10-K 1 c23863_10k.txt FORM 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ---------------------- FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 2001 ------------------------------------------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from _______________________ to ______________________ Commission file number 1-8547 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) 3900 Park Ave., Suite 102 Edison, NJ 08820 --------------------------------- --------------------------------------- (Address of Principal Executive (Zip Code) Offices) Registrant's Telephone Number, Including Area Code: (732) 494-9455 -------------------------------------------------------------------------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Common Stock, par value $.01 per share NONE 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 requirements for the past 90 days. Yes X No ---- ---- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not considered herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The Company's common stock, which is traded over the counter, had no identifiable transactions during 2001 and through March 22, 2002. Based on the last identifiable common stock transaction, the aggregate market value of the Company's common stock held by non-affiliates of the registrant would be an indeterminate nominal amount. On March 22, 2002, there were 1,730,559 shares of registrant's common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE See Item 14 (c) for a listing of exhibits incorporated by reference. PART I ITEMS 1 AND 2. BUSINESS AND PROPERTIES RECENT DEVELOPMENTS On July 23, 2001, Lincorp Holdings, Inc.'s (the "Company") parent company, Unicorp Inc. ("Unicorp") sold 370,000 of the Company's common shares to two unrelated third parties. This transaction reduced Unicorp's common stock ownership in the Company to 916,886 shares or 52.98%. At the same time, Unicorp sold its rights and obligations to approximately $168.9 million of the Company's principal and accrued interest outstanding under several of its debt obligations to an unrelated party. Unicorp continues to hold approximately $7.1 million of the Company's debt obligations. At December 31, 2001, the Company had approximately $176.0 million of principal and accrued interest (the "Indebtedness") outstanding under its various debt obligations. 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. The Company's debt holders have waived substantially all interest owing by the Company on its Indebtedness to them that would have otherwise accrued for the twelve months ended December 31, 2001. The total interest waived was approximately $10.9 million. The Company's sources of funds during the year ended December 31, 2001, and to date, have been primarily from its previously existing cash balances and advances from Unicorp. Unless the Company's debt holders continue to defer in realizing on the pledged collateral, the Company will be unable to continue as a going concern. As of December 31, 2001, the Company's stockholders' deficit was $179.7 million. REAL ESTATE AND MORTGAGE LOAN TRANSACTIONS 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. This loan was scheduled to mature May 19, 1998. To finance this loan, the Company borrowed funds from Unicorp. The Unicorp borrowing was in the form of a $602,000 discounted note (the "Unicorp 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 in November 1999, the Company foreclosed on the Republic Mortgage Loan and took possession of the land. As of December 31, 2000, the Company reduced the carrying value of the land to $300,000 which it believes is the current fair market value of the land. The Unicorp Republic Note, which matured on May 19, 1998, was not repaid by the Company as its payment was dependent upon collecting the Republic Mortgage Loan. Unicorp has agreed to defer the collection of its note until the land is sold. -1- EMPLOYEES The Company presently has no compensated employees. ITEM 3. LEGAL PROCEEDINGS (A) Joseph Frazier ("Frazier") has instituted three lawsuits in which Lincorp Holdings, Inc., the Company's predecessors in interest, Greit Realty Trust Company and Unicorp America Corporation (collectively the "Company"), and other parties were named as defendants. All three actions arose from a series of real estate-related transactions which began in 1978 with respect to property in Bucks County, PA (the "Bucks Property"). More specifically, Frazier's partnership used a mortgage as a vehicle pursuant to which Greit paid the partnership $400,000 contemporaneously with entering into the agreement and gave the partnership a Promissory Note in the amount of $850,000 which further provided for nineteen annual payments of $10,000 each and a final installment of $660,000. In return, the partnership assigned its rights in an Agreement of Sale for the Bucks Property to Greit. The Company has not made any payment to the partnership since 1992 and has a $730,000 unsecured liability recorded in its financial statements. In 1993, Frazier instituted an action in the Court of Common Pleas of Philadelphia County asserting claims against the Company for fraud and breach of contract, I.E., the failure to make certain payments due and owing to Frazier and/or a general partnership in which he had an interest in connection with a mortgage granted to Frazier's partnership by Greit. In 1997, Frazier instituted a second action in the Court of Common Pleas of Philadelphia County alleging fraudulent conveyancing of the Bucks Property by five separate parties, including the Company. These actions have been consolidated with FRAZIER V. ESTATE OF WRIGHT, an action previously filed in the Court of Common Pleas of Philadelphia County by Frazier against his late partner and attorney, Bruce Wright, alleging legal malpractice. The two actions against the Company were dismissed for failure to join an indispensable party. The appellate court denied Frazier's appeal of that dismissal as premature until judgment is entered in the FRAZIER V. ESTATE OF WRIGHT case. In 1998, Frazier instituted an action in the Court of Common Pleas of Bucks County, PA asserting vague claims arising from the conveyance of the Bucks Property. Frazier has asserted claims against the Company and numerous other parties, including approximately 475 homeowners who currently reside on the Bucks Property. Frazier sought to eject the homeowners from their homes and regain possession of the Bucks Property. The Court has dismissed claims against the home-owners. Frazier still seeks damages of $84 million from the Company and from other defendants. The Company is vigorously defending the claims that have been asserted in the Bucks County action. (B) A tax assessment (the "Assessment") has been made by the Commonwealth of Massachusetts against a former wholly-owned subsidiary of the Company, which was dissolved in July 1990. The Massachusetts Department of Revenue (the "MDR") stated, in a notice dated February 15, 1992, that the amount due and owing was $1.2 million and it is believed that additional interest and/or penalties have been imposed with regard to the Assessment. On November 29, 1993, an Offer in Settlement (the "Offer") was forwarded to the MDR with respect to the Assessment which was rejected by the MDR on October 26, 1995, -2- and there have been no subsequent developments on this matter since that date. The ultimate outcome of the Assessment cannot be determined at this time. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable. -3- PART II ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded over the counter. During 2001 there were no identifiable stock transactions. On March 22, 2002, there were approximately 766 stockholders of record of the Company's Common Stock. There were no dividends paid on the Company's Common Stock in 2001 and 2000. ITEM 6. SELECTED FINANCIAL DATA

-4- ITEM 6. SELECTED FINANCIAL DATA, CONTINUED

-5- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND GOING CONCERN At December 31, 2001, the Company had approximately $176.0 million of principal and accrued interest (the "Indebtedness") outstanding under its various debt obligations. 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. See Note 5 to the Company's Financial Statements. During 2001, the Company's debt holders agreed to waive substantially all interest owing by the Company on its Indebtedness to them that would otherwise accrue for the twelve months ended December 31, 2001, which was approximately $10.9 million. The Company's sources of funds during the year ended December 31, 2001, and to date, have been primarily from its previously existing cash balances and advances from Unicorp. Unless the Company's debt holders continue to defer in realizing on the pledged collateral, the Company will be unable to continue as a going concern. As of December 31, 2001, the Company's stockholders' deficit was $179.7 million. RESULTS OF OPERATIONS 2001 COMPARED TO 2000 For the year ended December 31, 2001, the Company had a net loss of $.2 million compared to a net loss of $.4 million for the year ended December 31, 2000. 2000 COMPARED TO 1999 For the year ended December 31, 2000, the Company had a net loss of $0.4 million compared to a net loss of $0.3 million for the year ended December 31, 1999. FINANCIAL POSITION MATERIAL CHANGES SINCE DECEMBER 31, 2000 There were no significant changes in the Company's financial position since December 31, 2000. -6- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Financial Statements of the Company are set forth in Part IV on pages F-1 to F-10 and incorporated herein by reference. See "Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K" for a complete list of Financial Statements and Financial Statement Schedules. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. -7- PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS AND EXECUTIVE OFFICERS The term of each director is for one year and thereafter until his successor shall have been elected and qualified. The Company's executive officers are elected by, and serve at the discretion of the Board of Directors. The following table sets forth certain information with respect to each director and executive officer of the Company on March 22, 2002. Service with Name Age Position with Company Company from ---- --- --------------------- ------------ George S. Mann 69 Chairman of the Board (1) 1981 Ian G. Cockwell 54 Director (2) 1994 Ralph V. Marra 64 Director (1) 1994 Jack R. Sauer 49 President 1996 Gordon Flatt 39 Vice President and 1998 Chief Financial Officer (2) --------------- (1) Member of the Executive Committee. (2) Member of the Audit Committee. -8- George S. Mann has served as Chairman of the Board since 1981, and as President from 1989 through August, 1996. He served as Chairman of the Board of Unicorp from 1983 until June 1990, and served as a Director until July 1998. Ian G. Cockwell has been President of Westcliff Management Services Inc. since prior to 1988. He is currently the Chairman of Unicorp. He has been a Director of the Company since November 1994. Ralph V. Marra has been Corporate Controller for SSR Realty Advisors, Inc. since April 1998. Prior to that he was Director of Planning with New Plan Reality Inc. from December 1997. From October 1994 through December 1997 he was the Senior Managing Director of Grubb and Ellis Inc. Jack R. Sauer has been the President of the Company since August, 1996. He is also the Vice President and Director of the Catalyst Group, Inc. since February, 1990. Gordon Flatt was President of Unicorp until April 3, 2000. Prior to that he was the Chief Operating Officer of Unicorp since September 1997. He has been the Vice President and Chief Financial Officer of the Company since December 1998. -9- COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT Section 16(a) of the Exchange Act requires the Company's officers and directors and persons who own more than 10% of the Company's Common Stock to file initial reports of ownership and reports of changes of ownership (Forms 3, 4 and 5) of the Company's Common Stock with the Securities and Exchange Commission (the "SEC"). Officers, directors and beneficial owners of more than 10% of the Company's Common Stock are required by the SEC regulations to furnish the Company with copies of such forms that they file. To the Company's knowledge, based solely on the Company's review of the copies of such reports received by the Company, all Section 16(a) filing requirements applicable to its officers, directors and beneficial owners of more than 10% of the Company's Common Stock, were complied with. DIRECTORS REMUNERATION Directors of the Company receive a fee of $600 for actual attendance at each directors' or committee meeting. Where meetings of the Board or committees thereof are held by telephone conference, directors receive a fee of $150. Fees paid to all directors for attendance at the Board and committee meetings during the year ended December 31, 2001, totaled $1,350. DIRECTORS MEETING AND COMMITTEES The Board of Directors of the Company held 4 meetings during the year ended December 31, 2001. During the year, the directors attended between 50% and 100% of the meetings. The Board of Directors has a standing Audit Committee which represents the Board of Directors in its relations with the Company's independent accountants and oversees the Company's compliance with operating procedures and policies. This committee also approves the scope of the Company's financial statement examinations, monitors the adequacy of the Company's internal controls and reviews and monitors any other activity that the committee deems necessary or appropriate. The Company does not have a standing Compensation or Nominating Committee. The Executive Committee is authorized to act on behalf of the Board of Directors between Board meetings and to have such powers and duties which may lawfully be assigned to it under Delaware law. The only Committee which held a meeting during the year ended December 31, 2001, was the Audit Committee which held one meeting. -10- ITEM 11. EXECUTIVE COMPENSATION No executive officer of the Company, received any compensation for their services during any of the years ended December 31, 2001, 2000 or 1999. No compensation committee report or performance graph is included herein because none of the executive officers draws any salary from the Company. -11- ITEM 12. SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND OFFICERS AND OTHER PRINCIPAL HOLDERS OF THE COMPANY'S VOTING SECURITIES The table below sets forth information concerning the shares of the Common Stock beneficially owned by the individual directors, all directors and officers of the Company as a group without naming them and each person who is known by the Company to be the beneficial owner of more than five percent of the Common Stock as of March 22, 2002. The address of each of the directors is c/o Lincorp Holdings, Inc., 3900 Park Ave., Suite 102, Edison, NJ 08820. The address of Unicorp is 67 Yonge Street Suite 1101 Toronto, Ontario, Canada M5E1J8. Shares of Common Stock Beneficially Name of Owned as of Percent of Beneficial Owner February 15, 2002 Class ---------------- ----------------------- ---------- Unicorp Inc. (1) 916,886 52.98% Ian G. Cockwell (1) 916,886 52.98% All officers and directors 916,886 52.98% as a group (1) Coastal Global Equities, Inc. 300,000 17.34% ------------- (1) The stockholdings indicated for Mr. Cockwell are all owned directly by Unicorp. Mr. Cockwell disclaim beneficial ownership of all such shares. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See Items 1 and 2 - Recent Developments and Real Estate and Mortgage Loan Transactions. -12- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(2)All schedules have been omitted because they are not required or because the required information is contained in the financial statements or notes thereto. (b) Reports on Form 8-K None. (c) Exhibits

-13- 3.2 By-Laws of the Company as amended to date (incorporated by * reference to Exhibit 3.2 to the Company's Annual Report Form 10-K for the year ended December 31, 1986). 10.01 Subscription and Purchase Agreement dated December 31, 1987, * between the Company and Unicorp (incorporated by reference to Exhibit 2.2 to the Company's Current Report Form 8-K dated January 14, 1988). 10.02 Letter Agreement re: Line of Credit dated November 30, 1989, * between Unicorp and the Company (incorporated by reference to Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989). 10.03 Revolving Demand Note dated November 30, 1989, * from the Company to Unicorp (incorporated by reference to Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989). 10.04 Consulting Agreement dated as of February 13, 1990, between the * Company and Coscan Inc. (incorporated by reference to Exhibit 10.27 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989). 10.05 Letter Agreement re: Operating Deficit Loan Agreement * dated February 13, 1990, between the Company and Coscan Inc. (incorporated by reference to Exhibit 10.28 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989). 10.06 Form of Promissory Note from the Company to Coscan Inc. * (incorporated by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989).

-14- 10.07 Closing Agreement, dated as of July 23, 1990, among the * Company, Coscan Colorado Inc. ("CCI"), Coscan Colorado LHI Inc. and Coscan Commercial Limited Partnership, a California Limited Partnership ("Coscan California) (incorporated by reference to Exhibit 28.1 to the Company's Report on Form 8-K dated August 13, 1990). 10.08 Closing Agreement, dated as of July 23, 1990, among the * Company, Coscan California Commercial Inc. ("CCC"), Coscan California LHI Inc. and Coscan Commercial Limited Partnership, a California Limited Partnership ("Coscan California) (incorporated by reference to Exhibit 28.2 to the Company's Report on Form 8-K dated August 13, 1990). 10.09 Agreement of Limited Partnership of Coscan Commercial, * dated as of July 23, 1990 (incorporated by reference to Exhibit 28.3 to the Company's Report on Form 8-K dated August 13, 1990). 10.10 Agreement of Limited Partnership of Coscan Commercial, * dated as of July 23, 1990 (incorporated by reference to Exhibit 28.3 to the Company's Report on Form 8-K dated August 13, 1990). 10.11 Letter Agreement, dated as of July 23, 1990, among CCI, CCC, * the Company, Coscan Commercial and Coscan California, regarding loans by CCI and CCC (incorporated by reference to Exhibit 28.5 to the Company's Report on Form 8-K dated August 13, 1990). 10.12 $24,000,000 Secured Revolving Credit Agreement, dated as of * July 25, 1990 (the "Senior Credit Agreement"), among the Company, Hees International Bancorp Inc. ("Hees"), National Bank of Canada ("NBC") and NBC, as Agent (incorporated by reference to Exhibit 28.6 to the Company's Report on Form 8-K dated August 13, 1990).

-15- 10.13 Amended and Restated Credit Agreement, dated as of July 25, * 1990, between the Company and NBC (incorporated by reference to Exhibit 28.7 to the Company's Report on Form 8-K dated August 13, 1990). 10.14 Letter Agreement, dated July 25, 1990, between Unicorp and the * Company regarding the revolving line of credit from UCC to the Company (incorporated by reference to Exhibit 28.8 to the Company's Report on Form 8-K dated August 13, 1990). 10.15 Securities Pledge Agreement, dated as of July 25, 1990, * by the Company in favor of Unicorp (incorporated by reference to Exhibit 28.8 to the Company's Report on Form 8-K dated August 13, 1990). 10.16 Lincorp Pledge Agreement, dated as of July 25, 1990, by Lincorp * Inc. in favor of Unicorp (incorporated by reference to Exhibit 28.10 to the Company's Report on Form 8-K dated August 13, 1990). 10.17 Subsidiaries Pledge Agreement, dated as of July 25, 1990, * by Unicorp Delaware I, Inc., Unicorp Delaware II, Inc. and ITT Missouri Corp. in favor of Unicorp (incorporated by reference to Exhibit 28.11 to the Company's Report on Form 8-K dated August 13, 1990). 10.18 Security Agreement, dated as of July 25, 1990, by the * Company in favor of Unicorp (incorporated by reference to Exhibit 28.12 to the Company's Report on Form 8-K dated August 13, 1990). 10.19 Agreement Relating to the Lincoln Savings Bank, FSB dated * as of December 31, 1992, among the OTS, the Company and certain other parties (incorporated by reference to Exhibit A to the Company's Current Report on Form 8-K dated January 20, 1993). 10.20 Trust Agreement dated as of January 20, 1993, among the OTS, * the Company and certain other parties (incorporated by reference to Exhibit B to the Company's Current Report on Form 8-K dated January 20, 1993).

-16- 10.21 Consent Agreement dated March 4, 1994, among Unicorp, * Union Holdings, Inc., Lincorp, Inc., the Company, Hees International Bancorp, Inc., National Bank of Canada, Anthony M. Frank, as trustee, the Lincoln Savings Bank, FSB and Anchor Savings Bank FSB (incorporated by referenced to Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.22 Loan Modification Agreement dated as of September 28, 1995, by * and between Coscan, Inc. and the Company (incorporated by reference to Exhibit B to the Company's Report on Form 8-K dated September 28, 1995). 10.23 Loan Modification Agreement dated as of September 28, 1995, by * and between CCI and the Company (incorporated by reference to Exhibit C to the Company's Report on Form 8-K dated September 28, 1995.) 10.24 Agreement dated as of September 5, 1995,by and among CCI, the * Company, Coscan Limited Partner Corporation, CCC, Coscan California Limited Partner Corporation and Coscan, Inc. 22 Subsidiaries of the Company.

--------------------- * Incorporated by reference. -17- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 in Edison, New Jersey. Dated: March 28, 2002 LINCORP HOLDINGS, INC. By: /s/ JACK R. SAUER ------------------------------- Jack R. Sauer President -18- Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Title Date ---- ----- ---- /s/ GEORGE S. MANN Chairman of the March 28, 2002 ------------------------ Board of Directors George S. Mann (Principal Executive Officer) /s/ JACK SAUER President March 28, 2002 ------------------------ Jack Sauer /s/ IAN G. COCKWELL Director March 28, 2002 ------------------------ Ian G. Cockwell /s/ RALPH V. MARRA Director March 28, 2002 ------------------------ Ralph V. Marra -19- Independent Auditors' Report The Board of Directors and Stockholders Lincorp Holdings, Inc.: We have audited the accompanying balance sheets of Lincorp Holdings, Inc. ("Company") as of December 31, 2001 and 2000, and the related statements of operations, changes in stockholders' deficit, and cash flows for each of the years in the three year period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lincorp Holdings, Inc. as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company is in default on several of its credit facilities and, at December 31, 2001, has $97.1 million of principal indebtedness, and $78.3 million of accrued and unpaid interest. In addition, the Company has a net capital deficiency of $179.7 million as of December 31, 2001. These matters raise substantial doubt about the Company's ability to continue as a going concern. The Company's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. KPMG LLP New York, New York March 7, 2002 F-1 LINCORP HOLDINGS, INC. BALANCE SHEETS

The accompanying notes are an integral part of these financial statements. F-2 LINCORP HOLDINGS, INC. STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these financial statements. F-3 LINCORP HOLDINGS, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

The accompanying notes are an integral part of these financial statements. F-4 LINCORP HOLDINGS, INC. STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these financial statements. F-5 LINCORP HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1 - CHANGE IN OWNERSHIP AND DEBT HOLDERS On July 23, 2001, Lincorp Holdings, Inc.'s (the "Company") parent company, Unicorp Inc. ("Unicorp") sold 370,000 of the Company's common shares to two unrelated third parties. This transaction reduced Unicorp's common stock ownership in the Company to 916,886 shares or 52.98%. At the same, Unicorp sold its rights and obligations to approximately $168.9 million of the Company's principal and accrued interest outstanding under several of its debt obligations to an unrelated party. Unicorp continues to hold approximately $7.1 million of the Company's debt obligations. NOTE 2 - LIQUIDITY AND GOING CONCERN At December 31, 2001, the Company had approximately $176.0 million of principal and accrued interest (the "Indebtedness") outstanding under its various debt obligations. 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. During 1999, 2000 and 2001, the Company's debt holders agreed to waive substantially all interest owing by the Company on its Indebtedness to them that would otherwise accrue for these years. For each of the three years ended December 31, 2001 the interest waived was approximately $10.9 million per year. The Company's sources of funds during the year ended December 31, 2001, and to date, have been primarily from its previously existing cash balances and advances from Unicorp. Unless the Company's debt holders continues to defer realizing on the pledged collateral, the Company will be unable to continue as a going concern. NOTE 3 - 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. This loan was scheduled to mature May 19, 1998. To finance this loan, the Company borrowed funds from Unicorp. The Unicorp borrowing was in the form of a $602,000 discounted note (the "Unicorp Republic Note") which matured on May 19, 1998 in the amount of $620,000 and was secured by the Republic Mortgage Loan. The Republic Mortgage Loan was not repaid on May 19, 1998 and in November 1999, the Company foreclosed on the Republic Mortgage Loan and took possession of the land. As of December 31, 2000, the Company reduced the carrying value of the land by $311,000 to $300,000 which it believes is the current fair market value of the land. F-6 LINCORP HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS The Unicorp Republic Note, which matured on May 19, 1998, was not repaid by the Company as its payment was dependent upon collecting the Republic Mortgage Loan. Unicorp has agreed to defer the collection of its note until the land is sold. NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INCOME TAXES Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of change in tax rates is recognized in income in the period that includes the enactment date. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INVESTMENT IN REAL ESTATE The investment in real estate is carried at estimated fair market value. NOTE 5 - OTHER BORROWED FUNDS The Company's other borrowed funds are as follows:

F-7 LINCORP HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS (a) This debt facility, of which $2.5 million is held by Unicorp, expired in August 1991 and the Company has made no interest payments on this facility since its expiration. (b) This $65 million facility matured in August 1997, and calls for interest-only payments at a fixed rate of 11.4 %, payable semi-annually. The term loan includes convenants, among others, that require the maintenance of a minimum level of tangible net worth and limit aggregate levels of additional indebtedness. As a result of the losses incurred by the Company, it was not in compliance with the above covenants and it has not paid its semi-annual interest payment since August 1991. (c) In November 1989, the Company entered into an agreement that provided the Company with a line of credit in the aggregate amount of $30 million (amended to $25 million on July 25,1990) due on demand with an interest rate of prime plus 3.5% and a standby fee of one quarter of one percent of the unused portion of the commitment. (d) This note with Unicorp matures June 30, 2005, and has an interest rate of 6.38%. During 2001 and 2000, the weighted average amount of total principal debt outstanding was $97.2 million. There is no weighted average interest cost for 2001 and 2000 due to the debt holders waiver of interest discussed in Note 2. The maximum amount of borrowed principal funds outstanding at any one time during 2001 and 2000 was approximately $97.2 million. SFAS No. 107 "Disclosures about Fair Value of Financial Instruments" requires entities to disclose the fair value of on and off-balance sheet financial instruments. In view of the financial position of the Company at December 31, 2001, management has determined it is not practicable to estimate the fair value of debt and other borrowed funds. NOTE 6 - INCOME TAXES Set forth below is an analysis of the Company's refund for income taxes for the years ended December 31, 2001, 2000 and 1999.

F-8 LINCORP HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS A reconciliation of the total benefit for income taxes to amounts computed by applying the federal tax rate to the net loss is as follows:

The accompanying balance sheets reflect no deferred tax assets or liabilities as of December 31, 2001 and 2000. NOTE 7 - LEGAL PROCEEDINGS (A) Joseph Frazier ("Frazier") has instituted three lawsuits in which Lincorp Holdings, Inc., the Company's predecessors in interest, Greit Realty Trust Company and Unicorp America Corporation (collectively the "Company"), and other parties were named as defendants. All three actions arose from a series of real estate-related transactions which began in 1978 with respect to property in Bucks County, PA (the "Bucks Property"). More specifically, Frazier's partnership used a mortgage as a vehicle pursuant to which Greit paid the partnership $400,000 contemporaneously with entering into the agreement and gave the partnership a Promissory Note in the amount of $850,000 which further provided for nineteen annual payments of $10,000 each and a final installment of $660,000. In return, the partnership assigned its rights in an Agreement of Sale for the Bucks Property to Greit. The Company has not made any payment to the partnership since 1992 and has a $730,000 unsecured liability recorded in its financial statements. In 1993, Frazier instituted an action in the Court of Common Pleas of Philadelphia County asserting claims against the Company for fraud and breach of contract, I.E., the failure to make certain payments due and owing to Frazier and/or a general partnership in which he had an interest in connection with a mortgage granted to Frazier's partnership by Greit. In 1997, Frazier instituted a second action in the Court of Common Pleas of Philadelphia County alleging fraudulent conveyancing of the Bucks Property by five separate parties, including the Company. These actions have been consolidated with FRAZIER V. ESTATE OF WRIGHT, an action previously filed in the Court of Common Pleas of Philadelphia County by Frazier against his late partner and attorney, Bruce Wright, alleging legal malpractice. The two actions against the Company were dismissed for failure to join an indispensable party. The appellate court squashed F-9 LINCORP HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS Frazier's appeal of that dismissal as premature until judgment is entered in the FRAZIER V. ESTATE OF WRIGHT case. In 1998, Frazier instituted an action in the Court of Common Pleas of Bucks County, PA asserting vague claims arising from the conveyance of the Bucks Property. Frazier has asserted claims against the Company and numerous other parties, including approximately 475 homeowners who currently reside on the Bucks Property. Frazier sought to eject the homeowners from their homes and regain possession of the Bucks Property. The Court has dismissed claims against the home-owners. Frazier still seeks damages of $84 million from the Company and from other defendants. The Company is vigorously defending the claims that have been asserted in the Bucks County action. (B) A tax assessment (the "Assessment") has been made by the Commonwealth of Massachusetts against a former wholly-owned subsidiary of the Company, which was dissolved in July 1990. The Massachusetts Department of Revenue (the "MDR") stated, in a notice dated February 15, 1992, that the amount due and owing was $1.2 million and it is believed that additional interest and/or penalties have been imposed with regard to the Assessment. On November 29, 1993, an Offer in Settlement (the "Offer") was forwarded to the MDR with respect to the Assessment which was rejected by the MDR on October 26, 1995, and there have been no subsequent developments on this matter since that date. The ultimate outcome of the Assessment cannot be determined at this time. F-10 EXHIBIT INDEX EXHIBIT NO. DOCUMENT NAME 22 Subsidiaries of the Company

LINCORP HOLDINGS INC 10-K