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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 September 30, 2004

[ ]  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 000-50885

QUANTA CAPITAL HOLDINGS LTD.

(Exact name of registrant as specified in its charter)


Bermuda N/A
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   
1 Victoria Street, Fourth Floor
Hamilton HM11
Bermuda
(Address of principal executive offices and zip code)
    
441-294-6350
(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 an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [ ]    No  [X]

As of November 4, 2004 there were 56,798,218 common shares, $0.01 par value per share, outstanding.



QUANTA CAPITAL HOLDINGS LTD.

INDEX TO FORM 10-Q


    Page No.
PART I.    FINANCIAL INFORMATION  
Item 1 Financial Statements
  Condensed Consolidated Balance Sheets at September 30, 2004 (unaudited) and December 31, 2003   3  
  Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three months and nine months ended September 30, 2004 and 2003 and the periods ended September 3, 2003 (predecessor)   4  
  Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity for the nine months ended September 30, 2004 and the period ended September 30, 2003   6  
  Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2004 and period ended September 3, 2003 (predecessor)   7  
  Notes to the Unaudited Condensed Consolidated Financial Statements   8  
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations   19  
Item 3 Quantitative and Qualitative Disclosures about Market Risk   44  
Item 4 Controls and Procedures   46  
PART II.    OTHER INFORMATION      
Item 1 Legal Proceedings   47  
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds   47  
Item 5 Other Information   47  
Item 6 Exhibits and Report on Form 8-K   47  

2



PART 1.    FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

QUANTA CAPITAL HOLDINGS LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of U.S. dollars except for share and per share amounts)


  September 30,
2004		 December 31,
2003
  (unaudited)  
Assets            
Investments at fair value (amortized cost: September 30, 2004, $510,410; December 31, 2003, $465,552) $ 510,680   $ 467,036  
Cash and cash equivalents   73,191     47,251  
Accrued investment income   3,754     2,995  
Premiums receivable   132,327     10,961  
Losses and loss adjustment expenses recoverable   6,051     3,263  
Other accounts receivable   8,804     8,957  
Deferred acquisition costs   42,601     6,616  
Deferred reinsurance premiums   44,967     1,925  
Property and equipment, net of accumulated depreciation of $1,027 (December 31, 2003: $185)   3,812     1,117  
Goodwill and other intangible assets   20,802     21,351  
Other assets   4,136     2,289  
Total assets $ 851,125   $ 573,761  
Liabilities            
Reserve for losses and loss expenses $ 124,534   $ 4,454  
Unearned premiums   225,960     20,044  
Environmental liabilities assumed   6,697     7,018  
Reinsurance balances payable   23,061     334  
Accounts payable and accrued expenses   10,866     17,609  
Net payable for investments purchased   10,928     34,766  
Deferred income and other liabilities   3,155     2,053  
Total liabilities $ 405,201   $ 86,278  
Shareholders' equity            
Preferred shares
($0.01 par value; 25,000,000 shares authorized; none issued and outstanding at September 30, 2004 and December 31, 2003)		 $ —   $ —  
Common shares
($0.01 par value; 200,000,000 shares authorized; 56,798,218 issued and outstanding at September 30, 2004 and December 31, 2003)		   568     568  
Additional paid-in capital   523,771     524,235  
Accumulated deficit   (78,633 )    (38,477 ) 
Accumulated other comprehensive income   218     1,157  
Total shareholders' equity $ 445,924   $ 487,483  
Total liabilities and shareholders' equity $ 851,125   $ 573,761  

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

3



QUANTA CAPITAL HOLDINGS LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE (LOSS) INCOME
(Expressed in thousands of U.S. dollars except for share and per share amounts)


  For the three
months ended
September 30,
2004		 For the three
months ended
September 30,
2003		 For the period
from July 1 to
September 3,
2003
  (Successor)   (Predecessor)
Revenues                  
Gross premiums written $ 116,729   $ —   $ —  
Net premiums written $ 85,969   $ —   $ —  
Change in net unearned premiums   (20,446 )    —     —  
Net premiums earned   65,523     —        
Technical services revenues   7,727     3,790     7,120  
Net investment income   3,258     349     2  
Net realized gains on investments   297     —     —  
Net foreign exchange losses   (43 )    —     —  
Other income   264     —     —  
Total revenues   77,026     4,139     7,122