<PAGE>
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, 1995 Commission File No. 1-8249
------------------ ------
LINCORP HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 23-2161279
--------------------------------- ---------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
250 Park Avenue
New York, New York 10017
-------------------------------- ---------------------------------------
(Address of Principal Executive (Zip Code)
Offices)
Registrant's Telephone Number,
Including Area Code: (212) 599-0465
---------------------------------------
- --------------------------------------------------------------------------------
(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 November 1, 1995
----------------------------------------------------------------
<PAGE>
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 (except
for the Balance Sheet as of December 31, 1994), 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.
1
<PAGE>
LINCORP HOLDINGS, INC.
BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Unaudited) (See Note 3)
<S> <C> <C>
ASSETS
Cash............................................................ $ 582 $ 125
Marketable securities, at fair value............................ 111 535
Investment in real estate assets, net........................... 15,273 -
Other assets.................................................... 4 -
---------- ----------
$ 15,970 $ 660
========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Debt on real estate, including accrued interest............ $ 15,298 $ -
Other borrowed funds, including accrued interest........... 155,388 136,141
Net liability of real estate discontinued operations....... - 10,518
Other liabilities.......................................... 3,763 2,900
---------- ----------
174,449 149,559
---------- ----------
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.................. 148,434 148,434
Accumulated deficit......................................... (306,930) (297,350)
---------- ----------
(158,479) (148,899)
---------- ----------
$ 15,970 $ 660
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
LINCORP HOLDINGS, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Unaudited
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------ ------------------
1995 1994 1995 1994
------ ------ ------ -------
<S> <C> <C> <C> <C>
Income:
Rental income.............................................. $ 130 $ - $ 365 $ -
Equity in operating results of real estate joint ventures.. (44) - 4 -
Interest income............................................ 43 16 117 41
Other income............................................... 202 2 205 6
------- ------ ------- -------
Total income........................................ 331 18 691 47
------- ------ ------- -------
Expenses:
Interest expense........................................... 3,385 2,680 10,001 8,011
General and administrative expense......................... 61 44 249 213
------- ------ ------- -------
Total expenses...................................... 3,446 2,724 10,250 8,224
------- ------ ------- -------
Loss before income taxes...................................... (3,115) (2,706) (9,559) (8,177)
Provision for income taxes.................................... 6 75 21 225
------- ------ ------- -------
Net loss...................................................... $(3,121) $(2,781) $(9,580) $(8,402)
======= ====== ======= =======
Loss per share of Common Stock outstanding.................... $ (1.80) $ (1.60) $ (5.53) $ (4.85)
======= ====== ======= =======
Weighted average shares of Common Stock outstanding........... 1,731 1,731 1,731 1,731
======= ====== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
LINCORP HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
Unaudited
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------- ---------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................................... $(3,121) $(2,781) $(9,580) $(8,402)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Equity in operating results of real estate
joint ventures................................ 44 - (4) -
Proceeds from sale of real estate joint ventures. 6,930 - 6,930 -
Investment in real estate assets................. (3,228) - (3,228) -
Decrease in marketable securities................ 222 - 424 137
Decrease in other assets......................... 267 182 274 177
Increase (decrease) in accrued interest payable.. (1,226) 2,680 5,184 8,003
Increase (decrease) in other liabilities......... (137) (77) 133 31
Operating activities of real estate discontinued
operations.................................... - - - 50
------- ------- ------- -------
Net cash provided by (used in) operating activities........ (249) 4 133 (4)
------- ------- ------- -------
FINANCING ACTIVITIES
Funds borrowed............................................. 6,550 - 6,550 -
Repayment of borrowed funds................................ (6,082) - (6,226) -
------- ------- ------- -------
Net cash provided by financing activities.................. 468 - 324 -
------- ------- ------- -------
Net increase (decrease) in cash............................ 219 4 457 (4)
Cash, beginning of period.................................. 363 105 125 113
------- ------- ------- -------
Cash, end of period........................................ $ 582 $ 109 $ 582 $ 109
======= ======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest......................................... $ 4,612 $ - $ 4,817 $ -
======= ======= ======= =======
Income taxes..................................... $ 6 $ 4 $ 21 $ 12
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
LINCORP HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DIVESTITURE OF THE LINCOLN SAVINGS BANK, FSB
- -----------------------------------------------------
The Lincoln Savings Bank, FSB ("Lincoln") was the primary asset of Lincorp
Holdings, Inc., (the "Company"). On January 20, 1993, in connection with the
transaction described below, the Company relinquished control of Lincoln by
placing the common stock of Lincoln into a trust for eventual sale, and by
filing a divestiture notice with the Office of Thrift Supervision (the "OTS").
On March 4, 1994, Lincoln entered into a definitive agreement (the
"Acquisition Agreement") with Anchor Savings Bank FSB ("Anchor") whereby Anchor
would acquire all of the assets in the trust, including outstanding preferred
and common stock of Lincoln and a senior secured note, for $80 million in cash.
The transaction was subject to, among other things, regulatory approval of the
OTS and the Federal Deposit Insurance Corporation. Approval of the transaction
was granted on July 12, 1994 and the transaction was completed on August 12,
1994. As anticipated under the Acquisition Agreement, the Company received none
of the proceeds from the sale of Lincoln but two of the Company's lenders
received a total of $6.1 million as repayment of a portion of the principal
amount of debt owed them. This payment to the Company's lenders represents a
reduction in the loss recorded in 1992 relating to the Company's writedown of
its investment in Lincoln. Accordingly, the Company recorded a $6.1 income
adjustment in the fourth quarter of 1994 relating to the discontinued operations
of Lincoln.
NOTE 2 - LIQUIDITY AND GOING CONCERN
- ------------------------------------
At September 30, 1995, the Company had outstanding $155.4 million of
indebtedness, including interest payable of $49.8 million, (collectively the
"Indebtedness") under its Senior, Subordinated and Junior credit facilities.
The Company's parent company, Unicorp Energy Corporation ("UEC"), holds $142.1
million of the Indebtedness and Hees International Bancorp, Inc. ("Hees"), which
currently owns an indirect 24.6% non-voting equity interest in UEC, holds the
balance of the indebtedness, $13.3 million. The Company is in payment default
under each of the above mentioned credit facilities. These credit facilities
are secured by a security interest in all of the Company's assets.
The Company's sources of operating funds during the nine months ended
September 30, 1995 and to date have been primarily funds from the sales of
marketable securities and payments received from mortgage receivables. The
assets generating the funds being utilized by the
5
<PAGE>
Company are part of the collateral package securing the above described credit
facilities. Unless the Company's lenders are prepared to continue to defer in
realizing on the pledged collateral and allow the Company to utilize the
proceeds from such collateral to fund its ongoing operations, the Company will
be unable to continue as a going concern.
NOTE 3 - CONTINUING OPERATIONS
- ------------------------------
Effective January 1, 1995, as a result of an improving real estate market, the
Company reformulated its business plan to focus on such activity. Accordingly,
effective January 1, 1995, the Company restated its balance sheet to reflect the
real estate operations as a continuing operation and will recognize its equity
in the operating results of the real estate operations in accordance with the
equity method of accounting. The following is the restated balance sheet of the
Company as of January 1, 1995 (dollars in thousands):
<TABLE>
<S> <C>
Assets
Cash $ 125
Marketable securities 535
Investment in real estate assets, net 18,971
Other assets 278
----------
Total Assets $ 19,909
==========
Liabilities
Debt on real estate, including accrued interest $ 18,971
Other borrowed funds, including accrued interest 146,207
Other liabilities 3,630
----------
Total Liabilities 168,808
Stockholders' Deficit (148,899)
----------
Total Liabilities and Stockholders' Deficit $ 19,909
==========
</TABLE>
NOTE 4 - REAL ESTATE ASSET TRANSACTIONS
- ---------------------------------------
(A) During July 1995, the Company made a $845,000 loan to a developer to
refinance land previously purchased by the developer for residential home
development. The Company will receive a $60,000 transaction fee, of which
$5,000 was paid up front, and the balance was rolled into the loan. The total
loan of $900,000 is for one year and carries a 10% interest rate, payable
monthly, and is secured by a first mortgage on the land. In order to make this
loan, the Company borrowed $550,000 from UEC under its existing Junior credit
facility.
6
<PAGE>
(B) During September 1995, the Company sold substantially all of its limited
partnership interests in two of its real estate joint ventures to the "General
Partner" for $6.9 million, which equalled the Company's recorded net book value
for these investments. In connection with the sale, the Company granted the
General Partner an option, which expires December 31, 1996, to purchase it's
remaining limited partnership interest not sold (1%) for $70,000.
The proceeds from the sale were used to repay loans from the General
Partner relating to the Company's real estate investments in Colorado State Bank
Building ("CSBB") and Montgomery St. Land Lease ("MSLL").
(C) During September 1995, the Company drew down $6.0 million on an existing
but unutilized line of credit provided by the General Partner and secured by the
Company's investment in the CSBB, for the purpose of investing an additional
$2.3 million in CSBB and making an additional repayment against the MSLL loan.
(D) At the end of September 1995, UEC purchased from the General Partner the
outstanding balance on the Company's loan secured by CSBB and MSLL at face
value. As a result of this transaction, all of the Company's debt is now held
by UEC and Hees.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DIVESTITURE OF THE LINCOLN SAVINGS BANK, FSB, LIQUIDITY AND GOING CONCERN, AND
- ------------------------------------------------------------------------------
CONTINUING OPERATIONS
- ---------------------
The Lincoln Savings Bank, FSB ("Lincoln") was the primary asset of Lincorp
Holdings, Inc., (the "Company"). On January 20, 1993, in connection with the
transaction described below, the Company relinquished control of Lincoln by
placing the common stock of Lincoln into a trust for eventual sale, and by
filing a divestiture notice with the Office of Thrift Supervision (the "OTS").
On March 4, 1994, Lincoln entered into a definitive agreement (the
"Acquisition Agreement") with Anchor Savings Bank FSB ("Anchor") whereby Anchor
would acquire all of the assets in the trust, including outstanding preferred
and common stock of Lincoln and a senior secured note, for $80 million in cash.
The transaction was subject to, among other things, regulatory approval of the
OTS and the Federal Deposit Insurance Corporation. Approval of the transaction
was granted on July 12, 1994 and the transaction was completed on August 12,
1994. As anticipated under the Acquisition Agreement, the Company received none
of the proceeds from the sale of Lincoln but two of the Company's lenders
received a total of $6.1 million as repayment of a portion of the principal
amount of debt owed them. This payment to the Company's lenders represents a
reduction in the loss recorded in 1992 relating to the Company's writedown of
its investment in Lincoln. Accordingly, the Company recorded a $6.1 million
income adjustment in the fourth quarter of 1994 relating to the discontinued
operations of Lincoln.
At September 30, 1995, the Company had outstanding $155.4 million of
indebtedness, including interest payable of $49.8 million, (collectively the
"Indebtedness") under its Senior, Subordinated and Junior credit facilities.
The Company's parent company, Unicorp Energy Corporation ("UEC"), holds $142.1
million of the Indebtedness and Hees International Bancorp, Inc. ("Hees"), which
currently owns an indirect 24.6% non-voting equity interest in UEC, holds the
balance of the Indebtedness, $13.3 million. The Company is in payment default
under each of the above mentioned credit facilities. These credit facilities
are secured by a security interest in all of the Company's assets.
The Company's sources of operating funds during the nine months ended
September 30, 1995 and to date have been primarily funds from the sales of
marketable securities and payments received from mortgage receivables. The
assets generating the funds being utilized
8
<PAGE>
by the Company are part of the collateral package securing the above described
credit facilities. Unless the Company's lenders are prepared to continue to
defer in realizing on the pledged collateral and allow the Company to utilize
the proceeds from such collateral to fund its ongoing operations, the Company
will be unable to continue as a going concern.
Effective January 1, 1995, as a result of an improving real estate market, the
Company reformulated their business plan to focus on such activity.
Accordingly, effective January 1, 1995, the Company restated its balance sheet
to reflect the real estate operations as a continuing operation and will
recognize its equity in the operating results of the real estate operations in
accordance with the equity method of accounting.
RESULTS OF OPERATIONS
- ---------------------
Nine Months Ended September 30, 1995 Compared to the Nine Months Ended September
- --------------------------------------------------------------------------------
30,1994
- -------
For the nine months ended September 30, 1995, the Company had a net loss of
$9.6 million compared to a $8.4 million net loss for the same period in 1994.
As stated previously, effective January 1, 1995, the Company has reflected the
results of its real estate operations as a continuing operation whereas these
same operations during 1994 were accounted for as a discontinued operation with
no effect on operating results.
The change in the operating results between 1995 and 1994 is primarily
attributable to the accounting for the real estate operations and an increase in
interest expense as a result of increasing interest rates. The $.6 million
increase in income is primarily due to rental income of $.4 million and a $.2
million gain on the sale of a mortgage receivable. Of the $2.0 million increase
in interest expense, $1.2 million is attributable to the debt on real estate
assets and the balance reflects an increase in interest rates.
FINANCIAL POSITION
- ------------------
Material Changes Since December 31, 1994
- ----------------------------------------
During July 1995, the Company made a $845,000 loan to a developer to refinance
land previously purchased by the developer for residential home development. The
Company will receive a $60,000 transaction fee, of which $5,000 was paid up
front, and the balance was rolled into the loan. The total loan of $900,000 is
for one year and carries a 10% interest rate, payable monthly, and is secured by
a first mortgage on the land. In order to make this loan, the Company borrowed
$550,000 from UEC under its existing Junior credit facility.
9
<PAGE>
During September 1995, the Company sold substantially all of its limited
partnership interests in two of its real estate joint ventures to the "General
Partner" for $6.9 million, which equalled the Company's recorded net book value
for these investments. In connection with the sale, the Company granted the
General Partner an option, which expires December 31, 1996, to purchase it's
remaining limited partnership interest not sold (1%) for $70,000.
The proceeds from the sale were used to repay loans from the General Partner
relating to the Company's real estate investments in Colorado State Bank
Building ("CSBB") and Montgomery St. Land Lease ("MSLL").
During September 1995, the Company drew down $6.0 million on an existing but
unutilized line of credit provided by the General Partner and secured by the
Company's investment in the CSBB, for the purpose of investing an additional
$2.3 million in CSBB and making an additional repayment against the MSLL loan.
At the end of September 1995, UEC purchased from the General Partner the
outstanding balance on the Company's loans secured by CSBB and MSLL at face
value. As a result of this transaction, all of the Company's debt is now held
by UEC and Hees.
10
<PAGE>
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, 1995, the Company had outstanding $155.4 million of
indebtedness, including interest payable of $49.8 million, (collectively
the "Indebtedness") under its Senior, Subordinated and Junior credit
facilities. The Company's parent company, Unicorp Energy Corporation
("UEC"), holds $142.1 million of the Company's Indebtedness and Hees
International Bancorp, Inc. which currently owns an indirect 24.6% non-
voting equity interest in UEC, holds the balance of the Indebtedness,
$13.3 million. The Company is in payment default under each of the above
mentioned credit facilities. These credit facilities are secured by a
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) A Form 8-K was filed on September 28, 1995.
11
<PAGE>
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 10, 1995 /s/ Jack R. Sauer
----------------------
Jack R. Sauer
Chief Financial Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 582
<SECURITIES> 111
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,970
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 17
0
0
<OTHER-SE> (158,462)
<TOTAL-LIABILITY-AND-EQUITY> 15,970
<SALES> 0
<TOTAL-REVENUES> 691
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 249
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,001
<INCOME-PRETAX> (9,559)
<INCOME-TAX> 21
<INCOME-CONTINUING> (9,580)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,580)
<EPS-PRIMARY> (5.53)
<EPS-DILUTED> (5.53)
</TABLE>
