0001445866-17-000080.txt : 20170126 0001445866-17-000080.hdr.sgml : 20170126 20170126160403 ACCESSION NUMBER: 0001445866-17-000080 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20170126 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20170126 DATE AS OF CHANGE: 20170126 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOSTON OMAHA Corp CENTRAL INDEX KEY: 0001494582 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE OPERATORS (NO DEVELOPERS) & LESSORS [6510] IRS NUMBER: 270788438 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-55714 FILM NUMBER: 17549721 BUSINESS ADDRESS: STREET 1: 292 NEWBURY STREET, SUITE 333 CITY: BOSTON STATE: MA ZIP: 02115 BUSINESS PHONE: 857-256-0079 MAIL ADDRESS: STREET 1: 292 NEWBURY STREET, SUITE 333 CITY: BOSTON STATE: MA ZIP: 02115 FORMER COMPANY: FORMER CONFORMED NAME: REO PLUS, INC. DATE OF NAME CHANGE: 20100618 8-K/A 1 boston8k01232017.htm 8-K/A

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 8-K/A

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Date of Report (Date of earliest event reported):  January 26, 2017
 
BOSTON OMAHA CORPORATION
(Exact name of registrant as specified in its Charter)
     
Delaware
333-170054
27-0788438
(State or other jurisdiction of Incorporation)
(Commission File Number)
(IRS Employer Identification Number)
     
     
(Address and telephone number of principal executive offices, including zip code)
     
c/o Boulderado Group, LLC
292 Newbury Street, Suite 333
Boston, Massachusetts  02115
(857) 256-0079 
     
___________________________________
(Former name or address, if changed since last report)
Not Applicable

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of Registrant under any of the following provisions (see General Instruction A.2. below):

[ ]           Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]           Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]           Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act   (17 CFR 240.14d-2(b))

[ ]           Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 


EXPLANATORY NOTE
 
Boston Omaha Corporation (the "Company") is filing this Current Report on Form 8-K/A (Amendment No. 1) (the "8-K/A") in order to amend its previously filed Current Report on Form 8-K, as filed with the Securities and Exchange Commission on December 8, 2016 (the "Initial 8-K"), in order to file certain financial statements and to furnish certain pro forma financial information pursuant to Item 9.01 of this Form 8-K/A.

As described in our Initial 8-K, on December 7, 2016, General Indemnity Group, LLC, our wholly-owned subsidiary ("GIG"), acquired all of the outstanding capital stock of United Casualty and Surety Insurance Company ("UC&S"), a Massachusetts corporation, for a cash purchase price totaling $13,000,000.  As previously reported, in our Form 8-K as filed with the Commission on May 23, 2016, on May 19, 2016, GIG entered into a Stock Purchase Agreement with the shareholders of UC&S.  The approval by the Massachusetts Division of Insurance of an acquisition of control statement on Form A, a condition to the closing, was obtained on December 5, 2016.

Item 9.01 of Form 8-K provides that with respect to transactions described pursuant to Item 2.01 of Form 8-K, the financial statements of businesses acquired may be filed, and pro forma financial information regarding such transactions may be furnished, not later than 71 calendar days after the date that the initial report on Form 8-K must be filed. As such, the Company disclosed in the Initial 8-K that it would file the required financial statements and furnish the required pro forma financial information within that time frame. 
 
The Company is now providing (i) audited financial statements for UC&S for the years ended December 31, 2015 and December 31, 2014, (ii) unaudited financial statements of UC&S for the nine-month periods ending September 30, 2016 and September 30, 2015, and (iii) the unaudited proforma combined balance sheet and unaudited pro forma combined statement of operations for Boston Omaha Corporation and UC&S for the year ended December 31, 2015 and the nine month period ended September 30, 2016.

 
SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS
 
Item 9.01        Financial Statements and Exhibits.

(a)     Financial statements of businesses acquiredThe audited financial statements of UC&S. for the years ended December 31, 2015 and December 31, 2014, are filed herewith as Exhibit 99.1.  The unaudited financial statements of UC&S for the nine months ended September 30, 2016 and September 30, 2015 are filed herewith as Exhibit 99.2

(b)     Pro forma financial informationThe unaudited pro forma combined balance sheet and unaudited pro forma combined statement of operations for Boston Omaha Corporation and UC&S for the year ended December 31, 2015 and the nine-month period ended September 30, 2016 are filed herewith as Exhibit 99.3.

(c)     Shell Company Transaction.
Not applicable.

(d)     Exhibits.
Not Applicable



 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.  
 

 
 
BOSTON OMAHA CORPORATION
 
 
 
 
 
 
Date:  January 26, 2017
 
 /s/Alex B. Rozek 
 
 
Name:  Alex B. Rozek
 
 
Title:  President and Treasurer (Principal Executive Officer)
 
 
 
 
 
 
 
 
 /s/Joshua Weisenburger
 
 
Name:   Joshua Weisenburger
    Controller (Principal Accounting Officer)
 

 

 
 
 
 

EX-99.1 2 ex991.htm EXHIBIT 99.1
Exhibit 99.1
 
United Casualty and Surety
Insurance Company
Financial Statements for the Years Ended
December 31, 2015 and 2014 and Report of
Independent Registered Public Accounting Firm






UNITED CASUALTY AND SURETY INSURANCE COMPANY
TABLE OF CONTENTS

  Page 
   
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014:
   
 
Balance Sheets
2
     
 
Statements of Income
3
     
 
Statements of Changes in Stockholders' Equity
4
     
 
Statements of Cash Flows
 5
     
 
Notes to Financial Statements
6-13
 
 
 

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
United Casualty and Surety Insurance Company
Quincy, Massachusetts
We have audited the accompanying balance sheets of United Casualty and Surety Insurance Company (the "Company") as of December 31, 2015 and 2014 and the related statements of income, changes in stockholders' equity, and cash flows for each of the years in the two-year period ended December 31, 2015.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of United Casualty and Surety Insurance Company as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the years in the two-year period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

/s/ Stowe & Degon LLC
Westborough, MA
January 9, 2017

1

UNITED CASUALTY AND SURETY INSURANCE COMPANY
   
     
BALANCE SHEETS
   
DECEMBER 31, 2015 AND 2014
   
 
             
ASSETS
 
2015
   
2014
 
             
CURRENT ASSETS:
           
  Cash and cash equivalents
 
$
884,609
   
$
848,047
 
  Investments, short-term
   
1,766,686
     
523,716
 
  Receivables:
               
    Premiums
   
230,312
     
261,846
 
    Anticipated salvage and subrogation
   
29,675
     
37,263
 
     Total receivables
   
259,987
     
299,109
 
  Prepaid reinsurance premiums
   
97,545
     
90,102
 
  Deferred policy acquisition costs
   
289,812
     
261,976
 
                 
     Total current assets
   
3,298,639
     
2,022,950
 
                 
  Other assets
   
4,864
     
4,864
 
  Investments, long-term
   
3,346,861
     
4,291,216
 
  Funds held as collateral assets
   
2,145,513
     
3,377,331
 
  Property and equipment, net
   
22,511
     
36,652
 
                 
     TOTAL ASSETS
 
$
8,818,388
   
$
9,733,013
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
CURRENT LIABILITIES:
               
  Accrued underwriting expenses
 
$
89,817
   
$
85,974
 
  Dividends payable
   
81,798
     
7,542
 
  Unearned premiums
   
1,174,208
     
1,084,285
 
  Accrued losses and loss adjustment expenses
   
22,000
     
20,000
 
  Federal income taxes payable
   
-
     
12,500
 
  Funds held as collateral
   
2,145,513
     
3,377,331
 
                 
     Total current liabilities
   
3,513,336
     
4,587,632
 
                 
LONG-TERM LIABILITIES:
               
  Deferred tax liability
   
155,000
     
147,000
 
                 
     TOTAL LIABILITIES
   
3,668,336
     
4,734,632
 
                 
STOCKHOLDERS' EQUITY:
               
  Common stock, $75 par value – 20,000 shares authorized, 14,484 shares
               
    issued and outstanding at December 31, 2015 and 2014
   
1,086,300
     
1,086,300
 
  Additional paid-in capital
   
1,459,445
     
1,459,445
 
  Retained earnings
   
2,604,307
     
2,452,636
 
                 
     Total Stockholders' Equity
   
5,150,052
     
4,998,381
 
                 
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
8,818,388
   
$
9,733,013
 
                 
The accompanying notes are an integral part of the financial statements.
               
2

UNITED CASUALTY AND SURETY INSURANCE COMPANY
   
     
STATEMENTS OF INCOME
   
YEARS ENDED DECEMBER 31, 2015 AND 2014
   
 
             
   
2015
   
2014
 
             
OPERATING REVENUES:
           
             
  Premiums earned
 
$
2,585,127
   
$
2,383,071
 
  Salvage and subrogation
   
19,276
     
86,989
 
  Net investment income
   
96,741
     
82,897
 
                 
    Total Operating Revenues
   
2,701,144
     
2,552,957
 
                 
OPERATING EXPENSES:
               
                 
  Underwriting, acquisition and insurance expenses
   
2,002,230
     
1,883,403
 
  Losses and loss adjustment expenses
   
19,283
     
99,840
 
  Other (income) expense
   
(5,378
)
   
(1,612
)
  Depreciation and amortization expense
   
14,141
     
13,525
 
                 
    Total Operating Expenses
   
2,030,276
     
1,995,156
 
                 
INCOME BEFORE FEDERAL INCOME TAXES
   
670,868
     
557,801
 
                 
FEDERAL INCOME TAXES
   
219,200
     
216,300
 
                 
NET INCOME
 
$
451,668
   
$
341,501
 
                 
The accompanying notes are an integral part of the financial statements.
         
3

UNITED CASUALTY AND SURETY INSURANCE COMPANY
     
           
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
       
YEARS ENDED DECEMBER 31, 2015 AND 2014
         
 
               
Additional
         
Total
 
   
Common Stock
   
Paid-in
   
Retained
   
Stockholders'
 
   
Shares
   
Amount
   
Capital
   
Earnings
   
Equity
 
                               
BALANCE, JANUARY 1, 2014
   
14,484
   
$
1,086,300
   
$
1,459,445
   
$
2,286,133
   
$
4,831,878
 
                                         
  Dividend declared
   
-
     
-
     
-
     
(174,998
)
   
(174,998
)
                                         
  Net income
   
-
     
-
     
-
     
341,501
     
341,501
 
                                         
BALANCE, DECEMBER 31, 2014
   
14,484
     
1,086,300
     
1,459,445
     
2,452,636
     
4,998,381
 
                                         
  Dividend declared
   
-
     
-
     
-
     
(299,997
)
   
(299,997
)
                                         
  Net income
   
-
     
-
     
-
     
451,668
     
451,668
 
                                         
BALANCE, DECEMBER 31, 2015
   
14,484
   
$
1,086,300
   
$
1,459,445
   
$
2,604,307
   
$
5,150,052
 
                                         
The accompanying notes are an integral part of the financial statements.
                         
4

UNITED CASUALTY AND SURETY INSURANCE COMPANY
   
     
STATEMENTS OF CASH FLOWS
   
YEARS ENDED DECEMBER 31, 2015 AND 2014
   
 
   
2015
   
2014
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
  Net income
 
$
451,668
   
$
341,501
 
  Adjustments to reconcile net income to net cash provided by operating activities:
               
     Deferred income tax expense
   
8,000
     
5,000
 
     Depreciation and amortization
   
14,141
     
13,525
 
     Amortization of held to maturity investments
   
3,279
     
5,940
 
     Change in carrying value of certificates of deposit
   
(59,032
)
   
(55,669
)
  Changes in operating assets and liabilities:
               
     Decrease (increase) in receivables
   
39,122
     
(15,686
)
     Increase in prepaid reinsurance premiums
   
(7,443
)
   
(907
)
     Increase in deferred policy acquisition costs
   
(27,836
)
   
(18,167
)
     Increase in accrued underwriting expenses
   
3,843
     
14,232
 
     Increase in unearned premiums
   
89,923
     
47,979
 
     Increase in accrued losses and loss adjustment expenses
   
2,000
     
1,000
 
     Decrease in federal income taxes payable
   
(12,500
)
   
(22,500
)
                 
       Net cash provided by operating activities
   
505,165
     
316,248
 
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
  Purchase of fixed assets
   
-
     
(3,707
)
  Proceeds from the sale of investments
   
497,138
     
1,502,601
 
  Investment purchases
   
(740,000
)
   
(1,825,000
)
                 
     Net cash used in investing activities
   
(242,862
)
   
(326,106
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
  Cash dividends paid to stockholders
   
(225,741
)
   
(272,319
)
                 
     Net cash used in financing activities
   
(225,741
)
   
(272,319
)
                 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
   
36,562
     
(282,177
)
                 
CASH AND CASH EQUIVALENTS:
               
  Beginning of year
   
848,047
     
1,130,224
 
                 
  End of year
 
$
884,609
   
$
848,047
 
                 
NONCASH CHANGE IN FINANCING ACTIVITIES:
               
Dividends declared but not paid
 
$
74,256
   
$
-
 
                 
SUPPLEMENTAL DISCLOSURES:
               
  Interest paid
 
$
-
   
$
-
 
  Federal income taxes paid
 
$
223,700
   
$
233,800
 
                 
The accompanying notes are an integral part of the financial statements.
         
5

UNITED CASUALTY AND SURETY INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Background – United Casualty and Surety Insurance Company ("UCSIC" or the "Company"), originally a Georgia corporation, redomesticated to the Commonwealth of Massachusetts in June 1993. The Company is licensed and authorized to issue Fidelity and Surety bonds in Massachusetts, New York, Connecticut, New Hampshire, Rhode Island, Maine, Pennsylvania, New Jersey, and Florida. The Company also holds a certificate of authority from the United States Department of the Treasury to act as a Surety and Reinsurer on Federal Bonds.
Basis of Accounting – The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).
Use of Estimates – The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities.  Management reviews its estimates and assumptions annually.  Amounts reported for anticipated salvage and subrogation, accrued losses and loss adjustment expenses, and litigation contingencies are based, in part, on management estimates.  Management estimates have been made as to the recoverability and value of the collateral held, deferred tax liabilities, and incurred but not reported losses.  Actual results could differ from management estimates.
Cash and Cash Equivalents – The Company considers all investments with original maturities of 90 days or less to be cash equivalents.  The carrying value of the Company's cash and cash equivalents approximates fair value.
Concentration of Credit Risks – During 2015 and 2014, cash and cash equivalents and certificates of deposit at various financial institutions exceeded the FDIC limit of $250,000.  These funds are deposited with institutions that management believes are financially sound.  The Company limits its collection risk exposure on accounts receivable by obtaining collateral from the policyholders.
Investments – Investments are classified as held-to-maturity and are accounted for at amortized cost, or carrying value with regards to certificates of deposit, with no adjustments for changes in fair value.  Premiums and discounts are amortized or accreted over the lives of the related fixed maturities as an adjustment to the yield using the effective interest method.  Dividend and interest income are recognized when earned.  Realized investment gains or losses are included in earnings.
Deferred Policy Acquisition Costs – Policy acquisition costs, primarily commissions to agents and brokers and premium taxes, directly related to the successful acquisition of new or renewal insurance contracts are deferred and amortized over the related policy period, generally one year.  The recoverability of these costs is analyzed by management quarterly and if determined to be impaired, is charged to expense.  The Company does not consider anticipated investment income in determining whether a premium deficiency exists.  All other acquisition expenses are charged to operations as incurred.
Funds Held as Collateral Assets – Funds held as collateral assets consist principally of cash collateral received from principals to guarantee performance on surety bonds issued by the Company, as well as all other contractual obligations of the principals to the surety. The Company also holds other non-cash collateral.
6

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization.  Depreciation and amortization of property and equipment are calculated using the straight-line method over the estimated useful lives (generally, the life of the leasehold improvement and three to five years for furniture and equipment.)
Premium and Unearned Premium Reserves – Premiums written are recognized as revenues based on a pro-rata daily calculation over the respective term of the policies in-force.  Unearned premiums represent the portion of premiums written applicable to the unexpired term of the policies in-force.  The cost of reinsurance ceded is initially written as prepaid reinsurance premiums and is amortized over the reinsurance contract period in proportion to the amount of insurance protection provided.  Premiums ceded are netted against premiums written.
Losses and Loss Adjustment Expenses – Unpaid losses and loss adjustment expenses represent estimates for the ultimate cost of unpaid reported and unreported claims incurred and related expense.  Estimates for losses and loss adjustment expenses are based on past experience of unreported losses, experience of investigating and adjusting claims and consideration of the level of premiums written during 2015 and 2014, among other things.  Since the reserves are based on estimates, the ultimate liability may be more or less than such reserves.  At December 31, 2015 and 2014, the Company is unaware of any significant incurred losses not specifically reserved for.  The effects of changes in such estimated reserves are included in the results of operations in the periods in which the estimates are changed.  In spite of the variability of such estimates, management believes that the liabilities for losses and loss adjustment expenses are adequate.
Income Taxes – The Company calculates deferred income taxes using the "asset and liability method."  Under this method, deferred income tax assets and liabilities arise from temporary differences between the tax basis of the assets and liabilities and their reported amount in the financial statements and are measured using enacted tax rates.  Current and deferred tax assets and liabilities are aggregated on the balance sheets.
The Company has concluded that there are no significant uncertain tax positions requiring recognition in the financial statements.  The Company will report any tax-related interest and penalties related to uncertain tax positions as a component of federal income tax expense.
Premium taxes assessed in each licensed state are typically based on premiums written in each respective state.  However, there are several states that assess a retaliatory premium tax which permits the state taxing authority to assess a premium tax at least equal to the premium tax paid to the state in which the insurer is domiciled.  Premium taxes, which amounted to $105,700 and $98,000 in 2015 and 2014, respectively are reported in the Statements of Income as a component of underwriting, acquisition and insurance expenses.
Advertising Costs – Advertising costs are charged to expense as incurred.  Total advertising costs were approximately $11,900 and $6,700 for the years ended December 31, 2015 and 2014, respectively.
Recent Accounting PronouncementsIn November 2015, the Financial Accounting Standards Board (FASB) issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which, effective for annual and interim reporting periods beginning after December 15, 2016, simplifies the presentation of deferred income taxes, requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. Since early application is permitted, the new standard has been applied in the Company's financial statements as of December 31, 2015.
7

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In May 2015 the FASB issued ASU No. 2015-09, Financial Services-Insurance (Topic 944): Disclosures about Short-Duration Contracts. The guidance requires additional disclosures related to the liability for unpaid claims and claim adjustment expenses in an effort to increase transparency and comparability. The standard is effective for fiscal years beginning after December 15, 2015, and is to be applied retroactively. Management believes that the new guidance will have no material impact on the Company's results of operations or financial position.
In May 2014 the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).  Insurance contracts have been excluded from the scope of the guidance. In August 2015 the FASB issued an ASU to defer the effective date from fiscal years beginning after December 15, 2016, to fiscal years beginning after December 15, 2017. Management does not expect the adoption of this standard to have a material impact on the Company's financial condition or results of operations.
Subsequent Events – The Company has evaluated all subsequent events through January 9, 2017, the date the financial statements were available to be issued.
2.     INVESTMENTS
        The carrying value and estimated fair value of investments are as follows:
   
December 31, 2015      
 
   
Amortized Cost/ Carrying Value
   
Gross Unrealized Gains
   
Gross Unrealized Loss
   
Estimated Fair Value
 
                         
U.S. Treasury securities
 
$
814,620
   
$
6,295
   
$
-
   
$
820,915
 
Certificates of deposit, less than 12 months*
   
1,766,686
     
-
     
-
     
1,761,240
 
Certificates of deposit, greater than 12 months*
   
2,532,241
     
-
     
-
     
2,532,241
 
                                 
  Total investments, held-to-maturity
   
5,113,547
   
$
6,295
   
$
-
   
$
5,114,396
 
  Amount reported as investments, short-term
   
1,766,686
                         
                                 
  Investments, long-term
 
$
3,346,861
                         
                                 
 
   
December 31, 2014      
 
   
Amortized Cost/ Carrying Value
   
Gross Unrealized Gains
   
Gross Unrealized Loss
   
Estimated Fair Value
 
                         
U.S. Treasury securities
 
$
817,899
   
$
14,065
   
$
-
   
$
831,964
 
Certificates of deposit, less than 12 months*
   
523,716
     
-
     
-
     
497,138
 
Certificates of deposit, greater than 12 months*
   
3,473,317
     
-
     
-
     
3,473,317
 
                                 
  Total investments, held-to-maturity
   
4,814,932
   
$
14,065
   
$
-
   
$
4,802,419
 
  Amount reported as investments, short-term
   
523,716
                         
                                 
  Investments, long-term
 
$
4,291,216
                         
                                 
* Certificates of deposit are stated at carrying value which estimates fair value.
                 
 
8

3. DEFERRED POLICY ACQUISITION COSTS
The following table presents the amounts of policy acquisition costs deferred and amortized for the years ended December 31:
   
2015
   
2014
 
             
Deferred policy acquisition costs, beginning of year
 
$
261,976
   
$
243,809
 
Policy acquisition costs deferred
   
665,884
     
593,945
 
Policy acquisition costs expensed
   
(638,048
)
   
(575,778
)
                 
  Deferred policy acquisition costs, end of year
 
$
289,812
   
$
261,976
 
The following table presents the components of underwriting, acquisition and insurance expenses for the years ended December 31:
   
2015
   
2014
 
             
Policy acquisition costs expensed
 
$
638,048
   
$
575,778
 
Payroll and payroll taxes
   
844,897
     
810,573
 
Other operating expenses
   
519,285
     
497,052
 
                 
  Underwriting, acquisition and insurance expenses
 
$
2,002,230
   
$
1,883,403
 
4. PROPERTY AND EQUIPMENT
The following table presents the components of property and equipment at December 31:
 
 
2015
   
2014
 
             
Equipment
 
$
80,667
   
$
80,667
 
Furniture and fixtures
   
40,266
     
40,266
 
Leasehold improvements
   
24,265
     
24,265
 
     
145,198
     
145,198
 
                 
Accumulated depreciation and amortization
   
(122,687
   
(108,546
                 
Property and equipment, net
 
$
22,511
   
$
36,652
 
Depreciation expense was $14,141 and $13,525 for the years ended December 31, 2015 and 2014, respectively.
5. LIABILITY FOR ACCRUED LOSSES AND LOSS ADJUSTMENT EXPENSES
Activity in the liability for accrued losses and loss adjustment expenses (net of revenue from salvage and subrogation) for 2015 and 2014 is summarized as follows:
   
2015
   
2014
 
             
Balance at January 1:
 
$
20,000
   
$
19,000
 
Incurred related to current year
   
2,000
     
1,000
 
Balance at December 31:
 
$
22,000
   
$
20,000
 
Revenue from salvage and subrogation amounted to $19,276 and $86,989 in 2015 and 2014, respectively.
9

6. FEDERAL INCOME TAXES
The following is a reconciliation of income taxes at the federal statutory rate of 34% to the effective provision for federal income taxes as shown in the Statements of Income:
   
2015
   
2014
 
             
Earnings before federal income taxes
 
$
670,868
   
$
557,801
 
                 
Income taxes at federal statutory rate
 
$
228,100
   
$
189,600
 
Effect of:
               
  Change in unearned premium balance
   
22,303
     
12,721
 
  Other, net
   
(31,203
)
   
13,979
 
Provision for federal income taxes as reported
               
  on the Statements of Income
 
$
219,200
   
$
216,300
 
The provision for federal income taxes consists of the following for the years ended December 31:
   
2015
   
2014
 
             
Current
 
$
211,200
   
$
211,300
 
Deferred
   
8,000
     
5,000
 
                 
Provision for federal income taxes
 
$
219,200
   
$
216,300
 
The following summarizes the estimated tax effects of temporary difference that are included in the net deferred federal income tax provision:
   
2015
   
2014
 
             
Deferred policy acquisition costs
 
$
11,000
   
$
7,000
 
Property and equipment
   
(5,000
)
   
(5,000
)
Accrued losses and loss adjustment expenses
   
2,000
     
3,000
 
                 
   
$
8,000
   
$
5,000
 
Deferred income taxes reflect the net tax effect of temporary difference between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  The tax effects of significant items comprising the Company's net deferred income tax liability are as follows, as of December 31:
   
2015
   
2014
 
             
Deferred federal income tax liabilities:
           
  Deferred policy acquisition costs
 
$
116,000
   
$
105,000
 
  Property and equipment
   
6,000
     
11,000
 
  Accrued losses and loss adjustment expenses
   
33,000
     
31,000
 
                 
Net deferred federal income tax liability
 
$
155,000
   
$
147,000
 
Management believes that all U.S. federal income and state tax matters have been concluded through 2012.
10

7. RELATED-PARTY TRANSACTION
During 2015 and 2014, the Company paid the life insurance premiums for several policies, of which one of its Directors is the beneficiary.  Premiums under these policies amounted to $15,870 in 2015 and 2014, respectively.  In 2004 the Company entered into a split-dollar agreement with the beneficiary of the life insurance policy, whereby the beneficiary has agreed to pay back to the Company the premiums paid on the related policies.  The cash surrender value of the policies and death benefit serve as collateral to the agreement.  The life insurance held by the related party is term coverage.  The Company has conservatively elected not to reflect the premiums paid in 2015 and 2014, as a receivable due from related party as there is no cash surrender value to cover the premiums paid.
8. REINSURANCE
The Company reinsures certain portions of its surety business in order to limit the amount of loss on individual claims.  Under the terms of the reinsurance agreement, the Company is responsible for $125,000 ($150,000 in 2014) of losses on contract surety for each principal for losses up to $2,500,000.  The Company is also responsible for 20% of the losses on contract surety covered under the reinsurance agreement between $2,500,000 and $3,000,000, subject to a maximum of $100,000 for each principal and in the aggregate.  The reinsurer covers amounts in excess of $125,000.  This excess loss coverage, however, is limited, in the aggregate, to losses of $3,000,000 and, in the case of each principal, to losses of $2,875,000.  Under the excess of loss reinsurance agreement the Company has coverage up to $5,500,000 on any one principal, subject to an annual aggregate limit of $5,500,000 on fully secured court bonds.  With respect to fully secured court bonds, the Company shall retain net for its own account, its underwriting limitation in accordance with The Department of Treasury less $125,000 of the business covered.  Insurance premiums ceded under this reinsurance agreement during 2015 and 2014 amounted to $245,406 and $212,270, respectively. The Company is contingently liable with respect to ceded insurance should any reinsurer be unable to meet the obligations assumed by it.
Effective January 1, 2016, the Company retention layer under its reinsurance agreement was reduced from $125,000 to $100,000 for losses up to $2,500,000 for all surety business in force.  Retention was reduced from 20% to 10% and is subject to a maximum of $50,000 for each principal and in the aggregate for losses between $2,500,000 and $3,000,000.  The excess of loss coverage aggregate was increased from $3,000,000 to $3,500,000 and in the case of each principal to losses of $3,400,000.
9. STATUTORY FINANCIAL INFORMATION
Insurance companies are required to file financial statements with state insurance regulatory authorities prepared on an accounting basis prescribed or permitted by such authorities (statutory basis).  Net earnings and capital and surplus on a statutory basis as of and for the years ended December 31 were as follows:
Statutory Net Earnings
   
Statutory Capital and Surplus
 
2015
   
2014
   
2015
   
2014
 
                     
$
438,973
   
$
336,859
   
$
4,901,365
   
$
4,739,460
 
For the years ended December 31, 2015 and 2014, statutory net earnings differ from net earnings on a GAAP basis primarily due to the treatment of deferred policy acquisition costs, the basis difference in property and equipment, and accrued losses and loss adjustment expenses.
11

9. STATUTORY FINANCIAL INFORMATION (CONTINUED)
Capital and surplus requirements of the states in which the Company is licensed to underwrite fidelity and surety insurance, including the Commonwealth of Massachusetts, New York, Connecticut, New Hampshire, Rhode Island, Maine, Pennsylvania, New Jersey, and Florida have been met as of December 31, 2015 and 2014.  The Company, as required, maintains a $100,000 cash collateral deposit in the State of Florida.  In addition the Company maintains a deposit of $250,000 and $500,000 in the States of New Hampshire and Massachusetts, respectively.  The deposits in Florida and New Hampshire were established solely for the benefit of policyholders located in those states.  The deposit maintained in Massachusetts is for the benefit of all policyholders.
As of December 31, 2015 and 2014, there are no regulatory restrictions on the payment of dividends to shareholders.  However, the Company's ability to declare and pay dividends will depend on the working capital of the Company.  Dividends declared to stockholders amounted to $299,997 and $174,998 in 2015 and 2014, respectively.
10. LEASES
The Company's corporate offices are located in Quincy, MA.  The lease agreement runs through August 1, 2017 with monthly payments, including storage space, of $5,014.    Rent expense for 2015 and 2014 was $68,438 and $66,416, respectively. During June 2016 the Company extended the operating lease for its corporate office for five years, expiring on July 31, 2022.  The Company has the option to extend the lease for an additional five years through July 2027.
Future minimum lease payments, inclusive of the extension, are as follows:
2016
 
$
60,171
 
2017
   
68,606
 
2018
   
81,400
 
2019
   
83,766
 
2020
   
86,132
 
Thereafter
   
140,927
 
11. EMPLOYEE BENEFIT PLAN
In September 2004 the Company established the United Casualty and Surety Insurance Company 401(k) Profit Sharing Plan (the "Plan').  The Plan is available to all employees that have completed one year of service and have attained the age of twenty-one.  Employees are allowed to contribute up to 75% of their compensation not to exceed the maximum amount allowed by the Internal Revenue Service.  The Company may make discretionary matching contributions up to 3% of individual compensation and discretionary profit sharing contributions.  During 2015 and 2014, the Company made discretionary contributions of $22,515 and $22,618, respectively.  Company contributions vest 20% after two years and are 100% vested after six-years.
12. COMMITMENTS AND CONTINGENCIES
Under insurance guaranty fund laws in each state, the District of Columbia and Puerto Rico, insurers licensed to do business can be assessed by state insurance guaranty associations for certain obligations of insolvent insurance companies to policyholders and claimants.  Recent regulatory actions against certain insurers encountering financial difficulty have prompted various state insurance guaranty associations to begin assessing insurance companies for the deemed losses.  Most of these laws do provide, however, that an assessment may be excused or deferred if it would threaten an insurer's solvency and further provide annual limits on such assessments.  A large part of the assessments paid by the Company pursuant to these laws may be used as credits for a portion of the Company's premium taxes.
12

12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Various litigation claims and assessments against the Company, in addition to those otherwise provided for in the Company's statutory financial statements, have arisen in the ordinary course of the Company's business.  Additionally, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company's compliance with applicable insurance and other laws and regulations.
In some of the matters referred to above, large and/or indeterminate amounts, including punitive damages and treble damages, are sought.  While it is not feasible to predict or determine the ultimate outcome of all pending investigations and legal proceedings or provide reasonable ranges of potential losses, it is the opinion of the Company's management that their outcomes, after consideration of available insurance and reinsurance and the provisions made in the Company's financial statements, are not likely to have a material adverse effect on the Company's financial position.  However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company's operating results or cash flows in particular annual periods.
13. SUBSEQUENT EVENTS
During June 2016 the Company extended the corporate office operating lease for an additional five years through July 2022.  The lease extension has been reflected in the lease commitment disclosure (see Note 10).
On December 5, 2016, the Massachusetts Department of Insurance approved the purchase of all outstanding common stock of United Casualty Surety Insurance Company by General Indemnity Group, LLC ("GIG"), a subsidiary of Boston Omaha Corporation (OTC: BOMN).  Subsequently, on December 7, 2016, the acquisition was completed and under the terms of the stock purchase agreement, GIG paid the Company's shareholders $13,000,000.
On December 27, 2016 the Company amended its articles whereby the par value of the common stock was increased to $130 per common share from $75 per common share.  This amendment results in a reclassification of additional paid in capital to the common stock account, however does not impact the reported total of stockholders' equity.

* * * * * * * * * * * * *
13

EX-99.2 3 ex992.htm EXHIBIT 99.2
Exhibit 99.2
 
United Casualty and Surety
Insurance Company
Unaudited Financial Statements for the Nine
Months Ended September 30, 2016 and Year
Ended December 31, 2015






UNITED CASUALTY AND SURETY INSURANCE COMPANY
TABLE OF CONTENTS

  Page 
   
 UNAUDITED FINANCIAL STATEMENTS:
   
 
Balance Sheets – September 30, 2016 and December 31, 2015
1
     
 
Statements of Income – Three and Nine Months Ended September 30, 2016 and 2015
2
     
 
Statements of Cash Flows – Nine Months Ended September 30, 2016 and 2015
3
     
 
Notes to Unaudited Financial Statements
 4-6


UNITED CASUALTY AND SURETY INSURANCE COMPANY
   
     
BALANCE SHEETS
   
(UNAUDITED)
   
 
             
   
September 30,
   
December 31,
 
ASSETS
 
2016
   
2015
 
             
CURRENT ASSETS:
           
  Cash and cash equivalents
 
$
1,678,554
   
$
884,609
 
  Investments, short-term
   
1,394,842
     
1,766,686
 
  Receivables:
               
    Premiums
   
590,212
     
230,312
 
    Anticipated salvage and subrogation
   
84,668
     
29,675
 
     Total receivables
   
674,880
     
259,987
 
  Prepaid reinsurance premiums
   
99,153
     
97,545
 
  Deferred policy acquisition costs
   
335,506
     
289,812
 
                 
      Total current assets
   
4,182,935
     
3,298,639
 
                 
  Other assets
   
5,529
     
4,864
 
  Investments, long-term
   
2,839,725
     
3,346,861
 
  Funds held as collateral assets
   
1,682,147
     
2,145,513
 
  Property and equipment, net
   
11,905
     
22,511
 
                 
     TOTAL ASSETS
 
$
8,722,241
   
$
8,818,388
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
CURRENT LIABILITIES:
               
  Accrued underwriting expenses
 
$
108,285
   
$
89,817
 
  Dividends payable
   
-
     
81,798
 
  Unearned premiums
   
1,343,739
     
1,174,208
 
  Accrued losses and loss adjustment expenses
   
22,000
     
22,000
 
  Federal income taxes payable
   
60,000
     
-
 
  Funds held as collateral
   
1,682,147
     
2,145,513
 
                 
     Total current liabilities
   
3,216,171
     
3,513,336
 
                 
LONG-TERM LIABILITIES:
               
  Deferred tax liability
   
155,000
     
155,000
 
                 
     TOTAL LIABILITIES
   
3,371,171
     
3,668,336
 
                 
STOCKHOLDERS' EQUITY:
               
  Common stock, $75 par value – 20,000 shares authorized, 14,484 shares
               
    issued and outstanding at September 30, 2016 and December 31, 2015
   
1,086,300
     
1,086,300
 
  Additional paid-in capital
   
1,459,445
     
1,459,445
 
  Retained earnings
   
2,805,325
     
2,604,307
 
                 
    Total Stockholders' Equity
   
5,351,070
     
5,150,052
 
                 
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
8,722,241
   
$
8,818,388
 
                 
See accompanying notes to the unaudited financial statements.
               
1

UNITED CASUALTY AND SURETY INSURANCE COMPANY
     
           
STATEMENTS OF INCOME
         
(UNAUDITED)
         
 
   
For the Three Months Ended
   
For the Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2016
   
2015
   
2016
   
2015
 
                         
OPERATING REVENUES:
                       
                         
  Premiums earned
 
$
559,254
   
$
663,521
   
$
1,690,180
   
$
1,949,418
 
  Salvage and subrogation
   
26,422
     
10,024
     
55,593
     
14,404
 
  Net investment income
   
24,863
     
22,401
     
73,868
     
70,280
 
                                 
    Total Operating Revenues
   
610,539
     
695,946
     
1,819,641
     
2,034,102
 
                                 
OPERATING EXPENSES:
                               
                                 
  Underwriting, acquisition and insurance expenses
   
466,978
     
494,294
     
1,358,578
     
1,407,610
 
  Losses and loss adjustment expenses
   
26,422
     
8,031
     
54,993
     
12,411
 
  Other (income) expense
   
-
     
(1,601
)
   
(2,054
)
   
(4,890
)
  Depreciation and amortization expense
   
3,535
     
3,535
     
10,606
     
10,606
 
                                 
    Total Operating Expenses
   
496,935
     
504,259
     
1,422,123
     
1,425,737
 
                                 
INCOME BEFORE FEDERAL INCOME TAXES
   
113,604
     
191,687
     
397,518
     
608,365
 
                                 
FEDERAL INCOME TAXES
   
30,000
     
30,000
     
96,500
     
122,500
 
                                 
NET INCOME
 
$
83,604
   
$
161,687
   
$
301,018
   
$
485,865
 
                                 
See accompanying notes to the unaudited financial statements.
                 
2

UNITED CASUALTY AND SURETY INSURANCE COMPANY
   
     
STATEMENTS OF CASH FLOWS
   
(UNAUDITED)
   
 
   
For the Nine Months Ended
 
   
September 30,
 
   
2016
   
2015
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
  Net income
 
$
301,018
   
$
485,865
 
  Adjustments to reconcile net income to net cash provided by operating activities:
               
    Depreciation and amortization
   
10,606
     
10,606
 
    Amortization of bond premiums
   
3,763
     
2,025
 
    Change in carrying value of certificates of deposit
   
(32,889
)
   
(30,094
)
  Changes in operating assets and liabilities:
               
    Increase in receivables
   
(414,893
)
   
(224,864
)
    Increase in prepaid reinsurance premiums
   
(1,608
)
   
(28,652
)
    Increase in other assets
   
(665
)
   
-
 
    Increase in deferred acquisition costs
   
(45,694
)
   
(120,452
)
    Increase in accrued underwriting expenses
   
18,468
     
59,354
 
    Increase in unearned premiums
   
169,531
     
372,043
 
    Increase in federal income taxes payable
   
60,000
     
97,500
 
                 
     Net cash provided by operating activities
   
67,637
     
623,331
 
                 
INVESTING ACTIVITIES:
               
  Proceeds from the sale of investments
   
1,008,106
     
497,130
 
  Investment purchases
   
(100,000
)
   
(490,000
)
                 
    Net cash provided by investing activities
   
908,106
     
7,130
 
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
  Dividends paid to stockholders
   
(181,798
)
   
(207,539
)
                 
    Net cash used in financing activities
   
(181,798
)
   
(207,539
)
                 
INCREASE IN CASH AND CASH EQUIVALENTS
   
793,945
     
422,922
 
                 
CASH AND CASH EQUIVALENTS:
               
  Beginning of period
   
884,609
     
848,047
 
                 
  End of period
 
$
1,678,554
   
$
1,270,969
 
                 
SUPPLEMENTAL DISCLOSURES:
               
  Interest paid
 
$
-
   
$
-
 
  Income taxes paid
 
$
36,500
   
$
25,000
 
                 
See accompanying notes to the unaudited financial statements.
               
3

UNITED CASUALTY AND SURETY INSURANCE COMPANY
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND YEAR ENDED DECEMBER 31, 2015
1. ORGANIZATION AND BACKGROUND
The accompanying unaudited interim financial statements have been prepared in connection with United Casualty and Surety Insurance Company's sale of all outstanding common stock to General Indemnity Group, LLC ("GIG"), a wholly-owned subsidiary of Boston Omaha Corporation, and to comply with the rules and regulations of the Securities and Exchange Commission ("SEC") for inclusion by Boston Omaha Corporation in its current report on Form 8-K/A.
United Casualty and Surety Insurance Company ("UCSIC" or the "Company"), originally a Georgia corporation, redomesticated to the Commonwealth of Massachusetts in June 1993. The Company is licensed and authorized to issue Fidelity and Surety bonds in Massachusetts, New York, Connecticut, New Hampshire, Rhode Island, Maine, Pennsylvania, New Jersey, and Florida. The Company also holds a certificate of authority from the United States Department of the Treasury to act as a Surety and Reinsurer on Federal Bonds.
The accompanying unaudited interim financial statements of United Casualty and Surety Insurance Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the Company's audited financial statements and notes thereto for the year ended December 31, 2015 included elsewhere in this Form 8-K/A.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein.  The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.  Notes to the interim financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the year ended December 31, 2015 included elsewhere in this Form 8-K/A have been omitted.

2.     INVESTMENTS
        The carrying value and estimated fair value of investments are as follows:
   
September 30, 2016      
 
   
Amortized Cost
   
Gross Unrealized Gains
   
Gross Unrealized Loss
   
Estimated Fair Value
 
                         
U.S. Treasury securities
 
$
810,857
   
$
44
   
$
-
   
$
810,901
 
Certificates of deposit, less than 12 months*
   
1,394,842
     
-
     
-
     
767,132
 
Certificates of deposit, greater than 12 months*
   
2,028,868
     
-
     
-
     
971,491
 
                                 
  Total investments, held-to-maturity
   
4,234,567
   
$
44
   
$
-
   
$
2,549,524
 
  Amount reported as investments, short-term
   
1,394,842
                         
                                 
  Investments, long-term
 
$
2,839,725
                         
* Certificates of deposit are stated at carrying value which estimates fair value.
4

2.     INVESTMENTS (CONTINUED)
   
December 31, 2015      
 
   
Amortized Cost/ Carrying Value
   
Gross Unrealized Gains
   
Gross Unrealized Loss
   
Estimated Fair Value
 
                         
U.S. Treasury securities
 
$
814,620
   
$
6,295
   
$
-
   
$
820,915
 
Certificates of deposit, less than 12 months*
   
1,766,686
     
-
     
-
     
1,761,240
 
Certificates of deposit, greater than 12 months*
   
2,532,241
     
-
     
-
     
2,532,241
 
                                 
  Total investments, held-to-maturity
   
5,113,547
   
$
6,295
   
$
-
   
$
5,114,396
 
  Amount reported as investments, short-term
   
1,766,686
                         
                                 
  Investments, long-term
 
$
3,346,861
                         
* Certificates of deposit are stated at carrying value which estimates fair value.
3. DEFERRED POLICY ACQUISITION COSTS
The following table presents the amounts of policy acquisition costs deferred and amortized as of:
   
September 30,
   
December 31,
 
   
2016
   
2015
 
             
Deferred policy acquisition costs, beginning of period
 
$
289,812
   
$
261,976
 
Policy acquisition costs deferred
   
467,701
     
665,884
 
Policy acquisition costs expensed
   
(422,007
)
   
(638,048
)
                 
  Deferred policy acquisition costs, end of period
 
$
335,506
   
$
289,812
 
The following table presents the components of underwriting, acquisition and insurance expenses:
   
For the Three Months
   
For the Nine Months
 
   
Ended September 30,
   
Ended September 30,
 
   
2016
   
2015
   
2016
   
2015
 
                         
Policy acquisition costs expensed
 
$
145,884
   
$
184,655
   
$
422,007
   
$
511,913
 
Payroll and payroll taxes
   
187,561
     
187,619
     
572,003
     
595,456
 
Other operating expenses
   
133,533
     
122,020
     
364,568
     
300,241
  
  Underwriting, acquisition and insurance expenses
 
$
466,978
   
$
494,294
   
$
1,358,578
   
$
1,407,610
 
5

4. PROPERTY AND EQUIPMENT
The following table presents the components of property and equipment as of:
    September 30,     December 31,  
 
  2016     2015  
             
Equipment
 
$
80,667
   
$
80,667
 
Furniture and fixtures
   
40,266
     
40,266
 
Leasehold improvements
   
24,265
     
24,265
 
     
145,198
     
145,198
 
                 
Accumulated depreciation and amortization
   
(133,293
)
   
(122,687
                 
  Property and equipment, net
 
$
11,905
   
$
22,511
 
5. STATUTORY FINANCIAL INFORMATION
Insurance companies are required to file financial statements with state insurance regulatory authorities prepared on an accounting basis prescribed or permitted by such authorities (statutory basis).  Net earnings and capital and surplus on a statutory basis were as follows:
Statutory Net Earnings
   
Statutory Capital and Surplus
 
September 30,
   
September 30,
   
September 30,
   
December 31,
 
2016
   
2015
   
2016
   
2015
 
                     
$
265,935
   
$
376,019
   
$
5,064,193
   
$
4,901,365
 
For the nine months ended September 30, 2016 and 2015, statutory net earnings differ from net earnings on a GAAP basis primarily due to the treatment of deferred acquisition costs, the basis of difference in property and equipment, and changes in non-admitted assets.
6. SUBSEQUENT EVENTS
On December 5, 2016 the Massachusetts Department of Insurance approved the purchase of all outstanding common stock of United Casualty Surety Insurance Company by General Indemnity Group, LLC ("GIG"), a subsidiary of Boston Omaha Corporation (OTC: BOMN).  Subsequently, on December 7, 2016, the acquisition was completed and under the terms of the stock purchase agreement, GIG paid the Company's shareholders $13,000,000.
On December 27, 2016 the Company amended its articles whereby the par value of the common stock was increased to $130 per common share from $75 per common share.  This amendment results in a reclassification of additional paid in capital to the common stock account, however does not impact the reported total of stockholders' equity.

* * * * * * * * * * * * *
6

EX-99.3 4 ex993.htm EXHIBIT 99.3
Exhibit 99.3
 

 
 
BOSTON OMAHA CORPORATION

AND UNITED CASUALTY AND SURETY INSURANCE COMPANY


UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AND
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS


BOSTON OMAHA CORPORATION
AND UNITED CASUALTY AND SURETY INSURANCE COMPANY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
                   
September 30, 2016
                   
ASSETS
 
                               
         
Pro Forma
   
Elimination
         
Pro Forma
 
   
Boston Omaha
   
Adjustments
   
Adjustments
   
Notes
   
Consolidated
 
                               
Current Assets:
                             
  Cash
 
$
42,375,758
   
$
(11,321,446
)
 
$
-
     
(2)
 
 
$
31,054,312
 
  Restricted cash
   
227,943
     
-
     
-
     
 
 
   
227,943
 
  Accounts receivable, net
   
469,796
     
674,880
     
-
     
(2)
 
   
1,144,676
 
  Investments, short-term
   
-
     
1,394,842
             
(2)
 
   
1,394,842
 
  Prepaid expense
   
377,091
     
99,153
             
(2)
 
   
476,244
 
  Deferred policy acquisition costs
   
-
     
335,506
     
-
     
(2)
 
   
335,506
 
                                         
    Total Current Assets
   
43,450,588
     
(8,817,065
)
   
-
             
34,633,523
 
                                         
Property and Equipment:
                                       
  Structures and displays
   
9,289,542
     
-
     
-
             
9,289,542
 
  Vehicles, equipment, and furniture
   
112,063
     
145,198
     
-
     
(2)
 
   
257,261
 
  Accumulated depreciation
   
(961,492
)
   
(133,293
)
   
-
     
(2)
 
   
(1,094,785
)
                                         
    Total Property and Equipment, net
   
8,440,113
     
11,905
     
-
             
8,452,018
 
                                         
Other Assets:
                                       
  Goodwill
   
7,917,853
     
7,198,930
     
-
     
(2)
 
   
15,116,783
 
  Intangible assets, net
   
2,887,800
     
450,000
     
-
     
(2)
 
   
3,337,800
 
  Investment in unconsolidated affiliate
   
866,221
     
-
     
-
             
866,221
 
  Investment in subsidiary
   
-
     
5,351,070
     
(5,351,070
)
   
(2)
 
   
-
 
  Funds held as collateral assets
   
-
     
1,682,147
     
-
     
(2)
 
   
1,682,147
 
  Investments, long-term
   
-
     
2,839,725
     
-
     
(2)
 
   
2,839,725
 
  Convertible note receivable
   
100,000
     
-
     
-
             
100,000
 
  Other assets
   
-
     
5,529
     
-
     
(2)
 
   
5,529
 
                                         
    Total Other Assets
   
11,771,874
     
17,527,401
     
(5,351,070
)
           
23,948,205
 
                                         
    Total Assets
 
$
63,662,575
   
$
8,722,241
   
$
(5,351,070
)
         
$
67,033,746
 
                                         
See accompanying notes to unaudited pro forma consolidated financial statements.
 
2

BOSTON OMAHA CORPORATION
AND UNITED CASUALTY AND SURETY INSURANCE COMPANY

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET    
                   
September 30, 2016         
                   
LIABILITIES AND STOCKHOLDERS' EQUITY      
 
                               
         
Pro Forma
   
Elimination
         
Pro Forma
 
   
Boston Omaha
   
Adjustments
   
Adjustments
   
Notes
   
Consolidated
 
                               
Current Liabilities:
                             
                             
  Accounts payable
 
$
342,505
   
$
130,285
   
$
-
     
(2)
 
 
$
472,790
 
    and accrued expenses                                        
  Unearned premiums
   
-
     
1,343,739
     
-
     
(2)
 
   
1,343,739
 
  Federal income taxes payable
   
-
     
60,000
     
-
     
(2)
 
   
60,000
 
  Funds held as collateral
   
-
     
1,682,147
     
-
     
(2)
 
   
1,682,147
 
  Deferred revenue
   
101,536
     
-
     
-
             
101,536
 
                                         
    Total Current Liabilities
   
444,041
     
3,216,171
     
-
             
3,660,212
 
                                         
  Deferred tax liability, noncurrent
     
155,000
             
(2)
 
   
155,000
 
  Long-term payable for acquisition
   
126,500
     
-
     
-
             
126,500
 
                                         
    Total Liabilities
   
570,541
     
3,371,171
     
-
             
3,941,712
 
                                         
Stockholders' Equity:
                                       
  Preferred stock, $.001 par value,
                                 
    1,000,000 shares authorized,
                                 
    0 shares issued and outstanding
   
-
     
-
     
-
             
-
 
  Common stock, $.001 par value,
                                 
    11,000,000 shares authorized,
                                 
    5,841,815 shares issued
                                       
    and outstanding
   
5,842
     
-
     
-
             
5,842
 
  Class A common stock, $.001 par value,
                                 
    1,161,161 shares authorized,
                                 
    1,055,560 shares issued
                                       
    and outstanding
   
1,056
     
-
     
-
             
1,056
 
  Common stock, $75 par value,
                                 
    20,000 shares authorized,
                                       
    14,484 shares issued
                                       
    and outstanding
   
-
     
1,086,300
     
(1,086,300
)
   
(2)
 
   
-
 
  Additonal paid-in capital
   
66,925,766
     
1,459,445
     
(1,459,445
)
   
(2)
 
   
66,925,766
 
  Accumulated deficit
   
(3,840,630
)
   
2,805,325
     
(2,805,325
)
   
(2)
 
   
(3,840,630
)
                                         
    Total Stockholders' Equity
   
63,092,034
     
5,351,070
     
(5,351,070
)
           
63,092,034
 
                                         
    Total Liabilities and
                                       
      Stockholders' Equity
 
$
63,662,575
   
$
8,722,241
   
$
(5,351,070
)
         
$
67,033,746
 
                                         
 See accompanying notes to unaudited pro forma consolidated financial statements.                     
3

BOSTON OMAHA CORPORATION
AND UNITED CASUALTY AND SURETY INSURANCE COMPANY

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS    
               
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016      
 
                         
         
Pro Forma
         
Pro Forma
 
   
Boston Omaha
   
Adjustments
   
Notes
   
Consolidated
 
Revenues:
                       
  Billboard rentals
 
$
2,273,210
   
$
-
         
$
2,273,210
 
  Premiums earned
   
-
     
1,690,180
     
(2)
 
   
1,690,180
 
  Insurance commissions
   
276,850
     
-
             
276,850
 
  Salvage and subrogation
   
-
     
55,593
     
(2)
 
   
55,593
 
  Net investment income
   
-
     
73,868
     
(2)
 
   
73,868
 
                                 
    Total Revenues
   
2,550,060
     
1,819,641
             
4,369,701
 
                                 
Costs and Expenses: