10-Q 1 c28912_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, 2003 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 21, 2003 LINCORP HOLDINGS, INC. INDEX PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets 1 Statements of Operations 2 Statemenst of Cash Flows 3 Notes to Financial Statements 4 Item 2. Management's Financial Discussion 6 Item 3. Quantitative and Qualitative Disclosures About Market Risk 7 Item 4. Evaluation of Disclosure Controls and Procedures 7 PART II. OTHER INFORMATION Item 1. Legal Proceedings 8 Item 3. Default upon senior securities 8 Item 6. Exhibits and Report on Form 8-K 8 SIGNATURES 9 CERTIFICATIONS 10 - 11 EXHIBITS 12 - 13 PART 1 - FINANCIAL INFORMATION LINCORP HOLDINGS, INC. BALANCE SHEETS (IN THOUSANDS) June 30, December 31, 2003 2002 ---------- ------------ (Unaudited) ASSETS Cash ................................................ $ 23 $ 5 Investment in real estate ........................... 300 300 ---------- ---------- $ 323 $ 305 ========== ========== LIABILITIES AND STOCKHOLDERS' DEFICIT Liabilities: Debt secured by real estate, including accrued interest ................. $ 620 $ 620 Other borrowed funds, including accrued interest 175,589 175,535 Other liabilities .............................. 4,118 4,018 ---------- ---------- 180,327 180,173 ---------- ---------- Commitments and contingent liabilities Stockholders' deficit: Preferred stock, Series A; 200 shares authorized; no shares issued and outstanding ............. -- -- Preferred stock, $.01 par value; 10,000 shares authorized; no shares issued and outstanding ............. -- -- Common stock, $.01 par value; 1,990,000 shares authorized; 1,730,559 shares issued and outstanding ...... 17 17 Capital contributed in excess of par value ...... 153,638 153,638 Accumulated deficit ............................. (333,659) (333,523) ---------- ---------- (180,004) (179,868) ---------- ---------- $ 323 $ 305 ========== ========== The accompanying notes are an integral part of these financial statements. 1 LINCORP HOLDINGS, INC. STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) UNAUDITED

The accompanying notes are an integral part of these financial statements. 2 LINCORP HOLDINGS, INC. STATEMENTS OF CASH FLOWS (IN THOUSANDS) UNAUDITED

The accompanying notes are an integral part of these financial statements. 3 LINCORP HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The balance sheet of Lincorp Holdings, Inc. (the "Company") as of June 30, 2003, and the related statements of operations and cash flows for the six-month periods ended June 30, 2003 and 2002, presented in this Form 10-Q are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consist only of normal recurring items. The balance sheet as of December 31, 2002 was derived from the Company's audited December 31, 2002 balance sheet. Interim results are not necessarily indicative of results for a full year. The financial statements and notes are presented as required by Form 10-Q, and do not contain certain information included in the Company's annual audited financial statements and notes. These financial statements should be read in conjunction with the annual audited financial statements of the Company and the notes thereto, together with management's discussion and analysis of financial condition and results of operations, contained in the Form 10-K for the fiscal year ended December 31, 2002. NOTE 2 - LIQUIDITY AND GOING CONCERN At June 30, 2003, the Company had approximately $176.2 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, 2003 and 2002, 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, 2003 and to date, have been primarily from its previously existing cash balances and advances from the two majority shareholders. 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. 4 LINCORP HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS 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 Wilmington Capital Management Inc. ("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. 5 PART I - FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S FINANCIAL DISCUSSION LIQUIDITY AND GOING CONCERN At June 30, 2003, the Company had approximately $176.2 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, 2003 and 2002, 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, 2003 and to date, have been primarily from its previously existing cash balances and advances from the two majority shareholders. 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, 2003 Compared to the Six Months Ended June 30, 2002 For the six months ended June 30, 2003 the Company had a net loss of $136,000 and for the six months ended June 30, 2002 the Company had a net loss of $100,000. FINANCIAL POSITION Material Changes Since December 31, 2002 There was no significant change in the Company's financial position since December 31, 2002. 6 PART I - FINANCIAL INFORMATION ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK No material changes have occurred related to the Company's policies, procedures, controls or risk profile. ITEM 4. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES The management of the Company including Mr. Jack R. Sauer as President and Chief Executive Officer and Mr. Gordon Flatt as Chief Financial Officer have evaluated the Company's disclosure controls and procedures. Under rules promulgated by the Securities and Exchange Commission (the "SEC"), disclosure controls and procedures are defined as those "controls or other procedures of an issuer that are designed to ensure that information required to be disclosured by the issuer in the reports filed or submitted by it under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms." Based on the evaluation of the Company's disclosure controls and procedures, it was determined that such controls and procedures were effective as of June 30, 2003, the date of the conclusion of the evaluation. Further, there were no significant changes in the internal controls or in other factors that could significantly affect these controls after June 30, 2003, the date of the conclusion of the evaluation of disclosure controls and procedures. 7 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There have been no material developments with respect to litigation. ITEM 3. DEFAULTS UPON SENIOR SECURITIES (a) At June 30, 2003 the Company had approximately $176.2 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. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K EXHIBITS 99(i) Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. 99(ii) Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. 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: July 28, 2003 /s/ JACK R. SAUER ---------------------- Jack R. Sauer President 9 CERTIFICATION I, Jack R. Sauer, certify that: 1. I have reviewed this "Quarterly Report" on Form 10-Q of Lincorp Holdings, Inc. for the quarter ended June 30, 2003. 2. Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared; a. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this Quarterly Report (the "Evaluation Date"); and c. presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this Quarterly Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: July 28, 2003 /s/ JACK R. SAUER ----------------- Jack R. Sauer President and Chief Executive Officer A signed original of this written statement required by Section 906 has been provided to Lincorp Holdings, Inc. and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. 10 CERTIFICATION I, Gordon Flatt, certify that: 1. I have reviewed this "Quarterly Report" on Form 10-Q of Lincorp Holdings, Inc. for the quarter ended June 30, 2003. 2. Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared; a. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this Quarterly Report (the "Evaluation Date"); and c. presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this Quarterly Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: July 28, 2003 /s/ GORDON FLATT ---------------- Gordon Flatt Chief Financial Officer A signed original of this written statement required by Section 906 has been provided to Lincorp Holdings, Inc. and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. 11

LINCORP HOLDINGS INC 10-Q