SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period from _______ to _______.
Commission File Number 0-9519
REGENT TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
Colorado 84-0807913
(State of Incorporation) (I. R. S. Employer Identification No.)
8080 N. Central, Suite 400, Dallas, Texas 75206
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 214-369-9055
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such 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. [X]
Number of shares of Common Stock, $.01 par value, outstanding as of
October 14, 1996: 12,467,189
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<TABLE>
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
STATEMENT OF EARNINGS
(Unaudited) REGENT TECHNOLOGIES, INC.
(Amounts in thousands, except per share data)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
__________________ _________________
1996 1995 1996 1995
______ ______ ______ ______
<S> <C> <C> <C> <C>
REVENUES
Internet sales and service $ 1 $ -- $ 1 $ --
Investment income -- 227 -- 365
Gain on sale of assets -- -- 2 --
Miscellaneous income -- 1 1 2
______ ______ ______ ______
1 228 4 367
COSTS AND OTHER DEDUCTIONS
Costs of Internet sales 1 -- 1 --
Costs of investment income -- 202 -- 283
General and administrative 12 26 41 86
Depreciation, depletion and
amortization 1 4 1 13
Interest Expense - 1 - 2
______ ______ ______ ______
14 233 43 384
Net Earnings (Loss)
Applicable to Common Stock (13) (5) (39) (17)
Loss per share $(.001) (.001) (.004) (.002)
Weighted Average Common
Shares Outstanding 9,215 8,869 9,215 8,869
<FN>
</TABLE>
The accompanying notes are an integral part of these statements.
2
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<TABLE>
BALANCE SHEET
(Unaudited) REGENT TECHNOLOGIES, INC.
(Amounts in thousands)
<CAPTION>
September 30, 1996 December 31, 1995
______________ ______________
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 5 $ 9
Costs and estimated earnings in
excess of billings -- 16
Accounts receivable 1 40
Deposit -- 25
Other current assets -- 12
______ ______
Total Current Assets 6 102
PROPERTY AND EQUIPMENT - AT COST
Net investment properties, using the
full cost method of accounting 29 29
Furniture and fixtures 4 4
______ ______
33 33
Less accumulated depreciation 3 2
______ ______
30 31
Other Assets, Net 377 99
______ ______
413 232
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C>
Current Liabilities
Accounts payable and
accrued liabilities $ 12 $ 72
Accrued Compensation 10 --
Notes payable to affiliates -- 10
______ ______
Total Current Liabilities 22 82
Notes Payable To Affiliate, less
current portion -- 44
STOCKHOLDERS' EQUITY
Common stock par value $0.01 per share;
Authorized 100,000,000 shares
Issued and outstanding -
12,467,189and 8,974,201 shares 125 90
Additional paid-in capital 2,517 2,228
Accumulated deficit (2,251) (2,212)
_______ _______
Total Stockholders' Equity $ 391 $ 106
Total Liabilities and Stockholders'
Equity $ 413 $ 232
<FN>
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
<TABLE>
STATEMENT OF CASH FLOWS REGENT TECHNOLOGIES, INC.
(Unaudited)
(Amounts in thousands)
For the Nine Months
Ended September 30,
<CAPTION>
1996 1995
<S> <C> <C>
Cash Flow From Operating Activities:
Net earnings (loss) $ (39) $ (17)
Adjustments To Reconcile Net
Earnings (Loss) to Net Cash Provided
(Used) by Operating Activities:
Gain on sale of assets 2 --
Depreciation 1 13
(Increase) Decrease In
Accounts receivables 39 (28)
Prepaid expenses 25 --
Other assets 28 (34)
Increase (Decrease) In
Accounts payable and
accrued liabilities (70) 39
Accrued compensation 10 --
_______ _______
Net Cash Used In Operating Activities $ (4) $ (27)
_______ _______
Cash Flow From Investing Activities:
(Increase) Decrease in investments $ (289) $ 11
Proceeds from sale of assets 10 37
_______ _______
Net Cash Provided From
Investing Activities $ (279) $ 48
Cash Flow From Financing Activities:
Payment On Long-Term Debt $ (44) $ (4)
Payment On Note To Stockholder -- (6)
Issuance Of Common Stock 323 --
_______ _______
Net Cash Provided (Used) From
Financing Activities $ 279 $ (10)
_______ _______
Decrease in Cash (4) 11
Cash at Beginning of Year $ 9 $ 25
_______ _______
Cash at End of Period $ 5 $ 36
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for
interest -- 2
_______ _______
<FN>
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1996(unaudited) and December 31, 1995
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements, which should be read in conjunction
with the financial statements of Regent Technologies, Inc. ("the Company")
included in the 1995 Annual Report filed on Form 10-KSB, are unaudited but
have been prepared in the ordinary course of business for the purpose of
providing information with respect to the interim period. The Company
believes that all adjustments (none of which were other than normal recurring
accruals) necessary for a fair presentation for such periods have been
included.
Regent Technologies, Inc. (the "Company"), formerly Regent Petroleum
Corporation, was incorporated on January 18, 1980, for the purpose of
exploration and development of oil and gas properties in the United States.
In 1994, the Company redirected its core activities and acquired SSBE
Environmental, Inc. ("SSBE"), which was organized for the purpose of
obtaining waste and landfill reclamation contracts. On August 16, 1996, the
Board of Directors of the Company voted to sale 81% of its investment in SSBE
to management of SSBE and to enter into a license agreement for the
technologies necessary to offer dialup access to the Internet. In 1995,
the operations of SSBE were consolidated with the accounts of the Company
and all significant intercompany accounts and transactions were eliminated.
Investment Properties -- Oil and Gas
The Company follows the full cost method of accounting for its investments
in oil and gas, whereby all costs of acquisition of oil and gas reserves,
including both productive and nonproductive costs, are capitalized as
incurred. Such costs are amortized in the aggregate on a unit-of-production
method based upon physical units of oil and gas. Physical units are
determined on the basis of relative energy content which is estimated by the
Company to be six MCF of gas to each barrel of oil. Gains or losses on the
sale or disposition of oil and gas properties are recognized only in the
case of extraordinary transactions. Otherwise they are added to or
deducted from capitalized costs. Under the full cost method of accounting,
capitalized costs less accumulated depreciation and depletion, are limited
to the sum of: (a) the future net revenues attributable to proved oil and
gas reserves, based on current economic and operating conditions, discounted
at 10%, (b) the costs of major properties not being amortized due to the
stage of evaluation or development and (c) the lower of cost or market value
of any unproved properties being amortized.
Depreciation
Depreciation of furniture and fixtures is provided in amounts sufficient to
relate the cost of depreciable assets to operations over their estimated
service lives (5 years). The straight-line method of depreciation is used
for financial reporting purposes, while accelerated methods are used for tax
purposes.
Stock Options and Awards
In 1994, as part of the investment in SSBE, the Company adopted a non-
qualified stock option plan which was canceled with the sale of 81% of its
investment in SSBE.
In 1995, the Directors approved a resolution granting each Director stock
options of 100,000 shares with an exercise price of $.075 for a term of ten
years or ninety days after termination or resignation, whichever comes first.
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1996(unaudited) and December 31, 1995
(2) SALE OF ASSETS
Effective January 1, 1996, the Company sold 81% of its ownership in SSBE to
managment of SSBE for the consideration of cash of $10,000 and 500,000 shares
of common stock of the Company, of which 29,156 shares were registered shares
of common stock of the Company. The sale was recorded as a gain on sale of
assets in the amount of $2,465. The remaining 19% investment ownership has a
book value of $13,496, which can by purchased by the buyers under a two year
option for the consideration of the greater of the Company's book value or the
market value at the date of the exercise of the option.
The following audited statements of operations present the results of
operations of SSBE for the years ended December 31, 1995 and December 31,
1994. The contract with the Town of Hague, New York, accounted for $421,794
of the SSBE revenues for the year ended 1995. This contract was suspended
indefinitely for 1996.
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
<S> <C> <C>
Revenues $ 435,577 $ 79,684
Net income (loss) ($3,946) ($7,682)
Net income (loss) per common share ($0.0004) ($0.0009)
Weighted average common shares 8,878,369 8,507,301
<FN>
</TABLE>
(3) PURCHASE OF TECHNOLOGY LICENSE
Effective August 16, 1996, the Board of Directors of the Company approved the
acquisition of the license (the "Technology License") of the hardware and the
software necessary for the Company to offer dialup access to the Internet.
The license was obtained from NKN Technologies, Inc. ("NKN") for the consi-
deration of the grant of 2,500,000 shares of common stock of the Company,
600,000 registered shares and 1,900,000 restricted shares. To satisfy the
grant of registered stock, the Board of Directors approved the exchange of
three (3) shares of restricted stock for one (1) share of registered stock.
The Company issued 3,141,688 shares of newly issued restricted common stock
plus the shares received from SSBE to satisfy the consideration for the
license, all valued at $.10 per share.
The following unaudited statements of operations present the pro forma
results of operations of the Company for the nine months ended September 30,
1996 and the year ended December 31, 1995, assuming the acquisition of the
license had been consummated January 1, 1995, with the addition of 75 users
per month thereafter. This pro forma information does not purport to be
indicative of what would have occurred had the acquisition been made as of
that date, or of the results which may occur in the future.
<TABLE>
<CAPTION>
Septermber 30, 1996 December 31, 1995
<S> <C> <C>
Revenues $ 229,500 $ 117,000
Net income (loss) $157,500 $45,000
Net income (loss) per common share $0.0126 $0.0036
Weighted average common shares 12,525,000 12,525,000
<FN>
</TABLE>
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1996(unaudited) and December 31, 1995
(4) TRANSACTIONS WITH RELATED PARTIES
Effective January 1, 1996, management of SSBE purchased 81% of the ownership
of SSBE from the Company for 500,000 shares of the common stock of the
Company and cash of $10,000. Managment of SSBE also received an option for
two years to purchase the remaining 19%. In May 1996, the Board of Directors
of the Company approved the sale of 500,000 shares of restricted common stock
for $.02 per share to raise working capital. In the second and third
quarters, the wife of the Company's President, purchased 225,000 shares of
common stock of the Company in two transactions for $4,500 to provide working
capital for the Company. Also, the wife of the Company's President, purchased
the stock of Regent Industries Inc. with an effective date of January 1, 1996.
The stock had a book value of less than $100 and was sold for $300 for the
purpose of raising working capital for the Company. In September 1996, the
President and Vice President of the Company exchanged 520,844 registered
shares of the Company to complete the grant of registered stock to NKN.
(5) INCOME TAXES
There is no provision for federal income taxes for 1996 due to the utilization
of net operating loss carryforwards. The Company has net operating loss
carryforwards for tax purposes totaling approximately $2,257,000, which
expire at various dates beginning in 1996.
The utilization of the net operating loss carryforwards to offset future
taxable income could be significantly restricted under Section 382 of the
Internal Revenue Code due to a change of 50 percent or more of ownership of
the Company in the last three years.
(6) INVESTMENT PROPERTIES
The Company continues to own passive overriding royalty interests in proven,
undeveloped oil and gas properties in Rusk County, Texas. The properties
have no additional investment requirement or cost of operations upon
development.
(7) OTHER ASSETS
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Goodwill and intangibles, less accumulated
amortization, for SSBE investment $ 13,496 $ 99,677
Goodwill, less accumulated
amortization, for the Technology License 364,000 --
<FN>
</TABLE>
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
General
On August 16, 1996, the Board of Directors of the Company voted to sell
81% of its holdings in SSB Environmental, Inc. ("SSBE") to management of
SSBE due to projected losses of the company. While the SSBE investment
generated over $400,000 of revenues in 1995, SSBE had a company loss of
$4,000. The outlook for 1996 for SSBE was for additional losses which was
primarily the result of SSBE's only contract being suspended indefinitely.
Without the prospect for profit contributions, the Company's Board of
Directors voted to sell its investment.
On September 15, 1996, the Company announced it had initiated highspeed
Internet access for home and business using the National Knowledge Networks,
Inc. ("NKN") digital network. The NKN digital network was designed by a team
of telecommunications specialists with years of TCP/IP experience and
hands-on knowledge of the field. The Company is offering Internet access
under the commercial name of TEL1.net and the first phase of the TEL1
Internet access will include the Dallas-Fort Worth metroplex. Key features
of the TEL1 Internet access include: (1) Speed: TEL1 is connected to the
Gigaswitch at the major Internet peering points and is located in the same
building where the major fiber bypass carrier houses its central switch;
(2) Reliability: TEL1 is more reliable due to its connection to a fault-
tolerant ring with no single point of failure. TEL1 operates under
uninterrupted power supplies to protect against power outages and TEL1
provides triple redundancy to the Internet; (3) Hardware: TEL1 utilizes
top-of-the-line, ISDN ready digital modems, SUN servers and CISCO 7513
routers which have superior performance features; and (4) Clear Channel
Service: TEL1 with its direct connection to the Internet offers a clear
channel network, meaning that the full bandwidth of its T-3 line is
exclusively used by TEL1 customers while most other local providers use
T-1 lines to support their servers.
In addition, the Company is partnering with numerous telecommunication
providers to offer the best options available to its subscribing customers
for their telecommunication needs. The first of these products should be
available no later than January 1, 1997.
Liquidity and Capital Resources
At September 30, 1996, the Company had a working capital deficit of $12,000.
The Company has no amortization requirements under any term loan agreements.
The Company is delinquent on certain trade payables due to a shortage of
working capital. All trade creditors have agreed to delayed payments by the
Company. The Company continues to raise monies as needed through sale
proceeds from the Company's authorized, unissued and restricted stock.
During the first three quarters of 1996, the Company raised $9,500 by selling
new restricted previously unissued.
Results of Operations
The Company's net loss for the third quarter was $13,000, or $.001 cents per
common share, compared with a net loss of $5,000, or $.001 per common share
in the third quarter of 1995. The Company's net loss for the nine months
ended September 30, 1996 was $39,000 compared with a net loss of $17,000 for
the same period in 1995. The difference was due to the Company's investment
in SSBE in 1995.
8
<PAGE>
Comparison of Three Months Ended September 30, 1996 to Three Months Ended
September 30, 1995
Internet sales and service -- The Company's acquisition of the Technology
License in September 1996, resulted in new customer subscriptions to the
Internet in September 1996. The Company sold dialup subscriptions to the
Internet in the 214 and 817 area codes for $19.95 per month.
Costs of Internet sales and services -- The Company paid $1,000 per month for
each of the 214 and 817 points of presence for Internet access. Due to the
small number of subscribers during September, the Company had a net operating
loss of approximately $1,000 for the three months ended September 30, 1996.
Investment revenues and expenses -- The Company's investment in an environmen-
tal company resulted in $227,000 of operating revenues and $216,000 of direct
expenses from operations involving landfill reclamation. Due to the sale of
81% of this investment effective January 1, 1996, the Company had no
investment income and expenses in 1996.
General and administrative expense -- For the three months ended September
30, 1996, general and administrative expenses decreased $14,000 from 1995
due primarily to the reduced expenses for the sale of the 81% investment in
SSBE.
Depreciation and amortization -- For the three months ended September 30,
1996, amortization expense for goodwill and intangibles decreased $2,000
compared to the same period in 1995 due to the sale of the investment in SSBE.
Comparison of Nine Months Ended September 30, 1996 to Nine Months Ended
September 30, 1995
Investment income and expense -- For the nine months ended September 30,
1995, the Company had revenue from SSBE operations of $365,000 compared to
none for 1996. The Company recorded $326,000 in investment operating expenses
for the same period in 1995.
Gain on sale of assets -- The Company recorded a gain of $2,465 for the sale
of its 81% investment in SSBE, effective January 1, 1996.
Miscellaneous and interest income -- The Company received income in 1995 from
an investment by Regent Industries, Inc. in a joint venture with McCabe
Technologies, Inc. to manufacture a laboratory distillation unit. The joint
venture terminated by its own terms with no plans for future manufacturing
activities. In addition, the Company recognized $481 as income for the refund
of franchise taxes from the State of Utah.
General and administrative expense -- For the nine months ended September 30,
1996, general and administrative expense decreased $45,000 for the same period
in 1995 due to the elimination of the 81% investment in SSBE.
Depreciation and amortization -- Amortization expense for goodwill and
intangibles were reduced $8,000 due to the sale of the SSBE investment.
Interest expense -- Interest expense was eliminated in 1996 due to the sale
of a Company owned vehicle in December, 1995 which was being purchased under
a loan agreement with Texas Commerce Bank.
9
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27
(b) Reports on Form 8-K
A report was filed on Form 8-K on August 16, 1996, announcing the
approval by the Board of Directors of an agreement in principle
under which the Company would license the technologies necessary
to offer dialup access to the Internet. The Company also announced
the decision to sale 81% of its investment in an environmental service
company.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
REGENT TECHNOLOGIES, INC.
(Registrant)
Date: October 18, 1996
By: David A. Nelson
David A. Nelson
Principal Executive and Financial Officer
By: Gordon M. Boyd
Gordon M. Boyd
Vice President
<TABLE> <S> <C>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
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0
0
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</TABLE>
