Edgar Filing: North American Insurance Leaders, Inc.

Form 10-Q, Quarterly report for period ending December 31, 2006

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2006

¨	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: 001-32837

North American Insurance Leaders, Inc.

(Exact name of registrant as specified in its charter)

Delaware

20-3284412

(State or other jurisdiction

of incorporation)

(I.R.S. Employer

Identification Number)


885 Third Avenue, 31st Floor, New York, New York		10022
(Address of principal executive offices)		(Zip Code)

(212) 319-9407

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

Number of shares of common stock outstanding as of February 13, 2007: 17,968,750.

Table of Contents


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1

	Balance Sheets	F-1

	Statements of Operations	F-2

	Statement of Stockholders’ Equity	F-3

	Statements of Cash Flows	F-4

	Notes to Financial Statements	F-5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4

Item 4.	Controls and Procedures	4

PART II. OTHER INFORMATION

Item 1A.	Risk Factors	5

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5

Item 5.	Other Information	5

Item 6.	Exhibits	5

SIGNATURES		6

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

NORTH AMERICAN INSURANCE LEADERS, INC.

(a development stage company)

Index to Financial Statements


		Page
Balance sheets		F-1
Statements of Operations		F-2
Statement of Stockholders’ Equity		F-3
Statements of Cash Flows		F-4
Notes to Financial Statements		F-5

NORTH AMERICAN INSURANCE LEADERS, INC.

(a development stage company)

Balance Sheets


	December 31, 2006		June 30, 2006
	(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	789,364	$	281,677
Cash and cash equivalents in Trust Account		112,650,399		111,291,949
Prepaid expenses		242,858		348,570

Total current assets		113,682,621		111,922,196
Deferred acquisition costs		117,205		—
Other assets		—		2,677

Total assets	$	113,799,826	$	111,924,873


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable	$	80,101	$	9,875
Deferred underwriting fee		2,875,000		2,875,000
Income taxes payable		989,935		536,359

Total current liabilities	$	3,945,036	$	3,421,234

Common stock, subject to possible conversion, 2,874,999 shares at conversion value	$	22,260,813	$	22,164,446

COMMITMENTS

STOCKHOLDERS’ EQUITY

Preferred stock—0.0001 par value; 1,000,000 shares authorized; 0 issued and outstanding		—		—
Common stock—0.0001 par value; 100,000,000 shares authorized; 17,968,750 issued and outstanding (which includes 2,874,999 shares subject to possible conversion)		1,797		1,797
Additional paid in capital		85,578,171		85,674,538
Retained earnings accumulated during the development stage		2,014,009		662,858

Total stockholders’ equity		87,593,977		86,339,193

Total liabilities and stockholders’ equity	$	113,799,826	$	111,924,873

See notes to financial statements.

F-1

NORTH AMERICAN INSURANCE LEADERS, INC.

(a development stage company)

Statements of Operations

(Unaudited)


	October 1, 2006 through December 31, 2006			October 1, 2005 through December 31, 2005		July 1, 2006 through December 31, 2006			August 8, 2005 (Date of Inception) through December 31, 2005			August 8, 2005 (Date of Inception) through December 31, 2006
Interest income	$	1,425,160		$	61	$	2,846,460		$	114		$	4,191,667

General and administrative expenses		147,859		$	—		367,983			1,500			513,973


Net income (loss) before provision for income taxes	$	1,277,301		$	61	$	2,478,477		$	(1,386	)	$	3,677,694

Provision for income taxes		574,785			—		1,127,326			—			1,663,685


Net income (loss)	$	702,516		$	61	$	1,351,151		$	(1,386	)		2,014,009

Accretion of Trust Account relating to common stock subject to possible conversion		(88,005	)		—		(96,367	)		—			(270,821	)

Net income (loss) attributable to common stockholders	$	614,511		$	61	$	1,254,784		$	(1,386	)	$	1,743,188


Weighted average common shares outstanding subject to possible conversion		2,874,999			—		2,874,999			—

Basic and diluted net income per share subject to possible conversion	$	0.03			—	$	0.03			—

Weighted average common shares outstanding		15,093,750			3,125,000		15,093,750			3,125,000


Basic and diluted net income per share	$	0.05			—	$	0.08			—

See notes to financial statements.

F-2

NORTH AMERICAN INSURANCE LEADERS, INC.

(a development stage company)

Statement of Stockholders’ Equity


	Common Stock Shares		Amount		Additional Paid-In Capital			Retained Earnings Accumulated During the Development Stage		Total
Balance at August 8, 2005 (Date of inception)	$	—	$	—	$	—		$	—	$	—
Issuance of common stock to initial stockholders		3,593,750		359		24,641			—		25,000
Issuance of D&O rights in private placement		—		—		1,700,000			—		1,700,000
Sale of 14,375,000 units (including the 1,875,000 units pursuant to the over-allotment option at a price of $8 per unit, net of underwriters’ discount and offering expenses)		14,375,000		1,438		106,114,345			—		106,115,783
Net proceeds subject to possible conversion of 2,874,999 shares		—		—		(21,989,992	)		—		(21,989,992	)
Net income for the period		—		—		—			662,858		662,858
Accretion of Trust Account relating to common stock subject to possible conversion		—		—		(174,454	)		—		(174,454	)

Balance at June 30, 2006		17,968,750	$	1,797	$	85,674,538		$	662,858	$	86,339,193
Net income for the period (unaudited)		—		—		—			1,351,151		1,351,151
Accretion of Trust Account relating to common stock subject to possible conversion (unaudited)		—		—		(96,367	)		—		(96,367	)

Balance at December 31, 2006 (unaudited)	$	17,968,750	$	1,797	$	85,578,171		$	2,014,009	$	87,593,977

See notes to financial statements.

F-3

NORTH AMERICAN INSURANCE LEADERS, INC.

(a development stage company)

Statements of Cash Flows

(Unaudited)


	July 1, 2006 Through December 31, 2006			August 8, 2005 (Date of Inception) through December 31, 2005			August 8, 2005 (Date of Inception) through December 31, 2006
Cash flows from operating activities:

Net income	$	1,351,151		$	(1,386	)	$	2,014,009
Adjustments to reconcile net income to net cash used in operating activities:
Changes in:
Interest income, net		(1,358,450	)		—			(2,700,399	)
Prepaid expenses		105,712			—			(242,858	)
Other assets		2,677			—			—
Accounts payable		70,226			—			80,101
Income taxes payable		453,576			—			989,935
Accrued expense		—			1,500			—

Net cash used in operating activities		624,892			114			140,788

Cash flows from investing activities:
Cash and cash equivalents deposited in Trust Account		—			—		$	(109,950,000	)
Deferred acquisition costs		(117,205	)		—			(117,205	)

Net cash used in investing activities		(117,205	)		—			(110,067,205	)

Cash flows from financing activities:
Net proceeds from public offering	$	—		$	—		$	108,990,781
Proceeds from notes payable to directors and officers		—			150,000			150,000
Prepayment of notes payable to directors and officers		—			—			(150,000	)
Proceeds from issuance of D&O rights		—			—			1,700,000
Proceeds from issuance of common stock to initial stockholders		—			25,000			25,000
Deferred offering costs paid		—			(117,126	)		—

Net cash provided by financing activities		—			57,874			110,715,781

Net increase in cash and cash equivalents	$	507,687		$	57,988		$	789,364
Cash and cash equivalents - beginning of period	$	281,677		$	—		$	—

Cash and cash equivalents - end of period	$	789,364		$	57,988		$	789,364

Supplemental disclosures of non-cash financing activity:
Accrued offering costs		—			6,223			—
Deferred underwriting fee	$	—		$	—		$	2,875,000
Accretion of Trust Account relating to common stock subject to possible conversion	$	96,367		$	—		$	270,821
Fair value of underwriter purchase option included in offering costs	$	—		$	—		$	1,477,500
Cash paid for income taxes	$	673,750		$	—		$	673,750

See notes to financial statements.

F-4

NORTH AMERICAN INSURANCE LEADERS, INC.

(a development stage company)

Notes to Financial Statements

NOTE A—ORGANIZATION AND BUSINESS OPERATIONS

North American Insurance Leaders, Inc. (the “Company”) was incorporated in Delaware on August 8, 2005. The Company was formed to effect a merger, capital stock exchange, asset acquisition, stock purchase and/or other similar transaction with one or more businesses in the insurance or insurance services industry in North America (“Business Combination”). The Company has not generated revenue to date other than interest income. The Company is considered to be in the development stage and is subject to the risks associated with activities of development stage companies. The Company has selected June 30th as its fiscal year end.

The registration statement for the Company’s initial public offering (the “Public Offering”) was declared effective on March 21, 2006. On that date, the Company consummated a private placement of 1,700,000 D&O rights (the “Private Placement”) for an aggregate purchase price of $1,700,000. On March 27, 2006, the Company consummated the Public Offering (together with the over-allotment offering, the “Offering”) of 14,375,000 units (“Units”) for net proceeds of approximately $106,000,000 (net of deferred underwriting fees).

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Offering of Units, although the Company intends to apply substantially all of the net proceeds of the Offering toward consummating a Business Combination with one or more insurance-related businesses. Furthermore, there is no assurance that the Company will be able to successfully effect a Business Combination. Upon the closing of the Offering and the Private Placement, $109,950,000 (including $2,875,000 of underwriting fees which have been deferred by the underwriters as described in Note C) was placed in a trust account (the “Trust Account”) and invested in money market instruments or accounts meeting conditions of the Investment Company Act of 1940 and/or securities principally issued or guaranteed by the U.S. government until the earlier of (1) the consummation of the Company’s first Business Combination or (2) the distribution of the Trust Account as described below. The balance in the Trust Account including interest on December 31, 2006 was $112,650,399. In each quarter commencing July 2006, half of the interest earned during the preceding quarter on the amounts held in the Trust Account (net of taxes payable) is being released to the Company to cover a portion of its working capital requirements up to an aggregate of $1,000,000. (During the quarter ended December 31, 2006, $405,075 was transferred to working capital resulting in an aggregate transfer to working capital of $807,869 since July 2006.) This interest and the proceeds of the Offering that were not deposited in the Trust Account may be used to pay for business, legal, and accounting due diligence costs incurred in connection with prospective Business Combinations and continuing general and administrative expenses. The Company will seek stockholder approval before it effects an initial Business Combination, even if the nature of the Business Combination would not ordinarily require stockholder approval under applicable state law. The Company will proceed with such a Business Combination only if a majority of the shares of common stock voted by the public stockholders of the Company (the “Public Stockholders”) are voted in favor of the Business Combination and Public Stockholders owning less than 20% of the shares sold in the Offering both vote against the Business Combination and exercise their conversion rights as described below.

F-5

NORTH AMERICAN INSURANCE LEADERS, INC.

(a development stage company)

Notes to Financial Statements

In no event will the pre-Public Offering stockholders of the Company (the “Initial Stockholders”) be considered Public Stockholders for purposes of voting for or against a Business Combination. Public Stockholders who convert their stock into an allocable share of the Trust Account will still have the right to exercise the warrants that they receive as part of the Units. In the event that Public Stockholders owning 20% or more of the stock sold in the Offering vote against the Business Combination and exercise their conversion rights described below, the Business Combination will not be consummated. Accordingly, Public Stockholders holding 19.99% of the aggregate number of shares owned by all Public Stockholders may seek conversion of their shares in the event of such a Business Combination. Such Public Stockholders are entitled to receive their per share interest in the Trust Account computed without regard to the shares held by the Initial Stockholders. In this respect, $22,260,813 (including accretion of $270,821, comprised of interest income of $792,601 minus income taxes of $360,207 and $161,573 transferred to working capital since inception) has been classified as common stock subject to possible conversion at December 31, 2006. Voting against the initial Business Combination alone will not result in an election to exercise a stockholder’s conversion rights. A stockholder must also affirmatively exercise such conversion rights at or prior to the time the Business Combination is voted upon by the stockholders. All of the Company’s Initial Stockholders, including all of the directors at the time of the Offering and officers of the Company, have agreed to vote all of the shares of common stock held by them in accordance with the vote of the majority in interest of all other stockholders of the Company, other than the Initial Stockholders, with respect to any initial Business Combination.

In the event that the Company does not consummate a Business Combination within 18 months after the completion of the Offering, or 24 months after the completion of the Offering if certain extension criteria have been satisfied, the proceeds then on deposit in the Trust Account net of taxes will be distributed to the Company’s Public Stockholders, excluding Initial Stockholders, to the extent of their initial stock holdings. In the event of the distribution, it is likely that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per share in the Offering (assuming no value is attributed to the Warrants included in the Units offered in the Offering as discussed in Note C).

On March 15, 2006, the Company effected a two-for-three reverse stock split. Following this reverse stock split, there were 3,125,000 shares of common stock outstanding. Immediately after the reverse stock split, the Company issued a stock dividend of 468,750 shares of common stock in order to ensure that, after the Offering, regardless of whether the underwriters exercised their over-allotment option in part or in full, the Company’s Initial Stockholders would maintain control over 20% of the Company’s outstanding shares of common stock after consummation of the Offering. Following this stock dividend and immediately prior to the Offering, there were 3,593,750 shares of common stock outstanding. All references in the accompanying financial statements to the number of shares of common stock and net income per share have been retroactively restated to reflect the reverse stock split and the stock dividend.

F-6

NORTH AMERICAN INSURANCE LEADERS, INC.

(a development stage company)

Notes to Financial Statements

NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

[1] Basis of Presentation:

The accompanying financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the audited financial statements and related notes that were included in the Company’s Form 10-K for the fiscal year ended June 30, 2006.

In the Company’s opinion, all adjustments (consisting primarily of normal accruals) have been made that are necessary to present fairly the financial position of the Company. Operating results for the interim period presented are not necessarily indicative of the results to be expected for a full year.

[2] Cash and Cash Equivalents:

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

[3] Net Income Per Common Share:

Basic net income per share is calculated by dividing net income attributable to (1) common stockholders and (2) common stockholders subject to possible conversion by their weighted average number of common shares outstanding during the period. Calculation of the weighted average common shares outstanding during the period is comprised of 3,125,000 initial shares outstanding throughout the period from August 8, 2005 (date of inception) to December 31, 2006 and an additional 14,843,750 shares (including 2,874,999 subject to possible conversion) outstanding after the effective date of the Offering in March 2006. No effect has been given to potential issuances of common stock from warrants or the underwriter option in the diluted computation, as the effect would not be dilutive.

F-7

NORTH AMERICAN INSURANCE LEADERS, INC.

(a development stage company)

Notes to Financial Statements

[4] Use of Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

[5] Income Taxes:

Deferred income taxes are provided for the differences between the bases of assets and liabilities for financial reporting and income tax purposes. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. There were no deferred taxes as of December 31, 2006.

[6] Deferred Acquisition Costs:

Costs related to proposed acquisitions are capitalized and will be expensed in the event the acquisition does not take place.

[7] Recently Issued Accounting Standards:

Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

NOTE C—OFFERING

In the Offering, the Company sold 14,375,000 Units. The underwriters were paid fees equal to 4.5% of the gross proceeds of the Offering, or $5,175,000, and have agreed to defer an additional $2,875,000 (the “Deferred Fees”) of their underwriting fees until the consummation of a Business Combination. Each Unit consists of one share of the Company’s common stock, par value $0.0001 per share, and one warrant exercisable to purchase one share of common stock (“Warrant”). Upon consummation of a Business Combination, the Company will pay such Deferred Fees out of the proceeds of the Offering held in the Trust Account. The underwriters will not be entitled to any interest accrued on the Deferred Fees. The underwriters have agreed to forfeit any rights to, or claims against, such proceeds if the Company does not successfully complete a Business Combination. Each Warrant will entitle the holder to purchase from the Company one share of common stock at an exercise price of $6.00 commencing on the later of (a) March 21, 2007 or (b) the completion of a Business Combination, and will expire on March 21, 2010, or earlier upon redemption. The Warrants will be redeemable at a price of $0.01 per Warrant upon 30 days’ notice after the Warrants become exercisable, only

F-8

NORTH AMERICAN INSURANCE LEADERS, INC.

(a development stage company)

Notes to Financial Statements

in the event that the last sale price of the common stock is at least $11.50 per share for any 20 trading days within a 30-trading day period ending on the third business day prior to the date on which notice of redemption is given. The D&O warrants referenced in Note D—Commitments have identical rights to those of the Warrants but will not be transferable or salable by the Company’s directors and officers and the spouse of one of the Company’s officers, as designee, until the later of March 21, 2007 or the consummation of a Business Combination. On February 13, 2007, the Company entered into a Warrant Clarification Agreement (the “Warrant Clarification Agreement”) to clarify the terms of the Warrant Agreement, dated as of March 27, 2006 (the “Warrant Agreement”), by and between the Company and Mellon Investor Services LLC, as Warrant Agent. The Warrant Clarification Agreement clarified, consistent with the terms of the Warrant Agreement and the disclosure contained in the Company’s Prospectus, dated March 22, 2006, that if the Company is unable to deliver securities pursuant to the exercise of a Warrant because a registration statement under the Securities Act of 1933, as amended, with respect to the common stock is not effective, then the Company will have no obligation to pay cash or other consideration to the holders of Warrants or otherwise “net-cash settle” the Warrant.

The Company sold to CRT Capital Group LLC, for $100, an option to purchase up to a total of 750,000 units, consisting of one share of common stock and one warrant, at $8.80 per unit, commencing on the later of the consummation of the Business Combination and one year after the date of the final prospectus for the Offering and expiring four years after the date of the final prospectus. The warrants underlying the units have terms that are identical to those issued in the Offering, with the exception of the exercise price, which is set at $7.50 per warrant. The purchase option also contains a cashless exercise feature that allows the holder or holders of the purchase option to receive units on a net exercise basis. In addition, the purchase option provides for registration rights that permit the holder or holders of the purchase option to demand that a registration statement be filed with respect to all or any part of the securities underlying the purchase option within five years of the completion of the Offering. Further, the holder or holders of the purchase option are entitled to piggy-back registration rights in the event the Company undertakes a subsequent registered offering within seven years of the completion of the Offering. Warrants issued and outstanding as a result of the exercise of the purchase option will be subject to the Company’s right of redemption.

The sale of the option was accounted for as a cost attributable to the Offering. Accordingly, there was no net impact on the Company’s financial position or results of operations, except for the recording of the $100 proceeds from the sale. The underwriters, on behalf of the Company, used a volatility of 15.86% to calculate the value of the underwriter option. This volatility measurement was based on the average four-year volatility of the S&P 600 Small-Cap Insurance Index. The S&P 600 Small-Cap Insurance Index is a sub-set of the S&P 600 Small-Cap Index and includes fourteen companies with a range of market capitalizations from $230 million to $1.5 billion operating in the insurance sector. The Company believes this index provides an objective and reasonable estimate for the price volatility of other small-cap companies operating in the insurance sector. The Company has reviewed the estimates and believes, based upon a Black-Scholes model, that the fair value of the option on the date of sale was approximately $1,477,500, using an expected life of four years, volatility of 15.86%, and a risk-free rate of 4.71%.

NOTE D—COMMITMENTS

The Company presently occupies office space provided by an affiliate of several of its directors. Pursuant to an office administration agreement, the affiliate has furnished the Company with office facilities, equipment and clerical services at the facilities for $10,000 per month commencing on January 1, 2006. Amounts of $30,000, $60,000 and $120,000 for such services have been included in general and administrative expenses for the three-month period ended December 31, 2006, the six-month period ended December 31, 2006 and the period from August 8, 2005 (date of inception) through December 31, 2006, respectively. The office administration agreement may be terminated by either party without penalty upon 30 days’ written notice to the other party.

F-9

NORTH AMERICAN INSURANCE LEADERS, INC.

(a development stage company)

Notes to Financial Statements

The Company’s directors at the time of the Offering and officers and the spouse of one of the Company’s officers, as designee, purchased from the Company on the closing date of the Offering an aggregate of 1,700,000 rights (“D&O rights”) in a Private Placement, at a purchase price of $1.00 per right, convertible into warrants (“D&O warrants”). The $1.7 million proceeds from the issuance and sale of the D&O rights were placed in the Trust Account and are part of the liquidating distribution to the Company’s Public Stockholders in the event of liquidation prior to the Company’s Business Combination or in the event that less than 20% of the Company’s Public Stockholders elect to convert their shares of common stock in connection with a Business Combination.

The D&O rights automatically converted into 2,383,957 D&O warrants on the 120th day following the effective date of the Offering, July 19, 2006. The conversion ratio of D&O rights into D&O warrants was calculated by dividing $1.00 by the conversion price of $0.7131. The conversion price was equal to the weighted average of all sale prices of the warrants as reported on the AMEX during the 20 trading days prior to the conversion date.

The D&O warrants have terms and provisions that are identical to those of the warrants sold as part of the units in the Offering but will not be transferable or salable by the Company’s directors and officers and the spouse of one of the Company’s officers, as designee, until the later of March 21, 2007 or the consummation of the initial Business Combination. In the event of liquidation prior to the Company’s Business Combination, the D&O warrants will expire worthless.

Holders of the D&O warrants are permitted to transfer D&O warrants in certain limited circumstances, such as by will in the event of their death. However, the transferees receiving such D&O warrants will be subject to the same sale restrictions imposed on the Company’s directors and officers and the spouse of one of the Company’s officers, as designee, who initially purchased the D&O rights from the Company.

NOTE E—PREFERRED STOCK

The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the board of directors.

NOTE F—COMMON STOCK

At December 31, 2006, 18,258,957 shares of common stock were reserved for issuance upon exercise of redeemable warrants and underwriters’ unit purchase option.

NOTE G—INCOME TAXES

Provision for Income Taxes

Provision for current income taxes consists of:


	Federal		State		Total Current
Period from October 1, 2006 to December 31, 2006	$	425,341	$	149,444	$	574,785
Period from July 1, 2006 to December 31, 2006		833,741		293,585		1,127,326
Period from August 8, 2005 (inception) to December 31, 2006		1,167,912	$	495,773	$	1,663,685

F-10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Unless the context otherwise requires, references in this report to “the Company,” “we,” “us,” and “our” refer to North American Insurance Leaders, Inc.

The following discussion should be read in conjunction with our financial statements and related notes thereto included elsewhere in this report.

Forward-Looking Statements

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. We have based these forward-looking statements on our current expectations, estimates and projections about our industry, our beliefs, our assumptions and future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in this report and our other Securities and Exchange Commission (“SEC”) filings, including the risks discussed in the section entitled “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2006 (the “Form 10-K”), and the following:

•

our blank check structure, limited operating history and the extremely limited basis upon which to evaluate our ability to achieve our business objective;

•

liquidation if no business combination occurs;

•

allocation of our management’s time to other businesses;

•

decreases in interest rates;

•

potential conflicts of interest involving our directors and officers;

•

our ability to hire and retain key personnel;

•

pervasive and increasing federal and state regulation of the insurance industry, including the possibility that regulation will delay or prevent a business combination; and

•

a target business having insufficient reserves and being potentially subject to unforeseeable and/or catastrophic natural and man-made events.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

We are a “blank check” company organized under the laws of the State of Delaware on August 8, 2005. We were formed to effect a merger, capital stock exchange, asset acquisition, stock purchase and/or other similar transaction with one or more businesses in the insurance or insurance services industry in North America, which we refer to as a “business combination.” We have not generated revenue to date other than interest income. We are considered to be in the development stage and are subject to the risks associated with activities of development stage companies. Since our initial public offering in March 2006, we have been actively engaged in sourcing a suitable business combination candidate. We have met with target companies, service professionals and other intermediaries to discuss our company, the background of our management and our combination preferences. However, as of the date of filing of this report, we have not consummated any business combination. We have selected June 30 as our fiscal year end. Our securities trade on the American Stock Exchange.

On March 27, 2006, we consummated our initial public offering of 14,375,000 units including the over-allotment option and received gross proceeds of $115,000,000. The underwriters were paid fees of 4.5% of the gross proceeds, or $5,175,000, and have agreed to defer an additional $2,875,000 of their underwriting fees until the consummation of a business combination. Upon the closing of the offering, $109,950,000 was placed in a trust account (the “trust account”), including $2,875,000 of deferred underwriting fees and $1,700,000 from the March 2006 private placement of rights to our directors at that time and officers and the spouse of one of our officers, as designee (“D&O rights”). The balance in the trust account including interest on December 31, 2006 was $112,650,399.

We intend to use substantially all of the net proceeds of our initial public offering to effect an initial business combination, including identifying and evaluating prospective acquisition candidates, selecting the target business, and structuring, negotiating and consummating the business combination. To the extent that our capital stock is used in whole or in part as consideration to effect a business combination, we intend to use the proceeds held in the trust account as well as any other net proceeds not expended to finance and grow the operations of the business we acquire, pay dividends to our shareholders or repurchase shares and warrants.

Net income for the three-month period ended December 31, 2006 was $702,516 and consisted of interest income of $1,425,160 earned predominantly on the trust account, offset by a $574,785 provision for income taxes and $147,859 of general and administrative expenses (primarily attributable to $49,831 of insurance expense, $34,938 of travel expenses, $30,000 in fees for a monthly administrative services agreement that commenced January 1, 2006 and $25,349 of legal and accounting fees unrelated to our initial public offering). Net income attributable to common stockholders was $614,511 after allowing for the $88,005 accretion of the trust account relating to common stock subject to possible conversion. The accretion was comprised of net investment income of $169,019, partially offset by the addition of $81,014 to working capital.

Net income for the three-month period ended December 31, 2005 was $61, which represented interest income earned during the period.

Net income for the six-month period ended December 31, 2006 was $1,351,151 and consisted of interest income of $2,846,460 earned primarily on the trust account, offset by a $1,127,326 provision for income taxes and $367,983 of general and administrative expenses (primarily attributable to $158,331 of legal and accounting fees unrelated to our initial public offering, $99,662 of insurance expense, $60,000 in fees for a monthly administrative services agreement that commenced January 1, 2006 and $34,938 of travel expenses). Net income attributable to common stockholders was $1,254,784 after allowing for the $96,367 accretion of the trust account relating to common stock subject to possible conversion. The accretion was comprised of net investment income of $298,746, partially offset by the addition of $161,573 to working capital and $40,806 of prior period taxes.

Net loss for the period since inception on August 8, 2005 to December 31, 2005 was $1,386 and consisted of $1,500 of general and administrative expenses offset by $114 in interest income.

Net income for the period since inception on August 8, 2005 to December 31, 2006 was $2,014,009 and consisted of interest income of $4,191,667 earned predominantly on the trust account, offset by a $1,663,685 provision for income taxes and $513,973 of general and administrative expenses (primarily attributable to $158,331 of legal and accounting fees unrelated to our initial public offering, $155,991 of insurance expense, $120,000 in fees for a monthly administrative services agreement that commenced January 1, 2006 and $34,938 of travel expenses). Accretion of the trust account relating to common stock subject to possible conversion totaled $270,821. Net income attributable to common stockholders was $1,743,188.

During each quarter commencing July 2006, half of the interest earned on the trust account (net of taxes payable) during the preceding quarter is being released to the Company to cover a portion of working capital requirements up to an aggregate of $1,000,000. This interest and the net proceeds of our initial public offering that were not deposited in the trust account will be used to pay business, legal, and accounting due diligence costs incurred in connection with prospective business combinations and to pay continuing general and administrative expenses. During the three-month period ended December 31, 2006, $405,075 of the $867,650 in net interest income that was earned on the trust account during the preceding quarter was released.

We believe that we have sufficient available funds outside of the trust account to operate through March 2008, assuming that a business combination is not consummated during that time. We do not believe we will need to raise additional funds during this time in order to meet the expenditures required to meet our operating expenses. However, we may issue additional capital stock, debt or a combination of capital stock and debt to complete one or more business combinations.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

To date, our efforts have been limited to organizational activities and activities relating to our initial public offering and the identification of a target business. We have not generated any revenue other than interest income. As the proceeds from our initial public offering held in trust have been invested in short term investments, our only market risk exposure relates to fluctuations in interest.

As of December 31, 2006, $112,650,399 of the net proceeds of our initial public offering (including interest) was held in trust for the purposes of consummating a business combination. The proceeds held in trust have been invested in money market funds at JPMorgan Chase Bank, which invest in United States Treasury Bills, commercial paper and other money market instruments. JPMorgan Chase Bank also acts as trustee. As of December 31, 2006, the effective annualized interest rate payable on our investment was 5.02%.

We have not engaged in any hedging activities since our inception on August 8, 2005. We do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.

Item 4. Controls and Procedures.

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our periodic filings with the SEC under the Exchange Act, including this report, is recorded, processed, summarized and reported on a timely basis. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to our management on a timely basis to allow decisions regarding required disclosure. Management, including our chief executive officer and chief financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and

procedures (as defined under Rules 13a-15(e) and 15(d)-15(e) of the Exchange Act) as of December 31, 2006. Based upon that evaluation, management has concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report. During the most recently completed fiscal quarter, there has been no significant change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A. Risk Factors.

See “Item 1A. Risk Factors” in the Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On March 27, 2006, we consummated our initial public offering of 14,375,000 units including the over-allotment option and received gross proceeds of $115,000,000. The securities sold in our initial public offering were registered under the Securities Act of 1933, as amended, on a registration statement on Form S-1 (No. 333-127871). The SEC declared the registration statement effective on March 21, 2006. The underwriters were paid fees of 4.5% of the gross proceeds, or $5,175,000, and have agreed to defer an additional $2,875,000 of their underwriting fees until the consummation of a business combination. Upon the closing of the initial public offering, $109,950,000 was placed in the trust account, including $2,875,000 of deferred underwriting fees and $1,700,000 from the March 2006 private placement of D&O rights. The balance in the trust account including interest on December 31, 2006 was $112,650,399. For a description of the use of proceeds generated in our initial public offering, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I of this report.

Item 5. Other Information.

On February 13, 2007, the Company entered into a Warrant Clarification Agreement (the “Warrant Clarification Agreement”) to clarify the terms of the Warrant Agreement, dated as of March 27, 2006 (the “Warrant Agreement”), by and between the Company and Mellon Investor Services LLC, as Warrant Agent. The Warrant Clarification Agreement clarified, consistent with the terms of the Warrant Agreement and the disclosure contained in the Company’s Prospectus, dated March 22, 2006, that if the Company is unable to deliver securities pursuant to the exercise of a warrant because a registration statement under the Securities Act of 1933, as amended, with respect to the common stock is not effective, then the Company will have no obligation to pay cash or other consideration to the holders of warrants or otherwise “net-cash settle” the warrant. A copy of the Warrant Clarification Agreement is attached hereto as Exhibit 4.

Item 6. Exhibits.

Listed below are the exhibits that are furnished herewith as part of this report (according to the number assigned to them in Item 601 of Regulation S-K):


Exhibit No.		Description of Document
4		Warrant Clarification Agreement, dated February 13, 2007, between the Company and Mellon Investor Services LLC

31.1		Certificate pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 of the Principal Executive Officer

31.2		Certificate pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 of the Principal Financial Officer

32.1		Certificate Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer

32.2		Certificate Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer

SIGNATURES

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


				NORTH AMERICAN INSURANCE LEADERS, INC.

February 14, 2007				/s/ William R. de Jonge
Date				Name: William R. de Jonge
				Title: President