Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
1. ORGANIZATION AND BASIS OF PRESENTATION
Oxbridge
Re Holdings Limited (the “Company”) was incorporated as an exempted company on April 4, 2013 under the laws of the
Cayman Islands. The Company owns 100%
of the equity interest in Oxbridge Reinsurance Limited, an exempted entity incorporated on April 23, 2013 under the laws of the
Cayman Islands and for which a Class “C” Insurer’s license was granted on April 29, 2013 under the provisions of
the Cayman Islands Insurance Law. The Company also owns 100%
of the equity interest in Oxbridge Re NS, an entity incorporated as an exempted company on December 22, 2017 under the laws of the
Cayman Islands to function as a reinsurance sidecar facility and to increase the underwriting capacity of Oxbridge Reinsurance
Limited. The Company also owns 100% of the equity interest in SurancePlus, an entity incorporated as a business company on December
19, 2022 under the laws of the British Virgin Islands to issue digital securities. The Company, through its subsidiaries (collectively
“Oxbridge Re”) provides collateralized reinsurance in the property catastrophe market and invests in various
insurance-linked securities. The Company operates as a single business segment through its wholly-owned subsidiaries. The
Company’s headquarters and principal executive offices are located at Suite 201, 42 Edward Street, George Town, Grand Cayman,
Cayman Islands, and have their registered offices at P.O. Box 309, Ugland House, Grand Cayman, Cayman Islands.
The
Company’s ordinary shares and warrants are listed on The NASDAQ Capital Market under the symbols “OXBR” and “OXBRW,”
respectively.
| (b) | Basis
of Presentation and Consolidation |
The
accompanying unaudited, consolidated financial statements of the Company have been prepared in accordance with accounting principles
generally accepted in the United States of America (“GAAP”) for interim financial information, and the Securities and Exchange
Commission (“SEC”) rules for interim financial reporting. Certain information and footnote
disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to
such rules and regulations. However, in the opinion of management, the accompanying interim consolidated financial statements
reflect all normal recurring adjustments necessary to present fairly the Company’s consolidated financial position as of March
31, 2023 and the consolidated results of operations and cash flows for the periods presented. The consolidated results of operations
for interim periods are not necessarily indicative of the results of operations to be expected for
any subsequent interim period or for the fiscal year ended December 31, 2023. The accompanying unaudited consolidated financial
statements and notes thereto should be read in conjunction with the audited consolidated financial
statements for the year ended December 31, 2022 included in the Company’s Form 10-K, which was filed with the SEC on March 30,
2023.
Use
of Estimates: In preparing the interim unaudited consolidated financial statements, management was required to make certain estimates
and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the financial
reporting date and throughout the periods being reported upon. Certain of the estimates result from judgments that can be subjective
and complex and consequently actual results may differ from these estimates, which would be reflected in future periods.
Material
estimates that are particularly susceptible to significant change in the near-term relate to the fair value of the Company’s investment
in Oxbridge Acquisition Corp., and the determination of the reserve for losses and loss adjustment expenses (if any), which may include
amounts estimated for claims incurred but not yet reported. The Company uses various assumptions and actuarial data it believes to be
reasonable under the circumstances to make these estimates. In addition, accounting policies specific to valuation of investments involve
significant judgments and estimates material to the Company’s consolidated financial statements. Although considerable variability
is likely to be inherent in these estimates, management believes that the amounts provided are reasonable. These estimates are continually
reviewed and adjusted if necessary. Such adjustments are reflected in current operations.
The
Company consolidates in these consolidated financial statements the results of operations and financial position of all voting interest
entities (“VOE”) in which the Company has a controlling financial interest and all variable interest entities (“VIE”)
in which the Company is considered to be the primary beneficiary. The consolidation assessment, including the determination as to whether
an entity qualifies as a VIE or VOE, depends on the facts and circumstances surrounding each entity.
All
significant intercompany balances and transactions have been eliminated.
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
2. SIGNIFICANT ACCOUNTING POLICIES
Cash
and cash equivalents: Cash and cash equivalents are comprised of cash and short- term investments with original maturities of
three months or less.
Restricted
cash and cash equivalents: Restricted cash and cash equivalents represent funds held in accordance
with the Company’s trust agreements with ceding insurers and trustees, which requires the Company to maintain collateral with a
market value greater than or equal to the limit of liability, less unpaid premium.
Investments: The
Company from time to time invests in fixed-maturity debt securities and equity securities, and for which its fixed-maturity debt
securities are classified as available-for-sale. The Company’s available for sale debt investments are carried at fair value
with changes in fair value included as a separate component of accumulated other comprehensive income (loss) in shareholders’
equity. For the Company’s investment in equity securities, and for the Company’s investment in the special purpose
acquisition company Oxbridge Acquisition Corp. classified as “other investments”, the changes in fair value are recorded
within the consolidated statements of operations. At March 31, 2023 and December 31, 2022 the Company did not own any fixed maturity debt securities.
Unrealized
gains or losses are determined by comparing the fair market value of the securities with their cost or amortized cost. Realized gains
and losses on investments are recorded on the trade date and are included in the consolidated statements of operations. The cost of securities
sold is based on the specified identification method. Investment income is recognized as earned and discounts or premiums arising from
the purchase of debt securities are recognized in investment income using the interest method over the remaining term of the security.
Fair
value measurement: GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level 1 measurements)
and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under GAAP are as
follows:
| Level
1 |
Inputs
that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access
at the measurement date; |
| |
|
| Level
2 |
Inputs
other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets
that are not considered to be active; and |
| |
|
| Level
3 |
Inputs
that are unobservable. |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair
value measurement (cont’d)
Inputs
are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make
valuation decisions, including assumptions about risk. For fixed maturity debt securities, inputs may include price information,
volatility statistics, specific and broad credit data, liquidity statistics, broker quotes for similar securities and other factors.
The fair value of investments in stocks and exchange-traded funds is based on the last traded price. A financial instrument’s
level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
However, the determination of what constitutes “observable” requires significant judgment by the Company’s
investment custodians and management. The investment custodians consider observable data to be market data which is readily
available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are
actively involved in the relevant markets.
Deferred
policy acquisition costs (“DAC”): Policy acquisition costs consist of brokerage fees, federal excise taxes and other
costs related directly to the successful acquisition of new or renewal insurance contracts and are deferred and amortized over the terms
of the reinsurance agreements to which they relate. The Company evaluates the recoverability of DAC by determining if the sum of future
earned premiums and anticipated investment income is greater than the expected future claims and expenses. If a loss is probable on the
unexpired portion of policies in force, a premium deficiency loss is recognized.
Offering
Expenses: At March 31, 2023, there were $252,000 of offering expenses on the consolidated balance sheet as prepaid
offering costs of which $133,000 was in relation to an equity distribution agreement with Maxim Group LLC (“Maxim”) for
the sale of the ordinary shares, and $119,000 was in relation to the offering of Delta Cat Re digital securities issuable by the Company’s
new subsidiary, SurancePlus Inc. (See Note 6).
In
accordance with the terms of the equity distribution agreement with Maxim, we intend to
offer and sell ordinary shares having an aggregate offering price of up to $6.3 million
from time to time, and in accordance with prospectus of SurancePlus Inc., the Company intends to offer and sell its Delta Cat Re
digital securities having an aggregate price of up to $5
million. Reclassification of prepaid offering costs to additional paid-in capital will occur upon successful drawdown(s) under the
respective offerings.
Reserves
for losses and loss adjustment expenses: The Company determines its reserves for losses and loss adjustment expenses, if any,
on the basis of the claims reported by the Company’s ceding insurers and for losses incurred but not reported (“IBNR”),
management uses the assistance of an independent actuary. The reserves for losses and loss adjustment expenses represent management’s
best estimate of the ultimate settlement costs of all losses and loss adjustment expenses. Management believes that the amounts are adequate;
however, the inherent impossibility of predicting future events with precision, results in uncertainty as to the amount which will ultimately
be required for the settlement of losses and loss expenses, and the differences could be material. Adjustments are reflected in the consolidated
statements of operations in the period in which they are determined.
Loss
experience refund payable: Certain contracts may include retrospective provisions that adjust premiums or result in profit commissions
in the event losses are minimal or zero. In accordance with GAAP, the Company will recognize a liability in the period in which the absence
of loss experience obligates the Company to pay cash or other consideration under the contracts. On the contrary, the Company will derecognize
such liability in the period in which a loss experience arises. Such adjustments to the liability, which accrue throughout the contract
terms, will reduce the liability should a catastrophic loss event covered by the Company occur.
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Premiums
assumed: The Company records premiums assumed, net of loss experience refunds, as earned pro-rata over the terms of the reinsurance
agreements, or period of risk, where applicable, and the unearned portion at the consolidated balance sheet date is recorded as unearned
premiums reserve. A reserve is made for estimated premium deficiencies to the extent that estimated losses and loss adjustment expenses
exceed related unearned premiums. Investment income is not considered in determining whether or not a deficiency exists.
Subsequent
adjustments of premiums assumed, based on reports of actual premium by the ceding companies, or revisions in estimates of ultimate premium,
are recorded in the period in which they are determined. Such adjustments are generally determined after the associated risk periods
have expired, in which case the premium adjustments are fully earned when assumed.
Certain
contracts allow for reinstatement premiums in the event of a full limit loss prior to the expiration of the contract. A reinstatement
premium is not due until there is a full limit loss event and therefore, in accordance with GAAP, the Company records a reinstatement
premium as written only in the event that the reinsured incurs a full limit loss on the contract and the contract allows for a reinstatement
of coverage upon payment of an additional premium. For catastrophe contracts which contractually require the payment of a reinstatement
premium equal to or greater than the original premium upon the occurrence of a full limit loss, the reinstatement premiums are earned
over the original contract period. Reinstatement premiums that are contractually calculated on a pro-rata basis of the original premiums
are earned over the remaining coverage period.
Unearned
Premiums Ceded: The Company may reduce the risk of future losses on business assumed by reinsuring certain risks and exposures
with other reinsurers (retrocessionaires). The Company remains liable to the extent that any retrocessionaire fails to meet its obligations
and to the extent that the Company does not hold sufficient security for their unpaid obligations.
Ceded
premiums are written during the period in which the risk incept and are expensed over the contract period in proportion to the period
of protection. Unearned premiums ceded consist of the unexpired portion of the reinsurance obtained. There were no unearned premiums
ceded at March 31, 2023.
Uncertain
income tax positions: The authoritative GAAP guidance on accounting for, and disclosure of, uncertainty in income tax positions
requires the Company to determine whether an income tax position of the Company is more likely than not to be sustained upon examination
by the relevant tax authority, including resolution of any related appeals or litigation processes, based on the technical merits of
the position. For income tax positions meeting the more likely than not threshold, the tax amount recognized in the consolidated financial
statements, if any, is reduced by the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate
settlement with the relevant taxing authority. The application of this authoritative guidance has had no effect on the Company’s
consolidated financial statements because the Company had no uncertain tax positions at March 31, 2023.
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Earnings
(Loss) Per Share: Basic earnings (loss) per share has been computed on the basis of the
weighted-average number of ordinary shares outstanding during the periods presented. Diluted earnings (loss) per share is computed based
on the weighted-average number of ordinary shares outstanding and reflects the assumed exercise or conversion of diluted securities,
such as stock options and warrants, computed using the treasury stock method.
Stock-Based
Compensation: The Company accounts for stock-based compensation under the fair value recognition provisions of GAAP which requires
the measurement and recognition of compensation for all stock-based awards made to employees and directors, including stock options and
restricted stock issuances based on estimated fair values. The Company measures compensation for restricted stock based on the price
of the Company’s ordinary shares at the grant date. Determining the fair value of stock options at the grant date requires significant
estimation and judgment. The Company uses an option-pricing model (Black-Scholes option pricing model) to assist in the calculation of
fair value for stock options. When estimating the expected volatility, the Company takes into consideration the historical volatility
of entities similar to itself. The Company considers factors such as an entity’s industry, stage of life cycle, size and financial
leverage when selecting similar entities. The Company may use a sample peer group of companies in the reinsurance industry and/or the
Company’s own historical volatility in determining the expected volatility.
Additionally,
the Company uses the guidance in the SEC’s Staff Accounting Bulletin No. 107 to determine the estimated life of options issued
and has assumed no forfeitures during the life of the options.
The
Company uses the straight-line attribution method for all grants that include only a service condition. Compensation expense related
to all awards is included in general and administrative expenses.
Accounting Updates:
Accounting
Standards Update No. 2016-13. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic
326): Measurements of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 amends the guidance on reporting
credits losses and affects loans, debt securities, trade receivables, reinsurance recoverable and other financial assets that have the
contractual right to receive cash. The Company has evaluated the impact of the requirements of ASU 2016-13 on the Company’s consolidated
financial statements, and there was not a material impact.
Segment
Information: Under GAAP, operating segments are based on the internal information that management uses for allocating resources
and assessing performance as the source of the Company’s reportable segments. The Company manages its business on the basis of
one operating segment, Property and Casualty Reinsurance, in accordance with the qualitative and quantitative criteria established under
GAAP.
Reclassifications:
Any reclassifications of prior period amounts have been made to conform to the current period presentation.
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
3. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS
SUMMARY
OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS
| | |
| | |
| |
| | |
At March 31, | | |
At December 31, | |
| | |
2023 | | |
2022 | |
| | |
(in thousands) | |
| | |
| | |
| |
| Cash on deposit | |
$ | 729 | | |
$ | 1,207 | |
| Restricted cash held in trust | |
| 2,891 | | |
| 2,721 | |
| Total | |
$ | 3,620 | | |
$ | 3,928 | |
Cash
and cash equivalents are held by large and reputable counterparties in the United States of America and in the Cayman Islands. Restricted
cash held in trust is custodied with Truist Bank and is held in accordance with the Company’s trust agreements with the ceding
insurers and trustees, which require that the Company provide collateral having a market value greater than or equal to the limit of
liability, less unpaid premium.
4. INVESTMENTS
The
Company from time to time invests in fixed-maturity debt securities and equity securities, with its fixed-maturity debt securities
classified as available-for-sale. At March 31, 2023 and December 31, 2022, the Company did not hold any available-for-sale
securities.
Proceeds
received, and the gross realized gains and losses from sale of equity securities, for the periods ended March 31, 2023 and 2022, are
as follows:
SCHEDULE
OF GROSS REALIZED GAINS AND LOSSES FROM SALE OF EQUITY SECURITIES
| | |
Gross proceeds from sales | | |
Gross
Realized Gains | | |
Gross
Realized Losses | |
| | |
($ in thousands) | |
| | |
| | |
| | |
| |
| Three Months Ended March 31, 2023 | |
| | | |
| | | |
| | |
| Equity securities | |
$ | - | | |
$ | - | | |
$ | - | |
| | |
| | | |
| | | |
| | |
| Three Months Ended March 31, 2022 | |
| | | |
| | | |
| | |
| Equity securities | |
$ | 208 | | |
$ | 7 | | |
$ | - | |
Other
Investments
In
connection with Oxbridge Acquisition Corp. (“OXAC”) initial public offering (“IPO”) in August 2021, the Company’s
affiliate OAC Sponsor Ltd. (“Sponsor”) purchased an aggregate 4,897,500 private placement warrants from OXAC (“Private
Placement Warrants”) at a price of $1.00 per warrant. Each Private Placement Warrant is exercisable for one of OXAC’s Class
A ordinary share at a price of $ 11.50 per share, and as such meets the definition of a derivative as outlined within ASC 815, Derivatives
and Hedging. The Sponsor also purchased an aggregate of 2,875,000 of OXAC’s Class B ordinary shares (the “Class B shares”)
par value $0.0001 per share for $25,000. The Class B shares and Private Placement Warrants were issued to and are held by Sponsor. The
Class B shares of OXAC held by Sponsor will automatically
convert into shares of OXAC’s Class A ordinary shares on a one-for- one basis at the time of OXAC’s initial business combination
and are subject to certain transfer restrictions.
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
4. INVESTMENTS (continued)
On
August 11, 2021, the Company acquired an aggregate of 1,500,000 ordinary shares and 3,094,999 preferred shares of Sponsor for an aggregate
purchase price of $2,000,000. In connection with the organization of Sponsor, the Company placed approximately 34.7% of the risk capital
and owns approximately 49.6% and 63.1% of the ordinary shares and preferred shares, respectively, of the Sponsor (the “Sponsor
Equity Interest”). The preferred shares of Sponsor are nonvoting shares and generally entitle the holders thereof to receive the
net proceeds, if any, received by Sponsor from the sale, exchange, or disposition of the Private Placement Warrants or the shares issuable
upon the exercise thereof, and the ordinary shares of Sponsor (which are voting shares in Sponsor) are equivalent to the value of the
Class B Shares of OXAC held by Sponsor.
The
registration statement for OXAC’s IPO was declared effective on August 11, 2021 and on August 16, 2021, OXAC consummated the IPO
with the sale of 11,500,000 units (the “Units”) at $10.00 per Unit, generating gross proceeds of $115,000,000. The Units
trade on the NASDAQ Capital Market under the ticker symbol “OXACU”. After the securities comprising the units began separate
trading on October 1, 2021, the Class A ordinary shares and public warrants were listed on NASDAQ under the symbols “OXAC”
and “OXACW,” respectively.
On
November 9, 2022, the OXAC held an extraordinary general meeting (the “EGM”) of shareholders. At the EGM, the OXAC’s
shareholders were presented the proposals to extend the date by which OXAC must consummate a business combination from November 16, 2022
to August 16, 2023 (or such earlier date as determined by OXAC’s Board) by amending OXAC’s Amended and Restated Memorandum
and Articles of Association (the “Extension Amendment Proposal”). The Extension Amendment Proposal to amend OXAC’s
Amended and Restated Memorandum and Articles of Association (“Charter Amendment”) was approved.
In
connection with the Extension Amendment Proposal, the Sponsor has agreed to contribute to OXAC a loan of $ (the “Extension
Loan” or “Promissory Note”), to be deposited into OXAC Trust Account to extend the Termination Date from November 16,
2022 to August 16, 2023. On November 14, 2022, the Company subscribed for additional ordinary shares in the Sponsor for an amount of
$, representing the Company’s pro-rata portion of the Extension Loan. As such, the Company’s Sponsor Equity Interest
remained at approximately % and % of the ordinary shares and preferred shares, respectively, of the Sponsor.
The
Company’s beneficial interests in OXAC’s Class B shares, the Private Placement Warrants and Extension Loan are recorded
at fair value and are classified in “Other Investments” on the consolidated balance sheets. The
fair value calculation of the Company’s beneficial interest in OXAC’s Class B shares and Private Placement Warrants is
dependent on company-specific adjustments applied to the observable trading prices of OXAC Class A ordinary shares and public
warrants. The fair value calculation of the Company’s beneficial interest in the Extension Loan is dependent on
company-specific adjustments applied to the pro-rata original principal amount of the Extension Loan. The Company’s management
estimates that a specific discount of 25.11% sufficiently captures the risk or profit that a market participant would require as
compensation for i) the lack of marketability of the Company’s beneficial interests in the OXAC and ii) assuming the inherent
risk of forfeiture and default if a business combination doesn’t occur within OXAC’s stipulated time frame. The Company
has selected a discount of 25.11% based on recent fair value measurements by an independent valuation expert, and due to the
unobservable nature of this company-specific adjustment, the Company classifies the Other Investment as Level 3 in the fair value
hierarchy. Subsequent changes in fair value will be recorded in the consolidated statement of operations during the period of the
change.
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
4. INVESTMENTS (continued)
As
a result of the re-measurement of our investment in OXAC, we recognized for the three months ended March 31, 2023 and 2022, an
unrealized gain (loss) on other investments of $381,000
and $(230,000), respectively, within our consolidated statements of operations.
Other
investments consist of the following (in thousands):
SCHEDULE
OF OTHER INVESTMENT
| | |
March
31, 2023 | |
| | |
| |
| Oxbridge Acquisition Corp. Promissory Note | |
$ | 214 | |
| Oxbridge Acquisition Corp. Class B Ordinary Shares | |
| 11,590 | |
| Total | |
$ | 11,804 | |
| | |
December 31, 2022 | |
| | |
| |
| Oxbridge Acquisition Corp. Promissory Note | |
$ | 214 | |
| Oxbridge Acquisition Corp. Class B Ordinary Shares | |
| 11,209 | |
| Total | |
$ | 11,423 | |
| |
| Three Months
Ended
March 31, 2023
|
|
|
Three
Months
ended
March
31, 2022 | |
| |
| |
|
|
|
| |
| Beginning of period |
| $ |
11,423 |
|
|
$ | 11,173 | |
| Unrealized gain (loss) on investment in affiliate |
| |
381 |
|
|
| (230 | ) |
| End of period |
| $ |
11,804 |
|
|
$ | 10,943 | |
If
OXAC does not complete a business combination by August 16, 2023, the proceeds from the sale of the Private Placement Warrants (after
OXAC IPO transaction costs) will be used to fund the redemption of the shares sold in the OXAC IPO (subject to the requirements of applicable
law), and the Private Placement Warrants will expire without value. The Sponsor holds approximately 20% of the total ordinary shares
(Class A and Class B) in OXAC along with the 4,897,500 Private Placement Warrants, and the Promissory Note of $575,000. OXAC is managed
by the Company’s executive officers.
Assets
Measured at Estimated Fair Value on a Recurring Basis
The
following table presents information about the Company’s financial assets measured at estimated fair value on a recurring basis
that is reflected in the consolidated balance sheets at carrying value. The table indicates the fair value hierarchy of the valuation
techniques utilized by the Company to determine such fair value as of March 31, 2023 and December 31, 2022:
SCHEDULE
OF FAIR VALUE OF ASSETS MEASURED ON RECURRING BASIS
| | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | | |
Total | |
| | |
Fair Value Measurements Using | | |
| |
| | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | | |
Total | |
| | |
($ in thousands) | |
| As of March 31, 2023 | |
| | | |
| | | |
| | | |
| | |
| Financial Assets: | |
| | | |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 729 | | |
$ | - | | |
$ | - | | |
$ | 729 | |
| | |
| | | |
| | | |
| | | |
| | |
| Restricted cash and cash equivalents | |
$ | 2,891 | | |
$ | - | | |
$ | - | | |
$ | 2,891 | |
| | |
| | | |
| | | |
| | | |
| | |
| Other investments | |
$ | - | | |
$ | - | | |
$ | 11,804 | | |
$ | 11,804 | |
| | |
| | | |
| | | |
| | | |
| | |
| Equity securities | |
$ | 718 | | |
$ | - | | |
$ | - | | |
$ | 718 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total | |
$ | 4,338 | | |
$ | - | | |
$ | 11,804 | | |
$ | 16,142 | |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
4.
INVESTMENTS (continued)
Assets Measured
at Estimated Fair Value on a Recurring Basis (continued)
| | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | | |
Total | |
| | |
Fair Value Measurements Using | | |
| |
| | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | | |
Total | |
| | |
($ in thousands) | |
| As of December 31, 2022 | |
| | | |
| | | |
| | | |
| | |
| Financial Assets: | |
| | | |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 1,207 | | |
$ | - | | |
$ | - | | |
$ | 1,207 | |
| | |
| | | |
| | | |
| | | |
| | |
| Restricted cash and cash equivalents | |
$ | 2,721 | | |
$ | - | | |
$ | - | | |
$ | 2,721 | |
| | |
| | | |
| | | |
| | | |
| | |
| Other investments | |
$ | - | | |
$ | - | | |
$ | 11,423 | | |
$ | 11,423 | |
| | |
| | | |
| | | |
| | | |
| | |
| Equity securities | |
$ | 642 | | |
$ | - | | |
$ | - | | |
$ | 642 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total | |
$ | 4,570 | | |
$ | - | | |
$ | 11,423 | | |
$ | 15,993 | |
At
December 31, 2022, the Company utilized the services of an independent valuation expert (“Valuation Expert”) to
determine the fair value of the Company’s indirect investment in OXAC. The Valuation Expert observed that the Class A shares
of OXAC trades in a relatively liquid market at the measurement date, and the Company’s share of OXAC’s Class B shares
were convertible to OXAC’s Class A Shares on a 1
to 1 basis. The Valuation Expert applied this ratio to the value of OXAC’s Class A shares and then applied an
additional 25.11%
discount to account for the lack of marketability and the inherent risk of forfeiture should a business combination not occur. At
March 31, 2023, management determined the discount rate of 25.11% was reasonable due to no significant variations in the lack of
marketability of the securities at December 31, 2022 through to present. Additionally, management concludes that with
respect to OXAC, there is reduced inherent risk of forfeiture and reduced default probability due to OXAC’s additional
extension through to August 16, 2023 as well as the proposed business combination as disclosed in Note 17.
Historically,
the Black-Scholes option pricing model to determine the fair value of the Company’s beneficial interest in OXAC’s
private placement warrants with a strike price of $11.50.
The Valuation Expert observed volatility at 2.97%,
term of 0.67 years,
expected dividend yield of 0%
and the risk-free rate of 4.85%. At March 31, 2023 and December 31, 2022, the fair value of the Private Placement Warrants were determined to be $0.
Management
has estimated the fair value of the Company’s beneficial interest in the Promissory Note to be equivalent to the discount rate
of 25.11%, as determined above, applied to the pro-rata original principal amount of the Promissory Note.
There
were no transfers between Levels 1, 2 or 3 during the three months ended March 31, 2023 or 2022.
The
following table provides a reconciliation of changes in fair value of the beginning and ending balances for the other investments classified
as Level 3:
SCHEDULE
OF RECONCILIATION OF CHANGES IN FAIR VALUE
| | |
Other | |
| | |
Investments | |
| | |
(in thousands) | |
| Fair value of Level 3 other investment at January 1, 2023 | |
$ | 11,423 | |
| Change in valuation inputs or other assumptions | |
| 381 | |
| Fair value of Level 3 other investment at March 31, 2023 | |
$ | 11,804 | |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
5. TAXATION
Under
current Cayman Islands law, no corporate entity, including the Company and the subsidiaries, is obligated to pay taxes in the Cayman
Islands on either income or capital gains. The Company and Oxbridge Reinsurance Limited have an undertaking from the Governor-in-Cabinet
of the Cayman Islands, pursuant to the provisions of the Tax Concessions Law, as amended, that, in the event that the Cayman Islands
enacts any legislation that imposes tax on profits, income, gains or appreciations, or any tax in the nature of estate duty or inheritance
tax, such tax will not be applicable to the Company and Oxbridge Reinsurance Limited or their operations, or to the ordinary shares or
related obligations, until April 23, 2033 and May 17, 2033, respectively.
The
Company and its subsidiaries intend to conduct substantially all of their operations in the Cayman Islands in a manner such that they
will not be engaged in a trade or business in the U.S. However, because there is no definitive authority regarding activities that constitute
being engaged in a trade or business in the U.S. for federal income tax purposes, the Company cannot assure that the U.S. Internal Revenue
Service will not contend, perhaps successfully, that the Company or its subsidiary is engaged in a trade or business in the U.S. A foreign
corporation deemed to be so engaged would be subject to U.S. federal income tax, as well as branch profits tax, on its income that is
treated as effectively connected with the conduct of that trade or business unless the corporation is entitled to relief under an applicable
tax treaty.
6. VARIABLE
INTEREST ENTITIES
Oxbridge
Re NS. On December 22, 2017, the Company established Oxbridge Re NS, a Cayman domiciled and licensed special purpose insurer, formed
to provide additional collateralized capacity to support Oxbridge Reinsurance Limited’s reinsurance business. In respect of the
debt issued by Oxbridge Re NS to investors, Oxbridge Re NS has entered into a retrocession agreement with Oxbridge Reinsurance Limited
effective June 1, 2020. Under this agreement, Oxbridge Re NS receives a quota share of Oxbridge Reinsurance Limited’s catastrophe
business. Oxbridge Re NS is a non-rated insurer and the risks have been fully collateralized by way of funds held in trust for the benefit
of Oxbridge Reinsurance Limited. Oxbridge Re NS is able to provide investors with access to natural catastrophe risk backed by the distribution,
underwriting, analysis and research expertise of Oxbridge Re.
The
Company has determined that Oxbridge Re NS meets the definition of a VIE as it does not have sufficient equity capital to finance its
activities. The Company concluded that it is the primary beneficiary and has consolidated the subsidiary upon its formation, as it owns
100% of the voting shares, 100% of the issued share capital and has a significant financial interest and the power to control the activities
of Oxbridge Re NS that most significantly impacts its economic performance. The Company has no other obligation to provide financial
support to Oxbridge Re NS. Neither the creditors nor beneficial interest holders of Oxbridge Re NS have recourse to the Company’s
general credit.
Upon
issuance of a series of participating notes by Oxbridge Re NS, all of the proceeds from the issuance are deposited into collateral accounts,
to fund any potential obligation under the reinsurance agreements entered into with Oxbridge Reinsurance Limited underlying such series
of notes. The outstanding principal amount of each series of notes generally is expected to be returned to holders of such notes upon
the expiration of the risk period underlying such notes, unless an event occurs which causes a loss under the applicable series of notes,
in which case the amount returned is expected to be reduced by such noteholder’s pro rata share of such loss, as specified in the
applicable governing documents of such notes. In addition, holders of such notes are generally entitled to interest payments, payable
annually, as determined by the applicable governing documents of each series of notes.
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
6.
VARIABLE
INTEREST ENTITIES (continued)
In
addition, holders of such notes are generally entitled to interest payments, payable annually, as determined by the applicable governing
documents of each series of notes.
The
Company receives an origination and structuring fee in connection with the formation, operation and management of Oxbridge Re
NS.
Launch
of SurancePlus Inc.
SurancePlus
Inc., a wholly-owned subsidiary of Oxbridge Re Holdings Limited, was incorporated as a British Virgin Islands Business Company
on December 19, 2022 for the purposes of fractionalizing reinsurance contracts underwritten by its affiliated licensed reinsurer, Oxbridge
Re NS.
On
March 27, 2023, the Company and SurancePlus Inc. (“SurancePlus”), issued a press release announcing the commencement of an
offering by SurancePlus of up to $5.0 million (USD) of DeltaCat R’se tokenized reinsurance securities (the “Tokens”), which represent Series DeltaCat
Preferred Shares of SurancePlus (“Preferred Shares”, and together with the Tokens, the “Securities”). Each digital security or token,
which will have a purchase price of $10.00 per token, will represent one Preferred Share of SurancePlus.
The
proceeds from the offer and sale of the Securities will be used by SurancePlus to purchase one or more participating notes of Oxbridge
Re NS, and the proceeds from the sale of participating notes will be invested in collateralized reinsurance contracts to be underwritten
by Oxbridge Re NS. The holders of the digital securities will generally be entitled to proceeds from the payment of participating notes in the
amount of a preferred return of $12.00 plus 80% of any proceeds in excess of the amount necessary to pay the preferred return. Assuming
no casualty losses to properties reinsured by Oxbridge Re’s reinsurance subsidiaries, DeltaCat Re investors are expected
to receive a return on the original purchase price of the digital securities of up to 196% after 3 years.
The
Securities have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state or
other securities laws and may not be offered or sold in the United States absent an effective registration statement or an applicable
exemption from registration requirements or a transaction not subject to the registration requirements of the Securities Act or any state
or other securities laws. The Securities will be sold in a transaction exempt from registration under the Securities Act and will be
sold only to persons reasonably believed to be accredited investors in the United States under SEC Rule 506(c) under the Securities Act
and outside the United States only to non-U.S. persons in accordance with Regulation S under the Securities Act.
Notes
Payable to Series 2020-1 noteholders
Oxbridge
Re NS entered into a retrocession agreement with Oxbridge Reinsurance Ltd on June 1, 2020 and issued $216,000
of participating notes which provides quota share support for Oxbridge Re’s global property catastrophe excess of loss
reinsurance business. The participating notes have been assigned Series 2020-1 and are due to mature on June
1, 2023. Participating notes totaling $44,000
were redeemed during the period ending March 31, 2023 resulting in a balance due of $172,000 at March 31, 2023. No participating notes were redeemed during the period ending March 31,
2022. No new participating notes were issued during the periods ended March 31, 2023 and 2022.
The
income from Oxbridge Re NS operations that are attributable to the participating notes noteholders for the three-month periods ended
March 31, 2023 and 2022 was $0
and $26,000,
respectively, and are included within accounts payable and other liabilities as at March 31, 2023 and 2022, respectively.
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
7. RESERVE FOR LOSSES AND LOSS ADJUSTMENT EXPENSES
The
following table summarizes the Company’s loss and loss adjustment expenses (“LAE”) and the reserve for loss and LAE
reserve movements for the three month periods ending March 31, 2023 and 2022:
SCHEDULE
OF LOSS ADJUSTMENT EXPENSE
| | |
2023 | | |
2022 | |
| | |
At March 31, | | |
At March 31, | |
| | |
2023 | | |
2022 | |
| | |
(in thousands) | |
| | |
| | |
| |
| Balance, beginning of period | |
$ | 1,073 | | |
$ | - | |
| Incurred related to: | |
| | | |
| | |
| Current period | |
| - | | |
| - | |
| Prior period | |
| - | | |
| - | |
| Total incurred | |
| - | | |
| - | |
| Paid related to: | |
| | | |
| | |
| Current period | |
| - | | |
| - | |
| Prior period | |
| - | | |
| - | |
| Total paid | |
| - | | |
| - | |
| Balance, end of period | |
$ | 1,073 | | |
$ | - | |
When
losses occur, the reserves for losses and LAE are typically comprised of case reserves (which are based on claims that have been reported)
and IBNR reserves (which are based on losses that are believed to have occurred but for which claims have not yet been reported and include
a provision for expected future development on existing case reserves). The Company typically suffers limit losses in the event of a
Category 3 or above hurricane making landfall in a populated area where the Company has catastrophe risk exposure. For the period ended
March 31, 2023, the Company has recorded it’s reserves for losses and LAE based on the contractual maximum loss the Company can
suffer under the affected contracts.
The
uncertainties inherent in the reserving process and potential delays by cedants and brokers in the reporting of loss information,
together with the potential for unforeseen adverse developments, may result in the reserve for losses and LAE ultimately being
significantly greater or less than the reserve provided at the end of any given reporting period. The degree of uncertainty is
further increased when a significant loss event takes place near the end of a reporting period. Reserve for losses and LAE estimates are
reviewed periodically on a contract-by-contract basis and updated as new information becomes known. Any resulting adjustments are
reflected in income in the period in which they become known.
The
Company’s reserving process is highly dependent on the timing of loss information received from its cedants and related brokers.
There
were no losses incurred during the three-month periods ended March 31, 2023 and 2022.
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
8. EARNINGS (LOSS) per share
A
summary of the numerator and denominator of the basic and diluted earnings (loss) per share is presented below (dollars in thousands
except per share amounts):
SCHEDULE
OF COMPUTATION OF BASIC AND DILUTED (LOSS) EARNING PER SHARE
| | |
2023 | | |
2022 | |
| | |
Three Months Ended | |
| | |
March 31, | |
| | |
2023 | | |
2022 | |
| | |
| | |
| |
| Numerator: | |
| | | |
| | |
| Net income (loss) | |
$ | 142 | | |
| (387 | ) |
| | |
| | | |
| | |
| Denominator: | |
| | | |
| | |
| Weighted average shares - basic | |
| 5,857,643 | | |
| 5,751,008 | |
| Effect of dilutive securities - Stock options | |
| - | | |
| - | |
| Shares issuable upon conversion of warrants | |
| - | | |
| - | |
| Weighted average shares - diluted | |
| 5,857,643 | | |
| 5,751,008 | |
| Earnings (Loss) per share - basic | |
$ | 0.02 | | |
| (0.07 | ) |
| Earnings (Loss) per share - diluted | |
$ | 0.02 | | |
| (0.07 | ) |
For
the three-month period ended March 31, 2023, options to purchase 846,250
ordinary shares and 8,230,700 warrants to purchase an aggregate of 8,230,700 ordinary shares were anti-dilutive due to the exercise price of these securities, including
unrecognized compensation expense, exceeded the average market price of the Company’s ordinary shares during the period ended March
31, 2023.
For the three-month period ended March 31, 2022, options to purchase 896,250
ordinary shares and 8,230,700 warrants to purchase
an aggregate of 8,230,700 ordinary shares were anti-dilutive due to net loss during the period ending March 31, 2022.
GAAP
requires the Company to use the two-class method in computing basic earnings (loss) per share since holders of the Company’s restricted
stock have the right to share in dividends, if declared, equally with common shareholders. These participating securities effect the
computation of both basic and diluted earnings (loss) per share during periods of net income (loss).
9.
WARRANTS
There
were 8,230,700 warrants outstanding at March 31, 2023 and December 31, 2022. One warrant may be exercised to acquire one ordinary share
at an exercise price equal to $7.50 per share on or before March 26, 2024. The Company at its option may cancel the warrants in whole
or in part, provided that the closing price per ordinary share has exceeded $9.38 for at least ten trading days within any period of
twenty consecutive trading days, including the last trading day of the period. No warrants were exercised during the three-month periods
ended March 31, 2023 and 2022.
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
10.
DIVIDENDS
As
of March 31, 2023, none of the Company’s retained earnings were restricted from payment of dividends to the company’s shareholders.
However, since most of the Company’s capital and retained earnings may be invested in its subsidiaries, a dividend from the subsidiaries
would likely be required in order to fund a dividend to the Company’s shareholders and would require notification to the Cayman
Islands Monetary Authority (“CIMA”).
Under
Cayman Islands law, the use of additional paid-in capital is restricted, and the Company will not be allowed to pay dividends out of
additional paid-in capital if such payments result in breaches of the prescribed and minimum capital requirement.
11.
SHARE-BASED COMPENSATION
The
Company currently has outstanding stock-based awards granted under the 2014 Omnibus Incentive Plan (the “2014 Plan”) and
the 2021 Omnibus Incentive Plan (the “2021 Plan”) (hereinafter collectively referred to as “the Plans”). Under
each of the Plans, the Company has discretion to grant equity and cash incentive awards to eligible individuals, including the
issuance of up to 1,000,000
of the Company’s ordinary shares. During the period ended March 31, 2023, the Company granted 96,647
restricted stock to directors and officers under the 2021 Plan. At March 31, 2023, there were 924,353
shares and 11,750
shares available for grant under the 2021 Plan and the 2014 Plan, respectively.
Stock
options
Stock
options granted and outstanding under the Plan vests quarterly over four years and are exercisable over the contractual term of ten years.
A
summary of the stock option activity for the three-month periods ended March 31, 2023 and 2022 is as follows:
SCHEDULE
OF STOCK OPTION ACTIVITY
| | |
Number of Options | | |
Weighted- Average Exercise Price | | |
Weighted- Average Remaining Contractual Term | |
Aggregate Intrinsic Value | |
| | |
| | |
| | |
| |
| |
| Outstanding at January 1, 2022 | |
| 896,250 | | |
| 4.71 | | |
6.9 years | |
| - | |
| Outstanding at March 31, 2022 | |
| 896,250 | | |
| 4.71 | | |
6.6 years | |
| - | |
| Exercisable at March 31, 2022 | |
| 601,250 | | |
| 4.44 | | |
5.7 years | |
| - | |
| | |
| | | |
| | | |
| |
| | |
| Outstanding at January 1, 2023 | |
| 871,250 | | |
$ | 4.67 | | |
5.6 years | |
$ | - | |
| Forfeited | |
| (25,000 | ) | |
$ | 6.00 | | |
| |
| - | |
| Outstanding at March 31, 2023 | |
| 846,250 | | |
$ | 4.63 | | |
5.5 years | |
$ | - | |
| Exercisable at March 31, 2023 | |
| 736,875 | | |
$ | 4.43 | | |
5.2 years | |
$ | - | |
Compensation
expense recognized for the three-month periods ended March 31, 2023 and 2022 totaled $5,000 and $15,000, respectively. Compensation
expense is included in general and administrative expenses. At March 31, 2023 and 2022, there was approximately $35,000 and $98,000,
respectively, of total unrecognized compensation expense related to non-vested stock options granted under the Plans. The
Company expects to recognize the remaining compensation expense over a weighted-average period of twenty-one (21) months.
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
11.
SHARE-BASED COMPENSATION (cont’d)
Restricted
Stock Awards
The
Company may grant restricted stock awards to eligible individuals in connection with their service to the Company. The terms of the Company’s
outstanding restricted stock grants may include service, performance and market-based conditions. The fair value of the awards with market-based
conditions is determined using a Monte Carlo simulation method, which calculates many potential outcomes for an award and then establishes
fair value based on the most likely outcome. The determination of fair value with respect to the awards with only performance or service-based
conditions is based on the value of the Company’s stock on the grant date.
During
the periods ended March 31, 2023 and 2022, the Company granted 96,647
and 32,000 restricted stock to directors under the 2021 Plan. Information with respect to the activity of unvested restricted stock
awards during the period ended March 31, 2023 is as follows (share amounts not in thousands):
SCHEDULE
OF ACTIVITY OF UNVESTED RESTRICTED STOCK AWARDS
| | |
Weighted- Number
of Restricted
Stock Awards | | |
Weighted- Average
Grant Date Fair
Value | |
| | |
| | |
| |
| Nonvested at January 1, 2023 | |
| 23,000 | | |
| 2.37 | |
| Granted | |
| 96,647 | | |
$ | 2.37 | |
| Vested | |
| (16,250 | ) | |
| 2.37 | |
| Nonvested at March 31, 2023 | |
| 103,397 | | |
| 2.37 | |
| | |
Weighted-
Number of
Restricted Stock
Awards | | |
Weighted-
Average Grant
Date Fair Value | |
| | |
| | |
| |
| Nonvested at January
1, 2022 | |
| 15,000 | | |
$ | 6.80 | |
| Granted | |
| 32,000 | | |
$ | 6.80 | |
| Vested | |
| (3,000 | ) | |
$ | 6.80 | |
| Nonvested
at March 31, 2022 | |
| 44,000 | | |
$ | 6.80 | |
Compensation
expense recognized for the periods ended March 31, 2023 and 2022 totaled $49,000 and $17,000, respectively,
and is included in general and administrative expenses. At March 31, 2023, there was approximately $294,000
unrecognized compensation expense related to non-vested restricted stock granted under the Plan, which the Company expects to
recognize over a weighted-average period of nine (9)
months.
12.
NET WORTH FOR REGULATORY PURPOSES
The
subsidiaries are subject to a minimum and prescribed capital requirement as established by CIMA. Under the terms of their respective
licenses, Oxbridge Reinsurance Limited and Oxbridge Re NS are required to maintain a minimum and prescribed capital requirement of $500
in accordance with the relevant subsidiary’s approved business plan filed with CIMA.
At
March 31, 2023, the Oxbridge Reinsurance Limited’s net worth of $9.1 million exceeded the minimum and prescribed capital requirement.
For the three-month periods ended March 31, 2023 and 2022, the Subsidiary’s net loss was approximately $90,000 and $490,000,
respectively.
At
March 31, 2023, the Oxbridge Re NS’ net worth of $155,000
exceeded the minimum and prescribed capital requirement.
For the three-month periods ended March 31, 2023 and 2022, the Subsidiary’s net income was approximately $Nil
and $6,000, respectively.
The
Subsidiaries are not required to prepare separate statutory financial statements for filing with CIMA, and there were no material differences
between the Subsidiaries’ GAAP capital, surplus and net income (loss), and its statutory capital, surplus and net income (loss)
as of March 31, 2023 or for the period then ended.
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
13.
FAIR VALUE AND CERTAIN RISKS AND UNCERTAINTIES
Fair
values
With
the exception of balances in respect of insurance contracts (which are specifically excluded from fair value disclosures under GAAP)
and investment securities as disclosed in Note 4 of these consolidated financial statements, the carrying amounts of all other financial
instruments, which consist of cash and cash equivalents, restricted cash and cash equivalents, accrued interest and dividends receivable,
premiums receivable and other assets, notes payable and accounts payable and other liabilities, approximate their fair values due to
their short-term nature.
Concentration
of underwriting risk
A
substantial portion of the Company’s current reinsurance business ultimately relates to the risks of a limited number of entities;
accordingly, the Company’s underwriting risks are not significantly diversified.
Concentrations
of Credit and Counterparty Risk
The
Company markets retrocessional and reinsurance policies worldwide through its brokers. Credit risk exists to the extent that any of these
brokers may be unable to fulfill their contractual obligations to the Company. For example, the Company is required to pay amounts owed
on claims under policies to brokers, and these brokers, in the Company. In some jurisdictions, if a broker fails to make such a payment,
the Company might remain liable to the ceding company for the deficiency. In addition, in certain jurisdictions, when the ceding company
pays premiums for these policies to brokers, these premiums are considered to have been paid and the ceding insurer is no longer liable
to the Company for those amounts, whether or not the premiums have actually been received.
The
Company remains liable for losses it incurs to the extent that any third-party reinsurer is unable or unwilling to make timely payments
under reinsurance agreements. The Company would also be liable in the event that its ceding companies were unable to collect amounts
due from underlying third-party reinsurers.
The Company seeks to mitigate its concentration of credit risk, and its
counterparty risk by using reputable (and in some cases) several counterparties which decreases the likelihood of any significant credit
and/or counterparty risk.
Market
risk
Market
risk exists to the extent that the values of the Company’s monetary assets fluctuate as a result of changes in market prices. Changes
in market prices can arise from factors specific to individual securities or their respective issuers, or factors affecting all securities
traded in a particular market. Relevant factors for the Company are both volatility and liquidity of specific securities and markets
in which the Company holds investments. The Company has established investment guidelines that seek to mitigate significant exposure
to market risk.
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
14.
LEASES
Operating
lease right-of-use assets and operating lease liabilities are disclosed as line in the consolidated balance sheet. We determine if a
contract contains a lease at inception and recognize operating lease right-of-use assets and operating lease liabilities based on the
present value of the future minimum lease payments at the commencement date. As our leases do not provide an implicit rate, we use our
incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments.
Lease agreements that have lease and non-lease components, are accounted for as a single lease component. Lease expense is recognized
on a straight-line basis over the lease term.
The
Company has two operating lease obligations namely for the Company’s office facilities located at Suite 201, 42 Edward Street Grand
Cayman, Cayman Islands and residential space at Turnberry Villas in Grand Cayman, Cayman Islands. The office lease has a remaining lease
term of approximately eleven (11) months and includes an option to extend the lease. Under the terms of the lease, the Company also has
the right to terminate the lease after thirty-six (36) months upon giving appropriate notice in writing to the Lessor. The residential
lease has a remaining lease term of approximately nine (9) months.
The
components of lease expense and other lease information as of and during the three-month periods ended March 31, 2023 and 2022 are as
follows:
SCHEDULE
OF OPERATING LEASE COST
| (in thousands) | |
For the Three-Month
Period Ended
March 31, 2023 | | |
For the Three-Month
Period Ended
March 31, 2022 | |
| | |
| | | |
| | |
| Operating Lease Cost (1) | |
$ | 24 | | |
$ | 24 | |
| | |
| | | |
| | |
| Cash paid for amounts included in the measurement of lease liabilities | |
| | | |
| | |
| Operating cash flows from operating leases | |
$ | 24 | | |
$ | 24 | |
| (1) | Includes short-term
leases |
SCHEDULE OF OPERATING LEASE OBLIGATIONS
| (in thousands) | |
At March 31, 2023 | | |
At December 31, 2022 | |
| | |
| | |
| |
| Operating lease right-of-use assets | |
$ | 85 | | |
$ | 44 | |
| | |
| | | |
| | |
| Operating lease liabilities | |
$ | 85 | | |
$ | 44 | |
| | |
| | | |
| | |
| Weighted-average remaining lease term - operating leases | |
| 0.82 years | | |
| 1.17 years | |
| | |
| | | |
| | |
| Weighted-average discount rate - operating leases | |
| 7.70 | % | |
| 6.50 | % |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements (unaudited)
March 31, 2023
14.
leases (continued)
Future
minimum lease payments under non-cancellable leases as of March 31, 2023 and December 31, 2022, reconciled to our discounted operating
lease liabilities presented on the consolidated balance sheet are as follows:
SCHEDULE
OF FUTURE MINIMUM LEASE PAYMENTS
| (in thousands) | |
At March 31, 2023 | | |
At December 31, 2022 | |
| Remainder of 2023 | |
| 79 | | |
| 40 | |
| 2024 | |
| 9 | | |
| 6 | |
| Total future minimum lease payments | |
$ | 88 | | |
$ | 46 | |
| | |
| | | |
| | |
| Less imputed interest | |
| (3 | ) | |
| (2 | ) |
| Total operating lease liability | |
$ | 85 | | |
| 44 | |
15.
RELATED PARTY TRANSACTIONS
Administrative
Services Agreement
Commencing
on the effective date of the SPAC’s IPO, the Sponsor agreed to pay the Company a total of up to $10,000 per month for office
space, utilities, secretarial and administrative support to the Sponsor and the SPAC. Upon completion of the SPAC’s
initial Business Combination or the SPAC’s liquidation, the Sponsor will cease paying these monthly fees. For the periods
ended March 31, 2023 and 2022, the Company recorded $30,000
income from the Sponsor under the Administrative Services Agreement, which is included in “net investment and other
income” in the consolidated statements of operations.
Included
within “due from related party” on the consolidated balance sheets is a balance of $9,000
representing reimbursable expenses relating to government fees and professional fees that the Company paid on behalf of the SPAC and
the Sponsor, as well as $
administrative fees from the Sponsor.
Participating
Notes
During
the year ending December 31, 2021, Mr. Jay Madhu, a director and officer of the Company and its subsidiaries, invested a principal
amount of $68,000 in
Series 2020-1 participating notes. During the period ended March 31, 2023, Mr. Madhu received a payment of $14,000 representing
partial redemption of principal and return on investment. Mr. Madhu’s remaining principal balance is included in notes payable
at March 31, 2023.
16.
SUBSEQUENT EVENTS
We
evaluate all subsequent events and transactions for potential recognition or disclosure in our consolidated financial statements.