What changed in this filing

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Item 1. Financial Statements

2025-11-13 compared with 2025-08-14 · 1235 added, 1251 removed, 715 unchanged (78% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

( Unaudited )

September 30,

Accounts receivable

24 unchanged sentences

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

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 )

2,000,000 shares issued and outstanding on September 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 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

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

Additional paid-in capital

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

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

Accumulated deficit

8 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Property investment portfolio revenues

13 unchanged sentences

Interest expenses

(Loss) income from derivative - interest rate swap

Income (loss) from derivative - interest rate swap

Total other expenses, net

NET INCOME (LOSS)

NET INCOME (LOSS) PER COMMON SHARE:

INCOME BEFORE EQUITY METHOD LOSSES

EQUITY METHOD LOSS:

Equity method loss from unconsolidated joint ventures

Total equity method loss

NET INCOME PER COMMON SHARE:

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

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

Preferred Stock

Treasury Stock

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

Stockholders'

Balance, December 31, 2024

December 31, 2024

$ ( 15,639,522 )

Accretion of stock-based compensation related to stock options issued

Balance, March 31, 2025

of stock-based compensation related to stock options issued

March 31, 2025

( 15,493,664 )

Purchase of treasury shares

Accretion of stock-based compensation related to stock options issued

Balance, June 30, 2025

of treasury shares

of stock-based compensation related to stock options issued

June 30, 2025

( 15,467,338 )

Preferred Stock

Treasury Stock

of stock-based compensation related to stock options issued

September 30, 2025

$ ( 15,312,141 )

Stockholders'

Balance, December 31, 2023

December 31, 2023

$ ( 16,213,480 )

Accretion of stock-based compensation related to stock options issued

Balance, March 31, 2024

of stock-based compensation related to stock options issued

March 31, 2024

( 16,117,007 )

Accretion of stock-based compensation related to stock options issued

Balance, June 30, 2024

of stock-based compensation related to stock options issued

June 30, 2024

( 16,149,290 )

of treasury stock

of stock-based compensation related to stock options issued

September 30, 2024

$ ( 16,090,418 )

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

For the Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

4 unchanged sentences

Loss on forfeited escrow deposit

Bad debt expense

Loss (income) from interest rate swap

Loss from unconsolidated joint ventures

Change in operating assets and liabilities:

14 unchanged sentences

Investment in cost-method investees

Increase in escrow deposits

Decrease (increase) in escrow deposits

NET CASH USED IN INVESTING ACTIVITIES

4 unchanged sentences

Repayment of notes payable

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

NET DECREASE IN CASH

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET INCREASE (DECREASE) IN CASH

( 1,947,705 )

9 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

Zoned Properties, Inc.

(“Zoned Properties”

or the “Company”) was incorporated in the State of Nevada on August 25, 2003 .

In October 2013, the Company changed its name

to Zoned Properties, Inc.

and in April 2014, the Company shifted its business model to address commercial real estate in the regulated

cannabis industry.

Zoned Properties is a technology-driven property investment company focused on acquiring value-add real estate within

the regulated cannabis industry in the United States.

The Company aspires to innovate within the real estate development sector, focusing

on direct-to-consumer real estate that is leased to the best-in-class cannabis retailers.

Headquartered in Scottsdale, Arizona, Zoned

Properties is redefining the approach to commercial real estate investment through its standardized investment model backed by its proprietary

property technology.

Zoned Properties has developed a national ecosystem of real estate services to support its real estate development

model, including a commercial real estate brokerage and a real estate advisory practice.

The Company operates in two organized segments:

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

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

Services” segment.

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

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

absolute-net leases.

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

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

The Company has the following wholly owned subsidiaries:

Chino Valley Properties, LLC (“Chino Valley”) was organized in the State of Arizona on April 15, 2014.

Kingman Property Group, LLC (“Kingman”) was organized in the State of Arizona on April 15, 2014.

Green Valley Group, LLC (“Green Valley”) organized in the State of Arizona on April 15, 2014.

Zoned Arizona Properties, LLC (“Zoned Arizona”) was organized in the State of Arizona on June 2, 2017.

Zoned Advisory Services, LLC (“Zoned Advisory”) was organized in the State of Arizona on July 27, 2018.

Zoned Properties Brokerage, LLC (“Arizona Brokerage”) was organized in the State of Arizona on March 17, 2021.

ZP Data Platform 1, LLC (“ZP Data 1”) was organized in the State of Arizona on April 14, 2021 (inactive).

ZP Data Platform 2, LLC (“ZP Data 2”) was organized in the State of Arizona on June 21, 2022.

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

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

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

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

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

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

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.

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

(see Note 5).

SEPTEMBER 30, 2025

1 – ORGANIZATION AND NATURE OF OPERATIONS

Properties, Inc.

(“Zoned Properties” or the “Company”) was incorporated in the State of Nevada on August 25,

In October 2013, the Company changed its name to Zoned Properties, Inc.

and in April 2014, the Company shifted its business model

to address commercial real estate in the regulated cannabis industry.

Zoned Properties is a technology-driven property investment company

focused on acquiring value-add real estate within the regulated cannabis industry in the United States.

The Company aspires to innovate

within the real estate development sector, focusing on direct-to-consumer real estate that is leased to the best-in-class cannabis retailers.

Headquartered in Scottsdale, Arizona, Zoned Properties is redefining the approach to commercial real estate investment through its standardized

investment model backed by its proprietary property technology.

Zoned Properties has developed a national ecosystem of real estate services

to support its real estate development model, including a commercial real estate brokerage and a real estate advisory practice.

operates in two organized segments:

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

Investment Portfolio” segment, and (2) the advisory, brokerage and technology services related to commercial properties, herein

known as the “Real Estate Services” segment.

The Company targets commercial properties that face unique zoning or development

challenges, identifies solutions that can potentially have a major impact on their commercial value, and then works to acquire the properties

while securing long-term, absolute-net leases.

The Company does not grow, harvest, sell or distribute cannabis or any substances regulated

under United States law such as the Controlled Substance Act of 1970, as amended.

Company has the following wholly owned subsidiaries:

Properties, LLC (“Chino Valley”) was organized in the State of Arizona on April 15, 2014.

Kingman Property Group,

LLC (“Kingman”) was organized in the State of Arizona on April 15, 2014.

Green Valley Group, LLC

(“Green Valley”) organized in the State of Arizona on April 15, 2014.

Zoned Arizona Properties,

LLC (“Zoned Arizona”) was organized in the State of Arizona on June 2, 2017.

Zoned Advisory Services,

LLC (“Zoned Advisory”) was organized in the State of Arizona on July 27, 2018.

Zoned Properties Brokerage,

LLC (“Arizona Brokerage”) was organized in the State of Arizona on March 17, 2021.

ZP Data Platform 1, LLC

(“ZP Data 1”) was organized in the State of Arizona on April 14, 2021 (inactive).

ZP Data Platform 2, LLC

(“ZP Data 2”) was organized in the State of Arizona on June 21, 2022.

ZP RE Holdings, LLC (“ZPRE

Holdings”) was organized in the State of Arizona on September 20, 2022.

ZP Brokerage MS, LLC (“Mississippi

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

ZP Brokerage FL, LLC (“Florida

Brokerage”) was organized in the State of Florida on October 20, 2022.

ZP Brokerage AL, LLC (“Alabama

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

ZP RE MI Woodward, LLC

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

ZP Brokerage MO, LLC (“Missouri

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

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.

Company also maintains a 50 % equity interest in two joint ventures (see Note 5).

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING

Basis of presentation and principles of consolidation

The accompanying unaudited consolidated financial

statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)

and include the accounts of the Company and its wholly owned subsidiaries.

All intercompany balances and transactions have been eliminated

upon consolidation.

The unaudited consolidated financial statements

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 June 30, 2025 and 2024, and for the periods then

ended, have been made.

Those adjustments consist of normal and recurring adjustments.

Operating results for interim periods are not necessarily

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

Accordingly, the unaudited consolidated financial statements

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

and should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2024 included in

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

As reflected in the accompanying unaudited consolidated

financial statements, the Company generated net income of $ 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

by operating activities serves to mitigate the conditions that historically raised substantial doubt about the Company’s ability

to continue as a going concern.

The Company believes that the Company has sufficient cash and positive cash flows to meet its obligations

for a minimum of twelve months from the date of this filing.

Use of estimates

The preparation of the consolidated financial

statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and

liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the

reported amounts of revenue and expenses during the reporting period.

Actual results could differ from those estimates.

Significant estimates

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

assets including rental property and investment in unconsolidated joint ventures, valuation of the lease liability and related right-of-use

asset, valuation allowances for deferred tax assets, the fair value of derivative asset or liability related to interest rate swap, and

the fair value of non-cash equity transactions, including options and stock-based compensation.

Risks and uncertainties

The Company’s operations are subject to

risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure.

The Company conducts a significant portion of its business in states that have legalized and regulated cannabis.

Additionally, the Company’s

tenants operate in the state-legalized and state-regulated cannabis industry.

Consequently, any significant economic downturn in the state

markets in which the Company operates or any changes in the federal government’s enforcement of current federal laws or changes

in state laws could potentially have a negative effect on the Company’s business, results of operations and financial condition.

Additionally, substantially all of the Company’s real estate properties are leased under triple-net or absolute-net leases to tenants

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

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).

SEPTEMBER 30, 2025

2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of presentation and principles of consolidation

accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted

in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries.

All intercompany

balances and transactions have been eliminated upon consolidation.

unaudited consolidated financial statements for the three and nine months ended September 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”).

opinion of management, all adjustments necessary to present fairly our consolidated financial position, results of operations, and cash

flows as of September 30, 2025 and 2024, and for the periods then ended, have been made.

Those adjustments consist of normal and recurring

Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year

Accordingly, the unaudited consolidated financial statements do not include all the information and notes necessary for a

comprehensive presentation of our financial position and results of operations and should be read in conjunction with the audited financial

statements of the Company for the year ended December 31, 2024, included in our Annual Report on Form 10-K filed with the SEC on March

reflected in the accompanying unaudited consolidated financial statements, the Company generated net income of $ 327,381 and cash provided

by operations of $ 661,392 during the nine months ended September 30, 2025.

Additionally, as of September 30, 2025, the Company had cash

of $ 1,113,900 and stockholders’ equity of $ 6,247,173 .

cash balance and positive net cash provided by operating activities serves to mitigate the conditions that historically raised substantial

doubt about the Company’s ability to continue as a going concern.

The Company believes that the Company has sufficient cash and

positive cash flows to meet its obligations for a minimum of twelve months from the date of this filing.

preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that

affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited

consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Actual results could

differ from those estimates.

Significant estimates for the nine months ended September 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 assets including rental property and investment in unconsolidated joint ventures,

valuation of the lease liability and related right-of-use asset, valuation allowances for deferred tax assets, the fair value of derivative

asset or liability related to interest rate swap, and the fair value of non-cash equity transactions, including options and stock-based

compensation.

and uncertainties

Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including

the potential risk of business failure.

The Company conducts a significant portion of its business in states that have legalized and

regulated cannabis.

Additionally, the Company’s tenants operate in the state-legalized and state-regulated cannabis industry.

Consequently,

any significant economic downturn in the state markets in which the Company operates or any changes in the federal government’s

enforcement of current federal laws or changes in state laws could potentially have a negative effect on the Company’s business,

results of operations and financial condition.

Additionally, substantially all of the Company’s real estate properties are leased

under triple-net or absolute-net leases to tenants (each, a “Significant Tenant” and collectively, the “Significant

For the nine months ended September 30, 2025 and 2024, revenues associated with Significant Tenants amounted to $ 1,768,371

and $ 1,779,227 , respectively, which represents 60.4 % and 69.5 % of the Company’s total revenues, respectively (see Note 3).

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

Fair value of financial instruments

The carrying amounts reported in the consolidated

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

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

The Financial Accounting Standards Board (“FASB”)

Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (“ASC 820”), requires companies

to determine fair value based on the price that would be received to sell the asset or paid to transfer the liability to a market participant.

ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement.

The guidance requires that assets and liabilities

carried at fair value be classified and disclosed in one of the following categories:

Quoted market prices in active markets for identical assets or liabilities.

Observable market-based inputs or unobservable inputs that are corroborated by market data.

Unobservable inputs that are not corroborated by market data.

Other than the interest rate swap, the Company

did not identify any other assets or liabilities that are required to be presented on the balance sheets at fair value, on a recurring

basis, in accordance with ASC Topic 820.

The following table represents the Company’s

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

June 30, 2025

SEPTEMBER 30, 2025

value of financial instruments

carrying amounts reported in the consolidated balance sheets for cash, accounts receivable, prepaid expenses and other assets, capitalized

project costs, escrow deposits, accounts payable, accrued expenses, and other payables approximate their fair market value based on the

short-term maturity of these instruments.

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value

Measurement (“ASC 820”), requires companies to determine fair value based on the price that would be received to sell

the asset or paid to transfer the liability to a market participant.

ASC 820 emphasizes that fair value is a market-based measurement,

not an entity-specific measurement.

guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:

market prices in active markets for identical assets or liabilities.

market-based inputs or unobservable inputs that are corroborated by market data.

inputs that are not corroborated by market data.

than the interest rate swap, the Company did not identify any other assets or liabilities that are required to be presented on the balance

sheets at fair value, on a recurring basis, in accordance with ASC Topic 820.

following table represents the Company’s fair value hierarchy of its financial assets and liabilities measured at fair value on

a recurring basis as of September 30, 2025 and December 31, 2024.

September 30, 2025

December 31, 2024

1 unchanged sentence

Interest rate swap liability

Interest rate swap

In connection with a bank loan executed in 2022,

the Company entered into an interest rate swap agreement to manage interest rate risk related to debt that accrues interest at variable

The Company accounts for its interest rate swap agreement in accordance with the guidance related to derivatives and hedging activities.

connection with a bank loan executed in 2022, the Company entered into an interest rate swap agreement to manage interest rate risk related

to debt that accrues interest at variable rates.

The Company accounts for its interest rate swap agreement in accordance with the guidance

related to derivatives and hedging activities.

The Company is exposed to market risk from changes in interest rates.

The Company agrees to exchange, at specified intervals, the difference

between fixed and variable interest amounts calculated by reference to an agreed upon notional principal amount.

Interest payments receivable

and payable under the terms of the interest rate swap agreement are accrued over the period to which the payment relates and the net difference

is treated as an adjustment of interest expense related to the underlying liability.

Because the variable interest rates used to calculate

payments under the terms of the swap agreement are calculated using different benchmarks than those included in the Company’s variable

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

The Company agrees

to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed

upon notional principal amount.

Interest payments receivable and payable under the terms of the interest rate swap agreement are accrued

over the period to which the payment relates and the net difference is treated as an adjustment of interest expense related to the underlying

Because the variable interest rates used to calculate payments under the terms of the swap agreement are calculated using

different benchmarks than those included in the Company’s variable rate debt agreement, the swap agreement is not considered an

effective cash flow hedge.

changes in the underlying market value of the remaining swap payments are recognized into income as an increase or decrease to other

income (expense) each reporting period.

In accordance with ASC 820, Fair Value Measurements and Disclosures , the Company believes

values provided by East West Bank (the “Counterparty”) represent the fair value of its swap agreement.

The Company believes

that the quality of the Counterparty to its swap agreement mitigates the Counterparty credit risk.

estimated fair value of the interest rate swap agreement is determined by the Counterparty based on market data used by Counterparty

and is reflected as a derivative asset or liability on the accompanying unaudited consolidated balance sheets with changes in the fair

value reflected in change in fair value of interest rate swap on the accompanying unaudited consolidated statements of operations.

Company uses derivative financial instruments only to manage interest rate risks and not as investment vehicles.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

Accordingly, changes in the underlying market

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

In accordance with ASC 820, Fair Value Measurements and Disclosures , the Company believes values provided by East West Bank (the

“Counterparty”) represent the fair value of its swap agreement.

The Company believes that the quality of the Counterparty

to its swap agreement mitigates the Counterparty credit risk.

The estimated fair value of the interest rate

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

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

rate swap on the accompanying unaudited consolidated statements of operations.

The Company uses derivative financial instruments only

to manage interest rate risks and not as investment vehicles.

Information regarding the interest rate swap is

SEPTEMBER 30, 2025

regarding the interest rate swap is as follows:

Description Notional

September 30,

2025 Interest

Rate Maturity Fair Value of

September 30,

2025 Fair Value of

December 10, 2022 interest rate swap $ 4,384,359 7.65 % December 10, 2032 $ 105,450 $ 44,581

Cash is carried at cost and represents cash on

hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of

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

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

(“FDIC”) limit.

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

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 .

Any loss incurred

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

results of operations and cash flows.

Accounts receivable

The Company recognizes an allowance for losses

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

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

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

On January 1, 2023, the Company

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

In accordance with ASC 326, an allowance is maintained for estimated

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

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

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

Investment in unconsolidated joint ventures

and cost method investments

The Company has equity investments in various

privately held entities.

The Company accounts for these investments either under the equity method or cost method of accounting depending

on the Company’s ownership interest and level of influence.

Investments accounted for under the equity method are recorded based

upon the amount of the Company’s investment and adjusted each period for its share of the investee’s income or loss.

are reviewed for changes in circumstance or the occurrence of events that suggest an other than temporary event where our investment may

not be recoverable.

The Company evaluates its investments in these entities for consolidation.

It considers its percentage interest in

the joint venture, evaluation of control and whether a variable interest entity exists when determining whether or not the investment

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

is carried at cost and represents cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid

investments with an original maturity of three months or less as of the purchase date of such investments.

The Company had no cash equivalents

on September 30, 2025 and December 31, 2024.

The Company’s cash is held at major commercial banks, and our accounts may at times

exceed the Federal Deposit Insurance Corporation (“FDIC”) limit.

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

invested cash.

On September 30, 2025 and December 31, 2024, the Company had approximately $ 600,000 and $ 510,000 , respectively, of cash

in excess of the FDIC limit of $ 250,000 .

Any loss incurred or a lack of access to such funds above the FDIC limit could have a significant

adverse impact on the Company’s financial condition, results of operations and cash flows.

Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries

under the current expected credit loss method.

The allowance is based on an analysis of historical bad debt experience, current receivables

aging and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible.

In accordance with ASC 326 - “Financial Instruments - Credit Losses”, an allowance is maintained for estimated forward-looking

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

The amount of the allowance

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

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

in unconsolidated joint ventures and cost method investments

Company has equity investments in various privately held entities.

The Company accounts for these investments either under the equity

method or cost method of accounting depending on the Company’s ownership interest and level of influence.

Investments accounted

for under the equity method are recorded based upon the amount of the Company’s investment and adjusted each period for its share

of the investee’s income or loss.

Investments are reviewed for changes in circumstance or the occurrence of events that suggest

an other than temporary event where our investment may not be recoverable.

The Company evaluates its investments in these entities for

consolidation.

It considers its percentage interest in the joint venture, evaluation of control and whether a variable interest entity

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

investment under the equity method of accounting.

an investment qualifies for the equity method of accounting, the Company’s investment is recorded initially at cost, and subsequently

adjusted for equity in net income (loss) and cash contributions and distributions.

The net income or loss of an unconsolidated investment

is allocated to its investors in accordance with the provisions of the operating agreement of the entity.

The allocation provisions in

these agreements may differ from the ownership interest held by each investor.

Differences, if any, between the carrying amount of our

investment in the respective joint venture and the Company’s share of the underlying equity of such unconsolidated entity are amortized

over the respective lives of the underlying assets as applicable.

These items are reported as a single line item in the statements of

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

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 nine months ended September 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 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.

investments are subject to the Company’s impairment review policy.

ZONED PROPERTIES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

If an investment qualifies for the equity method

of accounting, the Company’s investment is recorded initially at cost, and subsequently adjusted for equity in net income (loss)

and cash contributions and distributions.

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

with the provisions of the operating agreement of the entity.

The allocation provisions in these agreements may differ from the ownership

interest held by each investor.

Differences, if any, between the carrying amount of our investment in the respective joint venture and

the Company’s share of the underlying equity of such unconsolidated entity are amortized over the respective lives of the underlying

assets as applicable.

These items are reported as a single line item in the statements of operations as income or loss from investments

in unconsolidated affiliated entities.

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

impairment review policy.

Long-term investments

Long-term investments include investments in equity

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

Equity investments

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

to as the “measurement alternative”).

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

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

In applying the measurement alternative, the

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

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

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

30, 2025 and December 31, 2024, long-term investments consisted of an investment in convertible preferred stock with a value of $ 50,000

(see Note 5).

Rental properties

Rental properties are carried at cost, less accumulated

depreciation and amortization.

Betterments, major renovations and certain costs directly related to the improvement of rental properties

are capitalized.

SEPTEMBER 30, 2025

investments include investments in equity securities of entities over which the Company does not have a controlling financial interest

or significant influence.

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

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

This equity instrument does not have a readily

determinable fair value.

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

the measurement alternative, the Company performs a qualitative assessment on a quarterly basis and recognizes an impairment if there

are sufficient indicators that the fair value of the equity investments is less than carrying values.

Changes in value are recorded in

non-operating income (loss).

On September 30, 2025 and December 31, 2024, long-term investments consisted of an investment in convertible

preferred stock with a value of $ 50,000 (see Note 5).

properties are carried at cost, less accumulated depreciation and amortization.

Betterments, major renovations and certain costs directly

related to the improvement of rental properties are capitalized.

Maintenance and repair expenses are charged to expense as incurred.

Depreciation is recognized on a straight-line basis

over estimated useful lives of the assets, which range from 5 to 39 years.

Tenant improvements paid for by the Company are amortized on

a straight-line basis over the lives of the related leases, which approximate the useful lives of the assets.

Upon the acquisition of real estate, the Company

assesses the fair value of acquired assets (including land, buildings and improvements, identified intangibles, such as acquired above-market

leases and acquired in-place leases) and acquired liabilities (such as acquired below-market leases) and allocates the purchase price

based on these assessments.

The Company assesses fair value based on estimated cash flow projections that utilize appropriate discount

and capitalization rates and available market information.

Estimates of future cash flows are based on a number of factors including historical

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

Depreciation is recognized on a straight-line basis over estimated useful lives of the assets, which range from 5 to 39 years.

improvements paid for by the Company are amortized on a straight-line basis over the lives of the related leases, which approximate the

useful lives of the assets.

the acquisition of real estate, the Company assesses the fair value of acquired assets (including land, buildings and improvements, identified

intangibles, such as acquired above-market leases and acquired in-place leases) and acquired liabilities (such as acquired below-market

leases) and allocates the purchase price based on these assessments.

The Company assesses fair value based on estimated cash flow projections

that utilize appropriate discount and capitalization rates and available market information.

Estimates of future cash flows are based

on a number of factors including historical operating results, known trends, and market/economic conditions.

Company’s rental properties are individually reviewed for impairment whenever events or changes in circumstances indicate that

the carrying amount of an asset may not be recoverable.

An impairment exists when the carrying amount of an asset exceeds the aggregate

projected future cash flows over the anticipated holding period on an undiscounted basis.

An impairment loss is measured based on the

excess of the property’s carrying amount over its estimated fair value.

Impairment analyses are based on our current plans, intended

holding periods and available market information at the time the analyses are prepared.

the Company’s estimates of the projected future cash flows, anticipated holding periods, or market conditions change, the Company’s

evaluation of impairment losses may be different and such differences could be material to its consolidated financial statements.

evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and

capital requirements that could differ materially from actual results.

For the three and nine months ended September 30, 2025 and 2024,

the Company did not record any impairment losses.

Company owns land which is not subject to depreciation.

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.

These agreements often include the requirement to make escrow

Escrow deposits include cash deposits made by the Company for the future acquisition of properties or for the option to acquire

In most cases, upon closing of the acquisition of a property, the escrow deposit will be applied to the purchase price.

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 and nine months ended September 30, 2024,

the Company forfeited escrow deposits of $ 17,000 and $ 39,875 , respectively, which is reflected in operating expenses as part of property

portfolio business development costs on the accompanying unaudited consolidated statements of operations.

During the three and nine months

ended September 30, 2025, the Company did not forfeit any escrow deposits.

On September 30, 2025 and December 31, 2024, escrow deposits

amounted to $ 123,556 and $ 169,875 , respectively.

ZONED PROPERTIES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

The Company’s rental properties are individually

reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding

period on an undiscounted basis.

An impairment loss is measured based on the excess of the property’s carrying amount over its estimated

Impairment analyses are based on our current plans, intended holding periods and available market information at the time

the analyses are prepared.

If the Company’s estimates of the projected

future cash flows, anticipated holding periods, or market conditions change, the Company’s evaluation of impairment losses may be

different and such differences could be material to its consolidated financial statements.

The evaluation of anticipated cash flows is

subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially

from actual results.

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.

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

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 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

Property and equipment is stated at cost, less

accumulated depreciation.

Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful

The Company uses a five-year life for office equipment, seven years for furniture and fixtures, and five to ten years for vehicles.

SEPTEMBER 30, 2025

and equipment

and equipment is stated at cost, less accumulated depreciation.

Depreciation of property and equipment is provided utilizing the straight-line

method over the estimated useful lives.

The Company uses a five-year life for office equipment, seven years for furniture and fixtures,

and five to ten years for vehicles.

Expenditures for maintenance and repairs are charged to expense as incurred.

Upon sale or retirement of property and equipment, the related

cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations.

The Company examines the possibility of decreases

in the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

Revenue recognition

Property Investment Portfolio Revenues

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

The Company commences rental revenue recognition when the tenant takes possession of the leased space or controls the physical

use of the leased space and the leased space is substantially ready for its intended use.

If the lease provides for tenant improvements,

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

When the Company

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

use of the leased asset until the tenant improvements are substantially completed.

When the tenant is the owner of the tenant improvements,

any tenant improvement allowance (including amounts that can be taken in the form of cash or a credit against the tenant’s rent)

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

Upon sale or retirement

of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected

in statements of operations.

Company examines the possibility of decreases in the value of these assets when events or changes in circumstances reflect the fact that

their recorded value may not be recoverable.

Investment Portfolio Revenues

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 commences rental revenue recognition when the tenant takes possession of

the leased space or controls the physical use of the leased space and the leased space is substantially ready for its intended use.

the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned

by the tenant or the Company.

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

possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed.

tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that can be taken in the form of

cash or a credit against the tenant’s rent) that is funded by the Company is treated as a lease incentive receivable and amortized

as a reduction of revenue over the lease term.

the Company’s leases provide for payments with fixed monthly base rents over the term of the leases or annual percentage increases

in base rent over the term of the lease.

The leases also require the tenant to remit estimated monthly payments to the Company for property

taxes and common area maintenance.

These payments are recorded as rental income and the related property tax expense is reflected separately

on the accompanying unaudited consolidated statements of operations.

Estate Services Revenues

Company follows ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), except for revenues from lease contracts

within the scope of ASC 842, which are excluded from ASC 606.

This standard establishes a single comprehensive model for entities to

use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance.

ASC 606 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects

the consideration to which the entity expects to be entitled in exchange for those goods or services and requires certain additional

from advisory services is recognized when the Company performs services pursuant to its agreements with clients and collectability is

revenues primarily consist of real estate sales commissions and are recognized upon the successful completion of all required services

which is likely to occur upon a lease commencement, when escrow closes on the sale of a property, or as otherwise negotiated between

the Brokerage and its clients.

In accordance with the guidelines established for reporting revenue gross as a principal versus net as

an agent in ASC Topic 606, the Company records commission revenues and expenses on a gross basis.

Of the criteria listed in ASC Topic

606, the Company is the primary obligor in the transaction, does not have inventory risk, performs all or part of the service, has credit

risk, and has wide latitude in establishing the price of services rendered and discretion in selection of agents and determination of

service specifications.

Brokerage revenues that are payable upon payment of rent or other events beyond the Company’s control are

recognized upon the occurrence of such events.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

Currently, the Company’s leases provide

for payments with fixed monthly base rents over the term of the leases or annual percentage increases in base rent over the term of the

The leases also require the tenant to remit estimated monthly payments to the Company for property taxes and common area maintenance.

These payments are recorded as rental income and the related property tax expense is reflected separately on the accompanying unaudited

consolidated statements of operations.

Real Estate Services Revenues

The Company follows ASC Topic 606, Revenue

from Contracts with Customers (“ASC 606”), except for revenues from lease contracts within the scope of ASC 842, which

are excluded from ASC 606.

This standard establishes a single comprehensive model for entities to use in accounting for revenue arising

from contracts with customers and supersedes most of the existing revenue recognition guidance.

ASC 606 requires an entity to recognize

revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity

expects to be entitled in exchange for those goods or services and requires certain additional disclosures.

Revenues from advisory services is recognized

when the Company performs services pursuant to its agreements with clients and collectability is probable.

Brokerage revenues primarily consist of real estate

sales commissions and are recognized upon the successful completion of all required services which is likely to occur upon a lease commencement,

when escrow closes on the sale of a property, or as otherwise negotiated between the Brokerage and its clients.

In accordance with the

guidelines established for reporting revenue gross as a principal versus net as an agent in ASC Topic 606, the Company records commission

revenues and expenses on a gross basis.

Of the criteria listed in ASC Topic 606, the Company is the primary obligor in the transaction,

does not have inventory risk, performs all or part of the service, has credit risk, and has wide latitude in establishing the price of

services rendered and discretion in selection of agents and determination of service specifications.

Brokerage revenues that are payable

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

Contract liabilities

Contract liabilities include advisory fees received

in advance that are deferred and recognized when the services are complete or over the actual or expected contract term, rental revenue

received in advance, and other deferred revenue for when the Company receives consideration from an agreement before certain criteria

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

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

activities were as follows:

SEPTEMBER 30, 2025

liabilities include advisory fees received in advance that are deferred and recognized when the services are complete or over the actual

or expected contract term, rental revenue received in advance, and other deferred revenue for when the Company receives consideration

from an agreement before certain criteria have been met for revenue to be recognized in conformity with GAAP.

During the nine months

ended September 30, 2025 and 2024, contract liabilities activities were as follows:

September 30,

Balance at beginning of period

2 unchanged sentences

Balance at end of period

Lease accounting

The FASB’s ASC Topic 842, “Leases”

sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e.,

lessees and lessors).

The standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases

based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

This classification will determine

whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease.

is also required to recognize a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless

of their classification.

Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases

The new standard requires lessors to account for leases using an approach that is substantially equivalent to previous guidance

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

FASB’s ASC Topic 842, “Leases” sets out the principles for the recognition, measurement, presentation and disclosure

of leases for both parties to a contract (i.e., lessees and lessors).

The standard requires lessees to apply a dual approach, classifying

leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by

This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line

basis over the term of the lease.

A lessee is also required to recognize a right-of-use asset and a lease liability for all leases with

a term of greater than 12 months regardless of their classification.

Leases with a term of 12 months or less will be accounted for similar

to existing guidance for operating leases today.

The new standard requires lessors to account for leases using an approach that is substantially

equivalent to previous guidance for sales-type leases, direct financing leases and operating leases.

leases entered into on or after the effective date, where the Company is the lessor, at the inception of the contract, the Company assesses

whether the contract is a sales-type, direct financing or operating lease by reviewing the terms of the lease and determining if the

lessee obtains control of the underlying asset implicitly or explicitly.

If a change to a pre-existing lease occurs, the Company evaluates

if the modification results in a separate new lease or a modified lease.

A new lease results when a modification provides additional

right of use.

The new lease or modified lease is then reassessed to determine its classification based on the modified terms.

in Note 3, on January 24, 2022 and effective on March 1, 2022, the Chino Valley lease was amended and the monthly rent was increased

to $ 87,581 due to additional space of 30,000 square feet being leased to the lessee, increasing the premises to a total of 97,312 square

feet of operational space.

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

therefore, this modification

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

In connection with this lease

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

These lease incentives were capitalized as a lease incentive receivable and are recognized on a straight-line basis over the remaining

respective lease term as a reduction to property investment portfolio revenues.

Additionally, during the nine months ended September

30, 2025, the Company paid $ 600,000 to the tenant of ZP Dysart as a tenant improvement allowance for investment into the premises.

$ 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 Company excludes short-term leases having initial terms

of 12-months or less as an accounting policy election and recognizes rent expense on a straight-lines basis over the lease term.

Company records revenues from rental properties for its operating leases where it is the lessor on a straight-line basis.

on the straight-line basis exceeding the monthly payment amount required on the operating lease is reflected as deferred rent.

years, the Company has amended certain leases which resulted in the abatement of rent.

Additionally, in connection with operating leases

on various properties, the Company abated certain lease payments.

These rent abatements and the effect of recording rent on a straight-line

basis resulted in aggregate deferred rent as of September 30, 2025 and December 31, 2024 of $ 1,041,102 and $ 747,504 , respectively (see

Additionally, if the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting

purposes, are owned by the tenant or the Company.

When the Company is the owner of the tenant improvements, the tenant is not considered

to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially

When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that can be taken

in the form of cash or a credit against the tenant’s rent) that is funded is treated as a lease incentive receivable and amortized

as a reduction of revenue over the lease term.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

For leases entered into on or after the effective

date, where the Company is the lessor, at the inception of the contract, the Company assesses whether the contract is a sales-type, direct

financing or operating lease by reviewing the terms of the lease and determining if the lessee obtains control of the underlying asset

implicitly or explicitly.

If a change to a pre-existing lease occurs, the Company evaluates if the modification results in a separate

new lease or a modified lease.

A new lease results when a modification provides additional right of use.

The new lease or modified lease

is then reassessed to determine its classification based on the modified terms.

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

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

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

The increase in monthly

rent was commensurate with the additional space being leased;

therefore, this modification qualifies as a separate contract under ASC

842 which does not require lease classification reassessment.

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

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

These lease incentives were capitalized

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

property investment portfolio revenues.

Additionally, during the 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.

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

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

The Company records revenues from rental properties

for its operating leases where it is the lessor on a straight-line basis.

Any revenue on the straight-line basis exceeding the monthly

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

In prior years, the Company has amended certain leases which

resulted in the abatement of rent.

Additionally, in connection with operating leases on various properties, the Company abated certain

lease payments.

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

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

Additionally, if the lease provides for tenant

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

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

of the physical use of the leased asset until the tenant improvements are substantially completed.

When the tenant is the owner of the

tenant improvements, any tenant improvement allowance (including amounts that can be taken in the form of cash or a credit against the

tenant’s rent) that is funded is treated as a lease incentive receivable and amortized as a reduction of revenue over the lease

For contracts entered into on or after the effective

date, where the Company is the lessee, at the inception of a contract, the Company assesses whether the contract is, or contains, a lease.

SEPTEMBER 30, 2025

contracts entered into on or after the effective date, where the Company is the lessee, at the inception of a contract, the Company assesses

whether the contract is, or contains, a lease.

The Company’s assessment is based on:

(1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain

the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right

to direct the use of the asset.

The Company allocates the consideration in the contract to each lease component based on its relative

stand-alone price to determine the lease payments.

For leases where the Company is a lessee, primarily for the Company’s administrative

office lease, the Company analyzed if it would be required to record a lease liability and a right of use asset on its consolidated balance

sheets at fair value upon adoption of ASC 842.

Operating lease right of use asset represents

the right to use the leased asset for the lease term and operating lease liability is recognized based on the present value of the future

minimum lease payments over the lease term at commencement date.

As most leases do not provide an implicit rate, the Company used its

incremental borrowing rate of 6 % based on the information available at the adoption date or execution of a lease agreement in determining

the present value of future payments.

Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term

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

Basic net income per share is computed by dividing

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

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

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

as-if converted method.

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

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

The Company’s preferred stock is considered

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

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

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

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

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

The following table presents a reconciliation

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

(1) whether the contract involves the use

of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout

the period, and (3) whether we have the right to direct the use of the asset.

The Company allocates the consideration in the contract

to each lease component based on its relative stand-alone price to determine the lease payments.

For leases where the Company is a lessee,

primarily for the Company’s administrative office lease, the Company analyzed if it would be required to record a lease liability

and a right of use asset on its consolidated balance sheets at fair value upon adoption of ASC 842.

lease right of use asset represents the right to use the leased asset for the lease term and operating lease liability is recognized

based on the present value of the future minimum lease payments over the lease term at commencement date.

As most leases do not provide

an implicit rate, the Company used its incremental borrowing rate of 6 % based on the information available at the adoption date or execution

of a lease agreement in determining the present value of future payments.

Lease expense for minimum lease payments is amortized on a

straight-line basis over the lease term and is included in general and administrative expenses in the unaudited consolidated statements

of operations.

and diluted net income per share

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

common stock outstanding during each period.

Diluted net income per share is computed by dividing net income available to common shareholders

by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during

the period using the treasury stock method and as-if converted method.

Potentially dilutive common shares and participating securities

are excluded from the computation of diluted shares outstanding if they would have an anti-dilutive impact on the Company’s net

The Company’s preferred stock is considered a participating security since the preferred shares are entitled to dividends

equal to common share dividends and accordingly, are included in the computation of earnings per share pursuant to the two-class method.

The two-class method of computing income per share is an earnings allocation formula that determines income per share for common stock

and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings.

following table presents a reconciliation of basic and diluted net income per common share:

Three Months Ended

Six Months Ended

Net income (loss) per common share - basic:

Net income (loss)

September 30,

Nine Months Ended

September 30,

Net income per common share - basic:

undistributed (earnings) loss allocated to participating securities

Net income (loss) allocated to common stockholders

Net income allocated to common stockholders

Weighted average common shares outstanding – basic

Net income (loss) per common share – basic

Net income (loss) per common share - diluted:

Net income (loss) allocated to common shareholders – basic

interest of convertible debt

Numerator for income (loss) per common share – basic

Net income per common share – basic

Net income per common share - diluted:

Net income allocated to common shareholders – basic

interest on convertible debt

Numerator for income per common share – basic

Weighted average common shares outstanding – basic

3 unchanged sentences

Weighted average common shares outstanding – diluted

Net income (loss) per common share – diluted

Net income per common share – diluted

ZONED PROPERTIES, INC.

1 unchanged sentence

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.

SEPTEMBER 30, 2025

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 nine months ended September 30, 2025 and 2024.

September 30,

Convertible debt

Stock options

Segment reporting

The Company operates in two reportable segments

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

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

Services” segment.

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

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

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.

Deferred income tax assets and liabilities arise

from temporary differences between the financial statements and tax basis of assets and liabilities, as measured by the enacted tax rates,

which are expected to be in effect when these differences reverse.

Deferred tax assets and liabilities are classified as current or non-current,

depending upon the classification of the asset or liabilities to which they relate.

Deferred tax assets and liabilities not related to

an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected

Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company follows the provisions of FASB ASC

740-10, “Uncertainty in Income Taxes”.

Certain recognition thresholds must be met before a tax position is recognized in the

financial statements.

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

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

either recognition or disclosure in the accompanying consolidated financial statements.

Stock-based compensation

Stock-based compensation is accounted for based

on the requirements of ASC 718 – “Compensation – Stock Compensation ”, which requires recognition in the

financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments

over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively,

the vesting period).

The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange

for an award based on the grant-date fair value of the award.

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

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

Company operates in two reportable segments which consist of (1) the operations, leasing and management of its leased commercial properties,

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

properties, herein known as the “Real Estate Services” segment.

The Company has determined that these reportable segments

were strategic business units that offered different products.

Currently, these reportable segments are being managed separately based

on the fundamental differences in their operations.

November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

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.

income tax assets and liabilities arise from temporary differences between the financial statements and tax basis of assets and liabilities,

as measured by the enacted tax rates, which are expected to be in effect when these differences reverse.

Deferred tax assets and liabilities

are classified as current or non-current, depending upon the classification of the asset or liabilities to which they relate.

tax assets and liabilities not related to an asset or liability are classified as current or non-current depending on the periods in

which the temporary differences are expected to reverse.

Valuation allowances are established when necessary to reduce deferred tax assets

to the amount expected to be realized.

Company follows the provisions of FASB ASC 740-10, “Uncertainty in Income Taxes”.

Certain recognition thresholds must be

met before a tax position is recognized in the financial statements.

An entity may only recognize or continue to recognize tax positions

that meet a “more-likely-than-not” threshold.

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

30, 2025 and December 31, 2024 which would require either recognition or disclosure in the accompanying consolidated financial statements.

compensation is accounted for based on the requirements of ASC 718 – “Compensation – Stock Compensation ”,

which requires recognition in the financial statements of the cost of employee, director, and non-employee services received in exchange

for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange

for the award (presumptively, the vesting period).

The ASC also requires measurement of the cost of employee, director, and non-employee

services received in exchange for an award based on the grant-date fair value of the award.

The Company has elected to recognize forfeitures

as they occur as permitted under ASU 2016-09 Improvements to Employee Share-Based Payment Accounting.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

Recently issued accounting pronouncements

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

Income Taxes (Topic 740):

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

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

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

to the extent those items exceed a specified threshold.

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

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

net of refunds received.

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

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

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

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

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

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

to, depreciation, amortization, and employee compensation.

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

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

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

This pronouncement is effective

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

adoption permitted.

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

Management does not believe that any other recently

issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying unaudited consolidated

financial statements.

NOTE 3 – CONCENTRATIONS AND RISKS

Lease Agreements with Significant Tenants

Our properties located in Chino Valley and Green

Valley are leased by Broken Arrow Herbal Center, Inc.

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

Our property located in Kingman is leased by CJK,

Our property located in Tempe is leased by VSM,

LLC (“VSM”), doing business as Green Dot Labs.

Our property located in Pleasant Ridge is leased

by Rapid Fish, LLC (“Rapid Fish”), doing business as NOXX Cannabis.

Our property located in Chicago is leased by JG

IL LLC (“Justice Grown”), doing business as Justice Cannabis Co.

Our land located in Surprise, AZ is leased by

The Pharma, LLC (“Sunday Goods”), doing business as Sunday Goods.

The Company considers a tenant whose annual base

rent exceeds over 10 % of the Company’s annual rental income to be a significant tenant.

The Tempe Lease (leased by VSM), the Chino

Valley Lease and Green Valley Lease (leased by Broken Arrow), and the Woodward Lease (leased by Rapid Fish) are considered significant

and the tenants are referred to as the Significant Tenants.

SEPTEMBER 30, 2025

issued accounting pronouncements

December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which focuses on the rate

reconciliation and income taxes paid.

2023-09 requires a public business entity (PBE) to disclose, on an annual basis, a tabular

rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items

further broken out by nature and jurisdiction to the extent those items exceed a specified threshold.

In addition, all entities are required

to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the

amount is at least 5 % of total income tax payments, net of refunds received.

This pronouncement is effective for fiscal years beginning

after December 15, 2024, with early adoption permitted.

The adoption of this new guidance had no impact on the accompanying unaudited

consolidated financial statements.

November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures

(Subtopic 220-40), which requires entities to provide more detailed disaggregation of expenses in the income statement, focusing on the

nature of the expenses rather than their function.

The new disclosures will require entities to separately present expenses for significant

line items, including but not limited to, depreciation, amortization, and employee compensation.

Entities will also be required to provide

a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively,

disclose the total amount of selling expenses and, in annual reporting periods, provide a definition of what constitutes selling expenses.

This pronouncement is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning

after December 15, 2027, with early adoption permitted.

The Company does not expect the adoption of this new guidance to have a material

impact on the consolidated financial statements.

does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect

on the accompanying unaudited consolidated financial statements.

3 – CONCENTRATIONS AND RISKS

Agreements with Significant Tenants

properties located in Chino Valley and Green Valley are leased by Broken Arrow Herbal Center, Inc.

(“Broken Arrow”), doing

business as Hana Dispensaries.

property located in Kingman is leased by CJK, Inc.

property located in Tempe is leased by VSM, LLC (“VSM”), doing business as Green Dot Labs.

property located in Pleasant Ridge is leased by Rapid Fish, LLC (“Rapid Fish”), doing business as NOXX Cannabis.

property located in Chicago is leased by JG IL LLC (“Justice Grown”), doing business as Justice Cannabis Co.

land located in Surprise, AZ is leased by The Pharma, LLC (“Sunday Goods”), doing business as Sunday Goods.

Company considers a tenant whose annual base rent exceeds over 10 % of the Company’s annual rental income to be a significant tenant.

The Tempe Lease (leased by VSM), the Chino Valley Lease and Green Valley Lease (leased by Broken Arrow), and the Woodward Lease (leased

by Rapid Fish) are considered significant and the tenants are referred to as the Significant Tenants.

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

May 1, 2018 between Chino Valley and Broken Arrow (the “2018 Chino Valley Lease”), with a term of 22 years, expiring April

The 2018 Chino Valley Lease provided for payment by Broken Arrow of a fixed monthly base rent of $ 35,000 , as well as real property

taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon

or assessed against Chino Valley.

In addition, pursuant to the terms of the 2018 Chino Valley Lease, Broken Arrow agreed to maintain

insurance in full force during the term of the 2018 Chino Valley Lease and any other period of occupancy of the premises by Broken Arrow.

On January 1, 2019, Chino Valley and Broken Arrow entered into that the First Amendment to the 2018 Chino Valley Lease, pursuant to which

the monthly base rent was increased from $ 35,000 to $ 40,000 .

Except for the increase in base rent, the terms of the 2018 Chino Valley

Lease remain in full force and effect.

May 29, 2020, Chino Valley and Broken Arrow entered into a Second Amendment to the 2018 Chino Valley Lease, as amended (the “2020

Chino Valley Amendment”), effective May 31, 2020 (“Effective Date”).

Pursuant to the terms of the 2020 Chino Valley

Amendment, among other things, the base rent was adjusted to $ 32,800 per month, and the base rent was abated from June 1, 2020 to July

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

same, including, without limitation, base rent.

Pursuant to the terms of the 2020 Chino Valley Amendment, the parties agreed that if

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

and adversely affected as mutually and reasonably determined by Chino Valley and Broken Arrow, Broken Arrow may terminate the 2018 Chino

Valley Lease, as amended, by delivering written notice to Chino Valley, together with a termination payment which shall be the sum of

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

In addition, the parties agreed that from the period from the Effective Date to June 30, 2022 (the “Improvement Period”),

Broken Arrow or its affiliate, CJK, will invest a combined total of at least $ 8,000,000 of improvements (“Investment by Tenants”)

in and to the property that is the subject of the Chino Valley Lease and the property that is the subject of the Tempe Lease (discussed

below, and collectively referred to as the “Facilities”).

The Company’s Significant Tenants completed the Investment

by Tenants to the Facilities totaling in excess of $ 8,000,000 and have satisfied the contractual obligations related to the same.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

Chino Valley, AZ

On May 1, 2018, Chino Valley and Broken Arrow

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

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

The 2018 Chino Valley Lease provided

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

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

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

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

On January 1, 2019, Chino Valley and Broken Arrow

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

to $ 40,000 .

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

On May 29, 2020, Chino Valley and Broken Arrow

entered into a Second Amendment to the 2018 Chino Valley Lease, as amended (the “2020 Chino Valley Amendment”), effective

May 31, 2020 (“Effective Date”).

Pursuant to the terms of the 2020 Chino Valley Amendment, among other things, the base rent

was adjusted to $ 32,800 per month, and the base rent was abated from June 1, 2020 to July 31, 2020.

Any increase in the rentable area

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

Pursuant to the terms of the 2020 Chino Valley Amendment, the parties agreed that if there is any change in laws such that the dispensing,

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

by Chino Valley and Broken Arrow, Broken Arrow may terminate the 2018 Chino Valley Lease, as amended, by delivering written notice to

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

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

In addition, the parties agreed that from the period

from the Effective Date to June 30, 2022 (the “Improvement Period”), Broken Arrow or its affiliate, CJK, will invest a combined

total of at least $ 8,000,000 of improvements (“Investment by Tenants”) in and to the property that is the subject of the Chino

Valley Lease and the property that is the subject of the Tempe Lease (discussed below, and collectively referred to as the “Facilities”).

The Company’s Significant Tenants completed the Investment by Tenants to the Facilities totaling in excess of $ 8,000,000 and have

satisfied the contractual obligations related to the same.

On August 23, 2021, Chino Valley and Broken Arrow

entered into the Third Amendment (the “Third Chino Valley Amendment”) to the 2018 Chino Valley Lease, as amended (the “Chino

Valley Lease”), effective September 1, 2021.

The parties previously agreed that the base rental payments under the Chino Valley

Lease would increase commensurate to any and all expanded and operational square footage on the premises by calculating the fixed rate

of $ 0.82 per square foot per month by the new operational square footage.

Accordingly, in the Third Chino Valley Amendment, the parties

agreed that, as of September 1, 2021, the rental payment is increased to $ 55,195 per month base rental payment, plus additional rental

payments, as a result of the increase in the square footage to 67,312 square feet of operational space.

This lease modification qualified

as a separate contract as the modification grants the tenant additional right of use not included in the original lease, as amended, and

the increase in monthly rent payments is commensurate with the standalone price for the additional square footage being leased.

On January 24, 2022 and effective on March 1,

2022, Chino Valley and Broken Arrow entered into the Fourth Amendment (the “Fourth Chino Valley Amendment”) to the Chino Valley

Lease, as amended.

Pursuant to the terms of the Fourth Chino Valley Amendment, the parties acknowledge that an additional 30,000 square

feet have become operational, increasing the premises to a total of 97,312 square feet of operational space.

In connection with the Fourth

Chino Valley Amendment, the Company paid $ 500,000 to Tenant as a tenant improvement allowance or lease incentive for investment into the

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

as a reduction to the property investment portfolio revenues.

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

1, 2022, the monthly base rent was increased to $ 87,581 , representing an increase from $ 0.82 per square foot to $ 0.90 per square foot,

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

Green Valley, AZ

On May 1, 2018, Green Valley and Broken Arrow

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

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

The Green Valley Lease provided for payment

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

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

In addition, pursuant

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

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

SEPTEMBER 30, 2025

August 23, 2021, Chino Valley and Broken Arrow entered into the Third Amendment (the “Third Chino Valley Amendment”) to the

2018 Chino Valley Lease, as amended (the “Chino Valley Lease”), effective September 1, 2021.

The parties previously agreed

that the base rental payments under the Chino Valley Lease would increase commensurate to any and all expanded and operational square

footage on the premises by calculating the fixed rate of $ 0.82 per square foot per month by the new operational square footage.

in the Third Chino Valley Amendment, the parties agreed that, as of September 1, 2021, the rental payment is increased to $ 55,195 per

month base rental payment, plus additional rental payments, as a result of the increase in the square footage to 67,312 square feet of

operational space.

This lease modification qualified as a separate contract as the modification grants the tenant additional right of

use not included in the original lease, as amended, and the increase in monthly rent payments is commensurate with the standalone price

for the additional square footage being leased.

January 24, 2022 and effective on March 1, 2022, Chino Valley and Broken Arrow entered into the Fourth Amendment (the “Fourth Chino

Valley Amendment”) to the Chino Valley Lease, as amended.

Pursuant to the terms of the Fourth Chino Valley Amendment, the parties

acknowledge that an additional 30,000 square feet have become operational, increasing the premises to a total of 97,312 square feet of

operational space.

In connection with the Fourth Chino Valley Amendment, the Company paid $ 500,000 to Tenant as a tenant improvement

allowance or lease incentive for investment into the premises, which was capitalized as a lease incentive receivable and is recognized

on a straight-line basis over the remaining lease term as a reduction to the property investment portfolio revenues.

Pursuant to the

terms of the Fourth Chino Valley Amendment, effective March 1, 2022, the monthly base rent was increased to $ 87,581 , representing an

increase from $ 0.82 per square foot to $ 0.90 per square foot, for all current and future operational square footage that may be developed

as the premises continue to expand.

the third quarter of 2025, Broken Arrow faced operational challenges that impaired their ability to meet contractual rent

Beginning in September 2025, they remitted approximately 17 % of the September 2025 rent due.

On September 29, 2025, the

Company delivered a notice of default to Broken Arrow.

The Company and Broken Arrow have entered into discussions related to

possible rent relief and remedies to cure the event of default;

however, the Chino Valley Lease remains in default as of the date of

The Company expects to receive the full rent amount due in the near future.

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

May 1, 2018 between Green Valley and Broken Arrow (the “Green Valley Lease”), with a term of 22 years, expiring April 30,

The Green Valley Lease provided for payment by Broken Arrow of a fixed monthly base rent of $ 3,500 , as well as real property taxes,

personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed

against Chino Valley.

In addition, pursuant to the terms of the Green Valley Lease, Broken Arrow agreed to maintain insurance in full

force during the term of the Green Valley Lease and any other period of occupancy of the premises by Broken Arrow.

May 29, 2020, Green Valley and Broken Arrow entered into the First Amendment (the “Green Valley Amendment”) to the Green

Valley Lease, effective May 31, 2020.

The Green Valley Amendment provides that any increase in the rentable area of the leases premises

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

The parties also agreed

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

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

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

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

May 1, 2018, and amended on May 29, 2020, Zoned Arizona and CJK entered into that certain Licensed Medical Marijuana Facility Triple

Net (NNN) Lease Agreement dated May 1, 2018 between Zoned Arizona and CJK (the “Tempe Lease”), with a term of 22 years, expiring

April 30, 2040 .

The Tempe Lease provided for payment by CJK of a fixed monthly base rent of $ 33,500 , as well as real property taxes,

personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed

against Zoned Arizona.

In addition, pursuant to the terms of the Tempe Lease, CJK agreed to maintain insurance in full force during the

term of the Tempe Lease and any other period of occupancy of the premises by CJK.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

On May 29, 2020, Green Valley and Broken Arrow

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

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

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

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

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

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

SEPTEMBER 30, 2025

May 29, 2020, Zoned Arizona and CJK entered into the First Amendment (the “Tempe Amendment”) to the Tempe Lease, effective

May 31, 2020.

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

increase in the rentable area of the leased premises will result in an increase in all amounts calculated based on the same, including,

without limitation, base rent.

Pursuant to the terms of the Tempe Amendment, the parties agreed that if there is any change in laws such

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

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

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

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

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

Arizona and CJK entered into that certain Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between

Zoned Arizona and CJK (the “Tempe Lease”), with a term of 22 years, expiring April 30, 2040 .

The Tempe Lease provided for

payment by CJK of a fixed monthly base rent of $ 33,500 , as well as real property taxes, personal property taxes, privilege, sales, rental,

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

In addition, pursuant

to the terms of the Tempe Lease, CJK agreed to maintain insurance in full force during the term of the Tempe Lease and any other period

of occupancy of the premises by CJK.

On May 29, 2020, Zoned Arizona and CJK entered

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

Pursuant to the terms of the

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

Any increase in the rentable area of the leased

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

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

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

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

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

In addition, under the Tempe Amendment the parties

agreed to an Investment by Tenant (as defined above in the subheading Chino Valley ) to the property that is the subject of the

Chino Valley Lease and the property that is the subject of the Tempe Lease.

The Company’s Significant Tenants have completed the

Investment by Tenants to the Facilities totaling in excess of $ 8,000,000 and have satisfied the contractual obligations related to the

In connection with a promissory note (See Note

8), on July 11, 2022 and reaffirmed on December 7, 2022, the Company entered into a Deed of Trust Agreement that secures the Company’s

performance under the promissory note.

The Deed of Trust Agreement transfers and assigns to the lender the right to sell the assets of

Tempe and rights to rental income in case of default under the promissory note.

On November 30, 2022, Zoned Arizona, CJK, and

VSM entered into that Second Amendment (the “Tempe Second Amendment”) to the Tempe Lease, as amended.

Concurrently with the

execution of the Tempe Second Amendment:

(i) CJK assigned all its interest in the Tempe Lease to VSM (the “Assignment”), and

(ii) VSM subleased a portion of the Premises (as defined in the Tempe Lease), pursuant to that certain Sublease dated November 30, 2022

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,

among other things, and in consideration of Zoned Arizona’s agreement to enter into the Tempe Second Amendment:

(i) VSM paid Zoned

Arizona $ 300,000 (the “Assignment Fee”), (ii) VSM agreed to commit at least $ 3,000,000 to be spent toward capital improvements

to the Premises within two years after the effective date of the Tempe Second Amendment (the “Capital Commitment”), (iii)

VSM agreed to deposit an additional security deposit (the “Additional Security Deposit”) of $ 147,600 to be held by Zoned Arizona

per the terms of the Tempe Lease, and (iv) VSM agreed to cause its affiliate, GDL Inc.

(doing business as Green Dot Labs) (“GDL”)

to execute and deliver to Zoned Arizona that Guaranty of Payment and Performance dated on the same date as the Tempe Amendment, which

Guaranty of Payment and Performance requires GDL to guarantee and be liable for VSM’s compliance with and performance under the

addition, under the Tempe Amendment the parties agreed to an Investment by Tenant (as defined above in the subheading Chino Valley )

to the property that is the subject of the Chino Valley Lease and the property that is the subject of the Tempe Lease.

The Company’s

Significant Tenants have completed the Investment by Tenants to the Facilities totaling in excess of $ 8,000,000 and have satisfied the

contractual obligations related to the same.

connection with a promissory note (See Note 8), on July 11, 2022 and reaffirmed on December 7, 2022, the Company entered into a Deed

of Trust Agreement that secures the Company’s performance under the promissory note.

The Deed of Trust Agreement transfers and

assigns to the lender the right to sell the assets of Tempe and rights to rental income in case of default under the promissory note.

November 30, 2022, Zoned Arizona, CJK, and VSM entered into that Second Amendment (the “Tempe Second Amendment”) to the Tempe

Lease, as amended.

Concurrently with the execution of the Tempe Second Amendment:

(i) CJK assigned all its interest in the Tempe Lease

to VSM (the “Assignment”), and (ii) VSM subleased a portion of the Premises (as defined in the Tempe Lease), pursuant to

that certain Sublease dated November 30, 2022 between VSM, as sublessor, and CJK, as sublessee.

to the terms of the Tempe Second Amendment, among other things, and in consideration of Zoned Arizona’s agreement to enter into

the Tempe Second Amendment:

(i) VSM paid Zoned Arizona $ 300,000 (the “Assignment Fee”), (ii) VSM agreed to commit at least

$ 3,000,000 to be spent toward capital improvements to the Premises within two years after the effective date of the Tempe Second Amendment

(the “Capital Commitment”), (iii) VSM agreed to deposit an additional security deposit (the “Additional Security Deposit”)

of $ 147,600 to be held by Zoned Arizona per the terms of the Tempe Lease, and (iv) VSM agreed to cause its affiliate, GDL Inc.

business as Green Dot Labs) (“GDL”) to execute and deliver to Zoned Arizona that Guaranty of Payment and Performance dated

on the same date as the Tempe Amendment, which Guaranty of Payment and Performance requires GDL to guarantee and be liable for VSM’s

compliance with and performance under the Tempe Lease.

The Guaranty of Payment and Performance was entered into on November 30, 2022.

If VSM fails to deliver to Zoned Arizona invoices

or other documentation acceptable to Zoned Arizona showing the Capital Commitment has been satisfied in a timely manner, VSM will be in

default under the Tempe Lease.

If VSM fails to deliver to Zoned Arizona invoices or other documentation acceptable to Zoned Arizona showing the Capital Commitment has

been satisfied in a timely manner, VSM will be in default under the Tempe Lease.

No other terms of the Tempe Lease were modified.

Therefore, the Company’s accounting for the lease

remained unchanged subsequent to the Tempe Second Amendment and Assignment.

Pursuant to ASC 842-10-25, the lease modification

was not accounted for as a separate contract and the Company accounted for the modification as if it were a termination of the existing

lease and the creation of a new lease that commenced on the effective date of the modification.

Accordingly, the Company recorded the

$ 300,000 as a contract liability and will amortize the $ 300,000 Assignment Fees into rental revenue on a straight-line basis over the

remaining term of the lease through April 2040.

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 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.

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

Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Kingman and CJK (the “Kingman Lease”),

with a term of 22 years, expiring April 30, 2040 .

The Kingman Lease provides for payment by CJK of a fixed monthly base rent of $ 4,000 ,

as well as real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or

estate taxes) levied upon or assessed against Kingman.

In addition, pursuant to the terms of the Kingman Lease, CJK agreed to maintain

insurance in full force during the term of the Kingman Lease and any other period of occupancy of the premises by CJK.

On May 29, 2020, Kingman and CJK entered into

the First Amendment (the “Kingman Amendment”) to the Kingman Lease, effective May 31, 2020.

The Kingman Amendment provides

that any increase in the rentable area of the leases premises will result in an increase in all amounts calculated based on the same,

including, without limitation, base rent.

The parties also agreed that if there is any change in laws such that the dispensing, sale or

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

Kingman and CJK, CJK may terminate the Kingman Lease by delivering written notice to Kingman, together with a termination payment which

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

the balance of the term.

On November 30, 2022, Kingman and CJK entered

into the Second Amendment (the “Kingman Second Amendment”) to the Licensed Medical Marijuana Facility Triple Net (NNN) Lease

Agreement dated May 1, 2018 between Kingman and CJK.

Pursuant to the terms of the Kingman Second Amendment, CJK agreed to grant Kingman

a right to terminate the Kingman Lease upon 15 days’ prior written notice in Kingman’s sole discretion, without any obligation

to do so, provided that Kingman may not exercise this right to terminate if CJK is operating its business as a going concern at the premises

which is the subject of the Kingman Lease.

the Company’s accounting for the lease remained unchanged subsequent to the Tempe Second Amendment and Assignment.

to ASC 842-10-25, the lease modification was not accounted for as a separate contract and the Company accounted for the modification

as if it were a termination of the existing lease and the creation of a new lease that commenced on the effective date of the modification.

Accordingly, the Company recorded the $ 300,000 as a contract liability and will amortize the $ 300,000 Assignment Fees into rental revenue

on a straight-line basis over the remaining term of the lease through April 2040.

On September 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 sheets.

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.

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

Kingman and CJK (the “Kingman Lease”), with a term of 22 years, expiring April 30, 2040 .

The Kingman Lease provides for payment

by CJK of a fixed monthly base rent of $ 4,000 , as well as real property taxes, personal property taxes, privilege, sales, rental, excise,

use and/or other taxes (excluding income or estate taxes) levied upon or assessed against Kingman.

In addition, pursuant to the terms

of the Kingman Lease, CJK agreed to maintain insurance in full force during the term of the Kingman Lease and any other period of occupancy

of the premises by CJK.

ZONED PROPERTIES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

On August 2, 2023, the Company entered into a

Sublease Agreement (the “Sublease”) with CJK and a subtenant in connection with the Company’s Kingman property.

to the Sublease, the Sublease shall be effective on August 2, 2023 and end on the one year anniversary, or (ii) the last day of the Term

of the Master Lease (whether due to expiration or termination thereof by the Company, whichever is earlier (the “Sublease Expiration

Date”), such period being referred to herein as the “Sublease Term”, unless terminated earlier pursuant to the terms

of this Sublease or otherwise by consent of the Company, CJK and Subtenant.

The subtenant had two options to extend the Sublease Term

by one-year periods each (each a “Sublease Term Extension” and collectively the “Sublease Term Extensions”), which

were exercisable by Subtenant no later than 90 days prior to the expiration of the Sublease Term, as may be extended.

In August 2024,

the Sublease was not renewed and the Sublease expired.

Pursuant to the Kingman Lease, if pursuant to

any assignment or sublease, CJK receives rent, either initially or over the Term of the assignment or sublease, in excess of the Rent

called for hereunder, or in the case of this sublease of a portion of the Premises in excess of such Rent fairly allocable to such portion,

after appropriate adjustments to assure that all other payments called for hereunder are appropriately taken into account, CJK shall pay

to the Company, as Additional Rent hereunder, 50 % of the excess of each such payment of rent received by CJK.

Accordingly, the Company

receives additional rent of $ 3,500 per month during the term of the sublease.

Additionally, the subtenant paid a security deposit

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

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

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

Upon expiration

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

Pleasant Ridge, MI

On November 29, 2022, ZP Woodward, as landlord,

entered into a Licensed Cannabis Facility Absolute Net Lease Agreement (the “Woodward Lease”) with Rapid Fish 2 LLC, as tenant

(“Woodward Tenant”), whereby ZP Woodward leased the Woodward Property located in Pleasant Ridge, Michigan to the Woodward

The Woodward Lease commenced on December 1, 2022 and had a term of 14 years and 4 months through March 1, 2037, with two 5-year

options to extend the term, exercisable by the Woodward Tenant by written notice to ZP Woodward given not later than 180 days prior to

the expiration of the then current term on the same terms and conditions as provided in this Lease.

The Woodward Lease contains customary

obligations of the Woodward Tenant consistent with an absolute triple net lease agreement, including (i) the payment of real property

taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes), (ii) payment

of insurance premiums and operating costs of ZP Woodward related to the operation of the Woodward Property, and (iii) maintenance and

repair obligations to maintain the Woodward Property in first-class retail condition.

The Woodward Lease includes a Guaranty of Payment

and Performance by Ammar Kattoula and Thomas Nafso.

The Woodward Lease contains an abatement of the full or partial rent that would otherwise

have been due for the months from December 2022 to March 2023.

Subsequent to the abatement period, the Woodward Lease provided for payment

by the tenant of monthly base rent beginning at $ 40,319 per month and increasing by 3 % per year over the term of the lease, as well as

real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes)

levied upon or assessed against the Company.

In addition, pursuant to the terms of the Woodward Lease, the Woodward Tenant agreed to maintain

insurance in full force during the term of the Woodward Lease and any other period of occupancy of the premises by the tenant.

SEPTEMBER 30, 2025

May 29, 2020, Kingman and CJK entered into the First Amendment (the “Kingman Amendment”) to the Kingman Lease, effective

May 31, 2020.

The Kingman Amendment provides that any increase in the rentable area of the leases premises will result in an increase

in all amounts calculated based on the same, including, without limitation, base rent.

The parties also agreed that if there is any change

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

as mutually and reasonably determined by Kingman and CJK, CJK may terminate the Kingman Lease by delivering written notice to Kingman,

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

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

November 30, 2022, Kingman and CJK entered into the Second Amendment (the “Kingman Second Amendment”) to the Licensed Medical

Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Kingman and CJK.

Pursuant to the terms of the Kingman Second

Amendment, CJK agreed to grant Kingman a right to terminate the Kingman Lease upon 15 days’ prior written notice in Kingman’s

sole discretion, without any obligation to do so, provided that Kingman may not exercise this right to terminate if CJK is operating

its business as a going concern at the premises which is the subject of the Kingman Lease.

August 2, 2023, the Company entered into a Sublease Agreement (the “Sublease”) with CJK and a subtenant in connection with

the Company’s Kingman property.

Pursuant to the Sublease, the Sublease shall be effective on August 2, 2023 and end on the one

year anniversary, or (ii) the last day of the Term of the Master Lease (whether due to expiration or termination thereof by the Company,

whichever is earlier (the “Sublease Expiration Date”), such period being referred to herein as the “Sublease Term”,

unless terminated earlier pursuant to the terms of this Sublease or otherwise by consent of the Company, CJK and Subtenant.

The subtenant

had two options to extend the Sublease Term by one-year periods each (each a “Sublease Term Extension” and collectively the

“Sublease Term Extensions”), which were exercisable by Subtenant no later than 90 days prior to the expiration of the Sublease

Term, as may be extended.

In August 2024, the Sublease was not renewed and the Sublease expired.

to the Kingman Lease, if pursuant to any assignment or sublease, CJK receives rent, either initially or over the Term of the assignment

or sublease, in excess of the Rent called for hereunder, or in the case of this sublease of a portion of the Premises in excess of such

Rent fairly allocable to such portion, after appropriate adjustments to assure that all other payments called for hereunder are appropriately

taken into account, CJK shall pay to the Company, as Additional Rent hereunder, 50 % of the excess of each such payment of rent received

Accordingly, the Company receives additional rent of $ 3,500 per month during the term of the sublease.

Additionally,

the subtenant paid a security deposit of $ 22,000 per the terms of the sublease.

In 2023, the Company and CJK agreed to split the Security

Deposit at 68 % (the Company received $ 14,960 of the $ 22,000 Security Deposit, which $ 14,960 was included in security deposits payable

as of December 31, 2023.

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

November 29, 2022, ZP Woodward, as landlord, entered into a Licensed Cannabis Facility Absolute Net Lease Agreement (the “Woodward

Lease”) with Rapid Fish 2 LLC, as tenant (“Woodward Tenant”), whereby ZP Woodward leased the Woodward Property located

in Pleasant Ridge, Michigan to the Woodward Tenant.

The Woodward Lease commenced on December 1, 2022 and had a term of 14 years and 4

months through March 1, 2037, with two 5-year options to extend the term, exercisable by the Woodward Tenant by written notice to ZP

Woodward given not later than 180 days prior to the expiration of the then current term on the same terms and conditions as provided

in this Lease.

The Woodward Lease contains customary obligations of the Woodward Tenant consistent with an absolute triple net lease

agreement, including (i) the payment of real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or other

taxes (excluding income or estate taxes), (ii) payment of insurance premiums and operating costs of ZP Woodward related to the operation

of the Woodward Property, and (iii) maintenance and repair obligations to maintain the Woodward Property in first-class retail condition.

The Woodward Lease includes a Guaranty of Payment and Performance by Ammar Kattoula and Thomas Nafso.

The Woodward Lease contains an

abatement of the full or partial rent that would otherwise have been due for the months from December 2022 to March 2023.

to the abatement period, the Woodward Lease provided for payment by the tenant of monthly base rent beginning at $ 40,319 per month and

increasing by 3 % per year over the term of the lease, as well as real property taxes, personal property taxes, privilege, sales, rental,

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

In addition, pursuant

to the terms of the Woodward Lease, the Woodward Tenant agreed to maintain insurance in full force during the term of the Woodward Lease

and any other period of occupancy of the premises by the tenant.

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.

May 1, 2024, ZP Woodward and New Tenant (the “Parties”), with individual Guarantors, Thomas Nafso and Ammar Kattoula (the

“Guarantors”), entered into a First Amendment to the Absolute Net Lease Agreement (the “First Amendment”) pertaining

to premises located at 23600-23634 Woodward Ave, Pleasant Ridge MI 48069.

The Parties also agreed to a fully executed Reaffirmation of

Guaranty from the Guarantors.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

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

(the “Parties”), with individual Guarantors, Thomas Nafso and Ammar Kattoula (the “Guarantors”), entered into

a First Amendment to the Absolute Net Lease Agreement (the “First Amendment”) pertaining to premises located at 23600-23634

Woodward Ave, Pleasant Ridge MI 48069.

The Parties also agreed to a fully executed Reaffirmation of Guaranty from the Guarantors.

According to the terms of the First Amendment,

the following changes have been agreed to by the Parties:

Amended Rental Payment Schedule

The First Amendment provides that as long as the

Company’s Conditions, as outlined in this First Amendment, are satisfied including a Renovation Completion Commitment, the Rental

Payment Schedule of the Lease will be amended to the schedule set forth in the First Amendment.

Capital Commitment

The First Amendment provides for the inclusion

of the Capital Commitment as follows:

Tenant shall cause a total of at least $ 850,000 to be spent toward capital improvements to the Premises

(the “Commitment Improvements” and/or the “Capital Commitment”).

Any such Commitment Improvements shall be made

in accordance with the Lease as amended.

Commitment Improvements to be counted toward satisfying the Capital Commitment shall include

capital improvements to the Premises and any part thereof, as well as other improvements approved in advance in writing by the Company,

and shall exclude soft costs, permit, design, architectural and engineering fees, and legal fees.

Tenant acknowledges that the Capital

Commitment is material to the Company and the Company would not have agreed to enter into this First Amendment but for Tenant’s

obligations in this paragraph.

If the Capital Commitment is not completed in the prescribed time period, as evidenced by invoices or similar

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

Renovation Completion Commitment

The First Amendment provides for the inclusion

of the Renovation Completion Commitment as follows:

Tenant shall cause its Capital Commitment at the Premises (the “Renovation Completion

Commitment”) to be completed within three (3) months after the First Amendment Effective Date (the “Renovation Completion

Commitment Date”).

In order to satisfy the Renovation Completion Commitment, Tenant must satisfy the following prior to the Renovation

Completion Commitment Date (i) deliver to the Company the appropriate deliverables evidencing renovation completion (the “Renovation

Completion Deliverables”) (as defined below) (ii) open for business to the public for its intended Use of the Premises (the “Store

Opening”), (iii) and complete its first bona fide sale to the public.

SEPTEMBER 30, 2025

to the terms of the First Amendment, the following changes have been agreed to by the Parties:

Rental Payment Schedule

First Amendment provides that as long as the Company’s Conditions, as outlined in this First Amendment, are satisfied including

a Renovation Completion Commitment, the Rental Payment Schedule of the Lease will be amended to the schedule set forth in the First Amendment.

First Amendment provides for the inclusion of the Capital Commitment as follows:

Tenant shall cause a total of at least $ 850,000 to be

spent toward capital improvements to the Premises (the “Commitment Improvements” and/or the “Capital Commitment”).

Any such Commitment Improvements shall be made in accordance with the Lease as amended.

Commitment Improvements to be counted toward

satisfying the Capital Commitment shall include capital improvements to the Premises and any part thereof, as well as other improvements

approved in advance in writing by the Company, and shall exclude soft costs, permit, design, architectural and engineering fees, and

Tenant acknowledges that the Capital Commitment is material to the Company and the Company would not have agreed to enter

into this First Amendment but for Tenant’s obligations in this paragraph.

If the Capital Commitment is not completed in the prescribed

time period, as evidenced by invoices or similar documentation reasonably acceptable to the Company, Tenant’s failure shall constitute

an Event of Default under the Lease.

Completion Commitment

First Amendment provides for the inclusion of the Renovation Completion Commitment as follows:

Tenant shall cause its Capital Commitment

at the Premises (the “Renovation Completion Commitment”) to be completed within three (3) months after the First Amendment

Effective Date (the “Renovation Completion Commitment Date”).

In order to satisfy the Renovation Completion Commitment, Tenant

must satisfy the following prior to the Renovation Completion Commitment Date (i) deliver to the Company the appropriate deliverables

evidencing renovation completion (the “Renovation Completion Deliverables”) (as defined below) (ii) open for business to

the public for its intended Use of the Premises (the “Store Opening”), (iii) and complete its first bona fide sale to the

The Renovation Completion Deliverables include the following:

(x) Tenant has furnished to the Company a copy of a commercially reasonably detailed final cost breakdown for Tenant’s Work and

the Company 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;

(y) Tenant has furnished to the Company commercially reasonable final affidavits and final lien

releases from Tenant’s general contractor, 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);

(z) a copy of the certificate of occupancy

from the governmental authority having jurisdiction has been delivered to the Company.

Tenant acknowledges that the Renovation Completion

Commitment is material to the Company and the Company would not have agreed to enter into this First Amendment but for Tenant’s

obligations in this paragraph.

If the Renovation Completion Commitment is not completed in the prescribed time period, Tenant’s

failure shall constitute an Event of Default under the Lease.

the Company shall grant Tenant up to two additional 30-day extension

upon request, so long as at the time of the extension the site is conducting inspections toward certificate of occupancy.

The First Amendment also provides that if within

18 months of the date of this First Amendment, Tenant is able to complete all of the following related to 23634 Woodward Ave, Pleasant

Ridge MI 48069 with an APN of 25-27-181-003 (the “North Lot”):

(i) obtain authorization from all required jurisdictions (including

the City of Pleasant Ridge) that the use of the North Lot parking spaces is no longer required and releases the Company from all obligations

related to the North Lot under the Declaration of Restrictions and Parking Easement (the “Parking Agreement”), and (ii) confirm

that the Tenant is able to continue to use the lot for purposes of ingress and egress, and (iii) Tenant is able to arrange a deal with

the seller of the North Lot, which is currently under a Land Contract with outstanding installment payments, that (x) provides the Company

with indemnity from Tenant that completely releases the Company of any operational obligations or liabilities related to the North Lot,

(y) provides the Company with indemnity from Tenant that completely release the Company of any financial obligations or liabilities related

to the North Lot, and (z) does not cause any encumbrance or legal liability to the remaining properties at the Premises;

then within 30

days of the Company’s receipt of written confirmation from all appropriate parties that all requirements noted above have been satisfied,

at the Company sole discretion, the Company agrees that the parties shall enter into a Lease Amendment acknowledging the same and modifying

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

(x) Tenant has furnished to the Company a copy of a commercially

reasonably detailed final cost breakdown for Tenant’s Work and the Company 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;

(y) Tenant has furnished to

the Company commercially reasonable final affidavits and final lien releases from Tenant’s general contractor, 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);

(z) a copy of the certificate of occupancy from the governmental authority having jurisdiction has been delivered

to the Company.

Tenant acknowledges that the Renovation Completion Commitment is material to the Company and the Company would not have

agreed to enter into this First Amendment but for Tenant’s obligations in this paragraph.

If the Renovation Completion Commitment

is not completed in the prescribed time period, Tenant’s failure shall constitute an Event of Default under the Lease.

shall grant Tenant up to two additional 30-day extension upon request, so long as at the time of the extension the site is conducting

inspections toward certificate of occupancy.

First Amendment also provides that if within 18 months of the date of this First Amendment, Tenant is able to complete all of the following

related to 23634 Woodward Ave, Pleasant Ridge MI 48069 with an APN of 25-27-181-003 (the “North Lot”):

(i) obtain authorization

from all required jurisdictions (including the City of Pleasant Ridge) that the use of the North Lot parking spaces is no longer required

and releases the Company from all obligations related to the North Lot under the Declaration of Restrictions and Parking Easement (the

“Parking Agreement”), and (ii) confirm that the Tenant is able to continue to use the lot for purposes of ingress and egress,

and (iii) Tenant is able to arrange a deal with the seller of the North Lot, which is currently under a Land Contract with outstanding

installment payments, that (x) provides the Company with indemnity from Tenant that completely releases the Company of any operational

obligations or liabilities related to the North Lot, (y) provides the Company with indemnity from Tenant that completely release the

Company of any financial obligations or liabilities related to the North Lot, and (z) does not cause any encumbrance or legal liability

to the remaining properties at the Premises;

then within 30 days of the Company’s receipt of written confirmation from all appropriate

parties that all requirements noted above have been satisfied, at the Company sole discretion, the Company agrees that the parties shall

enter into a Lease Amendment acknowledging the same and modifying Tenant’s lease base rental rate to be reduced by $ 3,846 for the

Reaffirmation

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.

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.

ZONED PROPERTIES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Sunday Goods, as tenant.

Pursuant to the terms of the Sunday Goods Lease, ZPRE Holdings agreed to lease the Surprise Property to Sunday

Goods for use as a licensed medical and adult use marijuana retail dispensary in accordance with the laws of Arizona.

The Sunday Goods

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

Pursuant to the Sunday Goods Lease, ZPRE Holdings has agreed to provide

a tenant improvement allowance for up to $ 1,000,000 to Sunday Goods to be reimbursed in tranches following completion of tenant’s

During 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.

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.

Pursuant to the terms of the Contingent Lease, on February 27, 2024,

Sunday Goods executed a guaranty (the “Guaranty”) in favor of ZP Holdings, guaranteeing the prompt and complete payment and

SEPTEMBER 30, 2025

the third quarter of 2025, New Tenant faced operational challenges that impaired its ability to meet contractual rent obligations.

in July 2025, New Tenant remitted approximately 50 % of the rent then due.

In August 2025, the Company sent a demand notice to New Tenant

to remit full payment of outstanding rent.

In September 2025, New Tenant remitted full payment of all outstanding rent that was previously

The Company and New Tenant have entered into discussions related to future operations at the Woodward Property and under the Woodward

As of November 2025, New Tenant is current in its rent obligations;

however, the Company believes the parties will need to continue

discussions related to New Tenant’s operational challenges that may impact the future of the Woodward Lease and the Woodward Property.

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.

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”),

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.

the Justice Grown Lease, the Company’s tenant is responsible for constructing a new retail dispensary building on the Ashland Avenue

As of October 2025, various events and regulatory challenges have caused delays to the commencement of the construction of

the new building on the property.

As such, the Ashland Avenue Property remains a vacant lot of land.

Based upon the most recent information

received by the Company from Justice Grown, the Company believes that the development of the new retail dispensary building will be completed,

and the tenant will open for business in late 2026;

however, challenges related to the ongoing permitting and development process required

through the city of Chicago may continue to cause delays.

The Company’s tenant has and is expected to continue to pay its rent pursuant to the Justice Grown Lease.

January 2, 2024, ZPRE Holdings entered into a contingent Licensed Cannabis Facility Absolute Net Ground Lease Agreement (the

“Sunday Goods Lease”), with a commencement date contingent upon the satisfaction of various contingencies to the Sunday

Goods Lease, by and between ZPRE Holdings, as landlord, and Sunday Goods, as tenant.

Pursuant to the terms of the Sunday Goods

Lease, ZPRE Holdings agreed to lease the Surprise Property to Sunday Goods for use as a licensed medical and adult use marijuana

retail dispensary in accordance with the laws of Arizona.

The Sunday Goods Lease has a term of 15 years, with four five-year renewal

Pursuant to the Sunday Goods Lease, ZPRE Holdings has agreed to provide a tenant improvement allowance for up to $ 1,000,000

to Sunday Goods to be reimbursed in tranches following completion of tenant’s work.

During the nine months ended September 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.

Pursuant to the terms of the Contingent Lease, on February 27, 2024, Sunday

Goods executed a guaranty (the “Guaranty”) in favor of ZP Holdings, guaranteeing the prompt and complete payment and

performance of all of Sunday Goods’ obligations to ZPRE Holdings arising under the Contingent Lease.

As of July 8, 2024, all contingencies

were satisfied and the Contingent Lease commenced on July 13, 2024.

Pursuant to the Sunday Goods Lease, beginning in July 2025, Sunday

Goods shall pay monthly base rent of $ 25,000 through June 2026, with an annual increase of 3 % per annum through June 2040.

As of July 8, 2024, all

contingencies were satisfied and the Contingent Lease commenced on July 13, 2024.

Pursuant to the Sunday Goods Lease, beginning

in July 2025, Sunday Goods began paying monthly base rent of $ 25,000 which shall be paid through June 2026, with an annual increase

of 3 % per annum through June 2040.

September 2025, Sunday Goods completed the construction of a new retail dispensary building on the Surprise Property and has opened for

As of October 2025, Sunday Goods has delivered all required final construction deliverables to the Company, and the Company

anticipates completing the final payment to Sunday Goods as part of the tenant improvement allowance during the fourth quarter of 2025.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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:

SEPTEMBER 30, 2025

of September 30, 2025 and December 31, 2024, security deposits payable to the Company’s tenants amounted to $ 402,076 and $ 361,677 ,

respectively.

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

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

September 30, 2025, consists of the following:

Future annual base rent:

2025 (remainder of year)

Revenues – Significant Tenants

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

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

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 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

pursuant to the Chino Valley amendment executed during the year ended December 31, 2022.

Additionally, as discussed above, VSM paid Zoned

Arizona the $ 300,000 Assignment Price.

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

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

lease through April 2040.

On 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.

Asset concentration

The Company’s real estate properties are

leased to the Company’s tenants under absolute-net and triple-net leases that terminate through March 2037 and April 2040, respectively.

The Company monitors the credit of all tenants to stay abreast of any material changes in credit quality.

The Company monitors tenant

credit by (1) reviewing financial statements and related metrics and information that are publicly available or that are provided to us

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

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

Company had an asset concentration related to its 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.

Additionally, the Company had an

asset concentration related its Surprise, AZ property, which leased approximately 14.0 % of the Company’s total assets of the Company.

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

PROPERTIES, INC.

– Significant Tenants

the nine months ended September 30, 2025 and 2024, revenues associated with Significant Tenant leases described above are summarized

Nine Months Ended

September 30,

Nine Months Ended

September 30,

as of September 30, 2025 and December 31, 2024, deferred rent of $ 1,041,102 and $ 747,504 is due collectively from the tenants due to

the abatement of rent under the lease agreements discussed above, respectively, and as of September 30, 2025 and December 31, 2024, a

lease incentive receivable of $ 401,376 and $ 422,018 is due from one of the Significant Tenants, respectively, in connection with the

$ 500,000 tenant improvement allowance provided to tenant pursuant to the Chino Valley amendment executed during the year ended December

Additionally, as discussed above, VSM paid Zoned Arizona the $ 300,000 Assignment Price.

The Company considers the assignment

fee paid as a part of the lease payments for the modified lease and shall amortize the $ 300,000 assignment fees into rental revenue on

a straight-line basis over the remaining term of the modified lease through April 2040.

On September 30, 2025 and December 31, 2024 deferred

revenue related to this lease modification amounted to $ 251,196 and $ 264,115 , respectively, and is included in contract liabilities on

the accompanying consolidated balance sheets.

concentration

Company’s real estate properties are leased to the Company’s tenants under absolute-net and triple-net leases that terminate

through March 2037 and April 2040, respectively.

The Company monitors the credit of all tenants to stay abreast of any material changes

in credit quality.

The Company monitors tenant credit by (1) reviewing financial statements and related metrics and information that

are publicly available or that are provided to us upon request, and (2) monitoring the timeliness of rent collections.

of September 30, 2025 and December 31, 2024, the Company had an asset concentration related to its Significant Tenants.

As of September

30, 2025 and December 31, 2024, the Significant Tenants collectively leased approximately 52.1 % and 55.4 % of the Company’s total

assets, respectively.

Additionally, the Company had an asset concentration related its Surprise, AZ property, which leased approximately

13.8 % of the Company’s total assets of the Company.

Through September 30, 2025, substantially all rental payments have been made

on a timely basis.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

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

12 unchanged sentences

4 – RENTAL PROPERTIES

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

building improvements

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

September 30,

Building and building improvements

Construction in progress

3 unchanged sentences

( 2,942,611 )

properties, net

Rental properties, net

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

11 unchanged sentences

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

The $ 600,000 payment

4 unchanged sentences

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.

the three months ended September 30, 2025 and 2024, depreciation of rental properties amounted to $ 87,104 and $ 88,032 , respectively.

the nine months ended September 30, 2025 and 2024, depreciation of rental properties amounted to $ 262,401 and $ 264,320 , respectively.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

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.

September 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

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

21 unchanged sentences

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.

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

Balance sheets:

September 30,

Current assets:

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 ,

Total liabilities and equity

of September 30, 2025 and December 31, 2024, the Company’s investment in unconsolidated joint venture amounts to $ 3,268 and $ 4,923 ,

respectively.

of operations

Statement of operations

September 30,

Operating expenses, net

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.

Company’s share of loss from unconsolidated joint ventures

the three and nine months ended September 30, 2025 and 2024, the Company recorded a loss from unconsolidated joint ventures of $ 1,655 ,

$ 1,655 , $0 and $0 , respectively, which represents the Company’s proportionate share of losses from its joint venture, respectively.

in cost method investees

3 unchanged sentences

and any distributions received are recorded as income.

During the six months ended June 30, 2025, through its wholly-owned subsidiary

During the nine months ended September 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

1 unchanged sentence

ventures and cost-method investee.” ZP Ohio B LLC plans on developing several projects.

PROPERTIES, INC.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

in equity securities

2 unchanged sentences

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

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.

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

to $ 50,000 .

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

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

September 30,

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 discounts

Notes payable, net

West Bank Swap Note

24 unchanged sentences

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”).

8 unchanged sentences

The Amended Note requires Zoned Arizona to pay monthly principal

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

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

The Amended Note matures 10 years after its effective date and payments are calculated based on a 30 -year amortization schedule.

8 unchanged sentences

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

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

7 unchanged sentences

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.

September 30, 2025, principal and interest due on the East West Bank Swap Note amounted to $ 4,370,166 and $ 8,750 , respectively.

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

6 unchanged sentences

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

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025, principal and interest due on the 23616 Land Contract Note Payable amounted to $ 1,356,237 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.

Land Contract Note Payable

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

February 24, 2023, in connection with the Woodward Property 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”).

2 unchanged sentences

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

On June 30, 2025, principal

On September 30, 2025, principal

and interest due on the 23634 Land Contract Note Payable amounted to $ 388,402 and $ 0 , respectively.

24 unchanged sentences

of $ 36,060 .

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

During the nine months ended September 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

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

The First Amendment clarifies and defines the process

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

Subject to the terms and conditions

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

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

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

full execution of the First Amendment to the Lease;

(#2) $ 150,000 was paid on March 28, 2025;

As of September 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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

March 3, 2025, ZP Dysart entered into a First Amendment with its tenant related to the Sunday Goods Lease at the Surprise Property.

First Amendment clarifies and defines the process by which the tenant improvement Allowance for the Tenant Work at the Surprise Property

would be completed.

Subject to the terms and conditions of the Sunday Goods Lease, and so long as there is no default ongoing beyond

any notice and/or cure period, partial payments of the Allowance (the “Allowance Payments”) provided by Landlord shall be

made to Tenant as follows:

(#1) $ 300,000 was paid upon the full execution of the First Amendment to the Lease;

(#2) $ 150,000 was

paid on March 28, 2025;

(#3) $ 150,000 to be paid on May 1, 2025;

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

on the 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);

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

having jurisdiction has been delivered to Landlord.

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

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

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

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 Plans;

(ii) Tenant has furnished to Landlord commercially reasonable final

affidavits and final lien releases from Tenant’s general contractor, and if any, all subcontractors and all material suppliers

for all labor and materials performed or supplied as part of Tenant’s Work (whether or not the Allowance is applicable thereto);

and (iii) a copy of the certificate of occupancy from the governmental authority having jurisdiction has been delivered to Landlord.

Throughout the project, Tenant shall be required to provide Landlord with ongoing accounting reflecting a commercially reasonable breakdown

of the Tenant’s Work paid for with the Allowance Payments, and also a current Form W-9, Request for Taxpayer Identification Number

and Certification, executed by Tenant.

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

4 unchanged sentences

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

PROPERTIES, INC.

AND SUBSIDIARIES

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

10 unchanged sentences

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.

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

which was received during the nine months ended September 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.

6 unchanged sentences

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 ,

the three months ended September 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.

nine months ended September 30, 2025 and 2024, amortization of debt discount related to notes payable amounted to $ 19,254 and $ 15,648 ,

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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

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

Years ending September 30,

Total principal payments due on September 30, 2025

7 – CONVERTIBLE NOTE PAYABLE

23 unchanged sentences

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

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

As of September 30,

2025 and December 31, 2024, accrued interest payable due under the Abrams Debenture amounted to $ 0 , respectively.

For the three months

ended September 30, 2025 and 2024, interest expense related to the Abrams Debenture amounted to $ 30,000 .

For the nine months ended September

30, 2025 and 2024, interest expense related to the Abrams Debenture amounted to $ 90,000 .

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.

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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

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.

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.

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.

holders of the preferred stock are entitled to 50 votes for each share held.

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.

As of September 30, 2025 and 2024, there were 2,000,000 shares of preferred stock outstanding.

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

3 unchanged sentences

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.

2 unchanged sentences

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.

from a shareholder for $ 15,000 , or $ 0.15 per share, which as of September 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

2 unchanged sentences

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.

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.

per share, which as of September 30, 2025 and December 31, 2024, is reflected as treasury stock on the consolidated balance sheet until

such time as the shares are cancelled.

the nine months ended September 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 September 30, 2025, is reflected as treasury stock on the consolidated balance sheet until such time

as the shares are cancelled.

Equity incentive plans

15 unchanged sentences

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

As of September 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.

As of September 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

4 unchanged sentences

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

As of September 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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

Stock options

25 unchanged sentences

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

On April 23, 2025, three of the five directors submitted their respective resignations as Board members and accordingly, 262,500

unvested stock options were cancelled.

the nine months ended September 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 $ 86,136 and $ 39,133 , respectively.

As of September 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 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 September 30, 2025, there was $ 82,921 of unvested stock-based

compensation expense to be recognized through September 2031.

The aggregate intrinsic value on September 30, 2025 was $22,166 and was

calculated based on the difference between the quoted share price on September 30, 2025 of $ 0.46 and the exercise price of the underlying

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 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:

31, 2024, there was $ 80,805 of unvested stock-based compensation expense to be recognized through September 2031.

The aggregate intrinsic

value on December 31, 2024 was $0 and was calculated based on the difference between the quoted share price on December 31, 2024 of $ 0.54

and the exercise price of the underlying options.

option activities for the nine months ended September 30, 2025 are summarized as follows:

Options Weighted

5 unchanged sentences

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 Outstanding September 30, 2025 1,630,000 $ 0.80 5.93 $ 6,163

Exercisable, September 30, 2025 1,173,750 $ 0.84 5.23 $ 1,593

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

2 unchanged sentences

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

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

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Balance non-vested on September 30, 2025 456,250 $ 0.70 7.71 $ -

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.

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 September 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

7 unchanged sentences

the Company’s net income for the associated period.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

2018 Employment Agreement has a term of 10 years.

2 unchanged sentences

in any of the following circumstances:

immediately, if Mr.

McLaren dies;

immediately, if Mr.

7 unchanged sentences

basis for such Termination;

at the option of the Company,

without Cause;

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;

4 unchanged sentences

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.

12 unchanged sentences

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;

diminution in Mr.

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

of the Company;

a material diminution in

7 unchanged sentences

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

a material diminution in

the budget over which Mr.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

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

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.

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

McLaren’s total

compensation;

total compensation;

a material breach under

12 unchanged sentences

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

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

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

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

4 unchanged sentences

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.

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

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,

McLaren will be entitled to benefits provided below:

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.

any further salary payments to Mr.

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

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.

will pay to Mr.

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

In lieu of shares of common

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

McLaren under the Company’s stock

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

McLaren will receive an amount

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

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

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

McLaren (whether or not then fully exercisable)

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

each such option.

The Company will also pay

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.

will also pay to Mr.

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

Additionally,

5 unchanged sentences

on project terms and conditions.

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

McLaren a bonus of $ 56,473 .

In connection with such a bonus, during the nine months ended September 30, 2025 and 2024, the Company

McLaren a bonus of $ 87,413 and $ 18,513 , respectively.

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

19 unchanged sentences

on project terms and conditions.

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

Blackwell a bonus of $ 57,473 .

PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

In connection with such a bonus, during the nine months ended September 30, 2025 and 2024, the Company

Blackwell a bonus of $ 87,413 and $ 18,513 , respectively.

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

2 unchanged sentences

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

For the six months ended June 30, 2025

For the nine months ended September 30,

2025 and 2024, the Company contributed $ 17,471 and $ 18,835 to the Plan, respectively.

23 unchanged sentences

of this type.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

OH Columbus, LLC

3 unchanged sentences

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.

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

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Guaranty”), dated as of September 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.

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.

11 – SEGMENT REPORTING

14 unchanged sentences

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

Company’s 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 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 Company.

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

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

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 Statements.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

Months Ended September 30, 2025

Operating expenses (excluding depreciation and amortization)

Depreciation and amortization

and amortization

Income (loss) from operations

Interest expense

from derivative – interest rate swap

Income (loss) before provision

for income taxes

income (loss)

Equity method loss from unconsolidated joint ventures

Loss from derivative – interest rate swap

Income (loss) before provision for income taxes

Provision for income taxes

Net income (loss)

$ ( 154,700 )

$ ( 141,016 )

Months Ended June 30, 2024

Operating expenses (excluding

Months Ended September 30, 2024

Corporate and

Operating expenses (excluding depreciation and amortization)

Depreciation and amortization

and amortization

Income (loss) from operations

Interest expense

from derivative – interest rate swap

Income (loss) before provision

for income taxes

Income from derivative – interest rate swap

Income (loss) before provision for income taxes

Provision for income taxes

Net income (loss)

$ ( 255,734 )

PROPERTIES, INC.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Months Ended June 30, 2025

Operating expenses (excluding

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

Months Ended September 30, 2025

Corporate and

Operating expenses (excluding depreciation and amortization)

Depreciation and amortization

and amortization

Income (loss) from operations

Interest expense

from derivative – interest rate swap

Income (loss) before provision

for income taxes

Equity method loss from unconsolidated joint ventures

Loss from derivative – interest rate swap

Income (loss) before provision for income taxes

Provision for income taxes

Net income (loss)

$ ( 275,484 )

$ ( 637,493 )

Months Ended June 30, 2024

Investment Portfolio

Estate Services

and Unallocated

Operating expenses (excluding

Months Ended September 30, 2024

Property Investment Portfolio

Real Estate Services

Corporate and Unallocated

Operating expenses (excluding depreciation and amortization)

Depreciation and amortization

and amortization

Income (loss) from operations

Interest expense

from derivative – interest rate swap

Income (loss) before provision

for income taxes

Income from derivative – interest rate swap

Income (loss) before provision for income taxes

Provision for income taxes

Net income (loss)

$ ( 778,612 )

Total assets by segment

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

Property investment

September 30,

Total assets by segment on September 30, 2025 and December 31, 2024 was as follows:

Property investment portfolio

Real estate services

and unallocated

Corporate and unallocated

assets are located in the United States.

PROPERTIES, INC.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

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

19 unchanged sentences

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.

the nine months ended September 30, 2025 and 2024, in connection with its operating leases, the Company recorded rent expense of $ 34,218

and $ 27,793 , 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

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

September 30,

Office lease right of use asset

accumulated amortization

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

Balance of ROU assets

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

Year ending September 30,

Total minimum non-cancelable operating lease payments

discount to fair value

lease liability on June 30, 2025

Total lease liability on September 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