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Note 5 - Acquisitions and Discontinued Operations | 3 Months Ended
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Mar. 31, 2025
Notes to Financial Statements |
Business Combination, Disposal and Discontinued Operations Disclosure [Text Block] | NOTE 5 ACQUISITIONS A ND DISCONTINUED OPERATIONS
(a) | Business Combinations
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 $4.9 million, less certain escrowed amounts for purposes of indemnification claims and working capital adjustments. Bud's Plumbing, based in Evansville, Indiana, is a provider of various plumbing installation, service and repair services to residential and commercial customers. As further discussed in Note 19, "Segmented Information," Bud's Plumbing is included in the Kingsway Search Xcelerator segment. This acquisition was the Company’s seventh acquisition under its novel CEO Accelerator program and further expands the Company’s portfolio of businesses with recurring revenue and low capital intensity. This acquisition was accounted for as a business combination using the acquisition method of accounting. The purchase price 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. The Company expects to complete its purchase price allocation within the next six months. These estimates, allocations and calculations are subject to change as we obtain further information; therefore, the final fair values of the assets acquired and liabilities assumed could change from the estimates included in these consolidated financial statements. Refer to Note 8,"Intangible Assets," for further disclosure of the intangible assets related to this acquisition. The goodwill of $0.9 million 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. The following table summarizes the preliminary purchase price of Bud's Plumbing:
(in thousands) |  |  |  |
Preliminary purchase price: |  | March 14, 2025 |
Cash paid at closing |  | $ | 3,829 |
Seller note |  |  | 1,100 |
Total purchase price |  | $ | 4,929 |
The following table summarizes the preliminary allocation of the Bud's Plumbing purchase price and the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
(in thousands) |  |  |  |
|  |  | March 14, 2025 |
Preliminary purchase price |  | $ | 4,929 |
Cash and cash equivalents |  | $ | 308 |
Service fee receivable |  |  | 58 |
Property and equipment |  |  | 154 |
Intangible asset not subject to amortization - trade name |  |  | 3,100 |
Intangible asset subject to amortization - customer relationships |  |  | 500 |
Other assets - inventory and prepaid expenses |  |  | 226 |
Total assets |  | $ | 4,346 |
Accrued expenses and other liabilities |  | $ | 323 |
Total liabilities |  | $ | 323 |
Total identifiable assets and liabilities |  | $ | 4,023 |
Excess purchase price allocated to goodwill |  | $ | 906 |
The preliminary fair value of the acquired service fee receivable of $0.1 million is equivalent to its gross contractual amount. The unaudited 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. During the three months ended March 31, 2025, the Company incurred expenses related to the acquisition of Bud's Plumbing of $0.4 million, which are included in general and administrative expenses in the unaudited consolidated statements of operations for the three months ended March 31, 2025. The proforma effects of the Bud’s Plumbing acquisition are not material to the Company’s consolidated statements of operations for the three months ended March 31, 2025 and March 31, 2024. Image Solutions, LLC On September 26, 2024, the Company acquired 100% of the outstanding membership interests of Image Solutions, LLC ("Image Solutions") for aggregate cash consideration of $20.4 million, less certain escrowed amounts for purposes of indemnification claims and working capital adjustments. Image Solutions, based in Fletcher, North Carolina, is an information technology managed services provider. As further discussed in Note 19, "Segmented Information," Image Solutions is included in the Kingsway Search Xcelerator segment. This acquisition was the Company’s sixth acquisition under its novel CEO Accelerator program and further expands the Company’s portfolio of businesses with recurring revenue and low capital intensity. This acquisition was accounted for as a business combination using the acquisition method of accounting. The purchase price 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. The Company expects to complete its purchase price allocation within the next three months. These estimates, allocations and calculations are subject to change as we obtain further information; therefore, the final fair values of the assets acquired and liabilities assumed could change from the estimates included in these consolidated financial statements. Refer to Note 8,"Intangible Assets," for further disclosure of the intangible assets related to this acquisition. The goodwill of $6.5 million 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. The following table summarizes the preliminary allocation of the Image Solutions purchase price and the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
(in thousands) |  |  |  |
|  |  | September 26, 2024 |
Purchase Price |  | $ | 20,354 |
Cash and cash equivalents |  | $ | 293 |
Service fee receivable |  |  | 575 |
Other receivables |  |  | 160 |
Property and equipment |  |  | 85 |
Intangible asset not subject to amortization - trade name |  |  | 1,500 |
Intangible asset subject to amortization - customer relationships |  |  | 11,100 |
Other assets - inventory and prepaid expenses |  |  | 954 |
Total assets |  | $ | 14,667 |
Accrued expenses and other liabilities |  | $ | 799 |
Total liabilities |  | $ | 799 |
Total identifiable assets and liabilities |  | $ | 13,868 |
Excess purchase price allocated to goodwill |  | $ | 6,486 |
The preliminary fair value of the acquired service fee receivable of $0.6 million is equivalent to its gross contractual amount.
(b) | Discontinued Operations
Leased Real Estate Segment The Company’s subsidiaries, VA Lafayette, LLC ("VA Lafayette") and CMC Industries Inc. ("CMC"), which included CMC’s subsidiaries Texas Rail Terminal LLC and TRT Leaseco, LLC ("TRT"), comprised the Company's entire Leased Real Estate segment prior to the fourth quarter of 2022. Each of CMC, through indirect wholly owned subsidiary, TRT, and VA Lafayette own a single asset, which is real estate property. On December 29, 2022, TRT sold its assets and at December 31, 2022, VA Lafayette was classified as held for sale. In accordance with ASU No. 2014-08, Reporting of Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal is categorized as a discontinued operation if the disposal group is a component of an entity or group of components that meets the held for sale criteria, is disposed of by sale, or is disposed of other than by sale, and represents a strategic shift that has or will have a major effect on an entity’s operations and financial results. Leased Real Estate was a component of Kingsway since its operations and cash flows could be clearly distinguished, both operationally and for financial reporting purposes, from the rest of the reporting entity. A component of an entity may consist of multiple disposal groups and does not need to be disposed of in a single transaction. The disposal of the Leased Real Estate segment represents a strategic shift that will have a major effect on the Company's operations and financial results, as the disposal of the Leased Real Estate assets was in excess of 20% of the entity's total assets. As a result, the operating results and cash flows related to Leased Real Estate have been classified as discontinued operations in the unaudited consolidated interim financial statements for all periods presented. VA Lafayette During the fourth quarter of 2022, the Company began executing a plan to sell its subsidiary, VA Lafayette. VA Lafayette owns the LA Real Property, that is subject to a long-term lease and the LA Mortgage. During the second quarter of 2024, the Company entered into a letter of intent for the sale of VA Lafayette. On August 16, 2024, the Company completed the sale of VA Lafayette to an entity associated with a current holder of the Company's Class B Preferred Stock (the sale occurred prior to negotiations regarding the issuance of the Class B Preferred Stock). Refer to Note 21, "Related Parties," for further disclosure. The purchase price paid by the purchaser at the closing consisted of $1.3 million in cash plus the assumption of the unpaid principal balance as of the closing of the LA Mortgage of approximately $11.8 million, netting cash proceeds of $1.1 million to Kingsway after expenses. As part of recognizing the business as held for sale, the Company was required to measure VA Lafayette at the lower of its carrying amount or fair value less cost to sell. As a result of this analysis, during the first quarter of 2024, the Company recognized an estimated non-cash, loss on disposal of $0.4 million, which is included in loss on disposal of discontinued operations, net of taxes in the consolidated statements of operations for the three months ended March 31, 2024. The loss is a result of adjusting the net carrying value of VA Lafayette to be equal to the estimated selling price and was determined by comparing the expected cash consideration received for the sale of VA Lafayette with the net assets of VA Lafayette. Summary financial information for Leased Real Estate included in income from discontinued operations, net of taxes in the unaudited consolidated statement of operations for the three months ended March 31, 2024 is presented below:
(in thousands) |  | Three months ended March 31, |
|  | 2024 |
Income from discontinued operations, net of taxes: |  |  |  |
Revenues: |  |  |  |
Rental revenue |  | $ | 373 |
Total revenues |  |  | 373 |
Expenses: |  |  |  |
Cost of services sold |  |  | 53 |
General and administrative expenses |  |  | 60 |
Leased real estate segment interest expense |  |  | 88 |
Total expenses |  |  | 201 |
Non-operating other revenue |  |  | 19 |
Income from discontinued operations before income tax expense |  |  | 191 |
Income tax expense |  |  | — |
Income from discontinued operations, net of taxes |  | $ | 191 |
For the three months ended March 31, 2024, all of the pre-tax income from discontinued operations disclosed in the table above is attributable to the controlling interest. Loss on disposal of discontinued operations, net of taxes, related to Leased Real Estate, in the unaudited consolidated statement of operations for the three months ended March 31, 2024 is comprised of $0.4 million of loss on disposal of discontinued operations before income tax benefit and income tax benefit of zero.

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