Regan Holding Corp. assumes no obligation to update forward-looking statements to reflect actual results or changes in or additions to the factors affecting such forward-looking statements.
Legacy Marketing designs, markets and administers fixed annuity products on behalf of certain unaffiliated insurance carriers in each of the United States, except Alabama and New York. As of December 31, 2003, Legacy Marketing had marketing agreements with Transamerica, American National, John Hancock, and Investors Insurance Corporation. The marketing agreements grant Legacy Marketing the exclusive right to market certain fixed annuity products issued by these insurance carriers. Legacy Marketing is responsible for appointing independent insurance producers who have contracted with Legacy Marketing to sell these products. For these services, the insurance carriers pay Legacy Marketing commissions and marketing allowances.
Values Financial Network, Inc. incurred net losses of $1.0 million during 2003, compared to net losses of $520,000 during 2002. The increased losses were due to goodwill, intangibles, and long-lived asset impairment losses during 2003. Revenues increased $23,000 (329%) during 2003 compared to 2002 primarily due to rental income from a tenant who began subleasing office space from VFN in the second quarter of 2003. Expenses excluding the impairment losses were relatively unchanged during 2003 compared to 2002.
Additionally, when the Company purchased VFN in 2000, among the assets acquired were long lived assets comprising a website, which incorporates sales lead management, investment screening and asset allocation functionalities, and copyrights related to two books. These assets were recorded at fair value, as determined by an
Year ended December 31, 2003 compared with year ended December 31, 2002
During 2003, combined net income from Legacy Advisory Services and Legacy Re, which is inactive, was $122,000, compared to combined net income of $61,000 in 2002. This favorable change of $61,000 is primarily due to increased advisory fee revenues.
Any interruption, deterioration, or termination of the relationship with any of our insurance carriers could be disruptive to our business and harm our results of operations and financial condition.
As of December 31, 2003, we are obligated to redeem 3,289,000 shares of Series A Common Stock at the option of the holders of these shares. Of the 553,000 shares of Series B Common Stock outstanding, we are obligated to redeem up to 10% of these shares at the option of the holders of these shares, limited to a specified twenty-day period each year. The price per share is based on the estimated fair market value of the stock on the redemption date. The redemption of all eligible shares during 2004 would require $7.3 million, which would materially decrease our cash position.
As of December 31, 2003, Legacy Marketing had marketing agreements with Transamerica Life Insurance and Annuity Company ("Transamerica"), American National Insurance Company ("American National"), John Hancock Variable Life Insurance Company ("John Hancock"), and Investors Insurance Corporation (collectively, the "carriers"). During 2002, Legacy Marketing terminated its marketing agreement with IL Annuity and Insurance Company ("IL Annuity"). The marketing agreements grant Legacy Marketing the exclusive right to market certain fixed annuity and life insurance products issued by the carriers (the "policies"). In addition, Legacy Marketing is responsible for appointing independent insurance producers who contract with Legacy Marketing to sell policies. For providing these services, the carriers pay Legacy Marketing commissions and marketing allowances.
The Company has a stock-based employee compensation plan (see Note 12) and accounts for this plan under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. No stock-based employee compensation cost is reflected in net loss, as all options granted under the plan had an exercise price equal to the fair market value of the underlying common stock on the date of grant.
In November 2002, the Emerging Issues Task Force reached a consensus on Issue 00-21 ("EITF -00-21). "Accounting for Revenue Arrangements with Multiple Deliverables". EITF 00-21 provides guidance on when and how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. The Company adopted EITF 00-21 on July 1, 2003. The adoption of EITF 00-21 did not have a material effect on the Company's consolidated financial position and results of operations.