Cover
Cover | 9 Months Ended |
Sep. 30, 2021shares | |
Cover [Abstract] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Quarterly Report | true |
Document Transition Report | false |
Document Period End Date | Sep. 30, 2021 |
Document Fiscal Period Focus | Q2 |
Document Fiscal Year Focus | 2021 |
Current Fiscal Year End Date | --12-31 |
Entity File Number | 000-1695962 |
Entity Registrant Name | KORTH DIRECT MORTGAGE INC. |
Entity Central Index Key | 0001695963 |
Entity Tax Identification Number | 27-0644172 |
Entity Incorporation, State or Country Code | FL |
Entity Address, Address Line One | 135 San Lorenzo Avenue |
Entity Address, Address Line Two | Suite 600 |
Entity Address, City or Town | Coral Gables |
Entity Address, State or Province | FL |
Entity Address, Postal Zip Code | 33146 |
City Area Code | 305 |
Local Phone Number | 668-8485 |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Filer Category | Non-accelerated Filer |
Entity Small Business | true |
Entity Emerging Growth Company | true |
Elected Not To Use the Extended Transition Period | false |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding | 5,000,000 |
Entity Information, Former Legal or Registered Name | _________________________________ ___________________________________ |
UNAUDITED CONSOLIDATED STATEMEN
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
ASSETS | ||
Cash and Cash Equivalents | $ 13,610,286 | $ 2,037,177 |
Restricted Cash | 27,925,255 | 6,605,288 |
Mortgages Owned | 281,403,866 | 175,370,850 |
Mortgage Servicing Rights, at Fair Value | 7,958,479 | 3,864,416 |
Portfolio Loans | 9,384,423 | 2,042,414 |
Securities | 427,066 | 329,152 |
ROU Leased Asset | 987,011 | 1,031,126 |
Goodwill | 110,000 | 110,000 |
Property & equipment, net of depreciation | 317,344 | 186,703 |
Deposits | 359,872 | 140,359 |
Prepaid Expenses | 160,504 | 120,770 |
Accounts Receivable | 56,831 | 19,577 |
TOTAL ASSETS | 342,700,937 | 191,857,832 |
LIABILITIES | ||
Escrows Payable | 9,478,493 | 6,462,394 |
Due to Investors | 428,762 | 142,894 |
Due (from) to clearinghouse brokers | (10,911) | 240,942 |
Lease liability | 1,031,677 | 1,037,538 |
Preferred Dividend Payable | 273,222 | 12,500 |
Deferred Revenue, net | 984,548 | 500,130 |
Deferred Tax Liability | 1,642,953 | 641,111 |
Accrued Expenses | 88,880 | 57,197 |
Contingent liability, net | 489,952 | 773,405 |
PPP loan payable | 161,600 | |
Mortgage Secured Notes Payable | 298,421,866 | 175,370,850 |
Accounts Payable | 76,780 | 70,279 |
Total Liabilities | 312,906,222 | 185,470,840 |
STOCKHOLDERS' EQUITY | ||
Accumulated Earnings | 4,076,517 | 1,365,653 |
Additional Paid-in Capital | 25,712,879 | 5,020,639 |
5,000,000 shares issued and outstanding at September 30, 2021 and December 31, 2020 | 5,000 | 500 |
Total Stockholders' Equity | 29,794,715 | 6,386,992 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 342,700,937 | 191,857,832 |
Series A Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY | ||
Preferred Stock, Value, Issued | 300 | 200 |
Series B Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY | ||
Preferred Stock, Value, Issued | $ 19 | $ 0 |
UNAUDITED CONSOLIDATED STATEM_2
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Parenthetical) - $ / shares | Sep. 30, 2021 | Dec. 31, 2020 |
Common Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 60,000,000 | 60,000,000 |
Common Stock, Shares, Issued | 5,000,000 | 5,000,000 |
Common Stock, Shares, Outstanding | 5,000,000 | 5,000,000 |
Series A Preferred Stock [Member] | ||
Common Stock, Shares, Outstanding | 300,000 | 200,000 |
Preferred Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 |
Preferred Stock, Shares Authorized | 40,000,000 | 40,000,000 |
Preferred Stock, Shares Issued | 300,000 | 300,000 |
Preferred Stock, Shares Outstanding | 300,000 | 300,000 |
Series B Preferred Stock [Member] | ||
Common Stock, Shares, Outstanding | 19,000 | |
Preferred Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 |
Preferred Stock, Shares Authorized | 20,000 | 20,000 |
Preferred Stock, Shares Issued | 19,000 | 0 |
Preferred Stock, Shares Outstanding | 19,000 | 0 |
UNAUDITED CONSOLIDATED STATEM_3
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
REVENUES | ||
Total Revenue | $ 5,192,427 | $ 1,575,386 |
Total Revenues | 5,192,427 | 1,575,386 |
COST OF REVENUES | ||
Broker Underwriting Expense | 247,908 | 147,428 |
Mortgage Broker Expense | 508,069 | 181,904 |
Co-Manager Engagement Fee | 2,630 | 2,640 |
Bank Transaction Fees | 51,219 | 10,127 |
Appraisal Costs | 27,920 | 16,069 |
Marketing | 48,799 | 42,155 |
License and Registration | 68,563 | 31,943 |
Insurance Review | 1,000 | |
Ratings | 83,900 | 31,759 |
Technology Fees | 186,780 | 50,374 |
Total Cost of Revenues | 1,225,788 | 515,399 |
GROSS PROFIT | 3,966,639 | 1,059,987 |
OPERATING EXPENSES | ||
Office Supplies | 68,149 | 14,176 |
Accounting | 104,855 | 56,203 |
Salaries & Commissions | 2,543,283 | 973,355 |
Payroll Taxes | 137,058 | 54,640 |
Other Payroll Related Costs | 67,224 | 27,591 |
Professional & Legal | 543,754 | 95,996 |
Rent Expense | 211,393 | 17,311 |
Utilities | 17,416 | 4,106 |
Travel & Entertainment | 30,423 | 8,342 |
Tradeshow Expense | 90,969 | 9,199 |
Business Insurance | 63,269 | 31,274 |
Depreciation | 25,474 | 600 |
401K Match | 46,451 | |
Stock Compensation | 19,359 | 19,359 |
Total Expenses | 3,969,077 | 1,312,152 |
Net (Loss) From Operations | (2,438) | (252,165) |
Other Income / (Expenses/Loss) | ||
Unrealized Gain on Mortgages | 4,094,063 | 836,484 |
Unrealized Gain/Loss on Mortgage Secured Notes | 1,754 | (839) |
Interest Expense | (30,300) | (6,963) |
Interest Income | 3,639 | |
Gain from forgiveness of PPP Loan | 161,600 | |
Gain from Forgiveness of EIDL Advance | 10,000 | |
Total Other Income | 4,227,117 | 842,321 |
Net income before provision for income taxes | 4,224,679 | 590,156 |
Provision for income taxes | 1,028,093 | 154,852 |
Net Income | 3,196,586 | 435,304 |
Series A Preferred Dividends | 225,000 | 225,000 |
Net income attributable to common stockholder | 2,710,864 | 210,304 |
Origination Revenue [Member] | ||
REVENUES | ||
Total Revenue | 629,369 | 299,794 |
Total Revenues | 629,369 | 299,794 |
Service [Member] | ||
REVENUES | ||
Total Revenue | 1,988,943 | 784,955 |
Total Revenues | 1,988,943 | 784,955 |
Processing Revenue [Member] | ||
REVENUES | ||
Total Revenue | 60,285 | 38,919 |
Total Revenues | 60,285 | 38,919 |
Underwriting Income [Member] | ||
REVENUES | ||
Total Revenue | 797,693 | 85,685 |
Total Revenues | 797,693 | 85,685 |
Trading Profits [Member] | ||
REVENUES | ||
Total Revenue | 1,466,528 | 223,987 |
Total Revenues | 1,466,528 | 223,987 |
Interest Income 1 [Member] | ||
REVENUES | ||
Total Revenue | 160,826 | 130,763 |
Total Revenues | 160,826 | 130,763 |
Commissions [Member] | ||
REVENUES | ||
Total Revenue | 72,622 | 2,849 |
Total Revenues | 72,622 | 2,849 |
Late Fees [Member] | ||
REVENUES | ||
Total Revenue | 16,161 | 8,434 |
Total Revenues | $ 16,161 | $ 8,434 |
UNAUDITED CONSOLIDATED STATEM_4
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Income | $ 3,196,586 | $ 435,304 |
Net Cash (Used In)/Provided by Operating Activities: | ||
Unrealized Gain on Mortgages Owned | (4,094,063) | (836,484) |
Unrealized (gain) loss on Mortgage Secured Notes | (1,754) | 839 |
Gain from forgiveness of PPP loan | (161,600) | |
Gain from forgiveness of EIDL advance | (10,000) | |
Stock compensation expense | 19,359 | 19,359 |
Depreciation | 25,474 | 600 |
Deferred rent expense from operating lease | 38,254 | |
Deferred income taxes | 1,001,842 | 154,852 |
Changes in Operating Assets and Liabilities: | ||
Restricted Cash | (21,319,967) | (12,405,263) |
Mortgage Secured Notes Issued | 123,051,016 | 47,001,180 |
Mortgage Secured Notes Purchased | (96,160) | (101,717) |
Portfolio Loans | (7,342,009) | 742,570 |
Accounts Receivable | (37,254) | 36,623 |
Prepaid Expenses | (39,734) | (75,820) |
Deposits | (219,513) | (41,717) |
Due to Parent | (45,247) | |
Deferred Revenue, net | 484,418 | 86,089 |
Escrow Payable | 3,016,099 | 5,020,659 |
Due to Investors | 285,868 | 138,792 |
Due to clearinghouse brokers | (251,853) | 92,805 |
Interest payable | (67,951) | 6,963 |
Accrued Expenses | 31,683 | (40,965) |
Accounts Payable | 6,501 | 76,618 |
New Mortgage Lending | (106,033,016) | (39,755,370) |
Total Adjustments | (11,704,360) | 65,366 |
NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES | (8,507,774) | 500,670 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of propert and equipment | (156,115) | (132,610) |
Acquisition of related party affiliate, net of cash acquired | (215,502) | 229,141 |
NET CASH (USED IN)/PROVIDED BY INVESTING ACTIVITIES | (371,617) | 96,531 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Payment of Series A preferred stock dividends | (225,000) | (225,000) |
Net proceeds from the sale of Series A preferred stock | 2,375,000 | |
Net proceeds from the sale of Series B preferred stock | 18,302,500 | |
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES | 20,452,500 | (225,000) |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 11,573,109 | 372,201 |
CASH AND CASH EQUIVALENTS – Beginning of Period | 2,037,177 | 2,378,716 |
CASH AND CASH EQUIVALENTS – End of Period | 13,610,286 | 2,750,917 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION | ||
Cash paid during the quarter for interest | $ 30,300 |
UNAUDITED CONSOLIDATED STATEM_5
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - 9 months ended Sep. 30, 2021 - USD ($) | Series A Preferred Stock [Member] | Series B Preferred Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings (Accumulated Deficit) | Total |
Beginning balance, value at Dec. 31, 2020 | $ 200 | $ 500 | $ 5,020,639 | $ 1,365,653 | $ 6,386,992 | |
Balance at beginning (in shares) at Dec. 31, 2020 | 200,000 | 5,000,000 | 5,000,000 | |||
Options issued to employees and directors | 19,359 | $ 19,359 | ||||
Series A & Series B preferred stock dividends declared | (485,722) | (485,722) | ||||
Issuance of Series A Preferred Stock | $ 100 | 2,374,900 | 2,375,000 | |||
Issuance of Series A Preferred Stock (in shares) | 100,000 | |||||
Sale of Series B preferred stock | $ 19 | 18,302,481 | 18,302,500 | |||
Sales of series B preferred stock (In share) | 19,000 | |||||
Reclassification | 4,500 | (4,500) | ||||
Net income | 3,196,586 | 3,196,586 | ||||
Ending balance, value at Sep. 30, 2021 | $ 300 | $ 19 | $ 5,000 | $ 25,712,879 | $ 4,076,517 | $ 29,794,715 |
Balance, end (in shares) at Sep. 30, 2021 | 300,000 | 19,000 | 5,000,000 | 5,000,000 |
NATURE OF BUSINESS
NATURE OF BUSINESS | 9 Months Ended |
Sep. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF BUSINESS | NOTE 1 - NATURE OF BUSINESS Korth Direct Mortgage Inc. (the “Company”) is incorporated in the State of Florida. The Company was created to originate mortgages and fund those mortgages with notes secured by mortgage loans. On July 31, 2020, the Company acquired substantially all of the equity of J.W. Korth & Company Limited Partnership, a Michigan limited partnership (“J.W. Korth”), and its general partner, J.W. Korth, LLC, a Florida limited liability company. J.W. Korth is an SEC and FINRA registered securities broker dealer. The financials of J. W. Korth were integrated into the financials of the Company as of August 1, 2020. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with US generally accepted accounting principles (“GAAP”) have been condensed or omitted. These unaudited financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s 2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2021 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of the Company and J.W. Korth, its wholly-owned subsidiary. Intercompany balances and transactions have been eliminated upon consolidation. BASIS OF ACCOUNTING The accompanying financial statements have been prepared on the accrual basis of accounting, in accordance with GAAP. USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. 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 the 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. The net present value of the servicing revenue is recorded as mortgage servicing rights, at fair value on the Statements of Financial Condition, and is recognized on the Statement of Operations as an unrealized gain on mortgages. MORTGAGE SECURED NOTES The Company funds the mortgage loans (”CM Loans”) that it makes by issuing Mortgage Secured Notes (“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, and Rule 144A offerings. As of the date of these financial statements, the Company has funded CM Loans totaling $ 317,658,746 313,670,750 281,403,866 298,421,866 PORTFOLIO LOANS The Company recognizes loans made with its own capital, or those not securitized, under the caption “Portfolio Loans” on the balance sheet. As of September 30, 2021, the Company had issued Portfolio Loans in the amount of $ 9,384,423 GOODWILL Financial Accounting Standards Board Accounting Standards Codification (“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 period ending September 30, 2021. REVENUE RECOGNITION The Company’s primary sources of revenue are origination fees, servicing fees, processing fees, underwriting income, trading profits, and interest income. Origination Fees 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 Statement of Financial Condition. Servicing Fees 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 interest received from our CM Loans 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. 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. Underwriting Income 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 the settlement date of the trades. Trading Profits Trading profits represent revenue generated through the trading of securities either for its own account or on behalf of J.W. Korth’s clients. Revenue from trading profits is recognized upon settlement of the securities transactions. Interest Income Interest Income is primarily derived from interest earned on Portfolio Loans and includes interest earned on cash and securities. LEASES In February 2016, the FASB issued 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 generally accepted accounting principles. Leases will be classified as financing or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The Company adopted the new lease standard on January 1, 2019, and has chosen to use that date as the effective date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The new lease guidance provides a number of optional practical expedients in transition. The Company has elected the “package of practical expedient,” which permits it to not reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. As part of the adoption of this standard, the Company recognized 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. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. STOCK-BASED COMPENSATION The Company estimates the fair values 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. 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. Unrealized Gain on Mortgages Owned The net present value of the servicing income is recognized at the time the mortgage is initiated. This value uses several inputs that are highly subjective including: discount rate, prepayment rate, the current interest rate environment, and default rate assumptions. Since the Company has a short operating history and a small number of loans outstanding, we have a limited basis to predict prepayment rates and default rates. DUE TO CLEARINGHOUSE BROKERS J.W. Korth, a wholly owned subsidiary of the Company, operates as an SEC and FINRA registered securities broker dealer. 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 September 30, 2021, the Company had a net amount due from clearinghouse brokers of $ 10,911 DEPRECIATION Depreciation is provided on a straight-line basis using estimated useful lives of three seven INCOME TAXES On June 6, 2019, the Company converted from a Florida limited liability company into a Florida corporation. Effective with the conversion into a Florida corporation, 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 |
ACQUISITION OF RELATED PARTY AF
ACQUISITION OF RELATED PARTY AFFILIATE | 9 Months Ended |
Sep. 30, 2021 | |
Acquisition Of Related Party Affiliate | |
ACQUISITION OF RELATED PARTY AFFILIATE | NOTE 3 – ACQUISITION OF RELATED PARTY AFFILIATE On July 31, 2020 The Company was founded by J.W. Korth with James W. Korth, its Chairman and Chief Executive Officer, and his daughter, Holly MacDonald-Korth, the Company’s President and Chief Financial Officer. Mr. Korth is the Managing Partner of J.W. Korth and Ms. MacDonald-Korth is J.W. Korth’s Managing Director and Chief Financial Officer. J.W. Korth is registered with the Securities and Exchange Commission as a broker-dealer and investment advisor, and with the Financial Industry Regulatory Authority (“FINRA”) as a broker-dealer. Together, prior to closing of the Acquisitions Mr. Korth and Ms. MacDonald-Korth together owned approximately 80% of J.W. Korth’s partnership interests and controlled the business and operations of J.W. Korth. J.W. Korth funded the organization and operation of the Company pursuant to a support agreement with the Company from inception until April 2019, at which time the Company became self-sustaining and J.W. Korth forgave a receivable owed to it by the Company. Until the closing of the Acquisitions, the Company was controlled by J.W. Korth, which owned all of its voting common stock. The Company originates, funds and services loans which it makes to commercial borrowers. The loans are held by the Company as lender. The Company funds its loans 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. The Company and J.W. Korth determined that the Company could operate more efficiently if J.W. Korth became a wholly-owned subsidiary of the Company. J.W. Korth submitted its then-proposed sale to FINRA, as required by FINRA rules, and FINRA advised J.W. Korth that it could proceed with the closing. Pursuant to the Purchase Agreement, as a condition of closing J.W. Korth agreed to distribute all of its 5,000,000 Prior to the closing, J. W. Korth LLC owned 73.6 3,680,000 80 20 At closing, after the distribution to its members of the Company shares distributed to J W Korth LLC, the Company acquired all of the membership interests in JW Korth LLC from Mr. Korth and Ms. MacDonald-Korth for consideration of the payment to (i) the Preferred Capital Interest partners of J.W. Korth of accrued and unpaid 6% dividends through July 31, 2020, and (ii) James Korth of $150,000 in payment of the value of his JW Korth LLC’s Common Capital Interest account. As post-closing commitments the Company agreed to (i) retain Mr. Korth as the managing partner of J.W. Korth, Ms. MacDonald-Korth as J.W. Korth’s chief financial officer, and all other employees of JW Korth who were employed at closing of the Transactions; (ii) operate J.W. Korth as an SEC registered broker-dealer and investment advisor; (iii) pay the JW Korth Preferred Capital Interest Partners quarterly dividends concurrently with its payment of the Company’s Series A Preferred Stock dividends at least annually; (iv) in such years as it pays Series A Preferred dividends, redeem 25% annually of the JW Korth Preferred Capital Interest partners through a capital contribution to JW Korth; and (v) make a discretionary redemption of all accounts of the limited partners of J.W. Korth under the J.W. Korth partnership agreement. Upon redemption of the limited partners’ accounts and the payment of the other consideration to described above to the JW Korth partners, KDM will own 100% of the voting interests in JW Korth. The following table summarizes the consideration paid, or to be paid, for the Acquisitions: Consideration Accrued & unpaid dividends to the Preferred Capital Interest partners $ 213,443 JW Korth LLC’s Common Capital Interest account 150,000 Contingent liability to redeem J.W. Korth Preferred Capital Interest Partners 696,253 Disposition of outstanding loan due from J.W. Korth Executive Officer 69,780 Total Consideration Paid $ 1,129,476 The following table summarizes the net book value of assets and liabilities acquired as of the closing date, July 31, 2020: Net Book Value J.W. Korth Net Book Value $ 889,131 Less: Preferred Interest in J.W. Korth by Company prior to acquisition (250,000 ) Adjusted Net Book Value acquired $ 639,131 Since the acquisition was between related parties, the transaction was recorded at net book value as of the closing date. The difference of $ 490,345 |
CONTINGENT LIABILITY
CONTINGENT LIABILITY | 9 Months Ended |
Sep. 30, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
CONTINGENT LIABILITY | NOTE 4 – CONTINGENT LIABILITY As part of the acquisition of related party affiliate discussed above in Note 3, the Company agreed to pay (i) the Preferred Capital Interest partners of J.W. Korth accrued and unpaid dividends of 6 July 31, 2020 25 The following table summarizes the unpaid Contingent Liability outstanding as of September 30, 2021: Contingent liability to redeem J.W. Korth Preferred Capital Interest Partners 696,253 Contingent liability payment (215,502 ) Accrued quarterly dividends recorded as interest expense through September 30, 2021 9,201 Contingent Liability, net $ 489,952 |
RESTRICTED CASH
RESTRICTED CASH | 9 Months Ended |
Sep. 30, 2021 | |
Disclosure Restricted Cash Abstract | |
RESTRICTED CASH | 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 authority and insurance companies. This account corresponds to the Escrow Payable liability. As of September 30, 2021, this account has a balance of $ 8,113,315 The “In Trust for 2” account receives payments from borrowers, distributes payments to investors, and pays the servicing fee to the Company. This account corresponds to the Due to Investors liability. As of September 30, 2021, this account has a balance of $ 18,446,762 18,018,000 The Company also maintains multiple lockbox accounts that collect rental payments directly from tenants on the borrowers’ behalf. These accounts typically net out funds monthly. The lockbox account balances as of September 30, 2021 were $ 50,600 1,314,578 |
COMMITMENTS
COMMITMENTS | 9 Months Ended |
Sep. 30, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS | NOTE 6 - COMMITMENTS Prior to the acquisition of J.W. Korth in July 2020, the Company relied entirely on J.W. Korth to provide office space, internet connectivity, phone service, and incidentals. In November 2020, the Company signed a lease for new office space in Miami, Florida, for a term of sixty-two months with the right to extend the term of the lease for two additional, successive periods of two years upon the same terms and conditions as the initial term. In December 2020, the Company entered into a Sublease Agreement to sublet a portion of the office space described above. The subtenant has agreed to cover the proportionate amount of the lease costs associated with the office space based on essentially the same terms as the lease described above, including the rights to extend for two successive two-year periods. On January 13, 2021, J.W. Korth negotiated a five-month early termination of its lease for its Miami office and will rely entirely on its parent for office space at the Coral Gables location. The J. W. Korth Michigan office has renegotiated a new lease which began in May 2021. 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 Consolidated Statement 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 quarter ended September 30, 2021 was $ 211,393 As of September 30, 2021, the net present value of the future lease liabilities, using the weighted-average discount rate of 4.24 4.6 1,031,677 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 of as of September 30, 2021: Future Lease 2021 $ 60,988 2022 249,957 2023 256,920 2024 264,087 2025 271,470 2026 30,504 Total Lease Payments 1,133,926 Less: Imputed Interest (102,249 ) Present Value of Lease Liabilities $ 1,031,677 PPP Loan In April 2020, J. W. Korth, at that time the parent company of KDM, availed itself of a Paycheck Protection Program loan (“PPP Loan”) in the amount of $ 161,600 |
INDEMNIFICATIONS
INDEMNIFICATIONS | 9 Months Ended |
Sep. 30, 2021 | |
Indemnifications | |
INDEMNIFICATIONS | NOTE 7 - 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 | 9 Months Ended |
Sep. 30, 2021 | |
Risks and Uncertainties [Abstract] | |
CUSTOMERS | NOTE 8 - CUSTOMERS As of September 30, 2021, the Company had forty-seven single borrower or location other than three large loans in the states of Ohio, Virginia, and California for a total of approximately $109,370,280 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2021 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 9 – RELATED PARTY TRANSACTIONS The intercompany transactions and balances between the Company and J.W. Korth have been eliminated upon consolidation as a result of the acquisition. In March 2020 and September 2021, the Company purchased an MSN in the amount of $ 100,000 900,000 On April 1, 2020, the Company closed a first lien and corresponding MSN, along with a second lien loan of $500,000 on the same property. The funding for the second lien was provided by 110 Capital LLC, an entity controlled by a KDM director and employee. KDM services both notes On May 13, 2020, the Company executed a preferred partner subscription agreement with J.W. Korth in the amount of $250,000, which was eliminated upon consolidation as a result of the acquisition of J.W. Korth in July 2020 (see Note 4 above). For the period ended September 30, 2021, the Company paid underwriting fees of $ 277,546 . On February 12, 2021, the Company closed a first lien and corresponding MSN, along with a second lien loan of $200,000 on the same property. The funding for the second lien was provided by 110 Capital LLC, an entity controlled by a KDM director and employee. KDM services both notes |
DEFERRED REVENUE, NET
DEFERRED REVENUE, NET | 9 Months Ended |
Sep. 30, 2021 | |
Revenue from Contract with Customer [Abstract] | |
DEFERRED REVENUE, NET | 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 Statement of Financial Condition. The following is a summary of the loan originating fees and costs deferred and amortized for the nine months ended September 30, 2021: Schedule of loan originating fees and costs deferred and amortized Deferred Origination Deferred Deferred Deferred Revenue at December 31, 2020 $ 2,617,443 $ (2,117,313 ) $ 500,130 New loan deferrals 1,826,845 (1,146,333 ) 680,512 Amortization of deferrals (629,369 ) 433,275 (196,094 ) Deferred Revenue at September 30, 2021 $ 3,814,919 $ (2,830,371 ) $ 984,548 |
EMPLOYEE AND DIRECTOR STOCK OPT
EMPLOYEE AND DIRECTOR STOCK OPTIONS | 9 Months Ended |
Sep. 30, 2021 | |
Share-based Payment Arrangement [Abstract] | |
EMPLOYEE AND DIRECTOR STOCK OPTIONS | 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 for the purchase of up to an aggregate of 1,000,000 0.001 In June 2019, the Company issued options to purchase 835,000 1.00 0.1855 Schedule of estimated fair value of stockoptions weighted-average assumptions 2020 Risk-free interest rate: 1.76% Expected term: 5.75 years Expected dividend yield: 0% Expected volatility: 35.01% For the nine months ended September 30, 2021, the Company recorded $ 19,359 19,362 nine Stock option activity for the nine months ended September 30, 2021, is summarized as follows: Schedule of stock option activity 2019 Stock Option Plan: Shares Weighted Weighted Options outstanding at January 1, 2021 835,000 $ 1.00 8.5 Granted - Exercised - Expired or forfeited - Options outstanding at September 30, 2021 835,000 $ 1.00 7.75 Options exercisable at September 30, 2021 417,500 $ 1.00 7.75 Options expected to vest at September 30, 2021 417,500 $ 1.00 8.0 |
PREFERRED EQUITY
PREFERRED EQUITY | 9 Months Ended |
Sep. 30, 2021 | |
Equity [Abstract] | |
PREFERRED EQUITY | NOTE 12 – PREFERRED EQUITY On September 27, 2019, the Company issued 200,000 4,750,000 250,000 25 convertible into common stock at a ratio of 5 shares of common stock for each share of Series A Preferred Stock On June 29, 2021, the Company issued 19,000 1,000 18,302,500 697,500 The Series B preferred stock is non-convertible and will pay cumulative dividends, if and when declared by the Company’s board of directors, at a rate of 6.50 0.001 pari passu 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 Series B preferred stock is redeemable at the Company’s option, in whole or in part, on or after June 29, 2026 1,000.00 1,000.00 · 10% of the originally-issued shares of Series B preferred stock on June 29, 2027; · 10% of the originally-issued shares of Series B preferred stock on June 29, 2028; · 10% of the originally-issued shares of Series B preferred stock on June 29, 2029; · 20% of the originally-issued shares of Series B preferred stock on June 29, 2030; and · 50% of the originally-issued shares of Series B preferred stock on June 29, 2031. The Company’s obligations to redeem the Series B preferred stock will be 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 be subject to a thirty (30)-day grace period. |
FAIR VALUE
FAIR VALUE | 9 Months Ended |
Sep. 30, 2021 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE | NOTE 13 – FAIR VALUE FASB ASC 820, Fair Value Measurements and Disclosures 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 Level II Level III 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 Cash and cash equivalents: The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1. Mortgages Owned and Mortgage Secured Notes Payable: 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. If a decline in fair value below the carrying balance is other-than-temporary, an unrealized impairment loss is recorded and the loan is recorded at the lower fair value at each reporting period. To date, the Company has not recorded any impairment losses related to the mortgage loans. 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. Mortgage Servicing: The net present value of the servicing income is recognized at the time the mortgage is initiated as an unrealized gain. 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, we have 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 Statement of Financial Condition as “Mortgage Servicing Rights, at Fair Value.” Mortgage Secured Notes Receivable: From time to time the Company may buy-back mortgage secured notes previously issued to investors. These securities are available for sale, but may be held until maturity. These securities are recorded at fair value each quarter with the change in fair value recognized as an unrealized gain or loss each reporting period. The fair value estimate 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, we have 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. Securities J. W. Korth holds $ 225,000 KDM also holds a small amount of its own MSNs in an account which it may buy from time to time to provide liquidity to clients of J. W. Korth. 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: September 30, 2021 Total Level I Level II Level III Financial Assets Mortgages Owned $ 281,403,866 $ - $ 281,403,866 $ - Mortgage Servicing 7,958,479 - - 7,958,479 Securities 427,066 - - 427,066 Total Financial Assets $ 289,789,411 $ - $ 281,403,866 $ 8,385,545 Financial Liabilities Mortgage Secured Notes Payable $ 298,421,866 $ - $ 298,421,866 $ - December 31, 2020 Financial Assets Mortgages Owned $ 175,370,850 $ - $ 175,370,850 $ - Mortgage Servicing 3,864,416 - - 3,864,416 Securities 329,152 - 46 329,152 Total Financial Assets $ 179,564,418 $ - $ 175,370,896 $ 4,193,568 Financial Liabilities Mortgage Secured Notes Payable $ 175,370,850 $ - $ 175,370,850 $ - Fair Value Measurements Changes in Fair Value Measurements for the nine months ended September 30, 2021 The following table presents a reconciliation of changes in Level 3 assets and liabilities reported in the Statements of Financial Condition for the nine months ended September 30, 2021: Changes in assets: Period ended September 30, 2021 Mortgage Securities Total Value Beginning balance at January 1, 2021 $ 3,864,416 $ 329,106 $ 4,193,522 Purchases - 890,475 890,475 Trades - 26,043 26,043 Sales - 175,000 175,000 Eliminating entry (1,000,000 ) (1,000,000 ) Issues - - - Settlements - - - Net realized gain/loss or Interest income - 4,688 4,688 Unrealized Gain from newly issued mortgages 4,596,273 - 4,596,273 Fair Value adjustment (502,210 ) 1,754 (500,456 ) Transfers into Level 3 - - - Transfers out of Level 3 - - - Ending balance at September 30, 2021 $ 7,958,479 $ 427,066 $ 8,385,545 The Company’s policy for recording transfers between levels of the fair value hierarchy is to recognize as of the financial statement date. For the nine months ended September 30, 2021, 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 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 September 30, 2021: Investment type Fair Value Valuation technique Unobservable inputs Values Mortgage servicing $ 7,958,479 Net Present Value Prepayment Discount 15.31 % Discount rate 15.00 % Securities $ 427,066 Net Present Value |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2021 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 14 – INCOME TAXES The provision for income taxes was $ 1,028,093 24.3 4,224,679 21 The provision for income taxes was $ 154,852 26.2 590,156 21 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2021 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 15 – PROPERTY AND EQUIPMENT Property and Equipment are summarized as follows: Schedule of property and equipment Equipment $ 207,757 Furniture and fixtures $ 175,857 $ 383,614 Accumulated depreciation $ (66,270 ) Net Property Equipment $ 317,344 Depreciation expense for the period ending September 30, 2021 was $ 25,474 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2021 | |
Accounting Policies [Abstract] | |
SUBSEQUENT EVENTS | NOTE 16 – SUBSEQUENT EVENTS The Company has evaluated all events or transactions that occurred after September 30, 2021, 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, other than those noted below. An MSN issued in September with a notional value of $ 18,200,000 18,018,000 |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2021 | |
Accounting Policies [Abstract] | |
PRINCIPLES OF CONSOLIDATION | PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of the Company and J.W. Korth, its wholly-owned subsidiary. Intercompany balances and transactions have been eliminated upon consolidation. |
BASIS OF ACCOUNTING | BASIS OF ACCOUNTING The accompanying financial statements have been prepared on the accrual basis of accounting, in accordance with GAAP. |
USE OF ESTIMATES | USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. |
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 the 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. The net present value of the servicing revenue is recorded as mortgage servicing rights, at fair value on the Statements of Financial Condition, and is recognized on the Statement of Operations as an unrealized gain on mortgages. |
MORTGAGE SECURED NOTES | MORTGAGE SECURED NOTES The Company funds the mortgage loans (”CM Loans”) that it makes by issuing Mortgage Secured Notes (“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, and Rule 144A offerings. As of the date of these financial statements, the Company has funded CM Loans totaling $ 317,658,746 313,670,750 281,403,866 298,421,866 |
PORTFOLIO LOANS | PORTFOLIO LOANS The Company recognizes loans made with its own capital, or those not securitized, under the caption “Portfolio Loans” on the balance sheet. As of September 30, 2021, the Company had issued Portfolio Loans in the amount of $ 9,384,423 |
GOODWILL | GOODWILL Financial Accounting Standards Board Accounting Standards Codification (“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 period ending September 30, 2021. |
REVENUE RECOGNITION | REVENUE RECOGNITION The Company’s primary sources of revenue are origination fees, servicing fees, processing fees, underwriting income, trading profits, and interest income. Origination Fees 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 Statement of Financial Condition. Servicing Fees 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 interest received from our CM Loans 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. 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. Underwriting Income 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 the settlement date of the trades. Trading Profits Trading profits represent revenue generated through the trading of securities either for its own account or on behalf of J.W. Korth’s clients. Revenue from trading profits is recognized upon settlement of the securities transactions. Interest Income Interest Income is primarily derived from interest earned on Portfolio Loans and includes interest earned on cash and securities. |
LEASES | LEASES In February 2016, the FASB issued 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 generally accepted accounting principles. Leases will be classified as financing or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The Company adopted the new lease standard on January 1, 2019, and has chosen to use that date as the effective date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The new lease guidance provides a number of optional practical expedients in transition. The Company has elected the “package of practical expedient,” which permits it to not reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. As part of the adoption of this standard, the Company recognized 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. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION The Company estimates the fair values 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. 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. |
Unrealized Gain on Mortgages Owned | Unrealized Gain on Mortgages Owned The net present value of the servicing income is recognized at the time the mortgage is initiated. This value uses several inputs that are highly subjective including: discount rate, prepayment rate, the current interest rate environment, and default rate assumptions. Since the Company has a short operating history and a small number of loans outstanding, we have a limited basis to predict prepayment rates and default rates. |
DUE TO CLEARINGHOUSE BROKERS | DUE TO CLEARINGHOUSE BROKERS J.W. Korth, a wholly owned subsidiary of the Company, operates as an SEC and FINRA registered securities broker dealer. 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 September 30, 2021, the Company had a net amount due from clearinghouse brokers of $ 10,911 |
DEPRECIATION | DEPRECIATION Depreciation is provided on a straight-line basis using estimated useful lives of three seven |
INCOME TAXES | INCOME TAXES On June 6, 2019, the Company converted from a Florida limited liability company into a Florida corporation. Effective with the conversion into a Florida corporation, 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 |
ACQUISITION OF RELATED PARTY _2
ACQUISITION OF RELATED PARTY AFFILIATE (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Acquisition Of Related Party Affiliate | |
The following table summarizes the consideration paid, or to be paid, for the Acquisitions: | The following table summarizes the consideration paid, or to be paid, for the Acquisitions: Consideration Accrued & unpaid dividends to the Preferred Capital Interest partners $ 213,443 JW Korth LLC’s Common Capital Interest account 150,000 Contingent liability to redeem J.W. Korth Preferred Capital Interest Partners 696,253 Disposition of outstanding loan due from J.W. Korth Executive Officer 69,780 Total Consideration Paid $ 1,129,476 |
The following table summarizes the net book value of assets and liabilities acquired as of the closing date, July 31, 2020: | The following table summarizes the net book value of assets and liabilities acquired as of the closing date, July 31, 2020: Net Book Value J.W. Korth Net Book Value $ 889,131 Less: Preferred Interest in J.W. Korth by Company prior to acquisition (250,000 ) Adjusted Net Book Value acquired $ 639,131 |
CONTINGENT LIABILITY (Tables)
CONTINGENT LIABILITY (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
The following table summarizes the unpaid Contingent Liability outstanding as of September 30, 2021: | The following table summarizes the unpaid Contingent Liability outstanding as of September 30, 2021: Contingent liability to redeem J.W. Korth Preferred Capital Interest Partners 696,253 Contingent liability payment (215,502 ) Accrued quarterly dividends recorded as interest expense through September 30, 2021 9,201 Contingent Liability, net $ 489,952 |
COMMITMENTS (Tables)
COMMITMENTS (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
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 of as of September 30, 2021: | 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 of as of September 30, 2021: Future Lease 2021 $ 60,988 2022 249,957 2023 256,920 2024 264,087 2025 271,470 2026 30,504 Total Lease Payments 1,133,926 Less: Imputed Interest (102,249 ) Present Value of Lease Liabilities $ 1,031,677 |
DEFERRED REVENUE, NET (Tables)
DEFERRED REVENUE, NET (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of loan originating fees and costs deferred and amortized | The following is a summary of the loan originating fees and costs deferred and amortized for the nine months ended September 30, 2021: Schedule of loan originating fees and costs deferred and amortized Deferred Origination Deferred Deferred Deferred Revenue at December 31, 2020 $ 2,617,443 $ (2,117,313 ) $ 500,130 New loan deferrals 1,826,845 (1,146,333 ) 680,512 Amortization of deferrals (629,369 ) 433,275 (196,094 ) Deferred Revenue at September 30, 2021 $ 3,814,919 $ (2,830,371 ) $ 984,548 |
EMPLOYEE AND DIRECTOR STOCK O_2
EMPLOYEE AND DIRECTOR STOCK OPTIONS (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of estimated fair value of stockoptions weighted-average assumptions | In June 2019, the Company issued options to purchase 835,000 1.00 0.1855 Schedule of estimated fair value of stockoptions weighted-average assumptions 2020 Risk-free interest rate: 1.76% Expected term: 5.75 years Expected dividend yield: 0% Expected volatility: 35.01% |
Schedule of stock option activity | Stock option activity for the nine months ended September 30, 2021, is summarized as follows: Schedule of stock option activity 2019 Stock Option Plan: Shares Weighted Weighted Options outstanding at January 1, 2021 835,000 $ 1.00 8.5 Granted - Exercised - Expired or forfeited - Options outstanding at September 30, 2021 835,000 $ 1.00 7.75 Options exercisable at September 30, 2021 417,500 $ 1.00 7.75 Options expected to vest at September 30, 2021 417,500 $ 1.00 8.0 |
FAIR VALUE (Tables)
FAIR VALUE (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Fair Value Disclosures [Abstract] | |
The following tables display the Company’s assets and liabilities measured at fair value on a recurring basis: | The following tables display the Company’s assets and liabilities measured at fair value on a recurring basis: September 30, 2021 Total Level I Level II Level III Financial Assets Mortgages Owned $ 281,403,866 $ - $ 281,403,866 $ - Mortgage Servicing 7,958,479 - - 7,958,479 Securities 427,066 - - 427,066 Total Financial Assets $ 289,789,411 $ - $ 281,403,866 $ 8,385,545 Financial Liabilities Mortgage Secured Notes Payable $ 298,421,866 $ - $ 298,421,866 $ - December 31, 2020 Financial Assets Mortgages Owned $ 175,370,850 $ - $ 175,370,850 $ - Mortgage Servicing 3,864,416 - - 3,864,416 Securities 329,152 - 46 329,152 Total Financial Assets $ 179,564,418 $ - $ 175,370,896 $ 4,193,568 Financial Liabilities Mortgage Secured Notes Payable $ 175,370,850 $ - $ 175,370,850 $ - |
The following table presents a reconciliation of changes in Level 3 assets and liabilities reported in the Statements of Financial Condition for the nine months ended September 30, 2021: | The following table presents a reconciliation of changes in Level 3 assets and liabilities reported in the Statements of Financial Condition for the nine months ended September 30, 2021: Changes in assets: Period ended September 30, 2021 Mortgage Securities Total Value Beginning balance at January 1, 2021 $ 3,864,416 $ 329,106 $ 4,193,522 Purchases - 890,475 890,475 Trades - 26,043 26,043 Sales - 175,000 175,000 Eliminating entry (1,000,000 ) (1,000,000 ) Issues - - - Settlements - - - Net realized gain/loss or Interest income - 4,688 4,688 Unrealized Gain from newly issued mortgages 4,596,273 - 4,596,273 Fair Value adjustment (502,210 ) 1,754 (500,456 ) Transfers into Level 3 - - - Transfers out of Level 3 - - - Ending balance at September 30, 2021 $ 7,958,479 $ 427,066 $ 8,385,545 |
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 September 30, 2021: | 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 September 30, 2021: Investment type Fair Value Valuation technique Unobservable inputs Values Mortgage servicing $ 7,958,479 Net Present Value Prepayment Discount 15.31 % Discount rate 15.00 % Securities $ 427,066 Net Present Value |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and Equipment are summarized as follows: Schedule of property and equipment Equipment $ 207,757 Furniture and fixtures $ 175,857 $ 383,614 Accumulated depreciation $ (66,270 ) Net Property Equipment $ 317,344 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2021 | Dec. 31, 2020 | |
Property, Plant and Equipment [Line Items] | ||
Portfolio Loans | $ 9,384,423 | $ 2,042,414 |
Due to clearinghouse brokers | $ 10,911 | |
Minimum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives | 3 years | |
Maximum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives | 7 years | |
Actual Basis [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Mortgage saecured notes funded | $ 317,658,746 | |
Mortgage second secured notes funded | 313,670,750 | |
Mortagages owned | $ 281,403,866 |
The following table summarizes
The following table summarizes the consideration paid, or to be paid, for the Acquisitions: (Details) | 9 Months Ended |
Sep. 30, 2021USD ($) | |
Acquisition Of Related Party Affiliate | |
Accrued & unpaid dividends to the Preferred Capital Interest partners | $ 213,443 |
[custom:BusinessCombinationCapitalInterestAmount] | 150,000 |
Contingent liability to redeem J.W. Korth Preferred Capital Interest Partners | 696,253 |
Disposition of outstanding loan due from J.W. Korth Executive Officer | 69,780 |
Total Consideration Paid | $ 1,129,476 |
The following table summarize_2
The following table summarizes the net book value of assets and liabilities acquired as of the closing date, July 31, 2020: (Details) | Sep. 30, 2021USD ($) |
Acquisition Of Related Party Affiliate | |
J.W. Korth Net Book Value | $ 889,131 |
Less: Preferred Interest in J.W. Korth by Company prior to acquisition | (250,000) |
Adjusted Net Book Value acquired | $ 639,131 |
ACQUISITION OF RELATED PARTY _3
ACQUISITION OF RELATED PARTY AFFILIATE (Details Narrative) - USD ($) | Jul. 31, 2020 | Jul. 31, 2020 | Sep. 30, 2021 | Dec. 31, 2020 |
Restructuring Cost and Reserve [Line Items] | ||||
Goodwill | $ 110,000 | $ 110,000 | ||
J W Korth And J W Korth L L C [Member] | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Date of Acquisition | Jul. 31, 2020 | |||
Goodwill | $ 490,345 | $ 490,345 | ||
J W Korth [Member] | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Percentage of partnership interests | 73.60% | |||
Number of share received on closing | 3,680,000 | |||
J W Korth [Member] | James Korth [Member] | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Percentage of partnership interests | 80.00% | |||
J W Korth [Member] | Holly Mac Donald Korth [Member] | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Percentage of partnership interests | 20.00% | |||
J W Korth [Member] | Purchase Agreement [Member] | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Number of shares distribute to its partners | 5,000,000 | |||
J W Korth L L C [Member] | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Description of distribution after closing of business | the Company acquired all of the membership interests in JW Korth LLC from Mr. Korth and Ms. MacDonald-Korth for consideration of the payment to (i) the Preferred Capital Interest partners of J.W. Korth of accrued and unpaid 6% dividends through July 31, 2020, and (ii) James Korth of $150,000 in payment of the value of his JW Korth LLC’s Common Capital Interest account. | |||
Description of post-closing commitments | (i) retain Mr. Korth as the managing partner of J.W. Korth, Ms. MacDonald-Korth as J.W. Korth’s chief financial officer, and all other employees of JW Korth who were employed at closing of the Transactions; (ii) operate J.W. Korth as an SEC registered broker-dealer and investment advisor; (iii) pay the JW Korth Preferred Capital Interest Partners quarterly dividends concurrently with its payment of the Company’s Series A Preferred Stock dividends at least annually; (iv) in such years as it pays Series A Preferred dividends, redeem 25% annually of the JW Korth Preferred Capital Interest partners through a capital contribution to JW Korth; and (v) make a discretionary redemption of all accounts of the limited partners of J.W. Korth under the J.W. Korth partnership agreement. Upon redemption of the limited partners’ accounts and the payment of the other consideration to described above to the JW Korth partners, KDM will own 100% of the voting interests in JW Korth. |
The following table summarize_3
The following table summarizes the unpaid Contingent Liability outstanding as of September 30, 2021: (Details) | 9 Months Ended |
Sep. 30, 2021USD ($) | |
Business Combination and Asset Acquisition [Abstract] | |
Contingent liability to redeem J.W. Korth Preferred Capital Interest Partners | $ 696,253 |
Accrued quarterly dividends recorded as interest expense through June 30, 2021 | 9,201 |
Contingent Liability, net | $ 489,952 |
CONTINGENT LIABILITY (Details N
CONTINGENT LIABILITY (Details Narrative) - Michigan Limited Partnership [Member] | 9 Months Ended |
Sep. 30, 2021 | |
Business Acquisition [Line Items] | |
Dividend rate | 6.00% |
Dividends payable, date to be paid | Jul. 31, 2020 |
Series A Preferred Stock [Member] | |
Business Acquisition [Line Items] | |
Dividend rate | 25.00% |
RESTRICTED CASH (Details Narrat
RESTRICTED CASH (Details Narrative) | Sep. 30, 2021USD ($) |
Mortgage second secured notes funded | $ 8,113,315 |
Escrow payable liability account | 50,600 |
Borrower [Member] | |
Escrow payable liability account | 1,314,578 |
Actual Basis [Member] | |
Due to investors liability including commitment fees and accrued interest | 18,446,762 |
Closing of one loan | $ 18,018,000 |
The following is a schedule of
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 of as of September 30, 2021: (Details) | Sep. 30, 2021USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2021 | $ 60,988 |
2022 | 249,957 |
2023 | 256,920 |
2024 | 264,087 |
2025 | 271,470 |
2026 | 30,504 |
Total Lease Payments | 1,133,926 |
Less: Imputed Interest | (102,249) |
Present Value of Lease Liabilities | $ 1,031,677 |
COMMITMENTS (Details Narrative)
COMMITMENTS (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2021 | Dec. 31, 2020 | Apr. 30, 2020 | |
Defined Benefit Plan Disclosure [Line Items] | |||
Rent expense | $ 211,393 | ||
Weighted-average discount rate | 4.24% | ||
Weighted-average remaining life | 4 years 7 months 6 days | ||
Future lease liabilities | $ 1,031,677 | ||
PPP loan payable | $ 161,600 | ||
J W Korth [Member] | |||
Defined Benefit Plan Disclosure [Line Items] | |||
PPP loan payable | $ 161,600 |
CUSTOMERS (Details Narrative)
CUSTOMERS (Details Narrative) | 9 Months Ended |
Sep. 30, 2021Customer | |
Risks and Uncertainties [Abstract] | |
Number of customer | 47 |
Loans outstanding description | single borrower or location other than three large loans in the states of Ohio, Virginia, and California for a total of approximately $109,370,280 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Feb. 12, 2021 | Apr. 01, 2020 | Sep. 30, 2021 |
J W Korth [Member] | |||
Related Party Transaction [Line Items] | |||
Underwriting fees | $ 277,546 | ||
Mortgage Secured Notes [Member] | |||
Related Party Transaction [Line Items] | |||
Description of corresponding | along with a second lien loan of $200,000 on the same property. The funding for the second lien was provided by 110 Capital LLC, an entity controlled by a KDM director and employee. KDM services both notes | along with a second lien loan of $500,000 on the same property. The funding for the second lien was provided by 110 Capital LLC, an entity controlled by a KDM director and employee. KDM services both notes | |
Mortgage Secured Notes [Member] | Minimum [Member] | |||
Related Party Transaction [Line Items] | |||
Purchase of debt | 100,000 | ||
Mortgage Secured Notes [Member] | Maximum [Member] | |||
Related Party Transaction [Line Items] | |||
Purchase of debt | $ 900,000 |
Schedule of loan originating fe
Schedule of loan originating fees and costs deferred and amortized (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Amortization of Deferred Loan Origination Fees, Net | $ 3,814,919 | $ 2,617,443 |
[custom:AmortizationOfDeferredLoanOriginationCostNet] | (2,830,371) | (2,117,313) |
[custom:DeferredRevenueNet-0] | 984,548 | $ 500,130 |
New Loan Deferrals [Member] | ||
Amortization of Deferred Loan Origination Fees, Net | 1,826,845 | |
[custom:AmortizationOfDeferredLoanOriginationCostNet] | (1,146,333) | |
[custom:DeferredRevenueNet-0] | 680,512 | |
Amortization Of Deferrals [Member] | ||
Amortization of Deferred Loan Origination Fees, Net | (629,369) | |
[custom:AmortizationOfDeferredLoanOriginationCostNet] | 433,275 | |
[custom:DeferredRevenueNet-0] | $ (196,094) |
Schedule of estimated fair valu
Schedule of estimated fair value of stockoptions weighted-average assumptions (Details) | 9 Months Ended |
Sep. 30, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Risk-free interest rate: | 1.76% |
Expected term: | 5 years 9 months |
Expected dividend yield: | 0.00% |
Expected volatility: | 35.01% |
Schedule of stock option activi
Schedule of stock option activity (Details) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | ||
Balance, beginning (in shares) | 835,000 | |
Balance, beginning (in dollars per share) | $ 1 | |
Balance, ending | 8 years 6 months | |
Granted | ||
Exercised | ||
Expired or forfieted | ||
Balance, ending (in shares) | 835,000 | 835,000 |
Balance, ending (in dollars per share) | $ 1 | $ 1 |
Balance, ending | 7 years 9 months | |
Options exercisable, ending | 417,500 | |
Options exercisable, ending | $ 1 | |
Exercisable, ending | 7 years 9 months | |
Options expected to vest, ending | 417,500 | |
Options expected to vest, ending | $ 1 | |
Options expected to vest, ending | 8 years |
EMPLOYEE AND DIRECTOR STOCK O_3
EMPLOYEE AND DIRECTOR STOCK OPTIONS (Details Narrative) - USD ($) | Jun. 28, 2019 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | ||
Stock-based compensation expense | $ 19,359 | $ 19,359 | ||
Non-vested employee stock options term | 7 years 9 months | |||
Stock Option Plan [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense | $ 19,362 | |||
Non-vested employee stock options term | 9 months | |||
Stock Option Plan [Member] | Director [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of shares purchase | 1,000,000 | |||
Common stock, par value (in dollars per share) | $ 0.001 |
PREFERRED EQUITY (Details Narra
PREFERRED EQUITY (Details Narrative) - USD ($) | Jun. 29, 2021 | Sep. 27, 2019 | Sep. 30, 2021 | Dec. 31, 2020 |
Class of Stock [Line Items] | ||||
Prepaid Expense | $ 160,504 | $ 120,770 | ||
Series A Cumulative Perpetual Convertible Preferred Stock [Member] | ||||
Class of Stock [Line Items] | ||||
Number of shares issued | 200,000 | |||
Net proceeds from issuance of shares | $ 4,750,000 | |||
Conversion description | convertible into common stock at a ratio of 5 shares of common stock for each share of Series A Preferred Stock | |||
Preferred Stock, Par or Stated Value Per Share | $ 0.001 | |||
Series A Cumulative Perpetual Convertible Preferred Stock [Member] | Subsidiaries [Member] | ||||
Class of Stock [Line Items] | ||||
Prepaid Expense | $ 250,000 | |||
Conversion of Stock, Amount Converted | $ 25 | |||
Series B Cumulative Perpetual Convertible Preferred Stock [Member] | ||||
Class of Stock [Line Items] | ||||
Net proceeds from issuance of shares | $ 18,302,500 | |||
Prepaid Expense | 697,500 | |||
Stock Issued During Period, Value, New Issues | $ 19,000 | |||
Liquidation preference per share | $ 1,000 | |||
Stock redeemable terms | in whole or in part, on or after June 29, 2026 | |||
Preferred Stock, Redemption Price Per Share | $ 1,000 | |||
Series B Preferred Stock Non Convertible [Member] | ||||
Class of Stock [Line Items] | ||||
Percentage of dividend payable if and when declared | 6.50% |
The following tables display th
The following tables display the Company’s assets and liabilities measured at fair value on a recurring basis: (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 | Dec. 30, 2020 |
Financial Assets | |||
Securities | $ 427,066 | $ 329,152 | |
Fair Value, Recurring [Member] | |||
Financial Assets | |||
Mortgages Owned | 281,403,866 | 175,370,850 | |
Mortgage Servicing | 7,958,479 | 3,864,416 | |
Securities | 427,066 | 329,152 | |
Total Financial Assets | 289,789,411 | 179,564,418 | |
Financial Liabilities | |||
Mortgage Secured Notes Payable | 298,421,866 | 175,370,850 | |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | |||
Financial Assets | |||
Mortgages Owned | |||
Mortgage Servicing | |||
Securities | |||
Total Financial Assets | |||
Financial Liabilities | |||
Mortgage Secured Notes Payable | |||
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | |||
Financial Assets | |||
Mortgages Owned | 281,403,866 | 175,370,850 | |
Mortgage Servicing | |||
Securities | 46 | ||
Total Financial Assets | 281,403,866 | 175,370,896 | |
Financial Liabilities | |||
Mortgage Secured Notes Payable | 298,421,866 | 175,370,850 | |
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | |||
Financial Assets | |||
Mortgages Owned | |||
Mortgage Servicing | 7,958,479 | 3,864,416 | |
Securities | 427,066 | 329,152 | |
Total Financial Assets | 8,385,545 | 4,193,568 | |
Financial Liabilities | |||
Mortgage Secured Notes Payable |
The following table presents a
The following table presents a reconciliation of changes in Level 3 assets and liabilities reported in the Statements of Financial Condition for the nine months ended September 30, 2021: (Details) | 9 Months Ended |
Sep. 30, 2021USD ($) | |
Debt Instrument [Line Items] | |
Beginning balance at January 1, 2021 | $ 4,193,522 |
Purchases | 890,475 |
Trades | 26,043 |
Sales | 175,000 |
Eliminating entry | (1,000,000) |
Issues | |
Settlements | |
Net realized gain/loss or Interest income | 4,688 |
Unrealized Gain from newly issued mortgages | 4,596,273 |
Fair Value adjustment | (500,456) |
Transfers into Level 3 | |
Transfers out of Level 3 | |
Ending balance at September 30, 2021 | 8,385,545 |
Mortgages [Member] | |
Debt Instrument [Line Items] | |
Beginning balance at January 1, 2021 | 3,864,416 |
Purchases | |
Trades | |
Sales | |
Issues | |
Settlements | |
Net realized gain/loss or Interest income | |
Unrealized Gain from newly issued mortgages | 4,596,273 |
Fair Value adjustment | (502,210) |
Transfers into Level 3 | |
Transfers out of Level 3 | |
Ending balance at September 30, 2021 | 7,958,479 |
Securities [Member] | |
Debt Instrument [Line Items] | |
Beginning balance at January 1, 2021 | 329,106 |
Purchases | 890,475 |
Trades | 26,043 |
Sales | 175,000 |
Eliminating entry | (1,000,000) |
Issues | |
Settlements | |
Net realized gain/loss or Interest income | 4,688 |
Unrealized Gain from newly issued mortgages | |
Fair Value adjustment | 1,754 |
Transfers into Level 3 | |
Transfers out of Level 3 | |
Ending balance at September 30, 2021 | $ 427,066 |
The following table presents qu
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 September 30, 2021: (Details) - Fair Value, Recurring [Member] | 9 Months Ended | |
Sep. 30, 2021USD ($) | Dec. 31, 2020USD ($) | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair Value | $ 7,958,479 | $ 3,864,416 |
Unobservable inputs | Discount rate | |
Value | 0.1500 | |
Mortgage Servicing [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair Value | $ 7,958,479 | |
Valuation technique | Net Present Value | |
Unobservable inputs | Prepayment Discount | |
Value | 0.1531 | |
Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair Value | $ 427,066 | |
Valuation technique | Net Present Value |
FAIR VALUE (Details Narrative)
FAIR VALUE (Details Narrative) | Sep. 30, 2021USD ($) |
J W Korth [Member] | Securities [Member] | |
Defined Benefit Plan Disclosure [Line Items] | |
Default Bonds Amount | $ 225,000 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | ||
Provision for income taxes | $ 1,028,093 | $ 154,852 |
Effective tax rate | 24.30% | 26.20% |
Income before income taxes | $ 4,224,679 | $ 590,156 |
Statutory corporate tax rate | 21.00% | 21.00% |
Schedule of property and equipm
Schedule of property and equipment (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
Property, Plant and Equipment [Line Items] | ||
Total | $ 383,614 | |
Total | (66,270) | |
Total | 317,344 | $ 186,703 |
Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total | 207,757 | |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total | $ 175,857 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details Narrative) | 9 Months Ended |
Sep. 30, 2021USD ($) | |
Property, Plant and Equipment [Abstract] | |
Depreciation Expense | $ 25,474 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2021 | Dec. 31, 2020 | |
Subsequent Event [Line Items] | ||
Investments for mortgages | $ 281,403,866 | $ 175,370,850 |
Subsequent Event [Member] | ||
Subsequent Event [Line Items] | ||
Notional Value | 18,200,000 | |
Subsequent Event [Member] | Mortgages [Member] | ||
Subsequent Event [Line Items] | ||
Investments for mortgages | $ 18,018,000 |