LOAN 10-K & 10-Q changes, risk factors and insider trading

The following risk factors, among others, could affect our actual results of operations and could cause our actual results to differ materially from those expressed in forward-looking statements made by us. These forward-looking statements are based on current expectations and except as required by law we assume no obligation to update this information. These disclosures reflect the Company’s beliefs and opinions as to factors that could materially affect the Company and its securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. You should carefully consider the risks described below and elsewhere in this Report before making an investment decision. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. Our common stock is considered speculative and the trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. The following risk factors are not the only risk factors facing our Company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business.

As a real estate finance company, our revenuerevenues and net income isare limitedderived toprimarily from interest and other fees received or accrued on our loan portfolio. Our ability to originate real estate loans isdepends limited byon the funds atavailable ourto disposal.us. As of March 4,24, 2025,2026, we had approximately approximately $17.6$22.6 million of borrowingaggregate availability under the Webster Credit Line that expires on February 28, 2026. Although the Company does not believe there will be any issues in extending the Webster Credit Line or securing a similar line from another bank before its expiration, there can be no assurance that we will be able to extend the Webster Credit Line or secure a similar line from another bank before its expiration. We intend to use the proceeds from the repayment of loans outstanding and the additionalavailable borrowing capacity under the Webster Credit Line and the Valley Credit Line, which mature on February 28, 2029 and December 12, 2027, respectively. Although we do not currently anticipate any difficulty in extending these credit lines or obtaining a comparable credit facility from another lender prior to originatetheir respective maturities, there can be no assurance that we will be able to do so on acceptable terms, or at all. We intend to use repayments of outstanding loans and additional borrowing capacity under these credit lines to fund the origination of additional real estate loans. Nevertheless, However, if demand for our mortgage loans increases, we cannot assure you that we will be able to capitalizemeet on thisthat demand given in light of the limited funds available to us tofor originateloan loans.originations.

The enactment of the Terrorism Risk Insurance Act of 2002,2002 or (the TRIA,“TRIA”), and the subsequent enactment of the Terrorism Risk Insurance Program Program Reauthorization Act of 2007, which extended TRIA through the end of 2020, which in turn was extended by the Terrorism Risk Insurance Program Reauthorization Act of 2019 through the end of 2027 requires insurers to make terrorism insurance available under their property and casualty insurance policies in order to receive federal compensation under TRIA for insured losses. However, this legislation does not regulate the pricing of such insurance. The absence of affordable insurance coverage may adversely affect the general real estate lending market, lending volume and the market’s overall liquidity and may reduce the number of suitable financing opportunities available to us and the pace at which we are able to make loans. If property owners are unable to obtain affordable insurance coverage, the value of their properties could decline and in the event of an uninsured loss, we could lose all or a portion of our investment.

Our existing credit linelines hashave numerous covenants. If we are unable to comply with these covenants, or obtain necessary waivers, the outstanding amount of theour loanloans could become due and payable.

The Webster Credit Line containsand variousthe Valley Credit Line contain customary covenants and restrictions that are typical for these kinds of credit facilities,restrictions, including limitinglimitations on borrowings based the amount that we can borrow relative toon the value of the underlying collateral, maintainingrequirements variousto maintain specified financial ratios and limitations restrictions on the terms of loans we makemay to our customers.originate. If we fail to meetcomply or satisfywith any of these covenants,covenants orand faildo tonot obtain a waiver in the eventwaiver, we do fail to meet or satisfy any of these covenants, we wouldwill be in default under ourthe agreementapplicable credit withagreements. Webster,Upon Flushingan andevent Mizrahi, andof Webster,default, FlushingWebster and/or MizrahiValley could elect to declare outstanding amounts immediately due and payable, terminate their its commitments to us,commitments, require us to post additional collateral and/or enforceexercise their interestsremedies against existingthe collateral.collateral Acceleration ofsecuring our debtobligations. toAny Webster,such Flushingaction and/or Mizrahi could significantlymaterially reduce our liquidity orliquidity, require us to sell our assets to repay amountsoutstanding dueindebtedness, materially and outstanding.adversely This would significantly harmaffect our business, financial condition, results of operations and ability to make distributionsdistributions, and could result in the foreclosure of our assets which secure our obligations, which could cause the value of our outstanding securities to decline. A default could also significantlymaterially limit our financing alternativesalternatives, suchimpair thatour we would be unableability to pursueexecute our leverage strategy,strategy whichand adversely could adversely affect our returns.

We have, and expect that we will continue to have a significant amount of indebtedness. As of December 31, 2024,2025, we had approximately $17.6 $22.4 million of debt outstanding, consisting of the amounts outstanding under the Webster Credit Line and theValley balanceCredit ofLine. The Webster Credit Line expires on February 28, 2029, and the Notes. The WebsterValley Credit Line expires inon 2026,December and12, the Notes mature in April 2026.2027. As of March 4,24, 2025,2026, anotherwe $17.6have approximately $22.6 million was available under the Webstercredit Credit Line.lines. This level of indebtedness and the pending maturity of such indebtedness increasesincrease the risk risk that we may be unable to generate sufficient cash sufficient to pay amounts due in respect of theour indebtedness. Our indebtedness could have other important consequences to you and significantly impact our business. For example, it could:

We and our subsidiary may incur substantial additional indebtedness in the future. The covenants in the agreement governing the Webster Credit Line and the Valley Credit Line may limit our ability and the ability of our subsidiary to incur additional indebtedness. To the extent that we are nevertheless able to incur additional indebtedness or such other obligations, the risks associated with our indebtedness described above, including our possible inability to service our debt, will increase.

We are constantly exploring new and advanced security protection measures to prevent future cybersecurity incidents. These steps may include working with a cybersecurity consultant as well as potential additional measures. We continually assess cybersecurity threats and make investments to increase internal protection, detection, and response capabilities to address this risk. To date, we have not experienced any material impact to theour business or operations resulting from information or cybersecurity attacks, including the incident mentioned above; however, because of the frequently changing attack techniques, along with the increased volume and sophistication of the attacks, there is the potential for us to be adversely impacted. In addition, any cybersecurity breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. In addition, such cybersecurity breach could impact our borrowers if sensitive borrower information is compromised. 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 and the services we provide to customers or damage our reputation, which could materially and adversely affect us. This impact could result in reputational, competitive, operational or other business harm as well as financial costs and regulatory action. See Item 1C. “Cybersecurity”, for additional information.

RisingRising, declining, or continued highvolatile interest rates may reduce our profitability and may cause losses.

BasedOur on our experience and our periodic evaluation of ourexpected loancredit portfolio, we have not deemed it necessary to create any loan loss reserves. Thus, a loss with respect to all or a portion of a loan in our portfolio will have an immediatelosses and adverse impact on our net income. The valuation process of our loan portfolio requires us to make certain estimates and judgments, which are particularly difficult to determine during a period in which the availability of real estate creditcollectability is limited and real estate transactions have decreased. These estimates and judgments are based on a number of factors, includingwhich may include projected cash flows from the collateral securing our mortgageloans loans, (if any,any), loan structure,structure (including the availability of reserves and recourse guarantees,guarantees), the borrower’s ability and willingness to repay, the likelihood of repayment inor fullrefinancing at the maturity of a loan,maturity, the relative strength or weakness of the refinancing market market, and expected market discount rates for varying property types. If our estimates and judgments are notincorrect, correct,or if economic and market conditions deteriorate, we could experience losses on our loan portfolio and our results of operations and financial condition could be severelyadversely impacted.

A single borrower or a group of affiliated borrowers may account for more than 10% of our loan portfolio. A default by one borrower in a group is likely to result in a default by the other borrowers in the group. At December 31, 2024,2025, we have made loans to fourthree different entities in the aggregate amount of $7.2$6.2 million or representing 11.0%10.3% of our loan portfolio. One individual holds at least a fifty percent interest in each of the different entities. This individual is not affiliated with any of our officers or directors. Concentration of loans to one borrower or a group of affiliated borrowers poses a significant risk, as default would have a material adverse impact on our operating results, cash flow, financial condition and our ability to service our debt.

Our existing credit linelines hashave numerous covenants with which we must comply. If we are unable to comply with these covenants, the outstanding amountamounts of theour loanloans could become due and payable and we may have to sell off a portion of our loan portfolio to pay off the debt.

We have a $32.5 million credit line with Webster, FlushingWebster and MizrahiFlushing that expires on February 28, 2026.2029 and a $10.0 million credit line with Valley that expires on December 12, 2027, The Webster Credit Line contains and the Valley Credit Line contain various covenants and restrictions that are typical for these kinds of credit facilities, including limiting the amount that we can borrow relative to the value of the underlying collateral, maintaining various financial ratios and limitations on the terms of loans we make to our customers. The Webster Credit Line and imposesthe Valley Credit Line impose certain restrictions which may adversely impact our ability to grow and/or maintain our qualification for taxation as a REIT. Certain of these restrictions apply to both facilities, while others apply only to specific facilities. These limitations include the following:

If we fail to meet or satisfy any of these covenants, we would be in default under ourthe agreementterms withof Webster,the FlushingWebster Credit Line or the Valley Credit Line and Mizrahithe and theylenders could elect to declare outstanding amounts due and payable, terminate itsthe commitments to us, require us to post additional collateral and/or enforce their interests against existing collateral. Acceleration of our debt to Webster, Flushing and/or Mizrahi Valley could also make it difficult for us to satisfy the requirements necessary to maintain our qualification for taxation as a REIT, significantly reduce our liquidity or require us to sell our assets to repay amounts due and outstanding. This would significantly harm our business, financial condition, results of operations and ability to make distributions and could result in the foreclosure of our assets which secure our obligations, which could cause the value of our outstanding securities to decline. A default could also significantly limit our financing alternatives such that we would be unable to pursue our leverage strategy, which could adversely affect our returns.

Our failure to remain qualified for taxation as a REIT would subject us to U.S. federal income tax and applicable state and local income taxes, which would reduce the amount of cash available for distribution to our shareholders.

In order to qualify for taxation as a REIT, we must distribute to our shareholders, each calendar year, at least 90% of our REIT taxable income (including certain items of non-cash income), determined without regard to the deduction for dividends paid and excluding net capital gain. To the extent that we satisfy the 90% distribution requirement, but distribute less than 100% of our taxable income, we are subject to U.S. federal corporate income tax on our undistributed income. In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any calendar year are less than a minimum amount specified under U.S. federal income tax laws. We intend to distribute our net income to our shareholders in a manner that will satisfy the REIT 90% distribution requirement and avoid the 4% nondeductible excise tax.

As a result of the foregoing, we may generate less cash flow than taxable income in a particular year and find it difficult or impossible to meet the REIT distribution requirements in certain circumstances. In such circumstances, we may be required to: (i) sell assets in adverse market conditions, (ii) borrow on unfavorable terms, (iii) distribute amounts that would otherwise be invested in future acquisitions, capital expenditures or repayment of debt, (iv) make a taxable distribution of our shares as part of a distribution in which shareholders may elect to receive shares or (subject to a limit measured as a percentage of the total distribution) cash or (v) use cash reserves, in order to comply with the REIT distribution requirements and to avoid corporatefederal income tax and the 4% nondeductible excise tax. Thus, compliance with the REIT distribution requirements may hinder our ability to grow, which could adversely affect the value of our securities.

Dividends paid by REITs are not generally eligible for reduced rates applicable to “qualified” dividends paid by other corporations but are taxed at the same rate as ordinary income. However, for tax years beginning before 2026, REIT dividends paid to noncorporate U.S. shareholders that meet specified holding requirementrequirements are generally taxed at an effective tax rate lower than applicable ordinary income tax rates due to the availability of a deduction under the Code for specified forms of income from passthrough entities. More favorable rates will nevertheless continue to apply to regular corporate “qualified” dividends, which may cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends. This could have an adverse impact on the market price of our common shares.

In addition, distributions that we make to our shareholders will generally be taxable to our shareholders as ordinary income (subject to the lower effective tax rates applicable to qualified REIT dividends via the deduction-without-outlay mechanism of Section 199A of the Code, which is generally available to our noncorporate U.S. shareholders that meet specified holding requirement for taxable years before 2026requirements). However, a portion of our distributions may be designated by us as long-term capital gains to the extent that they are attributable to capital gain income recognized by us or may constitute a return of capital to the extent that they exceed our earnings and profits as determined for tax purposes. A return of capital is not taxable, but has the effect of reducing the basis of a shareholder’s investment in our common shares.

We intend to conduct our business in a manner that will qualify for the exception from the Investment Company Act set forth in Section 3(c)(5)(C) of the Investment Company Act. The SEC generally requires that, for the exception provided by Section 3(c)(5)(C) to be available, at least 55% of an entity’s assets be comprised of mortgages and other liens on and interests in real estate, also known as “qualifying interests,” and at least another 25% of the entity’s assets must be comprised of additional qualifying interests or real estate-type interests (with no more than 20% of the entity’s assets comprised of miscellaneous assets). Any significant acquisition by us of non-real estate assets without the acquisition of substantial real estate assets could cause us to meet the definitions of an “investment company.” IfAlthough we are deemedintend to bemonitor anour portfolio periodically and prior to each investment company,acquisition and disposition, there can be no assurance that we couldwill be requiredable to disposemaintain this exception from registration. Existing SEC no-action positions regarding the requirements of non-real estate assets or a portion thereof, potentially at a loss, in order to qualify for the Section 3(c)(5)(C) exception.were Weissued in accordance with factual situations that may alsobe substantially different from the factual situations we may face. No assurance can be requiredgiven tothat register asthe anSEC investmentwill companyconcur ifwith weour are unable to disposeclassification of the disqualifyingassets assets,of our whichsubsidiaries. couldFuture haverevisions ato materialthe adverse1940 effectAct or further guidance from the SEC staff may cause us to lose our ability to rely on Section us.3(c)(5)(C) and/or Section 3(c)(6) or force us to re-evaluate our portfolio and our investment strategy. Such changes may prevent us from operating our business successfully.

The properties securing the loans are generally classified as residential or commercial real estate and, typically, are not income producing. All loans, except for one loan with a facecurrent valueoutstanding principal balance of approximately $47,000,$22,000, are secured by a first mortgage lien on real estate. In addition, each loan is personally guaranteed by the principal(s) of the borrower, which guarantee may be collaterally secured by a pledge of the guarantor’s interest in the borrower. The face amount of the loans we originated in the past seven years ranged from $40,000 to a maximum of $3.6 million. Our lending policy limits the maximum amount of any loan to the lower of (i) 9.9% of the aggregate amount of our loan portfolio (not including the loan under consideration) and (ii) $4 million. Our loans typically have a maximum initial term of 12 months bearing interest at a fixed rate of 9% to 13%12.5% per year, except for one loan issued in June 2024, which hadinitially an initialbore interest rate ofat 11.5% thatper wasannum reducedand, to 7.25% oneffective January 2, 2025, was modified to bear interest at 7.25% per annum for an aextension periodterm of up to one year, which term was subsequently extended for an additional year. In addition, we usually receive origination fees or “points” ranging from 0% to 2% of the original principal amount of the loan as well as other fees relating to underwriting and funding the loan. Interest is always payable monthly, in arrears. In the case of acquisition financing, the principal amount of the loan usually does not exceed 75% of the value of the property (as determined by an independent appraiser) and in the case of construction financing, it is typically up to 80% of construction costs.

DuringIn FebruaryJune 2023, the Company sold one of its loans receivable to a third-party investor at its face value of $485,000. Mr. Assaf Ran, the Company’s President and Chief Executive Officer, participated in such acquisition in the amount of $152,000. In addition, in June 2023, the Companywe filed a foreclosure lawsuit relating to one property, as a result of a deed transfer from the borrower to a buyer without the Company’sour consent. In that instance, the buyer of the property on which the Companywe had a valid mortgage suffered a data breach which resulted in the failure of the buyer to remit the funds needed for the loan payoff. In October 2023, the Companywe received the entire payoff amount for the loan receivable, including all unpaid fees, to rectify the situation.

Effective January 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (ASU Topic 326).326. The ASU introduced a new credit loss methodology, Current Expected Credit Losses (“CECL”), which which requires earlier recognition of credit losses, while also providing additional transparency about credit risk. Management estimates our CECL reserve primarily using the Weighted Average Remaining Maturity (“WARM”) method, which requires reference to historic historic loss data taking into consideration expected economic conditions over the relevant timeframe. Application of the WARM method to estimate a CECL reserve requires judgment, including (i) the appropriate historical loan loss reference data, (ii) the expected timing and amount of future loan fundings and repayments, and (iii) the current credit quality of our loan portfolio and expectations of performance and market conditions over the relevant time period. In addition, management reviews each loan on a quarterly basis and evaluates the borrower’s ability to pay the monthly interest, the borrower’s likelihood of executing the original exit strategy, as well as the loan-to-value ratio. Failure to properly measure an allowance for credit losses could result in the overstatement of earnings and the carrying value of the loans receivable. Actual losses, if any, could differ significantly from estimated amounts.

Total revenue for the year ended December 31, 2024,2025, was approximately $9,689,000,$8,666,000, compared to approximately $9,796,000$9,689,000 for the year ended December 31, 2023,2024, a decrease of $107,000,$1,023,000, or 1.1%.10.6%. The decrease in revenue was dueprimarily attributable to lower interest income, resulting from a reductionperiod-over-period decrease in loans receivable, periodand over period, and reducedlower origination fees, which were impacted byreflecting a slowdown in new loan originations, partially offset by higher interest rates charged on our commercial loans.originations. In 2024, 2025, approximately $8,047,000$7,175,000 of our revenue representsrepresented interest income on secured, real estate loans that we offer to real estate investors, compared to approximately $7,976,000$8,047,000 in 2023,2024, and approximately $1,642,000$1,491,000 representsrepresented origination fees on such loans, compared to approximately $1,820,000$1,642,000 in 2023.2024. The loans are principally secured by collateral consisting of real estate and accompanied by personal guarantees from the principals of the borrowers.

Interest and amortization of deferred financing costs for the year ended December 31, 2024,2025, were approximately $2,337,000,$1,755,000, compared to approximately $2,526,000$2,337,000 for the year ended December 31, 2023,2024, a decrease of $189,000,approximately $582,000, or 7.5%.24.9%. The decrease iswas primarily attributable to the decrease inlower interest expense dueresulting tofrom alower reductionSOFR inrates borrowedand amountslower relatedaverage toborrowings the use ofunder the Webster Credit Line. (See Note 5 to the financial statements included elsewhere in this Report).

General and administrative expenses for the year ended December 31, 2024,2025, were approximately $1,776,000,$1,814,000, compared to approximately $1,825,000$1,776,000 for the year ended December 31, 2023,2024, aan decreaseincrease of $49,000,approximately $38,000, or 2.7%.2.1%. The decreaseincrease is primarily dueattributable to higher payroll and appraisal expenses, as well as a specialNYSE bonusAmerican awardedlisting fee related to officers in 2023 for extending the WebsterMBC CreditFunding LineII and6.00% aSenior reductionSecured inNotes marketing expenses,(the “Notes”), partially offset by higherlower salariesbank charges, travel and meal expenses as well as costs related to the filing of our registration statement on Form S-3 incurred in 2024.

Net income for the year ended December 31, 2024,2025, was approximately $5,591,000,$5,111,000, compared to approximately $5,476,000$5,591,000 for the year ended December 31, 2023,2024, ana increasedecrease of $115,000,approximately $480,000, or 2.1%.8.6%. This increasedecrease iswas primarily attributabledue to the decrease inlower interest expense,income, partially offset by bylower theinterest decrease in origination fees.expense.

As of December 31, 2024,2025, we had cash of approximately $178,000,$205,000, compared to approximately cash of approximately$178,000 $104,000as atof December 31, 2023.2024.

For the year ended December 31, 2024,2025, net cash provided by operating activities was approximately $4,932,000,$4,929,000, compared to approximately $5,395,000$4,932,000 of net cash provided by operating activities for the year ended December 31, 2023.2024. The slight decrease inwas primarily attributable to lower net cashincome, providedlargely offset by operatinga activitiessmaller primarily resulted from the increase in interest and other fees receivable on loans, and the decreases in deferred origination fees and in accounts payable and accrued expenses, partially offset by the increase in net income.loans.

OurThe Amended and Restated Credit and Security Agreement with Webster, Flushing Bank and Mizrahi provides for the Webster Credit Line. Currently, the Webster Credit Line providescontinues usto withprovide aan creditaggregate lineborrowing capacity of $32.5 million in the aggregate until February 28, 2026,million, secured by assignments of mortgages and other collateral. TheAs interestof ratesDecember relating31, to2025, borrowings under the Webster Credit Line equalbore interest, at our election for each drawdown, at either (i) SOFR plus aan applicable premium, which rate aggregated was approximately 8.0%,7.3%, includinginclusive of a 0.5% agency fee, as of December 31, 2024, or (ii) athe Base Rate (as defined in the Amended and Restated Credit Agreement) plus 2.00%2.00%, andplus a 0.5% agency fee, as chosen by the Company for each drawdown.fee.

The Webster Credit Line contains variouscustomary covenants and restrictionsrestrictions, includingincluding, covenantsamong limitingothers, thelimitations amounton that the Company can borrowborrowings relative to thecollateral value, valuerequirements ofto themaintain underlying collateral, maintaining variousspecified financial ratios andratios, limitations on the terms of loans thewe Companymake makes to itsour customers, limitingand the Company’s ability to pay dividends restrictions, under certain circumstances, on dividends and limitingshare therepurchases, Company’s abilityasset to repurchase its common shares, sell assets, engage indispositions, mergers or consolidations, grantthe granting of liens, and enter into transactions with affiliates. InThe addition,Amended theand WebsterRestated Credit LineAgreement also contains a cross defaultcross-default provision pursuant to which will deem any a default under anycertain indebtedness owed byof us or our subsidiary, MBC Funding II, asmay constitute a default under the creditWebster line.Credit Line. Under the Amended and Restated Credit Agreement, the Companywe may repurchase, redeem or otherwise retire itsour equity securities in an amount not to exceed ten percent of our annual net income from the prior fiscal year. Further,The theWebster CompanyCredit mayLine issuealso upincludes restrictions, subject to $20negotiated millionexceptions, inon bondsadditional through its subsidiary, of which not more than $10 million of such bonds may be secured by mortgage notes receivable,indebtedness and providedother thatrestricted the terms and conditions of such bonds are approved by Webster, subject to its reasonable discretion.payments. In addition, Mr. RandRan provideshas provided a personal guaranty of theup potentialto $1.0 million, plus enforcement costs, with respect to amounts that may be owed under the Webster Credit Line, with such guaranty not to exceed $1,000,000 plus any costs relating to the enforcement of the personal guaranty.Line.

On April 11, 2023, our board of directors authorizedapproved a share buybackrepurchase program forauthorizing the repurchase of up to 100,000 shares of our common shares.stock. Before thisThe program expired on April 10, 2024,2024. Prior to its expiration, we hadrepurchased purchased56,294 shares for an aggregate purchase price of 56,294$271,468, commonincluding 2,000 shares atrepurchased during the first quarter of 2024 for an aggregate costpurchase price of approximately $271,000.$9,800.

We expectbelieve that our current cash balances, available borrowings under the AmendedWebster Credit Line and Restatedthe Valley Credit Agreement, as described above,Line, and cash flows from operations will be sufficient to fund our operations overfor at least the next 12 months. We currently do not believecurrently there will beexpect any issues difficulty in extending thethese Webster Creditcredit Linefacilities or securingobtaining a similarcomparable linefacility from another bank before its expiration, and we plan to refinance the Noteslender prior to their maturity,respective though we cannot assure you that we will be successful in doing so on favorable terms or at all.maturities. From time to time, we also receiveobtain short-term unsecured loans from our executive officers and others, providing thewhich provide us with additional flexibility to needed forsupport the steadyongoing deployment of capital. However,We weexpect, anticipatehowever, that our working capital requirements will increase inover the comingnext 12 months as we continue to pursue growth opportunities under favorable market conditions.

Since commencing our business in 2007, except as set forth below, we have nevernot foreclosed oncompleted a foreclosure or taken title to any collateral property, although sometimesfrom time to time we have renewed or extended the term of a loan to enable the borrower to avoid premature sale or refinancing of the property. When we renew or extend a loan, we generally receive additional “points” and other fees. In June 2023, we filed a foreclosure lawsuit relating to one property, as a result of a deed transfer from the borrower to a buyer without our consent. In that instance, the buyer of the property on which we had a valid mortgage suffered a data breach which resulted in the failure of the buyer to remit the funds needed for the loan payoff. In October 2023, we received the entire payoff amount for the loan receivable, including all unpaid fees, to rectify the situation.

Our primary business objective is to grow our loan portfolio while protecting and preserving capital in a manner that provides for attractive risk-adjusted returns to our shareholders over the long term through dividends. We intend to achieve this objective by continuing to selectively originate,originate and fund loans secured by first mortgages on residential and commercial real estate held for investment located in in the New York metropolitan area, including New Jersey and Connecticut, and in Florida, and to carefully manage and service our portfolio in a manner designed to generate attractive risk-adjusted returns across a variety of market conditions and economic cycles. We believe that current market dynamicsdynamics, specifically the demand/supplysupply-and-demand imbalance for relatively small real estate loans, presentspresent opportunities for us to selectively originate high-quality first mortgage loans and we believe that these market conditions should persist for a number of years. We have built our business on a foundation of intimate knowledge of the New York metropolitan area real estate market combined with a disciplined credit and due diligence culture that is designed to protect and preserve capital. We believe that our flexibility and ability to structure loans that address the needs of our borrowers without compromising our standards on credit risk, our expertise, our intimate knowledge of the New York metropolitan area real estate market and our focus on newly originated first mortgage loans, hashave defined our success until now and should enable us to continue to achieve our objectives.

For the three-monthsix-month periods ended MarchJune 31,30, 2026 and 2025, the total amounts of $14,246,800$29,007,320 and $10,940,040,$23,482,540, respectively, have been lent, offset offset by collections received from borrowers, under our commercial loans of $12,388,029$27,302,347 and $12,698,051,$23,619,317, respectively.

At MarchJune 31,30, 2026, we were committed to $4,360,756$3,927,235 in construction loans that can be drawn by our borrowers when certain conditions are met.

Three monthsMonths endedEnded MarchJune 31,30, 2026 comparedCompared to threethe monthsThree endedMonths MarchEnded 31,June 30, 2025

RevenueTotal revenue

Total revenuesrevenue for the three months ended MarchJune 31,30, 2026 werewas approximately $2,068,000,$2,045,000 compared to approximately $2,274,000$2,355,000 for the same period in 2025, representing a decrease of $206,000,approximately $310,000, or 9.1%.13.2%. The decrease occurred despite increases in both the number of loans originated and the amount of capital deployed and was primarily attributable to lower interest income,rates driven by a period-over-period decline in loans receivable, as well as lowerand origination fees reflectingcharged reducedto borrowers as a result of increased competition in the marketplace. In addition, the Company granted approximately $85,000 of discretionary payoff and refinancing credits to certain borrowers during the quarter. These credits were provided in connection with negotiated loan originationpayoffs activity.and other borrower-specific business matters. For the three months ended MarchJune 31,30, 2026,2026 and 2025, approximately $1,699,000$1,738,000 and $1,899,000, respectively, of our revenuerevenues representswere attributable to interest income on secured commercial loans that we offer to real estate investors, compared to approximately $1,834,000 for the same period in 2025, and approximately $368,000$307,000 and $440,000,$456,000, respectively, respectively,of representour revenues were attributable to origination fees on such loans. The loans are principally secured by collateral consisting of real estate and accompanied by personal guarantees from the principals of the borrowers.

Interest and amortization of deferred financing costs for the three months ended MarchJune 31,30, 2026 were approximately $363,000,$399,000 compared to approximately $451,000$506,000 for the same period in 2025, representing a decrease of $88,000,approximately $107,000, or 19.5%.21.1%. The decrease was primarily attributable to lower interest expense resulting from reducedlower average borrowings under the Webster Credit Line and lower prevailing SOFR rates (see Note 5 to the condensed consolidated financial statements).

General and administrative expenses for the three months ended MarchJune 31,30, 2026 were approximately $431,000,$495,000, compared to approximately $454,000$438,000 for the same period in 2025, representing aan decreaseincrease of $23,000,approximately $57,000, or 5.1%.13.0%. The decreaseincrease was primarily attributable to lower advertising and appraisal expenses, as well as the absence of a NYSE American listing fee related to the MBC Funding II 6.00% Senior Secured Notes (the “Notes”) incurredincreases in thepayroll, priorlegal, yearbank, period.appraisal, and travel expenses.

Net income for the three months ended MarchJune 31,30, 2026 was approximately $1,274,000$1,153,000 compared to approximately $1,373,000$1,413,000 for the same period in 2025, representing a decrease of $99,000,approximately $260,000, or 7.2%.18.4%. The decrease was primarily attributable to lower revenue, partially offset by reduced interest expense.

At MarchJune 31,30, 2026, we had cash of approximately $184,000,$230,000, compared to cash of approximately $205,000 at December 31, 2025.2025, excluding restricted cash, which primarily represents collections on commercial loans pending clearance and designated for repayment of the Webster Credit Line.

For the threesix months ended MarchJune 31,30, 2026, net cash provided by operating activities was approximately $1,259,000,$2,692,000, compared to approximately $1,181,000$2,407,000 for the same period in 2025. The increase was primarily attributable to highera deferred origination and other fees, partially offset by lower net income and an increasedecrease in interest and other fees receivable onduring the loans.2026 period, compared with an increase in such receivables during the 2025 period, proceeds from borrower escrow deposits, and a greater increase in deferred origination and other fees, partially offset by lower net income.

For the threesix months ended MarchJune 31,30, 2026, net cash used in investing activities was approximately $1,859,000,$1,705,000, compared to net cash provided by investing activities of approximately $1,758,000$136,000 for the same period in 2025. Net cash used in investing activities for the threesix months months ended MarchJune 31,30, 2026 consisted of the issuance of commercial loans of approximately $14,247,000,$29,007,000, offset by the collection ofon ourcommercial commercial loans of approximately $12,388,000.$27,302,000. Net cash provided by investing activities for the threesix months ended MarchJune 31,30, 2025 primarily consisted of the collection of ouron commercial loans of approximately $12,698,000,$23,619,000, offset by the issuance of commercial loans of approximately $10,940,000.$23,483,000.

For the threesix months ended MarchJune 31,30, 2026, net cash providedused byin financing activities was approximately $577,000,$958,000, compared to net cash used in financing activities of approximately $2,918,000 $2,536,000 for the same period in 2025. FinancingNet cash flowsused in financing activities for the threesix months ended MarchJune 31,30, 2026 reflectedconsisted netof proceedsdividend from Webster Credit Line payments of approximately $1,835,000 and proceeds from borrower escrow deposits of approximately $115,000, partially offset by a dividend payment of approximately $1,315,000,$2,572,000, deferred financing costs of approximately $44,000,$65,000, and the repurchaserepurchases of treasury shares of approximately $14,000.$30,000, partially Financingoffset cash flows for the three months ended March 31, 2025 reflectedby net repaymentsproceeds offrom the Webster Credit Line of approximately $1,602,000$1,708,000. andNet acash used in financing activities for the six months ended June 30, 2025 consisted of dividend paymentpayments of approximately $1,315,000.$2,631,000, partially offset by net proceeds from the Webster Credit Line of approximately $95,000.

Our Amended and Restated Credit Agreement with Webster and Flushing provides for the Webster Credit Line. On March 24, 2026, we entered into an amendment to the Amended and Restated Credit Agreement that, among other things, (i) extended the maturity of the credit facility to February 28, 2029, (ii) modified certain portfolio composition requirements, including limiting mortgage loans outstanding for more than 30 months to 17.5% of the total portfolio, (iii) updated applicable interest margins, and (iv) revised certain mortgage loan eligibility criteria. Except as amended, all other material terms of the credit facility remain in full force and effect. The Webster Credit Line provides an aggregate borrowing capacity of $32.5 million, secured by assignments of mortgages and other collateral. As of MarchJune 31,30, 2026, 2026, borrowings under the Webster Credit Line bore interest, at our election for each drawdown, at either (i) SOFR plus an applicable premium, premium, which was approximately 6.9%, inclusive of a 0.5% agency fee, or (ii) the Base Rate (as defined in the Amended and Restated Credit Agreement) plus 2.00%, plus a 0.5% agency fee.

Outstanding borrowings under the Valley Credit Line bear interest at a floating rate equal to Term SOFR, subject to a floor of 3.00%, plus 2.95% per annum, and are subject to standard benchmark replacement provisions. The facility also requires the payment of an upfront fee equal to 0.20% of the total commitment and an unused line fee equal to 0.25% per annum on the average daily unused portion of the facility. As of MarchJune 31,30, 2026, borrowings under the Valley Credit Line bore interest at a floating rate equal to Term SOFR, subject to a floor, plus an applicable margin and customary fees, which rate was approximately 6.6%.

We were in compliance with all covenants under the Webster Credit Line and the Valley Credit Line as of MarchJune 31,30, 2026. As of that date, outstanding borrowings under the Webster Credit Line were $13,393,777$13,266,966 and outstanding borrowings under the Valley Credit Line were $6,042,500.

On November 20, 2025, our board of directors approved a new share repurchase program authorizing the repurchase of up to 100,000 shares of our common stock over the following 12 months. As of MarchJune 31,30, 2026, we had repurchased an aggregate of 9,30013,142 shares under the program at a total cost of approximately $42,000.$59,000. Of these amounts, 3,1006,942 shares were repurchased during the threesix months ended MarchJune 31,30, 2026 at at an aggregate cost of approximately $14,000.$30,000.

We believe that our current cash balances, available borrowings under the Webster Credit Line and the Valley Credit Line, and cash flows from operations will be sufficient to fund our operations for at least the next 12 months. From time to time, we also obtain short-term unsecured loans from our executive officers and others, which provide us with additional flexibility to support the ongoing deployment of capital. We expect, however, that our working capital requirements will increase over the next 12 months as we continue to pursue growth opportunities under favorable market conditions.