-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CWxPIlpQawdC9B+oLler2BTQ9TlXzcn1nhx2Ozu7kB2iddAMEhDBmgEefa6aOlht CulNtqAXAJMv8lu2BvrmDg== 0000100716-98-000008.txt : 19980817 0000100716-98-000008.hdr.sgml : 19980817 ACCESSION NUMBER: 0000100716-98-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNICO AMERICAN CORP CENTRAL INDEX KEY: 0000100716 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 952583928 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-03978 FILM NUMBER: 98690006 BUSINESS ADDRESS: STREET 1: 23251 MULHOLLAND DR CITY: WOODLAND HILLS STATE: CA ZIP: 91364 BUSINESS PHONE: 8185919800 MAIL ADDRESS: STREET 1: 23251 MULHOLLAND DRIVE CITY: WOODLAND HILLS STATE: CA ZIP: 91364 FORMER COMPANY: FORMER CONFORMED NAME: UNIVERSAL COVERAGE CORP DATE OF NAME CHANGE: 19730823 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period from April 1, 1998 to June 30, 1998 Commission File No. 0-3978 UNICO AMERICAN CORPORATION (Exact name of registrant as specified in its charter) Nevada 95-2583928 (State or other jurisdiction of (I.R.S. Employee incorporation or organization) Identification No.) 23251 Mulholland Drive, Woodland Hills, California 91364 (Address of Principal Executive Offices) (Zip Code) (818) 591-9800 Registrant's telephone number Securities registered pursuant to Section 12(b)of the Act: None (Title of each class) Securities registered pursuant to Section 12(g)of the Act: Common Stock, No Par Value (Title of Class) No Change Former name,former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No 6,220,672 Number of shares of common stock outstanding as of August 10, 1998 1 PART 1 - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS UNICO AMERICAN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30 December 31 1998 1997 ---- ---- ASSETS Investments Available for sale: Fixed maturities, at market value (amortized cost: June 30, 1998 $93,364,741; December 31, 1997 $86,106,571) $95,344,780 $87,965,590 Equity securities at market (cost: June 30, 1998 $0; December 31, 1997 $230,460) - 223,100 Short-term investments, at cost 6,358,069 6,137,495 ----------- ---------- Total Investments 101,702,849 94,326,185 Cash 183,391 55,768 Accrued investment income 1,850,050 1,807,364 Premiums and notes receivable, net 6,131,141 7,404,606 Reinsurance recoverable: Paid losses and loss adjustment expenses 164,241 56,379 Unpaid losses and loss adjustment expenses 1,360,470 1,413,603 Prepaid reinsurance premiums 22,189 945,563 Deferred policy acquisition costs 5,079,264 4,886,684 Property and equipment (net of accumulated depreciation) 206,116 203,709 Deferred income taxes 665,901 1,005,865 Other assets 521,514 836,658 ----------- ----------- Total Assets $117,887,126 $112,942,384 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Unpaid losses and loss adjustment expenses $42,170,299 $42,004,851 Unearned premiums 20,255,956 21,673,009 Advance premiums 1,305,774 1,368,114 Funds held as security for performance 714,682 723,066 Accrued expenses and other liabilities 3,606,575 2,095,567 Income taxes payable 291,611 16,993 Dividends payable 435,447 - ---------- ---------- Total Liabilities $68,780,344 $67,881,600 ---------- ---------- STOCKHOLDERS' EQUITY Common stock, no par - authorized 10,000,000 shares, issued and outstanding shares 6,220,672 at June 30, 1998 and 6,153,706 at December 31, 1997 2,886,952 2,838,058 Accumulated other comprehensive income: Net unrealized gains on investments classified as available for sale 1,306,826 1,222,095 Retained earnings 44,913,004 41,000,631 ---------- ---------- Total Stockholders' Equity $49,106,782 $45,060,784 ---------- ---------- Total Liabilities and Stockholders' Equity $117,887,126 $112,942,384 =========== ===========
See notes to unaudited consolidated financial statements. 2 UNICO AMERICAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended June 30 June 30 1998 1997 1998 1997 ---- ---- ---- ---- REVENUES Insurance Company Revenues Premium earned $10,415,497 $10,689,663 $20,970,307 $20,786,826 Premium ceded 1,600,108 1,598,378 2,771,136 2,554,001 ---------- ---------- ---------- ---------- Net premium earned 8,815,389 9,091,285 18,199,171 18,232,825 Net investment income 1,350,677 1,190,632 2,660,462 2,345,148 Net realized investment gains 16,230 - 16,230 919 Other income 105 45 1,063 160 ---------- ---------- ---------- ---------- Total Insurance Company Revenues 10,182,401 10,281,962 20,876,926 20,579,052 Other Revenues from Insurance Operations Gross commissions and fees 1,316,134 1,478,723 2,785,379 2,897,459 Investment income 54,520 34,759 103,613 69,713 Finance charges and late fees earned 254,765 301,857 517,918 591,925 Other income 3,601 3,553 5,129 6,354 ---------- ---------- ---------- ---------- Total Revenues 11,811,421 12,100,854 24,288,965 24,144,503 ---------- ---------- ---------- ---------- EXPENSES Losses and loss adjustment expenses 4,394,980 4,921,938 9,194,681 9,896,411 Policy acquisition costs 2,396,532 2,599,119 5,025,638 5,239,049 Salaries and employee benefits 992,116 935,663 2,041,737 1,860,076 Commissions to agents/brokers 235,611 294,485 480,538 569,461 Other operating expenses 501,145 619,809 1,129,871 1,353,436 --------- --------- ---------- ---------- Total Expenses 8,520,384 9,371,014 17,872,465 18,918,433 --------- --------- ---------- ---------- Income Before Taxes 3,291,037 2,729,840 6,416,500 5,226,070 Income Tax Provision 1,106,927 845,256 2,068,680 1,576,332 --------- --------- --------- --------- Net Income $2,184,110 $1,884,584 $4,347,820 $3,649,738 ========= ========= ========= ========= PER SHARE DATA: Basic Shares Outstanding 6,179,592 6,132,138 6,167,441 6,110,901 Basic Earnings Per Share $0.35 $0.31 $0.70 $0.60 Diluted Shares Outstanding 6,440,927 6,328,350 6,432,800 6,329,570 Diluted Earnings Per Share $0.34 $0.30 $0.68 $0.58
See notes to unaudited consolidated financial statements 3 UNICO AMERICAN CORPORATION AND SUBSIDIARIES STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended Six Months Ended June 30 June 30 1998 1997 1998 1997 ---- ---- ---- ---- Net income $2,184,110 $1,884,584 $4,347,820 $3,649,738 Other changes in comprehensive income net of tax: Unrealized gains (losses) on securities classified as available-for-sale arising during the period 160,968 631,822 84,731 (253,328) Less: reclassification adjustment for gains included in net income (10,712) - (10,712) (607) --------- --------- --------- --------- Comprehensive Income $2,334,366 $2,516,406 $4,421,839 $3,395,803 ========= ========= ========= =========
See notes to unaudited consolidated financial statements 4 UNICO AMERICAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30,
1998 1997 ---- ---- Cash Flows from Operating Activities: Net Income $4,347,820 $3,649,738 Adjustments to reconcile net income to net cash from operations Depreciation and amortization 49,396 41,343 Bond amortization, net 324,269 243,559 Net realized (gain) on sale of securities (16,230) (919) Changes in assets and liabilities Premium, notes and investment income receivable 1,230,779 677,565 Reinsurance recoverable (554,729) 635,370 Prepaid reinsurance premiums 923,374 314,653 Deferred policy acquisitions costs (192,580) (139,782) Other assets 315,144 24,130 Reserve for unpaid losses and loss adjustment expenses 665,448 1,075,525 Unearned premium reserve (1,417,053) 374,864 Funds held as security and advanced premiums (70,724) 2,653 Accrued expenses and other liabilities 1,511,008 (365,461) Income taxes current/deferred 570,933 78,035 --------- --------- Net Cash Provided from Operations 7,686,855 6,611,273 --------- --------- Investing Activities Purchase of fixed maturity investments (14,376,864) (8,688,530) Proceeds from maturity of fixed maturity investments 6,774,600 3,098,000 Purchase of equity securities - cost - (1,019,500) Proceeds from sale of equity securities 246,690 20,959 Net increase (decrease) in short-term investments (200,749) 671,987 Additions to property and equipment (51,803) (33,708) --------- --------- Net Cash (Used) by Investing Activities (7,608,126) (5,950,792) --------- --------- Financing Activities Proceeds from issuance of common stock 48,894 359 Repayment of note payable - bank - (250,000) ------ ------- Net Cash Provided (Used) by Financing Activities 48,894 (249,641) ------ ------- Net increase in cash 127,623 410,840 Cash at beginning of period 55,768 82,637 ------- ------- Cash at End of Period $183,391 $493,477 ======= ======= Supplemental cash flow information Cash paid during the period for: Interest $121 $21,697 Income taxes $1,448,336 $1,380,000
See notes to unaudited consolidated financial statements 5 UNICO AMERICAN CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1998 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - --------------------------------------------------- Nature of Business Unico American Corporation ("Unico") is an insurance holding company. Unico and its subsidiaries, all of which are wholly owned (the "Company"), provide, primarily in California, property, casualty, health and life insurance, and related premium financing. Principles of Consolidation The accompanying unaudited consolidated financial statements include the accounts of Unico American Corporation and its subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 1998, are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. Quarterly financial statements should be read in conjunction with the financial statements and related notes in the Company's 1997 Annual Report on Form 10-K as filed with the Securities and Exchange Commission. Recently Issued Accounting Standards The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which establishes standards for the reporting and displaying of comprehensive income and its components. All items required to be recognized as components of comprehensive income must be reported in a financial statement that is displayed with the same prominence as other financial statements. SFAS No. 130 became effective for financial statements with fiscal years beginning after December 15, 1997. NOTE 2 - INCENTIVE STOCK OPTION PLAN - ------------------------------------ The Company's 1985 stock option plan provided for the grant of "incentive stock options" to officers and key employees. The plan covers an aggregate of 1,500,000 shares of the Company's common stock (subject to adjustment in the case of stock splits, reverse stock splits, stock dividends, etc.). As of June 30, 1998, there were 286,366 options outstanding of which 216,035 were currently exercisable. During the quarter ended June 30, 1998, options on 82,327 shares of common stock were exercised. There are no additional options available for future grant under the 1985 plan. 6 UNICO AMERICAN CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1998 NOTE 3 - EARNINGS PER SHARE - --------------------------- The following table represents the reconciliation of the numerators and denominators of the Company's basic earnings per share and diluted earnings per share computations reported on the Consolidated Statements of Operations for the three months ended June 30, 1998 and 1997, and for the six months ended June 30, 1998 and 1997:
Three Months Ended Six Months Ended June 30 June 30 1998 1997 1998 1997 ---- ---- ---- ---- Basic Earnings Per Share Net income numerator $2,184,110 $1,884,584 $4,347,820 $3,649,738 ========= ========= ========= ========= Weighted average shares outstanding denominator 6,179,592 6,132,138 6,167,441 6,110,901 ========= ========= ========= ========= Basic Earnings Per Share $0.35 $0.31 $0.70 $0.60 Diluted Earnings Per Share Net income numerator $2,184,110 $1,884,584 $4,347,820 $3,649,738 ========= ========= ========= ========= Weighted average shares outstanding denominator 6,179,592 6,132,138 6,167,441 6,110,901 Effect of diluted securities 261,335 196,212 265,359 218,669 --------- --------- --------- --------- Diluted shares outstanding denominator 6,440,927 6,328,350 6,432,800 6,329,570 ========= ========= ========= ========= Diluted Earnings Per Share $0.34 $0.30 $0.68 $0.58
7 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (a) Liquidity and Capital Resources: Due to the nature of the Company's business (insurance and insurance services) and whereas Company growth does not normally require material reinvestments of profits into property or equipment, the cash flow generated from operations usually results in improved liquidity for the Company. Crusader Insurance Company ("Crusader"), the Company's property and casualty insurance company, generates a significant amount of cash as a result of its holdings of unearned premium reserves and reserves for loss payments. Crusader's loss and loss adjustment expense payments are the most significant cash flow requirement of the Company. These payments are continually monitored and projected to ensure that the Company has the liquidity to cover these payments without the need to liquidate its investments. As of June 30, 1998, the Company had cash and cash investments of $99,906,201 (at amortized cost) of which $94,452,001 (95%) were investments of Crusader. As of the quarter ended June 30, 1998, the Company had invested $93,364,741 (at amortized cost) or 94% of its invested assets in fixed maturity obligations. In accordance with Statement of Financial Accounting Standard No. 115, "Accounting for Certain Investments in Debt and Equity Securities," the Company is required to classify its investments in debt and equity securities into one of three categories: held-to-maturity, available-for-sale or trading securities. Although all of the Company's investments are classified as available-for-sale, the Company's investment guidelines place primary emphasis on buying and holding high-quality investments. The balance of the Company's investments was in high-quality, short-term investments that include a U.S. treasury bill, bank money market accounts, certificates of deposit, commercial paper and a short-term treasury money market fund. The Company's investments in fixed maturity obligations of $93,364,741 (at amortized cost) include $35,476,613 (38%) of pre-refunded state and municipal tax exempt bonds, $14,579,098 (16%) of U.S. treasury securities, $43,009,030 (46%) in high-quality industrial bonds and $300,000 of certificates of deposit. The tax exempt interest income earned for the three months and six months ended June 30, 1998, was $419,206 and $865,953, respectively. The tax exempt interest income earned for the three months and six months ended June 30, 1997, was $449,546 and $904,162, respectively. The Company's investment policy limits investments in any one company. This limit was raised from $1,000,000 to $1,500,000 in 1997. This limitation excludes bond premiums paid in excess of par value and U.S. Government or U.S. Government guaranteed issues. All of the Company's investments are high-grade investment quality; all state and municipal tax exempt fixed maturity investments are pre-refunded issues, and all certificates of deposit are FDIC insured. On May 1, 1998, the Board of Directors declared a ($0.07) per share cash dividend payable on August 14, 1998, to shareholders of record at the close of business on July 31, 1998. Although material capital expenditures may also be funded through borrowings, the Company believes that its cash and short-term investments at June 30, 1998, net of trust restriction of $2,557,954, statutory deposits of $2,725,000, and dividend restriction between Crusader and Unico plus the cash to be generated from operations, should be sufficient to meet its operating requirements during the next twelve months without the necessity of borrowing funds. There are no material commitments for capital expenditures as of the date of this report. Year 2000. The Year 2000 issue is the result of computer programs being written utilizing two digits rather than four digits to define a year. Any computer programs which have date sensitive software utilizing a two digit year would recognize a year of "00" as 1900 rather than 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. The Company has assessed its Year 2000 issues and is in the process of making any necessary modifications to its computer systems. This project is estimated to be completed by the end of 1998, prior to any anticipated impact on the Company's operating systems. Portions of this project have been completed and tested as of June 30, 1998. The cost of this project has been charged to current operations as incurred and will not have a material effect on the Company's results of operation or financial position. 8 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) While the Year 2000 considerations are not expected to materially impact the Company's internal operations, they may have an effect on some of the Company's agents and brokers, suppliers, financial institutions and others with whom the Company conducts business, and thus indirectly affect the Company. It is not possible to quantify the aggregate cost to the Company with respect to external Year 2000 problems, if any, although the Company does not presently anticipate it will have a material adverse impact on its business. (b) Results of Operations: All comparisons made in this discussion are comparing the three and six months ended June 30, 1998, to the three and six months ended June 30, 1997, unless otherwise indicated. The Company's net income increased $299,526 (16%) to $2,184,110 for the three months and $698,082 (19%) to $4,347,820 for the six months ended June 30, 1998, compared to net income of $1,884,584 for the three months and $3,649,738 for the six months ended June 30, 1997. Total revenues decreased $289,433 (2%) for the three months and increased $144,462 (1%) for the six months ended June 30, 1998, when compared to the three and six months ended June 30, 1997. Premium earned before reinsurance decreased $274,166 (3%) to $10,415,497 for the three months and increased $183,481 (1%) to $20,970,307 for the six months ended June 30, 1998, compared to the three and six months ended June 30, 1997. Crusader's Commercial Package business represents approximately 97% of insurance premiums earned as of June 30, 1998, compared to 96% as of June 30, 1997. Premium written before reinsurance decreased $2,240,253 (20%) to $9,239,511 for the three months and decreased $1,608,437 (8%) for the six months ended June 30, 1998, compared to the three and six months ended June 30, 1997. This decrease in written premium is primarily due to a change in the marketing strategy for the states of Washington and Oregon. The Company began marketing direct to retail agents and brokers in these states, and ceased marketing through its former General Agent. While this has resulted in a temporary reduction in premium written, the Company expects the long-term result to be increased revenues with reduced acquisition expense. Ceded premium earned was 15% of gross earned premium for the three months and 13% of gross earned premium for the six months ended June 30, 1998, compared to 15% for the three months and 12% for the six months ended June 30, 1997. Net investment income, excluding realized investment gains, increased $179,806 (15%) to $1,405,197 for the three months and $349,214 (14%) to $2,764,075 for the six months ended June 30, 1998, compared to investment income of $1,225,391 for the three months and $2,414,861 for the six months ended June 30, 1997. This increase was primarily due to a 15% increase (at amortized cost) in invested assets. Gross commission and fee income decreased $162,589 (11%) to $1,316,134 for the three months and decreased $112,080 (4%) to $2,785,379 for the six months ended June 30, 1998, compared to the three and six months ended June 30, 1997. This decrease for the three and six months consisted of the following: Three months Six months Workers' compensation program $ (34,202) $ 36,431 Daily automobile rental insurance program (901) 17,406 Service fee income (80,833) (59,551) Commercial automobile insurance program (24,098) (68,943) Health and life insurance program (22,555) (37,423) -------- -------- Net decrease in commission and fee income $(162,589) $(112,080) ======== ========= Losses and loss adjustment expenses were 50% of net premium earned for the three months and 51% of net premium earned for the six months ended June 30, 1998, compared to 54% of net premium earned for the three and six months ended June 30, 1997. This decrease was primarily due to the favorable development of prior period losses. 9 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Policy acquisition costs consist of commissions, premium taxes, inspection fees, and certain other underwriting costs which are related to the production of Crusader insurance policies. These costs include both Crusader expenses and allocated expenses of other Unico subsidiaries. Crusader's reinsurers pay Crusader a ceding commission, which is primarily a reimbursement of the acquisition cost related to the ceded premium. Policy acquisition costs, net of ceding commission, are deferred and amortized as the related premiums are earned. These costs were 27% of net premium earned for the three months and 28% of net premium earned for the six months ended June 30, 1998, compared to 29% of net premium earned for the three months and six months ended June 30, 1997. Salaries and employee benefits increased $56,453 (6%) to $992,116 for the three months and increased $181,661 (10%) to $2,041,737 for the six months ended June 30, 1998, compared to salary and employee benefits of $935,663 for the three months and $1,860,076 for the six months ended June 30, 1997. Commissions to agents/brokers decreased $58,874 (20%) to $235,611 for the three months and decreased $88,923 (16%) to $480,538 for the six months ended June 30, 1998, compared to the three and six months ended June 30, 1997. The decrease is primarily due to related decreases in revenue in the health and life program and to the sale of the commercial automobile program to a non-affiliated third party in June, 1997. Other operating expenses decreased $118,664 (19%) for the three months and $223,565 (17%) for the six months ended June 30, 1998, compared to the three and six months ended June 30, 1997. This decrease was primarily due to a $255,000 reduction in interest expense payable due to a settlement of federal income tax issues for the fiscal years ended March 31, 1990, through March 31, 1994, which were under appeal. Income tax provision increased 2.6% to 33.6% of income before taxes for the three months and increased 2.0% to 32.2% of income before taxes for the six months ended June 30, 1998, compared to the three months and six months ended June 30, 1997. This increase was primarily due to a federal income tax payment of $64,441 in full settlement of all issues under appeal regarding the Company's federal income tax returns for the fiscal years ended March 31, 1990, through March 31, 1994. The effect of inflation on net income of the Company during the three and six months ended June 30, 1998, and 1997 was not significant. Forward looking statements Information contained in this discussion, other than historical information, are considered "forward looking statements" and may be subject to change based on various important factors and uncertainties. Some, but not all, of the factors and uncertainties that may cause actual results to differ significantly from those expected in any forward looking statements are disclosed in the Company's 1997 Form 10-K as filed with the Securities and Exchange Commission. Further, the statements herein concerning the effects of the Company's stated expectation as to the long-term results of marketing in the states of Washington and Oregon directly to retail agents and brokers rather than through the Company's former general agent are forward looking statements which involve risks and uncertainties that could cause actual results to differ materially from these forward looking statements. With respect to the statement concerning the effects of the change in marketing in the states of Washington and Oregon, factors which would cause the actual results to differ materially include the Company's ability to effectively market to retail agents and brokers in those states, the willingness of the retail agents and brokers in those states to deal directly with the Company, and general economic conditions and competition in those states. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable. 10 PART II - OTHER INFORMATION ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS (c) During the quarter ended June 30, 1998, the Company issued an aggregate of 61,784 shares of its common stock upon exercise of employee stock options granted under the Unico American Corporation Employee Incentive Stock Option Plan. These shares were issued to an aggregate of three employees of the Company. Of these shares, 4,065 shares were issued in exchange for $14,227.50 in cash, 5,000 shares were issued in exchange for $17,500.00 in cash, and 73,262 shares were issued in exchange for 20,543 shares of common stock and $11.25 in cash. These shares were acquired for investment and without a view to the public distribution or resale thereof, and the issuance thereof was exempt from the registration requirements under the Securities Act of 1933, as amended, under Section 4(2) thereof as transactions not involving a public offering. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS (a) On June 5, 1998, the Company held its Annual Meeting of Stockholders. (b) Proxies for the meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934; there was no solicitation in opposition to nominees of the Board of Directors as listed in the Proxy Statement and all such nominees were elected. (c) At the meeting, the following persons were elected by the vote indicated (there were no abstentions or broker non-votes) as directors to serve until the next meeting of shareholders and until their successors are duly elected and qualified. Name For Against or Withheld Erwin Cheldin 5,414,584 50,200 Lester A. Aaron 5,414,584 50,200 Cary L. Cheldin 5,414,584 50,200 George C. Gilpatrick 5,414,584 50,200 Roger H. Platten 5,414,584 50,200 David A. Lewis 5,414,584 50,200 Bernard R. Gans 5,414,584 50,200 ITEM 5 - OTHER INFORMATION In July 1998, David E. Driscoll was elected a Director of the Registrant to fill a vacancy created by the resignation of Bernard R. Gans. Mr. Gans resigned for personal reasons. Mr. Driscoll is a partner in the Riverside, California, law firm of Foster, Driscoll & Reynolds that specializes in insurance defense matters. If a shareholder desires to submit a proposal for consideration at the Company's 1999 Annual Meeting of Shareholders and to have the proposal set forth in the Proxy Statement and form of Proxy for such meeting in accordance with Rule 14a-8 of the Securities and Exchange Commission, such proposal should be received by the Company no later than December 21, 1998. If a shareholder proposal is otherwise presented at the Company's 1999 Annual Meeting of Shareholders, proxies solicited by the Company for such Annual Meeting will confer upon the proxy holders' discretionary authority to vote on any matter so presented at the meeting of which the Company did not have notice prior to March 6, 1999. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K: None 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned there unto authorized. UNICO AMERICAN CORPORATION Date: August 13, 1998 By: /s/ Erwin Cheldin ------------------ Erwin Cheldin Chairman of the Board, President and Chief Executive Officer, (Principal Executive Officer) Date: August 13, 1998 By: /s/ Lester A. Aaron -------------------- Lester A. Aaron Treasurer, Chief Financial Officer, (Principal Accounting and Principal Financial Officer) 12 EX-27 2 FDS --
7 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 101,702,849 0 0 0 0 0 101,702,849 183,391 164,241 5,079,264 117,887,126 42,170,299 20,255,956 2,020,456 0 0 0 0 2,886,952 46,219,830 117,887,126 18,199,171 2,764,075 16,230 3,309,489 9,194,681 5,025,638 3,652,146 6,416,500 2,068,680 4,347,820 0 0 0 4,347,820 0.70 0.68 0 0 0 0 0 0 0
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