<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, 1998 Commission File No. 1-8249
------------------ ------
LINCORP HOLDINGS, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
245 Park Avenue
New York, New York 10167
- ------------------------------- -----------------------------------
(Address of Principal Executive (Zip Code)
Offices)
Registrant's Telephone Number,
Including Area Code: (212) 867-3800
--------------
- -------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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 3, 1998
<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, 1997), 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.
BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
----------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Cash ................................................ $ 1 $ 23
Investment in real estate and mortgage loans, net ... 1,546 1,512
--------- ---------
$ 1,547 $ 1,535
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Debt secured by real estate and mortgage loans,
including accrued interest ................. $ 620 $ 606
Other borrowed funds, including accrued interest 175,732 170,179
Other liabilities .............................. 3,930 3,786
--------- ---------
180,282 174,571
--------- ---------
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 ............................. (332,390) (326,691)
--------- ---------
(178,735) (173,036)
--------- ---------
$ 1,547 $ 1,535
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<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,
---------------------- ----------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Income:
Rental income ........................................... $ -- $ -- $ -- $ 357
Equity in operating results of real estate joint ventures -- -- -- 60
Interest income ......................................... -- -- 34 --
Gain on sale of subsidiary .............................. -- -- -- 146
Gain on sale of real estate assets ...................... -- 6,631 -- 6,631
Other income ............................................ -- -- -- 8
------- ------- ------- -------
Total income ..................................... -- 6,631 34 7,202
------- ------- ------- -------
Expenses:
Interest expense ........................................ 27 3,025 5,567 9,582
General and administrative expense ...................... 24 38 131 123
------- ------- ------- -------
Total expenses ................................... 51 3,063 5,698 9,705
------- ------- ------- -------
Income (loss) before income taxes .......................... (51) 3,568 (5,664) (2,503)
Provision for income taxes ................................. 4 8 35 14
------- ------- ------- -------
Net income (loss) .......................................... $ (55) $ 3,560 $(5,699) $(2,517)
======= ======= ======= =======
Basic income (loss) per share of Common Stock outstanding .. $ (0 03) $ 2 06 $ (3 29) $ (1 45)
======= ======= ======= =======
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.
4
<PAGE>
LINCORP HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
(dollars in thousands)
Unaudited
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------- ----------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) .................................... $ (55) $ 3,560 $ (5,699) $ (2,517)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Gain on sale of subsidiary .................. -- -- -- (146)
Gain on sale of real estate assets .......... -- (6,631) -- (6,631)
Equity in operating results of real estate
joint ventures .......................... -- -- -- (60)
Decrease (increase) in other assets ........ -- 6 (34) 72
Increase in accrued interest payable ....... 27 3,026 5,567 9,008
Increase (decrease) in other liabilities ... 25 19 144 149
-------- -------- -------- --------
Net cash provided by (used in) operating activities .. (3) (20) (22) (125)
-------- -------- -------- --------
INVESTING ACTIVITIES
Proceeds from sale of subsidiary ..................... -- -- -- 50
Investment in real estate assets ..................... -- -- -- (133)
-------- -------- -------- --------
Net cash provided by (used in) investing activities .. -- -- -- (83)
-------- -------- -------- --------
Net increase (decrease) in cash ...................... (3) (20) (22) (208)
Cash, beginning of period ............................ 4 22 23 210
-------- -------- -------- --------
Cash, end of period .................................. $ 1 $ 2 $ 1 $ 2
======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest ................................... $ -- $ -- $ -- $ 574
Income taxes ............................... $ 4 $ 8 $ 35 $ 14
Non cash investing and financing activities:
Assets sold ................................. $ -- $ 9,875 $ -- $ 22,989
Liabilities sold ............................ $ -- $ -- $ -- $ 13,210
Debt repurchased ............................ $ -- $ 16,506 $ -- $ 16,506
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
LINCORP HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - LIQUIDITY AND GOING CONCERN
At September 30, 1998, Lincorp Holdings, Inc. (the "Company") had
approximately $176.4 million of principal and accrued interest (the
"Indebtedness") outstanding under its various debt obligations. The
Company's parent company, Unicorp Energy Corporation ("UEC") holds all of
the Company's Indebtedness. 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.
On September 14, 1998, UEC agreed to waive substantially all interest owing
by the Company on it's Indebtedness to UEC that would otherwise accrue for
the period July 1, 1998 through December 31, 1998. For the three months
ended September 30, 1998 the interest waived was approximately $2.8 million.
The Company's sources of operating funds during the period ended September
30, 1998, and to date, have been primarily from it's previously existing
cash balances and borrowings from UEC. The assets being utilized to fund the
Company's operations are part of collateral package securing the above
described credit facilities. Unless the Company's lender continues 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 2 - REAL ESTATE OPERATIONS
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. The
Republic Mortgage Loan bears interest at 15% and was to mature on May 19,
1998. The Company had the option, which expired April 17, 1998, to convert
the Republic Mortgage Loan into a 50% ownership interest in the underlying
real estate property. To finance this loan, the Company borrowed funds from
UEC. The UEC borrowing was in the form of a $602,000 discounted note (the
"UEC Republic Note") which matured on May 19, 1998 in the amount of $620,000
and is secured by the Republic Mortgage Loan.
The Republic Mortgage Loan was not repaid on May 19, 1998 and the Company is
currently negotiating the repayment of the loan with the borrower. At this
time, the Company cannot determine the outcome of these negotiaitons. The
UEC Republic Note, which matured on May 19, 1998, was not repaid by the
Company as its payment is dependent upon collecting the Republic Mortgage
Loan. UEC has agreed to defer the collection of its note until the Republic
Mortgage Loan issue is resolved.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND GOING CONCERN
At September 30, 1998, Lincorp Holdings, Inc. (the "Company") had
approximately $176.4 million of principal and accrued interest (the
"Indebtedness") outstanding under its various debt obligations. The
Company's parent company, Unicorp Energy Corporation ("UEC") holds all of
the Company's Indebtedness. 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.
On September 14, 1998, UEC agreed to waive substantially all interest owing
by the Company on it's Indebtedness to UEC that would otherwise accrue for
the period July 1, 1998 through December 31, 1998. For the three months
ended September 30, 1998 the interest waived was approximately $2.8 million.
The Company's sources of operating funds during the period ended September
30, 1998, and to date, have been primarily from it's previously existing
cash balances and borrowings from UEC. The assets being utilized to fund the
Company's operations are part of collateral package securing the above
described credit facilities. Unless the Company's lender continues 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.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1998 Compared to the Nine Month Ended
September 30, 1997
For the nine months ended September 30, 1998 the Company had a net loss of
$5.7 million compared to a $2.5 million net loss for the nine months ended
September 30, 1997.
Total income decreased $7.2 million in 1998 compared to 1997 primarily due
to the Company having approximately $6.8 million in gains from the sale of
real estate assets and a subsidiary in 1997.
Interest expense decreased approximately $4.0 million in 1998 compared to
1997 reflecting a 1997 decrease in debt of approximately $24.8 million and
UEC waiving approximately $2.8 million of interest during 1998 that the
Company would have otherwise accrued as an expense.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL POSITION
Material Changes Since December 31, 1997
On September 14, 1998, UEC agreed to waive substantially all interest owing
by the Company on it's Indebtedness to UEC that would otherwise accrue for
the period July 1, 1998 through December 31, 1998. For the three months
ended September 30, 1998 the interest waived was approximately $2.8 million.
There was no other significant changes in the Company's financial position
since December 31, 1997.
8
<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
At September 30, 1998, Lincorp Holdings, Inc. (the "Company") had
approximately $176.3 million of principal and accrued interest
(the "Indebtedness") outstanding under its various debt
obligations. The Company's parent company, Unicorp Energy
Corporation ("UEC") holds all of the Company's Indebtedness. 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.
On September 14, 1998, UEC agreed to waive substantially all
interest owing by the Company on it's Indebtedness to UEC that
would otherwise accrue for the period July 1, 1998 through
December 31, 1998. For the three months ended September 30, 1998
the interest waived was approximately $2.8 million.
(b) Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
(a) Not applicable.
(b) None filed.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Not applicable.
(b) None filed.
9
<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 16, 1998 /s/ Jack R. Sauer
------------------------------
President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,547
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 17
<OTHER-SE> (175,752)
<TOTAL-LIABILITY-AND-EQUITY> 1,547
<SALES> 0
<TOTAL-REVENUES> 34
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 131
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,567
<INCOME-PRETAX> (5,664)
<INCOME-TAX> 35
<INCOME-CONTINUING> (5,699)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,699)
<EPS-PRIMARY> (3.29)
<EPS-DILUTED> (3.29)
</TABLE>
