<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB/A
Commission File Number 0-13969
AMENDMENT TO APPLICATION OR REPORT
FILED PURSUANT TO SECTION 12, 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
John Adams Life Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
AMENDMENT NO. 1
---
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its September 30, 1996 on Form 10-QSB
------------------ ------
as set forth in the pages attached hereto;
(List all such items, financial statements, exhibits or other portions amended)
Items 1 and 2 of Part 1 - Financial Statements and Management's Discussion
and Analysis of Financial Condition and Results of Operations.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
John Adams Life Corporation
-----------------------------
(Registrant)
November 15, 1996 By Benjamin A. DeMotto
- ------------------------- -----------------------------
(Date) (Signature)
Benjamin A. DeMotto
Chairman of the Board and
President
- ---------------
1 See Rule 12b-15.
2 Insert the appropriate designation, e.g., "Application for Registration,"
"Annual Report for 1948."
3 Insert the number of the form on which the application or report was filed,
e.g., "10-K."
4 Print the name and title of the signing officer under his signature.
<PAGE> 2
JOHN ADAMS LIFE CORPORATION
FORM 10-QSB
SEPTEMBER 30, 1996
INDEX
PAGE NO.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet - September 30, 1996
(Unaudited) 3
Consolidated Statements of Operations -
Three and nine months ended September 30, 1996 and 1995
(Unaudited) 5
Consolidated Statements of Cash Flows -
Three and nine months ended September 30, 1996 and 1995
(Unaudited) 6
Notes to Consolidated Financial Statements
(Unaudited) 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 10
PART II. OTHER INFORMATION (Previously Submitted)
2
<PAGE> 3
JOHN ADAMS LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET--SEPTEMBER 30, 1996
ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
CASH AND INVESTMENTS
<S> <C>
Cash .................................................. $ 626,867
Bonds:
Available for sale, at fair value
(amortized cost of $13,813,071) ..................... 13,445,481
Policy loans, net of unearned interest of $171,840 .... 671,124
-----------
14,743,472
REINSURANCE RECOVERABLE ................................. 9,772,532
DEFERRED POLICY ACQUISITION COSTS, less reimbursement
of deferred policy acquisition costs due
to reinsurance .................................... 4,352,362
ACCOUNTS RECEIVABLE ..................................... 9,945
ACCRUED INVESTMENT INCOME ............................... 154,267
OTHER ASSETS ............................................ 138,159
-----------
Total assets ...................................... $29,170,737
===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
JOHN ADAMS LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET--SEPTEMBER 30, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<S> <C>
LIABILITIES:
POLICY LIABILITIES
Future life benefits and other policy obligations $ 19,391,599
Deferred revenue 165,163
------------
19,556,762
DUE TO REINSURERS 4,198,899
OTHER LIABILITIES 356,316
------------
24,111,977
------------
CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, no par value--
Authorized--5,000,000 shares; no shares
outstanding --
Common stock, no par value--
Authorized--15,000,000 shares
Issued and Outstanding--2,864,700 shares 6,254,547
Net unrealized loss on bonds available for sale,
net of deferred policy acquisition costs
adjustments (198,015)
Retained earnings - deficit (997,772)
------------
5,058,760
------------
Total liabilities and shareholders' equity $ 29,170,737
============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
JOHN ADAMS LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Premiums and policy charges $ 870,751 $ 326,826 $ 1,515,711 $ 1,066,901
Premiums ceded (675,186) (113,809) (954,658) (450,487)
----------- ----------- ----------- -----------
Net Premiums and policy charges 195,565 213,017 561,053 616,414
Interest on policy loans 48,666 139,580 346,693 385,619
Investment income, net 215,544 182,274 689,720 531,125
Net realized investment losses (2,306) (39,529) (4,566) (44,931)
Net unrealized investment gains -- 25,972 -- 144,569
----------- ----------- ----------- -----------
457,469 521,314 1,592,900 1,632,796
----------- ----------- ----------- -----------
BENEFITS AND EXPENSES:
Benefits incurred 155,897 391,234 845,988 816,398
Reinsurance recoveries (34,024) (151,842) (382,310) (171,083)
----------- ----------- ----------- -----------
Net benefits incurred 121,873 239,392 463,678 645,315
Interest on policyholders'
accumulation accounts 189,119 108,072 550,324 312,783
Operating costs and expenses 188,535 158,949 614,313 702,759
Amortization of deferred policy
acquisition costs 58,042 54,632 172,850 52,897
----------- ----------- ----------- -----------
557,569 561,045 1,801,165 1,713,754
----------- ----------- ----------- -----------
Net income (loss) $ (100,100) $ (39,731) $ (208,265) $ (80,958)
=========== =========== =========== ===========
Net income (loss) per share $ (0.03) $ (0.01) $ (0.07) $ (0.03)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
JOHN ADAMS LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (208,265) $ (80,958)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Net sales of bonds held for trading -- 44,126
Net realized investment losses 4,566 44,931
Net unrealized investment losses -- (144,569)
Net accretion of investment premiums and discounts 5,328 179
Policy loans 5,515,346 (127,328)
Reinsurance recoverable (7,210,646) 1,842,737
Accounts receivable (471) 12,524
Other assets 163,846 500,673
Deferred policy acquisition costs before effect of
unrealized investment gains/losses (206,222) (302,410)
Accrued investment income (13,050) 69,499
Policy liabilities (1,148,491) (1,988,118)
Amortization of unearned restricted stock compensation 18,750 28,125
Amounts due to reinsurers 2,783,820 (1,579,818)
Other liabilities (279,176) (325,318)
----------- -----------
Net cash used in operating activities (574,665) (2,005,725)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments (3,861,114) (2,105,047)
Sales, maturities and repayments of principal on
investments 933,678 3,637,510
----------- -----------
Net cash provided by (used in) investing activities (2,927,436) 1,532,463
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholder fund receipts 3,340,866 1,049,339
----------- -----------
Net cash provided by financing activities 3,340,866 1,049,339
----------- -----------
INCREASE (DECREASE) IN CASH (161,235) 576,077
CASH AT BEGINNING OF YEAR 788,102 395,001
----------- -----------
CASH AT END OF PERIOD $ 626,867 $ 971,078
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
JOHN ADAMS LIFE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
Summary of significant accounting policies
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting only of normal accruals) considered
necessary for a fair presentation have been included. In addition, these
accounting principles differ in certain material respects from the accounting
practices prescribed by various insurance regulatory authorities. The results of
operations for the three months and nine months ended September 30, 1996, are
not necessarily indicative of the results to be expected for the full year. The
accompanying unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements for the year
ended December 31, 1995, contained in the Company's 1995 Annual Report to
Shareholders. Certain items have been reclassified to conform to the current
year's presentation.
Premium revenue and related expenses
Premiums for traditional life insurance products are recorded as earned when
due. Benefits and expenses are associated with earned premiums in order to
recognize profits over the contract terms in proportion to premiums earned. This
association is accomplished by the provision of a reserve for future policy
benefits and the deferral and subsequent amortization of policy acquisition
costs. The reserve for future policy benefits and the amortization of deferred
acquisition costs for traditional life insurance products are computed using the
net level premium method based on estimated future investment yield, mortality
and withdrawals.
Revenues for interest sensitive life policies and investment products consist of
mortality charges for the cost of insurance, policy administration fees and
surrender charges assessed to policy account balances.
7
<PAGE> 8
Deferred revenue
Deferred revenue represents the excess of premiums collected from policyholders
over the cost of providing insurance. This profit is amortized into income over
the life of the related insurance policy.
Deferred acquisition costs
The costs of acquiring new business, principally commissions paid to agents and
other related policy issuance costs, are capitalized and amortized over the
policy term in proportion to related premium income for traditional life
insurance products and for interest sensitive life-type and investment contracts
over the estimated lives of the contracts in relation to the present value of
the estimated gross profits, which are comprised of net interest income, net
realized investment gains and losses, surrender charges, mortality margins and
policy administration fees and expenses. Amounts received from reinsurers
representing reimbursements of the costs of acquiring new business are deferred
and recognized over the policy term in proportion to related premiums paid to
reinsurers.
Deferred acquisition costs, net of accumulated amortization at September 30,
1996, are summarized as follows:
<TABLE>
<S> <C>
Total amount capitalized.............. $6,139,565
Reimbursement due to reinsurance...... (1,787,203)
----------
$4,352,362
==========
</TABLE>
Bonds
Bonds available for sale are carried at aggregate market value, with net
unrealized holding losses charged directly to shareholders' equity. The change
in net unrealized holding loss on bonds available for sale charged to
shareholders' equity was $198,015 for the nine months ended September 30, 1996.
Realized gains and losses on the sale of bonds are recognized in operations at
the date of sale and are determined using the specific cost identification
method, in accordance with the Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
Policy loans
Policy loans are recorded at the unpaid balance, less interest collected in
advance. Interest on policy loans is recognized using the effective interest
method.
8
<PAGE> 9
Future policy benefits
Liabilities for future policy benefits for traditional life insurance products
have been computed on the net level premium method, based upon the following
estimated future investment yield, mortality and withdrawal assumptions:
Investment Yield - 9.9 percent to 13.6 percent annually over the
policy life of the Company's primary products.
Mortality Rates - Primarily based on 80 percent of the 1965-1970
Modified Basic Select and Ultimate Mortality Table.
Withdrawal Rates - Primarily based on Company experience.
Liabilities for interest sensitive life-type and investment contracts are stated
at policyholder account values (premiums received, plus interest credited less
withdrawals and charges for mortality and policy administration).
Income taxes
The adoption of Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" did not have a material effect on
the financial position or results of operations of the Company, in
the nine months of 1996.
Earnings per share
Earnings per share are computed on the basis of the weighted average number of
shares outstanding during each year. The calculation of the weighted average
number of shares outstanding includes the effect of stock equivalents arising
from the Company's repurchase of its stock and the issuance of restricted stock.
Weighted average shares outstanding totaled 2,864,700, at September 30, 1996 and
1995. The impact of stock options was not dilutive.
9
<PAGE> 10
JOHN ADAMS LIFE CORPORATION AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Results of Operations
The net loss in the third quarter of 1996 totaled $100,000 or $.03 per
share compared to a net loss of $40,000 or $.01 per share for the comparable
period of 1995. For the nine months, there was a net loss of $208,000 or $.07
per share in 1996, compared to a net loss of $81,000 or $.03 per share in 1995.
The net loss for the three months ended September 30, 1996, compared to
the net loss for the comparable period in 1995, is due primarily to a decrease
in policy loan interest and increases in interest on policyholder's accumulation
accounts and operating expenses.
Net premiums and policy charges during the first nine months of 1996
decreased to $561,000 from $616,000 for the comparable period of 1995. The
premiums shown on the Company's consolidated statement of operations in
accordance with GAAP consist of premiums received for traditional whole-life and
term life insurance products. Premiums collected by the Company for interest
sensitive whole-life, and single and flexible premium deferred annuities are not
reported as premium revenues, but rather are reported as policy liabilities.
With respect to these products, revenues are recognized over time in the form of
investment income on invested funds, surrender charges and mortality and other
charges deducted from the policyholders' account balances. The deposit-type
funds (premiums) collected by the Company for annuities (on a statutory
accounting basis as set forth in the Company's statutory financial statements
filed with state insurance departments) were $346,000 in the third quarter of
1996, and $245,000 in the third quarter of 1995, and were $3,292,000 for the
first nine months ended September 30, 1996 and $1,022,000 for the comparable
period of 1995.
There were no net unrealized investment gains or losses for the first
nine months of 1996, as the Company reclassified its bonds held for trading to
bonds available for sale thereby placing all of its bonds in the same category.
Revenues from interest sensitive life policies, consisting of mortality
charges, policy administration fees and surrender charges assessed to policy
account values decreased to $129,000 in the third quarter of 1996 from $150,000
in the third quarter of 1995. For the nine months, revenues from interest
sensitive policies decreased to $453,000 in 1996 from $501,000 in 1995.
10
<PAGE> 11
Interest on policy loans and net investment income increased to
$1,036,000 for the first nine months ending September 30, 1996 from $917,000 for
the comparable period in 1995.
The increase in the amortization of deferred acquisition costs during
the nine months ending September 30, 1996, as compared to 1995, is primarily due
to revised assumptions included in estimates of future gross profits relating to
investment and mortality margins based upon actual experience for the Company's
interest sensitive life products.
Liquidity and Capital Resources
On October 24, 1996, the Company and Unified Life Insurance Company, a
Texas corporation, entered into a Stock Purchase Agreement (the "Agreement") for
the sale by the Company of its capital stock of John Adams Life Insurance
Company of America ("JALIC"). The purchase price set forth in the Agreement is
$3,350,000, subject to adjustments as provided in the Agreement.
The Company could also receive up to an additional $1,200,000 over a
three-year period as commissions from certain of the policies being transferred
to the purchaser. The commissions are dependent on the persistency of the
policies and other conditions set forth in an Amendment to the Supervising
General Agent's Commission Agreement between JALIC and the Company's wholly
owned subsidiary, Firingline Corporation, which serves as JALIC's general agent.
The sale by the Company of its 99.6% ownership interest in JALIC is
subject to fulfillment of certain conditions, including, but not limited to,
approval of the transaction by the California and Texas Departments of Insurance
and by the Company's shareholders.
In September 1996, JALIC and Unified Life Insurance Company entered
into a reinsurance agreement, effective July 1, 1996, for a substantial number
of JALIC's policies. This transaction resulted in an increase in JALIC's
statutory surplus account of $800,000; however, no material gain or loss was
reported for GAAP purposes. JALIC's statutory capital and surplus at September
30, 1996, was $2,403,000.
11
<PAGE> 12
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.
JOHN ADAMS LIFE CORPORATION
Date: November 15, 1996 By: Benjamin A. DeMotto
------------------------
Benjamin A. DeMotto
Chairman of the Board
and President
Date: November 15, 1996 By: Bernadette de Vera
-----------------------
Bernadette de Vera
Controller
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF EARNINGS AND CONSOLIDATED BALANCE SHEETS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 626867
<SECURITIES> 13445481
<RECEIVABLES> 9945
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24009092
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 29170737
<CURRENT-LIABILITIES> 4555215
<BONDS> 0
0
0
<COMMON> 6254547
<OTHER-SE> (997772)
<TOTAL-LIABILITY-AND-EQUITY> 29170737
<SALES> 0
<TOTAL-REVENUES> 1592900
<CGS> 0
<TOTAL-COSTS> 1801165
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (208265)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> 0
</TABLE>
