# EDGAR Filing Document

**Accession Number:** 0001072627
**File Stem:** 0001437749-23-000475
**Filing Date:** 2023-1
**Character Count:** 24060
**Document Hash:** cf07d1a6b1b11fa85cb520bba2dbe53c
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001437749-23-000475.hdr.sgml**: 20230105

**ACCESSION NUMBER**: 0001437749-23-000475

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 16

**CONFORMED PERIOD OF REPORT**: 20221229

**ITEM INFORMATION**: Entry into a Material Definitive Agreement

**ITEM INFORMATION**: Completion of Acquisition or Disposition of Assets

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230105

**DATE AS OF CHANGE**: 20230105

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** KINGSWAY FINANCIAL SERVICES INC
- **CENTRAL INDEX KEY:** 0001072627
- **STANDARD INDUSTRIAL CLASSIFICATION:** FIRE, MARINE & CASUALTY INSURANCE [6331]
- **IRS NUMBER:** 999999999
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-15204
- **FILM NUMBER:** 23511196

**BUSINESS ADDRESS:**
- **STREET 1:** 10 S. RIVERSIDE PLAZA
- **STREET 2:** SUITE 1520
- **CITY:** CHICAGO
- **STATE:** IL
- **ZIP:** 60606
- **BUSINESS PHONE:** (312) 766-2144

**MAIL ADDRESS:**
- **STREET 1:** 10 S. RIVERSIDE PLAZA
- **STREET 2:** SUITE 1520
- **CITY:** CHICAGO
- **STATE:** IL
- **ZIP:** 60606

kfs20221220_8k.htm

**UNITED STATES**

 **SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM **8-K**

**CURRENT REPORT**

**Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**

Date of report (Date of earliest event reported): December 29, 2022

**KINGSWAY FINANCIAL SERVICES INC.**

(Exact Name of Registrant as Specified in Its Charter)

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| | | |
|:---|:---|:---|
| **Delaware**<br> (State or Other Jurisdiction of<br> Incorporation) | **001-15204**<br> (Commission File<br> Number) | **85-1792291** <br> (IRS Employer<br> Identification No.) |

---

**10 S. Riverside Plaza, Suite 1520, **Chicago IL 60606**

(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code: **(**312**) **766-2144**

**Not Applicable**

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

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| | | |
|:---|:---|:---|
| 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 check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ☐

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**Item 2.01 Completion of Acquisition or Disposition of Assets.**

On December 29, 2022, TRT Leaseco, LLC ("Kingsway Seller"), an indirect subsidiary of Kingsway Financial Services Inc. (the "Company"), completed its previously announced sale (the "TRT Sale") of certain real property in Liberty County, Texas that is currently operated as a railyard, pursuant to that certain Purchase and Sale Agreement (the "Agreement"), effective as of December 22, 2022, by and between Kingsway Seller and BNSF Dayton LLC ("Purchaser").

The material terms of the Agreement were previously disclosed in Item 1.01 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on December 23, 2022 (the "Announcement 8-K"), which is incorporated herein by reference. The description of the Agreement included or incorporated by reference in this Current Report on Form 8-K does not purport to be complete, and is subject to, and qualified in its entirety by, the terms of the Agreement, which was filed as Exhibit 10.1 to the Announcement 8-K, and is incorporated herein by reference.

**Item 7.01 Regulation FD Disclosure.**

On December 29, 2022, the Company issued a press release announcing the closing of the TRT Sale. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.

The information contained in Item 7.01 and Exhibit 99.1 to this Current Report on Form 8-K shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, except as expressly set forth by specific reference in such filing.

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| | |
|:---|:---|
| **Item 9.01** | **Financial Statements and Exhibits.** |

---

**(b) Pro forma financial information.**

The pro forma financial information required pursuant to Article 11 of Regulation S-X is filed as Exhibit 99.2 to this Current Report on Form 8-K and incorporated herein by reference.

**(d) Exhibits.**

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| | |
|:---|:---|
| **Exhibit**<br> **<u>Number</u>** | **Description** |
| 10.1 | [Purchase and Sale Agreement dated December 22, 2022, by and between TRT Leaseco, LLC, as Seller, and BNSF Dayton LLC, as Purchaser (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on December 23, 2022)](http://www.sec.gov/Archives/edgar/data/1072627/000121390022082517/ea170787ex10-1_kingsway.htm) |
| 99.1 | [Kingsway Financial Services Inc. Press Release dated December 29, 2022](ex_457915.htm) |
| 99.2 | [Unaudited Pro Forma Financial Information](ex_458652.htm) |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

---

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**SIGNATURES** 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | KINGSWAY FINANCIAL SERVICES INC. | KINGSWAY FINANCIAL SERVICES INC. |
| Date: January 5, 2023 | By: | /s/ Kent A. Hansen |
|  |  | Kent A. Hansen |
|  |  | Chief Financial Officer |

---

## Exhibit 99.1

**Exhibit 99.1**

![logo01.jpg](logo01.jpg)

**Kingsway Completes Sale of Texas Railyard for** 

**$21.4 Million of Net Cash Proceeds to The Company**

CHICAGO, Dec. 29, 2022 /CNW/ - (NYSE: KFS) **Kingsway Financial Services Inc.** ("Kingsway" or the "Company") today announced it has closed on the sale of the railyard it owns in Texas. TRT Leaseco, LLC, an indirect subsidiary of the Company and direct owner of the railyard, completed the sale to BNSF Dayton LLC, who also assumed the mortgage. The total sales price was $215.2 million – consisting of $44.5 million cash and $170.7 million of mortgage assumption – netting proceeds of $21.4 million to Kingsway after taxes, fees and distribution to the minority shareholder. John T. Fitzgerald, President and Chief Executive Officer of Kingsway, commented, "The sale of the railyard is a major milestone in monetizing our legacy assets and simplifying our balance sheet. With this sale – along with the previously announced sale of Flower Portfolio – our notes payable and subordinated debt as of December 31, 2022 will be $183.2 million lower (or 70%) than it was as of September 30, 2022." Net proceeds from the sale are expected to be used in furtherance of exercising Kingsway's options to repurchase its TruPs subordinated debt and other corporate purposes. Kingsway has options to repurchase $51.8 million fair value (or $75.5 million principal value) of its subordinated debt and $19.2 million of deferred interest (both as of September 30, 2022) for a total of $59.4 million. If Kingsway were to exercise its options in full, then – along with the railyard and Flower Portfolio sales – the remaining notes payable would be $16.4 million (value as of September 30, 2022), which is non-recourse to Kingsway, and the remaining subordinated debt, inclusive of deferred interest, would be $14.3 million (value as of September 30, 2022).

**About the Company**

Kingsway is a holding company that owns or controls subsidiaries primarily in the extended warranty, business services, asset management and real estate industries. The common shares of Kingsway are listed on the New York Stock Exchange under the trading symbol "KFS."

**Forward-Looking Statements**

This press release may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. Words such as "expects," "believes," "anticipates," "intends," "estimates," "seeks" and variations and similar words and expressions are intended to identify such forward-looking statements; however, the absence of any such words does not mean that a statement is a not a forward-looking statement. Such forward- looking statements relate to future events or future performance, but reflect Kingsway management's current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including as a result of the COVID 19 pandemic. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the section entitled "Risk Factors" in the Company's 2021 Annual Report on Form 10-K and subsequent Form 10-Qs and Form 8-Ks filed with the Securities and Exchange Commission. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

**Additional Information**

Additional information about Kingsway, including a copy of its Annual Reports can be accessed on the EDGAR section of the U.S. Securities and Exchange Commission's website at <u>www.sec.gov,</u> on the Canadian Securities Administrators' website at www.sedar.com<u>,</u> or through the Company's website at www.kingsway-financial.com

**For Further Information:**

Hayden IR

James Carbonara

(646)-755-7412

james@haydenir.com

Kingsway Financial Services, Inc.

Kent Hansen, CFO

312-766-2163

khansen@kingsway-financial.com

## Exhibit 99.2

**Exhibit 99.2**

**Kingsway Financial Services Inc.**

**Unaudited Pro Forma Consolidated Financial Statements**

On December 22, 2022, Kingsway Financial Services Inc. ("Kingsway" or the "Company") entered into an agreement for the sale of certain assets and the assumption of certain liabilities of TRT LeaseCo, a subsidiary of CMC Industries, Inc. ("CMC") to BNSF Dayton LLC for cash and certain additional consideration. CMC has been included in the Leased Real Estate segment and, after the sale, will no longer have revenues and essentially have no material assets or liabilities. The Company expects the sale to be accounted for as a discontinued operation. The sale closed on December 29, 2022.

The accompanying pro forma consolidated financial statements are presented to show the effects of the disposition of CMC, including the receipt of proceeds from the sale, on the Company's consolidated financial statements.

The following unaudited pro forma consolidated balance sheet of Kingsway as of September 30, 2022 is presented as if the disposition, as described in the notes to these unaudited pro forma consolidated financial statements, had occurred at September 30, 2022. The unaudited pro forma consolidated statements of operations for the year ended December 31, 2021 and for the nine months ended September 30, 2022 are presented as if the disposition had occurred on January 1, 2021. The unaudited pro forma consolidated financial statements are based on the historical financial statements of Kingsway for each period presented and in the opinion of the Company's management, all adjustments and disclosures necessary for a fair presentation of the pro forma data have been made.

These unaudited pro forma consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the results of operations or financial condition that would have been achieved had the disposition been completed as of the dates indicated or of the results that may be obtained in the future. These unaudited pro forma consolidated financial statements and the notes thereto should be read together with Kingsway's consolidated financial statements and the notes thereto as of and for the year ended December 31, 2021; Management's Discussion and Analysis included in Kingsway's Annual Report on Form 10-K for the year ended December 31, 2021; and Kingsway's Quarterly Report on Form 10-Q as of and for the nine months ended September 30, 2022.

------

**Kingsway Financial Services Inc.**

**Unaudited Notes to Pro Forma Consolidated Financial Statements**

The following is a summary of the pro forma adjustments reflected in the unaudited pro forma consolidated financial statements based on preliminary estimates, which may change as additional information is obtained.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Reflects the Company's historical consolidated balance sheet and statement of operations as of and for the nine months ended September 30, 2022, as presented in the Company's Quarterly Report on Form 10-Q, as filed with the SEC on November 10, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Reflects the net cash proceeds of $21.4 million r eceived by the Company from the sale of CMC less cash on hand at CMC of $2.2 million as of September 30, 2022. The base selling price of CMC was $215.2 million, consisting of $44.5 million of cash and $170.7 million of mortgage assumption. After the payment of taxes, expenses and the 19% paid to the noncontrolling interest holder, the Company received net cash proceeds of $21.4 million. The cash proceeds received reflects the Company's 81% ownership of CMC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Reflects the Company's disposition of CMC. Amounts represent the adjustments necessary to remove the assets, liabilities and noncontrolling interest associated with CMC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Reflects the adjustments related to the disposition of CMC and the estimated loss on sale of approximat ely $12.8 million.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. Reflects the Company's disposition of CMC. Amounts represent the adjustments necessary to remove the historical revenues, expenses and noncontrolling interest of CMC. Such adjustments exclude the effect of the loss on sale, as this would be reported as a component of discontinued operations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. Reflects the Company's historical consolidated statement of operations for the year ended December 31, 2021, as presented in the Company's Annual Report on Form 10-K, as filed with the SEC on February 28, 2022.

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**Unaudited Pro Forma Consolidated Balance Sheet**

**(in thousands, except share data)**

---

| | | | |
|:---|:---|:---|:---|
|  | **As of** | **Pro Forma** |  |
|  | **September 30, 2022 (a)** | **Adjustments** | **Pro Forma** |
| **Assets** |  |  |  |
| Investments: |  |  |  |
| Fixed maturities, at fair value | $36728 | $— | $36728 |
| Equity investments, at fair value | 126 |  | 126 |
| Limited liability investments | 1010 |  | 1010 |
| Limited liability investments, at fair value | 19182 |  | 19182 |
| Investments in private companies, at adjusted cost | 790 |  | 790 |
| Real estate investments, at fair value | 12150 |  | 12150 |
| Other investments, at cost which approximates fair value | 204 |  | 204 |
| Short-term investments, at cost which approximates fair value | 157 |  | 157 |
| Total investments | 70347 |  | 70347 |
| Cash and cash equivalents | 48640 | 19240 (b) | 67880 |
| Restricted cash | 13165 |  | 13165 |
| Accrued investment income | 1135 |  | 1135 |
| Service fee receivable, net of allowance for doubtful accounts | 7219 |  | 7219 |
| Other receivables, net of allowance for doubtful accounts | 12828 | (10477) (c) | 2351 |
| Deferred contract costs | 13065 |  | 13065 |
| Property and equipment, net of accumulated depreciation | 106025 | (88973) (c) | 17052 |
| Right-of-use asset | 887 |  | 887 |
| Goodwill | 100773 | (60983) (c) | 39790 |
| Intangible assets, net of accumulated amortization | 101489 | (74401) (c) | 27088 |
| Other assets | 30482 | (10418) (c) | 20064 |
| Total Assets | $506055 | $(226012) | $280043 |
| **Liabilities and Shareholders' Equity** |  |  |  |
| Liabilities: |  |  |  |
| Accrued expenses and other liabilities | $53981 | $(1963) (c) | $52018 |
| Income taxes payable | 2602 |  | 2602 |
| Deferred service fees | 84428 |  | 84428 |
| Bank loans | 21769 |  | 21769 |
| Notes payable | 199554 | (177160) (c) | 22394 |
| Subordinated debt, at fair value | 62302 |  | 62302 |
| Lease liability | 1189 |  | 1189 |
| Net deferred income tax liabilities | 31250 | (27949) (c) | 3301 |
| Total Liabilities | 457075 | (207071) | 250004 |
| Redeemable Class A preferred stock, no par value; 1,000,000 authorized at September 30, 2022; 149,733 issued and outstanding at September 30, 2022; redemption amount of $5,942 at September 30, 2022 | 5942 |  | 5942 |
| Shareholders' Equity: |  |  |  |
| Common stock, no par value; 50,000,000 authorized; 23,319,312 issued; 23,071,862 outstanding at September 30, 2022 |  |  |  |
| Additional paid-in capital | 359203 |  | 359203 |
| Treasury stock, at cost; 247,450 outstanding at September 30, 2022 | (492) |  | (492) |
| Accumulated deficit | (362130) | (12752) (d) | (374882) |
| Accumulated other comprehensive income | 31960 |  | 31960 |
| Shareholders' equity attributable to common shareholders | 28541 | (12752) | 15789 |
| Noncontrolling interests in consolidated subsidiaries | 14497 | (6189) (c) | 8308 |
| Total Shareholders' Equity | 43038 | (18941) | 24097 |
| Total Liabilities, Class A preferred stock and Shareholders' Equity | $506055 | $(226012) | $280043 |

---

*See accompanying notes to unaudited pro forma consolidated financial statements.*

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**Unaudited Pro Forma Consolidated Statement of Operations<br> (in thousands, except per share amounts)**

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| | | | |
|:---|:---|:---|:---|
|  | **Nine Months Ended** | **Pro Forma** |  |
|  | **September 30, 2022 (a)** | **Adjustments (e)** | **Pro Forma** |
| Revenues: |  |  |  |
| Service fee and commission revenue | $68442 | $— | $68442 |
| Rental revenue | 10933 | (10024) | 909 |
| Total revenues | 79375 | (10024) | 69351 |
| Operating expenses: |  |  |  |
| Claims authorized on vehicle service agreements | 15771 |  | 15771 |
| Commissions | 5537 |  | 5537 |
| Cost of services sold | 12908 |  | 12908 |
| General and administrative expenses | 34974 | (2115) | 32859 |
| Disposal of subsidiary transaction expenses | 5408 |  | 5408 |
| Leased real estate segment interest expense | 5005 | (4707) | 298 |
| Total operating expenses | 79603 | (6822) | 72781 |
| **Operating loss** | (228) | (3202) | (3430) |
| Other revenues (expenses), net: |  |  |  |
| Net investment income | 1547 |  | 1547 |
| Net realized gains | 1035 |  | 1035 |
| Loss on change in fair value of equity investments | (53) |  | (53) |
| Gain on change in fair value of limited liability investments, at fair value | 368 |  | 368 |
| Gain on change in fair value of real estate investments | 1488 |  | 1488 |
| Gain on change in fair value of derivative asset option contracts | 13498 |  | 13498 |
| Non-operating other expenses | (413) | (6) | (419) |
| Interest expense not allocated to segments | (5207) |  | (5207) |
| Amortization of intangible assets | (4397) | 47 | (4350) |
| Loss on change in fair value of debt | (4992) |  | (4992) |
| Gain on disposal of subsidiary | 37917 |  | 37917 |
| Total other revenue, net | 40791 | 41 | 40832 |
| Income from continuing operations before income tax expense | 40563 | (3161) | 37402 |
| Income tax expense | 5659 | (38) | 5621 |
| **Income from continuing operations** | 34904 | (3123) | 31781 |
| &nbsp;&nbsp;&nbsp; Less: net loss attributable to noncontrolling interests in consolidated subsidiaries | (615) | (469) | (1084) |
| &nbsp;&nbsp;&nbsp; Less: dividends on preferred stock | 234 |  | 234 |
| Income from continuing operations attributable to common shareholders | $35285 | $(2654) | $32631 |
| Earnings per share – continuing operations: |  |  |  |
| &nbsp;&nbsp;&nbsp; Basic: | $1.54 |  | $1.42 |
| &nbsp;&nbsp;&nbsp; Diluted: | $1.42 |  | $1.31 |
| Weighted-average shares outstanding (in '000s): |  |  |  |
| Basic: | 22909 |  | 22909 |
| Diluted: | 25055 |  | 25055 |

---

*See accompanying notes to unaudited pro forma consolidated financial statements.*

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**Unaudited Pro Forma Consolidated Statement of Operations<br> (in thousands, except per share amounts)**

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| | | | |
|:---|:---|:---|:---|
|  | **Year Ended**  | **Pro Forma** |  |
|  | **December 31, 2021 (f)** | **Adjustments (e)** | **Pro Forma** |
| Revenues: |  |  |  |
| Service fee and commission revenue | $78401 | $- | $78401 |
| Rental revenue | 13365 | (13365) | 0 |
| Total revenues | 91766 | (13365) | 78401 |
| Operating expenses: |  |  |  |
| Claims authorized on vehicle service agreements | 19536 |  | 19536 |
| Commissions | 7042 |  | 7042 |
| Cost of services sold | 7052 |  | 7052 |
| General and administrative expenses | 48733 | (3488) | 45245 |
| Leased real estate segment interest expense | 6164 | (6164) | (0) |
| Total operating expenses | 88527 | (9652) | 78875 |
| **Operating income** | 3239 | (3712) | (473) |
| Other revenues (expenses), net: |  |  |  |
| Net investment income | 1575 |  | 1575 |
| Net realized gains | 1809 |  | 1809 |
| Loss on change in fair value of equity investments | (242) |  | (242) |
| Gain on change in fair value of limited liability investments, at fair value | 2391 |  | 2391 |
| Non-operating other expense | (2788) | 2805 | 17 |
| Interest expense not allocated to segments | (6161) |  | (6161) |
| Amortization of intangible assets | (4900) | 63 | (4837) |
| Loss on change in fair value of debt | (3201) |  | (3201) |
| Gain on extinguishment of debt | 2494 |  | 2494 |
| Total other expenses, net | (9023) | 2868 | (6155) |
| Loss before income tax benefit | (5784) | (844) | (6628) |
| Income tax benefit | (7644) | 2266 | (5378) |
| **Net income** | $1860 | $(3110) | $(1250) |
| Less: Net income attributable to the noncontrolling interests in consolidated subsidiaries | 2202 | (542) | 1660 |
| Less: Dividends on preferred stock | 494 |  | 494 |
| Net loss attributable to the common shareholders | $(836) | $(2568) | $(3404) |
| Loss per share – net loss attributable to common shareholders: |  |  |  |
| Basic: | $(0.04) |  | $(0.15) |
| Diluted: | $(0.04) |  | $(0.15) |
| Weighted-average shares outstanding (in '000s): |  |  |  |
| Basic: | 22537 |  | 22537 |
| Diluted: | 22537 |  | 22537 |

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*See accompanying notes to the unaudited pro forma consolidated financial statements.*