The Company currently leases approximately 5,400 square feet of office space in Lexington, Kentucky. On August 31, 1995, the Company entered into a sublease agreement with Bizwill, Inc. for additional space on the same floor as the Company's current lease. The sublease agreement is for a period from October 1, 1995 to March 31, 1998. The current lease, which expired in May of 1996, was extended until March 31, 1998. Combined annual rental payments totaled $75,226, $75,288 and $41,490 for 1997, 1996 and 1995, respectively. Effective March 9, 1998, the Company extended the current lease through May of 1999. Annual rent expense under the lease extension is $78,435.
For the year ended December 31, 1997, revenues totaled $1,655,051. The primary source of revenue for the Company is premium income which accounted for $1,221,400 of the 1997 total revenue. Of the $1,494,132 of total revenue for the year ended December 31, 1996, $901,584 was premium income. Total revenue for the year ended December 31, 1995 was $503,939 of which $63,524 was premium related. Insurance operations commenced in November of 1995 therefore premium revenue is the result of two months of sales during 1995. The initial product marketed by the Company consists of a combination of life insurance and an annuity. Under generally accepted accounting principles, the life insurance premiums are included in premium revenue. However, the annuity premiums are considered deposits rather than income according to Statement of Financial Accounting Standard ("SFAS") No. 97, "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from Sales of Investments". As such, net premium revenues exclude amounts received as annuity premiums. During 1997, this initial product was modified to change the method of premium allocation between life insurance and annuity and to increase the amount of commission available to the sales agents. The first year premium under the revised product is allocated 100% to life insurance and half to life insurance and half to annuity in renewal years. Although first year premium income is increased substantially by this change, the amount of cash received is no different than under the previously marketed product. The sales of the newly modified product commenced on September 1, 1997.
Net investment income for the years ended December 31, 1997, 1996 and 1995 totaled $504,831, $585,244 and $440,415, respectively. Net investment income decreased $80,413 as compared to 1996, primarily due to write-offs of the investments in LGP, Inc. and Cybertyme, Inc. which totaled $97,184 during 1997. The increase in net investment income from 1995 to 1996 is due to the growth of FAIC's insurance operations.
Realized investment losses of $110,935 is primarily the result of the write-off of $31,000 line of credit balance due from LGP, Inc., a valuation allowance of $75,000 for notes receivable, offset by an $8,000 gain on the sale of MAC. The remaining realized losses of $12,935 and $4,368 were incurred during 1997 and 1996, respectively, from the sale of U.S. Treasury securities.
Miscellaneous taxes decreased from $80,844 for the year ended December 31, 1996 to $38,168 for the year ended December 31, 1997. Taxes during 1995 were under estimated and the related expense was charged to 1996 expenses. Due to the increased activity of operations, other operating costs and expenses increased $42,737 for the year ended December 31, 1997 as compared to the same period of 1996. Total other operating costs and expenses were $162,596 for 1997, $119,859 and $90,101 for 1997, 1996 and 1995, respectively.
Loss on line of credit agreement from venture capital investments 31,000
Changes in the consolidated balance sheet of 1997 compared to 1996 reflect the operations of the Company and the capital transactions discussed below.
year 2000 may be adversely affected by actions (or failure to act) of third parties beyond the Company's knowledge or control.