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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, 1995
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, 1996: $58,926
CLASS OUTSTANDING AT MARCH 1, 1996
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"). Over the last several years all excess cash has been 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. The Company also continues to retain ownership of approximately 20
acres of adjacent land.
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 the 20 acre land parcel.
INVESTMENT IN AFFILIATED COMPANY
The Company owns 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, owns the
majority of the outstanding stock of WREIT. The Company's shares were
purchased in 1980 at a cost of $93,836. The Company uses the equity method of
accounting for this investment which has a book value of $-0- at December 31,
1995 as the Company's share of WREIT losses has exceeded the original cost.
WREIT has an accumulated deficit of approximately $ 35 million. WREIT's stock
has no current market value.
LEASING ACTIVITIES
During 1979 and 1980, the Company entered into several agreements,
commonly referred to as money on money leases, which involved the purchase of
certain high technology equipment and the immediate resale of the equipment to
third parties. As a result of these transactions, the Company was the holder
of nonnegotiable, nonrecourse notes receivable. The Company also owed
nonnegotiable, nonrecourse notes payable to its suppliers. In each instance,
the notes were collateralized by the equipment involved in the related
transactions. In 1991 the notes receivable and notes payable both matured.
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 1994 $1.50 $1.50
All Quarters 1995 $1.50 $1.50
3. Approximate number of shareholders
December 31, 1995 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, 1995, 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
1995 1994 1993 1992 1991
Revenues $ -0- $ -0- $ -0- $ -0- $171,885
Loss before extraordinary
credit (32,149) (135,712) (66,469) (67,422) (6,597)
Net loss (32,149) (135,712) (66,469) (62,022) (597)
Total Assets (a) 9,800 41,949 172,489 172,639 172,649
Per Common Share:
Loss before extraordinary
credit $(.13) $(.53) $(.26) $(.26) $(.03)
(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 $(32,149) ($.13 per share) in 1995
compared to a net loss of $(135,712) ($.53 per share) and net loss of
$(66,469) ($.26 per share) in 1994 and 1993, 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 $32,149, $40,712 and $66,469 in 1995, 1994
and 1993 respectively. These amounts include fees of $29,000, $30,000 and
$55,000, 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, 1995 and
December 31, 1994. 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, 1995, interest earned but not accrued was an additional $687,000.
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 1995 expenses in the amount of
$39,460. The $75,000 was received by NRG from the windup of the gas
purification venture. In 1995, the management service fees of $29,000 reduced
the 1995 prepaid balance down to $10,460, which represents the 1996 prepayment
of expenses.
The Company has current liabilities of $2,549, 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.
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. The utilization of
net operating loss carryforward in 1993 was $6,230.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to Item 8 is submitted on pages 16 to 25 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 1995, 1994 and 1993.
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... 53 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; Director of
Hickory Furniture Company, and since September 1991, Chairman and Chief
Executive Officer; Director of Wellco Enterprises, Inc. until December,
1995; Director and Chairman (since May 1991) of Alba-Waldensian, Inc.;
Trustee and Chairman of Wisconsin Real Estate Investment Trust;
Director and Chief Executive Officer (since July 1, 1992) of Indiana
Financial Investors, Inc.; Chairman of the Board of Directors
(since 1985), President and Chief Executive Officer (December 1985 to
May, 1988) and Chief Executive Officer (since December, 1990) of
Acton Corporation (renamed Sunstates Corporation in December, 1993);
Director of Rocky Mountain Chocolate Factory, Inc. (until September,
1995).
Lee N. Mortenson... 60 1987 Director of NRG, Inc.
President, Chief Operating Officer and a Director of Telco Capital
Corporation (since January, 1984); Director of Hickory Furniture Company,
(since 1980), President (since May, 1988), and Chief Operating Officer
(since December, 1990) and Chief Executive Officer (from May, 1988 to
December 1991) and Director (from February, 1985 to May, 1988) of
Sunstates Corporation; President (since 1988) Chief Executive Officer
(1988 to 1990) of Acton Corporation (Renamed Sunstates Corporation in
December, 1993); Director (since April, 1984) of Alba- Waldensian, Inc.;
Director (since April, 1985) of Normandy Insurance Agency, Inc.; Director
(January, 1988 to October, 1992) of Sun Electric Corporation; and
Director (since November, 1987) of Rocky Mountain Chocolate Factory, Inc.
Phillip J. Robinson... 40 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
(since July, 1993) 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, 1995. 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 1993 - 1995.
(b) No director received compensation during 1993 - 1995.
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, 1996, 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, 1996 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,
1996, 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 29, 1996
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 29, 1996
By: /s/ Lee N. Mortenson
Lee N. Mortenson
Director
Date: March 29, 1996
By: /s/ Phillip J. Robinson
Phillip J. Robinson
Treasurer, Secretary,
Chief Financial and Accounting
Officer
Date: March 29, 1996
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, 1995
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, 1995 and December 31, 1994 ................17
Consolidated Statements of Operations - Years Ended
December 31, 1995, 1994 and 1993 ......................18
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 1995, 1994 and 1993 ..........19
Consolidated Statements of Cash Flows - Years Ended
December 31, 1995, 1994 and 1993 ......................20
Notes to Consolidated Financial Statements ..............21
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 1995, 1994 and
1993. Therefore its 1995, 1994 and 1993 financial statements for those three
years are unaudited.
NRG INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
DECEMBER 31,
1995 1994
ASSETS
Cash $ 81 $ 81
Prepaid expenses - affiliate 7,311 39,460
Vacant land 2,408 2,408
------ ------
Total Assets $ 9,800 $ 41,949
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued
expenses $ 2,549 $ 2,549
Estimated amount payable to
stockholder 1,805 1,805
------ ------
4,354 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) (2,484,682) (2,452,533)
Treasury stock, at cost - 50,518 shares (102,980) (102,980)
----------- -----------
Total stockholders' equity 1,984,766 2,016,915
Less receivable from affiliate (1,979,320) (1,979,320)
----------- -----------
Total Liabilities and
Stockholders Equity $ 9,800 $ 41,949
=========== ===========
See notes to consolidated financial statements
NRG INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
YEAR ENDED DECEMBER 31,
1995 1994 1993
REVENUES:
$ -- $ -- $ --
------ ------ ------
-- -- --
------ ------ ------
EXPENSES:
Loss from sale of gas
purification venture $ -- $ 75,000 $ --
Writedown of mining claims -- 20,000 --
General and administrative 32,149 40,712 66,469
------ ------- ------
32,149 135,712 66,469
------ ------- ------
NET LOSS (32,149) (135,712) (66,469)
======== ========= ========
PER SHARE INFORMATION
Net loss $(.13) $(.53) $(.26)
======== ========= ========
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 1,1993 305,829 $30,583 $4,470,595 $(2,250,352) 50,518 $(102,980)
Net loss (66,469)
------- ------- ---------- ------------ ------ ----------
Balance at Dec 31,1993 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)
======= ======= ========== ============ ====== ==========
See notes to consolidated financial statements
NRG INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
YEAR ENDED DECEMBER 31,
1995 1994 1993
OPERATING ACTIVITIES:
Net loss $ (32,149) $ (135,712) $ (66,469)
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 32,149 (39,460) --
Decrease in accounts payable
and accrued expenses -- (453) (4,589)
------- -------- --------
NET CASH USED IN
OPERATING ACTIVITIES -0- (80,625) (71,058)
INVESTING ACTIVITIES:
Proceeds from sale of gas
purification venture -- 75,000 --
Payments received
on stockholder loans -- 5,625 70,908
------- -------- --------
NET CASH PROVIDED BY(USED IN)
INVESTING ACTIVITIES -0- 80,625 70,908
DECREASE IN CASH -0- -0- (150)
Cash at beginning of year 81 81 231
------- ------- --------
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, 1992 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) 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:
1995 1994 1993
Balance at beginning of year $ 1,805 $129,305 $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 $129,305
====== ======== =======
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, 1995. 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:
1995 1994 1993
Balance at beginning of year $1,979,320 $2,041,195 $2,112,103
Reductions -- (61,875) (70,908)
--------- ---------- ----------
Balance at end of year $1,979,320 $1,979,320 $2,041,195
========= ========== ==========
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, 1995, interest earned but not accrued was an additional $687,000.
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 1995 expenses in the amount of $39,460. In 1995,
the management service fees of $29,000 reduced the 1995 prepaid balance down
to $10,460, which represents the 1996 prepayment of expenses. Total
management service fees expensed by NRG were $29,000, $30,000 and $55,000 for
1995, 1994 and 1993, 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 has an accumulated deficit of approximately $ 35 million. WREIT's stock
has no current market value.
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:
1995 1994 1993
Tax computed at statutory rate $ (10,930) $(46,142) $(22,599)
Interest from stockholder not
recognized for financial
reporting purposes 49,376 39,797 28,829
Utilization of net operating
loss carryforward (38,446) -- (6,230)
Effect of losses not utilized
in the provision -- 6,345 --
------- ----- -------
$ -- $ -- $ --
======= ===== =======
At December 31, 1995, the Company had net operating loss carryforwards for
financial reporting and federal income tax purposes of approximately
$6,600,000 expiring from 1996 through 2010.
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.
Exhibit Index
NRG Incorporated
Form 10K Annual Report
For the Year Ended December 31, 1995
(21) Subsidiaries of the Registrant
(22) Financial Data Schedule