SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
-----------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 2008
- --------------------------------------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from __________ to __________
Commission File Number 000-9519
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REGENT TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
COLORADO 84-0807913
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6727 Hillcrest Ave., Suite E
Dallas, Texas 75205
(Address of principal executive offices)
214-507-9507
(Issuer's telephone number)
Regent Petroleum Corporation
(Former name of Issuer)
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 (the
"Exchange Act") during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
------ ------
Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
--- ---
Non-accelerated filer Smaller reporting company X
--- ---
(Do not check if a smaller reporting company)
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes X No
------ ------
The number of outstanding shares of the issuer's only class of common stock as
of August 1, 2008 was 5,812,456.
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FORM 10-Q
JUNE 30, 2008
Page Nos.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) 1
At June 30, 2008
Consolidated Statements of Operations (Unaudited) 2
For the Three Months and Six Months Ended June 30, 2008 and 2007
For the Period from Inception (January 1, 1999) to
June 30, 2008
Consolidated Statements of Cash Flows (Unaudited) 3
For the Six Months Ended June 30, 2008 and 2007
For the Period from Inception (January 1, 1999) to
June 30, 2008
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
Item 4. Controls and Procedures 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 1A. Risk Factors 13
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 13
Item 6. Exhibits 13
SIGNATURE 14
EXHIBIT INDEX 15
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ------- --------------------
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
June 30, December 31,
2008 2007
------------------ ------------------
ASSETS (Unaudited) Audited
CURRENT ASSETS
Cash in bank $ 26,770 $ 20
Settlements and receivable, net of $12,892
allowance for uncollectible accounts - -
--------- ---------
Total Current Assets 26,770 20
Property and equipment:
Furniture and fixtures 8,593 8,593
Computer equipment 2,400 2,400
--------- ---------
10,993 10,993
Less accumulated depreciation ( 10,993) ( 10,993)
--------- ---------
Net property and equipment - -
Investments in affiliate (Note 6) 404,195 392,956
--------- ---------
TOTAL ASSETS $ 430,965 $ 392,956
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, trade $ - $ 36,170
Accounts payable, stockholder 10,000 10,000
Note payable, related parties 13,520 94,800
Accrued interest payable 331 8,277
--------- ---------
Total Current Liabilities 23,851 153,747
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock, $.10 par value, 1,000,000
shares authorized, 75,000 shares issued and
outstanding, Regent GLSC Technologies, Inc. 375,000 325,000
Preferred stock, $.10 par value, 30,000,000
shares authorized, no shares issued and
outstanding, Registrant - -
Common stock, $.01 par value, 100,000,000
shares authorized, 5,812,456 shares
issued and outstanding 58,125 56,575
Paid-in capital in excess of par 3,352,746 3,351,545
Accumulated deficit (including $30,757 deficit
accumulated since reentering the development stage) (3,378,757) (3,489,391)
--------- ---------
407,114 243,729
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 430,965 $ 392,976
========= =========
The accompanying notes are an integral part of the consolidated financial statements.
1
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007
AND FOR THE PERIOD JANUARY 1, 1999
THROUGH JUNE 30, 2008
(UNAUDITED)
For the For the For the For the
three three six six Cumulative
months months months months Since Re-entering
ended June ended June ended June ended June Development Stage
30, 2008 30, 2007 30, 2008 30, 2007 January 1, 1999
------------ ------------ ------------ ------------ ------------
Revenues $ - $ - $ - $ - $ -
Operating expenses:
General and administrative 3,611 15,350 17,680 32,718 281,845
--------- --------- --------- --------- ---------
Operating loss ( 3,611) ( 15,350) ( 17,680) ( 32,718) (281,845)
--------- --------- --------- --------- ---------
Other income and (expense):
Gain on fair value measurement 76,114 - 76,114 - 76,114
Gain on extinguishment of debt 21,154 4,124 21,154 4,124 145,340
Gain on sale of investment - 35,125 76,581
Stock grant expense ( 2,750) - ( 2,750) - ( 11,222)
Interest expense ( 292) ( 1,170) ( 1,328) ( 2,028) ( 35,725)
--------- --------- --------- --------- ---------
Total other income (expense) 94,226 2,954 128,315 2,042 251,088
Income (loss) from continuing operations
before income taxes 90,615 (12,396) 110,635 ( 30,676) ( 30,757)
Provisions for income taxes - - - - -
--------- --------- --------- --------- ---------
Net income (loss) 90,615 (12,396) 110,635 ( 30,676) ( 30,757)
========= ========= ========= ========= =========
Net income (loss) per common share
(basic and diluted) $ .02 $( .00) $ .02 $( .01)
========= ========= ========= =========
Weighted Average Shares Outstanding 5,812,456 4,793,983 5,812,456 4,793,983
The accompanying notes are an integral part of the consolidated financial statements.
2
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
AND FOR THE PERIOD JANUARY 1, 1999
THROUGH JUNE 30, 2008
(UNAUDITED)
Cumulative
Since Re-entering
For the Six Months Ended June 30, Development Stage
2008 2007 January 1, 1999
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net gain (loss) $ 110,635 $ ( 30,676) $ (30,757)
Adjustments to reconcile net gain (loss) to net
cash used in operating activities:
Depreciation - - 3,762
Gain on fair value measurement ( 76,114) - ( 76,114)
Gain on extinguishment of accounts payable ( 21,154) ( 4,124) (145,340)
Gain on stock sale ( 35,125) - ( 76,581)
Note issued for settlement expenses - - 20,000
Common stock issued for services 2,750 - 16,222
Common stock issued in legal settlement - - 14,000
Decrease in settlements and note receivable - - 4,800
Decrease in other assets - - 1,967
Increase in allowance for uncollectible settlements - - 79,892
Increase (decrease) in accounts payable ( 15,017) 24,978 31,331
Increase (decrease) in accounts payable, stockholder - - 10,000
Increase in accrued liabilities 7,945 1,183 35,068
--------- --------- ---------
Net Cash Used In Operating Activities ( 41,970) ( 8,639) (111,750)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in MacuCLEAR preferred stock - (200,000) (350,000)
--------- --------- ---------
Net Cash Used in Investing Activities - (200,000) (350,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of Preferred Stock 50,000 300,000 375,000
Proceeds from note payable - related party 40,100 94,800
Proceeds from sale of investments 100,000 - 100,000
Repayments of note payable ( 81,280) ( 6,500) ( 81,280)
--------- --------- ---------
Net Cash Provided By Financing Activities 68,720 333,600 488,520
--------- --------- ---------
Net Increase in cash 26,750 124,961 26,770
Cash At Beginning Of Period 20 175 -
--------- --------- ---------
Cash At End of Period $ 26,770 $ 125,136 $ 26,770
========= ========= =========
The accompanying notes are an integral part of the consolidated financial statements.
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
--------------------------------------------------------------------
Issuance of common stock upon conversion
of notes payable $ - $ - $ 193,840
Common stock issued for director stock awards
and services $ 2,750 $ - $ 16,222
Common stock returned in failed consideration
and debt settlement $ - $ - $ 509,760
Repayment of note payable transferred directly
to MacuCLEAR upon sale to GHI, Ltd. $ - $ - $ 150,000
Partial sale of MacuCLEAR holdings to GHI, Ltd. $ - $ - $ 148,500
Issuance of common stock upon MacuCLEAR sale
to GHI, Ltd. $ - $ - $ 1,500
The accompanying notes are an integral part of the consolidated financial statements.
3
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
---------------------
The accompanying unaudited consolidated financial statements included herein
have been prepared by REGENT TECHNOLOGIES, INC. (the "Registrant" or "Company")
pursuant to the rules and regulations of the Securities and Exchange Commission
for interim financial information, and do not include all the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, the accompanying unaudited consolidated financial statements include
all adjustments, which are of a normal recurring nature, necessary to reflect a
fair presentation of the results for the interim periods presented. The results
of operations for such interim periods are not necessarily indicative of what
may occur in future periods.
The unaudited consolidated financial statements herein should be read in
conjunction with the Company's audited report on Form 10-KSB for the year ended
December 31, 2007, which was previously filed with the Securities and Exchange
Commission.
Going concern uncertainties
As of the date of this quarterly report, there is substantial doubt regarding
our ability to continue as a going concern as we have not generated sufficient
cash flow to fund our business operations and material commitments. Our future
success and viability, therefore, are dependent upon our ability to generate
capital financing. We are optimistic that we will be successful in our new
business operations and capital raising efforts; however, there can be no
assurance that we will be successful in generating revenue or raising additional
capital. The failure to generate sufficient revenues or raise additional capital
may have a material and adverse effect upon the Company and our shareholders.
These consolidated financial statements do not give effect to any adjustments
which would be necessary should the Company be unable to continue as a going
concern and therefore be required to realize its assets and discharge its
liabilities in other than the normal course of business and at amounts different
from those reflected in the accompanying consolidated financial statements.
Development stage activities
By the end of 1998, the Company had ceased operations and had divested itself
of any interests in subsidiary companies and effective January 1, 1999 had
re-entered the development stage. Accordingly, all of the Company's operating
results and cash flows reported in the accompanying financial statements from
that date are considered to be those related to development stage activities
and represent the 'cumulative from inception' amounts from its development
stage activities reported pursuant to Statements of Financial Accounting
Standards No. 7, Accounting and Reporting by Development Stage Enterprises.
Management estimates
To prepare financial statements in conformity with United States of America
generally accepted accounting principles, management makes estimates and
assumptions based on available information. These estimates and assumptions
affect the amounts reported in the financial statements and the disclosures
provided, and actual results could differ. The allowance for loan losses,
fair values of financial investments and carrying value of intangible assets
are particularly subject to change.
4
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Recent accounting pronouncements
In December 2007, the FASB issued Statement of Financial Accounting Standards
No. 141 (revised 2007) ("SFAS 141R"), Business Combinations, and Statement of
Financial Accounting Standards No. 160 ("SFAS 160"), Noncontrolling Interests
in Consolidated Financial Statements, an amendment of Accounting Research
Bulletin No. 51. SFAS 141R will change how business acquisitions are accounted
for and will impact financial statements both on the acquisition date and in
subsequent periods. SFAS 160 will change the accounting and reporting for
minority interests, which will be recharacterized as noncontrolling interests
and classified as a component of equity. SFAS 141R and SFAS 160 are effective
in 2009. The Company is currently evaluating the impact that SFAS 141R and SFAS
160 will have on its consolidated financial statements.
In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157 ("SFAS 157"), Fair Value Measurements, which defines fair value,
establishes guidelines for measuring fair value, and expands disclosures
regarding fair value measurements. SFAS 157 does not require any new fair value
measurements but rather eliminates inconsistencies in guidance found in various
prior accounting pronouncements. SFAS 157 is effective for fiscal years
beginning after November 15, 2007. However, in February 2008, the FASB issued
FASB Staff Position FAS 157-2 ("FSP FAS 157-2"), which delays the effective date
of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except
those that are recognized or disclosed at fair value in the financial statements
on a recurring basis (at least annually), until fiscal years beginning after
November 15, 2008 and interim periods within those fiscal years. As of January
1, 2008, the Company has adopted SFAS 157 except as it applies to those
nonfinancial assets and nonfinancial liabilities as noted in FSP FAS 157-2.
In February 2007, the FASB issued Statement No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities, including an amendment of FASB
Statement No. 115" ("SFAS 159"). SFAS 159 allows entities to choose to measure
certain financial instruments and certain other items at fair value. The
standard requires that unrealized gains and losses on items for which the fair
value option has been elected be reported in earnings. SFAS 159 is effective for
fiscal years beginning after November 15, 2007.
Effective January 1, 2008, the Company adopted SFAS 157 and SFAS 159 without any
effect. Management is continuously assessing its adoption of SFAS 157 and SFAS
159, and the effect, if any, on the Company's financial position or results of
operations. See Note 9 for disclosures and adjustments required by these new
pronouncements.
Net income (loss) per share
The net income (loss) per share is computed by dividing the net income (loss) by
the weighted average number of shares of common outstanding. Warrants, stock
options, stock grants and common stock issuable upon the conversion of the
Company's preferred stock (if any), are not included in the computation if the
effect would be anti-dilutive and would increase the earnings or decrease the
loss per share.
2. PROVISION FOR INCOME TAXES
--------------------------
At June 30, 2008, the Company had net operating loss carryforwards to offset
against future taxable income. No tax expense has been reported in the June
30, 2008 financial statements since the potential tax expense is offset by a
utilization of net operating losses of the same amount.
5
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
--------------
Income (loss) before federal income taxes $ 110,635
Income tax expense (benefit) (37,616)
Income tax benefit of utilization of net
operating losses 37,616
--------------
Net income $ 110,635
==============
Due to the change in ownership provisions of the Tax Reform Act of 1986, net
operating loss carryforwards for Federal income tax reporting purposes are
subject to annual limitations. Should a change in ownership occur, net operating
loss carryforwards may be limited as to use in the future.
3. SIGNIFICANT EVENTS
------------------
Effective January 1, 2008, the Company adopted the provisions of SFAS 157 and
SFAS 159. Pursuant to the Company's election of the fair value option to measure
certain financial instruments, an unrealized gain of $76,114 was recognized for
the current quarter due to materiality. See Note 9, Fair Value Measurements.
Effective June 30, 2008, the Company issued 225,000 shares of common stock to
directors at $0.01 per share pursuant to its 2007 restricted stock awards. Also,
the Company granted 50,000 shares at $0.01 per share for legal services. See
Note 8, Stock-Based Compensation.
The Company received notification on May 16, 2008, that the Court had rendered
a default judgment in favor of the Company counter-claim against the last defen-
dant in the case styled Leake v. Regent Technologies, Inc. which included the
ruling that 120,000 common stock shares of the Company should be cancelled as
unauthorized shares issued without consideration. See PART II, Item 1 herein.
4. GAIN ON THE EXTINGUISHMENT OF DEBT
----------------------------------
During the six months ended June 30, 2008, the Company determined that the
statute of limitations under the laws of the state of Texas had expired on
certain debts previously carried on its financial statements since 1999.
Accordingly, the Company recognized a gain of $21,154 for the extinguishment
of those debts.
5. CAPITAL STRUCTURE DISCLOSURES
-----------------------------
Common Stock
The Company's capital structure is complex and consists of preferred stock and
a general class of common stock. The Company is authorized to issue 130,000,000
shares of stock, of which 30,000,000 have been designated as preferred shares
with a par value per share of $.10, and 100,000,000 have been designated as
common shares with a par value per share of $.01. As of this interim report,
5,812,456 shares of common stock are outstanding. This compares to 4,793,983
shares for the same period in 2007 with the difference due to issuances under
stock-based compensation (Note 8) and the cancellation of 120,000 shares as a
result of a favorable default judgment (Note 3).
6
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Subsidiary Preferred Stock
On April 18, 2007, Regent GLSC accepted purchase agreements in a total amount
of $150,000.00 received from four purchasers of a private offering of shares
of Series A Convertible Preferred Stock ("Regent GLSC Preferred Stock"). Under
the accepted purchase agreements, the subscribers purchased through a Preferred
Stock Purchase Agreement 30,000 shares of Regent GLSC's Series A Convertible
Preferred Stock at $5.00 per share. The stock was sold under a private placement
offering to sell 25% of the equity of Regent GLSC for $1,250,000 in $50,000.00.
units. Each unit is convertible into 10,000 shares of common stock of Regent
GLSC plus 0.5% of the outstanding shares of common stock of MacuCLEAR, non-
dilutable for a period of 24 months after closing. Including the initial sales
on April 18, 2007, Regent GLSC has accepted Preferred Stock purchase agreements
from additional investors in the total amount of $375,000.00. On February 20,
2008, Regent GLSC sold 10,000 shares of Regent GLSC Preferred Stock for $5.00
per share as the final sale under the initial private placement offering.
6. INVESTMENTS IN AFFILIATE
------------------------
Effective March 7, 2008, Regent GLSC sold 25,000 shares of MacuCLEAR Preferred
stock for $100,000 and a gain of $35,125 was recognized. As of the date of
this quarterly filing, Regent GLSC holds title to 126,428 shares of MacuCLEAR
Preferred Stock, of which 72,254 shares are beneficially held for the holders
of Regent GLSC Preferred Stock.
7. NOTES PAYABLE - RELATED PARTIES
-------------------------------
Beginning in 2005, the Company borrowed various amounts for general corporate
purposes under a note payable to NR Partners, a partnership comprised of the
President as a partner and director David Ramsour as a partner. The total NR
borrowings outstanding at December 31, 2007 was $89,800. On December 28, 2007,
the Company borrowed $5,000 under a promissory note to director Phil Ralston.
During the first quarter, the Company made payments toward the NR Partners note
totaling $76,300 in principal and $9,000 in interest. During the current period,
the Company repaid the $5,000 principal on the note payable to Phil Ralston and
paid interest on the outstanding notes payable.
8. STOCK-BASED COMPENSATION
------------------------
The Company has outstanding restricted common stock grant awards issued under
its equity incentives for board members. The Company granted 847,223 shares of
restricted common stock in 2007. See Note 3 to the financial statements in the
Company's Form 10-KSB for the year ended December 31, 2007 for additional
information. The Company accounts for stock grants and restricted stock awards
in accordance with SFAS No. 123(R), "Accounting for Stock-Based Compensation."
Effective June 30, 2008, the Company issued new restricted stock in the amount
of 225,000 as additional vested shares pursuant to the June 30 vesting period in
the restricted stock award agreements with the directors. Also effective June
30, 2008, the Company approved the issuance 50,000 shares of new restricted
common stock as consideration for legal services. The amount of $2,750 was
recognized as stock-based compensation expense for the current period.
7
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
9. FAIR VALUE MEASUREMENTS
-----------------------
SFAS No. 157 establishes a fair value hierarchy and specifies that a valuation
technique used to measure fair value shall maximize the use of observable inputs
and minimize the use of unobservable inputs. The objective of a fair value
measurement is to determine the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between participants in
the market at the measurement date (an exit price). Accordingly, the fair value
hierarchy gives the highest priority to quoted prices (unadjusted) in active
markets for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). The three levels of the fair value hierarchy
under SFAS No. 157 are described below:
o Level 1 -- Unadjusted quoted prices in active markets for identical,
unrestricted assets or liabilities that the Fund has the ability to
access at the measurement date;
o Level 2 -- Quoted prices which are not active, or inputs that are
observable (either directly or indirectly) for substantially the full
term of the asset or liability; and
o Level 3 -- Significant unobservable inputs that reflect the Company's
own assumptions about the assumptions that market participants would
use in pricing an investment.
The Company is responsible for the valuation process and as part of this process
may use data from outside sources in establishing fair value. The Company
performs due diligence to understand the inputs used or how the data was
calculated or derived. The Company corroborates the reasonableness of external
inputs in the valuation process.
As required by SFAS No. 157, investments are classified within the level of the
lowest significant input considered in determining fair value. Investments
classified within Level 3 consider several inputs and may include Level 1 or
Level 2 inputs as components of the overall fair value measurement. The table
below sets forth information about the level within the fair value hierarchy at
which the Company's investments are measured at June 30, 2008:
Investments in affiliate
- -------------------------
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
-------------- --------------- --------------- ---------------
MacuCLEAR Preferred Stock $ -- $ -- $ 404,195 $ 404,195
============== =============== =============== ===============
8
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The Company determined that its investment in MacuCLEAR Preferred Stock, was
valued fairly for the first quarter due to the nominal sales of the Preferred
Stock since the date of issuance, April 17, 2007. Regent GLSC's investment in
MacuCLEAR Preferred Stock was purchased for $2.595 per share in April, 2007.
During the second quarter of 2007, Regent GLSC sold 42,000 shares for $3.60 per
share and during the first quarter of 2008, the Company sold another 25,000
shares for $4.00 per share. Both sales were arms-length transactions with
independent third-parties. As additional input to the valuation process, Regent
GLSC noted that MacuCLEAR has made significant strides toward FDA approval for
human clinical trials and is now offering the Preferred Stock for $4.50 per
share. Therefore, the Company applied $4.00 per share as the measurement of fair
value for its remaining investment in MacuCLEAR Preferred Stock and due to the
materiality of the appreciation, the amount of $76,114 was recognized as gain
for the current period. The following is a reconciliation in which significant
input under Level 3 was used in determining the value of the investment:
Investments in
affiliate
--------------
Beginning Balance as of 12/31/07 (audited) $ 392,956
Realized gain/(loss) 35,125
Change in unrealized
appreciation/(depreciation) 76,114
Net purchase/sales (100,000)
Net transfers in and/or out of
Level 3 --
--------------
ENDING BALANCE AS OF 6/30/08 $ 404,195
==============
Item 2. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations
-------------------------
INTRODUCTION - STATEMENT OF FORWARD-LOOKING INFORMATION
- -------------------------------------------------------
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a safe
harbor for forward-looking statements made by or on behalf of the Company. The
Company and its representatives may from time to time make written or oral
statements that are "forward-looking", including statements contained in this
report and other filings with the Securities and Exchange Commission, reports to
the Company's shareholders and news releases. All statements that express
expectations, estimates, forecasts or projections are forward-looking statements
within the meaning of the Act. In addition, other written or oral statements,
which constitute forward-looking statements, may be made by or on behalf of the
Company. Words such as "expects", "anticipates", "intends", "plans", "believes",
"seeks", "estimates", "projects", "forecasts", "may", "should", variations of
such words and similar expressions are intended to identify such forward-looking
statements. Management cautions that forward-looking statements are subject to
risks and uncertainties that could cause our actual results to differ materially
from projections in such forward-looking statements. The risks, uncertainties
and other important factors that may cause our results to differ materially from
those projected in such forward-looking statements are detailed under the "Risk
Factors" and elsewhere in our Annual Report on Form 10-KSB for our fiscal year
ended December 31, 2007. We undertake no obligation to update a forward-looking
statement to reflect subsequent events, changed circumstances, or the occurrence
of unanticipated events.
9
This discussion should be read in conjunction with the consolidated financial
statements and notes presented in this Form 10-Q and the financial statements
and notes in our last filed Annual Report on Form 10-KSB filed for the period
ending December 31, 2007 for a full understanding of our financial position and
results of operations for the three and six month periods ended June 30, 2008.
OVERVIEW
- --------
The Registrant ("Regent," "Company," "we," "our" or "us") is a technology-based
company engaged in identifying and developing or investing in emerging
technologies. On April 17, 2007, Regent invested the development of a life
science technology with the purchase of MacuCLEAR Preferred Stock through
our subsidiary, Regent GLSC Technology, Inc. ("Regent GLSC"). See Note 1 of the
financial statements and notes in the Annual Report on Form 10-KSB filed for
the period ending December 31, 2007.
During 2008, the Company has continued its review of opportunities for the
development or co-development of new technologies. The discussions have focused
primarily on companies holding technologies or technology licenses in the fields
of life sciences, environmental services and energy development with an emphasis
on alternative energy and the non-conventional development of energy resources.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
- ------------------------------------------
Management's discussion and analysis of financial condition and results of
operations is based on the accounting policies used and disclosed in this
quarterly report and in the 2007 consolidated financial statements and
accompanying notes that were prepared in accordance with accounting principles
generally accepted in the United States of America and included as part of the
Company's annual report on Form 10-KSB for the year ended December 31, 2007.
The preparation of the referenced consolidated financial statements required
management to make estimates and assumptions that affected the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at
the dates of the consolidated financial statements and the reported amounts of
expenses during the reporting periods. Actual amounts or results could differ
from those estimates.
The significant accounting policies of the Company are described in Note 1 to
the 2007 consolidated financial statements, and the critical accounting policies
and estimates are described in Management's Discussion and Analysis included in
Item 7 of the 2007 Form 10-KSB. There have been no changes in the critical
accounting policies. Information concerning the implementation and the impact of
new accounting standards issued by the Financial Accounting Standards Board
("FASB") is included in the notes to the 2007 consolidated financial statements.
The Company adopted FASB Interpretation No. 157 and FASB Interpretation No. 159
effective January 1, 2008. Pursuant to the Company's election of the fair value
option under FASB Interpretation No. 159, an unrealized gain of $76,114 was
recognized for the current quarter. See Note 9, Fair Value Measurements.
10
RESULTS OF OPERATIONS
- ---------------------
For the second quarter of 2008, net income was $90,615 or $0.02 per share,
compared to net loss $12,396 in the second quarter of 2007. The net income for
the current period was the result of the unrealized gain of $76,114 from the
fair value measurement of the MacuCLEAR Preferred Stock and from the $21,154
gain from the extinguishment of debt. For the first six months of 2008, net
income was $110,635 or $0.02 per share, compared to a net loss of $30,676 for
the same period in 2007. The income for the first six months was the result of
the previously mentioned gains plus a $35,125 gain from the sale of a portion
the Company's holdings of MacuCLEAR Preferred Stock.
Operating Expenses
Operating expenses primarily include administrative and accounting expenses,
litigation settlement expense and acquisition expenses related to the MacuCLEAR
Preferred Stock. General and administrative expenses were $3,611 and $17,680 for
the three and six months ended June 30, 2008 compared to $15,350 and $32,718 for
the three and six months ended June 30, 2007. The decrease in 2008 is the result
of reduced expenses relating to stock transfer agent and legal fees, primarily
related to the MacuCLEAR Preferred Stock acquisition and the organization of the
Company's subsidiary, Regent GLSC. Interest expense decreased period over period
due to a reduction in outstanding debt to $23,851 from $730,698 for the periods
ending June 30, 2008 and 2007, respectively. The amount in 2007 included the
promissory note of $650,000 for the MacuCLEAR Preferred Stock, of which $150,000
was paid from the Regent GLSC private offering. The balance of $500,000 was
cancelled without penalty in exchange for the return of 192,678 shares of
MacuCLEAR Preferred Stock and Regent GLSC retained 192,678 share of Preferred
Stock. See Note 1 of the financial statements and notes in the Annual Report on
Form 10-KSB filed for the period ending December 31, 2007.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As a development stage company, Regent has funded operations through short-term
borrowings and equity investments in order to meet obligations. Our future
operations are dependent upon external funding and our ability to increase
revenues and reduce expenses. Management believes that sufficient funding will
be available from additional related party borrowings and private placements to
meet our business objectives including anticipated cash needs for working
capital, for a reasonable period of time.
The Company had a total accumulated deficit of $3,277,240 at June 30, 2008
substantially all of which has been funded out of proceeds received from the
issuance of stock and the incurrence of losses. As of June 30, 2008, the Company
had total assets of $532,482 and total liabilities of $23,852. The Company has
borrowings under a note payable to NR Partners, a partnership of which the
President and one Director are the partners. The NR Partners note bears interest
at the 8.5 percent per annum (Note 7). The funds have been used for general
corporate purposes and the outstanding balance as of May 1, 2008 is $13,520,
due on or before July 31, 2008. Regent GLSC raised $375,000 of capital through
the sale of 75,000 shares of its Series A Preferred Stock, which monies were
used to purchase 192,678 shares of MacuCLEAR Preferred Stock. Regent GLSC has
generated cash and income in the amounts of $250,000 and $76,581, respectively,
through the sale of part of its holdings of MacuCLEAR Preferred Stock.
As of the date of this quarterly report, there is substantial doubt regarding
our ability to continue as a going concern as we have not generated sufficient
cash flow to fund our business operations and material commitments. Our future
success and viability, therefore, are dependent upon our ability to generate
capital financing. We are optimistic that we will be successful in our new
business operations and capital raising efforts; however, there can be no
assurance that we will be successful in generating revenue or raising additional
capital. The failure to generate sufficient revenues or raise additional capital
may have a material and adverse effect upon the Company and our shareholders.
11
The Company is not performing any product research and development at this time
and it is not expected to purchase equipment or incur significant changes in the
number of employees.
Off-Balance Sheet Arrangements
As of the date of this report, we do not have any off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
are material to investors. The term "off-balance sheet arrangement" generally
means any transaction, agreement or other contractual arrangement to which an
entity unconsolidated with us is a party, under which we have: (i) any
obligation arising under a guarantee contract, derivative instrument or variable
interest; or (ii) a retained or contingent interest in assets transferred to
such entity or similar arrangement that serves as credit, liquidity or market
risk support for such assets.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------- ----------------------------------------------------------
There have been no material changes in market risk from the information provided
in our Annual Report on Form 10-KSB as of December 31, 2007.
Item 4. Controls and Procedures
- ------- -----------------------
Evaluation of Disclosure Controls and Procedures
The Company's principal executive and financial officers have conducted an
evaluation of the effectiveness of the Company's disclosure controls and
procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934
as of the end of the period (the "Evaluation Date"). Based upon that evaluation,
the Company's principal executive and financial officers have concluded that, as
of the Evaluation Date, the Company's disclosure controls and procedures were
effective in ensuring that all material information relating to the Company
required to be filed in this quarterly report has been made known to them in a
timely manner. The Company believes that a control system, no matter how well
designed and operated, cannot provide absolute assurance that the objectives of
the control system are met, and no evaluation of controls can provide absolute
assurance that all issues of control and instances of fraud, if any, within any
company have been detected.
Changes in Internal Control over Financial Reporting
No change in the Company's system of internal control over financial reporting
occurred during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, internal control over financial
reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- ------- -----------------
On November 2, 2005, W. T. Skip Leake initiated litigation in the 101st State
District Court of Dallas County against the Company and the Company's stock
transfer agent seeking a declaratory judgment for the release of 1,000,000
shares of the 7,331,504 shares which former management states were issued
without consideration. The Company filed a counter-claim against 35 defendants
for a declaratory judgment that all disputed shares were invalid for lack of
Director approval and failure of consideration and that the 7,331,504 shares
should be cancelled. On September 18, 2006, the Company reached a settlement
with W. T. Skip Leake, whereby he effectively agreed to return 900,000 shares.
Following the surrender of approximately 16,000,000 shares, the Company filed a
default judgment on one defendant and a dismissal of the lawsuit. On May 16,
2008, the Company received notice that the default judgment had been rendered in
favor of the Company and the lawsuit was terminated. The default judgment
declared an additional 120,000 shares of common stock of the Company void and
the shares were cancelled effective June 30, 2008.
12
Item 1A. Risk Factors
- -------- ------------
In addition to the other information set forth in this report, the factors
discussed in Part I, "Item 1A. Risk Factors." in the Company's 2007 Form 10-KSB,
which could materially affect the Company's business, financial condition or
future results, should be carefully considered. The risks described in the 2007
Form 10-KSB are not the only risks facing the Company. Additional risks and
uncertainties not currently known to the Company or that currently are deemed to
be immaterial also may materially adversely affect the Company's business,
financial condition or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
- ------- -----------------------------------------------------------
The following information relates to all securities issued or sold by us during
the period covered by this report and not registered under the Securities Act of
1933. Each of the transactions referenced below was conducted in reliance upon
the available exemptions from the registration requirements of the Securities
Act of 1933 under Section 3(a)(9) of the Securities Act of 1933. There were no
underwriters employed in connection with any of the transactions.
On February 20, 2008, Regent GLSC sold 10,000 shares of Regent GLSC Preferred
Stock for $5.00 per share as the final sale under the initial private placement
offering for the sale of Regent GLSC Preferred Stock. The proceeds were used
for general corporate purposes.
Item 6. Exhibits
- ------- --------
Exhibit No. Description
----------- -----------
31 Certification required by Rule 13a-14(a) under the Securities
Exchange Act of 1934.
32 Certification required pursuant to 18 U.S.C. Section 1350.
13
SIGNATURE
Pursuant to the requirements 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.
Date: August 13, 2008 REGENT TECHNOLOGIES, INC.
(Registrant)
By: /s/ David A. Nelson
---------------------------------------
David A. Nelson, Chief Executive Officer
(Principal Financial and Accounting Officer)
14
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
31 Certification required by Rule 13a-14(a) under the Securities Exchange
Act of 1934 - Filed herewith.
32 Certification required pursuant to 18 U.S.C. Section 1350 - Filed
herewith.
15