FIRSTFED FINANCIAL CORP - FORM 8-K - EX-99.1 - MONTHLY OPERATING REPORT - November 21, 2011

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UNITED STATES DEPARTMENT OF JUSTICE

OFFICE OF THE UNITED STATES TRUSTEE

CENTRAL DISTRICT OF CALIFORNIA

 

In Re:

      CHAPTER 11 (BUSINESS)   

    FirstFed Financial Corp

      
     Case Number:         2:10-bk-12927-ER   
     Operating Report Number:         22   

Debtor(s).

      For the Month Ending:         October 31, 2011   

I. CASH RECEIPTS AND DISBURSEMENTS

  

A. (GENERAL ACCOUNT*)

  

1. TOTAL RECEIPTS PER ALL PRIOR GENERAL ACCOUNT REPORTS

  

      228,570.55   

2. LESS: TOTAL DISBURSEMENTS PER ALL PRIOR GENERAL ACCOUNT REPORTS

  

      1,078,523.62   

3. BEGINNING BALANCE:

         2,995,807.47   

4. RECEIPTS DURING CURRENT PERIOD:

      

Accounts Receivable - Post-filing

      

Accounts Receivable - Pre-filing

      

General Sales

      

**Other

      

TOTAL RECEIPTS THIS PERIOD:

         0.00   

5. BALANCE:

         2,995,807.47   

6. LESS: TOTAL DISBURSEMENTS DURING CURRENT PERIOD

      

Transfers to Other DIP Accounts (from page 2)

      0.00      

Disbursements (from page 2)

      66,006.67      

TOTAL DISBURSEMENTS THIS PERIOD:***

  

      66,006.67   
     

 

 

  

7. ENDING BALANCE:

         2,929,800.80   
     

 

 

  

8. General Account Number(s):

      xxxxxxxxxx      
     Union Bank      

Depository Name & Location:

      445 South Figueroa      
     Los Angeles, CA 90071      

 

* All receipts must be deposited into the general account.
** Include receipts from the sale of any real or personal property out of the ordinary course of business; attach an exhibit specifying what was sold, to whom, terms, and date of Court Order or Report of Sale.
*** This amount should be the same as the total from page 2.

TOTAL DISBURSEMENTS FROM GENERAL ACCOUNT FOR CURRENT PERIOD

 

Date

mm/dd/yyyy

      Check
Number		   

Payee or DIP account

   

Purpose

    *Amount
Transfered		      **Amount
Disbursed		      Amount  
  10/5/2011       1139    Registrar & Transfer    Stock Registrar Fees Sep-11         1,384.04         1,384.04   
  10/5/2011       1140    Landau, Gottfried, & Berger    Legal-Bankruptcy Counsel         33,261.35         33,261.35   
  10/5/2011       1141    Carl W McKinzie    Professional Svcs. (Oct 2011)         16,000.00         16,000.00   
  10/7/2011       ACH    The Hartford    Insurance-Workman’s Comp         108.37         108.37   
  10/12/2011       1142    Chris Damore    Accounting Svcs Sep-11         255.00         255.00   
  10/14/2011       1143    Franchise Tax Board    2010 Tax Return         29.00         29.00   
  10/17/2011       1144    Manatt, Phelps & Phillips, LLP    Legal-Special Counsel         10,773.77         10,773.77   
  10/25/2011       n/a    Union Bank    Bank Fees         14.14         14.14   
  10/26/2011       1145    RR Donnelley    8k Filing         731.00         731.00   
  10/26/2011       1146    Riordon, Lewis & Haden    Rent Nov-11         1,500.00         1,500.00   
  10/26/2011       1147    Office of U.S. Trustee    Q3-2011 Bankruptcy Fees         1,950.00         1,950.00   
           

 

 

     

 

 

     

 

 

  
         TOTAL DISBURSEMENTS THIS PERIOD:      —           66,006.67         66,006.67   
           

 

 

     

 

 

     

 

 

  

 

* Fill in amounts in this column if they are TRANSFERS to another DIP account (e.g. Payroll or Tax); the “amount” column will be filled in for you.
** Fill in amounts in this column if they are DISBURSEMENTS to outside payees; the “amount” column will be filled in for you.

GENERAL ACCOUNT

BANK RECONCILIATION

 

Bank statement Date:    10/31/2011    Balance on Statement:    $2,931,750.80
Plus deposits in transit (a):         
     

Deposit Date

   

Deposit Amount

     
        
        
        
        

 

TOTAL DEPOSITS IN TRANSIT

      0.00
      

 

Less Outstanding Checks (a):

Check Number   

Check Date

   

Check
Amount

     

1147

    10/26/2011    1,950.00   
        

TOTAL OUTSTANDING CHECKS:

       1,950.00
        

 

Bank statement Adjustments:

         

Explanation of Adjustments-

         

ADJUSTED BANK BALANCE:

       $2,929,800.80

 

*       It is acceptable to replace this form with a similar form

      0.00   

**     Please attach a detailed explanation of any bank statement adjustment

   

I. CASH RECEIPTS AND DISBURSEMENTS

B. (PAYROLL ACCOUNT)

 

1. TOTAL RECEIPTS PER ALL PRIOR PAYROLL ACCOUNT REPORTS      0.00   
2. LESS: TOTAL DISBURSEMENTS PER ALL PRIOR PAYROLL ACCOUNT REPORTS      429,644.95   
3. BEGINNING BALANCE:      70,355.05   
     

 

 

  
4. RECEIPTS DURING CURRENT PERIOD:   
5. BALANCE:      70,355.05   
     

 

 

  
6. LESS: TOTAL DISBURSEMENTS DURING CURRENT PERIOD   
TOTAL DISBURSEMENTS THIS PERIOD:***      10,845.67   
     

 

 

  
7. ENDING BALANCE:      59,509.38   
  

 

 

  
8. PAYROLL Account Number(s):   
   xxxxxxxxxx   
Depository Name & Location:    Union Bank   
   445 South Figueroa   
   Los Angeles, CA 90071   

TOTAL DISBURSEMENTS FROM PAYROLL ACCOUNT FOR CURRENT PERIOD

 

Date mm/dd/yyyy

    Check
Number		    Payee    Purpose   Amount  
10/31/2011    EFT    Brian Argrett    Salary (net of payroll taxes) Nov-2011)     7,423.55   
          
10/31/2011    EFT    various governments    Payroll Taxes - Nov 2011     3,341.45   
          
10/31/2011    EFT    CBIZ    Payroll Processing Charge     80.67   
          
          
         Nov-2011 payroll paid on 10/31/11
by payroll processor		  
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          

 

 

  
TOTAL DISBURSEMENTS THIS PERIOD:     10,845.67   
          

 

 

  

PAYROLL ACCOUNT

BANK RECONCILIATION

 

Bank statement Date:

      10/31/2011         Balance on Statement:       $ 59,509.38   
  

 

 

        

 

 

  

Plus deposits in transit (a):

         
     Deposit Date         Deposit Amount      
        
        
        
        
        

TOTAL DEPOSITS IN TRANSIT

            0.00   
        

 

 

  

Less Outstanding Checks (a):

         
Check Number    Check Date      Check Amount         
        
        
        
        
        

TOTAL OUTSTANDING CHECKS:

            0.00   
        

 

 

  

Bank statement Adjustments:

         

Explanation of Adjustments-

         
        

 

 

  

ADJUSTED BANK BALANCE:

          $ 59,509.38   
        

 

 

  

*       It is acceptable to replace this form with a similar form

          

      0.00   

**     Please attach a detailed explanation of any bank statement adjustment

        

   

I. CASH RECEIPTS AND DISBURSEMENTS

C. (TAX ACCOUNT)

 

  
1. TOTAL RECEIPTS PER ALL PRIOR TAX ACCOUNT REPORTS      0.00   
2. LESS: TOTAL DISBURSEMENTS PER ALL PRIOR TAX ACCOUNT REPORTS      0.00   
3. BEGINNING BALANCE:      10,000.00   
     

 

 

  
4. RECEIPTS DURING CURRENT PERIOD:      
5. BALANCE:      10,000.00   
     

 

 

  
6. LESS: TOTAL DISBURSEMENTS DURING CURRENT PERIOD      
TOTAL DISBURSEMENTS THIS PERIOD:***      0.00   
     

 

 

  
7. ENDING BALANCE:      10,000.00   
     

 

 

  
8. TAX Account Number(s):    xxxxxxxxxx   
   Union Bank   
Depository Name & Location:    445 South Figueroa   
   Los Angeles, CA 90071   

TOTAL DISBURSEMENTS FROM TAX ACCOUNT FOR CURRENT PERIOD

 

Date

mm/dd/yyyy

    Check
Number		   

Payee

   

Purpose

   

Amount

      NONE       none
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           

 

TOTAL DISBURSEMENTS THIS PERIOD:

    0.00
           

 

TAX ACCOUNT

BANK RECONCILIATION

 

                                 Bank statement Date:

      10/31/2011         Balance on Statement:       $ 10,000.00   

Plus deposits in transit (a):

         
      Deposit Date      Deposit Amount         
        
        
        
        
        

TOTAL DEPOSITS IN TRANSIT

            0.00   
        

 

 

  

Less Outstanding Checks (a):

         

Check Number

    Check Date      Check Amount         
        
        
        
        
        

TOTAL OUTSTANDING CHECKS:

            0.00   
        

 

 

  

Bank statement Adjustments:

         

Explanation of Adjustments-

         
        

 

 

  

ADJUSTED BANK BALANCE:

          $ 10,000.00   
        

 

 

  

 

* It is acceptable to replace this form with a similar form
** Please attach a detailed explanation of any bank statement adjustment

I. D SUMMARY SCHEDULE OF CASH

 

ENDING BALANCES FOR THE PERIOD:

(Provide a copy of monthly account statements for each of the below)

     General Account:        2,929,800.80      
     Payroll Account:        59,509.38      
     Tax Account:        10,000.00      

*Other Accounts:

        

*Other Monies:

        
    

 

 

     
     **Petty Cash (see below):        0.00      
       

 

 

  

TOTAL CASH AVAILABLE:

           2,999,310.18   
       

 

 

  
       

Petty Cash Transactions:

        

Date

    Purpose     Amount         
     Opening balance        0.00      
TOTAL PETTY CASH TRANSACTIONS:           0.00   
ENDING PETTY CASH           0.00   

 

* Specify the Type of holding (e.g. CD, Savings Account, Investment Security), and the depository name, location & account #
** Attach Exhibit Itemizing all petty cash transactions

II. STATUS OF PAYMENTS TO SECURED CREDITORS, LESSORS

AND OTHER PARTIES TO EXECUTORY CONTRACTS

 

Creditor, Lessor, Etc.    Frequency of Payments
(Mo/Qtr)		    Amount of Payment      Post-Petition
payments not made
(Number)		      Total Due  

Regus Mgt, lessor*

    monthly    $ 0.00         0         0.00   

Premier Business Centers**

    monthly    $ 0.00         0         0.00   

Riordon, Lewis & Haden ***

    monthly    $ 1,500.00         0         0.00   
           
           
           
           

 

 

  
           TOTAL DUE:         0.00   
           

 

 

  

 

* FirstFed Financial Corp. vacated offices managed by Regus Mgt. on 06/22/10.
** FirstFed Financial Corp vacated offices managed by Premier Business Centers prior to 09/30/10.
*** FirstFed Financial Corp entered into a new lease agreement effective 10/01/10.

The offices are managed by Riordan, Lewis & Haden.

III. TAX LIABILITIES

FOR THE REPORTING PERIOD:

 

Gross Sales Subject to Sales Tax:

  

      0.00   
        

 

 

  

Total Wages Paid:

  

      10,000.00   
        

 

 

  
      Total Post -Petition
Amounts Owing		      Amount Delinquent      Date Delinquent
Amount Due		  

Federal Withholding*

         

State Withholding*

         

FICA- Employer’s Share*

         

FICA- Employee’s Share*

         

Federal Unemployment*

         

Sales and Use

         

Real Property

         

Other-Delaware Franchise**

      0.00         0.00      
  

 

 

     

 

 

     

TOTAL:

      0.00         0.00      
  

 

 

     

 

 

     

 

* Amounts paid through the payroll account. See “Total Disbursements from Payroll Account Current Period”
** It has been determined that prior year tax liabilities have been applied to tax receivable due from the State of Delaware.

IV. AGING OF ACCOUNTS PAYABLE AND RECEIVABLE

 

     *Accounts  Payable
Post-Petition		      Accounts Receivable  
        Pre-Petition      Post-
Petition		  

30 days or less

      2,002.03         0.00         0.00   

31 - 60 days

      0.00         0.00         0.00   

61 - 90 days

      0.00         0.00         0.00   

91 - 120 days

      0.00         0.00         0.00   

Over 120 days

      0.00         111,850.00         0.00   
  

 

 

     

 

 

     

 

 

  

TOTAL:

      2,002.03         111,850.00         0.00   
  

 

 

     

 

 

     

 

 

  
Delaware receivable of $124,600 has been adjusted down to $111,850 after acceptance of change in methodology from the authorized share method to the capital method (using gross assets)    

 

V. INSURANCE COVERAGE

 

Type

    Name of Carrier    Amount of
Coverage		      Policy Expiration
Date		      Premium Paid
Through (Date)

General Liability

    Hartford      1,000,000.00         1/11/2012       1/11/2012

Worker’s Compensation

    Hartford      1,000,000.00         1/11/2012       Paid with Payroll

Casualty

    None         

Vehicle

    None         

The Debtor also maintains directors and officers liability coverage purchased pre-petition for the 2009/2010 coverage year and an extended reporting period for the policies covering the 2008/2009 coverage year also purchased pre-petition. The extended reporting period expired on October 22, 2010.

VI. UNITED STATES TRUSTEE QUARTERLY FEES

(TOTAL PAYMENTS)

 

Quarterly Period

Ending (Date)

    Total
Disbursements		      Quarterly Fees      Date Paid      Amount Paid      Quarterly Fees
Still
Owing		  

31-Mar-2010

      134,229.09         975.00         18-Apr-2010         975.00         0.00   

30-Jun-2010

      157,114.39         1,625.00         20-Jul-2010         1,625.00         0.00   

30-Sep-2010

      89,586.25         975.00         12-Oct-2010         975.00         0.00   

31-Dec-2010

      333,124.03         4,875.00         10-Jan-2011         4,875.00         0.00   

31-Mar-2011

      378,812.38         4,875.00         27-Apr-2011         4,875.00         0.00   

30-Jun-2011

      173,135.33         1,625.00         25-Jul-2011         1,625.00         0.00   

30-Sep-2011

      229,206.02         1,950.00         26-Oct-2011         1,950.00         0.00   
                 0.00   
                 0.00   
        16,900.00            16,900.00         0.00   

 

* Post-Petition Accounts Payable SHOULD NOT include professionals’ fees and expenses which have been incurred but not yet awarded by the court. Post-Petition Accounts Payable SHOULD include professionals’ fees and expenses authorized by Court Order but which remain unpaid as of the close of the period report

VII SCHEDULE OF COMPENSATION PAID TO INSIDERS

 

Name of Insider

    Date of Order Authorizing
Compensation		   *Authorized Gross
Compensation		      Gross Compensation Paid
During the Month***		  

Babette Heimbuch

    **   $ 20,000/ month         0.00   

Vikas Arora

    **   $ 17,500/ month         0.00   

Brenda Battey

    ***   $ 20,000/month         0.00   

Brian Argrett

    ****   $ 10,000/month         10,000.00   
       
       
       

 

* Please indicate how compensation was identified in the order (e.g. $1,000/week, $2,500/month)
** Notice of Insider Compensation for Babette Heimbuch and Vikas Arora was filed and served on the UST and other necessary parties on January 7, 2010; no objections were filed.
*** Ms. Heimbuch and Mr. Arora no longer work for the Debtor. Ms. Battey works periodically for the Debtor at a rate of $150.00 per hour.
**** Notice of Insider Compensation for Brian Argrett was filed and served on the UST and other necessary parties on June 10, 2010; no objections were filed. Mr, Argrett was engaged by the Debtor upon the resignation of Ms. Heimbuch to provide Debtor with a second officer and to serve as its then Chief Executive Officer. Mr. Argrett currently serves as Corporate Secretary.

VIII. SCHEDULE OF OTHER AMOUNTS PAID TO INSIDERS

 

Name of Insider

    Date of Order Authorizing
Compensation		    Description    Amount Paid During the
Month

NONE

         
        
        
        

IX. PROFIT AND LOSS STATEMENT

(ACCRUAL BASIS ONLY)

 

     Current Month     Cumulative Post-Petition  

Sales/Revenue:

     

Gross Sales/Revenue

      —          —     

Less: Returns/Discounts

      —          —     

Net Sales/Revenue

      —          —     

Cost of Goods Sold:

     

Beginning Inventory at cost

     

Purchases

     

Less: Ending Inventory at cost

     

Cost of Goods Sold (COGS)

      —          —     

Gross Profit

      —          —     

Other Operating Income (Itemize)

     

Operating Expenses:

     

Payroll - Insiders

      10,000.00        396,153.85   

Payroll - Other Employees

      —          —     

Payroll Taxes

      765.00        31,809.56   

Other Taxes (Itemize)

      —          —     

Legal & Professional - Special Counsel *

      10,773.77        404,105.42   

Legal & Professional - Bankruptcy Counsel **

      33,261.35        610,700.69   

Legal & Professional - Administration ***

      16,000.00        264,000.00   

Legal & Professional - Accounting & Auditing ****

      255.00        205,043.37   

Legal & Professional - Other *****

      —          50,000.00   

Depreciation and Amortization

      24.00        528.00   

Rent Expense - Real Property

      1,500.00        32,757.79   

Lease Expense - Personal Property

      —          —     

Insurance

      312.37        3,024.23   

Real Property Taxes

      —          —     

Telephone and Utilities

      —          1,194.20   

IT Expenses

      —          371.00   

Travel and Entertainment (Itemize)

        —     

Parking & Mileage

      —          1,320.75   

Miscellaneous Operating Expenses (Itemize)

        —     

Stock registrar fees

      893.03        12,258.44   

Delaware & Calif filing fees & franchise tax

      9,654.00        14,614.27   

Indentured Trustee Expenses

      —          600.00   

SEC 8K fees

      731.00        19,444.00   

Relocation Expenses

      —          1,605.88   

CSC fee for Delaware representation

      —          356.00   

US Trustee fees accrued

      650.00        17,550.00   

Office Supplies

      —          347.86   

Postage & Courier

      —          203.28   

Document Management

      —          12,869.20   

Payroll Processing Fees

      55.67        1,656.54   

Banking Fees

      14.14        14.14   

Total Operating Expenses

      84,889.33        2,082,528.47   
  

 

 

    

 

 

  

Net Gain/(Loss) from Operations

      (84,889.33 )      (2,082,528.47 ) 
  

 

 

    

 

 

  

IX. PROFIT AND LOSS STATEMENT

(ACCRUAL BASIS ONLY)

 

     Current Month     Cumulative  Post-
Petition		  

Non-Operating Income:

     

Interest Income

     

Net Gain on Sale of Assets (Itemize)

     

Other (Itemize)

     

Total Non-Operating income

      —          —     

Non-Operating Expenses:

     

Interest Expense

     

Legal and Professional (Itemize)

     

Other (Itemize)

     

Total Non-Operating Expenses

      —          —     
  

 

 

    

 

 

  

NET INCOME/(LOSS)

      (84,889.33 )      (2,082,528.47 ) 
  

 

 

    

 

 

  

(Attach exhibit listing all itemizations required above)

Footnotes:

* Special counsel Manatt, Phelps & Phillips, LLP were paid pre-petition an initial retainer of $300,000. No Pre-petition fees and costs credited were used against the retainer. A $300,000 adjustment to Prepaid Legal Expense was made through Owners’ Equity. Costs and expenses incurred between the filing date and Mar-2011 were $304,574.92 exhausting the retainer. Pending court approval, $49,774.82 in fees for September and October 2011 have been incurred but not accrued. Additionally, $25,989.74 unpaid fees for March through August 2011 representing the 20% withheld amount per the Knudsen Order remain unpaid. See Footnote ** on Schedule X—Balance Sheet.
** Bankruptcy counsel Landau, Gottfried & Berger, LLP were paid pre-petition an initial retainer of $250,000. Pre-petition fees and costs credited against the retainer were $50,810.31 leaving a remaining retainer of $199,189.69 as of the filing date. A $199,189.69 adjustment to Prepaid Legal Expense was made through Owners’ Equity. Costs and fees from the filing date until August 2010 were $210,461.44 exhausting the remaining retainer. Pending court approval, $104,912.88 in fees for September and October 2011 have been incurred but not accrued. Additionally, $99,475.77 in unpaid fees for August 2010 through August 2011 representing the 20% withheld amount per the Knudsen Order remain unpaid. See footnote ** on Schedule X—Balance Sheet.
*** June and July Professional fees totaling $40,000 for Delta Corps, Inc., hiring Donald Pelgrim as Chief Administrative Officer, were paid after approval for payment by the Bankruptcy court. September 2010 through October 2011 professional fees of $280,000 for Carl McKinzie as Chief Executive Officer were incurred. $224,000 was paid after approval for payment by the Bankruptcy Court.
**** Accounting & Auditing Professional fees in the amount of $13,356 for Hutchinson & Bloodgood, LLP were incurred and unpaid pending approval of the fee statement from Bankruptcy court. Hutchinson & Bloodgood is no longer providing services to the Debtor.
**** The Debtor engaged Crowe Horwath, LLP for assistance with various tax matters including a 2008 federal tax audit and the filing of the 2009 tax returns. May through October 2010 costs and professional fees of $194,416.62 for Crowe Horwath’s engagement were paid afer court approval, Pending court approval $488,129.78 in costs and fees for November 2010 through October 2011 have been incurred but not accrued. Additionally, $48,450.90 in unpaid fees for May through October 2010 representing the 20% withheld amount per the Knudsen Order remain unpaid. See footnote ** on Schedule X—Balance Sheet.

IX. PROFIT AND LOSS STATEMENT

(ACCRUAL BASIS ONLY)

 

   Current Month    Cumulative Post-Petition

 

***** In June, the Debtor engaged the firm of Rus Miliband & Smith, LLP in investigate potential claims which may be brought by the Debtor. The initial engagement is on an hourly basis with a $50,000 cap. An application for employment has been submitted and approved by the bankruptcy court. This amount has been fully utliized and additional fees & expenses have been incurred.

X. BALANCE SHEET

(ACCRUAL BASIS ONLY)

 

      Current Month End        

ASSETS

     

Current Assets:

     

Unrestricted Cash

      2,999,310.18     

Restricted Cash

     

Accounts Receivable (Itemized, see below)*

      111,850.00     

Inventory

     

Notes Receivable

     

Prepaid Expenses (Rent)

      1,500.00     

Prepaid Expense-Legal Special Counsel

      —       

Prepaid Expense-Legal Bankruptcy Counsel

      —       

Prepaid Expense-Other Legal Counsel

      —       

Other (Prepaid Payroll)

      10,870.67     
    

 

 

  

Total Current Assets

        3,123,530.85   

Property, Plant, and Equipment

      875.00     

Accumulated Depreciation/Depletion

      528.00     

Net Property, Plant, and Equipment

        347.00   

Other Assets (Net of Amortization):

     

Due from Insiders

     

Other (Rent Deposits)

      2,912.00     

Total Other Assets

        2,912.00   

TOTAL ASSETS

        3,126,789.85   
    

 

 

  

LIABILITIES

     

Post-petition Liabilities:

     

Accounts Payable (Itemized, see below)**

      2,002.03     

Taxes Payable

     

Notes Payable

     

Professional fees

     

Secured Debt

     

Other (Itemize)

     

Total Post-petition Liabilities

        2,002.03   

Pre-petition Liabilities:

     

Secured Liabilities

     

Priority Liabilities

     

Unsecured Liabilities***

      159,617,187.50     

Other (Itemized, see below)****

      1,521.21     

Total Pre-petition Liabilities

        159,618,708.71   

TOTAL LIABILITIES

        159,620,710.74   
    

 

 

  

EQUITY:

     

1 Pre-petition Owners’ Equity (original amount)

      (155,177,680.00 )   

2 Direct Charges to Equity (Itemized, see below)*****

      766,287.58     

3 Post-petition Profit/(Loss)

      (2,082,528.47 )   
  

 

 

    

TOTAL EQUITY

        (156,493,920.89 ) 
    

 

 

  

TOTAL LIABILITIES & EQUITY

        3,126,789.85   
    

 

 

  

           (0.00)

* Itemization of Accounts Receivable:

     

Delaware Franchise Tax Refund Due (prior years)

      111,850.00     
  

 

 

    

Total

      111,850.00     

**Itemization of Post-Petition Liabilities:

     

Christopher Damore (Accounting Svcs-MOR Prep)

      255.00     

Registrar & Transfer

      893.03     

The Hartford

      204.00     

U.S. Quarterly Trustee Fees

      650.00     
  

 

 

    

subtotal

      2,002.03     

**Not included in the above table are the following incured and unpaid amount that are pending Bankruptcy Court approval:

     

Carl McKinzie (Chief Executive Officer)

      56,000.00     

Hutchinson & Bloodgood, LLP (accounting & auditing)

      13,356.00     

Crowe Horwath, LLP (accounting & audit)

      536,580.68     

Landau, Gottfried, & Berger, LLP

      204,388.65     

Manatt, Phelps & Philips, LLP

      75,764.56     
  

 

 

    

subtotal

      886,089.89     

***Itemization of Pre-Petition Unsecured Liabilities

     

Senior Debt Due 2015

      53,429,687.56     

Senior Debt Due 2016

      53,244,791.61     

Senior Debt Due 2017

      52,942,708.33     
  

 

 

    

Total

      159,617,187.50     

****Itemization of Pre-Petition Other Liabilities

     

Nixon Peabody

      318.74     

Registrar & Transfer

      983.52     

DF King & Co

      218.95     
  

 

 

    

Total

      1,521.21     

*****Itemization of Direct Charges to Equity

     

Reduction in Delaware tax

      157,600.00     

Refund from Auditors

      110,883.44     

Legal Retainer - Manatt, Phelps & Phillips, LLP

      300,000.00     

Legal Retainer - Landau, Gottfried & Berger , LLP

      199,189.69     

Change in SEC Refund

      135.53     

Bills received and accrued after BK filing (see above)

      (1,521.21 )   

Change in Opening Cash Balance

      0.04     

Change in New Oak receivable

      0.09     
  

 

 

    

Total

      766,287.58     
    
    

The prepaid retainer of $250,000 for Bankruptcy Counsel-Landau, Gottfried & Berger was adjusted downward $50,810.31 as the activity occurred pre-petition. As of the petition date, the prepaid legal retainer for Bankruptcy Counsel was $199,189.69.

XI. QUESTIONNAIRE

 

   No    Yes

1.      Has the debtor-in-possession made any payments on its pre-petition unsecured debt, except as have been authorized by the court? If “Yes”, explain below:

    x   
  

 

   

 

   No    Yes

2.      Has the debtor-in-possession during this reporting period provided compensation or remuneration to any officers, directors, principals, or other insiders without appropriate authorization? If “Yes”, explain below:

    x   
  

 

   

 

3.      State what progress was made during the reporting period toward filing a plan of reorganization:

      

The Debtor negotiated a consensual liquidating plan with Wilmington Trust Company as Trustee for by far the bulk of the Debtor’s debt. The FDIC, which is potentially another substantial creditor, did not object to that plan. The Debtor filed, and obtained approval of its disclosure statement, and conducted solicitation for the acceptance of that plan in accordance with the Court’s order approving the disclosure statement and the procedures to be used in soliciting plan acceptances. However, the plan confirmation process has been delayed while the Debtor seeks to continue negotiations towards a consensual plan with certain of its bondholders. Those efforts continue.

 

On October 14, 2011, the Debtor commenced an adversary proceeding against the Internal Revenue Service, objecting to the IRS’s claim in the case and seeking declaratory relief with respect to whether the Debtor is entitled to take a worthless stock deduction under its tax return (“Return”) for the tax year ended December 13, 2009. The IRS has, moreover, completed an audit of certain of the Debtor’s returns, with the result that the Debtor believes that the amount of the refund owed under its Return will be approximately $130, 998,000 plus interest from March 15, 2010. The Debtor anticipates that such refund will be paid once the IRS’s internal review procedures have been completed.

      

As noted in 4, below, the FDIC disputes the Debtor’s claim to ownership of the refund. The IRS has acknowledged that any refund will be paid into an escrow account established for that purpose by stipulation with the FDIC and order of the Court.

      

4.      Describe potential future developments which may have a significant impact on the case:

      

There is a potential refund of over $90 million relating to loss carrybacks from earlier tax years. The FDIC, in its capacity as Receiver for the Debtor’s bank subsidiary, has submitted a proof of claim which, among other things, claims that the FDIC is entitled to some or all of any such tax refund and may have other super priority claims. If the FDIC’s claim is successful, it will reduce or potentially eliminate any assets available for distribution to general unsecured creditors. The Debtor reserves its rights with respect to any such claims by the FDIC.

      

Debtor continues to investigate potential claims against third parties to determine potential for recovery. No Committee of Unsecured Creditors has been appointed in the case. However, the Debtor continues to work and communicate cooperatively with Wilmington Trust, its principal unsecured creditor, concerning all aspects of the case.

      

5.      Attach copies of all Orders granting relief from the automatic stay that were entered duing the reporting period.

      

None

      
   No    Yes

6.      Did you receive any exempt income this month, which is not set forth in the operating report? If “Yes”, please set forth the amounts and sources of the income below.

    x   
  

 

   

 

     

I, Carl W. McKinzie, Chief Executive Officer,

declare under penalty of perjury that I have fully read and understood the foregoing debtor-in-possession operating report and that the information contained herein is true and complete to the best of my knowledge.

      

/s/ Carl W. McKinzie                                                              Dated: 11/15/2011

      

Carl W. McKinzie

      

Chief Executive Officer