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 UNITED STATES SECURITIES
AND EXCHANGE COMMISSION

 Washington, D.C. 20549

 Form 10-K

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

 For the fiscal year ended December 31, 2024.

 or

 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)

 Securities registered pursuant to Section 12(b) of the Act: None

 Securities registered pursuant to Section 12(g) of the Act: None

 Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes No x

 Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act. Yes x No

 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. Yes x No

 Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted
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 and post such files). Yes x 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

 Accelerated filer

 Non-accelerated filer

 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.

 Indicate by check mark whether the registrant has filed a report on
and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Yes No x

 If securities are registered pursuant to Section 12(b) of the Act,
indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements.

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

 State the aggregate market value of the voting
and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the
average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second
fiscal quarter.

 There is no market for the common equity of Korth Direct Mortgage Inc.
As of December 31, 2024, there were 5,000,000 common shares of KDM outstanding.

 DOCUMENTS INCORPORATED BY REFERENCE

 No documents are incorporated in this Form 10-K by reference.

 KORTH DIRECT MORTGAGE, Inc.

 Item 1.

 Business

 Item 1A.

 Risk Factors

 Item 1B.

 Unresolved Staff Comments

 Item 1C.

 Cybersecurity

 Item 2.

 Properties

 Item 3.

 Legal Proceedings

 Item 4.

 Mine Safety Disclosures

 Item 5.

 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Item 6.

 Selected Financial Data

 Item 7.

 Management's Discussion and Analysis of Financial Condition and Results of Operations

 Item 7A.

 Quantitative and Qualitative Disclosures About Market Risk

 Item 8.

 Consolidated Financial Statements

 Item 9.

 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

 Item 9A.

 Controls and Procedures

 Item 9B.

 Other Information

 Item 10.

 Directors, Executive Officers and Corporate Governance

 Item 11.

 Executive Compensation

 Item 12.

 Security Ownership of Certain Beneficial Ownership and Management and Related Stockholder Matters

 Item 13.

 Certain Relationships and Related Transactions, and Director Independence

 Item 14.

 Principal Accountant Fees and Services

 Item 15.

 Exhibits and Financial Statement Schedules

 FORWARD-LOOKING STATEMENTS

 Some of the information contained in this Report
constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements
may include current expectations of future events based on certain assumptions and statements that do not directly relate to any historical
or current fact. When used in this Annual Report, in future filings by the Company with the Securities and Exchange Commission, in the
Company's press releases or other public or shareholder communications, on the Company's website, or in oral statements made
with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to,"
"will continue," "is anticipated," "estimate," "project," "plans," "believes,"
or similar expressions are intended to identify forward-looking statements. The Company's forward-looking statements are based on
management's current expectations and assumptions regarding the Company's business and performance, the economy, and other
future conditions and forecasts of future events, circumstances and results. As with any projection statement or forecast, forward-looking
statements are inherently susceptible to uncertainty and changes in circumstances and underlying assumptions. The Company's actual
results may vary materially from those expressed or implied in its forward-looking statements. Important factors that could cause the
Company's actual results to differ materially from those in its forward-looking statements include, among other things financial
performance, results of operations, financial position, and the achievement of our strategic objectives; the status of borrowers; the
ability of borrowers to repay CM Loans, as defined below; the plans of borrowers; expected rates of return and interest rates; mortgage
default rates; property values; the commercial real estate market; competition from larger better capitalized competitors, the attractiveness
of our CM Loans and Notes; our financial performance; the availability of a secondary market for our Notes; our ability to retain and
hire competent employees and appropriately staff our operation; government regulation; regional and national economic conditions, substantial
changes in levels of market interest rates; and other competitive and regulatory factors.

 The Company does not undertake and specifically
disclaims any obligation to update any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements.

 Item 1. Business

 Throughout this Report we use the terms "KDM," "we,"
"Company," and "us" to refer to Korth Direct Mortgage Inc, and its subsidiaries.

 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 korthdirect.com.

 Korth Direct Mortgage Inc. began its formal operations
in October of 2016 when we engaged our Chief Lending Officer. KDM is a licensed Mortgage Lender Servicer with the State of Florida. Our
NMLS License Number is 1579547. KDM converted from a Florida limited liability company to a Florida corporation effective June 6, 2019.
On July 31, 2020, KDM's ownership was reorganized, and its former sole shareholder, J. W. Korth & Company Limited Partnership
("J. W. Korth"), a Michigan limited partnership which is a FINRA and SEC registered broker-dealer founded in 1982, became
a wholly-owned subsidiary of the Company.

 Overview

 KDM originates and funds loans secured by commercial
real estate (each a "CM Loan" and collectively the "CM Loans"). CM Loans are held by KDM or its wholly-owned subsidiary
KDM Funding I, LLC, as lender. KDM is also the servicer of the CM Loans, though it may use a sub-servicer for some loans. KDM funds its
CM Loans directly in the capital markets through issuance of Mortgage Secured Notes ("MSNs" or "Notes"), through
direct participations, or other means (see "The KDM Process"). The MSNs are special obligations of KDM, payable to the extent
that the underlying mortgage is paid by the borrower. MSNs are secured by KDM's interest in the underlying CM Loan. CM Loans are
secured obligations of the borrowers, which are generally a single-purpose entity formed or existing that owns the underlying property
that is financed.

 KDM's primary business line is lending and
servicing. KDM also has a new additional business segment, asset management, in which we manage the properties that we have taken back
from our borrowers due to non-performance. See "Segment Reporting" for more information on each segment.

 Our loan origination team is comprised of employees
and a network of brokers that have joined the KDM Broker Network to submit loans to us via our website and email. We have created software
that integrates with our customer relationship management ("CRM") software to optimize our digital marketing campaigns and
streamline our origination program. We also engage in traditional email, internet, trade show, and telephone marketing as well as leveraging
our broker network to source new deals.

 We have positioned ourselves in the lending market
as a source for commercial real estate loans of higher quality borrowers and borrowers that may not qualify or may not want to go through
the process for bank loans, but whose loans have strong property and mortgage-related metrics. We fill the gap between traditional lenders
and hard money lenders, what we call Middle-Money.TM. Property metrics depend on the type of CM Loan being offered and are
described below.

 KDM is currently focused on the market for multi-family
value-add bridge loans and loans secured by mortgages on commercial tenanted properties,
including multi-family housing, specialty offices, industrial, retail and warehouses, but may fund other types of commercial real estate.

 KDM funds its loans in a variety of ways, including
by securitizing them in the capital markets as MSNs. J. W. Korth may act as the initial purchaser of MSN Notes and distribute them to
institutional investors. The proceeds from the closing of each MSN issuance are used to complete the funding of the CM Loan or CM Loans
underlying each MSN or to repurchase the CM Loan from our warehouse line. KDM also sells loan participations, and senior and subordinated
notes sometimes alongside an MSN, and sometimes separately. KDM may hold loans in part or in their entirety on its balance with and without
financing ("Portfolio Loans").

 While KDM has funded the bulk of its loans via
MSNs, KDM's business has broadened beyond MSNs.; we have diversified our funding channels. In order to encompass all of the options,
throughout this document when referring to KDM's business as a whole, we will refer to CM Investments and CM Investors. These terms
include our MSN program and its Noteholders, loan participations and the participants, senior note sales and their purchasers, funds and
their investors, and separately managed accounts and their investors.

 The KDM Process

 When KDM identifies a property proposed for financing,
it is screened by KDM's origination underwriting team. If the proposed financing passes preliminary underwriting and meets criteria
for one of KDM's lending programs and/or the KDM Rating process, KDM will put out a term sheet to the prospective borrower. Once
the term sheet is signed and deposit is received, KDM orders an appraisal and other third-party reports that it has determined are necessary
to underwrite the file. Depending on the type of planned loan funding, KDM will begin its CM Investor sales process on a parallel path
with underwriting. Once underwriting is complete, KDM closes the loan.

 KDM may market the loan as an MSN, for participation,
or close the loan on a warehouse line, distributing the interests in the loan to investors later.

 If the loan is being funded by a simultaneous
MSN issuance, the initial purchaser will execute orders and funds will transfer on the settlement date to one of KDM's segregated
accounts. KDM will then fund the CM Loan and issue the MSNs.

 KDM receives monthly interest and principal payments
from CM Loan borrowers. KDM collects its service fee from the interest portion of the payment and then disburses the remaining interest
and principal via wire transfer, ACH, or to DTC for credit to CM Investors' accounts at their respective DTC member or those brokerage
firms corresponding with DTC members, or directly, as the case may be.

 We make CM Loans to borrowers throughout the United
States. As of the date of this Report we were not dependent on any single party for a material amount of our revenue.

 Borrowers identify their intended use of CM Loan
proceeds in their initial CM Loan request. In some cases, we do not verify or monitor a borrower's actual use of funds following
the funding of a CM Loan unless otherwise specified in the offering memorandum for the MSN.

 The KDM Ratings System

 In order to assist us with pricing and underwriting
CM Loans, KDM has created an internal CM Loan rating system which we use for our MSN program.

 The scoring matrix consists of seven factors,
each weighted according to its relative importance in how we view the loans we choose to make. The seven factors are: loan to value, debt
service coverage ratio, property type, property/improvement age, property demand/metropolitan statistical area, building condition, and
sponsor experience. For bridge loans, we consider additional factors including: business plan, take-out lenders, development/lease up
schedule, take-out loan sizing.

 We grade each CM Loan on these factors when it
is presented to us, which results in a numerical figure that we then translate to a traditional AAA-BBB scale with + and – gradation.
We publish our KDM Rating along with each note term sheet and offering memorandum and update it annually in our annual reviews in the
quarterly or annual report that corresponds with the anniversary of the CM Loan issuance.

 The KDM Loan Committee meets annually to review
the KDM Ratings System. We review the performance, the factors, and how well those factors are weighted. The KDM Loan Rating Committee
met on March 13, 2025 to review the KDM rating methodology, but made no changes to its current metrics. The methodology considers seven
key criteria and is then subject to adjustment on a deal-by-deal basis. The seven criteria are: LTV (Loan to Value), DSCR (Debt Service
Coverage Ratio), Property Type, Lease terms, Location, Building Condition and Sponsor Experience. We added additional criteria and weightings
for multi-family bridge lending that include non-GSE geographic criteria, different occupancy categories, building class, and project
type.

 THE KDM UNDERWRITING PROCESS

 KDM has several different loan programs, each of which has its own
underwriting guidelines. Our account executives source loans from commercial mortgage brokers or directly from borrowers which fit our
loan parameters.

 Once we receive a full loan package, we pre-underwrite the loan to
confirm that it roughly fits the target loan program. If it does, we provide either a soft-quote or a term sheet to the prospective borrower.
If the estimated terms are accepted, then the term sheet is signed and a deposit is collected. The loan is then considered "under
application" and we use the borrower's deposit funds to order third party reports, including: appraisal, appraisal review,
environmental assessment, property condition assessment, title, and any other report we deem necessary depending on the property location
and business plan for the property. Simultaneously, KDM gathers all of the additional diligence and credit documentation and then prepares
any capital raise pitch decks or other offering documents, depending on the planned disposition for the loan.

 Once KDM receives the third party reports and
completes all of its property and underwriting diligence, KDM prepares a commitment letter for the borrower. KDM will also have a third
party underwrite the loan in certain circumstances. When the borrower executes the commitment letter, it pays KDM a commitment fee, which
is credited at closing along with the application fee.

 KDM may close and fund CMLs before securitization
either with its own funds, or on its warehouse line, or simultaneously with securitization.

 MSN Closing

 KDM will schedule closing for the CML on or within
a few days after the settlement date of the MSN. However, as with all loan closings, and particularly with multi-state, multi-property
loans, at times there may be certain delays in closing. KDM does not expect closing delays to exceed a few business days, but in some
instances the delay may be longer than anticipated. On the Settlement Date, funds, net of selling concession, will be wired by the Initial
Purchaser or the underwriter, as the case may be, to KDM's segregated account for loan funding. KDM will wire such funds to the
closing agent for the CML as soon as good title to the property is received and KDM authorizes funding of the CML. Barring any delays
in closing, this occurs on the Settlement Date, and KDM wires funds to the title company handling the transaction as soon as practicable
after receipt.

 Once funds are collected, the CML will be finalized
with documents filed in the proper jurisdiction showing KDM as mortgagee. Documents will also be filed, pursuant to the Indenture, assuring
the Trustee a first perfected interest in the CML. At the same time, KDM will create and execute a physical note for issuance to Cede
& Company and delivery to DTC, or its agent. DTC will credit each participating dealer with the appropriate face amount of the
note for further credit to each of its participating client accounts.

 In the event that a CML was closed by a correspondent
lender, such CML will be closed in the name of the correspondent lender and will be assigned to KDM at closing. Any other material aspects
of the process remain the same.

 Non-MSN Closing

 Depending on the plans for the CML post-closing,
KDM may close the loan on its warehouse line, with its own capital, with capital from participants, or table-fund via assignment or participation.
The warehouse lender provides a percentage of the capital to close the loan, and KDM provides the balance, according to the terms of its
warehouse repurchase agreement. KDM may also lend additional funds to CML Borrowers using its own capital. These loans are junior to any
CML and KDM may elect to sell or assign the rights to receive payments under these loans to a third party, provided however that these
notes shall remain in the name of KDM, and KDM shall continue providing the servicing of such notes until such time that the CMLs for
the underlying property have been paid in full.

 How KDM Prices CM Loans and CM Investments

 Note maturities and yields to CM Investors must
be competitive with other options they have for secured investments. Notes are not guaranteed by any federal agency, so they must be competitively
priced when compared with other types of asset-secured debt, such as lower investment grade corporate bonds or other mortgage loans. Borrowers
may have other options for acquiring new mortgage funding. KDM must be competitive with these options in order to acquire new CM Loans.
The dynamic between these two marketplaces is a principal factor in the determination of the terms of KDM Notes and other CM Investments.

 How our Servicing Fee Applies

 KDM services the underlying CM Loans and manages
the distribution and payment of interest and principal on the corresponding CM Investments. For these services it charges an annual servicing
fee ("Servicing Fee") targeted at 1.00% for MSNs. The Company also has contractual servicing agreements with related parties
and third parties that are significantly lower. The Servicing Fee could be lower or higher for a given CM Loan based on that CM Loan and
the corresponding CM Investment's terms, as disclosed in the offering material for each CM Investment. For some of its lending programs,
KDM has a fixed contractual servicing rate. The Servicing Fee accrues to KDM and is paid by the borrower from the borrower's CM
Loan interest payments. For CM Investments where there is not an explicit servicing agreement, the Servicing Fee is the difference between
the rate paid by the borrower and the rate paid to investors on the CM Investment. However, the Servicing Fee may sometimes be shared
with other parties, and not accrue directly to KDM. The Servicing Fee is applied to every interest payment received on the underlying
CM Loan. Therefore, if we receive 7.00% interest annually from the underlying CM Loan and the Servicing Fee is 1%, the Note payments will
be 6.00% annually, barring any other expenses. For the year ended December 31, 2024, the average Servicing Fee collected was 1.13%. KDM
may also derive Servicing Fees from loans that it sells to third parties. The rates received for servicing these loans are set by the
purchaser and KDM.

 CM Loan Servicing

 KDM is responsible for servicing and asset management
on all the loans it makes. This includes collecting payments from borrowers and delivering payments to investors and on its Notes. KDM
also manages the tax and insurance escrow accounts of the borrowers and their annual tax and insurance payments. KDM also handles all
loan requests, lease reviews and approvals, draw requests and annual reviews within its asset management department. KDM has a multi-disciplinary
staff with extensive servicing and asset management experience and uses a suite of servicing software and homegrown reporting software
to manage the ongoing servicing of our book of CM Loans. Currently KDM services 100% of its loans itself, though we may engage a third-party
servicer in the future.

 KDM makes advances of funds from time-to-time
as it believes necessary. KDM may advance payments to CM Investors if it believes a borrower will return to current status promptly. KDM
also may advance payments to local tax authorities, ground lessors, and insurance carriers as it believes necessary to protect the CM
Loan or underlying collateral.

 KDM has custodial responsibility for the CM Loans
and pursuant to the Trust Indenture for the Notes. There are no limitations in KDM's liability as servicer of its loans.

 KDM retains a Servicing Fee for each CM Loan.
See "How our Servicing Fee Applies," above. KDM has relationships with other servicers and uses SitusAMC for special servicing,
as needed. Should a specific backup or special servicer be named for an offering, it will be specified in the offering documents for that
CM Investment.

 CM Loan payments are deposited or transmitted
via ACH to the KDM In Trust For 2 Segregated Account. This segregated account collects payments from all CM Loans, except where otherwise
specified in the offering documents, and is segregated from the KDM operating funds. This account is managed as an omnibus account and
funds received are disbursed for their respective payment on the CM Investments. We also debit this account for our Servicing Fee as described
above.

 CM Loans may also retain an impound or escrow
amount for taxes, ground rent, and insurance and a replacement reserve for roof repairs, tenant improvements, leasing commissions, debt
service, or other items necessary to the proper functioning of the property. Such escrowed funds are currently in the KDM In Trust For
1 Segregated account. In most cases, KDM reserves the right as servicer to release any impounded amounts or reserved where permitted by
the loan documents or when in its reasonable business judgement, such releases are warranted as they do not impair the borrower's
ability to repay the CM Loan.

 In the event it becomes necessary to expend funds
for the collection or protection of a CM Loan, or for the preservation or protection of a CM Loan property, including the institution
of foreclosure proceedings, such expenses will initially be covered by KDM and recouped at disposition of the property or upon repayment
by the Borrower should the CM Loan be brought into compliance. Ultimately, all costs and expenses will be funded (or reimbursed to us)
from the proceeds of any foreclosure or settlement, including reimbursement to us of any expenses we have disbursed toward collection
of a CM Loan. These expenses may reduce interest or principal payments on a Note. See "Risk Factors."

 On our website, www.korthdirect.com, we disclose
borrowers' payment performance on our CM Loans at least annually. We have made arrangements for collection procedures in the event
of borrower default. When a CM Loan is past due and payment has not been received, we contact the borrower to request payment. After a
grace period as permitted under the applicable CM Loan agreements, we may, in our discretion, assess a late payment fee. This fee may
be charged only once per late payment. Amounts equal to any late payment fees we receive are paid to holders of the CM Investment if and
only if a payment on the CM Investment is also late. We may waive a late payment fee when a borrower promises to return a delinquent CM
Loan to current status and fulfills that promise. Each time a payment request is denied due to insufficient funds in the borrower's
account or for any other reason, we may assess an unsuccessful payment fee to the borrower in an amount of $35.00 per unsuccessful payment,
or such lesser amount as may be provided by applicable law. We retain 100% of this unsuccessful payment fee to cover our costs incurred
due to the denial of the payment.

 If the CM Loan becomes 31 days overdue (see "Certain
Definitions," below), we will identify the CM Loan as "Late (31-120)," and we may refer the CM Loan to a real estate
attorney for foreclosure proceedings. However, we may pursue other remedies to bring the loan back to performance before foreclosure.
In these cases, the interest rate on the CM Loan is increased to the highest legal rate in the state in which the property is located.
The costs from a foreclosure and resale of a defaulted CM Loan and mortgaged property are applied against the proceeds payable to CM Investors.
If funds remain after a property is resold and all expenses are paid, they will be distributed to CM Investors on a pro-rata basis.

 Asset Management

 KDM has an internal Asset Management department
that handles delinquent and defaulted loans. In 2024, five loans entered or were in delinquent or defaulted status. One loan on two properties
was part of an assignment for the benefit of creditors and the underlying properties were subsequently sold. Two loans were foreclosed
or deeded to KDM and are now in our REO portfolio. One other was given by deed in lieu of foreclosure
in March 2025, and a final loan, which is expected to be deeded over will be leased back to the company operating in the space. To handle
these issues, KDM uses a combination of inside and outside counsel, asset management, third parties, and servicing staff. The loans that
have gone into default are primarily offices that either failed to lease up or lost major tenants. As of the date of this report, KDM
owns five total properties in its REO portfolio. Please see "Segment Reporting" for more information.

 KDM works in the best interest of investors to
maximize recovery value on all properties in asset management. Recovery timelines can vary from as short as 4 months to as long as several
years. Properties may not have current cash flow that exceeds expenses and CM Investors may not receive cash flow for an extended period
for loans that are in Asset Management.

 Certain Definitions

 We define delinquent accounts as accounts that are more
than 31 days overdue with no immediate plan to repair the delinquency. Charge-offs are defined as the unpaid principal balance of a specific
CM Loan minus the expected recovery based on current market conditions for the foreclosed property. Uncollectable accounts are
defined as those CM Loans where no recovery is expected to be made. These definitions are regardless of any grace period, re-aging, restructure,
or partial payments received. A CM Loan that is categorized as a delinquent account could be re-categorized as current if the borrower
brought all payments up to date. Charge-offs would be adjusted for properties in foreclosure based on an annual review of the current
market conditions for the geography of the property. Uncollectible accounts will be reviewed quarterly and could be reclassified
as collectible if market conditions change for the property subject to the mortgage and foreclosure. See "Status of our CM
Loans".

 Intellectual Property

 We have intellectual property that is our brand,
our process, our ratings system, our KDM Broker Network, our correspondent network, and our internal applications and systems. We have
a trademark for the term "Middle-Money" and have filed trademark applications on our name and logo. We also have internal
applications that we have developed that assist in managing our business.

 Employees

 As of the date of this Report, we employ twenty-four
full-time people, and five contract people.

 Facilities

 We maintain offices at 135 San Lorenzo Avenue,
Suite 600, Coral Gables, Florida 33146, and J.W. Korth & Company has an office in Lansing, Michigan.

 Subsidiaries

 As of the date of this report, KDM has several
subsidiaries, many of which are special purpose entities.

 J. W. Korth, a FINRA and SEC registered broker-dealer
founded in 1982 by James W. Korth. J. W. Korth was previously the parent company of KDM. The companies were reorganized as of July 31,
2020, when KDM, directly and indirectly, acquired all of the equity of J. W. Korth.

 KDM Funding I, LLC is a wholly owned subsidiary
of KDM formed for the purpose of issuing MSNs on CM Loans that are originated and serviced by KDM.

 KDM owns a controlling interest in KDM Stafford
LLC, which is a special purpose entity that owns a building we acquired in Virginia.

 KDM holds a controlling interest in KDM Capital
LLC, the general partner of KDM Capital Partners, LP.

 KDM Asset Management, LLC is the owner of each
of KDM's Real Estate Owned ("REO") limited liability companies.

 KDM MFB LLC, a Delaware limited liability company, is a wholly
owned subsidiary of KDM.

 There are also a variety of entities created to
own real estate received through foreclosure or deed in lieu of foreclosure, the fund manager, the manager of the real estate assets,
and other various special purposes. If and when these become material they will be reported on as necessary.

 All of these entities are consolidated into our
financial statements.

 Item 1A. Risk Factors

 The following discussion of risk factors contains
"forward-looking statements," as discussed in the forward-looking statements Section of this Form 10-K Report. These risk
factors may be important to understanding any statement in this Annual Report on Form 10-K or elsewhere. The following information should
be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations section and
the Financial Statements and related notes of this Report on Form 10-K. Any of these factors, or others, many of which are beyond the
Company's control, could negatively affect the Company's revenues, profitability or cash flow in the future. The risks and
uncertainties described below are not the only ones we face but do represent those risks and uncertainties that we believe are material
to our business, operating results, prospects and financial condition. Additional risks and uncertainties not presently known to us or
that we currently deem immaterial may also harm our business.

 Difficult conditions in the mortgage, residential
and commercial real estate markets, or in the financial markets and the economy generally, including market volatility, and geopolitical
tensions, may cause us to experience market losses related to our holdings. There is no assurance that these conditions now existing,
will improve in the near future.

 Our results of operations are materially affected
by conditions in the mortgage market, the residential and commercial real estate markets, the financial markets and the economy generally.
Difficult market conditions, as well as inflation, energy costs, geopolitical issues, health epidemics, unemployment and the availability
and cost of credit, can contribute to increased volatility and diminished expectations for the economy and markets. The U.S. mortgage
market has been severely affected by changes in the lending landscape and has experienced defaults, credit losses and significant liquidity
concerns, and there is no assurance that these conditions have fully stabilized or that existing conditions will not worsen. Disruptions
in mortgage markets negatively impact new demand for real estate. Further, disruptions in the broader financial markets, including the
occurrence of unforeseen or catastrophic events such as the effects of COVID-19
or other widespread health emergencies, geopolitical tensions or terrorist attacks, could adversely affect our business and operations.
Any such disruption could adversely impact our ability to raise capital, cause increases in borrower defaults and decreases
in the value of our assets, cause continued interest rate volatility and movements that could make obtaining financing or refinancing
our debt obligations more challenging or more expensive, and could lead to operational difficulties that could impair our ability to manage
our business.

 The market for real estate assets constituting
commercial office space have experienced a significant downturn.

 The market for commercial office real estate assets
has seen a significant downturn due to changes in the workforce practices of many organizations. These changes have seen many office tenants
abandoning traditional office footprints and/or downsizing their positions in the same in favor of remote or hybrid working environments.
This practice has had a significant effect on the valuation of these assets and nationwide has caused an uptick in defaults by the owners
of such assets on their debt service obligations as the revenue from these tenants has disappeared. Many property owners have struggled
to relet some of these spaces causing outright maturity defaults, DSCR covenant violations and limited exit options for borrowers through
a softer demand for such properties on the real estate market, and reduced leasing activity for vacant spaces. These changes have been
exacerbated by continued high interest rates that make it difficult for borrowers to refinance existing debt at rates that generate sufficient
DSCR coverage. The result of these factors have created situations where lenders have to foreclose on such loans and manage the assets
until they can sell the collateral at a rate sufficient to cover the debt owed, or forcing lenders to extend the terms of the existing
debt at interest rates that may not be current market rates. See the Inflation risk factor below.

 KDM's lending of additional subordinated
funds to a Borrower may provide the Borrower needed funds to stabilize or complete needed renovations to subject properties but may also
cause the property to be leveraged higher than would be acceptable under the current CM Loans underwriting guidelines.

 KDM may lend a CM Loan Borrower additional funds
through a subordinated real estate mortgage loan. KDM may elect to do so when it seems that the CM Loan Borrower needs such additional
funds to complete or stabilize the subject property. This in turn may limit the ability of a CM Loan Borrower to refinance a loan and
may over-leverage the subject property if the valuation of the property does not increase as expected, if market conditions change or
of the CM Loan Borrower does not properly execute its business plan, which may increase the risk of a maturity or monetary default.

 Inflation in the U.S. is expected to continue at an elevated
level in the near- to medium-term, which may have an adverse impact on the valuation of our loans and affect our borrowers' ability
to refinance.

 Heightened competition for workers, supply chain
issues, the relocation of foreign production and manufacturing businesses to the U.S., and rising energy and commodity prices have contributed
to increasing wages and other economic inputs. Inflation can negatively impact the profitability of real estate assets with long-term
leases that do not provide for short-term rent increases or that provide for rent increases with a lower annual percentage increase than
inflation. Continued inflation, particularly at higher levels, may have an adverse impact on the valuation of the properties underlying
the CM Loans as well as the sponsors' ability to refinance.

 CM Investors may lose some or all of their CM Investment.

 The regular payment of a CM Investment depends
entirely on payments to KDM of a borrower's CM Loan. The Notes are special, limited obligations of KDM payable only from KDM's
receipts of CM Loan proceeds, net of KDM's Servicing Fee and cost of collection. If a borrower defaults on the CM Loan, CM Investors
in that CM Loan will be dependent on proceeds from the Assignment of Rents held by KDM and on the proceeds, if any, from foreclosure of
the CM Loan mortgage for payments on the their Notes. The failure of a borrower to repay a CM Loan is not an event of default by KDM.
Notes are suitable purchases only for investors of adequate financial means who, in the event of a default on the underlying CM Loan,
may have to wait for a foreclosure and subsequent sale to recover some or all of the principal invested in their Note. In some cases the
property may not be sold quickly and workouts may take years.

 We rely on third-party appraisals to value
the property securing the CM Loan, and information from the borrower on cash flow and profitability of the income property.

 While we make every effort to engage responsible
licensed third-party appraisers, we cannot be certain that the information and presentations they make are reliable. Appraisals are subject
to mistakes that could affect the value of a property. Further, appraisers may make judgments of value based on cash flow presented by
borrowers. If a borrower were to falsify its cash flow, it could affect the value shown in the appraisal. To verify cash flows, we receive
bank statements from borrowers. Although we engage appraisal review firms, some errors may not be caught. KDM is not responsible for mistakes
or fraudulent activities of borrowers or appraisers.

 As we are highly dependent on information technology. System
failures or security breaches could materially disrupt our business.

 Our business is highly dependent on information
technology and our ability to process, record and monitor many complex transactions and large amounts of data efficiently and accurately.
In the ordinary course of our business, we store sensitive data, including our proprietary business information and that of our business
partners, and non-public personally identifiable information of mortgage borrowers, on our networks. The secure maintenance and transmission
of this information is critical to our operations. Computer malware, viruses, ransomware and phishing attacks remain widespread and are
increasingly sophisticated. We are from time to time the target of attempted cyber threats. We continuously monitor and develop our information
technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses
and other events that could have a security impact. Despite these security measures, our information technology and infrastructure may
be vulnerable to attacks by hackers or breached due to employee or service provider error, malfeasance or other disruptions. Any such
breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such
access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy
of personal information, regulatory penalties, disruption to our operations, or disruption to our trading activities or damage our reputation,
which could have a material adverse effect on our financial results and negatively affect the market price of our common stock and our
ability to pay dividends to stockholders.

 The resources required to protect our information
technology and infrastructure, and to comply with the laws and regulations related to data and privacy protection, are continuously evolving.
Even in circumstances where we are able to successfully protect such technology and infrastructure from attacks, we may incur significant
expenses in connection with our responses to such attacks. Government and regulatory scrutiny of the measures taken by companies to protect
against cybersecurity attacks has resulted in heightened cybersecurity requirements and additional regulatory oversight. Any of the foregoing
issues may adversely impact our results of operations and financial condition.

 If we believe it is in the best interest
of CM Investors, we have the right to adjust the terms of a CM Loan. It is possible that due to natural disasters, local disruption
of services, political unrest, changes in local laws, market competition or disruptions and other unforeseen events that affect the property
pledged under a CM Loan or affect the borrower's ability to make its CM Loan payments, it might be in the best interest of the CM
Investors to provide a borrower with an accommodation regarding loan terms rather than be forced to foreclose on a loan. If we adjust
a CM Loan, that may reduce interest payments, suspend interest payments, lengthen the time when principal may be received or change other
terms of the CM Loan, any of which could reduce the expected benefits of the CM Loan to the CM Investors.

 KDM may also choose to extend a performing CM
Loan for an additional term due to market conditions, or may modify a loan for a good borrower to extend their period while adjusting
their rate to current market level, if we believe such modification will not be detrimental to Noteholders.

 There may be a default on a CM Loan.

 CM Loan default rates may be significantly affected
by general economic conditions beyond our control and beyond the control of the individual borrower. Default on a CM Loan is subject to
many factors, such as prevailing interest rates, the rate of unemployment, the level of consumer confidence, residential or commercial
real estate values, the value of the U.S. dollar, energy prices, changes in consumer spending, the number of personal bankruptcies, disruptions
in the credit markets, and other factors, none of which can be predicted with certainty.

 Any costs or delays involved in the completion
of a foreclosure or liquidation of the underlying property may further reduce proceeds from the property and may increase the loss.

 It is possible that we may find it necessary or
desirable to foreclose on certain CM Loans we acquire or originate, and the foreclosure process may be lengthy and expensive. Borrowers
may resist mortgage foreclosure actions by asserting numerous claims, counterclaims and defenses against us including, without limitation,
numerous lender liability claims and defenses, even when such assertions may have no basis in fact, in an effort to prolong the foreclosure
action and force us into a modification of the loan or a favorable buy-out of the borrower's position. In some states, foreclosure
actions can sometimes take several years or more to litigate. At any time prior to or during the foreclosure proceedings, the borrower
may file for bankruptcy, which would have the effect of staying the foreclosure actions and further delaying the foreclosure process.
Foreclosure may create a negative public perception of the related mortgaged property, resulting in a decrease in its value. Even if we
are successful in foreclosing on the loan, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover
our cost basis in the CM Loan, resulting in a loss to CM Investors. Furthermore, any costs or delays involved in the completion of a foreclosure
of the CM Loan or a liquidation of the underlying property will further reduce the proceeds and thus increase the loss. Any such reductions
could materially and adversely affect the return to the CM Investor.

 Real estate properties acquired through foreclosure subject us
to additional risks associated with owning real estate.

 When a CM Loan defaults, KDM may, on behalf of
CM Investors, acquire the property through foreclosure or a deed in lieu of foreclosure. Depending on the market environment at the time,
we may need to own the properties for an extended period of time before sale. We have acquired real estate properties through foreclosure,
which exposes us to additional risks, including, but not limited to, the following:

 facing difficulties in integrating these properties with our existing business operations;

 incurring costs to carry, and in some cases make repairs or improvements, which results in additional
expenses and requires additional liquidity that could exceed our original estimates and impact our operating results;

 being unable to realize sufficient amounts from sales of the properties to avoid losses;

 being unable to sell properties, which are not liquid assets, in a timely manner, or at all, when we need
to increase liquidity;

 maintaining occupancy of the properties;

 controlling operating expenses;

 coping with general and local market conditions;

 complying with changes in laws and regulations pertaining to taxes, use, zoning and environmental protection;

 possible liability for injury to persons and property;

 possible uninsured losses related to environmental events such as earthquakes, floods or mudslides; and

 possible liability for environmental remediation.

 Information supplied by the borrower could
be inaccurate or intentionally false.

 While we perform due diligence on each borrower,
including verifying property ownership, rent collections, property values, coverage ratios and other appropriate due diligence materials,
a borrower could present us with false information which we may not discover during our due diligence process.

 In many cases, we do not monitor our borrowers'
use of funds.

 Unless specified otherwise, KDM does not monitor
borrowers' use of funds. It is possible the borrower may not use the funds for the purposes it has asserted, for example, to improve
the property. Additionally, the borrower could potentially misuse the proceeds it receives from the loan in a way that negatively impacts
their ability to make timely payments on the CM Loan, their credit, or the value of the underlying property.

 CM Loan Guarantees May Not Be Collectable

 Some CM Loans may have a personal guarantee. We
may ask for guarantees from the owners, or the owners of the owner, if the owner is not an individual. Because we primarily focus our
underwriting on the value of the mortgaged property, the loan to value ratio, and the debt service coverage ratio, we generally do not
investigate the net worth of the borrowers, and therefore, the ultimate value of the guarantee on a CM Loan, if any. In the event a CM
Loan goes into foreclosure and the money realized in the foreclosure does not pay off the entire principal owed on the CM Loan, investors
should not count on the guarantee being collectible. Should such a situation arise, investors may not see repayment of the entire principal
amount of their Notes.

 If payments on a CM Loan are not paid when
due, CM Investors may not receive the full principal and interest payments that they expect to receive on Notes.

 Payment to holders of Notes is completely dependent
on payments received from corresponding CM Loans. If the borrower fails to make a required payment on a CM Loan within 30 days of a due
date, we will pursue collection. If we refer a CM Loan to an attorney, we will monitor that CM Loan until either the CM Loan is paid or
the property is foreclosed and resold and investors are paid. We may also pursue collection of a delinquent CM Loan directly. In the case
of collection efforts, the cost of attorney's fees will be charged against the CM Loan and will reduce the net payments on a Note.

 The CM Loans underlying the Notes are typically
payable on an interest-only basis until maturity, at which time the entire principal balance is due. Therefore, borrowers may have to
refinance to pay off a balloon payment on the CM Loan.

 If a borrower must refinance to pay off a CM Loan,
such refinancing could be impossible due to market conditions or other factors. In such a case, the CM Loan would default. Such a default
could reduce or eliminate principal payment of the Notes.

 The borrower may prepay some or all of the principal
amount of a CM Loan. A borrower may decide to prepay all, or a portion of, the remaining principal at any time subject to any prepayment
penalties (if any) listed in the CM Loan. The amount of any prepayment penalty will depend on the type of loan product and the borrower.
CM Investors will receive such prepayment net of our servicing fee. Interest will not accrue after the date on which the CM Loan is paid
in full. If the borrower prepays a portion of the remaining unpaid principal balance on the CM Loan, we will reduce the outstanding principal
amount and interest will cease to accrue on the prepaid portion. On an amortizing loan, we will require the borrower to pay the same amount
on the CM Loan as the borrower paid prior to any partial repayment of principal. As a result of the combination of the reduced principal
amount and the unchanged monthly payment, the effective term of the CM Loan will decrease. On an interest-only CM Loan, the monthly payment
CM Investors receive will be reduced proportionally by the amount of principal repaid. If the borrower prepays the CM Loan in full or
in part, CM Investors will in all probability not receive all the interest payments that they expected to receive on their Notes.

 The current interest rate environment and/or
market volatility may make it difficult for a CM Loan to refinance.

 Sharp increases in prevailing interest rates may
make it difficult or in some cases, not possible, for some CM Loan borrowers to refinance out of the CM Loan. Sharp increases in prevailing
interest rates and or inflationary pressures may negatively impact the profitability of the collateral secured by the CM Loans, causing
some assets to lose their ability to be cash flow positive or maintain the debt service covenants of lenders at the time they need to
refinance. Similarly, market volatility reduces the amount of lenders in the marketplace when outcomes of the current environment are
unpredictable. Accordingly, such changes may make it difficult, or in some cases, not possible for some CM Loan Borrowers to refinance
a CM Loan at maturity, affecting the CM Loan Investors' ability to realize a return of their principal and or interest payments.

 Prevailing interest rates may change during
the term of the CM Loan on which a Note is dependent.

 If a CM Loan is prepaid, CM Investors may be unable
to invest prepaid Note proceeds at a rate comparable to the interest payable on the Notes. Further, for our MSNs, if interest rates rise
and there is a market for the Notes, and a Noteholder decides to sell a Note prior to maturity, the Noteholder may receive a discounted
return on the Note.

 Investor funds in a KDM segregated account
do not earn interest.

 Proceeds of the sale of the Notes are held in
a non-interest bearing segregated account pending completion of the Note Offering. Further, we place borrower loan payments in a segregated
account under our control and pay all loan payments collected from the prior payment date at least four business days prior to the payment
date on the twenty-fifth day of each month, with an extension to the next business day if required. Funds held in segregated accounts
do not earn interest. These segregated accounts are held at BankUnited, RBC, or Chase and are managed by KDM. There is no escrow agreement
with the bank.

 We may have to limit our business to avoid being deemed an investment
company under the Investment Company Act.

 In general, a company
that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities may be deemed
to be an investment company under the Investment Company Act of 1940, as amended ("Investment Company Act"). The Investment
Company Act contains substantive legal requirements that regulate the manner in which "investment companies" are permitted
to conduct their business activities. We believe we are excluded from registration by Section 3(c)(5)(c) of the Investment Company Act
and have conducted, and we intend to continue to conduct, our business in a manner that does not result in our Company being characterized
as an investment company. This section of the Investment Company Act contains an exemption for companies that make mortgages and do not
issue redeemable shares. To avoid being deemed an investment company, we may not be able to broaden our offerings, which could require
us to forego attractive opportunities. If we are ever deemed to be an investment company under the Investment Company Act, we may be required
to institute burdensome compliance requirements and our activities may be restricted, which could materially adversely affect our business,
financial condition, and results of operations.

 Funds Received for all CM Loans are held on an omnibus basis
in a Segregated Account.

 We hold all funds received from CM Loans in a
segregated account titled In-Trust For 2 at BankUnited bank. We then use our internal accounting system to determine which funds are applied
to which Note investors. While our internal accounting system is backed up into separate record keeping systems managed by service providers,
should our systems fail and the back-up systems fail for any reason, we may have difficulty determining which payments are to be applied
to which Noteholder and your payments could be delayed until such a determination is made.

 In the event of a KDM bankruptcy, general creditors
of KDM may assert a claim that funds on deposit in the segregated account maintained by KDM for the benefit of CM Investors, and the separate
segregated account maintained by KDM for real estate tax and insurance payments, are subject to the claims of general creditors. Principal
and interest payments on CM Loans are deposited in a segregated bank account, and payments of real estate taxes and insurance on mortgaged
properties are deposited in another segregated account, when and as received by KDM. Receipts deposited in those accounts are disbursed
to CM Investors monthly and annually to property insurers and taxing authorities. KDM performs all accounting for these accounts, including
sub-accounts for each CM Investment and property, and maintains all accounting records at its principal office. Under the Trust Indenture
for the MSNs, the Trustee will have a first lien on the principal and interest account for the benefit of Noteholders. If the bankruptcy
court were to determine that the funds in the account were subject to claims of creditors other than Noteholders or the Trustee acting
on their behalf, the amount that Noteholders would receive from the account could be adversely affected. Further, amounts on deposit to
pay real estate taxes and insurance could be reduced or entirely eliminated if paid to general creditors of KDM in the bankruptcy proceeding.
The bankruptcy court could temporarily stay disbursements to CM Investors, taxing authorities and insurers even if the court were ultimately
to determine that the funds in the account should be distributed to the CM Investors, the Trustee acting on their behalf, and, also, as
appropriate, to taxing authorities and property insurers, resulting in delays to CM Investors in the receipt of payments on their Notes
and penalties imposed by insurers and taxing authorities.

 We rely on third-party banks to disburse
CM Loan proceeds and process CM Loan payments, and we rely on third-party computer hardware and software. If we are unable to continue
utilizing these services, our business and ability to service the CM Loans may be adversely affected.

 We rely on a third-party bank to disburse CM Loan
amounts. Additionally, because we are not a bank, we cannot belong to and directly access the ACH payment network, and we must rely on
an FDIC-insured depository institution to process our transactions, including CM Loan payments and remittances to CM Investors. We also
rely on computer hardware purchased and software licensed from third parties. This purchased or licensed hardware and software may not
continue to be available on commercially reasonable terms, or at all. If we cannot continue to obtain such services from this institution
or elsewhere, or if we cannot transition to another processor quickly, our ability to process payments will suffer and the ability to
receive principal and interest payments on the Notes will be delayed or impaired.

 Competition for our employees is strong,
and we may not be able to attract and retain the highly skilled employees that we need to support our business.

 The market for hiring highly skilled technical
and financial personnel is competitive. We may not be able to hire and retain personnel at compensation levels consistent with our existing
compensation and salary structure. Many of the companies with which we compete for experienced employees have greater resources than we
have and may be able to offer more attractive terms of employment.

 In addition, we invest significant time and expense
in training our employees, which increases their value to competitors that may seek to recruit them. If we fail to retain our employees,
we could incur significant expenses in hiring and training their replacements and the quality of our services and our ability to service
the CM Loans could diminish, resulting in a material adverse effect on our business and our ability to service the Notes.

 If we fail to retain our key personnel,
we may not be able to achieve our anticipated level of growth and our business could suffer.

 Our future depends, in part, on our ability to
attract and retain key personnel. Our future also depends on the continued contributions of our executive officers and other key technical
personnel, each of whom would be difficult to replace. The loss of the services of any of the executive officers or key personnel, and
the process to replace any key personnel would involve significant time and expense and may significantly delay or prevent the achievement
of our business objectives.

 Purchasers of CM Investments will have no
control over KDM and will not be able to influence KDM corporate matters.

 Our CM Investments grant no equity interest in
KDM to the purchaser nor grant the purchaser the ability to vote on or influence our management decisions, including forbearance or foreclosure.

 Unforeseeable Adverse Events.

 Events beyond our control may damage our ability
to maintain adequate records, or perform our servicing obligations. If such events result in a system failure, CM Investors' ability
to receive principal and interest payments on CM Investments could be substantially harmed.

 If a catastrophic event resulted in an outage
and physical data loss, our ability to perform our servicing obligations would be materially and adversely affected. Such events include,
but are not limited to, fires, earthquakes, hurricanes, terrorist attacks, natural disasters, computer viruses and telecommunications
failures. We store back-up records via cloud storage services via several different companies. If our electronic data storage and backup
storage system are affected by such events, we cannot guarantee that CM Investors would be able to recoup their investment.

 Federal and State regulatory bodies may
create new rules and regulations that could adversely affect our business.

 In the wake of the last financial crisis, banking
and finance regulation continues to evolve, and increasing regulation by federal and state governments may become more likely. Our business
could be negatively affected by the application of existing laws and regulations or the enactment of new laws applicable to lending, mortgages,
mortgage servicing, or securities distribution. The cost to comply with such laws or regulations could be significant and would increase
our operating expenses, and we may be unable to pass along those costs to our investors in the form of increased fees.

 If we discover a material weakness in our
internal control over financial reporting which we are unable to remedy, or otherwise fail to maintain effective internal control over
financial reporting, our ability to report our financial results on a timely and accurate basis may be adversely affected.

 Should we or our auditors discover a material
weakness in our internal controls, our ability to report our financial results on a timely and accurate basis may be adversely affected.

 New Government Regulation may limit our
ability to make CM Loans

 We do not believe that we are subject to Risk
Retention under RR (17 CFR 246), as our entity type is not within scope of the rule according to 12 CFR 244.1(c). However, if we become
subject to risk retention rules, we could be required to raise significant capital in order to continue doing business.

 Our Proprietary Ratings System is untested
and is based on broad assumptions for which we have little statistical basis

 We created the KDM Ratings System internally and
based it on very broad assumptions. It should be noted that our staff members have no experience in creating a ratings system. We are
not affiliated with any commercial rating agency, nor do we have experience in creating ratings of debt or mortgage securities. The Rating
System has a short track record and has not been tested against any known data set. The Rating System is still evolving as we add items
and add property types. It is not intended to be and should not be relied upon as a predictable measure of performance of the underlying
CM Loan at this time. We also have conflicts of interest with respect to our Ratings System. See "Conflicts of Interest Regarding
Our Proprietary Ratings System."

 Risks Related to the Banking System and
Financial Markets

 KDM depends on the functioning of the U.S. banking
system and bond markets to raise the capital needed to fund CM Loans which are the core of its business. Should the banking system or
bond markets enter into a prolonged downturn or suffer a crisis of confidence, KDM's ability to raise money to originate new CM
Loans may be adversely impacted, causing it to reduce the number of loans it originates.

 Item 1B. Unresolved Staff Comments

 Not applicable.

 Item 1C. Cybersecurity

 Our business is highly dependent on information
technology. In the ordinary course of our business, we store sensitive data, including our proprietary business information and that of
our business partners, and non-public personally identifiable information of mortgage borrowers, on our networks. The secure maintenance,
processing and transmission of this information is critical to our operations. Computer malware, viruses, ransomware and phishing attacks
remain widespread and are increasingly sophisticated. We are frequently the target of attempted cyber threats, as are many other organizations
within the financial servicing industry. We continuously monitor and develop our information technology networks and infrastructure to
help prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses, and other events that could have
a security impact. Despite these security measures, our information technology and infrastructure may be vulnerable to attacks by hackers
or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information
stored there could be accessed, publicly disclosed, lost or stolen. Such access, disclosure or other loss of information could result
in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disruption
to our operations or trading activities or damage to our reputation, all of which could have a material adverse effect on our business,
results of operations and financial condition. For additional information on these risks, see Item 1A, "Risk Factors".

 We recognize the importance of protecting our
information and our information technology systems, and assessing, identifying and managing cybersecurity-related risks have been integrated
into our risk management processes. We focus on information technology and cybersecurity measures at both an enterprise-wide operational
level and an individual employee level. We have in place various methods and levels of information technology and cybersecurity measures
which are aimed at protecting our information and information technology systems to help secure long-term value for our stockholders and
other stakeholders. By way of example, these measures include the following:

 1.
 Industry-Standard Security Frameworks: We adhere to recognized security frameworks, including the
 National Institute of Standards and Technology (NIST), and employ controls such as antivirus and anti-malware protections, multi-factor
authentication (MFA), complex password policies, patch management, email security solutions, and firewall protections.

 2.
 Threat Detection and Risk Management: We leverage advanced security technologies, including endpoint
detection and response (EDR), security information and event management (SIEM), and vulnerability management tools to proactively
identify and mitigate risks.

 3.
 Incident Response Protocols: We maintain a formal cybersecurity incident response plan that
ensures a structured and comprehensive response to security incidents. This plan involves senior executives, external legal and forensic
specialists, and includes an active
incident response retainer with our third-party Security Operations Center (SOC).

 4.
 Continuous Security Assessments: We conduct regular cybersecurity audits, third-party risk assessments,
penetration tests, and targeted control evaluations to identify and remediate potential vulnerabilities. Our security program is continuously
monitored and assessed by an external 24/7 Security Operations Center (SOC).

 5.
 Disaster Recovery and Data Resiliency: We have robust backup and disaster recovery processes
in place to ensure business continuity in the event of a security incident or system failure.

 6.
 Employee Awareness and Training: We implement comprehensive cybersecurity and data privacy training
programs to enhance employee awareness of cyber risks and reinforce secure operational practices.

 As part of our commitment to information security and data protection,
we have achieved SOC 2 Type II certification in 2024. This certification, issued by an independent third-party auditor, verifies that
our security controls meet the American Institute of Certified Public Accountants (AICPA) Trust Services Criteria for security, availability,
processing integrity, confidentiality, and privacy. The SOC 2 Type II audit evaluates the effectiveness of our cybersecurity and IT controls
over an extended period, further validating our commitment to safeguarding sensitive information and maintaining a secure operational
environment.

 Our executive team is responsible for overseeing
matters relating to our information technology and cybersecurity risk exposures and the steps our Company takes to monitor and mitigate
these risks. The executive team is briefed quarterly or as needed by senior management and the Chief Information Security Officer, or
CISO, on cybersecurity matters, or more frequently as the circumstances require. Our Vice President of Technology, who serves as our CISO,
oversees data privacy, information technology, and cybersecurity matters. Our CISO has extensive information technology and program management
experience, has served in this role for the Company since 2022 and has supported the Company's information security function since
2017.

 To date, we believe that the risks from identified
cybersecurity threats, have no t materially affected and are not reasonably likely to
materially affect us, including our business strategy, results of operations or financial condition.

 Item 2. Properties

 In November 2022, we acquired a majority interest in a property
in Stafford, Virginia. The property is tenanted by third parties. KDM took possession of properties in Acton, Massachusetts and St. Louis,
Missouri, both office properties, via foreclosure and deed in lieu, respectively, in 2024. In March of 2025, we took possession of property
in Los Angeles, CA via deed in lieu of foreclosure. We manage these properties under our Asset Management segment. Please see Segment
Reporting (Note 19).

 We lease office space in Coral Gables, Florida,
and through our J. W. Korth subsidiary in Lansing, Michigan.

 Item 3. Legal Proceedings

 The Company is not subject to any material legal
proceedings. The Company may at times be involved in legal proceedings, claims, and litigation arising in the ordinary course of business
not specifically discussed herein. In the opinion of management, the final disposition of such matters will not have a material adverse
effect on our consolidated financial position, cash flows or results of operations.

 Item 4. Mine Safety Disclosures

 Not applicable.

 Item 5. Market for Registrant's Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Market Information

 There is no market for the Company's common equity.

 Holders

 As of December 31, 2024, the Company had issued
and outstanding (i) 5,000,000 shares of its common stock, all which were issued to J.W. Korth, (ii) 460,000 shares of its Series A 6%
Cumulative Perpetual Convertible Preferred Stock (the "Series A Preferred"), all of which were issued to Cede & Company,
and (iii) 19,000 shares of its Series B 6.50% Cumulative Non-Voting Redeemable Secured Preferred Stock ("Series B Preferred")
issued to Cede & Company. The number of holders was determined from the records of our transfer agent and does not include beneficial
owners of common or preferred stock whose shares are held in the names of Cede & Company, broker-dealers, or registered clearing agencies.
The transfer agent of our common stock and preferred stock is Continental Transfer and Trust Company, One State Street, New York, New
York 10004.

 Dividends

 The Company has not paid, and has no plans to
pay dividends on its common stock. Holders of the Series A Preferred are entitled to receive, when, as, and if declared by the Board of
Directors, cash dividends at a rate of 6.00% per annum based on the Series A Preferred liquidation preference of $25.00 per share. Holders
of the Company's 460,000 issued shares of Series A Preferred were paid a dividend totaling $1.50 per share over four quarterly payments
for the year ended December 31, 2024.

 Holders of the Series B Preferred are entitled
to receive, when, as, and if declared by the Board of Directors, cash dividends at a rate of 6.50% per annum based on the Series B liquidation
preference of $1,000.00 per share. These holders received dividends of $65.00 per share for the year ended December 31, 2024.

 Securities Authorized for Issuance Under Equity Compensation Plans.

 For information regarding securities authorized
for issuance under our 2019 Stock Plan, please refer to the disclosure included below under the caption "Item 11. Executive Compensation—Equity
Compensation Plan Information."

 Sales of Unregistered Securities

 On June 29, 2021, KDM issued and sold 19,000 shares of its Series B
Preferred to "qualified institutional buyers," as defined in Rule 144A under the Securities Act of 1933, as amended (the "Securities
Act"), under exemptions from registration provided by Section 4(a)(2) of the Securities Act and Securities Act Rule 144A,

 On September 15, 2021, June 28, 2022, and March 23,2023, KDM issued
and sold 100,000, 480,000, and 160,000 shares, respectively of its Series A Preferred to qualified institutional buyers under exemptions
from registration provided by Section 4(a)(2) of the Securities Act and Securities Act Rule 144A,

 Item 6. [Reserved]

 Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations

 You should read the following discussion in
conjunction with our audited historical financial statements, which are included elsewhere in this Form 10-K. Management's Discussion
and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based
on current expectations and assumptions, which are subject to risk, uncertainties and other factors, including, but not limited to, those
described in the subsection titled "Risk Factors," located in Part I, Item 1A, of this Form 10-K.

 Overview

 KDM was organized as a Florida limited liability
company on July 24, 2009, under the name HCMK Consulting, LLC. We changed our name to J. W. Korth & Company, LLC, in November 2010,
and then to Korth Direct Mortgage, LLC, on August 24, 2016. KDM converted into a Florida corporation, Korth Direct Mortgage Inc., on June
6, 2019. 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, as well as via
our subsidiary, J. W. Korth & Company Limited Partnership, a Michigan limited partnership.

 Korth Direct Mortgage began its formal operations
in October of 2016 when we engaged our Chief Lending Officer. KDM is a licensed Mortgage Lender Servicer with the State of Florida. Our
NMLS License Number is 1579547.

 We were wholly owned by J. W. Korth until July
31, 2020, when we acquired all of the equity of J.W. Korth, making it a subsidiary.

 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 selling loan
participations, via a warehouse line, and directly in the capital markets through issuance of Mortgage Secured Notes ("MSNs"
or "Notes"), which are sold through J.W. Korth as initial purchaser through exemptions from registration available under Rule
144A, Regulation D, and other exemptions from registration. We also own and operate commercial property acquired via foreclosure or deed
in lieu of foreclosure. We may also issue second lien loans using KDM's own assets, in which case these loans will be junior to
the CM Loans where they are secured by the same property, or issue first mortgages with our own funds, which may or may not use additional
financing.

 KDM also operates its business through a variety
of subsidiaries. KDM MFB LLC, a Delaware limited liability company was formed to issue multi-family bridge loans, and KDM Funding I LLC,
a Florida limited liability company was formed to issue additional MSNs. These companies are wholly owned by KDM. Our REO portfolio is
held in the name of KDM Asset Management LLC, a wholly owned subsidiary of KDM, and each property is held in a special purpose entity
owned by KDM Asset Management, LLC.

 Results of Operations for Year Ended December
31, 2024

 The Company generated revenues of $12,067,657 for the year ended
December 31, 2024, an increase of $2,227,067 or 23% compared with revenues of $9,840,590 for the year ended December 31, 2023, due to
consolidation of revenues from our REO Properties. As of December 31, 2024, the Company owned mortgages of $451,974,989 compared with
mortgages of $484,484,408 as of December 31, 2023, a decrease of 6.7%.

 Similarly,
gross profits increased by $1,928,770, or 29% to $8,515,639 during the year ended December 31, 2024, compared with gross profits of $6,586,869
during the year ended December 31, 2023.

 Operating expenses were $9,533,115 during the
year ended December 31, 2024, an increase of $2,589,338 compared with operating expenses of $6,943,777 during the year ended December
31, 2023. The increase in operating expenses was primarily the result of an increase of $1,473,274 in office expenses related to the three
properties in our REO Portfolio.

 On an operating basis, after adding back depreciation,
KDM netted $225,317, or approximately 2.6% of gross profit.

 Other (expense)/income increased by
$4,224,639 to ($1,125,950) during the year ended December 31, 2024, compared with other (expense)/income of ($5,350,589) during the
year ended December 31, 2023. The increase in other (expense)/income in the current year was due to an unrealized gain on mortgages
of $14,348 as compared to the prior year there was an unrealized loss of $3,984,012.

 The Unrealized (Loss)/Gain on Mortgages caption
is the net present value of our mortgage servicing rights. The balance sheet caption Mortgage Servicing Rights ("MSRs") takes
our expected future servicing revenues from our entire book of loans and discounts it to present value. In 2024 we extended several of
our MSN loans for a year. Our newer lending programs are typically smaller balance for 10 year terms or shorter 2 year bridge loans. Both
of the newer programs result in smaller benefit to our MSRs, and drive more fee income. Our MSN program,
which has driven the majority of the value of our MSRs was not able to access the markets effectively in 2024 due to market conditions.
Servicing Revenue fell year over year by $769,211.

 For the year ended December 31, 2024, the
Company recorded an income tax benefit of $633,698 compared with an income tax benefit of $1,324,842 for the year ended December 31, 2023,
due to the impact of net loss for 2023.

 The Company pared Net Loss from $6,200,165 for the year ended
December 31, 2023 to $3,618,907 for the year ended December 31, 2024. The improvement in 2024 was primarily attributed to the increases
in Lease Revenue and Other Revenue, to the tune of $3,196,705, however was offset with additional Operating Expenses and Depreciation.
See Segment Reporting for more information on our REO Property segment.

 The commercial real estate landscape continued
to be challenging in 2024 while rates remained elevated and office remained in distress and multifamily deals mostly did not meet financial
underwriting criteria in the current rate environment. The Company spent significant time focused on asset management of its REO portfolio
and we see positive trends on all of the REO properties. In spite of the industry headwinds we remain sanguine about our business and
coming prospects.

 Financial Condition for the year ended December
31, 2024

 As of December 31, 2024, we had $2,898,659 in cash, $5,203,700
in portfolio loans and securities, as well as $451,974,989 of loans securitized or participated out to investors. Total KDM originations
stood at $647,000,597 as of December 31, 2024. As of December 31, 2024, we also hold $520,215 loans for sale, and our property and equipment
net of depreciation is valued at $31,922,404. The Company also has invested approximately $4,205,000 in KDM Capital Partners, LP, which
makes bridge loans on multifamily properties

 The fair value of our Mortgage Servicing Rights has stayed flat
due to several loan extensions for performing loans throughout the year. Our MSRs are the net present value of the future servicing income
we receive from loans made to date. This value is highly subjective and includes such variables as constant prepayment rate (CPR), discount
rate, and market pricing data. Please see an explanation of this change in value above in "Results of Operations." The current
value was provided by a third-party consulting firm and uses 15.0% for the discount rate and includes a 9.944% CPR, along with other assumptions
customary to the industry.

 Total assets declined by 5% to $521,851,544 at
December 31, 2024 due to $57,849,419 book value of loans paying off or otherwise being disposed. This includes $15,000,000 moved out of
the mortgage book and into REO at their new discounted basis as we took them back via foreclosure or deed in lieu of foreclosure. This
was offset by closing $34,523,368 new lending.

 Capital and Liquidity Needs

 On March
11, 2023, KDM's warehouse lender Signature was placed into receivership by the FDIC. KDM has been advised that the warehouse line
was acquired by New York Community Bancorp's Flagstar Bank. By mutual agreement of the parties, the line was closed, on February
22, 2024.

 On October 13, 2023, KDM MFB LLC, a Delaware limited
liability company (the "KDM MFB"), a newly formed and wholly owned subsidiary of the Company entered into a $100,000,000 Master
Repurchase and Securities Contract credit facility with Churchill MRA Funding I LLC (the "Agreement"). Through its KDM MFB
subsidiary the Company will use the credit facility provided by the Agreement (the "Line") to finance the Company's
expansion of its lending operations in multi-family and multifamily bridge financing.

 KDM is actively raising capital for a new debt
fund, KDM Capital Partners, LP (the "Fund"). The Fund currently is invested in three multifamily bridge loans, with a gross
loan balance of $25,340,000. We may access the capital markets or private credit markets as we deem necessary for our business in forms
that will comply with covenants of our trust indentures, and allow us the flexibility
to continue to grow our business.

 Status of our CM Loans

 As of year-end 2024, KDM had 4 loans in default and outstanding,
for a total of $64,635,000, for which all of the risk has been sold to investors. KDM held a $2,000,000 second lien note on one of the
properties. As of the date of this statement, KDM has disposed of one property and now owns the other three. There was one additional
loan that was a slow payer throughout 2024 and that sponsor has agreed to a deed in lieu of foreclosure and leaseback; we expect the transaction
to close by second quarter in 2025 and the MSN to be re-performing in a few months.

 CM Loans may from time to time be in a state of
technical default. Such defaults arise out of a breach of one or more covenants or obligations of the loan, other than those for the repayment
of principal or interest. KDM as the Servicer may elect to trigger default conditions where it feels that the underlying loan agreements
provide for such default and that the triggering of default remedies is in the best interest of protecting the value of the underlying
collateral and the repayment of the loan. Where KDM believes that a technical default would create a material risk to the CM Investors,
KDM will provide notice to the CM Investors of the default and its risks.

 Real Estate

 In November 2022, KDM acquired a majority interest in a specialty office
building in Stafford, Virginia after the borrower defaulted on its second lien mortgage. The first lien mortgage is in KDM2021-N011 and
the property continues to cash flow the first lien. KDM is planning a specialty buildout of the third floor for a new tenant and may continue
to operate the property or sell it to investors.

 In the beginning of 2024, KDM acquired two properties on behalf
of the MSN Noteholders in Acton, MA and St. Louis, MS via foreclosure and deed in lieu of foreclosure, respectively. The properties were
currently securitized in KDM2021-N015 and KDM2021-N022, respectively. Both properties had high vacancy at the point of acquisition and
the Company is working to stabilize the properties prior to sale in order to maximize recovery for the MSN Noteholders.

 Map of Current Loans

 Loan Information as
of March 31, 2025

 Number

 #
 of
 Buildings

 Ticker

 Property

 Property
 Type

 EJ
 Rating

 Issue
 Date

 Maturity Date

 Status

 Original
 Balance

 Original
 Appraisal

 Original LTV

 Appraisal
 Date

 Current
 Balance

 KDM2017-N001

 Pinellas Park, FL

 A+

 4/20/2017

 5/1/2027

 $
 1,059,000

 $
 1,920,000

 55.16
 %

 3/2017

 $
 -

 KDM2017-N002

 Miami, FL

 A

 12/21/2017

 12/21/2020

 $
 950,000

 $
 1,605,000

 59.19
 %

 3/2018

 $
 -

 KDM2018-N001

 Miami, FL

 A-

 10/11/2018

 3/13/2023

 $
 1,850,000

 $
 2,775,000

 66.7
 %

 2/2018

 $
 -

 KDM2018-N002

 St Petersburg, FL

 NR

 2/14/2018

 2/14/2021

 $
 341,250

 $
 570,000

 59.9
 %

 12/2017

 $
 -

 KDM2018-N003

 Perrysburg, OH

 A+

 4/27/2018

 5/25/2023

 $
 6,300,000

 $
 10,500,000

 60.0
 %

 1/18/2018

 $
 -

 KDM2018-N005

 Northwood, Ohio

 A+

 9/25/2018

 9/25/2023

 $
 2,700,000

 $
 4,155,000

 64.98
 %

 6/2018

 $
 -

 KDM2018-N007

 Vicksburg, MS

 A

 1/15/2019

 1/15/2024

 $
 4,850,000

 $
 8,100,000

 59.9
 %

 12/2018

 $
 -

 KDM2019-N001

 Hammonton, NJ

 A-

 3/22/2019

 3/22/2022

 $
 9,690,000

 $
 14,250,000

 68.00
 %

 2/2019

 $
 -

 KDM2019-N002

 Birmingham & Center Point, AL

 A-

 5/3/2019

 5/3/2024

 $
 4,400,000

 $
 6,875,000

 64.0
 %

 4/2019

 $
 -

 KDM2019-N003

 Springs Global SC and PA

 BBB+

 7/31/2019

 8/25/2024

 $
 9,700,000

 $
 14,220,000

 68.2
 %

 6/2019

 $
 -

 KDM2019-N004

 Masco Springs - OH, OK, GA

 A-

 10/10/2019

 11/25/2029

 $
 37,000,000

 $
 56,960,000

 65.0
 %

 9/2019

 $
 32,001,916

 KDM2019-N005

 Capitol Heights, MD

 A-

 9/30/2019

 10/25/2024

 Paid-In-Full

 $
 4,200,000

 $
 9,360,000

 44.87
 %

 9/2019

 $
 -

 KDM2019-N008

 Cleveland, Ohio

 A-

 12/18/2019

 12/18/2024

 $
 3,300,000

 $
 9,850,000

 33.5
 %

 11/2019

 $
 -

 KDM2020-N001

 Woodbridge, VA

 A-

 2/27/2020

 3/25/2025

 $

 $
 9,240,000

 54.11
 %

 11/2019

 $

 KDM2020-N002

 Cleveland, OH

 A-

 3/31/2020

 5/25/2025

 $
 8,500,000

 $
 23,000,000

 37.0
 %

 10/2019

 $
 -

 KDM2020-N003

 Carrollton, GA

 Data Center

 A-

 4/23/2020

 4/23/2025

 $
 4,000,000

 $
 7,100,000

 56.34
 %

 3/2020

 $
 4,000,000

 KDM2020-N007

 Stuart, FL

 A-

 7/27/2020

 8/25/2025

 $
 1,650,000

 $
 2,600,000

 63.5
 %

 3/2020

 $
 -

 KDM2020-N006

 Water's Edge, Trenton, NJ

 Skilled Nursing Facility

 A+

 7/31/2020

 8/25/2025

 Paid-In-Full

 $
 9,500,000

 $
 19,500,000

 48.72
 %

 5/2020

 $
 -

 KDM2020-N009

 La Grange, IL

 A-

 9/17/2020

 10/25/2025

 $
 2,308,000

 $
 3,550,000

 65.0
 %

 7/2020

 $
 2,308,000

 KDM2020-N008

 Loves Park, IL

 A-

 9/25/2020

 10/25/2023

 $
 7,765,000

 $
 13,170,000

 58.96
 %

 9/2020

 $
 -

 KDM2020-N010

 Multifamily in AL, NY, FL

 A-

 9/30/2020

 10/25/2025

 Partial Default

 $
 8,684,000

 $
 13,660,000

 63.6
 %

 8/2020

 $
 1,176,500

 KDM2020-N012

 Hampton, VA

 A

 10/30/2020

 11/25/2025

 $
 44,000,000

 $
 74,900,000

 58.74
 %

 10/2020

 $
 44,000,000

 KDM2020-N011

 Stamford, CT

 A-

 1/8/2021

 2/25/2026

 $
 12,000,000

 $
 19,100,000

 62.8
 %

 8/2020

 $
 12,000,000

 KDM2021-N001

 NJ, CA, TX

 Mixed-use

 A-

 2/12/2021

 3/25/2026

 $
 9,062,000

 $
 14,910,000

 60.78
 %

 11/20,12/20, and
 1/21

 $
 9,062,000

 KDM2021-N002

 Bellingham, WA

 BBB+

 3/18/2021

 4/25/2026

 $
 7,240,000

 $
 12,090,000

 59.9
 %

 01/2021

 $
 7,240,000

 KDM2021-N004

 Ronkonkoma, NY

 BBB/BBB+

 3/31/2021

 4/25/2026

 $
 2,179,000

 $
 3,800,000

 57.3
 %

 01/2021

 $
 2,179,000

 KDM2021-N005

 Los Angeles, CA

 A-/ WD

 4/23/2021

 5/25/2024

 Default

 $
 35,100,000

 $
 61,200,000

 57.4
 %

 03/2021

 $
 35,100,000

 KDM2021-N006

 FL and SC

 A-/A

 4/30/2021

 5/25/2026

 $
 4,380,000

 $
 8,080,000

 54.2
 %

 03/2021

 $
 1,980,000

 KDM2021-N007

 Cheyenne, WY

 A-

 5/21/2021

 6/25/2026

 Paid -In-Full

 $
 7,100,000

 $
 12,200,000

 58.2
 %

 $
 -

 KDM2021-N008

 Covina, CA & Las Cruces, NM

 A-/A

 6/25/2021

 6/25/2024

 $
 10,400,000

 $
 16,000,000

 65.0
 %

 $
 7,605,000

 KDM2021-N011

 Stafford, VA

 A-/A

 5/28/2021

 6/25/2026

 REO

 $
 9,500,000

 $
 15,000,000

 63.3
 %

 $
 9,500,000

 KDM2021-N013

 East Orange, NJ

 Education Center

 A-

 7/22/2021

 8/25/2026

 $
 5,253,000

 $
 9,550,000

 55.0
 %

 $
 5,253,000

 KDM2021-N014

 Mount Prospect, IL

 A

 7/23/2021

 8/25/2025

 $
 5,850,000

 $
 9,306,765

 62.9
 %

 $
 5,850,000

 KDM2021-N015

 Acton, MA

 A-/ WD

 8/25/2021

 9/25/2026

 REO

 $
 9,660,000

 $
 18,700,000

 51.7
 %

 06/2021

 $
 9,660,000

 KDM2021-N018

 Columbus, Toledo, Alliance & Mansfield, OH

 Skilled Nursing Facility

 A

 10/29/2021

 11/25/2026

 $
 23,000,000

 $
 35,400,000

 65.0
 %

 09/2021

 $
 23,000,000

 KDM2021-N020

 Washington, PA & Goreville & Marion, IL

 Funeral Homes & Office

 A-

 11/10/2021

 12/25/2026

 Paid off 89.90%

 $
 4,750,000

 $
 8,791,000

 54.0
 %

 09/2021

 $
 -

 KDM2021-N021

 Kentucky

 A-

 11/19/2021

 12/25/2026

 $
 8,500,000

 $
 17,300,000

 49.1
 %

 10/2021

 $
 8,500,000

 KDM2021-N022

 St. Louis, Missouri

 BBB+

 12/8/2021

 1/25/2027

 REO

 $
 18,000,000

 $
 24,450,000

 73.6
 %

 11/2021

 $
 18,000,000

 KDM2022-N001

 Allentown, PA

 A-

 1/31/2022

 2/25/2025

 $
 24,000,000

 $
 34,600,000

 69.4
 %

 12/2021

 $
 24,000,000

 KDM2022-N002

 North Carolina & Virginia

 A-

 2/3/2022

 2/25/2025

 $
 5,500,000

 $
 9,160,000

 60.0
 %

 11/2021

 $
 5,500,000

 KDM2022-N003

 Ohio

 Skilled Nursing Facility

 A-

 2/14/2022

 3/25/2027

 $
 16,500,000

 $
 33,100,000

 49.8
 %

 12/2021

 $
 13,000,000

 KDM2022-N006

 Honolulu, HI

 Special Use

 A-

 4/8/2022

 5/25/2027

 $
 33,000,000

 $
 52,000,000

 63.5
 %

 01/2022

 $
 33,000,000

 KDM2022-N007

 California and Texas

 A-

 6/22/2022

 7/25/2027

 $
 11,720,000

 $
 18,610,000

 63.0
 %

 12/2021

 $
 7,416,700

 KDM2022-N009

 Benton, Washington

 A+

 8/12/2022

 8/25/2027

 $
 44,880,000

 $
 78,300,000

 57.3
 %

 07/2022

 $
 41,124,832

 KDM2022-N010

 Washington D.C.

 BBB+

 8/18/2022

 9/25/2027

 $
 3,850,000

 $
 8,200,000

 47.0
 %

 04/2022

 $
 3,850,000

 KDM2022-N011

 Selma, Texas

 A-/WD

 6/28/2022

 6/28/2027

 Default

 $
 6,200,000

 $
 10,000,000

 62.0
 %

 05/2022

 $
 6,200,000

 KDM2022-N014

 Coral Gables, Florida

 A-

 12/9/2022

 12/9/2027

 $
 11,500,000

 $
 18,500,000

 62.2
 %

 11/2022

 $
 -

 KDM2023-N001

 Long Beach, CA

 A/A-/BBB

 3/23/2023

 4/25/2028

 $
 55,000,000

 $
 86,900,000

 63.3
 %

 01/2023

 $
 55,000,000

 KDM2023-N002

 Homewood, AL

 A-

 7/11/2023

 7/11/2028

 $
 11,500,000

 $
 19,600,000

 58.7
 %

 5/2023

 $
 11,500,000

 KDM2023-N003

 Murray, Kentucky & Kingsport, Tennesseee

 Multisecuritization

 A-

 7/28/2023

 8/25/2028

 $
 6,200,000

 $
 10,700,000

 50.5
 %

 05/2023

 $
 5,400,000

 KDM2023-N006

 Worcester, MA

 BBB+

 11/29/2023

 12/25/2028

 $
 4,500,000

 $
 8,750,000

 51.4
 %

 7/2023

 $
 4,500,000

 KDM2023-N008

 Ft Myers, FL

 SFR

 NR

 12/20/2023

 12/20/2025

 $
 750,000

 $
 1,140,000

 65.8
 %

 11/2023

 $
 750,000

 KDM2024-N001

 Pembroke Pines, FL

 Medical Office

 NR

 3/5/2024

 3/5/2034

 $
 1,333,368

 $
 1,400,000

 95.2
 %

 11/2023

 $
 1,333,368

 KDM2024-N002

 Miami, FL

 NR

 3/7/2024

 3/7/2034

 $
 3,550,000

 $
 6,500,000

 54.6
 %

 11/2023

 $
 3,533,237

 KDM2024-N003

 San Diego, CA

 Mixed-use

 5/3/2024

 6/1/2034

 $
 4,300,000

 $
 7,050,000

 61.0
 %

 11/2023

 $
 4,284,883

 KDM2019-N005

 Capitol Heights, MD

 A-

 12/5/2024

 10/10/2029

 $
 5,250,000

 $
 9,000,000

 58.3
 %

 11/2024

 $
 5,250,000

 MFB

 KDM2024-N004

 Clute, TX

 6/28/2024

 7/1/2026

 $
 9,440,000

 $
 13,500,000

 69.9
 %

 04/2024

 $
 9,440,000

 MFB

 KDM2024-N005

 Atlanta, GA

 6/7/2024

 7/1/2026

 $
 3,400,000

 $
 4,250,000

 80.0
 %

 04/2024

 $
 3,400,000

 MFB

 KDM2024-N007

 San Diego, CA

 8/14/2024

 9/1/2026

 $
 12,500,000

 $
 19,900,000

 62.8
 %

 06/2024

 $
 12,500,000

 *
 Ratings are the original and current ratings received from Egan-Jones Ratings Agency

 $
 624,594,618

 $
 1,044,897,765

 56.9
 %

 $
 494,398,436

 **
 NR means the loan has not been rated and was either sold as a participation or an unrated
 bond.

 ***
 Non-sequential loan numbers are due to some loans having been issued a file number, but the
 transaction was not closed, or is waiting to be closed

 Sales, Marketing and Customer Service

 Our marketing efforts are designed to attract
borrowers and brokers to solicit us for lending opportunities. Our origination team primarily does this through the substantial network
of commercial mortgage brokers we have assembled, as well as through correspondent and wholesale relationships. We employ primarily email
correspondence to mortgage brokers, banks, real estate agents, and commercial property owners to encourage them to present CM Loans to
us for possible funding through the issuance of corresponding Notes. We attend trade shows, subscribe to lead generation databases, and
loan and property platforms to find loans. We contact other financial institutions, directly and through brokers, that may own commercial
mortgages, and may attempt to purchase mortgages for KDM.

 Fraud detection

 We consider fraud detection to be of utmost importance
to the successful operation of our business. We employ a combination of proprietary technologies and commercially available licensed technologies
and solutions to prevent and detect fraud. We use services from third-party vendors for user identification and OFAC compliance.

 Notwithstanding KDM's due diligence examination
of the information provided to KDM by a borrower, there can be no assurance that the information provided to us, and on which we rely,
is true, accurate, and complete.

 Competition

 The market for mortgage lending is competitive and rapidly evolving.
We believe the following are the principal competitive factors in the lending market:

 pricing and fees;

 experience, including borrower full funding rates and investor returns;

 branding; and

 ease of use.

 We face competition from major banking institutions,
non-bank lenders, local banks, other private credit groups, as well as smaller private lenders.

 Our success depends on further developing
our network of transaction referral sources and broadening our distribution of our CM Investments.

 We may also face future competition from new companies
entering our market. If one or more of our competitors were to merge or partner with another of our competitors or a new market entrant,
the change in competitive landscape could adversely affect our ability to compete effectively.

 Item 7A. Quantitative and Qualitative Disclosures about Market Risk

 Not required.

 Item 8. Consolidated Financial Statements

 The following is an index to the Consolidated Financial Statements
of the Company being filed here-with commencing at page F-1 below:

 Report of Independent Registered Public Accounting Firm
 (PCAOB ID 52)

 Consolidated Statements of Financial Condition as of December 31, 2024 and 2023

 Consolidated Statements of Operations for the years ended December 31, 2024 and 2023

 Consolidated Statements of Changes in Stockholders' Equity for the years ended
 December 31, 2024 and 2023

 Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023

 Notes to the Consolidated Financial Statements

 Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure

 We have had no changes in nor disagreements with our independent accountants
on accounting and financial disclosure during the years ended December 2024 and 2023, nor in any subsequent interim period.

 Item 9A. Controls and Procedures

 Evaluation of Disclosure Controls and Procedures

 Disclosure controls and procedures are controls
and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's
rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief
Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 We carried out an evaluation of the effectiveness
of the design and operation of our disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e))
as of December 31, 2024. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of December 31, 2024.

 Management's Report on Internal Control Over Financial Reporting

 We are responsible for establishing and maintaining
adequate internal control over financial reporting as such term 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 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 financial statements will not be prevented or detected on a timely basis.

 Under the supervision and with the participation
of our Chief Executive Officer, we have evaluated the effectiveness of our internal control over financial reporting as of December 31,
2024, 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 December 31, 2024.

 Changes in internal control over financial
reporting

 There have been no changes in our internal control
over financial reporting that occurred during the fourth quarter ended December 31, 2024, or subsequent to the date the Company completed
its evaluation, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 Item 9B. Other Information

 None

 PART
III

 Item 10. Directors, Executive Officers and Corporate Governance

 As of the date of this Report, the Executive Officers and Directors
of the Company were:

 Name

 Age

 James W. Korth

 Chairman of the Board

 Holly C. MacDonald-Korth

 Chief Executive Officer, President, Chief Financial Officer and Director

 Pamela J. Hipp

 Director of Securities Marketing and Director

 Daniel Llorente

 Chief Lending Officer and Director

 Jonathan L. Shepard

 Secretary and Director

 Keith E. Henrich

 General Counsel

 James W. Korth is the Chairman of the Board of
Directors and was the Chief Executive Officer of KDM from 2016 until June 2023. He is also the Managing Partner of J W Korth & Company,
LP, which he started in 1982. Mr. Korth has spent his business career as an investment banker in all manner of debt securities,
including brokered CDs, and Certificates of Accrual on Treasury Securities ("CATS"), and has advised the US Treasury Department
in the creation of the STRIPS program, and corporate General Term Notes, a Medium Term Note program emulated across the industry. Mr.
Korth also manages several securities portfolios for clients of J W Korth & Company and holds his Series 4, 7, 24, 53, 66, and 79
licenses. He received his Master of Science from Michigan State University. Mr. Korth was made Chairman of the Board in June 2019.

 Holly MacDonald-Korth
is the Chief Executive Officer of KDM since June 2023, has been the President since 2019, and the Chief Financial Officer of KDM since
2016. Since 2006, she has been the Managing Director and Chief Financial Officer of J W Korth & Company, where she oversees all operations,
finance, and business development for the firm. Prior to joining J W Korth, Ms. MacDonald-Korth was Senior Vice President at Overstock.com
and a financial systems analyst at the Board of Governors of the Federal Reserve. Ms. MacDonald-Korth is the daughter of James W. Korth.
She received a Bachelor of Business Administration with Honors in Finance from University of Miami. She holds her Series 7, 24, 27, and
66 licenses.

 Daniel Llorente is the
Chief Lending Officer of KDM since 2016. Mr. Llorente has over fourteen years of commercial and residential real estate financing
experience at a variety of mortgage banks. Prior to joining KDM, Mr. Llorente was a Mortgage Loan Originator at Lakeview Loan Servicing.
In 2013 and 2014 he served as an Associate Portfolio Manager at Bayview Loan Servicing. From 2012 -2013 he served as Assistant Vice President
and Portfolio Manager at Intercredit Bank. From 2009 to 2012 he was Senior Loan Analyst at LNR Property LLC. Prior to that time he
held positions at Regions Bank, Silver Hill Financial, and Lincoln Road Funding. All positions were in Miami, Florida and related to real
estate financing. He is an ABA Certified Credit Analyst. Mr. Llorente graduated from Florida State University with a degree in finance
and received an MBA from Nova Southeastern University.

 Pamela J. Hipp is Managing Director of Fixed Income
and Investor Relations and a Director. Ms. Hipp works for J. W. Korth & Company as Managing Director of Trading. She joined J. W.
Korth in 2007 after its purchase of Cambridge Group Investments as regional trader and was promoted to Managing Director of Trading in
2010. Ms. Hipp has been in the securities industry for 23 years, first working at Citistreet Equities serving major corporations retirement
account management; she then moved on to Cambridge Group in 2000. A Registered Representative and General Principal, Pam holds FINRA Series
7, 24, 63, 66, and 79 registrations and received her Bachelor of Science degree from Michigan State University. Pam is also a Partner
of J. W. Korth and member of its Investment Committee, which guides recommendations and proprietary investment decisions.

 Keith Henrich serves
as KDM's General Counsel, joining in January 2022. Mr. Henrich has large public company experience serving as the Assistant General
Counsel for The Hackett Group, Inc. (NASDAQ: HCKT),from 2014-2021, a multi-national publicly traded company, and has focused his practice
handling mergers and acquisitions, private placements, debt financing, public company reporting obligations, commercial lending and general
corporate law as an associate at Bryn & Associates, from 2010 through 2014, in Miami, Florida, and Hogan Lovells in Washington D.C.
from 2008-2009. Mr. Henrich holds an LL.M. from Georgetown University in Securities and Financial Regulation and a J.D. from Nova Southeastern
University.

 Jonathan Shepard has
been KDM's Secretary and a Director since 2016. Mr. Shepard also served as outside general counsel to KDM from 2016 to 2021 and
continues to act as outside counsel to the Company. He has practiced in New York City, Philadelphia, and Boca Raton, Florida, in law firms,
corporations, and the United States Environmental Protection Agency. He was a partner in Siegel, Lipman, and Shepard, LLP, in Boca Raton
from 1994 until December 2017, and in October 2017 formed Shepard PLLC, where he now practices in Boca Raton. He is a graduate of Princeton
University and Yale Law School.

 Board Committees

 We do not have any Board committees. We anticipate
that as we grow our business, we may establish formal committees, which may include an audit committee, a compensation committee, and
a governance and nominating Committee.

 Code of Ethics

 We adopted a Code of Conduct and Ethics that applies
to all officers, directors, and employees of our Company on February 27, 2019. Any person may, without charge, request a copy of our Code
of Ethics by writing info@korthdirect.com. Our code of ethics is also available on our website at

 Item 11. Executive Compensation

 Summary Compensation Table

 The following table provides summary information regarding compensation
earned by the named executive officer during the fiscal years ended December 31, 2024 and 2023.

 Option

 All Other

 Name

 Salary

 Bonus

 Awards

 Compensation

 Total

 and Principal Position

 Year

 ($)

 ($)

 (1)

 ($)

 ($)

 Holly MacDonald Korth,

 Chief Executive Officer,

 President and Chief

 Financial Officer

 2024

 $

 614,400

 $

 $

 $

 614,400

 2023

 $

 628,400

 $

 25,000

 $

 $

 653,400

 James W Korth,

 Chairman

 2024

 $

 400,000

 $

 $

 $

 400,000

 2023

 $

 175,000

 $

 $

 $

 175,000

 For the years ended December 31, 2024 and 2023,
our Chief Lending Officer, Daniel Llorente, received compensation of $192,000 and $270,250, respectively.

 The Company does not have a compensation or other
committee of its directors.

 Equity Compensation Plan Information

 The Korth Direct Mortgage
Inc. 2019 Stock Option Plan (the "Stock 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 th, 2022 for
the purchase of up to an aggregate of 3,000,000 shares of the Company's common stock, $0.001 par value. The Stock Plan is administered
by the Board of Directors or a committee appointed by the Board.

 The purpose of the Stock Plan is to attract, retain and motivate employees,
officers, directors, consultants, agents, advisors and independent contractors of the Company by providing them the opportunity to acquire
a proprietary interest in the Company and to link their interests and efforts to the long-term interests of the Company's shareholders.

 The following table presents details of the Company's equity
compensation plan as of December 31, 2024:

 Number of securities
 to be issued upon
 exercise of outstanding
 options

 Weighted-average
 exercise price of
 outstanding options

 Number of securities
 remaining available for
 future issuance under
 equity compensation plans
 (excluding securities
 reflected in column (a))

 (a)

 (b)

 (c)

 Equity compensation plans approved
 by security holders (1)

 1,097,500

 $
 1.15

 1,902,500

 Equity compensation plans not
approved by security holders

 –

 –

 –

 Total

 1,097,500

 $
 1.15

 1,902,500

 (1) Consists of the Company's Stock Plan.

 Description of the Stock Plan

 The Stock Plan is administered by the Board of Directors of the Company.
The maximum number of shares of common stock available for issuance under the Stock Plan is 3,000,000.

 The Stock Plan permits awards of incentive stock
options, nonqualified stock options, and restricted stock. The Stock Plan provides that the exercise price of any option will not be less
than the fair market value of the common stock on the date of grant or, for a 10% shareholder, 110% of fair market value.

 Eligibility

 An award under the Stock Plan can be made to any
employee, consultant, or director of the Company, as selected by the Board of Directors.

 Shares Covered by the Stock Plan

 The Stock Plan permits the granting of awards
covering an aggregate of 1,097,500 shares of Company common stock. The shares of Company common stock may be either authorized but unissued
shares or treasury shares.

 Any shares that are reserved for options or performance
shares that lapse, expire, terminate or are cancelled, or if shares of Company common stock are issued under the plan and are thereafter
reacquired by the Company, the shares subject to such awards and the reacquired shares may be available for subsequent awards under the
Stock Plan.

 Stock Options and Rights

 Options granted under the Stock Plan may be either
non-qualified stock options or incentive stock options qualifying for special tax treatment under Section 422 of the Internal Revenue
Code. The exercise price of any stock option may not be less than the fair market value of the shares of common stock on the date of grant
and 110% of fair market value for 10% shareholders. The exercise price is payable in cash, shares of common stock previously owned by
the optionee or a combination of cash and shares of common stock previously owned by the optionee, or by a recourse or non-recourse note
executed by the nominee (subject to Sarbanes-Oxley prohibitions on officer loans). Both non-qualified stock options and incentive stock
options will generally expire on the tenth anniversary of the date of the grant, unless otherwise specified.

 Restricted Stock Plan

 Under the Stock Plan, the Board of Directors may
grant shares of restricted stock on terms and conditions, including performance criteria, repurchase and forfeiture, as determined by
the Board. Upon satisfaction of the terms and conditions of the award, shares of restricted stock become transferable.

 Amendment and Termination of the Stock Plan

 The Board may, at any time, amend the Stock Plan
or any portion of the plan, provided that to the extent required by law or a stock exchange rule, shareholder approval is required for
any amendment to the plan. By its terms, the Stock Plan terminates ten years after its effective date.

 Director Compensation

 No directors receive
compensation for their work as a director. However, directors received common stock options for their services as employees or consultants
to the Company. See Item 12 "Security Ownership of Certain Beneficial Ownership and Management and Related Stockholder Matters".

 Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters

 The following table sets
forth security ownership information pertaining to persons who are officers, directors, or known by us to beneficially own more than 5%
of the common stock, which is the sole class of voting stock in the Company, and of all of the directors and executive officers of the
Company as a group, as of December 31, 2024.

 Except as otherwise indicated, each person and
each group shown in the table has sole voting and investment power with respect to the shares of common stock indicated. For purposes
of the table below, in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, a person is deemed to be the
beneficial owner, of any shares of our common stock over which he or she has or shares, directly or indirectly, voting or investment
power or of which he or she has the right to acquire beneficial ownership at any time within 60 days. As used in this prospectus, "voting
power" is the power to vote or direct the voting of shares and "investment power" includes the power to dispose or
direct the disposition of shares. Common stock beneficially owned and percentage ownership was based on 5,000,000 shares outstanding
on December 31, 2024, plus 417,500 shares deemed outstanding pursuant to Rule 13d-3, for a total of 5,417,500 shares outstanding. Unless
otherwise indicated, the address of each beneficial owner is c/o Korth Direct Mortgage Inc., 135 San Lorenzo Ave, Coral Gables, FL 33146.

 Name and Address

 Number of

 Percent

 5% Beneficial Owners

 Directors and Executive Officers

 James W. Korth

 2,004,287

 37.0%

 Chairman of the Board

 Director

 Holly MacDonald-Korth

 2,313,233

 42.7%

 Chief Executive Officer, President, Chief Financial Officer,

 Director

 Pamela Hipp, Director (1)

 487,500

 9.0%

 Daniel Llorente, Director (1)

 312,500

 5.8%

 Jonathan Shepard, Secretary and Director (1)

 52,500

 1.0%

 All directors and executive officers as

 5,170,020

 95.5%

 a group (5 persons) (1)

 (1)
 Includes pursuant to Rule 13d-3 common stock options exercisable within 60 days of the date of this Report,
as follows: Mr. Korth, 25,000 shares; Ms MacDonald-Korth, 25,000 shares; Ms Hipp, 137,500 shares; Mr. Llorente, 312,500 shares; Mr. Shepard,
52,500 shares. See Item 11, "Executive Compensation-Equity Compensation Plan Information."

 The Company does not have a class of equity securities
registered under Section 12 of the Securities Exchange Act of 1934

 Item 13. Certain Relationships and Related
Transactions, and Director Independence

 The principal shareholders of the Company are
Holly MacDonald-Korth (43%) and James Korth (37%). Mr. Korth is Chairman and a Director of the Company, and together with his daughter,
Holly MacDonald-Korth, the CEO, President, Chief Financial Officer, and a Director of the Company, they both control 80% of the Company
voting stock. In June 2023, Ms. MacDonald-Korth purchased 1,100,000 shares of Company stock from her father, making her the largest shareholder.

 KDM earns money by making and servicing loans,
J. W. Korth, a wholly owned subsidiary of KDM, is a broker-dealer that makes money by selling securities, including securities issued
by KDM.

 Some members of the KDM loan origination team
are also registered brokers with J.W. Korth. Such employees may be paid for both origination and sales of a loan and a Note, respectively.
We mitigate these conflicts of interest with compliance oversight and review of such transactions and compensation.

 We believe we may have certain conflicts arising
from our rating system. The same people doing our ratings may also benefit from the sales of Notes and making new CM Loans. Further, J.W.
Korth is owned by KDM, and distributes our Notes and may make a market in them. Ratings will be reviewed periodically and changed as necessary
for each CM Loan and the corresponding Notes. If a secondary market were to develop, secondary market prices for our Notes may move up
or down if the rating is changed. However, no such market currently exists.

 We may change any of our procedures regarding
managing our conflicts of interest at any time. We also may amend our rating procedure at any time.

 Indemnification Agreement

 Our Bylaws provide that we will indemnify our
members, managers and officers to the fullest extent permitted by Florida law.

 Item 14. Principal Accountant Fees and Services

 Berkowitz Pollack and Brant was engaged as the
Company's independent registered public accounting firm for the years ended December 2024, 2023, 2022, and 2021.

 Auditor Fees

 The following table sets forth fees billed, or
expected to be billed, to the Company by the Company's independent auditors for the years ended December 31, 2024 and 2023 for (i)
services rendered for the audit of the Company's annual financial statements and the review of the Company's quarterly financial
statements; (ii) services rendered that are reasonably related to the performance of the audit or review of the Company's financial
statements that are not reported as Audit Fees; (iii) services rendered in connection with tax preparation, compliance, advice and assistance;
and (iv) all other services:

 2024

 2023

 Audit fees

 $
 205,261

 $
 181,825

 Audit related fees

 -

 -

 Total Fees

 $
 205,261

 $
 181,825

 For 2024, the audit fees listed include J. W. Korth's audit expense
of $25,000 as well as KDM's audit expense of $180,261.

 PART IV.

 Item 15. Exhibits and Financial Statement Schedules

 The following exhibits designated with a footnote
reference are incorporated herein by reference to a prior registration statement or a periodic report filed by the Registrant pursuant
to Section 13 or 15(d) of the Exchange Act:

 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)

 10.3

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

 23.1

 Consent of Berkowitz Pollack and Brant*

 31.1

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

 31.2

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

 Interactive Data File

 *Filed herewith.

 SIGNATURES

 Pursuant to the requirements of Section 13 or
15(d) 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.

 By:

 /s/ Holly MacDonald-Korth

 Holly MacDonald-Korth

 Chief Executive Officer and Chief Financial Officer

 Pursuant to the requirements of the Securities
Exchange Act of 1934, the following persons on behalf of the registrant and in the capacities and on the dates indicated have signed this
report below.

 Signature

 Title

 Date

 /s/ Holly MacDonald-Korth

 Chief Executive Officer and Chief Financial Officer

 April 1, 2025

 Holly MacDonald-Korth

 KORTH DIRECT MORTGAGE INC.

 REPORT ON CONSOLIDATED FINANCIAL STATEMENTS

 YEARS ENDED DECEMBER 31, 2024 AND 2023

 F- 1

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 To the Board of Directors and

 Stockholders of Korth Direct Mortgage, Inc.

 Opinion on the Financial Statements

 We have audited the accompanying balance
sheets of Korth Direct Mortgage, Inc. (the Company) as of December 31, 2024 and 2023, and the related statements of income,
comprehensive income, stockholders' equity, and cash flows for each of the years in the two-year period ended December 31, 2024, and
the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly,
in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations
and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles
generally accepted in the United States of America.

 Basis for Opinion

 These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required
to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.

 We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion.

 Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 Critical Audit Matters

 Critical audit matters are
matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the
audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. We determined that there were no critical audit matters.

 /s/ Berkowitz Pollack Brant, Advisors + CPAs

 We have served as the Company's auditor since
2021.

 West Palm Beach, FL

 April 1, 2025

 F- 2

 KORTH DIRECT MORTGAGE INC.

 CONSOLIDATED FINANCIAL STATEMENTS

 YEARS ENDED DECEMBER 31, 2024 AND 2023

 PAGE(S)

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 (PCAOB ID 52)

 CONSOLIDATED FINANCIAL STATEMENTS

 Consolidated Statements of Financial Condition

 Consolidated Statements of Operations

 Consolidated Statements of Changes in Stockholders' Equity

 Consolidated Statements of Cash Flows

 Notes to Consolidated Financial Statements

 F- 3

 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

 December 31, 2024

 December 31, 2023

 ASSETS

 $
 2,898,659

 $
 4,844,873

 Restricted Cash

 15,431,460

 16,856,935

 Restricted Investment

 1,192,510

 -

 451,974,989

 484,484,408

 Mortgage Servicing Rights, at Fair Value

 5,161,709

 7,674,198

 Loans Held for Sale

 520,215

 6,074,927

 ROU Leased Asset

 270,281

 501,715

 Goodwill

 Property and equipment, net of depreciation

 31,922,404

 17,674,959

 3,067,100

 1,784,370

 TOTAL ASSETS

 $
 521,851,543

 $
 549,337,262

 LIABILITIES AND STOCKHOLDERS' EQUITY

 LIABILITIES

 Escrows Payable

 $
 15,306,451

 $
 14,884,214

 Lease Liability

 294,412

 540,266

 Deferred Revenue, net

 1,958,967

 1,725,803

 Deferred Tax Liability, net

 1,378,721

 2,012,419

 Contingent Liability, net

 -

 164,644

 Securities Sold Short

 -

 2,565,082

 Mortgage Secured Notes Payable

 450,264,519

 485,154,510

 Warehouse Line of Credit, net

 17,269,278

 10,191,104

 Other Liabilities and Payables

 4,613,539

 2,030,662

 Total Liabilities

 491,085,887

 519,268,704

 STOCKHOLDERS' EQUITY

 Accumulated (Deficit)/ Earnings

 ( 3,325,687
)

 293,220

 Additional Paid-in Capital

 29,632,262

 29,578,706

 Common Stock, $ 0.001 par value, 60,000,000 shares authorized 5,000,000 shares
 issued and outstanding at December 31, 2024 and December 31, 2023

 5,000

 5,000

 Series A Preferred Stock, $ 0.001 par value, 460,000 shares authorized, 460,000
 shares issued and outstanding at December 31, 2024 and December 31, 2023

 Series B Preferred Stock, $ 0.001 par value, 20,000 shares authorized, 19,000
 issued and outstanding at December 31, 2024 and December 31, 2023

 Non-Controlling Interest

 4,453,602

 191,153

 Total Stockholders' Equity

 30,765,656

 30,068,558

 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 $
 521,851,543

 $
 549,337,262

 See accompanying notes to the audited consolidated
financial statements.

 F- 4

 CONSOLIDATED STATEMENTS OF OPERATIONS

 For Year Ended

 For Year Ended

 December 31, 2024

 December 31, 2023

 REVENUES

 Origination Revenue, Net

 $
 1,688,843

 $
 1,709,783

 Servicing Revenue

 5,040,383

 5,809,594

 Underwriting Income

 99,063

 278,550

 Leasing Revenue

 2,998,688

 1,076,320

 Other Revenue

 2,240,680

 966,343

 Total Revenues

 12,067,657

 9,840,590

 COST OF REVENUES

 Broker Underwriting Expense

 1,610,590

 1,826,143

 Administrative Expenses

 1,941,428

 1,427,578

 Total Cost of Revenues

 3,552,018

 3,253,721

 GROSS PROFIT

 8,515,639

 6,586,869

 OPERATING EXPENSES

 2,313,669

 840,395

 Compensation and Related Benefits

 4,511,675

 4,306,667

 Professional & Legal

 1,176,156

 858,949

 Advertising

 288,822

 272,215

 Depreciation

 665,551

 Total Expenses

 9,533,115

 6,943,777

 Loss From Operations

 ( 1,017,476
)

 ( 356,908
)

 Other (Expenses)/Income

 Unrealized Gain/(Loss) on Mortgages

 14,348

 ( 3,984,012
)

 Unrealized Gain/(Loss) on Mortgage Secured Notes

 39,501

 ( 10,565
)

 Interest Expense

 ( 1,802,786
)

 ( 1,324,770
)

 Unrealized Loss on Securities

 -

 ( 129,009
)

 Realized Gain on Foreclosure

 -

 Realized (Loss)/Gain on Mortgage Secured Notes

 ( 434
)

 97,767

 Realized Loss on Loans Held for Sale

 ( 141,647
)

 -

 Change in Fair Value of Mortgage Secured Notes

 -

 Loss on Foreclosures

)

 -

 Total Other Expenses

 ( 1,125,950
)

 ( 5,350,589
)

 Loss before provision for income taxes

 ( 2,143,426
)

 ( 5,707,497
)

 Income tax benefit for income taxes

)

)

 Net Loss before non-controlling interest

 ( 1,509,728
)

 ( 4,382,655
)

 Less: Net Income/(Loss) attributable to non-controlling interest

 184,179

 ( 47,490
)

 Net Loss

 ( 1,693,907
)

 ( 4,335,165
)

 Series A Preferred Dividends

 690,000

 630,000

 Series B Preferred Dividends

 1,235,000

 1,235,000

 Net loss attributable to common stockholders

 $
 ( 3,618,907
)

 $
 ( 6,200,165
)

 See accompanying notes to the audited
consolidated financial statements.

 F- 5

 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY

 Series A Preferred Stock

 Series B Preferred Stock

 Common Stock

 Additional Paid

 Accumulated

 Non-Controlling

 Amount

 Amount

 Amount

 in Capital

 (Deficit)/Earnings

 Interest

 Totals

 Balance at January 1, 2023

 300,000

 $

 19,000

 $

 $
 5,000

 $
 25,626,614

 $
 6,493,385

 $
 238,643

 $
 32,363,961

 Share-based compensation

 -

 -

 -

 -

 -

 -

 56,252

 -

 -

 56,252

 Issuance of Series A preferred stock

 160,000

 -

 -

 -

 -

 3,895,840

 -

 -

 3,896,000

 Series A & Series B preferred stock dividends declared

 -

 -

 -

 -

 -

 -

 -

 ( 1,865,000
)

 -

 ( 1,865,000
)

 Net loss

 -

 -

 -

 -

 -

 -

 -

 ( 4,335,165
)

 ( 47,490
)

 ( 4,382,655
)

 Balance at December 31, 2023

 460,000

 $

 19,000

 $
 5,000

 $
 29,578,706

 $
 293,220

 $
 191,153

 $
 30,068,558

 Share-based compensation

 -

 -

 -

 -

 -

 -

 53,556

 -

 -

 53,556

 Series A & Series B preferred stock dividends declared

 -

 -

 -

 -

 -

 -

 -

 ( 1,925,000
)

 -

 ( 1,925,000
)

 Investment in fund

 -

 -

 -

 -

 -

 -

 -

 -

 4,078,270

 4,078,270

 Net (loss)/income

 -

 -

 -

 -

 -

 -

 -

 ( 1,693,907
)

 184,179

 ( 1,509,728
)

 Balance at December 31, 2024

 460,000

 $

 19,000

 $

 $
 5,000

 $
 29,632,262

 $
 ( 3,325,687
)

 $
 4,453,602

 $
 30,765,656

 See accompanying notes to the audited
consolidated financial statements.

 F- 6

 CONSOLIDATED STATEMENTS OF CASH FLOWS

 For the Year Ended

 For the Year Ended

 December 31, 2024

 December 31, 2023

 CASH FLOWS FROM OPERATING ACTIVITIES

 Net Loss

 $
 ( 1,509,728
)

 $
 ( 4,382,655
)

 Adjustments to Reconcile Net Loss

 Net Cash (Used In)/Provided by Operating Activities:

 Unrealized Gain on Mortgages Owned

 ( 14,348
)

 3,984,012

 Unrealized Loss on Mortgage Secured Notes

 ( 39,501
)

 10,565

 Unrealized Loss on Securities

 82,510

 -

 Realized Gain on Foreclosure

 ( 765,068
)

 -

 Realized Loss on Loans Held for Sale

 141,647

 -

 Change in Fair Value of Mortgage Secured Notes

)

 -

 Loss on Foreclosures

 -

 Stock Compensation Expense

 53,556

 56,252

 Depreciation

 665,551

 Amortization of loan costs

 785,083

 589,955

 Deferred rent expense from operating lease

 ( 14,420
)

 ( 7,254
)

 Deferred income taxes

)

)

 Changes in Operating Assets and Liabilities:

 Mortgage Secured Notes Issued

 ( 22,229,991
)

 30,271,499

 Mortgage Secured Notes Purchased

 -

 472,261

 Restricted Investment

 ( 1,192,510
)

 3,986,207

 Warehouse LOC

 6,293,091

 9,274,413

 2,512,489

 ( 4,355,366
)

 Loans Held For Sale

 5,413,065

 ( 6,074,927
)

 ( 931,048
)

 ( 254,279
)

 Deferred Revenue, net

 233,164

 131,934

 Escrow Payable

 422,237

 2,462,661

 Contingent Liability

 ( 164,644
)

 ( 162,654
)

 Securities Sold Short

 ( 2,565,082
)

 2,565,082

 Other Liabilities and Payables

 2,582,877

 504,174

 New Mortgage Lending

 4,849,419

 ( 37,077,267
)

 Total Adjustments

 ( 3,938,378
)

 5,717,978

 NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES

 ( 5,448,106
)

 1,335,323

 CASH FLOWS FROM INVESTING ACTIVITIES

 Purchase of property and equipment

 ( 76,853
)

 ( 24,945
)

 NET CASH (USED IN) INVESTING ACTIVITIES

 ( 76,853
)

 ( 24,945
)

 CASH FLOWS FROM FINANCING ACTIVITIES

 Payment of Series A/B preferred stock dividends

 ( 1,925,000
)

 ( 1,865,000
)

 Investment in Fund

 4,078,270

 -

 Net proceeds from the sale of Series A preferred stock

 -

 3,896,000

 NET CASH PROVIDED BY FINANCING ACTIVITIES

 2,153,270

 2,031,000

 NET (DECREASE)/INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 ( 3,371,689
)

 3,341,378

 CASH, CASH EQUIVALENTS AND RESTRICTED CASH – Beginning of Year

 21,701,808

 18,360,430

 CASH, CASH EQUIVALENTS AND RESTRICTED CASH – End of Year

 $
 18,330,119

 $
 21,701,808

 SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION

 Cash paid during the year for interest

 $
 689,129

 $
 1,353,881

 Cash paid for income taxes

 $
 -

 $
 91,708

 NON-CASH INVESTING AND FINANCING ACTIVITIES

 Assets acquired through settlement in lieu of foreclosure

 $
 15,765,068

 $
 19,353,508

 See accompanying notes to the audited consolidated
financial statements.

 F- 7

 KORTH DIRECT MORTGAGE, INC

 NOTES TO AUDITED 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 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. See the current report Form 8-K filed with the Commission on August 5, 2022, for more information concerning the business
of KDMF.

 KDM a owns a controlling interest in KDM
Stafford LLC. KDM also owns 100% of KDM Nagog Park LLC, and KDM Cupples REO 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, Acton, MA, and St. Louis, MS. KDM's operations with respect to these properties is detailed under the Asset
Management section of Segment Reporting ("Note 19").

 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 audited consolidated financial statements and Notes, if and when created.

 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

 PRINCIPLES OF CONSOLIDATION

 The accompanying consolidated financial statements
include the accounts of the Company and the accounts of J.W. Korth, KDM MFB LLC, and KDM Funding I LLC, the Company's wholly-owned
subsidiaries, and KDM Stafford LLC, and KDM Capital Partners, LP, in which KDM owns controlling interests. Intercompany balances and transactions
have been eliminated in consolidation.

 BASIS OF ACCOUNTING

 The accompanying consolidated financial statements
have been prepared on the accrual basis of accounting, in accordance with Generally Accepted Accounting Principles ("GAAP").

 USE OF ESTIMATES

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

 CASH, CASH EQUIVALENTS AND RESTRICTED CASH

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

 F- 8

 The following table provides a reconciliation
of cash and cash equivalents, and restricted cash to amounts shown in the consolidated statements of cash flows as of December 31, 2024
and 2023:

 Schedule of cash and cash equivalents

 2024

 2023

 $
 2,898,659

 $
 4,844,873

 Restricted Cash

 15,431,460

 16,856,935

 $
 18,330,119

 $
 21,701,808

 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 financial statements, according to the amortization schedule for the loans,
which management believes to be the best estimate of fair value. All mortgages owned as of the date of these consolidated financial statements
are current. The net present value of the servicing revenue is recorded as mortgage servicing rights, at fair value on the Audited Statements
of Financial Condition and the change in mortgage servicing rights from year to year is recognized on the Audited Statements of Operations
as an unrealized gain/loss on mortgages.

 MORTGAGES OWNED

 The Company has funded the majority of the mortgage
loans that it has made by issuing Mortgage Secured Notes ("MSNs"), which are secured by those same mortgages. As of December
31, 2024 and 2023, the Company has outstanding loans totaling $ 451,974,989 and $ 484,484,408, respectively, and it issued MSNs secured
by those loans, also in the amount of $ 450,264,519 and $ 485,154,510, respectively. The deals have been funded in multiple ways, including
private placements, SEC registered deals, and 144A offerings. The Company also funds loans via participation, or a combination of MSN
and participation; it also funds a portion of some loans with its own capital and funds made by the Fund.

 PORTFOLIO LOANS

 The Company recognizes loans made with its own
capital, or those not securitized or participated out, under the caption "Portfolio Loans" on the balance sheet. As of December
31, 2024 and 2023, the Company issued Portfolio Loans in the amount of $ 5,161,709 and $ 7,674,198, respectively. These loans were funded
by the Company as well as its affiliates.

 LOANS HELD FOR SALE

 The Company purchases small balance commercial loans classified as
held for sale which are carried at the lower of amortized cost basis or market value. We determine the fair value of mortgage loans held
for sale by using a discounted cash flow model.

 GOODWILL

 Financial Accounting Standards Board Accounting
Standards Codification ("FASB ASC") Topic 350 requires an annual assessment of the recoverability of goodwill using a two-step
process. The first step of the impairment test involves a comparison of the fair value of the reporting unit to its carrying value. If
the carrying value is higher than the fair value or there is an indication that impairment may exist, a second step must be performed
to compute the amount of the impairment. Management conducted its annual assessment of goodwill impairment and determined that there were
no indicators of goodwill impairment and therefore did not record an impairment loss for the year ending December 31, 2024.

 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 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.

 F- 9

 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,
in which the Company holds a controlling interest, and the Company's wholly-owned subsidiaries, KDM Nagog Park and KDM Cupples REO.
Leasing revenue generated from operating leases are recognized over the lease term on a straight-line basis. We recorded rental revenue
of $ 2,998,688 for the year ending December 31, 2024 and $ 1,076,320 for the year ending December 31,2023.

 LEASES

 In February 2016, the FASB issued Accounting Standards
Update ("ASU") No. 2016-02, "Leases (Topic 842)." The standard requires organizations to recognize right-of-use
("ROU") assets and lease liabilities on the balance sheet and disclose key information about leases that were historically
classified as operating leases under previous GAAP. As part of the adoption of this standard, the Company recognizes lease liabilities
with a corresponding ROU leased asset of approximately the same amount based on the present value of the remaining lease payments pursuant
to current leasing standards for existing operating leases.

 STOCK-BASED COMPENSATION

 The Company estimates the fair value of share-based
payments on the date of grant using a Black-Scholes option pricing model. Compensation cost is recognized over the required service period,
generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over
the requisite service period for the entire award. The Company's accounting policy is to recognize forfeitures as they occur.

 The Black-Scholes option pricing model requires
assumptions for the expected volatility of the share price of our common stock, the expected dividend yield, and a risk-free interest
rate over the expected term of the stock-based award.

 Since the Company's common stock is not
publicly traded, we do not have sufficient Company specific information regarding the volatility of our share price on which to base an
estimate of expected volatility. As a result, we use the historical volatilities of similar entities within our industry as the expected
volatility of our share price.

 The expected dividend yield is 0 % as the Company
has not paid any dividends on its common stock and does not anticipate it will pay any dividends in the foreseeable future on its common
stock.

 The risk-free interest rate is based on the U.S.
Treasury yield curve in effect at the time of the grant date with a remaining term equal to the expected term of the stock-based award.

 Since the Company does not have sufficient historical
exercise data to provide a reasonable basis upon which to estimate the expected term, the Company utilizes the simplified method to calculate
the expected term of stock-based awards based on the average of the vesting term and contractual term of the award.

 The assumptions used in calculating the fair value
of stock-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management
judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different
in the future.

 Unrealized
Gain on Mortgages

 The net present value of the servicing income
is recognized at the time the mortgage is initiated. The changes to the net present value which is determined by the determination of
the fair value of the assets are recognized through an adjustment to the unrealized gain/loss in each reporting period. This value uses
several inputs that are highly subjective including: discount rate, prepayment rate, the current interest rate environment, and default
rate assumptions. We use a third-party to calculate this value.

 DUE TO CLEARINGHOUSE BROKERS

 J.W. Korth operates as an SEC and FINRA registered
securities broker dealer. The securities transactions are traded through broker clearinghouses and, upon settlement, funds are transferred
in and out of the Company's bank accounts. Unsettled transactions create short-term payables and receivables due to and from the
broker clearinghouses. As of December 31, 2024, the Company had a net amount due to the clearinghouse brokers of $ 0.

 DEPRECIATION

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

 F- 10

 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, and after remain subject to examination by federal and state jurisdictions.

 RECENT ACCOUNTING PRONOUNCEMENTS

 Improvements to Credit Loss Estimates

 In June 2016, the FASB issued ASU 2016-13 Financial
Instruments, Measurement of Credit Losses on Financial Instruments. This ASU updates the existing incurred loss model to a current expected
credit loss ("CECL") model for financial assets and net investments in leases that are not accounted for at fair value through
earnings. The amendments affect cash and cash equivalents, reverse repurchase agreements, certain loans, held-to-maturity debt securities,
trade receivables, net investments in leases, off-balance sheet credit exposures and any other financial assets not excluded from the
scope. There are also limited amendments to the impairment model for available-for-sale debt securities. ASU 2016-13 is effective
for annual reporting periods beginning after December 15, 2022 for public smaller reporting companies, including interim reporting periods
within those fiscal years. Early adoption is permitted, but not before annual reporting periods beginning after December 15, 2018. The
Company adopted CECL on January 1, 2023 and did not have a material impact on the Company's consolidated financial statements.

 Improvements to Reportable Segment Disclosures

 In November 2023, the FASB issued Accounting Standards
Update (ASU) No. 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, which did not have a material impact on the Company's financial condition, results
of operations or financial statement disclosures.

 Improvements to Income Tax Disclosures

 In December 2023, the FASB issued ASU No. 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.

 NOTE 3 – CONTINGENT LIABILITY

 As part of the acquisition of J. W. Korth in 2020,
the Company agreed to pay (i) the Preferred Capital Interest partners of J.W. Korth accrued and unpaid 6 % dividends through July 31, 2020;
(ii) the J.W. Korth Preferred Capital Interest Partners quarterly dividends concurrently with its payment of the Company's Series
A Preferred Stock dividends at least annually; and (iii) in such years as it pays Series A Preferred dividends, redeem 25 % annually of
the J.W. Korth Preferred Capital Interest partners through a capital contribution to JW Korth. The contingent liability was paid off in
July 2024.

 F- 11

 The following table summarizes the unpaid Contingent
Liability outstanding as of December 31, 2024 and 2023:

 Schedule of unpaid contingent liability outstanding

 2024

 2023

 Contingent liability to redeem J.W. Korth Preferred Capital Interest Partners

 $
 164,644

 $
 320,500

 Contingent liability payment

 ( 164,644
)

 ( 160,250
)

 Accrued and unpaid dividends recorded as interest expense

 4,394

 Contingent Liability, net

 $

 $
 164,644

 NOTE 4 – MORTGAGE SECURED NOTES PAYABLE

 As stated above in Note 2, the Company funds the
majority of mortgage loans that it makes by issuing Mortgage Secured Notes ("MSNs"), which are secured by those same mortgages.
As of December 31, 2024 and 2023, the Company has funded loans with current values totaling $ 451,974,989 and $ 484,484,408, respectively,
and it issued MSNs secured by those loans in the amount of $ 450,264,519 and $ 485,154,510, respectively. The deals have been funded in
multiple ways, including private placements, SEC registered deals, and 144A 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 MSNs range from 4.50 % to 9.94 % and mature at
various dates from February 2025 to June 2037. The MSNs are payable to the extent that the Company receives payment from the borrower
of the mortgage loans. Payments are received from the borrowers and passed through to the MSN noteholders. KDM has custodial responsibility
for the MSNs pursuant to the Trust Indenture for the Notes. There are no limitations in KDM's liability as servicer of its MSNs.

 The following table is a schedule of future maturities
of the MSNs for each of the five years and thereafter subsequent to December 31, 2024:

 Scheduled of principal payments

 Years ending

December 31

 Future

Maturities of

Debt

 2025

 68,644,747

 2026

 120,833,870

 2027

 74,842,931

 2028

 75,593,234

 2029

 36,421,793

 Thereafter

 73,927,944

 Total

 $
 450,264,519

 NOTE 5 - RESTRICTED CASH AND INVESTMENTS

 The Company maintains multiple segregated accounts
in trust for borrowers and investors. The value of these accounts is carried under the asset accounts, "Restricted Cash" and
"Restricted Investment," with respective offsets to the liability accounts, "Escrows Payable" and "Other
Liabilities and Payables."

 The "In Trust for 1" account holds
the monthly tax and insurance payments collected from borrowers and distributes payments annually, on behalf of borrowers, to the appropriate
tax authority and insurance companies. This account has a balance of $ 5,585,017 and $ 151,376 as of December 31, 2024 and 2023, respectively.
This account is included as part of the Escrow Payable liability account.

 The "In Trust for 2" account receives
payments from borrowers and distributes payments to investors and pays the servicing fee to the Company. This account has a balance of
$ 994,858 and $ 638,032 as of December 31, 2024 and 2023, respectively, which consists of borrower early payments and commitment fees. This
account is included as part of the Other Liabilities and Payables liability account.

 The Company also maintains multiple lockbox accounts
that collect rental payments directly from tenants on the borrowers' behalf. These accounts typically net out funds monthly. The
lockbox account balances were $ 0 as of December 31, 2024 and 2023. This account is included as part of the Escrow Payable liability account.

 The Company maintains an account for payment of
quarterly Preferred Series B dividends that has a balance of $ 308,750 as of December 31, 2024 and 2023.

 The Company maintains an account restricted per the warehouse line
agreement that has a balance of $0 as of December 31, 2024. See "Note 15 – Warehouse Line of Credit."

 F- 12

 The Company maintains a cash management account
that holds a portion of the restricted cash, which is swept on a regular basis. The account had a balance of $ 2,322,094 and $ 4,550,000
as of December 31, 2024 and December 31, 2023, respectively. This account is included as part of the Escrow Payable liability account.

 The Company invests a portion of the restricted cash collected from
borrowers in U.S. Treasury Bills with maturities of six to twelve months. The Restricted Investment account had a balance of $ 1,192,510
and $ 0 as of December 31, 2024 and 2023, respectively. This account is included as part of the Escrow Payable liability account.

 The Company invests a portion of restricted cash from borrowers in
a savings account with a balance of $ 250,000 as of December 31, 2024 and 2023.

 The Company has opened two cash management accounts at J.W. Korth &
Company that will hold a portion of restricted cash. The balances as of December 31, 2024, were $ 2,750,982 and $ 3,635,540, respectively.

 NOTE 6 – RENTAL PROPERTY

 In November 2022, through a Settlement in Lieu
of Foreclosure Agreement, the Company obtained majority ownership and the controlling interest in rental property located in Stafford,
Virginia. As part of the agreement, a $9.5 million mortgage held by the Company was assigned to a newly created special-purpose entity,
KDM Stafford LLC, which is majority-owned and controlled by the Company. The original borrower maintained a minority interest in the special-purpose
entity. For the years ended December 31, 2024 and December 31, 2023, the Company recorded net loss attributable to the non-controlling
interest of $ 53,698 and $ 47,490, 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.

 In March 2024, through foreclosure and via a special-purpose
entity named KDM Nagog Park LLC, a wholly owned subsidiary, KDM now owns a 3 building office park in Acton, Massachusetts. Similarly,
via deed in lieu of foreclosure in April 2024, KDM took ownership of an office building in St. Louis, Missouri through a wholly owned
subsidiary named KDM Cupples REO LLC. The activity of the wholly owned subsidiaries, KDM Nagog Park LLC and KDM Cupples REO LLC, are included
in the Company's consolidated financial statements beginning in the second quarter.

 As part of the transaction for the
acquisition of KDM Nagog Park LLC and KDM Cupples REO LLC, the Company recognized a gain of $ 765,068 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 transaction:

 Schedule of fair value of net assets acquired

 Fair Value of Net Assets Acquired:

 Building and land

 $
 15,000,000

 Acquired operating leases

 Mortgage liability assumed

 ( 15,000,000
)

 Gain on Settlemnt Agreement

 $

 Please see Note 19 Segment Reporting.

 Subsequent to the date of these consolidated financial statements,
KDM also acquired a property through deed in lieu of foreclosure in California.

 We have 20 operating leases where we are the lessor resulting in $ 2,998,688
and $ 1,076,320 in leasing revenue for the years ended December 31, 2024 and 2023, respectively. We lease retail and office space. Future
undiscounted lease income from operating leases where we are the lessor were as follows as of December 31, 2024:

 Schedule of future
undiscounted lease income

 Summary of 5 year future rents:

 2025

 $
 2,732,735

 2026

 1,368,432

 2027

 1,114,504

 2028

 630,535

 2029

 124,160

 Thereafter

 93,065

 $
 6,063,431

 F- 13

 Property is recorded at fair market value and depreciation is recognized
over a 39-year period. For these properties, we recorded depreciation expense of $ 742,949 and $ 441,667 for the years ended December 31,
2024 and 2023, respectively.

 NOTE 7 - COMMITMENTS

 The Company maintains office space in Coral Gables,
Florida. The Company entered into a lease in November 2020 for a term of sixty-two months with the right to extend the term of the lease
for two additional, successive periods of two years upon the same terms and conditions of the initial term.

 In December 2020, the Company entered into a Sublease
Agreement to sublet a portion of the office space described above. The subtenant has agreed to cover the proportionate amount of the lease
costs associated with the office space based on essentially the same terms as the lease described above, including the rights to extend
for two successive two-year periods. For the years ended December 31, 2024 and 2023, the Company recognized $ 11,026 and $ 60,158, respectively,
of sublease rental revenue, which is recorded as an offset to the Company's rental expense discussed below. The sublease was terminated.

 The J. W. Korth Michigan office has a lease which
began in May 2021 for a term of sixty months.

 The net present value of future lease payments
pursuant to the operating lease agreements are included in the ROU Leased Asset and the Lease Liability accounts on the Consolidated Statements
of Financial Condition. The ROU Leased Asset represents the right to use an underlying asset for the remaining lease term. The Lease Liability
represents the obligation to make lease payments pursuant to the terms of the lease agreements.

 Net rental expense for the year ended December
31, 2024 was $ 307,314 compared to $ 258,373 for the year ended December 31, 2023, which includes additional expenses for common area, direct
operating expense, utilities, parking, and taxes.

 As of December 31, 2024, 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 1.1 years was $ 294,412 compared to $ 540,266 for the year ended December 31,
2023.

 The following is a schedule of the maturities
of future lease payments, net of future sublease revenue, over the remaining life of the operating leases, reconciled to the net present
value of as of December 31, 2024:

 Schedule of future minimum rental payments for operating leases

 Future Lease

Payments

 2025

 $
 271,470

 2026

 30,504

 Total Lease Payments

 301,974

 Less: Imputed Interest

 ( 7,562
)

 Present Value of Lease Liabilities

 $
 294,412

 NOTE 8 - INDEMNIFICATIONS

 The Company provides representations and warranties
to counterparties in connection with a variety of commercial transactions and occasionally indemnifies them against potential losses caused
by the breach of those representations and warranties. These indemnifications generally are standard contractual terms and are entered
into in the normal course of business. The maximum potential amount of future payments that the Company could be required to make under
these indemnifications cannot be estimated. However, the Company believes that it is unlikely it will have to make material payments under
these arrangements and has not recorded any contingent liability in the consolidated financial statements for these indemnifications.

 NOTE 9 - CUSTOMERS

 The Company has forty and forty-four customers
as of December 31, 2024 and 2023, respectively. The Company defines customers as borrowers that have an active loan with the Company,
or are in the midst of the underwriting process and have a commitment fee on deposit with the Company.

 F- 14

 NOTE 10 – RELATED PARTY TRANSACTIONS

 From time to time, the Company purchases MSNs
and holds them in its brokerage account. These MSNs are included on the Consolidated Statements of Financial Condition as Securities.
As of December 31, 2024, the balance was $ 620,470, which is eliminated in consolidation. From time to time, second lien or balance sheet
loans may be all or partially funded by entities controlled by KDM directors or employees; such loans 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. The Company has created three special purpose entities to date, KDM Stafford LLC,
KDM Nagog Park LLC, and KDM Cupples REO LLC in order to acquire properties via foreclosure and in deed of lieu of foreclosure, respectively.
See Note 6.

 NOTE 11 – DEFERRED REVENUE, NET

 Loan origination fees are deferred and recognized
as revenue over the life of the respective loan. The associated loan origination costs are also deferred and recognized as expense over
the life of the loan. The deferred portion of the loan origination fees is netted against the deferred portion of the loan origination
costs and reported as a net deferred revenue liability on the Company's Consolidated Statements of Financial Condition.

 The following is a summary of the loan originating
fees and costs deferred and amortized for the years ended December 31, 2024 and 2023:

 Schedule of loan originating fees and costs deferred and amortized

 Deferred Origination

Fees

 Deferred

Origination

Costs

 Deferred

Revenue, Net

 Deferred Revenue at December 31, 2023

 $
 4,980,490

 $
 ( 3,254,687
)

 $
 1,725,803

 New loan deferrals

 1,380,574

 ( 501,122
)

 879,452

 Amortization of deferrals

 ( 1,688,843
)

 1,042,555

 ( 646,288
)

 Deferred Revenue at December 31, 2024

 $
 4,672,221

 $
 ( 2,713,254
)

 $
 1,958,967

 Deferred Origination

Fees

 Deferred

Origination

Costs

 Deferred

Revenue, Net

 Deferred Revenue at December 31, 2022

 $
 5,428,823

 $
 ( 3,834,954
)

 $
 1,593,869

 New loan deferrals

 1,261,450

 ( 562,529
)

 698,921

 Amortization of deferrals

 ( 1,709,783
)

 1,142,796

 ( 566,987
)

 Deferred Revenue at December 31, 2023

 $
 4,980,490

 $
 ( 3,254,687
)

 $
 1,725,803

 NOTE 12 – EMPLOYEE AND DIRECTOR STOCK OPTIONS

 On June 28, 2019, the Company's Board of
Directors adopted the 2019 Stock Option Plan (the "Incentive Plan"). The Incentive Plan provides for the grant of both incentive
and non-statutory stock options to key employees, directors or other persons having a service relationship with the Company. Effective
December 8, 2022, the Incentive Plan was amended to authorize the purchase of up to an aggregate of 3,000,000 shares of the Company's
unissued, or reacquired, common stock, $ 0.001 par value. The Plan is administered by the Board of Directors or a committee appointed by
the Board.

 F- 15

 During the year ended December 31, 2024, no options
to purchase shares of the Company's common stock were offered. The weighted-average grant date fair values of options granted during
the fiscal year 2023 was $ 1.22992 per share. The fair values of the stock-based awards granted were calculated with the following weighted-average
assumptions:

 Schedule of estimated fair value of stock options weighted-average assumptions

 Risk-free interest rate:

 3.82 %

 Expected term:

 5.75 years

 Expected dividend yield:

 0 %

 Expected volatility:

 52.17 %

 For the years ended December 31, 2024 and 2023,
the Company recorded $ 53,556 and $ 56,252 of stock-based compensation expense, respectively. As of December 31, 2024 and 2023, there was
$ 50,590 and $ 108,612, respectively in total unrecognized compensation expense related to non-vested employee stock options granted under
the Incentive Plan, which is expected to be recognized over 2.4 years and 3.0 years, respectively.

 Stock option activity for the years ended December
31, 2024 and 2023, is summarized as follows:

 Schedule of stock option activity

 2019 Stock Option Plan:

 Weighted
 Average
 Exercise
 Price

 Weighted
 Remaining
 Contractual
 Life (Years)

 Options outstanding at January 1, 2023

 1,090,000

 $
 1.47

 7.75

 Granted

 15,000

 $
 3.00

 9.44

 Exercised

 -

 -

 -

 Expired or forfeited

 10,000

 3.00

 8.00

 Options outstanding at December 31, 2023

 1,095,000

 $
 1.47

 7.64

 Granted

 -

 -

 -

 Exercised

 -

 -

 -

 Expired or forfeited

 -

 -

 -

 Options outstanding at December 31, 2024

 1,095,000

 $
 1.47

 6.64

 Options exercisable at December 31, 2024

 960,000

 $
 1.13

 7.3

 Options expected to vest at December 31, 2024

 135,000

 $
 3.00

 9.0

 NOTE 13 – PREFERRED EQUITY

 On September 27, 2019, the Company issued 200,000
shares of its Series A 6% Cumulative Perpetual Convertible Preferred Stock 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 (the "Series B 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 will pay 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 outstanding Series A 6% Cumulative Perpetual Convertible Preferred Stock, par value $ 0.001 per share,
or Series A preferred stock, and all of KDM's common stock, 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.

 F- 16

 The Series B preferred stock is redeemable at
the Company's option, in whole or in part, on or after June 29, 2026, at a redemption price per share equal to $ 1,000.00 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 $1,000.00 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 will be secured by a security interest on servicing fees, as specified in each mortgage secured note issued
by the Company, which is the difference between the interest payable pursuant to the mortgage secured note and the interest receivable
pursuant to the related commercial real estate mortgage loan. The requisite holders of Series B preferred stock will be entitled to exercise
rights and remedies pursuant to such security interest in the event that the Company does not pay the relevant mandatory redemption price
(inclusive of any accrued and unpaid dividends) within thirty (30) days of the applicable redemption date, except with respect to the
final redemption date, which is not subject to a thirty (30)-day grace period.

 The Company declared and paid dividends for the
years ended December 31, 2024 and 2023, as follows:

 Schedule of dividend paid

 Series A

 Series B

 Total Preferred

Stock Dividends

 Accrued Preferred Dividends, January 1, 2023

 $
 12,500

 $
 260,732

 $
 273,232

 Declared Dividends

 630,000

 1,235,000

 1,865,000

 Paid Dividends

 ( 630,000
)

 ( 1,235,000
)

 ( 1,865,000
)

 Accrued Preferred Dividends, December 31, 2023

 12,500

 260,732

 273,232

 Declared Dividends

 690,000

 1,235,000

 1,925,000

 Paid Dividends

 ( 690,000
)

 ( 1,235,000
)

 ( 1,925,000
)

 Accrued Preferred Dividends, December 31, 2024

 $
 12,500

 $
 260,732

 $
 273,232

 NOTE 14 – 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:

 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.

 F- 17

 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 names KDM Cupples REO LLC took title to the office property securing KDM2021-N022. Both loans went into default in late 2023 due to
the departure of major tenants. During the twelve months ending December 31,2024, it was determined that the value of these two mortgages
were impaired and recorded on the Statement of Operations in the amount of $12,660,000. The foreclosed properties in the amount of $15,000,000
are included in the property and equipment. The carrying value of the properties was determined by third party appraisals near the time
of acquisition..

 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 a limited operating history and a small amount of loans outstanding,
we have a limited basis to predict prepayment rates and default rates, but have engaged a third party, MIAC Analytics, to assist us in
our valuation of this asset. The amount is included on the Consolidated Statements of Financial Condition as "Mortgage Servicing
Rights, at Fair Value."

 J. W. Korth owns 225,000, $ 1 par of defaulted
Banco Cruzeiro del Sur bonds. As of December 31, 2024, 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.

 F- 18

 Fair Value Disclosure

 The following tables display the Company's
assets and liabilities measured at fair value on a recurring basis:

 Schedule of fair value, assets and liabilities measured on recurring basis

 December 31, 2024

 Total

 Level I

 Level II

 Level III

 Financial Assets

 $
 451,974,989

 $
 -

 $
 451,974,989

 $
 -

 Mortgage Servicing

 -

 -

 5,161,709

 -

 5,161,709

 -

 Non-MSN Securities

 -

 -

 Total Financial Assets

 $
 466,438,914

 $
 -

 $
 457,136,698

 $
 9,302,216

 Financial Liabilities

 Mortgage Secured Notes Payable

 $
 450,264,519

 $
 -

 $
 450,264,519

 $
 -

 Warehouse Line of Credit

 17,269,278

 -

 17,269,278

 -

 Total Financial Liabilities

 $
 467,533,797

 $
 -

 $
 467,533,797

 $
 -

 December 31, 2023

 Financial Assets

 $
 484,484,408

 $
 -

 $
 484,484,408

 $
 -

 Mortgage Servicing

 -

 -

 7,674,198

 -

 7,674,198

 -

 Non-MSN Securities

 -

 -

 Total Financial Assets

 $
 501,489,483

 $
 -

 $
 492,158,606

 $
 9,330,877

 Financial Liabilities

 Mortgage Secured Notes Payable

 $
 485,154,510

 $
 -

 $
 485,154,510

 $
 -

 Warehouse Line of Credit

 1,560,000

 -

 1,560,000

 -

 Total Financial Liabilities

 $
 486,714,510

 $
 -

 $
 486,714,510

 $
 -

 Fair Value Measurements

 Changes in Fair Value Measurements for the
year ended December 31, 2024

 The Company has engaged MIAC Analytics to assist
in the valuation of the mortgage servicing component of its business. The underlying assumptions in the valuation model may change year
over year, which will be reflected in the determined fair value and the difference year over year will be reflected in the unrealized
gain/loss adjustment.

 F- 19

 The following table presents a reconciliation
of changes in Level 3 assets and liabilities reported in the Audited Consolidated Statements of Financial Condition for the year ended
December 31, 2024 and 2023:

 Schedule of statements of financial condition

 Changes in assets:

 Year ended December 31, 2024

 Mortgage

Servicing

Value

 Non-MSN

 Total Value

 Beginning balance at January 1, 2024

 $

 $

 $
 9,330,877

 Sales

 -

 ( 43,009
)

 ( 43,009
)

 Unrealized Gain from newly issued mortgages

 384,231

 -

 384,231

 Fair Value adjustment

 ( 369,883
)

 -

 ( 369,883
)

 Ending balance at December 31, 2024

 $

 $

 $
 9,302,216

 Changes in assets:

 Year ended December 31, 2023

 Mortgage

Servicing

Value

 Non-MSN

 Total Value

 Beginning balance at January 1, 2023

 $
 13,229,889

 $
 225,000

 $
 13,454,889

 Sales

 -

 -

 -

 Unrealized Gain from newly issued mortgages

 2,278,894

 -

 2,278,894

 Fair Value adjustment

 ( 6,262,906
)

 ( 140,000
)

 ( 6,402,906
)

 Ending balance at December 31, 2023

 $

 $

 $
 9,330,877

 The Company's policy for recording transfers
between levels of the fair value hierarchy is to recognize as of the financial statement date. For the years ended December 31, 2024 and
December 31, 2023, 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 December
31, 2024 and December 31, 2023:

 Schedule of quantitative information

 2024

 Investment type

 Fair Value

 Valuation technique

 Unobservable inputs

 Values

 Mortgage servicing

 $

 Net Present Value

 Prepayment Discount

 9.94
 %

 Discount rate

 15.00
 %

 Non-MSN Securities

 $

 Net Present Value

 2023

 Investment type

 Fair Value

 Valuation technique

 Unobservable
 inputs

 Values

 Mortgage servicing

 $

 Net Present Value

 Prepayment Discount

 7.64
 %

 Discount rate

 15.00
 %

 Non-MSN Securities

 $

 Net Present Value

 F- 20

 NOTE 15 – WAREHOUSE LINE OF CREDIT

 On March 31, 2022, The
Company entered into a Master Repurchase Agreement and Securities Contract with Signature Bank (now Flagstar Bank) for the provision of
an uncommitted warehouse facility up to $100,000,000 (the " Line "). The Agreement provided for a three-year term.

 In connection with entering
into the Line, the Company incurred loan fees of approximately $ 1,589,783 which is netted against the amount drawn on the line and is
included in the warehouse line of credit, net in the accompanying audited consolidated statements of financial condition. Loan fees associated
with the Line will be amortized on a straight-line basis over the term of the Line.

 On March 20, 2023, Signature Bank announced that
much of its assets, including our warehouse line would now operate under the New York Community Bancorp's Flagstar Bank, N.A. Upon
mutual agreement of the parties, the Agreement was terminated on February 22, 2024. Fees and expenses associated with this transaction
that were originally amortized over the 3-year term of the facility were realized upon cancellation and are captured in the Interest Expense
caption on the Company's consolidated statement of operations.

 On October 13, 2023, KDM 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 December 31, 2024, the Company had a balance of $17,494,250 on the MFB Line. Total amortization expense of capitalized loan fees was
$ 134,135
for the year ended December 31, 2024 and recorded in interest expense.

 NOTE 16 – INCOME TAXES

 Income tax benefit is detailed as follows:

 Schedule of income tax expense

 2024

 2023

 Deferred income tax benefit:

 Federal

 $
 ( 496,183
)

 $
 ( 1,037,344
)

 State

 ( 137,515
)

 ( 287,498
)

 Total deferred Income tax expense/(benefit)

 $
)

 $
)

 Total Income tax benefit

 $
)

 $
)

 Income tax benefit differs from the amounts that would result from
applying the federal statutory rate of 21% to the Company's loss before taxes for the years ended December 31, 2024 and 2023, are
as follows:

 Schedule of income before taxes

 2024

 2023

 Computed "expected" Income tax benefit

 $
 ( 450,841
)

 21.0
 %

 $
 ( 1,102,309
)

 21.0
 %

 State income taxes, net of federal benefit

 ( 108,637
)

 5.1
 %

 ( 227,123
)

 4.3
 %

 Non-deductible expenses

 17,731

 - 0.8
 %

 20,815

 - 0.4
 %

 Other, net

 ( 91,951
)

 4.3
 %

 ( 16,225
)

 0.3
 %

 Total Income tax benefit

 $
)

 29.6
 %

 $
)

 25.2
 %

 F- 21

 Temporary differences that give rise to the components of deferred
tax assets and liabilities as of December 31, 2024 and 2023, are as follows:

 Schedule of deferred tax assets and liabilities

 2024

 2023

 Deferred tax assets:

 Deferred revenue, net

 $
 496,500

 $
 437,405

 Deferred rent from operating leases

 7,741

 11,396

 Net operating loss carry-forwards

 935,185

 402,271

 Deferred tax assets - current

 1,439,426

 851,072

 Less: Valuation allowance

 -

 -

 Deferred tax assets

 $
 1,439,426

 $
 851,072

 Deferred tax liabilities:

 Deferred capital loss

 125,593

 -

 Accrued expenses not paid

 85,388

 -

 Fixed assets/depreciation

 ( 63,068
)

 ( 48,463
)

 Unrealized gain/(loss) on mortgage secured notes

 14,046

 ( 8,640
)

 Realized (gain) on foreclosure

 ( 805,610
)

 ( 611,703
)

 Unrealized (gain) on accrued interest

 ( 3,887
)

 ( 7,185
)

 Unrealized (gain) on mortgages

 ( 2,170,609
)

 ( 2,187,500
)

 Deferred tax liability

 $
 ( 2,818,147
)

 $
 ( 2,863,491
)

 Net deferred tax asset (liability)

 $
 ( 1,378,721
)

 $
 ( 2,012,419
)

 As of December 31, 2024, management determined that there should
be no valuation allowance against the net deferred tax assets of $ 1,439,426. In assessing the ability to realize a portion of the deferred
tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which
those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and projected future
taxable income in making the assessment.

 The Company has not recognized any tax benefits
from uncertain tax positions for any of the reporting periods presented. Although it is reasonably possible that certain unrecognized
tax benefits may increase or decrease within the next twelve months due to tax examination changes, settlement activities, expirations
of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or
other similar activities, the Company does not anticipate any significant changes to unrecognized tax benefits over the next 12 months.
During the year ended December 31, 2024, no interest or penalties were required to be recognized relating to unrecognized tax benefits.

 The Company files U.S. federal and state tax returns,
of which the open tax period subject to examination by taxing authorities include the years ended December 31, 2021, 2022 and 2023. The
Company is not currently subject to any examinations by any state or federal taxation authority.

 F- 22

 NOTE 17 – PROPERTY AND EQUIPMENT

 Property and Equipment are summarized as follows:

 Schedule of property, plant and equipment

 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

 2023

 Land & Building

 $
 17,900,000

 Equipment

 300,472

 Furniture and fixtures

 184,591

 18,385,063

 Accumulated depreciation

 ( 710,104
)

 Net Property & Equipment

 $
 17,674,959

 Depreciation expense for the period ending December
31, 2024 and December 31, 2023 was $ 1,242,793 and $ 665,551, respectively.

 NOTE 18 – 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 a new investment
partnership over which the Company and its related parties have a controlling financial interest. The Company holds 49.7% of the equity
interest in the partnership and its CEO holds a 29.6% 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 sheet in the Mortgages Owned caption and on the liability
side in the Mortgage Secured Notes caption.

 F- 23

 NOTE 19 – 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.

 Lending and Servicing

 This is KDM's core business segment and
includes consolidation of the Fund and J.W. Korth. Our management profit and loss statements look at earnings before interest, taxes,
depreciation, dividends, and amortization ("EBITDDA"), as well as exclude the unrealized gain/loss from our book of 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

 Year Ended December 31,

 2024

 2023

 REVENUES

 Origination Revenue, Net

 $
 1,688,843

 $
 1,709,783

 Servicing Revenue

 5,040,383

 5,809,594

 Underwriting Income

 99,063

 278,550

 Other Revenue

 2,240,680

 1,539,837

 Total Revenues

 9,068,969

 9,337,764

 COST OF REVENUES

 Broker Expenses

 1,610,590

 1,826,143

 Administrative Expenses

 1,149,845

 1,427,578

 Total Cost of Revenues

 2,760,435

 3,253,721

 GROSS PROFIT

 6,308,534

 6,084,043

 OPERATING EXPENSES

 495,716

 450,214

 Compensation and Related Benefits

 4,394,048

 4,306,667

 Professional & Legal

 964,659

 856,335

 Advertising

 287,353

 272,215

 Total Operating Expenses

 6,141,776

 5,885,431

 EBITDDA

 $
 166,758

 $
 198,612

 F- 24

 2024

 2023

 ASSETS

 $
 1,974,155

 $
 4,235,802

 Restricted Cash

 15,726,038

 17,178,085

 Restricted Investment

 1,192,510

 -

 461,474,989

 493,984,408

 Mortgage Servicing Rights, at Fair Value

 12,661,709

 15,174,198

 Loans Held for Sale

 520,215

 6,074,927

 ROU Leased Asset

 270,281

 501,715

 Goodwill

 Property and equipment, net of depreciation

 203,058

 253,432

 16,632,923

 798,636

 Total Assets

 $
 520,068,094

 $
 547,642,080

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

 2024

 2023

 EBITDDA

 $
 166,758

 $
 198,612

 Other (Expenses)/Income

 Unrealized Gain/(Loss) on Mortgages

 14,348

 ( 3,984,012
)

 Unrealized Gain/(Loss) on Mortgage Secured Notes

 39,501

 ( 10,565
)

 Interest Expense

 ( 1,229,293
)

 ( 1,324,770
)

 Unrealized Loss on Securities

 -

 ( 129,009
)

 Realized Gain on Foreclosure

 -

 Realized (Loss)/Gain on Mortgage Secured Notes

 ( 434
)

 97,767

 Realized Loss on Loans Held for Sale

 ( 141,647
)

 -

 Change in Fair Value of Mortgage Secured Notes

 ( 665,551
)

 Loss on Foreclosures

)

 -

 Total Other Expenses

 ( 552,457
)

 ( 6,016,140
)

 Loss before provision for income taxes

 ( 385,699
)

 ( 5,817,528
)

 Asset Management

 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. Two out of the three properties owned as of December 31, 2024 we owned on
behalf of our MSN holders, and we are managing them in the best interests of the Noteholders until we can maximize recovery by
stabilizing or selling them. Below are the consolidated profit and loss statements and assets of the three properties KDM owns in
Stafford, Virginia (specialty office), Acton, Massachusetts (office), and St. Louis, Missouri (office).

 See Note 17 for total property values.

 As mentioned elsewhere in this report, subsequent
to the date of these financial statements, KDM has also acquired via deed in lieu of foreclosure a property from a delinquent loan in
Los Angeles, CA.

 F- 25

 Year Ended December 31,

 2024

 2023

 REVENUES

 Rental Income

 $
 2,556,216

 $
 1,076,320

 Tenant Reimbursements

 232,714

 -

 Other Revenue

 209,758

 -

 Total Revenues

 2,998,688

 1,076,320

 COST OF REVENUES

 Bank Transaction Fees

 -

 Appraisal Costs

 11,200

 -

 Ground Rent

 779,416

 -

 Total Cost of Revenues

 791,583

 -

 GROSS PROFIT

 2,207,105

 1,076,320

 OPERATING EXPENSES

 37,035

 -

 Compensation and Related Benefits

 117,628

 165,686

 Property Taxes

 243,567

 82,239

 Professional & Legal

 211,497

 2,614

 Utilities

 1,477,600

 131,149

 Travel & Entertainment

 1,469

 -

 Business Insurance

 59,750

 10,975

 Total Operating Expenses

 2,148,546

 392,663

 Net Operating Income

 58,559

 683,657

 OTHER EXPENSES

 Mortgage Interest

 573,493

 573,493

 Total Other Expenses

 573,493

 573,493

 Net Loss

 $
 ( 514,934
)

 $
 110,164

 2024

 2023

 ASSETS

 $
 629,926

 $
 287,920

 Escrow

 294,578

 321,151

 Property and equipment, net of depreciation

 31,719,346

 17,421,528

 1,649,071

 985,734

 Total Assets

 $
 34,292,921

 $
 19,016,333

 F- 26

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

 Schedule of segment operations

 2024

 Lending and Servicing

 Asset Management

 Other

 Total

 REVENUES

 Origination Revenue, Net

 $
 1,688,843

 $
 -

 $
 -

 $
 1,688,843

 Servicing Revenue

 5,040,383

 -

 -

 5,040,383

 Underwriting Income

 99,063

 -

 -

 99,063

 Rental Income

 -

 2,556,216

 -

 2,556,216

 Tenenat Reimbursements

 -

 232,714

 -

 232,714

 Other Revenue

 2,240,680

 209,758

 -

 2,450,438

 Total Revenues

 9,068,969

 2,998,688

 -

 12,067,657

 COST OF REVENUES

 Broker Expenses

 1,610,590

 -

 -

 1,610,590

 Bank Transaction Fees

 -

 -

 Appraisal Costs

 -

 11,200

 -

 11,200

 Ground Rent

 -

 779,416

 -

 779,416

 Administrative Expenses

 1,149,845

 -

 -

 1,149,845

 Total Cost of Revenues

 2,760,435

 791,583

 -

 3,552,018

 GROSS PROFIT

 6,308,534

 2,207,105

 -

 8,515,639

 OPERATING EXPENSES

 495,716

 37,035

 -

 532,751

 Compensation and Related Benefits

 4,394,048

 117,628

 -

 4,511,676

 Professional & Legal

 964,659

 211,497

 -

 1,176,156

 Property Taxes

 -

 243,567

 -

 243,567

 Utilities

 -

 1,477,600

 -

 1,477,600

 Travel & Entertainment

 -

 1,469

 -

 1,469

 Business Insurance

 -

 59,750

 -

 59,750

 Advertising

 287,353

 -

 -

 287,353

 Depreciation

 -

 -

 Total Operating Expenses

 6,141,776

 2,148,546

 9,533,115

 Net Operating Income

 166,758

 58,559

 ( 1,242,793
)

 ( 1,017,476
)

 Other (Expenses)/Income

 Unrealized Gain on Mortgages

 14,348

 -

 -

 14,348

 Unrealized Gain on Mortgage Secured Notes

 39,501

 -

 -

 39,501

 Interest Expense

 ( 1,229,293
)

 ( 573,493
)

 -

 ( 1,802,786
)

 Unrealized Loss on Securities

 -

 -

 -

 -

 Realized Gain on Foreclosure

 -

 -

 Realized (Loss)/Gain on Mortgage Secured Notes

 ( 434
)

 -

 -

 ( 434
)

 Realized Loss on Loans Held for Sale

 ( 141,647
)

 -

 -

 ( 141,647
)

 Change in Fair Value of Mortgage Secured Notes

 -

 -

 Loss on Foreclosures

)

 -

 -

)

 Total Other Expenses

 ( 552,457
)

 ( 573,493
)

 -

 ( 1,125,950
)

 Loss before provision for income taxes

 ( 385,699
)

 ( 514,934
)

 ( 1,242,793
)

 ( 2,143,426
)

 F- 27

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

 2024

 Lending and
 Servicing

 Asset Management

 Other

 Total

 ASSETS

 $
 1,974,155

 $
 924,504

 $
 -

 $
 2,898,659

 Restricted Cash

 15,726,038

 -

 ( 294,578
)

 15,431,460

 Restricted Investment

 1,192,510

 -

 -

 1,192,510

 461,474,989

 -

 ( 9,500,000
)

 451,974,989

 Mortgage Servicing Rights, at Fair Value

 -

 -

 12,661,709

 -

 ( 7,500,000
)

 5,161,709

 Loans Held for Sale

 520,215

 -

 -

 520,215

 -

 -

 ROU Leased Asset

 270,281

 -

 -

 270,281

 Goodwill

 -

 -

 Property and equipment, net of depreciation

 203,058

 31,719,346

 -

 31,922,404

 16,632,923

 1,649,071

 ( 15,214,894
)

 3,067,100

 Total Assets

 $
 520,068,094

 $
 34,292,921

 $
 ( 32,509,472
)

 $
 521,851,543

 NOTE 20 – SUBSEQUENT EVENTS

 The Company has evaluated all events or transactions
that occurred after December 31, 2024 through the date that the financial statements were available to be issued. During this period,
there were no material subsequent events requiring disclosure, other than those noted below.

 a.
 The Company approved a $ 308,750 cash payment of the quarterly Series B preferred stock dividend for the period of 10/15/2024 –
1/14/2025 paid on 1/15/2025.

 b.
 The Company approved a $ 172,500 cash payment of the quarterly Series A preferred stock dividend for the period of 12/15/2024 –
3/14/2025 paid on 3/14/2025.

 c.
 The Company approved a $ 308,750 cash payment of the quarterly Series B preferred stock dividend for the period of 1/15/2025 –
4/14/2025 to be paid on 4/15/2025.

 d.
 On March 26, 2025 the Company sold a loan held for sale for $ 520,000.

 e.
 On March 11, 2025 the Company acquired, on behalf of its MSN Noteholders, a mixed use property in Los Angeles, California via deed
in lieu of foreclosure.

 f.
 The Company currently has 1 loan over 30 days late, no loans in the foreclosure category, 5
 properties in its REO portfolio, and 2 MSNs that have been marked down and are awaiting re-performance or resolution of the REO
 properties.