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, 2003
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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
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Securities registered pursuant to Section 12(b) of the Act:
None
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 26, 2003 (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
26, 2003, was 10,985,046.
DOCUMENTS INCORPORATED BY REFERENCE
None
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
1
applied new capital 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.
3
FIRREA imposed, by no later 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.
On October 16, 2002, the Court granted the Admiral
Motion for Summary Judgment in part, by finding that the
United States Government liable for damages for breach of
contract, pending the taking of testimony regarding a
possible prior material breach by Admiral. A trial was
conducted during December, 2002, and testimony was taken
regarding the value of the assets originally contributed by
Admiral, and the Government's arguments regarding Admiral's
prior material breach were heard by the Court. On August 1,
2003, the Court held in favor of the United States
Government, stating that Admiral had committed a prior
material breach when the Company did not meet the minimum
capital requirement at March 31, 1989, despite the fact that
FIRREA was enacted (on August 9, 1989) prior to the end of
Admiral's "cure period" (October 16, 1989), thereby making
such a cure impossible to perform. Admiral management
strongly disagrees with the findings of the Court, and a
Notice of Appeal was filed in September, 2003. 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.
6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
Not Applicable.
7
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
---- --- ---- ---
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
2003:
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 0.0001 N/A
Fourth Quarter 0.01 0.001 0.0001 N/A
As of June 30, 2003, 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 selected consolidated financial
8
data for Admiral for the five years ended June 30, 2003. In
addition, selected financial data on the financial position
of Admiral is shown as of June 30, 2003, 2002, 2001, 2000,
and 1999. 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,
--------------------------------------------------
2003 2002 2001 2000 1999
------- ------ ------ ------ ------
(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,
--------------------------------------------------
2003 2002 2001 2000 1999
------- ------ ------ ------ ------
(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.
9
Comparison of Years Ended June 30, 2003 and 2002
- ------------------------------------------------
Admiral was inactive, and recorded no revenues or
expenses during either period.
Comparison of Years Ended June 30, 2002 and 2001
- ------------------------------------------------
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, 2003,
certain information with respect to the directors and
executive officers continuing in office until their
successors have been elected and qualified.
Officer
And/or
Director
Name Age Position Since
- -------------- --- -------- --------
Wm. Lee Popham 52 Chairman of the Board, 1987
Chief Executive Officer,
President and Chief
Financial Officer
10
Certain background information for the 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
Jeanne Baker Realty, Inc., Miami, Florida, since 2002. 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.
ITEM 11. EXECUTIVE COMPENSATION
Cash Compensation
- -----------------
The following table sets forth certain information with
respect to the Chief Executive Officer, and each other
executive officer of Admiral and/or Haven whose total cash
compensation exceeded $100,000 during the year ended June
30, 2003.
Name and Annual Compensation Awards
Principal Position Year Salary Bonus Other
------------------ ---- ------ ----- -----
Wm. Lee Popham 2003 $ --- --- ---
Chairman and President 2002 --- --- ---
Chief Executive Officer 2001 --- --- ---
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.
11
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.
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, 2003 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.
12
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
All directors and
executive officers as a
group (1 person) 1,923,684 17.51%
(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.
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.
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
Page
(a.)1. Admiral Financial Corp.:
Statement Regarding Sec. 210.3-11 of Regulation S-K F-1
Consolidated Balance Sheets as of June 30, 2003 and
2002 F-2
13
Consolidated Statement of Operations for the three
years ended June 30, 2003 F-3
Consolidated Statement of Stockholders' (Deficit)
Equity for the three years ended June 30, 2003 F-4
Consolidated Statement of Cash Flows for the three
years ended June 30, 2003 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.
(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) Financial Data Schedule attached.
(28) Not applicable.
(31) Certification of Chief Executive Officer and Chief
Financial Officer Pursuant to 18 U.S.C. Section
1350
(32) Certification of Chief Executive Officer and Chief
Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
(b.) Admiral filed no reports on Form 8-K during the fiscal
year ended June 30, 2003.
14
(c.) The exhibits required by Item 601 of Regulation S-K are
included in (a)(3) above.
15
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,
Date: September 29, 2003 Chief Executive Officer
And Chief Financial 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 29, 2003
Wm. Lee Popham Of Directors, Chief
Chairman and President Executive Officer,
Principal Executive Officer President, and
Principal Financial Officer Chief Financial Officer
16
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.
17
ADMIRAL FINANCIAL CORP.
AND SUBSIDIARY
Consolidated Balance Sheets
(Amounts in DOLLARS)
June 30, 2003 June 30, 2003
------------- -------------
(Unaudited) (Unaudited)
Assets
------
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-1
ADMIRAL FINANCIAL CORP.
AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
Years Ended June 30,
--------------------------------
2003 2002 2001
-------- -------- -------
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-2
ADMIRAL FINANCIAL CORP.
AND SUBSIDIARY
Consolidated Statement of Stockholders'
(Deficit) Equity
For the years ended June 30, 2003
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, 2002,
and 2003 10,985,046 $ 10,987 $ 680,710 $ (715,587)
========== ========= ========= ============
See accompanying notes to consolidated financial statements.
F-3
ADMIRAL FINANCIAL CORP. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Year Ended June 30,
--------------------------------
2003 2002 2001
-------- -------- -------
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-4
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, 2003 and
2002, 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-5
(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, 2003 and 2002, 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, 2002,
and 2003 $ 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, 2003,
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.
F-6
The net operating loss carryforwards expiring through
2002 were generated by the Association prior to its
acquisition 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, 2003 and 2002,
such purchased loss carryforwards remaining amounted to
approximately $0 and $0, 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.@
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."
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.
On October 16, 2002, the Court granted the Admiral
Motion for Summary Judgment in part, by finding that
the United States Government liable for damages for
breach of contract, pending the taking of testimony
regarding a possible prior material breach by Admiral.
A trial was conducted during December, 2002, and
testimony was taken regarding the value of the assets
originally contributed by Admiral, and the Government's
arguments regarding Admiral's prior material breach
were heard by the Court. On August 1, 2003, the Court
held in favor of the United States Government, stating
that Admiral had committed a prior material breach when
the Company did not meet the minimum capital
requirement at March 31, 1989, despite the fact that
FIRREA was enacted (on August 9, 1989) prior to the end
of Admiral's "cure period" (October 16, 1989), thereby
making such a cure impossible to perform.
Admiral filed a Notice of Appeal in September, 2003.
There can be no assurance that Admiral will ever 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-7