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, 1990
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, 1990: 10,985,046
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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 6. Exhibits and Reports on Form 8-K 8
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PART I - FINANCIAL INFORMATION
ADMIRAL FINANCIAL CORP.
AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS MARCH 31, 1990 JUNE 30, 1989
-------------- -------------
(Unaudited)
<S> <C> <C>
Cash $ 6,081 $ 2,262
Prepaid expenses and other assets 65,628 83,170
Net assets of Haven Federal Savings and
Loan Association (notes 1 and 2) 0 196,801,331
------------- -------------
Total assets $ 71,709 $ 196,886,763
============= =============
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Accrued expenses and other liabilities $ 23,055 $ 44,276
Net liabilities of Haven Federal Savings
and Loan Association (notes 1 and 2) 0 209,964,106
------------- -------------
Total liabilities 23,055 210,008,382
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 (643,043) (13,813,316)
------------- -------------
Total stockholders' (deficit) equity 48,654 (13,121,619)
------------- -------------
Total liabilities and stockholders'
(deficit) equity $ 71,709 $ 196,886,763
============= =============
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See accompanying notes to consolidated financial statements.
1
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PART I - FINANCIAL INFORMATION
ADMIRAL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MAR 31 NINE MONTHS ENDED MAR 31
------------------------- ------------------------
1990 1989 1990 1989
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest Income 121 179 795 1,315
Other income 0 1,540 25
---------- ---------- ---------- ----------
Total income 121 179 2,335 1,340
Expense
Employee Compensation 0 14,376 26,731 38,462
Other 16,274 11,353 43,521 60,711
---------- ---------- ---------- ----------
Total expense 16,274 25,729 70,252 99,173
Loss from discontinued
operation (note 2) 0 (711,998) 0 (2,088,550)
---------- ---------- ---------- ----------
Net loss $ (16,153) (737,548) (67,917) (2,186,383)
========== ========== ========== ==========
Loss per share $ (.001) $ (.067) $ (.006) $ (.199)
========== ========== ========== ==========
Dividend per share -- -- -- --
========== ========== ========== ==========
Weighted average number
of shares outstanding 10,985,046 10,986,046 10,985,046 10,985,046
========== ========== ========== ==========
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See accompanying notes to consolidated financial statements
2
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PART I - FINANCIAL INFORMATION
ADMIRAL FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED MARCH 31
------------------------------
1990 1989
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (67,917) $ (2,186,383)
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 13,438,190 0
Decrease in prepaid expenses and other assets 17,542 1,698
Decrease (increase) in net assets of
Haven Federal 196,601,331 (21,371,339)
(Decrease) in accrued expenses and other liabilities (21,221) (82,579)
(Decrease) Increase in net liabilities of
Haven Federal (209,964,106) 23,534,887
------------- -------------
Net cash provided (used) by operating activities 3,819 (103,716)
Cash and cash equivalents, beginning of year 2,262 109,760
------------- -------------
Cash and cash equivalents, end of quarter $ 6,081 $ 6,044
============= =============
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See accompanying notes to consolidated financial statements
3
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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. Due to Admiral's intent to dispose of its wholly-owned subsidiary,
Haven Federal Savings and Loan Association ('Haven') at all
pertinent times prior to the confiscation of the Subsidiary by the
United States government, 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, 1990 and 1989.
4
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PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
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, in exchange for
100% of the outstanding shares of Haven in an approve "supervisory acquisition"
of an insolvent thrift institution. Admiral has had substantially no assets or
operations other than its investment in Haven.
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 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 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 include the right of the FSLIC to (1) 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.
5
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The failure of Admiral and Haven to liquidate the real estate in accordance with
the agreement with the FHLBB could cause 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 little or no value. As reported
earlier on Form 8-K dated March 8, 1990, Haven was confiscated on March 2, 1990.
At all times, Haven has been successful in meeting the real estate liquidation
requirements imposed by the Agreement, including any extensions of time granted
thereunder. However, Haven has 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 eliminates the need for the government (or
any of its instrumentalities) to live up to any express or implied agreements
which may be contrary to the subsequent legislation, without the necessity of
the retroactive return of Admiral's $13+ million of net capital invested in
Haven.
Under the Agreement, Admiral is 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.
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 has virtually no assets other than the stock of Haven, and has
no other means available to cure the default. To date, Admiral has not infused
the additional capital required. The net assets of Haven, including Admiral's
$13 million of contributed equity, were confiscated on March 2, 1990.
The Financial Institution Reform, Recovery and Enforcement Act of 1989
("FIRREA") was 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 treatment of intangible assets, 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 meet this
additional capital requirement.
Admiral and Haven have 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. There can
be no assurance that Admiral or Haven will be granted any form of relief or
assistance. Admiral received no notice of any hearings prior to the confiscation
of Haven.
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 very little corporate liquidity, no available capital
resources, and no immediately foreseeable prospects
6
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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, 1990 AND 1989
The primary change in the operations of the parent company has been a reduction
in expenses from $25,729 in the three months ended March 31, 1989 to $16,274 for
the comparable period in 1990, and the elimination of subsidiary operations. The
decrease in expenses was due mostly to the discontinuance of directors fees, and
the suspension of all employee compensation.
In 1989, Haven experienced a loss of $711,998. Now there is no Haven.
COMPARISON OF NINE MONTHS ENDED MARCH 31, 1990 AND 1989
The primary change in the operations of the parent company has been a reduction
in expenses from $99,173 in the nine months ended March 31, 1989 to $70,252 for
the comparable period in 1990, and the elimination of subsidiary operations. The
decrease in expenses was due mostly to the discontinuance of directors fees and
employee compensation during the quarter ended March 31, 1990.
In 1989, Haven experienced a loss of $2,088,550 for the nine months ended March
31, 1989. Now there is no Haven.
7
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PART II - OTHER INFORMATION
ITEM 6(B) - EXHIBITS AND REPORTS ON FORM 8-K
The following reports on Form 8-K were filed during the quarter ended March 31,
1989:
DATE FILED ITEM NUMBER DESCRIPTION OF EVENT
- ---------- ----------- --------------------
March 8, 1990 2 - Disposition Confiscation of Haven by United States
government
8
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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 4, 1996 By: /s/ WM. LEE POPHAM
------------------
Wm. Lee Popham, President
Date: September 4, 1996 By: /s/ LINDA E. BAKER
------------------
Linda E. Baker, Principal Financial
and Accounting Officer
9
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1990
<PERIOD-END> MAR-31-1990
<CASH> 6,081
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 71,709
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 71,709
<CURRENT-LIABILITIES> 23,055
<BONDS> 0
0
0
<COMMON> 10,987
<OTHER-SE> 37,667
<TOTAL-LIABILITY-AND-EQUITY> 71,709
<SALES> 0
<TOTAL-REVENUES> 2,335
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 70,252
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (67,917)
<INCOME-TAX> 0
<INCOME-CONTINUING> (67,917)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (67,917)
<EPS-PRIMARY> (0.006)
<EPS-DILUTED> (0.006)
</TABLE>
