0001410578-23-002412.txt : 20231113 0001410578-23-002412.hdr.sgml : 20231113 20231113163100 ACCESSION NUMBER: 0001410578-23-002412 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 93 CONFORMED PERIOD OF REPORT: 20230930 FILED AS OF DATE: 20231113 DATE AS OF CHANGE: 20231113 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: 231399344 BUSINESS ADDRESS: STREET 1: 568 EAST MAIN STREET CITY: BRANFORD STATE: CT ZIP: 06405 BUSINESS PHONE: 2034334736 MAIL ADDRESS: STREET 1: 568 EAST MAIN STREET CITY: BRANFORD STATE: CT ZIP: 06405 10-Q 1 sach-20230930x10q.htm 10-Q
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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, 2023

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.)

568 East 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 10, 2023, the Issuer had a total of 45,356,429 common shares, $0.001 par value per share, outstanding.

SACHEM CAPITAL CORP.

TABLE OF CONTENTS

    

Page Number

Part I

FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited)

Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 (audited)

1

Consolidated Statements of Comprehensive Income for the Three-Month and Nine-Month Periods Ended September 30, 2023 and 2022 (unaudited)

2

Consolidated Statements of Changes in Shareholders’ Equity for the Three-Month and Nine-Month Periods Ended September 30, 2023 and 2022 (unaudited)

3

Consolidated Statements of Cash Flows for the Three-Month and Nine-Month Periods Ended September 30, 2023 and 2022 (unaudited)

5

Notes to Consolidated Financial Statements (unaudited)

7

Item 2.

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

29

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

39

Item 4.

Controls and Procedures

39

Part II

OTHER INFORMATION

40

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

Item 6.

Exhibits

41

SIGNATURES

44

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 2022 Annual Report on Form 10-K 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.

CONSOLIDATED BALANCE SHEETS

(unaudited)

    

September 30, 2023

    

December 31, 2022

(unaudited)

(audited)

Assets

 

  

 

  

Cash and cash equivalents

$

25,811,964

$

23,713,097

Investment securities

37,044,657

24,576,462

Mortgages receivable, net

 

495,917,840

 

460,633,268

Investments in rental real estate, net

 

10,434,591

 

Interest and fees receivable

 

7,922,415

 

6,309,845

Due from borrowers

 

7,415,413

 

5,276,967

Real estate owned

 

3,481,177

 

5,216,149

Investments in partnerships

39,959,110

30,831,180

Property and equipment, net

3,433,613

4,121,721

Other assets

6,427,159

4,983,173

Total assets

$

637,847,939

$

565,661,862

Liabilities and Shareholders’ Equity

 

  

 

  

Liabilities:

 

  

 

  

Unsecured notes payable (net of deferred financing costs of $6,641,817 and $8,352,597)

$

281,759,933

$

280,049,153

Repurchase facility

47,929,713

42,533,466

Mortgage payable

 

1,100,635

 

750,000

Line of credit

51,339,905

3,587,894

Accrued dividends payable

5,342,160

Accounts payable and accrued liabilities

2,060,788

1,439,219

Advances from borrowers

12,505,033

9,892,164

Below-market lease intangible

664,737

Deferred revenue

4,959,079

4,360,452

Total liabilities

402,319,823

347,954,508

Commitments and Contingencies

 

  

 

  

Shareholders’ equity:

 

  

 

  

Preferred shares - $.001 par value; 5,000,000 shares authorized; 2,903,000 shares designated as Series A Preferred Stock; 1,996,000 and 1,903,000 shares of Series A Preferred Stock issued and outstanding at September 30, 2023 and December 31, 2022, respectively

 

1,996

 

1,903

Common shares - $.001 par value; 200,000,000 shares authorized; 45,364,429 and 41,093,536 issued and outstanding at September 30, 2023 and December 31, 2022, respectively

 

45,364

 

41,094

Paid-in capital

 

243,834,113

 

226,220,990

Accumulated other comprehensive loss

(459,684)

(561,490)

Accumulated deficit

 

(7,893,673)

 

(7,995,143)

Total shareholders’ equity

 

235,528,116

 

217,707,354

Total liabilities and shareholders’ equity

$

637,847,939

$

565,661,862

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

1

SACHEM CAPITAL CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2023

    

2022

    

2023

    

2022

Revenue:

  

 

  

  

 

  

Interest income from loans

$

14,273,858

$

11,545,748

$

37,155,668

$

30,490,694

Investment gain, net

284,841

238,225

893,510

586,166

Income from partnership investments

781,530

523,067

2,337,731

1,112,560

Origination and modification fees, net

 

1,194,645

 

1,669,034

 

4,434,828

 

5,759,650

Fee and other income

 

1,239,552

 

641,749

 

3,518,132

 

2,048,921

Unrealized gain (loss) on investment securities

(239,989)

(1,076,836)

360,610

(3,607,498)

Total revenue

 

17,534,437

 

13,540,987

 

48,700,479

 

36,390,493

Operating costs and expenses:

 

  

 

  

 

  

 

  

Interest and amortization of deferred financing costs

 

7,683,059

 

5,974,975

 

21,694,966

 

15,083,228

Compensation, fees and taxes

 

1,735,430

 

1,509,518

 

5,077,213

 

3,691,421

General and administrative expenses

1,321,807

715,994

3,537,266

1,993,812

Other expenses

 

336,480

 

90,899

 

633,025

 

320,231

(Gain) Loss on sale of real estate

198,849

962

71,988

(121,381)

(Recovery of) provision for loan losses

(131,382)

65,065

105,000

Impairment loss

200,000

195,000

612,500

685,500

Total operating costs and expenses

11,344,243

8,487,348

31,692,023

21,757,811

Net income

 

6,190,194

 

5,053,639

 

17,008,456

 

14,632,682

Dividends paid on Series A Preferred Stock

(966,754)

(921,766)

(2,816,279)

(2,765,297)

Net income attributable to common shareholders

5,223,440

4,131,873

14,192,177

11,867,385

Other comprehensive loss

Unrealized gain (loss) on investment securities

(83,606)

(131,569)

101,806

(81,525)

Comprehensive income

$

5,139,834

$

4,000,304

$

14,293,983

$

11,785,860

Basic and diluted net income per common share outstanding:

 

  

 

  

 

  

 

  

Basic

$

0.12

$

0.11

$

0.32

$

0.32

Diluted

$

0.12

$

0.11

$

0.32

$

0.32

Weighted average number of common shares outstanding:

 

  

 

  

 

  

 

  

Basic

 

44,754,921

 

38,829,610

 

43,805,310

 

36,723,305

Diluted

 

44,754,921

 

38,829,852

 

43,805,310

 

36,729,184

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

2

SACHEM CAPITAL CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(unaudited)

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023

Accumulated

Additional 

Other

Preferred Shares

Common Shares

Paid in

Comprehensive

Accumulated

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit

    

Totals

Balance, July 1, 2023

 

1,927,603

$

1,928

 

43,822,050

$

43,822

$

236,595,201

$

(376,078)

$

(7,222,078)

$

229,042,795

Issuance of Series A Preferred Stock, net of expenses

 

68,276

68

 

1,378,133

1,378,201

Issuance of common shares, net of expenses

1,542,379

1,542

5,639,808

5,641,350

Stock based compensation

220,971

220,971

Unrealized gain (loss) on investments

(83,606)

(83,606)

Dividends paid on Series A Preferred Stock

 

 

(966,754)

(966,754)

Dividends paid on common shares

(5,895,035)

(5,895,035)

Net income for the period ended September 30, 2023

 

6,190,194

6,190,194

Balance, September 30, 2023

1,995,879

$

1,996

 

45,364,429

$

45,364

$

243,834,113

$

(459,684)

$

(7,893,673)

$

235,528,116

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022

Accumulated

Additional

Other

Preferred Shares

Common Shares

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

3

    

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023

Accumulated

Additional

Other

 

Preferred Shares

 

Common Shares

 

Paid in

 

Comprehensive

 

Accumulated

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit

    

Totals

Balance, January 1, 2023

1,903,000

$

1,903

41,093,536

$

41,094

$

226,220,990

$

(561,490)

$

(7,995,143)

$

217,707,354

Adoption of ASU 2016-13

(2,489,574)

(2,489,574)

Issuance of Series A Preferred Stock, net of expenses

92,879

93

1,895,110

1,895,203

Issuance of common shares, net of expenses

4,158,503

4,158

15,327,773

15,331,931

Repurchase of common shares

(71,000)

(71)

(226,256)

(226,327)

Stock based compensation

 

183,390

 

183

616,496

 

616,679

Unrealized loss on investments

 

101,806

 

101,806

Dividends paid on Series A Preferred Stock

(2,816,279)

(2,816,279)

Dividends paid on common shares

(11,601,133)

(11,601,133)

Net income for the period ended September 30, 2023

 

17,008,456

 

17,008,456

Balance, September 30, 2023

 

1,995,879

$

1,996

45,364,429

$

45,364

$

243,834,113

$

(459,684)

$

(7,893,673)

$

235,528,116

    

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

Accumulated

Additional

Other

Preferred Shares

Common Shares

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 gain 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

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

4

SACHEM CAPITAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOW

(unaudited)

Nine Months Ended

September 30, 

    

2023

    

2022

CASH FLOWS FROM OPERATING ACTIVITIES

  

 

  

Net income

$