What changed in this filing

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Item 1. Financial Statements

2021-05-14 compared with 2020-11-06 · 173 added, 202 removed, 244 unchanged (61% of the section changed)

2 unchanged sentences

BALANCE SHEETS

September 30, 2020

March 31, 2021

December 31, 2020

Cash and cash equivalents

Investment securities

Investment in partnership

Mortgages receivable

4 unchanged sentences

Property and equipment, net

Deposits on property and equipment

Real estate owned

Other deposits

Deferred financing costs

3 unchanged sentences

Line of credit

Accrued dividends payable

Accounts payable and accrued expenses

12 unchanged sentences

100,000,000 shares authorized;

22,117,301 issued and outstanding

22,428,208 and 22,124,801 issued and outstanding

Paid-in capital

Accumulated other comprehensive loss

Retained earnings (accumulated deficit)

Accumulated deficit

( 2,890,969 )

5 unchanged sentences

Three Months Ended

September 30,

Ended September 30,

Interest income from loans

Interest income on investments

Gain/(loss)on sale of investment securities

Origination fees, net

Investment income

Income from partnership investment

(Loss) gain on sale of investment securities

Origination fees

Late and other fees

1 unchanged sentence

Rental income, net

Net gain on sale of real estate

Total revenue

1 unchanged sentence

Interest and amortization of deferred financing costs

Compensation, fees and taxes

Stock based compensation

Professional fees

Other expenses and taxes

Compensation, fees and taxes

Exchange fees

Expense in connection with termination of LOC

Net loss on sale of real estate

Other expenses and taxes

General and administrative expenses

Loss on sale of real estate

Impairment loss

Total operating costs and expenses

Other comprehensive income (loss)

Unrealized gain (loss) on investment securities

Other comprehensive loss

Unrealized loss on investment securities

Comprehensive income

4 unchanged sentences

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020

FOR THE THREE MONTHS ENDED MARCH 31, 2021

Comprehensive

Income/(Loss)

Balance, July 1, 2020

Stock based compensation

Unrealized loss on marketable securities

Dividends paid

( 2,654,076 )

Beginning balance, January 1, 2021

( 2,890,969 )

Balance, September 30, 2020

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019

Comprehensive

Income/(Loss)

Balance, July 1, 2019

Sales of stock through ATM

Sale of common stock

Exercise of warrants

Sale of common stock through ATM

Offering costs-ATM

Stock based compensation

( 2,348,452 )

Balance, September 30, 2019

The accompanying notes are an integral part of these financial statements.

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020

Unrealized loss on investment securities

Net income for the period ended March 31, 2021

Balance, March 31, 2021

FOR THE THREE MONTHS ENDED MARCH 31, 2020

Comprehensive

Income/(Loss)

Balance, January 1, 2020

Beginning balance, January 1, 2020

( 1,266,729 )

1 unchanged sentence

Stock based compensation

Unrealized gain on marketable securities

Unrealized loss on investment securities

Dividends paid

1 unchanged sentence

( 2,654,076 )

Balance, September 30, 2020

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

Comprehensive

Income/(Loss)

Balance, January 1, 2019

Sales of stock through ATM

Sale of common stock

Exercise of warrants

Stock based compensation

( 4,403,181 )

Net income for the period ended March 31, 2020

Balance, March 31, 2020

( 1,682,191 )

Balance, September 30, 2019

The accompanying notes are an integral part of these financial statements.

1 unchanged sentence

STATEMENTS OF CASH FLOW

Ended September 30,

Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization of deferred financing costs

Amortization of deferred financing costs and bond discount

Write off of deferred financing costs

Depreciation expense

1 unchanged sentence

Impairment loss

Loss (gain) on sale of real estate

Abandonment of office furniture

Costs in connection with termination of line of credit

Realized gain on investments

Loss on sale of real estate

Loss (gain) on sale of investment securities

Changes in operating assets and liabilities:

(Increase) decrease in:

Escrow deposits

Interest and fees receivable

4 unchanged sentences

(Decrease) increase in:

Due to note purchaser

Accrued interest

5 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of investments

Purchase of investment securities

( 22,755,450 )

Proceeds from the sale of investments

( 17,417,059 )

Proceeds from the sale of investment securities

Purchase of interest in investment partnership

( 1,843,398 )

Proceeds from sale of real estate owned

Acquisitions of and improvements to real estate owned

( 1,584,300 )

Purchase of property and equipment

Security deposits held

Principal disbursements for mortgages receivable

2 unchanged sentences

Principal collections on mortgages receivable

Costs in connection with investment activities

NET CASH USED FOR INVESTING ACTIVITIES

3 unchanged sentences

Proceeds from line of credit

Repayment of line of credit

( 2,000,000 )

( 69,939,952 )

Proceeds from notes sold to shareholder

Repayment of notes sold to shareholder

( 2,217,000 )

Principal payments on mortgage payable

Repayment of mortgage payable

Principal payments on notes payable

2 unchanged sentences

( 2,654,076 )

Financing costs incurred

Proceeds from other loans

Proceeds from mortgage payable

Repayment of mortgage payable

Proceeds from notes payable, net

Proceeds from issuance of common stock

Costs associated with the issuance of common stock

Gross proceeds from issuance of fixed rate notes

Financing costs incurred in connection with fixed rate notes

Costs in connection with issuance of common stock - ATM

Proceeds from issuance of common stock - ATM

NET CASH USED FOR FINANCING ACTIVITIES

( 1,780,312 )

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

( 2,721,479 )

NET DECREASE IN CASH AND CASH EQUIVALENTS

( 1,062,374 )

( 17,215,915 )

CASH AND CASH EQUIVALENTS- BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS - END OF PERIOD

The accompanying notes are an integral part of these financial statements.

SACHEM CAPITAL CORP.

STATEMENTS OF CASH FLOW (Continued)

Nine Months Ended

September 30,

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

Interest paid

SUPPLEMENTAL INFORMATION-NON-CASH

Dividends declared and payable

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the period ended September 30, 2019 amounted to $ 2,265,927 .

During the nine months ended September 30, 2019, the Company purchased equipment for $ 13,005 subject to a capital lease.

During the nine months ended September 30, 2019, Mortgages receivable, affiliate in the amount of $ 879,457 were reduced to $ 0 as the underlying loans were transferred to the Company and are included in Mortgages receivable.

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the period ended September 30, 2020 amounted to $ 170,383 .

The accompanying notes are an integral part of these financial statements.

1 unchanged sentence

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

MARCH 31, 2021

Sachem Capital Corp.

1 unchanged sentence

The Company offers short term ( i.e.

, one to three years ), secured, loans (sometimes referred to as “hard money” loans) to real estate owners and investors to fund their acquisition, renovation, development, rehabilitation or improvement of properties located primarily in Connecticut.

, one to three years ), secured, non-banking loans (sometimes referred to as “hard money” loans) to real estate owners and investors to fund their acquisition, renovation, development, rehabilitation or improvement of properties located primarily in Connecticut.

The properties securing the Company’s loans are generally classified as residential or commercial real estate and, typically, are held for resale or investment.

3 unchanged sentences

In addition, the Company may make opportunistic real estate purchases apart from its lending activities.

The Company believes it qualifies and has operated as a real estate investment trust since 2017.

Significant Accounting Policies

3 unchanged sentences

However, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The accompanying unaudited financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2020 and the notes thereto included in the Company’s Annual Report on Form 10-K.

Results of operations for the interim periods are not necessarily indicative of the operating results to be attained in the entire fiscal year.

1 unchanged sentence

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Management’s estimates are based on (a) assumptions that consider the Company’s past experience, (b) projections regarding the Company’s future operations and (c) general financial market and local and general economic conditions.

Management will base the use of estimates on (a) various assumptions that consider its experience, (b) the Company’s projections regarding future operations and (c) general financial market and local and general economic conditions.

Actual amounts could differ from those estimates.

2 unchanged sentences

The Company maintains its cash and cash equivalents at various financial institutions.

The account balances typically exceed the Federal Deposit Insurance Corporation insurance coverage, and, as a result, there is a concentration of credit risk related to amounts on deposit.

The combined account balances typically exceed the Federal Deposit Insurance Corporation insurance coverage, and, as a result, there is a concentration of credit risk related to amounts on deposit.

The Company does not believe that the risk is significant.

4 unchanged sentences

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

MARCH 31, 2021

Fair Value Measurements

1 unchanged sentence

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels of the fair value hierarchy under Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 820 are described as follows:

The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:

Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company can access.

10 unchanged sentences

Expenditures for repairs and maintenance are charged to expense as incurred.

The Company relocated its entire operations to this property in March 2019.

Impairment of long-lived assets

8 unchanged sentences

The Company does not accrue interest income on mortgages receivable that are more than 90 days past due.

Origination fee revenue, generally 2 %- 5 % of the original loan principal amount, is collected at loan funding and in connection with the extension of loans, and is recognized ratably over the contractual life of the loan in accordance with ASC 310.

Interest income not accrued at March 31, 2021 and collected prior to the issuance of these financial statements is included in March 31, 2021 income.

Origination fee revenue, generally 2 %- 5 % of the original loan principal amount, is collected at loan funding and is recognized ratably over the contractual life of the loan in accordance with ASC 310.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

MARCH 31, 2021

The Company believes it qualifies as a Real Estate Investment Trust (REIT) for federal income tax purposes and made the election to be taxed as a REIT when it filed its 2017 federal income tax return.

7 unchanged sentences

Under this standard, an entity may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold.

Should the Company become liable for interest and penalties related to unrecognized tax benefits, such amounts would be included in interest expense.

The Company has determined that there are no uncertain tax positions requiring accrual or disclosure in the accompanying financial statements as of September 30, 2020.

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in interest expense.

The Company has determined that there are no uncertain tax positions requiring accrual or disclosure in the accompanying financial statements as of March 31, 2021.

Earnings Per Share

Basic and diluted earnings per share are calculated in accordance with FASB ASC 260 “Earnings Per Share”.

Basic and diluted earnings per share are calculated in accordance with ASC 260 “Earnings Per Share”.

Under ASC 260, basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period.

2 unchanged sentences

Recent Accounting Pronouncements

In May 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-05, “Financial Instruments—Credit Losses (Topic 326):

Targeted Transition Relief,"

which requires that entities use a new forward looking "expected loss"

model that generally will result in the earlier recognition of an allowance for credit losses.

This ASU allows entities to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost upon adoption of ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” The Company adopted both ASU 2016-13 and ASU 2019-05 effective January 1, 2020.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.” This ASU modifies ASC 740 to remove certain exceptions and adds guidance to reduce complexity in certain areas.

For companies that file with the U.S.

Securities and Exchange Commission (“SEC”), the standard is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

The adoption of this guidance did not have a material impact on the Company’s financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the Company’s financial statements.

Reclassifications

Certain 2019 account balances have been reclassified to conform with the current year’s presentation.

Management does not believe that any other recently issued, but not yet effected, accounting standards if currently adopted would have a material effect on the Company’s financial statements.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

MARCH 31, 2021

Fair Value Measurement

The fair value measurement level within the fair value hierarchy of an asset or liability is based on the lowest level of any input that is significant to the fair market value measurement.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair market value measurement.

Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following table sets forth by Level, within the fair value hierarchy, the Company’s assets at fair value as of September 30, 2020:

The following table sets forth by Level, within the fair value hierarchy, the Company’s assets at fair value as of March 31, 2021:

Stocks and ETFs

Fixed and Preferred Securities

Total Investments

2 unchanged sentences

Stocks and ETFs:

Valued at the closing price reported on the active market on which such securities are traded.

● Fixed and Preferred Securities:

Valued at the closing price reported on the active market on which such securities are traded.

Valued at the closing price reported in the active market in which the individual securities are traded.

Mutual funds :

Valued at the daily closing price reported by the fund.

Mutual funds held by the Company are open-end mutual funds that are registered with the Securities and Exchange Commission (the “SEC”).

Mutual funds held by the Company are open-end mutual funds that are registered with the SEC.

These funds are required to publish their daily net asset values and to transact at that price.

4 unchanged sentences

Mortgages Receivable

The Company offers secured, non-bank loans to real estate owners and investors (also known as “hard money” loans) to fund their acquisition, renovation, development, rehabilitation or improvement of properties located primarily in Connecticut.

The Company offers short-term secured, non-bank loans to real estate owners and investors (also known as “hard money” loans) to fund their acquisition, renovation, development, rehabilitation or improvement of properties located primarily in Connecticut.

The loans are secured by first mortgage liens on one or more properties owned by the borrower or related parties.

In addition, each loan is personally guaranteed by the borrower or its principals, which guarantees may be collaterally secured as well.

The loans are generally for a term of one to three years .

The loans are for a term of one to three years .

The loans are initially recorded and carried thereafter, in the financial statements, at cost.

All loans provide for monthly payments of interest only (in arrears) during the term of the loan and a “balloon” payment of the principal on the maturity date.

For the nine-month periods ended September 30, 2020 and 2019, the aggregate amounts of loans funded by the Company were $ 68,029,798 and $ 42,163,704 , respectively, offset by principal repayments of $ 37,859,270 and $ 27,917,331 , respectively.

At September 30, 2020, the Company’s portfolio included loans with outstanding principal balances up to approximately $ 3.2 million, with stated interest rates ranging from 5.0 % to 13.0 % and a default interest rate for non-payment of 18 % .

At September 30, 2020, no single borrower had loans outstanding representing more than 10 % of the total balance of the loans outstanding.

Most of the loans provide for monthly payments of interest only (in arrears) during the term of the loan and a “balloon” payment of the principal on the maturity date.

For the quarters ended March 31, 2021 and 2020, the aggregate amounts of loans funded by the Company were $ 31,661,577 and $ 28,675,048 , respectively, offset by principal repayments of $ 30,506,173 and $ 11,758,497 , respectively.

At March 31, 2021, the Company’s portfolio included loans with outstanding principal balances up to approximately $ 10.8 million, with stated interest rates ranging from 5.0 % to 13.0 % and a default interest rate for non-payment of 18 % .

At March 31, 2021, no single borrower had loans outstanding representing more than 10 % of the total balance of the loans outstanding.

The Company will extend the term of a loan if, at the time of the extension, the loan and the borrower satisfy the Company’s underwriting requirements at the time of the extension.

2 unchanged sentences

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

Credit risk profile based on loan activity as of September 30, 2020 and December 31, 2019:

MARCH 31, 2021

Credit risk profile based on loan activity as of March 31, 2021 and December 31, 2020:

Mortgages Receivable

September 30, 2020

March 31, 2021

December 31, 2020

The following are the maturities of mortgages receivable as of September 30:

At September 30, 2020, the Company’s mortgage loan portfolio included 480 mortgage loans, of which fourteen were the subject of foreclosure proceedings.

The aggregate outstanding balances due on these fourteen loans as of September 30, 2020, including unpaid principal, accrued but unpaid interest and borrower fees, was approximately $ 4.0 million.

The following are the maturities of mortgages receivable as of March 31:

2024 and thereafter

At March 31, 2021, of the 479 mortgage loans in the Company’s portfolio, 12 were the subject of foreclosure proceedings.

The aggregate outstanding balances due on these loans as of March 31, 2021, including unpaid principal, accrued but unpaid interest and borrower fees, was approximately $ 2.6 million.

In the case of each of these loans, the Company believes the value of the collateral exceeds the total amount due.

In the second quarter of 2020, the Company restructured twenty-three loans, having an aggregate balance of $ 6.5 million at June 30, 2020, pursuant to forbearance requests by borrowers under a program the Company adopted in response to the COVID-19 pandemic.

The total amount of interest deferred under these twenty-three loans was approximately $ 200,000 .

At September 30, 2020, eighteen of the original twenty-three forbearance loans, having an aggregate principal balance of $ 5.1 million and $ 146,000 of deferred interest, were still outstanding.

Once a forbearance request is initiated by the borrower, the Company requests documentation to determine the validity of the request and if deemed valid and reasonable, the Company defers the borrower's payment of interest for a period of 90 days .

A legal fee is the only charge passed on to the borrower.

To qualify for forbearance, a borrower must be current on all its obligations to the Company.

Real Estate Owned

Property purchased for rental or acquired through foreclosure are included on the balance sheet as real estate owned.

As of September 30, 2020, and December 31, 2019, real estate owned totaled $ 7,523,584 and $ 8,258,082 , respectively.

As of September 30, 2020, real estate owned included $ 1,478,854 of real estate held for rental and $ 6,044,730 of real estate held for sale.

In the first nine months of 2020, the Company recorded an impairment loss of $ 495,000 compared to an impairment loss of $- 0 - in the first nine months of 2019.

Notes Payable

At September 30, 2020, the Company had three series of unsecured unsubordinated notes issued and outstanding having an outstanding aggregate principal amount of $ 72,526,750 in underwritten public offerings (collectively, the "Notes").

Each series was issued pursuant to an Indenture, dated as of June 21, 2020, between the Company and U.S.

Bank National Association, as trustee, and a related supplement thereto.

Collectively, the indenture and each supplement thereto is referred to as the "Indenture").

In June 2019, the Company issued and sold $ 23,663,000 aggregate principal amount of its 7.125 % notes due 2024 (the “June 2024 Notes");

in November 2019, the Company issued and sold $ 34,500,000 of its 6.875 % notes due 2024 (the “December 2024 Notes");

and in September 2020, the Company issued and sold $ 14,363,750 of its 7.75 % notes due 2025 (the "September 2025 Notes “).

The June 2024 Notes commenced accruing interest on June 25, 2019, the December 2024 Notes commenced accruing interest on November 7, 2019 and the September 2025 Notes commenced accruing interest on September 4, 2020.

Accrued interest on the Notes is payable quarterly in cash, in arrears, on March 30, June 30, September 30 and December

As of March 31, 2021, and December 31, 2020, real estate owned totaled $ 8,624,044 and $ 8,861,609 , respectively, with no valuation allowance.

As of March 31, 2021, real estate owned included $ 1,381,687 of real estate held for rental and $ 7,242,357 of real estate held for sale.

In the first quarter of 2021, the Company recorded an impairment loss of $ 25,000 compared to an impairment loss of $ 250,000 in the first quarter of 2020.

Properties Held for Sale

On January 15, 2021, the Company sold a property classified as real estate held for sale, receiving approximately $ 371,000 in gross proceeds.

The Company recognized a loss of $ 2,134 on the sale.

Notes Payable and Line of Credit

At March 31, 2021, the Company had an aggregate of $ 109,884,797 of unsecured, unsubordinated notes payable outstanding, net of $ 4,641,953 of deferred financing costs (collectively, the “Notes”).

The Notes are divided into three series:

(i) Notes having an aggregate principal amount of $ 23,663,000 bearing interest at 7.125 % per annum and maturing June 30, 2024 (“the June 2024 Notes”);

(ii) Notes having an aggregate principal amount of $ 34,500,000 bearing interest at 6.875 % per annum and maturing December 30, 2024 (the “December 2024 Notes”);

(iii) Notes having an aggregate principal amount of $ 56,363,750 bearing interest at 7.75 % per annum and maturing December 30, 2024 (the “2025 Notes”).

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

30, commencing September 30, 2019 for the June Notes, December 30, 2019 for the December Notes and December 30, 2020 for the September Notes .

The June Notes, December Notes and September Notes mature, and all amounts outstanding thereunder including principal, accrued but unpaid interest and any other fees and costs, June 30, 2024, December 30, 2024 and September 30, 2025, respectively.

So long as the Notes are outstanding, the Company is prohibited from making distributions in excess of 90 % of its taxable income, incurring any additional indebtedness for borrowed money or purchasing any shares of its capital stock unless it has an “Asset Coverage Ratio” of at least 150 % after giving effect to the payment of such dividend, the incurrence of such indebtedness or the application of the net proceeds, as the case may be.

The Company may redeem the Notes, in whole or in part, without premium or penalty, at any time after June 25, 2021, in the case of the June Notes, November 7, 2021, in the case of the December Notes, and September 4, 2022, in case of the September Notes, upon at least 30 days prior written notice to the holders of the Notes.

MARCH 31, 2021

The Notes were sold in underwritten public offerings, were issued in denomination of $ 25.00 each and are listed on the NYSE American and trade under the symbol “SCCB”, “SACC” and “SCCC”, respectively.

All the notes were issued at par except for the last tranche of the 2025 Notes, in the original principal amount of $ 28 million, which were issued at $ 24.75 each.

Interest on the Notes is payable quarterly on each March 30, June 30, September 30 and December 30 that they are outstanding.

So long as the Notes are outstanding, the Company is prohibited from making distributions in excess of 90 % of its taxable income, incurring any additional indebtedness or purchasing any shares of its capital stock unless it has an “Asset Coverage Ratio” of at least 150 % after giving effect to the payment of such dividend, the incurrence of such indebtedness or the application of the net proceeds, as the case may be.

The Company may redeem the Notes, in whole or in part, without premium or penalty, at any time after their second anniversary of issuance upon at least 30 days prior written notice to the holders of the Notes.

The redemption price will be equal to the outstanding principal amount of the Notes redeemed plus the accrued but unpaid interest thereon up to, but not including the date of redemption.

The Notes are reflected on the Company’s September 30, 2020 and December 31, 2019 balance sheets net of deferred financing costs in the amount of approximately $ 3.6 million and $ 2.7 million, respectively.

Line of Credit

During the nine months ended September 30, 2020, the Company obtained a $ 12.1 million priority credit line from Wells Fargo, which is secured by the Company's portfolio of short-term securities.

The credit line bears interest at a rate equal to 1.5 % below the prime rate ( 1.75 % at September 30, 2020).

For the three-month and nine-months periods ended September 30, 2020 and 2019, other income consists of the following:

ended September 30,

The June 2024 Notes will be callable any time after June 30, 2021, the December 2024 Notes will be callable at any time after November 7, 2021 and the 2025 Notes will be callable at any time after September 4, 2022.

Wells Fargo Margin Line of Credit

At March 31, 2021, the Company had a total outstanding balance of $ 28,160,988 under the margin loan account from Wells Fargo, which is secured by the Company’s portfolio of short-term securities.

The credit line bears interest at a rate equal to 1.75 % below the prime rate ( 1.5 % at March 31, 2021).

For the three months ended March 31, 2021 and 2020, other income consists of the following:

Income on borrower charges

6 unchanged sentences

Original maturities of deferred revenue are as follows as of:

September 30,

In instances in which mortgages are repaid before their maturity date, the balance of any unamortized deferred revenue is recognized in full at the time of repayment.

1 unchanged sentence

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

MARCH 31, 2021

Unfunded Commitments

At September 30, 2020, the Company was committed to an additional $ 13,342,248 in construction loans that can be drawn by the borrower when certain conditions are met.

At March 31, 2021, the Company had future funding obligations totaling $ 23,489,412 , which can be drawn by the borrowers when the conditions relating thereto have been satisfied.

In the normal course of its business, the Company is named as a party-defendant because it is a mortgagee having interests in real properties that are being foreclosed upon, usually because the owner failed to pay property taxes.

The Company actively monitors these actions and, in all cases, believes there remains sufficient value in the subject property to assure that no loan impairment exists.

At September 30, 2020, there were eight such properties, representing approximately $ 1.3 million in mortgages receivable.

At March 31, 2021, there were five such properties, representing approximately $ 453,000 in mortgages receivable.

Related Party Transactions

2 unchanged sentences

The terms of such loans, including the interest rate, income, origination fees and other closing costs are the same as those applicable to loans made to unrelated third parties in the portfolio.

As of September 30, 2020, and 2019, loans to known shareholders totaled $ 4,626,665 and $ 5,703,655 , respectively.

Interest income earned on these mortgage loans for the three- and nine-months ended September 30, 2020 was $ 129,956 and $ 397,293 , respectively.

Interest income earned on these mortgage loans for the three- and nine-months ended September 30, 2019 was $ 143,061 and $ 365,784 , respectively.

For each of the nine-month periods ended September 30, 2020 and 2019, the wife of the Company’s chief executive officer was paid $ 75,000 for accounting and financial reporting services provided to the Company.

As of March 31, 2021, and 2020, loans to known shareholders totaled $ 10,589,641 and $ 5,922,692 , respectively, and interest income earned on these loans totaled $ 231,609 and $ 180,107 , respectively.

For the three-month periods ended March 31, 2021 and 2020, the wife of the Company’s chief executive officer was paid $ 28,206 and $ 25,000 , respectively, for accounting and financial reporting services provided to the Company.

Concentration of Credit Risk

1 unchanged sentence

The Company maintains its cash and cash equivalents with various financial institutions.

Accounts at the financial institutions are insured by the Federal Deposit Insurance Corporation up to $ 250,000 .

Accounts at the financial institution are insured by the Federal Deposit Insurance Corporation up to $ 250,000 .

The Company makes loans that are secured by first mortgage liens on real property located primarily (approximately 75.3 %) in Connecticut.

1 unchanged sentence

Credit risks associated with the Company’s mortgage loan portfolio and related interest receivable are described in Note 4 - Mortgages Receivable.

Equity Financing Transactions

During the nine-month period ended September 30, 2019, the Company generated approximately $ 32 million of gross proceeds from the sale of its securities as follows:

(i) $ 20,465,203 from the sale of 4,340,456 common shares in an "at-the-market"

(ii) $ 82,035 from the exercise of 16,407 warrants;

(iii) $ 11,500,000 from the sale of 2,300,000 common shares.

Equity Offerings

During the three-month period ended March 31, 2021, the Company sold 303,407 Common Shares in an at-the-market offering.

Net proceeds to the Company from the sale of these shares were $ 1,542,465 .

Partnership Investment

On February 22, 2021, the Company committed to $ 3 million in an investment partnership, or approximately a 7.6 % ownership interest in the partnership as of the commitment date.

The partnership is a commercial real estate finance company with a focus on providing debt capital solutions to local and regional commercial real estate owners in the Northeastern United States.

As of March 31, 2021, the Company’s outstanding investment totaled approximately $ 1.8 million.

The Company’s withdrawal from the partnership may only be granted by the manager.

As of March 31, 2021, the Company earned approximately $ 17 ,000 on the investment.

The Company uses the cost method of accounting to account for this investment.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

A portion of the net proceeds from these transactions were used to repay, the outstanding balance on a credit facility maintained with Webster Business Credit Corporation, with the balance used as working capital and for general corporate purposes.

On January 27, 2020, the Company filed a Registration Statement on Form S-3 with the SEC covering the offering and sale of up to $ 100 million of its securities, including common shares, preferred shares, debt securities, warrants, guaranties and units consisting of two or more classes of the foregoing securities.

The registration statement became effective February 5, 2020.

MARCH 31, 2021

Subsequent Events

In October 2020, the Company sold an additional $ 14,000,000 aggregate principal amount of its September 2025 Notes.

In connection with the offering of such notes, the Company granted the underwriters an option to purchase up to an additional $ 2.1 million aggregate principal amount of September 2025 Notes.

The option expires November 20, 20120.

On November 4, 2020, the Company paid a dividend of $ 0.12 per share, or $ 2,654,076 in the aggregate, to shareholders of record as of October 26, 2020.

On March 20, 2020, Governor Ned Lamont of Connecticut issued an executive order requiring all “non-essential” businesses to close effective 8:00 p.m., Monday, March 23, 2020, until further notice.

During the second quarter of 2020, the State of Connecticut announced plans to re-open selected businesses pursuant to a three Phase reopening plan for those businesses deemed non-essential and closed due to the March 20, 2020 executive order.

On May 20, 2020, Phase 1 of the re-opening plan was put in place, on June 17, 2020 Phase 2 was put into effect and on October 8, 2020 Phase 3 was put into effect.

The compliance requirements for certain businesses to operate are difficult to administer, costly and in many situations not customer friendly.

If these orders remain in effect for an extended period, it could disrupt the Company’s operations in a material way, resulting in reductions in revenues, net income, and cash flow.

In addition, any disruption to the operations of a borrower could impair its ability to make monthly payments of interest, payments of insurance and/or taxes or to repay the outstanding balances on their loans at maturity.

Furthermore, if a liquidity crisis were to develop, borrowers may not be able to refinance their loans when due.

Finally, the spread of COVID-19 is having a negative impact on the overall economy, including on real estate values.

If borrowers cannot sell their properties or the values of properties securing mortgage loans decline significantly, the borrowers may not be able to repay their loans when due.

In addition, the filing and preparation of loan documents with the various recording offices may be delayed and currently there is only limited access to the Connecticut court system to process foreclosures and evictions.

In the second quarter of 2020, the Company restructured twenty-three loans , having an aggregate balance of $ 6.5 million at June 30, 2020, pursuant to forbearance requests by borrowers under a program the Company adopted in response to the COVID-19 pandemic.

The total amount of interest deferred under these twenty-three loans was approximately $ 200,000 .

At September 30, 2020, eighteen forbearance loans, having an aggregate principal balance of $ 5.1 million and $ 146,000 of deferred interest, were still outstanding.

If there is a re-occurrence of the virus in Connecticut or the State mandates further business closures, the Company may be compelled to take measures to preserve its cash flow, including reducing operating expenses and dividend payments until the consequences of the outbreak subside.

There may be other adverse consequences to the Company’s business, operations, and financial condition from the spread of COVID-19 that have not been considered.

On April 9, 2021, the Company filed a Prospectus Supplement to its Form S-3 Registration Statement (File No.

333-236097) covering the sale of up to $ 43,636,250 of its Common Shares in an at-the-market offering.

In connection therewith, the Company also entered into an At Market Issuance Sales Agreement with Ladenburg Thalmann & Co.

and Janney Montgomery Scott LLC to act as its sales agents in connection with sales of Common Shares pursuant to that Prospectus Supplement.

During the period from April 1, 2021 to May 4, 2021, the Company sold 2,045,336 Common Shares in two at the market offerings realizing net proceeds of $ 10,535,405 .

In April 2021, the Compensation Committee of the Board of Directors of the Company (the “Committee”) approved the following 2021 compensation packages for its Chief Executive Officer, John L.

Villano, and Chief Operating Officer, Peter J.

With respect to Mr.

● A base salary of $ 500,000 (compared to $ 360,000 in 2020);

● A “targeted” annual bonus of $ 250,000 , the exact amount to be determined by the Committee in its sole discretion, and payable on or before March 31, 2022;

● A time-based equity award of $ 500,000 payable in restricted Common Shares;

● A one-time cash bonus of $ 250,000 , of which $ 125,000 is immediately payable and $ 62,500 is payable on each of July 1 and October 1, 2021, subject to Mr.

Villano’s continued employment by the Company.

With respect to Mr.

● A base salary of $ 250,000 (same as 2020);

● A cash bonus of $ 25,000 , payable immediately in one lump sum;

● A time-based equity award of $ 25,000 payable in restricted Common Shares.

The Company issued (i) 89,928 restricted Common Shares to Mr.

Villano based on the closing price of $ 5.56 per share on April 8, 2021 (the grant date) and (ii) 4,753 restricted Common Shares to Mr.

Cuozzo based on the closing price of $ 5.26 per share on April 12, 2021 (the grant date).

The shares were issued pursuant to the Company’s 2016 Equity Compensation Plan and are subject to restrictions on transfer and forfeiture of any unvested shares in the event of a voluntary resignation as an employee of the Company without “Good Reason” or of a termination of employment with the Company for “Cause,” as such terms are defined in their respective employment agreements with the Company.

The restrictions on transfer and the forfeiture provisions will lapse with respect to one-third of the shares on each of January 1, 2022, 2023 and 2024.

Each of Messrs.

Villano and Cuozzo has the right to vote and receive dividends with respect to all the shares granted to him.

On April 30, 2021, the Company sold a property classified as real estate held for sale at March 31, 2021.

Net proceeds from the sale were $ 280,449 .

No loss will be recognized on this sale.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2021

The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide and has materially and adversely affected many businesses.

In response to the onset of the COVID-19 pandemic and the restrictions imposed by various states, including the State of Connecticut, to prevent, or at least reduce the risk of the spread of the virus, at the end of the first quarter of 2020 the Company adopted certain temporary programs, policies and guidelines designed primarily to preserve its liquidity, help its borrowers and protect its employees.

In particular, the Company adopted a “forbearance” program to help borrowers that were unable to meet their financial obligations due to COVID-19.

In addition, to preserve its capital, the Company imposed a moratorium on funding new loans other than from proceeds generated from pay-offs of existing loans.

Finally, the Company imposed stricter lending criteria on new loans.

By the beginning of the third quarter of 2020, it appeared that economic conditions had stabilized to the point that the Company was able to cancel the forbearance program, restart its lending operations and return to its normal underwriting criteria.

Over the course of 2020 and into early 2021, the U.S.

Congress has authorized over $ 4.0 trillion of stimulus payments to small businesses and individuals adversely impacted by COVID-19.

In addition, the Federal Reserve Board has maintained its accommodative monetary policy.

Finally, since December 2020, the U.S.

Food and Drug Administration (“FDA”) has issued emergency use authorizations for three COVID-19 vaccines.

As of May 6, 2021, approximately 250 million doses of vaccines have been administered in the United States and over 100 million people in the United States are fully vaccinated.

As a result, many states have issued new orders relaxing or even eliminating many of the restrictions on social gatherings and businesses that were intended to stem the spread of the virus.

The combination of these factors – stimulus, monetary easing and vaccination roll-out, appears to be having a positive impact on general economic conditions.

In addition, interest rates remain low and markets are liquid.

As a result, real estate values have stabilized and the Company has not experienced any significant increase in defaults.

Notwithstanding the foregoing, there are still concerns regarding mutations of the virus that might not be susceptible to the existing vaccines and there is still a significant portion of the worldwide population, including in the U.S., that is not vaccinated.

If continuing concerns relating to the COVID-19 pandemic limit our ability to have meetings with potential borrowers, or our borrower’s ability to source materials and services to complete construction in process, the Company’s business and operations could be adversely impacted.

The extent to which COVID-19 impacts the Company’s business and operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others.

If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, the Company’s business, operations and financial condition may be materially adversely affected.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements