NOTE 16 – VARIABLE INTEREST ENTITIES

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

KDM Capital Partners, LP (the “Fund”) is an investment partnership over which the Company and its related parties have a controlling financial interest. The Company holds 10.4% 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 financial statements, and the Fund’s investments in loans originated by the Company are eliminated in consolidation. The loans are consolidated on the asset portion of the statements of financial condition in the Mortgages Owned caption and on the liability side in the Mortgage Secured Notes caption.

KDM is the manager and 25% owner of Sustainable Energy Holdings (NV) LLC (“Sustainable”), which is the manager and owner of SEH Fernley LLC. SEH Fernley LLC and its related entities own real estate positioned for infrastructure and power development. It was determined that this venture should be categorized as a VIE because KDM is the manager of both of the primary entities of the joint venture. KDM’s current net interest in the joint venture is approximately 25%. During the quarter ended June 30, 2026, properties valued at $10,769,605 were contributed to the joint venture and mortgages of the same amount were assumed.