What changed in this filing

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Item 1. Financial Statements

2025-08-14 compared with 2025-05-14 · 949 added, 914 removed, 1017 unchanged (65% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

( Unaudited )

Accounts receivable

24 unchanged sentences

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

2,000,000 shares issued and

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

2,000,000 shares issued and outstanding on June 30, 2025 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 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

12,201,516 and 12,201,516 shares issued on June 30, 2025 and December 31, 2024, respectively, and 12,030,829 and 12,087,829 shares outstanding on June 30, 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)

Treasury stock, at cost ( 170,687 and 113,687 shares on June 30, 2025 and December 31, 2024, respectively)

Accumulated deficit

3 unchanged sentences

Total Liabilities and Stockholders’ Equity

See accompanying notes to unaudited consolidated

financial statements.

See accompanying notes to unaudited consolidated financial statements.

ZONED PROPERTIES, INC.

2 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Property investment portfolio revenues

13 unchanged sentences

Interest expenses

Income (loss) from derivative - interest rate swap

(Loss) income from derivative - interest rate swap

Total other expenses, net

NET INCOME (LOSS)

NET INCOME (LOSS) PER COMMON SHARE:

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

See accompanying notes to unaudited consolidated

financial statements.

PROPERTIES, INC.

See accompanying notes to unaudited consolidated financial statements.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2025 AND 2024

Preferred Stock

6 unchanged sentences

( 15,493,664 )

Purchase of treasury shares

Accretion of stock-based compensation related to stock options issued

Balance, June 30, 2025

$ ( 15,467,338 )

Preferred Stock

6 unchanged sentences

( 16,117,007 )

Accretion of stock-based compensation related to stock options issued

Balance, June 30, 2024

$ ( 16,149,290 )

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

For the Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

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CASH FLOWS FROM FINANCING ACTIVITIES:

Purchase of treasury shares

Net proceeds from note payable

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

JUNE 30, 2025

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

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

ZP RE AZ DYSART.

LLC (“ZP Dysart”) was organized in the State of Arizona on May 24, 2024.

ZP RE AZ DYSART, LLC (“ZP Dysart”) was organized in the State of Arizona on May 24, 2024.

The Company also maintains a 50 % equity interest in two joint ventures

(see Note 5).

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING

5 unchanged sentences

upon consolidation.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

The unaudited consolidated financial statements

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

for the three and six months ended June 30, 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

fairly our consolidated financial position, results of operations, and cash flows as of June 30, 2025 and 2024, and for the periods then

ended, have been made.

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As reflected in the accompanying unaudited consolidated

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 .

financial statements, the Company generated net income of $ 172,184 and cash provided by operations of $ 569,790 during the six months ended

June 30, 2025.

Additionally, as of June 30, 2025, the Company had cash of $ 985,847 and stockholders’ equity of $ 6,074,476 .

The cash balance and positive net cash provided

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Significant estimates

for the three months ended March 31, 2025 and 2024 include the collectability of accounts and other receivables, valuation of investment

for the six months ended June 30, 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

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

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).

For the six months ended June 30,

2025 and 2024, revenues associated with Significant Tenants amounted to $ 1,174,835 and $ 1,181,412 , respectively, which represents 61.4 %

and 77.2 % of the Company’s total revenues, respectively (see Note 3).

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

Fair value of financial instruments

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Unobservable inputs that are not corroborated by market data.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

Other than the interest rate swap, the Company

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The following table represents the Company’s

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

March 31, 2025

fair value hierarchy of its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2025 and December

June 30, 2025

December 31, 2024

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rate debt agreement, the swap agreement is not considered an effective cash flow hedge.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

Accordingly, changes in the underlying market

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

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

The Company had no cash equivalents on June 30, 2025 and December 31,

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

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

On March 31, 2025 and December 31,

On June 30, 2025 and December 31,

2024, the Company had approximately $ 414,000 and $ 510,000 , respectively, of cash in excess of FDIC limits of $ 250,000 .

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

Investment in unconsolidated joint ventures

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qualifies for consolidation or if it should be accounted for as an unconsolidated investment under the equity method of accounting.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

If an investment qualifies for the equity method

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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.

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 as income.

six months ended June 30, 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 unaudited

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

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

The Company’s rental properties are individually

11 unchanged sentences

from actual results.

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

For the three and six months ended June 30, 2025 and 2024, the Company did not record any impairment losses.

The Company has land which is not subject to depreciation.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

Escrow deposits

The Company is in the business of pursuing real

estate acquisitions and investments that may include various contractual instruments to secure a property, such as an Option Agreement

or a Purchase and Sale Agreement.

The Company is in the business of pursuing real estate acquisitions

and investments that may include various contractual instruments to secure a property, such as an Option Agreement or a Purchase and Sale

These agreements often include the requirement to make escrow deposits.

Escrow deposits include cash

deposits made by the Company for the future acquisition of properties or for the option to acquire a property.

In most cases, upon closing

of the acquisition of a property, the escrow deposit will be applied to the purchase price.

In some cases, the Company may discontinue

pursuit of an acquisition of a property and therefore terminate an existing agreement, which can cause forfeiture of escrow deposits if

those deposits are non-refundable.

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.

Escrow deposits include cash deposits made by the Company

for the future acquisition of properties or for the option to acquire a property.

In most cases, upon closing of the acquisition of a

property, the escrow deposit will be applied to the purchase price.

In some cases, the Company may discontinue pursuit of an acquisition

of a property and therefore terminate an existing agreement, which can cause forfeiture of escrow deposits if those deposits are non-refundable.

During the six months ended June 30, 2025 and 2024, the Company forfeited escrow deposits of $0 and $ 22,875 , respectively, which is reflected

in operating expenses as part of property portfolio business development costs on the accompanying unaudited consolidated statements of

On June 30, 2025 and December 31, 2024, escrow deposits amounted to $ 188,056 and $ 169,875 , respectively.

Property and equipment

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that is funded by the Company is treated as a lease incentive receivable and amortized as a reduction of revenue over the lease term.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

Currently, the Company’s leases provide

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

Contract liabilities

3 unchanged sentences

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

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

During the six months ended June 30, 2025 and 2024, contract liabilities

activities were as follows:

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

For leases entered into on or after the effective

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property investment portfolio revenues.

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

Additionally, during the six months ended June 30, 2025, the Company paid $ 600,000 to the tenant

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

16 unchanged sentences

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

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

of June 30, 2025 and December 31, 2024 of $ 987,309 and $ 747,504 , respectively (see Note 3).

Additionally, if the lease provides for tenant

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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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

Basic and diluted net income per share

13 unchanged sentences

The following table presents a reconciliation

of basic and diluted net income per common share:

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

Three Months Ended

Net income per common share - basic:

Six Months Ended

Net income (loss) per common share - basic:

Net income (loss)

undistributed (earnings) loss allocated to participating securities

Net income allocated to common stockholders

Net income (loss) allocated to common stockholders

Weighted average common shares outstanding – basic

Net income per common share – basic

Net income per common share - diluted:

Net income allocated to common shareholders – basic

Net income (loss) per common share – basic

Net income (loss) per common share - diluted:

Net income (loss) allocated to common shareholders – basic

interest of convertible debt

Numerator for net income per common share – basic

Numerator for income (loss) per common share – basic

Weighted average common shares outstanding – basic

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Weighted average common shares outstanding – diluted

Net income per common share – diluted

Net income (loss) per common share – diluted

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

The following potentially dilutive shares have

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

June 30, 2025 and 2024.

Convertible debt

Stock options

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,

In November 2023, the FASB issued Accounting Standards Update (“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

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.

Deferred income tax assets and liabilities arise

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

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

The Company does not believe it has any uncertain tax positions as of June 30, 2025 and December 31, 2024 that would require

either recognition or disclosure in the accompanying consolidated financial statements.

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

Recently issued accounting pronouncements

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

JUNE 30, 2025

Chino Valley, AZ

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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.

for all current and future operational square footage that may be developed as the premises continue to expand.

Green Valley, AZ

8 unchanged sentences

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

On May 29, 2020, Green Valley and Broken Arrow

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

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

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between VSM, as sublessor, and CJK, as sublessee.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

Pursuant to the terms of the Tempe Second Amendment,

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remaining term of the lease through April 2040.

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

On June 30, 2025 and December 31, 2024, contract liability related to this lease modification

amounted to $ 255,502 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.

As of June 1, 2025, VSM has completed more than $ 10,000,000 worth of

improvements to the Tempe property.

Additionally, on the Tempe property, the Company

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

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

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which is the subject of the Kingman Lease.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

On August 2, 2023, the Company entered into a

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

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

and Assumption of Lease (“Assignment”) whereby the Woodward Lease was assigned from Rapid Fish 2 LLC (“Old Tenant”)

to Rapid Fish LLC (“New Tenant”).

JUNE 30, 2025

On May 14, 2023, ZP Woodward entered into an

Assignment and Assumption of Lease (“Assignment”) whereby the Woodward Lease was assigned from Rapid Fish 2 LLC (“Old

Tenant”) to Rapid Fish LLC (“New Tenant”).

Old Tenant and New Tenant share common ownership.

The assignment of the Woodward Lease is

conditioned upon issuance by the City of Pleasant Ridge, Michigan of a final cannabis business license to New Tenant and ZP Woodward’s

receipt of a fully executed Reaffirmation of Guaranty from the guarantors of the Woodward Lease.

The Assignment contains other terms as

are customary for a document of this type.

The assignment of the

Woodward Lease is conditioned upon issuance by the City of Pleasant Ridge, Michigan of a final cannabis business license to New Tenant

and ZP Woodward’s receipt of a fully executed Reaffirmation of Guaranty from the guarantors of the Woodward Lease.

The Assignment

contains other terms as are customary for a document of this type.

On May 1, 2024, ZP Woodward and Rapid Fish, LLC

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the following changes have been agreed to by the Parties:

Amended Rental Payment

Amended Rental Payment Schedule

The First Amendment provides that as long as the

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

Renovation Completion

Renovation Completion Commitment

The First Amendment provides for the inclusion

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

JUNE 30, 2025

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 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 14.5 years.

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 fee payable.

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.

On January 2, 2024, ZPRE Holdings entered into

a contingent Licensed Cannabis Facility Absolute Net Ground Lease Agreement (the “Sunday Goods Lease”), with a commencement

7 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

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

During the six months ended June 30, 2025, the Company paid $ 600,000 to Sunday Goods as a tenant improvement allowance.

The $ 600,000

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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)

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

JUNE 30, 2025

As of June 30, 2025 and December 31, 2024, security

deposits payable to the Company’s tenants amounted to $ 377,076 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 June 30, 2025, consists of the following:

Future annual base rent:

2025 (remainder of year)

Revenues – Significant Tenants

For the three months ended March 31, 2025 and

For the six months ended June 30, 2025 and 2024,

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

Three Months Ended

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

Six Months Ended

Further, as of June 30, 2025 and December 31,

2024, deferred rent of $ 987,309 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 March 31, 2025 and December 31, 2024, a lease incentive receivable of $ 415,138 and $ 422,018 is

discussed above, respectively, and as of June 30, 2025 and December 31, 2024, a lease incentive receivable of $ 408,257 and $ 422,018 is

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

5 unchanged sentences

lease through April 2040.

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

On June 30, 2025 and December 31, 2024 deferred revenue related to this lease modification amounted to $ 255,502

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

6 unchanged sentences

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

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

As of June 30, 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

As of June 30, 2025 and December 31, 2024, the Significant Tenants

collectively leased approximately 52.9 % and 55.4 % of the Company’s total assets, respectively.

1 unchanged sentence

asset concentration related its Surprise, AZ property, which leased approximately 14.0 % 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

Downturns relating to certain industries or business

sectors or the financial stability of the Company’s significant tenants may have a significant adverse impact on the Company’s

assets and its ability to pay its operating expenses or pay dividends than if the Company had a diversified property portfolio and service

The Company’s total assets are concentrated into a limited number of tenants who were considered significant tenants.

To the extent that the Company’s total assets are concentrated in a limited number of tenants that are in the regulated cannabis

industry, downturns relating generally to such industry or business sector, or a decline in the financial stability of the Company’s

Significant Tenants may result in defaults on all of the Company’s leases within a short time period, which may reduce the Company’s

net income and the value of the Company’s common stock and accordingly, limit the Company’s ability to pay our operating expenses

or pay dividends to its stockholders.

If the Company’s tenants are prohibited from operating or cannot pay their rent, the Company

may not have enough working capital to support its operations and the Company would need to consider seeking out new tenants at rental

rates per square foot that may be less than its current rate per square foot.

NOTE 4 – RENTAL PROPERTIES

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

properties, net consisted of the following:

Building and building improvements

Through June 30, 2025, all rental payments have been made on a timely basis.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

relating to certain industries or business sectors or the financial stability of the Company’s significant tenants may have a significant

adverse impact on the Company’s assets and its ability to pay its operating expenses or pay dividends than if the Company had a

diversified property portfolio and service offerings.

The Company’s total assets are concentrated into a limited number of tenants

who were considered significant tenants.

To the extent that the Company’s total assets are concentrated in a limited number of

tenants that are in the regulated cannabis industry, downturns relating generally to such industry or business sector, or a decline in

the financial stability of the Company’s Significant Tenants may result in defaults on all of the Company’s leases within

a short time period, which may reduce the Company’s net income and the value of the Company’s common stock and accordingly,

limit the Company’s ability to pay our operating expenses or pay dividends to its stockholders.

If the Company’s tenants

are prohibited from operating or cannot pay their rent, the Company may not have enough working capital to support its operations and

the Company would need to consider seeking out new tenants at rental rates per square foot that may be less than its current rate per

4 – RENTAL PROPERTIES

June 30, 2025 and December 31, 2024, rental properties, net consisted of the following:

building improvements

Construction in progress

3 unchanged sentences

( 2,942,611 )

Rental properties, net

ZONED PROPERTIES, INC.

properties, net

to the terms of the Agreement Regarding Purchase and Sale Contract and an Assignment and Assumption Agreement, on January 19, 2024, ZPRE

Holdings completed the acquisition of its Ashland Avenue Property located in Chicago, Illinois for an aggregate cash purchase price of

$ 1,585,878 , including (i) $ 1,250,000 , representing the Purchase Price, (ii) an assignment fees of $ 185,000 , and (iii) closing costs,

commissions, and fees customary to the acquisition of real estate of $ 150,878 , which includes a $ 65,000 commission expense, a $ 79,634

sponsor fee, and other costs of $ 6,244 .

July 8, 2024 (the “Closing”), ZP Dysart acquired a property in Surprise AZ (the “Surprise Property”) from NWC

Dysart & Bell LLC (“NWC”).

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) 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 .

the six months ended June 30, 2025, the Company paid $ 600,000 to Sunday Goods as a tenant improvement allowance.

The $ 600,000 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 $ 600,000 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 three months ended June 30, 2025 and 2024, depreciation of rental properties amounted to $ 87,486 and $ 88,202 , respectively.

the six months ended June 30, 2025 and 2024, depreciation of rental properties amounted to $ 175,297 and $ 176,288 , respectively.

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

Property Acquisitions

Pursuant to the terms of the Agreement Regarding

Purchase and Sale Contract and an Assignment and Assumption Agreement, on January 19, 2024, ZPRE Holdings completed the acquisition of

its Ashland Avenue Property located in Chicago, Illinois for an aggregate cash purchase price of $ 1,585,878 , including (i) $ 1,250,000 ,

representing the Purchase Price, (ii) an assignment fees of $ 185,000 , and (iii) closing costs, commissions, and fees customary to the

acquisition of real estate of $ 150,878 , which includes a $ 65,000 commission expense, a $ 79,634 sponsor fee, and other costs of $ 6,244 .

On July 8, 2024 (the “Closing”), ZP

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

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

easements, and appurtenances pertaining thereto.

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

included (i) $ 1,100,000 , representing the Purchase Price, (ii) 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.

NOTE 5 – INVESTMENT IN UNCONSOLIDATED

JOINT VENTURE AND EQUITY SECURITIES

Investment in unconsolidated joint venture

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

the equity method of accounting as the Company exercises significant influence but does not exercise financial and operating control over

Investments are reviewed for changes in circumstance or the occurrence of events that suggest an other than temporary event

where the Company’s investment may not be recoverable.

Currently, the Zoneomics Green team has completed the creation of the foundational

design, technology platform, and market positioning for Zoneomics Green to launch in the cannabis industry.

However, in order to successfully

launch, the technology platform relies upon a required merchant banking component.

While Company management knew this risk was a major

factor going into the investment, it was not foreseen exactly when an appropriate merchant banking solution would be available given the

federal status of regulated cannabis and specifically the federal banking status as it relates to regulated cannabis, even for ancillary

services such as Zoneomics Green.

The regulatory status related to cannabis banking reform and regulation at the federal level, which

the Zoneomics platform relies upon, is uncertain and the Company believes it is appropriate to cause an impairment of the Zoneomics Green

investment at this time, while also understanding that Company believes Zoneomics Green may still create material value for the Company

in the future.

Additionally, the Company is using the Zoneomics Green technology within its own business to generate leads for new projects.

The Company has no further financial or investment obligations at this time.

Accordingly, on December 31, 2023, the Company recorded an

other-than-temporary impairment loss of $ 45,000 because it was determined that the fair value of its equity method investment in Zoneomics

was less than its carrying value.

Based on management’s evaluation, it was determined that due to market and regulatory conditions,

implementing the Company’s business model was at risk and that the Company’s ability to recover the carrying amount of the

investment in Zoneomics was impaired.

The following represents summarized financial

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:

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

5 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURE AND EQUITY SECURITIES

in unconsolidated joint venture

June 30, 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 the equity method of accounting as the Company exercises significant influence but does

not exercise financial and operating control over this entity.

Investments are reviewed for changes in circumstance or the occurrence

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

Currently, the Zoneomics

Green team has completed the creation of the foundational design, technology platform, and market positioning for Zoneomics Green to

launch in the cannabis industry.

However, in order to successfully launch, the technology platform relies upon a required merchant banking

While Company management knew this risk was a major factor going into the investment, it was not foreseen exactly when an

appropriate merchant banking solution would be available given the federal status of regulated cannabis and specifically the federal

banking status as it relates to regulated cannabis, even for ancillary services such as Zoneomics Green.

The regulatory status related

to cannabis banking reform and regulation at the federal level, which the Zoneomics platform relies upon, is uncertain and the Company

believes it is appropriate to cause an impairment of the Zoneomics Green investment at this time, while also understanding that Company

believes Zoneomics Green may still create material value for the Company in the future.

Additionally, the Company is using the Zoneomics

Green technology within its own business to generate leads for new projects.

The Company has no further financial or investment obligations

at this time.

Accordingly, on December 31, 2023, the Company recorded an other-than-temporary impairment loss of $ 45,000 because it was

determined that the fair value of its equity method investment in Zoneomics was less than its carrying value.

Based on management’s

evaluation, it was determined that due to market and regulatory conditions, implementing the Company’s business model was at risk

and that the Company’s ability to recover the carrying amount of the investment in Zoneomics was impaired.

following represents summarized financial information derived from the financial statements of the Zoneomics Green Joint Venture, as

of June 30, 2025 and December 31, 2024 and 2023 and for the three months ended June 30, 2025 and 2024.

Current assets:

Total liabilities and equity

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

Statement of operations

Three Months Ended

liabilities and equity

of June 30, 2025 and December 31, 2024, the Company’s investment in unconsolidated joint venture amounts to $ 4,923 and $ 4,923 ,

respectively.

of operations

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

On June 24, 2022, the Company’s wholly-owned

subsidiary, ZP Data Platform 2 LLC, purchased 875 shares of Series A convertible preferred stock of Anami Technology, Inc., a California

corporation, for $ 50,000 , or $ 57.14 per share.

The Company’s ownership percentage is less than 20 % and it does not have the ability

to exercise significant influence as described in ASC 323-10-15-6.

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

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

If the Company identifies observable

price changes in orderly transactions for the identical or a similar investment of the same issuer, the Company shall measure the equity

security at fair value as of the date that the observable transaction occurred.

If the Company subsequently elects to measure this equity

security at fair value, the Company shall measure all identical or similar investments of the same issuer, including future purchases

of identical or similar investments of the same issuer, at fair value.

The election to measure this equity security at fair value shall

be irrevocable.

Any resulting gains or losses on the securities for which that election is made shall be recorded in earnings at the time

of the election.

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

NOTE 6 – NOTES PAYABLE

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

payable consisted of the following:

Note payable - East West Bank

Notes payable - 23616 Land Contract

Note payable – 23634 Land Contract

Note payable - Surprise, AZ property

Total principal due on notes payable

debt discount

Notes payable, net

East West Bank Swap Note

On July 11, 2022, Zoned Arizona entered into a

Loan Agreement (the “Loan Agreement”), dated as of July 11, 2022, by and between Zoned Arizona and East West Bank (the “Bank”).

Pursuant to the terms of the Loan Agreement, subject to and upon the satisfaction of the terms and conditions of the Loan Agreement, Zoned

Arizona could request advances under a multiple access loan (“MAL”) during the term of the MAL.

On July 11, 2022, in connection

with the Loan Agreement, Zoned Arizona paid loan and other fees of $ 176,472 , and in connection with the First Amendment to the Loan Agreement

discussed below, paid additional fees of $ 8,124 .

These loan and other fees aggregating $ 184,596 are reflected as a debt discount and are

being amortized ratably and charged to interest expense over the term of the related debt.

At any time before July 11, 2023, Zoned Arizona

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

with the repayment terms set forth in the variable rate note initially evidencing the MAL, executed by Zoned Arizona in favor of the Bank

(the “Note”).

When Zoned Arizona made the Early Amortization.

ZONED PROPERTIES, INC.

share of loss from unconsolidated joint ventures

the three and six months ended June 30, 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.

in cost method investees

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 as income.

During the six months ended June 30, 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.

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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:

(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 ;

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

in equity securities

June 24, 2022, the Company’s wholly-owned subsidiary, ZP Data Platform 2 LLC, purchased 875 shares of Series A convertible preferred

stock of Anami Technology, Inc.

for $ 50,000 , or $ 57.14 per share.

The Company’s ownership percentage

is less than 20 % and it does not have the ability to exercise significant influence as described in ASC 323-10-15-6.

This equity instrument

does not have a readily determinable fair value.

Accordingly, the Company elected to measure this equity security at its cost minus impairment,

If the Company identifies observable price changes in orderly transactions for the identical or a similar investment of the same

issuer, the Company shall measure the equity security at fair value as of the date that the observable transaction occurred.

If the Company

subsequently elects to measure this equity security at fair value, the Company shall measure all identical or similar investments of

the same issuer, including future purchases of identical or similar investments of the same issuer, at fair value.

The election to measure

this equity security at fair value shall be irrevocable.

Any resulting gains or losses on the securities for which that election is made

shall be recorded in earnings at the time of the election.

On June 30, 2025 and December 31, 2024, investment in equity securities amounted

to $ 50,000 .

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

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

Pursuant to the terms of the First Amendment, Zoned

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

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

Except as provided

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

Pursuant to the terms of the Loan Agreement and

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

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

completed on the Tempe Property.

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

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

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

Also as previously disclosed, on July 11, 2022

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

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

any of the loan documents.

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

“Reaffirmation”) in favor of the Bank.

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

the First Amendment and Swap Note.

On December 7, 2022, Zoned Arizona and the Bank

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

The Confirmation incorporates by reference

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

as if the parties to the Confirmation

executed such agreement in such form.

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

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

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

sheets with changes in fair value recorded contemporaneously in earnings.

The Company has entered into an interest rate swap to mitigate

variability in interest payments on its variable-rate debt.

On 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.

6 – NOTES PAYABLE

June 30, 2025 and December 31, 2024, notes payable consisted of the following:

Note payable -

East West Bank

Notes payable - 23616 Land

Note payable – 23634

Land Contract

payable - Surprise, AZ property

Total principal due on notes

debt discounts

West Bank Swap Note

July 11, 2022, Zoned Arizona entered into a Loan Agreement (the “Loan Agreement”), dated as of July 11, 2022, by and between

Zoned Arizona and East West Bank (the “Bank”).

Pursuant to the terms of the Loan Agreement, subject to and upon the satisfaction

of the terms and conditions of the Loan Agreement, Zoned Arizona could request advances under a multiple access loan (“MAL”)

during the term of the MAL.

On July 11, 2022, in connection with the Loan Agreement, Zoned Arizona paid loan and other fees of $ 176,472 ,

and in connection with the First Amendment to the Loan Agreement discussed below, paid additional fees of $ 8,124 .

These loan and other

fees aggregating $ 184,596 are reflected as a debt discount and are being amortized ratably and charged to interest expense over the term

of the related debt.

any time before July 11, 2023, Zoned Arizona could elect to commence paying principal together with interest on the MAL (the “Early

Amortization Election”) in accordance with the repayment terms set forth in the variable rate note initially evidencing the MAL,

executed by Zoned Arizona in favor of the Bank (the “Note”).

When Zoned Arizona made the Early Amortization.

Loan Agreement contains representations, warranties and covenants customary for a transaction of this type.

Among other things, the Loan

Agreement provides as follows:

(a) upon the occurrence of an event of default, the outstanding principal balance of the MAL will not

at any time exceed 65 % of the Property’s most recent appraised value;

(b) upon the occurrence of an event of default, Zoned Arizona

will maintain a minimum Non-Cannabis Debt Service Coverage Ratio (as hereinafter defined) of 1.40 to 1.00 ;

all times maintain a minimum debt service 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.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

December 7, 2022, Zoned Arizona and the Bank entered into a First Amendment to Loan Agreement (the “First Amendment”).

to the terms of the First Amendment, Zoned Arizona has elected to make its Early Amortization Election (defined in the First Amendment

and Loan Agreement), which election requires Zoned Arizona to commence paying principal and interest on the MAL as set forth in the Amended

Note (defined below).

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

to the terms of the Loan Agreement and First Amendment, on December 7, 2022, Zoned Arizona issued an Amended and Restated Promissory

Note (the “Amended Note”) to the Bank.

The Amended Note has an original principal amount of $ 4,500,000 , a 50 % loan-to-value

as determined by the bank-ordered appraisal completed on the Tempe Property.

The Amended Note requires Zoned Arizona to pay monthly principal

and interest payments to the Bank at an interest rate equal to the prime rate plus 0.75 % ( 8.25 % as of June 30, 2025 and December 31,

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 .

Arizona may prepay the outstanding principal under the Swap Note, at any time, subject to the provisions of the Swap Note.

as previously disclosed, on July 11, 2022 and pursuant to the terms of the Loan Agreement, the Company executed a Guaranty (the “Guaranty”)

in favor of the Bank, pursuant to which the Company agreed to guarantee all indebtedness of Zoned Arizona to the Bank arising under or

in connection with the MAL or any of the loan documents.

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

Reaffirmation of Guaranty (the “Reaffirmation”) in favor of the Bank.

The Reaffirmation reaffirms the Guaranty and provides

the Company’s consent to the First Amendment and Swap Note.

December 7, 2022, Zoned Arizona and the Bank entered into an Interest Rate Swap Transaction Confirmation (the “Confirmation”).

The Confirmation incorporates by reference the 2002 ISDA Master Agreement as published by the International Swaps and Derivatives Association,

as if the parties to the Confirmation executed such agreement in such form.

The Confirmation provides the terms and conditions governing

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

The Company recorded the swap

at fair value in the consolidated balance sheets with changes in fair value recorded contemporaneously in earnings.

The Company has entered

into an interest rate swap to mitigate variability in interest payments on its variable-rate debt.

June 30, 2025, principal and interest due on the East West Bank Swap Note amounted to $ 4,381,141 and $ 10,862 , respectively.

31, 2024, principal and interest due on the East West Bank Swap Note amounted to $ 4,404,279 and $ 7,478 , respectively.

Land Contract Note Payable

On December 5, 2022, in connection with the acquisition

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

(the “23616 Land Contract Note Payable”).

The 23616 Land Contract Note Payable bears interest at 9 % per annum and is due in

full as follows:

December 5, 2022, in connection with the acquisition of the Woodward Property located in Pleasant Ridge, Michigan, the Company entered

into a land contract note in the amount of $ 1,425,000 (the “23616 Land Contract Note Payable”).

The 23616 Land Contract Note

Payable bears interest at 9 % per annum and is due in full as follows:

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

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

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.

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

June 30, 2025, principal and interest due on the 23616 Land Contract Note Payable amounted to $ 1,364,474 and $ 0 , respectively.

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

MARCH 31, 2025

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Land Contract Note Payable

On February 24, 2023, in connection with the 23634

Land Contract dated February 24, 2023, the Company entered into a land contract note payable of $ 430,000 (the “23634 Land Contract

Note Payable”).

The 23634 Land Contract Note Payable accrues interest at the rate of 7 % and is payable in 48 monthly installments

of $ 3,865 , beginning April 1, 2023, until the purchase price and interest are fully paid, provided that such purchase price and all interest

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

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

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

On December 31, 2024, principal and interest due on the 23634 Land Contract Note Payable amounted

to $ 398,726 and $ 0 , respectively.

Surprise, AZ Construction Loan Agreement

In connection with the Surprise Property Closing,

ZP Dysart entered into the Construction Loan Agreement (the “PMF Loan Agreement”), dated as of July 8, 2024, by and between

ZP Dysart and Private Money Funding, LLC (“PMF”).

Pursuant to the terms of the PMF Loan Agreement, PMF agreed to loan up to

$ 1,620,000 to ZP Dysart, which loan is evidenced by a promissory note (the “PMF Note”).

ZP Dysart’s obligations under

the PMF Note and the PMF Loan Agreement are secured by a Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture

Filing (the “PMF Deed”).

The PMF Loan Agreement, the PMF Note, any guaranties, and all other related documents executed and

delivered concurrently with the PMF Loan Agreement are referred to herein as the “PMF Loan Documents.” Pursuant to the terms

of the PMF Loan Agreement, on July 8, 2024, ZP Dysart issued the PMF Note with the maximum principal amount of $ 1,620,000 to PMF (the

“Maximum Amount”).

Interest accrues at the rate of 12 % per annum, with ZP Dysart paying interest only in arrears, in monthly

installment payments, beginning on August 1, 2024 through July 1, 2029 (the “Maturity Date”).

ZP Dysart may prepay the PMF

Loan in full or in part at any time.

However, during the first 48 months of the term of the loan, if ZP Dysart pays any principal payment,

ZP Dysart will pay to PMF a prepayment premium equal to (i) 5% of the amount of principal prepaid in months 1-24;

(ii) 2% of the amount

of principal prepaid in months 25-36;

and (iii) 1% of the amount of principal prepaid in months 36-48, which amount will be due and payable

at the time ZP Dysart pays the principal payment.

During the 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.

February 24, 2023, in connection with the 23634 Land Contract dated February 24, 2023, the Company entered into a land contract note

payable of $ 430,000 (the “23634 Land Contract Note Payable”).

The 23634 Land Contract Note Payable accrues interest at the

rate of 7 % and is payable in 48 monthly installments of $ 3,865 , beginning April 1, 2023, until the purchase price and interest are fully

paid, provided that such purchase price and all interest will be fully paid on or before March 31, 2027.

On June 30, 2025, principal

and interest due on the 23634 Land Contract Note Payable amounted to $ 393,239 and $ 0 , respectively.

On December 31, 2024, principal and

interest due on the 23634 Land Contract Note Payable amounted to $ 398,726 and $ 0 , respectively.

AZ Construction Loan Agreement

connection with the Surprise Property Closing, ZP Dysart entered into the Construction Loan Agreement (the “PMF Loan Agreement”),

dated as of July 8, 2024, by and between ZP Dysart and Private Money Funding, LLC (“PMF”).

Pursuant to the terms of the PMF

Loan Agreement, PMF agreed to loan up to $ 1,620,000 to ZP Dysart, which loan is evidenced by a promissory note (the “PMF Note”).

ZP Dysart’s obligations under the PMF Note and the PMF Loan Agreement are secured by a Deed of Trust, Assignment of Leases and

Rents, Security Agreement and Fixture Filing (the “PMF Deed”).

The PMF Loan Agreement, the PMF Note, any guaranties, and

all other related documents executed and delivered concurrently with the PMF Loan Agreement are referred to herein as the “PMF

Loan Documents.” Pursuant to the terms of the PMF Loan Agreement, on July 8, 2024, ZP Dysart issued the PMF Note with the maximum

principal amount of $ 1,620,000 to PMF (the “Maximum Amount”).

Interest accrues at the rate of 12 % per annum, with ZP Dysart

paying interest only in arrears, in monthly installment payments, beginning on August 1, 2024 through July 1, 2029 (the “Maturity

ZP Dysart may prepay the PMF Loan in full or in part at any time.

However, during the first 48 months of the term of the

loan, if ZP Dysart pays any principal payment, ZP Dysart will pay to PMF a prepayment premium equal to (i) 5% of the amount of principal

prepaid in months 1-24;

(ii) 2% of the amount of principal prepaid in months 25-36;

and (iii) 1% of the amount of principal prepaid in

months 36-48, which amount will be due and payable at the time ZP Dysart pays the principal payment.

During the 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 six months ended June 30, 2025, the Company borrowed an additional $ 300,000 of the Maximum Amount and received

net proceeds of $ 300,000 .

As of June 30, 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 $ 13,200 and $ 0 , respectively.

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

5 unchanged sentences

(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

(#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

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

on the Property;

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

(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);

4 unchanged sentences

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

During the existence of any event of default,

PMF may, at its option, exercise any one or more of the remedies described in the PMF Loan Documents or otherwise available, including

declaring all unpaid indebtedness then evidenced by the Note (including any late charges that are then due and payable, any advances thereafter

made from the loan and any accruing costs and reasonable attorneys’ fees which are the obligation of ZP Dysart under the PMF Loan

Documents) to become immediately due and payable.

Unless PMF otherwise elects, such acceleration will occur automatically upon the occurrence

of any event of default described in PMF Loan Agreement or PMF Deed.

After maturity or during the existence of any

event of default, or at any time that ZP Dysart is more than 10 days delinquent in the payment of money as required by the Note or the

other Loan Documents (whether or not Holder has given any notice of default or any cure period has expired), then all amounts outstanding

thereunder will thereafter bear interest at the default rate of 18 % per annum from the date such payment became due until paid, but in

no event to exceed the highest rate lawfully collectible under applicable law.

Pursuant to the terms of the PMF Loan Agreement,

following ZP Dysart’s satisfaction of the conditions to funding the PMF Loan and recordation of the PMF Deed, the loan proceeds

will be disbursed in multiple advances through escrow, first in the form of an initial advance in the amount of $ 1,020,000 for the purpose

of contributing funding towards acquiring the Surprise Property (the “Acquisition Advance”).

The remaining loan proceeds will

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

Following the Acquisition Advance, subject to satisfying the conditions set forth in the PMF Loan Agreement, ZP Dysart

will be entitled to request the Construction Advances from the remaining loan proceeds at the following stages of completion of the construction

of Sunday Goods’ Work:

(i) first advance in the amount of $300,000 at 50% completion 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.

the existence of any event of default, PMF may, at its option, exercise any one or more of the remedies described in the PMF Loan Documents

or otherwise available, including declaring all unpaid indebtedness then evidenced by the Note (including any late charges that are then

due and payable, any advances thereafter made from the loan and any accruing costs and reasonable attorneys’ fees which are the

obligation of ZP Dysart under the PMF Loan Documents) to become immediately due and payable.

Unless PMF otherwise elects, such acceleration

will occur automatically upon the occurrence of any event of default described in PMF Loan Agreement or PMF Deed.

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

The PMF Loan Agreement contains representations,

warranties and covenants customary for a transaction of this type.

Pursuant to the terms of the Unconditional Repayment

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

in favor of PMF, the Company guaranteed

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

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

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

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

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

with the loan.

During the 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

On January 9, 2017, the Company issued a convertible

debenture (the “Abrams Debenture”) in the aggregate principal amount of $ 2,000,000 in favor of Mr.

Debenture accrues interest at the rate of 6 % per annum payable quarterly by the 1 st of each quarter and was originally due

on January 9, 2022.

On January 2, 2019, as part of a Stock Redemption Agreement, the Company and Mr.

Abrams entered into an amendment

of the Abrams Debenture (the “Debenture Amendment”), pursuant to which the parties agreed to extend the maturity date of the

Abrams Debenture from January 9, 2022 to January 9, 2030.

Except as set forth herein, the terms of the Abrams Debenture remain in full

force and effect.

The Company may prepay the Abrams Debenture at

any point after nine months, in whole or in part.

Pursuant to the terms of the Abrams Debenture, Mr.

Abrams is entitled to convert all

or a portion of the principal balance and all accrued and unpaid interest due under the Abrams Debenture into shares of the Company’s

common stock at a conversion price of $ 5.00 per share.

If the Company defaults on payment, Mr.

may, at his option, extend all conversion rights, through and including the date the Company tenders or attempts to tender payment in

full of all amounts due under the Abrams Debenture.

Any amount of principal or interest, which is not paid when due shall bear interest

at the rate of 12 % per annum.

Upon an Event of Default (as defined in the Abrams Debenture), Mr.

Abrams may (i) declare the entire principal

amount and all accrued and unpaid interest under the Abrams Debenture immediately due and payable, and (ii) exercise any and all rights,

powers and remedies available to Mr.

Abrams at law or in equity or other appropriate proceeding, whether for the specific performance

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 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.

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

maturity or during the existence of any event of default, or at any time that ZP Dysart is more than 10 days delinquent in the payment

of money as required by the Note or the other Loan Documents (whether or not Holder has given any notice of default or any cure period

has expired), then all amounts outstanding thereunder will thereafter bear interest at the default rate of 18 % per annum from the date

such payment became due until paid, but in no event to exceed the highest rate lawfully collectible under applicable law.

to the terms of the PMF Loan Agreement, following ZP Dysart’s satisfaction of the conditions to funding the PMF Loan and recordation

of the PMF Deed, the loan proceeds will be disbursed in multiple advances through escrow, first in the form of an initial advance in

the amount of $ 1,020,000 for the purpose of contributing funding towards acquiring the Surprise Property (the “Acquisition Advance”).

The remaining loan proceeds will be used for the purpose of financing for the completion of Sunday Goods’ Work (as hereinafter

defined) (the “Construction Advances”).

Following the Acquisition Advance, subject to satisfying the conditions set forth

in the PMF Loan Agreement, ZP Dysart will be entitled to request the Construction Advances from the remaining loan proceeds at the following

stages of completion of the construction of Sunday Goods’ Work:

(i) first advance in the amount of $300,000 at 50% completion, which

was received during the six months ended June 30, 2025, and (ii) final advance in the amount of $300,000 at 100% completion and issuance

of certificate of occupancy.

PMF Loan Agreement contains representations, warranties and covenants customary for a transaction of this type.

to the terms of the Unconditional Repayment Guaranty (the “PMF Guaranty”), dated as of July 8, 2024, by Zoned Properties,

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.

the three months ended June 30, 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.

During the six months

ended June 30, 2025 and 2024, amortization of debt discount related to notes payable amounted to $ 12,836 and $ 9,230 , respectively, which

is included in interest expense on the accompanying consolidated statements of operations.

June 30, 2025, future annual principal payments under the above notes payable were as follows:

ending June 30,

principal payments due on June 30, 2025

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

NOTE 8 – RELATED PARTY TRANSACTION

Indemnification agreements

On August 23, 2021, the Company entered into indemnification

agreements with each of its directors and executive officers.

In general, these indemnification agreements require the Company to indemnify

a director and officer to the fullest extent permitted by law against liabilities that may arise in connection with that director’s

service as a director and officer for the Company.

Additionally, the Company shall advance expenses incurred as a result of any proceeding

against them as to which they could be indemnified.

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

NOTE 9 – STOCKHOLDERS’ EQUITY

(A) Preferred Stock

On December 13, 2013, the Board of Directors of

the Company authorized and approved the creation of a new class of Preferred Stock consisting of 5,000,000 shares authorized, $ .001 par

The preferred stock is not convertible into any other class or series of stock.

The holders of the preferred stock are entitled

to fifty ( 50 ) votes for each share held.

Voting rights are not subject to adjustment for splits that increase or decrease the common shares

Upon liquidation, the holders of the shares will be entitled to receive $ 1.00 per share plus redemption provision before

assets distributed to other shareholders.

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

7 – CONVERTIBLE NOTE PAYABLE

January 9, 2017, the Company issued a convertible debenture (the “Abrams Debenture”) in the aggregate principal amount of

$ 2,000,000 in favor of Mr.

The Abrams Debenture accrues interest at the rate of 6 % per annum payable quarterly by the 1 st

of each quarter and was originally due on January 9, 2022.

On January 2, 2019, as part of a Stock Redemption Agreement, the Company and

Abrams entered into an amendment of the Abrams Debenture (the “Debenture Amendment”), pursuant to which the parties agreed

to extend the maturity date of the Abrams Debenture from January 9, 2022 to January 9, 2030.

Except as set forth herein, the terms of

the Abrams Debenture remain in full force and effect.

Company may prepay the Abrams Debenture at any point after nine months, in whole or in part.

Pursuant to the terms of the Abrams Debenture,

Abrams is entitled to convert all or a portion of the principal balance and all accrued and unpaid interest due under the Abrams

Debenture into shares of the Company’s common stock at a conversion price of $ 5.00 per share.

the Company defaults on payment, Mr.

Abrams may, at his option, extend all conversion rights, through and including the date the Company

tenders or attempts to tender payment in full of all amounts due under the Abrams Debenture.

Any amount of principal or interest, which

is not paid when due shall bear interest at the rate of 12 % per annum.

Upon an Event of Default (as defined in the Abrams Debenture),

Abrams may (i) declare the entire principal amount and all accrued and unpaid interest under the Abrams Debenture immediately due

and payable, and (ii) exercise any and all rights, powers and remedies available to Mr.

Abrams at law or in equity or other appropriate

proceeding, whether for the specific performance of any covenant or agreement contained in the Abrams Debenture and proceed to enforce

the payment thereof or any other legal or equitable right of Mr.

of June 30, 2025 and December 31, 2024, the principal balance due under the Abrams Debenture is $ 2,000,000 .

As of June 30, 2025 and December

31, 2024, accrued interest payable due under the Abrams Debenture amounted to $ 0 , respectively.

For the three months ended June 30, 2025

and 2024, interest expense related to the Abrams Debenture amounted to $ 30,000 .

For the six months ended June 30, 2025 and 2024, interest

expense related to the Abrams Debenture amounted to $ 60,000 .

8 – RELATED PARTY TRANSACTION

Indemnification

On August 23, 2021, the Company entered into indemnification agreements

with each of its directors and executive officers.

In general, these indemnification agreements require the Company to indemnify a director

and officer to the fullest extent permitted by law against liabilities that may arise in connection with that director’s service

as a director and officer for the Company.

Additionally, the Company shall advance expenses incurred as a result of any proceeding against

them as to which they could be indemnified.

Since August 2021, the Company has not maintained an officers’ and directors’

insurance policy.

9 – STOCKHOLDERS’ EQUITY

Preferred Stock

On December 13, 2013, the Board of Directors of the Company authorized

and approved the creation of a new class of Preferred Stock consisting of 5,000,000 shares authorized, $ .001 par value.

The preferred

stock is not convertible into any other class or series of stock.

The holders of the preferred stock are entitled to 50 votes for each

Voting rights are not subject to adjustment for splits that increase or decrease the common shares outstanding.

Upon liquidation,

the holders of the shares will be entitled to receive $ 1.00 per share plus redemption provision before assets distributed to other shareholders.

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

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.

Create any new class of stock having preferences over the Preferred Stock.

Repurchase any of our common stock.

Merge or consolidate with any other company, except our wholly owned subsidiaries.

As of June 30, 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.

Create any new class of

stock having preferences over the Preferred Stock.

Repurchase any of our common

Merge or consolidate with

any other company, except our wholly owned subsidiaries.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Sell, convey or otherwise dispose of, or create or incur any mortgage, lien, or charge or encumbrance or security interest in or pledge of, or sell and leaseback, in all or substantially all our property or business.

Incur, assume or guarantee any indebtedness maturing more than 18 months after the date on which it is incurred, assumed or guaranteed by us, except for operating leases and obligations assumed as part of the purchase price of property.

(B) Common stock redemption

On October 10, 2023, the Company entered into

a Stock Redemption Agreement, whereby the Company purchased 100,000 shares of its common stock from a shareholder for $ 15,000 , or $ 0.15

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

Common stock redemption

October 10, 2023, the Company entered into a Stock Redemption Agreement, whereby the Company purchased 100,000 shares of its common stock

from a shareholder for $ 15,000 , or $ 0.15 per share, which as of June 30, 2025 and December 31, 2024, is reflected as treasury stock on

the consolidated balance sheet until such time as the shares are cancelled.

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.

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 June 30, 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.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

On August 9, 2016, the Company’s Board of

Directors authorized the 2016 Equity Incentive Plan (the “2016 Plan”) and reserved 10,000,000 shares of common stock for issuance

the six months ended June 30, 2025, the Company purchased a total of 57,000 shares of its common stock for $ 26,858 or an average of $ 0.47

per share, which as of June 30, 2025, is reflected as treasury stock on the consolidated balance sheet until such time as the shares

are cancelled.

Equity incentive plans

August 9, 2016, the Company’s Board of Directors authorized the 2016 Equity Incentive Plan (the “2016 Plan”) and reserved

10,000,000 shares of common stock for issuance thereunder.

The 2016 Plan was approved by shareholders on November 21, 2016.

The 2016 Plan’s purpose is to encourage ownership in

the Company by employees, officers, directors and consultants whose long-term service the Company considers essential to its continued

progress and, thereby, encourage recipients to act in the stockholders’ interest and share in the Company’s success.

Plan authorizes the grant of awards in the form of options intended to qualify as incentive stock options under Section 422 of the Internal

Revenue Code of 1986, as amended, options that do not qualify (non-statutory stock options) and grants of restricted shares of common

Restricted shares granted pursuant to the 2016 Plan are amortized to expense over the vesting period.

Options vest and expire over

a period not to exceed seven years.

If any share of common stock underlying a stock option that has been granted ceases to be subject

to a stock option, or if any shares of common stock that are subject to any other stock-based award granted are forfeited or terminate,

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

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 March 31, 2025 and December 31, 2024,

8,357,500 and 8,882,500 shares, respectively, were available for future issuance.

The Company also continues to maintain its 2014

Equity Compensation Plan (the “2014 Plan”), pursuant to which 1,250,000 previously awarded stock options are outstanding.

Plan’s purpose is to encourage ownership in the Company by employees, officers, directors and consultants whose long-term service

the Company considers essential to its continued progress and, thereby, encourage recipients to act in the stockholders’ interest

and share in the Company’s success.

The 2016 Plan authorizes the grant of awards in the form of options intended to qualify as

incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended, options that do not qualify (non-statutory

stock options) and grants of restricted shares of common stock.

Restricted shares granted pursuant to the 2016 Plan are amortized to

expense over the vesting period.

Options vest and expire over a period not to exceed seven years.

If any share of common stock underlying

a stock option that has been granted ceases to be subject to a stock option, or if any shares of common stock that are subject to any

other stock-based award granted are forfeited or terminate, such shares shall again be available for distribution in connection with

future grants and awards under the 2016 Plan.

As of June 30, 2025, 1,380,000 stock option awards are outstanding and 923,750 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 June 30, 2025 and December 31, 2024, 8,620,000 and 8,882,500 shares, respectively, were available for future

issuance under the 2016 Plan.

Company also continues to maintain its 2014 Equity Compensation Plan (the “2014 Plan”), pursuant to which 250,000 previously

awarded stock options are outstanding.

The 2014 Plan has been superseded by the 2016 Plan.

Accordingly, no additional shares subject to the existing 2014 Plan will be issued

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

As of March 31,

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

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 %;

Accordingly, no additional shares subject

to the existing 2014 Plan will be issued and the 1,250,000 shares issued upon exercise of stock options were be issued pursuant to the

2014 Plan, if exercised.

As of June 30, 2025 and December 31, 2024, options to purchase 250,000 and 1,250,000 shares of common stock

are outstanding and 250,000 and 1,250,000 options are exercisable pursuant to the 2014 Plan, respectively.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Stock options

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:

dividend 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:

and an estimated

holding period of 6.5 years.

The Company valued this stock option at a fair value of $ 35,506 and will record stock-based compensation

expense over the vesting period.

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

2 unchanged sentences

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

The Company valued these stock options at a fair value of $ 176,504 and will record stock-based compensation expense over the vesting

On April 23, 2025, three of the five directors su bmitted their respective resignations as

Board members and accordingly, 262,500 unvested stock options were cancelled.

the six months ended June 30, 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 $ 68,636 and $ 29,511 , respectively.

As of June 30, 2025, there were 1,630,000

options outstanding and 1,173,750 options vested and exercisable.

As of June 30, 2025, there was $ 100,421 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.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

Stock option activities for the three months ended

March 31, 2025 are summarized as follows:

The aggregate intrinsic value on June 30, 2025 was $0 and was calculated based on the

difference between the quoted share price on June 30, 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 $22,165 and was calculated based on the difference between the quoted share price on December 31, 2024 of $ 0.5146 and the exercise

price of the underlying options.

option activities for the six months ended June 30, 2025 are summarized as follows:

Options Weighted

3 unchanged sentences

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 $ -

Expired ( 1,000,000 ) 1.00 - -

Forfeited ( 262,500 ) 0.44 - -

Balance Outstanding June 30, 2025 1,630,000 $ 0.80 6.18 $ 22,165

Exercisable, June 30, 2025 1,173,750 $ 0.84 5.49 $ 6,958

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

Issued during the period 525,000 0.44 9.82 -

Forfeited ( 262,500 ) 0.44 -

Vested during the period ( 122,500 ) 0.53 - -

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

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Legal matters

From time to time, the Company may be involved

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

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

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

Balance non-vested on June 30, 2025 456,250 $ 0.70 7.96 $ -

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

10 – COMMITMENTS AND CONTINGENCIES

From time to time, the Company may be involved in litigation related

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

As of June 30, 2025, the Company was 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.

and Related Golden Parachute Agreement

May 23, 2018, the Company and Bryan McLaren (“Mr.

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”).

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.

2018 Employment Agreement has a term of 10 years.

The term and Mr.

McLaren’s employment will terminate (a “Termination”) in any of the following circumstances:

McLaren’s employment will terminate (a “Termination”)

in any of the following circumstances:

immediately, if Mr.

McLaren dies;

immediately, if Mr.

McLaren receives benefits under the long-term disability insurance coverage then provided by the Company or, if no such insurance is in effect, upon Mr.

receives benefits under the long-term disability insurance coverage then provided by the Company or, if no such insurance is in effect,

McLaren’s disability;

on the expiration date, as the same may be extended by the parties by written amendment to the 2018 Employment Agreement prior to the occasion thereof;

at the option of the Company for Cause (as defined in the 2018 Employment Agreement) upon the Company’s provision of written notice to Mr.

McLaren of the basis for such Termination;

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

at the option of the Company, without Cause;

on the expiration date,

as the same may be extended by the parties by written amendment to the 2018 Employment Agreement prior to the occasion thereof;

at the option of the Company

for Cause (as defined in the 2018 Employment Agreement) upon the Company’s provision of written notice to Mr.

McLaren of the

basis for such Termination;

at the option of the Company,

without Cause;

McLaren at any time with Good Reason (as defined in the 2018 Employment Agreement), upon 30 days’ prior written notice to the Company delivered not later than within 90 days of the existence of the condition therefor;

McLaren at any time without Good Reason, upon not less than three months’ prior written notice to the Company.

In the event of a Termination for any reason or

for no reason whatsoever, or upon the expiration date of the 2018 Employment Agreement, whichever comes first, all rights and obligations

under the 2018 Employment Agreement shall cease (i) as to the Company, except for the Company’s obligations for the payment of applicable

severance benefits thereunder, and for indemnification thereunder, and (ii) as to Mr.

McLaren, except for his obligation under the restrictive

covenants in the 2018 Employment Agreement.

The Company and Mr.

McLaren also entered into

a Golden Parachute Agreement (the “Golden Parachute Agreement”) on May 23, 2018.

No benefits shall be payable under the Golden

Parachute Agreement unless there shall have been a change in control of the Company, as set forth below.

For purposes of the Golden Parachute

Agreement, amongst other terms in the Golden Parachute Agreement, a “change in control of the Company” shall mean a change

of control of a nature that would be required to be reported in response to Item 6 of Schedule 14A of Regulation 14A promulgated under

the Securities Exchange Act of 1934, as amended.

For purposes of the Golden Parachute Agreement,

“Cause” means termination upon (a) the willful and continued failure to substantially perform duties with the Company after

a written demand for substantial performance is delivered by the Board, which demand specifically identifies the manner in which the Board

believes that duties have not substantially been performed, or (b) the willful engaging in conduct, which is demonstrably and materially

injurious to the Company, monetarily or otherwise.

For purposes of the Golden Parachute Agreement,

“Good Reason” means, without express written consent, the occurrence after a change in control of the Company of any of the

following circumstances unless, such circumstances are fully corrected prior to the date of Termination specified in the notice of Termination:

a material diminution in Mr.

the event of a Termination for any reason or for no reason whatsoever, or upon the expiration date of the 2018 Employment Agreement,

whichever comes first, all rights and obligations under the 2018 Employment Agreement shall cease (i) as to the Company, except for the

Company’s obligations for the payment of applicable severance benefits thereunder, and for indemnification thereunder, and (ii)

McLaren, except for his obligation under the restrictive covenants in the 2018 Employment Agreement.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Company and Mr.

McLaren also entered into a Golden Parachute Agreement (the “Golden Parachute Agreement”) on May 23, 2018.

No benefits shall be payable under the Golden Parachute Agreement unless there shall have been a change in control of the Company, as

set forth below.

For purposes of the Golden Parachute Agreement, amongst other terms in the Golden Parachute Agreement, a “change

in control of the Company” shall mean a change of control of a nature that would be required to be reported in response to Item

6 of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended.

purposes of the Golden Parachute Agreement, “Cause” means termination upon (a) the willful and continued failure to substantially

perform duties with the Company after a written demand for substantial performance is delivered by the Board, which demand specifically

identifies the manner in which the Board believes that duties have not substantially been performed, or (b) the willful engaging in conduct,

which is demonstrably and materially injurious to the Company, monetarily or otherwise.

purposes of the Golden Parachute Agreement, “Good Reason” means, without express written consent, the occurrence after a

change in control of the Company of any of the following circumstances unless, such circumstances are fully corrected prior to the date

of Termination specified in the notice of Termination:

a material diminution in

McLaren’s authority, duties or responsibility from those in effect immediately prior to the change in control of the Company;

a material diminution in Mr.

a material diminution in

McLaren’s base compensation;

a material change in the geographic location at which Mr.

a material change in the

geographic location at which Mr.

McLaren performs his duties;

a material diminution in the authority, duties, or responsibilities of the supervisor to whom Mr.

McLaren is required to report, including a requirement that Mr.

a material diminution in

the authority, duties, or responsibilities of the supervisor to whom Mr.

McLaren is required to report, including a requirement that

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

a material diminution in the budget over which Mr.

a material diminution in

the budget over which Mr.

McLaren retains authority;

a material breach under any agreement with the Company to continue in effect any bonus to which Mr.

McLaren was entitled, or any compensation plan in which Mr.

a material breach under

any agreement with the Company to continue in effect any bonus to which Mr.

McLaren was entitled, or any compensation plan in which

McLaren participates immediately prior to the change in control of the Company which is material to Mr.

McLaren’s total compensation;

a material breach under any agreement with the Company to provide Mr.

McLaren benefits substantially similar to those enjoyed by him under any of the Company’s life insurance, medical, health and accident, or disability plans in which he was participating at the time of the change in control of the Company, the failure to continue to provide Mr.

McLaren’s total

compensation;

a material breach under

any agreement with the Company to provide Mr.

McLaren benefits substantially similar to those enjoyed by him under any of the Company’s

life insurance, medical, health and accident, or disability plans in which he was participating at the time of the change in control

of the Company, the failure to continue to provide Mr.

McLaren with a Company automobile or allowance in lieu of it, if Mr.

McLaren was provided with such an automobile or allowance in lieu of it at the time of the change of control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive him of any material fringe benefit enjoyed by him at the time of the change in control of the Company, or the failure by the Company to provide him with the number of paid vacation days to which he is entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of the change in control of the Company;

Following a change in control of the Company,

upon termination of Mr.

was provided with such an automobile or allowance in lieu of it at the time of the change of control of the Company, the taking of

any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive him of any material

fringe benefit enjoyed by him at the time of the change in control of the Company, or the failure by the Company to provide him with

the number of paid vacation days to which he is entitled on the basis of years of service with the Company in accordance with the

Company’s normal vacation policy in effect at the time of the change in control of the Company;

a change in control of the Company, upon termination of Mr.

McLaren’s employment or during a period of disability, Mr.

McLaren will be entitled to the following benefits:

During any period that he fails to perform his full-time duties with the Company as a result of incapacity due to physical or mental illness, Mr.

McLaren will continue to receive his base salary at the rate in effect at the commencement of any such period, together with all amounts payable to him under any compensation plan of the Company during such period, until the Golden Parachute Agreement is terminated.

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

McLaren other than for Good Reason, disability, death or retirement, the Company will pay Mr.

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

If employment by the Company shall be terminated (a) by the Company other than for Cause, death or disability or (b) by Mr.

will be entitled to the following benefits:

During any period that

he fails to perform his full-time duties with the Company as a result of incapacity due to physical or mental illness, Mr.

will continue to receive his base salary at the rate in effect at the commencement of any such period, together with all amounts

payable to him under any compensation plan of the Company during such period, until the Golden Parachute Agreement is terminated.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

employment is terminated by the Company for Cause or by Mr.

McLaren other than for Good Reason, disability, death or retirement,

the Company will pay Mr.

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

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

time such payments are due.

If employment by the Company

shall be terminated (a) by the Company other than for Cause, death or disability or (b) by Mr.

McLaren for Good Reason, Mr.

McLaren will be entitled to benefits provided below:

Company will pay Mr.

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

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

lieu of any further salary payments to Mr.

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

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

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

given in respect of them.

Company will pay to Mr.

will be entitled to benefits provided below:

The Company will pay Mr.

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

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

In lieu of any further

salary payments to Mr.

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

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

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

in respect of them.

The Company will pay to

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

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

McLaren under the

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

receive an amount in cash equal to the product of (i) the excess of the closing price of the Company’s common stock as reported

on or nearest the date of Termination (or, if not so reported, on the basis of the average of the lowest asked and highest bid prices

on or nearest the date of Termination), over the per share exercise price of each option held by Mr.

McLaren (whether or not then fully

exercisable) plus the amount of any applicable cash appreciation rights, times (ii) the number of the Company’s common stock covered

by each such option.

Company will also pay to Mr.

In lieu of shares of common

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

McLaren under the Company’s stock

option plans (which options shall be cancelled upon the making of the payment referred to below), Mr.

McLaren will receive an amount

in cash equal to the product of (i) the excess of the closing price of the Company’s common stock as reported on or nearest

the date of Termination (or, if not so reported, on the basis of the average of the lowest asked and highest bid prices on or nearest

the date of Termination), over the per share exercise price of each option held by Mr.

McLaren (whether or not then fully exercisable)

plus the amount of any applicable cash appreciation rights, times (ii) the number of the Company’s common stock covered by

each such option.

The Company will also pay

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

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.

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.

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.

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).

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 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).

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.

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

of directors adopted the Zoned Properties 401(k) Plan (the “Plan”) effective January 1, 2021.

The Company contributes a matching

contribution to the Plan for each employee in an amount equal to 100 % of the matched employee contributions that are not in excess of

4 % of the employee’s plan compensation.

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.

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2021, the Company’s board of directors adopted the Zoned Properties 401(k) Plan (the “Plan”) effective

January 1, 2021.

The Company contributes a matching contribution to the Plan for each employee in an amount equal to 100 % of the matched

employee contributions that are not in excess of 4 % of the employee’s plan compensation.

For the six months ended June 30, 2025

and 2024, the Company contributed $ 11,602 and $ 12,178 to the Plan, respectively.

OH Antwerp, LLC

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 & Trust Co.

(“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”).

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

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.

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.

Loan Agreement, Note and Assignment contain customary representations, warranties, covenants and events of defaults for a transaction

of this type.

OH Columbus, LLC

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

In connection therewith, on April 4, 2025, the Company delivered that certain Commercial Guaranty (the “Columbus

Guaranty”), dated as of June 30, 2025, to First Fidelity Bank (“First Fidelity”).

The Columbus Guaranty contains customary

representations, warranties, covenants and other provisions for a transaction of this type.

June 30, 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 Note”).

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 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

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

ZONED PROPERTIES, INC.

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.

Pursuant 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.

PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

11 – SEGMENT REPORTING

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 products.

Currently, these reportable segments are being managed separately

based on the fundamental differences in their operations.

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.

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.

and unallocated amounts that do not relate to a reportable segment have been allocated to “Corporate & Unallocated.”

The Company’s CODM is its Chief Executive

The decisions concerning the allocation of the Company’s resources are made by the CODM with oversight by the Board of

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 segment’s 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

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)

The accounting policies of the Property Investment

Portfolio segment and the Real Estate Services segment are the same as those described in Note 2 of the Notes to Consolidated Financial

Months Ended June 30, 2025

Corporate and

Operating expenses (excluding

depreciation and amortization)

and amortization

Income (loss) from operations

Interest expense

Loss from derivative – interest rate swap

Income (loss) before provision for income taxes

Provision for income taxes

Net income (loss)

from derivative – interest rate swap

Income (loss) before provision

for income taxes

income (loss)

$ ( 314,777 )

Three Months Ended March 31, 2024

Property Investment Portfolio

Real Estate Services

Corporate and Unallocated

Operating expenses (excluding depreciation and amortization)

$ ( 216,294 )

Months Ended June 30, 2024

Operating expenses (excluding

depreciation and amortization)

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)

from derivative – interest rate swap

Income (loss) before provision

for income taxes

$ ( 234,132 )

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

Property investment portfolio

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Months Ended June 30, 2025

Operating expenses (excluding

depreciation and amortization)

and amortization

Income (loss) from operations

Interest expense

from derivative – interest rate swap

Income (loss) before provision

for income taxes

$ ( 120,784 )

$ ( 496,478 )

Months Ended June 30, 2024

Investment Portfolio

Estate Services

and Unallocated

Operating expenses (excluding

depreciation and amortization)

and amortization

Income (loss) from operations

Interest expense

from derivative – interest rate swap

Income (loss) before provision

for income taxes

$ ( 522,878 )

Total assets by segment

on June 30, 2025 and December 31, 2024 was as follows:

Property investment

Real estate services

Corporate and unallocated

ZONED PROPERTIES, INC.

and unallocated

assets are located in the United States.

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

(“ROU”) ASSETS AND OPERATING LEASE LIABILITY

On March 15, 2022, the Company entered to an Assumption

of Lease and Consent Agreement with a landlord, whereby the landlord consented to the assignment of an office lease, as amended, from

the original tenant to the Company.

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.

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)

on January 1, 2019, the Company had elected the ‘package of practical expedients’ which permitted it not to reassess under

the new standard its prior conclusions about lease identification, lease classification and initial direct costs (see Note 2).

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

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 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

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

12 – OPERATING LEASE RIGHT-OF-USE (“ROU”) ASSETS AND OPERATING LEASE LIABILITY

March 15, 2022, the Company entered to an Assumption of Lease and Consent Agreement with a landlord, whereby the landlord consented to

the assignment of an office lease, as amended, from the original tenant to the Company.

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.

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.

adopting ASC Topic 842, Leases (Topic 842) on January 1, 2019, the Company had elected the ‘package of practical expedients’

which permitted it not to reassess under the new standard its prior conclusions about lease identification, lease classification and

initial direct costs (see Note 2).

In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12

months or less.

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 .

the six months ended June 30, 2025 and 2024, in connection with its operating leases, the Company recorded rent expense of $ 22,812 and

$ 18,529 , respectively, which is included in operating expenses on the accompanying unaudited consolidated statements of operations.

significant assumption used to determine the present value of the lease liability in December 2024 was a discount rate of 9 % which was

based on the Company’s incremental borrowing rate.

June 30, 2025 and December 31, 2024, ROU assets is summarized as follows:

right of use asset

accumulated amortization

Balance of ROU assets

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

of ROU assets

June 30, 2025, future minimum base lease payments due under a non-cancelable operating lease are as follows:

ending June 30,

Total minimum non-cancelable

operating lease payments

discount to fair value

Total lease liability on March 31, 2025

lease liability on June 30, 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