10-Q 1 c25959_10q.txt FORM 10Q 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, 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 Incorporation or Organization) Number) 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 OCTOBER 17, 2002 1 of 17 LINCORP HOLDINGS, INC. INDEX PAGE ---- PART I. FINANCIAL INFORMATION 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 5 Item 3. Quantitative and Qualitative Disclosures About Market Risk 6 Item 4. Evaluation of Disclosure Controls and Procedures 6 PART II. OTHER INFORMATION Item 1. Legal Proceedings 7 Item 3. Default upon senior securities 7 Item 6. Exhibits and Report on Form 8-K 7 SIGNATURES 8 CERTIFICATIONS 9 - 10 2 of 17 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. 3 of 17 PART 1 - FINANCIAL INFORMATION LINCORP HOLDINGS, INC. BALANCE SHEETS (IN THOUSANDS)

The accompanying notes are an integral part of these financial statements. 1 4 of 17 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 5 of 17 LINCORP HOLDINGS, INC. STATEMENTS OF CASH FLOWS (IN THOUSANDS) UNAUDITED

The accompanying notes are an integral part of these financial statements. 3 6 of 17 LINCORP HOLDINGS, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1 - LIQUIDITY AND GOING CONCERN At September 30, 2002, Lincorp Holdings, Inc. (the "Company") had approximately $176.1 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, 2002 and 2001, the total interest waived was approximately $8.1 million for each nine month period. The Company's sources of funds during the period ended September 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. 4 7 of 17 PART I - FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S FINANCIAL DISCUSSION LIQUIDITY AND GOING CONCERN At September 30, 2002, the Company had approximately $176.1 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, 2002 and 2001, the total interest waived was approximately $8.1 million for each six month period. The Company's sources of funds during the period ended September 30, 2002 and to date, have been primarily from its previously existing cash balances and advances from 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 Nine Months Ended September 30, 2002 Compared to the Nine Months Ended September 30, 2001 For the nine months ended September 30, 2002 and 2001 the Company had a net loss of $156,000 and $147,000, respectively. FINANCIAL POSITION Material Changes Since December 31, 2001 There was no significant change in the Company's financial position since December 31, 2001. 5 8 of 17 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 September 30, 2002, 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, 2002, the date of the conclusion of the evaluation of disclosure controls and procedures. 6 9 of 17 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, 2002 the Company had approximately $176.1 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. 7 10 of 17 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: October 24, 2002 /s/ Jack R. Sauer ---------------------- Jack R. Sauer President 8 11 of 17 CERTIFICATION I, Jack R. Sauer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Lincorp Holdings, Inc. 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; b. 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 9 12 of 17 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. OCTOBER 24, 2002 /s/ JACK R. SAUER ----------------------- Jack R. Sauer President and Chief Executive Officer 10 13 of 17 CERTIFICATION I, Gordon Flatt, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Lincorp Holdings, Inc. 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; b. 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 11 14 of 17 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: OCTOBER 24, 2002 /s/ GORDON FLATT ------------------------ Gordon Flatt Chief Financial Officer 12 15 of 17 Exhibit Index Exhibit Description ------- ----------- 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.

LINCORP HOLDINGS INC 10-Q