Filed 2026-03-20 · Period ending 2025-12-31 · 37,493 words · SEC EDGAR
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# STANDARD PREMIUM FINANCE HOLDINGS, INC. (SPFX) — 10-K
**Filed:** 2026-03-20
**Period ending:** 2025-12-31
**Accession:** 0001079973-26-000349
**Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/1807893/000107997326000349/)
**Origin leaf:** 4250823de36c06b25b58fe02e0b786a01506fa46343eac1037673f09d83939b8
**Words:** 37,493
---
**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,
2025**
or
**TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**
****
**Commission File No. 000-56243**
**_____________________________**
**Standard Premium Finance Holdings, Inc.**
(Exact name of registrant as specified in its charter)
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Florida |
81-2624094 | |
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(State or other jurisdiction of
incorporation or organization) |
(IRS Employer
Identification No.) | |
****
**13590 SW 134thAvenue****, Suite 214, Miami, FL 33186**(Address of principal executive offices) (zip code)
**305-232-2752**
(Registrants 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:**
****
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Common Stock, $.001 par value per share | |
(Title of Class)
Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YesNo
Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YesNo
Indicate by check mark
whether the registrant (1)has filed all reports required to be filed by Section13 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.YesNo
Indicate by check mark
whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (S. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).YesNo
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an 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:
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Large accelerated
filer |
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Accelerated filer | |
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Non-accelerated filer |
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Smaller reporting company | |
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Emerging growth company | |
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 managements 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.
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 any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
The
aggregate market value of the Registrants common stock held by non-affiliates of the Registrant on June 30, 2025, the
last business day of the Registrants most recently completed second fiscal quarter, was approximately $3,598,424 based upon the
closing bid price of the Companys stock on that date. For this purpose, executive officers and directors of the registrant are
considered affiliates.
3,000,030
shares of common stock were issued and outstanding as of March 20, 2026.
DOCUMENTS INCORPORATED BY REFERENCE
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STANDARD PREMIUM FINANCE HOLDINGS, INC.
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year EndedDecember31,
2025
TABLE OF CONTENTS
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PAGE | |
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Part I |
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Item 1 |
Business |
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1 | |
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Item 1A |
Risk Factors |
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9 | |
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Item 1B |
Unresolved Staff Comments |
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14 | |
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Item 1C |
Cybersecurity |
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14 | |
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Item 2 |
Properties |
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15 | |
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Item 3 |
Legal Proceedings |
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15 | |
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Item 4 |
Mine Safety Disclosures |
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15 | |
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Part II |
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Item 5 |
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
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16 | |
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Item 6 |
[Reserved] |
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16 | |
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Item 7 |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
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17 | |
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Item 7A |
Quantitative and Qualitative Disclosures about Market Risk |
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22 | |
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Item 8 |
Financial Statements and Supplementary Data |
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22 | |
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Item 9 |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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22 | |
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Item 9A |
Controls and Procedures |
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23 | |
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Item 9B |
Other Information |
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23 | |
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Item 9C |
Disclosures Regarding Foreign Jurisdictions that Prevent Inspections |
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23 | |
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Part III |
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Item 10 |
Directors, Executive Officers and Corporate Governance |
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24 | |
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Item 11 |
Executive Compensation |
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24 | |
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Item 12 |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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24 | |
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Item 13 |
Certain Relationships and Related Transactions, and Director Independence |
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24 | |
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Item 14 |
Principal Accountant Fees and Services |
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24 | |
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Part IV |
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Item 15 |
Exhibit and Financial Statement Schedules |
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25 | |
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Item 16 |
Form 10-K Summary |
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26 | |
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Signatures |
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27 | |
****
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**CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS**
This Annual Report on Form
10-K contains forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and
uncertainties. These statements may relate to, but are not limited to, information or assumptions about us, our capital and other expenditures,
dividends, financing plans, capital structure, cash flow, our potential future business acquisitions, future economic performance, operating
income and managements plans, strategies, goals and objectives for future operations and growth. These forward-looking statements
generally are accompanied by words such as intend, anticipate, believe, estimate,
expect, should, seek, project, plan, would, could,
can, may, and similar terms. Any statement that is not a historical fact is a forward-looking statement. It
should be understood that these forward-looking statements are necessarily estimates reflecting the best judgment of senior management,
not guarantees of future performance. They are subject to a number of assumptions, risks and uncertainties that could cause actual results
to differ materially from those expressed or implied in the forward-looking statements. When considering forward-looking statements, you
should keep in mind the risk factors and other cautionary statements described in Part I. Item 1A. Risk Factors in this
Annual Report. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required
by law.
Forward-looking statements
represent intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other
factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed
or implied by those forward-looking statements.
Each
of the terms Company, Standard, and Standard Premium as used herein refers collectively to Standard
Premium Finance Holdings, Inc. and its wholly owned subsidiaries, unless otherwise stated.
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**PART I**
****
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ITEM1. |
BUSINESS | |
****
**Overview**
We were incorporated in the
State of Florida in 1991 under the name Standard Premium Finance Management Corporation. In 2016, we established a holding company structure
under the name Standard Premium Finance Holdings, Inc., a Florida corporation, with Standard Premium Finance Management Corporation and
Standard Premium Finance Leasing, Inc. as our wholly-owned subsidiaries. Unless the context requires
otherwise or unless stated otherwise, references in this registration statement to the Company, Standard Premium,
we, our and us refer to Standard Premium Finance Holdings, Inc. and its wholly-owned subsidiaries,
Standard Premium Finance Management Corporation and Standard Premium Finance Leasing, Inc., on a consolidated basis.
We are a specialized finance
company that makes collateralized loans to businesses and individuals to finance the insurance premiums they pay on their commercial property
and casualty insurance policies. We began our business in 1991 and are currently licensed to operate in thirty-seven states. We have developed
relationships with insurance agents and brokers located in our market area who offer insurance premium loans as a service to their customers
which we underwrite. We evaluate each insurance premium loan application according to our loan underwriting criteria. Upon our approval
of an insurance premium loan, the borrower makes a down payment, generally 20% to 25% of the annual premium on the financed insurance
policy, and we provide the balance of the annual premium required to purchase the policy. The borrower pays us a fixed monthly amount
over the next nine to eleven months. In the event the borrower defaults on its loan payment obligation, we are contractually authorized
to terminate the insurance policy and receive the amount of the unearned premium paid on the insurance policy. The unearned premium on
the insurance policy represents the portion of the insurance premium subject to return if the policy is cancelled before the full term
of the policy is completed. The unearned premium serves as the collateral for our insurance premium loans and is designed to fully pay
off the balance of the insurance premium loan in the event of a default. We have the contractual right to cancel the insurance policy
and receive the amount of the unearned premium if the borrower defaults on repayment of any loan payment to us. Because of this collateral
security feature of our insurance premium loans, we consider our loans to be of high quality and low risk. Standard Premium commenced
operations in 1991 for the specific purpose of providing financing for property and casualty insurance premiums. Standard Premium:
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| maintains current state licenses to operate a premium
finance company, | |
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| meets or exceeds all statutory net worth requirements, | |
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| maintains professional liability insurance with an
A rated major insurance carrier with limits of $500,000, in compliance with all state requirements, | |
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| has secured and maintained computer hardware and licensed
software to conduct its business in a timely fashion, | |
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| has a revolving senior credit line and long-term debt
in the form of subordinated corporate notes to help finance its loan production, | |
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| has secured a long-term lease on office space which
it currently occupies, and which is sufficient to meet anticipated future needs, | |
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| has developed a set of working procedures by which
it operates, | |
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| generates daily management control reports, | |
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| has cultivated and maintained relationships with various
independent insurance agents providing the source of all new and renewal business, and | |
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| currently finances approximately $120 million dollars
in insurance premiums annually. | |
**The Property and Casualty
Insurance Premium Finance Market**
Commercial insurance performs
a critical role in the world economy. Without it, the economy could not function. Insurers protect the economic system from failure by
assuming the risks inherent in the production of goods and services. All businesses share a need for insurance: Without the right insurance
coverage, each could be wiped out by a disaster or a lawsuit. The Insurance Information Institute reported that $416.5 billion of commercial
lines insurance premiums were generated in the U.S. in 2023.
| 1 | |
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The insurance premium finance
industry began in Pennsylvania in 1933 and has grown along with the U.S. economy. There are several reasons that an insurance policy buyer
would choose to finance its insurance premiums. Financing an insurance premium is much like any other commercial or consumer purchase.
It is financed based on the insureds decision resulting from current economic trends and other considerations. For some customers,
insurance premium financing is a convenient way to buy insurance without tying up working capital or accessing other credit sources. Other
customers, who do not have the means to pay the premium in full at the time of purchase, consider premium financing a necessity. When
customers finance insurance policies, they enter into a contract with the insurance premium finance company to obtain a loan. The contract
assigns the borrowers rights to all unearned premiums and dividends on the policy to the insurance premium finance company and
appoints the insurance premium finance company as its attorney in fact, which gives the insurance premium finance company
the right to cancel the insurance policy in the event of non-payment of a loan installment and to receive all unearned premiums and credits
from the insurance company. The customer, upon executing the premium financing loan contract, makes the initial down payment and agrees
to pay back the principal with interest in monthly payments. The unearned premium of the insurance policy provides the collateral for
each loan.
**Our Loan Referral Base**
Substantially all of our insurance
premium loans originate from insurance agents and brokers who recommend our insurance premium loan program to their clients who would
like to finance their insurance premiums. We currently market our loans through more than 850 independent insurance brokers and agents
located in thirty-seven states, although most of our loans are made in thirteen (13) states. For risk management purposes, we have a policy
limiting the amount of loans to the customers of any one insurance broker or agent to 5% of our outstanding loan portfolio. We may change
this policy at any time based on then-existing market conditions or otherwise, at the discretion of our CEO.
Our website includes a secure
portal for our brokers and agents, which allows them to quote premiums, print drafts on our bank account to pay the balance of the insurance
premium due upon initiation of the premium finance loan, and finance agreements online. The drafts and agreements are forwarded to us
for loan underwriting, risk management, and approval. Our brokers and agents do not have the authority to bind us to making a loan.
We compensate the insurance
brokers and agents for their loan origination service through commissions, if permissible by state law regulated by the states in which
we do business. The commission paid is generally tied to the gross revenue that the loan generates or a fixed per-loan fee. Interest rates
are determined by the size of the loan, and, to a certain degree, the rating of the insurance company as well as the creditworthiness
of the borrower. Typically, a higher interest rate yields a higher commission to the broker. In addition, the Company offers a rewards
program (where permitted by state law) for our insurance brokers and agents. Under the rewards program, points are earned based on the
amount of financed premiums. These points are then redeemable for travel and merchandise. The rewards program is equivalent to 1/10th
of one percent (.001) of the amount financed and is in addition to payment of commissions.
We do not have any exclusive
or long-term arrangements with the insurance agents and brokers that make up our referral base and they have other sources of premium
financing at their disposal. We have no contractual relationship with the insurance agents and brokers requiring them to recommend us
to their clients. However, in connection with each premium loan we make, the borrowers agent or broker:
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| Certifies that the policies
being financed have been issued and delivered and that the required down payment has been paid by or on behalf of the insured; | |
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| Warrants that the premium finance
agreement evidences a bona fide and legal transaction and that the insured is of legal age and has capacity to contract; | |
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| Warrants that the insureds
signature is genuine, and that the agent or broker has delivered a copy of the premium finance agreement to the insured; | |
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| States that the financed policies
do not contain an audit or reporting form; | |
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| Acknowledges that it is not
affiliated in any capacity or manner with us; and | |
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| Agrees that in the event of
cancellation of the financed policy to remit the gross unearned commissions or unearned premiums to us upon request. | |
In the property and casualty
insurance industry, some insurance policies contain provisions for audits or other additional reporting. These provisions may allow the
insurance company to evaluate (audit) the insurance premium after cancellation. Such provisions may delay or reduce the amount of unearned
premium. Since the unearned premium represents the collateral in our loan, this would have a detrimental effect on us. It is Company policy
to avoid financing these types of policies.
****
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**Employees**
As
of December 31, 2025, we had twenty-five employees, twenty of whom were full-time employees. Our full-time employees are covered by a
corporate benefit plan for major medical and hospitalization. None of our employees are members of a labor union or subject to a collective
bargaining agreement. All of our employees are at will with no guaranteed period of employment except our CEO and CFO who
have executive contracts through March 2030. We believe our employee relations are satisfactory.
**Our Insurance Premium
Loans**
Our insurance premium finance
loans are typically provided to small- and medium-sized businesses to finance the purchase of commercial property and casualty insurance
policies with a one-year term. Insurance premium loans are generally in the range of $1,000 to $100,000 per loan. The customer typically
pays 25% of the annual policy premium at the initiation of coverage and we provide the balance of the premium at that time. Our loans
generally have a nine-to-ten-month term. The purpose of this is two-fold; first, by making the financing term shorter than the policy
term, a small surplus of collected funds is developed that helps ensure that the balance due is paid off by refund of the
unearned premium in case of cancellation, and second, it gives the insured a two to three-month break in payments before the policy term
expires and the process repeats for the renewal of the policy.
Insurance premiums are earned
by the insurance company over the term of the policy. If the policy is terminated prior to completion of the term, a refund of the unearned
portion of the policy premium is made. If the policy was financed, the refund of unearned premiums goes to the insurance premium finance
lender with any amount received by the lender in excess of the amount owed by the borrower being refunded to the borrower.
The following table illustrates
the surplus between the unearned premium and the loan balance based on a typical annual premium of $10,000 with a $2,500
(25%) deposit paid by the borrower at the inception of the loan. In this scenario, the insurance premium finance company advances $7,500
and the borrower repays the loan in 10 monthly payments of $750. Note that interest is excluded in this example to highlight the collateral
on the principal balance.
|
Months
in Force |
Payments
Made |
Payment
(Principal Only) |
Principal
Balance |
Unearned
Premium |
Surplus | |
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1 |
0 |
$0 |
$7,500 |
$7,890 |
$390 | |
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2 |
1 |
$750 |
$6,750 |
$7,150 |
$400 | |
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3 |
2 |
$750 |
$6,000 |
$6,410 |
$410 | |
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4 |
3 |
$750 |
$5,250 |
$5,670 |
$420 | |
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5 |
4 |
$750 |
$4,500 |
$4,930 |
$430 | |
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6 |
5 |
$750 |
$3,750 |
$4,190 |
$440 | |
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7 |
6 |
$750 |
$3,000 |
$3,450 |
$450 | |
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8 |
7 |
$750 |
$2,250 |
$2,710 |
$460 | |
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9 |
8 |
$750 |
$1,500 |
$1,970 |
$470 | |
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10 |
9 |
$750 |
$750 |
$1,230 |
$480 | |
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11 |
10 |
$750 |
$0 |
$490 |
$490 | |
Although this is a typical
representation of a loan in our portfolio, we may be undercollateralized depending on certain factors, including, but not limited to,
lower down payments, minimum earned premiums, fully earned fees and taxes, governmental filings, audit provisions, longer payment terms,
and other competitive factors. See Item 1A, Risk Factors, for more information about our loan risks.
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We had $76,630,634 and $67,173,975
in premium finance loans outstanding as of December 31, 2025 and December 31, 2024, respectively. As of December 31, 2025, we had 18,846
active premium finance loans in eighteen states. The following is a summary of our premium loan portfolio as of December 31, 2025:
|
State |
Loans |
Total
Premiums |
Down
Payment |
Amount
Financed |
Total
Outstanding | |
|
Florida |
12,321 |
108,954,692 |
25,895,452 |
83,059,240 |
47,650,451 | |
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Georgia |
1,827 |
13,325,913 |
3,551,625 |
9,774,288 |
5,942,237 | |
|
North Carolina |
2,520 |
13,007,189 |
2,907,361 |
10,099,828 |
5,734,629 | |
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South Carolina |
959 |
14,834,442 |
3,182,876 |
11,651,566 |
6,931,229 | |
|
Texas |
895 |
12,557,929 |
3,262,385 |
9,295,544 |
5,100,610 | |
|
All other states |
324 |
9,723,223 |
2,351,184 |
7,372,039 |
5,271,478 | |
|
Grand Total |
18,846 |
$172,403,388 |
$41,150,883 |
$131,252,505 |
$76,630,634 | |
As of December 31, 2024, we
had 18,858 active premium finance loans in thirteen states. The following is a summary of our premium loan portfolio as of December 31,
2024:
|
State |
Loans |
Total
Premiums |
Down
Payment |
Amount
Financed |
Total
Outstanding | |
|
Florida |
11,899 |
104,350,859 |
25,073,838 |
79,277,021 |
44,675,794 | |
|
Georgia |
1,889 |
15,225,990 |
3,934,361 |
11,291,629 |
6,644,889 | |
|
North Carolina |
2,812 |
13,130,784 |
2,999,627 |
10,131,157 |
5,328,038 | |
|
South Carolina |
1,027 |
14,076,290 |
2,946,522 |
11,129,768 |
5,564,436 | |
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Texas |
952 |
11,274,360 |
3,005,453 |
8,268,907 |
4,162,549 | |
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All other states |
279 |
1,854,586 |
428,834 |
1,425,752 |
798,269 | |
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Grand Total |
18,858 |
$159,912,869 |
$38,388,635 |
$121,524,234 |
$67,173,975 | |
**Credit Quality Information**
The following table presents
credit-related information at the class level in accordance with Financial Accounting Standards Board (FASB)
Accounting Standards Codification Topic (ASC) 310-10-50,*Disclosures about the Credit Quality of Finance Receivables
and the Allowance for Credit Losses*. A class is generally a disaggregation of a portfolio segment. In determining the classes, the
Company considered the finance receivable characteristics and methods it applies in monitoring and assessing credit risk and performance.
Our premium finance receivables
portfolio is analyzed in two segments: (1) Due from Insured and (2) Due from Insurance Carrier. The following tables summarize the portfolio
segments by the risk ratings that regulatory agencies utilize to classify credit exposure, and which are consistent with indicators the
Company monitors. Risk ratings are reviewed on a regular basis and are adjusted as necessary for updated information affecting the borrowers
ability to fulfill their obligations.
For the Due from Insured segment,
we analyze and rate our receivables based on the amount of unearned premium (i.e. collateral) on a loan based on a worst case
cancellation date. Loans that would be undercollateralized as of this assumed cancellation are deemed to be Special Mention loans. For
the Due from Insurance Carrier segment, we analyze and rate our receivables based on the amount of unearned premium (i.e. collateral)
on a loan based on the actual cancellation date. Loans that would be undercollateralized as of the cancellation date are deemed to be
Special Mention loans. The Company monitors the amount at which Special Mention receivables are undercollateralized. The Company strategically
balances its exposure to undercollateralized loans, while staying competitive in the markets it serves.
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The definitions of these ratings
are as follows:
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Pass finance receivables in this category do not meet the criteria for classification in one of the categories below. | |
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Special mention a special mention asset
exhibits potential weaknesses that deserve managements close attention.
If left uncorrected, these potential weaknesses
may, at some future date, result in the deterioration of the repayment prospects. | |
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Classified a classified asset ranges from:
1) assets that are inadequately protected by the current sound worth and
paying capacity of the borrower, and are characterized
by the distinct possibility that some loss will be sustained if the deficiencies are not corrected to 2) assets with weaknesses that make
collection or liquidation in full unlikely on the basis of current facts, conditions, and values. Assets in this classification can be
accruing or on non-accrual depending on the evaluation of these factors. | |
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Pass loan collateral in excess of receivable value the total amount of excess collateral over the receivable on loans classified as pass loans. All pass loans are fully collateralized based on the value of the unearned premium (i.e. collateral) compared to the unpaid balance of the loan. If a pass receivable were to undergo an assumed cancellation as of the respective balance sheet date, the Company would not experience a loss. | |
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Special mention receivable in excess of collateral value the total amount of excess receivable over collateral on loans classified as special mention loans. All special mention loans are undercollateralized based on the value of the unearned premium (i.e. collateral) compared to the unpaid balance of the loan. For the Due from Insured segment, if a special mention receivable were to undergo an assumed cancellation as of the respective balance sheet date, the Company would expect to experience a loss. For the Due from Insurance Carrier segment, the special mention receivable is expected to produce a loss based on the actual cancellation date as of the respective balance sheet date. An estimate of the anticipated loss of all special mention loans is represented by the Special mention receivable in excess of collateral value. | |
As of December 31, 2025 and
December 31, 2024, the Company considered $304,740 and $520,550, respectively, as lacking collateral adequate for the level of risk associated
with these loans while staying competitive within the industry. Management does not believe any of its receivables would be considered
Classified. The following tables classify our Finance Receivables by risk rating and portfolio segment:
|
Segment Due from Insured | |
| | |
| | |
|
| |
December
31, 2025 | | |
December
31, 2024 | | |
|
Pass | |
$ | 66,677,989 | | |
$ | 57,190,695 | | |
|
Special mention | |
| 2,672,817 | | |
| 2,567,395 | | |
|
Classified | |
| | | |
| | | |
|
Total | |
$ | 69,350,806 | | |
$ | 59,758,090 | | |
|
| |
| | | |
| | | |
|
Pass loan collateral in excess of receivable value | |
| 22,836,137 | | |
| 20,921,390 | | |
|
Special mention receivable in excess of collateral value | |
| 112,889 | | |
| 99,990 | | |
|
Segment Due from Insurance Carrier | |
| | |
| | |
|
| |
December
31, 2025 | | |
December
31, 2024 | | |
|
Pass | |
$ | 5,191,859 | | |
$ | 4,806,766 | | |
|
Special mention | |
| 2,087,969 | | |
| 2,609,119 | | |
|
Classified | |
| | | |
| | | |
|
Total | |
$ | 7,279,828 | | |
$ | 7,415,885 | | |
|
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| | | |
| | | |
|
Pass loan collateral in excess of receivable value | |
| 6,133,473 | | |
| 6,607,527 | | |
|
Special mention receivable in excess of collateral value | |
| 191,851 | | |
| 420,561 | | |
The Company regularly monitors
each contract for payment status, sending late notices and cancelling contracts at the earliest permissible date allowed by the statutory
cancellation regulations. In maintaining a proper allowance for credit losses, the Company monitors past due accounts and scrutinizes
older receivables, generally over 120 days. However, in this industry, even though accounts may be highly aged and appear stale, they
are still collectible. Unearned premiums on cancelled accounts may be held at insurance companies for varying periods, though they are
still highly collectible. The Company protects its collateral by cancelling policies at the earliest permissible date. The Company regularly
contacts the insurance companies to ensure collectability. The Company manages its allowance conservatively ensuring an allowance balance
that encompasses uncollectible accounts. In the following table, the Company defines non-performing loans without a specific reserve
as loans in the Due from Insurance Carrier segment aged over 120 days. All other loans are considered Performing loans evaluated
collectively. On December 31, 2025 and December 31, 2024, there were no loans with deteriorated credit quality.
| 5 | |
| | |
Finance Receivables Method of individual
evaluation:
|
| |
December
31, 2025 | | |
December
31, 2024 | | |
|
Performing loans evaluated individually | |
$ | | | |
$ | | | |
|
Performing loans evaluated collectively | |
| 74,132,785 | | |
| 64,786,338 | | |
|
Non-performing loans without a specific reserve | |
| 2,497,849 | | |
| 2,387,637 | | |
|
Non-performing loans with a specific reserve | |
| | | |
| | | |
|
Total | |
$ | 76,630,634 | | |
$ | 67,173,975 | | |
**Revenue Recognition**
****
Finance charges on insurance
premium installment contracts are initially recorded as unearned interest and are credited to income monthly over the term of the finance
agreement. An initial service fee, where permissible, and the first months interest, on a pro rata basis, are recognized as income
at the inception of a contract. The initial service fee can only be charged once to an insured in a twelve-month period. In accordance
with industry practice, finance charges are recognized as income using the Rule of 78s method of amortizing finance charge
income, which does not materially differ from the interest method of amortizing finance charge income on short term receivables. Late
charges are recognized as income when charged. Maximum late fee charges are mandated by state regulations. The Company charges late fees
at the earliest permissible date based on the late fee regulations of the state in which the loan originated. Furthermore, the Company
charges the maximum permissible late fee based on the state in which the loan originated. Unearned interest is netted against Premium
Finance Contracts and Related Receivables on the balance sheet for reporting purposes.
**Debt Summary and Sources of Liquidity**
Below is a summary of some
of our debt and sources of liquidity. The discussion below does not discuss all of our debt. Please see the Managements
Discussion and Analysis of Financial Condition and Results of Operations as well as our financial statements and the notes to those
financial statements contained elsewhere in Item 8 of this Form 10-K for additional information about debt and sources of liquidity.
**Line of Credit**
On February 3, 2021, the Company
entered into an exclusive twenty-four month loan agreement with First Horizon Bank, our senior lender, for a revolving line of credit
in the amount of $35,000,000, which was immediately funded for $25,974,695 to pay off the prior line of credit. On this date, the prior
line of credit was fully repaid and terminated. The Company recorded $180,350 of loan origination costs. In October 2021, the Company
increased its line of credit with First Horizon Bank from $35,000,000 to $45,000,000. The Company recorded $25,771 of line of credit costs
related to the credit increase. In November 2022, the Company extended the maturity on its line of credit agreement with FHB until November
30, 2025. This extension also changed the Index Rate of the line of credit from 30-Day Libor to 30-Day Secured Overnight Financing Rate
(SOFR). The Company recorded $117,228 of line of credit costs related to this extension. In June 2025, the Company increased
its line of credit with FHB from $45,000,000 to $50,000,000. In September 2025, the Company renewed its line of credit agreement with
FHB until September 25, 2028. This renewal also increased the commitment amount from $50,000,000 to $75,000,000, lowered the interest
rate margin from 2.55-2.96% to 2.10%, and syndicated the line of credit between two additional lenders, Flagstar Bank and Cadence Bank.
The Company is unaffected operationally by the additional lenders as First Horizon Bank acts as the agent for the other lenders in the
syndicated loan agreement. The Company recorded $373,011 of line of credit costs related to this extension, which is included in the line
of credit balance in the consolidated balance sheet at December 31, 2025.
At December 31, 2025 and 2024,
the advance rate was 85% of the aggregate unpaid balance of the Companys eligible accounts receivable. The line of credit is secured
by all Company assets and is personally guaranteed by our CEO. The line of credit bears interest at 30-Day SOFR plus 2.10% per annum (5.97%
and 7.30% at December 31, 2025 and 2024, respectively). As of December 31, 2025 and 2024, the amount of principal outstanding on the line
of credit was $49,575,004 and $41,217,513, respectively, and is reported on the consolidated balance sheet net of $341,927 and $1,445,
respectively, of unamortized loan origination fees. Interest expense on this line of credit for the years ended December 31, 2025 and
2024 totaled approximately $3,071,000 and $3,556,000, respectively. The Company recorded amortized loan origination fee for the years
ended December 31, 2025 and 2024 of $32,529 and $1,576, respectively. For the years ended December 31, 2025 and 2024, the Company paid
a fee based on the unused portion of the line of credit totaling $29,254 and $4,093, respectively, which is included in interest expense.
The Company had availability on this line of credit of $6,893,451 as of December 31, 2025.
The Companys agreements
with FHB contain certain financial covenants and restrictions. Under these restrictions, all the Companys assets are pledged to
secure the line of credit, the Company must maintain certain financial ratios such as an adjusted tangible net worth ratio, interest coverage
ratio and adjusted leverage ratio. The loan agreement also provides for certain covenants such as audited financial statements, notice
of change of control, budget, permission for any new debt, and copies of filings with regulatory bodies. On November 14, 2023, the Company
executed an amendment of the loan agreement, which provided a waiver of default on its Interest Coverage Ratio as of September 30, 2023.
The amendment also reduced the Minimum Interest Coverage Ratio for the following four quarters through September 30, 2024. Management
believes it was in compliance with the applicable debt covenants as of December 31, 2025 and December 31, 2024.
****
| 6 | |
| | |
**Promissory Notes to Unrelated Parties**
****
These are notes payable to
individuals. The notes have interest payable monthly, ranging from 6% to 8% per annum and are unsecured and subordinated. The principal
is due on various dates through December 31, 2031. The maturity date of these notes automatically extends for periods of three months
to six years unless the note holder requests repayment through written instructions at least ninety days prior to the maturity date of
the note. The automatic maturity extension of these notes is considered a loan modification. Notes totaling $2,832,726 and $1,029,750
were rolled over during the years ended December 31, 2025 and 2024, respectively. Interest expense on the notes totaled approximately
$680,000 and $596,000 during the year ended December 31, 2025 and 2024, respectively. The Company received proceeds on these notes of
$720,682 and $2,269,440 for the years ended December 31, 2025 and 2024, respectively. The Company repaid principal on these notes of $887,254
and $131,500 for the years ended December 31, 2025 and 2024, respectively. In August 2024, the Company exchanged, in a cashless transaction,
$10,000 of these notes for 12,500 shares of common stock at a price of $0.80 per share from the exercise of previously vested incentive
stock options by an employee. There were no gains or losses on this exchange.
**Promissory Notes to
Stockholders and Related Parties**
****
These are notes payable to
stockholders and related parties. The notes have interest payable monthly of 8% per annum and are unsecured and subordinated. The principal
is due on various dates through February 28, 2030. The maturity date of these notes automatically extends for periods of one to four years
unless the note holder requests repayment through written instructions at least ninety days prior to the maturity date of the note. The
automatic maturity extension of these notes is considered a loan modification. Notes totaling $506,000 and $278,040 were rolled over during
the years ended December 31, 2025 and 2024, respectively. Interest expense on the notes totaled approximately $231,000 and $211,000 during
the years ended December 31, 2025 and 2024, respectively. The Company received proceeds on these notes of $79,460 and $1,028,000 for the
years ended December 31, 2025 and 2024, respectively. The Company repaid principal on these notes of $490,000 and $10,000 for the years
ended December 31, 2025 and 2024, respectively. In August 2024, the Company exchanged, in a cashless transaction, $66,960 of these notes
for 83,700 shares of common stock at a price of $0.80 per share from the exercise of previously vested incentive stock options by an employee.
There were no gains or losses on this exchange.
**Series A Convertible
Preferred Stock**
****
The Company is authorized
to issue 600,000 shares of Series A Convertible Preferred Stock, $.001 par value. As of both December 31, 2025 and 2024, there were 166,000
shares of Series A convertible preferred stock issued and outstanding for $10.00 per share.
In the event of any liquidation,
dissolution or winding up of the Company, the holders of preferred stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of the Company to the holders of common stock, an amount equal to $10 for each share of preferred stock,
plus all unpaid dividends that have been accrued, accumulated or declared. As of December 31, 2025, the total liquidation preference on
the preferred stock is $1,689,050. The Company may redeem the preferred stock from the holders at any time following the second anniversary
of the closing of the original purchase of the preferred stock. The Series A Convertible Preferred Stock can be converted to common stock
at 80% of the prevailing market price over the previous 30-day period at the option of the Company.
Holders of preferred stock
are entitled to receive preferential cumulative dividends, only if declared by the board of directors, at a rate of 7% per annum per share
of the liquidation preference amount of $10 per share. During the years ended December 31, 2025 and 2024, the Board of Directors has declared
and paid dividends on the preferred stock of $116,200 and $116,200, respectively. As of each of December 31, 2025 and 2024, preferred
dividends are in arrears by $29,050. December 31, 2024 dividends in arrears were declared and paid in January 2025. December 31, 2025
dividends in arrears were declared and paid in January 2026. As of January 2026, all dividends in arrears had been declared and paid.
**Our Customers**
****
The
majority of our customers are small- to medium-sized businesses seeking property and casualty insurance through local independent insurance
agents. We are currently licensed to operate in thirty-seven states where the premium finance laws are favorable to making insurance premium
finance loans. Premiums on these commercial insurance policies are written on a semi-annual or annual basis exclusively and insurance
premium finance loans are repaid over a maximum of four and eleven consecutive monthly payments, respectively. Substantially all of our
loans are written for a nine- to ten-month term. Premiums on these financed policies typically range between $1,000 to $100,000.
At December 31, 2025 and December 31, 2024, we have 18,846 and 18,858 premium finance loans outstanding, respectively. The types of policies
we finance vary. They are most often motor truck cargo, physical damage and liability, commercial auto, commercial general liability,
commercial package policies, professional liability, and commercial property. Most of the policies we finance are written through local
independent insurance agents. The insurance companies they represent generally do not provide premium installment payment plans.
| 7 | |
| | |
**Competition**
Our industry is highly competitive
with three types of competitors. Fifteen of our largest competitors are national premium finance firms primarily owned by commercial banks,
which write over 70% of all premium finance loans. A second type of competitor is comprised of regional premium finance companies owned
by entrepreneurs. Our remaining competitors are smaller, local companies, many of which are affiliated with insurance agencies. There
is a low barrier to entry into the business as regulations do not require passing any tests or having substantial capital. A prime requirement
for success in the industry is access to low-cost capital as profits are substantially related to the spread between the cost of capital
and interest earned on premium finance loans. Because of the secure nature of insurance premium finance loans, our industry is intensely
competitive:
|
| Large National Finance Companies
are owned or affiliated with financial institutions and make up approximately 50% of the financed premiums in the industry today. Since
access to capital is plentiful and the cost of funds are historically low, these finance companies seek the security of the premium finance
industry to get valued returns with minimal risk. However, since these competitors oftentimes lack the agility or desire to develop personal
relationships, they generally seek out the largest premiums solely by offering the lowest rates. | |
|
| Regional finance companies compete
for business in smaller regional territories throughout the U.S. These companies are typically owned by entrepreneurs that raise debt
privately and leverage it with a bank or similar asset-based lender. While these regional competitors manage to maintain some of the benefits
of the smaller companies on a relationship level, they lack access to capital enjoyed by large institutionally owned competitors. Thus,
they are limited to modest organic growth with limited exit strategy. | |
|
| Smaller locally operated finance
companies generally conduct business in the state in which they are domiciled and typically limit their business to that state, county,
or municipality. These companies are often family-owned and operated and can even be affiliated with an insurance agency or agencies or
even a small insurance company. While these smaller competitors are able to develop personal relationships, owners often lack the experience,
business acumen and access to capital enjoyed by their larger competitors. | |
**Marketing**
The
servicing of loans for policy premiums of $1,000 to $100,000 can be time consuming and require responsive customer service, but competition
in this segment is less intense. Our customers generally do not have an insurance expert on staff, and they rely on their brokers or agents
to recommend insurance premium finance companies. Our referral base has access to multiple alternate insurance premium finance sources
operating at the national, regional and local level. We believe we compete against our competitors primarily through the quality of our
technology, which allows our agents and brokers to receive a quick response to a loan application and the quality of the personalized
service of the loans which we provide. We believe that we are successful because our technology and customer service helps our referral
sources achieve their own customer satisfaction and retention. We have a website for our customers and agents at www.standardpremium.com.
We have six employees who act as our marketing representatives in the field. They call on our broker and agent base and seek new brokers
and agents to represent us to their clients. Our main marketing activities are the establishment and maintenance of relationships with
our loan referral sources. We do not market or advertise our loan services directly to the parties receiving our loans but rather depend
upon insurance agents and brokers to advise their clients who wish to finance their premiums about our insurance premium loan program.
****
**Regulation**
****
In
most states, insurance premium finance companies are regulated by the Insurance Departments or Offices of Insurance Regulation in which
they operate. Each state has specific laws regulating items such as interest rates, late charges, loan terms, forms, audit provisions,
cancellation requirements among others. In addition, each state has the ability to audit each finance company and requires annual reports
to be submitted. We employ a full-time compliance manager as well as retained legal counsel who provide updates to our policies in accordance
with changes to laws in the states where we do business.
| 8 | |
| | |
|
ITEM1A. |
RISK FACTORS | |
An
investment in our common stock involves a high degree of risk and is subject to many uncertainties. These risks and uncertainties may
adversely affect our business, operating results and financial condition. In order to attain an appreciation for these risks and uncertainties,
you should read this Annual Report in its entirety and consider all of the information and advisements contained herein, including the
following risk factors and uncertainties. If any of the following risks occur, our business, operating results and financial condition
could be seriously harmed, and you could lose all or part of your investment.
****
**We depend on the
availability of significant amounts of credit to meet our liquidity needs and our failure to maintain our sources of credit could materially
and adversely affect our liquidity in the future.**
****
Our
business model is dependent upon our ability to borrow to maintain and grow our ability to lend money to our customers. On February 3,
2021, we entered into a new two-year line of credit in the maximum amount of $35 million, which was immediately funded for $25,974,695
to pay off the prior line of credit lender. In October 2021, the line of credit facility increased by $10 million to a total of $45 million.
In November 2022, the term of the line of credit was extended until November 30, 2025. In June 2025, the Company increased its line of
credit with First Horizon Bank from $45,000,000 to $50,000,000. In September 2025, the Company increased its line of credit with First
Horizon Bank from $50,000,000 to $75,000,000 and extended the maturity until September 25, 2028. If we fail to renew or replace our line
of credit at the expiration of the current term, or we default on our line of credit, then our ability to continue our lending business
at current levels and meet our other obligations, would be materially adversely affected. Since the amount of money we can borrow on our
revolving credit line is based on a percentage of our entire loan portfolio less certain ineligible items, our other corporate debt (i.e.,
subordinated and un-subordinated debt) plus our retained earnings and stockholder equity alone may limit our ability to increase the size
of our loan portfolio.
**If our growth requires
us to raise additional capital, that capital may not be available when it is needed, or the cost of that capital may be very high.**
As
we grow, organically and through possible acquisitions, the amount of capital required to support our operations grows as well. We may
need to raise additional capital to support continued growth both organically and through possible acquisitions. Any equity capital we
obtain may result in the dilution of the interests of existing holders of our common stock. Our ability to raise additional capital, if
needed, will depend on conditions in the capital markets at that time which are outside our control and on our financial condition and
performance. If we cannot raise additional capital when needed, or on terms acceptable to us, our ability to expand our operations through
organic growth and possible acquisitions could be materially impaired and our financial condition and liquidity could be materially and
negatively affected.
****
**Our reliance on
third party insurance agents and brokers to originate our premium finance loans may result in increased exposure to credit risk and fraud.**
****
Our
premium finance loans are issued primarily through relationships with a large number of unaffiliated insurance agents and brokers. As
a result, risk management and general supervisory oversight may be difficult since we have little direct contact with the borrowers and
such loans may also be more susceptible to third party fraud. In certain cases, insurance agents and brokers may be funded directly on
behalf of the insurance company and/or its affiliates. If the agent or broker fails to remit these funds accordingly, or fails to provide
an underlying insurance policy, there may be little or no collateral. Acts of fraud are difficult to detect and deter, and we cannot assure
investors that our risk management procedures and controls will prevent losses from fraudulent activity.
**If our allowance for credit losses is not sufficient to absorb
losses that may occur in our loan portfolio, our financial condition and liquidity could suffer.**
We
maintain an allowance for credit losses that is intended to absorb credit losses that we expect to incur in our loan portfolio. At each
balance sheet date, our management determines the amount of the allowance for credit losses based on our estimate of probable and reasonably
estimable losses in our loan portfolio, taking into account probable losses that have been identified relating to specific borrowing relationships,
as well as probable losses inherent in the loan portfolio and credit undertakings that are not specifically identified. Because our allowance
for credit losses represents an estimate of inherent losses, there is no certainty that it will be adequate over time to cover credit
losses in the loan portfolio, particularly if there is deterioration in general economic or market conditions or events that adversely
affect specific customers. Although we believe our credit loss allowance is adequate to absorb reasonably estimable losses in our loan
portfolio, if our estimates are inaccurate and our actual loan losses exceed the amount that is anticipated, or if the loss assumptions
we used in calculating our reserves are significantly different from those we actually experience, our financial condition and liquidity
could be materially adversely affected.
| 9 | |
| | |
**Failures of our
information technology systems may adversely affect our operations.**
****
We
are increasingly dependent upon computers and other information technology systems to manage our business. We rely upon information technology
systems to process, record, monitor and disseminate information about our operations. In some cases, we depend on third parties to provide
or maintain these systems. While we perform a review of controls instituted by our critical vendors in accordance with industry standards,
we must rely on the continued maintenance of these controls by the outside party, including safeguards over the security of customer data.
Additionally, we must rely on our employees to safeguard access to our information technology systems and avoid inadvertent complicity
with external security threats. Although we take protective measures and endeavor to modify them as circumstances warrant, the security
of our computer systems, software and networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses or other malicious
code and cyberattacks that could have a security impact. If one or more of these events occur, or if any of our financial, accounting
or other data processing systems fail or have other significant shortcomings, this could jeopardize our or our customers confidential
and other information processed and stored in, and transmitted through, our computer systems and networks or otherwise cause interruptions
or malfunctions in our operations or the operations of our customers or counterparties. We may be required to expend significant additional
resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject
to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us. Security
breaches in our online systems could also have an adverse effect on our reputation. Our systems may also be affected by events that are
beyond our control, which may include, for example, electrical or telecommunications outages or other damage to our property or assets.
Although we take precautions against malfunctions and security breaches, we cannot assure that such efforts will be adequate to prevent
problems that could materially adversely affect our business, financial condition and results of operations.
**If we are unable
to attract and retain experienced and qualified personnel, our ability to provide high quality service will be diminished, we may lose
key customer relationships, and our results of operations may suffer.**
We
believe that our success depends, in part, on our ability to attract and retain experienced personnel, including our senior management
and other key personnel. The departure of senior manager or other key personnel may damage relationships with certain customers, or certain
customers may choose to follow such personnel to a competitor. The loss of any of our senior managers or other key personnel, or our inability
to identify, recruit and retain such personnel, could materially and adversely affect our business, results of operations and financial
condition. All of our employees are at will with no guaranteed period of employment except our CEO and CFO who have executive
contracts through March 2030.
**Our lack of contractual
marketing relationships with our loan referral base could adversely affect our revenue, profits and financial condition.**
****
We
do not have contractual marketing arrangements with the insurance brokers and agents. Since we depend upon the insurance brokers and agents
to refer their customers to us for premium loans, our premium loan volume could decline if our referral base decided to refer their clients
to other sources of premium loans.
****
**Since our business
is concentrated in Florida, Georgia, North Carolina, South Carolina, and Texas, declines in the economy of these states could adversely
affect our business.**
Our
success depends primarily on the general economic conditions of the specific local markets in which we operate. We provide premium finance
loans to customers primarily in the states of Florida, Georgia, North Carolina, South Carolina, and Texas. The local economic conditions
in these market states significantly impact the demand for our premium finance loans as well as the ability of our customers to repay
loans. Declines in economic conditions, including inflation, recession, unemployment, changes in securities markets or other factors impacting
these local markets, including natural disasters, hurricanes, and pandemics, could, in turn, have a material adverse effect on our financial
condition and results of operations.
**Competition in
the insurance premium finance industry is intense, and some of our competitors have greater financial, technological and other resources
than we currently possess. If we are not able to compete effectively, we may lose market share and our business could suffer.**
We
face intense competition from other insurance premium finance firms. Many competing companies have longer operating histories, greater
access to capital, lower cost of capital, more lending experience, greater name recognition, larger staffs and substantially greater financial,
technical and marketing resources than we currently possess. The superior resources that some of these competitors have available could
allow them to compete successfully against us, which could have a material adverse effect on our business, results of operations, financial
condition, liquidity and prospects.
| 10 | |
| | |
We
face competition in financing insurance premiums throughout our market area. Our competitors include national, regional and other community
banks, and a wide range of other financial institutions such as credit unions, insurance companies, factoring companies and other non-bank
financial companies. Many of these competitors have access to cheaper capital, substantially greater resources and market presence than
Standard and, as a result of their size, may be able to offer a broader range of products at better prices.
**If we fail to establish
and maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business
could be harmed.**
Ensuring
that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements
on a timely basis is a costly and time-consuming effort that needs to bere-evaluatedfrequently. Internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements in accordance with U.S. GAAP.
In
addition, we are required to be compliant with public company internal control requirements mandated under Section302 and 906 of
the Sarbanes-Oxley Act. We implement measures designed to improve our internal controls over financial reporting, including the hiring
of accounting personnel and establishing new accounting and financial reporting procedures to establish an appropriate level of internal
controls over financial reporting. However, we cannot provide assurances that we will be successful in doing so. If we are unable to successfully
implement internal controls over financial reporting, the accuracy and timing of our financial reporting, and our stock price, may be
adversely affected and we may be unable to maintain compliance with the applicable stock market listing requirements.
Implementing
any appropriate changes to our internal controls may distract our officers and employees, entail substantial costs to modify existing
processes and take significant time to complete. These changes may not, however, be effective in maintaining the adequacy of our internal
controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis,
could increase operating costs and harm the business.
**We do not anticipate
that we will pay any cash dividends on our common stock in the foreseeable future.**
The
current expectation is that for the foreseeable future, we will retain our future earnings to fund the development and growth of our business.
As a result, capital appreciation, if any, of our common stock will be the sole source of gain, if any, for any stockholders for the foreseeable
future.
****
**Our common stock began trading on the OTCQX
on March 21, 2022 and there is no assurance that an active market will develop or be maintained.**
****
Our common stock commenced
trading on the OTCQX Best Market under the symbol SPFX on March 21, 2022. We cannot assure that an active trading market for our shares
will develop or be maintained. In the absence of an active trading market for our common stock, stockholders may not be able to sell their
shares at the time that they would like to sell and may have to hold their shares indefinitely.
****
**We may not realize the anticipated benefits
of any acquisitions that we are able to complete.**
****
Part of our business strategy
is to grow through potential acquisitions in order to achieve economies of scale. Acquisitions involve several risks, including, but not
limited to:
|
| it may occur that the acquired company or assets do
not further Standards business strategy, or that it overpaid for the company or assets, or that industry or economic conditions
change, all of which may require a future impairment charge; | |
|
| management may have difficulty integrating the operations
and personnel of the acquired business and may have difficulty retaining the key personnel of the acquired business; | |
|
| management may have difficulty incorporating the acquired
services with its existing services; | |
|
| there may be customer confusion where Standards
services overlap with those of entities that are acquired; | |
|
| Standards ongoing business and management's
attention may be disrupted or diverted by transition or integration issues and the complexity of managing geographically and culturally
diverse locations; | |
|
| There may be difficulty maintaining uniform standards,
controls, procedures and policies across locations; | |
|
| Standard may acquire companies that have material liabilities,
including, among other things, for the failure to comply with insurance laws and regulations; | |
|
| the acquisition may result in litigation from terminated
employees or third parties; | |
|
| management may experience significant problems or liabilities
associated with service quality, technology and legal contingencies; | |
|
| Standard may spend considerable amounts of money (legal,
accounting, diligence, etc.) in seeking an acquisition candidate and never complete the acquisition; and | |
|
| acquisition candidate letters of intent may have large
break-up fees if the acquisition is not completed. | |
****
| 11 | |
| | |
**We may not be able to make future acquisitions without obtaining
additional financing.**
To finance any acquisitions,
Standard may, from time to time, issue additional equity securities or incur additional debt. A greater amount of debt or additional equity
financing could be required to the extent that its common stock fails to achieve or to maintain a market value sufficient to warrant its
use in future acquisitions, or to the extent that acquisition targets are unwilling to accept common stock in exchange for their businesses.
Furthermore, the Company would require bank approval of any additional debt or equity financing. Even if Standard were permitted to incur
additional debt or determine to sell equity, management may not be able to obtain additional required capital on acceptable terms, if
at all, which would limit its plans for growth. In addition, any capital they may be able to raise could result in increased leverage
on its balance sheet, additional interest and financing expense, and decreased operating income.
**Compliance with
securities laws.**
****
The
Companys common stock, preferred stock and promissory notes were sold to investors pursuant to exemptions under the Securities
Act of 1933 with respect to transactions involving limited offers and sales without registration. If the Company should fail to comply
with each and every one of the requirements of the available exemptions from registration, the investors may have the right to rescind
their purchase of shares if they so desire. Compliance is highly technical. There is always the possibility that if any investor or investors
should obtain rescission of their investments, the Company may be required to repurchase the securities. In addition, failure to comply
with any of the requirements for exemption under state securities laws could occasion the same results as a failure to comply with the
above-mentioned federal rule exemptions.
****
**We depend on the
accuracy and completeness of information we receive about our customers and counterparties to make credit decisions. Reliance on inaccurate
or misleading information may adversely affect our business, operations, and financial condition.**
****
We
rely on information furnished by or on behalf of customers and counterparties in deciding whether to extend credit or enter into other
transactions. This information could include financial statements, credit reports, and other financial information. We also rely on representations
of those customers, counterparties, or other third parties, such as independent auditors, as to the accuracy and completeness of that
information. Reliance on inaccurate or misleading financial statements, credit reports, or other financial information could have a material
adverse impact on our business, financial condition and results of operations.
**Certain protective provisions of our Series A Convertible Preferred
Stock may prevent us from entering into certain transactions, issuing certain securities or making changes in the rights, preferences,
privileges, qualifications, limitations or restrictions of, or applicable to, the Series A Preferred Stock which may be beneficial to
the holders of our common stock.**
Our
Series A Convertible Preferred Stock has certain protective provisions as set forth in Item 11 herein which may prevent us from engaging
in transactions, including mergers and acquisitions, or taking other actions which alter the provisions of the Series A Convertible Preferred
Stock or issuing other equity securities which may have rights senior to or on parity with the Series A Convertible Preferred Stock, or
increasing the amount of authorized Series A Convertible Preferred Stock even if such matters were beneficial to the holders of our common
stock.
****
**We may cause the
Series A Convertible Preferred Stock to be converted into common stock which may reduce the price of our common stock.**
We
may increase the number of outstanding shares of our common stock by causing the conversion of the Series A Convertible Preferred Stock
into common stock. The issuance of additional shares of our common stock may cause a reduction in the market price of the shares of our
common stock.
**Particular Risks Associated with the Specialized
Insurance Premium Services Industry**
****
**Our premium finance
business may involve a higher risk of delinquency or collection than other lending operations and could expose us to losses.**
****
We
provide financing for the payment of commercial insurance premiums through our subsidiary Standard Premium Finance Management Corporation.
Commercial insurance premium finance loans involve a unique, and possibly higher, risk of delinquency or collection than other types of
loans. These are initiated primarily through relationships with unaffiliated independent insurance agents. As a result, risk management
is critical and may be difficult. Roughly one-third of all new borrowers fail to make all of their payments. In such an event, we request
cancellation of the insurance policy and anticipate a refund from the insurance company and the agent. Under ideal conditions the down
payment made by the insured should create sufficient equity to pay off our loan in the event of cancellation. However, as a consequence
of competitive market conditions, we may have accepted a down payment that did not fully cover our loan. If, after the unearned premium
on a cancelled policy is fully refunded, there is still an outstanding balance, the insured must be billed directly. The cost of pursuing
these funds often exceeds the amount collected and most often results in write-offs by the Company. Many commercial loans have underwriting
provisions that may affect our collateral. Such instances may include but are not limited to fully earned policy fees or inspection fees,
audit provisions, state reporting requirements, and cancellation limitations. Such circumstances could greatly reduce the unearned premium
in the event of cancellation. Since we depend on the unearned premium for collateral, we could experience greater write-offs and thus,
increased risk.
****
| 12 | |
| | |
**A Decline in the
Economy in General May Result in a Decrease in Loan Originations.**
****
Declines
in the economy generally could have an adverse impact on our operating results by reducing the number of businesses purchasing insurance.
Further, those who are currently financing their policies may have more difficulty making their payments, thus raising our default rates.
**Increases in the
Secured Overnight Financing Rate may reduce the profitability of our loans.**
****
The
rate at which we lend money is set by the state. However, our revolving line of credit, which comprises our senior debt, is based, in
part, on the Secured Overnight Financing Rate (SOFR). When the SOFR rate increases, the interest we pay on our line of credit
increases while our interest income continues to be based on the interest rate established at the initiation of each premium finance loan.
Thus, with each increase, the spread between the interest we earn and the interest we pay narrows, reducing our net interest income.
**Changes in Insurance
Law may adversely affect our business.**
****
Our
industry is subject to laws, rules, and regulations established by the states in which we operate. Any changes in such laws, rules, and
regulations could be detrimental to the premium finance industry, thus having a negative effect on our operating income.
**Aggressive Marketing
by our Competitors may adversely affect our business.**
****
There
may be changes in the insurance market such as aggressive marketing by other premium finance companies or the emergence of new premium
finance companies. Many insurance companies offer payment plans in-house or through affiliates. This practice could increase. Such an
event would reduce the market share of all independent premium finance companies and would have a negative effect on our company.
**Insurance Company
Insolvency may cause us losses.**
****
Insurance
companies, although closely regulated by the various states, can also fail. When an insurance company fails, we may have significant exposure.
Such an event would put us at considerable risk. Although most insurance companies are covered through a guarantee fund, there may be
a lengthy delay in recovering these funds, and all funds due to us may not be recovered. Such an event would have a negative effect on
cash flow. In the event of insurance company failure of a carrier not covered under such guarantee fund, our exposure will be much greater.
There are rating services that evaluate the financial condition and stability of insurance companies. We use these to help us lower our
risks. However, conditions for any insurance company can change rapidly and the rating services we use may not give us sufficient warning
of any changes. In such an event, our risk factor could be increased.
****
**We may experience
cash flow problems due to delays in receiving proceeds from our bank loan or premium finance loan documentation.**
****
We
issue drafts on our bank account to fund new premium finance loans. These drafts clear our bank on a daily basis. To meet this funding
need, we draw funds on our revolving credit line with our senior lender on a regular basis. Should the senior lender be unable to fund
us in a timely fashion, we would have difficulty in funding these drafts. Failure on our part to cover all or part of these drafts could
result in cancellation or non-issuance of an insurance policy for which we may be liable. Further, if drafts fail to clear our bank it
may jeopardize our relationships with insurance agents and insurance companies, adversely affecting our ability to conduct business in
the future. Insurance agents that do business with our Company have the authority to issue drafts on our bank account to pay a portion
of the insureds premium upon initiation of the premium finance loan. We review these drafts daily to make certain they are all
paid to and cashed by proper parties. Improper items can be returned to the bank and will not be honored. Under normal circumstances,
we receive the finance agreement before the draft is presented to our bank. Frequently however, the draft is presented to our bank before
we receive the finance agreement. Since we cannot draw on our revolving line of credit without first presenting the loan agreement, this
may cause a cash flow problem for us. Such an event temporarily causes us to, in effect, use funds for which no loans have been secured.
Such an event can reduce our profitability and increase risk to the Company. In the event that a draft has not been cashed for an undue
period of time, we may have a liability for the draft, and the insured may have no coverage.
****
| 13 | |
| | |
**Business Interruption
from natural disasters, including hurricanes and pandemics.**
****
In
the event of a natural disaster or other occurrence beyond our control, we may be unable to conduct our normal course of business that
could cause temporary or permanent harm to the Company due to loss of customers, increased defaults on our premium finance loans, interruptions
to our operations, and reduced demand for our premium finance loans.
****
**Insurance Company
Concentration**
****
To
reduce our exposure, we try to limit the amount of financing we do for any one insurance company. The senior lender providing our revolving
credit line has placed certain limits on the percentage of our business that can be financed with any one insurance company. Although
we endeavor to keep our concentration within the limits authorized by our senior lender, this is not always possible. Market conditions
may cause fluctuations in our concentration, creating disproportionate exposure to one or several insurance companies. Such an event could
increase our risks.
**Our dependance
on Insurance Agents may expose us to losses.**
****
We
are continually adding new insurance agents to our customer base. Each new agent is screened by us to verify that he or she is licensed
and is in good standing with state authorities. In addition, we attempt to gather as much information as possible to assist us in evaluating
prospective customers. The risk of doing business with a new agent is significantly greater than that of doing business with an agent
with whom we have established a business history.
**Liability Arising
from Wrongful Cancellation of an Insurance Policy**
****
Through
the normal course of business, we cancel many insurance policies for non-payment. In the event we cancel an insurance policy in error,
we could be deemed liable for claims that would normally be paid by the insurance carrier. Such claims and resultant damages could be
significant. Although we carry professional liability insurance to cover such instances, certain provisions could prevent us from recovering
all or part of our claim.
|
ITEM1B. |
UNRESOLVED STAFF COMMENTS | |
None.
|
ITEM1C. |
CYBERSECURITY | |
**Risk Management and
Strategy**
****
Cybersecurity
risk management is an essential part of our overall risk management strategy. We have established policies and processes for assessing,
identifying, and managing material risk from cybersecurity threats, and have integrated these processes into our overall risk management
systems and processes. We routinely assess material risks from cybersecurity threats, including any potential unauthorized occurrence
on or conducted through our information systems that may result in adverse effects on the confidentiality, integrity, or availability
of our information systems or any information residing therein.
We
conduct periodic risk assessments to identify cybersecurity threats, as well as assessments in the event of a material change in our business
practices that may affect information systems that are vulnerable to such cybersecurity threats. These risk assessments include identification
of reasonably foreseeable internal and external risks, the likelihood and potential damage that could result from such risks, and the
sufficiency of existing policies, procedures, systems, and safeguards in place to manage such risks.
Following
these risk assessments, we redesign, implement, and maintain reasonable safeguards to minimize identified risks; reasonably address any
identified gaps in existing safeguards; and regularly monitor the effectiveness of our safeguards. Primary responsibility for assessing,
monitoring, and managing our cybersecurity risks rests with our Vice President of Technology who reports to our Chief Executive Officer,
to manage the risk assessment and mitigation process.
As
part of our overall risk management system, we monitor and test our safeguards and train our employees on these safeguards, in collaboration
with IT and management. All personnel are made aware of our cybersecurity policies through training.
We
engage third parties in connection with our risk assessment processes. These service providers assist us in designing and implementing
our cybersecurity policies and procedures, as well as to monitor and test our safeguards. We require each third-party service provider
to certify that it has the ability to implement and maintain appropriate security measures, consistent with all applicable laws, to implement
and maintain reasonable security measures in connection with their work with us, and to promptly report any suspected breach of its security
measures that may affect our company.
We
have not encountered cybersecurity challenges that have materially impaired our operations or financial standing. For additional information
regarding risks from cybersecurity threats, please refer to Item 1A. Risk Factors in this annual report on Form 10-K.
****
| 14 | |
| | |
**Governance**
****
One
of the key functions of our board of directors is informed oversight of our risk management process, including risks from cybersecurity
threats. Our board of directors is responsible for monitoring and assessing strategic risk exposure, and our executive officers are responsible
for the day-to-day management of the material risks we face. Our board of directors administers its cybersecurity risk oversight function
directly as a whole, as well as through the audit committee.
Our
Chief Executive Officer and Chief Financial Officer are primarily responsible for assessing and managing our material risks from cybersecurity
threats with assistance from the Vice President of Technology and third-party service providers.
Our
Chief Executive Officer and Chief Financial Officer oversee our cybersecurity policies and processes, including those described in Risk
Management and Strategy above. The cybersecurity risk management program includes tools and activities to prevent, detect, and
analyze current and emerging cybersecurity threats, and plans and strategies to address threats and incidents.
Our
Chief Executive Officer and Vice President of Technology provide periodic briefings to the Board of Directors regarding our companys
cybersecurity risks and activities, including any recent cybersecurity incidents and related responses, cybersecurity systems testing,
and activities of third parties.
|
ITEM2. |
PROPERTIES | |
****
The corporate headquarters
of the Company are located at 13590 SW 134th Avenue, Suite 214, Miami, Florida 33186. We lease our general office space at
this location. In February 2024, the Company renewed this lease until February 28, 2027, including the one-year renewal option. We believe
that our existing facilities are adequate for our operations and their locations allow us to efficiently serve our customers.
|
ITEM3. |
LEGAL PROCEEDINGS | |
None.
|
ITEM4. |
MINE SAFETY DISCLOSURES | |
Not applicable.
| 15 | |
| | |
**PART II**
|
ITEM5. |
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | |
**Market Information**
Our common stock is traded
on the OTCQX under the symbol SPFX. Quotes on OTCQX represent inter-dealer prices that do not include retail mark-ups, mark-downs, or
commissions, and may not necessarily represent actual transactions.
**Holders**
As of March 20, 2026, we
had 122 holders of record of our common stock and 3,000,030 shares of common stock outstanding.
**Dividends**
We did not declare or pay
dividends on our common stock in either fiscal year 2025 or 2024. The terms of our current line of credit agreement prohibit us from paying
dividends on our common stock without the consent of the lender. The Company anticipates that, for the foreseeable future, it will retain
any earnings for use in the operations of its business.
**Purchases of Equity Securities by the Issuer
and Affiliated Purchasers**
Common Stock repurchase activity
during the three months ended December 31, 2025, was as follows:
|
Periods | |
Total
Number of Shares Purchased | | |
Average
Price Paid per Share | | |
Total
Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | |
Approximate
Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) | | |
|
October 1 to October 31, 2025: | |
| | |
| | |
| | |
| | |
|
| |
| 0 | | |
$ | | | |
| 0 | | |
| | | |
|
November 1, 2025 to November 30, 2025: | |
| | | |
| | | |
| | | |
| | | |
|
| |
| 0 | | |
$ | | | |
| 0 | | |
| | | |
|
December 1, 2025 to December 31, 2025: | |
| | | |
| | | |
| | | |
| | | |
|
Open market purchases | |
| 1,186 | | |
$ | 1.87 | | |
| 1,186 | | |
| | | |
|
Total | |
| 1,186 | | |
$ | 1.87 | | |
| 1,186 | | |
$ | 247,787 | | |
|
(1) | On May 27, 2025, the Company announced the approval of a stock repurchase
program to repurchase up to $250,000 of the Companys common stock by negotiated transaction through November 2, 2025. On July 31,
2025, the repurchase program was expanded to allow repurchases through open market transactions. On November 14, 2025, the repurchase
program was extended until June 10, 2026. During the fourth quarter of 2025, the Company utilized $2,213 under the repurchase program.
The repurchase program did not obligate the Company to acquire a minimum amount of shares. | |
****
|
ITEM6. |
[RESERVED] | |
Not required.
| 16 | |
| | |
|
ITEM7. |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |
**Overview**
****
We are an insurance premium
financing company, specializing primarily in commercial policies. We make it efficient for companies to access financing for insurance
premiums. Enabled by our network of marketing representatives and relationships with insurance agents, we provide a value-driven, customer-focused
lending service.
We have offered premium financing
since 1991 through our wholly owned subsidiary, Standard Premium Finance Management Corporation. We are generally targeting premium financing
loans from $1,000 to $100,000, with repayment terms ranging from 6 to 11 months, although we may offer larger loans under circumstances
we deem appropriate. Qualified customers may have multiple loans with us concurrently, which we believe provides opportunities for repeat
business, as well as increased value for our customers.
We originate loans primarily
in Florida, although we operate in several states. Over the past three years, the Company has expanded its operations, and currently is
financing insurance premiums in eighteen states. Throughout 2024 and 2025, we have obtained additional licenses for a total of forty-one
states. We intend to continue to expand our market into new states as part of our organic growth strategy. Loans originate primarily through
a network of insurance agents solicited by our in-house sales team and marketing representatives.
We generate the majority of
our revenue through interest income and the associated fees earned from our loan products. We earn interest based on the rule of
78 and earn other associated fees as applicable to each loan. These fees include, but are not limited to, a one-time finance charge,
late fees, and NSF fees. Our company charges interest to its customers solely by the Rule of 78. Charging interest per the Rule of 78
is the industry standard among premium finance loans. The Rule of 78 is a method to calculate the amount of principal and interest paid
by each payment on a loan with equal monthly payments. The Rule of 78 is a permissible method of calculating interest in the states in
which we operate. The Rule of 78 recognizes greater amounts of interest income and lesser amounts of principal repayment during the first
months of the loan, while decreasing interest income and increasing principal repayment during the final months of the loan. Whenever
a loan is repaid prior to full maturity, the Rule of 78 methodology is applied and the borrower is refunded accordingly.
We rely on a diversified set
of funding sources for the loans we make to our customers. Our primary source of financing has historically been a line of credit at a
bank collateralized by our loan receivables and our other assets. We receive additional funding from unsecured subordinate noteholders
that pays monthly interest to the investors. We have also used proceeds from operating cash flow to fund loans in the past and continue
to finance a portion of our outstanding loans with these funds. See *Liquidity and Capital Resources* for additional information
regarding our financing strategy.
****
The Companys main source
of funding is its line of credit, which represented approximately 66% ($49,233,077) of its capital and total liabilities as of December
31, 2025. As of December 31, 2025, the Companys subordinated notes payable and other loans represented approximately 16% ($11,949,853)
of the Companys capital and total liabilities, operating liabilities provide approximately 7% ($5,173,808) of the Companys
capital and total liabilities, preferred equity provides approximately 2% ($1,660,000) of the Companys capital and total liabilities,
and equity in retained earnings and common paid-in capital represents the remaining 9% ($6,800,219) of the Companys capital and
total liabilities.
****
**Key Financial and Operating Metrics**
****
We regularly monitor a series of metrics in order
to measure our current performance and project our future performance. These metrics aid us in developing and refining our growth strategies
and making strategic decisions.
|
| |
As of or for the Years Ended December
31, | | |
|
| |
2025 | | |
2024 | | |
|
Gross Revenue | |
$ | 12,469,770 | | |
$ | 12,143,143 | | |
|
Originations | |
$ | 158,136,311 | | |
$ | 149,509,349 | | |
|
Interest Earned Rate | |
| 17.9 | % | |
| 17.8 | % | |
|
Cost of Funds Rate, Gross | |
| 7.13 | % | |
| 8.36 | % | |
|
Cost of Funds Rate, Net | |
| 5.35 | % | |
| 6.27 | % | |
|
Reserve Ratio | |
| 2.43 | % | |
| 2.78 | % | |
|
Provision Rate | |
| 0.80 | % | |
| 0.84 | % | |
|
Return on Assets | |
| 1.56 | % | |
| 1.35 | % | |
|
Return on Equity | |
| 17.58 | % | |
| 16.57 | % | |
|
| |
| | | |
| | | |
| 17 | |
| | |
*Gross Revenue*
**
Gross Revenue represents the
sum of interest and finance income, associated fees and other revenue.
*Originations*
**
Originations represent the
total principal amount of Loans made during the period.
*Interest Earned Rate*
The Interest Earned Rate is
the average annual percentage interest rate earned on new loans.
*Cost of Funds Rate, Gross*
**
Cost of Funds Rate, Gross
is calculated as interest expense divided by average debt outstanding for the period.
*Cost of Funds Rate, Net*
**
Cost of Funds Rate, Net is
calculated as interest expense divided by average debt outstanding for the period, net of the interest related tax benefit.
*Reserve Ratio*
**
Reserve Ratio is our allowance
for credit losses at the end of the period divided by the total amount of principal outstanding on Loans at the end of the period. It
excludes net deferred origination costs and associated fees.
*Provision Rate*
**
Provision Rate equals the
provision for credit losses for the period divided by originations for the period. Because we reserve for probable credit losses inherent
in the portfolio upon origination, this rate is significantly impacted by the expectation of credit losses for the periods originations
volume. This rate is also impacted by changes in loss expectations for contract receivables originated prior to the commencement of the
period.
*Return on Assets*
**
Return on Assets is calculated
as annualized net income (loss) attributable to common stockholders for the period divided by average total assets for the period.
*Return on Equity*
**
Return on Equity is calculated
as annualized net income (loss) attributable to common stockholders for the period divided by average stockholders equity attributable
to common stockholders for the period.
| 18 | |
| | |
**RESULTS of OPERATIONS**
****
**Results of Operations for the Year ended December 31, 2025 Compared
to the Year ended December 31. 2024**
****
|
Summary of Comparative Results | |
|
| |
For
the years ended | | |
| | |
| | |
|
| |
December
31, 2025 | | |
December
31, 2024 | | |
Increase/
(Decrease) ($) | | |
Increase/
(Decrease) (%) | | |
|
Revenues: | |
| | |
| | |
| | |
| | |
|
Finance Charges | |
$ | 10,979,188 | | $ |
| 10,549,453 | | |
| 429,735 | | |
| 4.1 | % | |
|
Late Charges | |
| 1,129,309 | | |
| 1,209,614 | | |
| (80,305 | ) | |
| (6.6 | %) | |
|
Origination Charges | |
| 361,273 | | |
| 384,076 | | |
| (22,803 | ) | |
| (5.9 | %) | |
|
Gross Revenue | |
| 12,469,770 | | |
| 12,143,143 | | |
| 326,627 | | |
| 2.7 | % | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Expenses: | |
| | | |
| | | |
| | | |
| | | |
|
Interest | |
| 4,106,382 | | |
| 4,407,653 | | |
| (301,271 | ) | |
| (6.8 | %) | |
|
Salaries and wages | |
| 2,206,730 | | |
| 2,118,609 | | |
| 88,121 | | |
| 4.2 | % | |
|
Commissions | |
| 1,797,196 | | |
| 1,449,676 | | |
| 347,520 | | |
| 24.0 | % | |
|
Provision for credit losses | |
| 1,261,034 | | |
| 1,254,525 | | |
| 6,509 | | |
| 0.5 | % | |
|
Professional fees | |
| 281,944 | | |
| 372,162 | | |
| (90,218 | ) | |
| (24.2 | %) | |
|
Postage | |
| 123,324 | | |
| 113,529 | | |
| 9,795 | | |
| 8.6 | % | |
|
Insurance | |
| 174,188 | | |
| 170,959 | | |
| 3,229 | | |
| 1.9 | % | |
|
Other operating expenses | |
| 926,717 | | |
| 935,891 | | |
| (9,174 | ) | |
| (1.0 | %) | |
|
Total costs and expenses | |
| 10,877,515 | | |
| 10,823,004 | | |
| 54,511 | | |
| 0.5 | % | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Income before income taxes | |
| 1,592,255 | | |
| 1,320,139 | | |
| 272,116 | | |
| 20.6 | % | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Provision for income taxes | |
| 378,295 | | |
| 340,146 | | |
| 38,149 | | |
| 11.2 | % | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Net income | |
| 1,213,960 | | |
| 979,993 | | |
| 233,967 | | |
| 23.9 | % | |
****
**Revenue**
Revenue increased by 2.7% overall or $326,627
to $12,469,770 for the year ended December 31, 2025 from $12,143,143 for the year ended December 31, 2024. The increase in revenue was
due to a 4.1% or $429,735 increase in finance charges, partially offset by a 6.6% or $80,305 decrease in revenue from late charges and
a 5.9% or $22,803 decrease in origination charges. Revenue from finance charges comprised 88.0% of overall revenue for the year ended
December 31, 2025.
During the year ended December 31, 2025 compared
to the year ended December 31, 2024, the company financed an additional $8,626,962 in new loan originations, an increase of 5.8%. This
increase was due largely to increased marketing efforts throughout our established and new states, primarily by hiring additional marketing
representatives in Florida and the Midwest. The Company also noted a 2,226 increase in the quantity of loan originations to 27,020 new
loans for the year ended December 31, 2025 as compared to 24,794 for the year ended December 31, 2024. The quantity of loan originations
is directly correlated to origination charge revenue, as the Company immediately recognizes an origination fee on substantially all new
loans.
Under the terms
of the line of credit agreement, the loan receivables and our other assets provide the collateral for the loan. As the receivables increase,
driven by new sales, the company has greater borrowing power, giving it the opportunity to generate additional sales. In September 2025,
the Company increased its line of credit from $50,000,000 to $75,000,000, with an additional $40 million accordion feature, and extended
the maturity until September 2028. See *Future Cash Requirements* for the Companys strategy regarding its line of credit.
****
| 19 | |
| | |
**Expenses**
Expenses increased by 0.5% or $54,511 to $10,877,515
for the year ended December 31, 2025 from $10,823,004 for the year ended December 31, 2024.
The increase in expenses
was primarily due to increases in the following categories:
|
|
|
$347,520 increase in commission expense as a result of
competitive forces within agent relations. | |
|
|
|
$88,121 increase in salaries and wages expense as a result of the hiring
of additional marketing representatives in the Midwest, performance-bonus accruals, and increased base salaries and wages for our office
staff. | |
The increase in expenses was partially offset
primarily by a decrease in the following category:
|
|
|
$301,271 decrease in interest expense as a result of decreases in the line of credit interest rate. Due to benchmark interest rate decreases adopted by the Federal Reserve Board at the end of 2024, interest rates throughout the marketplace have decreased accordingly. The benchmark interest rate decreased again in September and December 2025, which will have a greater positive impact in the year ended December 31, 2026. Furthermore, in September 2025, the Company executed an extension on its line of credit, which decreased the interest rate margin by an average of 65 basis points. Our line of credit features a variable interest rate based on one-month SOFR. As of December 31, 2025 and 2024, our line of credits interest rate was 5.97% and 7.30%, respectively. | |
|
|
|
$90,218 decrease in professional fees primarily
related to the termination of a consulting agreement in December 2024. | |
****
**Income before Taxes**
****
Income before taxes increased by $272,116 to $1,592,255 for the year
ended December 31, 2025 from $1,320,139 for the year ended December 31, 2024. This increase was attributable to the net increases and
decreases as discussed above.
****
**Income Tax Provision**
****
Income tax provision increased $38,149 to $378,295
for the year ended December 31, 2025 from $340,146 for the year ended December 31, 2024. This increase was primarily attributable to the
increase in taxable income.
****
**Net Income**
**
Net income increased by $233,967 to $1,213,960
for the year ended December 31, 2025 from $979,993 for the year ended December 31, 2024. This increase was attributable to the $272,116
increase in income before taxes, partially offset by the $38,149 increase in the provision for income taxes.
****
**LIQUIDITY and CAPITAL RESOURCES as of December
31, 2025**
We had $10,970 of cash and
a working capital surplus of $15,124,071 at December 31, 2025. A significant working capital surplus is generally expected through the
normal course of business due primarily to the difference between the balance in loan receivables and the related line of credit liability.
As discussed in the Revenues section, the Companys line of credit is currently the primary source of operating funds. In September
2025, the Company renewed and amended its agreement with First Horizon Bank, for a three-year $75,000,000 line of credit with an additional
$40,000,000 uncommitted accordion feature. The terms of the amended line of credit include an interest rate based on the 30-day SOFR rate
plus a margin of 2.10%, with a minimum rate of 2.60%. We anticipate that the interest rate we pay on our revolving credit agreement may
decrease due to the recently adopted benchmark interest rate decreases by the Federal Reserve Board. Because of the short-term nature
of our loans, we are not bound to any particular loan and its fixed interest rate for a long period of time. Based on our estimates and
taking into account the risks and uncertainties of our plans, we believe that we will have adequate liquidity to finance and operate our
business and repay our obligations as they become due in the next twelve months.
****
During
the year ended December 31, 2025, the Company raised an additional $79,460 in subordinated notes payable related parties and $720,682
in subordinated notes payable. During the year ended December 31, 2025, the Company repaid $490,000 of notes payable related parties
and $887,254 of notes payable. The Company utilizes its cash inflows from subordinated debt as a financing source before drawing additionally
from the line of credit.
****
| 20 | |
| | |
**Future Cash Requirements**
As the Company anticipates
its growth patterns to continue, a larger line of credit is paramount to fueling this growth. The Companys line of credit is $75,000,000
and its maturity on its line of credit facility September 25, 2028. Extended maturity provides stability for the Companys future
cash requirements.
****
**Uses of Liquidity and Capital Resources**
****
We require cash to fund our
operating expenses and working capital requirements, including costs associated with our premium finance loans, capital expenditures,
debt repayments, acquisitions (if any), pursuing market expansion, supporting sales and marketing activities, and other general corporate
purposes. While we believe we have sufficient liquidity and capital resources to fund our operations and repay our debt, we may elect
to pursue additional financing activities such as refinancing or expanding existing debt or pursuing other debt or equity offerings to
provide flexibility with our cash management and provide capital for potential acquisitions.
****
**Off-balance Sheet Arrangements**
None.
****
**Contractual Obligations**
As of December 31, 2025, the Company was contractually obligated as
follows:
|
| |
Payments Due by Period | | |
|
| |
Total | | |
Less than 1 Year | | |
1 3 Years | | |
3 5 Years | | |
More than 5 Years | | |
|
Line of credit (1) | |
$ | 49,233,077 | | |
$ | 49,233,077 | | |
$ | | | |
$ | | | |
$ | | | |
|
Subordinated notes payable | |
| 11,455,425 | | |
| 3,709,799 | | |
| 7,403,137 | | |
| 342,489 | | |
| | | |
|
Capital lease obligations | |
| 13,518 | | |
| 13,518 | | |
| | | |
| | | |
| | | |
|
Operating lease obligations | |
| 151,823 | | |
| 107,326 | | |
| 44,497 | | |
| | | |
| | | |
|
Purchase obligations | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Other long-term obligations | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Total contractual obligations | |
$ | 60,853,843 | | |
$ | 53,063,720 | | |
$ | 7,447,634 | | |
$ | 342,489 | | |
$ | | | |
****
|
(1) | Although
the maturity of this line of credit is September 25, 2028, the Company repays principal amounts
on its line of credit daily in the normal course of business. Net cash receipts are deposited
into a locked account with its primary lender to pay down the principal balance on a daily
basis. | |
****
****
****
**CRITICAL ACCOUNTING POLICIES AND ESTIMATES**
We consider the following
to be our most critical accounting policy because it involves critical accounting estimates and a significant degree of management judgment:
*Allowance for credit losses*
We are subject to the risk
of loss associated with our borrowers inability to fulfill their payment obligations, the risk that we will not collect sufficient
unearned premium refunds on the cancelled policies on the defaulted loans to fully cover the unpaid loan principal and the risk that payments
due us from insurance agents and brokers will not be paid.
In developing a measurement
of credit loss, institutions are required to segment financial assets into pools that share similar risk characteristics. The Company
retains a third-party service provider to analyze its loan portfolio and create a financial model to better estimate its allowance for
credit losses within the context of ASC 326, Financial Instruments Credit Losses. Management, along with their service
provider, performs an annual analysis to assist with the determination process of how financial assets should be segregated by risk. Based
on this internal risk analysis performed on the Companys historical datasets, assets are designated into asset classes based on
asset codes and other credit quality indicators to provide structure based on similar risk characteristics or areas of risk concentration.
Management, at the recommendation of the service provider, updated its allowance estimation model by including portfolio segmentation
and the application of a separate methodology for each portfolio segment. The Company classifies its portfolio into two segments, (1)
Due from Insured and (2) Due from Insurance Carrier. The segmentation is based on the respective payment and risk characteristics of each
portfolio segment. The Company develops a systematic methodology to determine its allowance for credit losses at the portfolio segment
level.
| 21 | |
| | |
The Company utilized the vintage
Probability of Default (PD) method for determining expected future credit losses for the Due from Insured portfolio segment. PD is a measure
of the likelihood that a borrower will default on an asset or other financial obligation. Default refers to the failure by the borrower
to make scheduled payments. Defaults are tracked historically by the percentage of assets in default to assets remaining in the pool by
vintage cohort based on month after origination. Additionally, Loss Given Default (LGD) is a measure of the expected loss on a loan or
asset in the event of default by the borrower. In other words, it is the amount of money that a lender is likely to lose if the borrower
fails to make scheduled payments on the asset. The expectation of future defaults and loss given default are used as the basis for the
allowance for credit losses on each asset by segment. The asset level ACLs are then aggregated by asset segment for reporting purposes.
The Company utilized the reporting
period loss rate discounted cash flow method for determining expected future credit losses for the Due from Insurance Carrier portfolio
segment. In a DCF model, projected cash flows by asset are adjusted for charge-offs, prepayments and amortization are discounted to their
present value using the effective interest rate. The effective interest rate used in a DCF model is based on the stated rate that is adjusted
for deferred fees and costs, and premiums and discounts. The technique considers future cash flows, adjusted for potential charge-off
and prepayment activity, based on the Companys own historical experience. The difference between the discounted cash flow and the
current amortized cost basis of the asset represents the allowance for credit losses (ACL). These asset-level ACLs are then aggregated
for reporting purposes at the segment level. In a reporting period loss rate model, historical data is viewed from an historical reporting
period perspective and grouped into segments that share similar characteristics, such as asset type, and credit quality. This allows the
model to capture the unique cash flow profile of each segment over the contractual term of each pool.
**
*Stock-Based Compensation*
**
We account for stock-based
compensation by measuring and recognizing as compensation expense the fair value of all share-based payment awards made to directors,
executives, employees and consultants, including employee stock options related to our 2019 Equity Incentive Plan and stock warrants based
on estimated grant date fair values. The determination of fair value involves a number of significant estimates. We use the Black Scholes
option pricing model to estimate the value of employee stock options and stock warrants, which requires a number of assumptions to determine
the model inputs. These include the expected volatility of our stock and employee exercise behavior which are based expectations of future
developments over the term of the option.
|
ITEM7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | |
Not required.
|
ITEM8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | |
See Item 15 Exhibits and Financial Statement
Schedules of this filing.
|
ITEM9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | |
On April 18, 2025, Standard Premium Finance Holdings,
Inc., a Florida corporation (the Company), received the resignation of Assurance Dimensions, LLC as our independent registered
public accountant, effective immediately. The resignation of Assurance Dimensions, LLC was approved by the Audit Committee of the Board
of Directors.
The reports of Assurance Dimensions, LLC on the
Companys financial statements for the years ended December 31, 2024 and 2023 did not contain an adverse opinion or disclaimer of
opinion, and such reports were not qualified or modified as to uncertainty, audit scope, or accounting principle.
During the years ended December 31, 2024 and 2023
and the subsequent interim period through April 18, 2025, the Company has not had any disagreements with Assurance Dimensions, LLC on
any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements,
if not resolved to Assurance Dimensions, LLCs satisfaction, would have caused them to make reference thereto in their reports on
the Companys consolidated financial statements for such periods.
During the years ended December 31, 2024 and 2023
and the subsequent interim period through April 18, 2025, there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation
S-K.
The Company provided Assurance
Dimensions, LLC with a copy of the disclosures in the Current Report on Form 8-K filed on April 21, 2025 (the Report) prior
to the time the Report was filed with the SEC. The Company requested that Assurance Dimensions, LLC furnish a letter addressed to the
SEC stating whether or not it agrees with the statements made herein. A copy of Assurance Dimensions, LLCs letter, dated April
18, 2025, is attached as Exhibit 16.1 to the Current Report on Form 8-K filed on April 21, 2025.
| 22 | |
| | |
On April 21, 2025, the Audit
Committee of the Board of Directors of the Company engaged Stephano Slack, LLC to serve as the Companys independent registered
public accounting firm.
During the two most recent fiscal years ended
December 31, 2024 and 2023 and through the date the Company selected Stephano Slack, LLC as its independent registered public accounting
firm, neither the Company nor anyone on behalf of the Company consulted Stephano Slack, LLC regarding any accounting or auditing issues
involving the Company, including (i) the application of accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the Companys financial statements, or (ii) any matter that was the subject
of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K of the Securities Exchange Act of 1934, as amended,
and the related instructions to Item 304 of Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation
S-K).
|
ITEM9A. |
CONTROLS AND PROCEDURES | |
**Evaluation of Disclosure
Controls and Procedures**
As
required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2025. Our disclosure controls
and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file
or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal
financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the SEC. Based upon the evaluation, our principal executive officer
and principal financial officer have concluded that our disclosure controls and procedures were effective at December 31, 2025 at the
reasonable assurance level.
**Managements
Report on Internal Control over Financial Reporting**
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f)
under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of December 31,
2025. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission on Internal Control-Integrated Framework (2013 framework). Our management has concluded that our internal control over financial
reporting was effective as of December 31, 2025 based on these criteria. This annual report does not include an attestation report of
our independent registered public accounting firm regarding internal control over financial reporting. Managements report was not
subject to attestation by our independent registered public accounting firm pursuant to section 404(c) of the Sarbanes-Oxley Act of 2002,
as amended, that permits the Company, as a smaller reporting company, to provide only managements report in this annual report.
**Changes in Internal
Control Over Financial Reporting**
There have been no changes
in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our fiscal
quarter ended December 31, 2025 that have materially affected or are reasonably likely to materially affect our internal control over
financial reporting.
|
ITEM9B. |
OTHER INFORMATION | |
**Insider Adoption or
Termination of Trading Arrangements**
During the fiscal quarter
ended December 31, 2025, none of our directors or officers informed us of the adoption, modification, or termination of a Rule
10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as those terms are defined in Regulation S-K,
Item 408.
|
ITEM9C. |
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | |
None.
****
| 23 | |
| | |
**PART III**
|
ITEM10. |
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE | |
The information required
by this item will be included in the Companys definitive proxy statement to be filed with the SEC within 120 days after December
31, 2025, in connection with the solicitation of proxies for the Companys 2026 annual meeting of shareholders (2026 Proxy
Statement), and is incorporated herein by reference.
|
ITEM 11. |
EXECUTIVE COMPENSATION | |
****
The information required
by this Item will be included in the 2026 Proxy Statement, and is incorporated herein by reference.
|
ITEM12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | |
The information required
by this Item will be included in the 2026 Proxy Statement, and is incorporated herein by reference.
|
ITEM13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | |
The information required
by this Item will be included in the 2026 Proxy Statement, and is incorporated herein by reference.
|
ITEM14. |
PRINCIPAL ACCOUNTANT FEES AND SERVICES | |
The information required
by this Item will be included in the 2026 Proxy Statement, and is incorporated herein by reference.
| 24 | |
| | |
|
ITEM15. |
EXHIBIT AND FINANCIAL STATEMENT SCHEDULES | |
**(a) Documents filed
as part of this report**
**(1) All financial
statements**
****
****
****
|
The following financial statements are filed as part of this report: |
| |
|
Report of Independent Registered Public Accounting Firm (PCAOB ID #3523) |
F-2 | |
|
Report of Independent Registered Public Accounting Firm (PCAOB ID #5036) |
F-3 | |
|
CONSOLIDATED FINANCIAL STATEMENTS: |
|
|
Consolidated Balance Sheets as of December 31, 2025 and 2024 |
F-4 | |
|
Consolidated Statements of Operations for the years ended December 31, 2025 and 2024 |
F-5 | |
|
Consolidated Statements of Changes in Stockholders Equity for the years ended December 31, 2025 and 2024 |
F-6 | |
|
Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 |
F-7 | |
|
Notes to Consolidated Financial Statements |
F-9 | |
****
**Exhibit Index**
****
|
Exhibit Number |
Description
| |
|
2.1 |
Agreement of Share Exchange dated as of March 22, 2017 by and between Registrant, Standard Premium Finance Management Corporation and the shareholders of Standard Premium Finance Management Corporation. (Incorporated by reference to Exhibit 2.1 to Registrant's Registration Statement on Form 10 filed on January 19, 2021) | |
|
3.1 |
Articles of Incorporation of Registrant filed May 12, 2016. (Incorporated by reference to Exhibit 3.1 to Registrant's Registration Statement on Form 10 filed on January 19, 2021) | |
|
3.2 |
Articles of Amendment to Registrants Articles of Incorporation filed May 31, 2016. (Incorporated by reference to Exhibit 3.2 to Registrant's Registration Statement on Form 10 filed on January 19, 2021) | |
|
3.3 |
Articles of Amendment to Registrants Articles of Incorporation filed May 17, 2017. (Incorporated by reference to Exhibit 3.3 to Registrant's Registration Statement on Form 10 filed on January 19, 2021) | |
|
3.4 |
Articles of Amendment to Registrants Articles of Incorporation filed January 8, 2020. (Incorporated by reference to Exhibit 3.4 to Registrant's Registration Statement on Form 10-Q filed on August 12, 2025) | |
|
3.5 |
By-laws of Registrant. (Incorporated by reference to Exhibit 3.4 to Registrant's Registration Statement on Form 10 filed on January 19, 2021) | |
|
4.1
|
Description of Securities. (Incorporated by reference to Exhibit 4.1 to Registrants Annual Report on Form 10-K filed on March 17, 2023) | |
|
10.1* |
2019 Equity Incentive Plan. (Incorporated by reference to Exhibit 10.1 to Registrant's Registration Statement on Form 10 filed on January 19, 2021) | |
|
10.2* |
Form of Employee Incentive Stock Option Award Agreement. (Incorporated by reference to Exhibit 10.2 to Registrant's Registration Statement on Form 10 filed on January 19, 2021) | |
|
10.3* |
Form
of Warrant to Purchase Common Stock. $4.00 (Incorporated by reference to Exhibit 10.3(a) to Registrant's Registration Statement on Form 10 filed on January 19, 2021) | |
|
10.4 |
Lease Agreement dated March 1, 2024 between Registrant and Marlenko Acquisitions, LLC. (Incorporated by reference to Exhibit 10.7 to Registrants Annual Report on Form 10-K filed on March 15, 2024) | |
|
10.5* |
Schedule of Employee Incentive Stock Options issued on March 1, 2020 and June 29, 2022. (Incorporated by reference to Exhibit 10.7 to Registrants Annual Report on Form 10-K filed on March 17, 2023) | |
|
10.6 |
Loan Agreement dated February 3, 2021 among Standard Premium Finance Management Corporation and First Horizon Bank. (Incorporated by reference to Exhibit 10.9 to Amendment No. 1 to Registrant's Registration Statement on Form 10 filed on March 2, 2021) | |
|
10.7 |
First Amendment to Loan Agreement dated October 5, 2021 among Standard Premium Finance Management Corporation and First Horizon Bank. (Incorporated by reference to Exhibit 10.9 to Registrants Annual Report on Form 10-K filed on March 17, 2023) | |
|
10.8 |
Second Amendment to Loan Agreement dated November 30, 2022 among Standard Premium Finance Management Corporation and First Horizon Bank. (Incorporated by reference to Exhibit 10.10 to Registrants Annual Report on Form 10-K filed on March 17, 2023) | |
|
10.9 |
Third
Amendment to Loan Agreement dated November 14, 2023 among Standard Premium Finance Management Corporation and First Horizon Bank
(Incorporated by reference to Exhibit 10.12 to Registrants Annual Report on Form 10-K filed on March 15, 2024). | |
|
10.10 |
Fourth Amendment to Loan Agreement dated May 21, 2025 among Standard Premium Finance Management Corporation and First Horizon Bank. (Incorporated by reference to Exhibit 10.1 to Registrants Current Report on Form 8-K filed on May 28, 2025) | |
| 25 | |
| | |
|
10.11 |
Fifth Amendment to Loan Agreement and Omnibus Amendment to Loan Documents dated September 25, 2025 among Standard Premium Finance Management Corporation and First Horizon Bank. (Incorporated by reference to Exhibit 10.1 to Registrants Current Report on Form 8-K filed on October 1, 2025) | |
|
10.12* |
Amended and Restated Employment Agreement dated March 31, 2025 between Standard Premium Finance Holdings, Inc. and William Koppelmann. (Incorporated by reference to Exhibit 10.1 of Registrants Current Report on Form 8-K filed April 2, 2025) | |
|
10.13* |
Performance-Based Cash Award Agreement dated March 31, 2025 between Standard Premium Finance Holdings, Inc. and William Koppelmann. (Incorporated by reference to Exhibit 10.2 to Registrants Current Report on Form 8-K filed April 2, 2025) | |
|
10.14* |
Performance-Based Restricted Stock Unit Agreement dated March 31, 2025 between Standard Premium Finance Holdings, Inc. and William Koppelmann. (Incorporated by reference to Exhibit 10.3 to Registrants Current Report on Form 8-K filed April 2, 2025) | |
|
10.15* |
Restricted Stock Unit Agreement dated March 31, 2025 between Standard Premium Finance Holdings, Inc. and William Koppelmann. (Incorporated by reference to Exhibit 10.4 to Registrants Current Report on Form 8-K filed April 2, 2025) | |
|
10.16* |
Amendment to the Amended and Restated Employment Agreement dated February 11, 2026 between Standard Premium Finance Holdings, Inc. and William Koppelmann. | |
|
10.17* |
Performance-Based Cash Award Agreement dated February 11, 2026 between Standard Premium Finance Holdings, Inc. and William Koppelmann. | |
|
10.18* |
Performance-Based Restricted Stock Unit Agreement dated February 11, 2026 between Standard Premium Finance Holdings, Inc. and William Koppelmann. | |
|
10.19* |
Amended and Restated Employment Agreement dated March 31, 2025 between Standard Premium Finance Holdings, Inc. and Brian Krogol. (Incorporated by reference to Exhibit 10.5 to Registrants Current Report on Form 8-K filed April 2, 2025) | |
|
10.20* |
Performance-Based Cash Award Agreement dated March 31, 2025 between Standard Premium Finance Holdings, Inc. and Brian Krogol. (Incorporated by reference to Exhibit 10.6 to Registrants Current Report on Form 8-K filed April 2, 2025) | |
|
10.21* |
Performance-Based Restricted Stock Unit Agreement dated March 31, 2025 between Standard Premium Finance Holdings, Inc. and Brian Krogol. (Incorporated by reference to Exhibit 10.7 to Registrants Current Report on Form 8-K filed April 2, 2025) | |
|
10.22* |
Restricted Stock Unit Agreement dated March 31, 2025 between Standard Premium Finance Holdings, Inc. and Brian Krogol. (Incorporated by reference to Exhibit 10.8 to Registrants Current Report on Form 8-K filed April 2, 2025) | |
|
10.23* |
Amendment to the Amended and Restated Employment Agreement dated February 11, 2026 between Standard Premium Finance Holdings, Inc. and Brian Krogol. | |
|
10.24* |
Performance-Based Cash Award Agreement dated February 11, 2026 between Standard Premium Finance Holdings, Inc. and Brian Krogol. | |
|
10.25* |
Performance-Based Restricted Stock Unit Agreement dated February 11, 2026 between Standard Premium Finance Holdings, Inc. and Brian Krogol. | |
|
10.26 |
Procedures
and Guidelines Governing Securities Transactions by Company Personnel
(Incorporated by reference to Exhibit 10.15 to Registrants Annual Report on Form 10-K filed on March 15, 2024) | |
|
14
|
Code of Ethics. (Incorporated by reference to Exhibit 14.1 to Registrants Annual Report on Form 10-K filed on March 31, 2021) | |
|
19 |
Procedures
and Guidelines Governing Securities Transactions by Company Personnel (Incorporated by reference
to Exhibit 10.15 to Registrants Annual Report on Form 10-K filed on March 15, 2024) | |
|
21 |
Subsidiaries of the Registrant | |
|
31.1 |
Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer. | |
|
31.2 |
Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer. | |
|
32.1
|
Section 1350 Certifications of Principal Executive Officer and Principal Financial Officer. | |
______________________________________
* Indicates a management contract
or compensatory plan or arrangement.
|
ITEM16. |
FORM 10-K SUMMARY | |
Not Applicable.
| 26 | |
| | |
**SIGNATURES**
Pursuant to the requirements
of Section 13 or 15(d) 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.
|
|
|
|
|
|
|
|
|
| |
|
Date: March 20, 2026 |
| |
|
|
|
| |
|
STANDARD PREMIUM FINANCE HOLDINGS, INC. |
| |
|
|
|
| |
|
By: |
/s/ William Koppelmann |
| |
|
|
William Koppelmann |
| |
|
|
Chairman, President and Chief Executive Officer
(Principal Executive Officer) |
| |
|
|
|
| |
|
By: |
/s/ Brian Krogol |
| |
|
|
Brian Krogol |
| |
|
|
Chief Financial Officer
(Principal Financial Officer) |
| |
|
| |
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated
on March 20, 2026.
|
|
|
|
|
|
|
|
|
| |
|
Signature |
|
Title | |
|
|
|
| |
|
/s/ William Koppelmann |
|
Chairman, President, Chief Executive Officer, Director | |
|
William Koppelmann |
|
(Principal Executive Officer) | |
|
|
|
| |
|
/s/ Brian Krogol |
|
Chief
Financial Officer and Director | |
|
Brian Krogol |
|
(Principal Financial Officer) | |
|
|
|
| |
|
/s/ Scott Howell, MD |
|
Director | |
|
Scott
Howell, MD |
|
|
|
|
|
| |
|
/s/ Mark E.
Kutner, MD |
|
Director | |
|
Mark
E. Kutner, MD |
|
|
|
|
|
| |
|
/s/ Christopher
Perrucci |
|
Director | |
|
Christopher
Perrucci |
|
|
|
|
|
| |
|
/s/ James Wall |
|
Director | |
|
James Wall |
|
| |
|
|
|
| |
|
/s/ Carl C. Hoechner |
|
Director | |
|
Carl C. Hoechner |
|
|
|
| |
27
| | |
| | |
**STANDARD PREMIUM
FINANCE HOLDINGS, INC. AND SUBSIDIARY**
**CONSOLIDATED
FINANCIAL STATEMENTS**
**FOR
THE YEARS ENDED DECEMBER 31, 2025 AND 2024**
****
| | |
| | |
**Standard
Premium Finance Holdings, Inc. and Subsidiary**
**Table
of Contents**
|
Report of Independent Registered Public Accounting Firm (PCAOB ID #3523) | |
F-2 | | |
|
Report of Independent Registered Public Accounting Firm (PCAOB ID: 5036) | |
F-3 | | |
|
CONSOLIDATED FINANCIAL STATEMENTS: | |
| | |
|
Consolidated Balance Sheets as of December 31, 2025 and 2024 | |
| F-4 | | |
|
Consolidated Statements of Operations for the years ended December 31, 2025 and 2024 | |
| F56 | | |
|
Consolidated Statements of Changes in Stockholders Equity for the years ended December 31, 2025 and 2024 | |
| F-6 | | |
|
Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 | |
| F-7 | | |
|
Notes to Consolidated Financial Statements | |
| F-8
F-25 | | |
| F-1 | |
| | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and
Stockholders of Standard Premium Finance Holdings, Inc.
****
**Opinion on the Financial Statements**
We have audited the accompanying consolidated balance sheet of Standard
Premium Finance Holdings, Inc. and Subsidiary (the Company) as of December 31, 2025, and the related consolidated statements of operations,
stockholders equity and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the
consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the
year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
****
**Basis for Opinion**
These consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on the Companys consolidated financial statements based
on our audit. 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 audit 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 consolidated 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 audit, 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 Companys internal
control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material
misstatement of the consolidated 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 consolidated financial
statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for
our opinion.
****
|
| |
|
/s/ Stephano Slack LLC | |
|
We have served as the Companys auditor since 2025
Wayne, Pennsylvania | |
|
March
20, 2026 | |
| F-2 | |
| | |
*
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and
Stockholders of Standard Premium Finance Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying
consolidated balance sheet of Standard Premium Finance Holdings, Inc. and Subsidiary (the Company) as of December 31, 2024, and the related
consolidated statements of operations, stockholders equity and cash flows for the year ended December 31, 2024, and the related
notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations
and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States
of America.
**Basis for Opinion**
These consolidated financial statements
are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys consolidated
financial statements based on our audit. 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 audit 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 consolidated 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 audit, 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 Companys internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures
to assess the risks of material misstatement of the consolidated 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
consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provide
a reasonable basis for our opinion.
**Critical Audit Matters**
The critical audit matters to be
communicated below, 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. The communication of critical audit matters does not alter
in any way our opinion on the financial statements taken as a whole and we are not, by communicating the critical audit matters below,
providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Description of the Matter*
During our audit procedures, we identified
that there were significant premium finance contracts accounts receivable as of December 31, 2024 and therefore there was a question over
the adequacy of the allowance for credit losses.
*How we addressed the matter in
our audit*
The primary procedures we performed
to address this critical audit matter included examining the premium finance contracts and related receivable aging, evaluating managements
assessment of the collectability of accounts receivable, reviewing historical trends and write-offs, and testing the collection of outstanding
balances at year-end. Based on our procedures we deemed the Companys treatment of premium finance contracts and related receivable
and the corresponding allowance for credit losses to be materially appropriate as of December 31, 2024.
|
| |
|
/s/
Assurance Dimensions | |
|
We
have served as the Companys auditor since 2022. | |
|
Coral
Springs, Florida | |
|
March
10, 2025 | |
**ASSURANCE
DIMENSIONS,****LLC**
**also d/b/a McNAMARA and
ASSOCIATES, LLC**
**TAMPA BAY**: 4920
W Cypress Street, Suite 102 | Tampa, FL 33607 | Office: 813.443.5048 | Fax: 813.443.5053
**JACKSONVILLE**: 7800
Belfort Parkway, Suite 290 | Jacksonville, FL 32256 | Office: 888.410.2323 | Fax: 813.443.5053
**ORLANDO:** 1800 Pembrook
Drive, Suite 300 | Orlando, FL 32810 | Office: 888.410.2323 | Fax: 813.443.5053
**SOUTH FLORIDA**: 3111
N. University Drive, Suite 621 | Coral Springs, FL 33065 | Office: 754.800.3400 | Fax: 813.443.5053
ww.assurancedimensions.com
Assurance Dimensions is the brand name under
which Assurance Dimensions, LLC including its subsidiary McNamara and Associates, LLC (referred together as AD LLC) and
AbitOs Advisors, LLC ("AbitOs Advisors"), provide professional services. AD LLC and AbitOs Advisors practice as an alternative
practice structure in accordance with the AICPA Code of Professional Conduct and applicable laws, regulations, and professional standards.
AD LLC is a licensed independent CPA firm that provides attest services to its clients, and AbitOs Advisors provide tax and business consulting
services to their clients. AbitOs Advisors, and its subsidiary entities are not licensed CPA firms.
| F-3 | |
| | |
**Standard Premium Finance Holdings, Inc. and
Subsidiaries**
**Consolidated Balance Sheets**
**December 31, 2025 and 2024**
|
| |
| | |
| | |
|
| |
December 31, | | |
December 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
ASSETS | |
| | |
| | |
|
CURRENT ASSETS | |
| | | |
| | | |
|
Cash | |
$ | 10,970 | | |
$ | 1,716 | | |
|
Premium finance contracts and related receivable, net of allowance for credit losses of $2,202,768 and $1,969,007 at December 31, 2025 and December 31, 2024, respectively | |
| 72,837,383 | | |
| 63,857,557 | | |
|
Prepaid expenses and other current assets | |
| 347,905 | | |
| 414,411 | | |
|
TOTAL CURRENT ASSETS | |
| 73,196,258 | | |
| 64,273,684 | | |
|
| |
| | | |
| | | |
|
Property and equipment, net | |
| 115,594 | | |
| 134,179 | | |
|
Operating lease assets | |
| 151,823 | | |
| 203,119 | | |
|
Finance lease assets | |
| 12,152 | | |
| 25,408 | | |
|
| |
| | | |
| | | |
|
OTHER ASSETS | |
| | | |
| | | |
|
Cash surrender value of life insurance | |
| 766,130 | | |
| 705,593 | | |
|
Deferred tax asset | |
| 575,000 | | |
| 505,000 | | |
|
TOTAL OTHER ASSETS | |
| 1,341,130 | | |
| 1,210,593 | | |
|
| |
| | | |
| | | |
|
TOTAL ASSETS | |
$ | 74,816,957 | | |
$ | 65,846,983 | | |
|
| |
| | | |
| | | |
|
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | | |
|
CURRENT LIABILITIES | |
| | | |
| | | |
|
Cash overdraft | |
$ | 497,169 | | |
$ | 328,421 | | |
|
Line of credit, net | |
| 49,233,077 | | |
| 41,216,068 | | |
|
Drafts payable | |
| 2,074,866 | | |
| 2,080,810 | | |
|
Note payable - current portion | |
| 2,524,799 | | |
| 3,616,940 | | |
|
Note payable - stockholders and related parties - current portion | |
| 1,185,000 | | |
| 376,000 | | |
|
Other loans - current portion | |
| | | |
| 45,705 | | |
|
Operating lease obligation - current portion | |
| 107,326 | | |
| 114,230 | | |
|
Finance lease obligation - current portion | |
| 13,518 | | |
| 13,875 | | |
|
Accrued expenses and other current liabilities | |
| 2,436,432 | | |
| 1,915,223 | | |
|
TOTAL CURRENT LIABILITIES | |
| 58,072,187 | | |
| 49,707,272 | | |
|
| |
| | | |
| | | |
|
LONG-TERM LIABILITIES | |
| | | |
| | | |
|
Note payable, net of current portion | |
| 6,302,126 | | |
| 5,376,557 | | |
|
Note payable - stockholders and related parties, net of current portion | |
| 1,443,500 | | |
| 2,663,040 | | |
|
Life insurance policy loan | |
| 494,428 | | |
| 646,011 | | |
|
Operating lease obligation, net of current portion | |
| 44,497 | | |
| 88,888 | | |
|
Finance lease obligation, net of current portion | |
| | | |
| 13,518 | | |
|
TOTAL LONG-TERM LIABILITIES | |
| 8,284,551 | | |
| 8,788,014 | | |
|
| |
| | | |
| | | |
|
TOTAL LIABILITIES | |
| 66,356,738 | | |
| 58,495,286 | | |
|
| |
| | | |
| | | |
|
COMMITMENTS AND CONTINGENCIES (see Note 16) | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
STOCKHOLDERS' EQUITY: | |
| | | |
| | | |
|
Preferred stock, par value $0.001 per share; 20 million shares authorized, 600,000 shares designated as Series A - convertible, 166,000 issued and outstanding at December 31, 2025 and December 31, 2024 | |
| 166 | | |
| 166 | | |
|
Common stock, par value $0.001 per share; 100 million shares authorized, 3,001,216 shares issued and outstanding at December 31, 2025 and December 31, 2024 | |
| 3,001 | | |
| 3,001 | | |
|
Additional paid in capital | |
| 3,513,577 | | |
| 3,502,815 | | |
|
Retained earnings | |
| 4,943,475 | | |
| 3,845,715 | | |
|
TOTAL STOCKHOLDERS' EQUITY | |
| 8,460,219 | | |
| 7,351,697 | | |
|
| |
| | | |
| | | |
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | |
$ | 74,816,957 | | |
$ | 65,846,983 | | |
See accompanying notes to the consolidated financial
statements
| F-4 | |
| | |
**Standard Premium Finance Holdings, Inc. and
Subsidiaries**
**Consolidated Statements of Operations**
**For the Years Ended December 31, 2025 and 2024**
|
| |
| | |
| | |
|
| |
For the
Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
REVENUES | |
| | |
| | |
|
Finance charges | |
$ | 10,979,188 | | |
$ | 10,549,453 | | |
|
Late charges | |
| 1,129,309 | | |
| 1,209,614 | | |
|
Origination fees | |
| 361,273 | | |
| 384,076 | | |
|
| |
| | | |
| | | |
|
TOTAL REVENUES | |
| 12,469,770 | | |
| 12,143,143 | | |
|
| |
| | | |
| | | |
|
OPERATING COSTS AND EXPENSES | |
| | | |
| | | |
|
Interest | |
| 4,106,382 | | |
| 4,407,653 | | |
|
Salaries and wages | |
| 2,206,730 | | |
| 2,118,609 | | |
|
Commissions | |
| 1,797,196 | | |
| 1,449,676 | | |
|
Provision for credit losses | |
| 1,261,034 | | |
| 1,254,525 | | |
|
Professional fees | |
| 281,944 | | |
| 372,162 | | |
|
Postage | |
| 123,324 | | |
| 113,529 | | |
|
Insurance | |
| 174,188 | | |
| 170,959 | | |
|
Other operating expenses | |
| 926,717 | | |
| 935,891 | | |
|
| |
| | | |
| | | |
|
TOTAL COSTS AND EXPENSES | |
| 10,877,515 | | |
| 10,823,004 | | |
|
| |
| | | |
| | | |
|
INCOME BEFORE INCOME TAXES | |
| 1,592,255 | | |
| 1,320,139 | | |
|
| |
| | | |
| | | |
|
PROVISION FOR INCOME TAXES | |
| 378,295 | | |
| 340,146 | | |
|
| |
| | | |
| | | |
|
NET INCOME | |
| 1,213,960 | | |
| 979,993 | | |
|
| |
| | | |
| | | |
|
PREFERRED SHARE DIVIDENDS | |
| (116,200 | ) | |
| (116,200 | ) | |
|
| |
| | | |
| | | |
|
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS | |
$ | 1,097,760 | | |
$ | 863,793 | | |
|
| |
| | | |
| | | |
|
Net income per share attributable to common stockholders | |
| | | |
| | | |
|
Basic | |
$ | 0.37 | | |
$ | 0.29 | | |
|
Diluted | |
$ | 0.29 | | |
$ | 0.24 | | |
|
| |
| | | |
| | | |
|
Weighted average common shares outstanding | |
| | | |
| | | |
|
Basic | |
| 3,001,216 | | |
| 2,942,797 | | |
|
Diluted | |
| 4,192,439 | | |
| 4,050,262 | | |
See accompanying notes to the consolidated financial
statements
| F-5 | |
| | |
**Standard Premium Finance Holdings, Inc. and
Subsidiaries**
**Consolidated Statements of Changes in Stockholders
Equity**
**For the Years Ended December 31, 2025 and 2024**
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| |
Series
A Preferred Stock | | |
Common
Stock | | |
Additional
Paid-in | | |
Retained | | |
Total
Stockholders' | | |
|
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Earnings | | |
Equity | | |
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
BALANCE AT DECEMBER 31, 2023 | |
| 166,000 | | |
$ | 166 | | |
| 2,905,016 | | |
$ | 2,905 | | |
$ | 3,411,851 | | |
$ | 2,981,922 | | |
$ | 6,396,844 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Options issued for services | |
| | | |
| | | |
| | | |
| | | |
| 14,100 | | |
| | | |
| 14,100 | | |
|
Common stock issued in exchange for notes payable | |
| | | |
| | | |
| 96,200 | | |
| 96 | | |
| 76,864 | | |
| | | |
| 76,960 | | |
|
Dividends paid on Series A convertible preferred stock | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (116,200 | ) | |
| (116,200 | ) | |
|
Net income | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 979,993 | | |
| 979,993 | | |
|
BALANCE AT DECEMBER 31, 2024 | |
| 166,000 | | |
$ | 166 | | |
| 3,001,216 | | |
$ | 3,001 | | |
$ | 3,502,815 | | |
$ | 3,845,715 | | |
$ | 7,351,697 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Stock compensation | |
| | | |
| | | |
| | | |
| | | |
| 12,975 | | |
| | | |
| 12,975 | | |
|
Treasury stock | |
| | | |
| | | |
| | | |
| | | |
| (2,213 | ) | |
| | | |
| (2,213 | ) | |
|
Dividends paid on Series A convertible preferred stock | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (116,200 | ) | |
| (116,200 | ) | |
|
Net income | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 1,213,960 | | |
| 1,213,960 | | |
|
BALANCE AT DECEMBER 31, 2025 | |
| 166,000 | | |
$ | 166 | | |
| 3,001,216 | | |
$ | 3,001 | | |
$ | 3,513,577 | | |
$ | 4,943,475 | | |
$ | 8,460,219 | | |
See accompanying notes to the consolidated financial
statements
| F-6 | |
| | |
**Standard Premium Finance Holdings, Inc. and
Subsidiaries**
**Consolidated Statements of Cash Flows**
**For the Years Ended December 31, 2025 and 2024**
|
| |
| | |
| | |
|
| |
For the
Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
CASH FLOW FROM OPERATING ACTIVITIES: | |
| | | |
| | | |
|
NET INCOME | |
$ | 1,213,960 | | |
$ | 979,993 | | |
|
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: | |
| | | |
| | | |
|
Depreciation | |
| 46,501 | | |
| 40,477 | | |
|
Amortization of right to use asset - operating lease | |
| 51,296 | | |
| 113,056 | | |
|
Amortization of finance lease asset | |
| 13,256 | | |
| 13,256 | | |
|
Provision for credit losses | |
| 1,261,034 | | |
| 1,254,525 | | |
|
Amortization of loan origination fees | |
| 32,529 | | |
| 1,576 | | |
|
Stock compensation | |
| 12,975 | | |
| 14,100 | | |
|
Changes in operating assets and liabilities: | |
| | | |
| | | |
|
(Increase)/Decrease in prepaid expenses and other current assets | |
| 53,813 | | |
| (107,205 | ) | |
|
(Increase)/Decrease in deferred tax asset, net | |
| (70,000 | ) | |
| (114,000 | ) | |
|
Increase/(Decrease) in drafts payable | |
| 6,749 | | |
| (600,549 | ) | |
|
Increase/(Decrease) in accrued expenses and other current liabilities | |
| 312,781 | | |
| 360,179 | | |
|
Increase/(Decrease) in operating lease liability | |
| (51,295 | ) | |
| (113,057 | ) | |
|
Net cash provided by operating activities | |
| 2,883,599 | | |
| 1,842,351 | | |
|
| |
| | | |
| | | |
|
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | | |
|
Disbursements under premium finance contracts receivable, net | |
| (10,032,432 | ) | |
| (4,372,383 | ) | |
|
Payments made on cash surrender value of life insurance | |
| (60,537 | ) | |
| (51,279 | ) | |
|
Sale of property and equipment | |
| 5,500 | | |
| 19,571 | | |
|
Purchases of property and equipment | |
| (33,416 | ) | |
| (71,727 | ) | |
|
Net cash used in investing activities | |
| (10,120,885 | ) | |
| (4,475,818 | ) | |
|
| |
| | | |
| | | |
|
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | | |
|
Cash overdraft | |
| 168,748 | | |
| 159,878 | | |
|
Proceeds of line of credit, net of repayments | |
| 7,984,480 | | |
| (1,160,223 | ) | |
|
Proceeds (Repayments) from loan on cash surrender value of life insurance | |
| (151,583 | ) | |
| 641,934 | | |
|
Proceeds from notes payable | |
| 720,682 | | |
| 2,269,440 | | |
|
Repayment of notes payable | |
| (887,254 | ) | |
| (131,500 | ) | |
|
Proceeds from notes payable - stockholders and related parties | |
| 79,460 | | |
| 1,028,000 | | |
|
Repayment of notes payable - stockholders and related parties | |
| (490,000 | ) | |
| (10,000 | ) | |
|
Repayment of finance lease obligation | |
| (13,875 | ) | |
| (13,166 | ) | |
|
Proceeds of other loans | |
| | | |
| 43,000 | | |
|
Repayment of other loans | |
| (45,705 | ) | |
| (121,219 | ) | |
|
Purchases of treasury stock | |
| (2,213 | ) | |
| | | |
|
Dividends paid on Series A Convertible Preferred Stock | |
| (116,200 | ) | |
| (116,200 | ) | |
|
Net cash provided by financing activities | |
| 7,246,540 | | |
| 2,589,944 | | |
|
| |
| | | |
| | | |
|
NET CHANGE IN CASH | |
| 9,254 | | |
| (43,523 | ) | |
|
| |
| | | |
| | | |
|
CASH AT THE BEGINNING OF THE PERIOD | |
| 1,716 | | |
| 45,239 | | |
|
| |
| | | |
| | | |
|
CASH AT THE END OF THE PERIOD | |
$ | 10,970 | | |
$ | 1,716 | | |
|
| |
| | | |
| | | |
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | |
| | | |
| | | |
|
Cash paid during the period for: | |
| | | |
| | | |
|
Income taxes | |
$ | 371,493 | | |
$ | 383,842 | | |
|
Interest paid | |
$ | 4,096,339 | | |
$ | 4,448,909 | | |
|
NON-CASH INVESTING AND FINANCING TRANSACTION: | |
| | | |
| | | |
|
Operating lease assets obtained in exchange for lease liabilities | |
$ | | | |
$ | 235,335 | | |
|
Common stock issued in exchange for notes payable | |
$ | | | |
$ | 76,960 | | |
See accompanying notes to the consolidated financial
statements
F-7
| | |
| | |
**Standard Premium Finance Holdings, Inc. and
Subsidiaries**
**Notes to Consolidated Financial Statements**
**December 31, 2025**
**1. Principles of Consolidation and Description
of Business**
****
Standard Premium Finance Holdings, Inc. (SPFX
or the Holdings) was incorporated on May 12, 2016, pursuant to the laws of the State of Florida. SPFX issued 100,000 shares
of common stock to its founder with a fair value of $100 in exchange for services provided.
Standard Premium Finance Management Corporation
(SPFMC) was incorporated on April 23, 1991, pursuant to the laws of the State of Florida, to engage principally in the insurance
premium financing business. SPFMC is a licensed insurance premium finance company in forty-one states. Standard Premium Finance Leasing,
Inc. (SPFL) was incorporated on August 20, 2025, pursuant to the laws of the State of Florida, to engage principally in
leasing arrangements. As of December 31, 2025, SPFL has not engaged in any material activity.
On March 22, 2017, SPFX entered into an
agreement of share exchange with SPFMC and the shareholders of SPFMC common stock to facilitate the formation of SPFX that will own
all of the issued and outstanding shares of SPFMC. The shareholders of SPFMC agreed to exchange SPFMC common stock for newly issued
shares of SPFX common stock. For accounting purposes, this transaction is being accounted for as a merger of entities under common
control and has been treated as a recapitalization of SPFX with SPFMC as the accounting acquirer. The historical financial
statements of the accounting acquirer became the financial statements of the Company. The Company did not recognize goodwill or any
intangible assets in connection with the transaction.
The accompanying consolidated financial statements
include the accounts of SPFX and its wholly-owned subsidiaries SPFMC and SPFL. SPFX and its subsidiaries are collectively referred to
as (the Company). All intercompany balances and transactions have been eliminated in consolidation.
The Company is an emerging growth company (EGC)
as defined in the Jumpstart Our Business Startups Act of 2012. The Company 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 and, accordingly, the Company
adopts new or revised accounting standards on the effective dates applicable to public business entities.
**2. Summary of Significant Accounting Policies**
****
**Revenue Recognition**
Finance charges on insurance premium installment
contracts are initially recorded as unearned interest and are credited to income monthly over the term of the finance agreement. An initial
service fee, where permissible, and the first months interest, on a pro rata basis, are recognized as income at the inception of
a contract. The initial service fee can only be charged once to an insured in a twelve-month period. In accordance with industry practice,
finance charges are recognized as income using the Rule of 78s method of amortizing finance charge income, which does not
materially differ from the interest method of amortizing finance charge income on short term receivables. Late charges are recognized
as income when charged. Unearned interest is netted against Premium Finance Contracts and Related Receivables on the balance sheets for
reporting purposes.
The provisions of Financial Accounting Standards Board
(FASB) Accounting Standards Codification 606, *Revenue from Contracts with Customers* (ASC 606) provide
guidance on the recognition, presentation, and disclosure of revenue in financial statements. Management evaluated ASC 606 and determined
that it is not applicable to the Companys revenue streams. However, the Company follows ASC 835, *Interest*, and ASC 310,
*Receivables*, to recognize its finance charge, late charge, and origination fee revenue as these revenue streams are exempt from
ASC 606.
| F-8 | |
| Standard Premium Finance Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2025 | |
**2. Summary of Significant Accounting Policies (Continued)**
****
**Cash, Cash Equivalents, and Cash Overdraft**
The Company considers short-term interest-bearing
investments with initial maturities of three months or less to be cash equivalents. The Company had $7,815 and $0 in a money market account
at December 31, 2025 and 2024, respectively.
The Company experienced a cash overdraft
of $497,169 and $328,421 in its group of bank accounts at its primary lender as of December 31, 2025 and 2024, respectively. As this group
of bank accounts is funded by the Companys line of credit (see Note 7), overdrafts are an expected part of the cash cycle. The
Company is not charged any fees for overdrafts as the line of credit funds the operating accounts daily. The Company actively manages
its cash balances to minimize unnecessary interest charges.
*Balance sheet presentation and netting policy*
Cash overdrafts are presented as Cash overdraft
within current liabilities in the consolidated balance sheets. The Company does not net cash overdraft balances against cash and cash
equivalents.
*Statement of cash flows classification*
In the consolidated statements of cash flows, changes
in cash overdrafts are presented as Cash overdraft within financing activities because the cash overdrafts are funded daily
through draws on the Companys line of credit and therefore represent a form of short-term financing.
*Consistency*
The Companys presentation and classification
policy for cash overdrafts has been applied consistently for all periods presented.
**Premium Finance Contracts and Related Receivable**
The Company finances insurance premiums on policies
primarily for commercial enterprises. The Company amortizes these loans over the term of each contract, which varies from three to eleven
monthly payments, and manages these loans on a collective basis based on similar risk characteristics. As of December 31, 2025 and 2024,
the portfolio has an amortized cost basis of $76,630,634 and $67,173,975, respectively. Repayment terms are structured such that the contracts
will be repaid within the term of the underlying insurance policy, generally less than one year. The contracts are secured by the unearned
premium of the insurance carrier which is obligated to pay the Company any unearned premium in the event the insurance policy is cancelled
pursuant to the power of attorney contained in the finance contract. As of December 31, 2025 and 2024, the amount of unearned premium
on open and cancelled contracts approximated $105,300,000 and $94,200,000, respectively. The annual percentage interest rates on new contracts
averaged approximately 17.9% and 17.8% during the years ended December 31, 2025 and 2024, respectively.
****
**Allowance for Credit Losses**
In developing a measurement of credit loss, institutions
are required to segment financial assets into pools that share similar risk characteristics. The Company uses ARCSys, a third-party SaaS
platform, to support its allowance for credit losses (ACL) estimation process under ASC 326, Financial Instruments Credit
Losses. Management remains responsible for the selection of methodologies, key assumptions, and the resulting ACL. Management,
leveraging the third-party ARCSys platform, performs its own analysis each reporting period to assist with the determination process
of how financial assets should be segregated by risk. Based on this internal risk analysis performed on the Companys historical
datasets, assets are designated into asset classes based on asset codes and other credit quality indicators to provide structure based
on similar risk characteristics or areas of risk concentration. Management, with support from the ARCSys segmentation module, updated
its allowance estimation model by including portfolio segmentation and the application of a separate methodology for each portfolio segment.
The Company classifies its portfolio into two primary segments: (1) Due from Insured and (2) Due from Insurance Carrier. The segmentation
is based on the respective payment and risk characteristics of each portfolio segment. The Company develops a systematic and repeatable
methodology to determine its allowance for credit losses at the portfolio segment level.
The Company utilized the ARCSys Vintage PD/LGD
model, as defined below, for determining expected future credit losses for the Due from Insured portfolio segment. PD is a measure of
the likelihood that a borrower will default on an asset or other financial obligation over the contractual life of the loan. Default refers
to the failure by the borrower to make scheduled payments. Defaults are tracked historically by the percentage of assets in default to
assets remaining in the pool by vintage cohort based on month after origination. Additionally, Loss Given Default (LGD) is a measure of
the expected loss on a loan or asset in the event of default by the borrower. The expectation of future defaults and loss given default
are used as the basis for the allowance for credit losses on each asset by segment. The asset-level allowances for credit losses are then
aggregated by asset segment for reporting purposes within the ARCSys Disclosure modules.
| F-9 | |
| Standard Premium Finance Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2025 | |
**2. Summary of Significant Accounting Policies (Continued)**
****
The Company utilized the ARCSys Individual Asset
DCF (Discounted Cash Flow) module, as defined below, for determining expected future credit losses for the Due from Insurance Carrier
portfolio segment. In the ARCSys DCF model, projected cash flows by asset are adjusted for expected losses, prepayments, and amortization,
and are discounted to their present value using the effective interest rate. The effective interest rate used in the DCF model is based
on the stated rate that is adjusted for deferred fees and costs, and premiums and discounts. The technique considers future cash flows,
adjusted for potential default and prepayment activity, based on the Company's own historical experience stored within the ARCSys data
warehouse. The difference between the discounted cash flow and the current amortized cost basis of the asset represents the allowance
for credit losses . These asset-level allowances for credit losses are then aggregated for reporting purposes at the segment level. The
ARCSys platform captures the unique cash flow profile of each segment over the remaining contractual term, consistent with the
"Life of Loan" concept required by ASC 326.
*Reasonable and Supportable Forecasting*
When estimating credit losses, management considers
the need to adjust historical segment loss, default, or prepayment information to reflect the extent to which management expects current
conditions and reasonable and supportable forecasts to differ from the conditions that existed for the period over which historical information
was evaluated and utilized in the model.
The Company has established a 12-month reasonable
and supportable forecast period. Management utilizes the ARCSys Q-Factor and Forecasting module, which allows management to evaluate appropriate
macroeconomic variables and environmental factors, and incorporate them into the estimation engine. For the remaining life of the assets
beyond the forecast period, management incorporates a transition to historical loss experience (reversion).
*Off-Balance Sheet Credit Exposures*
In accordance with ASC 326, management has evaluated
the portfolio for off-balance sheet credit exposures. Due to the specific nature of the Companys current financial assets, there
are no applicable off-balance sheet exposures (such as unfunded commitments or lines of credit) that are not unconditionally cancellable.
Consequently, no separate allowance for off-balance sheet credit losses is required at this time.
*Qualitative Adjustments and Environmental Factors*
The adjustments to historical loss information
may be qualitative in nature and should reflect changes related to relevant data which reflect differences in current asset-specific risk
characteristics, such as differences in underwriting standards, portfolio mix, or asset term within a segment at the reporting date.
Management utilizes the ARCSys "Environmental
Factor" framework to document and quantify adjustments for:
|
| Nature and volume of the Companys
financial assets. | |
|
| The volume, trend, and severity
of past-due financial assets, nonaccrual assets, and internal risk rating migrations, work-outs and restructurings. | |
|
| Changes to the underlying value
or liquidity of collateral on financial assets. | |
|
| Managements lending policies
and procedures, including changes in underwriting standards, collections, write-offs and recovery practices. | |
|
| The quality of the credit review
system. | |
|
| The experience, ability, and
depth of lending, investment, and collections management, as well as other relevant staff. | |
|
| The effect of other external
factors, such as competition and regulatory, legal, and technological environments. | |
|
| Actual and expected changes
in the general market condition of either the geographical area or industry in which the Company has exposure. | |
| F-10 | |
| Standard Premium Finance Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2025 | |
**2. Summary of Significant Accounting Policies (Continued)**
|
| Actual and expected changes
in international, national, regional, and local economic and business conditions and developments that affect collectability of financial
assets, including unemployment rates and GDP forecasts. | |
|
| Additionally, concentration
of credit and external factors such as competition, legal, and regulatory requirements are also assessed to refine the overall estimate
of expected credit losses. | |
*Governance and Finalization*
To ensure the integrity of the financial reporting
process, the Company maintains strict governance controls over the allowance for credit losses calculation. At the end of each reporting
period, once management has reviewed and approved the final calculation, the period is finalized within the ARCSys platform. Following
this approval, the period is locked; no further edits or modifications can be made to the methodology, data, or qualitative factors for
that specific period, supporting a robust audit trail and consistency for external reporting.
This comprehensive approach, supported by the
ARCSys audit trail and governance controls, is intended to help ensure that the allowance for credit losses reflects management's best
judgment of future losses based on reasonable and supportable forecasts.
*Allowance for Amounts Due from Agents*
Management separately forms an estimate for the
allowance for credit losses for amounts due from agents. The Company estimates expected credit losses in accordance with ASC 326 using
a historical loss rate methodology applied to pooled receivables that share similar risk characteristics. For this analysis, management
considers historical loss information, updated for current conditions and reasonable and supportable forecasts that affect the expected
collectability of the amortized cost basis pool. Historical loss rates are adjusted through qualitative factors to reflect current economic
conditions and forward-looking information over a reasonable and supportable forecast period. Given the short-term nature of agent receivables,
historical loss experience, as adjusted for current conditions, is considered a reasonable basis for estimating expected credit losses.
The Company utilizes CreditSafe, a credit quality
reporting agency, to monitor agents for forecasts of credit risk. Credit quality information obtained from CreditSafe is considered in
managements qualitative assessment of collectability. As of December 31, 2025 and 2024, the Company did not expect any material
degradation to the credit quality of the agents it currently underwrites or anticipates underwriting in a way that would affect the allowance
for credit losses. Since agent balances are constantly fluctuating through the normal course of business, the Company utilizes agent inactivity,
defined as a minimum of three months without a change in balance, as a key factor when determining the allowance for credit losses. Receivables
from inactive agents are considered to present a higher risk of credit loss and are evaluated accordingly within the allowance analysis.
The Company writes off receivables when they are
deemed uncollectible based on specific facts and circumstances, including the agents financial condition and collection efforts.
Recoveries of amounts previously written off are recorded when received.
**Use of Estimates**
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Significant estimates include assumptions used in valuation of deferred tax assets, allowance for credit losses, and valuation of stock-based
compensation.
****
**Property and Equipment**
Property and equipment are recorded at cost. Depreciation
is computed using the straight-line method over the estimated useful lives of the assets as follows:
Furniture and equipment 5 - 7 years
Computer equipment and software 3 - 5 years
Leasehold improvements 10 years
****
| F-11 | |
| Standard Premium Finance Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2025 | |
**2. Summary of Significant Accounting Policies (Continued)**
****
**Concentration of Credit and Financial Instrument
Risk**
Financial instruments that potentially subject
the Company to concentrations of credit risk are primarily cash and accounts receivable from customers, agents, and insurance companies.
The Company maintains its cash balances at two banks, which are insured by the Federal Deposit Insurance Corporation up to $250,000, and
one money market account in a brokerage account, which is not insured. Uninsured balances are $7,815 and $94,291 at December 31, 2025
and 2024, respectively. The Company mitigates this risk by maintaining its cash balances at high-quality financial institutions. The following
table provides a reconciliation between uninsured balances and cash per the consolidated balance sheet:
|
Schedule of reconciliation between uninsured balances and cash per the consolidated balance sheets | |
| | |
| | |
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
Uninsured Balance | |
$ | 7,815 | | |
$ | 94,291 | | |
|
Plus: Insured balances | |
| 196,913 | | |
| 250,000 | | |
|
Plus: Balances at other institutions that do not exceed FDIC limit | |
| 3,155 | | |
| 1,716 | | |
|
Plus: Cash overdraft | |
| 497,169 | | |
| 328,421 | | |
|
Less: Outstanding checks | |
| (694,082 | ) | |
| (672,712 | ) | |
|
| |
| | | |
| | | |
|
Cash per Consolidated Balance Sheet | |
$ | 10,970 | | |
$ | 1,716 | | |
The Company controls its credit risk in accounts
receivable through credit standards, limits on exposure, by monitoring the financial condition of insurance companies, by adhering to
statutory cancellation policies, and by monitoring and pursuing collections from past due accounts. We cancel policies at the earliest
permissible date allowed by the statutory cancellation regulations.
****
Approximately 62% and 66% of the Companys
business activity is with customers located in Florida for 2025 and 2024, respectively. Approximately 8% and 10% of the Companys
business activity is with customers located in Georgia for 2025 and 2024, respectively. There were no other significant regional, industrial
or group concentrations during the years ended December 31, 2025 and 2024.
**Cash Surrender Value of Life Insurance**
The Company is the owner and beneficiary of a
life insurance policy on its president. The gross cash surrender value relative to the policy in place at December 31, 2025 and 2024,
was $766,130 and $705,593, respectively. In March 2024, the Company executed a $641,934 loan against the life insurance policy. Any death
benefit received would first be reduced by the outstanding loan amount at the time of death. In October 2025, the Company repaid $156,402
of the loan. The remaining loan accrues interest at a rate of 5.50% and has no maturity date. The Company paid interest on this loan of
$33,818 and $27,884 for the years ended December 31, 2025 and 2024, respectively.
****
**Fair Value of Financial Instruments**
The Companys carrying amounts of financial
instruments as defined by FASB ASC 825, Disclosures about Fair Value of Financial Instruments, including premium finance
contracts and related receivables, prepaid expenses, cash surrender value of life insurance, drafts payable, accrued expenses and other
current liabilities, approximate their fair value due to the relatively short period to maturity for these instruments. The fair value
of the line of credit and notes payable are based on current rates at which the Company could borrow funds with similar remaining maturities
and the carrying value approximates fair value.
****
**Income Taxes**
The provision for income taxes is computed using
the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences
of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating losses and tax credit
carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in
effect for the years in which those tax assets and liabilities are expected to be realized or settled. The Company records a valuation
allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
Uncertain tax positions are recognized only when
the Company believes it is more likely than not that the tax position will be upheld on examination by the taxing authorities based on
the merits of the position. The Company has no material unrecognized tax benefits and no adjustments to its consolidated financial position,
results of operations or cash flows were required as of December 31, 2025.
The Company filed consolidated tax returns for
the years ended December 31, 2025 and 2024, which are subject to examination by federal and state tax jurisdictions. The Companys
tax returns for the previous three years remain open for audit by the respective tax jurisdictions. No income tax returns are currently
under examination by taxing authorities. The Company recognizes interest and penalties, if any, related to uncertain tax positions in
income tax expense. The Company did not have any accrued interest or penalties associated with uncertain tax positions as of December
31, 2025 and 2024.
****
****
| F-12 | |
| Standard Premium Finance Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2025 | |
****
****
**2. Summary of Significant Accounting Policies (Continued)**
**Stock-Based Compensation**
The Company accounts for stock-based compensation
in accordance with FASB ASC Topic No. 718, Stock Compensation, which establishes the requirements for expensing equity awards.
The Company measures and recognizes as compensation expense the fair value of all share-based payment awards based on estimated grant
date fair values. Our stock-based compensation includes issuances made to directors, executives, employees and consultants, which includes
employee stock options related to our 2019 Equity Incentive Plan and stock warrants. The determination of fair value involves a number
of significant estimates. We use the Black-Scholes option pricing model to estimate the value of employee stock options and stock warrants,
which requires a number of assumptions to determine the model inputs. These include the expected volatility of our stock and employee
exercise behavior which are based expectations of future developments over the term of the option.
****
**Earnings per Common Share**
The Company accounts for earnings (loss)
per share in accordance with FASB ASC Topic No. 260 - 10*, Earnings Per Share,* which establishes the requirements
for presenting earnings per share (EPS). FASB ASC Topic No. 260 - 10 requires the presentation of basic and
diluted EPS on the face of the statement of operations. Basic EPS amounts are calculated using the weighted-average number
of common shares outstanding during each period. Diluted EPS assumes the exercise of all stock options, warrants and convertible securities
having exercise prices less than the average market price of the common stock during the periods, using the treasury stock method.
As of December 31, 2025 and 2024, the Company
had potentially dilutive securities outstanding, including stock options, stock warrants, and convertible preferred stock. All outstanding
stock options and warrants were fully vested as of the respective dates. The Companys Series A Convertible Preferred Stock is convertible
into common stock at 80% of the average market price over a 30-day period, at the Companys discretion. These instruments were evaluated
for dilutive effect and included in the diluted EPS calculation to the extent they were not antidilutive.
Reconciliation of Weighted-Average Shares Outstanding:
|
Schedule of outstanding options and warrants on earnings per share | |
| | |
| | |
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
Basic weighted-average shares outstanding | |
| 3,001,216 | | |
| 2,942,797 | | |
|
Effect of dilutive stock options (treasury stock method) | |
| 51,113 | | |
| 54,165 | | |
|
Effect of dilutive preferred stock (if-converted method) | |
| 1,140,110 | | |
| 1,053,300 | | |
|
Diluted weighted-average shares outstanding | |
| 4,192,439 | | |
| 4,050,262 | | |
The Company determined that all outstanding warrants as of December 31, 2025 and 2024 were antidilutive and therefore excluded them from
the diluted EPS computation. No adjustments to net income were required for the diluted earnings per share calculation for the periods
presented.
**Leases**
The Company recognizes and measures its leases
in accordance with ASC Topic 842, Leases. The Company determines if an arrangement is a lease, or contains a lease, at inception
of a contract and when the terms of an existing contract are changed. The Company recognizes a lease liability and a right of use (ROU)
asset at the commencement date of the lease. The lease liability is initially and subsequently recognized based on the present value of
its future lease payments calculated using the Companys incremental borrowing rate.
| F-13 | |
| Standard Premium Finance Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2025 | |
**2. Summary of Significant Accounting Policies (Continued)**
**Recent Accounting Pronouncements**
In November 2023, the FASB issued ASU 2023-07,
Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires incremental disclosures about reportable segments
but does not change the definition of a segment or the guidance for determining reportable segments. The new guidance requires disclosure
of significant segment expenses that are (1) regularly provided to (or easily computed from information regularly provided to) the chief
operating decision maker ("CODM") and (2) included in the reported measure of segment profit or loss. The new standard also
requires companies to disclose the title and position of the individual (or the name of the committee) identified as the CODM, allows
companies to disclose multiple measures of segment profit or loss if those measures are used to assess performance and allocate resources,
and is applicable to companies with a single reportable segment. The requirements are effective for annual reporting periods beginning
on January 1, 2024, and are required to be applied retrospectively. The Company has adopted the additional disclosure requirements under
ASU 2023-07. The additional requirements did not have a material impact on the financial statements.
****
**Amortization of Line of Credit Costs**
Amortization of line of credit costs is computed
using the straight-line method over the life of the loan.
****
**3. Premium Finance Contracts, Related Receivable
and Allowance for Credit Losses**
****
Premium Finance Contracts and Related Receivable
represent monthly payments due on insurance premium finance contracts. The Company finances insurance policies over periods from three
to eleven months for businesses and consumers who make an initial down payment of, on average, 25 percent of the insurance policy amounts.
The entire amount of the contract is recorded including amounts due for finance charges and services charges. These receivables are reported
net of unearned interest for financial statements purposes. Upon cancellation of an insurance premium finance contract, the unearned premium on the contract becomes due
from the insurance carrier. The Company segregates its Premium Finance Contracts Receivable into three portfolio segments for reporting
and allowance calculation purposes. The segments are (1) Due from Insured, (2) Due from Insurance Carrier, and (3) Due from Agents. Amounts
due from agents represent balances related to (1) an agents unearned commission due to a policy cancellation and (2) down payments
collected by the agents on behalf of the insured, which are due to us.
At December 31, 2025 and 2024, premium finance
contract and agents receivable consists of the following:
****
|
Schedule of premium finance contract and agents receivable | |
| | |
| | |
|
Description | |
December 31, 2025 | | |
December 31, 2024 | | |
|
Contracts due from insured | |
$ | 69,350,806 | | |
$ | 59,758,090 | | |
|
Contracts due from insurance carrier | |
| 7,279,828 | | |
| 7,415,885 | | |
|
| |
| 76,630,634 | | |
| 67,173,975 | | |
|
Amounts due from agents | |
| 1,146,494 | | |
| 1,059,085 | | |
|
Less: Unearned interest | |
| (2,736,977 | ) | |
| (2,406,496 | ) | |
|
| |
| 75,040,151 | | |
| 65,826,564 | | |
|
Less: Allowance for credit losses | |
| (2,202,768 | ) | |
| (1,969,007 | ) | |
|
| |
| | | |
| | | |
|
Total | |
$ | 72,837,383 | | |
$ | 63,857,557 | | |
| F-14 | |
| Standard Premium Finance Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2025 | |
**3. Premium Finance Contracts, Related Receivable
and Allowance for Credit Losses (Continued)**
The allowance for credit losses at December 31,
2025 and December 31, 2024 is as follows:
|
Schedule of allowance for credit losses | |
| | |
| | |
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
Allowance for contracts due from insured | |
$ | 1,268,799 | | |
$ | 1,099,338 | | |
|
Allowance for contracts due from insurance carrier | |
| 746,506 | | |
| 692,066 | | |
|
Allowance for amounts due from agents | |
| 187,463 | | |
| 177,603 | | |
|
| |
| | | |
| | | |
|
Total allowance for credit losses | |
$ | 2,202,768 | | |
$ | 1,969,007 | | |
****
****
Activity in the allowance for credit losses
for the years ended December 31, 2025 and 2024, is as follows:
|
Schedule of allowance for credit losses activity | |
| | |
| | |
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
Balance at the beginning of the year | |
$ | 1,969,007 | | |
$ | 1,501,593 | | |
|
Current year provision | |
| 2,115,000 | | |
| 1,846,860 | | |
|
Write-offs charged against the allowance | |
| (2,211,812 | ) | |
| (1,726,907 | ) | |
|
Recoveries of amounts previously charged off | |
| 330,573 | | |
| 347,461 | | |
|
| |
| | | |
| | | |
|
Balance at end of the year | |
$ | 2,202,768 | | |
$ | 1,969,007 | | |
****
The Company maintains an allowance that includes
the expected write-offs of principal and interest. Provisions and write-offs per the note disclosures above are displayed at gross amounts,
which include provisions and write-offs of both principal and unearned interest. The write-offs are allocated between the principal (i.e.
provision for credit losses) and interest (i.e. contra-revenue) on the income statement. The following table shows a reconciliation between
the total provision per this note and provision for credit losses on the consolidated statement of operations:
****
|
Schedule of reconciliation between the total provision per the footnote and the provision for credit losses | |
| | |
| | |
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
Current year provision | |
$ | 2,115,000 | | |
$ | 1,846,860 | | |
|
Less: Contra-revenue | |
| (853,966 | ) | |
| (592,335 | ) | |
|
Provision for credit losses | |
$ | 1,261,034 | | |
$ | 1,254,525 | | |
****
The aging analyses of past-due contract receivables
as of December 31, 2025 and December 31, 2024 are as follows:
|
Schedule of aging analyses of past-due contract receivables | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
As of December 31, 2025 | |
3059
Days | | |
6089
Days | | |
90-119
Days | | |
Greater Than
120 Days | | |
Total
Past-Due | | |
Current | | |
Grand
Total | | |
|
Premium finance contracts: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Due from insured | |
$ | 121,417 | | |
$ | 21,018 | | |
$ | 4,230 | | |
$ | 15,145 | | |
$ | 161,810 | | |
$ | 69,188,996 | | |
$ | 69,350,806 | | |
|
Due from insurance carrier | |
| 631,883 | | |
| 635,401 | | |
| 568,894 | | |
| 2,497,849 | | |
| 4,334,027 | | |
| 2,945,801 | | |
| 7,279,828 | | |
|
Total | |
$ | 753,300 | | |
$ | 656,419 | | |
$ | 573,124 | | |
$ | 2,512,994 | | |
$ | 4,495,837 | | |
$ | 72,134,797 | | |
$ | 76,630,634 | | |
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
As of December 31, 2024 | |
3059
Days | | |
6089
Days | | |
90-119
Days | | |
Greater Than
120 Days | | |
Total
Past-Due | | |
Current | | |
Grand
Total | | |
|
Premium finance contracts: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Due from insured | |
$ | 113,024 | | |
$ | 100,104 | | |
$ | 5,186 | | |
$ | 12,403 | | |
$ | 230,717 | | |
$ | 59,527,373 | | |
$ | 59,758,090 | | |
|
Due from insurance carrier | |
| 446,035 | | |
| 400,021 | | |
| 302,676 | | |
| 2,387,638 | | |
| 3,536,370 | | |
| 3,879,515 | | |
| 7,415,885 | | |
|
Total | |
$ | 559,059 | | |
$ | 500,125 | | |
$ | 307,862 | | |
$ | 2,400,041 | | |
$ | 3,767,087 | | |
$ | 63,406,888 | | |
$ | 67,173,975 | | |
Inactive agent receivables are defined as agent
receivables that have not changed in at least three months, which pose a greater risk of credit losses. Agent inactivity is used by management
as a credit quality indicator in evaluating receivables. The analysis of active and inactive agents as of December 31, 2025 and December
31, 2024 are as follows:
|
Schedule of inactive agent receivables | |
| | |
| | |
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
Receivables from active agents | |
$ | 997,452 | | |
$ | 882,890 | | |
|
Receivables from inactive agents | |
| 149,042 | | |
| 176,195 | | |
|
Total | |
$ | 1,146,494 | | |
$ | 1,059,085 | | |
| F-15 | |
| Standard Premium Finance Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2025 | |
**4. Property and Equipment, Net**
****
At December 31, 2025 and 2024, the Companys
property and equipment consists of the following:
|
Schedule of property and equipment | |
| | |
| | |
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
| |
| | |
| | |
|
Computer Software | |
$ | 25,857 | | |
$ | 25,857 | | |
|
Automobile | |
| 173,379 | | |
| 166,749 | | |
|
Furniture & Fixtures | |
| 17,773 | | |
| 17,773 | | |
|
Leasehold Improvements | |
| 116,811 | | |
| 116,811 | | |
|
Computer Equipment | |
| 54,821 | | |
| 52,535 | | |
|
Property and equipment, gross | |
| 388,641 | | |
| 379,725 | | |
|
Accumulated depreciation | |
| (273,047 | ) | |
| (245,546 | ) | |
|
Property and equipment, net | |
$ | 115,594 | | |
$ | 134,179 | | |
The Company recorded depreciation expense in other
operating expenses of $46,501 and $40,477, for the years ended December 31, 2025 and 2024, respectively.
****
**5. Leases**
The Company accounts for leases in accordance
with ASC Topic 842. The Company used its incremental borrowing rate of 5.25% for all operating leases as of December 31, 2025 and 2024.
In March 2024, the Company renewed its office lease with Marlenko Acquisitions, LLC. The new two-year lease is identical to the previous
lease and expires on February 28, 2026 with a one-year option to renew. The right-of-use asset and operating lease liability at the execution
of this lease totaled $235,335.
****
Office lease On March 1, 2024,
the Company entered into a two (2) year lease for an office facility located in Miami Florida with an entity controlled by our CEO and
related parties. The lease has a one-time renewal option for one year which management is reasonably certain will be exercised. The lease
is $7,048 per month and expires in February 2026, including the renewal option (see Note 15).
Secure facility lease In August
2025, the Company entered into a three (3) year lease for a secure facility located in Miami, Florida. The lease has no renewal option.
The lease is $1,760 per month, with payment increases of 4% annually, and expires in September 2028. The right-of-use asset and operating
lease liability at the execution of this lease totaled $61,073.
Copier lease On October 14,
2019 the Company entered into a copier lease. The right to use asset and lease liability at inception of the copier lease was $68,799.
The cost of the copier lease is $1,116 per month and expired October 14, 2024 with a one-year renewal option, which the Company exercised.
Hardware lease On September
30, 2022, the Company entered into a three-year lease for computer hardware. The lease has no renewal option. The lease is $664 per month
and expired in September 2025 and continued on a month-to-month rental basis. The right-of-use asset and operating lease liability at
the execution of this lease totaled $22,059.
Server lease On December 7,
2021, the Company entered into a five-year lease for a computer server. The lease contains a bargain purchase option, which the Company
intends to exercise. The Company recorded this lease as a finance lease. The lease payments are $1,249 per month through December 2026.
| F-16 | |
| Standard Premium Finance Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2025 | |
**5. Leases (Continued)**
****
Supplemental balance sheet information related
to leases is as follows:
|
Schedule of lease cost | |
| |
| | |
| | |
|
Leases | |
Classification | |
December
31, 2025 | | |
December
31, 2024 | | |
|
| |
| |
| | |
| | |
|
Right-of-use assets | |
Operating lease assets | |
$ | 151,823 | | |
$ | 203,119 | | |
|
Server lease | |
Finance lease assets | |
| 12,152 | | |
| 25,408 | | |
|
Total lease assets | |
| |
$ | 163,975 | | |
$ | 228,527 | | |
|
| |
| |
| | | |
| | | |
|
Current operating lease liability | |
Current operating lease liabilities | |
$ | 107,326 | | |
$ | 114,230 | | |
|
Non-current operating lease liability | |
Long-term operating lease liabilities | |
| 44,497 | | |
| 88,888 | | |
|
Total operating lease liabilities | |
| |
$ | 151,823 | | |
$ | 203,118 | | |
|
| |
| |
| | | |
| | | |
|
Current finance lease liability | |
Current finance lease liabilities | |
$ | 13,518 | | |
$ | 13,875 | | |
|
Non-current finance lease liability | |
Long-term finance lease liabilities | |
| | | |
| 13,518 | | |
|
Total finance lease liabilities | |
| |
$ | 13,518 | | |
$ | 27,393 | | |
Maturities of lease liabilities as of December 31, 2025 were as
follows:
|
Schedule of maturities of lease liabilities | | |
| | |
|
| 2026 | | |
$ | 119,801 | | |
|
| 2027 | | |
| 36,287 | | |
|
| 2028 | | |
| 17,137 | | |
|
| Total lease payments | | |
| 173,225 | | |
|
| Less: imputed interest | | |
| (7,884 | ) | |
|
| Present value of lease liabilities | | |
$ | 165,341 | | |
The weighted-average remaining lease term
was 1.69 years and 1.96 years as of December 31, 2025 and December 31, 2024, respectively. For the years ended December 31, 2025 and 2024,
the total operating lease costs was $114,959 and $123,814, respectively. As of December 31, 2025 and 2024, operating lease payments include
$84,586 and $95,746, respectively, of cost related to options to extend lease terms that are reasonably certain of being exercised.
****
**6. Drafts Payable**
****
Drafts payable outstanding represent unpaid
drafts that have not been disbursed by our senior lender as of the reporting date on insurance premium finance contracts received by the
Company prior to the reporting date. As of December 31, 2025 and 2024, the draft payable balances are $2,074,866 and $2,080,810, respectively.
****
****
| F-17 | |
| Standard Premium Finance Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2025 | |
****
**7. Line of Credit**
****
**Relationship with First Horizon Bank (FHB)**
On February 3, 2021, the Company
entered into an exclusive twenty-four month loan agreement with First Horizon Bank, our senior lender, for a revolving line of
credit in the amount of $35,000,000, which was immediately funded for $25,974,695 to pay off the prior line of credit. On this date,
the prior line of credit was fully repaid and terminated. The Company recorded $180,350 of loan origination costs. In October 2021,
the Company increased its line of credit with First Horizon Bank from $35,000,000 to $45,000,000. The Company recorded $25,771 of
line of credit costs related to the credit increase. In November 2022, the Company extended the maturity on its line of credit
agreement with FHB until November 30, 2025. This extension also changed the Index Rate of the line of credit from 30-Day Libor to
30-Day Secured Overnight Financing Rate (SOFR). The Company recorded $117,228 of line of credit costs related to this
extension. In June 2025, the Company increased its line of credit with FHB from $45,000,000 to $50,000,000. In September 2025, the
Company renewed its line of credit agreement with FHB until September 25, 2028. This renewal also increased the commitment amount
from $50,000,000 to $75,000,000, lowered the interest rate margin from 2.55-2.96% to 2.10%, and syndicated the line of credit
between two additional lenders, Flagstar Bank and Cadence Bank. The Company is unaffected operationally by the additional lenders as
First Horizon Bank acts as the agent for the other lenders in the syndicated loan agreement. The Company recorded $373,011 of line
of credit costs related to this extension, which is included in the line of credit balance in the consolidated balance sheet at
December 31, 2025.
At December 31, 2025 and 2024, the advance rate
was 85% of the aggregate unpaid balance of the Companys eligible accounts receivable. The line of credit is secured by all Company
assets and is personally guaranteed by our CEO. The line of credit bears interest at 30-Day SOFR plus 2.10% per annum (5.97% and 7.30%
at December 31, 2025 and 2024, respectively). As of December 31, 2025 and 2024, the amount of principal outstanding on the line of credit
was $49,575,004 and $41,217,513, respectively, and is reported on the consolidated balance sheet net of $341,927 and $1,445, respectively,
of unamortized loan origination fees. Interest expense on this line of credit for the years ended December 31, 2025 and 2024 totaled approximately
$3,071,000 and $3,556,000, respectively. The Company recorded amortized loan origination fee for the years ended December 31, 2025 and
2024 of $32,529 and $1,576, respectively. For the years ended December 31, 2025 and 2024, the Company paid a fee based on the unused portion
of the line of credit totaling $29,254 and $4,093, respectively, which is included in interest expense. The Company had availability on
this line of credit of $6,893,451 as of December 31, 2025.
****
The Companys agreements with FHB contain
certain financial covenants and restrictions. Under these restrictions, all the Companys assets are pledged to secure the line
of credit, the Company must maintain certain financial ratios such as an adjusted tangible net worth ratio, interest coverage ratio and
adjusted leverage ratio. The loan agreement also provides for certain covenants such as audited financial statements, notice of change
of control, budget, permission for any new debt, and copies of filings with regulatory bodies. Management believes it was
in compliance with the applicable debt covenants as of December 31, 2025 and December 31, 2024.
**8. Other Loans**
On April 18, 2020, the Company entered into a
$271,000 loan with Woodforest National Bank, under a program administered by the Small Business Administration (SBA) as
part of the Paycheck Protection Program (PPP) approved under the Coronavirus Aid, Relief, and Economic Security Act
(CARES Act) (Pub. L. No. 116-136). The loan matured in two (2) years and accrued interest at 1% from the origination of
the loan.
****
On June 22, 2022, the Company executed a
loan modification with Woodforest National Bank (WNB) allowing for the repayment of the PPP loan to WNB. This loan was fully
repaid in April 2025. For the years ended December 31, 2025 and 2024, the Company paid interest on this loan of $66 and $829, respectively,
which is included in interest expense.
On April 12, 2024, the Company entered into
a $43,700 loan agreement with American Express. This loan was fully repaid in April 2025 and contained a 10.89% fixed interest rate and
monthly principal and interest payments of $3,860 beginning in May 2024. For the years ended December 31, 2025 and 2024, the Company paid
interest on this loan of $874 and $2,448, respectively, which is included in interest expense.
****
****
| F-18 | |
| Standard Premium Finance Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2025 | |
****
**9. Notes Payable**
****
At December 31, 2025 and 2024, the balances of long-term unsecured
notes to unrelated parties are as follows:
|
Schedule of the balances of long-term unsecured notes to unrelated parties | |
| | |
| | |
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
Total notes payable - Others | |
$ | 8,826,925 | | |
$ | 8,993,497 | | |
|
Less current maturities | |
| (2,524,799 | ) | |
| (3,616,940 | ) | |
|
| |
| | | |
| | | |
|
Long-term maturities | |
$ | 6,302,126 | | |
$ | 5,376,557 | | |
|
| |
| | | |
| | | |
|
Scheduled future maturities of notes payable are as follows: | |
| | | |
| | | |
|
Schedule of future maturities of notes payable | |
| | | |
| | | |
|
Maturities due within: | |
| | | |
| | | |
|
1 year | |
$ | 2,524,799 | | |
$ | 3,616,940 | | |
|
2 years | |
| 1,201,887 | | |
| 1,685,157 | | |
|
3 years | |
| 2,971,750 | | |
| 802,500 | | |
|
4 years | |
| 1,866,000 | | |
| 2,187,900 | | |
|
5 years and beyond | |
| 262,489 | | |
| 701,000 | | |
|
| |
| | | |
| | | |
|
| |
$ | 8,826,925 | | |
$ | 8,993,497 | | |
****
These are notes payable to individuals. The notes
have interest payable monthly, ranging from 6% to 8% per annum and are unsecured and subordinated. The principal is due on various dates
through December 31, 2031. The maturity date of these notes automatically extends for periods of three months to six years unless the
note holder requests repayment through written instructions at least ninety days prior to the maturity date of the note. The automatic
maturity extension of these notes is considered a loan modification. Notes totaling $2,832,726 and $1,029,750 were rolled over during
the years ended December 31, 2025 and 2024, respectively. Interest expense on the notes totaled approximately $680,000 and $596,000 during
the year ended December 31, 2025 and 2024, respectively. The Company received proceeds on these notes of $720,682 and $2,269,440 for the
years ended December 31, 2025 and 2024, respectively. The Company repaid principal on these notes of $887,254 and $131,500 for the years
ended December 31, 2025 and 2024, respectively. In August 2024, the Company exchanged, in a cashless transaction, $10,000 of these notes
for 12,500 shares of common stock at a price of $0.80 per share from the exercise of previously vested incentive stock options by an employee.
There were no gains or losses on this exchange.
****
| F-19 | |
| Standard Premium Finance Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2025 | |
****
**10. Notes Payable Stockholders and Related Parties**
****
At December 31, 2025 and 2024, the balances of
long-term notes payable to stockholders and related parties are as follows:
|
Schedule of related parties | |
| | |
| | |
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
Total notes payable - Related parties | |
$ | 2,628,500 | | |
$ | 3,039,040 | | |
|
Less current maturities | |
| (1,185,000 | ) | |
| (376,000 | ) | |
|
| |
| | | |
| | | |
|
Long-term maturities | |
$ | 1,443,500 | | |
$ | 2,663,040 | | |
|
Schedule of future maturities of notes
payable | |
| | | |
| | | |
|
Scheduled future maturities of notes payable are as follows: | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Maturities due within: | |
| | | |
| | | |
|
1 year | |
$ | 1,185,000 | | |
$ | 376,000 | | |
|
2 years | |
| 330,000 | | |
| 1,255,000 | | |
|
3 years | |
| 817,500 | | |
| 120,000 | | |
|
4 years | |
| 216,000 | | |
| 1,288,040 | | |
|
5 years | |
| 80,000 | | |
| | | |
|
| |
| | | |
| | | |
|
| |
$ | 2,628,500 | | |
$ | 3,039,040 | | |
These are notes payable to stockholders and related
parties. The notes have interest payable monthly of 8% per annum and are unsecured and subordinated. The principal is due on various dates
through February 28, 2030. The maturity date of these notes automatically extends for periods of one to four years unless the note holder
requests repayment through written instructions at least ninety days prior to the maturity date of the note. The automatic maturity extension
of these notes is considered a loan modification. Notes totaling $506,000 and $278,040 were rolled over during the years ended December
31, 2025 and 2024, respectively. Interest expense on the notes totaled approximately $231,000 and $211,000 during the years ended December
31, 2025 and 2024, respectively. The Company received proceeds on these notes of $79,460 and $1,028,000 for the years ended December 31,
2025 and 2024, respectively. The Company repaid principal on these notes of $490,000 and $10,000 for the years ended December 31, 2025
and 2024, respectively. In August 2024, the Company exchanged, in a cashless transaction, $66,960 of these notes for 83,700 shares of
common stock at a price of $0.80 per share from the exercise of previously vested incentive stock options by an employee. There were no
gains or losses on this exchange.
| F-20 | |
| Standard Premium Finance Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2025 | |
**11. Income Taxes**
****
The provision (benefit) for income taxes for
the years ended December 31, 2025 and 2024, consisted of the following:
|
Schedule of provision for income taxes | |
| | |
| | |
|
| |
For the Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Current | |
$ | 448,295 | | |
$ | 353,047 | | |
|
Deferred | |
| (70,000 | ) | |
| (12,901 | ) | |
|
Change in valuation allowance | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Provision for income taxes | |
$ | 378,295 | | |
$ | 340,146 | | |
The
reconciliation of the statutory federal rate to the Companys effective income tax rate is as follows:
|
Schedule of effective income tax rate reconciliation | |
| | |
| | |
|
| |
2025 | | |
2024 | | |
|
Income tax benefit
at US statutory rate of 21% | |
| 21.00 | % | |
| 21.00 | % | |
|
Income tax benefitstate, net of federal tax benefit | |
| 4.27 | % | |
| 4.81 | % | |
|
Non-deductible
expense | |
| 0.81 | % | |
| -0.98 | % | |
|
Change
in temporary differences | |
| -2.32 | % | |
| 1.01 | % | |
|
Change
in valuation allowance | |
| 0.00 | % | |
| 0.00 | % | |
|
| |
| | | |
| | | |
|
Income
tax expense | |
| 23.76 | % | |
| 25.84 | % | |
The
primary components of the Companys December 31, 2024 and 2023 deferred tax assets and related valuation allowances are as follows:
|
Schedule of deferred tax assets and liabilities | |
| | |
| | |
|
| |
2025 | | |
2024 | | |
|
Deferred tax assets: | |
| | | |
| | | |
|
Allowance for uncollectible | |
$ | 519,575 | | |
$ | 454,577 | | |
|
Stock compensation | |
| 35,255 | | |
| 27,647 | | |
|
Book to tax depreciation | |
| 20,170 | | |
| 22,776 | | |
|
Gross deferred tax assets | |
| 575,000 | | |
| 505,000 | | |
|
Valuation allowance | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Net deferred tax assets | |
$ | 575,000 | | |
$ | 505,000 | | |
In assessing the realizability of deferred tax
assets, management evaluates whether it is more likely than not (a likelihood of more than 50%) that some portion or all of the deferred
tax assets will be realized. Realization of deferred tax assets is dependent upon the generation of future taxable income during the periods
in which the deductible temporary differences become available. In making this assessment, management considered, among other things,
projected future taxable income, the reversal of existing taxable temporary differences, and available tax planning strategies. Based
on this evaluation, management concluded that it is more likely than not that the Companys deferred tax assets will be realized;
accordingly, no valuation allowance has been recorded.
****
****
| F-21 | |
| Standard Premium Finance Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2025 | |
**12. Equity**
****
**Preferred Stock**
As of December 31, 2025 and 2024, the Company
was authorized to issue 20 million shares of preferred stock with a par value of $0.001 per share, of which 600,000 shares had been designated
as Series A convertible preferred stock. As of each of December 31, 2025 and 2024, there were 166,000 shares of Series A convertible preferred
stock issued and outstanding.
****
****
In the event of any liquidation, dissolution or
winding up of the Company, the holders of preferred stock shall be entitled to receive, prior and in preference to any distribution of
any of the assets of the Company to the holders of common stock, an amount equal to $10 for each share of preferred stock, plus all unpaid
dividends that have been accrued, accumulated or declared. As of December 31, 2025, the total liquidation preference on the preferred
stock is $1,776,200. The Company may redeem the preferred stock from the holders at any time following the second anniversary of the closing
of the original purchase of the preferred stock. The Series A convertible preferred stock can be converted to common stock at 80% of the
prevailing market price over the previous 30-day period at the option of the Company.
Holders of preferred stock are entitled to receive
preferential cumulative dividends, only if declared by the board of directors, at a rate of 7% per annum per share of the liquidation
preference amount of $10 per share. During the years ended December 31, 2025 and 2024, the Board of Directors has declared and paid dividends
on the preferred stock of $116,200 and $116,200, respectively. As of each of December 31, 2025 and 2024, preferred dividends are in arrears
by $29,050.
December 31, 2024 dividends in arrears were declared
and paid in January 2025. December 31, 2025 dividends in arrears were declared and paid in January 2026.
**Common Stock**
As of both December 31, 2025 and 2024, the Company
was authorized to issue 100 million shares of common stock with a par value of $0.001 per share, of which 3,001,216 shares were issued
and outstanding.
In August 2024, the Company exchanged $10,000
of notes payable and $66,960 of notes payable related parties for 96,200 shares of common stock at a price of $0.80 per share
from the exercise of incentive stock options by two employees.
In December 2025, the Company repurchased 1,186
shares of its common stock on the open market at an average share price of $1.87. At December 31, 2025, the shares were held in treasury
to be retired. In January 2026, the 1,186 shares were retired.
****
**Stock Options**
In 2019, the Companys Board of Directors
approved the creation of the 2019 Equity Incentive Plan (the 2019 Plan). The 2019 Plan provides for the issuance of incentive
stock options to designated employees, certain key advisors and non-employee members of the Board of Directors with the opportunity to
receive grant awards to acquire, in the aggregate, up to 300,000 shares of the Corporations common stock. The following table summarizes
information about employee stock options outstanding at December 31, 2025:
|
Schedule of employee stock options outstanding | | |
| | |
| | |
| | |
| | |
| | |
|
| Outstanding Options | | |
| Vested Options | | |
|
| Number
Outstanding at December 31, 2025 | | |
| Weighted
Average Remaining Term | | |
| Weighted
Average Exercise Price | | |
| Number
Exercisable at December 31, 2025 | | |
| Weighted
Average Remaining Term | | |
| Weighted
Average Exercise Price | | |
|
| 91,200 | | |
| 5.16 | | |
$ | 0.80 | | |
| 91,200 | | |
| 5.16 | | |
$ | 0.80 | | |
|
| 10,000 | | |
| 7.50 | | |
| 4.50 | | |
| 10,000 | | |
| 7.50 | | |
| 4.50 | | |
|
| 10,000 | | |
| 2.50 | | |
| 4.95 | | |
| 10,000 | | |
| 2.50 | | |
| 4.95 | | |
|
| 111,200 | | |
| 4.13 years | | |
$ | 1.51 | | |
| 111,200 | | |
| 4.13 years | | |
$ | 1.51 | | |
****
| F-22 | |
| Standard Premium Finance Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2025 | |
****
**12. Equity (Continued)**
****
A summary of information regarding the stock options outstanding
is as follows:
|
Schedule of share-based payment arrangement, option, activity | | |
| | |
| | |
| | |
| | |
|
| | |
Number
of Shares | | |
Weighted
Average Exercise Price | | |
Weighted
Average Remaining Contractual Term | | |
Intrinsic
Value | | |
|
| Outstanding at December 31, 2023 | | |
| 207,400 | | |
$ | 0.80 | | |
| 6.15 years | | |
| | | |
|
| Issued | | |
| | | |
| | | |
| | | |
| | | |
|
| Exercised | | |
| 96,200 | | |
$ | 0.80 | | |
| 5.42 years | | |
$ | 76,960 | | |
|
| Outstanding at December 31, 2024 | | |
| 111,200 | | |
$ | 1.51 | | |
| 5.13 years | | |
$ | 98,496 | | |
|
| Issued | | |
| | | |
| | | |
| | | |
| | | |
|
| Exercised | | |
| | | |
| | | |
| | | |
| | | |
|
| Outstanding at December 31, 2025 | | |
| 111,200 | | |
$ | 1.51 | | |
| 4.13 years | | |
$ | 118,560 | | |
|
| Exercisable at December 31, 2025 | | |
| 111,200 | | |
$ | 1.51 | | |
| 4.13 years | | |
$ | 118,560 | | |
****
In August 2024, the Company exchanged $10,000
of notes payable and $66,960 of notes payable related parties for 96,200 shares of common stock at a price of $0.80 per share
from the exercise of incentive stock options by two employees. During the years ended December 31, 2025 and 2024, the Company recognized
$0 and $14,100, respectively, of stock option expense.
The aggregate intrinsic value is calculated as the difference
between the exercise price of the underlying awards and the closing price of the Common Stock, which was $2.10 and $1.88 per share on
December 31, 2025 and 2024, respectively.
**Stock Warrants**
A summary of information regarding the stock
options outstanding is as follows:
|
Shedule of stock warrants | | |
| | |
| | |
| | |
| | |
|
| | |
Number
of Shares | | |
Weighted
Average Exercise Price | | |
Weighted
Average Remaining Contractual Term | | |
Intrinsic
Value | | |
|
| Outstanding at December 31, 2023 | | |
| 1,035,000 | | |
$ | 7.09 | | |
| 1.6 years | | |
$ | 355,600 | | |
|
| Issued | | |
| | | |
| | | |
| | | |
| | | |
|
| Exercised | | |
| | | |
| | | |
| | | |
| | | |
|
| Outstanding at December 31, 2024 | | |
| 1,035,000 | | |
$ | 7.09 | | |
| 0.6 years | | |
| | | |
|
| Issued | | |
| | | |
| | | |
| | | |
| | | |
|
| Expired | | |
| (800,000 | ) | |
$ | 8.00 | | |
| | | |
| | | |
|
| Exercised | | |
| | | |
| | | |
| | | |
| | | |
|
| Outstanding at December 31, 2025 | | |
| 235,000 | | |
$ | 4.00 | | |
| 0.7 years | | |
| | | |
|
| Exercisable at December 31, 2025 | | |
| 235,000 | | |
$ | 4.00 | | |
| 0.7 years | | |
| | | |
The warrants vested immediately. During the years
ended December 31, 2025 and 2024, the Company recognized no stock warrant expense.
The aggregate intrinsic value is calculated as the difference
between the exercise price of the underlying awards and the closing price of the Common Stock, which was $2.10 and $1.88 per share on
December 31, 2025 and 2024, respectively.
**13. Employee Benefit Plan**
****
The Company maintains a qualified retirement profit
sharing plan and a 401(k) retirement plan, which covers substantially all employees. Employees ratably vest in the plan over six years
and the Companys contributions to the profit sharing plan are discretionary. The Company matches a portion of employee contributions
to the 401(k) plan. Total 401(k) matching and profit-sharing plan contributions of $60,687 and $62,172 were made for the years ended December
31, 2025 and 2024, respectively.
****
| F-23 | |
| Standard Premium Finance Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2025 | |
**14. Executive Compensation Agreements**
****
**Restricted Stock Units**
On March 31, 2025, the Company entered into five-year
employment agreements with its Chief Executive Officer and Chief Financial Officer, which included grants of restricted stock units (RSUs)
subject to both performance-based and time-based vesting conditions. The fair value of each RSU was determined based on the fair value
of the Companys common stock on the grant date.
The performance-based RSU grant consisted of 37,500
units in total, with a grant-date fair value of $71,250, which vested on December 31, 2025, contingent upon the achievement of specified
performance targets. The Company determined that 4,668 of these RSUs are probable of vesting and recognized compensation expense for those
units on a straight-line basis over the nine-month service period from April 1, 2025 through December 31, 2025.
The time-based RSU grant consisted of 10,000 units,
which vest in five equal annual installments of 2,000 RSUs each on December 31 of each year from 2025 through 2029. The aggregate grant-date
fair value of the time-based RSUs was $19,000. The Company is recognizing compensation expense for these RSUs on a straight-line basis
over the 57-month vesting period beginning April 1, 2025.
****
For the years ended December 31, 2025 and 2024,
the Company recognized $12,975 and $0 of stock-based compensation expense related to RSUs, respectively.
As of December 31, 2025, the Company had a total
of $16,000 of unrecognized compensation expense related to RSUs related to the time-based RSUs, which is being recognized on a straight-line
basis over the remaining 51-month vesting period ending December 31, 2029.
In addition, the Company has not recognized any
compensation expense for 32,832 performance-based RSUs with a grant-date fair value of approximately $61,000, as the related performance
conditions were not considered probable of achievement as of December 31, 2025.
**Cash Performance Awards**
The March 31, 2025 employment agreements with
the Companys CEO and CFO also include cash performance awards payable on December 31, 2025, contingent upon the achievement of
certain financial and operational performance targets. As of December 31, 2025, the Company determined that a portion of the performance
conditions were probable to be met and recognized $164,000 of compensation expense during the year ended December 31, 2025. The maximum
potential combined payout under these awards is $450,000.
****
****
**15. Related Party Transactions**
The Company has engaged in transactions with related
parties primarily shareholders, officers and directors and their relatives that involve financing activities and services to the Company.
The following discussion summarizes its activities with related parties.
****
**Office lease**
As discussed in Note 5, the Company entered
into a three-year lease for its office space in Miami, FL with an entity that is controlled by our CEO and related parties. The Company
leases approximately 3,000 square feet of office space. The lease contract expires in February 2026.
**Line of credit**
As discussed in Note 7, the Company secured its
primary financing in part through the assistance of our CEO who guaranteed the loan to the financial institution. The current line of
credit with First Horizon Bank was initiated at $35,000,000. In October 2021, the Company increased its line of credit with First Horizon
Bank from $35,000,000 to $45,000,000. In November 2022, the Company extended the maturity of its line of credit with First Horizon Bank
until November 30, 2025. In June 2025, the Company increased its line of credit with First Horizon Bank from $45,000,000 to $50,000,000.
In September 2025, the Company increased its line of credit with First Horizon Bank from $50,000,000 to $75,000,000 and extended the maturity
until September 25, 2028.
****
**Notes Payable**
As discussed in Note 10, the Company has been
advanced funds by its shareholders. As of December 31, 2025 and 2024, the amounts advanced were $2,628,500 and $3,039,040, respectively.
****
| F-24 | |
| Standard Premium Finance Holdings, Inc. and SubsidiariesNotes to Consolidated Financial StatementsDecember 31, 2025 | |
****
**16. Commitments and Contingencies**
****
From time-to-time, we may be involved in litigation
or be subject to claims arising out of our operations or content appearing on our websites in the normal course of business. Although
the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary
course matters will not have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact
on our company because of defense and settlement costs, diversion of management resources and other factors.
****
**17. Segment Reporting**
****
The Company is engaged in a single line of business
as an insurance premium finance company, providing loans to customers for the purchase of insurance. The Chief Executive Officer and Chief
Financial Officer together function as the chief operating decision maker (CODM). The CODM evaluates performance and allocates
resources based on consolidated net income (as presented in the consolidated statements of operations). The CODM also monitors liquidity
measures such as borrowing capacity under the line of credit and prevailing interest rates. The Company has one operating segment and
one reportable segment.
Substantially all of the Companys revenues
are derived from finance charges, late charges and origination fees on premium finance loans. Substantially all revenues are generated
from customers located in the United States, and substantially all long-lived assets are located in the United States. No individual external
customer accounted for 10% or more of the Companys revenues for the years ended December 31, 2025 and 2024. Information regarding
geographic concentrations by state is included in Note 2.
****
****
**18. Subsequent Events**
In January 2026, the Board of Directors declared
and paid dividends on the Series A convertible preferred stock of $29,050.
In January 2026, the Company retired 1,186 shares
of common stock that were held in treasury.
In February 2026, the Company issued $10,000 of
notes payable and repaid $60,000 of notes payable stockholders and related parties.
F-25
| | |