Cover
Cover - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Jun. 30, 2023 | |
Cover [Abstract] | ||
Document Type | 10-K | |
Amendment Flag | false | |
Document Annual Report | true | |
Document Transition Report | false | |
Document Period End Date | Dec. 31, 2023 | |
Document Fiscal Period Focus | FY | |
Document Fiscal Year Focus | 2023 | |
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 Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | Yes | |
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 Public Float | $ 0 | |
Entity common stock, shares outstanding shares | 5,000,000 | |
Documents Incorporated by Reference [Text Block] | No documents are incorporated in this Form 10-K by reference. | |
ICFR Auditor Attestation Flag | false | |
Document Financial Statement Error Correction [Flag] | false | |
Auditor Firm ID | Berkowitz Pollack Brant | |
Auditor Firm ID | West Palm Beach, FL | |
Auditor Firm ID | 52 |
CONSOLIDATED STATEMENTS OF FINA
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
ASSETS | ||
Cash and Cash Equivalents | $ 4,844,873 | $ 7,776,789 |
Restricted Cash | 16,856,935 | 10,583,641 |
Restricted Investment | 3,986,207 | |
Mortgages Owned | 484,484,408 | 447,407,141 |
Mortgage Servicing Rights, at Fair Value | 9,245,877 | 13,229,889 |
Portfolio Loans | 7,674,198 | 3,318,832 |
Loans Held for Sale | 6,074,927 | |
Securities | 85,000 | 567,826 |
ROU Leased Asset | 501,715 | 723,179 |
Goodwill | 110,000 | 110,000 |
Property and equipment, net of depreciation | 17,674,959 | 18,172,304 |
Other Assets | 1,784,370 | 1,673,353 |
TOTAL ASSETS | 549,337,262 | 507,549,161 |
LIABILITIES | ||
Escrows Payable | 14,884,214 | 12,421,553 |
Lease Liability | 540,266 | 768,984 |
Deferred Revenue, net | 1,725,803 | 1,593,869 |
Deferred Tax Liability, net | 2,012,419 | 3,337,261 |
Contingent Liability, net | 164,644 | 327,298 |
Securities Sold Short | 2,565,082 | |
Mortgage Secured Notes Payable | 485,154,510 | 454,883,011 |
Warehouse Line of Credit, net | 10,191,104 | 326,736 |
Other Liabilities and Payables | 2,030,662 | 1,526,488 |
Total Liabilities | 519,268,704 | 475,185,200 |
STOCKHOLDERS' EQUITY | ||
Accumulated Earnings | 293,220 | 6,493,385 |
Additional Paid-in Capital | 29,578,706 | 25,626,614 |
Common Stock, $0.001 par value, 60,000,000 shares authorized 5,000,000 shares issued and outstanding at December 31, 2023 and December 31, 2022 | 5,000 | 5,000 |
Non-Controlling Interest | 191,153 | 238,643 |
Total Stockholders' Equity | 30,068,558 | 32,363,961 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 549,337,262 | 507,549,161 |
Series A Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock value | 460 | 300 |
Series B Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock value | $ 19 | $ 19 |
CONSOLIDATED STATEMENTS OF FI_2
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Parenthetical) - $ / shares | Dec. 31, 2023 | Dec. 31, 2022 |
Common stock, par value (in dollars 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] | ||
Preferred stock, par value (in dollar per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 460,000 | 460,000 |
Preferred stock, shares issued | 460,000 | 300,000 |
Preferred stock, shares outstanding | 460,000 | 300,000 |
Series B Preferred Stock [Member] | ||
Preferred stock, par value (in dollar per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 20,000 | 20,000 |
Preferred stock, shares issued | 19,000 | 19,000 |
Preferred stock, shares outstanding | 19,000 | 19,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
REVENUES | ||
Total Revenues | $ 9,840,590 | $ 9,862,033 |
COST OF REVENUES | ||
Broker Underwriting Expense | 1,826,143 | 2,119,892 |
Administrative Expenses | 1,427,578 | 952,207 |
Total Cost of Revenues | 3,253,721 | 3,072,099 |
GROSS PROFIT | 6,586,869 | 6,789,934 |
OPERATING EXPENSES | ||
Office | 840,395 | 501,923 |
Compensation and Related Benefits | 4,306,667 | 4,237,661 |
Professional & Legal | 858,949 | 775,760 |
Advertising | 272,215 | 415,137 |
Depreciation | 665,551 | 117,704 |
Total Expenses | 6,943,777 | 6,048,185 |
(Loss)/Income From Operations | (356,908) | 741,749 |
Other (Expenses)/Income | ||
Unrealized (Loss)/Gain on Mortgages | (3,984,012) | 3,627,472 |
Interest Expense | (1,324,770) | (1,344,907) |
Unrealized Loss on Mortgage Secured Notes | (10,565) | |
Unrealized Loss on Securities | (129,009) | |
Realized Gain/(Loss) on Mortgage Secured Notes | 97,767 | (564,300) |
Realized Gain on Foreclosure | 2,413,507 | |
Total Other (Expenses)/Income | (5,350,589) | 4,131,772 |
(Loss)/Income before provision for income taxes | (5,707,497) | 4,873,521 |
(Income tax benefit)/Provision for income taxes | (1,324,842) | 1,287,040 |
Net (Loss)/Income before non-controlling interest | (4,382,655) | 3,586,481 |
Less: Net (Loss)/Income attributable to non-controlling interest | (47,490) | 238,643 |
Net (Loss)/Income | (4,335,165) | 3,347,838 |
Series A Preferred Dividends | 630,000 | 450,000 |
Series B Preferred Dividends | 1,235,000 | 1,289,899 |
Net (loss)/income attributable to common stockholders | (6,200,165) | 1,607,939 |
Origination Revenue [Member] | ||
REVENUES | ||
Total Revenues | 1,709,783 | 1,439,675 |
Service [Member] | ||
REVENUES | ||
Total Revenues | 5,809,594 | 5,865,969 |
Underwriting Income [Member] | ||
REVENUES | ||
Total Revenues | 278,550 | 876,475 |
Leasing Revenue [Member] | ||
REVENUES | ||
Total Revenues | 1,076,320 | |
Other Revenue [Member] | ||
REVENUES | ||
Total Revenues | $ 966,343 | $ 1,679,914 |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) | Preferred Stock Series A [Member] | Preferred Stock Series B [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Noncontrolling Interest [Member] | Total |
Beginning balance, value at Dec. 31, 2021 | $ 300 | $ 19 | $ 5,000 | $ 25,719,332 | $ 4,885,445 | $ 30,610,096 | |
Beginning balance, shares at Dec. 31, 2021 | 300,000 | 19,000 | 5,000,000 | ||||
Share-based compensation | 171,282 | 171,282 | |||||
Issuance of Series A preferred stock | $ 480 | 11,856,000 | 11,856,480 | ||||
Issuance of Series A preferred stock, shares | 480,000 | ||||||
Repurchase of Series A Preferred Stock | $ (480) | (12,120,000) | (12,120,480) | ||||
Repurchase of Series A preferred stock, shares | (480,000) | ||||||
Series A & Series B preferred stock dividends declared | 1,739,898 | 1,739,898 | |||||
Net loss | 3,347,838 | 238,643 | 3,586,481 | ||||
Ending balance, value at Dec. 31, 2022 | $ 300 | $ 19 | $ 5,000 | 25,626,614 | 6,493,385 | 238,643 | 32,363,961 |
Ending balance, shares at Dec. 31, 2022 | 300,000 | 19,000 | 5,000,000 | ||||
Share-based compensation | 56,252 | 56,252 | |||||
Issuance of Series A preferred stock | $ 160 | 3,895,840 | 3,896,000 | ||||
Issuance of Series A preferred stock, shares | 160,000 | ||||||
Series A & Series B preferred stock dividends declared | 1,865,000 | 1,865,000 | |||||
Net loss | (4,335,165) | (47,490) | (4,382,655) | ||||
Ending balance, value at Dec. 31, 2023 | $ 460 | $ 19 | $ 5,000 | $ 29,578,706 | $ 293,220 | $ 191,153 | $ 30,068,558 |
Ending balance, shares at Dec. 31, 2023 | 460,000 | 19,000 | 5,000,000 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net (Loss)/Income | $ (4,382,655) | $ 3,586,481 |
Net Cash Provided by Operating Activities: | ||
Unrealized Gain on Mortgages Owned | 3,984,012 | (3,613,532) |
Unrealized Loss on Mortgage Secured Notes | 10,565 | (13,940) |
Realized Loss on Mortgage Secured Notes | 564,300 | |
Realized Gain on Foreclosure | (2,413,507) | |
Stock Compensation Expense | 56,252 | 171,282 |
Depreciation | 665,551 | 117,704 |
Amortization of loan costs | 589,955 | 356,519 |
Deferred rent expense from operating lease | (7,254) | (290) |
Deferred income taxes | (1,324,842) | 1,287,040 |
Changes in Operating Assets and Liabilities: | ||
Mortgage Secured Notes Issued | 30,271,499 | 128,670,647 |
Mortgage Secured Notes Purchased | 472,261 | (893,180) |
Restricted Investment | 3,986,207 | (3,986,207) |
Warehouse LOC | 9,274,413 | (29,783) |
Portfolio Loans | (4,355,366) | 3,931,030 |
Loans Held For Sale | (6,074,927) | |
Other Assets | (254,279) | 140,290 |
Deferred Revenue, net | 131,934 | 436,197 |
Escrow Payable | 2,462,661 | 2,807,918 |
Contingent Liability | (162,654) | (162,654) |
Securities Sold Short | 2,565,082 | |
Other Liabilities and Payables | 504,174 | 540,489 |
New Mortgage Lending | (37,077,267) | (130,594,796) |
Total Adjustments | 5,717,978 | (2,684,473) |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 1,335,323 | 902,008 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of property and equipment | (24,945) | (73,921) |
NET CASH (USED IN) INVESTING ACTIVITIES | (24,945) | (73,921) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Payment of Series A/B preferred stock dividends | (1,865,000) | (1,685,000) |
Repurchase of Series A preferred stock | (12,120,480) | |
Net proceeds from the sale of Series A preferred stock | 3,896,000 | 11,856,480 |
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES | 2,031,000 | (1,949,000) |
NET INCREASE/(DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 3,341,378 | (1,120,913) |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH – Beginning of Year | 18,360,430 | 19,481,343 |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH – End of Year | 21,701,808 | 18,360,430 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION | ||
Cash paid during the year for interest | 734,813 | 1,353,881 |
Cash paid for income taxes | 91,708 | |
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Assets acquired through settlement in lieu of foreclosure | $ 19,353,508 |
NATURE OF BUSINESS
NATURE OF BUSINESS | 12 Months Ended |
Dec. 31, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF BUSINESS | NOTE 1 - NATURE OF BUSINESS Korth Direct Mortgage, Inc. (the “Company” or “KDM”) is incorporated in the State of Florida. The Company was created to originate mortgages and fund those mortgages with Notes secured by mortgage loans. J.W. Korth & Company Limited Partnership (“J.W. Korth”) is a wholly owned subsidiary of KDM. J.W. Korth is a securities broker dealer registered with the Securities Exchange Commission and the states of Michigan, Florida, and various other states and an SEC registered investment adviser under the Investment Advisers Act of 1940. J.W. Korth is a licensed member of the Financial Industry Regulatory Authority (FINRA), the Securities Investor Protection Corporation, as well as a Municipal Securities Rulemaking Board (MSRB) registrant. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2023 | |
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 the accounts of J.W. Korth, KDM MFB LLC, and KDM Funding I LLC, the Company's wholly-owned subsidiaries, and KDM Stafford LLC, that KDM owns a controlling interest. Beginning July 2023, the consolidated financial statements also include the accounts of Citrus Servicing LLC, an entity controlled by the Company. Intercompany balances and transactions have been eliminated in consolidation. BASIS OF ACCOUNTING The accompanying consolidated financial statements have been prepared on the accrual basis of accounting, in accordance with Generally Accepted Accounting Principles (“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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH, CASH EQUIVALENTS AND RESTRICTED CASH 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. The following table provides a reconciliation of cash and cash equivalents, and restricted cash to amounts shown in the consolidated statement of cash flows as of December 31, 2023 and 2022: Schedule of cash and cash equivalents 2023 2022 Cash and Cash Equivalents $ 4,844,873 $ 7,776,789 Restricted Cash 16,856,935 10,583,641 $ 21,701,808 $ 18,360,430 The Company maintains cash and restricted cash balances at financial institutions in excess of federally insured limits. The Company has not experienced any losses related to these balances. The Federal Deposit Insurance Corporation insures eligible accounts up to $ 250,000 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 loans, which management believes to be the best estimate of fair value. All mortgages owned as of the date of these consolidated financial statements are current. The net present value of the servicing revenue is recorded as mortgage servicing rights, at fair value on the Audited Statements of Financial Condition and is recognized on the Audited Statements of Operations as an unrealized gain on mortgages. MORTGAGES OWNED The Company has funded the majority of the mortgage loans that it has made by issuing Mortgage Secured Notes (“MSNs”), which are secured by those same mortgages. As of December 31, 2023 and 2022, the Company has funded loans totaling $ 484,484,408 447,407,141 485,154,510 454,883,011 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 December 31, 2023 and 2022, the Company had issued Portfolio Loans in the amount of $ 7,674,198 3,318,832 LOANS HELD FOR SALE The Company purchases small balance commercial loans classified as held for sale which are carried at the lower of amortized cost basis or market value. We determine the fair value of mortgage loans held for sale by using a discounted cash flow model. 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 year ending December 31, 2023. REVENUE RECOGNITION The Company’s primary sources of revenue are generated from origination fees, servicing fees, underwriting income, and leasing revenue. 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 Statements 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 Corresponding Mortgage Loan (“CM Loan”) interest received and the MSN interest payable. Servicing Fees are recognized as revenue as the related mortgage payments are received; similarly, loan servicing expenses are charged to operations as incurred. 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 settlement date of the trades. Leasing Revenue Leasing revenue represents revenues generated through KDM Stafford for rental income earned from operating leases at rental properties majority-owned and controlled by KDM. Leasing revenue generated from operating leases are recognized over the lease term on a straight-line basis. We recorded rental revenue of $ 1,076,320 LEASES In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842).” The standard requires organizations to recognize right-of-use (“ROU”) assets and lease liabilities on the balance sheet and disclose key information about leases that were historically classified as operating leases under previous GAAP. As part of the adoption of this standard, the Company recognizes lease liabilities with a corresponding ROU leased asset of approximately the same amount based on the present value of the remaining lease payments pursuant to current leasing standards for existing operating leases. STOCK-BASED COMPENSATION The Company estimates the fair value of share-based payments on the date of grant using a Black-Scholes option pricing model. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. The Company’s accounting policy is to recognize forfeitures as they occur. The Black-Scholes option pricing model requires assumptions for the expected volatility of the share price of our common stock, the expected dividend yield, and a risk-free interest rate over the expected term of the stock-based award. Since the Company’s common stock is not publicly traded, we do not have sufficient Company specific information regarding the volatility of our share price on which to base an estimate of expected volatility. As a result, we use the historical volatilities of similar entities within our industry as the expected volatility of our share price. The expected dividend yield is 0% as the Company has not paid any dividends on its common stock and does not anticipate it will pay any dividends in the foreseeable future on its common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant date with a remaining term equal to the expected term of the stock-based award. Since the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term, the Company utilizes the simplified method to calculate the expected term of stock-based awards based on the average of the vesting term and contractual term of the award. The assumptions used in calculating the fair value of stock-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. Unrealized Gain on Mortgages The net present value of the servicing income is recognized at the time the mortgage is initiated. The changes to the net present value which is determined by the determination of the fair value of the assets are recognized through an adjustment to the unrealized gain/loss in each reporting period This value uses several inputs that are highly subjective including: discount rate, prepayment rate, the current interest rate environment, and default rate assumptions. We use a third-party to calculate this value. DUE TO CLEARINGHOUSE BROKERS J.W. Korth operates as an SEC and FINRA registered securities broker dealer. The securities transactions are traded through broker clearinghouses and, upon settlement, funds are transferred in and out of the Company’s bank accounts. Unsettled transactions create short-term payables and receivables due to and from the broker clearinghouses. As of December 31, 2023, the Company had a net amount due to the clearinghouse brokers of $ 13,700 DEPRECIATION Depreciation is provided on a straight-line basis using estimated useful lives of three thirty-nine INCOME TAXES Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance on deferred tax assets is established when management considers it is more likely than not that some portion or all of the deferred tax assets will not be realized. Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company’s tax returns for the years ended December 31, 2020, and after remain subject to examination by federal and state jurisdictions. RECENT ACCOUNTING PRONOUNCEMENTS In June 2016, the FASB issued ASU 2016-13 Financial Instruments, Measurement of Credit Losses on Financial Instruments. This ASU updates the existing incurred loss model to a current expected credit loss (“CECL”) model for financial assets and net investments in leases that are not accounted for at fair value through earnings. The amendments affect cash and cash equivalents, reverse repurchase agreements . |
CONTINGENT LIABILITY
CONTINGENT LIABILITY | 12 Months Ended |
Dec. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
CONTINGENT LIABILITY | NOTE 3 – CONTINGENT LIABILITY As part of the acquisition of J. W. Korth in 2020, the Company agreed to pay (i) the Preferred Capital Interest partners of J.W. Korth accrued and unpaid 6% July 31, 2020 25% The following table summarizes the unpaid Contingent Liability outstanding as of December 31, 2023 and 2022: Schedule of unpaid contingent liability outstanding 2023 2022 Contingent liability to redeem J.W. Korth Preferred Capital Interest Partners $ 320,500 $ 320,500 Contingent liability payment (160,250 ) - Accrued and unpaid dividends recorded as interest expense 4,394 6,798 Contingent Liability, net $ 164,644 $ 327,298 |
MORTGAGE SECURED NOTES PAYABLE
MORTGAGE SECURED NOTES PAYABLE | 12 Months Ended |
Dec. 31, 2023 | |
Debt Disclosure [Abstract] | |
MORTGAGE SECURED NOTES PAYABLE | NOTE 4 – MORTGAGE SECURED NOTES PAYABLE As stated above in Note 2, the Company funds the majority of mortgage loans that it makes by issuing Mortgage Secured Notes (“MSNs”), which are secured by those same mortgages. As of December 31, 2023 and 2022, the Company has funded loans with current values totaling $ 484,484,408 447,407,141 485,154,510 454,883,011 The MSNs are typically five-year interest-only notes with the principal balance due at maturity, but terms can vary. Interest rates on the MSNs range from 4.25% 10.35% The following table is a schedule of future maturities of the MSNs for each of the five years after December 31, 2023 Schedule of future maturities Years ending Future 2024 $ 102,896,351 2025 93,436,469 2026 116,831,015 2027 74,483,786 2028 64,927,323 Thereafter 32,579,566 Total $ 485,154,510 |
RESTRICTED CASH AND INVESTMENTS
RESTRICTED CASH AND INVESTMENTS | 12 Months Ended |
Dec. 31, 2023 | |
Restricted Cash And Investments | |
RESTRICTED CASH AND INVESTMENTS | NOTE 5 - RESTRICTED CASH AND INVESTMENTS The Company maintains multiple segregated accounts in trust for borrowers and investors. The value of these accounts is carried under the asset accounts, “Restricted Cash” and “Restricted Investment,” with respective offsets to the liability accounts, “Escrows Payable” and “Other Liabilities and Payables.” 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 has a balance of $ 151,376 626,414 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 has a balance of $ 638,032 752,156 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 were $ 0 100,359 The Company maintains an account for payment of quarterly Preferred Series B dividends that has a balance of $ 308,750 The Company maintains an account restricted per the warehouse line agreement that has a balance of $ 1,000,000 The Company maintains a cash management account that holds a portion of the restricted cash, which is swept on a regular basis. The account had a balance of $ 4,550,000 8,000,000 The Company invests a portion of the restricted cash collected from borrowers in U.S. Treasury Bills with maturities of six to twelve months. The Restricted Investment account had a balance of $ 0 3,986,207 The Company invests a portion of restricted cash from borrowers in a savings account with a balance of $ 250,000 The Company has opened two cash management accounts at J.W. Korth & Company that 6,299,514 3,556,615 |
RENTAL PROPERTY
RENTAL PROPERTY | 12 Months Ended |
Dec. 31, 2023 | |
Rental Property | |
RENTAL PROPERTY | NOTE 6 – RENTAL PROPERTY In November 2022, through a Settlement in Lieu of Foreclosure Agreement, the Company obtained majority ownership and the controlling interest in rental property located in Stafford, Virginia. As part of the agreement, a $9.5 million mortgage held by the Company was assigned to a newly created special-purpose entity, KDM Stafford LLC, which is majority-owned and controlled by the Company. The original borrower maintained a minority interest in the special-purpose entity. For the years ended December 31, 2023 and December 31, 2022, the Company recorded net (loss)/income attributable to the non-controlling interest of $( 47,490 238,643 |
COMMITMENTS
COMMITMENTS | 12 Months Ended |
Dec. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS | NOTE 7 - COMMITMENTS The Company maintains office space in Coral Gables, Florida. The Company entered into a lease in November 2020 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 of 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. For the years ended December 31, 2023 and 2022, the Company recognized $60,158 and $58,555, respectively, of sublease rental revenue, which is recorded as an offset to the Company’s rental expense discussed below. The J. W. Korth Michigan office has a lease which began in May 2021 for a term of sixty months. 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 Statements of Financial Condition. The ROU Leased Asset represents the right to use an underlying asset for the remaining lease term. The Lease Liability represents the obligation to make lease payments pursuant to the terms of the lease agreements. Net rental expense for the year ended December 31, 2023 was $ 258,373 263,523 As of December 31, 2023, the net present value of the future lease liabilities, using the weighted-average discount rate of 4.24% 2.1 540,266 768,984 The following is a schedule of the maturities of future lease payments, net of future sublease revenue, over the remaining life of the operating leases, reconciled to the net present value of as of December 31, 2023: Schedule of future minimum rental payments for operating leases Future Lease 2024 $ 264,087 2025 271,470 2026 30,504 Total Lease Payments 566,061 Less: Imputed Interest (25,795 ) Present Value of Lease Liabilities $ 540,266 |
INDEMNIFICATIONS
INDEMNIFICATIONS | 12 Months Ended |
Dec. 31, 2023 | |
Indemnifications | |
INDEMNIFICATIONS | NOTE 8 - INDEMNIFICATIONS The Company provides representations and warranties to counterparties in connection with a variety of commercial transactions and occasionally indemnifies them against potential losses caused by the breach of those representations and warranties. These indemnifications generally are standard contractual terms and are entered into in the normal course of business. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the consolidated financial statements for these indemnifications. |
CUSTOMERS
CUSTOMERS | 12 Months Ended |
Dec. 31, 2023 | |
Risks and Uncertainties [Abstract] | |
CUSTOMERS | NOTE 9 - CUSTOMERS The Company has forty-four thirty-nine |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2023 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 10 – RELATED PARTY TRANSACTIONS From time to time, the Company purchases MSNs and holds them in its brokerage account. These MSNs are included on the Consolidated Statements of Financial Condition as Securities. As of December 31, 2023, the balance was $ 275,241 |
DEFERRED REVENUE, NET
DEFERRED REVENUE, NET | 12 Months Ended |
Dec. 31, 2023 | |
Revenue Recognition and Deferred Revenue [Abstract] | |
DEFERRED REVENUE, NET | NOTE 11 – 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 Consolidated Statements of Financial Condition. The following is a summary of the loan originating fees and costs deferred and amortized for the years ended December 31, 2023 and 2022: Schedule of loan originating fees and costs deferred and amortized Deferred Origination Deferred Deferred Deferred Revenue at December 31, 2022 $ 5,428,823 $ (3,834,954 ) $ 1,593,869 New loan deferrals 1,261,450 (562,529 ) 698,921 Amortization of deferrals (1,709,783 ) 1,142,796 (566,987 ) Deferred Revenue at December 31, 2023 $ 4,980,490 $ (3,254,687 ) $ 1,725,803 Deferred Origination Deferred Deferred Deferred Revenue at December 31, 2021 $ 4,226,325 $ (3,068,653 ) $ 1,157,672 New loan deferrals 2,636,924 (1,807,399 ) 829,525 Amortization of deferrals (1,434,426 ) 1,041,098 (393,328 ) Deferred Revenue at December 31, 2022 $ 5,428,823 $ (3,834,954 ) $ 1,593,869 |
EMPLOYEE AND DIRECTOR STOCK OPT
EMPLOYEE AND DIRECTOR STOCK OPTIONS | 12 Months Ended |
Dec. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
EMPLOYEE AND DIRECTOR STOCK OPTIONS | NOTE 12 – EMPLOYEE AND DIRECTOR STOCK OPTIONS On June 28, 2019, the Company’s Board of Directors adopted the 2019 Stock Option Plan (the “Incentive Plan”). The Incentive Plan provides for the grant of both incentive and non-statutory stock options to key employees, directors or other persons having a service relationship with the Company. Effective December 8, 2022, the Incentive Plan was amended to authorize the purchase of up to an aggregate of 3,000,000 0.001 During the year ended December 31, 2023, the Company issued options to purchase 15,000 3.00 1.22992 Schedule of estimated fair value of stock options weighted-average assumptions Risk-free interest rate: 3.82% Expected term: 5.75 Expected dividend yield: 0% Expected volatility: 52.17% For the years ended December 31, 2023 and 2022, the Company recorded $ 56,252 171,282 108,613 151,708 2.4 3.0 Stock option activity for the years ended December 31, 2023 and 2022, is summarized as follows: Schedule of stock option activity 2019 Stock Option Plan: Shares Weighted Weighted Options outstanding at January 1, 2022 835,000 $ 3.00 7.5 Granted 255,000 $ 3.00 9.0 Exercised - - - Expired or forfeited - - - Options outstanding at December 31, 2022 1,090,000 $ 1.47 7.75 Granted 15,000 3.00 9.44 Exercised - - - Expired or forfeited (10,000 ) 3.00 8.00 Options outstanding at December 31, 2023 1,095,000 $ 1.47 7.64 Options exercisable at December 31, 2023 960,000 $ 1.12 7.3 Options expected to vest at December 31, 2023 135,000 $ 3.00 9.0 |
PREFERRED EQUITY
PREFERRED EQUITY | 12 Months Ended |
Dec. 31, 2023 | |
Equity [Abstract] | |
PREFERRED EQUITY | NOTE 13 – 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 August 12, 2022, the Company repurchased and retired 480,000 25.25 12,120,480 640,000 On June 29, 2021, the Company issued 19,000 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, at a redemption price per share equal to $ 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 subject to a thirty (30)-day grace period. The Company declared and paid dividends for the years ended December 31, 2023 and 2022, as follows: Schedule of dividend paid Series A Series B Total Preferred Accrued Preferred Dividends, January 1, 2022 $ 12,500 $ 205,833 $ 218,333 Declared Dividends 450,000 1,289,899 1,739,899 Paid Dividends (450,000 ) (1,235,000 ) (1,685,000 ) Accrued Preferred Dividends, December 31, 2022 12,500 260,732 273,232 Declared Dividends 630,000 1,235,000 1,865,000 Paid Dividends (630,000 ) (1,235,000 ) (1,865,000 ) Accrued Preferred Dividends, December 31, 2023 $ 12,500 $ 260,732 $ 273,232 |
FAIR VALUE
FAIR VALUE | 12 Months Ended |
Dec. 31, 2023 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE | NOTE 14 – 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: Due to the fact that the Company issues notes secured directly by underlying loans, our assets and liabilities in this category have identical values and assets have offsetting balances, net of any MSNs held by the Company. Mortgage Servicing The net present value of the servicing income is recognized at the time the mortgage is initiated as an unrealized gain, which is being recognized through net income at each reporting period This value uses several inputs that are highly subjective including: discount rate, constant prepayment rate, the current interest rate environment, and default rate assumptions. Since the Company has limited operating history and a small amount of loans outstanding, 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 Consolidated Statements of Financial Condition as “Mortgage Servicing Rights, at Fair Value.” Securities J. W. Korth owns 225,000 1 85,000 KDM also holds a small amount of its own MSNs in an account which it may buy from time to time. These bonds are carried at the published statement values. Fair Value Disclosure The following tables display the Company’s assets and liabilities measured at fair value on a recurring basis: Schedule of fair value, assets and liabilities measured on recurring basis December 31, 2023 Total Level I Level II Level III Financial Assets Mortgages Owned $ 484,484,408 $ - $ 484,484,408 $ - Mortgage Servicing 9,245,877 - - 9,245,877 Portfolio Loans 7,674,198 - 7,674,198 - Non-MSN Securities 85,000 - - 85,000 Total Financial Assets $ 501,489,483 $ - $ 492,158,606 $ 9,330,877 Financial Liabilities Mortgage Secured Notes Payable $ 485,154,510 $ - $ 485,154,510 $ - Securities Sold Short 2,565,082 - 2,565,082 - Warehouse Line of Credit 11,264,436 - 11,264,436 - Total Financial Liabilities $ 498,984,028 $ - $ 498,984,028 $ - December 31, 2022 Financial Assets Mortgages Owned $ 447,407,141 $ - $ 447,407,141 $ - Mortgage Servicing 13,229,889 - - 13,229,889 Portfolio Loans 3,318,832 - 3,318,832 - Non-MSN Securities 567,826 - - 567,826 Total Financial Assets $ 464,523,688 $ - $ 450,725,973 $ 13,797,715 Financial Liabilities Mortgage Secured Notes Payable $ 454,883,011 $ - $ 454,883,011 $ - Warehouse Line of Credit 1,560,000 - 1,560,000 - Total Financial Liabilities $ 456,443,011 $ - $ 456,443,011 $ - Fair Value Measurements Changes in Fair Value Measurements for the year ended December 31, 2023 The Company has engaged MIAC Analytics to assist in the valuation of the mortgage servicing component of its business. The underlying assumptions in the valuation model may change year over year, which will be reflected in the determined fair value and the difference year over year will be reflected in the unrealized gain/loss adjustment. The following table presents a reconciliation of changes in Level 3 assets and liabilities reported in the Audited Consolidated Statements of Financial Condition for the year ended December 31, 2023 and 2022: Schedule of statements of financial condition Changes in assets: Year ended December 31, 2023 Mortgage Non-MSN Total Value Beginning balance at January 1, 2023 $ 13,229,889 $ 225,000 $ 13,454,889 Sales - - - Unrealized Gain from newly issued mortgages 2,278,894 - 2,278,894 Fair Value adjustment (6,262,906 ) (140,000 ) (6,402,906 ) Ending balance at December 31, 2023 $ 9,245,877 $ 85,000 $ 9,330,877 Changes in assets: Year ended December 31, 2022 Mortgage Non-MSN Total Value Beginning balance at January 1, 2022 $ 9,616,357 $ 225,006 $ 9,841,363 Sales - (6 ) (6 ) Unrealized Gain from newly issued mortgages 4,187,817 - 4,187,817 Fair Value adjustment (574,285 ) - (574,285 ) Ending balance at December 31, 2022 $ 13,229,889 $ 225,000 $ 13,454,889 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 years ended December 31, 2023 and December 31, 2022, 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 December 31, 2023 and December 31, 2022: Schedule of quantitative information 2023 Investment type Fair Value Valuation technique Unobservable inputs Values Mortgage servicing $ 9,245,877 Net Present Value Prepayment Discount 7.64 % Non-MSN Securities $ 85,000 Net Present Value Discount rate 15.00 % 2022 Investment type Fair Value Valuation technique Unobservable inputs Values Mortgage servicing $ 13,229,889 Net Present Value Prepayment Discount 7.64 % Non-MSN Securities $ 225,000 Net Present Value Discount rate 15.00 % |
WAREHOUSE LINE OF CREDIT
WAREHOUSE LINE OF CREDIT | 12 Months Ended |
Dec. 31, 2023 | |
Warehouse Line Of Credit | |
WAREHOUSE LINE OF CREDIT | NOTE 15 – WAREHOUSE LINE OF CREDIT On March 31, 2022, The Company entered into a Master Repurchase Agreement and Securities Contract with Signature Bank (now Flagstar Bank) for the provision of an uncommitted warehouse facility up to $100,000,000 (the “ Line The Line is floating rate and both the haircut percentage and SOFR-linked interest rate spread vary according to property type and time on the line. The Line offers up to 75% leverage on investment grade loans and is designed for 30 to 90 day hold periods but can accommodate up to a 12-month holding period, with decreasing leverage as time passes. In connection with entering into the Line, the Company incurred loan fees of approximately $ 1,589,783 On March 20, 2023, Signature Bank announced that much of its assets, including our warehouse line would now operate under the New York Community Bancorp’s Flagstar Bank, N.A. As of December 31, 2023, the Company had a balance of $ 10,164,436 570,857 On October 13, 2023, KDM MFB 600,000 19,100 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 16 – INCOME TAXES Income tax expense/(benefit) is detailed as follows: Schedule of income tax expense 2023 2022 Deferred income tax(benefit)/expense: Federal $ (1,037,344 ) $ 1,007,745 State (287,498 ) 279,295 Total deferred Income tax expense/(benefit) $ (1,324,842 ) $ 1,287,040 Total Income tax expense/(benefit) $ (1,324,842 ) $ 1,287,040 Income tax expense differs from the amounts that would result from applying the federal statutory rate of 21% to the Company’s income before taxes for the years ended December 31, 2023 and 2022, are as follows: Schedule of income before taxes 2023 2022 Computed "expected" Income tax expense/(benefit) $ (1,102,309 ) 21.0 % $ 1,023,439 21 % State income taxes, net of federal benefit (227,123 ) 4.3 % 220,643 4.5 % Non-deductible expenses 20,815 -0.4 % 42,740 0.9 % Other, net (16,225 ) 0.3 % 218 0.0 % Total Income tax expense/(benefit) $ (1,324,842 ) 25.2 % $ 1,287,040 26.4 % Temporary differences that give rise to the components of deferred tax assets and liabilities as of December 31, 2023 and 2022, are as follows: Schedule of deferred tax assets and liabilities 2023 2022 Deferred tax assets: Deferred revenue, net $ 437,405 $ 403,966 Deferred rent from operating leases 11,396 11,609 Net operating loss carry-forwards 402,271 138,424 Deferred tax assets - current 851,072 553,999 Less: Valuation allowance - - Net deferred tax assets $ 851,072 $ 553,999 Deferred tax liabilities: Fixed assets/depreciation (48,463 ) (75,867 ) Unrealized (loss) on mortgage secured notes (8,640 ) (3,967 ) Realized (gain) on foreclosure (611,703 ) (611,703 ) Unrealized gain on accrued interest (7,185 ) (2,475 ) Unrealized gain on mortgages (2,187,500 ) (3,197,248 ) Deferred tax liability $ (2,863,491 ) $ (3,891,260 ) Net deferred tax asset (liability), net $ (2,012,419 ) $ (3,337,261 ) As of December 31, 2023, the Company had net operating loss carry-forwards of $ 1,091,648 As of December 31, 2023, management determined that there should be no valuation allowance against the net deferred tax assets of ($ 851,072 The Company has not recognized any tax benefits from uncertain tax positions for any of the reporting periods presented. Although it is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next twelve months due to tax examination changes, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities, the Company does not anticipate any significant changes to unrecognized tax benefits over the next 12 months. During the year ended December 31, 2022, no interest or penalties were required to be recognized relating to unrecognized tax benefits. The Company files U.S. federal and state tax returns, of which the open tax period subject to examination by taxing authorities include the years ended December 31, 2020, 2021 and 2022. The Company is not currently subject to any examinations by any state or federal taxation authority. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 17 – PROPERTY AND EQUIPMENT Property and Equipment are summarized as follows: Schedule of property and equipment 2023 Land & Building $ 17,900,000 Equipment 300,472 Furniture and fixtures 184,591 18,385,063 Accumulated depreciation (710,104 ) Net Property Equipment $ 17,674,959 2022 Land & Building $ 17,900,000 Equipment 276,358 Furniture and fixtures 183,760 18,360,118 Accumulated depreciation (187,814 ) Net Property Equipment $ 18,172,304 Depreciation expense for the period ending December 31, 2023 and December 31, 2022 was $ 665,551 117,704 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2023 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 18 – SUBSEQUENT EVENTS The Company has evaluated all events or transactions that occurred after December 31, 2023 through 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. a. The Company approved a $ 172,500 b. The Company approved a $ 308,750 c. In February 2024, by mutual agreement between the parties, KDM closed its warehouse line that was acquired by Flagstar. d. On March 5, 2024 the Company acquired, on behalf of its MSN Noteholders, an office property in Acton, Massachusetts via foreclosure auction. e. The Company closed $ 21,674,073 f. The Company currently has 4 loans in various stages of delinquency and foreclosure, one of which is under contract to be sold. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
PRINCIPLES OF CONSOLIDATION | PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of the Company and the accounts of J.W. Korth, KDM MFB LLC, and KDM Funding I LLC, the Company's wholly-owned subsidiaries, and KDM Stafford LLC, that KDM owns a controlling interest. Beginning July 2023, the consolidated financial statements also include the accounts of Citrus Servicing LLC, an entity controlled by the Company. Intercompany balances and transactions have been eliminated in consolidation. |
BASIS OF ACCOUNTING | BASIS OF ACCOUNTING The accompanying consolidated financial statements have been prepared on the accrual basis of accounting, in accordance with Generally Accepted Accounting Principles (“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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH | CASH, CASH EQUIVALENTS AND RESTRICTED CASH 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. The following table provides a reconciliation of cash and cash equivalents, and restricted cash to amounts shown in the consolidated statement of cash flows as of December 31, 2023 and 2022: Schedule of cash and cash equivalents 2023 2022 Cash and Cash Equivalents $ 4,844,873 $ 7,776,789 Restricted Cash 16,856,935 10,583,641 $ 21,701,808 $ 18,360,430 The Company maintains cash and restricted cash balances at financial institutions in excess of federally insured limits. The Company has not experienced any losses related to these balances. The Federal Deposit Insurance Corporation insures eligible accounts up to $ 250,000 |
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 loans, which management believes to be the best estimate of fair value. All mortgages owned as of the date of these consolidated financial statements are current. The net present value of the servicing revenue is recorded as mortgage servicing rights, at fair value on the Audited Statements of Financial Condition and is recognized on the Audited Statements of Operations as an unrealized gain on mortgages. |
MORTGAGES OWNED | MORTGAGES OWNED The Company has funded the majority of the mortgage loans that it has made by issuing Mortgage Secured Notes (“MSNs”), which are secured by those same mortgages. As of December 31, 2023 and 2022, the Company has funded loans totaling $ 484,484,408 447,407,141 485,154,510 454,883,011 |
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 December 31, 2023 and 2022, the Company had issued Portfolio Loans in the amount of $ 7,674,198 3,318,832 |
LOANS HELD FOR SALE | LOANS HELD FOR SALE The Company purchases small balance commercial loans classified as held for sale which are carried at the lower of amortized cost basis or market value. We determine the fair value of mortgage loans held for sale by using a discounted cash flow model. |
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 year ending December 31, 2023. |
REVENUE RECOGNITION | REVENUE RECOGNITION The Company’s primary sources of revenue are generated from origination fees, servicing fees, underwriting income, and leasing revenue. 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 Statements 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 Corresponding Mortgage Loan (“CM Loan”) interest received and the MSN interest payable. Servicing Fees are recognized as revenue as the related mortgage payments are received; similarly, loan servicing expenses are charged to operations as incurred. 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 settlement date of the trades. Leasing Revenue Leasing revenue represents revenues generated through KDM Stafford for rental income earned from operating leases at rental properties majority-owned and controlled by KDM. Leasing revenue generated from operating leases are recognized over the lease term on a straight-line basis. We recorded rental revenue of $ 1,076,320 |
LEASES | LEASES In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842).” The standard requires organizations to recognize right-of-use (“ROU”) assets and lease liabilities on the balance sheet and disclose key information about leases that were historically classified as operating leases under previous GAAP. As part of the adoption of this standard, the Company recognizes lease liabilities with a corresponding ROU leased asset of approximately the same amount based on the present value of the remaining lease payments pursuant to current leasing standards for existing operating leases. |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION The Company estimates the fair value of share-based payments on the date of grant using a Black-Scholes option pricing model. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. The Company’s accounting policy is to recognize forfeitures as they occur. The Black-Scholes option pricing model requires assumptions for the expected volatility of the share price of our common stock, the expected dividend yield, and a risk-free interest rate over the expected term of the stock-based award. Since the Company’s common stock is not publicly traded, we do not have sufficient Company specific information regarding the volatility of our share price on which to base an estimate of expected volatility. As a result, we use the historical volatilities of similar entities within our industry as the expected volatility of our share price. The expected dividend yield is 0% as the Company has not paid any dividends on its common stock and does not anticipate it will pay any dividends in the foreseeable future on its common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant date with a remaining term equal to the expected term of the stock-based award. Since the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term, the Company utilizes the simplified method to calculate the expected term of stock-based awards based on the average of the vesting term and contractual term of the award. The assumptions used in calculating the fair value of stock-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. |
Unrealized Gain on Mortgages | Unrealized Gain on Mortgages The net present value of the servicing income is recognized at the time the mortgage is initiated. The changes to the net present value which is determined by the determination of the fair value of the assets are recognized through an adjustment to the unrealized gain/loss in each reporting period This value uses several inputs that are highly subjective including: discount rate, prepayment rate, the current interest rate environment, and default rate assumptions. We use a third-party to calculate this value. |
DUE TO CLEARINGHOUSE BROKERS | DUE TO CLEARINGHOUSE BROKERS J.W. Korth operates as an SEC and FINRA registered securities broker dealer. The securities transactions are traded through broker clearinghouses and, upon settlement, funds are transferred in and out of the Company’s bank accounts. Unsettled transactions create short-term payables and receivables due to and from the broker clearinghouses. As of December 31, 2023, the Company had a net amount due to the clearinghouse brokers of $ 13,700 |
DEPRECIATION | DEPRECIATION Depreciation is provided on a straight-line basis using estimated useful lives of three thirty-nine |
INCOME TAXES | INCOME TAXES Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance on deferred tax assets is established when management considers it is more likely than not that some portion or all of the deferred tax assets will not be realized. Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company’s tax returns for the years ended December 31, 2020, and after remain subject to examination by federal and state jurisdictions. |
RECENT ACCOUNTING PRONOUNCEMENTS | RECENT ACCOUNTING PRONOUNCEMENTS In June 2016, the FASB issued ASU 2016-13 Financial Instruments, Measurement of Credit Losses on Financial Instruments. This ASU updates the existing incurred loss model to a current expected credit loss (“CECL”) model for financial assets and net investments in leases that are not accounted for at fair value through earnings. The amendments affect cash and cash equivalents, reverse repurchase agreements . |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
Schedule of cash and cash equivalents | Schedule of cash and cash equivalents 2023 2022 Cash and Cash Equivalents $ 4,844,873 $ 7,776,789 Restricted Cash 16,856,935 10,583,641 $ 21,701,808 $ 18,360,430 |
CONTINGENT LIABILITY (Tables)
CONTINGENT LIABILITY (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of unpaid contingent liability outstanding | Schedule of unpaid contingent liability outstanding 2023 2022 Contingent liability to redeem J.W. Korth Preferred Capital Interest Partners $ 320,500 $ 320,500 Contingent liability payment (160,250 ) - Accrued and unpaid dividends recorded as interest expense 4,394 6,798 Contingent Liability, net $ 164,644 $ 327,298 |
MORTGAGE SECURED NOTES PAYABLE
MORTGAGE SECURED NOTES PAYABLE (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of future maturities | Schedule of future maturities Years ending Future 2024 $ 102,896,351 2025 93,436,469 2026 116,831,015 2027 74,483,786 2028 64,927,323 Thereafter 32,579,566 Total $ 485,154,510 |
COMMITMENTS (Tables)
COMMITMENTS (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future minimum rental payments for operating leases | Schedule of future minimum rental payments for operating leases Future Lease 2024 $ 264,087 2025 271,470 2026 30,504 Total Lease Payments 566,061 Less: Imputed Interest (25,795 ) Present Value of Lease Liabilities $ 540,266 |
DEFERRED REVENUE, NET (Tables)
DEFERRED REVENUE, NET (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Revenue Recognition and Deferred Revenue [Abstract] | |
Schedule of loan originating fees and costs deferred and amortized | Schedule of loan originating fees and costs deferred and amortized Deferred Origination Deferred Deferred Deferred Revenue at December 31, 2022 $ 5,428,823 $ (3,834,954 ) $ 1,593,869 New loan deferrals 1,261,450 (562,529 ) 698,921 Amortization of deferrals (1,709,783 ) 1,142,796 (566,987 ) Deferred Revenue at December 31, 2023 $ 4,980,490 $ (3,254,687 ) $ 1,725,803 Deferred Origination Deferred Deferred Deferred Revenue at December 31, 2021 $ 4,226,325 $ (3,068,653 ) $ 1,157,672 New loan deferrals 2,636,924 (1,807,399 ) 829,525 Amortization of deferrals (1,434,426 ) 1,041,098 (393,328 ) Deferred Revenue at December 31, 2022 $ 5,428,823 $ (3,834,954 ) $ 1,593,869 |
EMPLOYEE AND DIRECTOR STOCK O_2
EMPLOYEE AND DIRECTOR STOCK OPTIONS (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of estimated fair value of stock options weighted-average assumptions | Schedule of estimated fair value of stock options weighted-average assumptions Risk-free interest rate: 3.82% Expected term: 5.75 Expected dividend yield: 0% Expected volatility: 52.17% |
Schedule of stock option activity | Schedule of stock option activity 2019 Stock Option Plan: Shares Weighted Weighted Options outstanding at January 1, 2022 835,000 $ 3.00 7.5 Granted 255,000 $ 3.00 9.0 Exercised - - - Expired or forfeited - - - Options outstanding at December 31, 2022 1,090,000 $ 1.47 7.75 Granted 15,000 3.00 9.44 Exercised - - - Expired or forfeited (10,000 ) 3.00 8.00 Options outstanding at December 31, 2023 1,095,000 $ 1.47 7.64 Options exercisable at December 31, 2023 960,000 $ 1.12 7.3 Options expected to vest at December 31, 2023 135,000 $ 3.00 9.0 |
PREFERRED EQUITY (Tables)
PREFERRED EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Equity [Abstract] | |
Schedule of dividend paid | Schedule of dividend paid Series A Series B Total Preferred Accrued Preferred Dividends, January 1, 2022 $ 12,500 $ 205,833 $ 218,333 Declared Dividends 450,000 1,289,899 1,739,899 Paid Dividends (450,000 ) (1,235,000 ) (1,685,000 ) Accrued Preferred Dividends, December 31, 2022 12,500 260,732 273,232 Declared Dividends 630,000 1,235,000 1,865,000 Paid Dividends (630,000 ) (1,235,000 ) (1,865,000 ) Accrued Preferred Dividends, December 31, 2023 $ 12,500 $ 260,732 $ 273,232 |
FAIR VALUE (Tables)
FAIR VALUE (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Fair Value Disclosures [Abstract] | |
Schedule of fair value, assets and liabilities measured on recurring basis | Schedule of fair value, assets and liabilities measured on recurring basis December 31, 2023 Total Level I Level II Level III Financial Assets Mortgages Owned $ 484,484,408 $ - $ 484,484,408 $ - Mortgage Servicing 9,245,877 - - 9,245,877 Portfolio Loans 7,674,198 - 7,674,198 - Non-MSN Securities 85,000 - - 85,000 Total Financial Assets $ 501,489,483 $ - $ 492,158,606 $ 9,330,877 Financial Liabilities Mortgage Secured Notes Payable $ 485,154,510 $ - $ 485,154,510 $ - Securities Sold Short 2,565,082 - 2,565,082 - Warehouse Line of Credit 11,264,436 - 11,264,436 - Total Financial Liabilities $ 498,984,028 $ - $ 498,984,028 $ - December 31, 2022 Financial Assets Mortgages Owned $ 447,407,141 $ - $ 447,407,141 $ - Mortgage Servicing 13,229,889 - - 13,229,889 Portfolio Loans 3,318,832 - 3,318,832 - Non-MSN Securities 567,826 - - 567,826 Total Financial Assets $ 464,523,688 $ - $ 450,725,973 $ 13,797,715 Financial Liabilities Mortgage Secured Notes Payable $ 454,883,011 $ - $ 454,883,011 $ - Warehouse Line of Credit 1,560,000 - 1,560,000 - Total Financial Liabilities $ 456,443,011 $ - $ 456,443,011 $ - |
Schedule of statements of financial condition | Schedule of statements of financial condition Changes in assets: Year ended December 31, 2023 Mortgage Non-MSN Total Value Beginning balance at January 1, 2023 $ 13,229,889 $ 225,000 $ 13,454,889 Sales - - - Unrealized Gain from newly issued mortgages 2,278,894 - 2,278,894 Fair Value adjustment (6,262,906 ) (140,000 ) (6,402,906 ) Ending balance at December 31, 2023 $ 9,245,877 $ 85,000 $ 9,330,877 Changes in assets: Year ended December 31, 2022 Mortgage Non-MSN Total Value Beginning balance at January 1, 2022 $ 9,616,357 $ 225,006 $ 9,841,363 Sales - (6 ) (6 ) Unrealized Gain from newly issued mortgages 4,187,817 - 4,187,817 Fair Value adjustment (574,285 ) - (574,285 ) Ending balance at December 31, 2022 $ 13,229,889 $ 225,000 $ 13,454,889 |
Schedule of quantitative information | Schedule of quantitative information 2023 Investment type Fair Value Valuation technique Unobservable inputs Values Mortgage servicing $ 9,245,877 Net Present Value Prepayment Discount 7.64 % Non-MSN Securities $ 85,000 Net Present Value Discount rate 15.00 % 2022 Investment type Fair Value Valuation technique Unobservable inputs Values Mortgage servicing $ 13,229,889 Net Present Value Prepayment Discount 7.64 % Non-MSN Securities $ 225,000 Net Present Value Discount rate 15.00 % |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
Schedule of income tax expense | Schedule of income tax expense 2023 2022 Deferred income tax(benefit)/expense: Federal $ (1,037,344 ) $ 1,007,745 State (287,498 ) 279,295 Total deferred Income tax expense/(benefit) $ (1,324,842 ) $ 1,287,040 Total Income tax expense/(benefit) $ (1,324,842 ) $ 1,287,040 |
Schedule of income before taxes | Schedule of income before taxes 2023 2022 Computed "expected" Income tax expense/(benefit) $ (1,102,309 ) 21.0 % $ 1,023,439 21 % State income taxes, net of federal benefit (227,123 ) 4.3 % 220,643 4.5 % Non-deductible expenses 20,815 -0.4 % 42,740 0.9 % Other, net (16,225 ) 0.3 % 218 0.0 % Total Income tax expense/(benefit) $ (1,324,842 ) 25.2 % $ 1,287,040 26.4 % |
Schedule of deferred tax assets and liabilities | Schedule of deferred tax assets and liabilities 2023 2022 Deferred tax assets: Deferred revenue, net $ 437,405 $ 403,966 Deferred rent from operating leases 11,396 11,609 Net operating loss carry-forwards 402,271 138,424 Deferred tax assets - current 851,072 553,999 Less: Valuation allowance - - Net deferred tax assets $ 851,072 $ 553,999 Deferred tax liabilities: Fixed assets/depreciation (48,463 ) (75,867 ) Unrealized (loss) on mortgage secured notes (8,640 ) (3,967 ) Realized (gain) on foreclosure (611,703 ) (611,703 ) Unrealized gain on accrued interest (7,185 ) (2,475 ) Unrealized gain on mortgages (2,187,500 ) (3,197,248 ) Deferred tax liability $ (2,863,491 ) $ (3,891,260 ) Net deferred tax asset (liability), net $ (2,012,419 ) $ (3,337,261 ) |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Schedule of property and equipment 2023 Land & Building $ 17,900,000 Equipment 300,472 Furniture and fixtures 184,591 18,385,063 Accumulated depreciation (710,104 ) Net Property Equipment $ 17,674,959 2022 Land & Building $ 17,900,000 Equipment 276,358 Furniture and fixtures 183,760 18,360,118 Accumulated depreciation (187,814 ) Net Property Equipment $ 18,172,304 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Accounting Policies [Abstract] | ||
Cash and Cash Equivalents | $ 4,844,873 | $ 7,776,789 |
Restricted Cash | 16,856,935 | 10,583,641 |
Cash, Cash Equivlents and Restricted Cash | $ 21,701,808 | $ 18,360,430 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Property, Plant and Equipment [Line Items] | ||
FDIC Insured Amount | $ 250,000 | |
Mortgage secured notes funded | 484,484,408 | $ 447,407,141 |
Mortgage second secured notes funded | 485,154,510 | 454,883,011 |
Portfolio loans | 7,674,198 | $ 3,318,832 |
Rental revenue | 1,076,320 | |
Due to clearinghouse brokers | $ 13,700 | |
Minimum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives | three | |
Maximum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated useful lives | thirty-nine |
CONTINGENT LIABILITY (Details)
CONTINGENT LIABILITY (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Contingent liability to redeem J.W. Korth Preferred Capital Interest Partners | $ 320,500 | $ 320,500 |
Contingent liability payment | (160,250) | |
Accrued and unpaid dividends recorded as interest expense | 4,394 | 6,798 |
Contingent Liability, net | $ 164,644 | $ 327,298 |
CONTINGENT LIABILITY (Details N
CONTINGENT LIABILITY (Details Narrative) - Michigan Limited Partnership [Member] | 12 Months Ended |
Dec. 31, 2023 | |
Restructuring Cost and Reserve [Line Items] | |
Dividend rate | 6% |
Dividends payable, date to be paid | Jul. 31, 2020 |
Series A Preferred Stock [Member] | |
Restructuring Cost and Reserve [Line Items] | |
Dividend rate | 25% |
MORTGAGE SECURED NOTES PAYABL_2
MORTGAGE SECURED NOTES PAYABLE (Details) | Dec. 31, 2023 USD ($) |
Debt Disclosure [Abstract] | |
2024 | $ 102,896,351 |
2025 | 93,436,469 |
2026 | 116,831,015 |
2027 | 74,483,786 |
2028 | 64,927,323 |
Thereafter | 32,579,566 |
Total | $ 485,154,510 |
MORTGAGE SECURED NOTES PAYABL_3
MORTGAGE SECURED NOTES PAYABLE (Details Narrative) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Debt Instrument [Line Items] | ||
Funded loans | $ 484,484,408 | $ 447,407,141 |
Secured loans | $ 485,154,510 | $ 454,883,011 |
Minimum [Member] | ||
Debt Instrument [Line Items] | ||
Interest Percentage | 4.25% | |
Maximum [Member] | ||
Debt Instrument [Line Items] | ||
Interest Percentage | 10.35% |
RESTRICTED CASH AND INVESTMEN_2
RESTRICTED CASH AND INVESTMENTS (Details Narrative) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Cash | $ 4,550,000 | $ 8,000,000 |
Restricted Investment | 0 | 3,986,207 |
Restricted cash collected from borrowers in savings account | 250,000 | 250,000 |
J.W. Korth [Member] | Cash Payment 1 [Member] | ||
Restricted cash | 6,299,514 | |
J.W. Korth [Member] | Cash Payment 2 [Member] | ||
Restricted cash | 3,556,615 | |
Warehouse Line Agreement [Member] | ||
Account restricted per the warehouse line agreement | 1,000,000 | |
Series B Preferred Stock [Member] | ||
Escrow deposit | 308,750 | 308,750 |
In Trust For 1 [Member] | ||
Account balance | 151,376 | 626,414 |
In Trust For 2 [Member] | ||
Account balance | 638,032 | 752,156 |
Multiple Lockbox [Member] | ||
Account balance | $ 0 | $ 100,359 |
RENTAL PROPERTY (Details Narrat
RENTAL PROPERTY (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Restructuring Cost and Reserve [Line Items] | ||
Net income attributable to non-controlling interest | $ (47,490) | $ 238,643 |
KDM Stafford LLC [Member] | ||
Restructuring Cost and Reserve [Line Items] | ||
Net income attributable to non-controlling interest | $ 47,490 | $ 238,643 |
COMMITMENTS (Details)
COMMITMENTS (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Commitments and Contingencies Disclosure [Abstract] | ||
2024 | $ 264,087 | |
2025 | 271,470 | |
2026 | 30,504 | |
Total Lease Payments | 566,061 | |
Less: Imputed Interest | (25,795) | |
Present Value of Lease Liabilities | $ 540,266 | $ 768,984 |
COMMITMENTS (Details Narrative)
COMMITMENTS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense | $ 258,373 | $ 263,523 |
Weighted-average discount rate | 4.24% | |
Weighted-average remaining life | 2 years 1 month 6 days | |
Present value of lease liabilities | $ 540,266 | $ 768,984 |
CUSTOMERS (Details Narrative)
CUSTOMERS (Details Narrative) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Risks and Uncertainties [Abstract] | ||
Number of customer | forty-four | thirty-nine |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) | Dec. 31, 2023 USD ($) |
Related Party Transactions [Abstract] | |
Related party payable | $ 275,241 |
DEFERRED REVENUE, NET (Details)
DEFERRED REVENUE, NET (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Deferred origination fees | $ 4,980,490 | $ 5,428,823 | $ 4,226,325 |
Deferred origination costs | (3,254,687) | (3,834,954) | (3,068,653) |
Deferred revenue, net | 1,725,803 | 1,593,869 | $ 1,157,672 |
New Loan Deferrals [Member] | |||
Deferred origination fees | 1,261,450 | 2,636,924 | |
Deferred origination costs | (562,529) | (1,807,399) | |
Deferred revenue, net | 698,921 | 829,525 | |
Amortization Of Deferrals [Member] | |||
Deferred origination fees | (1,709,783) | (1,434,426) | |
Deferred origination costs | 1,142,796 | 1,041,098 | |
Deferred revenue, net | $ (566,987) | $ (393,328) |
EMPLOYEE AND DIRECTOR STOCK O_3
EMPLOYEE AND DIRECTOR STOCK OPTIONS (Details) | 12 Months Ended |
Dec. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Risk-free interest rate: | 3.82% |
Expected term: | 5 years 9 months |
Expected dividend yield: | 0% |
Expected volatility: | 52.17% |
EMPLOYEE AND DIRECTOR STOCK O_4
EMPLOYEE AND DIRECTOR STOCK OPTIONS (Details 1) - $ / shares | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Share-Based Payment Arrangement [Abstract] | ||
Options outstanding number, beginning balance | 1,090,000 | 835,000 |
Weighted average exercise price, beginning balance | $ 1.47 | $ 3 |
Weighted remaining contractual life (years), beginning | 7 years 9 months | 7 years 6 months |
Options granted number | 15,000 | 255,000 |
Weighted average exercise price granted | $ 3 | $ 3 |
Weighted remaining contractual life (years) granted | 9 years 5 months 8 days | 9 years |
Options exercised number | ||
Weighted average exercise price exercised | ||
Options expired or forfeited number | (10,000) | |
Weighted average exercise price expired or forfeited | $ 3 | |
Weighted remaining contractual life (years) expired or forfeited | 8 years | |
Options outstanding number, ending balance | 1,095,000 | 1,090,000 |
Options, outstanding, weighted average exercise price, ending balance | $ 1.47 | $ 1.47 |
Weighted remaining contractual life (years), ending | 7 years 7 months 20 days | |
Options exercisable number | 960,000 | |
Options exercisable weighted average exercise price | $ 1.12 | |
Option exercisable, weighted remaining contractual life (years) | 7 years 3 months 18 days | |
Options expected to vest number | 135,000 | |
Weighted average exercise price expected to vest | $ 3 | |
Options expected to vest, weighted remaining contractual life (years) | 9 years |
EMPLOYEE AND DIRECTOR STOCK O_5
EMPLOYEE AND DIRECTOR STOCK OPTIONS (Details Narrative) - USD ($) | 12 Months Ended | ||
Jun. 28, 2019 | Dec. 31, 2023 | Dec. 31, 2022 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Number of shares to purchase | 15,000 | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | |
Share price (in dollars per share) | 3 | ||
Weighted-average grant date fair values | $ 1.22992 | ||
Stock based compensation | $ 56,252 | $ 171,282 | |
Unrecognized compensation expense | $ 108,613 | $ 151,708 | |
Non-vested employee stock options term | 7 years 9 months | 7 years 6 months | |
N 2019 Stock Option Plan [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Stock based compensation | $ 56,252 | $ 171,282 | |
Non-vested employee stock options term | 2 years 4 months 24 days | 3 years | |
Director [Member] | N 2019 Stock Option Plan [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Number of shares to purchase | 3,000,000 | ||
Common stock, par value (in dollars per share) | $ 0.001 |
PREFERRED EQUITY (Details)
PREFERRED EQUITY (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Class of Stock [Line Items] | ||
Accrued Preferred Dividends at begiining | $ 273,232 | $ 218,333 |
Declared Dividends | 1,865,000 | 1,739,899 |
Paid Dividends | (1,865,000) | (1,685,000) |
Accrued Preferred Dividends at end | 273,232 | 273,232 |
Series A Preferred Stock [Member] | ||
Class of Stock [Line Items] | ||
Accrued Preferred Dividends at begiining | 12,500 | 12,500 |
Declared Dividends | 630,000 | 450,000 |
Paid Dividends | (630,000) | (450,000) |
Accrued Preferred Dividends at end | 12,500 | 12,500 |
Series B Preferred Stock [Member] | ||
Class of Stock [Line Items] | ||
Accrued Preferred Dividends at begiining | 260,732 | 205,833 |
Declared Dividends | 1,235,000 | 1,289,899 |
Paid Dividends | (1,235,000) | (1,235,000) |
Accrued Preferred Dividends at end | $ 260,732 | $ 260,732 |
PREFERRED EQUITY (Details Narra
PREFERRED EQUITY (Details Narrative) - USD ($) | 12 Months Ended | ||||
Aug. 12, 2022 | Jun. 29, 2021 | Sep. 27, 2019 | Dec. 31, 2023 | Dec. 31, 2022 | |
Class of Stock [Line Items] | |||||
Series A preferred stock (in shares) | 15,000 | ||||
Interest expense | $ 1,324,770 | $ 1,344,907 | |||
Series A Cumulative Perpetual Convertible Preferred Stock [Member] | |||||
Class of Stock [Line Items] | |||||
Issue of shares | 200,000 | ||||
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. | ||||
Interest expense | $ 640,000 | ||||
Series A Cumulative Perpetual Convertible Preferred Stock [Member] | Subsidiaries [Member] | |||||
Class of Stock [Line Items] | |||||
Prepaid Expenses | $ 250,000 | ||||
Amount of conversion | $ 25 | ||||
Series A Preferred Stock [Member] | |||||
Class of Stock [Line Items] | |||||
Series A preferred stock (in shares) | 480,000 | ||||
Preferred stock, par value | $ 25.25 | $ 0.001 | $ 0.001 | ||
Series A preferred stock value | $ 12,120,480 | ||||
Series B Cumulative Perpetual Convertible Preferred Stock [Member] | |||||
Class of Stock [Line Items] | |||||
Issue of shares | 19,000 | ||||
Proceeds from issuance of shares | $ 18,302,500 | ||||
Stock issuance cost | $ 697,500 | ||||
Preferred Stock, Redemption Price Per Share | 1,000 | ||||
Series B Preferred Stock [Member] | |||||
Class of Stock [Line Items] | |||||
Preferred stock, par value | $ 0.001 | $ 0.001 | |||
Percentage of dividend payable if and when declared | 6.50% |
FAIR VALUE (Details)
FAIR VALUE (Details) - Fair Value, Recurring [Member] - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgages Owned | $ 484,484,408 | $ 447,407,141 |
Mortgage Servicing | 9,245,877 | 13,229,889 |
Portfolio Loans | 7,674,198 | 3,318,832 |
Non- MSN Securities | 85,000 | 567,826 |
Total Financial Assets | 501,489,483 | 464,523,688 |
Mortgage Secured Notes Payable | 485,154,510 | 454,883,011 |
Securities Sold Short | 2,565,082 | |
Warehouse Line of Credit | 11,264,436 | 1,560,000 |
Total Financial Liabilities | 498,984,028 | 456,443,011 |
Fair Value, Inputs, Level 1 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgages Owned | ||
Mortgage Servicing | ||
Portfolio Loans | ||
Non- MSN Securities | ||
Total Financial Assets | ||
Mortgage Secured Notes Payable | ||
Securities Sold Short | ||
Warehouse Line of Credit | ||
Total Financial Liabilities | ||
Fair Value, Inputs, Level 2 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgages Owned | 484,484,408 | 447,407,141 |
Mortgage Servicing | ||
Portfolio Loans | 7,674,198 | 3,318,832 |
Non- MSN Securities | ||
Total Financial Assets | 492,158,606 | 450,725,973 |
Mortgage Secured Notes Payable | 485,154,510 | 454,883,011 |
Securities Sold Short | 2,565,082 | |
Warehouse Line of Credit | 11,264,436 | 1,560,000 |
Total Financial Liabilities | 498,984,028 | 456,443,011 |
Fair Value, Inputs, Level 3 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgages Owned | ||
Mortgage Servicing | 9,245,877 | 13,229,889 |
Portfolio Loans | ||
Non- MSN Securities | 85,000 | 567,826 |
Total Financial Assets | 9,330,877 | 13,797,715 |
Mortgage Secured Notes Payable | ||
Securities Sold Short | ||
Warehouse Line of Credit | ||
Total Financial Liabilities |
FAIR VALUE (Details 1)
FAIR VALUE (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Debt Instrument [Line Items] | ||
Beginning balance at beginning | $ 13,454,889 | $ 9,841,363 |
Sales | (6) | |
Unrealized Gain from newly issued mortgages | 2,278,894 | 4,187,817 |
Fair Value adjustment | (6,402,906) | (574,285) |
Ending balance at ending | 9,330,877 | 13,454,889 |
Mortgages [Member] | ||
Debt Instrument [Line Items] | ||
Beginning balance at beginning | 13,229,889 | 9,616,357 |
Sales | ||
Unrealized Gain from newly issued mortgages | 2,278,894 | 4,187,817 |
Fair Value adjustment | (6,262,906) | (574,285) |
Ending balance at ending | 9,245,877 | 13,229,889 |
Non Msn Securities [Member] | ||
Debt Instrument [Line Items] | ||
Beginning balance at beginning | 225,000 | 225,006 |
Sales | (6) | |
Unrealized Gain from newly issued mortgages | ||
Fair Value adjustment | (140,000) | |
Ending balance at ending | $ 85,000 | $ 225,000 |
FAIR VALUE (Details 2)
FAIR VALUE (Details 2) - Fair Value, Recurring [Member] | 12 Months Ended | |
Dec. 31, 2023 USD ($) | Dec. 31, 2022 USD ($) | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair Value | $ 9,245,877 | $ 13,229,889 |
Mortgage Servicing [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair Value | $ 9,245,877 | $ 13,229,889 |
Valuation technique | Net Present Value | Net Present Value |
Unobservable inputs | Prepayment Discount | Prepayment Discount |
Servicing Asset, Measurement Input | 0.0764 | 0.0764 |
Non Msn Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair Value | $ 85,000 | $ 225,000 |
Valuation technique | Net Present Value | Net Present Value |
Unobservable inputs | Discount rate | Discount rate |
Servicing Asset, Measurement Input | 0.1500 | 0.1500 |
FAIR VALUE (Details Narrative)
FAIR VALUE (Details Narrative) - Securities [Member] - J.W. Korth [Member] | Dec. 31, 2023 USD ($) $ / shares shares |
Debt Instrument [Line Items] | |
Default bonds shares | shares | 225,000 |
Default bonds par value | $ / shares | $ 1 |
Default bonds amount | $ | $ 85,000 |
WAREHOUSE LINE OF CREDIT (Detai
WAREHOUSE LINE OF CREDIT (Details Narrative) | 12 Months Ended |
Dec. 31, 2023 USD ($) | |
Loans fees | $ 1,589,783 |
Warehouse costs | 10,164,436 |
Interest expense | 570,857 |
MFB Line [Member] | |
Warehouse costs | 600,000 |
Interest expense | $ 19,100 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Deferred income tax(benefit)/expense: | ||
Federal | $ (1,037,344) | $ 1,007,745 |
State | (287,498) | 279,295 |
Total deferred Income tax expense/(benefit) | (1,324,842) | 1,287,040 |
Total Income tax expense/(benefit) | $ (1,324,842) | $ 1,287,040 |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Income Tax Disclosure [Abstract] | ||
Computed "expected" Income tax expense/(benefit) | $ (1,102,309) | $ 1,023,439 |
Computed "expected" Income tax expense/(benefit), percent | 21% | 21% |
State income taxes, net of federal benefit | $ (227,123) | $ 220,643 |
State income taxes, net of federal benefit, percent | 4.30% | 4.50% |
Non-deductible expenses | $ 20,815 | $ 42,740 |
Non-deductible expenses, percent | (0.40%) | 0.90% |
Other, net | $ (16,225) | $ 218 |
Other, net, percent | 0.30% | 0% |
Total Income tax expense/(benefit) | $ (1,324,842) | $ 1,287,040 |
Total Income tax expense/(benefit), percent | 25.20% | 26.40% |
INCOME TAXES (Details 2)
INCOME TAXES (Details 2) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Deferred tax assets: | ||
Deferred revenue, net | $ 437,405 | $ 403,966 |
Deferred rent from operating leases | 11,396 | 11,609 |
Net operating loss carry-forwards | 402,271 | 138,424 |
Deferred tax assets - current | 851,072 | 553,999 |
Less: Valuation allowance | ||
Net deferred tax assets | 851,072 | 553,999 |
Deferred tax liabilities: | ||
Fixed assets/depreciation | (48,463) | (75,867) |
Unrealized (loss) on mortgage secured notes | (8,640) | (3,967) |
Realized (gain) on foreclosure | (611,703) | (611,703) |
Unrealized gain on accrued interest | (7,185) | (2,475) |
Unrealized gain on mortgages | (2,187,500) | (3,197,248) |
Deferred tax liability | (2,863,491) | (3,891,260) |
Net deferred tax asset (liability), net | $ (2,012,419) | $ (3,337,261) |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Income Tax Disclosure [Abstract] | ||
Net operating losses | $ 1,091,648 | |
Net deferred tax assets | $ 851,072 | $ 553,999 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Property, Plant and Equipment [Line Items] | ||
Total | $ 18,385,063 | $ 18,360,118 |
Accumulated depreciation | (710,104) | (187,814) |
Net property equipment | 17,674,959 | 18,172,304 |
Land and Building [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total | 17,900,000 | 17,900,000 |
Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total | 300,472 | 276,358 |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total | $ 184,591 | $ 183,760 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation Expense | $ 665,551 | $ 117,704 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - Subsequent Event [Member] - USD ($) | 1 Months Ended | ||
Mar. 15, 2024 | Mar. 05, 2024 | Apr. 15, 2024 | |
Subsequent Event [Line Items] | |||
Stock closed | $ 21,674,073 | ||
Series A Preferred Stock [Member] | |||
Subsequent Event [Line Items] | |||
Stock dividend paid | $ 172,500 | ||
Series B Preferred Stock [Member] | |||
Subsequent Event [Line Items] | |||
Stock dividend paid | $ 308,750 |