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ITEM 2.                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

WE URGE YOU TO READ THE FOLLOWING DISCUSSION IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES THERETO BEGINNING ON PAGE F-1. THIS DISCUSSION MAY CONTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS AS A RESULT OF A NUMBER OF FACTORS, INCLUDING BUT NOT LIMITED TO THE RISKS AND UNCERTAINTIES DISCUSSED UNDER THE HEADING “RISK FACTORS” SET FORTH IN OUR CURRENT REPORT ON FORM 8-K FILED WITH THE SEC ON MAY 14, 2009. IN ADDITION, SEE “CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS” SET FORTH IN THIS REPORT.

WE DID NOT CONDUCT ANY OPERATIONS DURING PERIODS UP THROUGH THE DATE OF THE ACQUISITION OF CONTROL OF AMALPHIS.  HOWEVER, WE HAVE INCLUDED ELSEWHERE IN THIS REPORT THE HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF AMALPHIS AND ITS WHOLLY-OWNED ALLIED PROVIDENT SUBSIDIARY FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008.

As previously reported by the Company on Form 8-K filed with the Securities and Exchange Commission on May 14, 2009 (the “Form 8-K”), on May 14, 2009 the Company entered into a preferred stock purchase agreement dated as of April 30, 2009 (the “Preferred Stock Purchase Agreement”) under which the Company sold an aggregate of 36,000 shares of its Series A convertible preferred stock (the “Series A Preferred Stock”) to Intigy Absolute Return Ltd., a British Virgin Islands corporation (“Intigy”), for a purchase price of $36,000,000, or $1,000 per share of Series A Preferred Stock.  In addition, pursuant to the terms of a stock purchase agreement dated as of May 14, 2009, Rineon agreed to acquire from NatProv Holdings Inc (“NatProv”) 1,985,834 shares of Amalphis common stock, representing approximately 81.5% of the 2,437,500 outstanding shares of Amalphis common stock, for total cash consideration of $36,000,000.  The remaining 451,666 of the outstanding Amalphis shares are currently owned by NatProv.

On July 14, 2009, with Rineon’s approval, NatProv converted all of the 1,985,834 shares of Amalphis common stock it agreed to sell to Rineon into 36,000 shares of Amalphis Series A preferred stock (the “Amalphis Preferred Stock”), and on July 15, 2009 issued the Amalphis Preferred Stock to Rineon in lieu of the 1,985,834 shares of Amalphis common stock contemplated by the May 14, 2009 stock purchase agreement.  The Amalphis Preferred Stock has a liquidation preference of $1,000 per share, is non-voting, may not be converted into Amalphis common stock, and participates with the common stock in the payment of any dividends by Amalphis.  As a result of such transaction, NatProv which owns 451,666 shares of Amalphis common stock, owns 100% of the Amalphis voting shares.  The conversion of the 1,985,834 shares of Amalphis common stock into 36,000 shares of Amalphis Preferred Stock was consummated primarily to enable Rineon’s subsidiary Allied Provident Insurance Inc. to continue to comply with Barbados insurance regulations. A copy of the Amalphis Certificate of Designation for the Series A Preferred Stock is attached hereto as exhibit 3.2.

Simultaneous with its receipt of the Amalphis Preferred Stock, Rineon, NatProv and Amalphis entered into a stockholders agreement under which the parties agreed that, unless additional shares of Amalphis have previously been issued with Rineon's prior written consent, in the event of any sale of the outstanding common stock or assets and business of Amalphis, whether by stock sale, asset sale, merger, consolidation or like combination to any person, firm or corporation not affiliated with the parties (a "Sale of Control"), Rineon shall receive the greater of (a) $36,000,000, or (b) 81.5% of the total consideration.  NatProv or its transferees shall receive any remaining balance of the total consideration.  In addition, the parties agreed that, without the prior written consent of Rineon:

·	the existing members of the board of directors of Amalphis cannot be changed nor may any vacancies on or additions to such board of directors be filled;
·	no additional shares of capital stock of Amalphis may be issued;

·	Amalphis may not incur indebtedness over $0.5 million at any one time or $2.5 million in the aggregate;
·	Amalphis may not change the fundamental nature of its business;

 

 

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·	Amalphis shall not make any material change in its senior executive officers or management; and
·	Amalphis shall not acquire the securities or assets of any other person, firm or corporation.

 

In addition, Rineon has a right of first refusal to purchase any Amalphis shares of common stock that any of Amalphis common shareholders wish to sell. A copy of the Shareholders Agreement is attached hereto as exhibit 10.1.

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

Unless otherwise indicated, references to “Amalphis” shall include is operating subsidiary, Allied Provident Insurance, Inc.

Amalphis is a specialty insurance company that offers reinsurance products in markets where traditional reinsurance alternatives are limited. Amalphis also directly sells a variety of property and casualty insurance products to businesses. Amalphis’ insurance business is currently conducted solely through its wholly-owned subsidiary, Allied Provident Insurance, Inc., a Barbados based exempt insurance company that holds an insurance license granted by the Ministry of Finance in Barbados.

 

Amalphis’ goal is to become a fully integrated financial services company.  Amalphis is considering one or more additional strategic acquisitions in the insurance industry.  There can be no assurance that any of such potential acquisitions will be consummated or, if so, that they will prove to be beneficial to Amalphis.

Company History

 Until consummation of its acquisition of Amalphis, Rineon, formerly known as Jupiter Resources Inc., was an inactive publicly traded Delaware corporation whose common stock is listed on the FINRA OTC Bulletin Board under the symbol “JPIT.” Jupiter was incorporated in the State of Nevada on June 15, 2006.  Rineon is authorized by its certificate of incorporation to issue an aggregate of 75,000,000 shares of common stock, $0.001 par value per share, and 10,000,000 shares of preferred stock upon such terms and conditions as the board of directors may from time to time determine.

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

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

Under the terms of the Preferred Stock Purchase Agreement, Rineon agreed to appoint Leo de Waal, Thomas Lindsay, Keith Laslop, Michael Hlavsa and Tore Nag as the members of the board of directors of Rineon and Mr. Roney resigned as a member of the Rineon board of directors.

 

In addition, under the terms of the Preferred Stock Purchase Agreement, Rineon has agreed to reincorporate in the British Virgin Islands.  We have prepared and executed all of the documents prepared by our British Virgin Islands counsel and intend to file such documents to reincorporate in the British Virgin Island and become re-domiciled in such jurisdiction in the near future.

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Critical Accounting Policies

 

Rineon’s consolidated financial statements contain certain amounts that are inherently subjective in nature and have required management to make assumptions and best estimates to determine reported values. If certain factors, including those described in “Cautionary Statement Concerning Forward-Looking Statements”, cause actual events or results to differ materially from its underlying assumptions or estimates, there could be a material adverse effect on its results of operations, financial condition or liquidity. Amalphis believes that the following accounting policies affect the more significant estimates used in the preparation of its consolidated financial statements. The descriptions below are summarized and have been simplified for clarity. A more detailed description of Amalphis’ critical accounting policies is included in the notes to the consolidated financial statements.

Premium Revenues and Risk Transfer.    The Company’s property and casualty insurance and its reinsurance premiums are recorded as premiums written at the inception of each contract, based upon contract terms and information received from ceding companies and their brokers. For excess of loss reinsurance contracts, premiums are typically stated as a percentage of the subject premiums written by the client, subject to a minimum and deposit premium. The minimum and deposit premium is typically based on an estimate of subject premium expected to be written by the client during the contract term. The minimum and deposit premium is reported initially as premiums written and adjusted, if necessary, in subsequent periods once the actual subject premium is known.

 

For each quota-share or proportional property and casualty reinsurance contract we underwrite, the client estimates gross premiums written at inception of the contract. We generally account for such premiums using the client’s initial estimates, and then adjust the estimates as advised by its client. We believe that the client’s estimate of the volume of business it expects to cede to us represents the best estimate of gross premiums written at the beginning of the contract. Because its agreement with the client provides us with an established percentage of the premium it receives from policies it sells, we believe the client is better able to predict that volume. As the contract progresses, we monitor actual premiums received in conjunction with correspondence from the client in order to refine its estimate. Variances from initial gross premiums written estimates can be greater for quota-share contracts than for excess of loss contracts. Premiums are earned on a pro rata basis over the coverage period. Unearned premiums consist of the unexpired portion of reinsurance provided.

 

We account for reinsurance contracts in accordance with ASC 944 Financial Services – Insurance Assessing whether or not a reinsurance contract meets the conditions for risk transfer requires judgment. The determination of risk transfer is critical to reporting premiums written and is based, in part, on the use of actuarial and pricing models and assumptions. If we determine that a reinsurance contract does not transfer sufficient risk, it accounts for the contract as a deposit liability.

 

Investments.   We classify all investments as trading securities and record their values based on the last reported price on the balance sheet date as reported by a recognized exchange. If no sale of such security was reported on that date, the market value will be the last reported bid price (in the case of securities held long), or last reported ask price (in the case of securities sold short). Securities for which recognized exchange quotations are not readily available are valued at management’s best estimate of fair value based on prices received from administrators, dealers or market makers. Any realized and unrealized gains or losses are determined on the basis of the specific identification method (by reference to cost or amortized cost, as appropriate) and included in investment income in the statement of income.

 

Loss and Loss Adjustment Expense Reserves.    We establish reserves for contracts based on estimates of the ultimate cost of all losses including losses incurred but not reported, or IBNR. These estimated ultimate reserves are based on reports received from ceding companies, historical experience and actuarial estimates. These estimates are periodically reviewed and adjusted when necessary. Since reserves are estimates, the setting of appropriate reserves is an inherently uncertain process. Our estimates are based upon actuarial and statistical projections and on its assessment of currently available data, predictions of future developments and estimates of future trends and other factors. The final settlement of losses may vary, perhaps materially, from the reserves initially established and any adjustments to the estimates are recorded in the period in which they are determined. Under U.S. GAAP, We are not permitted to establish loss reserves, which include case reserves and IBNR, until the occurrence of an event which may give rise to a claim. As a result, only loss reserves applicable to losses incurred up to the reporting date are established, with no allowance for the establishment of loss reserves to account for expected future losses.

 

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For natural catastrophe exposed business we establish loss reserves based on loss payments and case reserves reported by its clients, when and if received. We then add to these case reserves its estimates for IBNR. To establish its IBNR loss estimates, in addition to the loss information and estimates communicated by ceding companies, we use industry information, knowledge of the business written by management’s judgment.

Reserves for losses and loss adjustment expenses were comprised of the following:

 

In each of the contracts we have written to date, its risk exposure is limited by the fact that the contracts have defined limits of liability. Once the loss limit for a contract has been reached, we have no further exposure to additional losses from that contract.

 

For all non-natural catastrophe business, we initially reserve every individual contract to the expected loss and loss expense ratio in the pricing analysis. In its pricing analyses, we typically utilize a significant amount of information both from the individual client and from industry data. Where practical, we compare reserving data that it receive from its client, if any, to publicly-available financial statements of the client in an effort to identify, confirm and monitor the accuracy and completeness of the received data.

 

If we do not receive reserving data from a client, it relies on industry data, as well as the judgment and experience of its underwriters and actuaries. We complete our analyses for all contracts for all lines of business. The information may include many years of history. Depending on the type of business written, we are entitled to receive client and industry information on historical paid losses, incurred losses, number of open claims, number of closed claims, number of total claims, listings of individual large losses, earned premiums, policy count, policy limits underwritten, exposure information and rate change information. We also may receive information by class or subclass of business. As it is a new company, we currently rely more on client and industry data than its own to identify unusual trends in the data requiring changes in reserve estimates. Where available, we receive relevant actuarial reports from the client. We supplement this information with subjective information on each client, which may include management biographies, competitor information, meetings with the client, and supplementary industry research and data. Generally, we obtain regular updates of premium and loss related information for the current period and historical periods, which we utilize to update our initial expected loss and loss expense ratio. There may be a time lag from when claims are reported to its client and when its client reports the claims to Amalphis. This time lag may impact its loss reserve estimates from period to period. Once we receive this updated information we use a variety of standard actuarial methods in its analysis each quarter. Such methods may include:

 

	·	Paid Loss Development Method.    We estimate ultimate losses by calculating past paid loss development factors and applying them to exposure periods with further expected paid loss development. The paid loss development method assumes that losses are paid in a consistent pattern. It provides an objective test of reported loss projections because paid losses contain no reserve estimates. For many coverages, claim payments are made very slowly and it may take years for claims to be fully reported and settled.
	·	Reported Loss Development Method.    We estimate ultimate losses by calculating past reported loss development factors and applying them to exposure periods with further expected reported loss development. Since reported losses include payments and case reserves, changes in both of these amounts are incorporated in this method. This approach provides a larger volume of data to estimate ultimate losses than paid loss methods. Thus, reported loss patterns may be less varied than paid loss patterns, especially for coverage that have historically been paid out over a long period of time but for which claims are reported relatively early and case loss reserve estimates established.
	·	Expected Loss Ratio Method.    We estimate ultimate losses under the expected loss ratio method, by multiplying earned premiums by an expected loss ratio. We select the expected loss ratio using industry data, historical company data and its professional judgment. We use this method for lines of business and contracts where there are no historical losses or where past loss experience is not credible.
	·	Bornheutter-Ferguson Paid Loss Method.    We estimate ultimate losses by modifying expected loss ratios to the extent paid losses experienced to date differ from what would have been expected to have been paid based upon the selected paid loss development pattern. This method avoids some of the distortions that could result from a large development factor being applied to a small base of paid losses to calculate ultimate losses. We use this method for lines of business and contracts where there are limited historical paid losses.

 

 

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·

Bornheutter-Ferguson Reported Loss Method.   We estimate ultimate losses by modifying expected loss ratios to the extent reported losses experienced to date differ from what would have been expected to have been reported based upon the selected reported loss development pattern. This method avoids some of the distortions that could result from a large development factor being applied to a small base of reported losses to calculate ultimate losses. We use this method for lines of business and contracts where there are limited historical reported losses.

For each contract, we utilize each reserving methodology that its actuaries deem appropriate in order to calculate a best estimate, or point estimate, of reserves. In setting its reserves, we do not use a range of estimates that may be subject to adjustment. Accordingly, at the end of each period, we will establish reserves at a point estimate based upon all information then available. As of June 30, 2009, we had not adjusted any of its reserves since commencing underwriting operations in November 2007. Whether we use one methodology, a combination of methodologies or all methodologies depends upon the contract and the judgment of the actuaries responsible for the contract.

 

Our aggregate reserves are the sum of the point estimate of all contracts. Because its reserves are the sum of its point estimates, we do not adjust its reserves from the amounts its actuaries determine. We perform a quarterly loss reserve analysis on each contract. This analysis may incorporate some or all of the information described above, using some or all of the methodologies described above. Each contract is analyzed every quarter regardless of line of business. We generally calculate IBNR reserves for each contract by estimating the ultimate incurred losses at any point in time and subtracting cumulative paid claims and case reserves, which incorporate specific exposures, loss payment and reporting patterns and other relevant factors. We also intend to have its loss reserves reviewed, on an annual basis, by an independent outside actuary who will test and review the work done by its actuaries to ensure that reserves our reports are being established consistently and appropriately.

 

Acquisition Costs.    Acquisition costs include brokerage fees, ceding commissions, premium taxes and other direct expenses that relate directly to and vary with the writing of reinsurance contracts.  Acquisition costs relating to premiums that are fully earned are expensed.  Acquisition costs relating to premiums that have been received but not fully earned are deferred and amortized over the same period as the premiums are earned. Acquisition costs also include profit commissions.

Results of Operations

 

The Results of Operations presented below are for Rineon’s subsidiary, Amalphis, as Rineon had no revenues generated other than from Amalphis and its operating expenses were immaterial.

Three months ended September 30, 2009 as compared to the three months ended September 30, 2008

Premiums Earned

 

    For the three months ended September 30, 2009, Amalphis wrote $3,510,411 of net premiums earned, consisting of two insurance policies and one reinsurance contract.  For the three months ended September 30, 2008, Amalphis wrote $5,012,427 in net premiums earned.

Losses Incurred

 

    Losses incurred include losses paid and changes in loss reserves, including IBNR reserves, net of loss recoveries from retrocessionaires. Amalphis incurred net losses of $3,526,121 for the three months ended September 30, 2009, and $3,963,167 for the three months ended September 30, 2008.

 

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Acquisition Costs

 

    Acquisition costs for the three months ended September 30, 2009 and 2008 totaled $(149,015) and $949,589, respectively.  These acquisition costs represent the amortization of the commission and brokerage expenses incurred on contracts written. Deferred acquisition costs are limited to the amount expected to be recovered from future earned premiums and anticipated investment income.

 

General and Administrative Expenses

 

     Amalphis’ general and administrative expenses for the three months ended September 30, 2009 were $191,947 and for the three months ended September 30, 2008 were $22,617.  These expenses for both periods have no accrual of the fair value of stock options and restricted stock granted to employees and directors due to the fact that none were granted.

 

    Amalphis expects its general and administrative expenses for the remainder of 2009 to be higher than reported in 2008 as Amalphis intends to hire additional staff and resources to service anticipated increasing underwriting operations and to enable it to fulfill the increased reporting requirements applicable to public companies.

 

Net Realized and Unrealized Gains on Securities

For the three months ended September 30, 2009 and 2008, Amalphis reported net realized and unrealized gains on securities of $2,653,977 and $786,689, respectively.

Net Investment Income

 

    For the three months ended September 30, 2009 and 2008, Amalphis reported a net investment income of $43,071 and $(12,372), respectively.

 

Taxes

 

    Amalphis is not obligated to pay any taxes in the British Virgin Islands on either income or capital gains.

 

Net Income

 

    For the three months ended September 30, 2009 and 2008, Amalphis reported a net income of $2,150,301 and $693,867, respectively.

 

Capital

 

  For the period ended September 30, 2009, total shareholders’ equity was $54,407,381 million compared to $28,719,656 million for the period ended December 31, 2008. This increase in total shareholders’ equity is principally due to a net income of $9,109,235 million during the nine months ended September 30, 2009.

 

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Nine Months ended September 30, 2009 as compared to the Nine Months ended September 30, 2008

Premiums Earned

 

    Amalphis earned net premiums of $10,297,802 for the Nine Months ended September 30, 2009 and $10,006,851 for the Nine Months ended September 30, 2008.

 

Losses Incurred

 

    Losses incurred include losses paid and changes in loss reserves, including IBNR reserves, net of loss recoveries from retrocessionaires. Amalphis incurred net losses of $7,833,130for the Nine Months ended September 30, 2009, and $7,366,000 for the Nine Months ended September 30, 2008.

 

Acquisition Costs

 

    Acquisition costs for the Nine Months ended September 30, 2009 totaled $2,183,538 and $2,391,347 for the Nine Months ended September 30, 2008. These acquisition costs represent the amortization of the commission and brokerage expenses incurred on contracts written. Deferred acquisition costs are limited to the amount expected to be recovered from future earned premiums and anticipated investment income.

 

General and Administrative Expenses

 

    Amalphis’ general and administrative expenses for the Nine Months ended September 30, 2009 were $239,640 and for the Nine Months ended September 30, 2008 were $73,119.  These expenses for both periods have no accrual of the fair value of stock options and restricted stock granted to employees and directors due to the fact that none were granted.

 

    Amalphis expects its general and administrative expenses for the remainder of 2009 to be higher than reported in 2008 as Amalphis intends to hire additional staff and resources to service anticipated increasing underwriting operations and to enable it to fulfill the increased reporting requirements applicable to public companies.

 

Net Realized and Unrealized Gains on Securities

 

  For the Nine Months ended September 30, 2009 and 2008, Amalphis reported net realized and unrealized gains on securities of $11,123,301 and $3,686,982, respectively.

Net Investment Income

 

    For the Nine Months ended September 30, 2009 and 2008, Amalphis reported a net investment income of $44,603 and $0, respectively.

 

Taxes

 

  Amalphis is not obligated to pay any taxes in the British Virgin Islands on either income or capital gains.

 

Net Income

 

  For the Nine Months ended September 30, 2009 and 2008, Amalphis reported a net income of $9,135,660 and $3,148,644, respectively.

 

Liquidity and Capital Resources

 

  Amalphis is a specialty insurance company that offers reinsurance products in markets where traditional reinsurance alternatives are limited. Amalphis directly sells a variety of property and casualty insurance products to businesses. Amalphis’ wholly-owned insurance subsidiary, Allied Provident Insurance, Inc. was incorporated and commenced its insurance business in 2007 in Barbados.

 

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  Through Allied Provident, Amalphis currently writes reinsurance for a United States insurance carrier that offers non-standard personal automotive insurance coverage to drivers who are unable to obtain insurance from standard carriers. Amalphis plans to expand its reinsurance product offerings with other insurers that provide a variety of other property and casualty insurance products. Its direct insurance business includes a suite of business property and casualty insurance products, such as directors and officers liability insurance, financial guarantee insurance, excess and umbrella liability insurance, business income insurance, and inland marine and product liability insurance.

 

     Amalphis manages its business on the basis of one operating segment, property and casualty reinsurance, in accordance with the qualitative and quantitative criteria established by ASC 280 Segment Reporting  Within the property and casualty insurance and reinsurance segment, Amalphis analyzes its underwriting operations using two categories:

·	frequency business; and

·	severity business.

Frequency business is characterized by contracts containing a potentially large number of smaller losses emanating from multiple events. Clients generally buy this protection to increase their own underwriting capacity and typically select a reinsurer based upon the reinsurer’s financial strength and expertise. Amalphis expects the results of frequency business to be less volatile than those of severity business from period to period due to its greater predictability. Amalphis also expects that over time the profit margins and return on equity for its frequency business will be lower than those of its severity business.

Severity business is typically characterized by contracts with the potential for significant losses emanating from one event. Clients generally buy this protection to remove volatility from their balance sheets and, accordingly, Amalphis expects the results of severity business to be volatile from period to period. However, over the long term, Amalphis also expects that its severity business will generate higher profit margins and return on equity than its frequency business.

 

    Amalphis does not currently have any material commitments for capital expenditures, and does not anticipate the need for any such material expenditures this year.

 

    Because Amalphis has a limited operating history, period-to-period comparisons of its underwriting results are not yet possible and may not be meaningful in the near future. In addition, due to the nature of its reinsurance and investment strategies, its operating results will likely fluctuate from period to period.

Accounting Standards Updates

In June 2009, the Financial Accounting Standards Board (FASB) issued its final Statement of Financial Accounting Standards (SFAS) No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles a Replacement of FASB Statement No. 162”. SFAS No. 168 made the FASB Accounting Standards Codification (the Codification) the single source of U.S. GAAP used by nongovernmental entities in the preparation of financial statements, except for rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws, which are sources of authoritative accounting guidance for SEC registrants. The Codification is meant to simplify user access to all authoritative accounting guidance by reorganizing U.S. GAAP pronouncements into roughly 90 accounting topics within a consistent structure; its purpose is not to create new accounting and reporting guidance. The Codification supersedes all existing non-SEC accounting and reporting standards and was effective for the Company beginning July 1, 2009. Following SFAS No. 168, the Board will not issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead, it will issue Accounting Standards Updates (ASU). The FASB will not consider ASUs as authoritative in their own right; these updates will serve only to update the Codification, provide background information about the guidance, and provide the bases for conclusions on the change(s) in the Codification.

 

In August 2009, the FASB issued ASU 2009-05 which includes amendments to Subtopic 820-10, “Fair Value Measurements and Disclosures—Overall”. The update provides clarification that in circumstances, in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the techniques provided for in this update. The amendments in this ASU clarify that a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability and also clarifies  that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The guidance provided in this ASU is effective for the first reporting period, including interim periods, beginning after issuance.  The adoption of this standard did not have a material impact on the Company’s consolidated financial position and results of operations as of September 30, 2009 as the Company’s material investment was made effective September 29, 2009 just one day prior to the end of the quarter.  This standard may have a material impact in future reporting periods.

 

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