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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended FEBRUARY 29, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______TO_______.
Commission File Number 0-14873
NEVADA ENERGY COMPANY, INC.
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(Name of small business issuer in its charter)
DELAWARE 84-0897771
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
401 E. 4TH STREET, RENO, NEVADA 89512
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (702) 786-7979
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Securities registered under Section 12(b) of the Act: NONE
Title of each class Name of each exchange on which registered
Class A Common NASDAQ
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Class B Common No Market
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Series A Preferred No Market
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Series B Preferred No Market
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Securities registered under Section 12(g) of the Act:
CLASS A COMMON STOCK, $.001 PAR VALUE
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(Title of class)
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. [ ]
Issuer's consolidated revenues for its most recent fiscal year. $1,697,258
(Continued on Page 2 of cover page)
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(Page 2 of cover page)
(ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. YES X NO
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The aggregate market value of the voting stock held by NON-AFFILIATES
computed by reference to the average bid and asked prices of such stock as of
June 7, 1996. Series A Preferred stock, $.001 par value, $0 (No market), Series
B Preferred stock, $.001 par value, $0 (No market), Class B common Stock $.001
par value, $0 (No market), Class A Common Stock $.001 par value, $12,823,296.
As of June 1, 1996, there were 8,960,866 shares of Nevada Energy Company,
Inc. Class A Common Stock $.001 par value outstanding and 4,437,473 shares of
Class B Common Stock $.001 par value outstanding. Also, as of June 1, 1996 there
were 1,980,795 shares of Series A Preferred Stock outstanding, par value $.001
and 5 shares of Series B Preferred outstanding, par value $001.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Format (check one):
Yes No X
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PAGE
TOPIC NUMBER
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PART I.
ITEM 1. DESCRIPTION OF BUSINESS.
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company History . . . . . . . . . . . . . . . . . . . . . . . . . 4
Change in control . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Formation of new subsidiaries . . . . . . . . . . . . . . . . . . . . 5
Brady Hot Springs Geothermal Associates. . . . . . . . . . . . . . 5
Brady Geo Park Power Partners, Limited Partnership . . . . . . . . 6
Brady Power Partners . . . . . . . . . . . . . . . . . . . . . . . 6
Nevada Geothermal Power Partners . . . . . . . . . . . . . . . . . 7
Nevada Energy Partners I, Limited Partnership. . . . . . . . . . . 7
San Jacinto Power Company. . . . . . . . . . . . . . . . . . . . . 7
Combustion Energy Company. . . . . . . . . . . . . . . . . . . . . . . 8
Oreana Power Partners. . . . . . . . . . . . . . . . . . . . . . . 8
San Jacinto Energy Corporation . . . . . . . . . . . . . . . . . . . . 8
Central Communications Corporation . . . . . . . . . . . . . . . . . . 9
Telecom Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . . 9
BUSINESS OF ISSUER . . . . . . . . . . . . . . . . . . . . . . . . 9
Corporate Objectives . . . . . . . . . . . . . . . . . . . . . . . 9
Power Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Government Regulation. . . . . . . . . . . . . . . . . . . . . . . 11
Federal Energy Regulatory Commission ("FERC") Law. . . . . . . . . 11
Power Contract Regulations . . . . . . . . . . . . . . . . . . . . 11
Exemptions from Federal and State Regulations. . . . . . . . . . . 12
Local Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Environmental Compliance . . . . . . . . . . . . . . . . . . . . . 12
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PAGE
TOPIC NUMBER
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Telecommunications Market, Competitors,
Government Regulation. . . . . . . . . . . . . . . . . . . . . . . 12
Research and Development . . . . . . . . . . . . . . . . . . . . . 13
Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 2. DESCRIPTION OF PROPERTY.
ELECTRIC POWER GENERATING EQUIPMENT. . . . . . . . . . . . . . . . 13
Binary-Cycle Power Plants. . . . . . . . . . . . . . . . . . . . . 13
Raft River Power Plant . . . . . . . . . . . . . . . . . . . . . . 13
Wind Turbines. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Yerington Acquisition Company. . . . . . . . . . . . . . . . . . . 14
ITEM 3. LEGAL PROCEEDINGS.
MUNSON LAWSUIT . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
MARKET INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 15
HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
CONDITION OPERATION.
Plan of Operations . . . . . . . . . . . . . . . . . . . . . . . . 16
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Liquidity and Capital Resources. . . . . . . . . . . . . . . . . . 19
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Results of Operations. . . . . . . . . . . . . . . . . . . . . . . 20
ITEM 7. FINANCIAL STATEMENTS.
Financial Statements and Supplementary Data. . . . . . . . . . . . 24
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. 44
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PAGE
TOPIC NUMBER
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ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Executive officers . . . . . . . . . . . . . . . . . . . . . . . . 45
ITEM 10. EXECUTIVE COMPENSATION.
Director Compensation. . . . . . . . . . . . . . . . . . . . . . . 46
Discretionary Bonuses. . . . . . . . . . . . . . . . . . . . . . . 46
Employment Contracts and Termination of Employment
and Change-In-Control Arrangements. . . . . . . . . . . . . . 47
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT. 48
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. 48
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K. 48
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 48
Financial Statement Schedules. . . . . . . . . . . . . . . . . . . 50
List of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . 50
Reports on Form 8-K . (See Exhibits) . . . . . . . . . . . . . . . 50
Schedule V - Consolidated Property, Plant
and Equipment. . . . . . . . . . . . . . . . . . . . . . . 53
Schedule VI - Consolidated Accumulated Depreciation -
Property, Plant and Equipment. . . . . . . . . . . . 54
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
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ITEM 1. DESCRIPTION OF BUSINESS.
BUSINESS
Nevada Energy Company, Inc., a Delaware corporation, (the "Company") is an
independent, non-regulated utility holding company which acquires, develops,
finances, constructs and operates electric power facilities, telecommunication
businesses, and other non-related business enterprises. The Company is not
encumbered by internal rate of return regulation as are traditional retail
electric utility companies. The Company is primarily focused on developing
environmentally sound electric power facilities which utilize geothermal energy
and wind energy resources as the primary source of fuel for such facilities.
Located in Reno, Nevada, the Company is centrally located to supply
electrical energy to retail electric utilities which have traditionally been
large purchasers of independent power. These utilities include, but are not
limited to, Sierra Pacific Power Company ("Sierra") and Southern California
Edison ("SCE").
The Company maintains a majority 50.01% ownership interest in, and manages
a wind power generating facility located near Palm Springs, California known as
San Jacinto Power Company ("SJPC"). SJPC has an 18.955 megawatt ("MW") power
sales contract with SCE under which SJPC sells all of its electrical output.
The remaining term of the SCE contract is approximately 20 years.
The Company also owns geothermal power generating assets which includes
10.7 MW of power generating plants, fixtures and equipment. The Company is
seeking to deploy these currently idle binary cycle power generating assets in
one or more electric power generating projects. These assets which were
originally acquired by the Company in 1984-85 for the purpose of developing the
geothermal resources then controlled by the Company at Brady's Hot Springs have
never been employed in continuing operations by the Company.
The Company has executed certain documentation related to the proposed
acquisition of a geothermal power production facility located near Yerington,
Nevada, together with all geothermal reserves, governmental permitting,
transmission infrastructure, and related contract rights. This geothermal
facility provides electric power to Sierra pursuant to two (2) power purchase
agreements with a net contract rating of 1.47 MW. There are approximately 20
years remaining under the contracts.
It is the Company's intent to sell or deploy one (or more) of its 300
kilowatt ("Kw") Ormat power generating units following the acquisition of the
Yerington geothermal site for purposes of increasing the output of the facility
and thereby deploying presently idle geothermal power generating assets.
In addition to the Company's ownership interests in energy, the Company
owns a non-related business known as Herth Printing and Business Supplies
("Herth"). On November 30, 1994, the Company acquired by merger (see
COMBUSTION ENERGY COMPANY below) Herth which was established in 1983 in Reno,
Nevada. Herth has annual sales volume of approximately $1.0 million dollars and
is located in a its own warehouse/office space on approximately .77 acres of
land near down-town Reno. The Company has
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engaged the former proprietor to continue managing the business under a two year
employment agreement. The merger is being accounted for as a pooling of
interests and consequently, Herths' prior year results are reflected in the
Company's current financial reporting. The Company's corporate offices were
subsequently relocated to office spaces owned by Herth Printing and Office
Supplies.
COMPANY HISTORY
The Company was originally organized on December 2, 1982 under the laws of
the State of Delaware as "Munson Geothermal, Inc.". The Company changed its
name to Nevada Energy Company, Inc. on December 3, 1990.
Historically, the Company has sought to develop geothermal power projects.
To accomplish this objective, the Company first acquired a known geothermal
resource area ("KGRA") approximately 50 miles east of Reno, Nevada known as
Brady's Hot Springs ("Brady") in 1983. The Brady site consisted of leaseholds
from Southern Pacific Land Company (now Catellus Development) and the United
States Department of the Interior, Bureau of Land Management ("BLM") that were
long-term development leases with minimum annual lease payments, but with
production royalties. After acquiring the Brady leases, the Company expended
substantial funds to determine the potential of the resources on the Brady
leases in order to initiate their development.
Subsequent to initial development efforts, the Company secured several
long term contracts to sell electrical energy produced to Sierra Pacific Power
Company, a subsidiary of Sierra Pacific Resources and embarked upon a plan to
secure debt and equity financing sufficient to establish recurring revenue from
the Brady KGRA. The Company invested significant capital investment in the
development of the Brady KGRA, however, the Company did not initially secure
project development funding sufficient to establish recurring revenues from
Brady.
CHANGE IN CONTROL
On February 29, 1996 the Company executed a binding letter of intent with
Waterford Trust Company, Limited an Irish corporation ("Waterford"), in which
the Company agreed to sell to Waterford or its nominee approximately 2,000,000
shares of Series A preferred shares. On May 1, 1996 the Company announced the
completion of this transaction in which Waterford's nominee ,Golden Chance,
Limited ("Golden Chance"), an Isle of Man private company limited by shares,
agreed to purchase 1,960,795 shares of Series A Preferred stock at $2.50 per
share and 152,381 shares of Class A common stock at $0.643125 per share. The
Company received a cash payment for the Class A common shares in the amount of
$100,000 and a $4,900,000 promissory note made and delivered by Golden Chance.
The promissory note is secured by the corporate guarantee of Waterford Trust
Company, Limited, an Irish corporation ("Waterford") and an escrow of the shares
of registrants series A preferred shares acquired by Golden Chance.
The promissory note is payable in installments. The first installment is
payable July 1, 1996 in the amount of $400,000. Subsequent installments of
$500,000 are payable every thirty days thereafter until paid in full. The total
principal amount of the promissory note is due and payable on April 1, 1997.
Waterford has guaranteed the obligation of Golden Chance. The Series A
Preferred
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shares acquired by Golden Chance are held in escrow with an escrow agent for the
benefit of the registrant. Upon payment of each installment under the
promissory note, a portion of the Series A Preferred shares will convert to the
registrants class A common stock pursuant to the certificate of designation of
the Series A Preferred shares, which is on file with the Delaware Secretary of
State. The converted shares will be released from escrow.
Subsequent to May 1, 1996, the Company has receive cash payments in the
amount of $100,000 for the Class A common stock and $780,255 in cash payments on
the note secured by the Series A preferred shares.
In connection with this agreement, pursuant to a letter agreement ("Letter
of Intent") dated February 29, 1996, and conditional to the sale of series A
preferred shares, the former control group Chairman, Jeffrey Antisdel, and
Director, Richard Cascarilla, voluntarily resigned their respective Board of
Director positions, with nominee Directors, Charles Cain and Peter Cannell
elected by the Board of Directors. The remaining former members of the Board
subsequently resigned and John Goold has been nominated to the Board. The
active size of the board has been reduced from five directorships to three
directorships.
FORMATION OF NEW SUBSIDIARIES
On May 9, 1996, the Company announced the formation of two wholly owned
subsidiaries for purposes of increasing Company growth through strategic
acquisitions. The first of the two wholly owned subsidiaries, San Jacinto
Energy Corporation ("SJEC"), will directly or indirectly control applicable
shareholdings, debt instruments, partnership interests and power generating
assets of the Company. SJEC was formed to seek mergers and acquisitions within
the geothermal and wind energy business sectors.
The second wholly owned subsidiary, Central Communications Corporation
("Cencom"), was formed to pursue mergers and acquisitions of telecommunications
companies and business operating in related sectors.
On May 21, 1996, the Company announced execution of a binding letter of
intent for the purchase of Telecom Technologies, Inc. ("TTI"), an oregon
corporation. TTI is a telephone service provider currently operating twenty
(20) retail communications centers known as "Casetas". Casetas cater to the
Latin American community and provide customers the means to purchase telephone
service debit cards, complete money transfers, send and receive telecopier
transmissions and complete local and long distance telephone calls.
BRADY HOT SPRINGS GEOTHERMAL ASSOCIATES
In 1984, the Company identified a power project under development by the
United States Department of Energy ("USDOE") at Raft River, Idaho. The site
included a binary cycle power plant with a generator nameplate rating of 7,200
kilowatts or 7.2 MW (the "Raft River Plant"). The project was sold at auction
by the USDOE. The Company was selected by the purchaser, a subsidiary of Niagra
Mohawk Power known as HydroCo Associates ("HydraCo") to move the Raft River
plant to the Brady site.
On September 30, 1985, the Company entered into a partnership agreement
with a group led by HydraCo whereby the Company became the
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general partner of a single purpose development entity known as Brady Hot
Springs Geothermal Associates, Ltd. ("BHSGA").
The Company executed and delivered to BHSGA an assignment of a 6.6 MW
Power Purchase Agreement ("PPA") with Sierra, (which was owned by the Company),
together with a sublease of geothermal resources which had an agreed value of
$1,400,000. BHSGA assumed responsibility for relocating the Raft River plant to
the Brady Hot Springs property. On December 18, 1986, the Company entered into
a second agreement with BHSGA to acquire the Raft River plant, related equipment
and other tangible and intangible assets. In July 1991 the Company completed
the acquisition of the Raft River Plant which is currently located in Fernley,
Nevada.
BRADY GEO PARK POWER PARTNERS, LIMITED PARTNERSHIP
In 1986, the Company formed a Nevada Limited Partnership known as Brady
Geo Park Power Partners ("BGPPP") for the purpose of developing a small scale
power plant operation at the Brady site. As a component of forming BGPPP, the
Company sold 3.38 Ormat power plants to BGPPP in exchange for cash and a
non-recourse note in the amount of $584,000, accruing interest at 9% per annum
(accelerating to 18% on default). BGPPP successfully initiated limited
operations of the power project but later discontinued operations in 1987.
To date, BGPPP has not made payment of principal or interest to the
Company and is in technical default of its promissory note to the Company. The
Company has notified the owners of BGPPP of the need for reimbursement and
noticed payment for the non-recourse note. At present, the Ormat power
generating plants in which BGPPP has an interest are in storage at Fernley,
Nevada.
In December 1995, the Company transferred all of its right title and
interest, except the limited and general partnership interests, in BGPPP to its
wholly owned subsidiary Yerington Acquisition Company, Inc. ("YAC") in exchange
for shares of YAC's no par Common stock (See YERINGTON ACQUISITION COMPANY).
BRADY POWER PARTNERS
Brady Power Partners ("BPP"), a Nevada general partnership, was formed by
Nevada Geothermal Power Partners (see NEVADA GEOTHERMAL POWER PARTNERS) and
ESI BH Limited Partnership ("ESI-BH") in July, 1991, for purposes of developing
the Brady KGRA.
In July, 1991, BPP agreed to purchase the assets of BHSGA, including
rights to a 6.6 MW Power Purchase Agreement with Sierra, and assume the
Company's debts with BHSGA.
BPP and the Company thereafter entered into an agreement ("BPP Agreement")
whereby the Company sold to BPP certain geothermal power assets in exchange for
BPP's payment of $2,000,000 to the Company, a Gross Revenue Interest in the
completed project and forgiveness of the claims BHSGA had against the Company.
The BPP Agreement provided the Company the means to complete a voluntary
reorganization of the Company.
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Beginning on July 19, 1991, BPP developed, financed, constructed and now
operates the Brady Hot Springs Power Plant and services power purchase
agreements for 20.5 MW of power with Sierra.
In August 1991, the Company received cash consideration totaling
$2,000,000 and project construction commenced and BPP transferred a Gross
Revenue Interest ("GRI") in the Brady Hot Springs Power Plant Project to pay
certain indebtedness of the Company. The revenues generated by the GRI are
utilized to satisfy certain debts payable prior to reorganization, until paid in
full or until there is no further revenue payable under the GRI. To date, the
GRI services the indebtedness previously accrued by the Company in accordance
with the BPP Agreement.
NEVADA GEOTHERMAL POWER PARTNERS
Nevada Geothermal Power Partners ("NGPP") is a Nevada limited partnership
whose general partners are Hot Springs Power Company ("HSP") and Nevada Energy
Partners-I, LP ("NEP") and whose limited partners are certain cash investors and
contractors. NGPP previously owned a 50% interest in BPP until May 1995, when
NGPP interests in BPP were sold. NEP-I LP owns 31% of NGPP, (see NEVADA ENERGY
PARTNERS I, LIMITED PARTNERSHIP).
NEVADA ENERGY PARTNERS I, LIMITED PARTNERSHIP
Nevada Energy Partners I, Limited Partnership ("NEP") is a Nevada limited
partnership whose general partner is Nevada Electric Power Company, Inc. (40%
interest) and whose limited partner (60% interest) is the Company. Nevada
Electric Power Company, Inc. is a Nevada corporation wholly owned by Jeffrey E.
Antisdel, the Company's president and chief executive officer. The Company
obtained its limited partnership interest in NEP through its issuance of
4,437,473 shares of the Company's Class B Common Stock (representing 100% of all
Class B Common Stock issued and outstanding). As a result, NEP previously owned
a fully diluted ownership interest in Brady Power Partners totaling 9%.
Through the sale by NGPP of its 50% interest in BPP in May 1995, NEP's
interest in BPP was liquidated. The Company realized a net gain of $585,511 in
May 1995 as a result of its interest in NEP-I LP. Cash in the amount of
$508,018 was received in July 1995. The remaining $77,493 receivable has been
charged as uncollectible due to on-going litigation between NEP and HSP related
to monetary and management disputes between HSP and NEP.
As a limited partner of NEP, the Company was entitled to sixty percent
(60%) of NEP's net distributable cash flow. To date, the Company has received
no recurring revenues from its interest in NEP. Distributable cash flow from
NEP to the Company has consisted of non-recurring developer fees, cost
reimbursements, litigation recoveries and proceeds resulting from liquidation of
NEP's BPP interest.
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SAN JACINTO POWER COMPANY
The Company formed San Jacinto Power Corporation, a Nevada Corporation,
("SJPC") on December 15, 1993. On December 15, 1993, the Company contributed
222,267 shares of Class A Common Stock and cash of $275,055 in exchange for its
50.01% Common Stock ownership interest in SJPC.
On December 15, 1993, The New World Power Corporation ("New World")
contributed 48,000 shares of its Common Stock to SJPC. On February 10, 1994,
New World contributed cash of $149,970 to SJPC and contributed additional cash
of $124,975 on March 8, 1994. New World owns a 49.99% ownership interest in
SJPC.
SJPC acquired in July, 1994 the operating assets of Smith Wind Energy
Company ("Smith") and six affiliated limited partnerships operated by Smith
which are known as the Triad Partnerships (collectively "Triad"). As a result
of the acquisition, SJPC currently operates a wind turbine energy park in North
Palm Springs, California. Energy sales are pursuant to a contract with Southern
California Edison Company that has approximately 20 years remaining. A total of
64 wind turbines are currently available for operation, together with associated
infrastructure, additional turbine sites, turbine towers, parts and service
equipment and a long-term land lease with the BLM (collectively, the "Assets").
SJPC was formed for the purpose of acquiring, holding and operating the
Assets be acquired from Smith and Triad. On December 15, 1993, SJPC executed an
Escrow Agreement and Management Agreement with Smith and Triad.
COMBUSTION ENERGY COMPANY
The Company formed a wholly-owned subsidiary, Combustion Energy Company,
Inc. ("CEC"), a Nevada corporation, on February 12, 1993 for the purpose of
being a general partner of Oreana Power Partners ("OPP") (See OREANA POWER
PARTNERS below). The Company is also a limited partner in OPP.
On November 30, 1994, the Company caused CEC to merge with Herth Printing
and Business Supplies, Inc. ("Herth"), in exchange for Class A Common Stock of
the Company. The Company, through its ownership of CEC, owns 100% of the
post-merger business and has consolidated the financial results of CEC in its
current and prior reporting periods.
OREANA POWER PARTNERS
On February 12, 1993, the Company formed a Nevada limited partnership
known as Oreana Power Partners ("OPP"). The partnership is currently owned
equally owned by CEC and Geothermal Development Associates ("GDA") subsidiary,
Energy Development Associates ("EDA").
OPP was formed for the purpose of developing, financing and constructing a
gas turbine electric generating facility to provide power to Sierra pursuant to
power sales contracts to be obtained. OPP's primary development site is near
Sierra's Oreana substation and electric transmission lines. OPP is currently
inactive.
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SAN JACINTO ENERGY CORPORATION
On May 9, 1996, the Board of Directors initiated the formation San Jacinto
Energy Corporation ("SJEC") for purposes controlling applicable shareholdings,
debt instruments, partnership interests and power generating assets of the
Company. SJEC was also formed for purposes of completing mergers and
acquisitions within the geothermal and wind energy sectors with the intent of
acquiring additional energy reserves.
CENTRAL COMMUNICATIONS CORPORATION
On May 9, 1996, the Board of Directors initiated the formation of wholly
owned subsidiary Central Communications Corporation ("Cencom"). Cencom was
formed for purposes of controlling applicable rights, shareholdings, debt
instruments, partnership interests and technologies to be acquired by the
Company. Cencom was also formed for purposes of pursuing mergers and
acquisitions of telecommunication companies and business operating in related
sectors.
On May 21, 1996, the Company announced the execution of a binding letter
of intent for the purchase of Telecom Technologies, Inc., an Oregon corporation,
in consideration of the Company's delivery of cash and equity securities valued
at $2.5 million dollars by Cencom. The transaction is planned to close during
the month of June, 1996. However, there are several conditions to closing, if
any of the conditions are not satisfied, the transaction may not close.
TELECOM TECHNOLOGIES, INC.
Telecom Technologies, Inc., ("TTI") is telephone services provider
operating twenty (20) retail telephone service centers serving the needs of the
Latin American community in the Western United States. The telephone service
centers operated by TTI are known as a "Casetas", and are located in shopping
centers and modular offices. Each Casetta provides its customers with the means
to purchase long distance telephone debit cards, complete money transfers, send
and receive telecopier transmissions and complete local and long distance
telephone calls. TTI produces estimated annualized revenues of $3.0 million
dollars per year, which are monitored by a home office.
BUSINESS OF ISSUER
CORPORATE OBJECTIVES
The Company is an independent, non-regulated utility holding company
primarily engaged in the development, financing, construction and operation of
electric power facilities which generate electricity for sale to regulated
utilities.
As an independent electric power producer serving utility industry, the
Company specializes in the acquisition, development, financing, construction and
operation of electric power generating facilities which utilize renewable energy
resources such as geothermal, biomass or wind energy resources.
In addition to the Company's expertise in geothermal and wind energy
development, the Company is actively seeking the merger, acquisition,
development, financing and operation of various
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telecommunication companies and related businesses complimentary to its core
lines of energy business for purposes of better positioning the Company for
accelerated growth.
The corporate objectives of the Company are to:
(1) Acquire, develop, finance, construct and operate electric power
generating facilities utilizing geothermal and wind energy;
(2) deploy Company owned power generating assets where risks are
lowest; and
(3) acquire telecommunication companies and related business operations
which offer the Company increased growth opportunities.
The Company is an operating stage company subject to all risks inherent in
the establishment of new lines of business which are financed through equity
financings, debt financings, partnership distributions, asset sales, litigation
recoveries and management fees.
The Company has been unable to finance operations from cash flow from
operating revenues. Consequently, the Company has been required to sell equity
to finance operations. The Company may seek to raise additional capital through
subsequent financing(s) sufficient to satisfy the operational needs of the
Company over the next fiscal year. The Company has received commitments for
financing believed adequate for the coming twelve months of operation. However,
there can be no assurance that such financing will be available when needed or
on terms acceptable to the Company during the coming twelve months of operation.
POWER MARKETS
Led by the California Public Utility Commission, over twenty (20)
utilities commissions and the Federal Energy Regulatory Commission are
considering the proposed restructuring and deregulation of electric power
production and deliveries of electric power to utility customers.
Today, electricity generation is no longer a monopoly in which the
cheapest power is generated by the most capital intensive plants. Moreover,
smaller, more fuel efficient technologies such as gas-fired combustion turbines
and wind turbines have effectively reduced the traditional barriers to entry
into markets dominated by coal fired and nuclear power production.
In addition, legislators, regulators and individual states are increasing
economic competition with adjacent states due to their realization of the
overall importance which electricity prices have in creating, or destroying,
regional competitive business advantages.
Secondary to these issues, are increasingly environmentally conscious
customers supporting "green power" options such as geothermal, wind, biomass or
solar energy producers otherwise legally known as Qualifying Facilities ("QF").
Presently, regulated electric utilities must purchase all power produced
by qualifying renewable energy producers which are essentially
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wholesale utilities, known as "Qualifying Facilities" or "QFs", (See
"GOVERNMENT REGULATION"). These utilities must buy all power produced from
renewable energy sources at the retail utilities' highest incremental power
cost, known as "avoided costs". These are the costs retail utilities would have
to pay for the next future increment of power to go on-line. The avoided costs
are those not incurred or costs "avoided" by the utilities because of plants
constructed by renewable energy developers. The retail utilities avoid the
costs of building new power plants while reselling the power to their normal
customers at markups allowed by state regulatory agencies.
COMPETITION
Competitors of the Company include major oil companies, independent oil
and gas concerns, other independent power companies and power marketers. Most
of the major competitors are much larger and better capitalized than the Company
and have been in business from ten to fifteen years longer than the Company.
Competition for long-term power sales contracts has increased due to the
implementation of competitive bidding processes at most retail utilities.
GOVERNMENT REGULATION
The following is a summary of the regulatory requirements, permits and
approvals the Company must obtain, and other requirements that are relevant to
the operation of the Company's business.
FEDERAL ENERGY REGULATORY COMMISSION ("FERC") LAW
FERC legislation is enforced nationally, specifically to cause a shift
from retail utility reliance upon polluting forms of non-renewable fossil fuels
to more desirable domestic sources of clean power from renewable energy. This
legislation was enacted to reduce the previous trend toward ever larger,
centralized fossil and nuclear power plants and increasing reliance on foreign
energy sources. FERC also recognized that utility system overall reliability
may be increased by fuel and plant diversification of smaller size up to a
desired system-specific mix of small and large plants.
POWER CONTRACT REGULATIONS
The operations of the Company's developments will be directly affected by
federal and state statutes, regulations and rules relating to the ownership of
electrical generating facilities and the production and sale of electric power.
The primary federal law determining the extent to which the current and future
power plant projects will be subject to federal energy regulation is the Public
Utilities Regulatory Policies Act of 1978 ("PURPA"). If an electrical power
generating facility is a QF within the meaning of the regulations promulgated
pursuant to PURPA by the FERC, and within the meaning of rules promulgated
pursuant to both PURPA and the NPSC, then such facility and its owners will be
able to take advantage of provisions designed to encourage alternative sources
of electric power production. A facility will meet existing standards for a QF
if it produces electricity primarily from a "renewable resource," such as
geothermal, does not use oil, natural gas and coal for more than 25% of its
energy input, and is not owned more than 50% by an electric utility or electric
utility holding company. Section 210 of PURPA provides the framework for the
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promulgation of federal and state regulations, which would exempt a QF from
existing state and federal regulation, and would require an electric utility to
interconnect with a QF to purchase its power at a prescribed rate.
EXEMPTIONS FROM FEDERAL AND STATE REGULATIONS
Regulations issued by FERC exempt (with certain exceptions) any QF using
geothermal energy as a primary source under the Federal Power Act from the
provisions of the Public Utility Holding Company Act of 1935 relating to
electric utilities and from state laws regulating electric utility rates and
financial organization. While the FERC regulations provide that FERC may limit
the applicability of this broad exemption from state laws, upon request of a
state regulatory authority or non-regulated electric utility, the NPSC has not
requested FERC to limit the applicability of the exemption.
While PURPA exempts certain QFs from federal and state laws regulating
electric utilities, such QFs are not exempt from environmental laws and must
comply with all applicable federal, state and local zoning, air and other
environmental quality laws. In addition, PURPA's exemption from state regulation
for QFs does not extend to exemption from state laws or regulations enacted to
implement the FERC rules on Co-generation and Small Power Production, such as
the SPP Rules provisions described above.
LOCAL PERMITS
The Company also requires special use permits for construction and operation,
including access roads and power lines. In addition to these permits, the
Company must also obtain permits from other state and local agencies. These
permits include permits for temporary testing of existing geothermal wells which
have been approved, flora, fauna and environmental compliance.
ENVIRONMENTAL COMPLIANCE
In 1971, the Nevada Legislature enacted the Utility and Environmental
Protection Act designed to strengthen review processes, protect environmental
values and take into account the total costs of electric utility services. This
law prohibits any public utility from commencing the construction of any
electric generating facilities without a permit from the NPSC. Prior to
commercial operation, the Company must obtain several environmental permits
related to air quality, water quality, zoning, archeological and others matters.
The Company has incurred no direct costs of compliance with local and Federal
environmental regulations. Compliance costs are budgeted in project proposals
and while the costs are generally not significant, compliance is considered an
important factor.
TELECOMMUNICATIONS MARKET, COMPETITION AND GOVERNMENT REGULATION
The Company has had limited experience in the telecommunications
marketplace and is presently engaged in evaluating several business
opportunities related to the proposed merger and/or acquisition of
telecommunication companies and related businesses. The telecommunication
markets are competitive, with companies such as ATT, MCI and Sprint dominating
the communications marketplace. However, the
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Company is currently focused upon acquiring and developing smaller "niche"
companies engaged in providing specialty communications services and/or
technologies associated with such as long distance services, switching,
telephone debit card sales, retail service centers, and other related marketing
services.
Government regulation by the Federal Communications Commission and
regional Public Service Commissions regulate various facets of such
communications business. However, the Company is presently unable to fully
quantify the extent of regulation to which it will ultimately be subject until
such time operations are established.
RESEARCH AND DEVELOPMENT
The Company has not incurred any expense for research and development
activities in the last two fiscal years. The Company has focused its efforts
development of additional business opportunities.
EMPLOYEES
The Company and its consolidated subsidiaries currently employ fourteen
(14) full-time and two (2) part-time employees.
ITEM 2. DESCRIPTION OF PROPERTY
ELECTRIC POWER GENERATING EQUIPMENT
BINARY-CYCLE POWER PLANTS
In the mid-1980's, the Company acquired a total of ten Ormat power plants
with a gross nameplate rating of 3.7 MW. The Company owns six of these
binary-cycle power plants and holds a secured interest in the other four plants
(for financial statement purposes all ten units are treated as Company owned).
These units can be utilized with lower temperature geothermal or waste heat
energy sources. The Company is focused upon the profitable sale or deployment of
these power plants in geothermal, biomass or heat recovery projects. These
plants are presently located at Fernley, Nevada, awaiting sale or field
deployment, (See BRADY GEO PARK POWER PARTNERS 1986 above).
RAFT RIVER POWER PLANT
In the mid 1980's the Company acquired a 7.2 MW electric power generator
together with its associated geothermal turbine, gear box, generator, fluid
storage vessels, heat exchange vessels, pumps and other essential accessories
which are identified herein as the Raft River Power Plant. These Raft River
Plant is presently located at Fernley, Nevada, awaiting sale or field
deployment, (See BRADY HOT SPRINGS GEOTHERMAL ASSOCIATES above.)
WIND TURBINES
The Company's majority owned subsidiary, San Jacinto Power Company, owns
several wind turbine generators with name plate capacity in excess of 9,300 Kw.
The SJPC turbines are located and operating in North Palm Springs, California
(See SAN JACINTO POWER COMPANY above.)
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YERINGTON ACQUISITION COMPANY
On April 10, 1995, the Company's Board of Directors approved the execution
of documentation relating to the proposed acquisition by merger of Tad's
Geothermal Inc., through the Company's wholly owned subsidiary, Yerington
Acquisition Company (hereinafter referred to as the "Tads Acquisition").
The Tads Acquisition provides that upon achieving conditions precedent to
closing, the Company will acquire an operational geothermal power facility and a
non-operational ethanol facility in exchange for the assumption of a $125,000
non-interest bearing note and issuance of restricted Class A common shares with
a market value of $575,000. The primary condition precedent for closing is the
assignment of two (2) power sales agreements with Sierra Pacific Power Company
that have contract terms of approximately twenty years remaining, approval of
the transaction by Sierra, approval by the Nevada Public Service Commission,
environmental permitting and closing documentation acceptable in form and in
substance to the Company's Board of Directors.
Assets included in this acquisition are two (2) Ormat power plants,
related control modules, 80 acres of real property, cooling spray ponds and
related cooling infrastructure, geothermal water rights, electrical transmission
infrastructure and related assets.
It is the intent of the Company to retrofit the facility, improve cooling
efficiencies, add black-start power generation capability and otherwise improve
existing operations in a phased development approach.
In December 1995, the Company transferred to Yerington Acquistion Company
all of its right, title and interest in ten (10) Ormat power generating units
together with its rights under the note receivable from BGPPP for purposes of
consolidating the majority of its mobile, skid mounted Ormat power plants at the
project site.
ITEM 3. LEGAL PROCEEDINGS.
MUNSON LAWSUIT
On October 5, 1992, the Company, as plaintiff, initiated litigation in the
Chancery Court of New Castle County, Delaware, (the "Munson Lawsuit"), against
former officers and directors of the Company. The Defendants are Stephen Munson,
Leland Mink, Walter Mackenzie, Frank Carigula and Donald Selfridge, (the
"Defendants"). The allegations against the Defendants include numerous breaches
of fiduciary loyalty to the Company, invalid issuance of Company shares,
breaches of fiduciary duty arising out of improper issuance of Company stock,
and breaches of fiduciary duty arising out of failure to value the services for
which stock was awarded.
On October 13, 1992, a sequestrator was appointed and the shares of the
Company standing in the names of Leland Mink, Walter MacKenzie, Donald Selfridge
and Frank Carigula were seized to hold and preserve the shares of the Company
until further order of the Court. As of June 9, 1994, The Delaware Court
imposed sanctions against Stephen Munson related to non-compliance in matters of
deposition. A default judgement against Frank Carigula has since been obtained
in the amount of approximately $59,000 and the Company is seeking garnishments
and attachments sufficient to satisfy the full amount of judgement. The
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judgement is beyond appeal. Approxiamtely $8,000 have been recovered to date.
The case is currently pending as the Company is proceeding with further
discovery. The Company does not believe this litigation will have an adverse
material effect on its operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted during the fourth quarter of the fiscal year
covered by this Form 10-KSB to a vote of the security holders of the Company,
either through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
As of June 7, 1996, there was, and remains, an established public trading
market for the Company's Class A Common Stock on the "Small Cap" market of
NASDAQ. The Company's listing was effective September 1, 1992. There was, and
remains, no established public trading market for the Company's Class B Common
Stock, Series A Preferred stock or Series B Preferred stock.
The range of high and low bid information for the Company's Class A Common
Stock is set forth in the following table:
HIGH BID Low Bid
1991 Third Quarter $4.00 $0.50
Fourth Quarter 1.50 0.25
1992 First Quarter 4.00 1.31
Second Quarter 5.50 2.50
Third Quarter 4.38 3.00
Fourth Quarter 3.63 2.50
1993 First Quarter 3.38 2.13
Second Quarter 2.88 1.88
Third Quarter 3.00 2.13
Fourth Quarter 2.50 1.75
1994 First Quarter 2.13 1.38
Second Quarter 1.88 1.50
Third Quarter 1.75 0.94
Fourth Quarter 1.31 0.81
1995 First Quarter 1.38 0.50
Second Quarter 1.06 0.50
Third Quarter 1.00 0.50
Fourth Quarter 0.53 0.25
1996 First Quarter 1.06 0.25
Second Quarter (to 6/07/96) 1.75 0.70
The above trading data is provided on a calendar basis. No reliable price
quotations were available for the three year period prior to the third quarter
of 1991.
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HOLDERS
There were 1,197 holders of record of the Company's Class A Common Stock
as of May 15, 1996, excluding holders in street name. Estimated shareholders in
street name as of May 15, 1996 are 1,300. There is one (1) holder of the
Company's Class B Common Stock. In addition, there is one (1) holder of the
Company's Series A Preferred stock and 4 holders of the Company's Series B
Preferred stock.
DIVIDENDS
The Company has never paid cash dividends on any class of stock and has no
plans to do so in the foreseeable future. The payment of cash dividends by the
Company on the Company's Common Stock will continue to be restricted and
otherwise limited due to the Company's need to finance its on-going operations
and future growth.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS.
PLAN OF OPERATIONS
The Company has an asset base which includes several electric power
generating units (currently not in service and with a net book value of
$5,226,063), unencumbered by debt, from which the Company plans to increase
revenues and earnings. Management plans to deploy all of its idle power
generating assets in one or more projects which are currently under review. If
the Company is unable to sell or deploy these generating units there may be a
material negative impact on the financial position of the Company (See "RISK
FACTORS").
During the year ended February 29, 1996, financial liquidity for on-going
operations was provided primarily from sale of the Company's interest in the
Brady Power Project, sales of Class A Common Stock through private placement and
cash distributions and management fees received from San Jacinto Power Company.
Additionally, an increase in cash liquidity resulted from the acquisition by
merger of Herth Printing and Business Supplies, Inc.
Cash used in operating activities in the fiscal year ended February 29,
1996 was $501,757. The after-tax loss from operations was $628,638, which
included $66,375 of non-cash charges for depreciation and amortization and
$462,527 in non-cash provisions for obsolescence on idle power generation
equipment.
Investing activities provided $504,944 in cash in fiscal year ending
February 29, 1996, including asset sale proceeds of $585,512, proceeds of
$25,000 forefeited by a purchaser of certain wind power generating equipment
from SJPC and net of purchases of new equipment of $35,130 and advances to and
investments in partnerships.
Cash flow from financing activities in fiscal year ending February 29,
1996 provided net cash of $91,171, with receipts from cash sales of stock
totaling $149,752. Net proceeds from new financing borrowings were $41,182 and
related to insurance premium financing. Repayments on financing debt totaled
$99,763.
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Cash used in operating activities in the fiscal year ended February 28,
1995 was $622,769. The after-tax loss from operations was $1,770,654, which
included $52,839 of non-cash charges for depreciation and amortization and
$379,239 in non-cash provisions for obsolescence on idle power generation
equipment.
Investing activities provided $67,554 in cash in fiscal year ending
February 28, 1995, including asset purchases of $156,398 and asset sales
proceeds of $232,656.
Cash flow from financing activities in fiscal year ending February 28,
1995 provided net cash of $30,704, with receipts from cash sales of stock
totaling $374,046. Net proceeds from new financing were $19,932 and related to
insurance premium financing. Repayments on financing totaled $178,080,
including $110,000 in notes payable on turbines purchased from Smith Wind by the
Company's majority owned subsidiary San Jacinto Power Company. Pre-acquisition
distributions paid to the owners of Herth Printing and Business supplies were
$90,213.
On April 10, 1995 the Company executed an agreement for the acquisition of
Tad's Geothermal, Inc., ("Tads"), located in Yerington, Nevada. The closing of
the Tads acquisition is subject to the fulfillment of certain conditions
precedent to closing (See YERINGTON ACQUISITION COMPANY above). Tad's
operates a binary cycle power generating facility which sells electric power to
Sierra Pacific Power Company pursuant to the terms of two (2) power sales
agreements. Tads has sufficient geothermal lands, geothermal production wells,
permits, buildings, transmission infrastructure and cooling spray ponds to
operate two Ormat power generating units substantially similar to the idle Ormat
units owned by the Company.
RISK FACTORS
Associated with the Company's proposed Tads acquisition, there are certain
technical defaults requiring cure related to long term disposal and/or
reinjection of geothermal fluids which the Company has undertaken. In addition
to the above mentioned risk, the Company may deploy one or more of its idle
Ormat power plants for increasing power available for sale to Sierra. Risks
attendant to such deployment include, but are not limited to, governmental
permitting risks, construction risks in completing installation, cost overrun
risks and operational risks. A lack of success in completing the sale or
deployment of Company owned power plants may, in the opinion of the Company's
auditors, requires provision for a reserve related to the carrying value of the
Company's power generating assets.
The Company has been unable to finance operations from revenues and cash
flow. The Company has been financing operations from the sale of its Class A
common stock, asset sales, litigation recoveries and management fees. Moreover,
risks attendant to completing plant expansions includes closing equity financing
sufficient to achieve the Company's initial construction and working capital
needs. If such financing should not be completed, for any reason, there would
be a material adverse effect on the 12 month operations of the Company.
Similar risks exist in the proposed expansion of the wind farm owned by
the Company's majority owned subsidiary SJPC. While neither the Company nor the
minority owner, its development partner, have yet
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secured the requisite financing to initiate the proposed expansion. Lack of
financing would have a material negative effect on the future returns expected
from San Jacinto Power.
Since the Company maintains a holding company structure, the Company does
not intend to enter into direct purchases of capital equipment at the parent
company level in order to complete the deployment of its idle power equipment in
any proposed project. However, any capital expenditures required for project
development will be completed at the subsidiary level and will most likely
require equity, debt or project financing for which the Company will need to
seek additional funding.
The Company also evaluates, from time to time, prospective acquisitions in
the telecommunication industry group. If such an acquisition were to occur and
the Company were to suffer a material negative event, the Company's financial
performance could be adversely and materially impacted. Significant
acquisitions outside the Company's primary energy business may have the effect
of reducing or eliminating certain tax benefits associated with prior net
operating losses, as well negative financial impacts associated with possible
accruals of goodwill and potential increased depreciation charges against
earnings.
Presently, there are no plans for product research and development at the
parent company level over the coming twelve (12) months.
The Company maintains offices at 401 East Fourth Street, Reno, Nevada
89502. The telephone number is (702) 786-7979.
LIQUIDITY AND CAPITAL RESOURCES
Due to working capital constraints encountered during the course of the
fiscal year, the Company has not yet met its goal of covering all of its
operational costs with internally generated cash flows.
As of February 29, 1996, the Company had $424,267 current assets. Cash of
$132,243 including $36,146 held by its majority owned subsidiary San Jacinto
Power Company. Trade receivables of approximately $137,274 were available for
ongoing operations. Inventory of $35,375 was held by Herth Printing and
Business Supplies for utilization in its printing and business supply
activities. Prepaids of $119,375 included approximately $74,840 in annual rental
to the BLM paid by San Jacinto Power for its wind power electric generating
operations.
The Company has been advised that San Jacinto Power Company's primary
customer for electric power sales (Southern California Edison or "SCE") is
currently engaged in litigation with regard to power contract disputes. San
Jacinto Power Company holds an 18.955 MW power sales contract substantially
similar to the type of contract presently in dispute. The plaintiffs in the
above mentioned cases, which have been consolidated into a core action, allege
several claims against SCE, which include a claim for payment of higher rates
for electric power sales to the plaintiffs. San Jacinto Power Company is
closely monitoring the action and may, at some point in the future, join the
consolidated action. There can be no assurance of success, if such litigation
is joined. If the outcome of the litigation is unfavorable for the plaintiffs,
the Company's position will remain relatively unchanged.
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The Company's existing contract with SCE provides for purchase of a
maximum of 18.95 megawatts of output for a thirty year period. The initial ten
(10) year period provides for higher than contract average payments for energy
and capacity combined. With respect to certain equipment (to be determined
subject to the outcome of the above referenced litigation) rates were adjusted
downward beginning in October 1995. The timing of the rate adjustment is
generally based on the initial start-up date of each turbine. As a result of
this adjustment to lower rates, the Company anticipates lower unit revenues from
its wind farm.
In the year ended February 28, 1995, approximately $233,000 was expended
to refurbish the Company's wind turbine equipment. Substantial additional
amounts were also expended in extraordinary maintenance on the subject
equipment. The Company believes its efforts to improve the quality and
efficiency of its equipment will help offset lower rates. The Company will also
be dependent upon variable wind speeds approximating historical rates to achieve
its operating goals.
To date, the Company's 60% ownership stake in NEP has provided no
recurring equity returns, primarily due to costs associated with certain credit
enhancements and loan guarantee costs provided by ESI Energy, Inc. and NEP's
continuing litigation with HSP. During the year ending February 29, 1996, the
Compnay has received through NEP $508,018 in cash from the sale of NEP's
interest in the Brady Power Project (held by NEP through its 50% intereest in
NGPP). The Company is also due an additional $77,493 from NEP as a result of
the above reference sale. However, litigation between NEP and NGPP may, in the
opinion of management, cause this amount to be uncollectible. The Company
expects no further income from NEP and is evaluating options related to sale of
its interests in NEP.
The Company has timely met the majority of its debt obligations, with the
exception of amounts owed to taxing authorities, its officers and certain
professionals employed by the Company. Two payments to the IRS were due at
February 29, 1996. These were made subsequent to May 1, 1996. The Company
further reduced its operating costs during the fiscal year by closing its
corporate offices located at 989 Bible Way, Reno, NV and subsequently relocating
its corporate offices to the office building owned by wholly owned subsidiary
Herth Printing and Business Supplies.
The majority of the Company's ongoing expenses are for operating expenses,
auditing fees, legal fees, expansion of existing business operations, deployment
of Company owned power plants and the development of additional lines of
business.
DEBT
At fiscal year end February 29, 1996, the Company's total current
liabilities were $436,009. Other liabilities included accrued payroll and
accrued audit expenses. The liabilities subject to compromise represent the
long-term settlement amount for withholding taxes and related penalties and
interest due to the Internal Revenue Service, less payments made to date. Under
the terms of the settlement, the Company has been repaying this amount over a
term of 3 years at $4,940 per month plus 7% interest. As of February 29, 1996,
the Company had made nineteen (27) payments in accordance with the terms of the
proposed settlement schedule. Although the schedule of payments was verbally
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agreed to by the IRS, there has been no written acceptance by the IRS delivered
to the Company to date.
RESULTS OF OPERATIONS
GENERAL COMMENTS
The Company has, during fiscal year 1995 continued to look for and bid
upon opportunities to deploy its current core of idle power generating
equipment. The Company has sought to deploy the power generation plants and
equipment where little resource development risk was present. Development
opportunities in the Philippines, the Caribbean and Central America have been
evaluated from the standpoint of seeking least risk opportunities. More
specifically, the Company has sought to either acquire a fully developed
geothermal resource or a fully developed geothermal plant to which its assets
could be deployed with reduced risk.
Additionally, the Company has continued its due diligence investigations
of numerous development opportunities involving the acquisition of distressed
power generating facilities, such as the acquisition of the San Jacinto wind
power assets.
REVENUES AND EXPENSES
Consolidated revenue in fiscal year ending February 29, 1996 declined
approximately 0.9% to $1,625,636 from $1,641,776. The declines in revenues from
fiscal year 1995 to fiscal year 1996 were equal between energy sales and
printing and business supply sales. The decline in energy sales was a result of
contractually lower rates received in the forth quarter and slightly lower than
seasonal average wind activity. Printing and business supply revenues were
affected by lower rates in the business supply segement as a result of
competetive pressures. The Company is shifting its emphasis to the more
profitable segment of its business which is custom print work. Subsequent to
year end, the Company acquired a new high speed, high capacity printing press.
The Company expects growth in this segment of its business as the result of
hiring a commission salesman with extensive contacts in the local market. Print
revenues for 1995 were $608,141 compared to $562,998 in 1995. Office supply
revenues for 1996 were $374,113 compared to $426,440 in 1995.
San Jacinto has been a successful acquisition for the Company. Cash
returns to the Company on cash investments in San Jacinto for retrofit and other
improvements have substantially been recovered. Since the Company began
managing SJPC operations, cash of $241,019 has been received by the Company in
the form of on-going management fees and cash distributions from San Jacinto
Power Company between the acquition in June 1994 and February 29, 1996. The
Company's cash investment in San Jacinto Power totaled $275,055. A total of
$52,500 in cash payments were received in fiscal 1996.
Other income in the year ended February 29, 1996 included $585,299
received from Nevada Energy Partners I, Limited Partnership ("NEP") as a result
of the sale of its interest in the Brady Power Project and $25,000 from a
non-refundable deposit retained by SJPC in connection with the proposed sale of
some of its wind power generating equipment. Interest income was $8,198,
representing earnings on funds invested in
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money market accounts. Other income was principally from scrap sales. Loss from
partnership interests of $46,015 resulted from advances to NEP primarily to fund
NEP's litigation with HSP, NGPP's managing partner relating to internal NGPP
partnership disputes. Interest expense of $19,767 related to insurance premium
financing, the Herth mortgage note and the settlement proceeds payable to the
IRS.
Gain on disposition of assets in 1995 resulted from the sale of a large
crane and three inoperable wind turbines by San Jacinto Power for a gain of
$139,721 and a $45,016 gain on recovery of claims receivable held by the
Company. Interest income was $7,175, representing earnings on funds invested in
money market accounts. Other income of $48,308 was from developer fees received
through the Company's interest in NEP. Loss from partnership interests of
$3,245 resulted from advances to NEP to fund its operating expenses. Interest
expense of $32,460 related to insurance premium financing, the Herth mortgage
note and the settlement payable to the IRS.
COSTS AND EXPENSES COMPARISON OF 1996 AND 1995
Costs and expenses of operations for fiscal year 1996 were $2,897,988
compared to $3,527,541 in fiscal year 1995. Costs of sales of the printing and
business supply operations were $695,774 in 1996 and $664,837 in 1995 . The cost
of sales increase from 67.2% to 71.0% was caused by an increase in material
costs, primarily raw paper stock, from 46.5% to 48.1% with labor costs
increasing from 11.8% to 12.8%, cost of printing supplies increased from 1.5% to
2.5% with direct commission costs increasing from nothing to $14,195. The
Company anticipates increased material costs during fiscal 1996 due to rising
paper costs. The Company is unable to predict the extent to which such costs
can be passed on to its customers and therefore can not estimate the effect of
these expected increases on profitability.
Cost of operations relates directly to the cost of maintaining and
operating the energy production facilities of San Jacinto Power Company's wind
farm operations in Palm Springs, CA and other power generating equipment. Total
costs increased from $366,980 in 1995 to $543,149 in 1996. The 1995 costs
represent only 8 months of operations since the Company took possession of the
wind farm on June 24, 1994. Per month average costs decreased from $45,872 in
1995 to $45,262 in 1996. Total cost for 1996 were adversely affected by the
cost of flood damage repair which totaled in excess of $40,000 and also reflect
a full year of land lease costs versus eight months cost in 1995. Actual
routine operating costs decreased. This was a result of the impact on operating
efficiency of the refurbisment expenditures in 1995 and lower contract monthly
maintenance costs begining on January 15, 1996.
Costs were related to maintaining the Company's idle power generation
equipment were $3,600 in 1996 and $5,953 in 1995. The remaining 1996 costs were
$367,509 for equipment repairs and maintenance, $89,937 paid to the U.S. BLM for
land lease, $15,434 for property taxes and $66,669 for other site costs
(including flood damage repair). The 1995 costs were $275,138 for equipment
repairs and maintenance, $61,385 paid to the U.S. BLM for land lease, $11,186
for property taxes and $13,318 for other site costs.
Depreciation expense was $66,375 in 1996, versus $52,839 in fiscal year
1995. The increase was directly related to the purchase and
21
<PAGE>
operation of the wind farm assets beginning in late June 1994. Both fiscal
years 1996 and 1995 included provisions for obsolescence on idle company
electric power generation equipment. These assets are carried at the lower of
cost, net of accumulated obsolescence charges, of $2.6 million, or estimated
appraised value as of February 29, 1996. An independent appraisal completed in
May 1996 placed a value of $5.7 million on these assets and the obsolescence
charges for 1996 included $83,288 of additional charges to adjust the net value
of the Ormat units to the fair market appraisal value.
Professional fees for fiscal year 1996 were $372,148 including $109,426
for general legal expenses, accounting and audit fees of $67,995, payments in
consideration of a non-competition agreement with the former owner/manager of
Smith Wind of $180,000 and other outside professional services of $14,723
including professional appraisal costs of $9,500 and engineering fees related to
project development of $5,223.
Professional fees for fiscal year 1995 were $508,929 including $174,521
for general legal expenses, accounting and audit fees of $104,461, financial
consulting services of $44,000 principally related to on-going development of
financing sources, payments in consideration of a non-competition agreement with
the former owner/manager of Smith Wind or $123,500 and other outside
professional services of $72,446 including professional appraisal costs of
$10,725, engineering fees related project development of $5,000, public
relations consulting fees of $21,000 and $25,722 in various other services.
General and administrative expenses for fiscal year ending February 29,
1996 were $758,015. This included $361,245 in salaries, wages and related
payroll taxes, $117,644 for public and shareholder relations, $182,521 in
general office expenses, $85,602 in directors fees and expenses, $23,313 in
travel and related expenses, a credit of $12,866 for various taxes and fees and
$555 for miscellaneous office expenses.
General and administrative expenses for fiscal year ending February 28,
1995 were $1,554,718. This included $357,099 in salaries, wages and related
payroll taxes, $915,408 for public and shareholder relations, $101,644 in
general office expenses, $108,179 in directors fees and expenses, $39,149 in
travel and related expenses, $25,934 for various taxes and fees and $7,304 for
miscellaneous office expenses. Under an agreement entered into in June 1994,
the Company contracted for various services related to public and shareholder
relations, the development of its markets and potential merger candidates. The
services were to be provided, and continue to be provided, over an eighteen
month period. Payment for the services was in the form of restricted Class A
common stock. A total of 500,000 shares were issued at $1.75 per share for a
total agreed value of $875,000. While significant services were yet to be
performed at year end February 28, 1995, the Company elected not to carry a
prepaid balance into the current year, as it had initially intended, because the
program had not had its intended impact on the Company's share market. Based on
the early stages of the program, the Company believed that some portion of the
contract amount would be reported as prepaid expense at February 28, 1995, and
therefore in an early release of unaudited financial data, a portion of the
contract was treated as prepaid at February 28, 1995. All amounts relating to
the program have been expensed in the accompanying financial statements.
22
<PAGE>
INCOME TAXES
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standard No. 109, "Accounting for Income Taxes", which
requires tax computations different from those currently used by the Company.
The Company adopted this Statement in fiscal year 1994. The Company believes
that the adoption of this Statement will not have an impact on future financial
statements.
As of February 29, 1996, the Company had Federal income tax loss
carryforwards available to offset future taxable income for financial reporting
and tax purposes of $5,006,777 expiring in 2006 through 2010.
The Company has no remaining energy credit carryforwards of as of February
29, 1996.
There can be no assurance that the available tax loss carryforwards will
be utilized by the Company or that such tax loss carryforwards will be allowed
by the Internal Revenue Service.
NET INCOME (LOSS)
The total operating loss for fiscal year 1996 was $628,638. The operating
loss for fiscal year 1995 was $1,770,654.
ITEM 7. FINANCIAL STATEMENTS
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following financial statements are filed to meet the requirements of
this item. (See Item 13. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K for references to page numbers, where included).
Consolidated Balance Sheets as of February 29, 1996.
Consolidated Statements of Operations for the Years ended February 29,
1996, February 28, 1995.
Consolidated Statements of Cash Flows for the Years ended February 29,
1996, February 28, 1995.
Consolidated Statements of Shareholders' Equity for the Years ended
February 29, 1996, February 28, 1995.
Notes To Consolidated Financial Statements.
23
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Nevada Energy Company, Inc.:
We have audited the accompanying consolidated balance sheet of Nevada
Energy Company, Inc. and subsidiaries as of February 29, 1996, and the related
consolidated statements of operations, cash flows, and stockholders' equity for
the years ended February 29, 1996 and February 28, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Nevada Energy Company, Inc. and
subsidiaries as of February 29, 1996, and the results of their operations and
their cash flows for the years then ended February 29, 1996 and February 28,
1995 in conformity with generally accepted accounting principles.
/s/ Kofoury, Armstrong & Company
Reno, Nevada
May 31, 1996
24
<PAGE>
NEVADA ENERGY COMPANY, INC.
CONSOLIDATED BALANCE SHEET
FEBRUARY 29, 1996
ASSETS
CURRENT ASSETS
Cash $ 132,243
Receivables (net of allowance for
doubtful accounts of $0) 137,274
Inventory 35,375
Deposits and prepaid expenses 119,375
--------
Total Current Assets 424,267
--------
PROPERTY AND EQUIPMENT, at cost - Note 1
Furniture, equipment and vehicles 229,580
Building 253,156
Power generation equipment 1,087,607
Idle power generation equipment (net of
reserve for obsolescence of $2,648,032) 5,226,063
Land 70,000
-----------
6,866,406
Less: Accumulated depreciation
and amortization (336,277)
-----------
Net Property and Equipment 6,530,129
-----------
OTHER ASSETS - Note 2
Investments in partnerships 3,227
Investments in subsidiaries 24,546
Power purchase agreements (net of amortization
of $4,212) - Note 1 48,288
Other assets 1,102
-----------
77,163
-----------
Total Assets $ 7,031,559
-----------
-----------
25
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 187,455
Short-term borrowings - Note 3 42,041
Payable to related party - Note 4 37,965
Accrued payroll 60,294
Other liabilities 65,047
Liabilities subject to compromise 43,207
-----------
Total Current Liabilities 436,009
-----------
NON-CURRENT LIABILITIES
Mortgage payable - Note 3 15,688
-----------
Total Non-Current Liabilities 15,688
-----------
COMMITMENTS AND CONTINGENT LIABILITIES - Note 10 -
-----------
Total Liabilities 451,697
-----------
MINORITY INTEREST IN SUBSIDIARY - Note 2 698,430
-----------
SHAREHOLDERS' EQUITY - Notes 1, 5, 6, and 7
Preferred stock, $.001 par value;
authorized 2,000,000 shares, issued and
outstanding, none at February 29, 1996 -
Class A common stock, $.001 par value;
authorized 25,000,000 shares, issued and
outstanding 8,808,485 shares at
February 29, 1996 8,808
Class B common stock, $.001 par value;
authorized 25,000,000 shares, issued and
outstanding 4,437,473 shares at
February 29, 1996 4,437
Additional paid-in capital 11,528,754
Accumulated deficit (5,651,466)
Treasury stock, Class A, 16,785 shares at
February 29, 1996; Class B, 2,299,953
shares at February 29, 1996 (9,101)
-----------
Total Shareholders' Equity 5,881,432
-----------
Total Liabilities and
Shareholders' Equity $ 7,031,559
-----------
-----------
The accompanying notes are an integral part of these consolidated statements.
26
<PAGE>
NEVADA ENERGY COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------- -------------
REVENUES
Energy sales $ 646,030 $ 652,338
Printing and business supply sales 979,606 989,438
---------- -----------
Total Revenues 1,625,636 1,641,776
---------- -----------
COSTS AND EXPENSES
Cost of sales 695,774 664,837
Cost of operations 543,149 366,980
Depreciation and amortization - Note 1 66,375 52,839
Provision for obsolescence - Note 1 462,527 379,239
Professional fees 372,148 508,929
General and administrative 758,015 1,554,717
---------- -----------
Total Costs and Expenses 2,897,988 3,527,541
---------- -----------
OTHER INCOME AND (EXPENSES)
Interest income 8,198 7,175
Other income 24,130 48,308
Gain on disposition of assets 610,299 184,737
Loss from partnership interests (46,015) (3,245)
Interest expense (19,767) (32,460)
---------- -----------
Total Other Income and (Expenses) 576,845 204,515
---------- -----------
(Loss) before Taxes and Minority
Interests (695,507) (1,681,250)
Provision for Income Taxes - Note 8 933 866
---------- -----------
(Loss) before Minority Interests (696,440) (1,682,116)
MINORITY INTERESTS IN SUBSIDIARY'S
EARNINGS AND (LOSSES) - Notes 1 and 2 67,802 (88,538)
---------- -----------
Net (Loss) $ (628,638) $(1,770,654)
---------- -----------
---------- -----------
Net (Loss) Per Share - Notes 1 and 6 $(0.07) $(0.24)
---------- -----------
---------- -----------
The accompanying notes are an integral part of these consolidated statements.
27
<PAGE>
NEVADA ENERGY COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $(628,638) $(1,770,654)
Adjustments to reconcile:
Depreciation and amortization 66,375 52,839
Reserve for obsolescence 462,527 379,239
(Gain) on disposition of assets, net (610,299) (184,737)
Equity in loss from partnership interests 46,015 3,245
Stock issued to directors/officers/employee 18,362 45,730
Stock issued for services 50,000 926,700
Minority interest in subsidiary's earnings
and (losses) (67,802) 88,538
Changes in assets and liabilities:
(Increase) decrease in receivables 111,126 (136,143)
Decrease in receivables from related party 37,500 87,475
(Increase) decrease in inventory (10,312) 7,625
(Increase) decrease in deposits and prepaids 6,437 (46,921)
Decrease in other assets 10,035 -
Increase in accounts payable 42,314 11,679
Increase (decrease) in accounts payable to
related party (20,156) 58,122
Increase (decrease) in other liabilities 26,532 (90,706)
(Decrease) in liabilities subject
to compromise (41,773) (54,800)
---------- ----------
Net Cash Provided (Used) in
Operating Activities (501,757) (622,769)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment 585,512 232,656
Forfeited non-refundable deposit on
offer 25,000 -
Purchase of property and equipment (35,130) (156,398)
Advances to and investments in partnerships (70,438) (8,704)
---------- ----------
Net Cash Provided (Used) in
Investing Activities 504,944 67,554
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on financing (99,763) 19,932
Proceeds from new financing 41,182 (178,080)
Proceeds from cash sales of common stock 149,752 374,046
Contribution from (payment to) minority interest - (94,981)
Cash dividends - Note 10 - (90,213)
---------- ----------
Net Cash Provided (Used) in
Financing Activities 91,171 30,704
---------- ----------
Net Increase (Decrease) in Cash 94,358 (524,511)
CASH, Beginning of Year 37,885 562,396
---------- ----------
CASH, End of Year $ 132,243 $ 37,885
---------- ----------
---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 19,767 $ 32,460
---------- ----------
---------- ----------
Taxes paid through payments on liabilities
subject to compromise $ 41,773 $ 54,800
---------- ----------
---------- ----------
The accompanying notes are an integral part of these consolidated statements.
28
<PAGE>
NEVADA ENERGY COMPANY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
<TABLE>
<CAPTION>
CLASS A COMMON CLASS B COMMON PREFERRED STOCK
----------------------------------- -------------------- -----------------------
NUMBER NUMBER NUMBER
OF OF OF
SHARES AMOUNT SUBSCRIBED SHARES AMOUNT SHARES AMOUNT
----------- -------- ---------- ---------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, February 28, 1994 5,558,798 $ 5,559 $ - 3,476,875 $3,477 - $ -
Shares issued for cash - Note 6 442,867 443 - - - - -
Shares issued for services - Note 6 612,573 612 - - - - -
Shares issued for asset
acquisition - Notes 2 and 6 - - - - - - -
Stock dividends at market
value - Note 6 895,243 895 - 548,043 548 - -
Transfer of surplus for stock
dividend - - - - - - -
Stock subscribed - Note 6 - - 250,000 - - - -
Cash dividend - Note 10 - - - - - - -
Net (loss) for the year ended
February 28, 1995 - - - - - - -
--------- ------- -------- --------- ------ -------- ------
BALANCES, February 28, 1995 7,509,481 7,509 250,000 4,024,918 4,025 - -
Shares issued for cash - Note 6 333,333 333 (250,000) - - - -
Shares issued for services - Note 6 145,842 146 - - - - -
Stock dividends at market
value - Note 6 819,829 820 - 412,555 412 - -
Transfer of surplus for stock
dividend - - - - - - -
Net (loss) for the year ended
February 29, 1996 - - - - - - -
--------- ------- -------- --------- ------ -------- ------
8,808,485 $ 8,808 $ - 4,437,473 $4,437 - $ -
--------- ------- -------- --------- ------ -------- ------
--------- ------- -------- --------- ------ -------- ------
</TABLE>
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PAID-IN ACCUMULATED TREASURY SHAREHOLDERS'
CAPITAL DEFICIT STOCK EQUITY
----------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
BALANCES, February 28, 1994 $10,060,347 $(3,252,174) $(230,789) $6,586,420
Shares issued for cash - Note 6 273,930 - - 274,373
Shares issued for services - Note 6 971,818 - - 972,430
Shares issued for asset
acquisition - Notes 2 and 6 - - 222,267 222,267
Stock dividends at market
value - Note 6 1,057,940 (1,059,383) (331) (331)
Transfer of surplus for stock
dividend (1,059,383) 1,059,383 - -
Stock subscribed - Note 6 - - - 250,000
Cash dividend - Note 10 (90,213) - - (90,213)
Net (loss) for the year ended
February 28, 1995 - (1,770,654) - (1,770,654)
------------- ------------ --------- ------------
BALANCES, February 28, 1995 11,214,439 (5,022,828) (8,853) 6,444,292
Shares issued for cash - Note 6 247,331 - - (2,336)
Shares issued for services - Note 6 68,216 - - 68,362
Stock dividends at market
value - Note 6 802,321 (803,553) (248) (248)
Transfer of surplus for stock
dividend (803,553) 803,553 - -
Net (loss) for the year ended
February 29, 1996 - (628,638) - (628,638)
------------- ------------ --------- ------------
$11,528,754 $(5,651,466) $ (9,101) $5,881,432
------------- ------------ --------- ------------
------------- ------------ --------- ------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
29
<PAGE>
NEVADA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
Note 1 - Organization and Summary of Significant Accounting Policies:
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries Combustion Energy
Company, Inc. ("CEC"), a Nevada corporation, Yerington Acquisition Company,
Inc., a Nevada corporation and its majority owned subsidiary San Jacinto
Power Company, a Nevada corporation (See Note 2). On November 30, 1994,
the Company's wholly owned subsidiary CEC completed a merger with Herth
Printing and Business Supplies, Inc. ("HPBS" - see notes 2 and 6). This
acquisition has been treated as a pooling of interests and accordingly, the
consolidated financial statements presented herein have been restated to
include the accounts of HPBS. All significant intercompany accounts and
transactions have been eliminated in consolidation.
ORGANIZATION AND OPERATIONS:
Nevada Energy Company, Inc. ("the Company") was organized on December
2, 1982, and incorporated under the laws of Delaware on December 20, 1982,
under the name Munson Geothermal, Inc. Pursuant to an action of the Board
of Directors, the Company's name was changed to Nevada Energy Company, Inc.
on December 3, 1990. The Company is primarily engaged in the development,
financing, construction and operation of geothermal, wind and biomass
energy resources which are used primarily to generate electric power.
POWER GENERATION EQUIPMENT:
Power generation equipment is carried at cost and consists of 64 wind
turbine generators and associated infrastructure operated in California by
San Jacinto Power.
IDLE POWER GENERATION EQUIPMENT:
Idle power generation equipment includes ten Ormat power plants
capable of producing up to an estimated maximum 3,700 KW average output and
the relocated Raft River Power Plant with an estimated capacity of up to
7,200 KW of output. Total net book value of these assets is $5,309,351.
A recent appraisal (May 1996) of these assets determined the fair market
value to be $5.7 million. The Company intends to sell these assets in the
future.
LAND AND BUILDINGS
Included in the assets of HPBS (see above) is a ten thousand eight
hundred (10,800) square foot building containing office space, print shop
and warehouse space with an historical cost of $249,602 and approximately
1.0 acres of fee land with a book value of $70,000.
DEPRECIATION AND AMORTIZATION:
The Company provides for depreciation of buildings, furniture and
field equipment utilizing straight-line and accelerated methods over the
useful lives of three to twenty-one years beginning when assets are placed
in service. Costs of power generation equipment represents 64 wind
turbines together with related infrastructure, in use by the Company's
majority owned
30
<PAGE>
NEVADA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
subsidiary San Jacinto Power, which has been recorded at acquisition cost
and is being depreciated over the remaining 21 year life of the related
Power Purchase Agreement acquired in the same transaction. The Power
Purchase Agreement was valued at $52,500, its estimated value when
acquired, and it is being amortized on a straight line basis over the
remaining 21 years.
Idle geothermal power generation equipment was adjusted to the lower
of cost or appraisal value at February 29, 1992. Subsequently, provisions
for obsolescence have been provided based on the remaining economic life
estimated to be eighteen years at that time. Based on the May 1997
appraisal, an additional $83,288 of obsolescence was provided on the Ormat
power plants reducing their net book value to the appraisal value of $2.7
million. The HPBS vehicles, equipment and building are recorded at acquired
book value and are being depreciated over their remaining useful lives.
NET INCOME (LOSS) PER COMMON SHARE:
The net income (loss) per common share is computed based upon the
weighted average number of shares of Class A Common Stock outstanding
during each period. Class A shares issued in conjunction with the merger
of HPBS and CEC (See Notes 1 and 6) have been treated as issued at February
28, 1993. Shares issued as dividends (Notes 6 and 12) have been treated as
issued at February 28, 1993. Weighted average shares of Class A Common
Stock outstanding were 8,780,707 in the year ended February 29, 1996 and
7,678,077 in the year ended February 28, 1995. Shares issuable upon
exercise of warrants or options are excluded from the computation since the
effect of their inclusion would be antidilutive. Shares of Class B Common
Stock are excluded from the computation since Class B shareholders do not
participate in the earnings of the Company.
BUSINESS SEGMENT INFORMATION
The Company currently classifies its business activities in two
segments: (1) electric power production and development and (2) printing
and business supply sales. Information concerning the Company's business
segments in fiscal 1996 and 1995 is as follows (amounts in thousands):
ELECTRIC PRINTING
POWER AND OFFICE
($000) PRODUCTION SUPPLIES CONSOLIDATED
- ------ ------------ ---------- --------------
1996
Sales * $ 646 $ 980 $ 1,626
Operating Income (Loss) (659) 30 (629)
Identifiable assets 6,526 506 7,032
Depreciation/amortization 54 12 66
Provision for obsolescence 463 - 463
Capital expenditures - 32 32
31
<PAGE>
ELECTRIC PRINTING
POWER AND OFFICE
($000) PRODUCTION SUPPLIES CONSOLIDATED
- ------ ------------ ---------- --------------
1995
Sales $ 653 $ 989 $ 1,642
Operating Income (Loss) (1,841) 70 (1,771)
Identifiable assets 6,751 272 7,023
Depreciation/amortization 37 16 53
Provision for obsolescence 379 - 379
Capital expenditures 156 - 156
Intra-segment transactions, which are not material, have been eliminated.
* Substantially all revenues from the electric power production
were generated from sales to Southern California Edison Company
(SCE) under the Power Purchase Agreement, which will expire in
2015. Pursuant to the agreement, SCE will purchase all
electricity generated by the Company's wind system at the price
computed based on the forecast of annual as-available capacity
and a standard rate approved by the Public Commission of the
State of California. The Company's revenue from SCE of
approximately $646,030 represents 39.7% of the total revenue of
the Company in 1996.
** Includes $5,226,063 of net idle power generation equipment in
1996 and $5,688,590 of net idle power generation equipment in
1995. Note 2 - Investments in Partnerships and Consolidated
Subsidiaries:
COMBUSTION ENERGY COMPANY, INC.
Combustion Energy Company, Inc., a Nevada corporation, ("CEC") was
formed on February 12, 1993 for the purpose of being a general partner of
Oreana Power Partners (see below). CEC's assets consist of its one percent
(1%) partnership interest in Oreana Power Partners, currently valued at $95
based on its initial cash investment less accumulated losses return of
capital, and its ownership of the assets of HPBS (See Notes 1 and 6).
COMBUSTION ENERGY COMPANY MERGER WITH HERTH PRINTING
On November 30, 1994 the Board of Directors of the Company and the
shareholders of Herth Printing and Business Supplies, Inc. approved the
merger of NEC's subsidiary CEC with HPBS which resulted in HPBS becoming a
wholly-owned subsidiary of NEC. Under the terms of the agreement, HPBS
shareholders received 641,784 shares of the Company's class A common stock
in exchange for all of the outstanding shares of HPBS. HPBS was
established in 1983 as a sole proprietorship as a printing and retail
office supply business. The proprietors incorporated the business on
November 1, 1994.
The merger qualifies as a tax-free reorganization and was accounted
for as a pooling of interests. Accordingly, the Company's financial
statements have been restated to include the results of HPBS for all period
presented.
32
<PAGE>
NEVADA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
Separate and combined results of NEC and HPBS during the periods presented
were as follows (in thousands):
YEAR ENDED
FEBRUARY 29, 1996 COMBINED NEC HPBS
----------------- ---------- ------- ------
Net revenues $ 1,626 $ 646 $ 980
Net income (loss) (629) (659) 30
YEAR ENDED
FEBRUARY 28, 1995
-----------------
Net revenues $ 1,642 $ 653 $ 989
Net income (loss) (1,771) (1,841) 70
The combined financial results presented above include
adjustments made to conform accounting policies of the two companies.
There were no adjustments which impacted net income. Intercompany
transactions between the two companies, which were not material, have
been eliminated.
SAN JACINTO POWER COMPANY
San Jacinto Power Corporation, a Nevada Corporation, ("SJPC") was
formed on December 15, 1993. Under the terms of an "Escrow Agreement"
dated December 15, 1993, the Company contributed 222,267 shares of its
Class A Common Stock, valued at $222,267, based on 50% of market price at
the time of issue due to resale restrictions imposed pursuant to Rule 144,
and total cash of $275,055 in exchange for its 50.01% ownership interest in
SJPC.
Also under the terms of the Escrow Agreement, on December 15, 1993,
the New World Power Corporation ("New World") contributed 48,000 shares of
its Common Stock, with market value of $516,000 at time of issue, to SJPC.
On February 10, 1994, New World contributed cash of $149,970 to SJPC and
delivered a balance of cash of $124,975 on March 8, 1994. New World's
contribution of Common Stock and cash of $274,945 to SJPC are in exchange
for its 49.99% ownership interest in SJPC. The shares of Class A Common
Stock contributed to SJPC by the Company and the Common Stock of New World
are collectively referred to herein as the "Shares". The number of shares
to be issued by the Company and New World were established in an Asset
Purchase Agreement dated July 1, 1993 with no adjustment required due to
stock price variations to date of issue. The Escrow Agreement provides for
the shares of the Company and New World to be held for a two year period
from December 15, 1993, prior to distribution to the sellers. During the
two year period, certain costs arising in connection with the purchase
transaction could result in the number of shares finally transferred to the
seller being reduced. Such costs include unassessed claims for property
taxes, prior environmental infractions, prior BLM assessments, limited
partner claims and other contingent costs to be assessed against the
sellers. There is no provision for an increase in the number of shares to
be distributed.
33
<PAGE>
NEVADA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
The Company and New World subsequently engaged in negotiations to
acquire the operating assets of Smith Wind Energy Company and six
affiliated limited partnerships operated by Smith which are known as Triad
A, Triad B, Triad C, Triad D, Triad E, and Triad F Limited Partnerships
(collectively "Triad"). Smith and Triad were operating a wind turbine
energy park in North Palm Springs, California. Energy sales were pursuant
to a long-term contract with Southern California Edison Company. A total
of 77 wind turbines were available for operations, together with associated
infrastructure, additional turbine sites, turbine towers, parts and service
equipment and a long-term land lease with the BLM (collectively, the
"Assets").
SJPC was formed for the purpose of acquiring, holding and operating
the Assets to be acquired from Smith and Triad. The acquisition of the
Smith/Triad assets by SJPC was completed and effective on June 24, 1994.
The results of operations of Smith/Triad from June 24, 1994 have been
included in the accompanying consolidated financial statements for the
year ended February 28, 1995. The purchase price of $1,038,029 was equal
to the agreed value of the shares plus assumed liabilities totalling
approximately $293,957 for long-term secured debt and certain delinquent
property taxes.
The total cost was allocated based on managements estimate of fair
market value of assets acquired, except for prepaid BLM rent which was
valued at cost, as follows:
Field Equipment $ 21,177
Prepaid BLM Rent 46,892
Power Sales Contract 52,500
Power Generation Equipment 917,460
----------
Total $1,038,029
----------
----------
SJPC also entered into a non-competition agreement with the former
owner/general partner of Smith which provided for payment of $15,000 per
month for two years and a non-competition period of two years to begin at
the closing date of June 24, 1994. In conjunction with the retrofitting
of the acquired wind turbines, no interest has been capitalized. Retrofit
was done on a unit-by-unit basis, with no extended down time. SJPC has
been in discussions with various wind-farm developers with the objective of
expanding capacity at its present site. There are no agreed commitments
for expansion at this time.
34
<PAGE>
NEVADA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
MT. APO CORPORATION
Mount Apo Corporation, a Nevada corporation ("MAC") was formed on May
9, 1994. MAC is a joint venture of NEC and Geothermal Development
Associates and was formed for the purpose of submitting a competitive bid
on a 40 MWe geothermal project in the Philippines. The bid was
unsuccessful. The Company's investment in MAC is carried at cost of $590.
BRADY GEO PARK POWER PROJECT, 1986, LTD.
The Company's investment in Brady Geo Park Power Project, 1986, Ltd.,
("BGPPP") including note and related interest receivable and advances for
property taxes were written down to a combined book value substantially
equal to the appraised value of the Ormat energy converter interests held
by the partnership. Except for the residual partnership interest, the
Company transferred all of its interest in the assets of BGPPP to its
wholly owned subsidiary effective December 1, 1995. (See Note 2, Yerington
Acquisition Company.) The Company has classified this asset as Idle Power
Generation Equipment in the accompanying consolidated balance sheet.
NEVADA ENERGY PARTNERS - 1
In February 1991, the Company received a 60% interest as a limited
partner in Nevada Energy Partners 1, a Nevada limited partnership (NEP-I
LP), which holds a 31.66% interest in the equity of Nevada Geothermal Power
Partners ("NGPP"). NGPP is a Nevada limited partnership whose general
partners are Hot Springs Power Company and NEP-I LP. The Company issued a
total of 3,476,875 shares of Class B common shares for this interest. The
shares were valued at par of $0.001 per share as there is no market for
these shares and there was no other basis for valuing the interest
acquired. An additional 548,043 shares have been issued to NEP-I LP in
conjunction with the Company's 5% stock dividends made in July and October
1994 and January 1995. Class B common shares have full voting rights, but
have no cash dividend participation.
The Company's interest in NEP-I LP is valued at $3,080 based on the
par value of the shares issued, less amounts recorded as treasury stock due
to the Company's effective ownership of 60% of the Class B shares held by
NEP-I LP, plus subsequent cash investments, less estimated partnership
losses.
As a general partner of NGPP, NEP-I LP is entitled to a share in
NGPP's distributable cash flow. As a general partner in Brady Power
Partners ("BPP"), NGPP held a fifty percent (50%) ownership interest in the
completed Brady project and was also entitled to receive project
development fees and a share of BPP's distributable cash flow. BPP was a
Nevada general partnership whose general partners were NGPP and ESIBH
Limited Partnership, a Delaware limited partnership. The Company is
entitled to receive sixty
35
<PAGE>
NEVADA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
percent (60%) of NEP-I LP's distributable cash flow. There has been no
cash available for distribution through February 29, 1996.
On May 8, 1995, NGPP sold its 50% interest in the Brady Power Project
for approximately $5.5 million dollars. NGPP has received net cash
distributions of approximately $4.3 million dollars. The Company received
$508,018 in July 1995 as a part of its share of the distribution of theses
proceeds. The balance due of $77,493 was recorded as a receivable.
However, the receivable has subsequently been charged to bad debts as it is
believed to be uncollectible.
OREANA POWER PARTNERS
Oreana Power Partner ("OPP") is a limited partnership which was formed
in February 1993 for the purpose of developing and financing gas turbine
electricity generating facilities to provide power to Sierra Pacific Power
Company ("Sierra") pursuant to power sales contracts to be obtained. The
Company is a limited partner and its interest is valued at $46 based on its
initial cash investment, less expenses and returned capital. The general
partners of OPP are Energy Development Associates ("EDA", a Nevada
corporation and a wholly-owned subsidiary of Geothermal Development
Associates) and CEC, a wholly-owned subsidiary of the Company. EDA is the
Managing General Partner and CEC is the Financial General Partner.
Geothermal Development Associates is a privately owned Nevada company, not
related to the Company. There was no activity with respect to development
in the year ending February 28, 1995.
YERINGTON ACQUISITION COMPANY, INC.
Yerington Acquisition Company, Inc., a Nevada corporation ("YAC") was
formed on December 8, 1994 for the purpose of acquiring the assets of Tad's
Geothermal, a non-related owner/operator of a geothermal power generating
facility located near Yerington, Nevada. The acquisition was not
completed. In December 1995, the Company transferred all of its right
title and interest in 10 Ormat power generating units (classified as idle
power generating equipment in the financial statements) to YAC. In April
1995, the Company entered into an agreement through a non-binding letter of
intent, to transfer, through merger with YAC, to Pollution Controls,
International, all of its right title and interest in the 10 Ormat units
together with any remaining interest in acquiring the assets of Tad's.
Aggregate consideration to be received by the Company, in the form of
convertible preferred stock and convertible debt would exceed the net book
value of the assets.
36
<PAGE>
NEVADA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
NOTE 3 - Short-Term Borrowings and Mortgage Payable:
The following summarizes short-term borrowings at February 29, 1996:
AFCO $7,406
Cananwill, Inc. 5,805
Mortgage note - current 28,830
-------
Total $42,041
-------
-------
The note payable to AFCO represents the balance due on financing the
Company's insurance and is payable in monthly installments of $2,506.
The note payable to Cananwill, Inc. represents the balance due on
financing of San Jacinto Power Company's general liability and umbrella
insurance coverage and is payable in monthly installments of $1,955.
There is a mortgage in the amount of $44,518 secured by the land and
building acquired by CEC in its merger with HPBS (See Note 1). The current
portion is $28,830 and monthly installments are $2,718 with interest at 10%
per annum. Amounts payable in future years are: 1997 - $28,827, 1998 -
$13,214.
NOTE 4 - Related Party Transactions:
During the year ended February 28, 1995, San Jacinto Power Company
(the Company's majority owned consolidated subsidiary) received services
under a maintenance agreement from The New World Grid Power Company. The
New World Grid Power Company is a wholly owned subsidiary of The New World
Power Company, the minority owner of San Jacinto Power Company. Services
provided included repair and maintenance, refurbishment and on-site
operations oversight and were valued at approximately $296,511. A balance
of $37,965 was payable to the New World Grid Power Company for the services
as of February 29, 1996.
NOTE 5 - Preferred Stock:
On December 14, 1985, the stockholders of the Company authorized the
creation of 2,000,000 shares of $1.00 par value preferred stock. The board
of directors has the authority to issue the stock in series and to
determine all terms and preferences for each individual series. At the
annual meeting, the Company's shareholders approved an amendment of the
Company's certificate of incorporation reducing the par value of the
preferred stock to $.001 per share.
At February 29, 1996, there are no preferred shares issued or
outstanding.
37
<PAGE>
NEVADA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
NOTE 6 - Class A and Class B Common Stock:
The Company issued 222,267 shares of Class A Common Stock to its
subsidiary San Jacinto Power Company to be used by San Jacinto in the
acquisition of certain Assets (see Note 2). The shares were valued at
$222,267 and were recorded as treasury shares at February 28, 1994 as the
proposed acquisition had not been consummated at that time. Upon
consummation of the acquisition in June 1994, the shares were removed from
treasury and issued.
In the year ended February 29, 1996, 333,333 shares of Class A Common
Stock were issued for cash in the amount of $250,000, and 145,842 shares of
Class A Common Stock were issued for services valued at $68,216, including
106,670 shares issued to directors in lieu of cash for annual fees and
39,172 shares issued to officers and an employee as bonuses.
In the year ended February 28, 1995, 442,867 shares of Class A Common
Stock were issued for cash in the amount of $274,373, and 612,573 shares of
Class A Common Stock were issued for services valued at $972,430, including
27,500 shares issued to directors in lieu of cash for annual fees and
18,230 shares issued to officers and an employee as bonuses.
Included in the shares issued for services, on December 27, 1994, the
Company issued 500,000 shares of its Class A Common Stock registered under
the Form S-8 filed August 2, 1994 and having Registration No. 33-82318.
The shares were valued at $1.75 per share based upon the closing NASDAQ
price of the Company's common stock on June 24, 1994. These shares were
issued for services provided under an agreement dated June 27, 1994.
In conjunction with CEC's merger with HPBS (see Notes 1 and 3), the
Company issued 641,784 shares of its Class A Common stock during the year
ending February 28, 1995, in exchange for all of the outstanding shares of
HPBS. The Company's shares were valued $.6582 per share based on the value
of the net assets acquired. These shares were treated as if issued at
February 28, 1993.
On February 16, 1995, the Company entered into an agreement for the
sale of 333,333 shares of restricted Class A common stock at a price of
$0.75 per share for a total sale price of $250,000. Payment of $100,000
was received prior to February 28, 1995, with the balance being received
subsequent to that date (Note 12).
On December 20, 1994, the Company entered into two (2) irrevocable
subscription agreements for the sale of 500,000 Class A Common shares at a
purchase price of $2.00 per share. The agreements, which provided for
payment within 60 days of the execution, were extended to September 20,
1995. The subscribers subsequently failed to fulfill their obligation
under the agreement.
38
<PAGE>
NEVADA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
In the year ending February 28, 199, stock dividends of 5% on Class A
and Class B Common Stock were declared for shareholders of record as of
July 11, 1994, October 3, 1994 and January 20, 1995. The aggregate shares
issued are 895,243 Class A and 548,043 Class B, respectively.
In the year ending February 29, 1996, stock dividends of 5% on Class A
and Class B Common Stock were declared for shareholders of record as of
April 20, 1995 and July 31, 1995. The aggregate shares issued are 819,829
Class A and 411,555 Class B, respectively.
Each share of Class B common stock is entitled to all of the rights
and privileges pertaining to Class A common stock without any limitations,
prohibitions, restrictions or qualifications except that each share of such
Class B common stock shall not be entitled to receive any cash dividends
declared and paid by the corporation and shall be entitled to share in the
distribution of assets of the corporation upon liquidation or dissolution,
either partial or final.
NOTE 7 - Stock Option Plans:
On December 29, 1993, the Company adopted the 1993 Directors' Stock
Option Plan for the Company's directors. Under the terms of this stock
option plan, each of the five directors of the Company was granted an
option to purchase 25,000 shares of the Company's Class A Common Stock or a
total of 125,000 shares at a price of $2 per share, equal to the market
price of the stock at the date of grant. The option is exercisable until
December 31, 2001, and no options have been exercised through February 28,
1995.
On June 27, 1994, the Company adopted the 1994 Directors' Stock Option
Plan for the Company's directors. Under the terms of this stock option
plan, each of the five directors of the Company was granted an option to
purchase 12,500 shares of the Company's Class A Common Stock or a total of
62,500 shares at a price of $1.625 per share, equal to the market price of
the stock at the date of grant. The option is exercisable until May 31,
2002, and no options have been exercised through February 28, 1995.
On January 14, 1995, the Company adopted an additional 1994 Directors'
Stock Option Plan for the Company's directors. Under the terms of this
stock option plan, each of the five directors of the Company was granted an
option to purchase 17,500 shares of the Company's Class A Common Stock or a
total of 87,500 shares at a price of $0.9375 per share, equal to the market
price of the stock at the date of grant. The option is exercisable until
December 31, 2002, and no options have been exercised through February 28,
1995.
On December 31, 1995, the Company adopted an additional 1994
Directors' Stock Option Plan for the Company's directors. Under the terms
of this stock option plan, each of the five directors of the Company was
granted an
39
<PAGE>
NEVADA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
option to purchase 30,000 shares of the Company's Class A Common Stock or a
total of 150,000 shares at a price of $0.3125 per share, equal to the
market price of the stock at the date of grant. The option is exercisable
until December 31, 2003, and no options have been exercised through
February 29, 1996.
On June 28, 1994, the Company's Board of Directors adopted an Employee
and Consultant Stock Option Plan (the "Plan") and registered the shares
available under the Plan on Form S-8 in accordance with the Securities Act
of 1933 filed August 2, 1994, having Registration No. 33-82318 . The
purpose of the Plan is to provide compensation for services rendered to the
Company and to promote the success of the Company by providing "Eligible
Participants" (employees and consultants) with incentives for performance
on behalf of the Company. The Plan is accomplished by providing for the
granting of options to purchase Class A Common Stock to eligible
participants. The Board of Directors may suspend or terminate the Plan at
any time but no such action shall adversely affect the rights of any person
granted an option under the Plan prior to that date of suspension or
termination. The maximum number of shares available for option under the
Plan are 1,125,000 Class A Common, subject to adjustment by reason of
reorganization, merger, consolidation, recapitalization, dividends, stock
split, changes in par value and the like occurring or effective while any
such shares of Class A Common Stock are subject to the options under the
Plan. During 1995, 500,000 shares were exercised at a price of $1.75 per
share and there were no options outstanding as of February 28, 1995 under
this Plan.
NOTE 8 - Income Taxes:
The Company has adopted FASB 109 in the fiscal year 1994. Due to
uncertainty of realization in light of the Company's continuing operating
losses, no deferred tax asset has been recorded in the financial statements
because the Company has assessed a valuation account to the full extent of
its potential deferred tax asset. The following is a summary of the
potential deferred tax asset and the valuation allowance:
Property and equipment due to differences
in depreciation and reserve for obsolescence $ 769,349
Net operating loss carry forward 1,702,347
Energy credit carry forward -
-----------
Total deferred tax asset 2,471,696
Valuation allowance (2,471,696)
-----------
Net deferred tax asset $ -
-----------
-----------
40
<PAGE>
NEVADA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
During the year ended February 29, 1996, the Company's potential
deferred tax asset has increased by $238,956 and the valuation account has
been increased accordingly.
No provision for Federal income taxes was recorded during the years
ended February 29, 1996 and February 28, 1995 due to the net losses of the
Company. Income taxes included in the financial statements represent
California state income taxes on the net income of San Jacinto Power
Company, the Company's majority owned consolidated subsidiary.
As of February 29, 1996 the Company had federal income tax loss
carryforwards available to offset future taxable income for income tax
purposes of $5,006,777 which expire in 2006 through 2010.
The Company's energy credit carryforwards of $25,000 as of February
28, 1995 expired at November 30, 1995.
NOTE 9 - Supplemental Noncash Investing and Financing Activities:
During the year ended February 29, 1996, 145,842 shares of Class A
Common Stock were issued for compensation of $68,216 to certain officers,
directors and an employee.
During the year ended February 28, 1995, 45,730 shares of Class A
Common Stock were issued for compensation of $45,730 to certain officers,
directors and an employee. Also, 566,843 shares of Class A Common stock
were issued for other services valued at $926,700.
41
<PAGE>
NEVADA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
NOTE 10 - Commitments and Contingencies:
The Company's wholly owned subsidiary CEC, has entered into a two year
employment agreement with one of the former owners and manager of HPBS
commencing November 30, 1994 which provides for annual compensation of
$35,468 plus commissions. For purposes of the consolidated financial
statements, owner withdrawals during the period of proprietorship of HPBS
have been shown as dividends (see Note 2).
The Company's wholly owned subsidiary SJPC leases its wind turbine
generator sites under a long-term lease with the United States Bureau of
Land Management ("BLM"). Pursuant to the agreement, SJPC has the right of
usage of the land for windmill operations until March 2014 and for an
approximate annual fee of $89,000. The annual payments on the land lease
was $89,610 for the year ended February 29, 1996. Such expense is included
in the cost of operations in the accompanying financial statements.
Pursuant to the lease agreement, the Company's estimated payments to the
BLM as of February 29, 1996 are as follows:
1997 $ 89,000
1998 89,000
1999 89,000
2000 89,000
2001 89,000
Thereafter 1,157,000
-----------
Total $1,602,000
-----------
-----------
Note 11 - Subsequent Events:
On May 1, 1996, the Company entered into an agreement providing for
the issuance of 1,960,795 Series A preferred shares at $2.50 per share and
152,381 Class A common shares at $.65625 per share to Golden Chance,
Limited ("Golden Chance"), an Isle of Man private company limited by
shares. The terms of the Series A preferred shares provide that no
dividends of any kind or nature shall be paid or declared. Series A
preferred shares have a right to convert to the Company's Class A common
shares. Liquidation preference rights of series A preferred shares are
limited to the par value of $.001 per outstanding share. Voting rights for
each Series A preferred share are equal to all other classes of stock. On
May 1, 1996, the Company also entered into an agreement providing for the
issuance of 5 Series B preferred shares at $2.50 per share to directors of
the Company. The terms of the series B preferred shares provide that no
dividends of any kind or nature shall be paid or declared. Series B
preferred shares have a right to convert to the Company's Class A common
shares. Liquidation preference rights of series B preferred shares are
limited to the par value of $.001 per outstanding share. Holders of
series B preferred shares have the right to appoint a temporary director in
the event that Golden Chance defaults in the payment of the first $500,000
on its purchase of the series A preferred
42
<PAGE>
NEVADA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
shares. Payment of $98,000 for the Class A common shares was received on
May 2, 1996.
As a result of the above agreement, the Company's board of Directors
resigned and new board members were appointed. The total number of board
members was reduced from five to three active.
On May 9, 1996 the Company announced its intention to form two new
wholly owned subsidiaries to be named San Jacinto Energy Corporation and
Central Communications Corporation.
On May 21, 1996 the Company announced that it had signed a binding
letter of intent to acquire, through Central Communications Corporation,
all of the outstanding shares of Telecom Technologies. Inc., an Oregon
corporation ("TTI"), and certain other telecommunications assets. The
terms of the acquisition provide for the payment of $500,000 in cash and
issuance of 2,000,000 class A common shares. TTI is a telephone services
provider currently providing remote satellite telephone centers and debit
card operations in the Western United States.
43
<PAGE>
ITEM 8. CHANGES IN ACCOUNTANTS
The Company's accountants, Deloitte & Touche ("Deloitte") resigned
on March 23, 1994.
The change of independent auditors and the resignation of Deloitte &
Touche was not the result of any disagreements between the Company and the
former accountants on any matter of accounting principles or practices,
financial disclosures or auditing scope or procedures, and there have been no
such disagreements within the past two (2) fiscal years and any prior or
subsequent period. The audit opinions of Deloitte & Touche for fiscal years
1992 and 1993 did not contain any adverse opinion or disclaimer of opinion, and
their opinion was not qualified or modified as to uncertainty, audit or
accounting principles.
The Company has been advised that neither Kafoury, Armstrong &
Company, nor any of its partners hold any direct or indirect financial interest
in the securities of the Company, or its subsidiaries, nor have they had any
connection with the Company or its subsidiaries during the past three years.
The Company has provided Deloitte with a copy of the disclosure
which it made in a Form 8-K filed on March 23, 1994 and requested Deloitte to
furnish the Company with a letter addressed to the Securities and Exchange
Commission stating whether it agreed with the Company's statements made in the
Form 8-K and, if not, the respects in which it does not agree. Deloitte
provided the Company with such a letter and it is attached hereto as an Exhibit.
The Company's Board of Directors appointed new independent
accountants on April 22, 1994, as follows:
Kafoury, Armstrong & Company
6140 Plumas Street
Reno, NV 89509
(702) 689-9100
Kafoury, Armstrong & Company is the largest statewide independent
accounting firm operating in the state of Nevada and is qualified under the
requirements of the SEC Practice Section Division of firms of the American
Institute of Certified Public Accountants.
The appointment of Kafoury, Armstrong & Company as auditors was
subsequently ratified by vote of the shareholders in 1994 and 1995.
44
<PAGE>
PART III
Item 9. Directors and Executive Officers of the Registrant.
DIRECTORS
The directors of the Company as of May 1, 1996, are listed below.
________________________________________________________________________________
Name, Principal Occupation
During the Last Five Years
and Additional Information
________________________________________________________________________________
Peter J. Cannell Director, Secretary, Treasurer
Age 30
Director since 5/1/96
Term expires 1996 annual meeting
Prior to joining the Company, Mr. Cannell was company secretary for Operation
Mobilization, a United Kingdom corporation.
________________________________________________________________________________
Charles A. Cain Chairman of the Board
Age 58
Director since 5/96
Term expires 1997 annual meeting
Founder of Charles Cain & Company, Ltd., corporate and management trust firm and
editor of Offshore investment, an international journal for offshore fiance.
________________________________________________________________________________
John C. Goold Director
Age 52
Director since 5/960
Term expires 1998 annual meeting
Private investor specializing in research and development with energy companies,
computer technologies and telecommunications.
________________________________________________________________________________
The Company's Certificate of Incorporation was amended in 1990 to provide that
the number of directors will be no less than three (3) and no more than seven
(7), with a board size of five (5) until that number is changed by the board of
directors. The board is divided into three (3) classes with the terms of office
of each of the first, second and third classes set to first expire at the first,
second, and third annual meetings of shareholders held after November 20, 1990;
upon each such expiration of term, the successor directors shall be elected to
serve terms of three (3) years. The term of office of the first class
(currently held by Mr. Goold) and his current term will next expire at the 1998
annual shareholders' meeting. The term of office of the second class (currently
held by Mr. Cannell) will expire at the 1996 annual shareholders' meeting. The
term of office of the third class (currently held by Mr. Cain) will expire at
the 1997 annual shareholders' meeting; Mr. Cannell is standing for re-election
to a three-year term at the 1996 annual meeting.
EXECUTIVE OFFICERS
Presented below are the names, ages and positions held during the
past five years of the Company's executive officers as of June 7, 1996.
________________________________________________________________________________
Name Age Position
________________________________________________________________________________
Jeffrey E. Antisdel 40 President and
Officer since 11/90 Chief Executive Officer, private investor
Richard A. Cascarilla 44 Vice President, private law
Officer since 11/90 practice
________________________________________________________________________________
45
<PAGE>
The Company had previously entered into three-year employment
agreements with each of the above officers, effective July 19, 1991, renewable
annually thereafter. The above officers are currently serving at the discretion
of the Board of Directors.
REPORTS UNDER SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires directors, officers and
persons who are beneficial owners of more than 10% of the Company's Common Stock
to file with the Securities and Exchange Commission (the "Commission") reports
of their ownership of the Company's securities and change in that ownership. To
the Company's knowledge, based upon review of the copies of reports filed with
the Commission with respect to the fiscal year ended February 29, 1996, all
reports required to be filed under Section 16(a) by the Company's directors,
officers and persons who are beneficial owners of more than 10% of the Company's
Common Stock have been timely filed.
ITEM 10. EXECUTIVE COMPENSATION.
DIRECTOR COMPENSATION
Directors are entitled to receive annual compensation of $10,000 and
$500 for each Board of Directors meeting attended in person, plus related travel
expenses to meetings. Annual director compensation has also been retroactively
paid to each respective director in restricted shares of the Company's Class A
Common Stock and options to purchase Class A Common Stock.
DISCRETIONARY BONUSES
Although there is no formal plan, at the end of each calendar year,
the Board of Directors have in the past authorized the Company to issue a bonus
to administrative employees, including employees who are also Directors. The
bonuses have been paid in the past by the issuance of restricted Class A Common
Stock. For fiscal year 1995 the Company issued to Director Richard Cascarilla,
43,084 shares of Class A Common Stock at an average value of $0.4788 per share
for director, legal and other services. Jeffrey Antisdel was issued, as a bonus
for the current and prior years and for director services, 56,100 shares of
Class A Common Stock having a value of $0.6092 per share. No shares were issued
for the fiscal year ending February 29, 1996.
The Board of Directors adopted a Directors' 1993 Stock Option Plan,
under which each Director of the Company has the option to purchase two thousand
five hundred (2,500) shares of the Company's Class A Common Stock, par value
$.001 per share for each month between March 1, 1993 and December 31, 1993 the
Director provided services to the Company. The option to purchase may be
exercised at any time before December 31, 2001. The option price is $2.00 per
share. Twenty-five thousand (25,000) shares of Class A Common Stock which are
subject to the Directors.
On June 27, 1994, the Company adopted the 1994 Directors' Stock
Option Plan for the Company's directors. Under the terms of this stock option
plan, each of the five directors of the Company was granted an option to
purchase 12,500 shares of the Company's Class A Common Stock or a total of
62,500 shares at a price of $1.625 per share, equal to the market price of the
stock at the date of grant. The option is exercisable until May 31, 2002, and
no options have been exercised through February 28, 1995.
46
<PAGE>
On January 14, 1995, the Company adopted an additional 1994
Directors' Stock Option Plan for the Company's directors. Under the terms of
this stock option plan, each of the five directors of the Company was granted an
option to purchase 17,500 shares of the Company's Class A Common Stock or a
total of 87,500 shares at a price of $0.9375 per share, equal to the market
price of the stock at the date of grant. The option is exercisable until
December 31, 2002, and no options have been exercised through February 28, 1995.
On December 31, 1995, the Company adopted an additional 1994
Directors' Stock Option Plan for the Company's directors. Under the terms of
this stock option plan, each of the five directors of the Company was granted an
option to purchase 30,000 shares of the Company's Class A Common Stock or a
total of 150,000 shares at a price of $0.3125 per share, equal to the market
price of the stock at the date of grant. The option is exercisable until
December 31, 2003, and no options have been exercised through February 29, 1996.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company entered into an employment agreement with Jeffrey
Antisdel. The employment agreement expired on July 18, 1994. The Company and
Mr. Antisdel have not entered into a new written employment agreement. Mr.
Antisdel has been employed by the Company based upon the terms of the contract
and was paid a base salary based upon the last year of the written employment
agreement. Additionally, Mr. Antisdel received an automobile allowance of $500
per month. Further, Mr. Antisdel is also eligible to participate in all fringe
benefits which the Company customarily affords to its executive officers.
The Company entered into an employment agreement with Richard A.
Cascarilla. Mr. Cascarilla's contract terminated on July 18, 1994. Mr.
Cascarilla and the Company have not entered into a written employment agreement.
However, Mr. Cascarilla was employed during fiscal year 1995 based upon the term
of the contract and was paid a base salary based upon the last year of the
written employment agreement. The Company reimburses Mr. Cascarilla for all air
fare to and from Lansing, Michigan and from and to Reno, Nevada as incurred by
Mr. Cascarilla. Mr. Cascarilla also has the right to be included on the
Company's disability insurance policy maintained from time to time.
Both Mr. Antisdel and Mr. Cascarilla had each tendered voluntary
resignations as officers of the Company which were to become effective July 1,
1996. However, at the request of the Board of Directors, Mr. Antisdel and Mr.
Cascarilla have each agreed to continue their respective positions as President
and Vice President, pending the appointment of successor officers.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of June 1, 1996, the indicated
information regarding the security ownership of all persons who own more than
five percent (5%) of any class of the Company's voting securities.
47
<PAGE>
________________________________________________________________________________
(1) (2) (3) (4)
Title of Name and Address of Amount and Nature Percent
Class Beneficial Owner of Beneficial Owner of Class
________________________________________________________________________________
Series A Golden Chance, Ltd. Direct ownership 100.000%
Preferred 595Burrard Street, Suite 1700 1,980,975 shares
Vancouver, BC Canada V7X1G4
Class B Nevada Energy Partners Direct ownership of 100.000%
Voting I, Limited Partnership 4,437,473 shares
Common 401 E. Fourth Street
Reno, NV 89502
Class B Golden Chance, Ltd. Beneficial 100.000%
Voting 595 Burrard Street, Suite 1700 Ownership of
Common Vancouver, BC Canada V7XaG4 4,437,473 shares
Class A Mr. Jeffrey E. Antisdel Direct ownership 7.720%
Voting 401 E. Fourth Street of 691,741 shares
Common Reno, NV 89502
Class A Mr./Mrs. Wm. Rex Weller Direct and joint 5.537%
Voting 1135 Shoreland Ave. ownership of
Common Niles, MI 49120 496,149 shares
Class A Jeffry E. Antisdel Beneficial ownership 0.356%
Voting 401 E. Fourth Street of 31,910 shares
Common Reno, NV 89512 (1)
Class A Jeffrey E. Antisdel Beneficial ownership 0.266%
Voting 401 E. Fourth Street of 23,878 shares
Common Reno, NV 89512 (2)
(1) Shares owned directly by the wife of Jeffrey Antisdel (2) Shares owned
directly by the brother of Jeffrey Antisdel.
The following table sets forth, as of June 1, 1996, the indicated information
regarding the security ownership of all persons who are directors and nominees
of the Company and the security ownership of all the Company's directors and
officers, as a group.
________________________________________________________________________________
(1) (2) (3) (4)
Title of Name and Address of Amount and Nature Percent
Class Beneficial Owner of Beneficial Owner of Class
________________________________________________________________________________
Class A Mr. Jeffrey E. Antisdel Direct ownership 7.720%
Voting 401 East Fourth St. of 691,741 shares
Common Reno, NV 89512 (Officer)
Class A Mr. Richard A. Cascarilla Direct ownership 0.128%
Voting 401 East Fourth St. of 11,458 shares
Common Reno, NV 89512 (Officer)
Class A All officers & directors Direct and joint 7.847%
Voting as a group (5 persons) ownership of
Common 703,199 shares
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Ralph Cascarilla is the brother of Richard A. Cascarilla the Secretary and
Treasurer of the Company. The law firm in which Ralph Cascarilla was a partner
performed certain legal services during 1995 and 1996 for the Company. The
Company paid fees to Ralph Cascarilla's law firm in the amount of approximately
$67,700 in 1995 and approximately $61,900 to February 29, 1996.
William Weller and Donna Weller, owners of 5.54% of the outstanding shares of
the Company's Class A Common Stock as of June 1, 1996, have a family
relationship to Jeffrey Antisdel, the Company's current President and Chief
Executive Officer.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
48
<PAGE>
(a) The following appear elsewhere within this Report:
Page
No.
- --------------------------------------------------------------------------------
1. Financial Statements:
Independent Auditors' Report 24
Consolidated Balance Sheet
as of February 29, 1996 25,26
Consolidated Statements of Operations
for the Years Ended February 29, 1995
and February 28, 1994 27
Consolidated Statements of Shareholders' Equity
for the Years ended February 29, 1996 and
February 28, 1995 28
Consolidated Statement of Cash Flows for the
Years ended February 29, 1996 and
February 28, 1995 29
Notes to Consolidated Financial Statements 30-43
49
<PAGE>
(b) Reports on Form 8-K have been filed during the quarter for which
this Form 10-KSB is being filed, as follows:
March 15, 1996 - Change in control and purchase of Class B Common
shares
May 1, 1996 - Change in control/Resignation of Directors
2. Financial Statement Schedules:
Schedule V - Consolidated Property, Plant and
Equipment for the Years Ended February 29, 1996
and February 28, 1995 65
Schedule VI - Consolidated Accumulated Depreciation
and Amortization of Property, Plant
and Equipment for the Years Ended
February 29, 1996 and February 28, 1995 66
All other schedules have been omitted because they are not required, are
not applicable or the information is otherwise included in the financial
statements or notes thereto.
3. Exhibits (Exhibit numbers below refer to Exhibit
numbers from the Exhibit Table appearing in Item 601
of Regulation S-B.)
NEVADA ENERGY COMPANY, INC.
LIST OF EXHIBITS
SEC FORM 10-KSB FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1994
Exhibit numbers below refer to Exhibit numbers from the Exhibit Table
appearing in Item 601 (a) of Regulation S-B.
Exhibit
No.
- -------
2 Plan of Reorganization dated November 20,
1990 incorporated herein by reference to
the Exhibits to the Company's Form 10-K
for the fiscal year ended February 29, 1992. N/A
2 Amended Plan of Reorganization dated
June 25, 1991 incorporated herein by
reference to the Exhibits to the
Company's Form 10-K for the fiscal
year ended February 29, 1992. N/A
2 Confirmation Order dated November 20,
1990 incorporated herein by reference
to the Exhibits to the Company's Form
10-K for the fiscal year ended
February 29, 1992. N/A
2 Sierra Pacific Power Settlement Agreement
dated June 20, 1991 incorporated herein
by reference to the Exhibits to the Company's
Form 10-K for the fiscal year ended
February 29, 1992. N/A
3 Articles of Incorporation incorporated
50
<PAGE>
herein by reference to the exhibits to
the registrant's Registration Statement
on form S-18, Registration No. 2-84206-D. N/A
3 Certificate of Amendment to Certificate
of Incorporation of Munson Geothermal, Inc.
to change name to Nevada Energy Company, Inc.
dated December 3, 1990 incorporated herein
by reference to the Exhibits to the
Company's Form 10-K for the fiscal year
ended February 29,1992. N/A
3 Certificate of Amendment to Certificate
of Incorporation of Nevada Energy Company,
Inc. to effect reverse one for four stock
split dated June 25, 1992, incorporated
herein by reference to the Exhibits to
the Company's Form 10-K for the fiscal year
ended February 28, 1993. N/A
3 By-laws of the registrant, amended to
date, incorporated herein by reference to
the registrant's Registration Statement on
Form S-18, Registration No. 2-84206-D. N/A
(10)(i)(D) Office lease dated September 1, 1991
incorporated herein by reference to
the Exhibits to the Company's
Form 10-K for the fiscal year ended
February 29, 1992. N/A
(10)(i)(A) Employment agreement with Jeffrey E.
Antisdel incorporated herein by reference
to the Exhibits to the Company's Form
10-K for the fiscal year ended
February 29, 1992. N/A
(10)(i)(A) Employment agreement with Richard A.
Cascarilla incorporated herein by
reference to the Exhibits to the
Company's Form 10-K for the fiscal
year ended February 29, 1992. N/A
10(A) Asset Purchase Agreement dated December 15,
1993 among Triad American Energy 1985 VII-A,
Triad American Energy 1985 VII-B, TriadAmerican
Energy 1985 VII-C, Triad American Energy 1985 VII-D,
Triad American Energy 1985 VII-E, Triad American
Energy 1985 VII-F, South Wind Energy Corporation
and San Jacinto Power Company incorporated
by reference to Exhibits to the Company's
Form 8-K dated June 24, 1994. N/A
10(B) Escrow Agreement dated December 15, 1993
between Triad American Energy 1985 VII-A,
Triad American Energy 1985 VII-B, Triad
American Energy 1985 VII-C, Triad American
Energy 1985 VII-D, Triad American Energy
1985 VII-E, Triad American Energy 1985
VII-F and Shipman & Goodwin incorporated by
reference to Exhibits to the Company's
Form 8-K dated June 24, 1994. N/A
10(C) Agreement and Plan of Reorganization By and
Among Nevada Energy Company, Inc., Combustion
Energy Co., Herth Printing and Business
Supplies, Inc., H. Lawrence Herth and
Mary S. Herth dated November 30, 1994
incorporated by reference to Exhibits
51
<PAGE>
to the Company's Form 8-K dated November 30,
1994 (filed December 14, 1994). N/A
10(D) Agreement of Merger dated November 30, 1994
incorporated by reference to Exhibits to the
Company's Form 8-K dated November 30, 1994
(filed December 14, 1994). N/A
10(E) Articles of Merger of Herth Printing and
Business Supplies, Inc. into Combustion Energy
Company incorporated by reference to Exhibits
to the Company's Form 8-K dated November 30, 1994
(filed December 14, 1994). N/A
10(F) Two year non-Competition Agreement with Milton Warren
Smith, former owner of Smith Wind Energy, dated
June 23, 1994. 66
10(G) Employment Agreement with H. Lawrence Herth, former
co-owner of Herth Printing and Business Supplies, Inc.,
dated November 30, 1994. 72
10(H) Five year non-competition agreement with H. Lawrence
Herth, former co-owner of Herth Printing and Business
Supplies, Inc. dated November 28, 1994 77
10(I) Five year non-competition agreement with Mary. S. Herth,
former co-owner of Herth Printing and Business
Supplies, Inc. dated November 28, 1994 82
16 March 29, 1994 letter from Deloitte & Touche concerning
change in certifying accountant incorporated herein by
reference to Exhibits to Company's Form 8-K dated
March 30, 1994. N/A
10 Letter of Intent dated February 29, 1996 providing for
issuance of Series A preferred shares and eventual
resignation of directors incorporated herein by
reference to Exhibits to Company's Form 8-K dated
May 1, 1996.
4 Series A preferred stock description, Certificate
of Designation, filed with Delaware Secretary of
State May 1, 1996
4 Series B preferred stock description, Certificate
of Designation, filed with Delaware Secretary of
State May 1, 1996
17 Resignations of directors dated May 1, 1996
incorporated herein by reference to Exhibits to
Company's Form 8-K dated May 1, 1996.
28 Organization Chart, attached hereto
52
<PAGE>
NEVADA ENERGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NEVADA ENERGY COMPANY, INC.
By: /s/ Jeffrey E. Antisdel
--------------------------------
Jeffrey E. Antisdel, President
Date: June 12, 1996
--------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons, including a majority of the
registrant's Board of Directors, on behalf of the registrant and in the
capacities and on the dates indicated.
Date: June 12, 1996 By: /s/ Jeffrey E. Antisdel
------------------------- -------------------------------
Jeffrey E. Antisdel, President
and Chief Executive Officer
Date: June 13, 1996 By: /s/ Kenton H. Bowers
------------------------- -------------------------------
Kenton H. Bowers, Controller
Date: June 11, 1996 By: /s/ Charles Cain
------------------------- -------------------------------
Charles Cain, Director
Date: June 11, 1996 By: /s/ Peter Cannell
------------------------- -------------------------------
Peter Cannell, Director
Date: June 9, 1996 By: /s/ John C. Goold
------------------------- -------------------------------
John C. Goold, Director
<PAGE>
<TABLE>
<CAPTION>
<S><C>
EXHIBIT 28
------------------ ------------------ ------------------ ------------------ ------------------
Oreana Power Combustion Yerington Nt. Apo Corp Central
(Nev Ltd P) Energy Acquisition (Nev) Communication
CBC-GP- 3% (Nev) (Nev) 50% NEC Corporation
NEC-LP-49% dbs Berth 50% GDA NEC 100%
BDA-GP- 1% Priting 100% NEC (Dormant)
GDA-LP-49%
(Inactive) 100% NEC
------------------ ------------------ ------------------ ------------------ ------------------
| | | | |
| | | | |
| | | | |
|-------------------------------------------------------------------------------------------------------|
| |
| |
| |
------------------ ------------------ ------------------
NEC NEPC San Jacinto
NASDAQ-Sm Cap (Nev S, Corp) Energy
2,000+ shrhldrs JE Antisdel - 100% Corporation
Class a-8.8x abs NEC 100%
Class B-4.4x abs
------------------ ------------------ ------------------
| |
| |
| |
|----------------------------------------------- |
| | | |
| | | |
| | | |
------------------ ------------------ ------------------ ------------------
San Jacinto BGPPP, Ltd. NEP 1, LP NGPP Ltd Ptr
Power Co. (Nev Ltd Ptr) (Nev Ltd Ptr) (Nev LP)
NEC-GP-1% -------------------- NGP-BSP-62.5%
NEC 50.01% NEC-Ltd-35.315% NEPC-GP-40% GP-NEP-31.25%
NWP 49.99% 22 Ltds-63.685% NEC -LP-60% Ltd's-(5)-6.25%
(In dissolution)
------------------ ------------------ ------------------ ------------------
</TABLE>
