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Net of income tax benefit of $0 for the three months ended March 31, 2026 and March 31, 2025. attributable to instrument-specific credit risk Other segment items in the table above for each reportable segment include bank charges, bad debt expense, occupancy expenses, depreciation expense, licenses and taxes, general overhead expenses and miscellaneous income. Potentially dilutive securities consist of unvested restricted stock awards and warrants, calculated using the treasury stock method, and convertible preferred stock, using the if-converted method. 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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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock, par value $0.01 per share			KFS			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.

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KINGSWAY FINANCIAL SERVICES INC.



Table Of Contents
PART I - FINANCIAL INFORMATION	3
ITEM 1. FINANCIAL STATEMENTS	3
Consolidated Balance Sheets as of March 31, 2026 (unaudited) and December 31, 2025	3
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 Shareholders' Equity for the Three Months Ended March 31, 2026 and 2025 (unaudited)	6
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	39
PART II - OTHER INFORMATION	40
ITEM 1. LEGAL PROCEEDINGS	40
ITEM 1A. RISK FACTORS	40
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	40
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	40
ITEM 4. MINE SAFETY DISCLOSURES	40
ITEM 5. OTHER INFORMATION	40
ITEM 6. EXHIBITS	41
SIGNATURES	42

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KINGSWAY FINANCIAL SERVICES INC.

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	$	7,268		$	8,306
Restricted cash		7,781			7,965
Investments (including $36,945 and $36,765, respectively, at fair value) (Note 6)		37,123			36,943
Service fee receivable, net of allowance for credit losses of $1,321 and $1,113, respectively		16,431			13,840
Other current assets		9,506			9,449
Total current assets		78,109			76,503

Deferred contract costs, noncurrent		12,170			12,037
Property and equipment, net of accumulated depreciation of $2,908 and $2,587, respectively		6,423			6,354
Goodwill		69,808			69,130
Intangible assets, net of accumulated amortization of $36,165 and $34,013, respectively		50,913			52,265
Other assets		14,789			15,210
Total Assets	$	232,212		$	231,499

Liabilities, Redeemable Preferred Stock, Redeemable Noncontrolling Interest and Shareholders' Equity
Current liabilities:
Accrued expenses and other current liabilities	$	26,493		$	25,134
Deferred service fees		42,626			46,715
Short-term and current portion of long-term debt		15,847			11,709
Total current liabilities		84,966			83,558

Deferred service fees		45,793			40,439
Long-term debt (including $13,148 and $13,698, respectively, at fair value) (Note 10)		55,307			59,003
Other liabilities, noncurrent		10,533			10,862
Net deferred income tax liabilities		3,015			3,225
Total Liabilities		199,614			197,087
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		16,250			16,250
Redeemable noncontrolling interest in consolidated subsidiary		808			792

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		296			296
Additional paid-in capital		395,168			394,848
Treasury stock, at cost; 1,025,927 outstanding at March 31, 2026 and December 31, 2025		(6,545	)		(6,545	)
Accumulated deficit		(376,163	)		(373,370	)
Accumulated other comprehensive income (loss)		395			(60	)
Shareholders' equity attributable to common shareholders		13,151			15,169
Noncontrolling interests in consolidated subsidiaries		2,389			2,201
Total Shareholders' Equity		15,540			17,370
Total Liabilities, Redeemable Preferred Stock, Redeemable Noncontrolling Interest and Shareholders' Equity	$	232,212		$	231,499

See accompanying notes to unaudited consolidated financial statements.

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KINGSWAY FINANCIAL SERVICES INC.

Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

	Three months ended March 31,
	2026			2025

Revenue	$	38,959		$	28,349
Cost of services		21,624			16,197
Gross profit		17,335			12,152

Selling, general and administrative expenses		16,529			12,722
Depreciation expense		321			144
Operating income (loss)		485			(714	)

Other income (expenses), net:
Interest and investment income, net		726			310
Interest expense		(1,411	)		(1,230	)
Amortization and impairment of intangible assets		(2,352	)		(1,766	)
Other income, net		237			44
Total other expenses, net		(2,800	)		(2,642	)
Loss before income tax benefit		(2,315	)		(3,356	)
Income tax benefit		(47	)		(264	)
Net loss		(2,268	)		(3,092	)
Less: Net income attributable to:
Noncontrolling interests in consolidated subsidiaries		188			125
Redeemable noncontrolling interests in consolidated subsidiaries		16			—
Less: Dividends on preferred stock		321			222
Net loss attributable to common shareholders	$	(2,793	)	$	(3,439	)

Loss per share attributable to common shareholders:
Basic	$	(0.10	)	$	(0.13	)
Diluted	$	(0.10	)	$	(0.13	)
Weighted-average shares outstanding (in ‘000s):
Basic		28,626			27,102
Diluted		28,626			27,102

See accompanying notes to unaudited consolidated financial statements.

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KINGSWAY FINANCIAL SERVICES INC.

Consolidated Statements of Comprehensive Loss

(in thousands)

(Unaudited)

	Three months ended March 31,
	2026			2025

Net loss	$	(2,268	)	$	(3,092	)
Other comprehensive income, net of taxes(1):
Unrealized gains (losses) on available-for-sale investments:
Unrealized (losses) gains arising during the period		(180	)		389
Change in fair value of debt attributable to instrument-specific credit risk:
Unrealized gains arising during the period		635			14
Other comprehensive income, net of taxes(1):		455			403
Comprehensive loss		(1,813	)		(2,689	)
Less: comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interests in consolidated subsidiaries		204			125
Comprehensive loss attributable to common shareholders	$	(2,017	)	$	(2,814	)

(1) Net of income tax benefit of $0 for the three months ended March 31, 2026 and March 31, 2025.

See accompanying notes to unaudited consolidated financial statements.

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KINGSWAY FINANCIAL SERVICES INC.

Consolidated Statements of Shareholders' Equity

(in thousands, except share data)

(Unaudited)

	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		Total Shareholders' Equity
	Shares		Amount
Balance, December 31, 2025		28,625,744	$	296	$	394,848	$	(6,545	)	$	(373,370	)	$	(60	)		15,169		$	2,201	$	17,370
Net (loss) income		—		—		—		—			(2,472	)		—			(2,472	)		188		(2,284	)
Preferred stock dividends		—		—		—		—			(321	)		—			(321	)		—		(321	)
Other comprehensive income		—		—		—		—			—			455			455			—		455
Stock-based compensation		—		—		320		—			—			—			320			—		320
Balance, March 31, 2026		28,625,744	$	296	$	395,168	$	(6,545	)	$	(376,163	)	$	395		$	13,151		$	2,389	$	15,540

	Three Months Ended March 31, 2025
	Common Stock					Additional Paid-in Capital		Treasury Stock			Accumulated Deficit			Accumulated Other Comprehensive Loss			Shareholders' Equity Attributable to Common Shareholders			Noncontrolling Interests in Consolidated Subsidiaries		Total Shareholders' Equity
	Shares			Amount
Balance, December 31, 2024		27,136,749		$	281	$	376,503	$	(6,200	)	$	(361,453	)	$	(718	)	$	8,413		$	1,639	$	10,052
Net (loss) income		—			—		—		—			(3,217	)		—			(3,217	)		125		(3,092	)
Preferred stock dividends		—			—		—		—			(222	)		—			(222	)		—		(222	)
Repurchases of common stock		(42,900	)		—		—		(345	)		—			—			(345	)		—		(345	)
Other comprehensive income		—			—		—		—			—			403			403			—		403
Stock-based compensation		—			—		421		—			—			—			421			—		421
Balance, March 31, 2025		27,093,849		$	281	$	376,924	$	(6,545	)	$	(364,892	)	$	(315	)	$	5,453		$	1,764	$	7,217

See accompanying notes to unaudited consolidated financial statements.

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KINGSWAY FINANCIAL SERVICES INC.

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Three months ended March 31,
		2026			2025
Cash provided by (used in):

Operating activities:
Net loss		$	(2,268	)	$	(3,092	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense			2,472			1,826
Stock-based compensation expense			320			421
Net realized and unrealized investment gains			(323	)		70
Impairment of intangible assets			200			84
Deferred income taxes			(210	)		(348	)
Other non-cash items			183			91
Changes in operating assets and liabilities:
Service fee receivable, net, adjusted for assets acquired in 2025			(2,591	)		(1,442	)
Deferred contract costs			(158	)		(264	)
Other assets, adjusted for assets acquired in 2025			(154	)		176
Deferred service fees			1,265			1,228
Other, net, adjusted for liabilities acquired in 2025			1,256			(548	)
Net cash used in operating activities			(8	)		(1,798	)

Investing activities:
Proceeds from sales and maturities of fixed maturities			2,149			3,569
Purchases of fixed maturities			(2,499	)		(3,236	)
Net working capital settlement and escrow releases related to acquisitions			559			—
Acquisition of businesses, net of cash acquired			(840	)		(3,520	)
Net purchases of property and equipment			(390	)		(63	)
Other, net			27			68
Net cash used in investing activities			(994	)		(3,182	)

Financing activities:
Proceeds from issuance of preferred stock			—			6,000
Cash paid for repurchase of common stock			—			(345	)
Payment of preferred stock dividends			(328	)		(166	)
Payment of contingent consideration from acquisition			—			(420	)
Principal proceeds from debt, net of debt issuance costs of zero in 2026 and $38 in 2025			2,118			9,267
Principal payments on debt			(2,010	)		(8,532	)
Net cash (used in) provided by financing activities			(220	)		5,804
Net (decrease) increase in cash and cash equivalents and restricted cash			(1,222	)		824
Cash and cash equivalents and restricted cash at beginning of period			16,271			13,136
Cash and cash equivalents and restricted cash at end of period		$	15,049		$	13,960

	March 31,
	2026		2025
Reconciliation of cash and cash equivalents and restricted cash to the consolidated balance sheets:
Cash and cash equivalents	$	7,268	$	6,371
Restricted cash		7,781		7,589
Cash and cash equivalents and restricted cash per statements of cash flows	$	15,049	$	13,960

	Three months ended March 31,
	2026		2025
Non-cash financing activities:
Notes payable issued for acquisition of businesses, net of discount	$	840	$	1,100

See accompanying notes to unaudited consolidated financial statements.

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

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.

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

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.

In December 2025, the FASB issued ASU 2025- 11, Interim Reporting (Topic 270): Narrow-Scope Improvements ("ASU 2025- 11"), which clarifies the scope and application of interim reporting requirements. The amendments enhance guidance on the form and content of interim financial statements, and consolidate required interim disclosures across the Codification, including a new disclosure principle requiring entities to describe events or changes since the last annual reporting period that have a material impact on interim results. ASU 2025- 11 is effective for interim periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of this guidance on its interim consolidated financial statements.

In December 2025, the FASB issued ASU 2025- 12 Codification Improvements ("ASU 2025- 12"), which includes technical corrections, clarifications, and other minor amendments intended to improve the consistency and usability of the FASB Accounting Standards Codification. The amendments address a variety of topics and are not intended to change existing accounting conclusions. ASU 2025- 12 is effective for annual periods beginning after December 15, 2026, and interim periods within those fiscal years. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

NOTE 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.

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

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:

(in thousands)	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	$	3,829	$	20,201		$	2,652		$	4,040
Working capital adjustment		31		(27	)		(135	)		(47	)
Seller note		1,100		—			420			420
Release of indemnity escrow		—		(786	)		—			—
Seller phantom equity awards		—		3,328			—			—
Contingent consideration		—		—			790			190
Total purchase price	$	4,960	$	22,716		$	3,727		$	4,603

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.

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

The following table summarizes the allocation of the purchase price and the estimated fair values of the assets acquired and liabilities assumed for our acquisitions:

(in thousands)	Bud's Plumbing		Roundhouse		Advanced Plumbing		Southside Plumbing
	March 14, 2025		July 1, 2025		August 1, 2025		August 14, 2025
Purchase price	$	4,960	$	22,716	$	3,727	$	4,603

Cash and cash equivalents	$	308	$	333	$	23	$	94
Service fee receivable		46		4,259		465		334
Property and equipment		173		2,355		610		1,087
Intangible asset not subject to amortization - trade name		3,100		1,220		1,600		1,100
Intangible asset subject to amortization - customer relationships		500		11,000		1,100		1,000
Other assets - other receivables, inventory and prepaid expenses		226		894		130		58
Total assets	$	4,353	$	20,061	$	3,928	$	3,673

Accrued expenses and other liabilities	$	388	$	2,901	$	718	$	231
Debt		—		—		—		498
Income taxes payable		—		302		—		—
Net deferred income tax liabilities		—		2,927		—		—
Total liabilities	$	388	$	6,130	$	718	$	729

Total identifiable assets and liabilities	$	3,965	$	13,931	$	3,210	$	2,944

Redeemable noncontrolling interest	$	—	$	—	$	—	$	875

Excess purchase price allocated to goodwill	$	995	$	8,785	$	517	$	2,534

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:

(in thousands)		March 31, 2026		December 31, 2025
Available-for-sale fixed maturities, at fair value (amortized cost of $37,365 and $37,005, respectively)	$	36,945	$	36,765
Limited liability investments (a)		649		649
Limited liability investment, at fair value (a)		3,770		3,476
Investments in private companies, at adjusted cost (a)		575		575
Short-term investments, at cost which approximates fair value		178		178
Total investments	$	42,117	$	41,643

(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:

(in thousands)	March 31, 2026
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturities:
U.S. government, government agencies and authorities	$	13,799	$	38	$	65	$	13,772
States, municipalities and political subdivisions		1,438		2		17		1,423
Mortgage-backed		10,535		38		256		10,317
Asset-backed		1,292		5		12		1,285
Corporate		10,301		32		185		10,148
Total fixed maturities	$	37,365	$	115	$	535	$	36,945

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

(in thousands)	December 31, 2025
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturities:
U.S. government, government agencies and authorities	$	13,441	$	97	$	47	$	13,491
States, municipalities and political subdivisions		1,788		3		20		1,771
Mortgage-backed		9,965		79		226		9,818
Asset-backed		1,365		10		11		1,364
Corporate		10,446		58		183		10,321
Total fixed maturities	$	37,005	$	247	$	487	$	36,765

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.

(in thousands)	March 31, 2026
	Amortized Cost		Estimated Fair Value
Due in one year or less	$	6,903	$	6,836
Due after one year through five years		22,408		22,322
Due after five years through ten years		3,431		3,386
Due after ten years		4,623		4,401
Total	$	37,365	$	36,945

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.

(in thousands)	March 31, 2026
	Less than 12 Months				Greater than 12 Months				Total
	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Fixed maturities:
U.S. government, government agencies and authorities	$	2,185	$	16	$	5,197	$	49	$	7,382	$	65
States, municipalities and political subdivisions		100		—		939		17		1,039		17
Mortgage-backed		1,687		18		3,923		238		5,610		256
Asset-backed		337		1		241		11		578		12
Corporate		1,658		13		5,604		172		7,262		185
Total fixed maturities	$	5,967	$	48	$	15,904	$	487	$	21,871	$	535

(in thousands)	December 31, 2025
	Less than 12 Months				Greater than 12 Months				Total
	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Fixed maturities:
U.S. government, government agencies and authorities	$	2,477	$	21	$	2,370	$	26	$	4,847	$	47
States, municipalities and political subdivisions		300		—		1,088		20		1,388		20
Mortgage-backed		336		1		3,433		225		3,769		226
Asset-backed		—		—		417		11		417		11
Corporate		408		—		6,113		183		6,521		183
Total fixed maturities	$	3,521	$	22	$	13,421	$	465	$	16,942	$	487

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.

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

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:

(in thousands)	Three months ended March 31,
	2026		2025
Net investment income	$	403	$	380
Net realized gains (losses)		11		(71	)
Gain on change in fair value of limited liability investment, at fair value		312		1
Interest and investment income, net	$	726	$	310

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:

(in thousands)	Three months ended March 31,
	2026			2025
Investment income:
Interest from fixed maturities	$	354		$	336
Dividends		10			10
Other		71			70
Gross investment income		435			416
Investment expenses		(32	)		(36	)
Net investment income	$	403		$	380

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:

(in thousands)	Three months ended March 31,
	2026		2025
Available-for-sale fixed maturities:
Gross realized gains	$	—	$	—
Gross realized losses		—		(72	)
Net realized losses on available-for-sale fixed maturities		—		(72	)
Limited liability investment, at fair value		10		—
Investments in private companies		1		1
Net realized gains (losses)	$	11	$	(71	)

Proceeds from sales of available-for-sale fixed maturities were zero for the three months ended March 31, 2026 and March 31, 2025.

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

NOTE 7 GOODWILL

The following table summarizes the goodwill activity for the three months ended March 31, 2026:

(in thousands)	Kingsway Search Xcelerator		Extended Warranty		Total
Balance, December 31, 2025	$	37,977	$	31,153	$	69,130
Acquisition		678		—		678
Balance, March 31, 2026	$	38,655	$	31,153	$	69,808

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:

(in thousands)	March 31, 2026
	Gross Carrying Value		Accumulated Amortization		Accumulated Impairment Losses		Net Carrying Value
Intangible assets subject to amortization:
Customer relationships	$	66,012	$	36,002	$	—	$	30,010
Developed technology		651		163		—		488
Intangible assets not subject to amortization:
Trade names		23,437		—		3,022		20,415
Total	$	90,100	$	36,165	$	3,022	$	50,913

(in thousands)	December 31, 2025
	Gross Carrying Value		Accumulated Amortization		Accumulated Impairment Losses		Net Carrying Value
Intangible assets subject to amortization:
Customer relationships	$	65,112	$	33,867	$	—	$	31,245
Developed technology		651		146		—		505
Intangible assets not subject to amortization:
Trade names		23,337		—		2,822		20,515
Total	$	89,100	$	34,013	$	2,822	$	52,265

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.

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

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

Property and equipment at March 31, 2026 and December 31, 2025 are comprised as follows:

(in thousands)	March 31, 2026
	Cost		Accumulated Depreciation		Carrying Value
Leasehold improvements	$	540	$	376	$	164
Furniture and fixtures		259		214		45
Computer hardware		2,094		1,281		813
Medical equipment		829		411		418
Vehicles		3,001		414		2,587
Machinery and equipment		2,608		212		2,396
Total	$	9,331	$	2,908	$	6,423

(in thousands)	December 31, 2025
	Cost		Accumulated Depreciation		Carrying Value
Leasehold improvements		526		346		180
Furniture and fixtures		262		211		51
Computer hardware		2,088		1,184		904
Medical equipment		746		378		368
Vehicles		2,924		278		2,646
Machinery and equipment		2,395		190		2,205
Total	$	8,941	$	2,587	$	6,354

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:

(in thousands)	March 31, 2026				December 31, 2025
	Principal		Carrying Value		Principal		Carrying Value
Bank loans:
KSX Term Loans	$	35,481	$	34,926	$	36,135	$	35,551
KSX Revolvers		2,228		2,228		2,053		2,053
Extended Warranty Term Loan and DDTL		14,716		14,655		15,504		15,438
Extended Warranty Revolver		3,000		3,000		2,000		2,000
Total bank loans		55,425		54,809		55,692		55,042
Notes payable:
KSX Notes Payable		2,041		1,844		1,164		1,016
KSX Vehicle Loans		617		617		630		630
KSX Equipment Loans		736		736		326		326
Total notes payable		3,394		3,197		2,120		1,972
Subordinated debt		15,000		13,148		15,000		13,698
Total Debt	$	73,819	$	71,154	$	72,812	$	70,712

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.

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

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:

(in thousands)	Principal Maturities
2026	$	10,193
2027		12,108
2028		9,104
2029		12,140
2030		6,813
Thereafter		23,461
Total	$	73,819

(a) Bank loans - KSX:

Ravix

As part of the acquisition of Ravix Group, Inc. ("Ravix") on October 1, 2021, Ravix became a wholly owned subsidiary of Ravix Acquisition LLC ("Ravix LLC"), and together they borrowed from a bank a principal amount of $6.0 million in the form of a term loan, and established a $1.0 million revolver to finance 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 July 23, 2024, Ravix, Ravix LLC and CSuite entered into a second amendment to the original Ravix term loan that provides for: (1) a principal prepayment of the original Ravix term loan of $1.5 million, partially financed by borrowing $0.5 million under the revolver and the remainder to be paid with available cash; and (2) amending the loan amortization payment schedule to provide for equal monthly payments through the loan maturity date.
	•	On February 7, 2025, Ravix, Ravix LLC and CSuite entered into a 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).
	•	On January 2, 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.

As a result of the fourth amendment, the Ravix term loan and revolver have an annual interest rate equal to the Prime Rate plus 0.5%. At March 31, 2026, the interest rate was 7.25%.

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.

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

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.

Roundhouse

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.

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

(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 May 24, 2024, KWH entered into a third amendment that provides for: (1) a new term loan in the principal amount of $15.0 million, with a maturity date of May 24, 2029; and (2) a new DDTL in a principal amount of up to $6.0 million, with a maturity date of May 24, 2029. All or any portion of the DDTL, subject to a $2.0 million minimum draw amount, could be requested at any time in up to three advances through May 24, 2026. In connection with the third amendment, KWH used the proceeds from the amended loan to repay the following outstanding borrowings: (1) $9.6 million related to the original term loan; (2) $1.0 million related to the revolver; and (3) $3.1 million related to the KWH DDTL. The amended loan has an annual interest rate equal to SOFR, having a floor of 0.75%, plus spreads ranging from 2.62% to 3.12%. At March 31, 2026, the interest rate was 6.80%. During the third and fourth quarters of 2024, $6.0 million was borrowed under the amended KWH DDTL and $1.0 million was drawn on the KWH revolver. As of March 31, 2026 and December 31, 2025, the amended KWH DDTL is fully drawn.
	•	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:

	•	Ravix on January 2, 2026, principal amount of $0.9 million in the form of a promissory note, in connection with an acquisition;
	•	Advanced Plumbing on August 1, 2025, principal amount of $0.5 million in the form of a promissory note; and
	•	Southside Plumbing on August 14, 2025, principal amount of $0.5 million in the form of a promissory note.

(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.

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

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:

(in thousands)	Three Months ended March 31,
	2026			2025
Decrease in fair value included in other comprehensive income (a)	$	(635	)	$	(14	)
Loss (gain) on change in fair value included in other income, net in the consolidated statement of operations	$	85		$	(20	)
Decrease in fair value of subordinated debt	$	(550	)	$	(34	)

(a)

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:

(in thousands)	Classification in Balance Sheet	March 31, 2026		December 31, 2025
Assets
Right of use	Other assets	$	6,774	$	7,014

Liabilities
Lease liability, current	Accrued expenses and other current liabilities		1,090		1,083
Lease liability, noncurrent	Other liabilities, noncurrent		5,972		6,221
Total lease liability		$	7,062	$	7,304

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:

(in thousands)	Three months ended March 31,
	2026		2025
Operating lease cost	$	404	$	193
Variable lease cost		59		56
Short-term lease cost		6		29

The annual maturities of lease liabilities as of March 31, 2026 were as follows:

(in thousands)	Lease Commitments
2026	$	1,165
2027		1,394
2028		1,131
2029		1,043
2030		1,020
2031 and thereafter		3,363
Total undiscounted lease payments		9,116
Imputed interest		2,054
Total lease liabilities	$	7,062

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

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:

(in thousands)	March 31, 2026		December 31, 2025
Accrued Expenses and Other Current Liabilities:
Accounts payable	$	3,908	$	3,629
Refund liability		4,861		4,654
Current lease liability		1,090		1,083
Other accrued liabilities		16,634		15,768
Total	$	26,493	$	25,134

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:

(in thousands)		Three months ended March 31,
		2026		2025

Vehicle service agreement fees	IWS, Geminus and PWI	$	15,982	$	14,894
Maintenance support service fees	Trinity		603		926
Warranty product commissions	Trinity		1,267		850
Business services consulting fees	Ravix, CSuite and Image Solutions		6,166		6,208
Healthcare services fees	SNS and DDI		4,411		4,592
Software license and support fees	SPI		1,041		591
Motor sales and repair service fees	Roundhouse		4,812		—
Skilled trades repair and service fees	Bud's Plumbing, Advanced Plumbing and Southside Plumbing		4,677		288
Total revenue		$	38,959	$	28,349

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

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.

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

Contract asset

Contract asset is included in the Company's consolidated balance sheets as of March 31, 2026 and December 31, 2025 as follows:

(in thousands)	Classification in Balance Sheet	March 31, 2026		December 31, 2025
Contract asset, current	Other current assets	$	634	$	112
Contract asset, noncurrent	Other assets		1,307		1,945
Total contract asset		$	1,941	$	2,057

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:

(in thousands)	Three Months Ended March 31, 2026
Balance, December 31, 2025	$	2,057
Contract asset additions		427
Amounts transferred to service fee receivables		(470	)
Adjustment of contract asset balances		(73	)
Balance, March 31, 2026	$	1,941

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.

Deferred service fees

The Company records deferred service fees resulting from contracts with customers when payment is received in advance of satisfying the performance obligations. Changes in deferred service fees for the three months ended March 31, 2026 were as follows:

(in thousands)	Three Months Ended March 31, 2026
Balance, December 31, 2025	$	87,154
Deferral of revenue		17,247
Recognition of deferred service fees		(15,982	)
Balance, March 31, 2026	$	88,419

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

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:

(in thousands)	Three months ended March 31, 2026									Three months ended March 31, 2025
	Costs to Obtain a Contract			Costs to Fulfill a Contract			Total			Costs to Obtain a Contract			Costs to Fulfill a Contract			Total
Balance at December 31, net	$	14,819		$	88		$	14,907		$	13,808		$	81		$	13,889
Additions		3,057			7			3,064			2,701			7			2,708
Amortization		(2,899	)		(7	)		(2,906	)		(2,439	)		(5	)		(2,444	)
Balance at March 31, net	$	14,977		$	88		$	15,065		$	14,070		$	83		$	14,153

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

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:

(in thousands)	Three months ended March 31,
	2026			2025
Income tax benefit at U. S. statutory income tax rate	$	(486	)	$	(705	)
Valuation allowance		338			417
Share-based payment awards		25			44
Earnings of noncontrolling interests		(43	)		(26	)
State and local income taxes, net of federal income tax effects		98			(16	)
Other		21			22
Income tax benefit	$	(47	)	$	(264	)

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;
	•	$1.7 million and $1.4 million of deferred income tax assets related to indefinite life tax attribute carryforwards; and
	•	$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:

(in thousands, except per share data)	Three months ended March 31,
	2026			2025
Numerator:
Net loss	$	(2,268	)	$	(3,092	)
Less: net income attributable to noncontrolling interests and redeemable noncontrolling interests		(204	)		(125	)
Less: dividends on preferred stock		(321	)		(222	)
Numerator used in calculating basic loss per share attributable to common shareholders	$	(2,793	)	$	(3,439	)
Numerator used in calculating diluted loss per share attributable to common shareholders	$	(2,793	)	$	(3,439	)

Denominator:
Weighted-average basic shares
Weighted-average common shares outstanding		28,626			27,102
Weighted-average diluted shares
Weighted-average common shares outstanding		28,626			27,102
Effect of potentially dilutive securities (a)
Stock options		—			—
Unvested restricted stock awards		—			—
Convertible preferred stock		—			—
Total weighted-average diluted shares		28,626			27,102

Basic loss per share attributable to common shareholders	$	(0.10	)	$	(0.13	)
Diluted loss per share attributable to common shareholders	$	(0.10	)	$	(0.13	)

(a)

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.

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

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.

The following weighted-average potentially dilutive securities are not included in the dilut ed loss per share calculations above because they would have had an antidilutive effect on the loss per share:

	Three months ended March 31,
	2026		2025
Stock options		265,000		265,000
Unvested restricted stock awards		320,920		443,302
Convertible preferred stock		1,710,526		1,500,000
Total		2,296,446		2,208,302

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		330,000		330,000	$	0.01	$	25.00	$	8,250		8.0	%	September 24, 2031		868,421	$	8,250
Class C Preferred	February 1, 2025		240,000		240,000	$	0.01	$	25.00	$	6,000		8.0	%	February 12, 2032		631,579	$	6,000
Class D Preferred	May 8, 2025		80,000		80,000	$	0.01	$	25.00	$	2,000		8.0	%	May 7, 2032		210,526	$	2,000

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.

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

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:

(in thousands)	Three Months Ended March 31,
	2026		2025

Class B Preferred	$	163	$	163
Class C Preferred		118		59
Class D Preferred		40		—
Total	$	321	$	222

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:

(in thousands)	Three Months Ended March 31, 2026
Balance, December 31, 2025	$	792
Net income attributable to redeemable noncontrolling interest		16
Balance, March 31, 2026	$	808

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.

(in thousands)	Three months ended March 31, 2026
	Unrealized Gains (Losses) on Available-for-Sale Investments			Foreign Currency Translation Adjustments			Change in Fair Value of Debt Attributable to Instrument-Specific Credit Risk		Total Accumulated Other Comprehensive (Loss) Income

Balance at December 31, 2025	$	(241	)	$	(3,286	)	$	3,467	$	(60	)

Other comprehensive (loss) income arising during the period		(180	)		—			635		455
Amounts reclassified from accumulated other comprehensive loss		—			—			—		—
Net current-period other comprehensive (loss) income		(180	)		—			635		455

Balance at March 31, 2026	$	(421	)	$	(3,286	)	$	4,102	$	395

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

(in thousands)	Three months ended March 31, 2025
	Unrealized Gains (Losses) on Available-for-Sale Investments			Foreign Currency Translation Adjustments			Change in Fair Value of Debt Attributable to Instrument-Specific Credit Risk		Total Accumulated Other Comprehensive Loss

Balance at December 31, 2024	$	(1,157	)	$	(3,286	)	$	3,725	$	(718	)

Other comprehensive income arising during the period		389			—			14		403
Amounts reclassified from accumulated other comprehensive loss		—			—			—		—
Net current-period other comprehensive income		389			—			14		403

Balance at March 31, 2025	$	(768	)	$	(3,286	)	$	3,739	$	(315	)

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).

Extended Warranty Segment

Extended Warranty includes the following subsidiaries of the Company: IWS, Geminus, PW I and Trinity (collectively, "Extended Warranty").

IWS is a licensed motor vehicle service agreement company and is a provider of after-market vehicle protection services distributed by credit unions 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.

PWI markets, sells and administers vehicle service agreements to used car buyers in 47 states via independent used car and franchise network of approved automobile and motorcycle dealer partners. PWI’s business model is supported by an internal sales and operations team.

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

Trinity sells HVAC, standby generator, commercial LED lighting and commercial refrigeration warranty products and provides equipment breakdown and maintenance support services to companies across the United States. As a seller of warranty products, Trinity markets and administers product warranty contracts for certain new and used products in the HVAC, standby generator, commercial LED lighting and commercial refrigeration industries throughout the United States. Trinity acts as an agent on behalf of the third-party insurance companies that underwrite and guaranty these warranty contracts. Trinity does not guaranty the performance underlying the warranty contracts it sells. As a provider of equipment breakdown and maintenance support services, Trinity acts as a single point of contact to its clients for both certain equipment breakdowns and scheduled maintenance of equipment. Trinity will provide such repair and breakdown services by contracting with certain HVAC providers.

Revenues and Operating Income by Reportable Segment

Revenues by reportable segment reconciled to consolidated revenues for the three months ended March 31, 2026 and March 31, 2025 were:

(in thousands)	Three months ended March 31,
	2026		2025
Revenues:
KSX	$	21,107	$	11,679
Extended Warranty		17,852		16,670
Total revenues	$	38,959	$	28,349

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:

	Three months ended March 31, 2026							Three months ended March 31, 2025
(in thousands)	KSX		Extended Warranty		Total			KSX			Extended Warranty		Total

Revenue	$	21,107	$	17,852	$	38,959		$	11,679		$	16,670	$	28,349

Less segment expenses:
Cost of services - salaries and benefits		6,767		7		6,774			5,110			5		5,115
Cost of sales - claims		—		6,330		6,330			—			5,910		5,910
Cost of services - commissions		—		3,182		3,182			(93	)		2,752		2,659
Cost of services - other		4,744		594		5,338			1,693			820		2,513
Salaries and benefits		3,319		4,588		7,907			1,747			4,063		5,810
Insurance expense		351		602		953			107			561		668
Professional fees		416		336		752			336			346		682
IT expense		458		391		849			336			312		648
Depreciation expense		265		47		312			97			38		135
Other segment items (a)		1,880		1,528		3,408			603			1,348		1,951
Total segment operating income	$	2,907	$	247	$	3,154		$	1,743		$	515	$	2,258
Interest and investment income, net						726								310
Selling, general and administrative expenses and other income not allocated to segments, net (b)						(2,432	)							(2,928	)
Interest expense						(1,411	)							(1,230	)
Amortization and impairment of intangible assets						(2,352	)							(1,766	)
Loss before income tax benefit						(2,315	)							(3,356	)
Income tax benefit						(47	)							(264	)
Net loss					$	(2,268	)						$	(3,092	)

(a)

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.

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

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.

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

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.

(in thousands)	March 31, 2026
	Fair Value Measurements at the End of the Reporting Period Using

			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Recurring fair value measurements:

Assets:
Fixed maturities:
U.S. government, government agencies and authorities	$	13,772	$	—	$	13,772	$	—
States, municipalities and political subdivisions		1,423		—		1,423		—
Mortgage-backed		10,317		—		10,317		—
Asset-backed		1,285		—		1,285		—
Corporate		10,148		—		10,148		—
Total fixed maturities		36,945		—		36,945		—
Limited liability investment, at fair value		3,770		—		—		3,770
Total assets	$	40,715	$	—	$	36,945	$	3,770

Liabilities:
Subordinated debt	$	13,148	$	—	$	13,148	$	—
Contingent consideration		980		—		—		980
Seller phantom equity awards		3,328		—		—		3,328
Total liabilities	$	17,456	$	—	$	13,148	$	4,308

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KINGSWAY FINANCIAL SERVICES INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2026

(in thousands)	December 31, 2025
	Fair Value Measurements at the End of the Reporting Period Using

			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Recurring fair value measurements:

Assets:
Fixed maturities:
U.S. government, government agencies and authorities	$	13,491	$	—	$	13,491	$	—
States municipalities and political subdivisions		1,771		—		1,771		—
Mortgage-backed		9,818		—		9,818		—
Asset-backed		1,364		—		1,364		—
Corporate		10,321		—		10,321		—
Total fixed maturities		36,765		—		36,765		—
Limited liability investment, at fair value		3,476		—		—		3,476
Total assets	$	40,241	$	—	$	36,765	$	3,476

Liabilities:
Subordinated debt	$	13,698	$	—	$	13,698	$	—
Contingent consideration		980		—		—		980
Seller phantom equity awards		3,328		—		—		3,328
Total liabilities	$	18,006	$	—	$	13,698	$	4,308

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:

(in thousands)	Three months ended March 31,
	2026			2025
Assets:
Limited liability investment, at fair value:
Beginning balance	$	3,476		$	2,859
Distributions received		(28	)		—
Realized gains included in net loss		10			—
Change in fair value of limited liability investment, at fair value included in net loss		312			1
Ending balance	$	3,770		$	2,860
Unrealized gains on limited liability investments, at fair value held at end of period:
Included in net loss	$	312		$	1
Included in other comprehensive income	$	—		$	—
Ending balance - assets	$	3,770		$	2,860
Liabilities:
Contingent consideration:
Beginning balance	$	980		$	—
Change in fair value of contingent consideration included in net loss		—			—
Ending balance	$	980		$	—
Unrealized gains recognized on contingent consideration liability held at end of period:
Seller phantom equity awards:
Beginning balance	$	3,328		$	—
Change in fair value of seller phantom equity award liability included in net loss		—			—
Ending balance	$	3,328		$	—
Ending balance - liabilities	$	4,308		$	—

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		*(in thousands)*	*Valuation Techniques*	*Unobservable Inputs*		*Input Value(s)*
Limited liability investment, at fair value	$	3,770	Market approach	Valuation multiples	1.0x - 9.0x
Contingent consideration	$	980	Option-based income approach	Discount rate	14.0%-17.0%
				Risk-free rate	3.64%-3.67%
				Expected volatility	28.0		%

KINGSWAY FINANCIAL SERVICES INC 10-Q