On March 26, 2008, the Company’s subsidiary, Legacy Marketing Group (“LMG”), entered into a sale and assignment agreement to sell and assign all rights, title and interest in certain asset based trail commissions to Legacy TM, a limited partnership (the “Partnership”), for a Class A limited partnership interest in the Partnership and $6.5 million. LMG’s Class A limited partnership interest is unencumbered. The transaction closed on March 26, 2008. Through the Class A limited partnership interest, LMG received for a one-year period a 33.33% beneficial interest in the proceeds from the trail commissions on the policies existing on the closing date, and in perpetuity a 100% interest in the proceeds from trail commissions earned on new policies placed in force after the closing date. The trail commission revenue is recorded into income when it has been received. Simultaneously with the sale of the Class A limited partnership interest, the Partnership sold to Lynda L. Pitts and R. Preston Pitts the Class B limited partnership interest in exchange for the guarantee of $6.5 million in debt that the Partnership incurred to acquire the trail commissions. The holders of the Class B limited partnership interest received for a one-year period a 66.66% interest in the proceeds of the trail commissions on existing policies as of the closing date, and thereafter became entitled to receive a 100% interest in the proceeds from such trail commissions. Lynda L. Pitts, Chief Executive Officer, and R. Preston Pitts, President, Chief Operating Officer and Chief Financial Officer of the Company, each of whom is also a director of the Company, are the general partners of the Partnership and together own all of the Class B interests in the Partnership. As a part of the agreement, LMG was not obligated to repurchase or require the Partnership to return the asset under any conditions.
The business purpose of the retention of the Class A interest through Legacy TM is because we had to do a general assignment of the rights and title of all asset-based trail commissions in accordance with each carrier agreement rather than a limited or restricted assignment. Consequently, the future rights to the trail commissions associated to the policies in force after the sale date (March 26, 2008) were allocated to the Class A interest and ultimately inure to LMG.
On January 25, 2007, prospectdigital LLC (“prospectdigital”), an indirect wholly owned subsidiary of Regan, sold certain of its assets, which primarily included fixed assets and other miscellaneous operating assets, to PD Holdings LLC (“PD Holdings”). In addition, PD Holdings agreed to assume certain liabilities of prospectdigital. The action was taken in a continuing effort to reduce Regan’s operating expenses, as prospectdigital continued to sustain losses through the date of sale.
AmeriMark Freedom (SM) series (sold on behalf of OM Financial (Americom)
Net cash provided by financing activities of $3.8 million in 2007 consisted primarily of proceeds from loans received from our investment broker.
As evident from the Company’s prior year results, the Company had operating losses which created negative Shareholders’ equity and a negative working capital position. Starting in 2008, we have benefited from an increase in the aggregate amount of fixed annuity sales, which we believe is due to the dramatic drop in the equity markets that began last year. The combination of increased sales and reduced costs has resulted in improved cash flows. Although, this may or may not be sustainable, it had a positive impact on the initial operating results for 2009. The increased sales and acceptance of fixed annuities due to the current economic conditions has helped to improve our cash position and balance sheet.
The Company did not redeem any common stock related to Series A redeemable common stock for the years ended December 31, 2009, 2008 and 2007. Redeemable common stock is carried at the greater of the issuance value or the redemption value.