What changed in this filing

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Item 1. Financial Statements

2026-05-15 compared with 2025-11-13 · 2036 added, 1653 removed, 297 unchanged (93% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30,

Accounts receivable

7 unchanged sentences

Operating lease right of use asset, net

Investment in unconsolidated joint ventures and cost-method investee

Investment in equity securities

Interest rate swap asset

Investment in cost-method investees

Security deposits

LIABILITIES AND STOCKHOLDERS’ EQUITY

Convertible note payable

Convertible debenture

Notes payable, net

9 unchanged sentences

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

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 )

2,000,000 shares issued and outstanding on March 31, 2026 and December 31, 2025 ($ 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 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

13,351,516 and 12,201,516 shares issued on March 31, 2025 and December 31, 2025, respectively, and 13,180,829 and 12,030,829 shares outstanding on March 31, 20256 and December 31, 2025, respectively

Additional paid-in capital

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

Treasury stock, at cost ( 170,687 and 170,687 shares on March 31, 2026 and December 31, 2025, respectively)

Accumulated deficit

8 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

September 30,

Property investment portfolio revenues

10 unchanged sentences

Total operating expenses, net

INCOME FROM OPERATIONS

OTHER INCOME (EXPENSES):

(LOSS) INCOME FROM OPERATIONS

OTHER (EXPENSES) INCOME:

Interest expenses

1 unchanged sentence

Total other expenses, net

INCOME BEFORE EQUITY METHOD LOSSES

EQUITY METHOD LOSS:

Equity method loss from unconsolidated joint ventures

Total equity method loss

NET INCOME PER COMMON SHARE:

NET (LOSS) INCOME

NET (LOSS) INCOME PER COMMON SHARE:

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025

Preferred Stock

Treasury Stock

Stockholders’

December 31, 2024

$ ( 15,639,522 )

of stock-based compensation related to stock options issued

March 31, 2025

( 15,493,664 )

of treasury shares

of stock-based compensation related to stock options issued

June 30, 2025

Balance, December 31, 2025

$ ( 18,493,937 )

of stock-based compensation related to stock options issued

September 30, 2025

Common stock issued for future services

Reversal of stock-based compensation related to stock options cancellations

Balance, March 31, 2026

$ ( 18,548,597 )

Preferred Stock

Treasury Stock

Stockholders’

December 31, 2023

$ ( 16,213,480 )

of stock-based compensation related to stock options issued

March 31, 2024

( 16,117,007 )

of stock-based compensation related to stock options issued

June 30, 2024

Balance, December 31, 2024

$ ( 15,639,522 )

of treasury stock

of stock-based compensation related to stock options issued

September 30, 2024

Accretion of stock-based compensation related to stock options issued

Balance, March 31, 2025

$ ( 15,493,664 )

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended

September 30,

For the Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

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

Net (loss) income

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

Depreciation and amortization expense

Amortization of debt discount

Stock option expense

Loss on forfeited escrow deposit

Bad debt expense

Loss (income) from interest rate swap

Loss from unconsolidated joint ventures

Stock-based compensation

Stock option (recovery) expense

Loss on property portfolio business development costs

Bad debt recovery

(Income) loss from interest rate swap

Change in operating assets and liabilities:

10 unchanged sentences

Purchases of rental properties and improvements

( 3,290,956 )

Purchases of property and equipment

Increase in capitalized project costs

Decrease (increase) in capitalized project costs

Investment in cost-method investees

Decrease (increase) in escrow deposits

NET CASH USED IN INVESTING ACTIVITIES

( 3,318,916 )

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES:

Purchase of treasury shares

Net proceeds from note payable

Net proceeds from notes payable

Repayment of notes payable

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

NET INCREASE (DECREASE) IN CASH

( 1,947,705 )

CASH, beginning of period

4 unchanged sentences

Reclassification of capitalized project costs to prepaid expenses and other assets

Common stock issued for future services

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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).

MARCH 31, 2026

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-added real estate within

the regulated cannabis industry in the United States.

Headquartered in Scottsdale, Arizona, 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 “CSA”).

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.

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

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

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

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

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

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.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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).

MARCH 31, 2026

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

which are inactive as of March 31, 2026 (see Note 5).

On January 15, 2026, the Company entered into

an Asset Purchase Agreement (the “MBO APA”) by and among the Company, Zoned Arizona, ZP Dysart, ZPRE Holdings (collectively,

Zoned Arizona, ZP Dysart and ZPRE Holdings, the “Real Property Sellers” and, together with the Company, the “Seller

Parties” and each, a “Seller Party”), and BPB Partners, LLC (the “Buyer”).

The Buyer is owned by Bryan McLaren,

the Company’s Chairman of the Board, Chief Executive Officer and Chief Financial Officer;

Berekk Blackwell, the Company’s

President and Chief Operating Officer;

and Patrick Moroney.

Pursuant to the terms of the MBO APA, the Seller

Parties agreed to sell to the Buyer, and the Buyer agreed to purchase from the Seller Parties, subject to the terms of the MBO APA, all

of the Seller Parties’ rights, title and interest in and to the Company’s business, as described in the Company’s filings

with the Securities and Exchange Commission (the “Business”), and the assets, properties and rights of the Seller Parties,

subject to modification as set forth in the MBO APA, and other than the Excluded Assets (as defined in the MBO APA) (the “Assets”)

(such transaction, the “MBO”).

The Assets include, among other things, (i) the real property located at 410 S.

Madison Drive,

(ii) the real property located at 13150 W.

Bell Road, Surprise, AZ;

(iii) the real property located at 3455 S.

Ashland Avenue,

(iv) the Company’s membership interests in ZPRE Holdings, Arizona Brokerage, Florida Brokerage, ZP Data 2, ZP Ohio

B, LLC (“ZP Ohio B”), and Zoneomics Green, LLC (“Zoneomics Green”);

(v) all rights under all contracts to which

any Seller Party is a party or is bound as of the closing date that is related to the Business;

(vi) all intellectual property of the

Seller Parties;

(vii) all prepaid expenses, security deposits, and certain other operational assets;

and (vii) potentially certain additional

assets that may be acquired by the Seller Parties prior to the closing of the MBO.

On April 20, 2026, the Company through its wholly owned subsidiaries, Green Valley, Kingman and Chino Valley entered into a Real Estate

Purchase and Sale Agreement with Broken Arrow Herbal Center, Inc., an Arizona corporation, pursuant to which the Company agreed to sell

three properties (see Note 13 - Subsequent Events).

In connection with the potential sale of the above properties, the sale process is

ongoing and is subject to shareholder approval and other contingencies, and accordingly, not all the requirements under ASC 360-45-9 related

to long-lived assets held for sale have been met including the need for shareholder approval and certain contingencies exists such as

local government approvals and the attainment of financing.

The Company will reassess the classification of these assets during each subsequent

On May 1, 2026, ZP Woodward sold its property

located in Michigan (See Note 13- Subsequent Events).

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 months ended March 31, 2026 and 2025 have been prepared by the Company without audit, pursuant to the rules and regulations

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

In the opinion of management, all adjustments necessary to present

fairly our consolidated financial position, results of operations, and cash flows as of March 31, 2026 and 2025, 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, 2025, included

in our Annual Report on Form 10-K filed with the SEC on April 1, 2026.

Going concern consideration

These unaudited consolidated financial statements

have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments

in the normal course of business.

As reflected in these unaudited consolidated financial statements, the Company had a net loss of $ 54,660

and had cash provided by operations of $ 1,630,287 during the three months ended March 31, 2026.

Additionally, as of March 31, 2026, the

Company had cash of $ 2,500,758 and stockholders’ equity of $ 3,356,861 .

Furthermore, on December 31, 2025 and effective January 1,

2026, the Company entered into Amended and Restated Absolute Net Lease Agreements with certain tenants.

The Amended and Restated Absolute

Net Lease Agreements include, among other provisions, (i) a right of first refusal with a right of first refusal period of up to 60 days

and (ii) a short-term exclusive option that permits the tenant to purchase, on an all-or-none basis, three leased properties (Chino Valley,

Green Valley and Kingman).

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

Interest rate swap asset

Interest rate swap liability

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

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.

MARCH 31, 2026

On April 20, 2026, the Company through its wholly

owned subsidiaries, Green Valley, Kingman and Chino Valley (collectively, the “Seller”), entered into a Real Estate Purchase

and Sale Agreement (the “Purchase Agreement”) with Broken Arrow Herbal Center, Inc., an Arizona corporation (the “Purchaser”),

pursuant to which the Seller agreed to sell to the Purchaser three properties consisting of (i) property commonly known as 1732 W.

Point Place, Green Valley, Arizona 85614 (the “Green Valley Property”), (ii) property commonly known as 2095 E.

Northern Avenue,

Kingman, Arizona 86409 (the “Kingman Property”), and (iii) property commonly known as 2144-2148 N.

Road 1 East, Chino Valley,

Arizona 86323 (the “Chino Property” and together with the Green Valley Property and Kingman Property, the “Properties”).

The Purchase Agreement provides that the Purchaser is exercising purchase rights set forth in certain existing lease agreements relating

to the Properties.

The aggregate purchase price for the Properties

is $ 9.0 million, allocated as follows:

(i) $ 8.0 million for the Chino Property, (ii) $ 500,000 for the Kingman Property, and (iii) $ 500,000

for the Green Valley Property.

The Purchaser is required to deposit $ 400,000 into escrow.

Subject to the terms of the Purchase Agreement,

the purchase price is to be paid through a combination of (i) $ 4.0 million in cash and (ii) a $ 5.0 million promissory note to be secured

by a deed of trust.

The Purchase Agreement provides that, following closing, such seller financing is to be the only debt or lien permitted

to encumber the Properties until the note has been paid in full and the deed of trust has been released of record.

The closing is scheduled to occur on June 30,

2026, unless extended in accordance with the Purchase Agreement.

The Purchaser has the right, in its sole discretion, to extend the closing

date to August 31, 2026, by timely written notice.

If that extension right is exercised, the Purchase Agreement provides that the acquisitions

of the Green Valley Property and the Kingman Property would close on the original closing date for an aggregate cash payment of $ 1.0 million,

and the closing for the Chino Property would be extended to August 31, 2026.

If the first extension right is timely exercised, the Purchaser

also has a further right to extend the closing for the Chino Property to September 30, 2026, by timely written notice and by delivering

an additional $ 1.0 million supplemental deposit to the escrow agent, which supplemental deposit is nonrefundable except in the case of

an uncured seller default.

Except as expressly provided in connection with a timely exercised extension, the Purchase Agreement contemplates

an all-or-none closing involving all three Properties.

The Purchase Agreement contains customary provisions

regarding title review, closing deliveries, apportionments, casualty and condemnation, default remedies, confidentiality, governing law,

and other matters.

The Seller is required to remove certain monetary liens voluntarily created by the Seller, but otherwise has no general

obligation to cure title objections.

The Purchase Agreement also provides that the Purchaser is acquiring the Properties in their present

“as is,” “where is,” and “with all faults” condition, subject to limited exceptions expressly set

forth in the agreement.

In addition, effective as of closing and subject to certain carveouts described in the Purchase Agreement, the

Purchaser will release the Seller and certain related parties from claims relating to the condition of the Properties and certain other

matters described in the Purchase Agreement.

If the Purchaser fails to complete the purchase

without legal excuse and does not timely cure such default, the Seller’s sole remedy is to terminate the Purchase Agreement and

retain the deposit as liquidated damages.

If the transaction fails to close due to an uncured default by the Seller, the Purchaser’s

sole and exclusive remedies are to terminate the Purchase Agreement and receive a refund of the deposit, less the independent contract

consideration, waive the default and proceed to closing, or seek specific performance, subject to the timing limitations set forth in

the Purchase Agreement.

Additionally, on January 15, 2026, the Company

and its subsidiaries entered into the MBO APA, pursuant to which the Seller Parties agreed to sell the Business and the Assets, representing

a sale of substantially all of the Company’s assets to a company owned by management (See Note 1).

The closing of the MBO APA is

contingent upon the Buyer obtaining financing, the Company receiving shareholder approval and the receipt of a fairness opinion.

Company sells some or all of its properties, it will have minimal or no operations.

These factors raise substantial doubt about the Company’s

ability to continue as a going concern for a period of twelve months from the issuance date of this Quarterly Report.

There can be no

assurance that the Company will sell its properties.

If the Company sells its properties, the Company’s cash flow provided by operating

activities would decrease substantially and the Company may need to raise capital through debt and/or equity financings to fund any ongoing

operations, may need to curtail its operations, or may decide the liquidate the Company.

These unaudited consolidated financial statements

do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities

that might be necessary should the Company be unable to continue as a going concern.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

regarding the interest rate swap is as follows:

MARCH 31, 2026

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 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 three months ended March 31, 2026 and 2025 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 three months ended March 31,

2026 and 2025, revenues associated with Significant Tenants amounted to $ 584,633 and $ 587,418 , respectively, which represents 49.8 % and

60.3 % of the Company’s total revenues, respectively (see Note 3).

Fair value of financial instruments

The carrying amounts reported in the unaudited

consolidated balance sheets for cash, accounts receivable, prepaid expenses and other assets, capitalized 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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

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 March 31, 2026 and December

March 31, 2026

December 31, 2025

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.

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.

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 sheet 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

Description Notional

September 30,

2026 Interest

Rate Maturity Fair Value of

September 30,

2026 Fair Value of

December 10, 2022 interest rate swap $ 4,358,966 7.65 % December 10, 2032 $ 50,473 $ 77,328

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.

Cash is carried at cost and represents 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 March 31, 2026 and December 31, 2025.

Company’s cash is held at major commercial banks, which may at times exceed the Federal Deposit Insurance Corporation (“FDIC”)

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

As of March 31, 2026 and December 31, 2025, the Company

had approximately $ 1,681,000 and $ 328,000 , 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.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

MARCH 31, 2026

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.

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.

The expense associated with the allowance for doubtful

accounts on accounts receivable is recognized in general and administrative expenses.

Investment in equity method unconsolidated

joint ventures

The Company has equity investments in various

privately held entities.

The Company accounts for these investments under the equity method.

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.

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.

The Company’s equity method investment is

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

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

of the entity.

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

if any, between the carrying amount of our investment in the respective joint venture and 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 equity method unconsolidated joint ventures.

Investment in cost method investees

The Company accounts for its interests in entities

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

In such cases,

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

During the year ended December 31, 2025, through its wholly-owned subsidiary ZPRE Holdings, the Company invested $ 84,110 in

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

consolidated balance sheet under “investment in cost-method investee.” ZP Ohio B plans on developing several projects.

investment is subject to the Company’s impairment review policy.

Investment in cost method investees also includes

an investment in equity securities of an entity 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.

In applying the measurement alternative, the Company

performed a qualitative impairment assessment on a quarterly basis and shall recognize an impairment loss if there are sufficient indicators

that the fair value of the equity investment is less than carrying values.

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

On December 31, 2025, based on its qualitative assessment, the Company impaired its equity investment and recorded an impairment loss

on equity securities of $ 50,000 .

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

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.

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.

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

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.

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.

During the year ended December 31, 2025, the Company recorded an impairment loss of $ 3,118,716 due to (1) the damage

and demolition of its building located in Chicago, IL, where a vehicle crashed into the building, causing significant structural damage,

and the City of Chicago declared the building unsafe and ordered its demolition, and (2) in an effort to avoid litigation related to the

defaults under the lease, on May 1, 2026, the Company sold the Woodward Property to the New Tenant for approximately $ 600,000 in cash

plus the assumption of the notes payable outstanding on the Woodward Property (see Note 13 – Subsequent Events).

As of December

31, 2025, if the Company sold the Woodward Property for $ 600,000 , the net carrying value of the Woodward Property of approximately $ 2,700,000

would exceed the $ 600,000 sale price by $ 2,100,000 .

Accordingly, during the year ended December 31, 2025, we recorded an impairment loss

of $ 2,100,000 .

During the three months ended March 31, 2026 and 2025, the Company did not record any impairment losses.

The Company has land which is not subject to depreciation.

Escrow deposits and capitalized project costs

The Company is in the business of pursuing real

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

or a Purchase and Sale Agreement.

These agreements often include the requirement to make escrow deposits and capitalized project costs.

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.

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.

Capitalized project

costs include cash invested in project-related development and due diligence costs.

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 and write off capitalized project costs.

During the three months ended March 31, 2026 and 2025, the Company

forfeited escrow deposits and wrote off capitalized project costs of $ 199,650 and $0 , respectively, which is reflected in operating expenses

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

31, 2026 and December 31, 2025, escrow deposits amounted to $ 106,269 and $ 294,169 , respectively.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

MARCH 31, 2026

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.

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.

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.

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.

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 are 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 are likely to occur upon a lease commencement,

when escrow closes on the sale of a property, or as otherwise negotiated between the Company 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

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,

MARCH 31, 2026

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 three months ended March 31, 2026 and 2025, contract liabilities

activities were as follows:

On December 31, 2025, the Company, through its

wholly owned subsidiaries Chino Valley, Green Valley, and Kingman (collectively, the “Landlords”), entered into Amended and

Restated Absolute Net Lease Agreements (see Note 3) with the respective tenant entities Broken Arrow Herbal Center, Inc.

(Chino Valley

and Green Valley) and CJK, Inc.

(Kingman) (each, a “Tenant”), each with an effective date of January 1, 2026.

In connection

with the Amended and Restated Absolute Net Lease Agreements and a Consent of Landlord and Agreement Regarding Lease (see Note 3) with

Broken Arrow Herbal Center, Inc., AC Management Group, LLC (the existing guarantor), A&R Consultants, LLC (the new guarantor) and

Elevate Holdings, Group, LLC.

The Company was paid $ 965,000 as compensation for rent concessions reflected in the Amended and Restated

Absolute Net Lease Agreements, which was received by the Company on March 31, 2026.

The $ 965,000 rent concession received shall be recognized

into revenue over the remaining lease term on a straight-line basis.

Balance at beginning of period

Rental payments received in advance

Compensation received for rent concessions

Accretion of contract liabilities to revenue

Balance at end of period

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.

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.

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.

In connection with this

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

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

as a reduction to the property investment portfolio revenues.

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.

Additionally, during the year ended December 31, 2025, the Company paid $ 1,000,000 to the tenant of ZP Dysart as a tenant

improvement allowance for investment into the premises.

The $ 1,000,000 payment to the tenant was 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 $ 1,000,000 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, which occurred in September 2025.

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.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

MARCH 31, 2026

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 March 31, 2026 and December 31, 2025 of $ 1,302,471 and $ 1,084,413 , 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.

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.

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:

(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 whether 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 consolidated statements of operations.

Basic and diluted net income (loss) per share

Basic net income (loss) per share is computed

by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding during

Diluted net income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted

average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period using

the treasury stock method and as-if converted 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 (loss).

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 (loss) 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.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

The following table presents a reconciliation

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

Net income per common share - basic:

Net (loss) income per common share - basic:

Net (loss) income

undistributed (earnings) loss allocated to participating securities

Net income allocated to common stockholders

Net (loss) income allocated to common stockholders

Weighted average common shares outstanding – basic

Net income per common share – basic

Net income per common share - diluted:

Net income allocated to common shareholders – basic

Net (loss) income per common share – basic

Net (loss) income per common share - diluted:

Net (loss) income allocated to common shareholders – basic

interest on convertible debt

Numerator for income per common share – basic

Numerator for net (loss) income per common share – basic

Weighted average common shares outstanding – basic

3 unchanged sentences

Weighted average common shares outstanding – diluted

Net income per common share – diluted

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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,

Net (loss) income per common share – diluted

The following potentially dilutive shares have

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

31, 2026 and 2025.

Convertible debt

Stock options

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.

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 on its financial condition or results of operations.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

MARCH 31, 2026

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

to be reversed.

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 March 31, 2026 and December 31, 2025 that would require

either recognition or disclosure in the accompanying unaudited 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.

Recently issued accounting pronouncements

The Company adopted ASU 2023-09, Improvements

to Income Tax Disclosures in the current year.

The ASU requires greater disaggregation of information about a reporting entity’s

effective tax rate reconciliation and information on income taxes paid.

The ASU applies to all entities subject to income taxes and is

intended to help investors better understand an entity’s exposure to potential changes in jurisdictional tax legislation and assess

income tax information that affects cash flow forecasts and capital allocation decisions.

The ASU is effective for annual periods beginning

after December 15, 2024, 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.

The Company adopted ASU 203-09 during the year ended December 31, 2025 using a

retrospective approach.

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.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

MARCH 31, 2026

NOTE 3 – CONCENTRATIONS AND RISKS

Lease Agreements with Significant Tenants

Our property located in Chino Valley is leased

by Broken Arrow Herbal Center, Inc.

(“Broken Arrow”), doing business as JARS Cannabis.

Our property located in Green Valley is leased

by Broken Arrow, doing business as JARS Cannabis.

Our property located in Kingman is leased by CJK,

(“CJK”), doing business as JARS Cannabis.

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 property located in Surprise, AZ is leased

by The Pharm, 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 located in Pleasant Ridge (leased by Rapid Fish)

are considered significant and the tenants are referred to as the Significant Tenants.

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

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.

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 May 31, 2020 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.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

On August 23, 2021, Chino Valley and Broken Arrow

entered into the Third Amendment (the “Third Chino Valley Amendment”) to the 2018 Chino 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.

During 2025, Broken Arrow faced operational challenges

that impaired their ability to meet contractual rent obligations.

As of December 31, 2025, Broken Arrow remitted approximately 7 % of the

September to December 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 a Consent Agreement (see below) providing for an agreement by Broken Arrow to complete payment of the full

rent amount outstanding.

The Company received the full rent amount outstanding on March 31, 2026.

On December 31, 2025, the Company, through its

wholly owned subsidiaries Chino Valley, Green Valley, and Kingman (collectively, the “Landlords”), entered into Amended and

Restated Absolute Net Lease Agreements (the “A&R Leases”) with the respective tenant entities Broken Arrow Herbal Center,

(Chino Valley and Green Valley) and CJK, Inc.

(Kingman) (each, a “Tenant”), each with an effective date of January 1,

Each A&R Lease provides for an initial term of 14 years commencing January 1, 2026 and ending December 31, 2039, unless earlier

terminated pursuant to its terms.

The A&R Leases are contingent upon, among other conditions, the consummation of a change of control

transaction involving the Tenant(s), including the transfer of majority ownership and control of the applicable Tenant to A&R Consultants,

LLC (or its designee) and the transfer of the applicable cannabis license to A&R Consultants, LLC (or its designee).

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.

A&R Leases, A&R Consultants, LLC will provide a guaranty of payment and performance in favor of each Landlord.

Base rent under

the A&R Leases varies by property and is set forth in the respective rent schedules (including, for example, monthly base rent of

$ 3,500 for the Green Valley property and $ 4,000 for the Kingman property, and a step-up schedule for the Chino Valley property).

Leases include, among other provisions, (i) a right of first refusal with a right of first refusal period of up to 60 days and (ii) a

short-term exclusive option that permits the Tenant to purchase, on an all-or-none basis, the three leased properties (Chino Valley, Green

Valley and Kingman) for an aggregate purchase price of $ 9.0 million (the “Purchase Option”).

The Purchase Option was exercised

on April 20, 2026 (see Note 13 – Subsequent Events).

In connection with the anticipated change of control transaction for the

Chino Valley Tenant, on December 30, 2025, the Company, through Chino Valley Properties, LLC, entered into a Consent of Landlord and Agreement

Regarding Lease (the “Consent Agreement”) with Broken Arrow Herbal Center, Inc., AC Management Group, LLC (the existing guarantor),

A&R Consultants, LLC (the new guarantor) and Elevate Holdings, Group, LLC.

The Consent Agreement provided, among other things, that

the Landlord’s consent to the sale transaction is conditioned on the payment to Landlord at closing of (i) $ 389,984 for past due

rent, additional rent and late charges and (ii) $ 965,000 as compensation for rent concessions reflected in the A&R Lease, both of

which were received by the Company on March 31, 2026.

Upon receipt of such amounts, the Consent Agreement provided for the release of

the existing guarantor from liability for periods after closing and A&R Consultants, LLC executed a new guaranty of the A&R Lease.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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,

MARCH 31, 2026

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.

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,

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.

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.

On December 31, 2025, Green Valley entered into

an Amended and Restated Absolute Net Lease Agreements with Broken Arrow, with an effective date of January 1, 2026 (see Chino Valley above).

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

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.

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

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.

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.

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 March 31, 2026 and December 31, 2025, contract liability related to this lease modification

amounted to $ 246,890 and $ 246,890 , respectively, which has been included in contract liabilities on the accompanying unaudited consolidated

balance sheets.

As of June 1, 2025, VSM satisfied the Capital

Commitment and completed more than $ 3,000,000 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.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

MARCH 31, 2026

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.

On August 2, 2023, the Company consented to 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.

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

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.

The Kingman Lease remains in place;

however, the Kingman property is currently non-operational.

On December 31, 2025, Kingman entered into an

Amended and Restated Absolute Net Lease Agreements with CJK, Inc., with an effective date of January 1, 2026 (see Chino Valley above).

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 Tenant.

The Woodward Lease commenced on December 1, 2022 and had a term of 14 years and 4 months through March 1, 2037.

Woodward Lease contained 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 contained

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

1 unchanged sentence

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.

In addition, pursuant to

the terms of the Woodward Lease, the Woodward Tenant maintained insurance in full force during the term of the Woodward Lease and any

other period of occupancy of the premises by the tenant.

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.

ZONED PROPERTIES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

MARCH 31, 2026

During the third quarter of 2025, New Tenant faced

operational challenges that impaired its ability to meet contractual rent obligations.

On February 13, 2026, the Company sent New Tenant

at the Woodward Property a written notice default related to the New Tenant’s failure to i) make timely rental payments and ii)

fulfill its obligations related to non-monetary terms under the Woodward Lease.

On May 1, 2026, the Company, through its wholly

owned subsidiary ZP Woodward entered into and closed on an Agreement of Sale and Escrow Instructions (the “Woodward Agreement”)

with Woodward RE 1 LLC, a Michigan limited liability company, or its nominee (“Woodward Buyer”).

Pursuant to the Woodward

Agreement, ZP Woodward agreed to sell to the Woodward Buyer all Michigan properties (See Note 13 – Subsequent Events).

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.

Under the Justice Grown Lease, the Company’s

tenant is responsible for constructing a new retail dispensary building on the Ashland Avenue Property.

In 2025, the Company was notified

that a vehicle crashed into the building at the Ashland Avenue Property, causing significant structural damage.

The City of Chicago declared

the building unsafe and ordered its demolition (See Note 4).

As such, the Ashland Avenue Property remains a vacant lot of land.

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 still be completed, and the tenant will open for business in late 2027;

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 is expected

to continue to pay full rent pursuant to the Justice Grown Lease.

If Justice Grown does not construct the new building, the Company may

need to pursue recovery through legal claims.

In connection with the damage and demolition of the building, during the year ended December

31, 2025, the Company recorded an impairment loss of $ 1,018,716 .

ZONED PROPERTIES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 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.

MARCH 31, 2026

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.

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 year ended December 31, 2025, the Company paid $ 1,000,000 to Sunday Goods as a tenant improvement allowance.

The $ 1,000,000

payments to the tenant were 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 $ 1,000,000 tenant improvement allowance was capitalized

to rental properties and are being depreciated on a straight-line basis over the useful life of the building and related improvements

beginning in September 2025.

In September 2025, Sunday Goods completed the construction of a new retail dispensary building on the Surprise

Property and opened for business.

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 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.

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

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

The First Amendment clarifies and defines the process

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

Subject to the terms and conditions

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

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

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

execution of the First Amendment to the Lease;

(#2) $ 150,000 was paid on March 28, 2025;

(#3) $ 150,000 to be paid on May 1,

and (#4) the remaining $ 400,000 of the Allowance was paid on October 21, 2025 upon 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.

As of March 31, 2026 and December 31, 2025, security

deposits payable to the Company’s tenants amounted to $ 372,804 and $ 339,471 , respectively.

Future minimum lease payments primarily

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

ZONED PROPERTIES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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:

MARCH 31, 2026

Future minimum lease payments to be received,

on all leased properties, for each of the five succeeding calendar years and thereafter as of March 31, 2026, consists of the following:

Future annual base rent:

2026 (remainder of year)

– 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.

Revenues – Significant Tenants

For the three months ended March 31, 2026 and

2025, revenues associated with Significant Tenant leases described above are summarized as follows:

Three Months Ended

Further, as of March 31, 2026 and December 31,

2025, deferred rent of $ 1,302,471 and $ 1,084,413 was due collectively from the tenants due to the abatement of rent under the lease agreements

discussed above, respectively, and as of March 31, 2026 and December 31, 2025, a lease incentive receivable of $ 387,615 and $ 394,495 was

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.

Furthermore, in connection with the Consent Agreement discussed above, the Company received $ 965,000 as compensation

for rent concessions reflected in the A&R Lease.

The Company considers the concession compensation fee paid as a part of the lease

payments for the modified A&R Lease and shall amortize the $ 965,000 fees into rental revenue on a straight-line basis over the remaining

term of the modified A&R Lease.

On March 31, 2026 and December 31, 2025 deferred revenue related to this lease modification amounted

to $ 1,189,490 and $ 246,890 , respectively, and is included in contract liabilities on the accompanying unaudited 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.

ZONED PROPERTIES, INC.

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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

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

diversified property portfolio and service offerings.

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

who were considered significant tenants.

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

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

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

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

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

If the Company’s tenants

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

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

4 – RENTAL PROPERTIES

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

September 30,

MARCH 31, 2026

As of March 31, 2026 and December 31, 2025, the

Company had an asset concentration related to its Significant Tenants.

As of March 31, 2026 and December 31, 2025, the Significant Tenants

collectively leased approximately 42.1 % and 47.2 % of the Company’s total assets, respectively.

Additionally, the Company had an

asset concentration related to its Surprise, AZ property, which leased approximately 17.4 % and 19.4 % of the Company’s total assets

as of March 31, 2026 and December 31, 2025, respectively.

Industry risk

Downturns relating to certain industries or business

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

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

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

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

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

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

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

or pay dividends to its stockholders.

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

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

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

NOTE 4 – RENTAL PROPERTIES

On March 31, 2026 and December 31, 2025, rental

properties, net consisted of the following:

Building and building improvements

Construction in progress

Rental properties, at cost

3 unchanged sentences

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

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

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

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

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

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

Dysart & Bell LLC (“NWC”).

Surprise Property is a tract or parcel of land containing approximately 1.114 acres, together

with all improvements, buildings, leases, rights, easements, and appurtenances pertaining thereto.

The Surprise Property was acquired

for an aggregate purchase price of $ 1,712,541 , which included (i) $ 1,100,000 , representing the Purchase Price, (ii) reimbursement to

NWC for onsite and offsite improvements of $ 492,022 , and (iii) closing costs, commissions, and fees customary to the acquisition of real

estate of $ 120,519 .

the 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.

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.

Property Acquisitions and Impairments

Pursuant to the terms of the Agreement Regarding

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

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

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

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

In 2025, the Company was notified that a vehicle crashed into the building, causing significant structural damage.

The City of Chicago

declared the building unsafe and ordered its demolition.

As such, the Ashland Avenue Property remains a vacant lot of land.

the most recent information received by the Company from Justice Grown, the Company believes that the development of the new retail dispensary

building will still be completed, and the tenant will open for business in late 2027;

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 is expected to continue

to pay full rent pursuant to the Justice Grown Lease.

If Justice Grown does not construct the new building, the Company may need to pursue

recovery through legal claims.

In connection with the damage and demolition of the building, during the year ended December 31, 2025,

the Company recorded an impairment loss of $ 1,018,716 .

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

5 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURE AND EQUITY SECURITIES

in unconsolidated joint venture

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

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

Currently, the Zoneomics

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

launch in the cannabis industry.

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

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

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

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

The regulatory status related

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

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

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

Additionally, the Company is using the Zoneomics

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

The Company has no further financial or investment obligations

at this time.

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

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

Based on management’s

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

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

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

of 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:

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.

Statement of operations

September 30,

Operating expenses, net

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

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 being accounted

for under the cost method and reflected on the accompanying consolidated balance sheet under “investment in unconsolidated joint

ventures and cost-method investee.” ZP Ohio B LLC plans on developing several projects.

MARCH 31, 2026

On July 8, 2024, ZP Dysart acquired a property

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

Surprise Property is a tract

or parcel of land containing approximately 1.114 acres, together with all improvements, buildings, leases, rights, easements, and appurtenances

pertaining thereto.

The Surprise Property was acquired for an aggregate purchase price of $ 1,712,541 , which included (i) $ 1,100,000 , representing

the Purchase Price, (ii) reimbursement to NWC for onsite and offsite improvements of $ 492,022 , and (iii) closing costs, commissions, and

fees customary to the acquisition of real estate of $ 120,519 .

During the year ended December 31, 2025, the Company

paid $ 1,000,000 to Sunday Goods as a tenant improvement allowance.

The $ 1,000,000 payment to the tenant was 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 $ 1,000,000 tenant improvement allowance was capitalized to rental properties and is being depreciated on a straight-line

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

service, beginning in September 2025.

In September 2025, Sunday Goods completed the construction of a new retail dispensary building on

the Surprise Property and opened for business.

During the third quarter of 2025, New Tenant faced

operational challenges that impaired its ability to meet contractual rent obligations.

On February 13, 2026, the Company sent New Tenant

at the Woodward Property a written notice default related to the New Tenant’s failure to i) make timely rental payments and ii)

fulfill its obligations related to non-monetary terms under the Woodward Lease.

On May 1, 2026, the Company, through its wholly owned

subsidiary ZP Woodward entered into and closed on the Woodward Agreement with the Woodward Buyer.

Pursuant to the Woodward Agreement,

ZP Woodward agreed to sell to the Woodward Buyer all Michigan properties (See Note 13 – Subsequent Events).

The Company sold the

Woodward Property for $ 600,000 .

As of December 31, 2025, based on the potential sale of the Woodward Properties, the net carrying value

of the Woodward Property of approximately $ 2,700,000 would exceed the $ 600,000 sale price by $ 2,100,000 .

Based on these conditions, our

projected future cash flows, anticipated holding periods, and market conditions have changed.

Accordingly, during the year ended December

31, 2025, the Company recorded an impairment loss of $ 2,100,000 .

For the three months ended March 31, 2026 and

2025, depreciation of rental properties amounted to $ 73,138 and $ 87,811 , respectively.

NOTE 5 – INVESTMENT IN EQUITY METHOD

UNCONSOLIDATED JOINT VENTURE, COST METHOD INVESTEE AND EQUITY SECURITIES

Investment in equity method unconsolidated

joint venture

On March 31, 2026 and December 31, 2025, the Company

held an investment with carrying values of $ 0 in Zoneomics Green, a Delaware limited liability company formed on May 1, 2021 and owned

50 % by the Company.

The Company accounts for this investment under the equity method of accounting as the Company exercises significant

influence but does not exercise financial and operating control over this entity.

Investments are reviewed for changes in circumstance

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

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

Green to launch in the cannabis industry;

however, the project has stalled over the past year.

In order to successfully launch, the technology

platform needs to rely upon a required merchant banking component, which is has been unable to identify.

The Company does not currently

know when an appropriate merchant banking solution will become available given the federal status of regulated cannabis and specifically

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

The regulatory status

related to cannabis banking reform and regulation at the federal level remains uncertain and the Company believes it is appropriate to

cause an impairment of the Zoneomics Green investment at this time.

The Company has no further financial or investment obligations at

Zoneomics Green in inactive.

During the three months ended March 31, 2026 and

2025, the Company recorded a loss from unconsolidated joint ventures of $ 0 .

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

in equity securities

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

stock of Anami Technology, Inc.

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

The Company’s ownership percentage is less than 20 % and it does

not have the ability to exercise significant influence as described in ASC 323-10-15-6.

This equity instrument does not have a readily

determinable fair value.

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

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

September 30,

MARCH 31, 2026

Investments in cost method investees

The Company accounts for its interests in entities

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

In such cases,

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

as other income.

During the year ended December 31, 2025, through its wholly-owned subsidiary ZPRE Holdings, the Company invested $ 84,110

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

unaudited consolidated balance sheets under “investment in cost-method investees.” ZP Ohio B plans on developing several projects.

This investment is subject to the Company’s impairment review policy.

During the three months ended March 31, 2026 and 2025, the

Company received distribution income of $ 2,500 and $0 .

respectively.

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

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

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

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

to exercise significant influence.

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

Accordingly, pursuant to ASC

321-10-35-2, 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 December 31, 2025, based on its qualitative impairment assessment, the Company impaired its equity investment and recorded an impairment

loss on equity securities of $ 50,000 .

NOTE 6 – NOTES PAYABLE

On March 31, 2026 and December 31, 2025, notes

payable consisted of the following:

Note payable - East West Bank

3 unchanged sentences

Total principal due on notes payable

debt discounts

debt discount

Notes payable, net

West Bank Swap Note

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

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

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

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

during the term of the MAL.

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

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

These loan and other

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

of the related debt.

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

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

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

When Zoned Arizona made the Early Amortization.

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

Among other things, the Loan

Agreement provides as follows:

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

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

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

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

all times maintain a minimum debt service coverage ratio of 1.50 to 1.0 ;

and (d) Zoned Arizona and the Company, collectively, will maintain

at all times, liquid assets of at least the sum of all tenant securities deposits under leases, plus $ 350,000 in operating reserves.

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

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

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

Note (defined below).

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

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

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

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

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

The Amended Note requires Zoned Arizona to pay monthly principal

and interest payments to the Bank at an interest rate equal to the prime rate plus 0.75 % ( 8.25 % as of 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.

In connection with the Amended Note, in 2022, Zoned Arizona received gross proceeds of $ 4,500,000 and paid fees of $ 184,596 .

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

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

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

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

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

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

The Reaffirmation reaffirms the Guaranty and provides

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

East West Bank Swap Note

On July 11, 2022, Zoned Arizona entered into a

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

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

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

On July 11, 2022, in connection

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

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

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

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

At any time before July 11, 2023, Zoned Arizona

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

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

(the “Note”).

ZONED PROPERTIES, INC.

1 unchanged sentence

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”).

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

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

The Confirmation provides the terms and conditions governing

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

The Company recorded the swap

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

The Company has entered

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

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.

MARCH 31, 2026

The Loan Agreement contains representations, warranties

and covenants customary for a transaction of this type.

Among other things, the Loan Agreement provides as follows:

(a) upon the occurrence

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

appraised value;

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

Ratio (as hereinafter defined) of 1.40 to 1.00 ;

1.50 to 1.0 ;

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

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

On December 7, 2022, Zoned Arizona and the Bank

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

Pursuant to the terms of the First Amendment, Zoned

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

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

Except as provided

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

Pursuant to the terms of the Loan Agreement and

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

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

completed on the Tempe Property.

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

an interest rate equal to the prime rate plus 0.75 % ( 7.50 % and 7.50 % as of March 31, 2026 and December 31, 2025, respectively).

Note matures 10 years after its effective date and payments are calculated based on a 30 -year amortization schedule.

In connection with

the Amended Note, in 2022, Zoned Arizona received gross proceeds of $ 4,500,000 and paid fees of $ 184,596 .

Zoned Arizona may prepay the outstanding principal

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

Also as previously disclosed, on July 11, 2022

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

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

any of the loan documents.

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

“Reaffirmation”) in favor of the Bank.

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

the First Amendment and Swap Note.

On December 7, 2022, Zoned Arizona and the Bank

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

The Confirmation incorporates by reference

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

as if the parties to the Confirmation

executed such agreement in such form.

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

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

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

sheets with changes in fair value recorded contemporaneously in earnings.

The Company has entered into an interest rate swap to mitigate

variability in interest payments on its variable-rate debt.

On March 31, 2026, principal and interest due

on the East West Bank Swap Note amounted to $ 4,344,775 and $ 13,631 , respectively.

On December 31, 2025, principal and interest due on

the East West Bank Swap Note amounted to $ 4,358,038 and $ 10,092 , respectively.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

23616 Land Contract Note Payable

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

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

The 23616 Land Contract Note

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

On December 5, 2022, in connection with the acquisition

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

(the “23616 Land Contract Note Payable”).

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

full as follows:

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

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

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.

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

On March 31, 2026, principal and interest due

on the 23616 Land Contract Note Payable amounted to $ 1,339,861 and $ 0 , respectively.

On December 31, 2025, principal and interest due

on the 23616 Land Contract Note Payable amounted to $ 1,335,322 and $ 0 , respectively.

On May 1, 2026, the Woodward properties were

sold and this loan was assigned to the new owner (See Note 13 – Subsequent Events).

23634 Land Contract Note Payable

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”).

The 23634 Land Contract Note Payable accrues interest at the

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

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

On September 30, 2025, principal

and interest due on the 23634 Land Contract Note Payable amounted to $ 388,402 and $ 0 , respectively.

On December 31, 2024, principal and

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

AZ Construction Loan Agreement

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

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

Pursuant to the terms of the PMF

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

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

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

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

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

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

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

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

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

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

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

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

On 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”).

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

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

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

On March 31, 2026, principal and interest due on the 23634 Land Contract

Note Payable amounted to $ 378,618 and $ 0 , respectively.

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

Payable amounted to $ 379,688 and $ 0 , respectively.

On May 1, 2026, the Woodward properties were sold and this loan was assigned to the

new owner (See Note 13 – Subsequent Events).

Surprise, AZ Construction Loan Agreement

In connection with the Surprise Property, ZP Dysart

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

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

Pursuant to the terms of the PMF Loan Agreement, PMF agreed to loan up to $ 1,620,000

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

ZP Dysart’s obligations under the PMF Note

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

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

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

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

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

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

ZP Dysart may prepay the PMF Loan in full

or in part at any time.

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

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

(ii) 2% of the amount of principal

prepaid in months 25-36;

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

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

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

During the year ended December 31,

2024, the Company borrowed $ 1,020,000 of the Maximum Amount and received net proceeds of $ 983,940 , net of origination fees and costs

of $ 36,060 .

During the 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 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.

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

time ZP Dysart pays the principal payment.

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

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

During the year ended December 31, 2025, the Company

borrowed an additional $ 600,000 of the Maximum Amount and received net proceeds of $ 600,000 .

As of March 31, 2026 and December 31, 2025,

the principal amount of the loan was $ 1,620,000 and $ 1,620,000 , respectively, and accrued interest payable amounted to $ 16,200 and $ 16,200 ,

respectively.

ZONED PROPERTIES, INC.

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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 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

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

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

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

Unless PMF otherwise elects, such acceleration

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

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

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

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

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

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

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

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

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

defined) (the “Construction Advances”).

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

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

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

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

which was received during the 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.

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

in favor of PMF, the Company guaranteed to PMF the full and prompt payment of the principal sum of the PMF Note or so much thereof

that may be outstanding at any one time or from time to time in accordance with its terms when due, by acceleration or otherwise, together

with all interest accrued thereon, and the full and prompt payment of all other sums, together with all interest accrued thereon, when

due under the terms of the PMF Loan Agreement, the PMF Note, and in any deed of trust, security agreement, lease assignment and other

assignment or agreement referred to in the PMF Loan Agreement or the PMF Note and/or now or hereafter securing the PMF Note or setting

forth any obligations of ZP Dysart in connection with the loan.

the three months ended 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.

MARCH 31, 2026

During the existence of any event of default,

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

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

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

Documents) to become immediately due and payable.

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

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

After maturity or during the existence of any

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

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

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

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

Pursuant to the terms of the PMF Loan Agreement,

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

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

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

The remaining loan proceeds will

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

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

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

of Sunday Goods’ Work:

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

31, 2025, and (ii) final advance in the amount of $300,000 at 100% completion and issuance of certificate of occupancy which was received

in October 2025.

The PMF Loan Agreement contains representations,

warranties and covenants customary for a transaction of this type.

Pursuant to the terms of the Unconditional Repayment

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

in favor of PMF, the Company guaranteed

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

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

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

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

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

with the loan.

During the three months ended March 31, 2026 and

2025, amortization of debt discount related to notes payable amounted to $ 6,418 and $ 6,418 , respectively, which is included in interest

expense on the accompanying unaudited consolidated statements of operations.

ZONED PROPERTIES, INC.

1 unchanged sentence

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

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

$ 2,000,000 in favor of Mr.

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

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

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

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

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

Except as set forth herein, the terms of

the Abrams Debenture remain in full force and effect.

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

Pursuant to the terms of the Abrams Debenture,

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

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

the Company defaults on payment, Mr.

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

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

Any amount of principal or interest, which

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

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

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

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

Abrams at law or in equity or other appropriate

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

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

of 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 .

8 – RELATED PARTY TRANSACTION

Indemnification

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.

MARCH 31, 2026

On March 31, 2026, future annual principal payments

under the above notes payable were as follows:

Years ending March 31,

Total principal payments due on March 31, 2026

NOTE 7 – CONVERTIBLE DEBENTURE

On January 9, 2017, the Company issued a convertible

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

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

on January 9, 2022.

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

Abrams entered into an amendment

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

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

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

force and effect.

The Company may prepay the Abrams Debenture at

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

Pursuant to the terms of the Abrams Debenture, Mr.

Abrams is entitled to convert all

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

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

If the Company defaults on payment, Mr.

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

full of all amounts due under the Abrams Debenture.

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

at the rate of 12 % per annum.

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

Abrams may (i) declare the entire principal

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

powers and remedies available to Mr.

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

of any covenant or agreement contained in the Abrams Debenture and proceed to enforce the payment thereof or any other legal or equitable

As of March 31, 2026 and December 31, 2025, the

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

As of March 31, 2026 and December 31, 2025, accrued interest payable due

under the Abrams Debenture amounted to $ 0 and $ 0 , respectively, which is included in accrued expenses on the accompanying unaudited consolidated

balance sheets.

For the three months ended March 31, 2026 and 2025, interest expense related to the Abrams Debenture amounted to $ 30,000 .

NOTE 8 – RELATED PARTY TRANSACTION

Indemnification agreements

On August 23, 2021, the Company entered into indemnification

agreements with each of its directors and executive officers.

In general, these indemnification agreements require the Company to indemnify

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

service as a director and officer for the Company.

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

against them as to which they could be indemnified.

From August 2021 through December 2025, the Company did not maintained a directors’ and officers’ insurance policy.

in December 2025, the Company entered into a new directors’ and officers’ insurance policy with an annual term through December

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

9 – STOCKHOLDERS’ EQUITY

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.

MARCH 31, 2026

On January 15, 2026, the Company entered into

the MBO APA by and among the Seller Parties and the Buyer.

The Buyer is owned by Bryan McLaren, the Company’s Chairman of the Board,

Chief Executive Officer and Chief Financial Officer;

Berekk Blackwell, the Company’s President and Chief Operating Officer;

Patrick Moroney.

The Company formed the Committee, consisting of

its three independent directors, that has reviewed, negotiated and overseen the MBO APA and the other transaction documents and the MBO.

The Committee approved the MBO APA, the other transaction documents and the MBO, prior to its execution.

The MBO APA and the other transaction

documents and the MBO were also approved by the full Board prior to its execution.

Pursuant to the terms of the MBO APA, the Seller

Parties agreed to sell to the Buyer, and the Buyer agreed to purchase from the Seller Parties, subject to the terms of the MBO APA, all

of the Seller Parties’ rights, title and interest in and to the Business, and the Assets.

The Assets include, among other things,

(i) the real property located at 410 S.

Madison Drive, Tempe, AZ;

(ii) the real property located at 13150 W.

Bell Road, Surprise, AZ;

(iii) the real property located at 3455 S.

Ashland Avenue, Chicago, IL;

(iv) the Company’s membership interests in ZPRE Holdings,

Arizona Brokerage, Florida Brokerage, ZP Data 2, ZP Ohio B, and Zoneomics Green;

(v) all rights under all contracts to which any Seller

Party is a party or is bound as of the closing date that is related to the Business;

(vi) all intellectual property of the Seller Parties;

(vii) all prepaid expenses, security deposits, and certain other operational assets;

and (vii) potentially certain additional assets that

may be acquired by the Seller Parties prior to the closing of the MBO, as discussed below.

Subject to adjustment as set forth in the MBO

APA, the purchase price for the Assets will be $ 7,000,000 , less the Assumed Indebtedness (as defined in the MBO APA) (the “Purchase

The parties to the MBO APA acknowledged and agreed

that between January 15, 2026 and the date of the closing of the MBO (the “Closing”), the Company or one or more affiliates

of the Company may acquire or invest in additional real estate assets (“Additional Assets”).

Upon acquisition of or investment

in the Additional Assets, (i) such Additional Assets shall be deemed included in the “Assets” for purposes of the MBO APA,

(ii) the Purchase Price will be increased by the amount of the cash purchase price paid therefor by the Company or its affiliate, (iii)

the Purchase Price will be decreased by the amount of any cash and/or debt instruments issued by the Company or its affiliate to the seller

of such Additional Assets (the “Additional Asset Acquisition Indebtedness”), and (iv) such Additional Asset Acquisition Indebtedness

will be deemed included in the assumed liabilities pursuant to the MBO APA.

The parties to the MBO APA also acknowledged and

agreed that between January 15, 2026 and the Closing, the Company may sell the real estate assets located at 23622-23634 Woodward Avenue,

Pleasant Ridge, MI (the “Pleasant Ridge Assets”) to a third party for a purchase price to be determined.

The Pleasant Ridge

Assets are not currently included in the “Assets” for purposes of the MBO APA.

In the event that the sale of the Pleasant

Ridge Assets is not consummated prior to the Closing, then the Pleasant Ridge Assets will be deemed included in the “Assets”

and the Purchase Price will be increased by the amount of the appraisal value of the Pleasant Ridge Assets, as determined as set forth

in the MBO APA.

The parties to the MBO APA further acknowledged

and agreed that between January 15, 2026 and the Closing, the Company may sell the real estate assets located at 2144 N.

Chino Valley, AZ;

2095 Northern Avenue, Kingman, AZ;

Commerce Point Place, Green Valley, AZ (collectively, the “CKG

Properties”) to a third party for a total purchase price of $ 9,000,000 (the “CKG Purchase Price”), of which $ 4,000,000

is expected to be paid in cash and $ 5,000,000 is expected to be paid via a promissory note payable to the Company (the “CKG Note”).

In the event that the sale of the CKG Properties is not consummated prior to the Closing, then the CKG Properties will be deemed included

in the “Assets” and the Purchase Price will be increased by the amount of the CKG Purchase Price.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

The closing of the MBO is subject to certain closing

conditions, including, but not limited to, (i) the Company and the Committee having received an opinion as to the fairness of the transactions,

from a financial point of view, to the shareholders of the Company, and such opinion remaining valid and in full force and effect as of

(ii) MBO APA and the transactions set forth therein being approved by both (1) the shareholders of the Company holding a

majority of the voting power of the Company, as required by Nevada law, and (2) shareholders of the Company holding a majority of the

voting power of the Company, but excluding for such purposes any such shareholder, and shares or stock of the Company, held by any persons

who own, control or have any interest in the Buyer (i.e., a “majority of the minority” uninterested shareholders);

(iii) receipt

of any required regulatory approvals;

(iv) raising by the Buyer of the capital required, in its sole discretion, to fund the Purchase

and (v) other customary closing conditions.

NOTE 9 – STOCKHOLDERS’ EQUITY

(A) Preferred Stock

On December 13, 2013, the Board of Directors (the

“Board”) of the Company authorized and approved the creation of a new class of preferred stock consisting of 5,000,000 shares

authorized, $ 0.001 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

stock having preferences over the Preferred Stock.

Repurchase any of our common

Merge or consolidate with

any other company, except our wholly owned subsidiaries.

The 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 March 31, 2026 and December 31, 2025, there were 2,000,000 shares of preferred stock outstanding.

Once any shares of preferred stock

are outstanding, at least 51 % of the total number of shares of preferred stock outstanding must approve the following transactions:

Alter or change the rights, preferences or privileges of the preferred stock.

Create any new class of stock having preferences over the preferred stock.

Repurchase any of our common stock.

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

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

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

Common stock redemption

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

from a shareholder for $ 15,000 , or $ 0.15 per share, which as of 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

preferred stock approved a stock repurchase program (the “Repurchase Program”), pursuant to which the Company is authorized

to purchase up to $ 1 million of its common stock over an unlimited time period.

the year ended December 31, 2024, the Company purchased a total of 13,687 shares of its common stock for $ 8,010 or an average of $ 0.59

per share, which as of 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

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

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

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

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

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

and share in the Company’s success.

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

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

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

Restricted shares granted pursuant to the 2016 Plan are amortized to

expense over the vesting period.

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

If any share of common stock underlying

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

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

future grants and awards under the 2016 Plan.

As of 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 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

awarded stock options are outstanding.

The 2014 Plan has been superseded by the 2016 Plan.

Accordingly, no additional shares subject

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

2014 Plan, if exercised.

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.

(B) Common stock issued for services

Effective January 28, 2026, the Company issued

shares of restricted common stock, representing compensation for services to be rendered in 2026 and 2027, to the Company’s executive

officers and Board members as follows:

Bryan McLaren

Chairman of the Board, Chief Executive Officer and Chief Financial Officer

Berekk Blackwell

President and Chief Operating Officer

Independent Director

ZONED PROPERTIES, INC.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

Stock options

November 25, 2024, the Company granted a stock option to purchase 105,000 of the Company’s common stock at an exercise price of

$ 0.49 per share to a board of director pursuant to the 2016 Plan.

The grant date of the stock option was November 25, 2024 and the option

expires on November 25, 2034.

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

The fair value of this option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following

MARCH 31, 2026

Such issuances are subject to forfeiture, depending

on continued employment or service with the Company.

If a recipient voluntarily resigns or is terminated for cause prior to December 31,

2027, the recipient must return to the Company a pro-rata portion of the issued shares, calculated on a monthly basis.

If a change of

control occurs at any time prior to December 31, 2027, all clawback provisions will automatically terminate and each recipient will retain

100 % of the issued shares, free of any repayment obligation.

Additionally, the above executive officers and Board members will each receive

a cash payment from the Company to cover their income tax liability associated with the above stock issuances in an amount up to 35 % of

the cost basis of the shares (the “Payroll Tax Liability”).

In the event of a change of control, the Company will pay the

full Payroll Tax Liability to each of the above executive officers and Board members prior to consummation of such change of control.

Additionally, effective January 28, 2026, the

Company issued 150,000 shares of restricted common stock, representing compensation for services to be rendered in 2026 and 2027, to Mr.

Moroney, an employee.

The issuance is subject to forfeiture, depending on Mr.

Moroney’s continued employment or service with the

Moroney voluntarily resigns or is terminated for cause prior to December 31, 2027, he must return to the Company a pro-rata

portion of the issued shares, calculated on a monthly basis.

If a change of control occurs at any time prior to December 31, 2027, all

clawback provisions will automatically terminate and Mr.

Moroney will retain 100 % of the issued shares, free of any repayment obligation.

Additionally, Mr.

Moroney will receive a cash payment from the Company to cover his Payroll Tax Liability.

In the event of a change of

control, the Company will pay the full Payroll Tax Liability to Mr.

Moroney prior to consummation of such change of control.

The common shares issued above were valued at

$ 437,000 , or a per share price of $ 0.38 , based on the quoted closing price of the Company’s common stock on the measurement date,

which will be amortized into stock-based compensation expense over the services period.

During the three months ended March 31, 2026,

the Company recorded stock-based compensation of $ 54,625 , and as of March 31, 2026, the Company recorded prepaid expenses of $ 382,375 ,

which will be amortized over the remaining service period through December 31, 2027.

Additionally, in connection with the obligation

to cover the Payroll Tax Liability as discussed above, the Company recorded additional prepaid expenses and accrued expenses of $ 152,950 ,

which is equal to 35 % of the cost-basis of the shares issued to cover the Payroll Tax Liability associated with the above stock issuances.

During the three months ended March 31, 2026, the Company recorded compensation expense of $ 19,119 , and as of March 31, 2026, the Company

recorded prepaid expenses of $ 133,381 , which will be amortized over the remaining service period through December 31, 2027.

31, 2026, the amount due to cover the respective Payroll Tax Liability for each recipient of $ 152,500 is included in accrued expenses

on the accompanying unaudited consolidated balance sheet.

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

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

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

The 2016 Plan’s purpose is to encourage ownership in the Company by

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

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

The 2016 Plan authorizes

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

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

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

Options vest and expire over a period not to

exceed seven years.

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

or if any shares of common stock that are subject to any other stock-based award granted are forfeited or terminated, such shares shall

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

As of March 31, 2026, 956,250 stock

option awards were outstanding and 956,250 options were exercisable under the 2016 Plan.

As of December 31, 2025, 1,315,000 stock option

awards were outstanding and 1,206,250 options were exercisable under the 2016 Plan.

As of March 31, 2026 and December 31, 2025, 9,043,750

and 8,685,000 shares, respectively, were available for future issuance under the 2016 Plan.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

The Company maintained its 2014 Equity Compensation

Plan through its expiration date in 2024 (the “2014 Plan”).

The 2014 Plan has been superseded by the 2016 Plan.

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

As of March 31, 2026 and December 31, 2025, options to purchase

250,000 and 250,000 shares of common stock were outstanding and exercisable pursuant to the 2014 Plan, respectively.

(D) Stock options

On January 21, 2025, the Company granted an aggregate

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

members pursuant to the 2016 Plan ( 105,000 stock options each).

The grant date of the stock options was January 21, 2025 and the options

expire on January 21, 2035.

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

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

weighted-average assumptions:

dividend yield of 0 %;

expected volatility of 86.0 %;

risk-free interest rate of 4.17 %;

and an estimated

holding period of 6.5 years.

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

expense over the vesting period.

January 21, 2025, the Company granted an aggregate of 525,000 stock options to purchase 525,000 of the Company’s common stock at

an exercise price of $ 0.44 per share to certain members of the board of directors pursuant to the 2016 Plan ( 105,000 stock options each).

The grant date of the stock options was January 21, 2025 and the options expire on January 21, 2035.

The options shall vest evenly on

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

The fair value of these options grants was estimated

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

dividend yield of

historical volatility of 82.1 %;

risk-free interest rate of 4.30 %;

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

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

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 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 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:

and a holding period

of 6.5 years based on the simplified method.

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

compensation expense over the vesting period.

On April 23, 2025, three of the Company’s five directors submitted their respective

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

On January 19, 2026, all unvested stock options

Blackwell, or members of the Board, representing stock options to purchase an aggregate of 298,750 shares of

common stock ( 0 , 97,500 , 70,000 , 70,000 , and 61,250 of which were held by Mr.

Blackwell, Art Friedman, David G.

Cole Stevens, respectively), were canceled.

All vested stock options as of January 19, 2026 held by Mr.

Blackwell or members

of the Board remain outstanding and exercisable in accordance with their existing terms.

Effective January 19, 2026, all unvested stock

options held by Patrick Moroney, representing stock options to purchase an aggregate of 60,000 shares of common stock, were canceled.

Moroney is a non-executive officer member of the Company’s management team.

For the three months ended March 31, 2026 and

2025, in connection with the reversal of previously recorded stock-based option expense from the cancellation on unvested stock options,

and accretion of stock-based option expense, the Company recorded stock option (recovery) expense of $( 93,105 ) and $ 56,606 , respectively.

As of March 31, 2026, there was $ 0 of unvested stock-based compensation expense.

The aggregate intrinsic value on March 31, 2026 was $ 0

and was calculated based on the difference between the quoted share price on March 31, 2026 of $ 0.40 and the exercise price of the underlying

Stock option activities for the three months ended

March 31, 2026 are summarized as follows:

Options Weighted

Price Weighted

Price Weighted Average

(Years) Aggregate

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

Issued 525,000 0.44 9.82 -

Expired ( 1,000,000 ) 1.00 - -

Balance outstanding at December 31, 2025 1,565,000 0.79 5.65 $ 8,400

Forfeited ( 358,750 ) 0.69 -

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 outstanding at March 31, 2026 1,206,250 $ 0.82 4.87 $ -

Exercisable, March 31, 2026 1,206,250 $ 0.82 4.87 $ -

Balance non-vested on December 31, 2025 358,750 $ 0.69 7.45 $ -

Issued during the period 525,000 0.44 9.82 -

Forfeited ( 358,750 ) 0.69 -

Vested during the period -

Balance non-vested on September 30, 2025 456,250 $ 0.70 7.71 $ -

10 – COMMITMENTS AND CONTINGENCIES

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

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

McLaren”), the Company’s Chief Executive Officer, Chief Financial

Officer and Chairman of the Board of Directors, entered into an employment agreement (the “2018 Employment Agreement”).

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

McLaren his then-current base annual salary

of $ 215,000 , and to award Mr.

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

the Company’s net income for the associated period.

Balance non-vested on March 31, 2026 -

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

2018 Employment Agreement has a term of 10 years.

MARCH 31, 2026

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Legal matters

From time to time, the Company may be involved

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

As of March 31, 2026, the Company is not

involved in any pending or threatened legal proceedings that it believes could reasonably be expected to have a material adverse effect

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

Employment and Related Golden Parachute

Bryan McLaren

On May 23, 2018, the Company and Mr.

the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board, entered into an employment agreement (the

“2018 Employment Agreement”).

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

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

McLaren with an annual and/or quarterly bonus payable in

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

The 2018 Employment Agreement has a term of 10

The term and Mr.

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

in any of the following circumstances:

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

immediately, if Mr.

McLaren dies;

immediately, if Mr.

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

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

McLaren’s disability;

on the expiration date,

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

at the option of the Company

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

McLaren of the

basis for such Termination;

at the option

of the Company, without Cause;

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

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

McLaren of the basis for such Termination;

at the option of the Company, without Cause;

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

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

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

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

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

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

Company and Mr.

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

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

set forth below.

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

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

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

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

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

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

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

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

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

of Termination specified in the notice of Termination:

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

McLaren’s base compensation;

a material change in the

geographic location at which Mr.

McLaren performs his duties;

a material diminution in

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

McLaren is required to report, including a requirement that

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

In the event of a Termination for any reason or

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

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

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

McLaren, except for his obligation under the restrictive

covenants in the 2018 Employment Agreement.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

diminution in the budget over which Mr.

MARCH 31, 2026

The Company and Mr.

McLaren also entered into

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

No benefits shall be payable under the Golden

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

For purposes of the Golden Parachute

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

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

the Securities Exchange Act of 1934, as amended.

For purposes of the Golden Parachute Agreement,

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

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

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

injurious to the Company, monetarily or otherwise.

For purposes of the Golden Parachute Agreement,

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

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

a material diminution in Mr.

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

a material diminution in Mr.

McLaren’s base compensation;

a material change in the geographic location at which Mr.

McLaren performs his duties;

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

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

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

a material diminution in the budget over which Mr.

McLaren retains authority;

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

McLaren was entitled, or any compensation

plan in which Mr.

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

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

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

total compensation;

a material breach under

any agreement with the Company to provide Mr.

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

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

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

McLaren’s total compensation;

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

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

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

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

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

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

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

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

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

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

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

Following a change in control of the Company,

upon termination of Mr.

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

will be entitled to the following benefits:

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.

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

the Company will pay Mr.

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

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

time such payments are due.

If employment

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

McLaren for Good Reason,

McLaren will be entitled to the following benefits:

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

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

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

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

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

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

McLaren for Good Reason, Mr.

McLaren will be entitled to benefits provided below:

Company will pay Mr.

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

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

any further salary payments to Mr.

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

lieu of any further salary payments to Mr.

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

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

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

Termination given in respect of them.

will pay to Mr.

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

given in respect of them.

Company will pay to Mr.

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

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

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

McLaren under the

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

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

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

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

McLaren (whether or not then

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

stock covered by each such option.

will also pay to Mr.

McLaren (whether or not then fully

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

by each such option.

Company will also pay Mr.

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

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

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

by transactions.

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

Each transaction may vary

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

In connection

with such a bonus, during the three months ended March 31, 2026 and 2025, the Company incurred a bonus to Mr.

McLaren of $ 100,000 and

$ 0 , respectively.

Effective January 28, 2026, the Board approved

an increase in the base salary of Bryan McLaren, the Company’s Chairman of the Board, Chief Executive Officer and Chief Financial

Officer, by 10 %, such that Mr.

McLaren’s base salary was increased to $ 275,000 .

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

Additionally,

on August 16, 2024, the Company’s Compensation Committee approved a Compensation Memo whereby project team members may receive

up to 80 % bonus splits of project fees generated by transactions.

Project fees may include Acquisition Fees, Management Fees, Disposition

Fees, or Promote Fees.

Each transaction may vary significantly in the types of fees generated and the amount of fees generated depending

on project terms and conditions.

In connection with such a bonus, 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.

Blackwell (the “Blackwell Employment

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

Blackwell a base annual

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

MARCH 31, 2026

Berekk Blackwell

On July 26, 2022, the Company entered into an

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

Blackwell (the “Blackwell Employment Agreement”).

Pursuant to the terms

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

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

and Chief Operating Officer.

The Company may also award Mr.

Blackwell discretionary

cash and/or equity bonuses.

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

During the initial term,

neither party may terminate the Blackwell Employment Agreement except for Cause (as defined in the Blackwell Employment Agreement).

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

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

notice to the other party.

Additionally,

on August 16, 2024, the Company’s Compensation Committee approved a Compensation Memo whereby project team members may receive

up to 80 % bonus splits of project fees generated by transactions.

Project fees may include Acquisition Fees, Management Fees, Disposition

Fees, or Promote Fees.

Each transaction may vary significantly in the types of fees generated and the amount of fees generated depending

on project terms and conditions.

In connection with such a bonus, 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

January 1, 2021.

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

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

For the nine months ended September 30,

2025 and 2024, the Company contributed $ 17,471 and $ 18,835 to the Plan, respectively.

OH Antwerp, LLC

March 12, 2025, ZP OH Antwerp, LLC (“ZP Antwerp”), a wholly-owned subsidiary of ZP Ohio B LLC, a cost method investee of

the Company (See Note 5), and Jonestown Bank & Trust Co.

(“Jonestown”) entered into a Loan Agreement (the “Loan

Agreement”) pursuant to which Jonestown agreed to lend to ZP Antwerp $ 300,000 (the “Loan”) for purchase of commercial

real estate located at 503 W.

River Street, Antwerp, OH (the “Antwerp Property”), to be evidenced by the Mortgage Note, dated

as of March 12, 2025, in the principal amount of $ 300,000 , issued by ZP Antwerp in favor of Jonestown (the “Note”).

to the terms of the Loan Agreement, ZP Antwerp agreed to pay to Jonestown a $ 7,500 loan origination fee and a $ 1,500 loan enhancement

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

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

the Company, guaranteed the Loan Agreement pursuant to that certain Guaranty dated March 12, 2025, by ZP RE Holdings, LLC, and that certain

Guaranty dated March 12, 2025, by the Company, respectively.

The Company believes that the fair value of the guarantee is nominal since

the fair value of the property exceeds the loan amount.

March 12, 2025, ZP Antwerp entered into an Assignment of Rents and Leases (“Assignment”) with Jonestown.

Pursuant to the

terms of the Assignment, ZP Antwerp agreed to grant to Jonestown all of ZP Antwerp’s right, title and interest in and to all of

the rents, revenues, issues, profits, proceeds, royalties, bonuses, rights, benefits, receipts, income accounts and other receivables

arising out of or from the Antwerp Property to secure the payment by ZP Antwerp when due of indebtedness evidenced by the Note, and any

and all other indebtedness and obligations that may be due and owing to Jonestown by ZP Antwerp under or with respect to the Loan Agreement,

the Guaranty and certain other transaction documents.

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

of this type.

Blackwell discretionary cash and/or equity bonuses.

The Blackwell Employment

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

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

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

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

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

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

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

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

by transactions.

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

Each transaction may vary

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

In connection

with such a bonus, during the three months ended March 31, 2026 and 2025, the Company incurred a bonus to Mr.

Blackwell of $ 100,000 and

$ 0 , respectively.

Effective January 28, 2026, the Board approved

an increase in the base salary of each of Berekk Blackwell, the Company’s President and Chief Operating Officer, by 10 %, such that

Blackwell’s base salaries was increased to $ 210,000 .

Payroll Tax Liability

On September 29, 2021, the Company’s Board

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

The Company contributes a matching contribution

to the Plan for each employee in an amount equal to 100 % of the matched employee contributions that are not in excess of 4 % of the employee’s

plan compensation.

For the three months ended March 31, 2026 and 2025, the Company contributed $ 4,744 and $ 5,782 to the Plan, respectively.

Loan Guarantees

ZP OH Antwerp, LLC

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

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

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

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

River Street, Antwerp,

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

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

Pursuant to the terms of the Loan Agreement, ZP Antwerp

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

The Antwerp Property will be used as collateral

for the Loan.

The Company and ZP RE Holdings guaranteed the Loan Agreement pursuant to that certain Guaranty dated March 12, 2025, by

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

The Company believes that the fair value

of the guarantee is nominal since the fair value of the property exceeds the loan amount.

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

OH Columbus, LLC

April 4, 2025, ZP OH Columbus, LLC (“ZP Columbus”), a wholly-owned subsidiary of ZP Ohio B LLC, a cost method investee of

the Company (See Note 5), closed the acquisition of commercial real estate located at 601 S.

High Street, Columbus, OH (the “Columbus

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

Guaranty”), dated as of 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

MARCH 31, 2026

On March 12, 2025, ZP Antwerp entered into an

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

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

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

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

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

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

The Loan Agreement, Note and Assignment contain

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

ZP OH Columbus, LLC

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

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

of commercial real estate located at 601 S.

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

In connection therewith,

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

On 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

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 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

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

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

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

The Company has determined that these reportable

segments were strategic business units that offer different products.

Currently, these reportable segments are being managed separately

based on the fundamental differences in their operations.

Company’s Property Investment Portfolio segment generates revenues from its operating leases with its tenants.

Rental income is

accounted for pursuant to ASC Topic 842 “Leases” and includes base rents that each tenant pays in accordance with the terms

of its respective lease and is reported on a straight-line basis over the non-cancellable term of the lease, which includes the effects

of rent abatements under the leases.

Company’s Real Estate Services segment generates revenues which includes brokerage revenues consisting of real estate sales commissions

and assignment fees, and revenues from advisory services for services performed pursuant to its consulting agreements with clients.

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

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 Statements.

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.

NOTE 11 – SEGMENT REPORTING

The Company operates in two operating and reportable

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

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

Estate Services” segment.

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

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

The Company’s Property Investment Portfolio

segment generates revenues from its operating leases with its tenants.

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

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

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

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

Months Ended September 30, 2025

Operating expenses (excluding depreciation and amortization)

Depreciation and amortization

Income (loss) from operations

Interest expense

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 September 30, 2024

Corporate and

MARCH 31, 2026

The Company’s Real Estate Services segment

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

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

Corporate and unallocated amounts that do not

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

The Company’s 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.

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 Statements.

Information with respect to these reportable business

segments for the three months ended March 31, 2026 and 2025 was as follows:

Three Months Ended March 31, 2026

Corporate and Unallocated

Operating expenses (excluding depreciation and amortization)

7 unchanged sentences

$ ( 136,241 )

$ ( 209,802 )

ZONED PROPERTIES, INC.

1 unchanged sentence

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

Income (loss) from operations

Interest expense

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 September 30, 2024

Property Investment Portfolio

Real Estate Services

MARCH 31, 2026

Three Months Ended March 31, 2025

Corporate and Unallocated

3 unchanged sentences

Interest expense

Income from derivative – interest rate swap

Loss from derivative – interest rate swap

Income (loss) before provision for income taxes

2 unchanged sentences

$ ( 280,184 )

September 30,

Total assets by segment on September 30, 2025 and December 31, 2024 was as follows:

Total assets by segment on March 31, 2026 and

December 31, 2025 were as follows:

Property investment portfolio

1 unchanged sentence

Corporate and unallocated

assets are located in the United States.

All assets are located in the United States.

NOTE 12 – OPERATING LEASE RIGHT-OF-USE

(“ROU”) ASSETS AND OPERATING LEASE LIABILITY

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

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

the original tenant to the Company.

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

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

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

through November 30, 2026.

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

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

through November 30, 2028.

In adopting ASC Topic 842, Leases (Topic 842)

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

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

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

Upon signing of the Assumption of

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

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

In connection with

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

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

ZONED PROPERTIES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

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

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

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

The lease term began on March 15, 2022 and expired

on November 30, 2024 , provided the Company has the option to extend the lease for an additional five years.

On June 3, 2024 the Company

extended the lease for an additional 24 months through November 30, 2026.

Effective December 1, 2024, the monthly base rent shall be

$ 3,665 per month through November 30, 2025, $ 3,775 from December 1, 2025 through November 30, 2026, $ 3,887 from December 1, 2026 through

November 30, 2027, and $ 4,004 from December 1, 2027 through November 30, 2028.

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

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

initial direct costs (see Note 2).

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

months or less.

Upon signing of the Assumption of Lease and Consent Agreement on March 15, 2022 and the new lease effective December

1, 2024, the Company analyzed the leases and determined it is required to record a lease liability and a right of use asset on its consolidated

balance sheet, at fair value.

In connection with June 3, 2024 Lease, in December 2024, the Company increased its right of use assets

and lease liabilities by $ 81,974 and removed all remaining right of use assets and lease liabilities associated with the March 2022 lease,

which amounted to $ 90,710 .

the 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.

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

September 30,

MARCH 31, 2026

For the three months ended March 31, 2026 and 2025, in connection with

its operating leases, the Company recorded rent expense of $ 11,413 and $ 11,406 , respectively, which is included in operating expenses

on the accompanying unaudited consolidated statements of operations.

The significant assumption used to determine the

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

As of March 31, 2026 and December 31, 2025, ROU

assets were summarized as follows:

Office lease right of use asset

1 unchanged sentence

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,

As of March 31, 2026, future minimum base lease

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

Year ending March 31,

Total minimum non-cancelable operating lease payments

discount to fair value

Total lease liability on September 30, 2025

Total lease liability on March 31, 2026

NOTE 13 – SUBSEQUENT EVENTS

Real Estate Purchase and Sale Agreement

On April 20, 2026, the Company through its wholly

owned subsidiaries, Green Valley, Kingman and Chino Valley (collectively, the “Seller”), entered into a Real Estate Purchase

and Sale Agreement (the “Purchase Agreement”) with Broken Arrow Herbal Center, Inc., an Arizona corporation (the “Purchaser”),

pursuant to which the Seller agreed to sell to the Purchaser three properties consisting of (i) property commonly known as 1732 W.

Point Place, Green Valley, Arizona 85614 (the “Green Valley Property”), (ii) property commonly known as 2095 E.

Northern Avenue,

Kingman, Arizona 86409 (the “Kingman Property”), and (iii) property commonly known as 2144-2148 N.

Road 1 East, Chino Valley,

Arizona 86323 (the “Chino Property” and together with the Green Valley Property and Kingman Property, the “Properties”).

The Purchase Agreement provides that the Purchaser is exercising purchase rights set forth in certain existing lease agreements relating

to the Properties.

The aggregate purchase price for the Properties

is $ 9.0 million, allocated as follows:

(i) $ 8.0 million for the Chino Property, (ii) $ 500,000 for the Kingman Property, and (iii) $ 500,000

for the Green Valley Property.

The Purchaser is required to deposit $ 400,000 into escrow.

Subject to the terms of the Purchase Agreement,

the purchase price is to be paid through a combination of (i) $ 4.0 million in cash and (ii) a $ 5.0 million promissory note to be secured

by a deed of trust.

The Purchase Agreement provides that, following closing, such seller financing is to be the only debt or lien permitted

to encumber the Properties until the note has been paid in full and the deed of trust has been released of record.

ZONED PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

The closing is scheduled to occur on June 30,

2026, unless extended in accordance with the Purchase Agreement.

The Purchaser has the right, in its sole discretion, to extend the closing

date to August 31, 2026, by timely written notice.

If that extension right is exercised, the Purchase Agreement provides that the acquisitions

of the Green Valley Property and the Kingman Property would close on the original closing date for an aggregate cash payment of $ 1.0 million,

and the closing for the Chino Property would be extended to August 31, 2026.

If the first extension right is timely exercised, the Purchaser

also has a further right to extend the closing for the Chino Property to September 30, 2026, by timely written notice and by delivering

an additional $ 1.0 million supplemental deposit to the escrow agent, which supplemental deposit is nonrefundable except in the case of

an uncured seller default.

Except as expressly provided in connection with a timely exercised extension, the Purchase Agreement contemplates

an all-or-none closing involving all three Properties.

The Purchase Agreement contains customary provisions

regarding title review, closing deliveries, apportionments, casualty and condemnation, default remedies, confidentiality, governing law,

and other matters.

The Seller is required to remove certain monetary liens voluntarily created by the Seller, but otherwise has no general

obligation to cure title objections.

The Purchase Agreement also provides that the Purchaser is acquiring the Properties in their present

“as is,” “where is,” and “with all faults” condition, subject to limited exceptions expressly set

forth in the agreement.

In addition, effective as of closing and subject to certain carveouts described in the Purchase Agreement, the

Purchaser will release the Seller and certain related parties from claims relating to the condition of the Properties and certain other

matters described in the Purchase Agreement.

If the Purchaser fails to complete the purchase

without legal excuse and does not timely cure such default, the Seller’s sole remedy is to terminate the Purchase Agreement and

retain the deposit as liquidated damages.

If the transaction fails to close due to an uncured default by the Seller, the Purchaser’s

sole and exclusive remedies are to terminate the Purchase Agreement and receive a refund of the deposit, less the independent contract

consideration, waive the default and proceed to closing, or seek specific performance, subject to the timing limitations set forth in

the Purchase Agreement.

Agreement of Sale and Escrow Instructions

On May 1, 2026, the Company, through its wholly

owned subsidiary ZP Woodward entered into and closed on the Woodward Agreement with the Woodward Buyer.

Pursuant to the Woodward Agreement,

ZP Woodward agreed to sell to the Woodward Buyer:

(i) ZP Woodward’s fee interest in the real estate property located at 23600 Woodward

Avenue, Ferndale, Michigan APN No.

24-25-27-181-006 (the “Fee Property”);

(ii) ZP Woodward’s vendee interest in that

certain the Land Contract dated November 30, 2022 related to APNs 25-27-181-004 & 25-27-181-005, with a commonly known address of

23622 & 23616 Woodward Avenue, Pleasant Ridge, Michigan with THE THOMAS A.

PEARLMAN REVOCABLE TRUST U/A/D 6/13/2005, as vendor (the

“Pearlman Land Contract”);

(iii) ZP Woodward’s vendee interest in that certain Land Contract dated February 23, 2023

related to APN 25-27-181-003, with a commonly known address of 23634 Woodward Avenue, Pleasant Ridge, Michigan with GANGNIER INVESTMENTS

LLC, a Michigan limited liability company, as vendor (the “Gangnier Land Contract”);

and (iv) ZP Woodward’s interest

in that certain Licensed Cannabis Facility Absolute Net Lease Agreement dated December 1, 2022 with respect to the Fee Property and the

(the “Woodward Lease,” and collectively with the Fee Property and land contract interests, the “Woodward Property”).

The aggregate purchase price for the Woodward Property was $ 600,000 , plus Woodward Buyer’s assumption of all obligations and outstanding

balances under the Pearlman Land Contract and Gangnier Land Contract (being $ 1,327,371 and $ 374,826 , respectively).

At closing, ZP Woodward

conveyed the Fee Property by covenant deed and assigned its interests in the Pearlman Land Contract.

Gangnier Land Contract, and Lease

to the Woodward Buyer, and the Woodward Buyer assumed the related obligations.

The Woodward Agreement contains customary representations

and warranties of Seller, including with respect to authority, absence of conflicting agreements, and certain matters relating to litigation,

environmental conditions, and the land contracts, subject to knowledge qualifiers.

Except as expressly set forth in the Woodward Agreement

and related closing documents, the Woodward Property is being sold on an “as is, where is, with all faults” basis.

Agreement includes provisions allocating prorations of taxes, rent, land contract payments, utilities and other customary items as of

Certain closing costs, including escrow fees, owner’s title insurance premiums, and transfer taxes, are to be shared equally

by the Woodward Buyer and Seller, with the Woodward Buyer responsible for additional title coverage and any lender’s policy.

In connection with the closing, the parties have

entered into, or will enter into (i) and Assignment and Assumption of Land Contract with respect to the Pearlman Land Contract among Seller,

the Woodward Buyer, and Thomas A.

Pearlman, Trustee of the Thomas A.

Pearlman Revocable Trust u/a/d 6/13/2005 (the “Pearlman Land

Contract Assignment”);

(ii) an Assignment and Assumption of Land Contract with respect to the Gangnier Land contract among Seller,

the Woodward Buyer, and Gangnier Investment, LLC (the “Gangnier Land Contract Assignment”);

and (iii) an Assignment and Assumption

of Lease among ZP Woodward, the Woodward Buyer, and Rapid Fish 2, LLC, as tenant (the “Lease Assignment” and together with

the Pearlman Land Contract Assignment and Gangnier Land Contract Assignment, the “Assignment Agreements”).

Each of the Assignment Agreements became automatically

effective upon the consummation of the closing of the transaction contemplated by the Woodward Agreement.

From and after the effective

time of such closing, (i) ZP Woodward assigned to the Woodward Buyer all of its right, title, and interest in and to the applicable land

contract or Lease, as applicable, and (ii) the Woodward Buyer assumed and agreed to perform all obligations of ZP Woodward arising under

such agreements from and after the effective date thereof.

Under the Assignment Agreements, the Woodward Buyer does not assume liability

for obligations arising prior to the effective time of the assignments, and Seller retains such pre-closing liabilities.

each applicable counterparty (including the land contract sellers and the tenant under the Lease) has consented to the applicable assignment

and has agreed to release Seller from liabilities arising under the assigned agreements from and after the effective time of such assignment.

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