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 Three Months Ended September 30, 1993
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 September 30, 1993: 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 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ADMIRAL FINANCIAL CORP.
AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS SEPTEMBER 30, 1993 JUNE 30, 1993
------ ------------------ --------------
(Unaudited) (Unaudited)
<S> <C> <C>
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, at cost 0 0
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
============== ============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ADMIRAL FINANCIAL CORP. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Sept 30
----------------------------
1993 1992
----- ----
<S> <C> <C>
Interest Income 0 0
Other income 0 0
------- -------
Total income 0 0
Expense
Employee Compensation 0 0
Other 0 5,048
------- -------
Total expense 0 5,048
Loss from discontinued
operation (note 2) 0 0
------- -------
Net loss $ 0 (5,048)
======= ========
Loss per share $(.000) $(.000)
======= ========
Dividend per share -- --
======= ========
Weighted average number
of shares outstanding 10,985,046 10,985,046
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ADMIRAL FINANCIAL CORP. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended Sept 30
--------------------------
1993 1992
------ -------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ 0 $ (5,048)
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 5,048
------- --------
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
======== =========
</TABLE>
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 prior
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 month period ended September 30, 1993
and 1992.
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. Haven
did not meet these new capital requirements. 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.
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.
A condition to the Federal Home Loan bank Board ("FHLBB") Resolution
approving the
5
<PAGE>
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 hearings prior to the confiscation of Haven on March
2, 1990.
6
<PAGE>
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 SEPTEMBER 30, 1993 AND 1992
Amortization of organization expenses was $0 and $5,048 during the three months
ended September 30, 1993 and 1992, respectively.
7
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On August 5, 1993, Admiral filed a Complaint against the United States
of America in the United States Court of Federal Claims, alleging as follows:
"This action arises 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. The contractual promises were
made for the purpose of inducing Admiral to acquire and operate Haven Federal
Savings and Loan Association, an insolvent thrift institution. Admiral's
acquisition of Haven saved FSLIC's insurance fund millions of dollars that it
would have been obligated to pay to creditors and depositors of Haven had FSLIC
and the FHLBB been forced to liquidate it. Admiral fully performed its
obligations under its contract with FSLIC and the FHLBB. Although the United
States received the benefits of its contractual bargain with Admiral, it has
broken its contractual promises to Admiral, partially as a result of the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"),
and of certain regulations promulgated by the Office of Thrift Supervision
("OTS") pursuant to FIRREA. This repudiation and abrogation of the United
States' contractual promises to Admiral constitute a material breach of contract
that defeats the central object of this agreement, a taking of Admiral's
property without just compensation in violation of the Fifth Amendment to the
United States Constitution, and a deprivation of Admiral's property without due
process of law in violation of the Fifth Amendment to the United States
Constitution. 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.
Admiral is not a party to any other legal proceedings. If adversely
determined, the above litigation should not have, in the opinion of Admiral
management, a material adverse effect on the current operations or financial
condition of the Company.
Item 2. Changes in Securities
Not applicable.
8
<PAGE>
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.
9
<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 18, 1996 By: /s/ WM. LEE POPHAM
-----------------------------------
Wm. Lee Popham, President
Date: September 18, 1996 By: /s/ LINDA E. BAKER
-----------------------------------
Linda E. Baker, Principal Financial
and Accounting Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> SEP-30-1993
<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
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
