ZDPY 10-K
Zoned Properties, Inc. (ZDPY)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Documents Incorporated by Reference
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ZONED PROPERTIES, INC.
Form 10-K
December 31, 2025
TABLE OF CONTENTS
i
PART I
ITEM 1. BUSINESS
The following discussion should be read in conjunction with our consolidated financial statements and the related notes to the consolidated financial statements that appear elsewhere in this annual report on Form 10-K.
As used in this annual report on Form 10-K and unless otherwise indicated, the terms the terms “Zoned Properties”, “Company,” “we,” “us,” or “our” refer to Zoned Properties, Inc. and its wholly owned subsidiaries as detailed below.
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-added real estate within the regulated cannabis industry in the United States. Headquartered in Scottsdale, Arizona, Zoned Properties is redefining the approach to commercial real estate investment through its standardized investment model backed by its proprietary property technology. Zoned Properties has developed a national ecosystem of real estate services to support its real estate development model, including a commercial real estate brokerage and a real estate advisory practice.
The Company operates in two organized segments; (1) the operations, leasing and management of its commercial properties, herein known as the “Property Investment Portfolio” segment, and (2) the advisory, brokerage and technology services related to commercial properties 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”). Zoned Properties corporate headquarters are located at 8360 E. Raintree Dr., Suite 230, Scottsdale, Arizona. For more information, call 877-360-8839 or visit www.ZonedProperties.com.
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. |
1
The Company also maintains a 50% equity interest in two joint ventures which are inactive as of December 31, 2025.
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”). 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 (“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, as discussed below.
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.
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.
See “—Our Business—Management Buyout Asset Purchase Agreement” for additional information regarding the MBO APA and the MBO.
Additionally, 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, Inc. (Chino Valley and Green Valley) and CJK, Inc. (Kingman) (each, a “Tenant”), each with an effective date of January 1, 2026. 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 was 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).The contingencies were resolved on March 31, 2026. The A&R 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 originally stated that the Purchase Option may be exercised during an option period ending March 30, 2026; however, the parties have subsequently agreed that optionee will have until April 10, 2026 to exercise the Purchase Option, and if exercised, requires a closing no later than June 30, 2026. The Purchase Option contemplates (a) a $400,000 non-refundable earnest money deposit to be applied toward the down payment, (b) a $4.0 million cash down payment at closing, and (c) $5.0 million of seller financing. The seller financing would bear interest at 7% per annum over a 36-month term with payments calculated on a 15-year amortization schedule and a balloon payment at maturity, and would be secured by loan documentation (including a loan agreement, promissory note and deeds of trust) against all three properties. The properties would be conveyed on an as-is/where-is basis without representations or warranties from the applicable landlord/seller. 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 was 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 was 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.
Our Business
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.
2
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, Illinois, and Michigan 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 April 1, 2026, the Company leases land and/or building space at the seven properties in its portfolio to licensed and regulated cannabis tenants in areas with established cannabis regulations and zoning procedures. Four of the leased properties are zoned and permitted as regulated cannabis retail dispensaries, two of the leased properties are zoned and permitted as regulated cannabis cultivation and processing facilities, and one property is land leased currently under development to for a regulated cannabis retail dispensary.
There are significant challenges that take place when zoning, permitting, and developing real estate with facilities that intend to operate within a regulated industry, including the legalized cannabis industry. Each state and local jurisdiction may adopt specific zoning and permitting regulations that may be unique compared to alternative jurisdictions. The Company has gained valuable knowledge and developed best practices in this area by successfully completing projects for third party clients across the country in multiple states, as well as our own projects located in Arizona, Illinois, and Michigan, each highly regulated markets for the legalized cannabis industry.
The process for obtaining zoning authorizations and permitting for a regulated cannabis facility can take months or sometimes years to complete. The process primarily involves working directly with the local government representatives following state-level legalization. Notwithstanding proper zoning and permitted use, we may work with local zoning authorities in order to revise zoning codes and regulations. The Company has been involved with local representatives on behalf of our own properties held in our portfolio and on behalf of third-party clients across the nation. For example, the Company worked directly with local representatives in Tempe, Arizona to update the local zoning code that regulates licensed cannabis facilities. The successfully adoption of these code amendments can directly impact the continued development of any licensed cannabis facilities that operate within municipal limits.
In the event a property is not currently zoned correctly or does not currently allow permitted use as a regulated cannabis facility, we may work with local authorities to rezone the property or seek changes to existing zoning codes or permitted uses. Our efforts may not be successful. In the event that local zoning, permitting or any other required cannabis approvals are not received, a prospective investment property opportunity may fail, in which case the Company would move to terminate any agreements in place with prospective property sellers and prospective tenants at the property. While the Company intends to include contingencies and conditions precedent in its agreements with property sellers and prospective tenants, it may be possible that these risk mitigants fail, causing the Company to incur fess and/or lose escrow deposits.
3
The Company has established a network of experts in various fields of real estate: title and escrow, property insurance, property lending, property technology, commercial banking, commercial brokerage, property design and construction, property management and operations, and property security in order to provide tenants and clients with a full-spectrum of real estate solutions to best meet their needs. We require our prospective tenants and clients to go through due diligence in order to meet the Company’s standards.
As of April 1, 2026, we are the sole member of 13 limited liability companies: Chino Valley, Green Valley, Kingman, Zoned Arizona, Zoned Advisory, ZP Data 1, ZP Data 2, Arizona Brokerage, Florida Brokerage, ZPRE Holdings, ZP Woodward, ZP Dysart, and ZP Ashland. Seven of these entities—Zoned Arizona, Green Valley, Kingman, Chino Valley, ZPRE Holdings, ZP Woodward, and ZP Dysart have acquired land and/or real property and own our properties.
As it relates to the regulated cannabis industry, we are strictly a non-plant touching organization.
The Company currently believes that the challenges of operating as a public company in the regulated cannabis space have created a capital environment that will not allow for the continued expansion of the Company and/or the continued operations of the Company’s core business. As such, and as previously disclosed, the Company believes it is in the best interest of its shareholders to liquidate 100% of the Company’s assets and operations, and subsequently return net cash available back to its shareholders. See “—Management Buyout Asset Purchase Agreement” below.
Management Buyout Asset Purchase Agreement
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; and 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 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.
4
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
(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).
5
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.
Recent Corporate History and Transactions
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, Inc. (“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 land located in Surprise, AZ is leased by The Pharm, LLC (“Sunday Goods”), doing business as Sunday Goods.
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. 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.
On May 29, 2020, Chino Valley and Broken Arrow entered into a Second Amendment to the 2018 Chino Valley Lease, as amended (the “2020 Chino Valley Amendment”), effective May 31, 2020 (“Effective Date”). Pursuant to the terms of the 2020 Chino Valley Amendment, among other things, the base rent was adjusted to $32,800 per month, and the base rent was abated from June 1, 2020 to July 31, 2020. Any increase in the rentable area of the leased premises will result in an increase in all amounts calculated based on the same, including, without limitation, base rent. Pursuant to the terms of the 2020 Chino Valley Amendment, the parties agreed that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially and adversely affected as mutually and reasonably determined by Chino Valley and Broken Arrow, Broken Arrow may terminate the 2018 Chino Valley Lease, as amended, by delivering written notice to Chino Valley, together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned after termination for the balance of the term. In addition, the parties agreed that from the period from the Effective Date to June 30, 2022 (the “Improvement Period”), Broken Arrow or its affiliate, CJK, will invest a combined total of at least $8,000,000 of improvements (“Investment by Tenants”) in and to the property that is the subject of the Chino Valley Lease and the property that is the subject of the Tempe Lease (discussed below, and collectively referred to as the “Facilities”). The Company’s Significant Tenants completed the Investment by Tenants to the Facilities totaling in excess of $8,000,000 and have satisfied the contractual obligations related to the same.
6
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 Note 14 – Subsequent Events on our consolidated financial statements) 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, Chino Valley entered into an Amended and Restated Absolute Net Lease Agreements with Broken Arrow Inc. with an effective date of January 1, 2026 (See Note 14 - Subsequent Events on our consolidated financial statements).
As discussed above, the A&R 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 originally stated that the Purchase Option may be exercised during an option period ending March 30, 2026; however, the parties have subsequently agreed that optionee will have until April 10, 2026 to exercise the Purchase Option, and if exercised, requires a closing no later than June 30, 2026. The Purchase Option contemplates (a) a $400,000 non-refundable earnest money deposit to be applied toward the down payment, (b) a $4.0 million cash down payment at closing, and (c) $5.0 million of seller financing.
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. 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.
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 Note 14 -Subsequent Events on our consolidated financial statements).
7
Tempe, AZ
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. Pursuant to the terms of the Tempe Amendment, the parties agreed that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially and adversely affected as mutually and reasonably determined by Zoned Arizona and CJK, CJK may terminate the Tempe Lease by delivering written notice to Zoned Arizona, together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned after termination for the balance of the term.
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 same.
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 Tempe Lease. The Guaranty of Payment and Performance was entered into on November 30, 2022. If VSM fails to deliver to Zoned Arizona invoices or other documentation acceptable to Zoned Arizona showing the Capital Commitment has been satisfied in a timely manner, VSM will be in default under the Tempe Lease. No other terms of the Tempe Lease were modified. Therefore, the Company’s accounting for the lease remained unchanged subsequent to the Tempe Second Amendment and Assignment.
Pursuant to ASC 842-10-25, the lease modification was not accounted for as a separate contract and the Company accounted for the modification as if it were a termination of the existing lease and the creation of a new lease that commenced on the effective date of the modification. Accordingly, the Company recorded the $300,000 as a contract liability and will amortize the $300,000 Assignment Fees into rental revenue on a straight-line basis over the remaining term of the lease through April 2040. On December 31, 2025 and 2024, contract liability related to this lease modification amounted to $246,890 and $264,115, respectively, which has been included in contract liabilities on the accompanying consolidated balance sheets.
As of June 1, 2025, VSM has 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.
8
Kingman, AZ
On May 1, 2018, Kingman and CJK entered into a Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Kingman and CJK (the “Kingman Lease”), with a term of 22 years, expiring April 30, 2040. The Kingman Lease provides for payment by CJK of a fixed monthly base rent of $4,000, as well as real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed against Kingman. In addition, pursuant to the terms of the Kingman Lease, CJK agreed to maintain insurance in full force during the term of the Kingman Lease and any other period of occupancy of the premises by CJK.
On May 29, 2020, Kingman and CJK entered into the First Amendment (the “Kingman Amendment”) to the Kingman Lease, effective May 31, 2020. The Kingman Amendment provides that any increase in the rentable area of the leases premises will result in an increase in all amounts calculated based on the same, including, without limitation, base rent. The parties also agreed that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially and adversely affected as mutually and reasonably determined by Kingman and CJK, CJK may terminate the Kingman Lease by delivering written notice to Kingman, together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned after termination for the balance of the term.
On November 30, 2022, Kingman and CJK entered into the Second Amendment (the “Kingman Second Amendment”) to the Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Kingman and CJK. Pursuant to the terms of the Kingman Second Amendment, CJK agreed to grant Kingman a right to terminate the Kingman Lease upon 15 days’ prior written notice in Kingman’s sole discretion, without any obligation to do so, provided that Kingman may not exercise this right to terminate if CJK is operating its business as a going concern at the premises which is the subject of the Kingman Lease.
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. Pursuant to the Sublease, the Sublease shall be effective on August 2, 2023 and end on the one year anniversary, or (ii) the last day of the Term of the Master Lease (whether due to expiration or termination thereof by the Company, whichever is earlier (the “Sublease Expiration Date”), such period being referred to herein as the “Sublease Term”, unless terminated earlier pursuant to the terms of this Sublease or otherwise by consent of the Company, CJK and Subtenant. The subtenant had two options to extend the Sublease Term by one-year periods each (each a “Sublease Term Extension” and collectively the “Sublease Term Extensions”), which were exercisable by Subtenant no later than 90 days prior to the expiration of the Sublease Term, as may be extended. In August 2024, the Sublease was not renewed and the Sublease expired. Upon expiration of the Sublease, the Security Deposit of $14,960 was refunded to the subtenant. 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 Note 14 - Subsequent Events on our consolidated financial statements).
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, with two 5-year options to extend the term, exercisable by the Woodward Tenant by written notice to ZP Woodward given not later than 180 days prior to the expiration of the then current term on the same terms and conditions as provided in this Lease. The Woodward Lease contains customary obligations of the Woodward Tenant consistent with an absolute triple net lease agreement, including (i) the payment of real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes), (ii) payment of insurance premiums and operating costs of ZP Woodward related to the operation of the Woodward Property, and (iii) maintenance and repair obligations to maintain the Woodward Property in first-class retail condition. The Woodward Lease includes a Guaranty of Payment and Performance by Ammar Kattoula and Thomas Nafso. The Woodward Lease contains an abatement of the full or partial rent that would otherwise have been due for the months from December 2022 to March 2023. Subsequent to the abatement period, the Woodward Lease provided for payment by the tenant of monthly base rent beginning at $40,319 per month and increasing by 3% per year over the term of the lease, as well as real property taxes, personal property taxes, privilege, sales, rental, excise, use and/or other taxes (excluding income or estate taxes) levied upon or assessed against the Company. In addition, pursuant to the terms of the Woodward Lease, the Woodward Tenant agreed to maintain insurance in full force during the term of the Woodward Lease and any other period of occupancy of the premises by the tenant.
9
On May 14, 2023, ZP Woodward entered into an Assignment and Assumption of Lease (“Assignment”) whereby the Woodward Lease was assigned from Rapid Fish 2 LLC (“Old Tenant”) to Rapid Fish LLC (“New Tenant”). Old Tenant and New Tenant share common ownership. The assignment of the Woodward Lease is conditioned upon issuance by the City of Pleasant Ridge, Michigan of a final cannabis business license to New Tenant and ZP Woodward’s receipt of a fully executed Reaffirmation of Guaranty from the guarantors of the Woodward Lease. The Assignment contains other terms as are customary for a document of this type.
On May 1, 2024, ZP Woodward and Rapid Fish, LLC (the “Parties”), with individual Guarantors, Thomas Nafso and Ammar Kattoula (the “Guarantors”), entered into a First Amendment to the Absolute Net Lease Agreement (the “First Amendment”) pertaining to premises located at 23600-23634 Woodward Ave, Pleasant Ridge MI 48069. The Parties also agreed to a fully executed Reaffirmation of Guaranty from the Guarantors.
According to the terms of the First Amendment, the following changes have been agreed to by the Parties:
Amended Rental Payment Schedule
The First Amendment provides that as long as the Company’s Conditions, as outlined in this First Amendment, are satisfied including a Renovation Completion Commitment, the Rental Payment Schedule of the Lease will be amended to the schedule set forth in the First Amendment.
Capital Commitment
The First Amendment provides for the inclusion of the Capital Commitment as follows: Tenant shall cause a total of at least $850,000 to be spent toward capital improvements to the Premises (the “Commitment Improvements” and/or the “Capital Commitment”). Any such Commitment Improvements shall be made in accordance with the Lease as amended. Commitment Improvements to be counted toward satisfying the Capital Commitment shall include capital improvements to the Premises and any part thereof, as well as other improvements approved in advance in writing by the Company, and shall exclude soft costs, permit, design, architectural and engineering fees, and legal fees. Tenant acknowledges that the Capital Commitment is material to the Company and the Company would not have agreed to enter into this First Amendment but for Tenant’s obligations in this paragraph. If the Capital Commitment is not completed in the prescribed time period, as evidenced by invoices or similar documentation reasonably acceptable to the Company, Tenant’s failure shall constitute an Event of Default under the Lease.
Renovation Completion Commitment
The First Amendment provides for the inclusion of the Renovation Completion Commitment as follows: Tenant shall cause its Capital Commitment at the Premises (the “Renovation Completion Commitment”) to be completed within three (3) months after the First Amendment Effective Date (the “Renovation Completion Commitment Date”). In order to satisfy the Renovation Completion Commitment, Tenant must satisfy the following prior to the Renovation Completion Commitment Date (i) deliver to the Company the appropriate deliverables evidencing renovation completion (the “Renovation Completion Deliverables”) (as defined below) (ii) open for business to the public for its intended Use of the Premises (the “Store Opening”), (iii) and complete its first bona fide sale to the public. The Renovation Completion Deliverables include the following: (x) Tenant has furnished to the Company a copy of a commercially reasonably detailed final cost breakdown for Tenant’s Work and the Company has inspected the Premises to confirm that Tenant’s Work has been completed in a good and workmanlike manner according to the Tenant’s Approved Plans; (y) Tenant has furnished to the Company commercially reasonable final affidavits and final lien releases from Tenant’s general contractor, if any, all subcontractors and all material suppliers for all labor and materials performed or supplied as part of Tenant’s Work (whether or not the Allowance is applicable thereto); (z) a copy of the certificate of occupancy from the governmental authority having jurisdiction has been delivered to the Company. Tenant acknowledges that the Renovation Completion Commitment is material to the Company and the Company would not have agreed to enter into this First Amendment but for Tenant’s obligations in this paragraph. If the Renovation Completion Commitment is not completed in the prescribed time period, Tenant’s failure shall constitute an Event of Default under the Lease. the Company shall grant Tenant up to two (2) additional 30-day extension upon request, so long as at the time of the extension the site is conducting inspections toward certificate of occupancy.
10
North Lot
The First Amendment also provides that if within 18 months of the date of this First Amendment, Tenant is able to complete all of the following related to 23634 Woodward Ave, Pleasant Ridge MI 48069 with an APN of 25-27-181-003 (the “North Lot”): (i) obtain authorization from all required jurisdictions (including the City of Pleasant Ridge) that the use of the North Lot parking spaces is no longer required and releases the Company from all obligations related to the North Lot under the Declaration of Restrictions and Parking Easement (the “Parking Agreement”), and (ii) confirm that the Tenant is able to continue to use the lot for purposes of ingress and egress, and (iii) Tenant is able to arrange a deal with the seller of the North Lot, which is currently under a Land Contract with outstanding installment payments, that (x) provides the Company with indemnity from Tenant that completely releases the Company of any operational obligations or liabilities related to the North Lot, (y) provides the Company with indemnity from Tenant that completely release the Company of any financial obligations or liabilities related to the North Lot, and (z) does not cause any encumbrance or legal liability to the remaining properties at the Premises; then within 30 days of the Company’s receipt of written confirmation from all appropriate parties that all requirements noted above have been satisfied, at the Company sole discretion, the Company agrees that the parties shall enter into a Lease Amendment acknowledging the same and modifying Tenant’s lease base rental rate to be reduced by $3,846 for the Lease.
Reaffirmation of Guarantee
In consideration of the First Amendment, the Guarantors executed and delivered a Reaffirmation of Guaranty (the “Reaffirmation of Guaranty”) effective as of May 3, 2024. Related to the Guaranty and the Original Guarantors, the Company agreed, that so long as there are no uncured Events of Default and Tenant remains in good standing under the Lease, then the Original Guarantors shall be released of their guarantees following the original lease term of 14.5 years. 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.
During the third quarter of 2025, New Tenant faced operational challenges that impaired its ability to meet contractual rent obligations. Beginning 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 due and has received all rent payments due through December 31, 2025. Subsequent to year-end 2025, 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. As of the date of this filing, the Company remains in discussions with New Tenant about curing these events of default and regarding future operations at the Woodward Property. In an effort to avoid litigation related to the defaults under the lease, the Company is currently in negotiations to sell 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. If the Company sells 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. While the Company believes the sale is likely to occur, there is a possibility that the sale will fail to occur, in which case there is a strong likelihood that the New Tenant will be unable to continue paying rent, causing an ongoing default under the lease. 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, we recorded an impairment loss of $2,100,000.
11
Chicago, IL
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. 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 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.
Surprise, AZ
On January 2, 2024, ZPRE Holdings entered into a contingent Licensed Cannabis Facility Absolute Net Ground Lease Agreement (the “Sunday Goods Lease”), with a commencement date contingent upon the satisfaction of various contingencies to the Sunday Goods Lease, by and between ZPRE Holdings, as landlord, and Sunday Goods, as tenant. Pursuant to the terms of the Sunday Goods Lease, ZPRE Holdings agreed to lease the “Surprise Property” to Sunday Goods for use as a licensed medical and adult use marijuana retail dispensary in accordance with the laws of Arizona. The Sunday Goods Lease has a term of 15 years, with four five-year renewal terms. Pursuant to the Sunday Goods Lease, ZPRE Holdings has agreed to provide a tenant improvement allowance for up to $1,000,000 to Sunday Goods to be reimbursed in tranches following completion of tenant’s work. 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 were 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 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, 2025; 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.
12
Property Investment Portfolio
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.
During the years ended December 31, 2025 and 2024, all of the Company’s real estate properties are leased under triple-net and absolute-net leases to tenants that are controlled by Significant Tenants. For the years ended December 31, 2025 and 2024, revenues associated with Significant Tenant leases described above are summarized as follows:
| For the Year Ended December 31, 2025 | % of Total Revenues | For the Year Ended December 31, 2024 | % of Total Revenues | |||||||||||||
| Broken Arrow (Chino Valley) | $ | 1,161,867 | 28.1 | % | $ | 1,120,431 | 29.5 | % | ||||||||
| VSM (Tempe) | 657,979 | 15.9 | % | 656,736 | 17.3 | % | ||||||||||
| Woodward lease (Michigan) | 573,203 | 13.8 | % | 589,478 | 15.6 | % | ||||||||||
| Total | $ | 2,393,049 | 57.8 | % | $ | 2,366,645 | 62.4 | % | ||||||||
As of December 31, 2025 and 2024, the Company had an asset concentration related to the Significant Tenants. As of December 31, 2025 and 2024, the Significant Tenants collectively leased approximately 47.2% 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 19.4% of the Company’s total assets as of December 31, 2025.
Future minimum lease payments to be received, on all leased properties, for each of the five succeeding calendar years and thereafter as of December 31, 2025, consists of the following:
| Future annual base rent: | Amount | |||
| 2026 | $ | 2,725,617 | ||
| 2027 | 2,746,432 | |||
| 2028 | 2,776,883 | |||
| 2029 | 2,808,247 | |||
| 2030 | 2,840,553 | |||
| Thereafter | 28,497,521 | |||
| Total | $ | 42,395,253 | ||
Investment in equity method unconsolidated joint venture
On December 31, 2025 and 2024, the Company held an investment with carrying values of $0 and $4,923, respectively, in Zoneomics Green, LLC (“Zoneomics Green”), a Delaware limited liability company formed on May 1, 2021 and owned 50% by the Company. The Company accounts for this investment under the equity method of accounting as the Company exercises significant influence but does not exercise financial and operating control over this entity. Investments are reviewed for changes in circumstance or the occurrence of events that suggest an other than temporary event where the Company’s investment may not be recoverable. 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, 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 this time. 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. During the years ended December 31, 2025 and 2024, the Company recorded a loss from equity method unconsolidated joint ventures of $3,352 and $0, respectively,
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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 income. During the year ended December 31, 2025, through its wholly-owned subsidiary ZPRE Holdings, the Company invested $84,110 in ZP Ohio B, LLC, for a 5% ownership interest in ZP Ohio B LLC, which is being accounted for under the cost method and reflected on the accompanying consolidated balance sheet under “investment in cost-method investees.” ZP Ohio B LLC plans on developing several projects. This investment is subject to the Company’s impairment review policy.
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.
Tenants and Clients
We target tenants for our Property Investment Portfolio activity and clients for our Real Estate Services activity who require assistance with the identification and development of regulated cannabis properties. Our ideal prospective tenants and/or clients will have a commitment to operating their business and real estate projects with an emphasis on sophistication, safety, sustainability, and stewardship to the local community in which they operate.
We complete significant due diligence on prospective tenants and prospective clients. Credit-worthiness, character, and capital are all important variables that contribute to a target tenant and/or client for the Company.
Marketing
Currently, the Company uses general industry marketing to communicate its Property Investment Portfolio and Real Estate Services to industry operators and prospective clients. These include an industry newsletter that the Company distributes, as well as electronic and physical mailers directed to cannabis industry operators and property owners. Industry reputation, word-of-mouth, and networking are the primary tools the Company has used to complete the marketing of our services. We have previously and may in the future engaged with marketing, design, and public relations firms to assist with our industry branding and to help maintain an updated website, shareholder presentation, and profile outlining the Company’s services. These tools are created for transparency of operations and activities. Our executive management believes the reputation of having integrity is an essential tool for marketing and business development.
Competition
The commercial real estate market is highly competitive. We believe finding properties that are zoned an/or approved for the specific use of allowing regulated cannabis operations may be limited as more competitors enter the market. More competitors continue to enter the marketplace. We face significant competition from a diverse mix of market participants, including but not limited to, other public companies with similar business models, independent investors, hedge funds and other real estate investors, hard money lenders, as well as would be clients, regulated cannabis operators themselves, all of whom, may compete against us in our efforts to secure and acquire real estate zoned and/or approved for cannabis operations. In some instances, we will be competing to acquire real estate with persons who have no interest in the regulated cannabis business but have identified alternative value in a piece of real estate that we may be interested in acquiring.
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Government Regulation
Real Estate & General Business Regulations
We are subject to applicable provisions of federal and state securities laws and to regulations specifically governing the real estate industry, including those governing fair housing and federally backed mortgage programs. Our operations will also be subject to regulations normally incident to business operations, such as occupational safety and health acts, workers’ compensation statutes, unemployment insurance legislation and income tax and social security related regulations. Although we will use our best efforts to comply with applicable regulations, we can provide no assurance of our ability to do so, nor can we fully predict the effect of these regulations on our proposed activities.
In addition, zoning commercial properties for specific purposes, such as regulated cannabis dispensaries or cultivation facilities, is subject to specific regulations to the zoning requirements for the city, county and state related to any regulated cannabis facility. We expect regulations to get tighter as time goes on. Many jurisdictions have moved toward “Green Zoning” hubs, though others have increased setbacks from residential areas and schools following the 2025-2026 legislative sessions.
Federal and State Regulation of Cannabis
Controlled Substances Act and “Cole Memorandum”
The U.S. federal government regulates drugs through the Controlled Substances Act (21 U.S.C. § 811) (the “CSA”), which places controlled substances, including cannabis, in a schedule. While historically classified as a Schedule I drug, cannabis is currently in the final stages of being reclassified to Schedule III following a December 2025 executive order. Under U.S. federal law, a Schedule I drug has a high potential for abuse and no accepted medical use. Schedule III drugs are classified as having a moderate to low potential for physical and psychological dependence and have currently accepted medical uses. The United States Food and Drug Administration (the “FDA”) has approved Epidiolex, which contains a purified form of cannabidiol (“CBD”), a non-psychoactive cannabinoid found in the cannabis plant, for the treatment of seizures associated with two specific epilepsy conditions. The FDA has not approved cannabis or cannabis derived compounds as a safe and effective drug for any other indication, though it has issued updated guidance on clinical trials for Schedule III substances.
In the United States, cannabis is largely regulated at the state level. State laws regulating cannabis are in direct conflict with the federal CSA, although the move toward Schedule III is expected to reduce this conflict for medical-use participants. Although most U.S. states authorize medical or adult-use cannabis production and distribution by licensed or registered entities, under U.S. federal law, the possession, use, cultivation, and transfer of cannabis and any related drug paraphernalia is illegal, and any such acts are criminal acts under federal law. As of March 2026, over 40 states have legalized medical or adult-use cannabis.
Due to the conflicting views between state governments and the federal government regarding cannabis, cannabis businesses are subject to inconsistent laws and regulations. In response and until 2018, the federal government provided guidance to federal law enforcement agencies and banking institutions through a series of United States Department of Justice (“DOJ”) memoranda. The most significant of these memoranda was drafted by former Deputy Attorney General James Cole in 2013 (the “Cole Memo”).
The Cole Memo offered guidance to federal enforcement agencies as to how to prioritize civil enforcement, criminal investigations and prosecutions regarding marijuana in all states. The Cole Memo put forth eight prosecution priorities:
| ● | Preventing the distribution of marijuana to minors; |
| ● | Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs and cartels; |
| ● | Preventing the diversion of marijuana from states where it is legal under state law in some form to other states; |
| ● | Preventing the state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity; |
| ● | Preventing violence and the use of firearms in the cultivation and distribution of marijuana; |
| ● | Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use; |
| ● | Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and |
| ● | Preventing marijuana possession or use on federal property. |
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On January 4, 2018, former United States Attorney General Jefferson Sessions rescinded the Cole Memo by issuing a new memorandum to all United States Attorneys (the “Sessions Memo”). Rather than establish national enforcement priorities particular to marijuana-related crimes in jurisdictions where certain marijuana activity was legal under state law, the Sessions Memo instructs that “[i]n deciding which marijuana activities to prosecute ... with the DOJ’s finite resources, prosecutors should follow the well-established principles that govern all federal prosecutions.” Namely, these include the seriousness of the offense, history of criminal activity, deterrent effect of prosecution, the interests of victims, and other principles.
The former Attorneys Generals who succeeded former Attorney General Sessions following his resignation have not provided a clear policy directive for the United States as it pertains to state-legal marijuana-related activities. However, as discussed herein, during his term, President Joseph R. Biden, announced multiple mass pardons and clemency of persons who had been convicted of simple marijuana possession under federal law and initiated a regulatory process under the CSA to move cannabis from Schedule I to Schedule III. However, the future of the rescheduling process is uncertain since President Donald J. Trump took office on January 20, 2025.
The DOJ, under Attorney General Pamela Bondi, has not formally reinstated the Cole Memo. However, the administration’s focus has shifted toward “states’ rights” and the acceleration of the Schedule III reclassification. While federal enforcement remains a risk, the primary focus of federal authorities in 2026 has been on the illicit market and the “total THC” restrictions on hemp products.
2018 Farm Bill & 2026 Appropriations Act
Following the passage of the Agriculture Improvement Act of 2018 (popularly known as the “2018 Farm Bill”), cannabis with a tetrahydrocannabinol (“THC”) content below 0.3% dry weight volume is classified as hemp and has been removed from the CSA. The Continuing Appropriations and Extensions Act of 2026, signed in November 2025, has fundamentally narrowed the definition of hemp. Effective November 12, 2026, finished hemp products must contain no more than 0.4 mg of “total THC” per container (including Delta-8 and THCA).
This change effectively bans the majority of intoxicating hemp-derived products (such as Delta-8 gummies and THCA flower) from the “hemp” market, reclassifying them as “marijuana” under the CSA unless they are brought within a state-licensed cannabis regulatory framework. The FDA continues to maintain that CBD is not a legal dietary supplement, and the industry is currently navigating a one-year “runway” before the new strict THC caps take full effect in late 2026.
Financial Institutions and Banking
Due to the CSA categorization of marijuana as a Schedule I drug, federal law also makes it illegal for financial institutions that depend on the Federal Reserve’s money transfer system to take any proceeds from marijuana sales as deposits.
While there has been no change in U.S. federal banking laws to accommodate businesses in the large and increasing number of U.S. states that have legalized medical and/or adult-use marijuana, the Department of the Treasury Financial Crimes Enforcement Network (“FinCEN”), in 2014, issued guidance to prosecutors of money laundering and other financial crimes (the “FinCEN Guidance”). The FinCEN Guidance advised prosecutors not to focus their enforcement efforts on banks and other financial institutions that serve marijuana-related businesses so long as that business is legal in their state and none of the federal enforcement priorities referenced in the Cole Memo are being violated (such as keeping marijuana away from children and out of the hands of organized crime). The FinCEN Guidance also clarifies how financial institutions can provide services to marijuana-related businesses consistent with their Bank Secrecy Act obligations, including thorough customer due diligence, but makes it clear that they are doing so at their own risk. The customer due diligence steps include:
| 1. | Verifying with the appropriate state authorities whether the business is duly licensed and registered; |
| 2. | Reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its marijuana-related business; |
| 3. | Requesting from state licensing and enforcement authorities available information about the business and related parties; |
| 4. | Developing an understanding of the normal and expected activity for the business, including the types of products to be sold and the type of customers to be served (e.g., medical versus adult-use customers); |
| 5. | Ongoing monitoring of publicly available sources for adverse information about the business and related parties; |
| 6. | Ongoing monitoring for suspicious activity, including for any of the red flags described in this guidance; and |
| 7. | Refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk. |
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With respect to information regarding state licensure obtained in connection with such customer due diligence, a financial institution may reasonably rely on the accuracy of information provided by state licensing authorities, where states make such information available.
Because most banks and other financial institutions are unwilling to provide any banking or financial services to marijuana businesses, these businesses can be forced into becoming “cash-only” businesses. While the FinCEN Guidance decreased some risk for banks and financial institutions considering serving the industry, in practice it has not substantially increased banks’ willingness to provide services to marijuana businesses. This is because, as described above, the current law does not guarantee banks immunity from prosecution, and it also requires banks and other financial institutions to undertake time-consuming and costly due diligence on each marijuana business they accept as a customer.
Those state-chartered banks and credit unions that do have customers in the marijuana industry charge marijuana businesses high fees to pass on the added cost of ensuring compliance with the FinCEN Guidance. Unlike the Cole Memo, however, the FinCEN Guidance from 2014 has not been rescinded.
As a result, those businesses involved in the marijuana industry continue to encounter difficulty establishing banking relationships, which may increase over time. Our inability to maintain our current bank accounts would make it difficult for us to operate our business, increase our operating costs, and pose additional operational, logistical and security challenges and could result in our inability to implement our business plan.
The move toward Schedule III is expected to ease some banking restrictions, but legislation remains stalled in the Senate as of March 2026. FinCEN Guidance from 2014 remains the primary operational framework for banks, though many institutions are now transitioning their compliance models to accommodate the Schedule III “Medical/Prescription” model. Consequently, while banking access is improving, businesses still face higher fees and rigorous due diligence requirements.
The inability of our current and potential tenants to open accounts and continue using the services of banks will limit their ability to enter into triple-net lease arrangements with us or may result in their default under our lease agreements, either of which could materially harm our business and the trading price of our securities.
Controlled Substances Act Rescheduling
There have been recent developments regarding the potential for cannabis to be removed from the most restrictive schedule under the CSA, but with the recent re-election of President Trump, the regulatory process for this so-called “rescheduling” is uncertain. On December 18, 2025, President Trump signed an executive order instructing the DOJ and DEA to accelerate the reclassification of cannabis to Schedule III. While the DEA Administrative Law Judge (ALJ) hearings were briefly delayed in early 2025, the process has since resumed with an anticipated final rule effective date in mid-to-late 2026.
Internal Revenue Code, Section 280E
An additional challenge to marijuana-related businesses is that the provisions of the Internal Revenue Code, Section 280E (“Section 280E”), are being applied by the IRS to businesses operating in the medical and adult-use marijuana industry. As a result of Section 280E, the effective tax rate for many of the Company’s tenants and clients can be highly variable and depends on how large its ratio of non-deductible expenses is to its total revenues. Therefore, businesses in the legal cannabis industry may be less profitable than they would otherwise be. If and when the reclassification of cannabis to Schedule III is finalized, Section 280E would no longer apply to state-legal cannabis businesses. This would allow companies to deduct ordinary business expenses (rent, payroll, marketing) for the first time. However, until the final rule is published and effective, Section 280E remains in force for the current tax cycle.
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Federal Protections
Certain temporary federal legislative enactments that protect the medical marijuana industries have also been in effect for several years. For instance, certain marijuana businesses receive a measure of protection from federal prosecution by operation of temporary appropriations measures that have been enacted into law as amendments (or “riders”) to federal spending bills passed by Congress and signed by several presidents. For instance, in the Appropriations Act of 2015, Congress included a budget “rider” that prohibits the DOJ from expending any funds to enforce any law that interferes with a state’s implementation of its own medical marijuana laws. The rider is known as the “Rohrabacher-Farr Amendment” after its original lead sponsors.
Notably, the Rohrabacher-Farr Amendment has applied only to medical marijuana programs and has not provided the same protections to enforcement against adult-use activities. While the Rohrabacher-Farr Amendment has been included in successive appropriations legislation or resolutions since 2015, its inclusion or non-inclusion is subject to political change. The Rohrabacher-Farr Amendment has been renewed through the current 2026 appropriations cycle. It continues to prohibit the DOJ from using federal funds to interfere with state-legal medical marijuana programs, though it notably does not yet extend to adult-use recreational programs.
In sum, there is no guarantee that state laws legalizing and regulating the sale and use of marijuana will not be repealed or overturned, or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions. Unless and until the United States Congress amends the CSA with respect to marijuana (and as to the timing or scope of any such potential amendments there can be no assurance), there is a risk that federal authorities may enforce current U.S. federal law. Currently, in the absence of uniform federal guidance, as had been established by the Cole Memo, enforcement priorities are determined by respective United States Attorneys, and notwithstanding public statements to the contrary, federal law enforcement could enforce the CSA – and its criminal prohibition on commercial cannabis activity.
For these reasons, the Company’s investments in the U.S. cannabis market may subject the Company to heightened scrutiny by regulators, stock exchanges, clearing agencies and other U.S. authorities. See section entitled “Risk Factors” herein.
Although the Company’s activities are believed to be compliant with applicable state and local laws, strict compliance with state and local laws with respect to cannabis may neither absolve the Company of liability under U.S. federal law, nor may it provide a defense to any federal proceeding which may be brought against the Company.
We will continue to monitor compliance on an ongoing basis in accordance with our compliance program and standard operating procedures. For the reasons described above and the risks further described in “Risk Factors,” there are significant risks associated with our business.
Local, state and federal marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter our business plan. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on its operations. In addition, it is possible that regulations may be enacted in the future that will be directly applicable to our proposed business. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.
Employees
As of December 31, 2025, we had six full-time and part-time employees, including our chief executive officer, chief financial officer and chief operating officer. We have established a national network of external partners, contractors, and consultants to which we outsource various operational tasks in an effort to minimize administrative overhead and maximize efficiency.
The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health, safety and wellness of our employees. We provide our employees and their families with access to a variety of innovative, flexible and convenient health and wellness programs, including benefits that provide protection and security so they can have peace of mind concerning events that may require time away from work or that impact their financial well-being; that support their physical and mental health by providing tools and resources to help them improve or maintain their health status and encourage engagement in healthy behaviors; and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families.
We also provide robust compensation and benefits programs to help meet the needs of our employees. We believe that we maintain a strong working relationship with our employees and have not experienced any labor disputes.
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ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. You should not invest in our stock unless you are able to bear the complete loss of your investment. You should carefully consider the risks described below, as well as other information provided to you in this annual report on Form 10-K, including information in “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” before making an investment decision. The risks and uncertainties described below are not the only ones facing Zoned Properties. Additional risks and uncertainties not presently known to us or that we currently believe are immaterial may also impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected, the value of our common stock could decline, and you may lose all or part of your investment.
Risks Related to Our Business and Our Industry
There is substantial doubt as to our ability to continue as a going concern.
Our 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 elsewhere and in our consolidated financial statements, we had a net loss of $2,854,415 and had cash provided by operations of $781,476 during the year ended December 31, 2025. Additionally, as of December 31, 2025, we had cash of $837,767 and stockholders’ equity of $3,067,626. Furthermore, on December 31, 2025 and effective January 1, 2026, we entered into Amended and Restated Absolute Net Lease Agreements with certain tenants (See elsewhere in this Form10-K and Note 14 – Subsequent Events). 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). The Purchase Option originally stated that the Purchase Option may be exercised during an option period ending March 30, 2026; however, the parties have subsequently agreed that optionee will have until April 10, 2026 to exercise the Purchase Option, and if exercised, requires a closing no later than June 30, 2026. Additionally, on January 15, 2026, the Company and its subsidiaries entered into an Asset Purchase Agreement to sell substantially all of its properties to a company owned by management (See elsewhere in this Form 10-K and Note 14 – Subsequent Events on our consolidated financial statements and MBO risk factor below). The closing of the Asset Purchase Agreement is contingent upon the Buyer obtaining financing. If the Company sells some or all of its properties, it will have minimal or no operations. These factors raise substantial doubt about our ability to continue as a going concern for a period of twelve months from the issuance date of this Annual Report. There can be no assurance that we will sell our properties. If we sell our properties, our cash flow provided by operating activities would decrease substantially and we may need to raise capital through debt and/or equity financings to fund any ongoing operations, we may need to curtail our operations, or we may decide to liquidate the Company. Our 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.
Because we have limited operating history in the real estate industry, we may not succeed.
We have limited operating history or experience in procuring, building out or leasing real estate for agricultural purposes, specifically legalized marijuana grow facilities, or with respect to any other activity in the cannabis industry. Moreover, we are subject to all risks inherent in developing a new business enterprise. Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with establishing a new business and the competitive and regulatory environment in which we operate. For example, the regulated cannabis industry is new and may not succeed, particularly should the federal government change course and decide to prosecute those dealing in medical marijuana. If that happens there may not be an adequate market for our properties or other activities we propose to engage in.
You should further consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies that, like us, are in their early stages. For example, unanticipated expenses, delays and or complications with build outs, zoning issues, legal disputes with neighbors, local governments, communities and or tenants. We may not successfully address these risks and uncertainties or successfully implement our operating strategies. If we fail to do so, it could materially harm our business to the point of having to cease operations and could impair the value of our common stock to the point investors may lose their entire investment.
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Although we generate positive cash flows from operations, we may need to raise additional capital to fund our expansion.
We may need to raise additional funds through public or private debt or equity financings, as well as obtain credit from vendors to be able to fully execute our business plan. If we cannot raise additional capital, we may be otherwise unable to achieve our goals or continue our property development. While we believe that we will be able to raise the capital we need to continue our operations, there can be no assurances that we will be successful in these efforts or will be able to resolve any liquidity issues or eliminate our operating losses. In addition, any additional capital raised through the sale of equity may dilute your ownership interest. We may not be able to raise additional funds on favorable terms, or at all. If we are unable to obtain additional funds or credit from our vendors, we may be unable to execute our business plan and you could lose your investment.
Because we may be unable to identify and/or successfully acquire properties which are suitable for our business, our financial condition may be negatively affected.
Our business plan involves the identification and the successful acquisition of properties, which are zoned for legalized cannabis businesses, including cultivation and retail. The properties we acquire will be leased to regulated cannabis operators. Local governments must approve and adopt zoning ordinances for medical cannabis facilities and retail dispensaries. A lack of properly zoned real estate may reduce our prospects and limit our opportunity for growth and or increase the cost at which suitable properties are available to us. Conversely a surplus of real estate zoned for medical cannabis establishments may reduce demand and prices we are able to charge for properties we may have previously acquired.
In addition, some jurisdictions, such as Arizona, impose limits on the number of medical cannabis dispensaries that will be permitted to operate within designated geographic areas. Such limitations inherently place constraints on the number of properties we acquire for lease to operators in the cannabis industry.
If we fail to diversify our property investment portfolio or advisory and real estate services offered, downturns relating to certain industries or business sectors or the financial stability of our significant tenants may have a significant adverse impact on our assets and our ability to pay our operating expenses or pay dividends than if we had a diversified property portfolio and service offerings.
While we intend to diversify our portfolio of properties, we are not required to observe specific diversification criteria. Therefore, our total assets are concentrated into a limited number of tenants who were considered significant tenants. To the extent that our 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 our Significant Tenants may result in defaults on all of our leases within a short time period, which may reduce our net income and the value of our common stock and accordingly, limit our ability to pay or operating expenses or pay dividends to our stockholders. As of December 31, 2025 and 2024, we had an asset concentration related to our Significant Tenant leases at our Tempe, Chino Valley and Green Valley, Arizona properties and our property located in Pleasant Ridge, Michigan. As of December 31, 2025 and 2024, the Significant Tenants collectively leased approximately 47.2% 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 19.4% of the Company’s total assets as of December 31, 2025. If our tenants are prohibited from operating or cannot pay their rent, we may not have enough working capital to support our operations and we would have to seek out new tenants at rental rates per square foot that may be less than our current rate per square foot.
Any adverse economic or real estate developments in the medical cannabis industry could adversely affect our operating results and our ability to collect rent from out tenants, pay our operating expenses or pay dividends to our stockholders.
Our properties may be subject to impairment charges.
We routinely evaluate our real estate assets for impairment indicators. The judgment regarding the existence of impairment indicators is based on factors such as market conditions, tenant performance and lease structure. For example, the early termination of, or default under, a lease by a tenant may lead to an impairment charge. The financial failure of, or other default by, a single tenant under its lease may result in a significant impairment loss. If we determine that an impairment has occurred, we would be required to make a downward adjustment to the net carrying value of the property, which could have a material adverse effect on our results of operations in the period in which the impairment charge is recorded. We recorded an impairment charge related to our Woodward Property in the year ended December 31, 2025, and may record future impairments based on actual results and changes in circumstances. Negative developments in the real estate market may cause management to reevaluate assumptions used in its impairment analysis. Changes in management’s assumptions based on actual results may have a material impact on our financial statements. See also “—We may be unable to sell the Woodward Property for its carrying value, or at all” below, Note 2—Summary of Significant Accounting Policies—Rental Properties, and Note 14—Subsequent Events to our consolidated financial statements in this Annual Report on Form 10-K for additional information.
We may be unable to sell the Woodward Property for its carrying value, or at all.
During the third quarter of 2025, New Tenant, our current tenant in the Woodward Property, faced operational challenges that impaired its ability to meet contractual rent obligations. Beginning 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 due and has received all rent payments due through December 31, 2025. Subsequent to year-end 2025, 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. As of the date of this filing, the Company remains in discussions with New Tenant about curing these events of default and regarding future operations at the Woodward Property.
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In an effort to avoid litigation related to the defaults under the lease, the Company is currently in negotiations to sell 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. If the Company sells 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.
While the Company believes the sale is likely to occur, there is a possibility that the sale will fail to occur, in which case there is a strong likelihood that the New Tenant will be unable to continue paying rent, causing an ongoing default under the lease. 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, we recorded an impairment loss of $2,100,000.
Because our business is dependent upon continued market acceptance by our tenants’ consumers, any negative trends will adversely affect our business operations.
Out tenants are substantially dependent on continued market acceptance and proliferation of consumers of regulated cannabis. We believe that as cannabis becomes more accepted, the stigma associated with cannabis use will diminish and as a result, consumer demand will continue to grow. And while we believe that the market and opportunity in the cannabis space continues to grow, we cannot predict the future growth rate and size of the market. Any negative outlook on the cannabis industry will adversely affect our tenants’ business operations and their ability to pay rent to us.
In addition, it is believed by many that large well-funded businesses may have a strong economic opposition to the cannabis industry. We believe that the pharmaceutical industry clearly does not want to cede control of any product that could generate significant revenue. For example, medical cannabis will likely adversely impact the existing market for the current “marijuana pill” sold by the mainstream pharmaceutical industry, should cannabis displace other drugs or encroach upon the pharmaceutical industry’s products. The pharmaceutical industry is well funded with a strong and experienced lobby that eclipses the funding of the medical cannabis movement. Any inroads the pharmaceutical could make in halting the impending cannabis industry could have a detrimental impact on our proposed business.
Because we buy and lease property, we will be subject to general real estate risks.
We will be subject to risks generally incident to the ownership of real estate, including: (a) changes in general economic or local conditions; (b) changes in supply of, or demand for, similar or competing properties in the area; (c) bankruptcies, financial difficulties or defaults by tenants or other parties; (d) increases in operating costs, such as taxes and insurance; (e) the inability to achieve full stabilized occupancy at rental rates adequate to produce targeted returns; (f) periods of high interest rates and tight money supply; (g) excess supply of rental properties in the market area; (h) liability for uninsured losses resulting from natural disasters or other perils; (i) liability for environmental hazards; and (j) changes in tax, real estate, environmental, zoning or other laws or regulations. For these and other reasons, no assurance can be given that we will be profitable.
Our growth depends on external sources of capital, which may not be available on favorable terms or at all. In addition, banks and other financial institutions may be reluctant to enter into lending transactions with us, including secured lending, because our properties are used in the cannabis industry. If this source of funding is unavailable to us, our growth may be limited and our business may be materially adversely affected.
Our ability to acquire, operate and sell properties, engage in the business activities that we have planned and achieve positive financial performance depends, in large measure, on our ability to obtain financing in amounts and on terms that are favorable. The capital markets in the United States in general, and in the cannabis sector in particular, have undergone a turbulent period in which lending was severely restricted. Although there appear to be signs that financial institutions are resuming lending, the market has not yet returned to its pre-2008 state. The cannabis sector has experienced significant volatility and such volatility is expected to continue in 2026. Obtaining favorable financing in the current environment remains challenging.
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In order to grow our business, we may seek financing through newly issued equity or debt. We may not be in a position to take advantage of attractive investment opportunities for growth if we are unable, due to global or regional economic uncertainty, changes in the state or federal regulatory environment relating to the medical-use cannabis industry, changes in market conditions for the regulated cannabis industry, our own operating or financial performance or otherwise, to access capital markets on a timely basis and on favorable terms, or at all.
Our access to capital will depend upon a number of factors over which we have little or no control, including general market conditions and the market’s perception of our current and potential future earnings. If general economic instability or downturn, or volatility within the cannabis sector, leads to an inability to borrow at attractive rates or at all, our ability to obtain capital could be negatively impacted. In addition, banks and other financial institutions may be reluctant to enter into lending transactions with us, particularly secured lending, because our properties are used in the cultivation, production or dispensing of medical-use cannabis. If this source of funding is unavailable to us, our growth may be limited and our business may be materially adversely affected.
If we are unable to obtain capital on terms and conditions that we find acceptable, we likely will have to curtail operations and reduce the number of properties we purchase in the future. In addition, our ability to refinance all or any debt we may incur in the future, on acceptable terms or at all, is subject to all of the above factors, and will also be affected by our future financial position, results of operations and cash flows, which additional factors are also subject to significant uncertainties, and therefore we may be unable to refinance any debt we may incur in the future, as it matures, on acceptable terms or at all. All of these events would have a material adverse effect on our business, financial condition, liquidity and results of operations.
In addition, securities clearing firms may refuse to accept deposits of our securities, which may negatively impact the trading of our securities and have a material adverse impact on our ability to obtain capital.
Because we will compete with others for suitable properties, competition will result in higher costs that could materially affect our financial condition.
We will experience competition for real estate investments from individuals, corporations and other entities engaged in real estate investment activities, many of whom have greater financial resources than us. Competition for investments may have the effect of increasing costs and reducing returns to our investors.
Because we are liable for hazardous substances on our properties, environmental liabilities are possible and can be costly.
Federal, state and local laws impose liability on a landowner for releases or the otherwise improper presence on the premises of hazardous substances. This liability is without regard to fault for, or knowledge of, the presence of such substances. A landowner may be held liable for hazardous materials brought onto a property before it acquired title and for hazardous materials that are not discovered until after it sells the property. Similar liability may occur under applicable state law. Sellers of properties may make only limited representations as to the absence of hazardous substances. If any hazardous materials are found within our properties in violation of law at any time, we may be liable for all cleanup costs, fines, penalties and other costs. This potential liability will continue after we sell the properties and may apply to hazardous materials present within the properties before we acquire the properties. If losses arise from hazardous substance contamination, which cannot be recovered from a responsible party, the financial viability of the properties may be adversely affected. It is possible that we will purchase properties with known or unknown environmental problems, which may require material expenditures for remediation.
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Because we may not be adequately insured, we could experience significant liability for uninsured events.
While our tenants currently carry comprehensive insurance on our properties, including fire, liability and extended coverage insurance, there are certain risks that may be uninsurable or not insurable on terms that management believes to be economical. For example, management may not obtain insurance against floods, terrorism, mold-related claims, or earthquake insurance. If such an event occurs to, or causes the damage or destruction of, a property, we could suffer financial losses.
If we are found non-compliance with the Americans with Disabilities Act, we will be subject to significant liabilities.
If any of our properties are not in compliance with the Americans with Disabilities Act of 1990, as amended (the “ADA”), we may be required to pay for any required improvements. Under the ADA, public accommodations must meet certain federal requirements related to access and use by disabled persons. The ADA requirements could require significant expenditures and could result in the imposition of fines or an award of damages to private litigants. We cannot assure that ADA violations do not or will not exist at any of our properties.
Our inability to effectively manage our growth could harm our business and materially and adversely affect our operating results and financial condition.
Our strategy envisions growing our business. Any growth in or expansion of our business is likely to continue to place a strain on our management and administrative resources, infrastructure and systems. As with other growing businesses, we expect that we will need to further refine and expand our business development capabilities, our systems and processes and our access to financing sources. We also will need to hire, train, supervise and manage new employees. These processes are time consuming and expensive, will increase management responsibilities and will divert management attention. We cannot assure you that we will be able to:
| ● | expand our business effectively or efficiently or in a timely manner; |
| ● | allocate our human resources optimally; |
| ● | meet our capital needs; |
| ● | identify and hire qualified employees or retain valued employees; or |
| ● | effectively incorporate the components of any business or product line that we may acquire in our effort to achieve growth. |
Our inability or failure to manage our growth and expansion effectively could harm our business, and materially and adversely affect our operating results and financial condition.
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Unfavorable global economic, business or political conditions could adversely affect our business, financial condition or results of operations.
Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including conditions that are outside of our control, including the impact of health and safety concerns, such as those relating to the current COVID-19 outbreak and conflicts in Ukraine and the Middle East. The most recent global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for our properties and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could strain our tenants, possibly resulting in delays in tenant payments. Any of the foregoing could harm our business and we cannot anticipate all the ways in which the current economic climate and financial market conditions could adversely impact our business.
We hold our cash and cash equivalents that we use to meet our working capital and operating expense needs in deposit accounts that could be adversely affected if the financial institution holding such funds fail.
We hold our cash and cash equivalents that we use to meet our working capital and operating expense needs in deposit accounts at one financial institution. The balance held in these accounts exceeds the Federal Deposit Insurance Corporation, or FDIC, standard deposit insurance limit of $250,000. If the financial institution in which we hold such funds fails or is subject to significant adverse conditions in the financial or credit markets, we could be subject to a risk of loss of all or a portion of such uninsured funds or be subject to a delay in accessing all or a portion of such uninsured funds. Any such loss or lack of access to these funds could adversely impact our short-term liquidity and ability to meet our operating expense obligations, including payroll obligations.
We will be required to attract and retain top quality talent to compete in the marketplace.
We believe our future growth and success will depend in part on our ability to attract and retain highly skilled managerial, sales and marketing, and finance personnel. There can be no assurance of success in attracting and retaining such personnel. Shortages in qualified personnel could limit our ability to compete in the marketplace.
We are dependent on Bryan McLaren, our Chief Executive Officer, Chief Financial Officer and Chairman of the Board, and the loss of this officer could harm our business and prevent us from implementing our business plan in a timely manner.
In view of his direct relationships with industry partners that directly contribute to our business development strategy, our success depends substantially upon the continued services of Mr. McLaren. We previously purchased a one-year key person life insurance policy on Mr. McLaren with a base coverage amount of $8,000,000 renewable annually at a 10-year fixed guaranteed premium. The policy was renewed in January 2026. The loss of Mr. McLaren’s services could have a material adverse effect on our business and operations.
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Risks Related to the Proposed MBO
The MBO transaction is a “related party transaction,” which may lead to actual or perceived conflicts of interest.
The Buyer, BPB Partners, LLC, is owned by our Chairman and CEO, our President and COO, and another member of the Company’s management. Because our executive leadership is on both sides of the transaction, there is an inherent risk of conflicts of interest regarding the negotiation of the purchase price and terms.
Although a Special Transactions Committee of independent directors overseen the process, dissatisfied stockholders may still challenge the fairness of the transaction. Legal challenges or proxy contests related to these conflicts could delay the closing, result in significant legal costs, or prevent the MBO from being consummated.
The transaction is subject to a “majority of the minority” stockholder approval, which may be difficult to obtain.
A condition to closing the MBO is the approval by a majority of the voting power held by “uninterested” stockholders (excluding shares held by the Buyer’s principals). If our non-management stockholders do not perceive the purchase price or the transaction terms as favorable, they may vote against the proposal. Failure to obtain stockholder approval would prevent the closing of the MBO, even if a simple majority of total voting power is achieved.
The final Purchase Price is subject to significant adjustments based on interim real estate transactions, which creates uncertainty.
The $7.0 million base Purchase Price is not fixed and will fluctuate based on several factors before closing:
| ● | Additional Assets: If we acquire new real estate before closing, the price increases by the cash paid but decreases by any debt issued. |
| ● | Asset Sales (Pleasant Ridge & CKG Properties): The price will shift depending on whether these properties are sold to third parties or retained and transferred to the Buyer. |
These variables make it difficult for stockholders to value the total consideration of the deal at the time of voting and may impact our final liquidity position.
The Buyer must raise sufficient capital to fund the Purchase Price, and there is no guarantee they will be able to do so.
The MBO APA includes a closing condition that the Buyer must raise the capital required, in its sole discretion, to fund the Purchase Price. The Buyer does not currently have a committed financing arrangement disclosed in the APA. If capital markets tighten or if the Buyer’s creditworthiness is questioned, the Buyer may be unable to secure funding, leading to a termination of the agreement.
The Company retains the right to terminate the MBO APA if it receives a proposal on terms more favorable to stockholders than the MBO.
While this is intended to maximize stockholder value, it creates uncertainty regarding the finality of the deal. If a superior proposal is pursued, we may owe the Buyer termination fees (if applicable) or suffer from prolonged operational distraction and potential loss of our current executive leadership.
The Buyer has a broad right to terminate the MBO APA based on due diligence.
Pursuant to the MBO APA, the Buyer has a 180-day due diligence period (expiring July 14, 2026) during which the Buyer can terminate the MBO APA for any reason in its sole discretion. If the Buyer terminates during this period, our stock price may decline significantly as the market reacts to the failed MBO.
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Failure to complete the MBO could negatively impact our business and financial results.
If the MBO is not completed for any reason, we will have incurred substantial costs without realizing the benefits. In addition, we may face a management void or decreased morale if our top executives, who own the Buyer, remain in their roles after a failed transaction. Our ability to pursue alternative strategic transactions may be limited by the time and resources already expended on the MBO.
If the MBO closes, following the closing, we will be a “shell company” with no remaining operations, which may limit the liquidity of our common stock.
If and when the MBO closes, we will have sold substantially all of our operating assets and intellectual property to the Buyer. We would then be classified as a “shell company” under SEC rules, which carries significant regulatory burdens. We will no longer have an active business to generate revenue, and our sole remaining assets will likely be the cash proceeds (net of transaction costs and liabilities) and potentially the CKG Note. Additionally, the availability of Rule 144 for resales of our securities by stockholders will be significantly limited.
Our Board may elect to liquidate and dissolve the Company, and the timing and amount of any distributions are uncertain.
If the Board determines that it is in the best interest of stockholders to liquidate the Company following the MBO, if consummated, rather than pursuing a reverse takeover (“RTO”):
| ● | We must satisfy all remaining corporate liabilities, including potential tax obligations and “tail” insurance, before any cash is distributed to stockholders. |
| ● | The liquidation process can be lengthy. Stockholders may not receive a distribution for several months or even years following the Closing. |
| ● | There is no guarantee that the net proceeds available for distribution will equal or exceed the current trading price of our common stock. |
We may seek a RTO or a new business activity, which involves significant risks and uncertainty. The Board may choose to use the remaining public shell to acquire a new, unrelated business through an RTO.
Any such transaction would likely involve the issuance of a significant number of new shares, which would substantially dilute the ownership of our existing stockholders. We may be unable to identify a suitable target, or we may acquire a business with undisclosed liabilities or a failing business model. An RTO typically results in a change of control where our current stockholders would no longer hold a majority interest in the combined entity.
Stockholders may be required to approve a change in our primary business purpose or a formal plan of liquidation.
Under Nevada law and our governing documents, the sale of all or substantially all of our assets requires a stockholder vote. If the MBO is approved but a subsequent liquidation or RTO is not, we may continue to incur the high costs of being a public company without any operational revenue to offset those costs. This could rapidly deplete the $7.0 million (as adjusted) Purchase Price, leaving little to no value for stockholders.
The loss of our executive leadership team upon closing of the proposed MBO will leave the Company without experienced management.
Since the Buyer is comprised of our CEO, COO, and other key personnel, these individuals will likely focus their efforts on the newly acquired private business (BPB Partners, LLC) after the closing. The remaining public shell will be left without its primary leadership team to manage the transition, liquidation, or search for an RTO target. Hiring a new management team to oversee a shell company would incur significant additional administrative expenses.
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Risks Related to Government Regulation
Marijuana remains illegal under federal law, and the ongoing transition to Schedule III, along with the new restrictions on hemp-derived products, creates significant regulatory uncertainty that could disrupt our business plan.
While cannabis is in the final stages of reclassification from Schedule I to Schedule III under the CSA following a December 2025 executive order, it remains a controlled substance. The possession, distribution, cultivation, and use of cannabis continue to be violations of federal law. Even if reclassified to Schedule III, cannabis will remain subject to strict FDA oversight and the CSA’s registration requirements. Any failure by our tenants to comply with these evolving federal standards, or a decision by the federal government to strictly enforce remaining prohibitions, would materially and adversely affect our ability to execute our business plan.
The shift in federal enforcement priorities and the absence of a formal Cole Memo reinstatement create unpredictability.
In January 2018, the DOJ rescinded the Cole Memo, and as of March 2026, Attorney General Pamela Bondi has not formally reinstated it. While the current administration has signaled a focus on “states’ rights” and the illicit market, federal prosecutors maintain broad discretion to prosecute state-legal cannabis activities. Although Attorney General Bondi has historically overseen a well-regulated medical market in Florida, her national enforcement priorities remain subject to change. Any shift toward a more aggressive enforcement posture against state-licensed operators would jeopardize our real estate investments and could subject the Company to criminal prosecution, fines, or asset forfeiture.
New federal “Total THC” limits on hemp products may force tenants into more restrictive regulatory regimes or out of business.
The Continuing Appropriations and Extensions Act of 2026, effective November 12, 2026, imposes a strict cap of 0.4 mg of “total THC” per container for finished hemp products. This change effectively reclassifies many previously legal hemp-derived products (such as Delta-8 and THCA flower) as “marijuana” under the CSA. Tenants currently operating in the hemp space may be forced to obtain more costly cannabis licenses or cease operations entirely. Failure of our tenants to adapt to these new “total THC” restrictions by the late-2026 deadline could result in lease defaults and a loss of rental income for the Company.
The Rohrabacher-Farr Amendment provides limited protection and must be renewed annually.
The Rohrabacher-Farr Amendment, which prohibits the DOJ from using federal funds to interfere with state-legal medical marijuana programs, has been renewed through the 2026 appropriations cycle. However, this protection is temporary and notably does not extend to adult-use (recreational) programs. If Congress fails to renew this amendment, or if our tenants transition to adult-use operations not covered by the rider, the risk of federal prosecution increases significantly.
Owners of properties located in close proximity to our properties may assert claims against us regarding the use of the property as a marijuana dispensary or marijuana cultivation and processing facility, which if successful, could materially and adversely affect our business.
Owners of properties located in close proximity to our properties may assert claims against us regarding the use of our properties as cannabis dispensaries or for cannabis cultivation and processing, including assertions that the use of the property constitutes a nuisance that diminishes the market value of such owner’s nearby property. Such property owners may also attempt to assert such a claim in federal court as a civil matter under the Racketeer Influenced and Corrupt Organizations Act. If a property owner were to assert such a claim against us, we may be required to devote significant resources and costs to defending ourselves against such a claim, and if a property owner were to be successful on such a claim, our tenants may be unable to continue to operate their business in its current form at the property, which could materially adversely impact the tenant’s business and the value of our property, our business and financial results and the trading price of our securities.
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We and our tenants may have difficulty accessing the services of banks, which may make it difficult to contract for real estate needs.
Financial transactions involving proceeds generated by marijuana-related conduct can form the basis for prosecution under the federal money laundering statutes, unlicensed money transmitter statute and the Bank Secrecy Act. Previous guidance issued by the Financial Crimes Enforcement Network, a division of the U.S. Department of the Treasury (“FinCEN”), clarifies how financial institutions can provide services to marijuana-related businesses consistent with their obligations under the Bank Secrecy Act. Prior to the DOJ’s announcement in 2018 of the rescission of the Cole Memo and related memoranda, supplemental guidance from the DOJ directed federal prosecutors to consider the federal enforcement priorities enumerated in the Cole Memo when determining whether to charge institutions or individuals with any of the financial crimes described above based upon marijuana-related activity.
Consequently, those businesses involved in the marijuana industry continue to encounter difficulty establishing banking relationships, which may increase over time. Our inability to maintain our current bank accounts would make it difficult for us to operate our business, increase our operating costs, and pose additional operational, logistical and security challenges and could result in our inability to implement our business plan.
The inability of our current and potential tenants to open accounts and continue using the services of banks will limit their ability to enter into triple-net lease arrangements with us or may result in their default under our lease agreements, either of which could materially harm our business and the trading price of our securities.
Many of our existing tenants are, and we expect that many of our future tenants will be, companies with limited histories of operations and may be unable to pay rent with funds from operations or at all, which could adversely affect the value of our common stock.
Our success is dependent on the financial stability of our tenants. We rely on our management team to perform due diligence investigations of our potential tenants, related guarantors and their properties, operations and prospects, of which there is generally little or no publicly available operating and financial information. We may not learn all of the material information we need to know regarding these businesses through our investigations, and these businesses are subject to numerous risks and uncertainties, including but not limited to regulatory risks and the rapidly evolving market dynamics of each state’s regulated cannabis program. As a result, it is possible that we could lease properties to tenants that ultimately are unable to pay rent to us, which could adversely impact our business.
In addition, in general, our tenants are more vulnerable to adverse conditions resulting from federal and state regulations affecting their businesses or industries or other changes in the marketplace for their products, and have limited access to traditional forms of financing. For example, during the COVID-19 pandemic, our tenants were generally not able to access federal assistance programs that were available to companies in other industries, due to cannabis being a Schedule I controlled substance under the CSA. The success of our tenants will also heavily depend on the growth and development of the state markets in which the tenants operate, many of which have a very limited history or are still in the stages of establishing the regulatory framework.
Some of our tenants may be subject to significant debt obligations and may rely on debt financing to make rent payments to us. Tenants that are subject to significant debt obligations may be unable to make their rent payments if there are adverse changes in their business plans or prospects, the regulatory environment in which they operate or in general economic conditions. In addition, the payment of rent and debt service may reduce the working capital available to tenants for the start-up phase of their business. Furthermore, we may be unable to monitor and evaluate tenant credit quality on an on-going basis.
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Any lease payment defaults by a tenant could adversely affect our cash flows. In the event of a default by a tenant, we may also experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-leasing our property as operators of regulated cannabis cultivation and production facilities are generally subject to extensive state licensing requirements, including limited licenses in certain states.
Continuing unfavorable market dynamics affecting the regulated cannabis industry could adversely affect our business, liquidity and financial condition, and overall results of operations.
Market dynamics in the regulated cannabis industry have negatively impacted our tenants’ ability to make their lease payments on the properties they lease from us. Regulated cannabis operators have experienced, among other things:
| ● | federal, state and local taxation and regulatory burdens; |
| ● | declines in unit pricing for regulated cannabis products; |
| ● | ineffective state and local law enforcement efforts to curtail the illicit production and sale of cannabis; and |
| ● | limited access to capital on acceptable terms or at all. |
As a result of these unfavorable market dynamics, certain regulated cannabis operators, including some of our tenants, have consolidated operations or shuttered certain operations to reduce costs, which may lead to increased default rates on the leases for our properties.
Failure by any of our tenants to comply with the terms of its lease agreement with us could require us to seek another lessee for the applicable property. We cannot assure you that we will be able to re-lease that property for the rent we currently receive, or at all, or that a lease termination would not result in our having to sell the property at a loss. In addition, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-leasing properties on which any of our tenants default on their lease obligations. The result of any of the foregoing risks could materially and adversely affect our business, liquidity, financial condition and results of operations.
Laws and regulations affecting the regulated cannabis and marijuana industry are constantly changing, which could materially adversely affect our operations, and we cannot predict the impact that future regulations may have on us.
Local, state and federal marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter our business plan. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on its operations. In addition, it is possible that regulations may be enacted in the future that will be directly applicable to our proposed business. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.
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FDA regulation of marijuana and the possible registration of facilities where medical marijuana is grown could negatively affect the marijuana industry, which would directly affect our financial condition.
Should the federal government legalize marijuana for medical use, it is possible that the FDA would seek to regulate it under the Food, Drug and Cosmetics Act of 1938. Additionally, the FDA may issue rules and regulations including cGMPs (certified good manufacturing practices) related to the growth, cultivation, harvesting and processing of medical marijuana. Clinical trials may be needed to verify efficacy and safety. It is also possible that the FDA would require that facilities where medical marijuana is grown be registered with the FDA and comply with certain federally prescribed regulations. In the event that some or all of these regulations are imposed, we do not know what the impact would be on the medical marijuana industry, what costs, requirements and possible prohibitions may be enforced. If we or our tenants are unable to comply with the regulations and or registration as prescribed by the FDA, we and or our tenants may be unable to continue to operate their and our business in its current form or at all.
Risks Related to Our Common Stock
Our common stock is quoted on the OTCQB, which may limit the liquidity and price of our common stock more than if our common stock were listed on The NASDAQ Stock Market or another national exchange.
Our securities are currently quoted on the OTCQB, an inter-dealer automated quotation system for equity securities. Quotation of our securities on the OTCQB may limit the liquidity and price of our securities more than if our securities were listed on The NASDAQ Stock Market (“NASDAQ”) or another national exchange. As an OTCQB company, we do not attract the extensive analyst coverage that accompanies companies listed on national securities exchanges. Further, institutional and other investors may have investment guidelines that restrict or prohibit investing in securities traded on the OTCQB. These factors may have an adverse impact on the trading and price of our common stock.
The trading price of our common stock may decrease due to factors beyond our control.
The stock market from time to time has experienced extreme price and volume fluctuations, which have particularly affected the market prices for smaller reporting companies and which often have been unrelated to the operating performance of the companies. These broad market fluctuations may adversely affect the market price of our common stock. If our shareholders sell substantial amounts of their common stock in the public market, the price of our common stock could fall. These sales also might make it more difficult for us to sell equity, or equity-related securities, in the future at a price we deem appropriate.
The market price of our common stock may also fluctuate significantly in response to the following factors, most of which are beyond our control:
| ● | variations in our quarterly operating results, |
| ● | changes in general economic conditions and in the real estate industry, |
| ● | changes in market valuations of similar companies, |
| ● | announcements by us or our competitors of significant new contracts, acquisitions, strategic partnerships or joint ventures, or capital commitments, |
| ● | loss of a major customer, partner or joint venture participant and |
| ● | the addition or loss of key managerial and collaborative personnel. |
Any such fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. As a result, stockholders may be unable to sell their shares, or may be forced to sell them at a loss.
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The market price for our common shares is particularly volatile given our status as a relatively unknown company with a small and thinly traded public float, limited operating history and lack of profits which could lead to wide fluctuations in our share price. You may be unable to sell your common shares at or above your purchase price, which may result in substantial losses to you.
The market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common shares are sporadically and thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or “risky” investment due to our limited operating history and lack of profits to date. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.
Our preferred stockholders together have voting control, which will limit your ability to influence the outcome of important transactions, including a change in control.
Each of our preferred stockholders beneficially owns 1,000,000 shares of our preferred stock. Each share of preferred stock entitles the holder to 50 votes per share. In contrast, each share of our common stock has one vote per share. Each of our two preferred stockholders holds approximately 45.5% and 45.8% of the voting power of our outstanding capital stock, respectively. Because of the 50-to-1 voting ratio between our preferred stock and our common stock, our preferred stockholders together control a majority of the combined voting power of our capital stock and therefore are able to control all matters submitted to our stockholders for approval. The preferred stockholders may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentrated control may have the effect of delaying, preventing or deterring a change in control of our company, could deprive our stockholders of an opportunity to receive a premium for their capital stock as part of a sale of our company and might ultimately affect the market price of our common stock.
We may face continuing challenges in complying with the Sarbanes-Oxley Act, and any failure to comply or any adverse result from management’s evaluation of our internal control over financial reporting may have an adverse effect on our stock price.
As a smaller reporting company as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Section 404 requires us to include an internal control report with our Annual Report on Form 10-K. The report must include management’s assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year. This report must also include disclosure of any material weaknesses in internal control over financial reporting that we have identified.
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Failure to comply, or any adverse results from such evaluation, could result in a loss of investor confidence in our financial reports and have an adverse effect on the trading price of our equity securities. Management concluded that our internal control over financial reporting as of December 31, 2024 were not effective. Management realizes there are deficiencies in the design or operation of our internal control over financial reporting that adversely affect our internal controls, and management considers such deficiencies to be material weaknesses. As of the end of our 2025 fiscal year, management identified the following material weaknesses:
| ● | we had not implemented comprehensive entity-level internal controls; |
| ● | we had not implemented adequate system and manual controls; and |
| ● | we did not have sufficient segregation of duties. |
Achieving continued compliance with Section 404 may require us to incur significant costs and expend significant time and management resources. We cannot assure you that we will be able to fully comply with Section 404 or that we will be able to conclude that our internal control over financial reporting is effective at fiscal year-end. As a result, investors could lose confidence in our reported financial information, which could have an adverse effect on the trading price of our securities.
We have never paid dividends on our common stock and cannot guarantee that we will pay dividends to our stockholders in the future.
We have never paid dividends on our common stock. For the foreseeable future, we intend to retain our future earnings, if any, in order to reinvest in the development and growth of our business and, therefore, do not intend to pay dividends on our common stock. However, in the future, our board of directors may declare dividends on our common stock. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and such other factors as our board of directors deems relevant. Accordingly, investors may need to sell their shares of our common stock to realize a return on their investment, and they may not be able to sell such shares at or above the price paid for them. We cannot guarantee that we will pay dividends to our stockholders in the future.
Our common stock is a “penny stock” under SEC rules. It may be more difficult to resell securities classified as “penny stock.”
Our common stock is considered a “penny stock” under applicable SEC rules (generally defined as non-exchange traded stock with a per-share price below $5.00). Unless we maintain a per-share price above $5.00, these rules impose additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as “established customers” or “accredited investors.” For example, broker-dealers must determine the appropriateness for non-qualifying persons of investments in penny stocks. Broker-dealers must also provide, prior to a transaction in a penny stock not otherwise exempt from the rules, a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, disclose the compensation of the broker-dealer and its salesperson in the transaction, furnish monthly account statements showing the market value of each penny stock held in the customer’s account, provide a special written determination that the penny stock is a suitable investment for the purchaser, and receive the purchaser’s written agreement to the transaction.
Legal remedies available to an investor in “penny stocks” may include the following:
| ● | If a “penny stock” is sold to the investor in violation of the requirements listed above, or other federal or states securities laws, the investor may be able to cancel the purchase and receive a refund of the investment. |
| ● | If a “penny stock” is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damages. |
However, investors who have signed arbitration agreements may have to pursue their claims through arbitration.
These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that is or becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.
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Many brokerage firms will discourage or refrain from recommending investments in penny stocks. Most institutional investors will not invest in penny stocks. In addition, many individual investors will not invest in penny stocks due, among other reasons, to the increased financial risk generally associated with these investments.
For these reasons, penny stocks may have a limited market and, consequently, limited liquidity. We can give no assurance that our common stock will not be classified as a “penny stock” in the future.
Rule 144 Related Risks
Pursuant to Rule 144, a person who has beneficially owned restricted shares of our common stock for at least six months is entitled to sell his or her securities provided that: (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale, (ii) we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale and (iii) if the sale occurs prior to satisfaction of a one-year holding period, we provide current information at the time of sale.
Persons who have beneficially owned restricted shares of our common stock for at least six months but who are our affiliates at the time of, or at any time during the three months preceding a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:
| ● | 1% of the total number of securities of the same class then outstanding; or |
| ● | the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale; |
provided, in each case that we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale. Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.
In addition, as a former shell company, we are subject to additional restrictions. Historically, the SEC staff has taken the position that Rule 144 is not available for the resale of securities initially issued by companies that are, or previously were, shell companies, such as Zoned Properties. Rule 144 is not available for resale of securities issued by any shell companies (other than business combination related shell companies) or any issuer that has been at any time previously a shell company. The SEC has provided an exception to this prohibition, however, if the following conditions are met:
| ● | The issuer of the securities that was formerly a shell company has ceased to be a shell company, |
| ● | The issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, |
| ● | The issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than current reports on Form 8-K, and |
| ● | At least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its status as an entity that is not a shell company. |
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ITEM 1B. UNRESOLVED STAFF COMMENTS
This Item 1B is not applicable to smaller reporting companies.
ITEM 1C. CYBERSECURITY
Cybersecurity Risk Management and Strategy
The cybersecurity risk management program, processes
and strategy described in this section are limited to the personal and business information belonging to or maintained by the Company
(collectively, “Confidential Information”),
We have
Cybersecurity Governance
Our
Our Board considers cybersecurity risk as part of its risk oversight function and oversight of cybersecurity and other information technology risks.
Our Board oversees management’s implementation
of our cybersecurity risk management program.
Our
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ITEM 2. PROPERTIES
Our principal executive office is currently located at 8360 E. Raintree Drive, #230, Scottsdale, AZ 85260. On March 15, 2022, we 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 shall begin 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 and $3,775 from December 1, 2025 through November 30, 2026. If extended, the monthly base rent shall be: $3,887 from December 1, 2026 through November 30, 2027, and $4,004 from December 1, 2027 through November 30, 2028. The Company has the option to extend the lease for a two-year period through November 2028.
We are in the business of property acquisition, development, and commercial leasing and intend to primarily structure lease agreements with prospective tenants using a triple-net or absolute-net lease model. The property investment portfolio currently includes (i) land and real property constructed in Green Valley, Arizona, (ii) land and real property in Kingman, Arizona, (iii) land and real property in Tempe Arizona, (iv) land and real property of approximately 47 acres in Chino Valley, Arizona, (v) land and real property in Pleasant Ridge, Michigan and (vi) land in Chicago, Illinois, and (vii) land and real property in Surprise Arizona. The properties in Tempe, Green Valley, Kingman, Chino Valley, and Surprise, Arizona, Pleasant Ridge, Michigan and Chicago, Illinois are currently leasing space to tenants that operate licensed cannabis facilities. In 2025, the Company was notified that a vehicle crashed into the building located in Chicago, IL, causing significant structural damage. The City of Chicago declared the building unsafe and ordered its demolition. As such, the Ashland Avenue Property located in Chicago 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 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 located in Chicago, IL and based on conditions existing at our Michigan property, during the year ended December 31, 2025, the Company recorded an impairment loss of $3,118,716.
As of December 31, 2025, each of our leased properties was generating revenues.
ITEM 3. LEGAL PROCEEDINGS
There are no pending or threatened legal or administrative actions pending or threatened against us that we believe would have a material effect on our business.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is quoted on the OTCQB, operated by the OTC Markets Group, under the symbol “ZDPY.” Trading in OTCQB stocks can be volatile, sporadic and risky, as thinly traded stocks tend to move more rapidly in price than more liquid securities. Such trading may also depress the market price of our common stock and make it difficult for our stockholders to resell their common stock.
The following table reflects the high and low closing price for our common stock for the period indicated. The bid information was obtained from the OTC Markets Group, Inc. and reflects inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.
| Quarter Ended | High | Low | ||||||
| December 31, 2025 | $ | 0.50 | $ | 0.42 | ||||
| September 30, 2025 | $ | 0.57 | $ | 0.43 | ||||
| June 30, 2025 | $ | 0.61 | $ | 0.33 | ||||
| March 31, 2025 | $ | 0.47 | $ | 0.30 | ||||
| December 31, 2024 | $ | 0.55 | $ | 0.39 | ||||
| September 30, 2024 | $ | 0.66 | $ | 0.51 | ||||
| June 30, 2024 | $ | 0.70 | $ | 0.45 | ||||
| March 31, 2024 | $ | 0.55 | $ | 0.35 | ||||
On March 30, 2026, the closing price of our common stock on the OTCQB was $0.385 per share.
Holders of Common Stock
As of April 1, 2026, there were approximately 1,168 beneficial shareholders of our common stock. The number of record holders does not include beneficial owners of common stock whose shares are held in the names of banks, brokers, nominees or other fiduciaries.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Between September 2024 and November 2024, the Company purchased a total of 13,687 shares of common stock for $8,010, or $0.59 per share, which as of December 31, 2025, is reflected as treasury stock on the consolidated balance sheet until such time as the shares are cancelled.
Between May 2025 and June 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 December 31, 2025, is reflected as treasury stock on the consolidated balance sheet until such time as the shares are cancelled.
As of April 1, 2026, the Company holds 170,687 shares of common stock as treasury shares.
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Securities Authorized for Issuance under Equity Compensation Plans
On August 9, 2016, the Company’s Board of Directors authorized the 2016 Equity Incentive Plan (the “2016 Plan”) and reserved 10,000,000 shares of common stock for issuance thereunder. The 2016 Plan was approved by shareholders on November 21, 2016. The 2016 Plan’s purpose is to encourage ownership in the Company by employees, officers, directors and consultants whose long-term service the Company considers essential to its continued progress and, thereby, encourage recipients to act in the stockholders’ interest and share in the Company’s success. 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 terminated, such shares shall again be available for distribution in connection with future grants and awards 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 December 31, 2025, 8,685,000 shares were available for future issuance under the 2016 Plan.
The Company also continues to maintain its 2014 Equity Compensation Plan (the “2014 Plan”). The 2014 Plan has been superseded by the 2016 Plan. Accordingly, the Board does not intend to grant any additional awards under the 2014 Plan. As of December 31, 2025, options to purchase 250,000 shares of common stock were outstanding and exercisable pursuant to the 2014 Plan.
DESCRIPTION OF SECURITIES
Outstanding Shares and Holders
As of April 1, 2026, our authorized capital stock consists of (i) 100,000,000 shares of common stock, $0.001 par value per share, of which 13,351,516 and 13,180,829 shares were issued and outstanding, respectively, and (ii) 5,000,000 shares of preferred stock, $0.001 par value per share, of which 2,000,000 shares were issued and outstanding. As of April 1, 2026, the Company holds 170,687 shares of common stock as treasury shares.
Common Stock
Holders of the Company’s common stock are entitled to one vote for each share on all matters submitted to a stockholder vote. Holders of common stock do not have cumulative voting rights. Holders of the Company’s common stock are entitled to share in all dividends that our board of directors, in its discretion, declares from legally available funds. In the event of a liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over the common stock. The Company’s common stock has no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to the Company’s common stock.
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Preferred Stock
Our articles of incorporation, as amended, authorizes our board of directors, subject to any limitations prescribed by law, without further stockholder approval, to establish and to issue from time to time one or more classes or series of preferred stock. Each class or series of preferred stock will cover the number of shares and will have the powers, preferences, rights, qualifications, limitations and restrictions determined by the board of directors, which may include, among others, dividend rights, liquidation preferences, voting rights, conversion rights, preemptive rights and redemption rights. Except as provided by law or in a preferred stock designation, the holders of preferred stock will not be entitled to vote at or receive notice of any meeting of stockholders.
The certificate of designation for the preferred stock provides that the shares are not convertible into any other class or series of stock. Holders of preferred shares 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, holders of preferred stock will be entitled to receive $1.00 per share plus redemption provision before assets are distributed to other stockholders. Holders of preferred shares are entitled to dividends equal to common share dividends. 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:
| ● | alteration of the rights, preferences of privileges of the preferred stock, | |
| ● | creation of any new class of stock having preferences over the preferred stock, | |
| ● | repurchase of any of our common stock, | |
| ● | merger of consolidation with any other company, other than one of our wholly owned subsidiaries, | |
| ● | sale, conveyance or other disposal of, or creation or incurrence of any mortgage, lien, or charge or encumbrance or security interest in or pledge of, or sale and leaseback of, all or substantially all of our property or business, or | |
| ● | incurrence, assumption or guarantee of 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. |
Holders of a majority of the voting power of our capital stock issued, outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of stockholders. A vote by the holders of a majority of our outstanding voting shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our articles of incorporation.
Holders of preferred shares vote along with common stockholders on each matter submitted to a vote of security holders. As a result of the multiple votes accorded to holders of the preferred stock, Greg Johnston and Alex McLaren have the ability to control the outcome of all matters submitted to a vote of stockholders, including the election of directors. On those matters that require the approval of at least 51% of the preferred stock, both Mr. Johnston and Mr. Alex McLaren must provide their approval inasmuch as each of them owns 50% of the outstanding preferred stock.
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Dividends
Historically, we have not paid any cash dividends on our common stock. Except as set forth below, it is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest cash flow and earnings, if any, in our business operations. However, in the future, our board of directors may declare dividends on our common stock. Payment of future dividends on our common stock, if any, will be at the discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements and surplus, financial condition, contractual restrictions and other factors that our board of directors may deem relevant. In addition, the agreements into which we may enter in the future, including indebtedness, may impose limitations on our ability to pay dividends or make other distributions on our capital stock. We cannot guarantee that we will pay dividends to our stockholders in the future. Holders of preferred shares are entitled to dividends equal to common share dividends.
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. See “Item 1. Business—Our Business—Management Buyout Asset Purchase Agreement.”
Anti-Takeover Effects of Certain Provisions of Our Articles of Incorporation, as Amended, and Our Bylaws
These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with us. We believe that the benefits of increased protection and our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.
Preferred Stock. Our articles of incorporation, as amended, authorize our board of directors to issue from time to time any series of preferred stock and fix the voting powers, designation, powers, preferences and rights of the shares of such series of preferred stock.
Calling of Special Meetings of Stockholders. Our bylaws provide that special meetings of the stockholders may be called only by the chairman of the board or the chief executive officer, and shall be called by the chairman of the board or the secretary (i) when so directed by the board, or (ii) at the written request of stockholders owning shares representing at least 25% of voting power in the election of directors.
Advance Notice Requirements for Stockholder Proposals and Director Nominations. Our bylaws establish an advance notice procedure for stockholder proposals to be brought before a meeting of our stockholders, including proposed nominations of persons for election to the board of directors.
Removal of Directors; Vacancies. Our bylaws provide that a director may be removed from office by stockholders for cause, or without cause by a majority vote of the stockholders. A vacancy on the board of directors may be filled only by a majority of the directors then in office.
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ITEM 6. RESERVED
ITEM 7. 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 annual report on Form 10-K 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 annual report on Form 10-K 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 this annual report on Form 10-K.
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 audited consolidated financial statements and the related notes that appear elsewhere in this annual report on Form 10-K.
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 is redefining the approach to commercial real estate investment through its standardized investment model backed by its proprietary property technology. Zoned Properties has developed a national ecosystem of real estate services to support its real estate development model, including a commercial real estate brokerage and a real estate advisory practice.
The Company operates in two organized segments; (1) the operations, leasing and management of its commercial properties, herein known as the “Property Investment Portfolio” segment, and (2) the advisory, brokerage and technology services related to commercial properties, herein known as the “Real Estate Services” segment. The Company targets commercial properties that face unique zoning or development challenges, identifies solutions that can potentially have a major impact on their commercial value, and then works to acquire the properties while securing long-term, absolute-net leases. The Company does not grow, harvest, sell or distribute cannabis or any substances regulated under United States law such as the Controlled Substance Act of 1970, as amended.
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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, Illinois, and Michigan 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 April 1, 2026, the Company leases land and/or building space at the seven properties in its portfolio to licensed and regulated cannabis tenants in areas with established cannabis regulations and zoning procedures. Four of the leased properties are zoned and permitted as regulated cannabis retail dispensaries, two of the leased properties are zoned and permitted as regulated cannabis cultivation and processing facilities, and one property is leased for the future development of a licensed medical and adult use marijuana retail dispensary.
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As of December 31, 2025, a summary of rental properties owned by us consisted of the following:
| Location | Tempe, AZ | Chino Valley, AZ | Green Valley, AZ | Kingman, AZ | Pleasant Ridge, MI | Chicago, IL | Surprise, AZ | |||||||||||||||||||||||||
| Description | Industrial /Office | Greenhouse/ Nursery | Retail (special use) | Retail (special use) | Retail (special use) | Land | Retail (special use) | |||||||||||||||||||||||||
| Current Use | Cannabis Facility | Cannabis Facility | Cannabis Dispensary | Cannabis Dispensary | Cannabis Dispensary | Cannabis Dispensary | - | Property Investment Portfolio Total | ||||||||||||||||||||||||
| Date Acquired | March 2014 | August 2015 | Oct 2014 | May 2014 | Dec 22/Feb 23 | January 2024 | July 2024 | |||||||||||||||||||||||||
| Lease Start Date | May 2018 | May 2018 | May 2018 | May 2018 | December 2022 | January 2024 | July 2024 | |||||||||||||||||||||||||
| Lease End Date | April 2040 | April 2040 | April 2040 | April 2040 | March 2037 | January 2039 | June 2040 | |||||||||||||||||||||||||
| No. of Tenants | 1 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||||||||||||||||||||
| Land Area: (Acres) | 3.65 | 47.60 | 1.33 | 0.32 | 0.56 | 0.37 | 1.11 | 55.14 | ||||||||||||||||||||||||
| Land Area: (Sq. Feet) | 158,772 | 2,072,149 | 57,769 | 13,939 | 24,306 | 16,000 | 48,541 | 2,391,476 | ||||||||||||||||||||||||
| 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 | 24,306 | - | 48,541 | 586,035 | ||||||||||||||||||||||||
| Total Rentable Building Sq. Ft. | 60,000 | 97,312 | 1,440 | 1,497 | 5,172 | - | 4,200 | 169,621 | ||||||||||||||||||||||||
| Vacant Rentable (Sq. Ft.) | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||
| Sq. Ft. rented as of December 31, 2025 | 60,000 | 97,312 | 1,440 | 1,497 | 5,172 | - | 4,200 | 169,621 | ||||||||||||||||||||||||
| Annual Base Rent (*,**) | ||||||||||||||||||||||||||||||||
| 2026 | $ | 599,149 | $ | 1,050,970 | $ | 42,000 | $ | 48,000 | $ | 447,604 | $ | 233,394 | $ | 304,500 | $ | 2,725,617 | ||||||||||||||||
| 2027 | 590,400 | 1,050,970 | 42,000 | 48,000 | 461,032 | 240,395 | 313,635 | 2,746,432 | ||||||||||||||||||||||||
| 2028 | 590,400 | 1,050,970 | 42,000 | 48,000 | 474,862 | 247,607 | 323,044 | 2,776,883 | ||||||||||||||||||||||||
| 2029 | 590,400 | 1,050,970 | 42,000 | 48,000 | 489,109 | 255,036 | 332,732 | 2,808,247 | ||||||||||||||||||||||||
| 2030 | 590,400 | 1,050,970 | 42,000 | 48,000 | 503,782 | 262,687 | 342,714 | 2,840,553 | ||||||||||||||||||||||||
| Thereafter | 5,510,400 | 9,809,049 | 392 | 448,000 | 6,119,053 | 2,405,976 | 3,813,043 | 28,497,521 | ||||||||||||||||||||||||
| Total | $ | 8,471,149 | $ | 15,063,899 | $ | 602,000 | $ | 688,000 | $ | 8,495,442 | $ | 3,645,095 | $ | 5,429,668 | $ | 42,395,253 | ||||||||||||||||
| * | 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. |
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Annualized $ per Rented Sq. Ft. (Base Rent)
| Year | Tempe, AZ | Chino Valley, AZ | Green Valley, AZ | Kingman, AZ | Pleasant Ridge, MI | Chicago, IL | Surprise, AZ | |||||||||||||||||||||
| 2026 | $ | 9.8 | $ | 10.8 | $ | 29.2 | $ | 32.1 | $ | 86.5 | $ | - | $ | 72.5 | ||||||||||||||
| 2027 | $ | 9.8 | $ | 10.8 | $ | 29.2 | $ | 32.1 | $ | 89.1 | $ | - | $ | 74.7 | ||||||||||||||
| 2028 | $ | 9.8 | $ | 10.8 | $ | 29.2 | $ | 32.1 | $ | 91.8 | $ | - | $ | 76.9 | ||||||||||||||
| 2029 | $ | 9.8 | $ | 10.8 | $ | 29.2 | $ | 32.1 | $ | 94.6 | $ | - | $ | 79.2 | ||||||||||||||
| 2030 | $ | 9.8 | $ | 10.8 | $ | 29.2 | $ | 32.1 | $ | 97.4 | $ | - | $ | 81.6 | ||||||||||||||
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, Inc. (Chino Valley and Green Valley) and CJK, Inc. (Kingman) (each, a “Tenant”), each with an effective date of January 1, 2026. 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 were 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). These contingencies were resolved on March 31, 2026. Pursuant to the A&R Leases, A&R Consultants, LLC provided 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). The A&R 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 originally stated that the Purchase Option may be exercised during an option period ending March 30, 2026; however, the parties have subsequently agreed that optionee will have until April 10, 2026 to exercise the Purchase Option, and if exercised, requires a closing no later than June 30, 2026. The Purchase Option contemplates (a) a $400,000 non-refundable earnest money deposit to be applied toward the down payment, (b) a $4.0 million cash down payment at closing, and (c) $5.0 million of seller financing. The seller financing would bear interest at 7% per annum over a 36-month term with payments calculated on a 15-year amortization schedule and a balloon payment at maturity, and would be secured by loan documentation (including a loan agreement, promissory note and deeds of trust) against all three properties. The properties would be conveyed on an as-is/where-is basis without representations or warranties from the applicable landlord/seller. 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.
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.
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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.
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;
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(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
(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.
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Going concern consideration
Our 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 consolidated financial statements, the Company had a net loss of $2,854,415 and had cash provided by operations of $781,476 for the year ended December 31, 2025. Additionally, as of December 31, 2025, the Company had cash of $837,767 and stockholders’ equity of $3,067,626. On December 31, 2025 and effective January 1, 2026, the Company entered into Amended and Restated Absolute Net Lease Agreements with certain tenants (See Note 14 – Subsequent Events). 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). The Purchase Option originally stated that the Purchase Option may be exercised during an option period ending March 30, 2026; however, the parties have subsequently agreed that optionee will have until April 10, 2026 to exercise the Purchase Option, and if exercised, requires a closing no later than June 30, 2026. 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 (See Note 14 – Subsequent Events). 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. 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 Annual 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 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.
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 consolidated financial statements and the notes to those statements for the years ended December 31, 2025 and 2024, which are included elsewhere in this annual report on Form 10-K. The results discussed below are for the years ended December 31, 2025 and 2024.
Comparison of Results of Operations for the Years Ended December 31, 2025 and 2024
Revenues
For the years ended December 31, 2025 and 2024, revenues by reportable business segments were as follows:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenues: | ||||||||
| Property investment portfolio | $ | 3,080,654 | $ | 2,884,286 | ||||
| Real estate services | 1,059,804 | 909,003 | ||||||
| Total revenues | $ | 4,140,458 | $ | 3,793,289 | ||||
For the years ended December 31, 2025, total revenues amounted to $4,140,458, including property investment portfolio revenues of $3,080,654, which consists of rental revenues, as compared to total revenues of $3,793,289, including property investment portfolio revenues of $2,884,286, which consists of rental revenues, for the year ended December 31, 2024, representing an overall increase of $347,169, or 9.2%. This increase was attributable to an increase in rental revenues of $196,368, or 6.8%, primarily attributable to an increase in rental revenue from our recently acquired properties in Chicago, IL and Surprise, AZ, and a net increase in real estate services revenues of $150,801, or 16.6%, attributable to an increase in commissions and assignment fees earned on real estate listings, offset by a decrease in advisory fees.
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The increase in property investment portfolio revenues was primarily due to the signing of a new lease with new tenants at our recently acquired properties located in Chicago, Illinois which began in January 2024 and Surprise, AZ which began in July 2024. All of the Company’s real estate properties are leased under absolute-net or triple-net leases with our tenants.
Operating expenses
For the year ended December 31, 2025, operating expenses amounted to $3,926,000 as compared to $2,690,119 for the year ended December 31, 2024, representing an increase of $1,235,881, or 45.9%. For the years ended December 31, 2025 and 2024, operating expenses consisted of the following:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Compensation and benefits | $ | 1,398,498 | $ | 1,287,744 | ||||
| Professional fees | 252,636 | 351,426 | ||||||
| Brokerage fees | 131,236 | 158,871 | ||||||
| General and administrative expenses | 308,149 | 331,495 | ||||||
| Depreciation and amortization | 360,903 | 357,946 | ||||||
| Real estate taxes | 155,322 | 148,762 | ||||||
| Business development costs | 300,540 | 53,875 | ||||||
| Impairment loss | 3,118,716 | - | ||||||
| Total | $ | 6,026,000 | $ | 2,690,119 | ||||
| ● | For the year ended December 31, 2025, compensation and benefit expense increased by $110,754, or 8.6%, as compared to the year ended December 31, 2024. The increase was attributable to an increase in executive and staff compensation and related benefits of $53,501, primarily attributable to the payment of bonus splits on project fees generated by transactions to team members, an increase in stock-based compensation of $33,502 related to accretion of stock option expense, and an increase in health insurance expense of $23,751. | |
| ● | For the year ended December 31, 2025, professional fees decreased by $98,790, or 28.1%, as compared to the year ended December 31, 2024. This decrease was primarily attributable to a decrease in consulting fees of $100,000, offset by an increase in other professional fees of $1,210. | |
| ● | For the year ended December 31, 2025 and 2024, we recorded brokerage fees amounting to $131,236 and $158,871, respectively, representing a decrease of $27,635, or 17.4%. 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 year ended December 31, 2025, general and administrative expenses decreased by $23,346, or 7.0%, as compared to the year ended December 31, 2024, primarily due to a decrease in advertising and marketing expenses of $40,239, offset by an increase in other general and administrative fees of $6,900 and an increase in bad debt expense of $56,685. |
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| ● | For the year ended December 31, 2025, depreciation expense increased by $2,957, or 0.8%, as compared to the year ended December 31, 2024 due to an increase in depreciable rental properties. | |
| ● | For the year ended December 31, 2025, real estate taxes increased by $6,560, or 4.4%, as compared to the year ended December 31, 2024 related to our Michigan property. | |
| ● | For the year ended December 31, 2025, property portfolio business development costs increased by $246,665, or 457.9%, as compared to the year ended December 31, 2024. 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. | |
| ● | For the year ended December 31, 2025, impairment loss from rental properties increased by $3,118,716, or 100.0%, as compared to the year ended December 31, 2024. In 2025, (1) we were notified that a vehicle crashed into our Chicago building, causing significant structural damage. The City of Chicago declared the building unsafe and ordered its demolition. As such, as of December 31, 2025, the Chicago property is a vacant lot of land. In connection with the damage and demolition of the building, during the year ended December 31, 2025, we recorded an impairment loss of $1,018,716, and (2) in an effort to avoid litigation related to the defaults under the lease, the Company is currently in negotiations to sell 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. If the Company sells 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. While the Company believes the sale is likely to occur, there is a possibility that the sale will fail to occur, in which case there is a strong likelihood that the New Tenant will be unable to continue paying rent, causing an ongoing default under the lease. 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, we recorded an impairment loss of $2,100,000. |
(Loss) Income from operations
As a result of the factors described above, for the year ended December 31, 2025, loss from operations amounted to $(1,885,542) as compared to income from operations of $1,103,170 for the year ended December 31, 2024, representing a decrease of $2,988,712, or 270.9%.
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 years ended December 31, 2025 and 2024, total other expenses, net amounted to $965,521 and $529,212, respectively, representing an increase of $436,309, or 82.4%. This increase was attributable to an increase in interest expense of $100,440, primarily related to an increase in notes payable, an increase in impairment loss on equity securities of $50,000, and a negative change in gain or loss in fair value from an interest rate swap of $289,369, offset by an increase in other income of $3,500.
Equity method loss
For the years ended December 31, 2025 and 2024, we incurred an equity method loss of $3,352 and $0, respectively, representing an increase of $3,352, or 100.0%. During the year ended December 31, 2025, we recorded a loss from unconsolidated joint ventures of $3,352.
Net (loss) income
As a result of the foregoing, for the years ended December 31, 2025, net loss amounted to $(2,854,415), or $(0.24) per common share (basic and diluted), and for the year ended December 31, 2024, net income amounted to $573,958, or $0.05 per common share (basic) and $0.06 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 $837,767 and $1,019,980 as of December 31, 2025 and 2024, respectively.
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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, that 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 annual report on Form 10-K. 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 “Item 1. Business—Our Business—Management Buyout Asset Purchase Agreement.”
Recent Property Acquisitions and Related Note Payables
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.
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 “PMF Deed”). The PMF Loan Agreement, the PMF Note, any guaranties, and all other related documents executed and delivered concurrently with the PMF Loan Agreement are referred to herein as the “PMF Loan Documents.” Pursuant to the terms of the PMF Loan Agreement, on July 8, 2024, ZP Dysart issued the PMF Note with the maximum principal amount of $1,620,000 to PMF (the “Maximum Amount”). Interest accrues at the rate of 12% per annum, with ZP Dysart paying interest only in arrears, in monthly installment payments, beginning on August 1, 2024 through July 1, 2029 (the “Maturity Date”). ZP Dysart may prepay the PMF Loan in full or in part at any time. However, during the first 48 months of the term of the loan, if ZP Dysart pays any principal payment, ZP Dysart will pay to PMF a prepayment premium equal to (i) 5% of the amount of principal prepaid in months 1-24; (ii) 2% of the amount of principal prepaid in months 25-36; and (iii) 1% of the amount of principal prepaid in months 36-48, which amount will be due and payable at the time ZP Dysart pays the principal payment. During the year ended December 31, 2024, the Company borrowed $1,020,000 of the Maximum Amount and received net proceeds of $983,940, net of origination fees and costs of $36,060. During the 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 December 31, 2025 and 2024, the principal amount of the loan was $1,620,000 and $1,020,000, respectively, and accrued interest payable amounted to $16,200 and $0, respectively.
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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 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 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.
We may secure additional financing to acquire and develop additional and existing properties. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital may restrict our ability to grow our business operations.
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Cash Flow
For the Years Ended December 31, 2025 and 2024
Net cash flow provided by operating activities was $781,476 for the year ended December 31, 2025, as compared to net cash flow provided by operating activities of $578,218 for the year ended December 31, 2024, representing an increase of $203,258, or 35.2%.
| ● | Net cash flow provided by operating activities for the year ended December 31, 2025 primarily reflected a net loss of $2,854,415, adjusted for the add-back of non-cash items consisting of depreciation of $360,903, amortization of debt discount of $25,671, accretion of stock-based stock option expense of $88,385, loss of forfeited escrow deposits and development costs of $300,540, bad debt expense of $76,685, an impairment loss from equity securities of $50,000, an impairment loss from buildings of $3,118,716, and loss from the changes in fair value from an interest rate swap of $121,909, offset by changes in operating assets and liabilities primarily consisting of an increase in accounts receivable of $159,449, an increase in deferred rent of $336,909 attributable to rent abatement on our new tenant leases at our Chicago, Illinois and Surprise, AZ properties, a decrease in lease incentive receivable of $27,523, an increase in prepaid expenses of $18,028, an increase in accounts payable of $13,016, an increase in accrued expenses of $1,902, a decrease in contract liabilities of $16,669, and a decrease in security deposits payable of $22,206. |
| ● | Net cash flow provided by operating activities for the year ended December 31, 2024 primarily reflected net income of $573,958, adjusted for the add-back of non-cash items consisting of depreciation of $357,946, amortization of debt discount of $22,066 accretion of stock-based stock option expense of $54,833, a loss on forfeited escrow deposit of $22,875, an increase in bad debt expense of $20,000, and gain from the changes in fair value from an interest rate swap of $167,460, offset by changes in operating assets and liabilities primarily consisting of an increase in accounts receivable of $253,538, an increase in deferred rent of $376,032 attributable to rent abatement on our new tenant leases at our Chicago, Illinois and Surprise, AZ properties, an increase in accrued expenses of $256,951, a decrease in contract liabilities of $27,225, and an increase in security deposits payable of $71,217. |
For the year ended December 31, 2025, net cash flow used in investing activities amounted to $1,439,613, as compared to net cash used in investing activities of $3,527,929 for the year ended December 31, 2024, representing a decrease of $2,088,316. For the year ended December 31, 2025, net cash used in investing activities was attributable to the purchase of rental properties and improvements of $1,000,000, an increase in investments in cost method investee of $84,110, an increase in escrow deposits of $154,394 and an increase in capitalized project costs of $202,680, offset by cash received from investment in unconsolidated joint venture of $1,571. For the year ended December 31, 2024, net cash used in investing activities was attributable to the purchase of rental properties of $3,336,763, primarily in connection with the acquisition of properties in Chicago, IL and Surprise, AZ, a purchase of property and equipment of $6,480, an increase in capitalized project costs of $168,984, and an increase in escrow deposits of $15,702.
For the years ended December 31, 2025 and 2024, net cash provided by financing activities amounted to $475,924 and $869,896, respectively. For the year ended December 31, 2025, net cash provided by financing activities consisted of net proceeds from a note payable of $600,000, offset by cash used for the repayment of notes payable of $97,218 and cash used for the purchase of treasury shares of $26,858. For the year ended December 31, 2024, net cash provided by financing activities consisted of net proceeds from a note payable of $983,940 used to acquire our Surprise, AZ property, offset by cash used for the repayment of notes payable of $106,034 and the purchase of treasury stock of $8,010.
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.
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The following tables summarize our contractual obligations as of December 31, 2025 (dollars in thousands), and the effect these obligations are expected to have on our liquidity and cash flows in future periods.
| Payments Due by Period | ||||||||||||||||||||
| 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 | 450 | 120 | 240 | 90 | - | |||||||||||||||
| Notes payable | 7,693 | 80 | 1,774 | 1,735 | 4,104 | |||||||||||||||
| Total | $ | 10,143 | $ | 200 | $ | 2,014 | $ | 3,825 | $ | 4,104 | ||||||||||
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 December 31, 2025, the notional amount of our interest rate swaps was $4,372,231. 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.
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.
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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 December 31, 2025 | Interest Rate | Maturity | Fair Value of Liability on December 31, 2025 | Fair Value of Asset on December 31, 2024 | |||||||||||||
| December 7, 2022 interest rate swap | $ | 4,372,231 | 7.65 | % | December 10, 2032 | $ | 77,328 | $ | 44,581 | |||||||||
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. |
| ■ | 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. |
For the year ended December 31, 2025, we recorded an impairment loss of $3,118,716 due (1) to 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) to the write down of our Michigan property to net realizable value. For the year ended December 31, 2024, we did not record any impairment losses.
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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 consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements and Consolidated Financial Statement Schedules appearing on pages F-1 to F-45 of this annual report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officer and principal financial officer, evaluated our company’s disclosure controls and procedures as of the end of the period covered by this annual report on Form 10-K. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of December 31, 2025, our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to material weaknesses, which we identified in our report on internal control over financial reporting.
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Internal control over financial reporting
Management’s annual report on internal control over financial reporting
Our management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2025. Our management’s evaluation of our internal control over financial reporting was based on the 2013 framework in Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that as of December 31, 2025, our internal control over financial reporting was not effective.
The ineffectiveness of our disclosure controls and procedures was due to the following material weaknesses which we identified in our internal control over financial reporting: (1) the lack of multiples levels of management review on complex accounting and financial reporting issues, (2) we had not implemented adequate system and manual controls, and (3) a lack of adequate segregation of duties and necessary corporate accounting resources in our financial reporting process and accounting function as a result of our limited financial resources to support hiring of personnel and implementation of accounting systems. Until such time as we expand our staff to include additional accounting personnel and hire a full-time chief financial officer, it is likely we will continue to report material weaknesses in our internal control over financial reporting.
A material weakness is a deficiency or a combination of control deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Limitations on Effectiveness of Controls
Our principal executive officer and principal financial officer does not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Our Board of Directors currently has four members and there is one vacancy.
The following table sets forth the names, positions and ages of our directors and executive officers as of the date of this annual report on Form 10-K. All of the current directors’ terms expire as of the Annual Meeting and will serve until their successors are duly elected and qualified.
Set forth below is certain information regarding our executive officers and directors.
| Name | Age | Position | ||
| Bryan McLaren | 38 | Chairman, Chief Executive Officer, Chief Financial Officer, Treasurer, and Secretary | ||
| Berekk Blackwell | 36 | President and Chief Operating Officer | ||
| Art Friedman | 66 | Independent Director, Chair of the Compensation Committee | ||
| David G. Honaman | 74 | Independent Director, Chair of the Audit Committee | ||
| Cole Stevens | 29 | Independent Director, Chair of the Nominating and Governance Committee |
Background Information about our Officers and Directors
Biographical information concerning the directors and executive officers listed above is set forth below. The information presented includes information each individual has given us about all positions they hold and their principal occupation and business experience for the past five years. In addition to the information presented below regarding each director’s specific experience, qualifications, attributes and skills that led our board to conclude that he should serve as a director, we also believe that each of our directors has a reputation for integrity, honesty and adherence to high ethical standards. Each has demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to our company and our board of directors.
Bryan McLaren, MBA. Mr. McLaren has served as Chairman and Chief Executive Officer of the Company since 2014 and as Chief Financial Officer of the Company since 2018. Mr. McLaren has a dedicated history of work in the sustainability industry and in business development. Prior to joining the Company, McLaren worked as a sustainable development expert for both large corporations such as Waste Management, Inc., and for institutions of higher education such as Northern Arizona University. Mr. McLaren has a Masters of Business Administration Degree with an emphasis on Sustainable Development, a Master’s Degree in Sustainable Community Development, and an Executive Master’s Degree in Sustainability Leadership. As Chief Executive Officer and Chief Financial Officer, Mr. McLaren is able to provide our Board with valuable insight into the Company’s operations, its management team and associates as a result of his day-to-day involvement with the Company.
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Berekk Blackwell. Mr. Blackwell has served as our Chief Operating Officer since July 1, 2021, and as our President since July 1, 2022. Prior to his appointment to these positions and since September 2020, Mr. Blackwell served as our Director of Business Development. From December 2018 until June 2021, Mr. Blackwell also served as President of Daily Jam Holdings LLC. From January 2016 to December 2018, he served as Vice President of Due North Holdings LLC. Prior to joining the Company, Mr. Blackwell developed domestic and international markets for Kahala Brands, a global franchise organization with more than 3,000 retail locations in over a dozen countries. He also led emerging brand and portfolio operations for several private equity groups investing in the restaurant franchise space. Mr. Blackwell earned his B.A. in Finance from Fort Lewis College. Mr. Blackwell and his spouse filed for bankruptcy in the U.S. Bankruptcy Court, District of Arizona on November 13, 2020.
Art Friedman. Mr. Friedman, who has served as a director since 2014, is the Owner/Principal of Triple J Management Services, which specializes in consulting and professional services for the alcoholic beverage industry. Mr. Friedman was most recently President and CEO of Gold Coast Beverage Distributors, a position he held for the last 10 years of his 23 years with the company. During his tenure as President/CEO, Gold Coast more than tripled sales revenue and increased EBITDA by more than five-fold. Over the same period, Mr. Friedman led significant market share gains through organic growth as well as consolidating wholesaler acquisitions. Mr. Friedman began his career with General Foods Corporation, now part of Kraft Foods. He has served on the distributor advisory councils of Diageo-Guinness, Heineken USA, InBev and Miller-Coors. Mr. Friedman graduation Cum Laude with a Bachelor of Science in Business Management from the University of Florida, Warrington School of Business. We believe that Mr. Friedman’s background as an advisor in the area of business management and his experience in operating, growing and advising companies provides us with the requisite skills and qualifications required to serve on our board. Mr. Friedman’s service as a director at the Company since 2014, together with his business background, provides business, governance, organizational and strategic planning expertise to our Board and makes him a valued member of the Audit Committee, the Compensation Committee, which he chairs, and the Strategic Committee.
David G. Honaman. Mr. Honaman, who has served as a director since 2016, is the Principal and CFO of Advanced Benefit Solutions, Inc. (d/b/a 44 North), an insurance agent and consultant, since 2010. From 2008 to 2009, Mr. Honaman served as an independent financial consultant. Prior to that time, Mr. Honaman spent seven years at Wilcox Associates, Inc., a civil engineering firm, most recently as CFO and Treasurer. Mr. Honaman also served in several capacities at Wolohan Lumber Co. for over 20 years, including as Vice President of Merchandising, Senior Vice President of Finance and CFO. Mr. Honaman began his career as a CPA on the audit staff at Ernst & Young LLP. Mr. Honaman brings to the Board extensive experience dealing with and overseeing the implementation of accounting principles and financial reporting rules and regulations. With his substantial business and management experience for five years as a certified public accountant and an auditor at Ernst & Young LLP serving numerous public companies in various business sectors, including insurance agencies, Mr. Honaman provides relevant expertise on accounting, investment and financial matters. His service as a chief financial officer at Advanced Benefit Solutions, Inc. (d/b/a 44 North), Wilcox Associates, Inc. and Wolohan Lumber Co., together with his accounting and management experience, make him a valued member of our Board, Compensation Committee and Strategic Committee, and an effective Non-Executive Chair of the Audit Committee. Mr. Honaman meets the definition of an “audit committee financial expert” as established by the SEC.
Cole Stevens. Mr. Stevens, who has served as a director since November 2024, brings over a decade of experience in capital markets advisory, corporate finance, and strategic growth leadership. He has a proven track record of driving value creation and expansion across diverse industries, including technology, healthcare, and real estate. Since 2019, Mr. Stevens has served as President of AllAccess Capital Markets, a prominent North American capital markets advisory firm. In this capacity, he has consistently demonstrated exceptional leadership and financial acumen, successfully guiding organizations through periods of growth, transformation, and strategic evolution. Mr. Stevens’ expertise has earned him recognition on leading broadcast platforms, including appearances on CBC’s Lang & O’Leary Exchange and multiple features on BNN (Business News Network). Mr. Stevens has a Bachelor of Commerce from the Ted Rogers School of Management at Toronto Metropolitan University (formerly Ryerson University), with a focus on Global Management. The Company believes that Mr. Stevens’ strategic experience will be invaluable to the Company as it pursues its mission to deliver innovative, value-driven real estate solutions in emerging regulated markets
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Involvement in Certain Legal Proceedings
Our directors and executive officers have not been involved in any of the following events during the past 10 years:
| 1. | any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; | |
| 2. | any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); | |
| 3. | being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; | |
| 4. | being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; | |
| 5. | being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease- and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or | |
| 6. | being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Code of Ethics
We have adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including those employees responsible for financial reporting. The code of business conduct and ethics is available on our corporate website, www.zonedproperties.com. We intend to disclose any amendments to our code of business conduct and ethics, or waivers of its requirements, on our website or in filings under the Exchange Act to the extent required by applicable rules and exchange requirements.
Director Independence
Three of our four board members are independent. The Board has determined that each of Messrs. Friedman, Honaman, and Stevens is an independent director pursuant to the NASDAQ listing standards. Under the NASDAQ rules, no director qualifies as independent unless the Board affirmatively determines that the director has no material relationship with us (directly, or as a partner, stockholder or officer of an organization that has a relationship with us).
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In assessing the independence of our directors, the Board considers all of the business relationships between the Company and our directors and their respective affiliated companies. This review is based primarily on the Company’s review of its own records and on responses of the directors to questions in a questionnaire regarding employment, business, family, compensation and other relationships with the Company and our management. Where relationships exist, the Board determines whether the relationship between the Company and the directors or the directors’ affiliated companies impairs the directors’ independence. After consideration of the directors’ relationships with the Company, the Board has affirmatively determined that none of the individuals serving as non-employee directors during the fiscal year ended December 31, 2025 and 2024 had a material relationship with us and that each of such non-employee directors is independent.
Bryan McLaren was not considered an independent director during the fiscal years ended December 31, 2025 and 2024 because of his employment as our Chief Executive Officer and Chief Financial Officer.
Board of Directors and Board Committees
All of our directors and director nominees are encouraged to attend the annual meetings of our stockholders, as may be applicable.
The Board of Directors held one meeting during the fiscal year ended December 31, 2025. Each of our current directors attended 100% of the aggregate number of the meetings of the Board and meetings of the committees on which he or she served.
Our Board currently has four committees: the Audit Committee, the Compensation Committee, the Nominating and Governance Committee, and the Special Transactions Committee. As of April 1, 2026, the members and Chairs of our standing Board committees were:
| Audit | Compensation | Nom. & Gov | Special Trans. | ||||
| Independent Directors | |||||||
| Art Friedman | X | Chair | X | X | |||
| David G. Honaman | Chair | X | X | X | |||
| Cole Stevens | X | X | Chair | Chair |
Audit Committee
All Audit Committee members are “independent” under the NASDAQ listing standards and SEC rules and regulations. Our Board of Directors has determined that one of the members of the Audit Committee, Mr. Honaman, meets the definition of an “audit committee financial expert” as established by the SEC, and that Mr. Friedman, and Mr. Stevens as the two other members of the Audit Committee, meet the definition of “financially literate” as established by the SEC. The Audit Committee provides assistance to the Board in fulfilling its oversight responsibilities relating to the quality and integrity of the financial reports of the Company. The Audit Committee has the sole authority to appoint, review and discharge our independent accountants, and has established procedures for the receipt, retention, response to and treatment of complaints regarding accounting, internal controls and audit matters. In addition, the Audit Committee is responsible for:
| ● | reviewing the scope, results, timing and costs of the audit with our independent accountants and reviewing the results of the annual audit examination and any accompanying management letters; | |
| ● | assessing the independence of the outside accountants on an annual basis, including receipt and review of a written report from the independent accountants regarding their independence consistent with the independence standards of the board; | |
| ● | reviewing and approving the services provided by the independent accountants; | |
| ● | overseeing the internal audit function; and | |
| ● | reviewing our significant accounting policies, financial results and earnings releases, and the adequacy of our internal controls. |
The responsibilities of the Audit Committee are more fully described in the Audit Committee’s charter.
The Audit Committee held four meetings during the fiscal year ended December 31, 2025.
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Compensation Committee
All Compensation Committee members are “independent” under applicable NASDAQ listing standards. The Compensation Committee assists the Board in fulfilling its oversight responsibilities relating to executive compensation, employee compensation and benefit programs and plans, and leadership development and succession planning. In addition, the Compensation Committee is responsible for:
| ● | reviewing the performance of our Chief Executive Officer; | |
| ● | determining the compensation and benefits for our Chief Executive Officer and other executive officers; | |
| ● | establishing our compensation policies and practices; | |
| ● | administering our incentive compensation and stock plans (except for the issuance of securities to non-employee directors for services which is administered by the Board); and | |
| ● | approving the adoption of material changes to or the termination of our benefit plans. |
The Compensation Committee reviews and discusses with management the disclosures regarding executive compensation to be included in our annual proxy statement. The responsibilities of the Compensation Committee are more fully described in the Compensation Committee’s charter.
The Compensation Committee held two meetings during the fiscal year ended December 31, 2025.
Nominating and Governance Committee
All Nominating and Governance Committee members are “independent” under applicable NASDAQ listing standards. The Nominating and Governance Committee assists the Board in fulfilling its oversight responsibilities relating to Company and Board policies, and in relation to the nomination and election of Board Members. In addition, the Nominating and Governance Committee is responsible for:
| ● | establishing and reviewing the Nominating and Governance Committee Charter; and | |
| ● | establishing and reviewing various Company policies, such as the Company’s Insider Trading Policy and Code of Ethics. |
The responsibilities of the Nominating and Governance Committee are more fully described in the Nominating and Governance Committee’s charter.
The Nominating and Governance Committee held one meeting during the fiscal year ended December 31, 2025
During the fourth quarter of the fiscal year ended December 31, 2025, there were no material changes to the procedures by which stockholders may recommend nominees to the Board.
Officer and Director Indemnification Agreements
The Company entered into an Indemnification Agreement (each, an “Indemnification Agreement” and collectively, the “Indemnification Agreements”) with each of the Company’s officers and directors. The Indemnification Agreements supplement the indemnification provisions provided in the Company’s articles of incorporation and bylaws and any resolutions adopted pursuant thereto and generally provide that the Company shall indemnify the indemnitees to the fullest extent permitted by applicable law, subject to certain exceptions, against expenses, judgments, fines and other amounts actually and reasonably incurred in connection with their service as a director or officer and also provide for rights to advancement of expenses and contribution.
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ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation
The following 2025 Summary Compensation Table summarizes all compensation recorded by us for the years ended December 31, 2025 and 2024 for our “named executive officers” as such term is defined in Item 402(m)(2) of Regulation S-K (each, a “Named Executive Officer” and collectively, the “Named Executive Officers”).
2025 Summary Compensation Table
| Name and principal position | Year | Salary $ | Bonus $(1) | Stock Awards $ (2) | Option Awards $ | Non-Equity Incentive Plan Compensation $ | Nonqualified Deferred Compensation Earnings $ | All Other Compensation $ | Total $ | ||||||||||||||||||||||||||
| Bryan McLaren, | 2025 | 250,000 | 125,563 | - | - | - | - | - | 375,563 | ||||||||||||||||||||||||||
| Chief Executive Officer and Chief Financial Officer | 2024 | 250,000 | 56,473 | - | - | - | - | - | 306,473 | ||||||||||||||||||||||||||
| Berekk Blackwell, | 2025 | 190,000 | 125,563 | - | - | - | - | 11,924 | (3) | 327,487 | |||||||||||||||||||||||||
| President and Chief Operating Officer | 2024 | 190,000 | 57,473 | - | - | - | - | - | 247,473 | ||||||||||||||||||||||||||
| (1) | 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. Such amounts are included in bonus above. |
| (2) | As required by SEC rules, the amounts in this column reflect the grant date or modification date fair value as required by FASB ASC Topic 718. A discussion of the assumptions and methodologies used to calculate these amounts, are contained in the notes to our financial statements under “Note 11 – Shareholders’ Equity”. |
| (3) | Represent commissions paid in 2025 |
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Narrative Disclosure to Summary Compensation Table
Except as otherwise described below, there are no compensatory plans or arrangements, including payments to be received from the Company with respect to any executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with the Company, or our subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of the Company.
McLaren Employment Agreement & Golden Parachute Agreement
On May 23, 2018, we entered into an employment agreement with Mr. McLaren (the “2018 Employment Agreement”). Pursuant to the terms of the 2018 Employment Agreement, the Company agreed to continue to pay Mr. McLaren a base annual salary of $214,500, and to award Mr. McLaren with an annual and/or quarterly bonus payable in either cash and/or equity of no less than 2.5% of the Company’s net income for the associated period.
The 2018 Employment Agreement has a term of 10 years. The term and Mr. McLaren’s employment will terminate (a “Termination”) in any of the following circumstances:
| (i) | immediately, if Mr. McLaren dies; | |
| (ii) | immediately, if Mr. McLaren receives benefits under the long-term disability insurance coverage then | |
| (iii) | provided by the Company or, if no such insurance is in effect, upon Mr. McLaren’s disability; | |
| (iv) | 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; | |
| (v) | at the option of the Company for Cause (as hereinafter defined) upon the Company’s provision of written notice to Mr. McLaren of the basis for such Termination; | |
| (vi) | at the option of the Company, without Cause; | |
| (vii) | by Mr. McLaren at any time with Good Reason (as hereinafter defined), upon 30 days’ prior written notice to the Company delivered not later than within 90 days of the existence of the condition therefor; or | |
| (viii) | by Mr. McLaren at any time without Good Reason, upon not less than three months’ prior written notice to the Company. |
In the event of a Termination for any reason or for no reason whatsoever, or upon the expiration date of the 2018 Employment Agreement, whichever comes first, all rights and obligations under the 2018 Employment Agreement shall cease (i) as to the Company, except for the Company’s obligations for the payment of applicable severance benefits thereunder, and for indemnification thereunder, and (ii) as to Mr. McLaren, except for his obligation under the restrictive covenants in the 2018 Employment Agreement.
The Company and Mr. McLaren also entered into a Golden Parachute Agreement (the “Golden Parachute Agreement”) on May 23, 2018. No benefits shall be payable under the Golden Parachute Agreement unless there shall have been a change in control of the Company, as set forth below. For purposes of the Golden Parachute Agreement, 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(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the Company is in fact required to comply with that regulation, provided that, without limitation, such a change in control shall be deemed to have occurred if (A) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities; or (B) during any period of two consecutive years (not including any period prior to the execution of the Golden Parachute Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clauses (A) or (D) of this paragraph) whose election by the Board or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority; (C) the Company enters into an agreement, the consummation of which would result in the occurrence of a change in control of the Company; or (D) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to it continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) of more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company’s assets.
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.
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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) | 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; | |
| (b) | a material diminution in Mr. McLaren’s base compensation; | |
| (c) | a material change in the geographic location at which Mr. McLaren performs his duties; | |
| (d) | 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; | |
| (e) | a material diminution in the budget over which Mr. McLaren retains authority; |
| (f) | 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. McLaren’s total compensation; | |
| (g) | a material breach under any agreement with the Company to provide Mr. McLaren benefits substantially similar to those enjoyed by Mr. McLaren under any of the Company’s life insurance, medical, health and accident, or disability plans in which he was participating at the time of the change in control of the Company, the failure to continue to provide Mr. McLaren with a Company automobile or allowance in lieu of it, if Mr. McLaren was provided with such an automobile or allowance in lieu of it at the time of the change of control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive Mr. McLaren of any material fringe benefit enjoyed by Mr. McLaren at the time of the change in control of the Company, or the failure by the Company to provide him with the number of paid vacation days to which he is entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of the change in control of the Company; |
Following a change in control of the Company, upon termination of Mr. McLaren’s employment or during a period of disability, Mr. McLaren will be entitled to the following benefits:
| (i) | During any period that Mr. McLaren 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 Mr. McLaren under any compensation plan of the Company during such period, until the Golden Parachute Agreement is terminated. | |
| (ii) | If Mr. 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 Mr. McLaren is entitled under any compensation plan of the Company at the time such payments are due. | |
| (iii) | 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: |
| a. | 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 Mr. McLaren is entitled under any compensation plan of the Company. |
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| b. | In lieu of any further salary payments to Mr. McLaren for periods subsequent to the date of Termination, the Company will pay as severance pay to Mr. McLaren a lump sum severance payment (together with the payments provided in clauses (c) and (d) below) equal to five times the sum of Mr. McLaren’s 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. | |
| c. | The Company will pay Mr. McLaren any deferred compensation allocated or credited to Mr. McLaren or his account as of the date of Termination. | |
| d. | In lieu of shares of common stock of the Company issuable upon exercise of outstanding options, if any, granted to Mr. McLaren under the Company’s stock option plans (which options shall be cancelled upon the making of the payment referred to below), Mr. McLaren will receive an amount in cash equal to the product of (i) the excess of the closing price of the Company’s common stock as reported on or nearest the date of Termination (or, if not so reported, on the basis of the average of the lowest asked and highest bid prices on or nearest the date of Termination), over the per share exercise price of each option held by Mr. McLaren (whether or not then fully exercisable) plus the amount of any applicable cash appreciation rights, times (ii) the number of the Company’s common stock covered by each such option. | |
| e. | The Company will also pay Mr. McLaren all legal fees and expenses incurred by Mr. McLaren as a result of such Termination. |
| (iv) | In the event that Mr. McLaren is a “disqualified individual” within the meaning of Section 280G of the Code, the parties expressly agree that the payments described herein and all other payments to Mr. McLaren under any other agreements or arrangements with any persons which constitute “parachute payments” within the meaning of Section 280G of the Code are collectively subject to an overall maximum limit. Such maximum limit shall be $1 less than the aggregate amount which would otherwise cause any such payments to be considered a “parachute payment” within the meaning of Section 280G of the Code, as determined by the Company. |
Additionally, on August 16, 2024, the Company’s Compensation Committee approved a Compensation Memo whereby project team members may receive up to 80% bonus splits of project fees generated by transactions. Project fees may include Acquisition Fees, Management Fees, Disposition Fees, or Promote Fees. Each transaction may vary significantly in the types of fees generated and the amount of fees generated depending on project terms and conditions. In connection with such a bonus, in 2025 and 2024, the Company paid Mr. McLaren a bonus of $125,563 and $56,473, respectively.
Effective January 28, 2026, the Board of Directors of the Company approved an increase in the base salary of Bryan McLaren by 10%, such that Mr. McLaren’s base salary was increased to $275,000.
Blackwell Employment Agreement
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. In April 2023, Mr. Blackwells base annual salary was increased in $190,000.
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The Blackwell Employment Agreement has 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 hereinafter defined). For purposes of the Blackwell Employment Agreement, Cause, with respect to Mr. Blackwell, means:
| (i) | a material violation of any material written rule or policy of the Company applicable to Mr. Blackwell and which Mr. Blackwell fails to correct within 10 days after notice; |
| (ii) | misconduct by Mr. Blackwell to the material and demonstrable detriment of the Company; |
| (iii) | Mr. Blackwell’s conviction of, or pleading guilty to, a felony; or |
| (iv) | Mr. Blackwell’s material failure to fulfil his obligations and fulfill the covenants and agreements in the Blackwell Employment Agreement, after notice and failure to cure, as provided in the Blackwell Employment Agreement. |
With respect to the Company, “Cause” means the Company’s material failure to perform the Company’s obligations and fulfill the covenants and agreements in the Blackwell Employment Agreement, after notice and failure to cure, as provided in the Blackwell Employment Agreement.
The Blackwell Employment Agreement will continue to be in full force and effect after July 1, 2023, except that either party may terminate the Blackwell Employment Agreement for any reason upon 30 days’ written notice.
The Blackwell Employment Agreement contains representations, warranties and covenants customary for an agreement of this type.
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 years ended December 31, 2025 and 2024, the Company paid Mr. Blackwell a bonus of $125,563 and $57,473, respectively.
Effective January 28, 2026, the Board of Directors of the Company approved an increase in the base salary of Mr. Blackwell by 10%, such that Mr. Blackwell’s base salary was increased to $210,000.
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 as follows:
| Name | Position | No. of Shares of Restricted Common Stock | ||||
| Bryan McLaren | Chairman of the Board, Chief Executive Officer and Chief Financial Officer | 250,000 | ||||
| Berekk Blackwell | President and Chief Operating Officer | 150,000 | ||||
Such issuances are subject to forfeiture, depending on continued employment 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 will receive a cash payment from the Company to cover income tax liability associated with the above stock issuances in an amount up to 35% of the cost basis of the shares. In the event of a change of control, the Company will pay the full 35% tax coverage amount to each of the above executive officers prior to consummation of such change of control.
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Outstanding Equity Awards at 2025 Fiscal Year-End
The following table sets forth information as options outstanding on December 31, 2025.
| OUTSTANDING EQUITY AWARDS AT 2025 FISCAL YEAR-END | ||||||||||||||||||||||||||||||||||||
| OPTION AWARDS | STOCK AWARDS | |||||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised options (#) Exercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that have not Vested (#) | Market Value of Shares or Units of Stock that Have not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or other Rights that have not Vested ($) | |||||||||||||||||||||||||||
| Bryan McLaren | 250,000 | — | — | 1.00 | 12/26/2026 | — | — | — | — | |||||||||||||||||||||||||||
| Berekk Blackwell | 65,000 | 60,000 | (a) | — | 1.00 | 1/1/2031 | — | — | — | — | ||||||||||||||||||||||||||
| Berekk Blackwell | 37,500 | 37,500 | (a) | — | 1.00 | 1/21/2032 | — | — | — | — | ||||||||||||||||||||||||||
| (a) | Effective January 19, 2026, all unvested stock options held by Mr. Blackwell, representing an aggregate of 97,500 stock options, were canceled. |
Securities Authorized for Issuance under Equity Compensation Plans
On August 9, 2016, our Board of Directors authorized the 2016 Plan and reserved 10,000,000 shares of common stock for issuance thereunder. The 2016 Plan was approved by shareholders on November 21, 2016. The 2016 Plan’s purpose is to encourage ownership in the Company by employees, officers, directors and consultants whose long-term service the Company considers essential to its continued progress and, thereby, encourage recipients to act in the stockholders’ interest and share in the Company’s success. 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 Code, 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 three-year 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 December 31, 2025, 1,315,000 stock option awards were outstanding and 1,206,250 options were exercisable under the 2016 Plan. As of December 31, 2025, 8,685,000 shares were available for future issuance under the 2016 Plan.
The Company also continues to maintain its 2014 Equity Compensation Plan (the “2014 Plan”). The 2016 Plan has superseded the 2014 Plan. Accordingly, the Board does not intend to grant any additional awards under the 2014 Plan. As of December 31, 2025, options to purchase 250,000 shares of common stock were outstanding and exercisable pursuant to the 2014 Plan, respectively.
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The table below sets forth information as of December 31, 2025.
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number
of plans | |||||||||
| (a) | (b) | (c) | ||||||||||
| Equity compensation plans approved by security holders | 1,315,000 | $ | 0.75 | 8,685,000 | ||||||||
| Equity compensation plans not approved by security holders | 250,000 | $ | 1.00 | 0 | ||||||||
| Total | 1,565,000 | $ | 0.79 | 8,685,000 | ||||||||
Director Compensation
The following table sets forth compensation paid, earned or awarded during 2025 to each of our directors, other than Bryan McLaren, whose compensation is described above in the “2025 Summary Compensation Table”.
2025 Director Compensation
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | All Other Compensation ($) | Total ($) | ||||||||||||
| Art Friedman | - | 35,300 | - | 35,300 | ||||||||||||
| David G. Honaman | - | 35,200 | - | 35,300 | ||||||||||||
| Alex McLaren, MD (Former Director) | - | 5,883 | - | 5,883 | ||||||||||||
| Derek Overstreet (Former Independent Director) | - | 5,883 | - | 5,883 | ||||||||||||
| Jody Kane (Former Independent Director | - | 5,883 | - | 5,883 | ||||||||||||
| Cole Stevens (2) | - | - | - | - | ||||||||||||
| (1) | As required by SEC rules, the amounts in this column reflect the grant date or modification date fair value as required by FASB ASC Topic 718. A discussion of the assumptions and methodologies used to calculate these amounts is contained in the notes to our consolidated financial statements under “Shareholders’ Deficit”. On January 21, 2025, the director listed above received 105,000 stock options to purchase 105,000 shares of restricted stock with an exercise price of $0.44 per share. On April 23, 2025, 87,500 stock options issued to Alex McLaren, MD, Derek Overstreet and Jody Kane were cancelled. |
| (2) | Mr. Stevens received stock option in 2024 as part of his compensation.. |
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 Board members as follows:
| Name | Position | No. of Shares of Restricted Common Stock | ||||
| Art Friedman | Independent Director | 200,000 | ||||
| David G. Honaman | Independent Director | 200,000 | ||||
| Cole Stevens | Independent Director | 200,000 | ||||
Such issuances are subject to forfeiture, depending on continued 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 Board members will receive a cash payment from the Company to cover income tax liability associated with the above stock issuances in an amount up to 35% of the cost basis of the shares. In the event of a change of control, the Company will pay the full 35% tax coverage amount to each of the above Board members prior to consummation of such change of control.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regarding beneficial ownership of our common stock and preferred stock as of April 1, 2026, by:
| ● | Each director and each of our Named Executive Officers, | |
| ● | All executive officers and directors as a group, and | |
| ● | Each person known by us to be the beneficial owner of more than 5% of our outstanding common stock. |
As of April 1, 2026, there were 13,180,829 shares of our common stock outstanding and 2,000,000 shares of preferred stock outstanding.
The number of shares of common stock beneficially owned by each person is determined under the rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which such person has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days after the date hereof, through the exercise of any stock option, warrant or other right. Unless otherwise indicated, each person has sole investment and voting power (or shares such power with his or her spouse) with respect to the shares set forth in the following table. The inclusion herein of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.
Common Stock
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||
| Named Executive Officers and Directors: | ||||||||
| Bryan McLaren | 312,500 | (1) | 2.4 | % | ||||
| Berekk Blackwell | 130,879 | (2) | * | % | ||||
| Art Friedman | 295,575 | (3) | 2.2 | % | ||||
| David G. Honaman | 263,750 | (4) | 2.0 | % | ||||
| Cole Stevens | 52,500 | (5) | * | |||||
| All executive officers and directors as a group (five persons) | 1,055,204 | (6) | 8.0 | % | ||||
| Other 5% Stockholders: | ||||||||
| Alex McLaren, MD | 1,799,167 | (7) | 13.7 | % | ||||
c/o Zoned Properties, Inc. 8360 E. Raintree Drive #230 Scottsdale, AZ 85260 | ||||||||
Greg Johnston c/o Zoned Properties, Inc. 8360 E. Raintree Drive #230 Scottsdale, AZ 85260 | 1,262,500 | 9.6 | % | |||||
Melinda Jay Johnston c/o Zoned Properties, Inc. 8360 E. Raintree Drive #230 Scottsdale, AZ 85260 | 1,250,000 | 9.5 | % | |||||
Joseph Bartonek c/o Zoned Properties, Inc. 8360 E. Raintree Drive #230 Scottsdale, AZ 85260 | 756,250 | 5.7 | % | |||||
| * | Less than 1%. |
| (1) | Includes 250,000 vested stock options. |
| (2) | Includes 120,000 vested stock options. |
| (3) | Includes 148,750 vested stock options. |
| (4) | Includes 163,750 vested stock options. |
| (5) | Includes 52,500 vested stock options. |
| (6) | Includes 735,000 vested stock options. |
| (7) | Includes 1,501,667 shares held by McLaren Family LLLP. Dr. McLaren is the general partner of McLaren Family LLLP and has voting and dispositive power over such shares and includes 137,500 vested stock options. |
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Preferred Stock
| Name and Address of Beneficial Owner | Shares of Preferred Stock Beneficially Owned | Percent of Class Beneficially Owned | Percent of Voting Power (1) | |||||||||
| Greg Johnston c/o Zoned Properties, Inc. 8360 E. Raintree Drive #230 Scottsdale, AZ 85260 | 1,000,000 | 50.0 | % | 45.3 | % | |||||||
| Alex McLaren c/o Zoned Properties, Inc. 8360 E. Raintree Drive #230 Scottsdale, AZ 85260 | 1,000,000 | (2) | 50.0 | % | 45.8 | % | ||||||
| (1) | As a result of the multiple votes afforded to holders of the preferred stock (50 votes per share), Mr. Johnston and Dr. McLaren have the ability to control the outcome of all matters submitted to a vote of stockholders, including the election of directors. The percent of voting power in the table gives effect to the holder’s beneficial ownership of common stock and preferred stock. |
| (2) | Shares are held by McLaren Family LLLP. Dr. McLaren is the general partner of McLaren Family LLLP and has voting and dispositive power over such shares. |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
We do not have a written policy for the review, approval or ratification of transactions with related parties or conflicted transactions. When such transactions arise, they are referred to the audit committee for consideration for referral to our board of directors for its consideration.
Director Independence
Three of our four board members are independent. The Board has determined that each of Messrs. Friedman, Honaman, and Stevens is an independent director pursuant to the NASDAQ listing standards. Under the NASDAQ rules, no director qualifies as independent unless the Board affirmatively determines that the director has no material relationship with us (directly, or as a partner, stockholder or officer of an organization that has a relationship with us).
In assessing the independence of our directors, the Board considers all of the business relationships between the Company and our directors and their respective affiliated companies. This review is based primarily on the Company’s review of its own records and on responses of the directors to questions in a questionnaire regarding employment, business, familial, compensation and other relationships with the Company and our management. Where relationships exist, the Board determines whether the relationship between the Company and the directors or the directors’ affiliated companies impairs the directors’ independence. After consideration of the directors’ relationships with the Company, the Board has affirmatively determined that none of the individuals serving as non-employee directors during the fiscal year ended December 31, 2025 or 2024 had a material relationship with us and that each of such non-employee directors is independent.
Bryan McLaren was not considered an independent director during his service on the Board during the fiscal year ended December 31, 2025 or 2024 because of his employment as our Chairman of the Board, CEO, CFO, and Treasurer.
69
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the fees that were billed or that will be billed to our company for professional services rendered by Salberg & Company, P.A. for the years ended December 31, 2025 and 2024:
| Fees | 2025 | 2024 | ||||||
| Audit Fees | $ | 73,000 | $ | 72,500 | ||||
| Audit-Related Fees | 0 | 0 | ||||||
| Tax Fees | 0 | 0 | ||||||
| Other Fees | 0 | 0 | ||||||
| Total Fees | $ | 73,000 | $ | 72,500 | ||||
Audit Fees
Audit fees were for professional services rendered for the audits of our financial statements and for review of our quarterly financial statements.
Audit-Related Fees
During 2025 and 2024, our independent registered public accountants did not provide any assurance and related services that are reasonably related to the performance of the audit or review or our financial statements that are not reported under the caption “Audit Fees” above.
Tax Fees
As our independent registered public accountants did not provide any services to us for tax compliance, tax advice and tax planning during 2025 and 2024, no tax fees were billed or paid during those fiscal years.
All Other Fees
Our independent registered public accountants did not provide any products and services not disclosed in the table above during 2025 and 2024. As a result, there were no other fees billed or paid during 2025 and 2024.
Pre-Approval Policies and Procedures
Our Audit Committee pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by our Audit Committee before the respective services were rendered.
Our board of directors has considered the nature and amount of fees billed by our independent registered public accounting firm and believe that the provision of services for activities unrelated to the audit is compatible with maintaining their respective independence.
70
PART IV
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
Exhibits required by Item 601 of Regulation S-K:
EXHIBIT INDEX
71
72
73
74
| + | Management contract or compensatory plan or arrangement. |
| * | Filed herewith. |
| ** | Furnished herewith. |
ITEM 16. 10-K SUMMARY
As permitted, the registrant has elected not to supply a summary of information required by Form 10-K.
75
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Zoned Properties, Inc. | ||
| Date: April 1, 2026 | By: | /s/ Bryan McLaren |
| Bryan McLaren | ||
Chief Executive Officer and Chief Financial Officer | ||
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Bryan McLaren as attorney-in-fact with full power of substitution to execute in the name and on behalf of the registrant and each such person, individually and in each capacity stated below, one or more amendments to the annual report on Form 10-K, which amendments may make such changes in the report as the attorney-in-fact acting deems appropriate and to file any such amendment to the annual report on Form 10-K with the Securities and Exchange Commission. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Bryan McLaren | Chairman, Chief Executive Officer, Chief Financial Officer and Treasurer | April 1, 2026 | ||
| Bryan McLaren | (principal executive officer, principal financial officer and principal accounting officer) | |||
| /s/ Art Friedman | Director | April 1, 2026 | ||
| Art Friedman | ||||
| /s/ David G. Honaman | Director | April 1, 2026 | ||
| David G. Honaman | ||||
| /s/ Cole Stevens | Director | April 1, 2026 | ||
| Cole Stevens |
76
ZONED PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2025 and 2024
ZONED PROPERTIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 and 2024
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of:
Zoned Properties, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Zoned Properties, Inc. and Subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2025 and 2024, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company had a net loss of $2.85 million. Furthermore, in December 2025 and January 2026 the Company entered into an agreement with a third party and with a related party management group, respectively, to sell all its assets. The closings are contingent on certain events occurring. If the Company sells some or all of its properties, it will have minimal or no operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s Plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
2295 NW Corporate Blvd., Suite 240 ● Boca Raton, FL 33431-7326
Phone: (561) 995-8270 ● Toll Free: (866) CPA-8500 ● Fax: (561) 995-1920
www.salbergco.com ● [email protected]
Member National Association of Certified Valuation Analysts ● Registered with the PCAOB
Member CPAConnect with Affiliated Offices Worldwide ● Member AICPA Center for Audit Quality
F-2
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ SALBERG & COMPANY, P.A.
We have served as the Company’s auditor since 2024.
April 1, 2026
F-3
ZONED PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Deferred rent | ||||||||
| Lease incentive receivable | ||||||||
| Rental properties, net | ||||||||
| Prepaid expenses and other assets | ||||||||
| Escrow deposits | ||||||||
| Capitalized project costs | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right of use asset, net | ||||||||
| Investment in unconsolidated joint ventures | ||||||||
| Investment in cost-method investees | ||||||||
| Interest rate swap asset | ||||||||
| Security deposits | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| LIABILITIES: | ||||||||
| Convertible note payable | $ | $ | ||||||
| Notes payable, net | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Lease liability | ||||||||
| Contract liabilities | ||||||||
| Derivative liability - interest rate swap, at fair value | ||||||||
| Security deposits payable | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 10) | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred stock, $ | ||||||||
| Common stock: $ | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock, at cost ( | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
F-4
ZONED PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Year Ended | ||||||||
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| REVENUES: | ||||||||
| Property investment portfolio revenues | $ | $ | ||||||
| Real estate services revenues | ||||||||
| Total revenues | ||||||||
| OPERATING EXPENSES: | ||||||||
| Compensation and benefits | ||||||||
| Professional fees | ||||||||
| Brokerage fees | ||||||||
| General and administrative expenses | ||||||||
| Depreciation and amortization | ||||||||
| Real estate taxes | ||||||||
| Property portfolio business development costs | ||||||||
| Impairment loss from buildings | ||||||||
| Total operating expenses, net | ||||||||
| (LOSS) INCOME FROM OPERATIONS | ( | ) | ||||||
| OTHER (EXPENSES) INCOME: | ||||||||
| Interest expenses | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Impairment of equity securities | ( | ) | ||||||
| (Loss) income from derivative - interest rate swap | ( | ) | ||||||
| Total other expenses, net | ( | ) | ( | ) | ||||
| (LOSS) INCOME BEFORE EQUITY METHOD LOSSES | ( | ) | ||||||
| EQUITY METHOD LOSS: | ||||||||
| Equity method loss from unconsolidated joint ventures | ( | ) | ||||||
| Total equity method loss | ( | ) | ||||||
| NET (LOSS) INCOME | $ | ( | ) | $ | ||||
| NET (LOSS) INCOME PER COMMON SHARE: | ||||||||
| Basic | $ | ( | ) | $ | ||||
| Diluted | $ | ( | ) | $ | ||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
See accompanying notes to consolidated financial statements.
F-5
ZONED PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024
| Preferred Stock | Common Stock | Additional Paid-in | Treasury Stock | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Shares | Amount | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Purchase of treasury stock | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Accretion of stock-based compensation related to stock options issued | - | - | - | |||||||||||||||||||||||||||||||||
| Rounding | - | ( | ) | - | ||||||||||||||||||||||||||||||||
| Net income | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Balance, December 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Purchase of treasury shares | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||
| Accretion of stock-based compensation related to stock options issued | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
F-6
ZONED PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Year Ended | ||||||||
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM 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 | ||||||||
| Lease costs | ( | ) | ||||||
| Loss (income) from interest rate swap | ( | ) | ||||||
| Equity method loss from unconsolidated joint ventures | ||||||||
| Impairment loss from equity securities | ||||||||
| Impairment loss from buildings | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Deferred rent receivable | ( | ) | ( | ) | ||||
| Lease incentive receivable | ||||||||
| Prepaid expenses and other assets | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Contract liabilities | ( | ) | ( | ) | ||||
| Security deposits payable | ( | ) | ||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of rental properties and improvements | ( | ) | ( | ) | ||||
| Purchases of property and equipment | ( | ) | ||||||
| Increase in capitalized project costs | ( | ) | ( | ) | ||||
| Cash received from investment in unconsolidated joint ventures | ||||||||
| Investment in cost-method investees | ( | ) | ||||||
| Increase in escrow deposits | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Purchase of treasury shares | ( | ) | ( | ) | ||||
| Net proceeds from notes payable | ||||||||
| Repayment of notes payable | ( | ) | ( | ) | ||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET DECREASE IN CASH | ( | ) | ( | ) | ||||
| CASH, beginning of year | ||||||||
| CASH, end of year | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Interest paid | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Reclassification of capitalized project costs to prepaid expenses and other assets | $ | $ | ||||||
| Increase in operating lease right of use asset and lease liability | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
F-7
ZONED PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS
Zoned Properties, Inc. (“Zoned Properties”
or the “Company”) was incorporated in the State of Nevada on
The Company has the following wholly owned subsidiaries:
| ● | Chino Valley Properties, LLC (“Chino Valley”) was organized in the State of Arizona on April 15, 2014. | |
| ● | Kingman Property Group, LLC (“Kingman”) was organized in the State of Arizona on April 15, 2014. | |
| ● | Green Valley Group, LLC (“Green Valley”) organized in the State of Arizona on April 15, 2014. | |
| ● | Zoned Arizona Properties, LLC (“Zoned Arizona”) was organized in the State of Arizona on June 2, 2017. | |
| ● | Zoned Advisory Services, LLC (“Zoned Advisory”) was organized in the State of Arizona on July 27, 2018. | |
| ● | Zoned Properties Brokerage, LLC (“Arizona Brokerage”) was organized in the State of Arizona on March 17, 2021. | |
| ● | ZP Data Platform 1, LLC (“ZP Data 1”) was organized in the State of Arizona on April 14, 2021 (inactive). | |
| ● | ZP Data Platform 2, LLC (“ZP Data 2”) was organized in the State of Arizona on June 21, 2022. | |
| ● | ZP RE Holdings, LLC (“ZPRE Holdings”) was organized in the State of Arizona on September 20, 2022. | |
| ● | ZP Brokerage MS, LLC (“Mississippi Brokerage”) was organized in the State of Mississippi on October 4, 2022 (inactive and dissolved on January 13, 2025) | |
| ● | ZP Brokerage FL, LLC (“Florida Brokerage”) was organized in the State of Florida on October 20, 2022. | |
| ● | ZP Brokerage AL, LLC (“Alabama Brokerage”) was organized in the State of Alabama on October 20, 2022 (inactive and dissolved on January 9, 2025). | |
| ● | ZP RE MI Woodward, LLC (“ZP Woodward”) was organized in the State of Michigan on November 22, 2022 | |
| ● | ZP Brokerage MO, LLC (“Missouri Brokerage”) was organized in the State of Missouri on November 30, 2022 (inactive and dissolved on January 13, 2025.) | |
| ● | ZP RE IL Ashland, LLC (“ZP Ashland”) was organized in the State of Illinois on February 14, 2024. | |
| ● | ZP RE AZ DYSART. LLC (“ZP Dysart”) was organized in the State of Arizona on May 24, 2024. |
The Company also maintains a
F-8
ZONED PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
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”). 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 (“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, as discussed below. See Note 14—Subsequent Events.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
The accompanying 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.
Going concern consideration
These 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 consolidated financial statements, the Company had a net loss of $
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 years ended December 31, 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.
F-9
ZONED PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
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 years ended December 31, 2025
and 2024, revenues associated with Significant Tenants amounted to $
Fair value of financial instruments
The carrying amounts reported in the consolidated balance sheets for cash, accounts receivable, prepaid expenses and other assets, capitalized project costs, escrow deposits, accounts payable, accrued expenses, and other payables approximate their fair market value based on the short-term maturity of these instruments.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (“ASC 820”), requires companies to determine fair value based on the price that would be received to sell the asset or paid to transfer the liability to a market participant. ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement.
The guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:
| ● | Level 1: Quoted market prices in active markets for identical assets or liabilities. |
| ● | Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. |
| ● | Level 3: Unobservable inputs that are not corroborated by market data. |
Other than the interest rate swap, the Company did not identify any other assets or liabilities that are required to be presented on the balance sheets at fair value, on a recurring basis, in accordance with ASC Topic 820.
The following table represents the Company’s fair value hierarchy of its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 and 2024.
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||
| Description | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||
| Interest rate swap asset | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Interest rate swap liability | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
F-10
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
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 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 consolidated balance sheet with changes in the fair value reflected in change in fair value of interest rate swap on the accompanying 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 as follows:
| Description | Notional Amount on December 31, 2025 | Interest Rate | Maturity | Fair Value of Liability on December 31, 2025 | Fair Value of Asset on December 31, 2024 | |||||||||||||||
| December 10, 2022 interest rate swap | $ | % | $ | $ | ||||||||||||||||
Cash
Cash is carried at cost and represents cash on
hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of
three months or less as of the purchase date of such investments. The Company had no cash equivalents on December 31, 2025 and 2024. The
Company’s cash is held at major commercial banks, which may at times exceed the Federal Deposit Insurance Corporation (“FDIC”)
limit. To date, the Company has not experienced any losses on its invested cash. As of December 31, 2025 and 2024, the Company had approximately
$
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.
F-11
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
Investment in equity method unconsolidated joint ventures
The Company has equity investments in various privately held entities. The Company accounts for these investments either 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. 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.
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. 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 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
as income. During the year ended December 31, 2025, through its wholly-owned subsidiary ZPRE Holdings, the Company invested $
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. Accordingly,
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 $
F-12
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
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
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 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 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 $
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. 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 years ended December 31, 2025 and 2024, the Company forfeited
escrow deposits and wrote off capitalized project costs of $
F-13
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
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
lives. The Company uses a
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 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. 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 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 consolidated statements of operations.
Real Estate Services Revenues
The Company follows ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), except for revenues from lease contracts within the scope of ASC 842, which are excluded from ASC 606. This standard establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. ASC 606 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and requires certain additional disclosures.
Revenues from advisory services is recognized when the Company performs services pursuant to its agreements with clients and collectability is probable.
Brokerage revenues primarily consist of real estate sales commissions and are recognized upon the successful completion of all required services which is likely to occur upon a lease commencement, when escrow closes on the sale of a property, or as otherwise negotiated between the Brokerage and its clients. In accordance with the guidelines established for reporting revenue gross as a principal versus net as an agent in ASC Topic 606, the Company records commission revenues and expenses on a gross basis. Of the criteria listed in ASC Topic 606, the Company is the primary obligor in the transaction, does not have inventory risk, performs all or part of the service, has credit risk, and has wide latitude in establishing the price of services rendered and discretion in selection of agents and determination of service specifications. Brokerage revenues that are payable upon payment of rent or other events beyond the Company’s control are recognized upon the occurrence of such events.
F-14
ZONED PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
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.
| Year Ended December 31, 2025 | Year Ended December 31, 2024 | |||||||
| Balance at beginning of period | $ | $ | ||||||
| Rental payments received in advance | ||||||||
| Accretion of contract liabilities to revenue | ( | ) | ( | ) | ||||
| Balance at end of period | $ | $ | ||||||
Lease accounting
The FASB’s ASC Topic 842, “Leases” sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. 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.
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 $
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 December 31, 2025 and 2024 of $
F-15
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
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.
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
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 each period. 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). 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 (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.
The following table presents a reconciliation of basic and diluted net income (loss) per common share:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net (loss) income per common share - basic: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Less: undistributed (earnings) loss allocated to participating securities | ||||||||
| Net (loss) income allocated to common stockholders | $ | ( | ) | $ | ||||
| Weighted average common shares outstanding – basic | ||||||||
| Net (loss) income per common share – basic | $ | ( | ) | $ | ||||
| Net (loss) income per common share - diluted: | ||||||||
| Net (loss) income allocated to common shareholders – basic | $ | ( | ) | $ | ||||
| Add: interest of convertible debt | ||||||||
| Numerator for net (loss) income per common share – basic | $ | ( | ) | $ | ||||
| Weighted average common shares outstanding – basic | ||||||||
| Add: dilutive shares related to: | ||||||||
| Stock options | ||||||||
| Convertible debt | ||||||||
| Weighted average common shares outstanding – diluted | ||||||||
| Net (loss) income per common share – diluted | $ | ( | ) | $ | ||||
F-16
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
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 years ended December 31, 2025 and 2024.
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Convertible debt | ||||||||
| Stock options | ||||||||
Segment reporting
The Company operates in
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires entities to report incremental information about significant segment expenses included in a segment’s profit or loss measure as well as the title and position of the chief operating decision maker (“CODM”). The new standard also requires interim disclosures related to reportable segment profit or loss and assets that had previously only been disclosed annually. The Company adopted ASU 2023-07 effective December 31, 2024 on a retrospective basis. As a result, the Company has enhanced its segment disclosures in this report to include the presentation of depreciation and amortization, interest and joint venture expenses by segment and the disclosure of its CODM. The adoption of this ASU only affects the Company’s disclosures with no impact to its financial condition or results of operations.
Income tax
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 reverse. 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” threshold. The Company does not believe it has any uncertain tax positions as of December 31, 2025 and 2024 that would require either recognition or disclosure in the accompanying consolidated financial statements.
Stock-based compensation
Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation – Stock Compensation”, which requires recognition in the financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted under ASU 2016-09 Improvements to Employee Share-Based Payment Accounting.
F-17
ZONED PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
Recently issued accounting pronouncements
The Company adopted Accounting Standards Update (“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 adopted ASU 203-09 during the year ended December 31, 2025 using a retrospective approach and is complying with the related disclosure requirements in Note 13, Income Taxes.
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 function. The new disclosures will require entities to separately present expenses for significant line items, including but not limited to, depreciation, amortization, and employee compensation. Entities will also be required to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, disclose the total amount of selling expenses and, in annual reporting periods, provide a definition of what constitutes selling expenses. This pronouncement is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company does not expect the adoption of this new guidance to have a material impact on the consolidated financial statements.
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 consolidated financial statements.
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, Inc. (“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 land 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
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
F-18
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
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 $
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 $
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
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
On December 31, 2025, Chino Valley entered into an Amended and Restated Absolute Net Lease Agreements with Broken Arrow Inc. with an effective date of January 1, 2026 (see Note 14 – Subsequent Events).
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
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. 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)
F-19
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
On December 31, 2025, Green Valley entered into
an Amended and Restated Absolute Net Lease Agreements with Broken Arrow, with an effective date of
Tempe, AZ
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
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 $
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 $
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 $
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
$
F-20
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
As of June 1, 2025, VSM has satisfied the Capital
Commitment and completed more than $
Additionally, on the Tempe property, the Company leases parking lot space for an antenna location to a third party.
Kingman, AZ
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
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)
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. Pursuant
to the Sublease, the Sublease shall be effective on August 2, 2023 and end on the one year anniversary, or (ii) the last day of the Term
of the Master Lease (whether due to expiration or termination thereof by the Company, whichever is earlier (the “Sublease Expiration
Date”), such period being referred to herein as the “Sublease Term”, unless terminated earlier pursuant to the terms
of this Sublease or otherwise by consent of the Company, CJK and Subtenant. The subtenant had two options to extend the Sublease Term
by one-year periods each (each a “Sublease Term Extension” and collectively the “Sublease Term Extensions”), which
were exercisable by Subtenant no later than 90 days prior to the expiration of the Sublease Term, as may be extended. In August 2024,
the Sublease was not renewed and the Sublease expired. Upon expiration of the Sublease, the Security Deposit of $
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 Note 14 – Subsequent Events).
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.
F-21
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
On May 14, 2023, ZP Woodward entered into an Assignment and Assumption of Lease (“Assignment”) whereby the Woodward Lease was assigned from Rapid Fish 2 LLC (“Old Tenant”) to Rapid Fish LLC (“New Tenant”). Old Tenant and New Tenant share common ownership. The assignment of the Woodward Lease is conditioned upon issuance by the City of Pleasant Ridge, Michigan of a final cannabis business license to New Tenant and ZP Woodward’s receipt of a fully executed Reaffirmation of Guaranty from the guarantors of the Woodward Lease. The Assignment contains other terms as are customary for a document of this type.
On May 1, 2024, ZP Woodward and Rapid Fish, LLC (the “Parties”), with individual Guarantors, Thomas Nafso and Ammar Kattoula (the “Guarantors”), entered into a First Amendment to the Absolute Net Lease Agreement (the “First Amendment”) pertaining to premises located at 23600-23634 Woodward Ave, Pleasant Ridge MI 48069. The Parties also agreed to a fully executed Reaffirmation of Guaranty from the Guarantors.
According to the terms of the First Amendment, the following changes have been agreed to by the Parties:
Amended Rental Payment Schedule
The First Amendment provides that as long as the Company’s Conditions, as outlined in this First Amendment, are satisfied including a Renovation Completion Commitment, the Rental Payment Schedule of the Lease will be amended to the schedule set forth in the First Amendment.
Capital Commitment
The First Amendment provides for the inclusion
of the Capital Commitment as follows: Tenant shall cause a total of at least $
Renovation Completion Commitment
The First Amendment provides for the inclusion of the Renovation Completion Commitment as follows: Tenant shall cause its Capital Commitment at the Premises (the “Renovation Completion Commitment”) to be completed within three (3) months after the First Amendment Effective Date (the “Renovation Completion Commitment Date”). In order to satisfy the Renovation Completion Commitment, Tenant must satisfy the following prior to the Renovation Completion Commitment Date (i) deliver to the Company the appropriate deliverables evidencing renovation completion (the “Renovation Completion Deliverables”) (as defined below) (ii) open for business to the public for its intended Use of the Premises (the “Store Opening”), (iii) and complete its first bona fide sale to the public. The Renovation Completion Deliverables include the following: (x) Tenant has furnished to the Company a copy of a commercially reasonably detailed final cost breakdown for Tenant’s Work and the Company has inspected the Premises to confirm that Tenant’s Work has been completed in a good and workmanlike manner according to the Tenant’s Approved Plans; (y) Tenant has furnished to the Company commercially reasonable final affidavits and final lien releases from Tenant’s general contractor, if any, all subcontractors and all material suppliers for all labor and materials performed or supplied as part of Tenant’s Work (whether or not the Allowance is applicable thereto); (z) a copy of the certificate of occupancy from the governmental authority having jurisdiction has been delivered to the Company. Tenant acknowledges that the Renovation Completion Commitment is material to the Company and the Company would not have agreed to enter into this First Amendment but for Tenant’s obligations in this paragraph. If the Renovation Completion Commitment is not completed in the prescribed time period, Tenant’s failure shall constitute an Event of Default under the Lease. the Company shall grant Tenant up to two (2) additional 30-day extension upon request, so long as at the time of the extension the site is conducting inspections toward certificate of occupancy.
F-22
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
North Lot
The First Amendment also provides that if within
18 months of the date of this First Amendment, Tenant is able to complete all of the following related to 23634 Woodward Ave, Pleasant
Ridge MI 48069 with an APN of 25-27-181-003 (the “North Lot”): (i) obtain authorization from all required jurisdictions (including
the City of Pleasant Ridge) that the use of the North Lot parking spaces is no longer required and releases the Company from all obligations
related to the North Lot under the Declaration of Restrictions and Parking Easement (the “Parking Agreement”), and (ii) confirm
that the Tenant is able to continue to use the lot for purposes of ingress and egress, and (iii) Tenant is able to arrange a deal with
the seller of the North Lot, which is currently under a Land Contract with outstanding installment payments, that (x) provides the Company
with indemnity from Tenant that completely releases the Company of any operational obligations or liabilities related to the North Lot,
(y) provides the Company with indemnity from Tenant that completely release the Company of any financial obligations or liabilities related
to the North Lot, and (z) does not cause any encumbrance or legal liability to the remaining properties at the Premises; then within 30
days of the Company’s receipt of written confirmation from all appropriate parties that all requirements noted above have been satisfied,
at the Company sole discretion, the Company agrees that the parties shall enter into a Lease Amendment acknowledging the same and modifying
Tenant’s lease base rental rate to be reduced by $
Reaffirmation of Guarantee
In consideration of the First Amendment, the Guarantors
executed and delivered a Reaffirmation of Guaranty (the “Reaffirmation of Guaranty”) effective as of May 3, 2024. Related
to the Guaranty and the Original Guarantors, the Company agreed, that so long as there are no uncured Events of Default and Tenant remains
in good standing under the Lease, then the Original Guarantors shall be released of their guarantees following the original lease term
of
During the third quarter of 2025, New Tenant faced
operational challenges that impaired its ability to meet contractual rent obligations. Beginning in July 2025, New Tenant remitted approximately
Chicago, IL
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 $
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
F-23
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
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. 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 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 $
Surprise, AZ
On January 2, 2024, ZPRE Holdings entered into
a contingent Licensed Cannabis Facility Absolute Net Ground Lease Agreement (the “Sunday Goods Lease”), with a commencement
date contingent upon the satisfaction of various contingencies to the Sunday Goods Lease, by and between ZPRE Holdings, as landlord, and
Sunday Goods, as tenant. Pursuant to the terms of the Sunday Goods Lease, ZPRE Holdings agreed to lease the “Surprise Property”
to Sunday Goods for use as a licensed medical and adult use marijuana retail dispensary in accordance with the laws of Arizona. The Sunday
Goods Lease has a term of
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) $
F-24
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
Summary
As of December 31, 2025 and 2024, security deposits
payable to the Company’s tenants amounted to $
Future minimum lease payments to be received, on all leased properties, for each of the five succeeding calendar years and thereafter as of December 31, 2025, consists of the following:
| Future annual base rent: | Amount | |||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total | $ | |||
Revenues – Significant Tenants
For the years ended December 31, 2025 and 2024, revenues associated with Significant Tenant leases described above are summarized as follows:
| For the Year Ended December 31, 2025 | % of Total Revenues | For the Year Ended December 31, 2024 | % of Total Revenues | |||||||||||||
| Broken Arrow | $ | % | $ | % | ||||||||||||
| VSM | % | % | ||||||||||||||
| Rapid Fish | % | % | ||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
Further, as of December 31, 2025 and 2024, deferred
rent of $
F-25
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
Asset concentration
The Company’s real estate properties are leased to the Company’s tenants under absolute-net and triple-net leases that terminate through March 2037 and April 2040, respectively. The Company monitors the credit of all tenants to stay abreast of any material changes in credit quality. The Company monitors tenant credit by (1) reviewing financial statements and related metrics and information that are publicly available or that are provided to us upon request, and (2) monitoring the timeliness of rent collections.
As of December 31, 2025 and 2024, the Company
had an asset concentration related to its Significant Tenants. As of December 31, 2025 and 2024, the Significant Tenants collectively
leased approximately
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 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 square foot.
NOTE 4 – RENTAL PROPERTIES
On December 31, 2025 and 2024, rental properties, net consisted of the following:
| Description | Useful Life (Years) | December 31, 2025 | December 31, 2024 | |||||||||
| Building and building improvements | $ | $ | ||||||||||
| Construction in progress | ||||||||||||
| Land | ||||||||||||
| Rental properties, at cost | ||||||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||||||
| Rental properties, net | $ | $ | ||||||||||
Property Acquisitions and Impairments
2024
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 $
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
F-26
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
2025
During the year ended December 31, 2025, the Company
paid $
During the third quarter of 2025, New Tenant faced
operational challenges that impaired its ability to meet contractual rent obligations. Beginning in July 2025, New Tenant remitted approximately
For the years ended December 31, 2025 and 2024,
depreciation of rental properties amounted to $
NOTE 5 – INVESTMENT IN EQUITY METHOD UNCONSOLIDATED JOINT VENTURE, COST METHOD INVESTEE AND EQUITY SECURITIES
Investment in equity method unconsolidated joint venture
On December 31, 2025 and 2024, the Company held
an investment with carrying values of $
The following represents summarized financial information derived from the financial statements of Zoneomics Green (inactive), as of December 31, 2025 and 2024 and for the years ended December 31, 2025 and 2024.
| Balance sheets: | December 31, 2025 | December 31, 2024 | ||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Total assets | $ | $ | ||||||
| Liabilities | $ | $ | ||||||
| Equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
F-27
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
| Statement of operations | Year Ended December 31, 2025 | Year Ended December 31, 2024 | ||||||
| Net sales | $ | $ | ||||||
| Operating expenses, net | ||||||||
| Net loss | $ | $ | ||||||
| Company’s share of loss from unconsolidated joint ventures | $ | $ | ||||||
During the years ended December 31, 2025 and 2024,
the Company recorded a loss from unconsolidated joint ventures of $
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 $
On June 24, 2022, the Company’s wholly-owned
subsidiary, ZP Data Platform 2 LLC, purchased
NOTE 6 – NOTES PAYABLE
On December 31, 2025 and 2024, notes payable consisted of the following:
| December 31, 2025 | December 31, 2024 | |||||||
| Note payable - East West Bank | $ | $ | ||||||
| Notes payable - 23616 Land Contract | ||||||||
| Note payable – 23634 Land Contract | ||||||||
| Note payable - Surprise, AZ property | ||||||||
| Total principal due on notes payable | ||||||||
| Less: debt discount | ( | ) | ( | ) | ||||
| Notes payable, net | $ | $ | ||||||
F-28
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
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 $
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”).
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
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 Bank. The Amended Note has an original principal amount of $
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
F-29
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
On December 31, 2025, principal and interest due
on the East West Bank Swap Note amounted to $
23616 Land Contract Note Payable
On December 5, 2022, in connection with the acquisition
of the Woodward Property located in Pleasant Ridge, Michigan, the Company entered into a land contract note in the amount of $
| 1) | 60 monthly payments of principal and interest of $ |
| 2) | A balloon payment of $ |
On December 31, 2025, principal and interest due
on the 23616 Land Contract Note Payable amounted to $
23634 Land Contract Note Payable
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 $
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 $
F-30
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
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
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 $
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 years ended December 31, 2025 and 2024,
amortization of debt discount related to notes payable amounted to $
F-31
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
On December 31, 2025, future annual principal payments under the above notes payable were as follows:
| Years ending December 31, | Amount | |||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total principal payments due on December 31, 2025 | $ | |||
NOTE 7 – CONVERTIBLE NOTE PAYABLE
On January 9, 2017, the Company issued a convertible
debenture (the “Abrams Debenture”) in the aggregate principal amount of $
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 $
If 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
As of December 31, 2025 and 2024, the principal
balance due under the Abrams Debenture is $
NOTE 8 – RELATED PARTY TRANSACTION
Indemnification agreements
On August 23, 2021, the Company entered into indemnification agreements with each of its directors and executive officers. In general, these indemnification agreements require the Company to indemnify a director and officer to the fullest extent permitted by law against liabilities that may arise in connection with that director’s service as a director and officer for the Company. Additionally, the Company shall advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. Since August 2021, the Company has not maintained an officers’ and directors’ insurance policy.
See Note 14 – Subsequent Events for subsequent related party transaction.
F-32
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
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
| a. | Alter or change the rights, preferences or privileges of the preferred stock. | |
| b. | Create any new class of stock having preferences over the preferred stock. | |
| c. | Repurchase any of our common stock. | |
| d. | Merge or consolidate with any other company, except our wholly owned subsidiaries. | |
| e. | 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. | |
| f. | Incur, assume or guarantee any indebtedness maturing more than |
(B) Common stock redemption
On October 10, 2023, the Company entered into
a Stock Redemption Agreement, whereby the Company purchased
On April 23, 2024, following approval by the Board,
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 $
During the year ended December 31, 2024, the Company
purchased a total of
During the year ended December 31, 2025, the Company
purchased a total of
(C) Equity incentive plans
On August 9, 2016, the Company’s Board authorized
the 2016 Equity Incentive Plan (the “2016 Plan”) and reserved
F-33
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
The Company also continues to maintain its 2014
Equity Compensation Plan (the “2014 Plan”). The 2014 Plan has been superseded by the 2016 Plan. Accordingly, additional
shares subject to the existing 2014 Plan will be issued and the
(D) Stock options
On November 25, 2024, the Company granted a stock
option to purchase
On January 21, 2025, the Company granted an aggregate
of
For the year ended December 31, 2025 and 2024,
in connection with the accretion of stock-based option expense, the Company recorded stock option expense over the vesting period of $
Stock option activities for the year ended December 31, 2025 and 2024 are summarized as follows:
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||||||
| Balance Outstanding December 31, 2023 | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Balance Outstanding December 31, 2024 | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Expired | ( | ) | - | |||||||||||||
| Forfeited | ( | ) | - | |||||||||||||
| Balance Outstanding December 31, 2025 | $ | $ | ||||||||||||||
| Exercisable, December 31, 2025 | $ | $ | ||||||||||||||
| Balance non-vested on December 31, 2024 | $ | $ | ||||||||||||||
| Issued during the period | ||||||||||||||||
| Forfeited | ( | ) | - | |||||||||||||
| Vested during the period | ( | ) | - | |||||||||||||
| Balance non-vested on December 31, 2025 | $ | $ | ||||||||||||||
F-34
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Legal matters
From time to time, the Company may be involved in litigation related to claims arising out of its operations in the normal course of business. As of December 31, 2025, 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 Agreement
Bryan McLaren
On May 23, 2018, the Company and Mr. McLaren,
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
Mr. McLaren his then-current base annual salary of $
The 2018 Employment Agreement has a term of
| (i) | immediately, if Mr. McLaren dies; | |
| (ii) | immediately, if Mr. McLaren receives benefits under the long-term disability insurance coverage then provided by the Company or, if no such insurance is in effect, upon Mr. McLaren’s disability; | |
| (iii) | 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; | |
| (iv) | 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; |
| (v) | at the option of the Company, without Cause; |
| (vi) | by Mr. McLaren at any time with Good Reason (as defined in the 2018 Employment Agreement), upon | |
| (vii) | by Mr. McLaren at any time without Good Reason, upon not less than three months’ prior written notice to the Company. |
In the event of a Termination for any reason or for no reason whatsoever, or upon the expiration date of the 2018 Employment Agreement, whichever comes first, all rights and obligations under the 2018 Employment Agreement shall cease (i) as to the Company, except for the Company’s obligations for the payment of applicable severance benefits thereunder, and for indemnification thereunder, and (ii) as to Mr. McLaren, except for his obligation under the restrictive covenants in the 2018 Employment Agreement.
The Company and Mr. McLaren also entered into a Golden Parachute Agreement (the “Golden Parachute Agreement”) on May 23, 2018. No benefits shall be payable under the Golden Parachute Agreement unless there shall have been a change in control of the Company, as set forth below. For purposes of the Golden Parachute Agreement, amongst other terms in the Golden Parachute Agreement, a “change in control of the Company” shall mean a change of control of a nature that would be required to be reported in response to Item 6 of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended.
F-35
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
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) | 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; | |
| (b) | a material diminution in Mr. McLaren’s base compensation; | |
| (c) | a material change in the geographic location at which Mr. McLaren performs his duties; | |
| (d) | 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; |
| (e) | a material diminution in the budget over which Mr. McLaren retains authority; |
| (f) | 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. McLaren’s total compensation; | |
| (g) | a material breach under any agreement with the Company to provide Mr. McLaren benefits substantially similar to those enjoyed by him under any of the Company’s life insurance, medical, health and accident, or disability plans in which he was participating at the time of the change in control of the Company, the failure to continue to provide Mr. McLaren with a Company automobile or allowance in lieu of it, if Mr. McLaren was provided with such an automobile or allowance in lieu of it at the time of the change of control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive him of any material fringe benefit enjoyed by him at the time of the change in control of the Company, or the failure by the Company to provide him with the number of paid vacation days to which he is entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of the change in control of the Company; |
Following a change in control of the Company, upon termination of Mr. McLaren’s employment or during a period of disability, Mr. McLaren will be entitled to the following benefits:
| (i) | 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. |
| (ii) | If Mr. 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. |
F-36
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
| (iii) | 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: |
| a. | 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. |
| b. | In lieu of any further salary payments to Mr. McLaren for periods subsequent to the date of Termination, the Company will pay as severance pay to Mr. 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. |
| c. | The Company will pay to Mr. McLaren any deferred compensation allocated or credited to him or his account as of the date of Termination. |
| d. | In lieu of shares of common stock of the Company issuable upon exercise of outstanding options, if any, granted to Mr. McLaren under the Company’s stock option plans (which options shall be cancelled upon the making of the payment referred to below), Mr. McLaren will receive an amount in cash equal to the product of (i) the excess of the closing price of the Company’s common stock as reported on or nearest the date of Termination (or, if not so reported, on the basis of the average of the lowest asked and highest bid prices on or nearest the date of Termination), over the per share exercise price of each option held by Mr. McLaren (whether or not then fully exercisable) plus the amount of any applicable cash appreciation rights, times (ii) the number of the Company’s common stock covered by each such option. |
| e. | The 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
See “Note 14—Subsequent Events—Other.”
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 $
F-37
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
Additionally, on August 16, 2024, the Company’s
Compensation Committee approved a Compensation Memo whereby project team members may receive up to
See “Note 14—Subsequent Events—Other.”
401(k) Plan
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
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 &
Trust Co. (“Jonestown”) entered into a Loan Agreement (the “Loan Agreement”) pursuant to which Jonestown agreed
to lend to ZP Antwerp $
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.
F-38
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
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 $
NOTE 11 – SEGMENT REPORTING
The Company operates in
The Company’s Property Investment Portfolio segment generates revenues from its operating leases with its tenants. Rental income is accounted for pursuant to ASC Topic 842 “Leases” and includes base rents that each tenant pays in accordance with the terms of its respective lease and is reported on a straight-line basis over the non-cancellable term of the lease, which includes the effects of rent abatements under the leases.
The Company’s Real Estate Services segment generates revenues which includes brokerage revenues consisting of real estate sales commissions and assignment fees, and revenues from advisory services for services performed pursuant to its consulting agreements with clients.
Corporate and unallocated amounts that do not relate to a reportable segment have been allocated to “Corporate & Unallocated.”
F-39
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
Information with respect to these reportable business segments for the years ended December 31, 2025 and 2024 was as follows:
Year Ended 2025
| Property Investment Portfolio | Real Estate Services | Corporate and Unallocated | Consolidated | |||||||||||||
| Net revenues | $ | $ | $ | $ | ||||||||||||
| Operating expenses (excluding depreciation and amortization) | ||||||||||||||||
| Impairment loss from buildings | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Loss from operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Interest expense | ( |
) | ( |
) | ( |
) | ||||||||||
| Other income | ||||||||||||||||
| Impairment of equity securities | ( |
) | ( |
) | ||||||||||||
| Equity method loss from unconsolidated joint ventures | ( |
) | ( |
) | ||||||||||||
| Loss from derivative – interest rate swap | ( |
) | ( |
) | ||||||||||||
| Loss before provision for income taxes | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net income (loss) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Year Ended 2024
| Property Investment Portfolio | Real Estate Services | Corporate and Unallocated | Consolidated | |||||||||||||
| Net revenues | $ | $ | $ | $ | ||||||||||||
| Operating expenses (excluding depreciation and amortization) | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Income (loss) from operations | ( | ) | ||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income | ||||||||||||||||
| Income (loss) before provision for income taxes | ( | ) | ||||||||||||||
| Provision for income taxes | ||||||||||||||||
| Net income (loss) | $ | $ | $ | ( | ) | $ | ||||||||||
F-40
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
Total assets by segment on December 31, 2025 and 2024 were as follows:
| December 31, 2025 | December 31, 2024 | |||||||
| Property investment portfolio | $ | $ | ||||||
| Real estate services | ||||||||
| Corporate and unallocated | ||||||||
| $ | $ | |||||||
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
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). In addition,
the Company elected not to apply ASC Topic 842 to arrangements with lease terms of
For the years ended December 31, 2025 and 2024, in connection with
its operating leases, the Company recorded rent expense of $
The significant assumption used to determine the
present value of the lease liability in December 2024 was a discount rate of
As of December 31, 2025 and 2024, ROU assets were summarized as follows:
| December 31, 2025 | December 31, 2024 | |||||||
| Office lease right of use asset | $ | $ | ||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Balance of ROU assets | $ | $ | ||||||
As of December 31, 2025, future minimum base lease payments due under a non-cancelable operating lease were as follows:
| Year ending December 31, | Amount | |||
| 2026 | $ | |||
| Total minimum non-cancelable operating lease payments | ||||
| Less: discount to fair value | ( | ) | ||
| Total lease liability on December 31, 2025 | $ | |||
F-41
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
NOTE 13 - INCOME TAXES
The Company maintains deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The deferred tax assets on December 31, 2025 and 2024 consist of net operating loss carryforwards. The net deferred tax asset has been fully offset by a valuation allowance because of the uncertainty of the attainment of future taxable income.
For the years ended December 31, 2025 and 2024, the components of (loss) income before income taxes were as follows:
| 2025 | 2024 | |||||||
| Domestic | $ | ( | ) | $ | ||||
| Total loss before income taxes | $ | ( | ) | $ | ||||
The following table reconciles the U.S. federal statutory income tax rate to the Company’s effective income tax rate for the year ended December 31, 2025:
| Year Ended December 31, 2025 | ||||||||
| Amount | Percent | |||||||
| Statutory federal income tax benefit | $ | ( | ) | ( | )% | |||
| State taxes, net of federal benefit | ( | ) | ( | )% | ||||
| Permanent items | % | |||||||
| Change in valuation allowance | % | |||||||
| Total | $ | % | ||||||
As previously disclosed for the year ended December 31, 2024, prior to the adoption of ASU 2023-09, the effective income tax rate differed from the income tax rate as follows:
| Years Ended December 31, | ||||
| 2024 | ||||
| Income tax expense at U.S. statutory rate | $ | |||
| Income tax expense – state | ||||
| Permanent differences | ( | ) | ||
| Change in valuation allowance | ( | ) | ||
| Total provision for income tax | $ | |||
The Company’s approximate net deferred tax asset as of December 31, 2025 and 2024 was as follows:
| Deferred Tax Asset: | December 31, 2025 | December 31, 2024 | ||||||
| Net operating loss carryforward | $ | $ | ||||||
| Impairment of rental property | ||||||||
| Net deferred tax assets before valuation allowance | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
The net operating loss carryforward was approximately
$
The Company does not have any uncertain tax positions or events leading to uncertainty in a tax position. The Company’s 2025, 2024, 2023 and 2022 Corporate Income Tax Returns are subject to Internal Revenue Service examination.
F-42
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
NOTE 14 – SUBSEQUENT EVENTS
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,
Inc. (Chino Valley and Green Valley) and CJK, Inc. (Kingman) (each, a “Tenant”), each with an effective date of January 1,
2026. Each A&R Lease provides for an initial term of
Management Buyout Asset Purchase Agreement
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; and 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.
F-43
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
Subject to adjustment as set forth in the MBO
APA, the purchase price for the Assets will be $
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. 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 $
The closing of the MBO APA is contingent upon the Buyer obtaining financing.
Other
Effective January 28, 2026, the Board approved
an increase in the base salary of each of Bryan McLaren, the Company’s Chairman of the Board, Chief Executive Officer and Chief
Financial Officer, and Berekk Blackwell, the Company’s President and Chief Operating Officer, by
Effective January 19, 2026, all unvested stock
options held by Mr. McLaren, Mr. Blackwell, or members of the Board, representing stock options to purchase an aggregate of
F-44
ZONED PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025 AND 2024
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:
| Name | Position | No.
of Shares of Restricted Common Stock |
||||
| Bryan McLaren | Chairman of the Board, Chief Executive Officer and Chief Financial Officer | |||||
| Berekk Blackwell | President and Chief Operating Officer | |||||
| Art Friedman | Independent Director | |||||
| David G. Honaman | Independent Director | |||||
| Cole Stevens | Independent Director | |||||
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
Additionally, the above executive officers and
Board members will receive a cash payment from the Company to cover income tax liability associated with the above stock issuances in
an amount up to
Effective January 19, 2026, all unvested stock
options held by Patrick Moroney, representing stock options to purchase an aggregate of
Effective January 28, 2026, the Company issued
Pleasant Ridge Default
On February 13, 2026, the Company sent its tenant
at the Woodward Property a written notice of events of default related to the tenant’s failure to i) make timely rental payments
and ii) fulfill its obligations related to non-monetary terms under the Woodward Lease. As of the date of this filing, the Company remains
in discussions with the tenant about these events of default and regarding future operations at the Woodward Property. In an effort to
avoid litigation related to the defaults under the lease, the Company is currently in negotiations to sell the Woodward Property to the
New Tenant for approximately $
F-45