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Universal Insurance Holdings, Inc. – ‘10QSB/A’ for 6/30/98

As of: Wednesday, 9/2/98 · For: 6/30/98 · Accession #: 898432-98-615 · File #: 0-20848

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 9/02/98  Universal Ins Holdings, Inc.      10QSB/A     6/30/98    1:39K                                    K&L Gates LLP/DC/FA

Amendment to Quarterly Report — Small Business — Form 10-QSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10QSB/A     Amendment to Quarterly Report -- Small Business       18     76K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Changes in Securities Defaults upon Senior Securities Exhibits and Reports on Form 8-K Financial Condition Financial Statements Legal Proceedings Management's Discussion And Analysis or Plan of Operation Other Information Submission of Matters to a Vote of Security Holders
1	1st Page - Filing Submission
2	Item 1. Financial Statements
13	Item 2. Management's Discussion And Analysis or Plan of Operation
14	Financial Condition
16	Item 1. Legal Proceedings
"	Item 2. Changes in Securities
"	Item 3. Defaults upon Senior Securities
"	Item 4. Submission of Matters to a Vote of Security Holders
17	Item 5. Other Information
"	Item 6. Exhibits and Reports on Form 8-K

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 FORM 10 - QSB
(Amendment No. 1) 

[X]   QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE  SECURITIES  
EXCHANGE  ACT OF 1934                                               
For the quarterly period ended June 30, 1998

OR

[ ]  TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES   
EXCHANGE  ACT OF 1934                                                 
 For the transition period from ______________ to ______________

COMMISSION FILE NUMBER 0-20848

 UNIVERSAL HEIGHTS, INC.
(Name of small business issuer in its charter)

DELAWARE                                          65-0231984
(State or other jurisdiction of                             (I.R.S. Employer    
incorporation or organization)                             Identification No.)

2875 N.E. 191 STREET                                                
SUITE 400 A                                                         
MIAMI, FLORIDA                                          33180       
(Address of principal executive offices)                   (Zip Code)           

Company's telephone number, including area code: (305) 792-4200                 

      Indicate  by check mark  whether  the  Company  (1) has filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the preceding 12 months (or for such shorter period that the Company
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes /X/ No / /                               

    Number of shares of the Common Stock of Universal  Heights,  Inc. issued
and outstanding as of  June 30, 1998:  14,687,604.                              

Transitional Small Business Disclosure Format   Yes / /  No /X/     

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UNIVERSAL HEIGHTS, INC.   

PART I - FINANCIAL INFORMATION  

Item  1.     Financial Statements                                               

      The following unaudited,  condensed  consolidated  financial statements of
the Company  have been  prepared in  accordance  with the  instructions  to Form
10-QSB and, therefore,  omit or condense certain footnotes and other information
normally included in financial  statements prepared in accordance with generally
accepted accounting  principles.  In the opinion of management,  all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of the financial  information for the interim  periods  reported have been made.
Results of operations for the six months ended June 30, 1998 are not necessarily
indicative of the results for the year ending December 31, 1998.                

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                    UNIVERSAL HEIGHTS, INC. AND SUBSIDIARY                                                

                          CONSOLIDATED BALANCE SHEET                                                      
                                 (Unaudited)                                                              

                                    ASSETS                                                                

                                                                               June 30,      December 31, 
                                                                                 1998            1997     
                                                                            ----------------------------- 

                                                                                                          
Equity securities available for sale at cost which approximates fair value  $    156,460     $       --   
Fixed maturity securities held-to-maturity at amortized cost which                                        
      approximates fair value                                                  2,674,638             --   

Cash and cash equivalents                                                      3,755,712        1,172,418 
Prepaid Reinsurance Premiums                                                   5,027,165             --   
Prepaid Other                                                                    254,000             --   
Receivables:                                                                                              
      Reinsurance Recoverable on Losses                                        1,274,130             --   
      Other Receivables                                                        1,356,700           21,478 
Deferred Policy Acquisition Cost                                                 156,232             --   
Property and equipment, net                                                        4,375            9,388 
Deposits                                                                          10,316            9,816 
Insurance License Acquisition Costs                                              143,277          118,678 
Cash restricted for regulatory capitalization requirements                     5,300,000        5,300,000 
                                                                               ---------        --------- 
Total Assets                                                                $ 20,113,005     $  6,631,778 
                                                                            ============     ============ 

                              LIABILITIES AND STOCKHOLDERS' EQUITY                                        

LIABILITIES:                                                                                              
       Unpaid losses and loss adjustment expenses                           $  2,548,260             --   
       Unearned premiums                                                       8,882,831             --   
       Accounts payable                                                        1,218,542        1,030,085 
       Other accrued expenses                                                    334,123          278,392 
       Accrued Tax, Licenses and Fees                                             52,500             --   
       Due to related parties                                                    320,872          406,000 
       Other                                                                       3,182            7,161 
                                                                                   -----            ----- 
           Total Liabilities                                                  13,360,310        1,721,638 
                                                                              ==========        ========= 

STOCKHOLDERS' EQUITY:                                                                                     
Cumulative preferred stock, $.01 par value, 1,000,000 shares                                              
       authorized, 138,640 shares issued and outstanding                           1,387            1,387 
 Common stock, $.01 par value, 20,000,000 shares authorized,                                              
       14,687,604 shares issued                                                  146,876          146,326 
Additional paid-in capital                                                    14,983,471       14,688,981 
Accumulated deficit                                                           (8,379,039)      (9,926,554)
                                                                              ----------       ---------- 

Total Stockholders' Equity                                                     6,752,695        4,910,140 
                                                                               ---------        --------- 

Total Liabilities and Stockholders' Equity                                  $ 20,113,005      $ 6,631,778 
                                                                            ============        ========= 

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                    UNIVERSAL HEIGHTS, INC. AND SUBSIDIARY                                                                
                    CONSOLIDATED STATEMENTS OF OPERATIONS                                                                 
                                 (Unaudited)                                                                              

                                                               For Six Months Ended           For Three Months Ended      
                                                              June 30,           July 31,       June 30,        July 31,  
                                                                1998               1997           1998            1997    
                                                                ----               ----           ----            ----    
                                                                                                                          
PREMIUMS EARNED AND OTHER REVENUES                                                                                        
      Premium Income                                        $  4,196,356     $       --     $  3,394,766     $       --   
      Net investment income                                      336,812             --          244,195             --   
      Other income (expense)                                       3,545           (8,192)           980           (1,559)
                                                            ------------     ------------   ------------     ------------ 

           Total Revenues                                      4,536,713           (8,192)     3,639,941           (1,559)

OPERATING COST AND EXPENSES:                                                                                              
      Losses and loss adjustment expenses                      1,628,814             --        1,317,882             --   
      General and Administrative expenses                      1,360,383          329,165      1,147,374          228,939 
                                                            ------------     ------------   ------------     ------------ 

           Total Operating Expenses                            2,989,197          329,165      2,465,256          228,939 

INCOME FROM CONTINUING OPERATIONS                              1,547,516         (337,357)     1,174,685         (230,498)

DISCONTINUED OPERATIONS                                                                                                   
      Loss from operations of the sports novelty                                                                          
           and souvenir business                                    --           (227,322)          --            (38,771)
      Loss on disposal of sports novelty and                                                                              
           souvenir business                                        --         (1,387,575)          --               --   
                                                            ------------     ------------   ------------     ------------ 
           Loss from Discontinued Operations                        --         (1,614,897)          --            (38,771)

INCOME (LOSS) BEFORE INCOME TAXES                              1,547,516       (1,952,254)     1,174,685         (269,269)

Federal Income tax provision                                        --               --             --               --   
                                                            ------------     ------------   ------------     ------------ 

NET INCOME (LOSS)                                              1,547,516       (1,952,254)     1,174,685         (269,269)
                                                            ============     ============   ============     ============ 

INCOME (LOSS) PER COMMON SHARE:                                                                                           
Basic                                                                                                                     
      Income (loss) from continuing operations              $       0.11            (0.10)  $       0.08     $      (0.07)
      Income (loss from discontinued operations                                     (0.47)                          (0.01)
                                                            ------------     ------------   ------------     ------------ 
Net income (loss)                                           $       0.11     $      (0.57)  $       0.08     $      (0.08)
                                                            ============     ============   ============     ============ 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                                                                                
                                                              14,676,000        3,426,000     14,681,000        3,426,000 
                                                            ============     ============   ============     ============ 

INCOME (LOSS) PER COMMON SHARE:                                                                                           
Diluted                                                                                                                   
      Income (loss) from continuing operations              $       0.09     $      (0.10)  $       0.07     $      (0.07)
      Income (loss) from discontinued operations                    --              (0.47)          --              (0.01)
                                                            ------------     ------------   ------------     ------------ 
Net income (loss)                                           $       0.09     $      (0.57)  $       0.07     $      (0.08)
                                                            ------------     ------------   ------------     ------------ 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                                                                                
                                                              17,783,000        3,426,000     17,787,000        3,426,000 
                                                            ============     ============   ============     ============ 


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                    UNIVERSAL HEIGHTS, INC. AND SUBSIDIARY                                              
                     CONSOLIDATED STATEMENT OF CASH FLOWS                                               
                                 (Unaudited)                                                            

                                                                              For Six Months Ended      
                                                                          June 30, 1998    July 31, 1997
                                                                          --------------   -------------
                                                                                                        
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                   
 CONTINUING OPERATIONS:                                                                                 
     Net income (loss) from continuing operations                         $ 1,547,516     $  (337,357)  
     Add (deduct):                                                                                      
     Adjustments to reconcile net income to cash provided by operations:                                
     Amortization and depreciation                                             84,197            --     

Net change in non-cash balances relating to continuing operations:                                      
     Prepaid Reinsurance Premiums                                          (5,027,165)           --     
     Other Receivables and Deposits                                        (1,335,722)           --     
     Insurance License Acquisition Costs                                      (32,783)           --     
     Reinsurance Recoverable on Losses                                     (1,274,130)           --     
     Deferred Policy Acquisition Cost                                        (156,232)           --     
     Prepaid Other                                                           (150,000)           --     
     Accounts Payable                                                         308,496            --     
     Accrued Expenses                                                          51,752            --     
     Accrued Tax, Licenses & Fees                                              52,500            --     
     Unpaid Losses and Loss Adjustment Expenses                             2,548,260            --     
     Unearned Premiums                                                      8,882,831            --     
     Due to Related Parties and Other                                         (85,128)           --     
     Stock Issued for Services                                                   --            21,000   

Net cash provided by (used in) continuing operations                        5,414,392        (316,357)  

 DISCONTINUED OPERATIONS:                                                                               
     Loss from Discontinued Operations                                           --        (1,614,897)  
    Adjustments to reconcile loss from discontinued operations                                          
        to net cash used in discontinued operations:                                                    
    Stock issued for services                                                    --            20,034   
    Depreciation and amortization                                                --           575,068   
    Write down of inventories to net realizable value                            --           (94,308)  
    Loss on disposal of property, equipment and patents                          --           952,896   

    Change in assets and liabilities:                                                                   
      (Increase) Decrease in:                                                                           
       Accounts Receivable                                                       --           (21,855)  
       Inventories                                                               --           149,220   
      Other current assets                                                       --           312,071   
      Accounts payable and accrued expenses:                                     --           179,868   

Net cash provided by discontinued operations                                        0         458,097   

Net cash provided by operating activities                                   5,414,392         141,740   

                                       5                                                                

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                    UNIVERSAL HEIGHTS, INC. AND SUBSIDIARY                                              
                     CONSOLIDATED STATEMENT OF CASH FLOWS                                               
                             (Unaudited) cont'd.                                                        

                                                                              For Six Months Ended      
                                                                          June 30, 1998    July 31, 1997
                                                                          --------------   -------------
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                   
     Purchase of property and equipment                                          --             7,251   
     Purchase of equity securities                                           (156,460)           --     
     Purchase of debt securities                                           (2,674,638)                  
     Acquisition of patents and trademarks                                                              
                                                                                 --           (17,112)  

Net cash used in investing activities                                                                   
                                                                           (2,831,098)         (9,861)  

CASH FLOWS FROM FINANCING ACTIVITIES:                                                                   
    Proceeds from issuance of common stock                                       --          (191,250)  
    Advances from stockholders                                                   --          (149,780)  
    Issuance of related party loans                                              --           237,893   
    Payment on capital lease obligations                                                                
                                                                                 --            (6,112)  

Net cash used by financing activities                                               0        (109,249)  

NET INCREASE IN CASH AND CASH EQUIVALENTS                                   2,583,294          22,630   

CASH AND CASH EQUIVALENTS, Beginning of Period                                                          
                                                                            1,172,418           1,507   

CASH AND CASH EQUIVALENTS, End of Period                                  $ 3,755,712     $    24,137   

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                                        
    Interest Paid                                                                --               648   

SUPPLEMENTAL NONCASH FINANCING AND INVESTING ACTIVITIES                                                 
    Common stock issued for liabilities                                        60,000            --     
    Valuation of warrants issued for liabilities                               60,000            --     
    Valuation of warrants issued for prepaid expenses                         175,000            --     
    Preferred stock issued in exchange for debt                                  --               887   
    Common stock issued in exchange for debt                                     --           444,886   


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

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UNIVERSAL HEIGHTS, INC. AND SUBSIDIARY  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
June 30, 1998   
(Unaudited)   

NOTE 1 -  SIGNIFICANT ACCOUNTING POLICIES                                       

The  accompanying  consolidated  financial  statements  include the  accounts of
Universal Heights, Inc. ("Company") and its wholly-owned  subsidiary,  Universal
Property & Casualty Insurance Company ("UPCIC").  All intercompany  accounts and
transactions have been eliminated in consolidation.                             

UPCIC's application to become a Florida licensed property and casualty insurance
company was filed in May 1997 with the Florida  Department of Insurance  ("DOI")
and approved on October 29,  1997.  In 1998,  the  subsidiary  began  operations
through the  acquisition of homeowner  insurance  policies issued by the Florida
Residential Property and Casualty Joint Underwriting Association ("JUA").       

The JUA was  established  in 1992 as a  temporary  measure to provide  insurance
coverage for  individuals  who could not obtain  coverage from private  carriers
because of the impact on the private  insurance  market of  Hurricane  Andrew in
1992. Rather than serving as a temporary source of emergency  insurance coverage
as was originally intended,  the JUA has become a major provider of original and
renewal insurance  coverage for Florida  residents.  In an attempt to reduce the
number  of  policies  in the JUA,  and  thus  the  exposure  of the  program  to
liability,  the Florida  legislature  has  approved a number of  initiatives  to
depopulate  the JUA,  which to date has resulted in policies  being  acquired by
private  insurers  and  provides  additional  incentives  to  private  insurance
companies to acquire policies from the JUA.                                     

On December 4, 1997,  the Company raised  approximately  $6,700,000 in a private
offering  with  various  institutional  and/or  otherwise  accredited  investors
pursuant to which the Company issued, in the aggregate, 11,208,996 shares of its
Common Stock at a price of $.60 per share.  The proceeds of this transaction are
being used  partially  for  working  capital  purposes  and to meet the  minimum
regulatory  capitalization  requirements  ($5,300,000)  required  by the Florida
Department of Insurance to engage in this type of homeowners  insurance  company
business.                                                                       

No  income  taxes  have  been   provided  as  the  Company  has  utilized   loss
carryforwards.                                                                  

On March 10, 1998, the Company made a decision to change its  accounting  fiscal
year end  from  April 30 to  December  31 and in  February  1998  commenced  its
insurance business.  As a result of the change in accounting year, the three and
six month periods ended June 30, 1998 and July 31, 1997 have been  presented for
comparative  purposes.  There would not have been a material  difference  if the
Company had presented the three and six month periods ended June 30, 1997 rather
than the three and six month periods ended July 31, 1997.                       

The  consolidated  balance  sheet of the Company,  as of June 30, 1998,  and the
related consolidated statements of operations for the three and six months ended
June 30,  1998 and July 31,  1997 and cash flows for six  months  ended June 30,
1998 and July 31, 1997 are unaudited.                                           

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UNIVERSAL HEIGHTS, INC. AND SUBSIDIARY  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
June 30, 1998   
(Unaudited)   

NOTE 1 -  SIGNIFICANT ACCOUNTING POLICIES, Continued                            

The interim  financial  statements  reflect all adjustments  (consisting of only
normal and  recurring  accruals  and  adjustments)  which are, in the opinion of
management, necessary to a fair statement of the results for the interim periods
presented. The Company's operating results for any particular interim period may
not be  indicative  of  results  for the full  year and this  should  be read in
conjunction with the Company's annual statements.                               

Certain  reclassifications  have been made in the 1997  financial  statements to
conform them to and make them consistent with the presentation  used in the 1998
financial statements.                                                           

The fair value of all financial  instruments and investments consist of cash and
cash  equivalents  and approximate the carrying value at June 30, 1998. Cash and
cash equivalents  approximate fair value due to their short-term  nature.  Loans
payable approximate fair value due to their variable rate.                      

NOTE 2 - INSURANCE OPERATIONS                                                   

UPCIC  maintains  its  records  in  conformity  with  the  accounting  practices
prescribed or permitted by the Insurance  Department of the State of Florida. To
the extent  that  certain of these  practices  differ  from  generally  accepted
accounting  principles ("GAAP"),  adjustments have been made in order to present
the accompanying financial statements on the basis of GAAP.                     

The  preparation  of  financial  statements  in  conformity  with GAAP  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  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.                                                                      

UPCIC  commenced  its insurance  activity in February 1998 by assuming  policies
from the JUA.  UPCIC  received  the  unearned  premiums  and is  servicing  such
policies.   Unearned   premiums   represent  amounts  that  UPCIC  would  refund
policyholders if their policies were canceled.  UPCIC has acquired policies from
the JUA at  various  stages  in the life of such  policies.  Accordingly,  UPCIC
determines  unearned  premiums by calculating  the pro-rata amount that would be
due to the  policyholder  at a given point in time based upon the premiums  owed
over the life of each policy. At June 30, 1998, the Company recorded  $8,882,831
in connection with unearned premiums.                                           

UPCIC 's obligation for liabilities for policies  assumed from the JUA begins at
11:59 p.m. on the date of assumption of the policies. UPCIC has no liability for
assumed  policies prior to the assumption date nor does UPCIC have any liability
for claims  made to the JUA.  Similarly,  the JUA has no  liability  for assumed
liabilities subsequent to the assumption date.                                  

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UNIVERSAL HEIGHTS, INC. AND SUBSIDIARY  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
June 30, 1998   
(Unaudited)   

NOTE 2 - INSURANCE OPERATIONS, Continued                                        

The Company incurred  $151,461 in legal costs in connection with UPCIC's efforts
to acquire the insurance license from the DOI for the insurance subsidiary.  The
Company is amortizing the costs associated with acquiring the insurance  license
over a five year  period  as they  benefit  future  periods.  Insurance  license
acquisition  costs  reported at June 30, 1998 was  reported  net of  accumulated
amortization of $8,184.                                                         

The insurance  subsidiary's chief executive officer is affiliated with companies
that provide the Company with  management  and  personnel  for the  subsidiary's
underwriting claims and financial  requirements,  together with support offices,
equipment and services. The fees for such services for the six months ended June
30, 1998 have been recorded at $400,000.                                        

The JUA's incentive program (Note 1) has provided approximately $2,700,000 to an
escrow  account.  These funds will be released to UPCIC when certain  conditions
are met including  assuming and  maintaining  for a three-year  period a minimum
number of policies  acquired from the JUA. The escrow account is not included in
the financial statements.                                                       

Premiums  earned/received  from the JUA are included in earnings evenly over the
terms of the policies. UPCIC does not have policies that provide for retroactive
premium adjustments.                                                            

Policy  acquisition  costs,  consisting of commissions and other costs that vary
with and are  directly  related to the  production  of  business,  net of ceding
commissions  will be deferred and amortized over the terms of the policies,  but
only to the extent that  unearned  premiums are  sufficient to cover all related
costs and expenses. At June 30, 1998, deferred policy acquisition costs amounted
to $156,232.                                                                    

An allowance for uncollectible  premiums  receivable will be established when it
becomes evident collection is doubtful.                                         

Claims and claim adjustment expenses, less related reinsurance, are provided for
as claims are incurred.  The  provision  for unpaid claims and claim  adjustment
expenses includes:  (1) the accumulation of individual case estimates for claims
and claim  adjustment  expenses  reported  prior to the close of the  accounting
period;  (2) estimates for unreported  claims based on past experience  modified
for  current  trends;  and (3)  estimates  of  expenses  for  investigating  and
adjusting claims based on past experience.                                      

Liabilities  for  unpaid  claims  and  claim  adjustment  expenses  are based on
estimates of ultimate cost of settlement.  Changes in claim estimates  resulting
from the  continuous  review  process  and  differences  between  estimates  and
ultimate payments are reflected in expense for the year in which the revision of
these estimates first became known.                                             

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UNIVERSAL HEIGHTS, INC. AND SUBSIDIARY  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
June 30, 1998   
(Unaudited)   

NOTE 2 - INSURANCE OPERATIONS, Continued                                        

UPCIC  estimates  claims and claims  expenses based on historical  experience of
similar  entities  and  payment  and  reporting  patterns  for the  type of risk
involved.   These  estimates  are  reviewed   quarterly  by  UPCIC's  affiliated
management   professionals  and  any  resulting  adjustments  are  reflected  in
operations for the period in which they are determined.                         

Inherent  in the  estimates  of  ultimate  claims are  expected  trends in claim
severity,  frequency and other factors that may vary as claims are settled.  The
amount of  uncertainty in the estimates for casualty  coverage is  significantly
affected by such factors as the amount of historical claims experience  relative
to the development period, knowledge of the actual facts and circumstances,  and
the amount of insurance risk retained.                                          

In the normal course of business,  UPCIC seeks to reduce the loss that may arise
from catastrophes or other events that cause unfavorable underwriting results by
reinsuring  certain  levels of risk in  various  areas of  exposure  with  other
insurance enterprises or reinsurers.                                            

NOTE 3 - REVENUE RECOGNITION                                                    

Amounts  recoverable  from reinsurers are estimated in a manner  consistent with
the reinsurers policy. Reinsurance premiums, losses and loss adjustment expenses
("LAE") are accounted for on bases  consistent with those used in accounting for
the  original  policies  issued  and the  terms  of the  reinsurance  contracts.
Reinsurance  ceding  commissions  received are deferred and  amortized  over the
effective period of the related insurance policies.                             

UPCIC  limits the  maximum  net loss that can arise from large risks or risks in
concentrated  areas of exposure by reinsuring  (ceding)  certain levels of risks
with other  insurers or reinsurers,  either on an automatic  basis under general
reinsurance  contracts  known as "treaties"  or by  negotiation  on  substantial
individual  risks.  The reinsurance  arrangements  are intended to provide UPCIC
with the ability to maintain its exposure to loss within its capital  resources.
Such reinsurance  includes quota share,  excess of loss and catastrophe forms of
reinsurance.                                                                    

Effective February 1, 1998, UPCIC entered into quota share,  excess per risk and
excess  catastrophe  agreements with various  reinsurers,  rated A- or better by
A.M. Best. Under the quota share treaty,  UPCIC cedes fifty percent of its gross
written premiums,  losses and loss adjustment  expenses with a ceding commission
of twenty-seven  percent.  Under the excess per risk  agreement,  UPCIC obtained
coverage of  $1,250,000  in excess of $500,000  ultimate net loss for each risk,
each loss,  excluding  losses arising from the peril of wind. A $2,500,000 limit
applies to any one loss  occurrence.  Under the excess  catastrophe  reinsurance
contract, UPCIC obtained coverage of $23,300,000 in excess of $2,000,000.       

10

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UNIVERSAL HEIGHTS, INC. AND SUBSIDIARY  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
June 30, 1998   
(Unaudited)   

NOTE 3 - REVENUE RECOGNITION, continued                                         

Effective June 1, 1998,  with respect to losses arising out of loss  occurrences
commencing on or after that date, the Company  obtained  coverage of $41,000,000
in excess of  $2,000,000.  UPCIC also has  coverage  from the Florida  Hurricane
Catastrophe Fund which is estimated to be $38,000,000. In addition, in the event
a  hurricane  were to  decrease  the  limits  of  catastrophe  cover,  UPCIC has
purchased  contingency  coverage to replace the  Florida  Hurricane  Catastrophe
Cover for 90% of  losses of  $42,300,000  in  excess  of  $42,300,000  otherwise
recoverable excess of $10,600,000.                                              

The ceded reinsurance  arrangements had the following effect on certain items in
the accompanying consolidated financial statements:                             

PREMIUMS:                                                                       

Written            Earned                           
-------            ------                           

Direct     $  2,289,024     $     88,833                                        
Assumed      12,995,102        6,880,324                                        
Ceded        (8,760,239)      (2,772,801)                                       
------------     ------------                             
Net        $  6,523,887     $  4,196,356                                        
============     ============                             

OTHER AMOUNTS:                                                                  

Reinsurance Recoverable on Losses         $  1,274,130                          
Unearned Premiums Reserve Ceded           $  4,781,364                          

UPCIC's  reinsurance  contracts  do not relieve  UPCIC from its  obligations  to
policyholders.  Failure of reinsurers to honor their obligations could result in
losses to UPCIC;  consequently,  allowances are  established  for amounts deemed
uncollectible.  UPCIC evaluates the similar geographic regions,  activities,  or
economic   characteristics  of  the  reinsurers  to  minimize  its  exposure  to
significant losses from reinsurer insolvencies.  UPCIC currently has reinsurance
contracts  with various  reinsurers  located  throughout  the United  States and
internationally.  UPCIC believes that this distribution of reinsurance contracts
adequately  minimizes UPCIC's risk from any potential operating  difficulties of
its reinsurers.                                                                 

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UNIVERSAL HEIGHTS, INC. AND SUBSIDIARY  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
June 30, 1998   
(Unaudited)   

NOTE 4 - ISSUANCE OF STOCK                                                      

On May 7, 1998, the Company granted  1,050,000 options to officers and directors
to purchase  stock at $1.63 per share,  the quoted market price at that date. In
connection with a Settlement  Agreement and Mutual Release  described more fully
in Part II, Item 1 "Legal Proceedings" below, the Company issued an aggregate of
10,000  shares,  at a fair market  value of $1.50 per share,  to the  Plaintiffs
involved in the claim.  In addition,  pursuant to an  agreement  approved by the
board of  directors  on July 9, 1998  between the  Company and Value  Management
Research ("Value  Management"),  the Company agreed to issue 100,000 warrants to
purchase  shares of common  stock to Value  Management  at an exercise  price of
$2.00 per share in connection with investor  relation  services.  The fair value
attributable to operations for these warrants is approximately $159,000.        

NOTE 5 - RECENTLY ADOPTED ACCOUNTING STANDARDS                                  

In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards  ("SFAS") No. 130,  REPORTING  COMPREHENSIVE
INCOME, which establishes  standards for reporting and displaying  comprehensive
income and its components  (revenues,  expenses,  gains and losses) in financial
statements.  In addition, SFAS No. 130 requires the Company to classify items of
other comprehensive  income by their nature in a separate financial statement or
as a component of the statement of operations or the statement of  shareholders'
equity  and  display  the  accumulated  balance  of other  comprehensive  income
separately  in the  shareholders'  equity  section of the  consolidated  balance
sheets. The Company adopted SFAS No. 130 on January 1, 1998 as required. For the
period  ended  June 30,  1998,  there  were no items as  defined in FAS 130 that
should be reported  separately.  In the future,  if the Company  accumulates  an
investment   portfolio  and  has  unrealized  holding  gains  or  losses,  other
comprehensive income will be reported pursuant to FAS 130.                      

Also in June 1997, the FASB issued SFAS No. 131,  DISCLOSURES  ABOUT SEGMENTS OF
AN  ENTERPRISE  AND  RELATED  INFORMATION.  SFAS No. 131  establishes  reporting
standards  for  public  companies   concerning   annual  and  interim  financial
statements  of their  operating  segments  and  related  information.  Operating
segments are components of a company about which separate financial  information
is  available  that is  regularly  evaluated  by the  chief  operating  decision
maker(s)  in deciding  how to allocate  resources  and assess  performance.  The
standard sets criteria for reporting  disclosures about a company's products and
services,  geographic areas and major  customers.  For the period ended June 30,
1998,  there  were no  items  as  defined  in FAS 131 that  should  be  reported
separately.  In the  future,  if the  Company  establishes  operating  segments,
disclosures about segments and related  information will be reported pursuant to
FAS 131.                                                                        

12

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Item 2. Management's Discussion And Analysis or Plan of Operation               

       The  following  discussion  and  analysis of the  Company's  consolidated
financial condition and results of operations should be read in conjunction with
the Company's  Condensed  Consolidated  Financial  Statements and Notes thereto.
This  document may contain  forward-looking  statements  that involve  risks and
uncertainties.  The Company's actual results may differ  significantly  from the
results discussed in the forward-looking statements.                            

OVERVIEW                                                                        

       The Company has  continued  to  implement  its plan to become a financial
services company and, through its wholly-owned  insurance subsidiary,  Universal
Property &  Casualty  Company  ("UPCIC"),  has begun to take  advantage  of what
management  believes to be profitable  business and growth  opportunities in the
marketplace.                                                                    

      UPCIC's  application  to become a Florida  licensed  property and casualty
insurance company was filed in May 1997 with the Florida Department of Insurance
("DOI")  and  approved  on October  29,  1997.  In 1998,  the  subsidiary  began
operations through the acquisition of homeowner insurance policies issued by the
Florida  Residential  Property  and  Casualty  Joint  Underwriting   Association
("JUA").                                                                        

      The  JUA  was  established  in  1992 as a  temporary  measure  to  provide
insurance  coverage for  individuals  who could not obtain coverage from private
carriers  because of the impact on the  private  insurance  market of  Hurricane
Andrew in 1992. Rather than serving as a temporary source of emergency insurance
coverage  as was  originally  intended,  the JUA has become a major  provider of
original and renewal insurance coverage for Florida residents.  In an attempt to
reduce the number of policies in the JUA,  and thus the  exposure of the program
to liability,  the Florida  legislature  has approved a number of initiatives to
depopulate  the JUA,  which to date has resulted in policies  being  acquired by
private  insurers  and  provides  additional  incentives  to  private  insurance
companies to acquire policies from the JUA.                                     

       On December 4, 1997,  the Company  raised  approximately  $6,700,000 in a
private  offering  with  various   institutional   and/or  otherwise  accredited
investors  pursuant to which the Company  issued,  in the aggregate,  11,208,996
shares of its Common  Stock at a price of $.60 per share.  The  proceeds of this
transaction  are being used partially for working  capital  purposes and to meet
the minimum regulatory capitalization  requirements ($5,300,000) required by the
Florida  Department of Insurance to engage in this type of homeowners  insurance
company business.                                                               

       The Florida Department of Insurance requires applicants to have a minimum
capitalization of $5.3 million to be eligible to operate as an insurance company
in the state of Florida. Upon being issued an insurance license,  companies must
maintain  capitalization  of at  least $4  million.  If an  insurance  company's
capitalization  falls below $4 million,  then the company  will be deemed out of
compliance  with DOI  requirements,  which  could  result in  revocation  of the
participant's  license  to  operate  as an  insurance  company  in the  state of
Florida.  The Company's insurance subsidiary will maintain a separate account to
hold the minimum continued capitalization required.                             

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       UPCIC's initial business and operations consist of providing property and
casualty coverage through  homeowners'  insurance  policies acquired through the
JUA. UPCIC has entered into  agreements with the JUA whereby since February 1998
UPCIC has  assumed  and is  currently  servicing  over  29,000  policies.  These
policies, if renewed,  represent  approximately  $27,000,000 in estimated annual
gross  direct  written  premium  revenues.  In  addition,   UPCIC  has  received
approximately  $89 per policy in bonus  incentive money paid to UPCIC by the JUA
for  assuming  the  policies.  The bonus money must be  maintained  in an escrow
account for 3 years.  UPCIC must  maintain the  policies  from the JUA for the 3
year period at which point UPCIC will receive the bonus money.                  

SEASONALITY                                                                     

       The Company has not determined the level of  seasonality,  if any, in the
insurance  business.  The  Company  believes  that  its  earnings  has the  most
potential to be effected  negatively during the hurricane  windstorm season that
begins June 1, 1998, and ends November 30, 1998.                                

FINANCIAL CONDITION                                                             

       CASH AND CASH  EQUIVALENTS at June 30, 1998  aggregated  $3,755,712.  The
source of liquidity for possible claims payments consists of net premiums, after
deductions for expenses.                                                        

      The primary use of the private  offering  was to provide  restricted  cash
needed for the JUA.  UPCIC expects that JUA premiums and renewals are sufficient
to meet UPCIC's current working capital  requirements.  Amounts considered to be
in excess of current working capital requirements in the aggregate of $2,831,098
at June 30,  1998 have been  invested.  UPCIC  believes  that the JUA  premiums,
renewals  and the excess  working  capital  will be  sufficient  to meet UPCIC's
working capital needs for the next twelve months.                               

      UPCIC  believes in the  short-term  it will  continue to be able to obtain
additional  policies  from the JUA and  continue to receive  incentive  bonuses.
UPCIC currently has obtained  approximately 29,000 policies from the JUA and the
JUA has granted UPCIC approval to receive up to 30,000  policies.  UPCIC expects
to obtain most, if not all, of the 30,000 policies for which it has been granted
approval to receive  under the JUA  program.  UPCIC  believes  that this base of
insurance  business will provide  opportunities for UPCIC to solicit renewals of
premiums in future periods which, if obtained,  would allow UPCIC to develop its
insurance  business beyond the next twelve months.  The renewal rate of policies
acquired  by  UPCIC  is  approximately  eighty  percent.  Although  there  is no
assurance that policy renewals will continue at this rate,  UPCIC is negotiating
with insurance agents that are currently writing business in connection with the
JUA policies in an effort to obtain  policy  renewals.  UPCIC is also seeking to
establish  relationships  with  insurance  agents  outside of the JUA program to
write new business.                                                             

      To continue to grow its insurance operations,  UPCIC can obtain additional
policies  in  the  open   market  and,   upon   achieving   certain   additional
capitalization  requirements,  UPCIC may request permission from the JUA and the

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DOI to  increase  the number of  policies  that  UPCIC can obtain  under the JUA
program.  UPCIC recently  commenced  selling policies in the open market through
independent agents. In determining  appropriate  guidelines for such open market
policy  sales,  UPCIC  employs  standards  similar  to those  used by UPCIC when
selecting policies from the JUA.                                                

RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1998 VERSUS SIX MONTHS        
ENDED JULY 31, 1997                                                             

      The  operations  for the six  months  ended June 30,  1998  consist of the
Company's newly started insurance business,  accordingly, the operations are not
comparative  to the  previous  period  as  there  were no  insurance  operations
previously and the Company's former souvenir business was discontinued.         

      On February 1, 1998,  the Company  began  recognizing  earned  premiums on
insurance  contracts  acquired from JUA.  Income is  recognized  evenly over the
terms  of  policies.   The  Company  recognized  revenues  of  $4,196,356  after
reinsurance  on  approximately  29,000  policies.  See  MD&A  section  entitled,
"Financial  Condition  - Cash  and Cash  Equivalents"  for a  discussion  of the
short-term and long-term resources for the insurance subsidiary.                

      The Company's  investment income represents  primarily  interest income of
$336,812 in cash and cash equivalents  aggregating $3,755,712 and fixed maturity
securities aggregating $2,674,638 at June 30, 1998. Such funds were received for
advance premiums and from the Company's private offering.                       

      Loss and loss  adjustment  expenses for the six months ended June 30, 1998
were  $1,628,814.  These costs  relate to  insurance  claims  incurred by UPCIC.
General and administrative  expenses were $1,360,383 as compared to $329,165 for
the six months ended July 31, 1998.  General and  administrative  expenses  have
increased due to the Company's insurance operations.                            

      As a result of a change in the Company's  year end, the Company  presented
the six months ended July 31, 1997 (the fourth  quarter of its last fiscal year)
as comparatives.                                                                

RESULTS OF  OPERATIONS  - THREE MONTHS ENDED JUNE 30, 1998 VERSUS THREE MONTHS  
ENDED JULY 31, 1997                                                             

      The  operations  for the three  months  ended June 30,  1998  reflect  the
Company's first full quarter of the Company's newly started  insurance  business
and are therefore not directly  comparative  to the previous  period.  Revenues,
loss and loss adjustment  expenses and general and administrative  expenses have
increased  significantly  when  compared to the prior year period as well as the
first  quarter  of  1998  as a  result  of  the  development  of  the  insurance
operations.                                                                     

      As a result of a change in the  Company's  fiscal  year end,  the  Company
presented  the three months ended July 31, 1998 (the fourth  quarter of its last
fiscal year) as comparatives.                                                   

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UNIVERSAL HEIGHTS, INC.   

PART II - OTHER INFORMATION   

Item  1.    Legal Proceedings                                                   
--------    -----------------                                                   

      On May 15, 1997, two former  employees of the Company,  John D. Walker and
Larry Martin ("Claim  Representatives"),  filed a lawsuit against the Company on
behalf of themselves and certain other individuals ("Plaintiffs") in the Circuit
Court for  Pinellas  County,  Florida.  The  Plaintiffs  asserted  claims for an
injunction  and for  damages  for  breach of an Asset  Purchase  Agreement.  The
Complaint  also  includes  breach of  employment  agreements,  breach of royalty
agreements and other relief. In connection  therewith,  the Plaintiffs  demanded
unpaid salaries amounting to approximately  $130,000. The Company entered into a
Settlement  Agreement and Mutual  Release with the Claim  Representatives  dated
April 15,  1998  pursuant  to which the  Plaintiffs  received  exclusive  use of
certain patents and  trademarks,  the remaining  inventory of weighted  baseball
gloves, and 10,000 shares of Common Stock.                                      

Item  2.    Changes in Securities                                               
--------    ---------------------                                               

      On May 7, 1998,  the Company  granted  1,050,000  options to officers  and
directors to purchase  stock at $1.63 per share  ("Options"),  the quoted market
price at that date.  In  connection  with the  Settlement  Agreement  and Mutual
Release  described  in Item 1 above,  on April 15, 1998,  the Company  issued an
aggregate of 10,000  shares of the  Company's  common stock , $.01 par value per
share  ("Shares") to the Plaintiffs as follows:  John D. Walker  (3,333);  Larry
Martin  (3,333);  Michael K. Reese and Mary K. Reese, as Tenants by the Entirety
(1,112); Michael J. Keane and Lisa C. Keane, as Tenants by the Entirety (1,111);
Richard D.  Kriseman  (1,111).  The shares were issued at a fair market value of
$1.50 per share.  The cost of the  Shares  ($15,000)  was  applied  against  the
reserve of  approximately  $100,000 that the Company  established for additional
costs related to the Company's discontinued  operations at December 31, 1997. In
addition, pursuant to an agreement approved by the board of directors on July 9,
1998 between the Company and Value Management Research ("Value Management"), the
Company agreed to issue 100,000  warrants to purchase  shares of common stock to
Value  Management  at an  exercise  price of $2.00  per  share  ("Warrants")  in
connection with investor  relation  services.  The Options,  Shares and Warrants
were issued in reliance on an exemption from registration  under Section 4(2) of
the Securities Act of 1933, as amended.                                         

Item 3.     Defaults upon Senior Securities                                     
-------     -------------------------------                                     

None.                                                               

Item  4.    Submission of Matters to a Vote of Security Holders                 
--------    ---------------------------------------------------                 

None.                                                               

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UNIVERSAL HEIGHTS, INC.   

PART II - OTHER INFORMATION   

Item 5.     Other Information                                                   
-------     -----------------                                                   

None.                                                               

Item 6.     Exhibits and Reports on Form 8-K                                    
-------     --------------------------------                                    

None.                                                               

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SIGNATURES  

    In accordance  with Section 13 or 15(d) of the Securities  Exchange Act, the
Registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.                                                      

                                       UNIVERSAL HEIGHTS, INC.

Date: September 2, 1998                         _____________________________   
                                           Bradley I. Meier, President

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10QSB/A’ Filing	Date	First	Last	Other Filings

	12/31/98	2		10KSB, NT 10-K
	11/30/98	14
Filed on:	9/2/98	18
	7/31/98	15
	7/9/98	12	16
For Period End:	6/30/98	1	15	10QSB
	6/1/98	11	14
	5/7/98	12	16
	4/15/98	16
	3/10/98	7		10KSB/A, 8-K
	2/1/98	10	15
	1/1/98	12		10KSB
	12/31/97	16		10KSB/A, DEF 14C
	12/4/97	7	13
	10/29/97	7	13
	7/31/97	5	15	10QSB, 10QSB/A
	6/30/97	7
	5/15/97	16
				List all Filings

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Filing Submission 0000898432-98-000615 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Universal Insurance Holdings, Inc. – ‘10QSB/A’ for 6/30/98

As of: Wednesday, 9/2/98 · For: 6/30/98 · Accession #: 898432-98-615 · File #: 0-20848

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Amendment to Quarterly Report — Small Business — Form 10-QSBFiling Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Amendment to Quarterly Report — Small Business — Form 10-QSB
Filing Table of Contents