What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-14 compared with 2023-05-15 · 335 added, 221 removed, 562 unchanged (50% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

March 31, 2023

June 30, 2023

December 31, 2022

2 unchanged sentences

Mortgages receivable, net

Interest and fees receivable, net

Due from borrowers, net

Interest and fees receivable

Due from borrowers

Real estate owned

2 unchanged sentences

Liabilities and Shareholders’ Equity

Notes payable (net of deferred financing costs of $ 7,793,640 and $ 8,352,597 )

Unsecured notes payable (net of deferred financing costs of $ 7,223,456 and $ 8,352,597 )

Secured note payable

Repurchase facility

Mortgage payable

Line of credit

Lines of credit

Accrued dividends payable

8 unchanged sentences

2,903,000 shares designated as Series A Preferred Stock;

1,909,187 and 1,903,000 shares of Series A Preferred Stock issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Common shares - $ 0.001 par value;

1,928,000 and 1,903,000 shares of Series A Preferred Stock issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Common stock - $ .001 par value;

200,000,000 shares authorized;

43,756,724 and 41,093,536 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

43,822,050 and 41,093,536 issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Paid-in capital

9 unchanged sentences

Three Months Ended

Six Months Ended

Interest income from loans

5 unchanged sentences

( 1,478,432 )

( 2,530,662 )

Total revenue

5 unchanged sentences

(Gain) Loss on sale of real estate

Allowance for credit losses

Provision for Credit Losses

Impairment loss

Total operating costs and expenses

Series A Preferred Stock dividend

Preferred stock dividend

( 1,849,525 )

( 1,843,531 )

Net income attributable to common shareholders

Other comprehensive loss

Unrealized gain on investment securities

Unrealized gain (loss) on investment securities

Comprehensive income

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2023

FOR THE THREE MONTHS ENDED JUNE 30, 2023

Preferred Stock

Comprehensive

Balance, April 1, 2023

( 6,289,257 )

Issuance of Preferred Stock, net of expenses

Issuance of Common Stock, net of expenses

Stock Buyback

Stock based compensation

Unrealized gain on investments

Dividends paid on Series A Preferred Stock

Dividends Paid on Common Stock

( 5,706,096 )

Net income for the period ended June 30, 2023

Balance, June 30, 2023

( 7,222,078 )

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 SIX MONTHS ENDED JUNE 30, 2023

Preferred Stock

Comprehensive

Balance, January 1, 2023

( 7,995,143 )

Cumulative effect of change in

accounting principle - Adoption of ASU 2016-13 (Note 2)

Adoption of ASU 2016-13

( 2,489,574 )

Issuance of Series A Preferred Stock, net of expenses

Issuance of common shares, net of expenses

Issuance of Preferred Stock, net of expenses

Issuance of Common Stock, net of expenses

Stock Buyback

Stock based compensation

1 unchanged sentence

Dividends paid on Series A Preferred Stock

Net income for the period ended March 31, 2023

Balance, March 31, 2023

( 1,849,525 )

FOR THE THREE MONTHS ENDED MARCH 31, 2022

( 1,849,525 )

Dividends paid on Common Stock

( 5,706,095 )

Net income for the period ended June 30, 2023

Balance, June 30, 2023

( 7,222,078 )

FOR THE SIX MONTHS ENDED JUNE 30, 2022

Preferred Stock

2 unchanged sentences

( 4,992,450 )

Issuance of common shares, net of expenses

Issuance of Common Stock, net of expenses

Exercise of warrants

1 unchanged sentence

Unrealized gain on marketable securities

Dividends paid on Series A Preferred Stock

Net income for the period ended March 31, 2022

Balance, March 31, 2022

Dividends paid on Preferred Stock

( 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 )

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOW

Three Months Ended

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

3 unchanged sentences

Stock based compensation

Allowance for credit losses

Provision for credit losses

Impairment loss

1 unchanged sentence

Unrealized (gain) loss on investment securities

(Gain) loss on sale of investment securities

Gain on sale of investment securities

Changes in operating assets and liabilities:

1 unchanged sentence

Interest and fees receivable

( 1,455,807 )

( 1,620,733 )

Other assets - miscellaneous

Due from borrowers

( 1,521,226 )

( 1,102,371 )

Other assets - prepaid expenses

(Decrease) increase in:

Accounts payable and accrued liabilities - accrued interest

Accounts payable and accrued liabilities - accounts payable and accrued expenses

Accrued Interest

Accounts payable and accrued liabilities

Deferred revenue

Advances from borrowers

( 3,729,817 )

Total adjustments

( 2,247,577 )

NET CASH PROVIDED BY OPERATING ACTIVITIES

14 unchanged sentences

Principal collections on mortgages receivable

Other assets – pre-offering costs

NET CASH USED FOR INVESTING ACTIVITIES

10 unchanged sentences

( 8,253,864 )

Dividends paid on Series A Preferred Stock

Dividends paid on Preferred Stock

( 1,849,525 )

( 1,843,531 )

Proceeds from issuance of common shares, net of expenses

Common Stock buyback

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

Gross proceeds from issuance of fixed rate notes

Gross proceeds from issuance of secured note

Financings costs incurred in connection with fixed rate notes

1 unchanged sentence

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

NET DECREASE IN CASH AND CASH EQUIVALENTS

( 8,584,113 )

( 12,808,403 )

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOW (Continued)

Three Months Ended

Six Months Ended

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

Interest paid

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the three months ended March 31, 2023 amounted to $ 1,186,663 .

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the six months ended June 30, 2023 and 2022 amounted to $ 1,186,663 and $ 1,091,348 , respectively.

Increase in mortgage receivable from sale of real estate owned during the six months ended June 30, 2023 amounted to $ 1,307,112 .

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

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

JUNE 30, 2023

Sachem Capital Corp.

1 unchanged sentence

The Company offers short term ( i.e.

, 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.

2 unchanged sentences

The Company’s primary underwriting criteria is a conservative loan to value ratio.

In addition, the Company may make opportunistic real estate purchases apart from its lending activities or enter into other transactions with third parties involving real estate financing transactions.

In addition, the Company may participate in real estate loans made by third parties or invest in third parties that make real estate loans.

Significant Accounting Policies

4 unchanged sentences

The accompanying unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2022 and the notes thereto included in the Company’s Annual Report on Form 10-K.

Results of operations for the three months ended March 31, 2023, are not necessarily indicative of the operating results to be attained in the entire fiscal year, or for any subsequent period.

Results of operations for the three months and six month periods ended June 30, 2023, are not necessarily indicative of the operating results to be attained in the entire fiscal year, or for any subsequent period.

Use of Estimates

10 unchanged sentences

The fair values of these investments approximate their carrying values.

Investment transactions are accounted for on a trade-date basis.

Dividends are recorded on the ex-dividend date and interest is recognized on the accrual basis.

Debt investments are classified as available-for-sale and realized gains and losses are recorded using the specific identification method.

2 unchanged sentences

If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, credit quality of debt instrument issuers, and the extent to which the fair value is less than cost.

If qualitative factors indicate an available for sale debt security may be credit impaired the loss is measured as the excess of carrying value over the present value of expected cash flows, limited to the excess of carrying value over fair value.

To determine credit losses, the Company may employ a systematic

If qualitative factors indicate an available-for-sale debt security may be credit impaired the loss is measured as the excess of carrying value over the present value of expected cash flows,

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

methodology that considers available quantitative and qualitative evidence.

In addition, the Company considers specific adverse conditions related to the financial health of, and business outlook for, the investee.

JUNE 30, 2023

limited to the excess of carrying value over fair value.

To determine credit losses, the Company may employ a systematic methodology that considers available quantitative and qualitative evidence.

In addition, the Company considers specific adverse conditions related to the financial health of, and business outlook for, the person or entity for which it is providing credit.

If the Company has plans to sell the security or it is more likely than not that the Company will be required to sell the security before recovery, then a decline in fair value below cost is recorded as an impairment charge in net income and a new cost basis in the investment is established.

If market, industry, and/or investee conditions deteriorate, the Company may incur future impairments.

If market, industry, and/or there is a deterioration in the financial health, business outlook or other conditions of the person or entity to which it provided credit, the Company may incur future impairments.

Equity investments with readily determinable fair values are measured at fair value.

Equity investments without readily determinable fair values are measured using the equity method or measured at cost with adjustments for observable changes in price or impairments (referred to as the measurement alternative).

The Company performs a qualitative assessment on a periodic basis and recognize an impairment if there are sufficient indicators that the fair value of the investment is less than carrying value.

The Company performs a qualitative assessment on a periodic basis and recognizes an impairment if there are sufficient indicators that the fair value of the investment is less than carrying value.

Changes in value are recorded in net income.

6 unchanged sentences

In addition, interest and fees receivable and amounts included in due from borrowers, other than reimbursements, which include origination, modification and other fees receivable are also analyzed for credit losses in accordance with the CECL standard, as they represent a financial asset that is subject to credit risk.

As allowed under the CECL standard the Company uses, as a practical expedient, the fair value of the collateral at the reporting date when recording the net carrying amount of the loan and determining the allowance for credit losses for loans in pending/pre-foreclosure status, as defined.

As allowed under the CECL standard used by the Company , as a practical expedient, the fair value of the collateral at the reporting date is compared to the net carrying amount of the loan when determining the allowance for credit losses for loans in pending/pre-foreclosure status, as defined.

Fair value of collateral is reduced by estimated cost to sell if the collateral is expected to be sold.

The amount of loans in pending/pre-foreclosure as of March 31, 2023 and December 31, 2022 was approximately $ 40.6 million and $ 24.0 million, respectively.

As of March 31, 2023 and December 31, 2022, there were no such loans in pending/pre-foreclosure that required an allowance for credit loss.

The amount of loans in pending/pre-foreclosure as of June 30, 2023 and December 31, 2022 was approximately $ 50.0 million and $ 24.0 million, respectively.

As of June 30, 2023 and December 31, 2022, none of those loans required an allowance for credit loss.

The CECL standard requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the economic environment.

4 unchanged sentences

Management estimates the allowance for credit losses using relevant information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts.

The allowance for credit losses is maintained at a level sufficient to provide for expected credit losses over the life of the loans based on evaluating historical credit loss experience and making adjustments to historical loss information for differences in the specific risk characteristics in the current loan portfolio.

The allowance for credit losses is maintained at a level sufficient to provide for expected credit losses over the life of the loans based on evaluating historical credit loss experience and to make adjustments to historical loss information for differences in the specific risk characteristics in the current loan portfolio.

The CECL allowance related to the principal outstanding is presented within “Mortgages receivable, net” and for unfunded commitments is within accounts payable and accrued liabilities in the Company’s consolidated balance sheets.

The CECL allowance related to the late payment fees are presented in “Interest and fees receivable” and “Due from borrowers” in the Company’s consolidated balance sheets.

As of March 31, 2023 and January 1, 2023, the CECL allowance for mortgages receivable was approximately $ 2.0 million and approximately $ 1.9 million, respectively, an increase of approximately $ 55,000 .

As of June 30, 2023 and January 1, 2023, the CECL allowance for mortgages receivable was approximately $ 2.2 million and approximately $ 1.9 million, respectively, an increase of approximately $ 0.3 million.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

As of March 31, 2023 and January 1, 2023, the CECL allowance for interest and fees receivable was approximately $ 30,100 and approximately $ 26,100 , respectively, an increase of $ 4,000 .

As of March 31, 2023 and January 1, 2023, the CECL allowance for due from borrower was approximately $ 22,300 and $ 19,900 , respectively, an increase of approximately $ 2,400 .

As of March 31, 2023 and January 1, 2023, the CECL allowance for unfunded commitments was $ 562,000 , and approximately $ 522,000 , respectively, an increase of approximately $ 40,000 .

JUNE 30, 2023

As of June 30, 2023 and January 1, 2023, the CECL allowance for interest and fees receivable was approximately $ 29,100 and approximately $ 26,100 , respectively, an increase of approximately $ 3,000 .

As of June 30, 2023 and January 1, 2023, the CECL allowance for amounts due from borrowers was approximately $ 32,300 and $ 19,900 , respectively, an increase of approximately $ 12,400 .

As of June 30, 2023 and January 1, 2023, the CECL allowance for unfunded commitments was approximately $ 531,500 and $ 522,000 , respectively, an increase of approximately $ 9,500 .

Fair Value Measurements

15 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.

As of June 30, 2023 this property was under contract to be sold and, as such, the company classifies it as available-for-sale.

The carrying value of the land and building is $ 1,048,380 , which is net of an impairment loss of $ 200,000 that the Company recognized during the quarter ended June 30, 2023.

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

Renovation of the building was completed in the first quarter of 2023 and the Company relocated its operations to the new building in March 2023.

The building is being depreciated using the straight-line method over its estimated useful life of 40 years .

The new building was placed in service during the three months ended March of 2023.

The new building was placed in service during the six months ended June 30, 2023.

Real Estate Owned

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

JUNE 30, 2023

Consolidations

6 unchanged sentences

Goodwill is not amortized, but rather tested for impairment annually or more frequently if events or changes in circumstances indicate potential impairment.

Goodwill at March 31, 2023 represents the excess of the consideration paid over the fair value of net assets acquired from Urbane New Haven, LLC in October 2022.

Goodwill at June 30, 2023 represents the excess of the consideration paid over the fair value of net assets acquired from Urbane New Haven, LLC in October 2022.

In testing goodwill for impairment, the Company follows FASB ASC 350, “Intangibles—Goodwill and Other”, which permits a qualitative assessment of whether it is more likely than not that the fair value of a reporting unit is less than its carrying value including goodwill.

2 unchanged sentences

Deferred Financing Costs

Costs incurred in connection with the Company’s revolving credit facilities, described in Note 7-Line of Credit, Mortgage Payable, Churchill Facility, and Needham 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.

Costs incurred in connection with the Company’s revolving credit facilities, described in Note 7 – Lines of Credit, Mortgage Payable, and Churchill Facility and Note 9 – Secured Note Payable, 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 8 – Unsecured Notes Payable, are being amortized over the term of the respective Notes.

Revenue Recognition

1 unchanged sentence

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 or interest charged at default rates.

However, interest income not accrued at March 31, 2023 but collected prior to the issuance of this report is included in income for the period ended March 31, 2023.

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

However, interest income not accrued at June 30, 2023 but collected prior to the issuance of this report is included in income for the period ended June 30, 2023.

Origination and modification fee revenue, generally 1 % – 3 % of either the original loan principal or the modified loan balance, 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 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.

The Company’s qualification as a REIT

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

depends on its ability to meet on a continuing basis, through actual investment and operating results, various complex requirements under the Internal Revenue Code of 1986, as amended (the “Code”), relating to, among other things, the sources of its income, the composition and values of its assets, its compliance with the distribution requirements applicable to REITs and the diversity of ownership of its outstanding capital stock.

JUNE 30, 2023

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.

The Company’s qualification as a REIT depends on its ability to meet on a continuing basis, through actual investment and operating results, various complex requirements under the Internal Revenue Code of 1986, as amended (the “Code”), relating to, among other things, the sources of its income, the composition and values of its assets, its compliance with the distribution requirements applicable to REITs and the diversity of ownership of its outstanding capital stock.

So long as it qualifies as a REIT, the Company, generally, will not be subject to U.S.

6 unchanged sentences

The Company does not expect to incur any corporate federal income tax liability outside of the TRSs, as it believes it has maintained its qualification as a REIT.

During the three months ended March 31, 2023 and 2022, the Company’s TRSs recognized no provisions for federal income tax or state, local and franchise taxes on the Company’s consolidated statements of operations.

During the three months ended March 31, 2023 and 2022, there were no recognized provisions for federal income tax nor state, local and franchise tax.

During the three and six months ended June 30, 2023 and 2022, the Company’s TRSs, nor has the Company, recognized any provisions for federal income tax or state, local and franchise taxes on the Company’s consolidated statements of operations.

The income tax provision for the Company differs from the amount computed from applying the statutory federal income tax rate to income before income taxes due to non-taxable REIT income and other permanent differences including the non-deductibility of acquisition costs of business combinations for federal income tax reporting.

2 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 consolidated financial statements as of March 31, 2023 and 2022.

The Company has determined that there are no uncertain tax positions requiring accrual or disclosure in the accompanying consolidated financial statements as of June 30, 2023 and 2022.

Earnings Per Share

1 unchanged sentence

” 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.

The computation of diluted earnings per share is identical to the computation of 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.

The numerator in calculating both basic and diluted earnings per common share for each period is the reported net income.

5 unchanged sentences

At transition on January 1, 2023, the cumulative effect of adopting this ASU resulted in a decrease in retained earnings of $ 2,489,574 and an increase in the allowance for credit losses.

The increase in the allowance is driven by the fact that the allowance under CECL covers expected credit losses over the full expected life of the loan portfolios and also takes into account forecasts of expected future economic conditions.

The increase in the allowance is driven by the fact that the allowance under CECL covers expected credit losses over the full expected life of the loan portfolios and takes into account forecasts of expected future economic conditions.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

JUNE 30, 2023

In March 2022, the FASB issued ASU 2022-02, “Financial Instruments-Credit Losses” (Topic 326):

8 unchanged sentences

Reclassifications

Certain amounts included in the March 31, 2022 and December 31, 2022 consolidated financial statements have been reclassified to conform to the March 31, 2023 presentation.

Certain amounts included in the June 30, 2022 and December 31, 2022 consolidated financial statements have been reclassified to conform to the June 30, 2023 presentation.

Fair Value Measurement

1 unchanged sentence

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, 2023:

The following table sets forth by Level, within the fair value hierarchy, the Company’s assets at fair value as of June 30, 2023:

Stocks and ETFs

Debt securities

Convertible preferred equity security

Total liquid investments

Real estate owned

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

The following table sets forth by Level, within the fair value hierarchy, the Company’s assets at fair value as of December 31, 2022:

3 unchanged sentences

Real estate owned

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

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

7 unchanged sentences

The mutual funds held by the Company are deemed to be actively traded.

Debt securities :

Debt securities (level 2) :

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

Real estate owned :

Convertible preferred equity security (level 3):

The Company estimates fair values of convertible preferred equity securities using market information such as recent sales of such securities.

Real estate owned (level 3) :

The Company estimates fair values of real estate owned using market information such as recent sales contracts, appraisals, recent sales, assessed values or discounted cash value models.

4 unchanged sentences

Pursuant to ASC 326-30-50-4 and 50-5 the Company is required to disclose investment securities that have been in a continuous unrealized loss position for 12 months or more as of the balance sheet date.

As of March 31, 2023 and December 31, 2022, the Company had a continuous unrealized losses over 12 months in Available-For-Sale debt securities of approximately $ 517,000 and approximately $ 531,000 , respectively.

The Company reviewed a number of factors to assess the credit quality of the debt instruments including, but not limited to, current cash position, operating cash flow, and corporate earnings as of the most recently filed financial statements.

As such, as of March 31, 2023, the Company has concluded no such allowance for credit losses in regards to Available-For-Sale debt securities was deemed necessary.

The following table presents the impact of the Company’s Available-For-Sale (AFS) securities - debt securities on its Other Comprehensive Income (OCI) for the three months ended March 31, 2023:

As of June 30, 2023 and December 31, 2022, the Company had a continuous unrealized losses over 12 months in Available-For-Sale debt securities of approximately $ 645,000 and approximately $ 531,000 , respectively.

The Company reviewed several factors to assess the credit quality of the debt instruments including, but not limited to, current cash position, operating cash flow, and corporate earnings as of the most recently filed financial statements.

As such, as of June 30, 2023, the Company has concluded no such allowance for credit losses regarding Available-For-Sale debt securities was deemed necessary.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

The following table presents the impact of the Company’s Available-For-Sale (AFS) securities - debt securities on its Other Comprehensive Income (OCI) for the three and six months ended June 30, 2023:

Three Months Ended

Six months Ended

OCI from AFS securities:

Unrealized (loss) on AFS-debt securities at beginning of period

Unrealized gain on securities available-for-sale – debt securities

Change in OCI from AFS securities – debt securities

Unrealized (losses) on AFS securities at beginning of period

Unrealized gain (losses) on securities available-for-sale – debt securities

Change in OCI from AFS securities

Balance at end of period

The following table presents the Company’s Level 3 Investments of Real Estate Owned as of June 30, 2023 and December 31, 2022:

Six Months Ended

Twelve Months Ended

June 30, 2023

December, 31, 2022

Real Estate Owned at the beginning of period

Principal basis transferred to Real Estate Owned

Charges and/or improvements

Proceeds from sale of Real Estate Owned

( 1,498,386 )

( 2,090,880 )

Gain on sale of Real Estate Owned

Balance at end of period

The following table presents the Company’s Level 3 Investments of Convertible preferred equity securities as of June 30, 2023 and December 31, 2022:

Six Months Ended

Twelve Months Ended

June 30, 2023

December, 31, 2022

Convertible preferred equity securities at the beginning of period

Investment in

Balance at end of period

Mortgages Receivable

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

The Company’s lending standards typically require that the original principal amount of all mortgage receivable notes be secured by first mortgage liens on one or more properties owned by the borrower or related parties and that the maximum LTV be no greater than 70% of the appraised value of the underlying collateral, as determined by an independent appraiser at the time of the loan origination.

2 unchanged sentences

However, the Company makes exceptions to this guideline if the facts and circumstances support the incremental risk.

These factors include the additional collateral provided by the borrower, the

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

credit profile of the borrower, the Company’s previous relationship, if any, with the borrower, the nature of the property, the geographic market in which the property is located and any other information the Company deems appropriate.

These factors include the additional collateral provided by the borrower, the credit profile of the borrower, the Company’s previous relationship, if any, with the borrower, the nature of the property, the geographic market in which the property is located and any other information the Company deems appropriate.

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

1 unchanged sentence

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.

Allowance for credit losses are charged to income in amounts sufficient to maintain an allowance for credit losses inherent in the loans which are established systematically by management as of the reporting date.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

Allowance for credit losses is charged to income in amounts sufficient to maintain an allowance for credit losses inherent in the loans which are established systematically by management as of the reporting date.

Management’s estimate of expected credit losses is based on an evaluation of relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the future collectability of the reported amounts.

4 unchanged sentences

While management utilizes the best information available to make its evaluations, changes in macroeconomic conditions, interest rate environments, or both, may significantly impact the assumptions and inputs used in determining the allowance for credit losses.

The Company’s charge-off policy is based on a loan by loan review of delinquent loans.

The Company has an accounting policy to not place loans on nonaccrual status unless they are greater than 90 days delinquent.

Accrual of interest income is generally resumed when delinquent contractual principal and interest is paid or when a portion of the delinquent contractualy payments are made and the ongoing required contractual payments have been made for an appropriate period.

As of March 31, 2023 and December 31, 2022, the Company had an outstanding principal balance of $ 97,106,984 and $ 55,691,857 of loans on nonaccrual status, respectively.

The Company’s charge-off policy is determined by a review of each delinquent loans.

The Company has an accounting policy to not place loans on nonaccrual status unless they are more than 90 days delinquent.

Accrual of interest income is generally resumed when the delinquent contractual principal and interest is paid in full or when a portion of the delinquent contractually payments are made and the ongoing required contractual payments have been made for an appropriate period.

As of June 30, 2023 and December 31, 2022, loans on nonaccrual status had an outstanding principal balance of $ 96,371,599 and $ 55,691,857 , respectively.

The nonaccrual loans are inclusive of loans pending foreclosure.

For the three months ended March 31, 2023, $ 649,347 of interest income was recorded on nonaccrual loans.

For the three months ended March 31, 2023 and 2022, the aggregate amounts of loans funded by the Company were $ 58,883,818 and $ 88,735,230 , respectively, offset by principal repayments of $ 39,884,300 and $ 27,106,768 , respectively.

As of March 31, 2023, the Company’s mortgage loan portfolio includes loans ranging in size up to $ 29,919,097 with stated interest rates ranging from 5.0 % to 14.2 % .

The default interest rate is generally 18 %, but could be more or less depending on state usury laws.

At March 31, 2023, and December 31, 2022, no single borrower or group of related borrowers had loans outstanding representing more than 10 % of the total balance of the loans outstanding.

For the three and six months ended June 30, 2023, $ 174,397 and $ 222,506 of interest income, respectively, was recorded on nonaccrual loans.

For the six months ended June 30, 2023 and 2022, the aggregate amounts of loans funded by the Company were $ 114,468,454 and $ 191,971,926 , respectively, offset by principal repayments of $ 66,355,505 and $ 60,895,362 , respectively.

As of June 30, 2023, the Company’s mortgage loan portfolio includes loans ranging in size up to $ 34.0 million with stated interest rates ranging from 5.0 % to 14.2 % .

The default interest rate is generally 18 % but could be more or less depending on state usury laws and other considerations deemed relevant by the Company.

At June 30, 2023, and December 31, 2022, 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.

8 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

JUNE 30, 2023

The following table summarizes the activity in the CECL Allowance from adoption on January 1, 2023:

5 unchanged sentences

(dollars in thousands)

March 31, 2023

June 30, 2023

Geographical Location

2 unchanged sentences

Presented below is the Company’s loan portfolio by geographical location:

March 31, 2023

June 30, 2023

December 31, 2022

5 unchanged sentences

Geographical Location

Less, CECL Allowance

Less, CECL and Direct Allowances

Carrying value, net

Presented below are the carrying values by Property Type:

March 31, 2023

June 30, 2023

December 31, 2022

3 unchanged sentences

Property Type

Less, CECL Allowance

Less, CECL and Direct Allowances

Carrying value, net

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

JUNE 30, 2023

The following tables allocate the carrying value of the Company’s loan portfolio based on internal credit quality indicators in assessing estimated credit losses and vintage of origination at the dates indicated:

March 31, 2023

June 30, 2023

Year Originated (1)

FICO Score (2) (dollars in thousands)

Less, CECL Allowance

Less, CECL and Direct Allowances

Carrying value, net

4 unchanged sentences

FICO Score (2) (dollars in thousands)

Less, CECL Allowance

Less, CECL and Direct Allowances

Carrying value, net

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

The following table sets forth the maturities of mortgages receivable as of March 31, 2023 and December 31, 2022:

As of March 31, 2023

JUNE 30, 2023

The following table sets forth the maturities of mortgages receivable as of June 30, 2023 and December 31, 2022:

As of June 30, 2023

As of December 31, 2022

2023 and prior

Less, CECL Allowance

At March 31, 2023, of the 406 mortgage loans included in the Company’s loan portfolio, 128 , or approximately 31.5 %, representing approximately $ 81.4 million of mortgage receivables have matured but have not been repaid in full or extended.

The 128 aforementioned loans are inclusive of loans in pending/pre-foreclosure status.

These loans are in the process of modification and will be extended if the borrower can satisfy the Company’s underwriting criteria, including the proper loan-to-value ratio, at the time of renewal.

The Company treats renewals and extensions of existing loans as new loans.

At March 31, 2023, of the 406 mortgage loans in the Company’s loan portfolio, 52 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, 2023 was approximately $ 40.6 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, 2022, of the 444 mortgage loans included in the Company’s loan portfolio, 105 , or approximately 23.6 %, representing approximately $ 61.7 million of mortgage receivables had matured but have not been repaid in full or extended.

The Company treats renewals and extensions of existing loans as new loans.

At December 31, 2022, of the 444 mortgage loans in the Company’s loan portfolio, 40 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, 2022 was approximately $ 24.0 million.

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

Less, CECL and Direct Allowances

At June 30, 2023, of the 360 mortgage loans included in the Company’s loan portfolio, 126 , or approximately 19.1 %, representing approximately $ 97.1 million of mortgage receivables, have matured but have not been repaid in full or extended.

Of these 126 loans, 51 are in foreclosure status, of which have an aggregate principal balance of approximately $ 47.2 million.

At December 31, 2022, of the 444 mortgage loans included in the Company’s loan portfolio, 105 loans, or 13.4 %, representing approximately $ 61.6 million of mortgage receivables had matured but have not been repaid in full or extended.

Of these 105 loans, 40 were in foreclosure status, of which had an aggregate principal balance of approximately $ 22.5 million.

All loans in maturity default and not in foreclosure are subject to modification and will be extended if the borrower can satisfy the Company’s underwriting criteria, including the proper loan-to-value ratio, at the time of renewal.

In the case of each of the loans in foreclosure, the Company believed the value of the collateral exceeded the outstanding balance on the loan.

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, 2023 and March 31, 2022, real estate owned totaled $ 6,138,912 and $ 6,312,818 , respectively, with no valuation allowance.

During the three months ended March 31, 2023, the Company recorded an impairment loss of $- 0 - compared to an impairment loss of $ 155,500 during the three months ended March 31, 2022.

As of March 31, 2023, real estate owned included $ 813,090 of real estate held for rental and $ 5,325,822 of real estate held for sale.

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 June 30, 2023 and June 30, 2022, the fair value of real estate owned totaled $ 4,998,934 and $ 5,904,614 , respectively, with no valuation allowance.

For the three months ended June 30, 2023 and 2022, the Company recorded an impairment loss of $ 212,500 and $ 230,000 , respectively.

For the six months ended June 30, 2023 and 2022, the Company recorded an impairment loss of $ 212,500 and $ 490,500 , respectively.

As of June 30, 2023, real estate owned included $ 817,609 of real estate held for rental and $ 4,181,325 of real estate held for sale.

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.

Properties Held for Sale

During the three months ended March 31, 2023, the Company sold two properties held for sale and recognized an aggregate gain of $ 148,100 .

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

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

During the three months ended June 30, 2023, the Company sold three ( 3 ) properties held for sale and recognized an aggregate loss of $ 21,239 .

During the six months ended June 30, 2023, the Company sold five ( 5 ) properties held for sale and recognized an aggregate gain of $ 126,861 .

During the three months ended June 30, 2022, the Company sold two ( 2 ) properties held for sale and recognized an aggregate gain of $ 188,182 .

During the six months ended June 30, 2022, the Company sold three ( 3 ) properties held for sale and recognized an aggregate gain of $ 122,343 .

Properties Held for Rental

As of March 31, 2023, one property, a commercial building, was held for rental.

As of June 30, 2023, one property, a commercial building, was held for rental.

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

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

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

3 unchanged sentences

Year ending December 31, 2026

As of March 31, 2023 and December 31, 2022, other assets consists of the following:

March 31, 2023

As of June 30, 2023 and December 31, 2022, other assets consists of the following:

June 30, 2023

December 31, 2022

3 unchanged sentences

Deferred financing costs, net

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Line of Credit, Mortgage Payable, Churchill Facility, Credit Facility

Wells Fargo Margin Line of Credit

Lines of Credit, Mortgage Payable, and Churchill Facility

Line of Credit – Wells Fargo

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 ( 6.25 % at March 31, 2023, 6.50 % as of May 11, 2023).

As of March 31, 2023 the total outstanding balance on the Wells Fargo credit line was $ 13,673,930 .

The credit line bears interest at a rate equal to 1.75 % below the prime rate ( 6.5 % at June 30, 2023, 6.75 % as of July 27, 2023).

As of June 30, 2023 the total outstanding balance on the Wells Fargo credit line was $ 25.9 million.

Mortgage Payable

14 unchanged sentences

The new loan is a non-recourse obligation, secured primarily by a first mortgage lien on the properties located 698 Main Street, Branford, Connecticut and 568 East Main Street, Branford, Connecticut, which are owned by the Company.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

Churchill MRA Funding I LLC Repurchase Financing Facility

7 unchanged sentences

On November 18, 2022, the Facility was amended to replace the 90-day LIBOR with the 90-day SOFR as the new benchmark rate.

As of March 31, 2023 the effective rate charged under the Facility was 9.09 %.

As of June 30, 2023 the effective rate charged under the Facility was 9.31 %.

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

3 unchanged sentences

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

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

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, 2023, the total amount outstanding under the Facility was $ 54,055,815 .

The collateral pledged to Churchill at March 31, 2023 was 31 mortgage loans that in the aggregate had unpaid principal balance of approximately $ 87.9 million.

At June 30, 2023, the total amount outstanding under the Facility was $ 50.5 million.

The collateral pledged to Churchill at June 30, 2023 was 26 mortgage loans that in the aggregate had unpaid principal balance of approximately $ 82.9 million.

Each of the New NHB Mortgage and the Churchill Facility contain cross-default provisions.

Needham Bank Credit Facility

Line of Credit – Needham Bank

On March 2, 2023, the Company entered into a Credit and Security Agreement (the “Credit Agreement”), with Needham Bank, a Massachusetts co-operative bank, as the administrative agent (the “Administrative Agent”) for the lenders party thereto (the “Lenders”) with respect to a $ 45 million revolving credit facility (the “Credit Facility”).

7 unchanged sentences

The Credit Facility is subject to other terms and conditions, including representations and warranties, covenants and agreements typically found in these types of financing arrangements, including a covenant that requires the Company to maintain:

(A) a ratio of Adjusted EBITDA (as defined in the Credit Agreement) to Debt Service (as defined in the Credit Agreement) of less than 1.40 to 1.0, tested on a trailing-twelve-month basis at the end of each fiscal quarter, commencing with the quarter ending June 30, 2023;

(A) a ratio of Adjusted EBITDA (as defined in the Credit Agreement) to Debt Service (as defined in the Credit Agreement) of less than 1.40 to 1.0 , tested on a trailing-twelve-month basis at the end of each fiscal quarter, commencing with the quarter ended June 30, 2023;

(B) a sum of cash, cash equivalents and availability under the facility equal to or greater than $ 10 million;

and (C) an asset coverage ratio of at least 150 %.

As of June 30, 2023, the interest rate on the Credit Facility was 8.0 % and as of July 27, 2023, interest is accruing at the rate of 8.25 % per annum.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Notes Payable

At March 31, 2023, the Company had an aggregate of $ 280,608,110 of unsecured, unsubordinated notes payable outstanding, net of $ 7,793,640 of deferred financing costs (collectively, the “Notes”).

JUNE 30, 2023

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

At June 30, 2023, the total amount outstanding under the Credit Facility was $ 10.0 million.

Unsecured Notes Payable

At June 30, 2023, the Company had an aggregate of $ 281,178,294 of unsecured, unsubordinated notes payable outstanding, net of $ 7,223,456 of deferred financing costs (collectively, the “Notes”).

Currently, the Company has seven series of Notes outstanding:

16 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

The following are the future principal payments on the notes payable as of March 31, 2023:

JUNE 30, 2023

The following are the future principal payments on the notes payable as of June 30, 2023:

Year ending December 31,

4 unchanged sentences

Total notes payable, net of deferred financing costs

The estimated amortization of the deferred financing costs as of March 31, 2023 is as follows:

The estimated amortization of the deferred financing costs as of June 30, 2023 is as follows:

Year ending December 31,

1 unchanged sentence

Total deferred costs

Secured Note Payable

On May 30, 2023, and in connection with the Company’s investment in Shem Creek Sachem 100 LLC (one of the Company’s wholly-owned subsidiaries), the Company obtained a commercial loan from PeoplesBank of $ 7,000,000 .

At closing the Company had an outstanding principal balance of $ 6,224,000 with the ability to draw an additional $ 776,000 so long as there are no existing events of default under the loan agreement.

The loan accrues interest at a fixed annual rate of 6.50 %.

The loan has an original maturity date of June 20, 2026 and a one year extension option that defers the maturity date until June 20, 2027.

During the first 36 payment periods, only interest is due and payable, after which principal must be repaid for the remainder of the loan term under a thirty ( 30 ) year amortization schedule.

The PeoplesBank loan is non-recourse, secured by a first lien on the Shem Creek Middlesex mortgage receivable, as described in Note 18.

As of June 30, 2023, the outstanding balance remained at $ 6,224,000 .

Accounts Payable and Accrued Liabilities

As of March 31, 2023 and December 31, 2022, accounts payable and accrued liabilities include the following:

March 31, 2023

As of June 30, 2023 and December 31, 2022, accounts payable and accrued liabilities include the following:

June 30, 2023

December 31, 2022

2 unchanged sentences

Accrued interest

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

Fee and Other Income

For the three month periods ended March 31, 2023 and 2022, fee and other income consists of the following:

ended March 31,

For the three and six month periods ended June 30, 2023 and 2022, fee and other income consists of the following:

ended June 30,

Late and other fees

2 unchanged sentences

Extension fees

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Construction management fee

Commitments and Contingencies

Origination and Modification Fees

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

Origination, Modification, and Construction Servicing Fees

Loan origination, modification, and construction servicing fees generally range from 1 % - 3 % each of the original loan principal or the modified loan balance and, generally, are payable at the time the loan is funded or modified.

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

At March 31, 2023, deferred revenue was $ 4,681,060 , which will be recorded as income as follows:

At June 30, 2023, deferred revenue was $ 4.8 million, which will be recorded as income as follows:

Year ending December 31, 2023

1 unchanged sentence

Year ending December 31, 2025

Year ending December 31, 2026

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 CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

Employment Agreements

13 unchanged sentences

One -third of such shares will vest on each of January 1, 2024, 2025 and 2026 .

As of March 31, 2023, 226,483 restricted common shares remain unvested.

As of June 30, 2023, 226,483 restricted common shares remain unvested.

In July 2022, the Company entered into an employment agreement with John E.

Warch, the material terms of which are as follows:

(i) the employment term commenced on August 1, 2022 and will continue until terminated by either party;

Warch, the Company’s former chief financial officer, the material terms of which were as follows:

(i) the employment term commenced on August 1, 2022 and continued until terminated by either party;

(ii) a base salary of $ 325,000 ;

4 unchanged sentences

In February 2023, the Company granted 8,000 restricted common shares (having a market value of approximately $ 30,000 ) to Mr.

One -third of such shares vested on February 9, 2023, and an additional one -third will vest on each of Febuary 9, 2024 and 2025.

As of March 31, 2023, 5,333 restricted common shares remain unvested.

Warch’s employment with the Company was terminated effective May 4, 2023.

One -third of such shares vested on February 9, 2023, and an additional one -third were to vest on each of February 9, 2024 and 2025.

In connection with the termination of Mr.

Warch’s employment effective May 4, 2023, the 5,333 unvested restricted common shares were forfeited to the Company.

Unfunded Commitments

At March 31, 2023, the Company had future funding obligations totaling $ 114,851,913 , which can be drawn by the borrowers when the conditions relating thereto have been satisfied.

The unfunded commitments will be will be funded from loan payoffs and additional drawdowns under existing and future credit facilities and proceeds from sale of debt and equity securities.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

At June 30, 2023, the Company had future funding obligations totaling approximately $ 110.3 million, which can be drawn by the borrowers when the conditions relating thereto have been satisfied.

The unfunded commitments will be funded from loan payoffs and additional drawdowns under existing and future credit facilities and proceeds from sale of debt and equity securities.

In the normal course of its business, the Company is named as a party-defendant in connection with tax foreclosure proceedings against properties on which it holds a first mortgage lien.

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, 2023, there were three such proceedings.

The unpaid principal balances on the properties that are the subject of these proceedings was approximately $ 631,000 .

At June 30, 2023, there were five such proceedings.

The unpaid principal balances on the properties that are the subject of these proceedings was approximately $ 5.4 million.

In accordance with the asset purchase agreement with Urbane New Haven, LLC in October 2022 under certain circumstances the Company will be required to pay the seller 20 % of the net proceeds, as defined, of certain real estate development projects completed by the Company until such time that the principal former owner is no longer employed by the Company.

Any future payments will be expensed and included in net income.

On June 23, 2023, the Company entered into a purchase and sale contract for $ 10,600,000 to acquire a commercial building in Wesport, CT.

Upon execution of the agreement, the Company put down a deposit of $ 1,060,000 that is non-refundable, unless seller fails to meet certain diligence requirements.

The transaction is expected to close in the third quarter of 2023, but as of the date of this filing no closing date has been set.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

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, 2023, and 2022, loans to known shareholders totaled $ 25,436,352 and $ 15,594,572 , respectively.

Interest income earned on these loans for the three months ended March 31, 2023 and 2022 totaled $ 506,093 and $ 347,638 , respectively.

The wife of the Company’s chief executive officer was employed by the Company as its director of finance until the third quarter of 2022 when she retired.

For the three month periods ended March 31, 2023 and 2022, she was paid $ 0 and $ 27,500 , respectively, as compensation from the Company.

As of June 30, 2023 and 2022, loans to known shareholders totaled approximately $ 28.0 million and $ 18.4 million, respectively.

Interest income earned on these loans for the three months ended June 30, 2023 and 2022 totaled $ 546,266 and $ 666,584 , respectively, and for the six months ended June 30, 2023 and 2022 totaled $ 1,092,533 and $ 312,546 , respectively.

The wife of the Company’s chief executive officer was employed by the Company as its director of finance until her retirement from the Company on June 30, 2022.

For the six-month periods ended June 30, 2023 and 2022, she was paid $ 0 and $ 60,394 , respectively, as compensation from the Company.

For the three months ended June 30, 2023 and 2022, the corresponding amounts were $ 0 and $ 34,247 , respectively.

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, 2023 and 2022, she received compensation of $ 43,000 and $ 27,500 , respectively.

For the three-month periods ended June 30, 2023 and 2022, she received compensation of $ 33,000 and $ 36,704 , respectively.

For the six-month periods ended June 30, 2023 and 2022, she received compensation of $ 76,000 and $ 62,850 , respectively.

Concentration of Credit Risk

3 unchanged sentences

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.

Currently, all 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 41.13 %), Florida (approximately 26.79 %) and New York (approximately 12.55 %).

The Company makes loans that are secured by first mortgage liens on real property located primarily in Connecticut ( 42.17 %), Florida ( 26.47 %) and New York ( 11.36 %).

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.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Outstanding Warrants

6 unchanged sentences

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.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

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 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.

The number of securities remaining available for future issuance under the Plan as of March 31, 2023 was 1,005,078 .

During the three months ended March 31, 2023 and 2022, the Company granted an aggregate of 183,390 and 33,500 restricted common shares under the Plan, respectively with a fair value of $ 709,719 and $ 183,915 , respectively.

With respect to the restricted common shares granted during the three months ended March 31, 2023, (i) an aggregate of 17,500 shares vested immediately on the date of grant, an additional aggregate of 17,500 shares will vest on each of the first and second anniversaries of the date of grant and (ii) 43,630 shares will vest on January 1, 2024, and an additional 43,630 shares will vest on January 1, 2025 and 2026, respectively.

Stock based compensation for the three months ended March 31, 2023 and 2022 was $ 173,132 and $ 106,879 , respectively.

As of March 31, 2023, there was unrecorded stock-based compensation expense of $ 1,384,043 .

The number of securities remaining available for future issuance under the Plan as of June 30, 2023 was 1,005,078 .

During the six months ended June 30, 2023 and 2022, the Company granted an aggregate of 183,390 and 138,967 restricted common shares under the Plan, respectively, with a fair value of $ 707,719 and $ 718,913 , respectively.

With respect to the restricted common shares granted during the six months ended June 30, 2023, (i) an aggregate of 17,500 shares vested immediately on the date of grant, an additional aggregate of 17,500 shares will vest on each of the first and second anniversaries of the date of grant and (ii) 43,630 shares will vest on January 1, 2024, and an additional 43,630 shares will vest on January 1, 2025 and 2026, respectively.

Stock based compensation for the three months ended June 30, 2023 and 2022 was $ 222,211 and $ 123,428 , respectively.

Stock based compensation for the six months ended June 30, 2023 and 2022 was $ 395,709 and $ 230,167 , respectively.

As of June 30, 2023, unrecorded stock based compensation expense was $ 1,125,694 .

Employee Benefits

3 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 months ended March 31, 2023 and 2022, the 401(k) Plan expense was $ 44,696 and $ 19,993 , respectively.

Equity Offerings

On August 24, 2022, the Company filed a prospectus supplement to its Form S-3 Registration Statement covering the sale of up to $ 75,000,000 of its common shares and its Series A Preferred Stock (as defined in Note 19 below) with an aggregate liquidation preference of up to $ 25,000,000 in an “at-the market” offering, which is ongoing.

During the three months ended March 31, 2023, under this offering, the Company sold an aggregate of 2,479,798 common shares, realizing gross proceeds of approximately $ 9.4 million and sold shares of its Series A Preferred Stock having an aggregate liquidation preference of $ 154,675 , realizing gross proceeds of $ 139,500 representing a discount of approximately 10% from the liquidation preference.

For the three months ended June 30, 2023 and 2022, the 401(k) Plan expense was $ 30,693 and $ 30,008 , respectively.

For the six months ended June 30, 2023 and 2022, the 401(k) Plan expense was $ 75,389 and $ 50,001 , respectively.

On August 24, 2022, the Company filed a prospectus supplement to its Form S-3 Registration Statement covering the sale of up to $ 75,000,000 of its common shares and its Series A Preferred Stock (as defined in Note 20 below) having an aggregate liquidation preference of up to $ 25,000,000 in an “at-the market” offering, which is ongoing.

During the six months ended June 30, 2023, under this offering, the Company sold an aggregate of 2,616,124 common shares, realizing gross proceeds of approximately $ 9.9 million, and sold shares of its Series A Preferred Stock having an aggregate liquidation preference of $ 615,075 , realizing gross proceeds of approximately $ 527,600 representing a discount of approximately 16.6 % from the liquidation preference.

In October 2022, the Board adopted a stock repurchase plan (the “Repurchase Program”), pursuant to which the Company may repurchase up to an aggregate of $ 7,500,000 of its Common Shares.

Under the Repurchase Program, share repurchases will be made from time to time on the open market at prevailing market prices or in negotiated transactions off the market in accordance with applicable federal securities laws, including Rule 10b-18 and 10b5-1 of the Exchange Act.

During the six month period ended June 30, 2023, the Company repurchased 71,000 Common Shares under the Repurchase Program at a total cost of approximately $ 226,000 .

Following the repurchase, such shares were retired.

As of June 30, 2023, there were approximately $ 7,277,000 available under the Repurchase Program.

The Repurchase Program is expected to continue through September 30, 2023, unless extended or shortened by the Board.

Partnership Investments

As of March 31, 2023, the Company had invested an aggregate of approximately $ 35.3 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

As of June 30, 2023, the Company had invested an aggregate of approximately $ 35.4 million in four limited liability companies in which it held non-controlling interests.

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

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

In May 2023, the Company made an additional investment in a limited liability company, Shem Creek Sachem 100 LLC, of which it owns 100 % and, as such, the Company consolidates this investment within its books and records.

In connection

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

companies ranges up to 49 %.

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

JUNE 30, 2023

with this investment the third party manager originated a mortgage loan in the amount of $ 8,750,000 at a fixed rate of 8.4 % and borrowed $ 7,000,000 via a secured commercial loan, as more accurately described in Note 9.

The third party manager of both the non-controlling and consolidated investments is 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 withdrawal from each limited liability company may only be granted by the manager of such entity.

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These loans are primarily two- to three- year collateralized mortgage loans, often with contractual extension options for the borrowers of an additional year.

The Company receives quarterly dividends from the partnerships that are composed of a preferred return, return of capital and promote depending on each loans waterfall calculation, as defined by the loan agreements.

The Company receives quarterly dividends from the partnerships that are composed of a preferred return, return of capital and promote depending on each loan’s waterfall calculation, as defined by the loan agreements.

The Company cannot redeem its fund investment at any time, its investment will be repaid as the underlying loans are repaid.

The Company expects to be repaid on its current investments by December 31, 2026.

For the three months ended March 31, 2023 and 2022, the partnerships generated $ 549,723 and $ 272,488 , respectively, of income for the Company.

At March 31, 2023, the Company had unfunded partnership commitments totaling approximately $ 573,000 .

For the three months ended June 30, 2023 and 2022, the non-controlling partnership interests generated $ 1.0 million and $ 0.3 million, respectively, of income for the Company.

For the six months ended June 30, 2023 and 2022, the partnerships generated $ 1.6 million and $ 0.6 million, respectively, of income for the Company.

At June 30, 2023, the Company had unfunded partnership commitments totaling approximately $ 2.1 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, 2023, the Company had incurred approximately $ 452,000 of costs related to the preparation and filing of the registration statement, including legal fees, accounting fees and filing fees as well as organizational costs and an expense advance to the underwriter.

As of June 30, 2023, the Company had incurred approximately $ 457,000 of costs related to the preparation and filing of the registration statement, including legal fees, accounting fees and filing fees as well as organizational costs and an expense advance to the underwriter.

On July 14, 2021, Sachem Acquisition Corp.

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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.

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 Series A Designation Certificate) 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 Series A Designation Certificate, including provisions for the receipt, under specified circumstances, of alternative

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

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

consideration as described in the Series A Designation Certificate.

JUNE 30, 2023

A Preferred Stock in whole or in part, as described above, prior to the Change of Control Conversion Date as defined in the Series A Designation Certificate) 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 Series A Designation Certificate, including provisions for the receipt, under specified circumstances, of alternative consideration as described in the Series A Designation Certificate.

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

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Subsequent Events

From April 1, 2023 through May 12, 2023, the Company sold an aggregate of 136,356 common shares under its at-the-market offering facility, realizing gross proceeds of approximately $ 510,000 .

On April 4, 2023, the Company’s Board of Directors declared a dividend of $ 0.13 per share payable to shareholders of record as of April 17, 2023.

The dividend was paid April 24, 2023.

Management has evaluated subsequent events through May 12, 2023 the date on which the financial statements were available to be issued.

On July 26, 2023, the board of directors declared a dividend of $ 0.13 per common share payable on August 11, 2023 to shareholders of record as of August 7, 2023.

From July 1, 2023 through August 11, 2023, the Company sold an aggregate of 1,524,379 common shares under its at-the-market offering facility, realizing gross proceeds of approximately $ 5,756,477 .

From July 1, 2023 through August 11, 2023, the Company sold an aggregate of 28,531 Series A Preferred shares under its at-the-market offering facility, realizing gross proceeds of approximately $ 585,804 .

Management has evaluated subsequent events through August 11, 2023 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.

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