What changed in this filing

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Item 1. Financial Statements

2022-08-10 compared with 2022-05-04 · 196 added, 153 removed, 396 unchanged (47% of the section changed)

2 unchanged sentences

BALANCE SHEETS

March 31, 2022

June 30, 2022

December 31, 2021

40 unchanged sentences

Three Months Ended

Six Months Ended

Interest income from loans

1 unchanged sentence

Income from partnership investments

Loss on sale of investment securities

Gain (loss) on sale of investment securities

Origination fees, net

1 unchanged sentence

Processing fees

Rental income, net

Rental income (loss), net

Unrealized losses on investment securities

( 1,478,432 )

( 2,530,662 )

Total revenue

2 unchanged sentences

Professional fees

Compensation, fees and payroll taxes

Compensation, fees and taxes

Exchange fees

Other expenses and other taxes

Other expenses and taxes

General and administrative expenses

Loss on sale of real estate

(Gain) Loss on sale of real estate

Impairment loss

1 unchanged sentence

Preferred stock dividend

( 1,843,531 )

Net income attributable to common shareholders

7 unchanged sentences

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2022

FOR THE THREE MONTHS ENDED JUNE 30, 2022

Preferred Stock

Comprehensive

Balance, April 1, 2022

( 1,562,750 )

Issuance of Common Stock, net of expenses

Stock based compensation

Unrealized loss on marketable securities

Dividends paid on Preferred Stock

Dividends paid on Common Stock

( 4,326,262 )

Net income for the period ended June 30, 2022

Balance, June 30, 2022

( 1,583,202 )

FOR THE THREE MONTHS ENDED JUNE 30, 2021

Preferred Stock

Comprehensive

Beginning balance, April 1, 2021

Issuance of Preferred Stock, net of expenses

Issuance of Common Stock, net of expenses

Stock based compensation

Unrealized loss on marketable securities

Dividends paid

( 2,786,659 )

Net income for the period ended June 30, 2021

Balance, June 30, 2021

FOR THE SIX MONTHS ENDED JUNE 30, 2022

Preferred Stock

Comprehensive

Balance, January 1, 2022

5 unchanged sentences

Dividends paid on Preferred Stock

Net income for the period ended March 31, 2022

Balance, March 31, 2022

( 1,843,531 )

FOR THE THREE MONTHS ENDED MARCH 31, 2021

( 1,843,531 )

Dividends paid on Common Stock

( 4,326,264 )

Net income for the period ended June 30, 2022

Balance, June 30, 2022

( 1,583,202 )

FOR THE SIX MONTHS ENDED JUNE 30, 2021

Preferred Stock

2 unchanged sentences

( 2,890,969 )

Issuance of Preferred Stock, net of expenses

Issuance of Common Stock, net of expenses

1 unchanged sentence

Unrealized loss on marketable securities

Net income for the period ended March 31, 2021

Balance, March 31, 2021

Dividends paid

( 2,786,659 )

Net income for the period ended June 30, 2021

Balance, June 30, 2021

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

1 unchanged sentence

STATEMENTS OF CASH FLOW

Three Months Ended

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

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

Adjustments to reconcile net income to net

cash provided by operating activities:

Amortization of deferred financing costs and bond discount

3 unchanged sentences

Impairment loss

Loss on sale of real estate

(Gain) Loss on sale of real estate

Unrealized loss on investment securities

Loss on sale of investment securities

Debt Forgiveness

Changes in operating assets and liabilities:

1 unchanged sentence

Interest and fees receivable

( 1,620,733 )

Other receivables

Due from borrowers

( 1,102,371 )

Prepaid expenses

4 unchanged sentences

Advances from borrowers

( 3,729,817 )

Total adjustments

( 2,247,577 )

NET CASH PROVIDED BY OPERATING ACTIVITIES

8 unchanged sentences

Proceeds from sale of real estate owned

Acquisitions of and improvements to real estate owned

Acquisitions of and improvements to real estate owned, net

Purchase of property and equipment

8 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES

Net proceeds from line of credit

Net proceeds from (repayment of) line of credit

( 9,771,376 )

Net proceeds from repurchase facility

Repayment of mortgage payable

Repayment of line of credit

( 9,898,667 )

Principal payments on notes payable

Principal payments on other notes

Dividends paid on Common Stock

2 unchanged sentences

Dividends paid on Preferred Stock

( 1,843,531 )

Financings costs incurred

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

1 unchanged sentence

( 3,081,500 )

NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES

( 1,780,312 )

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

5 unchanged sentences

STATEMENTS OF CASH FLOW (Continued)

Three Months Ended

Six Months Ended

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

Interest paid

SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the period ended March 31, 2022 amounted to $ 420,547 .

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the period ended June 30, 2022 amounted to $ 1,091,348 .

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

1 unchanged sentence

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

JUNE 30, 2022

Sachem Capital Corp.

28 unchanged sentences

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

JUNE 30, 2022

Fair Value Measurements

27 unchanged sentences

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

JUNE 30, 2022

Deferred Financing Costs

4 unchanged sentences

Generally, the Company’s loans provide for interest to be paid monthly in arrears.

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

Interest income not accrued at March 31, 2022 and collected prior to the issuance of this report is included in income for the period ended March 31, 2022.

The Company, generally, does not accrue interest income on mortgages receivable that are more than 90 days past due or interest charged at default rates.

Interest income not accrued at June 30, 2022 and collected prior to the issuance of this report is included in income for the period ended June 30, 2022.

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.

9 unchanged sentences

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

The Company has determined that there are no uncertain tax positions requiring accrual or disclosure in the accompanying financial statements as of March 31, 2022 and 2021.

The Company has determined that there are no uncertain tax positions requiring accrual or disclosure in the accompanying financial statements as of June 30, 2022 and 2021.

Earnings Per Share

5 unchanged sentences

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

JUNE 30, 2022

Investment Transactions and Related Income.

6 unchanged sentences

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

Reclassifications

Certain amounts included in the June 30, 2021 financial statements have been reclassified to conform to the June 30, 2022 presentation.

Fair Value Measurement

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

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

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 March 31, 2022:

The following table sets forth by Level, within the fair value hierarchy, the Company’s assets at fair value as of June 30, 2022:

Stocks and ETFs

16 unchanged sentences

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

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

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

For the three months ended March 31 , 2022 and 2021, the aggregate amounts of loans funded by the Company were $ 88,735,230 and $ 31,661,577 , respectively, offset by principal repayments of $ 27,304,218 and $ 30,506,173 , respectively.

As of March 31, 2022, the Company’s mortgage loan portfolio includes loans ranging in size up to $ 20,753,028 with stated interest rates ranging from 5.0 % to 14.2 % , and a default interest rate for non-payment of 18 % .

The loans are initially recorded and carried thereafter, in the financial

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

As of March 31, 2022 and 2021, the Company’s mortgage loan portfolio had an impairment loss of $ 105,000 and $ 0 , respectively.

At March 31, 2022 and 2021, no single borrower or group of related borrowers had loans outstanding representing more than 10 % of the total balance of the loans outstanding.

JUNE 30, 2022

statements, at cost.

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

For the six months ended June 30 , 2022 and 2021, the aggregate amounts of loans funded by the Company were $ 191,971,926 and $ 75,190,172 , respectively, offset by principal repayments of $ 60,895,362 and $ 58,012,498 , respectively.

As of June 30, 2022, the Company’s mortgage loan portfolio includes loans ranging in size up to $ 22,122,500 with stated interest rates ranging from 5.0 % to 14.2 % , and a default interest rate for non-payment of 18 % .

As of June 30, 2022 and 2021, the Company’s mortgage loan portfolio had an impairment loss of $ 105,000 and $ 0 , respectively.

At June 30, 2022 and 2021, 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 then underwriting requirements.

The Company treats a loan extension as a new loan.

Credit risk profile based on loan activity as of March 31, 2022 and December 31, 2021:

Credit risk profile based on loan activity as of June 30, 2022 and December 31, 2021:

December 31, 2021

March 31, 2022

As of March 31, 2022, the following is the maturities of mortgages receivable as of March 31:

At March 31, 2022, of the 520 mortgage loans in the Company’s portfolio, 20 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 March 31, 2022 was approximately $ 6.3 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 March 31, 2022 approximately $ 27.2 million of mortgages receivable is past maturity and in the process of being extended.

June 30, 2022

The following is the maturities of mortgages receivable as of June 30:

At June 30, 2022 approximately $ 46.2 million of mortgages receivable were past maturity and either in foreclosure or in the process of being extended.

Of the 503 mortgage loans in the Company’s portfolio, 28 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 June 30, 2022 was approximately $ 9.1 million.

In the case of each of these loans, the Company believes the value of the collateral exceeds the outstanding balance on the loan plus accrued interest and borrower charges.

Real Estate Owned

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

As of March 31, 2022 and March 31, 2021, real estate owned totaled $ 6,312,818 and $ 8,624,044 , respectively , with no valuation allowance.

For the three months ended March 31, 2022, the Company recorded an impairment loss of $ 155,500 compared to an impairment loss of $ 25,000 in 2021.

As of March 31, 2022, real estate owned included $ 799,533 of real estate held for rental and $ 5,513,285 of real estate held for sale.As of March 31, 2021, real estate owned included $ 1,381,687 of real estate held for rental and $ 7,242,357 of real estate held for sale.

Properties Held for Sale

During the three months ended March 31, 2022, the Company sold a property held for sale and recognized an aggregate loss of $ 65,838 .

During the three months ended March 31, 2021, the Company sold a property classified as real estate held for sale, receiving approximately $ 371,000 in gross proceeds.

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

As of June 30, 2022 and June 30, 2021, real estate owned totaled $ 5,904,614 and $ 7,892,845 , respectively , with no valuation allowance.

For the six months ended June 30, 2022, the Company recorded an impairment loss of $ 490,500 compared to an impairment loss of $ 319,000 for the same period in 2021.

For the three-months ended June 30, 2022 and 2021, the impairment loss was $ 335,000 and $ 294,000 , respectively.

As of June 30, 2022, real estate owned included $ 800,949 of real estate held for rental and $ 5,103,685 of real estate held for sale.As of June 30, 2021, real estate owned included $ 986,975 of real estate held for rental and $ 6,905,870 of real estate held for sale.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

JUNE 30, 2022

Properties Held for Sale

During the three and six months ended June 30, 2022, the Company sold two properties held for sale and recognized an aggregate gain of $ 188,182 and $ 122,343 , respectively.

During the three and six months ended June 30, 2021, the Company sold a property classified as real estate held for sale, and recognized an aggregate loss of $ 14,962 and $ 17,096 , respectively.

Properties Held for Rental

As of March 31, 2022, one property, a commercial building, was held for rental.

As of June 30, 2022, one property, a commercial building, was held for rental.

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

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

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

8 unchanged sentences

Under the terms of the 401(k) Plan, the Company is obligated to contribute 3 % of a participant’s compensation to the 401(k) Plan on behalf of an employee-participant.

For the three month ended March 31, 2022 and 2021, the 401(k) Plan expense was $ 19,993 and $ 12,744 , respectively.

For the six months ended June 30, 2022 and 2021, the 401(k) Plan expense was $ 50,001 and $ 32,462 , respectively.

For the three month ended June 30, 2022 and 2021, the 401(k) Plan expense was $ 30,008 and $ 12,744 , respectively.

Line of Credit, Mortgage Payable, and Churchill Facility

1 unchanged sentence

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 ( 1.75 % at March 31, 2022).

As of March 31, 2022 the total outstanding balance was $ 23,279,364 .

The credit line bears interest at a rate equal to 1.75 % below the prime rate.

At June 30, the rate on the Wells Fargo credit line was 3.00 %.

As of June 30, 2022 the total outstanding balance on the Wells Fargo credit line was $ 23,406,655 .

Mortgage Payable

In 2021, the Company obtained a new adjustable-rate mortgage loan from New Haven Bank (“NHB”) for up to a maximum principal amount of $ 1.4 million (the “NHB Mortgage”) of which $ 750,000 is outstanding as of March 31, 2022.

The NHB 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.

1 unchanged sentence

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

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

Payments of principal under the NHB 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 NHB Mortgage is a non-recourse loan, secured by a first mortgage lien on the Company’s current corporate headquarters, located at 698 Main Street, Branford, Connecticut, and future corporate headquarters, located at 568 East Main Street, Branford, Connecticut.

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

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

The NHB Mortgage is a non-recourse loan, secured by a first mortgage lien on the Company’s current corporate headquarters, located at 698 Main Street, Branford, Connecticut, and the Company’s future corporate headquarters, located at 568 East Main Street, Branford, Connecticut.

The $ 750,000 of proceeds funded at closing were used to reimburse the Company for out-of-pocket costs relating to the acquisition of the East Main Street property.

The balance of the loan will be used to reimburse the

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022

Company for the out-of-pocket costs incurred to renovate the East Main Street property.

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

6 unchanged sentences

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 %

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

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 March 31, 2022 the effective rate charged under the Facility was 4.70 %.

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 June 30, 2022 the effective rate charged under the Facility was 5.44 %.

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

4 unchanged sentences

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

At March 31, 2022, the total amount outstanding under the Facility was $ 26,945,149 and the Company estimates that it had approximately $ 6.3 million of additional availability under the Facility.

The collateral pledged to Churchill at March 31, 2022, was 25 mortgage loans that in the aggregate had unpaid principal balance of approximately $ 57.3 million.

At June 30, 2022, the total amount outstanding under the Facility was $ 39,372,430 and the Company estimates that it had approximately $ 5.2 million of additional availability under the Facility.

The collateral pledged to Churchill at June 30, 2022, was 31 mortgage loans that in the aggregate had unpaid principal balance of approximately $ 73.9 million.

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

Financing Transactions

During the three month period ended March 31, 2022, the Company generated approximately $ 66.0 million of gross proceeds from the sale of its securities as follows:

(i) $ 50,000,000 from the sale of its 6.0 % unsecured, unsubordinated notes due March 30, 2027 (the “March 2027 Note Offering”);

(ii) $ 15,958,899 from the sale of 2,730,725 common shares in an “at-the-market” offering.

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

During the six month period ended June 30, 2022, the Company generated approximately $ 103.7 million of gross proceeds from the sale of its securities as follows:

(i) $ 51,875,000 from the sale of its 6.0 % unsecured, unsubordinated notes due March 30, 2027;

(ii) $ 30,000,000 from the sale of its 7.125 % unsecured, unsubordinated notes due June 30, 2027;

(iii) $ 21,780,906 from the sale of 3,867,157 common shares in an “at-the-market” offering.

The net proceeds from the sale of these securities, approximately $ 100.0 million, were used primarily to fund new mortgage loans, for working capital and general corporate purposes.

During the six month period ended June 30, 2021, the Company sold 4,513,731 common shares in an at-the-market offering.

Net proceeds to the Company from the sale of these shares were $ 22,878,849 .

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022

Notes Payable

At March 31, 2022, the Company had an aggregate of $ 209,050,671 of unsecured, unsubordinated notes payable outstanding, net of $ 7,226,079 of deferred financing costs (collectively, the “Notes”).

The Notes were issued in five series:

At June 30, 2022, the Company had an aggregate of $ 240,212,509 of unsecured, unsubordinated notes payable outstanding, net of $ 7,939,241 of deferred financing costs (collectively, the “Notes”).

The Notes were issued in six series:

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

2 unchanged sentences

(iv) 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”);

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

(v) Notes having an aggregate principal amount of $ 51,875,000 bearing interest at 6.0 % per annum and maturing March 30, 2027 (the “March 2027 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”, “SCCD” and “SCCE”, respectively.

(vi) Notes having an aggregate principal amount of $ 30,000,000 bearing interest at 7.125 % per annum and maturing June 30, 2027 (the “June 2027 Notes”)

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.

4 unchanged sentences

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, the December 2026 Notes will be callable at any time after December 30, 2023 and the March 2027 Notes will be callable at any time after March 9, 2024.

For the three months ended March 31, 2022 and 2021, other income consists of the following:

The September 2025 Notes will be callable at any time after September 4, 2022, the December 2026 Notes will be callable at any time after December 30, 2023, the March 2027 Notes will be callable at any time after March 9, 2024 and the June 2027 Notes will be callable at any time after May 11, 2024.

For the three and six-month periods ended June 30, 2022 and 2021, other income consists of the following:

ended June 30,

Income on borrower charges

Lender, modification and extension fees

Modification and extension fees

In-house legal fees

Miscellaneous

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022

Commitments and Contingencies

1 unchanged sentence

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:

The unamortized portion is recorded as Deferred revenue on the balance sheet.

At June 30, 2022, Deferred revenue was $ 4,627,997 , which will be recorded as income as follows:

Year ending December 31, 2022

2 unchanged sentences

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

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

Employment Agreements

1 unchanged sentence

(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;

(ii) a base salary of $260,000, which was increased in April 2018, April 2021 and April 2022 to $360,000, $500,000 and $750,000, respectively;

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

3 unchanged sentences

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

In April 2022, the Compenstion Committee increased Mr.

Villano’s base salary to $750,000.

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

(i) the agreement can be terminated by either party at any time upon delivery of written notice to the other party;

(ii) a base salary of $ 250,000 per year;

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

(iv) participation in the Company’s employee benefit plans;

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

(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 (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 and waived all future benefits under his employment agreement and the Company agreed to pay on his behalf or reimburse him for the cost of health insurance for him and his spouse through September 30, 2025 and to accelerate the vesting of 4,753 common shares previously awarded to Mr.

In April 2022, the Company granted 98,425 restricted common shares (having a market value of approximately $ 500,000 ) to Mr.

One-third of such shares will vest on January 1, 2023, and an additional one-third will vest on each of January 1, 2024 and 2025 .

Unfunded Commitments

At March 31, 2022, the Company had future funding obligations totaling $ 115,441,853 , which can be drawn by the borrowers when the conditions relating thereto have been satisfied.

At June 30, 2022, the Company had future funding obligations totaling $ 119,108,255 , which can be drawn by the borrowers when the conditions relating thereto have been satisfied.

In the normal course of its business, the Company is named as a party-defendant because it is a mortgagee having interests in real properties that are being foreclosed upon, primarily resulting from unpaid property taxes.

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

At March 31, 2022, there were nine such properties, representing approximately $ 810,000 of mortgages receivable.

At June 30, 2022, there were eight such properties, representing approximately $ 594,000 of mortgages receivable.

Related Party Transactions

2 unchanged sentences

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

As of March 31, 2022, and 2021, loans to known shareholders totaled $ 15,594,572 and $ 10,589,641 , respectively.

Interest income earned on these loans totaled $ 347,638 and $ 231,609 for the three months ended March 31, 2022 and 2021, respectively.

As of June 30, 2022, and 2021, loans to known shareholders totaled $ 18,409,255 and $ 10,153,291 , respectively.

Interest income earned on these loans for the six months ended June 30, 2022 and 2021 totaled $ 666,584 and $ 416,965 , respectively, and for the three months ended June 30, 2022 and 2021 totaled $ 312,546 and $ 246,006 , respectively.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022

The wife of the Company’s chief executive officer is employed by the Company as its director of finance.

For the three months ended March 31, 2022 and 2021, she received $ 27,500 and $ 28,206 , respectively, as compensation from the Company.

For the six-month periods ended June 30, 2022 and 2021, the wife of the Company’s chief executive officer was paid $ 60,394 and $ 56,385 , respectively, as compensation from the Company.

For the three months ended June 30, 2022 and 2021, the corresponding amounts were $ 34,247 and $ 28,206 , respectively.

She retired from the company on June 30, 2022.

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

For the three month period ended March 31, 2022, she received compensation of $ 27,500 .

For the three and six month periods ended June 30, 2022, she received compensation of $ 36,704 and $ 62,850 , respectively.

In January 2022, the Company hired the step-daughter of the Company’s chief executive officer to perform executive assistant and administrative services.

For the three and six month periods ended June 30, 2022, she received compensation of $ 19,570 and $ 27,716 , respectively.

Concentration of Credit Risk

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.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

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

10 unchanged sentences

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 .

The IPO Warrants expired unexercised on February 9, 2022.

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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 .

In Janaury 2022, warrants to purchase 93,750 of the Company’s common shares were exercised.

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As such, they received 19,658 common shares.

At March 31, 2022, 49,219 warrants were outstanding.

At June 30, 2022, 49,219 warrants were outstanding.

Stock-Based Compensation

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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.

The number of securities remaining available for future issuance under the Plan as of March 31, 2022 was 1,318,935 .

In February 2022, the Company issued an aggregate of 33,500 restricted common shares under the Plan to 20 of its employees.

One-third of such shares vested immediately upon issuance, and an additional one-third of such shares will vest on each of the first and second anniversaries of the date of grant.

Stock based compensation for the three months ended March 31, 2022 and 2021 was $ 106,845 and $ 4,107 , respectively.

As of March 31, 2022, there was unrecorded stock based compensation expense $ 732,928 .

The number of securities remaining available for future issuance under the Plan as of June 30, 2022 was 1,213,468 .

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

JUNE 30, 2022

During the six months ended June 30, 2022 and 2021, the Company granted an aggregate of 138,967 and 94,681 restricted common shares under the Plan, respectively.

With respect to the restricted common shares granted in 2022, (i) 13,514 shares vested immediately on the date of grant, an additional 13,514 shares will vest on each of the first and second anniversaries of the date of grant, and (ii) 32,808 shares will vest on January 1, 2023, 32,808 shares will vest on January 1, 2024 and 32,809 shares will vest on January 1, 2025.

With respect to the restricted common shares granted in 2021, (i) 29,976 shares vested on January 1, 2022 and an additional 29,976 shares will vest on each January 1, 2023 and January 1, 2024, and (ii) 4,753 shares became fully-vested when the Company waived the restrictions on such shares upon the retirement of its then executive vice president and chief operating officer in January 2022.

Stock based compensation for the three months ended June 30, 2022 and 2021 was $ 123,428 and $ 58,306 , respectively.

Stock based compensation for the six months ended June 30, 2022 and 2021 was $ 230,167 and $ 62,413 , respectively.

As of June 30, 2022, there was unrecorded stock based compensation expense $ 969,604 .

Equity Offerings

On December 6, 2021, the Company filed a 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 three months ended March 31, 2022, the Company sold an aggregate of 2,730,725 common shares under this prospectus and realized net proceeds of $ 15,547,815 in connection therewith.

At March 31, 2022, $ 22,118,520 of common shares were available for future sale under the ongoing “at-the market” offering.

During the six months ended June 30, 2022, the Company sold an aggregate of 3,867,157 common shares under this prospectus and realized net proceeds of $ 21,345,265 in connection therewith.

At June 30, 2022, $ 14,812,843 of common shares were available for future sale under the ongoing “at-the market” offering.

Partnership Investments

As of March 31, 2022, the Company had invested an aggregate of approximately $ 17.4 million in four limited liability companies managed by a commercial real estate finance company that provides debt capital solutions to local and regional commercial real estate owners in the Northeastern United States.

The Company’s ownership interest in the four limited liability companies and the investment partnership ranges from 7.6 % - 49 %.

As of June 30, 2022, the Company had invested an aggregate of approximately $ 19.6 million in four limited liability companies managed by a commercial real estate finance company that provides debt capital solutions to local and regional commercial real estate owners in the Northeastern United States.

The Company’s ownership interest in the four limited liability companies ranges from 7.6 % to 49 %.

The Company accounts for these investments at cost because the Company does not control or have significant influence over the investments.

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

For the three months ended March 31, 2022, the partnerships generated $ 272,489 of income for the Company.

At March 31, 2022, the Company had unfunded partnership commitments totaling approximately $ 3.7 million.

For the three and six months ended June 30, 2022, the partnerships generated $ 317,004 and $ 589,493 of income for the Company.

At June 30, 2022, the Company had unfunded partnership commitments totaling approximately $ 2.7 million.

Special Purpose Acquisition Corporation

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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 March 31, 2022, the Company had incurred approximately $ 364,000 of costs related to 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.

As of June 30, 2022, the Company had incurred approximately $ 421,000 of costs related to 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.

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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.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2022

Series A Preferred Stock

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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.

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

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.

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 April 4, 2022, the Company sold an additional $ 1,875,000 principal amount of the March 2027 Notes pursuant to a partial exercise of the underwriter’s over-allotment option in the March 2027 Note Offering and realized net proceeds of approximately $ 1.8 million, after payment of underwriting discounts and commissions and estimated offering expenses.

In April 2022, the Company granted (i) 98,425 restricted common shares (having a market value of approximately $ 500,000 ) to its chief executive officer.

One-third of such shares will vest on January 1, 2023, and an additional one-third will vest on each of January 1, 2024 and 2025 and (ii) 7,042 restricted common shares (having a market value of approximately $ 35,000 ) to its vice president of finance and operations.

One-third of such shares vested on the date of grant, and an additional one-third will vest on each of April 7, 2023 and 2024.

In addition, the Company increased the annual base salary of its chief executive officer to $ 750,000 .

On April 1, 2022, the board of directors declared a dividend of $ 0.12 per common share payable on April 18, 2022 to shareholders of record as of April 11, 2022.

From April 1, 2022 through May 3, 2022, the Company sold an aggregate of 663,765 common shares under its at-the-market offering facility realizing gross proceeds of approximately $ 3.4 million.

On April 6, 2022, the Company received a term sheet for another note offering up to a maximum of $ 75 million aggregate principal amount.

The Company expects that the offering will be made in May 2022.

Management has evaluated subsequent events through May 3, 2022 the date on which the financial statements were available to be issued.

From July 1, 2022 through August 8, 2022, the Company sold an aggregate of 2,265,841 common shares under its at-the-market offering facility realizing gross proceeds of approximately $ 10.8 million.

On July 8, 2022, the board of directors declared a dividend of $ 0.14 per common share payable on July 28, 2022 to shareholders of record as of July 21, 2022.

On July 19, 2022, after shareholders approved an amendment to the Company’s charter at its 2022 Annual Meeting of Shareholders, the Company filed a Certificate of Amendment of the Certificate of Incorporation to increase the number of authorized common shares available for issuance from 100,000,000 to 200,000,000 .

On July 19, 2022, the Company issued an aggregate of 15,000 restricted common shares to its three independent directors (i.e., 5,000 shares each), of which 3,750 shares vested immediately upon issuance and 3,750 shares will vest on each of July 19, 2023, 2024 and 2025.

On July 26, 2022, the Company entered into an agreement with John E.

Warch pursuant to which it will employ Mr.

Warch as its Chief Financial Officer and Executive Vice President.

Warch’s employment term commenced August 1, 2022 and will continue until terminated by either party.

His annual base compensation is $ 325,000 .

In connection with this hire, John L.

Villano resigned as the Company’s Chief Financial Officer but will continue to serve as its Chief Executive Office and President.

Management has evaluated subsequent events through August 9, 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 March 31, 2022, 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-Q

Item 1. Financial Statements