KFS Kingsway Financial Services Inc New

 

On November 18, 2022, Pegasus Acquirer LLC (the “Kingsway Buyer”), a newly formed subsidiary of Kingsway Financial Services Inc. (the “Company” or “Kingsway”), entered into an Asset Purchase Agreement (the “Agreement”) with Secure Nursing Service, Inc., a California corporation (“Seller”), Rafael Gofman (“Gofman”), Ella Gofman (“Ella”), and Zhanna Weiss (“Weiss” and, collectively with Gofman and Ella, the “Shareholders” and each, individually, a “Shareholder”) pursuant to which the Kingsway Buyer agreed to purchase and assume from Seller, substantially all of the assets and certain specified liabilities of Seller (the “SNS Interests”). The acquisition was effective as of 12:01 a.m. on November 18, 2022.

 

Pursuant to the terms of the Agreement, as consideration for the SNS Interests, the Kingsway Buyer paid to the Seller aggregate cash consideration of approximately $10.9 million, less certain escrowed amounts for purposes of indemnification claims and working capital adjustments as described below (the “Closing Consideration”).

 

The Agreement contains customary representations and warranties and covenants from the Seller and Shareholders, including but not limited to representations and warranties about the Seller, Shareholders, and the Seller's business, assets, financial statements, operations, material contracts, liabilities, real property and intellectual property. The Seller and Shareholders will also be subject to customary indemnification obligations related to breaches or misrepresentations under the Agreement, failure to perform covenants contained in the Agreement and losses related to certain designated pre-closing liabilities and pre-closing taxes. A portion of the Closing Consideration equal to approximately $1.05 million was deposited into an escrow account to satisfy indemnification claims and any post-closing working capital adjustments.

 

The Kingsway Buyer also made customary representations and warranties and covenants, including but not limited to representations and warranties about the Buyer’s authority to enter into the transaction and ability to pay the Closing Consideration. The Kingsway Buyer will also be subject to customary indemnification obligations related to breaches or misrepresentations under the Agreement and failure to perform covenants contained in the Agreement.

 

Th Closing Consideration was financed with a combination of debt financing provided by Signature Bank, and cash on hand. Pegasus Acquirer Holdings LLC and Pegasus Acquirer LLC, subsidiaries of Kingsway, borrowed a total of $6.5 million, in the form of a term loan, and established a $1 million revolver (together, the “Loan”) that was undrawn at close. The Loan has a variable interest rate equal to the Prime Rate plus 0.50%, with a floor of 5.00%. The Loan requires monthly principal and interest payments and the term loan matures on November 18, 2028.

 

The description above is a summary and does not purport to be complete and is subject to, qualified in its entirety by, the terms of the Agreement which is filed as Exhibit 10.1 to this report and is incorporated herein by reference.