nlcp20220630b

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-56327

NewLake Capital Partners, Inc.

(Exact name of registrant as specified in its charter)

Maryland	83-4400045
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

50 Locust Avenue, First Floor, New Canaan CT 06840	203-594-1402
(Address of principal executive offices)	(Registrants Telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	None	None

Securities registered pursuant to section 12(g) of the Act:

Common Stock, par value $0.01 per share

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒
Emerging Growth Company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Yes ☐ No ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ☐ No ☒

The number of shares of the registrant’s Common Stock, par value $0.01 per share, outstanding as of August 9, 2022 was 21,318,637.

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NewLake Capital Partners, Inc.

FORM 10-Q

June 30, 2022

TABLE OF CONTENTS

		Page No.

Part I Financial Information:
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations	2
	Consolidated Statements of Equity	3
	Consolidated Statements of Cash Flows	6
	Notes to the Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Special Note Regarding Forward Looking Information
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
Part II Other Information:
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
Signatures		34

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

NEWLAKE CAPITAL PARTNERS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	*June 30, 2022*			*December 31, 2021*
Assets:		*(Unaudited)*			*(Audited)*

Real Estate
Land	$	19,788		$	15,649
Building and Improvements		341,685			272,432
Total Real Estate		361,473			288,081
Less Accumulated Depreciation		(13,630	)		(9,155	)
Net Real Estate		347,843			278,926
Cash and Cash Equivalents		49,602			127,097
Loans Receivable		35,000			30,000
In-Place Lease Intangible Assets, net		22,995			24,002
Other Assets		1,560			858

Total Assets	$	457,000		$	460,883

Liabilities and Equity:

Liabilities:

Accounts Payable and Accrued Expenses	$	2,712		$	1,404
Revolving Credit Facility		1,000			-
Loan Payable, net		1,973			3,759
Dividends and Distributions Payable		7,650			6,765
Security Deposits Payable		7,136			6,047
Interest Reserve		306			2,144
Rent Received in Advance		1,628			1,429
Other Liabilities		272			-

Total Liabilities		22,677			21,548

Commitments and Contingencies (Note 13)

Equity:

Preferred Stock, $0.01 Par Value, 100,000,000 Shares Authorized, 12.5% Series A Redeemable Cumulative Preferred Stock, 0 and 0 Shares Issued and Outstanding, Respectively		-			-
Common Stock, $0.01 Par Value, 400,000,000 Shares Authorized, 21,318,637 and 21,235,914 Shares Issued and Outstanding, Respectively		213			213
Additional Paid-In Capital		456,083			450,916
Accumulated Deficit		(29,395	)		(23,574	)

Total Stockholders' Equity		426,901			427,555

Noncontrolling Interests		7,422			11,780

Total Equity		434,323			439,335

Total Liabilities and Equity	$	457,000		$	460,883

The accompanying notes are an integral part of the consolidated financial statements

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NEWLAKE CAPITAL PARTNERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share and per share amounts)

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Revenue:

Rental Income	$	9,553		$	6,616		$	18,678		$	11,035
Interest Income from Loans		948			-			1,867			-

Total Revenue		10,501			6,616			20,545			11,035

Expenses:

Depreciation and Amortization Expense		2,804			2,051			5,483			3,137
General and Administrative Expenses:
Compensation Expense		2,302			1,044			3,138			1,403
Stock-Based Compensation		515			97			921			1,004
Professional Fees		666			391			1,207			777
Other General and Administrative Expenses		426			233			834			378
Total General and Administrative Expenses		3,909			1,765			6,100			3,562

Total Expenses		6,713			3,816			11,583			6,699

Loss on Sale of Real Estate		-			-			(60	)		-

Income From Operations		3,788			2,800			8,902			4,336

Other Income (Expenses):
Interest Income		48			16			96			18
Interest Expense		(46	)		-			(73	)		-

Total Other Income		2			16			23			18

Net Income		3,790			2,816			8,925			4,354

Preferred Stock Dividends		-			-			-			(4	)

Net Income Attributable to Noncontrolling Interests		(32	)		(78	)		(149	)		(155	)

Net Income Attributable to Common Stockholders	$	3,758		$	2,738		$	8,776		$	4,195

Net Income Attributable to Common Stockholders Per Share - Basic	$	0.18		$	0.16		$	0.41		$	0.31

Net Income Attributable to Common Stockholders Per Share - Diluted	$	0.18		$	0.16		$	0.41		$	0.30

Weighted Average Shares of Common Stock Outstanding - Basic		21,307,621			17,329,964			21,279,919			13,645,990

Weighted Average Shares of Common Stock Outstanding - Diluted		21,732,289			17,455,599			21,734,180			13,759,484

The accompanying notes are an integral part of the consolidated financial statements

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NEWLAKE CAPITAL PARTNERS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(In thousands, except share amounts)

	Common Stock
	Shares		Par		Additional Paid-in Capital		Accumulated Deficit			Noncontrolling Interest			Total Equity

Balance as of December 31, 2021		21,235,914	$	213	$	450,916	$	(23,574	)	$	11,780		$	439,335

Conversion of Vested RSUs to Common Stock		3,002		-		126		-			(126	)		-

Conversion of OP Units to Common Stock		79,721		-		1,586		-			(1,586	)		-

Stock-Based Compensation		-		-		921		-			-			921

Dividends to Common Stock		-		-		-		(14,491	)		-			(14,491	)

Dividend Equivalents to Restricted Stock Units		-		-		-		(106	)		-			(106	)

Distributions to OP Unit Holders		-		-		-		-			(261	)		(261	)

Adjustment for Noncontrolling Interest Ownership in Operating Partnership		-		-		2,534		-			(2,534	)		-

Net Income		-		-		-		8,776			149			8,925

Balance as of June 30, 2022		21,318,637	$	213	$	456,083	$	(29,395	)	$	7,422		$	434,323

The accompanying notes are an integral part of the consolidated financial statements

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NEWLAKE CAPITAL PARTNERS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(In thousands, except share amounts)


				Common Stock
	Series A Preferred Stock			Shares		Par		Additional Paid-in Capital			Accumulated Deficit			Noncontrolling Interest			Total Equity

Balance as of December 31, 2020	$	61			7,758,145	$	78	$	151,778		$	(17,154	)	$	6,266		$	141,029

Net Proceeds from the Issuance of Common Stock		-			1,871,932		18		39,560			-			-			39,578

Issuance of Common Stock for Merger Transaction		-			7,699,887		77		162,776			-			-			162,853

Issuance of Warrants for Merger Transaction		-			-		-		4,820			-			-			4,820

Redemption of Series A Preferred Stock		(61	)		-		-		-			(64	)		-			(125	)

Issuance of 88,200 OP Units for Property Acquisition		-			-		-		-			-			2,205			2,205

Stock-Based Compensation		-			-		-		1,004			-			-			1,004

Dividends to Preferred Stock		-			-		-		-			(4	)		-			(4	)

Dividends to Common Stock		-			-		-		-			(6,374	)		-			(6,374	)

Dividend Equivalents to Restricted Stock Units		-			-		-		-			(59	)		-			(59	)

Distributions to OP Unit Holders		-			-		-		-			-			(172	)		(172	)

Adjustment for Noncontrolling Interest Ownership in Operating Partnership		-			-		-		(424	)		-			424			-

Net Income		-			-		-		-			4,240			114			4,354

Balance as of June 30, 2021	$	-			17,329,964	$	173	$	359,514		$	(19,415	)	$	8,837		$	349,109

The accompanying notes are an integral part of the consolidated financial statements

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NEWLAKE CAPITAL PARTNERS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(In thousands, except share amounts)

	Common Stock
	Shares		Par		Additional Paid-in Capital		Accumulated Deficit			Noncontrolling Interest			Total Equity

Balance as of March 31, 2022		21,300,410	$	213	$	452,690	$	(25,627	)	$	10,398		$	437,674

Conversion of OP Units to Common Stock		18,227		-		482		-			(482	)		-

Stock-Based Compensation		-		-		515		-			-			515

Dividends to Common Stock		-		-		-		(7,462	)		-			(7,462	)

Dividend Equivalents to Restricted Stock Units		-		-		-		(64	)		-			(64	)

Distributions to OP Unit Holders		-		-		-		-			(130	)		(130	)

Adjustment for Noncontrolling Interest Ownership in Operating Partnership		-		-		2,396		-			(2,396	)		-

Net Income		-		-		-		3,758			32			3,790

Balance as of June 30, 2022		21,318,637	$	213	$	456,083	$	(29,395	)	$	7,422		$	434,323



				Common Stock
	Series A Preferred Stock			Shares		Par		Additional Paid-in Capital		Accumulated Deficit			Noncontrolling Interest			Total Equity

Balance as of March 31, 2021	$	61			17,329,964	$	173	$	358,943	$	(17,920	)	$	7,136		$	348,393

Redemption of Series A Preferred Stock		(61	)		-		-		-		(64	)		-			(125	)

Issuance of 88,200 OP Units for Property Acquisition		-			-		-		-		-			2,205			2,205

Stock-Based Compensation		-			-		-		97		-			-			97

Dividends to Common Stock		-			-		-		-		(4,159	)		-			(4,159	)

Dividend Equivalents to Restricted Stock Units		-			-		-		-		(30	)		-			(30	)

Distributions to OP Unit Holders		-			-		-		-		-			(88	)		(88	)

Adjustment for Noncontrolling Interest Ownership in Operating Partnership		-			-		-		474		-			(474	)		-

Net Income		-			-		-		-		2,758			58			2,816

Balance as of June 30, 2021	$	-			17,329,964	$	173	$	359,514	$	(19,415	)	$	8,837		$	349,109

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NEWLAKE CAPITAL PARTNERS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	*For the Six Months Ended*
	*June 30, 2022*			*June 30, 2021*
Cash Flows from Operating Activities:
Net Income	$	8,925		$	4,354
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Stock-Based Compensation		921			1,004
Loss on Sale of Real Estate		60			-
Depreciation and Amortization Expense		5,483			3,137
Amortization of Debt Issuance Costs		20			-
Non-Cash Financing Expense		14			-
Changes in Assets and Liabilities, Net of Acquisitions:
Prepaid Expenses and Other Assets		(459	)		(55	)
Accounts Payable and Accrued Expenses		1,315			(1,691	)
Security Deposits Payable		1,088			2,179
Interest Reserve		(1,838	)		-
Rent Received in Advance		199			913
Net Cash Provided by Operating Activities		15,728			9,841

Cash Flows from Investing Activities:
Cash Acquired from Merger Transaction		-			64,355
Payment of Merger Related Transaction Costs		-			(2,144	)
Reimbursements of Tenant Improvements		(38,792	)		(6,719	)
Investment in Loans Receivable		(5,000	)		-
Acquisition of Real Estate		(35,421	)		(44,648	)
Disposition of Real Estate		761			-
Net Cash (Used in) Provided by Investing Activities		(78,452	)		10,844

Cash Flows from Financing Activities:
Proceeds from Issuance of Common Stock, Net of Offering Costs		-			39,579
Preferred Stock Dividends Paid		-			(4	)
Common Stock Dividends Paid		(13,612	)		(3,060	)
Restricted Stock Units Dividend Equivalents Paid		(89	)		(38	)
Distributions to OP Unit Holders		(270	)		(124	)
Redemption of Series A Preferred Stock		-			(125	)
Borrowings from revolving credit facility		1,000			-
Payment of Loan Payable		(1,800	)		-
Net Cash (Used in) Provided by Financing Activities		(14,771	)		36,228

Net Increase (Decrease) in Cash and Cash Equivalents		(77,495	)		56,913

Cash and Cash Equivalents - Beginning of Period		127,097			19,617

Cash and Cash Equivalents - End of Period	$	49,602		$	76,530

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Accrual for Dividends and Distributions Payable	$	7,650		$	4,277
Accrual for Reimbursements of Tenant Improvements	$	-		$	807
Real Estate Assets, In-Place Leases, Other Assets and Liabilities Acquired through the Issuance of Common Stock and Warrants	$	-		$	103,319
Issuance of 88,200 OP Units for Property Acquisition	$	-		$	2,205
Operating lease liability for obtaining right of use asset	$	271		$	-

The accompanying notes are an integral part of the consolidated financial statements

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 1 - Organization

NewLake Capital Partners, Inc. (the “Company”, “we”, “us", “our”), a Maryland corporation, was formed on April 9, 2019, under the Maryland General Corporation Law, as GreenAcreage Real Estate Corp. (“GARE”). The Company is an internally managed Real Estate Investment Trust (“REIT”) focused on providing long-term, single-tenant, triple-net sale leaseback and build-to-suit transactions for the cannabis industry. The Company’s year-end is December 31. On March 17, 2021, GARE completed a merger (the “Merger”) with another company (the “Target”) by issuing common stock and warrants, and subsequently changed its name to NewLake Capital Partners, Inc.

On March 17, 2021, we consummated a merger pursuant to which we combined our company with a separate company, or the Target, that owned a portfolio of cultivation facilities and dispensaries utilized in the cannabis industry, and renamed ourselves “NewLake Capital Partners, Inc.” The Merger was completed through the issuance of 7,699,887 shares of common stock valued at $21.15 per share and warrants to purchase up to 602,392 shares of the Company’s common stock valued at approximately $4.8 million. The Company also incurred approximately $2.1 million in merger-related transaction costs. The consideration issued was based upon the relative value of the two entities, such that the shareholders of the Company and the Target, immediately prior to the Merger, owned 56.79% and 43.21%, respectively, of the outstanding post-merger common stock of the Company. The Company issued warrants to Target shareholders based on the pre-merger options outstanding, using the equivalent proportion described in the previous sentence. Upon completion of the Merger, we owned 24 properties across nine states, and became one of the largest REITs in the cannabis industry. We consummated the Merger and combined businesses with the Target to, among other things, benefit from increasing economies of scale as we continue to grow, and as part of our evolution toward entering the public markets. The Merger has been treated as an asset acquisition, and we are treated as the accounting acquirer. In connection with the Merger, we also entered into various arrangements and agreements with certain of our significant stockholders, including director nomination rights.

The Company conducts its business through its subsidiary, NLCP Operating Partnership LP, a Delaware limited partnership (the “Operating Partnership” or “OP”). The Company holds an equity interest in the Operating Partnership and is the sole general partner. Subsequent to the Merger, the name of the Operating Partnership was changed from GreenAcreage Operating Partnership LP to NLCP Operating Partnership LP.

On August 13, 2021, we completed our initial public offering ("IPO") of 3,905,950 shares of our common stock, par value $0.01 per share at a public offering price of $26.00 per share for gross proceeds of approximately $102 million, before deducting placement agent fees and offering expenses. Net proceeds were approximately $93.5 million. Our common stock trades on the OTCQX® Best Market operated by the OTC Markets Group, Inc., under the symbol “NLCP”.

Note 2 - Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of the Company, the Operating Partnership, as well as the Operating Partnership’s wholly owned properties, each of which is held in a single member LLC and variable interest entities ("VIEs") in which the Company is considered the primary beneficiary. The accompanying unaudited financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete financial statements. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. In managements opinion, all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows have been made. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the operating results for the full year or any future period. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and filed with the Securities and Exchange Commission (“SEC”) on March 18, 2022.

Substantially all of the Company's asset are held by and all of its' operations are conducted through the Operating Partnership. The Company is the sole managing general partner of the Operating Partnership. Noncontrolling investors in the Operating Partnership are included in Noncontrolling interest in the Company's Consolidated Financial Statements. See Note 7 "Noncontrolling Interest" for details. The Operating Partnership is a variable interest entity (“VIE”) because the holders of limited partnership interests do not have substantive kick-out rights or participating rights. Furthermore, we are the primary beneficiary of the Operating Partnership because we have the obligation to absorb losses and the right to receive benefits from the Operating Partnership and the exclusive power to direct the activities of the Operating Partnership. As of June 30, 2022 and December 31, 2021, the assets and liabilities of the Company and the Operating Partnership are substantially the same, as the Company does not have any significant assets other than its investment in the Operating Partnership.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management will adjust such estimates when facts and circumstances dictate. Such estimates include, but are not limited to, useful lives for depreciation of property, the fair value of property and in-place lease intangibles acquired, and the fair value of stock-based compensation. Actual results could differ from those estimates.

Reclassification

Certain prior year balances have been reclassified to conform to our current year presentation.

Significant Accounting Policies

There have been no significant changes to our accounting polices included in Note 2 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2021.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 2 - Basis of Presentation and Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses, which changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, companies will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, which among other updates, clarifies that receivables arising from operating leases are not within the scope of this guidance and should be evaluated in accordance with Topic 842. This standard will be effective for the Company until January 1, 2023. The Company does not anticipate this standard will have a material impact on our consolidated financial statements due to the limited nature of financial assets held by the Company subject to ASU 2016-13.

Note 3 - Real Estate

Real Estate Acquisitions

During the six months ended June 30, 2022, the Company invested approximately $35.4 million to acquire three cultivation facilities. The following table presents the real estate acquisitions for the six months ended June 30, 2022 (in thousands):


Tenant	*Market*	*Site Type*	*Closing Date*	*Real Estate Acquisition Costs*
Bloom Medicinal	Missouri	Cultivation	April 1, 2022		7,301	⁽¹⁾
Ayr Wellness, Inc.	Pennsylvania	Cultivation	June 30, 2022		14,529
Ayr Wellness, Inc.	Nevada	Cultivation	June 30, 2022		13,579
*Total*				$	35,409

^{(1) Includes $5,004 of TI funded at closing of the property.}

Tenant Improvements Funded

During the six months ended June 30, 2022, the Company funded approximately $38.8 million of tenant improvements. The following table presents the tenant improvements funded for the six months ended June 30, 2022 (in thousands):


Tenant	Market	Site Type	Acquisition Closing Date	TI Funded during six months ended June 30, 2022			Unfunded Commitments ⁽¹⁾
Curaleaf	Florida	Cultivation	August 4, 2020		20,983	⁽²⁾		-
Mint	Massachusetts	Cultivation	April 1, 2021		349			2,651
Mint	Arizona	Cultivation	June 24, 2021		2,505			6,462
PharmaCann	Massachusetts	Dispensary	March 17, 2021		25			-
Trulieve	Pennsylvania	Cultivation	March 17, 2021		7,046			-
Organic Remedies	Missouri	Cultivation	December 20, 2021		4,271			757
Bloom Medicinal	Missouri	Cultivation	April 1, 2022		3,613			1,603
Ayr Wellness, Inc.	Pennsylvania	Cultivation	June 30, 2022		-			750
*Total*				$	38,792		$	12,223

^{(1) The $12.2 million of unfunded commitments does not include a $16.5 million option but not obligation to acquire an adjacent property from an existing tenant.}
^{(2) On June 16, 2022, the Company funded the expansion of an existing property.}

Disposal of Real Estate

On March 21, 2022, we sold one of our PharmaCann Massachusetts properties for approximately $0.8 million. We recognized a loss on sale of the property of $60,113. We continue to collect the rent that would have been received from the PharmaCann Massachusetts property through increased lease payments from each of the remaining properties operated by PharmaCann in our portfolio.

Construction in Progress

Construction in progress was $21.0 million and $13.1 million on June 30, 2022 and December 31, 2021, respectively, and is included in "Buildings and Improvements" on the accompanying consolidated balance sheet.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 3 – Real Estate (continued)

Depreciation and Amortization

Depreciation expense for the three and the six months ended June 30, 2022 and 2021, was $2.3 million and $1.5 million and $4.5 million and $2.6 million, respectively.

Amortization of the Company’s acquired in-place lease intangible assets for the three months ended June 30, 2022 and 2021 were approximately $0.5 million and $0.5 million, respectively and $1.0 million and $0.6 million, respectively, for the six months ended June 30, 2022 and 2021. The acquired in-place lease intangible assets have a weighted average remaining amortization period of 11.6 years.

The following table presents the future amortization of the Company’s acquired in-place leases as of June 30, 2022 (in thousands):

	*Amortization*
Year	*Expense*
2022 (six months ending balance at December 31, 2022)	$	1,006
2023		2,013
2024		2,013
2025		2,013
2026		2,013
Thereafter		13,937
Total	$	22,995

The following table presents the future contractual minimum rent under the Company’s operating leases as of June 30, 2022 (in thousands):

	*Contractual*
	*Minimum*
Year	*Rent*
2022 (six months ending balance at December 31, 2022)	$	22,144
2023		45,361
2024		46,583
2025		47,779
2026		49,007
Thereafter		536,181
Total	$	747,055

Concentration of Credit Risk

As of June 30, 2022, we owned 30 properties located in Arizona, Arkansas, California, Connecticut, Florida, Illinois, Massachusetts, Missouri, Nevada, North Dakota, Ohio, and Pennsylvania. The ability of any of our tenants to honor the terms of its lease are dependent upon the economic, regulatory, competitive, natural and social factors affecting the community in which that tenant operates.

The following table sets forth the tenants in our portfolio that represented the largest percentage of our total rental income for each of the periods presented:

	For the Six Months Ended June 30,
	*2022*					*2021*

	*Number*		*Percentage of*			*Number*		*Percentage of*
	of		*Rental*			of		*Rental*
	*Leases*		*Income*			*Leases*		*Income*
Curaleaf		11		25	%		11		38	%
Cresco Labs		1		17	%		1		28	%
Trulieve		1		14	%		1	9		%
Revolutionary Clinics		1		13	%		1		-	%
Columbia Care		5		11	%		5		10	%
Acreage		3		8	%		3		13	%
Organic Remedies		1		6	%		-		-	%

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Concentration of Credit Risk (continued)

	For the Three Months Ended June 30,
	*2022*					*2021*

	*Number*		*Percentage of*			*Number*		*Percentage of*
	of		*Rental*			of		*Rental*
	*Leases*		*Income*			*Leases*		*Income*
Curaleaf		11		25	%		11		35	%
Cresco Labs		1		17	%		1		23	%
Trulieve		1		14	%		1		13	%
Revolutionary Clinics		1		13	%		1		-	%
Columbia Care		5		10	%		5		15	%
Acreage		3		8	%		3		10	%
Organic Remedies		1		6	%		-		-	%

Impairment

We review current activities and changes in the business condition of all of our properties to determine the existence of any triggering events or impairment indicators. If triggering events or impairment indicators are identified, we analyze the carrying value of our real estate for any impairment. A provision is made for impairment if estimated future operating cash flows (undiscounted and without interest charges) plus estimated disposition proceeds (undiscounted) are less than the current book value of the property. Key inputs that we utilize in this analysis include projected rental rates, estimated holding periods, capital expenditures, and property sales capitalization rates. As of June 30, 2022 and December 31, 2021 no impairment losses were recognized.

Note 4 – Loans Receivable

Mortgage Loan

The Company funded a $30 million nine-month mortgage loan to Hero Diversified Associates, Inc. (“HDAI”) on October 29, 2021. The Company determined that HDAI meets the definition of a VIE because the equity investors do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The Company consolidates a VIE in accordance with Accounting Standards Codification (“ASC”) 810, Consolidation, when it is the primary beneficiary of such VIE. Based on a number of factors, including that the Company does not have the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance, the Company determined that it does not have a controlling financial interest and is not the primary beneficiary. The Company is required to reconsider its evaluation of whether to consolidate a VIE each reporting period, based upon changes in the facts and circumstances pertaining to the VIE. Our maximum exposure to a loss on the HDAI loan is $30 million.

The collateral for the loan includes a first-lien mortgage on a cultivation and processing facility in Erie, Pennsylvania. The loan bears interest at 12.25% and is structured to convert to a twenty-year sale leaseback, unless a specific provision in the loan agreement is satisfied prior to July 29, 2022. Refer to Note 14 - "Subsequent Events" for details of the conversion. HDAI funded a $2.8 million interest reserve at closing. The interest reserve is applied toward their monthly interest payments. As of June 30, 2022., the aggregate principal amount outstanding on the mortgage loan was $30.0 million and there is approximately $0.3 million remaining in the interest reserve which is recorded as a liability on the accompanying Consolidated Balance Sheets.

Loan Receivable

The Company funded a $5.0 million unsecured loan to Bloom Medicinals on June 10, 2022. The loan initially bears interest at a rate of 10.25% and is structured to increase by 0.225% on each anniversary of the disbursement date. The loan can be prepaid at any time without penalty and matures on June 30, 2026. The loan is cross defaulted with the lease agreement. As of June 30, 2022, the aggregate principal amount outstanding on the unsecured loan receivable was $5.0 million.

Note 5 – Financings

Seller Financing

In connection with the purchase and leaseback of a cultivation facility in Chaffee, Missouri on December 20, 2021, the Company entered into a $3.8 million loan payable to the seller, which is an independent third party from the tenant. The loan bears interest at a rate of 4.0% per annum. Principal on the loan is payable in annual installments of which $1.8 million was paid in January 2022. The remaining principal is payable in annual installments of $1.0 million in each of January 2023 and 2024. The loan's outstanding balance as of June 30, 2022 was $2.0 million and the remaining unamortized discount was $27.1 thousand.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 5 – Financings (continued)

Revolving Credit Facility

On May 6, 2022, the Company's Operating Partnership entered into a loan and security agreement (the “Loan and Security Agreement”) with a commercial federally regulated bank, as a lender and as agent for lenders that become party thereto from time to time (the “Agent”). The Loan and Security Agreement matures on May 6, 2027. The Loan and Security Agreement provides, subject to the Accordion Feature described below, $30.0 million in aggregate commitments for secured revolving loans (“Revolving Credit Facility”), the availability of which is based on a borrowing base consisting of fee simple owned real properties that satisfy eligibility criteria specified in the Loan and Security Agreement and the lease income thereunder which are owned by certain subsidiaries of the Operating Partnership. The Loan and Security Agreement also allows the Company, subject to certain conditions, to request additional revolving incremental loan commitments such that the Revolving Credit Facility may be increased to a total aggregate principal amount of up to $100.0 million. Borrowings under the Revolving Credit Facility may be voluntarily prepaid and re-borrowed, subject to certain fees. The Revolving Credit Facility bears a fixed rate of 5.65% for the first three years and thereafter a variable rate based upon the greater of (a) the Prime Rate quoted in the Wall Street Journal (Western Edition) (“Base Rate”) plus an applicable margin of 1% and (b) 4.75%. The facility is subject to certain liquidity and operating covenants and includes customary representations and warranties, affirmative and negative covenants and events of default. As of June 30, 2022, the Company is compliant with the covenants of the agreement.

The outstanding borrowings under the Revolving Credit Facility was $1.0 million as June 30, 2022. See Note 14 - "Subsequent Events" for more information regarding the increase in the aggregate principal amount of the Revolving Credit Facility to $90.0 million.

Note 6 - Related Party Transactions

Merger Agreement

In connection with the Merger, we entered into an investor rights agreement (the “Investor Rights Agreement”). The Investor Rights Agreement provides the stockholders party thereto with certain rights with respect to the nomination of members to our board of directors. Prior to the completion of our IPO, pursuant to the Investor Rights Agreement, HG Vora Capital Management, LLC (“HG Vora”) had the right to nominate four directors to our board of directors. Following the completion of our IPO, for so long as HG Vora owns (i) at least 9% of our issued and outstanding common stock for 60 consecutive days, HG Vora may nominate two of the members of our board of directors, and (ii) at least 5% of our issued and outstanding common stock for 60 consecutive days, HG Vora may nominate one member of our board of directors. If HG Vora owns less than 5% of our issued and outstanding common stock for 60 consecutive days, then HG Vora may not nominate any members of our board of directors pursuant to the Investor Rights Agreement.

Prior to the completion of our IPO, NLCP Holdings, LLC had the right to designate three directors to our board of directors. Subsequent to our IPO, NLCP Holdings, LLC no longer has these rights.

Prior to the completion of our IPO, West Investment Holdings, LLC, West CRT Heavy, LLC, Gary and Mary West Foundation, Gary and Mary West Health Endowment, Inc., Gary and Mary West 2012 Gift Trust and WFI Co-Investments acting unanimously, collectively referred to as the “West Stockholders,” did not have a director nomination right. Following the completion of our IPO, the West Stockholders may nominate one member of our board of directors for so long as the West Stockholders own in the aggregate at least 5% of the issued and outstanding shares of our common stock. If the West Stockholders own in the aggregate less than 5% of our issued and outstanding common stock for 60 consecutive days, then the West Stockholders may not nominate any members of our board of directors pursuant to the Investor Rights Agreement.

Prior to the completion of our IPO, NL Ventures, LLC (“Pangea”) did not have a director nomination right. Following the completion of our IPO, Pangea may nominate one member of our board of directors for so long as Pangea owns at least 4% of our issued and outstanding common stock for 60 consecutive days. If Pangea owns less than 4% of our issued and outstanding common stock for 60 consecutive days, then Pangea may not nominate any members of our board of directors pursuant to the Investor Rights Agreement. The Company made payments to Pangea for reimbursed expenses and services of $0 and $48,160 during the six months ended June 30, 2022 and 2021, respectively.

Note 7 - Noncontrolling Interests

Noncontrolling interests represent limited partnership interest in the Operating Partnership not held by the Company. Noncontrolling interests in the Operating Partnership are shown in the consolidated statements of changes in equity.

The following table presents the activity for the Company’s noncontrolling interests issued by the Operating Partnership for the six months ended June 30,:

	2022						2021
				Noncontrolling					Noncontrolling
	OP Units			Interests %			OP Units		Interests %
Balance at January 1,		453,303			2.1	%		365,103		4.4	%
Restricted Stock Units Converted, net of taxes		-						-
OP Units Issued		-						88,200
OP Units Converted		(79,721	)					-
Balance at June 30,		373,582			1.7	%		453,303		2.5	%

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 8 - Stock Based Compensation

Our board of directors adopted our 2021 Equity Incentive Plan (the “Plan”), to provide employees of the Company and its subsidiaries, certain consultants and advisors who perform services for the Company or its subsidiaries, and non-employee members of the board of directors of the Company with the opportunity to receive grants of incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, stock units, other stock-based awards, and cash awards to enable us to motivate, attract and retain the services of directors, officers and employees considered essential to the long term success of the Company. Under the terms of the Plan, the aggregate number of shares of awards will be no more than 2,275,727 shares. If and to the extent shares of awards granted under the Plan, expire or are canceled, forfeited, exchanged or surrendered without having been exercised, or if any stock awards, stock units or other stock-based awards are forfeited, terminated or otherwise not paid in full, the shares subject to such grants shall again be available for issuance or transfer under the Plan. The Plan has a term of ten years until August 12, 2031. As of June 30, 2022, there were approximately 2,151,007 shares available for issuance under the Plan.

Restricted Stock Units

During the six months ended June 30, 2022, the Company granted 16,796 RSUs to certain directors of the Company. Total outstanding RSUs as of June 30, 2022 are 180,424. 127,176 of these RSUs, were not issued pursuant to a formal plan, were granted prior to the IPO, and became fully vested upon the IPO. 66,445 RSUs were granted subsequent to the IPO and are pursuant to the Company’s 2021 Equity Incentive Plan (the “Plan”). On December 31, 2021, 4,631 RSUs vested. During the six months ended June 30, 2022, 10,798 RSUs vested and 8,566 RSUs were forfeited. RSUs are subject to restrictions on transfer and may be subject to a risk of forfeiture if the award recipient ceases to be an employee or director of the Company prior to vesting of the award. Each RSU represents the right to receive one share of common stock upon vesting. Each RSU is also entitled to receive a dividend equivalent payment equal to the dividend paid on one share of common stock upon vesting. Unearned dividend equivalents on unvested RSUs as of June 30, 2022 and 2021 were $22,663 and $0, respectively. The amortization of compensation costs for the awards of RSUs are included in "Stock-Based Compensation" in the accompanying consolidated statements of operations and amount to approximately $0.6 million and $1.0 million for the six months ended June 30, 2022 and 2021, respectively. Included in the $0.6 million of stock-based compensation for the six months ended June 30, 2022, is approximately $0.2 million of accelerated expense related to the retirement and separation of certain officers. The remaining unrecognized compensation cost of approximately $0.7 million for RSU awards is expected to be recognized over a weighted average amortization period of 0.9 years as of June 30, 2022.

The following table sets forth our unvested restricted stock activity for the six months ended June 30,:

	2022					2021
	Number of			Weighted Average		Number of			Weighted Average
	Unvested			Grant Date Fair Value		Unvested			Grant Date Fair Value
	Shares of RSUs			Per Share		Shares of RSUs			Per Share
Balance at January 1,		45,018		$	27.49		47,403		$	20.99
Granted		16,796		$	21.36		38,308		$	21.15
Forfeited		(8,566	)	$	27.49		-			-
Vested		(10,798	)	$	27.49		(46,225	)	$	21.15
Balance at June 30,		42,450		$	27.49		39,486		$	20.96

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 8 – Stock Based Compensation (continued)

Performance Stock Units

During the six months ended June 30, 2022, the Company did not grant any Performance Stock Units (“PSUs”) to officers or employees of the Company. Total outstanding PSUs as of June 30, 2022 and 2021 are 66,841 and 0, respectively. During the six months ended June 30, 2022, 10,901 PSUs were forfeited. PSUs vest subject to the achievement of relative total shareholder return as measured against a peer group of companies and absolute compounded annual growth in stock price during each performance period. The actual number of shares of common stock issued will range from 0 to 133,682 depending upon performance. The performance periods are August 13, 2021 through December 31, 2023 and January 1, 2022 through December 31, 2024, and 18,858 and 47,983 PSUs are scheduled to vest at the end of each performance period, respectively. PSUs are recorded at fair value which involved using a Monte Carlo simulation for the future stock prices of the Company and its corresponding peer group. A fair value of $24.15 and $24.00 was used for PSUs with performance periods ending December 31, 2023 and 2024, respectively.

PSUs are subject to restrictions on transfer and may be subject to a risk of forfeiture if the award recipient ceases to be an employee of the Company prior to vesting of the award. Each PSU is entitled to receive a dividend equivalent payment equal to the dividend paid on the number of shares of common stock issued per PSU vesting. Unearned dividend equivalents on unvested PSUs as of June 30, 2022 and 2021 were $66,173 and $0, respectively. The amortization of compensation costs for the awards of PSUs are included in "Stock-Based Compensation" in the accompanying Consolidated Statements of Operations and amount to $0.3 million and $0 for the six months ended June 30, 2022 and 2021, respectively. Amortization of compensation costs for the awards of PSUs amount to $0.1 million and $0 for the three months ended June 30, 2022 and 2021, respectively. The remaining unrecognized compensation cost of approximately $1.3 million for PSU awards is expected to be recognized over a weighted average amortization period of 1.2 years as of June 30, 2022.

The following table sets forth our unvested performance stock activity for the six months ended June 30,:

	*2022*					*2021*
	*Number of Unvested Shares of PSUs*			Weighted Average Grant Date Fair Value Per Share		*Number of Unvested Shares of PSUs*		Weighted Average Grant Date Fair Value Per Share
Balance at January 1,		77,742		$	24.04		-	$	-
Forfeit		(10,901	)	$	24.03		-		-
Balance at June 30,		66,841		$	24.04		-	$	-

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 8 – Stock Based Compensation (continued)

Stock Options

Prior to the completion of the IPO, the Company issued 791,790 nonqualified stock options (the “Options”) to purchase shares of the Company’s common stock, subject to the terms and conditions of the applicable Option Grant Agreements, with an exercise price per share of common stock equal to $24.00 and in such amounts as set forth in the Option Grant Agreements. The Options vested on August 31, 2020. The Options are exercisable upon the earliest of (i) the second anniversary of the Grant Date; (ii) termination of the grantee’s employment or service by the Company other than for cause, or by the grantee for “good reason”, the grantee’s death or disability or (iii) a change in control, as defined. As of June 30, 2022, 615,838 of the 791,790 Option Grants issued to the Company’s former employees and a director are exercisable. The options expire on July 15, 2027.

The following table summarizes stock option activity for the six months June 30,:

	2022				2021
	Number of		Weighted Average		Number of			Weighted Average
	Shares		Exercise Price		Shares			Exercise Price
Non-Exercisable at January 1,		175,952	$	24.00		263,928		$	24.00
Granted		-		-		-			-
Exercisable		-		-		(87,976	)		-
Non-Exercisable at June 30,		175,952	$	24.00		175,952		$	24.00

Note 9 - Warrants

On March 17, 2021, in connection with the Merger, the Company entered into a warrant agreement which granted the right to purchase 602,392 shares of common stock of the Company at a purchase price of $24.00 per share. Warrants are immediately exercisable and expire on July 15, 2027.

The following table summarizes warrant activity for the six months ended June 30,:

	2022				2021
			Weighted				Weighted
	*Number of*		*Average*		*Number of*		*Average*
	*Warrants*		*Exercise Price*		Warrants⁽¹⁾		*Exercise Price*
Exercisable at January 1,		602,392	$	24.00		-	$	24.00
Granted		-		-		602,392		-
Exercised		-		-		-		-
Exercisable at June 30,		602,392	$	24.00		602,392	$	24.00

^{(1) Warrants granted on March 17, 2021.}

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 10 - Earnings Per Share

The following table presents the computation of basic and diluted earnings per share (in thousands, except share data) :

	*For the Three Months Ended*				*For the Six Months Ended*
	*June 30,*				*June 30,*
	*2022*		*2021*		*2022*		*2021*
Numerator:
Net Income Attributable to Common Stockholders	$	3,758	$	2,738	$	8,776	$	4,195
Add: Preferred Stock Dividends		-		-		-		-
Add: Net Income Attributable to OP Interest		62		58		148		114
Add: Net Income Attributable to Restricted Stock Units		48		20		90		41
Dilutive Net Income Attributable to Common Stockholders	$	3,868	$	2,816	$	9,014	$	4,350

Denominator:
Weighted Average Shares of Common Stock Outstanding - Basic		21,307,621		17,329,964		21,279,919		13,645,990
Dilutive Effect of OP Units		384,598		-		411,338		-
Dilutive Effect of Vested Restricted Stock Units		-		125,635		-		113,494
Dilutive Effect of Options and Warrants		-		-		-		-
Dilutive Effect of Unvested Restricted Stock Units		40,070		-		42,923		-
Weighted Average Shares of Common Stock Outstanding - Diluted		21,732,289		17,455,599		21,734,180		13,759,484

Earnings Per Share - Basic
Net Income Attributable to Common Stockholders	$	0.18	$	0.16	$	0.41	$	0.31
Earnings Per Share - Diluted
Net Income Attributable to Common Stockholders	$	0.18	$	0.16	$	0.41	$	0.30

During the three and six months ended June 30, 2022, the effect of including OP Units and unvested RSUs were included in our calculation of weighted average shares of common stock outstanding – diluted. The effect of outstanding stock options and outstanding warrants were excluded in our calculation of weighted average shares of common stock outstanding – diluted as their inclusion would have been anti-dilutive. During the three and six months ended June 30, 2021, the effect of including vested RSUs were included in our calculation of weighted average shares of common stock outstanding – diluted. The effect of OP Units, outstanding stock options and outstanding warrants were excluded in our calculation of weighted average shares of common stock outstanding – diluted as their inclusion would have been anti-dilutive.

Note 11 - Stockholders' Equity

Preferred Stock

On April 6, 2021, the Company redeemed the 125 shares of Series A Preferred Stock outstanding. The shares were redeemed at a redemption price of $1,000 per share, plus accrued and unpaid dividends and an early redemption fee for a total payment of $137,416, in cash. As of June 30, 2022 there were no shares of preferred stock outstanding.

Common Stock

As of June 30, 2022, the Company had 21,318,637 shares of common stock outstanding.

Activity for the three and six months ended June 30, 2022:

During the three and six months ended June 30, 2022, 18,227 and 79,721 OP Units were converted into shares of our common stock, respectively.

Activity for the three and six months ended June 30,2021:

During January and February 2021, the Company issued 1,871,932 shares of common stock for $21.15 per share, resulting in net proceeds of approximately $39.6 million, after deducting offering expenses.

During March 2021, in connection with the Merger, the Company issued 7,699,887 shares of common stock and warrants to purchase up to 602,392 shares of the Company’s common stock.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Dividends

The following tables present the cash dividends, dividend equivalents on vested RSUs and, in our capacity as general partner of the Operating Partnership, authorized distributions on our OP Units declared by the Company during the six months ended June 30, 2022 and 2021:

	*Amount per*			*Dividends and*	Dividends and
Declaration Date	*Share/Unit*		*Period Covered*	*Distributions Paid Date*	Distribution Amounts
March 15, 2022	$	0.33	January 1, 2022 to March 31, 2022	April 14, 2022	$	7,200,400
June 15, 2022		0.35	April 1, 2022 to June 30, 2022	July 15, 2022		7,640,568
Total	$	0.68			$	14,840,968

	*Amount per*			*Dividends and*	Dividends and
Declaration Date	*Share/Unit*		*Period Covered*	*Distributions Paid Date*	Distribution Amounts
February 27, 2021	$	0.15	January 1, 2021 to March 16, 2021	March 22, 2021	$	1,518,070
March 15, 2021		0.08	January 1, 2021 to March 16, 2021	March 29, 2021		809,665
June 16, 2021		0.24	March 17, 2021 to June 30, 2021	July 15, 2021		4,276,968
Total	$	0.47			$	6,604,703

The Company had accrued unearned dividend equivalents on unvested RSUs and unvested PSUs of $22,663 and $66,173 as of June 30, 2022. There were no accrued unearned dividend equivalents on unvested RSUs or unvested PSUs as of June 30, 2021.

Note 12 – Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Accounting guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standards describe three levels of inputs that may be used to measure fair value:

Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 – Includes other inputs that are directly or indirectly observable in the marketplace.

Level 3 – Unobservable inputs that are supported by little or no market activities, therefore requiring an entity to develop its own assumptions.

The carrying amounts of financial instruments such as cash and cash equivalents, accrued expenses and other liabilities approximate their fair values due to generally short-term nature and the market rates of interest of these instruments. The carrying amounts of the Company's loans receivable, loan payable and Revolving Credit Facility approximate their fair values due to the market interest rates of these instruments.

Note 13 - Commitments and Contingencies

As of June 30, 2022, the Company has aggregate unfunded commitments to invest $12.2 million to develop and improve our existing cultivation facilities in Arizona, Massachusetts, Missouri, and Pennsylvania. The Company also has an option to acquire an adjacent parcel of land and fund the construction of a cultivation facility of an existing tenant (subject to normal and customary closing conditions and regulatory approvals) for a cost of up to $16.5 million; however, there is no obligation of the Company at this time as there is no guarantee the transaction will close.

As of June 30, 2022, the Company is the lessee under one office lease for a term of four years, subject to annual escalations. The annual rent payments range from approximately $72 thousand in year one to $85 thousand in year four.

The Company owns a portfolio of properties that it leases to entities which cultivate, harvest, process and distribute cannabis. Cannabis is an illegal substance under the Controlled Substances Act. Although the operations of the Company’s tenants are legalized in the states and local jurisdictions in which they operate, the Company and its tenants are subject to certain risks and uncertainties associated with conducting operations subject to conflicting federal, state and local laws in an industry with a complex regulatory environment which is continuously evolving. These risks and uncertainties include the risk that the strict enforcement of federal laws regarding cannabis would likely result in the Company’s inability, and the inability of its tenants, to execute their respective business plans.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 14 - Subsequent Events

Funded Commitments

Subsequent to June 30, 2022, the Company funded approximately $3.5 million in tenant improvements to the Company's cultivation facilities located in Arizona and Missouri.

Loan Receivable

On August 5, 2022, the $30 million mortgage loan collateralized by a cultivation and processing facility converted to a twenty-year sale leaseback.

Revolving Credit Facility

On July 29, 2022, the Operating Partnership, entered into an amendment to the Revolving Credit Facility, amending the Loan and Security Agreement, dated as of May 6, 2022, to increase the aggregate commitment under the Revolving Credit Facility from $30.0 million to $90.0 million and added two additional lenders.