SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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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 quarterly period ended March 31, 2011
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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)
214-694-2227
(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
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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
--- ---
(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 No X
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The number of outstanding shares of the issuer's only class of common stock as
of May 10, 2011 was 22,360,233.
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FORM 10-Q
March 31, 2011
Page Nos.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) 1
at March 31, 2011 and December 31, 2010 (Audited)
Consolidated Statements of Operations (Unaudited) 2
For the Three Months Ended March 31, 2011 and 2010
For the Period from Inception (January 1, 1999) to
March 31, 2011
Consolidated Statements of Cash Flows (Unaudited) 3
For the Three Months Ended March 31, 2011 and 2010
For the Period from Inception (January 1, 1999) to
March 31, 2011
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
Item 4. Controls and Procedures 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 1A. Risk Factors 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits 13
SIGNATURE 14
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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REGENT TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
March 31, December 31,
2011 2010
------------------ ------------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash in bank $ 5,610 $ 24,790
Accounts receivable 2,722 2,046
--------- ---------
Total Current Assets 8,332 26,836
PROPERTY AND EQUIPMENT (Net of Accumulated Depletion
and Depreciation):
Oil and natural gas properties, full cost accounting
Unproved properties 3,080 3,080
Proved properties 82,020 82,020
Net profits production interest 5,695 5,695
Equipment and other fixed assets 1,301 1,388
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Total property and equipment, net 92,096 92,183
Investment (Note 4) 575,992 575,992
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Total Assets $ 676,420 $ 695,011
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,453 $ 4,247
Notes payable - related parties 40,800 43,700
Accrued interest payable - 718
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Total Current Liabilities 42,253 48,665
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Note payable - related parties, less current portion 34,150 40,950
Asset retirement obligation 5,200 5,200
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Total liabilities 81,603 94,815
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY:
Convertible Preferred stock, $.10 par value, 1,000,000
shares authorized, 99,500 shares issued
and outstanding, Regent Natural Resources Co. 9,950 9,950
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, 22,360,233 shares
issued and outstanding 223,602 223,602
Paid-in capital in excess of par 3,629,141 3,629,141
Accumulated deficit (including $80,123 net income
accumulated since reentering the development stage) (3,267,876) (3,262,497)
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594,817 600,196
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 676,420 $ 695,011
========= =========
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 MONTHS ENDED MARCH 31, 2011 and 2010
AND FOR THE PERIOD JANUARY 1, 1999
THROUGH MARCH 31, 2011
(UNAUDITED)
Cumulative
Since Re-entering
For the Three Months Ended March 31, Development Stage
2011 2010 January 1, 1999
------------ ------------ ------------
Revenues $ 6,521 $ - $ 8,567
Operating expenses:
General and administrative ( 10,907) ( 7,168) (357,936)
Depreciation, depletion and accretion ( 87) - ( 355)
--------- --------- ---------
Operating loss ( 4,473) ( 7,168) (349,724)
--------- --------- ---------
Other income and (expense):
Gain on fair value measurement - - 307,726
Transfer in fair value measurement - ( 9,304) ( 44,966)
Gain on debt extinguishment - - 145,340
Gain on sale of investment - - 101,331
Stock grant expense - - ( 41,700)
Interest net ( 906) 607 ( 37,884)
--------- --------- ---------
Total other income (expense) ( 906) ( 8,697) 429,847
Income (loss) from continuing operations
before income taxes ( 5,379) ( 15,865) 80,123
Provisions for income taxes - - -
--------- --------- ---------
Net income (loss) $ ( 5,379) $ ( 15,865) $ 80,123
========== ========== =========
Net income (loss) per common share
(basic and diluted) $ - $ -
========== ==========
Weighted Average Shares Outstanding 22,360,233 8,487,456
========== ==========
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 THREE MONTHS ENDED MARCH 31, 2011 and 2010
AND FOR THE PERIOD JANUARY 1, 1999
THROUGH MARCH 31, 2011
(UNAUDITED)
Cumulative
Since Re-entering
For the Three Months Ended March 31, Development Stage
2011 2010 January 1, 1999
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $( 5,379) $( 15,865) $ 80,123
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation 87 - 4,117
Gain from fair value measurement - - (307,726)
Change in fair value measurement - 9,304 44,966
Gain from extinguishment of debt - - (145,340)
Gain from sale of investment - - (101,331)
Note issued for settlement expenses - - 20,000
Common stock issued for services - - 46,700
Common stock issued in legal settlement - - 14,000
(Increase) decrease in accounts receivable ( 676) - ( 2,722)
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 ( 2,794) ( 1,892) 32,783
Increase (decrease) in accrued interest payable ( 718) 185 24,737
--------- --------- ---------
Net Cash Used In Operating Activities ( 9,480) ( 8,268) (203,034)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments - - (350,000)
Capital expenditures for oil and gas interests - - ( 10,000)
Capital expenditures for equipment - ( 1,786) ( 1,656)
Proceeds from sale of investments - - 139,600
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Net Cash Used In Investing Activities - ( 1,786) (222,056)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable - related party - - 110,055
Proceeds from sale of Preferred Stock - 25,000 427,500
Proceeds from note payable - stockholder - - 20,000
Repayments of notes payable ( 9,700) - (126,855)
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Net Cash Provided By Financing Activities ( 9,700) 25,000 430,700
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Net Increase (Decrease) in Cash ( 19,180) 14,946 5,610
Cash At Beginning Of Period 24,790 5,297 -
--------- --------- ---------
Cash At End of Period $ 5,610 $ 20,243 $ 5,610
========= ========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
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Issuance of common stock upon conversion
of notes payable $ - $ - $ 193,840
Common stock issued for oil and gas interests $ - $ - $ 135,000
Cancellation of note payable for oil and gas interests $ - $ - $( 70,000)
Note payable as partial consideration for oil and gas
interests $ - $ - $ 81,750
Oil and gas assets acquired $ - $ - $ 80,795
Asset retirement obligation $ - $ - $ 5,200
Note receivable as partial consideration for
purchase of preferred stock $ - $ - $ 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
Common stock returned in failed consideration
and debt settlement $ - $ - $ 510,960
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
Note 1. ORGANIZATION AND NATURE OF OPERATIONS
Regent Technologies, Inc. (the "Company" or "Regent"), formerly Regent Petroleum
Corporation, was incorporated under the laws of the State of Colorado on January
18, 1980. During 1999, the Company's subsidiary companies were divested in the
ordinary course of business and effective January 1, 1999, the Company 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 No. 915, "Deve-
lopment Stage Activities" ("ASC 915") of the "Financial Accounting Standards
Codification ("Codification" or "ASC") and the Hierarchy of Generally Accepted
Accounting Principles."
During the third quarter of 2010, Regent restructured its management team and
refocused its core business objectives and strategy. The Company's subsidiary
was approved for a name change on September 30, 2010 to Regent Natural Resources
Co. ("Regent NRCo"). We operate through two business divisions, the Energy Tech-
nology Division and the Natural Resources Division. Regent NRCo is a Texas based
independent exploration and production company engaged in the acquisition and
development of producing oil and natural gas properties.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Presentation
--------------------------------------------
The consolidated financial statements include the accounts of the Company and
our wholly-owned subsidiary, Regent NRCo. All significant intercompany balances
and transactions have been eliminated. Our financial statements are prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of our financial statements requires management to make
estimates and assumptions that affect the reported assets, liabilities, revenues
and expenses. These estimates are based on information that is currently avail-
able to us and on various assumptions that we believe to be reasonable under the
circumstances. Actual results could differ from those estimates under different
assumptions and conditions.
The significant accounting policies of the Company are described in Note 2 to
the 2010 consolidated financial statements of the 2010 Form 10-K, and the criti-
cal accounting policies and estimates are described in Management's Discussion
and Analysis included in Item 7 of the 2010 Form 10-K and in Item 2 of this
quarterly report. In management's opinion, the accounting policies and estimates
presented in the 2010 Form 10-K have not changed and therefore the unaudited
consolidated financial statements herein should be read in conjunction with the
Company's audited report on Form 10-K for the period ended December 31, 2010,
which was previously filed with the Securities and Exchange Commission.
4
New Accounting Pronouncements
-----------------------------
In December 2010, the FASB issued ASU No. 2010-29, Business Combinations (Topic
805): Disclosure of Supplementary Pro Forma Information for Business Combina-
tions. ASU No. 2010-29 amends ASC Topic 805 and reflects the decision reached in
Emerging Issues Task Force ("EITF") Issue No. 10-G. The amendments in this ASU
specify that if a public entity presents comparative financial statements, the
entity should disclose revenue and earnings of the combined entity as though the
business combination(s) that occurred during the current year had occurred as of
the beginning of the comparable prior annual reporting period only. The amend-
ments expand the supplemental pro forma disclosures to include a description of
the nature and amount of material, nonrecurring pro forma adjustments directly
attributable to the business combination included in the pro forma revenue and
earnings. ASU No. 2010-29 becomes effective prospectively for the Company with
the reporting period beginning April 1, 2011. The Company does not anticipate
that adoption of this new guidance will have a material impact on its financial
statements for the current and prior periods.
There were other accounting standards and interpretations issued in 2010, all of
which have been determined to not be applicable or significant by management and
are not expected to have a material impact on the financial position, operations
or cash flows.
Note 3. 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.
Note 4. FAIR VALUE OF FINANCIAL INSTRUMENTS
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.
5
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. Cash, accounts payable, and other current lia-
bilities are carried at book value amounts which approximate fair value to the
short-term maturity of these instruments.
We used the following fair value measurements for certain of our assets and lia-
bilities during the current period and for the year ended December 31, 2010:
Level 3 Classification: Investment - MacuCLEAR Preferred Stock
---------------------------------------------------------------
As of this quarterly filing, the Company's subsidiary, Regent NRCo, held 123,128
shares of MacuCLEAR Preferred Stock, of which 95,858 shares are beneficially
held for the holders of subsidiary Preferred Stock. Under the process defined
for Level 3 assets, the Company has determined the fair value for the MacuCLEAR
Preferred Stock held directly changed to $12.00 per share at December 31, 2010
based on new sales of MacuCLEAR Series A-1 Preferred Stock for $12.00 per share
during October 2010. The Series A-1 Preferred Stock has the same designations
as the Series A Preferred Stock held by the Company. The Company's beneficial
holdings have not been increased beyond the original cost of $2.595 per share.
The following tables present the fair value measurement of the holdings of Macu-
CLEAR Preferred Stock, beneficial and direct, as of March 31, 2011 and December
31, 2010:
Fair Value Measurements Using
--------------------------------------
March 31, 2011 Level 1 Level 2 Level 3
-------------- ----------- ---------- -----------
MacuCLEAR Preferred Stock at fair value ........... $ - $ - $ 575,992
December 31, 2010
-----------------
MacuCLEAR Preferred Stock at fair value ........... $ - $ - $ 575,992
Note 5. ASSET RETIREMENT OBLIGATION
The Company accounts for asset retirement obligations based on the guidance of
ASC 410 which addresses accounting and reporting for obligations associated with
the retirement of tangible long-lived assets and the associated asset retirement
costs. ASC 410 requires that the fair value of a liability for a retirement ob-
ligation be recorded in the period in which it is incurred and the corresponding
cost capitalized by increasing the carrying amount of the related long-lived
asset. The liability is accreted to its then present value each period, and the
capitalized cost is depreciated over the estimated useful life of the related
asset. We have included estimated future costs of abandonment and dismantlement
in our amortization base and amortize these costs as a component of our depreci-
ation, depletion, and accretion expense. There was no change to the Company's
asset retirement obligaton for the current period.
6
Note 6. NOTES PAYABLE
Beginning in 2005, the Company borrowed various amounts for general corporate
purposes under promissory notes to NR Partners. During the current period, all
amounts owed to NR Partners were paid. The need for future borrowings from NR
Partners has not been determined as of the date of this report.
In connection with the net profits production interest acquisition in December
2010, the Company's subsidiary executed a promissory note for $81,750 to SIG
Partners, LC. The interest rate on the note is 7% with principal payments of
$3,400 per month beginning February 2011. The promissory note is secured by the
interest conveyed. The monthly payments for this period have been paid.
Note 7. SHAREHOLDERS EQUITY
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 the date of this filing,
there is no preferred stock outstanding and there are 22,360,233 shares of com-
mon stock outstanding.
Holders of Regent's common stock are entitled to one vote for each share on all
matters submitted to a stockholder vote. Holders of common stock do not have
cumulative voting rights. Therefore, holders of a majority of the shares of
common stock voting for the election of directors can elect all of the direc-
tors. Holders of the Regent's common stock representing a majority of the vot-
ing power of Regent's capital stock issued, outstanding and entitled to vote,
represented in person or by proxy, are necessary to constitute a quorum at any
meeting of stockholders. A vote by the holders of a majority of Regent's out-
standing shares is required to effectuate certain fundamental corporate changes
such as liquidation, merger or an amendment to Regent's articles of incorpo-
ration.
Holders of Regent's common stock are entitled to share in all dividends that
the board of directors, in its discretion, declares from legally available
funds. In the event of liquidation, dissolution or winding up, each outstand-
ing share entitles its holder to participate pro rata in all assets that remain
after payment of liabilities and after providing for each class of stock, if
any, having preference over the common stock. Regent's common stock has no
pre-emptive rights, no conversion rights and there are no redemption provisions
applicable to the Regent's common stock.
Stock Options
-------------
No options, warrants or similar rights are outstanding as of this report date.
7
Subsidiary Preferred Stock
--------------------------
On April 18, 2007, our subsidiary 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 at $5.00 per share. The stock was sold
under a private placement offering to sell $50,000 units convertible into 10,000
shares of common stock of the subsidiary plus 4,800 shares of common stock of
MacuCLEAR common stock. Including the initial sales, our subsidiary has accepted
purchase agreements from additional investors for $497,500. If all of the uncon-
verted shares of the Series A Preferred Stock were to be converted to common
stock of the subsidiary, the Company's ownership of the subsidiary would be di-
luted to approximately 90%.
Note 8. RELATED PARTY TRANSACTIONS
NR Partners, a partnership comprised of Mr. Nelson and director David Ramsour as
partners have loaned various amounts under promissory notes to the Company since
2005. Also, pursuant to an acquisition in December, 2010, a note payable to Mr.
Nelson was established (see Note 6). Under the 2010 acquisition agreement, the
seller, Signature Investor Group, LC, dba SIG Partners, LC, is the operator of
the oil and gas interests acquired which is a company controlled by Mr. Nelson.
There were no new related party transactions during the current period.
Note 9. COMMITMENTS AND CONTINGENCIES
There were no changes to our commitments and contingencies for the three month
period ended March 31, 2011.
Note 10. SUBSEQUENT EVENTS
Effective April 5, 2011, Regent NRCo acquired a .17% overriding royalty interest
in 153 acres in Coke County, Texas. In addition, Regent NRCo received a $2,000
payment, all as part of the agreement assigned to Regent NRCo in the acquisition
executed with Signature Investor Group, LC, dated September 29, 2010, and incor-
porated herein by reference to the Company's Report on Form 10-K for the period
ended December 31, 2010.
Item 2. Management's Discussion and Analysis of Financial Condition
------- -----------------------------------------------------------
and Results of Operations
-------------------------
The following discussion is intended to assist in understanding our results of
operations and our financial condition. This item should be read in conjunction
with management's discussion and analysis contained in our Annual Report on Form
10-K for the year ended December 31, 2010 filed with the Securities and Exchange
Commission ("SEC") on March 31, 2011. Our consolidated financial statements and
the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q
contain additional information that should be referred to when reviewing this
material. Certain statements in this discussion may be forward-looking. These
forward-looking statements involve risks and uncertainties, which could cause
actual results to differ from those expressed in this report. A glossary of the
meanings of the oil and gas industry terms used in this Management's discussion
and analysis follows the "Results of operations" table in this Item 2.
8
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q and other reports filed by Regent Technologies, Inc. ("Regent")
from time to time with the Securities and Exchange Commission (collectively the
"Filings") contain or may contain forward looking statements and information
that are based upon beliefs of, and information currently available to, Regent's
management as well as estimates and assumptions made by Regent's management.
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.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Management cautions that these forward-looking statements are subject to many
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". We undertake no obligation to update a forward-looking statement to
reflect subsequent events, changed circumstances, or the occurrence of unantici-
pated events which included, among others, the following:
-- difficult and adverse conditions in the domestic and global economies;
-- changes in domestic and global demand for oil and natural gas;
-- volatility in the prices we receive for our oil and natural gas;
-- the effects of government regulation, permitting and other legalities;
-- future developments with respect to the reserves on our properties;
-- uncertainties about the estimates of our oil and natural gas reserves;
-- our ability to increase our production through development;
-- drilling and operating risks;
-- the availability of equipment, such as drilling rigs and pipelines;
-- changes in our drilling plans, related budgets and liquidity;
-- other factors discussed under "Risk Factors" in Item 1A of the Company's
Form 10-K filed with the SEC for the period ended December 31, 2010.
9
Other unknown or unpredictable factors may cause actual results to differ mater-
ially from those projected by the forward-looking statements. Unless otherwise
required by law, we undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. We urge readers to review and consider disclosures we make
in this and other reports. See in particular our reports on Forms 10-K, 10-Q and
8-K subsequently filed from time to time with the SEC.
In this Form 10-Q, references to "we," "our," "us," the "Company," or "Regent"
refer to Regent Technologies, Inc., a Colorado corporation, and Regent's wholly
owned subsidiary, Regent Natural Resources Co., a Texas corporation, is referred
to as "Regent NRCo."
General and Business Overview
-----------------------------
Regent Technologies, Inc., a Colorado corporation, is listed on the Pink Sheets
under the symbol "REGT". We are a technology-focused company that utilizes
emerging proprietary technologies for our involvement in the energy industry. We
have rights to proprietary technologies which we believe provide us an advantage
in the industry. Our business strategy is to exploit these advantages and gene-
rate long-term value for our shareholders and partners. We operate through two
business divisions:
-Energy Technology Division
-Natural Resources Division
Our Mission is to accomplish our business strategy while maintaining the highest
standards of integrity and professionalism wherever we operate and promoting re-
sponsible energy now and in the future. Our Vision is to employ new technologies
to maximize the production of petroleum resources in an efficient and environ-
mentally safe manner while exploring new technologies for the increased use of
renewable energy.
Oil and Gas Strategy
--------------------
Our long term oil and gas development strategy is to increase profit margins and
concentrate on obtaining producing properties with low cost operations and with
the potential for long-lived production. We also focus on the acquisition of
royalties in areas with exploration and development potential.
Hill County, Texas
Pursuant to the Regent NRCo oil and gas property acquisitions from SIG Partners,
LC ("SIG") during the third and fourth quarters of 2010, we are working with the
operator to test the Austin Chalk formation in the wellbore on the 16 acre lease
acquired. If the well is not commercial, the operator has plans to deepen the
well to 1,300 feet and test the Woodbine formation. Both formations are produc-
tive in the area and the well acquired has produced 16,000 barrels of oil from
the Austin Chalk. Regent NRCo has a 100% working interest and a 75% net revenue
interest in the lease. The operator of the lease and the operator of the net
profits interest acquired by Regent NRCo on an adjacent lease is SIG (see Note 8
herein, Notes to Interim Consolidated Financial Statements).
10
Coke County, Texas
Effective April 5, 2011, Regent NRCo acquired a .17% overriding royalty interest
in 153 acres in Coke County, Texas. The acreage is currently being permitted to
drill a wildcat well, with plans to drill two additional wells. The proposed
initial location will be drilled to 6,700 feet to adequately test all potential
formations and is projected to reach the Gardner limestone. The main targets in
the prospect are the Strawn and Palo Pinto reef buildups which will be reached
between 5,750 and 6,500 feet. It is expected that the prospect will encounter at
least 300 feet of porous reef facies over an area of 115 acres. The oil and gas
potential is 600,000 barrels of oil and 1.5 billion cubic feet of gas assuming
20 feet of oil with a recovery factor based on nearby fields. Possible back out
potential exists in the Cisco sandstone and limestone intervals as well as Wolf-
camp sandstone. The Wolfcamp produced over 11,500 barrels of oil in a well 1.3
miles south of our proposed location from perforations between 3,770 and 3,840
feet.
We are continuing to review projects in which we may participate. The cost of
such projects would be funded through borrowings and, if appropriate, sales of
common or preferred stock of the Company or our subsidiary or partial sales of
our investment in MacuClear Preferred Stock.
Liquidity and Capital Resources
-------------------------------
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.
Crude oil and natural gas prices have fluctuated significantly in recent years.
The effect of declining prices on the oil business can be significant. Lower
product prices will reduce our cash flow from operations and diminish the pre-
sent value of our oil and gas reserves. Lower product prices also offer less
incentive to assume the development risks that are inherent in our business. The
volatility of the energy markets makes it extremely difficult to predict future
oil and natural gas price movements with any certainty. For example, the average
oil price for West Texas Intermediate ("WTI") for three months ended March 31,
2011 was $93.54 compared to $78.64 for the three months ended March 31, 2010.
During the first quarter, the average oil price for the production under our net
profits interest agreement was $87.76. During the quarter, we used $9,480 from
operating activities primarily for professional fees as compared to $8,268 for
the same period in 2010. Also, during the current period, we applied $9,700 to
debt service. As of March 31, 2010, the Company had total assets of $676,420 and
total liabilities of $81,603, of which $74,950 is a promissory note to a related
party. Management is of the opinion that cash flow from operations and funds
available from financing will be sufficient to provide needed liquidity through
this fiscal year.
The Company is not performing any product research and development at this time
and it is not expected to incur significant changes in the number of employees.
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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.
Results of Operations
---------------------
Revenues
The Company had $6,521 of revenue for the first quarter ended March 31, 2011 as
compared to none for the period ended March 31, 2010. Net loss from operations
was $4,473 for the quarter ended March 31, 2011, as compared to a net loss from
operations of $7,168 for the quarter ended March 31, 2010. The improvement was
due to the Company's new oil and gas operations.
Operating Expenses
Operating expenses are principally insurance, accounting and engineering fees.
General and administrative expenses were $10,907 for the three months ended
March 31, 2011 compared to $7,168 for the three months ended March 31, 2010.
Interest expense was $906 for the three months ended March 31, 2011 compared to
net interest income of $607 for the same period in 2010. The increase in general
and administrative expenses for the current period was due to our outlay for
directors and officers liability insurance which was not an expense for 2010.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
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There have been no material changes in market risk from the information provided
in our Annual Report on Form 10-K as of December 31, 2010.
Item 4. Controls and Procedures
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Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures to ensure that the information we
must disclose in our filings with the SEC is recorded, processed, summarized and
reported on a timely basis. At the end of the period covered by this report, our
principal executive and principal financial officers reviewed and evaluated the
effectiveness of our disclosure controls and procedures, as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e). Based on such evaluation, such officers con-
cluded that, as of March 31, 2010, our disclosure controls and procedures were
effective to ensure that information we are required to disclose in the reports
that we file under the Act is disclosed within the time periods specified in the
rules and forms of the SEC and are effective to ensure that information required
to be disclosed by us is accumulated and communicated to them to allow timely
decisions regarding required disclosure.
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Changes in Internal Control over Financial Reporting
No changes in the Company's system of internal control over financial reporting
occurred during the most recent fiscal quarter that have materially affected, or
are reasonably likely to materially affect, internal control over financial
reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
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The Company is not aware of any pending claims or assessments, that may have a
material adverse impact on Regent's financial position or operations.
Item 1A. Risk Factors.
-------- -------------
The discussion in Part I, "Item 1A. Risk Factors." in the Company's 2010 Form
10-K, of the risk factors which could materially affect the Company's business,
or future results, should be carefully considered. The risks described in the
Form 10-K 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. Changes in Securities
------ ---------------------
None.
Item 3. Defaults Upon Senior Securities
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None.
Item 4. Removed and Reserved
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Item 5. Other Information.
------- ------------------
None.
Item 6. Exhibits
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The exhibits listed below are filed herewith.
Exhibit
Number Description of Exhibit
------ ----------------------
31.1 Certification of C.E.O. and Principal Accounting Officer Pursuant to
Rule 13a-14(a) of the Securities Exchange Act of 1934
32.1 Certification of C.E.O. and Principal Accounting Officer Pursuant to
18 U.S.C. Section 1350
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SIGNATURE
In accordance with the requirements of the Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: May 11, 2011 REGENT TECHNOLOGIES, INC.
(Registrant)
By: /s/ David A. Nelson
---------------------------------------
David A. Nelson, Chief Executive Officer
(Principal Financial and Accounting Officer)
14