UNITED STATES SECURITIES AND EXCHANGE COMMISSION

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~September~~March 3031, ~~2025~~2026

☐o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________________________________to _______________________________________

Commission File Number: 000-1695962

KORTH DIRECT MORTGAGE INC.

(Exact name of registrant as specified in its charter)

Florida		27-0644172
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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

~~Indicate by~~_________________________________ check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ☐ No___________________________________

(Former name, former address and formal fiscal year, if changed since last report)

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

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

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

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

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

Large accelerated filer ☐o Accelerated filer ☐o Non-accelerated filer ☐o Smaller Reporting company x Emerging growth company x

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

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

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APPLICABLE ONLY TO CORPORATE ISSUERS:

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

As of ~~November~~July 131, ~~2025~~2026, there were 5,000,000 shares of common stock of Korth Direct Mortgage Inc. outstanding.

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TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements
	Unaudited Condensed Consolidated Statements of Financial Condition	4
	Unaudited Condensed Consolidated Statements of Operations	5
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity	6
	Unaudited Condensed Consolidated Statements of Cash Flows	7

	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Consolidated Operations	27

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28

Item 4.	Controls and Procedures	28

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	30

SIGNATURES		32

Item 1.	Unaudited Condensed Consolidated Financial Statements	4
	Unaudited Condensed Consolidated Statements of Financial Condition	4
	Unaudited Condensed Consolidated Statements of Operations	5
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity	6
	Unaudited Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Consolidated Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28
Item 4.	Controls and Procedures	28
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	30
SIGNATURES		32

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PART I—FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements.

KORTH DIRECT MORTGAGE INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	September 30, 2025			December 31, 2024
	March 31, 2026			December 31, 2025
	(Unaudited)
ASSETS
Cash and Cash Equivalents	$	62,~~168~~055,~~226~~669		$	25,~~898~~354,~~659~~168
Restricted Cash		86,~~421~~377,~~096~~796			154,~~431~~913,~~460~~585
Restricted Investment		-			1,192,510
Mortgages Owned		278,718,108			285,416,050
Mortgages Owned		301,898,930			451,974,989
Mortgage Servicing Rights, at Fair Value		8,004,758			6,108,755
Mortgage Servicing Rights, at Fair Value		6,535,766			9,260,225
Portfolio Loans		7,436,378			5,690,984
Portfolio Loans		4,253,683			5,161,709
Loans Held for Sale		-			520,215
Securities		41,991			41,991
ROU Leased Asset		622,220			270,281
Right-of-Use "ROU" Leased Asset		490,497			560,599
Goodwill		110,000			110,000
Property and equipment, net of depreciation		69,~~563~~416,~~421~~469			3169,~~922~~691,~~404~~129
Other Assets		53,~~457~~927,~~366~~044			32,~~067~~966,~~100~~752
TOTAL ASSETS	$	~~403~~376,~~072~~578,~~699~~710		$	~~521~~380,~~851~~854,~~543~~013
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Escrows Payable	$	52,~~298~~690,~~758~~909		$	154,~~306~~138,~~451~~619
Lease Liability		~~630~~491,~~210~~325			~~294~~562,~~412~~927
Deferred Revenue, net		1,~~480~~081,~~697~~329			1,~~958~~076,~~967~~253
Deferred Tax Liability, net		21,~~216~~772,~~100~~855			1,~~378~~478,~~721~~632
Line of Credit Payable		3,000,000			-3,000,000
Mortgage Secured Notes Payable		~~333~~315,~~779~~964,~~220~~576			~~450~~319,~~264~~683,~~519~~008
Warehouse Line of Credit, net		1714,~~355~~349,~~235~~632			17,~~269~~383,~~278~~887
Other Liabilities and Payables		68,~~740~~766,~~692~~486			43,~~613~~822,~~539~~288
Total Liabilities		~~370~~348,~~500~~117,~~912~~112			~~491~~351,~~085~~145,~~887~~614
STOCKHOLDERS' EQUITY
Accumulated Deficit		(25,~~273~~492,~~924~~347	)		(35,~~325~~669,~~687~~795	)
Additional Paid-in Capital		29,~~672~~685,~~429~~818			29,~~632~~685,~~262~~818
Common Stock, $0.001 par value, 60,000,000 shares authorized 5,000,000 shares issued and outstanding at September 30, 2025 and December 31, 2024		5,000			5,000
Common Stock, $0.001 par value, 60,000,000 shares authorized 5,000,000 shares issued and outstanding at March 31, 2026 and December 31, 2025		5,000			5,000
Series A Preferred Stock, $0.001 par value, 460,000 shares authorized, 460,000 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively		460			460
Series A Preferred Stock, $0.001 par value, 460,000 shares authorized, 460,000 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively		460			460
Series B Preferred Stock, $0.001 par value, 20,000 shares authorized, 19,000 shares issued and outstanding at September 30, 2025 and December 31, 2024		19			19
Series B Preferred Stock, $0.001 par value, 20,000 shares authorized, 19,000 shares issued and outstanding at March 31, 2026 and December 31, 2025		19			19
Non-Controlling Interest		54,~~167~~262,~~803~~648			45,~~453~~686,~~602~~897
Total Stockholders' Equity		3228,~~571~~461,~~787~~598			3029,~~765~~708,~~656~~399
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	~~403~~376,~~072~~578,~~699~~710		$	~~521~~380,~~851~~854,~~543~~013

See accompanying notes to the unaudited condensed consolidated financial statements.

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KORTH DIRECT MORTGAGE INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE ~~PERIOD~~THREE ~~FROM~~MONTHS ~~JANUARY~~ENDED 1MARCH ~~THROUGH~~31,2026 ~~SEPTEMBER 30~~AND 2025

	For the Nine Months Ended			For the Nine Months Ended
	For the Three Months Ended			For the Three Months Ended
	September 30, 2025			September 30, 2024
	March 31, 2026			March 31, 2025
REVENUES
Origination Revenue, Net	$	2241,~~050,334~~727		$	1,~~247~~140,~~425~~738
Servicing Revenue		3729,~~294,397~~103			31,~~826~~095,~~442~~671
Underwriting Income		~~22,435~~-			5012,~~000~~750
Leasing Revenue		41,~~561~~129,~~175~~626			21,~~157~~533,~~082~~259
Investment Interest		2906,~~407,317~~981			-
Other Revenue		~~574~~166,~~867~~569			1915,~~193,045~~809
Total Revenues		123,~~910~~174,~~525~~006			84,~~473~~698,~~994~~227
COST OF REVENUES
Broker Underwriting Expense		1121,~~512,223~~781			1977,~~229,158~~975
Administrative Expenses		1378,~~637,944~~311			1612,~~332,357~~330
Total Cost of Revenues		3500,~~150,167~~092			21,~~561~~590,~~515~~305
GROSS PROFIT		92,~~760~~673,~~358~~914			53,~~912~~107,~~479~~922
OPERATING EXPENSES
Office		2799,~~144,682~~788			1794,~~555,653~~490
Compensation and Related Benefits		3954,~~052,471~~541			3771,~~728,917~~613
Professional & Legal		~~872~~311,~~089~~387			1233,~~043,339~~089
Advertising		9844,~~533~~187			~~183~~30,~~524~~836
Depreciation		1456,~~408,825~~466			~~939~~323,~~352~~325
Total Expenses		72,~~576~~566,~~600~~369			72,~~450~~153,~~785~~353
Income (Loss) From Operations		2,183,758			(1,538,306	)
Income From Operations		107,545			954,569
Other Income (Expense)
Unrealized (Loss) Gain on Mortgages		(2,724,459	)		107,030
Unrealized Gain on Mortgages		1,896,003			368,972
Unrealized (Loss) Gain on Mortgage Secured Notes		(2415,~~595~~519	)		3114,~~946~~858
Interest Income		13,895			-
Unrealized (Loss) Gain on Investment		(13,802	)		74,798
Interest Expense		(1819,~~587,112~~296	)		(1484,~~001,866~~932	)
Unrealized Loss on Investment		(14,278	)		-
Realized Gain on Foreclosure		-			207,981
Realized Gain on Foreclosure		5,557,032			1,045,062
Realized Loss on Loans Held for Sale		-			(4,417	)
Realized Loss on Mortgage Secured Notes		-			(434	)
Total Other Income		1,047,386			177,260
Realized Loss on Loans Held for Sale		(526	)		(141,647	)
Income before provision for income taxes		1,154,931			1,131,829
Realized Gain on Securities		58,666			-
Provision for income taxes		294,223			285,731
Employee Retention Credit		45,000			-
Net Income		860,708			846,098
Change in Fair Value of Mortgage Secured Notes		9,000,000			12,660,000
Less: Net Income attributable to non-controlling interest		202,010			106,102
Loss on Foreclosures		(9,000,000	)		(12,660,000	)
Net Income attributable to Korth Direct Mortgage, Inc		658,698			739,996
Total Other Income (Expense)		1,323,623			40,091
Series A Preferred Dividends		172,500			172,500
Income (Loss) before provision for income taxes		3,507,381			(1,498,215	)
Series B Preferred Dividends		308,750			308,750
Provision (Tax Benefit) for income taxes		876,448			(365,762	)
Net Income attributable to common stockholders	$	177,448		$	258,746
Net Income (Loss)		2,630,933			(1,132,453	)
Less: Net Income (Loss) attributable to non-controlling interest		135,420			(38,719	)
Net Income (Loss) attributable to Korth Direct Mortgage, Inc		2,495,513			(1,093,734	)
Series A Preferred Dividends		517,500			517,500
Series B Preferred Dividends		926,250			926,250
Net Income (Loss) attributable to common stockholders	$	1,051,763		$	(2,537,484	)

See accompanying notes to the unaudited condensed consolidated financial statements.

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KORTH DIRECT MORTGAGE INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2025~~2026 AND ~~2024~~ 2025

	Series A Preferred Stock				Series B Preferred Stock				Common Stock				Additional Paid		Accumulated			Non-Controlling
	Shares		Amount		Shares		Amount		Shares		Amount		in Capital		Deficit			Interest			Totals
Balance at January 1, 2024		460,000	$	460		19,000	$	19		5,000,000	$	5,000	$	29,578,706	$	293,220		$	191,153		$	30,068,558
Balance at January 1, 2025		460,000	$	460		19,000	$	19		5,000,000	$	5,000	$	29,578,706	$	293,220		$	191,153		$	30,068,558
Share-based compensation		-		-		-		-		-		-		4013,~~167~~389		-			-			4013,~~167~~389
Series A & Series B preferred stock dividends declared		-		-		-		-		-		-		-		(1481,~~443,750~~250	)		-			(1481,~~443,750~~250	)
Net Loss		-		-		-		-		-		-		-		(1,~~093~~269,~~734~~499	)		(387,~~719~~944	)		(1,~~132~~277,~~453~~443	)
Balance at September 30, 2024		460,000	$	460		19,000	$	19		5,000,000	$	5,000	$	29,618,873	$	(2,244,264	)	$	152,434		$	27,532,522
Balance at March 31, 2025		460,000	$	460		19,000	$	19		5,000,000	$	5,000	$	29,592,095	$	(1,457,529	)	$	183,209		$	28,323,254
Balance at January 1, 2025		460,000	$	460		19,000	$	19		5,000,000	$	5,000	$	29,632,262	$	(3,325,687	)	$	4,453,602		$	30,765,656
Balance at January 1, 2026		460,000	$	460		19,000	$	19		5,000,000	$	5,000	$	29,685,818	$	(5,669,795	)	$	5,686,897		$	29,708,399
Share-based compensation		-		-		-		-		-		-		40,167		-			-			40,167
Series A & Series B preferred stock dividends declared		-		-		-		-		-		-		-		(481,250	)		-			(481,250	)
Series A & Series B preferred stock dividends declared		-		-		-		-		-		-		-		(1,443,750	)		-			(1,443,750	)
Redemptions to Fund		-		-		-		-		-		-		-		-			(1,626,259	)		(1,626,259	)
Contributions to Fund		-		-		-		-		-		-		-		-			578,781			578,781
Net Income		-		-		-		-		-		-		-		658,698			202,010			860,708
Net Income		-		-		-		-		-		-		-		2,495,513			135,420			2,630,933
Balance at March 31, 2026		460,000	$	460		19,000	$	19		5,000,000	$	5,000	$	29,685,818	$	(5,492,347	)	$	4,262,648		$	28,461,598
Balance at September 30, 2025		460,000	$	460		19,000	$	19		5,000,000	$	5,000	$	29,672,429	$	(2,273,924	)	$	5,167,803		$	32,571,787

See accompanying notes to the unaudited condensed consolidated financial statements.

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KORTH DIRECT MORTGAGE INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Nine Months Ended			For the Nine Months Ended
	For the Three Months Ended			For the Three Months Ended
	September 30, 2025			September 30, 2024
	March 31, 2026			March 31, 2025
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)	$	2,630,933		$	(1,132,453	)
Net Income	$	860,708		$	846,098
Adjustments to Reconcile Net Income (Loss) to:
Net Cash (Used in) Provided by Operating Activities:
Unrealized Loss (Gain) on Mortgages Owned		2,724,459			(107,030	)
Unrealized Gain on Mortgages Owned		(1,896,003	)		(368,972	)
Unrealized Loss (Gain) on Mortgage Secured Notes		2415,~~595~~519			(3114,~~946~~852	)
Unrealized Loss on Securities		-			60,666
Unrealized Gain on Investment		13,802			(74,798	)
Unrealized Loss on Investment		14,278			-
Realized Gain on Foreclosure		-			(207,981	)
Realized Gain on Foreclosure		(5,557,032	)		(1,045,062	)
Realized Loss on Loans Held for Sale		-			4,417
Realized Loss on Loans Held for Sale		526			141,647
Stock-Based Compensation		-			13,389
Change in Fair Value of Mortgage Secured Notes		(9,000,000	)		(12,660,000	)
Depreciation		456,466			323,325
Loss on Foreclosures		9,000,000			12,660,000
Amortization of loan costs		28,652			29,926
Stock-Based Compensation		40,167			40,167
Deferred rent expense from operating lease		(1,500	)		(4,893	)
Depreciation		1,408,826			939,352
Deferred income taxes		294,223			269,987
Amortization of loan costs		85,957			748,788
Deferred rent expense from operating lease		(16,141	)		(10,610	)
Deferred income taxes		837,379			(365,762	)
Changes in Operating Assets and Liabilities:
Mortgage Secured Notes Issued		~~3,900,000~~-			~~(16~~3,~~203~~485,~~327~~238	)
Restricted Investment		~~1,192,510~~-			(112,~~181,745~~296	)
Warehouse LOC		-			6,300,734
Warehouse Line of Credit "LOC"		(3,062,907	)		(1,274	)
Portfolio Loans		(1,~~259~~745,~~170~~394	)		2(176,~~527,112~~955	)
Loans Held For Sale, at Fair Value		~~519,689~~-			5312,~~411,341~~195
Other Assets		(~~640~~1,~~448~~048,144	)		(~~923~~202,~~105~~647	)
Deferred Revenue, net		~~(478~~5,~~270~~076	)		~~181~~(158,~~777~~774	)
Escrow Payable		(101,~~007~~447,~~693~~710	)		3(2,~~014~~271,~~884~~872	)
Line of Credit Payable		3,000,000			-
Other Liabilities and Payables		4,944,198			283,619
Contingent Liability		-			(164,644	)
New Mortgage Lending		-			(1,170,000	)
Securities Sold Short		-			(2,565,082	)
Mortgage Loans Matured/Paid Off		2,965,708			589,241
Other Liabilities and Payables		2,127,153			3,482,375
Total Adjustments		(478,014	)		646,023
New Mortgage Lending		(6,745,447	)		3,027,205
NET CASH PROVIDED BY OPERATING ACTIVITIES		382,694			1,492,121
Mortgage Loans Matured/Paid Off		(4,878,071	)		-
Total Adjustments		(13,706,733	)		3,277,735
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES		(11,075,800	)		2,145,282
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(~~815~~109,~~192~~473	)		(5011,~~767~~494	)
Disposals of property and equipment		9,015,164			-
NET CASH USED IN INVESTING ACTIVITIES		(109,473	)		(11,494	)
NET CASH PROVIDED BY (USED) IN INVESTING ACTIVITIES		8,199,972			(50,767	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of Series A/B preferred stock dividends		(1481,~~443,750~~250	)		(1481,~~443,750~~250	)
Contributions to Fund		578,781			-
(Redemptions) Contributions to Fund		(1,626,259	)		633,583
NET CASH USED IN FINANCING ACTIVITIES		(864,969	)		(1,443,750	)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(2,107,509	)		152,333
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(31,~~740~~834,~~797~~288	)		~~650~~1,~~765~~632,960
CASH, CASH EQUIVALENTS AND RESTRICTED CASH – Beginning of Period		1810,~~330~~267,~~119~~753			2118,~~701~~330,~~808~~119
CASH, CASH EQUIVALENTS AND RESTRICTED CASH – End of Period	$	148,~~589~~433,~~322~~465		$	2219,~~352~~963,~~573~~079
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Cash paid during the quarter for interest	$	1790,~~501,155~~644		$	~~253~~455,~~079~~303
Cash paid for income taxes	$	837,379		$	-
Income taxes paid, net of refunds
Federal	$	-		$	-
State	$	-		$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES
Fair value of assets acquired in settlement in lieu of foreclosure	$	~~49,024,228~~-			1637,~~045~~475,~~062~~177

See accompanying notes to the unaudited condensed consolidated financial statements.

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KORTH DIRECT MORTGAGE INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF BUSINESS

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

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

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

KDM ~~also~~ owns a controlling interest in KDM ~~Stafford LLC and KDM~~ Seaton Colyton Holdings LLC, and owns 100% of KDM Nagog Park LLC, KDM Beyer Drive Holding LLC, and KDM ~~Cupples REO~~Stafford LLC, which are special purpose entities whose primary business purpose is to own and operate various commercial real estate properties. Currently, these entities own properties in Stafford, VA, Los Angeles, CA, Acton, MA, and Selma, TX. KDM’s operations with respect to these properties is detailed under the Asset Management section of Segment Reporting (“Note 17”).

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

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

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

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

BASIS OF ACCOUNTING

The accompanying unaudited condensed consolidated financial statements are prepared on the accrual basis of accounting in accordance with US Generally Accepted Accounting Principles (“US GAAP”) and the Company’s functional currency is the U.S. Dollar. The accompanying unaudited condensed consolidated financial statements have also been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

We have condensed certain categories of information in our unaudited condensed consolidated financial statements to enhance the readability and understanding of those statements by making them more succinct. As a result, certain footnote disclosures we normally include in our annual consolidated financial statements have been omitted but remain prepared in accordance with US GAAP and the rules and regulations of the SEC. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2024~~2025 (the “~~2024~~ 2025 Annual Report”). In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present our unaudited condensed consolidated ~~balance sheets~~statements ~~and~~of financial condition and unaudited condensed consolidated statements of operations, changes in shareholders’ equity ~~(deficit)~~, and cash flows. Our interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year.

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USE OF ESTIMATES

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

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

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

The following table provides a reconciliation of cash, cash equivalents, and restricted cash to amounts shown in the unaudited condensed consolidated statements of cash flows as of ~~September 30~~March 31, ~~2025,~~2026 and ~~2024~~2025:

Schedule of cash and cash equivalents
	2025		2024
	2026		2025
Cash and Cash Equivalents	$	62,~~168~~055,~~226~~669	$	26,~~708~~879,~~935~~240
Restricted Cash		86,~~421~~377,~~096~~796		1913,~~643~~083,~~638~~839
	$	148,~~589~~433,~~322~~465	$	2219,~~352~~963,~~573~~079

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

MORTGAGE VALUATION

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

MORTGAGE SECURED NOTES (“MSNs”)

The Company primarily funds the mortgage loans (”CM Loans”) that it makes by issuing MSNs in series, each of which MSN series is secured by the mortgage or mortgages funded from proceeds of the MSN series. Our MSNs have been funded in multiple ways, including private placements, SEC registered offerings, loan participations, and Rule 144A offerings. As of ~~September~~March 3031, ~~2025~~2026, the Company has issued MSNs secured by these loans in the amount of $609,495,250 since inception and has redeemed $~~307~~330,~~596~~777,~~320~~142 of its MSNs since inception.

PORTFOLIO LOANS

The Company recognizes loans made with its own capital, or pieces of those not securitized or sold via participation, under the caption “Portfolio Loans” on the unaudited condensed consolidated statements of financial condition. This number also includes the cash we have invested in loans on our ~~warehouse~~Warehouse ~~line~~LOC as “haircut capital.” As of ~~September~~March 3031, ~~2025~~2026, the Company has issued Portfolio Loans in the amount of $5054,~~972~~182,449 and currently holds $47,~~253~~436,~~683~~ 378 Portfolio Loans, which management believes to be the best estimate of fair value.

LOANS HELD FOR SALE

The Company purchases small balance commercial loans classified as held for sale which are carried at the lower of amortized cost basis or fair market value, where gains and losses are recognized upon sale as realized loss on loans held for sale on the Unaudited Condensed Consolidated Statement of Operations which is $~~526~~ 0 for the three ~~nine~~ months ended ~~September~~March 3031, ~~2025~~2026. We determine the fair value of mortgage loans held for sale by using a yield based pricing or discounted cash flow model.

PARTICIPATIONS

From time to time the Company sells all or part of its mortgage loans as loan participations to banks or other lending institutions that prefer to hold their mortgage investments in that manner. As of ~~September 30~~March 31, ~~2025~~2026, the Company had issued loan participations in the amount of $3859,~~380~~557,~~000~~200 ~~all~~ of which ~~are~~$37,916,085 ~~still~~ remain outstanding. A portion of these participations are included in the Mortgages Owned number and Mortgage Secured Notes Payable.

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GOODWILL

FASB ASC Section 350 requires an annual ~~assessment~~ 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 three ~~nine~~ months ended ~~September~~March 3031, ~~2025~~2026.

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 Unaudited Condensed Consolidated 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 at rental properties majority-owned and controlled by KDM through operating leases. Leasing revenues are generated through KDM ~~Stafford~~ ~~and KDM~~ Seaton Colyton Holdings, in which the Company holds a controlling interest, and the Company’s wholly-owned subsidiaries, KDM Stafford LLC, KDM Nagog Park, and KDM Beyer Drive Holdings LLC~~, and KDM Cupples REO~~. Leasing revenue generated from operating leases are recognized over the lease term on a straight-line basis. We recorded leasing revenue of $41,~~561~~129,~~175~~626 for the ~~nine~~three months ended ~~September~~March 3031, ~~2025~~2026 and $21,~~157~~533,~~082~~ 259 for the ~~nine~~three months ended ~~September~~March 3031,~~2024~~ 2025.

Investment Interest

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

LEASES

In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842).” The standard requires organizations to recognize right-of-use (“ROU”) assets and lease liabilities on the ~~balance~~statement ~~sheet~~of financial condition and disclose key information about leases that were historically ~~classified~~ classified as operating leases under previous US 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 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.

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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~~ 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 ~~September~~March 3031, ~~2025~~2026, the Company had a net amount due to the clearinghouse brokers of $0150,923.

DEPRECIATION

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

INCOME TAXES

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

Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company’s tax returns for the years ended December 31, ~~2021~~2022, and after remain subject to examination by federal and state jurisdictions.

RECENT ACCOUNTING PRONOUNCEMENTS

Improvements to Reportable Segment Disclosures

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

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ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. In November 2024, the FASB issued ASU 2024-03, which requires public business entities to disclose additional information about certain natural expense categories included in each relevant expense caption on the income statement. The ASU affects only disclosure and does not change the recognition, measurement, or presentation of expenses. It is effective for annual reporting periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this ASU and does not expect it to have a material effect on its consolidated financial position, results of operations, or cash flows.

Improvements to Income Tax Disclosures

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

DEBT ISSUANCE COSTS

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

NOTE 3 – ~~CONTINGENT~~MORTGAGE ~~LIABILITY~~SECURED NOTES PAYABLE

As ~~part~~stated ofin Note 2 the ~~acquisition~~Company offunds J.the W.majority ~~Korth~~of inthe ~~2020,~~mortgage ~~the~~loans ~~Company~~that ~~agreed~~it tomakes ~~pay~~by ~~(i)~~issuing ~~the~~MSNs, ~~Preferred~~which ~~Capital~~are ~~Interest~~secured ~~partners~~by ofthose Jsame mortgages.W. ~~Korth~~As ~~accrued~~of ~~and~~March ~~unpaid~~31, 6%2026, ~~dividends~~and ~~through July~~December 31, 2025, ~~2020; (ii)~~ the ~~J.W.~~Company ~~Korth~~had ~~Preferred~~outstanding ~~Capital~~loans ~~Interest~~securing ~~Partners~~MSNs ~~quarterly~~totaling ~~dividends~~$278,718,108 ~~concurrently~~and ~~with~~$285,416,050, ~~its~~respectively, ~~payment~~and ofissued ~~the~~MSNs ~~Company’s~~secured by ~~Series~~those Aloans ~~Preferred~~in ~~Stock~~the ~~dividends~~amount atof ~~least~~$315,964,576 ~~annually;~~ and ~~(iii)~~$319,683,008, inrespectively. ~~such~~The ~~years~~MSNs ashave itbeen ~~pays~~funded ~~Series~~in Amultiple ~~Preferred dividends~~ways, ~~redeem~~including ~~25% annually~~private ofplacements, ~~the~~loan ~~J.W.~~participations, ~~Korth~~and ~~Preferred~~Rule ~~Capital~~144A ~~Interest~~offerings ~~partners~~exempt ~~through~~from aregistration, ~~capital~~and ~~contribution~~through toSEC JWregistered ~~Korth~~offerings. ~~The contingent liability was paid off in July 2024.~~

~~NOTE~~The MSNs are typically five-year interest-only notes with the principal balance due at maturity, but terms can vary. Interest rates on the senior MSNs have ranged from 4.25% –to ~~MORTGAGE~~9.94% and ~~SECURED~~mature ~~NOTES~~at ~~PAYABLE~~various dates from April 2026 to June 2037. The MSNs are non-recourse to KDM and are payable to the extent that the Company receives payment from the borrower of the borrower’s mortgage loans. Payments made to KDM by borrowers are distributed by KDM to MSN noteholders in accordance with the terms of their MSN Notes. KDM has custodial responsibility for the MSNs pursuant to the Trust Indenture for the Notes. There are no limitations in KDM’s liability as a servicer of its MSNs.

As stated in Note 2 the Company funds the majority of the mortgage loans that it makes by issuing MSNs, which are secured by those same mortgages. As of September 30, 2025, and December 31, 2024, the Company had outstanding loans securing MSNs totaling $301,898,930 and $451,974,989, respectively, and issued MSNs secured by those loans in the amount of $333,779,220 and $450,264,519, respectively. The MSNs have been funded in multiple ways, including private placements, loan participations, and Rule 144A offerings exempt from registration, and through SEC registered offerings.

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

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

Scheduled of principal payments
Years ending December 31	Future Maturities of Debt
Last 3 months of 2025	$	60,789,834
Last 9 months of 2026		105,371,284
2026		91,643,693
2027		45,581,048
2027		45,563,035
2028		20,635,488
2029		37,517,~~290~~311
Thereafter		77,629,880
2030		51,945,755
Total	$	333,779,220
Thereafter		54,913,690
Total	$	315,964,576

NOTE 4 - 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 “Restricted Cash.”

The “In Trust for 1” account holds the monthly tax and insurance payments collected from borrowers and distributes payments annually, on behalf of borrowers, to the appropriate tax authorities and insurance companies. This account corresponds to the Escrow Payable liability. As of March 31, 2026, and December 31, 2025, this account had balances of $649,771 and $1,375,700, respectively.

The “In Trust for 2” account receives payments from borrowers, distributes payments to investors, and pays the servicing fees to the Company. This account corresponds to the Due to Investors liability, which is included in other liabilities and payables. As of March 31, 2026, and December 31, 2025, this account had balances of $3,686,888 and $466,216, respectively.

The Company maintains an account for payment of quarterly Preferred Series B dividends that has balances of $0 and $308,750 as of March 31, 2026, and December 31, 2025, respectively.

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~~NOTE~~The 5Company -maintains ~~RESTRICTED~~a ~~CASH~~cash management account that holds a portion of the restricted cash, which is swept on a regular basis. The account had balances of $350,000 and $100,000 as of March 31, 2026, and December 31, 2025, respectively. This account is included as part of the Escrow Payable liability account.

The Company ~~maintains~~invests ~~multiple~~a ~~segregated accounts~~portion inof ~~trust~~restricted ~~for~~cash from borrowers ~~and~~in ~~investors.~~a ~~The~~savings ~~value~~account with a balance of ~~these~~$250,000 ~~accounts~~as isof ~~carried~~March ~~under~~31, ~~the~~2026, ~~asset~~and ~~“Restricted~~December ~~Cash~~31, 2025, respectively.”

The ~~“In~~Company ~~Trust~~has ~~for~~opened 1”two ~~account holds~~cash ~~the~~management ~~monthly~~accounts at ~~tax~~J.W. ~~and~~Korth ~~insurance~~& ~~payments~~Company ~~collected~~that ~~from~~hold ~~borrowers~~a ~~and~~portion ~~distributes~~of ~~payments~~restricted ~~annually,~~cash. onThe ~~behalf~~balances as of ~~borrowers~~March 31, to2026, ~~the appropriate~~were ~~tax~~$1,441,138 ~~authorities~~ and ~~insurance~~$0 ~~companies.~~and ~~This~~as ~~account corresponds to the Escrow Payable liability. As~~ of ~~September 30, 2025,~~ ~~and~~ December 31, ~~2024~~2025, ~~this~~were ~~account had balances of~~ $2,~~448~~412,~~314~~918 and $50,~~585,017,~~ respectively.

~~The~~NOTE ~~“In~~5 ~~Trust~~– ~~for~~ACQUISITION 2”& ~~account~~DISPOSITION ~~receives~~OF ~~payments~~RENTAL from borrowers, distributes payments to investors, and pays the servicing fees to the Company. This account corresponds to the Due to Investors liability, which is included in other liabilities and payables. As of September 30, 2025, and December 31, 2024, this account had balances of $2,810,003 and $994,858, respectively.PROPERTY

~~The~~In ~~Company~~November ~~maintains~~2022, anthrough ~~account~~a ~~for payment~~Settlement in Lieu of Foreclosure ~~quarterly~~Agreement, ~~Preferred~~the ~~Series~~Company Bobtained ~~dividends~~majority ~~that~~ownership ~~has~~and ~~balances~~the ofcontrolling ~~$308~~interest in rental property located in Stafford,~~750~~ asVirginia. As part of ~~September~~the 30agreement, 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. In 2025, KDM Stafford LLC moved from being a majority owned entity to a wholly owned entity. For the three months ended March 31, 2026 and ~~December~~March 31, ~~2024~~2025, ~~for~~the ~~both~~Company recorded net income and net loss attributable to the non-controlling interest of $0 and $13,615, ~~periods~~respectively. In addition, ~~respectively~~a portfolio loan held by the Company in the amount of $7.5 million was classified as an investment in the special-purpose entity which is eliminated in consolidation.

~~The~~In ~~Company~~March ~~maintains~~2024, athrough ~~cash~~foreclosure ~~management~~and ~~account~~via ~~that~~a ~~holds~~special-purpose aentity ~~portion~~named ofKDM ~~the~~Nagog ~~restricted~~Park ~~cash~~LLC, ~~which is swept on~~ a ~~regular~~wholly ~~basis.~~owned ~~The account had balances of $50~~subsidiary,~~000~~ ~~and~~KDM ~~$2,322,094~~now asowns ofa ~~September 30,~~3 ~~2025,~~building ~~and~~office ~~December~~park ~~31,~~in ~~2024~~Acton, ~~respectively.~~Massachusetts ~~This~~KDM ~~account~~Nagog Park LLC is included asin ~~part~~the ofCompany’s ~~the~~unaudited ~~Escrow~~condensed ~~Payable~~consolidated ~~liability~~financial ~~account~~statements.

~~The~~Similarly, ~~Company~~via ~~invests~~deed ain ~~portion~~lieu of ~~the~~foreclosure in April 2024, KDM took ~~restricted~~ownership ~~cash~~of ~~collected~~an ~~from~~office ~~borrowers~~building in USt.S Louis, Missouri through a wholly owned subsidiary named KDM Cupples REO LLC. ~~Treasury~~After ~~Bills~~taking ~~with~~the ~~maturities~~office building in April 2024, in May 2025, KDM Cupples REO LLC defaulted on the ground lease of ~~twelve~~the ~~months~~property orit ~~less.~~owned ~~The~~in ~~Restricted~~St. ~~Investment~~Louis, ~~account~~Missouri. ~~had~~After a ~~balance~~meeting ofwith $0the ~~and~~bondholders, $1where KDM informed all bondholders that capital would need to be raised to pay the taxes,~~192~~ insurance,~~510~~ and asground ofrent, ~~September~~in 30order to not default, ~~2025~~with additional funds in order to stabilize the property, the bondholders chose to let the property go. The ground lessor terminated the ground lease and ~~December~~KDM 31Cupples REO LLC no longer owns the leasehold estate. On June 23, ~~2024~~2025, ~~respectively~~KDM removed the $9,000,000 asset from its statement of financial condition and canceled the related outstanding bonds. ~~This~~The ~~account~~transaction is ~~included~~reflected in asthe ~~part~~statements of operations in the ~~Escrow~~second ~~Payable~~quarter ~~liability~~of ~~account~~2025 as a loss on foreclosures and change in fair value of mortgage secured notes.

~~The~~In ~~Company~~March ~~invests~~2025 aand ~~portion~~April of2025, ~~restricted cash~~via ~~from~~deed ~~borrowers~~ in alieu ~~savings~~of foreclosure, ~~account~~KDM ~~with~~acquired a ~~balance~~mixed ofuse ~~$250,000~~property asin ofLos ~~September~~Angeles, 30California, ~~2025~~a majority-owned via a subsidiary named KDM Seaton Colyton Holdings, LLC and ~~December~~an ~~31,~~owner-occupied ~~2024~~building in Selma, ~~respectively~~TX.

~~The~~Please ~~Company~~see ~~has~~Note ~~opened~~17 ~~two~~Segment ~~cash management accounts at J~~Reporting.~~W. Korth & Company that hold a portion of restricted cash. The balances as of September 30, 2025, were $2,550,443 and $3,585 and as of December 31, 2024, were $2,750,982 and $3,635,540, respectively.~~

~~NOTE~~As 6of –March ~~ACQUISITION~~31, 2026, we had 18 operating leases under which we are the &lessor, ~~DISPOSITION~~compared OFto ~~RENTAL~~23 ~~PROPERTY~~operating leases as of March 31, 2025. Leasing revenue recognized from these operating leases totaled $1,129,626 and $1,533,259 for the three months ended March 31, 2026 and 2025, respectively. These leases primarily relate to retail and office space. Future undiscounted lease income from operating leases where we are the lessor were as follows as of March 31, 2026:

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 nine months ended September 30, 2025 and September 30, 2024, the Company recorded net income and net loss attributable to the non-controlling interest of $135,420 and $38,719, respectively. In addition, a portfolio loan held by the Company in the amount of $7.5 million was classified as an investment in the special-purpose entity which is eliminated in consolidation.


Summary of 5 year future rents:

Last 9 months 2026		2,339,341
2027		3,041,271
2028		2,666,915
2029		2,441,659
2030		2,455,995
Thereafter		29,183,525
	$	42,128,706

InProperty ~~March~~is ~~2024,~~recorded ~~through~~at ~~foreclosure~~fair ~~and~~market ~~via~~value aand ~~special-purpose~~depreciation ~~entity~~is recognized ~~named~~over ~~KDM Nagog Park LLC,~~ a ~~wholly~~39-year ~~owned~~period. ~~subsidiary,~~For ~~KDM~~these ~~now owns a 3 building office park in Acton~~properties, ~~Massachusetts.~~we ~~Similarly,~~recorded ~~via~~depreciation ~~deed in~~expense ~~lieu~~ of ~~foreclosure in April 2024~~$360,834 ~~KDM~~and ~~took ownership of an office building in St. Louis~~$206,751 ~~Missouri~~for ~~through~~the athree ~~wholly~~months ~~owned~~ended ~~subsidiary~~March ~~named KDM Cupples REO LLC. The activity of the wholly owned subsidiaries~~31, ~~KDM~~2026 ~~Nagog Park LLC~~ and ~~KDM Cupples REO LLC~~2025, ~~are included in the Company’s unaudited condensed consolidated financial statements beginning in the second quarter of 2024~~respectively.

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

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InNOTE ~~March~~6 ~~2025~~– ~~and~~COMMITMENTS ~~April~~AND 2025, via deed in lieu of foreclosure, KDM acquired a mixed use property in Los Angeles, California, a majority-owned via a subsidiary named KDM Seaton Colyton Holdings, LLC and an owner-occupied building in Selma, TX. As part of the deed in lieu transactions, the Company recognized a gain of $5,557,032 which was the difference between the fair value of the net assets acquired, the mortgage liability assumed, and the consideration paid on the transaction date. The following table summarizes the transactions:CONTINGENCIES

Schedule of fair value of net assets acquired
Fair value of Net Assets Acquired:
Restricted Cash	$	66,300
Building and land		46,600,000
Acquired operating leases		2,357,928
Mortgage liability assumed		(41,300,000	)
Net Assets Acquired		7,724,228
Less: Investment in special-purpose entity		(2,167,196	)
Gain on Settlement Agreement	$	5,557,032

Please see Note 18 Segment Reporting.

As of September 30, 2025, we had 19 operating leases under which we are the lessor, compared to 18 operating leases as of September 30, 2024. Leasing revenue recognized from these operating leases totaled $4,561,397 and $1,970,477 for the nine months ended September 30, 2025 and 2024, respectively. These leases primarily relate to retail and office space. Future undiscounted lease income from operating leases where we are the lessor were as follows as of September 30, 2025:

Schedule of future undiscounted lease income
Summary of 5 year future rents:
	Last 3 months 2025	$	1,009,005
	2026		2,968,997
	2027		2,857,655
	2028		2,666,915
	2029		2,441,659
	Thereafter		27,562,411
		$	39,506,642

Property is recorded at fair market value and depreciation is recognized over a 39-year period. For these properties, we recorded depreciation expense of $691,651 and $536,378 for the nine months ended September 30, 2025 and 2024, respectively.

NOTE 7 - COMMITMENTS

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

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

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

Rental expense for the ~~nine~~three months ended ~~September~~March 3031, ~~2025~~ 2026, was $~~233~~80,~~807~~980 compared to $~~227~~79,~~877~~703 for the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025, this includes additional expenses for common area, direct operating expense, utilities, parking, and taxes.

As of ~~September~~March 3031, ~~2025~~2026, the net present value of the future lease liabilities, using the weighted-average discount rate of 4.24%, which is commensurate with the Company’s secured borrowing rate, over the weighted average remaining life of 21.778 years was $~~630~~491,~~210~~325.

The following is a schedule of the maturities of future lease payments over the remaining life of the operating leases, reconciled to the net present value as of March 31, 2026:


	Future Lease Payments

2026		206,949
2027		279,952
2028		23,386
Total Lease Payments		510,287
Less: Imputed Interest		(18,962	)
Present Value of Lease Liabilities	$	491,325

The Company is subject to various legal proceedings, claims, and regulatory matters. While the outcome of these matters cannot be predicted with certainty, the Company does not believe that any currently pending matters, individually or in the aggregate, will have a material adverse effect on its consolidated financial statements.

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 the Company will have to make material payments under these indemnification arrangements, and it has not recorded any contingent liability in the unaudited condensed consolidated financial statements for these indemnifications.

NOTE 8 – RELATED PARTY TRANSACTIONS

From time to time the Company purchases MSNs and holds them in its brokerage account. These MSNs are included on the unaudited condensed consolidated statements of financial condition as mortgages owned. Also, from time to time second lien or statement of financial condition loans may be all or partially funded by entities controlled by KDM directors or employees and are serviced by KDM. In some circumstances where MSNs are in default, in the event a foreclosure becomes necessary, KDM may acquire properties as a deed in lieu of foreclosure. KDM may create special purpose entities to take title to such properties, liquidate them to satisfy any debts due under an MSN, or keep such properties and repay the MSN from its own funds. To that end, KDM created KDM Stafford LLC, KDM Nagog Park LLC, KDM Beyer Drive Holdings LLC, and KDM Seaton Colyton Holdings LLC, in order to acquire properties via foreclosure and in deed of lieu of foreclosure, respectively (see Note 5).

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~~The~~NOTE ~~following~~9 is– aDEFERRED ~~schedule of the maturities of future lease payments over the remaining life of the operating leases~~REVENUE, ~~reconciled to the net present value as of September 30, 2025:~~NET

Schedule of future minimum rental payments for operating leases
		Future Lease Payments
2025	$	68,078
2026		280,259
2027		279,952
2028		23,386
Total Lease Payments		651,675
Less: Imputed Interest		(21,465)
Present Value of Lease Liabilities	$	630,210

NOTE 8 - INDEMNIFICATIONS

NOTE 9 – RELATED PARTY TRANSACTIONS

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

NOTE 10 – DEFERRED REVENUE, NET

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

The following is a summary of the loan origination fees and costs deferred and amortized for the ~~nine~~three months ended ~~September~~March 3031, ~~2025~~2026:

Schedule of loan originating fees and costs deferred and amortized
	Deferred Origination Fees	~~Deferred Origination Fees~~		Deferred Origination Costs	~~Deferred Origination Costs~~		Deferred Revenue, Net	~~Deferred Revenue, Net~~
Deferred Revenue at December 31, 2024	$	4,672,221		$	(2,713,254	)	$	1,958,967
Deferred Revenue at December 31, 2025	$	2,404,878		$	(1,328,625	)	$	1,076,253
New loan deferrals		~~562~~110,~~562~~600			~~(309,368~~-	)		~~253~~110,~~194~~600
								-
Amortization of deferrals		(241,726	)		136,202			(105,524	)
Amortization of deferrals		(2,022,130	)		1,290,666			(731,464	)
Deferred Revenue at March 31, 2026	$	2,273,752		$	(1,192,423	)	$	1,081,329
Deferred Revenue at September 30, 2025	$	3,212,653		$	(1,731,956	)	$	1,480,697

NOTE 10 – EMPLOYEE AND DIRECTOR STOCK OPTIONS

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

For the three months ended March 31, 2026, and March 31, 2025, the Company recorded $0 and $13,389, respectively of stock-based compensation expense. Stock options vest 50% at issuance and then ratably over the remaining three years vesting period until they are fully vested. As of March 31, 2026, there were 1,065,000 shares of the Company’s common stock available to be issued pursuant to the Incentive Plan.

Stock option activity for the three months ended March 31, 2026, is summarized as follows:

Schedule of stock option activity
2019 Stock Option Plan:	Shares		Weighted Average Exercise Price		Weighted Remaining Contractual Life (Years)
Options outstanding at January 1, 2026		1,065,000	$	1.43		4.088
Granted		-		-		-
Exercised
Expired or forfeited		-		-		-
Options outstanding at March 31, 2026		1,065,000	$	1.43		3.99

Options exercisable at March 31, 2026		1,065,000	$	1.43		3.99
Options expected to vest at March 31, 2026		0	$	0.00		0.0

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NOTE 11 – ~~EMPLOYEE~~PREFERRED ~~AND DIRECTOR STOCK OPTIONS~~EQUITY

For the nine months ended September 30, 2025, and September 30, 2024, the Company recorded $40,167 of stock-based compensation expense. Stock options vest 50% at issuance and then ratably over the remaining three years vesting period until they are fully vested. As of September 30, 2025, there were 1,905,000 shares of the Company’s common stock available to be issued pursuant to the Incentive Plan.

Stock option activity for the nine months ended September 30, 2025, is summarized as follows:

Schedule of stock option activity
2019 Stock Option Plan:	Shares		Weighted Average Exercise Price		Weighted Remaining Contractual Life (Years)
Options outstanding at January 1, 2025		1,095,000	$	1.47		6.64
Granted		-		-		-
Exercised
Expired or forfeited		-		-		-
Options outstanding at September 30, 2025		1,095,000	$	1.47		6.16
Options exercisable at September 30, 2025		960,000	$	1.13		7.3
Options expected to vest at September 30, 2025		135,000	$	3.00		9.0

NOTE 12 – PREFERRED EQUITY

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

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

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

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

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

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

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

NOTE 1312 – FAIR VALUE

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

ASC 820 establishes a hierarchy of valuation techniques based on the observability of inputs utilized in measuring financial assets and liabilities at fair value. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are described below: 16

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

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

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

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

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

Valuation Process

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 ~~which management believes to be the best estimate of fair value for the asset~~. If a decline in fair value below the carrying balance is other-than-temporary, an impairment loss is recorded and the loan is recorded at the lower fair value at each reporting period. On March 5, 2024, through a full bid in the foreclosure auction, KDM, via its subsidiary KDM Nagog Park LLC, took ownership of the office property securing KDM2021-N015. In April 2024, via a deed in lieu of foreclosure, a wholly owned subsidiary of KDM named KDM Cupples REO LLC took title to the office property securing KDM2021-N022. In May 2025, after extended attempts at negotiating with the ground owner for the property that was securing KDM2021-N022, in addition to discussions with the bondholders, KDM Cupples REO LLC defaulted on the ground lease and gave the property back to the ground owner.

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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, it has a limited basis to predict prepayment rates and default rates, but have engaged a third party, MIAC Analytics, to assist us in our valuation of this asset. The amount is included on the unaudited condensed consolidated statements of financial condition as “Mortgage Servicing Rights, at Fair Value.”

Securities

J. W. Korth owns 225,000, $1 par of defaulted Banco Cruzeiro del Sur bonds. As of ~~September~~March 3031, ~~2025~~2026, the value of these bonds was $41,991, which management believes to be the fair value expected to be received from the receiver handling the liquidation of the company in Brazil. Local counsel has informed us that the bank has sufficient cash to pay off the fair value of our bonds.

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

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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
	September 30, 2025
	March 31, 2026
	Total	~~Total~~	Level I	~~Level I~~	Level II	~~Level II~~	Level III	~~Level III~~
Financial Assets
Mortgages Owned	$	301,898,930	$	-	$	301,898,930	$	-
Mortgage Servicing		8,004,758		-		-		8,004,758
Mortgage Servicing		6,535,766		-		-		6,535,766
Portfolio Loans		4,253,683		-		4,253,683		-
Non-MSN Securities		41,991		-		-		41,991
Total Financial Assets	$	~~312~~8,~~730~~046,~~370~~749	$	-	$	~~306,152,613~~-	$	68,~~577~~046,~~757~~749
Financial Liabilities
Mortgage Secured Notes Payable	$	~~333~~315,~~779~~964,~~220~~576	$	-	$	~~333~~315,~~779~~964,~~220~~576	$	-
Line of Credit Payable	$	3,000,000	$	-	$	3,000,000	$	-
Warehouse Line of Credit		14,349,632		-		14,349,632		-
Warehouse Line of Credit		17,494,250		-		17,494,250		-
Total Financial Liabilities	$	330,314,208	$	-	$	330,314,208	$	-
Total Financial Liabilities	$	354,273,470	$	-	$	354,273,470	$	-

	December 31, 2024
	December 31, 2025
Financial Assets
Mortgages Owned	$	451,974,989	$	-	$	451,974,989	$	-
Mortgage Servicing		6,108,755		-		-		6,108,755
Mortgage Servicing		9,260,225		-		-		9,260,225
Portfolio Loans		5,161,709		-		5,161,709		-
Non-MSN Securities		41,991		-		-		41,991
Total Financial Assets	$	~~466~~6,~~438~~150,~~914~~746	$	-	$	~~457,136,698~~-	$	96,~~302~~150,~~216~~746
Financial Liabilities
Mortgage Secured Notes Payable	$	~~450~~319,~~264~~683,~~519~~008	$	-	$	~~450~~319,~~264~~683,~~519~~008	$	-
Warehouse Line of Credit		17,~~269~~383,~~278~~887		-		17,~~269~~383,~~278~~887		-
Total Financial Liabilities	$	~~467~~337,~~533~~066,~~797~~895	$	-	$	~~467~~337,~~533~~066,~~797~~895	$	-

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Fair Value Measurements

Changes in Fair Value Measurements for the ~~nine~~three months ended ~~September~~March 3031, ~~2025~~2026

The following table presents a reconciliation of changes in Level 3 assets and liabilities reported in the unaudited condensed consolidated statement of financial condition for ~~September~~March 3031, ~~2025~~2026:

Schedule of statements of financial condition
Changes in assets:
Period ended September 30, 2025	Mortgage Servicing Value			Non-MSN Securities		Total Value
Period ended March 31, 2026	Mortgage Servicing Value			Non-MSN Securities		Total Value
Beginning balance at January 1, 2025	$	9,260,225		$	41,991	$	9,302,216
Beginning balance at January 1, 2026	$	6,108,755		$	41,991	$	6,150,746
Sales		(2,665,009	)		-		(2,665,009	)
Unrealized Gain from newly issued mortgages		1,133,704			-		1,133,704
Unrealized Gain from newly issued mortgages		157,036			-		157,036
Fair Value adjustment		762,299			-		762,299
Fair Value adjustment		(216,486	)		-		(216,486	)
Ending balance at March 31, 2026	$	8,004,758		$	41,991	$	8,046,749
Ending balance at September 30, 2025	$	6,535,766		$	41,991	$	6,577,757

The Company’s policy for recording transfers between levels of the fair value hierarchy is to recognize such transfers as of the financial statement date. For the ~~nine~~three months ended ~~September~~March 3031, ~~2025~~2026, there were no transfers between levels.

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

~~The following table presents quantitative information regarding the significant unobservable inputs the Company uses to determine the fair value of Level 3 investments held as of September 30, 2025:~~18

Schedule of quantitative information
Investment type	Fair Value		Valuation technique	Unobservable inputs	Values
Mortgage servicing	$	6,535,766	Net Present Value	Prepayment Discount		14.82	%
				Discount rate		15.00	%
Non-MSN Securities	$	41,991	Net Present Value

NOTE 14 – INCOME TAXES

The income tax provision was $876,448 for the nine months ended September 30, 2025. The effective tax rate was 25.7% of the income before income taxes of $3,507,381, which differs from the federal statutory rate of 21% due to state income taxes and certain of the Company’s expenses that are not deductible for tax purposes.

The income tax benefit was $365,762 for the nine months ended September 30, 2024. The effective tax rate was 24.4% of the loss before income taxes of $1,498,215, which differs from the federal statutory rate of 21% due to state income taxes and certain of the Company’s expenses that are not deductible for tax purposes.

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~~NOTE~~The following table presents 15quantitative –information ~~PROPERTY~~regarding ~~AND~~the ~~EQUIPMENT~~significant unobservable inputs the Company uses to determine the fair value of Level 3 investments held as of March 31, 2026:

Schedule of quantitative information
Investment type	Fair Value		Valuation technique	Unobservable inputs	Values

Mortgage servicing	$	8,004,758	Net Present Value	Prepayment Discount	11.55%
				Discount rate	15.00%

Non-MSN Securities	$	41,991	Net Present Value

NOTE 13 – INCOME TAXES

The income tax provision was $294,223 for the three months ended March 31, 2026. The effective tax rate was 25.5% of the income before income taxes of $1,154,931, which differs from the federal statutory rate of 21% due to state income taxes and certain of the Company’s expenses that are not deductible for tax purposes.

The income tax provision was $285,731 for the three months ended March 31, 2025. The effective tax rate was 25.7% of the income before income taxes of $1,131,829, which differs from the federal statutory rate of 21% due to state income taxes and certain of the Company’s expenses that are not deductible for tax purposes.

NOTE 14 – PROPERTY AND EQUIPMENT

Property and Equipment are summarized as follows:

Schedule of property, plant and equipment
September 30, 2025
March 31, 2026
Land & Building	$	71,~~344~~972,~~743~~557
Equipment		~~330~~337,~~136~~643
Furniture and fixtures		~~194~~199,~~045~~239
		71,868,924
		72,509,439
Accumulated depreciation		(23,~~305~~092,~~503~~970	)
Net Property Equipment	$	69,563,421
Property Equipment, Net of Depreciation	$	69,416,469
December 31, 2024
Land & Building	$	32,940,768
Equipment		327,436
Furniture and fixtures		194,046
		33,462,250
Accumulated depreciation		(1,539,846	)
Net Property Equipment	$	31,922,404

Depreciation expense for the periods ending September 30, 2025, and September 30, 2024, were $1,408,825 and $939,352, respectively.

December 31, 2025

Land & Building	$	71,860,620
Equipment		330,136
Furniture and fixtures		199,238
		72,389,994

Accumulated depreciation		(2,698,865	)

Property Equipment, Net of Depreciation	$	69,691,129

~~NOTE~~Depreciation 16expense –for the ~~LINE~~periods ~~OF CREDIT~~ending March 31, 2026, and March 31, 2025, were $456,466 and $323,325, respectively.

OnNOTE ~~October~~15 ~~13,~~– ~~2023,~~LINES ~~KDM~~OF MFB LLC, a Delaware limited liability company (the “KDM MFB”), a newly formed and wholly owned subsidiary of Korth Direct Mortgage Inc. (the “Company”) entered into a $100,000,000 Master Repurchase and Securities Contract credit facility with Churchill MRA Funding I LLC (the “Agreement”). The Company vis a vis KDM MFB, will use the credit facility provided by the Agreement (the “MFB Line”) to finance the Company’s expansion of its lending operations in multi-family and multifamily bridge financing. As of September 30, 2025, the Company had a balance of $17,355,235 on the MFB Line. Total amortization expense of capitalized loan fees was $85,957 for the nine months ended September 30, 2025 compared to $86,381 for the nine months ended September 30, 2024, and recorded in interest expense.CREDIT

On ~~September~~October 3013, ~~2025~~2023, ~~the~~KDM MFB LLC, a Delaware limited liability company ~~entered~~(the ~~into~~“KDM MFB”), a ~~term~~newly ~~loan~~formed ~~agreement~~and ~~providing~~wholly ~~total~~owned ~~borrowing~~subsidiary ~~capacity~~ of Korth Direct Mortgage Inc. (the “Company”) entered into a $3100,000,000. ~~The~~Master ~~loan~~Repurchase ~~carries~~and aSecurities ~~36-month~~Contract ~~term~~credit ~~and~~facility ~~bears~~with ~~interest~~Churchill MRA Funding I LLC (the “Agreement”). atThe Company vis a ~~rate~~vis ~~based~~KDM onMFB, will use the ~~Secured~~credit ~~Overnight~~facility ~~Financing~~provided ~~Rate~~by the Agreement (~~SOFR~~the “MFB Line”) ~~index,~~to ~~fixed~~finance ~~through~~the anCompany’s expansion ~~interest~~of ~~rate~~its ~~swap~~lending ~~agreement~~operations ~~executed~~in ~~concurrently with~~multi-family ~~the~~and ~~loan.~~multifamily ~~The~~bridge ~~borrowings~~financing. ~~are~~As ~~guaranteed~~of byMarch ~~KDM~~31, ~~and~~2026, ~~are~~the ~~secured~~Company byhad an outstanding balance of $14,431,342 on the ~~property~~MFB ~~located~~Line, which is included in ~~Acton,~~the ~~MA.~~Warehouse ~~Proceeds~~Line ~~from~~of Credit on the ~~loan~~unaudited ~~are~~condensed consolidated statements ~~primarily~~of ~~used~~financial tocondition, ~~fund~~net ~~tenant~~of ~~improvements~~unamortized ~~and~~deferred ~~leasing~~loan costs toof ~~facilitate~~$81,710. ~~lease-up~~Total ~~and~~amortization ~~occupancy.~~expense As of ~~September~~capitalized ~~30,~~loan ~~2025~~fees was $28,652 for the ~~principal balance~~three ~~was~~months $3ended March 31,~~000~~ 2026 and March 31,~~000~~ 2025, and recorded in interest expense.

~~NOTE 17 – VARIABLE INTEREST ENTITIES~~19

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

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

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On September 30, 2025, the company entered into a term loan agreement providing total borrowing capacity of $3,000,000. The loan carries a 36-month term and bears interest at a rate based on the Secured Overnight Financing Rate (SOFR) index, fixed through an interest rate swap agreement executed concurrently with the loan. The borrowings are guaranteed by KDM, and are secured by the property located in Acton, MA. Proceeds from the loan are primarily used to fund tenant improvements and leasing costs to facilitate lease-up and occupancy. As of March 31, 2026, the principal balance was $3,000,000.

NOTE 16 – VARIABLE INTEREST ENTITIES

KDM Capital Partners, LP (the “Fund”) is a new investment partnership over which the Company and its related parties have a controlling financial interest. The Company holds 10.8% of the equity interest in the partnership and its CEO holds a 42.8% interest. The General Partner of the Fund is a wholly owned subsidiary of the Company. The Fund invests in loans originated by the Company and the holdings of the Fund are loan participations issued by the Company. The loan participations owned by the Fund are carried on the Company’s line of credit and are guaranteed by the Company.

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

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

NOTE 1817 – SEGMENT REPORTING

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

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Lending and Servicing

This is KDM’s core business segment and includes consolidation of the Fund and J.W. Korth. ~~Our~~Management ~~management~~evaluates ~~profit~~the ~~and~~performance ~~loss~~of ~~statements~~this ~~look~~segment atusing earnings before interest, taxes, depreciation, dividends, and amortization (“EBITDDA”), aswhich ~~well~~also asexcludes ~~exclude~~ the unrealized ~~gain/loss~~gains ~~from~~and ~~our~~losses ~~book~~on ofthe Company’s MSRs. This is an operating view of the business segment, so excludes the cost of financing the business and the future cash flows from loan servicing. These numbers do include salaries from all employees, including those who work across both business segments. Below are the consolidated profit and loss statements and assets:

Schedule of business segments
	Nine months ended September 30,
	Three months ended March 31,
	2025		2024
	2026		2025
REVENUES
Origination Revenue, Net	$	2241,~~050,334~~727	$	1,~~247~~140,~~425~~738
Servicing Revenue		3729,~~294,397~~103		31,~~826~~095,~~442~~671
Underwriting Income		~~22,435~~-		5012,~~000~~750
Investment Income		2906,~~407,317~~981		-
Other Revenue		~~574~~166,~~644~~569		1915,~~623,165~~586
Total Revenues		82,~~349~~044,~~127~~380		63,~~747~~164,~~032~~745
COST OF REVENUES
Broker Expenses		1121,~~512,223~~781		1977,~~229,158~~975
Administrative Expenses		~~998~~257,~~737~~782		~~848~~305,~~992~~594
Total Cost of Revenues		2379,~~510,960~~563		21,~~078~~283,~~150~~569
GROSS PROFIT		51,~~838~~664,~~167~~817		41,~~668~~881,~~882~~176
OPERATING EXPENSES
Office		~~364~~108,~~248~~470		~~367~~109,~~574~~320
Compensation and Related Benefits		2921,~~956,196~~928		3740,~~359,823~~563
Professional & Legal		~~669~~202,~~237~~118		~~877~~177,~~526~~604
Advertising		9844,~~533~~187		~~180~~30,~~706~~836
Total Operating Expenses		41,~~088~~276,~~214~~703		41,~~785~~058,~~629~~323
EBITDDA	$	1388,~~749,953~~114	$	~~(116~~822,~~747~~853	)

	September 30, 2025		December 31, 2024
	March 31, 2026		December 31, 2025
ASSETS
Cash and Cash Equivalents	$	1851,~~637,628~~714	$	12,~~974~~265,~~155~~998
Restricted Cash		86,~~421~~377,~~096~~796		154,~~726~~913,~~038~~585
Restricted Investment		-		1,192,510
Mortgages Owned		329,518,108		336,216,050
Mortgages Owned		352,698,930		461,474,989
Mortgage Servicing Rights, at Fair Value		8,004,758		6,108,755
Mortgage Servicing Rights, at Fair Value		6,535,766		9,260,225
Portfolio Loans		17,103,574		15,358,180
Portfolio Loans		13,920,880		12,661,709
Loans Held for Sale		-		520,215
Securities		41,991		41,991
ROU Leased Asset		~~622~~490,~~220~~497		~~270~~560,~~281~~599
Goodwill		110,000		110,000
Property and equipment, net of depreciation		~~138~~99,~~399~~248		~~203~~121,~~058~~038
Other Assets		1633,~~566,968~~902		161,~~632~~648,~~923~~778
Total Assets	$	~~385~~363,~~693~~231,~~878~~588	$	~~520~~367,~~068~~344,~~094~~974

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Below is the reconciliation of EBITDDA to income before provision for income taxes:

	Three months ended March 31,
	2026			2025

EBITDDA	$	388,114		$	822,853

Other Income (Expenses)
Unrealized (Loss) Gain on Mortgages		1,896,003			368,972
Unrealized (Loss) Gain on Mortgage Secured Notes		(15,519	)		14,858
Unrealized Loss on Investment		(13,802	)		74,798
Interest Expense		(491,322	)		(341,559	)
Realized Gain on Foreclosure		-			207,981
Realized Loss on Loans Held for Sale		-			(4,417	)
Total Other Income		1,375,360			320,633

Income before provision for income taxes	$	1,763,474		$	1,143,486

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

	Nine months ended September 30,
	2025			2024
EBITDDA	$	1,749,953		$	(116,747	)
Other Income (Expenses)
Unrealized (Loss) Gain on Mortgages		(2,724,459	)		107,030
Unrealized (Loss) Gain on Mortgage Secured Notes		(24,595	)		31,946
Interest Income		13,895			-
Interest Expense		(1,156,992	)		(1,001,866	)
Unrealized Loss on Investment		(14,278	)		-
Realized Gain on Securities		58,666			-
Realized Gain on Foreclosure		5,557,032			-
Realized Loss on Mortgage Secured Notes		-			(434	)
Realized Loss on Loans Held for Sale		(526	)		(141,647	)
Employee Retention Credit		45,000			-
Change in Fair Value of Mortgage Secured Notes		9,000,000			12,660,000
Loss on Foreclosures		(9,000,000	)		(12,660,000	)
Total Other Income (Expenses)		1,753,743			(1,004,971	)
Income (Loss) before provision for income taxes	$	3,503,696		$	(1,121,718	)

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

See Note 14 for total property values.

	Three months ended March 31,
	2026			2025
REVENUES
Rental Income	$	1,129,626		$	1,533,259
Other Revenue		-			223
Total Revenues		1,129,626			1,533,482

COST OF REVENUES
Bank Transaction Fees		2,814			312
Ground Rent		117,715			306,424
Total Cost of Revenues		120,529			306,736

GROSS PROFIT		1,009,097			1,226,746

OPERATING EXPENSES
Office		9,092			7,973
Compensation and Related Benefits		32,613			31,049
Property Taxes		195,000			102,360
Professional & Legal		109,269			76,478
Utilities		429,454			524,031
Business Insurance		57,772			29,814
Depreciation		433,170			-
Total Operating Expenses		1,266,370			771,705

Net Operating (Loss) Income		(257,273	)		455,041

OTHER EXPENSES
Mortgage Interest		327,974			143,373
Total Other Expenses		327,974			143,373

Net (Loss) Income	$	(585,247	)	$	311,668

	March 31, 2026		December 31, 2025
ASSETS
Cash and Cash Equivalents	$	1,203,955	$	3,088,170
Property and equipment, net of depreciation		69,317,221		69,570,091
Other Assets		3,293,142		1,317,974
Total Assets	$	73,814,318	$	73,976,235

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~~Asset~~Below ~~Management~~is a reconciliation of Segment Operations to Unaudited Condensed Consolidated Statements of Operations:

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

Schedule of segment operations
	For the three months ended March 31, 2026

	Lending and Servicing			Asset Management			Other			Total
REVENUES
Origination Revenue, Net	$	241,727		$	-		$	-		$	241,727
Servicing Revenue		729,103			-			-			729,103
Rental Income		-			1,129,626			-			1,129,626
Investment Revenue		906,981			-			-			906,981
Other Revenue		166,569			-			-			166,569
Total Revenues		2,044,380			1,129,626			-			3,174,006

COST OF REVENUES
Broker Expenses		121,781			-			-			121,781
Bank Transaction Fees		-			2,814			-			2,814
Ground Rent		-			117,715			-			117,715
Administrative Expenses		257,782			-			-			257,782
Total Cost of Revenues		379,563			120,529			-			500,092

GROSS PROFIT		1,664,817			1,009,097			-			2,673,914

OPERATING EXPENSES
Office		108,470			9,092			-			117,562
Compensation and Related Benefits		921,928			32,613			-			954,541
Professional & Legal		202,118			109,269			-			311,387
Property Taxes		-			195,000			-			195,000
Utilities		-			429,454			-			429,454
Business Insurance		-			57,772			-			57,772
Advertising		44,187			-			-			44,187
Depreciation		-			433,170			23,296			456,466
Total Operating Expenses		1,276,703			1,266,370			23,296			2,566,369

Net Operating Income (Loss)		388,114			(257,273	)		(23,296	)		107,545

Other Income (Expenses)
Unrealized Gain on Mortgages		1,896,003			-			-			1,896,003
Unrealized Loss on Mortgage Secured Notes		(15,519	)		-			-			(15,519	)
Interest Expense		(491,322	)		(327,974	)		-			(819,296	)
Unrealized Gain on Investment		(13,802	)		-			-			(13,802	)
Total Other Income (Expenses)		1,375,360			(327,974	)		-			1,047,386

Income (Expenses) before provision for income taxes	$	1,763,474		$	(585,247	)	$	(23,296	)	$	1,154,931

See Note 15 for total property values.

	Nine months ended September 30,
	2025		2024
REVENUES
Rental Income	$	4,561,398	$	2,157,082
Total Revenues		4,561,398		2,157,082
COST OF REVENUES
Bank Transaction Fees		1,201		678
Ground Rent		638,006		476,737
Total Cost of Revenues		639,207		477,415
GROSS PROFIT		3,922,191		1,679,667
OPERATING EXPENSES
Office		33,822		23,831
Compensation and Related Benefits		96,275		68,601
Property Taxes		54,072		300,493
Professional & Legal		202,852		174,581
Utilities		1,633,111		1,140,702
Business Insurance		59,429		23,545
Depreciation		1,341,467		874,536
Total Operating Expenses		3,421,028		2,606,289
Net Operating Income (Loss)		501,163		(926,622	)
OTHER EXPENSES
Mortgage Interest		430,120		430,120
Total Other Expenses		430,120		430,120
Net Income (Loss)	$	71,043	$	(1,356,742	)

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	September 30, 2025			December 31, 2024
	For the three months ended March 31, 2025
ASSETS
	Lending and Servicing			Asset Management			Other			Total
Cash and Cash Equivalents	$	4,530,598		$	924,504
REVENUES
Property and equipment, net of depreciation		69,425,022			31,719,347
Origination Revenue, Net	$	1,140,738		$	-		$	-		$	1,140,738
Other Assets		3,890,398			1,649,071
Servicing Revenue		1,095,671			-			-			1,095,671
Total Assets	$	77,846,018		$	34,292,922
Underwriting Income		12,750			-			-			12,750
Rental Income		-			1,533,259			-			1,533,259
Other Revenue		915,586			223			-			915,809
Total Revenues		3,164,745			1,533,482			-			4,698,227
COST OF REVENUES
Broker Expenses		977,975			-			-			977,975
Bank Transaction Fees		-			312			-			312
Ground Rent		-			306,424			-			306,424
Administrative Expenses		305,594			-			-			305,594
Total Cost of Revenues		1,283,569			306,736			-			1,590,305
GROSS PROFIT		1,881,176			1,226,746			-			3,107,922
OPERATING EXPENSES
Office		130,312			7,973			-			138,285
Compensation and Related Benefits		740,564			31,049			-			771,613
Professional & Legal		156,611			76,478			-			233,089
Property Taxes		-			102,360			-			102,360
Utilities		-			524,031			-			524,031
Business Insurance		-			29,814			-			29,814
Advertising		30,836			-			-			30,836
Depreciation		-			-			323,325			323,325
Total Operating Expenses		1,058,323			771,705			323,325			2,153,353
Net Operating Income (Loss)		822,853			455,041			(323,325	)		954,569
Other Income (Expenses)
Unrealized Gain on Mortgages		368,972			-			-			368,972
Unrealized Gain on Mortgage Secured Notes		14,858			-			-			14,858
Interest Expense		(341,559	)		(143,373	)		-			(484,932	)
Unrealized Loss on Investment		74,798			-			-			74,798
Realized Gain on Foreclosure		207,981			-			-			207,981
Realized Loss on Loans Held for Sale		(4,417	)		-			-			(4,417	)
Total Other Income (Expenses)		320,633			(143,373	)		-			177,260
Income (Loss) before provision for income taxes	$	1,143,486		$	311,668		$	(323,325	)	$	1,131,829

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

Schedule of segment operations
	For the nine months ended September 30, 2025
	Lending and Servicing			Asset Management			Other		Total
REVENUES
Origination Revenue, Net	$	2,050,334		$	-		$	-	$	2,050,334
Servicing Revenue		3,294,397			-			-		3,294,397
Underwriting Income		22,435			-			-		22,435
Rental Income		-			4,561,175			-		4,561,175
Investment Revenue		2,407,317			-			-		2,407,317
Other Revenue		574,644			223			-		574,867
Total Revenues		8,349,127			4,561,398			-		12,910,525
COST OF REVENUES
Broker Expenses		1,512,223			-			-		1,512,223
Bank Transaction Fees		-			1,201			-		1,201
Ground Rent		-			638,006			-		638,006
Administrative Expenses		998,737			-			-		998,737
Total Cost of Revenues		2,510,960			639,207			-		3,150,167
GROSS PROFIT		5,838,167			3,922,191			-		9,760,358
OPERATING EXPENSES
Office		364,248			33,822			-		398,070
Compensation and Related Benefits		2,956,196			96,275			-		3,052,471
Professional & Legal		669,237			202,852			-		872,089
Property Taxes		-			54,072			-		54,072
Utilities		-			1,633,111			-		1,633,111
Business Insurance		-			59,429			-		59,429
Advertising		98,533			-			-		98,533
Depreciation		-			1,341,467			67,358		1,408,825
Total Operating Expenses		4,088,214			3,421,028			67,358		7,576,600
Net Operating Income		1,749,953			501,163			67,358		2,183,758
Other Income (Expenses)
Unrealized Loss on Mortgages		(2,724,459	)		-			-		(2,724,459	)
Unrealized Loss on Mortgage Secured Notes		(24,595	)		-			-		(24,595	)
Interest Income		13,895			-			-		13,895
Interest Expense		(1,156,992	)		(430,120	)		-		(1,587,112	)
Unrealized Loss on Investment		(14,278	)		-			-		(14,278	)
Realized Gain on Securities		58,666			-			-		58,666
Realized Gain on Foreclosure		5,557,032			-			-		5,557,032
Realized Loss on Loans Held for Sale		(526	)		-			-		(526	)
Employee Retention Credit		45,000			-			-		45,000
Change in Fair Value of Mortgage Secured Notes		9,000,000			-			-		9,000,000
Loss on Foreclosures		(9,000,000	)		-			-		(9,000,000	)
Total Other Income		1,753,743			(430,120	)		-		1,323,623
Income before provision for income taxes	$	3,503,696		$	71,043		$	67,358	$	3,507,381

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

			September 30, 2025
			March 31, 2026
	Lending and Servicing		Asset Management		Other			Total
ASSETS
Cash and Cash Equivalents	$	1851,~~637,628~~714	$	41,~~530~~203,~~598~~955	$	-		$	62,~~168~~055,~~226~~669
Restricted Cash		86,~~421~~377,~~096~~796		-		-			86,~~421~~377,~~096~~796
Mortgages Owned		~~352~~329,~~698~~518,~~930~~108		-		(50,800,000	)		~~301~~278,~~898~~718,~~930~~108
Mortgage Servicing Rights, at Fair Value		68,~~535~~004,~~766~~758		-		-			68,~~535~~004,~~766~~758
Portfolio Loans		1317,~~920~~103,~~880~~574		-		(9,667,~~197~~196	)		47,~~253~~436,~~683~~378
Securities		41,991		-		-			41,991
ROU Leased Asset		622,220		-		-			622,220
Right-of-Use "ROU" Leased Asset		490,497		-		-			490,497
Goodwill		110,000		-		-			110,000
Property and equipment, net of depreciation		~~138~~99,~~399~~248		69,~~425~~317,~~022~~221		-			69,~~563~~416,~~421~~469
Other Assets		1633,~~566,968~~902		3,~~890~~293,~~398~~142		-			53,~~457~~927,~~366~~044
Total Assets	$	~~385~~363,~~693~~231,~~878~~588	$	7773,~~846~~814,~~018~~318	$	(60,467,~~197~~196	)	$	~~403~~376,~~072~~578,~~699~~710

NOTE 19 – SUBSEQUENT EVENTS

			December 31, 2025

		Lending and Servicing		Asset Management		Other			Total
ASSETS
Cash and Cash Equivalents	$	2,265,998	$	3,088,170	$	-		$	5,354,168
Restricted Cash		4,913,585		-		-			4,913,585
Mortgages Owned		336,216,050		-		(50,800,000	)		285,416,050
Mortgage Servicing Rights, at Fair Value		6,108,755		-		-			6,108,755
Portfolio Loans		15,358,180		-		(9,667,196	)		5,690,984
Securities		41,991		-		-			41,991
Right-of-Use "ROU" Leased Asset		560,599		-		-			560,599
Goodwill		110,000		-		-			110,000
Property and equipment, net of depreciation		121,038		69,570,091		-			69,691,129
Other Assets		1,648,778		1,317,974		-			2,966,752
Total Assets	$	367,344,974	$	73,976,235	$	(60,467,196	)	$	380,854,013

~~The~~NOTE ~~Company~~18 ~~has~~– ~~evaluated~~SUBSEQUENT all events or transactions for potential recognition or disclosure in the unaudited condensed consolidated financial statements through November 12, 2025, which is the date the unaudited condensed consolidated financial statements were issued and the Company has determined that there were no events.EVENTS

The Company has evaluated all events or transactions for potential recognition or disclosure in the unaudited condensed consolidated financial statements through July 1, 2026, which is the date the unaudited condensed consolidated financial statements were issued and the Company has determined that there were no material events requiring disclosures, other than those noted below.

The Company approved a $308,750 cash payment of the quarterly Series B preferred stock dividend for the period of 4/15/26-7/14/26 to be paid on July 15, 2026.

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

The following is a discussion of our historical unaudited condensed consolidated financial condition and results of operations, and should be read in conjunction with (i) our unaudited historical condensed consolidated financial statements and accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q; (ii) our Annual Report on Form 10-K for the year ended December 31, ~~2024~~2025, filed with the Securities and Exchange Commission (the “SEC”) on ~~April~~June 1, ~~2025~~2026; and (iii) our management’s discussion and analysis of financial condition and results of operations included in our ~~2024~~2025 Form 10-K. This discussion includes forward-looking statements that are subject to risk and uncertainties. Actual results may differ substantially from the statements we make in this section due to a number of factors that are discussed in “Part I – Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2024~~2025.

Overview

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

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

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

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

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

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

Results of Operations for the ~~Nine~~Three Months ended ~~September~~ ~~30,~~March ~~2025~~31, 2026

The Company generated revenues of $123,~~910~~174,~~525~~ 006 for the ~~nine~~three months ended March ~~September 30~~31, ~~2025~~2026, ana ~~increase~~decrease of $41,~~436~~524,~~531~~221, 52(32%), compared with revenues of $84,~~473~~698,~~994~~227 for the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025. The decline in revenue is primarily due to a decline in origination and extension fee revenue of approximately $899,000. As of ~~September~~March 3031, ~~2025~~2026, the Company owned mortgages of $~~301~~278,~~898~~718,~~930~~108 compared with mortgages of $~~451~~285,~~974~~416,~~989~~ 050 as of December 31, ~~2024~~2025, and $~~453~~417,~~797~~455,~~203~~748 as of ~~September 30~~March 31, ~~2024~~2025, due primarily to two large loan payoffs. of $97,500,000

Gross profit ~~increased~~decreased by $3434,~~847,879~~008 to $92,~~760~~673,~~358~~ 914 during the three ~~nine~~ months ended ~~September~~March 3031, ~~2025~~2026, compared with gross profit of $53,~~912~~107,~~479~~922 during the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025. The ~~increase~~ decrease in gross profit was due to ~~additional~~the ~~rental~~decline ~~revenues~~in ~~from buildings acquired via workouts; however~~ new lending ~~declined year over year~~.

Operating expenses were $72,~~576~~566,~~600~~369 during the ~~nine~~ three months ended March ~~September 30~~31, ~~2025~~2026, which was aan ~~decrease~~increase of $~~125~~413,~~815~~016 (219%) compared with operating expenses of $72,~~450~~153,~~785~~353 during the ~~nine~~ three months ended ~~September 30~~March 31, ~~2024~~2025.

Other income~~/(expense)~~ increased by $1870,~~283,532~~ 126 to $1,~~323~~047,~~623~~386 during the ~~nine~~three months ended ~~September~~March 3031, ~~2025~~2026, compared with other income~~/(expense)~~ of $40177,~~091~~260 during the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025. The increase is due to the gain on ~~the deed in lieu takeover of two properties~~mortgages.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2025~~2026, the Company recorded $~~876~~294,~~448~~223 in income tax expense due to increased income before income taxes compared with $~~365~~285,~~762~~731 of income tax ~~benefit~~ expense during the ~~nine~~ three months ended ~~September~~March 3031, ~~2024~~2025.

Net income attributable to Korth Direct Mortgage, Inc. is $2658,~~495,513~~ 698 for the ~~nine~~three months ended ~~September~~March 3031, ~~2025~~2026, compared with net ~~loss~~income of $1739,~~093,734~~996 during the ~~nine~~three months ended ~~September 30~~March 31, ~~2024~~2025. ~~The increase in net income is primarily due to the gain on foreclosure of two properties .~~

Financial Condition for the nine months Ended September 30, 2025

The Company’s Total Assets were $403,072,699 for the nine months ended September 30, 2025, and $521,851,543 as of December 31, 2024. The decline in total assets is due to over $100 million in loans being paid off, including one for $45 million in Q2 and one for $55 million in Q3.

As of September 30, 2025, we had $6,168,226 in cash, $8,421,096 in restricted cash, loans totaling $312,688,379, consisting of $301,898,930 in mortgages and participations, $4,253,683 in portfolio loans, and Mortgage Servicing Rights with a fair value of $6,535,766 on our Unaudited Condensed Consolidated Statement of Financial Condition. The decline in mortgage assets was offset by a corresponding increase in real estate assets, reflecting the transfer of certain loans to real estate owned (REO) following foreclosure activity.

Liquidity and Capital Resources

The Company closed on a $100,000,000 financing repurchase facility on October 13, 2023. From time to time, we may need additional haircut capital to use the repurchase facility, which we may fund in a variety of ways, on either a short or long-term basis. Haircut capital is the cash on hand necessary to fund the portion of the loan not funded by the facility. The Company generates servicing revenues on its Mortgages owned with maturity dates ranging from September 2025 to June 2037 as well as income from its investments and portfolio loans with maturity dates ranging from October 2025 to September 2035 .

The Company guaranteed a loan to KDM Nagog Park LLC for $3,000,000 in order to finance the tenant improvements and leasing commissions for stabilization of the property. While current liquidity is sufficient to sustain ongoing operations, we anticipate raising additional capital to fund our lending and development in the coming months. Additionally, we are actively raising capital in KDM Capital Partners LP (the “Fund”).

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Financial Condition for the three months Ended March 31, 2026

The Company’s Total Assets were $376,578,710 for the three months ended March 31, 2026, and $380,854,013 as of December 31, 2025.

As of March 31, 2026, we had $2,055,669 in cash, $6,377,796 in restricted cash, loans totaling $294,159,244, consisting of $278,718,108 in mortgages and participations, $7,436,378 in portfolio loans, and Mortgage Servicing Rights with a fair value of $8,004,758 on our Unaudited Condensed Consolidated Statement of Financial Condition.

Liquidity and Capital Resources

The Company closed on a $100,000,000 financing repurchase facility on October 13, 2023. From time to time, we may need additional haircut capital to use the repurchase facility, which we may fund in a variety of ways, on either a short or long-term basis. Haircut capital is the cash on hand necessary to fund the portion of the loan not funded by the facility. The Company generates servicing revenues on its Mortgages owned with maturity dates ranging from April 2026 to June 2037 as well as income from its investments and portfolio loans with maturity dates ranging from April 2026 to September 2035.

Status of KDM Loans

As of ~~September~~March 3031, ~~2025~~2026, there are 2 loans in payment default, one of which is cash flowing via its lockbox~~, and one small portfolio loan~~. Additionally, the Company has ~~taken~~three over property management for one multifamily bridge loan that exhausted its interest reserve. All previous pending foreclosures from defaults from 2023 and 2024 have been completed. The Company is actively managing these properties tocurrently ~~maximize~~in ~~value~~various onstages ~~behalf~~ of the ~~MSN~~foreclosure ~~investors~~process.

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We have no material positions subject to market risk.

Item 4. Controls and Procedures.

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

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

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

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our internal control over financial reporting as of ~~September 30~~March 31, ~~2025~~2026, as required by Securities Exchange Act Rule 13a- 15(c). In making our assessment, we have utilized the criteria set forth by the 2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. We concluded that based on our evaluation our internal control over financial reporting was effective as of ~~September~~March 3031, ~~2025~~ 2026.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2024~~2025. Please refer to the “Risks Factors” section in our Annual Report for a discussion of risks to which our business, financial condition, results of operations and cash flows are subject.

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

None.

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Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

Exhibit

Number	Description

1.1	Purchase Agreement for Multiple Series of Mortgage Secured Notes between J.W. Korth & Company Limited Partnership as the initial purchaser, and Korth Direct Mortgage Inc. dated July 29, 2022. (incorporated by reference to Exhibit 1.1 to the Registrant’s report on Form 8-K filed August 4, 2022)

1.2	Purchase Agreement for Multiple Series of Mortgage Secured Notes between J.W. Korth & Company Limited Partnership as the initial purchaser, and KDM Funding I LLC dated July 29, 2022. (incorporated by reference to Exhibit 1.2 to the Registrant’s report on Form 8-K filed August 4, 2022)

3.1	Articles of Conversion, dated May 31, 2019 (incorporated by reference to Exhibit to 3.1 to the Registrant’s Report on Form 8-K filed June 28, 2019)

3.2	Articles of Incorporation of Korth Direct Mortgage Inc., dated May 31, 2019 (incorporated by reference to Exhibit to 3.2 to the Registrant’s Report on Form 8-K filed June 28, 2019)

3.3	Amendment to Articles of Incorporation of Korth Direct Mortgage Inc. and Certificate of Designation of Series A 6% Cumulative Perpetual Convertible Preferred Stock, as filed with the Florida Secretary of State on September 20, 2019 (incorporated by reference to Current Report on Form 8-K filed July 1, 2021)

3.4	Amendment to Articles of Incorporation of Korth Direct Mortgage Inc. and Amended Certificate of Designation of Series A 6% Cumulative Perpetual Convertible Preferred Stock, as filed with the Florida Secretary of State on March 20, 2020 (incorporated by reference to Current Report on Form 8-K filed July 1, 2021)

3.5	Amendment to Articles of Incorporation of Korth Direct Mortgage Inc. and Amendment to Amended Certificate of Designation of Series A 6% Cumulative Perpetual Convertible Preferred Stock, as filed with the Florida Secretary of State on June 25, 2021 (incorporated by reference to Current Report on Form 8-K filed July 1, 2021)

3.6	Articles of Amendment to Articles of Incorporation of Korth Direct Mortgage Inc. and Certificate of Designation of Series B 6.50% Cumulative Non-Voting Redeemable Secured Preferred Stock, as filed with the Florida Secretary of State on June 25, 2021 (incorporated by reference to Current Report on Form 8-K filed July 1, 2021)

3.7	Bylaws of Korth Direct Mortgage Inc., dated May 31, 2019 (incorporated by reference to Exhibit to 3.1 to the Registrant’s Report on Form 8-K filed June 28, 2019)

4.1	Trust Indenture and Security Agreement between Korth Direct Mortgage LLC, and Delaware trust Company dated November 17, 2017 (incorporated by reference to Exhibit 3.4 to registrant’s Registration Statement on Form S-1/A filed November 20, 2017)

4.2	Trust Indenture and Security Agreement (Rule 144A Offerings) between Korth Direct Mortgage LLC, and Delaware Trust Company dated September 20, 2018 (incorporated by reference to Registrant’s Report on Form 10-Q filed November 13, 2018)

4.3	Trust Indenture and Security Agreement Dated September 30, 2020, between Korth Direct Mortgage Inc. and Delaware Trust Company as Trustee (incorporated by reference to Exhibit 4.3 to the Registrant’s report on Form 8-K filed October 6, 2020)

4.4	Trust Indenture and Security Agreement (144A Private Placements) Among KDM Funding I LLC., Delaware Trust Company, and Korth Direct Mortgage Inc. (incorporated by reference to Exhibit 4.3 to the Registrant’s report on Form 8-K filed August 4, 2022)

10.1	Korth Direct Mortgage Inc. 2019 Stock Option Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s report on Form 8-K filed June 29, 2019)

10.2	Purchase Agreement dated July 31, 2020, among Korth Direct Mortgage Inc., a Florida corporation; J.W. Korth & Company Limited Partnership, a Michigan limited partnership; and JW Korth LLC, a Florida limited liability company (incorporated by reference to Current Report on Form 8-K filed August 6, 2020)

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10.3	First Amendment to Purchase Agreement (incorporated by reference to Registrant’s Report on Form 10-Q filed August 16, 2021)

31.1	Section 302 Certificate of Chief Executive Officer and Chief Financial Officer*

32.1	Section 906 Certificate of Chief Executive Officer and Chief Financial Officer*

101	Interactive Data File

104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) *

*Filed herewith.

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SIGNATURES

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

	KORTH DIRECT MORTGAGE INC.
Dated: November 13, 2025	By:	/s/ Holly MacDonald-Korth
Dated: July 1, 2026	By:	/s/ Holly MacDonald-Korth
		Holly MacDonald-Korth, Chief Executive Officer and Chief Financial Officer

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