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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 SEPTEMBER 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)
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California 95-4081667
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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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 October 31, 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
SEPTEMBER 30, 1997
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INDEX
PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet - September 30, 1997
(Unaudited) 3
Consolidated Statements of Operations -
Nine and three months ended September 30, 1997
and 1996 (Unaudited) 4
Consolidated Statements of Cash Flows -
Nine months ended September 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
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JOHN ADAMS LIFE CORPORATION
CONSOLIDATED BALANCE SHEET--SEPTEMBER 30, 1997
(UNAUDITED)
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ASSETS
CASH AND INVESTMENTS:
CASH ............................................ $109,291
BONDS AVAILABLE FOR SALE AT FAIR VALUE
(AMORTIZED COST OF $2,010,274) .................. 1,937,194
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2,046,485
COMMISSIONS RECEIVABLE .......................... 698,513
ACCOUNTS RECEIVABLE ............................. 7,037
ACCRUED INVESTMENT INCOME ....................... 1,478
OTHER CURRENT ASSETS ............................ 67,572
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Total assets ................................ $2,821,085
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
OTHER LIABILITIES ............................... $ 2,498
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Total current liabilities ................... 2,498
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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 (73,080)
Retained earnings - deficit ................... (3,362,880)
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2,818,587
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Total liabilities and shareholders' equity .. $2,821,085
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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 NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
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Three Months Ended Nine Months Ended
September 30 September 30
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1997 1996 1997 1996
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REVENUES:
Commissions ......................... $ 24,712 $ 288,042 $ 76,256 $ 862,483
Other income ........................ 41,372 (2,548) 63,845 2,690
-------- -------- -------- --------
66,084 285,494 140,101 865,173
EXPENSES:
Commissions ......................... -- 112,324 -- 560,982
General and administrative .......... 106,978 74,565 433,017 296,801
-------- -------- -------- --------
106,978 186,889 433,017 857,783
-------- -------- -------- --------
Income (loss) from continuing operations (40,894) 98,605 (292,916) 7,390
Loss from discontinued operations ...... (11,977) (198,705) (155,050) (215,655)
-------- -------- -------- --------
Net Loss ............................... $(52,871) $(100,100) $(447,966) $(208,265)
======== ======== ======== ========
Per share information:
Income (loss) from continuing operations $ (0.01) $ 0.03 $ (0.10) $ 0.00
Loss from discontinued operations ...... (0.00) (0.06) (0.05) (0.07)
-------- -------- -------- --------
Net loss ............................... $ (0.01) $ (0.03) $ (0.15) $ (0.07)
======== ======== ======== ========
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The accompanying notes are an integral part of these statements.
4
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JOHN ADAMS LIFE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
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CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
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Net loss .......................................................... $ (447,966) $ (208,266)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Loss from discontinued operation ................................ 155,050 215,656
Realized investment losses ...................................... 63,098 --
Changes in assets and liabilities:
Accounts receivable ............................................. 273,260 (471)
Other assets .................................................... (15,910) 59,775
Accrued investment income ....................................... 212 1,390
Amortization of unearned restricted stock compensation .......... -- 18,750
Other liabilities ............................................... (156,818) 25,578
Other items ..................................................... 2,161 --
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Net cash (used in) provided by continuing operations ............ (126,913) 112,412
Net cash used in discontinued operation ................................ (343,061) (479,097)
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Net cash used in operating activities ........................... (469,974) (366,685)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments ........................................ (288,287) --
Sales, maturities and repayments of principal on
investments ................................................... 1,084,351 --
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Net cash provided by investing activities ......................... 796,064 --
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuing notes payable ............................... -- 377,000
Payments on notes payable ......................................... (243,429) --
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Net cash (used in) provided by financing activities ............... (243,429) 377,000
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INCREASE IN CASH ....................................................... 82,661 10,315
CASH AT BEGINNING OF YEAR .............................................. 26,630 16,224
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CASH AT END OF QUARTER ................................................. $ 109,291 $ 26,539
========== ==========
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The accompanying notes are an integral part of these statements.
5
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JOHN ADAMS LIFE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 nine months ended September 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 $73,000 for the nine months ended September 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 nine months of 1997.
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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 September 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.
Liquidity and Capital Resources
The Company's cash and investments as of September 30, 1997, were
approximately $2,046,000. As part of the proceeds from the sale of JALIC, there
will be additional commissions due from Unified; the estimated present value of
these additional commissions at September 30, 1997, was approximately $698,000.
The additional commissions represent a 35% commission to be paid by Unified on
certain JALIC life insurance policies. (In the third quarter of 1997, the
Company received $94,000 in additional commissions.) 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. (In the third quarter the Company received $23,000 in
renewal commissions.) 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.
Results of Operations
DISCONTINUED OPERATIONS: The net loss from expenses related to JALIC,
the Company's discontinued operations, was approximately $12,000 or $.00 per
share during the third quarter of 1997, compared to a net loss of $199,000 or
$.06 per share from the discontinued operations for the comparable period of
1996.
CONTINUING OPERATIONS: The net loss in the third quarter of 1997 from
the Company's continuing operations (as a life insurance sales agency) totaled
$41,000 or $.01 per share compared to a net income from continuing operations of
$99,000 or $.03 per share for the comparable period of 1996.
The net loss in the third quarter of 1997 from discontinued and
continuing operations totaled $53,000 or $.01 per share compared to a net loss
of $100,000 or $.03 per share for the Company's discontinued and continuing
operations in the third quarter of 1996. For the nine months, there was a net
loss of $448,000 or $.15 per share in 1997, compared to a net loss of $208,000
or $.07 per share in 1996.
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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 operations.
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 - Not
applicable.
Item 5. Other Information - On August 31, 1997, Nicholas Del Sesto
resigned his positions as Executive Vice President of the
Company, as President of Firingline Corporation and as a
director of both companies. On October 8, 1997, Nicholas
Del Sesto and Carolanne Del Sesto, as trustees for the
1992 Nicholas and Carolanne Del Sesto Family Trust sold
501,000 shares of the Company's common stock owned by the
Trust to the Benjamin A. DeMotto and Patricia L. DeMotto
Living Trust. With the acquisition of these 501,000
shares (17.5%), the interest of Mr. DeMotto, Chairman of
the Board, CEO, President, and a director of the Company,
increased to 2,206,000 shares (which includes options to
purchase 150,000 shares that are currently exercisable).
As of October 31, 1997, Mr. DeMotto's percentage of
ownership of the Company, including his options, is 73.2%.
In September 1997, the Company received the resignations of Robert E.
Adams and L.E. Chenault as directors of the Company. At a special
meeting of the Board of Directors held on October 30, 1997, the Board,
in accordance with the Company's by-laws, filled one of the vacancies
on the Board by the appointment of Christopher J. DeMotto as a
director.
Item 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K: On September 8, 1997, the Company filed a
report on Form 8-K, dated September 5, 1997; the item reported on this
Form 8-K was the purchase on August 27, 1997 by Benjamin A. DeMotto, as
Trustee of the Benjamin A. DeMotto and Patricia L. DeMotto Living Trust
of 175,000 shares (6.1%) of the common stock of John Adams Life
Corporation from Patrick W. Hopper.
(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: October 31, 1997 By: Benjamin A. DeMotto
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Benjamin A. DeMotto
Chairman of the Board
and President
Date: October 31, 1997 By: Cathy Nitta
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Cathy Nitta
Controller
10
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<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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 109,291
<SECURITIES> 1,937,194
<RECEIVABLES> 7,037
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 67,572
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,821,085
<CURRENT-LIABILITIES> 2,498
<BONDS> 0
0
0
<COMMON> 6,254,547
<OTHER-SE> (3,362,880)
<TOTAL-LIABILITY-AND-EQUITY> 2,821,085
<SALES> 0
<TOTAL-REVENUES> 140,101
<CGS> 0
<TOTAL-COSTS> 433,017
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (292,916)
<DISCONTINUED> (155,050)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (447,966)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> 0
</TABLE>
