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 March 31, ~~2021~~2022

☐ 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 2026	SCCE	NYSE American LLC
7.75% Series A Cumulative Redeemable Preferred Stock, Liquidation Preference $25.00 per share	SACHPRA	NYSE American LLC

As of May ~~14, 2021,~~3, 2022, the Issuer had a total of ~~24,568,225~~36,283,119 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 March 31, ~~2021~~2022 and December 31, ~~2020~~2021		1
	Statements of Comprehensive Income for the ~~Three Month~~Three-Month Periods Ended March 31, ~~2021~~2022 and ~~2020~~2021		2
	Statements of Changes in Shareholders’ Equity for the ~~Three Month~~Three-Month Periods Ended March 31, ~~2021~~2022 and ~~2020~~2021		3
	Statements of Cash Flows for the ~~Three Month~~Three-Month Periods Ended March 31, ~~2021~~2022 and ~~2020~~2021		4
	Notes to Financial Statements (unaudited)	5	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14	19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23	28
Item 4.	Controls and Procedures	23	28

Part II	OTHER INFORMATION

Item 6.	Exhibits	24	29
SIGNATURES		26	31
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


	March 31, 2021		December 31, 2020		March 31, 2022		December 31, 2021
	(unaudited)		(unaudited)		(unaudited)		(audited)
Assets
Assets:
Cash and cash equivalents	$	18,345,654	$	19,408,028	$	57,863,469	$	41,938,897
Investment securities		36,305,439		37,293,703		35,510,232		60,633,661
Investment in partnership		1,843,398		—
Mortgages receivable		156,771,704		155,616,300		353,627,221		292,301,209
Interest and fees receivable		1,882,611		1,820,067		3,988,127		3,693,645
Other receivables		413,212		67,307		304,796		94,108
Due from borrowers		2,525,039		2,025,663		3,841,663		3,671,016
Prepaid expenses		173,488		71,313		229,071		271,291
Property and equipment, net		1,449,653		1,433,388		2,153,604		2,172,185
Real estate owned		8,624,044		8,861,609		6,312,818		6,559,010
Other deposits		98,210		—
Deferred financing costs		0		72,806
Investments in partnerships						17,413,855		6,055,838
Other assets						364,208		306,440
Deferred financing costs, net						155,542		264,451
Total assets	$	228,432,452	$	226,670,184	$	481,764,606	$	417,961,751

Liabilities and Shareholders' Equity
Liabilities and Shareholders’ Equity
Liabilities:
Notes payable (net of deferred financing costs of $4,641,953 and $4,886,058)	$	109,884,797	$	109,640,692
Notes payable (net of deferred financing costs of $7,226,079 and $5,747,387)					$	209,050,671	$	160,529,363
Repurchase facility						26,945,149		19,087,189
Mortgage payable		0		767,508		750,000		750,000
Line of credit		28,160,988		28,055,648		23,279,364		33,178,031
Accrued dividends payable		0		2,654,977		0		3,927,600
Accounts payable and accrued expenses		536,323		372,662		512,473		501,753
Other loans		257,845		257,845
Security deposits held		13,416		13,416
Advances from borrowers		2,703,999		1,830,539		16,629,966		15,066,114
Deferred revenue		2,184,315		2,099,331		4,876,284		4,643,490
Notes payable		49,050		54,682
Other notes						24,294		30,921
Accrued interest		0		3,344		286,642		164,729
Total liabilities	$	143,790,733	$	145,750,644		282,354,843		237,879,190

Commitments and Contingencies

Shareholders’ equity:
Preferred shares - $.001 par value; 5,000,000 shares authorized; no shares issued		0		0
Common stock - $.001 par value; 100,000,000 shares authorized; 22,428,208 and 22,124,801 issued and outstanding		22,428		22,125
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; 35,513,887 and 32,730,004 issued and outstanding						35,514		32,730
Paid-in capital		85,360,645		83,814,376		201,168,304		185,516,394
Accumulated other comprehensive loss		(33,486)		(25,992)		(233,208)		(476,016)
Accumulated deficit		(707,868)		(2,890,969)		(1,562,750)		(4,992,450)
Total shareholders' equity		84,641,719		80,919,540
Total liabilities and shareholders' equity	$	228,432,452	$	226,670,184
Total shareholders’ equity						199,409,763		180,082,561
Total liabilities and shareholders’ equity					$	481,764,606	$	417,961,751

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

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SACHEM CAPITAL CORP.

STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

Three Months Ended

March 31,

2021

2020
Revenue:




Interest income from loans

$
4,531,232

$
2,901,406
Investment income

242,691

97,516
Income from partnership investment

17,373

0
(Loss) gain on sale of investment securities

(129,440)

446,083
Origination fees

517,428

511,056
Late and other fees

35,929

14,781
Processing fees

35,975

46,458
Rental income, net

4,184

10,728
Other income

456,809

284,274
Total revenue

5,712,181

4,312,302

Operating costs and expenses:




Interest and amortization of deferred financing costs

2,464,755

1,149,953
Professional fees

231,756

132,309
Compensation, fees and taxes

592,087

344,493
Exchange fees

12,329

7,273
Other expenses and taxes

21,809

28,703
Depreciation

19,602

16,283
General and administrative expenses

159,608

140,214
Loss on sale of real estate

2,134

4,460
Impairment loss

25,000

250,000
Total operating costs and expenses

3,529,080

2,073,688
Net income

2,183,101

2,238,614

Other comprehensive loss

Unrealized loss on investment securities

(7,494)

(135,382)
Comprehensive income

$
2,175,607

$
2,103,232
Basic and diluted net income per common share outstanding:




Basic

$
0.10

$
0.10
Diluted

$
0.10

$
0.10
Weighted average number of common shares outstanding:




Basic

22,138,006

22,117,301
Diluted

22,138,006

22,117,301


	Three Months Ended
	March 31,
	2022		2021
Revenue:
Interest income from loans	$	8,511,375	$	4,531,232
Investment income		271,472		242,691
Income from partnership investments		272,488		17,373
Loss on sale of investment securities		(154,135)		(129,440)
Origination fees, net		1,637,627		517,428
Late and other fees		128,864		35,929
Processing fees		65,855		35,975
Rental income, net		10,042		4,184
Unrealized losses on investment securities		(1,052,230)		0
Other income		610,017		456,809
Total revenue		10,301,375		5,712,181

Operating costs and expenses:
Interest and amortization of deferred financing costs		3,898,389		2,464,755
Professional fees		230,715		231,756
Compensation, fees and payroll taxes		993,962		592,087
Exchange fees		12,329		12,329
Other expenses and other taxes		64,704		21,809
Depreciation		22,239		19,602
General and administrative expenses		401,233		159,608
Loss on sale of real estate		65,838		2,134
Impairment loss		260,500		25,000
Total operating costs and expenses		5,949,909		3,529,080
Net income		4,351,466		2,183,101
Preferred stock dividend		(921,766)		0
Net income attributable to common shareholders		3,429,700		2,183,101

Other comprehensive loss
Unrealized gain (loss) on investment securities		242,808		(7,494)
Comprehensive income	$	3,672,508	$	2,175,607
Basic and diluted net income per common share outstanding:
Basic	$	0.10	$	0.10
Diluted	$	0.10	$	0.10

Weighted average number of common shares outstanding:
Basic		34,892,883		22,138,006
Diluted		34,898,666		22,138,006

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 MARCH 31, 2021



Accumulated

Additional

Other

Common

Paid in

Comprehensive

Accumulated


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

Sale of common stock through ATM

303,407

$
303

1,544,892

1,545,195
Offering costs-ATM

(2,730)

(2,730)

Stock based compensation

4,107

4,107

Unrealized loss on investment securities

(7,494)

(7,494)

Net income for the period ended March 31, 2021

2,183,101

2,183,101
Balance, March 31, 2021

22,428,208

$
22,428

$
85,360,645

$
(33,486)

$
(707,868)

$
84,641,719

				��
	FOR THE THREE MONTHS ENDED MARCH 31, 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	—		—	2,730,725		2,730		15,545,085		—		—		15,547,815

Exercise of warrants	—		—	19,658		20		(20)		—		—		—

Stock based compensation	—		—	33,500		34		106,845		—		—		106,879

Unrealized gain on marketable securities	—		—	—		—		—		242,808		—		242,808

Dividends paid on Preferred Stock	—		—	—		—		—		—		(921,766)		(921,766)

Net income for the period ended March 31, 2022	—		—	—		—		—		—		4,351,466		4,351,466
Balance, March 31, 2022	1,903,000	$	1,903	35,513,887	$	35,514	$	201,168,304	$	(233,208)	$	(1,562,750)	$	199,409,763

FOR THE THREE MONTHS ENDED MARCH 31, 2020

Accumulated

Additional

Other

Common

Paid in

Comprehensive

Accumulated


Shares

Amount

Capital

Loss

Deficit

Totals
Beginning balance, January 1, 2020

22,117,301

$
22,117

$
83,856,308

$
(50,878)

$
(1,266,729)

$
82,560,818

Offering costs-ATM

(58,353)

(58,353)

Stock based compensation

4,107

4,107

Unrealized loss on investment securities

(135,382)

(135,382)

Dividends paid

(2,654,076)

(2,654,076)

Net income for the period ended March 31, 2020

2,238,614

2,238,614
Balance, March 31, 2020

22,117,301

$
22,117

$
83,802,062

$
(186,260)

$
(1,682,191)

$
81,955,728


	FOR THE THREE MONTHS ENDED MARCH 31, 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 Common Stock, net of expenses	—		—	303,407		303		1,542,162		—		—		1,542,465

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

Unrealized loss on marketable securities	—		—	—		—		—		(7,494)		—		(7,494)

Net income for the period ended March 31, 2021	—		—	—		—		—		—		2,183,101		2,183,101
Balance, March 31, 2021	—		—	22,428,208	$	22,428	$	85,360,645	$	(33,486)	$	(707,868)	$	84,641,719

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

Table of Contents

SACHEM CAPITAL CORP.

STATEMENTS OF CASH FLOW

(unaudited)


	Three Months Ended					Three Months Ended
	March 31,					March 31,
	2021		2020			2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	2,183,101	$	2,238,614		$	4,351,466	$	2,183,101
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred financing costs and bond discount		244,105		116,764			469,251		244,105
Write off of deferred financing costs		72,806		0
Write-off of deferred financing costs							0		72,806
Depreciation expense		19,602		16,283			22,239		19,602
Stock based compensation		4,107		4,107			106,879		4,107
Impairment loss		25,000		250,000			260,500		25,000
Loss on sale of real estate		2,134		4,460			65,838		2,134
Loss (gain) on sale of investment securities		129,440		(446,083)
Unrealized loss on investment securities							1,052,230		0
Loss on sale of investment securities							154,135		129,440
Changes in operating assets and liabilities:
(Increase) decrease in:
Interest and fees receivable		(62,544)		(200,167)			(395,924)		(62,544)
Other receivables		(345,905)		25,000			(210,688)		(345,905)
Due from borrowers		(499,376)		(778,324)	��		(292,302)		(499,376)
Prepaid expenses		(102,175)		(8,555)			42,220		(102,175)
Deposits on property and equipment		0		36,680
(Decrease) increase in:
Accrued interest		(3,344)		(18)			121,913		(3,344)
Accounts payable and accrued expenses		163,661		8,136			10,720		163,661
Deferred revenue		84,984		75,005			232,794		84,984
Advances from borrowers		873,460		385,479			1,563,852		873,460
Total adjustments		605,955		(511,233)			3,203,657		605,955

NET CASH PROVIDED BY OPERATING ACTIVITIES		2,789,056		1,727,381			7,555,123		2,789,056

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment securities		(22,755,450)		(17,417,059)			(27,545,183)		(22,755,450)
Proceeds from the sale of investment securities		23,606,780		17,428,603			51,705,055		23,606,780
Purchase of interest in investment partnership		(1,843,398)		0
Purchase of interests in investment partnerships, net							(11,358,017)		(1,843,398)
Proceeds from sale of real estate owned		370,792		1,090,236			622,737		370,792
Acquisitions of and improvements to real estate owned		(160,361)		(377,289)			(177,336)		(160,361)
Purchase of property and equipment		(35,867)		(29,757)			(3,658)		(35,867)
Principal disbursements for mortgages receivable		(31,661,577)		(28,675,048)			(88,735,230)		(31,661,577)
Principal collections on mortgages receivable		30,506,173		11,758,497			27,106,768		30,506,173
Costs in connection with investment activities		(98,210)		0			(57,768)		(98,210)
NET CASH USED FOR INVESTING ACTIVITIES		(2,071,118)		(16,221,817)			(48,442,632)		(2,071,118)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit		105,340		0
Net proceeds from line of credit							0		105,340
Net proceeds from repurchase facility							7,857,960		0
Repayment of mortgage payable		(767,508)		(4,118)			0		(767,508)
Repayment of line of credit							(9,898,667)		0
Principal payments on notes payable		(5,632)		(4,932)			(6,627)		(5,632)
Dividends paid		(2,654,977)		(2,654,076)
Costs in connection with issuance of common stock - ATM		(2,730)		(58,353)
Proceeds from issuance of common stock - ATM		1,545,195		0
NET CASH USED FOR FINANCING ACTIVITIES		(1,780,312)		(2,721,479)
Dividends paid on Common Stock							(3,927,600)		(2,654,977)
Dividends paid on Preferred Stock							(921,766)		0
Proceeds from issuance of common shares, net of expenses							15,547,815		1,542,465
Gross proceeds from issuance of fixed rate notes							50,000,000		0
Financings costs incurred in connection with fixed rate notes							(1,839,034)		0
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES							56,812,081		(1,780,312)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(1,062,374)		(17,215,915)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS							15,924,572		(1,062,374)

CASH AND CASH EQUIVALENTS- BEGINNING OF YEAR		19,408,028		18,841,937			41,938,897		19,408,028

CASH AND CASH EQUIVALENTS - END OF PERIOD	$	18,345,654	$	1,626,022		$	57,863,469	$	18,345,654

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Interest paid	$	2,445,468	$	1,033,189

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

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SACHEM CAPITAL CORP.

STATEMENTS OF CASH FLOW (Continued)

(unaudited)


	Three Months Ended
	March 31,
	2022		2021
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Interest paid	$	3,307,225	$	2,445,468

SCHEDULE OF NON-CASH 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 March 31, 2022 amounted to $420,547.

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

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, ~~2021~~

2022

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, ~~non-banking~~non-bank 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 Northeastern United States and Florida. 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~~and/or 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.~~ratio evaluated on each transaction. In addition, the Company may make opportunistic real estate purchases apart from its lending ~~activities.~~activities or enter into other transactions with third parties involving real estate financing transactions.

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. The accompanying unaudited financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, ~~2020~~2021 and the notes thereto included in the Company’s Annual Report on Form 10-K. 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 ~~will base the use of~~bases its estimates on (a) various assumptions that consider its experience, (b) the Company’s projections regarding future operations and (c) general financial market and local and general economic conditions. Actual amounts could materially 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 combined 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.

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, ~~2021~~

2022

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 ~~FASB ASC~~Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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 orto 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 3~~Inputs~~inputs 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.

Land and building acquired in 2021 to serve as the Company’s future corporate headquarters is stated at cost. The building is not currently being depreciated as it is undergoing renovations.

Real Estate Owned

Real estate owned by the Company is stated at cost and is tested for impairment quarterly.

Consolidations

The consolidated financial statements of the Company include the accounts of all subsidiaries in which the Company has control over significant operating, financial and investing decisions of the entity. All intercompany accounts and transactions have been eliminated.

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~~flows.If 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.

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

Deferred Financing Costs

Costs incurred in connection with the Company’s revolving credit facilities, described in Note 7-Line of Credit, Mortgage Payable and Churchill Facility are amortized over the term of the applicable facility using the straight-line method.

Costs incurred by the Company in connection with the public offering of its unsecured, unsubordinated notes, described in Note 69 - 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~~Company’s loans provide for interest to be paid monthly in arrears. The Company, generally, does not accrue interest income on mortgages receivable that are more than 90 days past due. Interest income not accrued at March 31, ~~2021~~2022 and collected prior to the issuance of ~~these financial statements~~this report is included in income for the period ended March 31, ~~2021 income.~~2022.

Origination fee revenue, generally ~~2%- 5%~~1% – 3% of the original loan principal amount, is collected at loan funding and is recognized ratably over the contractual life of the loan in accordance with ASC 310.

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~~SACHEM CAPITAL CORP.~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~MARCH 31, 2021~~

Income Taxes

The Company believes it qualifies as a ~~Real Estate Investment Trust (REIT)~~real estate investment trust (“REIT”) for federal income tax purposes and operates accordingly. It made the election to be taxed as a REIT ~~when it filed~~on its 2017 ~~federal~~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 (the “Code”), 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.~~capital stock. 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~~Taxes” 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~~“more likely than ~~not”~~not” threshold. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in interest expense. The Company has determined that there are no0 uncertain tax positions requiring accrual or disclosure in the accompanying financial statements as of March 31, 2022 and 2021.

Earnings Per Share

Basic and diluted earnings per share are calculated in accordance with ASC 260 ~~“Earnings~~—“Earnings Per ~~Share”.~~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 December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU modifies ASC 740 to remove certain exceptions and adds guidance to reduce complexity in certain areas. For companies that file with the U.S. Securities and Exchange Commission (“SEC”), the standard is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. 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 effected, accounting standards if currently adopted would have a material effect on the Company’s financial statements.~~

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, ~~2021~~2022

Investment Transactions and Related Income.

Investment transactions are accounted for on a trade-date basis. Dividends are recorded on the ex-dividend date and interest is recognized on the accrual basis. Investment securities are marked-to-market. Unrealized gains and losses on investment securities with a stated maturity date are included in other comprehensive income (loss). All other unrealized gains and losses on investment securities are included in net income (loss).

Recent Accounting Pronouncements

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

3. Fair Value Measurement

The asset or liability’s fair value measurement level within the fair value hierarchy 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 March 31, ~~2021:~~2022:


	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Stocks and ETFs	$	3,963,599	$	0	$	0	$	3,963,599	$	20,137,864		0		0	$	20,137,864
Mutual Funds		32,341,840		0		0		32,341,840
Total Investments	$	36,305,439		0		0	$	36,305,439
Real Estate Owned					$	8,624,044	$	8,624,044
Mutual funds										15,372,368		0		0		15,372,368
Total liquid investments									$	35,510,232		0		0	$	35,510,232
Real estate owned										—		0	$	6,207,818	$	6,207,818

Following is a description of the methodologies used for assets measured at fair value:

Stocks and ETFs: Valued at the closing price reported in the active market in which the individual securities are traded.

Mutual ~~funds~~funds:: Valued at the daily closing price reported by the fund. Mutual funds held by the Company are open-end mutual funds that are registered with the ~~SEC.~~U.S. Securities and Exchange Commission. These funds are required to publish their daily net asset values and to transact at that price. The mutual funds held by the Company are deemed to be actively traded.

Real estate owned: The Company estimates fair values of real estate owned using market information such as recent sales contracts, appraisals, recent sales, ~~offers,~~ assessed values or discounted cash value models.

4. Mortgages Receivable

~~Mortgages Receivable~~

The Company offers ~~short-term~~ secured, non-bank loans to real estate owners and investors (also known as “hard money” loans) to fund their acquisition, renovation, development, rehabilitation or improvement of properties located primarily in ~~Connecticut.~~the Northeastern United States and Florida. The loans are secured by first mortgage liens on one or more properties owned by the borrower or related parties. ~~In addition, each loan is personally guaranteed by the borrower or its principals, which guarantees may be collaterally secured as well.~~ The loans are generally for a term of one to three years. The loans are initially recorded and carried thereafter, in the financial statements, at cost. Most of the loans provide for monthly payments of interest only (in arrears) during the term of the loan and a “balloon” payment of the principal on the maturity date.

For the ~~quarters~~three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, the aggregate amounts of loans funded by the Company were ~~$31,661,577~~$88,735,230 and ~~$28,675,048,~~$31,661,577, respectively, offset by principal repayments of ~~$30,506,173~~$27,304,218 and ~~$11,758,497,~~$30,506,173, respectively.

AtAs of March 31, ~~2021,~~2022, the Company’s mortgage loan portfolio ~~included~~includes loans ~~with outstanding principal balances~~ranging in size up to ~~approximately $10.8 million,~~$20,753,028 with stated interest rates ranging from 5.0% to ~~13.0%~~14.2%, and a default interest rate for non-payment of 18%.

~~At March 31, 2021, no single borrower had loans outstanding representing more than 10% of the total balance of the loans outstanding.~~

The Company will extend the term of a loan if, at the time of the extension, the loan and the borrower satisfy the Company’s underwriting requirements at the time of the extension. The Company treats a loan extension as a new loan.

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, ~~2021~~

2022

As of March 31, 2022 and 2021, the Company’s mortgage loan portfolio had an impairment loss of $105,000 and $0, respectively.

At March 31, 2022 and 2021, no single borrower or group of related borrowers had loans outstanding representing more than 10% of the total balance of the loans outstanding.

The Company may agree to extend the term of a loan if, at the time of the extension, the loan and the borrower meet all the Company’s then underwriting requirements. The Company treats a loan extension as a new loan.

Credit Risk

Credit risk profile based on loan activity as of March 31, ~~2021~~2022 and December 31, ~~2020:~~2021:


									Total										Total
									Outstanding										Outstanding
Mortgages Receivable	Residential		Commercial		Land		Mixed Use		Mortgages
March 31, 2021	$	100,858,097	$	41,464,982	$	7,085,462	$	7,363,163	$	156,771,704
December 31, 2020	$	112,240,129	$	33,548,683	$	6,111,670	$	3,715,818	$	155,616,300
											Residential		Commercial		Land		Mixed Use		Mortgages
December 31, 2021											$	157,841,896	$	95,319,795	$	20,755,891	$	18,383,627	$	292,301,209
March 31, 2022											$	192,305,801	$	113,902,025	$	23,184,331	$	24,235,064	$	353,627,221

~~The~~As of March 31, 2022, the following ~~are~~is the maturities of mortgages receivable as of March 31:


2021	$	84,701,867
2022		60,916,192	$	205,001,324
2023		10,885,121		118,276,090
2024 and thereafter		268,524
	$	156,771,704
2024				29,266,818
2025				1,082,989
Total			$	353,627,221

At March 31, ~~2021,~~2022, of the ~~479~~520 mortgage loans in the Company’s portfolio, 1220 were the subject of foreclosure proceedings. The aggregate outstanding ~~balances due on~~principal balance of these loans ~~as of March 31, 2021, including unpaid principal,~~and the accrued but unpaid interest and borrower ~~fees,~~charges as of March 31, 2022 was approximately ~~$2.6~~$6.3 million. In the case of each of these loans, the Company believes the value of the collateral exceeds the ~~total amount due.~~outstanding balance on the loan.

At March 31, 2022 approximately $27.2 million of mortgages receivable is past maturity and in the process of being extended.

5. Real Estate Owned

Property purchased for rental or acquired through foreclosure are included on the balance sheet as real estate owned.

As of March 31, ~~2021,~~2022 and ~~December~~March 31, ~~2020,~~2021, real estate owned totaled $6,312,818 and $8,624,044, ~~and $8,861,609,~~ respectively , with no valuation allowance. For the three months ended March 31, 2022, the Company recorded an impairment loss of $155,500 compared to an impairment loss of $25,000 in 2021.

As of March 31, 2022, real estate owned included $799,533 of real estate held for rental and $5,513,285 of real estate held for sale.As of March 31, 2021, real estate owned included $1,381,687 of real estate held for rental and $7,242,357 of real estate held for sale. ~~In the first quarter of 2021, the Company recorded an impairment loss of $25,000 compared to an impairment loss of $250,000 in the first quarter of 2020.~~

Properties Held for Sale

~~On January 15,~~During the three months ended March 31, 2022, the Company sold a property held for sale and recognized an aggregate loss of $65,838. During the three months ended March 31, 2021, the Company sold a property classified as real estate held for sale, receiving approximately $371,000 in gross proceeds. The Company recognized a loss of $2,134 on the sale.

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

Properties Held for Rental

As of March 31, 2022, 1 property, a commercial building, was held for rental. The tenant signed a 5 year lease that commenced on August 1, 2021.

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

Rental payments due from real estate held for rental are as follows:


Year ending December 31, 2022	$	53,200
Year ending December 31, 2023		53,200
Year ending December 31, 2024		53,200
Year ending December 31, 2025		53,200
Total	$	212,800

6. ~~Notes~~Profit Sharing Plan

On April 16, 2018, the Company’s Board of Directors approved the adoption of the Sachem Capital Corp. 401(k) Profit Sharing Plan (the “401(k) Plan”). All employees, who meet the participation criteria, are eligible to participate in the 401(k) Plan. Under the terms of the 401(k) Plan, the Company is obligated to contribute 3% of a participant’s compensation to the 401(k) Plan on behalf of an employee-participant. For the three month ended March 31, 2022 and 2021, the 401(k) Plan expense was $19,993 and $12,744, respectively.

7. Line of Credit, Mortgage Payable, and Churchill Facility

Wells Fargo Margin Line of Credit

During the year ended December 31, 2020, the Company established a margin loan account at Wells Fargo Advisors that is secured by the Company’s portfolio of short-term securities. The credit line bears interest at a rate equal to 1.75% below the prime rate (1.75% at March 31, 2022). As of March 31, 2022 the total outstanding balance was $23,279,364.

Mortgage Payable

In 2021, the Company obtained a new adjustable-rate mortgage loan from New Haven Bank (“NHB”) for up to a maximum principal amount of $1.4 million (the “NHB Mortgage”) of which $750,000 is outstanding as of March 31, 2022. The NHB Mortgage accrues interest at an initial rate of 3.75% per annum for the first 72 months and is due and payable in full on December 1, 2037. During the first 12 months, from December 1, 2021 to November 30, 2022, only interest is due and payable. Beginning on December 1, 2022 and through December 1, 2037, principal and interest on the NHB Mortgage will be due and payable on a monthly basis. All payments under the NHB Mortgage are amortized based on a 20-year amortization schedule. The interest rate will be adjusted on each of December 1, 2027 and 2032 to the then published 5-year Federal Home Loan Bank of Boston Classic Advance Rate, plus 2.60%. The NHB Mortgage is a non-recourse loan, secured by a first mortgage lien on the Company’s current corporate headquarters, located at 698 Main Street, Branford, Connecticut, and future corporate headquarters, located at 568 East Main Street, Branford, Connecticut. The first $750,000 of proceeds from the NHB Mortgage were used to reimburse the Company for out-of-pocket costs relating to the acquisition of the East Main Street property. The balance of the loan will be used to reimburse the Company for the out-of-pocket costs incurred to renovate the East Main Street property. Upon completion of the renovation, and assuming the Company can provide NHB with an appraisal that the East Main Street property has a value of not less than $1.4 million, the first mortgage lien on the current corporate headquarters will be released.

Churchill MRA Funding I LLC Repurchase Financing Facility

On July 21, 2021, the Company consummated a $200 million master repurchase financing facility (“Facility”) with Churchill MRA Funding I LLC (“Churchill”), a subsidiary of Churchill Real Estate, a vertically integrated real estate finance company based in New York, New York. Under the terms of the Facility, the Company has the right, but not the obligation, to sell mortgage loans to Churchill, and Churchill has the right, but not the obligation, to purchase those loans. In addition, the Company has the right and, in some instances the obligation, to repurchase those loans from Churchill. The amount that Churchill will pay for each mortgage loan it purchases will vary based on the attributes of the loan and various other circumstances. The repurchase price is calculated by applying an interest factor , as defined, to the purchase price of the mortgage loan. The Company has also pledged the mortgage loans sold to Churchill to secure its repurchase obligation. The cost of capital under the Facility is equal to the sum of (a) the greater of (i) 0.25%

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

and (ii) the 30-day LIBOR plus (b) 3%-4%, depending on the aggregate principal amount of the mortgage loans held by Churchill at that time. As of March 31, 2022 the effective rate charged under the Facility was 4.70%.

The Facility is subject to other terms and conditions, including representations and warranties, covenants and agreements typically found in these types of financing arrangements. Under one such covenant, the Company (A) is prohibited from (i) paying any dividends or making distributions in excess of 90% of its taxable income, (ii) incurring any indebtedness or (iii) purchasing any of its capital stock, unless, it has an asset coverage ratio of at least 150%; and (B) must maintain unencumbered cash and cash equivalents in an amount equal to or greater than 2.50% of the amount of its repurchase obligations. Churchill has the right to terminate the Facility at any time upon 180 days prior notice to the Company. The Company then has an additional 180 days after termination to repurchase all the mortgage loans held by Churchill.

The Company uses the proceeds from the Facility to finance the continued expansion of its lending business and for general corporate purposes. At March 31, 2022, the total amount outstanding under the Facility was $26,945,149 and the Company estimates that it had approximately $6.3 million of additional availability under the Facility. The collateral pledged to Churchill at March 31, 2022, was 25 mortgage loans that in the aggregate had unpaid principal balance of approximately $57.3 million.

The NHB Mortgage and the Churchill Facility contain cross-default provisions.

8. Financing Transactions

During the three month period ended March 31, 2022, the Company generated approximately $66.0 million of gross proceeds from the sale of its securities as follows:

(i)

$50,000,000 from the sale of its 6.0% unsecured, unsubordinated notes due March 30, 2027 (the “March 2027 Note Offering”); and

(ii)

$15,958,899 from the sale of 2,730,725 common shares in an “at-the-market” offering.

The net proceeds from the sale of these securities were used primarily to fund new mortgage loans, for working capital and general corporate purposes.

During the three month period ended March 31, 2021, the Company sold 303,407 common shares in an at-the-market offering. Net proceeds to the Company from the sale of these shares were $1,542,465.

9. Notes Payable

At March 31, ~~2021,~~2022, the Company had an aggregate of ~~$109,884,797~~$209,050,671 of unsecured, unsubordinated notes payable outstanding, net of ~~$4,641,953~~$7,226,079 of deferred financing costs (collectively, the “Notes”). The Notes ~~are divided into 3~~were issued in 5 series:

(i)

Notes having an aggregate principal amount of $23,663,000 bearing interest at 7.125% per annum and maturing June 30, 2024 (“the June 2024 Notes”);

(ii)

Notes having an aggregate principal amount of $34,500,000 bearing interest at 6.875% per annum and maturing December 30, 2024 (the “December 2024 Notes”); ~~and~~

(iii)

Notes having an aggregate principal amount of $56,363,750 bearing interest at 7.75% per annum and maturing December 30, 2024 (the ~~“2025~~“September 2025 Notes”).;

(iv)

Notes having an aggregate principal amount of $51,750,000 bearing interest at 6.0% per annum and maturing December 30, 2026 (the “December 2026 Notes”); and

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NOTES TO FINANCIAL STATEMENTS

MARCH 31, ~~2021~~

2022

(v)

Notes having an aggregate principal amount of $50,000,000 bearing interest at 6.0% per annum and maturing March 30, 2027 (the “March 2027 Notes”).

The Notes were sold in underwritten public offerings, were issued in denomination of $25.00 each and are listed on the NYSE American and trade under the ~~symbol~~symbols “SCCB”, “SACC”,“SCCC”, “SCCD” and ~~“SCCC”~~“SCCE”, respectively. All the ~~notes~~Notes were issued at par except for the last tranche of the September 2025 ~~Notes,~~notes, in the original principal amount of $28 million, which were issued at $24.75 each. Interest on the Notes is payable quarterly on each March 30, June 30, September 30 and December 30 that they are outstanding. So long as the Notes are outstanding, the Company is prohibited from making distributions in excess of 90% of its taxable income, incurring any additional indebtedness or purchasing any shares of its capital stock unless it has an “Asset Coverage Ratio” of at least 150% after giving effect to the payment of such dividend, the incurrence of such indebtedness or the application of the net proceeds, as the case may be. The Company may redeem the Notes, in whole or in part, without premium or penalty, at any time after their second anniversary of issuance upon at least 30 days prior written notice to the holders of the Notes. The redemption price will be equal to the outstanding principal amount of the Notes redeemed plus the accrued but unpaid interest thereon up to, but not including the date of redemption. The June 2024 Notes ~~will be callable any time after June 30, 2021,~~and the December 2024 Notes ~~will be~~are callable at any ~~time after November 7, 2021 and the~~time. The September 2025 Notes will be callable at any time after September 4, ~~2022.~~

~~Wells Fargo Margin Line of Credit~~

At2022, the December 2026 Notes will be callable at any time after December 30, 2023 and the March 31, 2021, the Company had a total outstanding balance of $28,160,988 under the margin loan account from Wells Fargo, which is secured by the Company’s portfolio of short-term securities. The credit line bears interest2027 Notes will be callable at ~~a rate equal to 1.75% below the prime rate (1.5% at~~any time after March ~~31, 2021).~~

9, 2024.

7.10. Other income

For the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, other income consists of the following:


	2021		2020		2022		2021
Income on borrower charges	$	108,740	$	86,449	$	234,467	$	108,740
Lender, modification and extension fees		281,894		132,274		308,048		281,894
In-house legal fees		57,300		51,150		62,100		57,300
Other income		8,875		14,401		5,402		8,875
Total	$	456,809	$	284,274	$	610,017	$	456,809

8.11. Commitments and Contingencies

Origination Fees

Loan origination fees ~~consist of points,~~ generally ~~2%-5%~~range from 1%-3% of the original loan ~~principal.~~principal and, generally, are payable at the time the loan is funded. These payments are amortized for financial statement purposes over the life of the loan ~~for financial statement purposes.~~

~~Original maturities of deferred revenue are~~and will be recorded as ~~follows~~income as ~~of:~~follows:

March 31,

2021

$
1,646,088
2022

511,441
2023

14,461
2024

12,325
Total

$
2,184,315


Year ending December 31, 2022	$	3,783,645
Year ending December 31, 2023		832,565
Year ending December 31, 2024		260,074
Total	$	4,876,284

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

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, ~~2021~~

2022

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 to $360,000, and increased again in April 2021 to $500,000; (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; (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 2022, the Compenstion Committee increased Mr. Villano’s base salary to $750,000.

In July 2020, the Company entered into an employment agreement with Peter Cuozzo, the material terms of which are as follows: (i) the agreement can be terminated by either party at any time upon delivery of written notice to the other party; (ii) a base salary of $250,000 per year; (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) subject to a covenant not to compete that continues for 18 months after termination unless he is terminated without “cause” prior to July 1, 2022; and (vii) severance pay equal to 18 months of his base compensation if he is terminated without cause, or if he terminates for good reason, prior to July 1, 2022. Mr. Cuozzo retired in January 2022 and waived all future benefits under his employment agreement and the Company agreed to pay on his behalf or reimburse him for the cost of health insurance for him and his spouse through September 30, 2025 and to accelerate the vesting of 4,753 common shares previously awarded to Mr. Cuozzo.

Unfunded Commitments

At March 31, ~~2021,~~2022, the Company had future funding obligations totaling ~~$23,489,412,~~$115,441,853, which can be drawn by the borrowers when the conditions relating thereto have been satisfied.

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, ~~usually because the owner failed to pay~~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 March 31, ~~2021,~~2022, there were 59 such properties, representing approximately ~~$453,000 in~~$810,000 of mortgages receivable.

9.12. Related Party Transactions

In the ordinary course of business, the Company may originate, fund, manage and service loans to shareholders. The underwriting process on these loans ~~is consistent with~~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 March 31, ~~2021,~~2022, and ~~2020,~~2021, loans to known shareholders totaled $15,594,572 and $10,589,641, ~~and $5,922,692, respectively, and interest~~respectively. Interest income earned on these loans totaled $347,638 and $231,609 ~~and $180,107, respectively.~~

~~For~~for the ~~three-month periods~~three months ended March 31, 2022 and 2021, ~~and 2020, the~~respectively.

The wife of the Company’s chief executive officer ~~was paid~~is employed by the Company as its director of finance. For the three months ended March 31, 2022 and 2021, she received $27,500 and $28,206, ~~and $25,000,~~ respectively, ~~for accounting and financial reporting services provided to~~as compensation from the Company. In December 2021, the Company hired the daughter of the Company’s chief executive officer to perform certain internal audit and compliance services. For the three month period ended March 31, 2022, she received compensation of $27,500.

~~10.~~13. Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, investments in securities , investments in partnerships, and mortgage loans.

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2022

The Company maintains its cash and cash equivalents with various financial institutions. Accounts at the financial institution are insured by the Federal Deposit Insurance Corporation up to $250,000.

The Company is potentially subject to concentration of credit risk in its investment securities. Currently, all of its investment securities, which include common stocks, preferred stock, corporate bonds and mutual funds, are held at Wells Fargo Advisors. Wells Fargo Advisors is a member of the Securities Investor Protection Corporation (SIPC). SIPC protects clients against the custodial risk of a member investment firm becoming insolvent by replacing missing securities and cash up to $500,000, including up to $250,000 in cash, per client in accordance with SIPC rules.

The Company makes loans that are secured by first mortgage liens on real property located primarily in Connecticut (approximately ~~75.3%~~47.3%), Florida (approximately 20.6%) ~~in Connecticut.~~and New York (approximately 13.4%). This concentration of credit risk may be affected by changes in economic or other conditions of the particular geographic area.

Credit risks associated with the Company’s mortgage loan portfolio and related interest receivable are described in Note 4 - Mortgages Receivable.

~~11. Equity Offerings~~14. Outstanding Warrants

~~During~~In 2017 the ~~three-month period ended~~Company consummated two public offerings – an initial public offering (“IPO”) in February and a follow-on offering in October-November. In connection with the IPO, the Company issued to the underwriters warrants to purchase an aggregate of 130,000 common shares at an exercise price of $6.25 per common share (“IPO Warrants”). The fair value of the IPO Warrants, using the Black-Scholes option pricing model, on the date of issuance was $114,926. The IPO Warrants expired unexercised on February 9, 2022.

In connection with a public offering that was consummated in October 2017, the Company issued to the underwriters warrants to purchase an aggregate of 187,500 common shares at an exercise price of $5.00 per share. These warrants expire on October 24, 2022. The fair value of these warrants, using the Black-Scholes option pricing model, on the date of issuance was $131,728. In Janaury 2022, warrants to purchase 93,750 of the Company’s common shares were exercised. The holders of those warrants elected to use the cashless exercise option available to them under the terms of the warrants. As such, they received 19,658 common shares. At March 31, ~~2021, the Company sold 303,407 Common Shares in an at-the-market offering. Net proceeds to the Company from the sale of these shares~~2022, 49,219 warrants were ~~$1,542,465.~~outstanding.

~~12. Partnership Investment~~15. Stock-Based Compensation

On ~~February 22, 2021,~~October 27, 2016, the Company ~~committed~~adopted the 2016 Equity Compensation Plan (the “Plan”), the purpose of which is to ~~$3 million~~align the interests of the Company’s officers, other employees, advisors and consultants or any subsidiary, if any, with those of the Company’s shareholders and to afford an incentive to such officers, employees, consultants and advisors to continue as such, to increase their efforts on the Company’s behalf and to promote the success of the Company’s business. The Plan is administered by the Compensation Committee. The maximum number of common shares reserved for the grant of awards under the Plan is 1,500,000, subject to adjustment as provided in ~~an investment partnership, or approximately a 7.6%~~ ~~ownership interest in~~Section 5 of the ~~partnership~~Plan. The number of securities remaining available for future issuance under the Plan as of March 31, 2022 was 1,318,935.

In February 2022, the ~~commitment date. The partnership is a commercial real estate finance company with a focus~~Company issued an aggregate of 33,500 restricted common shares under the Plan to 20 of its employees. One-third of such shares vested immediately upon issuance, and an additional one-third of such shares will vest on ~~providing debt capital solutions to local~~each of the first and ~~regional commercial real estate owners in~~second anniversaries of the ~~Northeastern United States.~~date of grant.

Stock based compensation for the three months ended March 31, 2022 and 2021 was $106,845 and $4,107, respectively. As of March 31, ~~2021, the Company’s outstanding investment totaled approximately~~ 2022, there was unrecorded stock based compensation expense $732,928.

$1.8 million. The Company’s withdrawal from the partnership may only be granted by the manager. As of March 31, 2021, the Company earned approximately $17,000 on the investment. The Company uses the cost method of accounting to account for this investment.

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, ~~2021~~

2022

~~13. Subsequent Events~~16. Equity Offerings

On ~~April 9,~~December 6, 2021, the Company filed a ~~Prospectus Supplement~~prospectus supplement to its Form S-3 Registration Statement ~~(File No. 333-236097)~~ covering the sale of up to ~~$43,636,250~~$44,925,000 of its ~~Common Shares~~common shares in an ~~at-the-market offering. In connection therewith,~~“at-the market” offering, which is ongoing. During the three months ended March 31, 2022, the Company ~~also entered~~sold an aggregate of 2,730,725 common shares under this prospectus and realized net proceeds of $15,547,815 in connection therewith. At March 31, 2022, $22,118,520 of common shares were available for future sale under the ongoing “at-the market” offering.

17. Partnership Investments

As of March 31, 2022, the Company had invested an aggregate of approximately $17.4 million in four limited liability companies managed by a commercial real estate finance company that provides debt capital solutions to local and regional commercial real estate owners in the Northeastern United States. The Company’s ownership interest in the four limited liability companies and the investment partnership ranges from 7.6% - 49%. The Company accounts for these investments at cost because the Company does not control or have significant influence over the investments. The Company’s withdrawal from each limited liability company may only be granted by the manager of such entity. Each limited liability company has elected to be treated as a partnership for income tax purposes.

For the three months ended March 31, 2022, the partnerships generated $272,489 of income for the Company.

At March 31, 2022, the Company had unfunded partnership commitments totaling approximately $3.7 million.

18. Special Purpose Acquisition Corporation

On March 24, 2021, the Company loaned $25,000 to its wholly-owned subsidiary, Sachem Sponsor LLC. Sachem Sponsor LLC used those funds to purchase 1,437,500 shares of Class B common stock of Sachem Acquisition Corp., a newly organized blank check company formed under the laws of Maryland in February 2021, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. As of March 31, 2022, the Company had incurred approximately $364,000 of costs related to the preparation and filing of the registration statement, including legal fees, accounting fees and filing fees as well organizational costs and an expense advance to the underwriter.

On July 14, 2021, Sachem Acquisition Corp. filed a registration statement on Form S-1 registering the sale of 5,750,000 units at $10.00 per unit, or $57,500,000 in the aggregate. Each unit consists of 1 share of Class A common stock and one-half of a warrant to purchase 1 share of Class A common stock.

19. Series A Preferred Stock

On June 25, 2021, the Company filed a Certificate of Amendment with the Department of State of the State of New York to designate 1,955,000 shares of the Company’s authorized preferred shares, par value $0.001 per share, as shares of Series A Preferred Stock with the powers, designations, preferences and other rights as set forth therein (the “Certificate of Amendment”). The Certificate of Amendment provides that the Company will pay quarterly cumulative dividends on the Series A Preferred Stock, in arrears, on the 30th day of each of September, December, March and June from, and including, the date of original issuance of the Series A Preferred Stock at 7.75% of the $25.00 per share liquidation preference per annum (equivalent to $1.9375 per annum per share). The Series A Preferred Stock will not be redeemable before June 29, 2026, except upon the occurrence of a Change of Control (as defined in the Certificate of Amendment). On or after June 29, 2026, the Company may, at its option, redeem any or all of the shares of the Series A Preferred Stock at $25.00 per share plus any accumulated and unpaid dividends to, but not including, the redemption date. Upon the occurrence of a Change of Control, the Company may, at its option, redeem any or all of the shares of Series A Preferred Stock within 120 days after the first date on which such Change of Control occurred at $25.00 per share plus any accumulated and unpaid dividends to, but not including, the redemption date. The Series A Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless repurchased or redeemed by the Company or converted into ~~an At Market Issuance Sales Agreement with Ladenburg Thalmann & Co. Inc. and Janney Montgomery Scott LLC to act as its sales agents~~common shares in connection with ~~sales~~a Change of ~~Common Shares pursuant to that Prospectus Supplement.~~

~~During~~Control by the ~~period from April 1, 2021 to May 4, 2021, the Company sold 2,045,336 Common Shares in 2 at the market offerings realizing net proceeds of $10,535,405.~~

~~In April 2021, the Compensation Committee~~holders of the ~~Board~~Series A Preferred Stock. Upon the occurrence of ~~Directors~~a Change of Control, each holder of Series A Preferred Stock will have the ~~Company (the “Committee”) approved the following 2021 compensation packages for its Chief Executive Officer, John L. Villano, and Chief Operating Officer, Peter J. Cuozzo:~~

~~With respect to Mr. Villano:~~

●

~~A base salary of $500,000 (compared to $360,000 in 2020);~~

●

~~A “targeted” annual bonus of $250,000, the exact amount to be determined by the Committee in its sole discretion, and payable on or before March 31, 2022;~~

●

~~A time-based equity award of $500,000 payable in restricted Common Shares; and~~

●

~~A one-time cash bonus of $250,000, of which $125,000 is immediately payable and $62,500~~ ~~is payable on each of July 1 and October 1, 2021, subject to Mr. Villano’s continued employment by the Company.~~

~~With respect to Mr. Cuozzo:~~

●

~~A base salary of $250,000 (same as 2020);~~

●

~~A cash bonus of $25,000, payable immediately in one lump sum; and~~

●

~~A time-based equity award of $25,000 payable in restricted Common Shares.~~

The Company issued (i) 89,928 restricted Common Shares to Mr. Villano based on the closing price of $5.56 per share on April 8, 2021 (the grant date) and (ii) 4,753 restricted Common Shares to Mr. Cuozzo based on the closing price of $5.26 ~~per share on April 12, 2021 (the grant date). The shares were issued pursuant~~right (subject to the Company’s ~~2016 Equity Compensation Plan and are subject~~election to ~~restrictions on transfer and forfeiture~~redeem the Series A Preferred Stock in whole or in part, as described above, prior to the Change of any unvested shares in the event of a voluntary resignation as an employee of the Company without “Good Reason” or of a termination of employment with the Company for “Cause,” as such terms are defined in their respective employment agreements with the Company. The restrictions on transfer and the forfeiture provisions will lapse with respect to one-third of the shares on each of January 1, 2022, 2023 and 2024. Each of Messrs. Villano and Cuozzo has the right to vote and receive dividends with respect to all the shares granted to him.

~~On April 30, 2021, the Company sold a property classified as real estate held for sale at March 31, 2021. Net proceeds from the sale were~~ ~~$280,449. NaN loss will be recognized on this sale.~~

Control Conversion

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, ~~2021~~2022

Date as defined in the Certificate of Amendment) to convert some or all of the Series A Preferred Stock held by such holder on the Change of Control Conversion Date into a number of the common shares determined by formula, in each case, on the terms and subject to the conditions described in the Certificate of Amendment, including provisions for the receipt, under specified circumstances, of alternative consideration as described in the Certificate of Amendment. Except under limited circumstances, holders of the Series A Preferred Stock generally do not have any voting rights.

~~14.~~20. Subsequent Events

On April 4, 2022, the Company sold an additional $1,875,000 principal amount of the March 2027 Notes pursuant to a partial exercise of the underwriter’s over-allotment option in the March 2027 Note Offering and realized net proceeds of approximately $1.8 million, after payment of underwriting discounts and commissions and estimated offering expenses.

In April 2022, the Company granted (i) 98,425 restricted common shares (having a market value of approximately $500,000) to its chief executive officer. One-third of such shares will vest on January 1, 2023, and an additional one-third will vest on each of January 1, 2024 and 2025 and (ii) 7,042 restricted common shares (having a market value of approximately $35,000) to its vice president of finance and operations. One-third of such shares vested on the date of grant, and an additional one-third will vest on each of April 7, 2023 and 2024. In addition, the Company increased the annual base salary of its chief executive officer to $750,000.

On April 1, 2022, the board of directors declared a dividend of $0.12 per common share payable on April 18, 2022 to shareholders of record as of April 11, 2022.

From April 1, 2022 through May 3, 2022, the Company sold an aggregate of 663,765 common shares under its at-the-market offering facility realizing gross proceeds of approximately $3.4 million.

On April 6, 2022, the Company received a term sheet for another note offering up to a maximum of $75 million aggregate principal amount. The Company expects that the offering will be made in May 2022.

Management has evaluated subsequent events through May 3, 2022 the date on which the financial statements were available to be issued. Based on the evaluation, no adjustments were required in the accompanying financial statements.

21. COVID-19

The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide and has materially and adversely affected many ~~businesses.~~businesses and as of March 31, 2022, the COVID-19 pandemic is ongoing. In response to the onset of the COVID-19 pandemic and the restrictions imposed by various states, including the ~~State~~States of Connecticut, Florida and New York to prevent, or at least reduce the risk of the spread of the virus, at the end of the first quarter of 2020 the Company adopted certain temporary programs, policies and guidelines designed primarily to preserve its liquidity, help its borrowers and protect its employees.

In ~~particular,~~the event the Company ~~adopted a “forbearance” program~~is forced to ~~help borrowers~~close its physical office, it is likely that ~~were unable~~there would be some adverse impact. For example, the underwriting process would continue to function but would take longer to complete without immediate access to background and credit profiles. Loan committee meetings would continue to be held virtually (as they are under normal conditions) but the loan approval process may incur delay or not be as thorough and efficient as in the past. In addition, Company personnel may not be able to meet ~~their financial obligations due~~with borrowers or potential borrowers, including physical property inspections, which could adversely impact its ability to ~~COVID-19. In addition, to preserve its capital, the Company imposed a moratorium on funding~~service loans, monitor compliance and originate new ~~loans other than from proceeds generated from pay-offs of existing~~ loans. Finally, the ~~Company imposed stricter lending criteria on new loans. By~~filing of loan documents with the beginning of the third quarter of 2020, it appeared that economic conditions had stabilized to the point that the Company was able to cancel the forbearance program, restart its lending operations and return to its normal underwriting criteria.

~~Over the course of 2020 and into early 2021, the U.S. Congress has authorized over $4.0~~ trillion of stimulus payments to small businesses and individuals adversely impacted by COVID-19. In addition, the Federal Reserve Board has maintained its accommodative monetary policy. Finally, since December 2020, the U.S. Food and Drug Administration (“FDA”) has issued emergency use authorizations for three COVID-19 vaccines. As of May 6, 2021, approximately 250 million doses of vaccines have been administered in the United States and over 100 million people in the United States are fully vaccinated. As a result, many states have issued new orders relaxing or even eliminating many of the restrictions on social gatherings and businesses that were intended to stem the spread of the virus. The combination of these factors – stimulus, monetary easing and vaccination roll-out, appears to be having a positive impact on general economic conditions. In addition, interest rates remain low and markets are liquid. As a result, real estate values have stabilized and the Company has not experienced any significant increase in defaults.

Notwithstanding the foregoing, there are still concerns regarding mutations of the virus that might not be susceptible to the existing vaccines and there is still a significant portion of the worldwide population, including in the U.S., that is not vaccinated. If continuing concerns relating to the COVID-19 pandemic limit our ability to have meetings with potential borrowers, or our borrower’s ability to source materials and services to complete construction in process, the Company’s business and operations could be adversely impacted. The extent to which COVID-19 impacts the Company’s business and operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, the Company’s business, operations and financial conditionvarious recording offices may be ~~materially adversely affected.~~delayed.

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Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations should be read in conjunction with the financial statements and the notes to those statements included elsewhere in this report. Certain statements in this discussion and elsewhere in this report constitute forward-looking statements, within the meaning of section 21E of the Exchange Act, that involve risks and uncertainties. The actual results may differ materially from those anticipated in these forward-looking statements.

Company Overview

We are a Connecticut-based real estate finance company that specializes in originating, underwriting, funding, servicing and managing a portfolio of short-term (~~i.e.~~(i.e., three years or less) loans secured by first mortgage liens on real property. From our inception in December 2010, through our initial public offering, in February 2017, we operated as a limited liability company. On February 9, 2017, we completed our initial public offering (the “IPO”), the primary purpose of which was to raise equity capital to fund mortgage loans and expand our mortgage loan portfolio and to diversify our ownership so that we could qualify, for federal income tax purposes, as a real estate investment trust, or REIT.

We believe that, since consummation of the IPO, we ~~met~~meet all the requirements to qualify as a REIT for federal income tax purposes and elected to be taxed as a REIT beginning with our 2017 tax year. As a REIT, we are entitled to claim deductions for distributions of taxable income to our shareholders thereby eliminating any corporate tax on such taxable income. Any taxable income not distributed to shareholders is subject to tax at the regular corporate tax rates and may also be subject to a 4% excise tax to the extent it exceeds 10% of our total taxable income. To maintain our qualification as a REIT, we are required to distribute each year at least 90% of our taxable income. As a REIT, we may also be subject to federal excise taxes and state taxes.

Review of the First Quarter and Outlook for Balance of Year

Compared to the first quarter of ~~2020,~~2021, revenue increased ~~32.5%~~80.3%, net income ~~decreased 2.5%~~attributable to common shareholders increased 57.1%, and earnings per share remained ~~unchanged.~~unchanged at $0.10 per share. The revenue increase was directly related to the growth in our lending ~~activities.~~activities, reflected in our interest income which had an increase of 87.8% and our origination fees that had an increase of 216.5%. The ~~decrease in net income was generally due to a 70.2%~~ increase in ~~total~~revenue was partly offset by a 68.6% increase in operating costs and expenses. ~~Interest~~The increase in operating expenses is mainly attributable to a 58.2% increase in interest and amortization of deferred financing costs ~~accounted for 90% of the~~and an 67.9% increase in ~~total operating costs~~compensation and ~~expenses, which, in turn reflects a 96.9%~~related expenses. The increase in ~~notes payable ($114.5 million at~~compensation expense is mainly attributable to the addition of a Chief Investment Officer in April 2021 as well as additional support staff in our operations and finance teams, positions that are part of our long-term growth strategy. Mortgages receivable increased by 125.6% compared to March 31, 2021, ~~and $58.2 million at March 31, 2020. However,~~while cash and cash equivalents increased 215.4%. The increase in both mortgages receivable and ~~investment securities at March 31, 2021~~cash and cash equivalents were ~~$54.7 million compared~~primarily due to ~~$17.9 million at March 31, 2020. In addition, we had $30.5 million~~increase in ~~loan repayments (compared to $55 million for all of 2020) versus $31.7 million of new funding. Both the loan repayments~~lending and ~~new funding amounts were the highest for any quarter since~~two public note offerings, a preferred stock offering and our IPO. As a result, our mortgage loan portfolio only increased $1 million from December 31, 2020. In other words, the velocity of loan repayments and reinvesting those proceeds did not allow us to put our working capital to work efficiently. Our biggest challenge for the remainder of the year is to put our working capital to work and reduce our interest expense.at-the-market offerings.

Our primary business objective for 2022 remains ~~constant:~~ to grow our loan portfolio while protecting and preserving capital in a manner that provides for attractive risk-adjusted returns to our shareholders over the long term principally through dividends. We intend to achieve this objective by accelerating profitable growth and driving operational excellence. To accelerate profitable growth, we will continue to focus on selectively originating, managing, and servicing a portfolio of first mortgage real estate loans designed to generate attractive risk-adjusted returns across a variety of market conditions and economic cycles. We are also targeting larger-value commercial loans with strong, experienced sponsors. To drive operational excellence, we have embarked on a broad change management initiative to review, assess, and upgrade –— or transform if necessary –— our existing operational processes, from workflows and employee roles/responsibilities to decision trees and data collection procedures and forms. To that end, in the third quarter of 2021 we rolled out a new underwriting model that automated the production of our loan documentation — term sheets, proof of funds, etc. The automation allows for more accurate and timely processing of loan applications, thus increasing loan production while keeping our employee headcount down. In addition, we have begun to focus on developing relationships with larger scale wholesale brokers, furthering our efforts to attract larger borrowers with better credit quality. We believe that our ability to react quickly to the needs of borrowers, our flexibility in terms of structuring loans to meet the needs of borrowers, our ~~intimate~~ knowledge of the ~~Connecticut~~primary real estate ~~market, which is our largest market,~~markets we lend in, our expertise in ~~‘‘hard money’’~~“hard money” lending and our focus on newly originated first mortgage loans, should enable us to achieve our primary objective. Nevertheless, we remain flexible to take advantage of other real estate opportunities that may arise from time to time, whether they relate to the mortgage market or to direct or indirect investments in real estate.

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Our strategy to achieve this objective also includes the following:

●

capitalize on opportunities created by the long-term structural changes in the real estate lending market and the continuing lack of liquidity in the commercial and investment real estate markets;

●

take advantage of the prevailing economic environment and current economic, political and social trends that may impact real estate lending, as well as the outlook for real estate in general and particular asset classes;

●

remain flexible to capitalize on changing sets of investment opportunities that may be present in the various points of an economic cycle;

●

increase the size and quality of our mortgage loans and expand our geographic footprint to reduce our exposure to adverse market conditions that have a disproportionate impact on a single asset class or geographic area;

●

maintain our status as a publicly-held company, subject to the reporting requirements of the Exchange Act, which gives us immediate access to the public markets for much-needed capital; and

●

operate to qualify as a REIT and for an exemption from registration under the Investment Company Act of 1940, as ~~amended, or the Investment Company Act.~~amended.

We expect 2022 to be a challenging year due to the following factors:

COVID-19. The novel corona virus known as COVID-19 remains a concern as the risk of new variants and the attendant personal and economic disruption is still prevalent. In terms of ~~our outlook for 2021, the biggest challenge remains the unknown impact of~~dealing with COVID-19, ~~and future actions that may be taken to contain the spread of COVID-19. Keeping~~keeping our workforce healthy and safe is our number one priority and we are following the updated guidelines and recommendations issued by the State of Connecticut ~~on March 19, 2021.~~and Centers for Disease Control. We continue to encourage employees to stay home when sick and encourage working from home when possible. In the event of a positive COVID-19 ~~case, Sachem~~test result, employees are expected to inform management immediately and follow state testing and contact tracing protocols. ~~At Sachem, we have not been immune to the virus striking our employees and their family members. Fortunately, none of these occurrences has been life-threatening in any way. However, to~~To mitigate the risk of office closure and to ensure business continuity, our employees are equipped so they can seamlessly work ~~remotely, away from the Sachem corporate office.~~remotely. This remote work set-up has proven to be effective since, at times during the pandemic, employees had to self-isolate based on their own health condition or that of an immediate family member. While loan processing and funding may have been marginally delayed, there was no material adverse impact to the service levels we provided our borrowers.

In the event we are forced to close our physical office, ~~there would be~~it is likely to have some ~~impact.~~adverse impact on our operations. For example, the underwriting process would continue to function but would take longer to complete without immediate access to background and credit profiles. Loan committee meetings would continue to be held virtually (as they are under normal conditions) but the loan approval process may incur delay or not be as thorough and efficient as in the past. In addition, we may not be able to meet with borrowers or potential borrowers, including physical property inspections, which could adversely impact our ability to service our loans, monitor compliance and originate new loans. Finally, the filing of loan documents with the various recording offices may be delayed.

~~In summary,~~Interest rate compression. For the ~~consequences may include one or more~~three months ended March 31, 2022 and 2021, the yield on our mortgage loan portfolio was 11.30% and 11.73%, respectively. (For this purpose, yield only takes into account the stated interest rate on the mortgage note adjusted to the default rate, if applicable.) We believe the interest rate compression will continue to be a factor in 2022, particularly as the Federal Reserve Board has begun to increase interest rates, thereby increasing borrowing costs and the cost of capital. This will have a direct impact on our future borrowing costs and on the amounts we borrow under the Churchill Facility (described below), the Wells Fargo Loan (described below) and the NHB Mortgage (described below), all of which are adjustable rate products. We seek to mitigate some of the ~~following:~~

●

~~increase the amount~~risk associated with rising rates by limiting the term of most new loans to one year. The interest rates we charge on our loans are subject to a variety of ~~time necessary to review loan applications, structure loans and fund loans;~~

●

~~adversely impact the ability of borrowers to remain current on their obligations;~~

●

~~reduce the rate of prepayments;~~

●

~~delay the completion of renovation projects in-process;~~

●

~~inhibit the ability of borrowers to sell their properties to repay their obligation to us; and~~

●

~~delay foreclosure or other judicial proceedings necessary to enforce our rights.~~

~~Other~~ factors including competition (see below) and consumer reluctance due to inflation and general economic conditions. If we cannot increase the rates on our loans, the spread between our cost of capital and what we earn on that ~~we believe~~capital will be reduced, which would adversely impact our ~~business~~income. On the other hand, since the interest rate on a portion of our outstanding indebtedness is fixed, we have reduced the risk of interest rate compression if interest rates increase. That will enable us to continue to focus on growth and building market share rather than short-term profits and cash flow.

Geopolitical concerns. The Russian Ukrainian war has caused market volatility, spikes in ~~2021 include the following:~~commodity prices, supply chain interruptions, heightened cybersecurity concerns and general concerns that it might lead to unconventional warfare. The true

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ramifications of this conflict and their impact on the markets and our business are not fully known at this time. Our business is purely domestic, but we are impacted by market volatility and cybersecurity is a concern for all businesses.

Increased competition. In the past, our primary competitors were other non-bank real estate finance companies (similar to Sachem Capital Corp.) and banks and other financial institutions. Our principal competitive advantages included our size and our ability to address the needs of borrowers in terms of timing and structuring loan transactions. More recently, we are encountering competition from private equity funds, hedge funds and other specialty finance entities funded by investment banks, asset managers, private equity funds and hedge funds. Clearly, the primary driver for these new market participants is the need to generate yield. They are well-funded and aggressive in terms of pricing. Competition is becoming more of a factor as we implement our strategy to focus on larger loans and more sophisticated borrowers.

Borrower expectations. The new competitive landscape is shifting the negotiating leverage in favor of borrowers. As borrowers have more choices, they are demanding better terms. ~~For the quarter ended March 31, 2021, the yield~~This is particularly true as we focus more on ~~our portfolio was 11.73% compared to 12.16% for the quarter ended March 31, 2020. We expect further rate compression in 2021.~~larger loans and borrowers with better credit histories.

Property value fluctuations. We remain aware of property value market cycles and utilize a dashboard of indicators to track property value trends. ~~If we see a decline in property values, our~~Our response to this development would be to adhere to our ~~strict loan-to-value ratio, limit the term of our loans to not more than one year,~~underwriting guidelines and aggressively enforce our rights when loans go into default. ~~We intend to be well-capitalized and well-positioned to be opportunistic through negative cycles as we did in the first quarter of 2020.~~ By judiciously relying on our dashboard of leading indicators and continuing to make decisions in a sound and proper manner, we see no reason to expect any significant negative outcome regarding our business operations and growth. Some of our indicators within our dashboard are interest rate changes impacting mortgage rates, days-on-market, pending sales, NAHB’s Housing Market Index and the Senior Loan Officer Opinion ~~Survey, among others.~~Survey.

Increased operating expenses. ~~We expect~~ Our operating expenses ~~to be~~for the three months ended March 31, 2022 are significantly higher ~~in 2021~~ than they were in ~~2020. Specifically, we expect an increase~~the same period in ~~interest expense~~2021 due to aour higher ~~level of indebtedness.~~debt load, increased headcount, and increased loan volume. In ~~2020, we sold approximately $56.1 million of unsecured unsubordinated five-year notes having an interest rate of 7.75%. The full impact of the interest will be felt for the first time in 2021. In~~ addition, ~~we expect~~ our compensation expense ~~to increase~~has increased as we hired new personnel and increased salaries ~~on account~~of existing employees to administer a larger loan portfolio and more complex loan transactions.

Unfunded commitments. Most of our ~~growth.~~loans are funded in full at closing. However, where all or a portion of the loan proceeds are to be used to fund the costs of renovating or constructing improvements on the property, only a portion of the loan may be funded at closing. At March 31, 2022, our mortgage loan portfolio included 204 loans with future funding obligations, in the aggregate principal amount of approximately $115.4 million, compared to 129 loans in the aggregate principal amount of approximately $23.5 million at March 31, 2021. The increase is due to an increase in construction loan originations, a large portion of which is in the Florida market. Advances under these loans are funded against requests supported by all required documentation (including lien waivers) as and when needed to pay contractors and other costs of construction. In order to deal with these obligations, we are compelled to maintain higher cash balances, which could adversely impact our financial performance.

Despite the challenges we faced in ~~2020,~~2021, the changing dynamics of the real estate finance marketplace, supply chain disruptions, and the impact of COVID-19, we continue to believe in the viability of our business model. We believe that there continues to be a significant market opportunity for a well-capitalized “hard money” lender to originate attractively priced loans to small- and mid-scale real estate developers with good collateral, particularly in markets where, traditionally, real estate values are stable and substandard properties are improved, rehabilitated, and renovated as well as under-developed markets that are experiencing rapid growth due to population shifts. We also believe developers will prefer to borrow from us rather than other lending sources because of flexibility in structuring loans to suit their needs, our lending criteria, which places greater emphasis on the value of the collateral rather than the property cash flow or credit of the borrower, and our ability to close quickly. Our goal is, and has always been, to continue to grow our mortgage loan portfolio and increase our loan profitability, while at the same time maintain or improve on our existing underwriting and loan criteria. ~~Specifically, we believe that the following factors will, in fact, help us deal with the uncertainties expected in 2021.~~

As of March 31, 2021, we had cash and cash equivalents and investment securities balance of approximately $54.7 million, which we will use to increase our mortgage loan portfolio. From January through March 31, 2021, we funded $31.7 million of mortgage loans including loan modifications and construction draws.

Our largest expense item is interest and amortization of deferred financing costs, which has increased significantly as we have increased our indebtedness. At March 31, 2021, our capital structure was 63.0% debt and 37.0% equity. The weighted average interest rate on our $114.5 million of outstanding unsecured unsubordinated five-year notes is 7.36% per annum. On the other hand, the notes provide us with operational flexibility. Other than interest, they do not have any significant costs and expenses, such as legal fees, collateral maintenance fees, unused facility fees, processing fees and the additional personnel costs relating to reporting and compliance. Second, they only have one financial covenant – an asset coverage ratio of 150%. There are no limitations in terms of the size of the mortgage loans we choose to fund, the markets in which we choose to operate and the nature of the collateral. Finally, the notes are unsecured. However, we may obtain a senior credit facility should such a facility be available at terms that are advantageous to our strategy.

We have made the necessary adjustments to our operations to replace our former co-chief executive officer by hiring new employees and re-assigning existing employees to new tasks. We now have a robust executive team that includes our chief executive and chief financial officer, a chief operating officer and a chief investment officer. In addition, we have added junior executives as well in accounting and administration. Although these new hires will result in increased compensation, they were and will continue to be necessary to accommodate our growth and to maintain our ability to continue to service our borrowers and manage our business without sacrificing quality.

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We have adjusted and refined our business strategy to address changes in the marketplace and our growth to-date. Specifically, we continue to strengthen our geographic footprint beyond Connecticut with particular emphasis on Florida and Texas. We are funding larger loans than we have in the past that are secured by what we believe are higher-quality properties that are being developed by borrowers that we deem to be more stable and successful. In 2020, we funded loans secured by properties in Arizona, Texas, South Carolina, Florida, Colorado and California. We continue to look for opportunities in new markets that meet our basic underwriting and loan criteria. In addition, we believe the migration to these types of loans will offset any rate compression and help us maintain a low foreclosure rate.

~~Operational and Financial Overview~~

Our loans typically have a maximum initial term of one to three years and bear interest at a fixed rate of 5% to 13% per year and a default rate of 18% per year. We usually receive origination fees, or “points,” ranging from 2% to 5% of the original principal amount of the loan as well as other fees relating to underwriting, funding and managing the loan, such as inspection fees. Since we treat an extension or renewal of an existing loan as a new loan, we also receive additional “points” and other loan-related fees in connection with those transactions. Interest is always payable monthly in arrears. As a matter of policy, we do not make any loans if the loan-to value ratio exceeds 70%. In the case of construction loans, the loan-to-value ratio is based on the post-construction value of the property. We rely on readily available market data, including appraisals when available or timely, tax assessment rolls, recent sales transactions and brokers to evaluate the value of the collateral. Finally, we have adopted a policy that limits the maximum amount of any loan we fund to a single borrower or a group of affiliated borrowers to 10% of the aggregate amount of our loan portfolio, taking into consideration the loan under consideration.

Our revenue consists primarily of interest earned on our loan portfolio. As our capital structure has tilted towards more debt over the past 21 months, debt service has become a significant factor in determining our net income. Our capital structure at March 31, 2021 was approximately 63.0% debt vs. 37.0% equity. Most of our debt, approximately $114.5 million, is unsecured unsubordinated 5-year notes. The weighted average interest rate on these notes is 7.36%. In addition, we had a balance of approximately $28.2 million at March 31, 2021 under our margin loan account with Wells Fargo. The outstanding balance on this loan bears interest at a rate equal to 1.75% below the prime rate. The interest rate on this loan as of March 31, 2021 was 1.5%.

In addition, our net income for three months ended March 31, 2021 has been adversely impacted by a reduction in the yield on our mortgage loan portfolio as well as $30.5 million of loan payoffs during the period compared to $55 million for all of 2020. In the first quarter of 2021, we realized faster payoff of investment “fix and flip” loans with these projects coming to fruition quicker due to a stronger real estate market and, we believe, our sound underwriting and analysis of each project. According to Realtor.com, nationwide for April 2021, year-over-year, “days on market,” a common real estate market indicator, fell 31%, active listings fell 53% and median list prices increased 17%. For the Connecticut market over the same period, days on market decreased between 43.1% - 51.5% and median list prices increased 1.7% - 18.3%, depending on the county. Our strategy continues to be to adhere to our current underwriting guidelines, which we believe will allow us to continue to grow our loan portfolio while protecting and preserving capital in a manner that provides attracted risk-adjusted returns to our shareholders.

For the three months ended March 31, 2021 and 2020, the yield on our mortgage loan portfolio was 11.73% and 12.16%, respectively. For this purpose, yield only takes into account the stated interest rate on the mortgage note adjusted to the default rate, if applicable. We believe the interest rate compression will continue to be a factor in 2021 as we implement our new strategy focusing on larger loans, secured by higher quality properties being developed by more seasoned developers with a history of successful development projects. On the other hand, since the interest rate on our outstanding indebtedness is fixed, we have reduced the risk on interest rate compression if and when interest rates begin to increase. That will enable us to continue to focus on growth and building market share rather than short-term profits and cash flow.

We seek to mitigate some of the risk associated with rising rates by limiting the term of new loans to one year. At March 31, 2021, approximately 82.7% of the mortgage loans in our portfolio had a term of one year or less. If, at the end of the term, the loan is not in default and meets our other underwriting criteria, we will consider an extension or renewal of the loan at our then prevailing interest rate. If interest rates have decreased and we renew a loan at a lower rate, the “spread” between our borrowing costs and the yield on our portfolio will be squeezed and would adversely impact our net income. We cannot assure you that we will be able to increase our rates at any time in the future and we cannot assure you that we can continue to increase our market share.

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As a real estate finance company, we deal with a variety of default situations, including breaches of covenants, such as the obligation of the borrower to maintain adequate liability insurance on the mortgaged property, to pay the taxes on the property and to make timely payments to us. As such, we may not be aware that a default occurred. At March 31, 2021, five of our mortgage loans were the subject of enforcement or collection proceedings. The aggregate amount due on these loans, including principal, unpaid accrued interest and borrower charges, was approximately $496,000, representing approximately 0.3% of our aggregate mortgage loan portfolio. In the case of each of these loans, we have determined the value of the collateral exceeds the aggregate amount due. To date, the aggregate amount of realized losses on our loan portfolio have been ~~de minimis.~~

Financing Strategy Overview

To continue to grow our business, we must increase the size of our loan portfolio, which requires that we use our existing working capital to fund new loans and raise additional capital either by selling shares of our capital stock or by incurring additional indebtedness. We do not have a policy limiting the amount of indebtedness that we may incur. Thus, our operating income in the future will depend on how much debt we incur and the spread between our cost of funds and the yield on our loan portfolio. Rising interest rates could have an adverse impact on our business if we cannot increase the rates on our loans to offset the increase in our cost of funds and to satisfy investor demand for yield. In addition, rapidly rising interest rates could have an unsettling effect on real estate values, which could compromise some of our collateral.

We do not have any formal policy limiting the amount of indebtedness we may incur. Depending on various factors we may, in the future, decide to take on additional debt to expand our mortgage loan origination activities to increase the potential returns to our shareholders. Although we have no pre-set guidelines in terms of leverage ratio, the amount of leverage we will deploy will depend on our assessment of a variety of factors, which may include the liquidity of the real estate market in which most of our collateral is located, employment rates, general economic conditions, the cost of funds relative to the yield curve, the potential for losses and extension risk in our portfolio, the gap between the duration of our assets and liabilities, our opinion regarding the creditworthiness of our borrowers, the value of the collateral underlying our portfolio, and our outlook for interest rates and property values. At March 31, ~~2021,~~2022, debt ~~proceeds~~ represented approximately ~~63.0%~~55.5% of our total ~~capital.~~capital compared to 63.0% at March 31, 2021. To prudently grow the business and satisfy the tax requirement to ~~pay out~~distribute 90% of ~~net profits, during the last two years~~our taxable income, we ~~increased~~expect to maintain our current level of debt ~~from 41.7%~~and look to ~~63.0%~~reduce our cost of ~~our total~~ capital. We intend to ~~maintain a modest amount of~~continue to leverage our portfolio for the sole purpose of financing our portfolio and not for speculating on changes in interest ~~rates.~~rates, particularly while interest rates remain low.

~~Our total outstanding indebtedness at~~As of March 31, ~~2021 was approximately $142.7 million, which included a credit line loan of approximately $28.2 million and three~~2022, we had five series of unsecured unsubordinated ~~five-year~~ notes outstanding, having an aggregate ~~original~~outstanding principal ~~amount~~balance of ~~approximately $114.5~~$216.3 million (collectively, the “Notes”)~~. The Notes include notes having an aggregate principal amount~~ all of approximately $23.7 million bearing interest at the rate of 7.125% per annum and have a maturity date of June 30, 2024 (the “June 2024 Notes”); notes having an aggregate principal amount of $34.5 million bearing interest at the rate of 6.875% per annum and have a maturity date of December 30, 2024 (the “December 2024 Notes”); and notes having an aggregate original principal amount of approximately $56.4 million, bearing interest at the rate of 7.75% per annum and have a maturity date of September 30, 2025 (the “2025 Notes”). All three series of Notes are unsecured, unsubordinated obligations andwhich rank equally in right of payment with all of our existing and future senior unsecured and unsubordinated indebtedness ~~but~~and are effectively subordinated in right of payment to all ~~our~~ existing and future secured indebtedness (including indebtedness that is initially unsecured ~~but~~ to which we subsequently grant a security interest). and structurally subordinated to all existing and future indebtedness of our subsidiaries. Interest on ~~all three~~each series of ~~Notes~~notes is payable quarterly in arrears on each March 30, June 30, September 30 and December 30 of each year they are outstanding and, except as noted below, each series can be prepaid beginning on the ~~Notes are outstanding. During the quarter we paid off a $795,000 mortgage loan that was secured by our office building.~~second anniversary of its date of issuance.

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$50,000,000 aggregate original principal amount, issued March 9, 2022, bearing interest at the rate of 6.00% per annum and maturing on March 30, 2027 (the “2027 Notes”) and which trade on the NYSE American under the symbol SCCE;

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$51,750,000 aggregate original principal amount, issued December 20, 2021, bearing interest at the rate of 6.00% per annum and maturing on December 30, 2026 (the “2026 Notes”) and which trade on the NYSE American under the symbol SCCD;

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$56,363,750 aggregate original principal amount, of which approximately $14.4 million was issued September 4, 2020, $14.0 million was issued October 23, 2020 and $28.0 million was issued December 22, 2020, bearing interest at the rate of 7.75% per annum and maturing on September 30, 2025 (the “2025 Notes”) and which trade on the NYSE American under the symbol SCCC. The 2025 Notes are prepayable beginning on September 4, 2022;

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$34,500,000 aggregate original principal amount, issued November 7, 2019, bearing interest at the rate of 6.875% per annum and maturing on December 30, 2024 (the “December 2024 Notes”) and which trade on the NYSE American under the symbol SACC; and

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$23,663,000 aggregate original principal amount, issued June 25, 2019, bearing interest at the rate of 7.125% per annum and maturing on June 30, 2024 (the “June 2024 Notes”) and which trade on the NYSE American under the symbol SCCB.

Each series of Notes was issued pursuant to the Indenture, dated June 21, 2019, and a supplement thereto, which provides for the form and terms, including default provisions and cures, applicable to each series. All ~~three~~five series of Notes are subject to (i) “Defeasance,” which means that, by depositing with a trustee an amount of cash and/or government securities sufficient to pay all principal and interest, if any, on such notes when due and satisfying any additional conditions required under the Indenture, we will be deemed to have been discharged from our obligations under such notes and (ii) an “Asset Coverage Ratio” requirement pursuant to which we may not (x) pay any dividends or make distributions in excess of 90% of our taxable income, (y) incur any indebtedness or (z) purchase any shares of our capital stock unless we have an “Asset Coverage Ratio” of at least 150% after giving effect to the payment of such dividend, the making of such distribution or the incurrence of such indebtedness. “Asset Coverage Ratio” means the ratio (expressed as a percentage) of the value of our total assets relative to the aggregate amount of its indebtedness.

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WeUnder the terms of the Indenture, we may, at our option, at any time and from time to time, on or after June 30, 2021, in the case of the June 2024 Notes, November 7, 2021, in the case of the December 2024 Notes, ~~and~~ September 4, 2022, in the case of the 2025 Notes, December 20, 2023, in the case of the 2026 Notes, and March 9, 2024, in the case of the 2027 Notes, redeem such notes, in whole or in part, at a redemption price equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest to, but excluding, the date fixed for redemption. On and after any redemption date, interest will cease to accrue on the redeemed notes.

~~All three series~~Our secured indebtedness includes the Churchill Facility, the Wells Fargo Loan and the NHB Mortgage (each as described below).

On July 21, 2021, we consummated a $200 million facility (the “Churchill Facility”) with Churchill MRA Funding I LLC (“Churchill”). Under the terms of ~~Notes trade~~the Churchill Facility, we have the right, but not the obligation, to sell mortgage loans to Churchill, and Churchill has the right, but not the obligation, to purchase those loans. In addition, we have the right and, in some instances the obligation, to repurchase those loans from Churchill. The amount that Churchill will pay for each mortgage loan it purchases will vary based on the ~~NYSE American.~~attributes of the loan and various other circumstances but generally will not exceed 70% of the unpaid principal balance purchased. The ~~June 2024 Notes trade~~repurchase price is calculated by applying an interest factor, as defined, to the purchase price of the mortgage loan. We also granted Churchill a first priority security interest on the mortgage loans sold to Churchill to secure our repurchase obligation. The cost of capital under the ~~symbol “SCCB”~~Churchill Facility is equal to the sum of (a) the greater of (i) 0.25% and (ii) the 30-day LIBOR plus (b) 3% - 4%, depending on the ~~December 2024 Notes trade~~aggregate principal amount of the mortgage loans held by Churchill at that time. Our obligations under the ~~symbol “SACC”~~Churchill Facility are secured by a lien on the mortgage loans sold to Churchill. (After the 30-day LIBOR is phased out a new benchmark rate, determined by Churchill, will be used instead.) The Churchill Facility is also subject to various terms and conditions, including representations and warranties, covenants and agreements typically found in these types of financing arrangements, including a covenant that prohibits us from (A) (i) paying any dividend or make any distribution in excess of 90% of our taxable income, (ii) incurring any indebtedness or (iii) purchasing any shares of our capital stock, unless, in any case, we have an asset coverage ratio of at least 150%; and (B) have unencumbered cash and cash equivalents in an amount equal to or greater than 2.50% of the ~~2025 Notes trade~~amount of our repurchase obligations. Churchill has the right to terminate the Churchill Facility at any time upon 180 days prior notice to us. At such time, we have an additional 180 days after termination to repurchase all the mortgage loans held by Churchill. We believe the Churchill Facility gives us the ability to raise capital as needed at a relatively low rate. It also gives us the flexibility to seek other sources of funding. At March 31, 2022, the amount outstanding under the ~~symbol “SCCC”.~~Churchill Facility was approximately $26.9 million, which amount was accruing interest of an effective rate of 4.70% per annum.

~~We have~~In 2020, we established a margin loan account with Wells Fargo ~~which~~that allows us to borrow against our investment securities portfolio (the “Wells Fargo Loan”). The Wells Fargo Loan is secured by our portfolio of short-term securities, ~~and has~~had a balance of approximately ~~$28.2~~$23.3 million at March 31, ~~2021.~~2022. The outstanding balance on this loan bears interest at a rate equal to 1.75% below the prime rate. The interest rate at March 31, ~~2021 is 1.5%~~2022 was 1.75%.

In 2021, we obtained a new adjustable-rate mortgage loan from New Haven Bank for up to a maximum principal amount of $1.4 million (the “NHB Mortgage”) of which $750,000 is outstanding as of December 31, 2021. The purpose of the NHB Mortgage is to fund the cost of our acquisition and renovation of the property located at 568 East Main Street, Branford, Connecticut, which, once renovated, will become our new corporate headquarters. The balance of the NHB Mortgage will be funded when those renovations are completed. The NHB Mortgage accrues interest at an initial rate of 3.75% per annum for the first 72 months and is due and payable in full on December 1, 2037. During the first 12 months, from December 1, 2021 to November 30, 2022, only interest will be due and payable. Beginning on December 1, 2022 and through December 1, 2037 (the “Amortization Period”), principal and interest will be due and payable on a monthly basis. All payments under the NHB Mortgage are amortized based on a 20-year amortization schedule. The interest rate will be adjusted on each fifth anniversary of the commencement of the Amortization Period to the then published 5-year Federal Home Loan Bank of Boston Classic Advance Rate, plus 2.60%. The NHB Mortgage is a non-recourse loan, secured by a first mortgage lien on 698 Main Street, Branford, Connecticut, our current corporate headquarters, and 568 East Main Street, Branford, Connecticut. Once the NHB Mortgage is fully funded, the mortgage lien on 698 Main Street will be released.

In addition to the foregoing, in June 2021 and July 2021, we raised aggregate net proceeds of approximately $45.5 million (after deducting underwriting discounts and commissions and offering expenses) from the sale of 1,903,000 shares of our Series A Preferred Stock in a firm commitment underwritten public offering at a public offering price of $25.00 per share, equal to the liquidation preference. The Series A Preferred Stock is listed on the NYSE American and began trading under the symbol “SACHPRA” on July 6, 2021.

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Finally, from time-to-time we raise capital by selling our common shares in various at-the market offerings. During the three months ended March 31, 2022, we sold an aggregate of 2,730,725 common shares pursuant to an at-the-market offering for which we realized aggregate net proceeds of approximately $15.5 million.

REIT Qualification

We believe that we have qualified as a REIT since the consummation of the IPO and that it is in the best interests of our shareholders that we operate as a REIT. We made the election to be taxed as a REIT beginning with our 2017 tax year. As a REIT, we are required to distribute at least 90% of our taxable income to our shareholders on an annual basis. We cannot assure you that we will be able to maintain REIT status.

Our qualification as a REIT depends on our 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 our gross income, the composition and values of our assets, our compliance with the ~~distributions~~distribution requirements applicable to REITs and the diversity of ownership of our outstanding common shares. We cannot assure you that we will be able to maintain our qualification as a REIT.

So long as we qualify as a REIT, we, generally, will not be subject to U.S. federal income tax on our taxable income that we distribute currently to our shareholders. If we fail to qualify as a REIT in any taxable year and do not qualify for certain statutory relief provisions, we will be subject to U.S. federal income tax at regular corporate income tax rates and may be precluded from electing to be treated as a REIT for four taxable years following the year during which we lose our REIT qualification. Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income.

Emerging Growth Company Status

We are an “emerging growth ~~company”,~~company,” as defined in the JOBS Act, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements not applicable to other public companies but applicable to emerging growth companies, including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As an emerging growth company, we can also delay adopting new or revised accounting standards until those standards apply to private companies. We intend to avail ourselves of these options. Once adopted, we must continue to report on that basis until we no longer qualify as an emerging growth company.

We will cease to be an emerging growth company ~~upon~~on December 31, 2022 and, accordingly, will no longer be exempt from the ~~earliest of: (i)~~various reporting requirements. However, since we will still be a smaller reporting company, we will continue to be exempt from the ~~end~~independent auditor certification requirement under Section 404 of the ~~2022 fiscal year; (ii)~~Sarbanes-Oxley Act.

Critical Accounting Policies and Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP in the ~~first fiscal year after our annual gross revenue are $1.07 billion or more; (iii)~~United States of America 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 ~~on which we have,~~of the financial statements and the reported amounts of revenues and expenses during the ~~previous three-year~~reporting period. We base our use of estimates on (a) a preset number of assumptions that consider past experience, (b) future projections and (c) general financial market conditions. Actual amounts could materially differ from those estimates.

Interest income from loans is recognized, as earned, over the loan period ~~issued more than $1.0 billion in non-convertible debt securities; or (iv)~~and origination fee revenue on commercial loans is amortized over the ~~end of any fiscal year in which the market value of our common shares held by non-affiliates exceeded $700 million as~~term of the end of the second quarter of that fiscal year. We cannot predict if investors will find our common shares less attractive if we choose to rely on these exemptions. If, as a result of our decision to reduce future disclosure, investors find our common shares less attractive, there may be a less active trading market for our common shares and the price of our common shares may be more volatile.respective note.

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As an “emerging growth company,” we intend to avail ourselves of the reduced disclosure requirements and extended transition periods for adopting new or revised accounting standards that would otherwise apply to us as a public reporting company. Once adopted, we must continue to report on that basis until we no longer qualify as an emerging growth company. As a result, our financial statements may not be comparable to those of other public reporting companies that either are not emerging growth companies or that are emerging growth companies but have opted not to avail themselves of the reduced disclosure requirements for

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emerging growth companies and investors may deem our securities a less attractive investment relative to those other companies, which could adversely affect our stock price.

Results of Operations

Three months ended March 31, ~~2021~~2022 compared to three months ended March 31, ~~2020~~2021

Total revenue

Total revenue for the three months ended March 31, ~~2021~~2022 was approximately ~~$5.7~~$10.3 million compared to approximately ~~$4.3~~$5.7 million for the three months ended March 31, ~~2020,~~2021, an increase of approximately ~~$1.4~~$4.6 million, or ~~32.5%~~80.3%. The increase in revenue is primarily attributable to an increase in our lending operations. For the ~~2021~~2022 period, interest income was approximately ~~$4.5~~$8.5 million compared to approximately ~~$2.9~~$4.5 million for the ~~2020~~2021 period, representing an increase of approximately ~~$1.6~~$4.0 million or ~~56.2%~~87.8%. Origination fees were ~~basically unchanged with~~approximately $1.6 million compared to approximately $517,000 for the 2021 period, compared to approximately $511,000 for the 2020 period. Investment income and gains and losses on sale of investment securities were approximately $113,000 for the 2021 period compared to approximately $544,000 for the 2020 period, a decreaserepresenting an increase of approximately ~~$431,000~~$1.1 million or ~~79%~~216.5%. Other income was approximately $610,000 for the 2022 period compared to approximately $457,000 for the 2021 period, ~~compared to approximately $284,000 for the 2020 period,~~ an increase of approximately ~~$173,000~~$153,000 or ~~60.7%.~~33.5%, offset by unrealized losses on investment securities of approximately $1.1 million compared to $0 for the 2021 period.

Operating costs and expenses

Total operating costs and expenses for three months ended March 31, ~~2021~~2022 were approximately ~~$3.5~~$5.9 million compared to approximately ~~$2.1~~$3.5 million for the three months ended March 31, ~~2020,~~2021, an increase of approximately ~~70.2%~~68.6%. The increase in operating costs and expenses is primarily attributable to the increase in our unsecured bond debt while growing our lending operations and for the reasons discussed hereinabove. In the ~~2021~~2022 period, interest and amortization of deferred financing costs was approximately ~~$2.5~~$3.9 million compared to approximately ~~$1.1~~$2.5 million in the same ~~2020~~2021 period, an increase of $1.4 million or ~~114.3%~~58.2%. The balance of the increase in operating expenses was primarily attributable to (i) ~~professional fees,~~impairment loss, which increased approximately ~~$100,000,~~$236,000, (ii) compensation, fees and taxes which increased approximately ~~$248,000,~~$402,000, and (iii) general and administrative expenses which increased approximately ~~$19,000, offset~~$242,000.

Comprehensive income

For the quarter ended March 31, 2022, we reported an unrealized gain on investment securities of approximately $243,000 reflecting the decrease in ~~part by a reduction in impairment~~prior unrealized losses since December 31, 2021. For the quarter ended March 31, 2021, we reported an unrealized loss on investment securities of ~~$225,000. In November 2019 one of our co-chief executive officers and our director of marketing resigned, which reduced our compensation expense~~approximately $7,500 reflecting the decrease in the ~~first quarter~~market value of such securities since December 31, 2020. ~~In the second half of 2020, we hired a chief operating officer and junior executives in accounting and administration, which resulted in increased compensation in the first quarter of 2021.~~

Net Income

Net income attributable to common shareholders for the three months ended March 31, ~~2021~~2022 was approximately ~~$2.2~~$3.4 million, or $0.10 per share, compared to approximately $2.2 million, or $0.10 per share for the three months ended March 31, ~~2020.~~2021.

Adjusted Earnings

Adjusted earnings is calculated as net income attributable to common shareholders, prior to the effect unrealized gains (losses) on securities available-for-sale. Adjusted Earnings should be examined in conjunction with net income (loss) as shown in our statements of comprehensive income. Adjusted Earnings should not be considered as an alternative to net income (loss) (determined in accordance with generally accepted accounting principles in the United States of America (“GAAP)), or to cash flows from operating activities (determined in accordance with GAAP), as a measure of our liquidity, nor is Adjusted Earnings indicative of funds available to fund our cash needs or available for distribution to shareholders. Rather, Adjusted Earnings is an additional measure we use to analyze our business performance because it excludes the effects of certain non-cash charges that we believe are not necessarily indicative of our

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operating performance. It should be noted that our manner of calculating Adjusted Earnings may differ from the calculations of similarly-titled measures by other companies.

For the Period Ended March 31,


2022

2021
Adjusted Earnings




Net income attributable to common shareholders

$
3,429,700

$
2,183,101
Add: Unrealized losses on investment securities

1,052,230

—
Adjusted earnings attributable to common shareholders

$
4,481,930

$
2,183,101

Adjusted earnings per share was $0.13.

Liquidity and Capital Resources

At March 31, ~~2021,~~2022, cash and cash equivalents and investment securities totaled approximately ~~$54.7~~$93.4 million compared to ~~$56.7~~approximately $102.6 million at December 31, ~~2020.~~2021. This decrease was reflected by ~~a corresponding~~an increase in mortgages ~~receivable of $1.2 million.~~receivable.

Total assets at March 31, ~~2021~~2022 were approximately ~~$228.4~~$481.8 million compared to approximately ~~$226.7~~$418.0 million at December 31, ~~2020,~~2021, an increase of approximately ~~$1.8~~$63.8 million, or ~~less than 1 %.~~15.3%. The increase was due primarily to the increase of our mortgage loan portfolio of approximately ~~$1.2~~$61.3 million, an increase in ~~investment~~investments in ~~partnership~~partnerships of approximately ~~$1.8~~$11.4 million, an increase in due from borrowers of approximately $499,000, an increase in other receivables of approximately $346,000, an increase in prepaid expenses and deposits of approximately $200,000 and an increase in interest and fees receivable of approximately $63,000, offset in part by a decrease in cash and cash equivalents and investment securities of approximately ~~$2.1~~$9.2 million.

Total liabilities at March 31, 2022 were approximately $282.4 million ~~a decrease in real estate owned~~compared to approximately $237.9 million at December 31, 2021, an increase of approximately ~~$237,000~~$44.5 million, or approximately 18.7%. This increase is principally due to an increase in the repurchase facility of approximately $7.9 million and ~~a decrease in~~the notes payable, net of deferred financing costs, of approximately ~~$73,000.~~

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~~Total liabilities at March 31, 2021 were approximately $143.8~~$48.5 million, ~~compared to approximately $145.8 million at December 31, 2020, a decrease of approximately $2.0 million, or approximately 1.3%. This decrease is principally due to a decrease~~offset by decreases in the accrued dividends payable of ~~$2.7~~approximately $3.9 million and ~~the mortgage payable~~line of ~~$768,000, offset by increases in advances from borrowers of $873,000, increases in accounts payable and accrued expenses of $164,000 and deferred revenue~~credit of approximately ~~$85,000.~~$9.9 million.

Total shareholders’ equity at March 31, ~~2021~~2022 was approximately ~~$84.6~~$199.4 million compared to approximately ~~$81.0~~$180.1 million at December 31, ~~2020,~~2021, an increase of approximately ~~$3.7~~$19.3 million. This increase was due primarily to net proceeds of ~~$1.5~~$15.5 million from the sale of ~~stock~~common shares and our net income attributable to common shareholders of approximately ~~$2.2~~$4.5 million.

Net cash provided by operating activities for the three months ended March 31, ~~2021~~2022 was approximately ~~$2.8~~$7.8 million compared to approximately ~~$1.7~~$2.8 million for same ~~2020~~2021 period. For the 2022 period net cash provided by operating activities consisted primarily of net income of approximately $5.4 million, amortization of deferred financing costs and bond discount of $469,000, an impairment loss of $261,000, a loss on the sale of marketable securities of $154,000, unrealized loss on investment securities of approximately $1.1 million, and increases in advances from borrowers of approximately $1.6 million, deferred revenue of $233,000 and accrued interest of $122,000, offset by increases in interest and fees receivable of $294,000, other receivables of $211,000 and due from borrowers of $171,000 . For the 2021 period net cash provided by operating activities consisted primarily of net income of $2.2 million, amortization of deferred financing costs and ~~original issue~~bond discount of $244,000, a loss on the sale of investment securities of $129,000, and increases in accounts payable and accrued expenses of $164,000, deferred revenue of $85,000 and advances from borrowers of $873,000, offset by an increase in interest and fees receivable of $63,000, other receivables of $346,000, due from borrowers of $499,000 and prepaid expenses of $102,000. For the 2020 period net cash from operating activities consisted primarily of net income of $2.2 million, an impairment loss of $250,000, depreciation and amortization of deferred financing cost of $133,000, decreases in other receivables of $25,000 and deposits of $37,000 and increases in deferred revenue of $75,000 and advances from borrowers of $385,000, offset by the realized gain on investment securities of $446,000, increases in interest and fees receivable of $200,000 and due from borrowers of $778,000.

Net cash used for investing activities for the three months ended March 31, ~~2021~~2022 was approximately ~~$2.1~~$48.7 million compared to approximately ~~$16.2~~$2.1 million for the comparable ~~2020~~2021 period. For the 2022 period, net cash used for investing activities consisted primarily of purchases of investment securities of approximately $27.5 million, purchases of interests in investment partnerships of approximately $11.4 million and principal disbursements for mortgages receivable of approximately $88.7 million, offset by principal collections on mortgages receivable of approximately $27.3 million, proceeds from the sale of investment securities and proceeds from the sale of real estate owned of $623,000. For the 2021 period, net cash used for investing activities consisted primarily of principal disbursements for mortgages receivable of approximately $31.7 million, purchase of an interest in investment partnership of approximately $1.8 million, purchase of investment securities of approximately $22.8 ~~acquisitions of and improvements to real estate owned of $160,000, purchase of property and equipment of $36,000 and costs in connections with investment activities of $98,000,~~million, offset by principal collections on mortgages receivable of approximately $30.5 million and proceeds from the sale of investment securities of approximately $23.6 ~~million and proceeds from the sale~~million.

Table of real estate owned of $371,000. For the 2020 period, net cash used for investing activities consisted primarily of principal disbursements for mortgages receivable of approximately $28.7 million, purchase of investment securities of approximately $17.4 million and acquisitions and improvements of real estate owned of approximately $377,000, offset by mortgage loan pay-offs of approximately $11.8 million, proceeds from the sale of investments securities of $17.4 million and proceeds from sale of real estate owned of approximately $1.1 million.Contents

Net cash ~~used for~~provided by financing activities for the three months ended March 31, ~~2021~~2022 was approximately ~~$1.8~~$56.8 million compared to approximately ~~$2.7~~$1.8 million of cash used for the comparable ~~2020~~2021 period. Net cash provided by financing activities for the 2022 period consists principally of net proceeds from the issuance of fixed rate notes of $48.2 million, net proceeds from the issuance of common shares of approximately $15.5 million and net proceeds from repurchase facility of approximately $7.9 million, offset by repayment of line of credit of approximately $9.9 million, dividends paid on common shares of approximately $3.9 million and dividends paid on preferred stock of $922,000. Net cash used for financing activities for the 2021 period consists principally of dividends paid of approximately $2.7 million and repayment of mortgage payable of approximately $768,000, offset by proceeds from the sale of common shares of approximately $1.5 million and proceeds from our line of credit of ~~$105,000. Net cash used for financing activities for the 2020 period consists principally of dividends paid of~~ approximately ~~$2.7 million and financing costs incurred of approximately $58,000.~~$105,000.

We project anticipated cash requirements for our operating needs as well as cash flows generated from operating activities available to meet these needs. Our short-term cash requirements primarily include funding of loans and construction draws and payments for usual and customary operating and administrative expenses, such as interest payments on notes payable, employee compensation, sales, marketing expenses and dividends. Based on this analysis, we believe that our current cash balances, and our anticipated cash flows from operations will be sufficient to fund the operations for the next 12 months.

Our long-term cash needs will include principal payments on outstanding indebtedness and funding of new mortgage loans. Funding for long-term cash needs will come from unused net proceeds from financing activities, operating cash flows and proceeds from sales of real estate owned.

From and after the effective date of our REIT election, we intend to pay regular quarterly distributions to holders of our common shares in an amount not less than 90% of our REIT taxable income (determined before the deduction for dividends paid and excluding any net capital gains).

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Subsequent Events

On April ~~9, 2021,~~4, 2022, we ~~entered into~~sold an At Market Issuance Sales Agreement (the “Sales Agreement”) with the Ladenburg Thalmann & Co. Inc. and Janney Montgomery Scott LLC, as distribution agents (collectively, the “Agents”), to sell up to $46,636,250 of our common shares from time to time, through an “at-the-market” equity offering program. The offer and saleadditional $1,875,000 principal amount of the ~~shares will be made~~2027 Notes pursuant to a ~~prospectus supplement, dated~~partial exercise of the underwriters’ over-allotment option in the March 2027 Note Offering (see Note 8 — Financing Transactions) and realized net proceeds of approximately $1.8 million, after payment of underwriting discounts and commissions and estimated offering expenses.

In April ~~9, 2021 (the “Prospectus Supplement”),~~2022, we granted (i) 98,425 restricted common shares (having a market value of approximately $500,000) our chief executive officer. One-third of such shares will vest on January 1, 2023, and an additional one-third will vest on each of January 1, 2024 and 2025 and (ii) 7,042 restricted common shares (having a market value of approximately $35,000) to our ~~Registration Statement~~vice president of finance and operations. One-third of such shares vested on ~~Form S-3 (File No. 333-236097) (the “Registration Statement”) declared effective by~~ the ~~Securities~~date of grant, and ~~Exchange Commission (the “SEC”)~~an additional one-third will vest on ~~February 5, 2020.~~each of April 7, 2023 and 2024. In addition, we increased the base salary for our chief executive officer to $750,000.

~~During the period from~~On April 1, ~~2021~~2022, the board of directors declared a dividend of $0.12 per common share payable on April 18, 2022 to shareholders of record as of April 11, 2022.

From April 1, 2022 through May ~~4, 2021,~~3, 2022, we sold an aggregate of ~~an additional 2,045,336 of our~~663,765 common shares ~~and realized aggregate net~~under our at-the-market offering facility realizing gross proceeds of approximately ~~$10,535,405, some of which were sold under the Sales Agreement and some which were sold under a similar agreement with the Agents that was signed in October 2019.~~

In April 2021, our Compensation Committee (the “Committee”) approved the following 2021 compensation packages for our Chief Executive Officer, John L. Villano, and Chief Operating Officer, Peter J. Cuozzo:

~~With respect to Mr. Villano:~~

●

~~A base salary of $500,000 (compared to $360,000 in 2020);~~

●

~~A “targeted” annual bonus of $250,000, the exact amount to be determined by the Committee in its sole discretion, and payable on or before March 31, 2022;~~

●

~~A time-based equity award of $500,000 payable in restricted common shares; and~~

●

A one-time cash bonus of $250,000, of which $125,000 is immediately payable and $62,500 is payable on each of July 1 and October 1, 2021, subject to Mr. Villano’s continued employment by the Company.

~~With respect to Mr. Cuozzo:~~

●

~~A base salary of $250,000 (same as 2020);~~

●

~~A cash bonus of $25,000, payable immediately in one lump sum; and~~

●

~~A time-based equity award of $25,000 payable in restricted common shares.~~

We issued (i) 89,928 restricted common shares to Mr. Villano based on the closing price of $5.56 per common share on April 8, 2021 (the grant date) and (ii) 4,753 restricted common shares to Mr. Cuozzo based on the closing price of $5.26 per common share on April 12, 2021 (the grant date). The shares were issued pursuant to our 2016 Equity Compensation Plan and are subject to restrictions on transfer and forfeiture of any unvested shares in the event of a voluntary resignation as our employee without “Good Reason” or of a termination of employment with us for “Cause,” as such terms are defined in their respective employment agreements. The restrictions on transfer and the forfeiture provisions will lapse with respect to one-third of the shares on each of January 1, 2022, 2023 and 2024. Each of Messrs. Villano and Cuozzo has the right to vote and receive dividends with respect to all the shares granted to him.$3.4 million.

On April ~~30, 2021,~~6, 2022, we ~~sold~~received a ~~property classified as real estate held~~term sheet for ~~sale at March 31, 2021, receiving $280,449~~another note offering up to a maximum of $75 million aggregate principal amount. We expect to make the offering in ~~net proceeds. No loss will~~May 2022.

Management has evaluated subsequent events through May 3, 2022 the date on which the financial statements were available to be ~~recognized~~issued. Based on ~~this sale.~~the evaluation, no adjustments were required in the accompanying financial statements.

Off-Balance Sheet Arrangements

We are not a party to any off-balance sheet transactions, arrangements or other relationships with unconsolidated entities or other persons that are likely to affect liquidity or the availability of our requirements for capital resources.

2227

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Contractual Obligations

As of March 31, ~~2021,~~2022, our contractual obligations include unfunded amounts of any outstanding construction loans and unfunded commitments for loans as well as contractual obligations consisting of operating leases for equipment, software licenses and ~~software licenses.~~investment in partnerships.


			Less than		1 – 3		3 – 5		More than				Less than		1 – 3		3 – 5		More than
	Total		1 year		years		years		5 years		Total		1 year		years		years		5 years
Operating lease obligation	$	8,031	$	2,888	$	5,143	$	—	$	—	$	4,222	$	3,756	$	466	$	—	$	—
Investment in partnerships												3,743,506		3,743,506		—		—		—
Unfunded loan commitments		23,489,412		23,489,412		—		—		—		115,441,853		115,441,853		—		—		—
Total contractual obligations	$	23,497,443	$	23,492,300	$	5,143	$	—	$	—	$	119,189,581	$	119,189,115	$	466	$	—	$	—

Critical Accounting Policies and Recent Accounting Pronouncements

See “Note 2 — Significant Accounting Policies” to the financial statements for explanation of recent accounting pronouncements impacting us included elsewhere in this report and in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 4.CONTROLS AND PROCEDURES

(a)

Evaluation and Disclosure Controls and Procedures

Management, specifically our chief executive officer and chief financial officer (the same person), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, ~~2021~~2022 (the “Evaluation Date”). Based upon that evaluation, the chief executive officer and the chief financial officer (same person) concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) are accumulated and communicated to management, specifically our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

(b)

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) identified in connection with the evaluation required by Rules 13a-15(d) or 15d-15(d) that occurred during the fiscal quarter ended March 31, ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 6.EXHIBITS


Exhibit No.		Description

2.1		Form of Amended and Restated Exchange Agreement (1)
3.1		Certificate of Incorporation (1)
3.1(a)		Certificate of Amendment to Certificate of Incorporation (1)
3.1(b)		Certificate of Amendment to Certificate of Incorporation filed on October 7, 2019 (2)
3.1(c)		Certificate of Amendment to Certificate of Incorporation filed on June 25, 2021 (10)
3.2		Amended and Restated Bylaws, effective as of November 25, 2019 (3)
4.1		~~Form of Representative’s Warrants issued on February 9, 2017 in connection with the initial public offering (1)~~
~~4.2~~		Form of Representatives’ Warrants issued on October 27, 2017 in connection with the follow-on underwritten public offering (4)
~~4.3~~4.2		Indenture, dated as of June 21, 2019, between the Company and U.S. Bank National Association, as Trustee (5)
~~4.4~~4.3		First Supplemental Indenture, dated as of June 25, 2019, between the Company and U.S. Bank National Association, as Trustee (5)
~~4.5~~4.4		Form of 7.125% Notes due 2024 (5)
~~4.6~~4.5		Second Supplemental Indenture between the Company and U.S. Bank National Association, as Trustee (2)
~~4.8~~4.6		Form of 6.875% Notes due 2024 (7)
~~4.9~~4.7		Third Supplemental Indenture between the Company and U.S. Bank National Association, as Trustee ~~(9)~~(8)
~~4.10~~4.8		Form of 7.75% Notes due 2025 (included as Exhibit A to Exhibit 4.7 above)
4.9		Specimen 7.75% Series A Cumulative Redeemable Preferred Stock Certificate.(10)
4.10		Fourth Supplemental Indenture between the Company and U.S. Bank National Association, as Trustee(11)
4.11		Form of 6.00% Note due 2026 (attached as Exhibit A to Exhibit 4.10 above).
4.12		Fifth Supplemental Indenture between the Company and U.S. Bank National Association, as Trustee(15)
4.13		Form of 6.00% Note due 2027 (attached as Exhibit A to Exhibit 4.12 above)
10.1**		Employment Agreement by and between John L. Villano and Sachem Capital ~~Corp. (1)~~Corp(1)
10.2		Sachem Capital Corp. 2016 Equity Compensation Plan (1)
10.3		Final Form of the Restrictive Stock Grant Agreement dated July 17, 2018 under the Sachem Capital Corp. 2016 Equity Compensation Plan between the Company and each of Leslie Bernhard, Arthur Goldberg and Brian Prinz (6)
~~10.7~~10.4		Final Form of the Restrictive Stock Grant Agreement dated October 4, 2019 under the Sachem Capital Corp. 2016 Equity Compensation Plan between the Company and each of Leslie Bernhard, Arthur Goldberg and Brian Prinz (2)
10.8**		~~Employment Agreement, dated as of July 1, 2020, by and between Peter J. Cuozzo and Sachem Capital Corp. (8)~~
10.9**10.5		Final Form of the Restrictive Stock Grant Agreement dated April 2021 under the Sachem Capital Corp. 2016 Equity Compensation Plan between the Company and each of John L., Villano and Peter J. ~~Cuozzo. (10)~~Cuozzo(12)
10.6		Master Repurchase Agreement and Securities Contract, dated as of July 21, 2021, between Sachem Capital Corp. and Churchill MRA Funding I LLC(13)
10.7		Custodial Agreement, dated as of July 21, 2021, among Sachem Capital Corp., Churchill MRA Funding I LLC. and U.S. Bank National Association(13)
10.8		Agreement and General Release, dated as of January 14, 2022, between Sachem Capital Corp. and Peter J. Cuozzo(16)
10.9		Final Form of the Restrictive Stock Grant Agreement dated April 2022 under the Sachem Capital Corp. 2016 Equity Compensation Plan between the Company and John L., Villano*
31.1		Chief Executive Officer Certification as required under section 302 of the Sarbanes Oxley Act *
31.2		Chief Financial Officer Certification as required under section 302 of the Sarbanes Oxley Act *
32.1		Chief Executive Officer Certification pursuant to 18 U.S.C. section 1350 as adopted pursuant to section 906 of the Sarbanes Oxley Act ***
101.INS		XBRL Instance Document *
101.SCH		XBRL Taxonomy Extension Schema Document *
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB		XBRL Taxonomy Extension Label Linkbase Document *
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document *
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*

Filed herewith.

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Compensation plan or arrangement for current or former executive officers and directors.

***

Furnished, not filed, in accordance with item 601(32)(ii) of Regulation S-K.

(1)

Previously filed as an exhibit to the Registration Statement on Form S-11, as amended (SEC File No.: 333-214323) and incorporated herein by reference.

(2)

Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended September 30, 2019 and incorporated herein by reference.

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(3)

Previously filed as an exhibit to the Current Report on Form 8-K on November 27, 2019 and incorporated herein by reference.

(4)

Previously filed on October 20, 2017, as Exhibit A to Exhibit 1.1 of the Registration Statement on Form S-11, as amended (SEC File No.: 333-218954) and incorporated herein by reference.

(5)

Previously filed as an exhibit to the Current Report on Form 8-K on June 25, 2019 and incorporated herein by reference.

(6)

Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended June 30, 2018 and incorporated herein by reference.

(7)

Previously filed as an exhibit to the Current Report on Form 8-K on November 6, 2019 and incorporated herein by reference.

(8)

~~Previously filed as an exhibit to the Current Report on Form 8-K on July 8, 2020 and incorporated herein by reference.~~

~~(9)~~

Previously filed as an exhibit to the Current Report on Form 8-K on September 9, 2020 and incorporated herein by reference.

(9)	Intentionally omitted.

(10)	Previously filed as an exhibit to the Current Report on Form 8-K on June 29, 2021 and incorporated herein by reference.

(11)	Previously filed as an exhibit to the Current Report on Form 8-K on December 20, 2021 and incorporated herein by reference.

(12)	Previously filed as an exhibit to the Current Report on Form 8-K on April 13, 2021 and incorporated herein by reference.

(13)	Previously filed as an exhibit to the Current Report on Form 8-K on July 27, 2021 and incorporated herein by reference.

(14)	Intentionally omitted.

(15)	Previously filed as an exhibit to the Current Report on Form 8-K on March 9, 2022 and incorporated herein by reference.

(16)	Previously filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2021 and incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	SACHEM CAPITAL CORP.


Date: May ~~14, 2021~~3, 2022	By:	/s/ John L. Villano
		John L. Villano, CPA
		President, Chief Executive Officer (Principal Executive
		Officer) and Chief Financial Officer (Principal ~~Executive Officer & Principal Financial~~ Accounting
		Officer))

2631


March 31,
2021	$	1,646,088
2022		511,441
2023		14,461
2024		12,325
Total	$	2,184,315


	For the Period Ended March 31,
	2022		2021
Adjusted Earnings
Net income attributable to common shareholders	$	3,429,700	$	2,183,101
Add: Unrealized losses on investment securities		1,052,230		—
Adjusted earnings attributable to common shareholders	$	4,481,930	$	2,183,101