Executive Summary / Key Takeaways

• Niche Market Leadership & PropTech Advantage: Zoned Properties (OTCQB:ZDPY) has carved a specialized niche in the regulated cannabis real estate sector, leveraging its proprietary PropTech platform, REZONE, to identify, acquire, and lease value-add properties. This technology-driven approach provides a distinct competitive edge in navigating complex zoning and regulatory challenges.
• Robust Financial Momentum: The company demonstrated significant financial acceleration in the first half of 2025, with total revenues increasing by 25.0% and income from operations surging by 202.1% year-over-year. Net income for the six months ended June 30, 2025, grew by an impressive 168%.
• Strategic Expansion & Portfolio Optimization: ZDPY is actively expanding its footprint, notably entering the Ohio market with key acquisitions and onboarding nationally recognized multi-state operators. The company also plans to potentially divest "legacy properties" to unlock capital, aligning with its evolving focus on direct-to-consumer retail properties.
• Solidified Liquidity for Growth: Positive net income and robust cash flow from operations, which increased by 323,002 for the six months ended June 30, 2025, have significantly strengthened ZDPY's financial position, mitigating historical going concern doubts and providing sufficient cash for at least the next twelve months.
• Key Risks to Monitor: Despite strong performance, investors should closely watch regulatory shifts in the cannabis industry, the company's concentration of revenue and assets with a few significant tenants, and ongoing efforts to address internal control weaknesses.

The Foundation: Building a Niche in Regulated Real Estate

Zoned Properties, Inc. (OTCQB:ZDPY) stands as a unique player in the commercial real estate landscape, having strategically pivoted in April 2014 to focus exclusively on the burgeoning regulated cannabis industry in the United States. Headquartered in Scottsdale, Arizona, ZDPY is not merely a landlord; it is a technology-driven property investment company that identifies, acquires, and leases value-add real estate, primarily to best-in-class cannabis retailers. This specialized approach addresses the inherent complexities of an industry grappling with a patchwork of state-level legalization and federal prohibition.

The company's business model is bifurcated into two core segments: the Property Investment Portfolio and Real Estate Services. The Property Investment Portfolio generates revenue from the operations, leasing, and management of its commercial properties, which are typically secured with long-term, absolute-net leases. The Real Estate Services segment complements this by offering advisory, brokerage, and technology services, supporting the broader real estate development model. This integrated approach allows ZDPY to engage with the market at multiple points, from initial site selection to long-term asset management.

The PropTech Edge: REZONE and Beyond

At the heart of ZDPY's differentiated strategy is its proprietary property technology (PropTech) platform, including REZONE. This technology is designed to innovate within the real estate development sector by standardizing the investment model and tackling the unique zoning and development challenges prevalent in highly regulated industries like cannabis. The Zoneomics Green technology, for instance, is actively utilized internally to generate leads for new projects, streamlining the identification of suitable properties.

The strategic intent behind this technological differentiation is clear: to unlock significant commercial value. By leveraging AI-powered tools, ZDPY aims to more efficiently identify properties that meet stringent local zoning and permitting requirements, often navigating complex restrictions related to proximity to schools, churches, or residential areas. This specialized expertise and technological capability allow ZDPY to offer a more precise and efficient pathway for cannabis operators to establish compliant facilities, a critical advantage in a market where regulatory hurdles are a primary barrier to entry. While specific quantitative performance metrics for the technology itself are not publicly detailed, the company's focus on exploring strategic options for its PropTech platform underscores its belief in its potential to unlock additional shareholder value through improved deal flow and operational efficiency.

Competitive Landscape and Strategic Positioning

ZDPY operates within a competitive environment that includes both specialized cannabis REITs and broader industrial real estate players. Direct competitors like Innovative Industrial Properties, Inc. (IIPR) and NewLake Capital Partners, Inc. (NLCP) primarily focus on long-term property ownership and sale-leaseback transactions, respectively. IIPR, with its larger portfolio scale, benefits from diversified revenue streams and established relationships, offering greater stability. NLCP, in turn, provides flexible financing options that attract cannabis businesses, leading to consistent revenue growth from its leasing model.

ZDPY distinguishes itself through its hands-on, advisory-driven approach, particularly in early-stage development and tenant matching. Its specialized expertise in cannabis zoning and regulatory navigation offers a qualitative advantage, potentially leading to faster project turnaround and enhanced customer loyalty through tailored services. This agility allows ZDPY to compete effectively in emerging markets where regulatory complexities are significant, potentially leading to qualitatively superior margins by reducing client acquisition costs. However, ZDPY's smaller scale compared to IIPR and NLCP can lead to higher operating costs and may limit its overall market share capture and cash flow generation, making it less competitive in terms of scale-driven efficiencies.

Indirect competitors, such as general industrial REITs like Prologis, Inc. (PLD), offer broad industrial solutions but lack ZDPY's cannabis-specific specialization. While PLD boasts extensive scale and global reach, ZDPY's focused expertise allows it to exploit niche opportunities that larger, less specialized players might overlook. The high barriers to entry in cannabis real estate, driven by regulatory complexities and capital requirements, further protect ZDPY's niche, limiting new entrants and supporting its market stability.

Financial Performance: A Story of Accelerated Growth

ZDPY's recent financial performance underscores the effectiveness of its specialized strategy and operational execution. For the three months ended June 30, 2025, total revenues reached $937,774, marking a substantial 35.4% increase from $692,326 in the prior-year period. This growth was fueled by an 11.5% rise in rental revenues, primarily from recently acquired properties in Chicago, IL, and Surprise, AZ, alongside a remarkable 1285.8% surge in real estate services revenues from advisory fees, commissions, and assignment fees.

The six-month period ending June 30, 2025, further illustrates this upward trajectory. Total revenues climbed to $1.91 million, a 25.0% increase from $1.53 million in the first half of 2024. Rental revenues contributed $1.52 million, growing 10.8%, while real estate services revenues jumped 148.1% to $393,808. This segment, while showing impressive revenue growth, recorded an operating loss of ($120,784) for the six months, indicating continued investment in scaling its advisory and brokerage capabilities.

Operational efficiency also saw significant improvement. Income from operations for the three months ended June 30, 2025, soared by 163.9% to $272,188. For the six-month period, income from operations surged by 202.1% to $700,959, compared to $232,047 in the prior year. This substantial increase was a direct result of revenue growth outpacing operating expense increases.

Net income for the six months ended June 30, 2025, reached $172,184, a 168% increase from $64,190 in the same period last year.

The Property Investment Portfolio remains the dominant force, contributing $15.56 million, or 93.3%, of the company's total assets as of June 30, 2025. This segment's operating income of $1.26 million for the six months ended June 30, 2025, highlights its core profitability. Cash flow from operations also saw a significant boost, providing $569,790 for the six months ended June 30, 2025, an increase of $323,002 from the prior year. This positive cash generation is crucial, as it "serves to mitigate the conditions that historically raised substantial doubt about the Company's ability to continue as a going concern."

Strategic Expansion and Outlook

ZDPY's investment thesis continues to evolve, with a current focus on "direct-to-consumer properties, located in state-markets with robust cannabis consumer demand." This strategy is evident in recent initiatives, including the company's successful entry into the Ohio market. ZDPY acted as a sponsor for two retail cannabis real estate transactions, onboarding nationally recognized multi-state operators, Trulieve Cannabis Corp. (TCNNF) in Columbus, OH, and Verano Holdings Corp. (VRNOF) in Antwerp, OH. This strategic expansion has broadened the company's active pipeline to include potential transactions across multiple state markets, including Arizona, Delaware, Illinois, and Ohio, reinforcing a national presence.

The company's portfolio currently boasts 100% occupancy across its investment properties in Arizona, Illinois, and Michigan, with a weighted average lease term exceeding 10 years. These properties include four retail dispensaries, two cultivation/processing facilities, and one property earmarked for future retail dispensary development. Management is also considering the sale or leveraging of its two cultivation sites, deemed "legacy properties," to unlock equity and create capital availability for future investments.

Liquidity remains a key focus. Management estimates that current cash and positive cash flows will be sufficient to meet obligations for at least twelve months from the August 14, 2025 filing date. However, the company acknowledges the potential need for additional capital or debt financing to fund new property acquisitions, develop existing properties, and support ongoing operations and new joint ventures.

Risks and Challenges

Investing in ZDPY comes with inherent risks, primarily stemming from its concentration in the regulated cannabis industry. Changes in federal enforcement of current laws or shifts in state regulations could significantly impact the company's business, results of operations, and financial condition. The reliance on "Significant Tenants," which accounted for 61.4% of total revenues and 52.9% of total assets for the six months ended June 30, 2025, presents a concentration risk. A decline in the financial stability of these tenants or a prohibition on their operations could lead to widespread lease defaults, severely affecting ZDPY's net income and working capital.

Operational challenges include the subjective nature of impairment analyses for rental properties, which rely on assumptions about future occupancy and rental rates that could differ materially from actual results. Furthermore, the company has reported material weaknesses in its internal control over financial reporting as of June 30, 2025. These include a lack of multiple levels of management review on complex accounting issues, inadequate system and manual controls, and insufficient segregation of duties and corporate accounting resources. Management anticipates these weaknesses will persist until additional accounting personnel are hired and a full-time Chief Financial Officer is in place.

The Zoneomics Green joint venture also highlights the challenges of operating in this nascent industry. Despite the technology's internal use for lead generation, its successful external launch is contingent on a "required merchant banking component," the availability of which is uncertain due to the federal status of cannabis banking. This regulatory uncertainty led to a $45,000 impairment loss on the investment, underscoring the broader market and regulatory risks.

Conclusion

Zoned Properties is strategically positioned at the intersection of real estate and the rapidly evolving regulated cannabis industry. Its technology-driven approach, particularly through its PropTech platform, offers a distinct advantage in navigating the complex regulatory landscape, enabling the company to identify and secure high-value properties for best-in-class operators. The robust financial performance in the first half of 2025, marked by significant revenue, operating income, and net income growth, demonstrates the effectiveness of this specialized model.

While the company faces inherent risks associated with regulatory uncertainty and tenant concentration, its proactive strategic expansion into new markets like Ohio, coupled with a focus on optimizing its portfolio through potential legacy asset divestitures, signals a clear path for continued growth. ZDPY's ability to leverage its technological edge to mitigate operational complexities and drive efficient deal flow will be critical in sustaining its momentum and unlocking further value for shareholders in this dynamic and high-growth sector.