SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the annual period ended December 31, 2009
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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.
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(Exact name of registrant as specified in its charter)
COLORADO 84-0807913
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5646 Milton, Suite 722
Dallas, Texas 75206
(Address of principal executive offices)
214-507-9507
(Issuer's telephone number)
Regent Petroleum Corporation
(Former Name or Former Address of Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, $.01 par value
Indicate by check mark whether the Registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.
Yes No X
----- -----
Indicate by check mark if the Registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Act").
Yes No X
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the 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 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 the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
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 [ ]
As of March 10, 2010, the registrant had 8,487,456 shares of common stock
issued and outstanding. No market value has been computed based upon the fact
that no active trading market had been established as of December 31, 2009.
REGENT TECHNOLOGIES, INC.
TABLE OF CONTENTS
Page No.
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PART I
Item 1. Business 3
Item 1A. Risk Factors 4
Item 1B. Unresolved Staff Comments 6
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Securities Holders 6
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities 7
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 24
Item 9A. Controls and Procedures 25
Item 9B. Other Information 26
PART III
Item 10. Directors and Executive Officers 26
Item 11. Executive Compensation 28
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 30
Item 13. Certain Relationships and Related Transactions 31
Item 14. Principal Accounting Fees and Services 31
PART IV
Item 15. Exhibits 32
Signatures 32
2
PART I
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Item 1. Business
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General
The term "Company" and "Regent" when used herein mean Regent Technologies, Inc.
and its subsidiaries. Regent Technologies, Inc., formerly Regent Petroleum
Corporation, was incorporated under the laws of the State of Colorado on
January 18, 1980. In 1994, new management redirected the Company's core
business toward the development of emerging technologies and the shareholders
voted to rename the Company at a meeting held on December 19, 1994. Following
the purchase in 1994 and the subsequent disposition of a landfill reclamation
business, the Company entered into a license agreement to provide retail dialup
access to the internet in 1996. During 1997 and 1998, the Company expanded its
product offerings to include wireless telephone and dedicated internet access
to professionals and corporations. At the shareholders' meeting on March 4,
1998, the shareholders approved a 1 for 6 reverse split of the common stock
of the Company. During 1999, the Company's subsidiary companies were divested
in the ordinary course of business including the sale of Regent's internet
assets to Allegiance Telecom, a NYSE company. Effective January 1, 1999, the
Company re-entered the development state. During 1999 and 2000, new management
issued common stock to insiders. In 2003, the current President initiated
procedures for reclaiming shares of stock issued in 1999 and 2000 as void for
failure of consideration. This process resulted in successfully canceling over
15,000,000 shares of common stock. See Item 3 - Legal Proceedings.
During 2005, the current President received the necessary information for
auditing the books and records of the Company in order to file delinquent SEC
reports. The Company has been current in its SEC filings since 2005 including
the filing of the delinquent reports for the quarterly and annual periods from
1999 to 2004. During 2008 and 2009, the current President filed the federal
income tax returns from 1998 through 2008.
Subsidiary Company
The Company has one subsidiary named Regent GLSC Technologies, Inc. ("Regent
GLSC"). Regent GLSC was formed to develop operations related to the global life
science commercialization process by working with inventors and research teams
focused on the life science technologies. Regent GLSC's initial entry was the
acquisition of an equity interest in MacuCLEAR, Inc. ("MacuCLEAR"), a company
organized by Texas A & M University for the development of a treatment of the
eye disease known as dry age-related macular degeneration ("AMD"). The ownership
of MacuCLEAR was financed through the sale of preferred stock in Regent GLSC.
The U.S. potential market for AMD is $18 billion based on current market treat-
ment of the 10% who have AMD. The potential MacuCLEAR revenues are $1.5 billion
in five years from licensing fees, milestone payments and royalties. MacuCLEAR
has a senior team of business and life science professionals with significant
industry experience.
Affiliates and Associated Companies
Regent GLSC Technologies, Inc., a subsidiary of the Company, owns 6.85% of the
Series A Convertible Preferred Stock of MacuCLEAR, Inc. Two directors of the
Company comprise 40% of the voting board of MacuCLEAR. Philip G. Ralston is the
CEO and President of MacuCLEAR, Inc. and the President of Regent GLSC. He is a
director of Regent GLSC, MacuCLEAR, and the Company. Also, David A. Nelson,
the Chairman and CEO of the Company and Regent GLSC, is a member of the Board of
Directors of MacuCLEAR and the representative for the stockholders of the Macu-
CLEAR Series A Preferred Stock. See Part III, Item 10, for more information
about the Company directors.
Employees
The Company currently has two executives, the Chairman, CEO and President of
the Company and the President of Regent GLSC Technologies, Inc., the Company's
subsidiary. Neither of the executives are considered employees. The Company
utilizes outside professionals with the number varying according to project
requirements.
Transfer Agent
On December 28, 2007, the Company appointed Securities Transfer Corporation as
the Transfer Agent to handle securities transactions for the Company. The
address for Securities Transfer Corporation is 2591 Dallas Parkway, Suite 102,
Frisco, Texas 75034.
3
Company Financial Information
The public may read and copy any materials the Company files with the SEC at
the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549, on
official business days during the hours of 10 a.m. to 3 p.m. The public may
obtain information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330 or through internet access via the Edgar reporting
system.
Item 1A. Risk Factors
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The risks described below are among those that could materially and adversely
affect the Company's business, financial condition or results of operations.
These risks could cause actual results to differ materially from historical
experience and from results predicted by any forward-looking statements related
to conditions or events that may occur in the future. These risks are not the
only risks the Company faces, and other risks include factors not presently
known as well as those that are currently considered to be less significant.
Risks Related to the Company's Acquisition
- ------------------------------------------
Improper Assessment of the Acquired Asset's Estimated Value
Evaluations of new technologies and invention groups are based on best effort
investigation of the research focus, the team strength and the potential market
prospects. In this regard, the recovery of the amount advanced, as well as
realization of a profit on marketing or licensing of a new product is dependent
on the initial assessment or appraisal of the invention's estimated value.
No assurance can be given that such appraisals will in any or all cases, be
accurate. Also, since an appraisal fixes its value at a given point in time,
subsequent events could adversely affect the prospect of financial recovery.
The Company will not necessarily be able to predict with any certainty whether
any of these events will occur after an acquisition is made. Improper assessment
of the market value of the invention can result in reduced marketability of the
asset and resale of the asset for an amount less than the amount advanced.
Although the skill of the Company management team lead us to believe that it can
expertly identify and evaluate innovations, no assurances can be given that such
innovations will produce a profit.
Competition
The Company has numerous competitors in the development of a drug for dry AMD,
including better financed research. In connection with the financing of the
research groups, competitors include numerous drug and technology companies.
The Company expects that new competitors will enter the market for acquiring
promising assets. Some of the competitors of the Company may have greater and
more sophisticated development, financial, marketing, distribution and other
resources than the Company. Increased competition may have a material adverse
effect on the profitability of the Company.
4
Risks Associated with Operations
If expenses of operations exceed the anticipated income of operations, Regent
GLSC may be required to dispose of the assets on disadvantageous terms, if
necessary, to raise capital. In the event operations do not generate sufficient
operating income to pay all of the operating expenses, taxes and debt service
requirements, the Company may sustain a loss of its investment. There can be no
assurance that the Company will not incur operating deficits.
Government Regulation
Development of new drugs and medical procedures are subject to extensive
regulation, supervision and licensing under various federal, state and local
statutes, ordinances and regulations. These statutes prescribe, among other
things, extent of testing and proof required to market a medical device or drug.
Governmental regulators have broad discretionary authority to refuse to grant a
license or to suspend or revoke any or all existing licenses of licensees under
common control if it is determined that any such licensee has violated any law
or regulation or that the management of any such licensee is not suitable to
bring such a product to market. In addition, there can be no assurance that
additional state or federal statutes or regulations will not be enacted at some
future date which could inhibit the team's ability to grow a product market,
conduct further research, bring new products to market, or prohibit or more
stringently regulate the sale of certain goods, any of which could significantly
adversely affect the Company's prospects.
Other Business Risks
- --------------------
Failure to Obtain Financing on Acceptable terms
The Company's operations depend on its ability to obtain financing for its
working capital and capital expenditure requirements and for making future
acquisitions. If the Company is not able to obtain suitable financing, its costs
could increase and its revenues could decrease, or the Company could be
precluded from continuing its operations at current or desired levels, or from
making future acquisitions. Increases in interest rates can make it more
difficult and expensive to obtain the funds needed to operate the Company's
businesses. The applicable interest rates on the revolving bank credit
facilities that the Company has in place fluctuate based on changes in
short-term interest rates. Increases in interest rates would increase the
Company's interest expense and adversely affect the Company's results of
operations and its ability to make acquisitions.
Inadequate Management and Internal Systems for Growth
To manage the Company's future growth, the Company's management must continue to
improve operational and financial systems. As the Company continues to grow,
it will also need to recruit and retain additional qualified management
personnel, and its ability to do so will depend upon a number of factors,
including the Company's results of operations and prospects and the level of
competition then prevailing in the market for qualified personnel. At the same
time, the Company will likely be required to manage an increasing number of
relationships with various customers and other parties. If the Company's
management personnel, systems, procedures and controls are inadequate to support
its operations, expansion could be slowed or halted and the opportunity to gain
significant additional market share could be impaired or lost. Any inability on
the part of the Company's management to manage the Company's growth effectively
may adversely affect its results of operations.
5
Failure of the Company's Accounting Controls and Procedures
Although the Company evaluates its internal controls over financial reporting
and the Company's disclosure controls and procedures at the end of each quarter,
any system of controls, however well designed and operated, is based in part on
certain assumptions and can provide only reasonable, not absolute, assurances
that the objectives of the system are met. Any failure or circumvention of the
controls and procedures or failure to comply with regulations related to
controls and procedures could have a material adverse effect on the Company's
results of operations.
Conflicts with Principal Shareholder
The Company has a principal shareholder, David A. Nelson, who, together with
certain of his affiliates, currently controls approximately 54.4% of the
Company's outstanding common stock. This includes 52.6% beneficially owned and
150,000 shares controlled through a voting agreement. As a result, this share-
holder exercises significant influence over the Company's major decisions,
including through his ability to vote for the members of the Board of Directors.
Because of this voting power, the principal shareholder could influence the
Company to make decisions that might run counter to the wishes of the Company's
other investors generally.
Item 1B. Unresolved Staff Comments
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None.
Item 2. Properties
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Offices
The Company currently does not occupy separate office facilities but uses space
on an as needed basis without charge provided by the Chairman of the Company.
The rental value of the space provided was not and is currently not material.
Management expects that the Company will establish formal office space in 2010.
Item 3. Legal Proceedings
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In the fourth quarter of 2005, the Company filed a claim against 35 defendants
seeking a declaratory judgment that certain common shares were invalid for lack
of Director approval plus failure of consideration and thus should be cancelled.
Following the surrender of approximately 15,000,000 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
all shares were cancelled effective June 30, 2008.
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were presented for a vote to the shareholders of the Company in 2008.
6
PART II
-------
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and
- ------- ------------------------------------------------------------------------
Issuer Purchases of Equity
--------------------------
Regent's Common Stock is listed on the Over-the-Counter Bulletin Board under the
symbol "REGT." For the period ended December 31, 2009, security dealers did
not report high and low bid quotations.
Shares Available Under Rule 144
There are currently 5,376,995 shares of common stock that are considered
restricted securities under Rule 144 of the Securities Act of 1933 (the "Act").
Most of the restricted shares are held by affiliates, as that term is defined
in Rule 144(a)(1). In general, under Rule 144 as amended, a person who has
beneficially owned and held restricted securities for at least a year, including
affiliates, may sell publicly without registration under the Act, within any
three-month period, assuming compliance with other provisions of the Act. In
general, under Rule 144, as currently in effect, a person who has beneficially
owned shares of a company's common stock for at least six months is entitled to
sell within any three month period a number of shares that does not exceed the
greater of:
1. 1% of the number of shares of the company's common stock then
outstanding; or
2. The average weekly trading volume of the company's common stock during
the four calendar weeks preceding the filing of a notice on Form 144
with respect to the sale.
Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about the
company.
Under Rule 144(k), a person who is not one of the company's affiliates at any
time during the three months preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, is entitled to sell
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Dividends
We have not declared any dividends, and we do not plan to declare any dividends
in the foreseeable future.
Other Shares Which May Be Issued
The following table lists additional shares of the Company's common stock which
may be issued.
Number of Note
Shares Reference
--------- ---------
Shares subject to semi-annual vesting pursuant to
a restricted stock grant award to the Directors 252,777 A
A - See Note 9, NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
7
Item 6. Selected Financial Data
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Not applicable.
Item 7. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations
-------------------------
INTRODUCTION
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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 this Annual Report. We undertake no obligation to
update a forward-looking statement to reflect subsequent events, changed
circumstances, or the occurrence of unanticipated events.
Overview
--------
Regent Technologies, Inc. is engaged in identifying and developing or acquiring
emerging technologies. On April 17, 2007, Regent acquired ownership in the
development of a life science technology with the purchase of MacuCLEAR Series
A Preferred Stock through our subsidiary, Regent GLSC Technology, Inc. See Item
1, "Subsidiary company."
During 2008, the Company has continued its review of opportunities for the
development or operation of new technologies. The discussions have focused
principally on assuming operations of technologies in the areas of 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
report and 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-K for the year ended December 31, 2009.
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 Notes 2 and
3 to the consolidated financial statements herein, and the critical accounting
policies and estimates are described in Management's Discussion and Analysis
included in Item 7 herein. 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 2009 consolidated financial statements.
There are numerous critical assumptions that may influence accounting estimates
in these and other areas. Management bases its critical assumptions on
historical experience, third-party data and various other estimates that it
believes to be reasonable under the circumstances.
8
PLAN OF OPERATION
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As a development stage company, Regent has focused on the identification of
new technologies which we believe have the potential for commercialization. We
conduct operations through our subsidiary, Regent GLSC Technologies, Inc. The
Company expects to form one or more additional subsidiary companies for future
operations. Our strategy is to initially acquire rights to technologies and
products that are at or near commercialization. We plan to control operating
companies which own or license emerging technologies. We do not intend to be an
investment company, engaged primarily in holding or trading in securities. We
are currently considering the commercialization of new technologies related to
renewable energy and environmental services, as well as the life sciences.
Regent has funded operations through short-term borrowings and equity investment
sales in order to meet obligations. Our future operations are dependent upon
external funding and our ability to increase revenues and reduce expenses.
There is no assurance 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.
RESULTS OF OPERATIONS
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Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
---------------------------------------------------------------------
For the period ended December 31, 2009, the Company experienced a net loss of
$70,868 compared to net income of $109,335 for the period ended December 31,
2008. The difference was primarily the result of net transfers out of $35,662
in fiscal 2009 related to the fair value measurement of the MacuCLEAR Preferred
Stock acquisition as compared to unrealized gains of $103,201 for fiscal 2008
related to the fair value measurement of the MacuCLEAR holdings. See Note 6,
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
General and administrative expenses were $20,706 for the period ended December
31, 2009 compared to $35,145 for the same period in 2008. The decrease was due
to less accounting expense as the result of completing the MacuCLEAR fair value
dispositions and fair value measurements. Interest expense decreased to $1,469
for the period ended 2009 from $1,868 for the period ended 2008 due to a con-
tinued reduction in notes payable.
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
---------------------------------------------------------------------
For the period ended December 31, 2008, net income was $109,335 compared to
net income of $7,443 for the same period ended 2007. The net income for fiscal
2008 was the result of total year-to-date unrealized gains of $103,201 due to
the fair value measurement of the MacuCLEAR Preferred Stock acquisition, plus a
$35,125 gain from the sale of a portion the Company's holdings of MacuCLEAR
Preferred Stock and the gain on the extinguishment of debt in the amount of
$21,154. The net income in 2007 was due to a $41,456 gain from the sale of a
portion of the Company's holdings in MacuCLEAR Preferred Stock.
Operating expenses primarily include administrative and accounting expenses,
litigation settlement expense and acquisition expense related to the MacuCLEAR
Preferred Stock. General and administrative expenses were $33,277 for the
period ended December 31, 2008 compared to $47,393 for the period ended December
31, 2007. The decrease was due to lower fees due to the change of stock transfer
agents which was partially offset by the one-time expense for the preparation
of tax returns for the past 10 years. Interest expense decreased period over
period due to a reduction in outstanding debt to $14,105 for the fiscal period
ended December 31, 2008 from $153,747 for the period ending December 31, 2007.
9
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company finances its operations from internally generated funds from stock
sales, proceeds from sales of acquisitions and from borrowings under its various
agreements. As of December 31, 2009, the Company had total assets of $470,917
and total liabilities of $11,722. The Company's subsidiary, Regent GLSC, has
a note receivable for $70,000. The Company has borrowings under one note payable
in the amount of $8,850. See Note 7 and Note 8, NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.
Cash Flows
----------
Net cash provided by financing activities was $22,830 for the 2009 fiscal
period, compared to a use of $41,280 for the same period in 2008. The Company
has financed its operations primarily from stock issuances. During fiscal 2007
and 2008, the Company's sole subsidiary Regent GLSC raised $325,000 and $50,000,
respectively, of capital through the issuance of its Series A Preferred Stock.
For the period ended December 31, 2008, the Company raised $100,000 through the
sale of part of its MacuCLEAR Preferred Stock. Regent GLSC raised $27,500 and
$50,000 in fiscal 2009 and 2008, respectively, from the issuance of additional
shares Regent GLSC Series A Preferred Stock. The Company repaid a portion of
the NR Partners note payable in the amounts of $19,925 and $91,280 in 2009 and
2008, respectively.
Net cash flows used in operating activities was $18,420, for the fiscal period
ending December 31, 2009, compared to net cash flows used of $57,853 for the
same period in 2008, due to lower costs for the Regent GLSC organization and the
MacuCLEAR stock acquisition costs.
Future Payments Under Contractual Obligations
---------------------------------------------
Neither the Company nor its subsidiary have incurred future payment obligations.
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.
10
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
TURNER, STONE & COMPANY, L.L.P
12700 Park Central Drive, Suite 1400
Dallas, Texas 75251
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Regent Technologies, Inc. and Subsidiary
Dallas, Texas
We have audited the accompanying consolidated balance sheet of Regent
Technologies, Inc. and Subsidiary, (the Company) (a development stage company)
as of December 31, 2009 and 2008, and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for the years ended
December 31, 2009 and 2008, and for the period January 1, 1999 through December
31, 2009. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Regent Technologies, Inc. and Subsidiary at December 31, 2009 and 2008, and
the results of their operations and cash flows for the years ended December 31,
2009 and 2008, and for the period January 1, 1999 through December 31, 2009 in
conformity with accounting principles generally accepted in the United States
of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to
the consolidated financial statements, the Company has no business operations
and has a working capital deficiency, both of which raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 1. The consolidated financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
/s/ Turner, Stone & Company, L.L.P.
- ----------------------------------
February 26, 2010
11
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2009 2008
------------------ ------------------
ASSETS
CURRENT ASSETS
Cash in bank $ 5,297 $ 887
--------- ---------
Total Current Assets 5,297 887
Long-term note receivable, stockholder 70,000 -
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) 395,620 431,282
--------- ---------
TOTAL ASSETS $ 470,917 $ 432,169
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, trade $ 2,606 $ 214
Note payable, related parties 8,850 13,520
Accrued interest payable 265 371
--------- ---------
Total Current Liabilities 11,721 14,105
--------- ---------
STOCKHOLDERS' EQUITY
Convertible Preferred stock, $.10 par value, 1,000,000
shares authorized, 94,500 and 75,000 shares issued
and outstanding, Regent GLSC Technologies, Inc. 9,450 7,500
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, 8,487,456 and 7,037,456
shares issued and outstanding 84,875 70,375
Paid-in capital in excess of par 3,815,795 3,720,245
Accumulated deficit (including $102,925 deficit
accumulated since reentering the development stage) (3,450,924) (3,380,056)
--------- ---------
459,196 418,064
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 470,917 $ 432,169
========= =========
The accompanying notes are an integral part of the consolidated financial statements.
12
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
AND THE PERIOD JANUARY 1, 1999
THROUGH DECEMBER 31, 2009
Cumulative
Since Re-entering
Development Stage
2009 2008 January 1, 1999
------------ ------------ ------------
Revenues $ - $ - $ -
Operating expenses:
General and administrative 19,237 33,277 316,679
--------- --------- ---------
Operating loss ( 19,237) ( 33,277) (316,679)
--------- --------- ---------
Other income and (expense):
Gain on fair value measurement - 103,201 103,201
Transfer on fair value measurement ( 35,662) - ( 35,662)
Gain on extinguishment of debt - 21,154 145,340
Gain on sale of investment - 35,125 76,581
Stock grant expense ( 14,500) ( 15,000) ( 37,972)
Interest expense ( 1,469) ( 1,868) ( 37,734)
--------- --------- ---------
Total other income (expense) ( 51,631) 142,612 213,754
Income (loss) from continuing operations
before income taxes ( 70,868) 109,335 (102,925)
Provisions for income taxes - - -
--------- --------- ---------
Net income (loss) $ ( 70,868) $ 109,335 $ (102,925)
========= ========= =========
Net income (loss) per common share
(basic and diluted) $ ( .01) $ .02
========= =========
Weighted Average Shares Outstanding 7,212,593 5,784,620
The accompanying notes are an integral part of the consolidated financial statements.
13
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD JANUARY 1, 1999 THROUGH DECEMBER 31, 2009
Preferred Stock Common Stock Total
----------------------- ----------------------- Additional Stockholders'
Issued Issued Paid-In Accumulated Equity
Shares Par Value Shares Par Value Capital Deficit (Deficit)
------ --------- ------ --------- ------- -------- ---------
Balance at January 1, 1999 - $ - 3,643,693 $ 36,437 $3,148,871 $( 3,347,999) $( 162,691)
Issuance of common stock in
exchange for services
at $.10 per share - - 50,000 500 4,500 - 5,000
Issuance of common stock upon
conversion of notes payable
at $.11 per share - - 1,800,000 18,000 172,000 - 190,000
Issuance of common stock with
failed consideration - - 50,877,713 508,777 ( 508,777) - -
Net loss for 1999 - - - - - ( 125,005) ( 125,005)
Issuance of common stock for
settlement of lawsuit
at $.10 per share - - 140,000 1,400 12,600 - 14,000
Issuance of common stock with
failed consideration returned
and cancelled - - (36,046,209) (360,462) 360,462 - -
Net loss for 2000 - - - - - ( 19,938) ( 19,938)
Net loss for 2001, 2002 and 2003 - - - - - - -
--------- ----------- ----------- -------- --------- ---------- ----------
Balance at December 31, 2003 - - 20,465,197 $ 204,652 $3,189,656 $( 3,492,942) $( 98,634)
Net loss for 2004 - - - - - ( 7,936) ( 7,936)
--------- ----------- ---------- -------- --------- ---------- ----------
Balance at December 31, 2004 - - 20,465,197 $ 204,652 $3,189,656 $( 3,500,878) $( 106,570)
Issuance of common stock with
failed consideration returned
and cancelled - - ( 750,000) ( 7,500) 7,500 - -
Cancellation of Treasury Stock - - ( 42,876) ( 429) 429 - -
Net loss for 2005 - - - - - ( 48,946) ( 48,946)
--------- ----------- ----------- -------- --------- ---------- ----------
Balance at December 31, 2005 - - 19,672,321 $ 196,723 $3,197,585 $( 3,549,824) $( 155,516)
Issuance of common stock for debt
settlement at $.06 per share - - 64,000 640 3,200 3,840
Net income for 2006 - - - - - 52,990 52,990
--------- ----------- ----------- -------- --------- ---------- ----------
Balance at December 31, 2006 - - 19,736,321 $ 197,363 $3,200,785 $( 3,496,834) $( 98,686)
Issuance of subsidiary
preferred stock 65,000 6,500 - - 318,500 - 325,000
Issuance of common stock as partial
consideration under GHI, Ltd.
sale at $.40 per share - - 3,750 38 1,462 - 1,500
Common stock issued with failed
consideration cancelled - - (14,929,838) (149,298) 149,298 - -
Issuance of restricted stock
awards to directors - - 847,223 8,472 - - 8,472
Net income for 2007 - - - - - 7,443 7,443
---------- ---------- ----------- -------- --------- ---------- ---------
Balance at December 31, 2007 65,000 $ 6,500 5,657,456 $ 56,575 $3,670,045 $( 3,489,391) $ 243,729
Issuance of subsidiary
preferred stock 10,000 1,000 - - 49,000 - 50,000
Common stock issued with failed
consideration cancelled - - ( 120,000) ( 1,200) 1,200 - -
Issuance of restricted stock
awards and bonus - - 1,500,000 15,000 - - 15,000
Net income for 2008 - - - - - 109,335 109,335
---------- --------- ----------- -------- --------- ---------- ---------
Balance at December 31, 2008 75,000 $ 7,500 7,037,456 $ 70,375 $3,720,245 $( 3,380,056) $ 418,064
Issuance of subsidiary
preferred stock 19,500 1,950 - - 95,550 - 97,500
Issuance of restricted stock
awards and bonus - - 1,450,000 14,500 - - 14,500
Net loss for 2009 - - - - - ( 70,868) ( 70,868)
---------- --------- ----------- -------- --------- ---------- ---------
Balance at December 31, 2009 94,500 $ 9,450 8,487,456 $ 84,875 $3,815,795 $( 3,450,924) $ 459,196
========== ========= =========== ======== ========= ========== ==========
The accompanying notes are an integral part of the consolidated financial statements.
14
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
AND FOR THE PERIOD JANUARY 1, 1999
THROUGH DECEMBER 31, 2009
Cumulative
Since Re-entering
Development Stage
2009 2008 January 1, 1999
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $( 70,868) $ 109,335 $ (102,925)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation - - 3,762
Gain (loss) from fair value measurement - (103,201) (103,201)
Change in fair value measurement 35,662 - 35,662
Gain from extinguishment of debt - ( 21,154) (145,340)
Gain from sale of investment - ( 35,125) ( 76,581)
Note issued for settlement expenses - - 20,000
Common stock issued for services 14,500 15,000 42,972
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, trade 2,392 ( 14,802) 33,937
Increase (decrease) in accrued interest payable ( 106) ( 7,906) 25,002
--------- --------- ---------
Net Cash Used In Operating Activities ( 18,420) ( 57,853) (166,053)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in affiliates - - (350,000)
Proceeds from sale of investments - 100,000 100,000
--------- --------- ---------
Net Cash Provided By (Used In) Investing Activities - 100,000 (250,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable - related party 15,255 - 105,055
Proceeds from sale of Preferred Stock 27,500 50,000 407,500
Proceeds from note payable - stockholder - - 20,000
Repayments of notes payable ( 19,925) ( 91,280) (111,205)
--------- --------- ---------
Net Cash Provided By (Used In) Financing Activities 22,830 ( 41,280) 421,350
--------- --------- ---------
Net Increase (Decrease) in Cash 4,410 867 5,297
Cash At Beginning Of Period 887 20 -
--------- --------- ---------
Cash At End of Period $ 5,297 $ 887 $ 5,297
========= ========= =========
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 $ 4,500 $ 5,000 $ 13,472
Common stock issued for bonus compensation $ 10,000 $ 10,000 $ 10,000
Common stock returned in failed consideration
and debt settlement $ - $ 1,200 $ 510,960
Note receivable as partial consideration for
purchase of preferred stock $ 70,000 $ - $ 70,000
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.
15
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. DESCRIPTION OF THE COMPANY AND BASIS OF PRESENTATION
Organization
- ------------
The term "Company" and "Regent" when used herein mean Regent Technologies, Inc.
and its subsidiaries. Regent Technologies, Inc., formerly Regent Petroleum
Corporation, was incorporated under the laws of the State of Colorado on
January 18, 1980. In 1994, new management redirected the Company's core
business toward the development of emerging technologies and the shareholders
voted to rename the Company at a meeting held on December 19, 1994. Following
the purchase in 1994 and the subsequent disposition of a landfill reclamation
business, the Company entered into a license agreement to provide retail dialup
access to the internet in 1996. During 1997 and 1998, the Company expanded its
product offerings to include wireless telephone and dedicated internet access
to professionals and corporations. At the shareholders' meeting on March 4,
1998, the shareholders approved a 1 for 6 reverse split of the common stock
of the Company. During 1999, the Company's subsidiary companies were divested
in the ordinary course of business including the sale of Regent's internet
assets to Allegiance Telecom, a NYSE company. Effective January 1, 1999, the
Company re-entered the development state.
Basis of Presentation
- ---------------------
The consolidated financial statements contained in this Annual Report were
prepared in accordance with accounting principles generally accepted in the
United States of America ("US GAAP") for all periods presented.
Note 2. SUMMARY OF ACCOUNTING POLICIES
Consolidation Principles
- ------------------------
The consolidated financial statements have been prepared in accordance with US
generally accepted accounting principles for all periods presented and include
the accounts of the Company and its subsidiary. All significant intercompany
accounts and transactions have been eliminated in consolidation.
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 consolidated 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 ASC 915.
Fiscal year
- -----------
The Company's fiscal year ends on December 31. All references to 2009, 2008 and
2007 mean the fiscal years ended December 31, 2009, 2008 and 2007 unless the
context otherwise indicates.
16
Cash and cash equivalents
- -------------------------
Cash equivalents consist of short-term, highly liquid investments that have an
original maturity of ninety days or less and are readily convertible into cash.
Income taxes
- ------------
Deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities, and are measured by
using currently enacted tax rates expected to apply to taxable income in the
years in which those differences are expected to reverse.
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.
Fair Value of financial instruments
- -----------------------------------
In accordance with the requirements of ASC No. 820, "Fair Value Measurements
and Disclosures" ("ASC 820"), the Company calculates the fair value of its
assets and liabilities which qualify as financial instruments under ASC 820 and
includes this additional information in the notes to the financial statements
when the fair value is different than the carrying value of those financial
instruments. The estimated fair value of cash and accounts payable approximate
their carrying value due to the short term nature of these instruments. The
carrying value of the notes payable and note receivable also approximate fair
value based on the terms of these instruments. None of these instruments are
held for reinvestment or trading purposes.
Stock-Based Compensation
- ------------------------
We account for equity based compensation under the provisions of ASC No. 718,
"Compensation - Stock Compensation" ("ASC 718"). ASC 718 requires the recogni-
tion of the fair value of equity-based compensation in operations. The fair
value of our stock option awards are estimated using a Black-Scholes option
valuation model. This model requires the input of subjective assumptions and
elections including expected stock price volatility and the estimated life of
each award. In addition, the calculation of equity-based compensation costs
requires that we estimate the number of awards that will be forfeited during
the vesting period. The fair value of equity-based awards is amortized over the
vesting period of the award and we elected to use the straight-line method for
awards granted after the adoption of ASC 718 with no forfeitures.
17
Earnings (Loss) per Share
- -------------------------
Earnings (loss) per common share are calculated under the provisions of ASC
No. 260, "Earnings per Share" ("ASC 260"), which requires the Company to report
both basic earnings per share, which is based on the weighted-average number
of common shares outstanding, and diluted earnings per share, which is based
on the weighted-average number of the common shares outstanding plus all
potentially dilutive shares outstanding. At December 31, 2009 and 2008, there
are no exercisable common stock equivalents. Accordingly, no common stock
equivalents are included in the earnings per share calculations and basic
and diluted earnings per share are the same for all periods presented.
Subsequent events
- -----------------
In preparing the consolidated financial statements, the Company has reviewed,
as determined necessary by the Company's senior management, events that have
occurred after December 31, 2009, up until the issuance of the consolidated
financial statements, which occurred on February 26, 2010.
Note 3. NEW ACCOUNTING GUIDANCE
In June 2009, the FASB issued ASC No. 105-10, "Financial Accounting Standards
Codification ("Codification" or "ASC") and the Hierarchy of Generally Accepted
Accounting Principles" ("ASC 105-10"). ASC 105-10 establishes the Codification
as the official source of authoritative U.S. accounting and reporting standards
for all non-governmental entities (other than guidance issued by the SEC). The
Codification under ASC 105-10 changes the referencing and organization on finan-
cial standards and is effective for interim and annual periods ending on or af-
ter September 15, 2009. We have applied the Codification to our disclosures
beginning in the third quarter fiscal quarter. As the Codification is not in-
tended to change the existing accounting guidance, its adoption did not have an
impact on our financial statements.
In May 2009, the FASB issued guidance under the provisions of ASC No. 855, "Sub-
sequent Events" ("ASC 855") establishing standards for accounting and disclosure
of events that occur after the balance sheet date, but before financial state-
ments are issued. This guidance requires the disclosure of the date through
which an entity has evaluated subsequent events and whether the date represents
the date the financial statements were issued or were available to be issued. We
adopted this guidance in the quarter ended June 30, 2009.
Note 4. GOING CONCERN UNCERTAINTIES
As of the date of this 2009 annual 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.
18
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.
Note 5. CAPITAL STRUCTURE DISCLOSURES
Common and preferred 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 December 31, 2009,
8,487,456 shares of common stock are outstanding. This compares to 7,037,456
shares at December 31, 2008 with the difference due to issuances under stock-
based compensation (Note 9).
Stock options
- -------------
In 1998, in connection with a private placement of the Company's common shares,
the Company issued 333,333 warrants to purchase restricted common stock at
$1.00 per share and expiring on June 30, 2003. In 1999, the Company issued to
a director an option to purchase 100,000 shares of the Company's common
stock at an exercise price of $.25 and expiring on June 30, 2004. Other than
the above options and warrants, no other options, warrants or similar rights
have been granted and all options have expired without execution.
Subsidiary preferred stock
- --------------------------
On April 18, 2007, Regent GLSC accepted purchase agreements in a total amount
of $150,000 received from four purchasers of a private offering of shares of
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
units. Each unit is convertible into 10,000 shares of common stock of Regent
GLSC plus 4,800 shares of common stock of MacuCLEAR. Including the initial sales
on April 18, 2007, Regent GLSC has accepted Preferred Stock purchase agreements
from additional investors in the total amount of $472,500. If all of the uncon-
verted shares of the Series A Preferred Stock were to be converted to common
stock of Regent GLSC, the Company's ownership of Regent GLSC would be diluted
to approximately 90%.
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 annual filing, Regent GLSC holds title to 126,428 shares of MacuCLEAR
Preferred Stock, of which 90,974 shares are beneficially held for the holders
of Regent GLSC Preferred Stock as of December 31, 2009.
19
Note 6. INVESTMENTS IN AFFILIATE
The Company has adopted ASC 820 which defines fair value and the framework for
using fair value to measure assets and liabilities, and expands disclosures
about fair value measurements. The statement applies whenever other statements
require or permit assets or liabilities to be measured at fair value. ASC 820
established the following fair value hierarchy that prioritizes the inputs used
to measure fair value:
o Level 1 -- Unadjusted quoted prices in active markets for identical,
unrestricted assets or liabilities that are accessible 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 asset or liability.
The following table presents our financial assets and liabilities that were
accounted for at fair value on a recurring basis by level within the fair value
hierarchy:
Fair Value Measurements Using
--------------------------------------
December 31, 2009 Level 1 Level 2 Level 3
----------------- ----------- ---------- -----------
Investment in affiliate............................ $ - $ - $ 395,620
December 31, 2008
-----------------
Investment in affiliate............................ $ - $ - $ 431,282
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.
20
As of the date of this annual filing, Regent GLSC holds title to 126,428
shares of MacuCLEAR Preferred Stock, of which 90,974 shares are beneficially
held for the holders of Regent GLSC Preferred Stock. The Company has determined
the fair value for these holdings has not materially changed from the amount
determined for the period ended December 31, 2008 based on continuous sales at
the same price per share for sales of MacuCLEAR Preferred Stock during 2009. Due
to the sale in 2009 of 19,500 shares of Regent GLSC Preferred Stock, the number
of shares beneficially owned by the Company was reduced from 54,174 to 35,454
(Note 5). We applied the $4.50 per share as the measurement of fair value for
our holdings in MacuCLEAR Series A Preferred Stock. As a result of our reduced
ownership, the amount of $35,662 is a transfer out of the Level 3 valuation
previously recorded and was treated as a net loss for this annual period. The
following is the reconciliation used in determining the value of the investment:
Investment in
affiliate
--------------
Beginning Balance as of 12/31/08 $ 431,282
Realized gain/(loss) -
Change in unrealized
appreciation/(depreciation) -
Net purchase/sales -
Net transfers in and/or out of
Level 3 ( 35,662)
--------------
ENDING BALANCE AS OF 12/31/09 $ 395,620
==============
Note 7. NOTES RECEIVABLE
As of December 31, 2009, Regent GLSC is the holder of a $70,000 promissory note
from the CEO of Regent executed as partial consideration for the sale of 15,000
shares of Regent GSLC Series A Preferred Stock for $5.00 per share. The terms
of the promissory note are interest payable monthly at the rate of 7.0 per cent
per annum, with the principal due on or before the expiration of 24 months. See
Note 13 - RELATED PARTY TRANSACTIONS.
Note 8. NOTES PAYABLE
As of December 31, 2009, the Company owes $8,850 principal and interest to NR
Partners under a demand promissory note. The promissory note bears interest at
a rate of 8.5 percent per annum. See Note 13 - RELATED PARTY TRANSACTIONS.
21
Note 9. STOCK-BASED COMPENSATION
Stock Award Agreements
- ----------------------
In December 2007, the Company entered into restricted stock award agreements
with its directors under which it may be required to issue up to 2,000,000
shares of common stock, 500,000 shares to each director. The restricted stock
awards vest over 36 months from the date of first service as a Director which
resulted in the grant of 500,000 shares to the President in 2007 and 347,223 and
450,000 shares to the remaining Directors in 2007 and 2008, respectively. The
grant was valued at $2,000 for tax purposes, being the value of the shares on
the day the agreement was completed. The Company has valued the shares at
$20,000 for book, being the par value of the stock. The total cost of the
restricted stock grant will be recognized in the consolidated statement of
operations at the dates of vesting over an estimated period of three years. We
recognized the amounts of $4,500 and $5,000 as stock-based director compensation
expense for the fiscal periods ended 2009 and 2008, respectively, based on the
par value of the stock issued. As of December 31, 2009, 252,777 shares remain
unvested and unissued under the director award agreements.
Stock Bonus
- -----------
In addition, the Company granted the CEO and Chairman of Regent a bonus for the
periods ended December 31, 2009 and 2008, which amount was paid with 1,000,000
shares of new restricted common stock and the amount of $10,000 as stock-
based compensation was expensed for 2009 and 2008 based on the par value of the
stock issued.
Note 10. 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 at the end of the second quarter.
Note 11. INCOME TAXES
The Company recognizes deferred tax assets and liabilities based on estimated
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. In addition, future tax benefits, such as those from net
operating loss carry forwards, are recognized to the extent that realization of
22
such benefits is more likely than not. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date. At
December 31, 2009 the Company had a deferred tax asset totaling approximately
$350,000, which relates to the Company's cumulative net operating loss carry
forward totaling approximately $1,029,000 which will expire through 2030. This
deferred tax asset has been fully offset by a valuation reserve. The Company
does not have any other deferred tax assets or liabilities.
The Tax Reform Act of 1986 imposed substantial restrictions of the utilization
of net operating loss and tax credit carry forwards in the event of an
"ownership change" as defined by the Section 382 of the Internal Revenue Code of
1986. If the Company has an "ownership change" as defined by the Internal Reve-
nue Code of 1986, the Company's ability to utilize the net operating losses
could be reduced.
A reconciliation of income tax expense at the statutory federal rate of 34% to
income tax expense at the Company's effective tax rate for the years ended
December 31, 2009 and 2008 and for the period January 1, 1999 through December
31, 2009 is as follows:
Year Ended Year Ended
12/31/09 12/31/08
------------------ -------------------
Tax benefit (expense) computed
at statutory rate $ 24,095 $ ( 37,174)
State income taxes -
Expiration of NOL Carryforward ( 25,648) -
Increase (decrease) in valuation allowance 1,553 ( 37,174)
-------- --------
$ - $ -
========= =========
The Company uses the accrual method of accounting for income tax reporting
purposes. At December 31, 2009, the significant components of the Company's
deferred tax assets (benefits) and liabilities are summarized.
2009 2008
---- ----
Deferred tax assets:
Net operating loss carry forward $ 350,009 $ 363,687
Less valuation allowance (327,046) (328,599)
-------- --------
22,963 35,088
Deferred tax liabilities:
Unrealized gain on investments 22,963 35,088
-------- --------
Net deferred tax assets $ - $ -
======== ========
23
Note 12. LITIGATION
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 I, Item 3 herein.
With the conclusion of this case, there is no other litigation, threatened or
pending.
Note 13. RELATED PARTY TRANSACTIONS
Notes receivable
- ----------------
Effective December 30, 2009, the Board of the Company and the Board of Regent
GLSC Technologies, Inc. approved the sale of 15,000 shares of Regent GLSC
Series A Preferred Stock to the Chairman and CEO of Regent Technologies, Inc.for
$5.00 per share. The acquisition required a payment of $5,000 plus the execution
of a promissory note in the amount of $70,000 which is be unsecured but with
personal liability. The terms of the note are interest at 7 per cent per annum,
payable monthly, with the principal due on or before the expiration of 2 years.
Notes payable
- -------------
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
Partners amount due and payable at December 31, 2009 was $8,850. The promissory
note is a demand note and pays interest at 8.5 percent per annum.
Note 14. SUBSEQUENT EVENTS
Effective January 7, 2010, Regent GLSC Technologies, Inc. executed a Preferred
Stock purchase agreement for the purchase and sale of 5,000 shares of Series A
Preferred Stock for $5.00 per share with the spouse of the CEO of Regent GLSC.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------- ---------------------------------------------------------------
Financial Disclosure
--------------------
None
24
Item 9A. Controls and Procedures
- -------- -----------------------
Evaluation of Disclosure Controls and Procedures
Regent is a development stage company with no revenues and during the period
covered by this annual report, our senior management had responsibility for our
internal controls and procedures over our financial reporting. Regent's
senior management, has evaluated the effectiveness of the Company's disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Act of 1934)
as of the end of the period covered by this report. As a result, the chief
financial officer has concluded that the evaluation of such controls and proce-
dures are effective to provide reasonable assurance that the information
required to be disclosed in the reports the Company files or submits under the
Securities Exchange Act of 1934 is (i) recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and (ii) accumulated and communicated to
management, including the Company's principal executive and principal financial
officers or persons performing such functions, as appropriate, to allow timely
decisions regarding disclosure. 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 control issues and instances of fraud, if
any, within a company have been detected.
Management's report on Internal Control over financial reporting
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) and 15d-15f under
the Securities Exchange Act of 1934. Regent's internal control over financial
reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with accounting principles generally
accepted in the United States of America. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstate-
ments. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes
in conditions or because the degree of compliance with policies or procedures
may deteriorate.
Under the supervision and with the participation of our management, including
our executives, we conducted an assessment of the effectiveness of our internal
control over financial reporting as of December 31, 2009. The assessment was
based on criteria established in the framework Internal Control-Integrated
Framework, issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this assessment, management concluded that our internal
control over financial reporting was effective as of December 31, 2009. This
annual report does not include an attestation report of the Company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's independent
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this annual report.
Changes in internal control over financial reporting
There were no changes in our internal control over financial reporting which
were identified in connection with the evaluation required by Rule 13a-15(d) and
Rule 15d-15(d) of the Exchange Act that occurred during the period covered by
this report that has materially affected, or reasonably likely to materially
affect, the Company's internal control over financial reporting.
Item 9B. Other Information
- -------- -----------------
None
25
PART III
--------
Item 10. Directors, Executive Officers and Corporate Governance
- -------- ------------------------------------------------------
The Executive Officers and Directors of the Company and their respective ages as
of December 31, 2009 are as follows:
DIRECTORS
Name of Director: Age: Director Since Other directorships held
- ----------------- ---- -------------- ------------------------
David A. Nelson 61 June, 2003 MacuCLEAR, Inc.
Philip G. Ralston 64 June, 2007 MacuCLEAR, Inc.
David L. Ramsour 69 June, 2007 None
EXECUTIVE OFFICERS
Executive Officer: Age: Office: Officer Since
- ------------------ ---- ------- -------------
David A. Nelson 61 Chairman, President, CEO, CFO June, 2003
Chairman & CEO, Regent GLSC April, 2007
Philip G. Ralston 64 President, Regent GLSC April, 2007
David A. Nelson, has been a licensed attorney in Texas since 1978. He started
his professional career with Republic National Bank of Dallas in 1971. In 1983,
he became Corporate Counsel for Richardson Energy Corporation and in 1984 formed
his own oil and gas company with the primary focus on natural gas production and
gas gathering. From 1989 to 1992, he was the Chairman and CEO of Intramerican
Oil and Minerals, a public oil and gas company. He presided over the expansion
of oil and gas proven reserves for 4 consecutive years, and the company's first
three years of profitability in ten years of previous operations. Acquisitions
included oil and gas production and gas gathering systems in Texas, Oklahoma and
Louisiana. Intramerican became the predecessor company to a NYSE company. From
1992 through 1998, Mr. Nelson was President of Regent Technologies, Inc., also a
publicly traded company. During his tenure, Regent was active in the internet
services and connectivity business. In 1998, Regent's internet assets were
acquired by Allegiance Telecom, a NYSE company and Mr. Nelson returned to the
financial services business. From January 1999 to September 2001, Mr. Nelson was
President, CEO and Chairman of Concord Trust Company, a Texas regulated trust
company. He holds various investment fiduciary designations and NASD licenses.
He is a graduate of Baylor University with BA and JD degrees and a Master of
Computing Sciences from Texas A & M University.
26
Philip G. Ralston has spent thirty plus years in the life science industry as a
senior executive, inventor, company founder, venture capitalist, and business
coach. Phil received a solid foundation in product development and technology
commercialization at Baxter Healthcare, as Director of Biomedical Engineering,
a corporate level group focused on strategic projects that advanced the state-
of-the-art. Since leaving Baxter, Mr. Ralston has started four companies, has
been the senior operating executive of two mid-size medical device companies,
and for the last decade has been a business coach for several Fortune 500, mid-
size and start-up clients. Mr. Ralston has a Master of Business Administration
from the Kellogg School of Management at Northwestern University, and a Bachelor
of Science Degree in Chemistry from Brigham Young University. He is a charter
board member of the Medical Device Manufacturers Association and currently
serves on the advisory board of the Houston Technology Center and Medici
Biomedical Development Center.
David L. Ramsour, PhD, has served as a financial and economic strategist for the
past 35 years. He began his career as Vice President and International Economist
with First National Bank of Dallas and its holding company, First International
Bancshares. Dr. Ramsour subsequently joined Bank of Hawaii as Senior Vice
President and Chief Economist. At the Bank of Hawaii, Dr. Ramsour headed the
Bank's division assessing Fed policy, rates and credit and investment conditions
in the US, Europe, Asia and the Pacific, and provided portfolio, market and
project feasibility counsel for the Bank and its clients. Dr. Ramsour left
Bancorp Hawaii in 1995 to begin work on behalf of the Governor of Guam in the
development of an extensive industrial restructuring. Over the ensuing years, he
has worked as a consultant to a great number of US, Pacific and Asian corporate
and government enterprises and has spoken to international conferences there
and in Europe. Dr. Ramsour also served on various task forces and policy
committees including three-terms as a member of the American Bankers Association
Council of Economic Advisors in Washington, DC. Dr. Ramsour is a graduate of
Baylor University with a Bachelor and Master's degree and received his PhD in
international finance from the University of Texas at Dallas. He holds an NASD
Series 63 license.
Section 16(A) Beneficial Ownership Reporting Compliance
During the 2008 fiscal year there were no individuals who were required to
comply with the reporting requirements under Rule 16A-3 of the Exchange Act and
failed to do so.
Effective March 1, 2006, the Board of Directors adopted a Code of Ethics that
will apply to its principal executive officer, principal financial officer,
principal accounting officer and controller, or persons performing similar
functions.
At present, Regent does not maintain an audit committee, instead the Company's
management and board of directors is responsible to review all audit matters.
27
Item 11. Executive Compensation
- -------- ----------------------
The table below summarizes all compensation awarded to, earned by, or paid to
the executive officers of Regent by any person for all services rendered in any
capacity to Regent for the present fiscal year, reported at book value.
Currently, our officers and/or directors are not being compensated for their
services during the development stage of our business operations except through
Restricted Stock Awards. See Note 9 to the NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.
The officers and directors are reimbursed for any out-of-pocket expenses they
incur on our behalf. In addition, in the future, we may approve payment of
salaries for our officers and directors, but currently, no such plans have been
approved. We also do not currently have any benefits, such as health insurance,
life insurance or any other benefits available to our employees.
In addition, none of our officers, directors or employees are party to any
employment agreements.
SUMMARY COMPENSATION TABLE
Change in
Pension
Value and
Non-Equity Nonqualified
Incentive Deferred All
Name and Restricted Plan Compen- Other
Principal Stock Option Compen- sation Compen-
Position Year Salary Bonus Awards Awards sation Earnings sation Totals
- ------------ ---- ------ ----- ------ ------ ------ -------- ------ ------
David A. 2009 0 0 $ 10,000 0 0 0 0 0
Nelson 2008 0 0 $ 10,000 0 0 0 0 0
President, 2007 0 0 $ 5,000 0 0 0 0 0
CEO, CFO,
Director
David L. 2009 0 0 $ 1,500 0 0 0 0 0
Ramsour 2008 0 0 $ 1,500 0 0 0 0 0
Secretary, 2007 N/A N/A $ 1,167 N/A N/A N/A N/A N/A
Director
Philip G. 2009 0 0 $ 1,500 0 0 0 0 0
Ralston, 2008 0 0 $ 1,500 0 0 0 0 0
Director 2007 N/A N/A $ 1,306 N/A N/A N/A N/A N/A
Douglas R. 2009 0 0 $ 1,500 0 0 0 0 0
Baum, 2008 0 0 $ 1,500 0 0 0 0 0
Subsidiary 2007 N/A N/A $ 1,000 N/A N/A N/A N/A N/A
Director
28
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
Option Awards Stock Awards
----------------------------------------------------------------- ----------------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Plan Market or
Awards: Payout
Equity Number of Value of
Incentive Number Unearned Unearned
Plan Awards; of Market Shares, Shares,
Number of Number of Number of Shares Value of Units or Units or
Securities Securities Securities or Units Shares or Other Other
Underlying Underlying Underlying of Stock Units of Rights Rights
Unexercised Unexercised Unexercised Option Option That Stock That That That
Options (#) Options (#) Unearned Exercise Expiration Have Not Have Not Have Not Have Not
Name Exercisable Unexercisable Options (#) Price Date Vested(#) Vested Vested Vested
- ---- ----------- ------------- ----------- ----- ---- --------- ------ ------ ------
David A. 0 0 0 0 0 0 0 0 0
Nelson
David L. 0 0 0 0 0 83,333 $ 83 0 0
Ramsour
Philip G. 0 0 0 0 0 69,444 $ 69 0 0
Ralston
Douglas R. 0 0 0 0 0 100,000 $100 0 0
Baum
DIRECTOR COMPENSATION
Change in
Pension
Value and
Fees Non-Equity Nonqualified
Earned Incentive Deferred
Paid in Stock Option Plan Compensation All Other
Name Cash Awards Awards Compensation Earnings Compensation Total
---- ---- ------ ------ ------------ -------- ------------ -----
David A. 0 $10,000 0 0 0 0 0
Nelson
David L. 0 $1,500 0 0 0 0 0
Ramsour
Philip G. 0 $1,500 0 0 0 0 0
Ralston
Douglas R. 0 $1,500 0 0 0 0 0
Baum
29
Item 12. Security Ownership of Certain Beneficial Owners and Management and
- -------- ----------------------------------------------------------------------
Related Stockholder Matters
---------------------------
Principal Shareholders
As of December 31, 2009, there are 8,487,456 shares of Common Stock issued and
outstanding. The following table utilizes the outstanding number as the
denominator in setting forth information as of the date of this Annual Report
concerning: (i) each person who is known by us to own beneficially more than
5% of our outstanding Common Stock; (ii) each of our executive officers,
directors and key employees; and (iii) all executive officers and directors
as a group. Common Stock not outstanding but deemed beneficially owned by
virtue of the right of an individual to acquire shares within sixty (60) days
is treated as outstanding only when determining the amount and percentage of
Common Stock owned by such individual. Except as noted, each person or entity
has sole voting and sole investment power with respect to the shares of Common
Stock shown.
Title of Class Name and Address of Amount and Percent of
Beneficial Owner Nature of Class
beneficial
Ownership
Common Stock David A. Nelson (1) 4,465,798 52.6%
18 St. Laurent Place
Dallas, Texas 75225
Common Stock Philip G. Ralston, Jr. (2) 416,667 4.9%
7101 Lake Mead Court
Frisco, Texas 75034
Common Stock David L. Ramsour (3) 430,556 5.1%
6807 Hyde Park
Dallas, Texas 75231
Common Stock Douglas R. Baum (4) 400,000 4.7%
5000 Raffee Cove
Austin, Texas 78731
Common Stock All officers and directors (5) 5,713,021 67.3%
as a group
(1) David A. Nelson is the President, Chief Executive Officer, Chief Financial
Officer and a director of Regent. He is also the CEO and a director of Regent
GLSC. At the date of the filing of this report. This figure includes:
(i) 3,988,834 restricted shares and 213,281 unrestricted shares held of record
or beneficially by David A. Nelson; (ii) 16,667 restricted shares and 70,835
unrestricted shares held of record by spouse Elaine E. Nelson; and (iii) 176,181
held directly or beneficially in brokerage accounts. Mr. Nelson also holds a
voting agreement with the right to vote an additional 150,000 shares.
30
(2) Philip G. Ralston is a director of Regent and the President and a director
of Regent GLSC. All shares are restricted and held directly.
(3) David L. Ramsour is a director and the Secretary of Regent. All shares are
restricted and held directly.
(4) Douglas R. Baum is a director of Regent GLSC, a subsidiary of Registrant.
All shares are restricted and held directly.
(5) This figure includes the shares of the officers and directors. There are no
outstanding options or warrants as of the date of the filing of this report.
Item 13. Certain Relationships and Related Transactions, and Director
- --------- ---------------------------------------------------------------------
Independence
------------
In May 2007, as an inducement for GHI, Ltd. to enter into the purchase of 41,250
shares of MacuCLEAR Preferred Stock from Regent GLSC, the President of Regent
GLSC pledged 100,000 shares of common stock of MacuCLEAR as a security which
security was released in September 2007. See Note 13 in NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
Item 14. Principal Accounting Fees and Services
- -------- --------------------------------------
The following information concerns the aggregate fees billed for each of the
last two fiscal years for professional services rendered by Turner, Stone &
Company, L.L.P., the principal accountants for Regent.
2009 2008
---- ----
1. Audit Fees $18,662 $30,735
2. Audit-Related Fees 0 0
3. Tax Fees 0 0
4. All Other Fees* 0 0
- ----------
* There were no other fees billed to Regent by its principal accountant for
the last two fiscal years for any products or services not covered in items
1, 2 or 3 above.
Although Regent has three directors, the Company does not maintain a standing
audit committee. Although the Company does not maintain an audit committee, all
professional services are pre-approved by the Board of Directors, including
the audit fees listed in item 1. The balance of the services described in
items 2 or 3 above are pre-approved only to the extent that discussions are held
with the principal independent accountant for Regent prior to the commencement
of any services by the accountant, during which time services to be performed by
the accountant on behalf of Regent were outlined.
31
PART IV
-------
Item 15. Exhibits and Financial Statement Schedules
- -------- ------------------------------------------
(a) 1. Financial Statements. The following consolidated financial statements
---------------------
and supplementary financial information are filed as part of this report:
Regent Technologies, Inc. and Subsidiary
Management's Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm dated
February 26, 2010 - Turner, Stone & Company, LLP
Consolidated Balance Sheets - December 31, 2009 and 2008
Consolidated Statements of Income for the Years Ended December 31, 2009
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 2009
Consolidated Statements of Cash Flows for the Years Ended December 31,
2009
Notes to Consolidated Financial Statements
2. Financial Statement Schedules. The following financial statement
------------------------------
schedule is filed as part of this report:
Financial statement schedules not included in this annual report on
Form 10-K have been omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
3. Exhibits.
---------
The exhibits filed in this report are listed in the Exhibit Index.
(b) Exhibits. See (a)3 above.
---------
(c) Financial Statement Schedules. See (a)2 above.
------------------------------
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
REGENT TECHNOLOGIES, INC.
By: /s/ DAVID A. NELSON
--------------------------------
David A. Nelson, President,
CEO and Principal Accounting
Officer
Date: March 10, 2010
--------------------------------
32
EXHIBIT INDEX
Exhibit Description of Exhibit
No.
3.1 Certificate of Incorporation. Incorporated by reference to the Company's
Registration Statement which became effective November 18, 1980 (File
Number 2-69087).
3.2 Restated Articles of Incorporation of Regent Technologies, Inc.;
Incorporated by references to Regent Petroleum Corporation Proxy
Statement for Special Meeting of Shareholders held January 26, 1988,
dated December 30, 1987.
3.3 Bylaws of Regent Technologies, Inc. as amended; Incorporated by reference
to Regent Petroleum Corporation Proxy Statement for Special Meeting of
Shareholders held January 26, 1988, dated December 30, 1987.
3.4 Code of Ethics; adopted by a resolution of the Board of Directors dated
March 14, 2006 with an effective date of March 1, 2006.
21 List of subsidiaries - Regent GLSC Technologies, Inc.
31.1 Certification of Chief Executive Officer and Principal Accounting Officer
32.1 Certification of Chief Executive Officer and Principal Accounting Officer