Insiders ranked by realized 90-day signed return on their open-market trades at Zoned Properties, Inc.. Minimum 3 scored trades. Returns are signed - a sale followed by a rally counts against the insider.
Real-time Form 4 intelligence. Smarter insider tracking.
YoY shift: Lean -
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.29pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.05pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.52pp
Lean -
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
closing+12
impairment+10
loss+6
failure+6
unable+5
Positive rising
leadership+4
favorable+2
able+1
effective+1
strong+1
Risk Factors (Item 1A)
9,900 words
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
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
closing+18
loss+8
impairment+7
breach+6
refusal+4
Positive rising
pleasant+5
effective+4
improvements+3
improvement+2
exclusive+2
MD&A (Item 7)
9,582 words
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.
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.
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 impairmentloss. 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.
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 impairmentloss 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 uninsuredlosses 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 achievepositive 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.
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.
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.
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.
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.
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.
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 criminalprosecution, 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 claimsagainst 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 claimsagainst 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.
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.
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.
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.
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, declineprecipitously 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.
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.
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.
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.
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.
As of December 31, 2025, a summary of rental properties owned by us consisted of the following:
Location
Tempe,
Chino Valley,
Green Valley,
Kingman,
Pleasant
Ridge, MI
Chicago,
Surprise,
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
Land Area: (Acres)
Land Area: (Sq. Feet)
Undeveloped Land Area (Sq. Feet)
Developed Land Area (Sq. Feet)
Total Rentable Building Sq. Ft.
Vacant Rentable (Sq. Ft.)
Sq. Ft. rented as of December 31, 2025
Annual Base Rent (*,**)
Thereafter
Total
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.
Annualized $ per Rented Sq. Ft. (Base Rent)
Year
Tempe,
Chino Valley,
Green Valley,
Kingman,
Pleasant Ridge,
Chicago,
Surprise,
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.
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;
(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.
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,
Revenues:
Property investment portfolio
Real estate services
Total revenues
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.
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,
Compensation and benefits
Professional fees
Brokerage fees
General and administrative expenses
Depreciation and amortization
Real estate taxes
Business development costs
Impairmentloss
Total
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.
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, impairmentloss 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 impairmentloss 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 impairmentloss 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 impairmentloss 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.
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.
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.
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 impairmentloss from equity securities of $50,000, an impairmentloss 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.
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
Interest on convertible notes
Notes payable
Total
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.
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,
Interest
Rate
Maturity
Fair Value of
Liability on
December 31,
Fair Value of
Asset on
December 31,
December 7, 2022 interest rate swap
December 10, 2032
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 impairmentloss 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 impairmentlosses 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 impairmentloss 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 impairmentlosses.
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.
