Kingsway(KFS) - 2025 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements This section presents Kingsway Financial Services Inc.'s unaudited consolidated financial statements for Q1 2025, including balance sheets, income statements, cash flows, and detailed accounting notes Consolidated Balance Sheets As of March 31, 2025, total assets increased to $192,117 thousand from $186,616 thousand, with liabilities rising and shareholders' equity decreasing Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $192,117 | $186,616 | | Total Investments | $41,265 | $41,337 | | Goodwill | $57,430 | $56,524 | | Intangible assets, net | $41,883 | $40,049 | | Total Liabilities | $170,650 | $168,314 | | Deferred service fees | $84,336 | $83,108 | | Bank loans | $45,001 | $44,128 | | Total Shareholders' Equity | $7,217 | $10,052 | Consolidated Statements of Operations For Q1 2025, the company reported a net loss of $3,092 thousand, increasing from $2,328 thousand in Q1 2024, due to higher operating expenses despite revenue growth Q1 2025 vs Q1 2024 Operating Results (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues | $28,349 | $26,160 | | Total Operating Expenses | $29,063 | $25,393 | | Operating (Loss) Income | $(714) | $767 | | Loss from Continuing Operations | $(3,092) | $(2,115) | | Net Loss | $(3,092) | $(2,328) | | Net Loss Attributable to Common Shareholders | $(3,439) | $(2,485) | | Basic and Diluted Loss Per Share | $(0.13) | $(0.09) | Consolidated Statements of Cash Flows In Q1 2025, net cash used in operating activities was $1,798 thousand, a shift from cash provided in Q1 2024, with increased cash used in investing and provided by financing Cash Flow Summary (in thousands) | Cash Flow Activity | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(1,798) | $249 | | Net cash used in investing activities | $(3,182) | $(166) | | Net cash provided by financing activities | $5,804 | $2,354 | Notes to Consolidated Financial Statements This section provides detailed explanations of the company's accounting policies and financial data, including acquisitions, segment disposals, and preferred stock issuances - On March 14, 2025, the Company acquired 100% of M.L.C. Plumbing, LLC (d/b/a Bud's Plumbing) for approximately $4.9 million, as part of the Kingsway Search Xcelerator segment[32] - The disposal of the Leased Real Estate segment was completed with the sale of VA Lafayette on August 16, 2024, with its results now classified as discontinued operations[44][45] - In February 2025, the Company issued 240,000 shares of Class C Preferred Stock for aggregate proceeds of $6.0 million[183] - A subsequent event occurred on May 8, 2025, with the company closing a private placement of 80,000 shares of Class D Preferred Stock for $2.0 million[243] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2025 performance, highlighting a net loss, varied segment operating income, and sufficient liquidity for the next twelve months Segment Operating Income (in thousands) | Segment | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Extended Warranty | $515 | $1,076 | $(561) | | Kingsway Search Xcelerator | $1,743 | $1,343 | $400 | | Total segment operating income | $2,258 | $2,419 | $(161) | - The Extended Warranty segment's operating income fell due to higher claims and administrative expenses at IWS and lower revenue at Geminus[275][277] - The Kingsway Search Xcelerator segment's growth was primarily driven by the inclusion of Image Solutions (acquired Sept 2024) and Bud's Plumbing (acquired Mar 2025)[276][277][278] - The holding company's liquidity was $1.4 million at March 31, 2025, up from $0.9 million at year-end 2024, with management believing liquidity is sufficient for the next 12 months[316][317] Quantitative and Qualitative Disclosures about Market Risk The company is a smaller reporting company and is therefore not required to provide disclosures under this item - As a smaller reporting company defined in Rule 12b-2 of the Exchange Act, the company is exempt from the disclosure requirements of this item[319] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of March 31, 2025, excluding a recent acquisition - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective[323] - Management concluded that as of March 31, 2025, the company's internal control over financial reporting was effective based on the COSO framework[324] - The acquisition of Bud's Plumbing on March 14, 2025, was excluded from the scope of management's assessment of internal control over financial reporting for the quarter[325] PART II - OTHER INFORMATION Legal Proceedings Information regarding legal proceedings is incorporated by reference, detailing a settlement agreement with a remaining maximum reimbursement obligation of $2.9 million - The company has a settlement agreement with Aegis Security Insurance Company with a remaining maximum reimbursement amount of $2.9 million as of March 31, 2025, though the ultimate amount is not reasonably determinable and no liability has been recorded[241] Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors were reported since the 2024 Annual Report[328] Unregistered Sales of Equity Securities and Use of Proceeds The company sold $6.0 million in Class C Preferred Stock via private placement and repurchased $0.3 million in common stock during the quarter - In February 2025, the company issued 240,000 shares of Class C Preferred Stock for $6.0 million in a private placement exempt from registration under Section 4(a)(2) of the Securities Act[331] Share Repurchases for Quarter Ended March 31, 2025 | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 1 - 31, 2025 | 42,900 | $7.99 | | February 1 - 28, 2025 | — | — | | March 1- 31, 2025 | — | — | | Total | 42,900 | $7.99 | Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[336] Mine Safety Disclosures This item is not applicable to the company - Not applicable[336] Other Information No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[337] Exhibits This section lists the exhibits filed with the Form 10-Q, including preferred stock designations, officer certifications, and XBRL data - Exhibits filed include the Class C Certificate of Designations, Subscription Agreements, CEO/CFO certifications, and XBRL data files[339]