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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2023

or

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from             to            .

 

Commission File No. 000-56243

 

 

STANDARD PREMIUM FINANCE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

     
Florida   81-2624094
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification Number)

 

13590 SW 134th Avenue, Suite 214, Miami, FL 33186

(Address of principal executive offices and Zip Code)

 

305-232-2752

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐  Accelerated filer  ☐ 
Non-accelerated Filer ☒  Smaller reporting company ☒ 
    Emerging growth company ☒ 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

 

There were 2,905,016 shares of common stock issued and outstanding as of August 4, 2023.

 

 

 
 

 

Explanatory Note



This Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (the “Form 10-Q”) contains certain financial statements and information for the six months ended June 30, 2022 filed by Standard Premium Finance Holdings, Inc. (the “Company”) with the Securities and Exchange Commission (the “SEC”) on its Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 filed on August 15, 2022.

In connection with preparing the Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2022 and 2021, the Company determined that it previously incorrectly classified its Increase/Decrease in Premium Finance Contracts Receivable as operating activities. Beginning in the third quarter of 2022, the Company adjusted its consolidated statements of cash flows to present Increase/Decrease in Premium Finance Contracts Receivable as investing activities in accordance with ASC 230, Statement of Cash Flows. The consolidated statement of cash flows for the six months ended June 30, 2022 contained in this Form 10-Q has been restated to reflect these adjustments to the presentation.

See Note 3 Adjustment to Statement of Cash Flows to the Consolidated Financial Statements included in Item 1 of this Form 10-Q for additional information regarding the restated Consolidated Statement of Cash Flows information contained in this Form 10-Q.

 

i 
 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties. These statements may relate to, but are not limited to, information or assumptions about us, our capital and other expenditures, dividends, financing plans, capital structure, cash flow, our potential future business acquisitions, future economic performance, operating income and management’s plans, strategies, goals and objectives for future operations and growth. These forward-looking statements generally are accompanied by words such as “intend,” “anticipate,” “believe,” “estimate,” “expect,” “should,” “seek,” “project,” “plan,” “would,” “could,” “can,” “may,” and similar terms. Any statement that is not a historical fact is a forward-looking statement. It should be understood that these forward-looking statements are necessarily estimates reflecting the best judgment of senior management, not guarantees of future performance. They are subject to a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described in Part I. “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 17, 2023. 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 the “Company” and “Standard Premium” as used herein refers collectively to Standard Premium Finance Holdings, Inc. and its wholly owned subsidiaries, unless otherwise stated.

 

ii 
 

 

 

STANDARD PREMIUM FINANCE HOLDINGS, INC.

TABLE OF CONTENTS

 

 

Part I – FINANCIAL INFORMATION

 

Item 1. 

 Financial Statements 1

Item 2.

 

 Management’s Discussion and Analysis of Financial Condition and Results of Operations 23

Item 3. 

 Quantitative and Qualitative Disclosures About Market Risk 28

Item 4. 

 Controls and Procedures 28
     

 

PART II – OTHER INFORMATION

 

Item 1. 

 Legal Proceedings 29

Item 1A. 

 Risk Factors 29

Item 2. 

 Unregistered Sales of Equity Securities and Use of Proceeds 29

Item 3. 

 Defaults Upon Senior Securities 29

Item 4. 

 Mine Safety Disclosures 29

Item 5. 

 Other Information 29

Item 6. 

 Exhibits 29
SIGNATURES

 

iii 
 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

 

STANDARD PREMIUM FINANCE HOLDINGS, INC. AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED
JUNE 30, 2023 AND DECEMBER 31, 2022
AND JUNE 30, 2022

   
CONSOLIDATED FINANCIAL STATEMENTS:  
Consolidated Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022 2
Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 (unaudited) 3
Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022 (unaudited) 4
Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (unaudited) 5
Condensed Notes to Consolidated Financial Statements (unaudited) 6 – 22

 

 

 

 

1 
 

  

Standard Premium Finance Holdings, Inc. and Subsidiary

Consolidated Balance Sheets

June 30, 2023 and December 31, 2022

 

           
   June 30,   December 31, 
   (unaudited)     
ASSETS
CURRENT ASSETS          
Cash  $147,800   $421,211 
Premium finance contracts and related receivable, net of allowance for credit losses of $1,230,263 and $1,129,498 at June 30, 2023 and December 31, 2022, respectively   55,778,974    49,474,903 
Prepaid expenses and other current assets   393,724    348,795 
TOTAL CURRENT ASSETS   56,320,498    50,244,909 
           
Property and equipment, net   98,424    103,591 
Operating lease assets   139,465    196,407 
Finance lease assets   45,292    51,920 
           
OTHER ASSETS          
Cash surrender value of life insurance   618,362    603,816 
Deferred tax asset   317,000    288,164 
TOTAL OTHER ASSETS   935,362    891,980 
           
TOTAL ASSETS  $57,539,041   $51,488,807 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
CURRENT LIABILITIES          
Line of credit, net  $38,032,709   $32,713,625 
Drafts payable   2,861,946    1,827,884 
Note payable - current portion   1,579,091    1,340,597 
Note payable - stockholders and related parties - current portion   587,000    109,000 
Payroll Protection Program loan - current portion   99,963    91,852 
Operating lease obligation - current portion   90,597    122,554 
Finance lease obligation - current portion   12,826    12,494 
Accrued expenses and other current liabilities   1,492,045    1,317,699 
TOTAL CURRENT LIABILITIES   44,756,177    37,535,705 
           
LONG-TERM LIABILITIES          
Note payable, net of current portion   5,127,922    5,946,324 
Note payable - stockholders and related parties, net of current portion   1,341,000    1,816,000 
Payroll Protection Program loan, net of current portion   77,649    123,924 
Operating lease obligation, net of current portion   48,868    73,853 
Finance lease obligation, net of current portion   34,062    40,559 
TOTAL LONG-TERM LIABILITIES   6,629,501    8,000,660 
           
TOTAL LIABILITIES   51,385,678    45,536,365 
           
COMMITMENTS AND CONTINGENCIES (see Note 14)   -     -  
           
STOCKHOLDERS' EQUITY:          
Preferred stock, par value $0.001 per share; 20 million shares authorized,          
600,000 shares designated as Series A - convertible, 166,000 issued and outstanding at June 30, 2023 and December 31, 2022   166    166 
Common stock, par value $0.001 per share; 100 million shares authorized, 2,905,016 shares issued and outstanding at June 30, 2023 and December 31, 2022   2,905    2,905 
Additional paid in capital   3,397,751    3,383,651 
Retained earnings   2,752,541    2,565,720 
TOTAL STOCKHOLDERS' EQUITY   6,153,363    5,952,442 
           
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $57,539,041   $51,488,807 

 

See accompanying condensed notes to the consolidated unaudited financial statements.

 

2 
 

Standard Premium Finance Holdings, Inc. and Subsidiary

Consolidated Statements of Operations

For the Three and Six Months Ended June 30, 2023 and 2022

(unaudited)

                 
  

For the Three Months Ended

June 30,

  

For the Six Months Ended

June 30,

 
   2023   2022   2023   2022 
                 
REVENUES                
Finance charges  $1,976,002   $1,699,523   $3,713,946   $3,259,113 
Late charges   241,479    250,008    488,708    478,338 
Origination fees   90,958    93,451    184,589    188,127 
                     
TOTAL REVENUES   2,308,439    2,042,982    4,387,243    3,925,578 
                     
OPERATING COSTS AND EXPENSES                    
                     
Interest expense   906,166    484,816    1,697,813    911,306 
Salaries and wages   421,825    366,608    851,075    727,307 
Commission expense   271,137    257,711    513,572    498,560 
Provision for credit losses   154,928    271,144    346,781    439,249 
Professional fees   78,013    88,331    165,833    194,133 
Postage expense   28,811    28,686    56,689    54,052 
Insurance expense   35,577    46,223    63,051    90,067 
Other operating expenses   163,303    246,329    364,002    457,082 
                     
TOTAL COSTS AND EXPENSES   2,059,760    1,789,848    4,058,816    3,371,756 
                     
INCOME BEFORE INCOME TAXES   248,679    253,134    328,427    553,822 
                     
PROVISION FOR INCOME TAXES   72,638    67,781    83,506    143,404 
                     
NET INCOME   176,041    185,353    244,921    410,418 
                     
PREFERRED SHARE DIVIDENDS   (29,050)   (17,558)   (58,100)   (34,883)
                     
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS  $146,991   $167,795   $186,821   $375,535 
                     
Net income per share attributable to common stockholders                    
Basic  $0.05   $0.06   $0.06   $0.13 
Diluted  $0.05   $0.05   $0.06   $0.12 
                     
Weighted average common shares outstanding                    
Basic   2,905,016    2,905,016    2,905,016    2,905,016 
Diluted   3,246,005    3,129,657    3,311,067    3,129,657 

 

See accompanying condensed notes to the consolidated unaudited financial statements.

3 
 

 

Standard Premium Finance Holdings, Inc. and Subsidiary

Consolidated Statements of Changes in Stockholders’ Equity

For the Three and Six Months Ended June 30, 2023 and 2022

(unaudited)

 

                             
   Series A Preferred Stock   Common Stock  

Additional

Paid-in

   Retained   Total Stockholders' 
   Shares   Amount   Shares   Amount   Capital   Earnings   Equity 
                             
BALANCE AT DECEMBER 31, 2021   99,000   $99    2,905,016   $2,905   $2,682,995   $1,848,780   $4,534,779 
                                    
Series A Convertible Preferred Stock issued in exchange for note payable   2,000    2    —      —      19,998    —      20,000 
Options issued for services   —      —      —      —      5,778    —      5,778 
Dividends paid on preferred stock   —      —      —      —      —      (17,325)   (17,325)
Net income   —      —      —      —      —      225,065    225,065 
BALANCE AT MARCH 31, 2022 (unaudited)   101,000   $101    2,905,016   $2,905   $2,708,771   $2,056,520   $4,768,297 
                                    
Series A Convertible Preferred Stock issued for cash and exchange for note payable   65,000    65    —      —      649,935    —      650,000 
Options issued for services   —      —      —      —      10,800    —      10,800 
Dividends paid on preferred stock   —      —      —      —      —      (17,558)   (17,558)
Net income   —      —      —      —      —      185,353    185,353 
BALANCE AT JUNE 30, 2022 (unaudited)   166,000   $166    2,905,016   $2,905   $3,369,506   $2,224,315   $5,596,892 
                                    

 

                             
                           
   Series A Preferred Stock   Common Stock  

Additional

Paid-in

   Retained   Total Stockholders' 
   Shares   Amount   Shares   Amount   Capital   Earnings   Equity 
                             
BALANCE AT DECEMBER 31, 2022   166,000   $166    2,905,016   $2,905   $3,383,651   $2,565,720   $5,952,442 
                                    
Options issued for services   —      —      —      —      7,050    —      7,050 
Dividends paid on preferred stock   —      —      —      —      —      (29,050)   (29,050)
Net income   —      —      —      —      —      68,880    68,880 
BALANCE AT MARCH 31, 2023 (unaudited)   166,000   $166    2,905,016   $2,905   $3,390,701   $2,605,550   $5,999,322 
                                    
Options issued for services   —      —      —      —      7,050    —      7,050 
Dividends paid on preferred stock   —      —      —      —      —      (29,050)   (29,050)
Net income   —      —      —      —      —      176,041    176,041 
BALANCE AT JUNE 30, 2023 (unaudited)   166,000   $166    2,905,016   $2,905   $3,397,751   $2,752,541   $6,153,363 

 

 

See accompanying condensed notes to the consolidated unaudited financial statements.

 

4 
 

 

Standard Premium Finance Holdings, Inc. and Subsidiary

Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2023 and 2022

(unaudited)

 

         
   For the Six Months Ended June 30, 
   2023   2022 
       (As Restated - 
       See Note 3) 
CASH FLOW FROM OPERATING ACTIVITIES:          
NET INCOME  $244,921   $410,418 
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:          
Depreciation   12,515    10,322 
Loss on disposal of property and equipment   —      2,167 
Amortization of right to use asset - operating lease   56,942    50,931 
Amortization of finance lease asset   6,628    6,628 
Provision for credit losses   346,781    439,249 
Amortization of loan origination fees   57,038    33,508 
Options issued for services   14,100    5,778 
Warrants issued for services   —      10,800 
Changes in operating assets and liabilities:          
(Increase)/Decrease in prepaid expenses and other current assets   (44,929)   172,209 
(Increase)/Decrease in deferred tax asset, net   (28,836)   3,000 
Increase/(Decrease) in drafts payable   1,034,062    331,762 
Increase/(Decrease) in accrued expenses and other current liabilities   174,346    (294,099)
Increase/(Decrease) in operating lease liability   (56,942)   (50,931)
Net cash provided by operating activities   1,816,626    1,131,742 
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Disbursements under premium finance contracts receivable, net   (6,650,852)   (4,358,311)
Payments made on cash surrender value of life insurance   (14,546)   (13,653)
Sale of property and equipment   —      4,500 
Purchases of property and equipment   (7,348)   (24,800)
Net cash used in investing activities   (6,672,746)   (4,392,264)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Cash overdraft   —      (153,264)
Proceeds of line of credit, net of repayments   5,262,046    3,285,079 
Proceeds from notes payable   91,668    325,000 
Repayment of notes payable   (671,576)   (236,000)
Proceeds from notes payable - stockholders and related parties   30,000    25,000 
Repayment of notes payable - stockholders and related parties   (27,000)   (181,302)
Repayment of finance lease obligation   (6,165)   (5,851)
Repayment of PPP loan   (38,164)   —   
Proceeds from sale of preferred stock   —      400,000 
Dividends paid on Series A Convertible Preferred Stock   (58,100)   (34,883)
Net cash provided by financing activities   4,582,709    3,423,779 
           
NET CHANGE IN CASH   (273,411)   163,257 
           
CASH AT THE BEGINNING OF THE PERIOD   421,211    20,987 
           
CASH AT THE END OF THE PERIOD  $147,800   $184,244 
           
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:          
   Cash paid during the period for:          
       Income taxes  $36,041   $239,059 
       Interest paid  $1,652,987   $879,481 
NON-CASH INVESTING AND FINANCING TRANSACTION:          
Debt exchanged for Series A Convertible Preferred Stock  $—     $270,000 

 

See accompanying condensed notes to the consolidated unaudited financial statements.

 

 5
 

Standard Premium Finance Holdings, Inc. and Subsidiary

Condensed Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

 

 

 

1. Principles of Consolidation and Description of Business

 

Standard Premium Finance Holdings, Inc. (“SPFH” or the “Holding”) was incorporated on May 12, 2016, pursuant to the laws of the State of Florida.

Standard Premium Finance Management Corporation (“SPFMC” or the “subsidiary”) was incorporated on April 23, 1991, pursuant to the laws of the State of Florida, to engage principally in the insurance premium financing business. The Subsidiary is a licensed insurance premium finance company in twenty-nine states.

The accompanying consolidated financial statements include the accounts of SPFH and its wholly-owned subsidiary SPFMC. SPFH and its subsidiary are collectively referred to as “the Company”. All significant intercompany balances and transactions have been eliminated in consolidation.

2. Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements (unaudited), which include the accounts of Standard Premium Finance Holdings, Inc. and its wholly-owned subsidiary, have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes thereto for the year ended December 31, 2022.

In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements of Standard Premium Finance Holdings, Inc. and its wholly-owned subsidiary for the fiscal year ended December 31, 2022, have been omitted.

Cash and Cash Equivalents

The Company considers short-term interest-bearing investments with initial maturities of three months or less to be cash equivalents. There are no cash equivalents at June 30, 2023 and December 31, 2022.

 

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. For Florida, Georgia, North Carolina and Texas contracts, an initial origination fee of $20 per contract and the first month’s interest are recognized as income at the inception of a contract. The same treatment is applied to the $15 initial origination fee and first month’s interest in South Carolina. The origination 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. Unearned interest is netted against Premium Finance Contracts and Related Receivables on the balance sheet for reporting purposes.

6 

Standard Premium Finance Holdings, Inc. and Subsidiary

Condensed Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

2. Summary of Significant Accounting Policies (Continued)

The provisions of Financial Accounting Standards Board (“FASB”) ASC 606, Revenue from Contracts with Customers (“ASC 606”) provide guidance on the recognition, presentation, and disclosure of revenue in financial statements. ASC 606 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. ASC 606 requires revenue to be recognized upon transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for services that are distinct and accounted for as separate performance obligations. In such cases, revenue would be recognized at the time of delivery or over time for each performance of service. However, ASC 606 exempts items under ASC 835-30 and ASC 310-20 (i.e. finance charges, late charges and origination fee income for the Company).

 

Premium Finance Contracts and Related Receivable

The Company finances insurance premiums on policies primarily for commercial enterprises. The Company amortizes these loans over the term of each contract, which varies from 3 to 12 monthly payments, and manages these loans on a collective basis based on similar risk characteristics. As of June 30, 2023 and December 31, 2022, the portfolio has an amortized cost basis of $58,205,806 and $51,525,950, respectively. Repayment terms are structured such that the contracts will be repaid within the term of the underlying insurance policy, generally less than one year. The contracts are secured by the unearned premium of the insurance carrier which is obligated to pay the Company any unearned premium in the event the insurance policy is cancelled pursuant to a power of attorney contained in the finance contract. As of June 30, 2023, and December 31, 2022, the amount of unearned premium on open and cancelled contracts totaled $80,521,039 and $71,315,354, respectively. The annual percentage interest rates on new contracts averaged approximately 16.7% and 15.0% during the six months ended June 30, 2023 and 2022, respectively.

 

Allowance for Credit Losses

The carrying amount of the Premium Finance Contracts (“Contracts”) is reduced by an allowance for credit losses that are maintained at a level which, in management’s judgment, is adequate to absorb credit losses inherent in the Contracts. The amount of the allowance is based upon management’s evaluation of the collectability of the Contracts, including the nature of the accounts, credit concentration, trends, historical data, specific impaired Contracts, current and forecasted economic conditions, and other risks inherent in the Contracts. The allowance is increased by a provision for credit losses, which is charged to expense, and reduced by charge-offs, net of recovery.

 

To estimate expected credit losses on loans that exhibit similar risk characteristics, the Company considers historical loss information (updated for current conditions and reasonable and supportable forecasts that affect the expected collectability of the amortized cost basis pool) using a loss-rate approach. The Company monitors the A.M. Best rating for insurance carriers whose policies are being financed as a factor of the quality of its contract receivables. As of June 30, 2023, and December 31, 2022, the Company did not expect any material degradation to the ratings of the insurance carriers it currently underwrites or anticipates underwriting in a way that would affect the allowance for credit losses.

 

In addition, specific allowances are established for accounts over 120 days. Individual contracts are written off against the allowance when collection of the individual contracts appears doubtful. The collectability of outstanding and cancelled contracts is generally secured by collateral in the form of the unearned premiums on the underlying policies. The collectability of amounts due from agents is determined by the financial strength of the agency.

 

 

7 

Standard Premium Finance Holdings, Inc. and Subsidiary

Condensed Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

 

 

 

 

2. Summary of Significant Accounting Policies (Continued)

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

 

Furniture and equipment 5 - 7 years

Computer equipment and software 3 - 5 years

Leasehold improvements 10 years

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include assumptions used in valuation of deferred tax assets, allowance for doubtful accounts, depreciable lives of property and equipment, and valuation of stock-based compensation.

 

Concentration of Credit and Financial Instrument Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and loans receivable from customers, agents, and insurance companies. The Company maintains its cash balances at two banks. Accounts at these financial institutions are insured by the Federal Deposit Insurance Corporation up to $250,000. Uninsured balances are $63,779 and $482,479 at June 30, 2023 and December 31, 2022, respectively. The Company mitigates this risk by maintaining its cash balances at high-quality financial institutions. The following table provides a reconciliation between uninsured balances and cash per the balance sheet:

 

          
   June 30, 2023
(unaudited)		   December 31, 2022 
Uninsured Balance  $63,779   $482,479 
Plus: Insured balances   250,000    250,000 
Plus: Balances at institutions that do not exceed FDIC limit   145,453    17,758 
Less: Outstanding checks   (311,432)   (329,026)
           
Cash per Consolidated Balance Sheet  $147,800   $421,211 

 

The Company controls its credit risk in accounts receivable through credit standards, limits on exposure, by monitoring the financial condition of insurance companies, by adhering to statutory cancellation policies, and by monitoring and pursuing collections from past due accounts. We cancel policies at the earliest permissible date allowed by the statutory cancellation regulations.

 

Approximately 61% and 56% of the Company’s business activity is with customers located in Florida for 2023 and 2022, respectively. Approximately 10% and 14% of the Company’s business activity is with customers located in Georgia for 2023 and 2022, respectively. Approximately 12% and 14% of the Company's business activity is with customers located in North Carolina for 2023 and 2022, respectively. There were no other significant regional, industrial or group concentrations during the three months ended June 30, 2023 and 2022.

 

 

8 

Standard Premium Finance Holdings, Inc. and Subsidiary

Condensed Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

 

 

 

 

2. Summary of Significant Accounting Policies (Continued)

Amortization of Line of Credit Costs

Amortization of line of credit costs is computed using the straight-line method over the life of the loan.

 

Fair Value of Financial Instruments

The Company’s carrying amounts of financial instruments as defined by Financial Accounting Standards Board (“FASB”) ASC 825, “Disclosures about Fair Value of Financial Instruments”, including premium finance contracts and related receivables, prepaid expenses, drafts payable, accrued expenses and other current liabilities, approximate their fair value due to the relatively short period to maturity for these instruments. The fair value of the line of credit and notes payable are based on current rates at which the Company can borrow funds with similar remaining maturities and the carrying value approximates fair value.

 

Income Taxes

The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets and liabilities are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

Uncertain tax positions are recognized only when the Company believes it is more likely than not that the tax position will be upheld on examination by the taxing authorities based on the merits of the position. The Company has no material unrecognized tax benefits and no adjustments to its consolidated financial position, results of operations or cash flows were required as of June 30, 2023.

 

Tax returns are open to examination by taxing authorities for three years after filing. No income tax returns are currently under examination by taxing authorities. SPFMC and SPFH recognize interest and penalties, if any, related to uncertain tax positions in income tax expense. SPFMC and SPFH did not have any accrued interest or penalties associated with uncertain tax positions as of June 30, 2023 and December 31, 2022.

 

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with FASB ASC Topic No. 718, “Stock Compensation,” which establishes the requirements for expensing equity awards. The Company measures and recognizes as compensation expense the fair value of all share-based payment awards based on estimated grant date fair values. Our stock-based compensation is issuances made to directors, executives, employees and consultants, which includes employee stock options related to our 2019 Equity Incentive Plan and stock warrants. The determination of fair value involves a number of significant estimates. We use the Black-Scholes option pricing model to estimate the value of employee stock options and stock warrants which requires a number of assumptions to determine the model inputs. These include the expected volatility of our stock and employee exercise behavior which are based expectations of future developments over the term of the option.

 

 

9 

Standard Premium Finance Holdings, Inc. and Subsidiary

Condensed Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

 

 

 

2. Summary of Significant Accounting Policies (Continued)

Earnings per Common Share

The Corporation accounts for earnings (loss) per share in accordance with FASB ASC Topic No. 260 - 10, “Earnings Per Share”, which establishes the requirements for presenting earnings per share (“EPS”). FASB ASC Topic No. 260 - 10 requires the presentation of “basic” and “diluted” EPS on the face of the statement of operations. Basic EPS amounts are calculated using the weighted-average number of common shares outstanding during each period. Diluted EPS assumes the exercise of all stock options, warrants and convertible securities having exercise prices less than the average market price of the common stock during the periods, using the treasury stock method.

For the six months ended June 30, 2023 and 2022, stock options to purchase 207,400 and 207,400 shares of common stock were outstanding, respectively, as described in Note 12. 93,700 of these options vested on March 1, 2021, 93,700 stock options vested on March 1, 2022, 10,000 stock options vested on June 29, 2023, and the remaining 10,000 stock options vest on June 29, 2024. The 197,400 vested stock options are considered dilutive and included in the calculation of diluted EPS at June 30, 2023 and 2022.

For the six months ended June 30, 2023 and 2022, stock warrants to purchase 1,035,000 and 1,035,000 shares of common stock were outstanding, respectively, as described in Note 12. All the stock warrants vested immediately. 635,000 warrants are considered dilutive and included in the calculation of diluted EPS and the remaining 400,000 warrants are “out-of-the-money” and excluded from the calculation of diluted EPS as of June 30, 2023 and 2022.

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. This preferred stock is anti-dilutive as of June 30, 2023 and December 31, 2022, and excluded from diluted earnings per share.

Leases

The Company recognizes and measures its leases in accordance with ASC Topic 842, “Leases”. The Company determines if an arrangement is a lease, or contains a lease, at inception of a contract and when the terms of an existing contract are changed. The Company recognizes a lease liability and a right of use (ROU) asset at the commencement date of the lease. The lease liability is initially and subsequently recognized based on the present value of its future lease payments calculated using the Company’s incremental borrowing rate.

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts on an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exceptions. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted. The Company does not anticipate any impact on the consolidated financial statements from the adoption of the standard.

 

 

10 

Standard Premium Finance Holdings, Inc. and Subsidiary

Condensed Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

 

 

 

2. Summary of Significant Accounting Policies (Continued)

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments," which replaces the existing "incurred loss" model for recognizing credit losses with an "expected loss" model referred to as the CECL model. Under the CECL model, the Company is required to present certain financial assets carried at amortized cost, such as insurance premium finance loans held for investment, at the net amount expected to be collected. The measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The Company adopted this standard in the first fiscal quarter of 2023. There has been no impact on current earnings due to the adoption of this standard.

 

Cash Surrender Value of Life Insurance

The Company is the owner and beneficiary of a life insurance policy on its president. The cash surrender value relative to the policy in place at June 30, 2023 and December 31, 2022 was $618,362 and $603,816, respectively. 

3. Restatement of the Statement of Cash Flows

In the third quarter of 2022, pursuant to the advice of a technical expert, the Company restated its consolidated statements of cash flows to present the increase/decrease in premium finance contracts receivable as investing activities, in accordance with ASC 230, Statement of Cash Flows. Previously, the increase/decrease in premium finance contracts receivable was presented within operating activities on the Company's consolidated statements of cash flows. These changes have no impact on previously reported consolidated statements of operations and balance sheets as well as earnings per share.

The consolidated statement of cash flows for the six months ended June 30, 2022 has been restated to reflect these adjustments to the presentation. The following tables present the effects of the changes on the presentation of the previously reported consolidated statement of cash flows:

               
   Six Months Ended June 30, 2022 
   As Previously Reported (i)   Restatement   As Restated 
Net cash provided by (used in):               
Operating activities: (ii)  $(3,226,569)  $4,358,311   $1,131,742 
Investing activities   (33,953)   (4,358,311)   (4,392,264)

 

(i)As reported in the Company's 2022 Form 10-Q filed with the SEC on August 15, 2022.
(ii)Financial statement line impacted in operating activities was increase/(decrease) in premium finance contracts receivable.

 

4. Premium Finance Contracts, Related Receivable and Allowance for Credit Losses

Premium Finance Contracts and Related Receivable represent monthly payments due on insurance premium finance contracts. The Company finances insurance policies over periods from three months to one year for businesses and consumers who make an initial down payment of, on average, 25 percent of the insurance policy amounts. The entire amount of the contract is recorded including amounts due for finance charges and services charges. These receivables are reported net of unearned interest for financial statements purposes. Amounts due from agents represent balances related to (1) an agent’s unearned commission due to a policy cancellation and (2) down payments collected by the agents on behalf of the insured, which are due to us. Receivables from insurance premium finance contracts cancelled are due from the insurance companies.

 

 

11 

Standard Premium Finance Holdings, Inc. and Subsidiary

Condensed Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

 

 

 

4. Premium Finance Contracts, Related Receivable and Allowance for Credit Losses (Continued)

 

At June 30, 2023 and December 31, 2022, premium finance contract and agents’ receivable consists of the following:

 

          
Description  June 30, 2023   December 31, 2022 
 Insurance premium finance contracts outstanding  $52,802,001   $45,520,349 
 Insurance premium finance contracts cancelled   5,403,805    6,005,601 
Insurance Premium finance contracts gross     58,205,806    51,525,950 
 Amounts due from agents   830,815    645,648 
 Less: Unearned interest   (2,027,384)   (1,567,197)
Insurance premium finance contracts net    57,009,237    50,604,401 
 Less: Allowance for credit losses   (1,230,263)   (1,129,498)
           
 Total  $55,778,974   $49,474,903 

 

The allowance for credit losses at June 30, 2023 and December 31, 2022 are as follows:

 

          
   June 30, 2023   December 31, 2022 
Allowance for premium finance contracts  $1,064,827   $1,000,000 
Allowance for amounts due from agents   165,436    129,498 

 

Activity in the allowance for credit losses for the six months ended June 30, 2023 and the year ended December 31, 2022 are as follows:

          
   June 30, 2023   December 31, 2022 
Balance at the beginning of the period  $1,129,498   $1,193,757 
Current year additions to the allowance   719,000    1,347,475 
Direct write-downs charged against the allowance   (775,478)   (1,513,814)
Recoveries of amounts previously charged off   157,243    102,080 
           
Balance at the end of the period  $1,230,263   $1,129,498 

 

 

12 

Standard Premium Finance Holdings, Inc. and Subsidiary

Condensed Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

 

 

 

4. Premium Finance Contracts, Related Receivable and Allowance for Credit Losses (Continued)

The Company maintains its allowance at gross amounts, which includes allowances for write-offs of unearned revenues. Provisions and write-offs per this footnote are displayed at gross amounts, which include provisions and write-offs of unearned revenues. These write-offs are appropriately split between the principal (i.e. provision for credit losses) and interest/fee (i.e. contra-revenue) portions on the income statement. The following tables show a reconciliation between the total provision per the footnote and the provision for credit losses on the consolidated statement of operations:

          
   For the three months ended
June 30,		 
   2023
(unaudited)		   2022
(unaudited)		 
Current additions to the allowance  $320,000   $380,000 
Less: Contra-revenues   (165,072)   (108,856)
Provision for credit losses  $154,928   $271,144 

 

           
   For the six months ended
June 30,		 
   2023
(unaudited)		   2022
(unaudited)		 
Current additions to the allowance  $719,000   $715,000 
Less: Contra-revenues   (372,219)   (275,751)
Provisions for credit losses  $346,781   $439,249 

 

The aging analyses of past-due contract receivables as of June 30, 2023 and December 31, 2022 are as follows:

 

                          
As of June 30, 2023  30–59 Days   60–89 Days   90-119 Days   Greater Than 120 Days   Total Past-Due   Current   Grand Total 
Premium finance contracts:                                   
Outstanding  $96,131   $48,459   $3,459   $8,443   $156,492   $52,645,509   $52,802,001 
Cancelled   733,876    926,829    377,334    1,657,399    3,695,438    1,708,367    5,403,805 
Total  $830,007   $975,288   $380,793   $1,665,842   $3,851,930   $54,353,876   $58,205,806 

 

 

                           
As of December 31, 2022  30–59 Days   60–89 Days   90-119 Days   Greater Than 120 Days   Total Past-Due   Current   Grand Total 
Premium finance contracts:                                   
Outstanding  $175,972   $61,678   $22,360   $11,270   $271,280   $45,249,069   $45,520,349 
Cancelled   1,363,841    850,939    340,619    720,429    3,275,828    2,729,773    6,005,601 
Total  $1,539,813   $912,617   $362,979   $731,699   $3,547,108   $47,978,842   $51,525,950 

 

 

13 

Standard Premium Finance Holdings, Inc. and Subsidiary

Condensed Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

 

 

 

 

5. Property and Equipment, Net

 

The Company’s property and equipment consists of the following:

 

          
   June 30, 2023     
   (unaudited)   December 31, 2022 
         
Computer Software  $26,207   $26,207 
Automobile   128,614    128,614 
Furniture & Fixtures   14,273    14,273 
Leasehold Improvements   116,811    116,811 
Computer Equipment   69,841    62,494 
Property and equipment, gross   355,746    348,399 
Accumulated depreciation   (257,322)   (244,808)
Property and equipment, net  $98,424   $103,591 

 

The Company recorded depreciation expense of $6,258 and $5,781, respectively for the three months ended June 30, 2023 and 2022. The Company recorded depreciation expense of $12,515 and $10,322, respectively for the six months ended June 30, 2023 and 2022.

 

6. Leases

The Company accounts for leases in accordance with ASC Topic 842. The Company used its incremental borrowing rate of 5.25% for all operating leases as of June 30, 2023 and December 31, 2022. In September 2022, the Company renewed its secure facility lease as described below. In September 2022, the Company also entered into a new lease agreement for computer hardware as described below.

 

Office lease – On March 1, 2021, the Company entered into a two (2) year lease for an office facility located in Miami Florida with an entity controlled by our CEO and related parties. The lease has a one-time renewal option for one year which management is reasonably certain will be exercised. The lease is $7,048 per month and expires in February 2024, including the renewal option (see Note 13).

Secure facility lease – On September 11, 2017, the Company entered into a five (5) year lease for a secure facility located in Miami Florida. The lease had no renewal option. The lease was $1,233 per month and expired in August 2022. On September 26, 2022, the Company entered into a three (3) year lease for a secure facility located in Miami, Florida. The lease has no renewal option. The lease is $1,418 per month, with payment increases of 4% annually, and expires in September 2025. The right-of-use asset and operating lease liability at the execution of this lease totaled $48,979.

Copier lease – On October 14, 2019 the Company entered into a copier lease. The right to use asset and lease liability at inception of the copier lease was $68,799. The Company used its incremental borrowing rate of 5.25% to determine the present value of the lease payment. The cost of the copier lease is $1,116 per month and expires October 14, 2024 with a one-year renewal option which the Company expects to exercise.

Hardware lease – On September 30, 2022, the Company entered into a three-year lease for computer hardware. The lease has no renewal option. The lease is $664 per month and expires in September 2025. The right-of-use asset and operating lease liability at the execution of this lease totaled $22,059.

Server lease – On December 7, 2021, the Company entered into a five-year lease for a computer server. The lease contains a bargain purchase option, which the Company intends to exercise. The Company recorded this lease as a finance lease. The fixed asset and lease liability at inception of the lease was $66,281 and $65,801, respectively. The Company used its incremental borrowing rate of 5.25% to determine the present value of the lease payment. The lease payments are $1,249 per month through December 2026.

The weighted-average remaining lease term was 2.09 years and 2.40 years as of June 30, 2023 and December 31, 2022, respectively. For the three months ended June 30, 2023 and 2022, the total lease cost was $31,382 and $28,194, respectively. For the six months ended June 30, 2023 and 2022, the total lease cost was $61,438 and $56,387, respectively.
14 

Standard Premium Finance Holdings, Inc. and Subsidiary

Condensed Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

 

 

6. Leases (Continued)
           
Leases  Classification  June 30, 2023 (unaudited)   December 31, 2022 
            
Right-of-use assets  Operating lease assets  $139,465   $196,407 
Server lease  Finance lease assets   45,292    51,920 
Total lease assets     $184,757   $248,327 
              
Current operating lease liability  Current operating lease liabilities  $90,597   $122,554 
Non-current operating lease liability  Long-term operating lease liabilities   48,868    73,853 
Total operating lease liabilities     $139,465   $196,407 
              
Current finance lease liability  Current finance lease liabilities  $12,826   $12,494 
Non-current finance lease liability  Long-term finance lease liabilities   34,062    40,559 
Total finance lease liabilities     $46,888   $53,053 

 

7. Drafts Payable

 

Drafts payable outstanding represent unpaid drafts that have not been disbursed by our senior lender as of the reporting date, on insurance premium finance contracts received by the Company prior to the reporting date. As of June 30, 2023 and December 31, 2022, the draft payable balances are $2,861,946 and $1,827,884, respectively.

 

8. Line of Credit

 

Relationship with First Horizon Bank (“FHB”)

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 with a different lender. 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”) in anticipation of the phase-out of Libor on June 30, 2023. The Company recorded $117,228 of line of credit costs related to this extension.

 

At June 30, 2023 and December 31, 2022, 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 the Company’s assets and is personally guaranteed by our CEO and two members of the Board of Directors of the Company. The line of credit bears interest at 30-Day SOFR plus 2.35-2.85% per annum (7.91% at June 30, 2023 and 6.87% at December 31, 2022). The terms of the Line of Credit agreement provide for a minimum interest of 3.35% when the 30-day SOFR falls below 0.50%. As of June 30, 2023, the amount of principal outstanding on the line of credit was $38,083,393 and is reported on the consolidated balance sheet net of $50,684 of unamortized loan origination fees. As of December 31, 2022, the amount of principal outstanding on the line of credit was $32,821,347 and is reported on the consolidated balance sheet net of $107,722 of unamortized loan origination fees. Interest expense on this line of credit for the three months ended June 30, 2023 and 2022 totaled approximately $711,000 and $270,000, respectively. Interest expense on this line

 
15 

Standard Premium Finance Holdings, Inc. and Subsidiary

Condensed Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

 

 

 

8. Line of Credit (Continued)

 

of credit for the six months ended June 30, 2023 and 2022 totaled approximately $1,297,000 and $528,000, respectively. The Company recorded amortized loan origination fees for the three months ended June 30, 2023 and 2022 of $28,519 and $11,650, respectively. The Company recorded amortized loan origination fees for the six months ended June 30, 2023 and 2022 of $57,038 and $33,508, respectively. The Company had availability on this line of credit of $4,889,826 as of June 30, 2023.

 

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. Management believes it was in compliance with the applicable debt covenants as of June 30, 2023 and December 31, 2022.

 

9. PPP Loan

On April 18, 2020, the Company entered into a $271,000 loan with Woodforest National Bank, under a program administered by the Small Business Administration (“SBA”) as part of the Paycheck Protection Program (“PPP”) approved under the “Coronavirus Aid, Relief, and Economic Security Act” (“CARES Act”) (Pub. L. No. 116-136). The loan matures in two (2) years and accrues interest at 1% from the origination of the loan. After a 6-month deferral, interest and principal payments are due monthly.

On June 22, 2022, the Company executed a loan modification with Woodforest National Bank (“WNB”) allowing for the repayment of the PPP loan to WNB. The modified loan has a maturity date of April 18, 2025 with a 1% fixed interest rate and monthly principal and interest payments of $7,801 beginning on May 18, 2022. As of June 30, 2023 and December 31, 2022, the balance of the PPP loan is as follows:

          
   June 30, 2023
(unaudited)		   December 31, 2022 
Total PPP loan  $177,612   $215,776 
Less current maturities   (99,963)   (91,852)
Long-term portion of PPP loan  $77,649   $123,924 

 

10. Notes Payable

At June 30, 2023 and December 31, 2022, the balances of long-term unsecured notes to unrelated parties are as follows:

        
   June 30, 2023     
   (unaudited)   December 31, 2022 
Total notes payable  $6,707,013   $7,286,921 
Less current maturities   (1,579,091)   (1,340,597)
           
Long-term maturities  $5,127,922   $5,946,324 

 
16 

Standard Premium Finance Holdings, Inc. and Subsidiary

Condensed Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

 

 

10. Notes Payable (Continued)

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 September 30, 2027. The maturity date of these notes automatically extends for periods of eight months 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. Interest expense on these notes totaled approximately $120,000 and $123,000 during the three months ended June 30, 2023 and 2022, respectively. Interest expense on these notes totaled approximately $248,000 and $251,000 during the six months ended June 30, 2023 and 2022, respectively. The Company received proceeds on these notes of $91,668 and $325,000 for the six months ended June 30, 2023 and 2022, respectively. The Company repaid principal on these notes of $671,576 and $236,000 for the six months ended June 30, 2023 and 2022, respectively. In April 2022, the Company exchanged $250,000 of these notes for 25,000 shares of Series A Convertible Preferred Stock at a price of $10.00 per share. There were no gains or losses on this exchange.

 

11. Notes Payable – Stockholders and Related Parties

 

At June 30, 2023 and December 31, 2022, the balances of long-term notes payable to stockholders and related parties are as follows:

         
   June 30, 2023     
   (unaudited)   December 31, 2022 
Total notes payable - Related parties  $1,928,000   $1,925,000 
Less current maturities   (587,000)   (109,000)
           
Long-term maturities  $1,341,000   $1,816,000 

 

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 August 31, 2026. 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. Interest expense on these notes totaled approximately $40,000 and $41,000 during the three months ended June 30, 2023 and 2022, respectively. Interest expense on these notes totaled approximately $79,000 and $80,000 during the six months ended June 30, 2023 and 2022, respectively. The Company received proceeds on these notes of $30,000 and $25,000 for the six months ended June 30, 2023 and 2022, respectively. The Company repaid principal on these notes of $27,000 and $181,032 for the six months ended June 30, 2023 and 2022, respectively. In January 2022, the Company exchanged $20,000 of these notes payable for 2,000 shares of Series A Convertible Preferred Stock at a price of $10.00 per share. There were no gains or losses on this exchange.

 

12. Equity

 

Preferred Stock

As of June 30, 2023, the Company was authorized to issue 20 million shares of preferred stock with a par value of $0.001 per share, of which 600,000 shares had been designated as Series A convertible and 166,000 shares had been issued and are outstanding.

 

 

17 

Standard Premium Finance Holdings, Inc. and Subsidiary

Condensed Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

 

 

 

 

12. Equity (Continued)

 

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 June 30, 2023, 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 three months ended June 30, 2023 and 2022, the Board of Directors has declared and paid dividends on the preferred stock of $29,050 and $17,558, respectively. During the six months ended June 30, 2023 and 2022, the Board of Directors has declared and paid dividends on the preferred stock of $58,100 and $34,883, respectively. As of both June 30, 2023 and December 31, 2022, preferred dividends are in arrears by $29,050.

 

December 31, 2021 dividends in arrears were declared and paid in January 2022. March 31, 2022 dividends in arrears were declared and paid in April 2022. June 30, 2022 dividends in arrears were declared and paid in July 2022. September 30, 2022 dividends in arrears were declared and paid in October 2022. December 31, 2022 dividends in arrears were declared and paid in January 2023. March 31, 2023 dividends in arrears were declared and paid in April 2023. June 30, 2023 dividends in arrears were declared and paid in July 2023.

 

In January 2022, the Company exchanged $20,000 of its notes payable for 2,000 shares of Series A Convertible Preferred Stock at a price of $10.00 per share. On April 30, 2022, the Company issued 65,000 shares of Series A Convertible Preferred Stock for $400,000 cash and exchanged for $250,000 of its notes payable at a price of $10.00 per share. There were no gains or losses on these exchanges.

 

Common Stock

As of both June 30, 2023 and December 31, 2022, the Company was authorized to issue 100 million shares of common stock with a par value of $0.001 per share, of which 2,905,016 shares were issued and outstanding.

 

Stock Options

In 2019, the Company’s Board of Directors approved the creation of the 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 Plan provides for the issuance of incentive stock options to designated employees, certain key advisors and non-employee members of the Board of Directors with the opportunity to receive grant awards to acquire, in the aggregate, up to 300,000 shares of the Corporation’s common stock. The following table summarizes information about employee stock options outstanding at June 30, 2023:

 

 

 
18 

Standard Premium Finance Holdings, Inc. and Subsidiary

Condensed Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

 

 

 

12. Equity (Continued)

 

A summary of information regarding the stock options outstanding is as follows:

 

                                
      Outstanding Options    Vested Options 
 Exercise Price    Number Outstanding at June 30, 2023    Weighted Average Remaining Life    Weighted Average Exercise Price    Number Exercisable at June 30, 2023    Weighted Average Remaining Life    Weighted Average Exercise Price 
$0.80    187,400    6.67   $0.80    187,400    6.67   $0.80 
$4.50    10,000    9.00    4.50    5,000    9.00    4.50 
$4.95    10,000    4.00    4.95    5,000    4.00    4.95 
 Total options    207,400    6.65   $1.18    197,400    6.66   $1.00 

 

 

                     
    Number of Shares   Weighted Average Exercise Price   Weighted Average Remaining Contractual Term   Intrinsic Value 
 Outstanding at December 31, 2022    207,400   $1.18    7.15 years   $1,091,236 
 Issued    —      —      —      —   
 Exercised    —      —      —      —   
 Outstanding at June 30, 2023    207,400   $1.18    6.65 years   $780,236 
 Exercisable at June 30, 2023    197,400   $1.00    6.66 years   $778,036 

 

On March 1, 2020, 187,400 of the above options were granted to designated Officers and employees. Half of those options vested on March 1, 2021 and the other half vested on March 1, 2022. On June 29, 2022 20,000 of the above options were granted to designated Officers. Half of these options vested on June 29, 2023 and the other half vest on June 29, 2024. During the three months ended June 30, 2023 and 2022, the Company recognized $7,050 and $0, respectively, of stock option expense. During the six months ended June 30, 2023 and 2022, the Company recognized $14,100 and $5,778, respectively, of stock option expense.

The fair value of the stock options originated in 2022 was determined using the Black Scholes Option Pricing Model based on the following assumptions:

          
Assumptions  $4.50 Strike   $4.95 Strike 
(1) dividend yield of   0%   0%
(2) expected volatility of   50%   50%
(3) risk-free interest rate of   3.10%   3.10%
(4) expected life of   10 years    5 years 
(5) estimated fair value  $4.50   $4.50 

 

 

 
19 

Standard Premium Finance Holdings, Inc. and Subsidiary

Condensed Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

 

 

 

12. Equity (Continued)

 

Stock Warrants

On April 1, 2020, the Company issued 800,000 of previously authorized warrants for the purchase of common stock that are split into two classes of warrants. The 400,000 Class W4 warrants are issued at $.001 Par Value and exercisable at a strike price of $4 for a period of five (5) years. The 400,000 Class W12 warrants are issued at $.001 Par Value and are exercisable at a strike price of $12 for a period of five (5) years. On June 11, 2021, the Company issued 175,000 previously authorized warrants for the purchase of common stock. The 175,000 Class W4A warrants are issued at $.001 Par Value and exercisable at a strike price of $4 for a period of five (5) years. On June 1, 2022 the Company issued 60,000 of previously authorized warrants for the purchase of common stock. The 60,000 Class W4A warrants are issued at $.0001 Par Value and exercisable at a strike price of $4 for a period of five (5) years. A summary of information regarding the stock options outstanding is as follows:

 

 

                     
    Number of Shares   Weighted Average Exercise Price   Weighted Average Remaining Contractual Term   Intrinsic Value 
 Outstanding at December 31, 2022    1,035,000   $7.09    2.6 years   $1,549,400 
 Issued    —      —      —      —   
 Exercised    —      —      —      —   
 Outstanding at June 30, 2023    1,035,000   $7.09    2.08 years   $596,900 
 Exercisable at June 30, 2023    1,035,000   $7.09    2.08 years   $596,900 

 

The above outstanding warrants were issued on June 1, 2022, June 11, 2021 and April 1, 2020, to designated Officers, Directors, and consultants with a total fair value of $10,800, $9,275 and $27,200 on the grant date, respectively. The warrants vested immediately. During the three months ended June 30, 2023 and 2022, the Company recognized $0 and $10,800, respectively, of stock warrant expense. During the six months ended June 30, 2023 and 2022, the Company recognized $0 and $10,800, respectively, of stock warrant expense.

 

The fair value of the stock options originated in 2022 was determined using the Black Scholes Option Pricing Model based on the following assumptions:

 

     
Assumptions  Grant Date 
(1) dividend yield of   0%
(2) expected volatility of   50%
(3) risk-free interest rate of   2.94%
(4) expected life of   5 years 
(5) estimated fair value  $1.17 

 

 

20 

Standard Premium Finance Holdings, Inc. and Subsidiary

Condensed Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

 

 

 

13. Related Party Transactions

 

The Company has engaged in transactions with related parties primarily shareholders, officers and directors and their relatives that involve financing activities and services to the Company. The following discussion summarizes its activities with related parties.

 

Office lease

The Company entered a three-year lease for its office space in Miami, FL with an entity that is controlled by our CEO and related parties. The Company leases approximately 3,000 square feet of office space. Rent of $7,048 is paid monthly. The lease contract expires in February 2024.

 

Line of credit

As discussed in Note 8, the Company secured its primary financing in part through the assistance of our CEO and two board members who guaranteed the loan to the financial institution. The current line of credit with First Horizon Bank was initiated at $35,000,000. In October 2021, the Company increased its line of credit with First Horizon Bank from $35,000,000 to $45,000,000. In November 2022, the Company extended the maturity of its line of credit with First Horizon Bank until November 30, 2025.

 

Notes payable

As discussed in Note 11, the Company has been loaned funds by its shareholders. As of June 30, 2023 and December 31, 2022, the amounts advanced were $1,928,000 and $1,925,000, respectively.

 

Stock Options

As discussed in Note 12, on March 1, 2020, the Company issued 187,400 stock options, of which 167,400 stock options were issued to officers and directors under the terms of the 2019 Equity Incentive Plan. The impact on earnings from this transaction was a total of $69,338, amortized over 24 months at a rate of $2,889 per month. These options were fully amortized on February 28, 2022. This transaction also increased additional paid-in capital over the same period.

 

On June 29, 2022, the Company issued 20,000 stock options to officers and directors under the terms of the 2019 Equity Incentive Plan. The total impact on earnings from this transaction is $56,400, which is being amortized over 24 months at a rate of $2,350 per month. This transaction will also increase additional paid-in capital over the same period at the same rate.

 

Stock Warrants

As discussed in Note 12, on April 1, 2020, the Company issued 800,000 stock warrants, of which 800,000 stock warrants were issued to officers, directors, and a related party. On June 11, 2021, the Company issued 175,000 stock warrants, of which 175,000 were issued to officers, directors, and a related party.

 

21 

Standard Premium Finance Holdings, Inc. and Subsidiary

Condensed Notes to Consolidated Financial Statements

June 30, 2023

(unaudited)

 

 

14. Commitments and Contingencies

On June 29, 2022, the Company signed “at-will” employment agreements with its CEO and CFO, which include fixed salary increases over the next five years and performance-based equity compensation. At the execution of the agreements, the Company issued a total of 20,000 stock options for the purchase of common stock pursuant to its 2019 Equity Incentive Plan. These stock options vest over a two-year period.

 

From time-to-time, we may be involved in litigation or be subject to claims arising out of our operations or content appearing on our websites in the normal course of business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on our company because of defense and settlement costs, diversion of management resources and other factors.

 

15. Subsequent Events

 

In July 2023, the Board of Directors declared and paid dividends on the Series A convertible preferred stock of $29,050.

 

In July 2023, the Company repaid $32,000 of notes payable.

 

 

 

 22
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

We are an insurance premium financing company, specializing primarily in commercial policies. We make it efficient for companies to access financing for insurance premiums. Enabled by our network of marketing representatives and relationships with insurance agents, we provide a value-driven, customer-focused lending service.

We have offered premium financing since 1991 through our wholly owned subsidiary, Standard Premium Finance Management Corporation. We are generally targeting premium financing loans from $1,000 to $15,000, with repayment terms ranging from 3 to 12 months, although we may offer larger loans in cases we deem appropriate. Qualified customers may have multiple financings with us concurrently, which we believe provides opportunities for repeat business, as well as increased value to our customers.

We originate loans primarily in Florida, although we operate in several states. Over the past three years, the Company has expanded its operations, and currently is licensed to finance insurance premiums in twenty-nine states. We intend to continue to expand our market into new states as part of our organic growth trend. Loans are originated primarily through a network of insurance agents solicited by our in-house sales team and marketing representatives.

We generate the majority of our revenue through interest income and the associated fees earned from our loan products. We earn interest based on the “rule of 78” and earn other associated fees as applicable to each loan. These fees include, but are not limited to, a one-time finance charge, late fees, and NSF fees. Our company charges interest to its customers solely by the Rule of 78. Charging interest per the Rule of 78 is the industry standard among premium finance loans. The Rule of 78 is a method to calculate the amount of principal and interest paid by each payment on a loan with equal monthly payments. The Rule of 78 is a permissible method of calculating interest in the states in which we operate. The Rule of 78 recognizes greater amounts of interest income and lesser amounts of principal repayment during the first months of the loan, while decreasing interest income and increasing principal repayment during the final months of the loan. Whenever a loan is repaid prior to full maturity, the Rule of 78 methodology is applied and the borrower is refunded accordingly.

We rely on a diversified set of funding sources for the loans we make to our customers. Our primary source of financing has historically been a line of credit at a financial institution collateralized by our loan receivables and our other assets. We receive additional funding from unsecured subordinate noteholders that pays monthly interest to the investors. We have also used proceeds from operating cash flow to fund loans in the past and continue to finance a portion of our outstanding loans with these funds. See Liquidity and Capital Resources for additional information regarding our financing strategy.

The Company’s main source of funding is its line of credit, which represented approximately 66% ($38,032,709) of its capital and total liabilities as of June 30, 2023. As of June 30, 2023, the Company’s subordinated notes payable and PPP loan represented approximately 15% ($8,812,625) of the Company’s capital and total liabilities, operating liabilities provide approximately 8% ($4,540,344) of the Company’s capital and total liabilities, preferred equity provides approximately 3% ($1,660,000) of the Company’s capital and total liabilities, and equity in retained earnings and common paid-in capital represents the remaining 8% ($4,493,363) of the Company’s capital and total liabilities.

 

23 
 

Key Financial and Operating Metrics

We regularly monitor a series of metrics in order to measure our current performance and project our future performance. These metrics aid us in developing and refining our growth strategies and making strategic decisions.

  

As of or for the Three Months Ended

June 30,

 
  

2023

(unaudited)

  

2022

(unaudited)

 
Gross Revenue  $2,308,439   $2,042,982 
Originations  $32,191,554   $29,869,917 
Interest Earned Rate   16.96%   15.10%
Cost of Funds Rate, Gross   7.74%   4.61%
Cost of Funds Rate, Net   6.05%   3.46%
Reserve Ratio   1.90%   1.97%
Provision Rate   0.48%   0.91%
Return on Assets   1.06%   1.35%
Return on Equity   13.31%   18.38%

 

  

As of or for the Six Months Ended

June 30,

 
  

2023

(unaudited)

  

2022

(unaudited)

 
Gross Revenue  $4,387,243   $3,925,578 
Originations  $63,101,588   $58,987,768 
Interest Earned Rate   16.72%   14.96%
Cost of Funds Rate, Gross   7.55%   4.33%
Cost of Funds Rate, Net   5.66%   3.25%
Reserve Ratio   1.90%   1.97%
Provision Rate   0.55%   0.74%
Return on Assets   0.69%   1.49%
Return on Equity   8.51%   20.08%

Gross Revenue

Gross Revenue represents the sum of interest and finance income, associated fees and other revenue.

Originations

Originations represent the total principal amount of Loans made during the period.

Interest Earned Rate

The Interest Earned Rate is the average annual percentage interest rate earned on new loans.

Cost of Funds Rate, Gross

Cost of Funds Rate, Gross is calculated as interest expense divided by average debt outstanding for the period.

Cost of Funds Rate, Net

Cost of Funds Rate, Net is calculated as interest expense divided by average debt outstanding for the period, net of the interest related tax benefit.

Reserve Ratio

Reserve Ratio is our allowance for credit losses at the end of the period divided by the total amount of principal outstanding on Loans at the end of the period. It excludes net deferred origination costs and associated fees.

Provision Rate

Provision Rate equals the provision for credit losses for the period divided by originations for the period. Because we reserve for probable credit losses inherent in the portfolio upon origination, this rate is significantly impacted by the expectation of credit losses for the period’s originations volume. This rate is also impacted by changes in loss expectations for contract receivables originated prior to the commencement of the period.

 

24 
 

Return on Assets

Return on Assets is calculated as annualized net income (loss) attributable to common stockholders for the period divided by average total assets for the period.

Return on Equity

Return on Equity is calculated as annualized net income (loss) attributable to common stockholders for the period divided by average stockholders’ equity attributable to common stockholders for the period.

RESULTS of OPERATIONS

Results of Operations for the Three Months ended June 30, 2023 Compared to the Three Months ended June 30. 2022

Revenue 

Revenue increased by 13.0% overall or $265,457 to $2,308,439 for the three months ended June 30, 2023 from $2,042,982 for the three months ended June 30, 2022. The increase in revenue was primarily due to a 16.3% or $276,479 increase in finance charges. Revenue from finance charges comprised 85.6% and 83.2% of overall revenue for the three months ended June 30, 2023 and 2022, respectively.

During the three months ended June 30, 2023 compared to the three months ended June 30, 2022, the company financed an additional $2,321,637 in new loan originations. This increase was due largely to increased marketing efforts throughout our established states. Although the Company increased amounts financed, the total quantity of loan originations remained stable for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. The quantity of loan originations is directly correlated to the origination charge revenue, as the Company immediately recognizes an origination fee on substantially all new loans.

Under the terms of the line of credit agreement, the loan receivables and our other assets provide the collateral for the loan. As the receivables increase, driven by new sales, the company has greater borrowing power, giving it the opportunity to generate additional sales. In November 2022, the Company extended the maturity of its line of credit until November 30, 2025. See Future Cash Requirements for the Company’s strategy regarding its line of credit.

Expense

Expenses increased by 15.1% or $269,912 to $2,059,760 for the three months ended June 30, 2023 from $1,789,848 for the three months ended June 30, 2022.

The increase in expenses was primarily due to increases in the following categories:

  ·  $421,350 increase in interest expense as a result of increases in the line of credit interest rate. Due to benchmark interest rate increases adopted by the Federal Reserve Board throughout 2022 and 2023, interest rates throughout the marketplace have increased accordingly. Our line of credit features a variable interest rate based on one-month SOFR with a minimum rate of 3.35%. As of June 30, 2023 and 2022, our line of credit’s interest rate was quoted at 7.91% and 3.91%, respectively. Furthermore, as of June 30, 2023, our net borrowings on the line of credit have increased by $4,237,747 to $38,032,709 from $33,794,962 at June 30, 2022. This increase in borrowings is due to increased loan originations.
  ·  $55,217 increase in salaries and wages expense as a result of increased base salaries and wages for our office staff and executives. Furthermore, in June 2022, the Company executed employment contracts with its CEO and CFO, increasing their base salaries.  

The increase in expenses was offset by decreases in the following categories:

  ·  $116,216 decrease in the provision for credit losses as a result of a greater proportion of our gross monthly write-offs being related to contra-revenues rather than principal balances. These contra-revenues are primarily write-offs of deferred interest, whereas credit losses relate to write-offs of principal balances. We maintained consistent allowance practices throughout 2023, which kept the reserves adequate for the size of the growing loan receivable portfolio.
  ·  $83,026 decrease in other operating expenses primarily as a result of a decrease in profit sharing accruals. During the second quarter of 2023, the Company began offering a 401(k) plan with an employer match as an additional benefit to its employees. As a result, the Company transferred the profit-sharing portfolio to the individual employees and began making matching contributions in June 2023. Furthermore, the Company faced a few general decreases in other expenses during the three months ended June 30, 2023 as compared to June 30, 2022.

 

 

25 
 

Income before Taxes

Income before taxes decreased by $4,455 to $248,679 for the three months ended June 30, 2023 from $253,134 for the three months ended June 30, 2022. This decrease was attributable to the net increases and decreases as discussed above.

Income Tax Provision

Income tax provision increased $4,857 to $72,638 for the three months ended June 30, 2023 from $67,781 for the three months ended June 30, 2022. This increase was primarily attributable to an increase in taxable income.

Net Income

Net Income decreased by $9,312 to $176,041 for the three months ended June 30, 2023 from $185,353 for the three months ended June 30, 2022. This decrease was attributable to the $4,455 decrease in income before taxes related primarily to increased interest expense and the $4,857 increase in the provision for income taxes.

Results of Operations for the Six Months ended June 30, 2023 Compared to the Six Months ended June 30. 2022

Revenue 

Revenue increased by 11.80% overall or $461,665 to $4,387,243 for the six months ended June 30, 2023 from $3,925,578 for the six months ended June 30, 2022. The increase in revenue was primarily due to a 14.0% or $454,833 increase in finance charges. Revenue from finance charges comprised 84.7% and 83.0% of overall revenue for the six months ended June 30, 2023 and 2022, respectively.

During the six months ended June 30, 2023 compared to the six months ended June 30, 2022, the company financed an additional $4,113,820 in new loan originations. This increase was due largely to increased marketing efforts throughout our established states. Although the Company increased amounts financed, the total quantity of loan originations remained stable for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. The quantity of loan originations is directly correlated to the origination charge revenue, as the Company immediately recognizes an origination fee on substantially all new loans.

Under the terms of the line of credit agreement, the loan receivables and our other assets provide the collateral for the loan. As the receivables increase, driven by new sales, the company has greater borrowing power, giving it the opportunity to generate additional sales. In November 2022, the Company extended the maturity of its line of credit until November 30, 2025. See Future Cash Requirements for the Company’s strategy regarding its line of credit.

Expense

Expenses increased by 20.4% or $687,060 to $4,058,816 for the six months ended June 30, 2023 from $3,371,756 for the six months ended June 30, 2022.

The increase in expenses was primarily due to increases in the following categories:

  ·  $786,507 increase in interest expense as a result of increases in the line of credit interest rate. Due to benchmark interest rate increases adopted by the Federal Reserve Board throughout 2022 and 2023, interest rates throughout the marketplace have increased accordingly. Our line of credit features a variable interest rate based on one-month SOFR with a minimum rate of 3.35%. As of June 30, 2023 and 2022, our line of credit’s interest rate was quoted at 7.91% and 3.91%, respectively. Furthermore, as of June 30, 2023, our net borrowings on the line of credit have increased by $4,237,747 to $38,032,709 from $33,794,962 at June 30, 2022. This increase in borrowings is due to increased loan originations.
  ·  $123,768 increase in salaries and wages expense as a result of increased base salaries and wages for our office staff and executives. Furthermore, in June 2022, the Company executed employment contracts with its CEO and CFO, increasing their base salaries.  

The increase in expenses was offset by decreases in the following categories:

  ·  $92,468 decrease in the provision for credit losses as a result of a greater proportion of our gross monthly write-offs being related to contra-revenues rather than principal balances. These contra-revenues are primarily write-offs of deferred interest, whereas credit losses relate to write-offs of principal balances. We maintained consistent allowance practices throughout 2023, which kept the reserves adequate for the size of the growing loan receivable portfolio.
  ·  $93,080 decrease in other operating expenses primarily as a result of a decrease in profit sharing accruals. During the second quarter of 2023, the Company began offering a 401(k) plan with an employer match as an additional benefit to its employees. As a result, the Company transferred the profit-sharing portfolio to the individual employees and began making matching contributions in June 2023. Furthermore, the Company faced a few general decreases in other expenses during the six months ended June 30, 2023 as compared to June 30, 2022.

 

26 
 

 

     
  ·  $28,300 decrease in professional fees primarily as a result of a reduction in one-time consulting fees related to the initial trading on the OTCQX Best Market as well as a reduction in programming fees for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.
  ·  $27,016 decrease in insurance expense primarily related to a decrease in the premiums of the employee health insurance plan for the six months ended June 30, 2023 as compared to June 30, 2022.

Income before Taxes

Income before taxes decreased by $225,395 to $328,427 for the six months ended June 30, 2023 from $553,822 for the six months ended June 30, 2022. This decrease was attributable to the net increases and decreases as discussed above.

Income Tax Provision

Income tax provision decreased $59,898 to $83,506 for the six months ended June 30, 2023 from $143,404 for the six months ended June 30, 2022. This decrease was primarily attributable to an decrease in taxable income.

Net Income

Net Income decreased by $165,497 to $244,921 for the six months ended June 30, 2023 from $410,418 for the six months ended June 30, 2022. This decrease was attributable to the $225,395 decrease in income before taxes related primarily to increased interest expense offset by the $59,898 decrease in the provision for income taxes.

LIQUIDITY and CAPITAL RESOURCES as of June 30, 2023

We had $147,800 of cash and a working capital surplus of $11,564,321 at June 30, 2023. A significant working capital surplus is generally expected through the normal course of business due primarily to the difference between the balance in premium finance contracts receivable and the line of credit liability. As discussed in the Revenues section, the Company’s line of credit is currently the primary source of operating funds. In February 2021, the Company entered into a contract with its lender, First Horizon Bank, for a two-year $35,000,000 line of credit. In October 2021, the Company further increased its borrowing power on its line of credit to $45,000,000, an increase of $10,000,000. In November 2022, the Company extended the maturity of this line of credit until November 30, 2025 and replaced the benchmark rate of the loan from 30-day LIBOR to 30-day SOFR (Secured Overnight Financing Rate). LIBOR will cease to be published after June 30, 2023. The terms of the amended line of include an interest rate based on the 30-day SOFR rate plus an applicable margin of 2.55% - 2.96%, with a minimum rate of 3.35%. The applicable margin is based on the Company’s ratio of total liabilities to tangible net worth. As of June 30, 2023, the Company’s applicable margin was 2.75%. We anticipate that the interest rate we pay on our revolving credit agreement may rise due to the recently adopted benchmark interest rate increases by the Federal Reserve Board. We believe that we will be able to pass along any interest rate increase on loans funded after the interest rate increase so that our net interest spread will not be materially affected. Furthermore, because of the short-term nature of our loans, we are not bound to any particular loan and its fixed interest rate for a long period of time. Based on our estimates and taking into account the risks and uncertainties of our plans, we believe that we will have adequate liquidity to finance and operate our business and repay our obligations as they become due in the next 12 months.

During the six months ended June 30, 2023, the Company raised an additional $30,000 in subordinated notes payable – related parties and $91,668 in subordinated notes payable. The Company repaid $27,000 of notes payable – related parties and $671,576 of notes payable. The Company utilizes its inflows from subordinated debt as a financing source before drawing additionally from the line of credit.

Future Cash Requirements

As the Company anticipates its growth patterns to continue, the availability on the line of credit is paramount to fueling this growth. By securing its line of credit, the Company can expect to satisfy the cash requirements anticipated by its future growth. Coinciding with these goals, in February 2021, the Company entered into a contract with First Horizon Bank for a two-year $35,000,000 line of credit. In October 2021, the Company executed a loan amendment with this lender to increase its line of credit to $45,000,000, an increase of $10,000,000. In November 2022, the Company extended its maturity on its line of credit facility until November 30, 2025. The extended maturity provides stability for the Company’s future cash requirements.

 

27 
 

Uses of Liquidity and Capital Resources

We require cash to fund our operating expenses and working capital requirements, including costs associated with our premium finance loans, capital expenditures, debt repayments, acquisitions (if any), pursuing market expansion, supporting sales and marketing activities, and other general corporate purposes. While we believe we have sufficient liquidity and capital resources to fund our operations and repay our debt, we may elect to pursue additional financing activities such as refinancing or expanding existing debt or pursuing other debt or equity offerings to provide flexibility with our cash management and provide capital for potential acquisitions.

Off-balance Sheet Arrangements

None.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We consider the following to be our most critical accounting policy because it involves critical accounting estimates and a significant degree of management judgment:

Allowance for credit losses

We are subject to the risk of loss associated with our borrowers’ inability to fulfill their payment obligations, the risk that we will not collect sufficient unearned premium refunds on the cancelled policies on the defaulted loans to fully cover the unpaid loan principal and the risk that payments due us from insurance agents and brokers will not be paid.

The carrying amount of the Premium Finance Contracts (“Contracts”) is reduced by an allowance for credit losses that are maintained at a level which, in management’s judgment, is adequate to absorb losses inherent in the Contracts. The amount of the allowance is based upon management’s evaluation of the collectability of the Contracts, including the nature of the accounts, credit concentration, trends, and historical data, specific impaired Contracts, economic conditions, and other risks inherent in the Contracts. The allowance is increased by a provision for credit losses, which is charged to expense, and reduced by charge-offs, net of recovery.

In addition, specific allowances are established for accounts past due over 120 days. Individual contracts are written off against the allowance when collection of the individual contracts appears doubtful. The collectability of outstanding and cancelled contracts is generally secured by collateral in the form of the unearned premiums on the underlying policies and accordingly historical losses are approximately 1% to 1.5% of the principal amount of loans made each year. The Company considers historical losses in determining the adequacy of the allowance for credit losses. The collectability of amounts due from agents is determined by the financial strength of the agency.

Stock-Based Compensation

We account for stock-based compensation by measuring and recognizing as compensation expense the fair value of all share-based payment awards made to directors, executives, employees and consultants, including employee stock options related to our 2019 Equity Incentive Plan and stock warrants based on estimated grant date fair values. The determination of fair value involves a number of significant estimates. We use the Black Scholes option pricing model to estimate the value of employee stock options and stock warrants which requires a number of assumptions to determine the model inputs. These include the expected volatility of our stock and employee exercise behavior which are based expectations of future developments over the term of the option.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not required.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

 

As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2023. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon the evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at June 30, 2023 at the reasonable assurance level.

 

28 
 

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2023 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

The Company becomes involved in various legal proceedings and claims in the normal course of business. In management’s opinion, the ultimate resolution of these matters will not have a material effect on our financial position or results of operations.

 

Item 1A. Risk Factors.

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I. “Item 1A. Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (“SEC”) on March 17, 2023 (“2022 Form 10-K”), which could adversely affect our business, financial condition, results of operations and cash flows. During the three months ended June 30, 2023, there have been no material changes in our risk factors disclosed in our 2022 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

29 
 

Item 6. Exhibits.

Exhibit Index

 

Exhibit Number   Description
2.1   Agreement of Share Exchange dated as of March 22, 2017 by and between Registrant, Standard Premium Finance Management Corporation and the shareholders of Standard Premium Finance Management Corporation . (Incorporated by reference to Exhibit 2.1 to Registrant's Registration Statement on Form 10 filed on January 19, 2021)
3.1   Articles of Incorporation of Registrant filed May 12, 2016. (Incorporated by reference to Exhibit 3.1 to Registrant's Registration Statement on Form 10 filed on January 19, 2021)
3.2   Articles of Amendment to Registrant’s Articles of Incorporation filed May 31, 2016. (Incorporated by reference to Exhibit 3.2 to Registrant's Registration Statement on Form 10 filed on January 19, 2021)
3.3   Articles of Amendment to Articles of Incorporation filed May 17, 2017. (Incorporated by reference to Exhibit 3.3 to Registrant's Registration Statement on Form 10 filed on January 19, 2021)
3.4   By-laws of Registrant. (Incorporated by reference to Exhibit 3.1 to Registrant's Current Report on Form 8-K filed on May 2, 2022)
4.1   Description of Securities. (Incorporated by reference to Exhibit 4.1 to Registrant's Form 10-K filed on March 17, 2023)
10.1*   2019 Equity Incentive Plan.(Incorporated by reference to Exhibit 10.1 to Registrant's Registration Statement on Form 10 filed on January 19, 2021)
10.2*   Form of Employee Incentive Stock Option Award Agreement. (Incorporated by reference to Exhibit 10.2 to Registrant's Registration Statement on Form 10 filed on January 19, 2021)
10.3*  

Form of Warrant to Purchase Common Stock. $4.00

Form of Warrant to Purchase Common Stock $12.00 (Incorporated by reference to Exhibit 10.3 to Registrant's Registration Statement on Form 10 filed on January 19, 2021)

10.4*   Schedule of Warrants to Purchase Common Stock issued on April 1, 2020. (Incorporated by reference to Exhibit 10.4 to Registrant's Registration Statement on Form 10 filed on January 19, 2021)
10.5*   Consulting Agreement dated August 1, 2016 between Registrant and Bayshore Corporate Finance, LLC.   (Incorporated by reference to Exhibit 10.5 to Amendment No. 1 to Registrant's Registration Statement on Form 10 filed on March 2, 2021)
10.6   Lease Agreement dated March 1, 2018 between Registrant and Marlenko Acquisitions, LLC. (Incorporated by reference to Exhibit 10.6 to Registrant's Registration Statement on Form 10 filed on January 19, 2021)
10.7*   Schedule of Employee Incentive Stock Options issued on March 1, 2020. (Incorporated by reference to Exhibit 10.7 to Registrant's Registration Statement on Form 10 filed on January 19, 2021)
10.8   Loan Agreement dated February 3, 2021 among Standard Premium Finance Management Corporation and First Horizon Bank. (Incorporated by reference to Exhibit 10.9 to Amendment No. 1 to Registrant's Registration Statement on Form 10 filed on March 2, 2021)
10.9   First Amendment to Loan Agreement dated October 5, 2021 among Standard Premium Finance Management Corporation and First Horizon Bank. (Incorporated by reference to Exhibit 10.9 to Registrant’s Form 10-K filed on March 17, 2023)
10.10   Second Amendment to Loan Agreement dated November 30, 2022 among Standard Premium Finance Management Corporation and First Horizon Bank. (Incorporated by reference to Exhibit 10.10 to Registrant’s Form 10-K filed on March 17, 2023)
10.11*   William Koppelmann Employment Contract. (Incorporated by reference to Exhibit 10.2 to Registrant’s Form 8-K filed on July 6, 2022)
10.12*   Brian Krogol Employment Contract. (Incorporated by reference to Exhibit 10.3 to Registrant’s Form 8-K filed on July 6, 2022)
14   Code of Ethics. (Incorporated by reference to Exhibit 14.1 to Registrant's Annual Report on Form 10-K filed on March 31, 2021)
21   Subsidiaries of the Registrant. (Incorporated by reference to Exhibit 21 to Registrant's Registration Statement on Form 10 filed on January 19, 2021)
31.1   Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer.
31.2   Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer.
32.1   Section 1350 Certifications of Principal Executive Officer and Principal Financial Officer.
101.INS   Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH   Inline XBRL Taxonomy Extension Schema
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase
104   Cover page formatted as Inline XBRL and contained in Exhibit 101

 _____________________________________

* Indicates a management contract or compensatory plan or arrangement.

 

 

30 
 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: August 4, 2023

               
STANDARD PREMIUM FINANCE HOLDINGS, INC.  
     
By: /s/ William Koppelmann  
  William Koppelmann  
  Chairman, President and Chief Executive Officer
(Principal Executive Officer)		  
     
By: /s/ Brian Krogol  
  Brian Krogol  
  Chief Financial Officer
(Principal Financial Officer)		  

 

 

 

31 
 

 

 

 

 

EXHIBIT 31.1

CERTIFICATIONS

I, William Koppelmann, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Standard Premium Finance Holdings, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 4, 2023

 

     
By:  

/s/ William Koppelmann

    William Koppelmann
    Principal Executive Officer

EXHIBIT 31.2

CERTIFICATIONS

I, Brian Krogol, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Standard Premium Finance Holdings, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 4, 2023

 

     
     
By:  

/s/ Brian Krogol

    Brian Krogol
    Principal Financial Officer

EXHIBIT 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, William Koppelmann, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Standard Premium Finance Holdings, Inc. on Form 10-Q for the fiscal quarter ended June 30, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Standard Premium Finance Holdings, Inc.

August 4, 2023

     
     
By:  

/s/ William Koppelmann

    William Koppelmann
    Principal Executive Officer

I, Brian Krogol, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Standard Premium Finance Holdings, Inc. on Form 10-Q for the fiscal quarter ended June 30, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Standard Premium Finance Holdings, Inc.

August 4, 2023

     
     
By:  

/s/ Brian Krogol

    Brian Krogol
    Principal Financial Officer

v3.23.2
Cover - shares
 6 Months Ended
Jun. 30, 2023
Aug. 04, 2023
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Jun. 30, 2023  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2023  
Current Fiscal Year End Date --12-31  
Entity File Number 000-56243  
Entity Registrant Name STANDARD PREMIUM FINANCE HOLDINGS, INC.  
Entity Central Index Key 0001807893  
Entity Tax Identification Number 81-2624094  
Entity Incorporation, State or Country Code FL  
Entity Address, Address Line One 13590 SW 134th Avenue  
Entity Address, Address Line Two Suite 214  
Entity Address, City or Town Miami  
Entity Address, State or Province FL  
Entity Address, Postal Zip Code 33186  
City Area Code 305  
Local Phone Number 232-2752  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company true  
Elected Not To Use the Extended Transition Period true  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   2,905,016
v3.23.2
Consolidated Balance Sheets (Unaudited) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
CURRENT ASSETS    
Cash $ 147,800 $ 421,211
Premium finance contracts and related receivable, net of allowance for credit losses of $1,230,263 and $1,129,498 at June 30, 2023 and December 31, 2022, respectively 55,778,974 49,474,903
Prepaid expenses and other current assets 393,724 348,795
TOTAL CURRENT ASSETS 56,320,498 50,244,909
Property and equipment, net 98,424 103,591
Operating lease assets 139,465 196,407
Finance lease assets 45,292 51,920
OTHER ASSETS    
Cash surrender value of life insurance 618,362 603,816
Deferred tax asset 317,000 288,164
TOTAL OTHER ASSETS 935,362 891,980
TOTAL ASSETS 57,539,041 51,488,807
CURRENT LIABILITIES    
Line of credit, net 38,032,709 32,713,625
Drafts payable 2,861,946 1,827,884
Note payable - current portion 1,579,091 1,340,597
Note payable - stockholders and related parties - current portion 587,000 109,000
Payroll Protection Program loan - current portion 99,963 91,852
Operating lease obligation - current portion 90,597 122,554
Finance lease obligation - current portion 12,826 12,494
Accrued expenses and other current liabilities 1,492,045 1,317,699
TOTAL CURRENT LIABILITIES 44,756,177 37,535,705
LONG-TERM LIABILITIES    
Note payable, net of current portion 5,127,922 5,946,324
Note payable - stockholders and related parties, net of current portion 1,341,000 1,816,000
Payroll Protection Program loan, net of current portion 77,649 123,924
Operating lease obligation, net of current portion 48,868 73,853
Finance lease obligation, net of current portion 34,062 40,559
TOTAL LONG-TERM LIABILITIES 6,629,501 8,000,660
TOTAL LIABILITIES 51,385,678 45,536,365
COMMITMENTS AND CONTINGENCIES (see Note 14)
STOCKHOLDERS' EQUITY:    
Common stock, par value $0.001 per share; 100 million shares authorized, 2,905,016 shares issued and outstanding at June 30, 2023 and December 31, 2022 2,905 2,905
Additional paid in capital 3,397,751 3,383,651
Retained earnings 2,752,541 2,565,720
TOTAL STOCKHOLDERS' EQUITY 6,153,363 5,952,442
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 57,539,041 51,488,807
Series A Convertible Preferred Stock [Member]    
STOCKHOLDERS' EQUITY:    
Preferred stock, value $ 166 $ 166
v3.23.2
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Allowance for credit losses $ 1,230,263 $ 1,129,498
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 20,000,000 20,000,000
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 2,905,016 2,905,016
Common stock, shares outstanding 2,905,016 2,905,016
Series A Convertible Preferred Stock [Member]    
Preferred stock, designated shares 600,000 600,000
Preferred stock, shares issued 166,000 166,000
Preferred stock, shares outstanding 166,000 166,000
v3.23.2
Consolidated Statements of Operations (Unaudited) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
REVENUES        
TOTAL REVENUES $ 2,308,439 $ 2,042,982 $ 4,387,243 $ 3,925,578
OPERATING COSTS AND EXPENSES        
Interest expense 906,166 484,816 1,697,813 911,306
Salaries and wages 421,825 366,608 851,075 727,307
Commission expense 271,137 257,711 513,572 498,560
Provision for credit losses 154,928 271,144 346,781 439,249
Professional fees 78,013 88,331 165,833 194,133
Postage expense 28,811 28,686 56,689 54,052
Insurance expense 35,577 46,223 63,051 90,067
Other operating expenses 163,303 246,329 364,002 457,082
TOTAL COSTS AND EXPENSES 2,059,760 1,789,848 4,058,816 3,371,756
INCOME BEFORE INCOME TAXES 248,679 253,134 328,427 553,822
PROVISION FOR INCOME TAXES 72,638 67,781 83,506 143,404
NET INCOME 176,041 185,353 244,921 410,418
PREFERRED SHARE DIVIDENDS (29,050) (17,558) (58,100) (34,883)
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS $ 146,991 $ 167,795 $ 186,821 $ 375,535
Net income per share attributable to common stockholders        
Basic $ 0.05 $ 0.06 $ 0.06 $ 0.13
Diluted $ 0.05 $ 0.05 $ 0.06 $ 0.12
Weighted average common shares outstanding        
Basic 2,905,016 2,905,016 2,905,016 2,905,016
Diluted 3,246,005 3,129,657 3,311,067 3,129,657
Finance Charge [Member]        
REVENUES        
TOTAL REVENUES $ 1,976,002 $ 1,699,523 $ 3,713,946 $ 3,259,113
Late Charges [Member]        
REVENUES        
TOTAL REVENUES 241,479 250,008 488,708 478,338
Origination Fees [Member]        
REVENUES        
TOTAL REVENUES $ 90,958 $ 93,451 $ 184,589 $ 188,127
v3.23.2
Consolidated Statements of Changes in Stockholders' Equity (unaudited) - USD ($)
Series A Convertible Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Total
Beginning balance, value at Dec. 31, 2021 $ 99 $ 2,905 $ 2,682,995 $ 1,848,780 $ 4,534,779
Beginning balance, shares at Dec. 31, 2021 99,000 2,905,016      
Series A Convertible Preferred Stock issued for cash and exchange for note payable $ 2 19,998 20,000
Series A Convertible Preferred Stock issued in exchange for note payable, shares 2,000        
Options issued for services 5,778 5,778
Dividends paid on preferred stock (17,325) (17,325)
Net income 225,065 225,065
Ending balance, value at Mar. 31, 2022 $ 101 $ 2,905 2,708,771 2,056,520 4,768,297
Ending balance, shares at Mar. 31, 2022 101,000 2,905,016      
Series A Convertible Preferred Stock issued for cash and exchange for note payable $ 65 649,935 650,000
Series A Convertible Preferred Stock issued in exchange for note payable, shares 65,000        
Options issued for services 10,800 10,800
Dividends paid on preferred stock (17,558) (17,558)
Net income 185,353 185,353
Ending balance, value at Jun. 30, 2022 $ 166 $ 2,905 3,369,506 2,224,315 5,596,892
Ending balance, shares at Jun. 30, 2022 166,000 2,905,016      
Beginning balance, value at Dec. 31, 2022 $ 166 $ 2,905 3,383,651 2,565,720 5,952,442
Beginning balance, shares at Dec. 31, 2022 166,000 2,905,016      
Options issued for services 7,050 7,050
Dividends paid on preferred stock (29,050) (29,050)
Net income 68,880 68,880
Ending balance, value at Mar. 31, 2023 $ 166 2,905 3,390,701 2,605,550 5,999,322
Ending balance, shares at Mar. 31, 2023 166,000        
Options issued for services 7,050 7,050
Dividends paid on preferred stock (29,050) (29,050)
Net income 176,041 176,041
Ending balance, value at Jun. 30, 2023 $ 166 $ 2,905 $ 3,397,751 $ 2,752,541 $ 6,153,363
Ending balance, shares at Jun. 30, 2023 166,000 2,905,016      
v3.23.2
Consolidated Statements of Cash Flows (unaudited) - USD ($)
 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
CASH FLOW FROM OPERATING ACTIVITIES:    
NET INCOME $ 244,921 $ 410,418
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:    
Depreciation 12,515 10,322
Loss on disposal of property and equipment 0 2,167
Amortization of right to use asset - operating lease 56,942 50,931
Amortization of finance lease asset 6,628 6,628
Provision for credit losses 346,781 439,249
Amortization of loan origination fees 57,038 33,508
Options issued for services 14,100 5,778
Warrants issued for services 0 10,800
Changes in operating assets and liabilities:    
(Increase)/Decrease in prepaid expenses and other current assets (44,929) 172,209
(Increase)/Decrease in deferred tax asset, net (28,836) 3,000
Increase/(Decrease) in drafts payable 1,034,062 331,762
Increase/(Decrease) in accrued expenses and other current liabilities 174,346 (294,099)
Increase/(Decrease) in operating lease liability (56,942) (50,931)
Net cash provided by operating activities 1,816,626 1,131,742
CASH FLOWS FROM INVESTING ACTIVITIES:    
Disbursements under premium finance contracts receivable, net (6,650,852) (4,358,311)
Payments made on cash surrender value of life insurance (14,546) (13,653)
Sale of property and equipment 0 4,500
Purchases of property and equipment (7,348) (24,800)
Net cash used in investing activities (6,672,746) (4,392,264)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Cash overdraft 0 (153,264)
Proceeds of line of credit, net of repayments 5,262,046 3,285,079
Proceeds from notes payable 91,668 325,000
Repayment of notes payable (671,576) (236,000)
Proceeds from notes payable - stockholders and related parties 30,000 25,000
Repayment of notes payable - stockholders and related parties (27,000) (181,302)
Repayment of finance lease obligation (6,165) (5,851)
Repayment of PPP loan (38,164) 0
Proceeds from sale of preferred stock 0 400,000
Dividends paid on Series A Convertible Preferred Stock (58,100) (34,883)
Net cash provided by financing activities 4,582,709 3,423,779
NET CHANGE IN CASH (273,411) 163,257
CASH AT THE BEGINNING OF THE PERIOD 421,211 20,987
CASH AT THE END OF THE PERIOD 147,800 184,244
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:    
       Income taxes 36,041 239,059
       Interest paid 1,652,987 879,481
NON-CASH INVESTING AND FINANCING TRANSACTION:    
Debt exchanged for Series A Convertible Preferred Stock $ 0 $ 270,000
v3.23.2
Principles of Consolidation and Description of Business
 6 Months Ended
Jun. 30, 2023
Accounting Policies [Abstract]  
Principles of Consolidation and Description of Business

1. Principles of Consolidation and Description of Business

 

Standard Premium Finance Holdings, Inc. (“SPFH” or the “Holding”) was incorporated on May 12, 2016, pursuant to the laws of the State of Florida.

Standard Premium Finance Management Corporation (“SPFMC” or the “subsidiary”) was incorporated on April 23, 1991, pursuant to the laws of the State of Florida, to engage principally in the insurance premium financing business. The Subsidiary is a licensed insurance premium finance company in twenty-nine states.

The accompanying consolidated financial statements include the accounts of SPFH and its wholly-owned subsidiary SPFMC. SPFH and its subsidiary are collectively referred to as “the Company”. All significant intercompany balances and transactions have been eliminated in consolidation.
v3.23.2
Summary of Significant Accounting Policies
 6 Months Ended
Jun. 30, 2023
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements (unaudited), which include the accounts of Standard Premium Finance Holdings, Inc. and its wholly-owned subsidiary, have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes thereto for the year ended December 31, 2022.

In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements of Standard Premium Finance Holdings, Inc. and its wholly-owned subsidiary for the fiscal year ended December 31, 2022, have been omitted.

Cash and Cash Equivalents

The Company considers short-term interest-bearing investments with initial maturities of three months or less to be cash equivalents. There are no cash equivalents at June 30, 2023 and December 31, 2022.

 

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. For Florida, Georgia, North Carolina and Texas contracts, an initial origination fee of $20 per contract and the first month’s interest are recognized as income at the inception of a contract. The same treatment is applied to the $15 initial origination fee and first month’s interest in South Carolina. The origination 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. Unearned interest is netted against Premium Finance Contracts and Related Receivables on the balance sheet for reporting purposes.

The provisions of Financial Accounting Standards Board (“FASB”) ASC 606, Revenue from Contracts with Customers (“ASC 606”) provide guidance on the recognition, presentation, and disclosure of revenue in financial statements. ASC 606 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. ASC 606 requires revenue to be recognized upon transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for services that are distinct and accounted for as separate performance obligations. In such cases, revenue would be recognized at the time of delivery or over time for each performance of service. However, ASC 606 exempts items under ASC 835-30 and ASC 310-20 (i.e. finance charges, late charges and origination fee income for the Company).

 

Premium Finance Contracts and Related Receivable

The Company finances insurance premiums on policies primarily for commercial enterprises. The Company amortizes these loans over the term of each contract, which varies from 3 to 12 monthly payments, and manages these loans on a collective basis based on similar risk characteristics. As of June 30, 2023 and December 31, 2022, the portfolio has an amortized cost basis of $58,205,806 and $51,525,950, respectively. Repayment terms are structured such that the contracts will be repaid within the term of the underlying insurance policy, generally less than one year. The contracts are secured by the unearned premium of the insurance carrier which is obligated to pay the Company any unearned premium in the event the insurance policy is cancelled pursuant to a power of attorney contained in the finance contract. As of June 30, 2023, and December 31, 2022, the amount of unearned premium on open and cancelled contracts totaled $80,521,039 and $71,315,354, respectively. The annual percentage interest rates on new contracts averaged approximately 16.7% and 15.0% during the six months ended June 30, 2023 and 2022, respectively.

 

Allowance for Credit Losses

The carrying amount of the Premium Finance Contracts (“Contracts”) is reduced by an allowance for credit losses that are maintained at a level which, in management’s judgment, is adequate to absorb credit losses inherent in the Contracts. The amount of the allowance is based upon management’s evaluation of the collectability of the Contracts, including the nature of the accounts, credit concentration, trends, historical data, specific impaired Contracts, current and forecasted economic conditions, and other risks inherent in the Contracts. The allowance is increased by a provision for credit losses, which is charged to expense, and reduced by charge-offs, net of recovery.

 

To estimate expected credit losses on loans that exhibit similar risk characteristics, the Company considers historical loss information (updated for current conditions and reasonable and supportable forecasts that affect the expected collectability of the amortized cost basis pool) using a loss-rate approach. The Company monitors the A.M. Best rating for insurance carriers whose policies are being financed as a factor of the quality of its contract receivables. As of June 30, 2023, and December 31, 2022, the Company did not expect any material degradation to the ratings of the insurance carriers it currently underwrites or anticipates underwriting in a way that would affect the allowance for credit losses.

 

In addition, specific allowances are established for accounts over 120 days. Individual contracts are written off against the allowance when collection of the individual contracts appears doubtful. The collectability of outstanding and cancelled contracts is generally secured by collateral in the form of the unearned premiums on the underlying policies. The collectability of amounts due from agents is determined by the financial strength of the agency.

 

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

 

Furniture and equipment 5 - 7 years

Computer equipment and software 3 - 5 years

Leasehold improvements 10 years

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include assumptions used in valuation of deferred tax assets, allowance for doubtful accounts, depreciable lives of property and equipment, and valuation of stock-based compensation.

 

Concentration of Credit and Financial Instrument Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and loans receivable from customers, agents, and insurance companies. The Company maintains its cash balances at two banks. Accounts at these financial institutions are insured by the Federal Deposit Insurance Corporation up to $250,000. Uninsured balances are $63,779 and $482,479 at June 30, 2023 and December 31, 2022, respectively. The Company mitigates this risk by maintaining its cash balances at high-quality financial institutions. The following table provides a reconciliation between uninsured balances and cash per the balance sheet:

 

          
   June 30, 2023
(unaudited)		   December 31, 2022 
Uninsured Balance  $63,779   $482,479 
Plus: Insured balances   250,000    250,000 
Plus: Balances at institutions that do not exceed FDIC limit   145,453    17,758 
Less: Outstanding checks   (311,432)   (329,026)
           
Cash per Consolidated Balance Sheet  $147,800   $421,211 

 

The Company controls its credit risk in accounts receivable through credit standards, limits on exposure, by monitoring the financial condition of insurance companies, by adhering to statutory cancellation policies, and by monitoring and pursuing collections from past due accounts. We cancel policies at the earliest permissible date allowed by the statutory cancellation regulations.

 

Approximately 61% and 56% of the Company’s business activity is with customers located in Florida for 2023 and 2022, respectively. Approximately 10% and 14% of the Company’s business activity is with customers located in Georgia for 2023 and 2022, respectively. Approximately 12% and 14% of the Company's business activity is with customers located in North Carolina for 2023 and 2022, respectively. There were no other significant regional, industrial or group concentrations during the three months ended June 30, 2023 and 2022.

 

Amortization of Line of Credit Costs

Amortization of line of credit costs is computed using the straight-line method over the life of the loan.

 

Fair Value of Financial Instruments

The Company’s carrying amounts of financial instruments as defined by Financial Accounting Standards Board (“FASB”) ASC 825, “Disclosures about Fair Value of Financial Instruments”, including premium finance contracts and related receivables, prepaid expenses, drafts payable, accrued expenses and other current liabilities, approximate their fair value due to the relatively short period to maturity for these instruments. The fair value of the line of credit and notes payable are based on current rates at which the Company can borrow funds with similar remaining maturities and the carrying value approximates fair value.

 

Income Taxes

The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets and liabilities are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

Uncertain tax positions are recognized only when the Company believes it is more likely than not that the tax position will be upheld on examination by the taxing authorities based on the merits of the position. The Company has no material unrecognized tax benefits and no adjustments to its consolidated financial position, results of operations or cash flows were required as of June 30, 2023.

 

Tax returns are open to examination by taxing authorities for three years after filing. No income tax returns are currently under examination by taxing authorities. SPFMC and SPFH recognize interest and penalties, if any, related to uncertain tax positions in income tax expense. SPFMC and SPFH did not have any accrued interest or penalties associated with uncertain tax positions as of June 30, 2023 and December 31, 2022.

 

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with FASB ASC Topic No. 718, “Stock Compensation,” which establishes the requirements for expensing equity awards. The Company measures and recognizes as compensation expense the fair value of all share-based payment awards based on estimated grant date fair values. Our stock-based compensation is issuances made to directors, executives, employees and consultants, which includes employee stock options related to our 2019 Equity Incentive Plan and stock warrants. The determination of fair value involves a number of significant estimates. We use the Black-Scholes option pricing model to estimate the value of employee stock options and stock warrants which requires a number of assumptions to determine the model inputs. These include the expected volatility of our stock and employee exercise behavior which are based expectations of future developments over the term of the option.

 

Earnings per Common Share

The Corporation accounts for earnings (loss) per share in accordance with FASB ASC Topic No. 260 - 10, “Earnings Per Share”, which establishes the requirements for presenting earnings per share (“EPS”). FASB ASC Topic No. 260 - 10 requires the presentation of “basic” and “diluted” EPS on the face of the statement of operations. Basic EPS amounts are calculated using the weighted-average number of common shares outstanding during each period. Diluted EPS assumes the exercise of all stock options, warrants and convertible securities having exercise prices less than the average market price of the common stock during the periods, using the treasury stock method.

For the six months ended June 30, 2023 and 2022, stock options to purchase 207,400 and 207,400 shares of common stock were outstanding, respectively, as described in Note 12. 93,700 of these options vested on March 1, 2021, 93,700 stock options vested on March 1, 2022, 10,000 stock options vested on June 29, 2023, and the remaining 10,000 stock options vest on June 29, 2024. The 197,400 vested stock options are considered dilutive and included in the calculation of diluted EPS at June 30, 2023 and 2022.

For the six months ended June 30, 2023 and 2022, stock warrants to purchase 1,035,000 and 1,035,000 shares of common stock were outstanding, respectively, as described in Note 12. All the stock warrants vested immediately. 635,000 warrants are considered dilutive and included in the calculation of diluted EPS and the remaining 400,000 warrants are “out-of-the-money” and excluded from the calculation of diluted EPS as of June 30, 2023 and 2022.

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. This preferred stock is anti-dilutive as of June 30, 2023 and December 31, 2022, and excluded from diluted earnings per share.

Leases

The Company recognizes and measures its leases in accordance with ASC Topic 842, “Leases”. The Company determines if an arrangement is a lease, or contains a lease, at inception of a contract and when the terms of an existing contract are changed. The Company recognizes a lease liability and a right of use (ROU) asset at the commencement date of the lease. The lease liability is initially and subsequently recognized based on the present value of its future lease payments calculated using the Company’s incremental borrowing rate.

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts on an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exceptions. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted. The Company does not anticipate any impact on the consolidated financial statements from the adoption of the standard.

 

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments," which replaces the existing "incurred loss" model for recognizing credit losses with an "expected loss" model referred to as the CECL model. Under the CECL model, the Company is required to present certain financial assets carried at amortized cost, such as insurance premium finance loans held for investment, at the net amount expected to be collected. The measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The Company adopted this standard in the first fiscal quarter of 2023. There has been no impact on current earnings due to the adoption of this standard.

 

Cash Surrender Value of Life Insurance

The Company is the owner and beneficiary of a life insurance policy on its president. The cash surrender value relative to the policy in place at June 30, 2023 and December 31, 2022 was $618,362 and $603,816, respectively. 
v3.23.2
Restatement of the Statement of Cash Flows
 6 Months Ended
Jun. 30, 2023
Restatement Of Statement Of Cash Flows  
Restatement of the Statement of Cash Flows

3. Restatement of the Statement of Cash Flows

In the third quarter of 2022, pursuant to the advice of a technical expert, the Company restated its consolidated statements of cash flows to present the increase/decrease in premium finance contracts receivable as investing activities, in accordance with ASC 230, Statement of Cash Flows. Previously, the increase/decrease in premium finance contracts receivable was presented within operating activities on the Company's consolidated statements of cash flows. These changes have no impact on previously reported consolidated statements of operations and balance sheets as well as earnings per share.

The consolidated statement of cash flows for the six months ended June 30, 2022 has been restated to reflect these adjustments to the presentation. The following tables present the effects of the changes on the presentation of the previously reported consolidated statement of cash flows:

               
   Six Months Ended June 30, 2022 
   As Previously Reported (i)   Restatement   As Restated 
Net cash provided by (used in):               
Operating activities: (ii)  $(3,226,569)  $4,358,311   $1,131,742 
Investing activities   (33,953)   (4,358,311)   (4,392,264)

 

(i)As reported in the Company's 2022 Form 10-Q filed with the SEC on August 15, 2022.
(ii)Financial statement line impacted in operating activities was increase/(decrease) in premium finance contracts receivable.

 
v3.23.2
Premium Finance Contracts, Related Receivable and Allowance for Credit Losses
 6 Months Ended
Jun. 30, 2023
Premium Finance Contracts Related Receivable And Allowance For Credit Losses  
Premium Finance Contracts, Related Receivable and Allowance for Credit Losses

4. Premium Finance Contracts, Related Receivable and Allowance for Credit Losses

Premium Finance Contracts and Related Receivable represent monthly payments due on insurance premium finance contracts. The Company finances insurance policies over periods from three months to one year for businesses and consumers who make an initial down payment of, on average, 25 percent of the insurance policy amounts. The entire amount of the contract is recorded including amounts due for finance charges and services charges. These receivables are reported net of unearned interest for financial statements purposes. Amounts due from agents represent balances related to (1) an agent’s unearned commission due to a policy cancellation and (2) down payments collected by the agents on behalf of the insured, which are due to us. Receivables from insurance premium finance contracts cancelled are due from the insurance companies.

 

 

At June 30, 2023 and December 31, 2022, premium finance contract and agents’ receivable consists of the following:

 

          
Description  June 30, 2023   December 31, 2022 
 Insurance premium finance contracts outstanding  $52,802,001   $45,520,349 
 Insurance premium finance contracts cancelled   5,403,805    6,005,601 
Insurance Premium finance contracts gross     58,205,806    51,525,950 
 Amounts due from agents   830,815    645,648 
 Less: Unearned interest   (2,027,384)   (1,567,197)
Insurance premium finance contracts net    57,009,237    50,604,401 
 Less: Allowance for credit losses   (1,230,263)   (1,129,498)
           
 Total  $55,778,974   $49,474,903 

 

The allowance for credit losses at June 30, 2023 and December 31, 2022 are as follows:

 

          
   June 30, 2023   December 31, 2022 
Allowance for premium finance contracts  $1,064,827   $1,000,000 
Allowance for amounts due from agents   165,436    129,498 

 

Activity in the allowance for credit losses for the six months ended June 30, 2023 and the year ended December 31, 2022 are as follows:

          
   June 30, 2023   December 31, 2022 
Balance at the beginning of the period  $1,129,498   $1,193,757 
Current year additions to the allowance   719,000    1,347,475 
Direct write-downs charged against the allowance   (775,478)   (1,513,814)
Recoveries of amounts previously charged off   157,243    102,080 
           
Balance at the end of the period  $1,230,263   $1,129,498 

 

The Company maintains its allowance at gross amounts, which includes allowances for write-offs of unearned revenues. Provisions and write-offs per this footnote are displayed at gross amounts, which include provisions and write-offs of unearned revenues. These write-offs are appropriately split between the principal (i.e. provision for credit losses) and interest/fee (i.e. contra-revenue) portions on the income statement. The following tables show a reconciliation between the total provision per the footnote and the provision for credit losses on the consolidated statement of operations:

          
   For the three months ended
June 30,		 
   2023
(unaudited)		   2022
(unaudited)		 
Current additions to the allowance  $320,000   $380,000 
Less: Contra-revenues   (165,072)   (108,856)
Provision for credit losses  $154,928   $271,144 

 

           
   For the six months ended
June 30,		 
   2023
(unaudited)		   2022
(unaudited)		 
Current additions to the allowance  $719,000   $715,000 
Less: Contra-revenues   (372,219)   (275,751)
Provisions for credit losses  $346,781   $439,249 

 

The aging analyses of past-due contract receivables as of June 30, 2023 and December 31, 2022 are as follows:

 

                          
As of June 30, 2023  30–59 Days   60–89 Days   90-119 Days   Greater Than 120 Days   Total Past-Due   Current   Grand Total 
Premium finance contracts:                                   
Outstanding  $96,131   $48,459   $3,459   $8,443   $156,492   $52,645,509   $52,802,001 
Cancelled   733,876    926,829    377,334    1,657,399    3,695,438    1,708,367    5,403,805 
Total  $830,007   $975,288   $380,793   $1,665,842   $3,851,930   $54,353,876   $58,205,806 

 

 

                           
As of December 31, 2022  30–59 Days   60–89 Days   90-119 Days   Greater Than 120 Days   Total Past-Due   Current   Grand Total 
Premium finance contracts:                                   
Outstanding  $175,972   $61,678   $22,360   $11,270   $271,280   $45,249,069   $45,520,349 
Cancelled   1,363,841    850,939    340,619    720,429    3,275,828    2,729,773    6,005,601 
Total  $1,539,813   $912,617   $362,979   $731,699   $3,547,108   $47,978,842   $51,525,950 

 
v3.23.2
Property and Equipment, Net
 6 Months Ended
Jun. 30, 2023
Property, Plant and Equipment [Abstract]  
Property and Equipment, Net

5. Property and Equipment, Net

 

The Company’s property and equipment consists of the following:

 

          
   June 30, 2023     
   (unaudited)   December 31, 2022 
         
Computer Software  $26,207   $26,207 
Automobile   128,614    128,614 
Furniture & Fixtures   14,273    14,273 
Leasehold Improvements   116,811    116,811 
Computer Equipment   69,841    62,494 
Property and equipment, gross   355,746    348,399 
Accumulated depreciation   (257,322)   (244,808)
Property and equipment, net  $98,424   $103,591 

 

The Company recorded depreciation expense of $6,258 and $5,781, respectively for the three months ended June 30, 2023 and 2022. The Company recorded depreciation expense of $12,515 and $10,322, respectively for the six months ended June 30, 2023 and 2022.

 
v3.23.2
Leases
 6 Months Ended
Jun. 30, 2023
Leases [Abstract]  
Leases

6. Leases

The Company accounts for leases in accordance with ASC Topic 842. The Company used its incremental borrowing rate of 5.25% for all operating leases as of June 30, 2023 and December 31, 2022. In September 2022, the Company renewed its secure facility lease as described below. In September 2022, the Company also entered into a new lease agreement for computer hardware as described below.

 

Office lease – On March 1, 2021, the Company entered into a two (2) year lease for an office facility located in Miami Florida with an entity controlled by our CEO and related parties. The lease has a one-time renewal option for one year which management is reasonably certain will be exercised. The lease is $7,048 per month and expires in February 2024, including the renewal option (see Note 13).

Secure facility lease – On September 11, 2017, the Company entered into a five (5) year lease for a secure facility located in Miami Florida. The lease had no renewal option. The lease was $1,233 per month and expired in August 2022. On September 26, 2022, the Company entered into a three (3) year lease for a secure facility located in Miami, Florida. The lease has no renewal option. The lease is $1,418 per month, with payment increases of 4% annually, and expires in September 2025. The right-of-use asset and operating lease liability at the execution of this lease totaled $48,979.

Copier lease – On October 14, 2019 the Company entered into a copier lease. The right to use asset and lease liability at inception of the copier lease was $68,799. The Company used its incremental borrowing rate of 5.25% to determine the present value of the lease payment. The cost of the copier lease is $1,116 per month and expires October 14, 2024 with a one-year renewal option which the Company expects to exercise.

Hardware lease – On September 30, 2022, the Company entered into a three-year lease for computer hardware. The lease has no renewal option. The lease is $664 per month and expires in September 2025. The right-of-use asset and operating lease liability at the execution of this lease totaled $22,059.

Server lease – On December 7, 2021, the Company entered into a five-year lease for a computer server. The lease contains a bargain purchase option, which the Company intends to exercise. The Company recorded this lease as a finance lease. The fixed asset and lease liability at inception of the lease was $66,281 and $65,801, respectively. The Company used its incremental borrowing rate of 5.25% to determine the present value of the lease payment. The lease payments are $1,249 per month through December 2026.

The weighted-average remaining lease term was 2.09 years and 2.40 years as of June 30, 2023 and December 31, 2022, respectively. For the three months ended June 30, 2023 and 2022, the total lease cost was $31,382 and $28,194, respectively. For the six months ended June 30, 2023 and 2022, the total lease cost was $61,438 and $56,387, respectively.

           
Leases  Classification  June 30, 2023 (unaudited)   December 31, 2022 
            
Right-of-use assets  Operating lease assets  $139,465   $196,407 
Server lease  Finance lease assets   45,292    51,920 
Total lease assets     $184,757   $248,327 
              
Current operating lease liability  Current operating lease liabilities  $90,597   $122,554 
Non-current operating lease liability  Long-term operating lease liabilities   48,868    73,853 
Total operating lease liabilities     $139,465   $196,407 
              
Current finance lease liability  Current finance lease liabilities  $12,826   $12,494 
Non-current finance lease liability  Long-term finance lease liabilities   34,062    40,559 
Total finance lease liabilities     $46,888   $53,053 

 
v3.23.2
Drafts Payable
 6 Months Ended
Jun. 30, 2023
Drafts Payable  
Drafts Payable

7. Drafts Payable

 

Drafts payable outstanding represent unpaid drafts that have not been disbursed by our senior lender as of the reporting date, on insurance premium finance contracts received by the Company prior to the reporting date. As of June 30, 2023 and December 31, 2022, the draft payable balances are $2,861,946 and $1,827,884, respectively.

 
v3.23.2
Line of Credit
 6 Months Ended
Jun. 30, 2023
Line Of Credit  
Line of Credit

8. Line of Credit

 

Relationship with First Horizon Bank (“FHB”)

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 with a different lender. 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”) in anticipation of the phase-out of Libor on June 30, 2023. The Company recorded $117,228 of line of credit costs related to this extension.

 

At June 30, 2023 and December 31, 2022, 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 the Company’s assets and is personally guaranteed by our CEO and two members of the Board of Directors of the Company. The line of credit bears interest at 30-Day SOFR plus 2.35-2.85% per annum (7.91% at June 30, 2023 and 6.87% at December 31, 2022). The terms of the Line of Credit agreement provide for a minimum interest of 3.35% when the 30-day SOFR falls below 0.50%. As of June 30, 2023, the amount of principal outstanding on the line of credit was $38,083,393 and is reported on the consolidated balance sheet net of $50,684 of unamortized loan origination fees. As of December 31, 2022, the amount of principal outstanding on the line of credit was $32,821,347 and is reported on the consolidated balance sheet net of $107,722 of unamortized loan origination fees. Interest expense on this line of credit for the three months ended June 30, 2023 and 2022 totaled approximately $711,000 and $270,000, respectively. Interest expense on this line

 

of credit for the six months ended June 30, 2023 and 2022 totaled approximately $1,297,000 and $528,000, respectively. The Company recorded amortized loan origination fees for the three months ended June 30, 2023 and 2022 of $28,519 and $11,650, respectively. The Company recorded amortized loan origination fees for the six months ended June 30, 2023 and 2022 of $57,038 and $33,508, respectively. The Company had availability on this line of credit of $4,889,826 as of June 30, 2023.

 

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. Management believes it was in compliance with the applicable debt covenants as of June 30, 2023 and December 31, 2022.

 
v3.23.2
PPP Loan
 6 Months Ended
Jun. 30, 2023
Ppp Loan  
PPP Loan

9. PPP Loan

On April 18, 2020, the Company entered into a $271,000 loan with Woodforest National Bank, under a program administered by the Small Business Administration (“SBA”) as part of the Paycheck Protection Program (“PPP”) approved under the “Coronavirus Aid, Relief, and Economic Security Act” (“CARES Act”) (Pub. L. No. 116-136). The loan matures in two (2) years and accrues interest at 1% from the origination of the loan. After a 6-month deferral, interest and principal payments are due monthly.

On June 22, 2022, the Company executed a loan modification with Woodforest National Bank (“WNB”) allowing for the repayment of the PPP loan to WNB. The modified loan has a maturity date of April 18, 2025 with a 1% fixed interest rate and monthly principal and interest payments of $7,801 beginning on May 18, 2022. As of June 30, 2023 and December 31, 2022, the balance of the PPP loan is as follows:

          
   June 30, 2023
(unaudited)		   December 31, 2022 
Total PPP loan  $177,612   $215,776 
Less current maturities   (99,963)   (91,852)
Long-term portion of PPP loan  $77,649   $123,924 

 
v3.23.2
Notes Payable
 6 Months Ended
Jun. 30, 2023
Debt Disclosure [Abstract]  
Notes Payable

10. Notes Payable

At June 30, 2023 and December 31, 2022, the balances of long-term unsecured notes to unrelated parties are as follows:

        
   June 30, 2023     
   (unaudited)   December 31, 2022 
Total notes payable  $6,707,013   $7,286,921 
Less current maturities   (1,579,091)   (1,340,597)
           
Long-term maturities  $5,127,922   $5,946,324 

 

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 September 30, 2027. The maturity date of these notes automatically extends for periods of eight months 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. Interest expense on these notes totaled approximately $120,000 and $123,000 during the three months ended June 30, 2023 and 2022, respectively. Interest expense on these notes totaled approximately $248,000 and $251,000 during the six months ended June 30, 2023 and 2022, respectively. The Company received proceeds on these notes of $91,668 and $325,000 for the six months ended June 30, 2023 and 2022, respectively. The Company repaid principal on these notes of $671,576 and $236,000 for the six months ended June 30, 2023 and 2022, respectively. In April 2022, the Company exchanged $250,000 of these notes for 25,000 shares of Series A Convertible Preferred Stock at a price of $10.00 per share. There were no gains or losses on this exchange.

 
v3.23.2
Notes Payable – Stockholders and Related Parties
 6 Months Ended
Jun. 30, 2023
Notes Payable Stockholders And Related Parties  
Notes Payable – Stockholders and Related Parties

11. Notes Payable – Stockholders and Related Parties

 

At June 30, 2023 and December 31, 2022, the balances of long-term notes payable to stockholders and related parties are as follows:

         
   June 30, 2023     
   (unaudited)   December 31, 2022 
Total notes payable - Related parties  $1,928,000   $1,925,000 
Less current maturities   (587,000)   (109,000)
           
Long-term maturities  $1,341,000   $1,816,000 

 

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 August 31, 2026. 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. Interest expense on these notes totaled approximately $40,000 and $41,000 during the three months ended June 30, 2023 and 2022, respectively. Interest expense on these notes totaled approximately $79,000 and $80,000 during the six months ended June 30, 2023 and 2022, respectively. The Company received proceeds on these notes of $30,000 and $25,000 for the six months ended June 30, 2023 and 2022, respectively. The Company repaid principal on these notes of $27,000 and $181,032 for the six months ended June 30, 2023 and 2022, respectively. In January 2022, the Company exchanged $20,000 of these notes payable for 2,000 shares of Series A Convertible Preferred Stock at a price of $10.00 per share. There were no gains or losses on this exchange.

 
v3.23.2
Equity
 6 Months Ended
Jun. 30, 2023
Equity [Abstract]  
Equity

12. Equity

 

Preferred Stock

As of June 30, 2023, the Company was authorized to issue 20 million shares of preferred stock with a par value of $0.001 per share, of which 600,000 shares had been designated as Series A convertible and 166,000 shares had been issued and are outstanding.

 

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 June 30, 2023, 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 three months ended June 30, 2023 and 2022, the Board of Directors has declared and paid dividends on the preferred stock of $29,050 and $17,558, respectively. During the six months ended June 30, 2023 and 2022, the Board of Directors has declared and paid dividends on the preferred stock of $58,100 and $34,883, respectively. As of both June 30, 2023 and December 31, 2022, preferred dividends are in arrears by $29,050.

 

December 31, 2021 dividends in arrears were declared and paid in January 2022. March 31, 2022 dividends in arrears were declared and paid in April 2022. June 30, 2022 dividends in arrears were declared and paid in July 2022. September 30, 2022 dividends in arrears were declared and paid in October 2022. December 31, 2022 dividends in arrears were declared and paid in January 2023. March 31, 2023 dividends in arrears were declared and paid in April 2023. June 30, 2023 dividends in arrears were declared and paid in July 2023.

 

In January 2022, the Company exchanged $20,000 of its notes payable for 2,000 shares of Series A Convertible Preferred Stock at a price of $10.00 per share. On April 30, 2022, the Company issued 65,000 shares of Series A Convertible Preferred Stock for $400,000 cash and exchanged for $250,000 of its notes payable at a price of $10.00 per share. There were no gains or losses on these exchanges.

 

Common Stock

As of both June 30, 2023 and December 31, 2022, the Company was authorized to issue 100 million shares of common stock with a par value of $0.001 per share, of which 2,905,016 shares were issued and outstanding.

 

Stock Options

In 2019, the Company’s Board of Directors approved the creation of the 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 Plan provides for the issuance of incentive stock options to designated employees, certain key advisors and non-employee members of the Board of Directors with the opportunity to receive grant awards to acquire, in the aggregate, up to 300,000 shares of the Corporation’s common stock. The following table summarizes information about employee stock options outstanding at June 30, 2023:

 

A summary of information regarding the stock options outstanding is as follows:

 

                                
      Outstanding Options    Vested Options 
 Exercise Price    Number Outstanding at June 30, 2023    Weighted Average Remaining Life    Weighted Average Exercise Price    Number Exercisable at June 30, 2023    Weighted Average Remaining Life    Weighted Average Exercise Price 
$0.80    187,400    6.67   $0.80    187,400    6.67   $0.80 
$4.50    10,000    9.00    4.50    5,000    9.00    4.50 
$4.95    10,000    4.00    4.95    5,000    4.00    4.95 
 Total options    207,400    6.65   $1.18    197,400    6.66   $1.00 

 

 

                     
    Number of Shares   Weighted Average Exercise Price   Weighted Average Remaining Contractual Term   Intrinsic Value 
 Outstanding at December 31, 2022    207,400   $1.18    7.15 years   $1,091,236 
 Issued    —      —      —      —   
 Exercised    —      —      —      —   
 Outstanding at June 30, 2023    207,400   $1.18    6.65 years   $780,236 
 Exercisable at June 30, 2023    197,400   $1.00    6.66 years   $778,036 

 

On March 1, 2020, 187,400 of the above options were granted to designated Officers and employees. Half of those options vested on March 1, 2021 and the other half vested on March 1, 2022. On June 29, 2022 20,000 of the above options were granted to designated Officers. Half of these options vested on June 29, 2023 and the other half vest on June 29, 2024. During the three months ended June 30, 2023 and 2022, the Company recognized $7,050 and $0, respectively, of stock option expense. During the six months ended June 30, 2023 and 2022, the Company recognized $14,100 and $5,778, respectively, of stock option expense.

The fair value of the stock options originated in 2022 was determined using the Black Scholes Option Pricing Model based on the following assumptions:

          
Assumptions  $4.50 Strike   $4.95 Strike 
(1) dividend yield of   0%   0%
(2) expected volatility of   50%   50%
(3) risk-free interest rate of   3.10%   3.10%
(4) expected life of   10 years    5 years 
(5) estimated fair value  $4.50   $4.50 

 

 

Stock Warrants

On April 1, 2020, the Company issued 800,000 of previously authorized warrants for the purchase of common stock that are split into two classes of warrants. The 400,000 Class W4 warrants are issued at $.001 Par Value and exercisable at a strike price of $4 for a period of five (5) years. The 400,000 Class W12 warrants are issued at $.001 Par Value and are exercisable at a strike price of $12 for a period of five (5) years. On June 11, 2021, the Company issued 175,000 previously authorized warrants for the purchase of common stock. The 175,000 Class W4A warrants are issued at $.001 Par Value and exercisable at a strike price of $4 for a period of five (5) years. On June 1, 2022 the Company issued 60,000 of previously authorized warrants for the purchase of common stock. The 60,000 Class W4A warrants are issued at $.0001 Par Value and exercisable at a strike price of $4 for a period of five (5) years. A summary of information regarding the stock options outstanding is as follows:

 

 

                     
    Number of Shares   Weighted Average Exercise Price   Weighted Average Remaining Contractual Term   Intrinsic Value 
 Outstanding at December 31, 2022    1,035,000   $7.09    2.6 years   $1,549,400 
 Issued    —      —      —      —   
 Exercised    —      —      —      —   
 Outstanding at June 30, 2023    1,035,000   $7.09    2.08 years   $596,900 
 Exercisable at June 30, 2023    1,035,000   $7.09    2.08 years   $596,900 

 

The above outstanding warrants were issued on June 1, 2022, June 11, 2021 and April 1, 2020, to designated Officers, Directors, and consultants with a total fair value of $10,800, $9,275 and $27,200 on the grant date, respectively. The warrants vested immediately. During the three months ended June 30, 2023 and 2022, the Company recognized $0 and $10,800, respectively, of stock warrant expense. During the six months ended June 30, 2023 and 2022, the Company recognized $0 and $10,800, respectively, of stock warrant expense.

 

The fair value of the stock options originated in 2022 was determined using the Black Scholes Option Pricing Model based on the following assumptions:

 

     
Assumptions  Grant Date 
(1) dividend yield of   0%
(2) expected volatility of   50%
(3) risk-free interest rate of   2.94%
(4) expected life of   5 years 
(5) estimated fair value  $1.17 

 
v3.23.2
Related Party Transactions
 6 Months Ended
Jun. 30, 2023
Related Party Transactions [Abstract]  
Related Party Transactions

13. Related Party Transactions

 

The Company has engaged in transactions with related parties primarily shareholders, officers and directors and their relatives that involve financing activities and services to the Company. The following discussion summarizes its activities with related parties.

 

Office lease

The Company entered a three-year lease for its office space in Miami, FL with an entity that is controlled by our CEO and related parties. The Company leases approximately 3,000 square feet of office space. Rent of $7,048 is paid monthly. The lease contract expires in February 2024.

 

Line of credit

As discussed in Note 8, the Company secured its primary financing in part through the assistance of our CEO and two board members who guaranteed the loan to the financial institution. The current line of credit with First Horizon Bank was initiated at $35,000,000. In October 2021, the Company increased its line of credit with First Horizon Bank from $35,000,000 to $45,000,000. In November 2022, the Company extended the maturity of its line of credit with First Horizon Bank until November 30, 2025.

 

Notes payable

As discussed in Note 11, the Company has been loaned funds by its shareholders. As of June 30, 2023 and December 31, 2022, the amounts advanced were $1,928,000 and $1,925,000, respectively.

 

Stock Options

As discussed in Note 12, on March 1, 2020, the Company issued 187,400 stock options, of which 167,400 stock options were issued to officers and directors under the terms of the 2019 Equity Incentive Plan. The impact on earnings from this transaction was a total of $69,338, amortized over 24 months at a rate of $2,889 per month. These options were fully amortized on February 28, 2022. This transaction also increased additional paid-in capital over the same period.

 

On June 29, 2022, the Company issued 20,000 stock options to officers and directors under the terms of the 2019 Equity Incentive Plan. The total impact on earnings from this transaction is $56,400, which is being amortized over 24 months at a rate of $2,350 per month. This transaction will also increase additional paid-in capital over the same period at the same rate.

 

Stock Warrants

As discussed in Note 12, on April 1, 2020, the Company issued 800,000 stock warrants, of which 800,000 stock warrants were issued to officers, directors, and a related party. On June 11, 2021, the Company issued 175,000 stock warrants, of which 175,000 were issued to officers, directors, and a related party.
v3.23.2
Commitments and Contingencies
 6 Months Ended
Jun. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

14. Commitments and Contingencies

On June 29, 2022, the Company signed “at-will” employment agreements with its CEO and CFO, which include fixed salary increases over the next five years and performance-based equity compensation. At the execution of the agreements, the Company issued a total of 20,000 stock options for the purchase of common stock pursuant to its 2019 Equity Incentive Plan. These stock options vest over a two-year period.

 

From time-to-time, we may be involved in litigation or be subject to claims arising out of our operations or content appearing on our websites in the normal course of business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on our company because of defense and settlement costs, diversion of management resources and other factors.

 
v3.23.2
Subsequent Events
 6 Months Ended
Jun. 30, 2023
Subsequent Events [Abstract]  
Subsequent Events

15. Subsequent Events

 

In July 2023, the Board of Directors declared and paid dividends on the Series A convertible preferred stock of $29,050.

 

In July 2023, the Company repaid $32,000 of notes payable.
v3.23.2
Summary of Significant Accounting Policies (Policies)
 6 Months Ended
Jun. 30, 2023
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

The consolidated financial statements (unaudited), which include the accounts of Standard Premium Finance Holdings, Inc. and its wholly-owned subsidiary, have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes thereto for the year ended December 31, 2022.

In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements of Standard Premium Finance Holdings, Inc. and its wholly-owned subsidiary for the fiscal year ended December 31, 2022, have been omitted.
Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers short-term interest-bearing investments with initial maturities of three months or less to be cash equivalents. There are no cash equivalents at June 30, 2023 and December 31, 2022.

 
Revenue Recognition

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. For Florida, Georgia, North Carolina and Texas contracts, an initial origination fee of $20 per contract and the first month’s interest are recognized as income at the inception of a contract. The same treatment is applied to the $15 initial origination fee and first month’s interest in South Carolina. The origination 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. Unearned interest is netted against Premium Finance Contracts and Related Receivables on the balance sheet for reporting purposes.

The provisions of Financial Accounting Standards Board (“FASB”) ASC 606, Revenue from Contracts with Customers (“ASC 606”) provide guidance on the recognition, presentation, and disclosure of revenue in financial statements. ASC 606 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. ASC 606 requires revenue to be recognized upon transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for services that are distinct and accounted for as separate performance obligations. In such cases, revenue would be recognized at the time of delivery or over time for each performance of service. However, ASC 606 exempts items under ASC 835-30 and ASC 310-20 (i.e. finance charges, late charges and origination fee income for the Company).

 
Premium Finance Contracts and Related Receivable

Premium Finance Contracts and Related Receivable

The Company finances insurance premiums on policies primarily for commercial enterprises. The Company amortizes these loans over the term of each contract, which varies from 3 to 12 monthly payments, and manages these loans on a collective basis based on similar risk characteristics. As of June 30, 2023 and December 31, 2022, the portfolio has an amortized cost basis of $58,205,806 and $51,525,950, respectively. Repayment terms are structured such that the contracts will be repaid within the term of the underlying insurance policy, generally less than one year. The contracts are secured by the unearned premium of the insurance carrier which is obligated to pay the Company any unearned premium in the event the insurance policy is cancelled pursuant to a power of attorney contained in the finance contract. As of June 30, 2023, and December 31, 2022, the amount of unearned premium on open and cancelled contracts totaled $80,521,039 and $71,315,354, respectively. The annual percentage interest rates on new contracts averaged approximately 16.7% and 15.0% during the six months ended June 30, 2023 and 2022, respectively.

 
Allowance for Credit Losses

Allowance for Credit Losses

The carrying amount of the Premium Finance Contracts (“Contracts”) is reduced by an allowance for credit losses that are maintained at a level which, in management’s judgment, is adequate to absorb credit losses inherent in the Contracts. The amount of the allowance is based upon management’s evaluation of the collectability of the Contracts, including the nature of the accounts, credit concentration, trends, historical data, specific impaired Contracts, current and forecasted economic conditions, and other risks inherent in the Contracts. The allowance is increased by a provision for credit losses, which is charged to expense, and reduced by charge-offs, net of recovery.

 

To estimate expected credit losses on loans that exhibit similar risk characteristics, the Company considers historical loss information (updated for current conditions and reasonable and supportable forecasts that affect the expected collectability of the amortized cost basis pool) using a loss-rate approach. The Company monitors the A.M. Best rating for insurance carriers whose policies are being financed as a factor of the quality of its contract receivables. As of June 30, 2023, and December 31, 2022, the Company did not expect any material degradation to the ratings of the insurance carriers it currently underwrites or anticipates underwriting in a way that would affect the allowance for credit losses.

 

In addition, specific allowances are established for accounts over 120 days. Individual contracts are written off against the allowance when collection of the individual contracts appears doubtful. The collectability of outstanding and cancelled contracts is generally secured by collateral in the form of the unearned premiums on the underlying policies. The collectability of amounts due from agents is determined by the financial strength of the agency.

 
Property and Equipment

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

 

Furniture and equipment 5 - 7 years

Computer equipment and software 3 - 5 years

Leasehold improvements 10 years

 
Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include assumptions used in valuation of deferred tax assets, allowance for doubtful accounts, depreciable lives of property and equipment, and valuation of stock-based compensation.

 
Concentration of Credit and Financial Instrument Risk

Concentration of Credit and Financial Instrument Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and loans receivable from customers, agents, and insurance companies. The Company maintains its cash balances at two banks. Accounts at these financial institutions are insured by the Federal Deposit Insurance Corporation up to $250,000. Uninsured balances are $63,779 and $482,479 at June 30, 2023 and December 31, 2022, respectively. The Company mitigates this risk by maintaining its cash balances at high-quality financial institutions. The following table provides a reconciliation between uninsured balances and cash per the balance sheet:

 

          
   June 30, 2023
(unaudited)		   December 31, 2022 
Uninsured Balance  $63,779   $482,479 
Plus: Insured balances   250,000    250,000 
Plus: Balances at institutions that do not exceed FDIC limit   145,453    17,758 
Less: Outstanding checks   (311,432)   (329,026)
           
Cash per Consolidated Balance Sheet  $147,800   $421,211 

 

The Company controls its credit risk in accounts receivable through credit standards, limits on exposure, by monitoring the financial condition of insurance companies, by adhering to statutory cancellation policies, and by monitoring and pursuing collections from past due accounts. We cancel policies at the earliest permissible date allowed by the statutory cancellation regulations.

 

Approximately 61% and 56% of the Company’s business activity is with customers located in Florida for 2023 and 2022, respectively. Approximately 10% and 14% of the Company’s business activity is with customers located in Georgia for 2023 and 2022, respectively. Approximately 12% and 14% of the Company's business activity is with customers located in North Carolina for 2023 and 2022, respectively. There were no other significant regional, industrial or group concentrations during the three months ended June 30, 2023 and 2022.

 
Amortization of Line of Credit Costs

Amortization of Line of Credit Costs

Amortization of line of credit costs is computed using the straight-line method over the life of the loan.

 
Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company’s carrying amounts of financial instruments as defined by Financial Accounting Standards Board (“FASB”) ASC 825, “Disclosures about Fair Value of Financial Instruments”, including premium finance contracts and related receivables, prepaid expenses, drafts payable, accrued expenses and other current liabilities, approximate their fair value due to the relatively short period to maturity for these instruments. The fair value of the line of credit and notes payable are based on current rates at which the Company can borrow funds with similar remaining maturities and the carrying value approximates fair value.

 
Income Taxes

Income Taxes

The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets and liabilities are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

Uncertain tax positions are recognized only when the Company believes it is more likely than not that the tax position will be upheld on examination by the taxing authorities based on the merits of the position. The Company has no material unrecognized tax benefits and no adjustments to its consolidated financial position, results of operations or cash flows were required as of June 30, 2023.

 

Tax returns are open to examination by taxing authorities for three years after filing. No income tax returns are currently under examination by taxing authorities. SPFMC and SPFH recognize interest and penalties, if any, related to uncertain tax positions in income tax expense. SPFMC and SPFH did not have any accrued interest or penalties associated with uncertain tax positions as of June 30, 2023 and December 31, 2022.

 
Stock-Based Compensation

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with FASB ASC Topic No. 718, “Stock Compensation,” which establishes the requirements for expensing equity awards. The Company measures and recognizes as compensation expense the fair value of all share-based payment awards based on estimated grant date fair values. Our stock-based compensation is issuances made to directors, executives, employees and consultants, which includes employee stock options related to our 2019 Equity Incentive Plan and stock warrants. The determination of fair value involves a number of significant estimates. We use the Black-Scholes option pricing model to estimate the value of employee stock options and stock warrants which requires a number of assumptions to determine the model inputs. These include the expected volatility of our stock and employee exercise behavior which are based expectations of future developments over the term of the option.

 
Earnings per Common Share

Earnings per Common Share

The Corporation accounts for earnings (loss) per share in accordance with FASB ASC Topic No. 260 - 10, “Earnings Per Share”, which establishes the requirements for presenting earnings per share (“EPS”). FASB ASC Topic No. 260 - 10 requires the presentation of “basic” and “diluted” EPS on the face of the statement of operations. Basic EPS amounts are calculated using the weighted-average number of common shares outstanding during each period. Diluted EPS assumes the exercise of all stock options, warrants and convertible securities having exercise prices less than the average market price of the common stock during the periods, using the treasury stock method.

For the six months ended June 30, 2023 and 2022, stock options to purchase 207,400 and 207,400 shares of common stock were outstanding, respectively, as described in Note 12. 93,700 of these options vested on March 1, 2021, 93,700 stock options vested on March 1, 2022, 10,000 stock options vested on June 29, 2023, and the remaining 10,000 stock options vest on June 29, 2024. The 197,400 vested stock options are considered dilutive and included in the calculation of diluted EPS at June 30, 2023 and 2022.

For the six months ended June 30, 2023 and 2022, stock warrants to purchase 1,035,000 and 1,035,000 shares of common stock were outstanding, respectively, as described in Note 12. All the stock warrants vested immediately. 635,000 warrants are considered dilutive and included in the calculation of diluted EPS and the remaining 400,000 warrants are “out-of-the-money” and excluded from the calculation of diluted EPS as of June 30, 2023 and 2022.

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. This preferred stock is anti-dilutive as of June 30, 2023 and December 31, 2022, and excluded from diluted earnings per share.
Leases

Leases

The Company recognizes and measures its leases in accordance with ASC Topic 842, “Leases”. The Company determines if an arrangement is a lease, or contains a lease, at inception of a contract and when the terms of an existing contract are changed. The Company recognizes a lease liability and a right of use (ROU) asset at the commencement date of the lease. The lease liability is initially and subsequently recognized based on the present value of its future lease payments calculated using the Company’s incremental borrowing rate.
Recent Accounting Pronouncements

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts on an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exceptions. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted. The Company does not anticipate any impact on the consolidated financial statements from the adoption of the standard.

 

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments," which replaces the existing "incurred loss" model for recognizing credit losses with an "expected loss" model referred to as the CECL model. Under the CECL model, the Company is required to present certain financial assets carried at amortized cost, such as insurance premium finance loans held for investment, at the net amount expected to be collected. The measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The Company adopted this standard in the first fiscal quarter of 2023. There has been no impact on current earnings due to the adoption of this standard.

 
Cash Surrender Value of Life Insurance

Cash Surrender Value of Life Insurance

The Company is the owner and beneficiary of a life insurance policy on its president. The cash surrender value relative to the policy in place at June 30, 2023 and December 31, 2022 was $618,362 and $603,816, respectively. 
v3.23.2
Summary of Significant Accounting Policies (Tables)
 6 Months Ended
Jun. 30, 2023
Accounting Policies [Abstract]  
Schedule of reconciliation between uninsured balances and cash per the balance sheet
          
   June 30, 2023
(unaudited)		   December 31, 2022 
Uninsured Balance  $63,779   $482,479 
Plus: Insured balances   250,000    250,000 
Plus: Balances at institutions that do not exceed FDIC limit   145,453    17,758 
Less: Outstanding checks   (311,432)   (329,026)
           
Cash per Consolidated Balance Sheet  $147,800   $421,211 
v3.23.2
Restatement of the Statement of Cash Flows (Tables)
 6 Months Ended
Jun. 30, 2023
Restatement Of Statement Of Cash Flows  
Schedule of consolidated statement of cash flows
               
   Six Months Ended June 30, 2022 
   As Previously Reported (i)   Restatement   As Restated 
Net cash provided by (used in):               
Operating activities: (ii)  $(3,226,569)  $4,358,311   $1,131,742 
Investing activities   (33,953)   (4,358,311)   (4,392,264)

 

(i)As reported in the Company's 2022 Form 10-Q filed with the SEC on August 15, 2022.
(ii)Financial statement line impacted in operating activities was increase/(decrease) in premium finance contracts receivable.
v3.23.2
Premium Finance Contracts, Related Receivable and Allowance for Credit Losses (Tables)
 6 Months Ended
Jun. 30, 2023
Premium Finance Contracts Related Receivable And Allowance For Credit Losses  
Schedule of premium finance contract and agents receivable
          
Description  June 30, 2023   December 31, 2022 
 Insurance premium finance contracts outstanding  $52,802,001   $45,520,349 
 Insurance premium finance contracts cancelled   5,403,805    6,005,601 
Insurance Premium finance contracts gross     58,205,806    51,525,950 
 Amounts due from agents   830,815    645,648 
 Less: Unearned interest   (2,027,384)   (1,567,197)
Insurance premium finance contracts net    57,009,237    50,604,401 
 Less: Allowance for credit losses   (1,230,263)   (1,129,498)
           
 Total  $55,778,974   $49,474,903 
Schedule of allowance for doubtful accounts
          
   June 30, 2023   December 31, 2022 
Allowance for premium finance contracts  $1,064,827   $1,000,000 
Allowance for amounts due from agents   165,436    129,498 
Activity in the allowance for doubtful accounts
          
   June 30, 2023   December 31, 2022 
Balance at the beginning of the period  $1,129,498   $1,193,757 
Current year additions to the allowance   719,000    1,347,475 
Direct write-downs charged against the allowance   (775,478)   (1,513,814)
Recoveries of amounts previously charged off   157,243    102,080 
           
Balance at the end of the period  $1,230,263   $1,129,498 
Schedule of footnote and bad debt expense
          
   For the three months ended
June 30,		 
   2023
(unaudited)		   2022
(unaudited)		 
Current additions to the allowance  $320,000   $380,000 
Less: Contra-revenues   (165,072)   (108,856)
Provision for credit losses  $154,928   $271,144 

 

           
   For the six months ended
June 30,		 
   2023
(unaudited)		   2022
(unaudited)		 
Current additions to the allowance  $719,000   $715,000 
Less: Contra-revenues   (372,219)   (275,751)
Provisions for credit losses  $346,781   $439,249 
Schedule of analyses of past due contract receivables
                          
As of June 30, 2023  30–59 Days   60–89 Days   90-119 Days   Greater Than 120 Days   Total Past-Due   Current   Grand Total 
Premium finance contracts:                                   
Outstanding  $96,131   $48,459   $3,459   $8,443   $156,492   $52,645,509   $52,802,001 
Cancelled   733,876    926,829    377,334    1,657,399    3,695,438    1,708,367    5,403,805 
Total  $830,007   $975,288   $380,793   $1,665,842   $3,851,930   $54,353,876   $58,205,806 

 

 

                           
As of December 31, 2022  30–59 Days   60–89 Days   90-119 Days   Greater Than 120 Days   Total Past-Due   Current   Grand Total 
Premium finance contracts:                                   
Outstanding  $175,972   $61,678   $22,360   $11,270   $271,280   $45,249,069   $45,520,349 
Cancelled   1,363,841    850,939    340,619    720,429    3,275,828    2,729,773    6,005,601 
Total  $1,539,813   $912,617   $362,979   $731,699   $3,547,108   $47,978,842   $51,525,950 
v3.23.2
Property and Equipment, Net (Tables)
 6 Months Ended
Jun. 30, 2023
Property, Plant and Equipment [Abstract]  
Schedule of property and equipment, net
          
   June 30, 2023     
   (unaudited)   December 31, 2022 
         
Computer Software  $26,207   $26,207 
Automobile   128,614    128,614 
Furniture & Fixtures   14,273    14,273 
Leasehold Improvements   116,811    116,811 
Computer Equipment   69,841    62,494 
Property and equipment, gross   355,746    348,399 
Accumulated depreciation   (257,322)   (244,808)
Property and equipment, net  $98,424   $103,591 
v3.23.2
Leases (Tables)
 6 Months Ended
Jun. 30, 2023
Leases [Abstract]  
Supplemental balance sheet information related to leases
           
Leases  Classification  June 30, 2023 (unaudited)   December 31, 2022 
            
Right-of-use assets  Operating lease assets  $139,465   $196,407 
Server lease  Finance lease assets   45,292    51,920 
Total lease assets     $184,757   $248,327 
              
Current operating lease liability  Current operating lease liabilities  $90,597   $122,554 
Non-current operating lease liability  Long-term operating lease liabilities   48,868    73,853 
Total operating lease liabilities     $139,465   $196,407 
              
Current finance lease liability  Current finance lease liabilities  $12,826   $12,494 
Non-current finance lease liability  Long-term finance lease liabilities   34,062    40,559 
Total finance lease liabilities     $46,888   $53,053 
v3.23.2
PPP Loan (Tables)
 6 Months Ended
Jun. 30, 2023
Ppp Loan  
Schedule of PPP loan
          
   June 30, 2023
(unaudited)		   December 31, 2022 
Total PPP loan  $177,612   $215,776 
Less current maturities   (99,963)   (91,852)
Long-term portion of PPP loan  $77,649   $123,924 
v3.23.2
Notes Payable (Tables)
 6 Months Ended
Jun. 30, 2023
Debt Disclosure [Abstract]  
Schedule of note payable
        
   June 30, 2023     
   (unaudited)   December 31, 2022 
Total notes payable  $6,707,013   $7,286,921 
Less current maturities   (1,579,091)   (1,340,597)
           
Long-term maturities  $5,127,922   $5,946,324 
v3.23.2
Notes Payable – Stockholders and Related Parties (Tables)
 6 Months Ended
Jun. 30, 2023
Notes Payable Stockholders And Related Parties  
Schedule of long-term notes payable to stockholders and related parties
         
   June 30, 2023     
   (unaudited)   December 31, 2022 
Total notes payable - Related parties  $1,928,000   $1,925,000 
Less current maturities   (587,000)   (109,000)
           
Long-term maturities  $1,341,000   $1,816,000 
v3.23.2
Equity (Tables)
 6 Months Ended
Jun. 30, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
Schedule of employee stock options
                                
      Outstanding Options    Vested Options 
 Exercise Price    Number Outstanding at June 30, 2023    Weighted Average Remaining Life    Weighted Average Exercise Price    Number Exercisable at June 30, 2023    Weighted Average Remaining Life    Weighted Average Exercise Price 
$0.80    187,400    6.67   $0.80    187,400    6.67   $0.80 
$4.50    10,000    9.00    4.50    5,000    9.00    4.50 
$4.95    10,000    4.00    4.95    5,000    4.00    4.95 
 Total options    207,400    6.65   $1.18    197,400    6.66   $1.00 
Schedule of stock options outstanding
 

                     
    Number of Shares   Weighted Average Exercise Price   Weighted Average Remaining Contractual Term   Intrinsic Value 
 Outstanding at December 31, 2022    207,400   $1.18    7.15 years   $1,091,236 
 Issued    —      —      —      —   
 Exercised    —      —      —      —   
 Outstanding at June 30, 2023    207,400   $1.18    6.65 years   $780,236 
 Exercisable at June 30, 2023    197,400   $1.00    6.66 years   $778,036 
Schedule of stock warrants
 

                     
    Number of Shares   Weighted Average Exercise Price   Weighted Average Remaining Contractual Term   Intrinsic Value 
 Outstanding at December 31, 2022    1,035,000   $7.09    2.6 years   $1,549,400 
 Issued    —      —      —      —   
 Exercised    —      —      —      —   
 Outstanding at June 30, 2023    1,035,000   $7.09    2.08 years   $596,900 
 Exercisable at June 30, 2023    1,035,000   $7.09    2.08 years   $596,900 
Equity Option [Member]  
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
Schedule of stock options valuation assumptions

          
Assumptions  $4.50 Strike   $4.95 Strike 
(1) dividend yield of   0%   0%
(2) expected volatility of   50%   50%
(3) risk-free interest rate of   3.10%   3.10%
(4) expected life of   10 years    5 years 
(5) estimated fair value  $4.50   $4.50 
Warrant [Member]  
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
Schedule of stock options valuation assumptions

     
Assumptions  Grant Date 
(1) dividend yield of   0%
(2) expected volatility of   50%
(3) risk-free interest rate of   2.94%
(4) expected life of   5 years 
(5) estimated fair value  $1.17 

 
v3.23.2
Summary of Significant Accounting Policies (Details) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Accounting Policies [Abstract]    
Uninsured Balance $ 63,779 $ 482,479
Plus: Insured balances 250,000 250,000
Plus: Balances at institutions that do not exceed FDIC limit 145,453 17,758
Less: Outstanding checks (311,432) (329,026)
Cash per Consolidated Balance Sheet $ 147,800 $ 421,211
v3.23.2
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
 1 Months Ended 6 Months Ended
Mar. 01, 2022
Mar. 01, 2021
Jun. 29, 2024
Jun. 29, 2023
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Property, Plant and Equipment [Line Items]              
Cash equivalents         $ 0   $ 0
Premium finance contracts gross         58,205,806   51,525,950
Unearned premium         $ 80,521,039   71,315,354
Interest Rate         16.70% 15.00%  
FDIC insured amount         $ 250,000    
Uninsured balances         63,779   482,479
Unrecognized tax benefits         0   0
Accrued interest or penalties         $ 0   $ 0
Number of share outstanding         207,400 207,400 207,400
Option vested         197,400 197,400  
Warrants outstanding         1,035,000   1,035,000
Cash Surrender Value of Life Insurance         $ 618,362   $ 603,816
Warrant [Member]              
Property, Plant and Equipment [Line Items]              
Warrants vested         635,000    
Warrant 1 [Member]              
Property, Plant and Equipment [Line Items]              
Warrants vested         400,000 400,000  
Options Held [Member]              
Property, Plant and Equipment [Line Items]              
Option vested   93,700          
Option 2 [Member]              
Property, Plant and Equipment [Line Items]              
Option vested 93,700     10,000      
Option 3 [Member]              
Property, Plant and Equipment [Line Items]              
Option vested     10,000        
FLORIDA              
Property, Plant and Equipment [Line Items]              
Concentration risk percentage         61.00% 56.00%  
GEORGIA              
Property, Plant and Equipment [Line Items]              
Concentration risk percentage         10.00% 14.00%  
NORTH CAROLINA              
Property, Plant and Equipment [Line Items]              
Concentration risk percentage         12.00% 14.00%  
Leasehold Improvements [Member]              
Property, Plant and Equipment [Line Items]              
Property and Equipment estimated useful lives         10 years    
Minimum [Member] | Furniture and Fixtures [Member]              
Property, Plant and Equipment [Line Items]              
Property and Equipment estimated useful lives         5 years    
Minimum [Member] | Computer Equipment [Member]              
Property, Plant and Equipment [Line Items]              
Property and Equipment estimated useful lives         3 years    
Maximum [Member] | Furniture and Fixtures [Member]              
Property, Plant and Equipment [Line Items]              
Property and Equipment estimated useful lives         7 years    
Maximum [Member] | Computer Equipment [Member]              
Property, Plant and Equipment [Line Items]              
Property and Equipment estimated useful lives         5 years    
v3.23.2
Restatement of the Statement of Cash Flows (Details) - USD ($)
 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Operating activities: $ 1,816,626 $ 1,131,742
Investing activities $ (6,672,746) (4,392,264)
Previously Reported [Member]    
Operating activities: [1],[2]   (3,226,569)
Investing activities [1]   (33,953)
Restatement [Member]    
Operating activities: [2]   4,358,311
Investing activities   (4,358,311)
As Adjusted [Member]    
Operating activities: [2]   1,131,742
Investing activities   $ (4,392,264)
[1] As reported in the Company's 2022 Form 10-Q filed with the SEC on August 15, 2022.
[2] Financial statement line impacted in operating activities was increase/(decrease) in premium finance contracts receivable.
v3.23.2
Premium Finance Contracts, Related Receivable and Allowance for Doubtful Accounts (Details) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Premium Finance Contracts Related Receivable And Allowance For Credit Losses    
 Insurance premium finance contracts outstanding $ 52,802,001 $ 45,520,349
 Insurance premium finance contracts cancelled 5,403,805 6,005,601
Insurance Premium finance contracts gross   58,205,806 51,525,950
 Amounts due from agents 830,815 645,648
 Less: Unearned interest (2,027,384) (1,567,197)
Insurance premium finance contracts net  57,009,237 50,604,401
 Less: Allowance for credit losses (1,230,263) (1,129,498)
 Total $ 55,778,974 $ 49,474,903
v3.23.2
Premium Finance Contracts, Related Receivable and Allowance for Doubtful Accounts (Details 1) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Premium Finance Contracts Related Receivable And Allowance For Credit Losses    
Allowance for premium finance contracts $ 1,064,827 $ 1,000,000
Allowance for amounts due from agents $ 165,436 $ 129,498
v3.23.2
Premium Finance Contracts, Related Receivable and Allowance for Doubtful Accounts (Details 2) - USD ($)
 6 Months Ended 12 Months Ended
Jun. 30, 2023
Dec. 31, 2022
Premium Finance Contracts Related Receivable And Allowance For Credit Losses    
Balance, at the beginning of the year $ 1,129,498 $ 1,193,757
Current year additions to the allowance 719,000 1,347,475
Direct write-downs charged against the allowance (775,478) (1,513,814)
Recoveries of amounts previously charged off 157,243 102,080
Balance at end of the year $ 1,230,263 $ 1,129,498
v3.23.2
Premium Finance Contracts, Related Receivable and Allowance for Doubtful Accounts (Details 3) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Premium Finance Contracts Related Receivable And Allowance For Credit Losses        
Current additions to the allowance $ 320,000 $ 380,000    
Less: Contra-revenues (165,072) (108,856)    
Provision for credit losses $ 154,928 $ 271,144    
Current additions to the allowance     $ 719,000 $ 715,000
Less: Contra-revenues     (372,219) (275,751)
Provisions for credit losses     $ 346,781 $ 439,249
v3.23.2
Premium Finance Contracts, Related Receivable and Allowance for Doubtful Accounts (Details 4) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Financing Receivable, Past Due [Line Items]    
Premium finance contracts outstanding $ 52,802,001 $ 45,520,349
Premium finance contracts cancelled 5,403,805 6,005,601
Premium finance contracts gross 58,205,806 51,525,950
Financial Asset, 30 to 59 Days Past Due [Member]    
Financing Receivable, Past Due [Line Items]    
Premium finance contracts outstanding 96,131 175,972
Premium finance contracts cancelled 733,876 1,363,841
Premium finance contracts gross 830,007 1,539,813
Financial Asset, 60 to 89 Days Past Due [Member]    
Financing Receivable, Past Due [Line Items]    
Premium finance contracts outstanding 48,459 61,678
Premium finance contracts cancelled 926,829 850,939
Premium finance contracts gross 975,288 912,617
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Financing Receivable, Past Due [Line Items]    
Premium finance contracts outstanding 3,459 22,360
Premium finance contracts cancelled 377,334 340,619
Premium finance contracts gross 380,793 362,979
Financing Receivables Equal To Greater Than 120 Days Past Due [Member]    
Financing Receivable, Past Due [Line Items]    
Premium finance contracts outstanding 8,443 11,270
Premium finance contracts cancelled 1,657,399 720,429
Premium finance contracts gross 1,665,842 731,699
Financial Asset, Past Due [Member]    
Financing Receivable, Past Due [Line Items]    
Premium finance contracts outstanding 156,492 271,280
Premium finance contracts cancelled 3,695,438 3,275,828
Premium finance contracts gross 3,851,930 3,547,108
Financial Asset, Not Past Due [Member]    
Financing Receivable, Past Due [Line Items]    
Premium finance contracts outstanding 52,645,509 45,249,069
Premium finance contracts cancelled 1,708,367 2,729,773
Premium finance contracts gross $ 54,353,876 $ 47,978,842
v3.23.2
Property and Equipment, Net (Details) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 355,746 $ 348,399
Accumulated depreciation (257,322) (244,808)
Property and equipment, net 98,424 103,591
Computer Software [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross 26,207 26,207
Automobiles [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross 128,614 128,614
Furniture and Fixtures [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross 14,273 14,273
Leasehold Improvements [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross 116,811 116,811
Computer Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 69,841 $ 62,494
v3.23.2
Property and Equipment, Net (Details Narrative) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Property, Plant and Equipment [Abstract]        
Depreciation expense $ 6,258 $ 5,781 $ 12,515 $ 10,322
v3.23.2
Leases (Details) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Leases [Abstract]    
Operating lease assets $ 139,465 $ 196,407
Server lease 45,292 51,920
Total lease assets 184,757 248,327
Current operating lease liability 90,597 122,554
Long-term operating lease liabilities 48,868 73,853
Total operating lease liabilities 139,465 196,407
Current finance lease liability 12,826 12,494
Non-current finance lease liability 34,062 40,559
Total finance lease liabilities $ 46,888 $ 53,053
v3.23.2
Leases (Details Narrative) - USD ($)
 1 Months Ended 3 Months Ended 6 Months Ended
Sep. 11, 2022
Dec. 07, 2021
Mar. 02, 2021
Oct. 14, 2019
Sep. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Sep. 26, 2022
Sep. 11, 2017
Lessee, Lease, Description [Line Items]                        
Right to use of asset           $ 139,465   $ 139,465   $ 196,407    
Lease liability           $ 139,465   $ 139,465   $ 196,407    
Weighted-average remaining lease term           2 years 1 month 2 days   2 years 1 month 2 days   2 years 4 months 24 days    
Total lease cost           $ 31,382 $ 28,194 $ 61,438 $ 56,387      
Office Lease [Member]                        
Lessee, Lease, Description [Line Items]                        
Borrowing rate           5.25%   5.25%   5.25%    
Lease term     2 years                  
Operating lease payments     $ 7,048                  
Secure Facility Lease [Member]                        
Lessee, Lease, Description [Line Items]                        
Borrowing rate           4.00%   4.00%        
Lease term                     3 years 5 years
Operating lease payments $ 1,233             $ 1,418        
Right to use of asset           $ 48,979   48,979        
Lease liability           48,979   48,979        
Copier Lease [Member]                        
Lessee, Lease, Description [Line Items]                        
Borrowing rate       5.25%                
Operating lease payments       $ 1,116                
Right to use of asset       68,799                
Lease liability       $ 68,799                
Hardware Lease [Member]                        
Lessee, Lease, Description [Line Items]                        
Operating lease payments         $ 664              
Right to use of asset           22,059   22,059        
Lease liability           $ 22,059   $ 22,059        
Server Lease [Member]                        
Lessee, Lease, Description [Line Items]                        
Borrowing rate   5.25%                    
Operating lease payments   $ 1,249                    
Right to use of asset   66,281                    
Lease liability   $ 65,801                    
v3.23.2
Drafts Payable (Details Narrative) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Drafts Payable    
Drafts Payable $ 2,861,946 $ 1,827,884
v3.23.2
Line of Credit (Details Narrative) - USD ($)
 1 Months Ended 3 Months Ended 6 Months Ended
Dec. 31, 2022
Oct. 31, 2022
Feb. 03, 2021
Nov. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Oct. 31, 2021
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                  
Line of credit costs $ 117,228 $ 25,771              
Maturity date             Nov. 30, 2025    
First Horizon Bank [Member]                  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                  
Revolving line of credit     $ 35,000,000            
Maturity date       Nov. 30, 2025          
Interest Rate Description             The line of credit bears interest at 30-Day SOFR plus 2.35-2.85% per annum (7.91% at June 30, 2023 and 6.87% at December 31, 2022).    
First Horizon Bank [Member] | Loan Agreement [Member]                  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                  
Revolving line of credit     35,000,000            
Payments of loan costs     180,350            
Long term line of credit 32,821,347       $ 38,083,393   $ 38,083,393    
Unamortized loan origination fees $ 107,722       50,684   50,684    
Interest expense line of credit         711,000 $ 270,000 1,297,000 $ 528,000  
Amortized loan origination fee         28,519 $ 11,650 57,038 $ 33,508  
Line of credit facility, maximum borrowing capacity         $ 4,889,826   $ 4,889,826    
First Horizon Bank [Member] | Loan Agreement [Member] | Minimum [Member]                  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                  
Revolving line of credit                 $ 35,000,000
First Horizon Bank [Member] | Loan Agreement [Member] | Maximum [Member]                  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                  
Revolving line of credit                 $ 45,000,000
First Horizon Bank [Member] | Initial Funding [Member]                  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                  
Revolving line of credit     $ 25,974,695            
v3.23.2
PPP Loan (Details) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Ppp Loan    
Total PPP loan $ 177,612 $ 215,776
Less current maturities (99,963) (91,852)
Long-term portion of PPP loan $ 77,649 $ 123,924
v3.23.2
PPP Loan (Details Narrative) - USD ($)
 1 Months Ended 6 Months Ended
Jun. 22, 2022
Apr. 18, 2020
Jun. 30, 2023
May 18, 2022
Debt Instrument [Line Items]        
Interest rate     8.00%  
Interest payable       $ 7,801
Small Business Administration [Member]        
Debt Instrument [Line Items]        
Debt instrument face amount   $ 271,000    
Debt instrument term   2 years    
Interest rate 1.00% 1.00%    
v3.23.2
Note Payable (Details) - Notes Payable, Other Payables [Member] - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Debt Instrument [Line Items]    
Total notes payable $ 6,707,013 $ 7,286,921
Less current maturities (1,579,091) (1,340,597)
Long-term maturities $ 5,127,922 $ 5,946,324
v3.23.2
Notes Payable (Details Narrative) - USD ($)
 3 Months Ended 6 Months Ended
Apr. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Jan. 31, 2022
Debt Instrument [Line Items]            
Interest rate       8.00%    
Interest expense   $ 120,000 $ 123,000 $ 248,000 $ 251,000  
Proceeds from notes payable       91,668 325,000  
Repayments of notes payable       $ 671,576 $ 236,000  
Stock exchanged during period, value $ 250,000          
Stock exchanged during period, shares 25,000          
Conversion price $ 10.00         $ 10.00
Minimum [Member]            
Debt Instrument [Line Items]            
Interest rate       6.00%    
Maximum [Member]            
Debt Instrument [Line Items]            
Interest rate       8.00%    
v3.23.2
Note Payable - Stockholders and Related Parties (Details) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Debt Instrument [Line Items]    
Less current maturities $ (1,579,091) $ (1,340,597)
Long-term maturities 5,127,922 5,946,324
Notes Payable, Other Payables [Member]    
Debt Instrument [Line Items]    
Total notes payable - Related parties 1,928,000 1,925,000
Less current maturities (587,000) (109,000)
Long-term maturities $ 1,341,000 $ 1,816,000
v3.23.2
Notes Payable – Stockholders and Related Parties (Details Narrative) - USD ($)
 1 Months Ended 3 Months Ended 6 Months Ended
Apr. 30, 2022
Jan. 31, 2022
Mar. 31, 2023
Mar. 31, 2022
Jun. 30, 2023
Jun. 30, 2022
Defined Benefit Plan Disclosure [Line Items]            
Interest rate         8.00%  
Interest expense     $ 40,000 $ 41,000 $ 79,000 $ 80,000
Proceeds from notes payable         30,000 25,000
Repayments of other notes payable         $ 27,000 $ 181,032
Stock exchanged during period, value $ 250,000          
Stock exchanged during period, shares 25,000          
Conversion price $ 10.00 $ 10.00        
Shareholder [Member]            
Defined Benefit Plan Disclosure [Line Items]            
Stock exchanged during period, value   $ 20,000        
Stock exchanged during period, shares   2,000        
v3.23.2
Equity (Details) - $ / shares
 6 Months Ended
Jun. 30, 2023
Dec. 31, 2022
Jun. 30, 2022
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]      
Number of shares outstanding 207,400 207,400 207,400
Weighted average contractual life 6 years 7 months 24 days    
Weighted average exercise price $ 1.18 $ 1.18  
Exercisable number of shares 197,400    
Weighted average contractual life 6 years 7 months 28 days    
Exercisable weighted average exercise price $ 1.00    
Exercise Price 0. 80 [Member]      
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]      
Number of shares outstanding 187,400    
Weighted average contractual life 6 years 8 months 1 day    
Weighted average exercise price $ 0.80    
Exercisable number of shares 187,400    
Weighted average contractual life 6 years 8 months 1 day    
Exercisable weighted average exercise price $ 0.80    
Exercise Price 4. 50 [Member]      
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]      
Number of shares outstanding 10,000    
Weighted average contractual life 9 years    
Weighted average exercise price $ 4.50    
Exercisable number of shares 5,000    
Weighted average contractual life 9 years    
Exercisable weighted average exercise price $ 4.50    
Exercise Price 4. 95 [Member]      
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]      
Number of shares outstanding 10,000    
Weighted average contractual life 4 years    
Weighted average exercise price $ 4.95    
Exercisable number of shares 5,000    
Weighted average contractual life 4 years    
Exercisable weighted average exercise price $ 4.95    
v3.23.2
Equity (Details 1) - USD ($)
 6 Months Ended 12 Months Ended
Jun. 30, 2023
Dec. 31, 2022
Equity [Abstract]    
Number of share outstanding, Beginning 207,400  
Weighted Average Exercise Price Outstanding, Beginning $ 1.18  
Weighted Average Remaining Contractual Term 6 years 7 months 24 days 7 years 1 month 24 days
Intrinsic value, outstanding beginning $ 1,091,236  
Number of shares, Issued 0  
Weighted Average Exercise Price Issue $ 0  
Number of shares, Exercised 0  
Weighted Average Exercise Price, Options exercised $ 0  
Number of share outstanding, Ending 207,400 207,400
Weighted Average Exercise Price Outstanding, Ending $ 1.18 $ 1.18
Intrinsic value, outstanding ending $ 780,236 $ 1,091,236
Number of shares, Exercisable 197,400  
Weighted Average Exercise Price Outstanding, Exercisable $ 1.00  
Weighted average remaining contractual term exercisable 6 years 7 months 28 days  
Intrinsic value, exercisable $ 778,036  
v3.23.2
Equity (Details 2) - Equity Option [Member]
 6 Months Ended
Jun. 30, 2023
$ / shares
Strike 4. 50 [Member]  
Offsetting Assets [Line Items]  
Dividend yield 0.00%
Expected volatility 50.00%
Risk-free interest rate 3.10%
Expected life 10 years
Estimated fair value $ 4.50
Strike 4. 95 [Member]  
Offsetting Assets [Line Items]  
Dividend yield 0.00%
Expected volatility 50.00%
Risk-free interest rate 3.10%
Expected life 5 years
Estimated fair value $ 4.50
v3.23.2
Equity (Details 3) - USD ($)
 6 Months Ended 12 Months Ended
Jun. 30, 2023
Dec. 31, 2022
Equity [Abstract]    
Warrants balance at beginning 1,035,000  
Weighted Average Exercise Price, Beginning $ 7.09  
Weighted Average Remaining Contractual Term, Outstanding 2 years 29 days 2 years 7 months 6 days
Intrinsic value, outstanding beginning $ 1,549,400  
Warrants Issued 0  
Weighted Average Exercise Price issued $ 0  
Warrants exercised 0  
Weighted Average Exercise Price, Options exercised $ 0  
Warrants balance at ending 1,035,000 1,035,000
Weighted Average Exercise Price, Ending $ 7.09 $ 7.09
Intrinsic value, outstanding ending $ 596,900 $ 1,549,400
Exercisable 1,035,000  
Weighted Average Exercise Price, Exercisable $ 7.09  
Weighted average remaining contractual term exercisable 2 years 29 days  
Intrinsic value, exercisable $ 596,900  
v3.23.2
Equity (Details 4) - Warrant 1 [Member]
 6 Months Ended
Jun. 30, 2023
$ / shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
dividend yield of 0.00%
expected volatility of 50.00%
risk-free interest rate of 2.94%
expected life of 5 years
estimated fair value $ 1.17
v3.23.2
Equity (Details Narrative) - USD ($)
 1 Months Ended 3 Months Ended 6 Months Ended
Jun. 02, 2022
Apr. 30, 2022
Jun. 11, 2021
Apr. 02, 2020
Jan. 31, 2022
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
Class of Stock [Line Items]                    
Preferred stock shares authorized           20,000,000   20,000,000   20,000,000
Preferred stock, par value           $ 0.001   $ 0.001   $ 0.001
Designated shares           600,000   600,000    
Preferred stock liquidation preference per share           $ 10   $ 10    
Liquidation preference preferred stock           $ 1,689,050   $ 1,689,050    
Dividends           29,050 $ 17,558 58,100 $ 34,883  
Dividends payable           $ 29,050   $ 29,050   $ 29,050
Common stock, shares authorized           100,000,000   100,000,000   100,000,000
Common stock, par value           $ 0.001   $ 0.001   $ 0.001
Common stock, shares issued           2,905,016   2,905,016   2,905,016
Common stock, shares outstanding           2,905,016   2,905,016   2,905,016
Stock or unit option plan expense           $ 7,050 0 $ 14,100 5,778  
Warrants Issued               0    
Warrant issued for services $ 10,800   $ 9,275 $ 27,200            
Stock warrant expense           $ 0 $ 10,800 $ 0 $ 10,800  
Warrant [Member]                    
Class of Stock [Line Items]                    
Warrants Issued       800,000            
Class W 4 Warrants [Member]                    
Class of Stock [Line Items]                    
Warrants Issued       400,000            
Warrant issued price       $ 0.001            
Strike price       $ 4            
Warrants and Rights Outstanding, Term       5 years            
Class W 12 Warrant [Member]                    
Class of Stock [Line Items]                    
Warrants Issued       400,000            
Warrant issued price       $ 0.001            
Strike price       $ 12            
Warrants and Rights Outstanding, Term       5 years            
Class W 4 A Warrants [Member]                    
Class of Stock [Line Items]                    
Warrants Issued 60,000   175,000              
Class W 4 A Warrant [Member]                    
Class of Stock [Line Items]                    
Warrants Issued 60,000   175,000              
Warrant issued price $ 0.0001   $ 0.001              
Strike price     $ 4              
Warrants and Rights Outstanding, Term 5 years   5 years              
Series A Convertible Preferred Stock [Member]                    
Class of Stock [Line Items]                    
Preferred stock, shares outstanding           166,000   166,000   166,000
Preferred stock, shares outstanding           166,000   166,000   166,000
Series A Convertible [Member]                    
Class of Stock [Line Items]                    
Stock repurchased and retired during period, value   $ 250,000     $ 20,000          
Stock repurchased and retired during period, shares         2,000          
Stock at a price   $ 10.00     $ 10.00          
Share issued   65,000                
Conversion of shares   $ 400,000                
v3.23.2
Related Party Transactions (Details Narrative) - USD ($)
 1 Months Ended 6 Months Ended
Jun. 11, 2021
Mar. 02, 2021
Apr. 02, 2020
Mar. 01, 2020
Nov. 30, 2022
Jun. 29, 2022
Jun. 30, 2023
Dec. 31, 2022
Oct. 31, 2021
Feb. 03, 2021
Related Party Transaction [Line Items]                    
Maturity date             Nov. 30, 2025      
Notes and Loans Payable, Current             $ 1,928,000 $ 1,925,000    
Equity Option [Member] | Officer [Member]                    
Related Party Transaction [Line Items]                    
Stock options issued           20,000        
Equity Option [Member] | N 2019 Equity Incentive Plan [Member]                    
Related Party Transaction [Line Items]                    
Stock options issued       187,400            
Impact on future earnings description       The impact on earnings from this transaction was a total of $69,338, amortized over 24 months at a rate of $2,889 per month   The total impact on earnings from this transaction is $56,400, which is being amortized over 24 months at a rate of $2,350 per month.        
Equity Option [Member] | N 2019 Equity Incentive Plan [Member] | Officers And Directors [Member]                    
Related Party Transaction [Line Items]                    
Stock options issued       167,400            
Warrant [Member]                    
Related Party Transaction [Line Items]                    
Stock Warrants Issued 175,000   800,000              
Warrant [Member] | Officers And Directors [Member]                    
Related Party Transaction [Line Items]                    
Stock Warrants Issued 175,000   800,000              
First Horizon Bank [Member]                    
Related Party Transaction [Line Items]                    
Long-term line of credit                   $ 35,000,000
Maturity date         Nov. 30, 2025          
First Horizon Bank [Member] | Minimum [Member]                    
Related Party Transaction [Line Items]                    
Line of credit increased                 $ 35,000,000  
First Horizon Bank [Member] | Maximum [Member]                    
Related Party Transaction [Line Items]                    
Line of credit increased                 $ 45,000,000  
Office Lease [Member]                    
Related Party Transaction [Line Items]                    
Operating lease payments   $ 7,048                
v3.23.2
Commitments and Contingencies (Details Narrative)
Jun. 29, 2022
shares
C E O And C F O [Member] | Equity Incentive Plan 2019 [Member]  
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]  
Stock option issued 20,000
v3.23.2
Subsequent Events (Details Narrative) - USD ($)
 3 Months Ended 6 Months Ended
Jul. 31, 2023
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
Subsequent Event [Line Items]          
Dividends   $ 29,050 $ 17,558 $ 58,100 $ 34,883
Series A Convertible Preferred Stock [Member] | Subsequent Event [Member]          
Subsequent Event [Line Items]          
Dividends $ 29,050        
Repayment of notes payable $ 32,000        
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