Risk Factors Dashboard

Item 1A. Risk Factors” in this Annual Report. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Forward-looking statements represent intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements.

Each of the terms “Company”, “Standard”, and “Standard Premium” as used herein refers collectively to Standard Premium Finance Holdings, Inc. and its wholly owned subsidiaries, unless otherwise stated.

PART I

ITEM 1.

BUSINESS

Overview

We were incorporated in the State of Florida in 1991 under the name Standard Premium Finance Management Corporation. In 2016, we established a holding company structure under the name Standard Premium Finance Holdings, Inc., a Florida corporation, with Standard Premium Finance Management Corporation and Standard Premium Finance Leasing, Inc., a Florida corporation, with Standard Premium Finance Management Corporation as our wholly-owned subsidiary. as our wholly-owned subsidiaries. Unless the context requires otherwise or unless stated otherwise, references in this registration statement to the “Company,” “Standard Premium,” “we,” “our” and “us” refer to Standard Premium Finance Holdings, Inc. and its wholly-owned subsidiaries, Standard Premium Finance Management Corporation and Standard Premium Finance Leasing, Inc. and its wholly-owned subsidiary, Standard Premium Finance Management Corporation, on a consolidated basis. , on a consolidated basis.

We are a specialized finance company that makes collateralized loans to businesses and individuals to finance the insurance premiums they pay on their commercial property and casualty insurance policies. We began our business in 1991 and are currently licensed to operate in thirty-seven states. We have developed relationships with insurance agents and brokers located in our market area who offer insurance premium loans as a service to their customers which we underwrite. We evaluate each insurance premium loan application according to our loan underwriting criteria. Upon our approval of an insurance premium loan, the borrower makes a down payment, generally 20% to 25% of the annual premium on the financed insurance policy, and we provide the balance of the annual premium required to purchase the policy. The borrower pays us a fixed monthly amount over the next nine to eleven months. In the event the borrower defaults on its loan payment obligation, we are contractually authorized to terminate the insurance policy and receive the amount of the unearned premium paid on the insurance policy. The unearned premium on the insurance policy represents the portion of the insurance premium subject to return if the policy is cancelled before the full term of the policy is completed. The unearned premium serves as the collateral for our insurance premium loans and is designed to fully pay off the balance of the insurance premium loan in the event of a default. We have the contractual right to cancel the insurance policy and receive the amount of the unearned premium if the borrower defaults on repayment of any loan payment to us. Because of this collateral security feature of our insurance premium loans, we consider our loans to be of high quality and low risk. Standard Premium commenced operations in 1991 for the specific purpose of providing financing for property and casualty insurance premiums. Standard Premium:

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maintains current state licenses to operate a premium finance company,

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meets or exceeds all statutory net worth requirements,

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maintains professional liability insurance with an A rated major insurance carrier with limits of $500,000, in compliance with all state requirements,

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has secured and maintained computer hardware and licensed software to conduct its business in a timely fashion,

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has a revolving senior credit line and long-term debt in the form of subordinated corporate notes to help finance its loan production,

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has secured a long-term lease on office space which it currently occupies, and which is sufficient to meet anticipated future needs,

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has developed a set of working procedures by which it operates,

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generates daily management control reports,

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has cultivated and maintained relationships with various independent insurance agents providing the source of all new and renewal business, and

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currently finances approximately $120 million dollars in insurance premiums annually.

The Property and Casualty Insurance Premium Finance Market

Commercial insurance performs a critical role in the world economy. Without it, the economy could not function. Insurers protect the economic system from failure by assuming the risks inherent in the production of goods and services. All businesses share a need for insurance: Without the right insurance coverage, each could be wiped out by a disaster or a lawsuit. The Insurance Information Institute reported that $416.5 billion of commercial lines insurance premiums were generated in the U.S. in 2023.

The insurance premium finance industry began in Pennsylvania in 1933 and has grown along with the U.S. economy. There are several reasons that an insurance policy buyer would choose to finance its insurance premiums. Financing an insurance premium is much like any other commercial or consumer purchase. It is financed based on the insured’s decision resulting from current economic trends and other considerations. For some customers, insurance premium financing is a convenient way to buy insurance without tying up working capital or accessing other credit sources. Other customers, who do not have the means to pay the premium in full at the time of purchase, consider premium financing a necessity. When customers finance insurance policies, they enter into a contract with the insurance premium finance company to obtain a loan. The contract assigns the borrower’s rights to all unearned premiums and dividends on the policy to the insurance premium finance company and appoints the insurance premium finance company as its ‘attorney in fact,’ which gives the insurance premium finance company the right to cancel the insurance policy in the event of non-payment of a loan installment and to receive all unearned premiums and credits from the insurance company. The contract assigns the borrower’s rights to all unearned premiums and dividends on the policy to the insurance premium finance company and appoints the insurance premium finance company as its ‘attorney in fact. The customer, upon executing the premium financing loan contract, makes the initial down payment and agrees to pay back the principal with interest in monthly payments. The unearned premium of the insurance policy provides the collateral for each loan.

Our Loan Referral Base

Substantially all of our insurance premium loans originate from insurance agents and brokers who recommend our insurance premium loan program to their clients who would like to finance their insurance premiums. We currently market our loans through more than 850 independent insurance brokers and agents located in thirty-seven states, although most of our loans are made in thirteen (13) states. For risk management purposes, we have a policy limiting the amount of loans to the customers of any one insurance broker or agent to 5% of our outstanding loan portfolio. We may change this policy at any time based on then-existing market conditions or otherwise, at the discretion of our CEO.

Our website includes a secure portal for our brokers and agents, which allows them to quote premiums, print drafts on our bank account to pay the balance of the insurance premium due upon initiation of the premium finance loan, and finance agreements online. The drafts and agreements are forwarded to us for loan underwriting, risk management, and approval. Our brokers and agents do not have the authority to bind us to making a loan.

We compensate the insurance brokers and agents for their loan origination service through commissions, if permissible by state law regulated by the states in which we do business. The commission paid is generally tied to the gross revenue that the loan generates or a fixed per-loan fee. Interest rates are determined by the size of the loan, and, to a certain degree, the rating of the insurance company as well as the creditworthiness of the borrower. Typically, a higher interest rate yields a higher commission to the broker. In addition, the Company offers a rewards program (where permitted by state law) for our insurance brokers and agents. Under the rewards program, points are earned based on the amount of financed premiums. These points are then redeemable for travel and merchandise. The rewards program is equivalent to 1/10^th of one percent (.001) of the amount financed and is in addition to payment of commissions.

We do not have any exclusive or long-term arrangements with the insurance agents and brokers that make up our referral base and they have other sources of premium financing at their disposal. We have no contractual relationship with the insurance agents and brokers requiring them to recommend us to their clients. However, in connection with each premium loan we make, the borrower’s agent or broker:

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Certifies that the policies being financed have been issued and delivered and that the required down payment has been paid by or on behalf of the insured;

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Warrants that the premium finance agreement evidences a bona fide and legal transaction and that the insured is of legal age and has capacity to contract;

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Warrants that the insured’s signature is genuine, and that the agent or broker has delivered a copy of the premium finance agreement to the insured;

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States that the financed policies do not contain an audit or reporting form;

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Acknowledges that it is not affiliated in any capacity or manner with us; and

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Agrees that in the event of cancellation of the financed policy to remit the gross unearned commissions or unearned premiums to us upon request.

In the property and casualty insurance industry, some insurance policies contain provisions for audits or other additional reporting. These provisions may allow the insurance company to evaluate (audit) the insurance premium after cancellation. Such provisions may delay or reduce the amount of unearned premium. Since the unearned premium represents the collateral in our loan, this would have a detrimental effect on us. It is Company policy to avoid financing these types of policies.

Employees

As of December 31, 2025, we had twenty-five employees, twenty of whom were full-time employees. Our full-time employees are covered by a corporate benefit plan for major medical and hospitalization. None of our employees are members of a labor union or subject to a collective bargaining agreement. All of our employees are “at will” with no guaranteed period of employment except our CEO and CFO who have executive contracts through March 2030. We believe our employee relations are satisfactory. All of our employees are “at will” with no guaranteed period of employment.

Our Insurance Premium Loans

Our insurance premium finance loans are typically provided to small- and medium-sized businesses to finance the purchase of commercial property and casualty insurance policies with a one-year term. Insurance premium loans are generally in the range of $1,000 to $100,000 per loan. The customer typically pays 25% of the annual policy premium at the initiation of coverage and we provide the balance of the premium at that time. Our loans generally have a nine-to-ten-month term. The purpose of this is two-fold; first, by making the financing term shorter than the policy term, a small “surplus” of collected funds is developed that helps ensure that the balance due is paid off by refund of the unearned premium in case of cancellation, and second, it gives the insured a two to three-month break in payments before the policy term expires and the process repeats for the renewal of the policy.

Insurance premiums are earned by the insurance company over the term of the policy. If the policy is terminated prior to completion of the term, a refund of the unearned portion of the policy premium is made. If the policy was financed, the refund of unearned premiums goes to the insurance premium finance lender with any amount received by the lender in excess of the amount owed by the borrower being refunded to the borrower.

The following table illustrates the “surplus” between the unearned premium and the loan balance based on a typical annual premium of $10,000 with a $2,500 (25%) deposit paid by the borrower at the inception of the loan. In this scenario, the insurance premium finance company advances $7,500 and the borrower repays the loan in 10 monthly payments of $750. Note that interest is excluded in this example to highlight the collateral on the principal balance.

Although this is a typical representation of a loan in our portfolio, we may be undercollateralized depending on certain factors, including, but not limited to, lower down payments, minimum earned premiums, fully earned fees and taxes, governmental filings, audit provisions, longer payment terms, and other competitive factors. See Item 1A, Risk Factors, for more information about our loan risks.

We had $76,630,634 and $67,173,975 in premium finance loans outstanding as of December 31, 2025 and December 31, 2024, respectively. As of December 31, 2025, we had 18,846 active premium finance loans in eighteen states. The following is a summary of our premium loan portfolio as of December 31, 2025:

As of December 31, 2024, we had 18,858 active premium finance loans in thirteen states. The following is a summary of our premium loan portfolio as of December 31, 2024:

Credit Quality Information

The following table presents credit-related information at the “class” level in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic (“ASC”) 310-10-50, Disclosures about the Credit Quality of Finance Receivables and the Allowance for Credit Losses. A class is generally a disaggregation of a portfolio segment. In determining the classes, the Company considered the finance receivable characteristics and methods it applies in monitoring and assessing credit risk and performance.

Our premium finance receivables portfolio is analyzed in two segments: (1) Due from Insured and (2) Due from Insurance Carrier. The following tables summarize the portfolio segments by the risk ratings that regulatory agencies utilize to classify credit exposure, and which are consistent with indicators the Company monitors. Risk ratings are reviewed on a regular basis and are adjusted as necessary for updated information affecting the borrowers’ ability to fulfill their obligations.

For the Due from Insured segment, we analyze and rate our receivables based on the amount of unearned premium (i.e. collateral) on a loan based on a “worst case” cancellation date. Loans that would be undercollateralized as of this assumed cancellation are deemed to be Special Mention loans. For the Due from Insurance Carrier segment, we analyze and rate our receivables based on the amount of unearned premium (i.e. collateral) on a loan based on the actual cancellation date. Loans that would be undercollateralized as of the cancellation date are deemed to be Special Mention loans. The Company monitors the amount at which Special Mention receivables are undercollateralized. The Company strategically balances its exposure to undercollateralized loans, while staying competitive in the markets it serves.

The definitions of these ratings are as follows:

As of December 31, 2025 and December 31, 2024, the Company considered $304,740 and $520,550, respectively, as lacking collateral adequate for the level of risk associated with these loans while staying competitive within the industry. Management does not believe any of its receivables would be considered Classified. The following tables classify our Finance Receivables by risk rating and portfolio segment:

The Company regularly monitors each contract for payment status, sending late notices and cancelling contracts at the earliest permissible date allowed by the statutory cancellation regulations. In maintaining a proper allowance for credit losses, the Company monitors past due accounts and scrutinizes older receivables, generally over 120 days. However, in this industry, even though accounts may be highly aged and appear stale, they are still collectible. Unearned premiums on cancelled accounts may be held at insurance companies for varying periods, though they are still highly collectible. The Company protects its collateral by cancelling policies at the earliest permissible date. The Company regularly contacts the insurance companies to ensure collectability. The Company manages its allowance conservatively ensuring an allowance balance that encompasses uncollectible accounts. In the following table, the Company defines “non-performing loans without a specific reserve” as loans in the Due from Insurance Carrier segment aged over 120 days. All other loans are considered “Performing loans evaluated collectively.” On December 31, 2025 and December 31, 2024, there were no loans with deteriorated credit quality.

Finance Receivables – Method of individual evaluation:

Revenue Recognition

Finance charges on insurance premium installment contracts are initially recorded as unearned interest and are credited to income monthly over the term of the finance agreement. An initial service fee, where permissible, and the first month’s interest, on a pro rata basis, are recognized as income at the inception of a contract. The initial service fee can only be charged once to an insured in a twelve-month period. In accordance with industry practice, finance charges are recognized as income using the “Rule of 78s” method of amortizing finance charge income, which does not materially differ from the interest method of amortizing finance charge income on short term receivables. Late charges are recognized as income when charged. Maximum late fee charges are mandated by state regulations. The Company charges late fees at the earliest permissible date based on the late fee regulations of the state in which the loan originated. Furthermore, the Company charges the maximum permissible late fee based on the state in which the loan originated. Unearned interest is netted against Premium Finance Contracts and Related Receivables on the balance sheet for reporting purposes.

Debt Summary and Sources of Liquidity

Below is a summary of some of our debt and sources of liquidity. The discussion below does not discuss all of our debt. Please see the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as our financial statements and the notes to those financial statements contained elsewhere in Item 8 of this Form 10-K for additional information about debt and sources of liquidity.

Line of Credit

On February 3, 2021, the Company entered into an exclusive twenty-four month loan agreement with First Horizon Bank, our senior lender, for a revolving line of credit in the amount of $35,000,000, which was immediately funded for $25,974,695 to pay off the prior line of credit. On this date, the prior line of credit was fully repaid and terminated. The Company recorded $180,350 of loan origination costs. In October 2021, the Company increased its line of credit with First Horizon Bank from $35,000,000 to $45,000,000. The Company recorded $25,771 of line of credit costs related to the credit increase. In November 2022, the Company extended the maturity on its line of credit agreement with FHB until November 30, 2025. This extension also changed the Index Rate of the line of credit from 30-Day Libor to 30-Day Secured Overnight Financing Rate (“SOFR”). The Company recorded $117,228 of line of credit costs related to this extension. In June 2025, the Company increased its line of credit with FHB from $45,000,000 to $50,000,000. In September 2025, the Company renewed its line of credit agreement with FHB until September 25, 2028. This renewal also increased the commitment amount from $50,000,000 to $75,000,000, lowered the interest rate margin from 2.55-2.96% to 2.10%, and syndicated the line of credit between two additional lenders, Flagstar Bank and Cadence Bank. The Company is unaffected operationally by the additional lenders as First Horizon Bank acts as the agent for the other lenders in the syndicated loan agreement. The Company recorded $373,011 of line of credit costs related to this extension, which is included in the line of credit balance in the consolidated balance sheet at December 31, 2025.

At December 31, 2025 and 2024, the advance rate was 85% of the aggregate unpaid balance of the Company’s eligible accounts receivable. The line of credit is secured by all Company assets and is personally guaranteed by our CEO. The line of credit is secured by all Company assets and is personally guaranteed by our CEO and two directors of the Company. The line of credit bears interest at 30-Day SOFR plus 2.10% per annum (5.97% and 7.30% at December 31, 2025 and 2024, respectively). The line of credit bears interest at 30-Day SOFR plus 2.55-2.96% per annum (7.30% and 8.09% at December 31, 2024 and 2023, respectively). As of December 31, 2025 and 2024, the amount of principal outstanding on the line of credit was $49,575,004 and $41,217,513, respectively, and is reported on the consolidated balance sheet net of $341,927 and $1,445, respectively, of unamortized loan origination fees. Interest expense on this line of credit for the years ended December 31, 2025 and 2024 totaled approximately $3,071,000 and $3,556,000, respectively. The Company recorded amortized loan origination fee for the years ended December 31, 2025 and 2024 of $32,529 and $1,576, respectively. For the years ended December 31, 2025 and 2024, the Company paid a fee based on the unused portion of the line of credit totaling $29,254 and $4,093, respectively, which is included in interest expense. The Company had availability on this line of credit of $6,893,451 as of December 31, 2025.

The Company’s agreements with FHB contain certain financial covenants and restrictions. Under these restrictions, all the Company’s assets are pledged to secure the line of credit, the Company must maintain certain financial ratios such as an adjusted tangible net worth ratio, interest coverage ratio and adjusted leverage ratio. The loan agreement also provides for certain covenants such as audited financial statements, notice of change of control, budget, permission for any new debt, and copies of filings with regulatory bodies. On November 14, 2023, the Company executed an amendment of the loan agreement, which provided a waiver of default on its Interest Coverage Ratio as of September 30, 2023. The amendment also reduced the Minimum Interest Coverage Ratio for the following four quarters through September 30, 2024. Management believes it was in compliance with the applicable debt covenants as of December 31, 2025 and December 31, 2024.

Promissory Notes to Unrelated Parties

These are notes payable to individuals. The notes have interest payable monthly, ranging from 6% to 8% per annum and are unsecured and subordinated. The principal is due on various dates through December 31, 2031. The maturity date of these notes automatically extends for periods of three months to six years unless the note holder requests repayment through written instructions at least ninety days prior to the maturity date of the note. The principal is due on various dates through August 31, 2030. The maturity date of these notes automatically extends for periods of three months to six years unless the note holder requests repayment through written instructions at least ninety days prior to the maturity date of the note. The automatic maturity extension of these notes is considered a loan modification. Notes totaling $2,832,726 and $1,029,750 were rolled over during the years ended December 31, 2025 and 2024, respectively. Notes totaling $1,029,750 and $1,243,021 were rolled over during the years ended December 31, 2024 and 2023, respectively. Interest expense on the notes totaled approximately $680,000 and $596,000 during the year ended December 31, 2025 and 2024, respectively. The Company received proceeds on these notes of $720,682 and $2,269,440 for the years ended December 31, 2025 and 2024, respectively. The Company received proceeds on these notes of $2,269,440 and $350,212 for the years ended December 31, 2024 and 2023, respectively. The Company repaid principal on these notes of $887,254 and $131,500 for the years ended December 31, 2025 and 2024, respectively. The Company repaid principal on these notes of $10,000 and $27,000 for the years ended December 31, 2024 and 2023, respectively. In August 2024, the Company exchanged, in a cashless transaction, $10,000 of these notes for 12,500 shares of common stock at a price of $0.80 per share from the exercise of previously vested incentive stock options by an employee. There were no gains or losses on this exchange.

Promissory Notes to Stockholders and Related Parties

These are notes payable to stockholders and related parties. The notes have interest payable monthly of 8% per annum and are unsecured and subordinated. The principal is due on various dates through February 28, 2030. The maturity date of these notes automatically extends for periods of one to four years unless the note holder requests repayment through written instructions at least ninety days prior to the maturity date of the note. The principal is due on various dates through November 30, 2028. The maturity date of these notes automatically extends for periods of one to four years unless the note holder requests repayment through written instructions at least ninety days prior to the maturity date of the note. The automatic maturity extension of these notes is considered a loan modification. Notes totaling $506,000 and $278,040 were rolled over during the years ended December 31, 2025 and 2024, respectively. Notes totaling $278,040 and $587,000 were rolled over during the years ended December 31, 2024 and 2023, respectively. Interest expense on the notes totaled approximately $231,000 and $211,000 during the years ended December 31, 2025 and 2024, respectively. The Company received proceeds on these notes of $79,460 and $1,028,000 for the years ended December 31, 2025 and 2024, respectively. The Company received proceeds on these notes of $1,028,000 and $190,000 for the years ended December 31, 2024 and 2023, respectively. The Company repaid principal on these notes of $490,000 and $10,000 for the years ended December 31, 2025 and 2024, respectively. The Company repaid principal on these notes of $10,000 and $27,000 for the years ended December 31, 2024 and 2023, respectively. In August 2024, the Company exchanged, in a cashless transaction, $66,960 of these notes for 83,700 shares of common stock at a price of $0.80 per share from the exercise of previously vested incentive stock options by an employee. There were no gains or losses on this exchange. 

Series A Convertible Preferred Stock

The Company is authorized to issue 600,000 shares of Series A Convertible Preferred Stock, $.001 par value. As of both December 31, 2025 and 2024, there were 166,000 shares of Series A convertible preferred stock issued and outstanding for $10.00 per share.

In the event of any liquidation, dissolution or winding up of the Company, the holders of preferred stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of common stock, an amount equal to $10 for each share of preferred stock, plus all unpaid dividends that have been accrued, accumulated or declared. As of December 31, 2025, the total liquidation preference on the preferred stock is $1,689,050. The Company may redeem the preferred stock from the holders at any time following the second anniversary of the closing of the original purchase of the preferred stock. The Series A Convertible Preferred Stock can be converted to common stock at 80% of the prevailing market price over the previous 30-day period at the option of the Company.

Holders of preferred stock are entitled to receive preferential cumulative dividends, only if declared by the board of directors, at a rate of 7% per annum per share of the liquidation preference amount of $10 per share. During the years ended December 31, 2025 and 2024, the Board of Directors has declared and paid dividends on the preferred stock of $116,200 and $116,200, respectively. As of each of December 31, 2025 and 2024, preferred dividends are in arrears by $29,050. December 31, 2024 dividends in arrears were declared and paid in January 2025. December 31, 2025 dividends in arrears were declared and paid in January 2026. As of January 2026, all dividends in arrears had been declared and paid.

Our Customers

The majority of our customers are small- to medium-sized businesses seeking property and casualty insurance through local independent insurance agents. We are currently licensed to operate in thirty-seven states where the premium finance laws are favorable to making insurance premium finance loans. Premiums on these commercial insurance policies are written on a semi-annual or annual basis exclusively and insurance premium finance loans are repaid over a maximum of four and eleven consecutive monthly payments, respectively. Substantially all of our loans are written for a nine- to ten-month term. Premiums on these financed policies typically range between $1,000 to $100,000. At December 31, 2025 and December 31, 2024, we have 18,846 and 18,858 premium finance loans outstanding, respectively. The types of policies we finance vary. They are most often motor truck cargo, physical damage and liability, commercial auto, commercial general liability, commercial package policies, professional liability, and commercial property. Most of the policies we finance are written through local independent insurance agents. The insurance companies they represent generally do not provide premium installment payment plans.

Competition

Our industry is highly competitive with three types of competitors. Fifteen of our largest competitors are national premium finance firms primarily owned by commercial banks, which write over 70% of all premium finance loans. A second type of competitor is comprised of regional premium finance companies owned by entrepreneurs. Our remaining competitors are smaller, local companies, many of which are affiliated with insurance agencies. There is a low barrier to entry into the business as regulations do not require passing any tests or having substantial capital. A prime requirement for success in the industry is access to low-cost capital as profits are substantially related to the spread between the cost of capital and interest earned on premium finance loans. Because of the secure nature of insurance premium finance loans, our industry is intensely competitive:

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Large National Finance Companies are owned or affiliated with financial institutions and make up approximately 50% of the financed premiums in the industry today. Since access to capital is plentiful and the cost of funds are historically low, these finance companies seek the security of the premium finance industry to get valued returns with minimal risk. However, since these competitors oftentimes lack the agility or desire to develop personal relationships, they generally seek out the largest premiums solely by offering the lowest rates.

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Regional finance companies compete for business in smaller regional territories throughout the U.S. These companies are typically owned by entrepreneurs that raise debt privately and leverage it with a bank or similar asset-based lender. While these regional competitors manage to maintain some of the benefits of the smaller companies on a relationship level, they lack access to capital enjoyed by large institutionally owned competitors. Thus, they are limited to modest organic growth with limited exit strategy.

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Smaller locally operated finance companies generally conduct business in the state in which they are domiciled and typically limit their business to that state, county, or municipality. These companies are often family-owned and operated and can even be affiliated with an insurance agency or agencies or even a small insurance company. While these smaller competitors are able to develop personal relationships, owners often lack the experience, business acumen and access to capital enjoyed by their larger competitors.

Marketing

The servicing of loans for policy premiums of $1,000 to $100,000 can be time consuming and require responsive customer service, but competition in this segment is less intense. Our customers generally do not have an insurance expert on staff, and they rely on their brokers or agents to recommend insurance premium finance companies. Our referral base has access to multiple alternate insurance premium finance sources operating at the national, regional and local level. We believe we compete against our competitors primarily through the quality of our technology, which allows our agents and brokers to receive a quick response to a loan application and the quality of the personalized service of the loans which we provide. We believe that we are successful because our technology and customer service helps our referral sources achieve their own customer satisfaction and retention. We have a website for our customers and agents at www.standardpremium.com. We have six employees who act as our marketing representatives in the field. They call on our broker and agent base and seek new brokers and agents to represent us to their clients. Our main marketing activities are the establishment and maintenance of relationships with our loan referral sources. We do not market or advertise our loan services directly to the parties receiving our loans but rather depend upon insurance agents and brokers to advise their clients who wish to finance their premiums about our insurance premium loan program.

Regulation

In most states, insurance premium finance companies are regulated by the Insurance Departments or Offices of Insurance Regulation in which they operate. Each state has specific laws regulating items such as interest rates, late charges, loan terms, forms, audit provisions, cancellation requirements among others. In addition, each state has the ability to audit each finance company and requires annual reports to be submitted. We employ a full-time compliance manager as well as retained legal counsel who provide updates to our policies in accordance with changes to laws in the states where we do business.

ITEM 1A.

RISK FACTORS

An investment in our common stock involves a high degree of risk and is subject to many uncertainties. These risks and uncertainties may adversely affect our business, operating results and financial condition. In order to attain an appreciation for these risks and uncertainties, you should read this Annual Report in its entirety and consider all of the information and advisements contained herein, including the following risk factors and uncertainties. If any of the following risks occur, our business, operating results and financial condition could be seriously harmed, and you could lose all or part of your investment.

We depend on the availability of significant amounts of credit to meet our liquidity needs and our failure to maintain our sources of credit could materially and adversely affect our liquidity in the future.

Our business model is dependent upon our ability to borrow to maintain and grow our ability to lend money to our customers. On February 3, 2021, we entered into a new two-year line of credit in the maximum amount of $35 million, which was immediately funded for $25,974,695 to pay off the prior line of credit lender. In October 2021, the line of credit facility increased by $10 million to a total of $45 million. In November 2022, the term of the line of credit was extended until November 30, 2025. In June 2025, the Company increased its line of credit with First Horizon Bank from $45,000,000 to $50,000,000. In September 2025, the Company increased its line of credit with First Horizon Bank from $50,000,000 to $75,000,000 and extended the maturity until September 25, 2028. If we fail to renew or replace our line of credit at the expiration of the current term, or we default on our line of credit, then our ability to continue our lending business at current levels and meet our other obligations, would be materially adversely affected. Since the amount of money we can borrow on our revolving credit line is based on a percentage of our entire loan portfolio less certain ineligible items, our other corporate debt (i.e., subordinated and un-subordinated debt) plus our retained earnings and stockholder equity alone may limit our ability to increase the size of our loan portfolio.

If our growth requires us to raise additional capital, that capital may not be available when it is needed, or the cost of that capital may be very high.

As we grow, organically and through possible acquisitions, the amount of capital required to support our operations grows as well. We may need to raise additional capital to support continued growth both organically and through possible acquisitions. Any equity capital we obtain may result in the dilution of the interests of existing holders of our common stock. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time which are outside our control and on our financial condition and performance. If we cannot raise additional capital when needed, or on terms acceptable to us, our ability to expand our operations through organic growth and possible acquisitions could be materially impaired and our financial condition and liquidity could be materially and negatively affected.

Our reliance on third party insurance agents and brokers to originate our premium finance loans may result in increased exposure to credit risk and fraud.

Our premium finance loans are issued primarily through relationships with a large number of unaffiliated insurance agents and brokers. As a result, risk management and general supervisory oversight may be difficult since we have little direct contact with the borrowers and such loans may also be more susceptible to third party fraud. In certain cases, insurance agents and brokers may be funded directly on behalf of the insurance company and/or its affiliates. If the agent or broker fails to remit these funds accordingly, or fails to provide an underlying insurance policy, there may be little or no collateral. Acts of fraud are difficult to detect and deter, and we cannot assure investors that our risk management procedures and controls will prevent losses from fraudulent activity.

If our allowance for credit losses is not sufficient to absorb losses that may occur in our loan portfolio, our financial condition and liquidity could suffer.

We maintain an allowance for credit losses that is intended to absorb credit losses that we expect to incur in our loan portfolio. At each balance sheet date, our management determines the amount of the allowance for credit losses based on our estimate of probable and reasonably estimable losses in our loan portfolio, taking into account probable losses that have been identified relating to specific borrowing relationships, as well as probable losses inherent in the loan portfolio and credit undertakings that are not specifically identified. Because our allowance for credit losses represents an estimate of inherent losses, there is no certainty that it will be adequate over time to cover credit losses in the loan portfolio, particularly if there is deterioration in general economic or market conditions or events that adversely affect specific customers. Although we believe our credit loss allowance is adequate to absorb reasonably estimable losses in our loan portfolio, if our estimates are inaccurate and our actual loan losses exceed the amount that is anticipated, or if the loss assumptions we used in calculating our reserves are significantly different from those we actually experience, our financial condition and liquidity could be materially adversely affected.

Failures of our information technology systems may adversely affect our operations.

We are increasingly dependent upon computers and other information technology systems to manage our business. We rely upon information technology systems to process, record, monitor and disseminate information about our operations. In some cases, we depend on third parties to provide or maintain these systems. While we perform a review of controls instituted by our critical vendors in accordance with industry standards, we must rely on the continued maintenance of these controls by the outside party, including safeguards over the security of customer data. Additionally, we must rely on our employees to safeguard access to our information technology systems and avoid inadvertent complicity with external security threats. Although we take protective measures and endeavor to modify them as circumstances warrant, the security of our computer systems, software and networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses or other malicious code and cyberattacks that could have a security impact. If one or more of these events occur, or if any of our financial, accounting or other data processing systems fail or have other significant shortcomings, this could jeopardize our or our customers’ confidential and other information processed and stored in, and transmitted through, our computer systems and networks or otherwise cause interruptions or malfunctions in our operations or the operations of our customers or counterparties. We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us. Security breaches in our online systems could also have an adverse effect on our reputation. Our systems may also be affected by events that are beyond our control, which may include, for example, electrical or telecommunications outages or other damage to our property or assets. Although we take precautions against malfunctions and security breaches, we cannot assure that such efforts will be adequate to prevent problems that could materially adversely affect our business, financial condition and results of operations.

If we are unable to attract and retain experienced and qualified personnel, our ability to provide high quality service will be diminished, we may lose key customer relationships, and our results of operations may suffer.

We believe that our success depends, in part, on our ability to attract and retain experienced personnel, including our senior management and other key personnel. The departure of senior manager or other key personnel may damage relationships with certain customers, or certain customers may choose to follow such personnel to a competitor. The loss of any of our senior managers or other key personnel, or our inability to identify, recruit and retain such personnel, could materially and adversely affect our business, results of operations and financial condition. All of our employees are “at will” with no guaranteed period of employment except our CEO and CFO who have executive contracts through March 2030.

Our lack of contractual marketing relationships with our loan referral base could adversely affect our revenue, profits and financial condition.

We do not have contractual marketing arrangements with the insurance brokers and agents. Since we depend upon the insurance brokers and agents to refer their customers to us for premium loans, our premium loan volume could decline if our referral base decided to refer their clients to other sources of premium loans.

Since our business is concentrated in Florida, Georgia, North Carolina, South Carolina, and Texas, declines in the economy of these states could adversely affect our business.

Our success depends primarily on the general economic conditions of the specific local markets in which we operate. We provide premium finance loans to customers primarily in the states of Florida, Georgia, North Carolina, South Carolina, and Texas. The local economic conditions in these market states significantly impact the demand for our premium finance loans as well as the ability of our customers to repay loans. Declines in economic conditions, including inflation, recession, unemployment, changes in securities markets or other factors impacting these local markets, including natural disasters, hurricanes, and pandemics, could, in turn, have a material adverse effect on our financial condition and results of operations.

Competition in the insurance premium finance industry is intense, and some of our competitors have greater financial, technological and other resources than we currently possess. If we are not able to compete effectively, we may lose market share and our business could suffer.

We face intense competition from other insurance premium finance firms. Many competing companies have longer operating histories, greater access to capital, lower cost of capital, more lending experience, greater name recognition, larger staffs and substantially greater financial, technical and marketing resources than we currently possess. The superior resources that some of these competitors have available could allow them to compete successfully against us, which could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects.

We face competition in financing insurance premiums throughout our market area. Our competitors include national, regional and other community banks, and a wide range of other financial institutions such as credit unions, insurance companies, factoring companies and other non-bank financial companies. Many of these competitors have access to cheaper capital, substantially greater resources and market presence than Standard and, as a result of their size, may be able to offer a broader range of products at better prices.

If we fail to establish and maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed.

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP.

In addition, we are required to be compliant with public company internal control requirements mandated under Section 302 and 906 of the Sarbanes-Oxley Act. We implement measures designed to improve our internal controls over financial reporting, including the hiring of accounting personnel and establishing new accounting and financial reporting procedures to establish an appropriate level of internal controls over financial reporting. However, we cannot provide assurances that we will be successful in doing so. If we are unable to successfully implement internal controls over financial reporting, the accuracy and timing of our financial reporting, and our stock price, may be adversely affected and we may be unable to maintain compliance with the applicable stock market listing requirements.

Implementing any appropriate changes to our internal controls may distract our officers and employees, entail substantial costs to modify existing processes and take significant time to complete. These changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase operating costs and harm the business.

We do not anticipate that we will pay any cash dividends on our common stock in the foreseeable future.

The current expectation is that for the foreseeable future, we will retain our future earnings to fund the development and growth of our business. As a result, capital appreciation, if any, of our common stock will be the sole source of gain, if any, for any stockholders for the foreseeable future.

Our common stock began trading on the OTCQX on March 21, 2022 and there is no assurance that an active market will develop or be maintained.

Our common stock commenced trading on the OTCQX Best Market under the symbol SPFX on March 21, 2022. We cannot assure that an active trading market for our shares will develop or be maintained. In the absence of an active trading market for our common stock, stockholders may not be able to sell their shares at the time that they would like to sell and may have to hold their shares indefinitely.

We may not realize the anticipated benefits of any acquisitions that we are able to complete.

Part of our business strategy is to grow through potential acquisitions in order to achieve economies of scale. Acquisitions involve several risks, including, but not limited to:

·

it may occur that the acquired company or assets do not further Standard’s business strategy, or that it overpaid for the company or assets, or that industry or economic conditions change, all of which may require a future impairment charge;

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management may have difficulty integrating the operations and personnel of the acquired business and may have difficulty retaining the key personnel of the acquired business;

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management may have difficulty incorporating the acquired services with its existing services;

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there may be customer confusion where Standard’s services overlap with those of entities that are acquired;

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Standard’s ongoing business and management's attention may be disrupted or diverted by transition or integration issues and the complexity of managing geographically and culturally diverse locations;

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There may be difficulty maintaining uniform standards, controls, procedures and policies across locations;

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Standard may acquire companies that have material liabilities, including, among other things, for the failure to comply with insurance laws and regulations;

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the acquisition may result in litigation from terminated employees or third parties;

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management may experience significant problems or liabilities associated with service quality, technology and legal contingencies;

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Standard may spend considerable amounts of money (legal, accounting, diligence, etc.) in seeking an acquisition candidate and never complete the acquisition; and

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acquisition candidate letters of intent may have large break-up fees if the acquisition is not completed.

We may not be able to make future acquisitions without obtaining additional financing.

To finance any acquisitions, Standard may, from time to time, issue additional equity securities or incur additional debt. A greater amount of debt or additional equity financing could be required to the extent that its common stock fails to achieve or to maintain a market value sufficient to warrant its use in future acquisitions, or to the extent that acquisition targets are unwilling to accept common stock in exchange for their businesses. Furthermore, the Company would require bank approval of any additional debt or equity financing. Even if Standard were permitted to incur additional debt or determine to sell equity, management may not be able to obtain additional required capital on acceptable terms, if at all, which would limit its plans for growth. In addition, any capital they may be able to raise could result in increased leverage on its balance sheet, additional interest and financing expense, and decreased operating income.

Compliance with securities laws.

The Company’s common stock, preferred stock and promissory notes were sold to investors pursuant to exemptions under the Securities Act of 1933 with respect to transactions involving limited offers and sales without registration. If the Company should fail to comply with each and every one of the requirements of the available exemptions from registration, the investors may have the right to rescind their purchase of shares if they so desire. Compliance is highly technical. There is always the possibility that if any investor or investors should obtain rescission of their investments, the Company may be required to repurchase the securities. In addition, failure to comply with any of the requirements for exemption under state securities laws could occasion the same results as a failure to comply with the above-mentioned federal rule exemptions.

We depend on the accuracy and completeness of information we receive about our customers and counterparties to make credit decisions. Reliance on inaccurate or misleading information may adversely affect our business, operations, and financial condition.

We rely on information furnished by or on behalf of customers and counterparties in deciding whether to extend credit or enter into other transactions. This information could include financial statements, credit reports, and other financial information. We also rely on representations of those customers, counterparties, or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports, or other financial information could have a material adverse impact on our business, financial condition and results of operations.

Certain protective provisions of our Series A Convertible Preferred Stock may prevent us from entering into certain transactions, issuing certain securities or making changes in the rights, preferences, privileges, qualifications, limitations or restrictions of, or applicable to, the Series A Preferred Stock which may be beneficial to the holders of our common stock.

Our Series A Convertible Preferred Stock has certain protective provisions as set forth in Item 11 herein which may prevent us from engaging in transactions, including mergers and acquisitions, or taking other actions which alter the provisions of the Series A Convertible Preferred Stock or issuing other equity securities which may have rights senior to or on parity with the Series A Convertible Preferred Stock, or increasing the amount of authorized Series A Convertible Preferred Stock even if such matters were beneficial to the holders of our common stock.

We may cause the Series A Convertible Preferred Stock to be converted into common stock which may reduce the price of our common stock.

We may increase the number of outstanding shares of our common stock by causing the conversion of the Series A Convertible Preferred Stock into common stock. The issuance of additional shares of our common stock may cause a reduction in the market price of the shares of our common stock.

Particular Risks Associated with the Specialized Insurance Premium Services Industry

Our premium finance business may involve a higher risk of delinquency or collection than other lending operations and could expose us to losses.

We provide financing for the payment of commercial insurance premiums through our subsidiary Standard Premium Finance Management Corporation. Commercial insurance premium finance loans involve a unique, and possibly higher, risk of delinquency or collection than other types of loans. These are initiated primarily through relationships with unaffiliated independent insurance agents. As a result, risk management is critical and may be difficult. Roughly one-third of all new borrowers fail to make all of their payments. In such an event, we request cancellation of the insurance policy and anticipate a refund from the insurance company and the agent. Under ideal conditions the down payment made by the insured should create sufficient equity to pay off our loan in the event of cancellation. However, as a consequence of competitive market conditions, we may have accepted a down payment that did not fully cover our loan. If, after the unearned premium on a cancelled policy is fully refunded, there is still an outstanding balance, the insured must be billed directly. The cost of pursuing these funds often exceeds the amount collected and most often results in write-offs by the Company. Many commercial loans have underwriting provisions that may affect our collateral. Such instances may include but are not limited to fully earned policy fees or inspection fees, audit provisions, state reporting requirements, and cancellation limitations. Such circumstances could greatly reduce the unearned premium in the event of cancellation. Since we depend on the unearned premium for collateral, we could experience greater write-offs and thus, increased risk.

A Decline in the Economy in General May Result in a Decrease in Loan Originations.

Declines in the economy generally could have an adverse impact on our operating results by reducing the number of businesses purchasing insurance. Further, those who are currently financing their policies may have more difficulty making their payments, thus raising our default rates.

Increases in the Secured Overnight Financing Rate may reduce the profitability of our loans.

The rate at which we lend money is set by the state. However, our revolving line of credit, which comprises our senior debt, is based, in part, on the Secured Overnight Financing Rate (“SOFR”). When the SOFR rate increases, the interest we pay on our line of credit increases while our interest income continues to be based on the interest rate established at the initiation of each premium finance loan. Thus, with each increase, the spread between the interest we earn and the interest we pay narrows, reducing our net interest income.

Changes in Insurance Law may adversely affect our business.

Our industry is subject to laws, rules, and regulations established by the states in which we operate. Any changes in such laws, rules, and regulations could be detrimental to the premium finance industry, thus having a negative effect on our operating income.

Aggressive Marketing by our Competitors may adversely affect our business.

There may be changes in the insurance market such as aggressive marketing by other premium finance companies or the emergence of new premium finance companies. Many insurance companies offer payment plans in-house or through affiliates. This practice could increase. Such an event would reduce the market share of all independent premium finance companies and would have a negative effect on our company.

Insurance Company Insolvency may cause us losses.

Insurance companies, although closely regulated by the various states, can also fail. When an insurance company fails, we may have significant exposure. Such an event would put us at considerable risk. Although most insurance companies are covered through a guarantee fund, there may be a lengthy delay in recovering these funds, and all funds due to us may not be recovered. Such an event would have a negative effect on cash flow. In the event of insurance company failure of a carrier not covered under such guarantee fund, our exposure will be much greater. There are rating services that evaluate the financial condition and stability of insurance companies. We use these to help us lower our risks. However, conditions for any insurance company can change rapidly and the rating services we use may not give us sufficient warning of any changes. In such an event, our risk factor could be increased.

We may experience cash flow problems due to delays in receiving proceeds from our bank loan or premium finance loan documentation.

We issue drafts on our bank account to fund new premium finance loans. These drafts clear our bank on a daily basis. To meet this funding need, we draw funds on our revolving credit line with our senior lender on a regular basis. Should the senior lender be unable to fund us in a timely fashion, we would have difficulty in funding these drafts. Failure on our part to cover all or part of these drafts could result in cancellation or non-issuance of an insurance policy for which we may be liable. Further, if drafts fail to clear our bank it may jeopardize our relationships with insurance agents and insurance companies, adversely affecting our ability to conduct business in the future. Insurance agents that do business with our Company have the authority to issue drafts on our bank account to pay a portion of the insured’s premium upon initiation of the premium finance loan. We review these drafts daily to make certain they are all paid to and cashed by proper parties. Improper items can be returned to the bank and will not be honored. Under normal circumstances, we receive the finance agreement before the draft is presented to our bank. Frequently however, the draft is presented to our bank before we receive the finance agreement. Since we cannot draw on our revolving line of credit without first presenting the loan agreement, this may cause a cash flow problem for us. Such an event temporarily causes us to, in effect, use funds for which no loans have been secured. Such an event can reduce our profitability and increase risk to the Company. In the event that a draft has not been cashed for an undue period of time, we may have a liability for the draft, and the insured may have no coverage.

Business Interruption from natural disasters, including hurricanes and pandemics.

In the event of a natural disaster or other occurrence beyond our control, we may be unable to conduct our normal course of business that could cause temporary or permanent harm to the Company due to loss of customers, increased defaults on our premium finance loans, interruptions to our operations, and reduced demand for our premium finance loans.

Insurance Company Concentration

To reduce our exposure, we try to limit the amount of financing we do for any one insurance company. The senior lender providing our revolving credit line has placed certain limits on the percentage of our business that can be financed with any one insurance company. Although we endeavor to keep our concentration within the limits authorized by our senior lender, this is not always possible. Market conditions may cause fluctuations in our concentration, creating disproportionate exposure to one or several insurance companies. Such an event could increase our risks.

Our dependance on Insurance Agents may expose us to losses.

We are continually adding new insurance agents to our customer base. Each new agent is screened by us to verify that he or she is licensed and is in good standing with state authorities. In addition, we attempt to gather as much information as possible to assist us in evaluating prospective customers. The risk of doing business with a new agent is significantly greater than that of doing business with an agent with whom we have established a business history.

Liability Arising from Wrongful Cancellation of an Insurance Policy

Through the normal course of business, we cancel many insurance policies for non-payment. In the event we cancel an insurance policy in error, we could be deemed liable for claims that would normally be paid by the insurance carrier. Such claims and resultant damages could be significant. Although we carry professional liability insurance to cover such instances, certain provisions could prevent us from recovering all or part of our claim.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 1C.

CYBERSECURITY