UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 2026
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
(State or other jurisdiction of
incorporation or organization)
85-1792291
(I.R.S. Employer
Identification No.)
10 S. Riverside Plaza, Suite 1520, Chicago, IL 60606
(Address of principal executive offices and zip code)
1-312-766-2138
(Registrant's telephone number, including area code)
Common Stock, par value $0.01 per share
New York Stock Exchange
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 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 is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The number of shares, including restricted common shares, outstanding of the registrant's common stock as of May 7, 2026 was 28,946,664.
KINGSWAY FINANCIAL SERVICES INC.
Table Of Contents
PART I - FINANCIAL INFORMATION
3
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 2026 (unaudited) and December 31, 2025
Consolidated Statements of Operations for the Three Months Ended March 31, 2026 and 2025 (unaudited)
4
Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2026 and 2025 (unaudited)
5
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025 (unaudited)
7
Notes to Consolidated Financial Statements (unaudited)
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
33
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
39
ITEM 4. CONTROLS AND PROCEDURES
PART II - OTHER INFORMATION
40
ITEM 1. LEGAL PROCEEDINGS
ITEM 1A. RISK FACTORS
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. MINE SAFETY DISCLOSURES
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
41
SIGNATURES
42
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
(in thousands, except share data)
March 31, 2026
December 31, 2025
(unaudited)
Assets
Current assets:
Cash and cash equivalents
Restricted cash
Investments (including $36,945 and $36,765, respectively, at fair value) (Note 6)
Service fee receivable, net of allowance for credit losses of $1,321 and $1,113, respectively
Other current assets
Total current assets
Deferred contract costs, noncurrent
Property and equipment, net of accumulated depreciation of $2,908 and $2,587, respectively
Goodwill
Intangible assets, net of accumulated amortization of $36,165 and $34,013, respectively
Other assets
Total Assets
Liabilities, Redeemable Preferred Stock, Redeemable Noncontrolling Interest and Shareholders' Equity
Current liabilities:
Accrued expenses and other current liabilities
Deferred service fees
Short-term and current portion of long-term debt
Total current liabilities
Long-term debt (including $13,148 and $13,698, respectively, at fair value) (Note 10)
Other liabilities, noncurrent
Net deferred income tax liabilities
Total Liabilities
Redeemable preferred stock, $0.01 par value; 650,000 authorized, issued and outstanding at March 31, 2026 and December 31, 2025; redemption amount of $16,250 at March 31, 2026 and December 31, 2025
Redeemable noncontrolling interest in consolidated subsidiary
Shareholders' Equity:
Common stock, $0.01 par value; 50,000,000 authorized; 29,651,671 issued at March 31, 2026 and December 31, 2025; and 28,625,744 outstanding at March 31, 2026 and December 31, 2025
Additional paid-in capital
Treasury stock, at cost; 1,025,927 outstanding at March 31, 2026 and December 31, 2025
Accumulated deficit
Accumulated other comprehensive income (loss)
Shareholders' equity attributable to common shareholders
Noncontrolling interests in consolidated subsidiaries
Total Shareholders' Equity
Total Liabilities, Redeemable Preferred Stock, Redeemable Noncontrolling Interest and Shareholders' Equity
See accompanying notes to unaudited consolidated financial statements.
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Three months ended March 31,
2026
2025
Revenue
Cost of services
Gross profit
Selling, general and administrative expenses
Depreciation expense
Operating income (loss)
Other income (expenses), net:
Interest and investment income, net
Interest expense
Amortization and impairment of intangible assets
Other income, net
Total other expenses, net
Loss before income tax benefit
Income tax benefit
Net loss
Less: Net income attributable to:
Redeemable noncontrolling interests in consolidated subsidiaries
Less: Dividends on preferred stock
Net loss attributable to common shareholders
Loss per share attributable to common shareholders:
Basic
Diluted
Weighted-average shares outstanding (in ‘000s):
Consolidated Statements of Comprehensive Loss
(in thousands)
Other comprehensive income, net of taxes(1):
Unrealized gains (losses) on available-for-sale investments:
Unrealized (losses) gains arising during the period
Change in fair value of debt attributable to instrument-specific credit risk:
Unrealized gains arising during the period
Comprehensive loss
Less: comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interests in consolidated subsidiaries
Comprehensive loss attributable to common shareholders
(1) Net of income tax benefit of $0 for the three months ended March 31, 2026 and March 31, 2025.
Consolidated Statements of Shareholders' Equity
Three Months Ended March 31, 2026
Common Stock
Additional Paid-in Capital
Treasury Stock
Accumulated Deficit
Accumulated Other Comprehensive (Loss) Income
Shareholders' Equity Attributable to Common Shareholders
Noncontrolling Interests in Consolidated Subsidiaries
Shares
Amount
Balance, December 31, 2025
Net (loss) income
Preferred stock dividends
Other comprehensive income
Stock-based compensation
Balance, March 31, 2026
Three Months Ended March 31, 2025
Accumulated Other Comprehensive Loss
Balance, December 31, 2024
Repurchases of common stock
Balance, March 31, 2025
Consolidated Statements of Cash Flows
Cash provided by (used in):
Operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense
Stock-based compensation expense
Net realized and unrealized investment gains
Impairment of intangible assets
Deferred income taxes
Other non-cash items
Changes in operating assets and liabilities:
Service fee receivable, net, adjusted for assets acquired in 2025
Deferred contract costs
Other assets, adjusted for assets acquired in 2025
Other, net, adjusted for liabilities acquired in 2025
Net cash used in operating activities
Investing activities:
Proceeds from sales and maturities of fixed maturities
Purchases of fixed maturities
Net working capital settlement and escrow releases related to acquisitions
Acquisition of businesses, net of cash acquired
Net purchases of property and equipment
Other, net
Net cash used in investing activities
Financing activities:
Proceeds from issuance of preferred stock
Cash paid for repurchase of common stock
Payment of preferred stock dividends
Payment of contingent consideration from acquisition
Principal proceeds from debt, net of debt issuance costs of zero in 2026 and $38 in 2025
Principal payments on debt
Net cash (used in) provided by financing activities
Net (decrease) increase in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash at beginning of period
Cash and cash equivalents and restricted cash at end of period
March 31,
Reconciliation of cash and cash equivalents and restricted cash to the consolidated balance sheets:
Cash and cash equivalents and restricted cash per statements of cash flows
Non-cash financing activities:
Notes payable issued for acquisition of businesses, net of discount
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1 BUSINESS
Kingsway Financial Services Inc. (the "Company" or "Kingsway") is a Delaware holding company with operating subsidiaries located in the United States. Kingsway is the only publicly-traded US company employing the Search Fund model to acquire and build great businesses. The Company owns and 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 BASIS OF PRESENTATION
The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements of the Company. In the opinion of management, all adjustments necessary for a fair presentation have been included and are of a normal recurring nature. Interim results are not necessarily indicative of the results that may be expected for the year.
The accompanying unaudited consolidated interim financial statements and footnotes should be read in conjunction with the audited consolidated financial statements and footnotes included within our Annual Report on Form 10-K ("2025 Annual Report") for the year ended December 31, 2025.
The unaudited consolidated interim financial statements include the accounts of the Company and its subsidiaries, as well as certain variable interest entities as further described in Note 6, "Variable Interest Entities," to the consolidated financial statements in the 2025 Annual Report. All material intercompany transactions and balances have been eliminated in consolidation.
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 classifications 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 unaudited consolidated interim financial statements include, but are not limited to, revenue recognition; valuation of fixed maturity investments; 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; fair value assumptions for subsidiary stock-based compensation awards; and valuation of redeemable noncontrolling interest.
Certain prior year amounts have been reclassified to conform to current year presentation. At March 31, 2026, the Company has presented a classified balance sheet. Accordingly, the consolidated balance sheet at December 31, 2025 has been reclassified to present current assets and current liabilities separate from noncurrent assets and liabilities and to combine or further disaggregate certain balance sheet line items. In addition, the prior period consolidated statements of operations has been reclassified to combine certain income statement line items and to present a gross profit subtotal. Such reclassifications had no impact on previously reported net loss or total assets, liabilities, redeemable preferred stock, redeemable noncontrolling interest or shareholders' equity.
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There have been no material changes to our significant accounting policies as reported in our 2025 Annual Report.
NOTE 4 RECENTLY ISSUED ACCOUNTING STANDARDS
(a) Adoption of New Accounting Standards:
Effective January 1, 2026, the Company adopted ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets ("ASU 2025-05"), which amends the guidance on measuring expected credit losses using a probabilistic method and provides a 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. The adoption of ASU 2025-05 did not have an impact on the Company's consolidated financial statements.
(b) Accounting Standards Not Yet Adopted:
In October 2023, the Financial Accounting Standards Board ("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 SEC’s 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 Company’s 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 within the footnotes 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 entity’s definition of those expenses are also required. ASU 2024-03 is effective for public companies with annual periods beginning after 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 September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, 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 and amends 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 Company’s consolidated financial statements. The Company will continue to evaluate the impact of this guidance on its consolidated financial statements.
NOTE 5 ACQUISITIONS
During the three months ended March 31, 2025, the Company incurred acquisition expenses related to business combinations of $0.4 million, which are included in selling, 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 their estimated 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.
The goodwill recognized for each acquisition represents 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.
M.L.C. Plumbing, LLC (d/b/a Bud's Plumbing)
On March 14, 2025, the Company acquired 100% of the outstanding membership interests of M.L.C. Plumbing, LLC (d/b/a Bud's Plumbing Service, "Bud's Plumbing") for aggregate consideration consisting of cash and a seller note, of approximately $5.0 million, 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.
During the third quarter of 2025, the Company finalized its fair value analysis of the assets acquired and liabilities 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 March 31, 2025, Bud's Plumbing earned revenue of $0.3 million and had net income of $0.1 million. The pro forma effects of the Bud's Plumbing acquisition were not material to the Company's consolidated statements of operations for the three months ended March 31, 2025.
The seller note was due to mature on April 1, 2030; however, on August 7, 2025, the seller note was repaid in full to the seller of Bud's Plumbing in exchange for shares of Kingsway common stock.
Roundhouse Electric & Equipment Co., Inc.
On July 1, 2025, the Company acquired 100% of the outstanding equity interests of Roundhouse Electric & Equipment Co., Inc. ("Roundhouse") for aggregate consideration consisting of cash and phantom 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 first quarter of 2026 and the fourth quarter of 2025, funds that had been held in escrow for the purposes of indemnification claims of less than $0.1 million and $0.8 million, respectively, were released to the Company. The final purchase price was subject 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 solutions primarily to midstream natural gas pipeline operators and utilities across the Permian Basin. As further discussed in Note 21, "Segmented Information," Roundhouse is included in the Kingsway Search Xcelerator segment.
AAA Flexible Pipe Cleaning Corporation (d/b/a AAA Advanced Plumbing & Drain)
On August 1, 2025, the Company (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 aggregate consideration 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 was subject to a working capital true-up of $0.1 million that 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.
Efficient Plumbing, LLC (d/b/a Southside Plumbing)
On August 14, 2025, the Company acquired 80% of the outstanding membership interests of Efficient Plumbing, LLC (d/b/a Southside Plumbing, "Southside Plumbing") for aggregate consideration 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 was subject 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 also pay 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 a put option redemption feature that is outside of the Company’s 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 18, "Redeemable Noncontrolling Interest," for further discussion related to the redeemable noncontrolling interest.
Bud’s Plumbing (Evansville, IN), Advanced Plumbing (Cleveland, OH) and Southside Plumbing (Omaha, NE), provide various plumbing installation, service and repair services to residential and commercial customers. As further discussed in Note 21, "Segmented Information," these companies are included in the Kingsway Search Xcelerator segment.
Summary Information
The following table summarizes the purchase price for our acquisitions:
Bud's Plumbing
Roundhouse
Advanced Plumbing
Southside Plumbing
March 14, 2025
July 1, 2025
August 1, 2025
August 14, 2025
Purchase price:
Cash paid at closing
Working capital adjustment
Seller note
Release of indemnity escrow
Seller phantom equity awards
Contingent consideration
Total purchase price
The estimated fair value of the Roundhouse seller phantom equity awards at the acquisition date of $3.3 million was determined based 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 is recorded in accrued expenses and other liabilities in the consolidated balance sheets. See Note 22, "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 consideration obligations at the respective acquisition dates of $0.8 million and $0.2 million, respectively, were determined using a Monte Carlo simulation based on forecasted future results, and are recorded in accrued expenses and other liabilities in the consolidated balance sheets. See Note 22, "Fair Value of Financial Instruments," for further discussion related to contingent 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:
Purchase price
Service fee receivable
Property and equipment
Intangible asset not subject to amortization - trade name
Intangible asset subject to amortization - customer relationships
Other assets - other receivables, inventory and prepaid expenses
Total assets
Accrued expenses and other liabilities
Debt
Income taxes payable
Total liabilities
Total identifiable assets and liabilities
Redeemable noncontrolling interest
Excess purchase price allocated to goodwill
The fair value of the acquired service fee receivables in the table above are equivalent to their gross contractual amounts.
The fair value of the 20% redeemable noncontrolling interest in Southside Plumbing at the date of acquisition of $0.9 million was estimated by applying a market approach, utilizing a discount rate of 20%.
NOTE 6 INVESTMENTS
Investments at March 31, 2026 and December 31, 2025 are comprised as follows:
Available-for-sale fixed maturities, at fair value (amortized cost of $37,365 and $37,005, respectively)
Limited liability investments (a)
Limited liability investment, at fair value (a)
Investments in private companies, at adjusted cost (a)
Short-term investments, at cost which approximates fair value
Total investments
(a)
Included in other assets in the consolidated balance sheets.
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 March 31, 2026 and December 31, 2025 are summarized in the tables shown below:
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Estimated Fair Value
Fixed maturities:
U.S. government, government agencies and authorities
States, municipalities and political subdivisions
Mortgage-backed
Asset-backed
Corporate
Total fixed maturities
The table below summarizes the Company's fixed maturities at March 31, 2026 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.
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total
The following tables highlight the aggregate unrealized loss position, by security type, of available-for-sale investments in unrealized loss positions where no credit loss allowance had been established as of March 31, 2026 and December 31, 2025. The tables segregate the holdings based on the period of time the investments have been continuously held in unrealized loss positions.
Less than 12 Months
Greater than 12 Months
Unrealized Loss
At March 31, 2026 and December 31, 2025, there are approximately 139 and 124 individual available-for-sale investments, respectively, that were in unrealized loss positions, for which an allowance for credit losses has 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 March 31, 2026 and December 31, 2025. 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 is less than amortized cost, conditions related to the security, industry, or geographic area, payment structure of the investment and the likelihood of the issuer’s 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 investment’s expected performance. The Company determined that the unrealized losses on the fixed maturity investments were due to non-credit related factors at March 31, 2026 and December 31, 2025.
The establishment of an impairment loss on an investment requires a number of judgments and estimates. Refer to the "Significant Accounting Policies and Critical Estimates" section of Management's Discussion and Analysis of Financial Condition included in the 2025 Annual Report for further information regarding the Company's detailed analysis and factors considered in recording an impairment loss on an investment.
The Company did not record any write-downs for impairment related to limited liability investments or investments in private companies for the three months ended March 31, 2026 and March 31, 2025.
At March 31, 2026, the Company had no unfunded commitments related to limited liability investments or limited liability investment, at fair value.
For the three months ended March 31, 2026 and March 31, 2025, the Company did not record any adjustments to the carrying value of its investments in private companies for observable price changes.
Interest and investment income, net reported in the consolidated statements of operations for the three months ended March 31, 2026 and March 31, 2025 are comprised as follows:
Net investment income
Net realized gains (losses)
Gain on change in fair value of limited liability investment, at fair value
Net investment income included in interest and investment income, net in the table above for the three months ended March 31, 2026 and March 31, 2025 is comprised as follows:
Investment income:
Interest from fixed maturities
Dividends
Other
Gross investment income
Investment expenses
Net realized gains (losses) on investments included in interest and investment income, net in the table above for the three months ended March 31, 2026 and March 31, 2025 are comprised as follows:
Available-for-sale fixed maturities:
Gross realized gains
Gross realized losses
Net realized losses on available-for-sale fixed maturities
Limited liability investment, at fair value
Investments in private companies
Proceeds from sales of available-for-sale fixed maturities were zero for the three months ended March 31, 2026 and March 31, 2025.
NOTE 7 GOODWILL
The following table summarizes the goodwill activity for the three months ended March 31, 2026:
Kingsway Search Xcelerator
Extended Warranty
Acquisition
During the three months ended March 31, 2026, the Company recorded goodwill of $0.7 million related to a small asset acquisition, that was accounted for as business combination.
At each of March 31, 2026 and December 31, 2025, 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. No goodwill impairment charges were recorded during the three months ended March 31, 2026 and March 31, 2025.
NOTE 8 INTANGIBLE ASSETS
Intangible assets at March 31, 2026 and December 31, 2025 are comprised as follows:
Gross Carrying Value
Accumulated Amortization
Accumulated Impairment Losses
Net Carrying Value
Intangible assets subject to amortization:
Customer relationships
Developed technology
Intangible assets not subject to amortization:
Trade names
During the three months ended March 31, 2026, the Company acquired intangible assets related to customer relationships of $0.9 million and trade name of $0.1 million, related to an acquisition.
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 $2.2 million and $1.7 million for the three months ended March 31, 2026 and March 31, 2025, respectively.
The trade names intangible assets have indefinite useful lives and are not amortized. Indefinite-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. 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.
At March 31, 2026 and March 31, 2025, 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 these assessments, the Company recorded impairment charges for the three months ended March 31, 2026 of $0.2 million related to the SNS trade name, and $0.1 million for the three months ended March 31, 2025 related to the Ravix trade name. The fair value of the SNS trade name of $2.0 million at March 31, 2026 was estimated using the relief-from-royalty method. The significant unobservable inputs used in the relief-from-royalty method, which are level 3 inputs, include a royalty 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.
NOTE 9 PROPERTY AND EQUIPMENT
Cost
Accumulated Depreciation
Carrying Value
Leasehold improvements
Furniture and fixtures
Computer hardware
Medical equipment
Vehicles
Machinery and equipment
Depreciation expense was $0.3 million and $0.1 million for the three months ended March 31, 2026 and March 31, 2025, respectively.
NOTE 10 DEBT
Debt consists of the following instruments at March 31, 2026 and December 31, 2025:
Principal
Bank loans:
KSX Term Loans
KSX Revolvers
Extended Warranty Term Loan and DDTL
Extended Warranty Revolver
Total bank loans
Notes payable:
KSX Notes Payable
KSX Vehicle Loans
KSX Equipment Loans
Total notes payable
Subordinated debt
Total Debt
All of the KSX and Extended Warranty indebtedness arises from individual, stand-alone credit agreements with the applicable Company subsidiary. None of such indebtedness is guaranteed 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 credit agreements.
Term loans are carried in the consolidated balance sheets at their amortized cost, which reflects the monthly or quarterly pay-down of principal, as well as amortization of any debt discount and issuance costs using the effective interest rate method.
The various bank loans contain a number of covenants, including, but not limited to, a leverage ratio and a fixed charge ratio, all of which are as defined in and calculated pursuant to the respective bank loan agreements that, among other things, restrict the respective borrower’s 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 contractual maturities of the Company's principal debt balances as of March 31, 2026 were as follows:
Principal Maturities
2027
2028
2029
2030
Thereafter
(a) Bank loans - KSX:
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 the acquisition of Ravix. The term loan was due to mature on October 1, 2027 prior to the fourth amendment of the tern loan on February 7, 2025 (see further discussion below).
The Ravix term loan has a carrying value of $8.6 million and $8.3 million as of March 31, 2026 and December 31, 2025, respectively. The Ravix revolver has a carrying value of $0.5 million at March 31, 2026 and December 31, 2025.
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 Ravix LLC. 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 additional principal amount of $6.0 million in the form of a supplemental term 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 to mature on November 16, 2028 and had an annual interest rate equal to the Prime Rate plus 0.75%.
On February 7, 2025, Ravix, Ravix LLC and CSuite entered into a fourth amendment to the Ravix term loan that provides for: (1) a new 2025 term loan in the principal amount of $9.1 million, with a maturity date of February 7, 2031; and (2) extending the 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).
The various 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 original Ravix term loan at the February 7, 2025 modification date of $0.1 million were recorded as loss on extinguishment of debt and are included in non-operating other revenue, net in the consolidated statement of operations for three months ended March 31, 2025, since the original and supplemental term loans were fully repaid as part of the modification.
The Ravix term loan, as amended, is secured by certain of the equity interests and assets of Ravix and CSuite.
SNS
The SNS term loan has a carrying value of $2.4 million and $2.5 million as of March 31, 2026 and December 31, 2025, respectively. The SNS revolver has a carrying value of $1.0 million as of March 31, 2026 and December 31, 2025.
As part of the asset acquisition of Secure Nursing Service, Inc. on November 18, 2022, the Company formed Secure Nursing Service LLC ("SNS"), which became a wholly owned subsidiary of Pegasus Acquirer Holdings LLC ("Pegasus LLC"), and together they borrowed from a bank a principal amount of $6.5 million in the form of a term loan, and established a $1.0 million revolver (the "SNS Revolver") to finance the acquisition of SNS (together, the "SNS Loan"). The SNS Loan has an annual interest rate equal to the greater of the Prime Rate plus 0.5%, or 5.00%. At March 31, 2026, the interest rate was 7.25%. The revolver matures on June 2, 2026 and the term loan matures on November 18, 2028. As of December 31, 2025, the SNS revolver is fully drawn.
The SNS Loan is secured by certain of the equity interests and assets of SNS.
Beginning March 31, 2024 through March 31, 2026, SNS was in default under the SNS Loan due to debt covenant violations related to the leverage and fixed charge ratios (measured quarterly). In February 2026, SNS and the lender amended the credit agreement to (1) extend the SNS revolver maturity date to be June 2, 2026; and (2) suspend monthly principal payments beginning February 2026 through May 2026, with the next principal payment resuming in June 2026. The Company has entered into an amendment to the SNS Loan that waives the events of default for the fiscal quarter ended March 31, 2026. 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 has a carrying value of $4.0 million and $4.2 million as of March 31, 2026 and December 31, 2025, respectively. The DDI revolver has a carrying value of $0.3 million and $0.2 million as of March 31, 2026 and December 31, 2025, respectively.
As part of the acquisition of Digital Diagnostics Inc. ("DDI") on October 26, 2023, DDI became 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 revolver to finance the acquisition of DDI (together, the "DDI Loan"). The DDI Loan has an annual interest rate equal to the greater of the Prime Rate plus 0.5%, or 5.00%. At March 31, 2026, the interest rate was 7.25%. The DDI revolver matures on November 1, 2026 and the term loan matures on October 26, 2029. During the three months ended March 31, 2026, DDI borrowed $0.2 million under the DDI revolver.
The DDI Loan is secured by certain of the equity interests and assets of DDI.
Beginning September 30, 2025 through March 31, 2026, DDI was in default under the DDI Loan due to a debt covenant violation related to the fixed charge ratio (measured quarterly). The Company has entered into an amendment to the DDI Loan that waives the event of default for the fiscal quarter ended March 31, 2026. 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 DDI Loan 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 has a carrying value of $6.5 million and $6.7 million as of March 31, 2026 and December 31, 2025, respectively. At March 31, 2026 and December 31, 2025, the balance of the revolver was zero.
As part of the acquisition of Image Solutions, LLC ("Image Solutions") on September 26, 2024, Image Solutions became a wholly owned subsidiary of Steel Bridge Acquisition, LLC ("SB LLC"), and together they borrowed from a bank a principal amount of $7.75 million in the form of a term loan, and established a $0.5 million revolver to finance the acquisition of Image Solutions (together, the "Image Solutions Loan"). The Image Solutions Loan requires monthly payments of principal and interest and has an annual interest rate equal to the greater of the Prime Rate plus 0.5%, or 7.25%. At March 31, 2026, 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.
The Roundhouse term loan has a carrying value of $9.9 million and $10.3 million as of March 31, 2026 and December 31, 2025, respectively. At March 31, 2026 and December 31, 2025, the balance of the revolver was zero.
As part of the acquisition of Roundhouse on July 1, 2025, Roundhouse became a wholly owned subsidiary of Longhorns Acquisition LLC ("Longhorns LLC"), and together they borrowed from a bank a principal amount of $11.0 million in the form of a term loan, and established a $0.5 million revolver to finance the acquisition of Roundhouse (together, the "Roundhouse Loan"). The Roundhouse term loan requires monthly payments of principal and interest and has 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 March 31, 2026, the interest rate was 7.38%. The Roundhouse term loan and revolver 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 has a carrying value of $3.6 million as of March 31, 2026 and December 31, 2025. The KPH revolver has a carrying value of $0.4 million as of March 31, 2026 and December 31, 2025.
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 $0.5 million revolver (together, the "KPH Loan"). The KPH term loan requires monthly payments of interest and has an annual fixed interest rate of 7.5%. Monthly principal payments on the KPH term loan begin September 14, 2026. The term loan matures on August 14, 2032. The KPH revolver requires monthly payments of interest and has an annual interest rate equal to the greater of the Prime Rate plus 0.75%, or 7.5%. The KPH revolver matures 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 has a carrying value of $10.2 million and $10.8 million as of March 31, 2026 and December 31, 2025, respectively. The KWH delayed draw term loan ("DDTL") has a carrying value of $4.4 million and $4.7 million as of March 31, 2026 and December 31, 2025, respectively. The KWH revolver has a carrying value of $3.0 million and $2.0 million as of March 31, 2026 and December 31, 2025, 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 $24.7 million term loan and a $1.0 million revolving credit facility.
The KWH term loan and revolver had an annual interest rate equal to SOFR, having a floor of 0.75%, plus spreads ranging from 2.62% to 3.12%, and was to mature on December 1, 2025.
Since origination, the KWH term 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 December 18, 2025, KWH entered into a fifth amendment 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 fourth quarter of 2025, KWH borrowed $1.0 million under the KWH revolver. During the first quarter of 2026, KWH borrowed an additional $1.0 million under the KWH revolver.
The amendments were not deemed to be substantially different than prior to the amendments; therefore, the amendments were accounted for as a modification.
The term loan and revolver, as amended, are secured by certain of the equity interests and assets of KWH and its subsidiaries.
(c) Notes payable - KSX:
On July 1, 2025 Roundhouse established a $0.75 million non-revolving equipment line of credit with a bank. On March 4, 2026, Roundhouse borrowed $0.4 million under the equipment line of credit. The Roundhouse equipment loan matures on March 1, 2033, requires monthly payments of principal and interest and has an annual fixed interest rate of 7.0%.
The following seller notes were entered into during 2026 and 2025 in connection with various acquisitions which were used to partially finance the respective acquisitions:
Advanced Plumbing on August 1, 2025, principal amount of $0.5 million in the form of a promissory note; and
(d) Subordinated debt:
On May 22, 2003, a subsidiary trust of 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 debenture bears interest at the rate of CME Term SOFR, plus a spread of 4.20%. The Company has the right to call these securities at par value any time after five years from its issuance until its maturity.
The subordinated debt, or TruPs, is carried in the consolidated balance sheets at fair value. See Note 22, "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 of the Company’s subordinated debt is recorded in the consolidated financial statements for the three months ended March 31, 2026 and March 31, 2025 are as follows:
Three Months ended March 31,
Decrease in fair value included in other comprehensive income (a)
Loss (gain) on change in fair value included in other income, net in the consolidated statement of operations
Decrease in fair value of subordinated debt
)
attributable to instrument-specific credit risk
The agreement governing the remaining subordinated debt contains a number of covenants that, among other things, restrict the Company’s ability to incur additional indebtedness, make dividends and distributions, and make certain payments in respect of the Company’s outstanding securities.
NOTE 11 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 Company’s 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.
The following table summarizes the operating lease amounts included in the Company's consolidated balance sheets as of March 31, 2026 and December 31, 2025:
Classification in Balance Sheet
Right of use
Liabilities
Lease liability, current
Lease liability, noncurrent
Total lease liability
Operating lease costs, variable lease costs and short-term lease costs included in selling, general and administrative expenses for the three months ended March 31, 2026 and March 31, 2025 were as follows:
Operating lease cost
Variable lease cost
Short-term lease cost
The annual maturities of lease liabilities as of March 31, 2026 were as follows:
Lease Commitments
2031 and thereafter
Total undiscounted lease payments
Imputed interest
Total lease liabilities
The weighted-average remaining lease term for our operating leases was 7.31 years and 7.47 years as of March 31, 2026 and December 31, 2025, respectively. The weighted-average discount rate of our operating leases was 6.87% and 6.86% as of March 31, 2026 and December 31, 2025, respectively. Cash paid for amounts included in the measurement of lease liabilities was $0.4 million and $0.2 million for the three months ended March 31, 2026 and March 31, 2025, respectively.
(b) Lessor leases:
The Company enters into contracts with third-parties to lease equipment to its customers. In certain of these contracts, the Company has the option to purchase the equipment back from such third-party at 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 revenue, and cost of services, respectively, upon delivery and installation of the equipment to the customer. For the three months ended March 31, 2026 and March 31, 2025, total revenue recognized from sales-type leases was $0.6 million and $0.3 million, respectively.
NOTE 12 OTHER ASSETS AND OTHER LIABILITIES
Other current assets includes accrued investment income, inventory, other receivables and the current portion of deferred contract costs, prepaid expenses and contract asset. Other receivables are recorded net of an allowance of $0.1 million at March 31, 2026 and December 31, 2025.
Other assets includes other investments, lease right of use asset and the noncurrent potion of prepaid expenses and contract asset.
Accrued expenses and other current liabilities includes the following:
Accrued Expenses and Other Current Liabilities:
Accounts payable
Refund liability
Current lease liability
Other accrued liabilities
Other liabilities, noncurrent includes contingent and phantom liabilities and the noncurrent portion of the lease liability.
NOTE 13 REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue from contracts with customers relates to the Kingsway Search Xcelerator and Extended Warranty segments and includes: business services consulting revenue, healthcare services revenue, software license and support revenue, motor sales and repair service revenue, skilled trades repair and service revenue, vehicle service agreement fees, maintenance support service fees and warranty product commissions, based on terms of various agreements with consumers, businesses and credit unions. Customers either pay in full when consulting, healthcare, software license and support, motor sales and skilled trades services are billed, or at the inception of a warranty contract or commission product sale, or on terms subject to the Company’s customary credit reviews.
The following table disaggregates revenues from contracts with customers by revenue type for the three months ended March 31, 2026 and March 31, 2025:
Vehicle service agreement fees
IWS, Geminus and PWI
Maintenance support service fees
Trinity
Warranty product commissions
Business services consulting fees
Ravix, CSuite and Image Solutions
Healthcare services fees
SNS and DDI
Software license and support fees
SPI
Motor sales and repair service fees
Skilled trades repair and service fees
Bud's Plumbing, Advanced Plumbing and Southside Plumbing
Total revenue
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 reasonably represents 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 10.90% 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.
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 revenue from providing outsourced finance and human resources consulting services and information technology managed services. The Company invoices for business services revenue based on contracted rates. Revenue is earned over time as services are provided to the customer.
Healthcare services revenue includes revenue from providing healthcare professional staffing services and outsourced cardiac telemetry services for general acute care, long-term acute care and inpatient rehabilitation hospitals. The Company invoices for healthcare services revenue based on contracted rates. Revenue is earned over time as services are provided to the customer.
Software license and support revenue includes revenue from the sale or rental of software products created exclusively to serve the management needs of all types of shared-ownership properties. Software licenses are on-premise at customer locations and 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 include software support services, which are accounted for as separate performance obligations. Software support revenue is recognized ratably over the contract period as services are rendered. For certain SPI contracts, the transaction price of the software license is billed in installments, typically over a three to five year period. 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 income separate from software license and support fee revenue over the term of 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 and repair service revenue include 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, infrared scans, VLF cable testing, and vibration analysis for various types of electrical equipment. Motor sales and repair service revenue is earned as motors are delivered to the customer or as repair services are provided to the customer.
Skilled trades repair and service revenue include the service fees collected to administer plumbing repairs and maintenance support services and are earned over time as services are provided to the customer.
The Company's revenue recognition policies are further described in Note 2(q), "Summary of Significant Accounting Policies - Revenue recognition," to the consolidated financial statements in the 2025 Annual Report.
Service fee receivables
Receivables from contracts with customers are reported as service fee receivable, net in the consolidated balance sheets and at March 31, 2026 and December 31, 2025 were $16.4 million and $13.8 million, respectively. The increase in receivables from contracts with customers is primarily due to the timing difference between the Company's satisfaction of performance obligations and customer payments.
Service fee receivable is reported net of an estimated allowance for credit losses at March 31, 2026 and December 31, 2025 of $1.3 million and $1.1 million, respectively. During the three months ended March 31, 2026 and March 31, 2025, the Company recorded an increase to its allowance for credit losses of $0.2 million and less than $0.1 million, respectively. Service fee receivables that are deemed to be uncollectible are written off against the allowance for credit losses when identified. The Company recorded write-offs of service fee receivables that were deemed to be uncollectible of less than $0.1 million for each of the three months ended March 31, 2026 and March 31, 2025.
Contract asset
Contract asset is included in the Company's consolidated balance sheets as of March 31, 2026 and December 31, 2025 as follows:
Contract asset, current
Contract asset, noncurrent
Total contract asset
The Company records a contract asset when revenue is recognized prior to billing the customer. Upon billing, which typically occurs over a three to five year installment period, the value of the contract asset is reversed and service fee receivable is recorded. Changes in the contract asset for the three months ended March 31, 2026 were as follows:
Contract asset additions
Amounts transferred to service fee receivables
Adjustment of contract asset balances
The contract asset is reported net of an estimated allowance for credit losses of zero at March 31, 2026 and December 31, 2025. Contract assets that are deemed to be uncollectible are written off against the allowance for credit losses when identified. During each of the three months ended March 31, 2026 and March 31, 2025, the Company recorded write-offs to the contract asset for amounts that were deemed to be uncollectible of zero.
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 the three months ended March 31, 2026 were as follows:
Deferral of revenue
Recognition of deferred service fees
Approximately $12.7 million and $13.1 million of revenues from contracts with customers recognized during the three months ended March 31, 2026 and March 31, 2025 was included in deferred service fees as of December 31, 2025 and December 31, 2024, respectively.
Remaining performance obligations
The Company expects to recognize within one year as revenue approximately 48.2% of the outstanding performance obligations as of March 31, 2026. The balance relates primarily to vehicle service agreement fees.
Deferred contract costs represent the deferral of incremental costs to obtain or fulfill a contract with a customer. Incremental costs to obtain a contract with a customer primarily include sales commissions. The Company capitalizes costs incurred to fulfill a contract if the costs are identifiable, generate or enhance resources used to satisfy future performance obligations and are expected to be recovered. Costs to fulfill a contract include labor costs for set-up activities directly related to the acquisition of vehicle service agreements. Contract costs are deferred and amortized over the expected customer relationship period consistent with the pattern in which the related revenues are earned. Amortization of incremental costs to obtain a contract and costs to fulfill a contract with a customer are recorded in cost of services in the unaudited consolidated statements of operations. No impairment charges related to deferred contract costs were recorded during the three months ended March 31, 2026 and March 31, 2025.
The deferred contract costs balances and related amortization expense for the three months ended March 31, 2026 and March 31, 2025 are comprised as follows:
Three months ended March 31, 2026
Three months ended March 31, 2025
Costs to Obtain a Contract
Costs to Fulfill a Contract
Balance at December 31, net
Additions
Amortization
Balance at March 31, net
NOTE 14 INCOME TAXES
Income tax benefit for the three months ended March 31, 2026 and March 31, 2025 varies from the amount that would result by applying the applicable U.S. federal corporate income tax rate of 21% to loss before income tax benefit. The following table summarizes the differences:
Income tax benefit at U. S. statutory income tax rate
Valuation allowance
Share-based payment awards
Earnings of noncontrolling interests
State and local income taxes, net of federal income tax effects
The Company maintains a valuation allowance for its gross deferred tax assets at March 31, 2026 and December 31, 2025. The Company's operations 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 valuation allowance on its March 31, 2026 and December 31, 2025 net deferred tax asset, excluding the deferred income tax liability amounts set forth in the paragraph below which were determined to not reverse and offset existing deferred tax assets.
The Company carries net deferred income tax liabilities of $3.0 million and $3.2 million at March 31, 2026 and December 31, 2025, respectively, that consists of:
$4.2 million and $4.1 million of deferred income tax liabilities related to indefinite lived intangible assets;
$0.5 million and $0.5 million of deferred state income tax liabilities.
As of March 31, 2026 and December 31, 2025, 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. The Company recorded income tax expense of zero related to interest and penalty accruals for the three months ended March 31, 2026 and March 31, 2025.
NOTE 15 LOSS PER SHARE
The following table sets forth the reconciliation of numerators and denominators for the basic and diluted loss per share computation for the three months ended March 31, 2026 and March 31, 2025:
Numerator:
Less: net income attributable to noncontrolling interests and redeemable noncontrolling interests
Less: dividends on preferred stock
Numerator used in calculating basic loss per share attributable to common shareholders
Numerator used in calculating diluted loss per share attributable to common shareholders
Denominator:
Weighted-average basic shares
Weighted-average common shares outstanding
Weighted-average diluted shares
Effect of potentially dilutive securities (a)
Stock options
Unvested restricted stock awards
Convertible preferred stock
Total weighted-average diluted shares
Basic loss per share attributable to common shareholders
Diluted loss per share attributable to common shareholders
Potentially dilutive securities consist of stock options and unvested restricted stock awards, calculated using the treasury stock method, and convertible preferred stock, using the if-converted method. Because the Company is reporting a net loss attributable to common shareholders for the three months ended March 31, 2026 and March 31, 2025, all potentially dilutive securities outstanding were excluded from the calculation of diluted loss per share since their inclusion would have been anti-dilutive.
Basic loss per share excludes dilution and is computed by dividing loss attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted loss per 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 loss per 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.
NOTE 16 STOCK-BASED COMPENSATION
The Company recognizes stock-based compensation expense for all share-based awards made to employees, including restricted stock awards, restricted common unit awards and employee stock options, based on estimated fair values. No new share-based awards were granted during the three months ended March 31, 2026.
Total stock-based compensation expense related to all of the Company's restricted stock awards, restricted common unit awards and employee stock options was $0.3 million and $0.4 million for the three months ended March 31, 2026 and March 31, 2025, respectively.
NOTE 17 REDEEMABLE PREFERRED STOCK
At March 31, 2026, the Company had three series of 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 series of the Preferred Stock outstanding, the holder has the option to convert each share of Preferred Stock into 2.6316 common 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 March 31, 2026 and 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
September 24, 2031
Class C Preferred
February 1, 2025
February 12, 2032
Class D Preferred
May 8, 2025
May 7, 2032
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 Company’s Class B Preferred Stock and 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 of each series of Preferred Stock are entitled to receive fixed, cumulative, preferential cash dividends at a rate of 8% per share of Preferred 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 of Preferred Stock. The cash dividend rate will increase to 18% per share of Preferred 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 any Preferred Stock not previously converted into common shares, and which remain outstanding on the conversion date, for the price of $25.00 per share of Preferred 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 of Preferred Stock it has issued following a sale of assets representing more than 15% of the Company’s 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 of Preferred Stock submitted for redemption.
Declared dividends to be paid to the holders of the Company's Preferred Stock for the three months ended March 31, 2026 and March 31, 2025 are as follows:
Three Months Ended March 31,
Accrued dividend included in accrued expenses and other current liabilities in the consolidated balance sheets, are $0.3 million at March 31, 2026 and December 31, 2025.
Cash dividends paid during the three months ended March 31, 2026 and March 31, 2025 were $0.3 million and $0.2 million, respectively.
Note 18 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 amount 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 is estimated based on the fair value of the subsidiary, determined using discounted cash flow methods, which represents a level 3 fair value measurement.
Changes in the Company's redeemable noncontrolling interest for the three months ended March 31, 2026 were as follows:
Net income attributable to redeemable noncontrolling interest
NOTE 19 Shareholders' Equity
On March 21, 2023, the Company's Board of Directors approved a security repurchase program under which the Company was authorized to repurchase up to $10.0 million of its currently issued and outstanding securities through 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. The timing and amount of any repurchases were determined based on market and economic conditions, share price and other factors, and the program could have been be terminated, modified or suspended at any time at the Company's discretion. During the three months ended March 31, 2025, the Company repurchased 42,900 shares of common stock for an aggregate purchase price of $0.3 million, including fees and commissions. The repurchased common stock will be held as treasury stock at cost and has been removed from common shares outstanding at March 31, 2026 and December 31, 2025.
NOTE 20 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The tables below detail the change in the balance of each component of accumulated other comprehensive income (loss), net of tax, for the three months ended March 31, 2026 and March 31, 2025, as relates to shareholders' equity attributable to common shareholders on the consolidated balance sheets.
Balance at December 31, 2025
Other comprehensive (loss) income arising during the period
Amounts reclassified from accumulated other comprehensive loss
Net current-period other comprehensive (loss) income
Balance at March 31, 2026
Balance at December 31, 2024
Other comprehensive income arising during the period
Net current-period other comprehensive income
Balance at March 31, 2025
NOTE 21 SEGMENTED INFORMATION
The Company reports segment information based on the "management" approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as a source of the Company’s reportable operating segments. The Company's chief operating decision maker is its President and Chief Executive Officer. The Company conducts its business through the following two reportable segments: Kingsway Search Xcelerator and Extended Warranty.
Kingsway Search Xcelerator Segment
Kingsway Search Xcelerator includes 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 firm that provides experienced chief financial officer and 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 the United States.
Ravix provides outsourced financial services and human resources consulting to 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 the United States.
SNS provides healthcare staffing services to acute healthcare facilities on a contract or per diem basis in the United States, primarily in California.
SPI provides software products created 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") cardiac telemetry services for general acute care, long-term acute care and inpatient rehabilitation hospitals. Outsourcing cardiac monitoring allows hospitals to eliminate personnel callouts and human resources issues, remove distractions from onsite operations, and free up facility staff to assist directly with patient care. DDI currently has a presence in 42 states and Puerto Rico.
Image Solutions provides comprehensive information technology managed services, including equipment sales, service, and helpdesk support to customers primarily in North Carolina, Kansas, Georgia, Kentucky and Tennessee.
Roundhouse provides industrial-scale electric motor solutions, including field maintenance, in-shop repair, testing, and new motor sales primarily to midstream natural gas pipeline operators and utilities across the Permian Basin.
Kingsway Skilled Trades ("KST") includes Bud's Plumbing, Advanced Plumbing and Southside Plumbing. KST provides a comprehensive 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).
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 fifty states.
Geminus primarily sells vehicle service agreements to used car buyers across the United States, through its subsidiary, The Penn Warranty Corporation ("Penn"). Penn distributes these products in 46 states via independent used car dealerships and franchised car dealerships.
Revenues and Operating Income by Reportable Segment
Revenues by reportable segment reconciled to consolidated revenues for the three months ended March 31, 2026 and March 31, 2025 were:
Revenues:
KSX
Total revenues
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 unaudited consolidated interim financial statements. The Company uses operating income as the measure of profit or loss for our segments. The Company's chief operating decision maker uses segment operating income to 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's incentive 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 current U.S. conflict with Iran, the degree and pace of inflation and interest rate changes may have impacts on our business and tariffs - or retaliatory responses to such tariffs - may impact the Company’s operating income. The potential impact of current macroeconomic uncertainties on the Company’s 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.
Total segment operating income reconciled to the consolidated net loss for the three months ended March 31, 2026 and March 31, 2025 is as follows:
Less segment expenses:
Cost of services - salaries and benefits
Cost of sales - claims
Cost of services - commissions
Cost of services - other
Salaries and benefits
Insurance expense
Professional fees
IT expense
Other segment items (a)
Total segment operating income
Selling, general and administrative expenses and other income not allocated to segments, net (b)
Other segment items in the table above for each reportable segment include bank charges, bad debt expense, occupancy expenses, licenses and taxes, general overhead expenses and miscellaneous income.
(b)
Selling, general and administrative expenses and other income not allocated to segments, net includes corporate and non-operating general and administrative expenses, (loss) gain on change in fair value of debt, loss on extinguishment of debt (2025 only) and non-operating other income.
NOTE 22 FAIR 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 awards are 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 Company’s 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.
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 vendor’s 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 and asset-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, include the underlying investments of Argo Holdings. 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 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 Advanced Plumbing and Southside Plumbing includes future 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 and are included in other liabilities, noncurrent 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 liabilities are categorized in Level 3 of the fair value hierarchy.
The fair value of Advanced Plumbing's contingent consideration liability is estimated by applying the Monte Carlo simulation method to forecast achievement of adjusted EBITDA, which may result in up to $1.5 million in total payments to the former owners of Advanced Plumbing through August 2028. Key inputs in the valuation include projected EBITDA, asset volatility, risk-free rate, discount rate and discount term. The estimated fair value of the Advanced Plumbing contingent consideration liability at March 31, 2026 and December 31, 2025 was $0.8 million.
The fair value of Southside's contingent consideration liability is estimated by applying the Monte Carlo simulation method to forecast achievement of adjusted EBITDA, which may result in up to $1.125 million in total payments to the former owners of Southside Plumbing through August 2028. Key inputs in the valuation include projected EBITDA, asset volatility, risk-free rate, discount rate and discount term. The estimated fair value of the Southside Plumbing contingent consideration liability at March 31, 2026 and December 31, 2025 was $0.2 million.
Seller phantom equity awards - In connection with the acquisition of Roundhouse, the Company granted phantom equity awards to the former owners. The seller phantom equity awards are measured and reported at fair value and are included in other liabilities, noncurrent in the consolidated balance sheets. The seller phantom equity awards liability is measured and reported at fair value at the date of grant and is revalued each reporting period. Changes in the fair value of the seller 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. The seller phantom equity awards liability is categorized in Level 3 of the fair value hierarchy.
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 March 31, 2026 and December 31, 2025 are as follows.
Fair Value Measurements at the End of the Reporting Period Using
Quoted Prices in
Significant
Active Markets for
Other Observable
Unobservable
Identical Assets
Inputs
(Level 1)
(Level 2)
(Level 3)
Recurring fair value measurements:
Assets:
Liabilities:
States municipalities and political subdivisions
The following table provides a reconciliation of the fair value of recurring Level 3 fair value measurements for the three months ended March 31, 2026 and March 31, 2025:
Limited liability investment, at fair value:
Beginning balance
Distributions received
Realized gains included in net loss
Change in fair value of limited liability investment, at fair value included in net loss
Ending balance
Unrealized gains on limited liability investments, at fair value held at end of period:
Included in net loss
Included in other comprehensive income
Ending balance - assets
Contingent consideration:
Change in fair value of contingent consideration included in net loss
Unrealized gains recognized on contingent consideration liability held at end of period:
Seller phantom equity awards:
Change in fair value of seller phantom equity award liability included in net loss
Ending balance - liabilities
The following table summarizes the valuation techniques and significant unobservable inputs utilized in determining fair values for the Company's financial assets and liabilities that are categorized as Level 3 at March 31, 2026:
Fair Value
Categories
Valuation Techniques
Unobservable Inputs
Market approach
Valuation multiples
1.0x - 9.0x
Option-based income approach
Discount rate
Risk-free rate
Expected volatility
Internal rate of return
The following table summarizes the valuation techniques and significant unobservable inputs utilized in determining fair values for the Company's financial assets and liabilities that are categorized as Level 3 at December 31, 2025:
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis, including assets that are adjusted for observable price changes or written down to fair value as a result of an impairment.
Indefinite-lived intangible assets are recorded at carrying value, and, if impaired, are adjusted to fair value using Level 3 inputs. Refer to Note 8, "Intangible Assets" for further information regarding the process of determining the fair value of indefinite-lived intangible assets and the impairment charges recorded for the three months ended March 31, 2026 and March 31, 2025.
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 of industrial bonds with similar maturities and are categorized within Level 2 of the fair value hierarchy. The estimated fair value of bank loans was $56.3 million and $57.3 million as of March 31, 2026 and December 31, 2025, respectively.
NOTE 23 RELATED 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 unaudited consolidated interim financial statements, the following is a summary of related party relationships and transactions.
Argo Management Group, LLC
The Company acquired Argo Management Group, LLC ("Argo Management") in April 2016. Argo Management's primary business is to act as Managing Member of Argo Holdings. At March 31, 2026 and December 31, 2025, each of the Company, John T. Fitzgerald ("Fitzgerald"), the Company's Chief Executive Officer and President, and certain of Fitzgerald’s immediate family members owns equity interests in Argo Holdings, all of which interests were acquired prior to the Company’s 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 three months ended March 31, 2026 and the year ended December 31, 2025.
Preferred Stock Private Placements
As further described in Note 17, " 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, one of Fitzgerald’s immediate family members, certain members of the Company's Board of Directors and members of the KSX Advisory Board invested a total of $5.2 million in the Class B Preferred 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 C Preferred Stock. Certain members of the Company's Board of Directors and one of Fitzgerald’s immediate family members invested a total of $3.7 million in the Class C Preferred 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 D Preferred Stock. Certain members of the Company's Board of Directors invested a total of $2.0 million in the Class D Preferred Stock private placement transaction.
Common Stock Private Placement
On June 24, 2025, the Company entered into a Purchase Agreement with certain third-parties for 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 Fund LP invested $3.0 million in the Common Stock private placement transaction. 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 Company’s outstanding common shares.
NOTE 24 COMMITMENTS AND CONTINGENCIES
(a) Collateral pledged and restricted cash:
The Company has restricted cash of $7.8 million and $8.0 million at March 31, 2026 and December 31, 2025, respectively. Included in restricted cash are:
$7.3 million and $7.4 million at March 31, 2026 and December 31, 2025, respectively, held as deposits by IWS, Geminus, PWI, Ravix and CSuite;
$0.2 million at March 31, 2026 and December 31, 2025, on deposit with state regulatory authorities; and
$0.3 million at March 31, 2026 and December 31, 2025, 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.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
Management's Discussion and Analysis includes “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 that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. Words such as “expects,” “believes,” “anticipates,” “intends,” “estimates,” “seeks” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect Kingsway management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, see Kingsway’s securities filings, including its Annual Report on Form 10-K for the year ended December 31, 2025 ("2025 Annual Report"). The Company's securities filings can be accessed on the EDGAR section of the U.S. Securities and Exchange Commission’s website at www.sec.gov, on the Canadian Securities Administrators’ website at www.sedar.com or through the Company’s website at www.kingsway-financial.com. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements because of new information, future events or otherwise.
OVERVIEW
Kingsway is a Delaware holding company with operating subsidiaries located in the United States. The Company is 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 two reportable segments: Kingsway Search Xcelerator and Extended Warranty.
Kingsway Search Xcelerator includes the following subsidiaries of the Company: CSuite Financial Partners, LLC ("CSuite"), Ravix Group, Inc. ("Ravix"), Secure Nursing Service LLC ("SNS"), Systems Products International, Inc. ("SPI"), Digital Diagnostics Inc. ("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 Management's Discussion and Analysis, the term the term "Kingsway Search Xcelerator" is used to refer to this segment.
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 Management's Discussion and Analysis, the term "Extended Warranty" is used to refer to this segment.
Trinity sells heating, ventilation, air conditioning ("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.
NON-U.S. GAAP FINANCIAL MEASURE
Throughout this quarterly 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. Our unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information. 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.
Segment Operating Income
Segment operating income represents one measure of the pretax profitability of our segments and is derived by subtracting direct segment expenses from direct segment revenues. Revenues and expenses are presented in the unaudited consolidated interim statements of operations, but are not subtotaled by segment; however, this information is available in total and by segment in Note 21, "Segmented Information," to the unaudited consolidated interim financial statements, regarding reportable segment information. The nearest comparable U.S. GAAP measure to total segment operating income is operating income (loss) that, 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 unaudited consolidated interim financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and classifications 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 Company’s 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 critical accounting policies and judgments in the accompanying unaudited consolidated interim financial statements include revenue recognition; valuation of fixed maturity investments; 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; fair value assumptions for subsidiary stock-based compensation awards; and valuation of redeemable noncontrolling interest. 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.
The Company’s significant accounting policies and critical estimates are described in Management's Discussion and Analysis of Financial Condition and Results of Operations included in the 2025 Annual Report. There has been no material change subsequent to December 31, 2025 to the information previously disclosed in the 2025 Annual Report with respect to these significant accounting policies and critical estimates.
RESULTS OF CONTINUING OPERATIONS
A reconciliation of total segment operating income to net loss for the three months ended March 31, 2026 and March 31, 2025 is presented in Table 1 below:
Table 1 Segment Operating Income
(in thousands of dollars)
For the three months ended March 31,
Change
Segment operating income:
Selling, general and administrative expenses and other income not allocated to segments, net
The discussion below highlights the key drivers of the current and prior year results.
Kingsway Search Xcelerator revenue increased to $21.1 million (80.3%) for the three months ended March 31, 2026 compared to $11.7 million for the three months ended March 31, 2025. Kingsway Search Xcelerator operating income was $2.9 million for the three months ended March 31, 2026 compared to $1.7 million for the three months ended March 31, 2025. Revenue and operating income were primarily impacted by the following:
The inclusion of Roundhouse for the three months ended March 31, 2026 following its acquisition on July 1, 2025. For the three months ended March 31, 2026, Roundhouse had revenue and operating income of $4.8 million and $1.0 million, respectively;
The inclusion of KST for the three months ended March 31, 2026 following the acquisitions of Bud's Plumbing in March 2025, and Advanced Plumbing and Southside Plumbing in August 2025. KST had revenue and operating income of $4.7 million and $0.1 million, respectively, for the three months ended March 31, 2026; and
Image Solutions revenue increased $0.5 million to $2.3 million (25.6% increase from prior year quarter) and operating income increased $0.3 million to $0.7 million for the three months ended March 31, 2026. The increase in revenue was due to Image Solutions having a fully-staffed sales team heading into 2026, as well as Q1 2025 being negatively impacted by the after effects of Hurricane Helene. Operating income benefitted from the increase in revenue, which was partially offset by higher general and administrative expenses for the three months ended March 31, 2026.
Extended Warranty revenue increased 7.2% (or $1.2 million) to $17.9 million for the three months ended March 31, 2026 compared with $16.7 million for the three months ended March 31, 2025, while cash sales and the average price per contract sold were up 11.8% and 7.3%, respectively, over the prior year. Extended Warranty operating income was $0.2 million for the three months ended March 31, 2026 compared with $0.5 million for the three months ended March 31, 2025. Extended Warranty'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 three months ended March 31, 2026, there was a 7.1% 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. We are able to mitigate the impact of higher claims expense by increasing pricing and re-categorizing vehicles to ensure they are in the appropriate rate class, which we do at least annually. However, 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.
Extended Warranty operating income was impacted by higher claims, commissions, dealer profit sharing, and personnel costs. Commissions and dealer profit sharing were up primarily due to the increase in cash sales during the first quarter of 2026. Personnel costs were up primarily at PWI, Geminus and Trinity, as each company continues to invest in its sales teams. However, the increases in costs were less than that budgeted for the quarter ended March 31, 2026. Extended Warranty gross profit – calculated as revenue less claims and commission expense – was up 7.7% over prior year.
Interest and Investment Income, Net
Interest and investment income, net was $0.7 million in the first quarter of 2026 compared to $0.3 million in the first quarter of 2025. Included is net investment income, realized gains (losses) and gain on change in fair value limited liability investment, at fair value. The increase for the first quarter of 2026 is primarily due to gain on change in fair value recognized by Argo Holdings Fund I, LLC ("Argo Holdings") of $0.3 million for the three months ended March 31, 2026 compared to less than $0.1 million for the three months ended March 31, 2025.
Selling, General and Administrative Expenses and Other Income not Allocated to Segments, Net
Selling, general and administrative expenses and other income not allocated to segments was a net expense of $2.4 million in the first quarter of 2026 compared to $2.9 million in the first quarter of 2025. Included are primarily expenses associated with our corporate holding company, expenses associated with our Operator-in-Residence who search for our next acquisitions, revenue and expenses associated with our various other investments (such as Argo Holdings) that are accounted for on a consolidated basis, (loss) gain on change in fair value of debt and loss on extinguishment of debt.
The decrease in net expense for the three months ended March 31, 2026 is primarily attributable to lower acquisition, search and compensation related expenses during the three months ended March 31, 2026 compared to the same period in 2025.
See Note 10, "Debt," to the unaudited consolidated interim financial statements, for further discussion of changes in fair value of debt and loss on extinguishment of debt recorded for the three months ended March 31, 2026 and March 31, 2025.
Interest Expense
Interest expense for the first quarter of 2026 was $1.4 million compared to $1.2 million in the first quarter of 2025. The increase for the three months ended March 31, 2026 is primarily attributable to the inclusion of the Roundhouse and KPH loans for the first quarter of 2026, partially offset by reduced expense for existing loans due to principal amortization.
See Note 10, "Debt," to the unaudited consolidated interim financial statements for further details.
Amortization and Impairment of Intangible Assets
Amortization of intangible assets was $2.2 million in the first quarter of 2026 compared to $1.7 million in the first quarter of 2025. The increase is primarily due to the inclusion of Roundhouse, Advanced Plumbing and Southside Plumbing (acquired in the third quarter of 2025) for the three months ended March 31, 2026, partially offset by decreased amortization expense for the Company's other intangible assets.
Impairment of intangible assets was $0.2 million in the first quarter of 2026 compared to $0.1 million in the first quarter of 2025. The Company's indefinite-lived intangible assets consist of trade names, which 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. At March 31, 2026 and March 31, 2025, the Company determined that certain of its trade name intangible assets should be further examined under a quantitative approach due to actual revenue coming in lower than previous projections. Based upon this assessment, the Company recorded an impairment charge during the first quarter of 2026 related to the SNS indefinite-lived trade name; and during the first quarter of 2025 related to the Ravix indefinite-lived trade name. The reductions in value are primarily due to higher discount rates and a reduction in projected revenue. See Note 8,"Intangible Assets," to the unaudited consolidated interim financial statements, for further discussion.
Income tax benefit for the first quarter of 2026 was less than $0.1 million compared to $0.3 million in the first quarter of 2025. For the three months ended March 31, 2026, the Company reported a tax benefit primarily due to the current period operating losses generating indefinite life deferred tax assets utilizable against existing indefinite life deferred tax liabilities. For the three months ended March 31, 2025, the Company reported a tax benefit primarily due to the release of its valuation allowance associated with indefinite life business interest expense carryforwards. See Note 14, "Income Taxes," to the unaudited consolidated interim financial statements, for additional detail of the income tax benefit recorded for the three months ended March 31, 2026 and March 31, 2025.
INVESTMENTS
Portfolio Composition
See Note 2(f), "Summary of Significant Accounting Policies - Investments," to the consolidated financial statements in the 2025 Annual Report for an overview of how we account for our various investments.
At March 31, 2026, we held cash and cash equivalents, restricted cash and investments with a carrying value of $57.2 million. Our operations 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 (in thousands of dollars, except for percentages)
Type of investment
% of Total
Limited liability investments
Short-term investments
Investment Impairment
The Company performs a quarterly analysis of its investments to determine if declines in fair value may 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. See the "Significant Accounting Policies and Critical Estimates" section of Management's Discussion and Analysis of Financial Condition included in the 2025 Annual Report for further information regarding the Company's detailed analysis and factors considered in establishing an impairment loss on an investment.
The Company's fixed 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. Significant judgment is required in the determination of whether a credit loss has occurred for a security. The Company considers all available evidence when determining whether a security requires a credit allowance to be recorded, including the financial condition and expected near-term and long term prospects of the issuer, whether the issuer is current with interest and principal payments, credit ratings on the security or changes in ratings over time, general market conditions, industry, sector or other specific factors and whether the Company expects to receive cash flows sufficient to recover the entire amortized cost basis of the security. 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 recorded related to investments during the three months ended March 31, 2026 and March 31, 2025.
At March 31, 2026 and December 31, 2025, the gross unrealized losses for fixed maturities amounted to $0.5 million for each period, and there were no unrealized losses attributable to non-investment grade fixed maturities.
DEBT
The principal and carrying value of the Company's debt instruments at March 31, 2026 and December 31, 2025 are as follows:
See Note 10, "Debt," to the unaudited consolidated interim financial statements for a detailed discussion of the Company’s debt instruments. Changes related to the Company’s debt during the three months ended March 31, 2026 are further described below.
Bank Loans
Our bank loans contain a number of covenants, including, but not limited to, a leverage ratio and a fixed charge ratio and limits on annual capital expenditures, all of which are as defined in and calculated pursuant to the respective loan that, among other things, restrict the borrowing company’s 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.
During the three months ended March 31, 2026:
Ravix, Ravix LLC and CSuite entered into a sixth amendment to the Ravix term loan that provides for adding a second tranche to the Ravix term loan with a principal amount of $0.5 million;
KWH borrowed $1.0 million under the KWH revolver; and
DDI borrowed $0.2 million under the DDI revolver.
Beginning March 31, 2024 through March 31, 2026, SNS was in default under its loan due to debt covenant violations related to the leverage and fixed charge ratios (measured quarterly). In February 2026, SNS and the lender amended the credit agreement to (1) extend the SNS revolver maturity date to be June 2, 2026; and (2) suspend monthly principal payments beginning February 2026 through May 2026, with the next principal payment resuming in June 2026.
Also, beginning September 30, 2025 through March 31, 2026, DDI was in default under its loan due to a debt covenant violation related to the fixed charge ratio (measured quarterly).
Each of SNS and DDI has entered into an amendment to its respective loan that waives the events of default for the fiscal quarter ended March 31, 2026. 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.
Notes Payable
On January 2, 2026, Ravix entered into a seller note with a principal amount of $0.9 million in connection with an asset acquisition. The seller note was used to partially finance the asset acquisition.
On March 4, 2026, Roundhouse borrowed $0.4 million under an equipment line of credit. The Roundhouse equipment loan matures on March 1, 2033, requires monthly payments of principal and interest and has an annual fixed interest rate of 7.0%.
Subordinated Debt
The Company's subordinated debt is measured and reported at fair value. At March 31, 2026, the carrying value of the subordinated debt is $13.1 million. 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, see Note 22, "Fair Value of Financial Instruments," to the unaudited consolidated interim financial statements.
Though changes in the market observable swap rates will continue to introduce some volatility each quarter to the Company’s 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 Company’s consolidated statements of operations. The fair value of the Company’s subordinated debt will eventually equal the principal value totaling $15.0 million of the subordinated debt by the time of the stated redemption date of the remaining trust, which matures on May 22, 2033.
RECENTLY ISSUED ACCOUNTING STANDARDS
See Note 4, "Recently Issued Accounting Standards," to the unaudited consolidated interim financial statements, for discussion of certain accounting standards that may be applicable to the Company's current and future consolidated financial statements.
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 have been met primarily by funds generated from operations, capital raising, disposal of subsidiaries, investment maturities and investment income, and other returns received on investments and from 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 maturities and other instruments that have durations similar to the expected future claim projections.
Cash provided from these sources is used primarily for warranty expenses, business service expenses, debt servicing, acquisitions and 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
During the three months ended March 31, 2026, the net cash used in operating activities from continuing operations was essentially break even, primarily due to operating income from the Kingsway Search Xcelerator and Extended Warranty (the latter due to higher cash sales) segments. During the three months ended March 31, 2025, the Company reported $1.8 million of net cash used in operating activities, primarily due to cash paid to settle the Ravix contingent liability of $2.3 million that is reported as an operating activity, partially offset by operating income from the Extended Warranty and Kingsway Search Xcelerator segments.
During the three months ended March 31, 2026, the net cash used in investing activities was $1.0 million. This use of cash is primarily attributed to proceeds from sales and maturities of fixed maturities in excess of purchases of fixed maturities, as well as an asset acquisition by Ravix. During the three months ended March 31, 2025, the net cash used in investing activities was $3.2 million. This use of cash is primarily attributed to the acquisition of Bud's Plumbing, net of cash acquired, partially offset by proceeds from sales and maturities of fixed maturities in excess of purchases of fixed maturities.
During the three months ended March 31, 2026, the net cash used in financing activities was $0.2 million. This use of cash was primarily attributed to principal proceeds from debt of $2.1 million, partially offset by principal repayment on debt of $2.0 million and payment of preferred stock dividends of $0.3 million. During the three months ended March 31, 2025, the net cash provided by financing activities was $5.8 million. This source of cash was primarily attributed to principal proceeds from debt of $9.3 million and proceeds from the issuance of Class C preferred stock of $6.0 million, partially offset by principal repayment on debt of $8.5 million, cash paid to settle the Ravix contingent liability of $0.4 million and cash paid for repurchases of common stock of $0.3 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; 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 company’s liquidity, defined as the amount of cash in the bank accounts of Kingsway Financial Services Inc. and Kingsway America Inc., was $0.9 million and $1.0 million at March 31, 2026 and December 31, 2025, respectively, which excludes future 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 and cash equivalents of $7.3 million and $8.3 million reported at March 31, 2026 and December 31, 2025, respectively, on the Company’s consolidated balance sheets.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); therefore, pursuant to Regulation S-K, we are not required to make disclosures under this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act as of March 31, 2026.
The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports the Company files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosures.
In designing and evaluating our disclosure controls and procedures, the Company’s management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints that require the Company’s management to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Based on the evaluation of our disclosure controls and procedures, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2026, the Company’s disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company's internal control over financial reporting during the period beginning January 1, 2026, and ending March 31, 2026, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information concerning pending legal proceedings is incorporated herein by reference to Note 24, "Commitments and Contingencies," to the unaudited consolidated interim financial statements in Part I of this Form 10-Q.
Item 1A. Risk Factors
There have been no material changes with respect to those risk factors previously disclosed in our 2025 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the quarter ended March 31, 2026, no director 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 6. Exhibits
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Instance Document
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Inline XBRL Taxonomy Extension Schema
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Pursuant to the requirements 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.
Date:
By:
/s/ John T. Fitzgerald
John T. Fitzgerald, President, Chief Executive Officer and Director
(principal executive officer)
/s/ Kent A. Hansen
Kent A. Hansen, Chief Financial Officer and Executive Vice President
(principal financial officer)