SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Fiscal Year ended June 30, 2000
Commission File No. 000-26687
THE REGENCY GROUP, LIMITED
(Exact Name of Registrant as Specified in its Charter)
Nevada 88-0429812
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number
8930 E. Raintree Drive
Suite 100
Scottsdale, Arizona 85260
(Address of Principal Executive Offices) (Zip Code)
480-444-2014
(The Registrant's telephone number, including area code)
Securities Registered pursuant to section 12(b) of the act:
None
Securities Registered pursuant to section 12(g) of the act:
Common Stock, $0.001 par value per share
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) if the Securities Exchange Act of
1934 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 checkmark if disclosure of delinquent filers pursuant to item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in any definitive proxy or information
statements incorporated by reference in Part III if this form 10-K (SB) or any
amendment to this Form 10-KSB: [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based on the closing price per share of the common stock on
September 20, 2000 of $1.44, as reported on the OTCBB, was approximately $
17,145,360. Shares of common stock held by each officer and director and by each
person known to Regency Group, Limited who own 5% or more of the outstanding
common stock have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
As of September 20, 2000, the registrant had 23,306,500 shares of common
stock outstanding
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THE REGENCY GROUP, LIMITED
2000 ANNUAL REPORT ON FORM 10-KSB
TABLE OF CONTENTS
PART I
PAGE
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Item 1. Business.......................................................... 3
Item 2. Property.......................................................... 10
Item 3. Legal Proceedings................................................. 10
Item 4. Submission of Matters to a Vote of Security Holders............... 10
PART II
Item 5. Market for Common Equity and Related Stockholder's Matters........ 11
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 11
Item 7. Financial Statements.............................................. 16
Item 8. Changes in and Disagreements with Accountants and Financial
Disclosure....................................................... 29
PART III
Item 9. Directors, Executive Officers, Promoters, and Control Persons..... 30
Item 10. Executive Compensation ........................................... 30
Item 11. Security Ownership of Certain Beneficial Owners and Management.... 31
PART IV
Item 12. Exhibits, Financial Statement Schedules and Reports on Form 8-K... 33
Signatures ................................................................ 34
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PART I
ITEM 1. BUSINESS
WE MAKE MANY STATEMENTS IN THIS ANNUAL REPORT, SUCH AS STATEMENTS REGARDING
OUR PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS, WHICH ARE FORWARD LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION
21E OF THE EXCHANGE ACT. WE MAY IDENTIFY THESE STATEMENTS BY THE USE OF WORDS
SUCH AS "BELIEVE", "EXPECT", "ANTICIPATE", "INTEND", "PLAN" AND SIMILAR
EXPRESSIONS. THESE FORWARD-LOOKING STATEMENTS INVOLVE SEVERAL RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS, INCLUDING
THOSE WE DISCUSS IN "RISK FACTORS" AND ELSEWHERE IN THIS ANNUAL REPORT. THESE
FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS ANNUAL REPORT, AND
WE CAUTION YOU NOT TO RELY ON THESE STATEMENTS WITHOUT ALSO CONSIDERING THE
RISKS AND UNCERTAINTIES ASSOCIATED WITH THESE STATEMENTS AND OUR BUSINESS
ADDRESSED IN THIS ANNUAL REPORT.
OVERVIEW
The Regency Group, Limited (Regency) is a technology-based investment
company focusing on the Internet-economy. The Company was incorporated in
February of 1999. Based in Scottsdale, Arizona, the firm has interests in three
companies that are developing key emerging technologies. Regency's main focus is
developing Internet, broadband, and telephony technology companies with a view
towards enhancing their value as potential take-over targets or through taking
them public. Regency provides financial, management, and technical support as
needed. Regency Group companies may be majority-owned, or the beneficiaries of
strategic investment capital by the company. We believe we are positioned to act
promptly on potential opportunities.
With the acquisition of its wholly owned subsidiary e-River Marketing,
Regency's day-to-day operations will be based on a set of core competencies that
focus on the buying, selling and manufacturing of computer and consumer
electronics. E-Rivers business divisions supply consumer electronics goods and
information, sales services featuring exclusive and regional agreements with
various technology-oriented manufacturers and in-house studio design services
for custom business-to-business web applications. Through it's affiliates,
Regency provides single source solutions for web sites, ad agencies and
advertisers seeking the best in Internet advertising expenditure activity data
as well as marketing products, services and business opportunities to home based
business consumers.
STRATEGY
Our strategy is to provide technology based business-to-business e-commerce
solutions, web-marketing services, electronics manufacturing, sales and
managerial expertise. We have made investments in technology companies and
formed strategic relationships that we believe position us to be competitive. We
apply our business philosophy and expertise to deliver a compelling menu of
services to our clients. We continually review investment and development
opportunities that are consistent with our core strategy. During the past year
Regency entered into an agreement to acquire e-River Marketing, Inc. and made
significant investments in AdZone Interactive and ClickIncomes.com.
e-RIVER MARKETING
e-River Marketing provides a business model that significantly enhances
Regency's operations by providing an exclusive launching pad for many new and
forthcoming partnerships, alliances, and investments. The Company offers a set
of well-rounded, technological, and diversified business-to-business commerce
solutions. The five core computer profit centers consisting of (1) storage and
duplication manufacturing, (2) distribution, (3) manufacturing sales agreements,
(4) intermediary services and (5) Internet applications and development.
e-River's network of manufacturers, sales representatives, product
intermediaries, buyers, and internet commerce developers have the combined
experience of over 76 years in bringing value to the shelves of mass retail
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outlets, internet outlets, and distributors. We believe that the addition of
e-River Marketing represents a unique opportunity to significantly enhance the
operations of the Company in the following ways:
* By fully exploiting the computer and consumer electronic markets;
* By remaining on the forefront of inter-connectivity with respect to
product sourcing and pricing;
* By manufacturing profitable/industry leading alternatives for the
newest media duplication products;
* By continuing to challenge in creative and profitable ways today's,
and future, selling mediums;
* By using market knowledge, inter-connectivity, and varying selling
mediums to assist our clients in exceeding their sales and
profitability goals;
* By utilizing our industry experience in a positive and constructive
manner and gaining industry-wide respect.
e-River consists of the following divisions: TSI, DealUpdate, The West Edge and
e-River Studios.
TSI:
The TSI division of e-River Marketing focuses on the manufacturing of CSI
storage subsystems and has fully evolved to today's technologies. The division's
technologies center around Fire Wire, USB, and SCSI with stand-alone products
like Compact Disc Duplicators, DVD, and portable Hard Drives. TSI currently
manufactures 4x and 8x stand-alone disc duplicators in single, quad, and other
multiple drive configurations; and, new licensing agreements and technologies
are in place to bring newer rounds of related technology into the marketplace.
Many of the Disc-Duplicators are geared for both for the Consumer Electronics
and Computer industries. Channels of distribution include; "Online",
"Brick-and-Mortar", Corporate, and Government clients. Products are centered
around computer-oriented solutions and consumer electronics goods as well.
Current customers include PC Zones, Egghead and HandTech, and we are currently
in negotiations to add others.
DEALUPDATE:
The DEALUpdate division supplies computer and consumer electronics goods
and informational services. Employees have over 75 years of experience. The
recent launch of the supporting DEALUpdate web site is designed to bring its
business partners time sensitive products and commodities and information in the
most efficient manner possible. Its proprietary DEALUpdate "DealTicker" and
"CommoditiesTracker" tools (TradeMarks pending), provide DEALUpdate's Trading
Partners the latest information streaming to them much like a stock ticker.
Information tracked includes memory, CPU's hard drives, monitors, and more. The
site is designed to assist in finding product information for purchasing and
selling products on-line while keeping them in-touch with up-to-the-minute
pricing. DEALUpdate's core clientele are "Online" Retailers, Systems
Integrators, Distributors, Small to Large Wholesalers, Corporate, and Government
accounts. Current customers include; Egghead, PC Zones, HandTech, WorldNet, and
more.
THE WEST EDGE:
The West Edge division is a group of sales agents with exclusive and
regional agreements with various technology oriented Manufacturers. These
contractual agreements provide access to today's newest technologies from
leaders in the industry. The West Edge Group's sales activities provides a
significant revenue stream to e-River Marketing. Current lines of representation
include; Scanport/Microtek Scanners, Gem Monitors, ECS Computer Systems and
Motherboards, Cyber Acoustics Speaker and Speech Recognition Accessories,
DataRight Disc Media, Cadmus Micro PCMCIA products, and more. Current customers
are Costco, Fred Meyer, Fry's Electronics, Future Shop Canada, Amazon.com, PC
Zones, Egghead, HandTech, Worldnet, and other smaller accounts.
e-RIVER STUDIOS:
Our in-house design studio develops custom websites. e-River Studios
focuses on simple, innovative designs that are fast and easy to use and serves
manufacturing, corporate, and commerce oriented clientele. We provide premium
quality website consulting, design, and implementation services for our
clientele. Past clients include; Cyber Acoustics, Schmitt Industries, Oregon
Realty, Cofan, SharDan International and more.
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ADZONE INTERACTIVE
AdZone Interactive is a single source solution provider for Web Site
hosting providers, Ad Agencies and Advertisers who require current information
about Internet advertising activity data. The Company's team of experts includes
programmers, business executives and scientists who have created a suite of
databases which can be searched extensively to create a wide array of timely
information and reports. The Company's proprietary NetGet technology, monitors
the top 2000+ International web sites 24 hours a day for content, frequency,
brand, creative executions, advertiser and date. This information is updated
hourly and available almost immediately with their Online Interactive AdZone
Reporter.
AdZone Interactive 's team of experts can also produce customized reports
from existing data sources or even create a custom set of data by monitoring
virtually any set of specified web sites. AdZone Interactive does not rely on
small sampling or outdated information. It constantly monitors 2000+
International web sites and thousands of advertisers to give the most complete
and up to date picture of this dynamically changing marketplace. AdZone's
services are not limited to simply reporting Internet information, but extends
to customizable formats plus graphs and charts. All data is exportable for use
with spreadsheets and documents. Its unique technology produces the most
accurate and in-depth look at Internet advertising available today.
NetGet, the Company's proprietary Computerized Advertising Information
Retrieval technology monitors top web sites on the Internet around the clock for
content, frequency, brand, creative executions, advertiser and date. This
information is updated hourly and available almost immediately with its Online
Interactive AdZone Reporter. Its proprietary highly accurate data collection,
collation and reduction methods were created with the needs of the demanding
Internet community in mind. The Online AdZone Interactive Reporter is a new
technology created by a highly skilled staff of Internet experts. The online
reports include detailed information on the frequency, expenditures and
impressions from the various advertisers and categories.
AdZone Interactive's service includes a sophisticated database that
provides crucial advertising activity data for the most frequented sites on the
Internet. The websites monitored account for more than 95% of all Internet
advertising revenue. The Company not only measures web publications and search
engines, but also monitors online services sites such as AOL and MSN. The
monitoring includes all banners, text ads, keywords, links, buttons and pop-ups.
Our database has information on more than 70,000 websites and can provide
detailed monthly reports from the top sites in the database. This information
includes parent company, brand, expenditures and site information.
Data is collected through the use of proprietary technology that monitors
various Internet sites and the database is updated daily with current
information. The proprietary NetGet technology, a computerized advertising
information retrieval system, monitors top web sites on the internet for
content, frequency, brand, creative executions, advertiser and date. This
information is collected around the clock, updated hourly and available almost
immediately with the Online AdZone Interactive Reporter. Each site's advertising
profile is carefully monitored and updated to reflect the dynamic changes in
advertising structure. The process monitors advertisers, frequency, brand, as
well as timing information and information is tabulated and integrated with
current rate and activity data to generate complete, accurate and up-to-date
reports.
CLICKINCOMES.COM
ClickIncomes.com is an internet based company specializing in marketing
products, services and selected business opportunities to home business
consumers and small businesses. Through direct and affiliate based marketing
utilizing the Company's web portal, ClickIncomes.com, the Company targets the
emerging market for business and income opportunity consumers. The recent growth
in the ranks of home based businesses coupled with the explosive growth of the
Internet, creates the opportunity for alternative part-time and full-time
businesses. Furthermore, the growth and visibility of e-commerce businesses has
fueled demand for Internet based opportunities for generating income.
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ClickIncomes.com targets the business-to-consumer market, estimated to
include over 30 million households and millions of small businesses by focusing
on income and business opportunity seekers on the Internet. Through its
affiliate network and direct marketing, the Company provides consumers with the
ability to easily locate business and income opportunities quickly through
affiliate links and business opportunity listings. In addition, consumers can
participate in the Company's business opportunity through the sale of customized
"Clickincomes commerce" web sites to promote either their existing business or
other business opportunities that they can select from ClickIncomes.com.
Furthermore, they can participate in an innovative sales-lead marketing program,
where they can purchase or sell qualified sales leads of individuals who are
actively seeking to make money on the web. Consumers can make money at the
ClickIncomes.com web site simply by choosing selected affiliate programs, such
as an internet bank card promotion, or through referral of others to
money-making affiliate programs, or by simply taking advantage of income
available through affiliate and network based marketing of the Company's
products. These services are the first phase of the company's plan to provide
diversified income opportunities for ClickIncomes.com customers simply with the
click of a mouse button at the Company's site.
EXPAND OUR PRODUCTS AND SERVICES INTO OTHER AREAS
We intend to provide our customers with access to premier business-
to-business and business-to-consumer e-commerce solutions, at any time, from any
Internet enabled device. We have invested substantial resources to develop
advanced technology and web sites that facilitate our business model. As new
technologies and business opportunities arise, we intend to select the most
promising ideas, incorporate them into our business model and make them
available to our customer base.
EMPLOYEES
As of June 30, 2000, Regency had 2 full-time employees excluding temporary
personnel and consultants. The acquisition of e-river Marketing will add an
additional ten full-time employees. None of our employees are represented by a
labor union, and we consider our relations with our employees to be good. Our
ability to achieve our financial and operational objectives depends in large
part upon the continued service of our senior management and key technical
personnel and our continuing ability to attract and retain highly qualified
technical and managerial personnel. Competition for such qualified personnel in
our industry and geographical location in the Phoenix/Scottsdale area is
intense. Our future success depends on our ability to attract, retain and
motivate highly skilled employees.
RICK FACTORS
THE RISKS DESCRIBED BELOW ARE NOT THE ONLY ONES FACING OUR COMPANY.
ADDITIONAL RISKS NOT PRESENTLY KNOW TO US, OR THAT WE CURRENTLY DEEM IMMATERIAL,
MAY ALSO IMPAIR OUR BUSINESS OPERATIONS. OUR BUSINESS, FINANCIAL CONDITION OR
RESULTS OF OPERATIONS COULD BE SERIOUSLY HARMED BY ANY OF THESE RISKS; AND, THE
TRADING PRICE OF OUR COMMON STOCK COULD ALSO DECLINE DUE TO ANY OF THESE RISKS.
WE MAY FAIL TO INTEGRATE OUR BUSINESS TECHNOLOGIES WITH THE TECHNOLOGIES OF
E-RIVER AND OTHER COMPANIES WE HAVE RECENTLY ACQUIRED OR MAY ACQUIRE.
WE HAVE INCURRED AND EXPECT TO INCUR OPERATING LOSSES
Regency was incorporated and commenced operations in February of 1999 and
has incurred losses in its initial years of operations. As of June 30, 2000 we
had an accumulated deficit of approximately $394,000 which includes depreciation
and amortization and the cost and amortization of acquisition related
intangibles. In addition, we currently intend to increase capital expenditures
and operating expenses in order to expand lines of products and services to
potential clients and customers. As a result of the acquisition of e-River
Marketing and our investments in AdZone and ClickIncomes.com, it is possible
that we will incur additional non-cash charges including those relating to the
amortization of goodwill and other intangible assets in the future. Therefore we
anticipate that we will incur additional losses in the future.
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RISKS RELATED TO REGENCY'S BUSINESS
We have completed a major acquisition and made several significant
investments recently. We intend to pursue additional acquisitions in the future.
If we fail to integrate these businesses, our quarterly and annual results may
be adversely affected. Integrating acquired organizations, products and services
could be expensive, time-consuming and a strain on our resources. Risks we could
face with respect to acquisitions include:
* The difficulty in integrating acquired technology and rights in our
services;
* The difficulty of assimilating the personnel of the acquired
companies;
* The difficulty of coordinating and integrating geographically-
disbursed operations;
* Our ability to retain customers of an acquired company;
* The potential disruption of our ongoing business and distraction of
management;
* The maintenance of brand recognition of acquired businesses;
* The failure to successfully develop acquired in-process technology;
* Unanticipated expenses related to technology integration;
* The maintenance of uniform standards, corporate cultures, controls,
procedures and policies;
* The impairment of relationships with employees and customers as a
result of the integration of new management personnel.
In addition, we may be unable to identify future acquisition targets and we
may be unable to complete future acquisitions on reasonable terms.
RECENTLY ACQUIRED BUSINESSES MAY NOT BE SUCCESSFUL
We have recently acquired and made significant investments in companies in
early stages of development and with unproven business models. Acquired
features, functions, products or services may not achieve market acceptance.
During the first quarter of 2000 we finalized our acquisition of e-River
Marketing and have made significant investments in AdZone Interactive and
ClickIncomes.com, and we expect to make additional acquisitions and investments
in several other companies in the future. These companies have specific
technologies and other capabilities that we may not be able to successfully
integrate with our existing products or services or transition to existing
e-commerce platforms. As a result we may incur unexpected integration and
product development expenses that could harm our results of operations. We may
also be required to record charges to operations related to the impairment of
acquired technologies or other intangible assets.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE BECAUSE OF A NUMBER OF FACTORS
Our quarterly operating results may fluctuate significantly in the future
as a result of a variety of factors, many of which are outside of our control.
These factors include:
* The level of usage of the Internet in general and use of web sites in
particular;
* General economic conditions;
* Seasonal nature during the year of demand for our products and
services;
* Timing of marketing expenditures to promote our products and services;
* The introduction of new products and services by our competitors;
* The addition of loss of clients and customers;
* Costs incurred with respect to acquisitions and investments.
Due to all of the foregoing factors and other risks described in this
section, you should not rely on quarter-to-quarter comparisons of our results of
operations as an indication of future performance, particularly in light of the
acquisitions and investments that we have completed. It is possible that in some
future periods our results of operations may be below the expectations of public
market analysts and investors. In this event, the price of our common stock may
fall.
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WE MUST DEVELOP AND MAINTAIN THE AWARENESS OF OUR BRANDS TO ATTRACT CUSTOMERS
Maintaining and strengthening our brands is critical to achieving
widespread acceptance of our products and services by our clients and customers,
particularly in light of the competitive nature of the market. Promoting and
positioning our brand will depend largely on the success of our marketing
efforts, and our ability to provide high quality services. We may find it
necessary to increase our marketing budget or otherwise increase our financial
commitment to creating and maintaining brand loyalty among our clients and
customers. If we fail to promote and maintain our brands or incur excessive
expenses in an attempt to promote and maintain our brands our business could be
harmed.
OUR EQUITY INVESTMENTS IN OTHER COMPANIES MAY NOT YIELD ANY RETURNS
We have made equity investments in other companies. These investments are
in the form of illiquid securities of private companies. These companies are in
the early stages of their growth and may be expected to incur operating losses.
Our investments in these companies may not yield any return. Furthermore, if
these companies are not successful, we could incur charges related to
write-downs or write-offs of assets. We also record and continue to record a
share of the net losses in some of these companies, up to our cost basis, if
they are our affiliates. We intend to continue to invest in illiquid securities
of private companies and in joint ventures in the future. Losses or charges
resulting from these investments could harm our operating results.
WE MAY BE LIABLE FOR OUR LINKS TO THIRD-PARTY WEB SITES
We could be exposed to liability with respect to the third-party web sites
that may be accessible through our services. These claims may allege, among
other things, that by linking to web sites operated by third parties, we may be
liable for copyright or trademark infringement or other unauthorized actions by
third parties through these web sites. Other claims may be based on errors or
false or misleading information provided by our services. Our business could be
harmed due to the cost of investigating and defending these claims, even to the
extent these types of claims do not result in liability.
WE MAY FACE POTENTIAL LIABILITY FROM OUR ELECTRONIC
COMMERCE-RELATED ADVERTISING ARRANGEMENTS
Some of our advertising relationships provide that we may receive payments
based on the amount of goods or services purchased by consumers clicking from
our services to the seller's web site. These arrangements may expose us to legal
risks and uncertainties, including potential liabilities to consumers of the
advertised products and services. Although we carry general liability insurance,
our insurance may not cover potential claims of this type or may not be adequate
to indemnify us from all liability that may be imposed. Some of the liabilities
that may result from these arrangements include:
* Potential liabilities for illegal activities that may be conducted by
the sellers;
* Product liability or other tort claims relating to goods or services
sold through third-party e-commerce sites;
* Claims for consumer fraud and false or deceptive advertising or sales
practices;
* Breach of contract claims relating to purchases;
* Claims that items sold through these sites infringe third-party
intellectual property rights.
Even to the extent these types of claims do not result in material
liability, investigating and defending these claims could harm our business.
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WE MAY BE SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS THAT ARE COSTLY
TO DEFEND AND COULD LIMIT OUR ABILITY TO USE CERTAIN TECHNOLOGIES IN THE FUTURE
Many parties are actively developing Internet-related technologies. We
believe that these parties will continue to take steps to protect these
technologies, including seeking patent protection. As a result, we believe that
disputes regarding the ownership of these technologies are likely to arise in
the future. From time to time, parties assert patent infringement claims against
us in the form of letters, lawsuits and other forms of communications. In
addition to patent claims, third parties may assert claims against us alleging
infringement of copyrights, trademark, rights, trade secret rights or other
proprietary rights or alleging unfair competition.
We may incur substantial expenses in defending against third-party
infringement claims regardless of the merit of the claims, In the event that
there is a determination that we have infringed on third-party proprietary
rights we could incur substantial monetary liability and be prevented from using
the rights in the future.
OUR FUTURE DEPENDS ON OUR ABILITY TO ATTRACT, RETAIN AND
MOTIVATE HIGHLY SKILLED EMPLOYEES
Our future success depends on our ability to attract, retain and motivate
highly skilled employees. Competition for employees in the e-commerce industry
is intense, particularly in Phoenix/Scottsdale where we are headquartered.
Additionally, it is often more difficult to attract employees once a company's
stock is publicly traded because the exercise price of equity awards such as
stock options are based on the public market, which is highly volatile. We may
be unable to attract, assimilate or retain other highly qualified employees in
the future. We have from time to time experienced, and we expect to continue to
experience in the future, difficulty in hiring and retaining highly skilled
employees with appropriate qualifications. Furthermore, certain key employees
possess marketing, technical and other expertise, which is important to the
operations of our business, and if these employees leave, we may not be able to
replace them with employees possessing comparable skills.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATING TO THE INTERNET COULD
HINDER THE POPULARITY OF THE INTERNET
NEW INTERNET AND PRIVACY LAWS. There are currently few laws or regulations
that specifically regulate communications or commerce on the Internet. However,
laws and regulations may be adopted in the future that address issues such as
user privacy, pricing, content and the characteristic and quality of products
and services. For example:
* The United States Federal government and various state governments
have proposed limitations on the collections and use of information
regarding Internet users. In October 1998, the European Union adopted
a directive that may result in limitations on our ability to collect
and use information regarding Internet users in Europe;
* A portion of the Telecommunications Act, which has since been ruled
unconstitutional, sought to prohibit transmitting certain types of
information and content over the Internet.
Moreover, it may take several years to determine the extent to which existing
laws relating to issues such as property ownership, libel, and personal privacy
are applicable to the Internet. Any new laws or regulations relating to the
Internet could harm our business.
TAX LAWS: The tax treatment of the Internet and electronic commerce is
currently unsettled. A number of proposals have been made at the federal, state
and local level that could impose taxes on the sale of goods and services and
certain other Internet activities. Our business may be harmed by the passage of
laws in the future imposing taxes or other burdensome regulation on online
commerce.
OTHER JURISDICTIONS: Because our services are available in multiple states,
these jurisdictions may claim that we are required to qualify to do business as
a foreign corporation in each of these states. If we file to qualify as a
foreign corporation in a jurisdiction where we are required to do so, we could
be subject to taxes and penalties.
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OUR BUSINESS DEPENDS ON THE CONTINUED GROWTH IN INTERNET USE
We operate in a new and rapidly evolving market. Our business may be
adversely affected if usage of the Internet or other online services does not
continue to grow. This growth could be hindered by a number of factors including
the adequacy of the Internet's infrastructure to meet increased usage demand,
privacy and security concerns and the availability of cost-effective services.
Any of these issues could cause the Internet's performance or level of usage to
decline.
PROTECTION OF OUR INTELLECTUAL PROPERTY RIGHTS IS COSTLY AND DIFFICULT
We regard our intellectual property, including our patents, copyrights,
trademark, trade secrets, and similar intellectual property as critical to our
success. We rely upon patents, trademark and copyright law, trade secret
protection and confidentiality and license agreements to protect our proprietary
rights. We cannot guarantee that the steps that we have taken to protect our
proprietary rights will be adequate.
FUTURE ACQUISITIONS DEPEND ON THE CONTINUED GROWTH IN INTERNET USE
We have typically paid for our acquisitions by issuing shares of our
capital stock. In the future, we may effect other large or small acquisitions by
using stock, and this will dilute our stockholders. We may also use cash to buy
companies or technologies in the future and we may need to incur additional debt
to pay for these acquisitions. Acquisition financing may not be available on
favorable terms or at all. In addition, we will likely be required to amortize
significant amounts of goodwill and other intangible assets in connection with
future acquisitions, which will have a material effect on our results of
operations.
WE MUST MANAGE OUR GROWTH
Our growth, recent acquisition and investments have placed a significant
strain on our managerial, operational, and financial resources. In addition, we
plan to continue to hire additional personnel. To manage our growth we must
continue to implement and improve our operational and financial systems and to
expand, train and manage our employee base. Any failure to manage our growth
effectively could harm our business.
ITEM 2. PROPERTY
We are moving to facilities consisting of approximately 6,000 square feet
in Scottsdale, Arizona, which we will occupy under a 5-year lease. Our
headquarters facilities are located in buildings constructed during 1999. We
believe that our existing facilities will be adequate to accommodate our growth
for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The Regency Group, Limited was not involved in any legal proceedings during
the period covered by this filing.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY VOTERS
The following matters were submitted to a vote of security holders and
approved in the quarter ending June 30, 2000:
* To change the name of the Company to Regency Group, Limited;
* To increase the number of authorized common shares to 50 million
* To approve a 10 for 1 stock split on common stock
* To transact any other business that may properly come before the
meeting or any adjournment of the meeting.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET FOR THE REGISTRANT'S COMMON EQUITY
Regency Group, Limited's common stock trades on the OTC bulletin board
under the symbol "RGNC." The following table sets forth, on a per share basis,
the high and low sales prices of the Company's common stock for the periods
indicated as reported by the NASDAQ National Market. The prices in the table
have been adjusted to reflect a 10 for 1 stock split approved on February 28,
2000.
HIGH LOW
---- ---
FISCAL YEAR ENDED DECEMBER 31, 1999 *
Quarter ended March 31, 1999................................ N/A N/A
Quarter ended June 30, 1999................................. N/A N/A
Quarter ended September 30, 1999............................ N/A N/A
Quarter ended December 31, 1999............................. N/A N/A
SIX MONTHS ENDED JUNE 30, 2000 ** N/A N/A
Quarter ended March 31, 2000................................ N/A N/A
Quarter ended June 30, 2000................................. 2.56 1.75
----------
* Regency Group, Limited commenced operations in February of 1999
** New fiscal year-end
As of June 30, 2000 there were 143 stockholders of record. We have never
declared or paid cash dividends on our common stock. We presently intend to
retain future earnings, if any, for use in our business, and therefore we do not
anticipate paying any cash dividends on our capital stock in the foreseeable
future.
RECENT STOCK SPLIT
On February 28, 2000 the board of Directors declared a 10 for 1 stock-split
for shareholders of record on February 28, 2000.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND RELATED NOTES CONTAINED IN ITEM 8 OF THIS ANNUAL REPORT. THIS
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A
OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. WE MAY IDENTIFY THESE
STATEMENTS BY THE USE OF WORDS SUCH AS "BELIEVE", "EXPECT", "ANTICIPATE",
"INTEND", "PLAN" AND SIMILAR EXPRESSIONS. THESE FORWARD-LOOKING STATEMENTS
INVOLVE SEVERAL RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF VARIOUS FACTORS, INCLUDING THOSE PREVIOUSLY DESCRIBED UNDER THE
CAPTION "RISK FACTORS" IN " ITEM 1. BUSINESS" ABOVE. THESE FORWARD-LOOKING
STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS ANNUAL REPORT, AND WE CAUTION YOU
NOT TO RELY ON THESE STATEMENTS WITHOUT ALSO CONSIDERING THE RISKS AND
UNCERTAINTIES ASSOCIATED WITH THESE STATEMENTS AND OUR BUSINESS ADDRESSED IN
THIS ANNUAL REPORT.
-11-
<PAGE>
OVERVIEW
Regency Group, Limited, is a managed technology investment company based in
Scottsdale, Arizona. The firm has interests in a diverse portfolio of companies
having industry leadership or which are developing emerging technology.
Regency's core focus is to develop Internet, broadband, and telephony technology
companies, with a view towards enhancing their value as potential take-over
targets or through taking them public. Regency Group provides financial,
management, and technical support as needed. Regency Group companies may be
majority-owned, or beneficiaries of strategic investment capital by the company.
The company is positioned to act immediately on opportunities and maximize its
investments.
With the acquisition of its wholly owned subsidiary e-River Marketing,
Regency's day-to-day operations will be focused on the buying, selling and
manufacturing of computer and consumer electronics. E-River's TSI division has
been one of the best known developers of peripherals for personal computers. The
other divisions of the Company supply consumer electronics goods and
information, sales services featuring exclusive and regional agreements with
various technology-oriented manufacturers and in-house studio design services
for custom business-to-business web applications. Through it's affiliates,
Regency provides single source solutions for web sights, ad agencies and
advertisers seeking the best in Internet advertising expenditure activity data
as well as marketing products, services and business opportunities to home based
business consumers.
MARKETING SERVICES
e-River Marketing provides a business model that significantly enhances the
operations of Regency Group Limited by providing a launching pad for many new
and forthcoming partnerships, alliances, and investments. The Company offers a
set of technology focused, and diversified B2B commerce operations with five
core computer and consumer electronics profit centers consisting of; storage and
duplication manufacturing, distribution, manufacturing sales agreements,
intermediary services, and Internet applications and development. e-River's
network of manufacturers, sales representatives, product intermediaries, buyers,
and internet commerce developers have the combined experience of over 76 years
in providing additional value to the shelves of mass retail outlets, internet
outlets, and distributors.
COMPUTER PERIPHERALS
The TSI division of e-River Marketing focuses on the manufacturing of CSI
storage subsystems and has fully evolved to today's technologies. The division's
technologies center around Fire Wire, USB, and SCSI with stand-alone products
like Compact Disc Duplicators, DVD, and portable Hard Drives. TSI currently
manufactures 4x and 8x stand-alone disc duplicators in single, quad, and other
multiple drive configurations; and, new licensing agreements and technologies
are in place to bring newer rounds of related technology into the marketplace.
Many of the Disc-Duplicators are geared for both for the Consumer Electronics
and Computer industries. Channels of distribution include; "Online",
"Brick-and-Mortar", Corporate, and Government clients. Products are centered
around computer-oriented solutions and consumer electronics goods as well.
COMPUTER AND CONSUMER ELECTRONIC GOODS AND INFORMATION SERVICES
e-River's DEALUpdate division supplies computer and consumer electronics
goods and informational services with a combined team experience level of over
75 years. The recent launch of the supporting DEALUpdate web site is designed to
bring its business partners time sensitive products/commodities and information
in the most efficient manner possible. Its proprietary DEALUpdate "DealTicker"
and "CommoditiesTracker" tools (TradeMarks pending), provide DEALUpdate's
Trading Partners the latest information streaming to them much like a stock
ticker. Information tracked includes memory, CPU's, hard drives, monitors, and
more. The site is designed to assist its current partners in finding product
information not only for selling products, but for purchasing on-line as well
while keeping them in touch with up-to-the-minute pricing.
-12-
<PAGE>
SALES:
The West Edge division of e-River is a group of sales agents with exclusive
and regional agreements with various technology oriented Manufacturers. These
contractual agreements provide access to today's newest technologies from some
of the industries newest technology leaders. The West Edge Group's sales
activities provide a significant revenue stream to e-River Marketing. Current
lines of representation include; Scanport/Microtek Scanners, Gem Monitors, ECS
Computer Systems and Motherboards, Cyber Acoustics Speaker and Speech
Recognition Accessories, DataRight Disc Media, Cadmus Micro PCMCIA products, and
more.
WEB DESIGN:
e-River's in-house design studio develops custom websites. e-River Studios
focuses on simplistic, mold-breaking designs that are fast and easy to use and
serves manufacturing, corporate, and commerce-oriented clientele.
AFFILIATE SERVICES:
ADZONE INTERACTIVE
AdZone Interactive is a single source solution for Web Sites, Ad Agencies
and Advertisers seeking Internet advertising activity data. The Company's team
of experts includes programmers, business executives and scientists who have
created a suite of databases which can be searched extensively to create a wide
array of informative and timely reports. The Company's proprietary NetGet
technology monitors the top 2000+ International web sites 24 hours a day for
content, frequency, brand, creative executions, advertiser and date. This
information is updated hourly and available almost immediately with its Online
Interactive AdZone Reporter.
AdZone Interactive's service also includes a sophisticated database that
provides crucial advertising activity data for the most frequented sites on the
Internet. It tracks over 2000 Internet sites. This pool of sites accounts for
more than 95% of all Internet advertising revenue. The Company not only measures
web publications and search engines, but also monitors online services sites
such as AOL and MSN. The monitoring includes all banners, text ads, keywords,
links, buttons and pop-ups. Our database has information on more than 70,000
websites and can provide detailed monthly reports from the top sites in the
database. This information includes parent company, brand, expenditures and site
information.
CLICKINCOMES.COM
ClickIncomes.com targets the business-to-consumer market, estimated to
include over 30 million households and millions of small businesses by targeting
income and business opportunity seekers on the Internet through affiliate
network and direct marketing. The Company's web site provides consumers with the
ability to easily locate business and income opportunities quickly through
affiliate links and business opportunity listings. In addition, consumers can
participate in the Company's business opportunity with the sales of customized
"Clickincomes commerce" web sites to promote either their existing business or a
business opportunity they can select from ClickIncomes.com. Furthermore, they
can participate in innovative sales lead marketing program where they can
purchase or sell qualified sales leads of individuals who are actively seeking
to make money on the web. Consumers can make money at the ClickIncomes.com web
site simply by choosing selected affiliate programs, such as an internet bank
card promotion, or through referral of others to money-making affiliate
programs, or by simply taking advantage of income available through affiliate
and network based marketing of the Company's products. These services are the
first phase of the company's plan to provide diversified income opportunities
for ClickIncomes.com customers simply with the click of a mouse button at the
Company's site.
-13-
<PAGE>
RECENT EVENTS:
EQUITY INVESTMENT IN CLICKINCOMES.COM
On February 19, 2000, we entered into an agreement with ClickIncomes.com to
provide them with investment capital for the purpose of enhancing existing
product-lines and to develop ones. The products to be enhanced and developed
will focus on business-to-business and business-to-consumer e-commerce
solutions. In accordance with the agreement, we contributed $500,000 in exchange
for 25% of ClickIncome.com's common stock. We accounted for this transaction as
an investment under the equity method.
ACQUISITION OF e-RIVER MARKETING, INC.
In July 2000, Regency entered into an agreement to acquire privately held
e-River Marketing, Inc., a computer and consumer electronics
business-to-business solutions provider. Regency is expected to bring additional
market exposure as well as financial resources that will allow e-River Marketing
to expand into new channels of distribution, while maximizing its current
business operations. The acquisition of e-River and its five primary operating
divisions offer a proven and diversified revenue stream which Regency plans to
utilize to enhance its existing investments in emerging and promising
technologies. The acquisition is expected to position the combined companies for
continued growth and position us to become a major player in our existing and
expanding markets. The e-River management team came from such notable companies
as: Insight (NASDAQ:NSIT), Avnet (NYSE:AVT), Egghead (NASDAQ-NM:EGGS), Fred
Meyer (A subsidiary of Kroger Co. - NYSE:KR) and Merisel (NASDAQ-NM:MSEL).
e-River Marketing will become a wholly owned subsidiary of the Regency
Group and will continue to provide the same service and product solutions to its
accounts after the close of the transaction. Current customers include: Costco
(NASDAQ-NM:COST), Fred Meyer (A subsidiary of Kroger Co. - NYSE:KR), Multiple
Zones (NASDAQ-NM:MZON), Fry's Electronics, Egghead (NASDAQ-NM:EGGS), Amazon.com
(NASDAQ-NM:AMZN), and others. The acquisition of e-River Marketing, Inc. is an
all-stock acquisition consisting of 5,000,000 shares of restricted common stock
and 2,500 shares of convertible preferred stock. The convertible preferred stock
is convertible at the rate of 1,000 shares of common for every share of the
convertible preferred stock held.
EQUITY INVESTMENT IN ADZONE INTERACTIVE
On February 29, 2000, we entered into an agreement with AdZone Interactive
to provide them with investment capital for the purpose of enhancing existing
product-lines and to develop ones. The products to be enhanced and developed
will focus on providing the Internet advertising data-metrics to e-commerce
users. In accordance with the agreement, we contributed $775,000 in exchange for
11.6% of AdZone Interactive's common stock.
PURCHASE OF REGENCY STOCK BY INVESTMENT GROUP
On March 3, 2000, an investment group led by Terry Neild entered into an
agreement to purchase 100% of the Regency common stock held by Merrill Moses and
18.6 million shares of Steven Bonenberger's Regency stock for $150,000. The
number of shares purchased by the investment group amounted to 39 million
shares.
ISSUANCE OF PREFERRED STOCK BY REGENCY
On March 29, 2000, Regency agreed to accept and cancel 24.5 million shares
of the shares that Terry Neild's investment group acquired on March 3rd in
exchange for 15,500 shares of convertible preferred stock.
-14-
<PAGE>
RESULTS OF OPERATIONS:
REVENUES
Regency has not generated any direct revenues. Revenue growth, if any, is
based on Regency's business plan, which is to grow based on strategic
acquisitions and investments in entities that currently have products and
services offered in the marketplace.
GENERAL AND ADMINISTRATIVE EXPENSES
Total General and Administrative expenses increased $57,925 or 74% over the
prior year. The increase is attributable to the increase in the number of
employees and the acquisition of AdZone Interactive. General and Administrative
Expenses are primarily related to maintaining Regency's corporate headquarters
while the Company is still in its infancy. Total General and Administrative
expenses for the period ending June 30, 2000 were $136,489. Of that total,
approximately $50,000 or 37% related to employee salaries, $17,000 or 12% were
for attorney's fees, $19,000 or 14% related to general office expense and
$50,000 or 37% were ancillary expenses related to the acquisition of AdZone
Interactive.
OTHER EXPENSES
Regency did not report "other expenses" in the prior year. Other Income
(Expense) totaled $121,999 with $32,299 comprising "other income" and $154,298
comprising "other Expense". $27,499 or 85% of total "other income" was earned in
conjunction with a $22,000 note payable that was cancelled in the current period
and the return of a security deposit totaling $5,499. The balance was generated
from interest income. Total "other expense" is comprised of a $25,000 realized
loss (16% of total) relating to a potential investment that Regency determined
not to pursue, a $124,498 unrealized loss (81% of total), which pertains to
Regency's equity portion of ClickIncome's net loss for the period and interest
expense (3% of total).
OPERATING ACTIVITIES
Net cash used by operating activities increased $168,771 or 215% over the
prior year while the net loss increased from $78,564 to $258,488, an increase of
$179,934 or 229%. Charges to operations that do not require the use of cash
include $125,737. This increase in non-cash charges during the year includes
Regency's equity portion of Click Income's loss for the period and depreciation
and amortization. Net cash used by operating activities after non-cash charges
for the year ending June 30, 2000 also reflects the impact of related party
receivables and other current assets, which increased over the prior year.
FINANCING ACTIVITIES
Net cash used by investing activities increased $1,597,218 over the prior
year. The majority of this amount is comprised of a $300,000 loan to a related
party and $1,300,000 for cash investments in ClickIncomes.com and AdZone
Interactive.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through private
sales of equity. At June 30, 2000, our principal source of liquidity was
approximately $123,000 in cash and cash equivalents compared with approximately
$46,000 in cash and cash equivalents at June 30, 1999. We intend to issue a
private placement in the second quarter of the next fiscal year, which will be
used for operating capital and potential additional business expansion. The
amount of cash proceeds raised in conjunction with the private offering,
together with current available, cash is anticipated to sustain the Regency's
operating and investment activities for the next 12 to 18 months.
-15-
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders of
Regency Group Limited, Inc.
We have audited the accompanying balance sheet of Regency Group Limited, Inc. as
of June 30, 2000, and the related statements of operations, changes in
stockholders' equity, and cash flows for the six month period then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on those financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the June 30, 2000 financial statements referred to above present
fairly, in all material respects, the financial position of Regency Group
Limited, Inc., and the results of their operations, changes in stockholders'
equity, and their cash flows for the six month period then ended, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 8 to the
financial statements, the Company's significant operating losses and working
capital deficit raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Certified Public Accountants /s/ Semple & Cooper, LLP
Phoenix, Arizona
September 1, 2000
-16-
<PAGE>
G. BRAD BECKSTEAD
Certified Public Accountants
330 E. Warm Springs
Las Vegas, NV 89119
702.528.1984
INDEPENDENT AUDITOR'S REPORT
April 12, 2000
Board of Directors
The Regency Group Limited, Inc.
7373 E. Double Tree Ranch Road, Suite 200
Scottsdale, AZ 85258
I have audited the Balance Sheet of the Regency Group Limited, Inc. (the
"Company") (A Development Stage Company), as of December 31, 1999, and the
related Statements of Operations, Stockholders' Equity, and Cash Flows for the
period February 1,1999 (Date of Inception) to December 31, 1999. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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 statement presentation. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis for my
opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of The Regency Group Limited, Inc., (A
Development Stage Company), as of February 1, 1999 (Date of Inception) to
December 31, 1999, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 5 to the financial
statements, the Company has had limited operations and have not commenced
planned principal operations. This raises substantial doubt about its ability to
continue as a going concern. Management's plan in regard to these matters are
also described in Note 5. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
CERTIFIED PUBLIC ACCOUNTANTS /s/ G. Brad Beckstead, CPA
-17-
<PAGE>
REGENCY GROUP LIMITED, INC.
BALANCE SHEET
JUNE 30, 2000
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Notes 1) $ 122,685
Other current assets 43,921
-----------
TOTAL CURRENT ASSETS 166,606
-----------
PROPERTY AND EQUIPMENT, NET (NOTES 1 AND 2) 11,323
OTHER ASSETS:
Note receivable-related party (Note 3) 78,463
Note receivable (Note 5) 300,000
Investment-at cost (Note 1) 775,000
Investment-at equity (Note 1 and 7) 375,502
-----------
1,528,965
-----------
TOTAL ASSETS $ 1,706,894
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable-related parties (Note 3) $ 350,000
Interest payable 4,800
-----------
TOTAL CURRENT LIABILITIES 354,800
-----------
STOCKHOLDERS' EQUITY: (NOTE 6)
Convertible preferred stock, $.001 par value, 5,000,000 shares
authorized, 15,500 shares issued and outstanding 15
Common stock, $.001 par value, 100,000,000 shares authorized,
23,306,500 shares issued and outstanding 23,307
Additional paid-in capital 1,723,428
Accumulated deficit (394,656)
-----------
TOTAL STOCKHOLDERS' EQUITY 1,352,094
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,706,894
===========
The Accompanying Notes are an Integral Part of the Financial Statements
-18-
<PAGE>
THE REGENCY GROUP LIMITED, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTH FROM INCEPTION, FROM INCEPTION,
TRANSITION FEBRUARY 1, 1999 FEBRUARY 1, 1999
PERIOD ENDED THROUGH THROUGH
JUNE 30, 2000 JUNE 30, 1999 DECEMBER 31, 1999 *
------------- ------------- -------------------
(UNAUDITED)
<S> <C> <C> <C>
Revenues $ -- $ -- $ --
COST OF REVENUES -- -- --
------------ ----------- -----------
GROSS PROFIT -- -- --
GENERAL AND ADMINISTRATIVE EXPENSES 136,489 78,564 138,834
------------ ----------- -----------
NET LOSS FROM OPERATIONS (136,489) (78,564) (138,834)
------------ ----------- -----------
OTHER INCOME (EXPENSE):
Loss on investment (25,000) -- --
Other income 27,499 -- 2,666
Interest income 4,800 -- --
Interest expense (4,800) -- --
Equity in loss of minority interest
investment (Note 1 and 7) (124,498) -- --
------------ ----------- -----------
TOTAL OTHER INCOME (EXPENSE) (121,999) -- 2,666
------------ ----------- -----------
NET LOSS $ (258,488) $ (78,564) $ (136,168)
============ =========== ===========
BASIC LOSS PER COMMON SHARE $ (0.01) $ (0.02) $ (0.03)
============ =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 34,827,060 4,618,750 4,618,750
============ =========== ===========
</TABLE>
----------
* As restated, for comparative purposes only.
The Accompanying Notes are an Integral Part of the Financial Statement
-19-
<PAGE>
REGENCY GROUP LIMITED, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTH TRANSITION PERIOD ENDED JUNE 30, 2000, AND
FOR THE PERIOD FROM THE DATE OF INCEPTION,
FEBRUARY 1, 1999, THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------- ------------------ PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at inception, February 1, 1999 -- $ -- -- $ -- $ -- $ -- $ --
Sale of common stock -- -- 4,000,000 4,000 -- -- 4,000
Sale of common stock and conversion of
debt to common stock -- -- 618,750 619 123,131 -- 123,750
Net loss, year ended December 31, 1999 -- -- -- -- -- (136,168) (136,168)
------ ---- ----------- ------- ----------- --------- -----------
Balance at December 31, 1999 -- -- 4,618,750 4,619 123,131 (136,168) (8,418)
Stock Split -- -- 41,568,750 41,569 (41,569) -- --
Private placement of common stock -- -- 1,619,000 1,619 1,617,381 -- 1,619,000
Conversion of common stock to
preferred stock 15,500 15 (24,500,000) (24,500) 24,485 -- --
Net loss, transition period ended
June 30, 2000 -- -- -- -- -- (258,488) (258,488)
------ ---- ----------- ------- ----------- --------- -----------
Balance at June 30, 2000 15,500 $ 15 23,306,500 $23,307 $ 1,723,428 $(394,656) $ 1,352,094
====== ==== =========== ======= =========== ========= ===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
-20-
<PAGE>
REGENCY GROUP LIMITED, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTH FROM INCEPTION FROM INCEPTION,
TRANSITION FEBRUARY 1, 1999, FEBRUARY 1, 1999,
PERIOD ENDED THROUGH THROUGH
JUNE 30, 2000 JUNE 30, 1999 DECEMBER 31, 1999 *
------------- ------------- -------------------
(UNAUDITED)
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (258,488) $ (78,564) $(136,168)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 1,239 -- 408
Loss on investment 25,000 -- --
Loss on minority interest investment 124,498 -- --
Debt restructuring (22,000) -- --
Changes in assets and liabilities:
Due from related party (78,463) -- --
Other current assets (39,121) -- --
Interest receivable (4,800) -- --
Interest payable 4,800 -- --
----------- --------- ---------
NET CASH USED BY OPERATING ACTIVITIES (247,335) (78,564) (135,760)
----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (718) (3,500) (12,252)
Disbursements for note receivable (300,000) -- --
Purchase of equity method investment (500,000) -- --
Purchase of investments (800,000) -- --
----------- --------- ---------
NET CASH USED BY INVESTING ACTIVITIES (1,600,718) (3,500) (12,252)
----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt-related parties 350,000 -- 22,000
Proceeds from issuance of stock 1,619,000 127,750 127,750
----------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,969,000 127,750 149,750
----------- --------- ---------
Net change in cash and cash equivalents 120,947 45,686 1,738
----------- --------- ---------
Cash and cash equivalents at beginning of period 1,738 -- --
----------- --------- ---------
Cash and cash equivalents at end of period $ 122,685 $ 45,686 $ 1,738
=========== ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Noncash investing and financing activities:
Loss on investment $ (25,000) $ -- $ --
=========== ========= =========
Loss on minority interest investment $ (124,498) $ -- $ --
=========== ========= =========
Debt restructuring $ 22,000 $ -- $ --
=========== ========= =========
</TABLE>
----------
* As restated, for comparative purposes only.
The Accompanying Notes are an Integral Part of the Financial Statements
-21-
<PAGE>
REGENCY GROUP LIMITED, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS
AND USE OF ESTIMATES:
NATURE OF OPERATIONS:
Regency Group Limited, Inc. (the "Company"), is a Nevada corporation formed on
February 1, 1999. The principal business purpose of the Company is to provide
managerial assistance and resources to selected eligible portfolio companies
throughout the United States through performance oriented financing and
high-level administrative support .
FISCAL YEAR CHANGE:
On July 10, 2000, the Company elected to change its fiscal year ended December
31, to a fiscal year ended June 30. The six-month transition period ended June
30, 2000, bridges the gap between the company's old and new fiscal year ends.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents are considered to be all highly liquid investments
purchased with an initial maturity of three (3) months or less.
SOFTWARE DEVELOPMENT COSTS:
The Company capitalizes software development costs in accordance with Statement
of Financial Accounting Standards No. 86. Capitalization of software development
costs begins when the preliminary project stage is completed and management
authorizes and commits to funding the computer software project and it is
probable that the project will be completed and the software will be used to
perform the function intended. Upgrades and enhancements that result in
additional functionality are capitalized as incurred. The Company periodically
reviews the carrying value of software development costs. Impairments, if any,
will be recognized when the asset is not expected to provide future service
potential to the Company equal to the net carrying value. Amortization of
capitalized software development costs begins when all substantial testing is
complete, and the computer software is ready for its intended use. Software
development costs are amortized using the straight-line method with a useful
life of five years, which represents the estimated economic life of the computer
software.
PROPERTY AND EQUIPMENT:
Property and equipment are recorded at cost. Depreciation is provided for on the
straight-line method over the estimated useful lives of the assets. The average
life of the assets are five years. Maintenance and repairs that neither
materially add to the value of the property nor appreciably prolong its life are
charged to expense as incurred. Betterments or renewals are capitalized when
incurred. Property and equipment are reviewed each year to determine whether any
events or circumstances indicate that the carrying amount of the assets may not
be recoverable. Such review includes estimating future cash flows.
-22-
<PAGE>
REGENCY GROUP LIMITED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND
USE OF ESTIMATES: (Continued)
INCOME TAXES:
Deferred income taxes are provided on an asset and liability method, whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards, and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
basis. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, there is uncertainty of the utilization of the operating
losses in future periods. Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the date of enactment.
INVESTMENTS:
Investments in unconsolidated subsidiaries, jointly owned companies, and other
investees in which the company has a 20% to 50% interest or otherwise exercises
significant influence are carried at cost, adjusted for the company's
proportionate share of their undistributed earnings or losses, this is known as
the equity method. Investment in companies in which the Company has less than a
20% interest are carried at lower of cost or market. Market is determined by
management's best estimate. Dividends, if any, received from those companies
will be included in other income. Dividends are currently not expected to be
realized under the cost or equity method. For the six-month period ended, June
30, 2000, the Company purchased a 25% interest in ClickIncomes.com for $500,000,
which is carried on the equity method. At June 30, 2000, the investment in
ClickIncome.com, Inc. exceeds the company's share of the underlying net assets
by $355,401. This excess will be amortized on the straight-line method over five
years. In addition, the Company acquired an 11.6% interest in ADZone
Interactive, Inc for $775,000, which is currently carried at cost.
NET LOSS PER SHARE:
Basic net loss per common share is computed based on weighted average shares
outstanding and excludes any potential dilution from stock options, warrants or
other common stock equivalents. Basic net loss per share is computed by dividing
loss available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted net loss per common share reflects
potential dilution from the exercise or conversion of securities into common
stock or from other contracts to issue common stock. As the Company has a net
loss available to common shareholders for all periods presented, the calculation
of diluted net loss per share has been excluded from the financial statements.
NOTE 2. PROPERTY AND EQUIPMENT:
At June 30, 2000, property and equipment consists of:
Software $ 8,752
Computers and equipment 3,500
Furniture and fixtures 718
--------
12,970
Less: accumulated depreciation (1,647)
--------
$ 11,323
========
-23-
<PAGE>
REGENCY GROUP LIMITED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. PROPERTY AND EQUIPMENT: (Continued)
Depreciation expense was $1,239 for the six month transition period ended June
30, 2000, was $0 for the period from the date of inception, February 1, 1999,
through June 30, 1999, (Unaudited), and was $408 for the period from the date of
inception, February 1, 1999, through December 31, 1999.
NOTE 3. RELATED PARTY TRANSACTIONS:
NOTE RECEIVABLE:
As of June 30, 2000, the Company has a note receivable from a related party in
the amount of $78,463, with interest at 6.46% per annum. Interest is receivable
annually with principal due in April, 2003.
NOTES PAYABLE:
As of June 30, 2000, the Company has two notes payable to related parties in the
amount of $300,000 and $50,000, with interest at 18% per annum, principal and
interest is payable on demand.
NOTE 4. INCOME TAXES:
As of June 30, 2000, long-term deferred tax assets (liabilities) consist of the
following:
Net operating loss carryforwards $ 82,570
Depreciation (70)
--------
82,500
Less: valuation allowance (82,500)
--------
$ --
========
The Company has established a valuation allowance equal to the full amount of
the net deferred tax asset primarily because of uncertainty in the utilization
of net operating loss carryforwards.
At June 30, 2000, the Company has federal and state net operating loss
carryforwards in the approximate amount of $394,000 available to offset future
taxable income through 2020 and 2005, respectively.
NOTE 5. NOTE RECEIVABLE:
As of June 30, 2000, the Company has an 8% convertible subordinated note
receivable in the amount of $300,000. Interest is payable semiannually with
principal due in April 2003.
-24-
<PAGE>
REGENCY GROUP LIMITED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. STOCKHOLDERS' EQUITY:
STOCK SPLIT:
During February, 2000, the Stockholders' authorized a 10 for 1 stock split of
the $.001 par value common stock.
PRIVATE PLACEMENT:
In February, 2000, the Stockholders' authorized a private offering of 2,000,000
shares of $.001 par value common stock at $1 per share. As of June 30, 2000,
1,619,000 shares had been sold. Proceeds from the offering were used primarily
for investments.
CONVERSION OF STOCK:
In April, 2000, an investment group converted 24,500,000 shares of $.001 par
value common stock into 15,500 shares of $.001 par value convertible voting
preferred stock. The voting preferred stock is convertible in 2002 for 1,000
common shares per each preferred share.
SALE OF COMMON STOCK:
At Inception, the Company issued 4,000,000 shares of its $.001 par value common
stock at par.
SALE OF COMMON STOCK AND CONVERSION OF DEBT TO COMMON STOCK:
In April, 1999, the Company issued 618,750 shares of its $.001 par value common
stock to shareholders in exchange for cash of $96,250 and to repay debt of
$27,500.
NOTE 7. INVESTMENT:
Following is a summary of the financial position and results of operations of
ClickIncomes.Com for the period from the date of inception February 18, 2000,
through June 30, 2000.
CLICKINCOMES.COM
BALANCE SHEET
June 30, 2000
ASSETS
Current assets 121,406
Property and equipment 28,514
Other assets 180,064
--------
Total Assets 329,984
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities 249,582
Stockholders' equity 80,402
--------
Total Liabilities and Stockholders' Equity 329,984
========
STATEMENT OF OPERATIONS
Net Sales 20,486
========
Gross profit 1,068
========
Net loss (497,991)
========
-25-
<PAGE>
REGENCY GROUP LIMITED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. INVESTMENT: (Continued)
The Company holds a 25% interest in ClickIncomes.com and uses the equity method
of accounting to account for the investment. For the period from the date of
inception, February 18, 2000, through June 30, 2000, the Company's 25% share of
ClickIncomes.com loss charged to operations was $124,498.
NOTE 8. GOING CONCERN:
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has experienced significant losses and negative cash
flows from operating and investment in activities for the six-month period
ending June 30, 2000, which have resulted in a deficiency of working capital of
approximately $188,000 and an accumulated deficit of approximately $395,000 as
of June 30, 2000.
There can be no assurance that the Company will be able to continue as a going
concern in view of its financial condition. The Company's continued existence
will depend upon its ability to obtain sufficient additional capital in a timely
manner to fund its operations and to further develop its long-term business
plan. Any inability to obtain additional financing will have a material adverse
effect on the Company, including possibly requiring the Company to significantly
reduce or cease operations.
These factors raise substantial doubt about the ability of the Company to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
NOTE 9. SUBSEQUENT EVENTS:
On July 10, 2000, the Company acquired all of the assets of e-River Marketing,
Inc. (formerly DealUpdate.com). The Company exchanged 5,000,000 shares of their
common restricted stock, and 2,500 shares of convertible preferred stock for all
of the shares of e-River Marketing, Inc. stock. The equities were valued at
approximately $1,500,000 as of the date of the transaction.
The following unaudited pro forma condensed consolidated financial statements
give effect to the acquisition in July, 2000 of e-River Marketing, Inc. by the
Company. They are based on the estimates and assumptions set forth herein and in
the notes to such statements. This pro forma information has been prepared
utilizing the historical financial statements and notes thereto, which are
incorporated by reference herein. The pro forma financial data does not purport
to be indicative of the results which actually would have been obtained had the
purchase been effected on the dates indicated or of the results which may be
obtained in the future.
The pro forma financial information is based on the purchase method of
accounting for the acquisition of e-River Marketing, Inc. by the Company. The
pro forma entries are described in the accompanying footnotes to the unaudited
pro forma condensed consolidated financial statements.
The following represents unaudited pro forma condensed consolidated balance
sheet and statement of operations for the year ended June 30, 2000. The pro
forma balance sheet assumes the acquisition of e-River Marketing, Inc. occurred
as of June 30, 2000, while the pro forma statement of operations assumes the
acquisition was effective as of the first day of the year.
-26-
<PAGE>
REGENCY GROUP LIMITED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. SUBSEQUENT EVENTS: (Continued)
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
<TABLE>
<CAPTION>
PRO FORMA
REGENCY GROUP e-RIVER PRO FORMA CONSOLIDATED
LIMITED, INC. MARKETING, INC. ADJUSTMENTS AMOUNTS
------------- --------------- ----------- -------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 122,685 $ 39,614 $ 162,299
Accounts receivable-trade, net -- 461,400 461,400
Inventory -- 93,917 93,917
Other current assets 43,921 6,584 50,505
----------- -------- ----------
TOTAL CURRENT ASSETS 166,606 601,515 768,121
----------- -------- ----------
PROPERTY AND EQUIPMENT, NET 11,323 22,588 33,911
----------- -------- ----------
OTHER ASSETS:
Note receivable 300,000 -- 300,000
Note receivable-related party 78,463 -- 78,463
Investments 1,150,502 -- (1) 1,229,460 2,379,962
----------- -------- ----------
1,528,965 -- 2,758,425
----------- -------- ----------
TOTAL ASSETS $ 1,706,894 $624,103 $3,560,457
=========== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Loans payable-related parties $ 350,000 $340,000 $ 690,000
Accounts payable 4,800 13,563 18,363
----------- -------- ----------
TOTAL CURRENT LIABILITIES 354,800 353,563 708,363
----------- -------- ----------
STOCKHOLDERS' EQUITY:
Stocks 1,746,750 746,216 (1) 1,500,000
(1) (746,216) 3,246,750
Accumulated deficit (394,656) (475,676)(1) 475,676 (394,656)
----------- -------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,352,094 270,540 2,852,094
----------- -------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,706,894 $624,103 $3,560,457
=========== ======== ==========
</TABLE>
------------
(1) To record the acquisition of e-River Marketing, Inc. by Regency Group
Limited, Inc. for common and preferred stock valued at approximately
$1,500,000.
-27-
<PAGE>
REGENCY GROUP LIMITED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. SUBSEQUENT EVENTS: (Continued)
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE YEAR-ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
PRO FORMA
REGENCY GROUP e-RIVER PRO FORMA CONSOLIDATED
LIMITED, INC. MARKETING, INC.(1) ADJUSTMENTS AMOUNTS
------------- --------------- ----------- -------
<S> <C> <C> <C> <C>
REVENUES $ -- $ 885,304 $ 885,304
COST OF REVENUES -- 793,084 793,084
----------- ---------- -----------
GROSS PROFIT -- 92,220 92,220
GENERAL AND ADMINISTRATIVE EXPENSES 275,323 565,506 (2) 245,892 1,086,721
----------- ---------- -----------
NET LOSS FROM OPERATIONS (275,323) (473,286) (994,501)
----------- -------- -----------
OTHER INCOME (EXPENSE):
Loss on investment (25,000) -- (25,000)
Other income 30,165 -- 30,165
Interest income 4,800 -- 4,800
Interest expense (4,800) (2,390) (7,190)
Equity in loss of minority interest investment (123,560) -- (123,560)
----------- -------- ----------
TOTAL OTHER INCOME (EXPENSE) (118,395) (2,390) (120,785)
----------- -------- -----------
NET LOSS $ (393,718) $ (475,676) $(1,115,286)
========== ========== ===========
BASIC LOSS PER COMMON SHARE $ (0.01) $ (0.05) $ (0.03)
========== ========== ===========
WEIGHTED AVERAGE SHARES USED IN COMPUTATION 40,538,320 9,521,700 44,348,760
========== ========== ===========
</TABLE>
----------
(1) Represents activity for the period from inception, February 1, 2000,
through June 30, 2000.
(2) To amortize goodwill in connection with the purchase of e-River Marketing ,
Inc. on a straight-line basis over five years.
-28-
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On August 10, 2000 Regency's Board of Directors approved a change of
accountants. The Company replaced Brad Beckstead as its independent accountant
and engaged Semple & Cooper, LLP. During the audited period ending December 31,
1999 and through the subsequent interim period ending August 10, 2000, there
were no disagreements with the former accountant on any matter of accounting
principles or practices, financial statement disclosures, or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of the former
accountant, would have caused him to make reference to the subject matter of the
disagreements in connection with his report. The accountants report on the
financial statements did not contain an adverse opinion and was not qualified or
modified as to uncertainty, audit scope or accounting principles. During the
interim period, we have not consulted Semple & Cooper, LLP regarding any matter
requiring disclosure under Regulation S-K, Item 304 (E)(2).
-29-
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table shows the name, age and position of each of our executive
officers and directors as of June 30, 2000:
Name Age Position
---- --- --------
Roberto Felice ................ 26 President and Director
Ralph Massetti ................ 34 Director
Lolita Prescod ................ 47 Secretary
ROBERTO FILICE has served as President of Regency since February of 1999. Mr.
Filice's unbridled energy, regimented business acumen, and successful
international experience, brings the Regency Group a well-rounded source of
managerial and operational knowledge. Mr. Filice served as a highly decorated
police officer from 1991 through 1995. He has received awards ranging from
"Officer of the Year," six "Superior Performance" awards, "Commendation For
Superior Performance," and many others. Prior to that, Mr. Filice has been an
international commerce director for MTE Commerciale in Alessandria Italy. His
experiences included strategic planning, purchasing, sales analysis, consumer
research, new product introduction processes, and even product usage
forecasting. He also established and maintained oversight responsibilities of
the company's international sales department and international export logistics.
Mr. Filice received his Masters of Science degree from the American Institute of
Computer Science in Scottsdale, AZ. Prior to his M.S. degree, he received B.S.
degree in Business Administration from Istituto Paolo Boselli, in Torino Italy.
Today Mr. Filice focuses on company merger and acquisition activities, reviewing
and researching promising business plans, while considering company investment
options. Mr. Filice's current experience includes his roll as CEO and President
for an international distributor of skin-care products.
RALPH MASSETTI has served as a board member of Regency since February of 1999.
Currently, Mr. Massetti is the Chief Executive Officer and founder of
SalesRepCentral.com (OTC BB: SREP). Mr. Massetti has over 12 years of
professional sales and management experience, including extensive Internet and
technical training. Additional experience includes working as a trained and
licensed Stockbroker for Morgan Stanley Dean Witter. More recently, he has
served as a Consulting Marketing Specialist for Computer Associates, Inc., where
he marketed enterprise management software solutions at the officer level for
many of the nation's largest organizations. Mr. Massetti received his Bachelors
and Masters degrees in Business Administration, and is currently pursuing a
Masters in Finance specializing in High Technology.
COMPLIANCE UNDER SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16 of the Exchange Act requires our directors and certain of our
officers, and persons who own more than 10% of our common stock, to file initial
reports of ownership and reports of changes in ownership with the Securities and
Exchange Commission and the NASDAQ National Market. Such persons are required by
Securities and Exchange Commission regulation to furnish us with copies of all
Section 16(a) forms they file. Based solely on our review of the copies of such
forms furnished to us and written representation from these officers and
directors, we believe that all Section 16(a) filing requirements were met during
the year ended June 30, 2000
ITEM 10. EXECUTIVE COMPENSATION
The following table provides compensation awarded to, earned by or paid for
services rendered to Regency in all capacities for the years ended June 30, 1999
and 2000 by our President and other highly compensated executive officers and
who were serving as executive officers at the end of 2000. We did not grant any
other compensation, restricted stock awards or stock appreciation rights to
these individuals in 1999 or 2000.
-30-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------- ------------
SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION (1)
--------------------------- ---- ------ ----- ------- ----------------
<S> <C> <C> <C> <C> <C>
Roberto Felice (2) 2000 60,000 -0- -0- -0-
1999 - 0 - -0- -0- -0-
Ralph Massetti 2000 - 0 - -0- -0- -0-
1999 - 0 - -0- -0- -0-
Lolita Prescod (2) 2000 60,000 -0- -0- -0-
1999 - 0 - -0- -0- -0-
</TABLE>
----------
(1) - Represents life insurance premiums paid for by Regency
(2) - Hired in February 2000
STOCK OPTION GRANTS IN 2000
Regency did not grant any stock options in 1999 or 2000.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information as to the beneficial owners of our
common stock as of June 30, 2000 by:
* Each stockholder known by us to be the beneficial owner of more than 5% of
our common stock;
* Each of our directors;
* Each executive officer listed in the SUMMARY COMPENSATION TABLE, listed
above;
* All of our executive officers and directors as a group.
Beneficial ownership is determined under the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Unless indicated above, to our knowledge, the persons and
entities named in the table have sole voting and sole investment power with
respect to all shares beneficially owned, subject to community property laws
where applicable. Percentage ownership is based on 23,306,500 shares of common
stock outstanding as of June 30, 2000.
Shares of common stock subject to options or warrants exercisable on or
before August 31, 2000 (within 60 days of June 30, 2000) are deemed to be
outstanding and beneficially owned by the person holding such options or
warrants for the purpose of computing the percentage ownership of such person,
but are not treated as outstanding for the purpose of computing the percentage
ownership of any other person. At June 30, 2000, Regency had not granted any
options on its common stock. Unless indicated above, the address for each
director and executive officer listed below is:
Regency Group, Limited
8930 East Raintree Drive
Suite 100
Scottsdale, Arizona 85260
-31-
<PAGE>
BENEFICIAL STOCK OWNERSHIP AT JUNE 30, 2000
PERCENTAGE
COMMON STOCK PERCENTAGE VOTING
BENEFICIALLY RIGHTS OF COMMON
NAME COMMON STOCK OWNED STOCK
---- ------------ ----- -----
Roberto Filice 1,000,000 4% 4%
Ralph Massetti 1,000,000 4% 4%
Lolita Prescod - 0 - N/A N/A
Baron Systems, Limited (1) 4,600,000 20% 20%
Terry Neild (2) 1,600,000 7% 7%
Charles Neild (3) 1,600,000 7% 7%
Kurt Weber (4) 1,600,000 7% 7%
All directors and executive
officers as a group 2,000,000 8% 8%
----------
(1) Baron Systems, Limited
1177 West Hastings Street
Vancouver, BC Canada
(2) Terry Neild
13663 East Windrose Drive
Scottsdale, AZ
(3) Charles Neild
14266 - 32nd Avenue
White Rock, BC Canada
(4) Kurt Weber
12840 - 16th Avenue
White Rock, BC Canada
-32-
<PAGE>
PART IV
ITEM 12. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) EXHIBITS
2 Agreement and plan of reorganization dated July 01, 2000 between
the Registrant, Deal Update.com and its wholly owned subsidiary
e-River Marketing, Inc. Incorporated by reference to the
Registrant's Current Report on Form 8-K filed on July 25, 2000.
16 Change in Registrant's certifying accountant to Brad Beckstead.
Incorporated by reference to the Registrant's Current Report on
Form 8-K filed on March 26, 2000.
16.1 Letter from Brad Beckstead to the Securities and Exchange
Commission regarding changes in the Registrant's certifying
accountant. Incorporated by reference to the Registrant's
Current Report on Form 8-K/A filed on August 21, 2000.
99.1 Stock Purchase Agreement dated February 29, 2000 between the
Registrant and WebAdNet.com to purchase 15% of the company's
common stock. Incorporated by reference to the Registrant's
Current Report on Form 8-K filed on April 12, 2000.
99.3 Stock Purchase Agreement dated February 19, 2000 between the
Registrant and ClickIncomes.com to purchase 25% of the company's
common stock. Incorporated by reference to the Registrant's
Current Report on Form 8-K filed on April 12, 2000.
99.5 Resignation of Steven Bonenberger as Director. Incorporated by
reference to the Registrant's Current Report on Form 8-K filed
on April 12, 2000.
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
A Form 8-K was filed on Augugst 21, 2000 regarding the change in
Registrant's certifying accountant to Semple & Cooper, LLP. and the
change in Registrant's fiscal year-end to June 30.
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: September 27, 2000 REGENCY GROUP, LIMITED
By: /s/ Roberto Filice
------------------------------
Roberto Filice
President
34
