<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 June 30, 1996 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 of each of the issuer's classes of
common stock, as of the latest practicable date.
1,730,559 Shares of Common Stock Outstanding at August 1, 1996
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The condensed consolidated 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, 1995), 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.
2
<PAGE>
LINCORP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Cash................................................... $ 464 $ 660
Investment in real estate assets, net ................. 28,958 15,517
Other assets .......................................... 3 4
--------- ---------
$ 29,425 $ 16,181
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Debt on real estate, including accrued interest .. $ 29,750 $ 15,663
Other borrowed funds, including accrued interest.. 163,777 157,989
Other liabilities ................................ 3,783 4,195
--------- ---------
197,310 177,847
--------- ---------
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 ............................... (316,336) (310,117)
--------- ---------
(167,885) (161,666)
--------- ---------
$ 29,425 $ 16,181
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
LINCORP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Unaudited
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Income:
Rental income ....................................................... $ 384 $ 118 $ 499 $ 235
Equity in operating results of real estate joint ventures ........... 47 (49) 87 48
Interest income ..................................................... -- 42 23 74
Other income ........................................................ 15 -- 104 3
------- ------- ------- -------
Total income ................................................. 446 111 713 360
------- ------- ------- -------
Expenses:
Interest expense .................................................... 3,542 3,382 6,832 6,616
General and administrative expense .................................. 31 129 87 188
------- ------- ------- -------
Total expenses ............................................... 3,573 3,511 6,919 6,804
------- ------- ------- -------
Loss before income taxes ............................................... (3,127) (3,400) (6,206) (6,444)
Provision for income taxes ............................................. 4 -- 13 15
------- ------- ------- -------
Net loss ............................................................... $(3,131) $(3,400) $(6,219) $(6,459)
======= ======= ======= =======
Loss per share of Common Stock outstanding ............................. $ (1.81) $ (1.96) $ (3.59) $ (3.73)
======= ======= ======= =======
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 consolidated financial
statements.
4
<PAGE>
LINCORP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Unaudited
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss ..................................................................... $(3,131) $(3,400) $(6,219) $(6,459)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Equity in operating results of real estate
joint ventures .................................................. (47) 49 (87) (48)
Decrease in marketable securities .................................. -- 216 -- 202
Decrease in other assets ........................................... 1 4 1 7
Increase in accrued interest payable ............................... 3,560 3,264 6,850 6,410
Increase (decrease) in other liabilities ........................... (12) 270 (412) 270
------- ------- ------- -------
Net cash provided by operating activities .................................... 371 403 133 382
------- ------- ------- -------
INVESTING ACTIVITIES
Investment in real estate assets ............................................. (221) -- (329) --
------- ------- ------- -------
FINANCING ACTIVITIES
Repayment of borrowed funds .................................................. -- (144) -- (144)
------- ------- ------- -------
Net increase (decrease) in cash .............................................. 150 259 (196) 238
Cash, beginning of period .................................................... 314 104 660 125
------- ------- ------- -------
Cash, end of period .......................................................... $ 464 $ 363 $ 464 $ 363
======= ======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest .......................................................... $ -- $ 87 $ -- $ 205
======= ======= ======= =======
Income taxes ...................................................... $ 4 $ -- $ 13 $ 15
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
LINCORP HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BUSINESS
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. The restatement
had no effect on prior period Statements of Operations but effective January 1,
1995, the Company recognized the results of its real estate operations as part
of its results from continuing operations. This included recording its equity in
the operating results of its real estate joint ventures in accordance with the
equity method of accounting as well as recording rental and other income and
expenses from its other real estate activities.
NOTE 2 - LIQUIDITY AND GOING CONCERN
At June 30, 1996, the Company had outstanding $163.8 million of
indebtedness, including interest payable of $58.6 million, (collectively the
"Indebtedness") under its Senior, Subordinated and Junior credit facilities. The
Company's parent company, Unicorp Energy Corporation ("UEC"), holds $149.9
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, $13.9 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 non real estate assets.
The Company's sources of operating funds during the six months ended June
30, 1996, and to date have been primarily funds from rental income. Unless the
Company's lenders are prepared to continue to defer the payment of the
Indebtedness, the Company will be unable to continue as a going concern.
NOTE 3 - REAL ESTATE OPERATIONS
The Company has a 25% limited partnership interest in a commercial building
known as the Colorado State Bank Building. During the first six months of 1996,
the Company funded its partnership share of capital expenditures and tenant
improvements totaling $.3 million.
Also, during 1996, the owner of the office building at 300 Montgomery St.
in San Francisco exercised his option to purchase the Company's land holdings
which underlies his office building. The Company is currently negotiating the
purchase price with the building owner.
6
<PAGE>
NOTE 3 - REAL ESTATE OPERATIONS - CONTINUED
During 1996, the Company acquired through a wholly owned subsidiary, DB
Holdings, Inc. ("DBH"), a parcel of land (the "DBH Land") underlying a
commercial real estate project in Minneapolis, Minnesota. The DBH Land was
acquired for $13.0 million, with the total purchase price funded from a senior
unsecured obligation (the "Loan") of DBH, payable the earlier of January 2,
1999, or immediately upon the sale, transfer or disposal of the DBH Land by DBH.
Interest on the Loan is payable monthly, starting July, 1996, at a rate equal to
the 180 day Libor rate plus 3%. The DBH Land is leased to a project developer
(the "Project Developer") through February, 2086 and for 1996, has an annual
minimum lease payment of $1.0 million. DBH has an agreement with the Project
Developer that at any time up to January 2, 1999, both DBH and the Project
Developer have the option to cause the transfer of the DBH Land to the other at
a price of $13.0 million plus accrued and unpaid lease payments. Should the
Project Developer exercise its option to purchase the DBH Land, DBH has the
right to sell the DBH Land, to the Project Developer for a 25% interest in the
project including the DBH Land.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND GOING CONCERN
At June 30, 1996, the Company had outstanding $163.8 million of
indebtedness, including interest payable of $58.6 million, (collectively the
"Indebtedness") under its Senior, Subordinated and Junior credit facilities. The
Company's parent company, Unicorp Energy Corporation ("UEC"), holds $149.9
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, $13.9 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 non real estate assets.
The Company's sources of operating funds during the six months ended June
30, 1996, and to date have been primarily funds from rental income. Unless the
Company's lenders are prepared to continue to defer the payment of the
Indebtedness, the Company will be unable to continue as a going concern.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1996 Compared to the Six Month Ended June 30, 1995
For the six months ended June 30, 1996, the Company had a net loss of $6.2
million compared to a $6.5 million net loss for the same period in 1995.
FINANCIAL POSITION
Material Changes Since December 31, 1995
During 1996, the Company acquired through a wholly owned subsidiary, DB
Holdings, Inc. ("DBH"), a parcel of land (the "DBH Land") underlying a
commercial real estate project in Minneapolis, Minnesota. The DBH Land was
acquired for $13.0 million, with the total purchase price funded from a senior
unsecured obligation (the "Loan") of DBH, payable the earlier of January 2,
1999, or immediately upon the sale, transfer or disposal of
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
the DBH Land by DBH. Interest on the Loan is payable monthly, starting July,
1996, at a rate equal to the 180 day Libor rate plus 3%. The DBH Land is leased
to a project developer (the "Project Developer") through February, 2086 and for
1996, has an annual minimum lease payment of $1.0 million. DBH has an agreement
with the Project Developer that at any time up to January 2, 1999, both DBH and
the Project Developer have the option to cause the transfer of the DBH Land to
the other at a price of $13.0 million plus accrued and unpaid lease payments.
Should the Project Developer exercise its option to purchase the DBH Land, DBH
has the right to sell the DBH Land, to the Project Developer for a 25% interest
in the project including the DBH Land.
9
<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 June 30, 1996, the Company had outstanding $163.8 million of
indebtedness, including interest payable of $58.6 million,
(collectively the "Indebtedness") under its Senior, Subordinated and
Junior credit facilities. The Company's parent company, Unicorp Energy
Corporation ("UEC"), holds $149.9 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, $13.9 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
non real estate 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.
10
<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: August 14, 1996 /s/ Jack R. Sauer
---------------------------
Jack R. Sauer
Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 464
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 29,425
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 17
<OTHER-SE> (167,902)
<TOTAL-LIABILITY-AND-EQUITY> 29,425
<SALES> 0
<TOTAL-REVENUES> 713
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 87
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,832
<INCOME-PRETAX> (6,206)
<INCOME-TAX> 13
<INCOME-CONTINUING> (6,219)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,219)
<EPS-PRIMARY> (3.59)
<EPS-DILUTED> (3.59)
</TABLE>
