12. Commitments and Contingencies

Origination, Modification, and Construction Servicing Fees

Loan origination, modification and construction servicing fees generally range from 1%-3% of the original loan principal or the modified loan balance and, generally, are payable at the time the loan is funded or modified. The unamortized portion is recorded as deferred revenue on the balance sheet. At December 31, 2023, deferred revenue was $4,647,302, which will be recorded as income as follows:

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In instances in which mortgages are repaid before their maturity date, the balance of any unamortized deferred revenue is generally recognized in full at the time of repayment.

Employment Agreements

In February 2017, the Company entered into an employment agreement with John Villano, the material terms of which are as follows: (i) the employment term is five years with extensions for successive one-year periods unless either party provides written

notice at least 180 days prior to the next anniversary date of its intention to not renew the agreement; (ii) a base salary of $260,000, which was increased in April 2018, April 2021 and April 2022 to $360,000, $500,000 and $750,000, respectively; (iii) incentive compensation in such amount as determined by the Compensation Committee of the Company’s Board of Directors; (iv) participation in the Company’s employee benefit plans; (v) full indemnification to the extent permitted by law; (vi) a two-year non-competition period following the termination of employment without cause; and (vii) payments upon termination of employment or a change in control. In April 2021, the Company granted 89,928 restricted common shares (having a market value of approximately $500,000) to Mr. Villano. All shares pursuant to this grant were fully vested on January 1, 2024. In April 2022, the Company granted 98,425 restricted common shares (having a fair market value of approximately $500,000) to Mr. Villano. One-third of such shares vested on January 1, 2023 and 2024, and the remaining one-third will vest on January 1, 2025. In February 2023, the Company granted 130,890 restricted common shares (having a fair market value of approximately $506,000) to Mr. Villano. One-third of such shares vested on January 1, 2024 and an additional one-third will vest on each of January 1, 2025 and 2026. As of December 31, 2023, there were 120,068 restricted common shares that remain unvested and $743,885 of future stock compensation expense.

In July 2022, the Company entered into an employment agreement with John E. Warch, the material terms of which are as follows: (i) the employment term commenced on August 1, 2022 and will continue until terminated by either party; (ii) a base salary of $325,000; (iii) incentive compensation in such amount as determined by the Compensation Committee of the Company’s Board of Directors; (iv) participation in the Company’s employee benefit plans; (v) full indemnification to the extent permitted by law; and (vi) payments upon termination of employment or a change in control. In February 2023, the Company granted 8,000 restricted common shares (having a fair market value of approximately $30,000) to Mr. Warch. One-third of such shares vested on February 9, 2023, and an additional one-third were to vest on each of February 9, 2024 and 2025. In connection with the termination of Mr. Warch’s employment effective May 4, 2023, the 5,333 unvested restricted common shares were forfeited to the Company.

Unfunded Commitments

At December 31, 2023, the Company had future funding obligations totaling approximately $97.9 million, which can be drawn by the borrowers when the conditions relating thereto have been satisfied. The unfunded commitments will be funded from loan payoffs and additional drawdowns under existing and future credit facilities and proceeds from sale of debt and equity securities.

Other

In the normal course of its business, the Company is named as a party-defendant because it is a mortgagee having interests in real properties that are being foreclosed upon, primarily resulting from unpaid property taxes. The Company actively monitors these actions and, in all cases, believes there remains sufficient value in the subject property to assure that no loan impairment exists. At December 31, 2023, there were three such properties. The unpaid principal balance on the properties that are subject to this proceeding was approximately $0.8 million.

In accordance with the asset purchase agreement with Urbane New Haven, LLC (“Urbane”) in October 2022, under certain circumstances the Company will be required to pay Urbane 20% of the net proceeds, as defined, of certain real estate development projects completed by the Company until such time that the former principal owner of Urbane, who is currently employed by the Company, is no longer employed by the Company. Any future payments will be expensed.

On September 11, 2023, the Company entered into a contract to acquire a residential property in Miami, FL. The purchase price for the property is $2,300,000. The Company paid $230,000 upon the execution and delivery of the contract, which amount is refundable if the seller fails to satisfy certain closing conditions or fails to transfer ownership of the property. The balance of the purchase price is due at closing. As of the date of this report, the Company expects the closing to occur during the second quarter of 2024.