UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

(Mark One)

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

For the quarterly period endedSeptember 30, ~~2019~~2020

¨☐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)	~~81-3467779~~	(I.R.S. Employer Identification No.)

698 Main Street,Branford, CT06405

(Address of principal executive offices)

~~(203)~~ (203) 433-4736

(Registrant’s telephone number, including area code)

~~N/A~~

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

~~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~~

~~7.125% Notes due 2024~~

~~6.875% Notes due 2024~~

~~SACH~~

~~SCCB~~

~~SACC~~

~~NYSE American LLC~~

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

x ~~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

x ~~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,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨☐	Accelerated filer ¨☒
Non-accelerated filer x☐	Smaller reporting company x☒
Emerging growth company x☒

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

¨ ~~Yes~~ x 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

As of November ~~13, 2019,~~5, 2020, the Issuer had ~~22,117,301~~a total of 22,124,801 common shares, $0.001 par value per share, ~~issued and~~ outstanding.

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

~~SACHEM CAPITAL CORP.~~

~~BALANCE SHEETS~~

PART I. FINANCIAL INFORMATION

~~Item 1.~~

~~FINANCIAL STATEMENTS~~

Item 1. FINANCIAL STATEMENTS

September 30, December 31,
2019 2018
(Unaudited) (Audited)
Assets
Assets:
Cash $ 11,004,943 $ 99,310
Cash - restricted - 59,549
Escrow deposits - 12,817
Mortgages receivable 89,020,538 78,011,653
Mortgages receivable, affiliate - 879,457
Interest and fees receivable 1,431,414 1,397,038
Other receivables 222,237 155,000
Due from borrowers 843,409 695,218
Prepaid expenses 37,171 14,866
Property and equipment, net 1,320,424 1,180,107
Deposits on property and equipment 49,881 12,000
Real estate owned 5,310,523 2,943,438
Deferred financing costs 38,351 553,597

Total assets $ 109,278,891 $ 86,014,050

Liabilities and Shareholders' Equity
Liabilities:
Unsecured unsubordinated fixed rate notes (net of deferred financing costs of $1,242,192) $ 22,420,808 $ -
Line of credit - 27,219,123
Mortgage payable 788,148 290,984
Accounts payable and accrued expenses 131,901 316,413
Security deposits held 7,800 7,800
Funds held in escrow 25,000 -
Advances from borrowers 498,504 317,324
Due to shareholder - 1,200,000
Deferred revenue 1,067,667 1,058,406
Notes payable 68,634 -
Capital leases payable 11,573 -
Dividend payable - 2,624,566
Accrued interest 3,323 176,619
Total liabilities 25,023,358 33,211,235

Commitments and Contingencies

Shareholders' equity:
Preferred shares - $.001 par value; 5,000,000 shares authorized; no shares issued - -
Common stock - $.001 par value; 50,000,000 shares authorized; 22,088,325 and 15,438,621 issued and outstanding 22,088 15,439
Paid-in capital 83,787,674 53,192,859
Retained earnings (accumulated deficit) 445,771 (405,483 )
Total shareholders' equity 84,255,533 52,802,815
Total liabilities and shareholders' equity $ 109,278,891 $ 86,014,050

SACHEM CAPITAL CORP.

BALANCE SHEETS


	September 30, 2020		December 31, 2019
	(Unaudited)		(Audited)
Assets
Assets:
Cash and cash equivalents	$	5,384,073	$	18,841,937
Investments		27,688,794		15,949,802
Mortgages receivable		124,131,879		94,348,689
Interest and fees receivable		1,551,333		1,370,998
Other receivables		87,307		141,397
Due from borrowers		1,501,470		840,930
Prepaid expenses		106,816		24,734
Property and equipment, net		1,418,442		1,346,396
Deposits on property and equipment		172,210		71,680
Real estate owned		7,523,584		8,258,082
Deferred financing costs		66,086		16,600

Total assets	$	169,631,994	$	141,211,245

Liabilities and Shareholders' Equity
Liabilities:
Notes payable (net of deferred financing costs of $3,074,115 and $2,687,190)	$	69,452,636	$	55,475,810
Mortgage payable		771,785		784,081
Line of credit		12,080,569		0
Accounts payable and accrued expenses		522,453		249,879
Other loans		257,845		0
Security deposits held		13,416		7,800
Advances from borrowers		1,413,974		848,268
Deferred revenue		1,114,721		1,205,740
Notes payable		60,130		75,433
Accrued interest		80,672		3,416
Total liabilities		85,768,201		58,650,427
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; 22,117,301 issued and outstanding		22,117		22,117
Paid-in capital		83,810,276		83,856,308
Accumulated other comprehensive loss		(37,596)		(50,878)
Retained earnings (accumulated deficit)		68,996		(1,266,729)
Total shareholders' equity		83,863,793		82,560,818
Total liabilities and shareholders' equity	$	169,631,994	$	141,211,245

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

Table of Contents

SACHEM CAPITAL CORP.

STATEMENTS OF ~~OPERATIONS~~COMPREHENSIVE INCOME

(unaudited)


	Three Months Ended				Nine Months
	September 30,				Ended September 30,
	2020		2019		2020		2019
Revenue:
Interest income from loans	$	3,473,304	$	2,442,750	$	9,640,387	$	7,509,155
Interest income on investments		32,483		28,148		163,161		28,148
Gain/(loss)on sale of investment securities		(21,858)		0		415,301		0
Origination fees, net		393,097		497,237		1,551,652		1,202,777
Late and other fees		10,955		18,149		46,835		205,182
Processing fees		37,445		44,870		123,568		121,470
Rental income, net		9,593		9,446		49,777		82,350
Other income		336,789		325,523		904,071		622,054
Net gain on sale of real estate		0		12,927		0		20,076
Total revenue		4,271,808		3,379,050		12,894,752		9,791,212

Operating costs and expenses:
Interest and amortization of deferred financing costs		1,262,278		537,878		3,564,533		1,611,332
Compensation, fees and taxes		496,058		476,404		1,220,412		1,325,822
Stock based compensation		4,107		4,107		12,321		12,327
Professional fees		158,206		105,053		400,868		259,275
Other expenses and taxes		26,247		39,355		61,484		70,683
Exchange fees		22,713		11,343		29,986		32,850
Expense in connection with termination of LOC		0		0		0		779,641
Impairment		0		0		495,000		0
Net loss on sale of real estate		2,816		0		7,276		0
Depreciation		15,348		18,618		46,318		44,286
General and administrative expenses		145,251		131,206		412,677		400,561

Total operating costs and expenses		2,133,024		1,323,964		6,250,875		4,536,777

Net income		2,138,784		2,055,086		6,643,877		5,254,435

Other comprehensive income (loss)
Unrealized gain (loss) on investment securities		(72,785)		0		13,282		0

Comprehensive income	$	2,065,999	$	2,055,086	$	6,657,159	$	5,254,435

Basic and diluted net income per common share outstanding:
Basic	$	0.10	$	0.10	$	0.30	$	0.30
Diluted	$	0.10	$	0.10	$	0.30	$	0.30

Weighted average number of common shares outstanding:
Basic		22,117,301		21,336,870		22,117,301		17,662,480
Diluted		22,117,301		21,336,870		22,117,301		17,622,480

Three Months Nine Months
Ended September 30, Ended September 30,
2019 2018 2019 2018
Revenue:
Interest income from loans $ 2,442,750 $ 2,272,100 $ 7,509,155 $ 6,610,273
Origination fees, net 497,237 383,322 1,202,777 1,071,921
Late and other fees 18,149 59,949 205,182 144,031
Processing fees 44,870 30,680 121,470 101,480
Rental income, net 9,446 10,136 82,350 87,865
Other income 353,671 175,271 650,202 674,830
Net gain on sale of real estate 12,927 119,666 20,076 119,666

Total revenue 3,379,050 3,051,124 9,791,212 8,810,066

Operating costs and expenses:
Interest and amortization of deferred financing costs 537,878 493,992 1,611,332 1,098,912
Stock based compensation 4,107 29,250 12,327 29,250
Professional fees 105,053 54,330 259,275 212,789
Compensation, fees and taxes 476,404 344,266 1,325,822 886,024
Exchange fees 11,343 10,000 32,850 26,667
Other expenses and taxes 39,355 7,669 70,683 67,668
Expense in connection with termination of LOC - - 779,641 -
Excise tax - - - 19,000
Depreciation 18,618 6,834 44,286 20,302
General and administrative expenses 131,206 142,119 400,561 314,839

Total operating costs and expenses 1,323,964 1,088,460 4,536,777 2,675,451

Net income $ 2,055,086 $ 1,962,664 $ 5,254,435 $ 6,134,615

Basic and diluted net income per common share outstanding:
Basic $ 0.10 $ 0.13 $ 0.30 $ 0.40
Diluted $ 0.10 $ 0.13 $ 0.30 $ 0.40

Weighted average number of common shares outstanding:
Basic 21,336,870 15,433,000 17,622,480 15,421,555
Diluted 21,336,870 15,433,000 17,662,480 15,421,555

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

Table of Contents

SACHEM CAPITAL CORP.

STATEMENTS OF CHANGES IN ~~STOCKHOLDERS'~~SHAREHOLDERS’ EQUITY

(unaudited)


	FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020
						Accumulated		(Accumulated
				Additional		Other		Deficit)
	Common			Paid in		Comprehensive		Retained
	Shares	Amount		Capital		Income/(Loss)		Earnings		Totals
Balance, July 1, 2020	22,117,301	$	22,117	$	83,806,169	$	35,189	$	584,288	$	84,447,763

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

Unrealized loss on marketable securities	—		—		—		(72,785)		—		(72,785)

Dividends paid	—		—		—		—		(2,654,076)		(2,654,076)

Net income	—		—		—		—		2,138,784		2,138,784

Balance, September 30, 2020	22,117,301	$	22,117	$	83,810,276	$	(37,596)	$	68,996	$	83,863,793


	FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019
						Accumulated		(Accumulated
				Additional		Other		Deficit)
	Common			Paid in		Comprehensive		Retained
	Shares	Amount		Capital		Income/(Loss)		Earnings		Totals
Balance, July 1, 2019	18,905,586	$	18,906	$	68,658,030	$	—	$	739,137	$	69,416,073

Sales of stock through ATM	866,332		866		4,375,320		—		—		4,376,186

Sale of common stock	2,300,000		2,300		10,668,202		—		—		10,670,502

Exercise of warrants	16,407		16		82,019		—		—		82,035

Stock based compensation	—		—		4,103		—		—		4,103

Dividends	—		—		—		—		(2,348,452)		(2,348,452)

Net income	—		—		—		—		2,055,086		2,055,086

Balance, September 30, 2019	22,088,325	$	22,088	$	83,787,674	$	—	$	445,771	$	84,255,533

~~FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019~~

Additional (Accumulated Deficit)
Common Stock Paid in Retained
Shares Amount Capital Earnings Totals
Balance, July 1, 2019 18,905,586 $ 18,906 $ 68,658,030 $ 739,137 $ 69,416,073
Sales of stock through ATM 866,332 866 4,375,320 4,376,186
Sale of common stock 2,300,000 2,300 10,668,202 10,670,502
Exercise of warrants 16,407 16 82,019 82,035
Stock based compensation - 4,103 4,103
Dividends paid (2,348,452 ) (2,348,452 )
Net income 2,055,086 2,055,086
Balance, September 30, 2019 22,088,325 $ 22,088 $ 83,787,674 $ 445,771 $ 84,255,533

~~FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018~~

Additional (Accumulated Deficit)
Common Stock Paid in Retained
Shares Amount Capital Earnings Totals
Balance, July 1, 2018 15,415,737 $ 15,416 $ 53,315,772 $ 2,180,618 $ 55,511,806
Stock based compensation 21 29,229 29,250
Dividends paid (1,708,939 ) (1,708,939 )
Net income 1,962,664 1,962,664
Balance, September 30, 2018 15,415,737 $ 15,437 $ 53,345,001 $ 2,434,343 $ 55,794,781

~~FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019~~

Additional (Accumulated Deficit)
Common Stock Paid in Retained
Shares Amount Capital Earnings Totals
Balance, January 1, 2019 15,438,621 $ 15,439 $ 53,192,859 $ (405,483 ) $ 52,802,815
Sales of stock through ATM 4,333,297 4,333 19,832,267 19,836,600
Sale of common stock 2,300,000 2,300 10,668,202 10,670,502
Exercise of warrants 16,407 16 82,019 82,035
Stock based compensation 12,327 12,327
Dividends paid (4,403,181 ) (4,403,181 )
Net income 5,254,435 5,254,435
Balance, September 30, 2019 22,088,325 $ 22,088 $ 83,787,674 $ 445,771 $ 84,255,533

~~FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018~~

Additional (Accumulated Deficit)
Common Stock Paid in Retained
Shares Amount Capital Earnings Totals
Balance January 1, 2018 15,415,737 $ 15,416 $ 53,315,772 $ 1,235,093 $ 54,566,281
Stock based compensation 21 29,229 29,250
Dividends paid (4,935,365 ) (4,935,365 )
Net income 6,134,615 6,134,615
Balance, September 30, 2018 15,415,737 $ 15,437 $ 53,345,001 $ 2,434,343 $ 55,794,781

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

Table of Contents


	FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
						Accumulated		(Accumulated
				Additional		Other		Deficit)
	Common			Paid in		Comprehensive		Retained
	Shares	Amount		Capital		Income/(Loss)		Earnings		Totals
Balance, January 1, 2020	22,117,301	$	22,117	$	83,856,308	$	(50,878)	$	(1,280,011)	$	82,547,536

Offering costs-ATM	—		—		(58,353)		—		—		(58,353)

Stock based compensation	—		—		12,321		—		—		12,321

Unrealized gain on marketable securities	—		—		—		13,282		—		13,282

Dividends paid	—		—		—		—		(5,308,152)		(5,308,152)

Net income	—		—		—		—		6,657,159		6,657,159

Balance, September 30, 2020	22,117,301	$	22,117	$	83,810,276	$	(37,596)	$	68,996	$	83,863,793


	FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019
							Accumulated		(Accumulated
					Additional		Other		Deficit)
	Common				Paid in		Comprehensive		Retained
	Shares	Amount			Capital		Income/(Loss)		Earnings		Totals
Balance, January 1, 2019	15,438,621	$	15,439		$	53,192,859	$	—	$	(405,483)	$	52,802,815

Sales of stock through ATM	4,333,297		4,333			19,832,267		—		—		19,836,600

Sale of common stock	2,300,000		2,300			10,668,202		—		—		10,670,502
				��
Exercise of warrants	16,407		16			82,019		—		—		82,035

Stock based compensation	—		—			12,327		—		—		12,327

Dividends	—		—			—		—		(4,403,181)		(4,403,181)

Net income	—		—			—		—		5,254,435		5,254,435

Balance, September 30, 2019	22,088,325	$	22,088		$	83,787,674	$	—	$	445,771	$	84,255,533

~~SACHEM CAPITAL CORP.~~

~~STATEMENTS OF CASH FLOW~~

~~(unaudited)~~

Nine Months
Ended September 30,
2019 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,254,435 $ 6,134,615
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred financing costs 159,872 90,165
Depreciation expense 44,286 20,302
Stock based compensation 12,327 29,250
Gain on sale of real estate (20,076 ) (119,666 )
Abandonment of office furniture 12,000 -
Costs in connection with termination of line of credit 439,446 -
Changes in operating assets and liabilities:
(Increase) decrease in:
Escrow deposits 12,813 111,189
Interest and fees receivable (454,487 ) (916,672 )
Other receivables (67,237 ) (150,520 )
Due from borrowers 2,122,939 (308,866 )
Prepaid expenses (22,305 ) (23,093 )
Deposits on property (37,881 ) -
(Decrease) increase in:
Due to note purchaser (176,619 ) (723,478 )
Accrued interest 3,323 117,128
Accrued expenses (159,512 ) (295,734 )
Deferred revenue 9,261 44,265
Advances from borrowers 180,889 (243,387 )
Total adjustments 2,059,039 (2,369,117 )
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,313,474 3,765,498

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate owned 362,136 672,538
Acquisitions of and improvements to real estate owned (443,217 ) (104,799 )
Purchase of property and equipment (196,603 ) (331,386 )
Principal disbursements for mortgages receivable (42,163,704 ) (37,278,346 )
Principal collections on mortgages receivable 27,917,331 20,958,280
NET CASH USED FOR INVESTING ACTIVITIES (14,524,057 ) (16,083,713 )

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes sold to shareholder 1,017,000 -
Repayment of notes sold to shareholder (2,217,000 ) -
Proceeds from line of credit 42,720,829 61,067,401
Repayment of line of credit (69,939,952 ) (43,648,867 )
Dividends paid (7,027,746 ) (4,935,365 )
Pre-offering costs incurred - (853 )
Financing costs incurred (6,836 ) (566,886 )
Proceeds from mortgage payable 795,000 -
Repayment of mortgage payable (297,837 ) (7,535 )
Proceeds from notes payable, net 68,634 -
Proceeds from issuance of common stock 30,736,148 -
Cost associated with the issuance of common stock (147,002 )
Proceeds from issuance of bonds 23,663,000 -
Cost associated with the issuance of notes (1,307,571 ) -
NET CASH PROVIDED BY FINANCING ACTIVITIES 18,056,667 11,907,895

NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH 10,846,084 (410,320 )

CASH AND RESTRICTED CASH- BEGINNING OF YEAR 158,859 954,223

CASH AND RESTRICTED CASH - END OF PERIOD $ 11,004,943 $ 543,903

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

Table of Contents

SACHEM CAPITAL CORP.

STATEMENTS OF CASH FLOW

(unaudited)


	Nine Months
	Ended September 30,
	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	6,643,877	$	5,254,435
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred financing costs		357,497		159,872
Depreciation expense		46,318		44,286
Stock based compensation		12,321		12,327
Impairment loss		495,000		0
Loss (gain) on sale of real estate		7,276		(20,076)
Abandonment of office furniture		0		12,000
Costs in connection with termination of line of credit				439,446
Realized gain on investments		(415,301)		0
Changes in operating assets and liabilities:
(Increase) decrease in:
Escrow deposits		0		12,813
Interest and fees receivable		(180,335)		(454,487)
Other receivables		54,090		(67,237)
Due from borrowers		(273,202)		2,122,939
Prepaid expenses		(82,082)		(22,305)
Deposits on property and equipment		(100,530)		(37,881)
(Decrease) increase in:
Due to note purchaser		0		(176,619)
Accrued interest		77,256		3,323
Accounts payable and accrued expenses		272,574		(159,512)
Deferred revenue		(91,019)		9,261
Advances from borrowers		565,706		180,889
Total adjustments		745,569		2,059,039
NET CASH PROVIDED BY OPERATING ACTIVITIES		7,389,446		7,313,474

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments		(37,216,177)		0
Proceeds from the sale of investments		25,905,769		0
Proceeds from sale of real estate owned		1,816,522		362,136
Acquisitions of and improvements to real estate owned		(1,584,300)		(443,217)
Purchase of property and equipment		(118,364)		(196,603)
Security deposits held		5,616		0
Principal disbursements for mortgages receivable		(68,029,798)		(42,163,704)
Principal collections on mortgages receivable		37,859,270		27,917,331
NET CASH USED FOR INVESTING ACTIVITIES		(41,361,462)		(14,524,057)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit		14,080,569		42,720,829
Repayment of line of credit		(2,000,000)		(69,939,952)
Proceeds from notes sold to shareholder		0		1,017,000
Repayment of notes sold to shareholder		0		(2,217,000)
Principal payments on mortgage payable		(12,296)		0
Principal payments on notes payable		(15,303)		0
Dividends paid		(5,308,152)		(7,027,746)
Financing costs incurred		(108,353)		(6,836)
Proceeds from other loans		257,845		0
Proceeds from mortgage payable		0		795,000
Repayment of mortgage payable		0		(297,837)
Proceeds from notes payable, net		0		68,634
Proceeds from issuance of common stock		0		30,736,148
Costs associated with the issuance of common stock		0		(147,002)
Gross proceeds from issuance of fixed rate notes		14,363,750		23,663,000
Financing costs incurred in connection with fixed rate notes		(743,908)		(1,307,571)
NET CASH PROVIDED BY FINANCING ACTIVITIES		20,514,152		18,056,667

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(13,457,864)		10,846,084

CASH AND CASH EQUIVALENTS- BEGINNING OF YEAR		18,841,937		158,859

CASH AND CASH EQUIVALENTS - END OF PERIOD	$	5,384,073	$	11,004,943

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

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SACHEM CAPITAL CORP.

STATEMENTS OF CASH FLOW (Continued)

September 30, September 30,
2019 2018
(Unaudited) (Unaudited)
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
INFORMATION
Taxes paid $ - $ 19,000
Interest paid $ 472,329 $ 1,008,747

(unaudited)


	Nine Months Ended
	September 30,
	2020		2019
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Taxes paid	$	0	$	0
Interest paid	$	2,093,080	$	472,329

SUPPLEMENTAL INFORMATION-NON-CASH
Dividends declared and payable	$	0	$	0

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

~~During the nine months ended September 30, 2018, the Company purchased a mortgage receivable from a third party at a discount in the amount of $21,433.~~

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the ~~nine months ended September 30, 2018 amounted to $2,369,196.~~

~~The reversal of previously accrued capitalized costs during the nine months ended September 30, 2018, amounted to $6,212.~~

~~Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the nine months~~period ended September 30, 2019 amounted to $2,265,927.

During the nine months ended September 30, 2019, the Company purchased equipment for $13,005 subject to a capital lease.

During the nine months ended September 30, 2019, Mortgages receivable, affiliate in the amount of $879,457 were reduced to $0 as the underlying loans were transferred to the Company and are included in Mortgages receivable.

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the period ended September 30, 2020 amounted to $170,383.

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

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, ~~2019~~2020

1.	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)~~years), secured, ~~non-banking~~ 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 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 ~~its~~the principals ~~and/or~~thereof, as well as personal guarantees by the principals of the borrower. The Company does not lend to ~~owner-occupants.~~owner occupants. The Company’s primary underwriting criteria is a conservative ~~loan-to-value~~loan to value ratio. In addition, the Company ~~has made and~~ may ~~continue to~~ make opportunistic real estate ~~acquisitions.~~purchases apart from its lending activities. The Company believes it qualifies and has operated as a real estate investment trust since 2017.

2.	~~Significant Accounting Policies~~

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 ~~audited~~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. 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 bases these~~Management’s estimates are based on (a) ~~various~~ assumptions that ~~take into account~~consider the Company’s past experience, (b) projections regarding the Company’s ~~projections regarding~~ future operations and (c) general financial market and local and general economic conditions. Actual amounts could differ from those estimates.

Cash and Cash Equivalents

~~Concentrations~~The Company considers all demand deposits, cashier’s checks, money market accounts and certificates of ~~Credit Risk~~

~~Financial instruments that potentially subject the Company~~deposit with an original maturity of three months or less to ~~concentrations of credit risk consist primarily of~~be cash ~~and mortgage loans.~~equivalents. The Company maintains its cash ~~with one major~~and cash equivalents at various financial ~~institution. Accounts at the financial institution are insured by~~institutions. The account balances typically exceed the Federal Deposit Insurance Corporation upinsurance coverage, and, as a result, there is a concentration of credit risk related to ~~$250,000.~~amounts on deposit. The Company does not believe that the risk is significant.

Allowance for Loan Loss

~~Credit risks associated with~~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

SEPTEMBER 30, 2020

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 Financial Accounting Standards Board Accounting Standards Codification (“FASB 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 or 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 3Inputs 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 ~~mortgage loan portfolio~~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 ~~related interest receivable~~maintenance are ~~described~~charged to expense as incurred. The Company relocated its entire operations to this property in ~~Note 3, below, entitled “Mortgage Loans Receivable.”~~March 2019.

Impairment of long-lived assets

The Company continually monitors events or changes in circumstances that could indicate ~~that the~~ 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 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.

Deferred Financing Costs

Costs incurred by the Company in connection with the public offering of its unsecured, unsubordinated notes, described in Note 6 - 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 loans provide for interest to be paid monthly in arrears. The Company does not accrue interest income on mortgages receivable that are more than 90 days past due.

Origination fee revenue, generally 2%- 5% of the original loan principal amount, is collected at loan funding and in connection with the extension of loans, 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

SEPTEMBER 30, ~~2019~~2020

Income Taxes

The Company believes it qualifies as a Real Estate Investment Trust (REIT) for federal income tax purposes and ~~elected~~made the election to be taxed as a REIT when it filed its 2017 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, relating to, among other things, the sources of its income, the composition and values of its assets, its compliance with the ~~distributions~~distribution requirements applicable to REITs and the diversity of ownership of its outstanding common shares. 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 ~~has adopted~~follows the provisions of FASB ASC Topic 740-10 “Accounting for Uncertainty in Income ~~Taxes,”~~Taxes”, which 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. AnUnder this standard, an entity may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold. ~~The~~Should the Company ~~recognizes~~become liable for interest and penalties ~~if any,~~ related to unrecognized tax benefits, such amounts would be included 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 September 30, ~~2019.~~2020.

~~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.

~~Revenue Recognition~~

Interest income from the Company’s mortgage loan portfolio is earned over the loan period and is calculated using the simple interest method on principal amounts outstanding. Generally, the Company’s mortgage loans provide for interest to be paid monthly in arrears.

~~Origination fee revenue is recognized ratably over the loan period in accordance with ASC 310.~~

~~Deferred Financing Costs~~

Costs incurred in connection with the Company’s revolving credit facilities, as discussed in Note 5 below, were amortized over the term of the applicable facility using the straight-line method. Unamortized deferred financing costs relating to the Webster credit facility were expensed when the liability was paid in full on June 25, 2019 and the facility was terminated.

~~Fair Value of Financial Instruments~~

The carrying amounts of the Bankwell mortgage, the mortgages receivable and the unsecured unsubordinated fixed rate notes payable approximates their respective fair values due to the relative short-term nature of such instruments. (See Notes 3, 5 and 6 below.)

Earnings Per Share

Basic and diluted earnings per share are calculated in accordance with FASB ASC 260 “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.

~~SACHEM CAPITAL CORP.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2019~~

Recent Accounting Pronouncements

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” The amendments in this ASU require that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The adoption of this guidance required the Company to reconcile changes in cash, cash equivalents, and restricted cash on the consolidated statement of cash flows. As a result, the Company no longer presents transfers between cash and cash equivalents and restricted cash in the statement of cash flows. The Company adopted this ASU in 2018.

In May 2019, the FASB issued ~~ASU~~Accounting Standards Update (“ASU”) 2019-05, “Financial Instruments—Credit Losses (Topic 326): Targeted Transition ~~Relief.”~~Relief," which requires that entities use a new forward looking "expected loss" model that generally will result in the earlier recognition of an allowance for credit losses. This ASU allows entities to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost upon adoption of ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” The Company ~~plans to adopt~~adopted both ASU 2016-13 and ASU 2019-05 effective January 1, 2020. The adoption of this guidance isdid not ~~expected to~~ have a material impact on the Company’s ~~consolidated~~ financial statements.

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

Reclassifications

Certain 2019 account balances have been reclassified to conform with the current year’s presentation.

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

3. Fair Value Measurement

The fair value measurement level within the fair value hierarchy of an asset or liability 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 September 30, 2020:


	Level 1		Level 2		Level 3		Total
Stocks and ETFs	$	1,332,540		0		0	$	1,332,540
Fixed and Preferred Securities	$	2,862,830		0		0	$	2,862,830
Mutual Funds	$	23,493,424		0		0	$	23,493,424
Total Investments	$	27,688,794		0		0	$	27,688,794
Real Estate Owned					$	7,523,584	$	7,523,584

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

~~Mortgage Loans Receivable; Due from Borrowers~~●

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

●

Fixed and Preferred Securities: Valued at the closing price reported on the active market on which such securities are traded.

●

Mutual 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 Securities and Exchange Commission (the “SEC”). 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 secured, ~~non-banking~~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 loans are secured by first mortgage liens on one or more properties owned by the borrower or related parties. In addition, each ~~mortgage~~ loan is personally guaranteed by the borrower or its principals, which guarantees may be collaterally secured as well. The ~~mortgage~~ loans are generally for a term of one to three years. The ~~mortgage~~ loans are initially recorded and carried thereafter, in ~~our~~the financial statements, at cost. ~~Most of the mortgage~~All 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 nine-month periods ended September 30, ~~2019~~2020 and ~~2018,~~2019, the aggregate amounts of loans funded by the Company were ~~$42,163,704~~$68,029,798 and ~~$37,278,346,~~$42,163,704, respectively, offset by principal repayments of $37,859,270 and $27,917,331, ~~and $20,958,280,~~ respectively.

At September 30, ~~2019,~~2020, the Company’s ~~mortgage loan~~ portfolio included loans ~~ranging in size from~~with outstanding principal balances up to approximately ~~$8,000 to $2,900,000, with an average loan size of $206,000, and~~$3.2 million, with stated interest rates ranging from 5.0% to 13.0% and a default interest rate for non-payment of 18%.

At September 30, ~~2019,~~2020, no single borrower ~~or affiliated group of borrowers, accounted for~~had loans outstanding representing more than 10% of the total ~~outstanding~~ balance of the ~~Company’s mortgage loan portfolio.~~loans outstanding.

~~At the request of the borrower, the~~The Company ~~may~~will extend the term of a ~~mortgage~~ loan ~~provided~~if, at the time of the extension, the loan ~~satisfies~~and the borrower satisfy the Company’s underwriting requirements at the time of the extension. ~~A mortgage~~The Company treats a loan ~~that is extended is treated~~extension as a new ~~loan and the borrower is required to pay all fees associated with the funding of a new loan, including origination fees.~~

8 loan.

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, ~~2019~~2020

Credit Risk

Credit risk profile ~~of the Company’s mortgage~~based on loan ~~portfolio~~activity as of September 30, ~~2019~~2020 and December 31, ~~2018 is as follows:~~2019:

Residential Commercial Land Mixed Use Total Outstanding
Mortgages
September 30, 2019 $ 61,086,582 $ 20,548,936 $ 6,461,394 $ 923,626 $ 89,020,538
December 31, 2018 $ 52,980,472 $ 19,250,618 $ 5,638,113 $ 1,021,907 $ 78,891,110


									Total
									Outstanding
Mortgages Receivable	Residential		Commercial		Land		Mixed Use		Mortgages
September 30, 2020	$	83,885,131	$	29,316,495	$	7,222,077	$	3,708,176	$	124,131,879
December 31, 2019	$	71,605,920	$	16,122,990	$	5,639,979	$	979,800	$	94,348,689

The following are the maturities of ~~mortgage loans~~mortgages receivable as of September 30:

2019	$	20,820,611

2020		50,701,366	$	40,472,468
2021		10,007,796		68,804,366
2022		7,490,765		12,471,850
2023				2,383,195
Total	$	89,020,538	$	124,131,879

At September 30, ~~2019, of the 432 mortgage loans in~~2020, the Company’s mortgage loan portfolio ~~sixteen (16) have been referred to counselfor collection and are currently the subject of foreclosure proceedings,~~included 480 mortgage loans, of which eight (8) had already been subject to foreclosure proceeding on July 1, 2019. The aggregate outstanding principal balance and the accrued but unpaid interest as of September 30, 2019 on these sixteen loans was approximately $7.9 million. At September 30, 2018, of the 395 mortgage loans in the Company’s portfolio, ten (10) had been referred to counsel for collection and14 were the subject of foreclosure proceedings. The aggregate outstanding balances due on these 14 loans as of September 30, 2020, including unpaid principal, ~~balance and the~~ accrued but unpaid interest ~~as of September 30, 2018 on these ten loans~~and borrower fees, was approximately ~~$5.2~~$4.0 million. In the case of each of these loans, ~~at September 30, 2019 and 2018,~~ the Company believes ~~that~~ the value of the collateral exceeds the ~~outstanding~~total amount due.

In the second quarter of 2020, the Company restructured NaN loans, having an aggregate balance of $6.5 million at June 30, 2020, pursuant to forbearance requests by borrowers under a program the Company adopted in response to the COVID-19 pandemic. The total amount of interest deferred under these NaN loans was approximately $200,000. At September 30, 2020, 18 of the original NaN forbearance loans, having an aggregate principal balance of $5.1 million and $146,000 of deferred interest, were still outstanding. Once a forbearance request is initiated by the borrower, the Company requests documentation to determine the validity of the request and if deemed valid and reasonable, the Company defers the borrower's payment of interest for a period of 90 days. A legal fee is the only charge passed on ~~such loan.~~to the borrower. To qualify for forbearance, a borrower must be current on all its obligations to the Company.

4.	5. Real Estate Owned

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

As of September 30, ~~2019,~~2020, and December 31, ~~2018,~~2019, real estate owned totaled ~~$5,310,523~~$7,523,584 and ~~$2,943,438, respectively, with no valuation allowance.~~$8,258,082, respectively. As of September 30, ~~2019,~~2020, real estate owned included ~~$906,617~~$1,478,854 of real estate held for rental and ~~$4,403,906~~$6,044,730 of real estate held for sale. AsIn the first nine months of ~~December 31, 2018, real estate owned included $887,918 of real estate held for rental and $2,055,520 of real estate held for sale.~~

5.	~~Line of Credit and Mortgage Payable~~

~~Line of Credit~~

~~Prior to May 11, 2018,~~2020, the Company ~~maintained~~recorded an impairment loss of $495,000 compared to an impairment loss of $-0- in the first nine months of 2019.

6. Notes Payable

At September 30, 2020, the Company had 3 series of unsecured unsubordinated notes issued and outstanding having an outstanding aggregate principal amount of $72,526,750 in underwritten public offerings (collectively, the "Notes"). Each series was issued pursuant to an Indenture, dated as of June 21, 2020, between the Company and U.S. Bank National Association, as trustee, and a ~~$20 million revolving credit facility with Bankwell Bank (“Bankwell”~~related supplement thereto. Collectively, the indenture and each supplement thereto is referred to as the "Indenture"). In June 2019, the Company issued and sold $23,663,000 aggregate principal amount of its 7.125% notes due 2024 (the “June 2024 Notes"); in November 2019, the Company issued and sold $34,500,000 of its 6.875% notes due 2024 (the “December 2024 Notes"); and in September 2020, the Company issued and sold $14,363,750 of its 7.75% notes due 2025 (the "September 2025 Notes “). The Bankwell credit facility was secured by substantially all the Company’s assets. Interest on the amounts outstanding accrued at a rate equal to the greater of (x) 5.5% and (y) the three-month LIBOR Rate plus 4.50%. At May 11, 2018 the outstanding balance under the Bankwell credit facility was $18,512,470 and wasJune 2024 Notes commenced accruing interest ~~at the rate of 6.79% per annum.~~

Effective May 11, 2018 (the “Closing Date”), the Company entered into a Credit and Security Agreement with Webster Business Credit Corporation (“WBCC”), Bankwell Bank and Berkshire Bank (collectively, the “Lenders”) regarding a new $35 million revolving credit facility (the “Webster Facility”) to replace the Bankwell credit facility. The Webster Facility was secured by a first priority lien on all the Company’s assets, including its mortgage loan portfolio. Interest on the outstanding balance accrued at a rate equal to the 30-day LIBOR rate plus 4.00% per annum. All amounts outstanding under the Webster Facility, including principal, accrued interest and other fees and charges, were to be due and payable May 11, 2022.

~~SACHEM CAPITAL CORP.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2019~~

On June 25, 2019, the ~~entire outstanding balance~~December 2024 Notes commenced accruing interest on ~~the Webster Facility, including principal, accrued but unpaid interest and other fees, in the aggregate amount of $19.8 million, was paid in full~~November 7, 2019 and the Webster Facility was terminated. In connection with the termination of the Webster Facility, the Company expensed non-recurring charges of $779,641, of which $439,446 constituted the write-off of non-cash deferred financing costs.

~~Mortgage Payable~~

Effective March 29, 2019, the Company refinanced a $310,000 mortgage loan it obtained from Bankwell in February 2017 with a new mortgage loan from Bankwell Bank in the principal amount of $795,000 bearingSeptember 2025 Notes commenced accruing interest ~~at the rate of 5.06% per annum and maturing~~ on ~~March 31, 2029 (the “New Bankwell Mortgage Loan”). Beginning May 2019, principal and~~September 4, 2020. Accrued interest on the New Bankwell Mortgage Loan is payable, in arrears, in monthly installments of $4,710. The New Bankwell Mortgage Loan is secured by a first mortgage lien on the property located at 698 Main Street, Branford, Connecticut, which, since March 2019, serves as the Company’s principal place of business.

~~Principal payments on the New Bankwell Mortgage Loan are due as follows:~~

Year ending December 31,
2019 $ 11,025
2020 17,249
2021 18,142
2022 19,082
2023 20,070
2024 and thereafter 702,580
Total $ 788,148

6.	~~Financing Transactions~~

~~During the nine-month period ended September 30, 2019, the Company generated approximately $55.7 million of gross proceeds from the sale of its securities as follows:~~

	~~(i)~~	~~$20,465,203 from the sale of 4,340,456 common shares in an “at-the-market” offerings,~~
	~~(ii)~~	~~$23,663,000 from the sale of its 7.125% unsecured, unsubordinated notes due June 30, 2024 (the “Notes”),~~
	~~(iii)~~	~~$ 82,035 from the exercise of 16,407 warrants, and~~
	~~(iv)~~	~~$11,500,000 from the sale of 2,300,000 common shares from an equity offering~~

In total, approximately $31.5 million of the net proceeds from these offerings were used primarily to pay-off the Webster Facility on an ongoing basis until fully paid on June 25, 2019, with the balance used as working capital and for general corporate purposes.

~~The~~ Notes were sold in an underwritten public offering. The Notes were issued in denomination of $25.00 each and are listed on the NYSE American and trade under the symbol “SCCB”. Interest on the Notes commenced accruing on June 25, 2019. The accrued interest is payable quarterly in cash, in arrears, on March 30, June 30, September 30 and December

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

30, commencing September 30, ~~2019.~~2019 for the June Notes, December 30, 2019 for the December Notes and December 30, 2020 for the September Notes . The June Notes, December Notes and September Notes mature, and ~~the entire~~all amounts outstanding thereunder including principal, ~~amount is due~~accrued but unpaid interest and any other fees and costs, June 30, ~~2024.~~2024, December 30, 2024 and September 30, 2025, respectively. 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 for borrowed money 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 June 25, 2021, in the case of the June Notes, November 7, 2021, in the case of the December Notes, and September 4, 2022, in case of the September Notes, 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 Notes are reflected on the Company’s September 30, 2020 and December 31, 2019 balance ~~sheet~~sheets net of deferred financing costs in the amount of approximately ~~$1.2 million.~~$3.6 million and $2.7 million, respectively.

7. Line of Credit

~~SACHEM CAPITAL CORP.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~SEPTEMBER~~During the nine months ended September 30, ~~2019~~2020, the Company obtained a $12.1 million priority credit line from Wells Fargo, which is secured by the Company's portfolio of short-term securities. The credit line bears interest at a rate equal to 1.5% below the prime rate (1.75% at September 30, 2020).

7.	8. Other income

~~Other~~For the three-month and nine-months periods ended September 30, 2020 and 2019, other income consists of the following:


	Three Months				Nine Months
	ended September 30,				ended September 30,
	2020		2019		2020		2019
Income on borrower charges	$	46,432	$	130,871	$	204,964	$	163,364
Lender, modification and extension fees		154,175		138,148		431,977		288,373
In-house legal fees		53,740		36,500		156,090		108,200
Other income		82,442		20,004		111,040		62,117
Total	$	336,789	$	325,523	$	904,071	$	622,054

Three Months ended
September 30, Nine Months ended
September 30,
2019 2018 2019 2018
Borrower charges $ 130,871 $ 23,579 $ 163,364 $ 164,296
Lender fees 51,426 26,955 132,397 205,222
In-house legal fees 36,500 7,478 108,200 58,728
Modification and extension fees 86,722 115,544 155,976 194,416
Interest income from investments 28,148 - 28,148 -
Other income 20,004 1,715 62,117 52,168
Total $ 353,671 $ 175,271 $ 650,202 $ 674,830

9. Commitments and Contingencies

8.	~~Commitments and Contingencies~~

Origination Fees

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

for financial statement purposes.

Original maturities of deferred revenue are as follows as ~~of September 30:~~of:


September 30,
2020	$	332,869
2021		618,867
2022		158,506
2023		4,479
Total	$	1,114,721

2019 $ 333,198
2020 581,541
2021 117,145
2022 35,783
Total $ 1,067,667

~~If a mortgage loan is paid~~In instances in ~~full prior to its stated~~which mortgages are repaid before their maturity date, the balance of any unamortized deferred revenue is recognized in ~~full.~~full at the time of repayment.

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

Unfunded Commitments

At September 30, ~~2019,~~2020, the Company iswas committed to ~~future fundings with respect to existing mortgage~~an additional $13,342,248 in construction loans ~~in an amount equal to $7,329,025 subject to satisfaction~~that can be drawn by the borrower ~~of the~~when certain conditions ~~set forth in the note and related mortgage.~~are met.

Other

~~Other~~

In the normal course of its business, the Company is named as a party-defendant ~~in various legal proceedings~~ because it is a mortgagee having ~~an interest~~interests in real ~~property~~properties that isare being foreclosed upon, usually because the ~~subject of a foreclosure proceeding, usually resulting from unpaid~~owner failed to pay 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 September 30, 2020, there were 8 such properties, representing approximately $1.3 million in mortgages receivable.

10. Related Party Transactions

In the ordinary course of business, the Company ~~believes that~~may originate, fund, manage and service loans to shareholders. The underwriting process on these loans is consistent with Company policy. The terms of such loans, including the ~~fair market value of the property subject to foreclosure is in excess of the sum of the unpaid balance of the loan, accrued but unpaid~~ interest ~~and unpaid property taxes, if any.~~

~~SACHEM CAPITAL CORP.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2019~~

9.	~~Related Party Transactions~~

Until March 11, 2019, the Company leased office space, on a month-to-month basis, in a building owned by Union News of New Haven, Inc., an entity that is controlled and 20%-owned by Jeffrey C. Villano, the Company’s co-CEO. Rentrate, income, origination fees and other ~~facility related charges paid by~~closing costs are the ~~Company~~same as those applicable to ~~Union News for~~loans made to unrelated third parties in the ~~nine- and three-month periods ended~~portfolio. As of September 30, 2020, and 2019, ~~were $4,500~~loans to known shareholders totaled $4,626,665 and ~~$-0-, respectively, and for the nine- and three-month periods ended June 30, 2018 were $9,000 and $4,500,~~$5,703,655, respectively. ~~In March 2019, the Company moved to its operations to a new Company-owned building. Accordingly, rental payments are no longer due to JJV.~~

Prior to the Exchange, from time to time, SCP would lend funds to JJV (the “JJV Loans”), which JJV would then use to acquire troubled assets from third parties who were not existing SCP borrowers. Those properties are then mortgaged to secure the JJV Loans. As part of the Exchange, the Company acquired the notes evidencing these loans from SCP. The principal balance of the JJV Loans at September 30, 2019 was $-0-, compared to $879,457 at December 31, 2018. During the quarter ended September 30, 2019, both of the JJV Loans were assigned to the Company so that the underlying borrower is directly liable to the Company. Interest income earned on these mortgage loans for the ~~three~~three- and ~~nine months~~nine-months ended September 30, 2020 was $129,956 and $397,293, respectively. Interest income earned on these mortgage loans for the three- and nine-months ended September 30, 2019 was ~~$5,812~~$143,061 and ~~$40,686,~~$365,784, respectively.

For each of the ~~three- and~~ nine-month periods ended September 30, ~~2018 interest payments on the JJV Loans were $26,384~~2020 and ~~$85,388, respectively.~~

~~In 2018 the Company sold two notes, having an aggregate original principal amount of $1,717,000, to a shareholder at par. In the first quarter of~~ 2019, the Company sold a third note, having an aggregate original principal amount of $500,000, to the same shareholder at par. All three notes are secured by commercial properties. The Company continued to service the notes on behalf of the purchaser until paid. In December 2018, the Company reacquired one of the notes, having an original principal amount of $1,200,000, and in 2019 reacquired the other two notes, having an aggregate principal amount, $1,017,000. The balance owed to the purchaser for the notes, $1,200,000 at December 31, 2018, is characterized as due to shareholder on the Company’s balance sheets for the relevant periods. On July 26, 2019 all principal and interest due to the shareholder were paid in full.

~~At September 30, 2019 and December 31, 2018, amounts owed by JJV to the Company were $22,794 and $22,977, respectively, and is reflected as other receivables on the Company’s balance sheet.~~

~~For the nine months ended September 30, 2019 and 2018,~~ the wife of ~~one of our~~the Company’s chief executive ~~officers~~officer was paid $75,000 ~~and $56,250, respectively,~~ for accounting and financial reporting services provided to the Company.

~~SACHEM CAPITAL CORP.~~
~~NOTES TO FINANCIAL STATEMENTS~~
~~SEPTEMBER 30, 2019~~11. Concentration of Credit Risk

~~10.~~

~~Stock-Based Compensation~~

~~On October 27, 2016,~~Financial instruments that potentially subject the Company ~~adopted~~to concentrations of credit risk consist primarily of cash, cash equivalents and mortgage loans.

The Company maintains its cash and cash equivalents with various financial institutions. Accounts at the ~~2016 Equity Compensation Plan (the “Plan”),~~financial institutions are insured by the ~~purpose~~Federal Deposit Insurance Corporation up to $250,000.

The Company makes loans that are secured by first mortgage liens on real property located primarily (approximately 90%) in Connecticut. This concentration of ~~which is to align the interests~~credit risk may be affected by changes in economic or other conditions of the ~~Company’s officers, other employees, advisors and consultants or any subsidiary, if any,~~geographic area.

Credit risks associated with ~~those of~~ the Company’s ~~shareholders~~mortgage loan portfolio and ~~to afford an incentive to such officers, employees, consultants and advisors to continue as such, to increase their efforts on~~related interest receivable are described in Note 4 - Mortgages Receivable.

12. Equity Financing Transactions

During the Company’s behalf and to promote the success of the Company’s business. The basis of participation in the Plan is upon discretionary grants of awards by the Company’s Board of Directors. 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 Section 5 of the Plan. The number of securities remaining available for future issuance by the Plan is 1,477,116. Stock based compensation for the three- and nine-month ~~periods~~period ended September 30, 2019, ~~was $4,107 and $12,321, respectively.~~

the Company generated approximately $32 million of gross proceeds from the sale of its securities as follows:

~~11.~~

~~Subsequent Events~~(i)

$20,465,203 from the sale of 4,340,456 common shares in an "at-the-market" offerings;

(ii)

$82,035 from the exercise of 16,407 warrants; and

(iii)

$11,500,000 from the sale of 2,300,000 common shares.

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SACHEM CAPITAL CORP.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

A portion of the net proceeds from these transactions were used to repay, the outstanding balance on a credit facility maintained with Webster Business Credit Corporation, with the balance used as working capital and for general corporate purposes.

On January 27, 2020, the Company filed a Registration Statement on Form S-3 with the SEC covering the offering and sale of up to $100 million of its securities, including common shares, preferred shares, debt securities, warrants, guaranties and units consisting of two or more classes of the foregoing securities. The registration statement became effective February 5, 2020.

13. Subsequent Events

In October ~~22, 2019~~2020, the Company sold an additional $14,000,000 aggregate principal amount of its September 2025 Notes. In connection with the offering of such notes, the Company granted the underwriters an option to purchase up to an additional $2.1 million aggregate principal amount of September 2025 Notes. The option expires November 20, 20120.

On November 4, 2020, the Company paid a dividend of $0.12 per ~~common~~ share, or $2,654,076 in the ~~aggregate.~~aggregate, to shareholders of record as of October 26, 2020.

14. COVID-19

On March 20, 2020, Governor Ned Lamont of Connecticut issued an executive order requiring all “non-essential” businesses to close effective 8:00 p.m., Monday, March 23, 2020, until further notice. During the second quarter of 2020, the State of Connecticut announced plans to re-open selected businesses pursuant to a three Phase reopening plan for those businesses deemed non-essential and closed due to the March 20, 2020 executive order. On May 20, 2020, Phase 1 of the re-opening plan was put in place, on June 17, 2020 Phase 2 was put into effect and on October 8, 2020 Phase 3 ~~2019,~~was put into effect. The compliance requirements for certain businesses to operate are difficult to administer, costly and in many situations not customer friendly. If these orders remain in effect for an extended period, it could disrupt the Company’s ~~board of directors authorized the grant of 2,500 common shares to each of its independent directors, of which 625 shares vested immediately upon grant~~operations in a material way, resulting in reductions in revenues, net income, and ~~625 shares will vest on each of October 4, 2020, 2021 and 2022 (each a “Vesting Date”) unless the director resigns or is removed for “cause” prior~~cash flow. In addition, any disruption to the ~~Vesting Date. The shares, 7,500 in~~operations of a borrower could impair its ability to make monthly payments of interest, payments of insurance and/or taxes or to repay the ~~aggregate,~~outstanding balances on their loans at maturity. Furthermore, if a liquidity crisis were ~~issued under~~to develop, borrowers may not be able to refinance their loans when due. Finally, the ~~Plan.~~spread of COVID-19 is having a negative impact on the overall economy, including on real estate values. If borrowers cannot sell their properties or the values of properties securing mortgage loans decline significantly, the borrowers may not be able to repay their loans when due. In addition, ~~each independent director entered into a Restricted Stock Agreement~~the filing and preparation of loan documents with the ~~Company with respect~~various recording offices may be delayed and currently there is only limited access to the ~~1,875 restricted shares granted~~Connecticut court system to ~~such director.~~

~~From October 1 through November 13, 2019,~~process foreclosures and evictions. In the second quarter of 2020, the Company ~~sold 14,317 common shares through its at-the-market offering facility, realizing gross proceeds~~restructured NaN loans , having an aggregate balance of ~~$68,006.~~

~~On or about October 7, 2019~~$6.5 million at June 30, 2020, pursuant to forbearance requests by borrowers under a program the Company ~~filed~~adopted in response to the COVID-19 pandemic. The total amount of interest deferred under these NaN loans was approximately $200,000. At September 30, 2020, 18 forbearance loans, having an ~~amendment~~aggregate principal balance of $5.1 million and $146,000 of deferred interest, were still outstanding.

If there is a re-occurrence of the virus in Connecticut or the State mandates further business closures, the Company may be compelled to take measures to preserve its ~~certificate~~cash flow, including reducing operating expenses and dividend payments until the consequences of ~~incorporation increasing~~ the ~~number of its authorized common shares, par value $0.001 per share, from 50,000,000~~outbreak subside. There may be other adverse consequences to ~~100,000,000. The amendment was approved by shareholders at~~ the Company’s ~~2019 Annual Meeting of Shareholders held on October 3, 2019.~~

On November 7, 2019, the Company consummated the sale of $30.0 million aggregate principal amount of its 6.875% unsecured unsubordinated notes due December 30, 2024 (the “November 2019 Notes”). Interest on the November 2019 Notes is payable quarterly in arrears on each March 30, June 30, September 30business, operations, and December 30 that they are outstanding beginning December 30, 2019. The Company has the right to prepay the November 2019 Notes, in whole or in part, at any time on or after November 7, 2021. Pending their use, the net proceedsfinancial condition from the ~~offering~~spread of COVID-19 that have not been ~~invested in short-term certificates~~considered.

Table of ~~deposit.~~Contents

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

~~Sachem Capital Corp. was formed as HML Capital Corp.~~We are a Connecticut-based real estate finance company that specializes in ~~January 2016 under the New York Business Corporation Law. On~~originating, underwriting, funding, servicing and managing a portfolio of short-term (i.e. three years or less) loans secured by first mortgage liens on real property. From our inception, in December 15, 2016, we changed our name to Sachem Capital Corp. Prior to February 8, 2017, our business operated as a Connecticut limited liability company under the name Sachem Capital Partners, LLC (“SCP”). On February 9, 2017, we completed2010, through our initial public offering in February 2017 (the “IPO”) ~~in which~~, we issued and sold 2.6 million of our common shares, $.001 par value per share (“Common Shares”), at $5.00 per share, which raised $13 million of gross proceeds. The net proceeds from the IPO were approximately $11.1 million.operated as a limited liability company. The primary purpose of the IPO was to raise ~~additional~~ equity capital to fund mortgage loans and expand our mortgage loan ~~portfolio. The IPO was also intended~~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, ~~upon~~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 Nine Months of 2020 and Outlook for Balance of Year

~~Financing Strategy Overview~~

ToWe began 2020 with approximately $35 million of liquid assets and within the first seven weeks of the year, we used about $15 million of that war chest to fund new mortgages. Then COVID-19 hit and we quickly realized that things were about to change drastically. Once the State of Connecticut went into lockdown mode, we were forced to scale-back our operations. As a finance company, we were permitted to remain open but, given “social distancing” and other measures designed to protect our employees and curtail the spread of the virus, we rotated employees in and out of the office and, for those with remote log-in capability, had them work from home. Remote work is inherently not as efficient because our underwriting process is collaborative, but we adjusted well to this "new way of working." Furthermore, face-to-face customer contact was curtailed significantly, placing greater emphasis on phone calls, emails and video conferencing. In addition, the filing and preparation of loan documents with the various recording offices were and may continue to ~~grow~~be delayed and currently there remains limited access to the Connecticut court system to process foreclosures and evictions. In summary, the consequences of COVID-19 have and may continue to include one or more of the following:

●

an increase in the amount 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 that are in process;

●

inhibit the ability of borrowers to sell their properties so they can repay their obligation to us; and

●

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

Currently, of our 480 mortgage loans receivable, eighteen were restructured pursuant to the forbearance program we adopted in response to the COVID-19 pandemic. These eighteen mortgage loans have an aggregate outstanding principal balance of $5.1 million and the total amount of interest deferred on these eighteen mortgage loans is $146,000.

As is the case with most industries and businesses impacted by COVID-19, we are limited in terms of the tools that are available to us to blunt the impact of COVID-19. We will continue to do all that is possible to keep our operations going, maintain

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contact with all our borrowers and applicants, and take whatever actions are necessary and appropriate to enforce our rights. However, we cannot assure you that our business, operations, and financial condition will not be adversely impacted by COVID-19.

In light of the impact of the COVID-19 pandemic on general economic conditions and the capital markets, we ~~must increase~~immediately took various steps to reduce our risks, including the ~~size~~following changes to our underwriting guidelines as of ~~our loan portfolio, which requires that~~April 1, 2020 applicable to new loans:

●

limited new loan activity to the amount of cash generated by loan payoffs;

●

reduced the loan-to-value ratio on new loans to 50%;

●

loans greater than $1 million required the approval of one of our independent directors; and

●

required an interest reserve with respect to loans exceeding a specified amount.

In addition, in response to the COVID-19 pandemic, in the second quarter of 2020 we ~~raise additional capital either~~instituted a forbearance program to help borrowers who were adversely impacted by ~~selling shares~~the pandemic. Under this program, approximately $200,000 of ~~our capital stock or by incurring additional indebtedness. We do not have a policy limiting the~~interest on twenty-three loans, having an aggregate principal amount of indebtedness that we may incur. Thus, our operating income in the future will depend, in part, on the amount of indebtedness incurred and the spread between our cost of funds and the yield on our loan portfolio. Furthermore, 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.

~~Historically, we have relied upon both equity capital and debt to grow our business. At December 31, 2018, we had approximately $52.8~~$6.5 million of shareholders’ equity and approximately $27.5 million of indebtedness, of which approximately $27.2 million was the outstanding balance on our $35 million credit facility. Since that date, we have restructured our balance sheet by raising additional equity capital and replacing our existing secured, variable interest rate, senior revolving credit facility with unsecured, unsubordinated fixed rate five-year term notes. At September 30, 2019, shareholders’ equity was approximately $84.3 million, and our indebtedness was approximately $23.2 million. In connection with the termination of the Webster Facility (as defined below), we incurred termination costs and expenses of approximately $780,000, including a write-off of unamortized deferred financing costs of approximately $440,000, or approximately $0.04 per share based on the weighted number of Common Shares outstanding at June 30, ~~2019. While the costs of this restructuring had an adverse impact on our operational performance for the nine months ended September 30, 2019, a majority of the costs were non-cash (~~~~i.e.,~~ ~~deferred financing costs) and non-recurring. Even though net income for the nine months ended September 2019~~2020, was adversely impacted by these financing transactions, net cash provided by operations in the first nine months of 2019 increased approximately 94.2% compared to the first nine months of 2018. In addition, we believe, our restructured balance sheet will have a positive impact on our operations over the balance of the year by reducing our operating expenses and providing us with greater operational flexibility.

~~Specifically, since January 1, 2019, we:~~

~~(i)~~

Refinanced the mortgage on our new corporate headquarters, increasing the loan amount from $310,000 to $795,000. The interest rate on the new mortgage loan is fixed at 5.06%, which, although higher than what we were paying on the original mortgage loan, is significantly less than the interest rate on the $35 million revolving credit facility from Webster Business Credit Corporation, Bankwell Bank and Berkshire Bank that we obtained in May 2018 (the “Webster Facility”), which at the time of the refinancing was 6.49%. The net proceeds from this refinancing, approximately $495,000, were used to reduce the outstanding balance on the Webster Facility.

~~(ii)~~

Sold an aggregate of 4,340,456 Common Shares through “at-the-market” offering facilities for aggregate gross proceeds of $20,465,203. A substantial portion of these net proceeds, approximately $15.5 million, were used to pay down the balance on the Webster Facility and approximately $2.2 million was used to repay an amount due to a shareholder.

~~(iii)~~

Sold $23,663,000 aggregate principal amount of our 7.125% unsecured, unsubordinated notes due June 30, 2024 (the “June 2019 Notes”) in an underwritten public offering. The net proceeds from the sale of the Notes, approximately, $22.3 million, were used to pay the remaining balance on the Webster Facility, which was then terminated.

~~(iv)~~

~~Sold 16,407 Common Shares through the exercise of warrants providing gross proceeds of $82,035.~~

~~(v)~~

Sold 2,300,000 Common Shares in an underwritten equity offering for aggregate gross proceeds of $11,500,000. We intend to use the net proceeds from this offering, approximately $10.7 million, to grow our portfolio and general corporate purposes.

deferred.

As ~~a result~~conditions improved, effective July 1, 2020, we relaxed some of these ~~transactions, we strengthened~~measures by increasing our ~~balance sheet, eliminated the fees and expenses relating~~loan-to-value ratio back to ~~the Webster Facility, which were significant, eliminated the risk associated with variable rate instruments and relieved ourselves from onerous loan covenants, which we felt limited~~70% while still maintaining a cautionary perspective.

Demand for our ~~operational and financing flexibility. We believe these benefits outweigh the higher interest rate we are paying on the Notes relative to the rate we were paying on the Webster Facility.~~

~~Because most of the net proceeds from these financing transactions were used to repay existing indebtedness, we were not able to significantly increase our mortgage loan portfolio or revenues~~products in the third quarter of ~~2019.~~2020 was robust. We believe this demand was driven by several factors, all of which are related to COVID-19.

●

First, was the improvement in the overall economy, particularly the northeast corridor. This improvement reflected the reduction in the transmission rate of the virus and the slow-down in the number of virus-related deaths. As a result, various restrictions that had been imposed by states were eased.

●

Second, the competitive landscape for us remains favorable. Notwithstanding the improvements in the economy, banks and other traditional lenders have not eased-up on their lending requirements and many non-traditional lenders remain undercapitalized. In a way, this validated our decision prior to the second quarter of the year to focus on preservation of capital rather than short-term growth.

●

Third, the residential real estate market in Connecticut, our primary market, has stabilized and is quite strong. Like many other communities surrounding New York, Connecticut, particularly the southern counties, have benefitted from the migration of New York City residents to the suburbs. We believe this contributed to the increase in the number of loan pay-offs that we experienced in the third quarter.

●

Fourth, in the third quarter we initiated a growth strategy focused on Florida. At June 30, 2020, we had less than $1 million of Florida loans in our portfolio. At September 30, 2020, our portfolio included $9.7 million aggregate principal amount of loans in Florida.

Outlook for Balance of 2020

Our outlook for the rest of the year remains optimistic, but we do recognize that challenges remain. We are aware that many public health experts are predicting a "second wave" of the COVID-19 pandemic and, in fact, almost every state is now experiencing an increasing number of infections and an increasing number of deaths related to COVID-19. Accordingly, many public health professionals and politicians are urging states to reimpose some of the earlier restrictions. If there is a second outbreak of the virus in Connecticut and the state mandates further business closures, we may be compelled to take measures to preserve our cash flow, including reducing operating expenses and dividend payments until the consequences of the outbreak subside. In addition, there may be other adverse consequences to our business, operations, and financial condition from the spread of COVID-19 that we have not considered. As is the case with most industries and businesses impacted by COVID-19, we are limited in terms of the tools that are available to us to blunt the impact of COVID-19. We will continue to do all that is possible to keep our operations going, maintain

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contact with all our borrowers and applicants, and take whatever actions we believe are necessary and appropriate to enforce our rights. However, atwe cannot assure you that our business, operations, and financial condition will not be adversely impacted by COVID-19.

Other factors that we believe will impact our business in 2020 include the following:

Increased competition. In the past, our primary competitors were other non-bank real estate finance companies (like us) as well as 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. Currently, we have seen a decrease in competition as a result of COVID-19.

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. As of September 30, ~~2019~~2020, the average yield on our portfolio was down slightly to 12.28% from 12.66% for the same period in 2019. We expect further rate compression in 2020.

Property values. In some parts of the U.S., the rate of increasing property values has slowed and, in some cases, has even reversed. In other parts of the United States - southern Connecticut for example - we've seen increased property values as borrowers flee highly concentrated geographies such as New York City. Although our default and foreclosure rate has been relatively consistent over the last three years, as property values decline the risk of foreclosure increases. Our response to this development has been to adhere to our strict loan-to-value ratio, limit the term of our loans to not more than one year whenever possible, and aggressively enforce our rights when loans go into default.

We have adjusted our business and growth strategy to address changes in the marketplace and our growth to date. Specifically, we ~~had $11.0 million of available cash, which~~are looking to expand our geographic footprint beyond Connecticut to Florida and Texas. We are also looking at funding larger loans than we ~~intend to use~~have in the past and we are looking to fund ~~new mortgage loans~~developers and builders with longer and stronger operating histories than those we have funded in the ~~fourth quarter of 2019.~~past. We continue to look for opportunities in new markets that meet our core underwriting and loan criteria. In addition, on October 31, 2019 we sold $30.0 million aggregate principal amount of unsecured unsubordinated 6.875% notes due December 30, 2024 (the “November 2019 Notes.”) The net proceeds from the sale of these notes were approximately $28.6 million. We may sell up to an additional $4.5 million aggregate principal amount of these notes if the underwriters exercise their over-allotment option in full. The over-allotment option expires November 30, 2019. Third, we can sell up to an additional $7.0 million of Common Shares through our existing at-the-market offering facility. (The facility was reduced to $11.5 million from $30 million in order to accommodate the sale of the November 2019 Notes.) Finally, given our improved balance sheet, we may obtain a new credit facility in the future if we believe the ~~terms are reasonable. Thus, we believe we are well-capitalized for the next 12-18 months~~migration to higher quality transactions will offset any rate compression and ~~plan to use these funds to increase our mortgage loan portfolio.~~help us maintain a low foreclosure rate.

Operational and Financial Overview

At September 30, 2019, (i) our loan portfolio included 432 mortgage loans, with individual principal loan amounts ranging from approximately $8,000 to approximately $2.9 million and an aggregate loan amount of approximately $89.0 million, (ii) the average original principal amount of the mortgage loans in the portfolio was approximately $206,000 and the median mortgage loan amount was $137,731 and (iii) approximately 77% of the mortgage loans had a principal amount of $250,000 or less. In comparison, at September 30, 2018, (i) our loan portfolio included 395 mortgage loans, with individual principal loan amounts ranging from $6,000 to $2.0 million and an aggregate loan amount of approximately $77.8 million, (ii) the average original principal amount of the mortgage loans in the portfolio was $197,000 and the median mortgage loan amount was $136,000 and (iii) approximately 79.5% of the mortgage loans had a principal amount of $250,000 or less. At September 30, 2019 and 2018, unfunded commitments for future advances totaled approximately $7.3 million and $6.8 million, respectively.

For the three months ended September 30, 2019, revenues and net income were approximately $3.4 million and $2.1 million, respectively. For the three months ended September 30, 2018, revenues and net income were approximately $3.1 million and $2.0 million, respectively. For the nine months ended September 30, 2019, revenues and net income were approximately $9.8 million and $5.3 million, respectively. For the nine months ended September 30, 2018, revenues and net income were approximately $8.8 million and $6.1 million, respectively.

Our ~~operating expenses have increased significantly primarily due to the growth in our operations.~~

~~The mortgage~~ loans ~~that we originate~~ typically have a maximum initial term of one to three years and bear interest at a fixed rate of 5%5.0% to ~~13%~~13.0% per year and a default rate of 18% per year. ~~For the three and nine month periods ended September 30, 2019, the yield on our mortgage loan portfolio was 12.66% and 12.58%, respectively.~~

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. Generally, our underwriting criteria mandated a loan-to-value ratio of no less than 70% – i.e., the amount of the loan could not exceed 70% of the market value of the property securing the loan. For the second quarter of 2020, we revised that policy so that the amount of the loan could not exceed 50% of the market value of the property securing the loan – i.e., a 50% loan-to-value ratio. As ~~a matter~~ of July 2020, the 50% loan-to-value ratio on new loan fundings has reverted back to our general policy ~~we do not make any loans if the loan-to value ratio exceeds~~of 70%. ~~However, in~~In the case of ~~loans secured by property undergoing~~ construction ~~or renovation and that have future funding obligations,~~loans, the loan-to-value ratio is based on the ~~estimated~~ post-construction ~~or post-renovation~~ value of the property. ~~Accordingly, during the construction or renovation period the loan amount could exceed the actual value of the property. Generally, we~~We rely on readily available market data, including appraisals when available or timely, tax assessment rolls, recent sales transactions ~~brokers~~ and ~~in some cases, third-party appraisals~~brokers to evaluate the ~~strength~~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, ~~after~~ taking into ~~account~~consideration the loan under consideration.

Our revenue consists primarily of interest earned on our loan portfolio and our net income is the spread between the interest we earn and our cost of funds. ~~Our capital structure is more heavily weighted to equity rather than debt (approximately 78% vs.22% of our total capitalization at September 30, 2019).~~ At September 30, 2020 and 2019, the ~~annual~~ yield on our mortgage loan portfolio was 12.28% and 12.66% ~~per annum. The~~, respectively. For this purpose, yield ~~has remained steady over the past few years as older loans come due~~takes into account interest payments, origination fees and ~~are either repaid or refinanced at similar rates. The yield reflected above does not include~~ other ~~amounts~~fees and charges collected from borrowers ~~such as origination fees, default~~related to originating, managing or servicing our mortgage loan portfolio. We expect interest rate compression to continue to be a factor in 2020 due to increased competition and borrower demands. 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.

Table of ~~interest and late payment fees.~~Contents

In addition, we seek to mitigate some of the risk associated with rising rates by ~~generally~~ limiting the term of new loans to one year. At September 30, 2020, approximately 78.1% 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. ~~However, if~~If interest rates ~~continue to increase,~~have decreased and we may find it necessary to change our strategy and try to increase the rates on our mortgage loans as well. If we are successful, this may undermine our strategy to increase market share. If we are not successful,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.

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. As a result, we are unable to quantify the number of loans that may have, at one time or another, been in default. Since inception through September 30, 2019, we have made approximately 1,100 mortgage loans having an aggregate original principal amount of approximately $217 million.

At September 30, ~~2019, of the 432~~2020, nine mortgage loans ~~in our portfolio, sixteen have been referred to legal counsel for collection and are~~were the subject of ~~foreclosure~~tax enforcement or collection proceedings. The aggregate ~~outstanding~~amount due on these loans, including principal ~~balance of these sixteen mortgage loans~~ and ~~the~~unpaid accrued ~~but unpaid~~ interest, ~~as of September 30, 2019~~ was approximately ~~$7.9~~$1.3 million, representing approximately ~~8.87%~~1.0% of our aggregate mortgage loan portfolio. In the case of each of these ~~sixteen mortgage~~ loans, we believe the value of the collateral exceeds the ~~sum~~aggregate amount due.

Financing Strategy Overview

To continue to grow our business, we must increase the size of our loan portfolio, which requires that we 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 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. To grow the business and satisfy the requirement to pay out 90% of net profits, we have increased our indebtedness to approximately 50.4% of our total capital at September 30, 2020 and we expect that percentage to increase. We intend to use leverage for the sole purpose of financing our portfolio and not for speculating on changes in interest rates.

At September 30, 2020, our capital structure was 49.6% equity and 50.4% debt. Our total indebtedness at September 30, 2020 was approximately $85.6 million, which included a mortgage loan of approximately $800,000, a credit line loan of approximately $12.1 million and three series of unsecured, unsubordinated five-year notes having an aggregate original principal amount of approximately $72.5 million (collectively, the “Notes”). Notes having an aggregate principal amount of approximately $23.7 million bear interest at the rate of 7.125% per annum and have a maturity date of June 30, 2024 (the “June Notes”). Notes having an aggregate principal amount of $34.5 million bear interest at the rate of 6.875% per annum and have a maturity date of December 30, 2024 (the “December Notes”). Notes having an aggregate original principal amount of approximately $14.4 million bear interest at the rate of 7.75% per annum and have a maturity date of September 30, 2025 (the “September Notes”). In addition, in October 2020, we sold an additional $14,000,000 aggregate principal amount of our September 2025 Notes, which notes are a further issuance of, rank equally in right of payment with and form a single series for all purposes under the Indenture governing such notes, including, without limitation, waivers, amendments, consents, redemptions and other offers to purchase and voting, with the previously issued September 2025 Notes.

The Notes are unsecured, unsubordinated obligations and rank equally in right of payment with all our existing and future senior unsecured and unsubordinated indebtedness but 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). Interest on the Notes is payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year the Notes are outstanding.

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The 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 (defined below), we will be deemed to have been discharged from our obligations under the Notes and (ii) an “Asset Coverage Ratio” requirement pursuant to which we may not pay any dividends or make distributions in excess of 90% of our taxable income, incur any indebtedness or 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 the Company’s total assets bears to the aggregate amount of its indebtedness.

We may, at our option, at any time and from time to time, on or after November 7, 2021, in the case of the December Notes, June 30, 2021, in the case of the June Notes, and September 4, 2022, in the case of the September Notes, redeem such Notes, in whole or in part, at a redemption price equal to 100% of the outstanding principal ~~balance~~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.

The December Notes, June Notes and September Notes are listed on the NYSE American LLC with a trading symbol “SACC”, “SCCB”, and “SCCC”, respectively.

We have entered into an Indenture, dated June 21, 2019, with U.S. Bank National Association, as trustee (the “Trustee”), as well as supplements thereto, which provides for the form and terms of the ~~loan, the accrued but unpaid interest on the loan and any unpaid property taxes due with respect to the collateral.~~

At September 30, 2019, real estate owned included sixteen properties having an aggregate book value of approximately $5.3 million. At December 31, 2018, real estate owned included eleven properties having an aggregate book $2.9 million.

~~The key factors contributing to our growth to date have been our ability to access working capital~~Notes and the ~~strong demand for our products~~issuance of the Notes. The Indenture also contains events of default and services, which was driven principally by a robust Connecticut real estate market. These factors coincided with the overall growth in the U.S. economy. In the second quarter of 2019, we curtailed our lending operations due to a shortage of working capital and our desire to repay in full our credit facility with Webster Bank, which adversely impacted our revenues and net income for the second and third quarters of 2019. cure provisions.

In addition, ~~beginning~~ in ~~the second half of 2018 and continuing through~~ the third quarter of ~~2019,~~2020, we ~~started noticing subtle changes in~~borrowed $12.1 million from Wells Fargo against our investment account, which had a balance of approximately $27.7 million at September 30, 2020. The outstanding balance on this loan bears interest at a rate equal to 1.5% below the ~~business environment. For example, traditional lending institutions, such as banks, appeared to be tightening their credit requirements. Normally, that would be a positive development~~prime rate. The current rate for ~~our business. However, at~~ the ~~same time, property values in Connecticut were either stagnant or declining and the length of time between initial listing and sale was expanding. It~~loan is unclear whether these developments are merely temporary phenomena or represent long-term trends. In the meantime, the demand for our products and services continues to be robust. We believe that our best strategy to deal with adverse changes in the marketplace is to adhere to our basic underwriting guidelines. Those two factors, together with our liquidity, lead us to believe that we are well-positioned to address the changes and new trends in the real estate lending market.1.75%.

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 (the “Code”),~~ relating to, among other things, the sources of our gross income, the composition and values of our assets, our compliance with the distributions requirements applicable to REITs and the diversity of ownership of our outstanding ~~Common Shares. Given that our senior executive officers, Jeffrey C. Villano and John L. Villano, own a significant portion of our outstanding capital shares, we~~common shares. We cannot assure you that we will be able to maintain ~~that qualification.~~

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 applicable to other public companies but not 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.

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We will cease to be an emerging growth company upon the earliest of: (i) the end of ~~the~~our 2022 fiscal year; (ii) the first fiscal year after our annual gross revenue are $1.07 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the end of any fiscal year in which the market value of our ~~Common Shares~~common shares held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year. We cannot predict if investors will find our ~~Common Shares~~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~~common shares less attractive, there may be a less active trading market for our ~~Common Shares~~common shares and the price of our ~~Common Shares~~common shares may be more volatile.

As an “emerging growth company,” we ~~intend to~~may 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 these provisions of the JOBS Act and investors may deem our securities a less attractive investment relative to those other companies, which could adversely affect our stock price.

~~Critical Accounting Policies and Use of Estimates~~

The preparation of financial statements in conformity with U.S. GAAP in the 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 of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our use of estimates on a preset number of assumptions that consider (a) past experience, (b) future projections and (c) general financial market conditions. Actual amounts could differ materially from those estimates.

~~Interest income from commercial loans is recognized, as earned, over the loan period and origination fee revenue on commercial loans is amortized over the term of the respective note.~~

Results of ~~operations~~Operations

Three months ended September 30, 2020 compared to three months ended September 30, 2019 ~~and 2018~~

Total revenue

Total revenue for the three months ended September 30, ~~2019~~2020 was approximately ~~$3.4~~$4.3 million compared to approximately ~~$3.1~~$3.4 million for the three months ended September 30, ~~2018,~~2019, an increase of approximately ~~10.7%~~$900,000, or 26.4%. The increase in revenue ~~reflects the~~represents an increase in ~~our~~ lending operations. ~~Compared~~However, as noted above, the restrictions we adopted in response to the ~~2018 period,~~COVID-19 pandemic in March 2020, precluded us from increasing our mortgage loan portfolio in the second quarter of 2020. See "Review of First Nine Months of 2020 and Outlook for Balance of Year". For the ~~2019~~2020 period, interest income was ~~higher by~~ approximately ~~$171,000,~~$3.5 million and net origination fees ~~higher by~~were approximately ~~$114,000~~$393,000. In comparison, for the three months ended September 30, 2019, interest income was approximately $2.4 million and ~~other income higher by~~net origination fees were approximately ~~$150,000.~~$497,000. In addition, we recorded an increase in interest on investments of approximately $4,000 during the 2020 period. These increases in revenue were partially offset by ~~reductions of~~decreases in late fees, approximately ~~$107,000~~$7,000, in ~~gain on~~processing fees, approximately $7,000, and a $22,000 loss from the sale of ~~real estate and approximately $42,000 in late fee income.~~

investments.

Operating costs and expenses

Total operating costs and expenses for three months ended September 30, ~~2019~~2020 were approximately ~~$1.3~~$2.1 million compared to ~~$1.1~~$1.3 million for the three months ended September 30, ~~2018 period,~~2019, an increase of approximately ~~21.6%~~$800,000, or 61.5%. Compared to the 2019 period, in the 2020 period interest expense and amortization of deferred financing costs increased approximately $724,000 due to the increase in our overall indebtedness -- $85.5 million at September 30, 2020 compared to $24.5 million at September 30, 2019. As discussed above, in light of COVID-19, we instituted various restrictions to our lending operations, the result of which was that we did not generate interest income to offset the additional interest expense. See "Review of First Nine Months of 2020 and Outlook for Balance of Year".

Professional fees, including fees for computer and technology services, director fees, legal fees and audit fees, increased approximately $53,000. General and administrative expenses increased approximately $14,000 due to increased operations, while compensation expense increased approximately $20,000.

Comprehensive income (loss)

For the quarter ended September 30, 2020, we reported an unrealized loss on investment securities of approximately $73,000 reflecting the decrease in the market value of such securities since June 30, 2020. There was no comparable item in the third quarter of 2019.

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Net Income

Net income for the three months ended September 30, 2020 was approximately $2.055 million, or $0.10 per share, compared to $2.139 million, or $0.10 per share for the three months ended September 30, 2019, despite the increase in weighted average number of shares outstanding -- 22,117,301 for the 2020 period compared to 21,336,870 for the 2019 period.

Nine months ended September 30, 2020 compared to nine months ended September30, 2019

Total revenue

Total revenue for the nine months ended September 30, 2020 was approximately $12.9 million compared to approximately $9.8 million for the nine months ended September 30, 2019, an increase of approximately $3.1 million, or 32%. The increase in revenue represents an increase in lending operations. As discussed above, in light of COVID-19, in March 2020 we instituted various restrictions to our lending operations, which continued through the quarter ended June 30, 2020. Revenue growth for the nine months ended September 30, 2020 is directly related to our expansion plans, which contributed to the overall growth in our mortgage loan portfolio.

For the 2020 period, interest income was approximately $9.6 million and net origination fees were approximately $1.55 million. In comparison, for the nine months ended September 30, 2019, interest income was approximately $7.5 million and net origination fees were approximately $1.2 million. The balance of the increase in revenues was attributable to an increase in interest on investments and the gain from sale of investments of approximately $550,000 in the aggregate and an increase in other income of approximately $282,000. These increases were offset by decreases in late fee income, approximately $158,000, net rental income, approximately $32,500 and net gain on sale of real estate, approximately $20,000.

Operating costs and expenses

Total operating costs and expenses for nine months ended September 30, 2020 were approximately $6.3 million compared to $4.5 million for the nine months ended September 30, 2019, an increase of approximately $1.8 million, or 40%. The increase in operating costs and expenses is primarily attributable to ~~increases~~the increase in our lending operations. Compared to the 2019 period, in the 2020 period interest expense and amortization of deferred financing costs ofincreased approximately $44,000, professional fees of approximately $51,000 and compensation, fees and taxes of approximately $132,000, offset by stock-based compensation of approximately $25,000 and general and administrative expenses of approximately $11,000.

~~Net Income~~

~~Net income for the three months ended September 30, 2019 was approximately $2.1~~$1.95 million ~~or $0.10 per share, compared to $2.0 million, or $0.13 per share for the three months ended September 30, 2018. The decrease in earnings per share is~~ due to the increase in ~~the weighted average number of shares outstanding~~

~~Nine months ended~~our overall indebtedness -- approximately $85.6 million at September 30, ~~2019 and 2018~~

~~Total revenue~~

~~Total revenue for the nine months ended September 30, 2019 was approximately $9.8 million~~2020 compared to approximately ~~$8.8~~$24.5 million ~~for the nine months ended~~at September 30, ~~2018, an increase~~2019. As discussed above, in light of COVID-19, we instituted various restrictions to our lending operations, the result of which was that we did not generate interest income to offset the additional interest expense. See “Review of First Nine Months of 2020 and Outlook for Balance of Year”.

Professional fees increased approximately ~~$980,000, or 11.1%.~~$142,000, while compensation expense decreased approximately $105,000, reflecting a reduction is property maintenance personnel. The ~~increase in revenue resulted from an increase in lending operations. For the~~ 2019 period interest income was approximately $7.5 million, net origination fees were approximately $1.2 million and other income approximately $650,000. In comparison, for the nine months ended September 30, 2018, interest income was approximately $6.6 million, net origination fees were approximately $1.1 million and other income was approximately $675,000. Finally, late and other fee income increased by approximately $61,000. These increases were offset, in part, by a reduction in gain on the sale of real estate of approximately $100,000.

~~Operating costs and~~included expenses

Total operating costs and expenses for nine months ended September 30, 2019 were approximately $4.5 million compared to $2.7 million for the nine months ended September 30, 2018 period, an increase of approximately 70.0%. The increase in operating costs and expenses is partially attributable to $780,000 of expense incurred in connection with the termination of our line of credit of approximately $780,000 and no such costs occurred in the ~~Webster Credit Facility.~~2020 period. In addition, ~~to that expense being a non-recurring charge, $439,446 represents a write-off~~we recorded an impairment loss of ~~unamortized deferred financing costs, a non-cash item. The second biggest contributor to~~$495,000 during the ~~increase in operating costs and expenses was interest and amortization~~September 2020 period on our real estate owned.

Comprehensive income

For the nine months ended September 30, 2020, we reported an unrealized gain on investment securities of ~~deferred financing costs, which increased~~ approximately ~~$512,000~~$13,000 reflecting the increase in ~~our mortgage loan portfolio, an increase in~~ the ~~interest rate on~~market value of such securities since December 31, 2019. There was no comparable item during the Webster Facility and the slightly higher cost of capital on our unsecured notes. Another contributor to the overall increase in operating costs and expenses was a $423,000 increase in compensation expense (including stock-based compensation). This increase reflects the increase in base salary paid to our co-chief executive officers, which was effective as of July 1, 2018, as well as compensation to our controller, who was hired in August 2018, and our in-house legal counsel, who was hired in November 2018. Finally, general and administrative expenses increased approximately $86,000.

nine months ended September 30, 2019.

Net Income

Net income for the nine months ended September 30, ~~2019~~2020 was approximately $6.7 million, or $0.30 per share, compared to approximately $5.3 million, or $0.30 per ~~share. In comparison, net income~~share for the nine months ended September 30, ~~2018 was $6.1 million, or $0.40 per share. The decrease in net income was due to~~2019, despite the increase in total operating expenses and most of that increase was attributable to the expense in connection with the termination of the Webster Credit Facility, which was incurred in the second quarter. We estimate the impact of that expense was to reduce earnings per share by approximately $0.04. In addition, earnings per share was negatively impacted by the increase in the weighted average number of shares outstanding -- 22,117,301 for the 2020 period compared to 17,662,480 for the 2019 period.

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Liquidity and Capital Resources

At September 30, ~~2019,~~2020, cash and investments totaled approximately $33.1 million compared to $34.8 million at December 31, 2019. Overall, total assets increased by approximately $28.4 million and total liabilities increased approximately $27.1 million compared to year-end. In addition, shareholders’ equity increased by approximately $1.3 million compared to year-end due to a corresponding increase in retained earnings. In addition, at September 30, 2020, we had approximately ~~$11.0~~$13.3 million ~~in cash, none~~ of ~~which is restricted, compared to cash of approximately $158,900 (including restricted cash) at December 31, 2018.~~

future funding commitments under existing loans.

Net cash provided by operating activities for the nine months ended September 30, ~~2019~~2020 was approximately ~~$7.3~~$7.4 million compared to approximately ~~$3.8~~$7.3 million for the ~~same 2018~~2019 period. For the 2020 period net cash from operations consisted primarily of net income of $6.6 million, an impairment loss of $495,000, depreciation and amortization of deferred financing cost of $404,000, an increase in advances from borrowers of $566,000, and in accounts payable and accrued expenses of $360,000, offset by increases in interest and fees receivable of $180,000, due from borrowers of $273,000, deposits on equipment if $101,000 and the realized gain on investments of approximately ~~$3.5 million or 94.2%.~~$415,000. For the 2019 period ~~the total adjustments to~~net cash provided by operating activities consisted primarily of net income ~~were~~of approximately ~~positive $2.1~~$5.3 million, ~~reflecting a (i) $440,000 adjustment for~~ non-cash costs associated with the termination of ~~the~~our revolving credit facility with Webster ~~Facility~~Business Credit Corporation of approximately $439,000, amortization of deferred financing costs and ~~(ii) $2.1 million~~depreciation expense of approximately $204,000, a decrease in due from borrowers of approximately $2.1 million and an increase in advances from borrowers of approximately $181,000, offset by ~~a (i) $450,000~~an increase in interest and fees receivable ~~(ii) $177,000 decrease~~of approximately $454,000, and decreases in due to note purchaser of approximately $177,000 and (iii) $160,000 decrease in accrued expenses. In comparison, for the 2018 period, the total adjustments to net income were approximately negative $2.37 million, reflecting a (i) $723,000 decrease in the amount due to the note purchaser, (ii) $296,000 decrease inaccounts payable and accrued expenses ~~(iii) $309,000 increase in due from borrowers, (iv) $917,000 increase in interest and fees receivable, (v) $151,000 increase in other receivables and (vi) $120,000 gain on sale~~ of real estate, offset by (i) $90,000 in amortization of deferred financing cost, (ii) $20,000 in depreciation expense, (iii) $29,250 in stock-based compensation, (iv) $111,000 decrease in escrow deposits, (v) $117,000 increase in accrued interest and (vi) $44,000 increase in deferred revenue.approximately $160,000..

Net cash used for investing activities for the nine months ended September 30, ~~2019~~2020 was approximately ~~$14.5~~$41.4 million compared to approximately ~~$16.1~~$14.5 million for the comparable ~~2018~~2019 period. ~~This decrease is~~For the 2020 period, net cash used for investing activities consisted primarily ~~due to a $7.0 million increase in principal collections on mortgages receivable, offset by a (i) $4.9 million increase in~~of principal disbursements for mortgages receivable ~~(ii) $340,000 increase in costs~~of approximately $68.0 million, the purchase of investments of $37.2 million and the acquisition of and improvements to ~~acquire and improve~~ real estate owned ~~and (iii) $310,000 decrease in~~of $1.6 million, offset by proceeds from the sale of investments of approximately $25.9 million, proceeds from the sale of real ~~estate.~~estate owned of $1.8 million and mortgage loan pay-offs of approximately $37.9 million. For the 2019 period, net cash used for investing activities consisted primarily of principal disbursements for mortgages receivable of approximately $42.2 million, acquisitions and improvements of real estate owned of approximately $443,000 and purchases of property and equipment of $197,000, offset by mortgage loan pay-offs of approximately $27.9 million and proceeds from sale of real estate owned of approximately $362,000.

Net cash provided by financing activities for the nine months ended September 30, ~~2019~~2020 was approximately ~~$18.1~~$20.5 million compared to approximately ~~$11.9~~$18.1 million of cash provided by financing activities for the comparable ~~2018~~2019 period. Net cash provided by financing activities for the 2020 period consists of proceeds from the Wells Fargo line of credit of $14.1 million, gross proceeds from the sale of our fixed rate notes of approximately $14.4 million and proceeds from other loans of approximately $258,000 offset by dividends paid of approximately $5.3 million, the repayment of our credit line in the amount of $2.0 million , financing costs incurred of approximately $862,000 and principal payments on our notes and mortgage payable of approximately $28,000. Net cash provided by financing activities for the 2019 period consists primarily of ~~approximately (i) $42.7 million of~~ proceeds from the Webster ~~Facility, (ii) $19.8~~revolving credit facility of approximately $42.7 million, approximately $30.7 of net proceeds from the sale of ~~Common Shares, (iii) $10.7~~common shares, approximately $23.7 million of ~~net~~ proceeds from the sale of ~~Common Shares, (iv) $82,000 in gross proceeds from the exercise of warrants, (v) $22.4 million of net proceeds from the sale of the June 2019 Notes, (vi)~~notes, approximately $1.0 million of proceeds from the sale of mortgage notes to shareholder and ~~(vii)~~approximately $800,000 of gross proceeds from the ~~New~~new Bankwell ~~Mortgage Loan,~~mortgage loan, offset by repayments of approximately ~~(i)~~ $69.9 million ~~of repayments~~ on ~~the Webster Facility, (ii)~~our credit facility, approximately $7.0 million of dividends paid, ~~(iii)~~approximately $2.2 million repayment of mortgage notes, financing costs of approximately $1.3 million and approximately $298,000 repayment of the ~~Old~~old Bankwell Mortgage Loan and (iv) 2.2 million of repayment of notes due to shareholder. For the 2018 period, net cash from financing activities consisted primarily of approximately $61.0 million of proceeds from our credit facilities offset by approximately (i) $43.7 million of repayments on our credit facilities, (ii) $4.9 million of dividends paid and (iii) $567,000 of financing costs (most of which related to the Webster Facility.)

~~2019 Financing Transactions~~

~~In the first nine months of 2019, we consummated the following financing transactions:~~

~~Refinancing of Bankwell Mortgage~~

~~We refinanced the $310,000~~ mortgage loan obtained from Bankwell Bank in February 2017 (the “Old Bankwell Mortgage Loan”) with a new 10-year mortgage loan from Bankwell Bank in the principal amount of $795,000 bearing interest at the rate of 5.06% per annum and maturing on March 31, 2029 (the “New Bankwell Mortgage Loan”). Monthly payments of interest and principal on the New Bankwell Mortgage Loan, $4,710, are payable in arrears starting May 1, 2019, calculated based on a 25-year amortization rate. Interest on the Old Bankwell Mortgage Loan accrued at the rate of 4.52% per annum and the monthly installment payments were $1,975. The entire outstanding principal balance of the New Bankwell Mortgage Loan and all accrued and unpaid interest thereon is due and payable on March 31, 2029. The New Bankwell Mortgage Loan, among other things, is secured by a first mortgage lien on the real property owned by us, which currently serves as our principal place of business, located at 698 Main Street, Branford, Connecticut. In connection with the New Bankwell Mortgage Loan, John L. Villano and Jeffrey C. Villano, our Co-Chief Executive Officers, jointly and severally, during the term of the loan, indemnified Bankwell Bank from and against any and all actual claims, demands, liabilities, losses, damages, judgments, penalties, reasonable out-of-pocket costs and expenses arising out of or attributable to the New Bankwell Mortgage Loan.

~~At-the-Market Offerings~~

Over the first nine months of 2019, we sold an aggregate of 4,340,456 Common Shares through our at-the-market offering facilities. Gross proceeds from these sales were $20,465,203 and the net proceeds were $19,836,610.

~~June 2019 Note Offering~~

In June and July 2019 we sold, in a registered public offering, $23,663,000 aggregate principal amount of our 7.125% unsecured, unsubordinated notes due June 30, 2024 (the “June 2019 Notes”). The net proceeds from the sale of the June 2019 Notes were approximately $22.3 million. The June 2019 Notes were issued in denomination of $25.00 each and are listed on the NYSE American and trade under the symbol “SCCB.” Interest accrues on the June 2019 Notes commencing on June 25, 2019. Accrued interest is payable quarterly, in cash, in arrears, on each March 30, June 30, September 30 and December 30 that they are outstanding, commencing September 30, 2019. So long as the June 2019 Notes are outstanding, we are prohibited from making distributions in excess of 90% of our taxable income, incurring any additional indebtedness or purchasing 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 incurrence of such indebtedness or the application of the net proceeds, as the case may be. We may redeem the June 2019 Notes, in whole or in part, without premium or penalty, at any time on or after June 30, 2021 upon at least 30 days prior written notice to the holders of the June 2019 Notes. The redemption price will be equal to the outstanding principal amount of the June 2019 Notes redeemed plus the accrued but unpaid interest thereon up to, but not including, the date of redemption.

In July and August 2019, we sold an aggregate of 2,300,000 Common Shares at $5.00 per share pursuant to an underwritten public offering, including 300,000 shares from the exercise of the over-allotment option by the underwriter of the offering, Aegis Capital Corp. The offering was made pursuant to a Prospectus Supplement filed under the Company’s S-3 Registration Statement, dated November 9, 2018. The net proceeds to us from the offering were approximately $10.9 million, after deducting underwriting discounts and commission but before deducting other transaction costs.

~~On July 16, 2019, we received gross proceeds of $82,035 from the exercise of 16,407 warrants having an exercise price of $5.00 per share.~~

loan.

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 payments for usual and customary operating and administrative expenses, such as interest payments on notes payable, employee compensation, ~~rent,~~ sales and marketing expenses and dividends. Based on this analysis, we believe that our current cash and investment 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, payment of operating expenses, interest payments on our outstanding notes and dividend payments to our shareholders.~~loans. Funding for long-term cash needs will come from ~~our~~the proceeds from the sale of debt and/or equity securities, cash on hand, investments and operating cash ~~flows and financing transactions, whether sales~~flows.

Table of ~~equity securities, debt securities or a new revolving credit facility.~~Contents

From and after the effective date of our REIT election, we intend to pay regular quarterly distributions to holders of our ~~Common Shares~~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).

Subsequent Events

In October 2020, we sold an additional $14,000,000 aggregate principal amount of the September 2025 Notes, which notes are a further issuance of, rank equally in right of payment with and form a single series for all purposes under the Indenture governing such notes, including, without limitation, waivers, amendments, consents, redemptions and other offers to purchase and voting, with the previously issued September 2025 Notes. In connection with the offering of such notes, we granted the underwriters an option to purchase up to an additional $2.1 million aggregate principal amount of September 2025 Notes. The option expires November 20,

20120.

On ~~July 11, 2019,~~November 4, 2020, we ~~declared~~paid a dividend of $0.12 per ~~common~~ share, ~~which was paid on July 29, 2019~~or $2,654,076 in the aggregate, to shareholders of record ~~on July 22, 2019. The total amount~~as of ~~the dividend payment was $2,348,452.~~October 26, 2020.

On July 26, 2019, we repaid an amount owed to a shareholder in connection with the repurchase of certain mortgage loans. The total payment was $2,231,777, including principal of $2,217,000 and accrued interest of $14,777.

~~Subsequent Events~~

On October 3, 2019, we declared a dividend of $0.12 per common share, which was paid on October 22, 2019 to shareholders of record on October 14, 2019. The total amount of the dividend payment was $2,654,076.

From October 1 through November 13, 2019, we sold 14,317 Common Shares through our at-the-market offering facility and realized gross proceeds of $68,006 from such sales. Approximately $7.0 million remains available to us for future sales under the facility. (The facility was reduced to $11.5 million from $30 million in order to accommodate the sale of the November 2019 Notes.)

In November 2019 we sold, in a registered public offering, $30.0 aggregate principal amount of our 6.875% unsecured, unsubordinated notes due December 30, 2024 (the “November 2019 Notes”). The net proceeds from the sale of the November 2019 Notes were approximately $28.6 million. The November 2019 Notes were issued in denomination of $25.00 each and are listed on the NYSE American and trade under the symbol “SACC.” Interest accrues on the November 2019 Notes commencing on November 7, 2019. Accrued interest is payable quarterly, in cash, in arrears, on each March 30, June 30, September 30 and December 30 that they are outstanding, commencing December 30, 2019. So long as the November 2019 Notes are outstanding, we are prohibited from making distributions in excess of 90% of our taxable income, incurring any additional indebtedness or purchasing 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 incurrence of such indebtedness or the application of the net proceeds, as the case may be. We may redeem the November 2019 Notes, in whole or in part, without premium or penalty, at any time on or after November 7, 2021 upon at least 30 days prior written notice to the holders of the November 2019 Notes. The redemption price will be equal to the outstanding principal amount of the November 2019 Notes redeemed plus the accrued but unpaid interest thereon up to, but not including, the date of redemption.

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.

Contractual Obligations

As of September 30, ~~2019,~~2020, 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.~~equipment and software licenses.


			Less than		1 – 3		3 – 5		More than
	Total		1 year		years		years		5 years
Operating lease obligation	$	8,795	$	2,940	$	5,855	$	—	$	—
Unfunded portions of outstanding construction loans		13,342,248		13,342,248		—		—		—
Unfunded loan commitments		—		—		—		—		—
Total contractual obligations	$	13,351,043	$	13,345,188	$	5,855	$	—	$	—

Total Less than 1 year 1 – 3 years 3 – 5 years More than 5 years
Operating lease obligation $ — $ — $ $ — $ —
Capital lease obligation 11,573 2,672 3,121 5,780
Unfunded portions of outstanding construction loans 7,329,025 7,329,025 — — —
Unfunded loan commitments
Total contractual obligations $ 7,340,598 $ 7,331,697 $ 3,121 $ 5,780 $ —

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.~~us included elsewhere in this report and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~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

~~CONTROLS AND PROCEDURES~~

(a)

Evaluation and Disclosure Controls and Procedures

~~Our management, with the participation of~~Management, specifically our ~~co-chief~~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 September 30, ~~2019~~2020 (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 ~~our~~ management, ~~including its~~specifically our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

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(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 September 30, ~~2019~~2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A. Risk Factors.
The outbreak and continued spread of the novel coronavirus disease, known as COVID-19, may have a material adverse effect on our business, operations and financial condition.
On March 20, 2020, Governor Ned Lamont of Connecticut issued an executive order requiring all “non-essential” businesses to close effective 8:00 p.m., Monday, March 23, 2020, until further notice. During the second quarter of 2020, the State of Connecticut announced plans to re-open selected businesses pursuant to a three-phase reopening plan for those businesses deemed non-essential and closed due to the March 20, 2020 executive order. On May 20, 2020, Phase 1 of the re-opening plan was put in place and on June 17, 2020 Phase 2 was put into effect. Phase 3 re-opening has not been announced. The compliance requirements for certain businesses to operate are difficult to administer, costly and in many situations not customer friendly. If these orders remain in effect for an extended period, it could disrupt our operations in a material way, resulting in reductions in revenues, net income, and cash flow. In addition, any disruption to the operations of a borrower could impair its ability to make monthly payments of interest, payments of insurance and/or taxes or to repay the outstanding balances on its loans at maturity. Furthermore, if a liquidity crisis were to develop, borrowers may not be able to refinance their loans when due. Finally, the spread of COVID-19 is having a negative impact on the overall economy, including on real estate values. If borrowers cannot sell their properties, which could have a material adverse effect on our cash flow and operating results, or the values of properties securing mortgage loans decline significantly, the borrowers may not be able to repay their loans when due. In addition, the filing and preparation of loan documents with the various recording offices may be delayed and currently there is limited access to the Connecticut court system to process foreclosures and evictions.
If there is a re-occurrence of the virus in Connecticut or the State mandates further business closures, we may be compelled to take measures to preserve our cash flow, including reducing operating expenses and dividend payments until the consequences of the outbreak subside. There may be other adverse consequences to our business, operations, and financial condition from the spread of COVID-19 that have not been considered.

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(2)

Previously filed as an exhibit to the ~~Annual~~Quarterly Report on Form ~~10-K~~10-Q for the ~~year~~period ended ~~December 31, 2016~~September 30, 2019 and incorporated herein by reference.

(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.

~~(4)~~(5)

Previously filed ~~on December 23, 2016,~~ as ~~Exhibit A~~an exhibit to ~~Exhibit 1.1 of~~ the ~~Registration Statement~~Current Report on Form ~~S-11, as amended, (SEC File No.: 333-214323)~~8-K on June 25, 2019 and incorporated herein by reference.

~~(5)~~(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.

~~(6)~~(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 April 5, 2019 and incorporated herein by reference.

~~(7)~~(9)

Previously filed as an exhibit to the Current Report on Form 8-K on ~~June 25, 2019~~July 8, 2020 and incorporated herein by reference.

~~(8)~~(10)

Previously filed as an exhibit to the Current Report on Form 8-K on ~~November 6, 2019~~September 9, 2020 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: November ~~13, 2019~~5, 2020
By:
~~/s/ Jeffrey C. Villano~~
~~Jeffrey C. Villano~~
~~Co-Chief Executive Office~~
~~(Principal Executive Officer)~~
~~Date: November 13, 2019~~ ~~By:~~
/s/ John L. Villano
John L. Villano, CPA
~~Co-Chief~~
President, Chief Executive ~~Office~~Officer (Principal Executive Officer) and Chief Financial Officer
~~(Principal~~ (Principal Financial Officer)

		~~Page Number~~
Part I	FINANCIAL INFORMATION
~~Part I~~	~~FINANCIAL INFORMATION~~	Page Number

Item 1.	Financial Statements (unaudited)

	Balance Sheets as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019	1

	Statements of ~~Operations~~Comprehensive Income for the ~~Three~~Three-Month and ~~Nine Month~~Nine-Month Periods Ended September 30, ~~2019~~2020 and ~~2018~~2019	2

	~~Statement~~Statements of Changes in Shareholders’ Equity for the ~~Three~~Three-Month and ~~Nine Month~~Nine-Month Periods Ended September 30, ~~2019~~2020 and ~~2018~~2019	3

	Statements of Cash Flows for the ~~Nine Month~~Nine-Month Periods Ended September 30, ~~2019~~2020 and ~~2018~~2019	4 5

	Notes to Financial Statements (unaudited)	6 7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14 15

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22 23

Item 4.	Controls and Procedures	22 23
Part II	OTHER INFORMATION
~~Part II~~Item 1A.	~~OTHER INFORMATION~~Risk Factors.	24
Item 6.	Exhibits	25
~~Item 6.~~SIGNATURES		~~Exhibits~~	23 27
EXHIBITS
~~SIGNATURES~~		24

~~EXHIBITS~~

~~Exhibit~~ ~~No.~~		~~Description~~
Exhibit No.		Description
~~2.1~~
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*2019 (2)
3.2		Amended and Restated Bylaws, effective as ~~amended (2)~~of November 25, 2019 (3)
4.1		Form of Representative’s Warrants ~~(4)~~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 ~~(3)~~(4)
4.3		Indenture, dated as of June 21, 2019, between the Company and U.S. Bank National Association, as Trustee ~~(7)~~(5)
4.4		First Supplemental Indenture, dated as of June 25, 2019, between the Company and U.S. Bank National Association, as Trustee ~~(7)~~(5)
4.5		Form of 7.125% ~~Note~~Notes due 2024 ~~(7)~~(5)
4.6		Second Supplemental Indenture between the Company and U.S. Bank National Association, as Trustee*Trustee (2)
~~4.7~~ 4.8		Form of 6.875% ~~Note~~Notes due 2024 ~~(8)~~(7)
4.9		Third Supplemental Indenture between the Company and U.S. Bank National Association, as Trustee (10)
4.10		Form of 7.75% Notes due 2025 (included as Exhibit A to Exhibit 4.9 above)
10.1**		Employment Agreement by and between John ~~C. Villano and Sachem Capital Corp. (1)~~
10.2**		~~Employment Agreement by and between Jeffrey~~ L. Villano and Sachem Capital Corp. (1)
~~10.3~~ 10.2		Sachem Capital Corp. 2016 Equity Compensation Plan (1)
~~10.4~~ 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 ~~(5)~~(6)
~~10.5~~ 10.4		Mortgage Note made by Sachem Capital Corp to Bankwell Bank, dated as of March 29, 2019, in the principal amount of $795,000 ~~(6)~~(8)
~~10.6~~ 10.5		Open-End Mortgage Deed, Security Agreement and Fixture Filing, dated March 29, 2019, by Sachem Capital Corp., in connection with the New Bankwell Mortgage Loan, for the benefit of Bankwell Bank ~~(6)~~(8)
~~10.7~~ 10.6		Indemnity Agreement, dated as of March 29, 2019, by and among John L. Villano, Jeffrey C. Villano and Bankwell Bank ~~(6)~~(8)
~~10.8~~ 10.7		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)
~~31.1~~ 10.8**		Employment Agreement, dated as of July 1, 2020, by and between Peter J. Cuozzo and Sachem Capital Corp. (9)
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 ***
~~32.2~~ 101.INS		Chief Financial 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)*

	September 30,		December 31,
	2019		2018
		(Unaudited)		(Audited)
Assets
Assets:
Cash	$	11,004,943	$	99,310
Cash - restricted		-		59,549
Escrow deposits		-		12,817
Mortgages receivable		89,020,538		78,011,653
Mortgages receivable, affiliate		-		879,457
Interest and fees receivable		1,431,414		1,397,038
Other receivables		222,237		155,000
Due from borrowers		843,409		695,218
Prepaid expenses		37,171		14,866
Property and equipment, net		1,320,424		1,180,107
Deposits on property and equipment		49,881		12,000
Real estate owned		5,310,523		2,943,438
Deferred financing costs		38,351		553,597

Total assets	$	109,278,891	$	86,014,050

Liabilities and Shareholders' Equity
Liabilities:
Unsecured unsubordinated fixed rate notes (net of deferred financing costs of $1,242,192)	$	22,420,808	$	-
Line of credit		-		27,219,123
Mortgage payable		788,148		290,984
Accounts payable and accrued expenses		131,901		316,413
Security deposits held		7,800		7,800
Funds held in escrow		25,000		-
Advances from borrowers		498,504		317,324
Due to shareholder		-		1,200,000
Deferred revenue		1,067,667		1,058,406
Notes payable		68,634		-
Capital leases payable		11,573		-
Dividend payable		-		2,624,566
Accrued interest		3,323		176,619
Total liabilities		25,023,358		33,211,235

Commitments and Contingencies

Shareholders' equity:
Preferred shares - $.001 par value; 5,000,000 shares authorized; no shares issued		-		-
Common stock - $.001 par value; 50,000,000 shares authorized; 22,088,325 and 15,438,621 issued and outstanding		22,088		15,439
Paid-in capital		83,787,674		53,192,859
Retained earnings (accumulated deficit)		445,771		(405,483	)
Total shareholders' equity		84,255,533		52,802,815
Total liabilities and shareholders' equity	$	109,278,891	$	86,014,050

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2019		2018		2019		2018
Revenue:
Interest income from loans	$	2,442,750	$	2,272,100	$	7,509,155	$	6,610,273
Origination fees, net		497,237		383,322		1,202,777		1,071,921
Late and other fees		18,149		59,949		205,182		144,031
Processing fees		44,870		30,680		121,470		101,480
Rental income, net		9,446		10,136		82,350		87,865
Other income		353,671		175,271		650,202		674,830
Net gain on sale of real estate		12,927		119,666		20,076		119,666

Total revenue		3,379,050		3,051,124		9,791,212		8,810,066

Operating costs and expenses:
Interest and amortization of deferred financing costs		537,878		493,992		1,611,332		1,098,912
Stock based compensation		4,107		29,250		12,327		29,250
Professional fees		105,053		54,330		259,275		212,789
Compensation, fees and taxes		476,404		344,266		1,325,822		886,024
Exchange fees		11,343		10,000		32,850		26,667
Other expenses and taxes		39,355		7,669		70,683		67,668
Expense in connection with termination of LOC		-		-		779,641		-
Excise tax		-		-		-		19,000
Depreciation		18,618		6,834		44,286		20,302
General and administrative expenses		131,206		142,119		400,561		314,839

Total operating costs and expenses		1,323,964		1,088,460		4,536,777		2,675,451

Net income	$	2,055,086	$	1,962,664	$	5,254,435	$	6,134,615

Basic and diluted net income per common share outstanding:
Basic	$	0.10	$	0.13	$	0.30	$	0.40
Diluted	$	0.10	$	0.13	$	0.30	$	0.40

Weighted average number of common shares outstanding:
Basic		21,336,870		15,433,000		17,622,480		15,421,555
Diluted		21,336,870		15,433,000		17,662,480		15,421,555

					Additional		(Accumulated Deficit)
	Common Stock				Paid in		Retained
	Shares		Amount		Capital		Earnings			Totals
Balance, July 1, 2019		18,905,586	$	18,906	$	68,658,030	$	739,137		$	69,416,073
Sales of stock through ATM		866,332		866		4,375,320					4,376,186
Sale of common stock		2,300,000		2,300		10,668,202					10,670,502
Exercise of warrants		16,407		16		82,019					82,035
Stock based compensation				-		4,103					4,103
Dividends paid								(2,348,452	)		(2,348,452	)
Net income								2,055,086			2,055,086
Balance, September 30, 2019		22,088,325	$	22,088	$	83,787,674	$	445,771		$	84,255,533

	Residential		Commercial		Land		Mixed Use		Total Outstanding Mortgages
September 30, 2019	$	61,086,582	$	20,548,936	$	6,461,394	$	923,626	$	89,020,538
December 31, 2018	$	52,980,472	$	19,250,618	$	5,638,113	$	1,021,907	$	78,891,110

Year ending December 31,
2019	$	11,025
2020		17,249
2021		18,142
2022		19,082
2023		20,070
2024 and thereafter		702,580
Total	$	788,148

	Three Months ended September 30,				Nine Months ended September 30,
	2019		2018		2019		2018
Borrower charges	$	130,871	$	23,579	$	163,364	$	164,296
Lender fees		51,426		26,955		132,397		205,222
In-house legal fees		36,500		7,478		108,200		58,728
Modification and extension fees		86,722		115,544		155,976		194,416
Interest income from investments		28,148		-		28,148		-
Other income		20,004		1,715		62,117		52,168
Total	$	353,671	$	175,271	$	650,202	$	674,830

	Total		Less than 1 year		1 – 3 years		3 – 5 years		More than 5 years
Operating lease obligation	$	—	$	—	$		$	—	$	—
Capital lease obligation		11,573		2,672		3,121		5,780
Unfunded portions of outstanding construction loans		7,329,025		7,329,025		—		—		—
Unfunded loan commitments
Total contractual obligations	$	7,340,598	$	7,331,697	$	3,121	$	5,780	$	—


	SACHEM CAPITAL CORP.


Date: November ~~13, 2019~~5, 2020	By:	~~/s/ Jeffrey C. Villano~~
		~~Jeffrey C. Villano~~
		~~Co-Chief Executive Office~~
		~~(Principal Executive Officer)~~

~~Date: November 13, 2019~~	~~By:~~	/s/ John L. Villano
		John L. Villano, CPA
		~~Co-Chief~~ President, Chief Executive ~~Office~~Officer (Principal Executive Officer) and Chief Financial Officer
		~~(Principal~~ (Principal Financial Officer)