UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2020

☐ 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		81-3467779
(State or other jurisdiction of incorporation or organization)		(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)

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

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.

☒ 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).

☒ 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 ☐	Smaller reporting company ☒
Emerging growth company ☒

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 ☒ No

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	SACH	NYSE American LLC
7.125% Notes due 2024	SCCB	NYSE American LLC
6.875% Notes due 2024	SACC	NYSE American LLC
7.75% Notes due 2025	SCCC	NYSE American LLC

As of November 5, 2020, the Issuer had a total of 22,124,801 common shares, $0.001 par value per share, outstanding.

Table of Contents

SACHEM CAPITAL CORP.

TABLE OF CONTENTS


Part I	FINANCIAL INFORMATION
		Page Number
Item 1.	Financial Statements (unaudited)
	Balance Sheets as of September 30, 2020 and December 31, 2019	1
	Statements of Comprehensive Income for the Three-Month and Nine-Month Periods Ended September 30, 2020 and 2019	2
	Statements of Changes in Shareholders’ Equity for the Three-Month and Nine-Month Periods Ended September 30, 2020 and 2019	3
	Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2020 and 2019	5
	Notes to Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23
Item 4.	Controls and Procedures	23
Part II	OTHER INFORMATION
Item 1A.	Risk Factors.	24
Item 6.	Exhibits	25
SIGNATURES		27
EXHIBITS

Table of Contents

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.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

SACHEM CAPITAL CORP.

BALANCE SHEETS


	September 30, 2020		December 31, 2019
	(Unaudited)		(Audited)
Assets
Assets:
Cash and cash equivalents	$	5,384,073	$	18,841,937
Investments		27,688,794		15,949,802
Mortgages receivable		124,131,879		94,348,689
Interest and fees receivable		1,551,333		1,370,998
Other receivables		87,307		141,397
Due from borrowers		1,501,470		840,930
Prepaid expenses		106,816		24,734
Property and equipment, net		1,418,442		1,346,396
Deposits on property and equipment		172,210		71,680
Real estate owned		7,523,584		8,258,082
Deferred financing costs		66,086		16,600

Total assets	$	169,631,994	$	141,211,245

Liabilities and Shareholders' Equity
Liabilities:
Notes payable (net of deferred financing costs of $3,074,115 and $2,687,190)	$	69,452,636	$	55,475,810
Mortgage payable		771,785		784,081
Line of credit		12,080,569		—
Accounts payable and accrued expenses		522,453		249,879
Other loans		257,845		—
Security deposits held		13,416		7,800
Advances from borrowers		1,413,974		848,268
Deferred revenue		1,114,721		1,205,740
Notes payable		60,130		75,433
Accrued interest		80,672		3,416
Total liabilities		85,768,201		58,650,427
Commitments and Contingencies

Shareholders’ equity:
Preferred shares - $.001 par value; 5,000,000 shares authorized; no shares issued		—		—
Common stock - $.001 par value; 100,000,000 shares authorized; 22,117,301 issued and outstanding		22,117		22,117
Paid-in capital		83,810,276		83,856,308
Accumulated other comprehensive loss		(37,596)		(50,878)
Retained earnings (accumulated deficit)		68,996		(1,266,729)
Total shareholders' equity		83,863,793		82,560,818
Total liabilities and shareholders' equity	$	169,631,994	$	141,211,245

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

Table of Contents

SACHEM CAPITAL CORP.

STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Three Months Ended				Nine Months
	September 30,				Ended September 30,
	2020		2019		2020		2019
Revenue:
Interest income from loans	$	3,473,304	$	2,442,750	$	9,640,387	$	7,509,155
Interest income on investments		32,483		28,148		163,161		28,148
Gain/(loss)on sale of investment securities		(21,858)		—		415,301		—
Origination fees, net		393,097		497,237		1,551,652		1,202,777
Late and other fees		10,955		18,149		46,835		205,182
Processing fees		37,445		44,870		123,568		121,470
Rental income, net		9,593		9,446		49,777		82,350
Other income		336,789		325,523		904,071		622,054
Net gain on sale of real estate		—		12,927		—		20,076
Total revenue		4,271,808		3,379,050		12,894,752		9,791,212

Operating costs and expenses:
Interest and amortization of deferred financing costs		1,262,278		537,878		3,564,533		1,611,332
Compensation, fees and taxes		496,058		476,404		1,220,412		1,325,822
Stock based compensation		4,107		4,107		12,321		12,327
Professional fees		158,206		105,053		400,868		259,275
Other expenses and taxes		26,247		39,355		61,484		70,683
Exchange fees		22,713		11,343		29,986		32,850
Expense in connection with termination of LOC		—		—		—		779,641
Impairment		—		—		495,000		—
Net loss on sale of real estate		2,816		—		7,276		—
Depreciation		15,348		18,618		46,318		44,286
General and administrative expenses		145,251		131,206		412,677		400,561

Total operating costs and expenses		2,133,024		1,323,964		6,250,875		4,536,777

Net income		2,138,784		2,055,086		6,643,877		5,254,435

Other comprehensive income (loss)
Unrealized gain (loss) on investment securities		(72,785)		—		13,282		—

Comprehensive income	$	2,065,999	$	2,055,086	$	6,657,159	$	5,254,435

Basic and diluted net income per common share outstanding:
Basic	$	0.10	$	0.10	$	0.30	$	0.30
Diluted	$	0.10	$	0.10	$	0.30	$	0.30

Weighted average number of common shares outstanding:
Basic		22,117,301		21,336,870		22,117,301		17,662,480
Diluted		22,117,301		21,336,870		22,117,301		17,622,480

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

Table of Contents

SACHEM CAPITAL CORP.

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(unaudited)


	FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020
						Accumulated		(Accumulated
				Additional		Other		Deficit)
	Common			Paid in		Comprehensive		Retained
	Shares	Amount		Capital		Income/(Loss)		Earnings		Totals
Balance, July 1, 2020	22,117,301	$	22,117	$	83,806,169	$	35,189	$	584,288	$	84,447,763

Stock based compensation	—		—		4,107		—		—		4,107

Unrealized loss on marketable securities	—		—		—		(72,785)		—		(72,785)

Dividends paid	—		—		—		—		(2,654,076)		(2,654,076)

Net income	—		—		—		—		2,138,784		2,138,784

Balance, September 30, 2020	22,117,301	$	22,117	$	83,810,276	$	(37,596)	$	68,996	$	83,863,793


	FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019
						Accumulated		(Accumulated
				Additional		Other		Deficit)
	Common			Paid in		Comprehensive		Retained
	Shares	Amount		Capital		Income/(Loss)		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	—		—		—		—		(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

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

Table of Contents


	FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
						Accumulated		(Accumulated
				Additional		Other		Deficit)
	Common			Paid in		Comprehensive		Retained
	Shares	Amount		Capital		Income/(Loss)		Earnings		Totals
Balance, January 1, 2020	22,117,301	$	22,117	$	83,856,308	$	(50,878)	$	(1,280,011)	$	82,547,536

Offering costs-ATM	—		—		(58,353)		—		—		(58,353)

Stock based compensation	—		—		12,321		—		—		12,321

Unrealized gain on marketable securities	—		—		—		13,282		—		13,282

Dividends paid	—		—		—		—		(5,308,152)		(5,308,152)

Net income	—		—		—		—		6,657,159		6,657,159

Balance, September 30, 2020	22,117,301	$	22,117	$	83,810,276	$	(37,596)	$	68,996	$	83,863,793


	FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019
						Accumulated		(Accumulated
				Additional		Other		Deficit)
	Common			Paid in		Comprehensive		Retained
	Shares	Amount		Capital		Income/(Loss)		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	—		—		—		—		(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

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

Table of Contents

SACHEM CAPITAL CORP.

STATEMENTS OF CASH FLOW

(unaudited)


	Nine Months
	Ended September 30,
	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	6,643,877	$	5,254,435
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred financing costs		357,497		159,872
Depreciation expense		46,318		44,286
Stock based compensation		12,321		12,327
Impairment loss		495,000		—
Loss (gain) on sale of real estate		7,276		(20,076)
Abandonment of office furniture		—		12,000
Costs in connection with termination of line of credit				439,446
Realized gain on investments		(415,301)		—
Changes in operating assets and liabilities:
(Increase) decrease in:
Escrow deposits		—		12,813
Interest and fees receivable		(180,335)		(454,487)
Other receivables		54,090		(67,237)
Due from borrowers		(273,202)		2,122,939
Prepaid expenses		(82,082)		(22,305)
Deposits on property and equipment		(100,530)		(37,881)
(Decrease) increase in:
Due to note purchaser		—		(176,619)
Accrued interest		77,256		3,323
Accounts payable and accrued expenses		272,574		(159,512)
Deferred revenue		(91,019)		9,261
Advances from borrowers		565,706		180,889
Total adjustments		745,569		2,059,039
NET CASH PROVIDED BY OPERATING ACTIVITIES		7,389,446		7,313,474

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments		(37,216,177)		—
Proceeds from the sale of investments		25,905,769		—
Proceeds from sale of real estate owned		1,816,522		362,136
Acquisitions of and improvements to real estate owned		(1,584,300)		(443,217)
Purchase of property and equipment		(118,364)		(196,603)
Security deposits held		5,616		—
Principal disbursements for mortgages receivable		(68,029,798)		(42,163,704)
Principal collections on mortgages receivable		37,859,270		27,917,331
NET CASH USED FOR INVESTING ACTIVITIES		(41,361,462)		(14,524,057)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit		14,080,569		42,720,829
Repayment of line of credit		(2,000,000)		(69,939,952)
Proceeds from notes sold to shareholder		—		1,017,000
Repayment of notes sold to shareholder		—		(2,217,000)
Principal payments on mortgage payable		(12,296)		—
Principal payments on notes payable		(15,303)		—
Dividends paid		(5,308,152)		(7,027,746)
Financing costs incurred		(108,353)		(6,836)
Proceeds from other loans		257,845		—
Proceeds from mortgage payable		—		795,000
Repayment of mortgage payable		—		(297,837)
Proceeds from notes payable, net		—		68,634
Proceeds from issuance of common stock		—		30,736,148
Costs associated with the issuance of common stock		—		(147,002)
Gross proceeds from issuance of fixed rate notes		14,363,750		23,663,000
Financing costs incurred in connection with fixed rate notes		(743,908)		(1,307,571)
NET CASH PROVIDED BY FINANCING ACTIVITIES		20,514,152		18,056,667

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(13,457,864)		10,846,084

CASH AND CASH EQUIVALENTS- BEGINNING OF YEAR		18,841,937		158,859

CASH AND CASH EQUIVALENTS - END OF PERIOD	$	5,384,073	$	11,004,943

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

Table of Contents

SACHEM CAPITAL CORP.

STATEMENTS OF CASH FLOW (Continued)

(unaudited)


	Nine Months Ended
	September 30,
	2020		2019
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Taxes paid	$	—	$	—
Interest paid	$	2,093,080	$	472,329

SUPPLEMENTAL INFORMATION-NON-CASH
Dividends declared and payable	$	—	$	—

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

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

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

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

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

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

Table of Contents

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

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, 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 or a pledge of the ownership interests in the borrower by the principals thereof, as well as personal guarantees by the principals of the borrower. 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 may make opportunistic real estate purchases apart from its lending activities. The Company believes it qualifies and has operated as a real estate investment trust since 2017.

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 complete 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’s estimates are based on (a) assumptions that consider the Company’s past experience, (b) projections regarding the Company’s future operations and (c) general financial market and local and general economic conditions. Actual amounts could differ from those estimates.

Cash and Cash Equivalents

The Company considers all demand deposits, cashier’s checks, money market accounts and certificates of deposit with an original maturity of three months or less to be cash equivalents. The Company maintains its cash and cash equivalents at various financial institutions. The account balances typically exceed the Federal Deposit Insurance Corporation insurance coverage, and, as a result, there is a concentration of credit risk related to amounts on deposit. The Company does not believe that the risk is significant.

Allowance for Loan Loss

The Company reviews each loan on a quarterly basis and evaluates the borrower’s ability to pay the monthly interest, the borrower’s likelihood of executing the original exit strategy, as well as the loan-to-value (LTV) ratio. Based on the analysis, management determines if any provisions for impairment of loans should be made and whether any loan loss reserves are required.

Table of Contents

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

Fair Value Measurements

The framework for measuring fair value provides a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 820 are described as follows:

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

Level 2Inputs to the valuation methodology include:

●

quoted prices for similar assets or liabilities in active markets;

●

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

●

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

●

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

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

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

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.

Impairment of long-lived assets

The Company continually monitors events or changes in circumstances that could indicate 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.

Deferred Financing Costs

Costs incurred by the Company in connection with the public offering of its unsecured, unsubordinated notes, described in Note 6 - Notes Payable -- are being amortized over the term of the respective Notes.

Revenue Recognition

Interest income from the Company's loan portfolio is earned, over the loan period and is calculated using the simple interest method on principal amounts outstanding. Generally, the Company's loans provide for interest to be paid monthly in arrears. The Company does not accrue interest income on mortgages receivable that are more than 90 days past due.

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

Table of Contents

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

Income Taxes

The Company believes it qualifies as a Real Estate Investment Trust (REIT) for federal income tax purposes and made the election to be taxed as a REIT when it filed its 2017 federal income tax return. 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 distribution 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 follows 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. Under this standard, an entity may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold. Should the Company become liable for interest and penalties related to unrecognized tax benefits, such amounts would be included in interest expense. The Company has determined that there are no uncertain tax positions requiring accrual or disclosure in the accompanying financial statements as of September 30, 2020.

Earnings Per Share

Basic and diluted earnings per share are calculated in accordance with FASB 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.

Recent Accounting Pronouncements

In May 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-05, “Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief," which requires that entities use a new forward looking "expected loss" model that generally will result in the earlier recognition of an allowance for credit losses. This ASU allows entities to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost upon adoption of ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” The Company adopted both ASU 2016-13 and ASU 2019-05 effective January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s financial statements.

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

Reclassifications

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

Table of Contents

SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

3. Fair Value Measurement

The fair value measurement level within the fair value hierarchy of an asset or liability is based on the lowest level of any input that is significant to the fair market value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

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


	Level 1		Level 2		Level 3		Total
Stocks and ETFs	$	1,332,540		—		—	$	1,332,540
Fixed and Preferred Securities	$	2,862,830		—		—	$	2,862,830
Mutual Funds	$	23,493,424		—		—	$	23,493,424
Total Investments	$	27,688,794		—		—	$	27,688,794
Real Estate Owned					$	7,523,584	$