Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2024

Accounting Policies [Abstract]

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. An initial service fee, where permissible, and the first month’s interest, on a pro rata basis, are recognized as income at the inception of a contract. The initial service fee can only be charged once to an insured in a twelve-month period. In accordance with industry practice, finance charges are recognized as income using the “Rule of 78s” method of amortizing finance charge income, which does not materially differ from the interest method of amortizing finance charge income on short term receivables. Late charges are recognized as income when charged. Unearned interest is netted against Premium Finance Contracts and Related Receivables on the balance sheets 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, the Company follows ASC 835, Interest, and ASC 310, Receivables, to recognize its finance charge, late charge, and origination fee revenue as these revenue streams are exempt from ASC 606.

Cash, Cash Equivalents, and Cash Overdraft

Cash, Cash Equivalents, and Cash Overdraft

The Company considers short-term interest-bearing investments with initial maturities of three months or less to be cash equivalents. The Company has no cash equivalents at December 31, 2024 and 2023.

The Company experienced a cash overdraft of $328,421 and $168,543 in its group of bank accounts at its primary lender as of December 31, 2024 and 2023, respectively. As this group of bank accounts is funded by the Company’s line of credit (see Note 7), overdrafts are an expected part of the cash cycle. The Company is not charged any fees for overdrafts as the line of credit funds the operating accounts daily. The Company actively manages its cash balances to minimize unnecessary interest charges.

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 three to eleven monthly payments, and manages these loans on a collective basis based on similar risk characteristics. As of December 31, 2024 and 2023, the portfolio has an amortized cost basis of $67,173,975 and $63,602,075, 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 December 31, 2024 and 2023, the amount of unearned premium on open and cancelled contracts approximated $94,200,000 and $87,600,000, respectively. The annual percentage interest rates on new contracts averaged approximately 17.8% and 17.0% during the years ended December 31, 2024 and 2023, respectively.

Allowance for Credit Losses

Allowance for Credit Losses

In developing a measurement of credit loss, institutions are required to segment financial assets into pools that share similar risk characteristics. The Company retains a third-party service provider to analyze its loan portfolio and create a financial model to better estimate its allowance for credit losses within the context of ASC 326, “Financial Instruments – Credit Losses”. Management, along with their service provider, performs an annual analysis to assist with the determination process of how financial assets should be segregated by risk. Based on this internal risk analysis performed on the Company’s historical datasets, assets are designated into asset classes based on asset codes and other credit quality indicators to provide structure based on similar risk characteristics or areas of risk concentration. Management, at the recommendation of the service provider, updated its allowance estimation model by including portfolio segmentation and the application of a separate methodology for each portfolio segment. The Company classifies its portfolio into two segments, (1) Due from Insured and (2) Due from Insurance Carrier. The segmentation is based on the respective payment and risk characteristics of each portfolio segment. The Company develops a systematic methodology to determine its allowance for credit losses at the portfolio segment level.

The Company utilized the vintage Probability of Default (PD) method for determining expected future credit losses for the Due from Insured portfolio segment. PD is a measure of the likelihood that a borrower will default on an asset or other financial obligation. Default refers to the failure by the borrower to make scheduled payments. Defaults are tracked historically by the percentage of assets in default to assets remaining in the pool by vintage cohort based on month after origination. Additionally, Loss Given Default (LGD) is a measure of the expected loss on a loan or asset in the event of default by the borrower. In other words, it is the amount of money that a lender is likely to lose if the borrower fails to make scheduled payments on the asset. The expectation of future defaults and loss given default are used as the basis for the allowance for credit losses on each asset by segment. The asset level ACLs are then aggregated by asset segment for reporting purposes.

The Company utilized the reporting period loss rate discounted cash flow method for determining expected future credit losses for the Due from Insurance Carrier portfolio segment. In a DCF model, projected cash flows by asset are adjusted for charge-offs, prepayments and amortization are discounted to their present value using the effective interest rate. The effective interest rate used in a DCF model is based on the stated rate that is adjusted for deferred fees and costs, and premiums and discounts. The technique considers future cash flows, adjusted for potential charge-off and prepayment activity, based on the Company's own historical experience. The difference between the discounted cash flow and the current amortized cost basis of the asset represents the allowance for credit losses (ACL). These asset-level ACLs are then aggregated for reporting purposes at the segment level. In a reporting period loss rate model, historical data is viewed from an historical reporting period perspective and grouped into segments that share similar characteristics, such as asset type, and credit quality. This allows the model to capture the unique cash flow profile of each segment over the contractual term of each pool.

When estimating credit losses, management considers the need to adjust historical segment loss, default, or prepayment information to reflect the extent to which management expects current conditions and reasonable and supportable forecasts to differ from the conditions that existed for the period over which historical information was evaluated and utilized in the model.

The adjustments to historical loss information may be qualitative in nature and should reflect changes related to relevant data which reflect differences in current asset specific risk characteristics, such as differences in underwriting standards, portfolio mix, or asset term within a segment at the reporting date or when an entity’s historical loss information is not reflective of the contractual term of the financial asset or group of financial assets.

This can include differences in:

· Nature and volume of the Company’s financial assets.

· The volume, trend and severity of past-due financial assets, nonaccrual assets, watch, special mention, adversely classified, or independently graded assets, work-outs and restructurings.

· Changes to the underlying value or liquidity of collateral on financial assets.

· Management’s lending policies and procedures, including changes in underwriting standards, collections, write-offs and recovery practices.

· The quality of the credit review system.

· The experience, ability, and depth of lending, investment, and collections management, as well as other relevant staff.

· The effect of other external factors, such as competition and regulatory, legal, and technological environments.

· Actual and expected changes in the general market condition of either the geographical area or industry in which the Company has exposure.

· Actual and expected changes in international, national, regional, and local economic and business conditions and developments that affect collectability of financial assets, including the condition of various market segments.

· Additionally, concentration of credit and external factors such as competition, legal, and regulatory requirements are also assessed to refine the overall estimate of expected credit losses. This comprehensive approach ensures that the allowance for credit losses accurately reflects management's best judgment of future losses based on reasonable and supportable forecasts.

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 credit losses, depreciable lives of property and equipment, and valuation of stock-based compensation.

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

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 accounts receivable from customers, agents, and insurance companies. The Company maintains its cash balances at two banks. Accounts at this financial institution are insured by the Federal Deposit Insurance Corporation up to $250,000. Uninsured balances are $94,291 and $250,200 at December 31, 2024 and 2023, respectively. The Company mitigates this risk by maintaining its cash balances at a high-quality financial institution. The following table provides a reconciliation between uninsured balances and cash per the consolidated balance sheet:

	December 31, 2024			December 31, 2023
Uninsured Balance	$	94,291		$	250,200
Plus: Insured balances		250,000			250,000
Plus: Balances at other institutions that do not exceed FDIC limit		1,716			45,239
Plus: Cash overdraft		328,421			168,543
Less: Outstanding checks		(672,712	)		(668,743	)
Cash per Consolidated Balance Sheet	$	1,716		$	45,239

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 66% and 61% of the Company’s business activity is with customers located in Florida for 2024 and 2023, respectively. Approximately 10% and 10% of the Company’s business activity is with customers located in Georgia for 2024 and 2023, respectively. Approximately 8% and 10% of the Company’s business activity is with customers located in North Carolina for 2024 and 2023, respectively. Approximately 8% and 10% of the Company’s business activity is with customers located in South Carolina for 2024 and 2023, respectively. There were no other significant regional, industrial or group concentrations during the years ended December 31, 2024 and 2023.

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 gross cash surrender value relative to the policy in place at December 31, 2024 and 2023, was $705,593 and $650,237, respectively. In March 2024, the Company executed a $641,934 loan against the life insurance policy. Any death benefit received would first be reduced by the outstanding loan amount at the time of death. The loan accrues interest at a blended interest rate of 6.64%, has no maturity date, and was funded in April 2024. The Company paid interest on this loan of $27,884 and $0 for the years ended December 31, 2024 and 2023, respectively.

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, cash surrender value of life insurance, 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 could 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 December 31, 2024.

The Company filed consolidated tax returns for the years ended December 31, 2024 and 2023, which are subject to examination by federal and state tax jurisdictions. The Company’s tax returns for the previous three years remain open for audit by the respective tax jurisdictions. No income tax returns are currently under examination by taxing authorities. The Company recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense. The Company did not have any accrued interest or penalties associated with uncertain tax positions as of December 31, 2024 and 2023.

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 includes 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 Company 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.

As of December 31, 2024 and 2023, stock options to purchase 111,200 and 207,400 shares of common stock were outstanding, respectively, and stock warrants to purchase 1,035,000 and 1,035,000 shares of common stock were outstanding, respectively, as described in Note 12. All outstanding stock options have fully vested. All outstanding stock warrants vested immediately. In August 2024, the Company exchanged $10,000 of notes payable and $66,960 of notes payable – related parties for 96,200 shares of common stock at a price of $0.80 per share from the exercise of incentive stock options by two employees. The following table summarizes the effects of the outstanding options and warrants on earnings per share:

	December 31, 2024		December 31, 2023
Options included in the calculation of diluted EPS		91,200		197,400
Vested but antidilutive options		20,000		—
Nonvested options		—		10,000
Total options outstanding		111,200		207,400
Warrants included in the calculation of diluted EPS		—		635,000
Vested but antidilutive warrants		1,035,000		400,000
Total warrants outstanding		1,035,000		1,035,000

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. This preferred stock is dilutive as of December 31, 2024 and anti-dilutive as of December 31, 2023.

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 did not experience any impact on the consolidated financial statements from the adoption of the standard.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires incremental disclosures about reportable segments but does not change the definition of a segment or the guidance for determining reportable segments. The new guidance requires disclosure of significant segment expenses that are (1) regularly provided to (or easily computed from information regularly provided to) the chief operating decision maker ("CODM") and (2) included in the reported measure of segment profit or loss. The new standard also requires companies to disclose the title and position of the individual (or the name of the committee) identified as the CODM, allows companies to disclose multiple measures of segment profit or loss if those measures are used to assess performance and allocate resources, and is applicable to companies with a single reportable segment. The requirements are effective for annual reporting periods beginning on January 1, 2024, and are required to be applied retrospectively. The Company has adopted the additional disclosure requirements under ASU 2023-07. The additional requirements did not have a material impact on the financial statements.