Broken Arrow.

On January 1, 2019, Chino Valley and Broken Arrow entered

into that the First Amendment to the 2018 Chino Valley Lease, pursuant to which the monthly base rent was increased from $ 35,000 to $ 40,000 .

Arrow (the “2018 Chino Valley Lease”), with a term of 22 years, expiring April 30, 2040 .

The 2018 Chino Valley Lease provided

for payment by Broken Arrow of a fixed monthly base rent of $ 35,000 , as well as real property taxes, personal property taxes, privilege,

sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed against Chino Valley.

pursuant to the terms of the 2018 Chino Valley Lease, Broken Arrow agreed to maintain insurance in full force during the term of the 2018

Chino Valley Lease and any other period of occupancy of the premises by Broken Arrow.

On January 1, 2019, Chino Valley and Broken Arrow

entered into that the First Amendment to the 2018 Chino Valley Lease, pursuant to which the monthly base rent was increased from $ 35,000

to $ 40,000 .

Except for the increase in base rent, the terms of the 2018 Chino Valley Lease remain in full force and effect.

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

as a reduction to the lease revenue.

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

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

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

as a reduction to the property investment portfolio revenues.

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

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entered into a Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Green Valley and Broken

Arrow (the “Green Valley Lease”), with a term of 22 years, expiring April 30, 2040 , and the abatement of rent that would otherwise

have been due for the month of April 2018 under the prior Green Valley Lease.

The Green Valley Lease provided for payment by Broken Arrow

of a fixed monthly base rent of $ 3,500 , as well as real property taxes, personal property taxes, privilege, sales, rental, excise, use

and/or other taxes (excluding income or estate taxes) levied upon or assessed against Chino Valley.

In addition, pursuant to the terms

of the Green Valley Lease, Broken Arrow agreed to maintain insurance in full force during the term of the Green Valley Lease and any other

period of occupancy of the premises by Broken Arrow.

Arrow (the “Green Valley Lease”), with a term of 22 years, expiring April 30, 2040 .

The Green Valley Lease provided for payment

by Broken Arrow of a fixed monthly base rent of $ 3,500 , as well as real property taxes, personal property taxes, privilege, sales, rental,

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

In addition, pursuant

to the terms of the Green Valley Lease, Broken Arrow agreed to maintain insurance in full force during the term of the Green Valley Lease

and any other period of occupancy of the premises by Broken Arrow.

On May 29, 2020, Green Valley and Broken Arrow

entered into the First Amendment (the “Green Valley Amendment”) to the Green Valley Lease, effective May 31, 2020.

to the terms of the Green Valley Amendment, among other things, the parties agreed to abate the fixed base rent of $ 3,500 from June 1,

2020 to July 31, 2020.

In addition, the Green Valley Amendment provides that any increase in the rentable area of the leases premises

will result in an increase in all amounts calculated based on the same, including, without limitation, base rent.

The parties also agreed

that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially

and adversely affected as mutually and reasonably determined by Green Valley and Broken Arrow, Broken Arrow may terminate the Green Valley

Lease by delivering written notice to Green Valley, together with a termination payment which shall be the sum of (i) any unpaid rent

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

Valley Amendment provides that any increase in the rentable area of the leases premises will result in an increase in all amounts calculated

based on the same, including, without limitation, base rent.

The parties also agreed that if there is any change in laws such that the

dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially and adversely affected as mutually and reasonably

determined by Green Valley and Broken Arrow, Broken Arrow may terminate the Green Valley Lease by delivering written notice to Green Valley,

together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5 % of the base rent which would

have been earned after termination for the balance of the term.

ZONED PROPERTIES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

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

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Pursuant to the terms of the

Tempe Amendment, among other things, the base rent was increased to $ 49,200 per month, and the base rent was abated from June 1, 2020

to July 31, 2020.

Any increase in the rentable area of the leased premises will result in an increase in all amounts calculated based

on the same, including, without limitation, base rent.

Pursuant to the terms of the Tempe Amendment, the parties agreed that if there

is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially and adversely

affected as mutually and reasonably determined by Zoned Arizona and CJK, CJK may terminate the Tempe Lease by delivering written notice

to Zoned Arizona, together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5 % of the

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

Tempe Amendment, among other things, the base rent was increased to $ 49,200 per month.

Any increase in the rentable area of the leased

premises will result in an increase in all amounts calculated based on the same, including, without limitation, base rent.

the terms of the Tempe Amendment, the parties agreed that if there is any change in laws such that the dispensing, sale or cultivation

of marijuana upon the premises is prohibited or materially and adversely affected as mutually and reasonably determined by Zoned Arizona

and CJK, CJK may terminate the Tempe Lease by delivering written notice to Zoned Arizona, together with a termination payment which shall

be the sum of (i) any unpaid rent and interest, plus (ii) 5 % of the base rent which would have been earned after termination for the balance

In addition, under the Tempe Amendment the parties

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remaining term of the lease through April 2040.

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.

On March 31, 2025 and December 31, 2024, contract liability related to this lease modification

amounted to $ 259,809 and $ 264,115 , respectively, which has been included in contract liabilities on the accompanying consolidated balance

As of March 1, 2025, the Company’s new

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

Additionally, on the Tempe property, the Company

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

On May 1, 2018, Kingman and CJK entered into a

43 unchanged sentences

of $ 22,000 per the terms of the sublease.

The Company and CJK have agreed to split the Security Deposit at 68 % (the Company received $ 14,960

of the $ 22,000 Security Deposit, which $ 14,960 is included in security deposits payable on the accompanying unaudited consolidated balance

In 2023, the Company and CJK agreed to split the Security Deposit at 68 % (the Company received

$ 14,960 of the $ 22,000 Security Deposit, which $ 14,960 was included in security deposits payable as of December 31, 2023.

Upon expiration

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

Pleasant Ridge, MI

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

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

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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 (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

a Licensed Cannabis Facility Absolute Net Lease Agreement (the “Justice Grown Lease”), with a commencement date of January

19, 2024, by and between ZPRE Holdings, as landlord, and JG IL LLC (“Justice Grown”), as tenant.

Pursuant to the terms of

the Lease, ZPRE Holdings agreed to lease the Ashland Avenue Property located in Chicago, IL to Justice Grown for use as a licensed recreational

adult-use (and, if permitted, medical) cannabis dispensary in accordance with Illinois law.

The Justice Grown Lease has a term of 15 years,

with four five-year renewal terms.

MARCH 31, 2025

Reaffirmation

In consideration

of the First Amendment, the Guarantors executed and delivered a Reaffirmation of Guaranty (the “Reaffirmation of Guaranty”)

effective as of the First Amendment Effective Date, May 3, 2024.

Related to the Guaranty and the Original Guarantors, the Company agreed,

that so long as there are no uncured Events of Default and Tenant remains in good standing under the Lease, then the Original Guarantors

shall be released of their guarantees following the original lease term of fourteen and a half ( 14.5 ) years.

The Company also agreed

that, provided the Company has given written approval, at its discretion, which shall not be unreasonably withheld, then the Original

Guarantors may be permitted to transfer the obligations under their Guarantees in the event of a Permitted Transfer, on to a new Guarantor(s)

that are of at least equal or greater credit than the Original Guarantors, to be determined by the Company in its discretion, which shall

not be unreasonably withheld.

On January 19,

2024, ZPRE Holdings and Keystone entered into that certain Assignment and Assumption Agreement, dated as of January 19, 2024, by and

between Keystone and ZP Holdings (the “Assignment Agreement”).

Pursuant to the terms of the Assignment Agreement, Keystone

assigned to ZP Holdings all of Keystone’s right, title and interest in and to the Original PSA to purchase the Ashland Avenue Property.

On January 19, 2024, the transactions contemplated by the Agreement and Assignment and Assumption Agreement closed and ZPE Holdings completed

the acquisition of the Ashland Avenue Property under the Original PSA, as assigned.

The completed transactions were subject to closing

costs, commissions, and fees customary to the acquisition of real estate, including a $ 65,000 commission payable and a $ 79,634 sponsor

On January 18,

2024, ZPRE Holdings entered into a Licensed Cannabis Facility Absolute Net Lease Agreement (the “Justice Grown Lease”), with

a commencement date of January 19, 2024, by and between ZPRE Holdings, as landlord, and JG IL LLC (“Justice Grown”), as tenant.

Pursuant to the terms of the Lease, ZPRE Holdings agreed to lease the Ashland Avenue Property located in Chicago, IL to Justice Grown

for use as a licensed recreational adult-use (and, if permitted, medical) cannabis dispensary in accordance with Illinois law.

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

On January 2, 2024, ZPRE Holdings entered into

8 unchanged sentences

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 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 September 30, 2024, consists of the following:

Future annual base rent:

During the three months ended March 31, 2025, the Company paid $ 450,000 to Sunday Goods as a tenant improvement allowance.

The $ 450,000

payment to the tenant will be used by the tenant to construct a building on the land as well as for the buildout of the property.

ZP Dysart will own the building and related improvements at the end of the lease, the $ 450,000 tenant improvement allowance was capitalized

to rental properties and will be depreciated on a straight-line basis over the useful life of the building and related improvements beginning

when the building and related improvements is placed in service.

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 March 31,

2025 and December 31, 2024, security deposits payable to the Company’s tenants amounted to $ 361,677 and $ 361,677 , respectively.

Future minimum lease payments primarily consist of minimum base rent payments from the Company’s tenants.

Future minimum

lease payments to be received, on all leased properties, for each of the five succeeding calendar years and thereafter as of March 31,

2025, consists of the following:

annual base rent:

2025 (remainder of year)

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

Revenues – Significant Tenants

For the nine months ended September 30, 2024 and

For the three months ended March 31, 2025 and

2024, revenues associated with Significant Tenant leases described above are summarized as follows:

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Further, as of September 30, 2024 and December

Three Months Ended

Further, as of March 31, 2025 and December 31,

2024, deferred rent of $ 870,650 and $ 747,504 is due collectively from the tenants due to the abatement of rent under the lease agreements

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).

Additionally, as discussed above,

VSM paid Zoned Arizona the $ 300,000 Assignment Price.

The Company considers the assignment fee paid as a part of the lease payments for

the modified lease and shall amortize the $ 300,000 assignment fees into rental revenue on a straight-line basis over the remaining term

of the modified lease through April 2040.

On 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

discussed above, respectively, and as of March 31, 2025 and December 31, 2024, a lease incentive receivable of $ 415,138 and $ 422,018 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.

Additionally, as discussed above, VSM paid Zoned

Arizona the $ 300,000 Assignment Price.

The Company considers the assignment fee paid as a part of the lease payments for the modified

lease and shall amortize the $ 300,000 assignment fees into rental revenue on a straight-line basis over the remaining term of the modified

lease through April 2040.

On March 31, 2025 and December 31, 2024 deferred revenue related to this lease modification amounted to $ 259,809

and $ 264,115 , respectively, and is included in contract liabilities on the accompanying consolidated balance sheets.

Asset concentration

5 unchanged sentences

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

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.

As of March 31, 2025 and December 31, 2024, the

Company had an asset concentration related to its Significant Tenants.

As of March 31, 2025 and December 31, 2024, the Significant Tenants

collectively leased approximately 53.5 % and 55.4 % of the Company’s total assets, respectively.

Additionally, the Company had an

asset concentration related its Surprise, AZ property, which leased approximately 13.0 % of the Company’s total assets of the Company.

Through March 31, 2025, all rental payments have been made on a timely basis.

Industry risk

12 unchanged sentences

NOTE 4 – RENTAL PROPERTIES

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

On March 31, 2025 and December 31, 2024, rental

properties, net consisted of the following:

September 30,

Building and building improvements

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

Property Acquisitions

9 unchanged sentences

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

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

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

During the three months ended March 31, 2025,

the Company paid $ 450,000 to Sunday Goods as a tenant improvement allowance.

The $ 450,000 payment to the tenant will be used by the tenant

to construct a building on the land as well as for the buildout of the property.

Since ZP Dysart will own the building and related improvements

at the end of the lease, the $ 450,000 tenant improvement allowance was capitalized to rental properties and will be depreciated on a straight-line

basis over the useful life of the building and related improvements beginning when the building and related improvements is placed in

For the three months ended March 31, 2025 and

2024, depreciation of rental properties amounted to $ 87,811 and $ 88,086 , respectively.

2 unchanged sentences

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.

On March 31, 2025 and December 31, 2024, 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

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The following represents summarized financial

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):

information derived from the financial statements of the Zoneomics Green Joint Venture, as of March 31, 2025

and December 31, 2024 and 2023 and for the three months ended March 31, 2025 and 2024.

Balance sheets:

Current assets:

3 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

Statement of operations (Unaudited)

Operating recovery (expenses)

Net income (loss)

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

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

MARCH 31, 2025

Statement of operations

Three Months Ended

Operating expenses, net

Company’s share of loss from unconsolidated joint ventures

During the three months ended March 31, 2025 and

2024, the Company recorded a loss from unconsolidated joint ventures of $0 and $0 , respectively, which represents the Company’s

proportionate share of losses from its joint venture, respectively.

Investments in cost method investees

The Company accounts for its interests in entities

where the Company has virtually no influence over operating and financial policies under the cost method of accounting.

In such cases,

the Company’s original investments are recorded at the cost to acquire the interest and any distributions received are recorded

During the three months ended March 31, 2025, through its wholly-owned subsidiary ZPRE Holdings, the Company invested $ 84,110

in ZP Ohio B, LLC, for a 5 % ownership interest in ZP Ohio B LLC, which is being accounted for under the cost method and reflected on the

accompanying consolidated balance sheet under “investment in unconsolidated joint ventures and cost-method investee.” ZP Ohio

B LLC plans on developing several projects.

Investment in equity securities

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of the election.

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

On March 31, 2025 and December 31, 2024, investment in equity securities amounted to $ 50,000 .

NOTE 6 – NOTES PAYABLE

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

On March 31, 2025 and December 31, 2024, notes

payable consisted of the following:

September 30,

Note payable - East West Bank

Notes payable - Woodward Properties

Notes payable - 23616 Land Contract

Note payable – 23634 Land Contract

Note payable - Surprise, AZ property

16 unchanged sentences

(the “Note”).

When Zoned Arizona made the Early Amortization Election, (i) Zoned Arizona will not be entitled to any further

advances under the MAL, and (ii) the 25 -year amortization schedule referenced in the Note will be from the date Zoned Arizona made the

Early Amortization Election.

When Zoned Arizona made the Early Amortization.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

The Loan Agreement contains representations,

warranties and covenants customary for a transaction of this type.

MARCH 31, 2025

The Loan Agreement contains representations, warranties

and covenants customary for a transaction of this type.

Among other things, the Loan Agreement provides as follows:

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.

(a) upon the occurrence

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

appraised value;

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

Ratio (as hereinafter defined) of 1.40 to 1.00 ;

1.50 to 1.0 ;

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

tenant securities deposits under leases, plus $ 350,000 in operating reserves.

On December 7, 2022, Zoned Arizona and the Bank

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 % ( 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 .

an interest rate equal to the prime rate plus 0.75 % ( 8.25 % as of March 31, 2025 and December 31, 2024).

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

16 unchanged sentences

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

The Company recorded the swap at fair value in the unaudited 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 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

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 March 31, 2025, principal and interest due

on the East West Bank Swap Note amounted to $ 4,391,891 and $ 12,943 , respectively.

On December 31, 2024, principal and interest due on

the East West Bank Swap Note amounted to $ 4,404,279 and $ 7,478 , 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 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.

On March 31, 2025, principal and interest due

on the 23616 Land Contract Note Payable amounted to $ 1,372,530 and $ 0 , On December 31, 2024, principal and interest due on the 23616 Land

Contract Note Payable amounted to $ 1,367,262 and $ 0 , respectively.

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

23634 Land Contract Note Payable

5 unchanged sentences

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

On March 31, 2025, principal and interest due on the 23634 Land Contract Note Payable

amounted to $ 397,993 and $ 0 , respectively.

24 unchanged sentences

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

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

During the three months ended March 31, 2025,

the Company borrowed an additional $ 300,000 of the Maximum Amount and received net proceeds of $ 300,000 .

As of March 31, 2025 and December

31, 2024, the principal amount of the loan is $ 1,320,000 and $ 1,020,000 , respectively and accrued interest payable amounted to $ 0 and

$ 0 , respectively.

On March 3, 2025, ZP Dysart entered into a First

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

The First Amendment clarifies and defines the process

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

Subject to the terms and conditions

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

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

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

execution of the First Amendment to the Lease;

(#2) $ 150,000 was paid on March 28, 2025 (#3) $ 150,000 to be paid on May 1, 2025,

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

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

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

(i) Tenant has furnished to

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

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

(ii) Tenant has furnished to Landlord commercially reasonable final affidavits and final lien releases from Tenant’s general contractor,

and if any, all subcontractors and all material suppliers for all labor and materials performed or supplied as part of Tenant’s

Work (whether or not the Allowance is applicable thereto);

and (iii) a copy of the certificate of occupancy from the governmental authority

having jurisdiction has been delivered to Landlord.

Throughout the project, Tenant shall be required to provide Landlord with ongoing

accounting reflecting a commercially reasonable breakdown of the Tenant’s Work paid for with the Allowance Payments, and also a

current Form W-9, Request for Taxpayer Identification Number and Certification, executed by Tenant.

During the existence of any event of default,

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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.

(i) first advance in the amount of $300,000 at 50% completion which was received during the three months

ended March 31, 2025, and (ii) final advance in the amount of $300,000 at 100% completion and issuance of certificate of occupancy.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

The PMF Loan Agreement contains representations,

9 unchanged sentences

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

During the three months ended March 31, 2025 and

2024, amortization of debt discount related to notes payable amounted to $ 6,418 and $ 4,615 , respectively, which is included in interest

expense on the accompanying consolidated statements of operations.

On March 31, 2025, future annual principal payments

under the above notes payable are as follows:

Years ending March 31,

Total principal payments due on March 31, 2025

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 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 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 .

As of March 31, 2025 and December 31, 2024, the

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

As of March 31, 2025 and December 31, 2024, accrued interest payable due

under the Abrams Debenture amounted to $ 0 , respectively.

For the three months ended March 31, 2025 and 2024, interest expense related

to the Abrams Debenture amounted to $ 30,000 .

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

NOTE 8 – RELATED PARTY TRANSACTION

7 unchanged sentences

against them as to which they could be indemnified.

In August 2021, the Company did not renew its officers and directors insurance.

Since August 2021, the Company did not renew its officers and directors insurance.

NOTE 9 – STOCKHOLDERS’ EQUITY

9 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.

Once any shares of Preferred Stock are outstanding,

at least 51 % of the total number of shares of Preferred Stock outstanding must approve the following transactions:

31, 2025 and 2024, there were 2,000,000 shares of preferred stock outstanding.

Once any shares of Preferred Stock are outstanding, at

least 51 % of the total number of shares of Preferred Stock outstanding must approve the following transactions:

Alter or change the rights, preferences or privileges of the Preferred Stock.

7 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 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.

per share, which as of March 31, 2025 and December 31, 2024, is reflected as treasury stock on the consolidated balance sheet until such

time as the shares are cancelled.

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

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

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

unlimited time period.

During the year ended December 31, 2024, the Company

purchased a total of 13,687 shares of its common stock for $ 8,010 or an average of $ 0.59 per share, which as of March 31, 2025 and December

31, 2024, is reflected as treasury stock on the consolidated balance sheet until such time as the shares are cancelled.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

13 unchanged sentences

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

As of September

30, 2024, 1,012,500 stock option awards are outstanding and 690,000 options are exercisable under the 2016 Plan.

As of December 31, 2023,

As of March 31,

2025, 1,642,500 stock option awards are outstanding and 871,250 options are exercisable under the 2016 Plan As of December 31, 2024, 1,117,500

stock option awards are outstanding and 826,250 options are exercisable under the 2016 Plan.

As of September 30, 2024 and December

As of March 31, 2025 and December 31, 2024,

8,357,500 and 8,882,500 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 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

As of December 31, 2023, options to purchase 1,250,000 shares of common stock are outstanding and 1,225,000 options are exercisable

As of March 31,

2025 and December 31, 2024, options to purchase 1,250,000 shares of common stock are outstanding and 1,250,000 options are exercisable

pursuant to the 2014 Plan.

(D) Stock 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.

On November 25, 2024, the Company granted a stock

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

to the 2016 Plan.

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

The option shall

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

The fair value of this option grant

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

yield of 0 %;

expected volatility of 86.0 %;

risk-free interest rate of 4.17 %;

and an estimated holding period of 6.5 years.

valued this stock option at a fair value of $ 35,506 and will record stock-based compensation expense over the vesting period.

On January 21, 2025, the Company granted an aggregate

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

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

The grant date of the stock options was January 21,

2025 and the options expire on January 21, 2035.

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

beginning immediately.

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

model with the following weighted-average assumptions:

dividend yield of 0 %;

historical volatility of 82.1 %;

risk-free interest rate of

and a holding period of 6.5 years based on the simplified method.

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

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

For the three months ended March 31, 2025 and

2024, in connection with the accretion of stock-based option expense for all options, the Company recorded stock option expense over the

vesting period of $ 56,606 and $ 16,494 , respectively.

As of March 31, 2025, there were 2,892,500 options outstanding and 2,121,250 options

vested and exercisable.

As of March 31, 2025, there was $ 200,703 of unvested stock-based compensation expense to be recognized through

September 2031.

The aggregate intrinsic value on March 31, 2025 was $0 and was calculated based on the difference between the quoted share

price on March 31, 2025 of $ 0.45 and the exercise price of the underlying options.

As of December 31, 2024, there were 2,367,500 options

outstanding and 2,051,250 options vested and exercisable.

As of December 31, 2024, there was $ 80,805 of unvested stock-based compensation

expense to be recognized through September 2031.

The aggregate intrinsic value on December 31, 2024 was $0 and was calculated based on

the difference between the quoted share price on December 31, 2024 of $ 0.54 and the exercise price of the underlying options.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

Stock option activities for the nine months ended

September 30, 2024 are summarized as follows:

MARCH 31, 2025

Stock option activities for the three months ended

March 31, 2025 are summarized as follows:

Options Weighted

2 unchanged sentences

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

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

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

Issued 525,000 0.44 9.82 -

Balance Outstanding March 31, 2025 2,892,500 $ 0.84 4.55 $ -

Exercisable, March 31, 2025 2,121,250 $ 0.92 2.98 $ -

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

Forfeited during the period -

Issued during the period 525,000 0.44 9.82 -

Vested during the period ( 70,000 ) 0.59 -

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

Balance non-vested on March 31, 2025 771,250 $ 0.59 8.86 $ -

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 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.

As of December 31, 2024, the Company is

not involved in any pending or threatened legal proceedings that it believes could reasonably be expected to have a material adverse effect

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

Employment and Related Golden Parachute

On May 23, 2018, the Company and Mr.

the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors, agreed to replace Mr.

2014 employment agreement with a new employment agreement dated May 23, 2018 (the “2018 Employment Agreement”).

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

McLaren his then-current base annual salary of $ 215,000 ,

and to award Mr.

McLaren with an annual and/or quarterly bonus payable in either cash and/or equity of no less than 2 % of the Company’s

net income for the associated period.

Bryan McLaren

On May 23, 2018, the Company and Bryan McLaren

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

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

Pursuant to the terms of the 2018 Employment Agreement,

the Company agreed to continue to pay Mr.

McLaren his then-current base annual salary of $ 215,000 , and to award Mr.

McLaren with an annual

and/or quarterly bonus payable in either cash and/or equity of no less than 2 % of the Company’s net income for the associated period.

The 2018 Employment Agreement has a term of 10

12 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

at the option of the Company, without Cause;

36 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

MARCH 31, 2025

a material diminution in the budget over which Mr.

30 unchanged sentences

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO 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.

9 unchanged sentences

McLaren all legal fees and expenses incurred by him as a result of such Termination.

On July 23, 2022, the Board of Directors of the

Company appointed Berekk Blackwell, the Company’s Chief Operating Officer, as President of the Company, effective immediately.

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

Blackwell (the “Blackwell Employment

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

Blackwell a base annual

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

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

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

by transactions.

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

Each transaction may vary

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

In connection

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

McLaren a bonus of $ 56,473 .

Berekk Blackwell

On July 26, 2022, the Company entered into an

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

Blackwell (the “Blackwell Employment Agreement”).

Pursuant to the terms

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

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

and Chief Operating Officer.

The Company may also award Mr.

Blackwell discretionary cash

and/or equity bonuses.

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

During the initial term, neither

party may terminate the Blackwell Employment Agreement except for Cause (as defined in the Blackwell Employment Agreement).

initial term that expired July 1, 2023, the Blackwell Employment Agreement continued to be in full force and effect, unaffected by the

expiration, except that either party may terminate the Blackwell Employment Agreement for any reason upon 30 days’ written notice

to the other party.

Blackwell discretionary cash and/or equity bonuses.

The Blackwell Employment

Agreement had a term of one year , expiring on July 1, 2023.

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

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

After the initial term that expired July 1, 2023, the Blackwell

Employment Agreement continued to be in full force and effect, unaffected by the expiration, except that either party may terminate the

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

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

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

by transactions.

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

Each transaction may vary

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

In connection

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

Blackwell a bonus of $ 57,473 .

On September 29, 2021, the Company’s board

3 unchanged sentences

4 % of the employee’s plan compensation.

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

For the three months ended March 31, 2025 and 2024, the Company contributed $ 5,782 and $ 5,697

to the Plan, respectively.

Loan Guarantees

ZP OH Antwerp, LLC

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

Antwerp”), a wholly-owned subsidiary of ZP Ohio B LLC, a cost method investee of the Company (See Note 5), and Jonestown Bank &

(“Jonestown”) entered into a Loan Agreement (the “Loan Agreement”) pursuant to which Jonestown agreed

to lend to ZP Antwerp $ 300,000 (the “Loan”) for purchase of commercial real estate located at 503 W.

River Street, Antwerp,

OH (the “Antwerp Property”), to be evidenced by the Mortgage Note, dated as of March 12, 2025, in the principal amount of

$ 300,000 , issued by ZP Antwerp in favor of Jonestown (the “Note”).

Pursuant to the terms of the Loan Agreement, ZP Antwerp

agreed to pay to Jonestown a $ 7,500 loan origination fee and a $ 1,500 loan enhancement fee.

The Antwerp Property will be used as collateral

for the Loan.

The Company and ZP RE Holdings, LLC, a wholly owned subsidiary of the Company, guaranteed the Loan Agreement pursuant to

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

The Company believes that the fair value of the guarantee is nominal since the fair value of the property exceeds the loan amount.

On March 12, 2025, ZP Antwerp entered into an

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

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

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

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

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

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

The Loan Agreement, Note and Assignment contain

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

ZP OH Columbus, LLC

On April 4, 2025, ZP OH Columbus, LLC (“ZP

Columbus”), a wholly-owned subsidiary of ZP Ohio B LLC, a cost method investee of the Company (See Note 5), closed the acquisition

of commercial real estate located at 601 S.

High Street, Columbus, OH (the “Columbus Property”).

In connection therewith,

on April 4, 2025, the Company delivered that certain Commercial Guaranty (the “Columbus Guaranty”), dated as of March 31,

2025, to First Fidelity Bank (“First Fidelity”).

The Columbus Guaranty contains customary representations, warranties, covenants

and other provisions for a transaction of this type.

On March 31, 2025, ZP Columbus and First Fidelity

entered into a Business Loan Agreement (the “Columbus Loan Agreement”), pursuant to which First Fidelity agreed to lend to

ZP Columbus $ 1,500,000 (the “Columbus Loan”) for purchase of the Columbus Property, to be evidenced by a promissory note,

dated as of March 31, 2025, in the principal amount of $ 1,500,000 , issued by ZP Columbus in favor of First Fidelity (the “Columbus

The Columbus Loan Agreement and the Columbus Note were entered into in the ordinary course of the Company’s business.

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

The Company and ZP RE Holdings, LLC, a wholly owned subsidiary

of the Company, guaranteed the Columbus Loan Agreement pursuant to the Columbus Guaranty.

The Company believes that the fair value of

the Columbus Guaranty is nominal since the fair value of the Columbus Property exceeds the amount of the Columbus Loan.

to the terms of the mortgage on the Columbus Property, ZP Columbus agreed to grant to First Fidelity all of ZP Columbus’ right,

title and interest in and to all present and future leases of the Columbus Property and all rents from the Columbus Property to secure

the payment by ZP Columbus when due of indebtedness evidenced by the Columbus Note, and performance of obligations under the Columbus

Note, the Columbus Loan Agreement and the related transaction documents.

NOTE 11 – SEGMENT REPORTING

The Company operates in two reportable segments

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

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

Services” segment.

The Company operates in two operating and reportable

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

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

Estate Services” segment.

The Company has determined that these reportable segments were strategic business units that offer different

3 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

Information with respect to these reportable business

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

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

MARCH 31, 2025

The Company’s Property Investment Portfolio

segment generates revenues from its operating leases with its tenants.

Rental income is accounted for pursuant to ASC Topic 842 “Leases”

and includes base rents that each tenant pays in accordance with the terms of its respective lease and is reported on a straight-line

basis over the non-cancellable term of the lease, which includes the effects of rent abatements under the leases.

The Company’s Real Estate Services segment

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

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

Corporate and unallocated amounts that do not

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

The Company’s chief operating decision maker

(“CODM”) is its Chief Executive Officer.

The decisions concerning the allocation of the Company’s resources are made

by the CODM with oversight by the Board of Directors.

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

the allocation of resources based upon segment operating profit (loss), generally defined as income or loss before interest expense and

income taxes.

The CODM assesses segment performance by using each segments’ operating income (loss) and considers budget-to-actual

variances on a periodic basis (at least quarterly) when making decisions about operational planning, including whether to invest resources

into the segments or into other parts of the Company.

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

The accounting policies of the Property investment portfolio and Real estate services segment are the same as those described in Note

2 of the Notes to Consolidated Financial Statements.

Three Months Ended March 31, 2025

Property Investment Portfolio

Real Estate Services

Corporate and Unallocated

Operating expenses (excluding depreciation and amortization)

Depreciation and amortization

Property investment portfolio

Real estate services

Income (loss) from operations

Interest expense

Property investment portfolio

Real estate services

Loss from unconsolidated joint ventures:

Property investment portfolio

Real estate services

Net (loss) income:

Loss from derivative – interest rate swap

Income (loss) before provision for income taxes

Provision for income taxes

Net income (loss)

$ ( 280,184 )

Three Months Ended March 31, 2024

Property Investment Portfolio

Real Estate Services

Corporate and Unallocated

Operating expenses (excluding depreciation and amortization)

Depreciation and amortization

Income (loss) from operations

Interest expense

Income from derivative – interest rate swap

Income (loss) before provision for income taxes

Provision for income taxes

Net income (loss)

$ ( 288,746 )

September 30,

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

Total assets by segment on March 31, 2025 and December 31, 2024 was as follows:

Property investment portfolio

Real estate services

(a) Operating

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

in the property investment portfolio segment.

Corporate and unallocated

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

All assets are located in the United States.

NOTE 12 – OPERATING LEASE RIGHT-OF-USE

3 unchanged sentences

the original tenant to the Company.

The lease term began on March 15, 2022 and expires on November 30, 2024 , provided the Company has

The lease term began on March 15, 2022 and expired on November 30, 2024 , provided the Company has

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

The monthly base rent shall be $ 2,932 per month through November 30, 2021,

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

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

through November 30, 2026.

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

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

through November 30, 2028.

In adopting ASC Topic 842, Leases (Topic 842)

2 unchanged sentences

the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 months or less.

Since the terms of the Company’s

operating lease for its office space prior to March 15, 2022 was 12 months or less on the date of adoption, pursuant to ASC 842, the Company

determined that the lease met the definition of a short-term lease, and the Company did not recognize the right-of use asset and lease

liability arising from this lease.

Upon signing of the Assumption of Lease and Consent Agreement on March 15, 2022, the Company analyzed

the new lease and determined it is required to record a lease liability and a right of use asset on its consolidated balance sheet, at

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.

Upon signing of the Assumption of

Lease and Consent Agreement on March 15, 2022 and the new lease effective December 1, 2024, the Company analyzed the leases and determined

it is required to record a lease liability and a right of use asset on its consolidated balance sheet, at fair value.

In connection with

June 3, 2024 Lease, in December 2024, the Company increased its right of use assets and lease liabilities by $ 81,974 and removed all remaining

right of use assets and lease liabilities associated with the March 2022 lease, which amounted to $ 90,710 .

For the three months ended March 31, 2025 and 2024, in connection with

its operating leases, the Company recorded rent expense of $ 11,406 and $ 9,264 , 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 September 30, 2024 and December 31, 2023, right-of-use

asset (“ROU”) is summarized as follows:

September 30,

present value of the lease liability in December 2024 was a discount rate of 9 % which was based on the Company’s incremental borrowing

On March 31, 2025 and December 31, 2024, ROU Assets

is summarized as follows:

Office lease right of use asset

1 unchanged sentence

Balance of ROU assets

On September 30, 2024, future minimum base lease

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

Year ending September 30,

On March 31, 2025, future minimum base lease payments

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

Year ending March 31,

Total minimum non-cancelable operating lease payments

discount to fair value

Total lease liability on September 30, 2024

NOTE 13 – SUBSEQUENT EVENTS

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.

Total lease liability on March 31, 2025

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