US Alliance Corporation

Consolidated Statements of Comprehensive Loss

See Notes to Consolidated Financial Statements (unaudited).

US Alliance Corporation

Consolidated Statements of Changes in Shareholders' Equity

Nine Months Ended September 30, 2017 and 2016 (unaudited)

See Notes to Consolidated Financial Statements (unaudited).

US Alliance Corporation
Consolidated Statements of Cash Flows
(unaudited)

See Notes to Consolidated Financial Statements (unaudited).

US Alliance Corporation
Supplemental Cash Flow Information
(unaudited)

US Alliance Corporation

Notes to Consolidated Financial Statements (unaudited)

Note 1.Description of Business and Significant Accounting Policies

Description of business: US Alliance Corporation ("USAlliance" or “the Company”USAC") iswas formed as a Kansas corporation located in Topeka, Kansas. The Company was incorporated on April 24, 2009 as a holding companyto raise capital to form own, operate and manage a new Kansas-based life insurance companycompany. Our offices are located at 1303 SW First American Place, Suite 200, Topeka, Kansas 66604. Our telephone number is 785-228-0200 and its marketing and investment affiliates. On June 9, 2011, the wholly owned subsidiary,our website address is www.usalliancecorporation.com.

USAC has five wholly-owned operating subsidiaries. US Alliance Life and Security Company (“USALSC”("USALSC") was incorporated. USALSC received its Certificate of Authority from the Kansas Insurance Department (KID) effective January 2, 2012. On incorporated June 9, 2011, to serve as our life insurance company. US Alliance Marketing Corporation ("USAMC") was incorporated April 23, 2012,to serve as a marketing resource. US Alliance Investment Corporation (“USAIC”("USAIC") was incorporated April 23, 2012 to serve as investment manager for USAC and US Alliance Marketing Corporationits subsidiaries. Dakota Capital Life Insurance Company (“USAMC”DCLIC”) were incorporated as wholly-owned subsidiaries of the Company to provide investment management and marketing services. On , was acquired on August 1, 2017 the Company, through its wholly owned subsidiary,when USAC merged with Northern Plains Capital Corporation (“Northern Plains”NPCC”) with the Company being the ultimate surviving entity. As a result of this merger, the Company acquired Dakota Capital Life Insurance Company (“DCLIC”) which became a wholly owned subsidiary of. US Alliance Life and Security Company.Company - Montana ("USALSC-Montana"), was acquired December 14, 2018. Both DCLIC and USALSC-Montana are wholly-owned subsidiaries of USALSC. Unless the context otherwise indicates, references in this registration statement to "we", "us", "our", or the "Company" refer collectively to USAC and its subsidiaries.

The Company terminatedits initial public offering on February 24, 2013. During the balance of 2013, the Company achieved approval of an array of life insurance and annuity products, began development of various distribution channels and commenced insurance operations and product sales. The Company sold its first insurance product on May 1, 2013. The Company continued to expand its product offerings and distribution channels throughout 2014 and 2015. On February 24, 2015, the Company commenced a warrant exercise offering set to expire on February 24, 2016. On February 24, 2016, the Company extended its currentthe offering until February 24, 2017 and made additional shares available for purchase. All outstanding warrants associated with this offering expired on April 1, 2016. The Company further extended this offering to February 24, 2018.2023. During the fourth quarter of 2017, the Company began a private placement offering to accredited investors in the state of North Dakota.

USALSC received a Certificate of Authority from the Kansas Insurance Department ("KID") effective January 2, 2012, and sold its first insurance product on May 1, 2013. DCLIC received a Certificate of Authority from the North Dakota Insurance Department ("NDID") effective January 24, 2012.

USALSC and DCLIC seek opportunities to develop and market additional products.

The Company began offering third party administrative (“TPA”) services in 2015. TPA agreements generate service fee income forCompany’s business model also anticipates the Company. The Company currently has one TPA agreement in place. The Company has been ableacquisition by USAC and/or USALSC of other insurance and insurance related companies, including third-party administrators, marketing organizations, and rights to perform its TPA services using existing resources.other blocks of insurance business through reinsurance or other transactions.

Basis of presentation: The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q10-Q and Article 10 of Regulation S-X.S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation of the results for the interim periods have been included.

The results of operation for the three and nine months ended September 30, 20172022 are not necessarily indicative of the results to be expected for the year ended December 31, 2017 2022 or for any other interim period or for any other future year. Certain financial information which is normally included in notes to financial statements prepared in accordance with US GAAP, but which are not required for interim reporting purposes, has been condensed or omitted. The accompanying financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company’sUSAC’s report on Form 10-K10-K and amendments thereto for the year ended December 31, 2016.2021.

Principles of consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated from the consolidated financial statements.

Reclassifications: Certain reclassifications of a minor nature have been made to prior-period balances to conform to current-period presentation with no net impact to net loss/income or equity.

Area of Operation: USALSCOperation: US Alliance Life and Security Company is authorized to operate in the states of Kansas, North Dakota, Missouri, Nebraska, Oklahoma, Wyoming, South Dakota, Montana, Utah, and Nebraska.Kentucky. DCLIC is authorized to operate in the states of North Dakota and South Dakota. USALSC-Montana is authorized to operate in the state of North Dakota.Montana.

Reclassifications: Certain reclassifications of a minor nature have been made to prior-year balances to conform to current-year presentation with no net impact to net loss/income or equity.

US Alliance Corporation

Notes to Consolidated Financial Statements (unaudited)

Common stock and earningsincome (loss) per share: The par value for common stock is $0.10 per share with 20,000,000 shares authorized. As of September 30, 2017, 2022, and December 31, 2016, the company2021, USAC had 7,296,3517,746,922 and 5,565,9437,745,404 common shares issued and outstanding, respectively.

Earnings (loss)Loss per share attributable to the Company’sUSAC’s common stockholders were computed based on the net loss and the weighted average number of shares outstanding during each year. The weighted average number of shares outstanding during the quartersnine months ended September 30, 2017 2022 and 20162021 were 6,181,4927,746,187 and 5,552,2277,742,894 shares, respectively. The weighted average number of shares outstanding during the ninethree months ended September 30, 2017 2022 and 20162021 were 5,698,5147,746,922 and 5,395,4567,745,404 shares, respectively.  Potential common shares are excluded from the computation when their effect is anti-dilutive. BasicThere was no difference between basic and diluted net loss per common share is the same for the quartersnine and ninethree months ended September 30, 2017 2022 and 2016 because all warrants for common shares are anti-dilutive.2021.

New accounting standards

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (“FASB”) issued updated guidance to clarify the principles for recognizing revenue. While insurance contracts are not within the scope of this updated guidance, the Company's fee income related to providing services will be subject to this updated guidance. The updated guidance requires an entity to recognize revenue as performance obligations are met, in order to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration the entity is entitled to receive for those goods or services.:

The following steps are applied in the updated guidance: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when, or as, the entity satisfies a performance obligation.

In July 2015, the FASB deferred the effective date of the updated guidance on revenue recognitionby one year to the quarter ending March 31, 2018.  The adoption of this guidance is not expected to have a material effect on the Company’s result of operations, financial position or liquidity.

Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern

In August 2014, the FASB issued guidance to address the diversity in practice in determining when there is substantial doubt about an entity's ability to continue as a going concern and when an entity must disclose certain relevant conditions and events. The new guidance requires an entity to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). The new guidance allows the entity to consider the mitigating effects of management's plans that will alleviate the substantial doubt and requires certain disclosures when substantial doubt is alleviated as a result of consideration of management's plans.

If conditions or events raise substantial doubt that is not alleviated, an entity should disclose that there is substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued), along with the principal conditions or events that raise substantial doubt, management's evaluation of the significance of those conditions or events in relation to the entity's ability to meet its obligations and management's plans that are intended to mitigate those conditions.

The guidance is effective for annual periods ending after December 15, 2016, and interim and annual periods thereafter. The adoption of this guidance did not have a material effect on the Company's results of operations, financial position or liquidity.

US Alliance Corporation

Notes to Consolidated Financial Statements (unaudited)

Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the FASB issued updated guidance regarding financial instruments. This guidance intends to enhance reporting for financial instruments and addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The significant amendments in this update generally require equity investments to be measured at fair value with changes in fair value recognized in net income, require the use of an exit price notion when measuring the fair value of financial instruments for disclosure purposes and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities. This guidance also intends to enhance the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments.

This guidance is effective for fiscal years beginning after December 15, 2017. The recognition and measurement provisions of this guidance will be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption and early adoption is not permitted. The Company is evaluating this guidance but expects the primary impact will be the recognition of unrealized gains and losses on available-for-sale equity securities in net income. Currently, all unrealized gains and losses on available-for-sale equity securities are recognized in other comprehensive income (loss).

The effect of the adoption of this guidance on the Company’s results of operations, financial position and liquidity is primarily dependent on the fair value of the available-for-sale equity securities in future periods and the existence of a deferred tax asset related to available-for-sale securities in future periods that have not yet been fully assessed.

Leases

In February2016, the FASB issued updated guidance to require lessees to recognize a right-to-use asset and a lease liability for leases with terms of more than 12 months.  The updated guidance retains the two classifications of a lease as either an operating or finance lease (previously referred to as a capital lease).  Both lease classifications require the lessee to record the right-to-use asset and the lease liability based upon the present value of cash flows.  Finance leases will reflect the financial arrangement by recognizing interest expense on the lease liability separately from the amortization expense of the right-to-use asset.  Operating leases will recognize lease expense (with no separate recognition of interest expense) on a straight-line basis over the term of the lease.   The accounting by lessors is not significantly changed by the updated guidance.  The updated guidance requires expanded qualitative and quantitative disclosures, including additional information about the amounts recorded in the financial statements.

The updated guidance is effective for reporting periods beginning after December 15, 2018, and will require that the earliest comparative period presented include the measurement and recognition of existing leases with an adjustment to equity as if the updated guidance had always been applied.  Early adoption is permitted.  The adoption of this guidance is did not expected to have a material effect on the Company’s results of operations, financial position or liquidity.liquidity as the Company does not have any significant leases as a lessee.

Contingent Put and Call Options in Debt InstrumentsIncome Taxes - Simplifying the Accounting for Income Taxes

In March 2016, December 2019, the FASB issued updated guidance clarifying that when a call (put) option in a debt instrument can accelerate(Accounting Standards Update 2019-12) for the repayment of principal on the debt instrument, a reporting entity does not need to assess whether the contingent event that triggers the ability to exercise the call (put) option is related to interest rates or credit risk in determining whether the option should be accountedaccounting for separately.income taxes. The updated guidance is intended to simplify the accounting for income taxes by removing several exceptions contained in existing guidance and amending other existing guidance to simplify several other income tax accounting matters. The updated guidance was effective for reporting periods beginningthe quarters ending and after December 15, 2016.  Early adoption is permitted.  March 31, 2021. The adoption of this guidance did not have a material effect on the Company’s results of operations, financial position or liquidity.

US Alliance Corporation

Notes to Consolidated Financial Statements (unaudited)

Measurement of Credit Losses on Financial Instruments

In June2016, the FASB issued updated guidance for the accounting for credit losses for financial instruments.  The updated guidance applies a new credit loss model (current expected credit losses or CECL) for determining credit-related impairments for financial instruments measured at amortized cost (e.g. reinsurance recoverables) and requires an entity to estimate the credit losses expected over the life of an exposure or pool of exposures. The estimate of expected credit losses should consider historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. The expected credit losses, and subsequent adjustments to such losses, will be recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the consolidated balance sheet at the amount expected to be collected.

US Alliance Corporation

Notes to Consolidated Financial Statements (unaudited)

The updated guidance also amends the current other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value.  In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists.

The updated guidance iswas effective for reporting periods beginning after December15,2019.  Early adoption iswas permitted for reporting periods beginning after December 15,2018.  As an emerging growth company, the Company has elected to defer implementation of this standard to fiscal years beginning after December 15, 2018.  2022. The Company will not be able to determine the impact that the updated guidance will have on its results of operations, financial position or liquidity until the updated guidance is adopted.

Classification of Certain CTargeted Improvements to the Accounting for Long-Duration Contractsash Receipts and Cash Payment

In August 2016, August 2018, the FASB issued new guidance that clarifiesASU 2018-12 “Targeted Improvements to the classificationAccounting for Long-Duration Contracts.” ASU 2018-12 requires periodic reassessment of certain cash receiptsactuarial and cash paymentsdiscount rate assumptions used in the statementvaluation of cash flows under eight different scenarios including, but not limited to: (i) debt prepayment or debt extinguishment costs; (ii) proceedspolicyholder liabilities and deferred acquisition costs arising from the settlementissuance of corporate-owned lifelong-duration insurance policies including bank-owned life insurance policies; (iii) distributions received from equity method investees; and (iv) separately identifiable cash flows and applicationreinsurance contracts, with the effects of the predominance principle. Thischanges in cash flow assumptions reflected in earnings and the effects of changes in discount rate assumptions reflected in other comprehensive income. Under current accounting guidance, the actuarial and discount rate assumptions are set at the contract inception date and not subsequently changed, except in limited circumstances. ASU 2018-12 also requires new disclosures and is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early2023, with early adoption is permitted. The Company is currentlyWe are evaluating the impact ofeffect this guidancestandard will have on its statement of cash flows.our Consolidated Financial Statements.

All other new accounting standards and updates of existing standards issued through the date of this filing were considered by management and did not relate to accounting policies and procedures pertinent or material to the Company at this time.

Note 2.     Acquisitions

On August 1, 2017 the Company acquired Northern Plains pursuant to a Plan and Agreement of Merger dated May 23, 2017 (the "Merger Agreement") under which Alliance Merger Sub, Inc. (“Acquisition”), a wholly owned subsidiary of the Company, merged with and into Northern Plains (“Merger”) with Acquisition being the surviving company. Pursuant to the Merger Agreement, the Company exchanged .5841 shares of the Company’s common stock for each share of Northern Plains common stock, or approximately 1,644,458 shares, as consideration for the Merger. Subsequent to the Merger, Acquisition was merged into the Company and the Company contributed its interest in DCLIC to USALSC.

US Alliance Corporation

Notes to Consolidated Financial Statements (unaudited)

Note 2.Investments

Fixed Maturity

The amortized cost and fair value of available for sale investments as of September 30, 2022 and December 31,2021 is as follows:

The amortized cost and fair value of debt securities as of September 30, 2022 and December 31, 2021, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

US Alliance Corporation

Notes to Consolidated Financial Statements (unaudited)

The Merger was accounted for under

Proceeds from the acquisition methodsale of accounting, which requiressecurities, maturities, and asset paydowns in the consideration transferred nine months ended September 30, 2022 and all assets2021 were $5,109,627 and liabilities assumed to be recorded at fair value. The table on the following page summarizes the preliminary fair value of the consideration transferred$3,371,416, respectively. Realized gains and the preliminary fair value of Northern Plains’ assets acquired and liabilities assumed:

The fair value of the US Alliance  common stock issued as consideration and the assets acquired and liabilities assumed from our Merger with  Northern Plains was based on a preliminary valuation and our estimates and assumptions are subject to change within the measurement period. The primary areas that are not yet finalized arelosses related to the fair valuesale of US Alliance common stock issuedsecurities are summarized as follows:

Proceeds from the sale of securities, maturities, and asset paydowns in the fair value of value of business acquired ("VOBA"). Measurement period adjustments will be appliedthree months ended September 30, 2022 and 2021 were $939,113 and $460,583, respectively. Realized gains and losses related to the period that the adjustment is identified in our consolidated financial statements.sale of securities are summarized as follows:

VOBA is being amortized on a straight-line basis over 30 years which approximates the earnings pattern of the related policies.

Gross unrealized losses by duration are summarized as follows:

The following table presents unaudited pro forma consolidated total income and net loss as if the Merger had occurred as of January 1, 2016 (the earliest date presented).