0001410578-22-003110.txt : 20221110 0001410578-22-003110.hdr.sgml : 20221110 20221110125017 ACCESSION NUMBER: 0001410578-22-003110 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 81 CONFORMED PERIOD OF REPORT: 20220930 FILED AS OF DATE: 20221110 DATE AS OF CHANGE: 20221110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Sachem Capital Corp. CENTRAL INDEX KEY: 0001682220 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 813467779 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-37997 FILM NUMBER: 221376117 BUSINESS ADDRESS: STREET 1: 698 MAIN STREET CITY: BRANFORD STATE: CT ZIP: 06405 BUSINESS PHONE: 2034334736 MAIL ADDRESS: STREET 1: 698 MAIN STREET CITY: BRANFORD STATE: CT ZIP: 06405 10-Q 1 sach-20220930x10q.htm 10-Q
Sachem Capital 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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 September 30, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                         to                        

Commission File Number: 001-37997

SACHEM CAPITAL CORP.

(Exact name of registrant as specified in its charter)

New York

    

81-3467779

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

698 Main Street, Branford, CT 06405

(Address of principal executive offices)

(203) 433-4736

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.         Yes     No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).      Yes         No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).         Yes         No

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Ticker symbol(s)

    

Name of each exchange on which registered

Common Shares, par value $.001 per share

 

SACH

 

NYSE American LLC

7.125% Notes due 2024

SCCB

NYSE American LLC

6.875% Notes due 2024

SACC

NYSE American LLC

7.75% Notes due 2025

SCCC

NYSE American LLC

6.00% Notes due 2026

SCCD

NYSE American LLC

6.00% Notes due 2027

SCCE

NYSE American LLC

7.125% Notes due 2027

SCCF

NYSE American LLC

8.00% Notes due 2027

SCCG

NYSE American LLC

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

SACHPRA

NYSE American LLC

As of November 8, 2022, the Issuer had a total of 40,795,709 common shares, $0.001 par value per share, outstanding.

SACHEM CAPITAL CORP.

TABLE OF CONTENTS

Part I

FINANCIAL INFORMATION

    

Page Number

Item 1.

Financial Statements (unaudited)

Balance Sheets as of September 30, 2022 and December 31, 2021

1

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

2

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

3

Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2022 and 2021

5

Notes to Financial Statements (unaudited)

7

Item 2.

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

22

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

33

Item 4.

Controls and Procedures

33

Part II

OTHER INFORMATION

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

34

Item 6.

Exhibits

35

SIGNATURES

38

EXHIBITS

i

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 numerous risks, uncertainties and assumptions, some of which are described in our 2021 Annual Report on Form 10-K and in our quarterly reports on Form 10-Q for the first and second quarters of 2022, all of which are filed with the U.S. Securities and Exchange Commission. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. In addition, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We disclaim any duty to update any of these forward-looking statements after the date of this report to confirm these statements in relationship to actual results or revised expectations.

All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in this report. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties.

Unless the context otherwise requires, all references in this quarterly report on Form 10-Q to “Sachem Capital,” “we,” “us” and “our” refer to Sachem Capital Corp., a New York corporation.

ii

PART I.        FINANCIAL INFORMATION

Item 1.    FINANCIAL STATEMENTS

SACHEM CAPITAL CORP.

BALANCE SHEETS

    

September 30, 2022

    

December 31, 2021

(unaudited)

(audited)

Assets

 

  

 

  

Assets:

 

  

 

  

Cash and cash equivalents

$

35,464,257

$

41,938,897

Investment securities

34,351,374

60,633,661

Mortgages receivable

 

448,524,665

 

292,301,209

Interest and fees receivable

 

5,746,907

 

3,693,645

Due from borrowers

 

5,055,146

 

3,671,016

Real estate owned

 

5,615,940

 

6,559,010

Investments in partnerships

22,542,941

6,055,838

Property and equipment, net

3,397,812

2,172,185

Other assets

1,122,342

936,290

Total assets

$

561,821,384

$

417,961,751

Liabilities and Shareholders’ Equity

 

  

 

  

Liabilities:

 

  

 

  

Notes payable (net of deferred financing costs of $8,844,137 and $5,747,387)

$

279,557,613

$

160,529,363

Repurchase facility

43,100,146

19,087,189

Mortgage payable

 

750,000

 

750,000

Line of credit

3,542,853

33,178,031

Accrued dividends payable

3,927,600

Accounts payable and accrued liabilities

1,162,170

697,403

Advances from borrowers

9,936,828

15,066,114

Deferred revenue

4,471,800

4,643,490

Total liabilities

342,521,410

237,879,190

Commitments and Contingencies

 

  

 

  

Shareholders’ equity:

 

  

 

  

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

 

1,903

 

1,903

Common shares - $.001 par value; 200,000,000 shares authorized; 40,080,672 and 32,730,004 issued and outstanding

 

40,081

 

32,730

Paid-in capital

 

222,520,783

 

185,516,394

Accumulated other comprehensive loss

(557,541)

(476,016)

Accumulated deficit

 

(2,705,252)

 

(4,992,450)

Total shareholders’ equity

 

219,299,974

 

180,082,561

Total liabilities and shareholders’ equity

$

561,821,384

$

417,961,751

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

1

SACHEM CAPITAL CORP.

STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2022

    

2021

    

2022

    

2021

Revenue:

  

 

  

  

 

  

Interest income from loans

$

11,545,748

$

6,094,165

$

30,490,694

$

15,307,692

Investment gains, net

238,225

532,163

586,166

911,005

Income from partnership investments

523,067

35,983

1,112,560

90,225

Origination and modification fees, net

 

1,669,034

 

1,268,624

 

5,759,650

 

2,788,498

Fee and other income

 

641,749

 

591,441

 

2,048,921

 

1,851,031

Unrealized losses on investment securities

(1,076,836)

(3,607,498)

Total revenue

 

13,540,987

 

8,522,376

 

36,390,493

 

20,948,451

Operating costs and expenses:

 

  

 

  

 

  

 

  

Interest and amortization of deferred financing costs

 

5,974,975

 

2,589,847

 

15,083,228

 

7,541,536

Compensation, fees and taxes

 

1,509,518

 

771,373

 

3,691,421

 

2,175,603

Other expenses

 

90,899

 

137,607

 

320,231

 

248,581

General and administrative expenses

715,994

478,484

1,993,812

1,369,328

Loss (Gain) on sale of real estate

962

94,450

(121,381)

111,545

Impairment loss

195,000

150,000

790,500

469,000

Total operating costs and expenses

8,487,348

4,221,761

21,757,811

11,915,593

Net income

 

5,053,639

 

4,300,615

 

14,632,682

 

9,032,858

Preferred stock dividend

(921,766)

(913,791)

(2,765,297)

(932,089)

Net income attributable to common shareholders

4,131,873

3,386,824

11,867,385

8,100,769

Other comprehensive loss

Unrealized gain (loss) on investment securities

(131,569)

(500,188)

(81,525)

(611,998)

Comprehensive income

$

4,000,304

$

2,886,636

$

11,785,860

$

7,488,771

Basic and diluted net income per common share outstanding:

 

  

 

  

 

  

 

  

Basic

$

0.11

$

0.12

$

0.32

$

0.32

Diluted

$

0.11

$

0.12

$

0.32

$

0.32

Weighted average number of common shares outstanding:

 

  

 

  

 

  

 

  

Basic

 

38,829,610

 

27,973,249

 

36,723,305

 

24,968,885

Diluted

 

38,829,852

 

27,977,095

 

36,729,184

 

24,972,837

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

2

SACHEM CAPITAL CORP.

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(unaudited)

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022

Accumulated

Additional 

Other

Preferred Stock

Common Stock

Paid in

Comprehensive

Accumulated

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit

    

Totals

Balance, July 1, 2022

 

1,903,000

$

1,903

 

36,755,786

$

36,756

$

206,973,510

$

(425,972)

$

(1,583,202)

$

205,002,995

Issuance of common shares, net of expenses

 

 

3,309,886

3,310

15,420,273

15,423,583

Stock based compensation

15,000

15

127,000

127,015

Unrealized loss on marketable securities

(131,569)

(131,569)

Dividends paid on Series A Preferred Stock

(921,766)

(921,766)

Dividends paid on common shares

(5,253,923)

(5,253,923)

Net income for the period ended September 30, 2022

5,053,639

5,053,639

Balance, September 30, 2022

 

1,903,000

$

1,903

 

40,080,672

$

40,081

$

222,520,783

$

(557,541)

$

(2,705,252)

$

219,299,974

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021

Accumulated

Additional

Other

Preferred Stock

Common Stock

Paid in

Comprehensive

Accumulated

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit

    

Totals

Beginning balance, July 1, 2021

 

1,700,000

$

1,700

 

26,733,213

$

26,733

$

147,362,456

$

(137,802)

$

(963,683)

$

146,289,404

Issuance of Series A Preferred Stock, net of expenses

203,000

203

4,849,297

4,849,500

Issuance of common shares, net of expenses

 

 

 

1,582,717

1,583

8,003,496

 

 

8,005,079

Stock based compensation

64,219

64,219

Unrealized loss on marketable securities

(500,188)

(500,188)

Dividends paid common shares

(3,336,756)

(3,336,756)

Dividends paid on Series A Preferred Stock

(913,791)

(913,791)

Net income for the period ended September 30, 2021

4,300,615

4,300,615

Balance, September 30, 2021

 

1,903,000

$

1,903

 

28,315,930

$

28,316

$

160,279,468

$

(637,990)

$

(913,615)

$

158,758,082

3

    

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

Accumulated

Additional

Other

 

Preferred Stock

 

Common Stock

 

Paid in

 

Comprehensive

 

Accumulated

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit

    

Totals

Balance, January 1, 2022

1,903,000

$

1,903

32,730,004

$

32,730

$

185,516,394

$

(476,016)

$

(4,992,450)

$

180,082,561

Issuance of common shares, net of expenses

7,177,043

7,177

36,647,242

36,654,419

Exercise of warrants

19,658

20

(20)

Stock based compensation

 

153,967

 

154

357,167

 

357,321

Unrealized loss on marketable securities

 

(81,525)

 

(81,525)

Dividends paid on Series A Preferred Stock

(2,765,297)

(2,765,297)

Dividends paid on common shares

(9,580,187)

(9,580,187)

Net income for the period ended September 30, 2022

 

14,632,682

 

14,632,682

Balance, September 30, 2022

 

1,903,000

$

1,903

40,080,672

$

40,081

$

222,520,783

$

(557,541)

$

(2,705,252)

$

219,299,974

    

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

Accumulated

Additional

Other

Preferred Stock

Common Stock

Paid in

Comprehensive

Accumulated

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit

    

Totals

Beginning balance, January 1, 2021

 

$

22,124,801

$

22,125

$

83,814,376

$

(25,992)

$

(2,890,969)

$

80,919,540

Issuance of Series A Preferred Stock, net of expenses

1,903,000

1,903

45,460,723

45,462,626

Issuance of common shares, net of expenses

 

 

6,096,448

 

6,097

 

30,877,831

 

30,883,928

Stock based compensation

94,681

94

126,538

126,632

Unrealized loss on marketable securities

(611,998)

(611,998)

Dividends paid on common shares

 

(6,123,415)

 

(6,123,415)

Dividends paid on Series A Preferred Stock

 

(932,089)

 

(932,089)

Net income for the period ended September 30, 2021

 

9,032,858

 

9,032,858

Balance, September 30, 2021

 

1,903,000

$

1,903

28,315,930

$

28,316

$

160,279,468

$

(637,990)

$

(913,615)

$

158,758,082

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

4

SACHEM CAPITAL CORP.

STATEMENTS OF CASH FLOW

(unaudited)

Nine Months Ended

September 30, 

    

2022

    

2021

CASH FLOWS FROM OPERATING ACTIVITIES

  

 

  

Net income

$

14,632,682

$

9,032,858

Adjustments to reconcile net income to net

 

 

  

cash provided by operating activities:

Amortization of deferred financing costs and bond discount

 

1,664,822

 

839,418

Write-off of deferred financing costs

72,806

Depreciation expense

 

66,533

 

61,286

Stock based compensation

 

357,321

 

126,632

Impairment loss

790,500

469,000

(Gain) Loss on sale of real estate

(121,381)

111,545

Unrealized loss on investment securities

3,607,498

(212,449)

Loss on sale of investment securities

 

148,565

 

Debt Forgiveness

(257,845)

Changes in operating assets and liabilities:

 

 

  

(Increase) decrease in:

 

 

Interest and fees receivable

 

(2,154,704)

 

(885,380)

Other assets - other receivables

 

(418,176)

 

(361,084)

Due from borrowers

 

(1,505,785)

 

(1,405,352)

Other assets - prepaid expenses

 

153,842

 

(14,500)

(Decrease) increase in:

 

Accounts payable and accrued liabilities - accrued interest

 

431,110

 

(3,344)

Accounts payable and accrued liabilities - accounts payable and accrued expenses

 

53,818

 

(179,992)

Deferred revenue

 

(171,690)

 

1,779,960

Advances from borrowers

 

(5,129,286)

 

8,201,117

Total adjustments

 

(2,227,013)

 

8,341,818

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

12,405,669

 

17,374,676

CASH FLOWS FROM INVESTING ACTIVITIES

 

  

 

  

Purchase of investment securities

(39,715,900)

(160,896,229)

Proceeds from the sale of investment securities

62,160,599

141,709,658

Purchase of interests in investment partnerships, net

(16,487,103)