Sachem Capital Corp.

Previous wording

We incurred a net loss attributable to common shareholders for 2024 and we cannot assure you that we will be profitable for 2025.

Current wording

We incurred a net loss attributable to common shareholders for 2024 but returned to profitability in 2025. We cannot assure you that we will be profitable for 2026.

Previous wording

For the year ended December 31, 2024, we reported a net loss of $43.9 million compared to net income of $12.1 million for the year ended December 31, 2023. This is the first annual net loss that we reported since we became a publicly traded company in 2017. There were a number of factors that contributed to this result. For the year ended December 31, 2024, we recorded a $22.0 million realized loss on sale of loans, a $4.9 million valuation allowance for loans held for sale, a $26.9 million provision for credit loss related to loans held for investment and loans transferred to real estate owned, and an impairment charge of $0.5 million relating to real estate owned, all of which are presented on our consolidated statement of operations. Second, top-line revenue for 2024 declined 11.2% compared to 2023, after we had delivered solid growth every year from 2017 through 2023. This decrease was due to the unavailability of capital required to grow our business. Historically, we relied on the capital markets to provide us with the bulk of our growth capital. Given the interest rate environment in 2023 and 2024 and the state of the real estate market in general, we were unable to access the capital markets and our existing credit facilities were not robust enough to fill the gap. The effects of this lack of growth was compounded by the fact that two tranches of outstanding Notes, having an aggregate principal amount of $58.2 million came due in 2024 and were repaid from cash flow from operations or drawdowns on our credit facilities. We cannot assure you that any of these structural issues adversely impacting our operational performance will ease or resolve in 2025. If they do not, and we are not able to find suitable solutions to address these issues, we may continue to incur losses in 2025.

Current wording

For the year ended December 31, 2025, we reported net income attributable to common shareholders of $1.8 million compared to a net loss attributable to common shareholders of $43.9 million for the year ended December 31, 2024. 2024 was the first annual net loss that we reported since we became a publicly traded company in 2017. There were a number of factors that contributed to this result. For the year ended December 31, 2024, we recorded a $22.0 million realized loss on sale of loans, a $4.9 million valuation allowance for loans held for sale, a $26.9 million provision for credit loss related to loans held for investment and loans transferred to real estate owned, and an impairment charge of $0.5 million relating to real estate owned, all of which are presented on our consolidated statement of operations. Second, top-line revenue for 2024 declined 11.2% compared to 2023, after we had delivered solid growth every year from 2017 through 2023. This decrease was due to the unavailability of capital required to grow our business after revenues decreased due to increases in nonperforming loans and distress in the lending markets. Historically, we relied on the capital markets to provide us with the bulk of our growth capital. Given the interest rate environment in 2023 and 2024 and the state of the real estate market in general, we were unable to access the capital markets and our existing credit facilities were not robust enough to fill the gap. On top of that, two tranches of outstanding unsecured public notes, having an aggregate principal amount of $58.2 million came due in 2024 and were repaid from cash flow from operations or drawdowns on our credit facilities. We were able to improve our results of operations in 2025 by obtaining new debt financing and amending existing credit facilities. In addition, we were able to significantly reduce the losses and other charges that we reported in 2024 related to loan sales, valuation allowances and credit losses. For 2025, gains on loan sales were $0.1 million, valuations allowances were $1.0 million and credit losses were $3.3 million. Nonetheless, we cannot assure you that we will continue to be profitable in 2026.

Previous wording

As a real estate investment trust (REIT), to maintain our REIT status for income tax purposes, we are required to distribute at least 90% of our taxable income to our shareholders. As a practical matter, since we started to operate as a REIT in 2017 through the end of 2023, we distributed 100% of our GAAP income to shareholders, in cash. However, in 2024, primarily because we did not have access to growth capital, we reduced the dividend payable to shareholders. The reduction in the dividend payment does not jeopardize our REIT election because our taxable income has decreased as well. Any distributions we make to our shareholders, the amount of such dividend and whether such dividend is payable in cash, our Common Shares or other property, or a combination thereof, is at the discretion of the Board and will depend on, among other things, our actual results of operations and liquidity. Our ability to pay distributions will be affected by various factors, including the net interest and other revenue generated from operations, our operating expenses, working capital requirements, the restrictions and limitations imposed by the New York Business Corporation Law (“BCL”), and any restrictions and/or limitations imposed on us by our creditors. Accordingly, we cannot assure you as to the timing or amount of any dividend payments in the future or how they may be paid.

Current wording

To maintain our REIT status for income tax purposes, we are required to distribute at least 90% of our taxable income to our shareholders. As a practical matter, since we started to operate as a REIT in 2017 through the end of 2023, we distributed 100% of our GAAP income to shareholders, in cash. However, in 2024 and 2025, primarily because we did not have access to growth capital, we reduced the dividend payable to shareholders. The reduction in the dividend payment does not jeopardize our REIT election because our taxable income has decreased as well. Despite the decrease in taxable income, the Company continued to pay dividends, which were in excess of our taxable income for 2024 and 2025. Any distributions we make to our shareholders, the amount of such dividend and whether such dividend is payable in cash, our Common Shares or other property, or a combination thereof, is at the discretion of the Board and will depend on, among other things, our actual results of operations and liquidity. Our ability to pay distributions will be affected by various factors, including the net interest and other revenue generated from operations, our operating expenses, working capital requirements, the restrictions and limitations imposed by the New York Business Corporation Law (“BCL”), and any restrictions and/or limitations imposed on us by our creditors. Accordingly, we cannot assure you as to the timing or amount of any dividend payments in the future or how they may be paid.

Previous wording

Primarily because of our operating performance and the dividend cuts, in 2024 we experienced a steep decline in the trading price of all our securities. For example, the opening price of our Common Shares on January 2, 2024, as reported on the New York Stock Exchange, was $3.73 per share. The closing price on December 31, 2024, as reported by the New York Stock Exchange, was $1.35 per share. Similarly, the opening price of our Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”) on January 2, 2024, as reported on the New York Stock Exchange, was $20.00 per share. The closing price on December 31, 2024, as reported by the New York Stock Exchange, was $15.49 per share. Similar declines were recorded for the price of our Notes. The declining prices in our securities does not only adversely impact the holders of those securities, it also adversely impacts our ability to raise capital at accretive or market prices. Lower trading prices means we have to sell more securities to raise the funds we need for growth, which dilutes the interests of the existing security holders and raises the cost of issuance through interest expense or dividends. Thus, issuing more securities increases our costs, which, in turn, means we have to raise more money to cover the costs, which means we have to sell more securities. Therefore, during the second half of 2024, we did not sell Common Shares, shares of our Series A Preferred Stock, or debt securities to raise capital. We believe it is imperative for us to increase the value of our securities, both debt and equity, and for us to do so, we must improve our operating performance and increase our dividend. We are currently in the market for accretive working capital and working through opportunities to do so. However, we cannot assure you that capital will be available to us or, if it is, what will be the cost of such capital.

Current wording

Primarily because of our operating performance and the reduced dividend payments, in 2024 and 2025, we experienced a steep decline in the trading price of all our equity and debt securities. For example, the opening price of our Common Shares on January 2, 2024, as reported on the NYSE American, was $3.73 per share. The closing price on December 31, 2024, as reported by the NYSE American, was $1.35 per share. The closing price on December 31, 2025, as reported by the NYSE American, was $1.04 per share. Similarly, the opening price of our 7.75% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”) on January 2, 2024, as reported on the NYSE American, was $20.00 per share. The closing price on December 31, 2024, as reported by the NYSE American, was $15.49 per share. The closing price on December 31, 2025, as reported by the NYSE American, was $17.75 per share. Similar declines were recorded for the price of our Notes. The declining prices in our securities does not only adversely impact the holders of those securities, it also adversely impacts our ability to raise capital at accretive or market prices. Lower trading prices means we have to sell more securities to raise the funds we need for growth, which dilutes the interests of the existing security holders and raises the cost of issuance through interest expense or dividends. Thus, issuing more securities increases our costs, which, in turn, means we have to raise more money to cover the costs, which means we have to sell more securities. Therefore, during the second half of 2024 and in 2025, we did not sell Common Shares or debt securities to raise capital. However, we did sell an immaterial amount of shares of our Series A Preferred Stock in December 2025. We believe it is imperative for us to increase the value of our securities, both debt and equity, and for us to do so, we must improve our operating performance and increase our dividend. We are currently in the market for accretive working capital. However, we cannot assure you that capital will be available to us or, if it is, what will be the cost of such capital.

Previous wording

Under the Credit and Security Agreement, dated as of March 2, 2023, that governed our $65 million revolving credit facility with Needham Bank (“Needham”), we were required to maintain a debt service coverage ratio of 1.4-to-1.0 throughout the entire term of that facility. In other words, our operating cash flow must be equal to or greater than 1.4 times the interest payable on all our outstanding indebtedness. An identical covenant is contained in the Credit, Security and Guaranty Agreement, dated as of March 20, 2025, that governs our new $50 million revolving credit facility with Needham that replaced the 2023 $65 million credit facility with Needham. (The term “Needham Credit Facility” refers to either the $65 million credit facility or the $50 million credit facility, as applicable depending on the context.) Since September 30, 2024 we were not been in compliance with this covenant, which constituted an “Event of Default” under the $65 million Needham Credit. Since the $65 million Needham Credit Facility has now been terminated and replaced by the $50 million Needham Credit Facility, our failure to comply with this covenant is no longer an issue. However, under the terms of the new $50 million Needham Credit Facility, we are required to provide Needham with a certificate no later than May 15, 2025 that we were in compliance with the covenant at March 31, 2025, which we believe we will be to deliver. If we cannot deliver that compliance certificate we will be in default of the covenant under the new $50 million credit facility, and if Needham issues a notice of default, it could have significant adverse consequences on our business, operations, and financial condition. First, Needham could declare the entire outstanding balance on its credit facility, which at the time of this report was $36.1 million, immediately due and payable. Alternatively, it could look to execute on the collateral securing the loan, which would deprive us of a significant portion of our working capital and cash flow. In addition, a default under the Needham credit facility would trigger a default under the terms of the $200 million master repurchase financing facility (the “Churchill Credit Facility”) with Churchill MRA Funding I LLC (“Churchill”) as well as our $1.1 million mortgage with New Haven Bank (the “NHB Mortgage”).

Current wording

Under our new $50 million revolving credit facility (the “Needham Credit Facility”) with Needham Bank (“Needham”), we are required to maintain a debt service coverage ratio of 1.4-to-1.0 throughout the entire term of that facility. In other words, our operating cash flow must be equal to or greater than 1.4 times the interest payable on all our outstanding indebtedness. We have maintained compliance with that covenant as well as the other covenants governing the Needham Credit Facility. However, we cannot assure you that we will continue to remain in compliance with any of these covenants during the remainder of the term. If we were in default of the covenant under the Needham Credit Facility, and if Needham issues a notice of default, it could have significant adverse consequences on our business, operations, and financial condition. First, Needham could declare the entire outstanding balance on the facility immediately due and payable. Alternatively, it could look to execute on the collateral securing the loan, which would deprive us of a significant portion of our working capital and cash flow. In addition, a default under the Needham Credit Facility would trigger a default under the terms of our $0.9 million mortgage with New Haven Bank (the “NHB Mortgage”).

Previous wording

Notes having an aggregate outstanding principal amount of $56.4 million are due and payable in full on September 30, 2025.

Current wording

Notes having an aggregate outstanding principal amount of $173.3 million are due and payable in full between December 2026 and September 2027.

Previous wording

Notes having an outstanding principal balance of $56.4 million are due and payable in full on September 30, 2025. If we cannot repay these Notes and the holders of these Notes call a default, it may trigger defaults under our other obligations and impair our ability to raise capital from other sources. As previously noted, a default under the Notes would also trigger a default under the Master Purchase Agreement with Churchill and under the term of the NHB Mortgage. This could have a material adverse impact on our operations, financial condition and business. We believe we will have the ability to repay those notes on the due date from a combination of cash flow from operations and borrowings under our various credit facilities.

Current wording

Notes having an aggregate outstanding principal amount of $173.3 million mature between December 2026 and September 2027, including $51.8 million on December 30, 2026, $51.7 million on March 30, 2027, $29.7 million on June 30, 2027 and $40.1 million on September 30, 2027. If we cannot repay any of these Notes and the holders of such Notes call a default, it may trigger defaults under our other obligations and impair our ability to raise capital from other sources. As previously noted, a default under the Notes would also trigger a default under the terms of the NHB Mortgage. This could have a material adverse impact on our operations, financial condition and business.

Previous wording

To date, we have financed our operations through the sale of our Common Shares, Series A Preferred Stock and the Notes. These securities were covered by an S-3 Registration Statement that the SEC declared effective on February 25, 2022. At that time, we were not subject to any limitations on the volume of securities that we could sell under that Registration Statement. That Registration Statement expired on February 25, 2025. Given the fact that our public float is currently less than $75 million and for so long as the “public float” remains under $75 million, we are limited as to the amount of securities we can sell during any 12-month period. The limit is an amount equal to one-third of our “public float”.

Current wording

To date, we have financed our operations through the sale of our Common Shares, Series A Preferred Stock and the Notes. These securities were covered by an S-3 Registration Statement that the SEC declared effective on February 25, 2022. At that time, we were not subject to any limitations on the volume of securities that we could sell under that Registration Statement. That Registration Statement expired on February 25, 2025. We filed a new S-3 Registration Statement that was declared effective on May 30, 2025. Given the fact that our public float is currently less than $75 million and for so long as the “public float” remains under $75 million, we are limited as to the amount of securities we can sell during any 12-month period. The limit is an amount equal to one-third of our “public float”.

Previous wording

Although alternative public and private transaction structures may be available, these may require additional time and cost, may impose operational restrictions on the Company, and may not be available on attractive terms. The Company’s inability to continue to raise capital when needed will harm its business, financial condition and results of operations, and will likely cause the Company’s stock value to decline further, which could have a material adverse impact on the Company’s business, operations and financial condition.

Current wording

Although alternative public and private transaction structures may be available, these may require additional time and cost, may impose operational restrictions on the Company, and may not be available on attractive terms. Our inability to continue to raise capital when needed will harm our business, financial condition and results of operations, and will likely cause our stock value to decline further, which could have a material adverse impact on our business, operations and financial condition.

Previous wording

We have experienced a significant increase in the number of non-performing loans.

Current wording

We have experienced a significant increase in the balance of non-performing loans.

Previous wording

We define loans that are more than 90 days in arrears as non-performing status and stop accruing interest on such loans. Over the past two years, we have experienced a significant increase in the outstanding balance of loans in this category as well as the number of loans in foreclosure. For example, at December 31, 2022, the number of loans in non-performing status was 72 and the number of loans in foreclosure was 40. The aggregate outstanding balance on these loans was $45.9 million and $22.6 million, respectively. At December 31, 2023, the comparable numbers were 71 and 56. The aggregate outstanding balance on these loans was $84.6 million and $55.7 million, respectively. At December 31, 2024 the comparable numbers were 35 and 34. The aggregate outstanding balance on these loans was $87.0 million and $52.1 million, respectively. Of the $52.1 million of loans in foreclosure for the year ended December 31, 2024, $15.9 million was held for sale. This has had a material adverse impact on our operational performance and financial condition.

Current wording

We define loans that are more than 90 days in arrears as non-performing status and stop accruing interest on such loans. Over the past two years, we have experienced a significant increase in the outstanding balance of loans in this category. At December 31, 2022, loans in non-performing status had an aggregate outstanding balance of $45.9 million. At December 31, 2023, the comparable balance increased to $84.6 million. At December 31, 2024, loans in non-performing status had an aggregate outstanding balance of $87.0 million. At December 31, 2025, the comparable balance increased to $117.6 million. This has had a material adverse impact on our operational performance and financial condition.

Previous wording

Historically, our mortgage loans were relatively small, and a small number of foreclosures did not have a material adverse impact on our business. However, our business strategy has changed, and we are now making larger loans with increasing frequency, changing the risk profile of our mortgage loan portfolio. When combined with the decline in commercial real estate values and restrictive credit conditions, the rate of foreclosures that we are experiencing is increasing. At December 31, 2024, we had 88 loans, 52.4% of the loans in our portfolio, with an outstanding principal balance exceeding $1 million. At December 31, 2023, we had 113 loans, 36.3% of the loans in our portfolio, with an outstanding principal balance exceeding $1 million. If this trend continues, it could have a material adverse impact on our business, operations and financial condition.

Current wording

Historically, our mortgage loans were relatively small, and a small number of foreclosures did not have a material adverse impact on our business. However, our business strategy has changed, and we are now making larger loans with increasing frequency, changing the risk profile of our mortgage loan portfolio. When combined with the decline in commercial real estate values and restrictive credit conditions, the rate of foreclosures that we are experiencing is increasing. At December 31, 2025, we had 66 loans, 57.4% of the loans in our portfolio, with an outstanding principal balance exceeding $1 million. At December 31, 2024, we had 88 loans, 52.4% of the loans in our portfolio, with an outstanding principal balance exceeding $1 million. At December 31, 2023, we had 113 loans, 36.3% of the loans in our portfolio, with an outstanding principal balance exceeding $1 million. If this trend continues, it could have a material adverse impact on our business, operations and financial condition.

Previous wording

Although the Fed cut interest rates in 2024 and the rate of inflation has decreased as well, the economic data is still not conclusive to support the continuation of these trends. Thus, there is still the possibility of interest rate increases in the future, especially if there is a recurrence of inflation. Moreover, notwithstanding the reduction in the federal funds rate in 2024, mortgage rates continue to increase raising the concern that residential real estate values will begin to decline. Rising interest rates adversely impacts our business in several ways. First, it makes it more difficult for us to borrow money to sustain our growth. Second, even if we borrow money at higher rates there is no assurance that we can pass these increases on to our borrowers, without adversely impacting the demand for our products. If our borrowers and their related projects cannot manage the increase in interest rates, we may have an increase in non-performing loans. Further, if we cannot raise the rates on our mortgages, the spread between our cost of funds and the yield on our mortgage loan portfolio will decrease. Thus, increases in interest rates could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our shareholders.

Current wording

Although the Federal Reserve Board (the "Fed") reduced the federal funds rate in 2025 and the rate of inflation has decreased as well, inflation still remains above the Fed's target of 2% and the data on the labor market continues to be volatile. Accordingly, it is clear that the Fed will continue to reduce interest rates in 2026. In addition, commercial lending rates remain relatively high, adversely impacting our ability to refinance our existing indebtedness at lower rates and obtain growth capital. High interest rates adversely impacts our business in several ways. First, it makes it more difficult for us to borrow money to sustain our growth. Second, even if we borrow money at higher rates there is no assurance that we can pass these increases on to our borrowers, without adversely impacting the demand for our products. If our borrowers and their related projects cannot manage the increase in interest rates, we may have an increase in non-performing loans. Further, if we cannot raise the rates on our mortgages, the spread between our cost of funds and the yield on our mortgage loan portfolio will decrease. Thus, increases in interest rates could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our shareholders.

Previous wording

Many of the properties securing our mortgage loans are not income producing, thus increasing the risks of delinquency and foreclosure.

Current wording

Most of the properties securing our mortgage loans are not income producing, thus increasing the risks of delinquency and foreclosure.

Previous wording

Most of our loans are secured by properties, whether residential or commercial, that are under construction or renovation and are not income producing. The risks of delinquency and foreclosure on these properties may be greater than similar risks associated with loans made on the security of single- family, owner-occupied, residential property. In the case of income producing properties, the ability of a borrower to repay the loan typically depends primarily upon the successful operation of such property. If the net operating income of the subject property is reduced, the borrower’s ability to repay the loan, or our ability to receive adequate returns on our investment, may be impaired.

Current wording

Most of our loans, by both number of loans and aggregate principal amount, are secured by properties, whether residential or commercial, that are under construction or renovation and are not income producing. The risks of delinquency and foreclosure on these properties may be greater than similar risks associated with loans made on the security of single- family, owner-occupied, residential property. In the case of income producing properties, the ability of a borrower to repay the loan typically depends primarily upon the successful operation of such property. If the net operating income of the subject property is reduced, the borrower’s ability to repay the loan, or our ability to receive adequate returns on our investment, may be impaired.

Previous wording

At December 31, 2024, 56.2% of the loans in our loan portfolio (representing 49.4% of our outstanding mortgage loans receivable) are secured by residential real property. None of these loans are guaranteed by the U.S. government or any government sponsored entity. Therefore, the value of the underlying property, the creditworthiness and financial position of the borrower and the priority and enforceability of our lien will significantly impact the value of such mortgage. In the event of foreclosure, we may assume direct ownership of the underlying real estate. The liquidation proceeds upon sale of such real estate may be less than the outstanding balance of the loan (including principal, accrued but unpaid interest and other fees and charges). In addition, any costs or delays involved in the foreclosure or liquidation process may increase losses.

Current wording

While we are not a traditional long term mortgage lender, we do lend on commercial use of transitional residential property. At December 31, 2025, 53.6% of our outstanding mortgage loans receivable are secured by residential real property. None of these loans are guaranteed by the U.S. government or any government sponsored entity. Therefore, the value of the underlying property, the creditworthiness and financial position of the borrower and the priority and enforceability of our lien will significantly impact the value of such mortgage. In the event of foreclosure, we may assume direct ownership of the underlying real estate. The liquidation proceeds upon sale of such real estate may be less than the outstanding balance of the loan (including principal, accrued but unpaid interest and other fees and charges). In addition, any costs or delays involved in the foreclosure or liquidation process may increase losses.

Previous wording

At December 31, 2024, 53.6% of our mortgage loans held for investment (representing 34.4% of the aggregate outstanding principal balance of our loans held for investment portfolio) were secured by property located in Connecticut; 14.7% (representing 30.6% of the aggregate outstanding principal balance of our loans held for investment portfolio) were secured by property located in Florida; and 13.5% (representing 8.8% of the aggregate outstanding principal balance of our loans held for investment portfolio) were secured by property located in New York. As a result, we are subject to the general economic and market conditions in those markets as well as in other markets where we lend. For example, other geographic markets in neighboring states could become more attractive for developers, investors and owners based on favorable costs and other conditions to construct or improve or renovate real estate properties. Some states have created tax and other incentives to attract businesses to relocate or to establish new facilities in their jurisdictions. These changes in other markets may increase demand in those markets and result in a corresponding decrease in demand in the markets in which we currently operate. Any adverse economic or real estate developments or any adverse changes in the local business climate in any geographic market in which we have a concentration of properties, could have a material adverse effect on us. To the extent any of the foregoing risks arise in Connecticut, New York and Florida, our business, financial condition and results of operations and ability to make distributions to shareholders could be materially adversely affected.

Current wording

At December 31, 2025, 41.8% of our mortgage loans held for investment (representing 26.9% of the aggregate outstanding principal balance of our loans held for investment portfolio) were secured by property located in Connecticut; 13.9% (representing 30.3% of the aggregate outstanding principal balance of our loans held for investment portfolio) were secured by property located in Florida; and 14.8% (representing 8.2% of the aggregate outstanding principal balance of our loans held for investment portfolio) were secured by property located in New York. As a result, we are particularly subject to the general economic and market conditions in those markets. For example, other geographic markets in neighboring states could become more attractive for developers, investors and owners based on favorable costs and other conditions to construct or improve or renovate real estate properties. Some states have created tax and other incentives to attract businesses to relocate or to establish new facilities in their jurisdictions. These changes in other markets may increase demand in those markets and result in a corresponding decrease in demand in the markets in which we currently operate. Any adverse economic or real estate developments or any adverse changes in the local business climate in any geographic market in which we have a concentration of properties, could have a material adverse effect on us. To the extent any of the foregoing risks arise in Connecticut, New York and Florida, our business, financial condition and results of operations and ability to make distributions to shareholders could be materially adversely affected.

Previous wording

At December 31, 2024, we had unfunded commitments under existing loans of $49.9 million. We do not record these unfunded commitments as liabilities on our balance sheets as the unfunded portion of the loans are not included in the outstanding mortgage loan balances. We try to maintain a reasonable amount of working capital at all times, although not in amounts sufficient to cover all of our deferred funding obligations. Nevertheless, there is a risk that borrower demand for funding under existing loans could exceed our available working capital and if we fail to meet our funding obligations, we may be subject to legal claims by the borrowers. This could have a material and adverse impact on our business reputation, our operations as well as our financial condition.

Current wording

At December 31, 2025, we had unfunded commitments under existing loans of $37.2 million. We do not record these unfunded commitments as liabilities on our balance sheets as the unfunded portion of the loans are not included in the outstanding mortgage loan balances. We try to maintain a reasonable amount of working capital at all times, although not in amounts sufficient to cover all of our deferred funding obligations. Nevertheless, there is a risk that borrower demand for funding under existing loans could exceed our available working capital and if we fail to meet our funding obligations, we may be subject to legal claims by the borrowers. This could have a material and adverse impact on our business reputation, our operations as well as our financial condition.

Previous wording

For us to maintain our qualification as a REIT under the Code, not more than 50% in value of the issued and outstanding shares of our capital stock may be owned, actually or constructively, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of each taxable year (other than our first year as a REIT). This test is known as the “5/50 test.” Attribution rules in the Code apply to determine if any individual or entity actually or constructively owns our capital stock for purposes of this requirement. Additionally, at least 100 persons must beneficially own our capital stock during at least 335 days of each taxable year (other than our first year as a REIT). To help ensure that we meet these tests, our charter restricts the acquisition and ownership of shares of our capital stock. Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT and provides that, unless exempted by the Board, no person may own more than 4.99% in value of the aggregate of the outstanding shares of our capital stock or more than 4.99% in value or in number of shares, whichever is more restrictive, of the aggregate of our outstanding shares of our Common Shares. Our founder John L. Villano, is exempt from this provision. The ownership limits contained in our charter could delay or prevent a transaction or a change in control of our company under circumstances that otherwise could provide our shareholders with the opportunity to realize a premium over the then current market price for our Common Shares or would otherwise be in the best interests of our shareholders.

Current wording

For us to maintain our qualification as a REIT under the Code, not more than 50% in value of the issued and outstanding shares of our capital stock may be owned, actually or constructively, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of each taxable year (other than our first year as a REIT). This test is known as the “5/50 test.” Attribution rules in the Code apply to determine if any individual or entity actually or constructively owns our capital stock for purposes of this requirement. Additionally, at least 100 persons must beneficially own our capital stock during at least 335 days of each taxable year (other than our first year as a REIT). To help ensure that we meet these tests, our charter restricts the acquisition and ownership of shares of our capital stock. Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT and provides that, unless exempted by the Board, no person may own more than 4.99% in value of the aggregate of the outstanding shares of our capital stock or more than 4.99% in value or in number of shares, whichever is more restrictive, of the aggregate of our outstanding shares of our Common Shares. The ownership limits contained in our charter could delay or prevent a transaction or a change in control of our company under circumstances that otherwise could provide our shareholders with the opportunity to realize a premium over the then current market price for our Common Shares or would otherwise be in the best interests of our shareholders.

Previous wording

In order to raise working capital, we may sell or transfer mortgage loans to a third party, including a securitization entity. In December 2024, we consummated the sale of 32 mortgage loans, having an aggregate outstanding principal balance of $55.8 million to a number of buyers, all of whom specialize in distressed debt. Most of the loans sold were designated as pending/pre-foreclosure by us. In connection with these sales, we were required to make certain representations and warranties to the buyers that are typical in these types of transactions. If there is a material breach in any of theses representations and warranties, we may be liable for any damages incurred by the buyer as a result of such breach or we may be obligated to repurchase one or more of the sold loans that is directly impacted by the breach or replace the impacted loan with another loan. Any remedy, whether we have to pay damages or repurchase or replace a loan, could have a material adverse impact on our business, operations and financial condition.

Current wording

In order to raise working capital, we may sell or transfer mortgage loans to a third party, including a securitization entity. In connection with these sales, we may be required to make certain representations and warranties to the buyers that are typical in these types of transactions. If there is a material breach in any of these representations and warranties, we may be liable for any damages incurred by the buyer as a result of such breach or we may be obligated to repurchase one or more of the sold loans that is directly impacted by the breach or replace the impacted loan with another loan. Any remedy, whether we have to pay damages or repurchase or replace a loan, could have a material adverse impact on our business, operations and financial condition.

Previous wording

In addition to the usual operating expenses, we have significant other cash requirements, notably interest and dividend payments (to maintain our REIT status, we are required to distribute at least 90% of our taxable income on a annual basis) and loan repayments ($56.4 million principal amount of Notes will become due in September of 2025 and another $51.8 million principal amount of Notes will become due in December of 2026.) Consequently, we rely on third-party sources of capital to fund a substantial amount of our working capital needs. Our access to third-party sources of capital depends, in part, on general market conditions, the market’s perception of our growth potential, leverage, current and expected results of operations, liquidity, financial condition and cash distributions to shareholders and the market price of our equity securities. If we cannot obtain capital when needed, we may not be able to execute our business and growth strategies, satisfy our debt service obligations, make the cash distributions to our shareholders necessary to qualify and maintain our qualification as a REIT (which would expose us to significant penalties and corporate level taxation), or fund our other business needs, any of which could have a material adverse effect on us.

Current wording

In addition to the usual operating expenses, we have significant other cash requirements, notably interest and dividend payments (to maintain our REIT status, we are required to distribute at least 90% of our taxable income on a annual basis) and loan repayments ($51.8 million principal amount of Notes will become due in December 2026 and an aggregate of an additional $121.5 million principal amount of Notes will become at various due dates in 2027.) Consequently, we rely on third-party sources of capital to fund a substantial amount of our working capital needs. Our access to third-party sources of capital depends, in part, on general market conditions, the market’s perception of our growth potential, leverage, current and expected results of operations, liquidity, financial condition and cash distributions to shareholders and the market price of our equity securities. If we cannot obtain capital when needed, we may not be able to execute our business and growth strategies, satisfy our debt service obligations, make the cash distributions to our shareholders necessary to qualify and maintain our qualification as a REIT (which would expose us to significant penalties and corporate level taxation), or fund our other business needs, any of which could have a material adverse effect on us.

Previous wording

Borrowings, also known as leverage, magnify the potential for income gain or loss on amounts invested in loans and, therefore, increase the risks associated with investing in us. We borrow from and issue senior debt securities to banks and other lenders that are secured by liens on our assets. Holders of these senior securities have fixed dollar claims on our assets that are superior to the claims of the holders of our other securities. Leverage is generally considered a speculative investment technique. Any increase in our income in excess of interest payable on our outstanding indebtedness would cause our net income to increase more than it would have had we not incurred leverage, while any decrease in our income would cause net income to decline more sharply than it would have had we not incurred leverage. Such a decline could negatively affect our ability to pay dividends to the holders of our equity securities or scheduled debt payments. There can be no assurance that our leveraging strategy will be successful.

Current wording

Indebtedness for borrowed money, also known as "leverage", magnify the potential for income gain or loss on amounts invested in loans and, therefore, increase the risks associated with investing in us. We borrow from and issue senior debt securities to banks and other lenders that are secured by liens on our assets. Holders of these senior securities have fixed dollar claims on our assets that are superior to the claims of the holders of our other securities. Leverage is generally considered a speculative investment technique. Any increase in our income in excess of interest payable on our outstanding indebtedness would cause our net income to increase more than it would have had we not incurred leverage, while any decrease in our income would cause net income to decline more sharply than it would have had we not incurred leverage. Such a decline could negatively affect our ability to pay dividends to the holders of our equity securities or scheduled debt payments. There can be no assurance that our leveraging strategy will be successful.

Previous wording

Total outstanding indebtedness at December 31, 2024 was $304.9 million, which included $230.2 million aggregate outstanding principal balance of Notes, $40 million outstanding on the Needham Credit Facility (since reduced to $36.1 million), $33.7 million outstanding on the Churchill Credit Facility, and $1.0 million outstanding on the NHB Mortgage. All amounts borrowed under the Needham Credit Facility are secured by a first priority lien on virtually all our assets excluding real estate owned by us (other than real estate acquired pursuant to foreclosure) and mortgages sold under the Churchill Credit Facility. To secure our obligations under the Churchill Credit Facility, we grant Churchill a first priority security interest on the mortgage loans that are that are sold to Churchill under that facility. The NHB Mortgage is secured by a first mortgage lien on the property located at 568 E. Main Street, Branford Connecticut, which we own and which is our principal place of business. In addition, the Churchill Credit Facility and the NHB Mortgage have cross default provisions, which means that a default under the terms of any other indebtedness, would also be an event of default under the Churchill Credit Facility and the NHB Mortgage as well. Thus, any default under the Needham Credit or the Churchill Credit Facility or the NHB Mortgage could have a material adverse effect on our business, financial condition and results of operations, cash flows, our ability to make distributions to shareholders and make the interest payment on the Notes.

Current wording

Total outstanding indebtedness at December 31, 2025 was $277.8 million, which included $171.3 million aggregate outstanding principal balance of Notes, $86.6 million of senior secured notes payable, $19.0 million outstanding on the Needham Credit Facility, and $0.9 million outstanding on the NHB Mortgage. All amounts borrowed under the Needham Credit Facility are secured by a first priority lien on virtually all our assets excluding real estate owned by us (other than real estate acquired pursuant to foreclosure). The NHB Mortgage is secured by a first mortgage lien on the property located at 568 E. Main Street, Branford Connecticut, which we own and which is our principal place of business. In addition, the NHB Mortgage has cross default provisions, which means that a default under the terms of any other indebtedness, would also be an event of default under the NHB Mortgage as well. Thus, any default under the Needham Credit or the NHB Mortgage could have a material adverse effect on our business, financial condition and results of operations, cash flows, our ability to make distributions to shareholders and make the interest payment on the Notes.

Previous wording

Any default under the agreements governing our existing indebtedness, or other indebtedness that we may incur in the future that is not waived by the required lenders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal and interest on the Notes and substantially decrease the market value of the Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness, including the Notes. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest. In addition, the lenders under any revolving credit facility or other financing that we may obtain in the future could elect to terminate their commitment, cease making further loans and institute foreclosure proceedings against our assets and force us into bankruptcy or liquidation. Any such default may constitute a default under all our indebtedness, including the Notes, which could further limit our ability to repay our indebtedness, including the Notes. If our operating performance declines, we may in the future need to seek to obtain waivers from our existing lenders at the time to avoid being in default. If we breach any loan covenants, we may not be able to obtain such a waiver from the lenders in which case we would be in default under the credit arrangement and the lender could exercise its rights as described above, and we may be forced into bankruptcy or liquidation. If we are unable to repay indebtedness, lenders having secured obligations could proceed against the collateral securing the debt. Because the Churchill Credit Facility and the NHB Mortgage have, and any future credit facilities may have, customary cross-default provisions, if repayment of any outstanding indebtedness, such as the Notes, the Churchill Facility, the NHB Mortgage, the Needham Credit Facility or any future credit facility, is accelerated, we may be unable to repay or finance the amounts due.

Current wording

Any default under the agreements governing our existing indebtedness, or other indebtedness that we may incur in the future that is not waived by the required lenders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal and interest on the Notes and substantially decrease the market value of the Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness, including the Notes. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest. In addition, the lenders under any revolving credit facility or other financing that we may obtain in the future could elect to terminate their commitment, cease making further loans and institute foreclosure proceedings against our assets and force us into bankruptcy or liquidation. Any such default may constitute a default under all our indebtedness, including the Notes, which could further limit our ability to repay our indebtedness, including the Notes. If our operating performance declines, we may in the future need to seek to obtain waivers from our existing lenders at the time to avoid being in default. If we breach any loan covenants, we may not be able to obtain such a waiver from the lenders in which case we would be in default under the credit arrangement and the lender could exercise its rights as described above, and we may be forced into bankruptcy or liquidation. If we are unable to repay indebtedness, lenders having secured obligations could proceed against the collateral securing the debt. Because the NHB Mortgage have, and any future credit facilities may have, customary cross-default provisions, if repayment of any outstanding indebtedness, such as the Notes, the NHB Mortgage, the Needham Credit Facility or any future credit facility, is accelerated, we may be unable to repay or finance the amounts due.

Previous wording

As of December 31, 2024, we had $230.2 million aggregate principal amount of Notes outstanding. The Notes are unsecured. As a result, they are effectively subordinated to all our existing and future secured indebtedness, such as the Churchill Credit Facility ($33.7 million outstanding balance at December 31, 2024), the Needham Credit Facility, ($40.0 million outstanding balance at December 31, 2024), and the NHB Mortgage, ($1.0 million outstanding balance at December 31, 2024) as well as any secured indebtedness that we may incur in the future, or any indebtedness that is initially unsecured to which we subsequently grant a security interest, to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the Notes. The Needham Credit Facility is secured by a first priority lien on virtually all our assets excluding real estate owned by us (other than real estate acquired pursuant to foreclosure) and mortgages sold under the Churchill Credit Facility. The Churchill Credit Facility is secured by a first priority security interest on the mortgage loans pledged as collateral under the facility. The NHB Mortgage is secured by a first mortgage lien on the property located at 568 East Main Street, Branford, Connecticut.

Current wording

As of December 31, 2025, we had $173.3 million aggregate principal amount of Notes outstanding. The Notes are unsecured. As a result, they are effectively subordinated to all our existing and future secured indebtedness, such as the Senior Secured Notes Payable ($90.0 million outstanding principal balance at December 31, 2025), the Needham Credit Facility ($19.0 million outstanding balance at December 31, 2025), and the NHB Mortgage, ($0.9 million outstanding balance at December 31, 2025) as well as any secured indebtedness that we may incur in the future, or any indebtedness that is initially unsecured to which we subsequently grant a security interest, to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the Notes. The Needham Credit Facility is secured by a first priority lien on virtually all our assets excluding real estate owned by us (other than real estate acquired pursuant to foreclosure) and mortgages sold under the Senior Secured Notes Payable. The NHB Mortgage is secured by a first mortgage lien on the property located at 568 East Main Street, Branford, Connecticut.

Previous wording

Other debt we issue or incur in the future could contain more protections for its holders than the indenture and the Notes, including additional covenants and events of default. For example, the indenture under which the Notes are issued does not contain cross-default provisions. The issuance or incurrence of any indebtedness with incremental protections could affect the market for, trading volume and prices of the Notes.

Current wording

Other debt we issue or incur in the future could contain more protections for its holders than the indenture and the Notes, including additional covenants and events of default. For example, the indenture under which the Notes are issued does not contain cross-default provisions. The issuance of any indebtedness with incremental protections could adversely affect the market for, trading volume and prices of the Notes.

Previous wording

Although the Notes are listed on the NYSE American, an active trading market for the Notes may not develop, which could limit the ability of Noteholders to sell the Notes and/or the market price of the Notes.

Current wording

Although the Notes are listed on the NYSE American, an active trading market for the Notes may not develop, which could limit a noteholder's ability to sell the Notes and/or the market price of the Notes.

Previous wording

Although the Notes are listed on the NYSE American, there is limited trading of the Notes on the exchange and we cannot assure holders of the Notes that an active trading market will develop or be maintained for the Notes. In addition, the Notes may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, if any, general economic conditions, our financial condition, performance and prospects and other factors. Although the underwriters advised us at the time of issuance that they intend to make a market in the Notes, they are not obligated to do so. The underwriters may discontinue any market-making in the Notes at any time at their sole discretion. Accordingly, we cannot assure you that a liquid trading market for the Notes will develop or can be sustained, or that holders of the Notes will be able to sell their Notes at a particular time or that the price they will receive at the time of sale will be favorable. To the extent an active trading market does not develop, the liquidity and trading price for the Notes may be harmed. Accordingly, the Noteholders may be required to bear the financial risk of an investment in the Notes indefinitely.

Current wording

Although the Notes are listed on the NYSE American, there is limited trading of the Notes on the exchange and we cannot assure holders of the Notes that an active trading market will develop or be maintained for the Notes. In addition, the Notes may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, if any, general economic conditions, our financial condition, performance and prospects and other factors. Although the underwriters advised us at the time of issuance that they intend to make a market in the Notes, they are not obligated to do so. The underwriters may discontinue any market-making in the Notes at any time at their sole discretion. Accordingly, we cannot assure you that a liquid trading market for the Notes will develop or can be sustained, or that holders of the Notes will be able to sell their Notes at a particular time or that the price they will receive at the time of sale will be favorable. To the extent an active trading market does not develop, the liquidity and trading price for the Notes may be harmed. Accordingly, the holders of Notes may be required to bear the financial risk of an investment in the Notes indefinitely.

Previous wording

In the event of our bankruptcy, liquidation, dissolution or winding up of our affairs, our assets will be available to pay obligations on the Series A Preferred Stock only after all of our indebtedness and other liabilities have been paid. At December 31, 2024, our total outstanding indebtedness, including the aggregate outstanding principal amount of the Notes (net of deferred financing costs), amounts due under the Churchill Credit Facility, the NHB Mortgage and the Needham Credit Facility, totaled $301.2 million, and total liabilities were $310.3 million.

Current wording

In the event of a bankruptcy, liquidation, dissolution or winding up of our affairs, our assets will be available to pay obligations on the Series A Preferred Stock only after all our indebtedness and other liabilities and that of our subsidiaries have been paid in full. At December 31, 2025, the aggregate liquidation preference of the issued and outstanding shares Series A Preferred Stock was $57.8 million and our total liabilities on a consolidated basis were $285.1 million.

Previous wording

The rights of holders of the Series A Preferred Stock to participate in the distribution of our assets will rank junior to the prior claims of our current and future creditors and any future series or class of preferred stock we may issue that ranks senior to the Series A Preferred Stock. In addition, the Series A Preferred Stock effectively ranks junior to all existing and future indebtedness and other liabilities of (as well as any preferred equity interests held by others in) our existing subsidiaries and any future subsidiaries in that the Series A Preferred Stock is structurally subordinated to these types of indebtedness and other liabilities. Our existing subsidiaries are, and any future subsidiaries would be, separate legal entities and have no legal obligation to pay any amounts to us in respect of dividends due on the Series A Preferred Stock. If we are forced to liquidate our assets to pay our creditors, we may not have sufficient assets to pay amounts due with respect to the outstanding shares of the Series A Preferred Stock. We and our subsidiaries have incurred and may in the future incur substantial amounts of debt and other obligations that will rank senior to the Series A Preferred Stock. Certain of our existing or future debt instruments may restrict the authorization, payment or setting apart of dividends on the Series A Preferred Stock.

Current wording

The rights of holders of the Series A Preferred Stock to participate in the distribution of our assets will rank junior to the prior claims of our current and future creditors and any future series or class of preferred stock we may issue that ranks senior to the Series A Preferred Stock. Similarly, the Series A Preferred Stock effectively ranks junior to all existing and future indebtedness and other liabilities of (as well as any preferred equity interests held by others in) our existing subsidiaries and any future subsidiaries. Our existing subsidiaries are, and any future subsidiaries would be, separate legal entities and have no legal obligation to pay any amounts to us in respect of dividends due on the Series A Preferred Stock. If we are forced to liquidate our assets to pay our creditors, we may not have sufficient assets to pay amounts due with respect to the outstanding shares of Series A Preferred Stock. We and our subsidiaries have incurred and may in the future incur substantial amounts of debt and other obligations that will rank senior to the Series A Preferred Stock. Certain of our existing or future debt instruments may restrict the authorization, payment or setting apart of dividends on the Series A Preferred Stock.

Previous wording

Future offerings of debt or senior equity securities may adversely affect the market price of the Series A Preferred Stock. If we decide to issue debt or senior equity securities in the future, it is possible that these securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of the Series A Preferred Stock and may result in dilution to owners of the Series A Preferred Stock. We and, indirectly, our shareholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of the Series A Preferred Stock will bear the risk of our future offerings reducing the market price of the Series A Preferred Stock and diluting the value of their holdings in us.

Current wording

As a result, future offerings of debt or senior equity securities may adversely affect the market price of the Series A Preferred Stock. In addition, if we issue debt or senior equity securities in the future, it is possible that these securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility, including the ability to pay dividends. Furthermore, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of the Series A Preferred Stock and may dilute the ownership interest of the holders of the Series A Preferred Stock. We and, indirectly, our shareholders, including holders of the Series A Preferred Stock will bear the cost of issuing and servicing such securities. Thus, holders of the Series A Preferred Stock will bear the risk of our future offerings reducing the market price of the Series A Preferred Stock and diluting the value of their holdings in us.

Previous wording

We are allowed to issue additional shares of Series A Preferred Stock and additional series of preferred shares that would rank equally to the Series A Preferred Stock as to dividend payments and rights upon our liquidation, dissolution or winding up of our affairs pursuant to our certificate of incorporation, as amended, including the certificate of amendment creating the Series A Preferred Stock without any vote of the holders of the Series A Preferred Stock.

Current wording

We may issue additional shares of Series A Preferred Stock in the future and may create new classes or series of preferred shares that would rank equal or senior to the Series A Preferred Stock with respect to dividend payments and rights upon liquidation, dissolution or winding up of our affairs.

Previous wording

The issuance of additional shares of Series A Preferred Stock and additional series of parity preferred stock could have the effect of reducing the amounts available to the holders of the Series A Preferred Stock issued in this offering upon our liquidation or dissolution or the winding up of our affairs. It also may reduce dividend payments on the Series A Preferred Stock issued in this offering if we do not have sufficient funds to pay dividends on all Series A Preferred Stock outstanding and other classes of stock with equal priority with respect to dividends.

Current wording

The issuance of additional shares of Series A Preferred Stock and additional series of parity preferred stock may reduce amounts available to the holders of the Series A Preferred Stock upon our liquidation or dissolution or the winding up of our affairs. It also may reduce dividend payments on the Series A Preferred Stock if we do not have sufficient funds to pay dividends on all Series A Preferred Stock outstanding and other classes of stock with equal priority with respect to dividends.

Previous wording

In addition, although holders of shares of Series A Preferred Stock are entitled to limited voting rights, the Series A Preferred Stock will vote separately as a class together with all other classes or series of our preferred shares that we may issue upon which like voting rights have been conferred and are exercisable. As a result, the voting rights of holders of shares of Series A Preferred Stock may be significantly diluted, and the holders of such other series of preferred shares that we may issue may be able to control or significantly influence the outcome of any vote.

Current wording

Although holders of shares of Series A Preferred Stock are entitled to limited voting rights, the Series A Preferred Stock will vote separately as a class together with all other classes or series of our preferred shares that we may issue upon which like voting rights have been conferred. As a result, the voting rights of holders of shares of Series A Preferred Stock may be significantly diluted, and the holders of such other series of preferred shares that we may issue may be able to control or significantly influence the outcome of any vote.

Previous wording

One of the factors that will influence the price of the Series A Preferred Stock will be the dividend yield on the Series A Preferred Stock (as a percentage of the market price of the Series A Preferred Stock) relative to market interest rates. An increase in market interest rates may lead prospective purchasers of the Series A Preferred Stock to expect a higher dividend yield (and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for dividend payments). Thus, higher market interest rates could cause the market price of the Series A Preferred Stock to materially decrease.

Current wording

One of the factors that will influence the price of the Series A Preferred Stock will be the dividend yield on the Series A Preferred Stock (as a percentage of the market price of the Series A Preferred Stock) relative to market interest rates. Dividends on the Series A Preferred Stock are payable at the rate of 7.75% per annum. An increase in market interest rates may lead prospective purchasers of the Series A Preferred Stock to expect a higher dividend yield (and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for dividend payments). Thus, higher market interest rates could cause the market price of the Series A Preferred Stock to materially decrease and reduce the amount of funds available and that may be used to make dividend payments.

Previous wording

Upon the occurrence of a Change of Control, each holder of shares of Series A Preferred Stock will have the right (unless, prior to the Change of Control Conversion Date (as defined in our certificate of incorporation, as amended), we have provided notice of our election to redeem some or all of the shares of Series A Preferred Stock held by such holder, in which case such holder will have the right only with respect to shares of Series A Preferred Stock that are not called for redemption) to convert some or all of such holder’s shares of Series A Preferred Stock into our Common Shares (or under specified circumstances certain alternative consideration). Notwithstanding that we generally may not redeem the Series A Preferred Stock prior to June 29, 2026, we have a special optional redemption right to redeem the Series A Preferred Stock in the event of a Change of Control, and holders of the Series A Preferred Stock will not have the right to convert any shares that we have elected to redeem prior to the Change of Control Conversion Date.

Current wording

Upon the occurrence of a “Change of Control” (as defined in our certificate of incorporation, as amended), each holder of shares of Series A Preferred Stock will have the right (unless, prior to the Change of Control Conversion Date (as defined in our certificate of incorporation, as amended), we have provided notice of our election to redeem some or all of the shares of Series A Preferred Stock held by such holder in which case such holder will have the right only with respect to shares of Series A Preferred Stock that are not called for redemption) to convert some or all of such holder’s shares of Series A Preferred Stock into our Common Shares (or under specified circumstances certain alternative consideration). Notwithstanding that we generally may not redeem the Series A Preferred Stock prior to June 29, 2026, we have a special optional redemption right to redeem the Series A Preferred Stock in the event of a Change of Control, and holders of the Series A Preferred Stock will not have the right to convert any shares that we have elected to redeem prior to the Change of Control Conversion Date.

Previous wording

If we do not elect to redeem the Series A Preferred Stock prior to the Change of Control Conversion Date, then upon an exercise of their conversion rights, the holders of Series A Preferred Stock will be limited to a maximum number of our Common Shares (or, if applicable, the Alternative Conversion Consideration (as defined in our certificate of incorporation, as amended)) equal to the lesser of (a) the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference per share of Series A Preferred Stock plus the amount of any accumulated and unpaid dividends thereon to, but not including, the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a dividend record date and prior to the corresponding dividend payment date for the Series A Preferred Stock, in which case no additional amount for such accrued and unpaid dividend will be included in this sum) by (ii) the Common Stock Price (as defined in our certificate of incorporation, as amended); and (b) 25.00, multiplied by the number of shares of Series A Preferred Stock converted.

Current wording

If we do not elect to redeem the Series A Preferred Stock prior to the Change of Control Conversion Date, then upon an exercise of their conversion rights, the holders of Series A Preferred Stock will be limited to a maximum number of our Common Shares (or, if applicable, the Alternative Conversion Consideration (as defined in our certificate of incorporation, as amended)) equal to the lesser of (a) the quotient obtained by dividing (i) the sum of (A) the $25.00 liquidation preference per share of Series A Preferred Stock plus (B) the amount of any accumulated and unpaid dividends thereon to, but not including, the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a dividend record date and prior to the corresponding dividend payment date for the Series A Preferred Stock, in which case no additional amount for such accrued and unpaid dividend will be included in this sum) by (ii) the Common Stock Price (as defined in our certificate of incorporation, as amended); and (b) 25.00, multiplied by the number of shares of Series A Preferred Stock converted.

Previous wording

During the year ended December 31, 2024, the price for our Series A Preferred Stock on the NYSE American has ranged from a high of $24.70 to a low of $15.39. We cannot assure you that the market price of the Series A Preferred Stock will not fluctuate or decline significantly. The trading price of the Series A Preferred Stock will depend on many factors, which may change from time to time, including the following:

Current wording

During the year ended December 31, 2025, the closing price for our Series A Preferred Stock on the NYSE American ranged from a high of $18.99 to a low of $12.54. The market price of the Series A Preferred Stock in the future may be higher or lower than the limits reflected in the prior sentence depending on many factors, many of which are beyond our control and may not be directly related to our operating performance. These factors include, but are not limited to, the following:

Previous wording

Our certificate of incorporation, as amended, including the certificate of amendment creating the Series A Preferred Stock, contains restrictions on ownership and transfer of the Series A Preferred Stock intended, among other things, to assist us in maintaining our qualification as a REIT for federal income tax purposes. For example, our charter provides that no person may own, or be deemed to own by virtue of applicable attribution provisions of the Code, more than 4.99% (by value or by number of shares, whichever is more restrictive) of our outstanding Common Shares or 4.99% by value of our outstanding shares of capital stock, subject to certain exceptions. Notwithstanding any other provision of the Series A Preferred Stock, no holder of shares of Series A Preferred Stock will be entitled to convert such stock into our Common Shares to the extent that receipt of our Common Shares would cause the holder to exceed the ownership limitations contained in our certificate of incorporation, as amended, including the certificate of amendment creating the Series A Preferred Stock. In addition, these restrictions could have takeover defense effects and could reduce the possibility that a third party will attempt to acquire control of us, which could adversely affect the market price of the Series A Preferred Stock.

Current wording

Our certificate of incorporation, as amended, including the certificate of amendment creating the Series A Preferred Stock, contains restrictions on ownership and transfer of the Series A Preferred Stock intended to assist us in maintaining our qualification as a REIT for federal income tax purposes. Specifically, our charter provides that no person may own, or be deemed to own by virtue of applicable constructive ownership rules of the Code, more than 4.99% (by value or by number of shares, whichever is more restrictive) of our outstanding Common Shares or 4.99% by value of our outstanding shares of capital stock, subject to certain exceptions. Notwithstanding any other provision of the Series A Preferred Stock, no holder of shares of Series A Preferred Stock will be entitled to convert such stock into our Common Shares to the extent that receipt of our Common Shares would cause the holder to exceed the ownership limitations contained in our certificate of incorporation, as amended, including the certificate of amendment creating the Series A Preferred Stock. In addition, these restrictions could have takeover defense effects and could reduce the possibility that a third party will attempt to acquire control of us, which could adversely affect the market price of the Series A Preferred Stock.

Previous wording

The Series A Preferred Stock shareholders has extremely limited voting rights.

Current wording

The Series A Preferred Stock shareholders have limited voting rights.