SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 2001 Commission File No. 1-8249
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LINCORP HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 23-2161279
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(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
3900 Park Ave., Suite 102
Edison, NJ 08820
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(Address of Principal Executive (Zip Code)
Offices)
Registrant's Telephone Number,
Including Area Code: (732) 494-9455
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(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 ___
Indicate the number of shares outstanding or each of the issuer's classes of
common stock, as of the latest practicable date.
1,730,559 SHARES OF COMMON STOCK OUTSTANDING AT OCTOBER 16, 2001
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The condensed financial statements included herein have been prepared by the
registrant from the books of Lincorp Holdings, Inc. without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. This
information, which is subject to year-end adjustments, reflects all adjustments
which are, in the opinion of management, necessary to present fairly the results
for the interim periods. Although the registrant believes that the disclosures
are adequate to make the information presented not misleading, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and the notes thereto included in the registrant's latest
Annual Report on Form 10-K.
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LINCORP HOLDINGS, INC.
BALANCE SHEETS
(in thousands)
September 30, December 31,
2001 2000
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(Unaudited)
ASSETS
Cash ................................................. $ .15 $ 70
Investment in real estate ............................ 300 300
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$ 315 $ 370
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Debt secured by real estate,
including accrued interest ..................... $ 620 $ 620
Other borrowed funds, including accrued interest ... 175,398 175,317
Other liabilities .................................. 3,915 3,904
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179,933 179,841
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Commitments and contingent liabilities
Stockholders' deficit:
Preferred stock, Series A;
200 shares authorized;
no shares issued and outstanding ................ -- --
Preferred stock, $.01 par value;
10,000 shares authorized;
no shares issued and outstanding ................ -- --
Common stock, $.01 par value;
1,990,000 shares authorized;
1,730,559 shares issued and outstanding ......... 17 17
Capital contributed in excess of par value ......... 153,638 153,638
Accumulated deficit ................................ (333,273) (333,126)
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(179,618) (179,471)
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$ 315 $ 370
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The accompanying notes are an integral part of these financial statements.
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LINCORP HOLDINGS, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Unaudited
Three Months Nine Months
Ended Ended
September 30, September 30,
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2001 2000 2001 2000
------- ------- ------- -------
Expenses:
Interest expense ...................... $ 29 $ 42 $ 91 $ 96
General and administrative expenses ... 19 11 56 63
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Total expenses .................... 48 53 147 159
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Loss before income taxes ................ (48) (53) (147) (159)
Income taxes ............................ -- -- -- --
------- ------- ------- -------
Net loss ................................ $.(48) $ (53) $ (147) $ (159)
======= ======= ======= =======
Basic loss per share of
Common Stock outstanding .............. $ (0.02) $ (0.03) $ (0.08) $ (0.09)
======= ======= ======= =======
Weighted average shares of
Common Stock outstanding .............. 1,731 1,731 1,731 1,731
======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
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LINCORP HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
Unaudited
Three Months Nine Months
Ended Ended
September 30, September 30,
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2001 2000 2001 2000
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OPERATING ACTIVITIES
Net loss ................................... $.(48) $ (53) $ (147) $ (159)
Adjustments to reconcile net
loss to net cash provided by
(used in) operating activities:
Increase in accrued interest payable ... 27 27 81 81
Increase in other liabilities .......... 3 29 11 40
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Net cash provided by (used in)
operating activities ..................... (18) 3 (55) (38)
Cash, beginning of period .................. 33 -- 70 41
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Cash, end of period ........................ $ .15 $ .3 $ 15 $ 3
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest ............................... $ -- $ -- $ -- $ --
====== ====== ====== ======
Income taxes ........................... $ -- $ -- $ -- $ 2
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The accompanying notes are an integral part of these financial statements.
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LINCORP HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - LIQUIDITY AND GOING CONCERN
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At September 30, 2001, Lincorp Holdings, Inc. (the "Company") had approximately
$176.0 million of principal and accrued interest (the "Indebtedness")
outstanding under its various debt obligations. The Company is in payment
default under several of the debt obligations comprising the Indebtedness. The
Indebtedness is secured by a senior security interest in all of the Company's
assets.
The Company's debt holders have waived substantially all interest owing by the
Company on its Indebtedness to them that would have otherwise accrued since July
1, 1998. For the nine months ended September 30, 2001 and 2000, the total
interest waived was approximately $8.1 million for each nine month period.
The Company's sources of funds during the period ended September 30, 2001 and to
date, have been primarily from its previously existing cash balances and
advances from its majority shareholder Unicorp Inc. ("Unicorp)". Unless the
Company's debt holders continue to defer in realizing on the pledged collateral,
the Company will be unable to continue as a going concern.
NOTE 2 - REAL ESTATE OPERATIONS
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During the fourth quarter of 1997, the Company made a $0.6 million secured first
mortgage loan to Republic Development Co. (the "Republic Mortgage Loan") for the
purpose of developing a commercial real estate property. This loan was scheduled
to mature May 19, 1998. To finance this loan, the Company borrowed funds from
Unicorp. The Unicorp borrowing was in the form of a $602,000 discounted note
(the "Unicorp Republic Note") which matured on May 19, 1998 in the amount of
$620,000 and was secured by the Republic Mortgage Loan.
The Republic Mortgage Loan was not repaid on May 19, 1998 and in November 1999,
the Company foreclosed on the Republic Mortgage Loan and took possession of the
land. At December 31, 2000, the Company reduced the carrying value of the land
by $311,000 to $300,000 which it believes is the current fair market value of
the land. The Unicorp Republic Note, which matured on May 19, 1998, was not
repaid by the Company as its payment was dependent upon collecting the Republic
Mortgage Loan. Unicorp has agreed to defer the collection of its note until the
land is sold.
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LINCORP HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - OTHER BORROWED FUNDS
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Unicorp sold 370,000 of the Company's common shares on July 23, 2001 to two
unrelated third parties reducing Unicorp's common stock ownership in the Company
to 916,886 shares or 52.98%. At the same time, Unicorp sold its rights and
obligations to a portion of the Company's debt to a unrelated third party. The
debt sold by Unicorp was as follows (in thousands):
Accrued
Principal Interest Total
--------- -------- --------
Senior secured revolving credit facility $ 7,761 $ 6,952 $ 14,713
Subordinated term loan 65,000 48,651 113,651
Junior line of credit 20,494 20,074 40,568
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Total other borrowed funds $93,255 $75,677 $168,932
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The new lender has agreed to continue to defer interest on the above debt until
December 31, 2001.
Unicorp continues to own the following Company debt and has also deferred all
interest on this debt until December 31, 2001 (in thousands):
Accrued
Principal Interest Total
--------- -------- --------
Debt secured by real estate $ 602 $ 18 $ 620
======= ======= ========
Senior secured revolving credit facility $ 2,500 $ 1,983 $ 4,483
MSLL Note 1,399 543 1,942
Other accrued interest -- 41 41
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Total other borrowed funds $ 3,899 $ 2,567 $ 6,466
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND GOING CONCERN
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At September 30, 2001, Lincorp Holdings, Inc. (the "Company") had approximately
$176.0 million of principal and accrued interest (the "Indebtedness")
outstanding under its various debt obligations. The Company is in payment
default under several of the debt obligations comprising the Indebtedness. The
Indebtedness is secured by a senior security interest in all of the Company's
assets.
The Company's debt holders have waived substantially all interest owing by the
Company on its Indebtedness to them that would have otherwise accrued since July
1, 1998. For the nine months ended September 30, 2001 and 2000, the total
interest waived was approximately $8.1 million for each nine month period.
The Company's sources of funds during the period ended September 30, 2001 and to
date, have been primarily from its previously existing cash balances and
advances from its majority shareholder Unicorp Inc. ("Unicorp"). Unless the
Company's debt holders continue to defer in realizing on the pledged collateral,
the Company will be unable to continue as a going concern.
RESULTS OF OPERATIONS
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NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THE NINE MONTH ENDED SEPTEMBER
30, 2000
For the nine months ended September 30, 2001 the Company had a net loss of $147
thousand compared to a $159 thousand net loss for the nine months ended
September 30, 2000.
FINANCIAL POSITION
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MATERIAL CHANGES SINCE DECEMBER 31, 2000
There was no significant change in the Company's financial position since
December 31, 2000.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments with respect to litigation.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(a) At September 30, 2001 Lincorp Holdings, Inc. (the "Company") had
approximately $176.0 million of principal and accrued interest (the
"Indebtedness") outstanding under its various debt obligations. The
Company is in payment default under several of the debt obligations
comprising the Indebtedness. The Indebtedness is secured by a senior
security interest in all of the Company's assets.
(b) Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Not applicable.
(b) None filed.
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SIGNATURE
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 thereunto duly authorized.
LINCORP HOLDINGS, INC.
Dated: November 1, 2001 /s/ Jack R. Sauer
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Jack R. Sauer
President
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