FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission File Number 0-17214
ADMIRAL FINANCIAL CORP.
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(Exact name of registrant as specified in its charter)
FLORIDA 59-2806414
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(State of incorporation) (I.R.S. Employer
Identification No.)
7101 Southwest 67 Avenue
South Miami, Florida 33143
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 305-669-6117
Securities registered pursuant to Section 12(b) of the Act:
None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
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(Title of Class)
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 and (2) has been
subject to such filing 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 contained 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 ___.
Aggregate market value of the voting stock held by non-
affiliates of the Registrant as of September 24, 2002 (based on the
last closing sale price as reported on the OTC Bulletin Board on such
date) was NO BID.
Number of shares of common stock outstanding as of September 24,
2001, was 10,985,046.
DOCUMENTS INCORPORATED BY REFERENCE
None
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ADMIRAL FINANCIAL CORP.
FORM 10-K
TABLE OF CONTENTS
Page
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Part I
Item 1. Business 1
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of
Security Holders 6
Part II
Item 5. Market for the Registrant's Common Stock
and Related Security Holder Matters 7
Item 6. Selected Consolidated Financial Data 7
Item 7. Management's Discussion and Analysis of
Consolidated Financial Condition and
Results of Operations 8
Item 8. Consolidated Financial Statements 9
Item 9. Disagreements on Accounting and Financial
Disclosure 9
Part III
Item 10. Directors and Executive Officers of the
Registrant 9
Item 11. Executive Compensation 10
Item 12. Security Ownership of Certain Beneficial
Owners and Management 12
Item 13. Certain Relationships and Related Transactions 13
Part IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 14
PART I
ITEM 1. BUSINESS.
ADMIRAL FINANCIAL CORP. ("ADMIRAL"), an inactive
corporation, is currently seeking to recapitalize the Company in
order to resume its prior activities with respect to the
acquisition and investment in interest-earning assets and
specialty real estate, as well as other new lines of business, as
yet unidentified. Admiral has been a plaintiff in a Winstar-type
action against the United States government in the United States
Court of Federal Claims since 1993, wherein the Company seeks
damages for the government's breach of a contract involving the
Supervisory Goodwill and Regulatory Capital granted in connection
with Admiral's previous acquisition of an insolvent savings and
loan association in 1988.
This discussion may contain statements regarding future
financial performance and results. The realization of outcomes
consistent with these forward-looking statements is subject to
numerous risks and uncertainties to the Company including, but
not limited to, the availability of equity capital and financing
sources, the availability of attractive acquisition opportunities
once such new equity capital and financing is secured (if at
all), the successful integration and profitable management of
acquired businesses, improvement of operating efficiencies, the
availability of working capital and financing for future
acquisitions, the Company's ability to grow internally through
expansion of services and customer bases without significant
increases in overhead, seasonality, cyclicality, and other risk
factors.
Admiral is presently conducting virtually no business
operation, other than its efforts to effect a merger, exchange of
capital stock, asset acquisition, recapitalization, or other
similar business combination (a "Recapitalization") with an
operating or development stage business which Admiral considers
to have significant growth potential. Admiral has neither
engaged in any operations nor generated any revenue since the
confiscation of the Company's entire asset base by the United
States government in 1990 (See Admiral's Winstar-type breach of
contract litigation regarding Admiral's former supervisory
goodwill position, discussed below). It receives no cash flow.
Admiral anticipates no capital infusions prior to effectuating a
Recapitalization. Until such time as Admiral effectuates a
Recapitalization, with the exception of certain other
professional fees and costs for such a transaction, Admiral
currently expects that it will incur minimal future operating
costs.
No officer or director of Admiral is paid any type of
compensation by Admiral and presently, there are no arrangements
or anticipated arrangements to pay any type of compensation to
any officer or director in the near future. Admiral expects that
it will meet its cash requirements until such time as a
Recapitalization occurs. However, in the event Admiral depletes
its present cash reserves, or in the event that Admiral
management ceases to perform it's duties on a non-compensatory
basis, Admiral may cease operations and a Recapitalization may
not occur. There are no agreements or understandings of any kind
with respect to any loans from officers or directors of Admiral
on the Company's behalf.
Admiral was formed in 1987 to acquire an insolvent savings
and loan association in a supervisory acquisition solely with
private investment funds, and without the benefit of any federal
assistance payments. Admiral acquired Haven Federal Savings and
Loan Association ("Haven") on June 16, 1988. Admiral had no
prior operating history.
Haven was a Federally chartered stock savings and loan
association that had been conducting its business in Winter
Haven, Florida, since 1964. In addition to its main office,
Haven had four branch offices in Polk County, which were located
in central Florida. A large portion of the population of Polk
County consists of retired persons on fixed incomes so that the
operations of the Association were dependent primarily on the
needs of this community and were relatively unaffected by the
prosperity of any of the businesses located in its primary market
area.
As a result of the enactment of The Financial Institution
Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), the
United States government retroactively applied new capital
1
standards to Haven, declared Haven to be insolvent and in default
of certain provisions of an agreement that the federal government
itself had disregarded, and confiscated the net assets of Haven
on March 2, 1990.
Admiral's sole significant asset was its investment in
Haven, and Admiral has been reduced to an inactive corporate
shell.
Admiral acquired Haven on June 16, 1988. The acquisition
occurred through a contributed property exchange, whereby Admiral
issued 8,000,000 new common shares in exchange for assets
(primarily real estate and a profitable business engaged in the
purchase and redemption of Florida tax sale certificates) having
fair market values of approximately $40 million, subject to
approximately $27 million of mortgages and other liabilities, and
less approximately $1 million of fees and expenses (necessary to
provide the proper forms and documentation in accordance with
government rules and regulations) during the ensuing sixteen
month application and negotiation process with federal regulatory
authorities, for a net fair value equity contribution of
approximately $12 million. Admiral then contributed virtually
all of these net assets and liabilities to the capital of Haven,
while simultaneously issuing an additional 987,000 new common
shares of Admiral to the former Haven shareholders, in exchange
for 100% of the outstanding shares of Haven in an approved
supervisory acquisition of an insolvent thrift institution.
Admiral has had substantially no assets, and no operations other
than its investment in Haven, and all active business operations
were carried on through Haven.
Prior to the consideration of any of the equity capital
contributed by Admiral in the exchange, the fair value of Haven's
liabilities assumed by Admiral, plus the cost of acquisition, was
determined to have exceeded the fair market value of Haven's
tangible assets acquired by approximately $14,902,000, of which
approximately $5,374,000 was attributable to the estimated
intangible value of Haven's deposit base and approximately
$548,000 to the estimated intangible value of Haven's mortgage
loan servicing portfolio. The balance of approximately
$8,980,000 was recorded under generally accepted accounting
principles (GAAP) by Haven as excess cost over net assets
acquired (Goodwill). The acquisition was accounted for as if it
occurred on June 30, 1988. The purchase method of accounting was
used to record the acquisition and, accordingly, all assets and
liabilities of Haven were adjusted to their estimated fair value
as of the acquisition date.
By way of a Resolution (the Agreement) dated April 26,
1988, the Federal Home Loan Bank Board (FHLBB) approved the
acquisition of control of Haven by Admiral. A condition of the
Agreement authorizing the acquisition required that Admiral
account for the acquisition of Haven under the purchase method of
accounting, whereby an asset in the nature of Supervisory
Goodwill would be calculated in accordance with the Regulatory
Accounting Principles (RAP) then in effect. Supervisory Goodwill
was realized, generally, to the extent of any previous negative
net worth of the acquired insolvent thrift, plus the excess of
the fair market values of the contributed assets over their
respective historical costs. Haven's Supervisory Goodwill of
approximately $20 million was, in accordance with the Agreement,
to be amortized against future earnings over a period of twenty-
five years.
Also in accordance with the Agreement, Haven was credited
with new capital under RAP accounting, equal to $11 million.
This amount was computed by taking into account the $13 million
fair market value of the net assets contributed by Admiral to
Haven, less the $1 million of fees and costs incurred, and less
an additional $1 million resulting from reduced valuations of
certain of the contributed assets for purposes of calculating
Haven's RAP equity by the appraisal division of the Federal Home
Loan Bank Board.
In accordance with GAAP, however, the contributed equity
values reported to Admiral's shareholders was the net historical
book value of $596,812, net of approximately $1.05 million of
out-of-pocket professional fees, expenses, and other transaction
costs associated with the supervisory acquisition, and not the
appraised net fair market equity values of $13 million.
As an integral part of Admiral's application to acquire
Haven, Admiral filed a Business Plan of proposed operations
calling for a significant growth of earning assets, and an
2
increase in low-cost deposits and other lower-cost liabilities to
refinance Haven's relatively high cost of funds. This growth was
to be generated both internally, and by acquisitions of other
branches and thrifts. The FHLBB Agreement approved Admiral's
Business Plan.
In exchange for the favorable accounting treatments
regarding the Supervisory Goodwill and the resulting calculation
of RAP equity, the Agreement imposed a number of conditions upon
Admiral. Specifically:
Admiral was required to record the supervisory acquisition
transaction utilizing the purchase method of accounting,
resulting in the recognition of Supervisory Goodwill of
approximately $20 million.
Admiral agreed that it would cause the regulatory capital
of Haven to be maintained at a level at or above the
quarterly minimum regulatory capital requirement and, if
necessary, infuse additional equity capital sufficient to
comply with this requirement.
Should Admiral default in this provision and be unable to
cure the default within 90 days, the FSLIC could exercise
any right or remedy available to it by law, equity, statute
or regulation. In addition to the rights that were
available to the FSLIC by virtue of the Agreement, whenever
any savings and loan association fails to meet its
regulatory capital requirement, the FHLBB and the FSLIC (or
their successors) could take such actions as they deem
appropriate to protect the Association, its depositors and
the FSLIC.
Admiral agreed that it would cause Haven to liquidate all
of the contributed real estate according to a schedule
specified by the FHLBB as follows: 37.5% of the market
value of the properties (as determined by the FHLBB's
District Appraiser) by March 31, 1989, an additional 12.5%
by June 30, 1989, and an additional 12.5% during each
succeeding quarter.
If Admiral had defaulted in this regard, it could have been
subject to forfeiture of 100% of its Haven stock. The
FSLIC would have the right to vote the Haven stock, remove
Haven's Board of Directors and/or dispose of the stock of
Haven.
Admiral acquired Haven solely with private equity capital.
There were no federal assistance payments, capital assistance
notes, or any other form of federal payments (which had been made
available to other purchasers of insolvent thrifts), involved in
the acquisition Agreement negotiations. The only elements of the
Agreement that Admiral specifically bargained for was the
allowance of Supervisory Goodwill, with its twenty-five year
amortization period, to compensate Admiral for its
recapitalization of an insolvent thrift with a $15 million
negative net worth on the supervisory acquisition date.
For the fiscal year ended June 30, 1989, Haven experienced
a Net Interest Income (similar to a Gross Profit for commercial
business operations) of $1.635 million, as opposed to a Net
Interest Expense of ($.163 million) for the fiscal year
immediately preceding Admiral's supervisory acquisition of Haven.
These results represented a significant turnaround for Haven
during the first year of post-supervisory acquisition operations.
Haven was successful in meeting the real estate liquidation
requirements imposed by the Agreement, including any extensions
of time granted thereunder. However, Haven experienced a $4.3
million erosion of its regulatory capital due to losses sustained
as a result of liquidating one single, large commercial property
included in the stated real estate under what can only be
described as "fire sale" conditions, on the last possible day
under the Agreement, in order to meet the time schedules mandated
by the FHLBB in the Agreement. This loss, together with other
operating losses and goodwill amortization expenses, caused Haven
to fail to meet its minimum capital requirement as of March 31,
1989, and at all times thereafter.
The Financial Institution Reform, Recovery and Enforcement
Act of 1989 ("FIRREA") was introduced on February 5, 1989, and
enacted into law on August 9, 1989. FIRREA imposed, by no later
3
than December 7, 1989, more stringent capital requirements upon
savings institutions than those previously in effect. These
capital requirements were applied to Haven on a retroactive
basis. Haven did not meet these new capital requirements on the
date of enactment, or on the earlier date of Haven's acquisition
by Admiral. Because of certain provisions of FIRREA relating
primarily to the disallowance of supervisory goodwill and certain
other intangible assets in the calculation of required net
capital, management estimates that Admiral would have been
required under the Agreement to infuse additional capital of
approximately $18 million by December 7, 1989. Had FIRREA been
in effect on the date of Haven's acquisition by Admiral, Haven
would have fallen short of the capital requirements by
approximately $14 million, after taking into account Admiral's
contribution of $11 million of new regulatory capital. Admiral
did not infuse any additional capital, and the net assets of
Haven were confiscated by the federal authorities on March 2,
1990.
With nearly $20 million of Supervisory Goodwill on the
books and only $11 million of contributed capital (thereby
resulting in a negative tangible net worth in excess of $8
million, and an immediate shortfall of qualifying capital in
excess of nearly $15 million) on the date of the supervisory
acquisition of Haven by Admiral, Haven did not meet these new
capital requirements imposed by FIRREA.
The FHLBB, in a supervisory letter dated March 31, 1989,
designated the Association as a "troubled institution" subject to
the requirements of the office of Regulatory Activities
Regulatory Bulletin 3a ("RB3a"). A troubled institution under
RB3a is subject to various growth restrictions concerning deposit
accounts and lending activities. Haven was directed to shrink
its asset and deposit base, thereby assuring future operating
losses.
As of March 31, 1989, Haven's regulatory capital fell
approximately $580,000 below its minimum regulatory capital
requirement, as the direct result of a $4.3 million real estate
loss recorded on March 31, 1989. As of June 30, 1989, Haven's
regulatory capital was approximately $2.3 million below the
minimum regulatory requirement. This regulatory capital
deficiency was a result of the Association's substantial
operating losses incurred as a result of the directive from FHLBB
supervisory personnel to shrink the assets and deposits of Haven,
and the sale of certain parcels of contributed real estate, under
circumstances that could only be described as a fire sale, at
amounts which approximated predecessor cost, rather than at the
substantially higher appraised values (which had previously been
reviewed and approved by the appropriate regulatory authorities).
In addition, due to Haven's inability to continue operations
without a significant capital infusion or other source of
recapitalization, the value of the Association's excess cost over
net assets acquired (Goodwill) was considered permanently
impaired and, accordingly, the entire balance was written off at
June 30, 1989.
Admiral was notified by the FHLBB on July 17, 1989, that
since the regulatory capital deficiency had not been corrected,
Admiral was in default of the Agreement and had 90 days (i.e.,
until October 18, 1989) to cure the default. Admiral management
was directed to resign any positions held at Haven, Haven
personnel were directed to cease communications with Admiral, and
to abandon any efforts to meet the contributed real estate
liquidation schedule contained in the Agreement. Admiral did not
infuse the additional capital required, and the net assets of
Haven were confiscated by the federal government on March 2,
1990.
Due to the regulatory capital requirements imposed by
FIRREA, even if Admiral were able to infuse the approximate $2.3
million June 30, 1989 regulatory capital deficiency and cure the
default, the cure would have only been temporary. Because of
certain provisions of FIRREA relating primarily to the treatment
of intangible assets, management estimates that Admiral would
have been required to infuse additional capital of approximately
$18 million by the December 7, 1989 date specified by the new
law. Had the FIRREA requirements been effective and fully phased
in at the time of the acquisition, Haven would have had a
tangible capital deficiency of approximately $14 million as of
the acquisition date; and to meet the capital requirements,
Admiral would have had to fund approximately $14 million, in
addition to the assets which were contributed with an appraised
equity value of approximately $11 million for regulatory capital
purposes.
4
At all times prior to the enactment of FIRREA, Haven had
met the contributed real estate sale schedule. On September 27,
1989, the Association received a letter from its Supervisory
Agent in which the Supervisory Agent agreed not to enforce its
rights upon a default in the real estate sale schedule until
after hearings were conducted regarding various applications
requesting administrative relief that were filed by Haven could
be conducted. No hearings were actually conducted, but the net
assets of Haven were confiscated by the federal government on
March 2, 1990.
Because of the effects of FIRREA, and the impact of certain
requirements imposed by the Federal Home Loan Bank Board
("FHLBB") and the Federal Savings and Loan insurance Corporation
("FSLIC") upon Admiral and upon the operations of Haven,
Admiral's management determined that the initial economic
decisions leading to the acquisition, recapitalization and
operation of Haven had been frustrated by FIRREA, and the only
remaining alternative available to Admiral was to sell or merge
Haven, and withdraw from the savings and loan business. Once
Haven was divested, Admiral would have no other operations.
In the meantime, Admiral and Haven applied, immediately
after the enactment of FIRREA, for relief from the requirements
of the Agreement. Haven also applied for regulatory relief from
sanctions imposed by FIRREA for failing to meet the minimum
regulatory capital requirements. Furthermore, Admiral and Haven
applied for federal assistance payments under a FIRREA relief
provision which management believed was intended to be applicable
to prior acquirers of insolvent thrift institutions in
supervisory acquisitions, where a significant amount of
"supervisory goodwill" is involved, and those acquirers were
being treated by the effects of the new legislation as if they
had been the persons who had caused the thrift to become
insolvent in the first place. Admiral management was never
notified of any action taken or hearing scheduled in connection
with the various forms of relief being sought.
Because of all of the circumstances enumerated above,
Admiral attempted to dispose of its Haven common stock and to
secure a release of its obligations under the Agreement either
through a merger, an acquisition or a tender of its Haven common
stock to the FHLBB or its successor in the event that the
Association's applications for specific relief were not approved.
The net assets of Haven were confiscated on March 2, 1990.
ITEM 2. PROPERTIES.
Admiral Financial Corp.'s principal office is located in
South Miami, Florida. The Company is currently being allowed to
share, free of charge, certain office facilities and office
equipment located at 7101 Southwest 67 Avenue, South Miami,
Florida 33143. Admiral does not have any lease obligations.
ITEM 3. LEGAL PROCEEDINGS.
On August 5, 1993, Admiral filed a Complaint against the
United States of America in the United States Court of Federal
Claims, arising in part out of contractual promises made to
Admiral by the United States' Government, acting through the
Federal Home Loan Bank Board ("FHLBB") and the Federal Savings
and Loan Insurance Corporation ("FSLIC") pursuant to their
statutory supervisory authority over federally insured savings
and loan institutions and savings banks (hereinafter referred to
a "thrifts" or "thrift institutions"), and in part out of takings
of property by the FHLBB and FSLIC in the course of exercising
that authority. In this action, Admiral seeks (1) a
declaration that the government's actions constitute a
5
repudiation and material breach of their contractual obligations
to Admiral and, thereby, effect a taking of Admiral's property
without just compensation and a deprivation of Admiral's property
without due process of law, in violation of the Fifth Amendment,
and (2) compensatory damages for the United States' breach of
contract, or (3) rescission of the contract and restitutionary
relief, or (4) compensation for the taking of Admiral's property,
or (5) damages for the deprivation of Plaintiffs' property
without due process of law.
This action was stayed by order of the Court dated
September 3, 1993, pending the en banc decision on rehearing of
the Court of Appeal for the Federal Circuit in Winstar Corp., et
al. v. United States, a pending action which Admiral management
believes to contain a similar fact pattern.
On August 30, 1995, the United States Court of Appeals for
the Federal Circuit, in an en banc decision, affirmed the summary
judgment decisions by the Court of Federal Claims on the
liability portion of the breach of contract claims against the
United States in Winstar, and in two other similar cases
(Statesman and Glendale) which had been consolidated for purposes
of the appeal. In its Winstar decisions, the Court of Federal
Claims found that an implied-in-fact contract existed between the
government and Winstar, and that the government breached this
contract when Congress enacted FIRREA. In Statesman and
Glendale, that Court found that the Plaintiffs had express
contracts with the government which were breached by the
enactment of FIRREA.
The federal government appealed the Winstar decisions to
the United States Supreme Court. On November 14, 1995, Admiral's
action (and all other similar actions) was stayed by order of the
Court, pending the outcome of that appeal.
On July 1, 1996, the United States Supreme Court concluded
in Winstar that the United States is liable for damages for
breach of contract, affirmed the summary judgment decisions in
Winstar, and remanded the cases to the Court of Federal Claims
for further hearings on the calculation of damages. The majority
of the Court found no reason to question the Federal Circuit's
conclusion that the Government had express contractual
obligations to permit respondents to use goodwill and capital
credits in computing their regulatory capital reserves. When the
law as to capital requirements changed, the Government was unable
to perform its promises and became liable for breach under
ordinary contract principles.
Subsequent to the United States Supreme Court decision in
Winstar, the stay on Admiral's litigation proceedings has been
lifted. Admiral's Motion for Summary Judgment, together with
several other motions, claims and counter-claims filed by all the
Parties to the litigation, were argued in two hearings at the
United States Court of Claims on December 18, 2001, and on
January 10, 2002. A written opinion of the Court is expected
during the current calendar year.
While the Supreme Court's ruling in U.S. v. Winstar Corp.,
et al., serves to support Admiral's legal claims in its pending
lawsuit against the federal government, it is not possible at
this time to predict what effect the Supreme Court's ruling, and
the subsequent rulings of a lower court concerning damages, will
have on the outcome of Admiral's lawsuit. Notwithstanding the
Supreme Court's ruling, there can be no assurance that Admiral
will be able to recover any funds arising out of its claim and,
if any recovery is made, the amount of such recovery.
Admiral is not a party to any other legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
6
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS.
Admiral's common stock currently trades on the Over-The-
Counter Market (often referred to as the Pink Sheets) under the
symbol ADFK.
On June 21, 1988, Admiral's common stock began trading on
the National Association of Securities Dealers Automatic
Quotation System (NASDAQ) under the symbol ADFC. In 1989,
Admiral was notified by NASDAQ that Admiral's net worth did not
meet the minimum standards for listing on the NASDAQ National
Market System and that Admiral's stock would begin trading in the
"over-the-counter" market after September 30, 1989, if the
minimum capital standards were not met.
From September 30, 1989 until October 1999, Admiral's
shares were listed in the over-the-counter market on the OTC
Bulletin Board. Admiral was notified in October 1999 that as an
inactive Company, trading on the OTC Bulletin Board would no
longer be allowed. There is currently no firm making an active
market in Admiral's stock. The Company was notified of a change
in the stock symbol from ADFC to ADFK in January 1999.
The following table sets forth, for the periods indicated,
the high and low sales prices as reported on the OTC Bulletin
Board.
Ask Bid
High Low High Low
2001:
First Quarter 0.01 0.001 0.001 N/A
Second Quarter 0.01 0.001 0.001 N/A
Third Quarter 0.01 0.001 0.001 N/A
Fourth Quarter 0.01 0.001 0.001 N/A
2002:
First Quarter 0.01 0.001 0.001 N/A
Second Quarter 0.01 0.001 0.001 N/A
Third Quarter 0.01 0.001 0.001 N/A
Fourth Quarter 0.01 0.001 0.001 N/A
As of June 30, 2002, there were 497 stockholders of record.
The Company has not paid cash dividends since inception.
The Company anticipates that for the foreseeable future any
earnings from future operations will be retained for use in its
business and no cash dividends will be paid on its common stock.
Declaration of dividends in the future will remain within the
discretion of the Company's Board of Directors, which will review
its dividend policy from time to time on the basis of the
company's financial condition, capital requirements, cash flow,
profitability, business outlook and other factors.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
Admiral was formed in 1987 for the purpose of effecting the
Contributed Property Exchange Offer and Merger with Haven and had
no prior operating history. Admiral's acquisition of Haven
occurred on June 16, 1988, and has been accounted for as if it
occurred on June 30, 1988. The following table sets forth
7
selected consolidated financial data for Admiral for the five
years ended June 30, 2001. In addition, selected financial data
on the financial position of Admiral is shown as of June 30,
2002, 2001, 2000, 1999, and 1998. Such information is qualified
in its entirety by the more detailed information set forth in the
financial statements and the notes thereto included elsewhere
herein.
Year ended June 30,
-----------------------------------------------
2002 2001 2000 1999 1998
-------- ------- ------- ------ ------
(Dollars in thousands except per share data)
Admiral income $ 0 0 0 0 0
Haven:
Interest income - - - - -
Interest expense - - - - -
-------- ------- ------- ------ ------
Net interest income
before provision
for loan losses
(expense) 0 0 0 0 0
Provision for loan losses - - - - -
-------- ------- ------- ------ ------
Net interest income
(expense) after
provision for
loan losses 0 0 0 0 0
Loss before extraordinary
item and cumulative effect
of change in accounting
principle 0 0 0 0 0
Extraordinary item - - - - -
Cumulative effect of change in
accounting principle - - - - -
Net earnings (loss) $ 0 0 0 0 0
======= ======= ======= ======= =======
Earnings (loss) per share $ 0.00 0.00 0.00 0.00 0.00
Year ended June 30,
-----------------------------------------------
2002 2001 2000 1999 1998
-------- ------- ------- ------ ------
(Dollars in thousands except per share data)
Net assets of Haven $ - - - - -
Total assets 0 0 0 0 0
Net liabilities of Haven - - - - -
Total liabilities 24 24 24 24 24
Total stockholders' equity
(deficit) (24) (24) (24) (24) (24)
Book value (deficit) per
common share (.00) (.00) (.00) (.00) (.00)
Number of offices of Admiral 1 1 1 1 1
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Results of Operations
- ---------------------
Admiral was formed in 1987 and had no operations until its
acquisition of Haven on June 16, 1988. Admiral's only
significant asset was its investment in Haven. Admiral has been
inactive since 1990.
8
Comparison of Years Ended June 30, 2002 and 2001
- ------------------------------------------------
Admiral was inactive, and recorded no revenues or expenses
during either period.
Comparison of Years Ended June 30, 2001 and 2000
- ------------------------------------------------
Admiral was inactive, and recorded no revenues or expenses
during either period.
Liquidity and Capital Resources
- -------------------------------
Admiral is currently inactive, and awaiting the ultimate
outcome and results of the Company's Winstar-type litigation
against the United States government for breach of contract.
There is no corporate liquidity, no available capital resources,
and no immediately foreseeable prospects for the future
improvement of Admiral's financial picture.
Admiral management intends to seek a new line of business,
as yet unidentified. In connection therewith, Admiral's
management believes that a restructuring of Admiral may be
necessary in order to raise capital for new operations, and any
such restructuring may have a substantial dilutive effect upon
Admiral's existing shareholders. Admiral has no ongoing
commitments or obligations other than with respect to its
obligations related to the acquisition and subsequent
confiscation of Haven.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and schedules listed in Item 14
hereof and included in this report on Pages F-1 through F-11 are
incorporated herein by reference.
ITEM 9. CHANGES IN, AND DISAGREEMENTS WITH, ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth, as of June 30, 2001,
certain information with respect to the directors and executive
officers continuing in office until their successors have been
elected and qualified.
9
Officer
And/or
Director
Name Age Position Since
- ---- --- -------- --------
Wm. Lee Popham 51 Chairman of the Board, 1987
Chief Executive Officer
and President
Linda E. Baker 63 Director, Vice President, 1987
Secretary, and Treasurer
Charles E. Fancher, Jr. 52 Director 1988
Certain background information for each director is set
forth below.
WM. LEE POPHAM has served as Chairman of the Board and
President of Admiral since its inception in 1987. He has also
been an independent corporate planning and acquisition consultant
since 1996, as well as the Sr. Vice President - Finance of Daniel
Electrical Contractors, Inc., Miami, Florida, (a wholly-owned
electrical contractor subsidiary of Integrated Electrical
Services, Inc., Houston, Texas, NYSE-IES) since January 1999, and
a Senior Sales Associate with Arvida Realty, Miami, Florida,
since 1997. He had also served as Chairman of the Board and
President of Caesar Creek Holdings, Inc. (CCH), Miami, Florida (a
financial acquisition company) since June 1985, and in various
other officer and director positions with several subsidiaries
and affiliates of CCH, until its liquidation in December 1989.
He has also served as a Director and Secretary-Treasurer of
Jeanne Baker, Inc., a real estate brokerage company located in
Dade County, Florida, since 1973, and was actively employed by
that Company from 1990 until its sale in 1996. He previously
served as President of First Atlantic Capital Corporation, Miami,
Florida (an investment company) from July 1983 to May 1985.
Prior thereto, he was a partner in the accounting firm of KPMG
Peat Marwick, LLP, Miami, Florida, where he practiced as a
Certified Public Accountant. He also served as a director of
Cruise America, Inc.(AMEX-RVR), Mesa, Arizona (a recreational
vehicle rental and sales corporation), which shares were traded
on the American Stock Exchange until its sale to Budget Group,
Inc.(NYSE-BD), from 1984 until 1991.
LINDA E. BAKER has served as Vice President, Secretary and
Treasurer of Admiral since its inception in April 1987. She has
also served as Vice President, Secretary and Treasurer of CCH,
Miami, Florida (a financial acquisition company) from June 1985
until its liquidation in December 1989, and in various other
officer and director positions with several subsidiaries and
affiliates of CCH. Ms. Baker has been employed as
Office/Personnel Manager at Trivest, Inc., Miami, Florida, an
investment holding company, since January 1990. She was Vice
President and Secretary of First Atlantic Capital Corporation,
Miami, Florida (an investment company) from October 1983 to June
1985. Prior thereto, she was a Manager with the accounting firm
of KPMG Peat Marwick, LLP, Miami, Florida. Ms. Baker is a
Certified Public Accountant.
CHARLES E. FANCHER, JR. has served as President and Chief
Operating Officer of Fancher Management Group, Inc., Miami,
Florida (a water, waste water, and liquid propane gas utility
consulting company), since April 1996. He also has served as Sr.
Vice President - Operations Administration of Daniel Electrical
Contractors, Inc., Miami, Florida, (a wholly-owned electrical
contractor subsidiary of Integrated Electrical Services, Inc.,
Houston, Texas, NYSE-IEE) since January 1999. He previously
served as President and Chief Operating Officer of General
Development Utilities, Inc., Miami, Florida (a water, waste
water, and liquid propane gas utility company) from June 1991
until March 1996, and Vice President of Atlantic Gulf Communities
Corporation (f/k/a General Development Corporation), in Miami,
Florida (a real estate development company) from January 1986
until March 1996. Mr. Fancher was also previously Senior Vice
President of General Development Utilities, Inc., from January
1986 until June 1991. Prior thereto, he served as a Vice
President of General Development Utilities, Inc. in the areas of
finance and operations.
ITEM 11. EXECUTIVE COMPENSATION
Cash Compensation
The following table sets forth certain information with
respect to the Chief Executive Officer, and each other executive
10
officer of Admiral and/or Haven whose total cash compensation
exceeded $100,000 during the year ended June 30, 2000.
Name and Annual Compensation Awards
Principal Position Year Salary Bonus Other
- ------------------ ---- -------- ------- -------
Wm. Lee Popham 2002 $ --- --- ---
Chairman and President 2001 --- --- ---
Chief Executive Officer 2000 --- --- ---
Incentive Bonus Plan
Admiral has a policy of paying discretionary bonuses to
eligible officers and employees based upon the individual's
performance. Under the plan, Admiral and its subsidiaries
distribute approximately 20% of Admiral's consolidated pre-tax
profits in the form of cash bonuses awarded by the Compensation
Committee of the Board of Directors, based on management's
recommendations and evaluations of performance. No bonuses have
been paid since Admiral's inception in 1987.
Retirement Plan
No Admiral employee is currently covered under any form of
retirement plan.
In prior years, Haven employees were covered under a non-
contributory trusteed pension plan, which was replaced by a
contributory Section 401(k) plan for Admiral and Haven employees
on March 31, 1989. Employees were permitted to contribute
amounts up to 6% of their annual salary to this plan, with the
employer providing matching contributions at a rate of 50% of
such employee's contributions (to a maximum of 3% of such
employee's salary), together with a discretionary contribution
amount not exceeding 1% of covered compensation.
The Section 401(k) contribution plan was suspended when the
net assets of Haven were confiscated, and all Admiral employees
were removed from their employment positions by the federal
regulators.
Stock Compensation Program
The Board of Directors and shareholders of Admiral adopted
the 1988 Stock Compensation Program (the "Program"), effective
December 19, 1988, for the benefit of directors, officers and
other employees of Admiral and its subsidiaries, including Haven,
who are deemed to be responsible for the future growth of
Admiral. Under the Program, Admiral has reserved 1,100,000
shares of authorized but unissued Common Stock for the future
issuance of option grants. Options granted under the Program can
be in the form of incentive options, compensatory options, stock
appreciation rights, performance shares, or any combination
thereof.
There have been no grants of any rights or options to any
director, officer or employee of Admiral or any affiliate. The
Company expects to distribute such option grants in the event of
any Recapitalization transaction.
Employee Stock Purchase Plan
The Board of Directors and shareholders of Admiral approved
the 1988 Employee Stock Purchase Program on December 19, 1988,
enabling the directors, officers and employees of Admiral and its
affiliates to acquire a proprietary interest in Admiral's Common
Stock through a payroll deduction program. This plan has been
suspended by Admiral management.
Employment Agreements
There are no employment agreements between Admiral and any
of Admiral's employees.
11
Indebtedness of Management
Admiral has made no loans to its directors, officers or
employees.
Compensation of Directors
While each Director is entitled to receive $500 plus
reasonable out-of-pocket expenses for attending each meeting,
each Director volunteered to suspend the receipt of all director
fees due to Admiral's current financial condition, beginning with
the meeting held during the third fiscal quarter of the fiscal
year ended June 30, 1989. This suspension of payments includes
additional compensation paid for attendance of committee
meetings.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information regarding the
beneficial ownership of Admiral's Common Stock as of June 30,
2002 by (i.) each person who is known by Admiral to own
beneficially 5% or more of Admiral's Common Stock, (ii.) each
Director and/or officer of the Company, and (iii.) all Directors
and executive officers of Admiral as a group. Except as
indicated below, each person has sole dispositive and voting
power with respect to the shares of Common Stock indicated.
Amount and Percent
Nature of of
Name and Address of Beneficial Common
Beneficial Owner Ownership Stock
- ------------------- ---------- -------
Wm. Lee Popham (l) 1,923,684 17.51%
7101 Southwest 67 Avenue
South Miami, Florida 33143
Ti-Aun Plantations, N.V. 889,007 8.09%
Suite 600
600 Brickell Avenue
Miami, Florida 33131
David C. Popham (2) 668,651 6.09%
3166 Commodore Plaza
Coconut Grove, Florida 33133
Linda E. Baker 150,120 1.37%
Suite 800
2665 South Bayshore Drive
Coconut Grove, Florida 33133
Charles E. Fancher, Jr. 12,000 *
2844 Chucunantah Road
Coconut Grove, Florida 33133
All directors and
executive officers as a group
(3 persons) 2,085,804 18.99%
* Less than one percent
(1) Includes 46,278 shares held in a testamentary trust for
members of Wm. Lee Popham's family, for which Mr. Popham
disclaims beneficial ownership. Does not include any
shares directly or beneficially owned by David C. Popham
(his brother) or Jeanne M. Baker (his mother).
(2) Includes 76,185 shares held jointly by David C. Popham and
Valerie P. Popham, his wife. Also includes 119,928 shares
held jointly by David C. Popham and Jeanne M. Baker, the
mother of David C. Popham and Wm. Lee Popham. Does not
include any shares beneficially owned by Wm. Lee Popham,
the brother of David C. Popham.
12
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Wm. Lee Popham, the Chairman and President of Admiral, was
previously also the Chairman, President and controlling
stockholder of CCH. Mr. Popham's mother, Jeanne M. Baker, was
also a director of CCH. While CCH did not receive any fees or
other compensation from Admiral or Haven during the fiscal year,
CCH did receive a consulting, management and organizational fee
in connection with the acquisition of Haven by Admiral of
$354,286, plus expense reimbursements payable in cash during
fiscal 1988. CCH and its affiliates, including Caesar Creek TSC,
Ltd. (CCTSC) were liquidated in December 1989.
Wm. Lee Popham, together with certain members of his family
(including David C. Popham and Jeanne M. Baker) and certain
affiliates including CCH and CCTSC, participated in a transaction
which capitalized Admiral in order to effect the acquisition of
Haven in a contributed property exchange offer. The total
historical cost of the property contributed by Wm. Lee Popham,
his family and affiliates in the exchange was $1,228,227, the
aggregate appraised value of such contributed property was
$12,586,553, and the net contribution value was $7,022,965. Mr.
Popham and his family and affiliates received an aggregate of
4,330,208 shares of Admiral Common Stock in the exchange, which
occurred on June 16, 1988.
Linda E. Baker, a director, officer and stockholder of
Admiral was also an officer, director and stockholder of CCH
prior to its liquidation, as described above. She is not related
to Jeanne M. Baker.
In accordance with the approved supervisory acquisition
Agreement, Haven was contractually obligated to pay Admiral a
management fee of $25,000 per quarter for financial and
operational advice, budgeting, business planning, marketing and
public relations. Haven was directed by FHLBB supervisory
personnel to cease in honoring this approved contractual
obligation, beginning with the January 1990 payment.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
ADMIRAL FINANCIAL CORP.
INDEX
(a.)1. Admiral Financial Corp.: Page
----
Statement Regarding Sec. 210.3-11 of Regulation S-K F-1
Consolidated Balance Sheets as of June 30, 2001 and 2000 F-2
Consolidated Statement of Operations for the three years
ended June 30, 2002 F-3
Consolidated Statement of Stockholders' (Deficit) Equity
for the three years ended June 30, 2002 F-4
Consolidated Statement of Cash Flows for the three years
ended June 30, 2002 F-5
Notes to Consolidated Financial Statements F-6
(a.)2. There are no financial statement schedules required to
be filed by Item 8 of this Form 10-K, or by paragraph
(d) of Item 14.
13
(a.)3. Exhibits
(3) The Articles of Incorporation and By-Laws of Admiral
are incorporated herein by reference to Exhibits 3.1
and 3.2 of Admiral's Form S-4 Registration Statement
filed with the Securities and Exchange Commission on
January 22, 1988.
(4) A specimen copy of Admiral's common stock certificate
is incorporated herein by reference to Exhibit 4.1 in
Amendment No. 1 of Admiral's Form S-4 Registration
Statement filed with the Securities and Exchange
Commission on April 5, 1988.
(9) Not applicable.
(10) Admiral hereby incorporates by reference the sections
entitled Appendix A - Agreement and Plan of
Reorganization, as amended, dated October 26, 1987,
and related Agreement and Plan of Merger, as amended
and Contributed Property Exchange Offer contained in
Haven's Prospectus/Proxy Statement filed pursuant to
Section 14(a) of the Securities Exchange Act of 1934
in connection with Haven's special meeting held on
June 3, 1988.
(11) Not applicable.
(12) Not applicable.
(13) Not applicable.
(16) Not applicable.
(18) Not applicable.
(21) Admiral's sole subsidiary has been Haven Federal
Savings and Loan Association. The assets and
liabilities of Haven were confiscated by the federal
government on March 2, 1990.
(22) Not applicable.
(23) Not applicable.
(24) Not applicable.
(27) Not applicable.
(28) Not applicable.
(99) Not applicable.
(b.) Admiral filed no reports on Form 8-K during the fiscal year
ended June 30, 2002.
(c.) The exhibits required by Item 601 of Regulation S-K are
included in (a)(3) above.
14
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,
hereunto duly authorized.
ADMIRAL FINANCIAL CORP.
By /s/ Wm. Lee Popham
-----------------------------
Wm. Lee Popham, President and
Date: September 24, 2002 Chief Executive Officer
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.
Signature Title Date
--------- ----- ----
/s/ Wm. Lee Popham Chairman of the Board September 24, 2002
Wm. Lee Popham Of Directors, Chief
Chairman and President Executive Officer, and
Principal Executive Officer President
/s/ Linda E. Baker Director, Vice President, September 24, 2002
Linda E. Baker Secretary And Treasurer
Principal Financial Officer
/s/ Charles E. Fancher, Jr. Director September 24, 2002
Charles E. Fancher, Jr.
FINANCIAL STATEMENTS OF AN INACTIVE REGISTRANT
Pursuant to Sec. 210.3-11 of Regulation S-X, Admiral
Financial Corp. qualifies as an inactive entity, meeting all of
the following conditions:
(A.) Gross receipts from all sources for the fiscal year are
not in excess of $100,000;
(B.) Admiral has not purchased or sold any of its own stock,
granted options therefor, or levied assessments upon
outstanding stock;
(C.) Expenditures for all purposes for the fiscal year are
not in excess of $100,000;
(D.) No material change in the business has occurred during
the fiscal year, including any bankruptcy,
reorganization, readjustment or succession or any
material acquisition or disposition of plants, mines,
mining equipment, mine rights or leases; and
(E.) No exchange upon which the shares are listed, or
governmental authority having jurisdiction, requires
the furnishing to it or the publication of audited
financial statements.
Accordingly, the attached financial statements of Admiral
Financial Corp. are unaudited.
F-1
ADMIRAL FINANCIAL CORP.
AND SUBSIDIARY
Consolidated Balance Sheets
Assets June 30, 2002 June 30, 2001
------ ------------- -------------
(Unaudited) (Unaudited)
Cash $ 0 $ 0
Prepaid expenses and other assets 0 0
Net assets of Haven Federal Savings
and Loan Association (note 2) 0 0
------------- -------------
Total assets $ 0 $ 0
============= =============
Liabilities and Stockholders' (Deficit) Equity
----------------------------------------------
Accrued expenses and other liabilities $ 23,890 $ 23,890
Net liabilities of Haven Federal
Savings and Loan Association (note 2) 0 0
------------- -------------
Total liabilities 23,890 23,890
Preferred stock, $.01 par value.
Authorized 6,000,000 shares, none
outstanding
Common stock, $.001 par value,
50,000,000 shares authorized
10,987,000 shares issued 10,987 10,987
Treasury stock, 1,954 and 1,954
shares, at cost 0 0
Additional paid-in capital 680,710 680,710
Deficit (715,587) (715,587)
------------- -------------
Total stockholders' (deficit)
equity (23,890) (23,890)
------------- -------------
Total liabilities and stockholders'
(deficit) equity $ 0 $ 0
============= =============
See accompanying notes to consolidated financial statements.
F-2
ADMIRAL FINANCIAL CORP.
AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
Years Ended June 30,
------------------------------------
2002 2001 2000
--------- -------- --------
REVENUES:
Interest Income $ 0 $ 0 $ 0
Other income - - -
--------- -------- --------
Total income 0 0 0
EXPENSES:
Employee Compensation - - -
Other Expense 0 0 0
--------- -------- --------
Total expense 0 0 0
Loss from discontinued
operation (note 2) 0 0 0
--------- -------- --------
Net loss $ 0 $ 0 $ 0
========= ======== ========
Loss per share $ 0.00 $ 0.00 $ 0.00
========= ======== ========
Dividend per share - - -
========= ======== ========
Weighted average number
of shares outstanding 10,985,046 10,985,046 10,985,046
========== ========== ==========
See accompanying notes to consolidated financial statements
F-3
ADMIRAL FINANCIAL CORP.
AND SUBSIDIARY
Consolidated Statement of Stockholders'
(Deficit) Equity
For the years ended June 30, 2002
Common Stock Additional Retained
Issued and Outstanding Paid-In Earnings
Shares Amount Capital (Deficit)
---------- --------- --------- ------------
Balance at June 30, 1988 10,985,046 $ 10,987 $ 680,710 $ -
Net loss for the year - - (13,813,316)
---------- --------- --------- ------------
Balance at June 30, 1989 10,985,046 10,987 680,710 (13,813,316)
Confiscation of Subsidiary
Net Assets and Liabilities - - 13,238,189
Net loss for the year - - (79,030)
---------- --------- --------- ------------
Balance at June 30, 1990 10,985,046 $ 10,987 $ 680,710 $ (654,157)
Net loss for the year (21,043)
---------- --------- --------- ------------
Balance at June 30, 1991 10,985,046 $ 10,987 $ 680,710 $ (675,200)
Net loss for the year (20,194)
---------- --------- --------- ------------
Balance at June 30, 1992 10,985,046 $ 10,987 $ 680,710 $ (695,394)
Net loss for the year (20,193)
---------- --------- --------- ------------
Balance at June 30, 1993, 1994,
1995, 1996, 1997 , 1998,
1999, 2000, 2001, and 2002 10,985,046 $ 10,987 $ 680,710 $ (715,587)
========== ========= ========= ============
See accompanying notes to consolidated financial statements.
F-4
ADMIRAL FINANCIAL CORP. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Year Ended June 30
------------------------------------------
2002 2001 2000
---------- ---------- ---------
Cash flows from operating activities:
Net loss $ 0 $ 0 $ 0
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Decrease in deficit arising from
confiscation of Haven Federal after
retroactive disallowance of agreed
supervisory goodwill and regulatory
capital
Decrease in prepaid expenses and other
assets
Decrease (increase) in net assets of
Haven Federal
(Decrease) in accrued expenses and other
liabilities
(Decrease) Increase in net liabilities
of Haven Federal
Amortization of organization expenses 0 0 0
---------- ---------- ---------
Net cash provided (used) by operating
activities 0 0 0
Cash and cash equivalents, beginning of year 0 0 0
---------- ---------- ---------
Cash and cash equivalents, end of year $ 0 $ 0 $ 0
========== ========== =========
See accompanying notes to consolidated financial statements
F-5
ADMIRAL FINANCIAL CORP.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(1) Organization and Regulatory Matters
-----------------------------------
Admiral Financial Corp. ("Admiral") is inactive.
The net assets of Admiral were seized by the federal
government on March 2, 1990.
(2) Summary of Significant Accounting Policies
------------------------------------------
(a) Basis of Presentation
---------------------
The accompanying balance sheets as of June 30, 2002 and
2001, include references to the accounts of Admiral and the
net assets and net liabilities of its wholly-owned
subsidiary, Haven Federal Savings and Loan Association.
All significant intercompany transactions have been
eliminated in consolidation.
(b) Office Properties and Equipment
-------------------------------
All office properties and equipment were sold when the
offices of the Company were closed during the fiscal year
ended June 30, 1990, and the proceeds from such sales are
reflected as "other income."
(c) Income Taxes
------------
Admiral and its wholly-owned subsidiary file a consolidated
tax return. Taxes are provided on all income and expense
items included in earnings, regardless of the period in
which such items are recognized for tax purposes, except
for income representing a permanent difference.
(d) Real Estate
-----------
Loss from real estate operations includes rental income,
operating expenses, interest expense on the related
mortgages payable, gains on sales, net and provision for
estimated losses to reflect subsequent declines in the net
realizable value below predecessor cost.
Provisions for estimated losses on real estate are charged
to earnings when, in the opinion of management, such losses
are probable. While management uses the best information
available to make evaluations, future adjustments to the
allowances may be necessary if economic conditions change
substantially from the assumptions used in making the
evaluations.
(e) Excess Cost Over Net Assets Acquired and Other
Intangibles
----------------------------------------------
The excess cost over net assets acquired was amortized by
the interest method over the estimated lives of the long-
term, interest-bearing assets acquired. The remaining
unamortized excess cost over net assets acquired was
written off at June 30, 1989 (see note 1).
F-6
(g) Cash and Cash Equivalents
-------------------------
For the purpose of the statement of cash flows, cash and
cash equivalents include the accounts of Admiral.
(3) Purchase Accounting
-------------------
At June 30, 1989, the remaining unamortized excess cost
over net assets acquired of $7,768,074 was written off and
charged to operations (see note 1).
(4) Income Taxes
------------
At June 30, 2002 and 2001, the Company has estimated net
operating loss carryforwards of approximately $10,447,000
and $10,447,000, respectively, for Federal income tax
purposes, and $10,095,000 and $10,095,000, respectively,
for state income tax purposes to offset future taxable
income.
These carryforwards were scheduled to expire in future
years as follows:
Year ending
June 30, Federal State
----------- ------------ ------------
1990 $ 2,348,000 $ 2,304,000
1991 2,984,000 2,941,000
1992 5,360,000 5,230,000
2001 1,549,000 1,537,000
2002 1,288,000 1,288,000
2004 7,468,000 7,128,000
------------ ------------
Net operating loss
carryforwards, June 30, 1989: 20,997,000 20,428,000
Less: 1990 Expirations (2,348,000) (2,304,000)
2005 79,000 79,000
------------ ------------
Net operating loss
carryforwards, June 30, 1990: 18,728,000 18,203,000
Less: 1991 Expirations (2,984,000) (2,941,000)
2006 21,000 21,000
------------ ------------
Net operating loss
carryforwards, June 30, 1991 15,765,000 15,283,000
Less: 1992 Expirations (5,360,000) (5,230,000)
2007 21,000 21,000
------------ ------------
Net operating loss
carryforwards, June 30, 1992 $ 10,426,000 $ 10,074,000
2008 21,000 21,000
------------ ------------
Net operating loss
carryforwards, June 30,
1993, 1994, 1995, 1996,
1997, 1998, 1999, 2000, 2001 and 2002 $ 10,447,000 $ 10,095,000
============ ============
The Company has not filed its federal or Florida income tax
returns for the fiscal years ended June 30, 2002, 2001,
2000, 1999, 1998, 1997, 1996, 1995, 1994, 1993, 1992, 1991
and 1990. While the confiscation of the assets and
liabilities of Haven may have resulted in a taxable event,
management believes that any taxable income resulting from
such confiscation of assets and liabilities should not
exceed the available net operating loss carryforwards.
The net operating loss carryforwards expiring through 2002
were generated by the Association prior to its acquisition
F-7
by Admiral Financial Corp. and have been carried over at
their original amounts for income tax purposes. For
financial statement purposes, these purchased loss
carryforwards will not be used to offset the future tax
expense of Admiral. They will be accounted for as an
adjustment to equity if and when a tax benefit is realized.
At June 30, 2001 and 2000, such purchased loss
carryforwards remaining amounted to approximately
$2,837,000 and $2,837,000, respectively.
(5) Disposal of the Association Assets and Liabilities
--------------------------------------------------
The net assets and net liabilities of Haven were
confiscated by the federal government on March 2, 1990.
(6) Commitments and Contingencies
-----------------------------
On August 5, 1993, Admiral filed a Complaint against the
United States of America in the United States Court of
Federal Claims, arising in part out of contractual promises
made to Admiral by the United States' Government, acting
through the Federal Home Loan Bank Board ("FHLBB") and the
Federal Savings and Loan Insurance Corporation ("FSLIC")
pursuant to their statutory supervisory authority over
federally insured savings and loan institutions and savings
banks (hereinafter referred to a "thrifts" or "thrift
institutions"), and in part out of takings of property by
the FHLBB and FSLIC in the course of exercising that
authority. In this action, Admiral seeks (1) a
declaration that the government's actions constitute a
repudiation and material breach of their contractual
obligations to Admiral and, thereby, effect a taking of
Admiral's property without just compensation and a
deprivation of Admiral's property without due process of
law, in violation of the Fifth Amendment, and (2)
compensatory damages for the United States' breach of
contract, or (3) rescission of the contract and
restitutionary relief, or (4) compensation for the taking
of Admiral's property, or (5) damages for the deprivation
of Plaintiffs' property without due process of law.@
This action was stayed by order of the Court dated
September 3, 1993, pending the en banc decision on
rehearing of the Court of Appeal for the Federal Circuit in
Winstar Corp., et al. v. United States, a pending action
which Admiral management believes to contain a similar fact
pattern.
On July 1, 1996, the United States Supreme Court concluded
in Winstar that the United States is liable for damages for
breach of contract, affirmed the summary judgment decisions
in Winstar, and remanded the cases to the Court of Federal
Claims for further hearings on the calculation of damages.
The majority of the Court found "no reason to question the
Federal Circuit's conclusion that the Government had
express contractual obligations to permit respondents to
use goodwill and capital credits in computing their
regulatory capital reserves. When the law as to capital
requirements changed, the Government was unable to perform
its promises and became liable for breach under ordinary
contract principles."
Subsequent to the United States Supreme Court decision
in Winstar, the stay on Admiral's litigation proceedings
has been lifted. Admiral's Motion for Summary Judgment,
together with several other motions, claims and counter-
claims filed by all the Parties to the litigation, were
argued in two hearings at the United States Court of Claims
on December 18, 2001, and on January 10, 2002. A written
opinion of the Court is expected during the current
calendar year.
While the Supreme Court's ruling in U.S. v. Winstar Corp.,
et al., serves to support Admiral's legal claims in its
pending lawsuit against the federal government, it is not
possible at this time to predict what effect the Supreme
Court's ruling, and the subsequent rulings of a lower court
concerning damages, will have on the outcome of Admiral's
lawsuit. Notwithstanding the Supreme Court's ruling, there
can be no assurance that Admiral will be able to recover
any funds arising out of its claim and, if any recovery is
made, the amount of such recovery.
Admiral is not a party to any other legal proceedings.
F-8