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Table of Contents

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 June 30, 2022

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

    

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,” “non-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

6.00% Notes due 2026

SCCD

NYSE American LLC

6.00% Notes due 2027

SCCE

NYSE American LLC

7.125% Notes due 2027

SCCF

NYSE American LLC

7.75% Series A Cumulative Redeemable Preferred Stock, Liquidation Preference $25.00 per share

SACHPRA

NYSE American LLC

As of August 8, 2022, the Issuer had a total of 38,526,689 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 June 30, 2022 and December 31, 2021

1

Statements of Comprehensive Income for the Three-Month and Six-Month Periods Ended June 30, 2022 and 2021

2

Statements of Changes in Shareholders’ Equity for the Three-Month and Six-Month Periods Ended June 30, 2022 and 2021

3

Statements of Cash Flows for the Six-Month Periods Ended June 30, 2022 and 2021

5

Notes to Financial Statements (unaudited)

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

29

Item 4.

Controls and Procedures

30

Part II

OTHER INFORMATION

Item 1A.

Risk Factors

31

Item 6.

Exhibits

31

SIGNATURES

34

EXHIBITS

i

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.

ii

Table of Contents

PART I.        FINANCIAL INFORMATION

Item 1.    FINANCIAL STATEMENTS

SACHEM CAPITAL CORP.

BALANCE SHEETS

    

June 30, 2022

    

December 31, 2021

(unaudited)

(audited)

Assets

 

  

 

  

Assets:

 

  

 

  

Cash and cash equivalents

$

29,130,494

$

41,938,897

Investment securities

34,382,317

60,633,661

Mortgages receivable

 

422,404,523

 

292,301,209

Interest and fees receivable

 

5,212,936

 

3,693,645

Other receivables

 

487,732

 

94,108

Due from borrowers

 

4,651,732

 

3,671,016

Prepaid expenses

 

170,142

 

271,291

Property and equipment, net

 

2,943,046

 

2,172,185

Real estate owned

 

5,904,614

 

6,559,010

Investments in partnerships

19,616,970

6,055,838

Other assets

420,684

306,440

Deferred financing costs, net

 

45,423

 

264,451

Total assets

$

525,370,613

$

417,961,751

Liabilities and Shareholders’ Equity

 

  

 

  

Liabilities:

 

  

 

  

Notes payable (net of deferred financing costs of $7,939,241 and $5,747,387)

$

240,212,509

$

160,529,363

Repurchase facility

39,372,430

19,087,189

Mortgage payable

 

750,000

 

750,000

Line of credit

23,406,655

33,178,031

Accrued dividends payable

3,927,600

Accounts payable and accrued expenses

 

177,866

 

501,753

Advances from borrowers

 

11,336,297

 

15,066,114

Deferred revenue

 

4,627,997

 

4,643,490

Other notes

17,640

30,921

Accrued interest

 

466,224

 

164,729

Total liabilities

320,367,618

237,879,190

Commitments and Contingencies

 

  

 

  

Shareholders’ equity:

 

  

 

  

Preferred shares - $.001 par value; 5,000,000 shares authorized; 1,903,000 shares of Series A Preferred Stock issued and outstanding

 

1,903

 

1,903

Common stock - $.001 par value; 100,000,000 shares authorized; 36,755,786 and 32,730,004 issued and outstanding

 

36,756

 

32,730

Paid-in capital

 

206,973,510

 

185,516,394

Accumulated other comprehensive loss

(425,972)

(476,016)

Accumulated deficit

 

(1,583,202)

 

(4,992,450)

Total shareholders’ equity

 

205,002,995

 

180,082,561

Total liabilities and shareholders’ equity

$

525,370,613

$

417,961,751

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

1

Table of Contents

SACHEM CAPITAL CORP.

STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Revenue:

  

 

  

  

 

  

Interest income from loans

$

10,433,572

$

4,682,295

$

18,944,947

$

9,213,528

Investment income

225,033

180,120

496,505

422,811

Income from partnership investments

317,004

36,868

589,493

54,241

Gain (loss) on sale of investment securities

5,570

85,471

(148,565)

(43,968)

Origination fees, net

 

2,045,638

 

831,893

 

3,683,266

 

1,349,321

Late and other fees

 

117,676

 

61,970

 

246,540

 

97,899

Processing fees

 

62,615

 

43,410

 

128,470

 

79,385

Rental income (loss), net

 

18,158

 

(9,398)

 

28,200

 

(5,214)

Unrealized losses on investment securities

(1,478,432)

(2,530,662)

Other income

 

801,296

 

801,266

 

1,411,312

 

1,258,075

Total revenue

 

12,548,130

 

6,713,895

 

22,849,506

 

12,426,078

Operating costs and expenses:

 

  

 

  

 

  

 

  

Interest and amortization of deferred financing costs

 

5,209,865

 

2,505,234

 

9,108,253

 

4,969,989

Professional fees

 

229,038

 

251,170

 

459,753

 

482,928

Compensation, fees and taxes

 

1,187,940

 

812,143

 

2,181,903

 

1,404,230

Exchange fees

 

12,467

 

12,465

 

24,795

 

24,795

Other expenses and taxes

95,354

23,506

160,058

45,314

Depreciation

 

22,239

 

21,263

 

44,478

 

40,865

General and administrative expenses

416,833

248,308

818,066

407,916

(Gain) Loss on sale of real estate

(188,182)

14,962

(122,343)

17,096

Impairment loss

335,000

294,000

595,500

319,000

Total operating costs and expenses

7,320,554

4,183,051

13,270,463

7,712,133

Net income

 

5,227,576

 

2,530,844

 

9,579,043

 

4,713,945

Preferred stock dividend

(921,766)

(1,843,531)

Net income attributable to common shareholders

4,305,810

2,530,844

7,735,512

4,713,945

Other comprehensive loss

Unrealized gain (loss) on investment securities

(192,764)

(104,316)

50,044

(111,810)

Comprehensive income

$

4,113,046

$

2,426,528

$

7,785,556

$

4,602,135

Basic and diluted net income per common share outstanding:

 

  

 

  

 

  

 

  

Basic

$

0.12

$

0.10

$

0.22

$

0.20

Diluted

$

0.12

$

0.10

$

0.22

$

0.20

Weighted average number of common shares outstanding:

 

  

 

  

 

  

 

  

Basic

 

36,373,570

 

24,851,010

 

35,630,455

 

23,503,679

Diluted

 

36,373,877

 

24,857,897

 

35,636,374

 

23,507,685

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

2

Table of Contents

SACHEM CAPITAL CORP.

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(unaudited)

FOR THE THREE MONTHS ENDED JUNE 30, 2022

Accumulated

Additional 

Other

Preferred Stock

Common Stock

Paid in

Comprehensive

Accumulated

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit

    

Totals

Balance, April 1, 2022

 

1,903,000

$

1,903

 

35,513,887

$

35,514

$

201,168,304

$

(233,208)

$

(1,562,750)

$

199,409,763

Issuance of Common Stock, net of expenses

 

 

1,136,432

1,136

5,681,884

5,683,020

Stock based compensation

105,467

106

123,322

123,428

Unrealized loss on marketable securities

(192,764)

(192,764)

Dividends paid on Preferred Stock

(921,766)

(921,766)

Dividends paid on Common Stock

(4,326,262)

(4,326,262)

Net income for the period ended June 30, 2022

5,227,576

5,227,576

Balance, June 30, 2022

 

1,903,000

$

1,903

 

36,755,786

$

36,756

$

206,973,510

$

(425,972)

$

(1,583,202)

$

205,002,995

FOR THE THREE MONTHS ENDED JUNE 30, 2021

Accumulated

Additional

Other

Preferred Stock

Common Stock

Paid in

Comprehensive

Accumulated

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit

    

Totals

Beginning balance, April 1, 2021

 

$

 

22,428,208

$

22,428

$

85,360,645

$

(33,486)

$

(707,868)

$

84,641,719

Issuance of Preferred Stock, net of expenses

1,700,000

1,700

40,611,426

40,613,126

Issuance of Common Stock, net of expenses

 

 

 

4,210,324

4,211

21,332,173

 

 

21,336,384

Stock based compensation

94,681

94

58,212

58,306

Unrealized loss on marketable securities

(104,316)

(104,316)

Dividends paid

(2,786,659)

(2,786,659)

Net income for the period ended June 30, 2021

2,530,844

2,530,844

Balance, June 30, 2021

 

1,700,000

$

1,700

 

26,733,213

$

26,733

$

147,362,456

$

(137,802)

$

(963,683)

$

146,289,404

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Table of Contents

    

FOR THE SIX MONTHS ENDED JUNE 30, 2022

Accumulated

Additional

Other

 

Preferred Stock

 

Common Stock

 

Paid in

 

Comprehensive

 

Accumulated

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit

    

Totals

Balance, January 1, 2022

1,903,000

$

1,903

32,730,004

$

32,730

$

185,516,394

$

(476,016)

$

(4,992,450)

$

180,082,561

Issuance of Common Stock, net of expenses

3,867,157

3,867

21,227,108

21,230,975

Exercise of warrants

19,658

20

(20)

Stock based compensation

 

138,967

 

139

230,028

 

230,167

Unrealized gain on marketable securities

 

50,044

 

50,044

Dividends paid on Preferred Stock

(1,843,531)

(1,843,531)

Dividends paid on Common Stock

(4,326,264)

(4,326,264)

Net income for the period ended June 30, 2022

 

9,579,043

 

9,579,043

Balance, June 30, 2022

 

1,903,000

$

1,903

36,755,786

$

36,756

$

206,973,510

$

(425,972)

$

(1,583,202)

$

205,002,995

    

FOR THE SIX MONTHS ENDED JUNE 30, 2021

Accumulated

Additional

Other

Preferred Stock

Common Stock

Paid in

Comprehensive

Accumulated

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit

    

Totals

Beginning balance, January 1, 2021

 

$

22,124,801

$

22,125

$

83,814,376

$

(25,992)

$

(2,890,969)

$

80,919,540

Issuance of Preferred Stock, net of expenses

1,700,000

1,700

40,611,426

40,613,126

Issuance of Common Stock, net of expenses

 

 

4,513,731

 

4,514

 

22,874,335

 

22,878,849

Stock based compensation

94,681

94

62,319

62,413

Unrealized loss on marketable securities

(111,810)

(111,810)

Dividends paid

 

(2,786,659)

 

(2,786,659)

Net income for the period ended June 30, 2021

 

4,713,945

 

4,713,945

Balance, June 30, 2021

 

1,700,000

$

1,700

26,733,213

$

26,733

$

147,362,456

$

(137,802)

$

(963,683)

$

146,289,404

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

4

Table of Contents

SACHEM CAPITAL CORP.

STATEMENTS OF CASH FLOW

(unaudited)

Six Months Ended

June 30, 

    

2022

    

2021

CASH FLOWS FROM OPERATING ACTIVITIES

  

 

  

Net income

$

9,579,043

$

4,713,945

Adjustments to reconcile net income to net

 

 

  

cash provided by operating activities:

Amortization of deferred financing costs and bond discount

 

1,108,675

 

502,872

Write-off of deferred financing costs

72,806

Depreciation expense

 

44,478

 

40,865

Stock based compensation

 

230,167

 

62,319

Impairment loss

595,500

319,000

(Gain) Loss on sale of real estate

(122,343)

17,096

Unrealized loss on investment securities

2,530,662

Loss on sale of investment securities

 

148,565

 

43,968

Debt Forgiveness

(257,845)

Changes in operating assets and liabilities:

 

 

  

(Increase) decrease in:

 

 

Interest and fees receivable

 

(1,620,733)

 

(197,929)

Other receivables

 

(393,624)

 

(63,868)

Due from borrowers

 

(1,102,371)

 

(280,683)

Prepaid expenses

 

101,149

 

(82,419)

(Decrease) increase in:

 

Accrued interest

 

301,495

 

14,955

Accounts payable and accrued expenses

 

(323,887)

 

(56,954)

Deferred revenue

 

(15,493)

 

131,104

Advances from borrowers

 

(3,729,817)

 

1,156,692

Total adjustments

 

(2,247,577)

 

1,421,979

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

7,331,466

 

6,135,924

CASH FLOWS FROM INVESTING ACTIVITIES

 

  

 

  

Purchase of investment securities

(36,088,438)

(85,471,393)

Proceeds from the sale of investment securities

59,710,599

78,107,144

Purchase of interests in investment partnerships, net

(13,561,132)

(1,843,398)

Proceeds from sale of real estate owned

1,397,502

919,014

Acquisitions of and improvements to real estate owned, net

 

(19,917)

 

(286,346)

Purchase of property and equipment

 

(815,339)

 

(776,465)

Principal disbursements for mortgages receivable

 

(191,971,926)

 

(75,190,172)

Principal collections on mortgages receivable

 

60,895,362

 

58,012,498

Costs in connection with investment activities

(114,244)

(192,646)

NET CASH USED FOR INVESTING ACTIVITIES

 

(120,567,533)

 

(26,721,764)

CASH FLOWS FROM FINANCING ACTIVITIES

 

  

 

  

Net proceeds from (repayment of) line of credit

 

(9,771,376)