In 2000, we experienced consolidated net losses of $3.6 million, compared to consolidated net income of $3.6 million in 1999. The decrease of $7.2 million (percentage not meaningful) is primarily due to losses incurred by Legacy Marketing and recognition of $721,000 of losses related to our investment in prospectdigital, partially offset by income by Regan Holding Corp. (stand-alone) during 2000 compared to losses during 1999, and consolidated income tax benefits.
The change in accounting principle would not have a material effect on the statement of operations if adopted in 1999.
Combined net losses from other entities increased to $1.1 million in 2000, compared to $880,000 in 1999, primarily due to increased expenses, partially offset by increased revenues. Expenses increased $553,000 (34%) primarily due to increased selling, general and administrative expenses. Revenues increased $329,000 (160%) primarily due to increased seminar attendance at LifeSurance Corporation.
k. Accounting Pronouncements to be Adopted Subsequent to December 31, 2001
In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142 (SFAS 142), Goodwill and Intangible Assets, which supercedes Accounting Principles Board ("APB") Opinion No. 17, Intangible Assets. SFAS 142 eliminates the current requirement to amortize goodwill and indefinite-lived intangible assets, addresses the amortization of intangible assets with a defined life and addresses the impairment testing and recognition for goodwill and intangible assets. The provisions of SFAS 142 are applicable on January 1, 2002. However, goodwill and intangible assets acquired after June 30, 2001 are subject immediately to SFAS 142. The Company's management anticipates that the implementation of SFAS 142 will not have a material effect on its consolidated results of operations or financial position.
Between 1990 and 1992, the Company issued Series A and Series B redeemable common stock to certain shareholders. The Company is obligated to repurchase the redeemable common stock at the current fair market value. Because there is no active trading market for the Company's stock that would establish market value, the Company's Board of Directors approved a redemption value of $2.19 per share and $2.10 per share as of December 31, 2001 and 2000, based on an independent appraisal of the stock value obtained by management.
The Company currently sponsors two stock-based compensation plans. Under both plans, the exercise price of each option equals the estimated fair value of the underlying common stock on the date of grant, as estimated by management, except for incentive stock options granted to 10% shareholders where the exercise price equals 110% of the estimated fair value. Both plans are administered by committees, which are appointed by the Company's Board of Directors.
For purposes of estimating the fair value of the Employee Options for the pro forma amounts listed above, the Company applied the minimum value method, with the following assumptions:
As of December 31, 2001, Legacy Marketing sells its products on behalf of four unaffiliated insurance carriers: American National, IL Annuity, Transamerica, and John Hancock. The agreements with three of these carriers generated a significant portion of the Company's total consolidated revenue (sales on behalf of John Hancock began in the fourth quarter of 2001):