What changed in FG Nexus Inc.'s 2023 10-K compared to 2022?

Across the narrative sections we track, FG Nexus Inc. (FGNXP) added 156 paragraphs, removed 203, and edited 115 between the 2022 and 2023 10-K filings. The biggest movers are Item 7. Management's Discussion & Analysis (+75/−104), Item 1A. Risk Factors (+53/−60), Item 1. Business (+23/−34).

Did FG Nexus Inc. add new Risk Factors in the 2023 10-K?

Yes — Item 1A Risk Factors shows 53 new/edited paragraphs and 60 removed paragraphs versus the 2022 10-K.

What changed in FG Nexus Inc.'s MD&A (Item 7) in 2023?

Item 7 Management's Discussion & Analysis shows 75 new/edited paragraphs and 104 removed paragraphs year-over-year. Read the side-by-side diff to see exactly which revenue, margin, and outlook commentary was rewritten.

Did FG Nexus Inc.'s Legal Proceedings (Item 3) change in 2023?

Item 3 shows 2 added/edited paragraphs and 2 removed paragraphs — usually indicating new litigation disclosed or settled cases removed.

Where does this FGNXP 10-K diff come from?

The source filings are FG Nexus Inc.'s official 2022 and 2023 Form 10-K annual reports from SEC EDGAR. 10q10k.net parses each filing, aligns paragraphs by section (Item 1, 1A, 1C, 2, 3, 7, 7A), and highlights every added, removed and edited sentence side-by-side.

What changed in FG Nexus Inc.'s 10-K — 2022 vs 2023

Paragraph-level year-over-year comparison of FG Nexus Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+156 added−203 removedSource: 10-K (2024-03-14) vs 10-K (2023-03-24)

Top changes in FG Nexus Inc.'s 2023 10-K

156 paragraphs added · 203 removed · 115 edited across 6 sections

Item 7. Management's Discussion & Analysis+75 / −104 · 51 edited
Item 1A. Risk Factors+53 / −60 · 46 edited
Item 1. Business+23 / −34 · 13 edited
Item 3. Legal Proceedings+2 / −2 · 2 edited
Item 5. Market for Registrant's Common Equity+2 / −2 · 2 edited

Item 1. Business

Business — how the company describes what it does

13 edited+10 added−21 removed2 unchanged

2022 filing

2023 filing

Biggest changeThe Reincorporation was accomplished by means of a merger by and between the Company and its former wholly owned subsidiary FG Financial Group, Inc., a Nevada corporation. As of December 9, 2022, the rights of the Company’s stockholders began to be governed by the Nevada corporation laws, our Amended and Restated Nevada Articles of Incorporation and our Nevada Bylaws.

Biggest changeET on December 9, 2022, the Company completed its reincorporation from a Delaware corporation to a Nevada corporation (the “Reincorporation”). The Reincorporation was accomplished by means of a merger by and between the Company and its former wholly owned subsidiary FG Financial Group, Inc., a Nevada corporation.

As part of our refined focus, we have adopted the following capital allocation philosophy: “ Grow intrinsic value per share with a long-term focus using fundamental research , allocating capital to asymmetric risk/reward opportunities.” Currently, the business operates as a diversified holding company of insurance, reinsurance, asset management, our Special Purpose Acquisition Corporation (“SPAC”) Platform businesses, and merchant banking division.

As part of our refined focus, we have adopted the following capital allocation philosophy: “ Grow intrinsic value per share with a long-term focus using fundamental research , allocating capital to asymmetric risk/reward opportunities.” Currently, the business operates as a diversified holding company of insurance, reinsurance, asset management, our Special Purpose Acquisition Corporation “SPAC” Platform businesses, and our merchant banking division.

SPAC Platform On December 21, 2020, we formed FG Management Solutions LLC (“FGMS”), formerly known as FG SPAC Solutions, LLC, a Delaware company, to facilitate the launch of our “SPAC Platform”. Under the SPAC Platform, we provide various strategic, administrative, and regulatory support services to newly formed SPACs for a monthly fee.

SPAC Platform and Merchant Banking On December 21, 2020, we formed FG Management Solutions LLC (“FGMS”), formerly known as FG SPAC Solutions, LLC, a Delaware company, to facilitate the launch of our “SPAC Platform.” Under the SPAC Platform, we provide various strategic, administrative, and regulatory support services to newly formed SPACs for a monthly fee.

Insurance Sponsor Protection Coverage and Risk, Inc. is being formed as a special purpose captive in South Carolina to provide reinsurance coverage for Sides A, B, & C Directors and Officers Liability insurance coverage for related and unrelated entities of Fundamental Global Reinsurance Ltd. (“FGRe”).

Insurance Sponsor Protection Coverage and Risk, Inc. has been formed as a special purpose captive in South Carolina to provide reinsurance coverage for Sides A, B, & C Directors and Officers Liability insurance coverage for related and unrelated entities of FG Reinsurance Ltd (“FGRe”).

These will include SPAC entities engaged in the services or business of taking companies public, as well as small cap businesses performing an initial public offering. Reinsurance The Company’s wholly owned reinsurance subsidiary, FGRe, a Cayman Islands limited liability company, provides specialty property and casualty reinsurance.

These will include SPAC entities engaged in the services or business of taking companies public, as well as small cap businesses performing an initial public offering. Sponsor Protection Coverage and Risk, Inc. has yet to write any business. Reinsurance The Company’s wholly owned reinsurance subsidiary, FGRe, a Cayman Islands limited liability company, provides specialty property and casualty reinsurance.

We are not a party to any collective bargaining agreement and believe that relations with our employees are satisfactory. Each of our employees has entered into confidentiality agreements with us. Website Our corporate website is www.fgfinancial.com. A copy of our Code of Ethics can be found in the Governance Documents section of our website.

We are not a party to any collective bargaining agreement and believe that relations with our employees are satisfactory. Website Our corporate website is www.fundamentalglobal.com. A copy of our Code of Ethics can be found in the Governance Documents section of our website. Information contained at the website is not a part of this report.

These agreements limit exposure by loss-caps stipulated within the reinsurance contracts. 3 Asset Management FG Strategic Consulting, LLC (“FGSC”), a wholly-owned subsidiary of the Company, provides investment advisory services, including identifying, analyzing and recommending potential investments, advising as to existing investments and investment optimization, recommending investment dispositions, and providing advice regarding macro-economic conditions.

In addition, during 2023, the Company began to focus on growing fee-based revenue through FG Re Solutions, Ltd. 3 Asset Management FG Strategic Consulting, LLC, (“FGSC”) a wholly owned subsidiary of the Company, provides investment advisory services, including identifying, analyzing and recommending potential investments, advising as to existing investments and investment optimization, recommending investment dispositions, and providing advice regarding macro-economic conditions.

ITEM 1. BUSINESS Overview FG Financial Group, Inc. (“FGF”, the “Company”, “we”, or “us”) is a reinsurance, merchant banking and asset management holding company. We focus on opportunistic collateralized and loss capped reinsurance, while allocating capital in partnership with Fundamental Global ® , and from time to time, other strategic investors, to merchant banking activities.

(“FGF”, the “Company”, “we”, or “us”), formerly known as FG Financial Group, Inc., is a reinsurance, merchant banking and asset management holding company. We focus on opportunistic collateralized and loss-capped reinsurance, while allocating capital to merchant banking activities. The Company’s principal business operations are conducted through its subsidiaries and affiliates.

The Reincorporation did not alter any stockholder’s percentage ownership interest or number of shares owned in the Company and the Company’s common stock continues to be quoted on the Nasdaq Global Market under the same symbol “FGF” and the 8.00% Cumulative Preferred Stock, Series A of the Company continues to be quoted on the Nasdaq Global Market under the same symbol, “FGFPP.” Sale of the Insurance Business On December 2, 2019, we completed the sale of our insurance subsidiaries to FedNat Holding Company for a combination of cash and FedNat common stock (the “Asset Sale”).

The Reincorporation did not alter any stockholder’s percentage ownership interest or number of shares owned in the Company and the Company’s common stock continues to be quoted on the Nasdaq Global Market under the same symbol “FGF” and the 8.00% Cumulative Preferred Stock, Series A of the Company continues to be quoted on the Nasdaq Global Market under the same symbol, “FGFPP.” Current Business Our strategy has evolved to focus on opportunistic collateralized and loss capped reinsurance, with capital allocation to merchant banking activities with asymmetrical risk/reward opportunities.

The Reincorporation was approved by the Company’s stockholders at a special meeting held on December 6, 2022.

As of December 9, 2022, the rights of the Company’s stockholders began to be governed by the Nevada corporation laws, our Amended and Restated Nevada Articles of Incorporation and our Nevada Bylaws. The Reincorporation was approved by the Company’s stockholders at a special meeting held on December 6, 2022.

The terms of the license require advance approval from the Authority should FGRe wish to enter into any reinsurance agreements which are not fully collateralized.

The terms of the license require advance approval from the Authority should FGRe wish to enter into any reinsurance agreements which are not fully collateralized. As of December 31, 2023, the Company had eight active reinsurance contracts, including participating in a Funds at Lloyds (“FAL”) syndicate covering risks written by the syndicate during the 2021, 2022 and 2023 calendar years.

Kyle Cerminara, Chairman of our Board of Directors, serves as Chief Executive Officer, Co-Founder and Partner of FG. Reincorporation Effective at 5:01 p.m. ET on December 9, 2022, the Company completed its reincorporation from a Delaware corporation to a Nevada corporation (the “Reincorporation”).

As of December 31, 2023, FG Financial Holdings, LLC (“FG”), a private partnership focused on long-term strategic holdings, and its affiliated entity, collectively beneficially owned approximately 54.6% of our common stock. D. Kyle Cerminara, Chairman of our Board of Directors, serves as Chief Executive Officer, Co-Founder and Partner of FG. Reincorporation Effective at 5:01 p.m.

Additionally, the Company co-founded a partnership, FG Merchant Partners, LP (“FGMP”), formerly known as FG SPAC Partners, LP, to participate as a co-sponsor for newly formed SPACs. The Company also participates in the risk capital investments associated with the launch of such SPACs through its Asset Management business, specifically FG Special Situations Fund, LP (“Fund”).

Additionally, the Company co-founded a partnership, FG Merchant Partners, LP (“FGMP”), formerly known as FG SPAC Partners, LP, to participate as a co-sponsor for newly formed SPACs. In the third quarter of 2022, the Company announced the expansion of its growth strategy through the formation of a merchant banking division. Employees As of December 31, 2023, we had six employees.

Removed

The Company’s principal business operations are conducted through its subsidiaries and affiliates. The Company also provides asset management services. From our inception in October 2012 through December 2019, we operated as an insurance holding company, writing property and casualty insurance throughout the states of Louisiana, Florida, and Texas.

Added

ITEM 1. BUSINESS Recent Developments On January 3, 2024, FG Financial Group, Inc. (“FGF”) and FG Group Holdings, Inc. (NYSE American: FGH) (“FGH”), signed a definitive plan of merger to combine the companies in an all-stock transaction. The plan of merger and transaction were unanimously approved by the independent members of the Board of Directors of both FGF and FGH.

Removed

On December 2, 2019, we sold our three former insurance subsidiaries, and embarked upon our current strategy focused on reinsurance, merchant banking and asset management. As of December 31, 2022, Fundamental Global GP, LLC (“FG”), a private partnership focused on long-term strategic holdings, and its affiliated entity, collectively beneficially owned approximately 60.0% of our common stock. D.

Added

Under the plan of the merger, FGH common stockholders would receive one share of FGF common stock for each share of common stock of FGH held by such stockholder.

Removed

The Company sold the remaining FedNat common stock shares held in October 2022. Current Business Our strategy has evolved to focus on opportunistic collateralized and loss-capped reinsurance, with capital allocation to merchant banking activities with asymmetrical risk/reward opportunities.

Added

Upon completion of the merger, the combined company would be renamed to Fundamental Global Inc. and the common stock and Series A cumulative preferred stock of the combined company would continue to trade on the Nasdaq under the tickers “FGF” and “FGFPP,” respectively.

Removed

FGRe participates in a Funds at Lloyds (“FAL”) syndicate covering risks written by the syndicate during the 2021 and 2022 calendar years, and on December 10, 2022 agreed to cover risks written by the syndicate during the calendar year 2023.

Added

On February 29, 2024, FGF and FGH completed the previously announced merger transaction pursuant to the Plan of Merger, dated as of January 3, 2024, by and among FGF, FGH and FG Group LLC, a Nevada limited liability company and wholly owned subsidiary of FGF (the “Merger Sub”).

Removed

On April 1, 2021, FGRe entered its second reinsurance contract with a leading insurtech company that provides automotive insurance utilizing driver monitoring to predictively segment and price drivers. The Company added a second agreement with the automotive insurance provider as of April 1, 2022.

Added

Pursuant to the terms of the Merger Agreement and in accordance with the Nevada Revised Statutes, FGH merged with and into the Merger Sub (the “Merger”), with the Merger Sub as the surviving entity and wholly owned subsidiary of FGF.

Removed

Beginning January 1, 2022, FGRe participates in a quota share reinsurance contract with a startup homeowners’ insurance company. On April 1, 2022, FGRe entered a homeowners’ property catastrophe excess of loss reinsurance contract with a specialty insurance company covering loss occurrences from named tropical storms arising out of the Atlantic.

Added

Following the Merger, on February 29, 2024, the Company amended its Amended and Restated Articles of Incorporation to change its name to Fundamental Global Inc. Effective immediately following the closing of the Merger, the Board of Directors of the Company increased in size from six to seven directors. In connection with the closing of the Merger, E.

Removed

On July 1, 2022, FGRe entered a contract with a specialty insurance company that provides hired and non-owned automotive insurance.

Added

Gray Payne and Larry G. Swets, Jr., resigned from the Board. In addition, in accordance with the terms of the Plan of Merger and effective immediately following the closing of the Merger each of Michael C. Mitchell, Ndamukong Suh, and Robert J. Roschman were appointed to the Board. The Board has determined that all of its directors, except for D.

Removed

As discussed in Note 4, the Company had consolidated the results of the Fund through November 30, 2021; however, effective December 1, 2021, the Company began accounting for its investment in the Fund under the equity method.

Added

Kyle Cerminara, are “independent directors” as such term is defined by the applicable rules and regulations of the SEC and Nasdaq. In connection with the Merger, Larry G. Swets, President and Chief Executive Officer of FGF prior to the closing of the Merger, and Hassan R.

Removed

The first transaction entered under the SPAC Platform occurred on January 11, 2021, by and among FGMS and Aldel Investors, LLC, the sponsor of Aldel Financial, Inc. (“Aldel”), a special purpose acquisition company which completed its business combination with Hagerty (NYSE: HGTY) on December 2, 2021.

Added

Baqar, Executive Vice President and Chief Financial Officer of FGF prior to the closing of the Merger, resigned from their respective positions with the combined company. Messrs. Swets and Baqar will remain with the combined company leading the merchant banking and SPAC businesses. Effective as of the closing of the Merger, the Board appointed D.

Removed

Under the services agreement between FGMS and Aldel Investors, LLC (the “Agreement”), FGMS provided accounting, regulatory, strategic advisory, and other administrative services to Aldel, which included assistance with negotiations with potential merger targets for the SPAC as well as assistance with the de-SPAC process. In March and April 2022, the Company continued to build upon its SPAC Platform strategy.

Added

Kyle Cerminara as Chief Executive Officer and Mark D. Roberson as Chief Financial Officer of Fundamental Global Inc. Unless stated otherwise, all information included within this Annual Report relates to information that precedes the Merger with FGH. Overview Fundamental Global Inc.

Removed

On March 3, 2022, FG Merger Corp. (“FG Merger”) (Nasdaq: FGMCU) announced the closing of an $80.5 million IPO in the United States, including the exercise of the over-allotment option granted to the underwriters in the offering. Similarly, on April 5, 2022, FG Acquisition Corp.

Removed

(“FG Acquisition”) (TSX:FGAA.V), announced the closing of a $115 million IPO in Canada, including the exercise of the over-allotment option granted to the underwriters in the offering. The Company participated in the risk capital associated with the launch of the SPACs through its asset management business, specifically FG Special Situations Fund, LP. Mr. Cerminara, our Chairman, Larry G.

Removed

Swets, Jr., our Director and Chief Executive Officer, and Hassan R. Baqar, our Executive Vice President and Chief Financial Officer, also hold financial interests in the SPACs and/or their sponsor companies. Additionally, Messrs. Cerminara, Swets, and Baqar are managers of the sponsor companies of FG Merger and FG Acquisition. Mr. Swets serves as Chairman of FG Merger, while Messrs.

Removed

Baqar and Cerminara serve as Director and Senior Advisor of FG Merger, respectively. Mr. Swets serves as Chief Executive Officer and Director of FG Acquisition. Mr. Baqar serves as Chief Financial Officer, Secretary and Director of FG Acquisition. Mr. Cerminara serves as Chairman of FG Acquisition.

Removed

In the aggregate, the Company’s indirect exposure to FG Merger through its subsidiaries represents potential beneficial ownership of approximately 820,000 shares of FG Merger’s common stock, approximately 989,000 warrants with an $11.50 exercise price and 5-year expiration, and approximately 85,000 warrants with a $15.00 exercise price and 10-year expiration.

Removed

The Company has invested approximately $2.6 million in FG Merger through its subsidiaries.

Removed

The Company’s indirect exposure in FG Acquisition through its subsidiaries represents potential beneficial ownership of approximately 819,000 shares of FG Acquisition’s common stock, approximately 1,400,000 warrants with an $11.50 exercise price and 5-year expiration (the “FGAC Warrants”), approximately 440,000 warrants with a $15 exercise price and 10-year expiration, and either (i) up to approximately an additional 1,600,000 FGAC Warrants, or (ii) up to approximately $2 million in cash, or (iii) a pro-rata combination of such FGAC Warrants and cash, based on certain adjustment provisions and the level of redemptions of FG Acquisition’s publicly traded warrants at the time of a business combination.

Removed

The Company has invested approximately $3.4 million in FG Acquisition through its subsidiaries. Merchant Banking In Q3 2022, the Company announced the expansion of its growth strategy through the formation of a merchant banking division. The Company invested $2.0 million into its first project launched under the platform, FG Communities, Inc (“FGC”).

Removed

FGC is a self-managed real estate company focused on a growing portfolio of manufactured housing communities which are owned and operated by FGC.

Removed

As discussed further in Note 4, the Company will hold this investment at cost, subject to any adjustment from time to time due to impairment or observable price changes in orderly transactions. 4 Employees As of December 31, 2022, we had seven employees.

Removed

Information contained at the website is not a part of this report.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

46 edited+7 added−14 removed105 unchanged

2022 filing

2023 filing

Biggest changeOur results of operations and the implementation of our new business strategy could be adversely affected by general conditions in the global economy, including conditions that are outside of our control, such as the impact of health and safety concerns from the COVID-19 coronavirus pandemic, which resulted in volatility and disruptions in the capital and credit markets.

Biggest changeGeneral Risk Factors Unfavorable global economic conditions, including as a result of health and safety concerns, could adversely affect our business, financial condition or results of operations. Our results of operations and the implementation of our new business strategy could be adversely affected by general conditions in the global economy, including conditions that are outside of our control.

Our inexperience as a public company and the requirements of being a public company may strain our resources, divert management’s attention, affect our ability to attract and retain qualified board members and have a material adverse effect on us and our stockholders. We have a limited operating history as a publicly traded company.

We have a limited operating history as a publicly traded company. Our inexperience as a public company and the requirements of being a public company may strain our resources, divert management’s attention, affect our ability to attract and retain qualified board members and have a material adverse effect on us and our stockholders.

For these reasons and others, delisting could adversely affect the price of our stock and our business, financial condition and results of operations. Technology and Operational Risks Our information technology systems may fail or suffer a loss of security which may have a material adverse effect on our business.

For these reasons and others, delisting could adversely affect the price of our stock and our business, financial condition and results of operations. 11 Technology and Operational Risks Our information technology systems may fail or suffer a loss of security which may have a material adverse effect on our business.

As a result, actual losses and loss adjustment expenses paid can deviate, perhaps substantially, from the reserve estimates reflected in our financial statements. 7 If our loss reserves are determined to be inadequate, we will be required to increase loss reserves at the time of such determination with a corresponding reduction in our net income in the period when the deficiency becomes known.

As a result, actual losses and loss adjustment expenses paid can deviate, perhaps substantially, from the reserve estimates reflected in our financial statements. 6 If our loss reserves are determined to be inadequate, we will be required to increase loss reserves at the time of such determination with a corresponding reduction in our net income in the period when the deficiency becomes known.

We will be subject to the risk of inadvertently becoming an investment company, which would require us to register under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Registered investment companies are subject to extensive, restrictive and potentially adverse regulations relating to, among other things, operating methods, management, capital structure, dividends and transactions with affiliates.

We are subject to the risk of inadvertently becoming an investment company, which would require us to register under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Registered investment companies are subject to extensive, restrictive and potentially adverse regulations relating to, among other things, operating methods, management, capital structure, dividends and transactions with affiliates.

In addition, we do not have or currently intend to obtain financial strength ratings, which may discourage certain counterparties from entering into reinsurance contracts with us. 5 As a reinsurer, we will depend on our cedents’ evaluations of the risks associated with their insurance underwriting, which may subject us to reinsurance losses.

In addition, we do not have or currently intend to obtain financial strength ratings, which may discourage certain counterparties from entering into reinsurance contracts with us. 4 As a reinsurer, we will depend on our cedents’ evaluations of the risks associated with their insurance underwriting, which may subject us to reinsurance losses.

As a result, at times, fewer attractive targets may be available to consummate an initial business combination. In addition, because there are more SPACs seeking to enter into an initial business combination with available targets, the competition for available targets with attractive fundamentals or business models may increase, which could cause targets companies to demand improved financial terms.

As a result, at times, fewer attractive targets may be available to consummate an initial business combination. 8 In addition, because there are more SPACs seeking to enter into an initial business combination with available targets, the competition for available targets with attractive fundamentals or business models may increase, which could cause target companies to demand improved financial terms.

As of December 31, 2022, we have issued and outstanding 894,580 shares of preferred stock designated as 8.00% Cumulative Preferred Stock, Series A, par value $25.00 per share (the “Series A Preferred Stock”).

As of December 31, 2023, we have issued and outstanding 894,580 shares of preferred stock designated as 8.00% Cumulative Preferred Stock, Series A, par value $25.00 per share (the “Series A Preferred Stock”).

Failure to receive or maintain the licenses necessary to execute on our strategy or receive necessary approvals may have a material adverse effect on our future business. We will be subject to the risk of becoming an investment company under the Investment Company Act.

Failure to receive or maintain the licenses necessary to execute on our strategy or receive necessary approvals may have a material adverse effect on our future business. We are subject to the risk of becoming an investment company under the Investment Company Act.

As a publicly traded company, we are required to develop and implement substantial control systems, policies and procedures to satisfy our periodic SEC reporting and Nasdaq obligations. Management’s previous experience may not be sufficient to successfully develop and implement these systems, policies and procedures and to operate our Company.

We have a limited operating history as a publicly traded company. As a publicly traded company, we are required to develop and implement substantial control systems, policies and procedures to satisfy our periodic SEC reporting and Nasdaq obligations. Management’s previous experience may not be sufficient to successfully develop and implement these systems, policies and procedures and to operate our Company.

If it were established that we were an investment company, there would be a risk, among other material adverse consequences, that we could become subject to monetary penalties or injunctive relief, or both, in an action brought by the SEC, that we would be unable to enforce contracts with third parties, or that third parties could seek to obtain rescission of transactions with us undertaken during the period it was established that we were an unregistered investment company. 10 We have a limited operating history as a publicly traded company.

As of December 31, 2022, FG and its affiliates own approximately 60.0% of our issued and outstanding common stock. Accordingly, they may exert a substantial influence on actions requiring a stockholder vote, including election of directors, potentially in a manner that you do not support. D.

As of December 31, 2023, FG and its affiliates own approximately 54.6% of our issued and outstanding common stock. Accordingly, they may exert a substantial influence on actions requiring a stockholder vote, including election of directors, potentially in a manner that you do not support. D.

Risks Related to Our Significant Shareholder Fundamental Global GP, LLC (“FG”) and its affiliated entity control a substantial interest in us and thus may exert substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support.

Risks Related to Our Significant Shareholder FG Financial Holdings, LLC (“FG”) and its affiliated entity control a substantial interest in us and thus may exert substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support.

In the event of a major disruption caused by the pandemic, we may lose the services of our employees, experience system interruptions or face challenges accessing the capital or credit markets, which could lead to diminishment of our business operations. Any of the foregoing could harm our business and delay the implementation of our business strategy.

Additionally, as of December 31, 2022, we have invested approximately $6.0 million to acquire equity interests in various sponsors of SPACs (“Sponsor”) and expect to acquire additional interests in sponsors of SPACs in the future. By investing in a Sponsor, we have provided at-risk capital which allows the Sponsor to launch the IPO of the SPAC.

Additionally, as of December 31, 2023, we have acquired equity interests in various sponsors of SPACs (“Sponsor”) and expect to acquire additional interests in sponsors of SPACs in the future. By investing in a Sponsor, we have provided at-risk capital which allows the Sponsor to launch the IPO of the SPAC.

The U.S. economy is being negatively impacted by historically significant inflation, a looming recession and disruptions in supply and the workforce; recent global socioeconomic trends, including the war in Ukraine and U.S. relations with certain foreign powers including China may have a further adverse effect on the U.S. economy and our businesses.

Any of the foregoing could harm our business and delay the implementation of our business strategy. 13 The U.S. economy is being negatively impacted by historically significant inflation, a looming recession and disruptions in supply and the workforce; recent global socioeconomic trends, including the war in Ukraine and U.S. relations with certain foreign powers including China may have a further adverse effect on the U.S. economy and our businesses.

Aldel Financial Inc. completed its business combination in December 2021 and now operates as Hagerty, Inc. (NYSE: HGTY). Our investment consists of approximately 231,000 common shares of HGTY as well as approximately 299,000 warrants to purchase common shares of HGTY at a price of $15.00 per share.

Our investment consists of approximately 860,000 common shares of OPFI as well as approximately 358,000 warrants to purchase common shares of OPFI at a price of $11.50 per share. Aldel Financial Inc. completed its business combination in December 2021 and now operates as Hagerty, Inc. (NYSE: HGTY).

These Sponsor interests do not have redemption rights to receive any portion of our original investment back from the trust account of the SPAC, as is normally associated with an IPO investment directly into a SPAC.

In exchange for this investment, we own interests in the Sponsor that entitle us to receive distributions of shares and warrants in the SPAC. These Sponsor interests do not have redemption rights to receive any portion of our original investment back from the trust account of the SPAC, as is normally associated with an IPO investment directly into a SPAC.

In recent years, the number of SPACs that have been formed has increased substantially. Many potential targets for special purpose acquisition companies have already entered into an initial business combination, and there are still many SPACs preparing for an initial public offering, as well as many such companies currently in registration.

Our Chairman, D. Kyle Cerminara, serves as an executive officer of FG and its affiliated entity, which together, as of December 31, 2022, beneficially owned approximately 60.0% of our outstanding shares of common stock. Additionally, Mr. Cerminara also currently serves as Director of FG Group Holdings, Inc.

Kyle Cerminara, serves as an executive officer of FG and its affiliated entity, which together, as of December 31, 2023, beneficially owned approximately 54.6% of our outstanding shares of common stock. Additionally, Mr. Cerminara also currently serves as Director of FG Group Holdings, Inc. (NYSE American: FGH) (formerly Ballantyne Strong, Inc.). Mr.

These consolidated entities may use their enhanced market power and broader capital base to negotiate price reductions for products and services that compete with ours, and we may experience rate declines and possibly write less business. Any failure by us to effectively compete could adversely affect our financial condition and results of operations.

So long as we qualify as a smaller reporting company, based on our public float, and report less than $100 million in annual revenues in a fiscal year, we are permitted, and we intend, to omit the auditor’s attestation on internal control over financial reporting that would otherwise be required by the Sarbanes-Oxley Act. 10 Until such time that we lose smaller reporting company status, it is unclear if investors will find our stock less attractive because we may rely on certain disclosure exemptions.

Together, this could increase the cost of, delay or otherwise complicate or frustrate the ability of a SPAC to find and consummate an initial business combination, and may result in an inability to consummate an initial business combination on terms favorable to investors altogether. 9 Furthermore, the strength of the market for SPAC IPOs has fluctuated substantially from year to year and has experienced cycles of relative strength and weakness.

Together, this could increase the cost of, delay or otherwise complicate or frustrate the ability of a SPAC to find and consummate an initial business combination and may result in an inability to consummate an initial business combination on terms favorable to investors altogether.

Any delisting of our stock from Nasdaq could: ● adversely affect our ability to attract new investors; ● decrease the liquidity of our outstanding stock; ● reduce our flexibility to raise additional capital; ● reduce the price at which our stocks trade; and ● increase the transaction costs inherent in trading our stock, with overall negative effects for our stockholders. 12 In addition, delisting our stock could deter broker-dealers from making a market in or otherwise seeking or generating interest in our stock and might deter some institutions or others from investing in our securities at all.

If we are unable to implement our business plans successfully, our financial condition and results of operations will be impaired, and your investment in our Company will be at risk.

In addition, the uncertainty surrounding our future operations and business prospects may negatively impact the value and liquidity of our stock. If we are unable to implement our business plans successfully, our financial condition and results of operations will be impaired, and your investment in our Company will be at risk.

The change in value of any of the investments noted above could significantly impact our reported results and shareholders’ equity. 8 Adverse developments in the financial markets could have a material adverse effect on our results of operations, financial position and our businesses, and may also limit our access to capital.

Adverse developments in the financial markets could have a material adverse effect on our results of operations, financial position and our businesses, and may also limit our access to capital.

Baqar, also serves as Director and Chief Financial Officer of FG Acquisition Corp. (TSX: FGAA.U) and Director of FG Merger Corp. (Nasdaq: FGMC). Our executive officers and members of our Company’s Board of Directors have fiduciary duties to our stockholders; likewise, persons who serve in similar capacities at the public companies have fiduciary duties to those companies’ investors.

(TSX: FGAA.U) 12 Our executive officers and members of our Company’s Board of Directors have fiduciary duties to our stockholders; likewise, persons who serve in similar capacities at the public companies have fiduciary duties to those companies’ investors.

If we lose the service of qualified management or other personnel or are unable to attract and retain the necessary members of management or personnel, we may not be able to successfully execute on our business strategy, which could have an adverse effect on our business. 13 Some of our directors and executive officers also serve as directors and/or executive officers for other public companies or for our controlling stockholders or their affiliates, which may lead to conflicting interests.

Continued increases in the supply of insurance and reinsurance may have consequences for us, including fewer contracts written, lower premium rates, increased expenses for customer acquisition and retention, and less favorable policy terms and conditions. 6 Climate change, as well as increasing regulation in the area of climate change, may adversely affect our insurance and reinsurance business, financial condition and results of operations.

Any such claims or investigations may divert management’s attention from our business or be detrimental to our reputation, resulting in adverse effects upon our results of operations, financial condition, and prospects and the value of our securities held by investors. 14 General Risk Factors Unfavorable global economic conditions, including as a result of health and safety concerns, could adversely affect our business, financial condition or results of operations.

(NYSE American: FGH) (formerly Ballantyne Strong, Inc.) and BK Technologies Corporation (NYSE American: BKTI). Mr. Cerminara is also the Chairman of FG Acquisition Corp (TSX:FGAA.U). One of our directors serves as an executive officer and director of Atlas Financial Holdings, Inc. (Nasdaq: AFH) (“Atlas”), a commercial automobile managing general agency. Our chief executive officer and director, Mr.

Cerminara is also the Chairman of FG Acquisition Corp (TSX:FGAA.U). Scott D. Wollney, one of our directors, serves as an executive officer and director of Atlas Financial Holdings, Inc. (Nasdaq: AFH) (“Atlas”), a commercial automobile managing general agency. Our chief executive officer and director, Mr. Swets, serves as director of GreenFirst Forest Products Inc. (TSXV: GFP), FG Group Holdings, Inc.

ITEM 1A. RISK FACTORS Risks Relating to Our Industry, Business and Operations We have had limited operations upon which to predict our future performance, since the sale of our former insurance business. At the end of 2019, we sold our former insurance business, and began to transition to operate as a reinsurance, merchant banking and asset management holding company.

Our revenue has been reduced, as we have limited assets with which to generate revenue. Our failure to secure additional sources of revenue may have a material impact on our results of operations and financial condition. In addition, the uncertainty surrounding our future operations and business prospects may negatively impact the value and liquidity of our stock.

Accordingly, our historical financial statements provide little basis upon which to predict our future performance. Our revenue has been reduced, as we have limited assets with which to generate revenue. Our failure to secure additional sources of revenue may have a material impact on our results of operations and financial condition.

In addition, as a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, and Nasdaq rules, including those promulgated in response to the Sarbanes-Oxley Act.

Failure to do so could jeopardize our status as a public company, and the loss of such status may have a material adverse effect on us and our stockholders. 9 In addition, as a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, and Nasdaq rules, including those promulgated in response to the Sarbanes-Oxley Act.

Changes in the value of the investments we directly own, or indirectly own through our ownership of equity method investees, could materially affect our income and increase the volatility of our earnings. As of December 31, 2023, our consolidated balance sheet includes approximately $30.9 million related to investments held directly by us or indirectly through equity method investees.

Swets, serves as director of GreenFirst Forest Products Inc. (TSXV: FGP), Harbor Custom Development, Inc. (Nasdaq: HCDI), FG Group Holdings, Inc (NYSE American: FGH), FG Merger Corp (Nasdaq: FGMC) and FG Acquisition Corp. (TSX: FGAA.U). He also serves as Chief Executive Officer and Director of FG Acquisition Corp. (TSX: FGAA.U). Our Executive Vice President and Chief Financial Officer, Hassan R.

(NYSE American: FGH), and FG Acquisition Corp. (TSX: FGAA.U). He also serves as the Chief Executive Officer of FG Acquisition Corp. Our Executive Vice President and Chief Financial Officer, Hassan R. Baqar, also serves as Director and Chief Financial Officer of FG Acquisition Corp.

The insurance and reinsurance industries are highly cyclical, and we may at times experience periods characterized by excess underwriting capacity and unfavorable premium rates.

Any failure by us to effectively compete could adversely affect our financial condition and results of operations. 5 The insurance and reinsurance industries are highly cyclical, and we may at times experience periods characterized by excess underwriting capacity and unfavorable premium rates.

Once we lose smaller reporting company status, the costs and demands placed upon our management are expected to increase. The SEC’s rules exempt smaller reporting companies, like us, from various reporting requirements applicable to public companies that are not smaller reporting companies.

The SEC’s rules exempt smaller reporting companies, like us, from various reporting requirements applicable to public companies that are not smaller reporting companies.

FG New America Acquisition Corp. completed its business combination in July 2021 and now operates as OppFi, Inc. (NYSE: OPFI). Our investment consists of approximately 860,000 common shares of OPFI as well as approximately 358,000 warrants to purchase common shares of OPFI at a price of $11.50 per share.

Our investment consists of approximately 299,000 warrants to purchase common shares of HGTY at a price of $15.00 per share. FG Merger Corp completed its business combination in August 2023 and now operates as iCoreConnect, Inc. (NASDAQ: ICCT).

This may have a material adverse effect on our business, financial condition and results of operations and could also lead to a decline in the price of our common stock. 11 While we currently qualify as a smaller reporting company under SEC regulations, we cannot be certain, if we take advantage of the reduced disclosure requirements applicable to these companies, that we will not make our stock less attractive to investors.

While we currently qualify as a smaller reporting company under SEC regulations, we cannot be certain, if we take advantage of the reduced disclosure requirements applicable to these companies, that we will not make our stock less attractive to investors. Once we lose smaller reporting company status, the costs and demands placed upon our management are expected to increase.

The U.S. and larger global economies are experiencing historically high inflation during 2022 and 2023. The Federal Reserve and other Central Banks already have raised interest rates more aggressively and to their highest levels in the last four to five decades. As a result, the prospect for a recession is high and considered by many to be likely.

The U.S. and larger global economies experienced historically high inflation during 2023. As a result, the prospect for a recession is high and considered by many to be likely. Some sources have declared that the U.S. already is in a recession.

Some sources have declared that the U.S. already is in a recession. Consumer prices, including basic costs of food, fuel, utilities, healthcare, mortgage and personal loan rates, and other non-discretionary and discretionary consumer items are up by high single digits.

Consumer prices, including basic costs of food, fuel, utilities, healthcare, mortgage and personal loan rates, and other non-discretionary and discretionary consumer items are up by high single digits. Wages are up, however, increases in wages lag price inflation resulting in a net decline in real personal incomes relative to consumer spending.

U.S. unemployment remains relatively low, however the labor utilization rate and ratio of workers to the total population also remain low. Shortages in the workforce are a significant factor in supply shortages relative to demand and also help fuel inflation.

Shortages in the workforce are a significant factor in supply shortages relative to demand and also help fuel inflation.

As of December 31, 2022, FG Merger Corp. and FG Acquisition Corp. had not yet entered into a definitive business combination agreement. On January 5, 2023, FG Merger Corp. entered into a Merger Agreement and Plan of Reorganization with iCoreConnect Inc.

As of December 31, 2023, FG Acquisition Corp. had not yet completed a business combination agreement.

As of December 31, 2022, our consolidated balance sheet includes approximately $20.1 million related to investments held directly or indirectly in FG New America Acquisition Corp., Aldel Financial Inc., FG Merger Corp., and FG Acquisition Corp., all of which were originally launched as special purpose acquisition companies.

Included in the $30.9 million are investments in FG New America Acquisition Corp, Aldel Financial Inc., FG Merger Corp, and FG Acquisition Corp., all of which were originally launched as special purpose acquisition companies. FG New America Acquisition Corp. completed its business combination in July 2021 and now operates as OppFi, Inc. (NYSE: OPFI).

Wages are up, however, increases in wages lag price inflation resulting in a net decline in real personal incomes relative to consumer spending. Volatility continues to exist in the workforce making it more difficult and costly for employers to recruit, hire and/or retain workers.

Volatility continues to exist in the workforce making it more difficult and costly for employers to recruit, hire and/or retain workers. U.S. unemployment remains relatively low, however the labor utilization rate and ratio of workers to the total population also remain low.

Removed

Since we sold our former insurance business, at the end of 2019, we have transitioned to operate as a reinsurance, merchant banking and asset management holding company, with allocation of capital to merchant banking activities. Accordingly, our historical financial statements provide little basis upon which to predict our future performance.

Added

Climate change, as well as increasing regulation in the area of climate change, may adversely affect our insurance and reinsurance business, financial condition and results of operations.

Removed

We intend to participate in a risk retention group which will provide director’s and officer’s insurance to special purpose acquisition companies and represents a line of insurance for which we do not have previous experience.

Added

Our investment consists of approximately 715,000 preferred shares of ICCT as well as approximately 1,240,000 warrants to purchase preferred shares of ICCT at a price of $11.50 per share, and approximately 190,000 warrants to purchase preferred shares of ICCT at a price of $15.00 per share.

Removed

Risk retention groups (“RRG”) are mutual companies, or companies owned by the members of the group that allow businesses with similar insurance needs to pool their risks and form an insurance company that operates under state regulated guidelines.

Added

In addition to the investments noted above, the Company also holds interests in FG Communities and Craveworthy LLC, both of which are private companies. 7 The change in value of any of the investments noted above, which primarily make up the $30.9 million on our consolidated balance sheet at December 31, 2023, could significantly impact our reported results and shareholders’ equity.

Removed

Risk retention groups are treated differently from traditional insurance companies in that they are exempted from having to obtain a license in every state in which they write insurance and are also exempt from other various state laws that regulate insurance.

Added

Furthermore, the strength of the market for SPAC IPOs has fluctuated substantially from year to year and has experienced cycles of relative strength and weakness. There can be no assurance that the SPAC market will be strong in the future.

Removed

As a result, a RRG may not be adequately capitalized and able to remain solvent if faced with continuing losses. While we intend to mitigate this risk through the purchase of reinsurance, there can be no guarantee that we will be able to purchase adequate reinsurance on favorable terms.

Added

This may have a material adverse effect on our business, financial condition and results of operations and could also lead to a decline in the price of our common stock.

Removed

Due to our inexperience in providing director’s and officer’s insurance, we run the risk of underwriting our coverage at levels that do not provide adequate returns for our shareholders. Furthermore, we run the risk of not generating external interest in our RRG after incurring significant start-up and regulatory costs associated with the formation of the group.

Added

In addition, delisting our stock could deter broker-dealers from making a market in or otherwise seeking or generating interest in our stock and might deter some institutions or others from investing in our securities at all.

Removed

Our investment in FG Merger Corp. consists of approximately 820,000 shares of FG Merger’s common stock, approximately 989,000 warrants with an $11.50 exercise price and 5-year expiration, and approximately 85,000 warrants with a $15.00 exercise price and 10-year expiration.

Added

Some of our directors and officers also serve as directors and/or executive officers for other public companies or for our controlling stockholders or their affiliates, which may lead to conflicting interests. Our Chairman, D.

Removed

In exchange for this investment, we own interests in the Sponsor that entitle us to receive distributions of shares and warrants in the SPAC after the lock-up period following the SPACs IPO has expired or any other applicable conditions.

Removed

There can be no assurance that the SPAC market will be strong in the future. Risks Relating to Sale of our Former Insurance Business We are subject to non-competition and non-solicitation covenants under the Asset Sale agreement, which may limit our operations in certain respects.

Removed

We are subject to the non-competition and non-solicitation covenants in the Asset Sale agreement, until December 2, 2024.

Removed

During this period of time, subject to certain exceptions, we will generally be prohibited from (i) marketing, selling and issuing residential property and casualty insurance policies to residential consumers anywhere in the States of Alabama, Florida, Georgia, Louisiana, South Carolina and Texas (a “Restricted Business”), and owning the equity securities of, managing, operating or controlling any person that engages in a Restricted Business, (ii) hiring or soliciting certain FedNat employees, and (iii) soliciting or accepting business from certain third parties in connection with a Restricted Business.

Removed

The non-competition covenant does not apply to our reinsurance business, and we will be permitted to enter into reinsurance contracts in the States of Alabama, Florida, Georgia, Louisiana, South Carolina and Texas.

Removed

Failure to do so could jeopardize our status as a public company, and the loss of such status may have a material adverse effect on us and our stockholders.

Removed

Until such time that we lose smaller reporting company status, it is unclear if investors will find our stock less attractive because we may rely on certain disclosure exemptions.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Our executive offices are located at 104 S Walnut, Unit 1A, Itasca, IL 60189. Our lease term expires in December 2025. Total minimum rent over the next twelve months is expected to be $21,000. In the opinion of the Company’s management, our executive offices are suitable for our current business and are adequately maintained.

Biggest changeITEM 2. PROPERTIES Our executive offices are located at 104 S Walnut, Unit 1A, Itasca, IL 60143. Our lease term expires in December 2025. Total minimum rent over the next twelve months is expected to be $21,000. In the opinion of the Company’s management, our executive offices are suitable for our current business and are adequately maintained.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeCurrently, it is not possible to predict legal outcomes and their impact on the future development of claims. Any such development will be affected by future court decisions and interpretations. Because of these uncertainties, additional liabilities may arise for amounts in excess of the Company’s current reserves. 15 ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II

Biggest changeCurrently, it is not possible to predict legal outcomes and their impact on the future development of claims. Any such development will be affected by future court decisions and interpretations. Because of these uncertainties, additional liabilities may arise for amounts in excess of the Company’s current reserves. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II

ITEM 3. LEGAL PROCEEDINGS As of December 31, 2022, the Company was not a party to any legal proceedings and was not aware of any material claims or actions pending or threatened against us. From time to time, we are involved in legal proceedings and litigation arising in the ordinary course of business.

ITEM 3. LEGAL PROCEEDINGS As of December 31, 2023, the Company was not a party to any legal proceedings and was not aware of any material claims or actions pending or threatened against us. From time to time, we are involved in legal proceedings and litigation arising in the ordinary course of business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans See Item 12.

Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans See Item 12. 15 ITEM 6. [RESERVED]

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Registrant’s Common Stock Our common stock is traded on the Nasdaq Global Market tier of the Nasdaq Stock Market, LLC under the symbol “FGF.” Our Series A Preferred Stock is also traded on the Nasdaq Global Market tier of the Nasdaq Stock Market under the symbol “FGFPP.” Number of Common Stockholders As of December 31, 2022, we had 9,410,473 shares of common stock outstanding, which were held by 13 stockholders of record, including Cede & Co., which holds shares on behalf of the beneficial owners of the Company’s common stock.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Registrant’s Common Stock Our common stock is traded on the Nasdaq Global Market tier of the Nasdaq Stock Market, LLC under the symbol “FGF.” Our Series A Preferred Stock is also traded on the Nasdaq Global Market tier of the Nasdaq Stock Market under the symbol “FGFPP.” Number of Common Stockholders As of December 31, 2023, we had 10,558,931 shares of common stock outstanding, which were held by 9 stockholders of record, including Cede & Co., which holds shares on behalf of the beneficial owners of the Company’s common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCash Flows The following table summarizes the Company’s consolidated cash flows for the years ended December 31, 2022 and 2021: ($ in thousands) Year ended December 31, Summary of Cash Flows 2022 2021 Cash and cash equivalents – beginning of period $ 15,542 $ 12,132 Net cash used by operating activities (11,022 ) (14,406 ) Net cash (used) provided by investing activities (3,453 ) 5,898 Net cash provided by financing activities 1,943 11,918 Net (decrease) increase in cash and cash equivalents (12,532 ) 3,410 Cash and cash equivalents – end of period $ 3,010 $ 15,542 27 For the year ended December 31, 2022, the Company’s net cash used by operating activities was approximately $11.0 million, the major drivers of which were as follows: ● Our net income of approximately $1.1 million for the year. ● Approximately $13.0 million for a non-cash charge related to the change in unrealized holding loss on our equity investments, and approximately $7.6 for a non-cash charge related to income from equity method investments, offset by $13.9 million in realized loss on sale associated with our shares of FedNat common stock. ● A cash outflow of approximately $5.4 million representing cash placed in trust as collateral, pursuant to our quota-share agreements.

Biggest changeCash provided from these sources has historically been used for making investments, loss and LAE payments, as well as other operating expenses. 24 Cash Flows The following table summarizes the Company’s consolidated cash flows for the years ended December 31, 2023 and 2022: ($ in thousands) Year ended December 31, Summary of Cash Flows 2023 2022 Cash and cash equivalents – beginning of period $ 3,010 $ 15,542 Net cash used by operating activities (4,215 ) (11,022 ) Net cash provided (used) by investing activities 4,107 (3,453 ) Net cash (used) provided by financing activities (506 ) 1,943 Net decrease in cash and cash equivalents (614 ) (12,532 ) Cash and cash equivalents – end of period $ 2,396 $ 3,010 For the year ended December 31, 2023, the Company’s net cash used by operating activities was approximately $4.2 million, primarily driven by net income for the period of $3.8 million, an increase in unearned premiums and loss adjustment expense reserves of $6.7 million and $4.6 million, respectively, and an increase in stock compensation expense of $2.0 million.

Our investees estimate the volatility of these investments based on the historical performance of various broad market indices blended with various peer companies which they consider as having similar characteristics to the underlying investment, as well as consideration of price and volatility of relevant publicly traded securities such as SPAC warrants.

The Company paid $1.8 million and $1.8 million to FGM under the agreement, for the years ended December 31, 2022 and 2021, respectively. FGM is an affiliate of FG, the Company’s largest shareholder. Income Tax Expense (Benefit) Our actual effective tax rate varies from the statutory federal income tax rates as shown in the following table.

The Company paid $1.8 million and $1.8 million to FGM under the agreement, for the years ended December 31, 2023 and 2022, respectively. FGM is an affiliate of FG, the Company’s largest shareholder. Income Tax Expense (Benefit) Our actual effective tax rate varies from the statutory federal income tax rates as shown in the following table.

Analysis of Financial Condition As of December 31, 2022 compared to December 31, 2021 Investments The table below summarizes, by type, the Company’s investments held at fair value as of December 31, 2022 and 2021.

Analysis of Financial Condition As of December 31, 2023 compared to December 31, 2022 Investments The table below summarizes, by type, the Company’s investments held at fair value as of December 31, 2023 and 2022.

Approximately $0.5 million will expire on December 31, 2039, $0.2 million will expire on December 31, 2040, and $1.6 million of the Company’s NOLs will expire on December 31, 2041. The remaining $17.6 million of the Company’s NOLs do not expire under current tax law.

Approximately $0.5 million will expire on December 31, 2039, $0.1 million will expire on December 31, 2040, $1.6 million of the Company’s NOLs will expire on December 31, 2041. The remaining $22.2 million of the Company’s NOLs do not expire under current tax law.

Some of the information contained in this discussion and analysis and set forth elsewhere in this annual report on Form 10-K includes forward-looking statements that involve risks and uncertainties. Unless context denotes otherwise, the terms “Company,” “FGF,” “we,” “us,” and “our,” refer to FG Financial Group, Inc., and its subsidiaries. Overview FG Financial Group, Inc.

Our investees also consider the probability of a successful merger when valuing SPAC equity. Investments without Readily Determinable Fair Value In addition to our equity method investments, other investments, as listed on our balance sheet, consist of equity we have purchased in companies for which there do not exist readily determinable fair values.

Our investees also consider the probability of a successful merger when valuing SPAC equity. Investments without Readily Determinable Fair Value In addition to our equity method investments, other investments, as listed on our consolidated balance sheets, consist of equity we have purchased in companies for which there does not exist a readily determinable fair value.

The Company has recorded a valuation allowance against its deferred tax assets of $5.5 million, as of December 31, 2022, due to the uncertain nature surrounding our ability to realize these tax benefits in the future.

The Company has recorded a valuation allowance against its deferred tax assets of $4.7 million and $5.5 million, as of December 31, 2023 and December 31, 2022, respectively, due to the uncertain nature surrounding our ability to realize these tax benefits in the future.

The Company is the sole managing member of the general partner of FGMP and holds a limited partner interest in FGMP directly and through its subsidiaries. FGMP participates as a co-sponsor of the SPACs launched under our SPAC Platform as well as merchant banking initiatives.

The Company is the sole managing member of the general partner of FGMP and holds a limited partner interest of approximately 46% in FGMP. FGMP participates as a co-sponsor of the SPACs launched under our SPAC Platform as well as merchant banking initiatives.

All actual and estimated premiums earned are the result of property and casualty assumed premium. For the twelve months ended December 31, 2022 and 2021, earned premiums are approximately $13.0 million and $4.9 million, respectively. The increase in reinsurance premiums was due primarily to the additional reinsurance agreements signed during the current year.

All actual and estimated premiums earned are the result of property and casualty assumed premium. For the years ended December 31, 2023 and 2022, earned premiums are approximately $16.6 million and $13.0 million, respectively. The increase in reinsurance premiums was due primarily to the additional reinsurance agreements signed during the current year.

Our investees also consider the probability of a successful merger when valuing SPAC equity. 17 Valuation of Net Deferred Income Taxes The provision for income taxes is calculated based on the expected tax treatment of transactions recorded in the Company’s consolidated financial statements.

Our investees also consider the probability of a successful merger when valuing equity for SPACs that have not yet completed a business combination. Valuation of Net Deferred Income Taxes The provision for income taxes is calculated based on the expected tax treatment of transactions recorded in the Company’s consolidated financial statements.

As discussed under Note 5, Loss and Loss Adjustment Expense Reserves, a portion of this charge represents an estimate based upon a full calendar year forecast of results provided to us by the ceding companies under our FAL arrangements.

As discussed under Note 5, Loss and Loss Adjustment Expense Reserves, a portion of this charge represents an estimate based upon a full calendar year forecast of results provided to the Company by the Company’s cedants under our Funds at Lloyd (“FAL”) arrangements.

Significant components of the Company’s net deferred taxes are as follows: ($ in thousands) As of December 31, 2022 2021 Deferred income tax assets: Net operating loss carryforward $ 4,171 $ 3,010 Loss and loss adjustment expense reserve 39 25 Unearned premium reserves 287 152 Capital loss carryforward 4,313 1,114 Share-based compensation 242 253 Investments 5 1,692 Other 9 3 Deferred income tax assets $ 9,066 $ 6,249 Less: Valuation allowance (5,463 ) (5,715 ) Deferred income tax assets net of valuation allowance $ 3,603 $ 534 Deferred income tax liabilities: Investments $ 3,282 $ 369 Deferred policy acquisition costs 321 165 Deferred income tax liabilities $ 3,603 $ 534 Net deferred income tax asset (liability) $ – $ – As of December 31, 2022, the Company had net operating loss carryforwards (“NOLs”) for federal income tax purposes of approximately $19.9 million, which will be available to offset future taxable income.

Significant components of the Company’s net deferred taxes are as follows: ($ in thousands) As of December 31, 2023 2022 Deferred income tax assets: Net operating loss carryforward $ 5,117 $ 4,171 Loss and loss adjustment expense reserve 70 39 Unearned premium reserves 566 287 Capital loss carryforward 2,377 4,313 Share-based compensation 294 242 Investments 1 5 Other 30 9 Deferred income tax assets $ 8,455 $ 9,066 Less: Valuation allowance (4,654 ) (5,463 ) Deferred income tax assets net of valuation allowance $ 3,801 $ 3,603 Deferred income tax liabilities: Investments $ 3,453 $ 3,282 Deferred policy acquisition costs 348 321 Deferred income tax liabilities $ 3,801 $ 3,603 Net deferred income tax asset (liability) $ – $ – As of December 31, 2023, the Company had net operating loss carryforwards (“NOLs”) for federal income tax purposes of approximately $24.4 million, which will be available to offset future taxable income.

While the Company believes its estimate of loss and LAE reserves are adequate as of December 31, 2022, based on available information, actual losses may ultimately differ materially from the Company’s current estimates.

While the Company believes its estimate of loss and LAE reserves are adequate as of December 31, 2023, based on available information, actual losses may ultimately differ materially from the Company’s current estimates. The Company will continue to monitor the reasonableness of its assumptions as new information is provided by the Company’s cedants.

Of the $5.7 million carrying value of our investment in FGMP at December 31, 2022, the Company may allocate up to approximately $1.0 million to incentivize and compensate individuals and entities for the successful merger of SPAC’s launched under our platform. Equity method investments also include our investment in the Fund as of December 31, 2022.

Of the $8.8 million carrying value of our investment in FGMP at December 31, 2023 the Company may allocate up to approximately $0.4 million to incentivize and compensate individuals and entities for the successful merger of SPACs launched under our platform. 19 Equity method investments previously included our investment in the Fund.

(“FGF”, the “Company”, “we”, or “us”) is a reinsurance, merchant banking and asset management holding company. We focus on opportunistic collateralized and loss-capped reinsurance, while allocating capital in partnership with Fundamental Global ® , and from time to time, other strategic investors, to merchant banking activities. The Company’s principal business operations are conducted through its subsidiaries and affiliates.

Net Deferred Taxes Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes, as compared to the amounts used for income tax purposes. The Company’s gross deferred tax assets and liabilities are $9.1 million and $3.6 million, respectively, as of December 31, 2022.

In June 2022, we sold a total of 2,750,000 shares of our common stock in an underwritten public offering, at a price of $1.58 per share, for net proceeds of approximately $3.8 million.

In June 2023, the Company sold a total of 865,000 shares of common stock in an underwritten public offering, at a price of $1.85 per share, for net proceeds of approximately $1.3 million.

The Company sold its remaining FedNat common stock shares held in October 2022. Critical Accounting Estimates Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

Critical Accounting Estimates Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. Actual results may differ materially from these estimates.

Net Loss Information regarding our net loss and loss per share for the years ended December 31, 2022 and 2021 is as shown in the following table: ($ in thousands) Year Ended December 31, 2022 2021 Basic and diluted: Net income (loss) from continuing operations $ 1,088 $ (7,333 ) Loss attributable to noncontrolling interest - (1,326 ) Dividends declared on Series A Preferred Shares (1,789 ) (1,692 ) Loss attributable to FG Financial Group, Inc. common shareholders (701 ) (10,351 ) Weighted average common shares 8,030,106 5,212,772 Loss per common share from continuing operations $ (0.09 ) $ (1.99 ) Gain on sale of former insurance business $ - $ (145 ) Weighted average common shares outstanding 8,030,106 5,212,772 Income per common share from discontinued operations $ - $ 0.03 Loss per share attributable to common shareholders $ (0.09 ) $ (1.96 ) Liquidity and Capital Resources The purpose of liquidity management is to ensure that there is sufficient cash to meet all financial commitments and obligations as they fall due.

Net Income (Loss) Information regarding our net loss and loss per share for the years ended December 31, 2023 and 2022 is as shown in the following table: ($ in thousands) Year Ended December 31, 2023 2022 Basic and diluted: Net income from continuing operations $ 3,845 $ 1,088 Dividends declared on Series A Preferred Shares (1,786 ) (1,789 ) Income (loss) attributable to common shareholders 2,059 (701 ) Weighted average common shares 9,991,980 8,030,106 Income (loss) per common share from continuing operations $ 0.21 $ (0.09 ) Liquidity and Capital Resources The purpose of liquidity management is to ensure that there is sufficient cash to meet all financial commitments and obligations as they fall due.

Reinsurance Balances Receivable Reinsurance balances receivable were $9.3 million as of December 31, 2022, compared to $3.9 million as of December 31, 2021, representing net amounts due to the Company under our quota-share agreements.

Reinsurance Balances Receivable Reinsurance balances receivable were $21.6 million as of December 31, 2023, compared to $9.3 million as of December 31, 2022, representing net amounts due to the Company under our quota-share agreements. The increase in balance is primarily due to additional reinsurance contracts that the Company entered into during 2023.

For the year ended December 31, 2021, the Company’s net cash used by financing activities consist of was approximately $11.9 million, the major drivers of which were as follows: ● The payments of dividends in the amount of $1.7 million on our Series A Preferred Shares. ● Net proceeds from the issuance of our Series A Preferred Shares in the amount of approximately $4.2 million. ● Net proceeds from the issuance of our common stock in the amount of approximately $5.2 million.

For the year ended December 31, 2023, the Company’s net cash provided by financing activities consist of proceeds of approximately $1.3 million from the issuance of common stock, offset by the payments of dividends in the amount of $1.8 million on our Series A Preferred Shares.

Accordingly, these shares have been classified as authorized, but unissued shares on the Company’s balance sheet, as of December 31, 2021. Change in Shareholders’ Equity The table below presents the primary components of changes to total shareholders’ equity for the years ended December 31, 2022 and 2021: Preferred Shares Outstanding Common Shares Outstanding Treasury Shares Total Shareholders’ Equity.

Change in Shareholders’ Equity The table below presents the primary components of changes to total shareholders’ equity for the years ended December 31, 2023 and 2022: Preferred Shares Outstanding Common Shares Outstanding Total Shareholders’ Equity.

Inherent in Monte-Carlo simulation and option pricing models are assumptions related to expected volatility and discount for lack of marketability of the underlying investment.

As discussed further in Note 4, these investments held by our equity method investees are valued using Monte-Carlo simulation and option pricing models. Inherent in Monte-Carlo simulation and option pricing models are assumptions related to expected volatility and discount for lack of marketability of the underlying investment.

For the twelve months ended December 31, 2022, the Company has contributed $0.1 million into FGMP, and has received distributions in the approximate amount of $2.2 million. The Company has recorded equity method gains from FGMP of approximately $4.0 million for the twelve months ended December 31, 2022.

For the year ended December 31, 2023, the Company contributed $0.1 million into FGMP and has recorded equity method gains of approximately $3.0 million.

In determining its provision for income taxes, the Company interprets tax legislation in a variety of jurisdictions and makes assumptions about the expected timing of the reversal of deferred income tax assets and liabilities and the valuation of net deferred income taxes. 17 The ultimate realization of the deferred income tax asset balance is dependent upon the generation of future taxable income during the periods in which the Company’s temporary differences reverse and become deductible.

The ultimate realization of the deferred income tax asset balance is dependent upon the generation of future taxable income during the periods in which the Company’s temporary differences reverse and become deductible. A valuation allowance is established when it is more likely than not that all or a portion of the deferred income tax asset balance will not be realized.

A valuation allowance is established when it is more likely than not that all or a portion of the deferred income tax asset balance will not be realized.

GAAP does not permit establishing loss reserves, which include case reserves and IBNR loss reserves, until the occurrence of an event which may give rise to a claim.

The final settlement of losses may vary, perhaps materially, from the reserves recorded. All adjustments to the estimates are recorded in the period in which they are determined. U.S. GAAP does not permit establishing loss reserves, which include case reserves and IBNR loss reserves, until the occurrence of an event which may give rise to a claim.

Since reserves are estimates, the final settlement of losses may vary from the reserves established and any adjustments to the estimates, which may be material, are recorded in the period they are determined. 18 Loss estimates may also be based upon actuarial and statistical projections, an assessment of currently available data, predictions of future developments, estimates of future trends and other factors.

Also included in general and administrative expenses are payments to Fundamental Global Management, LLC (“FGM”), pursuant to a shared services agreement entered into on March 31, 2020.

The increase was primarily due to a $1.7 million increase from stock compensation expense, offset by lower salaries and benefits and legal fees. 23 Also included in general and administrative expenses are payments to Fundamental Global Management, LLC (“FGM”), pursuant to a shared services agreement entered into on March 31, 2020.

Balance, January 1, 2021 700,000 4,988,310 1,281,511 $ 34,193 Retirement of Treasury Stock - - (1,281,511 ) - Stock compensation – 67,160 – 559 Series A Preferred Share issuance 194,580 4,217 Dividends declared on Series A Preferred Stock – – – (1,692 ) Issuance of common stock 1,441,735 5,246 Net loss – – – (8,514 ) Balance, December 31, 2021 894,580 6,497,205 – $ 34,009 Balance, January 1, 2022 894,580 6,497,205 – $ 34,009 Stock compensation – 91,498 – 255 Dividends declared on Series A Preferred Stock – – – (1,789 ) Issuance of common stock – 2,821,770 – 3,732 Net income – – – 1,088 Balance, December 31, 2022 894,580 9,410,473 – $ 37,295 Results of Operations Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Net Premiums Earned Net premiums earned represent actual premiums earned on our reinsurance agreements as well as estimated premiums earned on our FAL agreement as disclosed previously.

Balance, January 1, 2022 894,580 6,497,205 $34,009 Stock compensation – 91,498 255 Dividends declared on Series A Preferred Stock – – (1,789 ) Issuance of common stock 2,821,770 3,732 Net income – – 1,088 Balance, December 31, 2022 894,580 9,410,473 $ 37,295 Balance, January 1, 2023 894,580 9,410,473 $ 37,295 Stock compensation – 255,193 1,964 Dividends declared on Series A Preferred Stock – – (1,786 ) Issuance of common stock – 893,265 1,280 Cumulative effect of adoption of accounting guidance for expected credit losses at January 1, 2023 - - (106 ) Net income – – 3,845 Balance, December 31, 2023 894,580 10,558,931 $ 42,492 22 Results of Operations Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Net Premiums Earned Net premiums earned represent actual premiums earned on our reinsurance agreements as well as estimated premiums earned on our FAL agreement as disclosed previously.

Recent Accounting Pronouncements See Item 8, Note 3 – Recently Adopted and Issued Accounting Standards in the Notes to the Consolidated Financial Statements for a discussion of recent accounting pronouncements and their effect, if any, on the Company.

Additionally, most of the contracts that have the potential for large single event losses have provisions that such loss notifications are provided to the Company immediately upon the occurrence of an event. 18 Recent Accounting Pronouncements See Item 8, Note 3 – Recently Adopted and Issued Accounting Standards in the Notes to the Consolidated Financial Statements for a discussion of recent accounting pronouncements and their effect on the Company.

The liquidity requirements of the Company and its subsidiaries have been met primarily by funds generated from operations and from the proceeds from the sales of our common and preferred stock. Cash provided from these sources has historically been used for making investments, loss and LAE payments, as well as other operating expenses.

The liquidity requirements of the Company and its subsidiaries have been met primarily by funds generated from operations and from the proceeds from the sales of our common stock.

Additionally, the Company has approximately $20.5 million of capital loss carryforward that can only be used to offset capital gains, and which will expire in December 2026 if not used prior. 22 Loss and Loss Adjustment Expense Reserves A significant degree of judgment is required to determine amounts recorded in the consolidated financial statements for the provision for loss and loss adjustment expense (“LAE”) reserves.

Additionally, the Company has approximately $11.3 million of capital loss carryforward that can only be used to offset capital gains, and which will expire in December 2026 if not used prior. 21 Loss and Loss Adjustment Expense Reserves Net losses and loss adjustment expenses for the years ended December 31, 2023 and 2022, were $9.7 million and $7.5 million, respectively.

These estimates are periodically reviewed by the Company’s management and adjusted as necessary.

Loss and Loss Adjustment Expense Reserves Loss and loss adjustment expense reserve estimates are based on estimates derived from reports received from ceding companies. These estimates are periodically reviewed by the Company’s management and adjusted as necessary.

Net Losses and Loss Adjustment Expenses Net losses and LAE for the twelve months ended December 31, 2022 and 2021, were $7.5 million and $4.3 million, respectively. The increase in net losses and loss adjustment expenses was due primarily to the additional reinsurance agreements signed during the current year.

The increase in net losses and loss adjustment expenses was due primarily to the additional reinsurance agreements entered into during the current year.

Net Investment Income Net investment income for the years ended December 31, 2022 and 2021 is as follows: (in thousands) Year Ended December 31, 2022 2021 Investment income (loss): Realized loss on FedNat common stock $ (13,797 ) $ (5,452 ) Unrealized holding loss on Hagerty common stock (48 ) - Unrealized holding gain on private placement investments - 5,267 Change in unrealized holding loss on FedNat common stock 13,074 (865 ) Equity method earnings 7,618 3,448 Other (loss) income (70 ) 147 Net investment income $ 6,777 $ 2,545 25 Other Income Other income was approximately $320,000, compared to $186,000, for the years ended December 31, 2022, and 2021, respectively, and is comprised of fees earned under the investment advisory and transition services agreements between the Company and FedNat.

Net Investment Income Net investment income for the years ended December 31, 2023 and 2022 is as follows: (in thousands) Year Ended December 31, 2023 2022 Investment income (loss): Realized gain (loss) on common stock $ 3,062 $ (13,797 ) Change in unrealized holding on common stock 2,684 13,026 Increase in investments without readily determinable fair value 250 - Increase in fair value of convertible note 125 - Equity method earnings 3,130 7,618 Other investment income (loss) 547 (70 ) Net investment income $ 9,798 $ 6,777 Other Income Other income was approximately $413,000, compared to $320,000, for the years ended December 31, 2023, and 2022, respectively, and is comprised of service fee revenue we have earned under our SPAC Platform, whereby we provide certain accounting, regulatory, strategic, advisory, and other administrative services.

On the date of distribution, the common shares had an aggregate fair value of approximately $889,000. FedNat Common Stock The Company sold its remaining FedNat common stock shares held in October 2022.

On the date of the distribution, the securities had an aggregate fair value of approximately $1.9 million. Hagerty Common Stock On December 15, 2022, FGMP distributed 99,999 common shares of Hagerty to the Company. On the date of distribution, the common shares had an aggregate fair value of approximately $889,000.

As of December 31, 2022, and December 31, 2021, the total cash collateral on deposit to support all our reinsurance treaties was approximately $9.3 million and $4.4 million, respectively. 21 In January 2023, the losses ascribed were commuted for the homeowners’ property catastrophe excess of loss reinsurance contract that became effective April 1, 2022.

As of December 31, 2023 and December 31, 2022, the total cash collateral posted to support all of our reinsurance treaties was approximately $8.0 million and $9.3 million, respectively.

Equity Method Investments Other investments on the Company’s Consolidated Balance Sheets consists of equity method investments, which as of December 31, 2022, includes our investment in FGMP and the Fund. On January 4, 2021, FGMP was formed as a Delaware limited partnership to co-sponsor newly formed SPACs with their founders or partners, as well as other merchant banking interests.

Below is a summary of the carrying values on the consolidated balance sheets: (in thousands) Year ended December 31, 2023 2022 FG Merchant Partners, LP $ 8,812 $ 5,772 FGAC Investors LLC 8,835 - FG Merger Investors LLC 4,977 - Greenfirst Forest Products Holdings LLC 908 - FG Special Situations Fund, LP - 16,814 Balance, December 31 $ 23,532 $ 22,586 On January 4, 2021, FGMP was formed as a Delaware limited partnership to co-sponsor newly formed SPACs with their founders or partners, as well as other merchant banking interests.

Other Investments Other investments consist, in part, of equity investments made in privately held companies accounted for under the equity method. As discussed further in Note 4, certain investments held by our equity method investees are valued using Monte-Carlo simulation and option pricing models.

Other Investments Other investments consist, in part, of equity investments made in privately held companies accounted for under the equity method. The carrying values of investments accounted for under the equity method of accounting, and the corresponding gains and losses resulting from equity pickups, are significantly impacted by certain investments held by equity method investees.

For the year ended December 31, 2021, the Company’s net cash used by operating activities was approximately $14.4 million, the major drivers of which were as follows: ● Our net loss of approximately $7.2 million for the year. ● Approximately $7.8 million for a non-cash charge related to the unrealized holding gains on our various investments, offset by $5.5 million in realized loss on sale associated with our shares of FedNat common stock. ● A cash outflow of approximately $2.0 million representing cash placed in trust as collateral, pursuant to our quota-share agreements. ● A cash outflow of approximately $6.5 million for our investment in our SPAC sponsorships through the Fund.

This was offset by $13.9 million in realized loss on sale associated with our shares of FedNat common stock, and a cash outflow of approximately $5.4 million representing cash placed in trust as collateral, pursuant to our quota-share agreements.

The Company will continue to monitor the appropriateness of its assumptions as new information is provided. 23 A summary of changes in outstanding loss and LAE reserves for the twelve months ended December 31, 2022, and 2021, is as follows: (in thousands) Twelve months ended December 31, 2022 2021 Balance, beginning of period $ 2,133 $ – Incurred related to: – – Current year 6,628 4,338 Prior year 856 – Paid related to: Current year (3,822 ) (2,205 ) Prior years (1,386 ) – Balance, December 31 $ 4,409 $ 2,133 Off Balance Sheet Arrangements None.

A summary of changes in outstanding loss and LAE reserves for the year ended December 31, 2023, and 2022, is as follows: (in thousands) Year ended December 31, 2023 2022 Balance, beginning of period $ 4,409 $ 2,133 Incurred related to: Current year 8,487 6,628 Prior year 1,226 856 Paid related to: Current year (3,803 ) (3,822 ) Prior years (1,303 ) (1,386 ) Balance, December 31 $ 9,016 $ 4,409 Shareholders’ Equity Common Stock On November 3, 2022, the Company entered into a Sales Agreement with ThinkEquity LLC, pursuant to which the Company may offer and sell, from time to time through ThinkEquity LLC, shares of the Company’s common stock, subject to the terms and conditions of the Sales Agreement.

The Company’s total investment in companies without a readily determinable fair value was approximately $2.3 million and $0.5 million as of December 31, 2022 and 2021, respectively. For the years ended December 31, 2022, and 2021, the Company has received distributions of $230,000 and $101,000 on these investments, respectively.

For the year ended December 31, 2023, the Company received distributions from investments without readily determinable fair values in the amount of $0.3 million, as compared to $0.2 million for the year ended December 31, 2022.

We have also recorded a benefit of $252,000 and a charge of $1.8 million for the years ended December 31, 2022 and 2021, respectively, as a valuation allowance against all of our net deferred tax assets, due to uncertainty regarding our ability to realize these tax benefits in the future, reducing the net deferred income tax asset to $0, as of December 31, 2022.

($ in thousands) Year Ended December 31, 2023 2022 Amount % Amount % Provision for taxes at U.S. statutory marginal income tax rate of 21% $ 807 21.0 % $ 229 21.0 % Valuation allowance for deferred tax assets deemed unrealizable (832 ) (21.7 )% (252 ) (23.1 )% Other 25 0.7 % 23 2.1 % Income tax expense (benefit) $ - - % $ - - % As of December 31, 2023 and 2022, the Company has gross deferred tax assets of approximately $8.5 million and $9.1 million, respectively; however the Company has recorded a valuation allowance against all of its deferred tax assets due to the uncertain nature surrounding our ability to realize these tax benefits in the future, resulting in a net deferred income tax asset of $0 as of December 31, 2023 and 2022.

This includes the Company’s $2.0 million direct investment in FGC. The Company accounts for these investments at their cost, subject to any adjustment from time to time due to impairment or observable price changes in orderly transactions. Any profit distributions the Company receives on these investments are included in net investment income.

The Company accounts for these investments at their cost, subject to any adjustment from time to time due to impairment or observable price changes in orderly transactions. When the Company observes an orderly transaction of an investee’s identical or similar equity securities, the Company adjusts the carrying value based on the observable price as of the transaction date.

As of December 31, 2022, the carrying value of our investment in the Fund was approximately $16.8 million, compared to $9.7 million as of December 31, 2021. 20 Certain investments held by our equity method investees are valued using Monte-Carlo simulation and option pricing models.

In addition, the Company recorded an equity method loss from Greenfirst Forest Products Holdings LLC of approximately $0.1 million and a gain of $0.1 million from FGAC Investors LLC. Certain investments held by our equity method investees are valued using Monte-Carlo simulation and option pricing models.

Significant assumptions used by the Company’s management and third-party actuarial specialists include loss development factor selections, initial expected loss ratio selections, and weighting of methods used. The final settlement of losses may vary, perhaps materially, from the reserves recorded. All adjustments to the estimates are recorded in the period in which they are determined. U.S.

Loss estimates may also be based upon actuarial and statistical projections, an assessment of currently available data, predictions of future developments, estimates of future trends and other factors. Significant assumptions used by the Company’s management and third-party actuarial specialists include loss development factor selections, initial expected loss ratio selections, and weighting of methods used.

On December 2, 2019, we sold our three former insurance subsidiaries, and embarked upon our current strategy focused on reinsurance, merchant banking and asset management. As of December 31, 2022, Fundamental Global GP, LLC (“FG”), a private partnership focused on long-term strategic holdings, and its affiliated entity collectively beneficially owned approximately 60.0% of our common stock. D.

As of December 31, 2023, FG Financial Holdings, LLC (“FG”), a private partnership focused on long-term strategic holdings, and its affiliated entity collectively beneficially owned approximately 54.6% of our common stock. D. Kyle Cerminara, Chairman of our Board of Directors, serves as Chief Executive Officer, Co-Founder and Partner of FG.

($ in thousands) As of December 31, 2022 Cost Basis Gross Unrealized Gains Gross Unrealized Losses Carrying Amount Hagerty common stock $ 889 $ – $ 48 $ 841 Total investments $ 889 $ – $ 48 $ 841 As of December 31, 2021 Cost Basis Gross Unrealized Gains Gross Unrealized Losses Carrying Amount FedNat common stock $ 14,495 $ – $ 13,074 $ 1,421 Total investments $ 14,495 $ – $ 13,074 $ 1,421 19 Hagerty Common Stock On December 15, 2022, FG Merchant Partners, LP (“FGMP”) distributed 99,999 common shares of Hagerty to the Company, which it now owns directly.

($ in thousands) As of December 31, 2023 Cost Basis Gross Unrealized Gains Gross Unrealized Losses Carrying Amount OppFi common stock and warrants $ 1,916 $ 2,636 $ - $ 4,552 Total investments $ 1,916 $ 2,636 $ - $ 4,552 As of December 31, 2022 Cost Basis Gross Unrealized Gains Gross Unrealized Losses Carrying Amount Hagerty common stock $ 889 $ – $ 48 $ 841 Total investments $ 889 $ – $ 48 $ 841 OppFi Common Stock As a result of FG Special Situations Fund, LP (“The Fund”) unwinding the Company received approximately 860,000 common shares of OppFi common stock and approximately 360,000 $11.50 strike warrants.

For the year ended December 31, 2021, the Company’s net cash provided by investing activities consist primarily of proceeds of approximately $5.9 million from the sale of a portion of our FedNat shares as well as the complete liquidation of our Metrolina investment.

For the year ended December 31, 2023, the Company’s net cash provided by investing activities was $4.1 million, primarily related to the sale of iCoreConnect securities, offset by our investments into convertible notes and equity method investments.

Removed

The Company also provides asset management services. From our inception in October 2012 through December 2019, we operated as an insurance holding company, writing property and casualty insurance throughout the states of Louisiana, Florida, and Texas.

Added

(“FGF”) and FG Group Holdings, Inc. (NYSE American: FGH) (“FGH”), signed a definitive plan of merger to combine the companies in an all-stock transaction. The plan of merger and transaction were unanimously approved by the independent members of the Board of Directors of both FGF and FGH.

Removed

Kyle Cerminara, Chairman of our Board of Directors, serves as Chief Executive Officer, Co-Founder and Partner of FG. Sale of Insurance Business On December 2, 2019, we completed the sale (“Asset Sale”) of our insurance subsidiaries to FedNat Holding Company for a combination of cash and FedNat common stock.

Added

Under the plan of the merger, FGH common stockholders would receive one share of FGF common stock for each share of common stock of FGH held by such stockholder.

Removed

Actual results may differ materially from these estimates. The business and economic uncertainty resulting from the coronavirus (COVID-19) pandemic has made such estimates and assumptions difficult to calculate.

Added

Removed

Deferred Policy Acquisition Costs Policy acquisition costs are costs that vary with, and are directly related to, the successful production of new and renewal reinsurance business, and consist principally of commissions, taxes, and brokerage expenses.

Added

On February 29, 2024, FGF and FGH completed the previously announced merger transaction pursuant to the Plan of Merger, dated as of January 3, 2024 (the “Merger Agreement”), by and among FGF, FGH and FG Group LLC, a Nevada limited liability company and wholly owned subsidiary of FGF (the “Merger Sub”).

Removed

If the sum of a contract’s expected losses and loss expenses and deferred acquisition costs exceeds associated unearned premiums and expected investment income, a premium deficiency is determined to exist. In this event, deferred acquisition costs are written off to the extent necessary to eliminate the premium deficiency.

Added

Removed

If the premium deficiency exceeds deferred acquisition costs, then a liability is accrued for the excess deficiency. There were no premium deficiency adjustments recognized during the periods presented herein. Loss and Loss Adjustment Expense Reserves Loss and loss adjustment expense reserve estimates are based on estimates derived from reports received from ceding companies.

Added

Following the Merger, on February 29, 2024, the Company amended its Amended and Restated Articles of Incorporation to change its name to Fundamental Global Inc. Effective immediately following the closing of the Merger, the Board of Directors of the Company (the “Board”) increased in size from six to seven directors. In connection with the closing of the Merger, E.

Removed

Additionally, most of the contracts that have the potential for large single event losses have provisions that such loss notifications are provided to the Company immediately upon the occurrence of an event. Stock-Based Compensation Expense The Company uses the fair-value method of accounting for stock-based compensation awards granted.

Added

Removed

The Company has determined the fair value of its outstanding stock options on their grant date using the Black-Scholes option pricing model along with multiple Monte Carlo simulations to determine a derived service period as the options vest based upon meeting certain performance conditions.

Added

Removed

The Company determines the fair value of restricted stock units (“RSUs”) on their grant date using the fair value of the Company’s common stock on the date the RSUs were issued (for those RSU which vest solely based upon the passage of time).

Added

Removed

The fair value of these awards is recorded as compensation expense over the requisite service period, which is generally the expected period over which the awards will vest, with a corresponding increase to additional paid-in capital.

Added

Kyle Cerminara as Chief Executive Officer and Mark D. Roberson as Chief Financial Officer of Fundamental Global Inc. 16 Unless stated otherwise, all information included within this Annual Report relates to information that precedes the Merger with FGH. Overview Fundamental Global Inc.

Removed

When the stock options are exercised, or correspondingly, when the RSUs vest, the amount of proceeds together with the amount recorded in additional paid-in capital is recorded in shareholders’ equity.

Added

The Company sold the common shares during the first quarter of 2023 for a realized loss of approximately $16,000. Equity Method Investments Other investments on the Company’s consolidated balance sheets include our equity method investments.

Removed

Deconsolidation of Subsidiary At the time of the Company’s initial investment into FG Special Situations Fund, LP (“Fund”), in September 2020, the Company had determined that its investment represented an investment in a variable interest entity (“VIE”), in which the Company was the primary beneficiary, and, as such, had consolidated the financial results of the Fund through November 30, 2021.

Added

However, during the first quarter of 2023, it was determined that the Fund would begin the process of winding down, and all investment holdings held in the name of the Fund would be transferred and distributed to members within the Fund based on their ownership percentage of each respective holding.

Removed

At each reporting date, the Company evaluates whether it remains the primary beneficiary and continuously reconsiders that conclusion.

Added

Prior to the unwinding, through the Fund, the Company held underlying investments in FGAC Investors LLC, FG Merger Investors LLC, and Greenfirst Forest Products Holdings LLC. The Fund, an investment company, carried each of these investments at fair value.

Removed

On December 1, 2021, the Company’s investment became that of a limited partner, and it no longer had the power to govern the financial and operating policies of the Fund and accordingly derecognized the related assets, liabilities, and noncontrolling interests of the Fund as of that date.

Added

In June 2023, all transfers were completed, resulting in the Company being transferred direct limited partner interests in FGAC Investors LLC, with a carrying value of $8.9 million, FG Merger Investors LLC, with a carrying value of $3.4 million, and Greenfirst Forest Products Holdings, LLC, with a carrying value of $1.4 million.

Removed

The Company did not receive any consideration in the deconsolidation of the Fund, nor did it record any gain, or loss upon deconsolidation.

… 48 more changes not shown on this page.

Top changes in FG Nexus Inc.'s 2023 10-K

Item 1. Business

Item 1A. Risk Factors

Item 2. Properties

Item 3. Legal Proceedings

Item 5. Market for Registrant's Common Equity

Item 7. Management's Discussion & Analysis

Other FGNXP 10-K year-over-year comparisons