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PART I. FINANCIAL INFORMATION

Item 1 Financial Statements

 

RINEON GROUP, INC.
CONDENSED BALANCE SHEETS
AS OF JUNE 30, 2010 AND DECEMBER 31, 2009
		June 30, 2010				December 31, 2009
		(unaudited)				(Consolidated)
ASSETS
Current Assets
Cash		$	-			$	195,732
Investments			48,825,250				43,500,495
Accrued interest			-				65,089
Insurance premium receivable			-				4,875,112
Total current assets			48,825,250				48,636,429
GOODWILL			-				16,521,500
TOTAL ASSETS		$	48,825,250			$	65,157,929
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES
Accounts payable			178,391				243,941
Due to related party			20,000				-
Unearned premium reserve			-				1,580,095
Loss reserves			-				3,031,723
Total liabilities			198,391				4,855,759
COMMITMENTS AND CONTINGENCIES							-
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value, 75,000,000 shares
authorized; 2,010,000 shares issued and outstanding			2,010				2,010
Preferred stock, $.001 par value, 10,000,000 shares
authorized; 36,000 shares issued and outstanding			36				36
Additional paid-in-capital			36,022,954				40,444,454
Retained earnings			12,601,859				17,261,279
Total stockholders' equity			48,626,859				57,707,779
NONCONTROLLING INTEREST			-				2,594,391
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	48,825,250			$	65,157,929

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

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RINEON GROUP, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010
AND JUNE 30, 2009 (UNAUDITED)
		Three Months Ended								Six Months Ended
		June 30, 2010				June 30, 2009				June 30, 2010				June 30, 2009
						(Consolidated)								(Consolidated)
Net premiums earned		$	-			$	3,393,696			$	-			$	6,787,391
Investment income			-				873				-				1,532
Net realized and unrealized gains (loss) on securities			-				2,798,167				-				8,469,324
Total revenues			-				6,192,736				-				15,258,247
Expenses:
Losses and loss adjustment expenses			-				2,153,504				-				4,307,009
Policy acquisition costs			-				1,166,276				-				2,332,553
General and administrative expense			68,661				17,806				71,712				47,692
Total expense			68,661				3,337,587				71,712				6,687,254
Income (loss) from operations before other income and
provision for (benefit from) income tax			(68,661	)			2,855,149				(71,712	)			8,570,993
Gain on deconsolidation of subsidiary							-				3,200,000				-
Other comprehensive income			2,699,731				-				2,699,731				-
			2,631,071				2,855,149				5,828,020				8,570,993
Provision for (benefit from) income tax			-				-				-				-
Minority interest			-				(528,203	)			-				(1,585,634	)
Net income		$	2,631,071			$	2,326,947			$	5,828,020			$	6,985,360
Weighted Average Common Shares Outstanding:
Basic and diluted			2,010,000				7,000,000				2,010,000				7,000,000
Earnings per share:
Basic and diluted		$	1.27			$	0.33			$	2.86			$	1.00

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

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RINEON GROUP, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
		June 30, 2010				June 30, 2009
						(Consolidated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	5,828,020			$	6,985,360
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Realized and unrealized gains on investments			(2,699,731	)			(8,469,324	)
Gain on deconsolidation of subsidiary			(3,200,000	)
Changes in assets and liabilities:
(Increase) decrease in insurance premium receivable			-				(130,065	)
Increase (decrease) in accounts payable			51,711				(24,169	)
Increase (decrease) in related party payables			-				(14,400	)
Increase (decrease) in unearned premium reserve			-				(12,329	)
Increase (decrease) in loss reserves			-				302,271
Net cash provided by operating activities			(20,000	)			(1,362,656	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Effect on cash of deconsolidation of subsidiary			(195,733	)			-
Purchase of investments			-				(36,000,000	)
Minority interest			-				1,585,634
Proceeds from forgiveness of debt			-				30,565
Accrued interest from investments			-				(1,317	)
Net cash provided by (used in)  investing activities			(195,733	)			(34,385,118	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loan from related party			20,000				-
Proceeds from the issuance of preferred stock			-				36,000,000
Net cash used in financing activities			20,000				36,000,000
INCREASE IN CASH			(195,733	)			252,226
CASH, BEGINNING OF YEAR			195,733				629,429
CASH, END OF PERIOD		$	-			$	881,655
Supplemental Disclosures
Cash paid during the year for interest		$	-			$	-
Cash paid during the year for taxes		$	-			$	-

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

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RINEON GROUP, INC.

f/k/a JUPITER RESOURCES INC.

NOTES TO FINANCIAL STATEMENTS

For the six months ended June 30, 2010 and 2009

 

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1.       ORGANIZATION AND BUSINESS OPERATIONS

Rineon Group, Inc. f/k/a Jupiter Resources Inc. (the “Company”) was incorporated in the State of Nevada on June 15, 2006, and that is the inception date. The Company was an Exploration Stage Company as defined by Statement of Financial Accounting Standard (SFAS) No. 7 "Accounting and Reporting for Development Stage Enterprises". The Company acquired a mineral claim located in British Columbia, Canada in March 2007. On May 14, 2008, the claim was forfeited due to nonpayment of renewal fees.

As previously reported by the Company on Form 8-K filed with the Securities and Exchange Commission on May 14, 2009 (the “Form 8-K”), on May 14, 2009 the Company entered into a preferred stock purchase agreement dated as of April 30, 2009 (the “Preferred Stock Purchase Agreement”) under which the Company sold an aggregate of 36,000 shares of its Series A convertible preferred stock (the “Series A Preferred Stock”) to Intigy Absolute Return Ltd., a British Virgin Islands corporation (“Intigy”), for a purchase price of $36,000,000, or $1,000 per share of Series A $.001 Par Value Preferred Stock. In addition, pursuant to the terms of a stock purchase agreement dated as of May 14, 2009, Rineon agreed to acquire 1,985,834 shares of Amalphis from NatProv Holdings Inc (“NatProv”) for a total consideration of $36,000,000.  Of the 2,437,500 shares of Amalphis held by NatProv, 1,985,834 were converted into Class A Preferred non-voting shares, which were then assigned by NatProv to Rineon.  As a result, NatProv now owns 451,666 Common Shares of Amalphis, representing 100% of the voting shares of Amalphis, and Rineon owns 1,985,834 of  Amalphis’ Class A Preferred Shares which have the same rights and privileges as the common shares except that they have a liquidation preference and no voting rights.  Amalphis’ Class A Preferred Shares are not convertible into Common Shares.

The transactions consummated as set forth above resulted in a change of control of the Company.  In connection with such change in control, on May 14, 2009 the board of directors of the Company authorized a change in the fiscal year end of the Company from May 31 to December 31.

Amalphis Group, Inc., (“Amalphis”) was formed in July 2008 as a British Virgin Islands (BVI) Business Company.  Amalphis, through it’s wholly owned subsidiary Allied Provident, Inc. (“API”), offers customized reinsurance products in markets where traditional reinsurance alternatives are limited.  In addition, the Amalphis was formed to directly sell a variety of property and casualty insurance products to businesses around the world.    In September 2008,  Amalphis acquired API, an entity that issues customized reinsurance to a United States insurance carrier that offers automotive insurance coverage to drivers who are unable to obtain insurance from standard carriers.  API was formed in Barbados on November 9, 2007 by NatProv Holdings Inc., (“NatProv”) a British Virgin Islands corporation.

On January 19, 2010, Amalphis, our 81.5% controlled subsidiary, entered into a transaction to sell 81.5% controlling equity interest in Amalphis Group, Inc., a British Virgin Islands company, and its wholly-owned subsidiary, Allied Provident Insurance Inc., a Barbados company, to Gerova Financial Group Ltd. (the “Amalphis Agreement”). The Amalphis Agreement resulted in Rineon owning convertible preferred stock, which was converted to restricted common stock, of an unaffiliated publicly traded insurance group. As a result of this transaction, Rineon became a minority investor in this insurance group and, therefore, no longer have control of the former operating subsidiary, Allied Provident Insurance.

 

Interim Financial Statements

 

The interim financial statements presented herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The interim financial statements should be read in conjunction with the Company's annual financial statements, notes and accounting policies included in the Company's annual report on Form 10-K for the year ended December 31, 2009 as filed with the SEC. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) which are necessary to provide a fair presentation of financial position as of June 30, 2010 and the related operating results and cash flows for the interim period presented have been made. The results of operations, for the period presented are not necessarily indicative of the results to be expected for the year.

 

 

 

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RINEON GROUP, INC.

f/k/a JUPITER RESOURCES INC.

NOTES TO FINANCIAL STATEMENTS

For the six months ended June 30, 2010 and 2009

 

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2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

The consolidated financial statements include the accounts of Amalphis Group Inc. and its wholly owned subsidiary, Allied Provident, Inc.  All material intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements.  These estimates and assumptions also affect the reported amounts of revenues, costs and expenses during the reporting period.  Management evaluates these estimates and assumptions on a regular basis.  Significant estimates include valuation of investments and intangible assets.  Actual results could differ from those estimates.

Fair Value of Financial Instruments

 

The fair value of a financial instrument is the amount that would be received to see an asset or amount paid to transfer a liability in a current transaction between market participants, other than in a forced sale or liquidation, at the measurement date.   The carrying amounts of financial instruments, including cash, accounts payable and accrued expenses approximate fair value because of the relatively short maturity of the instruments.

Accounting Standards Updates

 

In January 2010, the FASB has published ASU 2010-01 “Equity (Topic 505) - Accounting for Distributions to Shareholders with Components of Stock and Cash—a consensus of the FASB Emerging Issues Task Force,” as codified in ASC 505. ASU No. 2010-01 clarifies the treatment of certain distributions to shareholders that have both stock and cash components. The stock portion of such distributions is considered a share issuance that is reflected in earnings per share prospectively and is not a stock dividend. The amendments in this Update are effective for interim and annual periods ending on or after December 15, 2009 and should be applied on a retrospective basis.  Early adoption is permitted.  The adoption of this standard did/did not have an impact on the Company’s (consolidated) financial position and results of operations.

In January 2010, the FASB has published ASU 2010-02 “Consolidation (Topic 810) - Accounting and Reporting for Decreases in Ownership of a Subsidiary—a Scope Clarification,” as codified in ASC 810, “Consolidation.” ASU No. 2010-02 applies retrospectively to April 1, 2009, our adoption date for ASC 810-10-65-1 as previously discussed in this financial note. This ASU clarifies the applicable scope of ASC 810 for a decrease in ownership in a subsidiary or an exchange of a group of assets that is a business or nonprofit activity. The ASU also requires expanded disclosures. The amendments in this Update are effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis.  The adoption of this standard is not expected to have any impact on the Company’s consolidated financial position and results of operations.

In January 2010, the FASB has published ASU 2010-06 “Fair Value Measurements and Disclosures (Topic 820): - Improving Disclosures about Fair Value Measurements” . ASU No. 2010-06 clarifies improve disclosure requirement related to fair value measurements and disclosures – Overall Subtopic (Subtopic 820-10) of the FASB Accounting Standards Codification. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosure about purchase, sales, issuances, and settlement in the roll forward of activity in Level 3 fair value measurements.  Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The amendments in this Update are effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis.  The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

 

 

 

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Other ASUs not effective until after June 30, 2010, are not expected to have a significant effect on the Company’s consolidated financial position or results of operations.

 

3.      FAIR VALUE

 

The Company records fair value of monetary and nonmonetary instruments in accordance with ASC 820 Fair Value Measurements and Disclosures. The ASC   establishes a framework for measuring fair value, establishes a fair value hierarchy based on inputs used to measure fair value, and expands disclosure about fair value measurements. Adopting this statement has not had an effect on the Company’s financial condition, cash flows, or results of operations.

 

In accordance with ASC 820, the financial instruments have been categorized, based on the degree of subjectivity inherent in the valuation technique, into a fair value hierarchy of three levels, as follows:

 

•

Level 1 :  Inputs are unadjusted, quoted prices in active markets for identical instruments at the measurement date (e.g., U.S. Government securities and active exchange-traded equity securities).

 

•

Level 2 :  Inputs (other than quoted prices included within Level 1) that are observable for the instrument either directly or indirectly (e.g., certain corporate and municipal bonds and certain preferred stocks). This includes: (i) quoted prices for similar instruments in active markets, (ii) quoted prices for identical or similar instruments in markets that are not active, (iii) inputs other than quoted prices that are observable for the instruments, and (iv) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

•

Level 3 :  Inputs that are unobservable. Unobservable inputs reflect the reporting entity’s subjective evaluation about the assumptions market participants would use in pricing the financial instrument (e.g., certain structured securities and privately held investments).

 

The composition of the investment portfolio as of June 30, 2010 was:

 

 

 

3.       FAIR VALUE (Continued)

 

Our portfolio of equity  securities are classified as Level 1 in the above table and are priced from quoted prices in active markets.

 

During each valuation period, internal estimations of portfolio valuation (performance returns) are created based on current market-related activity (i.e., interest rate and credit spread movements and other credit-related factors) within each major sector of our portfolio. Internally generated portfolio results are compared with those generated based on quotes we received externally and research material valuation differences.

 

Based on the criteria described above, the Company believes that the current level classifications are appropriate based on the valuation techniques used and that our fair values accurately reflect current market assumptions in the aggregate.

 

 

5.       RELATED PARTY TRANSACTIONS

 

Rineon’s sole officer and director is also an officer and director of Gerova Financial Group, Ltd.  Rineon owns 9,025,000 shares of Gerova which accounts for all of its current investment asset.

 

6.       COMMON STOCK

The Company is authorized to issue 75,000,000 shares with a par value of $0.001 per share and no other class of shares is authorized.

On March 9, 2007, the Company sold 5,000,000 shares of common stock at a price of $0.001 per share for cash proceeds of $5,000.

On March 30, 2007, the Company sold 650,000 shares of common stock at a price of $0.01 per share for cash proceeds of $6,500.

On April 20, 2007, the Company sold 200,000 shares of common stock at a price of $0.01 per share for cash proceeds of $2,000.

 

 

 

On May 17, 2007, the Company sold 50,000 shares of common stock at a price of $0.01 per share for cash proceeds of $500.

On June 15, 2007, the Company sold 650,000 shares of common stock at a price of $0.01 per share for cash proceeds of $6,500.

On June 28, 2007, the Company sold 450,000 shares of common stock at a price of $0.01 per share for cash proceeds of $4,500.

Simultaneous with the sale of the Series A Preferred Stock, Darcy George Roney, an individual who owned 5,000,000 shares of Rineon common stock sold 4,990,000 of his shares back to Rineon for $25,000, which shares were cancelled.  As a result of such stock redemption, an aggregate of 2,010,000 shares of Rineon common stock are currently issued and outstanding, all of which shares are owned by 21 shareholders of record. 

The Company has no warrants or other dilutive securities.

7.         CONTINGENT LIABILITY

On May 14, 2009, pursuant to the terms of a preferred stock purchase agreement dated as of April 30, 2009 (the “Preferred Stock Purchase Agreement”), Rineon sold an aggregate of 36,000 shares of its Series A convertible preferred stock (the “Series A Preferred Stock”) to Intigy Absolute Return Ltd ., (“Intigy”) for a purchase price of $36,000,000, or $1,000 per share of Series A Preferred Stock.

As set forth in its certificate of designations of rights, preferences and privileges (the “Certificate of Designations”), the 36,000 shares of Series A Preferred Stock has, as one of its rights, that in the event of any “Sale of Control” (as defined in the Certificate of Designation), in addition to the right of the holder(s) of the Series A Preferred Stock to receive a preferential payment in respect of such Series A Preferred Stock equal to product of (A) the $1,000 per share Stated Value, and (B) the number of Series A Preferred Stock then owned, the holder(s) of the Series A Preferred Stock shall be entitled to participate with the holders of Rineon Common Stock in receipt of the consideration payable upon such Sale of Control to the extent of 0.000099% of such consideration for each one share of Series A Preferred Stock then owned by the holder(s), or an aggregate of 4.95% of such consideration as to all 36,000 shares of Series A Preferred Stock.

The Company is presently in discussions with the Preferred Stock Shareholder about a settlement.  If the transaction is deemed to be a “Sale of Control”, the Company would be obligated to a payment of $37,782,000