U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from: _________________ to _________________
Commission file number 0-23178
Equisure, Inc.
(Exact name of small business issuer as specified in its charter)
Minnesota 41-1309882
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
527 Marquette Avenue, Suite 1800
Minneapolis, Minnesota 55402
(Address of principal executive offices)
(612) 338-3738
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes _X_ No ____
As of November 19, 1996, there were 5,575,833 shares of the issuer's common
stock, par value $0.001 per share.
Transitional Small Business Disclosure Format (check one):
Yes ___ ; No _X_
EQUISURE, INC. AND SUBSIDIARY
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INDEX
Page
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Required by Form 10-Q 2
Condensed Consolidated Balance Sheets of Equisure, Inc.
and Subsidiary as of September 30, 1996 and December
31, 1995 3
Condensed Consolidated Statements of Operations
of Equisure, Inc. and Subsidiary for the Three and
Nine Months Ended September 30, 1996 and 1995 4
Condensed Consolidated Statement of Stockholders'
Equity for the Nine Months Ended September 30, 1996 5
Condensed Consolidated Statements of Cash Flows
of Equisure, Inc. and Subsidiary for the Nine Months
Ended September 30, 1996 and 1995 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Exhibits and Reports 17
Item 6. Other Information 17
Signatures 18
</TABLE>
PART I
FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS REQUIRED BY FORM 10-Q
Equisure, Inc. (formerly Aloe Vera Naturel, Inc.) (the "Registrant"), files
herewith condensed consolidated balance sheets of the Registrant as of September
30, 1996, and December 31, 1995, and the related condensed consolidated
statements of operations for the three months ended September 30, 1996 and 1995,
and the nine months ended September 30, 1996 and 1995, together with the
condensed consolidated statement of stockholders' equity for the nine months
ended September 30, 1996 and the condensed consolidated statements of cash flows
for the nine months ended September 30, 1996 and 1995. In the opinion of the
management of the Registrant, the condensed consolidated financial statements
reflect all adjustments, all of which are normal recurring adjustments,
necessary to fairly present the financial condition of the Registrant for the
interim periods presented.
The Registrant was incorporated on August 12, 1977, and for several years prior
to May 10, 1996, was not engaged in any business activity. On May 10, 1996, the
Registrant acquired, as a wholly-owned subsidiary, Equihot Herverzekering N.V.
(EH), which operates under the laws of Belgium and whose principal activity is
the assumption of risks arising from reinsurance policies. Effective, May 10,
1996, the stockholders of the Registrant approved amendments to its Articles of
Incorporation changing the corporate name to Equisure, Inc.
On May 10, 1996, the Registrant entered into an exchange agreement with Equihot
Delfstoffen N.V. in which the former stockholder of EH exchanged all 50,000
shares of outstanding common stock of EH for 5,297,041 shares of authorized but
unissued common stock of Equisure.
Immediately prior to entering into the exchange agreement, the Registrant
approved a 20-for-1 reverse stock split, which reduced the number of outstanding
shares of common stock from 5,575,833 shares to 278,792 shares.
Following the exchange, the former stockholder of EH, Equihot Delfstoffen N.V.,
held 95% of the Registrant's common stock outstanding. For accounting purposes,
this exchange/acquisition was treated as a reverse purchase acquisition. As a
result, the condensed consolidated financial statements filed herewith present
the operations of EH prior to May 10, 1996 and include the Registrant's
operations only from the date of acquisition.
The historical condensed consolidated financial statements presented according
to U.S. generally accepted accounting principles, for 1995 were derived from the
audited financial statements of Equihot Herverzekering N.V. as of December 31,
1995. This audit was carried out by Moores Rowland International, Belgium, on
financial statements prepared in accordance with generally accepted European
accounting standards.
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EQUISURE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1996 1995
----------- -----------
(Unaudited) (Unaudited)
ASSETS
<S> <C> <C>
Assets:
Investments, available for sale $30,721,620 $15,790,358
Cash and cash equivalents 24,296,571 32,216,805
Premiums receivable 1,201,774 75,329
Prepaid reinsurance 3,437,500 -
Due from related party 9,389,754 10,751,974
Accrued interest 241,240 80,680
Deferred income taxes - 38,000
----------- -----------
Total assets $69,288,459 $58,953,146
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Underwriting reserves $27,985,235 $16,909,846
Premiums payable 253,976 822,232
Accrued income taxes 671,000 -
Due to related parties 1,144,407 6,618,235
Deferred income taxes 1,098,000 -
Other 733,668 675,352
----------- -----------
Total liabilities 31,886,286 25,025,665
----------- -----------
Stockholders' equity:
Common stock, par value $0.001, authorized 10,000,000 shares, issued and
outstanding 5,575,833 shares at September 30, 1996 and no par value,
authorized, issued and outstanding
50,000 shares at December 31, 1995 5,576 1,594,896
Additional paid-in capital 35,640,660 34,051,340
Retained earnings (deficit) 1,700,162 (1,663,883)
Net unrealized appreciation (depreciation)
on investments, available for sale 55,775 (54,872)
----------- -----------
Total stockholders' equity 37,402,173 33,927,481
----------- -----------
Total liabilities and
stockholders' equity $69,288,459 $58,953,146
=========== ===========
</TABLE>
The December 31, 1995 figures represent the historic position of Equihot
Herverzekering, N.V.
See Notes to Condensed Consolidated Financial Statements.
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<CAPTION>
EQUISURE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- -------
(Unaudited) (Unaudited)
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Revenues:
Reinsurance income assumed $2,216,244 $2,202,207 $4,495,204 $4,292,907
Net investment income 660,942 561,921 3,631,315 783,921
---------- ---------- ---------- ----------
Total revenues 2,877,186 2,764,128 8,126,519 5,076,828
---------- ---------- ---------- ----------
Expenses:
Acquisition costs 221,624 269,771 449,520 525,881
Administrative expenses 751,703 646,628 2,193,425 2,009,278
Foreign currency exchange (gains) losses 85,342 (6,969) 387,529 15,260
Interest - 487,500 - 1,462,500
---------- ---------- ---------- ----------
Total expenses 1,058,669 1,396,930 3,030,474 4,012,919
---------- ---------- ---------- ----------
Income before income taxes 1,818,517 1,367,198 5,096,045 1,063,909
Income taxes (682,000) - (1,732,000) -
---------- ---------- ---------- ---------
Net income $1,136,517 $1,367,198 $3,364,045 $1,063,909
========== ========== ========== ==========
Net income per weighted average
number of common shares outstanding $ .20 $ .26 $ .62 $ .20
========== ========== ========== ==========
Weighted average number of common
shares outstanding 5,575,833 5,297,041 5,443,075 5,297,041
========== ========== ========== ==========
</TABLE>
The 1995 comparative figures represent the historic position of Equihot
Herverzekering, N.V.
See Notes to Condensed Consolidated Financial Statements.
<TABLE>
<CAPTION>
EQUISURE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
Common Stock Additional
------------ Paid-In
Shares Amount Capital
--------- ---------- -----------
<S> <C> <C> <C>
BALANCE, January 1, 1996 50,000 $1,594,896 $34,051,340
Effects of reverse purchase acquisition:
Recapitalization 5,247,041 (1,589,599) 1,589,599
Issuance of additional
common stock to
effect merger 278,792 279 (279)
Change in unrealized
appreciation on
investments, available
for sale - - -
Net income - - -
--------- ---------- -----------
BALANCE, September 30, 1996 5,575,833 $ 5,576 $35,640,660
========= ========== ===========
</TABLE>
(WIDE TABLE CONTINUED FROM ABOVE)
<TABLE>
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Net Unrealized
Appreciation
(Depreciation) Net
On Investments, Retained
Available Earnings
For Sale (Deficit) Total
---------- ----------- -----------
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BALANCE, January 1, 1996 $ (54,872) $(1,663,883) $33,927,481
Effects of reverse purchase acquisition:
Recapitalization - - -
Issuance of additional
common stock to
effect merger - - -
Change in unrealized
appreciation on
investments, available
for sale 110,647 - 110,647
Net income - 3,364,045 3,364,045
---------- ----------- -----------
BALANCE, September 30, 1996 $ 55,775 $ 1,700,162 $37,402,173
========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<TABLE>
<CAPTION>
EQUISURE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
NINE MONTHS ENDED
SEPTEMBER 30,
-------------
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,364,045 $ 1,063,909
Adjustments to reconcile net income to net
cash flows from operating activities:
Gains on sale of investments (2,199,550) -
Foreign currency exchange loss 287,529 15,260
Deferred income taxes 1,061,000 -
Change in:
Premiums receivable (1,126,445) -
Prepaid reinsurance (3,437,500) -
Underwriting reserves 11,075,389 6,690,206
Due from/due to related parties (3,731,650) 2,058,573
Premiums payable (840,295) -
Accrued income taxes 671,000 -
Other (210,163) 590,181
----------- -----------
Net cash flows from operating activities 4,913,360 10,418,129
----------- -----------
Cash flows from investing activities:
Proceeds from sale of investments 8,018,106 -
Purchases of investments (20,564,171) -
----------- -----------
Net cash flows from investing activities (12,546,065) -
----------- -----------
Effect of foreign currency exchange rate
changes on cash (287,529) (15,260)
----------- -----------
Net change in cash and
cash equivalents (7,920,234) 10,402,869
Cash and cash equivalents, beginning of period 32,216,805 19,316,261
----------- -----------
Cash and cash equivalents, end of period $24,296,571 $29,719,130
=========== ===========
</TABLE>
The 1995 comparative figures represent the historic position of Equihot
Herverzekering, N.V.
See Notes to Condensed Consolidated Financial Statements.
EQUISURE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated financial statements have
been prepared by the Company. Certain information and note
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. In the opinion of the Company's management, the
disclosures made are adequate to make the information presented not
misleading, and the condensed consolidated financial statements
contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial position as of September
30, 1996, results of operations for the three months and nine months
ended September 30, 1996 and 1995 and cash flows for the nine months
ended September 30, 1996 and 1995.
The results of operations for the nine months ended September 30,
1996 are not necessarily indicative of the results to be expected for
the full year.
The condensed consolidated financial statements are stated in United
States dollars and are prepared in conformity with accounting
principles generally accepted in the United States of America.
The preparation of condensed consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the condensed consolidated financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Principles of Consolidation
The condensed consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiary, Equihot
Herverzekering N.V. All material intercompany transactions have been
eliminated.
Investments
Investments consist of marketable equity securities and certificates
of gold deposit available for sale. They are carried at fair value
based on quoted market prices. Unrealized appreciation (depreciation)
are excluded from operations and reported as a separate component of
stockholders' equity. Realized gains and losses are determined on the
specific identification method.
Cash and Cash Equivalents
For the purpose of presentation in the Company's condensed
consolidated statements of cash flows, cash equivalents are
short-term, highly liquid investments that are both (1) readily
converted into known amounts of cash and (2) so near to maturity that
they present insignificant risk of changes in value due to changing
interest rates.
Premiums and Determination of Underwriting Results and Reserves
Premium revenues on short-duration reinsurance contracts of between
30 and 90 days duration, are accounted for using the periodic method.
Premiums that commence within the current underwriting year are taken
into revenues as earned. Retrocession and acquisition costs together
with claims incurred are matched against premiums. Calculations are
made to determine the unearned premiums and deferred acquisition
costs as necessary.
Long-duration reinsurance contracts are accounted for using the
open-year method. Premiums, retrocession and acquisition costs
together with claims incurred are allocated to underwriting year
accounts according to the inception of the contracts. The aggregation
of the underwriting year accounts form the basis of the underwriting
reserves on the balance sheet. The underwriting reserves will be
desegregated and reported on the statement of operations as premiums,
claims and expenses only when earned premiums become reasonably
determinable. If at any time an underwriting year or class of
business within an underwriting year shows a deficiency, this loss
will be recognized immediately.
Income Taxes
Income tax provisions are based on the asset and liability method.
Deferred income taxes have been provided for temporary differences
between the tax bases of assets and liabilities and their reported
amounts in the condensed consolidated financial statements. Such
differences relate principally to the unrealized appreciation
(depreciation) on investments, available for sale and the
undistributed earnings of the foreign subsidiary.
Retrocession
Retrocession protection is purchased from other insurers and
reinsurers by the Company in the normal course of business to reduce
the Company's exposure to certain levels of risk. The Company,
however, remains liable under its initial reinsurance contract, but
then collects where appropriate from its own reinsurers. Premiums are
allocated in whole or in part to the applicable underwriting year and
are included in the determination of underwriting reserves.
2. INVESTMENTS, AVAILABLE FOR SALE
Investments available for sale consist of marketable equity securities
which are publicly traded on exchanges in London and the United States
and marketable certificates of gold deposit.
The aggregate fair value, gross unrealized holding gains, gross
unrealized holding losses and cost are as follows:
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September 30, December 31,
1996 1995
----------- -----------
<S> <C> <C>
Marketable equity securities:
Cost $27,167,814 $15,883,230
Gross unrealized holding gains 1,027,288 737,743
Gross unrealized holding losses (902,482) (830,615)
----------- -----------
Fair value 27,292,620 15,790,358
----------- -----------
Marketable certificates of gold deposit:
Cost 3,461,031 -
Unrealized holding losses (32,031) -
----------- -----------
Fair value 3,429,000 -
----------- -----------
Total fair value $30,721,620 $15,790,358
=========== ===========
</TABLE>
3. UNDERWRITING RESERVES
Underwriting reserves consisted of the following:
September 30, December 31,
1996 1995
----------- -----------
Reinsurance premiums written $64,292,956 $45,158,208
Retrocession premiums (30,299,182) (24,456,449)
Acquisition costs (6,008,539) (3,791,913)
----------- -----------
$27,985,235 $16,909,846
=========== ===========
Acquisition costs consist of commissions to the ceding companies and
brokerage and agents commissions.
Movements for the period from January 1, 1996 to September 30, 1996 were
as follows:
Balance, January 1, 1996 $16,909,846
Reinsurance premiums written 19,134,748
Retrocession premiums (5,842,733)
Acquisition costs (2,216,626)
-----------
Balance, September 30, 1996 $27,985,235
===========
4. INCOME TAXES
Prior to May 10, 1996, the Company was subject to corporate income taxes
in Belgium. Subsequent to May 10, 1996, the Company is subject to
corporate income taxes in both Belgium and the Unites States. The
Company's effective tax rate is lower than what would be expected
applying statutory tax rates because of expenses for tax purposes that
are considered equity transactions for financial reporting purposes. For
tax purposes, the Company incurred $699,863 of interest expense to
stockholders under an agreement that was considered additional paid-in
capital for financial reporting purposes. As of May 10, 1996, the
underlying debt agreement was contributed to stockholders' equity as
part of the exchange agreement. No material net operating loss
carryforwards are available due to additional equity transactions being
treated as taxable events under Belgium tax laws.
The provision for income taxes consists of the following:
September 30, December 31,
1996 1995
---------- ----------
Current:
Foreign $ 671,000 $ -
Deferred:
Federal 1,061,000 -
---------- ----------
$1,732,000 $ -
========== ==========
Amounts for deferred income tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---------- ----------
<S> <C> <C>
Deferred income tax assets:
Unrealized depreciation on investments,
available for sale $ - $ 38,000
========== ==========
Deferred income tax liabilities:
Unrealized appreciation on investments,
available for sale $ 37,000 $ -
Undistributed earnings of foreign
subsidiary 1,061,000 -
---------- ----------
$1,098,000 $ -
========== ==========
</TABLE>
5. RELATED PARTY TRANSACTIONS
Transactions or balances with related parties included in the condensed
consolidated financial statements are as follows:
Statements of Operations
All of the reinsurance premiums assumed were related to transactions
with Equihot Verzekering N.V., while all the acquisition costs were
due to transactions with Equihot Delfstoffen N.V.
Balance Sheets
All amounts due from and due to related parties represent
non-interest bearing obligations, receivable from or payable to
either Equihot Delfstoffen N.V. or one of its wholly-owned
subsidiaries, and are due within one year.
6. FAIR VALUES OF FINANCIAL INSTRUMENTS
Cash and cash equivalents are carried at their face amount.
Investments, available for sale are carried at fair value as determined
based on quoted market prices.
7. RETAINED EARNINGS RESTRICTIONS
Belgian company law requires 5% of annual net income to be transferred
to a legal reserve which is not normally distributable to stockholders.
These transfers must be made until the legal reserve has attained 10% of
the value of the paid in common stock.
Paid in common stock for the Company under Belgian company law is
$1,594,896. At September 30, 1996 and December 31, 1995, the Company's
legal reserve under Belgian company law was $159,490 and $6,
respectively.
8. CONTINGENCIES
Underwriting reserves are provisions for the future losses based on
individual underwriting years. To the extent that an underwriting year
becomes fully developed and earned premiums can be ascertained, credit
can be taken to the statement of operations comprising the loss
provision no longer required.
Belgian fiscal authorities have examined the records for the year ended
December 31, 1994, the first year of activity as a reinsurer. By their
letter on May 13, 1996, they contest the basis on which the Company has
determined its underwriting reserves. Directors believe that the
authorities have misunderstood the nature of the time frame of the risks
provided against. A formal rejection of authorities' assertions is
currently being drawn up.
In the unlikely event of the total underwriting reserve for 1994 of
$8,488,697 being deemed to be profit by the tax authorities, a tax
charge of some $4,200,000 would arise. However, if the authorities
accept the Directors' assertions, taxation will in any event become due
for 1999 if the underwriting reserve of 1994 suffers no losses. Based on
current tax rates, the amount payable at that time would be $3,600,000.
Similar considerations may apply to the 1995 and 1996 underwriting
years.
Any change in the revenues recognition policy for tax purposes would
result in gross temporary timing differences, the proposed adjustments
would be substantially offset by deferred income taxes and would not be
material to the condensed consolidated financial statements taken as a
whole.
9. SUBSEQUENT EVENT
On November 15, 1996, the Company announced a forward stock split of two
for one effective for stockholders of record November 22, 1996 and will
be distributed on November 29, 1996.
PART I
FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following information should be read in conjunction with the unaudited
condensed consolidated financial statements included herein, see Item 1.
Overview
Equisure, Inc. has a wholly-owned subsidiary, Equihot Herverzekering N.V., a
Belgian reinsurer, incorporated in Belgium and operating principally from
Antwerp, the main commercial Flemish city of Belgium. The word
"Herverzekering" is Dutch- Flemish for reinsurance.
Equihot Herverzekering N.V. has been underwriting reinsurance since January
1, 1994, and specializes in financial risk and political risk reinsurance, as
well as underwriting a general reinsurance account.
The majority of the financial and political risk reinsurance is ultimately
derived from the former parent trading activities. In overall reinsurance
premiums written terms Equihot Herverzekering N.V. considers the financial
and political risk sector to ceiling at approximately $30,000,000, by choice.
In the general reinsurance sector, the intended ceiling is also approximately
$30,000,000, again by choice, giving a combined $60,000,000 net premiums
written ceiling per year. In balance sheet terms, Equihot Herverzekering N.V.
is then limiting its annual underwriting premiums written to less than twice
stockholders' equity. This deliberate under use of capacity allows for
selective growth on a conservative basis, producing a steady increase in
profitability. Reinsurance premiums written in the nine months totalled
$23,629,952, of which $4,495,204 related to short-term expired policies and
therefore is credited to income, and $19,134,748 relates to longer term
policies and therefore is credited to underwriting reserves.
Related party transactions with the former parent, Equihot Delfstoffen N.V.
are commission payments on business introduced. This agreement is in keeping
with market levels of 10%, and will continue up until December 31, 2005.
Equihot Verzekering N.V., an insurance company, fronts for part of Equihot
Herverzekering N.V.'s business. Equihot Verzekering N.V. is owned 100% by
Equihot Delfstoffen N.V. Since a reinsurer does not insure directly, it must
enter into fronting arrangements with insurance companies. Fronting
arrangements are defined as reinsurance arrangements in which the ceding
insurance company issues a policy and reinsures all or substantially all of
the insurance risk with the reinsurer. This service is provided for a fee of
2.5% on net ceded reinsurance premiums written from Equihot Verzekering N.V.,
and this level will be maintained until December 31, 1996. Thereafter, a fee
of 5% will be levied on all business fronted by Equihot Verzekering N.V., up
to December 31, 2005. This fronting fee is normal commercial practice, and 5%
is considered by management to be competitive with market rates.
On July 23, 1996, the management of Equisure, Inc. and a group of independent
investors purchased 4,047,338 shares in Equisure, Inc. from Equihot
Delfstoffen N.V. The total number of shares held by Equihot Delfstoffen N.V.
had been 5,297,041. There are now 1,249,703 shares held by Equihot
Delfstoffen N.V.
During the third quarter of 1996 the Company entered into the final stages of
the negotiation of a significant reinsurance contract within the United
States. The major part of the contract will be effective during 1997. The
contract, if agreed by both parties, will still require approval by U.S.
insurance regulatory authorities.
The Company has continued to increase its operational profitability with
increases in reinsurance premiums assumed. It is envisaged that this trend
will continue.
The Directors are encouraged by the results of the Company since the
acquisition on May 10, 1996. The decision regarding the distribution of a
dividend has been deferred until the financial year end, December 31, 1996.
Liquidity and Capital Resources
The Company remains in a strong liquid position, despite a cash flow decrease
of $7,920,234 for the nine months ended September 30, 1996. This was as a
result of positive cash flows from operating activities of $4,913,360,
proceeds from the sale of investments of $8,018,106 which totals $12,931,466,
reduced by the purchase of investments totalling $20,564,171.
Results of Operations
Three Months Ended September 30, 1996, Compared to Three Months Ended
September 30, 1995
Reinsurance income assumed on the completion of short-duration reinsurance
contracts for the three months ended September 30, 1996, of $2,216,244
showed a 0.6% increase on the comparative quarters figure of $2,202,207
and is reflective of the continued steady growth of business in this
sector.
Net investment income showed an increase from $561,921 for the three
months ended September 30, 1995, to $660,942 for the three months ended
September 30, 1996. The largest factor in respect of the increase in net
investment income was the result of realized gains on the sale of selected
quoted investments held for sale. This produced income of $81,438 for the
three months ended September 30, 1996. No such comparative sales were made
in the third quarter of 1995. The remainder of the increase was due to
increases in dividend and interest income resulting from higher total cash
and investment balances in 1996, compared to 1995.
Acquisition costs in respect of the underwriting of reinsurance contracts
were down by 17.8% for the three months ended September 30, 1996 at
$221,624 compared with $269,771 for the 1995 comparative quarter. This is
due directly to the fact that the Company now deals directly with its main
front carrier, Equihot Verzekering N.V., rather than through a broker.
Administrative expenses for the current quarter are up 16.2% at $751,703,
compared with $646,628 for the three months ended September 30, 1995. This
increase is attributable to increases in marketing and research
expenditures, together with regulatory costs.
Foreign currency exchange gains and losses occur due to the fluctuations
in the rate of exchange between the U.S. dollar and other major
currencies, where transactions occur and where balances are held in those
currencies.
Interest payments of $487,500 for the three months ended September 30,
1995, represent the interest due on a note held by the previous parent,
Equihot Delfstoffen N.V. No similar payment is shown for the three months
ended September 30, 1996, as this has been eliminated during the
consolidation of Equisure, Inc. with its subsidiary. The note was assigned
to Equisure, Inc. by Equihot Delfstoffen N.V. on May 10, 1996 as part of
the reverse purchase acquisition.
No income taxes are due in respect of the results for the three months
ended September 30, 1995, as this quarter represents the results of
Equihot Herverzekering N.V. prior to the reverse purchase acquisition and
no income taxes were payable in Belgium.
Nine Months Ended September 30, 1996, Compared to Nine Months Ended
September 30, 1995
Reinsurance premiums assumed on the completion of short-duration
reinsurance contracts for the nine months ended September 30, 1996, of
$4,495,204 showed a 4.7% increase on the comparative nine month's figure
of $4,292,907 and is reflective of the continued steady growth of business
in this sector.
Net investment income showed a dramatic increase from $783,921 for the
nine months ended June 30, 1995, to $3,631,315 for the nine months ended
September 30, 1996. The largest factor in respect of the increase in net
investment income was the result of realized gains on the sale of selected
quoted investments held for sale. This produced income of $2,199,550 for
the nine months ended September 30, 1996. No such comparative sales were
made in the first nine months of 1995. The remainder of the increase was
due to increases in dividend and interest income resulting from higher
total cash and investment balances in 1996, compared to 1995.
Acquisition costs in respect of the underwriting of reinsurance contracts
were down by 14.5% for the nine months ended September 30, 1996 at
$449,520 compared with $525,881 for the 1995 comparative nine months. This
is due directly to the fact that the Company now deals directly with its
main front carrier, Equihot Verzekering N.V., rather than through a
broker.
Administrative expenses for the nine months ended September 30, 1996 are
up 9.2% at $2,193,425, compared with $2,009,278 for the nine months ended
September 30, 1995. This increase is attributable to increases in
marketing and research expenditures, together with regulatory costs.
Foreign currency exchange gains and losses occur due to the fluctuations
in the rate of exchange between the U.S. dollar and other major
currencies, where transactions occur and where balances are held in those
currencies.
Interest payments of $1,462,500 for the nine months ended September 30,
1995, represent the interest due on a note held by the previous parent,
Equihot Delfstoffen N.V. No similar payment is shown for the nine months
ended September 30, 1996, as this has been eliminated during the
consolidation of Equisure, Inc. with its subsidiary. The note was assigned
to Equisure, Inc. by Equihot Delfstoffen N.V. on May 10, 1996 as part of
the reverse purchase acquisition.
No income taxes are due in respect of the results for the nine months
ended September 30, 1995, as this nine months represents the results of
Equihot Herverzekering N.V. prior to the reverse purchase acquisition and
no income taxes were payable in Belgium.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Reference is made to a Form 14-A, filed on August 29, 1996.
Reference is made to a Form 14-A, filed on October 15, 1996.
ITEM 5. EXHIBITS AND REPORTS
Reference is made to a Form 8-K filed on November 21, 1996.
Reference is made to a Form 8-A filed on November 21, 1996.
ITEM 6. OTHER INFORMATION
On November 15, 1996, the Company announced a forward stock split of two
for one effective for stockholders of record November 22, 1996 and will be
distributed on November 29, 1996.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned thereunto duly authorized.
Date:
/S/ D.J. Sachman
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