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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
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(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ____________ to _____________
Commission file number 0-13969
JOHN ADAMS LIFE CORPORATION
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(Exact name of small business issuer as specified in its charter)
California 95-4081667
- -------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11845 W. Olympic Boulevard, Suite 905, Los Angeles, California 90064
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(Address of principal executive offices)
Issuer's telephone number:
(310) 444-5252
Former Address: Not Applicable
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
The number of shares outstanding of the issuer's common stock (no par
value) as of August 5, 1997, was 2,864,700.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [x]
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JOHN ADAMS LIFE CORPORATION
FORM 10-QSB
JUNE 30, 1997
INDEX
<TABLE>
<CAPTION>
PAGE NO.
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet - June 30, 1997
(Unaudited) 3
Consolidated Statements of Operations -
Six and three months ended June 30, 1997 and 1996
(Unaudited) 4
Consolidated Statements of Cash Flows Six months
ended June 30, 1997 and 1996 (Unaudited) 5
Notes to Consolidated Financial Statements
(Unaudited) 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8
PART II. OTHER INFORMATION 9
</TABLE>
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JOHN ADAMS LIFE CORPORATION
CONSOLIDATED BALANCE SHEET--JUNE 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
CASH AND INVESTMENTS:
CASH ....................................................... $ 379,797
BONDS AVAILABLE FOR SALE AT FAIR VALUE
(AMORTIZED COST OF $1,706,755) ............................. 1,594,112
-----------
1,973,909
COMMISSIONS RECEIVABLE ..................................... 792,715
ACCOUNTS RECEIVABLE ........................................ 9,412
ACCRUED INVESTMENT INCOME .................................. 1,386
OTHER CURRENT ASSETS ....................................... 68,132
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Total assets ........................................... $ 2,845,554
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
OTHER LIABILITIES .......................................... $ 13,658
-----------
Total current liabilities .............................. 13,658
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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 .......... (112,643)
Retained earnings - deficit .............................. (3,310,008)
-----------
2,831,896
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Total liabilities and shareholders' equity ............. $ 2,845,554
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</TABLE>
The accompanying notes are an integral part of these statements.
3
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JOHN ADAMS LIFE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
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1997 1996 1997 1996
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<S> <C> <C> <C> <C>
REVENUES:
Commissions ............................ $ (68,200) $ 216,900 $ 51,544 $ 574,441
Other Income ........................... (2,526) 3,881 22,473 5,238
--------- --------- --------- ---------
(70,726) 220,781 74,017 579,679
EXPENSES:
Commissions ............................ -- 170,407 -- 448,658
General and Administrative ............. 140,000 133,108 326,039 222,236
--------- --------- --------- ---------
140,000 303,515 326,039 670,894
--------- --------- --------- ---------
Loss from Continuing Operations ........... (210,726) (82,734) (252,022) (91,215)
Income (loss) from Discontinued Operations (80,309) 110,849 (143,073) (16,950)
--------- --------- --------- ---------
Net Income (loss) ......................... $(291,035) $ 28,115 $(395,095) $(108,165)
========= ========= ========= =========
Per share information:
Loss from continuing operations ........... $ (0.08) $ (0.03) $ (0.09) $ (0.03)
Income (loss) from discontinued operations (0.02) 0.04 (0.05) (0.01)
--------- --------- --------- ---------
Net Income (loss) ......................... $ (0.10) $ 0.01 $ (0.14) $ (0.04)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
4
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JOHN ADAMS LIFE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................................... $ (395,095) $ (108,165)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Loss from discontinued operation ................................ 143,073 16,950
Realized investment losses ...................................... 63,076 --
Changes in assets and liabilities:
Accounts receivable ............................................. 176,683 (9,530)
Other assets .................................................... (16,470) (215,623)
Accrued investment income ....................................... (120) 1,417
Amortization of unearned restricted stock compensation .......... -- 18,750
Other liabilities ............................................... (145,656) 248,356
Other items ..................................................... (3,674) --
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Net cash used in continuing operations .......................... (178,183) (47,845)
Net cash used in discontinued operation ................................ (307,572) (316,981)
----------- -----------
Net cash used in operating activities ........................... (485,755) (364,826)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Sales, maturities and repayments of principal on
investments ................................................... 1,082,351 --
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Net cash provided by investing activities ......................... 1,082,351 --
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuing notes payable ............................... -- 377,000
Payments on notes payable ......................................... (243,429) --
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Net cash provided by (used in) financing activities ............... (243,429) 377,000
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INCREASE (DECREASE) IN CASH ............................................ 353,167 12,174
CASH AT BEGINNING OF YEAR .............................................. 26,630 16,224
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CASH AT END OF QUARTER ................................................. $ 379,797 $ 28,398
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
5
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JOHN ADAMS LIFE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(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 six months ended June 30, 1997, 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,
1996, contained in the Company's 1996 Annual Report to Shareholders. Certain
items have been reclassified to conform to the current year's presentation.
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 $113,000 for the six months ended June 30, 1997.
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."
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 first six months of 1997.
6
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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 June 30, 1997 and
1996. The impact of stock options was not dilutive.
Reclassifications
The 1996 financial statements have been reclassified to conform to the
discontinued operations accounting adopted in 1996.
7
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JOHN ADAMS LIFE CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
In January 1997, John Adams Life Corporation (the "Company") completed
the sale to Unified Life Insurance Company ("Unified") of the 49,803.16 shares
(99.6%) of the Common Stock of John Adams Life Insurance Company of America
("JALIC") owned by the Company. As a result of the sale, the Company through its
wholly-owned subsidiary, Firingline Corporation, operates as a life insurance
sales agency.
Results of Operations
DISCONTINUED OPERATIONS: The net loss from expenses related to JALIC,
the Company's discontinued operations, was approximately $80,000 or $.02 per
share during the second quarter of 1997, compared to a net income of $111,000 or
$.04 per share from the discontinued operations for the comparable period of
1996.
CONTINUING OPERATIONS: The net loss in the second quarter of 1997 from
the Company's continuing operations totaled $211,000 or $.08 per share compared
to a net loss from continuing operations of $83,000 or $.03 per share for the
comparable period of 1996.
The net loss in the second quarter of 1997 from discontinued and
continuing operations totaled $291,000 or $.10 per share compared to a net
income of $28,000 or $.01 per share for the Company's discontinued and
continuing operations in the second quarter of 1996. For the six months, there
was a net loss of $395,000 or $.14 per share in 1997, compared to a net loss of
$108,000 or $.04 per share in 1996.
Liquidity and Capital Resources
As a result of the sale of JALIC, the Company's cash and investments as
of June 30, 1997, were approximately $1,974,000. In addition, as part of the
sale proceeds, there will be additional commissions due from Unified; the
estimated present value of these additional commissions at June 30, 1997, was
approximately $793,000. The additional commissions represent a 35% commission to
be paid by Unified on certain JALIC life insurance policies. The maximum
aggregate amount of these additional commissions, which are to be paid to
Firingline as earned over the three-year period, 1997 through 1999, is
$1,200,000. Firingline will also continue to be paid renewal commissions on the
JALIC policies transferred to Unified. The amounts of any renewal commissions
and any additional commissions are primarily dependent upon the persistency of
the policies and there is no guarantee that any renewal commissions or
additional commissions will be earned.
8
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not involved in any legal proceedings that in
management's opinion could result in a material adverse effect on the
Company's financial condition or results of operation.
Item 2. Changes in Securities - Not applicable.
Item 3. Defaults Upon Senior Securities - Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Shareholders
on June 5, 1997.
(b) and (c) The following directors were elected at the
June 5, 1997 meeting:
<TABLE>
<CAPTION>
Director *Votes: For Withheld
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<S> <C> <C>
Robert E. Adams 2,278,490 189,325
L.E. Chenault 2,278,490 189,325
Nicholas Del Sesto 2,278,490 189,325
Benjamin A. De Motto 2,278,490 189,325
Alvin S. Milder 2,278,490 189,325
</TABLE>
*The Company had 2,864,700 shares outstanding on the record date,
April 11, 1997.
The ratification of the Board of Directors' selection of Ernst & Young
as the Company's independent public accountants for the year ending
December 31, 1997, was also voted on at the Annual Meeting. The votes
were:
For: 2,466,715
Against: 500
Abstain: 600
Item 5. Other Information - At a special meeting of the Company's Board of
Directors held on July 24, 1997, during the Board's discussion
regarding reduction of the Company's expenses, Benjamin A. DeMotto, the
Company's President and CEO, proposed as part of the program to reduce
the costs of operation that his salary be reduced by fifty percent
(50%) (from $17,500 per month to $8,750 per month for the period August
1, 1997 through December 31, 1997). Mr. DeMotto also said that he would
waive any bonus that may become due to him for the period July 1, 1996,
through the remainder of the term of his employment agreement (June 30,
1999). The Company intends to amend the written employment agreement to
give effect to the foregoing.
Item 6. Exhibits and Reports on Form 8-K
(a) No reports on Form 8-K were filed during the quarter for which this
report is filed.
(b) Exhibits - Previously filed.
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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: August 5, 1997 By: Benjamin A. DeMotto
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Benjamin A. DeMotto
Chairman of the Board
and President
Date: August 5, 1997 By: Cathy Nitta
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Cathy Nitta
Controller
10
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 379,797
<SECURITIES> 1,594,112
<RECEIVABLES> 9,412
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 68,132
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,845,554
<CURRENT-LIABILITIES> 13,6580
<BONDS> 0
0
0
<COMMON> 6,254,547
<OTHER-SE> (3,310,008)
<TOTAL-LIABILITY-AND-EQUITY> 2,845,554
<SALES> 0
<TOTAL-REVENUES> 74,017
<CGS> 0
<TOTAL-COSTS> 326,039
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (252,022)
<DISCONTINUED> (143,073)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (395,095)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> 0
</TABLE>
