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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): January 22, 1997
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JOHN ADAMS LIFE CORPORATION
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(Exact name of registrant as specified in its charter)
California 0-13969 95-4081667
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
11845 W. Olympic Blvd., Suite 905, Los Angeles, California 90064
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (310) 444-5252
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Item 2. Acquisition or Disposition of Assets.
On January 22, 1997, John Adams Life Corporation (the "Company")
completed the sale to Unified Life Insurance Company ("Unified") of the
49,803.16 shares of Common Stock (the "Shares") of John Adams Life Insurance
Company of America ("JALIC") owned by the Company. The Shares comprise 99.6% of
the issued and outstanding shares of common stock of JALIC.
Pursuant to the Stock Purchase Agreement dated October 24, 1996, as
amended, between the Company and Unified (the "Stock Purchase Agreement"), the
purchase price for the Shares (the "Purchase Price") was $3,350,000, subject to
certain adjustments. Pursuant to a formula set forth in the Stock Purchase
Agreement, at the Closing the Purchase Price was adjusted to $3,153,000, based
upon an estimate of JALIC's statutory capital and surplus account, asset
valuation reserve and interest maintenance reserve as of December 31, 1996. The
final calculation and settlement of the Purchase Price will be determined in
February 1997, when JALIC files its California Statutory Insurance Statement
for the year ended December 31, 1996. At that time, any final payment owed to
the Company or Unified will be made by the appropriate party.
At the Closing on January 22, 1997, the Company retained invested
assets of JALIC with an aggregate admitted book value, as indicated on JALIC's
most recent California Statutory Insurance Statement, of $2,817,000. The
balance of $336,000 represents indebtedness due from the Company to JALIC,
which was satisfied at the Closing.
Pursuant to a Supervising General Agent's Commission Agreement dated
February 1, 1976, as amended (the "Firingline Agreement"), Firingline, a
wholly-owned subsidiary of the Company, provides marketing, servicing and other
efforts in connection with the sale of life insurance and annuity products sold
by JALIC, in consideration for commissions paid to Firingline by JALIC. This
relationship will continue after the Closing.
Pursuant to the Amendment to the Firingline Agreement dated October 22,
1996, between JALIC and Firingline, JALIC will pay to Firingline, effective
January 1, 1997, additional commissions ("Additional Commissions") on certain
JALIC life insurance policies. The maximum aggregate amount of Additional
Commissions which can be earned by JALIC over a three-year period is $1,200,000.
Firingline will also continue to be paid renewal commissions under the
Firingline Agreement on all of the JALIC policies transferred to Unified at the
Closing. Over the three-year period commencing January 1, 1997, under certain
conditions JALIC will make monthly guaranteed advances against Additional
Commissions to Firingline.
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Item 7. Financial Statements and Exhibits.
(b) Pro forma financial information
INTRODUCTION
The following unaudited Pro Forma Condensed Consolidated Balance Sheet of
the Company as of September 30, 1996, gives effect to the sale of the JALIC
Shares as if it had occurred on September 30, 1996. The unaudited Pro Forma
Condensed Consolidated Statements of Operations for the year ended December 31,
1995, and the nine months ended September 30, 1996, assume that the disposition
occurred on the first day of each period presented and are based on the
operations of the Company for the year ended December 31, 1995, and the nine
months ended September 30, 1996.
The unaudited Pro Forma Condensed Consolidated Financial Statements have
been prepared by the Company based upon assumptions deemed appropriate. The
unaudited Pro Forma Condensed Consolidated Financial Statements presented herein
are shown for illustrative purposes only and are not necessarily indicative of
the future financial position or future results of operations of the Company, or
of the financial positions or results of operations of the Company that would
have actually occurred had the sale of the JALIC Shares been in effect as of the
date or for the periods presented.
The unaudited Pro Forma Condensed Consolidated Financial Statements should
be read in conjunction with the historical financial statements of the Company,
including notes thereto, and other financial information pertaining to the
Company included in the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1995; Quarterly Reports on Form 10-QSB for the quarters
ended March 31, 1996 and June 30, 1996; and Amended Quarterly Report on Form
10-QSB for the quarter ended September 30, 1996.
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JOHN ADAMS LIFE CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
JOHN ADAMS LIFE
CORPORATION PRO FORMA ADJUSTMENTS
AND ------------------------- PRO FORMA
SUBSIDIARIES JALIC(a) OTHER CONSOLIDATED
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ASSETS
Cash, investments and accrued investment
income................................ $14,226,615 $14,193,350 $ 2,564,414(b) $ 2,597,679
Receivable from buyer................... 950,000(b) 950,000
Policy loans............................ 671,124 671,124 -- --
Accounts receivable and other assets.... 148,104 72,114 -- 75,990
Reinsurance recoverable................. 9,772,532 9,772,532 -- --
Deferred policy acquisition costs....... 4,352,362 3,362,258 (990,104)(c) --
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Total Assets.................. $29,170,737 $28,071,378 $ 2,524,310 $ 3,623,669
=========== =========== =========== ===========
LIABILITIES
Future life benefits and other policy
obligations........................... $19,391,599 $19,391,599 $ -- $ --
Deferred revenue and other
liabilities........................... 521,479 92,814 (400,586)(b) 28,079
Due to reinsurers....................... 4,198,899 4,198,899 -- --
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Total Liabilities............. 24,111,977 23,683,312 (400,586) 28,079
SHAREHOLDERS' EQUITY
Capital stock and paid in capital....... 6,254,547 3,873,142 3,873,142 (d) 6,254,547
Retained earnings (deficit)............. (997,772) 712,939 712,939 (d) (2,658,957)
Unrealized loss on bonds, net of
deferred acquisition costs
adjustment............................ (198,015) (198,015) (1,661,185)(e) --
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Total Shareholders' Equity.... 5,058,760 4,388,066 2,924,896 3,595,590
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Total Liabilities and
Shareholders' Equity........ $29,170,737 $28,071,378 $ 2,524,310 $ 3,623,669
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(a) To eliminate the assets, liabilities and equity of JALIC as of September 30,
1996.
(b) To reflect the proceeds of $3,915,000 (which consists of the adjusted
Purchase Price of $2,965,000 pursuant to the terms of the Stock Purchase
Agreement plus the present value, $950,000, of Additional Commissions) from
the sale of the JALIC Shares. The net proceeds are invested in short-term
investments after retiring $400,586 of outstanding debt and accrued interest
due to the President, Chief Executive Officer and principal shareholder of
the Company.
(c) To write-down deferred acquisition costs of $990,104 recorded by Firingline.
(d) To record the Company's equity associated with JALIC.
(e) To record the Company's net loss on the sale of the JALIC Shares calculated
as follows:
The Company's investment in JALIC........................ $4,586,081
Less the sales price..................................... 3,915,000
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671,081
Write-down of deferred acquisition costs recorded by
Firingline............................................. 990,104
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Total.......................................... $1,661,185
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JOHN ADAMS LIFE CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
JOHN ADAMS LIFE
CORPORATION PRO FORMA ADJUSTMENTS
AND -------------------------- PRO FORMA
SUBSIDIARIES JALIC(a) OTHER CONSOLIDATED
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REVENUES
Premiums and policy charges.......... $ 1,542,540 $1,542,540 $ -- $ --
Premiums ceded....................... (776,768) (776,768) --
Commission income.................... 711,477(b) 711,477
Interest on policy loans............. 530,865 530,865 -- --
Net investment income................ 717,916 708,824 215,325(c) 224,417
Net realized investment losses....... (45,882) (28,836) -- (17,046)
Net unrealized investment gains...... 195,635 195,635 -- --
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Total Revenues............. 2,164,306 2,172,260 926,802 918,848
EXPENSES
Benefits incurred.................... 1,209,079 1,209,079 -- --
Reinsurance recoveries............... (343,794) (343,794) -- --
Interest on policyholders'
accumulation accounts.............. 478,516 478,516 -- --
Operating costs and expenses......... 906,571 131,121 -- 775,450
Amortization of deferred acquisition
costs.............................. 116,951 82,053 (34,898)(d) --
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Total Expenses............. 2,367,323 1,556,975 (34,898) 775,450
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Income (loss) from continuing
operations
before loss on sale of the JALIC
Shares............................. (203,017) 615,285 961,700 143,398
Loss on sale of the JALIC Shares..... (1,811,372)(e) (1,811,372)
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Income (loss) before income taxes.... (203,017) 615,285 (849,672) (1,667,974)
Income taxes......................... 0 -- -- (f) --
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Net Income (loss).................... $ (203,017) $ 615,285 $ (849,672) $ (1,667,974)
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PER SHARE DATA:
Income (loss) from continuing
operations before loss on sale of
the JALIC Shares................... $ (0.07) $ 0.05
Net loss............................. $ (0.07) $ (0.58)
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Weighted average shares.............. 2,864,700 2,864,700
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(a) To eliminate the operating results of JALIC for the year ended December 31,
1995.
(b) To reflect the commissions earned from the sale of life and annuity products
underwritten by JALIC.
(c) To reflect the investment of the net proceeds from the sale of the JALIC
Shares, assuming a yield of 5.5%.
(d) To eliminate the amortization of deferred acquisition costs recorded by
Firingline.
(e) To record the estimated $771,052 excess of the net assets sold over the
purchase price and write-down of deferred acquisition costs of $1,040,320
recorded by Firingline at January 1, 1995.
(f) Due to the Company's net operating losses being utilized, no provision for
income taxes is necessary.
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JOHN ADAMS LIFE CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
JOHN ADAMS LIFE
CORPORATION PRO FORMA ADJUSTMENT
AND ------------------------- PRO FORMA
SUBSIDIARIES JALIC(a) OTHER CONSOLIDATED
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REVENUES:
Premiums and policy charges........... $ 1,515,711 $1,515,711 $ -- $ --
Premiums ceded........................ (954,658) (954,658) -- --
Commissions income.................... 859,651(b) 859,651
Interest on policy loans.............. 346,693 346,693 -- --
Net investment income................. 689,720 687,030 146,000(c) 148,690
Net realized investment losses........ (4,566) (4,566) -- --
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Total Revenues.............. 1,592,900 1,590,210 1,005,651 1,008,341
EXPENSES:
Benefits incurred..................... 845,988 845,988 -- --
Reinsurance recoveries................ (382,310) (382,310) -- --
Interest on policyholders'
accumulation accounts............... 550,324 550,324 -- --
Operating costs and expenses.......... 614,313 (298,309) (23,586)(d) 889,036
Amortization of deferred acquisition
costs............................... 172,850 119,245 (53,605)(e) --
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Total Expenses.............. 1,801,165 834,938 (77,191) 889,036
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Income (loss) from continuing
operations before loss on sale of
the JALIC Shares.................... (208,265) 755,272 1,082,842 119,305
Loss on sale of the JALIC Shares...... -- -- (1,520,379)(f) (1,520,379)
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Income (loss) before income taxes..... (208,265) 755,272 (437,537) (1,401,074)
Income taxes.......................... -- -- -- (g) --
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Net Income (loss)..................... $ (208,265) $ 755,272 $ (437,537) $ (1,401,074)
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PER SHARE DATA:
Income (loss) from continuing
operations before loss on sale of
the JALIC Shares.................... $ (0.07) $ 0.04
Net loss.............................. $ (0.07) $ (0.49)
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Weighted average shares............... 2,864,700 2,864,700
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(a) To eliminate the operating results of JALIC for the nine months ended
September 30, 1996.
(b) To reflect the commissions earned from the sale of life and annuity products
underwritten by JALIC.
(c) To reflect the investment of the net proceeds from the sale of the JALIC
Shares, assuming a yield of 5.5% after retiring $377,000 of outstanding debt
due to the President, Chief Executive Officer and principal shareholder of
the Company.
(d) To eliminate the interest expense on the debt due to the President, Chief
Executive Officer and principal shareholder of the Company.
(e) To eliminate the amortization of deferred acquisition costs recorded by
Firingline.
(f) To record the estimated $418,968 excess of the net assets sold over the
purchase price and write-down of deferred acquisition costs of $1,101,411
recorded by Firingline at January 1, 1996.
(g) Due to the Company's net operating losses being utilized, no provision for
income taxes is necessary.
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(c) Exhibits.
Exhibit
Number Description
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2.1 Stock Purchase Agreement, signed October 22, 1996, by and
between Unified Life Insurance Company and John Adams Life
Corporation (previously filed with the Registrant's Current
Report on Form 8-K filed November 5, 1996).
SIGNATURE
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 hereunto duly authorized.
JOHN ADAMS LIFE CORPORATION
Date: February 5, 1997 Benjamin A. DeMotto
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Benjamin A. DeMotto
President and Chief Executive Officer