10-Q 1 c25311_10q.txt FORM 10-Q 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 JUNE 30, 2002 Commission File No. 1-8249 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 --------------------------------------- -------------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) 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 filing requirements for the past 90 days. 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 JULY 17, 2002 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, 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 LINCORP HOLDINGS, INC. BALANCE SHEETS (IN THOUSANDS)

The accompanying notes are an integral part of these financial statements. 3 LINCORP HOLDINGS, INC. STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) UNAUDITED

The accompanying notes are an integral part of these financial statements. 4 LINCORP HOLDINGS, INC. STATEMENTS OF CASH FLOWS (IN THOUSANDS) UNAUDITED

The accompanying notes are an integral part of these financial statements. 5 LINCORP HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1 - LIQUIDITY AND GOING CONCERN At June 30, 2002, Lincorp Holdings, Inc. (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 otherwise accrue since July 1, 1998. For the six months ended June 30, 2002 and 2001, the total interest waived was approximately $5.4 million for each six month period. The Company's sources of funds during the period ended June 30, 2002 and to date, have been primarily from its previously existing cash balances and advances from a shareholder, Wilmington Capital Management Inc. ("Wilmington"). 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. 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. This loan was scheduled to mature May 19, 1998. To finance this loan, the Company borrowed funds from Wilmington. The Wilmington borrowing was in the form of a $602,000 discounted note (the "Wilmington 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. At 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. The Company is currently pursuing legal action against Republic Development Co. and the original appraisal firm. The ultimate outcome of this litigation cannot be determined at this time. The Wilmington 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. Wilmington has agreed to defer the collection of its note until the land is sold. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND GOING CONCERN At June 30, 2002, Lincorp Holdings, Inc. (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 otherwise accrue since July 1, 1998. For the six months ended June 30, 2002 and 2001, the total interest waived was approximately $5.4 million for each six month period. The Company's sources of funds during the period ended June 30, 2002 and to date, have been primarily from its previously existing cash balances and advances from its majority shareholder, Wilmington Capital Management Inc. 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. RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2001 For the six months ended June 30, 2002 and 2001 the Company had a net loss of $.1 million. FINANCIAL POSITION MATERIAL CHANGES SINCE DECEMBER 31, 2001 There was no significant change in the Company's financial position since December 31, 2001. 7 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 (a) At June 30, 2002 Lincorp Holdings, Inc. (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. (b) 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 (a) Not applicable. (b) None filed. 8 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: August 8, 2002 /s/ Jack R. Sauer ---------------------- Jack R. Sauer President 9

LINCORP HOLDINGS INC 10-Q