The Company currently leases 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 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, 2018 were $13,500 and $4,500, respectively, and for the period beginning February 8, 2017 and ending September 30, 2017 and three-month period ended September 30, 2017 were $10,500 and $3,000, respectively. Amounts for the 2017 periods only reflect payments made after the Exchange. The Company expects to move its operations to a new location, owned by the Company, in the first quarter of 2019.

 

Prior to the Exchange, SCP reimbursed the Manager for rent and other expenses paid by the Manager on its behalf. For the period beginning January 1, 2017 and ending February 8, 2017, such amount totaled $35,847. In addition to rent, these amounts include other payments made by the Manager on SCP’s behalf including insurance premiums and real estate taxes in instances where SCP was notified that the borrower is in default, costs of any actions

foreclosures) commenced by SCP to enforce its rights or collect amounts due from borrowers who were in default of their obligations to SCP as well as other costs that the Manager deemed appropriate to protect SCP’s interests. For the period beginning January 1, 2017 and ending February 8, 2017, the Manager paid salaries and payroll taxes on behalf of the Company totaling $12,223. Unreimbursed costs advanced by the Manager on behalf of SCP as of September 30, 2017 were $4,905 and are included in other receivables on the Company’s balance sheet.

 

During the period beginning January 1, 2017 and ending February 8, 2017, SCP paid the Manager $52,902 representing origination fees on loans funded by SCP during the period.

 

From time to time, the Manager would acquire certain troubled assets from third parties who were not existing SCP borrowers. In such instances, the Manager would borrow money from SCP to finance these acquisitions. As part of the Exchange, the Company acquired the notes evidencing these loans from SCP. The principal balance of the loans to the Manager at September 30, 2018 was $969,457. The real estate purchased is held by the Manager in trust for the Company. The Company accounts for these arrangements as separate loans to the Manager. The income earned on these loans is equivalent to the income earned on similar loans in the portfolio. All underwriting guidelines are adhered to. The mortgage documents allow the Manager to sell the properties in case of default with proceeds in excess of loan principal and accrued expense being returned to the Manager. Since the IPO, the Company has not made any loans to the Manager. Interest income earned on loans to the Manager totaled $85,388 and $26,384 for the nine- and three-month periods ended September 30, 2018, respectively, and $103,223 and $31,320 for the nine- and three-month periods ended September 30, 2017, respectively. 2017 amounts include interest paid to SCP prior to the Exchange.

 

In the ordinary course of business, the Company may originate, fund, manage and service loans to shareholders (members in the case of loans funded prior to the Exchange). The underwriting process on these loans is consistent with Company policy. The terms of such loans, including the interest rate, income, origination fees and other closing costs are the same as those applicable to loans made to unrelated third parties in the portfolio. As of September 30, 2018, loans to former partners and now shareholders totaled $3,708,742. Interest income earned on these loans totaled $226,005 and $107,590 for the nine- and three-month periods ended September 30, 2018,

 

During the year ended December 31, 2017, the Company originated then sold notes to a shareholder in the amount of $2,750,000. Notes totaling $2,000,000 were repurchased by the Company and are classified as mortgages receivable at December 31, 2017. Prior to December 31, 2017, $723,478 was paid to the Company for the benefit of the noteholder. This amount is reflected on the Company’s balance sheet as “Due to note purchaser” at December 31, 2017 and was paid to the noteholder in January 2018.

 

At both September 30, 2018 and December 31, 2017, total amounts owed by the Manager to the Company was $22,977 and is reflected as other receivables on the Company’s balance sheet.

 

On February 9, 2017, the Company purchased computer hardware, software and furniture and fixtures totaling $92,806 from JJV.

 

For the nine months periods ended September 30, 2018 and 2017, the Company paid $56,250 and $50,200, respectively, to the wife of one of its co-chief executive officers for accounting and financial reporting services provided to the Company.