OXRE(OXBR) - 2023 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements The company's financial position significantly deteriorated in 2023, marked by decreased assets, halved equity, and increased net losses Consolidated Balance Sheets Total assets and shareholders' equity significantly declined by September 30, 2023, primarily due to reduced 'Other Investments' Consolidated Balance Sheet Summary (in thousands of U.S. Dollars) | Account | At September 30, 2023 (Unaudited) | At December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $11,197 | $16,616 | | Other Investments | $5,039 | $11,423 | | Cash and cash equivalents | $1,801 | $1,207 | | Restricted cash and cash equivalents | $1,848 | $2,721 | | Total Liabilities | $3,249 | $1,627 | | Total Shareholders' Equity | $7,948 | $14,989 | - The primary driver for the decrease in total assets was the significant reduction in the fair value of 'Other Investments', which fell by over $6.3 million[13] - Shareholders' equity decreased by approximately 47%, from $15.0 million to $7.9 million, largely due to the accumulated deficit increasing from ($17.5 million) to ($24.7 million)[13] Consolidated Statements of Operations The company reported a significantly increased net loss for the first nine months of 2023, primarily due to unrealized investment losses Consolidated Statements of Operations Summary (in thousands of U.S. Dollars) | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net premiums earned | $732 | $995 | | Unrealized loss on other investments | ($6,384) | ($986) | | Total Revenue | ($5,144) | ($191) | | Losses and loss adjustment expenses | $0 | $1,073 | | General and administrative expenses | $1,708 | $1,050 | | Total Expenses | $1,788 | $2,233 | | Net Loss | ($7,243) | ($2,467) | | Loss per Share (Basic and Diluted) | ($1.23) | ($0.43) | - The significant increase in net loss for the nine-month period was driven by a $6.38 million unrealized loss on other investments, which turned total revenue negative[16] - The company incurred no losses and loss adjustment expenses in the first nine months of 2023, compared to over $1 million in the same period of 2022, which was related to Hurricane Ian[16][180] Consolidated Statements of Cash Flows Net cash used in operating activities increased, while financing activities provided cash, leading to an overall decrease in cash and equivalents Cash Flow Summary (Nine Months Ended, in thousands of U.S. Dollars) | Cash Flow Activity | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,356) | ($682) | | Net cash used in investing activities | ($105) | ($376) | | Net cash provided by financing activities | $1,182 | $0 | | Net change in cash | ($279) | ($1,058) | | Cash at end of period | $3,649 | $4,360 | - Financing activities in 2023 were driven by $1.28 million in gross proceeds from the issuance of Delta Cat Re tokens, partially offset by a $98,000 redemption of notes payable[18] Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity decreased substantially due to a net loss, increasing the accumulated deficit by September 30, 2023 Shareholders' Equity Movement (in thousands of U.S. Dollars) | Description | Amount | | :--- | :--- | | Balance at December 31, 2022 | $14,989 | | Net loss for the nine months ended Sep 30, 2023 | ($7,243) | | Stock-based compensation | $202 | | Balance at September 30, 2023 | $7,948 | Notes to the Consolidated Financial Statements The notes detail the company's structure, accounting policies, and key financial components, including the significant investment in Jet.AI and tokenized reinsurance - The company operates as a single business segment, providing reinsurance solutions through its subsidiaries and tokenized securities through its new Web3-focused subsidiary, SurancePlus[26] - The company's investment in Jet.AI is classified as 'Other Investments' and measured at fair value (Level 3), resulting in a significant unrealized loss of $6.38 million for the nine months ended September 30, 2023[75][76] - The subsidiary SurancePlus Inc. completed a private placement of DeltaCat Re tokenized reinsurance securities, raising aggregate gross proceeds of $2.45 million, with proceeds used to invest in collateralized reinsurance contracts[94] - The company entered into a reinsurance agreement with TypTap Insurance Company, a related party, which accounted for significant portions of premiums receivable and unearned premiums as of September 30, 2023[135] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the increased net loss to unrealized investment losses in Jet.AI, while highlighting new tokenized reinsurance ventures - The net loss for Q3 2023 was $7.3 million, a substantial increase from a $2.16 million loss in Q3 2022, primarily due to unrealized losses on the company's investment in Jet.AI[176] - The company's business focus includes traditional fully collateralized reinsurance for property catastrophes and a new initiative in tokenized Real World Assets (RWA) through its Web3 subsidiary, SurancePlus Inc[144] - The company's investment in Jet.AI closed its business combination on August 10, 2023, with its fair value change being the main driver of recent financial results[157][194] Performance Ratios to Net Premiums Earned | Ratio | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Loss ratio | 0.0% | 107.8% | | Acquisition cost ratio | 10.9% | 11.1% | | Expense ratio | 244.3% | 116.6% | | Combined ratio | 244.3% | 224.4% | Quantitative and Qualitative Disclosures About Market Risk The company is exempt from providing market risk disclosures as it qualifies as a smaller reporting company - The company is exempt from providing quantitative and qualitative disclosures about market risk because it qualifies as a smaller reporting company[221] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[222] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[223] PART II – OTHER INFORMATION Legal Proceedings The company is not currently involved in any litigation or arbitration but anticipates such proceedings in the ordinary course of business - As of the filing date, the company is not involved in any litigation or arbitration[224] Risk Factors The company highlights the risk of income statement volatility and equity reduction due to its significant fair-valued investment in Jet.AI Inc - The company emphasizes the risk that its significant investment in Jet.AI Inc., which is recorded at fair value, could result in income statement volatility and cause fluctuations in the company's stock price[226] - A decline in the fair value of the Jet.AI investment could significantly reduce both earnings and shareholders' equity[226] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales or repurchases of equity securities during the reporting period - There were no unregistered sales of equity securities or repurchases of equity securities during the reporting period[227][228] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[229] Mine Safety Disclosures This item is not applicable to the company - Not applicable[230] Other Information The company reported no other information for this item - None[231] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL interactive data files - Exhibits filed include certifications from the CEO and CFO as required by the Sarbanes-Oxley Act[232] - The financial statements and notes are also provided in XBRL format[232]