<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1999
Commission file Number 0-9519
Regent Technologies, Inc.
(Exact name of registrant as specified in its charter.)
Texas 84-0807913
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2929 ELM STREET, DALLAS, TEXAS 75226
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 214 741 9523
Indicate by check mark whether the registrant(1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date:
Common Stock, $.10 Par Value - 4,500,817 shares as of June 8, 1999.
<PAGE> 2
REGENT TECHNOLOGIES, INC.
TABLE OF CONTENTS
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements........................................ 2
INCOME STATEMENTS
For the three months ended March 31, 1999 and 1998........ 2
BALANCE SHEETS
As of March 31, 1999 (unaudited)
and December 31, 1998 (audited)........................... 3
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1999 and 1998........ 4
Item 2. Management's Discussino and Ananlysis of Financial
Condition and Results of Operations......................... 7
PART II OTHER INFORMATION
Item 5. Other Information........................................... 8
Item 6. Exhibits and Reports on Form 8-K............................ 8
SIGNATURES........................................................... 9
<PAGE> 3
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
REGENT TECHNOLOGIES, INC.
INCOME STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
-------- --------
(Amounts in thousands, except per share data)
<S> <C> <C>
REVENUES
Internet product sales $ 0 $ 50
Digital prepress and printing 0 47
Interest income and other 4 5
-------- --------
0 102
COSTS AND OTHER DEDUCTIONS
Cost of sales and services 72
Selling, general and
administrative expenses 11 256
Depreciation and amortization 0 52
Interest expense 0 12
-------- --------
NET LOSS (7) (290)
Loss per share $ (.002) $ (.094)
Weighted average Common
Shares outstanding 4,650 3,079
</TABLE>
See Accompanying Notes to Financial Statements
2
<PAGE> 4
REGENT TECHNOLOGIES, INC.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 1999 December 1998
---------- -------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 0 $ 0
Accounts receivable from
related party 20 48
-------- --------
Total Current Assets 20 48
Furniture and fixtures 6 6
Computer and electronic equipment 5 5
-------- --------
11 11
Less accumulated depreciation 7 7
-------- --------
Total Fixed Assets 4 4
Other Assets 67 67
TOTAL ASSETS 91 119
LIABILITIES
Current Liabilities
Accounts Payable $ 30 $ 48
Accrued Compensation 0 170
-------- --------
Total Current Liabilities 30 218
Long Term Liabilities 64 64
Stockholder's Equity (Deficiency)
Common stock par value $.01 per share
Authorized 100,000,000 shares
Issued and outstanding -
5,500,817 and 3,643,693 shares 55 36
Capital in excess of par value 3,317 3,149
Accumulated deficit (3,375) (3,348)
-------- --------
Total Stockholders' Equity $ (3) $ (163)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY) $ 91 $ 119
</TABLE>
See Accompanying Notes to Financial Statements
3
<PAGE> 5
REGENT TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
-------- --------
(Amounts in thousands)
<S> <C> <C>
Cash Flow From Operating Activities:
Loss From Operations $ (7) $ (290)
-------- --------
Adjustments To Reconcile Net
Income to Net Cash (Used) Provided by
Operating Activities
Depreciation 52
(Increase) Decrease in
Receivables 8 (41)
Deposits (5)
Increase (Decrease) in
Accounts payable (17) 38
Accrued compensation (170) 77
-------- --------
Net Cash Used In Operating Activities $ (186) $ (169)
-------- --------
Cash Flow From Investing Activities:
Net collections on notes $ 0 $ 46
Increase (Decrease) of equipment 36
Proceeds (Costs) of investment
in subsidiary (1)
Net Cash Used In -------- --------
Investing Activities $ 0 $ 81
Cash Flow From Financing Activities:
Net issuance of Common Stock $ 186 $ 40
Increase (Decrease) of equipment (29)
Net proceeds from (repayment of)
note to stockholder 77
-------- --------
Net Cash Provided From
Financing Activities $ 186 $ 88
-------- --------
Decrease in Cash 0 0
Cash at Beginning of Year $ 0 $ 2
-------- --------
Cash at End of Period $ 0 $ 2
</TABLE>
See Accompanying Notes to Financial Statements
4
<PAGE> 6
REGENT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999 (unaudited) and December 31, 1998
(1) BASIS OF PRESENTATION
The accompanying financial statements, which should be read in conjunction with
the financial statements of Regent Technologies, Inc. ("the Company") included
in the 1998 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.
(2) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Regent Technologies, Inc., 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. Activities of the Company up to
1992 were primarily organization, issuance of equity capital and acquisition of
developed and undeveloped oil and gas properties which included the formation of
Earth Minerals, Inc. in 1991, which was later renamed Regent Industries, Inc. In
1992, the Company redirected its core activities and acquired SSB Environmental,
Inc. ("SSBE"), which was organized for the purpose of obtaining waste and
landfill reclamation contracts and accounted for under the purchase method of
accounting. Effective January 1, 1996, the Company sold 100% of Regent
Industries and 81% of its interest in SSBE, and the remaining 19% was accounted
for on the cost method of accounting. In September, 1996, the Company entered
into a license agreement for the technologies necessary to offer dialup access
to the Internet (the "Technology License" or "License"). During the fourth
quarter of 1996, the Company organized Regent TEL1 Communications, Inc. ("TEL1")
as a Nevada corporation and a wholly owned subsidiary to market its Internet
products and services primarily to consumer markets. In the third quarter of
1997, the Company acquired ConnecTen, L.L.C. as a wholly owned subsidiary to
market its dedicated Internet access services to professionals and corporations.
Effective January 1, 1998, the Company acquired Channel Services, LC, to expand
its telecommunications products to include wireless telephone services. The
acquisitions of ConnecTen and Channel Services were accounted for under the
purchase method of accounting. During the first quarter of 1998, the Company
organized Regent Digital Imaging, Inc. to offer digital printing and prepress
services with access available via the Internet. Effective January 1, 1998, the
Company divested 100% of its ownership in all subsidiary companies. The
investment in SSBE was written off without value as of December 31, 1998.
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.
Income Taxes
The Company utilizes 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 liabilities
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 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 carryforwards 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.
Loss Per Share
Loss per share is based on the weighted average number of common shares
outstanding for each period presented. Common stock equivalents are included if
dilutive. In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share," which is required to be adopted for
years ending December 15, 1997. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options and warrants
will be excluded. Statement No. 128 is not expected to have a material impact on
the net income per share of the Company.
Cash Equivalents
The Company does not consider any of its assets to meet the definition of a cash
equivalent.
5
<PAGE> 7
REGENT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999 (unaudited) and December 31, 1998
(3) TRANSACTIONS WITH RELATED PARTIES
During the first quarter, 1999, the Directors approved settlement agreements
with the Chairman, the President, the General Counsel, the Director of Marketing
and the Chief Technical Officer to terminate each of their employment contracts
and the deferred compensation amounts due thereunder.
The Chairman accepted a $90,000 promissory note for the $90,000 deferred
compensation owed. The promissory note was assigned to a third party and
redeemed by the Company with 900,000 shares of restricted Common Stock. In
addition, the Chairman agreed to accept conveyance of 100% of the ownership and
interests in Regent Digital Imaging, Inc. and ConnecTen, L.L.C. in exchange for
all other monies owed to the Chairman including $200,000 owed under a secured
line of credit and termination of his employment contract. From the assets of
the transferred companies, the Chairman agreed to pay certain Company payables,
including $20,000 to the Company plus monies owed to the General Counsel, the
Chief Technical Officer and the Director of Marketing and related taxes for the
termination of their employment contracts.
The President accepted a $90,000 promissory note and an account payable of
$10,000 for the $80,000 deferred compensation owed and $20,000 of expense
reimbursement for the termination of his employment contract. The promissory
note was assigned to a third party and paid by the Company with 900,000 shares
of Common Stock.
In addition, the Company released the Chief Technical Officer from his Contract
in exchange for the stock grant thereunder. Pursuant thereto, 42,876 shares of
Company restricted Common Stock was returned to the Company. Also, the Company
issued 50,000 shares of restricted Common Stock each to the General Counsel and
the Director of Marketing to fulfill previous commitments.
(4) COMMITMENTS
The Company has a lease on its office space located at 2929 Elm Street, Dallas,
Texas 75226 for $3,500 per month, which lease expires on August 31, 2000. The
Company has month to month subleases with WorkSoft, Inc. for $2,000 per month
and with ConnecTen, L.L.C. for $1,500 per month.
(5) SUBSEQUENT EVENTS
Effective June 22, 1999, the Board of Directors appointed Lupe Vasquez and Brian
Layton as Directors.
Effective June 28, 1999, the Board of Directors accepted the resignations of Roy
W. Mers as Director, Chairman and as Chief Executive Officer and David A. Nelson
as Director and President.
Effective June 28, 1999 the Board of Directors appointed Robyn Sterritt as
Director, President and Chief Executive Officer. Ms. Sterritt was also elected
Chairman of the Board of Directors effective June 28, 1999.
The Company entered into an agreement to issue 36,666,666 shares of restricted
Common Stock to the Straza Family Limited Partnership in exchange for $1,000,000
in notes receivable and additionally issued the following options to that
entity:
1. For six months, the option to purchase, for cash or assets, up to
$1,400,000 worth of restricted stock at $.03 per share
2. For two years, the option to purchase up to 5,000,000 restricted
shares at a purchase price of $.50 per share
3. For three years, the option to purchase up to 5,000,000 restricted
shares at a purchase price of $1.00 per share
4. For four years, the option to purchase up to 5,000,000 restricted
shares at a purchase price of $2.00 per share
Regent plans to expand its focus to include waste management, landfill
management, recycling, and other environmental service areas.
6
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations
The statements contained in this Form 10-QSB that are not historical facts are
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995) that involve risks and uncertainties. Such
forward-looking statements may be identified by, among other things, the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
should" or "anticipates" or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy that involve risks and
uncertainties. From time to time, the Company or its representatives have made
or may make forward-looking statements, orally or in writing. Such
forward-looking statements may be included in various filings made by the
Company with the Securities and Exchange Commission (the "SEC"), or press
releases or oral statements made by or with the approval of an authorized
executive officer of the Company. These forward-looking statements, such as
statements regarding anticipated future revenues, capital expenditures and other
statements regarding matters that are not historical facts, involve predictions.
The Company's actual results, performance or achievements could differ
materially from the results expressed in, or implied by, these forward-looking
statements.
Business and Acquisition Strategy
With the Company's decision to return to the landfill and waste related
businesses, the Company will seek to expand this business with the acquisition
of companies in markets where consolidations are an appropriate method for
long-term growth. The Company expects to initiate operation centers in four new
markets primarily by the acquisition of existing companies primarily with
issuance of the Company's restricted Common Stock.
Financial Condition
Liquidity and Capital Resources
At March 31, 1999, the Company had net working capital of $10,000. The Company
has no amortization requirements under any term loan agreements. The Company is
not current on its trade payables including amounts owed to officers and
affiliates. The Company continues to raise monies as needed through proceeds
from the sale of the Company's common stock.
Results of Operations
COMPARISION OF THE THREE MONTHS ENDED MARCH 31, 1999 TO THE THREE MONTHS ENDED
MARCH 31, 1998
The Company's net loss for the three months ending March 31, 1999 was
$7,000 or $.002 cents per common share, compared with a net loss of $290,000 for
the same period in 1998. The $4,000 recorded as Other Income was due to the
receipt of 42,876 shares of Common Stock of the Company for the settlement of an
employee contract. A total of $10,000 was recorded as expense related to the
100,000 shares of Common Stock granted to settle employee related compensation.
The primary difference for the current three month period as compared to the
previous year was the decrease of general and administrative costs for the
current period.
7
<PAGE> 9
PART II - OTHER INFORMATION
Item 5. Other Information
Effective June 22, 1999 the Board of Directors elected Lupe Vasquez and Brian
Layton as Directors. Effective June 28, 1999 the Board of Directors accepted the
resignations of Roy W. Mers as Director, Chairman and Chief Executive Officer
and David A. Nelson as Director and President. Effective June 28, 1999 the Board
of Directors appointed Robyn Sterritt as a Director, President and Chief
Executive Officer. Ms. Sterritt was also elected as Chairman of the Board of
Directors effective June 28, 1999.
Item 6. Exhibits and Reports on Form 8-k
(a) Exhibits
27 Financial data schedule for the quarter ended March 31, 1999 (included
only in the copy of this report filed electronically).
(b) Reports of Form 8-k
On March 9, 1999 Regent announced that it had sold all of the assets of its
wholly owned subsidiary, Regent Digital, Inc. to The Color Place, Inc., a
Texas corporation. The corporate headquarters were moved to 2929 Elm
Street, Dallas, Texas 75226.
On April 2, 1999 Regent announced the sale of all of the assets of
ConnecTen, L.L.C. to Internet Allegiance, Inc.
On July 19, Regent announced the changes to its Board of Directors and
officers, sale of stock to the Straza Family Limited Partnership, and its
plans to expand into the landfill, waste managsement, and recycling areas.
8
<PAGE> 10
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly cause this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REGENT TECHNOLOGIES, INC.
Registrant
Date /s/ David A. Nelson
June 23, 1999 David A. Nelson
Principal Financial Officer
Date /s/ Roy W. Mers
June 23, 1999 Roy W. Mers
Principal Executive Officer
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ------------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 20
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20
<PP&E> 11
<DEPRECIATION> 7
<TOTAL-ASSETS> 91
<CURRENT-LIABILITIES> 30
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (3)
<TOTAL-LIABILITY-AND-EQUITY> 91
<SALES> 4
<TOTAL-REVENUES> 0
<CGS> 1
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7)
<EPS-BASIC> (.002)
<EPS-DILUTED> (.002)
</TABLE>
