What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-03-31 compared with 2021-03-31 · 437 added, 332 removed, 657 unchanged (54% of the section changed)

8 unchanged sentences

As defined by the SEC, internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of John L.

Villano, our principal executive and principal financial officer, and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Villano, our principal executive and principal accounting officer, and effected by the Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our internal control over financial reporting is supported by written policies and procedures that:

2 unchanged sentences

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Our internal control system was designed to provide reasonable assurances to our management and the board of directors regarding the preparation and fair presentation of published financial statements.

Our internal control system was designed to provide reasonable assurances to our management and the Board regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations which may not prevent or detect misstatements.

12 unchanged sentences

Our directors are elected annually by our shareholders and serve for one-year terms until his/her successor is elected and qualified or until such director’s earlier death, resignation or removal.

The executive officers and key personnel are appointed by and serve at the pleasure of the board of directors.

The executive officers and key personnel are appointed by and serve at the pleasure of the Board.

Our executive officers and directors, and their respective ages as of March 30, 2022, are as follows:

1 unchanged sentence

Officer, President and Treasurer

Executive Vice President and Chief Operating Officer

Chief Investment Officer and Director of Investor Relations

Leslie Bernhard (1, 2)

7 unchanged sentences

Villano is one of our founders.

At the time of our IPO, he became our Chairman, co-Chief Executive Officer, Chief Financial Officer and Secretary.

At the time of our IPO, he was appointed Chairman, co-Chief Executive Officer, Chief Financial Officer and Secretary.

In November 2019, upon the resignation of his brother, Jeffrey C.

6 unchanged sentences

We believe that Mr.

Villano’s experience in managing our business for the last seven years and his professional background as a certified public accountant make him an important part of our management team and make him a worthy candidate to serve on the board of directors.

Cuozzo , is Executive Vice President and Chief Operating Officer since July 2020.

He is an experienced business executive and professional educator with nearly 40 years diverse background as a corporate officer, senior HR leader, CEO advisor, chief learning and talent officer, organization development partner, executive coach, and entrepreneur.

From 2007 to June 30, 2020, Dr.

Cuozzo was a managing partner of Cuozzo Enterprises LLC, a management consulting firm specializing in organizational effectiveness, executive and leadership development, talent management, and employee engagement.

From 2017 to 2020, he was also serving as a vice president of TBC Corporation, one of North America’s largest marketers of automotive replacement tires.

From 2013 to 2017, he was a managing partner of Americana Memories LLC, a buyer and seller of vintage memorabilia and collectibles for both the wholesale and retail marketplace.

Prior to that, from 2011 to 2013, he was a managing partner of Sachem Capital Partners LLC, our predecessor.

Cuozzo earned both a doctorate and masters in adult and workplace education from Columbia University’s Teachers College (USA).

He also holds an MBA from the University of Bridgeport (USA) and a Bachelor of Arts degree from the University of Notre Dame (USA).

Leslie Bernhard became a member of the board of directors as of February 9, 2017.

Villano’s experience in managing our business since its inception and his professional background as a certified public accountant make him an important part of our management team and make him a worthy candidate to serve on the Board.

Haydon was appointed as our chief investment officer and director of investor relations in May 2021.

Haydon has more than 25 years of experience in financial services and investment banking.

He brings us expertise in areas such as lending, securities asset management, initial public offerings, investment banking, financial strategy and long-term planning.

Haydon is responsible for managing our liquid reserves and securities portfolio and he oversees our underwriting team.

Prior to joining Sachem, Mr.

Haydon served as a portfolio manager and branch manager at Wells Fargo Advisors Financial Network from 2011.

From 2008 to 2011, he served as a vice president within the Wealth Management division of UBS Financial Services.

From 1999 to 2006 Mr.

Haydon was a Managing Director of Northern Mortgage Company, LLC, a firm which he successfully merged into a division of Indy Mac Bank in 2006.

From 1996 to 1999, Mr.

Haydon was a regional lending officer at Dime Bank of New York, focusing on commercial and residential lending.

Haydon has held numerous FINRA securities registration designations including series 65, 7, and a Series 24 General Securities Principal registration.

He holds a Master of Business Administration from the Isenberg School of Management at the University of Massachusetts Amherst and a Bachelor of Science in Business from Skidmore College in Saratoga Springs, New York.

Leslie Bernhard became a member of the Board as of February 9, 2017.

She has served as the non-executive chairman of the board of directors of Milestone Scientific Inc.

3 unchanged sentences

From 2007 through September 2018, Ms.

Bernhard has also served as an independent director of Universal Power Group, Inc., a global supplier of power solutions (“UPG”), and since September 2018 she has been serving as a consultant to UPG.

Bernhard also served as an independent director of Universal Power Group, Inc., a global supplier of power solutions (“UPG”), and since September 2018 she has been serving as a consultant to UPG.

In 1986 she co-founded AdStar, Inc., an electronic ad intake service to the newspaper industry, and served as its president, chief executive officer and executive director until 2012.

2 unchanged sentences

We believe that Ms.

Bernhard’s experience as an entrepreneur and her service as a director of other public corporations will enable her to make an important contribution to the board of directors.

Goldberg became a member of the board of directors as of February 9, 2017.

Bernhard’s experience as an entrepreneur and her service as a director of other public corporations will enable her to make an important contribution to the Board.

Goldberg became a member of the Board as of February 9, 2017.

He has been a private accounting and business consultant since April 2012.

From March 2011 through June 2015, he served as a director of Sport Haley Holdings, Inc., a manufacturer and distributor of sportswear and furniture.

From January 2008 through March 2013, he served as a member of the board of directors of directors of SED International Holdings, Inc.

From January 2008 through March 2013, he served as a member of the board of directors of SED International Holdings, Inc.

SEDN), a distributor of consumer electronics.

11 unchanged sentences

Goldberg was selected as a director because of his experience as the senior executive, operations and financial officer of several public companies and because of his background in law and accounting.

We believe that his background and experience will provide the board of directors with a perspective on corporate finance matters.

Given his financial experience, the board of directors has also determined that Mr.

We believe that his background and experience will provide the Board with a perspective on corporate finance matters.

Given his financial experience, the Board has also determined that Mr.

Goldberg qualifies as the Audit Committee financial expert, pursuant to Item 407(d)(5) of Regulation S-K promulgated by the SEC.

Prinz became a member of the board of directors as of February 9, 2017.

Prinz became a member of the Board as of February 9, 2017.

Since 1976, Mr.

1 unchanged sentence

Since 2011, Mr.

Prinz has served as president and chief financial officer.

Prinz has served as president and chief financial officer of Current, Inc.

Prinz graduated from Bryant College with a B.A.

We believe that his background and experience make him well qualified to serve as a member of the board of directors.

We believe that his background and experience make him well qualified to serve as a member of the Board.

Director Independence and Committees of the Board of Directors

The members of the Board of directors are John L.

The members of the Board are John L.

Villano, Leslie Bernhard, Arthur Goldberg and Brian Prinz.

The board of directors has determined, in accordance with the NYSE American LLC Company Guide, that:

The Board has determined, in accordance with the NYSE American LLC Company Guide, that:

Bernhard and Messrs.

2 unchanged sentences

Goldberg and Prinz, as the members of the Audit Committee, the Nominating and Corporate Governance and Compensation Committee, are independent for such purposes.

In determining director independence, the board of directors applies the independence standards set by NYSE American.

In applying these standards, the board of directors considers all transactions with the independent directors and the impact of such transactions, if any, on any of the independent directors’ ability to continue to serve on the board of directors.

In determining director independence, the Board applies the independence standards set by NYSE American.

In applying these standards, the Board considers all transactions with the independent directors and the impact of such transactions, if any, on any of the independent directors’ ability to continue to serve on the Board.

We have three standing committees:

16 unchanged sentences

Compensation Committee.

The Compensation Committee assists the board of directors in determining the compensation of our officers and directors.

The Compensation Committee assists the Board in determining the compensation of our officers and directors.

The Compensation Committee is comprised entirely of directors who satisfy the standards of independence applicable to compensation committee members established under 162(m) of the Code and Section 16(b) of the Exchange Act.

4 unchanged sentences

Nominating and Corporate Governance Committee.

The Corporate Governance and Nominating Committee assists the board of directors by identifying and recommending individuals qualified to become members of the board of directors.

The Corporate Governance and Nominating Committee assists the Board by identifying and recommending individuals qualified to become members of the Board.

Specific responsibilities include the following:

● evaluating the composition, size and governance of our board of directors and its committees and making recommendations regarding future planning and the appointment of directors to our committees;

● establishing a policy for considering shareholder nominees to our board or directors;

● reviewing our corporate governance principles and making recommendations to the board of directors regarding possible changes;

● evaluating the composition, size and governance of the Board and its committees and making recommendations regarding future planning and the appointment of directors to our committees;

● establishing a policy for considering shareholder nominees to the Board;

● reviewing our corporate governance principles and making recommendations to the Board regarding possible changes;

● reviewing and monitoring compliance with our Code of Ethics and insider trading policy.

4 unchanged sentences

Delinquent Section 16(a) Reports

During the year ended December 31, 2020, Brian Prinz, a director, was late in the filing of one Statements of Changes in Beneficial Ownership on Form 4.

During the year ended December 31, 2021, Brian Prinz, a director, was late in the filing of two Statements of Changes in Beneficial Ownership on Form 4.

Code of Ethics

9 unchanged sentences

Name and Principal Position

Chairman, Chief Executive

Officer, President, Chief Financial Officer,

Stock Awards (1)

Chairman, Chief Executive Officer, President,

Chief Financial Officer,

Treasurer and Director

Executive Vice President and Chief Operating

* Effective as of July 1, 2020, Mr.

Cuozzo was hired as our executive vice president and chief operating officer.

Executive Vice President and Chief Operating Officer

Chief Investment Officer and Director of

Investor Relations

* Effective January 14, 2022, Mr.

Cuozzo retired from all of his positions with the company.

** Effective May 1, 2021, Mr.

Haydon was hired as our chief investment officer and director of investor relations.

(1) Represents the aggregate grant-date fair value of the awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codified Topic 718 (“FASB ASC Topic 718”).

(2) Represents the grant-date fair value on an aggregate of 89,928 Common Shares awarded on April 8, 2021.

(3) Represents the grant-date fair value on an aggregate of 4,753 Common Shares awarded on April 12, 2021.

Employment Agreements — John L.

2 unchanged sentences

Villano’s employment agreement are as follows.

Villano will serve as our co-chief executive officer, president and treasurer.

In addition, Mr.

Villano serves as chairman and as our chief financial officer.

Upon the resignation of Jeffrey C.

Villano in November 2019, he became our sole chief executive officer.

● The term of his employment is five years, which commenced on February 9, 2017, unless terminated earlier pursuant to the terms of the agreement.

The termination date will be extended one year on each anniversary date of the agreement unless either party to the agreement provides written notice at least 180 days before the next anniversary date that it is electing not to renew the agreement, in which case the agreement will terminate at the end of the fourth year from the next anniversary date.

● Initially his base compensation was $260,000.

Effective as of April 1, 2018, his base compensation was increased to $360,000 per annum.

● He is entitled to incentive compensation in such amount as shall be determined by the Compensation Committee of the board of directors in its sole and absolute discretion, based on our achievement of the financial performance goals set by the board of directors.

● He is also entitled to incentive compensation for certain capital transactions in such amount as shall be determined by the Compensation Committee of the board of directors in its sole and absolute discretion.

● He has the right to participate in all retirement, pension, deferred compensation, insurance and other benefit plans adopted and maintained by us for the benefit of employees and be entitled to additional compensation in an amount equal to the cost of any such benefit plan or program if he chooses not to participate.

● He is indemnified to the full extent permitted by law against and for any claims, liabilities, losses, expenses and costs incurred that relate to any acts or omission taken in his capacity as an officer or director.

Villano serves as our chairman, chief executive officer, president, chief financial officer and treasurer.

● The term of his employment, which commenced in February 2017, is five years, unless terminated earlier in accordance with his employment agreement.

The termination date is extended one year on each anniversary date of the agreement unless either party to the agreement provides written notice at least 180 days before the next anniversary date that it is electing not to renew the agreement, in which case the agreement will terminate at the end of the fourth year from the next anniversary date.

● As of April 1, 2018, Mr.

Villano’s base salary was $360,000 per annum.

In April 2021, his base salary was increased to $500,000 per annum, retroactive to January 1, 2021.

Villano is entitled to incentive compensation in such amount as shall be determined by the Compensation Committee of the Board in its sole and absolute discretion, based on our achievement of the financial performance goals set by the Board of directors and capital transactions.

● For 2019 and 2020, Mr.

Villano did not receive any bonus or incentive compensation.

In April 2021, he received a one-time cash bonus of $250,000, of which $125,000 was paid immediately, $62,500 was paid on July 1 and $62,500 was paid on October 1, 2021.

● In April 2021, Mr.

Villano received a grant of 89,928 restricted Common Shares (based on the closing price of $5.56 per Common Share on April 8, 2021) vesting in three equal installments on each of January 1, 2022, 2023 and 2024, which are subject to forfeiture, to the extent unvested, if he voluntary resigns as an employee of the Company without “Good Reason” or if his employment is terminated for “Cause.”

Villano has the right to participate in all retirement, pension, deferred compensation, insurance and other benefit plans adopted and maintained by us for the benefit of employees and be entitled to additional compensation in an amount equal to the cost of any such benefit plan or program if he chooses not to participate.

Villano is indemnified to the full extent permitted by law against and for any claims, liabilities, losses, expenses and costs incurred that relate to any acts or omission taken in his capacity as an officer or director.

● We have the right to terminate the employment agreement at any time with or without cause and for death or disability (as defined in the employment agreement).

See below for the payments due upon a termination.

● He is subject to a two-year non-competition provision if we terminate the employment agreement for cause.

● In the event any payment to the employee is subject to an excise tax under the Code, we will pay the employee an additional amount equal to the amount of the excise tax and any other taxes (whether in the nature of excise taxes or income taxes) due with respect to such payment.

Villano is subject to a two-year non-competition provision if we terminate the employment agreement for cause.

● In the event any payment to the employee is subject to an excise tax under the Code, we are obligated to pay Mr.

Villano an additional amount equal to the amount of the excise tax and any other taxes (whether in the nature of excise taxes or income taxes) due with respect to such payment.

Termination and Change of Control Arrangement

13 unchanged sentences

(2) we sell, lease or otherwise dispose of all or substantially all of our assets;

(3) the acquisition of beneficial ownership, directly or indirectly, of our common shares or any other securities having voting rights that we may issue in the future, rights to acquire our voting securities (including, without limitation, securities that are convertible into voting securities and rights, options warrants and other agreements or arrangements to acquire such voting securities) by any person, corporation or other entity or group thereof acting jointly, in such amount or amounts as would permit such person, corporation or other entity or group thereof acting jointly to elect a majority of the members of the board of directors, as then constituted;

or (4) the acquisition of beneficial ownership, directly or indirectly, of voting securities and rights to acquire voting securities having voting power equal to 40% or more of the combined voting power of our then outstanding voting securities by any person, corporation or other entity or group thereof acting jointly unless such acquisition is expressly approved by resolution of the board of directors passed upon affirmative vote of not less than a majority of the board of directors and adopted at a meeting of the board of directors held not later than the date of the next regularly scheduled or special meeting held following the date we obtain actual knowledge of such acquisition (which approval may be limited in purpose and effect solely to affecting the rights of the executive under his employment agreement).

(3) the acquisition of beneficial ownership, directly or indirectly, of our Common Shares or any other securities having voting rights that we may issue in the future, rights to acquire our voting securities (including, without limitation, securities that are convertible into voting securities and rights, options warrants and other agreements or arrangements to acquire such voting securities) by any person, corporation or other entity or group thereof acting jointly, in such amount or amounts as would permit such person, corporation or other entity or group thereof acting jointly to elect a majority of the members of the Board, as then constituted;

or (4) the acquisition of beneficial ownership, directly or indirectly, of voting securities and rights to acquire voting securities having voting power equal to 40% or more of the combined voting power of our then outstanding voting securities by any person, corporation or other entity or group thereof acting jointly unless such acquisition is expressly approved by resolution of the Board passed upon affirmative vote of not less than a majority of the directors and adopted at a meeting of the Board held not later than the date of the next regularly scheduled or special meeting held following the date we obtain actual knowledge of such acquisition (which approval may be limited in purpose and effect solely to affecting the rights of the executive under his employment agreement).

Notwithstanding the preceding sentence, any transaction that involves a mere change in identity form or place of organization within the meaning of Section 368(a)(1)(F) of the Code, or a transaction of similar effect, will not constitute a “change in control.”

Employment Agreement — Peter J.

On July 7, 2020, we entered into an employment agreement with Peter J.

Cuozzo, our executive vice president and chief operating officer, effective as of July 1, 2020.

The material terms of the employment agreement are as follows.

● He will serve as our executive vice president and chief operating officer on a full-time basis.

● The agreement can be terminated by either party at any time upon delivery of written notice to the other party.

● His duties include overseeing, supervising and managing our business, (ii) overseeing and supervising our expansion into Florida, Texas and such other markets identified by our chief executive office and/or the Board and (iii) such other duties, responsibilities, tasks and projects as shall be determined by our chief executive officer and/or the Board, with the understanding that he shall have the customary authority and support to accomplish such assigned duties, responsibilities, tasks and projects.

● He will be based in Naples, Florida but is required to work from our principal place of business, currently in Branford Connecticut, as frequently and for such period of time as directed by our chief executive officer.

● His base compensation is $250,000 per year.

In July 2020, we entered into an employment agreement with Peter J.

Cuozzo, our former executive vice president and chief operating officer.

The material terms of his agreement are described below.

Cuozzo retired from all his positions with the company on January 14, 2022.

● He served as our executive vice president and chief operating officer on a full-time basis.

● The agreement was terminable by either party at any time upon delivery of written notice to the other party.

● His duties included overseeing, supervising and managing our business, (ii) overseeing and supervising our expansion into Florida, Texas and such other markets identified by our chief executive officer and/or the Board and (iii) such other duties, responsibilities, tasks and projects as shall be determined by our chief executive officer and/or the Board, with the understanding that he shall have the customary authority and support to accomplish such assigned duties, responsibilities, tasks and projects.

● He was based in Naples, Florida but required to work from our principal place of business, in Branford Connecticut, as frequently and for such period of time as directed by our chief executive officer.

● His base compensation was $250,000 per year.

● He was paid a signing bonus of $25,000.

● He will be entitled to additional compensation in such amounts, at such times and under such circumstances as shall be determined by the Board and/or the Compensation Committee based on (i) the growth of our business;

● He was be entitled to additional compensation in such amounts, at such times and under such circumstances as shall be determined by the Board and/or the Compensation Committee based on (i) the growth of our business;

(ii) capital origination, whether via the sale by us of our equity, debt or derivative securities or via new credit facilities with traditional or non-traditional lenders and (iii) mergers and acquisitions of other entities or assets.

● He is eligible to participate in any retirement plans (qualified and non-qualified), pension, insurance, health, disability or other benefit plan or program that has been or is hereafter adopted by us (or in which we participate), according to the terms of such plan or program, on terms no less favorable than the most favorable terms granted to our senior executives.

● He is entitled to 25 vacation days per annum and severance pay equal to 18 months of his base compensation if he is terminated without cause, or if he terminates for good reason, prior to July 1, 2022.

● He is subject to a covenant not to compete that continues for 18 months after termination unless he is terminated without “cause” prior to July 1, 2022.

In April 2021, he was paid a one-time cash bonus of $25,000 and received a grant of 4,753 restricted Common Shares (based on the closing price of $5.26 per Common Share on April 12, 2021) vesting in three equal installments on each of January 1, 2022, 2023 and 2024, which are subject to forfeiture, to the extent unvested, if he voluntary resigns as an employee of the Company without “Good Reason” or if his employment is terminated for “Cause.”

● He was eligible to participate in any retirement plans (qualified and non-qualified), pension, insurance, health, disability or other benefit plan or program that has been or subsequently adopted by us (or in which we participate), according to the terms of such plan or program, on terms no less favorable than the most favorable terms granted to our senior executives.

● He was entitled to 25 vacation days per annum and severance pay equal to 18 months of his base compensation if he is terminated without cause, or if he terminates for good reason, prior to July 1, 2022.

● He is subject to a covenant not to compete that continues for 18 months after termination.

Outstanding Equity Awards at December 31, 2021

The following table sets forth information concerning outstanding equity awards to the Named Executives as of December 31, 2021.

Number of shares or units of

Market value of shares or

stock that have not vested

units of stock that have not vested

(1) Calculated based on the closing market price of $5.84 at the end of the last completed fiscal year on December 31, 2021.

(2) One-third of these restricted Common Shares vest on each of January 1, 2022, 2023 and 2024.

Unvested shares may not be transferred, sold, pledged, hypothecated or assigned, and are subject to forfeiture.

Compensation of Directors

Our non-employee director compensation plan, as amended and effective on October 1, 2019 (the “Director Plan”), provides as follows:

● each non-employee director will receive cash compensation at a rate of $30,000 per year, which amount shall be paid in equal quarterly installments of $7,500 on the first day of each calendar quarter (i.e.

January 1, April 1, July 1, and October 1);

● the chairman of the Audit Committee will receive additional cash compensation of $7,500 per year, payable in equal quarterly installments of $1,875 on the first day of each calendar quarter (i.e.

January 1, April 1, July 1, and October 1);

● the chairman of the Compensation Committee will receive additional cash compensation of $5,000 per year, payable in equal quarterly installments of $1,250 on the first day of each calendar quarter (i.e.

January 1, April 1, July 1, and October 1);

● the chairman of the Corporate Governance and Nominating Committee will receive additional cash compensation of $2,500 per year, payable in equal quarterly installments of $625 on the first day of each calendar quarter (i.e.

January 1, April 1, July 1, and October 1);

● each non-employee director will receive a grant of 2,500 common shares on the date he or she is re-elected to serve on the board of directors.

The Named Executives, who are also directors, do not receive additional compensation in connection with their positions as members of the board of directors.

Our non-employee director compensation plan, as amended on April 8, 2021 and retroactively effective as of January 1, 2021 (the “Director Plan”), provides as follows:

● each non-employee director will receive cash compensation at a rate of $60,000 per year, which amount shall be paid in equal quarterly installments of $15,000 on the first day of each calendar quarter ( i.e., January 1, April 1, July 1 and October 1);

● the additional cash compensation payable to the chairperson of each of the Audit Committee, the Compensation Committee and the Corporate Governance and Nominating Committee will remain unchanged as follows:

● the chairperson of the Audit Committee will receive additional cash compensation of $7,500 per year, payable in equal quarterly installments of $1,875 on the first day of each calendar quarter ( i.e., January 1, April 1, July 1 and October 1);

● the chairperson of the Compensation Committee will receive additional cash compensation of $5,000 per year, payable in equal quarterly installments of $1,250 on the first day of each calendar quarter ( i.e., January 1, April 1, July 1 and October 1);

● the chairperson of the Corporate Governance and Nominating Committee will receive additional cash compensation of $2,500 per year, payable in equal quarterly installments of $625 on the first day of each calendar quarter ( i.e., January 1, April 1, July 1 and October 1);

● each non-employee director will receive a grant of 5,000 Common Shares on the date he or she is re-elected to serve on the Board;

● the non-employee director serving on our Loan Approval Committee will receive additional cash compensation of $7,500 per year, payable in equal quarterly installments of $1,875 on the first day of each calendar quarter ( i.e., January 1, April 1, July 1 and October 1).

The Named Executives, who are also directors, do not receive additional compensation in connection with their positions as members of the Board.

The following table provides compensation information for the year ended December 31, 2021 for each of our non-employee directors.

14 unchanged sentences

All officers and directors as a group (6 persons)

Greater than 5% Shareholders

*Less than 1%.

2 unchanged sentences

Each beneficial owner’s percentage ownership is determined by assuming that options, warrants and convertible securities that are held by such person (but not held by any other person) and that are exercisable or convertible within 60 days have been exercised or converted.

Except as otherwise indicated, and subject to applicable community property and similar laws, each of the persons named has sole voting and investment power with respect to the shares shown as beneficially owned.

(3) All percentages are determined based on 22,124,801 common shares outstanding as of the March 25, 2021.

(4) Includes 6,827 common shares owned by Mr.

Except as otherwise indicated, and subject to

applicable community property and similar laws, each of the persons named has sole voting and investment power with respect to the shares shown as beneficially owned.

(3) All percentages are determined based on 35,513,887 Common Shares outstanding as of March 30, 2022.

(4) Includes 89,928 restricted Common shares that were issued in 2021.

One-third of these shares vest on each of January 1, 2022, 2023 and 2024.

Also includes 6,827 Common Shares owned by Mr.

Villano’s wife.

Villano disclaims beneficial ownership of the 6,827 common shares owned by his wife for the purposes of section 13(d) or 13(g) of the Exchange Act.

(5) Served as our Co-Chief Executive Officer, President and Treasurer until November 20, 2019 and as a director until December 10, 2019.

His holdings include 301,718 common shares owned by Ultimate Brands Inc., a corporation of which he is the founder and chief executive officer and over which he has full voting and dispositive control, and 3,251 common shares owned by his daughter.

Villano disclaims beneficial ownership of the 3,251 common shares owned by his daughter for the purposes of section 13(d) or 13(g) of the Exchange Act.

The foregoing is based on Mr.

Villano’s Schedule 13G/A filed with the SEC on February 16, 2021, reporting beneficial ownership as of December 31, 2020.

Villano disclaims ownership of the 6,827 Common Shares owned by his wife for the purposes of section 13(d) or 13(g) of the Exchange Act.

(5) Includes 5,625 restricted Common Shares that vest as follows:

(i) 625 shares vest on October 4, 2022;

(ii) 1,250 shares vest on October 13, 2022;

(iii) 625 shares vest on October 15, 2022;

(iv) 1,250 shares vest on October 13, 2023;

(v) 625 shares vest on October 15, 2023;

and (vi) 1,250 shares vest on October 13, 2023.

(6) Includes 4,753 restricted Common Shares issued in 2021 that were to vest one-third on each of January 1, 2022, 2023 and 2024.

Cuozzo retired from the Company effective January 14, 2022.

In connection therewith, the Company agreed to lift the restrictions on these shares.

Equity Compensation Plan Information

On October 27, 2016, we adopted the 2016 Equity Compensation Plan (the “Plan), the purpose of which is to align the interests of our officers, other employees, advisors and consultants or any subsidiary, if any, with those of our shareholders and to afford an incentive to such officers, employees, consultants and advisors to continue as such, to increase their efforts on our behalf and to promote the success of our business.

The basis of participation in the Plan is upon discretionary grants of awards by the board of directors.

The basis of participation in the Plan is upon discretionary grants of awards by the Board.

The Plan is administered by the Compensation Committee.

27 unchanged sentences

Amendment and Termination of the Plan

The Plan expires on the tenth anniversary of the date of its adoption by the board of directors.

The Plan expires on the tenth anniversary of the date of its adoption by the Board.

Prior to the expiration date, the board of directors may at any time, and from time to time, suspend or terminate the Plan in whole or in part or amend it from time to time;

provided, however, that unless otherwise determined by the board of directors, an amendment that requires shareholder approval in order for the Plan to continue to comply with Section 162(m) or any other law, regulation or stock exchange requirement shall not be effective unless approved by the requisite vote of shareholders.

provided, however, that unless otherwise determined by the Board, an amendment that requires shareholder approval in order for the Plan to continue to comply with Section 162(m) or any other law, regulation or stock exchange requirement shall not be effective unless approved by the requisite vote of shareholders.

Notwithstanding the foregoing, no amendment to or termination of the Plan shall affect adversely any of the rights of any grantee under any outstanding award granted under the Plan without such grantee’s consent.

20 unchanged sentences

Certain Relationships and Related Transactions and Director Independence.

In March 2019 we relocated our principal offices to 698 Main Street, Branford, Connecticut upon the completion of renovations.

Prior to March 2019, our principal offices were located at 23 Laurel Street, Branford, Connecticut, a property owned by Union News of New Haven, Inc.

Villano is the chief executive officer of Union News and owns 20% of its outstanding stock.

The other 80% is owned by his and John L.

Villano’s mother, Shirley Villano.

The rent payable to Union News was $1,500 per month.

During 2019 one loan to JJV, LLC (“JJV”), the managing member of Sachem Capital Partners, LLC, the entity through which we conducted our business prior to our IPO, in the amount of $298,222 was refinanced by the borrower and the other loan was assigned from JJV to us in the amount of $581,235.

The principal balance of the loans to JJV at December 31, 2020 and 2019 were $-0-, respectively.

Interest paid to us by JJV for years ended December 31, 2020 and 2019 was approximately $-0- and $44,000, respectively.

These loans were made in connection with JJV’s purchase of real property from third parties who, for various reasons, did not meet our loan criteria.

We believe that the terms of these loans are no less beneficial to us than they would have been if we made the loans to unrelated third parties and are all properly documented.

During the years ended December 31, 2021 and 2020, the wife of our chief executive officer was paid $120,000 and $108,000, respectively, for accounting and financial reporting services provided to us.

During the year ended December 31, 2021 the daughter of our chief executive officer was paid $10,962 for internal audit and compliance services provided to us.

We have adopted a policy that prohibits any transaction between us and a related party unless the terms of that transaction are no less favorable to us than if we had entered into the same transaction with an unrelated party and the transaction is approved by our Audit Committee or other independent committee of the board of directors, in the case where it is inappropriate for our Audit Committee to review such a transaction due to a conflict of interest.

3 unchanged sentences

All other fees

· In 2020, the audit fees include fees for professional services rendered for (i) the review of our quarterly financial statements, (ii) in connection with our shelf registration statement (File No.

333-236097) on Form S-3 under the Securities Act of 1933, as amended which was declared effective by the SEC on February 5, 2020, (iii) the review of three separate prospectus supplements to our shelf registration statement on Form S-3, described below, and (iv) other services that are normally provided in connection with statutory and regulatory filings.

· In 2019, the audit fees include fees for professional services rendered for (i) the review of our quarterly financial statements, (ii) the review of four separate prospectus supplements to our shelf registration statement on Form S-3, described below, and (iii) other services that are normally provided in connection with statutory and regulatory filings.

● In 2021, the audit fees include fees for professional services rendered for (i) the review of our quarterly financial statements, (ii) the review of our shelf registration statement (File No.

333-256940) on Form S-3 under the Securities Act of 1933, as amended, which was declared effective by the SEC on June 17, 2021, (iii) the review of three separate prospectus supplements to the aforementioned shelf registration statement on Form S-3 and (iv) other services that are normally provided in connection with statutory and regulatory filings.

● In 2020, the audit fees include fees for professional services rendered for (i) the review of our quarterly financial statements, (ii) the review of our shelf registration statement (File No.

333-236097) on Form S-3 under the Securities Act of 1933, as amended, which was declared effective by the SEC on February 5, 2020, (iii) the review of three separate prospectus supplements to the aforementioned shelf registration statement on Form S-3 and (iv) other services that are normally provided in connection with statutory and regulatory filings.

Audit Committee Pre-Approval Policies and Procedures

13 unchanged sentences

Certificate of Amendment to Certificate of Incorporation filed on October 7, 2019(2)

Certificate of Amendment to Certificate of Incorporation filed on June 25, 2021(10)

Amended and Restated Bylaws, effective as of November 25, 2019(3)

Form of Representative’s Warrants issued on February 9, 2017 in connection with the initial public offering(1)

Form of Representatives’ Warrants issued on October 27, 2017 in connection with the follow-on underwritten public offering(4)

10 unchanged sentences

Form of 7.75% Notes due 2025 (included as Exhibit A to Exhibit 4.9 above)

Specimen 7.75% Series A Cumulative Redeemable Preferred Stock Certificate.(10)

Fourth Supplemental Indenture between the Company and U.S.

Bank National Association, as Trustee(11)

Form of 6.00% Note due 2026 (attached as Exhibit A to Exhibit 4.12 above).

Fifth Supplemental Indenture between the Company and U.S.

Bank National Association, as Trustee(15)

Form of 6.00% Note due 2027 (attached as Exhibit A to Exhibit 4.12 above)

Employment Agreement by and between John L.

4 unchanged sentences

2016 Equity Compensation Plan between the Company and each of Leslie Bernhard, Arthur Goldberg and Brian Prinz(6)

Mortgage Note made by Sachem Capital Corp to Bankwell Bank, dated as of March 29, 2019, in the principal amount of $795,000 (8)

Open-End Mortgage Deed, Security Agreement and Fixture Filing, dated March 29, 2019, by Sachem Capital Corp., in connection with the New Bankwell Mortgage Loan, for the benefit of Bankwell Bank (8)

Indemnity Agreement, dated as of March 29, 2019, by and among John L.

Villano, Jeffrey C.

Villano and Bankwell Bank (8)

Final Form of the Restrictive Stock Grant Agreement dated October 4, 2019 under the Sachem Capital Corp.

2016 Equity Compensation Plan between the Company and each of Leslie Bernhard, Arthur Goldberg and Brian Prinz(2)

Employment Agreement, dated as of July 1, 2020, by and between Peter J.

Cuozzo and Sachem Capital Corp.

Final Form of the Restrictive Stock Grant Agreement dated April 2021 under the Sachem Capital Corp.

2016 Equity Compensation Plan between the Company and each of John L., Villano and Peter J.

Master Repurchase Agreement and Securities Contract, dated as of July 21, 2021, between Sachem Capital Corp.

and Churchill MRA Funding I LLC(13)

Custodial Agreement, dated as of July 21, 2021, among Sachem Capital Corp., Churchill MRA Funding I LLC.

Bank National Association(13)

Agreement and General Release, dated as of January 14, 2022, between Sachem Capital Corp.

Code of Ethics(9)

5 unchanged sentences

section 1350 as adopted pursuant to section 906 of the Sarbanes Oxley Act ***

Open-End Construction Mortgage, Security Agreement and Assignment of Leases and Rents, dated November 12, 2021, by Sachem Capital Corp., in connection with the New Haven Bank Mortgage Loan *

Term Note made by Sachem Capital Corp to New Haven Bank, dated November 17, 2021, in the principal amount of $1,400,000 (attached as Exhibit B to Exhibit 99.1 above)

Loan Agreement between Sachem Capital Corp.

and New Haven Bank, dated as of November 17, 2021*

XBRL Instance Document *

17 unchanged sentences

(7) Previously filed as an exhibit to the Current Report on Form 8-K on November 6, 2019 and incorporated herein by reference.

(8) Previously filed as an exhibit to the Current Report on Form 8-K on April 5, 2019 and incorporated herein by reference.

(9) Previously filed as an exhibit to the Current Report on Form 8-K on July 8, 2020 and incorporated herein by reference.

(8) Previously filed as an exhibit to the Current Report on Form 8-K on September 9, 2020 and incorporated herein by reference.

(9) Previously filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2016 and incorporated herein by reference.

(10) Previously filed as an exhibit to the Current Report on Form 8-K on June 29, 2021 and incorporated herein by reference.

(11) Previously filed as an exhibit to the Current Report on Form 8-K on December 20, 2021 and incorporated herein by reference.

(12) Previously filed as an exhibit to the Current Report on Form 8-K on April 13, 2021 and incorporated herein by reference.

(13) Previously filed as an exhibit to the Current Report on Form 8-K on July 27, 2021 and incorporated herein by reference.

(15) Previously filed as an exhibit to the Current Report on Form 8-K on March 9, 2022 and incorporated herein by reference.

(c) No financial statement schedules are included because the information is either provided in the financial statements or is not required under the related instructions or is inapplicable and such schedules therefore have been omitted.

8 unchanged sentences

Financial Officer and Director (Principal Executive

Officer & Principal Financial Officer)

Officer & Principal Accounting Officer)

/s/ Leslie Bernhard

Leslie Bernhard

/s/ Arthur L.

INDEX TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

Reports of Independent Registered Public Accounting Firms

Reports of Independent Registered Public Accounting Firms ( PCAOB ID 694 )

Financial Statements:

32 unchanged sentences

BALANCE SHEETS

December 31, 2021

December 31, 2020

Cash and cash equivalents

Short-term marketable securities

Investment securities

Mortgages receivable

4 unchanged sentences

Property and equipment, net

Deposits on property and equipment

Real estate owned

Deferred financing costs

Investments in partnerships

Deferred financing costs, net

Liabilities and Shareholders’ Equity

Notes payable (net of deferred financing costs of $ 5,747,387 and $ 4,866,058 )

Repurchase facility

Mortgage payable

12 unchanged sentences

5,000,000 shares authorized;

no shares issued

1,903,000 shares of Series A Preferred Stock issued and outstanding

Common stock - $ .001 par value;

10 unchanged sentences

SACHEM CAPITAL CORP.

STATEMENTS OF OPERATIONS

STATEMENTS OF COMPREHENSIVE INCOME

Interest income from loans

Investment income

Gain on sale of marketable securities

Income from partnership investments

Gain on sale of investment securities

Origination fees, net

5 unchanged sentences

Interest and amortization of deferred financing costs

Compensation, fees and taxes

Professional fees

Other expenses and taxes

Compensation, fees and taxes

Exchange fees

Expense in connection with termination of credit facility

Impairment loss

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

Preferred stock dividend

( 1,853,855 )

Net income attributable to common shareholders

Other comprehensive (loss) income

Unrealized (loss) gain on investment securities

Comprehensive income

3 unchanged sentences

SACHEM CAPITAL CORP.

STATEMENT OF CHANGES IN SHAREHOLDERS’/MEMBERS’ EQUITY

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

Preferred Stock

Comprehensive

Balance, January 1, 2020

Sale of common stock through ATM

Sale of common stock

Exercise of warrants

( 1,266,729 )

Offering costs - ATM

Stock based compensation

Unrealized loss on marketable securities

Dividends paid

Unrealized gain on marketable securities

Dividends paid on Common Stock

( 7,963,128 )

Dividends declared and payable

( 2,654,977 )

Net income for the year ended December 31, 2020

1 unchanged sentence

( 2,890,969 )

Offerings costs - ATM

Stock based commpensation

Unrealized gain on marketable securities

Dividends paid

( 7,963,128 )

Issuance of Preferred Stock, net of expenses

Issuance of Common Stock, net of expenses

Exercise of warrants

Stock based compensation

Unrealized loss on marketable securities

Dividends paid on Common Stock

( 9,638,722 )

2 unchanged sentences

( 3,927,600 )

Dividends paid on Preferred Stock

( 1,853,855 )

Net income for the year ended December 31, 2021

6 unchanged sentences

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

2 unchanged sentences

Loss on sale of real estate

Abandonment of office furniture

Gain on sale of marketable securities

1 unchanged sentence

(Increase) decrease in:

Escrow deposits

Interest and fees receivable

( 1,873,578 )

Other receivables

1 unchanged sentence

( 1,645,353 )

( 1,537,768 )

Prepaid expenses

8 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of investments

Purchase of investment securities

( 204,064,590 )

( 97,555,422 )

Proceeds from the sale of investments

Proceeds from the sale of investment securities

Purchase of interests in investment partnerships, net

( 6,055,838 )

Proceeds from sale of real estate owned

8 unchanged sentences

Principal collections on mortgages receivable

Costs in connection with investment activities

NET CASH USED FOR INVESTING ACTIVITIES

2 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES

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 )

Net proceeds from line of credit

Net proceeds from repurchase facility

Proceeds from mortgage

Repayment of mortgage payable

Principal payments on mortgage payable

Principal payments on notes payable

Dividends paid

Dividends paid on Common Stock

( 12,267,706 )

( 7,963,128 )

Financing costs incurred

Dividends paid on Preferred Stock

( 1,853,855 )

Financings costs incurred

Proceeds from other loans

Proceeds from mortgage payable

Prepayment of mortgage payable

Proceeds from notes payable, net

Proceeds from issuance of common stock

Proceeds from exercise of warrants

Gross proceeds from the issuance of fixed rate notes

Financing costs incurred in connection with fixed rate notes

Repayment of other loans

Proceeds from issuance of common shares, net of expenses

Proceeds from issuance of Series A Preferred Stock, net of expenses

Gross proceeds from issuance of fixed rate notes

Financings costs incurred in connection with fixed rate notes

( 1,879,463 )

NET CASH PROVIDED BY FINANCING ACTIVITIES

( 2,520,143 )

NET CASH PROVIDED BY IN FINANCING ACTIVITIES

NET INCREASE IN CASH AND CASH EQUIVALENTS

7 unchanged sentences

SUPPLEMENTAL INFORMATION-NON-CASH

Original Issue Discount

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 and other fees receivable, during the year ended December 31, 2019 amounted to $ 5,406,477 .

During the year ended December 31, 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 and other fees receivable, during the year ended December 31, 2020 amounted to $ 1,553,103 .

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the year ended December 31, 2020 amounted to $ 1,553,103 .

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the year ended December 31, 2021 amounted to $ 685,763 .

Gain on real estate acquired in lieu of foreclosure during the year ended December 31, 2021 amounted to $ 273,610 .

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

5 unchanged sentences

The Company offers short term ( i.e.

, 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.

, one to three years ), secured, non-bank 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 the Northeastern United States and Florida.

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

Each loan is secured by a first mortgage lien on real estate and may also be secured with additional collateral, such as other real estate owned by the borrower or its principals or a pledge of the ownership interests in the borrower by the principals thereof, as well as personal guarantees by the principals of the borrower.

Each loan is secured by a first mortgage lien on real estate and may also be secured with additional collateral, such as other real estate owned by the borrower or its principals, a pledge of the ownership interests in the borrower by the principals thereof, and/or personal guarantees by the principals of the borrower.

The Company does not lend to owner occupants.

4 unchanged sentences

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America 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 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.

Management will base the use of estimates on (a) various assumptions that consider prior reporting results, (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.

7 unchanged sentences

Based on the analysis, management determines if any provisions for impairment of loans should be made and whether any loan loss reserves are required.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2020

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 FASB ASC 820 are described as follows:

The three levels of the fair value hierarchy under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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.

2 unchanged sentences

● quoted prices for identical or similar assets or liabilities in inactive markets;

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

● inputs other than quoted prices that are observable for the asset or liability;

● inputs that are derived principally from or corroborated by observable market data by correlation to other means.

If the asset or liability has a specified ( i.e.

, contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

If the asset or liability has a specified (i.e., contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

4 unchanged sentences

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

Land and building acquired in 2021 to serve as the Company’s future corporate headquarters is stated at cost.

The building is not currently being depreciated as it is undergoing renovations.

Consolidations

The consolidated financial statements of the Company include the accounts of all subsidiaries in which the Company has control over significant operating, financial and investing decisions of the entity.

All intercompany accounts and transactions have been eliminated.

Impairment of Long-Lived Assets

1 unchanged sentence

When such events or changes in circumstances occur, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows.

If the total of the undiscounted cash flows is less than the carrying amount of these assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair market value of the assets.

If the undiscounted cash flows is less than the carrying amount of these assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair market value of the assets.

Deferred Financing Costs

Costs incurred in connection with the Company’s revolving credit facilities, described in Note 8—Line of Credit and Mortgage Payable, were amortized over the term of the applicable facility using the straight-line method.

Unamortized deferred financing costs relating to the Company’s $ 35 million credit facility were expensed when the facility was terminated on June 25, 2019 and the entire balance due was paid in full.

Costs incurred in connection with the Company’s revolving credit facilities, described in Note 7—Line of Credit, Mortgage Payable and Churchill Facility are amortized over the term of the applicable facility using the straight-line method.

Costs incurred by the Company in connection with the public offering of its unsecured, unsubordinated notes, described in Note 9–Notes Payable, are being amortized over the term of the respective Notes.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2020

Revenue Recognition

4 unchanged sentences

Origination fee revenue, generally 1 % – 3 % 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.

The Company believes it qualifies as a REIT for federal income tax purposes and operates accordingly.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

The Company believes it qualifies as a real estate investment trust (“REIT”) for federal income tax purposes and operates accordingly.

It made the election to be taxed as a REIT on its 2017 Federal income tax return.

4 unchanged sentences

federal income tax at regular corporate rates and may also be subject to various penalties and may be precluded from re-electing REIT status for the four taxable years following the year during in which it lost its REIT qualification.

The Company has adopted the provisions of Financial Accounting Standards Board (“FASB”) ASC Topic 740-10 “Accounting for Uncertainty in Income Taxes.” The standard prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and disclosure required.

FASB ASC Topic 740-10 “Accounting for Uncertainty in Income Taxes ” prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and disclosure required.

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

2 unchanged sentences

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.

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.

The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased to include the potential dilution from the exercise of stock options and warrants for common shares using the treasury stock method.

1 unchanged sentence

Recent Accounting Pronouncements

In May 2019, the FASB issued 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 also 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.” However, after beginning to implement the various key provisions of this ASU, and recognizing the complexities and challenges required, we determined to take advantage of our status as an emerging growth company, which allows us to defer the adoption of this ASU until our year ended December 31, 2023.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2020

For smaller reporting companies, such as the Company, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022.

As indicated in previous filings, the Company had intended to adopt ASU 2016-13 as of January 1, 2020.

However, given the complexity of ASU 2016-13 and upon becoming aware that smaller reporting companies were not required to implement ASU 2-16-13 yet, the Company has decided to defer its implementation ASU 2016-13.

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.

” However, after beginning to implement the various key provisions of this ASU, and recognizing the complexities and challenges required, we determined to take advantage of our status as an emerging growth company, which allows us to defer the adoption of this ASU until our year ended December 31, 2023.

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.

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

Early adoption is permitted but requires simultaneous adoption of all provisions of the new standard.

The Company believes that the adoption of this guidance will not have a material impact on its financial statements.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform:

Facilitation of the Effects of Reference Rate Reform on Financial Reporting."

This ASU provides optional expedients and exceptions for applying U.S.

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

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform:

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides optional expedients and exceptions for applying U.S.

GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued.

In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848):

ASU 2021-01 amends ASU 2020-04 and focuses on refining accounting relief for modifications made to certain derivatives and hedging contracts, such as interest rate swaps.

The Company believes that neither the adoption of ASU 2020-04 nor the adoption of ASU 2021-01 will have a material impact on its financial statements as it currently does not have any indebtedness tied to LIBOR or any other rate expected to be discontinued.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820).” ASU 2018-13 amends certain disclosure requirements regarding the fair value hierarchy of investments in accordance with GAAP, particularly the significant unobservable inputs used to value investments within Level 3 of the fair value hierarchy.

The Company adopted this guidance effective on January 1, 2020.

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

In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848):

Scope.” ASU 2021-01 amends ASU 2020-04 and focuses on refining accounting relief for modifications made to certain derivatives and hedging contracts, such as interest rate swaps.

The Company believes that neither the adoption of ASU 2020-04 nor the adoption of ASU 2021-01 will have a material impact on its financial statements as it does not have any hedging relationships with respect to its LIBOR referenced credit facility.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

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.

2 unchanged sentences

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 December 31, 2020:

Certificates of Deposit

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

Stocks and ETF's

Total Investments

Total liquid investments

Real estate owned

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2020

The following table sets forth by Level, within the fair value hierarchy, the Company’s assets at fair value as of December 31, 2019:

Certificates of Deposit

The following table sets forth by Level, within the fair value hierarchy, the fair value of the Company’s assets as of December 31, 2020:

Stocks and ETF's

Total Investments

Total liquid investments

Real estate owned

Following is a description of the methodologies used for assets measured at fair value:

Certificates of deposit:

Included in cash and cash equivalents and are valued at amortized cost, which approximates fair value.

Stocks and ETFs:

9 unchanged sentences

Mortgages Receivable

The Company offers secured, non-banking 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 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 the Northeastern United States and Florida.

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 .

2 unchanged sentences

For the years ended December 31, 2021 and 2020, the aggregate amounts of loans funded by the Company were $ 251,832,318 and $ 117,230,923 , respectively, offset by principal repayments of $ 115,147,409 and $ 54,961,570 , respectively.

As of December 31, 2020, the Company’s mortgage loan portfolio includes loans ranging in size from $ 2,600 to $ 10,780,000 with stated interest rates ranging from 5.0 % to 13.0 % and a default interest rate for non-payment of 18 %.

At December 31, 2020 and 2019, no single borrower had loans outstanding representing more than 10 % of the total balance of the loans outstanding.

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

The Company treats a loan extension as a new loan.

SACHEM CAPITAL CORP.

1 unchanged sentence

DECEMBER 31, 2021

As of December 31, 2021, the Company’s mortgage loan portfolio includes loans ranging in size up to $ 19,535,000 with stated interest rates ranging from 5.0 % to 14.2 %, and a default interest rate for non-payment of 18 %.

At December 31, 2021 and 2020, no single borrower or group of related borrowers had loans outstanding representing more than 10 % of the total balance of the loans outstanding.

The Company may agree to extend the term of a loan if, at the time of the extension, the loan and the borrower meet all the Company’s underwriting requirements.

The Company treats a loan extension as a new loan.

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

3 unchanged sentences

At December 31, 2021, of the 520 mortgage loans in the Company’s portfolio, sixteen were the subject of foreclosure proceedings.

The aggregate outstanding principal balance of these and the accrued but unpaid interest and borrower charges as of December 31, 2020 was approximately $ 3.1 million.

In the case of each of these loans, the Company believes the value of the collateral exceeds the outstanding balance on the loan.

At December 31, 2019, of the 438 mortgage loans in the Company’s portfolio, nine were the subject of foreclosure proceedings.

The aggregate outstanding principal balance of these loans and the accrued but unpaid interest and borrower charges as of December 31, 2021 was approximately $ 4.4 million.

In the case of each of these loans, the Company believes the value of the collateral exceeds the outstanding balance on the loan.

At December 31, 2020, of the 495 mortgage loans in the Company’s portfolio, sixteen were the subject of foreclosure proceedings.

The aggregate outstanding principal balance of these and the accrued but unpaid interest and borrower charges as of December 31, 2020 was approximately $ 3.1 million.

In the case of each of these loans, the Company believes the value of the collateral exceeds the outstanding balance on the loan.

Real Estate Owned

4 unchanged sentences

As of December 31, 2020, real estate owned included $ 1,393,398 of real estate held for rental and $ 7,468,211 of real estate held for sale.

Properties Held for Sale

During the year ended December 31, 2020, the Company sold two properties held for sale and recognized an aggregate loss of $ 7,219 .

During the year ended December 31, 2019, the Company sold six properties, of which three were held for sale and three were held for rental, and recognized an aggregate loss of $ 34,919 .

Properties Held for Rental

As of December 31, 2020, five properties, four single-family residences and one commercial building, were held for rental.

Four properties are leased on a month-month basis and the other one is subject to a lease expiring in March 2022.

During the year ended December 31, 2020, three purchase options expired and one property is subject to an option to purchase in favor of the current lessee.

SACHEM CAPITAL CORP.

1 unchanged sentence

DECEMBER 31, 2021

Properties Held for Sale

During the year ended December 31, 2021, the Company sold ten properties held for sale and recognized an aggregate loss of $ 165,915 .

During the year ended December 31, 2020, the Company sold two properties held for sale and recognized an aggregate loss of $ 7,218 .

Properties Held for Rental

As of December 31, 2021, one property, a commercial building, was held for rental.

The tenant signed a 5 year lease that commenced on August 1, 2021.

Rental payments due from real estate held for rental are as follows:

1 unchanged sentence

Year ending December 31, 2023

Year ending December 31, 2024

Year ending December 31, 2025

Profit Sharing Plan

4 unchanged sentences

For the years ended December 31, 2021 and 2020, the 401(k) Plan expense was $ 64,322 and $ 47,164 , respectively.

Line of Credit and Mortgage Payable

Line of Credit

Effective May 11, 2018, the Company obtained a $ 35 million credit facility (the “Webster Credit Facility”) with Webster Business Credit Corporation, Bankwell Bank and Berkshire Bank.

The Webster Credit Facility was secured by a first priority lien on all the Company’s assets, including its mortgage loan portfolio.

Interest on the outstanding balance accrued at a rate equal to the 30-day LIBOR rate plus 4.00 % per annum.

All amounts outstanding under the Webster Credit Facility, including principal, accrued interest and other fees and charges, were to be due and payable May 11, 2022.

On June 25, 2019, the entire outstanding balance of the Webster Credit Facility, including principal, accrued and unpaid interest and other fees, in the aggregate amount of $ 19.8 million was paid in full and the Webster Credit Facility was terminated.

In connection with the termination of the Webster Credit Facility, the Company expensed non-recurring charges of $ 779,641 , of which $ 439,446 constituted the write-off of non-cash deferred financing costs.

Amortization of all deferred financing costs for the years ended December 31, 2019 was $ 722,580 including costs of $ 439,446 incurred in connection with the termination of the Webster Credit Facility.

Line of Credit, Mortgage Payable, and Churchill Facility

Wells Fargo Margin Line of Credit

During the year ended December 31, 2020, the Company obtained a margin loan account from Wells Fargo, which is secured by the Company's portfolio of short-term securities.

During the year ended December 31, 2020, the Company established a margin loan account at Wells Fargo Advisors that 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 December 31, 2021).

As of the December 31, 2020 the total outstanding balance was $ 28,055,648 .

As of December 31, 2021 the total outstanding balance was $ 33,178,031 .

Mortgage Payable

At December 31, 2020, the Company had a mortgage loan payable of $ 767,508 .

The original amount of the loan was $ 795,000 and was secured by a first mortgage loan on the Company’s property located at 698 Main Street, Branford, Connecticut.

Interest on the mortgage loan accrued at the rate of 5.06 % per annum, monthly payments were $ 4,710 and the maturity date was to be March 31, 2029.

On February 19, 2021 this mortgage loan was repaid in full.

In 2021, the Company obtained a new adjustable-rate mortgage loan from New Haven Bank for up to a maximum principal amount of $ 1.4 million (the “New Haven Mortgage”) of which $ 750,000 is outstanding as of December 31, 2021.

The New Haven Mortgage accrues interest at an initial rate of 3.75 % per annum for the first 72 months and is due and payable in full on December 1, 2037.

During the first 12 months , from December 1, 2021 to November 30, 2022, only interest is due and payable.

Beginning on December 1, 2022 and through December 1, 2037, principal and interest on the New Haven Mortgage will be due and payable on a monthly basis.

All payments under the New Haven Mortgage are amortized based on a 20-year amortization schedule.

The interest rate will be adjusted on each of December 1, 2027 and 2032 to the then published 5 -year Federal Home Loan Bank of Boston Classic Advance Rate, plus 2.60 %.

The New Haven Mortgage is a non-recourse loan, secured by a first mortgage lien on each of our current corporate headquarters, located at 698 Main Street, Branford, Connecticut, and our future corporate headquarters, located at 568 East Main Street, Branford, Connecticut.

The first $ 750,000 of proceeds from the New Haven Mortgage were used to reimburse us for our out-of-pocket costs relating to the acquisition of the East Main Street property.

The balance of the loan will be used to reimburse us for the out-of-pocket costs we incur to renovate the East Main Street property.

Upon completion of the renovation, and assuming we can provide an appraisal that the East Main Street property has a value of not lesss than $ 1.4 million, the first mortgage lien on our current corporate headquarters will be released.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

Churchill MRA Funding I LLC Repurchase Financing Facility

On July 21, 2021, the Company consummated a $ 200 million master repurchase financing facility (“Facility”) with Churchill MRA Funding I LLC (“Churchill”), a subsidiary of Churchill Real Estate, a vertically integrated real estate finance company based in New York, New York.

Under the terms of the Facility, the Company has the right, but not the obligation, to sell mortgage loans to Churchill, and Churchill has the right, but not the obligation, to purchase those loans.

In addition, the Company has the right and, in some instances the obligation, to repurchase those loans from Churchill.

The amount that Churchill will pay for each mortgage loan it purchases will vary based on the attributes of the loan and various other circumstances.

The repurchase price is calculated by applying an interest factor to the purchase price of the mortgage loan.

The Company has also pledged the mortgage loans sold to Churchill to secure its repurchase obligation.

The cost of capital under the Facility is equal to the sum of (a) the greater of (i) 0.25 % and (ii) the 30-day LIBOR plus (b) 3 %- 4 %, depending on the aggregate principal amount of the mortgage loans held by Churchill at that time.

As of December 31, 2021 the effective rate charged under the Facility was 4.25 %.

The Facility is subject to other terms and conditions, including representations and warranties, covenants and agreements typically found in these types of financing arrangements.

Under one such covenant, the Company (A) is prohibited from (i) paying any dividends or making distributions in excess of 90% of its taxable income, (ii) incurring any indebtedness or (iii) purchasing any of its capital stock, unless, it has an asset coverage ratio of at least 150 %;

and (B) must maintain unencumbered cash and cash equivalents in an amount equal to or greater than 2.50 % of the amount of its repurchase obligations.

Churchill has the right to terminate the Facility at any time upon 180 days prior notice to the Company.

The Company then has an additional 180 days after termination to repurchase all the mortgage loans held by Churchill.

The Company uses the proceeds from the Facility to finance the continued expansion of its lending business and for general corporate purposes.

At December 31, 2021, the total amount outstanding under the Facility was $ 19,087,189 and the Company estimates that it had approximately $ 6.3 million of additional availability under the Facility.

The collateral pledged to Churchill at December 31, 2021 was 17 mortgage loans that in the aggregate had unpaid principal balance of approximately $ 37.9 million.

The NHB Mortgage and the Churchill Facility contain cross-default provisions.

Financing Transactions

During the year ended December 31, 2021, the Company generated approximately $ 156.8 million of gross proceeds from the sale of its securities as follows:

(i) $ 51,750,000 from the sale of its 6.0 % unsecured, unsubordinated notes due December 30, 2026;

(ii) $ 47,575,000 from the sale of its 7.75 % cumulative Series A Preferred Stock;

(iii) $ 57,510,243 from the sale of 10,490,188 common shares in “at-the-market” offerings.

The net proceeds from the sale of these securities were used primarily to fund new mortgage loans, for working capital and general corporate purposes.

During the year ended December 31, 2020, the Company generated approximately $ 56.1 million (after taking into account the original issue discount) of gross proceeds from the sale of its securities as follows:

(i) $ 28,363,750 from the sale of its 7.75 % unsecured, unsubordinated notes due September 30, 2025 in September and October 2020;

(iv) $ 28,363,750 from the sale of its 7.75 % unsecured, unsubordinated notes due September 30, 2025 in September and October 2020;

(v) $ 27,720,000 from the sale of additional September 2025 Notes in December 2020.

The net proceeds from the sale of these securities were used primarily to fund new mortgage loans, for working capital and general corporate purposes.

SACHEM CAPITAL CORP.

1 unchanged sentence

DECEMBER 31, 2021

(ii) $ 27,720,000 from the sale of additional September 2025 Notes in December 2020.

The net proceeds from the sale of these securities were used primarily to fund new mortgage loans and for working capital and general corporate purposes.

During the year ended December 31, 2019, the Company generated approximately $ 90.3 million of gross proceeds from the sale of its securities as follows:

(i) $ 20,533,208 from the sale of 4,354,773 common shares in an “at-the-market” offerings;

(ii) $ 23,663,000 from the sale of its 7.125 % unsecured, unsubordinated notes due June 30, 2024;

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

(iv) $ 11,500,000 from the sale of 2,300,000 common shares from an equity offering;

(v) $ 34,500,000 from the sale of its 6.875 % unsecured, unsubordinated notes due December 30, 2024.

Approximately $ 31.5 million of the net proceeds from the sale of the foregoing securities were used to pay-off the Webster Credit Facility and the balance was used to fund new mortgage loans and for general corporate purposes.

Notes Payable

At December 31, 2021, the Company had an aggregate of $ 160,529,363 of unsecured, unsubordinated notes payable outstanding, net of $ 5,747,387 of deferred financing costs (collectively, the “Notes”).

The Notes are divided into three series:

The Notes were issued in four series:

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”);

1 unchanged sentence

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

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.

Notes having an aggregate principal amount of $ 51,750,000 bearing interest at 6.0 % per annum and maturing December 30, 2026 (the "December 2026 Notes").

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 symbols “SCCB”, “SACC”,“SCCC”, and “SCCD”, respectively.

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

3 unchanged sentences

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 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.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2020

The June 2024 Notes and the December 2024 Notes are callable at any time.

The September 2025 Notes will be callable at any time after September 4, 2022 and the December 2026 Notes will be callable at any time after December 30, 2023.

Other income of the Company includes the following:

2 unchanged sentences

In-house legal fees

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

Commitments and Contingencies

Origination Fees

Loan origination fees range from 2 %- 5 % of the original loan principal and, generally, are payable at the time the loan is funded.

Loan origination fees generally range from 1 %- 3 % of the original loan principal and, generally, are payable at the time the loan is funded.

These payments are amortized for financial statement purposes over the life of the loan and will be recorded as income as follows:

Original maturities of deferred revenue are as follows as of:

Year ending December 31,

4 unchanged sentences

In February 2017, the Company entered into an employment agreement with John Villano, the material terms of which are as follows:

(i) the employment term is five years commencing February 9, 2017, with extensions for successive one-year periods unless either party provides written notice at least 180 days prior to the next anniversary date of its intention to not renew the agreement;

(ii) a base salary of $ 260,000 , which was increased in April 2018 to $ 360,000 ;

(i) the employment term is five years with extensions for successive one-year periods unless either party provides written notice at least 180 days prior to the next anniversary date of its intention to not renew the agreement;

(ii) a base salary of $ 260,000 , which was increased in April 2018 to $ 360,000 , and increased again in April 2021 to $500,000;

(iii) incentive compensation in such amount as determined by the Compensation Committee of the Company’s Board of Directors;

1 unchanged sentence

(v) full indemnification to the extent permitted by law;

(v) a two-year non-competition period following the termination of employment without cause;

and (vi) payments upon termination of employment or a change in control.

(vi) a two-year non-competition period following the termination of employment without cause;

and (vii) payments upon termination of employment or a change in control.

In July 2020, the Company entered into an employment agreement with Peter Cuozzo, the material terms of which are as follows:

4 unchanged sentences

(v) full indemnification to the extent permitted by law;

(v) subject to a covenant not to compete that continues for 18 months after termination unless he is terminated without "cause"

(vi) subject to a covenant not to compete that continues for 18 months after termination unless he is terminated without "cause"

prior to July 1, 2022;

and (vi) severance pay equal to 18 months of his base compensation if he is terminated without cause, or if he terminates for good reason, prior to July 1, 2022.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2020

and (vii) severance pay equal to 18 months of his base compensation if he is terminated without cause, or if he terminates for good reason, prior to July 1, 2022.

Cuozzo retired in January 2022.

Unfunded Commitments

2 unchanged sentences

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 December 31, 2020, there were five such properties, representing approximately $ 276,000 of mortgages receivable.

At December 31, 2021, there were nine such properties, representing approximately $ 810,000 of mortgages receivable.

Related Party Transactions

1 unchanged sentence

The underwriting process on these loans adheres to prevailing Company policy.

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.

The terms of such loans, including the interest rate,

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

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 December 31, 2021, and 2020, loans to known shareholders totaled $ 16,629,844 and $ 9,356,336 , respectively.

Interest income earned on these loans totaled $ 830,925 and $ 649,159 for the years ended December 31, 2021 and 2020, respectively.

During the years ended December 31, 2020 and 2019, the wife of the Company’s chief executive officer was paid $ 108,000 and $ 100,000 , respectively, for accounting and financial reporting services provided to the Company.

During the years ended December 31, 2021 and 2020, the wife of the Company’s chief executive officer was employed by the Company as its director of finance.

She received a salary of $ 120,000 for 2021 and $ 108,000 for 2020.

During the year ended December 31, 2021, the Company hired the daughter of the Company’s chief executive officer to perform certain internal audit and compliance services.

For 2021, she received compensation of $ 10,962 .

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and mortgage loans.

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

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, investments in securities, investments in partnerships, and mortgage loans.

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

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 in Connecticut.

This concentration of credit risk may be affected by changes in economic or other conditions of the geographic area.

The Company is potentially subject to concentration of credit risk in its investment securities.

Currently, all of its investment securities, which include common stocks, preferred stock, corporate bonds and mutual funds, are held at Wells Fargo Advisors.

Wells Fargo Advisors is a member of the Securities Investor Protection Corporation (SIPC).

SIPC protects clients against the custodial risk of a member investment firm becoming insolvent by replacing missing securities and cash up to $500,000, including up to $250,000 in cash, per client in accordance with SIPC rules.

The Company makes loans that are secured by first mortgage liens on real property located primarily in Connecticut (approximately 55.10 %), Florida (approximately 18.21 )% and New York (approximately 13.14 %).

This concentration of credit risk may be affected by changes in economic or other conditions of the particular geographic area.

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

Outstanding Warrants

In 2017 the Company consummated two public offerings – the IPO in February and a follow-on offering in October-November.

In connection with the IPO, the Company issued to the underwriters warrants to purchase an aggregate of 130,000 common shares at an exercise price of $ 6.25 per common share.

These warrants are exercisable at any time, and from time to time, in whole or in part, commencing on February 9, 2018 and expire on February 9, 2022.

The fair value of these warrants, using the Black-Scholes option pricing model, on the date of issuance was $ 114,926 .

At December 31, 2020, all these warrants were outstanding .

In 2017 the Company consummated two public offerings – an initial public offering (“IPO”) in February and a follow-on offering in October-November.

In connection with the IPO, the Company issued to the underwriters warrants to purchase an aggregate of 130,000 common shares at an exercise price of $ 6.25 per common share (“IPO Warrants”).

The fair value of the IPO Warrants, using the Black-Scholes option pricing model, on the date of issuance was $ 114,926 .

At December 31, 2021, all of the IPO Warrants were outstanding .

The IPO Warrants expired on February 9, 2022.

In connection with a public offering that was consummated in October 2017, the Company issued to the underwriters warrants to purchase an aggregate of 187,500 common shares at an exercise price of $ 5.00 per share.

These warrants are exercisable at any time, and from time to time, in whole or in part, commencing on October 24, 2018 and expire on October 24, 2022 .

These warrants expire on October 24, 2022 .

The fair value of these warrants, using the Black-Scholes option pricing model, on the date of issuance was $ 131,728 .

At December 31, 2020, 171,093 of these warrants were outstanding.

At December 31, 2021 and 2020, 142,969 and 171,093 warrants were outstanding, respectively.

In October 2021, warrants to purchase 28,124 of the Company’s common shares were exercised.

The holders of those warrants elected to use the cashless exercise option available to them under the terms of the warrants.

As such, they received 5,334 common shares.

Stock-Based Compensation

On October 27, 2016, the Company adopted the 2016 Equity Compensation Plan (the “Plan”), the purpose of which is to align the interests of the Company’s officers, other employees, advisors and consultants or any subsidiary, if any, with those of the Company’s shareholders and to afford an incentive to such officers, employees, consultants and advisors to continue as such, to increase their efforts on the Company’s behalf and to promote the success of the Company’s business.

The Plan is administered by the

SACHEM CAPITAL CORP.

1 unchanged sentence

DECEMBER 31, 2021

Stock-Based Compensation

The basis of participation in the Plan is upon discretionary grants of awards by the Company’s Board of Directors.

The Plan is administered by the Compensation Committee.

Compensation Committee.

The maximum number of Common Shares reserved for the grant of awards under the Plan is 1,500,000 , subject to adjustment as provided in Section 5 of the Plan.

Since the Plan was adopted, the Company has issued 37,884 shares to its directors.

The number of securities remaining available for future issuance under the Plan as of December 31, 2021 was 1,352,435 .

During each of the years ended December 31, 2020 and 2019, the Company granted an aggregate of 7,500 restricted Common Shares under the Plan, respectively.

In 2020, the Company issued 7,500 restricted common shares to its independent directors.

One-third of such shares ( i.e ., 2,500 ) vested immediately upon issuance;

one-third vested in 2021;

and one third will vest in 2022.

No other awards were made under the Plan in 2020.

In 2021, the Company issued 15,000 restricted common shares to its independent directors.

One-third of such shares ( i.e.

, 5,000 ) vested immediately upon issuance;

one-third will vest in 2022;

and one third will vest in 2023.

Also in 2021, the Company granted 89,928 restricted common shares (having a market value of approximately $ 500,000 ) to its chief executive officer and 4,753 restricted common shares (having a market value of approximately $ 25,000 ) to its then executive vice president and chief operating officer.

None of the restricted shares granted to the Company’s officers vested in 2021.

One-third of such shares vested on January 1, 2022, and one-third will vest on each of January 1, 2023 and 2024.

However, in connection with his retirement from the Company in 2022, the Company waived the restrictions on the 4,753 common shares granted to its executive vice president and chief operating officer.

Stock based compensation for the years ended December 31, 2021 and 2020 was $ 191,428 and $ 16,429 , respectively .

Equity Offerings

On April 9, 2021, the Company filed a prospectus supplement to its Form S-3 Registration Statement covering the sale of up to $ 43,636,250 of its common shares in an “at-the market” offering.

On December 6, 2021, the Company filed a second prospectus supplement to its Form S-3 Registration Statement covering the sale of up to $ 44,925,000 of its common shares in an “at-the market” offering, which is ongoing.

During the year ended December 31, 2021, the Company sold an aggregate of 10,490,188 common shares under these prospectuses and realized net proceeds of $ 56,003,751 in connection therewith.

At December 31, 2021, no common shares were available for sale under the first prospectus supplement and $ 38,017,386 of common shares were available for future sale under the second prospectus supplement.

On June 23, 2021, the Company entered into an underwriting agreement with respect to a firm commitment underwritten public offering of up to 1,955,000 shares (including 255,000 shares to cover overallotments) of the Company’s 7.75 % Series A Cumulative Redeemable Preferred Stock, par value $ 0.001 per share (the “Series A Preferred Stock”), at a public offering price of $ 25.00 per share, equal to the liquidation preference (the “Series A Offering”).

The Series A Offering was made pursuant to a prospectus supplement, dated June 23, 2021, to the Company’s shelf registration statement on Form S-3 declared effective by the U.S.

Securities and Exchange Commission (the “SEC”) on June 17, 2021, and the base prospectus included in such registration statement.

On June 29, 2021, the Company consummated the sale of 1,700,000 shares of Series A Preferred Stock for an aggregate purchase price of $ 42.5 million.

Another 203,000 shares were sold on July 2, 2021 after the Underwriters exercised their over-allotment option.

Total gross proceeds from the offering were $ 47.6 million and net proceeds from the sale, after paying underwriting discounts and commissions and other offering expenses, were approximately $ 45.5 million.

(See Note 19.)

Partnership Investments

As of December 31, 2021, the Company had invested $ 6.7 million in three limited liability companies managed by a a commercial real estate finance company that provides debt capital solutions to local and regional commercial real estate owners in the Northeastern United States.

Each limited liability company has elected to be treated as a partnership for income tax purposes.

The Company invested $ 4 million in one partnership, for which it received a membership interest.The Company’s withdrawal from the partnership may only be granted by the manager.

For the year ended December 31, 2021, the Company received distributions of $142,000 from this partnership.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021

In December 2021, the Company invested an aggregate of $ 2.7 million in two additional investment partnerships, which are managed by an affiliate of the manager of the partnership described in the paragraph above.

In connection therewith, the Company received a 49 % membership interest in each entity.

The Company accounts for these investments at cost.

Special Purpose Acquisition Corporation

On March 24, 2021, the Company loaned $ 25,000 to its wholly-owned subsidiary, Sachem Sponsor LLC.

Sachem Sponsor LLC used those funds to purchase 1,437,500 shares of Class B common stock of Sachem Acquisition Corp., a newly organized blank check company formed under the laws of Maryland in February 2021, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

As of December 31, 2021, the Company had incurred approximately $ 306,000 of costs related to the the preparation and filing of the registration statement, including legal fees, accounting fees and filing fees as well organizational costs and an expense advance to the underwriter.

On July 14, 2021, Sachem Acquisition Corp.

filed a registration statement on Form S-1 registering the sale of 5,750,000 units at $ 10.00 per unit, or $ 57,500,000 in the aggregate.

Each unit consists of one share of Class A common stock and one -half of a warrant to purchase one share of Class A common stock.

Series A Preferred Stock

On June 25, 2021, the Company filed a Certificate of Amendment with the Department of State of the State of New York to designate 1,955,000 shares of the Company’s authorized preferred shares, par value $ 0.001 per share, as shares of Series A Preferred Stock with the powers, designations, preferences and other rights as set forth therein (the “Certificate of Amendment”).

The Certificate of Amendment provides that the Company will pay quarterly cumulative dividends on the Series A Preferred Stock, in arrears, on the 30th day of each of September, December, March and June from, and including, the date of original issuance of the Series A Preferred Stock at 7.75 % of the $ 25.00 per share liquidation preference per annum (equivalent to $ 1.9375 per annum per share).

The Series A Preferred Stock will not be redeemable before June 29, 2026, except upon the occurrence of a Change of Control (as defined in the Certificate of Amendment).

On or after June 29, 2026, the Company may, at its option, redeem any or all of the shares of the Series A Preferred Stock at $ 25.00 per share plus any accumulated and unpaid dividends to, but not including, the redemption date.

Upon the occurrence of a Change of Control, the Company may, at its option, redeem any or all of the shares of Series A Preferred Stock within 120 days after the first date on which such Change of Control occurred at $ 25.00 per share plus any accumulated and unpaid dividends to, but not including, the redemption date.

The Series A Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless repurchased or redeemed by the Company or converted into common shares in connection with a Change of Control by the holders of the Series A Preferred Stock.

Upon the occurrence of a Change of Control, each holder of Series A Preferred Stock will have the right (subject to the Company’s election to redeem the Series A Preferred Stock in whole or in part, as described above, prior to the Change of Control Conversion Date as defined in the Certificate of Amendment) to convert some or all of the Series A Preferred Stock held by such holder on the Change of Control Conversion Date into a number of the common shares determined by formula, in each case, on the terms and subject to the conditions described in the Certificate of Amendment, including provisions for the receipt, under specified circumstances, of alternative consideration as described in the Certificate of Amendment.

Except under limited circumstances, holders of the Series A Preferred Stock generally do not have any voting rights.

Subsequent Events

On January 8, 2021, the Company paid a dividend of $ 0.12 per share, or $ 2,654,976 in the aggregate, to shareholders of record as of December 31, 2020.

On January 15, 2021, the Company sold a property classified as real estate held for sale at December 31, 2020 receiving $ 360,424 in net proceeds.

The Company recognized an impairment loss of $ 42,067 with respect to this property as of December 31, 2020.

On February 19, 2021, the Company paid off the Bankwell mortgage securing the Company’s corporate office (see Note 8).

In March 2021, the Company sold an aggregate of 234,051 common shares under an at-the-market offering facility realizing gross proceeds of approximately $ 1.2 million, all of which are due to settle by March 31, 2021.

Management has evaluated subsequent events through March 30, 2021 the date on which the financial statements were available to be issued.

Based on the evaluation, no adjustments were required in the accompanying financial statements.

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

In the State of Connecticut, our primary market, on March 20, 2020, Governor Ned Lamont 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.

On November 6, 2020, Connecticut rolled back its re-opening plans to Phase 2.1, a slightly modified version of the State’s Phase 2.

The rollback was initiated due to a spike in cases statewide.

These actions directly impacted our ability to conduct our business in the usual manner.

The compliance requirements were difficult to administer, costly and in many situations not customer friendly.

If left in effect for an extended period, they could have had a material adverse impact on our operations, 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, a liquidity crisis, would impair the ability of our borrowers to refinance their loans when due.

Moreover, if our borrowers cannot sell their properties or the values of properties securing mortgage loans decline significantly, they would not be able to repay their loans when due.

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

On January 10, 2022, the Company paid a dividend of $ 0.12 per share, or $ 3,927,600 in the aggregate, to common shareholders of record as of December 31, 2021.

On January 14, the Company’s executive vice president and chief operating officer retired.

On March 14, 2022, the Company sold a property classified as real estate held for sale at December 31, 2021 receiving $ 622,737 in net proceeds.

From January 3, 2022 through March 2, 2022, the Company sold an aggregate of 2,730,725 common shares under its at-the-market offering facility realizing gross proceeds of approximately $ 16.0 million, all of which settled by March 4, 2022.

SACHEM CAPITAL CORP.

1 unchanged sentence

DECEMBER 31, 2021

To address these concerns, we imposed certain policies and guidelines designed primarily to preserve our liquidity and help our borrowers.

In the second quarter of 2020, we agreed to restructure twenty-three loans, having an aggregate balance of $ 6.5 million at June 30, 2020, pursuant to forbearance requests by borrowers under the program we adopted and implemented.

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

As of December 31, 2020, all these loans have moved off forbearance and no other loans were added to the forbearance program.

Since December 2020, the U.S.

Food and Drug Administration (“FDA”) has issued emergency use authorizations that approved the use of three different Covid-19 vaccines.

Since then, over 100 million doses of vaccines have been administered.

Although there are concerns regarding mutations of the virus that might not be susceptible to the existing vaccines, the prevailing view among medical experts is that the worst of the pandemic may be over and that states will soon be able to lift many of the restrictions that were imposed to slow the spread of the virus.

In fact, many states have already done so.

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

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

On March 9, 2022, the Company sold $ 50,000,000 aggregate principal amount of 6.00 % notes due March 30, 2027 (the “2027 Notes”) and realized net proceeds of approximately $ 48.2 million.

The 2027 Notes are unsecured, unsubordinated obligations and rank equally in right of payment with all our existing and future senior unsecured and unsubordinated indebtedness, including the Notes (see Note 9 – Notes Payable) but are effectively subordinated in right of payment to all our existing and future secured indebtedness (including indebtedness that is initially unsecured but to which we subsequently grant a security interest), and trade on the NYSE American under the ticker symbol “SCCE.” The 2027 Notes bear interest at the rate of 6.00 % per annum beginning on March 9, 2022, which will be payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year they are outstanding.

The first interest payment date will be June 30, 2022.

The unpaid principal balance of the 2027 Notes and all accrued but unpaid interest thereon is payable in full on March 30, 2027.

On February 9, 2022, all the outstanding warrants expired without being exercised.

On March 30, 2022, the Company was notified that the underwriter of the 2027 Notes offering is exercising its over-allotment option in part, and will purchase an additional $ 1,875,000 principal amount of the 2027 Notes.

Closing is scheduled for April 4, 2022.

Management has evaluated subsequent events through March 30, 2022 the date on which the financial statements were available to be issued.

Based on the evaluation, no adjustments were required in the accompanying financial statements.

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 and as of December 31, 2021, the COVID-19 pandemic is ongoing.

In response to the onset of the COVID-19 pandemic and the restrictions imposed by various states, including the States of Connecticut, Florida and New York 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 the event the Company is forced to close its physical office, it is likely that there would be some adverse impact.

For example, the underwriting process would continue to function but would take longer to complete without immediate access to background and credit profiles.

Loan committee meetings would continue to be held virtually (as they are under normal conditions) but the loan approval process may incur delay or not be as thorough and efficient as in the past.

In addition, Company personnel may not be able to meet with borrowers or potential borrowers, including physical property inspections, which could adversely impact its ability to service loans, monitor compliance and originate new loans.

Finally, the filing of loan documents with the various recording offices may be delayed.

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-K

Item 9A. Controls and Procedures