SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Jun. 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRINCIPLES OF CONSOLIDATION | 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 Beyer Drive Holdings LLC, KDM Capital Management LLC, KDM Capital Partners LP, KDM Capital LLC, KDM Asset Management LLC, KDM Stafford LLC, SEH Fernley LLC, Sustainable Energy Holdings (NV) LLC and KDM Seaton Colyton Holdings LLC, in which KDM owns a controlling interest.
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| BASIS OF ACCOUNTING | 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 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, 2025 (the “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 statements of financial condition and unaudited condensed consolidated statements of operations, changes in shareholders’ equity, 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 | 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.
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| CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 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 June 30, 2026, June 30, 2025 and December 31, 2025:
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.
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| MORTGAGE VALUATION | 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, amortized 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 on mortgages.
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| MORTGAGE SECURED NOTES (“MSNs”) | 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 June 30, 2026, the Company has issued MSNs secured by these loans in the amount of $609,495,250 since inception and has redeemed $345,039,198 of its MSNs since inception.
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| PORTFOLIO LOANS | 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 LOC as “haircut capital.” As of June 30, 2026, the Company has issued Portfolio Loans in the amount of $54,182,449 and currently holds $7,226,651 Portfolio Loans, which management believes to be the best estimate of fair value.
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| LOANS HELD FOR SALE | LOANS HELD FOR SALE The Company purchases small balance commercial loans classified as held for sale which are carried at the lower of amortized cost basis or 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 $206,977 for the six months ended June 30, 2026. We determine the fair value of mortgage loans held for sale by using a yield based pricing or discounted cash flow model.
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| PARTICIPATIONS | 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 June 30, 2026, the Company had issued loan participations in the amount of $59,557,200 of which $37,850,456 remain outstanding. A portion of these participations are included in the Mortgages Owned number and Mortgage Secured Notes Payable.
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| GOODWILL | GOODWILL FASB ASC Section 350 requires an annual assessment of the recoverability of goodwill using a two-step process. The first step of the impairment test involves a comparison of the fair value of the reporting unit to its carrying value. If the carrying value is higher than the fair value or there is an indication that impairment may exist, a second step must be performed to compute the amount of the impairment. Management conducted its annual assessment of goodwill impairment and determined that there were no indicators of goodwill impairment and therefore did not record an impairment loss for the six months ended June 30, 2026.
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| REVENUE RECOGNITION | REVENUE RECOGNITION The Company’s primary sources of revenue are generated from origination fees, servicing fees, underwriting income, and leasing revenue.
Origination Fees Loan origination fees represent revenue earned from originating mortgage loans, net of any credits given to the borrower. Loan origination fees generally represent flat, per-loan fee amounts and are deferred and recognized as revenue over the life of the loan. The associated loan origination costs are also deferred and recognized as expense over the life of the loan. The deferred portion of the loan origination fees is netted against the deferred portion of the loan origination costs, which include mortgage broker expenses, and reported as a net deferred revenue liability on the Company’s 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 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 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. Leasing revenue generated from operating leases are recognized over the lease term on a straight-line basis. We recorded leasing revenue of $2,342,697 for the six months ended June 30, 2026 and $3,181,453 for the six months ended June 30, 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.
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| LEASES | LEASES In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842).” The standard requires organizations to recognize right-of-use (“ROU”) assets and lease liabilities on the statement of financial condition and disclose key information about leases that were historically 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 current leasing standards for existing operating leases.
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| STOCK-BASED COMPENSATION |
The Company estimates the fair value of share-based payments on the date of grant using a Black-Scholes option pricing model. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. The Company’s accounting policy is to recognize forfeitures as they occur.
The Black-Scholes option pricing model requires assumptions for the expected volatility of the share price of our common stock, the expected dividend yield, and a risk-free interest rate over the expected term of the stock-based award.
Since the Company’s common stock is not publicly traded, we do not have sufficient Company specific information regarding the volatility of our share price on which to base an estimate of expected volatility. As a result, we use the historical volatilities of similar entities within our industry as the expected volatility of our share price.
The expected dividend yield is 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.
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| Unrealized Gain on Mortgages | Unrealized Gain on Mortgages The net present value of the servicing income is recognized at the time the mortgage is initiated. The changes to the net present value which is determined by the determination of the fair value of the assets are recognized through an adjustment to the unrealized gain/loss in each reporting period. This value uses several inputs that are highly subjective including: discount rate, prepayment rate, the current interest rate environment, and default rate assumptions. We use a third-party to calculate this value.
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| DUE TO CLEARINGHOUSE BROKERS | DUE TO CLEARINGHOUSE BROKERS J.W. Korth operates as an SEC and FINRA registered securities broker dealer. The securities transactions are traded through broker clearinghouses and, upon settlement, funds are transferred in and out of the Company’s bank accounts. Unsettled transactions create short-term payables and receivables due to and from the broker clearinghouses. As of June 30, 2026, the Company had a net amount due to the clearinghouse brokers of $368,410.
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| DEPRECIATION | DEPRECIATION Depreciation is provided on a straight-line basis using estimated useful lives of three to thirty-nine years.
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| INCOME TAXES | INCOME TAXES Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance on deferred tax assets is established when management considers it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company’s tax returns for the years ended December 31, 2022, and after remain subject to examination by federal and state jurisdictions.
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| RECENT ACCOUNTING PRONOUNCEMENTS | RECENT ACCOUNTING PRONOUNCEMENTS
In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses”, which requires disclosure of specified information about certain costs and expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted, and should be applied either on a prospective basis or retrospective basis. The Company is currently assessing the impact of this ASU on the Company’s unaudited condensed consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements ("ASU 2025-11"). The amendments clarify and reorganize existing interim reporting guidance, including the scope of Topic 270 and interim disclosure requirements, and introduce a disclosure principle requiring entities to disclose material events or changes occurring since the most recent annual reporting period. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of ASU 2025-11 on its unaudited condensed consolidated financial statements and related disclosures.
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| DEBT ISSUANCE COSTS | 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.
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