What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-14 compared with 2024-11-14 · 163 added, 164 removed, 374 unchanged (47% of the section changed)

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Factors that could cause our actual results

of operations and financial condition to differ materially are set forth in the “Risk Factors” section of our annual report

on Form 10-K as filed on March 26, 2024, as the same may be updated from time to time.

of operations and financial condition to differ materially are set forth in the “Risk Factors” section of the Company’s

annual report on Form 10-K for the fiscal year ended December 31, 2024, as the same may be updated from time to time.

We caution that these factors could cause our

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The Company operates in two organized segments;

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

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

Services” segment.

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

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

absolute-net leases.

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

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

(1) the operations,

leasing and management of its commercial properties, herein known as the “Property Investment Portfolio” segment, and (2)

the advisory, brokerage and technology services related to commercial properties, herein known as the “Real Estate Services”

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

have a major impact on their commercial value, and then works to acquire the properties while securing long-term, absolute-net leases.

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

Substance Act of 1970, as amended.

The core of our business operations involves identifying,

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leased properties is occupied by a commercial cannabis tenant.

Zoned Properties maintains a portfolio of properties

that it owns, develops and leases.

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

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

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

as regulated cannabis cultivation and processing facilities.

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

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

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

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

As of September 30, 2024, a summary of rental

properties owned by us consisted of the following:

Zoned Properties maintains a portfolio of properties that it owns,

develops and leases.

As of March 31, 2025, the Company leases land and/or building space at the seven properties in its portfolio to licensed

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

Four of the leased properties are

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

cultivation and processing facilities, and one property is leased for the future development of a licensed medical and adult use marijuana

retail dispensary.

The Company considers the two cultivation sites in its portfolio as legacy properties and may consider selling or leveraging

those properties to unlock equity and create capital availability in the future.

The Zoned Properties investment thesis has evolved over

the years as the cannabis industry has emerged, and is currently focused on investing capital into direct-to-consumer properties, located

in state-markets with robust cannabis consumer demand in the industry

As of March 31, 2025, a summary of rental properties

owned by us consisted of the following:

Chino Valley,

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Vacant Rentable (Sq.

rented as of September 30, 2024

rented as of March 31, 2025

Annual Base Rent (*,**)

2024 (remainder of year)

Annual base rent represents amount of cash payments due from tenants.

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

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

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

Comparison of Results of Operations for the Three and Nine Months

Ended September 30, 2024 and 2023

For the three and nine months ended September

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

three months ended March 31, 2025 and 2024, which are included elsewhere in this quarterly report on Form 10-Q.

The results discussed

below are for the three months ended March 31, 2025 and 2024.

Comparison of Results of Operations for the Years Ended December

31, 2024 and 2023

For the three months ended March 31, 2025 and

2024, revenues by reportable business segments were as follows:

the Three Months Ended

Property investment portfolio

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Total revenues

For the three months ended September 30, 2024,

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

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

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

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

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

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

property in Chicago, IL and Surprise, AZ.

For the nine months ended September 30, 2024,

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

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

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

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

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

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

listings and a decrease in advisory fees.

For the three months ended March 31, 2025, total

revenues amounted to $974,552, including property investment portfolio revenues $760,892, which consists of rental revenues, as compared

to total revenues of $837,052, including property investment portfolio revenues of $691,292, for the three months ended March 31, 2024,

an overall increase of $137,500, or 16.4%.

This increase was attributable to an increase in rental revenues of $69,600 or 10.0%, primarily

attributable to an increase in rental revenue from our recently acquired property in Chicago, IL and Surprise, AZ, and a net increase

in real estate services revenues of $67,900, or 46.6%, attributable to an increase in commissions and assignment fees earned on real estate

listings, offset by a decrease in advisory fees.

The increase in property investment portfolio

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Operating expenses

For the three months ended September 30, 2024,

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

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

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

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

expenses consisted of the following:

Three Months Ended

September 30,

Nine Months Ended

September 30,

For the three months ended March 31, 2025, operating

expenses amounted to $545,781 as compared to $708,143 for the three months ended March 31, 2024, representing a decrease of $162,362,

For the three months ended March 31, 2025 and 2024, operating expenses consisted of the following:

the Three Months Ended

Compensation and benefits

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Business development costs

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

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

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

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

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

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

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

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

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

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

For the three months ended March 31, 2025, compensation and benefit expense increased by $20,504, or 7.7%, as compared to the three months ended March 31, 2024.

The increase was attributable to an in stock-based compensation of $40,112 related to an increase in accretion of stock option expense and an increase in health insurance of $11,647, offset by a decrease in executive and staff salaries and other benefits of $31,255.

For the three months ended March 31, 2025, professional fees decreased by $44,509, or 36.4%, as compared to the three months March 31, 2024.

This decrease was primarily attributable to a decrease in consulting fees of $27,869 and a decrease in legal fees of $19,491, offset by an increase in other professional fees of $2,851.

For the three months ended March 31, 2025 and 2024, we recorded brokerage fees amounting to $0 and $103 330, respectively, representing a decrease of $103,330, or 100%.

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

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

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

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

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

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

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

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

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

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

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

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

For the three months ended March 31, 2025, general and administrative expenses decreased by $22,936, or 29.1%, as compared to the three months ended March 31 2024, primarily to a decrease in advertising travel and conference fee expenses.

For the three months ended March 31, 2025, depreciation expense decreased by $1,139, or 1.3%, as compared to the three months ended March 31, 2024 due to a decrease in depreciable rental properties.

For the three months ended March 31, 2025, real estate taxes increased by $10,648, or 38.9%, as compared to the three months ended March 31, 2024 related to our Michigan property.

For the three months ended March 31, 2025, property portfolio business development costs decreased by $21,600, or 100%, as compared to the three months ended March 31, 2024.

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

Income from operations

As a result of the factors described above, for

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

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

For the nine months ended September 30, 2024, income

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

increase of $586,704, or 648.1%.

the three ended March 31, 2025, income from operations amounted to $428,771 as compared to income from operations of $128,909 for the

three months ended March 31, 2024, representing an increase of $299,862, or 232.6%.

Other (expenses) income, net

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

For the three months ended September 30, 2024, total

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

For the three months ended March 31, 2025 and 2024,

total other expenses, net amounted to $282,913 as compared to total other expenses, net of $32,436, respectively, representing an increase

of $250,477, or 772.2%.

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

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

For the nine months ended September 30,

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

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

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

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

Equity method loss

For the three months ended September 30, 2024

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

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

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

Net income (loss)

This increase was attributable to an increase in interest expense of $36,484 primarily related to an increase

in notes payable, and an increase in loss in fair value from an interest rate swap of $213,993, which resulted in a loss from derivative

– interest rate swap of $88,390 for the three months ended March 31, 2025.and compared to a gain from derivative – interest

rate swap for the three months ended March 31, 2024.

As a result of the foregoing for the three months

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

per common share (basic and diluted), respectively.

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

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

ended March 31, 2025 and 2024, net income amounted to $145,858, or $0.01 per common share (basic) and $0.01 per common share (diluted),

and $96,473, or $0.01 per common share (basic and diluted), respectively.

Liquidity and Capital Resources

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

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

December 31, 2023, respectively.

We had cash of $993,918 and $1,019,980 as of March 31, 2025 and December

31, 2024, respectively.

Our primary uses of cash have been for the acquisition

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The following trends are reasonably likely to result in changes in our liquidity over the near

to long term:

term to long term:

An increase in working capital requirements to finance our current business,

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We have used these funds to fund our operating

expenses, pay our obligations, acquire and develop rental properties, invest in joint ventures and notes receivable, and to grow our company.

We may need to raise significant additional capital or debt financing to acquire new properties, to develop existing properties, to assure

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

expenses, pay our obligations, acquire and develop rental properties, invest in joint ventures, and to grow our company.

We may need to

raise significant additional capital or debt financing to acquire new properties, to develop existing properties, to assure we have sufficient

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

Recent Property Acquisitions and Related Note

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

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

easements, and appurtenances pertaining thereto.

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

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

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

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

rights, easements, and appurtenances pertaining thereto.

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

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

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

As previously disclosed, on January

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.

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,

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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 $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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Pursuant to the terms of the Unconditional Repayment

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

in favor of PMF, the Company guaranteed

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

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

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

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

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

with the loan.

Guaranty (the “PMF Guaranty”), dated as of July 8, 2024, by the Company, in favor of PMF, the Company guaranteed to PMF the

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

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

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

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

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

We may secure additional financing to acquire

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may restrict our ability to grow our business operations.

For the Nine Months Ended September 30, 2024

Net cash flow provided by operating activities

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

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

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

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

During the nine months ended September 30, 2024,

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

an increase of $2,021,610.

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

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

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

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

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

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

For the Three Months Ended March 31, 2025 and

Net cash flow provided by operating activities was $330,632 for the

three months ended March 31, 2025, as compared to net cash flow provided by operating activities of $213,818 for the three months ended

March 31, 2024, representing an increase of $116,814.

● Net cash flow provided by operating activities for the three months

ended March 31, 2025 primarily reflected net income of $145,858, adjusted for the add-back of non-cash items consisting of depreciation

of $88,508, amortization of debt discount of $6,418, accretion of stock-based stock option expense of $56,606, and loss from the changes

in fair value from an interest rate swap of $88,390, offset by changes in operating assets and liabilities primarily consisting of a decrease

in accounts receivable of $121,966, an increase in deferred rent of $123,146 attributable to rent abatement on our new tenant leases at

our Chicago, Illinois and Surprise, AZ properties, a decrease in lease incentive receivable of $6,880, a decrease in prepaid expenses

of $40,313, a decrease in accounts payable of $10,983, a decrease in accrued expenses of $86,037, and a decrease in contract liabilities

cash flow provided by operating activities for the three months ended March 31, 2024 primarily reflected net income of $96,473, adjusted

for the add-back of non-cash items consisting of depreciation of $89,647, amortization of debt discount of $4,615, accretion of stock-based

stock option expense of $16,494, a loss on forfeited escrow deposit of $21,600, and income from the changes in fair value from an interest

rate swap of $125,603, offset by changes in operating assets and liabilities primarily consisting of an increase in accounts receivable

of $42,908, an increase in deferred rent of $88,048 attributable to rent abatement on our new tenant lease at our Chicago, Illinois Property,

an increase in accounts payable of $58,025, an increase in accrued expenses of $128,038, an increase in contract liabilities of $23,508,

and an increase in security deposits payable of $27,730.

During the three months ended March 31 2025, net

cash flow used in investing activities amounted to $648,841 as compared to net cash used in investing activities of $1,771,916, representing

a decrease of $1,123,075.

During the three months ended March 31, 2025, net cash used in investing activities was attributable to the

purchase of rental properties and improvements of $450,000, an increase in investments in cost method investee of $84,110, and an increase

in escrow deposits of $8,681 and an increase in capitalized project costs of $106,050.

three months ended March 31, 2024, net cash flow used in investing activities amounted to $1,771,916.

During the three months ended March

31, 2024, net cash used in investing activities was attributable to the purchase of rental property of $1,585,878 primarily in connection

with the acquisition of property in Chicago, Illinois, a purchase of property and equipment of $6,480, an increase in capitalized permit

costs of $56,290, and an increase in escrow deposits of $123,268 in connection with escrow deposits made on other potential acquisitions

of rental properties

During the nine months ended September 30, 2024

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

During the nine months

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

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

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

payable of $59,803.

the three months ended March 31, 2025 and 2024, net cash provided by (used in) financing activities amounted to $292,147 and $(21,794),

respectively.

During the three months ended March 31, 2025, net cash provided by financing activities consisted of net proceeds from a

note payable of $300,000, offset by cash used for the repayment of notes payable of $7,853.

the three months ended March 31, 2024, net cash used in financing activities amounted to $21,794, which consisted of the repayment of

notes payable.

Contractual Obligations and Off-Balance Sheet

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The following tables summarize our contractual

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

cash flows in future periods.

obligations as of March 31, 2025 (dollars in thousands), and the effect these obligations are expected to have on our liquidity and cash

flows in future periods.

Payments Due by Period

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Off-balance Sheet Arrangements

Other than discussed below, we have not entered

Other than discussed herein, we have not entered

into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties.

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swap payments utilizing cash flows from operations.

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

As of March 31, 2025, the notional amount of our interest rate swaps was $4,406,083.

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

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We base our estimates on historical experience

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

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

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

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

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

the fair value of its swap agreement.

The Company believes that the quality of the counterparty to its swap agreement mitigates the counterparty

In accordance with the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”)

820, Fair Value Measurements and Disclosures , the Company believes values provided by its counterparty represent the fair value

of its swap agreement.

The Company believes that the quality of the counterparty to its swap agreement mitigates the counterparty credit

The estimated fair value of the interest rate

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Information regarding the interest rate swap is as follows:

September 30,

Fair Value of

September 30,

Fair Value of

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

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

Assumptions used in the estimation of stock-based grants

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

under FASB’s Accounting Standards Update (ASU) 2016-09 Improvements to Employee Share-Based Payment Accounting .

used in the estimation of stock-based grants may include the volatility of our common stock, expected term of exercise, our discount rate

and our dividend rate.

Recent Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis