(1) Earnings per share data restated for the fiscal 2011 stock split.
We must make estimates of the collectability of accounts and notes receivable and premium advances. The accounts associated with these areas are critical to recognizing the correct amount of revenue and expenses in the proper period. Our historical success of collecting premium advances has enabled us to build a body of evidence by which we can demonstrate full collectability of the remaining balance of advanced premiums.
We must evaluate the carrying value of our investment in life settlements trust for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. We have an investment in a financial instrument held by a third party. We do not have direct ownership of the individual policies but have a derivative right to share in income generated from the policies. Impairment testing entails evaluating our indirect investment in the policies, based on insurance carriers, legal environment, political environment and a basis using the entity’s financial statements. Based on this assessment, we believe that there was no impairment for our investment during fiscal 2014, 2013 and 2012.
We cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to prepare our financial statements when we deem it necessary.
We had a net loss of $2,454,105 for fiscal 2014, compared to net losses of $2,877,025 for fiscal 2013 and $3,123,478 for fiscal 2012. The net loss in fiscal 2014, with a 17.0% decrease in gross revenues and a 30.2% decline in revenues, net of brokerage fees, was due to primarily the damage to our licensee network and purchaser base resulting from the SEC investigation and subsequent lawsuit, the filing of multiple private suits, and the publication of news articles criticizing our operations. We have made significant reductions in legal and professional fees, premium advances and impairment expenses which were positive influences in fiscal 2014 when compared to fiscal 2013. The 42.6% decrease in gross revenue and 51.1% decrease in revenues, net of brokerage fees, in fiscal 2013 was primarily the result of the aforementioned news articles and disclosure of the SEC investigation, which occurred in the fourth quarter of fiscal 2011. In fiscal 2012, the aforementioned news articles and disclosure of the SEC investigation resulted in a 67.6% decrease in gross revenues and a 78.8% decrease in revenues, net of brokerage and licensee fees. The decrease in revenues, net of brokerage and licensee fees, together with a large increase in legal and professional fees and impairment expense, offset by significant reduction in settlement costs, resulted in a loss from operations of $5,736,639. Legal and professional costs were $3,211,799, $3,713,536, and $6,522,221 in fiscal 2014, 2013 and 2012, respectively, and were the largest single general and administrative expense. The legal and professional costs were attributable primarily to legal costs associated with the SEC investigation and lawsuit, related private litigation, and our audit fees. See Item 3, Legal Proceedings.
Revenues - Revenues decreased by $3,218,598, or 17.0%, from $18,904,837 in fiscal 2013 to $15,686,239 in fiscal 2014. This decrease was due primarily to the decreased number of settlements, from 35 in fiscal 2013 to 26 in fiscal 2014, along with lower revenues, net of brokerage fees, as a percentage of gross revenue. Revenues decreased by $14,017,352, or 42.6%, from $32,922,189 in fiscal 2012 to $18,904,837 in fiscal 2013. This decrease was due primarily to the decreased number of settlements, from 62 in fiscal 2012 to 35 in fiscal 2013, along with lower revenues, net of brokerage fees, as a percentage of gross revenue. Revenues, net of brokerage fees, were $3,997,820 in fiscal 2014 or 25.5% of gross revenue in fiscal 2014, versus $5,729,582 or 30.3% of gross revenue in fiscal 2013 and $11,714,430 or 35.6% of gross revenue in fiscal 2012, as we increased promotional bonuses and lowered our fees to obtain business. Average revenue per settlement, net of brokerage fees, increased 11.7%, or $63,179 to $603,317 in fiscal 2014 compared to $540,138 in fiscal 2013 and $531,003 in fiscal 2012.
Brokerage and Referral Fees - Brokerage and referral fees decreased 11.3%, or $1,486,836 from $13,175,255 in fiscal 2013 to $11,688,419 in fiscal 2014. Brokerage and referral fees decreased 37.9%, or $8,032,504 from $21,207,759 in fiscal 2012 to $13,175,255 in fiscal 2013. Brokerage and referral fees constituted 74.5%, 69.7%, and 64.4% of revenues in fiscal 2014, 2013 and 2012, respectively. In fiscal 2014, broker referrals accounted for 98% of the total face value of policies transacted. In fiscal 2013, broker referral accounted for 91% of the total face value of policies transacted, and in fiscal 2012, 99%. Policies presented from five brokers each represented more than 10% of all completed transactions in fiscal 2014 and represented 94.7% in total. Policies presented from three brokers each represented more than 10% of all completed transactions in fiscal 2013 and represented 54.7% in total. Policies presented from two brokers each represented more than 10% of all completed transaction in fiscal 2012 and represented 24.3% in total.
Brokerage and referral fees generally increase or decrease with revenues, face value of policies transacted and the volume of transactions, although the exact ratio may vary according to a number of factors. Brokers may adjust their fees with the individual policyholders whom they represent. In some instances, several brokers may compete for representation of the same seller, which will result in lower broker fees. Referral fees also vary depending on factors such as varying contractual obligations, market demand for a particular kind of policy or life expectancy category and individual agreements between clients and their referring financial planners. To counter declining revenues and to stimulate transaction interest, we have implemented licensee-directed, promotional programs, which have increased referral fees as a percentage of revenues. We also have reduced our fees on select brokerage transactions to remain competitive in the marketplace. The effect of the growing concentration is also reflected in the increase of broker fees as a percentage of revenues.
Legal and professional expenses decreased by 13.5% to $3,211,799 in fiscal 2014 versus $3,713,536 in fiscal 2013. These expenses are primarily associated with the SEC lawsuit, the private litigation that followed disclosure of the SEC investigation, and auditing fees. Legal and professional expenses in fiscal 2012 were $6,522,221.
Impairment expense for fiscal 2014 declined $447,792 to $297,610. Many of the remaining older viatical policies that were fully impaired in previous periods were sold in fiscal 2013. We decreased impairment expense for our investments in policies from $906,451 in fiscal 2012 to $745,402 in fiscal 2013 again because many of the older viatical policies that we owned were fully impaired in previous periods and were sold. General and administrative expenses increased 8.5% or $663,474 from $7,813,970 in fiscal 2013 to $8,477,444 in fiscal 2014. Increases of $763,672 in personnel expenses and $83,006 in postage expenses were mitigated by decreases of $134,330 in charitable contributions, and $233,726 in other outside services.
Employee bonuses increased $232,110 in fiscal 2014, due in part to $150,000 in executive bonuses paid in the fourth quarter as recognition for efforts in anticipation of the SEC trial scheduled for January 2014 and $137,307 in executive bonuses paid in the second quarter after positive first quarter results. Officer salaries also increased $304,975 in fiscal 2014 to partially offset the compensation declines from earlier years with the absence of profit-based bonuses. Employee bonuses increased $126,064 in fiscal 2013, due in part to $81,708 in executive bonuses paid in the second quarter after positive first quarter results.
Interest and Other Income - Interest and other income decreased $103,075 to $83,961 in fiscal 2014 from $187,036 in fiscal 2013. Interest and other income decreased $349,329 from $536,365 in fiscal 2012 to $187,036 in fiscal 2013. The decreases in interest and other income in fiscal 2014 and fiscal 2013 were due to a lower amount of cash available for investment.
Income from Investments in Policies - Income from investments in policies decreased $3,621,490 from $3,716,225 in fiscal 2013 to $94,735 in fiscal 2014. Income in fiscal 2012 was $809,218. This income in all three years was from sales and maturities in which we owned an interest. The decline in fiscal 2014 income reflects the lower quality of policies that we had in inventory following the sales in fiscal 2013. The current carrying value of all policies we own, net of impairment, was $2,241,146 as of February 28, 2014. We have classified one policy interest valued at $1,075,205, net of impairment, as a current asset, as we anticipate selling this policy interest within the next twelve months. We believe the remainder are not currently marketable and have classified those interests as held for long term. See Footnote 9 to the Consolidated Financial Statements.
Loss on Settlement of Note Receivable - Loss on settlement of note receivable of $231,096 in fiscal 2013 is the net amount from the proceeds received of $350,000 versus amount of note receivable on the consolidated balance sheet at February 29, 2012, which was $581,096. See Footnote 7 to the Consolidated Financial Statements.
Realized Gain/Loss on Investment Securities - We realized a gain on sales of investment securities of $22 in fiscal 2013 and a loss of $185,456 in fiscal 2012. We had no gain or loss in fiscal 2014.
Income Taxes - The income tax benefits were $1,142,312 in fiscal 2014, $1,212,363 in fiscal 2013, and $1,429,921 in fiscal 2012, which arose from negative pretax earnings in each fiscal year. Income tax expense is in direct correlation to pretax earnings, taxed at 35% at the Federal level. Fiscal 2014’s income tax benefit of $1,142,312 is comprised of current Federal expense benefit of $(79), current state tax expense of $63,659, and deferred tax benefit of $1,205,892. Fiscal 2014 tax expense includes an accrual of Texas margin tax in the amount of $72,428 that was paid with the filing of the 2014 annual return on May 15, 2014. Income tax expense was also affected by the establishment of a $611,298 valuation allowance within the deferred income tax asset account in 2011. This allowance was established to recognize the uncertainty of netting future capital gains against a current capital loss. We have net capital losses from prior years of $91,729. This increased the valuation allowance to $643,403 at February 29, 2012 and February 28, 2013 and other adjustments increased the valuation allowance to $672,115 at February 28, 2014.
Investing and Financing Activities - Our investing activities provided cash of $5,564,339 in fiscal 2014, primarily from the proceeds of $5,254,500 from the assignment of future income from our life settlement trust investment, proceeds from investments in certificates of deposits of $500,728, proceeds from the life settlements trust of $227,508, and proceeds from sales of investments in policies of $146,530, less $47,695 return of investment in life settlements trust, $250,000 investment in certificate of deposit and $298,844 purchase of investment in policies for investment purposes. Net cash flow provided by investing activities in fiscal 2013 of $9,387,419 consisted of $9,817,929 proceeds from sales of investments in policies, $400,000 proceeds from sales of investments in securities, $691,682 proceeds from our investment in the life settlement trust, offset by $369,611 purchases of policies for investment purposes and $609,371 investment in life settlement trust.
While we were exonerated by the outcome of the SEC suit, it is clear that the suit did damage to our reputation and our relationships within our licensee network and client base. We are working to rebuild confidence among our licensees and clients and to expand our client base. We continue to invest significantly in programs to develop and strengthen our relationships with new and inactive licensees. We have increased our communication with our client base, emphasizing the inherent benefits of life settlements as an asset class and the particular advantages of our settlements, which have no annual management fees and do not cap investor returns as do many of the settlements offered in the industry. We believe we have made substantial progress in restoring the confidence and interest of our clients. We are exploring alternatives for expanding our client base, including the marketing of life settlements as securities. Quarterly revenues have increased in the third and fourth quarters of fiscal 2014, reversing a downward trend that began with announcement of the SEC investigation in the fourth quarter of fiscal 2011. Over the past two calendar years, there have been over $112 million in payouts from our life settlement transactions.
Our outstanding contractual obligations and commitments as of February 28, 2014 were:
The following tables set forth our unaudited consolidated financial data regarding operations for each quarter of fiscal 2014, 2013 and 2012. This information, in the opinion of management, includes all adjustments necessary, consisting only of normal and recurring adjustments, to state fairly the information set forth therein.