August 12, 1996
Securities and Exchange Commission
450 Fifth Street, NW.
Washington, D.C. 20549
Re: American Investment Network, Inc.
(formerly Great American Investment Network, Inc.) - Form 10-QSB
Gentlemen:
Please accept for filing the Form 10-QSB of the above referenced registrant for
the period June 30, 1996.
Enclosed are eight copies; one copy with manual signatures and seven copies with
printed signatures.
Sincerely,
H. Harold Crumpler
Vice President/Treasurer
HHC:ll
Enclosures (8)
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended: June 30, 1996
Commission File Number: 0-21572
AMERICAN INVESTMENT NETWORK, INC.
(formerly Great American Investment Network, Inc.
(Exact name of registrant as specified in its charter)
Mississippi 74-2447294
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
660 Lakeland East Drive, Flowood, Mississippi 39208
(Address of principal executive offices) (Zip Code)
(601) 936-2090
Registrant's telephone number, including area code
NOT APPLICABLE
Former name, former address and former fiscal year, if changed since last report
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
As of June 30, 1996, there were outstanding 5,021,764 shares of registrant's
Class A common stock, no par value per share and 2,500 shares of Class B common
stock, par value $1 per share.
AMERICAN INVESTMENT NETWORK, INC.
FORM 10-QSB
TABLE OF CONTENTS
FOR THE QUARTER ENDED JUNE 30, 1996
Page
PART I. Financial Information
Item 1. Consolidated Balance Sheet (Unaudited)
as of June 30, 1996 3
Consolidated Statements of Operations (Unaudited)
for the Three Months and Six Months Ended
June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows (Unaudited)
for the Six Months Ended June 30, 1996 and 1995 5-6
Notes to Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II. Other Information
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Default Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Part I. Financial Information
ITEM 1: AMERICAN INVESTMENT NETWORK, INC. AND SUBSIDIARIES
Consolidated Balance Sheet (Unaudited)
June 30, 1996
ASSETS:
SECURITIES AVAILABLE FOR SALE:
Fixed maturities $2,659,876
Equity securities 960,989
Total investments 3,620,865
OTHER ASSETS:
Cash and cash equivalents 135,990
Accrued investment income 80,489
Notes and accounts receivable 322,218
Reinsurance receivable 39,265
Property and equipment - net 744,501
Deferred policy acquisition costs 2,328,476
Intangible and other assets 214,605
TOTAL ASSETS $7,486,409
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Future policy benefits $2,250,727
Unpaid claims 166,142
Unearned premiums 74,113
Policyholder's dividend accumulations 807,419
Accounts payable and other liabilities 232,118
Notes payable 518,968
Total liabilities 4,049,487
STOCKHOLDERS' EQUITY:
Class A Common Stock, participating, no par value
15,000,000 shares authorized; 5,025,490 shares
issued 4,480,620
Class B Common Stock, $1 par value;
2,500 shares authorized, issued and outstanding 2,500
Unrealized loss on marketable securities (64,272)
Retained earnings (deficit) (974,474)
3,444,374
Less: Cost of treasury stock - 3,726 shares (7,452)
Total stockholders' equity 3,436,922
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,486,409
See notes to consolidated financial statements.
Part I. Financial Information (Continued)
ITEM I: AMERICAN INVESTMENT NETWORK, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
REVENUE:
Premiums $729,271 $734,168 $1,390,793 $1,462,824
Net investment income 77,486 80,558 145,554 146,716
Gross realized investment losses (2,325) (2,325)
Other income 15,414 13,577 30,325 25,146
822,171 825,978 1,566,672 1,632,361
BENEFITS AND EXPENSES:
Benefits and claims 396,747 286,239 757,221 641,095
Amortization of deferred policy
acquisition costs 122,606 114,196 252,166 213,879
Interest expense 13,762 19,490 30,466 37,868
Salaries and employee benefits 184,274 227,601 351,452 386,732
Actuarial and other professional fees 39,342 27,572 72,509 85,931
Depreciation and amortization expense 12,671 18,859 34,143 36,160
Other expenses 124,279 97,436 221,282 256,076
893,681 791,393 1,719,239 1,657,741
(LOSS) INCOME FROM CONTINUING
OPERATIONS (71,510) 34,585 (152,567) (25,380)
DISCONTINUED OPERATIONS:
Income (loss) from operations 3,163 (6,709)
Gain on sale of agency subsidiary 47,133 47,133
50,296 40,424
NET (LOSS) INCOME ($ 71,510) $ 84,881 ($152,567) $ 15,044
NET (LOSS) INCOME PER COMMON SHARE:
(Loss) income from continuing
operations ($0.01) $0.01 ($0.03) ($0.01)
Discontinued operations .01 .01
Net (loss) income ($0.01) $0.02 ($0.03) $0.00
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 5,024,264 5,024,264 5,024264 5,024,264
See notes to consolidated financial statements.
Part I. Financial Information (Continued)
ITEM 1. AMERICAN INVESTMENT NETWORK, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended
June 30,
1996 1995
OPERATING ACTIVITIES:
Net (loss) income ($152,567) $ 15,044
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Discontinued operations (40,424)
Realized loss on sale of investments 2,325
Write-off of investment in U. S. Star subsidiary 30,000
Depreciation and amortization 34,143 36,160
Amortization of deferred policy acquisition costs 252,166 213,879
Change in net assets of discontinued operations 20,958
Decrease in restricted cash 95,000 161,000
(Increase) decrease in accrued investment income,
accounts receivable and other assets (3,962) (89,534)
Policy acquisition costs deferred (339,239) (456,598)
Increase in liability for future policy benefits
and unpaid claims 277,706 235,140
Increase in unearned premiums and policyholders'
dividend accumulations 78,354 75,552
Decrease in accounts payable and other
liabilities (83,859) (256,945)
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 157,742 (53,443)
INVESTING ACTIVITIES:
Cost of fixed maturities investments acquired (100,000) (211,454)
Proceeds from sales, maturities and repayments of
fixed-maturities investments 14,380 254,915
Property and equipment purchased (49,755) (74,209)
NET CASH USED IN INVESTING ACTIVITIES (135,375) (30,748)
Part I. Financial Information (Continued)
ITEM 1. AMERICAN INVESTMENT NETWORK, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited) (Continued)
Six Months Ended
June 30,
1996 1995
FINANCING ACTIVITIES:
Repayments of notes payable ($ 7,479) ($ 4,898)
NET CASH USED IN FINANCING ACTIVITIES (7,479) (4,898)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 14,888 (89,089)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 121,102 283,747
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $135,990 $194,658
SUPPLEMENTAL INFORMATION:
Non-cash activities:
Change in unrealized (loss) gain on marketable
securities ($112,000) $350,000
Sale of agency subsidiary in exchange for
note receivable $170,000
Interest paid $30,000 $37,000
Income taxes paid $-0- $-0-
See notes to consolidated financial statements.
ITEM 1. Financial Information (Continued)
AMERICAN INVESTMENT NETWORK, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Six Months Ended June 30, 1996
(Unaudited)
Note 1. Basis of Presentation
The consolidated condensed unaudited interim financial statements of American
Investment Network, Inc. and its subsidiaries ("the Company") have been prepared
in accordance with generally accepted accounting principles ("GAAP").
In the opinion of management, the attached unaudited financial statements
reflect all adjustments necessary for a fair presentation of the financial
position, results of operations, and cash flows of the Company. The results of
operations for the interim periods are not indicative of results for the full
year.
The consolidated interim financial statements should be read in conjunction with
the audited consolidated financial statements for the year ended December 31,
1995, and the notes related thereto.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
Total assets as of June 30, 1996 were $7,486,000, which represented only a
minimal change of less than $1,000 when compared to December 31, 1995.
Significant changes within the Company's composition of assets and liabilities
as compared to its most recent fiscal year end related principally to (i) a
general decline in the fair values of the Company's fixed maturity and preferred
stock securities resulting from market and economic changes, (ii) the payment of
contingent liabilities resulting from the purchase of Financial Security Life of
Mississippi (FSL) with cash escrowed for such purposes, and (iii) anticipated
increases in the assets and liabilities related to the Company's growth in the
accident and health insurance market. As of June 30, 1996, the Company's
unrealized loss on marketable securities was $64,000 compared to an unrealized
gain of $48,000 as of December 31, 1995 or an adverse change of $112,000.
Restricted cash decreased $95,000 (as well as the corresponding liability
included in accounts payable and other liabilities) as a result of the
settlement of certain liabilities and contingencies of FSL for which seller
funds were escrowed. As of June 30, 1996, the Company's deferred policy
acquisition cost increased $87,000 as compared to December 31, 1995 and future
policy benefit and unpaid claims liabilities increased an aggregate of $278,000.
This increase principally related to accident and health products.
Policyholders' dividend accumulations increased $76,000 and relates to the
dividend scale of the Company's participating life policies.
Results of Operations
Total revenues for the six months ended June 30, 1996 were $1,391,000 compared
with revenues of $1,463,000 at the same period in 1995 or a decrease of $72,000.
Both life and accident and health premiums decreased during the first six months
of 1996 by approximately $70,000 and $2,000, respectively, due to a slow down in
new business. While the Company believes life premiums will continue to
decrease, it is expected the reduction in accident and health premiums is
temporary. Other income increased in 1996 by $5,000 principally as a result of
increased rental income from its home office facility.
Policy benefits and claims increased $116,000 for the six month period ended
June 30, 1996 over the same period ended June 30, 1995. This increase is
principally related to the growth in accident and health business and related
claims and increases in dividend benefits related to the Company's Lifetime
Accumulator participating policies. The change in the Company's accident and
health future policy benefit reserves represented $83,000 of this increase.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Amortization of deferred policy acquisition cost increased $38,000 for the six
month period ended June 30, 1996 as compared to the same period ended June 30,
1995. This increase is due principally to increases related to the amortization
of deferred policy acquisition cost of accident and health business due to
anticipated increases from existing business volume. Amortization of accident
and health deferred policy acquisition cost increased from $76,000 in 1995 to
$110,000 in 1996.
Salaries and wages reflected a decrease of $35,000 or 9% for the first six
months of 1996. This decrease principally results from the accrual of $55,000
in compensation cost in 1995 as a result of the obligation relative to past
services resulting from the adoption of an executive compensation plan in May
1995. In 1996 cost relative to this plan approximated $20,000.
Actuarial and other professional fees decreased from $86,000 for the first six
months of 1995 to $73,000 for the six months ended June 30, 1996. This $13,000
decrease was the direct result of less legal and actuarial services in 1996.
During 1995 legal fees approximated $19,000 and included final billings relative
to previously accrued litigation settlements and cost relating to the sale of
certain assets. In 1996, legal fees approximated $13,000. Additionally
actuarial fees decreased approximately $6,000 due to less cost related to new
product development.
Other general operating expenses decreased by $35,000 for the first six months
of 1996 as compared to the same period in 1995. This net decrease was a
combination of several factors including (i) an increase in non-deferrable
renewal commissions of $30,000; (ii) a decrease in the cost of outside computer
processing of $31,000 due to a migration to in-house processing; (iii) a
decrease in 1996 of $30,000 as compared to 1995 resulting from the write-off of
the Company's remaining investment in U. S. Star During the first quarter of
1995, and (iv) cost containment measures in controllable expenses. Addition-
ally, management is continually pursuing alternative capital resources or new
investor interest for purposes of raising capital.
Management believes that the cash flow generated from the Company's insurance
operations, investment income and proceeds from sales and maturities of invest-
ments will be sufficient to meet its current and future operating requirements.
The Company is monitoring the volume of new accident and health business written
in 1996 in order to manage the possible cash flow and statutory surplus effects
resulting from the related acquisition expenses to secure such business in the
first year. The Company continues to actively pursue alternative sources of
captial through solicitation of new investor interests for purpose of raising
capital to invest in its insurance subsidiary.
PART II.
ITEM 1. Legal Proceedings.
Included herewith by reference to Form 10-KSB for year ended December 31, 1995.
There have been no significant changes in these matters since the filing of the
Form 10-KSB.
ITEM 2. Changes in Securities.
There have been no changes in securities since 1995.
ITEM 3. Default Upon Senior Securities.
The Registrant has no senior securities.
ITEM 4. Submission of Matters to a Vote of Security Holders
On May 7, 1996, shareholders of the Company approved the adoption of an Agents'
Stock Option Plan for eligible agents licensed with the Company wherein 200,000
shares of Class A common stock was reserved for option as directed by the Board
of Directors. Under the terms of the plan, agents writing premiums which exceed
certain minimum levels will be granted options at an exercise price equal to
fair value at the date of grant.
In addition, on May 7, 1996, the shareholders approved the change of the
Company's name from Great American Investment Network, Inc. to American
Investment Network, Inc.
There have been no matters submitted to a vote of security holders, through the
solicitation of proxies or otherwise, since the last annual meeting held May 7,
1996.
ITEM 5. Other Information
There is no other information to be disclosed in this Form 10-QSB.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
NONE
(b) Reports on Form 8-K:
NONE
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.
AMERICAN INVESTMENT NETWORK, INC.
(Registrant)
June 30, 1996 /s/ H. Harold Crumpler
H. Harold Crumpler, Executive Vice President/Treasurer
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.
AMERICAN INVESTMENT NETWORK, INC.
(Registrant)
Date H. Harold Crumpler, Executive Vice President/Treasurer
8/12/96- 4 -- 1 -- 11 - - 11 -
