nlcp-20240930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________

FORM 10-Q

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

For the quarterly period ended September 30, 2024

o 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 incorporation or organization)			(I.R.S. Employer Identification No.)

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

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 x No o

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 x No o

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 o	Accelerated filer o	Non-accelerated filer x	Smaller reporting company x
Emerging Growth Company x

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 o No x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

The number of shares of the registrant’s Common Stock, par value $0.01 per share, outstanding as of November 12, 2024 was 20,512,156.

Table of Contents

NewLake Capital Partners, Inc.

FORM 10-Q

September 30, 2024

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	5
	Notes to the Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
	Special Note Regarding Forward Looking Information
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41
Part II Other Information:
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Issuer Purchases of Equity Securities	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	43
Signatures		44

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

NEWLAKE CAPITAL PARTNERS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share amounts)


	September 30, 2024		December 31, 2023
Assets:
Real Estate
Land	$	21,717	$	21,397
Building and Improvements	408,548		390,911
Total Real Estate	430,265		412,308
Less Accumulated Depreciation	(41,417)		(31,999)
Net Real Estate	388,848		380,309
Cash and Cash Equivalents	19,833		25,843
In-Place Lease Intangible Assets, net	18,290		19,779
Loan Receivable, net (Current Expected Credit Loss of $128 and $167, respectively)	4,872		4,833

Other Assets	2,736		2,528
Total Assets	$	434,579	$	433,292

Liabilities and Equity:

Liabilities:
Accounts Payable and Accrued Expenses	$	1,253	$	1,117
Revolving Credit Facility	7,600		1,000
Loan Payable, net	—		1,000
Dividends and Distributions Payable	9,009		8,385
Security Deposits	8,995		8,616
Rent Received in Advance	668		990
Other Liabilities	130		227
Total Liabilities	27,655		21,335

Commitments and Contingencies

Equity:
Preferred Stock, $0.01 Par Value, 100,000,000 Shares Authorized, 0 Shares Issued and Outstanding, respectively	—		—
Common Stock, $0.01 Par Value, 400,000,000 Shares Authorized, 20,511,508 and 20,503,520 Shares Issued and Outstanding, respectively	205		205
Additional Paid-In Capital	446,466		445,289
Accumulated Deficit	(47,008)		(40,909)
Total Stockholders' Equity	399,663		404,585

Noncontrolling Interests	7,261		7,372
Total Equity	406,924		411,957

Total Liabilities and Equity	$	434,579	$	433,292

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

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CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share and per share amounts)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Revenue:
Rental Income	$	12,276	$	11,297	$	36,657	$	33,637
Interest Income from Loans	134		131		399		390
Fees and Reimbursables	144		63		562		256
Total Revenue	12,554		11,491		37,618		34,283

Expenses:
Property Expenses	128		78		179		228
Depreciation and Amortization Expense	3,726		3,568		10,920		10,698
General and Administrative Expenses:
Compensation Expense	1,169		1,173		3,554		3,450
Professional Fees	475		300		1,120		986
Other General and Administrative Expenses	433		389		1,307		1,309
Total General and Administrative Expenses	2,077		1,862		5,981		5,745
Total Expenses	5,931		5,508		17,080		16,671


Provision for Current Expected Credit Loss	12		—		38		—

Income From Operations	6,635		5,983		20,576		17,612

Other Income (Expense):
Other Income	80		178		262		607
Interest Expense	(177)		(95)		(388)		(284)
Total Other Income (Expense)	(97)		83		(126)		323

Net Income	6,538		6,066		20,450		17,935



Net Income Attributable to Noncontrolling Interests	(116)		(108)		(363)		(312)

Net Income Attributable to Common Stockholders	$	6,422	$	5,958	$	20,087	$	17,623

Net Income Attributable to Common Stockholders Per Share - Basic	$	0.31	$	0.28	$	0.98	$	0.83

Net Income Attributable to Common Stockholders Per Share - Diluted	$	0.31	$	0.28	$	0.98	$	0.83

Weighted Average Shares of Common Stock Outstanding - Basic	20,578,838		21,199,638		20,558,754		21,330,046

Weighted Average Shares of Common Stock Outstanding - Diluted	20,975,718		21,582,314		20,956,515		21,710,101

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

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NEWLAKE CAPITAL PARTNERS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands, except share amounts)


	Three Months Ended September 30, 2024
		Common Stock
		Shares	Par		Additional Paid-in Capital		Accumulated Deficit		Noncontrolling Interest		Total Equity
Balance as of June 30, 2024		20,509,883	$	205	$	446,006	$	(44,581)	$	7,316	$	408,946



Conversion of OP Units to Common Stock		942	—		19		—		(19)		—





Stock-Based Compensation		683	—		449		—		—		449



Dividends to Common Stock		—	—		—		(8,820)		—		(8,820)

Dividends on Restricted Stock Units		—	—		—		(29)		—		(29)

Distributions to OP Unitholders		—	—		—		—		(160)		(160)

Adjustment for Noncontrolling Interest Ownership in Operating Partnership		—	—		(8)		—		8		—

Net Income		—	—		—		6,422		116		6,538

Balance as of September 30, 2024		20,511,508	$	205	$	446,466	$	(47,008)	$	7,261	$	406,924


	Three Months Ended September 30, 2023
		Common Stock
		Shares	Par		Additional Paid-in Capital		Accumulated Deficit		Noncontrolling Interest		Total Equity
Balance as of June 30, 2023		21,302,515	$	213	$	455,143	$	(37,508)	$	7,328	$	425,176





Repurchase of Common Stock		(608,152)	(6)		(7,914)		—		—		(7,920)

Stock-Based Compensation		—	—		379		—		—		379



Dividends to Common Stock		—	—		—		(8,071)		—		(8,071)

Dividend Equivalents to Restricted Stock Units		—	—		—		(14)		—		(14)

Distributions to OP Unitholders		—	—		—		—		(146)		(146)

Adjustment for Noncontrolling Interest Ownership in Operating Partnership		—	—		(77)		—		77		—

Net Income		—	—		—		5,958		108		6,066

Balance as of September 30, 2023		20,694,363	$	207	$	447,531	$	(39,635)	$	7,367	$	415,470

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

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NEWLAKE CAPITAL PARTNERS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands, except share amounts)


	Nine Months Ended September 30, 2024
		Common Stock
		Shares	Par		Additional Paid-in Capital		Accumulated Deficit		Noncontrolling Interest		Total Equity
Balance as of December 31, 2023		20,503,520	$	205	$	445,289	$	(40,909)	$	7,372	$	411,957

Conversion of Vested RSUs to Common Stock		6,363	—		—		—		—		—

Conversion of OP Units to Common Stock		942	—		19		—		(19)		—



Cash Paid for Taxes in Lieu of Issuance of Common Stock		—	—		(46)		—		—		(46)

Stock-Based Compensation		683	—		1,223		—		—		1,223



Dividends to Common Stock		—	—		—		(26,048)		—		(26,048)

Dividends on Restricted Stock Units		—	—		—		(138)		—		(138)

Distributions to OP Unitholders		—	—		—		—		(474)		(474)

Adjustment for Noncontrolling Interest Ownership in Operating Partnership		—	—		(19)		—		19		—

Net Income		—	—		—		20,087		363		20,450

Balance as of September 30, 2024		20,511,508	$	205	$	446,466	$	(47,008)	$	7,261	$	406,924


	Nine Months Ended September 30, 2023
		Common Stock
		Shares	Par		Additional Paid-in Capital		Accumulated Deficit		Noncontrolling Interest		Total Equity
Balance as of December 31, 2022		21,408,194	$	214	$	455,822	$	(32,487)	$	7,389	$	430,938

Repurchase of Common Stock		(713,831)	(7)		(9,247)		—		—		(9,254)





Stock-Based Compensation		—	—		1,060		—		—		1,060



Dividends to Common Stock		—	—		—		(24,709)		—		(24,709)

Dividends on Restricted Stock Units		—	—		—		(62)		—		(62)

Distributions to OP Unitholders		—	—		—		—		(438)		(438)

Adjustment for Noncontrolling Interest Ownership in Operating Partnership		—	—		(104)		—		104		—

Net Income		—	—		—		17,623		312		17,935

Balance as of September 30, 2023		20,694,363	$	207	$	447,531	$	(39,635)	$	7,367	$	415,470

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

Table of Contents

NEWLAKE CAPITAL PARTNERS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	For the Nine Months Ended
	September 30, 2024		September 30, 2023
Cash Flows from Operating Activities:
Net Income	$	20,450	$	17,935
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Stock-Based Compensation	1,223		1,060

Depreciation and Amortization Expense	10,920		10,698
Amortization of Debt Issuance Costs	202		201
Amortization of Debt Discount	—		10
Provision for Credit Loss	(38)		—

Non-Cash Lease Expense	(2)		—
Non-Cash Application of Rent Escrow	(299)		—
Non-Cash Application of Security Deposit	—		(945)
Changes in Assets and Liabilities
Other Assets	(123)		22
Accounts Payable and Accrued Expenses	128		(659)
Security Deposits	677		510

Rent Received in Advance	(322)		(468)
Other Liabilities	(96)		(761)
Net Cash Provided by Operating Activities	32,720		27,603

Cash Flows from Investing Activities:



Funding of Building and Tenant Improvements	(13,964)		(5,609)

Acquisition of Real Estate	(3,993)		(350)

Net Cash Used in Investing Activities	(17,957)		(5,959)

Cash Flows from Financing Activities:


Repurchase of Common Stock	—		(9,254)
Cash Paid for Taxes in Lieu of Issuance of Common Stock	(46)		—
Common Stock Dividends Paid	(25,430)		(24,987)
Restricted Stock Unit Dividends Paid	(143)		(65)
Distributions to OP Unitholders	(463)		(437)

Borrowings from Revolving Credit Facility	6,600		—
Principal Repayment on Loan Payable	(1,000)		(1,000)
Deferred Financing Costs	—		(28)
Deferred Offering Costs	(291)		—
Net Cash Used in Financing Activities	(20,773)		(35,771)

Net (Decrease) in Cash and Cash Equivalents	(6,010)		(14,127)
Cash and Cash Equivalents - Beginning of Period	25,843		45,192

Cash and Cash Equivalents - End of Period	$	19,833	$	31,065
Supplemental Disclosure of Cash Flow Information:
Interest Paid	$	195	$	123
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Dividends and Distributions Declared, Not Paid	$	9,009	$	8,231


Accrual for Deferred Offering Costs	$	7	$	—





Conversion of OP Units to Common Stock	$	19	$	—

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

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

Note 1 - Organization

NewLake Capital Partners, Inc. (the “Company”), a Maryland corporation, was formed on April 9, 2019, originally 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 conducts its operations through its subsidiary, NLCP Operating Partnership LP, a Delaware limited partnership (the “Operating Partnership” or “OP”). The Company is the sole managing general partner of the Operating Partnership. The Company's common stock trades on the OTCQX® Best Market (the "OTCQX") 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 accompanying unaudited consolidated 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. The consolidated financial statements include the accounts of the Company, the Operating Partnership, as well as any wholly owned subsidiaries of the Operating Partnership and variable interest entities (“VIEs”) in which the Company is considered the primary beneficiary. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. The results of operations for the three and nine months ended September 30, 2024 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, 2023, and filed with the Securities and Exchange Commission (“SEC”) on March 11, 2024. In management's opinion, all adjustments (which include normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows have been made.

Variable Interest Entities

The Company consolidates a VIE in which it is considered the primary beneficiary. The primary beneficiary is the entity that has: (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.

NLCP Operating Partnership LP

The Operating Partnership is a VIE because the holders of limited partnership interests do not have substantive kick-out rights or participating rights. Furthermore, the Company is the primary beneficiary of the Operating Partnership because it has 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 September 30, 2024 and December 31, 2023, the assets and liabilities of the Company and the Operating Partnership were 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

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

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

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 and corporate assets, the fair value of acquired real estate and in-place lease intangibles acquired, and the valuation of stock-based compensation. Actual results could differ from those estimates.

Reclassification

Certain prior year balances have been reclassified to conform to the Company's current year presentation.

Significant Accounting Policies

There have been no changes to the Company's accounting policies included in Note 2 to the Consolidated Financial Statements of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Recently Issued Accounting Pronouncements

Description

Effective Date

Effect on Financial Statements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 aims to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. The update also requires disclosure regarding the chief operating decision maker and expands the interim segment disclosure requirements.

For fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of ASU 2023-07 on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires entities to disclose additional information with respect to the effective tax rate reconciliation and to disclose the disaggregation by jurisdiction of income tax expense and income taxes paid.

For fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of ASU 2023-09 on its consolidated financial statements.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

Note 3 - Real Estate

As of September 30, 2024, the Company owned 32 properties, located in 12 states. The following table presents the Company's real estate portfolio as of September 30, 2024 (in thousands):


Tenant		Market	Site Type	Land		Building and Improvements(1)		Total Real Estate		Accumulated Depreciation			Net Real Estate
Acreage		Connecticut	Dispensary	$	395	$	534	$	929	$	(88)		$	841
Acreage		Massachusetts	Cultivation	481		9,310		9,791		(1,367)			8,424
Acreage		Pennsylvania	Cultivation	952		9,209		10,161		(1,305)			8,856
Ayr Wellness, Inc.		Nevada	Cultivation	1,002		12,577		13,579		(859)			12,720
Ayr Wellness, Inc.		Pennsylvania	Cultivation	2,963		12,315		15,278		(916)			14,362
C3 Industries		Connecticut	Cultivation	321		4,272		4,593		(42)		(3)	4,551
C3 Industries		Missouri	Cultivation	948		28,069		29,017		(958)			28,059
Calypso Enterprises		Pennsylvania	Cultivation	1,486		30,527		32,013		(2,170)		(3)	29,843
Cannabist	(2)	California	Dispensary	1,082		2,692		3,774		(305)			3,469
Cannabist	(2)	Illinois	Dispensary	162		1,053		1,215		(115)			1,100
Cannabist	(2)	Illinois	Cultivation	801		10,560		11,361		(1,167)			10,194
Cannabist	(2)	Massachusetts	Dispensary	108		2,212		2,320		(270)			2,050
Cannabist	(2)	Massachusetts	Cultivation	1,136		12,690		13,826		(1,887)			11,939
Cresco Labs		Illinois	Cultivation	276		50,456		50,732		(6,815)			43,917
Curaleaf		Connecticut	Dispensary	184		2,748		2,932		(324)			2,608
Curaleaf		Florida	Cultivation	388		75,595		75,983		(7,992)			67,991
Curaleaf		Illinois	Dispensary	69		525		594		(65)			529
Curaleaf		Illinois	Dispensary	65		959		1,024		(122)			902
Curaleaf		Illinois	Dispensary	606		1,128		1,734		(140)			1,594
Curaleaf		Illinois	Dispensary	281		3,072		3,353		(371)			2,982
Curaleaf		North Dakota	Dispensary	779		1,395		2,174		(168)			2,006
Curaleaf		Ohio	Dispensary	574		2,788		3,362		(393)			2,969
Curaleaf		Pennsylvania	Dispensary	877		1,041		1,918		(164)			1,754
Curaleaf		Pennsylvania	Dispensary	216		2,011		2,227		(242)			1,985
Greenlight		Arkansas	Dispensary	238		1,919		2,157		(232)			1,925
Mint		Arizona	Cultivation	2,400		18,610		21,010		—		(3)	21,010
Organic Remedies		Missouri	Cultivation	204		20,897		21,101		(2,993)			18,108
PharmaCann		Massachusetts	Dispensary	411		1,701		2,112		(364)			1,748
PharmaCann		Ohio	Dispensary	281		1,269		1,550		(70)			1,480
PharmaCann		Pennsylvania	Dispensary	44		1,271		1,315		(140)			1,175
Revolutionary Clinics		Massachusetts	Cultivation	926		41,934		42,860		(3,977)			38,883
Trulieve		Pennsylvania	Cultivation	1,061		43,209		44,270		(5,396)			38,874
Total Real Estate(4)				$	21,717	$	408,548	$	430,265	$	(41,417)		$	388,848

(1) Includes construction in progress in the amount of $21.2 million that had been funded as of September 30, 2024.

(2) This tenant was formerly known as Columbia Care.

(3) A portion of this investment is currently under development or undergoing building or tenant improvements. Once the development or improvements are completed and placed-in service, the Company will begin depreciating the applicable part of the property.

(4) At times, numbers in this table may differ due to rounding.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

Note 3 - Real Estate (continued)

Real Estate Acquisitions

2024 Acquisitions

In May 2024, the Company purchased a cultivation facility in Connecticut for approximately $4.0 million and committed to fund approximately $12.0 million in building and tenant improvements (refer to the Building and Tenant Improvements table below for details). The property was simultaneously leased to a related entity of an existing tenant.

The following table presents the real estate acquisition for the nine months ended September 30, 2024 (in thousands):

Tenant

Market

Site Type

Closing Date

Real Estate Acquisition Costs

C3 Industries

Connecticut

Cultivation

May 7, 2024

3,993

Total

3,993

2023 Acquisitions

In March 2023, the Company exercised its option to acquire an adjacent parcel of land to expand its cultivation facility in Missouri and invested $350 thousand and committed to fund approximately $16.2 million to expand the facility (refer to the Building and Tenant Improvements table below for details).

The following table presents the real estate acquisition for the year ended December 31, 2023 (in thousands):

Tenant

Market

Site Type

Closing Date

Real Estate Acquisition Costs

C3 Industries

Missouri

Cultivation

March 3, 2023

350

Total

350

Real Estate Commitments

2024 Improvement Allowances

For the nine months ended September 30, 2024, the Company funded approximately $14.0 million towards its' committed improvement allowances across four tenants. The following table presents the funded commitments and the remaining unfunded commitments for the nine months ended September 30, 2024 (in thousands):


Tenant	Market	Site Type	Closing Date		Funded Commitments		Unfunded Commitments
Ayr Wellness, Inc.	Pennsylvania	Cultivation	June 30, 2022		$	750	$	—
C3 Industries	Connecticut	Cultivation	May 7, 2024		600		11,424
C3 Industries	Missouri	Cultivation	March 3, 2023	(1)	8,826		—

Mint	Arizona	Cultivation	June 24, 2021		3,788		800		(2)



Total					$	13,964	$	12,224

(1) Funded commitments and unfunded commitments relate to the Missouri cultivation facility expansion project.

(2) Effective June 6, 2024, the lease agreement was amended to include an additional commitment of approximately $800 thousand.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

Note 3 - Real Estate (continued)

2023 Improvement Allowances

For the year ended December 31, 2023, the Company funded approximately $14.4 million towards its' committed improvement allowances across four tenants. The following table presents the funded commitments and the remaining unfunded commitments for the year ended December 31, 2023 (in thousands):


Tenant	Market	Site Type	Closing Date	Funded Commitments		Unfunded Commitments
Ayr Wellness, Inc.	Pennsylvania	Cultivation	June 30, 2022	$	—	$	750
C3 Industries	Missouri	Cultivation	April 1, 2022	7,858		8,826
Calypso	Pennsylvania	Cultivation	August 5, 2022	2,013		987		(1)
Mint	Arizona	Cultivation	June 24, 2021	4,281		3,788		(2)
Organic Remedies	Missouri	Cultivation	December 20, 2021	282		—



Total				$	14,434	$	14,351

(1) As of September 30, 2024, the Company's obligation to fund the remaining improvement allowance was suspended until all outstanding rent is paid and the escrow deposit is replenished.

(2) Effective June 1, 2023, the lease agreement was amended to include an additional commitment of approximately $6.5 million.

Construction in Progress

As of September 30, 2024 and December 31, 2023, funded commitments recorded in Construction in Progress ("CIP") were $21.2 million and $24.2 million, respectively, and are classified in "Buildings and Improvements" in the accompanying consolidated balance sheets.

2024 Construction in Progress

The following table presents the CIP balance as of September 30, 2024 (in thousands):

Tenant

State

Site Type

CIP Balance(1)

C3 Industries

Connecticut

Cultivation

600

Calypso

Pennsylvania

Cultivation

2,013

Mint

Arizona

Cultivation

18,610

Total

21,223

(1) These properties were under development or undergoing building or tenant improvements as of September 30, 2024. Once the development or the improvements are completed for its intended use, the assets will be placed-in-service and the Company will begin depreciation.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

Note 3 - Real Estate (continued)

2023 Construction in Progress

The following table presents the CIP balance as of December 31, 2023 (in thousands):

Tenant

State

Site Type

CIP Balance(1)

C3 Industries

Missouri

Cultivation

7,324

Calypso

Pennsylvania

Cultivation

2,013

Mint

Arizona

Cultivation

14,822

Total

24,159

(1) These properties were under development or improvement as of December 31, 2023. Once the development or the improvements are completed for its intended use, the assets will be placed-in-service and the Company will begin depreciation.

Disposal of Real Estate

2024 Dispositions

There were no sales of real estate property investments during the nine months ended September 30, 2024.

2023 Dispositions

During the year ended December 31, 2023, there was one real estate property sold. On October 27, 2023, the Company closed on the sale of its property in Palmer, Massachusetts, for $2.0 million, which was leased to Mint. The Company's investment in the property was $1.9 million. Upon closing, Mint's lease agreement was terminated and they paid a portion of the closing costs, resulting in a break-even sale of the property. Therefore, the Company did not recognize a gain or loss on sale of the property.

In-place Leases

The following table presents the future amortization of the Company’s acquired in-place leases as of September 30, 2024 (in thousands):


Year	Amortization Expense
2024 (three months ending December 31, 2024)	$	497
2025	1,985
2026	1,985
2027	1,985
2028	1,985
Thereafter	9,853
Total	$	18,290

Depreciation and Amortization

For the three months ended September 30, 2024 and 2023, depreciation expense on the Company's real estate assets was approximately $3.2 million and $3.1 million, respectively. Depreciation expense on the Company's real

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

Note 3 - Real Estate (continued)

estate assets for the nine months ended September 30, 2024 and 2023, was approximately $9.4 million and $9.2 million, respectively.

Amortization of the Company’s acquired in-place lease intangible assets was approximately $0.5 million for both the three months ended September 30, 2024 and 2023. Amortization of the Company’s acquired in-place lease intangible assets was approximately $1.5 million for both the nine months ended September 30, 2024 and 2023. The acquired in-place lease intangible assets have a weighted average remaining amortization period of approximately 9.48 years.

Impairment

The Company did not identify any situations in its review of tenant activities and changes in the business condition of all of its properties that would require the recognition of an impairment loss. Accordingly, the Company did not record an impairment loss for the three months ended September 30, 2024 and September 30, 2023, respectively.

Note 4 - Leases

As Lessor

The Company's properties are leased to single tenants on a long-term, triple-net basis, which obligates the tenant to be responsible for the ongoing expenses of a property, in addition to its rent obligations. Under certain circumstances the Company will pay for certain expenses on behalf of the tenant and the tenant is required to reimburse the Company. The presentation in the statements of operations for these expenses are gross where the Company records revenue and a corresponding reimbursable expense. Expenses paid directly by a tenant are not reimbursable and therefore are not reflected in the statements of operations. The expense and reimbursable amounts may differ due to timing, since the revenue is recorded on a cash basis. The revenues associated with the reimbursable expenses were classified in "Fees and Reimbursables" in the accompanying consolidated statements of operations. For the three months ended September 30, 2024 and 2023, the reimbursable revenues were $93.7 thousand and $14.5 thousand, respectively. For the nine months ended September 30, 2024, and 2023 the reimbursable revenues were $411.9 thousand, and $111.9 thousand, respectively. Reimbursable expenses are classified as "Property Expenses" in the accompanying consolidated statements of operations.

The Company's tenants operate in the cannabis industry. All of the Company's leases generally contain annual increases in rent (typically between 2% and 3%) over the expiring rental rate at the time of expiration. Certain leases of the Company also contain an improvement allowance, which is generally available to be funded between 12 and 18 months. In some leases, the tenant becomes liable to pay rent as if all the improvement allowance has been funded, even if there are still unfunded commitments. Improvement allowances also contains annual increases which generally increase at the same rate as base rent, per the lease agreement.

Certain of the Company's leases provide the lessee with a right of first refusal or right of first offer in the event the Company markets the leased property for sale. During the fourth quarter of 2023, the Company granted Calypso a purchase option to purchase the leased property and during the first quarter of 2024, the tenant was out of compliance with certain provisions of the lease and as a result the purchase option was terminated. As of September 30, 2024, the Company had two leases that granted the lessee an option to purchase the leased property at its fair market value at the end of the initial lease term in December 2029, provided certain conditions. As of September 30, 2024, the Company's gross investment in these two properties was approximately $6.3 million.

NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

Note 4 - Leases (continued)

Lease Income

The following table presents the future contractual minimum rent under the Company’s operating leases as of September 30, 2024 (in thousands):


Year	Contractual Minimum Rent(1)
2024 (three months ending December 31, 2024)	$	12,807
2025	52,649
2026	55,044
2027	56,475
2028	57,944
Thereafter	577,041
Total	$	811,960

(1) The table includes future contractual minimum rent from two non-performing tenants since their lease's remained in effect and had not been modified or terminated as of September 30, 2024.

Credit Risk and Geographic Concentration

The ability of any of the Company’s 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. As of September 30, 2024 and December 31, 2023, the Company owned 32 and 31 properties, respectively, leased to 13 tenants across 12 states including Arizona, Arkansas, California, Connecticut, Florida, Illinois, Massachusetts, Missouri, Nevada, North Dakota, Ohio, and Pennsylvania.

The following table presents the tenants in the Company's portfolio that represented the largest percentage of the Company's total rental income and fees, excluding revenue reimbursables, for each of the periods presented:


For the Three Months Ended September 30,
2024				2023
Tenant		Number of Leases	Percentage of Rental Income(1)	Tenant		Number of Leases	Percentage of Rental Income(1)(2)
Curaleaf		10	23%	Curaleaf		10	25%
Cresco Labs		1	14%	Cresco Labs		1	14%
Trulieve		1	11%	Trulieve		1	12%
Cannabist	(3)	5	9%	Cannabist	(3)	5	9%
C3 Industries		2	8%	Calypso		1	8%

(1) Calculated based on rental income received during the period. This amount includes fees, applied escrow/security deposits, if any, and excludes revenue reimbursables.

(2) Prior year presentation has been recalculated to exclude revenue reimburseables to conform to current year presentation.

(3) This tenant was formerly known as Columbia Care.

NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

Note 4 - Leases (continued)


For the Nine Months Ended September 30,
2024				2023
Tenant		Number of Leases	Percentage of Rental Income(1)	Tenant		Number of Leases	Percentage of Rental Income(1)(2)
Curaleaf		10	23%	Curaleaf		10	25%
Cresco Labs		1	14%	Cresco Labs		1	14%
Trulieve		1	11%	Trulieve		1	12%
Cannabist	(3)	5	9%	Cannabist	(3)	5	9%
Calypso		1	7%	Calypso		1	8%

(1) Calculated based on rental income received during the period. This amount includes fees, applied escrow/security deposits, if any, and excludes revenue reimbursables.

(2) Prior year presentation has been recalculated to exclude revenue reimbursables to conform to current year presentation.

(3) This tenant was formerly know as Columbia Care.

The following table presents the states in the Company’s portfolio that represented the largest percentage of the Company’s total rental income and fees, excluding reimbursable revenues, for each of the periods presented:


For the Three Months Ended September 30,
2024			2023
State	Number of Properties	Percentage of Rental Income(1)	State		Number of Properties	Percentage of Rental Income(1)
Pennsylvania	7	26%	Pennsylvania		7	28%
Florida	1	19%	Florida		1	20%
Illinois	7	18%	Illinois		7	19%
Missouri	2	11%	Massachusetts	(2)	6	12%
Massachusetts	5	11%	Missouri		2	9%

(1) Calculated based on rental income received during the period. This amount includes fees, applied escrow/security deposits, if any, and excludes revenue reimbursables.

(2) Included in the number of properties and revenue is one Massachusetts property sold in October 2023.


For the Nine Months Ended September 30,
2024			2023
State	Number of Properties	Percentage of Rental Income(1)	State		Number of Properties	Percentage of Rental Income(1)
Pennsylvania	7	26%	Pennsylvania		7	28%
Florida	1	19%	Florida		1	20%
Illinois	7	18%	Illinois		7	19%
Massachusetts	5	12%	Massachusetts	(2)	6	12%
Missouri	2	11%	Missouri		2	8%

(1) Calculated based on rental income received during the period. This amount includes fees, applied escrow/security deposits, if any, and excludes revenue reimbursables.

(2) Included in the number of properties and revenue is one Massachusetts property sold in October 2023.

Condition of Our Tenants

During the fourth quarter of 2023, the Company amended its leases with: a) Revolutionary Clinics as part of a restructuring of their business, their receipt of new third-party capital and new management, and b) Calypso in connection with their sale to Canvas Acquisition Corporation. Both tenants experienced recent operating

NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

Note 4 - Leases (continued)

challenges impacting their ability to pay rent as described below. The Company is currently in discussion with these tenants and have reserved all rights under the lease agreements.

Revolutionary Clinics

Revolutionary Clinics did not pay approximately 50% of the contractual rent from June 2024 through September 2024.

Calypso Enterprises

Calypso Enterprises did not pay its September 2024 contractual rent due under its lease agreement. The Company held an escrow deposit amounting to approximately six months of contractual rent payments. The Company applied approximately $299 thousand from this escrow deposit to cover the outstanding September 2024 rent. Additionally, in accordance with the lease agreement, the Company suspended its obligation to fund the remaining improvement allowance of approximately $987 thousand until all outstanding rent is paid and the escrow deposit is replenished.

As Lessee

Commencing on June 1, 2022, the Company entered into a four year lease agreement, subject to annual escalations, which includes the option to extend the lease for a single three year period. The annual rent payments range from approximately $72.0 thousand in year one to approximately $85.0 thousand in year four. The one office lease qualifies under the right-of-use ("ROU") model. Upon entering into the lease in June 2022, the Company recorded a ROU asset of $273 thousand which is classified in “Other Assets” and a lease liability, which is classified in "Other Liabilities" in the accompanying consolidated balance sheets. The ROU balance as of September 30, 2024 and December 31, 2023, were approximately $127.5 thousand and $177.4 thousand, respectively. The ROU asset is amortized over the remaining lease term. The amortization is made up of the principal amortization under the lease liability plus or minus the straight-line adjustment of the operating lease rent.

The following table presents the future contractual rent obligations as lessee as of September 30, 2024 (in thousands):


Year	Contractual Base Rent
2024 (three months ended December 31, 2024)	$	19
2025	77
2026	52



Total Minimum Lease Payments	$	148
Less: Amount Discounted Using Incremental Borrowing Rate	$	(13)
Total Lease Liability	$	135

As of September 30, 2024, the weighted-average discount rate used to calculate the lease liability was 5.65% and the remaining lease term was 1.92 years.

Note 5 – Loan Receivable, net

Loan Receivable

The Company funded a $5.0 million unsecured loan to C3 Industries on June 10, 2022. The loan initially bore interest at a rate of 10.25% and is structured to increase annually in April by the product of 1.0225 times the interest rate in effect immediately prior to the anniversary date. The loan is interest only for the first four years and

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

Note 5 – Loans Receivable (continued)

can be prepaid at any time without penalty. If full principal payment on the loan is not made on June 30, 2026, the loan will begin amortizing principal and interest over the next five years, with a final maturity of June 30, 2031. The loan is cross defaulted with their lease agreement with the Company. As of September 30, 2024 and December 31, 2023, the loan earned interest at a rate of 10.72% and 10.48%, respectively, and the aggregate principal amount outstanding on the unsecured loan receivable as of September 30, 2024 and December 31, 2023, was $5.0 million.

CECL Reserve

The Company recorded a provision for current expected credit loss on the $5.0 million unsecured loan (discussed above). Estimating the CECL allowance for credit loss requires significant judgement. The Company used a discounted cash flow analysis to determine the expected credit loss. The following table presents the CECL reserve for the three months ended September 30, 2024 (in thousands):


Period	Expected Credit Loss
CECL reserve as of June 30, 2024	$	140.6
Adjustment to expected credit loss	(12.2)
CECL reserve as of September 30, 2024(1)	$	128.4

(1) Included in "Loan Receivable, net" on the accompanying consolidated balance sheets.

The following table presents the CECL reserve for the nine months ended September 30, 2024 (in thousands):


Period	Expected Credit Loss
CECL reserve as of December 31, 2023	$	166.7
Adjustment to expected credit loss	(38.3)
CECL reserve as of September 30, 2024(1)	$	128.4

(1) Included in "Loan Receivable, net" on the accompanying consolidated balance sheets.

Note 6 – Financings

Loan Payable

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 was an independent third party from the tenant. The loan bore interest at a rate of 4.0% per annum. Principal on the loan was payable in annual installments of which $1.8 million and $1.0 million were paid in January 2022 and January 2023, respectively. On January 3, 2024, the Company made its final annual principal and interest payment of approximately $1.0 million.

Revolving Credit Facility

On May 6, 2022, the 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 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.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

Note 6 – Financings (continued)

On July 29, 2022, the Operating Partnership, entered into an amendment to the Revolving Credit Facility, amending the Loan and Security Agreement, to increase the aggregate commitment under the Revolving Credit Facility from $30.0 million to $90.0 million and added two additional lenders. 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) plus an applicable margin of 1.0% or (b) 4.75%.

As of September 30, 2024 and December 31, 2023, the Company had approximately $7.6 million and $1.0 million, respectively, outstanding under the Revolving Credit Facility. As of September 30, 2024, there was $82.4 million in funds available to be drawn, subject to sufficient collateral in the borrowing base.

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 September 30, 2024, the Company was in compliance with the terms of such covenants under the agreement.

Note 7 - Related Party Transactions

Investor Rights Agreement

Pursuant to our Investor Rights Agreement (the "Investor Rights Agreement"), HG Vora Capital Management, LLC (“HG Vora”), West Investment Holdings, LLC, West CRT Heavy, LLC, Gary and Mary West Foundation, Gary and Mary West Charitable Trust, Gary and Mary West 2012 Gift Trust and WFI Co-Investments, acting unanimously, collectively referred to as the “West Stockholders" and NL Ventures LLC ("Pangea") hold certain nomination rights with respect to members of our board of directors so long as they individually own in the aggregate certain percentages of the Company’s issued and outstanding common stock for 60 days consecutively.

Note 8 - Noncontrolling Interests

Noncontrolling interests represent the limited partnership interest ("LPI Units") in the Operating Partnership not held by the Company. Net income is allocated to noncontrolling interest is based on LPI Unitholders' ownership percentage in the Operating Partnership. As of September 30, 2024 and December 31, 2023 noncontrolling interests represented approximately 372,640 and 373,582 LPI Units, respectively, or 1.8% ownership interest in the Operating Partnership. Net income allocated to the Operating Partnership non-controlling interest for the three months ended September 30, 2024 and 2023 was $116 thousand and $108 thousand, respectively. Net income allocated to the Operating Partnership non-controlling interest for the nine months ended September 30, 2024 and 2023 was $363 thousand and $312 thousand million, respectively.

During the nine months ended September 30, 2024 and 2023 there were 942 and no LPI Units converted to common stock, respectively.

Note 9 - Stock Based Compensation

The Company's 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,

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

Note 9 - Stock Based Compensation (continued)

other stock-based awards, and cash awards to enable the Company to motivate, attract and retain the services of directors, officers and employees considered essential to the long term success of the Company.

Under the Plan, the total 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.

Additionally, the Plan provides for the issuance of unrestricted common stock to directors who elect to receive their compensation in common stock rather than cash. During the nine months ended September 30, 2024, 683 shares of common stock were issued related to director compensation, As of September 30, 2024, there were approximately 1,788,250 shares available for issuance under the Plan, which assumes maximum performance is achieved with respect to Performance Stock Units (“PSUs”) .

Restricted Stock Units

Restricted Stock Units ("RSUs") are granted to certain directors, officers and employees of the Company. Per the terms of the agreements, certain director RSUs that vest cannot be converted until the director separates from the Company. Total outstanding RSUs as of September 30, 2024 and 2023 were 139,499 and 106,820, respectively.

Unvested Restricted Stock Units

The following table sets forth the Company's unvested RSU activity for the nine months ended September 30,:


	2024				2023
	Number of Unvested Shares of RSUs		Weighted Average Grant Date Fair Value Per Share		Number of Unvested Shares of RSUs	Weighted Average Grant Date Fair Value Per Share
Balance at January 1,	63,582		$	13.92	29,255	$	22.89
Granted	49,014		$	17.40	59,031	$	12.87
Forfeited	(740)		$	15.19	—	$	—
Vested	(40,610)	(1)	$	12.64	(18,318)	$	20.14
Balance at September 30,	71,246		$	17.03	69,968	$	15.15

(1) Vested shares are reported gross and include 2,846 shares withheld to satisfy tax and other compensation related withholdings associated with the vested RSUs issued under the 2021 Equity Incentive Plan.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

Note 9 - Stock Based Compensation (continued)

Vested Restricted Stock Units

The following table sets forth the Company's vested RSU activity for the nine months ended September 30,:


	2024				2023
	Number of Vested Shares of RSUs		Weighted Average Grant Date Fair Value Per Share		Number of Vested Shares of RSUs	Weighted Average Grant Date Fair Value Per Share
Balance at January 1,	36,852		$	22.05	18,534	$	23.93
Vested	40,610	(1)	$	12.64	18,318	$	20.14
Converted	(6,363)		$	13.38	—	$	—
Shares Withheld(2)	(2,846)		$	13.38	—	$	—
Balance at September 30,	68,253		$	17.62	36,852	$	22.05

(2) Represents shares withheld to satisfy tax and other compensation related withholdings associated with the vested RSUs issued under the 2021 Equity Incentive Plan.

Each RSU represents the right to receive one share of common stock upon vesting. Upon vesting, each RSU is also entitled to receive an accumulated dividend payment equal to the dividend paid on each share of common stock during the vesting period. During the nine months ended September 30, 2024 and 2023, the Company paid $83.0 thousand and $35.3 thousand respectively, of accumulated dividends that became earned upon vesting of RSUs. Accrued unearned dividends on unvested RSUs as of September 30, 2024 and 2023, were $125,817 and $88,756, respectively.

The amortization of compensation costs for the RSU awards are classified in "Compensation Expense" in the accompanying consolidated statements of operations and amounted to approximately $0.2 million for both the three months ended September 30, 2024 and 2023, respectively. The amortization of compensation costs for the RSU awards amounted to approximately $0.6 million and $0.5 million for the nine months ended September 30, 2024 and 2023, respectively. The remaining unrecognized compensation cost of approximately $0.8 million for RSU awards is expected to be recognized over a weighted average amortization period of 1.2 years as of September 30, 2024.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

Note 9 - Stock Based Compensation (continued)

Performance Stock Units

PSUs are granted to officers and certain employees of the Company. Total outstanding PSUs as of September 30, 2024 and 2023, were 159,522 and 121,858, respectively.

The following table sets forth the Company's unvested PSU activity for the nine months ended September 30,:


	2024			2023
	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,	103,000	$	17.18	66,841	$	24.04
Granted	56,522	$	17.30	55,017	$	11.23


Balance at September 30,	159,522	$	17.22	121,858	$	18.26

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 319,044 depending upon performance. The performance periods are January 1, 2022 through December 31, 2024, January 1, 2023 through December 31, 2025 and January 1, 2024 through December 31, 2026 and 47,983, 55,017 and 56,522 PSUs are scheduled to vest at the end of each performance period, respectively.

The fair value of PSUs is determined using a Monte Carlo simulation for our future stock price and the future stock price of a corresponding peer group. The grant date fair value is an equally weight value comprised of (i) total shareholder return of the Company and a peer group of companies (“rTSR”); and (ii) the Company’s absolute compound annual growth rate (“CAGR”). To derive the value of rTSR, the Company uses a stochastic stock price simulation model using Geometric Brownian Motion (“GBM”) to model the future stock prices of the Company and the peer group companies. The key inputs to the GBM model include the standard deviation of the movement of the share price, also expressed as stock price volatility. Historical volatility is analyzed for the Company and peer group companies based on publicly traded shares of common stock. The model also assists in deriving a value of the Company’s CAGR which is then subjected to the vesting percentages according to the terms of the PSU agreements. The key inputs to calculate CAGR are the ending stock price, initial stock price and vesting period. The GBM simulates the ending stock price that is used in the CAGR model to determine the grant date fair value.

Using the above methodology, grant date fair values of $24.00, $11.23 and $17.30 were used for PSUs with performance periods ending December 31, 2024, 2025 and 2026, 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 represents the right to receive one share of common stock upon vesting. Upon vesting, each PSU is also entitled to receive an accumulated dividend payment equal to the dividend paid on each share of common stock during the performance period. If PSUs do not meet the performance hurdles and are cancelled, no dividends are paid on the cancelled units. During the nine months ended September 30, 2024 and 2023, no PSUs vested and therefore the Company did not pay any dividends. Unearned dividends on unvested PSUs as of September 30, 2024 and 2023, were $448,273 and $259,546, respectively.

The amortization of compensation costs for the PSU awards are included in "Compensation Expense" in the accompanying consolidated statements of operations and amounted to approximately $0.2 million for both the three months ended September 30, 2024 and 2023. The amortization of compensation costs for the PSU awards

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

Note 9 - Stock Based Compensation (continued)

amounted to approximately $0.7 million and $0.6 million for the nine months ended September 30, 2024 and 2023, respectively. The remaining unrecognized compensation cost of approximately $1.1 million for PSU awards is expected to be recognized over a weighted average amortization period of 1.8 years as of September 30, 2024.

Stock Options

Prior to the completion of the initial public offering ("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. As of September 30, 2024 and 2023, the Options were fully exercisable and expire on July 15, 2027.

Note 10 - Warrants

Warrants Issued

On March 17, 2021, the Company entered into a warrant agreement which granted the holder the right to purchase 602,392 shares of common stock of the Company at a purchase price of $24.00 per share. Warrants were immediately exercisable and expire on July 15, 2027. As of September 30, 2024 and 2023, 602,392 warrants were fully exercisable.

Investment in Warrants

On October 27, 2023, the Company entered into a lease amendment and forbearance agreement for its existing lease agreement with Revolutionary Clinics on its cultivation facility in Massachusetts. Under the forbearance agreement, the Company provided forbearance of delinquent rent and received warrants. The warrants are accounted for under ASC 321. The Company elected to use the measurement alternative to value its investment in warrants, since the fair value was not readily determinable. The investment in warrants is classified in “Other Assets” in the consolidated balance sheets at its initial cost value of $522 thousand. The cost value was determined based upon the implied recapitalized equity value of Revolutionary Clinics.

Note 11 - Stockholders' Equity

Preferred Stock

As of September 30, 2024 and December 31, 2023, the Company had 100,000,000 shares of preferred stock authorized and 0 shares of preferred stock outstanding.

Common Stock

As of September 30, 2024 and December 31, 2023, the Company had 400,000,000 shares of common stock authorized and 20,511,508 and 20,503,520 shares, respectively, of common stock issued and outstanding. Common stock is issued at a par value of $0.01 per share.

Stock Repurchase Program

On November 7, 2022, the board of directors of the Company authorized a stock repurchase program of its common stock up to $10.0 million through December 31, 2023. Purchases made pursuant to the stock repurchase program will be made in the open market, in privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with Rule 10b-18 of the Securities and Exchange Act of 1934, as amended. The authorization of the stock repurchase program does not obligate the Company to acquire any particular amount of common stock. The timing, manner, price and amount of any repurchases will be dete