Filed 2026-03-12 · Period ending 2025-12-31 · 75,798 words · SEC EDGAR
# KINGSWAY FINANCIAL SERVICES INC (KFS) — 10-K
**Filed:** 2026-03-12
**Period ending:** 2025-12-31
**Accession:** 0001437749-26-007961
**Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/1072627/000143774926007961/)
**Origin leaf:** b06faf698c670cd9c13b0cbe3964c845b7b82c79fcb9e854962336237a7c3708
**Words:** 75,798
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**
UNITED STATES**
**SECURITIES AND EXCHANGE COMMISSION**
**WASHINGTON, D.C. 20549**
**FORM 10-K**
| | |
| | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year endedDecember 31, 2025
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
**For the Transition Period from _____ to _____**
Commission File Number 001-15204
**Kingsway Financial Services Inc.**
(Exact name of registrant as specified in its charter)
| | Delaware | | 85-1792291 | | |
| | (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | | |
| | 10 S. Riverside Plaza, Suite 1520 Chicago, IL | | 60606 | | |
| | (Address of principal executive offices) | | (Zip Code) | | |
**1-312-766-2138**
(Registrant's telephone number, including area code)
**Securities registered pursuant to Section****12(b) of the Act:**
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | |
| Common Stock, par value $0.01 per share | KFS | New York Stock Exchange | |
**Securities registered pursuant to Section****12(g) of the Act: None**
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule405 of the Securities Act.Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section13 or Section15(d) of the Act.Yes No
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.Yes No
Indicate by check mark whether the registrant has submitted electronically everyInteractive Data File required to be submitted pursuant to Rule 405 of Regulation S-T ( 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).Yes No
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 definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller Reporting Company | 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
As of June 30,2025, the aggregate market value of the registrant's voting common stock held by non-affiliates of registrant was $217,756,671based upon the closing sale price of the common stock as reported by the New York Stock Exchange. Solely for purposes of this calculation, all executive officers and directors of the registrant are considered affiliates.
The number of shares, including restricted common shares, of the Registrant's Common Stock outstanding as of March 12, 2026was 28,946,664.
**DOCUMENTS INCORPORATED BY REFERENCE**
Part III of this Form 10-K is incorporated by reference to certain sections of the Proxy Statement for the2026Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission no later than 120 days after the end of our fiscal year ended December 31, 2025.
[Table of Contents](#toc)
KINGSWAY FINANCIAL SERVICES INC.
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Table Of Contents |
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Caution Regarding Forward-Looking Statements |
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PART I |
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Item 1. Business |
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Item 1A. Risk Factors |
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Item 1B. Unresolved Staff Comments |
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Item 1C. Cybersecurity |
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Item 2. Properties |
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Item 3. Legal Proceedings |
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Item 4. Mine Safety Disclosures |
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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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Item 6. Reserved |
18 |
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk |
29 |
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Item 8. Financial Statements and Supplementary Data |
30 |
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
78 |
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Item 9A. Controls and Procedures |
78 |
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Item 9B. Other Information |
78 |
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Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
78 |
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PART III |
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Item 10. Directors, Executive Officers, and Corporate Governance |
79 |
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Item 11. Executive Compensation |
79 |
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
79 |
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Item 13. Certain Relationships and Related Transactions, and Director Independence |
79 |
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Item 14. Principal AccountantFees and Services |
79 |
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PART IV |
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Item 15. Exhibits andFinancial Statement Schedules |
79 |
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Item 16. Form 10-K Summary |
84 |
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EXHIBIT INDEX |
85 |
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SIGNATURES |
88 |
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2
[Table of Contents](#toc)
KINGSWAY FINANCIAL SERVICES INC.
**Caution Regarding Forward-Looking Statements**
This2025 Annual Report on Form 10-K (the "2025 Annual Report"), including the accompanying consolidated financial statements of Kingsway Financial Services Inc. ("Kingsway") and its subsidiaries (individually and collectively referred to herein as the "Company") and the notes thereto appearing in Item 8 herein (the "Consolidated Financial Statements"), Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in Item 7 herein ("MD&A"), and the other Exhibits and Financial Statement Schedules filed as a part hereof or incorporated by reference herein may contain or incorporate by reference information that includes or is based on forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements relate to future events or future performance and reflect Kingsway management's current beliefs, based on information currently available. The words "anticipate," "expect," "believe," "may," "should," "estimate," "project," "outlook," "forecast" and variations or similar words and expressions are used to identify such forward looking information, but these words are not the exclusive means of identifying forward-looking statements. Specifically, statements about (i) the Company's ability to preserve and use its net operating losses; (ii) the Company's expected liquidity; and (iii) the potential impact of volatile investment markets and other economic conditions on the Company's investment portfolio, among others, are forward-looking, and the Company may also make forward-looking statements about, among other things:
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its results of operations and financial condition (including, among other things, net and operating income, investment income and performance, return on equity and expected current returns); |
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changes in industry trends and significant industry developments,especially as it relates to the automotive service contract and business services industries; |
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the impact of certain guarantees and indemnities made by the Company; |
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its ability to complete and integrate current or future acquisitions successfully; |
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its abilityexecute its strategic initiatives successfully; and |
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the potential impact of the uncertainties related to actual or potential changes in international, national, regional and local economic, business and financial conditionson the short and long-term economic effects on the Companys business. |
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For a discussion of some of the factors that could cause actual results to differ, see Item 1A, "Risk Factors" and our disclosures under the heading "Significant Accounting Policies and Critical Estimates" in MD&A in this2025 Annual Report.
Except as expressly required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, that might arise subsequent to the date of this2025 Annual Report.
3
[Table of Contents](#toc)
KINGSWAY FINANCIAL SERVICES INC.
**Part I**
**Item 1. BUSINESS**
In this report, the terms "Kingsway," the "Company," "we," "us" or "our" mean Kingsway Financial Services Inc. and all entities included in our Consolidated Financial Statements.
Kingsway Financial Services Inc. was incorporated under the Business Corporations Act (Ontario) on September 19, 1989. Effective December 31, 2018, the Company changed its jurisdiction of incorporation from the province of Ontario, Canada, to the State of Delaware. The Company's registered office is located at 10 S. Riverside Plaza, Suite 1520, Chicago, Illinois 60606. The common shares of Kingsway are listed on the NYSE under the trading symbol "KFS."
Kingsway is a holding company with operating subsidiaries located in the United States and is the only publicly-traded US company employing the Search Fund model to acquire and build great businesses. The Company ownsand operates a collection of high-quality B2B and B2C services companies that are asset-light, growing,and that have recurring revenues. Kingsway seeks to compound long-term shareholder value on a per share basis via its decentralized management model, its talented team of operators, and its tax-advantaged corporate structure.
The Company owns or controls subsidiaries primarily in thebusiness servicesand extended warrantyindustries. Kingsway conducts its business through tworeportable segments -Kingsway Search Xcelerator andExtended Warranty- thatconduct their business and distribute their products and services primarily in the United States.
Financial information about Kingsway's reportable business segments for the years endedDecember 31, 2025 and December 31, 2024 is contained in the following sections of this2025 Annual Report: (i)Note 22, "Segmented Information," to the Consolidated Financial Statements; and (ii) "Results of Continuing Operations" section of MD&A.
All of the dollar amounts in this 2025 Annual Report are expressed in U.S. dollars.
**GENERAL DEVELOPMENT OF BUSINESS**
**Acquisition of****M.L.C. Plumbing, LLC (d/b/a Bud's Plumbing)**
On March 14, 2025, theCompany acquired 100% of the outstanding membership interests of M.L.C. Plumbing, LLC (d/b/a Bud's Plumbing Service, "Bud's Plumbing").Bud's Plumbing,based in Evansville, Indiana, is a provider of various plumbing installation,service and repair services toresidential and commercial customers.Bud's Plumbing is included in the Kingsway Search Xcelerator segment.
The Company acquiredBud's Plumbingfor aggregateconsideration consisting ofcash anda seller note, of approximately $5.0 million, less certain escrowed amounts for purposes of indemnification claims.The closing purchase price was paid with cash on hand. Further information is contained in Note 4, "Acquisitions," to the Consolidated Financial Statements.
**Acquisition of****Roundhouse Electric & Equipment Co., Inc.**
On July1, 2025, theCompany acquired 100% of the outstanding equity interests of Roundhouse Electric & Equipment Co., Inc. ("Roundhouse").Roundhouse,based in Odessa, Texas, is a provider of industrial-scale electric motor maintenance, repair, testing, and sales solutionsprimarily to midstream natural gas pipeline operators and utilities across the Permian Basin.Roundhouseis included in the Kingsway Search Xcelerator segment.
The Company acquired Roundhousefor aggregateconsideration consisting of cash and phantom equity awards to the selling stockholders,of approximately $22.7 million, less certain escrowed amounts for purposes of indemnification claims. Further information is containe
d in Note 4
, "Acquisitions
," to the Consolidated Financial Statements.
The closing purchase price was financed with a combination of debt financing provided by MainstreetBank and cash on hand. LonghornsAcquisitionLLC and Roundhouse, subsidiaries of Kingsway, borrowed a total of $11.0 million, in the form of a term loan, and established a $0.5million revolverthat was undrawn at close. The Roundhouse term loanrequires monthlypayments of principal and interest and has a variable interest rate equal to the greater of the one-month term Secured Overnight Financing Rate ("SOFR")plus 3.3%, or 5.0%.The Roundhouse term loan and revolver matureon July 1, 2035.
**Acquisition ofAAA Flexible****Pipe Cleaning Corporation (d/b/a AAA Advanced Plumbing & Drain)**
On August 1, 2025, theCompany(through its newly formed subsidiary, Advanced Plumbing & Drain LLC) acquired substantially all of the assets and certain specified liabilities of AAA Flexible Pipe Cleaning Corporation (d/b/a AAA Advanced Plumbing & Drain, "Advanced Plumbing").Advanced Plumbing,based in Cleveland, Ohio, is a provider of various plumbing installation,service and repair services toresidential and commercial customers.Advanced Plumbing is included in the Kingsway Search Xcelerator segment.
The Company acquired Advanced Plumbingfor aggregateconsideration consisting ofcash, a seller note and contingent consideration, of approximately $3.7million, less certain escrowed amounts for purposes of indemnification claims.The closing purchase price was paid with cash on hand. Further information is contained in Note 4, "Acquisitions," to the Consolidated Financial Statements.
**Acquisition of****Efficient Plumbing, LLC (d/b/a Southside Plumbing)**
On August 14, 2025, theCompany acquired 80% of the outstanding membership interests of Efficient Plumbing, LLC (d/b/a Southside Plumbing, "Southside Plumbing").SouthsidePlumbing,based in Omaha, Nebraska, is a provider of various plumbing installation,service and repair services toresidential and commercial customers. Southside Plumbingis included in the Kingsway Search Xcelerator segment.
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[Table of Contents](#toc)
KINGSWAY FINANCIAL SERVICES INC.
The Company acquiredSouthside Plumbingfor aggregateconsideration consisting ofcash, a seller note and contingent consideration, of approximately $4.6million, less certain escrowed amounts for purposes of indemnification claims.Further information is contained in Note 4, "Acquisitions," to the Consolidated Financial Statements.
The closing purchase price was financed with a combination of debt financing provided by NewburyportBank and cash on hand. Kingsway Plumbing Holdco LLC ("KPH"), a subsidiaryof Kingsway,and its subsidiaries,Bud's Plumbing, Advanced Plumbing and Southside Plumbing,borrowed a total of $3.75 million, in the form of a term loan, and established a $0.5million revolver that was undrawn at close. The KPH term loanrequires monthlypayments of interest,has an annual fixed interest rate of 7.5% and matures on August 14, 2032. Monthly principal payments on the KPH term loan begin September 14, 2026. The revolver matures on August 14, 2026.
**Private Placements**
During 2025, the Company closed ontwo separateprivate placements to accredited investorsfor aggregate proceeds totaling $8.0million,resulting from the sale and issuance of 320,000 shares of redeemable preferred stock with apar value$0.01 per share for a purchase price of $25.00 per share, including 240,000 shares of a newly created class of preferred stock designated Class C Preferred Stock, for aggregate proceeds of $6.0 million and 80,000 shares of a newly created class of preferred stock designated Class D Preferred Stock, for aggregate proceeds of $2.0 million.Each share of redeemable preferred stock is convertible into 2.6316common shares at any time at the option of the holder.Further information is contained inNote 18, "Redeemable Preferred Stock," to the Consolidated Financial Statements.
**Common Stock Sale**
On June 24, 2025, the Company entered into a Stock Purchase Agreement (the Purchase Agreement) with certain third-parties. Pursuant to the Purchase Agreement, the Company sold an aggregate of 1,336,264 shares of its Common Stock, par value $0.01 per sharefor aggregate gross proceeds of$15.7 million. The purchase price for each share of Common Stock was $11.75 per share. Net proceeds to the Company were $15.6 million after deductingoffering expenses.
**KINGSWAY SEARCH XCELERATORSEGMENT**
Kingsway Search Xcelerator includes the following subsidiaries of the Company (collectively, Kingsway Search Xcelerator),and includes the Companys unique CEO Accelerator program.
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Advanced Plumbing & Drain, LLC (d/b/a AAA Advanced Plumbing &Drain, "Advanced Plumbing") |
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CSuite Financial Partners, LLC ("CSuite") |
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Digital Diagnostics, Inc. ("DDI") |
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Efficient Plumbing, LLC (d/b/a Southside Plumbing, "Southside Plumbing") |
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Image Solutions, LLC ("Image Solutions") |
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M.L.C. Plumbing, LLC (d/b/a Bud's Plumbing Service, "Bud's Plumbing") |
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Ravix Group, Inc. ("Ravix") |
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Roundhouse Electric & Equipment Co., Inc. ("Roundhouse") |
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Secure Nursing Service Inc. ("SNS") |
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Systems Products International, Inc. ("SPI") |
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Kingsway Search Xcelerator's revenue is derived from the provision of various services and equipment sales.
*Business Services*
CSuite is a professional services firmthat provides experienced chief financial officerand other finance professionals to its clients through a variety of flexible offerings. These offerings include project, fractional,and interim staffing of senior finance professionals, CFO mentoring, board advisory services, and executive search services for permanent placements for its clients throughout theUnited States.
Ravix provides outsourced finance and human resources consulting services to its clients on a fractional basis for both projects with definitive endpoints and ongoing engagements of indeterminate length for customers throughout theUnited States. All services are delivered by employees who are located primarily in the United States.Ravix offers its services across four different practices:
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Operational Accounting. Offers services oriented around day-to-day financial stewardship of its clients, such as bookkeeping, accounting, financial reporting and analysis and strategic finance. |
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Technical Accounting. Provides specialized expertise in areas of technical accounting, such as initial public offerings, SEC reporting and international consolidation; |
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Human Resources. Offers human resources, workforce management, and compliance support; and |
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Advisory Services. Focuses on managing clients through liquidations and assignment for the benefit of the creditors. |
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Image Solutionsprovides comprehensive information technology ("IT") managed services primarily inNorth Carolina, Kansas, Georgia, Kentucky and Tennessee. Image Solutions' services encompass a full suite of IT solutions including:
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Equipment Sales. Supplying cutting-edge technology and hardware tailored to the customer's business needs. |
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Service and Maintenance. Working to keepthe customer's IT infrastructure operatingat peak performance with proactive support and timely repairs. |
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Helpdesk Support. Delivering responsive, expert assistance designed to resolve the customer's IT challenges quickly and efficiently. |
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[Table of Contents](#toc)
KINGSWAY FINANCIAL SERVICES INC.
*Healthcare Staffing and Monitoring Services*
SNS provideshealthcare staffing services to acute healthcare facilities on a contract or per diem basis in the United States, primarily in California.SNS isfocused on providing temporary registered nurses to hospitals; however, SNS maintains contracts to provide allied healthcare professionals to hospitals.SNS offers its services across twodifferent practices:
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Travel Staffing. Offers healthcare staffing services to address the short-term needs of hospitals contracts have a guaranteed length, which is typically 13 weeks. |
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Per Diem Staffing.Offers healthcare staffing services to meet the day-to-day needs of hospitals. |
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DDI provides outsourced 24 hours a day and 7 days per week ("24/7")cardiactelemetry services for general acute care, long-term acute care ("LTAC") and inpatient rehabilitation hospitals.Outsourcing cardiac monitoringallows hospitals to eliminate personnel callouts and human resourcesissues, remove distractions from onsite operations, and free up facility staff to assist directly with patient care.DDI has been operating for over 15years and currently has a presence in42states and Puerto Rico. DDIoffers its services as follows:
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General Acute Care and LTAC Hospitals.DDI connects to the hospitals existing installed telemetry system and outsources the telemetry department for the hospital 24/7. |
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Inpatient Rehabilitation Hospitals.DDI provides mobile monitors to the hospital which automatically connect to the hospitals WiFi, and then conducts 24/7 monitoring for patients requiring the service. This allows inpatient rehabilitation hospitals to keep the patient on-site, reducing ambulatory costs and improving continuity of care. |
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*Vertical Market Software*
SPI providessoftware productscreated exclusively to serve the management needs of all types of shared-ownership properties globally.
*Electric Motor Solutions*
Roundhouse is a provider of industrial-scale electric motor solutions, including field maintenance, in-shop repair, testing, and new motor sales. The Company's primary customers are midstream natural gas pipeline operators and utilities across the Permian Basin.
*Kingsway Skilled Trades*
Kingsway Skilled Trades includes Bud's Plumbing, Advanced Plumbing and Southside Plumbing. Kingsway Skilled Tradesprovides acomprehensive range of plumbing services, including emergency repairs, drain cleaning, water heater installations, and water treatment solutionsto residential and commercial customers, primarily in Evansville, Indiana (Bud's Plumbing), Cleveland, Ohio (Advanced Plumbing) and Omaha, Nebraska (Southside Plumbing).
**Marketing, Distribution and Competition**
No Kingsway Search Xcelerator customer or group of affiliated customers accounts for 10% or more of the Company's consolidated revenues.
*Business Services*
CSuite and Ravix actively markettheirservices via sponsorships of industry events and conferencestargeted at private equity and venture capital. Ravix and CSuite receives most of theirnew businessas a result of business networking activities,referrals from service providers and former clients.
Image Solutions actively promotes its services by partnering with local businesses, sponsoring regional events, and participating in industry-focused conferences. These efforts are strategically aimed at building relationships with small and medium-sized enterprises seeking reliable technology solutions.Additionally, competition from both regional and national managed service providers poses a constant challenge. Larger competitors may have access to broader resources and pricing advantages, while smaller providers may target niche markets, impacting Image Solutions' ability to expand its client base.
*HealthcareStaffing and Monitoring Services*
SNS primarily relies on word-of-mouth to recruit nurses to help meet the demands of the hospitals, and SNS actively markets its services through third-party lead generation channels to better meet the hospitals clinician demand.
DDI has primarily grown through word-of-mouth referrals and also actively markets its services through traditional channels and via sponsorship of industry events and conferences.
*Vertical Market Software*
SPI markets its services via industry trade shows and industry conferences. Because the SPI product is a business to business software solution, SPI's target market is a subset of a larger travel market; therefore, competitionis limited.
*Electric Motor Solutions*
Roundhouse has primarily grown through word-of-mouth referrals, but also actively markets its services through traditional channels, including email marketing and sales calls.
*Kingsway Skilled Trades*
Kingsway Skilled Trades actively markets its services via online and traditional advertising channels.
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KINGSWAY FINANCIAL SERVICES INC.
**CEO Accelerator**
The Company has developed a unique program, whereby it employs dedicated Operator-in-residence (or "Searcher") personnel whose sole function is to search for an appropriate business for Kingsway to acquire and then to ultimately run that business. As an example, our first Searcher, who was hired in May 2020, identified Ravix as a potential acquisition, which the Company closed on in October 2021.
The CEO Accelerator focuses on identifying and acquiring privately-held businesses with EBITDA between $1and $3million where the owner/operator is looking to transition from day-to-day operating responsibilities. The CEO Accelerator utilizes the proven framework and characteristics of the Search Fund acquisition model and targets industries and companies with pre-defined characteristics.
The Company believes that having a dedicated Searcher(s) whose background includes a mix of real-world work experience and a graduate degree (usually a masters of business administration) who is ready to transition into the role of CEO gives it a competitive advantage over traditional private equity firms and other potential acquirers of businesses in the lower middle market.
When a search ends with a successful acquisition, the Searcher transitions into an operational role as CEO of the acquired company and receives a financial incentive, in the form of various stock-based grants, in the acquired company. The awards have both time and performance vesting requirements, which aligns the incentives with those of the overall Company.
The Company currently has threefull-time Searchersas of December 31, 2025. The Company intends to maintain this level and potentially expand it as business opportunities permit.
**EXTENDED WARRANTY SEGMENT**
Extended Warranty includes the following subsidiaries of the Company (collectively, "Extended Warranty"):
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IWS Acquisition Corporation ("IWS") |
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Geminus Holding Company, Inc. ("Geminus") |
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PWI Holdings, Inc. ("PWI") |
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Trinity Warranty Solutions LLC ("Trinity") |
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IWS is a licensed motor vehicle service agreement company and is a provider of after-market vehicle protection services distributed by credit unio
ns in
28
states and the District of Columbia to their members, with customers in all fiftystates
.
Geminus primarily sells and administersvehicle service agreements to used car buyers across the United States, mainly through its subsidiary, The Penn Warranty Corporation ("Penn"). Penn distributes these products in
46statesvia independent used car dealerships and franchised car dealerships.The business models are supported by an internal sales and operations team.
PWI markets, sells and administers vehicle service agreements to used car buyers in
47 states via independent used car and franchise networks of approved automobile and motorcycle dealer partners. PWIs business model is supported by an internal sales and operations team.
Trinity sells heating, ventilation, air conditioning ("HVAC"), standby generator, commercial LED lighting and commercialrefrigeration warranty products and provides equipment breakdown and maintenance support services to companies across the United States. As a seller of warranty products, Trinity markets and administers product warranty contracts for certain new and used products in the HVAC, standby generator, commercial LED lighting and commercial refrigeration industries throughout the United States. Trinity acts as an agent on behalf of the third-party insurance companies that underwrite and guaranty these warranty contracts. Trinity does not guaranty the performance underlying the warranty contracts it sells. As a provider of equipment breakdown and maintenance support services, Trinity acts as a single point of contact to its clients for both certain equipment breakdowns and scheduled maintenance of equipment. Trinity will provide such repair and breakdown services by contracting with certain HVAC providers.
**Extended Warranty Products**
*Automotive*
IWS, Geminus and PWI market and administer vehicle service agreements ("VSAs") and related products for new and used automobiles throughout the United States. IWS and PWI also marketand administerVSAs for motorcycles and ATVs. A VSA is an agreement between the Company and the vehicle purchaser under which the Company agrees to replace or repair, for a specific term, designated vehicle parts in the event of a mechanical breakdown. VSAs supplement, or are in lieu of, manufacturers' warranties and provide a variety of extended coverage options. The cost of the VSA is a function of the contract term, coverage limits and type of vehicle.
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IWS serves as the administrator on all contracts it originates. VSA's range from one to seven years and/or 12,000 miles to 125,000 miles. The average term of a VSA is between four and five years. |
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Geminus goes to market through its subsidiary, Penn. Penn serves as the administrator on all contracts they originate and its VSAs range from three months to ninety-sixmonths and/or 3,000 miles to 250,000 miles. Penn offers a limited product line of vehicle service agreements with unlimited miles offerings that have an average term of twelve to twenty-four months. |
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PWI serves as the contract administrator and originator in all states in which it operates. Across thestates in which it operates, PWI has an extensive menu of VSAs with terms starting at three months to ninety-six months and mileage bands up to 250,000 miles. Products range from basic Powertrain to the Exclusionary product ("Premier").The average term of a VSA is twenty-four to thirty-six months. |
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KINGSWAY FINANCIAL SERVICES INC.
*HVAC*
Trinity sells HVAC, standby generator, commercial LED lighting and commercialrefrigeration warranty products. As a seller of warranty products, Trinity markets and administers product warranty contracts for certain new and used products in the HVAC, standby generator, commercial LED lighting and commercial refrigeration industries throughout the United States. Trinity acts as an agent on behalf of the third-party insurance companies that underwrite and guaranty these warranty contracts. Trinity does not guaranty the performance underlying the warranty contracts it sells.
Trinity also provides equipment breakdown and maintenance support services to companies across the United States. As a provider of such services, Trinity acts as a single point of contact to its clients for both certain equipment breakdowns and scheduled maintenance of equipment. Trinity will provide such repair and breakdown services by contracting with certain HVAC providers.
**Marketing, Distribution and Competition**
No Extended Warranty customer or group of affiliated customers accounts for 10% or more of the Company's consolidated revenues, and no loss of a customer or group of affiliated customers would have a material adverse effect on the Company.
*Automotive*
IWS markets its products primarily through credit unions. IWS enters into an exclusive agreement with each credit union whereby the credit union receives a stipulated access fee for each vehicle service agreement issued to its members. The credit unions are served by IWS employee representatives located throughout the United States in close geographical proximity to the credit unions they serve. IWS distributes and markets its product
s in
28
states and the District of Columbia.
IWS focuses exclusively on the automotive finance market with its core VSA and related product offerings, while much of its competition in the credit union channel has a less targeted product approach. IWS' typical competitor takes a generalist approach to market by providing credit unions with a variety of different product offerings. They might be unable to deliver specialty expertise on par with IWS and may not give VSA products the attention they require for healthy profitability and strong risk management.
Geminus goes to marketthrough its subsidiary, Penn, whomarkets itsproducts primarily through independent automotive dealerships and franchise automotive dealerships. Penn enters into dealer wholesale agreements that allow the dealer to resell Penn vehicle service agreements at a retail rate that varies by state as they earn potential commission on the remarketing. The dealer base is serviced by the Company'semployees located throughout the United States in close geographical proximity to the dealers they serve. Penndistributes and markets itsproducts in
46states.
Pennfocuses exclusively on the automotive finance market with its core VSArelated product offerings, while much of its competition is employee based or agent centric. Pennoperates within a highly competitive environment where product pricing and options are important. Many of its competitors have a comprehensive menu of products and services available to offer the independent and franchise dealers. Penn's typical competitors approach to market is by working through employees or agents with a variety of different product offerings. Pennsolely focuses on the suite of VSAproducts it offers, which allows the proper attention required for healthy profitability and risk management.
PWI markets, sells and administers VSAs to used car buyers in
47 states, primarily through a network of approved automobile dealer partners. PWI enters into anagreement with dealer partners that permits dealers to legally sell PWI products to its customers. The distribution of PWI VSAs is supported by an internal sales team geographically located around the country and in close proximity to its dealer partners.
PWI operates exclusively in the automotive finance market with its sole focus on VSAs. PWI does operate within a highly competitive environment where product pricing and productoptions are important. Most of its competitors have a comprehensive menu of products and services to offer the independent and franchise dealers. PWIsstrategy will drive additional competitiveness by adding new products to its existing menu of VSAs. PWIs competitors are a blend of national and regional competitors implementing employee and agent-based sales models.
*HVAC*
Trinity directly markets and distributes its warranty products to manufacturers, distributors and installers of HVAC, standby generator, commercial LED lighting and commercial refrigeration equipment. As a provider of equipment breakdown and maintenance support, Trinity directly markets and distributes its products through its clients, which are primarily companies that directly own and operate numerous locations across the United States.
Trinity operates in an environment with few market competitors. Trinity competes on two important facets: its belief that it provides superior customer service relative to its competitors and its ability, through the support of its insurance company partners, to provide warranty solutions to a wider range of HVAC, standby generator, commercial LED lighting and commercialrefrigeration equipment customers than that of its competitors.
**Claims Management**
Claims management is the process by which Extended Warranty determines the validity and amount of a claim. The Company believes that claims management is fundamental to its operating results. The Company's goal is to settle claims fairly for the benefit of policyholdersin a manner that is consistent with the policy language and the Company's regulatory and legal obligations.
IWS, Geminus and PWI effectively and efficiently manageclaims by utilizing in-house expertise and information systems. They employ an experienced claims staff, in some cases comprised of Automotive Service Excellence certified mechanics, knowledgeable in all aspects of vehicle repairs and potential claims. Additionally, each owns aproprietary database of historical claims information that has been compiledover several years.****Management utilizes these databases to drive real-time pricing adjustments and strategic decision-making.
Trinity claims on warranty products are managed by the insurance companies with which Trinity partners. Trinity may, at times, act as a third-party administrator of such claims; however, at no time does Trinity bear the loss of claims on warranty products.
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KINGSWAY FINANCIAL SERVICES INC.
**PRICING AND PRODUCT MANAGEMENT**
Responsibility for pricing and product management rests with the Company's individual operating subsidiaries in Kingsway Search Xcelerator andExtended Warranty.For theKingsway Search Xcelerator companies,reviews of billing rates and product prices areperformed regularly, and rates can beadjusted to reflect prevailing marketing expectations. In Extended Warranty, teamstypicallycomprised of pricing actuaries, product managers and business development managers work together by territory to develop policy forms and language, rating structures, regulatory filings and new product ideas. Data solutions and claims groups within the individual operating subsidiariestrack loss performancemonthlyto alert the operating subsidiaries' management teamsto the potential need to adjust forms or rates.
**INVESTMENTS**
The Company manages its investments to support its liabilities, preserve capital, maintain adequate liquidity and maximize after-tax investment returns within acceptable risks:
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The fixed maturities portfolios are managed by a third-party firm and are comprised predominantly of high-quality fixed maturities with relatively short durations. |
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Limited liability investments aregenerally overseen by corporate. |
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Limited liability investment, at fair value and investments in private companies are generally overseen by corporate, who engages third-party managers for certain holdings. |
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The Investment Committee of the Board of Directors is responsible for monitoring the performance of the Company's investments and compliance with the Company's investment policies and guidelines, which it reviews annually.
For further descriptions of the Company's investments, see "Investments" and "Significant Accounting Policies and Critical Estimates" in MD&A and Note 7, "Investments," and Note 23, "Fair Value of Financial Instruments,"to the Consolidated Financial Statements.
**REGULATORY ENVIRONMENT**
*Kingsway Search Xcelerator*
Certain, but not all, states regulate nursing registries and supplemental healthcare staffing agencies. SNS is licensed as a nursing registry in those states where it is required.
*Extended Warranty*
Vehicle service agreements are regulated in all states in the United States, and IWS, Geminus and PWI are subject to these regulations. Most states utilize the approach of the Uniform Service Contract Act thatwas adopted by the National Association of Insurance Commissioners in the early 1990's. Under that approach, states regulate vehicle service contract companies by requiring them annually to file documentation, together with a copy of the contract of insurance covering their liability under the service contracts, which complies with the particular state's regulatory requirements. IWS, Geminus and PWI are in compliance with the regulations of each state where it sells vehicle service agreements.
Certain, but not all, states regulate the sale of HVAC and equipment warranty contracts. Trinity is licensed as a service contract provider in those states where it is required.
**HUMAN CAPITAL MANAGEMENT**
At December 31, 2025, the Company employed607personnel supporting itsoperations, consisting of approximately569 full-time employees and38part-time employees.At December 31, 2025, 29of ouremployees were represented by a labor union or covered by acollective bargaining agreement.We consider our relationship with our employees to be good.
We believe the skills and experience of our employees are an essential driver of our business and important to our future prospects. To attract qualified applicants and retain our employees, we offer our employees what we believe to be competitive salaries, comprehensive benefit packages, equity compensation awards, and discretionary bonuses based on a combination of seniority, individual performance and corporate performance. The principal purposes of these employee benefits are to attract, retain, reward and motivate our personnel and to provide long-term incentives that align the interests of employees with the interests of our stockholders.
**ACCESS TO REPORTS**
The Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are made available free of charge through its website at *www.kingsway-financial.com*as soon as reasonably practicable after such material is electronically filed with, or furnished to, the U.S. Securities and Exchange Commission ("SEC").
**Item 1A. Risk Factors**
Most issuers, including Kingsway, are exposed to numerous risk factors that could cause actual results to differ materially from recent results or anticipated future results. The risks and uncertainties described below are those specific to the Company that we currently believe have the potential to be material, but they may not be the only ones we face. If any of the following risks, or any other risks and uncertainties that we have not yet identified or that we currently consider not to be material, actually occur or become material risks, our business, prospects, financial condition, results of operations and cash flows could be materially and adversely affected. Investors are advised to consider these factors along with the other information included in this2025 Annual Report and to consult any further disclosures Kingsway makes in its filings with the SEC.
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KINGSWAY FINANCIAL SERVICES INC.
**FINANCIAL RISK**
**We haveoutstanding recourse debt and acquisition financing****, which could adversely affect our ability to obtain financing in the future, react to changes in our business and satisfy our obligations.**
As of December 31, 2025, we had $15.0 million principal value of outstanding recourse subordinated debtin the form of trust preferred securities, with a redemption date of May 2033.
Additionally, we incurred indebtedness in connection with our acquisitions of PWI Holdings, Inc. and its various subsidiaries (collectively, "PWI")onDecember 1, 2020,Ravix Financial, Inc. ("Ravix") onOctober 1, 2021, CSuite Financial Partners, LLC ("CSuite") on November 1, 2022,Secure Nursing Service Inc. ("SNS") on November 18, 2022,Digital Diagnostics Inc. ("DDI") on October 26, 2023, Image Solutions, LLC ("Image Solutions") on September 26, 2024,Roundhouse Electric & Equipment Co., Inc. ("Roundhouse") on July 1, 2025 andEfficient Plumbing, LLC(d/b/a Southside Plumbing, "Southside Plumbing") on August 14, 2025. As ofDecember 31, 2025, we have $55.7million principal value of such acquisition financing outstanding; however, such acquisition financing is non-recourse to other Kingsway entities.
Because of ouroutstanding recourse debt and acquisition financing:
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our ability to engage in acquisitions without raising additional equity or obtaining additional debt financing could be limited; |
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our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes and our ability to satisfy our obligations with respect to our debt may be impaired in the future; |
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aportion of our cash flow must be dedicated to the payment of interest on our debt, thereby reducing the funds available to us for other purposes; |
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we are exposed to the risk of increased interest rates because our outstanding subordinated debt and our outstanding acquisition financing bear interest directly related to theSecured Overnight Financing Rate (SOFR) and the Prime Rate; |
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it may be more difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on, and acceleration of, such debt; |
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we may be more vulnerable to general adverse economic and industry conditions and may have reduced flexibility to deploy capital or otherwise respond to changes; |
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we may be at a competitive disadvantage compared to our competitors with proportionately less debt or with comparable debt on more favorable terms and, as a result, they may be better positioned to withstand economic downturns; |
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our ability to refinance debt may be limited or the associated costs to do so may increase; |
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our ability to transfer funds among our various subsidiaries and/or distribute such funds to the holding company arelimited; |
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our flexibility to adjust to changing market conditions and ability to withstand competitive pressures could be limited; and |
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we may be prevented from carrying out capital spending that is, among other things, necessary or important to our growth strategy and efforts to improve the operating results of our businesses. |
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**Increases in interest rates would increase the cost of servicing our outstanding recourse debt and could adversely affect our results of operation.**
Our outstanding recourse subordinatedebtas of December 31, 2025 of $15.0 millionprincipal valuebears interest directly related toCME Term SOFRand$51.9million ofour outstanding acquisition financing related to the acquisitions of PWI,Ravix, CSuite,SNS,DDI,Image Solutions andRoundhousebears interest directly related to either SOFR orthe Prime Rate. As a result, increases inCME Term SOFR, SOFRand the Prime Rate would increase the cost of servicing our debt and could adversely affect our results of operations. Each one hundred basis point increase in CME Term SOFR, SOFR or the Prime Rate would result in an approximately$0.6 million increase in our annual interest expense.
**Our operations are restricted by the terms of our debt indentures, which could limit our ability to plan for or react to market conditions or meet our capital needs.**
Our debt indentures contain numerous covenants thatlimit our ability, among other things, to make particular types of restricted payments and pay dividends or redeem capital stock. The covenants under our debt agreements could limit our ability to plan for or react to market conditions or to meet our capital needs. No assurances can be given that we will be able to maintain compliance with these covenants.
If we are not able to comply with the covenants and other requirements contained in the debt indentures, an event of default under the relevant debt instrument could occur, which could result in the acceleration of all obligations under such debt instruments.
The Board of Directors closely monitors the debt and capital position and, from time to time, recommends capital initiatives based upon the circumstances of the Company.
**We may not be able to realize our investment objectives, which could significantly reduce our earnings and liquidity.**
We depend on our investments for a substantial portion of our liquidity. As of December 31, 2025, our investments included $36.8 million of fixed maturities, at fair value. General economic conditions can adversely affect the markets for interest rate-sensitive instruments, including the extent and timing of investor participation in such markets, the level and volatility of interest rates and, consequently, the fair value of fixed maturities. In addition, changing economic conditions can result in increased defaults by the issuers of investments that we own. Interest rates are highly sensitive to many factors, including monetary policies, domestic and international economic and political conditions and other factors beyond our control. Given the low interest rate environment that exists for fixed maturities, a significant increase in investment yields or an impairment of investments that we own could have a material adverse effect on our business, results of operations or financial condition by reducing the fair value of the investments we own, particularly if we were forced to liquidate investments at a loss.
As of December 31, 2025, our investments also included$0.6 million of limited liability investments,$3.5 million of limited liability investment, at fair value and$0.6 million of investments in private companies, at adjusted cost. These investments are less liquid than fixed maturities.General economic conditions, stock market conditions and many other factors can adversely affect the fair value of the investments we own. If circumstances necessitated us disposing of our limited liability investments prematurely in order to generate liquidity for operating purposes, we would be exposed to realizing less than their carrying value.
Our ability to achieve our investment objectives is affected by general economic conditions that are beyond our control and our own liquidity needs for operating purposes. We may not be able to realize our investment objectives, which could adversely affect our results of operations, financial condition and available cash resources.
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KINGSWAY FINANCIAL SERVICES INC.
**Our business, financial condition and results of operations could be materially and adversely affected by public health crises and changes in international and national economic and industry conditions****.**
Public health crises, epidemics and pandemics, including a pandemic similar in nature toCOVID-19 thatcreated significant disruption and uncertainty in the global economy,negatively impacted our business and results of operations and financial condition, and may lead to adverse United States domestic and global macroeconomic effects. These effects may include adverse impacts on various industries' supply chains and automobile sales, consumer demand for our products and services, and our ability to access capital, and may otherwise adversely impact the operation of our businesses, cause substantial disruption to our employees, distribution channels, investors, tenants, and customers through self-isolation, travel limitations, business restrictions, and/or other means. As such, these effects, individually or in the aggregate, may adversely impact our businesses, financial condition, operating results and cash flows, and such adverse impacts may be material.
Additionally, actual or potential changes in international, national, regional and local economic, business and financial conditions, including recession, high inflation, changing interest rates and actual or threatened trade protection measures and creditworthiness of our customers, may negatively affect consumer preferences, perceptions, spending patterns or demographic trends, any of which could adversely affect our business, financial condition, results of operations and/or liquidity. In addition, political and social turmoil may put further pressure on economic conditions in the United States and abroad. The global economy has been periodically impacted by the effects of global economic downturns (such as those recently related to COVID-19). There can be no assurance that there will not be further such events or deterioration in the global economy. Any such economic, business, financial or political conditions may make it more difficult for us to accurately forecast and plan our future business activities.
Market volatility may also make it more difficult to value certain of our investments if trading becomes less frequent and the liquidity of such investment declines. Disruptions, uncertainty and volatility in the global credit markets may also adversely affect our ability to obtain financing for future acquisitions. If financing is available, it may only be available at an unattractive cost of capital, which would decrease our profitability or result in our inability to consummate such acquisitions. There can be no assurance that market conditions will not deteriorate in the future.
**Financial disruption or a prolonged economic downturn could materially and adversely affect the credit, investment and financial markets which, in turn, could materially adversely affect our business, results of operations or financial condition****.**
A severe or prolonged economic weakness and uncertainty, both in the U.S. and worldwide, could lead toinstability in the global credit markets, including heightened credit risk, reduced valuation of investments and decreased economic activity. Depending on market conditions going forward, we could incur substantial realized and unrealized losses in future periods, which could have an adverse effect on our results of operations or financial condition. These market conditions may affect the Company's ability to access debt and equity capital markets. Additionally, certain trust accounts for the benefit of related companies and third parties have been established with collateral on deposit under the terms and conditions of the relevant trust agreements. The value of collateral could fall below the levels required under these agreements putting the subsidiary or subsidiaries in breach of the agreements which could expose us to damages or otherwise adversely impact our business, financial condition, operating results or cash flows.
**Worldwide armed conflicts and the related implications may negatively impact our operations.**
Current conflicts around the world, including in Ukraine and in the**Middle East, and related sanctions have damaged and disrupted, and could continue to damage or disrupt, international commerce and the global economy. For example, Russias ongoing invasion and military attacks on Ukraine have triggered significant economic and trade sanctions, export controls, and other restrictions targeting Russia and Belarus. Resulting changes in U.S. trade policy could trigger retaliatory actions by Russia, its allies and other affected countries, including China, resulting in a trade war. Furthermore, if the conflict between Russia and Ukraine continues for a long period of time or if serious conflict arises elsewhere, or if other countries, including the U.S., become further involved in the conflict and any other military conflicts, we could face material adverse effects on our business, financial condition, results of operations and/or liquidity. Given the evolving nature of these conflicts, the related sanctions, potential governmental actions and economic impact, such potential effects remain uncertain.
**International trade policies, including tariffs, sanctions and trade barriers, may adversely affect our business, financial condition, results of operations and prospects.**
Beginning in our fiscal year 2025, significant new and expanded tariffs, reciprocal tariffs and other trade restrictions have been imposed with selective tariff exemptions impacting global trade. Current or future tariffs or other restrictive trade measures may adversely impact both our product and services and our operational expenses. Such cost increases may reduce our margins andrequire us to increase prices, which could harm our competitive position, reduce customer demand and damage customer relationships. Trade disputes, trade restrictions, tariffs and other political tensions between the U.S. and other countries may also exacerbate unfavorable macroeconomic conditions including inflationary pressures, foreign exchange volatility, financial market instability, and economic recessions or downturns, which may also negatively impact customer demand for our products or services, delay purchases or renewals, limit expansion opportunities with customers, limit our access to capital, or otherwise negatively impact our business and operations.
**Ourcash, cash equivalents and investments could be adversely affected if the financial institutions in which we hold our cash, cash equivalents and investments fail.**
We maintain cash balances at third-party financial institutions in excess of the Federal Deposit Insurance Corporation (the FDIC) insurance limit. The FDIC took control and was appointed receiver of Silicon Valley Bank (SVB) and New York Signature Bank (SB) on March 10, 2023 and March 12, 2023, respectively. We do not have any direct exposure to Silicon Valley Bank or New York Signature Bank. However,if other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments could be threatened and may have a material adverse impact on our business, prospects, financial condition and results of operations. Moreover, events such as the closure of SVB and SB, in addition to other global macroeconomic conditions, may cause further turbulence and uncertainty in the capital markets.
**We have generated net operating loss carryforwards for U.S. income tax purposes, but our ability to use these net operating losses could be limited by our inability to generate future taxable income.**
Our U.S. businesses have generated consolidated net operating loss carryforwards ("U.S. NOLs") for U.S. federal income tax purposes of approximately$628.0million as of December 31, 2025. These U.S. NOLs can be available to reduce income taxes that might otherwise be incurred on future U.S. taxable income and would have a positive effect on our cash flow. There can be no assurance that we will generate the taxable income in the future necessary to utilize these U.S. NOLs and realize the positive cash flow benefit. Also, almost all of our U.S. NOLs have expiration dates. There can be no assurance that, if and when we generate taxable income in the future from operations or the sale of assets or businesses, we will generate such taxable income before our U.S. NOLs expire.
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KINGSWAY FINANCIAL SERVICES INC.
**We have generated U.S. NOLs, but our ability to preserve and use these U.S. NOLs could be limited or impaired by future ownership changes.**
Our ability to utilize the U.S. NOLs after an "ownership change" is subject to the rules of Section 382 of the U.S. Internal Revenue Code of 1986, as amended ("Section 382"). An ownership change occurs if, among other things, the shareholders (or specified groups of shareholders) who own or have owned, directly or indirectly, five percent (5%) or more of the value of our shares or are otherwise treated as five percent (5%) shareholders under Section 382 and the regulations promulgated thereunder increase their aggregate percentage ownership of the value of our shares by more than fifty (50) percentage points over the lowest percentage of the value of the shares owned by these shareholders over a three-year rolling period. An ownership change could also be triggered by other activities, including the sale of our shares that are owned by our five percent (5%) shareholders.
In the event of an ownership change, Section 382 would impose an annual limitation on the amount of taxable income we may offset with U.S. NOLs. This annual limitation is generally equal to the product of the value of our shares on the date of the ownership change multiplied by the long-term tax-exempt rate in effect on the date of the ownership change. The long-term tax-exempt rate is published monthly by the Internal Revenue Service. Any unused Section 382 annual limitation may be carried over to later years until the applicable expiration date for the respective U.S. NOLs. In the event an ownership change as defined under Section 382 were to occur, our ability to utilize our U.S. NOLs would become substantially limited. The consequence of this limitation would be the potential loss of a significant future cash flow benefit because we would no longer be able to substantially offset future taxable income with U.S. NOLs. There can be no assurance that such ownership change will not occur in the future.
**Expiration of our tax benefit preservation plan could increase the probability that we will experience an ownership change as defined under Section 382.**
In order to reduce the likelihood that we would experience an ownership change without the approval of our Board of Directors, our shareholders ratified and approved the tax benefit preservation plan agreement (the "Plan"), dated as of September 28, 2010, between the Company and Computershare Investor Services Inc., as rights agent, for the sole purpose of protecting the U.S. NOLs. The Plan expired on September 28, 2013. There can be no assurance that our Board of Directors will recommend to our shareholders that a similar tax benefit preservation plan be approved to replace the expired Plan; furthermore, there can be no assurance that our shareholders would approve any new tax benefit preservation plan were our Board of Directors to present one for shareholder approval. The expiration of the Plan, without a new tax benefit preservation plan, exposes us to certain changes in share ownership that we would not be able to prevent as we would have been able to prevent under the Plan. Such changes in share ownership could trigger an ownership change as defined under Section 382 resulting in restrictions on the use of NOLs in future periods, as discussed above.
**We will only be able to utilize our U.S. NOLs against the future taxable income generated by companies we acquire if we are able to include the acquired companies in our U.S. consolidated tax return group.**
We have in the past acquired companies and expect to do so in the future. Our ability to include acquired companies in our U.S. consolidated tax return group is subject to the rules of Section 1504 of the U.S. Internal Revenue Code of 1986, as amended. If it were ever determined that an acquired company did not qualify to be included in our U.S. consolidated tax return group, such acquired company would be required to file a U.S. tax return separate and apart from our U.S. consolidated tax return group. In that instance, the acquired company would be required to pay U.S. income tax on its taxable income despite the existence of our U.S. NOLs, which would be a use of cash at the acquired company; furthermore, were the income tax obligation of the acquired company in such instance to be greater than its available cash, we could be obligated to contribute cash to our subsidiary to meet its income tax obligation. There can be no assurance that an acquired company will generate taxable income and, if an acquired company does generate taxable income, there can be no assurance that the acquired company will be allowed to be included in our U.S. consolidated tax return group.
**We have outstanding preferred stock with rights senior to our common stock, and may issue additional preferred stock in the future.**
Our Certificate of Incorporation authorizes the issuance of up to 1,000,000 shares of preferred stock, par value $0.01 per share, without stockholder approval and on terms established by our board of directors. We have outstanding shares of Class B Preferred Stock,Class CPreferred Stock andClass DPreferred Stockwhich will have, and we may issue additional shares of preferred stock in the future which have, rights and preferences that are senior to the rights of our common stock.
**COMPLIANCE RISK**
**If we fail to comply with insurance,securities or other applicable laws or regulatory requirements, our business, results of operations, financial condition or cash flow could be adversely affected.**
Weare subject to numerous laws and regulations, including those applicable to us as a publicly traded holding company listed on the New York Stock Exchange. These laws and regulations delegate regulatory, supervisory and administrative powers to federal, provincial or state regulators.
Any failure to comply with applicable laws or regulations or the mandates of applicable regulators could result in the imposition of fines or significant restrictions on our ability to do business, which could adversely affect our results of operations or financial condition. In addition, any changes in laws or regulations (or the interpretation or application thereof, including changes to applicable case law and legal precedent) could materially adversely affect our business, results of operations or financial condition. It is not possible to predict the future effect of changing federal, state and provincial law or regulation (or the interpretation or application thereof) on our operations, and there can be no assurance that laws and regulations enacted in the future will not be more restrictive than existing laws and regulations.Further, as new laws, regulations, treaties, executive orders, directives, enforcement priorities and similar initiatives and programs are adopted and implemented, we are required to comply or potentially face market access limitations or restrictions on our products entering certain jurisdictions or our ability to provide services within certain jurisdictions, sanctions or other penalties.
Additionally, the rapid evolution and increased adoption of AI technologies and our obligations to comply with emerging laws and regulations may require us to develop AI-specific governance programs, which could entail significant costs or limit our ability to incorporate certain AI capabilities into our products and services. There is also uncertainty in the legal and regulatory landscape for artificial intelligence technologies and any laws, regulations, or industry standards adopted in response to the emergence of artificial intelligence technologies may be burdensome, could entail significant costs, and may restrict or impede our ability to successfully deploy artificial intelligence technologies efficiently and effectively.
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KINGSWAY FINANCIAL SERVICES INC.
**Our business is subject to risks related to litigation.**
In connection with our operations in the ordinary course of business, at times we are named as defendants in various actions for damages and costs allegedly sustained by the plaintiffs. While it is not possible to estimate the loss, or range of loss, if any, that would be incurred in connection with any of the various proceedings at this time, it is possible an individual action could result in a loss having a material adverse effect on our business, results of operations or financial condition.
**Material weaknesses in our internal control over financial reporting could result in material misstatements in our consolidated financial statements.**
We are required to evaluate the effectiveness of the design and operation of our disclosure controls and procedures under the Securities Exchange Act of 1934. In the past, we have identified the existence of material weaknesses in our internal control over financial reporting, which have since been remediated. Although we have remediated material weaknesses previously identified,we can provide no assurance that additional material weaknesses in our internal control over financial reporting will not be identified in the future and that such material weaknesses, if identified, will not result in material misstatements in our consolidated financial statements.
**STRATEGIC RISK**
**The achievement of our strategic objectives****is highly dependent on effective change management.**
Over the past several years, wehave restructured our operating insurance subsidiaries, including exiting states and lines of business, placing subsidiaries into voluntary run-off, terminating managing general agent relationships, hiring a new management team,selling Mendota and CMCand acquiring various companieswith the objective of focusing on our Kingsway Search Xcelerator andExtended Warranty segments, creating a more effective and efficient operating structure and focusing on profitability. These actions resulted in changes to our structure and business processes. While these changes are expected to bring us benefits in the form of a more agile and focused business, success is dependent on management effectively realizing the intended benefits. Change management may result in disruptions to the operations of the business or may cause employees to act in a manner that is inconsistent with our objectives. Any of these events could negatively affect our performance. We may not always achieve the expected cost savings and other benefits of our initiatives.
**We may experience difficulty continuing to retainour holding company staff.**
There can be no assurance that our businesses will produce enough cash flow to adequately compensate and retain staff and to service our other holding company obligations, particularly the interest expense burden of our remaining outstanding debt.
**The highly competitive environment in which we operate could have an adverse effect on our business, results of operations or financial condition.**
The vehicle service agreement market in which we compete is comprised of a number of companies, including a few large companies, which market service agreements on a national basis and have significantly more financial, marketing and management resources than we do, as well as several other companies that are somewhat similar in size to our Extended Warranty companies. There may also be other companies of which we are not aware that may be planning to enter the vehicle service agreement industry.
Competitors in our market generally compete on coverages offered, claims handling, customer service, financial stability and, to a lesser extent, price. Larger competitors of ours benefit from added advantages such as industry endorsements and preferred vendor status. We do not believe that it is in our best interest to compete solely on price. Instead, we focus our marketing on the total value experience, with an emphasis on customer service.While we historically have been able to adjust our product offering to remain competitive when competitors have focused on price, our business could be adversely affected by the loss of business to competitors offering vehicle service agreementsat lower prices.
**Engaging in acquisitions involves risks, and, if we are unable to effectively manage these risks, our business could be materially harmed.**
From time to time, we engage in discussions concerning acquisition opportunities and, as a result of such discussions, may enter into acquisition transactions.
Acquisitions entail numerous potential risks, including the following:
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difficulties in the integration of the acquired business, including implementation of proper internal controls over financial reporting; |
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assumption of unknown material liabilities; |
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diversion of management's attention from other business concerns; |
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failure to achieve financial or operating objectives or other anticipated benefits or synergies and/or anticipated cost savings; and |
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potential loss of customers or key employees. |
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We may not be able to integrate or operate successfully any business, operations, personnel, services or products that we may acquire in the future.
**OPERATIONAL RISK**
**Our Extended Warranty subsidiaries' deferred service fees may be inadequate, which would result in a reduction in our net income and could adversely affect our financial condition.**
Our Extended Warranty subsidiaries' deferred service fees do not represent an exact calculation but are estimates involving actuarial and statistical projections at a given point in time of what we expect to be the remaining future revenue to be recognized in relation to our remaining future obligations to provide policy administration and claim-handling services. The process for establishing deferred service fees reflects the uncertainties and significant judgmental factors inherent in estimating the length of time and the amount of work related to our future service obligations. If we amortize the deferred service fees too quickly, we could overstate current revenues, which may result in a future significant reversal of revenue andadversely affect future reported operating results.
As time passes and more information about the remaining service obligations becomes known, the estimates are appropriately adjusted upward or downward to reflect this additional information. We cannot assure that we will not have unfavorable re-estimations in the future of our deferred service fees and that such unfavorable re-estimations will not have a material adverse effect on our business, results of operations or financial condition. In addition, we have in the past, and may in the future, acquire companies that record deferred service fees. We cannot assure that the deferred service fees of the companies that we acquire are or will be adequate.
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KINGSWAY FINANCIAL SERVICES INC.
**Extended Warranty's reliance on credit unions and dealers, as well as our overall reliance on automobile sales could adversely affect our ability to maintain business.**
The Extended Warranty business markets and distributes vehicle service agreements through a network of credit unions and dealers in the United States. We have competitors that offer similar products exclusively through credit unions and competitors that distribute similar products through dealers. Loss of all or a substantial portion of our existing relationships could have a material adverse effect on our business, results of operations or financial condition. Moreover, our vehicle service agreement businesses rely heavily on the sale of new and used vehicles to drive product sales. Accordingly, a significant decline in new and used automobile sales could have a material adverse effect on our business, results of operations or financial condition.
**Our reliance on a limited number of warranty and maintenance support clients and customers could adversely affect our ability to maintain business.**
We market and distribute our warranty products and equipment breakdown and maintenance support services through a limited number of customers and clients across the United States. Loss of all or a substantial portion of our existing customers and clients could have a material adverse effect on our business, results of operations or financial condition.
**CSuite****s focus on serving private equity backed businesses creates exposure to general mergers and acquisitions ("M&A") activity.**
CSuites business opportunities outside of search are correlated with M&A activities. Clients will often engage CSuites financial executive services to prepare a business for a transaction or to assist with post-acquisition implementation. Accordingly, a major contraction of M&A activity could have a material effect on our business, results of operations or financial condition.
**Ravix's concentration in venture-capital-funded startups creates exposure to the venture capital funding cycles**.
Ravix focuses on venture-capital-funded companies, often in Silicon Valley, as its clients and receives a significant portion of its referrals from service providers focused on servicing the same market. Accordingly, a major contraction of available venture capital funding into companies or industries that Ravix services could have a material adverse effect on our business, results of operations or financial condition.
**SNS may experience increased costs that reduce its revenue and profitability if applicable government regulations change.**
The introduction of new regulatory provisions could materially raise the costs associated with hiring temporary employees such as per diem and travel nurses. For example, a state could impose sales taxes or increase sales tax rates on temporary healthcare staffing services. Furthermore, if government regulations were implemented that limitthe amount SNS is permitted to charge for its services, SNS'profitability could be adversely affected.
**Healthcare is a regulated industry and modifications, inaccurate interpretations or violations of any applicable statutory or regulatory requirements may result in material costs or penalties as well as litigation and could reduce SNS****revenue and profitability.**
Healthcare is subject to many complex federal, state, local and international laws and regulations related to professional licensing, the payment of employees (e.g., wage and hour laws, employment taxes, arbitration agreements, and income tax withholdings, etc.) andgeneral business operations (e.g., federal, state and local tax laws). Failure to comply with allapplicable laws and regulations could result in civil and/or criminal penalties as well as litigation, injunction or other equitable remedies. SNS maintains insurance coverage for employment claims, however, SNS'insurance coverage may not be sufficient to fully cover all claims against SNS or may not continue to be available to SNS at a reasonable cost or without coverage exclusions. If SNS'insurance does not cover the claim or SNS is otherwise not able to maintain adequate insurance coverage, SNS may be exposed to substantial liabilities that would materially impact its business and financial performance.
We cannot ensure that our compliance controls, policies, and procedures will in every instance protect us from acts committed by our employees, agents, contractors, or collaborators that would violate the laws or regulations of the jurisdictions in which we operate, including, without limitation, healthcare, employment, foreign corrupt practices, trade restrictions and sanctions, environmental, competition, and privacy laws and regulations.
**SNS****profitability could be adversely impacted if SNS is unable to adjust its nurse pay rates as the bill rates decline.**
SNS does not have control over the bill rate from hospitals and negotiates the pay rates with the nurses who work with the company. If the bill rates decline,SNS will need to renegotiate the pay rates with its nurses and successfully recruit new nurses at lower pay rates. SNS'ability to recruit and retain nurses is contingent on SNS'ability to offer attractive assignments with competitive wages and benefits or payments.
**SNS may be unable to recruit and retain enough quality nurses to meet the demand.**
SNS relies on its ability to attract, develop, and retain nurses who possess the skills, experience and required licenses necessary to meet the specified requirements of the healthcare facilities. SNS competes for nurses with other temporary healthcare staffing companies. SNS relies on word-of-mouth referrals, as well as social and digital media to attract qualified nurses. If SNS'social and digital media strategy is not successful, SNS'ability to attract qualified nurses could be negatively impacted. Moreover, the competition for nurses remains high as many areas of the United States continue to experience a shortage of qualified nurses.
**Image Solutions may be unable to recruit and retain enough quality IT professionals to meet the demand.**
Difficulties in finding and retaining skilled talent in the IT and managed services sector remains a critical risk. The demand for qualified professionals often outpaces supply, particularly in competitive markets, which could hinder Image Solutions ability to scale its operations or maintain service quality. Thiscould significantly and adversely impact Image Solutions' growth trajectory, operational performance, and financial outcomes.
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KINGSWAY FINANCIAL SERVICES INC.
**Revenue and growth of certain of our business linesdepend on sustained customer retention and repeat work; the loss of key customers or reduced repeat business could harm results.**
While many of our businesseshave historically experienced strong customer retention and integration into client workflows, including Roundhouse and our plumbing subsidiaries, performance depends on continuing to win repeat work and renew service activity across their customer bases. Adverse changes in customer preferences, increased competition, customer consolidation, or dissatisfaction with service quality, turnaround time, or response times could cause customers to reduce spendingor switch to competitors. Because many services are mission-critical and time-sensitive, service failures, delays, safety incidents, or performance issues could lead to the loss of customers and reputational harm.
**Roundhouse faces regional and industry-specific risks given concentration in the Permian Basin and customer segment of midstream natural gas pipeline operators and utilities.**
Roundhouses revenues and operating results may be affected by regional economic conditions, customer capital spending, and operational activity levels in the Permian Basin and related energy and utility markets. Any reduction in natural gas infrastructure spending, pipeline maintenance activity, or other adverse developments affecting Roundhouses customer base could materially and adversely affect Roundhouses revenue, profitability, and cash flows.
**Roundhouse****s business includes equipment sales that may be subject to supply chain constraints, delivery delays, and pricing pressures.**
Roundhouse sells new electric motors, often ordered to customer specifications, and may provide installation. Equipment sales may be impacted by supplier lead times, availability of components, transportation constraints, and vendor pricing changes. Delays in sourcing or delivering motors or other electrical equipment could delay customer projects and revenue recognition, while cost inflation or inability to pass through price increases could pressure margins. Supply disruptions could also impair Roundhouses ability to meet customer expectations and maintain customer relationships.
**Roundhouse faces inherent health, safety, and operational risks associated with providing mission-critical field services at customer sites.**
Roundhouse performs on-site services such as preventative maintenance, infrared scans, VLF cable testing, and vibration analysis, as well as installation services. Field work and industrial service environments inherently carry risks of employee injury, property damage, service interruption, and other incidents. Accidents or safety incidentswhether caused by Roundhouse, customers, subcontractors, or third partiescould result in litigation, higher insurance costs, reputational damage, operational disruptions, and regulatory scrutiny, any of which could materially adversely affect results.
**Certain of our businessoperations rely on the availability of skilled labor and effective execution in field services and shop repair; labor shortages, wage inflation, or operational disruptions could reduce margins and impair service levels.**
Roundhouses business includes field maintenance and testing and in-shop motor repair activities, and our plumbing subsidiaries business includes installation and repair services, both of which require specialized technical skills and rapid response. The ability to recruit, train, and retain qualified technicians and other personnel is critical to operating performance. A constrained labor market, increasing wage rates, higher employee turnover, or an inability to maintain adequate staffing levels could lead to longer turnaround times, reduced service quality, missed deadlines, or the inability to accept additional work, each of which could materially adversely affect our financial performance.
**Our skilled trades operations involve inherent safety risks that could result in worker injuries, property damage, regulatory liabilities and increased operating costs.**
The services provided by certain of our business lines routinely involve hazardous conditions, including work in confined spaces, at heights, around heavy machinery, and with potentially dangerous materials. Any injuries to our employees or subcontractors, incidents of property damage, worker compensation claims or citations from regulatory authorities could result in increased insurance premiums, litigation, regulatory enforcement actions, project delays, reputational harm and increased operating costs.
**Changes in the skilledtrade customer demand or customer concentration in certain markets could adversely affect our results of operations.**
A limited number of customers or markets may represent a significant portion of our revenue. The loss of one or more key customers, reduced demand from significant customer segments or adverse changes in customer buying patterns could materially and adversely impact our financial condition and results of operations.
**Disruptions or security failures in our information technology systems, including as a result of cybersecurity incidents,could create liability for us and/or limit our ability to effectively monitor, operate and control our operations and adversely affect our reputation, business, financial condition, results of operation and cash flows.**
Our information technology systems facilitate our ability to monitor, operate and control our operations.These information systems and other digital technology are subject to the risk of increasingly sophisticated cybersecurity attacks, incursions or other incidents such as unauthorized access to data and systems, loss or destruction of data, computer viruses, or other malicious code, phishing and cyberattacks, and other similar events. These incidents could arise from numerous sources outside our control, including fraud or malice on the part of third parties, accidental technological failure, electrical or telecommunication outages, failures of computer servers or other damage to our property or assets, human error, complications encountered as existing systems are maintained, repaired, replaced or upgraded, or outbreaks of hostilities or terrorist acts.
Further, changes or modifications to our information technology systems could cause disruption to our operations or cause challenges with respect to our compliance with laws, regulations or other applicable standards. For example, delays, higher than expected costs or unsuccessful implementation of new information technology systems could adversely affect our operations. In addition, any disruption in or failure of our information technology systems to operate as expected could, depending on the magnitude of the problem, adversely affect our business, financial condition, results of operation and cash flows, including by limiting our capacity to monitor, operate and control our operations effectively. Failures of our information technology systems could also lead to violations of privacy laws, regulations, trade guidelines or practices related to our customers and employees.
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KINGSWAY FINANCIAL SERVICES INC.
Given the rapidly evolving nature of cybersecurity incidents, there can be no assurance that the controls we have designed and implemented to prevent or limit the effects of cybersecurity incidents or attacks will be sufficient in preventing or limiting the effects of all such incidents or attacks or that we will be able to avoid a material impact to our systems should such incidents or attacks occur. If our disaster recovery plans do not work as anticipated, or if the third-party vendors to which we have outsourced certain information technology or other services fail to fulfill their obligations to us, our operations may be adversely affected.Additionally, our third-party vendors face variouscybersecuritythreats and also may suffercybersecurityincidents or other security breaches.
Any of these circumstances could adversely affect our reputation, business, financial condition, results of operation and cash flows.
**Our success depends on our ability to price accurately the risks we underwrite.**
Our results of operation or financial condition depend on our ability to price accurately for a wide variety of risks. Adequate rates are necessary to generate revenues sufficient to pay expenses and to earn a profit. To price our products accurately, we must collect and properly analyze a substantial amount of data; develop, test and apply appropriate pricing techniques; closely monitor and timely recognize changes in trends; and project both severity and frequency of losses with reasonable accuracy. Our ability to undertake these efforts successfully, and as a result, price our products accurately, is subject to a number of risks and uncertainties, some of which are outside our control, including:
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the availability of reliable data and our ability to properly analyze available data; |
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the uncertainties that inherently characterize estimates and assumptions; |
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our selection and application of appropriate pricing techniques; and |
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changes in applicable legal liability standards and in the civil litigation system generally. |
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Consequently, we could underprice risks, which would adversely affect our results, or we could overprice risks, which would reduce our sales volume and competitiveness. In either case, our results of operation could be materially and adversely affected.
**HUMAN RESOURCES RISK**
**Our business depends upon key employees, and if we are unable to retain the services of these key employees or to attract and retain additional qualified personnel, our business could be adversely affected.**
Our success at improving our performance will be dependent in part on our ability to retain the services of our existing key employees and to attract and retain additional qualified personnel in the future. The loss of the services of any of our key employees, or the inability to identify, hire and retain other highly qualified personnel in the future, could adversely affect our results of operations.
**Item 1B. Unresolved Staff Comments**
None.
**Item 1C. Cybersecurity**
Identifying, assessing, and managing material cybersecurity risks is an important component of our overall enterprise risk management program.
Given our company structure, the management of cybersecurity risks involves coordination between the parent company and our subsidiaries. Senior IT leadership at the parent company and each subsidiary are responsible for developing cybersecurity programs appropriate for their respective entities, including as *may*be required by applicable law or regulation. The parent company has issued an IT policy that is required to be adhered to by each subsidiary, and such policy is reviewed and updated annually. It is the responsibility of each subsidiary to communicate any items required by the IT policy to the parent company.
The parent company and each of our subsidiaries are responsible for assessing and identifying material risks from cybersecurity threats, as each entity has their own unique IT infrastructure. However, based on experience, cybersecurity threats, including those resulting from any previous cybersecurity incidents, have not materially affected our Company and are not reasonably likely to materially affect our Company, including our business strategy, results of operations, or financial condition.
We have various processes for managing and mitigating risks from cybersecurity threats:
| | | We have an employee education program that is designed to raise awareness ofcybersecuritythreats to reduce our vulnerability as well as to encourage consideration ofcybersecurityrisks across functions. | |
| | | Our IT policy requires minimum password lengths and for passwords to be changed on a regular basis.We maintain back-ups and disaster recovery plans to restore our information in the event of an incident. | |
In some locations, we *may*use third-party IT providers to assist with maintaining our IT structure, including cybersecurity monitoring and testing.
*Governance*
Our Board of Directors plays an important role in our risk oversight and discharges its duties both as a full board and through its committees. Our Board of Directors has assigned oversight of cybersecurity risk management to the Audit Committee.
The Audit Committee receives reports from senior management of any cybersecurity incidents that may have occurred at the parent company or any of its subsidiaries. If material, the Audit Committee will bring it to the attention of the Board of Directors as promptly as practicable. If not material, the Audit Committee will bring it to the attention of the Board of Directors at its next regularly scheduled meeting.
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KINGSWAY FINANCIAL SERVICES INC.
Senior management (currently the Chief Financial Officer) receives reports from IT leadership at the parent company and each subsidiary. These individuals expertise in IT and cybersecurity generally has been gained from a combination of education, including relevant degrees and/or certifications, and prior work experience.
Information regarding cybersecurity risks and incidents *may*be elevated to senior leadership through a variety of different channels, including discussions between or among subsidiary and parent company management. It is the responsibility of each subsidiary to communicate any items required by the IT policy to the parent company.
**Item 2. Properties**
**Leased Properties**
Kingsway Search Xceleratorleasesfacilities withan aggregate square footage of approximately146,637 attenlocations in eightstates. The latest expiration date of the existing leases is in June2035.The facilities consist of office space, as well as storage and warehousing spaces.
Extended Warranty leases facilities with an aggregate square footage of approximately16,825at fourlocations in threestates. The latest expiration date of the existing leases is in March2032.
The Company leases a facility for its corporate office with an aggregatesquare footage of approximately3,219atone location inonestate. The expiration date of the existing lease is in February 2028.
The properties described above are in good condition. We consider our office facilities suitable and adequate for our current levels of operations.
**Item 3. Legal Proceedings**
In connection with its operations in the ordinary course of business, the Company and its subsidiaries are named as defendants in various actions for damages and costs allegedly sustained by the plaintiffs. While it is not possible to estimate reasonably the loss, or range of loss, if any, that would be incurred in connection with any of the various proceedings at this time, it is possible an individual action could result in a loss having a material adverse effect on the Company's business, results of operations or financial condition.
SeeNote 25, "Commitments and Contingent Liabilities,"to the ConsolidatedFinancial Statements, for further information regarding the Company's legal proceedings.
**Item 4. Mine Safety Disclosures**
Not applicable.
**Part II**
**Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities**
**Market Information**
Our common shares are listed on the New York Stock Exchange ("NYSE") under the trading symbol "KFS."
The following table sets forth, for the calendar quarters indicated, the high and low sales price for our common shares as reported on the NYSE.
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NYSE |
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High - US$ |
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Low - US$ |
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2025 |
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Quarter 4 |
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$ |
16.13 |
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$ |
12.30 |
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Quarter 3 |
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16.57 |
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13.36 |
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Quarter 2 |
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14.32 |
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7.57 |
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Quarter 1 |
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8.31 |
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7.29 |
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2024 |
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Quarter 4 |
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$ |
9.55 |
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$ |
8.17 |
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Quarter 3 |
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8.78 |
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7.69 |
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Quarter 2 |
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9.29 |
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7.86 |
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Quarter 1 |
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9.34 |
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8.01 |
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**Shareholders of Record**
As of March 11, 2026the closing sales price of our common shares as reported by the NYSE was $11.00per share.
As of March 12, 2026, we had 28,946,664common shares issued and outstanding. As of March 12, 2026, there were13shareholders of record of our common stock. The number of shareholders of record includes one single shareholder, Cede & Co., for all of the shares held by our shareholders in individual brokerage accounts maintained at banks, brokers and institutions.
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KINGSWAY FINANCIAL SERVICES INC.
**Dividends**
The Company has not declared a dividend on its common sharessince the first quarter of 2009. The declaration and payment of dividends is subject to the discretion of our Board of Directors after taking into account many factors, including financial condition, results of operations, anticipated cash needs and other factors deemed relevant by our Board of Directors. For a discussion of our cash resources and needs, see the "Liquidity and Capital Resources" section of MD&A.
**Securities Authorized for Issuance under Equity Compensation Plans**
The information required related to securities authorized for issuance under equity compensation plans is incorporated herein by reference to the Proxy Statement for our2025 Annual Meeting of Shareholders, which will be filed with the SEC no later than 120 days after the end of our fiscal year ended December 31, 2025.
**Recent Sales of Unregistered Securities**
During the years ended December 31, 2025and December 31, 2024, the Companyissued equity securities that were not registered under the Securities Actof 1933, as amended (the "Securities Act"), as described below. Thesetransactions did not involveany underwriters, underwriting discounts or commissions,or any public offering. Thetransactions described belowwereexempt from the registration requirements of the Securities Act either underSection 4(a)(2)of the Securities Actand/orRule 506of Regulation D promulgated thereunder. All recipients had adequate access, through their relationships with the Company, to information about the Company.
On September 24, 2024, the Company entered into certain Subscription Agreements pursuant to which the Company issued and sold in a private placementto accredited investors in the aggregate 330,000 shares of a newly created class of preferred stock designated Class B Preferred Stock, with a liquidation preference of $25.00 per share ("Class B PreferredStock"), for aggregate proceeds of $8.3 million. The Company'sChief Executive Officer and President, certain members of the Company's Board of Directors,members of the KSX Advisory Boardand another related party invested a total of$5.2millionin the Class B Preferred Stock private placement transaction.
On February 12 through February 24, 2025, the Company entered into certain Subscription Agreements pursuant to which the Company issued and sold in a private placementto accredited investors in the aggregate 240,000 shares of a newly created class of preferred stock designated Class CPreferred Stock, with a liquidation preference of $25.00 per share ("Class CPreferredStock"), for aggregate proceeds of $6.0 million. Certain members of the Company's Board of Directors and another related party invested a total of$3.7 millionin theClass CPreferred Stock private placement transaction.
On May 8, 2025, the Company entered into certain Subscription Agreements pursuant to which the Company issued and sold in a private placementto accredited investors in the aggregate 80,000 shares of a newly created class of preferred stock designated Class DPreferred Stock, with a liquidation preference of $25.00 per share ("Class DPreferredStock"), for aggregate proceeds of $2.0 million. Certain members of the Company's Board of Directorsinvested a total of$2.0 millionin theClass DPreferred Stock private placement transaction.
**Issuer Purchases of Equity Securities**
On March 21, 2023, the Company's Board of Directorsapproved a securityrepurchase program under which the Company is authorized to repurchase up to $10.0 millionof its currently issued and outstanding securitiesthrough March 22,2024.On March 22, 2024, the Company entered into a one year extension of its existing share repurchase program. As amended, the share repurchase program expired on March 21, 2025; however, in January 2025 the Company fully utilized the authorized amount.SeeNote 20,"Shareholders' Equity," for further discussion of the share repurchase program.
There were norepurchases by us of our securities during the quarter ended December 31, 2025.
**Item 6. Reserved.**
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KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
**Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**
The following management's discussion and analysis ("MD&A") of our financial condition and results of operations should be read together with the Consolidated Financial Statements included in Part II, Item 8 of this2025 Annual Report.
**OVERVIEW**
Kingsway is aholding company with operating subsidiaries located in the United States. The Companyis the only publicly-traded US company employing the Search Fund model to acquire and build great businesses and owns and operates a collection of high-quality B2B and B2C services companies that are asset-light, growing, profitable, and that have recurring revenues. Kingsway seeks to compound long-term shareholder value on a per share basis via its decentralized management model, its talented team of operators, and its tax-advantaged corporate structure. Kingsway conducts its business through tworeportable segments: Kingsway Search Xcelerator and Extended Warranty.
Kingsway Search Xceleratorincludes the Company's subsidiaries, CSuite Financial Partners, LLC ("CSuite"), Ravix Group, Inc. ("Ravix"),Secure Nursing Service LLC ("SNS"), Systems Products International, Inc. ("SPI"),Digital DiagnosticsInc. ("DDI"),Image Solutions, LLC ("Image Solutions"), Roundhouse Electric & Equipment Co., Inc. ("Roundhouse"), M.L.C. Plumbing, LLC (d/b/a Bud's Plumbing Service, "Bud's Plumbing"), Advanced Plumbing & Drain, LLC (d/b/a AAA Advanced Plumbing &Drain, "Advanced Plumbing") and Efficient Plumbing, LLC (d/b/a Southside Plumbing, "Southside Plumbing").Throughout this2025 Annual Report, the term "Kingsway Search Xcelerator" or "KSX" is used to refer to this segment.
CSuite is a professional services firmthat provides experienced chief financial officerand other finance professionals to its clients through a variety of flexible offerings. These offerings include project, fractional,and interim staffing of senior finance professionals, CFO mentoring, board advisory services, and executive search services for permanent placements for its clients throughout theUnited States.
Ravixprovides outsourced financial services and human resources consultingto its clients on a fractional basis for both projects with definitive endpoints and ongoing engagements of indeterminate length for short or long duration engagements for customers throughout theUnited States.
SNSprovideshealthcare staffing services to acute healthcare facilities on a contract or per diem basis in the United States, primarily in California.
SPI providessoftware productscreated exclusively to serve the management needs of all types of shared-ownership properties globally.
DDI provides outsourced 24 hours a day and 7 days per week ("24/7")cardiactelemetry services forgeneral acute care,long-term acute careand inpatient rehabilitation hospitals.Outsourcing cardiac monitoringallows hospitals to eliminate personnel callouts and human resourcesissues, remove distractions from onsite operations, and free up facility staff to assist directly with patient care.DDI currently has a presence in
42states and Puerto Rico.
Image Solutionsprovides comprehensive information technologymanaged services, including equipment sales, service, and helpdesk support to customers primarily inNorth Carolina, Kansas, Georgia, Kentucky and Tennessee.
Roundhouseprovidesindustrial-scale electric motor solutions, including field maintenance, in-shop repair, testing, and new motor salesprimarily to midstream natural gas pipeline operators and utilities across the Permian Basin.
Kingsway Skilled Trades includes Bud's Plumbing, Advanced Plumbing and Southside Plumbing. Kingsway Skilled Tradesprovides acomprehensive range of plumbing services, including emergency repairs, drain cleaning, water heater installations, and water treatment solutions to residential and commercial customers, primarily in Evansville, Indiana (Bud's Plumbing), Cleveland, Ohio (Advanced Plumbing) and Omaha, Nebraska (Southside Plumbing).
Extended Warranty includes the following subsidiaries of the Company: IWS Acquisition Corporation ("IWS"), Geminus Holding Company, Inc. ("Geminus"), PWI Holdings, Inc. ("PWI")and Trinity Warranty Solutions LLC ("Trinity").Throughout this2025 Annual Report, the term "Extended Warranty" is used to refer to this segment.
IWS is a licensed motor vehicle service agreement company and is a provider of after-market vehicle protection services distributed by credit unions in 28 states and the District of Columbia to their members, with customers in all fiftystates.
Geminus primarily sells vehicle service agreements to used car buyers across the United States, mainly through its subsidiary, The Penn Warranty Corporation ("Penn"). Penn distributes these products in 46statesvia independent used car dealerships and franchised car dealerships.
PWI markets, sells and administers vehicle service agreements to used car buyers in47 states via independent used car and franchise network of approved automobile and motorcycle dealer partners. PWIs business model is supported by an internal sales and operations team.
Trinity sells heating, ventilation, air conditioning ("HVAC"), standby generator, commercial LED lighting and commercialrefrigerationwarranty products and provides equipment breakdown and maintenance support services to companies across the United States. As a seller of warranty products, Trinity markets and administers product warranty contracts for certain new and used products in the HVAC, standby generator, commercial LED lighting and commercial refrigeration industries throughout the United States. Trinity acts as an agent on behalf of the third-party insurance companies that underwrite and guaranty these warranty contracts. Trinity does not guaranty the performance underlying the warranty contracts it sells. As a provider of equipment breakdown and maintenance support services, Trinity acts as a single point of contact to its clients for both certain equipment breakdowns and scheduled maintenance of equipment. Trinity will provide such repair and breakdown services by contracting with certain HVAC providers.
**NON U.S.-GAAP FINANCIAL MEASURE**
Throughout this2025 Annual Report, we present our operations in the way we believe will be most meaningful, useful and transparent to anyone using this financial information to evaluate our performance. In addition to the U.S. GAAP presentation of net loss, we present segment operating income as a non-U.S. GAAP financial measure, which we believe is valuable in managing our business and drawing comparisons to our peers. Below is a definition of our non-U.S. GAAP measure and its relationship to U.S. GAAP.
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KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
**Segment Operating Income**
Segment operating incomerepresents one measure of the pretax profitability of our segments and is derived by subtracting direct segment expenses from direct segment revenues. Revenues and expenses presented in the consolidated statements of operations are not subtotaled by segment; however, this information is available in total and by segment inNote 22, "Segmented Information,"to the Consolidated Financial Statements, regarding reportable segment information. The nearest comparable U.S. GAAP measure to total segment operating income is operating (loss) incomethat, in addition to total segment operating income, includes corporate general and administrative expenses and excludes segment non-operating other revenue, net.
**SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ESTIMATES**
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and classification of assets and liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates. Estimates and their underlying assumptions are reviewed on an ongoing basis. Changes in estimates are recorded in the accounting period in which they are determined.
The Companys most critical accounting policies are those that are most important to the portrayal of its financial condition and results of operations, and that require the Company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. The Company has identified the following as its most critical accounting policies and judgments. Although management believes that its estimates and assumptions are reasonable, they are based upon information available when they are made, and therefore, actual results may differ from these estimates under different assumptions or conditions.
**Revenue Recognition**
Service fee and otherrevenue represents vehicle service agreement fees, maintenance support service fees, warranty product commissions, business services consulting revenue, healthcareservices revenue, software license and support revenue, motor sales and repair service revenue andskilled trades repair and service revenue. Revenue is based on terms of various agreements with credit unions, consumers andbusinesses. Customers either pay in full at the inception of a warrantycontract orcommission product sale, or when consulting, healthcare, software license and support,motor sales and repair and skilled tradesservices are billed, or on terms subject to the Companys customary credit reviews.
The Companys revenue recognition policy follows guidance from ASC 606, *Revenue from Contracts with Customers,*which utilizes a five-step revenue recognition framework. The Company identifies the contract with its customers and then identifies the performance obligations in the contracts. The transaction price is determined based on the amount we expect to be entitled to in exchange for providing the promised services to the customer. The transaction price is allocated to each distinct performance obligation on a relative standalone selling price basis. Revenue is recognized when performance obligations are satisfied.
Certain of the Companys contracts with customers include obligations to provide multiple services to a customer. Determining whether services are considered distinct performance obligations that should be accounted for separately from one another requires judgment. Revenue from software license and supportcontains multiple distinct performance obligations that are accounted for separately.
Judgment is required to determine the standalone selling price ("SASP") for each distinct performance obligation. Revenue is allocated to each performance obligation based on the relative SASP. SASP are not directly observable in the softwarelicense and support contracts forthe separate performance obligations.
For software license and support contracts, theCompany's software licenses are sold as term licenses, and the contracts includesoftware support services, which are accounted for as separate performance obligations.Revenue is recognized upfront at the point in time when control is transferred, which is defined as the point in time when the customer can use and benefit from the license.The Companyrecognizesthe portion of the transaction price allocated to the software license on a residual basis. The residual basis is used to allocate revenue when the contract arrangement includes a software license and has at least one performance obligation for which the SASPis observable, such as the software support services.The residual methodis used as the selling price for software licenses in circumstances when the transaction price is highly variable and the SASP is not discernable from past transactions or other observable evidence.The Companyevaluates the residual approach estimate compared to all available observable data in order to conclude the estimate is representative of its SASP. Software support revenue is recognized ratably over the contract period as services are rendered. The SASP of software support is consistent with the stand-alone pricing of subsequent software support renewals.For certain SPI contracts, the transaction price ofthe software license is billed in installments, typically overa three to five yearperiod.The Company allocates a portion of the consideration received from these arrangements to a financing component when it determines that a significant financing component exists.The financing component is subsequently recognized as interest incomeseparate from software license and support fee revenue over the termof the arrangement with the customer. Pursuant to practical expedients afforded under ASC 606, the Company does not recognize a financing component for software license sales that have a term of one year or less.
In certain jurisdictions the Company is required to refund to a customer a pro-rata share of the vehicle service agreement fees if a customer cancels the agreement prior to the end of the term. Depending on the jurisdiction, the Company may be entitled to deduct from the refund a cancellation fee and/or amounts for claims incurred prior to cancellation. While refunds vary depending on the term and type of product offered, historically refunds have averaged6.65%to10.10%of the original amount of the vehicle service agreement fee. Revenues recorded by the Company are net of variable consideration related to refunds and the associated refund liability is included in accrued expenses and other liabilities. The Company estimates refunds based on the actual historical refund rates by warranty type taking into consideration current observable refund trends in estimating the expected amount of future customer refunds to be paid at each reporting period.
Refer to Note 2, "Summary of Significant Accounting Policies," to the Consolidated Financial Statements for information about our revenue recognition accounting policies.
20
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KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
**Valuation of Fixed Maturity Investments**
For fixed maturity investments, we use observable inputs such as quoted prices for similar assets in active markets; quoted prices for identical or similar assets in markets that are inactive; or valuations based on models where the significant inputs are observable or can be corroborated by observable market data. We do not have any fixed maturities in our portfolio that require us to use unobservable inputs. The Company engages a third-party vendor who utilizes third-party pricing sources and primarily employs a market approach to determine the fair values of our fixed maturities. The market approach includes primarily obtaining prices from independent third-party pricing services as well as, to a lesser extent, quotes from broker-dealers. Our third-party vendor also monitors market indicators, as well as industry and economic events, to ensure pricing is appropriate. All classes of our fixed maturities are valued using this technique. We have obtained an understanding of our third-party vendors valuation methodologies and inputs. Fair values obtained from our third-party vendor are not adjusted by the Company.
Gains and losses realized on the disposition of investments are determined on the first-in first-out basis and credited or charged to the consolidated statements of operations. Premium and discount on investments are amortized using the interest method and charged or credited to net investment income.
Fixed maturity investments are exposed to various risks, such as interest rate risk, credit risk and overall market volatility risk. Accordingly, it is reasonably possible that changes in the fair values of the Companysinvestments reported at fair value will occur in the near term and such changes could materially affect the amounts reported in the consolidated financial statements.
**Impairment Assessment of Investments**
The establishment of animpairment loss on an investment requires a number of judgments and estimates.A consistent and systematic process is followed for determining and recording an impairment loss, including the evaluation of securities in an unrealized loss position and securities with an allowance for credit losses.
We perform a quarterly analysis of our investments classified as available-for-sale fixed maturity investmentsto determine if an impairment loss has occurred.
If the decline in fair value is due to credit factors and the Company does not expect to receive cash flows sufficient to support the entire amortized cost basis, the credit loss is reported in the consolidated statements of operations in the period that the declines are evaluated. Significant judgment is required in the determination of whether a credit loss has occurred for a security. The Companyconsiders all available evidence when determining whether a security requires a credit allowance to be recorded, including the following:
|
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theextent to which the fair value has been less than amortized cost; |
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thefinancial condition and expected near-term and long term prospects of the issuer; |
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whether the issuer is current with interest and principal payments; |
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credit ratings on the security or changes in ratings over time; |
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general market conditions, industry, sector or other specific factors; and |
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whether the Companyexpects to receive cash flows sufficient to recover the entire amortized cost basis of the security. |
|
As a result of the analysis performed, the Company recorded no impairment lossesrelated to available-for-sale fixed maturity investmentsduring theyears ended December 31, 2025andDecember 31, 2024.
See "Investments" section below andNote 7, "Investments,"to the Consolidated Financial Statements for further information.
**Valuation of Limited Liability Investment, at Fair Value**
Limited liability investment, at fair value represents the underlying investments of the Companys consolidated entity,Argo Holdings Fund I, LLC ("Argo Holdings"). The Company accounts for thisinvestmentat fair value with changes in fair value reported in the consolidated statements of operations.
Argo Holdings makes investments in limited liability companies and limited partnerships that hold investments in private operating companies.The fair value of Argo Holdings' limited liability investments that hold investments in private operating companies is valued using a market approach.
Refer toNote 23, "Fair Value of Financial Instruments,"to the Consolidated Financial Statements for further information.
**Valuation of Deferred Income Taxes**
The provision for income taxes is calculated based on the expected tax treatment of transactions recorded in our consolidated financial statements. In determining our provision for income taxes, we interpret tax legislation in a variety of jurisdictions and make assumptions about the expected timing of the reversal of deferred income tax assets and liabilities and the valuation of deferred income taxes.
The ultimate realization of the deferred income tax asset balance is dependent upon the generation of future taxable income during the periods in which the Company's temporary differences reverse and become deductible. A valuation allowance is established when it is more likely thannot that all or a portion of the deferred income tax asset balance will not be realized. In determining whether a valuation allowance is needed, management considers all available positive and negative evidence affecting specific deferred income tax asset balances, including the Company's historical and anticipated future performance, the reversal of deferred income tax liabilities, and the availability of tax planning strategies.
21
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KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
Objective positive evidence is necessary to support a conclusion that a valuation allowance is not needed for all or a portion of a company's deferred income tax asset balances when significant negative evidence exists. Cumulative losses are the most compelling form of negative evidence considered by management in this determination. To the extent a valuation allowance is established in a period, an expense must be recorded within the income tax provision in the consolidated statements of operations. As of December 31, 2025, the Company maintains a valuation allowance of $129.4 million. The largest component of the U.S. deferred income tax asset balance relates to tax loss carryforwards that have arisen as a result of losses generated from the Company's U.S. operations. Uncertainty over the Company's ability to utilize these losses over the short-term has led the Company to record a valuation allowance.
Future events may result in the valuation allowance being adjusted, which could materially affect our financial position and results of operations. If sufficient positive evidence were to arise in the future indicating that all or a portion of the deferred income tax assets would meet the more likely than not standard, all or a portion of the valuation allowance would be reversed in the period that such a conclusion was reached, which wouldbeneficially impact our results ofoperations.
**Accounting for Business Combinations**
The Company evaluates acquisitionsin accordance with Accounting Standards Codification 805, *Business Combinations*("ASC 805"),to determine if a transaction representsan acquisition of a businessor an acquisitionof assets.
An acquisition of a business represents a business combination. The acquisition method of accounting is used to account for a business combinationby assigning the purchase price to tangible and intangible assets acquired and liabilities assumed.Assets acquired and liabilities assumed are recorded at their fair values and the excess of the purchase price over the amounts assigned is recorded as goodwill. We determine the fair value of such assets and liabilities, often in consultation with third-party valuation advisors. Determining the fair value of assets acquired and liabilities assumed requires significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue, costs and cash flows, discount rates, royalty rates, and selection of comparable companies. The resulting fair values and useful lives assigned to acquisition-related intangible assets impact the amount and timing of future amortization expense. Acquired intangible assets with finite lives are amortized over their estimated useful lives. Adjustments to fair value assessments are recorded to goodwill over the measurement period, which is not to exceed one year but is considered complete once all necessary information is available to management to estimate fair value. Acquisition costs related to a business combinationare expensed as incurred.
**Valuation and Impairment Assessment of Intangible Assets**
Intangible assets are recorded at their estimated fair values at the date of acquisition. Intangible assets with definite useful lives consist of developed technologyandcustomer relationships. Intangible assets with definite useful lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. If circumstances require that a definite-lived intangible asset be tested for possible impairment, we first compare the undiscounted cash flows expected to be generated by that definite-lived intangible asset to its carrying amount. If the carrying amount of the definite-lived intangible asset is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value.
Indefinite-lived intangible assets consist oftrade names, whichare assessed for impairment annually as of November 30, or more frequently if events or circumstances indicate that the carrying value may not be recoverable. The Company may perform its impairment test for any indefinite-lived intangible asset through a qualitative assessment or elect to proceed directly to a quantitative impairment test;however, the Company may resume a qualitative assessment in any subsequent period if facts and circumstances permit.
Under the qualitative approach, the impairment test consists of an assessment of whether it is more likely than not that an indefinite-lived intangible asset is impaired. If the Company elects to bypass the qualitative assessment for any indefinite-lived intangible asset, or if a qualitative assessment indicates it is more likely than not that the estimated carrying amount of such asset exceeds its fair value, the Company performs a quantitative test. Factors that could trigger a quantitative impairment review include, but are not limited to, significant under performance relative to historical or projected future operating results and significant negative industry or economic trends.
Ateach quarter end of the first throughthird quarters of
2025 and
2024 and at November 30,
2025 and November 30,
2024
,the Company determined that certain trade names should be further examined under a quantitative approach due to actual revenue coming in lower than previous projections.
Based upon thesequantitative assessments,the Company recordedimpairment charges of
$0.7millionand
$2.1 millionduring
2025and
2024, respectively,related to the CSuite, Ravix and SNS indefinite-lived trade names. The fair value of the CSuite, Ravix and SNS trade names wereestimated using the relief-from-royalty method. The significant unobservable inputsused in the relief-from-royalty method, which are level 3 inputs, include aroyalty rate and discount rate. The reduction in value is primarily due to higher discount rates and a reduction in projected revenue. Future impairments may be recorded if discount rates increase further, or if actual revenue falls short of current projections.The valuation of these assets is not dependent on the underlying profit or loss generated by the respective business. Therefore, even if a change in revenue does not have a significant impact on operating results, it could significantly impact the fair value of the trade name.
Additional information regarding our intangible assets is included i
n Note 9,"Intangible Assets," to the Consolidated Financial Statements.
**Goodwill Recoverability**
Goodwill is assessed for impairment annually as of November30, or more frequently if events or circumstances indicate that the carrying value may not be recoverable. In evaluating the recoverability of goodwill, the Company estimates the fair value of its reporting units and compares it to the carrying value. If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to such excess.
For the reporting units within Kingsway Search Xcelerator, the Company estimates the fair value usinga valuation technique based on observed market capitalization multiples of EBITDA from its recent acquisitions of similar businesses.
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KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
For Extended Warranty, the Company estimates the fair value using a valuation technique based on observed market capitalization multiples of earnings before interest, taxes, depreciation and amortization ("EBITDA") for a group of publicly traded insurance services and insurance brokerage companies, an approach that the Company views as a technique consistent with the objective of measuring fair value consistent with prior years assessments performed.
Estimating the fair value of reporting units requires the use of significant judgments that are based on a number of factors including actual operating results, internal forecasts, market observable pricing multiples of similar businesses and comparable transactions and determining the appropriate discount rate and long-term growth rate assumptions. There are inherent uncertainties related to these factors and managements judgment in applying them to the analysis of goodwill impairment. It is reasonably possible that the judgments and estimates described above could change in future periods.
Although the Company believes its estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting units, the amount of the goodwill impairment charge, or both.
Based upon the assessment performed at November 30,2025,no impairment charges were recorded against goodwill in 2025. Based upon the quantitative assessment performed at November 30,2024, the Company recorded an impairment chargeof$0.7 million during 2024related to the Argo Management reporting unit. No impairment charges wererecorded against goodwill for the Company'sother reporting units in 2024,as the estimated fair values of the Company's other reporting units exceeded their respective carrying values.
Additional information regarding our goodwill is included in Note 8, "Goodwill," to the Consolidated Financial Statements.
**Valuation of Contingent Consideration**
The consideration for certain of the Company's acquisitions includefuture payments to the former owners that are contingent upon the achievement of certain targets over future reporting periods. Liabilities for contingent consideration are measured and reported at fair value at the date of acquisition with subsequent changes in fair value reported in the consolidated statements of operations as non-operatingother revenue, net.
Determining the fair value of contingent consideration liabilities requires management to make assumptions and judgments. The fair value of Companys contingent consideration liabilitiesis estimated by applying theMonte Carlosimulation methodto forecast achievement of gross profit,gross revenue or adjusted EBITDA. These fair value measurements are based on significant inputs not observable in the market. Key inputs in the valuations include forecasted gross profit or revenue, gross profit or revenuevolatility, projected EBITDA, asset volatility, risk-free rate,discount rate and discount term.Management must use judgment in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Changes in assumptions could have a material impact on the amount of contingent consideration benefit or expense reported in the consolidated statements of operations and have an impact on the payout of contingent consideration liabilities. Contingent consideration liabilities are revalued each reporting period. Changes in the fair value of contingent consideration liabilities can result from changes to one or multiple inputs, including adjustments to the key inputs or changes in the assumed achievement or timing of any targets. Any changes in fair value are reported in the consolidated statements of operations.Additional information regarding our contingent consideration liabilities is included inNote 23,"Fair Value of Financial Instruments,"to the Consolidated Financial Statements.
**Fair Value Assumptions for Subordinated Debt Obligations**
Our subordinated debt is measured and reported at fair value. The fair value of the subordinated debt is calculated using a model based on significant market observable inputs and inputs developed by a third-party. These inputs include credit spread assumptions developed by a third-party and market observable swap rates. The following summarizes the impacts:
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Impact of Rate Change on Fair Value |
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2025 Result |
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2024 Result |
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SOFR: |
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increase causes fair value to increase; decrease causes fair value to decrease |
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Decrease to fair value |
|
Decrease to fair value |
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Risk free rate: |
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increase causes fair value to decrease; decrease causes fair value to increase |
|
Increase to fair value |
|
Increase to fair value |
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|
The other primary variable affecting the fair value of debt calculation is the passage of time, which will always have the effect of increasing the fair value of debt.
Therefore, changes in the underlying interest rates used would cause the fair value to be impacted, butonly impacts the income statement (or comprehensive income/lossfor the portion related to credit risk) and does not impact cash flows.
**Fair Value Assumptions for Subsidiary Stock-Based Compensation Awards**
Certain of the Company's subsidiaries have made grants of restricted stock awards or restricted unit awards (together "Subsidiary Restricted Awards"). The Subsidiary Restricted Awards are measured at fair value on the date of grant and recognized as compensation expense on a straight-line basis over the requisite service period during which awards are expected to vest, with a corresponding increase to either additional paid-in capital for equity-classified awards or to a liability for liability-classified awards. Certain of the Subsidiary Restricted Awards are classified as a liabilitybecausetheawards are expected to settle in cash. Liability-classified awards,included in accrued expenses and other liabilities in the consolidated balance sheets, are measured and reported at fair value on the date of grant and are remeasured each reporting period. TheSubsidiary Restricted Awards containperformance vesting and/or marketvesting conditions. Performance vesting conditions arereviewed quarterly to assess the probability of achievement of the performance condition. Compensation expense is adjusted when a change in the assessment of achievement of the specific performance condition is determined to be probable.Compensation expense is recognized on a straight-line basisfor awards subject to market conditions regardless of whether the market condition is satisfied, provided that the requisite service has been provided. Forfeitures are recognized in the period that Subsidiary Restricted Awards are forfeited.
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KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
The determination of fair value of the Subsidiary Restricted Awards is subjective and involves significant estimates and assumptions of whether the awards will achieve performance thresholds. The fair value of the Subsidiary Restricted Awards is estimated using either the Black-Scholes option pricing model and/or the Monte Carlo simulation model to derive certain inputs. The determination of the grant date fair value using the Black-Scholes option-pricing model is affected by subjective assumptions, including the expected term of the awards, expected volatility over the expected term of the awards, expected dividend yield, and risk-free interest rates. The determination of the grant date fair value using the Monte Carlo simulation model is affected by subjective assumptions, including the expected term of the awards, expected volatility over the expected term of the awardsand risk-free interest rates. The assumptions used in the Companys Black-Scholes option-pricingand Monte Carlo simulation models requiressignificant judgment andrepresents managements best estimates.
**Valuation of Redeemable Noncontrolling Interest**
Redeemable noncontrolling interest represents a 20% noncontrolling ownership in Southside Plumbing, which was acquired on August 14, 2025.The 20% noncontrolling interest in Southside Plumbingincludes a put option redemption rightfor the noncontrolling interest holderto require the Company to repurchase the 20% interest of the noncontrolling interest holderat fair value, onthe fifth anniversary of the acquisition of Southside Plumbing, or August 14, 2030. The redeemable noncontrolling interest is presented outside of permanent equity in the consolidated balance sheets since it isredeemable by the holder of the noncontrolling interest and the redemption is outside the control of the Company. The redeemable noncontrolling interestwasinitially recorded at fair value at the date ofissuance and is subsequently adjusted each reporting period.The Company records the carrying value of the redeemable noncontrolling interest at the greater of (i) the initial carrying amount, increased or decreased for the noncontrolling interest's share of net income or loss and its share of other comprehensive income or loss, and dividends or (ii) the redemption value. Determining the fairvalue of the redeemable noncontrolling interest requires management to make assumptions and judgments.Thefairvalue of the redeemable noncontrolling interest is determined using the market approach, whichestimatesthe fair value of the subsidiaryusing discounted cash flow methods.
**RESULTS OF CONTINUING OPERATIONS**
A reconciliation of total segment operating income to net lossfor the years ended December 31, 2025 and December 31, 2024 is presented in Table 1 below:
**Table 1 Segment Operating Income**
For the years ended December 31 (in thousands of dollars)
|
|
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2025 |
|
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2024 |
|
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Change |
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Segment operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KSX |
|
$ |
7,787 |
|
|
$ |
5,662 |
|
|
$ |
2,125 |
|
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Extended Warranty |
|
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1,154 |
|
|
|
5,942 |
|
|
|
(4,788 |
) |
|
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Total segment operating income |
|
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8,941 |
|
|
|
11,604 |
|
|
|
(2,663 |
) |
|
|
Net investment income |
|
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1,627 |
|
|
|
1,432 |
|
|
|
195 |
|
|
|
Net realized and unrealized investment gains |
|
|
714 |
|
|
|
1,896 |
|
|
|
(1,182 |
) |
|
|
General and administrative expenses and other revenue not allocated to segments, net |
|
|
(10,962 |
) |
|
|
(9,250 |
) |
|
|
(1,712 |
) |
|
|
Interest expense |
|
|
(5,449 |
) |
|
|
(4,790 |
) |
|
|
(659 |
) |
|
|
Amortization of intangible assets |
|
|
(8,169 |
) |
|
|
(6,304 |
) |
|
|
(1,865 |
) |
|
|
Impairment of goodwill and intangible assets |
|
|
(706 |
) |
|
|
(2,848 |
) |
|
|
2,142 |
|
|
|
Loss from continuing operations before income tax benefit |
|
|
(14,004 |
) |
|
|
(8,260 |
) |
|
|
(5,744 |
) |
|
|
Income tax benefit |
|
|
(3,752 |
) |
|
|
(147 |
) |
|
|
(3,605 |
) |
|
|
Loss from continuing operations |
|
|
(10,252 |
) |
|
|
(8,113 |
) |
|
|
(2,139 |
) |
|
|
Income from discontinued operations, net of taxes (a) |
|
|
|
|
|
|
438 |
|
|
|
(438 |
) |
|
|
Loss on disposal of discontinued operations, net of taxes (a) |
|
|
|
|
|
|
(620 |
) |
|
|
620 |
|
|
|
Net loss |
|
$ |
(10,252 |
) |
|
$ |
(8,295 |
) |
|
$ |
(1,957 |
) |
|
|
|
(a) |
The income from discontinued operations and the loss on disposal of discontinued operations is related to VA Lafayette. See Note 5, "Discontinued Operations," to the Consolidated FinancialStatements, for further information. |
|
Among other items, the degree and pace of inflation and interest rate changes may have impacts on our business and the recently announced tariffs or retaliatory responses to such tariffs may impact the Companys operating income. The potential impact of current macroeconomic uncertainties on the Companys financial condition, results of operations, and cash flows is subject to change and continues to depend on the extent and duration of these uncertainties.
The discussion below highlights the key drivers of the current and prior year results.
**Kingsway Search Xcelerator**
The Kingsway Search Xcelerator revenue increasedto $64.2 millionfor the yearended December 31, 2025compared with $40.5 million for the year ended December 31, 2024. Kingsway Search Xcelerator operating income was$7.8 millionfor the year ended December 31, 2025compared with$5.7 millionfor the year ended December 31, 2024.Revenue and operating income were primarily impacted by the following:
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Theinclusion of Image Solutions for twelve months during 2025 following its acquisition effectiveSeptember 26, 2024. For2025, Image Solutions had revenue and operating income of $8.0 million and $2.0 million, respectively; |
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Roundhouse had revenue and operating income of $9.7 million and $2.0 million, respectively, following its acquisition on July 1, 2025; |
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Kingsway Skilled Trades had revenue and operating loss of $10.3 million and $0.2 million, respectively following the acquisitions of Bud's Plumbing in March 2025 and Advanced Plumbing and Southside Plumbing in August 2025; |
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DDI operating income increased $0.2 million to $1.2 million,primarily due to an increase in revenue,partially offset by highercost of sales compared to 2024; and |
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24
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KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
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Ravix operating income decreased$0.9million to $2.4 million, due to a 19% decrease inrevenue (primarily due to loss of retained customers as they were acquired, as well as financially distressed customers spending less on Ravix services), partially offset by a decrease in costs of services sold and general and administrative expensescompared to 2024. |
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**Extended Warranty**
The Extended Warranty revenue increased 2.8% (or $1.9 million) to$70.8 millionfor the year ended December 31, 2025 compared with$68.9 millionfor the year endedDecember 31, 2024, while cash sales were up 9.2% in 2025(and 12.4% in the second half of 2025 compared with the prior year). The Extended Warranty operating income was$1.2 million for the year ended December 31, 2025 compared with$5.9million for the year ended December 31, 2024.The Company's revenue and therefore operating income is impacted by the fact that VSA sales are recognized over the life of the contract, which is not on a straight-line basis. This means that in periods where cash VSA sales are declining, revenue and operating income may continue to be strong due to higher prior-year sales. Conversely, when VSA cash sales are in a period of growth as we are seeing now revenue and operating income may continue to lag as prior-year lower sales have a larger impact on current period revenue/operating income than current period VSA cash sales.
During the year ended December 31, 2025, there was a 4.4%increase in claims paid at our auto Extended Warranty companies, primarily due to inflationary pressures on the cost of parts and labor, but not due to a spike in the number of claims; however, the year-over-year increase was lower than that experienced in2024. In 2025, wemitigated the impact of claims increasing by increasing pricing and re-categorizing vehicles to ensure they are in the appropriate rate class.Due to the deferred revenue model under US GAAP, these price increases may impact our financials more in future periods rather than in the current period.
The Extended Warranty operating income was impacted by other higher expenses, such as commissions, dealer profit sharing, and personnel costs. Commissions and dealer profit sharing were up primarily due to the increase in cash sales during 2025. Personnel costs were up primarily at PWI, Geminus and Trinity, as each company invests in its sales teams. In addition, PWI/Geminus includes nearly $0.4 million in severance and redundant compensation related to the transition of their leadership team in the second quarter of2025.
**Net Realized and Unrealized InvestmentGains**
Net realized and unrealized investment gainswere$0.7million in 2025 compared to$1.9 million in 2024, due primarily tonetrealized gains on the sale of investments of$0.1millionin2025 compared to$1.6 millionin2024.Thenet realized gains for 2024primarily relate to realized gains recognized by Argo Holdings Fund I, LLC ("Argo Holdings")and a net realized gain related to the saleofone of theprivate company investments.
**General and Administrative Expenses and Other Revenue**
****not Allocated to Segments, Net
General and administrative expenses and other revenuenot allocated to segments was a net expense of$11.0million in2025 compared to$9.3 millionin 2024.Included are primarilyexpenses associated with our corporate holding company,expenses associated with our Operator-in-Residence who search for our next acquisition, revenue and expenses associated with our various other investments that are accounted for on a consolidated basis, losson change in fair value of debt and loss onextinguishment of debt.
The increase in net expense for2025 isprimarily attributable toreimbursement payments made to Aegis in connection with the Settlement Agreement and higher acquisition, searchand slightly higher compensationrelated expenses as the holding company staffed-up to take on more accounting from the KSX subsidiaries.
SeeNote 25,"Commitments and Contingent Liabilities" to the Consolidated Financial Statementsfor further details related to the Aegis Settlement Agreement.
See Note 11, "Debt," to the Consolidated Financial Statements, for further discussion of changes in fair value of debt and loss on extinguishment of debt recorded in 2025 and 2024.
**Interest Expense**
Interest expensefor2025 was$5.4 millioncompared to$4.8million in 2024. The increase in2025 is primarily attributable to the inclusion of the Image Solutions loan for 12 months in 2025, as well as the addition of the new Roundhouse and KPH loans in 2025, partially offset by reduced expense for existing loans due to principal amortization.
See Note 11, "Debt," to the Consolidated Financial Statements, for further details.
**AmortizationIntangible Assets**
Amortization of intangible assets was$8.2 millionin2025compared to$6.3 millionin 2024.The increasefor the year ended December 31, 2025 is primarily due to theinclusion of Image Solutions (acquired September 26, 2024) and Roundhouse, Advanced Plumbing and Southside Plumbing (acquired in the third quarter of 2025), partially offset by decreased amortization expense for the Company's other intangible assets.
**Impairment of Goodwill and Intangible Assets**
Impairment of goodwill and intangible assets was$0.7millionin2025(tradenames at CSuite, Ravix and SNS) compared to$2.8 millionin 2024(Argo goodwill impairment of $0.7million; remainder tradenames at CSuite, Ravix and SNS). The Company's goodwill andindefinite-lived intangible assets are assessed for impairment annually as of November 30, or more frequently if events or circumstances indicate that the carrying value may not be recoverable.SeeNote 9, "Intangible Assets,"to the Consolidated Financial Statements, for further discussion.
25
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KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
**Income Tax Benefit**
Income tax benefitfor2025 was $3.8 million compared to$0.1 million in 2024. The2025 and 2024 income tax benefitis primarily related to:
|
|
|
An income tax benefitof $1.2 million and $0.2 millionin 2025and 2024, respectively,associated with interest expense and net operating loss carryforwards generatingindefinite life deferred tax assets utilizable against indefinite life deferred tax liabilities; |
|
|
|
|
An income tax benefitof $2.7million and income tax expense $0.1 million in2025 and2024, respectively,for the change in the Companys deferred tax valuation allowance related to acquired deferred tax liabilities; |
|
|
|
|
Anincome tax expense of less than $0.1 million and income tax benefit of $0.2 million in 2025 and 2024, respectively, relating to a change in valuation allowance due to the change in indefinite life deferred income tax liabilities; and |
|
|
|
|
An income tax expenseof $0.1 millionand $0.2 millionin 2025 and 2024, respectively, for state income taxes. |
|
See Note 14,"Income Taxes," to the Consolidated Financial Statements, for additional detail of the income tax benefitrecorded for the years ended December 31, 2025 and December 31, 2024, respectively.
**INVESTMENTS**
**Portfolio Composition**
Our investments consist primarily of fixed maturities and limited liability investment, at fair value.The following is an overview of how we account for these investments:
|
|
|
Investments in fixed maturities are classified as available-for-sale and are reported at fair value. |
|
|
|
|
Limited liability investment, at fair value representsthe underlying investments of the Companys consolidated entity, Argo Holdings. The difference between the end of the reporting period of the limited liability investment, at fair value and that of the Company is no more than three months. |
|
At December 31, 2025, we held cash and cash equivalents, restricted cash and investments with a carrying value of $57.9 million.Ouroperations typically invest in U.S. dollar-denominated instruments to mitigate their exposure to currency rate fluctuations.
Table 2 below summarizes the carrying value of investments, including cash and cash equivalents and restricted cash, at the dates indicated.
**TABLE 2 Carrying value of investments, including cash and cash equivalents and restricted cash**
As of December 31 (in thousands of dollars, except for percentages)
|
Type of investment |
|
2025 |
|
|
% of Total |
|
|
2024 |
|
|
% of Total |
|
|
|
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government, government agencies and authorities |
|
|
13,491 |
|
|
|
23.3 |
% |
|
|
13,354 |
|
|
|
24.5 |
% |
|
|
States, municipalities and political subdivisions |
|
|
1,771 |
|
|
|
3.1 |
% |
|
|
2,775 |
|
|
|
5.1 |
% |
|
|
Mortgage-backed |
|
|
9,818 |
|
|
|
17.0 |
% |
|
|
9,886 |
|
|
|
18.1 |
% |
|
|
Asset-backed |
|
|
1,364 |
|
|
|
2.4 |
% |
|
|
1,326 |
|
|
|
2.4 |
% |
|
|
Corporate |
|
|
10,321 |
|
|
|
17.8 |
% |
|
|
9,622 |
|
|
|
17.7 |
% |
|
|
Total fixed maturities |
|
|
36,765 |
|
|
|
63.5 |
% |
|
|
36,963 |
|
|
|
67.9 |
% |
|
|
Limited liability investments |
|
|
649 |
|
|
|
1.1 |
% |
|
|
650 |
|
|
|
1.2 |
% |
|
|
Limited liability investment, at fair value |
|
|
3,476 |
|
|
|
6.0 |
% |
|
|
2,859 |
|
|
|
5.2 |
% |
|
|
Investments in private companies |
|
|
575 |
|
|
|
1.0 |
% |
|
|
696 |
|
|
|
1.3 |
% |
|
|
Short-term investments |
|
|
178 |
|
|
|
0.3 |
% |
|
|
169 |
|
|
|
0.3 |
% |
|
|
Total investments |
|
|
41,643 |
|
|
|
71.9 |
% |
|
|
41,337 |
|
|
|
75.9 |
% |
|
|
Cash and cash equivalents |
|
|
8,306 |
|
|
|
14.3 |
% |
|
|
5,493 |
|
|
|
10.1 |
% |
|
|
Restricted cash |
|
|
7,965 |
|
|
|
13.8 |
% |
|
|
7,643 |
|
|
|
14.0 |
% |
|
|
Total |
|
|
57,914 |
|
|
|
100.0 |
% |
|
|
54,473 |
|
|
|
100.0 |
% |
|
**InvestmentImpairment**
The Company performs a quarterly analysis of its investments to determine if declines in fair valuemay result in the recognition of impairment losses in net loss.Factors considered in the determination of whether or not an impairment loss is recognized in net loss include a current intention or need to sell the security or an indication that a credit loss exists.Further information regarding our detailed analysis and factors considered in establishing animpairment loss on an investment is discussed within the "Significant Accounting Policies and Critical Estimates" section of MD&A.
The Company'sfixed maturities are subject to declines in fair value below amortized cost that may result in the recognition of impairment losses in net loss.If the decline in fair value is due to credit factors and the Company does not expect to receive cash flows sufficient to support the entire amortized cost basis, the credit loss is reported in the consolidated statements of operations in the period that the declines are evaluated.The Company performs a quarterly analysis of its available for-sale fixed maturity investments to determine if an impairment loss has occurred.
There were no impairment losses recordedrelated toinvestmentsfor theyears ended December 31, 2025 and December 31, 2024.
At December 31, 2025 and December 31, 2024, the gross unrealized losses for fixed maturities amounted to$0.5million and$1.2million, and there were no unrealized losses attributable to non-investment grade fixed maturities.
26
[Table of Contents](#toc)
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
**DEBT**
The principal and carrying value of the Companys debt instruments at December 31, 2025 and December 31, 2024 are as follows:
|
(in thousands) |
|
December 31, 2025 |
|
|
December 31, 2024 |
|
|
|
|
|
Principal |
|
|
Carrying Value |
|
|
Principal |
|
|
Carrying Value |
|
|
|
Bank loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KSX Term Loans |
|
$ |
36,135 |
|
|
$ |
35,551 |
|
|
$ |
23,493 |
|
|
$ |
23,100 |
|
|
|
KSX Revolvers |
|
|
2,053 |
|
|
|
2,053 |
|
|
|
950 |
|
|
|
950 |
|
|
|
Extended Warranty Term Loan and DDTL |
|
|
15,504 |
|
|
|
15,438 |
|
|
|
19,163 |
|
|
|
19,078 |
|
|
|
Extended Warranty Revolver |
|
|
2,000 |
|
|
|
2,000 |
|
|
|
1,000 |
|
|
|
1,000 |
|
|
|
Total bank loans |
|
|
55,692 |
|
|
|
55,042 |
|
|
|
44,606 |
|
|
|
44,128 |
|
|
|
Notes payable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KSX Notes Payable |
|
|
1,164 |
|
|
|
1,016 |
|
|
|
|
|
|
|
|
|
|
|
KSX Vehicle Loans |
|
|
630 |
|
|
|
630 |
|
|
|
|
|
|
|
|
|
|
|
KSX Equipment Loans |
|
|
326 |
|
|
|
326 |
|
|
|
|
|
|
|
|
|
|
|
Total notes payable |
|
|
2,120 |
|
|
|
1,972 |
|
|
|
|
|
|
|
|
|
|
|
Subordinated debt |
|
|
15,000 |
|
|
|
13,698 |
|
|
|
15,000 |
|
|
|
13,409 |
|
|
|
Total Debt |
|
$ |
72,812 |
|
|
$ |
70,712 |
|
|
$ |
59,606 |
|
|
$ |
57,537 |
|
|
SeeNote 11, "Debt,"to the Consolidated Financial Statements for a detailed discussion of the Companys debt instruments. Changes related to the Companys debt during 2025 are further described below.
*Bank Loans*
Our bank loanscontaina number of covenants, including, but not limited to, a leverage ratio anda fixed charge ratio and limits on annual capital expenditures, all of which are as defined in and calculated pursuant to the respective loanthat, among other things, restrict the borrowing companys ability to incur additional indebtedness, create liens, make dividends and distributions, engage in mergers, acquisitions and consolidations, make certain payments and investments and dispose of certain assets.
On February 7, 2025, Ravix,Ravix LLC and CSuite entered into a fourthamendment to the Ravix term loan that provides for: (1) a new 2025term loan in the principal amount of $9.1million, with a maturity date of February 7, 2031; and (2) extendingthe maturity date of the revolver to February 7, 2027.In connection with the fourth amendment, Ravix used a portion of the proceeds to repay $6.4 million on the then outstanding term loan (original and supplemental).
During 2025, SNSborrowed $0.6million under itsrevolver.As of December 31, 2025, the SNS revolver isfully drawn.
As part of the acquisition of Roundhouse on July 1, 2025, Roundhouse became a wholly owned subsidiary of Longhorns Acquisition LLC ("LonghornsLLC"), and together they borrowed from a bank a principal amount of $11.0 million in the form of a term loan,and established a $0.5million revolverto finance theacquisition of Roundhouse. The Roundhouse termloanrequiresmonthly payments of principal and interest andhas an annual interest rate equal to the greater of the one-month term Secured Overnight Financing Rateplus 3.3%, or 5.0%.Theterm loan andrevolver mature on July 1, 2035. AtDecember 31, 2025,the balance of the revolver waszero.
In 2025, the Company formed Kingsway Plumbing Holdco LLC ("KPH"), whose subsidiaries include Bud's Plumbing, Advanced Plumbing and Southside Plumbing. As part of the acquisition of Southside Plumbing on August 14, 2025,KPH and its subsidiaries borrowed from a bank a principal amount of $3.75 million in the form of a term loan,and established a $0.5million revolver. The KPH termloan requiresmonthly payments of interest andhas an annual fixed interest rate of 7.5%. Monthly principal payments on the KPH term loan begin September 14, 2026. Theterm loan matures on August 14, 2032.The KPH revolverrequiresmonthly payments of interest andhas an annualinterest rate equal to the greater of the Prime Rateplus 0.75%, or 7.5%.TheKPH revolvermatures on August 14, 2026.During the fourth quarter of 2025, KPH borrowed $0.4 million under its revolver.
On December 18, 2025, KWH entered into a fifthamendment to its revolver that provides for: (1) an increase to the KWH revolver commitment from $1.0 million to $5.0 million; and (2) amends to maturity date of the KWH revolver to March 31, 2027. During the fourthquarter of 2025, KWH borrowed $1.0 million under its revolver.
At each quarter endbeginning March 31, 2024 through December 31, 2025, the SNS was in default under its loan due to debt covenant violations related to the leverage and fixed charge ratios. Also, as of September 30, 2025 and December 31, 2025, DDI was in default under its loan due to a debt covenant violation related to the fixed charge ratio. Each of the companies has entered into an amendment to its respective loan that waives the events of default for the fiscal quarter ended December 31, 2025. As of the report date, there is some uncertainty as to whether the companies will be in compliance with the covenants in future periods, and if not, when the companies will be able to cure any potential violations. A default may permit the lender to declare the amounts owed under the loans immediately due and payable, exercise their rights with respect to collateral securing the obligations, and/or exercise any other rights and remedies available.
All of the KSX and Extended Warrantyindebtedness arises from individual, stand-alone creditagreements with the applicable Company subsidiary. None of such indebtedness isguaranteed by the Company or any other subsidiary or affiliate of the Company other than the borrower entity and its direct subsidiary, if any,and there areno cross-collateral, cross-default or similar provisions in the creditagreements.
27
[Table of Contents](#toc)
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
*Notes Payable*
As part of the acquisition of Bud's Plumbing on March 14, 2025, Bud's Plumbingbecame a wholly owned subsidiary of KPH,and together they borrowed from the seller of Bud's Plumbinga principal amount of $1.25 million in the form of a promissory note, to partially finance theacquisition of Bud's Plumbing (the "KPH Note"). The KPH Notewas recorded at its estimated fair value of $1.1 million, which included the unpaid principal amount of $1.25million as of the date of acquisition less a discount of $0.2 million.The KPH Noterequiredmonthly payments of principal and interest andhadan annual fixed interest rate of6.00%.The KPH Note was due to matureon April 1, 2030; however onAugust 7, 2025, the KPH Note was repaid in full to the seller of Bud's Plumbing in exchange forshares of Kingswaycommon stock. SeeNote 20, "Shareholders' Equity,"for further discussion of the exchange.The settlement of the KPH Note by issuing the Company's common sharesis accounted for as a debt extinguishment. Thedifference between the reacquisition price of the debt and the net carrying amount of the KPH Note at the date of the exchangeof$0.1million is recorded as loss on extinguishment of debt and is included in non-operating other revenue, netin theconsolidated statement of operations for the year ended December 31, 2025.
The following seller notes were entered into during 2025in connection with various acquisitions which were used to partially finance the respective acquisitions:
|
|
|
Advanced Plumbingon August 1, 2025, principal amount of $0.5 million in the form of a promissory note; and |
|
|
|
|
Southside Plumbing on March 14, 2025, principal amount of $0.5 million in the form of a promissory note. |
|
*Subordinated Debt*
The Company's subordinated debt is measured and reported at fair value. At December 31, 2025, the carrying value of the subordinated debt is$13.7million.The fair value of the subordinated debt is calculated using a model based on significant market observable inputs and inputs developed by a third-party. For a description of the market observable inputs and inputs developed by a third-party used in determining fair value of debt, seeNote 23, "Fair Value of Financial Instruments,"to the Consolidated Financial Statements.
Though changes in the market observable swap rates will continue to introduce some volatility each quarter to the Companys reported gain or loss on change in fair value of debt, changes in the credit spread assumption developed by the third party does not introduce volatility to the Companys consolidated statements of operations. The fair value of the Companys subordinated debt will eventually equal the principal valuetotaling $15.0 millionof the subordinated debt by the time of the stated redemption date of the remaining trust, which matureson May 22, 2033.
**LIQUIDITY AND CAPITAL RESOURCES**
The purpose of liquidity management is to ensure there is sufficient cash to meet all financial commitments and obligations as they fall due. The liquidity requirements of the Company and its subsidiaries havebeen met primarily by funds generated from operations, capital raising, disposal of subsidiaries, investment maturities and investment income, and other returns received on investments andfrom the sale of investments.
A significant portion of the cash provided by our Extended Warranty companies is required to be placed into restricted trust accounts, as determined by the insurers who back-up our service contracts, in order to fund future expected claims. On a periodic basis (quarterly or annually), we may be required to contribute more into the restricted accounts or we may be permitted to draw additional funds from the restricted accounts, dependent upon actuarial analyses performed by the insurers regarding sufficiency of funds to cover future expected claims. A substantial portion of the restricted trust accounts are invested in fixed maturitiesand other instruments that have durations similar to the expected future claim projections.
Cash provided from these sources is used primarily for warranty expenses, business serviceexpenses, debt servicing, acquisitionsand operating expenses of the holding company.
The Company's Kingsway Search Xcelerator and Extended Warranty subsidiaries fund their obligations primarily through service fee and other revenue.
**Cash Flows from Continuing Operations**
During 2025, the net cash used in operating activities from continuing operations was essentially break even, primarilydue tooperating income from the Kingsway Search Xcelerator and Extended Warranty(the latter due to higher cash sales) segments, offset by higher interest expense on term loans and cash paidto settle the Ravix contingent liability of $2.3million that is reported as an operating activity.
During2024,the Company reported$0.6 million of net cash provided byoperating activities from continuing operations, primarily due to operating income from the Extended Warranty and Kingsway Search Xcelerator segments.
During 2025, the net cash used in investing activitiesfrom continuing operations was$29.6 million. This use of cash was primarily attributed tothe acquisitions of Bud's Plumbing, Roundhouse, Advanced Plumbing and Southside Plumbing, that was partially offset by Extended Warranty investment activity.
During 2024,the net cash used in investing activitiesfrom continuing operations was$16.8 million. This use of cash was primarily attributed to:
|
|
|
The acquisition of Image Solutions in 2024, which totaled $20.1 million, net of cash acquired; partially offset by |
|
|
|
|
Distributionsreceived by Argo Holdings from four of its underlying limited liability investment companies; |
|
|
|
|
Proceeds from the sale of a private company investment; and |
|
|
|
|
Proceedsfrom the sale of VALafayette. |
|
During 2025, the net cashprovided by financing activitiesfrom continuing operations was$32.7 million,primarily attributed to:
|
|
|
Principal proceeds from debt of$26.3million, primarily related to the Roundhouse, KPH and Ravix loans issued in 2025; |
|
|
|
|
Netproceeds from the issuance of common stock of$15.6 million; and |
|
28
[Table of Contents](#toc)
KINGSWAY FINANCIAL SERVICES INC.
Management's Discussion and Analysis
|
|
|
Proceeds from the issuance of Class C and Class D preferred stock of $6.0 million and $2.0 million, respectively; partially offset by |
|
|
|
|
Principalrepayments on bank loans of$15.3million; |
|
|
|
|
Payment of preferred stock dividends of $1.0 million; |
|
|
|
|
Cash paid for repurchases of common stock of $0.3 million; and |
|
|
|
|
Cash paid to settle a portion of the Ravix contingent consideration liability of $0.4 million. |
|
During2024, the net cashprovided byfinancing activitiesfrom continuing operations was$11.9 million,primarily attributed to:
|
|
|
Principalproceeds from bank loans of $34.6 million; and |
|
|
|
|
Proceedsfrom the issuance of Class B preferred stock of $8.3 million; partially offset by |
|
|
|
|
Principalrepayments on bank loans of $21.6 million; |
|
|
|
|
Cashpaid for repurchases of common stock of $2.5 million; |
|
|
|
|
Cashpaid to acquire the IWS noncontrolling interest of $2.5 million; |
|
|
|
|
Taxespaid related to net share settlements of restricted stock awards of $2.3 million; |
|
|
|
|
Distributionsto noncontrolling interest holders of $1.4 million; and |
|
|
|
|
Cash paid to settle a portion of the Ravix contingent consideration liability of $0.7 million. |
|
**Holding Company Liquidity**
The liquidity of the holding company is managed separately from its subsidiaries. The obligations of the holding company primarily consist of holding company operating expenses; transaction-related expenses; investments; stock repurchases; and any other extraordinary demands on the holding company.The holding company does not provide guarantees to any of the operating companies with respect to borrowings that they might have and, as such, any debt incurred by the operating companies is non-recourse to the holding company. In addition, any debt incurred by the operating companies does not have cross-collateral or cross-default provisions; therefore, any default that might arise is limited only to the underlying borrower that might be in default and does not extend to other operating companies debt.
Pursuant to satisfying the covenants under the KWH bank loan,distributions to the holding company in an aggregate amount not to exceed $1.5 million in any 12-month period are permitted. Also, the holding company is permitted to receive a portion of the excess cash flow (as defined in the loan document) generated by the KWH subsidiaries in the previous year.
The holding companys liquidity, defined as the amount of cash in the bank accounts of Kingsway Financial Services Inc. and Kingsway America Inc., was$1.0million and$0.9millionat December 31, 2025 and December 31, 2024, respectively, which excludesfuture actions available to the holding company that could be taken to generate liquidity.Such future actions include, but are not limited to, issuance of equity securities and distributions from the Kingsway Search Xcelerator and Extended Warranty operating companies subject to certain loan covenants that may be in place at each operating company. The holding company cash amounts are reflected in the cash, cash equivalents and restricted cash of$16.3 million and$13.1millionreported at December 31, 2025 and December 31, 2024, respectively, on the Companys consolidated balance sheets.
Based on the Companys current business plan and revenue prospects, existing cash, cash equivalents, investment balances and anticipated cash flows from operations are expected to be sufficient to meet the Companys working capital and operating expenditure requirements, for the next twelve months. However, the Companys assessment could also be affected by various risks and uncertainties, including, but not limited to, the developing macro-economic environment.
**CONTRACTUAL OBLIGATIONS**
Table 3summarizes cash disbursements related to the Company's contractual obligations projected by period, including debt maturities, interest payments on outstanding debtand future minimum payments under operating leases. Interest payments on outstanding debt in Table 3related to the subordinated debt and the Company's bank loans with variable interest rates,assume the variable rates atDecember 31, 2025 remainconstant throughout the projection period.Future minimum lease payments in Table 3 includepayments on leases for office space that are included in total lease liabilities inNote 12,"Leases," to the Consolidated Financial Statements, as well as payments for short-term leases andequipment leases.
**TABLE 3Cash payments related to contractual obligations projected by period**
As of December 31, 2025 (in thousands of dollars)
|
|
|
2026 |
|
|
2027 |
|
|
2028 |
|
|
2029 |
|
|
2030 |
|
|
Thereafter |
|
|
Total |
|
|
|
Bank loans |
|
|
9,612 |
|
|
|
12,094 |
|
|
|
8,566 |
|
|
|
12,540 |
|
|
|
5,522 |
|
|
|
7,358 |
|
|
|
55,692 |
|
|
|
Subordinated debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
15,000 |
|
|
|
Interest payments on outstanding bank loans and subordinated debt |
|
|
5,059 |
|
|
|
4,212 |
|
|
|
3,520 |
|
|
|
2,632 |
|
|
|
2,069 |
|
|
|
4,031 |
|
|
|
21,523 |
|
|
|
Future minimum lease payments |
|
|
1,570 |
|
|
|
1,379 |
|
|
|
1,134 |
|
|
|
1,047 |
|
|
|
1,020 |
|
|
|
3,363 |
|
|
|
9,513 |
|
|
|
Total |
|
|
16,241 |
|
|
|
17,685 |
|
|
|
13,220 |
|
|
|
16,219 |
|
|
|
8,611 |
|
|
|
29,752 |
|
|
|
101,728 |
|
|
**Item 7A. Quantitative and Qualitative Disclosures About Market Risk**
We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act; therefore, pursuant to Regulation S-K, we are not required to make disclosures under this Item.
29
[Table of Contents](#toc)
KINGSWAY FINANCIAL SERVICES INC.
**Item 8. Financial Statements and Supplementary Data.**
**Index to the Consolidated Financial Statements of**
**Kingsway Financial Services Inc.**
| Management's Report on Internal Control Over Financial Reporting | 31 | |
| Report of Independent Registered Public Accounting Firm (PCAOB ID 166) | 32 | |
| Consolidated Balance Sheets atDecember 31, 2025 and 2024 | 35 | |
| Consolidated Statements of Operations for the Years Ended December 31, 2025 and 2024 | 36 | |
| Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2025 and 2024 | 37 | |
| Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2025 and 2024 | 38 | |
| Consolidated Statements of Cash Flows for the Years Ended December 31, 2025 and 2024 | 39 | |
| Notes to the Consolidated Financial Statements | 41 | |
| Note 1 -Business | 41 | |
| Note 2-Summary of Significant Accounting Policies | 41 | |
| Note 3-Recently Issued Accounting Standards | 47 | |
| Note 4-Acquisitions | 47 | |
| Note 5-Discontinued Operations | 51 | |
| Note 6-Variable Interest Entities | 51 | |
| Note 7-Investments | 52 | |
| Note 8-Goodwill | 54 | |
| Note 9-Intangible Assets | 55 | |
| Note 10-Property and Equipment | 56 | |
| Note 11-Debt | 57 | |
| Note 12-Leases | 60 | |
| Note 13-Revenue from Contracts with Customers | 61 | |
| Note 14-Income Taxes | 63 | |
| Note 15-Loss Per Share | 65 | |
| Note 16-Stock-Based Compensation | 65 | |
| Note 17-Employee Benefit Plan | 67 | |
| Note 18-Redeemable Preferred Stock | 68 | |
| Note 19-Redeemable Noncontrolling Interest | 68 | |
| Note 20-Shareholders' Equity | 69 | |
| Note 21-Accumulated Other Comprehensive Loss | 70 | |
| Note 22-Segmented Information | 70 | |
| Note 23-Fair Value of Financial Instruments | 72 | |
| Note 24-Related Parties | 76 | |
| Note 25-Commitments and Contingent Liabilities | 77 | |
30
[Table of Contents](#toc)
KINGSWAY FINANCIAL SERVICES INC.
**Management's 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. Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework in Internal Control Integrated Frame work issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).
In accordance with guidance issued by the Securities and Exchange Commission, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting for the first fiscal year in which the acquisition occurred. Our managements assessmentof internal control over financial reporting excluded thefour entities acquired in 2025, which are included in our 2025 consolidated financial statements and discussed in Note 4, "Acquisitions," to the consolidated financial statements. Collectively, these acquired entities constituted approximately 20% of total assets as of December 31, 2025 (or 13% if goodwill and intangible assets are excluded, which are accounted for by the holding company) and approximately 15% of total revenues for the year then ended.
Based on our assessment under the 2013 framework, management concluded that our internal control over financial reporting was effective as of December 31, 2025 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. In addition, the effectiveness of our internal control over financial reporting as of December 31, 2025, has been audited by Plante & Moran, PLLC, an independent registered public accounting firm, as stated in their attestation report which is included herein.
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KINGSWAY FINANCIAL SERVICES INC.
**Report of Independent Registered Public Accounting Firm**
To theStockholders andBoard of DirectorsofKingsway Financial Services Inc.
**Opinions on theConsolidatedFinancial Statements and Internal Control over Financial Reporting**
We have audited the accompanyingconsolidatedbalance sheets ofKingsway Financial Services Inc.(the Company)as ofDecember 31, 2025and2024,therelated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the yearsin thetwo-yearperiod endedDecember 31, 2025, and the related notesand schedules(collectively referred to as the financial statements). We also have auditedtheCompany's internal control over financialreporting as ofDecember 31, 2025, based on criteriaestablishedinInternal Control-Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (theCOSOframework).
In our opinion, theconsolidatedfinancial statements referred to above present fairly, in all material respects, the financial position ofthe Company as ofDecember 31, 2025and2024, andthe results of its operations and its cash flows for each of the years in thetwo-yearperiod endedDecember 31, 2025, in conformity with accounting principles generally accepted in the United States of America.Alsoin our opinion,the Companymaintained, in all material respects, effective internal control over financial reporting as ofDecember 31, 2025,based on criteriaestablishedintheCOSOframework.
**Basis for Opinion**
TheCompany's managementis responsible forthese financial statements, formaintainingeffective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included inManagements Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on theCompanysconsolidatedfinancial statementsand an opinion on theCompany's internal control over financial reporting based on our audits.We are a public accounting firm registered with thePublic Company Accounting Oversight Board (United States)(PCAOB) andare required tobe independent with respect to the Companyin accordance withthe U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our auditsin accordance withthe standards of thePCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether theconsolidatedfinancial statements are free of material misstatement, whether due to error or fraud,and whether effective internal control over financial reporting wasmaintainedin all material respects.
Our audits of theconsolidatedfinancial statements includedperforming procedures to assess the risks of material misstatement of theconsolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures includedexamining, on a test basis, evidenceregardingthe amounts and disclosures in the financial statements. Our audits also included evaluatingthe accounting principles used and significant estimates made by management,as well asevaluating the overallpresentationof thefinancial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As described in Managements Report on Internal Control Over Financial Reporting, management hasexcludedthe four entitiesacquiredin 2025from its assessment of internal control over financial reporting as of December 31,2025becausethey wereacquiredby the Company in a business combination during 2025. We have also excludedthefour entitiesacquiredin2025from our audit of internal control over financial reporting.These businesses, each of whichareconsolidatedsubsidiaries, comprised, in the aggregate,total assets and total revenues excluded from managements assessment and our audit of internal control over financial reportingof approximately20percent and15percent of consolidatedtotal revenues and consolidated total assets, respectively,as of and for the year ended December 31, 2025.
**Definitionand Limitations of Internal Control over Financial Reporting**
A company's internal control over financial reporting is a process designed to provide reasonable assuranceregardingthe reliability of financial reporting and the preparation of financial statements for external purposesin accordance withgenerally acceptedaccounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
**Critical Audit Matters**
The critical audit matterscommunicated belowaremattersarising from the current period audit of the financial statements thatwerecommunicated or required to be communicated to the audit committee and that (1) relates 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 mattersbelow, providing a separate opinion on the critical audit mattersor on the accounts or disclosures to whichtheyrelate.
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KINGSWAY FINANCIAL SERVICES INC.
**Revenue Recognition Extended Warranty Segment Refer to Notes 2 and 13 to the Financial Statements**
***Critical Audit Matter Description***
The Company's revenue from contracts with customers (ASC 606) includes extended warranty service fee and commission income, which is composed of multiple revenue streams, including vehicle service agreement fees, guaranteed asset protection commissions, maintenance support service fees, and warranty product commissions.Accordingly, the application of revenue recognition policies for the extended warranty segment requires the Company to exercise significant judgment in the following areas:
| | | Determination of whether individual services are promises that are considered distinct performance obligations | |
| | | Assessment of variable consideration attributable to each contract and the related estimates of variable consideration, which are significant in vehicle service contracts, based on refund rights provided to the customer under vehicle service contracts and related business practices | |
| | | Assessment of the transaction price, including the impact of various dealer and partner incentive and rebate programs, which are considered contract acquisition costs | |
| | | For performance obligations satisfied over time, the selection of an appropriate methodology that best depicts the transfer of services to the customer under the contract | |
For these reasons, weidentifiedrevenue recognition for the extended warranty segment as a critical audit matter, as it involves especially subjective auditor judgement.
**How the Critical Audit Matter was Addressed in the Audit**
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included the following, among other procedures:
| | | We obtained an understanding of the processes and internal controls related to each significant revenue-generating activity within scope of ASC 606. | |
| | | We evaluated the Company's application of the portfolio approach to individual groups of contracts to ensure the application was in compliance with ASC 606. | |
| | | We tested the determination of individual performance obligations identified by management to ensure distinct performance obligations identified were consistent with the underlying contracts. We also tested whether all distinct performance obligations within each contract were complete and reflected all material promises that are capable of being distinct. | |
| | | We evaluated and tested the key judgments applied by management, including the following: | |
| | o | Estimating variable consideration, primarily related to refund liabilities on vehicle service contracts, based on historical patterns and future expectations of customer refund requests. We tested the estimated amount of expected refunds, including managements assessment of refund rates, on each significant type of warranty contract to assess the overall reasonableness of the refund liabilities. | |
| | o | Determining whether certain incentive payments to dealers and partners were considered customer acquisition costs and should be included in the determination of the overall transaction price by examining the underlying program agreements and related business practices followed by the Company. | |
| | o | Application of over-time recognition patterns, including managements estimates related to claims emergence patterns, for each separate group of contracts that possess similar characteristics that faithfully represent the transfer of services to the customer. We tested warranty contracts at the warranty company subsidiaries to determine the accuracy and consistency of the application of the claim emergence patterns to the warranty contract transaction price. | |
***Indefinite-lived Intangible Asset Impairment Assessment - Certain Trade Name Intangible Assets in the Kingsway Search Xcelerator (KSX) Segment - Refer to Notes 2 and 9 to the Financial Statements***
***Critical Audit Matter Description***
The Companys indefinite-lived intangible assets consist of trade names with a balance of$20.5million as of December 31, 2025, of which aportionrelates to certain trade name intangibles in the KSX segment. Indefinite-lived intangible assets are tested annually for impairmentatNovember 30, or between annual tests if the Company becomes aware of an event or a change in circumstances that wouldindicatethe carrying value of an asset may be impaired. During 2025, management performed quantitative analyses for the impairment assessment of indefinite-lived intangible assets, whichidentifiedimpairments. The impairment assessment requires the Company to exercise significant judgement in the following areas:
| | | Determining an appropriate method to determine fair value of the Companys trade name assets. Management uses a form of the income approach referred to as the relief-from-royalty method. | |
| | | Determining the fair value of trade name assets involves the use of significant estimates and assumptions, including projections of future revenue and the selection of discount and royalty rates. | |
Theprincipal considerations for our determination that performing procedures relating to impairment assessment of certain KSX segment trade name assets are a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of those trade names; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating managements significant assumptions related to projections of future revenue and the selection of discount and royalty rates; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
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KINGSWAY FINANCIAL SERVICES INC.
***How the Critical Audit Matter was Addressed in the Audit***
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included the following, among other procedures:
| | | We tested managements process for developing the fair value estimates of certain KSX segment indefinite-lived trade name assets, which included: | |
| | o | Evaluating the appropriateness of the relief-from-royalty method used by management. | |
| | o | Testing the completeness and accuracy of underlying data and calculations used in the relief-from- royalty method. | |
| | o | Evaluating the reasonableness of the significant assumptions used by management related to projections of future revenue, the discount rate, and the royalty rate. Evaluating managements assumptions related to projected revenue involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the companies associated with the trade names, (ii) the consistency with industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. | |
| | | We utilized professionals from our firm with specialized skill and knowledge to assist in evaluating the appropriateness of the relief-from-royalty method and the reasonableness of the discount rate and royalty rate assumptions. | |
/s/ Plante & Moran, PLLC
We have served as the Companys auditor since 2020.
Chicago, Illinois
March 12, 2026
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KINGSWAY FINANCIAL SERVICES INC.
**Consolidated Balance Sheets**
**(in thousands, except share data)**
| | | December 31, 2025 | | | December 31, 2024 | | |
| Assets | | | | | | | | | |
| | | | | | | | | | |
| Cash and cash equivalents | | $ | 8,306 | | | $ | 5,493 | | |
| Restricted cash | | | 7,965 | | | | 7,643 | | |
| Investments (including $40,241 and $36,765, respectively, at fair value) (Note 7) | | | 41,643 | | | | 41,337 | | |
| Service fee receivable, net of allowance for credit losses of $1,113 and $626, respectively | | | 13,840 | | | | 9,361 | | |
| Deferred contract costs | | | 14,907 | | | | 13,889 | | |
| Income taxes receivable | | | | | | | 574 | | |
| Property and equipment, net of accumulated depreciation of $2,587 and $1,720, respectively | | | 6,354 | | | | 1,567 | | |
| Right-of-use asset | | | 7,014 | | | | 2,390 | | |
| Goodwill | | | 69,130 | | | | 56,524 | | |
| Intangible assets, net of accumulated amortization of $34,013 and $25,844, respectively | | | 52,265 | | | | 40,049 | | |
| Other assets | | | 10,075 | | | | 7,789 | | |
| Total Assets | | $ | 231,499 | | | $ | 186,616 | | |
| Liabilities, Redeemable Preferred Stock, Redeemable Noncontrolling Interest and Shareholders' Equity | | | | | | | | | |
| Liabilities: | | | | | | | | | |
| Accrued expenses and other liabilities | | $ | 28,664 | | | $ | 20,616 | | |
| Income taxes payable | | | 28 | | | | | | |
| Deferred service fees | | | 87,154 | | | | 83,108 | | |
| Debt (including $13,698 and $13,409, respectively, at fair value) (Note 11) | | | 70,712 | | | | 57,537 | | |
| Lease liability | | | 7,304 | | | | 2,682 | | |
| Net deferred income tax liabilities | | | 3,225 | | | | 4,371 | | |
| Total Liabilities | | | 197,087 | | | | 168,314 | | |
| Redeemable preferred stock, $0.01 par value; 650,000 and 330,000 authorized, issued and outstanding at December 31, 2025 and December 31, 2024, respectively; redemption amount of $16,250 and $8,250 at December 31, 2025 and December 31, 2024, respectively | | | 16,250 | | | | 8,250 | | |
| Redeemable noncontrolling interest in consolidated subsidiary | | | 792 | | | | | | |
| Shareholders' Equity: | | | | | | | | | |
| Common stock, $0.01 par value; 50,000,000 authorized; 29,651,671 and 28,119,776 issued at December 31, 2025 and December 31, 2024, respectively; and 28,625,744 and 27,136,749 outstanding at December 31, 2025 and December 31, 2024, respectively | | | 296 | | | | 281 | | |
| Additional paid-in capital | | | 394,848 | | | | 376,503 | | |
| Treasury stock, at cost; 1,025,927 and 983,027 outstanding at December 31, 2025 and December 31, 2024, respectively | | | (6,545 | ) | | | (6,200 | ) | |
| Accumulated deficit | | | (373,370 | ) | | | (361,453 | ) | |
| Accumulated other comprehensive loss | | | (60 | ) | | | (718 | ) | |
| Shareholders' equity attributable to common shareholders | | | 15,169 | | | | 8,413 | | |
| Noncontrolling interests in consolidated subsidiaries | | | 2,201 | | | | 1,639 | | |
| Total Shareholders' Equity | | | 17,370 | | | | 10,052 | | |
| Total Liabilities, Redeemable Preferred Stock, Redeemable Noncontrolling Interest and Shareholders' Equity | | $ | 231,499 | | | $ | 186,616 | | |
*See accompanying notes to Consolidated Financial Statements.*
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KINGSWAY FINANCIAL SERVICES INC.
**Consolidated Statements of Operations**
**(in thousands, except per share data)**
| | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Revenues: | | | | | | | | | |
| Service fee and other revenue | | $ | 134,996 | | | $ | 109,382 | | |
| Total revenues | | | 134,996 | | | | 109,382 | | |
| Operating expenses: | | | | | | | | | |
| Claims authorized on vehicle service agreements | | | 25,727 | | | | 24,577 | | |
| Cost of services sold | | | 50,443 | | | | 37,718 | | |
| General and administrative expenses | | | 61,224 | | | | 44,925 | | |
| Total operating expenses | | | 137,394 | | | | 107,220 | | |
| Operating (loss) income | | | (2,398 | ) | | | 2,162 | | |
| Other revenues (expenses), net: | | | | | | | | | |
| Net investment income | | | 1,627 | | | | 1,432 | | |
| Net realized and unrealized investment gains | | | 714 | | | | 1,896 | | |
| Non-operating other revenue, net | | | 377 | | | | 192 | | |
| Interest expense | | | (5,449 | ) | | | (4,790 | ) | |
| Amortization of intangible assets | | | (8,169 | ) | | | (6,304 | ) | |
| Impairment of goodwill and intangible assets | | | (706 | ) | | | (2,848 | ) | |
| Total other expenses, net | | | (11,606 | ) | | | (10,422 | ) | |
| Loss from continuing operations before income tax benefit | | | (14,004 | ) | | | (8,260 | ) | |
| Income tax benefit | | | (3,752 | ) | | | (147 | ) | |
| Loss from continuing operations | | | (10,252 | ) | | | (8,113 | ) | |
| Income from discontinued operations, net of taxes | | | | | | | 438 | | |
| Loss on disposal of discontinued operations, net of taxes | | | | | | | (620 | ) | |
| Net loss | | | (10,252 | ) | | | (8,295 | ) | |
| Less: Net income (loss) from continuing operations attributable to: | | | | | | | | | |
| Noncontrolling interests in consolidated subsidiaries | | | 562 | | | | 977 | | |
| Redeemable noncontrolling interests in consolidated subsidiaries | | | (83 | ) | | | | | |
| Less: Dividends on preferred stock | | | 1,186 | | | | 179 | | |
| Net loss attributable to common shareholders | | $ | (11,917 | ) | | $ | (9,451 | ) | |
| | | | | | | | | | |
| Net loss from continuing operations attributable to common shareholders | | $ | (11,917 | ) | | $ | (9,269 | ) | |
| Net loss from discontinued operations attributable to common shareholders | | | | | | | (182 | ) | |
| Net loss attributable to common shareholders | | $ | (11,917 | ) | | $ | (9,451 | ) | |
| | | | | | | | | | |
| Basic loss per share attributable to common shareholders: | | | | | | | | | |
| Continuing operations | | $ | (0.43 | ) | | $ | (0.34 | ) | |
| Discontinued operations | | $ | | | | $ | (0.01 | ) | |
| Basic loss per share - net loss attributable to common shareholders | | $ | (0.43 | ) | | $ | (0.35 | ) | |
| Diluted loss per share attributable to common shareholders: | | | | | | | | | |
| Continuing operations | | $ | (0.43 | ) | | $ | (0.34 | ) | |
| Discontinued operations | | $ | | | | $ | (0.01 | ) | |
| Diluted loss per share - net loss attributable to common shareholders | | $ | (0.43 | ) | | $ | (0.35 | ) | |
| Weighted average shares outstanding (in 000s): | | | | | | | | | |
| Basic: | | | 27,862 | | | | 27,192 | | |
| Diluted: | | | 27,862 | | | | 27,192 | | |
*See accompanying notes to Consolidated Financial Statements.*
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KINGSWAY FINANCIAL SERVICES INC.
**Consolidated Statements of Comprehensive Loss**
**(in thousands)**
| | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| | | | | | | | | | |
| Net loss | | $ | (10,252 | ) | | $ | (8,295 | ) | |
| Other comprehensive income, net of taxes(1): | | | | | | | | | |
| Unrealized gains (losses) on available-for-sale investments: | | | | | | | | | |
| Unrealized gains arising during the period | | | 1,037 | | | | 642 | | |
| Reclassification adjustment for amounts included in net loss | | | (121 | ) | | | (164 | ) | |
| Change in fair value of debt attributable to instrument-specific credit risk: | | | | | | | | | |
| Unrealized (losses) gains arising during the period | | | (258 | ) | | | 383 | | |
| Other comprehensive income, net of taxes(1) | | | 658 | | | | 861 | | |
| Comprehensive loss | | $ | (9,594 | ) | | $ | (7,434 | ) | |
| Less: comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interests in consolidated subsidiaries | | | 479 | | | | 987 | | |
| Comprehensive loss attributable to common shareholders | | $ | (10,073 | ) | | $ | (8,421 | ) | |
|
(1) Net of income tax benefitof $0 and $0 in2025 and 2024, respectively |
|
*See accompanying notes to Consolidated Financial Statements.*
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KINGSWAY FINANCIAL SERVICES INC.
**Consolidated Statements of Shareholders' Equity**
**(in thousands, except share data)**
| | | | | | | | | | | | | | | | | | | | | | | | | | | Shareholders' | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Accumulated | | | Equity | | | Noncontrolling | | | | | | |
| | | | | | | | | | | Additional | | | | | | | | | | | Other | | | Attributable to | | | Interests in | | | Total | | |
| | | | | | | | | | | Paid-in | | | Treasury | | | Accumulated | | | Comprehensive | | | Common | | | Consolidated | | | Shareholders' | | |
| | | Common Stock | | | Capital | | | Stock | | | Deficit | | | Income (Loss) | | | Shareholders | | | Subsidiaries | | | Equity | | |
| | | Shares | | | Amount | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance, December 31, 2023 | | | 27,101,613 | | | $ | 278 | | | $ | 379,535 | | | $ | (3,696 | ) | | $ | (346,868 | ) | | $ | (1,540 | ) | | | 27,709 | | | $ | (3,098 | ) | | $ | 24,611 | | |
| Vesting of restricted stock awards | | | 626,390 | | | | 6 | | | | | | | | | | | | | | | | | | | | 6 | | | | | | | | 6 | | |
| Tax withholding related to net share settlement of restricted stock awards | | | (278,404 | ) | | | (3 | ) | | | (2,317 | ) | | | | | | | | | | | | | | | (2,320 | ) | | | | | | | (2,320 | ) | |
| Purchase of noncontrolling interest | | | | | | | | | | | (2,500 | ) | | | | | | | 2,357 | | | | (29 | ) | | | (172 | ) | | | (2,328 | ) | | | (2,500 | ) | |
| Net (loss) income | | | | | | | | | | | | | | | | | | | (9,272 | ) | | | | | | | (9,272 | ) | | | 977 | | | | (8,295 | ) | |
| Preferred stock dividends | | | | | | | | | | | | | | | | | | | (179 | ) | | | | | | | (179 | ) | | | | | | | (179 | ) | |
| Distributions to noncontrolling interest holders | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (1,413 | ) | | | (1,413 | ) | |
| Dissolution of noncontrolling interest | | | | | | | | | | | | | | | | | | | (7,491 | ) | | | | | | | (7,491 | ) | | | 7,491 | | | | | | |
| Repurchases of common stock | | | (312,850 | ) | | | | | | | | | | | (2,504 | ) | | | | | | | | | | | (2,504 | ) | | | | | | | (2,504 | ) | |
| Other comprehensive income | | | | | | | | | | | | | | | | | | | | | | | 851 | | | | 851 | | | | 10 | | | | 861 | | |
| Stock-based compensation | | | | | | | | | | | 1,785 | | | | | | | | | | | | | | | | 1,785 | | | | | | | | 1,785 | | |
| Balance, December 31, 2024 | | | 27,136,749 | | | $ | 281 | | | $ | 376,503 | | | $ | (6,200 | ) | | $ | (361,453 | ) | | $ | (718 | ) | | | 8,413 | | | $ | 1,639 | | | $ | 10,052 | | |
| Vesting of restricted stock awards | | | 122,382 | | | | 1 | | | | | | | | | | | | | | | | | | | | 1 | | | | | | | | 1 | | |
| Tax withholding related to net share settlement of restricted stock awards | | | (9,488 | ) | | | | | | | (122 | ) | | | | | | | | | | | | | | | (122 | ) | | | | | | | (122 | ) | |
| Common stock issued at $11.75 and $13.90 per share, net | | | 1,419,001 | | | | 14 | | | | 16,746 | | | | | | | | | | | | | | | | 16,760 | | | | | | | | 16,760 | | |
| Net (loss) income | | | | | | | | | | | | | | | | | | | (10,731 | ) | | | | | | | (10,731 | ) | | | 562 | | | | (10,169 | ) | |
| Preferred stock dividends | | | | | | | | | | | | | | | | | | | (1,186 | ) | | | | | | | (1,186 | ) | | | | | | | (1,186 | ) | |
| Dissolution of noncontrolling interest | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Repurchases of common stock | | | (42,900 | ) | | | | | | | | | | | (345 | ) | | | | | | | | | | | (345 | ) | | | | | | | (345 | ) | |
| Other comprehensive income | | | | | | | | | | | | | | | | | | | | | | | 658 | | | | 658 | | | | | | | | 658 | | |
| Stock-based compensation | | | | | | | | | | | 1,721 | | | | | | | | | | | | | | | | 1,721 | | | | | | | | 1,721 | | |
| Balance, December 31, 2025 | | | 28,625,744 | | | $ | 296 | | | $ | 394,848 | | | $ | (6,545 | ) | | $ | (373,370 | ) | | $ | (60 | ) | | $ | 15,169 | | | $ | 2,201 | | | $ | 17,370 | | |
*See accompanying notes to Consolidated Financial Statements.*
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KINGSWAY FINANCIAL SERVICES INC.
**Consolidated Statements of Cash Flows**
**(in thousands)**
| | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Cash provided by (used in): | | | | | | | | | |
| Operating activities: | | | | | | | | | |
| Net loss | | $ | (10,252 | ) | | $ | (8,295 | ) | |
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | | | | | | | | | |
| Income from discontinued operations, net of taxes | | | | | | | (438 | ) | |
| Loss on disposal of discontinued operations, net of taxes | | | | | | | 620 | | |
| Equity in net loss of limited liability investments | | | 1 | | | | 162 | | |
| Depreciation and amortization expense | | | 9,225 | | | | 6,997 | | |
| Stock-based compensation expense | | | 1,721 | | | | 1,785 | | |
| Net realized and unrealized investment gains | | | (714 | ) | | | (1,896 | ) | |
| Impairment of goodwill and intangible assets | | | 706 | | | | 2,848 | | |
| Loss on change in fair value of contingent consideration | | | | | | | 270 | | |
| Deferred income taxes, adjusted for liabilities acquired | | | (4,073 | ) | | | (537 | ) | |
| Other non-cash items | | | 479 | | | | 488 | | |
| Changes in operating assets and liabilities: | | | | | | | | | |
| Service fee receivable, net, adjusted for assets acquired | | | 779 | | | | 1,270 | | |
| Deferred contract costs | | | (1,018 | ) | | | (155 | ) | |
| Other assets, adjusted for assets acquired | | | (1,034 | ) | | | (360 | ) | |
| Deferred service fees | | | 4,046 | | | | (887 | ) | |
| Other, net, adjusted for liabilities acquired | | | 131 | | | | (1,267 | ) | |
| Cash (used in) provided by operating activities - continuing operations | | | (3 | ) | | | 605 | | |
| Cash provided by operating activities - discontinued operations | | | | | | | 462 | | |
| Net cash (used in) provided by operating activities | | | (3 | ) | | | 1,067 | | |
| Investing activities: | | | | | | | | | |
| Proceeds from sales and maturities of fixed maturities | | | 10,596 | | | | 7,845 | | |
| Proceeds from sales of equity investments | | | | | | | 77 | | |
| Purchases of fixed maturities | | | (9,515 | ) | | | (7,760 | ) | |
| Net proceeds from limited liability investments, at fair value | | | 153 | | | | 2,347 | | |
| Net proceeds from sale of discontinued operations | | | | | | | 1,136 | | |
| Acquisition of businesses, net of cash acquired | | | (29,181 | ) | | | (20,054 | ) | |
| Net purchases of property and equipment, adjusted for assets acquired | | | (1,618 | ) | | | (709 | ) | |
| Other, net | | | (46 | ) | | | 272 | | |
| Cash used in investing activities - continuing operations | | | (29,611 | ) | | | (16,846 | ) | |
| Cash used in investing activities - discontinued operations | | | | | | | | | |
| Net cash used in investing activities | | | (29,611 | ) | | | (16,846 | ) | |
| Financing activities: | | | | | | | | | |
| Proceeds from issuance of common stock, net | | | 15,602 | | | | | | |
| Proceeds from issuance of preferred stock | | | 8,000 | | | | 8,250 | | |
| Cash paid for repurchase of common stock | | | (345 | ) | | | (2,504 | ) | |
| Cash paid to acquire noncontrolling interest | | | | | | | (2,500 | ) | |
| Distributions to noncontrolling interest holders | | | | | | | (1,413 | ) | |
| Payment of preferred stock dividends | | | (1,024 | ) | | | (13 | ) | |
| Payment of contingent consideration from acquisition | | | (420 | ) | | | (650 | ) | |
| Taxes paid related to net share settlements of restricted stock awards | | | (122 | ) | | | (2,314 | ) | |
| Principal proceeds from debt, net of debt issuance costs of $389 in 2025 and $287 in 2024 | | | 26,297 | | | | 34,613 | | |
| Principal payments on debt | | | (15,239 | ) | | | (21,590 | ) | |
| Cash provided by financing activities - continuing operations | | | 32,749 | | | | 11,879 | | |
| Cash used in financing activities - discontinued operations | | | | | | | (435 | ) | |
| Net cash provided by financing activities | | | 32,749 | | | | 11,444 | | |
| Net increase (decrease) in cash and cash equivalents and restricted cash from continuing operations | | | 3,135 | | | | (4,362 | ) | |
| Cash and cash equivalents and restricted cash at beginning of period | | | 13,136 | | | | 18,110 | | |
| Less: cash and cash equivalents and restricted cash of discontinued operations | | | | | | | 612 | | |
| Cash and cash equivalents and restricted cash of continuing operations at beginning of period | | | 13,136 | | | | 17,498 | | |
| Cash and cash equivalents and restricted cash of continuing operations at end of period | | $ | 16,271 | | | $ | 13,136 | | |
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KINGSWAY FINANCIAL SERVICES INC.
| (in thousands) | | December 31, | | |
| | | 2025 | | | 2024 | | |
| Reconciliation of cash and cash equivalents and restricted cash to the consolidated balance sheets: | | | | | | | | | |
| Cash and cash equivalents | | $ | 8,306 | | | $ | 5,493 | | |
| Restricted cash | | | 7,965 | | | | 7,643 | | |
| Cash and cash equivalents and restricted cash per statements of cash flows | | $ | 16,271 | | | $ | 13,136 | | |
|
|
|
Years ended December 31, |
|
|
|
(in thousands) |
|
|
2025 |
|
|
|
2024 |
|
|
|
Supplemental disclosures of cash flows information: |
|
|
|
|
|
|
|
|
|
|
Cash paid (received) by continuing operations during the year for: |
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
5,251 |
|
|
$ |
4,659 |
|
|
|
Income taxes - state and local |
|
$ |
237 |
|
|
$ |
(112 |
) |
|
|
Non-cash investing and financing activities from continuing operations: |
|
|
|
|
|
|
|
|
|
|
Contingent consideration for acquisition of businesses |
|
$ |
980 |
|
|
$ |
|
|
|
|
Seller phantom equity awards issued for acquisition of businesses |
|
$ |
3,328 |
|
|
$ |
|
|
|
|
Notes payable issued for acquisition of businesses |
|
$ |
1,940 |
|
|
$ |
|
|
|
|
Notes payable extinguished in exchange for common stock |
|
$ |
(1,038 |
) |
|
$ |
|
|
|
|
Common stock issued in exchange for notes payable |
|
$ |
1,158 |
|
|
$ |
|
|
|
|
Accrued dividends on preferred stock issued |
|
$ |
327 |
|
|
$ |
166 |
|
|
*See accompanying notes to Consolidated Financial Statements.*
40
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
**NOTE 1 BUSINESS**
Kingsway Financial Services Inc. (the "Company" or "Kingsway") was incorporated under the Business Corporations Act (Ontario) on *September 19, 1989.*Effective *December 31, 2018,*the Company changed its jurisdiction of incorporation from the province of Ontario, Canada, to the State of Delaware. Kingsway is a holding company with operating subsidiaries located in the United States and is the only publicly-traded US company employing the Search Fund model to acquire and build great businesses. The Company ownsand operates a collection of high-quality *B2B* and *B2C* services companies that are asset-light, growing, and that have recurring revenues. Kingsway seeks to compound long-term shareholder value on a per share basis via its decentralized management model, its talented team of operators, and its tax-advantaged corporate structure.
**NOTE****2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
| (a) | Principles of consolidation: | |
The accompanying information in the*2025* Annual Report has been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").
The accompanying consolidated financial statements include the accounts of Kingsway and its majority owned and controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
In addition, the Company evaluates its relationships or investments for consolidation pursuant to authoritative accounting guidance related to the consolidation of a variable interest entity ("VIE") under the Variable Interest Model prescribed by the Financial Accounting Standards Board ("FASB").
The Companys investments include certain investments, primarily in limited liability companies and limited partnerships in which the Company holds a variable interest. The Company evaluates these investments for the characteristics of a VIE. The Variable Interest Model identifies the characteristics of a VIE to include investments (*1*) lacking sufficient equity to finance activities without additional subordinated support or (*2*) in which the holders of equity at risk in the investments lack characteristics of a controlling financial interest, such as the power to direct activities that most significantly impact the legal entitys economic performance; the obligation to absorb the legal entitys expected losses; or the right to receive the expected residual returns of the legal entity. The equity investors as a group are considered to lack the power to direct activities that most significantly impact the legal entitys economic performance when (*1*) the voting rights of some investors are *not* proportional to their obligations to absorb the expected losses of the legal entity or their rights to receive the expected residual returns of the legal entity and (*2*) substantially all of the activities of the legal entity are conducted on behalf of an investor with disproportionately few voting rights. When evaluating whether an investment lacks characteristics of a controlling financial interest, the Company considers limited liability companies and limited partnerships to lack the power of a controlling financial interest if neither of the following exists: (*1*) a simple majority or lower threshold of partners or members with equity at risk are able to exercise substantive kick-out rights through voting interest over the general partner(s) or managing member(s) or (*2*) limited partners with equity at risk are able to exercise substantive participating rights over the general partner(s) or managing member(s).
If the characteristics of a VIE are met, the Company evaluates whether it meets the primary beneficiary criteria. The primary beneficiary is considered to be the entity holding a variable interest that has the power to direct activities that most significantly impact the economic performance of the VIE; the obligation to absorb losses of the VIE; or the right to receive benefits from the VIE that could potentially be significant to the VIE. In instances where the Company is considered to be the primary beneficiary, the Company consolidates the VIE. When the Company is *not* considered to be the primary beneficiary of the VIE, the VIE is *not* consolidated and the Company uses the equity method to account for the investment. Under this method, the carrying value is generally the Companys share of the net asset value of the unconsolidated entity, and changes in the Companys share of the net asset value are recorded in net investment income.
Certainprior year amounts have been reclassified to conform to current year presentation. Such reclassifications had *no* impact on previously reported net loss or total assets, liabilities orshareholders' equity.
*Subsidiaries*
The Company's consolidated financial statements include the assets, liabilities, shareholders' equity, revenues, expenses and cash flows of the holding company and its subsidiaries and have been prepared in accordance with U.S. GAAP. A subsidiary is an entity controlled, directly or indirectly, through ownership of more than *50%* of the outstanding voting rights, or where the Company has the power to govern the financial and operating policies so as to obtain benefits from its activities. Assessment of control is based on the substance of the relationship between the Company and the entity and includes consideration of both existing voting rights and, if applicable, potential voting rights that are currently exercisable and convertible. The operating results of subsidiaries that have been disposed are included up to the date control ceased, and any difference between the fair value of the consideration received and the carrying value of a subsidiary that has been disposed is recognized in the consolidated statements of operations. All intercompany balances and transactions are eliminated in full.
The consolidated financial statements are prepared as of *December 31, 2025* based on individual company financial statements at the same date, or in the case of certain limited liability companies that are consolidated, on a *three*-month lag basis. Accounting policies of subsidiaries have been aligned where necessary to ensure consistency with those of Kingsway.
The Company's subsidiary,Argo Holdings Fund I, LLC ("Argo Holdings"), meets the definition of an investment company and follows the accounting and reporting guidance in Financial Accounting Standards Codification Topic *946,* *Financial Services-Investment Companies*.
*Noncontrolling interests*
The Company has noncontrolling interests attributable to certain of its subsidiaries. A noncontrolling interest arises where the Company owns less than *100%* of the voting rights and economic interests in a subsidiary. A noncontrolling interest is initially recognized at the proportionate share of the identifiable net assets of the subsidiary at the acquisition date and is subsequently adjusted for the noncontrolling interest's share of the acquiree's net income (loss) and changes in capital. The effects of transactions with noncontrolling interests are recorded in shareholders' equity where there is *no* change of control.
*41*
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
On *July 25, 2024,*the Company completed the purchase of the 10% interest in its subsidiary, IWS Acquisition Corporation ("IWS"), *not* previously owned by the Company. Therefore, as of *July 25,**2024,* IWS became a wholly-owned subsidiary of the Company.
During the *third* quarter of *2024,* the Company's subsidiary,CMC Industries Inc. ("CMC") and its subsidiariesTexas Rail Terminal LLC and TRT Leaseco, LLC ("TRT"),were legally dissolved. As a result, the remaining equity related toCMC and its subsidiaries that was included in noncontrolling interests in consolidated subsidiaries was transferred to accumulated deficit in the consolidated balance sheet during *2024.*
*Redeemable noncontrolling interest*
Redeemable noncontrolling interestrepresents a 20% noncontrolling ownership in Southside Plumbing, which was acquired on *August 14, 2025.*The 20% noncontrolling interest in Southside Plumbingincludes a put option redemption rightfor the noncontrolling interest holderto require the Company to repurchase the 20% interest of the noncontrolling interest holderat fair value, onthe *fifth* anniversary of the acquisition of Southside Plumbing, or *August 14, 2030.*Redeemable noncontrolling interestispresented outside of permanent equity inthe consolidated balance sheets as it is redeemable by the holderof the noncontrolling interest and the redemption is outside the control of the Company. The redeemable noncontrolling interestwasinitially recorded at fair value at the date ofissuance. The Companyrecords the carrying amount of the redeemable noncontrolling interest at the greater of (i) the initial carrying amount, increased or decreased for the noncontrolling interests share of net income or loss and its share of other comprehensive income or loss, and dividends or (ii) the redemption value.For interests that are redeemable in the future, the Companyrecognizes changes in the redemption value immediately as they occur.
| (b) | Use of estimates: | |
The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and classification of assets and liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates. Estimates and their underlying assumptions are reviewed on an ongoing basis. Changes in estimates are recorded in the accounting period in which they are determined.
The critical accounting estimates and assumptions in the accompanying consolidated financial statements include, but are *not* limited to, revenue recognition;valuation of fixed maturityinvestments; impairment assessment of investments; valuation of limited liability investment, at fair value; valuation of deferred income taxes; accounting for business combinations;valuation and impairment assessment of intangible assets; goodwill recoverability;valuation of contingent consideration; fair value assumptions for subordinated debt obligations; and fair value assumptions for subsidiary stock-based compensation awards.
| (c) | Business combinations and asset acquisitions: | |
The Company evaluates acquisitionsin accordance with Accounting Standards Codification ("ASC") *805,* *Business Combinations*("ASC *805"*),to determine if a transaction representsan acquisition of a businessor an acquisitionof assets.The results of acquiredsubsidiariesare included in the consolidated statements of operations from the date of acquisition.
An acquisition of a business represents a business combination. The acquisition method of accounting is used to account fora business combination. The cost of an acquired businessis measured as the fair value of the assets received, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any noncontrolling interest. The excess of the cost of an acquired businessover the fair value of the Company's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquired businessis less than the fair value of the net assets of the subsidiary acquired, the difference is recognized in the consolidated statements of operations. Noncontrolling interests in the net assets of consolidated entities are reported separately in shareholders' equity and initially measured at fair value.Redeemable noncontrolling interests in the net assets of consolidated entities are reported separatelyoutside of permanent equity and initially measured at fair value. Acquisition costs related to a business combinationare expensed as incurred.
When an acquisition does *not* meet the definition of a business combination either because: (i) substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset, or group of similar identified assets, or (ii) the acquired entity does *not* have an input and a substantive process that together significantly contribute to the ability to create outputs, the Company accounts for the acquisition as anasset acquisition. In anasset acquisition, goodwill is *not* recognized. Anyexcess of the total purchase price plus transactioncosts over the fair valueof the net assets acquired is allocated on a relative fair value basis to the identifiable net assets at the acquisition date.
| (d) | Cash and cash equivalents: | |
Cash and cash equivalents include cash and investments with original maturities of *no* more than *three* months when purchased that are readily convertible into cash.
| (e) | Restricted cash: | |
Restricted cash represents certain cash and cash equivalent balances restricted as to withdrawal or use. The Company's restricted cash is comprised primarily of cash held for the payment of vehicle service agreement claims under the terms of certain contractual agreements, funds held in escrow, statutory deposits and amounts pledged to *third*-parties as deposits or to collateralize liabilities.
| (f) | Investments: | |
Investmentsincludes investments in fixed maturities, limited liability investments, limited liability investment, at fair value, investments in private companies and short-term investments.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
Investments in fixed maturities are classified as available-for-sale and reported at fair value. Unrealized gains and losses are included in accumulated other comprehensive loss, net of tax.
Limited liability investment, at fair valuerepresents the underlying investments of the Companys consolidated entity, Argo Holdings, andisaccounted for at fair value with changes in fair value included in net realized and unrealized investment gains. The difference between the end of the reporting period of the limited liability investment, at fair value and that of the Company is *no* more than *three* months.
Realized gains and losses on sales, determined on a *first*-in *first*-out basis, are included in net realized and unrealized investment gains.
Dividends and interest income are included in net investment income. Investment income is recorded as it accrues.
The Company accounts for all financial instruments using trade date accounting.
The Company conducts a quarterly review to identify and evaluate investments that show objective indications of possible impairment. Impairment is charged to the consolidated statements of operations if the fair value of an instrument falls below its cost oramortized cost.
When an available-for-sale fixed maturity investmentis impaired, it is evaluated to determine whether there is an intent to sell the investmentbefore recovery of amortized cost or whether a credit loss exists.
For fixed maturity investments that the Company intends to sell or for which it is more likely than *not* that the Company will be required to sell before an anticipated recovery of value, the full amount of the impairment is recordedas an impairment losswhich is included innet realized and unrealized investment gains in theconsolidated statements of operations. The investments amortized cost is written down to its fair valueand is *not* adjustedfor any subsequent recoveries.
For fixed maturity investments that the Company does *not* intend to sell or for which it is more likely than *not* that the Company will *not* be required to sell before an anticipated recovery of value, the Companyevaluates whether a decline in fair value below the amortized cost basis has occurred from a credit loss or othernon-credit related factors.
Considerations in the credit loss assessment include (*1*) extent to which the fair value has been less than amortized cost, (*2*) conditions related to the investment, an industry, or a geographic area, (*3*) payment structure of the investment and the likelihood of the issuer's ability to make contractual cash flows, (*4*) defaults or other collectability concerns related to the issuer, (*5*) changes in the ratings assigned by a rating agency and (*6*) other credit enhancements that affect the investments expected performance.
If a credit loss exists, an allowance is established, which is equal to thedifference between the present value of cash flows expected to be collected and the amortized cost basis.The expected allowance for credit losses is limited by the amount that the fair value is less than the amortized cost basis and is adjusted in subsequent periods for any additional expected credit losses or subsequent recoveries. Changes in the allowance are recordedasimpairment losses and areincluded innet realized and unrealized investment gainsin the consolidated statements of operations.The amortized cost basis of the investment is *not* adjusted for the expected allowance for credit loss. The impairment related to other non-credit related factorsis reported in other comprehensiveincome.
The Company reports accrued investment income separately for available-for-sale fixed maturity investmentsand has made a policy election to *not*measure an allowance for credit losses on accrued investment income. Accrued investment income is written off againstnet investment incomeat the time the issuer of the bond defaults or is expected to default on interest payments.
| (g) | Service fee receivable: | |
Service fee receivable includes balances due and uncollected from customers. Service fee receivable is reported net of an estimated allowance for credit losses. The Company recognizes credit losses based on a forward-looking current expected credit losses.The Company estimatesexpected credit losses based upon its assessment of various factors, including historical collection experience, the age of service feereceivable balances, credit quality of its customers, current economic conditions,managements experience, reasonable and supportable forecasts of future economic conditions, and other factors that *may*affect its ability to collect from customers. Expected credit losses are recorded as general and administrative expenses in the consolidated statements of operations. Amounts are written off against the allowance when determined to be uncollectible.Write-offs are applied as a reduction to the allowance for credit losses and any recoveries of previous write-offs are netted against bad debt expense in the period recovered.
| (h) | Deferred contract costs: | |
Deferred contractcosts represent the deferralof incremental costs to obtain or fulfill a contract with a customer. Incremental coststo obtain a contract with a customerprimarily include sales commissions. The Companycapitalizes costs incurred to fulfill a contractif the costsare identifiable, generate or enhance resources used to satisfy future performance obligations and are expected to be recovered. Costs to fulfill a contractinclude labor costs forset-up activities directly related to the acquisition of vehicle service agreements.Contract costsare deferred and amortized over the expected customer relationship periodconsistent with the pattern in which the related revenues are earned.Amortization of incremental coststo obtain a contract and costs to fulfill a contract are recorded incost of services soldin the consolidated statements of operations.Changes in estimates, if any, are recorded in the accounting period in which they are determined.
| (i) | Property and equipment: | |
Property and equipment are reported in the consolidated financial statements at cost. Depreciation of property and equipment has been provided using the straight-line method over the estimated useful lives of such assets. Repairs and maintenance are recognized in operations during the period incurred. The Company estimates useful life to be threeto ten years for leasehold improvements; threetoseven years for furniture and fixtures;three to seven years for computer hardware;fiveyears for medical equipment;threeto eightyears for vehicles; andthreetoten years for machinery and equipment.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
| (j) | Goodwill and intangible assets: | |
When the Company acquires a subsidiary or other business where it exerts significant influence, the fair value of the net tangible and intangible assets acquired is determined and compared to the amount paid for the subsidiary or business acquired. Any excess of the amount paid over the fair value of those net assets is considered to be goodwill.
Goodwill is tested for impairment annually as of *November 30,*or more frequently if events or circumstances indicate that the carrying value *may**not* be recoverable.In evaluating the recoverability of goodwill, the Company estimates the fair value of its reporting units and compares it to the carrying value. Any excess of areporting unit's carrying valueover its fair value is recognized as an impairment loss in the consolidated statements of operations in the period in which the impairment is determined.
When the Company acquires a subsidiary or other business where it exerts significant influence or acquires certain assets, intangible assets *may*be acquired, which are recorded at their fair value at the time of the acquisition. An intangible asset with a definite useful life is amortized in the consolidated statements of operations over its estimated useful life. The Company writes down the value of an intangible asset with a definite useful life when the undiscounted cash flows are *not* expected to allow for full recovery of the carrying value.
Intangible assets with indefinite useful lives are *not* subject to amortization and are tested for impairment annually as of *November 30,*or more frequently if events or circumstances indicate that the carrying value *may**not* be recoverable, to ensure that fair values are greater than or equal to carrying values. Any excess of carrying value over fair value is charged to the consolidated statements of operations in the period in which the impairment is determined.The Company *may*perform its impairment test for any indefinite-lived intangible asset through a qualitative assessment or elect to proceed directly to a quantitative impairment test, however, the Company *may*resume a qualitative assessment in any subsequent period if facts and circumstances permit.
| (k) | Other assets: | |
Other assets includes accrued investment income, prepaid expenses, contract asset, inventory and other receivables. Other receivables are recorded net of an allowance of$0.1million and less than$0.1million at *December 31, 2025*and *December 31, 2024*, respectively.
Inventoryconsists of plumbing, electric motor,printer and computerequipment, parts,suppliesand work in in process.Inventory is statedat the lower of cost or net realizable value and includes the product cost, inbound freight and warehousing costs, where applicable, and is maintained on the *first*-in, *first*-out method. The Company regularly reviewsinventoryquantities on hand, future purchase commitments with suppliers and the estimated utility ofinventory.An assessment is made periodicallyto determine what slow-movinginventoryitems, if any, should be deemed obsolete and written down to their estimated net realizable value.
Inventory consisted of the following at *December 31, 2025*and *December 31, 2024*:
| (in thousands) | | | December 31, 2025 | | | | December 31, 2024 | | |
| | | | | | | | | | |
| Equipment | | $ | 977 | | | $ | 148 | | |
| Parts and supplies | | | 493 | | | | 566 | | |
| Work in process | | | 292 | | | | | | |
| Total | | $ | 1,762 | | | $ | 714 | | |
| (l) | Debt: | |
Debt includes bank loans, notes payable and subordinated debt.
Bank loans and notes payableare reported in the consolidated balance sheets at par value adjusted for unamortized discount or premium and unamortized issuance costs. Discounts, premiums, and costs directly related to the issuance of debt are capitalized and amortized through the maturity date of the debt using the effective interest rate method and are recorded in interest expensein the consolidated statements of operations. Gains and losses on the extinguishment of debt are recorded in non-operating other revenue, net.
The Company's subordinated debt is measured and reported at fair value. The fair value of the subordinated debt is calculated using a model based on significant market observable inputs and inputs developed by a *third*-party. These inputs include credit spread assumptions developed by a *third*-party and market observable swap rates. The portion of the change in fair value of subordinated debt related to the instrument-specific credit risk is recognized in other comprehensive income.
| (m) | Contingent consideration: | |
The consideration for certain of the Company's acquisitions includefuture payments toformer owners that are contingent upon the achievement of certain targets over future reporting periods. Liabilities for contingent consideration are measured and reported at fair value at the date of acquisition and are included in accrued expenses and other liabilities in the consolidated balance sheets. Changes in the fair value of contingent consideration liabilities can result from changes to *one* or multiple inputs, including adjustments to the discount rates or changes in the assumed achievement or timing of any targets. These fair value measurements are based on significant inputs *not* observable in the market. Changes in assumptions could have an impact on the payout of contingent consideration liabilities. Changes in fair value are reported in the consolidated statements of operations.
*44*
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
| (n) | Income taxes: | |
The Company follows the asset and liability method of accounting for income taxes, whereby deferred income tax assets and liabilities are recognized for (i) the differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and (ii) loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment. Future tax benefits are recognized to the extent that realization of such benefits is more likely than *not* and a valuation allowance is established for any portion of a deferred tax asset that management believes will *not* be realized. Current federal income taxes are charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year. The Company accounts for uncertain tax positions in accordance with the income tax accounting guidance. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax benefit.
| (o) | Leases: | |
The Company records a right of use asset and lease liability for all leases in which the estimated term exceeds *twelve* months. The Company treats contracts as a lease when the contract: (*1*) conveys the right to use a physically distinct property or equipment asset for a period of time in exchange for consideration, (*2*) the Company directs the use of the asset and (*3*) the Company obtains substantially all the economic benefits of the asset. Right-of-use assets and lease liabilities are measured and recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As the Companys leases are office leases, the Company is unable to determine an implicit rate; therefore, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments for those leases. The Company includes options to extend or terminate the lease in the measurement of the right-of-use asset and lease liability when it is reasonably certain that such options will be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
The Company determines lease classification at the commencement date. Leases *not* classified as sales-type (lessor) or financing leases (lessor and lessee) are classified as operating leases. The primary accounting criteria the Company uses that results in operating lease classification are: (a) the lease does *not* transfer ownership of the underlying asset to the lessee by the end of the lease term, (b) the lease does *not* grant the lessee a purchase option that the lessee is reasonably certain to exercise, (c) using a *seventy-five* percent or more threshold in addition to other qualitative factors, the lease term is *not* for a major part of the remaining economic life of the underlying asset and, (d) using a *ninety* percent or more threshold in addition to other qualitative factors, the present value of the sum of the lease payments and residual value guarantee from the lessee, if any, does *not* equal or substantially exceed the fair value of the underlying asset.
As an accounting policy, the Company has elected *not* to apply the recognition requirements in ASC *842* to short-term leases (generally those with terms of *twelve* months or less). Instead, the Company recognizes the lease payments as expense on a straight-line basis over the lease term and any variable lease payments in the period in which the obligation for those payments is incurred.
Rental expense for operating leases is recognized on a straight-line basis over the lease term, net of any applicable lease incentive amortization.
| (p) | Redeemable preferred stock: | |
The Company accounts for its redeemable preferred stock in accordance with the guidance in Accounting Standards Codification (ASC) Topic *480,**Distinguishing Liabilities from Equity*.The Company measures its redeemablepreferred stock at its current redemption value plus dividends *not* currently declared or paid but which will be payable upon redemption. Redeemable preferred stock with redemption features *not* solely within the control of the issuer arepresented in temporary or mezzanine equity in the consolidated balance sheets.
| (q) | Revenue recognition: | |
*Service fee and other revenue and contract balances*
Service fee and other revenue represents vehicle service agreement fees, maintenance support service fees, warranty product commissions, business services consulting revenue, healthcareservices revenue, software license and support revenue, motor sales and repair service revenue and skilled trades repair and service revenue based on terms of various agreements with credit unions, consumers andbusinesses. Customers either pay in full at the inception of a warranty contract orcommission product sale, or when consulting, healthcare,software license and support, motor sales and skilled tradesservices are billed, or on terms subject to the Companys customary credit reviews.
Vehicle service agreement fees include the fees collected to cover the costs of future automobile mechanical breakdown claims and the associated administration of those claims. Vehicle service agreement fees are earned over the duration of the vehicle service agreement contracts as the single performance obligation is satisfied. Vehicle service agreement fees are initially recorded as deferred service fees with revenues recognized over the term of the contract based on the proportion of expected claims to total overall claims to be incurred over the life of the contract. The Company believes this reasonablyrepresents the transfer of services to the vehicle service contract holder over the warranty term.The Company compares the remaining deferred service fees balance to the estimated amount of expected future claims under the vehicle service agreement contracts and records an additional accrual if the deferred service fees balance is less than expected future claims costs.
In certain jurisdictions the Company is required to refund to a customer a pro-rata share of the vehicle service agreement fees if a customer cancels the agreement prior to the end of the term. Depending on the jurisdiction, the Company *may*be entitled to deduct from the refund a cancellation fee and/or amounts for claims incurred prior to cancellation. While refunds vary depending on the term and type of product offered, historically refunds have averaged *6.65%*to *10.10%*of the original amount of the vehicle service agreement fee. Revenues recorded by the Company are net of variable consideration related to refunds and the associated refund liability is included in accrued expenses and other liabilities. The Company estimates refunds based on the actual historical refund rates by warranty type taking into consideration current observable refund trends in estimating the expected amount of future customer refunds to be paid at each reporting period.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
Maintenance support service fees include the service fees collected to administer equipment breakdown and maintenance support services and are earned as services are rendered.
Warranty product commissions include the commissions from the sale of warranty contracts for certain new and used heating, ventilation, air conditioning ("HVAC"), standby generator, commercial LED lighting and commercial refrigeration equipment. The Company acts as an agent on behalf of the *third*-party insurance companies that underwrite and guaranty these warranty contracts. The Company does *not* guaranty the performance underlying the warranty contracts it sells. Warranty product commissions are earned at the time of the warranty product sales.
Business services consulting revenue includes the revenuefrom providingoutsourced finance andhuman resources consulting services andinformationtechnologymanaged services. The Company invoices for business servicesrevenuebased on contracted rates. Revenue is earned over time asservices are provided to the customer.
Healthcare servicesrevenue includes revenue from providinghealthcare professional staffing services and outsourcedcardiactelemetry services for general acute care, long-term acute careand inpatient rehabilitation hospitals. The Company invoices for healthcare servicesrevenuebased on contracted rates. Revenue is earned over time asservices are provided to the customer.
Software license and support revenue includes revenue from the sale or rental of software productscreated exclusively to serve the management needs of all types of shared-ownership properties.Software licenses are on-premise at customer locationsand considered fully functional when made available and delivered to the customer. As the customer can use and benefit from the license on its own,software licenses represent distinct performance obligations. Revenue is recognized upfront at the point in time when control is transferred, which is defined as the point in time when the customer can use and benefit from the license.The Company's software licenses are sold as term licenses, and the contracts includesoftware support services, which are accounted for as separate performance obligations.The Companyrecognizesthe portion of the transaction price allocated to the software license on a residual basis. The residual basis is used to allocate revenue when the contract arrangement includes a software license and has at least *one* performance obligation for which the stand-alone selling price ("SASP") is observable, such as the software support services.The residual methodis used as the selling price for software licenses in circumstances when the transaction price is highly variable and the SASP is *not* discernable from past transactions or other observable evidence.The Companyevaluates the residual approach estimate compared to all available observable data in order to conclude the estimate is representative of its SASP. Software support revenue is recognized ratably over the contract period as services are rendered. The SASP of software supportis consistent with the stand-alone pricing of subsequent software support renewals.For certain SPI contracts, the transaction price ofthe software license is billed in installments, typically overa *three* to *five* yearperiod.The Company allocates a portion of the consideration received from these arrangements to a financing component when it determines that a significant financing component exists.The financing component is subsequently recognized as interest incomeseparate from software license and support fee revenue over the termof the arrangement with the customer. Pursuant to practical expedients afforded under ASC *606,* the Company does *not* recognize a financing component for software license sales that have a term of *one* year or less.
Motor sales andrepair service revenueinclude the service fees collected from the sale of new electric motors, in-shop repair and refurbishment of customer-owned electric motors, transformers, switchgear, ancillary parts, and on-site services for customers, including preventative maintenance, infraredscans, VLF cable testing, and vibration analysis for various types of electrical equipment.Motor sales andrepair service revenue isearned as motors aredelivered to the customer or as repairservices are provided to the customer.
Skilled trades repair and service revenueinclude the service fees collected to administer plumbing repairs and maintenance support services and are earned over time as services are provided to the customer.
*Contract balances*
The timing of revenue recognition *may*differ from the timing of billing and cash receipts from customers.A contract assetis established for revenue that is recognized prior to billingthe customer and is included in other assets in the consolidated balance sheets. Uponbilling, which typically occurs over a *three* to *five* year installment period, the value of the contract assetis reversed and service fee receivable is recorded. When payment is made prior to satisfaction of performance obligations, a contract liability is established which is recorded as deferred service fees in the consolidated balance sheets. If the satisfaction of the performance obligation occurs over time, the contract liability is reversed over the contract term, as the services are provided tothe customer. If the satisfaction of the performance obligation is at a point in time, the contract liability reverses upon delivery to the customer.
| (r) | Stock-based compensation: | |
The Company uses the fair-value method of accounting for stock-based compensation awards granted to employees. Expense is recognized on a straight-line basis over the requisite service period during which awards are expected to vest, with a corresponding increase to either additional paid-in capital for equity-classified awards or to a liability for liability-classified awards. Liability-classified awards,included in accrued expenses and other liabilities in the consolidated balance sheets, are measured and reported at fair value on the date of grant and are remeasured each reporting period. Compensation expense related to the changein fair value for liability-classified awards is reported in the consolidated statements of operations asgeneral and administrative expenses.For awards with a graded vesting schedule, expense is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. For awards subject to a performance condition, expense is recognized when the performance condition has been satisfied or is probable of being satisfied. For awards subject to a market condition, compensation expense is recognized on a straight-line basisregardless of whether the market condition is satisfied, provided that the requisite service has been provided. Forfeitures are recognized in the period that the award is forfeited.
| (s) | Fair value accounting: | |
The fair values of the Company's investments in fixed maturities, limited liability investment, at fair value, subordinated debt,contingent consideration,seller phantom equity awards and redeemable noncontrolling interestare estimated using a fair value hierarchy to categorize the inputs it uses in valuation techniques. The carrying amounts reported in the consolidated balance sheets approximate fair values for cash and cash equivalents, restricted cash, short-term investments and certain other assets and other liabilities because of their short-term nature.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
**NOTE 3 RECENTLY ISSUED ACCOUNTING STANDARDS**
| (a) | Adoption of New Accounting Standards: | |
In *December**2023,* the Financial Accounting Standards Board ("FASB") issued ASU*No.**2023*-*09,**Improvements to Income Tax Disclosures* (ASU*2023*-*09*), which requires disaggregated information about a reporting entitys effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. ASU *2023*-*09* is effectivefor public companies forannual periods beginning after*December 15, 2024.*The Company adopted ASU *2023*-*09* with comparative period income tax disclosures adjusted to reflect the change in accounting guidance. Refer toNote *14*, "Income Taxes,"for these additional disclosures.
| (b) | Accounting Standards Not Yet Adopted: | |
In*October 2023,*the FASB issued ASU*2023*-*06,**Disclosure Improvements: Codification Amendments in Response to the SEC**s Disclosure Update and Simplification Initiative***("ASU *2023*-*06"*), which amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification.For SEC registrants, the effective date for each amendment will be the date on which the SECs removal of that related disclosure requirement from Regulation S-*X* or Regulation S-K becomes effective, with early adoption prohibited. The Company will monitor the removal of various requirements from the current regulations in order to determine when to adopt the related amendments, but does *not* anticipate the adoption of the new guidance will have a material impact on the Companys consolidated financial statements. The Company will continue to evaluate the impact of this guidance on its consolidated financial statements.
In *November 2024,*the FASB issued ASU *2024*-*03,* *Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures* ("ASU *2024*-*03"*). ASU *2024*-*03* requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense caption. Qualitative disclosures about any remaining amounts in relevant expense line items must be provided. Separate disclosures of total selling expenses and an entitys definition of those expenses are also required. ASU *2024*-*03* is effective for public companies with annual periods beginningafter *December 15, 2026,*and interim periods within annual period beginning after*December 15, 2027,*with early adoption permitted. The Company expects the adoption of the standard to result in additional disaggregation of expense captions within its footnote disclosures.
In *July 2025,*the FASB issued ASU *2025*-*05,**Financial Instruments**Credit Losses (Topic 326):**Measurement of Credit Losses for Accounts Receivable and Contract Assets*("ASU *2025*-*05"*)*,*which amends theguidance on measuring expected credit losses using a probabilistic method and providesa practical expedient for all entities that simplifies the estimation of expected credit losses for current trade accounts receivable and contract assets arising from revenue transactions. ASU *2025*-*06* is effective for public business entities for fiscal years beginning after *December 15, 2025,*including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the timing of adoption and the potential impact of this new guidance on its consolidated financial statements.
In *September 2025,*the FASB issuedASU *2025*-*06,**Intangibles**Goodwill and Other**Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software*("ASU *2025*-*06"*),to modernize the accounting guidance for the costs to develop software for internal use. ASU *2025*-*06*applies to costs incurred to develop or obtain software for internal use andamends the existing standard that refers to various stages of a software development project to align better with current software development methods. Under ASU *2025*-*06,* entities will commence capitalizing eligible costs when (i) management has authorized and committed to funding the software project, and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. ASU *2025*-*06* is effective for public business entities for fiscal years beginning after *December 15, 2027,*and interim periods within those fiscal years. Early adoption is permitted for any interim period. The Company does *not* anticipate the adoption of the new guidance will have a material impact on the Companys consolidated financial statements.The Company will continue to evaluate the impact of this guidance on its consolidated financial statements.
In *December 2025,*the FASB issued ASU *2025*-*11,* *Interim Reporting (Topic 270): Narrow-Scope Improvements*("ASU *2025*-*11"*), which clarifies the scope and application of interim reporting requirements. The amendments enhance guidance on the form and content of interim financial statements, and consolidate required interim disclosures across the Codification, including a new disclosure principle requiring entities to describe events or changes since the last annual reporting period that have a material impact on interim results. ASU *2025*-*11* is effective for interim periods within annual reporting periods beginning after *December 15, 2027.*The Company is currently evaluating the impact of this guidance on its interim consolidated financial statements.
In *December 2025,*the FASB issued ASU *2025*-*12* *Codification Improvements*("ASU *2025*-*12"*), which includes technical corrections, clarifications, and other minor amendments intended to improve the consistency and usability of the FASB Accounting Standards Codification. The amendments address a variety of topics and are *not* intended to change existing accounting conclusions. ASU *2025*-*12* is effective for annual periods beginning after *December 15, 2026,*and interim periods within those fiscal years. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
**NOTE 4 ACQUISITIONS**
During the years ended *December 31, 2025*and *December 31, 2024*, the Company incurred acquisition expenses related to business combinationsof $1.4million and$0.5million, respectively, which are included in general and administrative expenses in the consolidated statements of operations.
The following acquisitions were accounted for as business combinations using the acquisition method of accounting. The purchase price for each acquisition was provisionally allocated to the assets acquired and liabilities assumed based on theirestimated fair values at the date of acquisition and are subject to adjustment during a measurement period subsequent to the acquisition date, *not* to exceed *one* year, as permitted under U.S. GAAP. Unless noted otherwise, the purchase accounting for each acquisition is still open and is expected to be completed within the *one* year window. As such, the estimates, allocations and calculations are subject to change as we obtain further information; therefore, the final fair values of the assets acquired and liabilities assumed could change from the estimates included in these consolidated financial statements.
Refer to Note *9*, "Intangible Assets,"for further disclosure of the intangible assets related to theacquisitions.Thegoodwill recognized for each acquisitionrepresents the premium paid over the fair value of the net tangible and intangible assets acquired, which the Company paid to grow its portfolio of companies and acquire an assembled workforce.The goodwill is *not* deductible for tax purposes.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
**M.L.C. Plumbing, LLC (d/b/a Bud's Plumbing)**
On *March 14, 2025,*theCompany acquired 100% of the outstanding membership interests of M.L.C. Plumbing, LLC (d/b/a Bud's Plumbing Service, "Bud's Plumbing") for aggregateconsideration consisting of cash and a seller note, of approximately$5.0million, less certain escrowed amounts for purposes of indemnification claims and working capital adjustments. The final purchase price was subject to a working capital true-up of less than$0.1 million that was paid during the *second*quarter of *2025.* Bud's Plumbing,based in Evansville, Indiana, is a provider of various plumbing installation,service and repair services toresidential and commercial customers. As further discussed in Note *22*, "Segmented Information,"Bud's Plumbingis included in the Kingsway Search Xcelerator segment.This acquisition was the Companys *seventh*acquisition under its novel CEO Accelerator programand the *first*business operated under the Kingsway Skilled Trades platform andfurther expands the Companys portfolio of businesses with recurring revenue and low capital intensity.
During the *third* quarter of *2025,* the Company finalized its fair value analysis of the assets acquired andliabilities assumed with the assistance of a *third* party.
The consolidated statements of operations include the earnings of Bud's Plumbing from the date of acquisition. From the date of acquisition through *December 31, 2025*,Bud's Plumbingearned revenue of$5.7 millionand had net income of$0.1 million.
The seller note was due to matureon *April 1, 2030;*however, on*August 7, 2025,*the seller note was repaid in full to the seller of Bud's Plumbing in exchange forshares of Kingswaycommon stock. See Note *20*, "Shareholders' Equity,"for further discussion of the exchange.
**Roundhouse Electric & Equipment Co., Inc.**
On *July**1,* *2025,* theCompany acquired 100% of the outstanding equity interests of Roundhouse Electric & Equipment Co., Inc. ("Roundhouse")for aggregateconsideration consisting of cash andphantom equity awards to the selling stockholders, of approximately$23.5 million, less certain escrowed amounts for purposes of indemnification claims and working capital adjustments. During the *fourth* quarter of *2025,* funds that had been held in escrowfor the purposes of indemnification claims of$0.8million were releasedto the Company. The final purchase price wassubject to a working capital true-up of less than $0.1 million that was paid to the Company during the *fourth* quarter of *2025.* Roundhouse,based in Odessa, Texas, is a provider of industrial-scale electric motor maintenance, repair, testing, and sales solutionsprimarily to midstream natural gas pipeline operators and utilities across the Permian Basin.As further discussed inNote *22*, "Segmented Information,"Roundhouseis included in the Kingsway Search Xcelerator segment.This acquisition was the Companys *eighth*acquisition under its novel CEO Accelerator programandfurther expands the Companys portfolio of businesses with recurring revenue and low capital intensity.
The consolidated statements of operations include the earnings of Roundhouse from the date of acquisition. From the date of acquisition through *December 31, 2025*, Roundhouse earned revenue of$9.7million and had net income of$3.0 million, primarily related to a tax benefit recognized for the partial release of the Company's deferred tax valuation allowance related to the acquired deferred tax liabilities.
**AAA Flexible****Pipe Cleaning Corporation (d/b/a AAA Advanced Plumbing & Drain)**
On *August 1, 2025,*theCompany(through its newly formed subsidiary, Advanced Plumbing & Drain LLC) acquired substantially all of the assets and certain specified liabilities of AAA Flexible Pipe Cleaning Corporation (d/b/a AAA Advanced Plumbing & Drain, "Advanced Plumbing") for aggregateconsideration consisting of cash, a seller note and contingent consideration, of approximately$3.9 million, less certain escrowed amounts for purposes of indemnification claims and working capital adjustments.The final purchase price wassubject to a working capital true-up of $0.1 millionthat was paid to the Company during the *first* quarter of *2026.* The Company will also pay additional contingent consideration, only to the extent earned, in an aggregate amount of up to $1.5 million, which is subject to certain conditions, including growth in adjusted EBITDA for Advanced Plumbing during the *three*-year period following the acquisition date.
Advanced Plumbing,based in Cleveland, Ohio, is a provider of various plumbing installation,service and repair services toresidential and commercial customers.As further discussed in Note *22*, "Segmented Information,"Advanced Plumbingis included in the Kingsway Search Xcelerator segment.This acquisition was the Companys *ninth*acquisition under its novel CEO Accelerator program and the *second*business operated under the Kingsway Skilled Trades platform andfurther expands the Companys portfolio of businesses with recurring revenue and low capital intensity.
The consolidated statements of operations include the earnings ofAdvanced Plumbingfrom the date of acquisition. From the date of acquisition through *December 31, 2025*,Advanced Plumbingearned revenue of$2.9 millionand had net loss of$0.3 million.
**Efficient Plumbing, LLC (d/b/a Southside Plumbing)**
On *August 14, 2025,*theCompany acquired 80% of the outstanding membership interests of Efficient Plumbing, LLC (d/b/a Southside Plumbing, "Southside Plumbing") for aggregateconsideration consisting of cash,a seller note and contingent consideration, of approximately$4.7 million, less certain escrowed amounts for purposes of indemnification claims and working capital adjustments.The final purchase price wassubject to a working capital true-up of less than $0.1 million that was paid to the Company during the *first* quarter of *2026.* The Company will alsopay additional contingent consideration, only to the extent earned, in an aggregate amount of up to $1.125 million, which is subject to certain conditions, including growth in adjusted EBITDA for Southside Plumbing during the *three*-year period following the acquisition date.The 20% noncontrolling interest in Southside Plumbing is redeemable by the holder of the noncontrolling interest and includes aput option redemption featurethat isoutside of the Companys control; therefore, the 20%interest is treated as redeemable noncontrolling interest and is presented outside of permanent equity in the consolidated balance sheets.See Note *19*, "Redeemable Noncontrolling Interest,"for further discussion related to the redeemable noncontrolling interest.
SouthsidePlumbing,based in Omaha, Nebraska, is a provider of various plumbing installation,service and repair services toresidential and commercial customers.As further discussed in Note *22*, "Segmented Information,"Southside Plumbingis included in the Kingsway Search Xcelerator segment.This acquisition was the Companys *tenth*acquisition under its novel CEO Accelerator program and the *third* business operated under the Kingsway Skilled Trades platform andfurther expands the Companys portfolio of businesses with recurring revenue and low capital intensity.
The consolidated statements of operations include the earnings of Southside Plumbing from the date of acquisition. From the date of acquisition through *December 31, 2025*,Southside Plumbingearned revenue of$1.7 millionand had net loss of$0.4 million.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
**Image Solutions, LLC**
On *September 26, 2024,*theCompany acquired 100% of the outstanding membership interests of Image Solutions, LLC ("Image Solutions") for aggregate cash consideration of$20.4 million, less certain escrowed amounts for purposes of indemnification claims and working capital adjustments.The final purchase price wassubject to a working capital true-up of $0.3 million that was paid to the Company during the *third* quarter of *2025.*Image Solutions,based in Fletcher, North Carolina, isan information technology managed services provider. As further discussed inNote *22*, "Segmented Information,"Image Solutionsis included in the Kingsway Search Xcelerator segment.This acquisition was the Companys *sixth*acquisition under its novel CEO Accelerator programandfurther expands the Companys portfolio of businesses with recurring revenue and low capital intensity.
During the *third* quarter of *2025,* the Company finalized its fair value analysis of the assets acquired andliabilities assumed with the assistance of a *third* party.The consolidated statements of operations include the earnings of Image Solutions from the date of acquisition. From the *September 26, 2024*date of acquisition through *December 31, 2024,*Image Solutionsearned revenue of $2.5million and had a net loss of $0.1million.
**Summary Information**
The following table summarizes the purchase price for our acquisitions:
| (in thousands) | | Bud's Plumbing | | | Roundhouse | | | Advanced Plumbing | | | Southside Plumbing | | | Image Solutions | | |
| | | March 14, 2025 | | | July 1, 2025 | | | August 1, 2025 | | | August 14, 2025 | | | September 26, 2024 | | |
| Purchase price: | | | | | | | | | | | | | | | | | | | | | |
| Cash paid at closing | | $ | 3,829 | | | $ | 20,201 | | | $ | 2,652 | | | $ | 4,040 | | | $ | 20,354 | | |
| Working capital adjustment | | | 31 | | | | (27 | ) | | | (135 | ) | | | (47 | ) | | | (309 | ) | |
| Seller note | | | 1,100 | | | | | | | | 420 | | | | 420 | | | | | | |
| Release of indemnity escrow | | | | | | | (763 | ) | | | | | | | | | | | | | |
| Seller phantom equity awards | | | | | | | 3,328 | | | | | | | | | | | | | | |
| Contingent consideration | | | | | | | | | | | 790 | | | | 190 | | | | | | |
| Total purchase price | | $ | 4,960 | | | $ | 22,739 | | | $ | 3,727 | | | $ | 4,603 | | | $ | 20,045 | | |
The estimated fair value of the Roundhouse seller phantom equity awards at the acquisition date of$3.3 millionwas determinedbased on the economic value of the phantom equity as of the acquisition date, which was derived from the fair value of Roundhouse, net of any debt, and isrecorded in accrued expenses and other liabilities in the consolidated balance sheet at*December 31, 2025*.SeeNote *23*, "Fair Value of Financial Instruments,"for further discussion related to the seller phantom equity awards.
The estimated fair value of the Advanced Plumbing and Southside Plumbing contingent considerationobligations at the respective acquisition dates of$0.8 million and$0.2 million, respectively, weredetermined using a Monte Carlo simulation based on forecasted future results, and arerecorded in accrued expenses and other liabilities in the consolidated balance sheets.See Note *23*, "Fair Value of Financial Instruments,"for further discussion related tocontingent consideration.
The following table summarizes the allocation of the purchase price and the estimated fair values of the assets acquired and liabilities assumed for our acquisitions:
| (in thousands) | | Bud's Plumbing | | | Roundhouse | | | Advanced Plumbing | | | Southside Plumbing | | | Image Solutions | | |
| | | March 14, 2025 | | | July 1, 2025 | | | August 1, 2025 | | | August 14, 2025 | | | September 26, 2024 | | |
| Purchase price | | $ | 4,960 | | | $ | 22,739 | | | $ | 3,727 | | | $ | 4,603 | | | $ | 20,045 | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 308 | | | $ | 333 | | | $ | 23 | | | $ | 94 | | | $ | 293 | | |
| Service fee receivable | | | 46 | | | | 4,259 | | | | 465 | | | | 334 | | | | 575 | | |
| Property and equipment | | | 173 | | | | 2,355 | | | | 610 | | | | 1,087 | | | | 85 | | |
| Intangible asset not subject to amortization - trade name | | | 3,100 | | | | 1,220 | | | | 1,600 | | | | 1,100 | | | | 1,500 | | |
| Intangible asset subject to amortization - customer relationships | | | 500 | | | | 11,000 | | | | 1,100 | | | | 1,000 | | | | 11,100 | | |
| Other assets - other receivables, inventory and prepaid expenses | | | 226 | | | | 894 | | | | 130 | | | | 58 | | | | 1,030 | | |
| Total assets | | $ | 4,353 | | | $ | 20,061 | | | $ | 3,928 | | | $ | 3,673 | | | $ | 14,583 | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Accrued expenses and other liabilities | | $ | 388 | | | $ | 2,878 | | | $ | 718 | | | $ | 231 | | | $ | 799 | | |
| Debt | | | | | | | | | | | | | | | 498 | | | | | | |
| Income taxes payable | | | | | | | 302 | | | | | | | | | | | | | | |
| Net deferred income tax liabilities | | | | | | | 2,927 | | | | | | | | | | | | | | |
| Total liabilities | | $ | 388 | | | $ | 6,107 | | | $ | 718 | | | $ | 729 | | | $ | 799 | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Total identifiable assets and liabilities | | $ | 3,965 | | | $ | 13,954 | | | $ | 3,210 | | | $ | 2,944 | | | $ | 13,784 | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Redeemable noncontrolling interest | | $ | | | | $ | | | | $ | | | | $ | 875 | | | $ | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Excess purchase price allocated to goodwill | | $ | 995 | | | $ | 8,785 | | | $ | 517 | | | $ | 2,534 | | | $ | 6,261 | | |
Thefair value of the acquired service fee receivables in the table aboveareequivalent to theirgross contractual amounts.
The fair value of the 20% redeemable noncontrolling interest in Southside Plumbing at the date of acquisitionof$0.9 millionwas estimated by applying a market approach, utilizing a discount rate of 20%.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
**Unaudited Pro Forma Summary**
The pro forma summaries below arepresented for illustrative purposes only and do*not* purport to represent the results of our operations that would have actually occurred had the acquisitions occurred as of the beginning of the period presented or project our results of operations as of any future date or for any future period, as applicable.
*2025 Acquisitions*
The following unaudited pro forma summary presents the Company's consolidated financial statements for theyears ended*December 31, 2025*and *December 31, 2024*as ifBud's Plumbing, Roundhouse, Advanced Plumbing and Southside Plumbinghad been acquired on *January 1, 2024.*The pro forma results primarily include purchase accounting adjustments related to the acquisitions of Bud's Plumbing, Roundhouse, Advanced Plumbing and Southside Plumbing, interest expense and the amortization of debt issuance costs and discounts associated with the related financing obtained in connection with the Roundhouse and Southside Plumbingacquisitions (see Note *11*, "Debt"), tax related adjustmentsand acquisition-related expenses.
| (in thousands, except per share data) | | | | | | Years ended December 31 | | |
| | | 2025 | | | 2024 | | |
| Revenues | | $ | 153,951 | | | $ | 141,036 | | |
| Loss from continuing operations attributable to common shareholders | | $ | (11,793 | ) | | $ | (8,950 | ) | |
| Basic loss per share - continuing operations | | $ | (0.42 | ) | | $ | (0.33 | ) | |
| Diluted loss per share - continuing operations | | $ | (0.42 | ) | | $ | (0.33 | ) | |
*2024 Acquisition*
The following unaudited pro forma summary presents the Company's consolidated financial statements for the year ended *December 31, 2024*as if Image Solutions had been acquired on *January 1, 2023.*The pro forma results primarily include purchase accounting adjustments related to the acquisitionof Image Solutions, interest expense and the amortization of debt issuance costs and discounts associated with the related financing obtained in connection with the Image Solutions acquisition(see Note *11*, "Debt")and acquisition-related expenses.
| (in thousands, except per share data) | | Year ended December 31, | | |
| | | 2024 | | |
| Revenues | | $ | 116,224 | | |
| Loss from continuing operations attributable to common shareholders | | $ | (9,747 | ) | |
| Basic loss per share - continuing operations | | $ | (0.36 | ) | |
| Diluted loss per share - continuing operations | | $ | (0.36 | ) | |
**NOTE 5 DISCONTINUED OPERATIONS**
**Leased Real Estate Segment**
The Companyssubsidiaries,VA Lafayette, LLC ("VA Lafayette")and CMC, which includedCMCs subsidiaries Texas Rail Terminal LLC and TRT, comprised the Company's entire Leased Real Estate segment prior to the *fourth* quarter of *2022.* Each ofCMC, throughindirect wholly owned subsidiary, TRT,and VA Lafayette own a single asset, which is real estate property.On *December 29, 2022,*TRT sold its assets and at *December 31, 2022,*VA Lafayette was classified as held for sale.
In accordance with ASU*No.* *2014*-*08,**Reporting of Discontinued Operations and Disclosures of Disposals of Components of an Entity,*a disposal is categorized as a discontinued operation if the disposal group is a component of an entity or group of components that meets the held for sale criteria, is disposed of by sale, or is disposed of other than by sale, and represents astrategic shiftthat has or will have a major effect on an entitys operations and financial results*.*
Leased Real Estate was a component of Kingswaysince its operations and cash flows couldbe clearly distinguished, both operationally and for financial reporting purposes, from the rest of the reporting entity. A component of an entity *may*consist of multiple disposal groups and does *not* need to be disposed of in a single transaction. The disposal of the Leased Real Estatesegment represents astrategic shiftthat will have a major effect on the Company'soperations andfinancial results, as the disposal of the Leased Real Estate assets was in excess of *20%* of the entity's total assets.As a result, theoperating results and cash flows related to Leased Real Estate have been classified as discontinued operations in the consolidated financial statements for all periods presented.
*VA Lafayette*
During the *fourth* quarter of *2022,* the Company began executinga planto sell itssubsidiary, VA Lafayette. VA Lafayetteowns the LA Real Property, thatis subject to a long-termlease and the LAMortgage.During the *second* quarter of *2024,* the Company entered into a letter of intent for the sale of VA Lafayette.On *August 16, 2024,*the Company completed the sale of VA Lafayette to an entity associated with a currentholderof the Company's Class B Preferred Stock. Refer to Note *24*, "Related Parties," for further disclosure.The purchase pricepaid by the purchaser at the closing consistedof $1.3 millionin cash plus the assumption of the unpaid principal balanceas of the closingof the LA Mortgageof approximately $11.8 million, netting cash proceeds of $1.1 million to Kingsway after expenses. During the year ended *December 31, 2024,*the Company recognized a loss on disposal of VA Lafayette of $0.6million.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
Summary financial information for Leased Real Estate included in income from discontinued operations, net of taxes in the consolidated statements of operations for the yearended
*December 31, 2024*is presented below:
| (in thousands) | | Year ended December 31, | | |
| | | 2024 | | |
| Income from discontinued operations, net of taxes: | | | | | |
| Revenues: | | | | | |
| Rental revenue | | $ | 890 | | |
| Total revenues | | | 890 | | |
| Expenses: | | | | | |
| Cost of services sold | | | 136 | | |
| General and administrative expenses | | | 128 | | |
| Leased real estate segment interest expense | | | 218 | | |
| Total expenses | | | 482 | | |
| Non-operating other revenue | | | 30 | | |
| Income from discontinued operations before income tax expense | | | 438 | | |
| Income tax expense | | | | | |
| Income from discontinued operations, net of taxes | | $ | 438 | | |
Fortheyearended*December 31, 2024*, all of the pre-tax incomefrom discontinued operations disclosed in the table above isattributable to the controlling interest.
Loss on disposal of discontinued operations, net of taxes, related to Leased Real Estate,in the consolidated statements of operations for the yearended*December 31, 2024*is comprised of$0.6millionof loss on disposal of discontinued operations before income tax benefit and income tax benefit of zero.
**NOTE 6VARIABLE INTEREST ENTITIES**
| (a) | Consolidated VIE | |
**Argo Holdings Fund I, LLC**
The Company holdsa 43.4% investment in Argo Holdings at *December 31, 2025*and *December 31, 2024*. Argo Holdings makes investments, primarily in established lower middle market companies based in North America, through investments in search funds. The managing member of Argo Holdings is Argo Management Group, LLC ("Argo Management"), a wholly owned subsidiary of the Company. Argo Holdings is considered to be a VIE as the members holding equity at risk lack characteristics of a controlling financial interest. The Company holds a variable interest in Argo Holdings due to its right to absorb significant economics in Argo Holdings and through its controlling interest in Argo Management, through which the Company holds the power to direct the significant activities of Argo Holdings. As such, the Company was the primary beneficiary of Argo Holdings and consolidated Argo Holdings at *December 31, 2025*and *December 31, 2024*.
The following table summarizes the assets and liabilities related to the VIEconsolidated by the Company at *December 31, 2025*and *December 31, 2024*:
| (in thousands) | | December 31, | | |
| | | 2025 | | | 2024 | | |
| Assets | | | | | | | | | |
| Limited liability investment, at fair value | | $ | 3,476 | | | $ | 2,859 | | |
| Cash and cash equivalents | | | 15 | | | | 222 | | |
| Other receivables | | | | | | | 7 | | |
| Accrued investment income | | | 526 | | | | 430 | | |
| Total Assets | | | 4,017 | | | | 3,518 | | |
| Liabilities | | | | | | | | | |
| Accrued expenses and other liabilities | | | 121 | | | | 618 | | |
| Total Liabilities | | $ | 121 | | | $ | 618 | | |
*No* arrangements exist requiring the Company to provide additional funding to the consolidated VIEin excess of the Companys unfunded commitments to its consolidated VIE. At *December 31, 2025*and *December 31, 2024*, the Company had no unfunded commitments. There are *no* restrictions on assets consolidated by theVIE. There are *no* structured settlements of liabilities consolidated by theVIE. Creditors have *no* recourse to the general credit of the Company as the primary beneficiary of theVIE.
| (b) | Non-Consolidated VIEs | |
The Companys investments include certain non-consolidated investments, primarily in limited liability companies and limited partnerships in which the Company holds variable interests, that are considered VIEs due to the legal entities holding insufficient equity; the holders of equity at risk in the legal entities lacking controlling financial interests; and/or the holders of equity at risk having non-proportional voting rights.
The Companys risk of loss associated with its non-consolidated VIEs is limited and depends on the investment. Limited liability investments accounted for under the equity method are limited to the Companys initial investments. At *December 31, 2025*and *December 31, 2024*, the Company had no unfunded commitments to its non-consolidated VIEs.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
The following table summarizes the carrying value and maximum loss exposure of the Companys non-consolidated VIEs at *December 31, 2025*and *December 31, 2024*:
| (in thousands) | | December 31, | | |
| | | 2025 | | | 2024 | | |
| | | | | | | Maximum Loss | | | | | | | Maximum Loss | | |
| | | Carrying Value | | | Exposure | | | Carrying Value | | | Exposure | | |
| Investments in non-consolidated VIEs | | $ | 691 | | | $ | 691 | | | $ | 692 | | | $ | 692 | | |
The following table summarizes the Companys non-consolidated VIEs by category at *December 31, 2025*and *December 31, 2024*:
| (in thousands) | | December 31, | | |
| | | 2025 | | | 2024 | | |
| | | Carrying | | | | | | | Carrying | | | | | | |
| | | Value | | | Percent of total | | | Value | | | Percent of total | | |
| Investments in non-consolidated VIEs: | | | | | | | | | | | | | | | | | |
| Non-real estate related | | | 691 | | | | 100.0 | % | | | 692 | | | | 100.0 | % | |
| Total investments in non-consolidated VIEs | | $ | 691 | | | | 100.0 | % | | $ | 692 | | | | 100.0 | % | |
The following table presents aggregated summarized financial information of the Companys non-consolidated VIEs at *December 31, 2025*and *December 31, 2024*. For certain of the non-consolidated VIEs, the financial information is presented on a lag basis, consistent with how the changes in the Companys share of the net asset values of these equity method investees are recorded in net investment income. The difference between the end of the reporting period of an equity method investee and that of the Company is typically *no* more than *three* months.
| (in thousands) | | December 31, | | |
| | | 2025 | | | 2024 | | |
| Assets | | $ | 191,948 | | | $ | 191,796 | | |
| Liabilities | | $ | 290,980 | | | $ | 283,737 | | |
| Equity | | $ | (99,032 | ) | | $ | (91,941 | ) | |
| (in thousands) | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Net income | | $ | 10,368 | | | $ | 7,965 | | |
**NOTE 7INVESTMENTS**
Investmentsat *December 31, 2025*and *December 31, 2024* are comprised as follows:
| (in thousands) | | December 31, | | |
| | | 2025 | | | 2024 | | |
| Fixed maturities, at fair value (amortized cost of $37,005 and $38,117, respectively) | | $ | 36,765 | | | $ | 36,963 | | |
| Limited liability investments | | | 649 | | | | 650 | | |
| Limited liability investment, at fair value | | | 3,476 | | | | 2,859 | | |
| Investments in private companies, at adjusted cost | | | 575 | | | | 696 | | |
| Short-term investments, at cost which approximates fair value | | | 178 | | | | 169 | | |
| Total investments | | $ | 41,643 | | | $ | 41,337 | | |
The amortized cost, gross unrealized gains and losses included in accumulated other comprehensive loss, and estimated fair value of the Company's available-for-sale investments at *December 31, 2025*and *December 31, 2024* are summarized in the tables shown below:
| (in thousands) | | December 31, 2025 | | |
| | | | | | | Gross | | | Gross | | | | | | |
| | | Amortized | | | Unrealized | | | Unrealized | | | Estimated Fair | | |
| | | Cost | | | Gains | | | Losses | | | Value | | |
| Fixed maturities: | | | | | | | | | | | | | | | | | |
| U.S. government, government agencies and authorities | | $ | 13,441 | | | $ | 97 | | | $ | 47 | | | $ | 13,491 | | |
| States, municipalities and political subdivisions | | | 1,788 | | | | 3 | | | | 20 | | | | 1,771 | | |
| Mortgage-backed | | | 9,965 | | | | 79 | | | | 226 | | | | 9,818 | | |
| Asset-backed | | | 1,365 | | | | 10 | | | | 11 | | | | 1,364 | | |
| Corporate | | | 10,446 | | | | 58 | | | | 183 | | | | 10,321 | | |
| Total fixed maturities | | $ | 37,005 | | | $ | 247 | | | $ | 487 | | | $ | 36,765 | | |
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
| (in thousands) | | December 31, 2024 | | |
| | | | | | | Gross | | | Gross | | | | | | |
| | | Amortized | | | Unrealized | | | Unrealized | | | Estimated Fair | | |
| | | Cost | | | Gains | | | Losses | | | Value | | |
| Fixed maturities: | | | | | | | | | | | | | | | | | |
| U.S. government, government agencies and authorities | | $ | 13,561 | | | $ | 11 | | | $ | 218 | | | $ | 13,354 | | |
| States, municipalities and political subdivisions | | | 2,846 | | | | 2 | | | | 73 | | | | 2,775 | | |
| Mortgage-backed | | | 10,309 | | | | 10 | | | | 433 | | | | 9,886 | | |
| Asset-backed | | | 1,346 | | | | 2 | | | | 22 | | | | 1,326 | | |
| Corporate | | | 10,055 | | | | 9 | | | | 442 | | | | 9,622 | | |
| Total fixed maturities | | $ | 38,117 | | | $ | 34 | | | $ | 1,188 | | | $ | 36,963 | | |
The table below summarizes the Company's fixed maturities at *December 31, 2025* by contractual maturity periods. Actual results *may*differ as issuers *may*have the right to call or prepay obligations, with or without penalties, prior to the contractual maturity of these obligations.
| (in thousands) | | December 31, 2025 | | |
| | | | | | | Estimated Fair | | |
| | | Amortized Cost | | | Value | | |
| Due in one year or less | | $ | 7,210 | | | $ | 7,147 | | |
| Due after one year through five years | | | 23,086 | | | | 23,102 | | |
| Due after five years through ten years | | | 2,731 | | | | 2,731 | | |
| Due after ten years | | | 3,978 | | | | 3,785 | | |
| Total | | $ | 37,005 | | | $ | 36,765 | | |
The following tables highlight the aggregate unrealized loss position, by security type, of available-for-sale investments in unrealized loss positionswhere no credit loss allowance hasbeen established as of *December 31, 2025*and *December 31, 2024*. The tables segregate the holdings based on the period of time the investments have been continuously held in unrealized loss positions.
| (in thousands) | | | | | | | | | | | | | | | | | | December 31, 2025 | | |
| | | Less than 12 Months | | | Greater than 12 Months | | | Total | | |
| | | Estimated | | | Unrealized | | | Estimated | | | Unrealized | | | Estimated | | | Unrealized | | |
| | | Fair Value | | | Loss | | | Fair Value | | | Loss | | | Fair Value | | | Loss | | |
| Fixed maturities: | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. government, government agencies and authorities | | $ | 2,477 | | | $ | 21 | | | $ | 2,370 | | | $ | 26 | | | $ | 4,847 | | | $ | 47 | | |
| States, municipalities and political subdivisions | | | 300 | | | | | | | | 1,088 | | | | 20 | | | | 1,388 | | | | 20 | | |
| Mortgage-backed | | | 336 | | | | 1 | | | | 3,433 | | | | 225 | | | | 3,769 | | | | 226 | | |
| Asset-backed | | | | | | | | | | | 417 | | | | 11 | | | | 417 | | | | 11 | | |
| Corporate | | | 408 | | | | | | | | 6,113 | | | | 183 | | | | 6,521 | | | | 183 | | |
| Total fixed maturities | | $ | 3,521 | | | $ | 22 | | | $ | 13,421 | | | $ | 465 | | | $ | 16,942 | | | $ | 487 | | |
| (in thousands) | | | | | | | | | | | | | | | | | | December 31, 2024 | | |
| | | Less than 12 Months | | | Greater than 12 Months | | | Total | | |
| | | Estimated | | | Unrealized | | | Estimated | | | Unrealized | | | Estimated | | | Unrealized | | |
| | | Fair Value | | | Loss | | | Fair Value | | | Loss | | | Fair Value | | | Loss | | |
| Fixed maturities: | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. government, government agencies and authorities | | $ | 2,417 | | | $ | 28 | | | $ | 7,984 | | | $ | 190 | | | $ | 10,401 | | | $ | 218 | | |
| States, municipalities and political subdivisions | | | 331 | | | | 1 | | | | 1,981 | | | | 72 | | | | 2,312 | | | | 73 | | |
| Mortgage-backed | | | 3,006 | | | | 57 | | | | 5,477 | | | | 376 | | | | 8,483 | | | | 433 | | |
| Asset-backed | | | 254 | | | | | | | | 756 | | | | 22 | | | | 1,010 | | | | 22 | | |
| Corporate | | | 966 | | | | 10 | | | | 7,274 | | | | 432 | | | | 8,240 | | | | 442 | | |
| Total fixed maturities | | $ | 6,974 | | | $ | 96 | | | $ | 23,472 | | | $ | 1,092 | | | $ | 30,446 | | | $ | 1,188 | | |
At *December 31, 2025*and*December 31, 2024*, there are approximately 124and191 individual available-for-sale investments, respectively,that were in unrealized loss positions, for which an allowance for credit losses had *not* been recorded. The Company did *not* have the intent to sell these investments, and it was *not* more likely than *not* that the Company would be required to sell these investments before recovery of its amortized cost. The Company evaluated these investments for credit losses at *December 31, 2025*and*December 31, 2024*. The Company considers many factors in evaluating whether the unrealized losses were credit-related, including, but *not* limited to, the extent to which the fair value has been less than amortized cost, conditions related to the security, industry, or geographic area, payment structure of the investment and the likelihood of the issuers ability to make contractual cashflows, defaults or other collectability concerns related to the issuer, changes in the ratings assigned by a rating agency, and other credit enhancements that affect the investments expected performance. The Company determined that the unrealized losses on the fixed maturity investmentswere due to non-credit related factors at*December 31, 2025*and*December 31, 2024*.
The establishment of an impairment loss on aninvestment requires a number of judgments and estimates. Refer to the "Significant Accounting Policies and Critical Estimates" section of Management's Discussion & Analysis for further information regarding the Company's detailed analysis and factors considered in recording animpairment loss on an investment.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
The Company did *not* recordany write-downs forimpairment related toavailable-for-sale fixed maturity investments, limited liability investments or investments in private companiesfor the years ended *December 31, 2025*and *December 31, 2024*.
At *December 31, 2025*, the Company has *no* unfunded commitments related to limited liability investments orlimited liability investment, at fair value.
For the years ended *December 31, 2025*and *December 31, 2024*, the Company did not record anyadjustments to the carrying value of its investments in private companies for observable price changes.
Net investment income for the years ended *December 31, 2025*and *December 31, 2024*is comprised as follows:
| (in thousands) | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Investment income | | | | | | | | | |
| Interest from fixed maturities | | $ | 1,402 | | | $ | 1,305 | | |
| Dividends | | | 41 | | | | 50 | | |
| Loss from limited liability investments | | | (1 | ) | | | (162 | ) | |
| Other | | | 323 | | | | 387 | | |
| Gross investment income | | | 1,765 | | | | 1,580 | | |
| Investment expenses | | | (138 | ) | | | (148 | ) | |
| Net investment income | | $ | 1,627 | | | $ | 1,432 | | |
Net realized and unrealized investment gainsfor the years ended*December 31, 2025*and *December 31, 2024* are comprised as follows:
| (in thousands) | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Net realized gains | | $ | 97 | | | $ | 1,557 | | |
| Net loss on equity investments | | | | | | | (3 | ) | |
| Gain on change in fair value of limited liability investment, at fair value | | | 617 | | | | 342 | | |
| Net realized and unrealized investment gains | | $ | 714 | | | $ | 1,896 | | |
For theyear ended December 31, 2024, net loss on equity investments relates to net losses recognized on equity investments sold during the period.
Net realized gains oninvestmentsfor the years ended *December 31, 2025*and *December 31, 2024*arecomprised as follows:
| (in thousands) | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Available-for-sale fixed maturities: | | | | | | | | | |
| Gross realized gains | | $ | 3 | | | $ | 71 | | |
| Gross realized losses | | | (86 | ) | | | | | |
| Net realized gains on available-for-sale fixed maturities | | | (83 | ) | | | 71 | | |
| Limited liability investments | | | | | | | 4 | | |
| Limited liability investment, at fair value | | | 153 | | | | 1,369 | | |
| Investments in private companies | | | 27 | | | | 113 | | |
| Net realized gains | | $ | 97 | | | $ | 1,557 | | |
Proceeds from sales of available-for-sale fixed maturities were$0.7 million and less than$0.1 million for theyears ended *December 31, 2025*and *December 31, 2024*, respectively.
**NOTE 8****GOODWILL**
The following table summarizes goodwill activity for the years ended *December 31, 2025*and *December 31, 2024*:
| | | | | | | | | | | | | | | | | | |
| (in thousands) | | Kingsway Search Xcelerator | | | Extended Warranty | | | Corporate | | | Total | | |
| Balance, December 31, 2023 | | $ | 18,473 | | | $ | 31,153 | | | $ | 732 | | | $ | 50,358 | | |
| Acquisition | | | 6,486 | | | | | | | | | | | | 6,486 | | |
| Measurement period adjustments | | | 412 | | | | | | | | | | | | 412 | | |
| Impairment | | | | | | | | | | | (732 | ) | | | (732 | ) | |
| Balance, December 31, 2024 | | | 25,371 | | | | 31,153 | | | | | | | | 56,524 | | |
| Acquisitions | | | 12,831 | | | | | | | | | | | | 12,831 | | |
| Measurement period adjustments | | | (225 | ) | | | | | | | | | | | (225 | ) | |
| Balance, December 31, 2025 | | $ | 37,977 | | | $ | 31,153 | | | $ | | | | $ | 69,130 | | |
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
As further discussed in Note *4*, "Acquisitions," during *2025,* the Company recorded goodwill of$12.8 millionrelated to the acquisitions of Bud's Plumbing ($1.0 million), Roundhouse ($8.8 million), Advanced Plumbing($0.5 million) and Southside Plumbing ($2.5 million).The goodwill related to theRoundhouse, Advanced Plumbing and Southside Plumbingacquisitions is provisional and subject to adjustment during the measurement period. The Company expects to complete its purchase price allocations within the next *three* months.The estimates, allocations and calculations recorded at *December 31, 2025* are subject to change as we obtain further information; therefore, the final fair values of the assets acquired and liabilities assumed *may**not* agree with the estimates included in these consolidated financial statements.
During *2024,* the Company recorded goodwill of$6.5millionrelated to the acquisition of Image Solutions on *September 26, 2024.*The goodwill related to thisacquisition was provisional and subject to adjustment during the measurement period. During the*second* quarter of *2025,*the Company recorded a measurement period adjustment, related to acquisitionof Image Solutions,that increased goodwill by$0.1million due to changes in the estimated fair value ofinventory. Also during *2025,*the Company settled the working capital true-up, relatedto the acquisition of Image Solutions, that decreased goodwill by $0.3 million.
During *2024,*the Company recordedmeasurement period adjustments, related tothe acquisitions of SPI on *September 7, 2023*and DDI on *October 26, 2023,*that increased goodwill by$0.4 million. These measurement period adjustments related to changes in the estimated fair values of certain assets acquired.
At eachof*December 31, 2025*and *December 31, 2024*, accumulated goodwill impairment losses were$0.7 million.
Goodwill is assessed for impairment annually as of *November 30,*or more frequently if events or circumstances indicate that the carrying value *may**not* be recoverable. In evaluating the recoverability of goodwill, the Company estimates the fair value of its reporting units and compares it to the carrying value. Although the Company believes its estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting units, the amount of the goodwill impairment charge, or both.
Based upon the impairment assessments performed at *November 30,**2025*,*no* impairment charges were recorded against goodwill in *2025*. Based upon the impairment assessments performed at *November 30,**2024*, the Company recorded an impairment chargeof$0.7 million during *2025*related to the Argo Management reporting unit.The fair value of theArgo Management reporting unit was estimatedusinga discounted cash flow analysisthat includesestimates of future cash flows expected to be generated by the business andrecent market transactions related to the investments owned byArgo Holdings. The declinein fair valueis primarily due toreduced estimated future cash flows as a result of fewer investmentsremaining in the Argo Holdings, which is an expected result as Argo Holdings investments continue to be acquired. No impairment charges wererecorded against goodwill for the Company'sother reporting units in *2024,*as the estimated fair values of the Company's other reporting units exceeded their respective carrying values.
**NOTE 9INTANGIBLE ASSETS**
Intangible assets at *December 31, 2025*and *December 31, 2024* are comprised as follows:
| (in thousands) | | | | | | | | | | | | | | December 31, 2025 | | |
| | | Gross Carrying | | | Accumulated | | | Accumulated | | | Net Carrying | | |
| | | Value | | | Amortization | | | Impairment Losses | | | Value | | |
| Intangible assets subject to amortization | | | | | | | | | | | | | | | | | |
| Customer relationships | | $ | 65,112 | | | $ | 33,867 | | | | | | | $ | 31,245 | | |
| Developed technology | | | 651 | | | | 146 | | | | | | | | 505 | | |
| Intangible assets not subject to amortization | | | | | | | | | | | | | | | | | |
| Trade names | | | 23,337 | | | | | | | | 2,822 | | | | 20,515 | | |
| Total | | $ | 89,100 | | | $ | 34,013 | | | $ | 2,822 | | | $ | 52,265 | | |
| (in thousands) | | | | | | | | | | | | | | December 31, 2024 | | |
| | | Gross Carrying | | | Accumulated | | | Accumulated | | | Net Carrying | | |
| | | Value | | | Amortization | | | Impairment Losses | | | Value | | |
| Intangible assets subject to amortization | | | | | | | | | | | | | | | | | |
| Customer relationships | | $ | 51,242 | | | $ | 25,765 | | | $ | | | | $ | 25,477 | | |
| Developed technology | | | 600 | | | | 79 | | | | | | | | 521 | | |
| Intangible assets not subject to amortization | | | | | | | | | | | | | | | | | |
| Trade names | | | 16,167 | | | | | | | | 2,116 | | | | 14,051 | | |
| Total | | $ | 68,009 | | | $ | 25,844 | | | $ | 2,116 | | | $ | 40,049 | | |
As further discussed in Note *4*, "Acquisitions,"the Company recorded the following intangible assets related to the acquisitions that occurredduring*2025*and*2024*:
| (in thousands) | | Image Solutions | | | Buds Plumbing | | | Roundhouse | | | Advanced Plumbing | | | Southside Plumbing | | |
| Acquisition Date | | September 26, 2024 | | | March 14, 2025 | | | July 1, 2025 | | | August 1, 2025 | | | August 14, 2025 | | |
| Customer Relationships | | $ | 11,100 | | | $ | 500 | | | $ | 11,000 | | | $ | 1,100 | | | $ | 1,000 | | |
| Amortization Period | | 13 years | | | 6 years | | | 12 years | | | 9 years | | | 9 years | | |
| Trade Name | | $ | 1,500 | | | $ | 3,100 | | | $ | 1,220 | | | $ | 1,600 | | | $ | 1,100 | | |
| Amortization Period | | Indefinite | | | Indefinite | | | Indefinite | | | Indefinite | | | Indefinite | | |
| Total Intangibles | | $ | 12,600 | | | $ | 3,600 | | | $ | 12,220 | | | $ | 2,700 | | | $ | 2,100 | | |
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
The intangible assets related to the Roundhouse, Advanced Plumbing and Southside Plumbingacquisitions areprovisional and subject to adjustment during themeasurement period. The Company expects to complete its purchase price allocation within the next *three*months. Theestimates, allocations and calculations recorded at *December 31, 2025*are subject to change as we obtain further information; therefore, the final fair values of the assets acquired and liabilities assumed *may**not* agree with the estimates included in these consolidated financial statements. In addition to the above, during the year ended *December 31, 2025*, the Company had other immaterial acquisitions of assetsthat resultedin intangible assets related tocustomer relationships of$0.3million,developed technology of$0.1millionand trade name of$0.2million.
The Company's intangible assets with definite useful lives are amortized either based on the patterns in which the economic benefits of the intangible assets are expected to be consumed or using the straight-line method over their estimated useful lives, which range from 5 to 15 years. Amortization of intangible assets was $8.2 million and $6.3million for the years ended *December 31, 2025*and *December 31, 2024*, respectively. The estimated aggregate future amortization expense of all intangible assets is $8.0 million for *2026,* $6.3 million for *2027,* $4.8 million for *2028,* $3.6million for *2029,*$2.5million for *2030*and$6.5million thereafter.
Thetrade names intangible assets haveindefinite useful livesand are *not* amortized.Indefinite-lived intangible assetsare assessed for impairment annually as of *November 30,*or more frequently if events or circumstances indicate that the carrying value *may**not* be recoverable. The Company *may*perform its impairment test for any indefinite-lived intangible asset through a qualitative assessment or elect to proceed directly to a quantitative impairment test, however, the Company *may*resume a qualitative assessment in any subsequent period if facts and circumstances permit.
Ateach quarter end of the *first* through*third* quarters of *2025* and*2024* and at *November 30,**2025* and *November 30,**2024*, the Company determined that certain trade names should be further examined under a quantitative approach due to actual revenue coming in lower than previous projections. Based upon theseassessments, the Company recordedimpairment charges of$0.7millionand$2.1million for the years ended *December 31, 2025*and*December 31, 2024*, respectively,related to theCSuite, Ravix and SNS indefinite-lived trade names. The fair value of the CSuite ($0.8million), Ravix ($1.4 million) and SNS($2.2 million) trade names at*December 31, 2025* wereestimated using the relief-from-royalty method. The significant unobservable inputsused in the relief-from-royalty method, which are level *3* inputs, include aroyalty rate and discount rate. The reduction in value is primarily due to higher discount rates and a reduction in projected revenue. Future impairments *may*be recorded if discount rates increase further, or if actual revenue falls short of current projections.The valuation of these assets is *not* dependent on the underlying profit or loss generated by the respective business. Therefore, even if a change in revenue does *not* have a significant impact on operating results, it could significantly impact the fair value of the trade name.
**NOTE10PROPERTY AND EQUIPMENT**
Property and equipment at *December 31, 2025*and *December 31, 2024* are comprised as follows:
| (in thousands) | | | | | | December 31, 2025 | | |
| | | Total Property and Equipment | | |
| | | | | | | Accumulated | | | | | | |
| | | Cost | | | Depreciation | | | Carrying Value | | |
| Leasehold improvements | | $ | 526 | | | $ | 346 | | | $ | 180 | | |
| Furniture and fixtures | | | 262 | | | | 211 | | | | 51 | | |
| Computer hardware | | | 2,088 | | | | 1,184 | | | | 904 | | |
| Medical equipment | | | 746 | | | | 378 | | | | 368 | | |
| Vehicles | | | 2,924 | | | | 278 | | | | 2,646 | | |
| Machinery and equipment | | | 2,395 | | | | 190 | | | | 2,205 | | |
| Total | | $ | 8,941 | | | $ | 2,587 | | | $ | 6,354 | | |
| (in thousands) | | | | | | December 31, 2024 | | |
| | | Total Property and Equipment | | |
| | | | | | | Accumulated | | | | | | |
| | | Cost | | | Depreciation | | | Carrying Value | | |
| Leasehold improvements | | $ | 583 | | | $ | 346 | | | $ | 237 | | |
| Furniture and fixtures | | | 256 | | | | 228 | | | | 28 | | |
| Computer hardware | | | 1,675 | | | | 874 | | | | 801 | | |
| Medical equipment | | | 701 | | | | 263 | | | | 438 | | |
| Vehicles | | | 72 | | | | 9 | | | | 63 | | |
| Total | | $ | 3,287 | | | $ | 1,720 | | | $ | 1,567 | | |
During *2025,* the Company acquired vehiclesand machinery and equipment with an estimatedfair value of $2.4 million and$1.7 million, respectively, as part of the acquisitions of Bud's Plumbing, Roundhouse, Advanced Plumbing and Southside Plumbing.
Forthe years ended *December 31, 2025*and *December 31, 2024*, depreciation expense onmedical equipment and certain computer hardwareof$0.3million and$0.2million,respectively, is included in cost of services soldin the consolidated statements of operations. Forthe years ended *December 31, 2025*and *December 31, 2024*, depreciation expense on all other property and equipment of$0.8million and$0.5million, respectively, is included in general and administrative expenses in the consolidated statements of operations.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
**NOTE 11 DEBT**
Debt consists of the following instruments at *December 31, 2025*and *December 31, 2024*:
| (in thousands) | | December 31, 2025 | | | December 31, 2024 | | |
| | | Principal | | | Carrying Value | | | Principal | | | Carrying Value | | |
| Bank loans: | | | | | | | | | | | | | | | | | |
| KSX Term Loans | | $ | 36,135 | | | $ | 35,551 | | | $ | 23,493 | | | $ | 23,100 | | |
| KSX Revolvers | | | 2,053 | | | | 2,053 | | | | 950 | | | | 950 | | |
| Extended Warranty Term Loan and DDTL | | | 15,504 | | | | 15,438 | | | | 19,163 | | | | 19,078 | | |
| Extended Warranty Revolver | | | 2,000 | | | | 2,000 | | | | 1,000 | | | | 1,000 | | |
| Total bank loans | | | 55,692 | | | | 55,042 | | | | 44,606 | | | | 44,128 | | |
| Notes payable: | | | | | | | | | | | | | | | | | |
| KSX Notes Payable | | | 1,164 | | | | 1,016 | | | | | | | | | | |
| KSX Vehicle Loans | | | 630 | | | | 630 | | | | | | | | | | |
| KSX Equipment Loans | | | 326 | | | | 326 | | | | | | | | | | |
| Total notes payable | | | 2,120 | | | | 1,972 | | | | | | | | | | |
| Subordinated debt | | | 15,000 | | | | 13,698 | | | | 15,000 | | | | 13,409 | | |
| Total Debt | | $ | 72,812 | | | $ | 70,712 | | | $ | 59,606 | | | $ | 57,537 | | |
All of the KSX and Extended Warrantyindebtedness arises from individual, stand-alone creditagreements with the applicable Company subsidiary. *None* of such indebtedness isguaranteed by the Company or any other subsidiary or affiliate of the Company other than the borrower entity and its direct subsidiary, if any,and there are*no* cross-collateral, cross-default or similar provisions in the creditagreements.
Term loans arecarried in the consolidated balance sheets at theiramortized cost, which reflects themonthly or quarterlypay-down of principal, as well as amortization of anydebt discount and issuance costs using the effective interest rate method.
The various bank loanscontaina number of covenants, including, but *not* limited to, a leverage ratio anda fixed charge ratio, all of which are as defined in and calculated pursuant to the respective bank loan agreementsthat, among other things, restrict the respective borrowers ability to incur additional indebtedness, create liens, make dividends and distributions, engage in mergers, acquisitions and consolidations, make certain payments and investments and dispose of certain assets.
The contractualmaturities of the Company's principal debt balances as of *December 31, 2025* were as follows:
| (in thousands) | | | Principal Maturities | | |
| 2026 | | $ | 9,706 | | |
| 2027 | | | 12,207 | | |
| 2028 | | | 8,639 | | |
| 2029 | | | 12,812 | | |
| 2030 | | | 6,834 | | |
| Thereafter | | | 22,614 | | |
| Total | | $ | 72,812 | | |
| (a) | Bank loans - KSX: | |
*Ravix*
As part of the acquisition of Ravix Group Inc. ("Ravix") on *October 1, 2021,*Ravix became a wholly owned subsidiary of Ravix Acquisition LLC ("Ravix LLC"), and together they borrowed from a bank a principal amount of $6.0 million in the form of a term loan, and established a $1.0 million revolver to finance theacquisition of Ravix.The term loan was due to mature on*October**1,* *2027.*
The Ravix term loan hasa carrying value of$8.3million and$6.5million as of*December 31, 2025*and *December 31, 2024*, respectively. The Ravix revolver hasa carrying value of$0.5millionat*December 31, 2025*and *December 31, 2024*.
Since origination, the Ravix term loan and revolver have been amended as follows:
| | | Subsequent to the acquisition of CSuite Financial Partners, LLC ("CSuite") on November 1, 2022, CSuite became a wholly owned subsidiary of RavixLLC. As a result of the acquisition of CSuite, on November 16, 2022, the Ravix term loan was amended to (1) include CSuite as a borrower; (2)borrow an additionalprincipal amount of $6.0 millionin the form of a supplementalterm loan; and (3)amend the maturity date and interest rate of the$1.0 million Ravix revolver. The $6.0 million supplemental term loan was due tomatureon November 16, 2028 and hadan annual interest rate equal to thePrimeRateplus 0.75%. | |
| | | On July 23, 2024, Ravix,Ravix LLC and CSuite entered into a second amendment to the original Ravix term loan that provides for: (1) a principal prepayment of the original Ravix term loan of $1.5 million, partially financed by borrowing $0.5 million under the revolver and the remainder to be paid with available cash; and (2) amending the loan amortization payment schedule to provide for equal monthly payments through the loan maturity date. | |
| | | On February 7, 2025,Ravix,Ravix LLC and CSuite entered into a fourthamendment to the Ravix term loan that provides for: (1) a new 2025term loan in the principal amount of $9.1million, with a maturity date of February 7, 2031; and (2) extendingthe maturity date of the revolver to February 7, 2027.In connection with the fourth amendment, Ravix used a portion of the proceeds to repay $6.4 million on the then outstanding term loan (original and supplemental). | |
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
As a result of the *fourth* amendment, the Ravix term loan and revolver havean annual interest rate equal tothe PrimeRateplus 0.5%.At*December 31, 2025*,the interest rate was7.25%.
Thevarious amendments to the term loan and revolver were *not* deemed to be substantially different than prior to the amendment;therefore, the amendments were accounted for as modifications. The unamortized debt discount and issuance costs from the originalRavix term loan at the modification date of $0.1million were recorded as loss on extinguishment of debtand areincluded in non-operating other revenue, netin theconsolidated statement of operations for the yearended *December 31, 2025*, since the original and supplemental term loans werefully repaid as part of the modification.
TheRavix term loan, as amended, issecured by certain of the equity interests and assets of Ravix and CSuite.
*SNS*
The SNS term loan hasa carrying value of$2.5million and$3.8million as of *December 31, 2025*and *December 31, 2024*, respectively. The SNS revolver hasa carrying value of$1.0and$0.5millionas of *December 31, 2025*and *December 31, 2024*, respectively.
As part of the asset acquisition of Secure Nursing Service, Inc. on *November 18, 2022,*the Company formed Secure Nursing Service LLC ("SNS"), whichbecame a wholly owned subsidiary of Pegasus Acquirer HoldingsLLC ("Pegasus LLC"), and together they borrowed from a bank a principal amount of $6.5million in the form of a term loan, and established a $1.0 million revolver to finance theacquisition of Secure Nursing Service, Inc.(together, the "SNS Loan").The SNS Loan has an annual interest rate equal to the greater of the PrimeRateplus 0.5%, or 5.00%. At *December 31, 2025*, the interest rate was7.25%.Therevolver matures on *June**2,* *2026* and the term loan matures on *November 18, 2028*.During*2025*and *2024,* SNSborrowed $0.6 million and$0.4million, respectively, under therevolver.As of *December 31, 2025*, the SNS revolver isfully drawn.
The SNS Loan is secured by certain of the equity interests and assets of SNS.
At each quarter endbeginning *March 31, 2024*through *December 31, 2025*, SNS was in default under the SNS Loan due to debt covenant violations related to the leverage and fixed charge ratios. The Company has entered into anamendment to the SNS Loan that waives the events of default for the fiscal quarter ended *December 31, 2025*. As of the report date, there is some uncertainty as to whether the Company will be in compliance with the covenants in future periods, and if *not,* when the Company will be able to cure any potential violations.A default *may*permit the lender to declare the amounts owed under the SNS Loan immediately due and payable, exercise their rights with respect to collateral securing the obligation, and/or exercise any other rights and remedies available.
*DDI*
The DDI term loan hasa carrying value of$4.2million and$5.5millionas of *December 31, 2025*and *December 31, 2024*, respectively. The DDIrevolver hasa carrying value of$0.2million andzeroas of *December 31, 2025*and *December 31, 2024*, respectively.
As part of the asset acquisition of DDIon *October 26, 2023,*DDIbecame a wholly owned subsidiary of DDI Acquisition, LLC ("DDI LLC"), and together they borrowed from a bank a principal amount of $5.6 million in the form of a term loan, and established a $0.4 million revolverto finance theacquisition of DDI (together, the "DDI Loan").The DDI Loan has an annual interest rate equal to the greater of the PrimeRateplus 0.5%, or 5.00%. At *December 31, 2025*, the interest rate was7.25%. Monthly principal payments on the term loan began on *December 15, 2024.*The DDI revolver matureson *November 1, 2026*and the term loan matures on *October 26, 2029*.During*2025*, DDI borrowed$0.2million andmade principal repayments of less than $0.1 million under therevolver.
The DDI Loan is secured by certain of the equity interests and assets of DDI.
As of
*September 30, 2025*and
*December 31, 2025*, DDI was in default under the DDI Loan due to a debt covenant violation related to the fixed charge ratio. The Company has entered into an amendment to the DDI Loan that waives the event of default for the fiscal quarter ended
*December 31, 2025*. As of the report date, there is some uncertainty as to whether the Company will be in compliance with the covenants in future periods, and if
*not,* when the Company will be able to cure any potential violations. A default
*may*permit the lender to declare the amounts owed under the DDILoan immediately due and payable, exercise their rights with respect to collateral securing the obligation, and/or exercise any other rights and remedies available.
*Image Solutions*
The Image Solutions term loan hasa carrying value of
$6.7million and
$7.4millionas of
*December 31, 2025*and
*December 31, 2024*, respectively.At
*December 31, 2025*and
*December 31, 2024*, the balance of the revolver was
zero.
As part of the acquisition of Image Solutions on
*September 26, 2024,*Image Solutionsbecame a wholly owned subsidiary of Steel BridgeAcquisition, LLC ("SB LLC"), and together they borrowed from a bank a principal amount of
$7.75million in the form of a term loan, and established a
$0.5million revolver to finance theacquisition of Image Solutions (together, the "Image Solutions Loan"). The Image Solutions Loanrequiresmonthly payments of principal and interest andhas an annual interest rate equal to the greater of the PrimeRateplus
0.5%, or
7.25%. At
*December 31, 2025*, the interest rate was
7.25%. The revolver matures on
*September 26, 2026*and the term loan matures on
*September 26, 2030.*
The Image Solutions Loan is secured by certain of the equity interests and assets of Image Solutions.
*Roundhouse*
The Roundhouse term loan hasa carrying value of$10.3millionas of *December 31, 2025*.At*December 31, 2025*,the balance of the revolver waszero.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
As part of the acquisition of Roundhouse on *July 1, 2025,*Roundhouse became a wholly owned subsidiary of Longhorns Acquisition LLC ("LonghornsLLC"), and together they borrowed from a bank a principal amount of $11.0 million in the form of a term loan, and established a $0.5million revolver to finance theacquisition of Roundhouse (together, the "RoundhouseLoan"). The Roundhouse termloanrequiresmonthly payments of principal and interest andhas an annual interest rate equal to the greater of the *one*-month term Secured Overnight Financing Rate ("SOFR")plus 3.3%, or 5.0%. At *December 31, 2025*, the interest rate was 7.38%. The Roundhouse term loan andrevolver mature on *July 1, 2035.*
The Roundhouse Loan is secured by certain of the equity interests and assets of Roundhouse.
*Kingsway Plumbing Holdco LLC ("KPH")*
The KPH term loan had a carrying value of$3.6millionas of *December 31, 2025*.During the *fourth* quarter of *2025,* KPH borrowed $0.4 million under the KPH revolver.
In *2025,* the Company formed KPH, whose subsidiaries include Bud's Plumbing, Advanced Plumbing and Southside Plumbing. As part of the acquisition of Southside Plumbing on *August 14, 2025,*KPH and its subsidiaries borrowed from a bank a principal amount of $3.75 million in the form of a term loan, and established a $0.5million revolver (together, the "KPH Loan"). The KPH termloanrequiresmonthly payments of interest andhas an annual fixed interest rate of 7.5%. Monthly principal payments on the KPH term loan begin *September 14, 2026.*Theterm loan matures on *August 14, 2032.*The KPH revolverrequiresmonthly payments of interest andhas an annualinterest rate equal to the greater of the Prime Rateplus 0.75%, or 7.5%.TheKPH revolvermatures on *August 14, 2026.*
The KPH Loan is secured by certain of the equity interests and assets of KPH.
| (b) | Bank loans - Extended Warranty: | |
*Kingsway Warranty Holdings LLC*("*KWH")*
The KWH term loan hasa carrying value of$10.8million and$13.2million as of*December 31, 2025*and *December 31, 2024*, respectively.The KWH delayed draw term loan ("DDTL") hasa carrying value of$4.7million and$5.9million as of*December 31, 2025*and *December 31, 2024*, respectively. The KWH revolver hasa carrying value of$2.0million and$1.0million as of*December 31, 2025*and *December 31, 2024*, respectively.
In *2019,* the Company formed KWH, whose original subsidiaries included IWS Acquisition Corporation ("IWS"), Geminus Holdings Company, Inc. ("Geminus") and Trinity Warranty Solutions LLC ("Trinity"). As part of the acquisition of PWI Holdings, Inc. ("PWI") on *December 1, 2020,*PWI became a wholly owned subsidiary of KWH, which borrowed a principal amount of $25.7 million from a bank, consisting of a $24.7million term loan and a $1.0million revolving credit facility.
TheKWH term loan and revolver hadan annual interest rate equal to SOFR, having a floor of 0.75%, plus spreads ranging from2.62% to 3.12%, and was to matureon *December 1, 2025.*
Since origination, the KWHterm loan and revolver have been amended as follows:
| | | On February 28, 2023, KWH entered into a second amendment that provides for an additional DDTL in the principal amount of up to $10.0 million, with a maturity date of December 1, 2025. All or any portion of the KWH DDTL, subject to a $2.0 million minimum draw amount, could be requested at any time through February 27, 2024. The proceeds are evidenced by an intercompany loan and guarantee between KAI and KWH. The principal amount shall be repaid in quarterly installments in an amount equal to 3.75% of the original amount of the drawn KWH DDTL. Proceeds from certain assets dispositions, as defined, may be required to be used to repay outstanding draws under the KWH DDTL. The KWH DDTL also increases the senior cash flow leverage ratio maximum permissible for certain periods.During the first quarter of 2024,the Company borrowed $3.5 million under the KWH DDTL and $0.5 million under the KWH revolver. | |
| | | On May 24, 2024, KWH entered into a thirdamendment that provides for: (1) a new term loan in the principal amount of $15.0 million, with a maturity date of May 24, 2029; and (2) a new DDTL in a principal amount of up to $6.0 million, with a maturity date of May 24, 2029. All or any portion of the DDTL, subject to a$2.0 millionminimum draw amount, could be requested at any time in up to three advances through May 24, 2026. In connection with the third amendment, KWH used the proceeds from the amended loan to repay the following outstanding borrowings: (1) $9.6 million related to the original term loan; (2) $1.0 million related to the revolver; and (3) $3.1 million related to the KWH DDTL.The amended loan hasan annual interest rate equal toSOFR, having a floor of 0.75%, plus spreads ranging from2.62% to 3.12%.At December 31, 2025, the interest rate was6.85%.During the third and fourth quarters of2024,$6.0 million was borrowed under the amended KWH DDTL and $1.0million was drawn on the KWH revolver.As of December 31, 2024 and December 31, 2025,the amended KWH DDTL isfully drawn. | |
| | | On December 18, 2025, KWH entered into a fifthamendment to the revolver that provides for: (1) an increase to the KWH revolver commitment from $1.0 million to $5.0 million; and (2) amends to maturity date of the KWH revolver to March 31, 2027. During the fourthquarter of 2025, KPH borrowed $1.0 million under the KWH revolver. | |
The amendmentswere *not* deemed to be substantially different than prior to the amendments;therefore, the amendments wereaccounted for as amodification.The unamortized debt discount and issuance costs from the original term loan at the modification date of $0.2 million were recorded as loss on extinguishment of debtand areincluded in non-operating other revenue, netin theconsolidated statement of operations for the year ended *December 31, 2024*since the original debt was fully repaid as part of the modification.
The term loan and revolver, as amended, are secured by certain of the equity interests and assets of KWH and its subsidiaries.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
| (c) | Notes payable: | |
As part of the acquisition of Bud's Plumbing on *March 14, 2025,*Bud's Plumbingbecame a wholly owned subsidiary of KPH,and together they borrowed from the seller of Bud's Plumbinga principal amount of $1.25 million in the form of a promissory note, to partially finance theacquisition of Bud's Plumbing (the "KPH Note"). The KPH Notewas recorded at its estimated fair value of $1.1 million, which included the unpaid principal amount of $1.25million as of the date of acquisition less a discount of $0.2 million.The KPH Noterequiredmonthly payments of principal and interest andhadan annual fixed interest rate of6.00%.The KPH Note was due to matureon *April 1, 2030;*however on*August 7, 2025,*the KPH Note was repaid in full to the seller of Bud's Plumbing in exchange forshares of Kingswaycommon stock. SeeNote *20*, "Shareholders' Equity,"for further discussion of the exchange.The settlement of the KPH Note by issuing the Company's common sharesis accounted for as a debt extinguishment. Thedifference between the reacquisition price of the debtand the net carrying amount ofthe KPH Note at the date of the exchangeof$0.1million is recorded as loss on extinguishment of debtand is included in non-operating other revenue, netin theconsolidated statement of operations forthe year ended *December 31, 2025*.
The following seller notes were entered into during *2025*in connection with various acquisitions which were used to partially finance the respective acquisitions:
| | | Advanced Plumbingon August 1, 2025, principal amount of $0.5 million in the form of a promissory note; and | |
| | | Southside Plumbing on March 14, 2025, principal amount of $0.5 million in the form of a promissory note. | |
| (d) | Subordinated debt: | |
On *May 22, 2003,*a subsidiary trustof the Company, Kingsway DE Statutory Trust III,issued $15.0 million of 30-year capital securities to *third*-parties in a private transaction. A corresponding floating rate junior subordinated deferrable interest debenture was then issued by KAI to the trust in exchange for the proceeds from the private sale. The floating rate debenturebears interest at the rate of CME Term SOFR, plus a spread of4.20%.The Company has the right to call thesesecuritiesat par value any time after *five* years from itsissuance until itsmaturity.
The subordinated debt, or TruPs,is carried in the consolidated balance sheets at fair value. See Note *23*, "Fair Value of Financial Instruments," for further discussion of the subordinated debt. The portion of the change in fair value of subordinated debt related to the instrument-specific credit risk is recognized in other comprehensive income.
The change in fair value ofthe Companys subordinated debt is recorded in the consolidated financial statements for the years ended*December 31, 2025*and*December 31, 2024*as follows:
| (in thousands) | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Increase (decrease) in fair value included in other comprehensive income (a) | | $ | 258 | | | $ | (383 | ) | |
| Loss on change in fair value included in consolidated statement of operations | | $ | 31 | | | $ | 198 | | |
| Increase (decrease) in fair value of subordinated debt | | $ | 289 | | | $ | (185 | ) | |
| | (a) | attributable to instrument-specific credit risk | |
The agreements governing the subordinated debt contain a number of covenants that, among other things, restrict the Companys ability to incur additional indebtedness, make dividends and distributions, and make certain payments in respect of the Companys outstanding securities.
**NOTE 12 LEASES**
| (a) | Lessee leases: | |
The Company has operating leases for office space that include fixed base rent payments, as well as variable rent payments to reimburse the landlord for operating expenses and taxes. The Companys variable lease payments do *not* depend on a published index or rate, and therefore, are expensed as incurred. The Company includes only fixed payments for lease components in the measurement of the right-of-use asset and lease liability. There are *no* residual value guarantees.
Operating lease costs, variable lease costs and short-termlease costs included in general and administrative expenses for the years ended *December 31, 2025*and*December 31, 2024*were as follows:
| (in thousands) | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Operating lease cost | | $ | 1,190 | | | $ | 613 | | |
| Variable lease cost | | | 203 | | | | 251 | | |
| Short-term lease cost | | | 68 | | | | 102 | | |
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
The annual maturities of lease liabilities as of *December 31, 2025* were as follows:
| (in thousands) | | Lease Commitments | | |
| 2026 | | $ | 1,550 | | |
| 2027 | | | 1,374 | | |
| 2028 | | | 1,130 | | |
| 2029 | | | 1,043 | | |
| 2030 | | | 1,020 | | |
| 2031 and thereafter | | | 3,363 | | |
| Total undiscounted lease payments | | | 9,480 | | |
| Imputed interest | | | 2,176 | | |
| Total lease liabilities | | $ | 7,304 | | |
The weighted-average remaining lease term for operating leases was 7.47 years and4.61 years as of*December 31, 2025*and *December 31, 2024*, respectively.The weighted average discount rate of operating leases was 6.86%and 6.07%as of*December 31, 2025*and *December 31, 2024*, respectively.Cash paid for amounts included in the measurement of lease liabilities was $1.2million and$0.6million for the years ended *December 31, 2025*and *December 31, 2024*, respectively.
Supplemental non-cash information related to leases for the years ended *December 31, 2025*and *December 31, 2024* includes right-of-use assets acquiredof$5.5 million and$2.0million, respectively, in exchange forlease obligations of$5.5 million and $2.0million, respectively.
| (b) | Lessor leases: | |
The Company enters into contracts with *third*-partiesto lease equipment to its customers. In certain of these contracts, the Company has the option to purchase the equipment back from such *third*-partyat the end of the lease term with the end customer. In these cases, the Company determined that these contracts represent a lease, and the Company is a lessor under these contracts. The sum of the lease payments received by the Company exceed the cost of the equipment.Therefore, these leases are determined to be sales-type leases. The Company receives the full lease payment for the equipment upfront when the equipment is delivered to the customer and installation is complete. Therefore the Company does *not* record a receivable or interest income related to these leases. The Company recognizes all revenue and costs associated with the sales-type lease within service fee and other revenue, and cost of services sold, respectively, upon delivery and installation of the equipment to the customer. For the years ended*December 31, 2025*and *December 31, 2024*, total revenue recognized from sales-type leases was$1.6million and$0.8million, respectively.
**NOTE 13REVENUE FROM CONTRACTS WITH CUSTOMERS**
Revenue from contracts with customers relates to the Extended Warranty and Kingsway Search Xceleratorsegments. The following table disaggregates revenues from contracts with customers by revenue type for the years ended*December 31, 2025*and *December 31, 2024*:
| (in thousands) | | | Years ended December 31, | | |
| | | | 2025 | | | 2024 | | |
| | | | | | | | | | | |
| Vehicle service agreement fees | IWS, Geminus and PWI | | $ | 61,402 | | | $ | 60,513 | | |
| Maintenance support service fees | Trinity | | | 4,343 | | | | 3,809 | | |
| Warranty product commissions | Trinity | | | 5,050 | | | | 4,548 | | |
| Business services consulting fees | Ravix, CSuite and Image Solutions | | | 22,623 | | | | 19,761 | | |
| Healthcare services fees | SNS and DDI | | | 17,940 | | | | 17,269 | | |
| Software license and support fees | SPI | | | 3,750 | | | | 3,482 | | |
| Motor sales and repair service fees | Roundhouse | | | 9,660 | | | | | | |
| Skilled trades repair and service fees | Bud's Plumbing, Advanced Plumbing and Southside Plumbing | | | 10,228 | | | | | | |
| Service fee and other revenue | | $ | 134,996 | | | $ | 109,382 | | |
**Service fee receivables**
Receivables from contracts with customers are reported as service fee receivable, net in the consolidated balance sheets and at *December 31, 2025*and *December 31, 2024*were $13.8 million and$9.4 million,respectively.The increase in receivables from contracts with customersis primarily due to receivables related to Roundhouse, Advanced Plumbing and Southside Plumbing,which were acquired during the *third* quarter of *2025,* as well as due to thetiming difference between the Company's satisfaction of performance obligations andcustomerpayments. At *December 31, 2023*, service fee receivable, net was $10.1million.The decrease in receivables from contracts with customers from *December 31, 2023*to *December 31, 2024*is primarilydue to the timing difference between the Company's satisfaction of performance obligations and customerpayments partially offset by an increase related to Image Solutions receivables which were acquired on*September 26, 2024*.
Service fee receivable is reported net of an estimated allowance for credit lossesat *December 31, 2025*and *December 31, 2024*of$1.1 million and $0.6 million, respectively.During the years ended *December 31, 2025*and*December 31, 2024*,the Company recorded an increase to its allowance for credit losses of$0.6million and$0.6million, respectively.Service feereceivables that are deemed to be uncollectible are written off against the allowance for credit losses when identified.TheCompany recorded write-offs of service fee receivablesthat weredeemed to be uncollectible of$0.1million and$0.2 millionduring the yearsended*December 31, 2025*and *December 31, 2024*, respectively.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
**Contract asset**
The Company records acontract asset, which is included in other assets in the consolidated balance sheets, whenrevenue is recognized prior to billingthe customer. Uponbilling, which typically occurs over a *three* to *five* year installment period, the value of the contract assetis reversed and service fee receivable is recorded.Changes in contract assetfor the years ended *December 31, 2025*and*December 31, 2024* were as follows:
| (in thousands) | | Years ended December 31, | | |
| Balance, December 31, 2023 | | $ | 1,688 | | |
| Contract asset additions | | | 1,093 | | |
| Amounts transferred to service fee receivables | | | (521 | ) | |
| Write-off of contract asset balances | | | (40 | ) | |
| Measurement period adjustment related to SPI | | | (342 | ) | |
| Balance, December 31, 2024 | | | 1,878 | | |
| Contract asset additions | | | 1,086 | | |
| Amounts transferred to service fee receivables | | | (897 | ) | |
| Write-off of contract asset balances | | | (10 | ) | |
| Balance, December 31, 2025 | | $ | 2,057 | | |
The contract asset is reported net of an estimated allowance for credit losses of zero at *December 31, 2025*and *December 31, 2024*.Contract assets that are deemed to be uncollectible are written off against the allowance for credit losses when identified.During the *second* quarter of *2024,*the Company recorded a measurement period adjustmentrelated to acquisitionof SPI on *September**7,* *2023* that decreasedtheestimatedvalueof the contract asset by $0.3million.
**Deferred service fees**
The Company records deferred service fees resulting from contracts with customers when payment is received in advance of satisfying the performance obligations.Changes in deferred service fees for theyears ended*December 31, 2025*and *December 31, 2024*were as follows:
| (in thousands) | | Years ended December 31, | | |
| Balance, December 31, 2023 | | $ | 83,995 | | |
| Deferral of revenue | | | 63,506 | | |
| Recognition of deferred service fees | | | (64,393 | ) | |
| Balance, December 31, 2024 | | | 83,108 | | |
| Deferral of revenue | | | 63,616 | | |
| Recognition of deferred service fees | | | (59,570 | ) | |
| Balance, December 31, 2025 | | $ | 87,154 | | |
The increase in deferred service fees during the year ended *December 31, 2025*is primarily due toadditions to deferred service fees in excess of deferred service fees recognized during the yearended *December 31, 2025*. The decrease in deferred service fees during the year ended *December 31, 2024*is primarily due todeferred service fees recognized in excess of additions to deferred service fees duringtheyearended *December 31, 2024*.
Approximately $43.4million and $44.3million of service fee and other revenue recognized during the years ended *December 31, 2025*and *December 31, 2024* was included in deferred service fees as of *December 31, 2024* and *December 31, 2023*, respectively.
**Remaining performance obligations**
The Company expects to recognize within one year as service fee and other revenue approximately 53.6%of the outstanding performance obligationsof *December 31, 2025*.The balance relates primarily to vehicle service agreement fees.
**Deferred contract costs**
Deferred contractcosts represent the deferralof incremental costs to obtain or fulfill a contract with a customer.Thedeferred contract costs balances and related amortization expense for theyears ended*December 31, 2025*and *December 31, 2024* are comprised as follows:
| (in thousands) | | Years ended December 31, 2025 | | | Years ended December 31, 2024 | | |
| | | Costs to Obtain a Contract | | | Costs to Fulfill a Contract | | | Total | | | Costs to Obtain a Contract | | | Costs to Fulfill a Contract | | | Total | | |
| Balance at January 1, net | | $ | 13,808 | | | $ | 81 | | | $ | 13,889 | | | $ | 13,653 | | | $ | 81 | | | $ | 13,734 | | |
| Additions | | | 11,324 | | | | 26 | | | | 11,350 | | | | 9,595 | | | | 24 | | | | 9,619 | | |
| Amortization | | | (10,313 | ) | | | (19 | ) | | | (10,332 | ) | | | (9,440 | ) | | | (24 | ) | | | (9,464 | ) | |
| Balance at December 31, net | | $ | 14,819 | | | $ | 88 | | | $ | 14,907 | | | $ | 13,808 | | | $ | 81 | | | $ | 13,889 | | |
No impairment losses related to deferred contract costs were recorded in*2025* or *2024*.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
**NOTE 14INCOME TAXES**
The Company and all of its eligible U.S. subsidiaries file a U.S. consolidated federal income tax return ("KFSI Tax Group"). The method of allocating federal income taxes among the companies in the KFSI Tax Group is subject to written agreement, approved by each company's Board of Directors. The allocation is made primarily on a separate return basis, with current credit for any net operating losses or other items utilized in the consolidated federal income tax return. The Companys non-U.S. subsidiaries file separate foreign income tax returns.
The following table presents the components ofconsolidated loss from continuing operations before income tax benefit:
| (in thousands) | | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| | | | | | | | | | |
| Domestic | | $ | (13,744 | ) | | $ | (8,256 | ) | |
| Foreign | | | (260 | ) | | | (4 | ) | |
| Loss from continuing operations before income tax benefit | | $ | (14,004 | ) | | $ | (8,260 | ) | |
The following table presents the components of income tax benefit:
| (in thousands) | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| | | | | | | | | | |
| Current income tax expense | | | | | | | | | |
| Federal | | $ | | | | $ | 1 | | |
| State and local | | | 321 | | | | 389 | | |
| Total current income tax expense | | | 321 | | | | 390 | | |
| Deferred income tax benefit | | | | | | | | | |
| Federal | | | (3,866 | ) | | | (352 | ) | |
| State and local | | | (207 | ) | | | (185 | ) | |
| Total deferred income tax benefit | | | (4,073 | ) | | | (537 | ) | |
| Income tax benefit | | $ | (3,752 | ) | | $ | (147 | ) | |
Income tax benefitvaries from the amount that would result by applying the applicable U.S. corporate income tax rate of 21% to lossfrom continuing operations before income tax benefit. The following table summarizes the differences:
| (in thousands) | | Years Ended December 31, | | |
| | | 2025 | | | 2024 | | |
| | | Amount | | | Percent | | | Amount | | | Percent | | |
| U.S Federal Statutory tax rate | | $ | (2,941 | ) | | | 21.0 | % | | $ | (1,735 | ) | | | 21.0 | % | |
| State and local income taxes, net of federal income tax effects (a) | | | 90 | | | | (0.6 | )% | | | 161 | | | | (1.9 | )% | |
| Foreign tax effects | | | 55 | | | | (0.4 | )% | | | 1 | | | | 0.0 | % | |
| Changes in valuation allowances | | | (1,204 | ) | | | 8.6 | % | | | 1,364 | | | | (16.5 | )% | |
| Nontaxable or non deductible items: | | | | | | | | | | | | | | | | | |
| Shared-based payments awards | | | (56 | ) | | | 0.4 | % | | | (823 | ) | | | 10.0 | % | |
| Non-deductible compensation | | | 217 | | | | (1.5 | )% | | | 966 | | | | (11.7 | )% | |
| Non-deductible transactions costs | | | 151 | | | | (1.1 | )% | | | 3 | | | | 0.0 | % | |
| Earnings of noncontrolling interests | | | (93 | ) | | | 0.7 | % | | | (166 | ) | | | 2.0 | % | |
| Other | | | 29 | | | | (0.2 | )% | | | 82 | | | | (1.0 | )% | |
| Effective tax rate | | $ | (3,752 | ) | | | 26.8 | % | | $ | (147 | ) | | | 1.8 | % | |
| | (a) | State taxes in California, Florida and Texas for 2025 made up the majority (greater than 50%) of the tax effect in this category. | |
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities are presented as follows:
| (in thousands) | | December 31, | | |
| | | 2025 | | | 2024 | | |
| Deferred income tax assets: | | | | | | | | | |
| Losses carried forward | | $ | 134,226 | | | $ | 132,150 | | |
| Unpaid loss and loss adjustment expenses and unearned premiums | | | 4,002 | | | | 3,790 | | |
| Intangible assets | | | 649 | | | | 860 | | |
| Investments | | | 25 | | | | 109 | | |
| Deferred revenue | | | 247 | | | | 247 | | |
| Compensation | | | 279 | | | | 219 | | |
| Other | | | 510 | | | | 465 | | |
| Valuation allowance | | | (129,412 | ) | | | (130,707 | ) | |
| Deferred income tax assets | | $ | 10,526 | | | $ | 7,133 | | |
| Deferred income tax liabilities: | | | | | | | | | |
| Indefinite life intangibles | | $ | (4,178 | ) | | $ | (3,899 | ) | |
| Depreciation and amortization | | | (1,016 | ) | | | (140 | ) | |
| Fair value of debt | | | (273 | ) | | | (334 | ) | |
| Intangible assets | | | (2,875 | ) | | | (1,892 | ) | |
| Deferred revenue | | | (1,762 | ) | | | (1,605 | ) | |
| Deferred acquisition costs | | | (3,130 | ) | | | (2,913 | ) | |
| Other | | | (517 | ) | | | (721 | ) | |
| Deferred income tax liabilities | | $ | (13,751 | ) | | $ | (11,504 | ) | |
| Net deferred income tax liabilities | | $ | (3,225 | ) | | $ | (4,371 | ) | |
The Company maintains a valuation allowance for its gross deferred income tax assets of$129.4million (U.S. operations - $129.4 million; Other - less than $0.1 million) and$130.7million (U.S. operations - $130.7 million; Other - less than $0.1 million) at *December 31, 2025*and *December 31, 2024*, respectively. The Company's businesses have generated substantial operating losses in prior years. These losses can be available to reduce income taxes that might otherwise be incurred on future taxable income; however, it is uncertain whether the Company will generate the taxable income necessary to utilize these losses or other reversing temporary differences. This uncertainty has caused management to place a full valuation allowance on its *December 31, 2025*and *December 31, 2024* net deferred income tax assets, excluding the deferred income tax asset and liability amounts set forth in the paragraph below.
The Company carries net deferred income tax liabilities of $3.2million and $4.4million at *December 31, 2025*and *December 31, 2024*, respectively, that consists of:
| | | $4.1million and $3.9 million of deferred income tax liabilities related to indefinite life intangible assets; and | |
| | | $1.4 million and $0.2 million of deferred income tax assetsrelated to indefinite life tax attribute carryforwards; and | |
| | | $0.5millionand $0.7millionof deferred state income tax liabilities. | |
In *2025*,the Company decreased its valuation allowance by $1.3million primarily due to deferred tax liabilities assumed from corporate acquisitions.
In *2024*, the Company increased its valuation allowance by $1.3million primarily due to an increase in deferred tax assets created as a result of its net operating loss.
Amounts, originating dates and expiration dates of the KFSI Tax Group's consolidated U.S. net operating loss carryforwards, totaling$628.0million, are as follows:
| | | | | Net operating loss | | |
| Year of net operating loss | | Expiration date | | (in thousands) | | |
| | | | | | | | |
| 2009 | | 2029 | | $ | 384,280 | | |
| 2010 | | 2030 | | | 92,058 | | |
| 2011 | | 2031 | | | 39,866 | | |
| 2012 | | 2032 | | | 30,884 | | |
| 2013 | | 2033 | | | 30,779 | | |
| 2014 | | 2034 | | | 7,245 | | |
| 2016 | | 2036 | | | 16,006 | | |
| 2017 | | 2037 | | | 20,848 | | |
| 2025 | | Indefinite | | | 4,941 | | |
| 2025 | | 2040 | | | 1,127 | | |
In addition, *not* reflected in the table above, are net operating loss carryforwards of (i) $4.0 million relating to losses generated in separate U.S. tax return years, which losses will expire over various years through *2037* and (ii) $0.3million relating to non-U.S. operations, which losses will expire over various years through *2045.*
At*December 31, 2025*and *December 31, 2024*, the Company had no unrecognized tax benefits. The Company classifies interest and penalty accruals, if any, related to unrecognized tax benefits as income tax benefit.
On *July 4, 2025,*the One Big Beautiful Bill P.L. *119*-*21* was signed into law. This legislation includes changes to U.S. federal tax law, which *may*be subject to further clarification and the issuance of interpretive guidance. We are assessing the legislation and its effect on our consolidated financial statements, which we have started reflecting in *2025.*
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
The federal income tax returns of the Company's U.S. operations for the years through *2021*are closed for Internal Revenue Service ("IRS") examination. The Company's federal income tax returns are *not* currently under examination by the IRS for any open tax years. The federal income tax returns of the Company's Canadian operations for the years through *2020*are closed for Canada Revenue Agency ("CRA") examination. The Company's Canadian federal income tax returns are *not* currently under examination by the CRA for any open tax years.
**NOTE 15LOSSPER SHARE**
The following table sets forth the reconciliation of numerators and denominators for the basic and dilutedlossper share computation for the years ended *December 31, 2025*and *December 31, 2024*:
| (in thousands, except per share data) | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Numerator: | | | | | | | | | |
| Loss from continuing operations | | $ | (10,252 | ) | | $ | (8,113 | ) | |
| Less: net income from continuing operations attributable to noncontrolling interests and redeemable noncontrolling interest | | | (479 | ) | | | (977 | ) | |
| Less: dividends on preferred stock | | | (1,186 | ) | | | (179 | ) | |
| Numerator used in calculating basic loss per share from continuing operations attributable to common shareholders | | $ | (11,917 | ) | | $ | (9,269 | ) | |
| Numerator used in calculating diluted loss per share from continuing operations attributable to common shareholders | | $ | (11,917 | ) | | $ | (9,269 | ) | |
| Loss from discontinued operations | | | | | | | (182 | ) | |
| Numerator used in calculating diluted loss per share - net loss attributable to common shareholders | | $ | (11,917 | ) | | $ | (9,451 | ) | |
| Denominator: | | | | | | | | | |
| Weighted average basic shares | | | | | | | | | |
| Weighted average common shares outstanding | | | 27,862 | | | | 27,192 | | |
| Weighted average diluted shares | | | | | | | | | |
| Weighted average common shares outstanding | | | 27,862 | | | | 27,192 | | |
| Effect of potentially dilutive securities (a) | | | | | | | | | |
| Stock options | | | | | | | | | |
| Unvested restricted stock awards | | | | | | | | | |
| Convertible preferred stock | | | | | | | | | |
| Total weighted average diluted shares | | | 27,862 | | | | 27,192 | | |
| Basic loss attributable to common shareholders: | | | | | | | | | |
| Continuing operations | | $ | (0.43 | ) | | $ | (0.34 | ) | |
| Discontinued operations | | $ | | | | $ | (0.01 | ) | |
| Basic loss per share - net loss attributable to common shareholders | | $ | (0.43 | ) | | $ | (0.35 | ) | |
| Diluted loss attributable to common shareholders: | | | | | | | | | |
| Continuing operations | | $ | (0.43 | ) | | $ | (0.34 | ) | |
| Discontinued operations | | $ | | | | $ | (0.01 | ) | |
| Diluted loss per share - net loss attributable to common shareholders | | $ | (0.43 | ) | | $ | (0.35 | ) | |
| | (a) | Potentially dilutive securities consist of stock options and unvested restricted stock awards,calculated using the treasury stock method,and convertible preferred stock,using theif-convertedmethod.Because the Company is reporting aloss from continuing operations attributable to common shareholders for the years ended December 31, 2025and December 31, 2024, all potentially dilutive securities outstanding were excluded from the calculation of diluted loss from continuing operationsper share since their inclusion would have been anti-dilutive | |
Basic lossper shareexcludes dilution and is computed by dividing lossattributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted lossper share is calculated using weighted-average diluted shares. Weighted-average diluted shares is calculated by adding the effect of potentially dilutive securities to weighted-average common shares outstanding.Potentially dilutive securities are excluded from the diluted lossper share computation in loss periods and when the applicable exercise price is greater than the market price on the period end date as their effect would be anti-dilutive.
The following weighted-average potentially dilutive securities are *not* included in the dilutedlossper share calculations above because they would have had an antidilutive effect on the lossper share:
| | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Stock options | | | 265,000 | | | | 265,000 | | |
| Unvested restricted stock awards | | | 320,920 | | | | 443,302 | | |
| Convertible preferred stock | | | 1,710,526 | | | | 868,421 | | |
| Total | | | 2,296,446 | | | | 1,576,723 | | |
**NOTE 16STOCK-BASED COMPENSATION**
On *September 21, 2020,*the Company's shareholders approved the *2020* Equity Incentive Plan (the *"2020* Plan"). The *2020* Plan replaced the Company's previous *2013* Equity Incentive Planwith respect to the granting of future equity awards. The *2020* Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Shares, Restricted Stock Units, Performance Share Awards, Dividend Equivalent Rights, Other Stock-Based Awards and Cash-Based Awards (collectively "Awards"). Under the *2020* Plan, an aggregate of 1.6 million common shares will be available for all Awards, subject to adjustment in the event of certain corporate transactions.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
| (a) | Restricted Stock Awards of the Company | |
Under the *2020* Plan, the Company has grantedrestricted common stock awards to certain officers of the Company (the "Restricted Stock Awards"). The Restricted Stock Awards vest according to a graded vesting schedule and shall become fully vested subject to the officers' continued employment through the applicable vesting dates. The Restricted Stock Awards are amortized on a straight-line basis over the requisite service periods. The grant-date fair values of theRestricted Stock Awards aredetermined using the closing price of Kingsway common stock on the dateof grant. During the year ended*December 31, 2025*,122,382shares of the Restricted Stock Awards became fully vested. No awards were granted during the year ended*December 31, 2025*.Total unamortized compensation expense related to unvested Restricted Stock Awards at *December 31, 2025* was$1.4million.
The following table summarizes the activity related to unvested Restricted Stock Awards during the year ended *December 31, 2025*:
| | |
| | | | | | | Weighted-Average | | |
| | | Number of Restricted | | | Grant Date Fair Value | | |
| | | Stock Awards | | | (per Share) | | |
| Unvested at December 31, 2024 | | | 443,302 | | | $ | 5.01 | | |
| Vested | | | (112,894 | ) | | | 5.04 | | |
| Vested and Settled for Tax Withholding | | | (9,488 | ) | | | 8.10 | | |
| Unvested at December 31, 2025 | | | 320,920 | | | $ | 4.91 | | |
Stock-based compensation expense related to theRestricted Stock Awardswas $0.6 million and $0.7 million for the years ended *December 31, 2025*and *December 31, 2024*, respectively.
| (b) | Restricted Common UnitAwardsof Subsidiaries | |
Certain subsidiaries of the Company have granted restricted Class B common unit awardsto officers of the various KSX subsidiaries pursuant to restricted unit award agreements (KSX RUAs). The KSX RUAs vest based on service and the achievement of criteria based on the IRRof the respective operating companies. The grant date fair value of the KSX RUAs are estimated using the Black-Scholes option pricing model (Ravix RUA only)or the Monte Carlosimulationmodel. The service condition vests according to a graded vesting schedule and shall become fully vestedsubject to the officer's continued employment through the applicable vesting dates.
The following table summarizes the KSX RUA activityduring the year ended *December 31, 2025*:
| Subsidiary RUA | | Unvested 12/31/2024 | | | Weighted-Average Grant-Date FV per Share at 12/31/24 | | | Granted | | | Vested | | | Unvested 12/31/2025 | | | Weighted-Average Grant-Date FV per Share at 12/31/25 | | |
| Ravix RUA | | | 49,695 | | | $ | 3.08 | | | | | | | | (17,361 | ) | | | 32,334 | | | $ | 3.08 | | |
| SNS RUA | | | 36,979 | | | $ | 5.70 | | | | | | | | (6,250 | ) | | | 30,729 | | | $ | 5.50 | | |
| SPI RUA | | | 89,625 | | | $ | 1.09 | | | | | | | | (20,833 | ) | | | 68,792 | | | $ | 1.05 | | |
| DDI RUA | | | 91,361 | | | $ | 4.07 | | | | | | | | (20,833 | ) | | | 70,528 | | | $ | 3.94 | | |
| IMSO RUA | | | 115,667 | | | $ | 6.12 | | | | | | | | (26,042 | ) | | | 89,625 | | | $ | 5.93 | | |
| KPH RUA | | | | | | | | | | | 199,000 | | | | (83,333 | ) | | | 115,667 | | | $ | 0.98 | | |
| Roundhouse RUA | | | | | | | | | | | 199,000 | | | | (83,333 | ) | | | 115,667 | | | $ | 2.85 | | |
| Total | | | 383,327 | | | | | | | | 398,000 | | | | (257,985 | ) | | | 523,342 | | | | | | |
The table below summarizes information about the KSX RUA'soutstanding at *December 31, 2025*:
| (in thousands, except units granted) | | | | | | | | | | | Stock Based Compensation Expense | | |
| | | | | | | | Unamortized | | | Years ended | | |
| Subsidiary RUA | | Units Granted | | Date of Grant | | Compensation Expense | | | December 31, 2025 | | | December 31, 2024 | | |
| Ravix RUA | | | 199,000 | | October 1, 2021 | | $ | | | | $ | 77 | | | $ | 102 | | |
| SNS RUA | | | 75,000 | | November 18, 2022 | | | 62 | | | | 74 | | | | 74 | | |
| SPI RUA | | | 199,000 | | September 7, 2023 | | | 57 | | | | 31 | | | | 31 | | |
| DDI RUA | | | 199,000 | | October 26, 2023 | | | 232 | | | | 115 | | | | 115 | | |
| IMSO RUA | | | 199,000 | | October 26, 2024 | | | 496 | | | | 170 | | | | 607 | | |
| KPH RUA | | | 199,000 | | March 14, 2025 | | | 92 | | | | 106 | | | | | | |
| Roundhouse RUA | | | 199,000 | | July 1, 2025 | | | 290 | | | | 310 | | | | | | |
| Total | | | 1,269,000 | | | | $ | 1,229 | | | $ | 883 | | | $ | 929 | | |
On *March 14, 2025,*KPH, a subsidiary of the Company,granted 199,000 restricted Class B common unit awards to an officer of Bud'sPlumbing pursuant to an agreement dated *March 14, 2025(*"KPHRUA"). The KPHRUA hada weighted-average grant date fair value of$0.85per Class B common unit.The grant-date fair value of the KPHRUA was estimated using the Monte Carlosimulationmodel, using the following assumptions:expected term of five years, expected volatility of 34%and risk-free interest rate of 4.26%.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
On *August 14, 2025,*the Company modified the inputs related to the IRR portion of the KPH RUA to be based on the combined internal rate of return of Bud's Plumbing, Advanced Plumbing and Southside Plumbing. The modified portion of the awardwas probable of vesting both immediately before and after the modification. As a result, the fair value of the award that is subject to the IRR was measured at the modification date and compared to the fair value of the modified portion of the award immediately prior to the modification, with the difference resulting in incremental compensation expense of less than$0.1 million. The incremental fair value was estimated using the Monte Carlo simulationmodel, using the following assumptions at the modification date and prior to the modification:expected term of 4.6 years, expected volatility of 35% and risk-free interest rate of 4.21%.
On *July 1, 2025,*LonghornsLLC, a subsidiary of the Company,granted 199,000 restricted Class B common unit awards to an officer of Roundhouse pursuant to an agreement dated *July 1, 2025(*"RoundhouseRUA").The RoundhouseRUA hasa weighted-average grant date fair value of$3.01per Class B common unit.The grant-date fair value of the RoundhouseRUA was estimated using the Monte Carlosimulationmodel, using the following assumptions:expected term of five years, expected volatility of 43%and risk-free interest rate of 4.22%.
| (c) | Stock Options | |
Under the *2020*Plan, the Company granted 265,000 stock optionawards to certain employees of the Company during the *second* quarter of *2024*(the "Stock Options"). TheStock Optionsvest and become exercisable ratably over a five-year period and expire ten years after the date of grant. The Stock Options are amortized on a straight-line basis over the exerciseperiod. The Company did not grant any stock options during year ended *December 31, 2025*.
The following table summarizes the stock option activityduring the year ended *December 31, 2025*:
| (in thousands, except per share data) | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Weighted- | | | | | | |
| | | | | | | | | | | Average | | | | | | |
| | | Number of | | | Weighted- | | | Remaining | | | Aggregate | | |
| | | Options | | | Average | | | Contractual | | | Intrinsic Value | | |
| | | Outstanding | | | Exercise Price | | | Term (in years) | | | (in thousands) | | |
| Outstanding at December 31, 2024 | | | 265,000 | | | $ | 10.00 | | | | 9.4 | | | $ | | | |
| Granted | | | | | | | | | | | | | | | | | |
| Outstanding at December 31, 2025 | | | 265,000 | | | $ | 10.00 | | | | 8.4 | | | $ | 914 | | |
| Exercisable at December 31, 2025 | | | 53,000 | | | $ | 10.00 | | | | 8.4 | | | $ | 183 | | |
The aggregate intrinsic value of stock options outstanding and exercisable is the difference between the *December 31, 2025* market price for the Company's common shares and the exercise price of the options, multiplied by the number of options where the *December 31, 2025* market price exceeds the exercise price.
Stock-based compensation expense related to the Stock Options was $0.2million and $0.1million forthe years ended *December 31, 2025*and *December 31, 2024*, respectively. Total unamortized compensation expense related to unvestedStock Options at *December 31, 2025*was$0.7million.
The Company uses the Black-Scholes option pricing model to estimate the fair value of each option on the date of grant.The fair value of grants and the related assumptions used in the Black-Scholes pricing model for the Stock Options granted during the year ended *December 31, 2024*were as follows:
| | | Years ended December 31, | | |
| | | 2024 | | |
| Weighted-average fair value of grants | | $ | 3.73 | | |
| Risk-free interest rate | | | 4.57 | % | |
| Dividend yield | | | | | |
| Expected volatility | | | 41.7 | % | |
| Expected term (in years) | | | 7.5 | | |
The risk-free rate was determined based on U.S. treasury yields that most closely approximated the options expected term. The dividend yield was determined based on the Company's dividend payinghistory. The expected volatility was calculated based on the weekly closing price of the Company's common stock overthe expected life of the options. The expected term was determined by estimating a cost of equity for the Companyto determine time to when the option would be at-the-money, and then adding that amount to the average time to vest.
| (d) | Employee Share Purchase Plan | |
The Company has an employee share purchase plan ("ESPP Plan") whereby qualifying employees can choose each year to have up to 5% of their annual base earnings withheld to purchase the Company's common shares. After *one* year of employment, the Company matches 100% of the employee contribution amount, and the contributions vest immediately. All contributions are used by the plan administrator to purchase common shares in the open market. The Company's contribution is expensed as paid and for the years ended *December 31, 2025*and *December 31, 2024* totaled$0.2million and$0.2million, respectively.
**NOTE 17EMPLOYEE BENEFIT PLAN**
The Company maintains a defined contribution plan in the United States for all of its qualified employees. Qualifying employees can choose to voluntarily contribute up to 60% of their annual earnings subject to an overall limitation of $23,500and $23,000 in*2025* and *2024*, respectively. The Company matches an amount equal to 50% of each participant's contribution, limited to the lesser of contributions up to 5% of a participant's earnings or $7,250.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
The contributions for the plan vest based on years of service with 100% vesting after *five* years of service. The Company's contribution is expensed as paid and for the years ended *December 31, 2025*and *December 31, 2024* totaled $0.6 million and$0.5million, respectively. All Company obligations to the plans were fully funded as of *December 31, 2025*.
**NOTE 18 REDEEMABLEPREFERRED STOCK**
At *December 31, 2025*, the Company had *three*seriesof redeemable preferred stock ("Preferred Stock") outstanding.In accordance with FASB ASC Topic *480*-*10*-*S99*-*3A,* *SEC Staff Announcement: Classification and Measurement of Redeemable Securities*, redemption features *not* solely within the control of the issuer are required to be presented outside of permanent equity on the consolidated balance sheets. For each seriesof the Preferred Stock outstanding, the holder has the option to convert each share of Preferred Stockinto 2.6316common shares at any time; however, if *not* converted, they are required to be redeemed on certain dates. As such, the Preferred Stock is presented in temporary or mezzanine equity on the consolidated balance sheets.
The following table summarizes the Company's redeemable preferred stock outstanding at*December 31, 2025*:
| Description | Issue Date | | Shares Authorized | | | Shares Outstanding | | | Par Value | | | Redemption Value per Share | | | Aggregate Redemption Value (in thousands) | | | Dividend Rate | | Redemption Date | | Maximum Number of Common Shares Issuable on Conversion | | | Carrying Amount (in thousands) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class B Preferred | September 24, 2024 | | | 330,000 | | | | 330,000 | | | $ | 0.01 | | | $ | 25.00 | | | $ | 8,250 | | | | 8.0 | % | September 24, 2031 | | | 868,421 | | | $ | 8,250 | | |
| Class C Preferred | February 1, 2025 | | | 240,000 | | | | 240,000 | | | $ | 0.01 | | | $ | 25.00 | | | $ | 6,000 | | | | 8.0 | % | February 12, 2032 | | | 631,579 | | | $ | 6,000 | | |
| Class D Preferred | May 8, 2025 | | | 80,000 | | | | 80,000 | | | $ | 0.01 | | | $ | 25.00 | | | $ | 2,000 | | | | 8.0 | % | May 7, 2032 | | | 210,526 | | | $ | 2,000 | | |
At
*December 31, 2024*, there were
330,000 shares of Class B Preferred Stock outstanding with aredemption amount of
$8.3million.
The Class B Preferred Stock ranks senior to the Company's common shares.The Class C and Class D Preferred Stock ranks
*pari passu*with the Companys Class B Preferred Stockand senior to the Company's common shares.
The holders of each series of Preferred Stock will
*not* be entitled to receive notice of or to attend any meeting of the shareholders of the Company and will
*not* be entitled to vote at any such meeting. The holders ofeach series of Preferred Stock are entitled to receive fixed, cumulative, preferential cash dividends at a rate of
8% per share ofPreferred Stock per year, payable in equal quarterly installments if declared by the Board of Directors of the Company. Dividends on outstanding shares of each series of Preferred Stock will accrue from day to day commencing on the date of issuance of each such share ofPreferred Stock. The cash dividend rate will increase to
18% per share ofPreferred Stock if the dividend is
*not* paid and accumulates for a period greater than
*two* consecutive quarters from the date of the most recent dividend payment. The Company will redeem anyPreferred Stock
*not* previously converted into common shares, and which remain outstanding on the conversion date, for the price of
$25.00 per share ofPreferred Stock, plus accrued but unpaid dividends thereon, whether or
*not* declared, up to and including the date specified for redemption.
The Company shall have the option to redeem
25% of each series ofPreferred Stock it has issued following a sale of assets representing more than
15% of the Companys consolidated revenues in the prior
*12* month period at a price equal to the amount that would yield a total internal rate of return of
15% on the subscription price paid to the Company for the purchase of shares ofPreferred Stock submitted for redemption.
Accrued dividends declared for each series of Preferred Stock, which is included in accrued expenses and other liabilitiesin the consolidated balance sheets, at
*December 31, 2025*and
*December 31, 2024*are as follows:
| (in thousands) | | December 31, 2025 | | | December 31, 2024 | | |
| | | | | | | | | | |
| Class B Preferred | | $ | 166 | | | $ | 166 | | |
| Class C Preferred | | | 121 | | | | | | |
| Class D Preferred | | | 40 | | | | | | |
| Total | | $ | 327 | | | $ | 166 | | |
**NOTE 19 REDEEMABLE NONCONTROLLING INTEREST**
Redeemable noncontrolling interest represents a 20% noncontrolling ownership in Southside Plumbing, which was acquired on *August 14, 2025.*Redeemable noncontrolling interest is presented outside of permanent equity in the consolidated balance sheets as it is redeemable by the holder of the noncontrolling interest and the redemption is outside the control of the Company. Shares are redeemable at their fair value on the *fifth* anniversary of the acquisition of Southside Plumbing. The redeemable noncontrolling interest was initially recorded at fair value at the date of issuance. The Company records the carrying value of the redeemable noncontrolling interest at the greater of (i) the initial carrying amount, increased or decreased for the noncontrolling interest's share of net income or loss and its share of other comprehensive income or loss, and dividends or (ii) the redemption value. For interests that are redeemable in the future, the Company recognizes changes in the redemption value immediately as they occur, with an offsetting entry to additional paid-in capital. The redemption amount isestimated based on the fair value of the subsidiary, determined using discounted cash flow methods, which represents a level *3* fair value measurement.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
ChangesintheCompany'sredeemablenoncontrollinginterestfortheyear ended*December 31, 2025*wereasfollows:
| (in thousands) | | December 31, 2025 | | |
| Balance, December 31, 2024 | | $ | | | |
| Acquisition of noncontrolling interest in Southside Plumbing | | | 875 | | |
| Net loss attributable to redeemable noncontrolling interest | | | (83 | ) | |
| Balance, December 31, 2025 | | $ | 792 | | |
**NOTE 20SHAREHOLDERS' EQUITY**
The Company is authorized to issue 50,000,000 shares of $0.01par value common stock. There were28,625,744and27,136,749shares of common stock outstanding at *December 31, 2025*and *December 31, 2024*, respectively.
There were no common stock dividends declared during the years ended *December 31, 2025*and *December 31, 2024*.
There were 1,025,927and983,027 shares of treasury stock outstanding at *December 31, 2025*and *December 31, 2024*, respectively. The Company records treasury stock at cost.
| (a) | Common Stock Sale | |
On *June 24, 2025,*the Company entered into a Stock Purchase Agreement (the Purchase Agreement) with certain *third*-parties. Pursuant to the Purchase Agreement, the Company sold an aggregate of 1,336,264 shares of its Common Stock, par value $0.01 per sharefor aggregate gross proceeds of$15.7 million. The purchase price for each share of Common Stock was $11.75 per share. Net proceeds to the Company were $15.6 million after deductingoffering expenses.
| (b) | Notes Payable Exchanged for Common Shares | |
As described inNote *11*, "Debt,"as part of the acquisition of Bud's Plumbing on *March 14, 2025,*KPH borrowed from the seller of Bud's Plumbinga principal amount of $1.25 million in the form of a promissory note. On*August 7, 2025,*the KPH Note was repaid in full to the seller of Bud's Plumbing in exchange for 82,737shares of the Company's Common Stock at a price per share of$13.90 per share.
| (c) | Preferred Stock | |
Dividends declared to the holders of the Company's Preferred Stockfor the yearsended *December 31, 2025*and *December 31, 2024* isas follows:
| (in thousands) | | December 31, 2025 | | | December 31, 2024 | | |
| | | | | | | | | | |
| Class B Preferred | | $ | 660 | | | $ | 179 | | |
| Class C Preferred | | | 421 | | | | | | |
| Class D Preferred | | | 105 | | | | | | |
| Total | | $ | 1,186 | | | $ | 179 | | |
Cash dividends paid during theyears ended *December 31, 2025*and *December 31, 2024*were$1.0million and less than$0.1million, respectively.
| (d) | Security Repurchases | |
On *March 21, 2023,*the Company's Board of Directorsapproved a securityrepurchase program under which the Company is authorized to repurchase up to $10.0 millionof its currently issued and outstanding securitiesthrough *March 22,**2024.*On *March 22, 2024,*the Company entered into a *one* year extension of its existing share repurchase program. As amended, the share repurchase programexpired on *March 21, 2025;*however, in *January 2025*the Company fully utilized the authorized amount.The timing and amount of anyrepurchases weredetermined based on market and economic conditions, share price and other factors, and the program could have been terminated, modified orsuspended at any time at the Company's discretion.During the years ended*December 31, 2025*and*December 31, 2024*, the Company repurchased 42,900and312,850sharesof common stock, respectively,for an aggregate purchase price of $0.3million and$2.5million, respectively, including fees and commissions.Therepurchased common stock will be held as treasury stock at cost and has been removed from common shares outstandingat *December 31, 2025*and *December 31, 2024*.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
**NOTE 21ACCUMULATED OTHER COMPREHENSIVE LOSS**
The table below details the change in the balance of each component of accumulated other comprehensive loss, net of tax, for the years ended *December 31, 2025*and *December 31, 2024*, as it relates to shareholders' equity attributable to common shareholders on the consolidated balance sheets.
| (in thousands) | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Change in | | | | | | |
| | | | | | | | | | | Fair Value of | | | | | | |
| | | Unrealized | | | | | | | Debt | | | | | | |
| | | (Losses) | | | | | | | Attributable | | | Total | | |
| | | Gains on | | | Foreign | | | to | | | Accumulated | | |
| | | Available- | | | Currency | | | Instrument- | | | Other | | |
| | | for-Sale | | | Translation | | | Specific | | | Comprehensive | | |
| | | Investments | | | Adjustments | | | Credit Risk | | | Loss | | |
| Balance, December 31, 2023 | | $ | (1,596 | ) | | $ | (3,286 | ) | | $ | 3,342 | | | $ | (1,540 | ) | |
| | | | | | | | | | | | | | | | | | |
| Other comprehensive income arising during the period | | | 632 | | | | | | | | 383 | | | | 1,015 | | |
| Amounts reclassified from accumulated other comprehensive loss | | | (164 | ) | | | | | | | | | | | (164 | ) | |
| Amounts reclassified from noncontrolling interest | | | (29 | ) | | | | | | | | | | | (29 | ) | |
| Net current-period other comprehensive income | | | 439 | | | | | | | | 383 | | | | 822 | | |
| Balance, December 31, 2024 | | $ | (1,157 | ) | | $ | (3,286 | ) | | $ | 3,725 | | | $ | (718 | ) | |
| | | | | | | | | | | | | | | | | | |
| Other comprehensive income (loss) arising during the period | | | 1,037 | | | | | | | | (258 | ) | | | 779 | | |
| Amounts reclassified from accumulated other comprehensive loss | | | (121 | ) | | | | | | | | | | | (121 | ) | |
| Net current-period other comprehensive income (loss) | | | 916 | | | | | | | | (258 | ) | | | 658 | | |
| Balance, December 31, 2025 | | $ | (241 | ) | | $ | (3,286 | ) | | $ | 3,467 | | | $ | (60 | ) | |
For the yearended *December 31, 2024,*the consolidated statements of comprehensive losspresent the components of other comprehensive income, net of tax,inclusive of the components attributable to noncontrolling interests in consolidated subsidiaries.
Components of accumulated other comprehensive loss were reclassified to the following lines of the consolidated statements of operations for the years ended *December 31, 2025*and *December 31, 2024*:
| (in thousands) | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Reclassification of accumulated other comprehensive loss from unrealized gains (losses) on available-for-sale investments to: | | | | | | | | | |
| Net realized gains | | $ | 121 | | | $ | 164 | | |
| Loss from continuing operations before income tax benefit | | | 121 | | | | 164 | | |
| Income tax benefit | | | | | | | | | |
| Loss from continuing operations, net of taxes | | | 121 | | | | 164 | | |
| Income from discontinued operations, net of taxes | | | | | | | | | |
| Net loss | | $ | 121 | | | $ | 164 | | |
**NOTE 22SEGMENTED INFORMATION**
The Company reports segment information based on the "management"approach. Themanagement approachdesignates the internal reporting used by management for making decisions and assessing performance as a source of the Companys reportable operating segments. The Company's chief operating decision maker is its President and Chief Operating Officer. The Company conducts its business through the following tworeportable segments:Kingsway Search Xcelerator andExtended Warranty.
**Kingsway Search XceleratorSegment**
Kingsway Search Xceleratorincludes the Company's subsidiaries CSuite, Ravix,SNS, SPI,DDI, Image Solutions, Roundhouse, Bud's Plumbing, Advanced Plumbing and Southside Plumbing (collectively, "KSX").
CSuite is a professional services firmthat provides experienced chief financial officerand other finance professionals to its clients through a variety of flexible offerings. These offerings include project, fractional,and interim staffing of senior finance professionals, CFO mentoring, board advisory services, and executive search services for permanent placements for its clients throughout theUnited States.
Ravixprovides outsourced financial services and human resources consulting for short or long duration engagements for customersthroughout theUnited States.
SNSprovideshealthcare staffing services to acute healthcare facilities on a contract or per diem basis in the United States, primarily in California.
SPI providessoftware productscreated exclusively to serve the management needs of all types of shared-ownership properties globally.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
DDIprovides outsourced *24* hours a day and *7* days per weekcardiactelemetry services for general acute care, long-term acute careand inpatient rehabilitation hospitals.Outsourcing cardiac monitoringallows hospitals to eliminate personnel callouts and human resourcesissues, remove distractions from onsite operations, and free up facility staff to assist directly with patient care.DDI currently has a presence in42states and Puerto Rico.
Image Solutionsprovides comprehensive information technologymanaged services, including equipment sales, service, and helpdesk support to customers primarily inNorth Carolina, Kansas, Georgia, Kentucky and Tennessee.
Roundhouseprovidesindustrial-scale electric motor solutions, including field maintenance, in-shop repair, testing, and new motor salesprimarily to midstream natural gas pipeline operators and utilities across the Permian Basin.
Kingsway Skilled Trades includes Bud's Plumbing, Advanced Plumbing and Southside Plumbing. Kingsway Skilled Tradesprovides acomprehensive range of plumbing services, including emergency repairs, drain cleaning, water heater installations, and water treatment solutions to residential and commercial customers, primarily in Evansville, Indiana (Bud's Plumbing), Cleveland, Ohio (Advanced Plumbing) and Omaha, Nebraska (Southside Plumbing).
**Extended Warranty Segment**
Extended Warranty includes the following subsidiaries of the Company: IWS, Geminus, PWI and Trinity (collectively, "Extended Warranty").
IWS is a licensed motor vehicle service agreement company and is a provider of after-market vehicle protection services distributed by credit unions i
n
28
states and the District of Columbia to their members, with customers in all
*fifty*states
.
Geminus primarily sells vehicle service agreements to used car buyers across the United States, mainly through its subsidiary, Penn. Penndistributes these products in
46
states
via independent used car dealerships and franchised car dealerships.
PWI markets, sells and administers vehicle service agreements to used car buyers in
47 states via independent used car and franchise network of approved automobile and motorcycle dealer partners. PWIs business model is supported by an internal sales and operations team
.
Trinity sells HVAC, standby generator, commercial LED lighting and commercial refrigeration warranty products and provides equipment breakdown and maintenance support services to companies across the United States. As a seller of warranty products, Trinity markets and administers product warranty contracts for certain new and used products in the HVAC, standby generator, commercial LED lighting and commercial refrigeration industries throughout the United States. Trinity acts as an agent on behalf of the
*third*-party insurance companies that underwrite and guaranty these warranty contracts. Trinity does
*not* guaranty the performance underlying the warranty contracts it sells. As a provider of equipment breakdown and maintenance support services, Trinity acts as a single point of contact to its clients for both certain equipment breakdowns and scheduled maintenance of equipment. Trinity will provide such repair and breakdown services by contracting with certain HVAC providers.
**Revenues and Operating Income by Reportable Segment**
Revenues by reportable segment reconciled to consolidated revenues for the years ended *December 31, 2025*and *December 31, 2024* were:
| (in thousands) | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Revenues: | | | | | | | | | |
| Service fee and other revenue - KSX | | $ | 64,201 | | | $ | 40,511 | | |
| Service fee and other revenue - Extended Warranty | | | 70,795 | | | | 68,871 | | |
| Total revenues | | $ | 134,996 | | | $ | 109,382 | | |
Results for the Company's reportable segments are based on the Company's internal financial reporting systems and are consistent with those followed in the preparation of the consolidated financial statements. The Companyuses operating income as the measure of profit or loss for our segments. The Company'schief operating decision maker uses segment operating incometo allocate resources in the annual budget and forecasting process and considers actual versus plan variances in assessing the performance of each segment. The chief operating decision maker also uses segment operating income as an input to the overall compensation measures for segment management under the Company'sincentive compensation plans.From time to time we *may*report the impact of certain events, gains, losses or other charges related to our segments outside of segment operating income.Segment assets are *not* regularly reviewed by the Company's chief operating decision maker and, therefore, are *not* included in the segment disclosures below.
Among other items, the degree and pace of inflation and interest rate changes *may*have impacts on our business and the recently announced tariffs or retaliatory responses to such tariffs *may*impact the Companys operating income. The potential impact of current macroeconomic uncertainties on the Companys financial condition, results of operations, and cash flows is subject to change and continues to depend on the extent and duration of these uncertainties.
The operating income by reportable segment in the following table is before income taxes and includes revenues and direct segment costs. The significant expense categories and amounts by segment align with the segment level information that is regularly provided to the chief operating decision maker.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
Total segment operating income reconciled to the consolidated lossfrom continuing operations for the years ended *December 31, 2025*and *December 31, 2024* is as follows:
| | | Year ended December 31, | | | Year ended December 31, | | |
| | | 2025 | | | 2024 | | |
| (in thousands) | | KSX | | | Extended Warranty | | | Total | | | KSX | | | Extended Warranty | | | Total | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Service fee and other revenue | | $ | 64,201 | | | $ | 70,795 | | | $ | 134,996 | | | $ | 40,511 | | | $ | 68,871 | | | $ | 109,382 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Less segment expenses: | | | | | | | | | | | | | | | | | | | | | | | | | |
| Claims authorized on vehicle service agreements | | | | | | | 25,727 | | | | 25,727 | | | | | | | | 24,577 | | | | 24,577 | | |
| Cost of services - salaries and benefits | | | 21,685 | | | | 19 | | | | 21,704 | | | | 18,275 | | | | 24 | | | | 18,299 | | |
| Cost of services - commissions | | | (93 | ) | | | 12,000 | | | | 11,907 | | | | 112 | | | | 10,871 | | | | 10,983 | | |
| Cost of services - other | | | 12,798 | | | | 4,034 | | | | 16,832 | | | | 5,010 | | | | 3,426 | | | | 8,436 | | |
| Salaries and benefits | | | 10,993 | | | | 16,531 | | | | 27,524 | | | | 6,504 | | | | 14,676 | | | | 21,180 | | |
| Insurance expense | | | 855 | | | | 2,308 | | | | 3,163 | | | | 306 | | | | 2,216 | | | | 2,522 | | |
| Professional fees | | | 2,281 | | | | 1,340 | | | | 3,621 | | | | 1,059 | | | | 977 | | | | 2,036 | | |
| IT expense | | | 1,651 | | | | 1,323 | | | | 2,974 | | | | 822 | | | | 1,168 | | | | 1,990 | | |
| Other segment items (a) | | | 6,244 | | | | 6,359 | | | | 12,603 | | | | 2,761 | | | | 4,994 | | | | 7,755 | | |
| Total segment operating income | | $ | 7,787 | | | $ | 1,154 | | | $ | 8,941 | | | $ | 5,662 | | | $ | 5,942 | | | $ | 11,604 | | |
| Net investment income | | | | | | | | | | | 1,627 | | | | | | | | | | | | 1,432 | | |
| Net realized and unrealized investment gains | | | | | | | | | | | 714 | | | | | | | | | | | | 1,896 | | |
| General and administrative expenses and other revenue not allocated to segments, net (b) | | | | | | | | | | | (10,962 | ) | | | | | | | | | | | (9,250 | ) | |
| Interest expense | | | | | | | | | | | (5,449 | ) | | | | | | | | | | | (4,790 | ) | |
| Amortization of intangible assets | | | | | | | | | | | (8,169 | ) | | | | | | | | | | | (6,304 | ) | |
| Impairment of goodwill and intangible assets | | | | | | | | | | | (706 | ) | | | | | | | | | | | (2,848 | ) | |
| Loss from continuing operations before income tax benefit | | | | | | | | | | | (14,004 | ) | | | | | | | | | | | (8,260 | ) | |
| Income tax benefit | | | | | | | | | | | (3,752 | ) | | | | | | | | | | | (147 | ) | |
| Loss from continuing operations | | | | | | | | | | $ | (10,252 | ) | | | | | | | | | | $ | (8,113 | ) | |
| | (a) | Other segment items in the table above for each reportable segment include bank charges, bad debt expense, occupancy expenses, depreciation expense, licenses and taxes, general overhead expenses and miscellaneous income. | |
| | (b) | General and administrative expenses and other revenue not allocated to segments, net includes corporate and non-operating general and administrative expenses, contingent consideration expense (2024 year to date only) and non-operating other revenue. | |
**NOTE 23FAIR VALUE OF FINANCIAL INSTRUMENTS**
Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best evidenced by quoted bid or ask price, as appropriate, in an active market. Where bid or ask prices are *not* available, such as in an illiquid or inactive market, the closing price of the most recent transaction of that instrument subject to appropriate adjustments as required is used. Where quoted market prices are *not* available, the quoted prices of similar financial instruments or valuation models with observable market-based inputs are used to estimate the fair value. These valuation models *may*use multiple observable market inputs, including observable interest rates, foreign exchange rates, index levels, credit spreads, equity prices, counterparty credit quality, corresponding market volatility levels and option volatilities. Minimal management judgment is required for fair values calculated using quoted market prices or observable market inputs for models. Greater subjectivity is required when making valuation adjustments for financial instruments in inactive markets or when using models where observable parameters do *not* exist. Also, the calculation of estimated fair value is based on market conditions at a specific point in time and *may**not* be reflective of future fair values. For the Company's financial instruments carried at cost or amortized cost, the book value is *not* adjusted to reflect increases or decreases in fair value due to market fluctuations, including those due to interest rate changes, as it is the Company's intention to hold them until there is a recovery of fair value, which *may*be to maturity.
The Company employs a fair value hierarchy to categorize the inputs it uses in valuation techniques to measure the fair value. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level *1:*
| | | Level 1 Quoted prices for identical instruments in active markets. | |
| | | Level 2 Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets. | |
| | | Level 3 Valuations derived from valuation techniques in which one or more significant inputs are not observable. | |
The Company classifies its investments in fixed maturities as available-for-sale and reports these investments at fair value. The Company's limited liability investment, at fair value, subordinated debt, contingent consideration and seller phantom equity awardsare measured and reported at fair value.
*Fixed maturities -*Fair values of fixed maturities for which *no* active market exists are derived from quoted market prices of similar instruments or other *third*-party evidence. All classes of the Companys fixed maturities, primarily consisting of investments in US. Treasury bills and government bonds; obligations of states, municipalities and political subdivisions; mortgage-backed securities; and corporate securities, are classified as Level *2.* Level *2* is applied to valuations based upon quoted prices for similar assets in active markets; quoted prices for identical or similar assets in markets that are inactive; or valuations based on models where the significant inputs are observable or can be corroborated by observable market data.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
The Company engages a *third*-party vendor who utilizes *third*-party pricing sources and primarily employs a market approach to determine the fair values of our fixed maturities. The market approach includes primarily obtaining prices from independent *third*-party pricing services as well as, to a lesser extent, quotes from broker-dealers. Our *third*-party vendor also monitors market indicators, as well as industry and economic events, to ensure pricing is appropriate. All classes of our fixed maturities are valued using this technique. The Company has obtained an understanding of our *third*-party vendors valuation methodologies and inputs. Fair values obtained from our *third*-party vendor are *not* adjusted by the Company.
The following is a description of the significant inputs, by asset class, used by the *third*-party pricing services to determine the fair values of our fixed maturities included in Level *2:*
| | | U.S. government, government agencies and authorities are generally priced using the market approach. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets and maturity. | |
| | | States, municipalities and political subdivisions are generally priced using the market approach. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets, new issuances and credit spreads. | |
| | | Mortgage-backed securities are generally priced using the market approach. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets, expected prepayments, expected credit default rates, delinquencies and issue specific information including, but not limited to, collateral type, seniority and vintage. | |
| | | Corporate securities are generally priced using the market approach using pricing vendors. Inputs generally consist of trades of identical or similar securities, quoted prices in inactive markets, issuer rating, benchmark yields, maturity and credit spreads. | |
*Limited liability investment, at fair value*- Limited liability investment, at fair value**includes the underlying investments ofArgo Holdings. Argo Holdings makes investments in limited liability companies and limited partnerships that hold investments inprivate operating companies.
The fair value of Argo Holdings' limited liability investments that hold investments in private operating companies is valued using a market approach including valuation multiples applied to corresponding performance metrics, such as earnings before interest, tax, depreciation and amortization; revenue; or net earnings. The selected valuation multiples were estimated using multiples provided by the investees and review of those multiples in light of investor updates, performance reports, financial statements and other relevant information. These investments are categorized in Level *3* of the fair value hierarchy
*Subordinated debt -*The fair value of the subordinated debt is calculated using a model based on significant market observable inputs and inputs developed by a *third*-party. These inputs include credit spread assumptions developed by a *third*-party and market observable swap rates. The subordinated debt is categorized in Level *2* of the fair value hierarchy.
*Contingent consideration**-*The consideration for the Company's acquisitions of Ravix, CSuite, Advanced Plumbing and Southside Plumbingincludesfuture payments to the former owners that arecontingent upon the achievement of certain targets over future reporting periods. Liabilities for contingent consideration are measured and reported at fair value and are included in accrued expenses and other liabilities in the consolidated balance sheets.Contingent consideration liabilities are revalued each reporting period. Changes in the fair value of contingent consideration liabilities can result from changes to *one* or multiple inputs, including adjustments to the discount rates or changes in the assumed achievement or timing of any targets. Any changes in fair value are reported in the consolidated statements of operations.The contingent consideration liabilitiesarecategorized in Level *3*of the fair value hierarchy.
| | | The fair value ofRavix'scontingent consideration liability was estimated by applying theMonte Carlosimulation methodto forecast achievement of gross profitwhichresulted in the maximum of$4.5 million in total payments to the former owners of Ravix through October2024.Key inputs in the valuation included forecasted gross profit, gross profit volatility, discount rate and discount term. During 2022 and 2023, Ravix madepayments to the formerowners totaling $1.1 million.The remaining contingent liability of $3.4 million was due to be paid in October 2024. Ravix made a payment of $0.7 million during the fourth quarter of 2024.In accordance with the terms of the purchase agreement, any unpaid portion will bear interest at an annual rate of 6.0%. In February 2025, the Ravix contingent consideration liability and related accrued interestwas paid in full.At December 31, 2024, the unpaidcontingent consideration liabilitydue to the former owners of Ravix was $2.7 million. Accrued interest on theunpaid contingent consideration liability, which is included inaccrued expenses and other liabilities in the consolidated balance sheet, was less than $0.1 million at December 31, 2024. | |
| | | The fair value ofCSuite's contingent consideration liability was estimated by applying theMonte Carlosimulation methodto forecast achievement of gross revenuewhichcould have resulted in up to $3.6 million in total payments to the former owners of CSuitethrough October 2025. Key inputs in the valuation included forecasted gross revenue, gross revenue volatility, discount rate and discount term. The earn-out period expired on October 31, 2025 and no amount was due to the former owners of CSuite.The estimated fair value of the CSuite contingent considerationliability at December 31, 2024was zero. | |
| | | The fair value ofAdvanced Plumbing's contingent consideration liabilityis estimated by applying theMonte Carlosimulation methodto forecast achievement of adjusted EBITDA, which may result in up to $1.5 million in total payments to the former owners of Advanced Plumbingthrough August 2028.Key inputs in the valuation include projectedEBITDA, asset volatility, risk-free rate, discount rate and discount term. The estimated fair value of the Advanced Plumbing contingent considerationliability at December 31, 2025 was$0.8million. | |
| | | The fair value ofSouthside'scontingent consideration liabilityis estimated by applying theMonte Carlosimulation methodto forecast achievement of adjusted EBITDA, which may result in up to $1.125million in total payments to the former owners of Southside Plumbingthrough August 2028.Key inputs in the valuation include projectedEBITDA, asset volatility, risk-free rate, discount rate and discount term. The estimated fair value of the Southside Plumbingcontingent considerationliability at December 31, 2025 was$0.2 million. | |
*Seller phantom equity awards**-*In connection with the acquisition of Roundhouse, the Company grantedphantom equity awards tothe former owners.The seller phantom equity awards are measured and reported at fair value and areincluded in accrued expenses and other liabilities in the consolidated balance sheet at*December 31, 2025*.The seller phantomequity awards liabilityismeasured and reported at fair value at the date of grant and is revalued each reporting period. Changes in the fair value of theseller phantom equity awards can result from changes to *one* or multiple inputs, including adjustments to the discount rates or changes in Roundhouse performance. Any changes in fair value are reported in the consolidated statements of operations as non-operating other revenue, net.The seller phantom equity awards liabilityiscategorized in Level *3*of the fair value hierarchy.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
**Assets and Liabilities Measured at Fair Value on a Recurring Basis**
The balances of the Company's financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of *December 31, 2025*and *December 31, 2024* are as follows:
| (in thousands) | | | | | | | | | | December 31, 2025 | | |
| | | Fair Value Measurements at the End of the Reporting Period Using | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | Quoted | | | | | | | | | | |
| | | | | | | Prices in | | | | | | | | | | |
| | | | | | | Active | | | Significant | | | | | | |
| | | | | | | Markets for | | | Other | | | Significant | | |
| | | | | | | Identical | | | Observable | | | Unobservable | | |
| | | | | | | Assets | | | Inputs | | | Inputs | | |
| | | Total | | | (Level 1) | | | (Level 2) | | | (Level 3) | | |
| Recurring fair value measurements | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Assets: | | | | | | | | | | | | | | | | | |
| Fixed maturities: | | | | | | | | | | | | | | | | | |
| U.S. government, government agencies and authorities | | $ | 13,491 | | | $ | | | | $ | 13,491 | | | $ | | | |
| States, municipalities and political subdivisions | | | 1,771 | | | | | | | | 1,771 | | | | | | |
| Mortgage-backed | | | 9,818 | | | | | | | | 9,818 | | | | | | |
| Asset-backed | | | 1,364 | | | | | | | | 1,364 | | | | | | |
| Corporate | | | 10,321 | | | | | | | | 10,321 | | | | | | |
| Total fixed maturities | | | 36,765 | | | | | | | | 36,765 | | | | | | |
| Limited liability investment, at fair value | | | 3,476 | | | | | | | | | | | | 3,476 | | |
| Total assets | | $ | 40,241 | | | $ | | | | $ | 36,765 | | | $ | 3,476 | | |
| | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | | |
| Subordinated debt | | $ | 13,698 | | | $ | | | | $ | 13,698 | | | $ | | | |
| Contingent consideration | | | 980 | | | | | | | | | | | | 980 | | |
| Seller phantom equity awards | | | 3,328 | | | | | | | | | | | | 3,328 | | |
| Total liabilities | | $ | 18,006 | | | $ | | | | $ | 13,698 | | | $ | 4,308 | | |
| (in thousands) | | | | | | | | | | December 31, 2024 | | |
| | | Fair Value Measurements at the End of the Reporting Period Using | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | Quoted | | | | | | | | | | |
| | | | | | | Prices in | | | | | | | | | | |
| | | | | | | Active | | | Significant | | | | | | |
| | | | | | | Markets for | | | Other | | | Significant | | |
| | | | | | | Identical | | | Observable | | | Unobservable | | |
| | | | | | | Assets | | | Inputs | | | Inputs | | |
| | | Total | | | (Level 1) | | | (Level 2) | | | (Level 3) | | |
| Recurring fair value measurements | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Assets: | | | | | | | | | | | | | | | | | |
| Fixed maturities: | | | | | | | | | | | | | | | | | |
| U.S. government, government agencies and authorities | | $ | 13,354 | | | $ | | | | $ | 13,354 | | | $ | | | |
| States, municipalities and political subdivisions | | | 2,775 | | | | | | | | 2,775 | | | | | | |
| Mortgage-backed | | | 9,886 | | | | | | | | 9,886 | | | | | | |
| Asset-backed | | | 1,326 | | | | | | | | 1,326 | | | | | | |
| Corporate | | | 9,622 | | | | | | | | 9,622 | | | | | | |
| Total fixed maturities | | | 36,963 | | | | | | | | 36,963 | | | | | | |
| Limited liability investment, at fair value | | | 2,859 | | | | | | | | | | | | 2,859 | | |
| Total assets | | $ | 39,822 | | | $ | | | | $ | 36,963 | | | $ | 2,859 | | |
| | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | | |
| Subordinated debt | | $ | 13,409 | | | $ | | | | $ | 13,409 | | | $ | | | |
| Contingent consideration | | | 2,725 | | | | | | | | | | | | 2,725 | | |
| Total liabilities | | | 16,134 | | | | | | | | 13,409 | | | | 2,725 | | |
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
The following table provides a reconciliation of the fair value of recurring Level *3* fair value measurements for the years ended *December 31, 2025*and *December 31, 2024*:
| (in thousands) | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Assets: | | | | | | | | | |
| Limited liability investment, at fair value: | | | | | | | | | |
| Beginning balance | | $ | 2,859 | | | $ | 3,496 | | |
| Distributions received | | | (153 | ) | | | (2,347 | ) | |
| Realized gains included in net loss | | | 153 | | | | 1,369 | | |
| Change in fair value of limited liability investments, at fair value included in net loss | | | 617 | | | | 341 | | |
| Ending balance | | $ | 3,476 | | | $ | 2,859 | | |
| Unrealized gains on limited liability investments, at fair value held at end of period: | | | | | | | | | |
| Included in net loss | | $ | 617 | | | $ | 341 | | |
| Included in other comprehensive income | | | | | | | | | |
| Ending balance - assets | | $ | 3,476 | | | $ | 2,859 | | |
| Liabilities: | | | | | | | | | |
| Contingent consideration: | | | | | | | | | |
| Beginning balance | | $ | 2,725 | | | $ | 3,105 | | |
| Issuance of contingent consideration in connection with acquisitions | | | 980 | | | | | | |
| Settlements of contingent consideration liabilities | | | (2,725 | ) | | | (650 | ) | |
| Change in fair value of contingent consideration included in net loss | | | | | | | 270 | | |
| Ending balance | | $ | 980 | | | $ | 2,725 | | |
| Unrealized losses recognized on contingent consideration liabilities held at end of period: | | | | | | | | | |
| Included in net loss | | | | | | | 270 | | |
| Included in other comprehensive income | | $ | | | | $ | | | |
| Seller phantom equity awards: | | | | | | | | | |
| Beginning balance | | $ | | | | | | | |
| Issuance of seller phantom equity in connection with acquisition | | | 3,328 | | | | | | |
| Ending balance | | $ | 3,328 | | | $ | | | |
| Ending balance - liabilities | | $ | 4,308 | | | $ | 2,725 | | |
The following table summarizes the valuation techniques and significant unobservable inputs utilized in determining fair values for the Company's investments that are categorized as Level *3* at *December 31, 2025*:
| Categories | | Fair Value | | Valuation Techniques | Unobservable Inputs | | Input Value(s) | | |
| Limited liability investment, at fair value | | $ | 3,476 | | Market approach | Valuation multiples | | 1.0x - 9.0x | | |
| Contingent consideration | | $ | 980 | | Option-based income approach | Discount rate | | | 14.0%-17.0% | | |
| | | | | | | Risk-free rate | | 3.64%-3.67% | | |
| | | | | | | Expected volatility | | 28.0 | % | |
| Seller phantom equity awards | | $ | 3,328 | | Market approach | Internal rate of return | | | 19.7 | % | |
The following table summarizes the valuation techniques and significant unobservable inputs utilized in determining fair values for the Company's investments that are categorized as Level *3* at *December 31, 2024*:
| Categories | | Fair Value | | Valuation Techniques | Unobservable Inputs | | Input Value(s) | | |
| Limited liability investment, at fair value | | $ | 2,859 | | Market approach | Valuation multiples | | 1.0x - 9.0x | | |
| Contingent consideration | | $ | 2,725 | | Option-based income approach | Discount rate | | | 8.25 | % | |
| | | | | | | Risk-free rate | | 4.96 | % | |
| | | | | | | Expected volatility | | 9.0 | % | |
**Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis**
Goodwill and indefinite-lived intangible assets are recorded at carrying value, and, if impaired, are adjusted to fair value using Level *3* inputs. Refer toNote *8*, "Goodwill" andNote *9*, "Intangible Assets"for further information regarding the process of determining the fair value of goodwill and indefinite-lived intangible assets, respectively, and the impairment charges recorded for the years ended *December 31, 2025*and*December 31, 2024*.
As further discussed inNote *4*, "Acquisitions,"the Company acquired several companies during *2025* and *2024* and allocated the purchase price of these various acquisitions to the assets acquired and liabilities assumed. The fair values of intangible assets associated with the acquisitions were determined to be Level *3* under the fair value hierarchy.
The following tables summarizethe valuation techniques and significant unobservable inputs utilized in determining fair values for these Level *3* measurements at the respective acquisition dates:
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
Customer Relationships (using the multi-period excess earnings valuation technique):
| | Acquisition Date | | Fair Value (in thousands) | | | Unobservable Inputs | | |
| | | | | | | | Growth rate | | | Attrition rate | | | Discount rate | | |
| Bud's Plumbing | March 14, 2025 | | $ | 500 | | | | 3.0 | % | | | 30.0 | % | | | 18.0 | % | |
| Roundhouse | July 1, 2025 | | $ | 11,000 | | | | 9.0 | % | | | 10.0 | % | | | 21.0 | % | |
| Advanced Plumbing | August 1, 2025 | | $ | 1,100 | | | | 3.0 | % | | | 15.0 | % | | | 17.0 | % | |
| Southside Plumbing | August 14, 2025 | | $ | 1,000 | | | | 5.0 | % | | | 20.0 | % | | | 15.0 | % | |
| Image Solutions | September 26, 2024 | | $ | 11,100 | | | | 3.0 | % | | | 2.0 | % | | | 25.0 | % | |
Trade Name (using the relief from royalty valuation technique):
| | Acquisition Date | | Fair Value (in thousands) | | | Unobservable Inputs | | |
| | | | | | | | Royalty rate | | | Discount rate | | |
| Bud's Plumbing | March 14, 2025 | | $ | 3,100 | | | | 5.0 | % | | | 17.0 | % | |
| Roundhouse | July 1, 2025 | | $ | 1,220 | | | | 1.5 | % | | | 20.0 | % | |
| Advanced Plumbing | August 1, 2025 | | $ | 1,600 | | | | 3.0 | % | | | 16.0 | % | |
| Southside Plumbing | August 14, 2025 | | $ | 1,100 | | | | 3.0 | % | | | 14.0 | % | |
| Image Solutions | September 26, 2024 | | $ | 1,500 | | | | 2.0 | % | | | 25.0 | % | |
**Assets and Liabilities Not Carried at Fair Value**
The carrying amounts reported in the consolidated balance sheets approximate fair values for cash and cash equivalents, restricted cash, short-term investments and certain other assets and other liabilities because of their short-term nature.The fair values of the Company's bank loans,which are reported as debt in the consolidated balance sheets, are derived from quoted market prices ofindustrial bonds with similar maturities and arecategorized within Level *2* of the fair value hierarchy.The estimated fair value of bank loans was $57.3million and$45.6 millionas of *December 31, 2025*and*December 31, 2024*, respectively.
**NOTE 24RELATED PARTIES**
Related party transactions, including services provided to or received by the Company's subsidiaries, are measured in part by the amount of consideration paid or received as established and agreed by the parties. Except where disclosed elsewhere in these consolidated financial statements, the following is a summary of related party relationships and transactions.
**Argo Management Group, LLC**
The Company acquired Argo Management in *April 2016.*Argo Management's primary business is to act as Managing Member of Argo Holdings. At *December 31, 2025*and *December 31, 2024*, each of the Company, John T. Fitzgerald ("Fitzgerald"), the Company's Chief Executive Officer and President, and certain of Fitzgeralds immediate family members owns equity interests in Argo Holdings, all of which interests were acquired prior to the Companys acquisition of Argo Management. Subject to certain limitations, Argo Holdings' governing documents require all individuals and entities owning an equity interest in Argo Holdings to fund upon request his/her/its pro rata share of any funding requirements of Argo Holdings up to an aggregate maximum amount equal to his/her/its total capital commitment (each request for funds being referred to as a "Capital Call"). Argo Holdings made *no* Capital Calls during the years ended *December 31, 2025*and *December 31, 2024*.
**Preferred Stock Private Placements**
As further described inNote *18*"Redeemable Preferred Stock":
| | | On September 24, 2024, the Company closed on a private placement for aggregate proceeds totaling $8.3 million, resulting from the sale and issuance of 330,000 shares of Class B Preferred Stock. Fitzgerald, oneof Fitzgeralds immediate family members, certain members of the Company's Board of Directors and members of the KSX Advisory Boardinvested a total of$5.2millionin the Class BPreferred Stock private placement transaction. | |
| | | In February 2025, the Company closed on a private placement for aggregate proceeds totaling $6.0 million, resulting from the sale and issuance of 240,000 shares of Class CPreferred Stock. Certain members of the Company's Board of Directors andoneof Fitzgeralds immediate family membersinvested a total of$3.7 millionin the Class CPreferred Stock private placement transaction. | |
| | | On May 8, 2025, the Company closed on a private placement for aggregate proceeds totaling $2.0 million, resulting from the sale and issuance of 80,000 shares of Class DPreferred Stock. Certain members of the Company's Board of Directorsinvested a total of$2.0 millionin the Class DPreferred Stock private placement transaction. | |
**VA Lafayette**
On *August 16, 2024,*the Company closed on the sale of 100% of the membership interests in VA Lafayette to a *third*-party, who subsequently invested in the Company's private placement transaction that closed on*September 24, 2024*and is a current holder of the Companys Class B Preferred Stock(refer to Note *5*, "Discontinued Operations,"for further detail of the sale of VA Lafayette andNote *18*, "Redeemable Preferred Stock,"for further detail of the private placement). The Company determined the sale was an arms-length transaction based upon the purchase price paid compared to the pricing of similar *third*-party transactions, and given the fact that the terms of the sale were negotiated before the private placement was contemplated.
**Seller Note****Exchange for Common Stock**
As part of the acquisition of Bud's Plumbing on *March 14, 2025,*theCompany entered into a $1.25 million promissory note("KPH Note"), withthe seller of Bud's Plumbing to partially finance theacquisition of Bud's Plumbing. On*August 7, 2025,*the balance of the KPH Note of approximately $1.2 million was repaid in full to the seller of Bud's Plumbing in exchange82,737shares of Kingswaycommon stock issued at $13.90 per share.The selleris a currentemployee of Bud's Plumbing.
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KINGSWAY FINANCIAL SERVICES INC
Notes to Consolidated Financial Statements
**Seller Notes Payable**
As part of the acquisition of Advanced Plumbing on *August 1, 2025,*theCompany entered into a $0.5 million promissory note (the "AAA Note"), withthe seller of Advanced Plumbing to partially finance theacquisition of Advanced Plumbing. The selleris a currentemployee of Advanced Plumbing. The AAA Notematures on *August**1,* *2030,* requiresquarterlypayments of interest andhas an annual fixed interest rate of6.00%.
As part of the acquisition of Southside Plumbing on *August 14, 2025,*theCompany entered into a $0.5 million promissory note(the "SouthsideNote"), withthe seller of Southside Plumbing to partially finance theacquisition of Southside Plumbing. The selleris a currentemployee of Southside Plumbing. The SouthsideNotematures on *August**1,* *2030,* requiresquarterlypayments of interest andhas an annual fixed interest rate of6.00%.
**Amounts Payable to Employees**
The Company had amounts payable to certain employees who are related parties, primarily representing reimbursable expenses totaling $0.4million at*December 31, 2025*. These employees includemanagement personnel at Advanced Plumbingand Southside Plumbing. All amounts are non-interest-bearingand were settled in cash within the normal course of business.
**Common Stock Private Placement**
As further described inNote *20*, "Shareholders' Equity,"on *June 24, 2025,*the Company entered into aPurchase Agreementwith certain *third*-partiesfor aggregate gross proceeds of$15.7 million, resulting from the sale of 1,336,264 shares of its Common Stock in a private placement transaction. Blue Riband FundLP invested$3.0millionin the CommonStock private placementtransaction. Mirabella Financial Services LLP acts as the Investment Manager for Blue Riband Fund LP and is a shareholder known by the Company to be a beneficial owner of more than 5% of the Companys outstanding common shares.
**Office Leases**
Roundhouse leases its primary office space from an entity owned by the sellers of Roundhouse, *one* of whichis also a current employee of Roundhouse.The lease commenced on *July 1, 2025*and provides for monthly rent payments totaling $5.3 million overa term of 10years.****Lease payments are considered to be at rates consistent with those the Company believes could be obtained from an unrelated *third* party for similar space and terms.For the year *December 31, 2025*, total lease expense of$0.3million was recognized related to this office lease.
Advanced Plumbingleases its primary office space from an entity owned by the seller of Advanced Plumbing, who is also a current employee of Advanced Plumbing.The lease commenced on *August 1, 2025*and provides for monthly rent payments totaling $0.7 million overa term of 7 years.****Lease payments are considered to be at rates consistent with those the Company believes could be obtained from an unrelated *third* party for similar space and terms.For the year *December 31, 2025*, total lease expense of less than$0.1 million was recognized related to this office lease.
Southside Plumbing leases its primary office space froman entity owned by acurrent employee of Southside Plumbing.The lease commenced on *August 14, 2025*and provides for monthly rent payments totaling $0.5million overa term of 7 years.****Lease payments are considered to be at rates consistent with those the Company believes could be obtained from an unrelated *third* party for similar space and terms.For the year *December 31, 2025*, total lease expense of less than $0.1 million was recognized related to this office lease.
**NOTE 25COMMITMENTS AND CONTINGENCIES**
| (a) | Legal proceedings: | |
In *May 2016,*Aegis Security Insurance Company ("Aegis") filed a complaint for breach of contract and declaratory relief against the Company in the Eastern District of Pennsylvania alleging, among other things, that the Company breached a contractual obligation to indemnify Aegis for certain customs bond losses incurred by Aegis under the indemnity and hold harmless agreements provided by the Company to Aegis for certain customs bonds reinsured by Lincoln General Insurance Company ("Lincoln General") during the period of time that Lincoln General was a subsidiary of the Company. Lincoln General was placed into liquidation in *November 2015*and Aegis subsequently invoked its rights to indemnity under the indemnity and hold harmless agreements.Effective *January 20, 2020,*Aegis and the Company entered into a Settlement Agreement with respect to such litigation pursuant to which the Company agreed to pay Aegis a *one*-time settlement amount of $0.9 million, and to reimburse Aegis for 60% of future losses that Aegis *may*sustain in connection with such customs bonds, up to a maximum reimbursement amount of $4.8 million. From *2020* through *2023,*the Company made reimbursement payments to Aegis of $1.5million in connection with the Settlement Agreement. During*2025* and*2024*, the Company made reimbursement payments to Aegis of$0.7million and $0.2million, respectively,in connection with the Settlement Agreement, which is includedin general and administrative expenses in its consolidated statements of operations for the years ended *December 31, 2025*and*December 31, 2024*, respectively.No liability wasrecorded in the consolidated financial statements at*December 31, 2025*and*December 31, 2024*.
TheCompany's obligation tomake reimbursement payments to Aegis terminatedon *June 30, 2025.*
| (b) | Collateral pledged and restricted cash: | |
The Company also has restricted cash of$8.0 million and$7.6 million at *December 31, 2025*and *December 31, 2024*, respectively. Included in restricted cash are:
| | | $7.4million and $6.8million at December 31, 2025 and December 31, 2024, respectively, held as deposits by IWS, Geminus, PWI, Ravix and CSuite; | |
| | | $0.2 million at December 31, 2025 and December 31, 2024, on deposit with state regulatory authorities; and | |
| | | $0.3 million and $0.7 million at December 31, 2025 and December 31, 2024, respectively, pledged to third-parties as deposits or to collateralize liabilities. Collateral pledging transactions are conducted under terms that are common and customary to standard collateral pledging and are subject to the Company's standard risk management controls. | |
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KINGSWAY FINANCIAL SERVICES INC.
**Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure**
None
**Item 9A. Controls and Procedures**
**Evaluation of Disclosure Controls and Procedures**
We carried out an evaluation required by the Exchange Act, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SECs rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding requireddisclosure.
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
**Management's 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 concluded that our internal control over financial reporting was effective as of December 31, 2025 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. In addition, the effectiveness of our internal control over financial reporting as of December 31, 2025, has been audited by Plante & Moran, PLLC, an independent registered public accounting firm, as stated in their attestation report. Managements Report on Internal Control Over Financial Reporting and Plante & Moran, PLLCs Report of Independent Registered Public Accounting Firm are included in Item 8 of this Annual Report on Form 10-K and are incorporated into this Item 9A by reference.
**Changes in Internal Control over Financial Reporting**
Beginning in fiscal year 2025 we integrated Image Solutions, which we acquired in September 2024, into our overall internal control over financial reporting process. Other than this integration, therehave been no changes in the Company's internal control over financial reporting during the period ending December 31, 2025, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
**Item 9B. Other Information**
During the *three* months ended*December 31, 2025*,nodirector or officer (as defined in Rule*16a*-*1*(f) under the Exchange Act) of the Company adopted, modified or terminated a Rule*10b5*-*1*trading arrangement or non-Rule*10b5*-*1*trading arrangement (as each term is defined in Item*408*of Regulation S-K).
**Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections**
Not Applicable
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KINGSWAY FINANCIAL SERVICES INC.
**PART III.**
**Item 10. Directors, Executive Officers, and Corporate Governance**
The information required by this Item, including the information required by Item *408*(b) of Regulation S-K related to our insider trading policies and procedures, is incorporated herein by reference to the Proxy Statement for our2026Annual Meeting of Shareholders, which will be filed with the SEC *no* later than *120* days after the end of our fiscal year ended *December 31, 2025*.
We have adopted a Code of Business Conduct and Ethics that is applicable to all employees, including our chief executive officer, chief financial officer and other senior financial personnel, as well as our directors. A copy of the Code of Business Conduct and Ethics is posted in the "Corporate Governance" section of our website at www.kingsway-financial.com. Any future amendments to the Code of Business Conduct and Ethics and any grant of waiver from a provision of the code requiring disclosure under applicable SEC rules will be disclosed in the "Corporate Governance" section of our website.
**Item 11. Executive Compensation**
The information required by this Item is incorporated herein by reference to the Proxy Statement for our2026 Annual Meeting of Shareholders, which will be filed with the SEC *no* later than *120* days after the end of our fiscal year ended *December 31, 2025*.
**Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters**
The information required by this Item is incorporated herein by reference to the Proxy Statement for our2026 Annual Meeting of Shareholders, which will be filed with the SEC no later than 120 days after the end of our fiscal year ended December 31, 2025.
**Item 13. Certain Relationships and Related Transactions, and Director Independence**
The information required by this Item is incorporated herein by reference to the Proxy Statement for our2026Annual Meeting of Shareholders, which will be filed with the SEC no later than 120 days after the end of our fiscal year ended December 31, 2025.
**Item 14. Principal Accounting Fees and Services**
The information required by this Item is incorporated herein by reference to the Proxy Statement for our2026 Annual Meeting of Shareholders, which will be filed with the SEC no later than 120 days after the end of our fiscal year ended December 31, 2025.
**Part IV**
**Item 15. Exhibits, Financial Statement Schedules**
*(a) Documents filed as part of this Report*
(1) Financial Statements. We have filed the following documents, which are included in Part II, Item8 of this2025 Annual Report on Form 10-K.
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flow
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules. The following financial statement schedules are filed as a part hereof along with the related reports of the Independent Registered Public Accounting Firm included in Part II, Item8. Schedules not listed here have been omitted because they are not applicable or the required information is included in the Consolidated Financial Statements.
Schedule ICondensed Financial Information of the Registrant (Parent Company)
(3) Exhibits. The exhibits listed in the accompanying "Index to Exhibits" that follow the signature pages of this report are filed or incorporated by reference as part of this Form 10-K.
*(b) Exhibits.*Included in Item 15(a)(3) above
*(c) Financial Statement Schedules.*Included in Item 15(a)(2) above
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KINGSWAY FINANCIAL SERVICES INC.
**SCHEDULE I. Condensed Financial Information of the Registrant (Parent Company)**
**Parent Company Balance Sheets**
| (in thousands) | | December 31, 2025 | | | December 31, 2024 | | |
| | | | | | | | | | |
| Assets | | | | | | | | | |
| Investments in subsidiaries | | $ | 6,923 | | | $ | 12,851 | | |
| Cash and cash equivalents | | | 70 | | | | 56 | | |
| Other assets | | | 24,807 | | | | 3,992 | | |
| Total Assets | | $ | 31,800 | | | $ | 16,899 | | |
| Liabilities and Shareholders' Equity | | | | | | | | | |
| Liabilities: | | | | | | | | | |
| Accrued expenses and other liabilities | | $ | 381 | | | $ | 236 | | |
| Total Liabilities | | | 381 | | | | 236 | | |
| Redeemable preferred stock | | | 16,250 | | | | 8,250 | | |
| Shareholders' Equity: | | | | | | | | | |
| Common stock | | | 296 | | | | 281 | | |
| Additional paid-in capital | | | 394,848 | | | | 376,503 | | |
| Treasury stock, at cost | | | (6,545 | ) | | | (6,200 | ) | |
| Accumulated deficit | | | (373,370 | ) | | | (361,453 | ) | |
| Accumulated other comprehensive loss | | | (60 | ) | | | (718 | ) | |
| Shareholders' equity attributable to common shareholders | | | 15,169 | | | | 8,413 | | |
| Total Liabilities, Redeemable preferred stock and Shareholders' Equity | | $ | 31,800 | | | $ | 16,899 | | |
See accompanying report of independent registered accounting firm.
*80*
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KINGSWAY FINANCIAL SERVICES INC.
**SCHEDULE I. Condensed Financial Information of the Registrant (Parent Company)**
**Parent Company Statements of Operations**
| (in thousands) | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Other revenue (expenses), net: | | | | | | | | | |
| Net investment income | | $ | 21 | | | $ | | | |
| General and administrative expenses | | | (2,641 | ) | | | (98 | ) | |
| Non-operating other expense | | | (124 | ) | | | (1 | ) | |
| Total other expenses, net | | | (2,744 | ) | | | (99 | ) | |
| Loss from continuing operations before income tax benefit and equity in loss of subsidiaries | | | (2,744 | ) | | | (99 | ) | |
| Income tax benefit | | | (365 | ) | | | (439 | ) | |
| Equity in loss of subsidiaries | | | (7,873 | ) | | | (8,635 | ) | |
| Net loss | | $ | (10,252 | ) | | $ | (8,295 | ) | |
See accompanying report of independent registered accounting firm.
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KINGSWAY FINANCIAL SERVICES INC.
**SCHEDULE I. Condensed Financial Information of the Registrant (Parent Company)**
**Parent Company Statements of Comprehensive Loss**
| (in thousands) | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| | | | | | | | | | |
| Net loss | | $ | (10,252 | ) | | $ | (8,295 | ) | |
| Other comprehensive income, net of taxes(1): | | | | | | | | | |
| Unrealized losses on available-for-sale investments: | | | | | | | | | |
| Unrealized losses arising during the period | | | | | | | | | |
| Reclassification adjustment for amounts included in net loss | | | | | | | | | |
| Other comprehensive loss - parent only | | | | | | | | | |
| Equity in other comprehensive income of subsidiaries | | | 658 | | | | 861 | | |
| Other comprehensive income, net of taxes(1): | | | 658 | | | | 861 | | |
| Comprehensive loss | | $ | (9,594 | ) | | $ | (7,434 | ) | |
(*1*) Net of income tax benefitof $0 and $0 in*2025* and *2024*, respectively
See accompanying report of independent registered accounting firm.
*82*
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KINGSWAY FINANCIAL SERVICES INC.
**SCHEDULE I. Condensed Financial Information of the Registrant (Parent Company)**
**Parent Company Statements of Cash Flows**
| (in thousands) | | Years ended December 31, | | |
| | | 2025 | | | 2024 | | |
| Cash provided by (used in): | | | | | | | | | |
| Operating activities: | | | | | | | | | |
| Net loss | | $ | (10,252 | ) | | $ | (8,295 | ) | |
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | | | | | | | | | |
| Equity in net loss of subsidiaries | | | 7,873 | | | | 8,635 | | |
| Stock-based compensation expense, net of forfeitures | | | 717 | | | | (1,459 | ) | |
| Change in other assets | | | (20,815 | ) | | | 1,347 | | |
| Change in accrued expenses and other liabilities | | | (16 | ) | | | 57 | | |
| Other, net | | | 119 | | | | | | |
| Net cash (used in) provided by operating activities | | | (22,374 | ) | | | 285 | | |
| Investing activities: | | | | | | | | | |
| Net cash from investing activities | | | | | | | | | |
| Financing activities: | | | | | | | | | |
| Proceeds from issuance of common stock, net | | | 15,602 | | | | | | |
| Proceeds from issuance of preferred stock | | | 8,000 | | | | 8,250 | | |
| Cash paid for repurchase of common stock | | | (345 | ) | | | (2,504 | ) | |
| Payment of preferred stock dividends | | | (1,024 | ) | | | (13 | ) | |
| Dividends from subsidiary | | | 155 | | | | | | |
| Capital contributions to subsidiaries | | | | | | | (8,020 | ) | |
| Net cash provided by (used in) financing activities | | | 22,388 | | | | (2,287 | ) | |
| Net increase (decrease) in cash and cash equivalents | | | 14 | | | | (2,002 | ) | |
| Cash and cash equivalents at beginning of period | | | 56 | | | | 2,058 | | |
| Cash and cash equivalents at end of period | | $ | 70 | | | $ | 56 | | |
See accompanying report of independent registered accounting firm.
*83*
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KINGSWAY FINANCIAL SERVICES INC.
**Item 16.****Form 10-K Summary**
None.
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KINGSWAY FINANCIAL SERVICES INC.
**EXHIBIT INDEX**
|
Exhibit |
Description |
|
|
2.1 |
Stock Purchase Agreement By and Among Premier Holdings, LLC, Advantage Auto MGA, LLC, Mendota Insurance Company, Kingsway America Inc. and Kingsway Financial Services Inc., Dated as of July 16, 2018(included as Exhibit 2.1 to the Form 8-K, filed July 20, 2018, and incorporated herein by reference). |
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2.2 |
Stock Purchase Agreement, dated as of October 12, 2020, by and among Kingsway Warranty Holdings LLC, Kingsway America Inc., PWI Holdings, Inc., and ADESA Dealer Services, LLC(included as Exhibit 2.1 to Form 8-K, filed October 13, 2020, and incorporated herein by reference). |
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|
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2.3 |
Stock Purchase Agreement, dated July 29, 2022, by and among Professional Warranty Service Corporation, a Virginia corporation (the Company) Tyler Gordy, an individual (Gordy) Professional Warranty Services LLC, a Delaware limited liability company (Parent and together with Gordy, each a Seller and collectively Sellers) and PCF Insurance Services of the West, LLC, a Delaware limited liability company (Buyer) (included as Exhibit 2.1 to the Form 10-Q, filed August 4, 2022, and incorporated herein by reference). |
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|
|
3.1 |
Certificate of Incorporation of Kingsway Financial Services Inc.(included as Exhibit 3.1 to the Form 8-K, filed September 27, 2024, and incorporated herein by reference). |
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3.2 |
By-laws of Kingsway Financial Services Inc.(included as Exhibit 3.2 to the Form 8-K, filed December 31, 2018, and incorporated herein by reference). |
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3.3 |
Class B Certificate of Designations (included as Exhibit 3.1 to the Form 8-K, filed September 27, 2024, and incorporated herein by reference). |
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3.4 |
Class C Certificate of Designations(included as Exhibit 3.1 to the Form 8-K, filed February 18, 2025, and incorporated herein by reference). |
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3.5 |
Class D Certificate of Designations(included as Exhibit 3.1 to the Form 8-K, filed May 16, 2025, and incorporated herein by reference). |
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|
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4.1 |
Indenture dated May 22, 2003 between Kingsway America Inc., Kingsway Financial Services Inc., and Wilmington Trust Company(included as Exhibit 4.6 to the Form 10-K, filed March 30, 2012, and incorporated herein by reference). |
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4.2 |
Form of Stock Certificate(included as Exhibit 4.1 to the Form 8-K, filed December 31, 2018, and incorporated herein by reference). |
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|
|
10.1 |
Kingsway Financial Services Inc. 2013 Equity Incentive Plan(included as Schedule B to the Definitive Proxy Statement on Schedule 14A filed with the SEC on April 11, 2013, and incorporated herein by reference). * |
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|
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10.2 |
Form of Subscription Agreement(included as Exhibit 10.1 to the Form 8-K, filed December 27, 2013, and incorporated herein by reference). |
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|
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10.3 |
Registration Rights Agreement, dated February 3, 2014, by and among the Company and the other parties signatory thereto(included as Exhibit 10.2 to the Form 8-K, filed February 4, 2014, and incorporated herein by reference). |
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10.4 |
Kingsway America Inc. Employee Share Purchase Plan(included as Schedule B to the Definitive Proxy Statement on Schedule 14A filed with the SEC on April 30, 2014 and incorporated herein by reference). * |
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|
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|
|
10.5 |
Registration Rights Agreement, dated as of November 16, 2016 by and among the Company, GrizzlyRock Institutional Value Partners, LP and W.H.I. Growth Fund Q.P., L.P.(included as Exhibit 10.4 to Form 8-K, filed November 16, 2016, and incorporated herein by reference). |
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10.6 |
Registration Rights Agreement, dated as of November 16, 2016 by and between the Company and Yorkmont Capital Partners, LP.(included as Exhibit 10.5 to Form 8-K, filed November 16, 2016, and incorporated herein by reference). |
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10.7 |
Amendment No. 1 to the Kingsway Financial Services Inc. 2013 Equity Incentive Plan(included as Exhibit 10.1 to Form 10-Q, filed August 8, 2018, and incorporated herein by reference). |
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10.8 |
Offer Letter, dated September 5, 2018, between the Company and John T. Fitzgerald(included as Exhibit 10.2 to Form 8-K, filed September 10, 2018, and incorporated herein by reference). |
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10.9 |
Severance Agreement, dated September 5, 2018, between the Company and John T. Fitzgerald(included as Exhibit 10.3 to Form 8-K, filed September 10, 2018, and incorporated herein by reference). |
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10.10 |
Form of Indemnification Agreement for Directors and Officers(included as Exhibit 10.5 to Form 8-K, filed September 10, 2018, and incorporated herein by reference). |
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10.11 |
Employment Offer Letter, dated as of October 23, 2019, by and between Kent A. Hansen and Kingsway America Inc.(included as Exhibit 10.2 to Form 8-K, filed February 28, 2020, and incorporated herein by reference). |
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KINGSWAY FINANCIAL SERVICES INC.
|
10.12 |
Kingsway Financial Services Inc. 2020 Equity Incentive Plan (included as Schedule A to the Definitive Proxy Statement on Schedule 14A filed with the SEC on August 20, 2020, and incorporated herein by reference). * |
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10.13 |
Loan and Security Agreement, dated as of December 1, 2020, among Kingsway Warranty Holdings LLC, Trinity Warranty Solutions LLC, Geminus Holding Company, Inc., IWS Acquisition Corporation and PWI Holdings, Inc., as Borrowers, the other Loan Parties party thereto, and CIBC Bank USA, as Lender and as Issuing Lender(included as Exhibit 10.1 to Form 8-K, filed December 2, 2020, and incorporated herein by reference). |
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10.14 |
Letter Agreement, effective as of December 31, 2020, by and among Kingsway Warranty Holdings LLC, Trinity Warranty Solutions LLC, Geminus Holding Company, Inc., IWS Acquisition Corporation, and PWI Holdings, Inc., as Borrowers, the other Loan Parties party thereto, and CIBC Bank USA, as Lender.(included as Exhibit 10.1 for Form 8-K, filed December 2, 2020, and incorporated herein by reference). |
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10.15 |
Form of Restricted Stock Agreement.*(included as Exhibit 10.29 to Form 10-K, filed March03, 2021, and incorporated herein by reference). |
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10.16 |
Stock Purchase Agreement by and among, Ravix Acquisition, LLC, The Shareholders of Ravix Financial, Inc., Ravix Financial, Inc., Kingsway America, Inc. (solely with respect to Section 9.21), and Dan Saccani, as the Seller Representative, dated October 1, 2021 (included as Exhibit 10.1 to Form 8-K, filed October 4, 2021, and incorporated herein by reference). |
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10.17 |
Membership Interest Purchase Agreement by and among CSuite Acquisition, LLC, Arthur J. Cohen and Beth Garden, as Trustees of the Cohen Garden Trust dated July 13, 2015, Realized Potential, LLC, and Arthur J. Cohen, as the Sellers Representative, dated November 1, 2022 (included as Exhibit 10.1 to the Form 8-K, filed November 2, 2022, and incorporated herein by reference). |
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10.18 |
Asset purchase agreement by and among Pegasus acquirer LLC, as buyer, Secure Nursing Service, Inc., as seller and Rafael Gofman, Ella Gofman And Zhanna Weiss, as the shareholders (included as Exhibit 10.1 to the Form 8-K, filed November 21, 2022, and incorporated herein by reference). |
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10.19 |
Second Amendment toLoan and Security Agreement, dated as of February 28, 2023, among Kingsway Warranty Holdings LLC, Trinity Warranty Solutions LLC, Geminus Holding Company, Inc., IWS Acquisition Corporation and PWI Holdings, Inc., as Borrowers, the other Loan Parties party thereto, and CIBC Bank USA, as Lender and as Issuing Lender. (included as Exhibit 10.24 to form 10-K, Filed March 8, 2023, and incorporated herein by reference). |
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10.20 |
Stock Purchase Agreement by and among Thomas J. Corney and TC Family 2023 LLC, as Sellers, and DDI Acquisition LLC, as Buyer, dated October 26, 2023 (included as Exhibit 10.1 to the Form 8-K, filed October 30, 2023, and incorporated herein by reference). |
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10.21 |
Third Amendment to Loan and Security Agreement, dated May 24, 2024, by and among CIBC Bank USA, Kingsway Warranty Holdings LLC, Trinity Warranty Solutions LLC, Geminus Holding Company, Inc., IWS Acquisition Corporation, PWI Holdings, Inc. and the other Loan Parties party thereto (included as Exhibit 10.1 to the Form 8-K, filed May 29, 2024, and incorporated herein by reference). |
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|
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10.22 |
Form of Subscription Agreement - Legal Entity (included as Exhibit 10.1 to the Form 8-K, filed September 27, 2024, and incorporated herein by reference). |
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10.23 |
Form of Subscription Agreement - Individual Investor (included as Exhibit 10.2 to the Form 8-K, filed September 27, 2024, and incorporated herein by reference). |
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10.24 |
Membership Interest Purchase Agreement, dated as of September 26, 2024. by and among Steel Bridge Acquisition LLC, Image Solutions, LLC, Post IS Holdings, LLC and Garrett S. Williams* (included as Exhibit 10.3 to the Form 8-K, filed September 27, 2024, and incorporated herein by reference). |
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10.25 |
Credit Agreement, dated as of September 26, 2024, between Image Solutions, LLC, Steel Bridge Acquisition LLC and Avidbank* (included as Exhibit 10.4 to the Form 8-K, filed September 27, 2024, and incorporated herein by reference). |
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10.26 |
Form of Subscription Agreement- Legal Entity(included as Exhibit 10.1 to the Form 8-K, filed February 18, 2025, and incorporated herein by reference). |
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10.27 |
Form of Subscription Agreement- Individual Investor(included as Exhibit 10.2 to the Form 8-K, filed February 18, 2025, and incorporated herein by reference). |
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10.28 |
Form of Subscription Agreement - Legal Entity(included as Exhibit 10.1 to the Form 8-K, filed May 16, 2025, and incorporated herein by reference). |
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10.29 |
Form of Subscription Agreement - Individual Investor(included as Exhibit 10.2 to the Form 8-K, filed May 16, 2025, and incorporated herein by reference). |
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10.30 |
Stock Purchase Agreement, dated June 24, 2025, by and among the Company and the purchasers named there in (included as Exhibit 10.1 to the form 8-K, filed June 25, 2025, and incorporated herein by reference). |
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10.31 |
Stock Purchase Agreement, dated July 1, 2025, by and among Longhorns Acquisition LLC, Armando Gonzales and Lee Hudson (included as Exhibit 10.1 to the form 8-K, filed July 7, 2025, and incorporated herein by reference). |
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10.32 |
Credit Agreement, dated July 1, 2025, by and between Roundhouse Electric & Equipment Co., Inc., Longhorns Acquisition LLC and Main Street Bank.(included as Exhibit 10.2 to the Form 8-K, filed July 7, 2025, and incorporated herein by reference). |
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14 |
Kingsway Financial Services Inc. Code of Business Conduct & Ethics Inc. Code of Business Conduct & Ethics(included as Exhibit 14 to form 10-K, Filed March 16, 2018, and incorporated herein by reference). |
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19 |
Disclosure, Securities Trading and Confidentiality Policy. |
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21 |
Subsidiaries of Kingsway Financial Services Inc. |
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KINGSWAY FINANCIAL SERVICES INC.
|
23 |
Consent of Plante & Moran, PLLC |
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31.1 |
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act |
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31.2 |
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act |
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32.1 |
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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32.2 |
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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97.1 |
Incentive Compensation Clawback Policy (included as Exhibit 97.1 to the Form 10-K, filed March 5, 2024, and incorporated herein by reference). |
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101.INS |
Inline XBRL Instance Document |
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101.SCH |
Inline XBRL Taxonomy Extension Schema |
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101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase |
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101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase |
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101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase |
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101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase |
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104 |
Cover Page Interactive Data File (embedded within the Inline XBRL Document and include in Exhibit 101) |
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* Management contract or compensatory plan or arrangement.
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KINGSWAY FINANCIAL SERVICES INC.
**SIGNATURES**
Pursuant to the requirements of Section13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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KINGSWAY FINANCIAL SERVICES INC. |
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Date: |
March 12, 2026 |
By: |
/s/ John T. Fitzgerald |
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Name: |
John T. Fitzgerald |
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Title: |
Chief Executive Officer, President and Director |
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(Principal Executive Officer) |
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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 and on the dates indicated.
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/s/ John T. Fitzgerald John T. Fitzgerald |
Chief Executive Officer, President and Director |
March 12, 2026 |
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/s/ Kent A. Hansen Kent A. Hansen |
Chief Financial Officer and Executive Vice President (principal financial officer and principal accounting officer) |
March 12, 2026 |
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/s/ Terence Kavanagh Terence Kavanagh |
Chairman of the Board and Director |
March 12, 2026 |
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/s/ Gregory Hannon Gregory Hannon |
Director |
March 12, 2026 |
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/s/ Joshua S. Horowitz Joshua S. Horowitz |
Director |
March 12, 2026 |
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/s/ Doug Levine Doug Levine |
Director |
March 12, 2026 |
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/s/ Adam Patinkin Adam Patinkin |
Director |
March 12, 2026 |
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/s/ Corissa Porcelli Corissa Porcelli |
Director |
March 12, 2026 |
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/s/Joseph Stilwell Joseph Stilwell |
Director |
March 12, 2026 |
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