Quarterly Report (10-q)

Date : 11/14/2019 @ 2:02PM
Source : Edgar (US Regulatory)
Stock : Sachem Capital Corp (SCCB)
Quote : 17.86  0.0 (0.00%) @ 9:00AM

Quarterly Report (10-q)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended September 30, 2019

or

 

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

 

For the transition period from ______________________________________ to ____________________________________

 

Commission File Number: 001-37997

 

SACHEM CAPITAL CORP.

(Exact name of registrant as specified in its charter)

 

New York

(State or other jurisdiction of incorporation or organization)

81-3467779

(I.R.S. Employer Identification No.)

 

698 Main Street, Branford, CT 06405

(Address of principal executive offices)

 

(203) 433-4736

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Ticker symbol(s)   Name of each exchange on which registered

Common Shares, par value $.001 per share

7.125% Notes due 2024

6.875% Notes due 2024

 

SACH

SCCB

SACC

 

NYSE American LLC

NYSE American LLC

NYSE American LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

x     Yes     ¨  No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 

 

x     Yes     ¨   No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  ¨ Accelerated filer  ¨
Non-accelerated filer  x Smaller reporting company   x
Emerging growth company  x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

 

¨     Yes     x  No

 

As of November 13, 2019, the Issuer had 22,117,301 common shares, $0.001 par value per share, issued and outstanding.

 

 

 

 

 

SACHEM CAPITAL CORP.

 

TABLE OF CONTENTS

  

    Page Number
     
Part I FINANCIAL INFORMATION
   
Item 1. Financial Statements (unaudited)
     
  Balance Sheets as of September 30, 2019 and December 31, 2018 1
     
  Statements of Operations for the Three and Nine Month Periods Ended September 30, 2019 and 2018 2
     
  Statement of Changes in Shareholders’ Equity for the Three and Nine Month Periods Ended September 30, 2019 and 2018 3
     
  Statements of Cash Flows for the Nine Month Periods Ended September 30, 2019 and 2018 4
     
  Notes to Financial Statements (unaudited) 6
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 22
     
Item 4. Controls and Procedures 22
     
Part II OTHER INFORMATION  
     
Item 6. Exhibits 23
     
SIGNATURES   24
     
EXHIBITS

 

 

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This quarterly report on Form 10-Q includes forward-looking statements. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words “anticipate,” “estimate,” “expect,” “project,” “plan,” “seek,” “intend,” “believe,” “may,” “might,” “will,” “should,” “could,” “likely,” “continue,” “design,” and the negative of such terms and other words and terms of similar expressions are intended to identify forward-looking statements.

 

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

 

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. In addition, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We disclaim any duty to update any of these forward-looking statements after the date of this report to confirm these statements in relationship to actual results or revised expectations.

 

All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in this report. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties.

 

Unless the context otherwise requires, all references in this quarterly report on Form 10-Q to “Sachem Capital,” “we,” “us” and “our” refer to Sachem Capital Corp., a New York corporation.

 

 

 

 

SACHEM CAPITAL CORP.

BALANCE SHEETS

 

PART I.         FINANCIAL INFORMATION

 

Item 1. FINANCIAL STATEMENTS

 

    September 30,     December 31,  
    2019     2018  
      (Unaudited)       (Audited)  
Assets                
Assets:                
Cash   $ 11,004,943     $ 99,310  
Cash - restricted     -       59,549  
Escrow deposits     -       12,817  
Mortgages receivable     89,020,538       78,011,653  
Mortgages receivable, affiliate     -       879,457  
Interest and fees receivable     1,431,414       1,397,038  
Other receivables     222,237       155,000  
Due from borrowers     843,409       695,218  
Prepaid expenses     37,171       14,866  
Property and equipment, net     1,320,424       1,180,107  
Deposits on property and equipment     49,881       12,000  
Real estate owned     5,310,523       2,943,438  
Deferred financing costs     38,351       553,597  
                 
Total assets   $ 109,278,891     $ 86,014,050  
                 
Liabilities and Shareholders' Equity                
Liabilities:                
Unsecured unsubordinated fixed rate notes (net of deferred financing costs of $1,242,192)    $ 22,420,808     $ -  
Line of credit     -       27,219,123  
Mortgage payable     788,148       290,984  
Accounts payable and accrued expenses     131,901       316,413  
Security deposits held     7,800       7,800  
Funds held in escrow     25,000       -  
Advances from borrowers     498,504       317,324  
Due to shareholder     -       1,200,000  
Deferred revenue     1,067,667       1,058,406  
Notes payable     68,634       -  
Capital leases payable     11,573       -  
Dividend payable     -       2,624,566  
Accrued interest     3,323       176,619  
Total liabilities     25,023,358       33,211,235  
                 
Commitments and Contingencies                
                 
Shareholders' equity:                
Preferred shares - $.001 par value; 5,000,000 shares authorized; no shares issued     -       -  
Common stock - $.001 par value; 50,000,000 shares authorized; 22,088,325 and 15,438,621 issued and outstanding     22,088       15,439  
Paid-in capital     83,787,674       53,192,859  
Retained earnings (accumulated deficit)     445,771       (405,483 )
Total shareholders' equity     84,255,533       52,802,815  
Total liabilities and shareholders' equity   $ 109,278,891     $ 86,014,050  

 

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

 

1 

 

 

SACHEM CAPITAL CORP.

STATEMENTS OF OPERATIONS

(unaudited)

 

    Three Months     Nine Months  
    Ended September 30,     Ended September 30,  
    2019     2018     2019     2018  
Revenue:                        
Interest income from loans   $ 2,442,750     $ 2,272,100     $ 7,509,155     $ 6,610,273  
Origination fees, net     497,237       383,322       1,202,777       1,071,921  
Late and other fees     18,149       59,949       205,182       144,031  
Processing fees     44,870       30,680       121,470       101,480  
Rental income, net     9,446       10,136       82,350       87,865  
Other income     353,671       175,271       650,202       674,830  
Net gain on sale of real estate     12,927       119,666       20,076       119,666  
                                 
Total revenue     3,379,050       3,051,124       9,791,212       8,810,066  
                                 
Operating costs and expenses:                                
Interest and amortization of deferred financing costs     537,878       493,992       1,611,332       1,098,912  
Stock based compensation     4,107       29,250       12,327       29,250  
Professional fees     105,053       54,330       259,275       212,789  
Compensation, fees and taxes     476,404       344,266       1,325,822       886,024  
Exchange fees     11,343       10,000       32,850       26,667  
Other expenses and taxes     39,355       7,669       70,683       67,668  
Expense in connection with termination of LOC     -       -       779,641       -  
Excise tax     -       -       -       19,000  
Depreciation     18,618       6,834       44,286       20,302  
General and administrative expenses     131,206       142,119       400,561       314,839  
                                 
Total operating costs and expenses     1,323,964       1,088,460       4,536,777       2,675,451  
                                 
Net income   $ 2,055,086     $ 1,962,664     $ 5,254,435     $ 6,134,615  
                                 
Basic and diluted net income per common share outstanding:                                
Basic   $ 0.10     $ 0.13     $ 0.30     $ 0.40  
Diluted   $ 0.10     $ 0.13     $ 0.30     $ 0.40  
                                 
Weighted average number of common shares outstanding:                                
Basic     21,336,870       15,433,000       17,622,480       15,421,555  
Diluted     21,336,870       15,433,000       17,662,480       15,421,555  

 

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

 

2 

 

 

SACHEM CAPITAL CORP.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(unaudited)

 

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019

 

                Additional     (Accumulated Deficit)        
    Common Stock     Paid in     Retained        
    Shares     Amount     Capital     Earnings     Totals  
Balance, July 1, 2019     18,905,586     $ 18,906     $ 68,658,030     $ 739,137     $ 69,416,073  
Sales of stock through ATM     866,332       866       4,375,320               4,376,186  
Sale of common stock     2,300,000       2,300       10,668,202               10,670,502  
Exercise of warrants     16,407       16       82,019               82,035  
Stock based compensation             -       4,103               4,103  
Dividends paid                             (2,348,452 )     (2,348,452 )
Net income                             2,055,086       2,055,086  
Balance, September 30, 2019     22,088,325     $ 22,088     $ 83,787,674     $ 445,771     $ 84,255,533  

 

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018

 

                Additional     (Accumulated Deficit)        
    Common Stock     Paid in     Retained        
    Shares     Amount     Capital     Earnings     Totals  
Balance, July 1, 2018     15,415,737     $ 15,416     $ 53,315,772     $ 2,180,618     $ 55,511,806  
Stock based compensation           21     29,229             29,250  
Dividends paid                             (1,708,939 )     (1,708,939 )
Net income                             1,962,664       1,962,664  
Balance, September 30, 2018     15,415,737     $ 15,437     $ 53,345,001     $ 2,434,343     $ 55,794,781  

 

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

 

                Additional     (Accumulated Deficit)        
    Common Stock     Paid in     Retained        
    Shares     Amount     Capital     Earnings     Totals  
Balance, January 1, 2019     15,438,621     $ 15,439     $ 53,192,859     $ (405,483 )   $ 52,802,815  
Sales of stock through ATM     4,333,297       4,333       19,832,267               19,836,600  
Sale of common stock     2,300,000       2,300       10,668,202               10,670,502  
Exercise of warrants     16,407       16       82,019               82,035  
Stock based compensation                     12,327               12,327  
Dividends paid                             (4,403,181 )     (4,403,181 )
Net income                             5,254,435       5,254,435  
Balance, September 30, 2019     22,088,325     $ 22,088     $ 83,787,674     $ 445,771     $ 84,255,533  

 

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

 

                Additional     (Accumulated Deficit)        
    Common Stock     Paid in     Retained        
    Shares     Amount     Capital     Earnings     Totals  
Balance January 1, 2018     15,415,737     $ 15,416     $ 53,315,772     $ 1,235,093     $ 54,566,281  
Stock based compensation             21       29,229               29,250  
Dividends paid                             (4,935,365 )     (4,935,365 )
Net income                             6,134,615       6,134,615  
Balance, September 30, 2018     15,415,737     $ 15,437     $ 53,345,001     $ 2,434,343     $ 55,794,781  

 

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

 

3 

 

 

SACHEM CAPITAL CORP.

STATEMENTS OF CASH FLOW

(unaudited)

 

    Nine Months  
    Ended September 30,  
    2019     2018  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net income   $ 5,254,435     $ 6,134,615  
Adjustments to reconcile net income to net cash provided by operating activities:                
Amortization of deferred financing costs     159,872       90,165  
Depreciation expense     44,286       20,302  
Stock based compensation     12,327       29,250  
Gain on sale of real estate     (20,076 )     (119,666 )
Abandonment of office furniture     12,000       -  
Costs in connection with termination of line of credit     439,446       -  
Changes in operating assets and liabilities:                
(Increase) decrease in:                
Escrow deposits     12,813       111,189  
Interest and fees receivable     (454,487 )     (916,672 )
Other receivables     (67,237 )     (150,520 )
Due from borrowers     2,122,939       (308,866 )
Prepaid expenses     (22,305 )     (23,093 )
Deposits on property     (37,881 )     -  
(Decrease) increase in:                
Due to note purchaser     (176,619 )     (723,478 )
Accrued interest     3,323       117,128  
Accrued expenses     (159,512 )     (295,734 )
Deferred revenue     9,261       44,265  
Advances from borrowers     180,889       (243,387 )
Total adjustments     2,059,039       (2,369,117 )
NET CASH PROVIDED BY OPERATING ACTIVITIES     7,313,474       3,765,498  
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Proceeds from sale of real estate owned     362,136       672,538  
Acquisitions of and improvements to real estate owned     (443,217 )     (104,799 )
Purchase of property and equipment     (196,603 )     (331,386 )
Principal disbursements for mortgages receivable     (42,163,704 )     (37,278,346 )
Principal collections on mortgages receivable     27,917,331       20,958,280  
NET CASH USED FOR INVESTING ACTIVITIES     (14,524,057 )     (16,083,713 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from notes sold to shareholder     1,017,000       -  
Repayment of notes sold to shareholder     (2,217,000 )     -  
Proceeds from line of credit     42,720,829       61,067,401  
Repayment of line of credit     (69,939,952 )     (43,648,867 )
Dividends paid     (7,027,746 )     (4,935,365 )
Pre-offering costs incurred     -       (853 )
Financing costs incurred     (6,836 )     (566,886 )
Proceeds from mortgage payable     795,000       -  
Repayment of mortgage payable     (297,837 )     (7,535 )
Proceeds from notes payable, net     68,634       -  
Proceeds from issuance of common stock     30,736,148       -  
Cost associated with the issuance of common stock     (147,002 )        
Proceeds from issuance of bonds     23,663,000       -  
Cost associated with the issuance of notes     (1,307,571 )     -  
NET CASH PROVIDED BY FINANCING ACTIVITIES     18,056,667       11,907,895  
                 
NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH     10,846,084       (410,320 )
                 
CASH AND RESTRICTED CASH- BEGINNING OF YEAR     158,859       954,223  
                 
CASH AND RESTRICTED CASH - END OF PERIOD   $ 11,004,943     $ 543,903  

 

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

 

4 

 

 

SACHEM CAPITAL CORP.

STATEMENTS OF CASH FLOW (Continued)

 

    September 30,     September 30,  
    2019     2018  
      (Unaudited)       (Unaudited)  
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS                
INFORMATION                
Taxes paid   $ -     $ 19,000  
Interest paid   $ 472,329     $ 1,008,747  

 

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

 

During the nine months ended September 30, 2018, the Company purchased a mortgage receivable from a third party at a discount in the amount of $21,433.

 

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the nine months ended September 30, 2018 amounted to $2,369,196.

 

The reversal of previously accrued capitalized costs during the nine months ended September 30, 2018, amounted to $6,212.

 

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

 

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

 

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

 

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

 

5 

 

 

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019

 

1. The Company

 

Sachem Capital Corp. (the “Company”), a New York corporation, specializes in originating, underwriting, funding, servicing and managing a portfolio of first mortgage loans. The Company offers short term (i.e., one to three years), secured, non-banking loans (sometimes referred to as “hard money” loans) to real estate owners and investors to fund their acquisition, renovation, development, rehabilitation or improvement of properties located primarily in Connecticut. The properties securing the Company’s loans are generally classified as residential or commercial real estate and, typically, are held for resale or investment. Each loan is secured by a first mortgage lien on real estate and may also be secured with additional collateral, such as other real estate owned by the borrower or its principals, a pledge of the ownership interests in the borrower by its principals and/or personal guarantees by the principals of the borrower. The Company does not lend to owner-occupants. The Company’s primary underwriting criteria is a conservative loan-to-value ratio. In addition, the Company has made and may continue to make opportunistic real estate acquisitions.

 

2. Significant Accounting Policies

 

Unaudited Financial Statements

 

The accompanying unaudited financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by GAAP for audited financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results of operations for the interim periods are not necessarily indicative of the operating results to be attained in the entire fiscal year.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases these estimates on (a) various assumptions that take into account the Company’s past experience, (b) the Company’s projections regarding future operations and (c) general financial market and local and general economic conditions. Actual amounts could differ from those estimates.

 

Concentrations of Credit Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and mortgage loans. The Company maintains its cash with one major financial institution. Accounts at the financial institution are insured by the Federal Deposit Insurance Corporation up to $250,000.

 

Credit risks associated with the Company’s mortgage loan portfolio and related interest receivable are described in Note 3, below, entitled “Mortgage Loans Receivable.”

 

Impairment of long-lived assets

 

The Company continually monitors events or changes in circumstances that could indicate that the carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances occur, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the undiscounted cash flows is less than the carrying amount of these assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair market value of the assets.

 

6 

 

 

SACHEM CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019

 

Income Taxes

 

The Company believes it qualifies as a Real Estate Investment Trust (REIT) for federal income tax purposes and elected to be taxed as a REIT when it filed its 2017 federal income tax return. As a REIT, the Company is required to distribute at least 90% of its taxable income to its shareholders on an annual basis. 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, relating to, among other things, the sources of its income, the composition and values of its assets, its compliance with the distributions requirements applicable to REITs and the diversity of ownership of its outstanding common shares. So long as it qualifies as a REIT, the Company, generally, will not be subject to U.S. federal income tax on its taxable income distributed to its shareholders. However, if it fails to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, it will be subject to U.S. federal income tax at regular corporate rates and may also be subject to various penalties and may be precluded from re-electing REIT status for the four taxable years following the year during in which it lost its REIT qualification.

 

The Company has adopted the provisions of FASB ASC Topic 740-10 “Accounting for Uncertainty in Income Taxes,” which prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and disclosure required. An entity may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold. 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 September 30, 2019.

 

Property and Equipment

 

Land and building acquired in December 2016 to serve as the Company’s office facilities is stated at cost. The building is being depreciated using the straight-line method over its estimated useful life of 40 years. Expenditures for repairs and maintenance are charged to expense as incurred. The Company relocated its entire operations to this property in March 2019.

 

Revenue Recognition

 

Interest income from the Company’s mortgage loan portfolio is earned over the loan period and is calculated using the simple interest method on principal amounts outstanding. Generally, the Company’s mortgage loans provide for interest to be paid monthly in arrears.

 

Origination fee revenue is recognized ratably over the loan period in accordance with ASC 310.

 

Deferred Financing Costs

 

Costs incurred in connection with the Company’s revolving credit facilities, as discussed in Note 5 below, were amortized over the term of the applicable facility using the straight-line method. Unamortized deferred financing costs relating to the Webster credit facility were expensed when the liability was paid in full on June 25, 2019 and the facility was terminated.

 

Fair Value of Financial Instruments

 

The carrying amounts of the Bankwell mortgage, the mortgages receivable and the unsecured unsubordinated fixed rate notes payable approximates their respective fair values due to the relative short-term nature of such instruments. (See Notes 3, 5 and 6 below.)

 

Earnings Per Share

 

Basic and diluted earnings per share are calculated in accordance with ASC 260, “Earnings Per Share.” Under ASC 260, basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. 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 numerator in calculating both basic and diluted earnings per common share for each period is the reported net income.

 

7 

 

 

SACHEM CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019

 

Recent Accounting Pronouncements 

 

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” The amendments in this ASU require that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The adoption of this guidance required the Company to reconcile changes in cash, cash equivalents, and restricted cash on the consolidated statement of cash flows. As a result, the Company no longer presents transfers between cash and cash equivalents and restricted cash in the statement of cash flows. The Company adopted this ASU in 2018.

 

In May 2019, the FASB issued ASU 2019-05, “Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief.” This ASU allows entities to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost upon adoption of ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” The Company plans to adopt both ASU 2016-13 and ASU 2019-05 effective January 1, 2020. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

  

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

 

3. Mortgage Loans Receivable; Due from Borrowers

 

The Company offers secured, non-banking loans to real estate owners and investors (also known as “hard money” loans) to fund their acquisition, renovation, development, rehabilitation or improvement of properties located primarily in Connecticut. The loans are secured by first mortgage liens on one or more properties owned by the borrower or related parties. In addition, each mortgage loan is personally guaranteed by the borrower or its principals, which guarantees may be collaterally secured as well. The mortgage loans are generally for a term of one to three years. The mortgage loans are initially recorded and carried thereafter, in our financial statements, at cost. Most of the mortgage loans provide for monthly payments of interest only (in arrears) during the term of the loan and a “balloon” payment of the principal on the maturity date.

 

For the nine-month periods ended September 30, 2019 and 2018, the aggregate amounts of loans funded by the Company were $42,163,704 and $37,278,346, respectively, offset by principal repayments of $27,917,331 and $20,958,280, respectively.

 

At September 30, 2019, the Company’s mortgage loan portfolio included loans ranging in size from approximately $8,000 to $2,900,000, with an average loan size of $206,000, and with stated interest rates ranging from 5.0% to 13.0% and a default interest rate for non-payment of 18%.

 

At September 30, 2019, no single borrower, or affiliated group of borrowers, accounted for more than 10% of the total outstanding balance of the Company’s mortgage loan portfolio.

 

At the request of the borrower, the Company may extend the term of a mortgage loan provided the loan satisfies the Company’s underwriting requirements at the time of the extension. A mortgage loan that is extended is treated as a new loan and the borrower is required to pay all fees associated with the funding of a new loan, including origination fees.

 

8 

 

 

SACHEM CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019

 

Credit Risk 

 

Credit risk profile of the Company’s mortgage loan portfolio as of September 30, 2019 and December 31, 2018 is as follows:

 

    Residential     Commercial     Land     Mixed Use     Total Outstanding
Mortgages
 
September 30, 2019   $ 61,086,582     $ 20,548,936     $ 6,461,394     $ 923,626     $ 89,020,538  
December 31, 2018   $ 52,980,472     $ 19,250,618     $ 5,638,113     $ 1,021,907     $ 78,891,110  

 

The following are the maturities of mortgage loans receivable as of September 30:

 

2019   $ 20,820,611  
2020     50,701,366  
2021     10,007,796  
2022     7,490,765  
Total   $ 89,020,538  

 

At September 30, 2019, of the 432 mortgage loans in the Company’s mortgage loan portfolio, sixteen (16) have been referred to counsel for collection and are currently the subject of foreclosure proceedings, of which eight (8) had already been subject to foreclosure proceeding on July 1, 2019. The aggregate outstanding principal balance and the accrued but unpaid interest as of September 30, 2019 on these sixteen loans was approximately $7.9 million. At September 30, 2018, of the 395 mortgage loans in the Company’s portfolio, ten (10) had been referred to counsel for collection and were the subject of foreclosure proceedings. The aggregate outstanding principal balance and the accrued but unpaid interest as of September 30, 2018 on these ten loans was approximately $5.2 million. In the case of each of these loans, at September 30, 2019 and 2018, the Company believes that the value of the collateral exceeds the outstanding balance on such loan.

 

4. Real Estate Owned

 

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

 

As of September 30, 2019, and December 31, 2018, real estate owned totaled $5,310,523 and $2,943,438, respectively, with no valuation allowance. As of September 30, 2019, real estate owned included $906,617 of real estate held for rental and $4,403,906 of real estate held for sale. As of December 31, 2018, real estate owned included $887,918 of real estate held for rental and $2,055,520 of real estate held for sale.

 

5. Line of Credit and Mortgage Payable

 

Line of Credit  

 

Prior to May 11, 2018, the Company maintained a $20 million revolving credit facility with Bankwell Bank (“Bankwell”). The Bankwell credit facility was secured by substantially all the Company’s assets. Interest on the amounts outstanding accrued at a rate equal to the greater of (x) 5.5% and (y) the three-month LIBOR Rate plus 4.50%. At May 11, 2018 the outstanding balance under the Bankwell credit facility was $18,512,470 and was accruing interest at the rate of 6.79% per annum.

 

Effective May 11, 2018 (the “Closing Date”), the Company entered into a Credit and Security Agreement with Webster Business Credit Corporation (“WBCC”), Bankwell Bank and Berkshire Bank (collectively, the “Lenders”) regarding a new $35 million revolving credit facility (the “Webster Facility”) to replace the Bankwell credit facility. The Webster Facility was secured by a first priority lien on all the Company’s assets, including its mortgage loan portfolio. Interest on the outstanding balance accrued at a rate equal to the 30-day LIBOR rate plus 4.00% per annum. All amounts outstanding under the Webster Facility, including principal, accrued interest and other fees and charges, were to be due and payable May 11, 2022.

  

9 

 

 

SACHEM CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019

 

On June 25, 2019, the entire outstanding balance on the Webster Facility, including principal, accrued but unpaid interest and other fees, in the aggregate amount of $19.8 million, was paid in full and the Webster Facility was terminated. In connection with the termination of the Webster Facility, the Company expensed non-recurring charges of $779,641, of which $439,446 constituted the write-off of non-cash deferred financing costs.

 

Mortgage Payable 

 

Effective March 29, 2019, the Company refinanced a $310,000 mortgage loan it obtained from Bankwell in February 2017 with a new mortgage loan from Bankwell Bank in the principal amount of $795,000 bearing interest at the rate of 5.06% per annum and maturing on March 31, 2029 (the “New Bankwell Mortgage Loan”). Beginning May 2019, principal and interest on the New Bankwell Mortgage Loan is payable, in arrears, in monthly installments of $4,710. The New Bankwell Mortgage Loan is secured by a first mortgage lien on the property located at 698 Main Street, Branford, Connecticut, which, since March 2019, serves as the Company’s principal place of business.

 

Principal payments on the New Bankwell Mortgage Loan are due as follows:

 

Year ending December 31,        
2019   $ 11,025  
2020     17,249  
2021     18,142  
2022     19,082  
2023     20,070  
2024 and thereafter     702,580  
Total   $ 788,148  

 

6. Financing Transactions

 

During the nine-month period ended September 30, 2019, the Company generated approximately $55.7 million of gross proceeds from the sale of its securities as follows:

 

(i) $20,465,203 from the sale of 4,340,456 common shares in an “at-the-market” offerings,
(ii) $23,663,000 from the sale of its 7.125% unsecured, unsubordinated notes due June 30, 2024 (the “Notes”),
(iii) $ 82,035 from the exercise of 16,407 warrants, and
(iv) $11,500,000 from the sale of 2,300,000 common shares from an equity offering

 

In total, approximately $31.5 million of the net proceeds from these offerings were used primarily to pay-off the Webster Facility on an ongoing basis until fully paid on June 25, 2019, with the balance used as working capital and for general corporate purposes.

 

The Notes were sold in an underwritten public offering. The Notes were issued in denomination of $25.00 each and are listed on the NYSE American and trade under the symbol “SCCB”. Interest on the Notes commenced accruing on June 25, 2019. The accrued interest is payable quarterly in cash, in arrears, on March 30, June 30, September 30 and December 30, commencing September 30, 2019. The Notes mature and the entire principal amount is due June 30, 2024. So long as the Notes are outstanding, the Company is prohibited from making distributions in excess of 90% of its taxable income, incurring any additional indebtedness or purchasing any shares of its capital stock unless it has an “Asset Coverage Ratio” of at least 150% after giving effect to the payment of such dividend, the incurrence of such indebtedness or the application of the net proceeds, as the case may be. The Company may redeem the Notes, in whole or in part, without premium or penalty, at any time after June 25, 2021 upon at least 30 days prior written notice to the holders of the Notes. The redemption price will be equal to the outstanding principal amount of the Notes redeemed plus the accrued but unpaid interest thereon up to, but not including, the date of redemption. The Notes are reflected on the Company’s September 30, 2019 balance sheet net of deferred financing costs in the amount of approximately $1.2 million.

 

10 

 

 

SACHEM CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019

 

7. Other income

 

Other income consists of the following:

 

    Three Months ended
September 30,
    Nine Months ended
September 30,
 
    2019     2018     2019     2018  
Borrower charges   $ 130,871     $ 23,579     $ 163,364     $ 164,296  
Lender fees     51,426       26,955       132,397       205,222  
In-house legal fees     36,500       7,478       108,200       58,728  
Modification and extension fees     86,722       115,544       155,976       194,416  
Interest income from investments     28,148       -       28,148       -  
Other income     20,004       1,715       62,117       52,168  
Total   $ 353,671     $ 175,271     $ 650,202     $ 674,830  

 

 

8. Commitments and Contingencies

 

Origination Fees

 

Loan origination fees range from 2%-5% of the original loan principal and, generally, are payable at the time the loan is funded. These payments are amortized for financial statement purposes over the life of the loan and will be recorded as income as follows:

 

Original maturities of deferred revenue are as follows as of September 30:

 

2019   $ 333,198  
2020     581,541  
2021     117,145  
2022     35,783  
Total   $ 1,067,667  

 

If a mortgage loan is paid in full prior to its stated maturity date, the balance of any unamortized deferred revenue is recognized in full.

 

Unfunded Commitments

 

At September 30, 2019, the Company is committed to future fundings with respect to existing mortgage loans in an amount equal to $7,329,025 subject to satisfaction by the borrower of the conditions set forth in the note and related mortgage.

 

Other

 

In the normal course of its business, the Company is named as a party-defendant in various legal proceedings because it is a mortgagee having an interest in real property that is the subject of a foreclosure proceeding, usually resulting from unpaid property taxes. The Company actively monitors these actions and, in all cases, the Company believes that the fair market value of the property subject to foreclosure is in excess of the sum of the unpaid balance of the loan, accrued but unpaid interest and unpaid property taxes, if any. 

  

11 

 

 

SACHEM CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019

  

9. Related Party Transactions

 

Until March 11, 2019, the Company leased office space, on a month-to-month basis, in a building owned by Union News of New Haven, Inc., an entity that is controlled and 20%-owned by Jeffrey C. Villano, the Company’s co-CEO. Rent and other facility related charges paid by the Company to Union News for the nine- and three-month periods ended September 30, 2019 were $4,500 and $-0-, respectively, and for the nine- and three-month periods ended June 30, 2018 were $9,000 and $4,500, respectively. In March 2019, the Company moved to its operations to a new Company-owned building. Accordingly, rental payments are no longer due to JJV.

 

Prior to the Exchange, from time to time, SCP would lend funds to JJV (the “JJV Loans”), which JJV would then use to acquire troubled assets from third parties who were not existing SCP borrowers. Those properties are then mortgaged to secure the JJV Loans. As part of the Exchange, the Company acquired the notes evidencing these loans from SCP. The principal balance of the JJV Loans at September 30, 2019 was $-0-, compared to $879,457 at December 31, 2018. During the quarter ended September 30, 2019, both of the JJV Loans were assigned to the Company so that the underlying borrower is directly liable to the Company. Interest earned on these mortgage loans for the three and nine months ended September 30, 2019 was $5,812 and $40,686, respectively. For the three- and nine-month periods ended September 30, 2018 interest payments on the JJV Loans were $26,384 and $85,388, respectively.

 

In 2018 the Company sold two notes, having an aggregate original principal amount of $1,717,000, to a shareholder at par. In the first quarter of 2019, the Company sold a third note, having an aggregate original principal amount of $500,000, to the same shareholder at par. All three notes are secured by commercial properties. The Company continued to service the notes on behalf of the purchaser until paid. In December 2018, the Company reacquired one of the notes, having an original principal amount of $1,200,000, and in 2019 reacquired the other two notes, having an aggregate principal amount, $1,017,000. The balance owed to the purchaser for the notes, $1,200,000 at December 31, 2018, is characterized as due to shareholder on the Company’s balance sheets for the relevant periods. On July 26, 2019 all principal and interest due to the shareholder were paid in full.

 

At September 30, 2019 and December 31, 2018, amounts owed by JJV to the Company were $22,794 and $22,977, respectively, and is reflected as other receivables on the Company’s balance sheet. 

 

For the nine months ended September 30, 2019 and 2018, the wife of one of our executive officers was paid $75,000 and $56,250, respectively, for accounting and financial reporting services provided to the Company.

 

12 

 

 

SACHEM CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019

 

10. Stock-Based Compensation

 

On October 27, 2016, the Company adopted the 2016 Equity Compensation Plan (the “Plan”), the purpose of which is to align the interests of the Company’s officers, other employees, advisors and consultants or any subsidiary, if any, with those of the Company’s shareholders and to afford an incentive to such officers, employees, consultants and advisors to continue as such, to increase their efforts on the Company’s behalf and to promote the success of the Company’s business. The basis of participation in the Plan is upon discretionary grants of awards by the Company’s Board of Directors. The Plan is administered by the Compensation Committee. 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 by the Plan is 1,477,116. Stock based compensation for the three- and nine-month periods ended September 30, 2019 was $4,107 and $12,321, respectively.

 

  

11. Subsequent Events

 

On October 22, 2019 the Company paid a dividend of $0.12 per common share, or $2,654,076 in the aggregate.

 

On October 3, 2019, the Company’s board of directors authorized the grant of 2,500 common shares to each of its independent directors, of which 625 shares vested immediately upon grant and 625 shares will vest on each of October 4, 2020, 2021 and 2022 (each a “Vesting Date”) unless the director resigns or is removed for “cause” prior to the Vesting Date. The shares, 7,500 in the aggregate, were issued under the Plan. In addition, each independent director entered into a Restricted Stock Agreement with the Company with respect to the 1,875 restricted shares granted to such director.

 

From October 1 through November 13, 2019, the Company sold 14,317 common shares through its at-the-market offering facility, realizing gross proceeds of $68,006.

 

On or about October 7, 2019 the Company filed an amendment to its certificate of incorporation increasing the number of its authorized common shares, par value $0.001 per share, from 50,000,000 to 100,000,000. The amendment was approved by shareholders at the Company’s 2019 Annual Meeting of Shareholders held on October 3, 2019.

 

On November 7, 2019, the Company consummated the sale of $30.0 million aggregate principal amount of its 6.875% unsecured unsubordinated notes due December 30, 2024 (the “November 2019 Notes”). Interest on the November 2019 Notes is payable quarterly in arrears on each March 30, June 30, September 30 and December 30 that they are outstanding beginning December 30, 2019. The Company has the right to prepay the November 2019 Notes, in whole or in part, at any time on or after November 7, 2021. Pending their use, the net proceeds from the offering have been invested in short-term certificates of deposit.

 

13 

 

 

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion of the financial condition and results of operations should be read in conjunction with the financial statements and the notes to those statements included elsewhere in this report. Certain statements in this discussion and elsewhere in this report constitute forward-looking statements, within the meaning of section 21E of the Exchange Act, that involve risks and uncertainties. The actual results may differ materially from those anticipated in these forward-looking statements.

 

Company Overview 

 

Sachem Capital Corp. was formed as HML Capital Corp. in January 2016 under the New York Business Corporation Law. On December 15, 2016, we changed our name to Sachem Capital Corp. Prior to February 8, 2017, our business operated as a Connecticut limited liability company under the name Sachem Capital Partners, LLC (“SCP”). On February 9, 2017, we completed our initial public offering (the “IPO”) in which we issued and sold 2.6 million of our common shares, $.001 par value per share (“Common Shares”), at $5.00 per share, which raised $13 million of gross proceeds. The net proceeds from the IPO were approximately $11.1 million. The primary purpose of the IPO was to raise additional equity capital to fund mortgage loans and expand our mortgage loan portfolio. The IPO was also intended to diversify our ownership so that we could qualify, for federal income tax purposes, as a real estate investment trust, or REIT.

 

We believe that, upon consummation of the IPO, we met all the requirements to qualify as a REIT for federal income tax purposes and elected to be taxed as a REIT beginning with our 2017 tax year. As a REIT, we are entitled to claim deductions for distributions of taxable income to our shareholders thereby eliminating any corporate tax on such taxable income. Any taxable income not distributed to shareholders is subject to tax at the regular corporate tax rates and may also be subject to a 4% excise tax to the extent it exceeds 10% of our total taxable income. To maintain our qualification as a REIT, we are required to distribute each year at least 90% of our taxable income. As a REIT, we may also be subject to federal excise taxes and state taxes.

 

Financing Strategy Overview

 

To continue to grow our business, we must increase the size of our loan portfolio, which requires that we raise additional capital either by selling shares of our capital stock or by incurring additional indebtedness. We do not have a policy limiting the amount of indebtedness that we may incur. Thus, our operating income in the future will depend, in part, on the amount of indebtedness incurred and the spread between our cost of funds and the yield on our loan portfolio. Furthermore, rising interest rates could have an adverse impact on our business if we cannot increase the rates on our loans to offset the increase in our cost of funds and to satisfy investor demand for yield. In addition, rapidly rising interest rates could have an unsettling effect on real estate values, which could compromise some of our collateral.

 

Historically, we have relied upon both equity capital and debt to grow our business. At December 31, 2018, we had approximately $52.8 million of shareholders’ equity and approximately $27.5 million of indebtedness, of which approximately $27.2 million was the outstanding balance on our $35 million credit facility. Since that date, we have restructured our balance sheet by raising additional equity capital and replacing our existing secured, variable interest rate, senior revolving credit facility with unsecured, unsubordinated fixed rate five-year term notes. At September 30, 2019, shareholders’ equity was approximately $84.3 million, and our indebtedness was approximately $23.2 million. In connection with the termination of the Webster Facility (as defined below), we incurred termination costs and expenses of approximately $780,000, including a write-off of unamortized deferred financing costs of approximately $440,000, or approximately $0.04 per share based on the weighted number of Common Shares outstanding at June 30, 2019. While the costs of this restructuring had an adverse impact on our operational performance for the nine months ended September 30, 2019, a majority of the costs were non-cash (i.e., deferred financing costs) and non-recurring. Even though net income for the nine months ended September 2019 was adversely impacted by these financing transactions, net cash provided by operations in the first nine months of 2019 increased approximately 94.2% compared to the first nine months of 2018. In addition, we believe, our restructured balance sheet will have a positive impact on our operations over the balance of the year by reducing our operating expenses and providing us with greater operational flexibility.

 

Specifically, since January 1, 2019, we:

 

(i) Refinanced the mortgage on our new corporate headquarters, increasing the loan amount from $310,000 to $795,000. The interest rate on the new mortgage loan is fixed at 5.06%, which, although higher than what we were paying on the original mortgage loan, is significantly less than the interest rate on the $35 million revolving credit facility from Webster Business Credit Corporation, Bankwell Bank and Berkshire Bank that we obtained in May 2018 (the “Webster Facility”), which at the time of the refinancing was 6.49%. The net proceeds from this refinancing, approximately $495,000, were used to reduce the outstanding balance on the Webster Facility.

 

14 

 

 

(ii) Sold an aggregate of 4,340,456 Common Shares through “at-the-market” offering facilities for aggregate gross proceeds of $20,465,203. A substantial portion of these net proceeds, approximately $15.5 million, were used to pay down the balance on the Webster Facility and approximately $2.2 million was used to repay an amount due to a shareholder.

 

(iii) Sold $23,663,000 aggregate principal amount of our 7.125% unsecured, unsubordinated notes due June 30, 2024 (the “June 2019 Notes”) in an underwritten public offering. The net proceeds from the sale of the Notes, approximately, $22.3 million, were used to pay the remaining balance on the Webster Facility, which was then terminated.

 

(iv) Sold 16,407 Common Shares through the exercise of warrants providing gross proceeds of $82,035.

 

(v) Sold 2,300,000 Common Shares in an underwritten equity offering for aggregate gross proceeds of $11,500,000. We intend to use the net proceeds from this offering, approximately $10.7 million, to grow our portfolio and general corporate purposes.  

 

As a result of these transactions, we strengthened our balance sheet, eliminated the fees and expenses relating to the Webster Facility, which were significant, eliminated the risk associated with variable rate instruments and relieved ourselves from onerous loan covenants, which we felt limited our operational and financing flexibility. We believe these benefits outweigh the higher interest rate we are paying on the Notes relative to the rate we were paying on the Webster Facility.

 

Because most of the net proceeds from these financing transactions were used to repay existing indebtedness, we were not able to significantly increase our mortgage loan portfolio or revenues in the third quarter of 2019. However, at September 30, 2019 we had $11.0 million of available cash, which we intend to use to fund new mortgage loans in the fourth quarter of 2019. In addition, on October 31, 2019 we sold $30.0 million aggregate principal amount of unsecured unsubordinated 6.875% notes due December 30, 2024 (the “November 2019 Notes.”) The net proceeds from the sale of these notes were approximately $28.6 million. We may sell up to an additional $4.5 million aggregate principal amount of these notes if the underwriters exercise their over-allotment option in full. The over-allotment option expires November 30, 2019. Third, we can sell up to an additional $7.0 million of Common Shares through our existing at-the-market offering facility. (The facility was reduced to $11.5 million from $30 million in order to accommodate the sale of the November 2019 Notes.) Finally, given our improved balance sheet, we may obtain a new credit facility in the future if we believe the terms are reasonable. Thus, we believe we are well-capitalized for the next 12-18 months and plan to use these funds to increase our mortgage loan portfolio.

 

Operational and Financial Overview

 

At September 30, 2019, (i) our loan portfolio included 432 mortgage loans, with individual principal loan amounts ranging from approximately $8,000 to approximately $2.9 million and an aggregate loan amount of approximately $89.0 million, (ii) the average original principal amount of the mortgage loans in the portfolio was approximately $206,000 and the median mortgage loan amount was $137,731 and (iii) approximately 77% of the mortgage loans had a principal amount of $250,000 or less. In comparison, at September 30, 2018, (i) our loan portfolio included 395 mortgage loans, with individual principal loan amounts ranging from $6,000 to $2.0 million and an aggregate loan amount of approximately $77.8 million, (ii) the average original principal amount of the mortgage loans in the portfolio was $197,000 and the median mortgage loan amount was $136,000 and (iii) approximately 79.5% of the mortgage loans had a principal amount of $250,000 or less. At September 30, 2019 and 2018, unfunded commitments for future advances totaled approximately $7.3 million and $6.8 million, respectively.

 

For the three months ended September 30, 2019, revenues and net income were approximately $3.4 million and $2.1 million, respectively. For the three months ended September 30, 2018, revenues and net income were approximately $3.1 million and $2.0 million, respectively. For the nine months ended September 30, 2019, revenues and net income were approximately $9.8 million and $5.3 million, respectively. For the nine months ended September 30, 2018, revenues and net income were approximately $8.8 million and $6.1 million, respectively.

 

Our operating expenses have increased significantly primarily due to the growth in our operations.

 

15 

 

 

The mortgage loans that we originate typically have a maximum initial term of one to three years and bear interest at a fixed rate of 5% to 13% per year and a default rate of 18% per year. For the three and nine month periods ended September 30, 2019, the yield on our mortgage loan portfolio was 12.66% and 12.58%, respectively.

 

We usually receive origination fees, or “points,” ranging from 2% to 5% of the original principal amount of the loan as well as other fees relating to underwriting, funding and managing the loan, such as inspection fees. Since we treat an extension or renewal of an existing loan as a new loan, we also receive additional “points” and other loan-related fees in connection with those transactions. Interest is always payable monthly in arrears. As a matter of policy, we do not make any loans if the loan-to value ratio exceeds 70%. However, in the case of loans secured by property undergoing construction or renovation and that have future funding obligations, the loan-to-value ratio is based on the estimated post-construction or post-renovation value of the property. Accordingly, during the construction or renovation period the loan amount could exceed the actual value of the property. Generally, we rely on readily available market data, including tax assessment rolls, recent sales transactions, brokers and, in some cases, third-party appraisals to evaluate the strength of the collateral. Finally, we have adopted a policy that limits the maximum amount of any loan we fund to a single borrower or a group of affiliated borrowers to 10% of the aggregate amount of our loan portfolio after taking into account the loan under consideration. 

 

Our revenue consists primarily of interest earned on our loan portfolio and our net income is the spread between the interest we earn and our cost of funds. Our capital structure is more heavily weighted to equity rather than debt (approximately 78% vs.22% of our total capitalization at September 30, 2019). At September 30, 2019, the annual yield on our loan portfolio was 12.66% per annum. The yield has remained steady over the past few years as older loans come due and are either repaid or refinanced at similar rates. The yield reflected above does not include other amounts collected from borrowers such as origination fees, default rates of interest and late payment fees.

 

In addition, we seek to mitigate some of the risk associated with rising rates by generally limiting the term of new loans to one year. If, at the end of the term, the loan is not in default and meets our other underwriting criteria, we will consider an extension or renewal of the loan at our then prevailing interest rate. However, if interest rates continue to increase, we may find it necessary to change our strategy and try to increase the rates on our mortgage loans as well. If we are successful, this may undermine our strategy to increase market share. If we are not successful, the “spread” between our borrowing costs and the yield on our portfolio will be squeezed and would adversely impact our net income. We cannot assure you that we will be able to increase our rates at any time in the future and we cannot assure you that we can continue to increase our market share.

 

As a real estate finance company, we deal with a variety of default situations, including breaches of covenants, such as the obligation of the borrower to maintain adequate insurance on the mortgaged property, to pay the taxes on the property and to make timely payments to us. As such, we may not be aware that a default occurred. As a result, we are unable to quantify the number of loans that may have, at one time or another, been in default. Since inception through September 30, 2019, we have made approximately 1,100 mortgage loans having an aggregate original principal amount of approximately $217 million.

 

At September 30, 2019, of the 432 mortgage loans in our portfolio, sixteen have been referred to legal counsel for collection and are the subject of foreclosure proceedings. The aggregate outstanding principal balance of these sixteen mortgage loans and the accrued but unpaid interest as of September 30, 2019 was approximately $7.9 million, representing approximately 8.87% of our aggregate mortgage loan portfolio. In the case of each of these sixteen mortgage loans, we believe the value of the collateral exceeds the sum of the outstanding principal balance of the loan, the accrued but unpaid interest on the loan and any unpaid property taxes due with respect to the collateral.

 

At September 30, 2019, real estate owned included sixteen properties having an aggregate book value of approximately $5.3 million. At December 31, 2018, real estate owned included eleven properties having an aggregate book $2.9 million.

 

16 

 

 

The key factors contributing to our growth to date have been our ability to access working capital and the strong demand for our products and services, which was driven principally by a robust Connecticut real estate market. These factors coincided with the overall growth in the U.S. economy. In the second quarter of 2019, we curtailed our lending operations due to a shortage of working capital and our desire to repay in full our credit facility with Webster Bank, which adversely impacted our revenues and net income for the second and third quarters of 2019. In addition, beginning in the second half of 2018 and continuing through the third quarter of 2019, we started noticing subtle changes in the business environment. For example, traditional lending institutions, such as banks, appeared to be tightening their credit requirements. Normally, that would be a positive development for our business. However, at the same time, property values in Connecticut were either stagnant or declining and the length of time between initial listing and sale was expanding. It is unclear whether these developments are merely temporary phenomena or represent long-term trends. In the meantime, the demand for our products and services continues to be robust. We believe that our best strategy to deal with adverse changes in the marketplace is to adhere to our basic underwriting guidelines. Those two factors, together with our liquidity, lead us to believe that we are well-positioned to address the changes and new trends in the real estate lending market.

 

REIT Qualification

 

We believe that we have qualified as a REIT since the consummation of the IPO and that it is in the best interests of our shareholders that we operate as a REIT. We made the election to be taxed as a REIT beginning with our 2017 tax year. As a REIT, we are required to distribute at least 90% of our taxable income to our shareholders on an annual basis. We cannot assure you that we will be able to maintain REIT status.

 

Our qualification as a REIT depends on our 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 our gross income, the composition and values of our assets, our compliance with the distributions requirements applicable to REITs and the diversity of ownership of our outstanding Common Shares. Given that our senior executive officers, Jeffrey C. Villano and John L. Villano, own a significant portion of our outstanding capital shares, we cannot assure you that we will be able to maintain that qualification.

 

So long as we qualify as a REIT, we, generally, will not be subject to U.S. federal income tax on our taxable income that we distribute currently to our shareholders. If we fail to qualify as a REIT in any taxable year and do not qualify for certain statutory relief provisions, we will be subject to U.S. federal income tax at regular corporate income tax rates and may be precluded from electing to be treated as a REIT for four taxable years following the year during which we lose our REIT qualification. Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income.

 

Emerging Growth Company Status

 

We are an “emerging growth company,” as defined in the JOBS Act, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As an emerging growth company, we can also delay adopting new or revised accounting standards until those standards apply to private companies. We intend to avail ourselves of these options. Once adopted, we must continue to report on that basis until we no longer qualify as an emerging growth company.

 

We will cease to be an emerging growth company upon the earliest of: (i) the end of the 2022 fiscal year; (ii) the first fiscal year after our annual gross revenue are $1.07 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the end of any fiscal year in which the market value of our Common Shares held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year. We cannot predict if investors will find our Common Shares less attractive if we choose to rely on these exemptions. If, as a result of our decision to reduce future disclosure, investors find our Common Shares less attractive, there may be a less active trading market for our Common Shares and the price of our Common Shares may be more volatile.

 

17 

 

 

As an “emerging growth company,” we intend to avail ourselves of the reduced disclosure requirements and extended transition periods for adopting new or revised accounting standards that would otherwise apply to us as a public reporting company. Once adopted, we must continue to report on that basis until we no longer qualify as an emerging growth company. As a result, our financial statements may not be comparable to those of other public reporting companies that either are not emerging growth companies or that are emerging growth companies but have opted not to avail themselves of these provisions of the JOBS Act and investors may deem our securities a less attractive investment relative to those other companies, which could adversely affect our stock price.

 

Critical Accounting Policies and Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our use of estimates on a preset number of assumptions that consider (a) past experience, (b) future projections and (c) general financial market conditions. Actual amounts could differ materially from those estimates.

 

Interest income from commercial loans is recognized, as earned, over the loan period and origination fee revenue on commercial loans is amortized over the term of the respective note.

 

Results of operations

 

Three months ended September 30, 2019 and 2018

 

Total revenue

 

Total revenue for the three months ended September 30, 2019 was approximately $3.4 million compared to approximately $3.1 million for the three months ended September 30, 2018, an increase of approximately 10.7%. The increase in revenue reflects the increase in our lending operations. Compared to the 2018 period, for the 2019 period, interest income was higher by approximately $171,000, origination fees higher by approximately $114,000 and other income higher by approximately $150,000. These increases were offset by reductions of approximately $107,000 in gain on sale of real estate and approximately $42,000 in late fee income.

  

Operating costs and expenses

 

Total operating costs and expenses for three months ended September 30, 2019 were approximately $1.3 million compared to $1.1 million for the three months ended September 30, 2018 period, an increase of approximately 21.6%. The increase in operating costs and expenses is primarily attributable to increases in interest and amortization of deferred financing costs of approximately $44,000, professional fees of approximately $51,000 and compensation, fees and taxes of approximately $132,000, offset by stock-based compensation of approximately $25,000 and general and administrative expenses of approximately $11,000.

 

Net Income

 

Net income for the three months ended September 30, 2019 was approximately $2.1 million, or $0.10 per share, compared to $2.0 million, or $0.13 per share for the three months ended September 30, 2018. The decrease in earnings per share is due to the increase in the weighted average number of shares outstanding

 

Nine months ended September 30, 2019 and 2018

 

Total revenue

 

Total revenue for the nine months ended September 30, 2019 was approximately $9.8 million compared to approximately $8.8 million for the nine months ended September 30, 2018, an increase of approximately $980,000, or 11.1%. The increase in revenue resulted from an increase in lending operations. For the 2019 period, interest income was approximately $7.5 million, net origination fees were approximately $1.2 million and other income approximately $650,000. In comparison, for the nine months ended September 30, 2018, interest income was approximately $6.6 million, net origination fees were approximately $1.1 million and other income was approximately $675,000. Finally, late and other fee income increased by approximately $61,000. These increases were offset, in part, by a reduction in gain on the sale of real estate of approximately $100,000.

 

18 

 

 

 

Operating costs and expenses

 

Total operating costs and expenses for nine months ended September 30, 2019 were approximately $4.5 million compared to $2.7 million for the nine months ended September 30, 2018 period, an increase of approximately 70.0%. The increase in operating costs and expenses is partially attributable to $780,000 of expense incurred in connection with the termination of the Webster Credit Facility. In addition to that expense being a non-recurring charge, $439,446 represents a write-off of unamortized deferred financing costs, a non-cash item. The second biggest contributor to the increase in operating costs and expenses was interest and amortization of deferred financing costs, which increased approximately $512,000 reflecting the increase in our mortgage loan portfolio, an increase in the interest rate on the Webster Facility and the slightly higher cost of capital on our unsecured notes. Another contributor to the overall increase in operating costs and expenses was a $423,000 increase in compensation expense (including stock-based compensation). This increase reflects the increase in base salary paid to our co-chief executive officers, which was effective as of July 1, 2018, as well as compensation to our controller, who was hired in August 2018, and our in-house legal counsel, who was hired in November 2018. Finally, general and administrative expenses increased approximately $86,000.

  

Net Income

 

Net income for the nine months ended September 30, 2019 was approximately $5.3 million, or $0.30 per share. In comparison, net income for the nine months ended September 30, 2018 was $6.1 million, or $0.40 per share. The decrease in net income was due to the increase in total operating expenses and most of that increase was attributable to the expense in connection with the termination of the Webster Credit Facility, which was incurred in the second quarter. We estimate the impact of that expense was to reduce earnings per share by approximately $0.04. In addition, earnings per share was negatively impacted by the increase in the weighted average number of shares outstanding

 

Liquidity and Capital Resources

        

At September 30, 2019, we had approximately $11.0 million in cash, none of which is restricted, compared to cash of approximately $158,900 (including restricted cash) at December 31, 2018.

 

Net cash provided by operating activities for the nine months ended September 30, 2019 was approximately $7.3 million compared to approximately $3.8 million for the same 2018 period, an increase of approximately $3.5 million or 94.2%. For the 2019 period, the total adjustments to net income were approximately positive $2.1 million reflecting a (i) $440,000 adjustment for non-cash costs associated with the termination of the Webster Facility and (ii) $2.1 million decrease in due from borrowers, offset by a (i) $450,000 increase in interest and fees receivable, (ii) $177,000 decrease in due to note purchaser and (iii) $160,000 decrease in accrued expenses. In comparison, for the 2018 period, the total adjustments to net income were approximately negative $2.37 million, reflecting a (i) $723,000 decrease in the amount due to the note purchaser, (ii) $296,000 decrease in accrued expenses, (iii) $309,000 increase in due from borrowers, (iv) $917,000 increase in interest and fees receivable, (v) $151,000 increase in other receivables and (vi) $120,000 gain on sale of real estate, offset by (i) $90,000 in amortization of deferred financing cost, (ii) $20,000 in depreciation expense, (iii) $29,250 in stock-based compensation, (iv) $111,000 decrease in escrow deposits, (v) $117,000 increase in accrued interest and (vi) $44,000 increase in deferred revenue.

 

Net cash used for investing activities for the nine months ended September 30, 2019 was approximately $14.5 million compared to approximately $16.1 million for the comparable 2018 period. This decrease is primarily due to a $7.0 million increase in principal collections on mortgages receivable, offset by a (i) $4.9 million increase in principal disbursements for mortgages receivable, (ii) $340,000 increase in costs to acquire and improve real estate owned and (iii) $310,000 decrease in proceeds from the sale of real estate.

 

Net cash provided by financing activities for the nine months ended September 30, 2019 was approximately $18.1 million compared to approximately $11.9 million for the comparable 2018 period. Net cash provided by financing activities for the 2019 period consists primarily of approximately (i) $42.7 million of proceeds from the Webster Facility, (ii) $19.8 million of net proceeds from the sale of Common Shares, (iii) $10.7 million of net proceeds from the sale of Common Shares, (iv) $82,000 in gross proceeds from the exercise of warrants, (v) $22.4 million of net proceeds from the sale of the June 2019 Notes, (vi) $1.0 million of proceeds from the sale of mortgage notes and (vii) $800,000 of gross proceeds from the New Bankwell Mortgage Loan, offset by approximately (i) $69.9 million of repayments on the Webster Facility, (ii) $7.0 million of dividends paid, (iii) $298,000 repayment of the Old Bankwell Mortgage Loan and (iv) 2.2 million of repayment of notes due to shareholder. For the 2018 period, net cash from financing activities consisted primarily of approximately $61.0 million of proceeds from our credit facilities offset by approximately (i) $43.7 million of repayments on our credit facilities, (ii) $4.9 million of dividends paid and (iii) $567,000 of financing costs (most of which related to the Webster Facility.)

 

19 

 

 

2019 Financing Transactions

 

In the first nine months of 2019, we consummated the following financing transactions:

 

Refinancing of Bankwell Mortgage

 

We refinanced the $310,000 mortgage loan obtained from Bankwell Bank in February 2017 (the “Old Bankwell Mortgage Loan”) with a new 10-year mortgage loan from Bankwell Bank in the principal amount of $795,000 bearing interest at the rate of 5.06% per annum and maturing on March 31, 2029 (the “New Bankwell Mortgage Loan”). Monthly payments of interest and principal on the New Bankwell Mortgage Loan, $4,710, are payable in arrears starting May 1, 2019, calculated based on a 25-year amortization rate. Interest on the Old Bankwell Mortgage Loan accrued at the rate of 4.52% per annum and the monthly installment payments were $1,975. The entire outstanding principal balance of the New Bankwell Mortgage Loan and all accrued and unpaid interest thereon is due and payable on March 31, 2029. The New Bankwell Mortgage Loan, among other things, is secured by a first mortgage lien on the real property owned by us, which currently serves as our principal place of business, located at 698 Main Street, Branford, Connecticut. In connection with the New Bankwell Mortgage Loan, John L. Villano and Jeffrey C. Villano, our Co-Chief Executive Officers, jointly and severally, during the term of the loan, indemnified Bankwell Bank from and against any and all actual claims, demands, liabilities, losses, damages, judgments, penalties, reasonable out-of-pocket costs and expenses arising out of or attributable to the New Bankwell Mortgage Loan.

 

At-the-Market Offerings

 

Over the first nine months of 2019, we sold an aggregate of 4,340,456 Common Shares through our at-the-market offering facilities. Gross proceeds from these sales were $20,465,203 and the net proceeds were $19,836,610.

 

June 2019 Note Offering

 

In June and July 2019 we sold, in a registered public offering, $23,663,000 aggregate principal amount of our 7.125% unsecured, unsubordinated notes due June 30, 2024 (the “June 2019 Notes”). The net proceeds from the sale of the June 2019 Notes were approximately $22.3 million. The June 2019 Notes were issued in denomination of $25.00 each and are listed on the NYSE American and trade under the symbol “SCCB.” Interest accrues on the June 2019 Notes commencing on June 25, 2019. Accrued interest is payable quarterly, in cash, in arrears, on each March 30, June 30, September 30 and December 30 that they are outstanding, commencing September 30, 2019. So long as the June 2019 Notes are outstanding, we are prohibited from making distributions in excess of 90% of our taxable income, incurring any additional indebtedness or purchasing any shares of our capital stock unless we have an “Asset Coverage Ratio” of at least 150% after giving effect to the payment of such dividend, the incurrence of such indebtedness or the application of the net proceeds, as the case may be. We may redeem the June 2019 Notes, in whole or in part, without premium or penalty, at any time on or after June 30, 2021 upon at least 30 days prior written notice to the holders of the June 2019 Notes. The redemption price will be equal to the outstanding principal amount of the June 2019 Notes redeemed plus the accrued but unpaid interest thereon up to, but not including, the date of redemption.

 

In July and August 2019, we sold an aggregate of 2,300,000 Common Shares at $5.00 per share pursuant to an underwritten public offering, including 300,000 shares from the exercise of the over-allotment option by the underwriter of the offering, Aegis Capital Corp. The offering was made pursuant to a Prospectus Supplement filed under the Company’s S-3 Registration Statement, dated November 9, 2018. The net proceeds to us from the offering were approximately $10.9 million, after deducting underwriting discounts and commission but before deducting other transaction costs.

 

On July 16, 2019, we received gross proceeds of $82,035 from the exercise of 16,407 warrants having an exercise price of $5.00 per share.

 

We project anticipated cash requirements for our operating needs as well as cash flows generated from operating activities available to meet these needs. Our short-term cash requirements primarily include funding of loans and payments for usual and customary operating and administrative expenses, such as employee compensation, rent, sales, marketing expenses and dividends. Based on this analysis, we believe that our current cash balances, and our anticipated cash flows from operations will be sufficient to fund the operations for the next 12 months.

 

Our long-term cash needs include funding of new mortgage loans, payment of operating expenses, interest payments on our outstanding notes and dividend payments to our shareholders. Funding for long-term cash needs will come from our cash on hand, operating cash flows and financing transactions, whether sales of equity securities, debt securities or a new revolving credit facility.

 

From and after the effective date of our REIT election, we intend to pay regular quarterly distributions to holders of our Common Shares in an amount not less than 90% of our REIT taxable income (determined before the deduction for dividends paid and excluding any net capital gains).

 

20 

 

 

On July 11, 2019, we declared a dividend of $0.12 per common share, which was paid on July 29, 2019 to shareholders of record on July 22, 2019. The total amount of the dividend payment was $2,348,452.

 

On July 26, 2019, we repaid an amount owed to a shareholder in connection with the repurchase of certain mortgage loans. The total payment was $2,231,777, including principal of $2,217,000 and accrued interest of $14,777.

  

Subsequent Events

 

On October 3, 2019, we declared a dividend of $0.12 per common share, which was paid on October 22, 2019 to shareholders of record on October 14, 2019. The total amount of the dividend payment was $2,654,076.

 

From October 1 through November 13, 2019, we sold 14,317 Common Shares through our at-the-market offering facility and realized gross proceeds of $68,006 from such sales. Approximately $7.0 million remains available to us for future sales under the facility. (The facility was reduced to $11.5 million from $30 million in order to accommodate the sale of the November 2019 Notes.)

 

In November 2019 we sold, in a registered public offering, $30.0 aggregate principal amount of our 6.875% unsecured, unsubordinated notes due December 30, 2024 (the “November 2019 Notes”). The net proceeds from the sale of the November 2019 Notes were approximately $28.6 million. The November 2019 Notes were issued in denomination of $25.00 each and are listed on the NYSE American and trade under the symbol “SACC.” Interest accrues on the November 2019 Notes commencing on November 7, 2019. Accrued interest is payable quarterly, in cash, in arrears, on each March 30, June 30, September 30 and December 30 that they are outstanding, commencing December 30, 2019. So long as the November 2019 Notes are outstanding, we are prohibited from making distributions in excess of 90% of our taxable income, incurring any additional indebtedness or purchasing any shares of our capital stock unless we have an “Asset Coverage Ratio” of at least 150% after giving effect to the payment of such dividend, the incurrence of such indebtedness or the application of the net proceeds, as the case may be. We may redeem the November 2019 Notes, in whole or in part, without premium or penalty, at any time on or after November 7, 2021 upon at least 30 days prior written notice to the holders of the November 2019 Notes. The redemption price will be equal to the outstanding principal amount of the November 2019 Notes redeemed plus the accrued but unpaid interest thereon up to, but not including, the date of redemption.

 

Off-Balance Sheet Arrangements

 

We are not a party to any off-balance sheet transactions, arrangements or other relationships with unconsolidated entities or other persons that are likely to affect liquidity or the availability of our requirements for capital resources.

 

Contractual Obligations

 

As of September 30, 2019, our contractual obligations include unfunded amounts of any outstanding construction loans and unfunded commitments for loans as well as contractual obligations consisting of operating leases for equipment.

 

    Total     Less than 1 year     1 – 3 years     3 – 5 years     More than 5 years  
Operating lease obligation   $     $     $     $     $  
Capital lease obligation     11,573       2,672       3,121       5,780          
Unfunded portions of outstanding construction loans     7,329,025       7,329,025                    
Unfunded loan commitments                                        
Total contractual obligations   $ 7,340,598     $ 7,331,697     $ 3,121     $ 5,780     $  

 

21 

 

 

Recent Accounting Pronouncements

 

See “Note 2 — Significant Accounting Policies” to the financial statements for explanation of recent accounting pronouncements impacting us.

 

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

Item 4. CONTROLS AND PROCEDURES

 

  (a) Evaluation and Disclosure Controls and Procedures

 

Our management, with the participation of our co-chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2019 (the “Evaluation Date”).  Based upon that evaluation, the chief executive officer and the chief financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) are accumulated and communicated to our management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

  (b) Changes in Internal Control Over Financial Reporting

 

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) identified in connection with the evaluation required by Rules 13a-15(d) or 15d-15(d) that occurred during the fiscal quarter ended September 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

22 

 

 

PART II.          OTHER INFORMATION

 

Item 6. EXHIBITS

 

Exhibit

No.

  Description
     
2.1   Form of Amended and Restated Exchange Agreement (1)
3.1   Certificate of Incorporation (1)
3.1(a)   Certificate of Amendment to Certificate of Incorporation (1)
3.1(b)   Certificate of Amendment to Certificate of Incorporation filed on October 7, 2019*
3.2   Bylaws, as amended (2)
4.1   Form of Representative’s Warrants (4)
4.2   Form of Representatives’ Warrants issued on October 27, 2017 in connection with the follow-on underwritten public offering (3)
4.3   Indenture, dated as of June 21, 2019, between the Company and U.S. Bank National Association, as Trustee (7)
4.4   First Supplemental Indenture, dated as of June 25, 2019, between the Company and U.S. Bank National Association, as Trustee (7)
4.5   Form of 7.125% Note due 2024 (7)
4.6   Second Supplemental Indenture between the Company and U.S. Bank National Association, as Trustee*
4.7   Form of 6.875% Note due 2024 (8)
10.1**   Employment Agreement by and between John C. Villano and Sachem Capital Corp. (1)
10.2**   Employment Agreement by and between Jeffrey L. Villano and Sachem Capital Corp. (1)
10.3   Sachem Capital Corp. 2016 Equity Compensation Plan (1)
10.4   Final Form of the Restrictive Stock Grant Agreement dated July 17, 2018 under the Sachem Capital Corp. 2016 Equity Compensation Plan between the Company and each of Leslie Bernhard, Arthur Goldberg and Brian Prinz (5)
10.5   Mortgage Note made by Sachem Capital Corp to Bankwell Bank, dated as of March 29, 2019, in the principal amount of $795,000 (6)
10.6   Open-End Mortgage Deed, Security Agreement and Fixture Filing, dated March 29, 2019, by Sachem Capital Corp., in connection with the New Bankwell Mortgage Loan, for the benefit of Bankwell Bank (6)
10.7   Indemnity Agreement, dated as of March 29, 2019, by and among John L. Villano, Jeffrey C. Villano and Bankwell Bank (6)
10.8   Final Form of the Restrictive Stock Grant Agreement dated October 4, 2019 under the Sachem Capital Corp. 2016 Equity Compensation Plan between the Company and each of Leslie Bernhard, Arthur Goldberg and Brian Prinz *
31.1   Chief Executive Officer Certification as required under section 302 of the Sarbanes Oxley Act *
31.2   Chief Financial Officer Certification as required under section 302 of the Sarbanes Oxley Act *
32.1   Chief Executive Officer Certification pursuant to 18 U.S.C. section 1350 as adopted pursuant to section 906 of the Sarbanes Oxley Act ***
32.2   Chief Financial Officer Certification pursuant to 18 U.S.C. section 1350 as adopted pursuant to section 906 of the Sarbanes Oxley Act ***
101.INS   XBRL Instance Document *
101.SCH   XBRL Taxonomy Extension Schema Document *
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB   XBRL Taxonomy Extension Label Linkbase Document *
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document *

 

 

 

* Filed herewith.

** Compensation plan or arrangement for current or former executive officers and directors.

*** Furnished, not filed, in accordance with item 601(32)(ii) of Regulation S-K.

  (1) Previously filed as an exhibit to the Registration Statement on Form S-11, as amended, (SEC File No.: 333-214323) and incorporated herein by reference.
  (2) Previously filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2016 and incorporated herein by reference.
  (3) Previously filed on October 20, 2017, as Exhibit A to Exhibit 1.1 of the Registration Statement on Form S-11, as amended, (SEC File No.: 333-218954) and incorporated herein by reference.
  (4) Previously filed on December 23, 2016, as Exhibit A to Exhibit 1.1 of the Registration Statement on Form S-11, as amended, (SEC File No.: 333-214323) and incorporated herein by reference.
  (5) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended June 30, 2018 and incorporated herein by reference.
  (6) Previously filed as an exhibit to the Current Report on Form 8-K on April 5, 2019 and incorporated herein by reference.
  (7) Previously filed as an exhibit to the Current Report on Form 8-K on June 25, 2019 and incorporated herein by reference.
  (8) Previously filed as an exhibit to the Current Report on Form 8-K on November 6, 2019 and incorporated herein by reference.

 

23 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  SACHEM CAPITAL CORP.
   
Date:  November 13, 2019 By: /s/ Jeffrey C. Villano
    Jeffrey C. Villano
    Co-Chief Executive Office
    (Principal Executive Officer)
   
Date:  November 13, 2019 By: /s/ John L. Villano
    John L. Villano, CPA
    Co-Chief Executive Office and Chief Financial Officer
    (Principal Financial Officer)

 

24 

 

Sachem Capital (AMEX:SCCB)
Historical Stock Chart

1 Year : From Apr 2019 to Apr 2020

Click Here for more Sachem Capital Charts.

Sachem Capital (AMEX:SCCB)
Intraday Stock Chart

Today : Wednesday 8 April 2020

Click Here for more Sachem Capital Charts.

Latest SCCB Messages

{{bbMessage.M_Alias}} {{bbMessage.MSG_Date}} {{bbMessage.HowLongAgo}} {{bbMessage.MSG_ID}} {{bbMessage.MSG_Subject}}

Loading Messages....


No posts yet, be the first! No {{symbol}} Message Board. Create One! See More Posts on {{symbol}} Message Board See More Message Board Posts


Your Recent History
LSE
GKP
Gulf Keyst..
LSE
QPP
Quindell
FTSE
UKX
FTSE 100
LSE
IOF
Iofina
FX
GBPUSD
UK Sterlin..
Stocks you've viewed will appear in this box, letting you easily return to quotes you've seen previously.

Register now to create your own custom streaming stock watchlist.


NYSE, AMEX, and ASX quotes are delayed by at least 20 minutes.
All other quotes are delayed by at least 15 minutes unless otherwise stated.