Our revenues come from investment income based on investments in fixed maturity available-for-sale securities. We will likely not begin selling insurance products until 2017. We expect to have revenues from sales of life insurance in the future.
Expenses were $1,023,702 for the year ended December 31, 2016, an increase of $277,839 from $745,863 for the year ended December 31, 2015. An increase in professional fees, third-party administrative fees, recruiting fees, bad debt, salaries and wages, travel, meals and entertainment, director fees, office and other expenses, employee benefits and office rent accounted for $277,200 of this increase. We expect our general and administrative expenses to continue to increase in the future as a result of administrative expenses necessary for the entry into the life insurance business.
Total assets of the Company increased from $11,321,876 as of December 31, 2015 to $13,187,732 as of December 31, 2016, an increase of $1,865,856 attributable to the ongoing stock sales.
Since inception, our operations have been financed primarily through an organizational offering, three private placement offerings and an intrastate public stock offering. Through December 31, 2016, we received $18,444,735 from the sale of 14,486,647 shares and incurred offering costs of $2,449,432. During 2016 we paid $10,000 for 2,000 shares of Company’s common stock (treasury stock). Our operations have not been profitable and have generated significant operating losses since we were incorporated in 2012.
We have audited the accompanying consolidated statements of financial position of Texas Republic Capital Corporation and Subsidiary (the Company) as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive loss, changes in shareholders’ equity, and cash flows for the years then ended. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Texas Republic Capital Corporation and Subsidiary as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Since incorporation, the Company has been involved in the sale of common stock to provide working capital. The Company has completed an organizational offering and three private placement stock offerings. During 2014 the Company initiated an intrastate public stock offering in the state of Texas. The public stock offering intends to raise up to $25,000,000 by offering 5,000,000 shares of its common stock.
Notes receivable are recorded at unpaid principal balances. Management evaluates the collectability of notes receivable on the specific identification basis. Uncollectible amounts are reported in the results of operations in the year the determination is made.
Net loss per common share is calculated using the weighted average number of common shares outstanding and subscribed during the year. Shares sold during the period are considered to be outstanding for one half of the month in which they were sold. The weighted average common shares outstanding and subscribed were 14,113,976 and 13,687,880 for the years ended December 31, 2016 and 2015, respectively.
In August 2014, the FASB issued guidance to address the diversity in practice in determining when there is substantial doubt about an entity’s ability to continue as a going concern and when an entity must disclose certain relevant conditions and events. The new guidance requires an entity to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). The new guidance allows the entity to consider the mitigating effects of management’s plans that will alleviate the substantial doubt and requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans.
The Company’s decision to record an impairment loss is primarily based on whether the security’s fair value is likely to remain significantly below its book value based on all of the factors considered. Factors that are considered include the length of time the security’s fair value has been below its carrying amount, the severity of the decline in value, the credit worthiness of the issuer and the coupon and/or dividend payment history of the issuer. The Company also assesses whether it intends to sell or whether it is more likely than not that it may be required to sell the security prior to its recovery in value.
Net unrealized gains (losses) included in other comprehensive income (loss) for investments classified as available-for-sale are summarized as follows:
Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Major categories of net investment income for the years ended December 31, 2016 and 2015 are summarized as follows:
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) on the measurement date. The Company also considers the impact on fair value of a significant decrease in volume and level of activity for an asset or liability when compared with normal activity.
The carrying amount and fair value of the Company’s financial assets disclosed, but not carried, at fair value as of December 31, 2016 and 2015 and the level within the fair value hierarchy at which such assets and liabilities are measured on a recurring basis are summarized as follows: