Zoned Properties, Inc. 10-Q

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations Cautionary Note Regarding Forward-Looking Information and Factors That May Affect Future Results This quarterly report on Form 10-Q contains forward-looking statements regarding our business, financial condition, results of operations and prospects. The Securities and Exchange Commission (the “SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This quarterly report on Form 10-Q and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results. Factors that could cause our actual results of operations and financial condition to differ materially are set forth in the “Risk Factors” section of the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2025, as the same may be updated from time to time. We caution that these factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. The following discussion should be read in conjunction with our unaudited consolidated financial statements and the related notes that appear elsewhere in this quarterly report on Form 10-Q. Overview Zoned Properties, Inc. (“Zoned Properties” or the “Company”) was incorporated in the State of Nevada on August 25, 2003. In October 2013, the Company changed its name to Zoned Properties, Inc. and in April 2014, the Company shifted its business model to address commercial real estate in the regulated cannabis industry. Zoned Properties is a technology-driven property investment company focused on acquiring value-add real estate within the regulated cannabis industry in the United States. 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. 45 The core of our business operations involves identifying, securing, acquiring, and leasing commercial properties that intend to operate within highly regulated industries, including the legalized cannabis industry. Within highly regulated industries, local municipalities typically develop strict regulations, including zoning and permitting requirements related to commercial real estate, that dictate the specific locations and parameters under which regulated properties can operate, including cannabis properties. We often refer to these requirements as cannabis approvals. These regulations often include complex permitting processes that require longer development timelines than traditional commercial real estate and can include non-standard codes governing each location; for example, restricting a regulated property or facility from operating within a certain distance of any parks, schools, churches, or residential districts, or restricting a regulated property from operating outside a defined set of hours of operation. When an organization can collaborate with local representatives, a proactive set of rules and regulations can be established and followed to meet the needs of both the regulated operators and the local community. Due to the complex nature of the Company’s core business operations and target investment properties, the Company may secure dozens of potential property candidates for acquisition and prospective tenant candidates for leasing at any given time, all in the normal course of business. The process of securing a potential property candidate may include completing contractual agreements such as an option agreement or a purchase agreement, which may include various contingencies and conditions precedent related to the ultimate consummation of the acquisition, investment, or transaction. Simultaneously with the securing of potential property candidates, the Company will advertise and market a property to prospective tenant candidates for a long-term, absolute-net lease agreement, which may include various contingencies and conditions precedent related to the ultimate commencement of the lease and tenancy. In order to deliver a successful investment property transaction, the Company must collectively receive all cannabis approvals from state and local governing authorities that may be required at a given property, secure a qualified tenant to lease and operate the property, and complete the acquisition of the property. The Company’s current investment properties are located in Arizona and Illinois with 100% occupancy and a weighted average lease term over 10 years. Each of the Company’s leased properties is occupied by a commercial cannabis tenant. Zoned Properties maintains a portfolio of properties that it owns, develops and leases. As of May 12, 2026, the Company leases land and/or building space at the six properties in its portfolio to licensed and regulated cannabis tenants in areas with established cannabis regulations and zoning procedures. Three of the leased properties are zoned and permitted as regulated cannabis retail dispensaries, two of the leased properties are zoned and permitted as regulated cannabis cultivation and processing facilities, and one property is leased for the future development of a licensed medical and adult use marijuana retail dispensary. Sale of Woodward Property 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). We 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. 46 As of May 12, 2026, a summary of rental properties owned by us consisted of the following: Location Tempe, AZ Chino Valley, AZ Green Valley, AZ Kingman, AZ Chicago, IL Surprise, AZ Description Industrial /Office Greenhouse/ Nursery Retail (special use) Retail (special use) Land Retail (special use) Current Use Cannabis Facility Cannabis Facility Cannabis Dispensary Cannabis Dispensary Development Cannabis Dispensary Property Investment Portfolio Total Date Acquired March 2014 August 2015 Oct 2014 May 2014 January 2024 July 2024 Lease Start Date May 2018 May 2018 May 2018 May 2018 January 2024 July 2024 Lease End Date April 2040 April 2040 April 2040 April 2040 January 2039 June 2040 No. of Tenants 1 1 1 1 1 1 Land Area: (Acres) 3.65 47.60 1.33 0.32 0.37 1.11 54.58 Land Area: (Sq. Feet) 158,772 2,072,149 57,769 13,939 16,000 48,541 2,367,170 Undeveloped Land Area (Sq. Feet) - 1,782,563 - 6,878 16,000 - 1,805,441 Developed Land Area (Sq. Feet) 158,772 289,586 57,769 7,061 - 48,541 561,729 Total Rentable Building Sq. Ft. 60,000 97,312 1,440 1,497 - 4,200 164,449 Vacant Rentable (Sq. Ft.) - - - - - - - - Sq. Ft. rented as of May 12, 2026 60,000 97,312 1,440 1,497 - 4,200 164,449 Annual Base Rent (*,**) April 2026 to Dec 2026 $ 458,633 $ 495,000 $ 31,500 $ 36,000 $ 175,045 $ 229,500 $ 1,425,678 2027 611,849 865,200 42,000 48,000 240,395 313,635 2,121,079 2028 612,276 891,156 42,000 48,000 247,607 323,044 2,164,083 2029 612,715 917,891 42,000 48,000 255,036 332,732 2,208,374 2030 613,159 945,427 42,000 48,000 262,687 342,714 2,253,987 Thereafter 5,519,960 9,892,838 378,000 432,000 2,405,976 3,813,043 22,441,817 Total $ 8,428,592 $ 14,007,512 $ 577,500 $ 660,000 $ 3,586,746 $ 5,354,668 $ 32,615,018 * Annual base rent represents amount of cash payments due from tenants. ** For Tempe, AZ, table includes rental income generated from the lease of parking lot space used by a third party as an antenna location. 47 Annualized $ per Rented Sq. Ft. (Base Rent) Year Tempe, AZ Chino Valley, AZ Green Valley, AZ Kingman, AZ Chicago, IL Surprise, AZ 2026 $ 9.8 $ 10.8 $ 29.2 $ 32.1 $ - $ 72.5 2027 $ 9.8 $ 10.8 $ 29.2 $ 32.1 $ - $ 74.7 2028 $ 9.8 $ 10.8 $ 29.2 $ 32.1 $ - $ 76.9 2029 $ 9.8 $ 10.8 $ 29.2 $ 32.1 $ - $ 79.2 2030 $ 9.8 $ 10.8 $ 29.2 $ 32.1 $ - $ 81.6 Real Estate Purchase and Sale Agreement regarding CGK Properties 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. Commerce 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. 48 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. Management Buyout Asset Purchase Agreement 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 and collectively with Zoned Arizona and ZP Dysart, 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. The Company formed a Special Transactions Committee of the Board of Directors (the “Committee”), consisting of its three independent directors, that has reviewed, negotiated and overseen the MBO APA and the other transaction documents and the transactions contemplated by the MBO APA (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 of Directors 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 Company’s business (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”). 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, LLC, 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 Price”). The parties to the MBO APA acknowledged and agreed that between January 15, 2026 and the date of the closing of the MBO, 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. 49 The parties to the MBO APA also acknowledged and agreed that between January 15, 2026 and the closing of the MBO, 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. Road 1 East, Chino Valley, AZ; 2095 Northern Avenue, Kingman, AZ; and 1732 W. 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. If the sale of the CKG Properties is consummated prior to the closing, then the CKG Properties will not be included in the “Assets,” but the CKG Note will be included in the “Assets” for purposes of the MBO APA, and the Purchase Price will be increased by the principal amount of the CKG Note. Pursuant to the terms of the MBO APA, the MBO APA may be terminated at any time prior to the closing by: (a) The mutual agreement of the parties, each in their sole discretion; (b) The Company or by Buyer if there shall be in effect a final non-appealable order, judgment, injunction or decree entered by or with a governmental entity restraining, enjoining or otherwise prohibiting the consummation of the MBO; (c) The Buyer if there shall have been a breach in any material respect of any representation, warranty, covenant or agreement on the part of any Seller Party, which breach has not been cured within 10 days after receipt of notice of such breach by the Company; (d) The Company if there shall have been a breach in any material respect of any representation, warranty, covenant or agreement on the part of Buyer, which breach has not been cured within 10 days after receipt of notice of such breach by Buyer; (e) Any party in the event that the closing has not occurred by September 30, 2026, which date may be extended by 90 days as set forth in the MBO APA; (f) Written notice by Buyer to the Company, if there shall have been a “Seller Material Adverse Effect” (as defined in the MBO APA) following the Effective Date which is uncured for at least 20 business days after written notice by the Buyer; (g) The Buyer, during the 180-day period following the Effective Date, if the Buyer determines that its due diligence review is not satisfactory for any reason in its sole discretion; or 50 (h) The Company, in the event it receives a proposal on terms more favorable to the Company’s stockholders than those set forth in the MBO APA, subject to the terms of the MBO APA, prior to the date that is the later of (i) the date on which the Company receives stockholder approval as set forth in the MBO APA, and July 14, 2026 (the date on which the Buyer’s due diligence period expires). 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 the closing; (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 Price; and (v) other customary closing conditions. The MBO APA contains customary representations, warranties and covenants. If the MBO APA is approved by the Company’s stockholders, as required, the Company expects that the closing of the MBO will take place by the end of 2026. Assuming that the MBO APA is approved by the Company’s stockholders, as required, and the Company can successfully sell and liquidate 100% of the Company’s assets and operations, the Company expects (i) to pay off any remaining debt, settle any remaining accounts and agreements, liquidate the Company’s outstanding preferred shares, and then distribute the net available balance of cash to stockholders as a return of capital through a special dividend, and (ii) to subsequently complete a reverse merger or other transaction involving the public company. Going concern consideration Our 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 our unaudited consolidated financial statements, the Company had a net loss of $54,660 and had cash provided by operations of $1,630,287 for 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. 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). 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. Commerce 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. 51 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, of which $100 constitutes independent contract consideration payable to the Seller. 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 certain of its subsidiaries entered into the MBO APA with the Buyer to sell substantially all of its properties to the Buyer, a company owned by management. The closing of the MBO is subject to certain closing conditions, including, but not limited to, approval by the Company’s stockholders and the Buyer obtaining financing. 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). The Company sold the Woodward Property for $600,000. If the 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. The 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. 52 Results of Operations The following comparative analysis on results of operations was based primarily on the comparative financial statements, footnotes and related information for the periods identified below and should be read in conjunction with the unaudited consolidated financial statements and the notes to those statements for the three months ended March 31, 2026 and 2025, which are included elsewhere in this quarterly report on Form 10-Q. The results discussed below are for the three months ended March 31, 2026 and 2025. Comparison of Results of Operations for the Three Months Ended March 31, 2026 and 2025 Revenues For the three months ended March 31, 2026 and 2025, revenues by reportable business segments were as follows: Three Months Ended March 31, 2026 2025 Revenues: Property investment portfolio $ 755,730 $ 760,892 Real estate services 416,706 213,600 Total revenues $ 1,172,436 $ 974,552 For the three months ended March 31, 2026, total revenues amounted to $1,172,436, including property investment portfolio revenues of $755,730, which consists of rental revenues, as compared to total revenues of $974,552, including property investment portfolio revenues $760,892, which consists of rental revenue, for the three months ended March 31, 2025, representing an overall increase of $197,884, or 20.3%. This increase was attributable to an increase in real estate services revenues of $203,046, or 95.0%, attributable to an increase in commissions and assignment fees earned on real estate listings, offset by a decrease in advisory fees. This increase was offset by a decrease in properties investment portfolio revenue of $5,162, or 0.7%. All of the Company’s real estate properties are leased under absolute-net or triple-net leases with our tenants. Due to the sale of our Woodward properties located in Michigan on May 1, 2026, we expect property investment portfolio revenues to decrease. 53 Operating expenses For the three months ended March 31, 2026, operating expenses amounted to $1,045.868, as compared to $545,781 for the three months ended March 31, 2025, representing an increase of $500,087, or 91.6%. For the three months ended March 31, 2026 and 2025, operating expenses consisted of the following: Three Months Ended March 31, 2026 2025 Compensation and benefits $ 170,179 $ 285,668 Professional fees 142,510 77,761 Brokerage fees 370,617 - General and administrative expenses 50,297 55,840 Depreciation and amortization 73,835 88,508 Real estate taxes 38,780 38,004 Property portfolio business development costs 199,650 - Total $ 1,045,868 $ 545,781 ● For the three months ended March 31, 2026, compensation and benefit expense decreased by $115,489, or 40.4%, as compared to the three months ended March 31, 2025. The decrease was primarily attributable to an overall decrease in compensation and related benefits of $20,405 and a decrease in stock-based compensation of $95,084 related to reversal of previously recorded stock-based stock option expense due to the cancellation of unvested stock options. ● For the three months ended March 31, 2026, professional fees increased by $64,749, or 83.3%, as compared to the three months ended March 31, 2025. This increase was primarily attributable to an increase in legal fees of $52,508, an increase in consulting fees of $10,642, and an increase in other professional fees of $1,599. ● For the three months ended March 31, 2026 and 2025, we recorded brokerage fees amounting to $370,617 and $0, respectively, representing an increase of $370,617, or 100.0%. Brokerage fees occur as the result of various percentage-based commission splits we pay to our licensed brokerage team members who participate in various real estate listing transactions. ● General and administrative expenses consist of expenses such as rent expense, debt expense, insurance expense, travel expenses, office expenses, telephone and internet expenses, advertising and marketing expense, and other general operating expenses. For the three months ended March 31, 2026, general and administrative expenses decreased by $5,543, or 9.9%, as compared to the three months ended March 31, 2025, primarily due to the recording of bad debt recovery of $38,016, offset by an increase in insurance expense of $38,829 related to an increase in directors and officers liability insurance premiums incurred. 54 ● For the three months ended March 31, 2026, depreciation expense decreased by $14,673, or 16.6%, as compared to the three months ended March 31, 2025 due to a decrease in depreciable rental properties. ● For the three months ended March 31, 2026, real estate taxes increased by a nominal amount of $776, or 2.0%, as compared to the three months ended March 31, 2025. ● For the three months ended March 31, 2026, property portfolio business development costs increased by $199,650, or 100.0%, as compared to the three months ended March 31, 2025. Property portfolio business development costs are costs related to forfeited escrow deposits and the write off of development costs related to projects which we decided not to pursue due to the rejection of permits and licensing by local governments. Income from operations As a result of the factors described above, for the three months ended March 31, 2026, income from operations amounted to $126,568, as compared to income from operations of $428,771 for the three months ended March 31, 2025, representing a decrease of $302,203, or 70.5%. Other (expenses) income, net Other (expense) income, net primarily includes interest expense incurred on debt with third parties and also includes other income (expense). For the three months ended March 31, 2026 and 2025, total other expenses, net amounted to $181,228 and $282,913, respectively, representing a decrease of $101,685, or 35.9%. This decrease was attributable to an increase in interest expense of $16,060, primarily related to an increase in notes payable, and a positive change in gain or loss in fair value from an interest rate swap of $115,245 and an increase in other income of $2,500. Net (loss) income As a result of the foregoing, for the three months ended March 31, 2026, net loss amounted to $(54,660), or $(0.00) per common share (basic and diluted), and for the three months ended March 31, 2025, net income amounted to $145,858, or $0.01 per common share (basic) and $0.01 per common share (diluted). Liquidity and Capital Resources Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had cash of $2,500,758 and $837,767 as of March 31, 2026 and December 31, 2025, respectively. 55 Our primary uses of cash have been for the acquisition of new property investments, compensation and benefits, fees paid to third parties for professional services, real estate taxes, general and administrative expenses, and the development of rental properties and other lines of business. All funds received have been expended in the furtherance of growing the business. We receive funds from the collection of rental income, and real estate services, which primarily includes advisory fees and brokerage fees. The following trends are reasonably likely to result in changes in our liquidity over the near term to long term: ● An increase in working capital requirements to finance our current business, ● Addition of administrative and sales personnel as the business grows, ● The cost of being a public company, ● An increase in investments in joint ventures and other projects, and ● An increase in investments in rental properties. We may need to raise additional funds, particularly if we are unable to continue to generate positive cash flows from our operations. We estimate that based on current plans and assumptions, our available cash will be sufficient to satisfy our cash requirements under our present operating expectations for the next 12 months from the date of this quarterly report on Form 10-Q. Other than revenue received from the lease of our rental properties and real estate services, and from a bank note and other notes payable, we presently have no other significant alternative source of working capital. We have used these funds to fund our operating expenses, pay our obligations, acquire and develop rental properties, invest in joint ventures, and to grow our company. We may need to raise significant additional capital or debt financing to acquire new properties, to develop existing properties, to assure we have sufficient working capital for our ongoing operations and debt obligations, and to invest in new joint venture and other projects. See also “Overview—Management Buyout Asset Purchase Agreement.” Cash Flow For the Three Months Ended March 31, 2026 and 2025 Net cash flow provided by operating activities was $1,630,287 for the three months ended March 31, 2026, as compared to net cash flow provided by operating activities of $330,632 for the three months ended March 31, 2025, representing an increase of $1,299,655, or 393.1%. ● Net cash flow provided by operating activities for the three months ended March 31, 2026 primarily reflected a net loss of $54,660, adjusted for the add-back of non-cash items consisting of depreciation of $73,835, amortization of debt discount of $6,418, stock-based compensation expense of $56,605, net recovery of stock-based stock option expense of $93,105, loss of forfeited escrow deposits and development costs of $199,650, bad debt recovery of $33,016, and income from the changes in fair value from an interest rate swap of $26,855, offset by changes in operating assets and liabilities primarily consisting of a decrease in accounts receivable of $390,794, an increase in deferred rent of $218,058 attributable to the modification of lease agreements, a decrease in lease incentive receivable of $6,880, an increase in prepaid expenses and other current assets of $90,376, an increase in accounts payable of $13,447, an increase in accrued expenses of $415,363, an increase in contract liabilities of $950,197, and an increase in security deposits payable of $33,333. ● Net cash flow provided by operating activities for the three months ended March 31, 2025 primarily reflected net income of $145,858, adjusted for the add-back of non-cash items consisting of depreciation of $88,508, amortization of debt discount of $6,418, accretion of stock-based stock option expense of $56,606, and loss from the changes in fair value from an interest rate swap of $88,390, offset by changes in operating assets and liabilities primarily consisting of a decrease in accounts receivable of $121,966, an increase in deferred rent of $123,146 attributable to rent abatement on our new tenant leases at our Chicago, Illinois and Surprise, AZ properties, a decrease in lease incentive receivable of $6,880, a decrease in prepaid expenses of $40,313, a decrease in accounts payable of $10,983, a decrease in accrued expenses of $86,037, and a decrease in contract liabilities of $4,306. 56 For the three months ended March 31, 2026, net cash flow used in investing activities amounted to $42,498, as compared to net cash used in investing activities of $648,841 for the three months ended March 31, 2025, representing a positive increase of $691,339. For the three months ended March 31, 2026, net cash provided by investing activities was attributable to a decrease in escrow deposits of $32,900 and a decrease in capitalized project costs of $9,598. During the three months ended March 31, 2025, net cash used in investing activities was attributable to the purchase of rental properties and improvements of $450,000, an increase in investments in cost method investee of $84,110, an increase in escrow deposits of $8,681 and an increase in capitalized project costs of $106,050. During the three months ended March 31, 2026 and 2025, net cash (used in) provided by financing activities amounted to $(9,794) and $292,147, respectively. For the three months ended March 31, 2026, net cash used in financing activities consisted of cash used for the repayment of notes payable of $9,794. During the three months ended March 31, 2025, net cash provided by financing activities consisted of net proceeds from a note payable of $300,000, offset by cash used for the repayment of notes payable of $7,853. Contractual Obligations and Off-Balance Sheet Arrangements Contractual Obligations We have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information within the context of our consolidated financial position, results of operations, and cash flows. The following tables summarize our contractual obligations as of March 31, 2026, and the effect these obligations are expected to have on our liquidity and cash flows in future periods. Payments Due by Period (dollars in thousands), Contractual obligations: Total Less than 1 year 1-3 years 3-5 years 5 + years Convertible notes $ 2,000 $ - $ - $ 2,000 $ - Interest on convertible notes 420 120 240 60 - Notes payable 7,683 459 1,405 1,737 4,082 Total $ 10,103 $ 579 $ 1,645 $ 3,797 $ 4,082 Off-balance Sheet Arrangements Other than discussed herein, we have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us. Our off-balance sheet arrangement includes the notional amount of our interest rate swaps which we use to hedge a portion of our exposure to interest rate fluctuations. Currently, our interest rate swap fixes the variable rate interest on our bank swap note payable. We intend to fund our interest rate swap payments utilizing cash flows from operations. As of March 31, 2026, the notional amount of our interest rate swaps was $4,358,966. In interest rate swaps, the notional amount is the specified value upon which interest rate payments will be exchanged. The notional amount in interest rate swaps is used to come up with the amount of interest due. 57 Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including the critical ones related to an interest rate swap, the allowance for accounts receivable, impairment of rental properties, and the valuation of equity transactions. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting estimates affect our more significant judgments and estimates used in the preparation of the financial statements. 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 rates. The Company accounts for its interest rate swap agreement in accordance with the guidance related to derivatives and hedging activities. The Company is exposed to market risk from changes in interest rates. The Company agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed upon notional principal amount. Interest payments receivable and payable under the terms of the interest rate swap agreement are accrued over the period to which the payment relates and the net difference is treated as an adjustment of interest expense related to the underlying liability. Because the variable interest rates used to calculate payments under the terms of the swap agreement are calculated using different benchmarks than those included in the Company’s variable rate debt agreement, the swap agreement is not considered an effective cash flow hedge. 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 the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures , the Company believes values provided by its counterparty represent the fair value of its swap agreement. The Company believes that the quality of the counterparty to its swap agreement mitigates the counterparty credit risk. The estimated fair value of the interest rate swap agreement is reflected as a derivative liability on the accompanying balance sheets with changes in the fair value reflected in income (loss) from derivative - interest rate swap on the accompanying 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 as follows: Description Notional Amount on March 31, 2026 Interest Rate Maturity Fair Value of Liability on March 31, 2026 Fair Value of Liability on December 31, 2025 December 7, 2022 interest rate swap $ 4,358,966 7.65 % December 10, 2032 $ 50,473 $ 77,328 58 Accounts receivable We recognize 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 receivable 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. 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. Tenant improvements 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, we assess 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 allocate 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. Our 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. If our estimates of the projected future cash flows, anticipated holding periods, or market conditions change, our evaluation of impairment losses may be different and such differences could be material to our 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. Impairment occurs when the carrying amount of our rental properties exceeds its recoverable amount. For our rental property, we considered the recoverable amount to be the respective properties fair value less costs to sell (FVLCS) plus its value in use (VIU). The recoverable amount is the higher of the asset’s fair value less costs to sell (FVLCS) and its value in use (VIU). FVLCS and VIU as defined as follows: ■ Fair Value Less Costs to Sell (FVLCS): ■ Fair value is typically determined by market prices or appraisals or tax value. 59 ■ Subtract any costs that would be incurred to sell the asset (like commissions). ■ Value in Use (VIU): ■ This is the present value of the future cash flows the asset is expected to generate. ■ Cash flows should be based on leases in place. We have capitalized land, which is not subject to depreciation. 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 FASB’s Accounting Standards Update (ASU) 2016-09 Improvements to Employee Share-Based Payment Accounting . Assumptions used in the estimation of stock-based grants may include the volatility of our common stock, expected term of exercise, our discount rate and our dividend rate. Recent Accounting Pronouncements Management does not believe that recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying unaudited consolidated financial statements. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not applicable to smaller reporting companies.