Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are an insurance premium financing company, specializing primarily in commercial policies. We make it efficient for companies to access financing for insurance premiums. Enabled by our network of marketing representatives and relationships with insurance agents, we provide a value-driven, customer-focused lending service.

We have offered premium financing since 1991 through our wholly owned subsidiary, Standard Premium Finance Management Corporation. We are generally targeting premium financing loans from $1,000 to $100,000, with repayment terms ranging from 6 to 11 months, although we may offer larger loans under circumstances we deem appropriate. Qualified customers may have multiple loans with us concurrently, which we believe provides opportunities for repeat business, as well as increased value for our customers.

We originate loans primarily in Florida, although we operate in several states. Over the past three years, the Company has expanded its operations, and currently is financing insurance premiums in eighteen states. Throughout 2024 and 2025, we have obtained additional licenses for a total of forty-one states. We intend to continue to expand our market into new states as part of our organic growth strategy. Loans originate primarily through a network of insurance agents solicited by our in-house sales team and marketing representatives.

We generate the majority of our revenue through interest income and the associated fees earned from our loan products. We earn interest based on the "rule of 78" and earn other associated fees as applicable to each loan. These fees include, but are not limited to, a one-time finance charge, late fees, and NSF fees. Our company charges interest to its customers solely by the Rule of 78. Charging interest per the Rule of 78 is the industry standard among premium finance loans. The Rule of 78 is a method to calculate the amount of principal and interest paid by each payment on a loan with equal monthly payments. The Rule of 78 is a permissible method of calculating interest in the states in which we operate. The Rule of 78 recognizes greater amounts of interest income and lesser amounts of principal repayment during the first months of the loan, while decreasing interest income and increasing principal repayment during the final months of the loan. Whenever a loan is repaid prior to full maturity, the Rule of 78 methodology is applied and the borrower is refunded accordingly.

We rely on a diversified set of funding sources for the loans we make to our customers. Our primary source of financing has historically been a line of credit at a bank collateralized by our loan receivables and our other assets. We receive additional funding from unsecured subordinate noteholders that pays monthly interest to the investors. We have also used proceeds from operating cash flow to fund loans in the past and continue to finance a portion of our outstanding loans with these funds. See Liquidity and Capital Resources for additional information regarding our financing strategy.

The Company's main source of funding is its line of credit, which represented approximately 66% ($49,233,077) of its capital and total liabilities as of December 31, 2025. As of December 31, 2025, the Company's subordinated notes payable and other loans represented approximately 16% ($11,949,853) of the Company's capital and total liabilities, operating liabilities provide approximately 7% ($5,173,808) of the Company's capital and total liabilities, preferred equity provides approximately 2% ($1,660,000) of the Company's capital and total liabilities, and equity in retained earnings and common paid-in capital represents the remaining 9% ($6,800,219) of the Company's capital and total liabilities.

Key Financial and Operating Metrics

We regularly monitor a series of metrics in order to measure our current performance and project our future performance. These metrics aid us in developing and refining our growth strategies and making strategic decisions.

		As of or for the Years Ended December 31,
		2025				2024
Gross Revenue		$	12,469,770			$	12,143,143
Originations		$	158,136,311			$	149,509,349
Interest Earned Rate			17.9	%			17.8	%
Cost of Funds Rate, Gross			7.13	%			8.36	%
Cost of Funds Rate, Net			5.35	%			6.27	%
Reserve Ratio			2.43	%			2.78	%
Provision Rate			0.80	%			0.84	%
Return on Assets			1.56	%			1.35	%
Return on Equity			17.58	%			16.57	%

Gross Revenue

Gross Revenue represents the sum of interest and finance income, associated fees and other revenue.

Originations

Originations represent the total principal amount of Loans made during the period.

Interest Earned Rate

The Interest Earned Rate is the average annual percentage interest rate earned on new loans.

Cost of Funds Rate, Gross

Cost of Funds Rate, Gross is calculated as interest expense divided by average debt outstanding for the period.

Cost of Funds Rate, Net

Cost of Funds Rate, Net is calculated as interest expense divided by average debt outstanding for the period, net of the interest related tax benefit.

Reserve Ratio

Reserve Ratio is our allowance for credit losses at the end of the period divided by the total amount of principal outstanding on Loans at the end of the period. It excludes net deferred origination costs and associated fees.

Provision Rate

Provision Rate equals the provision for credit losses for the period divided by originations for the period. Because we reserve for probable credit losses inherent in the portfolio upon origination, this rate is significantly impacted by the expectation of credit losses for the period's originations volume. This rate is also impacted by changes in loss expectations for contract receivables originated prior to the commencement of the period.

Return on Assets

Return on Assets is calculated as annualized net income (loss) attributable to common stockholders for the period divided by average total assets for the period.

Return on Equity

Return on Equity is calculated as annualized net income (loss) attributable to common stockholders for the period divided by average stockholders' equity attributable to common stockholders for the period.

RESULTS of OPERATIONS

Results of Operations for the Year ended December 31, 2025 Compared to the Year ended December 31. 2024

Summary of Comparative Results
		For the years ended
		December 31, 2025				December 31, 2024				Increase/ (Decrease) ($)				Increase/ (Decrease) (%)
Revenues:
Finance Charges		$	10,979,188		$		10,549,453				429,735				4.1	%
Late Charges			1,129,309				1,209,614				(80,305	)			(6.6	%)
Origination Charges			361,273				384,076				(22,803	)			(5.9	%)
Gross Revenue			12,469,770				12,143,143				326,627				2.7	%
Expenses:
Interest			4,106,382				4,407,653				(301,271	)			(6.8	%)
Salaries and wages			2,206,730				2,118,609				88,121				4.2	%
Commissions			1,797,196				1,449,676				347,520				24.0	%
Provision for credit losses			1,261,034				1,254,525				6,509				0.5	%
Professional fees			281,944				372,162				(90,218	)			(24.2	%)
Postage			123,324				113,529				9,795				8.6	%
Insurance			174,188				170,959				3,229				1.9	%
Other operating expenses			926,717				935,891				(9,174	)			(1.0	%)
Total costs and expenses			10,877,515				10,823,004				54,511				0.5	%
Income before income taxes			1,592,255				1,320,139				272,116				20.6	%
Provision for income taxes			378,295				340,146				38,149				11.2	%
Net income			1,213,960				979,993				233,967				23.9	%

Revenue

Revenue increased by 2.7% overall or $326,627 to $12,469,770 for the year ended December 31, 2025 from $12,143,143 for the year ended December 31, 2024. The increase in revenue was due to a 4.1% or $429,735 increase in finance charges, partially offset by a 6.6% or $80,305 decrease in revenue from late charges and a 5.9% or $22,803 decrease in origination charges. Revenue from finance charges comprised 88.0% of overall revenue for the year ended December 31, 2025.

During the year ended December 31, 2025 compared to the year ended December 31, 2024, the company financed an additional $8,626,962 in new loan originations, an increase of 5.8%. This increase was due largely to increased marketing efforts throughout our established and new states, primarily by hiring additional marketing representatives in Florida and the Midwest. The Company also noted a 2,226 increase in the quantity of loan originations to 27,020 new loans for the year ended December 31, 2025 as compared to 24,794 for the year ended December 31, 2024. The quantity of loan originations is directly correlated to origination charge revenue, as the Company immediately recognizes an origination fee on substantially all new loans.

Under the terms of the line of credit agreement, the loan receivables and our other assets provide the collateral for the loan. As the receivables increase, driven by new sales, the company has greater borrowing power, giving it the opportunity to generate additional sales. In September 2025, the Company increased its line of credit from $50,000,000 to $75,000,000, with an additional $40 million accordion feature, and extended the maturity until September 2028. See Future Cash Requirements for the Company's strategy regarding its line of credit.

Expenses

Expenses increased by 0.5% or $54,511 to $10,877,515 for the year ended December 31, 2025 from $10,823,004 for the year ended December 31, 2024.

The increase in expenses was primarily due to increases in the following categories:

	·	$347,520 increase in commission expense as a result of competitive forces within agent relations.
	·	$88,121 increase in salaries and wages expense as a result of the hiring of additional marketing representatives in the Midwest, performance-bonus accruals, and increased base salaries and wages for our office staff.

The increase in expenses was partially offset primarily by a decrease in the following category:

	·	$301,271 decrease in interest expense as a result of decreases in the line of credit interest rate. Due to benchmark interest rate decreases adopted by the Federal Reserve Board at the end of 2024, interest rates throughout the marketplace have decreased accordingly. The benchmark interest rate decreased again in September and December 2025, which will have a greater positive impact in the year ended December 31, 2026. Furthermore, in September 2025, the Company executed an extension on its line of credit, which decreased the interest rate margin by an average of 65 basis points. Our line of credit features a variable interest rate based on one-month SOFR. As of December 31, 2025 and 2024, our line of credit's interest rate was 5.97% and 7.30%, respectively.
	·	$90,218 decrease in professional fees primarily related to the termination of a consulting agreement in December 2024.

Income before Taxes

Income before taxes increased by $272,116 to $1,592,255 for the year ended December 31, 2025 from $1,320,139 for the year ended December 31, 2024. This increase was attributable to the net increases and decreases as discussed above.

Income Tax Provision

Income tax provision increased $38,149 to $378,295 for the year ended December 31, 2025 from $340,146 for the year ended December 31, 2024. This increase was primarily attributable to the increase in taxable income.

Net Income

Net income increased by $233,967 to $1,213,960 for the year ended December 31, 2025 from $979,993 for the year ended December 31, 2024. This increase was attributable to the $272,116 increase in income before taxes, partially offset by the $38,149 increase in the provision for income taxes.

LIQUIDITY and CAPITAL RESOURCES as of December 31, 2025

We had $10,970 of cash and a working capital surplus of $15,124,071 at December 31, 2025. A significant working capital surplus is generally expected through the normal course of business due primarily to the difference between the balance in loan receivables and the related line of credit liability. As discussed in the Revenues section, the Company's line of credit is currently the primary source of operating funds. In September 2025, the Company renewed and amended its agreement with First Horizon Bank, for a three-year $75,000,000 line of credit with an additional $40,000,000 uncommitted accordion feature. The terms of the amended line of credit include an interest rate based on the 30-day SOFR rate plus a margin of 2.10%, with a minimum rate of 2.60%. We anticipate that the interest rate we pay on our revolving credit agreement may decrease due to the recently adopted benchmark interest rate decreases by the Federal Reserve Board. Because of the short-term nature of our loans, we are not bound to any particular loan and its fixed interest rate for a long period of time. Based on our estimates and taking into account the risks and uncertainties of our plans, we believe that we will have adequate liquidity to finance and operate our business and repay our obligations as they become due in the next twelve months.

During the year ended December 31, 2025, the Company raised an additional $79,460 in subordinated notes payable - related parties and $720,682 in subordinated notes payable. During the year ended December 31, 2025, the Company repaid $490,000 of notes payable - related parties and $887,254 of notes payable. The Company utilizes its cash inflows from subordinated debt as a financing source before drawing additionally from the line of credit.

Future Cash Requirements

As the Company anticipates its growth patterns to continue, a larger line of credit is paramount to fueling this growth. The Company's line of credit is $75,000,000 and its maturity on its line of credit facility September 25, 2028. Extended maturity provides stability for the Company's future cash requirements.

Uses of Liquidity and Capital Resources

We require cash to fund our operating expenses and working capital requirements, including costs associated with our premium finance loans, capital expenditures, debt repayments, acquisitions (if any), pursuing market expansion, supporting sales and marketing activities, and other general corporate purposes. While we believe we have sufficient liquidity and capital resources to fund our operations and repay our debt, we may elect to pursue additional financing activities such as refinancing or expanding existing debt or pursuing other debt or equity offerings to provide flexibility with our cash management and provide capital for potential acquisitions.

Off-balance Sheet Arrangements

None.

Contractual Obligations

As of December 31, 2025, the Company was contractually obligated as follows:

		Payments Due by Period
		Total				Less than 1 Year				1 - 3 Years				3 - 5 Years				More than 5 Years
Line of credit (1)		$	49,233,077			$	49,233,077			$	-			$	-			$	-
Subordinated notes payable			11,455,425				3,709,799				7,403,137				342,489				-
Capital lease obligations			13,518				13,518				-				-				-
Operating lease obligations			151,823				107,326				44,497				-				-
Purchase obligations			-				-				-				-				-
Other long-term obligations			-				-				-				-				-
Total contractual obligations		$	60,853,843			$	53,063,720			$	7,447,634			$	342,489			$	-

(1)

Although the maturity of this line of credit is September 25, 2028, the Company repays principal amounts on its line of credit daily in the normal course of business. Net cash receipts are deposited into a locked account with its primary lender to pay down the principal balance on a daily basis.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We consider the following to be our most critical accounting policy because it involves critical accounting estimates and a significant degree of management judgment:

Allowance for credit losses

We are subject to the risk of loss associated with our borrowers' inability to fulfill their payment obligations, the risk that we will not collect sufficient unearned premium refunds on the cancelled policies on the defaulted loans to fully cover the unpaid loan principal and the risk that payments due us from insurance agents and brokers will not be paid.

In developing a measurement of credit loss, institutions are required to segment financial assets into pools that share similar risk characteristics. The Company retains a third-party service provider to analyze its loan portfolio and create a financial model to better estimate its allowance for credit losses within the context of ASC 326, "Financial Instruments - Credit Losses". Management, along with their service provider, performs an annual analysis to assist with the determination process of how financial assets should be segregated by risk. Based on this internal risk analysis performed on the Company's historical datasets, assets are designated into asset classes based on asset codes and other credit quality indicators to provide structure based on similar risk characteristics or areas of risk concentration. Management, at the recommendation of the service provider, updated its allowance estimation model by including portfolio segmentation and the application of a separate methodology for each portfolio segment. The Company classifies its portfolio into two segments, (1) Due from Insured and (2) Due from Insurance Carrier. The segmentation is based on the respective payment and risk characteristics of each portfolio segment. The Company develops a systematic methodology to determine its allowance for credit losses at the portfolio segment level.

The Company utilized the vintage Probability of Default (PD) method for determining expected future credit losses for the Due from Insured portfolio segment. PD is a measure of the likelihood that a borrower will default on an asset or other financial obligation. Default refers to the failure by the borrower to make scheduled payments. Defaults are tracked historically by the percentage of assets in default to assets remaining in the pool by vintage cohort based on month after origination. Additionally, Loss Given Default (LGD) is a measure of the expected loss on a loan or asset in the event of default by the borrower. In other words, it is the amount of money that a lender is likely to lose if the borrower fails to make scheduled payments on the asset. The expectation of future defaults and loss given default are used as the basis for the allowance for credit losses on each asset by segment. The asset level ACLs are then aggregated by asset segment for reporting purposes.

The Company utilized the reporting period loss rate discounted cash flow method for determining expected future credit losses for the Due from Insurance Carrier portfolio segment. In a DCF model, projected cash flows by asset are adjusted for charge-offs, prepayments and amortization are discounted to their present value using the effective interest rate. The effective interest rate used in a DCF model is based on the stated rate that is adjusted for deferred fees and costs, and premiums and discounts. The technique considers future cash flows, adjusted for potential charge-off and prepayment activity, based on the Company's own historical experience. The difference between the discounted cash flow and the current amortized cost basis of the asset represents the allowance for credit losses (ACL). These asset-level ACLs are then aggregated for reporting purposes at the segment level. In a reporting period loss rate model, historical data is viewed from an historical reporting period perspective and grouped into segments that share similar characteristics, such as asset type, and credit quality. This allows the model to capture the unique cash flow profile of each segment over the contractual term of each pool.

Stock-Based Compensation

We account for stock-based compensation by measuring and recognizing as compensation expense the fair value of all share-based payment awards made to directors, executives, employees and consultants, including employee stock options related to our 2019 Equity Incentive Plan and stock warrants based on estimated grant date fair values. The determination of fair value involves a number of significant estimates. We use the Black Scholes option pricing model to estimate the value of employee stock options and stock warrants, which requires a number of assumptions to determine the model inputs. These include the expected volatility of our stock and employee exercise behavior which are based expectations of future developments over the term of the option.