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Note 3 - Investments

3 Months Ended

Mar. 31, 2026

3.	Investments

Investments in Related Parties

On June 30, 2025, the Company completed a non-cash equity-for-equity exchange transaction pursuant to which it acquired a 39.1% equity interest (a 10.4% voting interest) in ACMAT Corporation ("ACMAT"), a Connecticut corporation. The investment in ACMAT was completed via an Assignment and Contribution Agreement (the “Contribution Agreement”) with the certain assignors listed therein (the “Assignors”), pursuant to which the Assignors agreed to assign and contribute to the Company an aggregate of 10,203 shares of common stock, no par value ("ACMAT Common Stock"), and 291,656 shares of Class A stock, no par value ("ACMAT Class A Stock"), of ACMAT and, in consideration of and exchange therefor, the Company agreed to issue to the Assignors an aggregate of 2,899,876 shares of Company common stock. Holders of ACMAT Class A Stock are entitled to one-tenth vote per share in relation to ACMAT Common Stock, holders of which are entitled to one vote per share, with respect to matters subject to approval by ACMAT stockholders. ACMAT, through its subsidiaries, offers surety bonds for prime, sub-prime, specialty trade, environmental, asbestos and lead abatement contractors and miscellaneous obligations nationwide. ACMAT also provides other miscellaneous surety bonds such as workers’ compensation bonds, supply bonds, subdivision bonds, and license and permit bonds. ACMAT is considered a related party as the Company is a principal owner of ACMAT through its voting interest.

The Company accounts for its investment in ACMAT under the equity method of accounting, as the Company has concluded that it has the ability to exercise significant influence over the operating and financial policies of the investee. As of March 31, 2026 and December 31, 2025, the Company’s investment in ACMAT was $12.7 million and $12.6 million, respectively. The Company recognizes equity method earnings from ACMAT on a lag basis, generally one reporting period in arrears, as financial information for ACMAT is not available on a timely basis. Management has determined that the use of a reporting lag does not have a material impact on the Company’s consolidated financial statements. The Company’s share of ACMAT’s earnings for the three months ended March 31, 2026, of $86,000 is reflected in "Income from investments in related parties, net" in the Unaudited Consolidated Statements of Operations.

As a result of the Company’s equity method investment in ACMAT, the Company includes the following summarized income statement information of ACMAT for the latest available period, the three months ended December 31, 2025 (in thousands):

	*Three Months*
	*Ended*
	*December 31, 2025*

Total revenue	$	564
Total expense		374
Pre-tax earnings		190
Income tax benefit		30
Net earnings	$	220

Additionally, the Company owns approximately 28.0% of the voting interest of HC Realty through its ownership of 250 shares of HC Common Stock and 1,025,000 shares of HC Series B Stock.

The following table summarizes the Company’s investment in HC Realty as of March 31, 2026 and December 31, 2025 and for the three months ended March 31, 2026 and 2025 (amounts in thousands, except ratios):

											Loss recorded in the Consolidated
	Ownership %						Carrying Value				Statements of Operations (b)
											For the Three
	*As of*			As of			*As of*		As of		Months Ended
	*March 31,*			December 31,			*March 31,*		December 31,		March 31,
	*2026*			2025			*2026*		2025		*2026*		2025

HC Series B Stock (a)		27.9	%		27.9	%	$	5,166	$	5,166	$	-	$	(41	)
HC Common Stock		0.1	%		0.1	%		5		5		-		-
Total		28.0	%		28.0	%	$	5,171	$	5,171	$	-	$	(41	)

(a)

Represents investments in shares of HC Series B Stock with a basis of $10.25 million. Each share of HC Series B Stock has voting rights on an as converted basis and can be converted into shares of HC Common Stock at a conversion ratio equal to $10.00 per share divided by the lesser of $9.10 per share or the fair market value per share of HC Common Stock, subject to adjustment upon the occurrence of certain events.

(b)

Loss from these investments is included in “Income from investments in related parties, net” in the Unaudited Consolidated Statements of Operations. Since HC Realty is a REIT and not a taxable entity, the loss is not reported net of taxes.

The Company’s investment in HC Common Stock is accounted for under the equity method of accounting as the Company has concluded it has a significant influence over the investee. The HC Series B Stock is not deemed to be in-substance common stock and is accounted for under the cost adjusted for market observable events less impairment method. Both investments in HC Common Stock and HC Series B Stock are evaluated quarterly for impairment. During the three months ended March 31, 2026 and March 31, 2025, the Company did not recognize any impairment of HC Common Stock. During the three months ended March 31, 2026, the Company did not recognize any impairment of HC Series B Stock. During the three months ended March 31, 2025, the Company recognized impairment of HC Series B Stock of $41,000.

As a result of the Company’s holdings in HC Realty, the Company includes the following summarized income statement information of HC Realty for the three months ended March 31, 2026 and 2025 (in thousands):

	Three Months
	Ended
	*March 31,*			March 31,
	*2026*			2025
Total revenue	$	5,521		$	5,340
Total expense		7,908			8,320
Net loss		(2,387	)		(2,980	)
Net loss attributable to noncontrolling interest in operating partnership		(1,813	)		(1,998	)
Net loss attributable to common shareholders	$	(574	)	$	(982	)

The Company’s other investments in related parties totaled $1.1 million as of both March 31, 2026 and December 31, 2025, and included investments in limited liability companies and corporations. These investments do not meet the criteria for accounting under the equity method and are accounted for under the cost adjusted for market observable events less impairment method. As of March 31, 2026, the Company had total receivables and payables from the related parties of $536,000 and $14,000, respectively. As of December 31, 2025, the Company had total receivables and payables from these related parties of $526,000 and $355,000, respectively. During the three-month periods ended March 31, 2026 and March 31, 2025, the Company received $155,000 and $245,000 of distributions from the related party investees, respectively, which are included in “Income from investments in related parties, net” in the Unaudited Consolidated Statements of Operations.

Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The hierarchy for inputs used in determining fair value maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Assets and liabilities recorded on our Consolidated Balance Sheets at fair value are categorized in the fair value hierarchy based on the observability of inputs to the valuation techniques as follows:

Level 1: Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that we can access.

Level 2: Assets and liabilities whose values are based on the following:

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets or liabilities in markets that are not active; or

Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Unobservable inputs reflect our estimates of the assumptions that market participants would use in valuing the assets and liabilities.

Where available, we estimate the fair value of our investments using the closing prices on the last business day of the reporting period, obtained from active markets such as the New York Stock Exchange, Nasdaq and NYSE American. For securities for which quoted prices in active markets are unavailable, we use a third-party pricing service that utilizes quoted prices in active markets for similar instruments, benchmark interest rates, broker quotes and other relevant inputs to estimate the fair value of those securities for which quoted prices are unavailable.

The Company’s investments in related parties are accounted for either under the equity method of accounting or, where they do not meet the criteria of accounting under the equity method, under the cost adjusted for market observable events less impairment method. For information about the Company’s investments in related parties, refer to the Investments in Related Parties section above.

The Company has elected the practical expedient for fair value for its investment in limited partnership which is estimated based on our share of the net asset value (“NAV”) of the limited partnership, as provided by the independent fund administrator. The Company’s share of the NAV represents the Company’s proportionate interest in the members’ equity of the limited partnership. As of March 31, 2026, there are no unfunded commitments related to the investment in limited partnership. This limited partnership invests in property catastrophe risk through customized reinsurance solutions. The underlying assets of the limited partnership are one year or less in duration and the Company’s proceeds may be redeemed or reinvested annually. Changes in net asset value of the investment in limited partnership are included in "Net investment income" on the Company’s Unaudited Consolidated Statements of Operations.

The following tables present the carrying amounts and estimated fair values of the Company’s financial instruments not measured at fair value as of March 31, 2026 and December 31, 2025:

			*Estimated fair value*
(in thousands)	*Carrying Amount*		*Total*		*Level 1*		*Level 2*		*Level 3*		*NAV*
March 31, 2026
Assets:
Cash and cash equivalents	$	10,732	$	10,732	$	10,732	$	-	$	-	$	-
Restricted cash	$	9,818	$	9,818	$	9,818	$	-	$	-	$	-
Investments in limited partnerships	$	3,093	$	3,093	$	-	$	-	$	-	$	3,093

			*Estimated fair value*
(in thousands)	*Carrying Amount*		*Total*		*Level 1*		*Level 2*		*Level 3*		*NAV*
December 31, 2025
Assets:
Cash and cash equivalents	$	10,333	$	10,333	$	10,333	$	-	$	-	$	-
Restricted cash	$	6,746	$	6,746	$	6,746	$	-	$	-	$	-
Investments in limited partnerships	$	3,088	$	3,088	$	-	$	-	$	-	$	3,088

Assets measured at fair value on a non-recurring basis

There were no assets measured at fair value on a non-recurring basis as of March 31, 2026.

The following table presents assets measured at fair value on a non-recurring basis as of December 31, 2025 (in thousands):

Estimated Fair Value

Total Level 1 Level 2 Level 3

HC Series B Stock

5,166

Net investment income

Net investment income for the three months ended March 31, 2026 and 2025 is detailed below (in thousands):

	*For the Three Months Ended*
	*March 31, 2026*		*March 31, 2025*
Interest on:
Cash equivalents	$	80	$	93
Fixed income securities		-		1
Change in NAV of investment in limited partnership		55		(62	)
Net investment income	$	135	$	32