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 Villano, one of the Company’s co-chief executive officers. Rent and other facility related charges paid by the Company to Union News for each of the years ended December 31, 2018 and 2017 was $18,000. On March 11, 2019, the Company relocated its operations to a new location, which is owned by the Company.

 

Prior to the Exchange, SCP reimbursed JJV for rent and other expenses paid by JJV on behalf of SCP. 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 JJV on SCP’s behalf including insurance premiums and real estate taxes in instances where SCP was been 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 JJV deemed appropriate to protect SCP’s interests. During 2017, JJV paid salaries and payroll taxes on behalf of the Company totaling $12,223.

 

During the period beginning January 1, 2017 and ending February 8, 2017, SCP paid JJV $52,902, representing the origination fees on loans funded by SCP in those years. (See Note 9 – Commitments and Contingencies.)

 

From time to time, JJV would acquire certain troubled assets from third parties who are not existing SCP borrowers. In such instances, JJV 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 JJV at December 31, 2018 and 2017 was $879,457 and $1,104,022, respectively. The real estate purchased is held by JJV in trust for the Company. The Company accounts for these arrangements as separate loans to JJV. 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 terms of the mortgage allow JJV to sell the properties in case of default with proceeds in excess of loan principal and accrued expense being returned to JJV. Neither SCP nor the Company made any loans to JJV in 2018 or 2017. During the years ended December 31, 2018 and 2017, JJV paid $148,171 and $134,452, respectively, in interest to the Company (or 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 adheres to prevailing 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 December 31, 2018 and 2017, loans to former partners and now shareholders totaled $4,412,742 and $3,588,669, respectively. Interest income earned on these loans totaled $375,552 and $303,232 for the years ended December 31, 2018 and 2017, respectively.

 

During the year ended December 31, 2018, the Company originated then sold two notes to a shareholder in the aggregate amount of $1,717,000. One note in the amount of $1,200,000 was modified as to its term and has not been re-assigned back to the note holder. This amount is reflected as due to shareholder at December 31, 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 in the balance sheet as Due to shareholder at December 31, 2017, and was paid to the noteholder in January 2018.

 

At December 31, 2018 and 2017, the total amount owed by JJV to the Company was $22,794 and $22,977, respectively 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.

 

During the years ended December 31, 2018 and 2017, the wife of one of the Company’s executive officers was paid $80,532 and $75,000, respectively, for accounting and financial reporting services provided to the Company.