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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the fiscal year ended DECEMBER 31, 1996
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 No. 0-3689
NRG INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 23- 1682488
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 EAST MONROE STREET, SUITE 1600, CHICAGO, IL 60603
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 849-2990
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
None Not applicable
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.10 PER SHARE
(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 (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate 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. [X]
State the aggregate market value of the voting stock held by non affiliates of
the Registrant as of March 1, 1997: $58,926
CLASS OUTSTANDING AT MARCH 1, 1997
Common Stock, $.10 par value 255,311 shares
PART I
ITEM 1. DESCRIPTION OF BUSINESS
NRG is a majority-owned subsidiary of Telco Capital Corporation
("Telco"). In prior years all excess cash was loaned to Telco, payable on
demand, as more fully described in Note C of the Notes to Consolidated
Financial Statements.
Telco intends to develop a proposal whereby NRG would merge with a newly
formed subsidiary of TELCO and then all shares of NRG not owned by Telco would
be acquired by Telco as a result of the merger.
The Company's business activities (or investments) during the past five
years are as follows:
ENERGY-RELATED ACTIVITIES
(i) ENERGY GENERATION FROM SOLID WASTE. During 1975 and prior, the
Company developed a unique system for collecting energy from sanitary
landfills. In its present application the system involves drilling wells for
the extraction of methane from specially selected landfill sites. At present,
there are several plants in actual production. However, during the past five
years the Company's interest in such activities was limited to a net profits
participation in plants operated by GSF Energy, Inc. ("GSF"), a subsidiary of
Air Products and Chemicals, Inc. Under the net profits participation, the
Company was entitled to receive certain specified percentages of the net
profits realized by GSF plus a return of certain previously paid-in capital.
No payments were received in the last five years. In December, 1994, the
Company's remaining interest in this activity was purchased by GSF. As a part
of the transaction each party released the other from all future claims under
the participation agreement and NRG received $75,000.
Any revenues realized by the Company from the arrangement with GSF were
subject to the cash receipts participation rights of TELCO as described in
Note B of the Notes to Consolidated Financial Statements contained herein.
(ii) MINING ACTIVITIES. Until May, 1995, the Company held interests in
mining claims located in the State of Arizona, containing types of zeolite,
known as chabazite, a crystalline absorbent filtering substance determined to
have various gas filtration and other unique applications, including
agriculture feed, odor absorption and fertilizers. No revenues were received
from this activity during the last five years.
Although the Company has sizeable estimates of zeolite reserves -
approximately 132,000 tons of high grade chabazite and over 1,300,000 tons of
lower grade material - the Company lacks the financial resources to actively
pursue the market development of this material. The Company is also subject to
strong competition from both other grades of natural zeolite and synthetic
zeolites marketed by competitors of the Company. The mining claims are on
government-owned land and consist of 15 claims encompassing a total of 300
acres.
In May, 1995, the Company sold its mining rights in exchange for a future
royalty of $2.00 per ton of zeolite mined, however, there is no assurance that
the purchaser will be able to sell any significant amounts of zeolite. The
purchaser, who owns other mining rights in the same area, will absorb all
costs of maintaining the claims and will attempt to develop the market for
this type of zeolite. The Company retained ownership of approximately
20 acres of land in close proximity to the mining claims.
INVESTMENT IN AFFILIATED COMPANY
The Company owned 20,000 shares (representing approximately 1.4% of all
outstanding shares) of Wisconsin Real Estate Investment Trust ("WREIT").
Hickory Furniture Company, a majority owned subsidiary of TELCO, owned the
majority of the outstanding stock of WREIT. The Company's shares were
purchased in 1980 at a cost of $93,836. The Company used the equity method of
accounting for this investment which had a book value of $-0- as the Company's
share of WREIT losses had exceeded the original cost. WREIT was dissolved by
operation of law in April, 1996 with no distributions to shareholders.
EMPLOYEES
The Company has not had any employees since 1989.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company has no plants or other materially important physical
properties, except the property described below.
Reference is made to Item (b)(ii) regarding ownership of certain mining
rights which were sold in 1995 and land. Revenues generated from these assets
are subject to the cash receipts participation rights of TELCO.
ITEM 3. LEGAL PROCEEDINGS
There are no known legal proceedings to which the Company or any of its
subsidiaries are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
NRG's common shares are traded through brokers who have registered with
the National Association of Securities Dealers to make a market in these
shares. The following table sets forth for the periods indicated the range of
high and low bid prices as reported by the primary market maker, Mesirow
Financial. These quotations do not reflect retail mark-ups, mark-downs or
commissions and do not represent actual transactions. There is no significant
trading market for NRG common stock.
Bid Prices
LOW HIGH
All Quarters 1995 $1.50 $1.50
All Quarters 1996 $1.50 $1.50
3. Approximate number of shareholders
December 31, 1996 607
4. Dividends
There are no restrictions on the payment of dividends, but the Company has
never paid dividends and has no plans for paying dividends in the foreseeable
future.
5. Number of shares authorized and outstanding
A. Common Stock $.10 par value
- Authorized 15,000,000
- Outstanding (new shares) 255,311*
* In December 1983, the Company's Board of Directors approved a reverse stock
split effective as of the close of business on December 19, 1983 pursuant to
which one new share of common stock, par value $.10 per share, was issued for
every 20 shares of old common stock, par value $.005 per share, then
outstanding. No other change in the attributes of the common shares were made.
The Company undertook to repurchase fractional shares resulting from the
implementation of the reverse stock split at the rate of $.25 for each old
share. Through oversight, certain of the corporate actions necessary to
implement fully the reverse stock split have not yet been completed; however,
the Company intends to complete the action as soon as practicable. All
comments relating to common shares have been adjusted to reflect the full
implementation of the reverse stock split. Since December 19, 1983 no matters
have been submitted to the Company's stockholders for their approval, nor has
the Company taken any action requiring the submission of any matter to the
stockholders for approval.
After giving consideration to the Company's commitment to purchase all
fractional shares resulting from the reverse stock split, the Company has
255,311 new shares of stock outstanding. As of December 31, 1996, 305,619 new
shares (including 50,518 new shares held in treasury) were issued, which
represents a 100% conversion of old shares into new shares.
ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER
1996 1995 1994 1993 1992
Revenues $ -0- $ -0- $ -0- $ -0- -0-
Loss before
extraordinary credit (33,288) (32,149) (135,712) (66,469) (67,422)
Net loss (33,288) (32,149) (135,712) (66,469) (62,022)
Total Assets (a) 2,489 9,800 41,949 172,489 172,639
Per Common Share:
Loss before
extraordinary credit $(.13) $(.13) $(.53) $(.26) $(.26)
(a) See Note C of Notes to Consolidated Financial Statements
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OPERATING RESULTS
The Company reported a net loss of $(33,288) ($.13 per share) in 1996
compared to $(32,149) ($.13 per share) and $(135,712) ($.53 per share)
in 1995 and 1994, respectively. In 1994, the Company recorded a $75,000 loss
on the sale of the gas purification venture and a $20,000 writedown of
zeolite mining claims. In May, 1995, the Company sold its mining rights in
exchange for a future royalty of $2.00 per ton of zeolite mined, however,
there is no assurance that the purchaser will be able to sell any significant
amounts of zeolite. General and administrative expenses were $33,288,
$32,149 and $40,712 in 1996, 1995 and 1994 respectively. These amounts
include fees of $29,000, $29,000 and $30,000, respectively, charged by Telco
and Hickory for management services (accounting, shareholder services,
legal, etc.) provided.
LIQUIDITY AND CAPITAL RESOURCES
The Company has no cash generating activities. Substantially all of the
Company's cash surpluses were loaned in the 1980's to its major stockholder,
TELCO, in the form of a demand note carrying interest at the rate of 2% over
prime. This note had a balance of $1,523,441 as of December 31, 1996 and
December 31, 1995. Through January, 1994, administrative expenses of NRG were
paid for by Telco and charged against the note and management service fees
from Telco were also charged against the note. Interest income was not
received in cash during the last three years. No schedule for payment of the
amounts advanced has been established and no significant collections on the
amount due, including interest, are anticipated within the next year. Because
of the uncertainty as to the period for recovery that exists due to the
illiquidity of Telco, at December 31, 1991 the Company classified the loan
with stockholders' equity and effective January 1, 1992 suspended recognition
of interest in its financial statements with respect to the loan. The
receivable balance includes accrued interest receivable of $455,879. At
December 31, 1996, interest earned but not accrued was an additional $975,000.
Effective February, 1994, the administrative expenses and management
services were paid for/provided by Hickory. Amounts paid by NRG to Hickory
totalled $75,000 in 1994. This represented reimbursements to Hickory of
$35,540 for 1994 expenses and a prepayment of expenses in the amount of
$39,460. The $75,000 was received by NRG from the windup of the gas
purification venture. In 1995 and 1996, the management service fees of $29,000
for each year eliminated the prepaid balance. As of December 31, 1996, NRG owes
Hickory $25,875 for administrative expenses and management service fees.
The Company has current liabilities of $2,651, along with a liability to
Telco of $1,805, which is payable only from actual future cash receipts
realized by the Company from the sale of vacant land.
The Company has no plans for capital expenditures or borrowing funds.
TELCO intends to develop a proposal whereby NRG would merge with a newly
formed subsidiary of TELCO and then all shares of NRG not owned by Telco would
be acquired by Telco as a result of the merger.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to Item 8 is submitted on pages 15 to 24 of this report.
Pursuant to Regulation S-X Rule 3-11 of the Securities Exchange Act of 1934
NRG met the definition of an inactive entity in 1996, 1995 and 1994.
Therefore, its financial statements for these three years are unaudited.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
The following sets forth the names and ages of all directors and
executive officers of the registrant, all positions and offices with the
registrant held by each such person and the year in which each such person was
first elected a director of the registrant. Directors of the registrant are
elected to serve until their successors have been elected and qualified.
Year Positions and Offices
First with NRG Incorporated
Became and Business Experience
NAME AGE DIRECTOR DURING LAST FIVE YEARS
Clyde Wm. Engle... 54 1979 Chairman of the Board of
Directors and Chief Executive
Officer of NRG, Inc.
Chairman of the Board of Directors and Chief Executive Officer of TELCO;
Chairman of the Board and President of RDIS Corporation; General Partner
of Sierra Associates, itself the general partner of Sierra Capital Group
(an investment partnership); Chairman of the Board and Chief Executive
Officer of GSC Enterprises, Inc. (a one-bank holding company), and
Chairman of the Board of its subsidiary, Bank of Lincolnwood; Chairman,
Chief Executive Officer and Director of Hickory Furniture Company;
Director of Wellco Enterprises, Inc.(until December, 1995); Director
and Chairman of Alba-Waldensian, Inc.; Trustee and Chairman of Wisconsin
Real Estate Investment Trust (until April, 1996); Director and Chief
Executive Officer (since July 1, 1992) of Indiana Financial Investors,
Inc.; Chairman of the Board of Directors and Chief Executive
Officer of Sunstates Corporation; Director of Rocky Mountain Chocolate
Factory, Inc. (until September, 1995).
Lee N. Mortenson... 61 1987 Director of NRG, Inc.
President, Chief Operating Officer and a Director of Telco Capital
Corporation; Director of Hickory Furniture Company; President, Chief
Operating Officer and Director of Sunstates Corporation; Director of
Alba- Waldensian, Inc.; Director of Normandy Insurance Agency, Inc.;
Director (January, 1988 to October, 1992) of Sun Electric Corporation;
and Director of Rocky Mountain Chocolate Factory, Inc.
Phillip J. Robinson... 41 Treasurer and Secretary (since
July, 1993) and Controller
(from 1989 to July, 1993)
of NRG, Inc.
Treasurer, Vice President and Chief Financial Officer (since July, 1993)
and Controller (from 1989 to July, 1993) of Telco Capital Corporation;
Vice President and Treasurer (since July, 1993) and Controller (from 1989
to July, 1993) of Hickory Furniture Company ; Secretary and Treasurer
(from July, 1993 until April, 1996) and Controller (from 1989 to July,
1993) of Wisconsin Real Estate Investment Trust; Treasurer (since July,
1993) and Controller (from 1989 to July, 1993) of Indiana Financial
Investors, Inc.
(1) The following information is provided voluntarily by Mr. Engle although
it is not deemed material information as that term is used in Item 401 of
Regulation S-K. Mr. Engle is the subject of a Cease and Desist Order dated
October 7, 1993, issued by the Securities and Exchange Commission (the
Commission) requiring Mr. Engle and certain of his affiliated companies to
permanently cease and desist from committing any further violations of Section
16(a) of the Securities Exchange Act of 1934 as amended and the rules
promulgated thereunder, which requires monthly and other periodic reports of
transactions in certain securities. The Commission found some of the reports
of such transactions to have been filed delinquently although many of these
transactions were between affiliated entities or had been publicly reported in
other reports filed with the Commission or had been otherwise publicly
announced.
COMPLIANCE WITH SECTION 16(a) OF SECURITIES EXCHANGE ACT OF 1934
No Forms 3 and 4 have been filed and no Forms 5 have been furnished to
the Company during the fiscal year ended December 31, 1996. To the best of the
Company's knowledge, no person who was a director, officer or beneficial owner
of more than ten percent of any class of equity securities of the Company (a
reporting person) failed to file on a timely basis, reports required by
Section 16(a) of the Securities Exchange Act of 1934 during the most recent
fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
(a) No officer received compensation during 1994 - 1996.
(b) No director received compensation during 1994 - 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table shows the name, address, relationship to the Company,
and record and beneficial ownership, as of March 1, 1997, of each person known
to the Company to be either the record or beneficial owner of more than five
percent (5%) of its outstanding, $.10 par value, common stock:
Name, Address and Company Amount and Nature
Affiliation of Beneficial of Beneficial Percent of Class
OWNER OWNERSHIP OUTSTANDING (1)
Clyde Wm. Engle, Director (2)
and
RDIS Corporation and 216,027 84.62 (2)
TELCO (of record and
55 East Monroe St., Ste. 1600 beneficially)
Chicago, Illinois 60603
All officers and directors 216,027 84.62
as a group (three persons) (beneficially)
NOTE (1)
At March 1, 1997 the Company has 255,311 shares of new common stock
outstanding (excluding 50,518 shares held in treasury), after consideration of
the implementation of a 1 for 20 reverse stock split authorized by the
Company's Board of Directors on December 19, 1983, and subsequent purchase of
related fractional shares by the Company.
NOTE (2)
Mr. Clyde Wm. Engle, who is a director of the Company, is the Chairman of
the Board of Directors of RDIS Corporation ("RDIS") and is the beneficial
owner of in excess of 50% of the outstanding common stock of RDIS. RDIS
presently owns 100% of the outstanding common stock of TELCO. Mr. Engle is
Chairman of the Board and Chief Executive Officer of TELCO. As of March 1,
1997, TELCO owned beneficially 84.62% of the Company's common stock. RDIS has
made a loan to Mr. Engle on a non-preferential basis secured by a lien on the
shares of RDIS owned by Mr. Engle. A default under this loan could result in
foreclosure on the pledged stock and, potentially, a change in control of RDIS
and TELCO and hence a change in control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1979 TELCO and the Company entered into a certain cash
receipts participation arrangement. Under this arrangement, which was
principally to compromise certain indebtedness owed by the Company, TELCO will
receive 75% of the cash receipts realized by the Company from specific
enumerated areas of activity, until such time as the total amount realized by
TELCO is $992,853. Thereafter TELCO will receive 25% of any further cash
receipts realized by the Company from the indicated areas of activity. The
cumulative payments since 1979 have amounted to $785,060, which includes
$56,250 in 1994, upon the sale of the gas purification venture which was
offset against the note receivable from Telco.
See discussion of investment in affiliated company under Description of
Business. See discussion of balances due to and from affiliates in Managements
Discussion and Analysis and in Note C of the Notes to Consolidated Financial
Statements.
All transactions with affiliates are done on terms as fair as those that
would exist for transactions with non-affiliates.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT
(1) Financial Statements and (2) Financial Statement
Schedules - The response to this portion of Item 14 is
submitted on page 16 to 25 as a separate section of this
report.
(3) Exhibits - Exhibit 21, Subsidiaries of the Registrant
Exhibit 27, Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
(c) Exhibits - Exhibit 21, Subsidiaries of the Registrant Exhibit
27, Financial Data Schedule
(d) FINANCIAL STATEMENT SCHEDULES
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or the required information is included in the
Consolidated Financial Statements and notes thereto, and therefore have been
omitted.
SIGNATURES
Pursuant to the requirements of Section 13 of 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, thereunto duly authorized.
NRG INCORPORATED
By: /S/ CLYDE WM. ENGLE
Clyde Wm. Engle
Chairman, Chief Executive
Officer and Director
Date: March 27, 1997
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.
By: /S/ CLYDE WM. ENGLE
Clyde Wm. Engle
Chairman, Board of Directors
Date: March 27, 1997
By: /S/ LEE N. MORTENSON
Lee N. Mortenson
Director
Date: March 27, 1997
By: /S/ PHILLIP J. ROBINSON
Phillip J. Robinson
Treasurer, Secretary,
Chief Financial and Accounting
Officer
Date: March 27, 1997
Annual Report on Form 10-K
Item 8, Item 14(a)(1) and (2), and Item 14 (d)
List of Financial Statements and Financial Statement Schedules
Financial Statements
Year Ended December 31, 1996
NRG Incorporated
Chicago, Illinois
FORM 10-K ITEM 14(a)(1) AND (2)
NRG INCORPORATED
List of Financial Statements and Financial Statement Schedules
The following consolidated financial statements of the Registrant are included
in Item 8:
Consolidated Financial Statements of NRG
Incorporated:
Consolidated Balance Sheets -
December 31, 1996 and December 31, 1995 .....16
Consolidated Statements of Operations - Years Ended
December 31, 1996, 1995 and 1994 ......................17
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 1996, 1995 and 1994 ..........18
Consolidated Statements of Cash Flows - Years Ended
December 31, 1996, 1995 and 1994 ......................19
Notes to Consolidated Financial Statements ..............20
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or the required information is included in the
Consolidated Financial Statements and notes thereto, and therefore have been
omitted.
Pursuant to Regulation S-X Rule 3-11 of the Securities Exchange Act of 1934,
NRG has met the definition of an inactive entity in 1996, 1995 and 1994.
Therefore its 1996, 1995 and 1994 financial statements for those three years
are unaudited.
NRG INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
DECEMBER 31,
1996 1995
ASSETS
Cash $ 81 $ 81
Prepaid expenses - affiliate -0- 7,311
Vacant land 2,408 2,408
------ ------
Total Assets $ 2,489 $ 9,800
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued
expenses $ 2,651 $ 2,549
Payable to affiliates 25,875 -0-
Estimated amount payable to
stockholder 1,805 1,805
------- ------
30,331 4,354
======= ======
STOCKHOLDERS' EQUITY
Common stock, par value $.10 per share-
authorized 15,000,000 shares; issued,
including shares held in treasury,
305,829 shares 30,583 30,583
Additional paid-in capital 4,541,845 4,541,845
Retained earnings (deficit) (2,517,970) (2,484,682)
Treasury stock, at cost - 50,518 shares (102,980) (102,980)
---------- ----------
Total stockholders' equity 1,951,478 1,984,766
Less receivable from affiliate (1,979,320) (1,979,320)
---------- ----------
Total Liabilities and
Stockholders Equity $ 2,489 $ 9,800
========== ==========
See notes to consolidated financial statements
NRG INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
YEAR ENDED DECEMBER 31,
1996 1995 1994
REVENUES:
$ -- $ -- $ --
------- ------- -------
-- -- --
------- ------- -------
EXPENSES:
Loss from sale of gas
purification venture $ -- $ -- $ 75,000
Writedown of mining claims -- -- 20,000
General and administrative 33,288 32,149 40,712
--------- -------- --------
33,288 32,149 135,712
--------- -------- --------
NET LOSS (33,288) (32,149) (135,712)
========= ======== ========
PER SHARE INFORMATION
Net loss $(.13) $(.13) $(.53)
========= ======== ========
See notes to consolidated financial statements
NRG INCORPORATED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
Additional Retained
COMMON STOCK Paid-in Earnings TREASURY STOCK
SHARES AMOUNT CAPITAL (DEFICIT) SHARES AMOUNT
Balance at Jan 1, 1994 305,829 $30,583 $4,470,595 $(2,316,821) 50,518 $(102,980)
Net loss (135,712)
Increase in paid-in
capital - Note B 71,250
------- ------ --------- ---------- ------ --------
Balance at Dec 31 1994 305,829 $30,583 $4,541,845 $(2,452,533) 50,518 $(102,980)
Net loss (32,149)
------- ------ --------- ---------- ------ --------
Balance at Dec 31 1995 305,829 $30,583 $4,541,845 $(2,484,682) 50,518 $(102,980)
Net loss (33,288)
------- ------ --------- ---------- ------ --------
Balance at Dec 31 1996 305,829 $30,583 $4,541,845 $(2,517,970) 50,518 $(102,980)
======= ====== ========= ========== ====== ========
See notes to consolidated financial statements
NRG INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
YEAR ENDED DECEMBER 31,
1996 1995 1994
OPERATING ACTIVITIES:
Net loss $ (33,288) $ (32,149) $ (135,712)
Adjustments to reconcile net
income to net cash
used in operating activities:
Loss on sale of gas purification
venture -- -- 75,000
Writedown of mining claims -- -- 20,000
(Increase) Decrease in prepaid
expenses - affiliate 7,311 32,149 (39,460)
Increase(Decrease) in accounts payable
and accrued expenses 102 -- (453)
Increase in payable to affiliate 25,875 -- --
------- ------ -------
NET CASH USED IN
OPERATING ACTIVITIES -0- -0- (80,625)
INVESTING ACTIVITIES:
Proceeds from sale of gas
purification venture -- -- 75,000
Payments received
on stockholder loans -- -- 5,625
------- ------- -------
NET CASH PROVIDED BY
INVESTING ACTIVITIES -0- -0- 80,625
DECREASE IN CASH -0- -0- -0-
Cash at beginning of year 81 81 81
------- ------- -------
CASH AT END OF YEAR $ 81 $ 81 $ 81
======= ======= =======
See notes to consolidated financial statements
NRG INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PARENT COMPANY: The Company is a majority-owned subsidiary of Telco Capital
Corporation ("TELCO") and TELCO is a wholly owned subsidiary of RDIS
Corporation ("RDIS"). Hickory Furniture Company ("Hickory") is a majority
owned subsidiary of TELCO.
PRINCIPLES OF CONSOLIDATION: The accompanying financial statements include
the accounts of the Company and its subsidiaries. All material intercompany
balances have been eliminated.
CASH: Cash consists of cash in non-interest bearing and money market checking
accounts.
INCOME TAXES: Beginning with the year ended December 31, 1990, the Company is
included in the consolidated federal income tax return of RDIS as the result
of Telco becoming the owner of greater than 80% of the Company's common stock
in late 1989. Prior to 1990, the Company filed a separate federal income tax
return. The Company continued to calculate its income tax provision as if it
filed a separate return.
EARNINGS PER SHARE: Earnings per share is based on the weighted average
number of common shares outstanding during the year. There are no common stock
equivalents.
NOTE B - ESTIMATED AMOUNT PAYABLE TO STOCKHOLDER
In 1979, the Company entered into an agreement with TELCO whereby TELCO was
granted a contingent right to a major portion of the net cash receipts
realized by the Company from defined participating assets in consideration for
the cancellation of certain debt obligations and the return of 1,000,000
shares of the Company's common stock owned by TELCO.
This transaction resulted in the recording of an estimated amount payable to
TELCO in the amount of 75% of the book value of the participating assets at
December 31, 1979.
Under the terms of the agreement, the remaining participating assets as of
December 31, 1993 were defined as follows:
(a) The Company's participating interest in certain methane and other gas
purification activities of GSF Energy Inc., a subsidiary of Air Products and
Chemicals, Inc. (sold in 1994).
(b) All mining claims owned or held by the Company in Graham County, Arizona
(sold in 1995).
(c) Twenty acres of rural vacant land owned by the Company in Cochise County,
Arizona.
A summary of the estimated amount payable to stockholder follows for the years
ended December 31:
1996 1995 1994
Balance at beginning of year $ 1,805 $ 1,805 $129,305
Payment from sale of gas
purification venture -- -- (56,250)
Change in estimate to adjust
liability to 75% of remaining
underlying net book value of
the applicable assets -- -- (71,250)
------- ------- -------
Balance at end of year $ 1,805 $ 1,805 $ 1,805
======= ======= =======
Changes in estimate are accounted for as a change to paid-in capital. The 1994
change in estimate includes $56,250, which represents 75% of the $75,000 loss
from the sale of the gas purification venture, and $15,000, which represents
75% of the writedown of the mining claims. The mining claims were sold in 1995
in exchange for a future royalty of $2.00 per ton of zeolite mined, however
there is no assurance that the purchaser will be able to sell any significant
amounts of zeolite.
TELCO has the right to receive 75% of the cash realized from the participating
assets until the total of such receipts reaches $992,853. The payment of
$56,250 in 1994, was reflected as a reduction of the note from stockholder as
discussed below. The potential unpaid balance under the agreement is $207,793
at December 31, 1996. This contingent liability is recorded at a lower amount
of $1,805 in the Company's balance sheet, representing 75% of the remaining
underlying net book value of the applicable assets described above.
In the event that 75% of the future cash realized from the remaining
participating assets exceeds the recorded amount of $1,805, the Company has an
obligation to continue making payments up to the potential unpaid balance. If
the potential unpaid balance is ever paid in full, TELCO is entitled to
receive, in perpetuity, 25% of any further cash realized from the
participating assets.
NOTE C - NOTE AND INTEREST RECEIVABLE FROM STOCKHOLDER
A summary of the note and interest receivable from Telco for the years ended
December 31 follows:
1996 1995 1994
Balance at beginning of year $1,979,320 $1,979,320 $2,041,195
Reductions -- -- (61,875)
---------- ---------- ----------
Balance at end of year $1,979,320 $1,979,320 $1,979,320
========== ========== ==========
No schedule for payment of the amounts advanced has been established and no
significant collections on the amount due, including interest, are anticipated
within the next year. Because of the uncertainty as to the period for recovery
that exists due to the illiquidity of Telco, at December 31, 1991 the Company
classified the loan with stockholders' equity and effective January 1, 1992
suspended recognition of interest in its financial statements with respect to
the loan.
The receivable balance includes accrued interest receivable of $455,879. At
December 31, 1996, interest earned but not accrued was an additional $975,000.
The note is payable upon demand and bears interest at the prime rate of
interest plus two percent.
Reductions to the note represent administrative expenses of NRG paid for by
Telco and management service fees (for accounting, shareholder relations,
legal, etc.) through January, 1994. The reduction in 1994 to the note also
reflects the offset of the payable to Telco of $56,250 per Note B. Effective
February, 1994, the administrative expenses and management service fees were
paid for/provided by Hickory. Amounts paid by NRG to Hickory totalled $75,000
in 1994. This represented reimbursements to Hickory of $35,540 for 1994
expenses and a prepayment of expenses in the amount of $39,460. In 1995
and 1996 the management service fees of $29,000 for each year eliminated the
prepaid balance. As of December 31, 1996, NRG owes Hickory $25,875 for
administrative expenses and management service fees. Total management service
fees expensed by NRG were $29,000, $29,000 and $30,000 for 1996, 1995 and
1994, respectively.
NOTE D - INVESTMENT IN AFFILIATED COMPANY
In 1980, the Company acquired 20,000 shares, or approximately 1.4% of the
outstanding common shares of beneficial interest of Wisconsin Real Estate
Investment Trust ("WREIT"). WREIT is a majority owned subsidiary of Hickory
Furniture Company which is a majority owned subsidiary of TELCO. Since January
1984 the Company has accounted for its investment in WREIT under the equity
method of accounting. Equity in the losses of WREIT reduced NRG's investment
to zero during 1991 as cumulative equity in WREIT's losses exceeded NRG's
original investment. The investment balance has not changed since 1991.
WREIT was dissolved by operation of law in April, 1996 with no distribution to
shareholders.
NOTE E - INCOME TAXES
The Company adopted Financial Accounting Standards Board ("FASB") Statement
No. 109, "Accounting for Income Taxes", effective January 1, 1993. The only
current impact of this statement on the Company is that the utilization of net
operating loss carryforwards will no longer be reported as an extraordinary
item in the statement of operations but instead the provision for income taxes
will be presented net of any benefit recognized from the utilization of
existing net operating loss carryforwards.
Following is a reconciliation of NRG's provision for income taxes to the
amount determined by applying the statutory federal rates of 34% to pretax
income:
1996 1995 1994
Tax computed at statutory rate $ (11,318) $(10,930) $(46,142)
Interest from stockholder not
recognized for financial
reporting purposes -- -- 39,797
Effect of losses not utilized
in the provision 11,318 10,930 6,345
------- ------- -------
$ -- $ -- $ --
======= ======= =======
At December 31, 1996, the Company had net operating loss carryforwards for
financial reporting and federal income tax purposes of approximately
$7,000,000 expiring from 1998 through 2011.
NOTE F - REVERSE STOCK SPLIT
REVERSE STOCK SPLIT: In December 1983, the Company's Board of Directors
approved a reverse stock split effective as of the close of business on
December 19, 1983, pursuant to which one new share of common stock, par value
$.10 per share, would be issued for every 20 shares of old common stock, par
value $.005 per share, then outstanding. No other change in the attributes of
the common shares would be made.
The Company undertook to repurchase fractional shares resulting from the
implementation of the reverse stock split at the rate of $.25 for each old
share. Through oversight, certain of the corporate actions necessary to
implement fully the reverse stock split have not yet been completed; however,
the Company intends to complete the actions as soon as practicable. All
information relating to common shares has been adjusted to reflect the full
implementation of the reverse stock split.
NOTE G - PENDING MERGER
TELCO intends to develop a proposal whereby NRG would merge with a newly
formed subsidiary of TELCO and then all shares of NRG not owned by TELCO would
be acquired by Telco as a result of the merger.
NRG Incorporated
Form 10K Annual Report
For the Year Ended December 31, 1996
(21) Subsidiaries of the Registrant
(22) Financial Data Schedule