# EDGAR Filing Document

**Accession Number:** 0001695963
**File Stem:** 0001214659-25-012201
**Filing Date:** 2025-8
**Character Count:** 126159
**Document Hash:** c59438060084b11852862fb7f8a0cb0d
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001214659-25-012201.hdr.sgml**: 20250814

**ACCESSION NUMBER**: 0001214659-25-012201

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 78

**CONFORMED PERIOD OF REPORT**: 20250630

**FILED AS OF DATE**: 20250814

**DATE AS OF CHANGE**: 20250814

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Korth Direct Mortgage Inc.
- **CENTRAL INDEX KEY:** 0001695963
- **STANDARD INDUSTRIAL CLASSIFICATION:** MORTGAGE BANKERS & LOAN CORRESPONDENTS [6162]
- **ORGANIZATION NAME:** 02 Finance
- **EIN:** 270644172
- **STATE OF INCORPORATION:** FL
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 333-215782
- **FILM NUMBER:** 251218276

**BUSINESS ADDRESS:**
- **STREET 1:** 135 SAN LORENZO AVE
- **STREET 2:** SUITE 600
- **CITY:** CORAL GABLES
- **STATE:** FL
- **ZIP:** 33146
- **BUSINESS PHONE:** 3056688485

**MAIL ADDRESS:**
- **STREET 1:** 135 SAN LORENZO AVE
- **STREET 2:** SUITE 600
- **CITY:** CORAL GABLES
- **STATE:** FL
- **ZIP:** 33146

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Korth Direct Mortgage LLC
- **DATE OF NAME CHANGE:** 20170126

?xml version='1.0' encoding='ASCII'?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

(Mark One)

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

For the quarterly period ended June 30, 2025

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: **<u>000-1695962</u>**

**<u>KORTH DIRECT MORTGAGE INC.</u>**

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| **Florida** | **27-0644172** |
| *(State or other jurisdiction of<br> incorporation or organization)* | *(I.R.S. Employer Identification No.)* |

---

---

| |
|:---|
| **135 San Lorenzo Avenue, Suite 600, Coral Gables, FL 33146** |
| *(Address of principal executive offices)* |
| (**305) 668-8485** |
| *(Registrant's telephone number, including area code)* |
| *(Former name, former address and formal fiscal year, if changed since last report)* |

---

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

The Registrant voluntarily files Exchange Act Reports and has filed all Exchange Act reports for the preceding 12 months.

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

The Registrant voluntarily files Exchange Act Reports and has filed all Exchange Act reports for the preceding 12 months.

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

Large accelerated filer ☐ Accelerated filer ☐ <br> Non-accelerated filer ☐ Smaller Reporting company ⌧ <br> Emerging growth company ⌧

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

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

[**Table of Contents**](#toc)

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

As of June 30, 2025, there were 5,000,000 shares of common stock of Korth Direct Mortgage Inc. outstanding.

**TABLE OF CONTENTS**

<u>PART I – FINANCIAL INFORMATION</u>

---

| | | |
|:---|:---|:---|
| Item 1. | [Consolidated Financial Statements](#p1i1) | 4 |
|  | [Unaudited Consolidated Statements of Financial Condition](#sfc) | 4 |
|  | [Unaudited Consolidated Statements of Operations](#seq) | 5 |
|  | [Unaudited Consolidated Statements of Changes in Stockholders' Equity](#seq) | 6 |
|  | [Unaudited Consolidated Statements of Cash Flows](#cf) | 7 |
|  | [Notes to Unaudited Consolidated Financial Statements](#notes) | 8 |
| Item 2. | [Management's Discussion and Analysis of Consolidated Financial Condition and Results of Consolidated Operations](#p1i2) | 26 |
| Item 3. | [Quantitative and Qualitative Disclosures about Market Risk](#p1i3) | 28 |
| Item 4. | [Controls and Procedures](#p1i4) | 28 |
| PART II – OTHER INFORMATION | PART II – OTHER INFORMATION | PART II – OTHER INFORMATION |
| Item 1. | [Legal Proceedings](#p2i1) | 28 |
| Item 1A. | [Risk Factors](#p2i1a) | 28 |
| Item 2. | [Unregistered Sales of Equity Securities and Use of Proceeds](#p2i2) | 28 |
| Item 3. | [Defaults Upon Senior Securities](#p2i3) | 28 |
| Item 4. | [Mine Safety Disclosures](#p2i4) | 28 |
| Item 5. | [Other Information](#p2i5) | 28 |
| Item 6. | [Exhibits](#p2i6) | 29 |
| [SIGNATURES](#sig) | [SIGNATURES](#sig) | 31 |

---

[**Table of Contents**](#toc)

**PART I—FINANCIAL INFORMATION**

**Item 1. Consolidated Financial Statements**.

**KORTH DIRECT MORTGAGE INC.**

**UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION**

---

| | | |
|:---|:---|:---|
|  | June 30, 2025 | December 31, 2024 |
|  | (Unaudited) | |
| ASSETS |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and Cash Equivalents | $4412051 | $2898659 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted Cash | 53560527 | 15431460 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted Investment |  | 1192510 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mortgages Owned | 369855725 | 451974989 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mortgage Servicing Rights, at Fair Value | 8287578 | 9260225 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Portfolio Loans | 3171255 | 5161709 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans Held for Sale | 203086 | 520215 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities | 41991 | 41991 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ROU Leased Asset | 683122 | 270281 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill | 110000 | 110000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and equipment, net of depreciation | 69215848 | 31922404 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Assets | 5379130 | 3067100 |
| TOTAL ASSETS | $514920313 | $521851543 |
| LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |
| LIABILITIES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Escrows Payable | $9837902 | $15306451 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lease Liability | 696774 | 294412 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred Revenue, net | 1638264 | 1958967 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred Tax Liability, net | 2716885 | 1378721 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mortgage Secured Notes Payable | 401639333 | 450264519 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warehouse Line of Credit, net | 17326583 | 17269278 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Liabilities and Payables | 46660437 | 4613539 |
| Total Liabilities | 480516178 | 491085887 |
| STOCKHOLDERS' EQUITY |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated Deficit | (303027) | (3325687) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional Paid-in Capital | 29659040 | 29632262 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common Stock, $0.001 par value, 60,000,000 shares authorized<br> 5,000,000 shares issued and outstanding at June 30, 2025 and December 31, 2024 | 5000 | 5000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series A Preferred Stock, $0.001 par value, 460,000 shares authorized,<br> 460,000 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively | 460 | 460 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series B Preferred Stock, $0.001 par value, 20,000 shares authorized, 19,000 shares issued and outstanding at June 30, 2025 and December 31, 2024 | 19 | 19 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-Controlling Interest | 5042643 | 4453602 |
| Total Stockholders' Equity | 34404135 | 30765656 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $514920313 | $521851543 |

---

See accompanying notes to the unaudited consolidated financial statements.

[**Table of Contents**](#toc)

**KORTH DIRECT MORTGAGE INC.**

**UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS**

**FOR THE PERIOD FROM JANUARY 1 THROUGH JUNE 30**

---

| | | |
|:---|:---|:---|
|  | For the Six Months Ended | For the Six Months Ended |
|  | June 30, 2025 | June 30, 2024 |
| REVENUES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Origination Revenue, Net | $1578779 | $820154 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Servicing Revenue | 2263827 | 2499354 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Underwriting Income | 12750 | 40000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Leasing Revenue | 3181453 | 1451188 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment Interest | 1564298 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Revenue | 253775 | 372868 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Revenues | 8854882 | 5183564 |
| COST OF REVENUES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Broker Underwriting Expense | 1289684 | 768292 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Administrative Expenses | 1131931 | 729422 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Cost of Revenues | 2421615 | 1497714 |
| GROSS PROFIT | 6433267 | 3685850 |
| OPERATING EXPENSES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Office | 1307189 | 847392 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compensation and Related Benefits | 1898099 | 2306493 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Professional & Legal | 458575 | 843775 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advertising | 62940 | 113506 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation | 916098 | 571042 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Expenses | 4642901 | 4682208 |
| Income/(Loss) From Operations | 1790366 | (996358) |
| Other Income/(Expense) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized Loss on Mortgages | (972647) | (1137243) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized Loss on Mortgage Secured Notes | (29541) | (888) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Income | 13895 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Expense | (1033443) | (709778) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized Gain on Investment | 1496 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realized Gain on Foreclosure | 5557032 | 1045062 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realized Loss on Mortgage Secured Notes |  | (434) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realized Loss on Loans Held for Sale | (4417) | (141647) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realized Gain on Securities | 58666 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employee Retention Credit | 45000 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in Fair Value of Mortgage Secured Notes | (9000000) | 12660000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on Foreclosures | 9000000 | (12660000) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Other Income/(Expense) | 3636041 | (944928) |
| Income/(Loss) before provision for income taxes | 5426407 | (1941286) |
| Provision/(Tax Benefit) for income taxes | 1360049 | (482857) |
| Net Income/(Loss) | 4066358 | (1458429) |
| Less: Net Income/(Loss) attributable to non-controlling interest | 81198 | (24729) |
| Net Income/(Loss) attributable to Korth Direct Mortgage, Inc | 3985160 | (1433700) |
| Series A Preferred Dividends | 345000 | 345000 |
| Series B Preferred Dividends | 617500 | 617500 |
| Net Income/(Loss) attributable to common stockholders | $3022660 | $(2396200) |

---

See accompanying notes to the unaudited consolidated financial statements.

[**Table of Contents**](#toc)

**KORTH DIRECT MORTGAGE INC.**

**UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY** 

**FOR SIX MONTHS ENDED JUNE 30, 2025 AND 2024**

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Series A Preferred Stock | Series A Preferred Stock | Series B Preferred Stock | Series B Preferred Stock | Common Stock | Common Stock | | | | |
|  | Shares | Amount | Shares | Amount | Shares | Amount | Additional Paid<br>in Capital | Accumulated<br>Deficit | Non-Controlling<br>Interest |<br>Totals |
| Balance at January 1, 2024 | 460000 | $460 | 19000 | $19 | 5000000 | $5000 | $29578706 | $293220 | $191153 | $30068558 |
| &nbsp;&nbsp;&nbsp;&nbsp;Share-based compensation |  |  |  |  |  |  | 26778 |  |  | 26778 |
| &nbsp;&nbsp;&nbsp;&nbsp;Series A & Series B preferred stock<br> dividends declared |  |  |  |  |  |  |  | (962500) |  | (962500) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net Loss | - | - | - | - | - | - | - | (1433700) | (24729) | (1458429) |
| Balance at June 30, 2024 | 460000 | $460 | 19000 | $19 | 5000000 | $5000 | $29605484 | $(2102980) | $166424 | $27674407 |
| Balance at January 1, 2025 | 460000 | $460 | 19000 | $19 | 5000000 | $5000 | $29632262 | $(3325687) | $4453602 | $30765656 |
| &nbsp;&nbsp;&nbsp;&nbsp;Share-based compensation |  |  |  |  |  |  | 26778 |  |  | 26778 |
| &nbsp;&nbsp;&nbsp;&nbsp;Series A & Series B preferred stock<br> dividends declared |  |  |  |  |  |  |  | (962500) |  | (962500) |
| &nbsp;&nbsp;&nbsp;&nbsp;Contributions to Fund |  |  |  |  |  |  |  |  | 507843 | 507843 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net Income |  |  |  |  |  |  |  | 3985160 | 81198 | 4066358 |
| Balance at June 30, 2025 | 460000 | $460 | 19000 | $19 | 5000000 | $5000 | $29659040 | $(303027) | $5042643 | $34404135 |

---

See accompanying notes to the unaudited consolidated financial statements.

[**Table of Contents**](#toc)

**KORTH DIRECT MORTGAGE INC.**

**UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS**

---

| | | |
|:---|:---|:---|
|  | For the Six Months Ended | For the Six Months Ended |
|  | June 30, 2025 | June 30, 2024 |
| CASH FLOWS FROM OPERATING ACTIVITIES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Income/(Loss) | $4066358 | $(1458429) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjustments to Reconcile Net Income/(Loss) to: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Cash Provided by/(Used in) Operating Activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized Loss on Mortgages Owned | 972647 | 1137243 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized Loss on Mortgage Secured Notes | 29541 | 888 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized Gain on Investment | (1496) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized Gain on Securities |  | 27832 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realized Gain on Foreclosure | (5557032) | (1045062) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realized Loss on LHS | 4417 | 141647 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on cancellation of debt | (9000000) | (12660000) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on Foreclosures | 9000000 | 12660000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock Compensation Expense | 26778 | 26778 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation | 916098 | 571042 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of loan costs | 57305 | 720136 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred rent expense from operating lease | (10479) | (6801) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes | 1338164 | (482857) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in Operating Assets and Liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mortgage Secured Notes Issued |  | (4945633) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted Investment | 1192510 | (1158247) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warehouse LOC |  | (1650520) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Portfolio Loans | (176742) | 2526393 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans Held For Sale, at Fair Value | 312712 | 5409022 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Assets | (456672) | (360267) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred Revenue, net | (320703) | (125455) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Escrow Payable | (5468549) | (476196) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities Sold Short |  | (2565082) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Liabilities and Payables | 42046899 | 955842 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New Mortgage Lending | (2871447) | 81716 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mortgage Loans Matured/Paid Off | (4932979) | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Adjustments | 27100972 | (1217581) |
| NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES | 31167330 | (2676010) |
| CASH FLOWS FROM INVESTING ACTIVITIES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase of property and equipment | (85378) | (32549) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Disposals of property and equipment | 9015164 | - |
| NET CASH PROVIDED BY/(USED) IN INVESTING ACTIVITIES | 8929786 | (32549) |
| CASH FLOWS FROM FINANCING ACTIVITIES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payment of Series A/B preferred stock dividends | (962500) | (962500) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Contributions to Fund | 507843 | - |
| NET CASH USED IN FINANCING ACTIVITIES | (454657) | (962500) |
| NET INCREASE/(DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 39642459 | (3671059) |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH – Beginning of Period | 18330119 | 21701808 |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH – End of Period | $57972578 | $18030749 |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash paid during the quarter for interest | $976139 | $- |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash paid for income taxes | $1338164 | $- |
| NON-CASH INVESTING AND FINANCING ACTIVITIES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value of assets acquired in settlement in lieu of foreclosure | $40033898 | 16045062 |

---

See accompanying notes to the unaudited consolidated financial statements.

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**KORTH DIRECT MORTGAGE INC.**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE 1 - NATURE OF BUSINESS**

Korth Direct Mortgage Inc. (the "Company" or "KDM") is incorporated in the State of Florida. The Company was created to originate mortgages and fund those mortgages with Notes secured by mortgage loans. J.W. Korth & Company Limited Partnership ("J.W. Korth") is a wholly owned subsidiary of KDM.

J.W. Korth is a securities broker dealer registered with the Securities Exchange Commission (the "Commission") and the states of Michigan, Florida, and various other states and an SEC registered investment adviser under the Investment Advisers Act of 1940. J.W. Korth is a licensed member of the Financial Industry Regulatory Authority (FINRA), the Securities Investor Protection Corporation, as well as a Municipal Securities Rulemaking Board (MSRB) registrant.

On July 28, 2022, KDM created a new wholly owned subsidiary, KDM Funding I LLC ("KDMF"), which is an additional issuer of Mortgage Secured Notes ("MSNs"). KDM is the servicer of KDMF's loans, and all revenue and expenses are passed through to the Company and consolidated within these financial statements. Although KDMF's deal history is broken out by KDM and KDMF as issuers in KDM's annual reports on Form 10-K as well as its securities memoranda there are no stand-alone financial statements prepared for KDMF.

KDM also owns a controlling interest in KDM Stafford LLC and KDM Seaton Colyton Holdings LLC, owns 100% of KDM Nagog Park LLC, KDM Beyer Drive Holding LLC, and KDM Cupples REO LLC, which are special purpose entities whose primary business purpose is to own and operate various commercial real estate properties. Currently, these entities own properties in Stafford, VA, Los Angeles, CA, Acton, MA, and Selma, TX.

KDM Capital Partners LP (the "Fund") was formed in June 2024 as a limited partnership in the state of Delaware. The Fund's primary business purpose is to invest in mortgages that are originated and serviced by KDM and other real estate related investments. KDM Capital, LLC serves as the Fund's General Partner and J.W. Korth serves as the Fund's Investment Manager. The Fund is actively raising capital.

The Fund qualifies as an investment company, as defined in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 946 Financial Services – Investment Companies, and, therefore, is applying the specialized accounting and reporting guidance pursuant to ASC Topic 946.

The Company may create and operate other special purpose and pass-through entities typically organized as limited liability companies in order to own real estate and issue additional securities. These entities will be consolidated into these unaudited consolidated financial statements and Notes, if and when created.

**NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

*PRINCIPLES OF CONSOLIDATION*

The accompanying unaudited consolidated financial statements include the accounts of the Company and the accounts of the Company's wholly owned subsidiaries J.W. Korth, KDM MFB LLC, KDM Funding I LLC, KDM Nagog Park LLC, KDM Cupples REO LLC, KDM Beyer Drive Holdings LLC, KDM Capital Management LLC, KDM Capital Partners LP, KDM Capital LLC, KDM Asset Management LLC, and KDM Stafford LLC and KDM Seaton Colyton Holdings LLC, in which KDM owns a controlling interest.

*BASIS OF ACCOUNTING*

The accompanying unaudited consolidated financial statements have been prepared on the accrual basis of accounting in accordance with Generally Accepted Accounting Principles ("GAAP"). The accompanying unaudited consolidated financial statements have also been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").

 

*USE OF ESTIMATES*

The preparation of unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

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*CASH, CASH EQUIVALENTS AND RESTRICTED CASH*

For purposes of the statements of cash flows, the Company considers all money market accounts, highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash to amounts shown in the unaudited consolidated statements of cash flows as of June 30, 2025, and 2024:

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| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Cash and Cash Equivalents | $4412051 | $3521162 |
| Restricted Cash | 53560527 | 14509587 |
|  | $**57972578** | $**18030749** |

---

The Company maintains cash and restricted cash balances at financial institutions in excess of federally insured limits. The Company has not experienced any losses related to these balances. The Federal Deposit Insurance Corporation insures eligible accounts up to $250,000 per depositor at each financial institution. The Company holds cash and restricted cash at well-known banks and does not believe that it is exposed to any significant credit risk on cash and cash equivalents.

*MORTGAGE VALUATION*

Mortgages that are current are carried at the principal value owed by the borrower as of the date of the unaudited consolidated financial statements, according to the amortization schedule for the loans, which management believes to be the best estimate of fair value. Mortgages owned as of the date of these unaudited consolidated financial statements are current. The net present value of the servicing revenue is recorded as mortgage servicing rights at fair value on the Unaudited Consolidated Statements of Financial Condition and the change in the fair value is recognized on the Unaudited Consolidated Statements of Operations as an unrealized gain/(loss) on mortgages.

*MORTGAGE SECURED NOTES*

The Company primarily funds the mortgage loans ("CM Loans") that it makes by issuing MSNs in series, each of which MSN series is secured by the mortgage or mortgages funded from proceeds of the MSN series. Our MSNs have been funded in multiple ways, including private placements, SEC registered offerings, loan participations, and Rule 144A offerings. As of June 30, 2025, the Company has issued MSNs secured by these loans in the amount of $605,621,250 since inception and has redeemed $235,765,525 of its MSNs since inception.

*PORTFOLIO LOANS*

The Company recognizes loans made with its own capital, or pieces of those not securitized or sold via participation, under the caption "Portfolio Loans" on the unaudited consolidated statements of financial condition. This number also includes the cash we have invested in loans on our warehouse line as "haircut capital." As of June 30, 2025, the Company has issued Portfolio Loans in the amount of $49,589,472 and currently holds $3,171,255 Portfolio Loans, which management believes to be the best estimate of fair value.

*LOANS HELD FOR SALE*

The Company purchases small balance commercial loans classified as held for sale which are carried at the lower of amortized cost basis or fair market value, where gains and losses are recognized upon sale as realized loss on loans held for sale on the Unaudited Consolidated Statement of Operations which is $4,417 as of June 30, 2025. We determine the fair value of mortgage loans held for sale by using a yield based pricing or discounted cash flow model.

*PARTICIPATIONS*

From time to time the Company sells all or part of its mortgage loans as loan participations to banks or other lending institutions that prefer to hold their mortgage investments in that manner. As of June 30, 2025, the Company had issued loan participations in the amount of $52,930,000 all of which are still outstanding. A portion of these participations are included in the Mortgages Owned number and Mortgage Secured Notes Payable.

*GOODWILL*

FASB ASC Section 350 requires an annual assessment of the recoverability of goodwill using a two-step process. The first step of the impairment test involves a comparison of the fair value of the reporting unit to its carrying value. If the carrying value is higher than the fair value or there is an indication that impairment may exist, a second step must be performed to compute the amount of the impairment. Management conducted its annual assessment of goodwill impairment and determined that there were no indicators of goodwill impairment and therefore did not record an impairment loss for the six months ended June 30, 2025.

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*REVENUE RECOGNITION*

The Company's primary sources of revenue are generated from origination fees, servicing fees, underwriting income, and leasing revenue.

<u>Origination Fees</u>

Loan origination fees represent revenue earned from originating mortgage loans; net of any credits given to the borrower. Loan origination fees generally represent flat, per-loan fee amounts and are deferred and recognized as revenue over the life of the loan. The associated loan origination costs are also deferred and recognized as expense over the life of the loan. The deferred portion of the loan origination fees is netted against the deferred portion of the loan origination costs, which include mortgage broker expenses, and reported as a net deferred revenue liability on the Company's Consolidated Statements of Financial Condition.

<u>Servicing Fees</u>

Loan servicing fees represent revenue earned for servicing loans for various investors. Loan servicing fees are a percentage of the outstanding unpaid principal balance and represent the difference between the Corresponding Mortgage Loan ("CM Loan") interest received and the MSN interest payable. Servicing Fees are recognized as revenue as the related mortgage payments are received; similarly, loan servicing expenses are charged to operations as incurred.

<u>Underwriting Income</u> 

Underwriting income represents revenue earned by J.W. Korth for underwriting and distribution of the Company's securities. Revenues from underwriting income are recognized on settlement date of the trades.

<u>Leasing Revenue</u>

<u>Investment Interest</u>

Investment Interest represents the Fund's interest income from its investments, including interest earned on loans and interest earned on cash balances. Interest income is recognized over the term of the investment based on the principal amount outstanding and is recognized as earned.

*LEASES*

In February 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-02, "Leases (Topic 842)." The standard requires organizations to recognize right-of-use ("ROU") assets and lease liabilities on the balance sheet and disclose key information about leases that were historically classified as operating leases under previous GAAP. As part of the adoption of this standard, the Company recognizes lease liabilities with a corresponding ROU leased asset of approximately the same amount based on the present value of the remaining lease payments pursuant to current leasing standards for existing operating leases.

*STOCK-BASED COMPENSATION* 

The Company estimates the fair value of share-based payments on the date of grant using a Black-Scholes option pricing model. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. The Company's accounting policy is to recognize forfeitures as they occur.

The Black-Scholes option pricing model requires assumptions for the expected volatility of the share price of our common stock, the expected dividend yield, and a risk-free interest rate over the expected term of the stock-based award.

Since the Company's common stock is not publicly traded, we do not have sufficient Company specific information regarding the volatility of our share price on which to base an estimate of expected volatility. As a result, we use the historical volatilities of similar entities within our industry as the expected volatility of our share price.

The expected dividend yield is 0% as the Company has not paid any dividends on its common stock and does not anticipate it will pay any dividends in the foreseeable future on its common stock.

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant date with a remaining term equal to the expected term of the stock-based award.

Since the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term, the Company utilizes the simplified method to calculate the expected term of stock-based awards based on the average of the vesting term and contractual term of the award.

The assumptions used in calculating the fair value of stock-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

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*Unrealized Gain on Mortgages* 

The net present value of the servicing income is recognized at the time the mortgage is initiated. The changes to the net present value which is determined by the determination of the fair value of the assets are recognized through an adjustment to the unrealized gain/loss in each reporting period. This value uses several inputs that are highly subjective including: discount rate, prepayment rate, the current interest rate environment, and default rate assumptions. We use a third-party to calculate this value.

 

*DUE TO CLEARINGHOUSE BROKERS*

J.W. Korth operates as an SEC and FINRA registered securities broker dealer. The securities transactions are traded through broker clearinghouses and, upon settlement, funds are transferred in and out of the Company's bank accounts. Unsettled transactions create short-term payables and receivables due to and from the broker clearinghouses. As of June 30, 2025, the Company had a net amount due to the clearinghouse brokers of $1,278.

*DEPRECIATION* 

Depreciation is provided on a straight-line basis using estimated useful lives of three to thirty-nine years.

 

*INCOME TAXES*

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance on deferred tax assets is established when management considers it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company's tax returns for the years ended December 31, 2021, and after remain subject to examination by federal and state jurisdictions.

*RECENT ACCOUNTING PRONOUNCEMENTS*

*Improvements to Credit Loss Estimates*

In June 2016, the FASB issued ASU 2016-13 Financial Instruments, Measurement of Credit Losses on Financial Instruments. This ASU updates the existing incurred loss model to a current expected credit loss ("CECL") model for financial assets and net investments in leases that are not accounted for at fair value through earnings. The amendments affect cash and cash equivalents, reverse repurchase agreements, certain loans, held-to-maturity debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures and any other financial assets not excluded from the scope. There are also limited amendments to the impairment model for available-for-sale debt securities. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2022 for public smaller reporting companies, including interim reporting periods within those fiscal years. Early adoption is permitted, but not before annual reporting periods beginning after December 15, 2018. The Company adopted CECL on January 1, 2023 and did not have a material impact on the Company's consolidated financial statements.

*Improvements to Reportable Segment Disclosures*

In November 2023, the FASB issued ASU 2023-07, which requires public entities to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment's profit or loss and assets that are currently required annually. Public entities with a single reportable segment are required to provide the new disclosures and all the disclosures required under ASC 280, Segment Reporting. The ASU does not change how a public entity identifies its operating segments, aggregates them or applies the quantitative thresholds to determine its reportable segments. The ASU is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024, with early adoption permitted. The guidance should be applied retrospectively to all periods presented in the financial statements, unless it is impracticable. The segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company has adopted this ASU, which did not have a material impact on the Company's financial position, results of operations or financial statement disclosures.

*Improvements to Income Tax Disclosures*

In December 2023, the FASB issued ASU 2023-09, which requires entities to provide additional information about federal, state and foreign income taxes and reconciling items in the rate reconciliation table, and to disclose further disaggregation of income taxes paid (net of refunds received) by federal (national), state and foreign taxes by jurisdiction. For public business entities, the ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The guidance should be applied prospectively, but entities have the option to apply it retrospectively for each period presented. The Company has determined this ASU will not have a material impact on the Company's financial condition, results of operations or financial statement disclosures.

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*DEBT ISSUANCE COSTS*

Debt issuance costs are amortized over the term of the respective obligation, using the straight-line method. Amortization expense of debt issuance costs is recorded in interest expense in the unaudited consolidated statements of operations.

**NOTE 3 – CONTINGENT LIABILITY** 

As part of the acquisition of J. W. Korth in 2020, the Company agreed to pay (i) the Preferred Capital Interest partners of J.W. Korth accrued and unpaid 6% dividends through July 31, 2020; (ii) the J.W. Korth Preferred Capital Interest Partners quarterly dividends concurrently with its payment of the Company's Series A Preferred Stock dividends at least annually; and (iii) in such years as it pays Series A Preferred dividends, redeem 25% annually of the J.W. Korth Preferred Capital Interest partners through a capital contribution to JW Korth. The contingent liability was paid off in July 2024.

**NOTE 4 – MORTGAGE SECURED NOTES PAYABLE**

As stated in Note 2 the Company funds the majority of the mortgage loans that it makes by issuing MSNs, which are secured by those same mortgages. As of June 30, 2025, and December 31, 2024, the Company had outstanding loans securing MSNs totaling $369,855,725 and $451,974,989, respectively, and issued MSNs secured by those loans in the amount of $401,639,333 and $450,264,519, respectively. The decrease in the MSN numbers for the period is due to a large loan paying off at quarter end, and the MSN was paid off after quarter end. The MSNs have been funded in multiple ways, including private placements, loan participations, and Rule 144A offerings exempt from registration, and through SEC registered offerings.

The MSNs are typically five-year interest-only notes with the principal balance due at maturity, but terms can vary. Interest rates on the senior MSNs have ranged from 4.25% to 9.94% and mature at various dates from September 2025 to June 2037. The MSNs are non-recourse to KDM and are payable to the extent that the Company receives payment from the borrower of the borrower's mortgage loans. Payments made to KDM by borrowers are distributed by KDM to MSN noteholders in accordance with the terms of their MSN Notes.

The following table presents the future scheduled principal payments on the Company's MSNs:

---

| | |
|:---|:---|
| **Years ending <br> December 31** | **Future <br> Maturities of <br> Debt** |
| Last 6 months of 2025 | $67703108 |
| 2026 | 91609190 |
| 2027 | 55334083 |
| 2028 | 75593234 |
| 2029 | 37471774 |
| Thereafter | 73927944 |
| Total | $401639333 |

---

**NOTE 5 - RESTRICTED CASH**

The Company maintains multiple segregated accounts in trust for borrowers and investors. The value of these accounts is carried under the asset "Restricted Cash."

The "In Trust for 1" account holds the monthly tax and insurance payments collected from borrowers and distributes payments annually, on behalf of borrowers, to the appropriate tax authorities and insurance companies. This account corresponds to the Escrow Payable liability. As of June 30, 2025, and December 31, 2024, this account had balances of $149,287 and $5,585,017, respectively.

The "In Trust for 2" account receives payments from borrowers, distributes payments to investors, and pays the servicing fees to the Company. This account corresponds to the Due to Investors liability, which is included in other liabilities and payables. As of June 30, 2025, and December 31, 2024, this account had balances of $43,408,088 and $994,858, respectively.

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The Company maintains an account for payment of quarterly Preferred Series B dividends that has balances of $308,750 as of June 30, 2025, and December 31, 2024, for both periods, respectively.

The Company maintains a cash management account that holds a portion of the restricted cash, which is swept on a regular basis. The account had balances of $4,100,000 and $2,322,094 as of June 30, 2025, and December 31, 2024, respectively. This account is included as part of the Escrow Payable liability account.

The Company invests a portion of the restricted cash collected from borrowers in U.S. Treasury Bills with maturities of twelve months or less. The Restricted Investment account had a balance of $0 and $1,192,510 as of June 30, 2025, and December 31, 2024, respectively. This account is included as part of the Escrow Payable liability account.

The Company invests a portion of restricted cash from borrowers in a savings account with a balance of $250,000 as of June 30, 2025, and December 31, 2024, respectively.

The Company has opened two cash management accounts at J.W. Korth & Company that hold a portion of restricted cash. The balances as of June 30, 2025, were $3,765,926 and $1,578,476 and as of December 31, 2024, were $2,750,982 and $3,635,540, respectively.

**NOTE 6 – ACQUISITION & DISPOSITION OF RENTAL PROPERTY** 

In November 2022, through a Settlement in Lieu of Foreclosure Agreement, the Company obtained majority ownership and the controlling interest in rental property located in Stafford, Virginia. As part of the agreement, a $9.5 million mortgage held by the Company was assigned to a newly created special-purpose entity, KDM Stafford LLC, which is majority-owned and controlled by the Company. The original borrower maintained a minority interest in the special-purpose entity. For the six months ended June 30, 2025 and June 30, 2024, the Company recorded net income and net loss attributable to the non-controlling interest of $29,294 and $24,729, respectively. In addition, a portfolio loan held by the Company in the amount of $7.5 million was classified as an investment in the special-purpose entity which is eliminated in consolidation.

In March 2024, through foreclosure and via a special-purpose entity named KDM Nagog Park LLC, a wholly owned subsidiary, KDM now owns a 3 building office park in Acton, Massachusetts. Similarly, via deed in lieu of foreclosure in April 2024, KDM took ownership of an office building in St. Louis, Missouri through a wholly owned subsidiary named KDM Cupples REO LLC. The activity of the wholly owned subsidiaries, KDM Nagog Park LLC and KDM Cupples REO LLC, are included in the Company's consolidated financial statements beginning in the second quarter of 2024.

After taking the office building in April 2024, in May 2025, KDM Cupples REO LLC defaulted on the ground lease of the property it owned in St. Louis, Missouri. After a meeting with the bondholders, where KDM informed all bondholders that capital would need to be raised to pay the taxes, insurance, and ground rent, in order to not default, with additional funds in order to stabilize the property, the bondholders chose to let the property go. The ground lessor terminated the ground lease and KDM Cupples REO LLC no longer owns the leasehold estate. On June 23, 2025, KDM removed the $9,000,000 asset from its balance sheet and canceled the related outstanding bonds. The transaction is reflected in the statements of operations as a loss on foreclosure and cancellation of debt.

In March 2025 and April 2025, via deed in lieu of foreclosure, KDM acquired a mixed use property in Los Angeles, California, a majority-owned via a subsidiary named KDM Seaton Colyton Holdings, LLC and an owner-occupied building in Selma, TX. As part of the deed in lieu transactions, the Company recognized a gain of $5,557,032 which was the difference between the fair value of the net assets acquired, the mortgage liability assumed, and the consideration paid on the transaction date. The following table summarizes the transactions:

---

| | |
|:---|:---|
| **Fair value of Net Assets Acquired:** | |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted Cash | $66300 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Building and land | 46600000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquired operating leases | 2357928 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mortgage liability assumed | (41300000) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net Assets Acquired** | 7724228 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Investment in special-purpose entity | (2167196) |
| **Gain on Settlement Agreement** | $5557032 |

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Please see Note 18 Segment Reporting.

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As of June 30, 2025, we had 16 operating leases under which we are the lessor, compared to 14 operating leases as of June 30, 2024. Leasing revenue recognized from these operating leases totaled $3,181,453 and $1,451,188 for the six months ended June 30, 2025 and 2024, respectively. These leases primarily relate to retail and office space. Future undiscounted lease income from operating leases where we are the lessor were as follows as of June 30, 2025:

<u>Summary of 5 year future rents:</u>

---

| | |
|:---|:---|
| Last 6 months 2025 | $2052065 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2026 | 2968997 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2027 | 2857655 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2028 | 2666915 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2029 | 2441659 |
| Thereafter | 27562411 |
|  | $40549702 |

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Property is recorded at fair market value and depreciation is recognized over a 39-year period. For these properties, we recorded depreciation expense of $332,239 and $329,807 for the six months ended June 30, 2025 and 2024, respectively.

**NOTE 7 - COMMITMENTS**

The Company maintains office space in Coral Gables, Florida. In November 2020, the Company signed a lease for office space in Coral Gables, Florida, for a term of sixty-two months with the right to extend the term of the lease for two additional, successive terms of two years upon the same terms and conditions as the initial term. In April 2025, the Company signed a second amendment to lease for a term of 24 months.

The Company also maintains an office in Lansing, Michigan for J.W. Korth.

The net present value of future lease payments pursuant to the operating lease agreements are included in the ROU Leased Asset and the Lease Liability accounts on the unaudited consolidated statements of financial condition. The ROU Leased Asset represents the right to use an underlying asset for the remaining lease term. The Lease Liability represents the obligation to make lease payments pursuant to the terms of the lease agreements.

Rental expense for the six months ended June 30, 2025, was $156,510 compared to $148,185 for the six months ended June 30, 2024, this includes additional expenses for common area, direct operating expense, utilities, parking, and taxes.

As of June 30, 2025, the net present value of the future lease liabilities, using the weighted-average discount rate of 4.24%, which is commensurate with the Company's secured borrowing rate, over the weighted average remaining life of 2.52 years was $696,774.

The following is a schedule of the maturities of future lease payments over the remaining life of the operating leases, reconciled to the net present value as of June 30, 2025:

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| | |
|:---|:---|
|  | **Future Lease <br> Payments** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2025 | $136157 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2026 | 280259 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2027 | 279952 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2028 | 23386 |
| Total Lease Payments | 719754 |
| Less: Imputed Interest | (22980) |
| **Present Value of Lease Liabilities** | $**696774** |

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**NOTE 8 - INDEMNIFICATIONS** 

The Company provides representations and warranties to counterparties in connection with a variety of commercial transactions and occasionally indemnifies them against potential losses caused by the breach of those representations and warranties. These indemnifications generally are standard contractual terms and are entered into in the normal course of business. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes that it is unlikely the Company will have to make material payments under these indemnification arrangements, and it has not recorded any contingent liability in the unaudited consolidated financial statements for these indemnifications.

**NOTE 9 – RELATED PARTY TRANSACTIONS**

From time to time the Company purchases MSNs and holds them in its brokerage account. These MSNs are included on the unaudited consolidated statements of financial condition as mortgages owned. Also, from time to time second lien or balance sheet loans may be all or partially funded by entities controlled by KDM directors or employees and are serviced by KDM. In some circumstances where MSNs are in default, in the event a foreclosure becomes necessary, KDM may acquire properties as a deed in lieu of foreclosure. KDM may create special purpose entities to take title to such properties, liquidate them to satisfy any debts due under an MSN, or keep such properties and repay the MSN from its own funds. To that end, KDM created KDM Stafford LLC, KDM Nagog Park LLC, KDM Cupples REO LLC, KDM Beyer Drive Holdings LLC, and KDM Seaton Colyton Holdings LLC, in order to acquire properties via foreclosure and in deed of lieu of foreclosure, respectively. See Note 6.

**NOTE 10 – DEFERRED REVENUE, NET**

Loan origination fees are deferred and recognized as revenue over the life of the respective loan. The associated loan origination costs are also deferred and recognized as expense over the life of the loan. The deferred portion of the loan origination fees is netted against the deferred portion of the loan origination costs and reported as a net deferred revenue liability on the Company's unaudited consolidated statements of financial condition.

The following is a summary of the loan origination fees and costs deferred and amortized for the six months ended June 30, 2025:

---

| | | | |
|:---|:---|:---|:---|
|  | Deferred Origination <br> Fees | Deferred <br> Origination<br> Costs | Deferred <br> Revenue, Net |
| Deferred Revenue at December 31, 2024 | $4672221 | $(2713254) | $1958967 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New loan deferrals | 243616 | (47124) | 196492 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of deferrals | (1560260) | 1043065 | (517195) |
| Deferred Revenue at June 30, 2025 | $3355577 | $(1717313) | $1638264 |

---

**NOTE 11 – EMPLOYEE AND DIRECTOR STOCK OPTIONS**

On June 28, 2019, the Company's Board of Directors adopted the 2019 Stock Option Plan (the "Incentive Plan"). The Incentive Plan provides for the grant of both incentive and non-statutory stock options to key employees, directors or other persons having a service relationship with the Company. Effective December 8, 2022, the Incentive Plan was amended to increase the number of authorized option shares to 3,000,000 shares of the Company's unissued, or reacquired, common stock, $0.001 par value. The Plan is administered by the Board of Directors.

During the six months ended June 30, 2023, the Company issued options to purchase 15,000 shares of the Company's common stock at an exercise price of $3.00 per share. The weighted-average grant date fair values of options granted during the fiscal year 2023 were $1.22992 per share. The fair values of the stock-based awards granted were calculated with the following weighted-average assumptions:

---

| | |
|:---|:---|
|  | **2023** |
| Risk-free interest rate: | 3.62% |
| Expected term: | 5.75 years |
| Expected dividend yield: | 0% |
| Expected volatility: | 52.17% |

---

For the six months ended June 30, 2025, and June 30, 2024, the Company recorded $26,778 of stock-based compensation expense. Stock options vest 50% at issuance and then ratably over the remaining three years vesting period until they are fully vested. As of June 30, 2025, there were 1,905,000 shares of the Company's common stock available to be issued pursuant to the Incentive Plan.

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Stock option activity for the six months ended June 30, 2025, is summarized as follows:

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| | | | |
|:---|:---|:---|:---|
| **2019 Stock Option Plan:** | **Shares** | **Weighted <br> Average <br> Exercise <br> Price** | **Weighted <br> Remaining <br> Contractual <br> Life (Years)** |
| **Options outstanding at January 1, 2025** | **1095000** | $**1.47** | **6.64** |
| &nbsp;&nbsp;&nbsp;&nbsp;Granted |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Exercised |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Expired or forfeited | - | - | - |
| **Options outstanding at June 30, 2025** | **1095000** | $**1.47** | **6.32** |
| Options exercisable at June 30, 2025 | 960000 | $1.13 | 7.3 |
| Options expected to vest at June 30, 2025 | 135000 | $3.00 | 9.0 |

---

**NOTE 12 – PREFERRED EQUITY**

On September 27, 2019, the Company issued 200,000 shares of its Series A 6% Cumulative Perpetual Convertible Preferred Stock, par value $0.001 per share, for net proceeds of $4,750,000. The Company paid $250,000 in expenses related to the preferred stock issuance to J. W. Korth as underwriter and distributor. Each share was sold for $25 and is convertible into common stock at a ratio of 5 shares of common stock for each share of Series A Preferred Stock. On September 15, 2021, June 28, 2022, and March 23, 2023, the Company sold an additional 100,000, 480,000, and 160,000 shares, respectively, of its Series A 6% Cumulative Perpetual Convertible Preferred Stock for net proceeds of $2,375,000, $11,856,480, and $3,896,000.

On August 12, 2022, the Company repurchased and retired 480,000 shares of its Series A 6% Cumulative Perpetual Convertible Preferred Stock at a price of $25.25 per share, for a total of $12,120,480. The Company paid $640,000 in interest expense.

On June 29, 2021, the Company issued 19,000 shares of its Series B 6.50% Cumulative Non-Voting Redeemable Secured Preferred Stock, with a liquidation preference of $1,000 per share, for net proceeds of $18,302,500. The Company paid $697,500 in expenses related to the preferred stock issuance to its financial advisor and placement agent.

The Series B preferred stock is non-convertible and pays cumulative dividends, if and when declared by the Company's Board of Directors, at a rate of 6.50% per annum. Dividends declared will be payable quarterly in arrears on the 15th day of January, April, July and October of each year. The Series B preferred stock ranks senior to KDM's common stock and Series A 6% Cumulative Preferred Stock in dividend rights and upon liquidation, winding up or dissolution, and will rank *pari passu* with, or senior to, all future issuances of preferred stock of KDM.

The Company is required to use commercially reasonable efforts to maintain a nationally recognized statistical ratings organization, or NRSRO, rating for so long as any shares of Series B preferred stock remain outstanding. If the Company fails to maintain an NRSRO rating for the Series B preferred stock of at least BBB (or the equivalent thereof), the dividend rate applicable to the Series B preferred stock will be increased by 25 basis points, and in the event the Company fails to maintain an NRSRO rating of at least BBB- (or the equivalent thereof), the dividend rate applicable to the Series B preferred stock will be increased by an additional 25 basis points. The Company's current corporate rating is BBB.

The Series B preferred stock is redeemable at the Company's option, in whole or in part, on or after June 29, 2026, at a redemption price per share equal to $1,000 per share, plus accrued and unpaid dividends, if any. Subject to applicable law, the Company is required to redeem the Series B preferred stock, in each case at a redemption price equal to $1,000 per share, plus accrued and unpaid dividends, as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· 10% of the originally-issued shares of Series
B preferred stock on June 29, 2027;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· 10% of the originally-issued shares of Series
B preferred stock on June 29, 2028;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· 10% of the originally-issued shares of Series
B preferred stock on June 29, 2029;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· 20% of the originally-issued shares of Series
B preferred stock on June 29, 2030; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· 50% of the originally-issued shares of Series
B preferred stock on June 29, 2031.

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The Company's obligations to redeem the Series B preferred stock are secured by a security interest on servicing fees, as specified in each mortgage secured note issued by the Company, which is the difference between the interest payable pursuant to the mortgage secured note and the interest receivable pursuant to the related commercial real estate mortgage loan. The requisite holders of Series B preferred stock will be entitled to exercise rights and remedies pursuant to such security interest in the event that the Company does not pay the relevant mandatory redemption price (inclusive of any accrued and unpaid dividends) within thirty (30) days of the applicable redemption date, except with respect to the final redemption date, which is not subject to a thirty (30)-day grace period.

**NOTE 13 – FAIR VALUE**

FASB ASC 820, *Fair Value Measurements and Disclosures* ("ASC 820"), defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not assumptions specific to the entity.

 

ASC 820 establishes a hierarchy of valuation techniques based on the observability of inputs utilized in measuring financial assets and liabilities at fair value. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are described below:

*Level I*—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

*Level II*—Inputs (other than quoted prices included in Level I) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument's anticipated life.

 

*Level III*—Inputs reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurements. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

***Valuation Process***

 ****

<u>Cash and cash equivalents:</u>

The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1.

<u>Mortgages Owned and Mortgage Secured Notes Payable:</u>

Mortgage loans for which the Company has the intention and ability to hold for the foreseeable future, or until maturity or payoff, are reported at their outstanding principal balances, net of any unearned income, premiums or discounts which management believes to be the best estimate of fair value for the asset. If a decline in fair value below the carrying balance is other-than-temporary, an impairment loss is recorded and the loan is recorded at the lower fair value at each reporting period. On March 5, 2024, through a full bid in the foreclosure auction, KDM, via its subsidiary KDM Nagog Park LLC, took ownership of the office property securing KDM2021-N015. In April 2024, via a deed in lieu of foreclosure, a wholly owned subsidiary of KDM named KDM Cupples REO LLC took title to the office property securing KDM2021-N022. In May 2025, after extended attempts at negotiating with the ground owner for the property that was securing KDM2021-N022, in addition to discussions with the bondholders, KDM Cupples REO LLC defaulted on the ground lease and gave the property back to the ground owner.

Due to the fact that the Company issues notes secured directly by underlying loans, our assets and liabilities in this category have identical values and assets have offsetting balances, net of any MSNs held by the Company.

<u>Mortgage Servicing:</u>

The net present value of the servicing income is recognized at the time the mortgage is initiated as an unrealized gain, which is being recognized through net income at each reporting period. This value uses several inputs that are highly subjective including: discount rate, constant prepayment rate, the current interest rate environment, and default rate assumptions. Since the Company has limited operating history and a small amount of loans outstanding, it has a limited basis to predict prepayment rates and default rates, but have engaged a third party, MIAC Analytics, to assist us in our valuation of this asset. The amount is included on the unaudited consolidated statements of financial condition as "Mortgage Servicing Rights, at Fair Value."

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<u>Securities</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;J. W. Korth owns 225,000, $1 par of defaulted Banco Cruzeiro del Sur bonds. As of June 30, 2025, the value of these bonds was $41,991, which management believes to be the fair value expected to be received from the receiver handling the liquidation of the company in Brazil. Local counsel has informed us that the bank has sufficient cash to pay off the fair value of our bonds.

KDM also holds a small amount of its own MSNs in an account which it may buy from time to time. These bonds are carried at the published statement values.

***Fair Value Disclosure***

The following tables display the Company's assets and liabilities measured at fair value on a recurring basis:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | <u>June 30, 2025</u> | <u>June 30, 2025</u> | <u>June 30, 2025</u> | <u>June 30, 2025</u> |
|  | Total | Level I | Level II | Level III |
| Financial Assets |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Mortgages Owned | $369855725 | $- | $369855725 | $- |
| &nbsp;&nbsp;&nbsp;Mortgage Servicing | 8287578 |  |  | 8287578 |
| &nbsp;&nbsp;&nbsp;Portfolio Loans | 3171255 |  | 3171255 |  |
| &nbsp;&nbsp;&nbsp;Non-MSN Securities | 41991 | - | - | 41991 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Financial Assets | $381356549 | $- | $373026980 | $8329569 |
| Financial Liabilities |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Mortgage Secured Notes Payable | $401639333 | $- | $401639333 | $- |
| &nbsp;&nbsp;&nbsp;Warehouse Line of Credit | 17494250 | - | 17494250 | - |
| &nbsp;&nbsp;&nbsp;Total Financial Liabilities | $419133583 | $- | $419133583 | $- |
|  | December 31, 2024 | December 31, 2024 | December 31, 2024 | December 31, 2024 |
| Financial Assets |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Mortgages Owned | $451974989 | $- | $451974989 | $- |
| &nbsp;&nbsp;&nbsp;Mortgage Servicing | 9260225 |  |  | 9260225 |
| &nbsp;&nbsp;&nbsp;Portfolio Loans | 5161709 |  | 5161709 |  |
| &nbsp;&nbsp;&nbsp;Non-MSN Securities | 41991 | - | - | 41991 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Financial Assets | $466438914 | $- | $457136698 | $9302216 |
| Financial Liabilities |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Mortgage Secured Notes Payable | $450264519 | $- | $450264519 | $- |
| &nbsp;&nbsp;&nbsp;Warehouse Line of Credit | 17269278 | - | 17269278 | - |
| &nbsp;&nbsp;&nbsp;Total Financial Liabilities | $467533797 | $- | $467533797 | $- |

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***Fair Value Measurements***

<u>Changes in Fair Value Measurements for the six months ended June 30, 2025</u>

The following table presents a reconciliation of changes in Level 3 assets and liabilities reported in the unaudited consolidated statement of financial condition for June 30, 2025:

---

| | | | |
|:---|:---|:---|:---|
| **Period ended June 30, 2025** | Mortgage <br> Servicing <br> Value | Non-MSN <br> Securities | Total Value |
| &nbsp;&nbsp;&nbsp;Beginning balance at January 1, 2025 | $9260225 | $41991 | $9302216 |
| &nbsp;&nbsp;&nbsp;Sales | (871743) |  | (871743) |
| &nbsp;&nbsp;&nbsp;Unrealized Gain from newly issued mortgages | 116204 |  | 116204 |
| &nbsp;&nbsp;&nbsp;Fair Value adjustment | (217108) | - | (217108) |
| **Ending balance at June 30, 2025** | $8287578 | $41991 | $8329569 |

---

The Company's policy for recording transfers between levels of the fair value hierarchy is to recognize such transfers as of the financial statement date. For the six months ended June 30, 2025, there were no transfers between levels.

The Company has established valuation processes and policies for its Level 3 investments to ensure that the methods used are fair and consistent in accordance with ASC 820 – *Fair Value Measurements and Disclosures*. The Company's valuation committee performs reviews of the Level 3 investments' valuations, which include reviewing any significant price changes reported from the prior period. When a Level 3 investment has a significant price change, the valuation committee reviews relevant market data to substantiate the price change.

The following table presents quantitative information regarding the significant unobservable inputs the Company uses to determine the fair value of Level 3 investments held as of June 30, 2025:

---

| | | | | |
|:---|:---|:---|:---|:---|
| <u>Investment type</u> | <u>Fair Value</u> | <u>Valuation technique</u> | <u>Unobservable inputs</u> | <u>Values</u> |
| Mortgage servicing | $8287578 | Net Present Value | Prepayment Discount | 13.64% |
|  |  |  | Discount rate | 15.00% |
| Non-MSN Securities | $41991 | Net Present Value |  |  |

---

**NOTE 14 – INCOME TAXES**

The income tax provision was $1,360,049 for the six months ended June 30, 2025. The effective tax rate was 25.5% of the income before income taxes of $5,426,407, which differs from the federal statutory rate of 21% due to state income taxes and certain of the Company's expenses that are not deductible for tax purposes.

The income tax benefit was $482,857 for the six months ended June 30, 2024. The effective tax rate was 24.9% of the loss before income taxes of $1,941,286, which differs from the federal statutory rate of 21% due to state income taxes and certain of the Company's expenses that are not deductible for tax purposes.

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**NOTE 15 – PROPERTY AND EQUIPMENT**

Property and Equipment are summarized as follows:

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| | |
|:---|:---|
| **<u>June 30, 2025</u>** | **<u>June 30, 2025</u>** |
| Land & Building | $70608029 |
| Equipment | 330136 |
| Furniture and fixtures | 194045 |
|  | 71132210 |
| Accumulated depreciation | (1916362) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Property Equipment | $69215848 |
| **<u>December 31, 2024</u>** | **<u>December 31, 2024</u>** |
| Land & Building | $32940768 |
| Equipment | 327436 |
| Furniture and fixtures | 194046 |
|  | 33462250 |
| Accumulated depreciation | (1539846) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Property Equipment | $31922404 |

---

Depreciation expense for the periods ending June 30, 2025, and June 30, 2024, were $376,770 and $571,042, respectively.

**NOTE 16 – WAREHOUSE LINE OF CREDIT**

On October 13, 2023, KDM MFB LLC, a Delaware limited liability company (the "KDM MFB"), a newly formed and wholly owned subsidiary of Korth Direct Mortgage Inc. (the "Company") entered into a $100,000,000 Master Repurchase and Securities Contract credit facility with Churchill MRA Funding I LLC (the "Agreement"). The Company vis a vis KDM MFB, will use the credit facility provided by the Agreement (the "MFB Line") to finance the Company's expansion of its lending operations in multi-family and multifamily bridge financing. As of June 30, 2025, the Company had a balance of $17,326,583 on the MFB Line. Total amortization expense of capitalized loan fees was $57,305 for the six months ended June 30, 2025 and recorded in interest expense.

**NOTE 17 – VARIABLE INTEREST ENTITIES**

A VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest. A VIE is consolidated by its primary beneficiary, which is the entity that, through its variable interests, has both the power to direct the activities that significantly impact the VIE's economic performance and the obligations to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

KDM Capital Partners, LP (the "Fund") is a new investment partnership over which the Company and its related parties have a controlling financial interest. The Company holds 28.9% of the equity interest in the partnership and its CEO holds a 35.9% interest. The General Partner of the Fund is a wholly owned subsidiary of the Company. The Fund invests in loans originated by the Company and the holdings of the Fund are loan participations issued by the Company. The loan participations owned by the Fund are carried on the Company's line of credit and are guaranteed by the Company.

The Fund's partnership agreement provides the General Partner with complete decision-making responsibilities and grants the limited partners no substantive participating or kick-out rights. Additionally, the Company guarantees the debt used to finance the Fund's loan investments. Accordingly, the Company determined that the Fund is a VIE subject to consolidation under the guidance of FASB ASC 810.

The Company determined that it is the primary beneficiary of the VIE because as the holder of the controlling interest in the general partner, it has the power to direct the activities of the Fund that most significantly impact the Fund's economic performance and, through the debt guarantee, has the obligation to absorb any expected losses of the Fund. Accordingly, the Company consolidates the VIE into its financials, and the Fund holdings are eliminated in consolidation. The loans are consolidated on the asset portion of the balance sheet in the Mortgages Owned caption and on the liability side in the Mortgage Secured Notes caption.

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**NOTE 18 – SEGMENT REPORTING**

The Company accounts for its segment information in accordance with the provisions of ASC 280-10, Segment Reporting. ASC 280-10 establishes annual and interim reporting standards for operating segments of a company. ASC 280-10 requires disclosures of selected segment-related financial information about products, major customers, and geographic areas based on the Company's internal accounting methods. The Company has two business segments: *Lending and Servicing* and *Asset Management*. The chief operating decision maker ("CODM"), who is the Company's Chief Executive Officer, evaluates performance, makes operating decisions, and allocates resources based on the revenue and gross profit information from the different segments.

*Lending and Servicing* 

This is KDM's core business segment and includes consolidation of the Fund and J.W. Korth. Our management profit and loss statements look at earnings before interest, taxes, depreciation, dividends, and amortization ("EBITDDA"), as well as exclude the unrealized gain/loss from our book of MSRs. This is an operating view of the business segment, so excludes the cost of financing the business and the future cash flows from loan servicing. These numbers do include salaries from all employees, including those who work across both business segments. Below are the consolidated profit and loss statements and assets:

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| | | |
|:---|:---|:---|
|  | Six months ended June 30, | Six months ended June 30, |
|  | 2025 | 2024 |
| REVENUES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Origination Revenue, Net | $1578779 | $820154 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Servicing Revenue | 2263827 | 2499354 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Underwriting Income | 12750 | 40000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment Income | 1564298 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Revenue | 253552 | 659615 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Revenues | 5673206 | 4019123 |
| COST OF REVENUES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Broker Expenses | 1289684 | 768292 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Administrative Expenses | 609347 | 547541 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Cost of Revenues | 1899031 | 1315833 |
| GROSS PROFIT | 3774175 | 2703290 |
| OPERATING EXPENSES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Office | 236998 | 235227 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compensation and Related Benefits | 1834647 | 2250000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Professional & Legal | 338123 | 718501 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advertising | 62940 | 113506 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Operating Expenses | 2472708 | 3317234 |
| EBITDDA | $1301467 | $(613944) |

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| | | |
|:---|:---|:---|
|  | June 30, 2025 | December 31, 2024 |
| ASSETS |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and Cash Equivalents | $2928968 | $1974155 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted Cash | 53724592 | 15726038 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted Investment |  | 1192510 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mortgages Owned | 420655725 | 461474989 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mortgage Servicing Rights, at Fair Value | 8287578 | 9260225 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Portfolio Loans | 12671255 | 12661709 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans Held for Sale | 203086 | 520215 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities | 41991 | 41991 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ROU Leased Asset | 683122 | 270281 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill | 110000 | 110000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and equipment, net of depreciation | 161226 | 203058 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Assets | 1918305 | 16632923 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Assets | $501385848 | $520068094 |

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Below is the reconciliation of EBITDDA to income/(loss) before provision for income taxes:

 

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| | | |
|:---|:---|:---|
|  | Six months ended June 30, | Six months ended June 30, |
|  | 2025 | 2024 |
| EBITDDA | $1301467 | $(613944) |
| Other Income/(Expenses) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized Loss on Mortgages | (972647) | (747227) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized Loss on Mortgage Secured Notes | (29541) | (2634) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Income | 13895 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Expense | (746696) | (694068) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized Gain on Investment | 1496 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realized Gain on Securities | 58666 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realized Gain on Foreclosure | 5557032 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realized Loss on Loans Held for Sale | (4417) | (572) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employee Retention Credit | 45000 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in Fair Value of Mortgage Secured Notes | (9000000) | 12660000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on Foreclosures | 9000000 | (12660000) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Other Income/(Expenses) | 3922788 | (1444501) |
| Income/(Loss) before provision for income taxes | $5224255 | $(2058445) |

---

*Asset Management*

 

While we view this business segment as necessary to support the Lending and Servicing segment, it also clearly has a very different set of metrics and we look at each property's profit and loss statement independently. The numbers we use to manage the properties are primarily driven by total occupancy, rent per square foot, and net operating income. Below are the consolidated profit and loss statements for the six months ended 6/30/2025 and statement of assets as of 6/30/25 of the five properties KDM owns in Stafford, Virginia (specialty office), Acton, Massachusetts (office), Selma, TX (office), St. Louis, Missouri (office), and Los Angeles, California (mixed use).

See Note 15 for total property values.

[**Table of Contents**](#toc)

---

| | | |
|:---|:---|:---|
|  | Six months ended June 30, | Six months ended June 30, |
|  | 2025 | 2024 |
| REVENUES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rental Income | $3181676 | $1451188 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Revenues | 3181676 | 1451188 |
| COST OF REVENUES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bank Transaction Fees | 754 | 364 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ground Rent | 521830 | 175568 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Cost of Revenues | 522584 | 175932 |
| GROSS PROFIT | 2659092 | 1275256 |
| OPERATING EXPENSES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Office | 22818 | 15163 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compensation and Related Benefits | 63453 | 37552 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property Taxes | 134976 | 18942 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Professional & Legal | 120452 | 131224 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Utilities | 863494 | 615787 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Business Insurance | 48902 | (18787) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation | 871567 | 528308 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Operating Expenses | 2125662 | 1328189 |
| Net Operating Income | 533430 | (52933) |
| OTHER EXPENSES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mortgage Interest | 286747 | 286747 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Other Expenses | 286747 | 286747 |
| Net Income | $246683 | $(339680) |

---

---

| | | |
|:---|:---|:---|
|  | June 30, 2025 | December 31, 2024 |
| ASSETS |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and Cash Equivalents | $1483083 | $924504 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and equipment, net of depreciation | 69054622 | 31719347 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Assets | 3812794 | 1649071 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Assets | $74350499 | $34292922 |

---

[**Table of Contents**](#toc)

Below is a reconciliation of Segment Operations to Consolidated Statements of Operations:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | For the six months ended June 30, 2025 | For the six months ended June 30, 2025 | For the six months ended June 30, 2025 | For the six months ended June 30, 2025 |
|  | <u>Lending and Servicing</u> | <u>Asset Management</u> | <u>Other</u> | <u>Total</u> |
| REVENUES |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Origination Revenue, Net | $1578779 | $- | $- | $1578779 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Servicing Revenue | 2263827 |  |  | 2263827 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Underwriting Income | 12750 |  |  | 12750 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rental Income |  | 3181453 |  | 3181453 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment Revenue | 1564298 |  |  | 1564298 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Revenue | 253552 | 223 | - | 253775 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Revenues | 5673206 | 3181676 | - | 8854882 |
| COST OF REVENUES |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Broker Expenses | 1289684 |  |  | 1289684 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bank Transaction Fees |  | 754 |  | 754 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ground Rent |  | 521830 |  | 521830 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Administrative Expenses | 609347 | - | - | 609347 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Cost of Revenues | 1899031 | 522584 | - | 2421615 |
| GROSS PROFIT | 3774175 | 2659092 | - | 6433267 |
| OPERATING EXPENSES |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Office | 236998 | 22818 |  | 259816 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compensation and Related Benefits | 1834647 | 63453 |  | 1898100 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Professional & Legal | 338123 | 120452 |  | 458575 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property Taxes |  | 134976 |  | 134976 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Utilities |  | 863494 |  | 863494 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Business Insurance |  | 48902 |  | 48902 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advertising | 62940 |  |  | 62940 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation | - | 871567 | 44531 | 916098 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Operating Expenses | 2472708 | 2125662 | 44531 | 4642901 |
| Net Operating Income | 1301467 | 533430 | 44531 | 1790366 |
| Other Income/(Expenses) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized Gain on Mortgages | (972647) |  |  | (972647) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized Gain on Mortgage Secured Notes | (29541) |  |  | (29541) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Income | 13895 |  |  | 13895 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Expense | (746696) | (286747) |  | (1033443) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized Loss on Investment | 1496 |  |  | 1496 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realized Gain on Securities | 58666 |  |  | 58666 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realized Gain on Foreclosure | 5557032 |  |  | 5557032 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realized Loss on Loans Held for Sale | (4417) |  |  | (4417) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employee Retention Credit | 45000 |  |  | 45000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in Fair Value of Mortgage Secured Notes | (9000000) |  |  | (9000000) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on Foreclosures | 9000000 | - | - | 9000000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Other Income | 3922788 | (286747) | - | 3636041 |
| Income before provision for income taxes | $5224255 | $246683 | $44531 | $5426407 |

---

[**Table of Contents**](#toc)

Below is a reconciliation of Segment Assets to Total Assets per the Statements of Financial Condition:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | | June 30, 2025 | | |
|  | <u>Lending and Servicing</u> | <u>Asset Management</u> | <u>Other</u> | <u>Total</u> |
| ASSETS |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and Cash Equivalents | $2928968 | $1483083 | $- | $4412051 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted Cash | 53724592 |  | (164065) | 53560527 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mortgages Owned | 420655725 |  | (50800000) | 369855725 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mortgage Servicing Rights, at Fair Value | 8287578 |  |  | 8287578 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Portfolio Loans | 12671255 |  | (9500000) | 3171255 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans Held for Sale | 203086 |  |  | 203086 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities | 41991 |  |  | 41991 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ROU Leased Asset | 683122 |  |  | 683122 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill | 110000 |  |  | 110000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and equipment, net of depreciation | 161226 | 69054622 |  | 69215848 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Assets | 1918305 | 3812794 | (351969) | 5379130 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Assets | $501385848 | $74350499 | $(60816034) | $514920313 |

---

**NOTE 19 – SUBSEQUENT EVENTS**

The Company has evaluated all events or transactions for potential recognition or disclosure in the unaudited consolidated financial statements through August 14, 2025, which is the date that the unaudited consolidated financial statements were available to be issued. During this period, the following events requiring disclosure.

The Company paid off $42,500,000 of bonds.

[**Table of Contents**](#toc)

**Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.**

The following is a discussion of our historical unaudited consolidated financial condition and results of operations, and should be read in conjunction with (i) our unaudited historical consolidated financial statements and accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q; (ii) our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the "SEC") on April 1, 2025; and (iii) our management's discussion and analysis of financial condition and results of operations included in our 2024 Form 10-K. This discussion includes forward-looking statements that are subject to risk and uncertainties. Actual results may differ substantially from the statements we make in this section due to a number of factors that are discussed in "Part I – Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2024.

<u>Overview</u>

Korth Direct Mortgage Inc. ("KDM," the "Company," "we," or "us") began operations in October of 2016. We were founded by J. W. Korth & Company, LP, a FINRA and SEC registered broker-dealer, which is now a wholly owned subsidiary.

Our principal executive offices are located at 135 San Lorenzo Avenue, Suite 600, Coral Gables, Florida 33146, and our telephone number is (305) 668-8485. Our website address is www.korthdirect.com. We also operate under the trade name KDM Financial, and our principal subsidiary is J.W. Korth & Company, Limited Partnership ("J. W. Korth").

We are licensed in Florida as a Mortgage Lender Servicer. Our NMLS License Number is 1579547.

We originate, fund and service loans which are made to commercial borrowers. The loans are held by KDM as the lender. We fund our loans in a variety of ways, including directly in the capital markets through issuance of Mortgage Secured Notes ("MSNs" or "Notes"), which are sold through J.W. Korth as underwriter or placement agent through exemptions from registration available under Rule 144A, Regulation D, and other exemptions from registration. We also fund loans via loan participations and direct investments as well as on our warehouse line.

In July of 2022, we created an additional subsidiary to issue our MSNs, KDM Funding I LLC ("KDMF"). KDMF solely issues the Notes and does not have any other operations and there are no stand-alone financial statements prepared for KDMF. KDM is the servicer of the loans. The revenue and expenses associated with the Note issuance and the underlying loans are consolidated into the Company's consolidated results of operations. However, when reporting on deal level information, we will break out the deals by issuer.

KDM has a number of special purpose entities that it manages including KDM Capital Management LLC, KDM Capital Partners LP, KDM Funding I LLC, KDM Stafford LLC, KDM Nagog Park, LLC, KDM Cupples REO, LLC, KDM Beyer Drive Holdings LLC, KDM Seaton Colyton Holdings LLC, KDM Asset Management, LLC, and a wholly owned subsidiary named Citrus Servicing LLC which services the loans in our small balance multifamily program.

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**Results of Operations for the Six Months ended June 30, 2025**

The Company generated revenues of $8,854,882 for the six months ended June 30, 2025, an increase of $3,671,318, 71%, compared with revenues of $5,183,564 for the six months ended June 30, 2024. As of June 30, 2025, the Company owned mortgages of $369,855,725 compared with mortgages of $451,974,989 as of December 31, 2024, and $456,742,692 as of June 30, 2024 due to loan payoffs.

Gross profit increased by $2,747,417 to $6,433,267 during the six months ended June 30, 2025, compared with gross profit of $3,685,850 during the six months ended June 30, 2024. The increase in gross profit was due to additional rental revenues from buildings acquired via workouts; however new lending declined year over year.

Operating expenses were $4,642,901 during the six months ended June 30, 2025, which was a decrease of $39,307 (1%) compared with operating expenses of $4,682,208 during the six months ended June 30, 2024. Operating expenses did not increase in line with revenues because the increases are primarily from increased leasing revenue from properties that were taken due to defaulted loans.

Other income/(expense) increased by $4,580,969 to $3,636,041 during the six months ended June 30, 2025, compared with other income/(expense) of ($944,928) during the six months ended June 30, 2024. The increase is due to the gain on the deed in lieu takeover of two properties.

During the six months ended June 30, 2025, the Company recorded $1,360,049 in income tax expense due to increased income before income taxes compared with $482,857 of income tax benefit during the six months ended June 30, 2024.

Net income is $3,985,160 for the six months ended June 30, 2025, compared with net loss of $1,433,700 during the six months ended June 30, 2024. The increase in net income is primarily due to the gain on foreclosure of two properties.

**Financial Condition for the six months Ended June 30, 2025**

The Company's Total Assets were $514,920,313 for the six months ended June 30, 2025, and $521,851,543 as of December 31, 2024.

As of June 30, 2025, we had $4,412,051 in cash, $53,560,527 in restricted cash, loans totaling $381,517,644, consisting of $369,855,725 in mortgages and participations, $3,171,255 in portfolio loans and $203,086 in loans held for sale, and Mortgage Servicing Rights with a fair value of $8,287,578 on our unaudited consolidated statement of financial condition. The decline in mortgage assets was offset by a corresponding increase in real estate assets, reflecting the transfer of certain loans to real estate owned (REO) following foreclosure activity. Subsequent to quarter end, a significant MSN payable was paid off, which contributed to the increase in restricted cash reported as of quarter end.

**Liquidity and Capital Resources** 

The Company closed on a $100,000,000 financing repurchase facility on October 13, 2023. From time to time, we may need additional haircut capital to use the repurchase facility, which we may fund in a variety of ways, on either a short or long-term basis. Haircut capital is the cash on hand necessary to fund the portion of the loan not funded by the facility. The Company generates servicing revenues on its Mortgages owned with maturity dates ranging from June 2025 to June 2037 as well as income from its investments and portfolio loans with maturity dates ranging from October 2025 to July 2028.

While current liquidity is sufficient to sustain ongoing operations, we anticipate raising additional capital to fund our lending and development in the coming months. Additionally, we are actively raising capital in KDM Capital Partners LP (the "Fund").

**Status of KDM Loans**

As of June 30, 2025, there are 2 loans in payment default, one of which is cash flowing via its lockbox, and one small portfolio loan. All previous pending foreclosures from defaults from 2023 and 2024 have been completed. The Company is actively managing these properties to maximize value on behalf of the MSN investors.

The current commercial real estate mortgage financing market remains a challenge for many of our borrowers. Office, in particular, is still experiencing low valuations, even on properties in our portfolio that are performing. Bondholders can expect that, if it is in the best interest of the Noteholders (i.e., the loan would otherwise default due to inability to refinance elsewhere), that KDM may need to extend currently **<u>performing</u>** loans for additional full 5 year terms so long as the properties and loans are otherwise well-tenanted and in good condition. For loans that are not performing, KDM plans to aggressively pursue remedies available to it.

[**Table of Contents**](#toc)

**Item 3. Quantitative and Qualitative Disclosures About Market Risk.**

We have no material positions subject to market risk.

**Item 4. Controls and Procedures.**

We are responsible for establishing and maintaining adequate internal control over financial reporting as such item is defined by Securities Exchange Act Rule 13a - 15(f). Our internal controls are designed to provide reasonable assurance as to the reliability of our consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Internal control over financial reporting has inherent limitations and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable, not absolute, assurance with respect to financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our internal control over financial reporting as of March 31, 2025, as required by Securities Exchange Act Rule 13a- 15(c). In making our assessment, we have utilized the criteria set forth by the 2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. We concluded that based on our evaluation our internal control over financial reporting was effective as of June 30, 2025.

**PART II—OTHER INFORMATION**

**Item 1. Legal Proceedings**.

The Company is not currently subject to any material legal proceedings other than in the course of ordinary business which upon the disposition thereof, in the opinion of management are likely to have a material adverse effect on our consolidated financial condition, cash flows, or results of operations.

**Item 1A. Risk Factors.**

There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024. Please refer to the "Risks Factors" section in our Annual Report for a discussion of risks to which our business, financial condition, results of operations and cash flows are subject.

**Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.**

None.

**Item 3. Defaults Upon Senior Securities.**

None.

**Item 4. Mine Safety Disclosures**.

Not Applicable.

**Item 5. Other Information**.

None.

[**Table of Contents**](#toc)

**Item 6. Exhibits**.

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| | |
|:---|:---|
| **Exhibit**<br>**Number** | <br>**Description** |
| 1.1 | [Purchase Agreement for Multiple Series of Mortgage Secured Notes between J.W. Korth & Company Limited Partnership as the initial purchaser, and Korth Direct Mortgage Inc. dated July 29, 2022.](https://www.sec.gov/Archives/edgar/data/1695963/000121465922009644/ex1_2.htm) (incorporated by reference to Exhibit 1.1 to the Registrant's report on Form 8-K filed August 4, 2022) |
| 1.2 | [Purchase Agreement for Multiple Series of Mortgage Secured Notes between J.W. Korth & Company Limited Partnership as the initial purchaser, and KDM Funding I LLC dated July 29, 2022.](https://www.sec.gov/Archives/edgar/data/1695963/000121465922009644/ex1_2.htm) (incorporated by reference to Exhibit 1.2 to the Registrant's report on Form 8-K filed August 4, 2022) |
| 3.1 | [Articles of Conversion, dated May 31, 2019 (incorporated by reference to Exhibit to 3.1 to the Registrant's Report on Form 8-K filed June 28, 2019)](http://www.sec.gov/Archives/edgar/data/1695963/000121465919004158/ex3_1.htm) |
| 3.2 | [Articles of Incorporation of Korth Direct Mortgage Inc., dated May 31, 2019 (incorporated by reference to Exhibit to 3.2 to the Registrant's Report on Form 8-K filed June 28, 2019)](http://www.sec.gov/Archives/edgar/data/1695963/000121465919004158/ex3_2.htm) |
| 3.3 | [Amendment to Articles of Incorporation of Korth Direct Mortgage Inc. and Certificate of Designation of Series A 6% Cumulative Perpetual Convertible Preferred Stock, as filed with the Florida Secretary of State on September 20, 2019](https://www.sec.gov/Archives/edgar/data/1695963/000121465921007128/ex3_1.htm) (incorporated by reference to Current Report on Form 8-K filed July 1, 2021) |
| 3.4 | [Amendment to Articles of Incorporation of Korth Direct Mortgage Inc. and Amended Certificate of Designation of Series A 6% Cumulative Perpetual Convertible Preferred Stock, as filed with the Florida Secretary of State on March 20, 2020](https://www.sec.gov/Archives/edgar/data/1695963/000121465921007128/ex3_2.htm) (incorporated by reference to Current Report on Form 8-K filed July 1, 2021) |
| 3.5 | [Amendment to Articles of Incorporation of Korth Direct Mortgage Inc. and Amendment to Amended Certificate of Designation of Series A 6% Cumulative Perpetual Convertible Preferred Stock, as filed with the Florida Secretary of State on June 25, 2021](https://www.sec.gov/Archives/edgar/data/1695963/000121465921007128/ex3_3.htm) (incorporated by reference to Current Report on Form 8-K filed July 1, 2021) |
| 3.6 | [Articles of Amendment to Articles of Incorporation of Korth Direct Mortgage Inc. and Certificate of Designation of Series B 6.50% Cumulative Non-Voting Redeemable Secured Preferred Stock, as filed with the Florida Secretary of State on June 25, 2021](https://www.sec.gov/Archives/edgar/data/1695963/000121465921007128/ex3_4.htm) (incorporated by reference to Current Report on Form 8-K filed July 1, 2021) |
| 3.7 | [Bylaws of Korth Direct Mortgage Inc., dated May 31, 2019 (incorporated by reference to Exhibit to 3.1 to the Registrant's Report on Form 8-K filed June 28, 2019)](http://www.sec.gov/Archives/edgar/data/1695963/000121465919004158/ex3_3.htm) |
| 4.1 | [Trust Indenture and Security Agreement between Korth Direct Mortgage LLC, and Delaware trust Company dated November 17, 2017 (incorporated by reference to Exhibit 3.4 to registrant's Registration Statement on Form S-1/A filed November 20, 2017)](http://www.sec.gov/Archives/edgar/data/1695963/000121465917006816/ex4_1.htm) |
| 4.2 | [Trust Indenture and Security Agreement (Rule 144A Offerings) between Korth Direct Mortgage LLC, and Delaware Trust Company dated September 20, 2018 (incorporated by reference to Registrant's Report on Form 10-Q filed November 13, 2018)](http://www.sec.gov/Archives/edgar/data/1695963/000121465918007064/ex4_2.htm) |
| 4.3 | [Trust Indenture and Security Agreement Dated September 30, 2020, between Korth Direct Mortgage Inc. and Delaware Trust Company as Trustee](https://www.sec.gov/Archives/edgar/data/1695963/000121465920008449/ex4_3.htm) (incorporated by reference to Exhibit 4.3 to the Registrant's report on Form 8-K filed October 6, 2020) |
| 4.4 | [Trust Indenture and Security Agreement (144A Private Placements) Among KDM Funding I LLC., Delaware Trust Company, and Korth Direct Mortgage Inc.](https://www.sec.gov/Archives/edgar/data/1695963/000121465922009644/ex4_4.htm) (incorporated by reference to Exhibit 4.3 to the Registrant's report on Form 8-K filed August 4, 2022) |
| 10.1 | [Korth Direct Mortgage Inc. 2019 Stock Option Plan (incorporated by reference to Exhibit 10.1 to the Registrant's report on Form 8-K filed June 29, 2019)](http://www.sec.gov/Archives/edgar/data/1695963/000121465919004369/ex10_1.htm) |
| 10.2 | [Purchase Agreement dated July 31, 2020, among Korth Direct Mortgage Inc., a Florida corporation; J.W. Korth & Company Limited Partnership, a Michigan limited partnership; and JW Korth LLC, a Florida limited liability company](https://www.sec.gov/Archives/edgar/data/1695963/000121465920006814/ex10_03.htm) (incorporated by reference to Current Report on Form 8-K filed August 6, 2020) |

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[**Table of Contents**](#toc)

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| | |
|:---|:---|
| 10.3 | [First Amendment to Purchase Agreement](https://www.sec.gov/Archives/edgar/data/1695963/000121465921008603/ex10_3.htm) (incorporated by reference to Registrant's Report on Form 10-Q filed August 16, 2021) |
| 31.1 | [Section 302 Certificate of Chief Executive Officer and Chief Financial Officer\*](ex31_1.htm) |
| 32.1 | [Section 906 Certificate of Chief Executive Officer and Chief Financial Officer\*](ex32_1.htm) |
| 101 | Interactive Data File |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) \* |

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\*Filed herewith.

[**Table of Contents**](#toc)

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | KORTH DIRECT MORTGAGE INC. | KORTH DIRECT MORTGAGE INC. |
| Dated: August 14, 2025 | By: | /s/ Holly MacDonald-Korth |
|  |  | Holly MacDonald-Korth, Chief Executive Officer and Chief Financial Officer |

---

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION OF CHIEF EXECUTIVE OFFICER**

**PURSUANT TO RULE 13a-14(a) OR 15d-14(a)**

**OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE**

**SARBANES-OXLEY ACT OF 2002**

I, Holly MacDonald-Korth, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this Quarterly Report on Form 10-Q of Korth Direct Mortgage Inc. (the "Registrant").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the unaudited condensed consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. As the Registrant's certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the Registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Dated: August 14, 2025 | /s/ Holly MacDonald-Korth |
|  | Holly MacDonald-Korth, Chief Executive Officer and Chief Financial Officer |

---

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350**

**AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

I, Holly MacDonald-Korth, the Chief Executive Officer and Chief Financial Officer of Korth Direct Mortgage Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. This Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2025 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The information contained in this Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | |
|:---|:---|
| Dated: August 14, 2025 | /s/ Holly MacDonald-Korth |
|  | Holly MacDonald-Korth, Chief Executive Officer and Chief Financial Officer |

---