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 Nine Months Ended March 31, 1996
Commission File Number 0-17214
ADMIRAL FINANCIAL CORP.
State of Florida I.R.S. No. 59-2806414
825 Arthur Godfrey Road
Miami Beach, Florida 33140
Telephone Number: (305) 672-5800
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 twelve (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 ninety (90) days.
Yes [X] No [ ]
Common Stock $.001 Par Value
Outstanding Shares at March 31, 1996: 10,985,046
<PAGE>
ADMIRAL FINANCIAL CORP. AND SUBSIDIARY
TABLE OF CONTENTS
FORM 10-Q
PART I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets 1
Consolidated Statements of Operations 2
Consolidated Statements of Cash Flows 3
Notes to Consolidated Financial Statements 4
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 5
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
<PAGE>
PART I - FINANCIAL INFORMATION
ADMIRAL FINANCIAL CORP.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 JUNE 30, 1995
ASSETS -------------- -------------
(UNAUDITED) (UNAUDITED)
Cash $ 0 $ 0
Prepaid expenses and other assets 0 0
Net assets of Haven Federal Savings and
Loan Association (notes 1 and 2) 0 0
--------- ---------
Total assets $ 0 $ 0
========= =========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Accrued expenses and other liabilities $ 23,890 $ 23,890
Net liabilities of Haven Federal Savings
and Loan Association (notes 1 and 2) 0 0
--------- ---------
Total liabilities 23,890 23,890
Preferred stock, $.01 par value, Authorized
6,000,000 shares, none outstanding
Common stock, $.001 par value,
50,000,000 shares authorized,
10,987,000 shares issued 10,987 10,987
Treasury stock, 1,954 and 1,954 shares, 0 0
at cost
Additional paid-in capital 680,710 680,710
Deficit (715,587) (715,587)
--------- ---------
Total stockholders' (deficit) equity (23,890) (23,890)
--------- ---------
Total liabilities and stockholders'
(deficit) equity $ 0 $ 0
========= =========
See accompanying notes to consolidated financial statements.
1
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ADMIRAL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MAR 31 NINE MONTHS ENDED MAR 31
--------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest Income 0 0 0 0
Other income 0 0 0 0
----------- ----------- ----------- -----------
Total income 0 0 0 0
Expense
Employee Compensation 0 0 0 0
Other 0 0 0 0
----------- ----------- ----------- -----------
Total expense 0 0 0 0
Loss from discontinued
operation (note 2) 0 0 0 0
----------- ----------- ----------- -----------
Net loss $ 0 0 0 0
=========== =========== =========== ===========
Loss per share $ 0.00 $ 0.00 $ 0.00 $ 0.00
=========== =========== =========== ===========
Dividend per share -- -- -- --
=========== =========== =========== ===========
Weighted average number
of shares outstanding 10,985,046 10,985,04 10,985,046 10,985,046
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
PART I - FINANCIAL INFORMATION
ADMIRAL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED MARCH 31
--------------------------
1996 1995
---- ----
Cash flows from operating activities:
Net loss $ 0 $ 0
Adjustments to reconcile net loss to net cash
provided by operating activities:
Decrease in deficit arising from confiscation of
Haven Federal after retroactive disallowance
of agreed supervisory goodwill and regulatory
capital 0 0
Decrease in prepaid expenses and other assets 0 0
Decrease (increase) in net assets of
Haven Federal 0 0
(Decrease) in accrued expenses and other
liabilities 0 0
(Decrease) Increase in net liabilities of
Haven Federal 0 0
Amortization of organization expenses 0 0
---- ----
Net cash provided (used) by operating activities 0 0
Cash and cash equivalents, beginning of year 0 0
Cash and cash equivalents, end of quarter $ 0 $ 0
==== ====
See accompanying notes to consolidated financial statements
3
<PAGE>
PART I - FINANCIAL INFORMATION
ADMIRAL FINANCIAL CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. In the opinion of management, the accompanying consolidated
financial statements contain all the adjustments (principally
consisting of normal recurring accruals and the confiscation of all the
principal assets of the Company by the United States government)
necessary to present fairly the financial statements of Admiral
Financial Corp. ('Admiral') and Subsidiary.
Note 2. The net assets of Admiral's principal operating subsidiary, Haven
Federal Savings and Loan Association ('Haven'), were confiscated by the
United States government on March 2, 1990. Therefore, where applicable,
Haven's net assets and net liabilities are presented in the balance
sheets in the aggregate; and its loss is shown in the aggregate in the
Statements of Operations for the three and nine month periods ended
March 31, 1996 and 1995.
4
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2 - Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations
GENERAL
ADMIRAL FINANCIAL CORP. ("ADMIRAL") IS CURRENTLY AN INACTIVE
CORPORATION, WITH NO ONGOING BUSINESS ACTIVITY.
Admiral Financial Corp. was formed in 1987 to acquire an insolvent
savings and loan association in a supervisory acquisition solely with private
investment funds, and without the benefit of any federal assistance payments.
Admiral acquired Haven Federal Savings and Loan Association of Winter Haven,
Florida on June 16, 1988. In that acquisition transaction, Admiral issued
8,000,000 new common shares in exchange for assets (primarily real estate and a
profitable business engaged in the purchase and redemption of Florida tax sale
certificates) having a fair market value of approximately $40 million, subject
to approximately $27 million of mortgages and other liabilities, and less
approximately $1 million of fees and expenses (necessary to provide the proper
forms and documentation in accordance with government rules and regulations),
for a net equity contribution of approximately $12 million. Admiral then
contributed virtually all of these net assets and liabilities to the capital of
Haven, plus an additional 987,000 new common shares of Admiral, which were
simultaneously issued in exchange for 100% of the outstanding shares of Haven in
an approved "supervisory acquisition" of an insolvent thrift institution.
Admiral has had substantially no assets or operations other than its investment
in Haven.
The Financial Institution Reform, Recovery and Enforcement Act of 1989
("FIRREA") was introduced on February 5, 1989, and enacted into law on August 9,
1989. FIRREA imposed, by no later than December 7, 1989, more stringent capital
requirements upon savings institutions than those previously in effect. These
capital requirements were applied to Haven on a retroactive basis. Haven did not
meet these new capital requirements on the date of enactment, or on the date of
Haven's acquisition by Admiral. Because of certain provisions of FIRREA relating
primarily to the disallowance of supervisory goodwill and certain other
intangible assets in the calculation of required net capital, management
estimates that Admiral would have been required under the Agreement to infuse
additional capital of approximately $18 million by December 7, 1989. Had FIRREA
been in effect on the date of Haven's acquisition by Admiral, Haven would have
fallen short of the capital requirements by approximately $14 million, after
taking into account Admiral's contribution of $11 million of new regulatory
capital. Admiral did not infuse any additional capital, and the net assets of
Haven were confiscated by the federal authorities on March 2, 1990.
In the agreement allowing Admiral to acquire Haven in the supervisory
acquisition, Haven was credited with new capital under "Regulatory Accounting
Principles" (RAP) then in effect equal to $11 million. This amount was computed
by taking into account the $13 million fair market value of the net assets
contributed by Admiral to Haven, less the $1 million of fees and costs incurred,
and less an additional $1 million resulting from reduced valuations of certain
of the contributed assets for purposes of calculating Haven's RAP equity by the
appraisal division of the Federal Home Loan Bank Board.
5
<PAGE>
A condition to the Federal Home Loan bank Board ("FHLBB") Resolution
approving the acquisition of control of Haven by Admiral (the "Agreement")
required that Admiral account for the acquisition of Haven under the "purchase"
method of accounting, whereby an asset in the nature of "Goodwill" would be
realized, generally, to the extent of any previous negative net worth of the
acquired insolvent thrift, plus the excess of the fair market values of the
contributed assets over their respective historical costs. Haven's regulatory
goodwill of approximately $20 million was, in accordance with the Agreement, to
be amortized against earnings over a period of twenty-five years.
Another condition to the same Agreement required that Admiral execute a
Regulatory Capital Maintenance/Dividend Agreement which provided certain
remedies if Haven and Admiral were unable to liquidate, on a scheduled basis
ending June 30, 1990, the real estate used by Admiral to capitalize its
acquisition of Haven. The remedies of the Federal Savings and Loan Insurance
Corporation ("FSLIC") agreed to by Admiral in the Agreement included the right
of the FSLIC to (I) vote the common stock of Haven; (ii) remove the board of
directors of Haven; and/or (iii) dispose of any or all of the voting securities
of Haven owned by Admiral.
The failure of Admiral and Haven to liquidate the real estate in
accordance with the agreement with the FHLBB could have caused the forfeiture to
the FSLIC of all shares of Haven. If the voting securities of Haven were so
forfeited, the stockholders of Admiral would still hold their shares of Admiral.
However, Admiral would have lost substantially its only asset, and the shares of
Admiral common stock, after such forfeiture, could have had little or no value.
Under the same Agreement, Admiral was also obligated to cause the
regulatory capital of Haven to be maintained at a level at or above the minimum
regulatory capital requirement and, if necessary, infuse additional equity
capital into Haven.
At all times during Admiral's control , Haven was successful in meeting
the real estate liquidation requirements imposed by the Agreement, including any
extensions of time granted thereunder. However, Haven experienced a $4.3 million
erosion of its regulatory capital due in large part to losses sustained as a
result of liquidating the real estate under the "fire sale" conditions imposed
by the Agreement. This loss, together with other operating losses and goodwill
amortization expenses, caused Haven to fail to meet its minimum capital
requirement as of March 31, 1989 and at all times thereafter. Admiral and Haven
continued to abide by the Agreement entered into with the FHLBB, to its
financial detriment, in spite of the United States government's assertion that
the enactment of FIRREA retroactively eliminated the need for the government (or
any of its instrumentalities) to live up to any express or implied agreements
which may have been contrary to the subsequent legislation, without the
necessity of the retroactive return of Admiral's $13+ million of net capital and
expenses invested in Haven.
Admiral was notified by the FHLBB on July 17, 1989 that Admiral was in
default of the Agreement and had 90 days (i.e. until October 16. 1989) to cure
the default. Admiral had virtually no assets other than the stock of Haven, and
has had no other viable means available to cure the default since the
introduction of FIRREA. The net assets of Haven, including Admiral's $13 million
of contributed equity, were confiscated on March 2, 1990.
Admiral and Haven applied for relief from the requirements of the
Resolution and the Agreement. Haven has also applied for regulatory relief from
sanctions imposed by FIRREA for failing to meet the minimum regulatory capital
requirements. Furthermore, Admiral and Haven have also applied for federal
assistance payments under a FIRREA provision for assistance which management
believes is directly applicable to Admiral/Haven's current situation. Admiral
received no notice of any
6
<PAGE>
hearings prior to the confiscation of Haven on March 2, 1990.
On August 5, 1993, Admiral filed a Complaint against the United States
of America in the United States Court of Federal Claims, arising in part out of
contractual promises made to Admiral by the United States' Government, acting
through the Federal Home Loan Bank Board ("FHLBB") and the Federal Savings and
Loan Insurance Corporation ("FSLIC") pursuant to their statutory supervisory
authority over federally insured savings and loan institutions and savings banks
(hereinafter referred to a "thrifts" or "thrift institutions"), and in part out
of takings of property by the FHLBB and FSLIC in the course of exercising that
authority. In this action, Admiral seeks (1) a declaration that the government's
actions constitute a repudiation and material breach of their contractual
obligations to Admiral and, thereby, effect a taking of Admiral's property
without just compensation and a deprivation of Admiral's property without due
process of law, in violation of the Fifth Amendment, and (2) compensatory
damages for the United States' breach of contract, or (3) rescission of the
contract and restitutionary relief, or (4) compensation for the taking of
Admiral's property, or (5) damages for the deprivation of Plaintiffs' property
without due process of law."
This action was stayed by order of the Court dated September 3, 1993,
pending the en banc decision on rehearing of the Court of Appeal for the Federal
Circuit in WINSTAR CORP., ET AL. V. UNITED STATES, a pending action which
Admiral management believes to contain a substantially similar fact pattern.
Since Haven was the only significant asset owned by Admiral, the
Admiral common stock has little or no continuing value.
LIQUIDITY AND CAPITAL RESOURCES
Admiral has been reduced to a corporate "shell," with no operations or
current activity. There is no corporate liquidity, no available capital
resources, and no immediately foreseeable prospects for the future improvement
of Admiral's financial picture.
Admiral management intends to seek a new line of business. as yet
unidentified. In connection therewith, Admiral's management believes that a
restructuring of Admiral may be necessary in order to raise capital for new
operations, and any such restructuring may have a substantial dilutive effect
upon Admiral's existing shareholders. Admiral has no ongoing commitments or
obligations other than with respect to its obligations related to the
acquisition of Haven.
COMPARISON OF THREE MONTHS ENDED MARCH 31. 1996 AND 1995
Admiral was inactive, and recorded no revenues or expenses during the
period.
COMPARISON OF NINE MONTHS ENDED MARCH 31. 1996 AND 1995
Admiral was inactive, and recorded no revenues or expenses during the
period.
7
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Admiral did not become involved in any new material legal proceedings
during the period covered by this report.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
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
Not applicable.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADMIRAL FINANCIAL CORP. (Registrant)
Date: September 19, 1996 By: /s/ WM. LEE POPHAM
-----------------------------------
Wm. Lee Popham, President
Date: September 19, 1996 By: /s/ LINDA E. BAKER
-----------------------------------
Linda E. Baker, Principal Financial
and Accounting Officer
9
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 23,890
<BONDS> 0
0
0
<COMMON> 10,987
<OTHER-SE> (34,877)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
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<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
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