10-Q 1 c29865_10q.txt 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 SEPTEMBER 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 requirements for the past 90 days. Yes X No --- --- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12(b)-2 of the Exchange Act). Yes No X --- --- 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 OCTOBER 10, 2003 LINCORP HOLDINGS, INC. INDEX PART 1. FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements Balance Sheets 1 Statements of Operations 2 Statements of Cash Flows 3 Notes to Financial Statements 4 Item 2 Management's Financial Discussion 6 Item 3. Quantitative and Qualitative Disclosures 7 About Market Risk 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 SIGNATURE 9 EXHIBIT INDEX 10 PART 1 - FINANCIAL INFORMATION LINCORP HOLDINGS, INC. BALANCE SHEETS (IN THOUSANDS)

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 September 30, 2003, and the related statements of operations and cash flows for the nine-month periods ended September 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 September 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 nine months ended September 30, 2003 and 2002, the total interest waived was approximately $5.4 million for each nine month period. The Company's sources of funds during the period ended September 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 September 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 nine months ended September 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 September 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 NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2002 For the nine months ended September 30, 2003 the Company had a net loss of $199,000 and for the nine months ended September 30, 2002 the Company had a net loss of $156,000. 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. Gordon Flatt as President, Chief Executive Officer and 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 September 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 September 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 September 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 A. EXHIBITS -------- 31 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13A-14(a)/ 15D-14(a) of the Securities Exchange Act of 1934. 32 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. B. REPORTS ON 8-K -------------- NONE 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: November 13, 2003 /s/ GORDON FLATT --------------------------------------- Gordon Flatt President, Chief Executive Officer and Chief Financial Officer 9 EXHIBIT INDEX 31 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13A-14(a) / 15D-14(a) 32 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. 10

LINCORP HOLDINGS INC 10-Q