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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NO. 1-4766
REGENCY AFFILIATES, INC.
(Exact name of registrant as specified in its charter)
Delaware 72-0888772
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
381 Robinwood Lane, Wheaton, IL 60187
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(Address of principal executive offices) (Zip Code)
10842 Old Mill Road, # 5, Omaha, Nebraska 68154
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(Address of administrative offices) (Zip Code)
Registrant's Telephone Number (executive office), including Area Code:
(708-690-8684)
Registrant's Telephone Number (administrative office), including Area Code:
(402-330-8750)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Name of Each Exchange on Which
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Title of Each Class Registered
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Common Stock, $0.40 Par Value None
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT.
________________________ None _____________________
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such
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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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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
registrant was $3,729,100 on December 31, 1995, which value has been computed
on the basis of $0.46 per share of Common Stock, the mean of the bid and asked
price as reported on the bulletin board section of NASDAQ on December 29, 1995.
The number of shares outstanding of the registrant's $.40 Par Value Common
Stock, as of December 31, 1995 was 11,166,537.
DOCUMENTS INCORPORATED BY REFERENCE (See Exhibit Listing).
(The remainder of this page is intentionally left blank.)
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FORM 1O-K
PART I
ITEM 1. BUSINESS.
General development of business.
Regency Affiliates, Inc. (the "Company" or "Regency" or the
"Registrant") formerly Transcontinental Energy Corporation, was organized as a
Delaware corporation in 1980 to be the successor to Transcontinental Oil
Corporation which existed since 1947. In late 1984 and early 1985, the
Company, all of its wholly-owned subsidiaries and twenty-one affiliated limited
partnerships, commenced reorganization proceedings pursuant to Chapter 11 of
the Bankruptcy Reform Act of 1978, as amended.
Pursuant to two Plans of Reorganization which were completed December
31, 1987, all of the Company's assets, except for its ownership in
Transcontinental Drilling Company, Inc. ("Drilling") and all of the obligations
of the Company and of Drilling were transferred to a creditor liquidating
trust. The Plans provided that the par value of the Company's Common Stock be
increased from $.10 per share to $.40 per share and that a 1 for 4 reverse
stock split be implemented. An additional 747,500 shares of Common Stock
(approximately 20% of pro forma outstanding shares) were issued to the
creditor's liquidating trust. In addition, the Company privately placed with a
group of investors (the "Original Investors") in 1987 approximately 24% of the
pro-forma outstanding shares of Common Stock of the Company.
During the year ended December 31, 1988, the Company, through
RegTransco, Inc. an 80% owned subsidiary ("RTI"), made two acquisitions. On
June 3, 1988, RTI acquired all of the outstanding stock of Florida Truss, Inc.,
Gangnail of Palm Beach and Pinewood Lumber and Truss, Inc., collectively,
Florida Truss, Inc. ("Florida Truss"), which was involved in the manufacture of
wood trusses in the Fort Lauderdale and Palm Beach areas of Florida. In
August, 1988, RTI acquired all of the outstanding stock of Willbanks Steel
Corporation ("Willbanks"), a steel fabricator and service center with locations
in Fort Worth and Houston, Texas and Albuquerque, New Mexico.
In late 1988 and early 1989, the operating results of the two
subsidiaries began to deteriorate rapidly due to economic conditions, and other
matters affecting the Companies' operating areas. Management attempted to scale
down operations, reorganize operating management and secure additional capital
with only limited success resulting ultimately in the close down and
liquidation of the Florida operations and a Chapter XI bankruptcy filing for
the Willbanks' steel operations.
As of April 15, 1992, the Willbanks Chapter XI proceedings had been
consummated in so far as the Company was concerned with the Company turning
over its stock investment in Willbanks to the Court and the creditors. In
addition to the settlement in the Chapter XI proceedings, the Company
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also reached a settlement agreement with its senior lenders with respect to
obligations, guarantees and other credit obligations incurred in connection
with the acquisition of Willbanks and its operations. These senior lender
settlements, which settlements also included credit obligations with respect to
the liquidation of the Florida Truss operations, resulted in the issuance by
the Company of a new series of preferred stock. The new series of preferred
stock (Series B) was limited to and issued only to the two senior lenders,
Washington Square Capital, Inc. and Cargill Financial Services Corporation.
During 1990 the Company executed a stock subscription agreement with
an investor group for the sale of newly issued shares of the Company's Common
Stock (approximately 44% of the then outstanding shares on a fully diluted
basis). As a condition of the consummation of this transaction, the Company
was required to restructure its then capital structure. Agreements were
consummated with various financial groups and creditors as their interests were
affected by the capital restructuring. The transaction documents (which
documents included, among other things, a Promissory Note payable to the
Company in the amount of $4,400,000, executed by a nominee of the investor
group) were closed to escrow on July 13, 1990.
On July 25, 1990, the nominee of the investor group notified the
Company that in the investor group's opinion there had been a material adverse
change in the Company after July 13, 1990 and accordingly they were withdrawing
their investment, and the transaction terminated.
The Company made further attempts to close the transaction but was
unsuccessful in its efforts. The Company, through early 1991, attempted to
solicit other possible investors to take the place of the investor group. It
became apparent that the Company's heavy debt capital structure, even after the
restructuring for the transaction, and the Willbanks' bankruptcy filing,
continued to be a deterrent to finding another investor group. Due to the lack
of financial resources, and the likelihood that a transaction probably could
not be consummated given the present financial condition of the Company, the
Company announced in early 1991 that it probably would be unable to continue as
a going concern.
In late March of 1991, at the request of the Company, certain of the
Original Investors who had participated in a 1987 private placement agreed to
provide certain limited funding in an attempt to preserve the Company's going
concern status. These investors engaged the firm L.J. Horbach & Associates, of
which Larry J. Horbach is a principal of such firm, to review the financial
condition of the Company and prepare a plan to completely restructure the
Company ("The Restructuring Plan") and to attempt to locate a business
combination partner who could return the Company to a profitable operating
status and who could succeed to control of the Company upon completion of the
restructuring. Mr. Horbach had tendered his resignation as an officer and
director of the Company as part of the 1990 transaction discussed earlier.
The Restructuring Plan, which was submitted to all of the Original
Investors who had participated in the 1987 private placement, included the
following in general terms:
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Objective -
(i) Elimination of all obligations and guarantees of the Company
through a formal compromise and settlement outside of a
bankruptcy filing proceeding.
(ii) Preservation of the Company's two primary economic assets, its
public shareholder base and its $50,000,000 plus net operating
loss carry forward.
(iii) Reinstatement of the Company into good standing with the
various regulatory agencies.
(iv) Location of a possible business combination partner who would
be able to succeed to control of the Company and be able to
utilize the net operating loss carry forward, thus creating
value for the Company's common shareholders.
Obligations Restructuring -
(i) The creditors were segregated by classes including, but not
limited to: the senior lenders; regulatory, "going concern"
and "good standing"; general unsecured creditors; and the
Willbanks Steel Corporation Chapter XI bankruptcy filing in so
far as the Company was affected by such filing.
(ii) The creditors were asked to compromise and settle the amounts
due from Regency by continuing to honor the settlements (as
outlined in the Company's 1989 Form 10-K) reached with the
Company in connection with the 1990 transaction and to
exchange the remaining portions of their obligations for
common and/or preferred equity of Regency.
(iii) Certain creditors, in addition to the above, were asked to
forgive portions of their obligations and the interest accrued
and accruing with respect thereto.
Funding to implement the Restructuring Plan was provided by certain
investors and creditors who subscribed to an offering of $400,000 of 11%
Restructuring Serial Promissory Notes (the "Restructuring Notes") issued by the
Company. In addition, the investors who participated in the Restructuring and
subscription for the Restructuring Notes held 260,037 shares of Series A
Preferred Stock which was convertible into approximately 1,381,000 shares of
common. In contemplation of the National Resource Development Corporation
transaction herein described (the "1993 Transaction"), the investors converted
the Series A preferred stock.
The Registrant entered into an Agreement for Acquisition dated
December 12, 1992 (the "1992 Agreement") with National Resource Development
Corporation (Delaware) of Iron Mountain, Michigan and affiliated companies.
The Agreement provided for the acquisition of 80% of the
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outstanding stock of National Resource Development Corporation (Delaware) in
exchange for securities of the Registrant and its subsidiary. National
Resource Development Corporation (Delaware) was the owner of 75 million short
tons of previously quarried and piled aggregate rock located at the site of the
Groveland Mine in Iron Mountain, Michigan (the "Aggregate"). Under the 1992
Agreement, the following securities were to be issued by Regency and its wholly
owned subsidiary:
(i) 888,500 newly issued shares of Regency's participating, non
voting, cumulative, senior preferred stock with a stated
value of $10.00 per share and carrying a contingent conversion
right (Series-C).
(ii) $11,120,000 of 9% secured promissory notes, comprised of
$5,560,000 of adjustable convertible notes of Regency, and
$5,560,000 of 5-year amortized notes of Regency's wholly owned
subsidiary.
(iii) 2,700,000 shares of Regency Common Stock.
The 1992 Agreement provided that if it was not closed by December 31,
1992, it would become null and void. While the parties informally extended the
closing deadline, the transaction was unable to close in a timely fashion. The
Registrant continued negotiations with National Resource Development
Corporation (Delaware) and its affiliated companies ending in a second
Acquisition Agreement in June 1993.
On June 4, 1993, the Company entered into an Acquisition Agreement
with Statesman Group, Inc., a Bahamian international business corporation
("Statesman"), and National Resource Development Corporation (Delaware) (the
"Acquisition Agreement"), which provided for Statesman or its nominees to
acquire 2,975,000 shares of the Company's $0.40 par value Common Stock, 208,850
shares of the Company's Cumulative $100 Series-C Preferred stock and 20% of the
outstanding shares of Transcontinental Drilling Co., a subsidiary of the
Company. Statesman undertook to deliver to the Company 80% of the issued and
outstanding common shares of National Resource Development Corporation
(Delaware).
The scheduled closing of July 6, 1993 under the Acquisition Agreement
was deferred to July 7, 1993. At that time various modifications were made to
the June 4, 1993 Acquisition Agreement, including the substitution of National
Resource Development Corporation ("NRDC"), a Nevada corporation formed on June
29, 1993 for National Resource Development Corporation (Delaware), which newly
formed corporation was wholly owned by Statesman and acquired title to the
Aggregate. On July 7, 1993, 2,975,000 shares of the Company's Common Stock,
208,850 shares of the Company's Cumulative $100 Series-C Preferred stock and
20% of the outstanding shares of Transcontinental Drilling Co. were delivered
to Statesman. Statesman has the right to transfer some or all of these shares
to its nominees. Immediately following the closing, the Company had
outstanding 10,336,997 common shares outstanding of which those issued to
Statesman represented
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approximately 28.8%. On July 7, 1993, Statesman designated eight (8) persons
to fill existing vacancies on the Board of Directors of the Company. Statesman
designated Edward G. Harshfield, Donald A. Saviano, Stephanie Carey, Craig R.
Grossman, Robert L. Brock, William R. Ponsoldt, Jr., Martin J. Craffey and
Pamlyn Kelly, Ph.D. The appointments were made by the sole acting director to
fill the vacancies until their successors are duly elected and qualified. Mr.
Larry J. Horbach remained a director and became interim Secretary and Treasurer
until his resignation effective February 15, 1994. On November 16, 1994, Mr.
Horbach rejoined the Board of Directors of Regency Affiliates, Inc. when he was
again appointed to fill an existing vacancy.
Statesman, in addition to receiving the rights to 28.8% of the
Company's Common Stock in the 1993 Transaction, received irrevocable proxies
over 855,991 shares of Regency's $0.40 par value Common Stock which, when
combined with the 2,644,710 shares of Regency Common Stock owned directly by
Statesman as of December 31, 1995, entitled Statesman to vote a total of
3,500,701 shares, or approximately 31.3% of the 11,166,537 outstanding shares
as of December 31, 1995.
PRINCIPAL PRODUCTS AND RELATED INFORMATION
Reference is made to Item 1 herein. As the Florida Truss operations
were closed and liquidated, and the Company turned over its investment in
Willbanks within the Willbanks bankruptcy proceedings to the creditors and does
not plan to own and operate the businesses in the future, additional disclosure
concerning them would not be meaningful.
NRDC
NRDC has as its sole asset 75 million short tons of previously
quarried and stock piled rock located at the site of the Groveland Mine in
Dickinson County, Michigan. During the year ended December 31, 1995, NRDC made
only casual sales of Aggregate, and, since NRDC lacks any liquid assets to
support marketing efforts, there can be no assurance that NRDC will be able to
secure material sales of the Aggregate in the future.
Aggregate is primarily sold for railroad ballast, road construction,
construction along shore lines and decorative uses. The market for aggregate
stone is highly competitive and, as shipping costs are high, the majority of
sales, if any, can be anticipated to be made locally. Other companies that
produce rock and aggregate products are located in the same region as the
Groveland Mine. Many of the competitors will have greater financial and
personnel resources than the Company. As a consequence, there can be no
assurance that NRDC will be able to consummate sales of material amounts of its
Aggregate.
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SECURITY LAND AND DEVELOPMENT COMPANY LIMITED PARTNERSHIP
On November 18, 1994, Regency Affiliates, Inc. acquired a limited
partnership interest in Security Land And Development Company Limited
Partnership (the "Partnership") for an equity investment of $350,000, which
investment was used to pay brokerage fees related to Regency's purchase of its
interest in the Partnership. Regency has no obligation to make any further
capital contribution to the Partnership. The Partnership owns the 34.3 acre
complex at 1500 Woodlawn Drive, Woodlawn, MD containing the Security West
Buildings consisting of a two-story office building and a connected six-story
office tower occupied by the United States Social Security Administration
Office of Disability and International Operations under a nine year lease
expiring October 31, 2003 (the "Lease"). The buildings have a net rentable
area of approximately 717,011 square feet. The construction of the Security
West Buildings was completed in 1972 and the building has been occupied by the
Social Security Administration since 1972 under prior leases between the U.S.
Government and the Partnership.
During 1994, the Partnership completed the placement of a $56,450,000
non-recourse project note, due November 15, 2003, issued by the Partnership.
The placement of the project note was undertaken by the issuance of 7.90%
certificates of participation and was underwritten by Dillon Read & Co., Inc.
The net proceeds received from the sale of the certificates have or are being
used to refinance existing debt of the Partnership related to the project, to
finance certain alterations to the project by the Partnership, to fund certain
reserves and to pay costs of the project note issue. The project note is a
non-recourse obligation of the Partnership and is payable solely from the Lease
payments from the U.S. Government, which rental payments under the Lease are
not subject to annual appropriation by the United States Congress and
accordingly, the obligations to make such payments are unconditional general
obligations of the government backed by the full faith and credit of the United
States. The payments under the Lease consist of base rent, maintenance rent,
additional base rent, additional maintenance rent and the government tax
reimbursement amount. The base rent, maintenance rent and additional base rent
are fixed amounts and are not subject to adjustment. The base rent and the
additional base rent together constitute the finance rent, which will be
utilized to pay principal and interest on the project note, certain real estate
taxes and costs of insurance and other reserves.
The terms of the Security Land And Development Company Limited
Partnership Agreement (as amended) and the project note (which note will be
fully amortized over the term of the lease) call for Regency Affiliates, Inc.
to be allocated 95% of the profits and losses of the Partnership until October
31, 2003, and 50% thereafter. Regency is to receive certain limited cash flow
after debt service, and a contingent equity build-up depending upon the value
of the project upon termination of the Lease.
The transaction with Security Land And Development Company Limited
Partnership provides for the Company to receive management fees equaling
$100,000 per annum, which funds should be available as working capital.
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As of December 31, 1995, Regency Affiliates, Inc. had as its sole
employees, Pamlyn Kelly, Ph.D., the Company's President and Eunice M. Antosh,
the Company's Secretary. Both were employed by the Company on a part time
basis. Dr. Kelly was elected as the Company's interim President following the
resignation of Craig R. Grossman and has focused her efforts on the search for
a chief executive officer. Dr. Kelly resigned on February 1, 1996 in
connection with the election on that date of Gary K. Nuttall as President of
Regency Affiliates, Inc.
Financial information about industry segment & Narrative description
of business.
Because of Regency Affiliates, Inc.'s lack of operations during the
last three fiscal years, information about industry segments is not provided.
ITEM 2. PROPERTIES
As of December 31, 1995, NRDC owned approximately 75 million short
tons of Aggregate located at the site of the Groveland Mine in Dickinson
County, Michigan. The Groveland Mine is an iron ore mine that was shut down in
1981 by a former owner and operator, M.A. Hanna Company. The mine was acquired
by International Aggregate Corporation in December, 1989. Subsequent thereto,
International Aggregate Corporation transferred title to the Aggregate to
National Resource Development Corporation (Delaware), NRDC's predecessor.
The 75 million short tons of Aggregate is commingled with other
aggregate not owned by NRDC and is rock that was separated from iron ore during
previous mining operations. The ownership of the Aggregate is subject to a
Royalty Agreement between North American Demolition Company (International
Aggregate Corporation's predecessor in title) and M.A. Hanna Company dated
December 22, 1989, as amended, which requires the payment of certain royalties
to M.A. Hanna Company upon sales of Aggregate. The Aggregate has been pledged
to secure loans made to Regency Affiliates, Inc. by Statesman Group, Inc. and
to secure repayment of certain Zero Coupon Non-Recourse Secured Bonds due
January 1, 2002 issued by National Resource Development Corporation (Delaware).
At December 31, 1995, Bonds having a face value at maturity of $542,000 had
been issued by National Resource Development Corporation (Delaware). While a
general market for aggregate exists, the Company currently lacks the resources
required to make sales of material amounts of the aggregate.
Reference is made to Item 1, Business, page 3 of this report, for a
description of the Security West Building at 1500 Woodlawn Drive, Woodlawn,
MD, which property is owned by Security Land And Development Company Limited
Partnership.
ITEM 3. LEGAL PROCEEDINGS
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There are no material pending legal proceedings to which the Company
is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the vote of security holders during the
quarter ending December 31, 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS'
MATTERS
Market information.
Regency's Common Stock is traded in the over-the-counter market on the
bulletin board section of NASDAQ. The following table sets forth the high and
low bid prices for each calendar quarter during the last two fiscal years of
the Company. The bid quotations represent interdealer prices and do not include
retail markups, mark-downs or commissions. The prices indicated may not reflect
the actual market for substantial quantities of the Company's Common Stock. As
of December 31, 1995, Regency estimated that the outstanding shares were held
by an estimated 4,000 shareholders.
Year Ended
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December 31, 1994 High Low
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First Quarter 13/16 1/8
Second Quarter 7/16 1/8
Third Quarter 11/16 1/8
Fourth Quarter 3/4 1/4
Year Ended
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December 31, 1995 High Low
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First Quarter 11/16 1/4
Second Quarter 9/16 1/4
Third Quarter 7/16 1/8
Fourth Quarter 13/32 1/8
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The Company has not paid or declared cash dividends on its Common
Stock during the last two fiscal years of the since the Company has had
inadequate earnings and resources to fund the payment of cash dividends on its
Common Stock. The Company has no present intention to pay cash dividends on
its Common Stock in the future.
In early 1990, Continental Illinois National Bank & Trust of Chicago
("Continental") resigned as the Company's registrar and transfer agent because
of the Company's inability to pay Continental for services performed. The
records were forwarded to the Company and the Company has since assumed the
record keeping responsibility until such time as the Company has the funds to
secure the services of an independant transfer agent. As of December 31, 1995,
and the date of this report, such record keeping services were provided to the
Company by L.J. Horbach & Associates. On February 7, 1995, Regency
Affiliates, Inc. entered into an agreement with L.J. Horbach & Associates, Inc.
pursuant to which L.J. Horbach & Associates, Inc. will provide certain
administrative services to the Company for a monthly fee of $3,000, including
but not limited to accounting and stock transfer record keeping. L.J. Horbach
& Associates, Inc. is wholly owned by Larry J. Horbach, a member of the Board
of Directors of the Company.
Securities of the registrant.
As of February 9, 1995, Regency Affiliates, Inc. had placed 57 Units
of a $350,000 minimum, $800,000 maximum offering of the Company's Cumulative
Convertible $100 Series-E Preferred Stock and $0.40 p.v. Common Stock. The
securities were offered in 80 Units consisting of 88.5 shares in Cumulative
Convertible $100 Series-E Preferred Stock and 6,000 shares of the Common Stock
to accredited investors as defined in Regulation D for a cost of $10,000 per
unit. The proceeds of the offering were used to cover operating cash flow
deficits. Statesman Group, Inc. converted $20,000 of the debt owing to it by
the Company into two Units as part of the offering.
VOTING $0.40 PAR VALUE COMMON
Regency Affiliates, Inc. has authorized 25,000,000 shares of its
voting $0.40 p.v. Common Stock. Holders of the Common Stock are entitled to
one vote per share on matters submitted to shareholders for approval or upon
the election of directors.
CUMULATIVE CONVERTIBLE 7% PREFERRED $10 STATED VALUE SERIES-A STOCK - $0.10 PAR
VALUE
All of the authorized, issued and outstanding shares of the Series-A
Preferred Stock were converted into 1,380,796 shares of the Company's $0.40
p.v. Common Stock prior to the 1993 Transaction.
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CUMULATIVE CONTINGENT CONVERTIBLE PREFERRED $10 STATED VALUE SERIES-B STOCK -
$0.10 PAR VALUE
By agreement and in settlement of the Senior Lenders' obligations as
part of the Company's Restructuring Plan, 212,747 shares of the Series-B
Preferred Stock were issued to Washington Square Capital and 158,000 shares to
Cargill Financial Services. Such shares (370,747 in the aggregate) represent
100% of the shares of Series-B authorized, issued and outstanding. Semi-annual
dividend periods commence on the 24th month from the consummation of an
"Initial Business Combination", as defined in the Certificate of Designation
for the Series-B Preferred Stock, and accrue for a period of 35 months without
cash payment. Dividends accrue at the rate of 6% per annum. The holders of
the Series-B Preferred Stock hold contingent rights to convert into Common
Stock exercisable on the earlier of the date that the Company (and its tax
consolidated subsidiaries) has accumulated consolidated taxable earnings of $55
Million, or the date that at least 80% in value of any convertible securities
of the Company, as adjusted in certain circumstances, issued in the Initial
Business Combination are retired or converted by the holders thereof. The
Series-B shares carry a preference upon liquidation. Except in limited
circumstances, the Series-B shares carry no voting rights. The Company has the
right to redeem the Series-B Preferred Stock, at any time.
CUMULATIVE SENIOR PREFERRED $100 STATED VALUE SERIES-C STOCK - $0.10 PAR VALUE
On July 7, 1993, 208,850 shares of the Company's Cumulative Senior
Preferred $100 Series-C Stock were delivered to Statesman Group, Inc. as part
of the 1993 Transaction. Such shares represent 100% of the issued and
outstanding Series-C shares. 210,000 shares of the Series-C Preferred Stock
are authorized. Quarterly dividend periods commenced on September 30, 1993 and
quarterly dividends per share are equal to 20%, not to exceed $500,000, of the
annual after tax earnings of NRDC, divided by the number of shares outstanding.
During the fiscal year ending December 31, 1995, with the consent of the holder
of the Series-C Preferred Stock, the contingent rights to convert the Series-C
Preferred Stock into Common Stock were eliminated. The Series-C shares carry a
preference upon liquidation. Except in limited circumstances, the Series-C
shares carry no voting rights. The Company has the right to redeem the
Series-C Preferred Stock, at any time.
CUMULATIVE CONTINGENT CONVERTIBLE JUNIOR PREFERRED $10 STATED VALUE SERIES-D
STOCK - $0.10 PAR VALUE
The Series-D junior preferred shares were issued in exchange for the
serial restructuring promissory notes issued as part of Company's Restructuring
Plan. The total issued was 25,694 shares and was required by the Acquisition
Agreement as a condition to closing. 26,000 shares of the Series-D Preferred
Stock are authorized. Annual dividend periods commenced on January 1, 1993.
Dividends accrue at the rate of 7% per annum. The holders of the Series-D
Preferred Stock hold contingent rights to convert into Common Stock, but can
not convert until the Series-C Preferred Stock has been converted into Common
Stock, or with the consent of a majority of the holders of the Series-C
Preferred Stock. The Series-D shares carry a preference upon liquidation.
Except in limited
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circumstances, the Series-D shares carry no voting rights. The Company has the
right to redeem the Series-D Preferred Stock, at any time.
SERIES-E CUMULATIVE CONVERTIBLE PREFERRED STOCK - $100 STATED VALUE - $0.10 PAR
VALUE
Quarterly dividends on the Series-E Preferred Stock are cumulative
from the dates of original issue and are payable in cash or accrued at the
option of the Company. The Series-E Preferred Stock carries the right to
receive an annual dividend of $12.50 per share. Subject to certain conditions,
the Series-E Preferred Stock must be redeemed by the Company commencing on the
fifth anniversary from the date of issuance. At any time after the second
anniversary of the date of issuance, the Company may redeem the shares at their
stated value plus accrued and unpaid dividends. Holders of the Series-E
Preferred Stock, commencing on the second anniversary of the date of issuance,
have the right to convert their shares into a number of shares of Common Stock
of the Company determined by dividing $1,000, plus accrued and unpaid
dividends, by a figure equal to 88% of the average bid price for Common Stock
for the 90 days previous to the date the Series-E stock is surrendered for
conversion. Redemption of the Series-E shares by the Company will terminate
the conversion rights. The Series-E shares carry a preference upon
liquidation. Except in limited circumstances, the Series-E shares carry no
voting rights. As of December 31, 1995, 5,044.5 shares of the Series-E
Preferred Stock had been issued and remained outstanding.
REGTRANSCO, INC. OWNERSHIP
RegTransco, Inc. (RTI) has two classes of outstanding common stock,
Class A and Class B. There are 20,000 shares of Class A common stock
outstanding, all of which are owned by Drilling (a wholly owned subsidiary of
Regency Affiliates, Inc.). Five thousand (5,000) shares of Class B common
stock were issued to the Original Investors who financed the Company's Chapter
XI filing in 1986 and 1987 and represented 20% of the voting power of RTI's
outstanding common stock. As part of the Restructuring Plan, the holders of the
Class B stock returned their 20% interest as a group to RTI. RTI's Class A and
Class B common stock are equal to each other in all respects except dividend
preference. Holders of shares of Class A and Class B common stock are entitled
to one vote per share in the election of directors.
TRANS CONTINENTAL DRILLING COMPANY OWNERSHIP
As part of the 1993 Transaction, Drilling issued sufficient shares to
transfer 20% of the issued and outstanding stock of Drilling to Statesman
Group, Inc. The remainder (80%) is owned by Regency Affiliates, Inc.
NRDC
As part of the 1993 Transaction, Regency Affiliates, Inc. acquired 80%
of the issued and outstanding stock of NRDC. The remainder (20%) is owned by
Statesman Group, Inc.
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ITEM 6. SELECTED FINANCIAL DATA.
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
REVENUES $2,597 $5,125 $0 $0 $0
INCOME FROM EQUITY INVESTMENT
IN PARTNERSHIP 3,718,056 100,000 0 0 0
LOSS FROM LIQUIDATION OF
DISCONTINUED OPERATIONS 0 0 0 0 (997,555)
EXTRAORDINARY GAIN FROM DEBT
RESTRUCTURING 0 0 0 78,000 10,599,302
NET INCOME (LOSS) 3,298,589 (102,541) (121,789) (50,568) 9,526,556
INCOME (LOSS) FROM CONTINUING
OPERATIONS PER SHARE 0.29 (0.01) (0.01) (0.03) (0.02)
EXTRAORDINARY GAIN PER SHARE 0 0 0 0.02 2.23
NET INCOME (LOSS) PER SHARE
(PRIMARY) 0.29 (0.01) (0.01) (0.01) 2.00
NET INCOME (LOSS) PER SHARE
(FULLY DILUTED) 0.09 (0.01) (0.01) (0.01) 2.00
TOTAL ASSETS 4,980,148 1,473,832 853,922 93 6,531
LONG-TERM DEBT & REDEEMABLE 691,254 557,954 272,100 0 372,300
PREFERRED STOCK
14
15
ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Company may, from time to time, issue forward looking statements,
including, but not limited to the statements of future economic performance
contained in Item 7 of this Report, or elsewhere herein. Such forward looking
statements, whether contained in this report on Form 10-K, or elsewhere, are
subject to the following factors that could cause actual results to differ
materially from those contained in the forward looking statements:
(i) The Company suffers from a severe lack of liquidity and its
ability to remain a going concern is dependent upon the
Company's ability to continue to raise working capital from
its shareholders, or from the sale of its assets or securities
or from the proceeds of outside financing.
(ii) The Company lacks the necessary infrastructure at the site of
the Groveland Mine, and the capital necessary to place such
infrastructure in place, in order to permit the company to
make more than casual sales of the Aggregate.
(iii) The Company's lack of operations render the Company dependant
upon the investment in Security Land And Development Company
Limited Partnership for a material portion of its cash flow
and for a material portion of its reportable income.
(iv) The investment activities of the Company do not, in and of
themselves, generate sufficient cash flow to permit the
Company to continue as a going concern.
(v) An unsecured default in the Lease or sudden catastrophe to the
Security West Building from uninsured acts of God or war could
have a materially adverse impact upon the Company's investment
in Security Land And Development Company Limited Partnership.
Liquidity and Capital Resources.
In the last quarter of 1994, Regency Affiliates, Inc. commenced a
private placement of its Cumulative Convertible $100 Series-E Preferred Stock
and $0.40 p.v. Common Stock (the "Private Placement") in a transaction reported
on Form D, Notice of Sale of Securities Pursuant To Regulation D, filed with
the Securities and Exchange Commission on November 23, 1994, the contents of
which are incorporated herein by reference thereto. As of February 9, 1995,
the most recent sale under the Private Placement, Regency Affiliates, Inc. had
placed 57 Units ($570,000) of the $350,000 minimum, $800,000 maximum offering.
The securities were offered in 80 Units, each consisting of 88.5 shares in
Cumulative Convertible $100 Series-E Preferred Stock and 6,000 shares
15
16
of the Common Stock, to accredited investors as defined in Regulation D for a
cost of $10,000 per unit. The proceeds of the offering were used for to cover
negative operating cash flows. Because of the restatement of the acquisition
cost of NRDC reported in the Company's report on Form 10-K for the year ending
December 31, 1994, management has determined to offer rescission to certain of
the purchasers in the Private Placement. Management believes there is no
substantial likelihood that the offerees will exercise rescission because the
restatement does not result from a change in the fair market value of the
Aggregate. However, should all of the offerees exercise the right of
rescission, the Company would have inadequate cash resources to pay them in
full.
The investment in Security Land And Development Company Limited
Partnership should provide the Company with management fees of at least
$100,000 per annum until 2003. In the fiscal year ending December 31, 1995,
the Company's income from its equity investment in the Partnership was
$3,718,056.
Despite the cash flow from the Partnership and the working capital
raised by the Private Placement, the Company continues to suffer from a
relative lack of liquidity and capital resources. Gary K. Nuttall, who was
elected as the Company's President on February 1, 1996, is, in large part,
focusing his efforts on obtaining a financing to be secured by the Company's
investment in Security Land And Development Company Limited Partnership. While
preliminary negotiations have been favorable and the board of directors of a
potential lender has given its approval to a loan to the Company, neither due
diligence nor definitive loan agreements have been concluded, and there can be
no assurance that the contemplated transaction will be consummated.
Regency Affiliates, Inc. is continuing to explore opportunities for
the acquisition of companies with operations that will provide additional
liquidity and cash flow. The Company anticipates that such acquisitions would
be financed by borrowings secured by the assets acquired and by the Company's
investment in Security Land And Development Company Limited Partnership. The
Company is also continuing to explore transactions which would utilize the
Company's uncommitted and remaining net operating losses. There can be no
assurances that any such acquisitions or transactions will come to fruition.
As part of the 1993 Transaction with NRDC, the Company received a
working capital loan of $100,000 from Statesman Group, Inc., which loan matured
on July 7, 1995 and carries a 10% interest obligation payable quarterly in
arrears. Statesman has agreed to extend the maturity of its loan beyond 1995,
to a date yet to be determined. During 1994, the Company paid Statesman
$15,509.22 in interest and $97,464.32 in principal, bringing the loans current
as of December 31, 1994. As of December 31, 1995, the Company had a principal
balance outstanding on notes payable to Statesman of $80,000.
16
17
Results of Operations.
The operations of Regency Affiliates, Inc. and its subsidiaries in
1995 were limited to casual sales of Aggregate (less than $3,000) and the
Company's ongoing effort to secure acquisitions and/or business combinations to
provide the Company with material operations and cash flow.
SFAS 121.
In March 1995, the Financial Accounting Standards Board issued a new
standard (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of." SFAS 121 requires that long-lived
assets and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. SFAS 121 is
effective for financial statements for fiscal years beginning after December
15, 1995. The Company intends to adopt SFAS 121 in the first quarter of 1996.
The Company does not believe its adoption will have a material effect on the
Company's financial position or results of operation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company, as a result of its financial condition, did not have
funds to have timely audits conducted for the years ended December 31, 1990,
1991 and 1992. The report of independent accountants with respect to the 1989
financial statements contained a qualification with respect to adjustments that
might result in the event that the Company were unable to continue as a going
concern. On November 5, 1993, R.L. Quint & Co. issued its independent
auditor's report for the years ended December 31, 1990, 1991 and 1992. Because
as of December 31, 1992, the Company had an excess of liabilities over assets
and had no revenue producing activities, the auditors reported substantial
doubt about the Company's ability to continue as a going concern. The
auditors' report for the year ended December 31, 1993 also expressed
substantial doubt about the Company's ability to continue as a going concern
because of the Company's continued lack of revenue producing activities and
working capital.
The following pages contain the Financial Statements and supplementary
data required by Item 8 of Part II of Form 10-K for the year ending December
31, 1995.
(The remainder of this page is intentionally left blank.)
17
18
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
1995 CONSOLIDATED FINANCIAL REPORT
F-1
19
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
CONTENTS
______________________________________________________________________________
Page
AUDITORS' REPORT F-3
FINANCIAL STATEMENTS
Consolidated balance sheets F-4 - F-5
Consolidated statements of operations F-6
Consolidated statements of shareholders' equity F-7
Consolidated statements of cash flows F-8
Notes to consolidated financial statements F-9 - F-20
F-2
20
Independent Auditors' Report
----------------------------
Shareholders and Board of Directors
Regency Affiliates, Inc.
Wheaton, Illinois
We have audited the accompanying consolidated balance sheets of Regency
Affiliates, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the years then ended. These 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 did not audit the 1995 financial statements of Security Land and
Development Company Limited Partnership, the investment in which is reflected in
the accompanying financial statements using the equity method of accounting. The
investment in this partnership represents 82% of consolidated total assets as of
December 31, 1995 and 100% of the income from equity investment in partnership
for the year ended December 31, 1995. Those financial statements were audited by
other auditors whose report has been furnished to us, and our opinion, insofar
as it relates to the 1995 amounts included for Security Land and Development
Company Limited Partnership, is based solely on the reports of such other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, based on our audits and the report of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Regency Affiliates, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the consolidated results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
As described in Note 14 to the consolidated financial statements, the
Company's management determined that its 1993 acquisition of National Resource
Development Corporation was improperly accounted for. The correction of the
error was treated as a prior period adjustment and the 1993 year end balances of
certain assets, liabilities and equity accounts were, therefore, restated.
HAUSSER + TAYLOR
Cleveland, Ohio
March 26, 1996
F-3
21
REGENCY AFFLIATES, INC. SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
--------------------------
ASSETS 1995 1994
------ ---- ----
CURRENT ASSETS
Cash $ 39,689 $ 150,027
Accounts receivable 2,691 2,129
------------ ------------
Total current assets 42,380 152,156
OTHER ASSETS
Investment in partnership 4,068,056 450,000
Inventory 850,000 850,000
Other 19,712 21,676
------------ ------------
4,937,768 1,321,676
------------ ------------
$ 4,980,148 $ 1,473,832
============ ============
The accompanying notes are an integral part of these financial statements.
F-4
22
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
--------------------------
1995 1994
---- ----
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Note payable $ - $ 300,000
Notes payable - related party 80,000 105,800
Accounts payable 95,980 73,382
Accrued expenses 79,816 5,705
----------- -----------
Total current liabilities 255,796 484,887
LONG-TERM DEBT 323,000 296,500
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 106,449 111,391
SERIAL PREFERRED STOCK SUBJECT TO MANDATORY
REDEMPTION (liquidation preference and redemption
value, $504,400 and $309,700 in 1995 and 1994, respectively) 368,254 261,454
SHAREHOLDERS' EQUITY
Serial preferred stock not subject to mandatory redemption
(maximum liquidation preference, $24,903,368 and
$24,885,382 in 1995 and 1994, respectively) 1,052,988 1,052,988
Common stock, par value $.40, authorized 25,000,000 shares
issued and outstanding 11,166,537 and 10,524,537 shares
in 1995 and 1994, respectively (net of 22,460 treasury shares) 4,456,308 4,199,508
Additional paid-in capital 140,000 -
Readjustment resulting from quasi-reorganization at
December 31, 1987 (1,670,596) (1,670,596)
Accumulated deficit (52,051) (3,262,300)
----------- -----------
Total shareholders' equity 3,926,649 319,600
----------- -----------
$ 4,980,148 $ 1,473,832
=========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
F-5
23
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1995 and 1994
--------------------------------------
1995 1994
---- ----
NET SALES $ 2,597 $ 5,125
OPERATING EXPENSES
General and administrative expenses 311,611 166,213
Interest expense 45,395 45,329
---------- ---------
357,006 211,542
---------- ---------
LOSS FROM OPERATIONS (354,409) (206,417)
INCOME FROM EQUITY INVESTMENT IN PARTNERSHIP 3,718,056 100,000
---------- ---------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE
AND MINORITY INTEREST 3,363,647 (106,417)
INCOME TAX EXPENSE 70,000 -
MINORITY INTEREST 4,942 3,876
---------- ---------
NET INCOME (LOSS) $3,298,589 $(102,541)
========== =========
NET INCOME (LOSS) ATTRIBUTABLE
TO COMMON SHAREHOLDERS
[after paid or accrued preferred stock dividends of
$78,526 and $17,986 in 1995 and 1994, respectively, and
preferred stock accretion of $27,800 in 1995] $3,192,263 $(120,527)
========== =========
NET INCOME (LOSS) PER COMMON SHARE:
PRIMARY $ 0.29 $ (0.01)
========== =========
FULLY DILUTED $ 0.09 $ (0.01)
========== =========
<FN>
The accompanying notes are an integral part of these financial statements.
F-6
24
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1995 and 1994
--------------------------------------
Readjustment
Preferred Stock* Common Stock** Additional Resulting
----------------- ------------------ Paid-In From Quasi- Accumulated Shareholders'
Shares Amount Shares Amount Capital Reorganization Deficit Equity
------ ---------- ---------- ---------- --------- --------------- ----------- ------------
BALANCE - JANUARY 1, 1994,
AS RESTATED (See Note 14) 605,291 $1,052,988 10,304,537 $4,111,508 $ - $(1,670,596) $(3,159,759) $ 334,141
Issuance of common stock - - 220,000 88,000 - - - 88,000
Net loss - - - - - - (102,541) (102,541)
------- ---------- ---------- ---------- -------- ------------ ----------- ----------
BALANCE - DECEMBER 31, 1994 605,291 1,052,988 10,524,537 4,199,508 - (1,670,596) (3,262,300) 319,600
Issuance of common stock - - 642,000 256,800 140,000 - - 396,800
Net income - - - - - - 3,298,589 3,298,589
Accretion of Series E
preferred stock - - - - - - (27,800) (27,800)
Payment of dividend on
Series E preferred stock - - - - - - (60,540) (60,540)
------- ---------- ---------- ---------- -------- ----------- ----------- ----------
BALANCE - DECEMBER 31, 1995 605,291 $1,052,988 11,166,537 $4,456,308 $140,000 $(1,670,596) $ (52,051) $3,926,649
======= ========== ========== ========== ========= =========== =========== ==========
<FN>
* Preferred stock does not include Series E Preferred
Stock which is subject to mandatory redemption
** Common stock is net of 22,460 treasury shares
The accompanying notes are an integral part of these financial statements.
F-7
25
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995 and 1994
--------------------------------------
1995 1994
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 3,298,589 $ (102,541)
Adjustments to reconcile net income (loss) to net cash used by
operating activities:
Minority interest (4,942) (3,876)
Income from equity investment in partnership (3,718,056) (100,000)
Distribution of equity earnings from partnership 100,000 -
Interest amortization on long-term debt 26,500 24,400
Issuance of treasury stock in lieu of cash compensation - 4,000
Changes in operating assets and liabilities:
Accounts receivable (562) (2,129)
Other assets 1,964 (21,676)
Accounts payable 22,598 64,832
Accrued expenses 74,111 (18,159)
---------- ---------
Total adjustments (3,498,387) (52,608)
---------- ---------
Net cash used by operating activities (199,798) (155,149)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in partnership - (50,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Net short-term borrowings (5,800) 5,800
Proceeds from issuance of preferred stock 152,000 266,000
Proceeds from issuance of common stock 48,000 84,000
Offering costs (44,200) (4,546)
Dividends paid (60,540) -
---------- ---------
Net cash provided by financing activities 89,460 351,254
---------- ---------
(DECREASE) INCREASE IN CASH (110,338) 146,105
CASH - BEGINNING 150,027 3,922
---------- ---------
CASH - ENDING $ 39,689 $ 150,027
========== =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 20,944 $ 20,301
Supplemental disclosure of noncash investing and financing activities:
In 1994, the Company, as part of its investment in the partnership,
issued a $300,000 note payable. In 1995, the note was converted into 400,000
shares of the Company's common stock (see Note 3).
In 1995, $20,000 of debt was converted into equity (see Note 3) and
$44,000 of stock offering costs were satisfied by the issuance of 110,000
shares of the Company's common stock.
The accompanying notes are an integral part of these financial statements.
F-8
26
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Business and Reorganization -- Regency Affiliates, Inc. (the
"Company"), formerly Transcontinental Energy Corporation, was
organized as a Delaware corporation in 1980 to be the successor to
Transcontinental Oil Corporation which existed since 1947. In late
1984 and early 1985 the Company, all of its wholly owned
subsidiaries and twenty-one affiliated limited partnerships
commenced reorganization proceedings pursuant to Chapter 11 of the
Bankruptcy Reform Act of 1978, as amended.
Pursuant to two Plans of Reorganization which were completed
December 31, 1987, all of the Company's assets, except for its
ownership in Transcontinental Drilling Company, Inc. (Drilling) and
all of the obligations of the Company and of Drilling were
transferred to a creditor liquidating trust. The Plans provided that
the par value of the Company's common stock be increased from $.10
per share to $.40 per share and that a 1 for 4 reverse stock split
be implemented. An additional 747,500 shares were issued to the
creditor's liquidating trust, 238,700 were issued to TransCapital,
Ltd. for a cash purchase price of $111,480 and 954,800 shares were
issued to investors.
During the year ended December 31, 1988 the Company, through
RegTransco, Inc. ("RTI"), made two acquisitions. On June 3, 1988 RTI
acquired all of the outstanding stock of Florida Truss, Inc.,
Gangnail of Palm Beach and Pinewood Lumber and Truss, Inc.
(collectively, "Florida Truss, Inc."), which was involved in the
manufacture of wood trusses in the Fort Lauderdale and Palm Beach
areas of Florida. In August 1988, RTI acquired all of the
outstanding stock of Willbanks Steel Corporation ("Willbanks"), a
steel fabricator and service center with locations in Fort Worth and
Houston, Texas and Albuquerque, New Mexico. In 1990 and 1991, the
Company elected to discontinue operations at its subsidiaries,
Florida Truss and Willbanks, respectively.
On July 7, 1993 the Company entered into an Acquisition Agreement
with National Resource Development Corporation and Statesman Group,
Inc. ("Statesman"), an international business corporation organized
under the laws of the Bahamas which provided for the acquisition of
an 80% interest in National Resource Development Corporation, which
was wholly owned by Statesman in exchange for 2,975,000 shares of
the Company's common stock, 208,850 shares of the Company's Series C
Preferred stock and 20% of the outstanding shares of
Transcontinental Drilling Co. (the "Transaction"). Statesman has the
right to transfer some or all of these shares to its nominees.
Immediately following the closing, the Company had outstanding
10,336,997 common shares outstanding of which those issued to
Statesman represented approximately 28.8%.
Statesman, in addition to receiving the rights to approximately
28.8% of the Company's common stock, received irrevocable proxies
over 855,991 common shares of the Company.
As part of the closing of the Transaction on July 7, 1993, the then
sole director of the Company redesignated the nominal value of the
Company's Series C Preferred stock from $10.00 to $100.00 per share.
Immediately following the closing there were 208,850 shares of the
Company's Series C Preferred stock outstanding, all of which were
issued to Statesman as part of the Transaction.
F-9
27
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. Principles of Consolidation -- The consolidated financial
statements include the accounts of Regency Affiliates, Inc. (the
"Company") and its 80% owned subsidiaries National Resource
Development Corporation ("NRDC"), Transcontinental Drilling Company
("Drilling") and RegTransco, Inc. ("RTI"). All significant
intercompany balances and transactions have been eliminated in
consolidation. Regency Affiliates, Inc.'s (Registrant's) share of
consolidated net assets at December 31, 1995 and 1994 consist
principally of cash of approximately $37,000 and $150,000,
respectively, investment in partnership of approximately $4,068,000
and $450,000, respectively, and liabilities of approximately
$256,000 and $485,000, respectively.
C. Earnings (Loss) Per Share -- Primary earnings (loss) per share
are computed by dividing net income (loss) attributable to common
shareholders (net income (loss) less preferred stock dividend
requirements and periodic accretion) by the weighted average number
of common and dilutive equivalent shares outstanding during the
year. Fully diluted earnings per share computations assume the
conversion of Series E, Series B, and Junior Series D preferred
stock during the period that the preferred stock issues were
outstanding. If the result of these assumed conversions is dilutive,
the dividend requirements and periodic accretion for the preferred
stock issues are reduced (See Note 7).
The weighted average number of shares used in primary earnings
(loss) per share computations for 1995 and 1994 were approximately
10,941,000 and 10,327,000, respectively. The weighted average number
of shares used in the computation of fully diluted earnings (loss)
per share for 1995 was approximately 37,847,000. The computation of
fully diluted earnings (loss) per share for the year ended December
31, 1994 was antidilutive; therefore, the amounts reported for
primary and fully diluted earnings (loss) per share are the same for
that year. The Company's stock is thinly traded in the
over-the-counter market on the bulletin board section of NASDAQ. In
1995, a market price of $.25 per share was utilized in the
conversion formulas for the computation of fully diluted earnings
per share. If a market price of $.125 per share, the lowest bid
price of the Company's common shares during the year, was used in
the conversion formulas, the weighted average number of shares
utilized in the computation of fully diluted earnings per share
would amount to approximately 63,658,000 yielding fully diluted
earnings per share of $.05.
D. Cash -- The Company places its cash with high credit quality
financial institutions which may exceed federally insured amounts at
times.
E. Inventory -- Inventory, which consists of aggregate, is stated at
lower of cost or market. Liens have been attached to the aggregate
inventory by the note payable to the related party and the holders
of the zero coupon bonds. The Company is also subject to a royalty
agreement which requires the payment of certain royalties to a
previous owner of the aggregate inventory upon sales of the
aggregate.
F-10
28
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
F. Income Taxes - Effective January 1, 1993, the Company adopted
Statement of Financial Accounting Standards No. 109 ("SFAS 109"),
"Accounting for Income Taxes," which requires an asset and liability
approach to financial accounting and reporting for income taxes. The
difference between the financial statement and tax basis of assets and
liabilities is determined annually. Deferred income tax assets and
liabilities are computed for those temporary differences that have
future tax consequences using the current enacted tax laws and rates
that apply to the periods in which they are expected to affect taxable
income. In some situations SFAS 109 permits the recognition of
expected benefits of utilizing net operating loss and tax credit
carryforwards. Valuation allowances are established, if necessary, to
reduce the deferred tax asset to the amount that will, more likely
than not, be realized. Income tax expense is the current tax payable
or refundable for the period plus or minus the net change in the
deferred tax assets and liabilities.
G. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
H. Statement of Financial Accounting Standard No. 121 - In March 1995,
the Financial Accounting Standards Board issued a new standard,
Statement of Financial Accounting Standard No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" (SFAS 121). SFAS 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
SFAS 121 is effective for financial statements for fiscal years
beginning after December 15, 1995. The Company intends to adopt SFAS
121 in the first quarter of 1996. The Company does not believe its
adoption will have a material effect on the Company's financial
position or results of operations.
NOTE 2. INVESTMENT IN PARTNERSHIP
In November 1994, the Company invested $50,000 and a $300,000 note payable
(see Note 3) for a limited partner interest in Security Land and
Development Company Limited Partnership ("Security"), which owns and
operates an office complex. The Company has limited voting rights and is
entitled to be allocated 95% of the profit and loss of the partnership
until October 31, 2003 (the lease termination date of the sole tenant of
the office complex) and 50% thereafter. The Company is entitled to 95% of
operating cash flow distributions, as defined, until October 31, 2003,
which are expected to be limited, and 50% thereafter. Further, the partners
are entitled to the net cash flow generated from the sale or refinancing of
the property in the proportion of their individual positive capital account
balance to the total positive capital account balances of all the partners.
The Company can force the sale of the property after December 31, 2004.
F-11
29
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. INVESTMENT IN PARTNERSHIP (CONTINUED)
Security was organized to own and operate, for investment purposes,
two buildings containing approximately 717,000 net rentable square
feet consisting of a two-story office building and a connected
six-story office tower. The building was purchased by Security in 1986
and is located on approximately 34.3 acres of land which is also owned
by Security. The building has been occupied by the United States
Social Security Administration's Office of Disability and
International Operations for approximately 22 years under leases
between the United States of America, acting by and through the
General Services Administration ("GSA"). Effective November 1, 1994,
Security and the GSA entered into a nine-year lease (the "Lease") for
100% of the building. Security has received an opinion of the
Assistant General Counsel to the GSA that lease payments are not
subject to annual appropriation by the United States Congress and the
obligations to make such payments are unconditional general
obligations of the United States Government.
The Company accounts for the investment in partnership on the equity
method, whereby the carrying value of the investment is increased or
decreased by the Company's allocable share of income or loss. The
investment in partnership included in the Consolidated Balance Sheets
at December 31, 1995 and 1994 was $4,068,056 and $450,000,
respectively. The income from the Company's equity investment in the
partnership for the years ended December 31, 1995 and 1994 was
$3,718,056 and $100,000, respectively. The undistributed earnings from
the Company's equity investment in the partnership as of December 31,
1995 and 1994 amounted to $3,718,056 and $100,000, respectively.
Summarized financial information for Security is as follows:
1995 1994
BALANCE SHEET DATA ---- ----
------------------
Cash and receivables $ 1,344,049 $ 1,340,903
Restricted cash 18,514,573 30,065,176
Real estate 38,706,350 25,336,736
Other assets 2,252,224 2,573,546
---------- ----------
Total assets $ 60,817,196 $ 59,316,361
========== ==========
Accounts payable and accrued expenses $ 1,510,030 $ 1,088,400
Project note payable 51,380,596 55,760,764
Other liabilities 4,623,171 2,972,277
---------- ----------
Total liabilities 57,513,797 59,821,441
Partners' capital (deficit):
Regency Affiliates, Inc. 4,068,056 450,000
Other partners (764,657) (955,080)
---------- ----------
Total partners' capital (deficit) 3,303,399 (505,080)
---------- ----------
Total liabilities and partners' capital (deficit) $ 60,817,196 $ 59,316,361
========== ==========
F-12
30
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. INVESTMENT IN PARTNERSHIP (CONTINUED)
1995 1994
STATEMENT OF OPERATIONS DATA ----- -----
----------------------------
Revenues $ 11,757,102 $ 5,880,551
Expenses 4,215,587 3,920,118
---------- ----------
Net operating income 7,541,515 1,960,433
Other revenue and expenses (3,627,772) (2,487,007)
---------- ----------
Income (loss) before extraordinary item 3,913,743 (526,574)
Extraordinary gain on forgiveness of debt - 10,322,652
---------- ----------
Net income $ 3,913,743 $ 9,796,078
========== ==========
Note 3. Notes Payable
Notes payable consist of:
A note payable of $300,000 at December 31, 1994, due to Security
Land and Development Company Limited Partnership as part of the
Company's initial capital contribution (see Note 2). The note
payable was satisfied in July 1995 upon delivery to the note
holder of 400,000 shares of the Company's common stock in lieu of
cash.
Note payable - related party of $80,000 and $105,800 at December
31, 1995 and 1994, respectively, is due Statesman and is secured
by the aggregate inventory. Interest is payable quarterly at 10%
per annum with the principal due on January 1, 1996. Statesman
has agreed to waive the Company's obligation to pay the note
until it has funds available to make payment which is expected to
be in 1997. In 1995, Statesman converted $20,000 of the debt into
two units of the stock offering described in Note 6.
F-13
31
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. LONG-TERM DEBT
Long-term debt consists of zero coupon non-recourse secured bonds, due
January 1, 2002, with a face value of $542,000 and a carrying value of
$323,000 and $296,500 at December 31, 1995 and 1994, respectively. The
bonds were issued by NRDC and the difference (discount) between
the face value and carrying value is being amortized utilizing the
interest method at 9%. Interest expense related to the bonds for
1995 and 1994 was $26,500 and $24,400, respectively. The bonds are
redeemable at anytime at the option of the Company at an amount that
approximates the carrying value. As of December 31, 1995, a sinking
fund has not been established to fund the payment of the zero coupon
non-recourse secured bonds upon maturity. The Collateral Trust
Indenture ("Indenture"), dated as of April 1, 1991, states that the
Company is prohibited from selling all or any of the pledged aggregate
inventory unless the Company makes a payment to the bond trustee for
deposit into the sinking fund. The Indenture grants the trustee to
secure the bonds a first priority mortgage lien and security interest
in the aggregate and establishes a "mandatory sinking fund payment per
short ton sold" of pledged aggregate inventory until the maturity of
the bonds. The minimum payment for sales during calendar years 1994
through 2002 ranges from $0.60 to $1.00 per short ton. The Indenture
provides that the Company will have no personal liability for the
payment of the debts evidenced by the Indenture or any bond or for the
performance of the covenants, representations and warranties of the
Company in the Indenture or any bond, and that the rights of the
trustee and the bondholders shall be limited to the foreclosure on the
lien, with certain exceptions.
Based on borrowing rates currently available to the Company for loans
with similar terms and average maturities, the fair value of long-term
debt is $235,000.
NOTE 5. MINORITY INTEREST
Statesman Group, Inc. has a 20% minority interest in the Company's
subsidiaries. In addition, Statesman holds a significant common stock
interest in the Company.
NOTE 6. STOCK OFFERING
Through a private placement memorandum dated November 18, 1994, and
concluded in 1995, the Company offered for sale 80 units of
securities, each unit consisting of 88.5 shares of 12.5% cumulative
convertible Series E preferred stock and 6,000 shares of common stock.
The units were priced at $10,000 per unit. As of December 31, 1995 and
1994, subscriptions for 57 and 35 units, respectively, were received
and offering costs of $92,746 and $4,546, respectively, were incurred.
Purchasers of units were issued financial statements containing errors
resulting from the improper accounting treatment of the acquisition of
NRDC (see Note 14). Management intends to offer such purchasers
rescission, however, because the appraised fair value of the
underlying net assets of NRDC are significantly in excess of the
carrying value for accounting purposes, management believes the
likelihood of rescission is remote.
F-14
32
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. SERIAL PREFERRED STOCK
At December 31, 1995 and 1994, the Company had 5,000,000 authorized
shares of $.10 par value serial preferred stock. Serial preferred
stock at December 31, 1995 and 1994, all of which is convertible
(other than Series C) and cumulative consists of:
Mandatory Redeemable Shares - Series E, $100 stated value, 12.5% cumulative
---------------------------------------------------------------------------
Shares Value
------------------------ ------------------------
Designated Outstanding Carrying Liquidation
---------- ----------- -------- -----------
Balance, January 1, 1994 - - $ - $ -
Issuance, net of offering costs 566,400 3,097 261,454 309,700
------- ------ ------- -------
Balance, December 31, 1994 566,400 3,097 261,454 309,700
Issuance, net of offering costs - 1,947 79,000 194,700
Accretion - - 27,800 -
------- ------ ------- -------
Balance, December 31, 1995 566,400 5,044 $ 368,254 $ 504,400
======= ===== ======== ========
Redeemable Shares at Company's Option
-------------------------------------
Shares Value
------------------------ ---------------------------------------------
1995 1994
Designated Outstanding Carrying Liquidation Liquidation
---------- ----------- -------- ----------- -----------
Series C, $100 stated
value 210,000 208,850 $ 229,136 $ 20,885,000 (a) $ 20,885,000 (a)
Series B, $10 stated
value, 6% cumulative 370,747 370,747 566,912 3,707,470 3,707,470
Junior Series D, $10
stated value, 7%
cumulative 26,000 25,694 256,940 310,898 (b) 292,912 (b)
------- ------- --------- ---------- ----------
606,747 605,291 $ 1,052,988 $ 24,903,368 $ 24,885,382
======= ======= ========= ========== ==========
(a) This represents the estimated maximum possible liquidation value of
the Series C preferred shares, which is defined as the lesser of: 1)
net proceeds of the assets of NRDC, or 2) the redemption value
(defined below). In the event of liquidation, the Series C shares are
senior to all other shares of the Company's stock, with the exception
of the Series E shares.
(b) The liquidation value of the Junior Series D shares includes accrued
and unpaid dividends of $53,958 and $35,972 at December 31, 1995 and
1994, respectively.
F-15
33
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. SERIAL PREFERRED STOCK (CONTINUED)
SERIES E - The Series E shares must be redeemed by the Company at the
stated value plus accrued and unpaid dividends on the fifth
anniversary from the date of issuance. The Company, at its option, may
redeem the shares beginning on the second anniversary of the date of
issuance. The carrying value of the Series E stock was recorded at its
issue price (net of issue costs). Beginning in 1995, the carrying
value is being increased by periodic accretion to the Company's
accumulated deficit, for the difference between the initial carrying
value and the redemption value. Accretion, utilizing the interest
method, for 1995 was $27,800. Dividends of $60,540 on the Series E
stock were paid or accrued in 1995. Holders of Series E stock may
convert their shares to common stock based on the stated value
multiplied by ten (10) divided by 88% of the average bid price for the
90 days preceding the conversion date of the Company's common shares
beginning on the second anniversary from the date of issuance of the
Series E shares.
SERIES C - The Series C shares were issued on July 7, 1993 as part of
the transaction to acquire an 80% interest in NRDC. The cumulative
dividend right is equal to 20% (not to exceed $500,000) of annual
after tax earnings of NRDC. At the Company's option, the Series C may
be redeemed at the lesser of (a) the stated value plus accrued and
unpaid dividends, or (b) the fair market value of the common stock
interest acquired by the Company in NRDC. The Company and Statesman,
the sole shareholder of Series C shares, agreed to permanently waive
the contingent conversion feature related to such shares for no
consideration.
SERIES B - The Series B shares were issued in 1991 as part of a
restructuring plan limited to senior lenders and was issued in
exchange for all obligations and any claims or causes of action
relating to the Company's obligations and the Florida Truss and
Willbanks Steel Corp. guarantees. Such preferred stock includes, among
other provisions and preferences, the following:
a) A 6% cumulative dividend right commencing on the 24th month from
the consummation of a defined "initial business combination
transaction" and if the Company has reached a defined ratio of
earnings to fixed charges. In addition, dividends accrue for a
period of 35 additional months without cash payment.
b) At the Company's option, the shares may be redeemed subject to
certain limitations, by cash payment or by exchanging shares of
its common stock at 77% of its stated value divided by the quoted
market value of its common stock.
c) A contingent conversion provision which conversion right, and the
Company common shares to be issued in connection with the
conversion, would be based on the stated value divided by the
average bid and asked price for the 90 days preceding the
conversion date of the Company's common shares. In addition, the
number of the Company's common shares to be received upon
conversion is subject to certain limitations.
F-16
34
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. SERIAL PREFERRED STOCK (CONTINUED)
JUNIOR SERIES D - The junior preferred stock was issued in 1992 in
exchange for the Company's Restructuring Serial Promissory Notes. This
preferred stock is redeemable, at the Company's option, at the stated
value plus accrued and unpaid dividends and is contingently
convertible into common at the fair market value of the common as
determined by the average of the bid and asked price for the thirty
(30) day period preceding the conversion date.
Generally, no dividends can be made on the Company's common stock
until all cumulative dividends on the serial preferred stock have been
paid. Additionally, no dividends on the Company's common shares can be
made if the Company is in default or in arrears with respect to any
sinking or analogous fund or any call or tenders or other agreement
for the purchase, redemption or other retirement of shares of
preferred stock. No provision for dividends has been made for the
Company's Series B and C "increasing rate preferred stock," as defined
in Staff Accounting Bulletin Topic 5Q, due to the contingent nature of
dividends on such shares.
Generally the preferred shares have limited voting rights. However, in
the event dividends payable on the Series C and E shares,
respectively, are accumulated and unpaid for seven quarterly dividends
(whether or not declared and whether or not consecutive), the holders
of record of the Series C and E shares, respectively, shall thereafter
have the right to elect two directors (each) until all arrears in
required cash dividends (whether or not declared) on such shares have
been paid. Its bylaws provide for eight members on its Board of
Directors. At December 31, 1995, the Company had no accumulated and
unpaid dividends on Series C and E preferred shares.
NOTE 8. STOCK OPTION PLANS
The Company has reserved 125,000 shares of its common stock for
issuance upon exercise of incentive stock options under the 1984
Incentive Stock Option Plan. The plan provides that options must be
granted within ten years after February 8, 1984, the effective date of
the plan, must have not more than a ten year term, and, in general,
must be exercised during the optionee's employment. The exercise price
must be equal to the fair market value of the common stock on the date
of the grant. Subject to the limitations in the plan, an Employee
Incentive Stock Option Plan committee of the Board of Directors
determines the optionee, the number of shares covered by each option
and the duration of each option. As of December 31, 1995 and 1994,
options aggregating 50,000 shares had been granted, exercisable at
prices of $1.31 to $1.75 per share.
In addition, the Company has reserved 500,000 shares of common stock
for issuance upon exercise of incentive stock options under the 1988
Incentive Stock Option Plan. The plan provides that no option is
exercisable less than six months nor more than ten years from the
grant date, and, in general, must be exercised during the optionee's
employment. The exercise price must be at least equal to the fair
market value of the common stock on the date of the grant. Subject to
limitations in the plan, a Personnel and Compensation Committee of the
Board of Directors determines the optionee, the number of shares to be
granted to each employee and the restrictions to be imposed upon each
grant. As of December 31, 1995 and 1994, no options to purchase stock
under this plan were outstanding.
F-17
35
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. STOCK WARRANTS
Previously issued warrants to purchase 500,000 shares of the Company's
common stock, issued to two former Company directors, were cancelled
and extinguished during the year ended December 31, 1994.
NOTE 10. INCOME TAXES
As referred to in Note 1, the Company accounts for income taxes under
SFAS 109, "Accounting for Income Taxes." The deferred taxes are the
result of long-term temporary differences between financial reporting
and tax reporting for earnings from the Company's partnership
investment in Security Land and Development Company Limited
Partnership related to depreciation and amortization and the
recognition of income tax carryforward items.
At December 31, 1995 and 1994, the Company's net deferred tax asset,
utilizing a 34% effective tax rate, consists of:
1995 1994
---- ----
Deferred tax assets:
Investment partnership earnings $ 1,020,000 $ 1,020,000
Net operating loss carryforwards 15,060,000 16,210,000
------------ ------------
Total deferred tax assets before valuation allowance 16,080,000 17,230,000
Valuation allowance (16,080,000) (17,230,000)
------------ ------------
Net deferred tax asset $ - $ -
============ ============
The valuation allowance was established to reduce the net deferred tax
asset to the amount that will more likely than not be realized. This
reduction is necessary due to uncertainty of the Company's ability to
utilize the net operating loss and tax credit carryforwards before
they expire.
For regular federal income tax purposes, the Company has remaining net
operating loss carryforwards of approximately $44,300,000. These
losses can be carried forward to offset future taxable income and, if
not utilized, will expire in varying amounts beginning in the year
2000. The Company's tax returns have not recently been examined by the
Internal Revenue Service ("Service") and there is no assurance that
the Service would not attempt to limit the Company's use of its net
operating loss and tax credit carryforwards.
For the years ended December 31, 1995 and 1994, the tax effect of net
operating loss carryforwards reduced the current provision for regular
federal income taxes by approximately $1,150,000 and $1,020,000,
respectively. At December 31, 1995, the Company has provided $70,000
for taxes, which relates to alternative minimum tax liabilities.
F-18
36
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. EMPLOYMENT AGREEMENT
On February 1, 1996, the Company entered into a written employment
agreement with Gary K. Nuttall pursuant to which Mr. Nuttall was
employed as the Company's President and Chief Executive Officer. Mr.
Nuttall's agreement calls for him to receive 466,667 shares of the
Company's common stock upon execution, one-half of which may be
forfeited by Mr. Nuttall under certain circumstances. During his
employment with the Company, Mr. Nuttall is to receive base
compensation in the amount of $3,000 payable semi-monthly, and
certain other benefits. He is to receive a cash flow bonus equal to
20% of eligible cash flow, defined generally as net cash provided (or
used) by operations and distributions from partnerships or
distributions from or sales of other passive investments and income
tax expense as reported on the financial statements of the Company
each year before such bonus, however, distributions from proceeds of
sale or refinancing of Security Land and Development Company Limited
Partnership ("Security") shall only be included to the extent that
such cash flows exceed the carrying amount of Security on the
Company's financial statement. It is payable in cash, or part of
which may be paid in warrants to purchase the Company's common stock,
at 50% of the average bid price, at the option of the Company.
Mr. Nuttall is also to receive a bonus equal to 10% of any financing
secured solely by the Company's investment in Security, part of which
may also be paid in the Company's common stock or in warrants to
purchase the Company's common stock, at 50% of the average bid price
for the week ended December 1, 1995, also at the option of the
Company. The agreement also provides for a grant of options to
purchase 450,000 shares of the Company's common stock pursuant to the
terms of the Company's 1988 Incentive Stock Option Plan. The options
shall become exercisable at the rate of 150,000 shares for each $.03
annual increase in the per share book value of the Company excluding
the effects of the non-cash income accrual on the Company's
investment in Security, and the effects of any non-cash interest
expense on indebtedness of the Company secured by the investment in
Security. The option price is the greater of 50% of the average of
the bid price for the Company's common stock during the week ended
December 1, 1995 or the par value of the stock at the date of the
grant.
NOTE 12. RELATED PARTY TRANSACTIONS
In 1995, L. J. Horbach and Associates, of which L. J. Horbach, a
director of the Company, is the sole owner, was compensated for
services rendered in the amount of $33,000 under an agreement to
provide certain administrative services to the Company for a monthly
fee of $3,000.
In 1994, Mr. Horbach advanced the Company $50,000 to fund the equity
investment in Security Land and Development Company Limited
Partnership. The funds were repaid with interest during 1994. In
addition, Mr. Horbach was issued 10,000 shares of the Company's
common stock, out of treasury shares, for the payment of commitment
fees. L. J. Horbach and Associates was also compensated for services
rendered in the amount of $1,500. Mr. Horbach also holds 1,238 shares
of the Junior Series D preferred stock.
F-19
37
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. GOING CONCERN
Since 1990 the Company has had limited operating activities and
substantially all of its efforts have been devoted to acquiring or
developing profitable operations. The Company's ability to become an
operating entity and to continue in existence is partly dependent upon
its ability to arrange adequate financing and to attain satisfactory
levels of operating cash flows, including its ability to develop
positive cash flow and profitable operations in NRDC to meet its
obligations. However, due to the minimal operating expenses the
Company currently has, management believes the Company can continue in
existence for an extended period of time. Additionally, the Company's
anticipated cash flow from its investment in Security (see Note 2) and
the proceeds of anticipated financings should provide sufficient
working capital to fund its 1996 operations and obligations.
NOTE 14. PRIOR PERIOD ADJUSTMENT
In 1994, management of the Company determined that its 1993
acquisition of NRDC had been improperly accounted for. Originally the
acquisition was recorded at the March 16, 1994 appraised value of
NRDC's inventory ($15,000,000). The acquisition should have been
recorded at the purchase cost of NRDC's net assets which approximates
the estimated historical cost of NRDC's underlying assets and
liabilities.
The correction of the error has been recorded as a prior period
adjustment and, therefore, certain 1993 ending and 1994 beginning
balance sheet amounts have been restated. The effect of the
restatement on the balance sheet follows:
December 31, 1993 December 31, 1993
Balances As Balances
Previously Reported As Adjusted
------------------- -----------------
Inventory $15,000,000 $850,000
Long-term Debt $ 542,000 $272,100
Minority Interest $ 2,891,287 $115,267
Shareholders' Equity $11,438,221 $334,141
The effect on 1993 results of operations and net loss per share of the
prior period adjustment was not material.
F-20
38
Reznick Fedder & Silverman
Certified Public Accountants - Business Consultants
A Professional Corporation
4520 East-West Highway - Suite 300 - Bethesda, MD 20814-3319 -
(301) 652-9100 - Fax (301) 652-1848
INDEPENDENT AUDITORS' REPORT
To the Partners
Security Land and Development Company Limited Partnership
We have audited the accompanying balance sheet of Security Land and
Development Company Limited Partnership as of December 31, 1995, and the
related statements of operations, changes in partners, capital and cash flows
for the year then ended. These financial statements are the responsibility of
the partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Security Land and
Development Company Limited Partnership as of December 31, 1995, and the
results of its operations, changes in partners' capital and cash flows for the
year then ended in conformity with generally accepted accounting principles.
Bethesda, Maryland
January 25, 1996
[List of addresses]
F-21
39
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There has not been and do not presently exist any disagreements
between the Company and its accountants concerning accounting principles,
auditing procedures or financial disclosure.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS OF THE REGISTRANT.
Identification of directors and officers.
Since there has not been an annual meeting of the stockholders since
August of 1988, the sitting Directors have appointed persons to fill existing
vacancies on the Board. Executive officers are elected annually by the Board of
Directors or until their successors are duly elected and qualified. In
connection with the Transaction, new directors were designated to fill eight
vacant director positions to serve until elected at the next annual meeting of
stockholders. Following is a list of the names and addresses, ages, positions
with the Company, principal occupation and periods of service of the directors.
POSITIONS AND OFFICES HELD AND PRINCIPAL
OCCUPATIONS OR EMPLOYMENT DURING PAST FIVE
NAME, ADDRESS (AGE) YEARS
Stephanie Carey (45) Director since July 1993. Ms. Carey is a principal and the
West Bay Street Investment Manager for Managed Companies with Bradley
P.O. Box CB 10985 Management (Bahamas) Limited. She is also a director of
Nassau, Bahamas Regal Bahamas International Airways Limited.
18
40
Martin J. Craffey (58) Director since July 1993. From January 1988 until December
58 Mainsail Drive 31, 1993, Mr. Craffey was a real estate and business
Patchogue, New York 11772 broker and contract vendee with Prudential Realty of Long
Island, N.Y. Mr. Craffey is presently employed in seeking
financing for and reorganizing real estate projects.
Larry J. Horbach (54) Director from 1987 to 1990, from 1992 to February 15, 1994
1869 South 120th Street and since November 16, 1994. Interim Secretary and
Omaha, Nebraska 68144 Treasurer from July 1993 until his resignation effective
February 15, 1994. Mr. Horbach has been Chairman of the
Board, President and Chief Executive Officer of Gateway
Energy Corporation since June 1990 and had served as a
director of Seilon, Inc., both reporting companies under
the Securities Exchange Act of 1934. In addition, during
the past five years, Mr. Horbach has been associated with
L.J. Horbach & Associates, a firm specializing in re-
organizations and restructurings. Mr. Horbach was
designated to fill a vacancy on the Board on November 16,
1994.
Pamlyn Kelly, Ph.D. (52) Director since July 1993. Dr. Kelly is principal and Chief
10 Winged Foot Drive Executive Officer of Human Resource Concepts, Novato, CA,
Novato, California 94949 a registered minority owned management consultant firm and
has a private practice. Dr. Kelly is a licensed
Psychologist in both Arizona and California. Dr. Kelly
received her Ph.D. in Clinical Psychology in 1990. She
received a discharge under Chapter 12 of the United States
Bankruptcy laws in 1991.
Gary K. Nuttall (49) Director and President since February, 1996. Since 1994,
381 Robinwood Lane Mr. Nuttall has served as President of G-BAN Inc., an
Wheaton, IL 60187 investment and financial services advisory company. From
1990 to 1994, Mr. Nuttall served as managing partner and
managing director of Cornerstone Financial Advisors
Limited Partnership of Chicago, Illinois.
19
41
William R. Ponsoldt, Jr. (29) Director since July 1993. Mr. Ponsoldt is an attorney
50 S.E. Kindred Street engaged in the private practice of law in Florida with the
Stuart, Fla. 34994 law firm of Kohl, Metzter, Spotts, P.A. Formerly, he was
with Kohl, Bobko, McKey, McManus & Higgins, P.A.
Eunice M. Antosh (46) Secretary of the Company since February 25, 1994. Mrs.
Rural Route One Antosh has been employed by L.J. Horbach & Associates
Box 130 since 1983 being responsible for clerical and accounting
Yutan, Nebraska 68073 matters.
Each of Messrs. Ponsoldt and Craffey, Dr. Kelly and Ms. Carey were
appointed directors of the Company by Statesman as part of the closing of the
Transaction on July 7, 1993. Each had an understanding with Statesman and/or
the Company that as an inducement to accept their positions as directors he or
she would receive certain consideration from Statesman and/or the Company as
set forth in Item 11, COMPENSATION OF DIRECTORS, to which reference is made.
Mr. Horbach was a Director of the Company from 1987 to 1990 and again
from 1992 to February 15, 1994. As noted above, he rejoined the Board on
November 16, 1994 agreeing to serve as a director until the next shareholders'
meeting, at which time he intends not to stand for re- election. Mr. Horbach
served as the interim President of the Registrant on a part time basis until
the closing of the 1993 Transaction. Mr. Horbach had served as the chief
financial officer of the Company from 1987 to 1989 and as Secretary of the
Company from July 7, 1993 to February 15, 1994. From 1976 through the current
date, Mr. Horbach was primarily self-employed with L.J. Horbach & Associates, a
firm specializing in reorganizations. He previously served as Vice President
and Chief Financial Officer of American Beef Packers, Inc., now Sudbury
Holdings, Inc., on a part time basis from 1977 through that Company's
reorganization in 1983, after which he continued to work for Sudbury on a
project by project basis. From 1963 to 1976 he was with Arthur Andersen & Co.,
a public accounting firm. In January 1990, Mr. Horbach was elected to the
Board of Directors of Gateway Sporting Goods Company, a public company (name
later changed to Gateway Energy Corporation.). In June 1990, Mr. Horbach was
appointed the interim President and agreed to serve as the interim Chairman of
the Board upon the resignation of the then president and chairman, and is
currently serving as Gateway's Chairman, President and Chief Executive Officer.
In January 1992, Mr. Horbach was also elected to the Board of Directors of
Seilon, Inc., a public company currently restructuring and without operations
and resigned therefrom on December 13, 1994. On February 7, 1995, Regency
Affiliates, Inc. entered into an agreement with L.J. Horbach & Associates, Inc.
pursuant to which L.J. Horbach & Associates, Inc. will provide certain
administrative services to the Company for a monthly fee of
20
42
$3,000, including but not limited to accounting and stock transfer record
keeping. L.J. Horbach & Associates, Inc. is wholly owned by Larry J. Horbach.
Item 405 Disclosure.
Stephanie Carey failed to timely file a Form 4 reporting on her
September, 1995 sale of 100,000 shares of the Company's $0.40 p.v. Common
Stock in a private transaction. Ms. Carey did report the transaction on a Form
5.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table.
The following table sets forth the annual and long-term compensation,
attributable to all service in the fiscal year 1995 to Mr. Craig R. Grossman,
Pamlyn Kelly, Ph.D., and Ms. Eunice M. Antosh, the only officers who received
compensation during fiscal 1995.
21
43
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
-------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
Other Securities
Name and Annual Restricted Underlying All Other
Principal Compen- Stock Options/ LTIP Compensation
Position Year Salary ($) Bonus ($) sation ($) Award(s) ($) SARs (#) Payouts ($) $
- -------------------------------------------------------------------------------------------------------------------------------
Edward G. 1995 -0- -0- -0- -0- -0- -0- -0-
Harshfield 1994 -0- -0- -0- -0- -0- -0- -0-
1993 -0- -0- -0- -0- 750,000(1) -0- -0-
Gary F. 1995 -0- -0- -0- -0- -0- -0- -0-
Spahn 1994 20,000.00 -0- -0- -0- -0- -0- -0-
1993 12,500.00 -0- -0- -0- 250,000(2) -0- -0-
Craig R. 1995 25,000.00 -0- -0- -0- -0- -0- -0-
Grossman, 1994 18,000.00 -0- -0- -0- -0- -0- -0-
President 1993 -0- -0- -0- -0- 2,000(3) -0- -0-
Pamlyn 1995 6,000.00 -0- -0- -0- -0- -0- -0-
Kelly, Ph.D. 1994 500.00 -0- -0- -0- -0- -0- -0-
President 1993 -0- -0- -0- -0- -0- -0- -0-
Eunice M. 1995 11,000.00 -0- -0- -0- -0- -0- -0-
Antosh, 1994 -0- -0- -0- -0- -0- -0- -0-
Secretary 1993 -0- -0- -0- -0- -0- -0- -0-
____________________________
(1) During the fiscal year ending December 31, 1994, Mr.
Harshfield relinquished the remaining unexercised warrants held by
him.
(2) During the fiscal year ending December 31, 1994, Mr. Spahn
relinquished the remaining unexercised warrants held by him.
(3) Statesman Group, Inc. granted Mr. Grossman warrants to
purchase 2,000 shares of the Company's Cumulative Senior Preferred
$100 Series-C Stock from Statesman at $0.01 per share.
22
44
STOCK OPTIONS.
The Option/SAR Grants Table is omitted as there were no individual
grants of stock options (whether or not in tandem with SARs) nor freestanding
SARs made during the last completed fiscal year.
The Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End
Option/SAR Values table is omitted as there were no exercise of stock options
(nor tandem SARs) nor freestanding SARs during the last completed fiscal year.
Incentive Stock Option Plans.
The Company has reserved 500,000 shares of its Common Stock for
issuance under the 1988 INCENTIVE STOCK PLAN. In addition, 125,000 shares were
reserved for issuance under the 1984 INCENTIVE STOCK OPTION PLAN. During the
year ending December 31, 1995, no options were granted to executive officers or
directors under either plan.
Non-Qualified Stock Options.
The shareholders of the Company approved in 1989 non-qualified stock
options (stock purchase warrants), granted by the Board of Directors in 1988,
for the purchase of 100,000 shares of Regency's Common Stock to Donald L.
Anderson, a former director, 75,000 shares to each of L.J. Horbach and Paul V.
Degenhart, a former officer and director, and 25,000 shares to each of Stanley
M. Seeds and Joseph Wilwerding (also former directors). Each of these options
was exercisable at $1.50 per share and had a five-year term beginning on
December 19, 1988. In July, 1988, Messrs. Degenhart, Horbach and Wilwerding
exercised their warrants by execution of a secured promissory note to the
Company. The notes were secured by the shares received upon exercise of the
warrants. As part of the Restructuring Plan, certain of these promissory notes
were forgiven in a compromise and settlement of prior compensation due the
executive officers and certain shares issued upon exercise of the warrants, as
well as the remaining warrants, were forfeited and returned to the Company.
OTHER.
LTIP Awards.
There have been no awards under any Long-Term Incentive Plan during
the last completed fiscal year.
Defined Benefit Plans.
The Company has no defined benefit or actuarial plans.
23
45
Compensation of Directors.
Standard Arrangements. The members of the Board of Directors of
Regency Affiliates, Inc. did not receive any standard compensation for services
as directors or for attendance at meetings during the last completed fiscal
year.
Other Arrangements. There were no other arrangements pursuant to
which any director of the Regency Affiliates, Inc. was compensated during the
Company's last completed fiscal year for services provided as a director.
Employment Contracts, Termination of Employment and Change in Control
Arrangements.
As of December 31, 1995, Regency Affiliates, Inc. had no formal
employment contracts with any executive officers. On February 1, 1996, the
Company entered into a written employment agreement with Gary K. Nuttall
pursuant to which Mr. Nuttall was employed as the Company's President and Chief
Executive Officer. Mr. Nuttall's agreement calls for him to receive 466,667
shares of the Company's $0.40 p.v. Common Stock upon execution, one-half of
which may be forfeited by Mr. Nuttall under certain circumstances. During his
employment with the Company, Mr. Nuttall is to receive base compensation in the
amount of $3,000 payable semi-monthly, a cash flow bonus equal to 20% of
eligible cash flow, payable in cash or in warrants to purchase the Company's
$0.40 p.v. Common Stock, at the option of the Company, and certain other
benefits. Mr. Nuttall is also to receive a bonus equal to 10% of any financing
secured solely by the Company's investment in Security Land And Development
Company Limited Partnership, part of which may also be paid in warrants to
purchase the Company's $0.40 p.v. Common Stock, also at the option of the
Company. The agreement also provides for a grant of options to purchase
450,000 shares of the Company's $0.40 p.v. Common Stock pursuant to the terms
of the Company's 1988 Incentive Stock Option Plan. The option price is the
greater of 50% of the average of the bid price for the Company's $0.40 p.v.
Common Stock during the week ending December 1, 1995 or the par value of the
stock at the date of the grant. In the event that Mr. Nuttall's employment is
terminated without cause by the Company, Mr. Nuttall is entitled to receive his
base compensation, other compensation and benefits for a twelve month period
following his termination. A copy of Mr. Nuttall's agreement is filed herewith
at page E-12.
Compensation Committee Report on Executive Compensation.
This item is omitted as Regency Affiliates, Inc. qualifies as a "small
business issuer" under Rule 405 and Regulation S-B.
Performance Graph.
24
46
This item is omitted as Regency Affiliates, Inc. qualifies as a "small
business issuer" under Rule 405 and Regulation S-B.
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions.
This item is omitted as Regency Affiliates, Inc. qualifies as a "small
business issuer" under Rule 405 and Regulation S-B.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Security ownership of certain beneficial owners.
To the best of the Company's knowledge, the only beneficial owners of
more than five percent of Regency's voting securities as of February 1, 1996
are listed below:
(2) Name and address of (3) Amount and nature of (4) Percent of
--------------------- ----------------- -- ----------
(1) Title of class beneficial owner beneficial ownership class
-------------- ---------------- -------------------- -----
Regency Affiliates, Statesman Group, Inc. 2,644,710 (4) 22.7%
Inc. $0.40 p.v. King & George Streets
Common Stock Nassau, Bahamas
Regency Affiliates, Gary K. Nuttall and 666,667 (5) 5.7%
Inc. $0.40 p.v. G-BAN Inc.
Common Stock 381 Robinwood Lane
Wheaton, IL 60187
____________________
(4) The nature of beneficial ownership is sole investment power and sole
voting power as to all shares listed.
(5) 466,667 shares of the Company's $0.40 p.v. Common Stock were owned
directly by Gary K. Nuttall as of February 1, 1996 over which Mr. Nuttall has
sole investment power and sole voting power. An additional 200,000 shares were
owned as of that date by G-BAN Inc., a corporation owned by members of the
immediate family of Mr. Nuttall and a corporation of which Mr. Nuttall serves as
Secretary and Treasurer and a member of its Board of Directors. As a director
of G-BAN Inc., Mr. Nuttall shares the power to direct the vote and direct the
disposition of the shares held by G-BAN Inc.
25
47
Transcontinental Statesman Group, Inc. 250 (6) 20%
Drilling Company, King & George Streets
Inc. $1.00 p.v. Nassau, Bahamas
Common Stock
Statesman Group, Inc. is an international business corporation
organized under the laws of the Bahamas. Statesman's principal business is the
making of investments in the United States and elsewhere. Statesman is
currently a holding company for the securities acquired by it in the 1993
Transaction. Both its principal business and principal office is located at
King & George Streets, Nassau, Bahamas. The William R. Ponsoldt, Sr.
Irrevocable Trust dated April 15, 1991 is the controlling person of Statesman.
The William R. Ponsoldt Sr. Trust is an irrevocable trust for the benefit of
William R. Ponsoldt, Jr., a director of the Company, Tracey A. Ponsoldt, now
married and sometimes known as Tracey A. Powers, and Christopher J. Ponsoldt,
all children of William R. Ponsoldt, Sr. The acting trustee of the William R.
Ponsoldt, Sr. Irrevocable Trust dated April 15, 1991 has the sole right to
control the disposition of and vote the Regency securities acquired by
Statesman and the irrevocable proxies over Regency Common Stock delivered to
Statesman pursuant to the terms of the 1993 Transaction.
On February 1, 1996, Mr. Nuttall was elected as President and Chief
Executive Officer of Regency Affiliates, Inc. As an inducement for Mr. Nuttall
to assume his offices and enter into the employment agreement with Regency
Affiliates, Inc. heretofore described, the Company issued to Mr. Nuttall
466,667 shares of the Company's $0.40 p.v. Common Stock. G-BAN Inc. is a
corporation organized under the laws of the State of Illinois. All of the
issued and outstanding shares of G-BAN Inc. are owned directly by Mr. Nuttall's
wife and children. G-BAN Inc. received 200,000 shares of the Company's $0.40
p.v. Common Stock from the Company as part of the finder's fee paid by the
Company for the acquisition by the Company of its partnership interest in
Security Land And Development Company Limited Partnership. Mr. Nuttall
disclaims the right to acquire beneficial ownership of the shares held by G-BAN
Inc.
Security ownership of management.
The following tables set forth as of February 1, 1996 the number of
shares of Regency's on $0.40 p.v. Common Stock beneficially owned by each
director and by all executive officers and directors of Regency as a group as
of such date. Unless otherwise indicated, each person has sole voting and
investment powers with respect to the shares indicated.
____________________
(6) The nature of beneficial ownership is sole investment power and sole
voting power as to all shares listed.
26
48
(2) Name of beneficial (3) Amount and nature of (4) Percent of
-------------------- ----------------- -- ----------
(1) Title of class owner beneficial ownership class
-------------- ----- -------------------- -----
Regency Affiliates, Gary K. Nuttall and 666,667 (7) 5.7%
Inc. $0.40 p.v. G-BAN Inc.
Common Stock
Regency Affiliates, Larry J. Horbach 385,204 (8) 3.3%
Inc. $0.40 p.v.
Common Stock
Regency Affiliates, Eunice M. Antosh 62,345 0.5%
Inc. $0.40 p.v.
Common Stock
Regency Affiliates, All officers and directors 1,114,216 9.6%
Inc. $0.40 p.v. as a group (3 individuals)
Common Stock
Cumulative Senior Preferred $100 Series-C Stock
As of December 31, 1995 certain members of the Board of Directors of
Regency Affiliates, Inc. held warrants to purchase Cumulative Senior Preferred
$100 Series-C Stock from Statesman Group, Inc., as follows: William R.
Ponsoldt, Jr. (warrants to purchase 1,000 shares); Pamlyn Kelly, Ph.D.
(warrants to purchase 1,000 shares); and Martin J. Craffey (warrants to
purchase 1,000 shares).
____________________
(7) See footnote 5 supra.
(8) An irrevocable proxy with respect to 375,205 of these shares, so
long as the shares are held by Mr. Horbach, was given to Statesman Group, Inc.
as part of the 1993 Transaction.
27
49
Series-D Junior Preferred Stock - $10 Stated Value
Larry J. Horbach holds 1,238 shares of the Series-D Junior Preferred
Stock - $10 Stated Value over which he has sole voting power and sole
investment power.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Transactions with management and others.
During the fiscal year ending December 31, 1995, the Company made
payments of interest and principal to Statesman aggregating $25,211, leaving a
principal balance due Statesman at year end of $80,000.
Reference is made to Part III, Item 12, page 26 of this report for a
description of the transactions with Mr. Gary K. Nuttall which resulted in Mr.
Nuttall becoming a director and an executive officer of the Company and
receiving the securities described therein.
Certain business relationships.
At the end of Regency Affiliates, Inc.'s last fiscal year the Company
had no indebtedness to Larry J. Horbach.
Indebtedness of Management.
Reference is made to "Non-Qualified Stock Options" under Part III,
Item 11.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM
8-K.
Financial information:
(2) Exhibits
See Index to Exhibits
(3) Certain schedules are omitted because of the condition under which
they are required or because the required information is included in
the financial statements or notes thereof.
(4) Reports on Form 8-K during the fourth quarter of the Company's fiscal
year:
28
50
None.
SUBSEQUENT EVENTS
Reference is made to Part III, Item 12, page 26 of this report for a
description of the transactions with Mr. Gary K. Nuttall which resulted in Mr.
Nuttall becoming a director and an executive officer of the Company and
receiving the securities described therein.
(The balance of this page was intentionally left blank).
29
51
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.
REGENCY AFFILIATES, INC.
-------------------------------
(Registrant)
3/27/96 /s/ Gary K. Nuttall
__________ By: __________________________
Date Gary K. Nuttall, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
DATE SIGNATURE AND TITLE
- ---- -------------------
3/27/96 /s/ Gary K. Nuttall
- --------------- ----------------------------------------------
Date Gary K. Nuttall, President
3/27/96 /s/Eunice Antosh
- ----------------- ------------------------------------------
Date Eunice Antosh, Secretary
3/27/96 /s/ Stephenie Carey
- ----------------- -----------------------------------------
Date Stephanie Carey,*
Director
3/27/96 /s/ Martin J. Craffey
- --------------- -------------------------------------------
Date Martin J. Craffey,*
Director
52
3/27/96 /s/ Larry J. Horbach
- ----------------- -----------------------------------------
Date Larry J. Horbach,*
Director
3/27/96 /s/ Pamlyn Kelly, Ph.D.
- ----------------- ------------------------------------------
Date Pamlyn Kelly, Ph.D.,*
Director
3/27/96 /s/ Gary K. Nuttall
- ---------- ------------------------------------
Date Gary K. Nuttall,*
Director
3/27/96 /s/ William R. Ponsoldt, Jr.
- ----------- -------------------------------------
Date William R. Ponsoldt, Jr.,*
Director
*By /s/ Gary K. Nuttall
-------------------------------------
Gary K. Nuttall,
Attorney-in-fact
53
INDEX TO EXHIBITS
Exhibit No. Description of Document
- ----------- -----------------------
1 (a) Agreement For Acquisition among Regency Affiliates, Inc., Statesman
Group, Inc., and National Resource Development Corporation, as amended,
and incorporated herein by reference
1 (b) Irrevocable Proxies over 855,991 shares of Regency's $0.40 par value
Common Stock, and incorporated herein by reference
1 (c) National Resource Development Corporation Assignment and Assumption
Agreement, and incorporated herein by reference
1 (d) Security Land And Development Company Limited Partnership
Agreement, as amended, filed as Exhibit 1(a) to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994, and incorporated
herein by reference
1 (e) Letter Agreement dated November 17, 1994 between TCG Management
Corporation and Regency Affiliates, Inc., filed as Exhibit 1(b) to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1994, and incorporated herein by reference
1 (f) Security Land And Development Company Limited Partnership Irrevocable
Written Instruction Concerning Payments From Escrow Fund, filed as
Exhibit 1(c) to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994, and incorporated herein by reference
1 (g) Audited financial statement for Security Land And Development Company
Limited Partnership, filed as Exhibit 1(d) to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994, and incorporated
herein by reference
3 (a) Certificate of Incorporation of Registrant filed at Exhibit 6.1 to
Registrant's Registration Statement on Form S-14, Registration No. 2-66923
1 (a), p. E-1 Agreement For Acquisition among Regency Affiliates, Inc.,
Statesman Group, Inc., and National Resource Development Corporation, as
amended, and incorporated herein by reference
32
54
3 (b) Certificate of Amendment of Certificate of Incorporation of Registrant filed
at Exhibit 3.2 to Registrant's Annual Report on Form 10-K, and incorporated
herein by reference
3 (c) Certificate of Amendment of Certificate of Incorporation filed February 15, 1988,
and incorporated herein by reference
3 (d) By-laws of Registrant filed at Exhibit 3.4 to Registrant's Registration
Statement on Form S-1, Registration No. 2-86906, and incorporated herein
by reference
4 Certificate of Designation - Series A Cumulative $10 Convertible
Preferred Stock, $.10 par value, filed as Exhibit to Form 8-K dated
June 19, 1989, and incorporated herein by reference
4 (a) Restated Certificate of Designation Series A $10 Convertible Preferred
Stock, $.10 par value filed as Exhibit to Form 10-K dated June 7, 1993
and incorporated herein by reference
4 (b) Certificate of Designation - Series B Preferred Stock, $10 Stated Value,
$.10 Par Value filed as Exhibit to Form 10-K dated June 7, 1993 and
incorporated herein by reference
4 (c) Certificate of Designation - Series C Preferred Stock, $100 Stated Value,
$.10 Par Value filed as Exhibit to Form 10-K dated June 7, 1993 and
incorporated herein by reference
4 (d) Certificate of Designation - Series D Junior Preferred Stock, $10 Stated
Value, $.10 Par Value filed as Exhibit to Form 10-K dated June 7, 1993 and
incorporated herein by reference
4 (e) Certificate of Designation, Preferences and Rights of Cumulative Senior
Preferred Stock $100, Series C and incorporated herein by reference
4 (f) Specimen of Certificate representing Cumulative Senior Preferred Stock $100,
Series C and incorporated herein by reference
4 (g) Specimen of Certificate representing Warrants and incorporated herein by
reference
4 (h) Restated Certificate of Designation of Preferences and Rights of Cumulative
Senior Preferred $100, Series-C Stock, filed as Exhibit 4(a) to
33
55
Registrant's Annual Report on Form 10-K for the year ended December 31, 1994,
and incorporated herein by reference
4 (i) Certificate of Designation of Preferences and Rights of Cumulative Contingent
Convertible Senior Preferred $100, Series-E Stock, filed as Exhibit 4(b) to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1994,
and incorporated herein by reference
4 (j) Specimen Certificate for Cumulative Contingent Convertible Senior Preferred
$100, Series-E Stock, filed as Exhibit 4(c) to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994, and incorporated herein by
reference
9 Letter dated November 30, 1994 from R.L. Quint & Co. to Regency Affiliates,
Inc., filed as Exhibit 4(c) to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994
10 1984 Incentive Stock Option filed as exhibit to Registrants' 1984 Proxy
Statement, and incorporated herein by reference
10 (a) Agreement For Acquisition among Regency Affiliates, Inc., Statesman Group,
Inc., and National Resource Development Corporation filed as Exhibit to
Form 10-K dated June 7, 1993 and incorporated herein by reference
10 (b) Agreement between Regency Affiliates, Inc. and Edward G. Harshfield, as
amended and incorporated herein by reference
10 (c) Agreement dated July 25, 1994 between Edward G. Harshfield and Regency
Affiliates, Inc., filed as Exhibit 10(a) to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994
10 (d) Agreement dated July 21, 1994 between Gary F. Spahn and Regency Affiliates,
Inc., filed as Exhibit 10(b) to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994
10 (e) Letter Agreement dated February 7, 1995 between L.J. Horbach & Associates,
Inc., filed as Exhibit 10(c) to Registrant's Annual Report on Form
10-K for the year ended December 31, 1994
22 Schedule of Registrant's subsidiaries, and incorporated herein by reference
34
56
28 Private Placement Offering Memorandum dated June 3, 1991 offering
$400,000 of Regency Restructuring Serial Promissory Notes filed as
Exhibit to Form 10-K dated June 7, 1993 and incorporated herein by
reference
EXHIBITS FILED HEREWITH:
Exhibit No. Description of Document
- ----------- -----------------------
4.1, p. E-1 Certificate of Designation - Series C Preferred Stock, $100 Stated Value,
$.10 Par Value
10.1, p. E-12 Agreement executed February 1, 1996 between Gary K. Nuttall and
Regency Affiliates, Inc.
Exhibit 13
24.1, p. E-23 Power of Attorney for Stephanie Carey
24.2, p. E-25 Power of Attorney for Martin J. Craffey
24.3, p. E-27 Power of Attorney for Larry J. Horbach
24.4, p. E-29 Power of Attorney for Pamlyn Kelly, Ph.D.
24.5, p. E-31 Power of Attorney for William R. Ponsoldt, Jr.
27.1 Financial Data Schedule
99.1, p. E-49 Certified resolution of the Board of Directors of Regency Affiliates, Inc.
authorizing the use of powers of attorney to execute this report on Form 10-
K dated March 20, 1996
35