UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________________________________ to _________________________________________ Commission File Number: 001-37997 SACHEM CAPITAL CORP. (Exact name of re ...

Sachem Capital Corp. (NYSE:SACH) Q4 2018 Results Earnings Conference Call April 2, 2019 8:00 AM ET Company Participants David Waldman - IR, Crescendo Communications John Villano - Chairman, Co-Chief Executive Officer, Chief Financial Officer and Secretary Conference Call Participants Jim Altschul - Aviation Advisory Service Ethan Brown - Cox Capital Management Operator Greetings, and welcome to the Sachem Capital Fourth Quarter 2018 Business Update Call. At this time, all participants are in a listen-only m ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) The company operates as a Connecticut-based REIT specializing in short-term, first-lien "hard money" real estate loans - The company operates as a Real Estate Investment Trust (REIT) since its 2017 tax year, requiring it to distribute at least **90% of its taxable income** to shareholders annually[16](index=16&type=chunk) - Sachem specializes in short-term (1-3 years) "hard money" loans secured by first mortgage liens, primarily for real estate investors acquiring, renovating, or developing properties in Connecticut[17](index=17&type=chunk) - The company's primary business objective is to grow its loan portfolio while preserving capital to generate attractive risk-adjusted returns for shareholders, mainly through dividends[31](index=31&type=chunk)[33](index=33&type=chunk) - In May 2018, the company secured a **$35 million revolving credit facility** from a consortium of lenders led by Webster Business Credit Corporation, replacing a smaller facility[22](index=22&type=chunk)[69](index=69&type=chunk) Loan Portfolio Snapshot as of December 31, 2018 | Metric | Value | | :--- | :--- | | Total Loans Outstanding | 403 | | Aggregate Principal Amount | $78,891,110 | | Average Loan Size | ~$196,000 | | Loans ≤ $250,000 | ~79% of total loans | | Geographic Concentration (by principal) | ~89.5% in Connecticut | [Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from real estate market downturns, interest rate fluctuations, and its geographic concentration in Connecticut - The business is highly sensitive to conditions in the mortgage and real estate markets, where an economic slowdown could lead to **increased defaults and declining property values**[94](index=94&type=chunk) - A high concentration of loans in Connecticut (**approximately 89.5% of the portfolio**) makes the company particularly vulnerable to adverse economic or real estate developments in that state[112](index=112&type=chunk) - Rising interest rates pose a risk as the company's credit facility has a floating rate (LIBOR-based), while its loans are fixed-rate, potentially **squeezing the interest rate spread** and reducing income[96](index=96&type=chunk) - The company's credit agreement contains financial covenants, including maintaining a **minimum tangible net worth of $52 million**, and failure to comply could lead to default[140](index=140&type=chunk) - To maintain its REIT status, the company must distribute at least **90% of its taxable income annually**, which could limit its ability to retain earnings for growth[134](index=134&type=chunk)[151](index=151&type=chunk) [Unresolved Staff Comments](index=36&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved comments from the SEC staff - There are no unresolved staff comments[166](index=166&type=chunk) [Properties](index=36&type=section&id=Item%202.%20Properties) The company relocated its principal offices to a company-owned property in Branford, Connecticut in March 2019 - The company relocated its principal offices to 698 Main Street, Branford, Connecticut in March 2019[167](index=167&type=chunk) [Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings) The company is not party to any material legal proceedings outside the ordinary course of business - The company is not currently involved in any material legal proceedings outside the ordinary course of business[168](index=168&type=chunk) [Mine Safety Disclosure](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This section is not applicable to the company's operations - Mine Safety Disclosure is not applicable[169](index=169&type=chunk) Part II [Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities](index=37&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Shareholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity) The company's common shares trade on the NYSE American, and it pays regular dividends to maintain its REIT status - The company's Common Shares are listed on the NYSE American LLC under the symbol **"SACH"** since February 10, 2017[172](index=172&type=chunk) - As of March 28, 2019, there were **79 shareholders of record**[174](index=174&type=chunk) Dividends Paid Per Share (2017-2019) | Payment Date | Amount Per Share | | :--- | :--- | | **2019** | | | January 10, 2019 | $0.17 | | **2018** | | | November 6, 2018 | $0.12 | | July 27, 2018 | $0.11 | | April 27, 2018 | $0.105 | | February 27, 2018 | $0.105 | | **2017** | | | November 17, 2017 | $0.105 | | July 27, 2017 | $0.105 | | April 27, 2017 | $0.05 | [Selected Financial Data](index=38&type=section&id=Item%206.%20Selected%20Financial%20Data) As a smaller reporting company, this section is not required - The company is a "smaller reporting company" and is not required to provide selected financial data[181](index=181&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses significant 2018 growth in revenue and net income, driven by an expanding loan portfolio and new financing - The company replaced its $20M Bankwell credit facility with a new **$35M revolving credit facility** from Webster Business Credit Corporation in May 2018 to support its lending operations[198](index=198&type=chunk) - Net cash from operating activities increased to **$6.2 million in 2018** from $4.8 million in 2017, while net cash used for investing was $16.8 million, primarily for new loans[223](index=223&type=chunk)[224](index=224&type=chunk) - In the first quarter of 2019, the company sold 511,635 common shares through its ATM offering, raising approximately **$2.2 million in net proceeds**[193](index=193&type=chunk)[231](index=231&type=chunk) Financial Performance Comparison (2018 vs. 2017) | Metric | 2018 | 2017 | | :--- | :--- | :--- | | Total Revenue | ~$11.7 million | ~$7.0 million | | Net Income | ~$7.8 million | ~$4.9 million | | Total Operating Expenses | ~$3.9 million | ~$2.1 million | Loan Portfolio Growth (2018 vs. 2017) | Metric | Dec 31, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | Number of Loans | 403 | 337 | | Aggregate Loan Amount | ~$78.9 million | ~$63.3 million | | Non-Performing Loans (Principal) | ~$5.1 million (13 loans) | ~$2.2 million (12 loans) | [Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, this section is not required - The company is a "smaller reporting company" and is not required to provide quantitative and qualitative disclosures about market risk[237](index=237&type=chunk) [Financial Statements and Supplementary Data](index=47&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited financial statements and accompanying notes for fiscal years 2018 and 2017 Balance Sheet Summary (as of Dec 31) | Account | 2018 | 2017 | | :--- | :--- | :--- | | Total Assets | $86,014,050 | $67,494,537 | | Total Liabilities | $33,211,235 | $12,928,256 | | Total Shareholders' Equity | $52,802,815 | $54,566,281 | Statement of Operations Summary (Year Ended Dec 31) | Account | 2018 | 2017 | | :--- | :--- | :--- | | Total Revenue | $11,713,370 | $6,996,877 | | Total Operating Costs | $3,941,585 | $2,136,029 | | Net Income | $7,771,785 | $4,860,848 | | Basic & Diluted EPS | $0.50 | $0.38 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=47&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no disagreements with its accountants on accounting and financial disclosure - There were no changes in or disagreements with accountants[239](index=239&type=chunk) [Controls and Procedures](index=47&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal controls over financial reporting were effective - Management concluded that as of December 31, 2018, the company's **disclosure controls and procedures were effective**[240](index=240&type=chunk) - Based on an evaluation using the COSO framework, management concluded that the company's **internal control over financial reporting was effective** as of December 31, 2018[243](index=243&type=chunk) [Other Information](index=48&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - No other information is reported[246](index=246&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=49&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company details its board composition, executive leadership, and committee structure, emphasizing director independence - The Board has determined that directors Leslie Bernhard, Arthur Goldberg, and Brian Prinz are **independent**[257](index=257&type=chunk) - The company has three standing committees (Audit, Compensation, Nominating and Corporate Governance), each **composed entirely of independent directors**[258](index=258&type=chunk) Executive Officers and Directors | Name | Position | | :--- | :--- | | John L. Villano | Chairman, Co-CEO, CFO, Secretary | | Jeffrey C. Villano | President, Co-CEO, Treasurer, Director | | Leslie Bernhard | Director | | Arthur L. Goldberg | Director | | Brian A. Prinz | Director | [Executive Compensation](index=53&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation consists of base salaries for the Co-CEOs, with provisions for bonuses and severance - The Co-CEOs' employment agreements include a five-year term, a **base salary of $360,000 per annum** (effective April 1, 2018), and potential incentive compensation[269](index=269&type=chunk) - Non-employee directors receive annual cash compensation of **$15,000**, plus additional fees for committee chairmanships, and an annual grant of **$2,500 in common shares** upon re-election[273](index=273&type=chunk) Named Executive Compensation (2018) | Name | Position | Salary ($) | | :--- | :--- | :--- | | John L. Villano | Co-CEO, CFO | 310,500 | | Jeffrey C. Villano | Co-CEO, President | 310,500 | [Security Ownership of Certain Beneficial Owners and Management and Related Shareholders Matters](index=56&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholders%20Matters) Management and directors beneficially own approximately 20.93% of common shares, with an equity plan in place for awards - The company's 2016 Equity Compensation Plan reserves **1,500,000 common shares** for awards, with 1,477,116 shares remaining available as of December 31, 2018[280](index=280&type=chunk)[281](index=281&type=chunk) Beneficial Ownership of Executive Officers and Directors (as of March 28, 2019) | Name | Percentage of Class | | :--- | :--- | | John L. Villano | 7.82% | | Jeffrey C. Villano | 10.99% | | All officers and directors as a group (5 persons) | 20.93% | [Certain Relationships and Related Transactions and Director Independence](index=58&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) The company discloses transactions with entities controlled by its Co-CEOs, including management fees and property leases - Prior to the IPO in February 2017, JJV, LLC, an entity owned by the Co-CEOs, received management and loan origination fees from the company's predecessor[291](index=291&type=chunk)[292](index=292&type=chunk) - The company's loan portfolio includes loans made to JJV, LLC, with an outstanding principal balance of **$879,000** as of December 31, 2018[294](index=294&type=chunk) - Until March 2019, the company paid **$1,500 per month in rent** to Union News of New Haven, Inc, an affiliate of Co-CEO Jeffrey C. Villano[293](index=293&type=chunk) [Principal Accountant Fees and Services](index=59&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) This section details fees paid to the principal accounting firm for 2018 and 2017, all pre-approved by the Audit Committee - The Audit Committee has a policy to **pre-approve all audit and non-audit services** to ensure auditor independence[298](index=298&type=chunk) Accountant Fees (Hoberman & Lesser, LLP) | Fee Type | 2018 | 2017 | | :--- | :--- | :--- | | Audit fees | $111,800 | $230,700 | | Audit related fees | - | - | | Tax fees | - | - | | All other fees | - | - | | **Total fees** | **$111,800** | **$230,700** | Part IV [Exhibits and Financial Statement Schedules](index=61&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the Form 10-K, including material contracts and required certifications - Lists all exhibits filed with the report, including organizational documents, material contracts, and required certifications[301](index=301&type=chunk)[302](index=302&type=chunk)[304](index=304&type=chunk) [Form 10-K Summary](index=62&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company does not provide a summary for this item - No Form 10-K summary is provided[306](index=306&type=chunk)