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 March 31, 1997
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.)
350 N. St. Paul Street, Suite 2410 75201
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 214-880-0702
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
May 20, 1997: 12,867,189
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED EARNINGS
(Unaudited) REGENT TECHNOLOGIES, INC.
(Amounts in thousands, except per share data)
<CAPTION>
For the Three Months
Ended March 31,
__________________
1996 1995
______ ______
<S> <C> <C>
REVENUES
Internet sales and service $ 2 $ --
Miscellaneous income -- 2
______ ______
2 2
COSTS AND OTHER DEDUCTIONS
Costs of Internet sales 0 0
General and administrative 13 23
Depreciation, depletion and
amortization 9 2
______ ______
22 25
NET EARNINGS (LOSS) (20) (23)
EXTRADORDINARY ITEM - FORGIVENESS OF DEBT -- 46
Net Earnings (Loss)
Applicable to Common Stock (20) 23
Gain (Loss) per share $(.002) .003
Weighted Average Common
Shares Outstanding 12,567 8,877
<FN>
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
<TABLE>
BALANCE SHEET
(Unaudited) REGENT TECHNOLOGIES, INC.
(Amounts in thousands)
<CAPTION>
March 31, 1997 December 31, 1996
______________ ______________
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 2 $ 1
Accounts receivable 1 1
______ ______
Total Current Assets 3 2
PROPERTY AND EQUIPMENT - AT COST
Furniture and fixtures 4 4
______ ______
4 4
Less accumulated depreciation 3 3
______ ______
1 1
Other Assets, Net 360 369
______ ______
364 372
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C>
Current Liabilities
Accounts payable and
accrued liabilities $ 11 $ 16
Accrued Compensation 20 14
Notes payable to affiliates 4 2
______ ______
Total Current Liabilities 35 32
LONG TERM DEBT -- --
COMMITMENTS -- --
STOCKHOLDERS' EQUITY
Common stock par value $0.01 per share;
Authorized 100,000,000 shares
Issued and outstanding -
12,667,189 and 12,467,189 shares 125 125
Additional paid-in capital 2,525 2,517
Accumulated deficit (2,322) (2,302)
_______ _______
Total Stockholders' Equity $ 329 $ 340
Total Liabilities and Stockholders'
Equity $ 364 $ 372
<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 Three Months
Ended March 31,
<CAPTION>
1997 1996
<S> <C> <C>
Cash Flow From Operating Activities:
Net earnings (loss) $ (20) $ 23
Adjustments To Reconcile Net
Earnings (Loss) to Net Cash Provided
(Used) by Operating Activities:
Forgiveness of debt -- (46)
Depreciation and amortization 9 2
(Increase) Decrease In
Accounts receivables -- 2
Prepaid expenses -- 29
Other assets (1) (2)
Increase (Decrease) In
Accounts payable and
accrued liabilities (5) (16)
Accrued compensation and other 6 --
_______ _______
Net Cash Used In Operating Activities $ (11) $ (8)
_______ _______
Cash Flow From Investing Activities:
Proceeds from sale of assets -- --
_______ _______
Net Cash Provided From
Investing Activities $ -- $ --
Cash Flow From Financing Activities:
Net proceeds from (repayment of)
note to stockholder 2 --
Issuance Of Common Stock 10 5
_______ _______
Net Cash Provided (Used) From
Financing Activities $ 12 $ 5
_______ _______
Decrease in Cash 1 (3)
Cash at Beginning of Period $ 1 $ 9
_______ _______
Cash at End of Period $ 2 $ 6
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for
interest -- --
_______ _______
<FN>
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 (unaudited) and December 31, 1996
(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 1996 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., formerly Regent Petroleum Corporation, was incor-
porated 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
projects. On August 16, 1996, the Board of Directors of the Company voted
sell 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 (the "Technology License" or "License"). In 1995, the operations of
SSBE were consolidated with the accounts of the Company and all significant
intercompany accounts and transactions were eliminated.
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 under the Technology License (see "TECHNOLOGY
LICENSE" below). The NKN digital network was designed by a team of telecom-
munications specialists with 20 years of experience and hands-on knowledge of
the field. On December 7, 1996, the Company assigned the Technology License
to the Company's subsidiary, TEL1 Communications, Inc. ("TEL1"), for the purpose
of marketing Internet and telecommunications products and services. TEL1 is
a wholly owned subsidiary of the Company and is offering Internet access under
the commercial name TEL1.net. The first phase for offering TEL1 Internet
access was the sale of dialup service in 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 its major fiber bypass carrier, MFS WORLDCOM 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 ahve
superior performance features; and (4) Clear Channel Service: TEL1 with its
direct connection to the Internet offers a clear channel network, maening that
the full bandwidth of its T-3 line is exclusively used by TEL1 customers while
most other local providers use T-1 lines. The operations of TEL1 Communica-
tions, Inc. were consolidated with the Company in 1996 and for the period ended
March 31, 1997.
In addition, the Company is partnering with numerous telecommunication providers
to offer the best options available to its subscribing customers for their
telecommunications needs. The Company's current product offerings include
interstate long distance service through Coastal Telephone Company and cellular
service through an AT&T exclusive product.
Use of Estimates
Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and reported
revenues and expenses. Actual results could differ from these estimates.
5
<PAGE>
Depreciation and Amortization
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. Amortization of the Technology License is provided in amounts which
reflect the anticipated minimum number of years of the term of the license
(10 years).
Income Taxes
The Company utilized the method of accounting for income taxes set forth in
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" (SFAS 109). SFAS 109 requires the recognition of deferred tax liabi-
lities and assets for the expected future tax consequences of events that have
been recognized in the Company's financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined based on the
difference between the financial statement carrying amounts and tax bases
of assets and liabilities, using enacted tax rates in effect in the years in
which the differences are expected to reverse. These temporary differences
primarily relate to depreciation, depletion and amortization.
The Company has not recognized the benefit of any net operating loss carry
forwards as the result of adopting SFAS 109, and no deferred tax assets have
been recorded in the books of the Company due to uncertainty as to the Company's
ability to utilize the loss carryforwards.
Consolidated Statements of Cash Flows
The Company does not consider any of its assets to meet the definition of a
cash equivalent.
Stock Options and Awards
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.
(2) TECHNOLOGY LICENSE
Effective August 16, 1996, the Board of Directors of the Company approved the
acquisition of the Technology License which licenses the hardware and the
software necessary for the Company to offer access to the Internet. The license
was obtained from NKN Technologies, Inc. ("NKN") which was under license to
National Knowledge Networks, Inc. The consideration was 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, which resulted
the Technology License being booked at $364,168. On December 7, 1996, the
License was assigned to the Company's wholly owned subsidiary, TEL1 Communica-
tions Inc.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1997 (unaudited) and December 31, 1996
(3) OTHER ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
<S> <C> <C>
Investment, minority ownership SSBE 13,496 13,496
Technology License, less accumulated
amortization of $8,975 and $9,104 in
1997 and 1996, respectively 346,089 355,064
<FN>
</TABLE>
(4) TRANSACTIONS WITH RELATED PARTIES
On December 31, 1996, and January 27, 1997, the President issued notes to the
Company in the amounts of $2,000 and $1,500 to assist in the payment of cer-
tain trade payables. The notes are due upon demand and bear interest at eight
percent (8%) per annum. The notes were repaid April, 1997. On February 27,
1997 and March 19, 1997, the wife of the Company's President purchased on each
date 100,000 of restricted common stock of the Company for $.05 per share. On
April 1, 1997, Mr. Roy Mers, a director since March, 1997, and Chairman and CEO
since April 1, 1997, purchased 200,000 shares of restricted common stock of the
Coompany for $.05 per share.
(5) COMMITMENTS
In April, 1997, the Company moved its corporate offices to 350 N. St. Paul,
Suite 2410, Dallas, Texas, under a month-to-month lease which provides for
rental payments of $750 per month.
(6) INCOME TAXES
There is no provision for federal income taxes due to the net operating loss.
The Company has net operating loss carryforwards for tax purposes totaling
approximately $2,257,000, which expire at various dates beginning in 1996 and
expiring in 2010. 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.
(7) CONCENTRATION OF CREDIT RISK
The Company receives its revenues from various individual and business
accounts for Internet access and from reseller contracts for telecommunications
products and services.
(8) EARNINGS PER COMMON SHARE
Earnings per common share are based on the weighted average number of shares
outstanding during each year.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
General
On September 15, 1996, the Company initiated highspeed Internet access for
home and business using the National Knowledge Networks, Inc. ("NKN") digital
network. The Technology License allows access to digital telecommunications
equipment which is superior in quality to that available from the traditional
Internet Service Providers ("ISP") for the purpose of dialup services for
Internet access. The License provides for the exclusive worldwide right of
first refusal for dialup Internet access through NKN for any Point of Presence
("POP") including but not limited to dialup support for 28.8, ISDN and xDSL
modems, but excluding services for POPs activated by NKN prior to the execution
of the License. TEL1 offers Internet access for the Dallas - Ft. Worth POP on
a nonexclusive basis for 28.8 and ISDN dialup services. The Company provides
ISP services under the name TEL1.net which has been registered with the Inter-
nic. The Company offers website development services to its customers, both
for personal and commercial use. The License Agreement has a primary term
of ten (10) years.
In addition, the Company is partnering with numerous telecommunication providers
to offer the best options available to its subscribing customers for their
telecommunication needs, including long distance and cellular telephone
services.
Liquidity and Capital Resources
At March 31, 1997, excluding amounts owed to officers and affiliates, the Com-
pany had a working capital surplus of $2,000. The Company has no amortization
requirements under any term loan agreements. The Company is current on all
trade payable excluding amounts owed to officers and affiliates. The Company
continues to raise monies as needed through proceeds from the sale of the Com-
pany's common stock. During the first first quarter of 1997, the Company
raised $20,000 by selling new restricted previously unissued common stock.
Results of Operations
The Company's net loss for the first quarter of 1997 was $20,431, or $.002
cents per common share, compared with a net gain of $23,000, or $.003 per
common share for the same period in 1996. The difference was due to the
forgiveness of debt of $46,000 by affiliates of the Company in the first
quarter of 1996.
Comparison of Three Months Ended March 31, 1997 to Three Months Ended March 31,
1996
Internet and telecommunications sales -- The Company's acquisition of the
Technology License in September 1996, resulted in new customer subscriptions
to the Internet for the period ended March 31, 1997. The Company sold dialup
and dedicated access subscriptions to the Internet in the 214 and 817 area
codes under monthly, quarterly and annual contracts. In addition, the Company
earned nominal commissions for reselling long distance services.
Costs of Internet sales and services -- The Technology License was modified
to eliminate POP charges by NKN for the first 12 months of the License or until
the number of TEL1 subscribers exceeds 300, whichever comes first. At March
31, 1997, the Company had 26 Internet subscribers.
Miscellaneous income -- The Company had consulting income through its
investment in SSBE in the first quarter of 1996.
8
<PAGE>
General and administrative expense -- For the three months ended March 31,
1997, general and administrative expenses decreased $10,000 from 1996 due
primarily to the reduced expenses for the sale of the 81% investment in SSBE.
Depreciation and amortization -- For the three months ended March 31, 1997,
amortization expense for goodwill and intangibles increased from $2,000 to
$8,975 compared to the same period in 1996 due to the amortization of the
Technology License.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial data schedule for the quarter ended March 31, 1997
(included only in the copy of this report filed electronically
with the Commission).
(b) Reports on Form 8-K
None
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: May 20, 1997
By: David A. Nelson
---------------
David A. Nelson
Principal Executive and Financial Officer
By: Gordon M. Boyd
--------------
Gordon M. Boyd
Vice President
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 1
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3
<PP&E> 4
<DEPRECIATION> 3
<TOTAL-ASSETS> 364
<CURRENT-LIABILITIES> 35
<BONDS> 0
0
0
<COMMON> 126
<OTHER-SE> 329
<TOTAL-LIABILITY-AND-EQUITY> 364
<SALES> 2
<TOTAL-REVENUES> 2
<CGS> 0
<TOTAL-COSTS> 22
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (20)
<INCOME-TAX> 0
<INCOME-CONTINUING> (20)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
