Korth Direct Mortgage 10-K 2 Apr 18 2017 FY Annual report Financial data

Document and Entity Information

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2017	Mar. 29, 2018
Document And Entity Information
Entity Registrant Name	Korth Direct Mortgage LLC
Entity Central Index Key	1,695,963
Document Type	10-K
Document Period End Date	Dec. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float	$ 0
Entity Common Stock, Shares Outstanding		1,000,000
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2,017

STATEMENTS OF FINANCIAL CONDITI

STATEMENTS OF FINANCIAL CONDITION - USD ($)	Dec. 31, 2017	Dec. 31, 2016
ASSETS
Cash and Cash Equivalents	$ 19,844	$ 7,290
Restricted Cash	55,487
Mortgages Owned, at Fair Value	1,999,132
Prepaid Expenses	11,332
TOTAL ASSETS	2,085,795	7,290
LIABILITIES
Due to Parent	334,324	73,061
Taxes Payable		8,213
Escrow Payable	46,579
Due to Investors	8,908
Accrued Expenses	15,000
Mortgage Secured Notes Payable, at Fair Value	1,999,132
Total Liabilities	2,403,943	81,274
MEMBERS' DEFICIT
Accumulated Deficit	(321,670)	(77,506)
Capital	3,522	3,522
Total Members' Deficit	(318,148)	(73,984)
TOTAL LIABILITIES AND MEMBERS' DEFICIT	$ 2,085,795	$ 7,290

STATEMENTS OF OPERATIONS

STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2017
REVENUES
Origination Revenue		$ 40,180
Servicing Revenue		4,352
Processing Revenue		1,500
Total Revenues		46,032
COST OF REVENUES
Bank Fees	15	275
Appraisal Costs		950
Marketing	1,557	6,720
License and Registration	717	11,398
Underwriter Expense		19,990
Ratings		10,000
Technology Fees		6,967
Total Cost of Revenues	2,289	56,300
GROSS PROFIT (LOSS)	(2,289)	(10,268)
OPERATING EXPENSES
Office Supplies	713	1,551
Salaries	21,092	129,061
Payroll Taxes	8,213	9,411
Professional & Legal	45,199	91,480
SEC Filings Expense		258
Travel & Entertainment		2,135
Total Expenses	75,217	233,896
Net Loss From Operations	(77,506)	(244,164)
NET LOSS	$ (77,506)	$ (244,164)

STATEMENTS OF CHANGES IN MEMBER

STATEMENTS OF CHANGES IN MEMBERS' EQUITY (DEFICIT)	Members' Equity [Member]USD ($)
Members' Equity Beginning of Period at Sep. 30, 2016
Member Contributions	3,522
Net Loss	(77,506)
MEMBERS' DEFICIT End of Period at Dec. 31, 2016	(73,984)
Member Contributions
Net Loss	(244,164)
MEMBERS' DEFICIT End of Period at Dec. 31, 2017	$ (318,148)

STATEMENTS OF CASH FLOWS

STATEMENTS OF CASH FLOWS - USD ($)	3 Months Ended	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$ (77,506)	$ (244,164)
Changes in Operating Assets and Liabilities:
Restricted Cash		(55,487)
New Mortgage Lending		(1,999,132)
Prepaid Expenses		(11,332)
Due to Parent	73,061	261,263
Taxes Payable	8,213	(8,213)
Escrow Payable		46,579
Due to Investors		8,908
Accrued Expenses		15,000
Mortgage Secured Notes Issued		1,999,132
Total Adjustments	81,274	256,718
NET CASH PROVIDED BY OPERATING ACTIVITIES	3,768	12,554
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOW FROM FINANCING ACTIVITIES
Member Contributions	3,522
NET CASH PROVIDED BY FINANCING ACTIVITIES	3,522
NET DECREASE IN CASH AND CASH EQUIVALENTS	7,290	12,554
CASH AND CASH EQUIVALENTS - Beginning of Period		7,290
CASH AND CASH EQUIVALENTS - End of Period	$ 7,290	$ 19,844

NATURE OF BUSINESS

NATURE OF BUSINESS	12 Months Ended
	Dec. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
NATURE OF BUSINESS	NOTE 1 - NATURE OF BUSINESS Korth Direct Mortgage, LLC (“the Company”) is a limited liability company formed in the State of Florida. The Company is a wholly owned subsidiary of J. W. Korth & Company, L.P. an SEC and FINRA registered broker dealer. The Company was created to sell Notes payable by and secured by mortgage CM Loans. The Company may not incur any debt other than support provided by its owner J. W. Korth & Company. The Company and J. W. Korth & Company executed a support agreement that provides financial, managerial, and office support to the Company until it is fully operational and a going concern. Pursuant to this agreement, for any moneys owed by the Company to J. W Korth, J. W. Korth may not seek reimbursement from the Company until the Company shall maintain a liquid net worth of at least $1,000,000 for a minimum period of 90 days.

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	12 Months Ended
	Dec. 31, 2017
Accounting Policies [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The accompanying financial statements are solely for the Company. The financial statements of the parent company, J. W. Korth & Company, have these accounts consolidated within them. BASIS OF ACCOUNTING The accompanying financial statements have been prepared on the accrual basis of accounting, in accordance with accounting principles generally accepted in the United States of America. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. MORTGAGE VALUATION Mortgages that are current are carried at the principal value owed by borrower, as of the date of the financial statements, according to the amortization schedule for the loan. All mortgages owned as of the date of these financial statements are current. MORTGAGE SECURED NOTES The Company funds the mortgage loans that it makes by issuing Mortgage Secured notes “MSNs”, which are secured by those same mortgages. As of the date of these financial statements, the Company has funded CM Loans totaling $2,009,000, and it issued MSNs secured by those loans, also in the amount of $2,009,000. The first MSN that was issued was via a private placement to Company affiliates. That note was redeemed on December 29, 2017 when a new publicly traded note was issued pursuant to a registration statement with the SEC. REVENUE RECOGNITION The Company has three primary sources of revenue: origination fees, servicing fees, and processing fees. Origination Fees Loan origination fees represent revenue earned from originating mortgage loans. Loan origination fees generally represent flat, per-loan fee amounts and, are recognized as revenue at the time the loans are funded. Servicing Fees Processing Fees Processing fees are collected from the borrower at the time the commitment letter is signed and cover a variety of expenses during the underwriting process. . If the Company cancels the transaction, then unused fees are refunded. If the transaction is unable to proceed for any reason not the fault of the Company, then the Company keeps the full processing fee. Revenues from processing fees are recognized at closing or at the time a transaction is canceled. ESTIMATES The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. DUE TO PARENT AND PAYABLES Items due to parent are operating expenses due to the parent company, J. W. Korth & Company, L.P. pursuant to the support agreement. The date such payments are due has not yet been determined since revenue generating operations are minimal at the current time. A repayment plan for operating expenses will be created once the company is an independently going concern. INCOME TAXES The Company is a limited liability company which is treated as a partnership for federal and state income tax. Accordingly, no provision for federal income taxes is required since the members report their proportionate share of company taxable income or loss on their respective income tax returns. Such income or losses are proportionately allocated to the members based upon their ownership interests. In accordance with FASB ASC 740

RESTRICTED CASH

RESTRICTED CASH	12 Months Ended
	Dec. 31, 2017
Restricted Cash [Abstract]
RESTRICTED CASH	NOTE 3 - RESTRICTED CASH The Company maintains two 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 to annually on behalf of borrowers to the appropriate tax authority and insurance companies. This account corresponds to the Escrow Payable liability. As of December 31, 2017, this account had a balance of $46,579. The “In Trust for 2” account receives payments from borrowers and distributes payments to investors, and pays the servicing fee to the company. This account corresponds to the Due to Investors liability. As of December 31, 2017, this account had a balance of $8,908.

COMMITMENTS

COMMITMENTS	12 Months Ended
	Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS	NOTE 4 - COMMITMENTS The Company relies entirely on its parent, J. W. Korth & Company, L.P. to provide office space, internet connectivity, phone service, and incidentals for the foreseeable future.

INDEMNIFICATIONS

INDEMNIFICATIONS	12 Months Ended
	Dec. 31, 2017
Indemnifications
INDEMNIFICATIONS	NOTE 5 - 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 it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for these indemnifications.

CUSTOMERS

CUSTOMERS	12 Months Ended
	Dec. 31, 2017
Risks and Uncertainties [Abstract]
CUSTOMERS	NOTE 6 - CUSTOMERS As of December 31, 2017, the Company has two customers. These two customers provided 100% of the Company’s revenue during the year and period ended December 31, 2017 and 2016; however, this is due to the business being in its infancy. The Company does not expect to rely on these two customers for all of its revenue going forward. Currently, our customers are geographically concentrated in the state of Florida.

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS	12 Months Ended
	Dec. 31, 2017
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS	NOTE 7 – RELATED PARTY TRANSACTIONS The Company is currently supported by its parent company, J. W. Korth & Company, L.P. This support is expected to be repaid once the Company is cash flow positive. The Company records this value as a liability on its balance sheet. The Company owed J. W. Korth & Company $314,334 and $73,061 as of December 31, 2017 and 2016, respectively. Pursuant to the Support Agreement between the Company and J. W. Korth & Company, J. W. Korth & Company may not seek reimbursement from the Company until the Company shall maintain a liquid net worth of at least $1,000,000 for a minimum of 90 days. The Company paid underwriting fees of $19,990 to J. W. Korth & Company.

FAIR VALUE

FAIR VALUE	12 Months Ended
	Dec. 31, 2017
Fair Value Disclosures [Abstract]
FAIR VALUE	NOTE 8 – FAIR VALUE GAAP 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 Level II Level III Valuation Process Cash and cash equivalents: The carrying amounts of cash and short-term instruments approximate fair values and are classified as either Level 1 or Level 2. Mortgages Owned and Mortgage Secured Notes Payable: Both of the loans on the balance as of December 31, 2017, were either sold or securitized in December 2017. Due to the recency of issue and the securitization and sale of these loans, both priced at par, the Company has determined that the fair values were determined by the market at the time of sale and should be classified as Level II of the fair value hierarchy. The carrying amounts for these items approximate the fair value. For amortizing loans, the Company discounts those to remaining principal value. 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. Fair Value on a Recurring Basis The Company determines the fair value of our financial assets and liabilities measured at fair value on an annual basis. Fair Value Disclosure On December 31, 2016 the Company had no financial assets. Accordingly, the Company only displays our disclosure as of December 31, 2017. December 31, 2017 Total Level I Level II Level III Financial Assets Mortgages Owned $ 1,999,132 $ - $ 1,999,132 $ - Financial Liabilities - Mortgage Secured Notes Payable $ 1,999,132 $ - $ 1,999,132 $ -

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	12 Months Ended
	Dec. 31, 2017
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	NOTE 9 – SUBSEQUENT EVENTS The Company has evaluated all events or transactions that occurred after December 31, 2017 through the date of these financial statements, which is the date that the financial statements were available to be issued. During this period, there were no material subsequent events requiring disclosure.

SUMMARY OF SIGNIFICANT ACCOUN15

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	12 Months Ended
	Dec. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
PRINCIPLES OF CONSOLIDATION	PRINCIPLES OF CONSOLIDATION The accompanying financial statements are solely for the Company. The financial statements of the parent company, J. W. Korth & Company, have these accounts consolidated within them.
BASIS OF ACCOUNTING	BASIS OF ACCOUNTING The accompanying financial statements have been prepared on the accrual basis of accounting, in accordance with accounting principles generally accepted in the United States of America.
CASH AND CASH EQUIVALENTS	CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.
MORTGAGE VALUATION	MORTGAGE VALUATION Mortgages that are current are carried at the principal value owed by borrower, as of the date of the financial statements, according to the amortization schedule for the loan. All mortgages owned as of the date of these financial statements are current.
MORTGAGE SECURED NOTES	MORTGAGE SECURED NOTES The Company funds the mortgage loans that it makes by issuing Mortgage Secured notes “MSNs”, which are secured by those same mortgages. As of the date of these financial statements, the Company has funded CM Loans totaling $2,009,000, and it issued MSNs secured by those loans, also in the amount of $2,009,000. The first MSN that was issued was via a private placement to Company affiliates. That note was redeemed on December 29, 2017 when a new publicly traded note was issued pursuant to a registration statement with the SEC.
REVENUE RECOGNITION	REVENUE RECOGNITION The Company has three primary sources of revenue: origination fees, servicing fees, and processing fees. Origination Fees Servicing Fees Loan servicing fees represent revenue earned for servicing loans for various investors. Loan servicing fees are based on a contractual percentage of the outstanding unpaid principal balance and are recognized into revenue as the related mortgage payments are received. Loan servicing expenses are charged to operations as incurred. Processing Fees Processing fees are collected from the borrower at the time the commitment letter is signed and cover a variety of expenses during the underwriting process. . If the Company cancels the transaction, then unused fees are refunded. If the transaction is unable to proceed for any reason not the fault of the Company, then the Company keeps the full processing fee. Revenues from processing fees are recognized at closing or at the time a transaction is canceled.
ESTIMATES	ESTIMATES The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
DUE TO PARENT AND PAYABLES	DUE TO PARENT AND PAYABLES Items due to parent are operating expenses due to the parent company, J. W. Korth & Company, L.P. pursuant to the support agreement. The date such payments are due has not yet been determined since revenue generating operations are minimal at the current time. A repayment plan for operating expenses will be created once the company is an independently going concern.
INCOME TAXES	INCOME TAXES The Company is a limited liability company which is treated as a partnership for federal and state income tax. Accordingly, no provision for federal income taxes is required since the members report their proportionate share of company taxable income or loss on their respective income tax returns. Such income or losses are proportionately allocated to the members based upon their ownership interests. In accordance with FASB ASC 740

FAIR VALUE (Tables)

FAIR VALUE (Tables)	12 Months Ended
	Dec. 31, 2017
Fair Value Disclosures [Abstract]
Schedule of fair value disclosure	On December 31, 2016 the Company had no financial assets. Accordingly, the Company only displays our disclosure as of December 31, 2017. December 31, 2017 Total Level I Level II Level III Financial Assets Mortgages Owned $ 1,999,132 $ - $ 1,999,132 $ - Financial Liabilities - Mortgage Secured Notes Payable $ 1,999,132 $ - $ 1,999,132 $ -

NATURE OF BUSINESS (Details Nar

NATURE OF BUSINESS (Details Narrative)	12 Months Ended
	Dec. 31, 2017USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Liquid net worth	$ 1,000,000
minimum period liquid net worth	90 days

SUMMARY OF SIGNIFICANT ACCOUN18

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative)	12 Months Ended
	Dec. 31, 2017USD ($)
Accounting Policies [Abstract]
Mortgage secured notes funded	$ 2,009,000
Mortgage secured notes funded redemption date	Dec. 29, 2017

RESTRICTED CASH (Details Narrat

RESTRICTED CASH (Details Narrative) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Restricted Cash [Abstract]
Escrow Payable	$ 46,579
Due to Investors	$ 8,908

CUSTOMERS (Details Narrative)

CUSTOMERS (Details Narrative)	12 Months Ended
	Dec. 31, 2017Customer
Risks and Uncertainties [Abstract]
Number of customer	2
Percentage of revenue	100.00%

RELATED PARTY TRANSACTIONS (Det

RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Related Party Transactions [Abstract]
Liquid net worth	$ 1,000,000
minimum period liquid net worth	90 days
Underwriting fees	$ 19,990
Due to Parent	$ 334,324	$ 73,061

FAIR VALUE (Details)

FAIR VALUE (Details) - Fair Value, Measurements, Recurring [Member]	Dec. 31, 2017USD ($)
Financial Assets
Mortgages Owned	$ 1,999,132
Financial Liabilities
Mortgage Secured Notes Payable	1,999,132
Fair Value, Inputs, Level 1 [Member]
Financial Assets
Mortgages Owned
Financial Liabilities
Mortgage Secured Notes Payable
Fair Value, Inputs, Level 2 [Member]
Financial Assets
Mortgages Owned	1,999,132
Financial Liabilities
Mortgage Secured Notes Payable	1,999,132
Fair Value, Inputs, Level 3 [Member]
Financial Assets
Mortgages Owned
Financial Liabilities
Mortgage Secured Notes Payable