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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED June 30, 1997 COMMISSION FILE NO. 1-4766
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REGENCY AFFILIATES, INC.
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(Exact Name Of Registrant As Specified In Its Charter)
Delaware 72-0888772
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
729 South Federal Highway, Ste. 307, Stuart, Florida 34994
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(Address of principal executive offices) (Zip Code)
10842 Old Mill Road 5B, Omaha, Nebraska 68154
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(Address of administrative offices) (Zip Code)
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Registrant's Telephone Number (executive office) including Area Code: (561) 220-7662
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Registrant's Telephone Number (administrative office) including Area Code: (402) 330-8750
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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 practicable date.
$.40 Par Value Common Stock- 12,255,800 shares as of June 30, 1997 .
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<TABLE>
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements............................................................................3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.....................................................................................15
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings..............................................................................17
Item 2. Changes in Securities..........................................................................17
Item 3. Defaults Upon Senior Securities................................................................17
Item 4. Submission of Matters to a Vote of Security Holders............................................17
Item 5. Other Information..............................................................................17
Item 6. Exhibits and Reports on Form 8-K...............................................................17
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REGENCY AFFILIATES, INC.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following pages contain the information required by Part I, Item 1.
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<TABLE>
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REGENCY AFFILIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 DECEMBER 31,
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ASSETS (UNAUDITED) 1996
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 442,500 $ 2,303,700
Accounts receivable 445,300 - 0 -
Inventories 641,200 - 0 -
Other current assets 308,000 4,400
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Total current assets 1,837,000 2,308,100
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INVESTMENTS
Partnership investment 10,056,600 8,233,700
Rental property 118,900 50,900
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Total investments 10,175,500 8,284,600
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PROPERTY AND EQUIPMENT
Machinery and equipment 28,900 - 0 -
Leasehold improvements 73,200 - 0 -
Other 35,900 - 0 -
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138,000
Less accumulated depreciation 15,000 - 0 -
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Net property and equipment 123,000 - 0 -
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OTHER ASSETS
Aggregate inventory 850,000 850,000
Goodwill and intangibles, net 666,700 - 0 -
Other 191,300 124,000
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Total other assets 1,708,000 974,000
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$13,843,500 $11,566,700
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</TABLE>
The accompanying notes are an integral part of these financial statements.
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<TABLE>
<CAPTION>
REGENCY AFFILIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 DECEMBER 31,
LIABILITIES AND SHAREHOLDERS' EQUITY (UNAUDITED) 1996
<S> <C> <C>
CURRENT LIABILITIES
Notes Payable $ 335,000 $ ---
Accounts payable 249,500 79,900
Accrued expenses 68,700 58,200
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Total current liabilities 653,200 138,100
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LONG-TERM DEBT 4,567,800 4,199,900
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 98,100 101,100
SERIAL PREFERRED STOCK SUBJECT TO MANDATORY
REDEMPTION (liquidation preference and redemption value $350,400
and $504,400 in 1997 and 1996, respectively) 266,900 401,100
SHAREHOLDERS' EQUITY
Serial preferred stock not subject to mandatory redemption (maximum
liquidation preference, $24,921,400 and $24,903,400 in 1997 and
1996, respectively) 1,053,000 1,053,000
Common stock, par value $.40, authorized 25,000,000 shares issued
and outstanding 12,255,800 and 11,399,900 shares in 1997 and 1996,
respectively (net of 22,460 treasury shares) 4,892,000 4,549,600
Additional paid in capital 241,500 140,000
Readjustment resulting from quasi-reorganization at December 31,
1987 (1,670,600) (1,670,600)
Retained earnings 3,741,600 2,654,500
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Total shareholders' equity 8,257,500 6,726,500
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$ 13,843,500 $ 11,566,700
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</TABLE>
The accompanying notes are an integral part of these financial statements.
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REGENCY AFFILIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
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Three Months Six Months
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1997 1996 1997 1996
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<S> <C> <C> <C> <C>
NET SALES $ 678,400 $ -- $ 795,400 $ --
COSTS AND EXPENSES
Cost of goods sold 432,600 -- 498,100 --
Selling and administrative 575,000 96,000 714,800 267,200
Other 500 -- 21,700 --
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS (329,700) (96,000) (439,200) (267,200)
INCOME FROM EQUITY INVESTMENT IN
PARTNERSHIP 1,072,300 1,051,200 1,925,700 1,709,600
INTEREST INCOME 12,200 -- 37,500 --
INTEREST EXPENSE (194,100) (22,500) (383,100) (30,200)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAX EXPENSE &
MINORITY INTEREST 560,700 932,700 1,140,900 1,412,200
INCOME TAX EXPENSE -- 139,700 11,100 159,700
MINORITY INTEREST 1,400 1,200 3,000 2,400
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NET INCOME $ 562,100 $ 794,200 $ 1,132,800 $ 1,254,900
=========== =========== =========== ===========
NET INCOME APPLICABLE TO COMMON
STOCK (after accrued preferred stock dividends of
$13,500; $15,800; $29,300; and $31,600,
respectively in 1997 and 1996, and preferred stock
accretion of $8,100; $7,000; $16,200; and $14,000,
respectively in 1997 and 1996.) $ 540,500 $ 771,400 $ 1,087,800 $ 1,209,300
=========== =========== =========== ===========
NET INCOME PER SHARE
Primary $ .05 $ .07 $ .09 $ .11
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Fully diluted $ .04 $ .06 $ .08 $ .09
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</TABLE>
The accompany notes are an integral part of these financial statements.
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REGENCY AFFILIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
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1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,132,800 $ 1,254,900
Adjustments to reconcile net income to net cash used by operating
activities:
Minority interest (3,000) (2,400)
Stock issued for services 233,300 93,300
Income from equity investment in partnership (1,925,700) (1,709,600)
Distribution of equity earnings from partnership 102,800 103,200
Interest amortization on long-term debt 367,900 12,000
Depreciation and amortization 40,600 --
Changes in operating assets and liabilities:
Accounts receivable (191,000) --
Inventories (154,200) --
Other current assets (283,200) (18,400)
Other assets (49,300) 400
Accounts payable 19,400 (30,500)
Accrued expenses (253,100) 192,200
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Net cash used by operating activities (962,700) (104,900)
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CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business, net of $13,500 cash acquired (1,086,500) --
Acquisition of property (89,200) --
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Net cash used by investing activities (1,175,700) --
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 335,000 --
Proceeds from issuance of long-term debt -- 3,500,000
Debt issuance and offering costs (28,500) (455,300)
Dividends paid (29,300) (15,800)
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Net cash provided by financing activities 277,200 3,028,900
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INCREASE (DECREASE) IN CASH (1,861,200) 2,924,000
CASH-BEGINNING 2,303,700 39,700
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CASH-ENDING $ 442,500 $ 2,963,700
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The accompanying notes are an integral part of these financial statements.
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<TABLE>
<CAPTION>
1997 1996
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Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ 30,000 - 0 -
Supplemental disclosure of noncash investing and financing
activities:
In 1997, the Company issued 100,000 shares of common stock in
connection with the acquisition of the assets of Rustic Crafts Co.,
Inc.
In 1997, 1,505 shares of Series E preferred stock were converted
into 289,300 shares of the Company's common stock.
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The balance of this page has been intentionally left blank.
The accompany notes are an integral part of these financial statements.
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REGENCY AFFILIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation and Summary of Significant Accounting
Policies
A. Basis of Presentation - The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three-month and six-month
periods ended June 30, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Registrant Company
and Subsidiaries' annual report on Form 10-K for the year ended
December 31, 1996.
B. Principles of Consolidation - The consolidated financial statements
include the accounts of Regency Affiliates, Inc. (the "Company"),
its wholly-owned subsidiary, Rustic Crafts International, Inc.
("RCI") (see Note 6), and its 80% owned subsidiaries National
Resource Development Corporation ("NRDC"), Transcontinental Drilling
Company ("Drilling") and RegTransco, Inc. ("RTI"). All significant
intercompany balances and transactions have been eliminated in
consolidation.
C. Earnings Per Share - Primary earnings per share are computed by
dividing net income attributable to common shareholders (net income
less preferred stock dividend requirements and periodic accretion)
by the weighted average number of common and dilutive equivalent
shares outstanding during the year. Fully diluted earnings per share
computations assume the conversion of Series E, Series B, and Junior
Series D preferred stock during the period that the preferred stock
issues were outstanding. If the result of these assumed conversions
is dilutive, the dividend requirements and periodic accretion for
the preferred stock issues are reduced.
D. Inventory - Inventories are stated at the lower of cost or market.
Cost is determined using the first-in, first-out method. Inventories
were comprised of the following at June 30, 1997:
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Raw materials and supplies $ 146,700
Work in process 44,200
Finished products 450,300
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$ 641,200
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E. Aggregate Inventory - Aggregate inventory is stated at lower of cost
or market. Liens have been attached to the aggregate by the holders
of certain zero coupon bonds, having a face value of $542,200 and a
carrying valuing of $367,900 at June 30, 1997. The Company is also
subject to a royalty agreement which requires the payment of certain
royalties to a previous owner of the aggregate upon sales of the
aggregate.
F. Income Taxes - The Company utilizes Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes," which requires an asset and liability approach to financial
accounting and reporting for income taxes. The difference between
the financial statement and tax basis of assets and liabilities is
determined annually. Deferred income tax assets and liabilities are
computed for those temporary differences that have future tax
consequences using the current enacted tax laws and rates that apply
to the periods in which they are expected to affect taxable income.
In some situations SFAS 109 permits the recognition of expected
benefits of utilizing net operating loss and tax credit
carryforwards. Valuation allowances are established based on
management's estimate, if necessary. Income tax expense is the
current tax payable or refundable for the period plus or minus the
net change in the deferred tax assets and liabilities.
NOTE 2. INVESTMENT IN PARTNERSHIP
In November 1994, the Company purchased a limited partnership interest
in Security Land and Development Company Limited Partnership
("Security"), which owns and operates an office complex. The Company
has limited voting rights and is entitled to be allocated 95% of the
profit and loss of the partnership until October 31, 2003 (the lease
termination date of the sole tenant of the office complex) and 50%
thereafter. The Company is to receive certain limited cash flow after
debt service, and a contingent equity build-up depending upon the value
of the project upon termination of the lease. The Company is also
entitled to receive certain management fees relating to the
partnership.
Security was organized to own and operate a building of approximately
717,000 net square feet consisting of a two-story office building and a
connected six-story office tower. The building was purchased by
Security in 1986 and is located on approximately 34.3 acres of land
which is also owned by Security. The building has been occupied by the
United States Social Security Administration's Office of Disability and
International Operations for approximately 22 years under leases
between the United States of America, acting by and through the General
Services Administration ("GSA"). Effective November 1, 1994, Security
and the GSA entered into a nine-year lease (the "Lease") for 100% of
the building. Security has received an opinion of the Assistant General
Counsel to the GSA that lease payments are not subject to annual
appropriation by the United States Congress and the obligations to make
such payments are unconditional general obligations of the United
States Government.
The Company accounts for the investment in partnership on the equity
method, whereby the carrying value of the investment is increased or
decreased by the Company's allocable share of income or loss. The
investment in partnership included in the Consolidated Balance Sheet at
June 30, 1997 was $10,056,600. The income from the Company's equity
investment in the
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partnership for the three-months and the six months ended June 30, 1997
was $1,072,300 and $1,925,700, respectively.
Summarized operating data for Security for the three months and six
months ended June 30, 1997, and June 30, 1996, is as follows:
<TABLE>
<CAPTION>
Three Months Six Months
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1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Revenues $2,788,500 $2,797,100 $5,524,100 $5,632,500
Operating Expenses 743,600 767,400 1,541,100 1,556,000
Depreciation and
Amortization 623,000 483,200 1,208,600 945,200
Interest Expense, Net 293,000 440,000 747,400 1,331,700
---------- ---------- ---------- ----------
Net Income $1,128,900 $1,106,500 $2,027,000 $1,799,600
========== ========== ========== ==========
</TABLE>
NOTE 3. LONG-TERM DEBT
The Company entered into a Credit Agreement (the "Agreement") in 1996
with an initial principal amount of $3,500,000. The Agreement provides
that semi-annual Regular Interest at 14% and Contingent Interest at an
additional 6% may be added to the principal outstanding balance.
Long-term debt was increased by $175,300 and $347,800 for the three
months and six months ended June 30, 1997, respectively, as a result of
the accrual of Regular and Contingent Interest.
NOTE 4. SHORT-TERM BORROWINGS.
In May 1997, RCI entered into a Loan Agreement with a bank which
provides for a line of credit with a maximum loan amount of $1,000,000.
Interest is payable monthly, computed at a variable rate of 0.5% over
the bank's prime lending rate; such rate is currently 9%. The principal
balance of the loan is payable at maturity in May 1998.
RCI's accounts receivable, inventory, and other general intangibles are
pledged as security for the loan. The loan is also guaranteed by
Regency Affiliates, Inc., the parent company. The security agreement
requires RCI to maintain certain financial ratios. RCI was in
compliance with such ratios at June 30, 1997. At June 30, 1997 the
amount outstanding under the Loan Agreement was $335,000.
NOTE 5. INCOME TAXES
As indicated in Note 1, the Company utilizes SFAS 109, "Accounting for
Income Taxes". The deferred taxes are the result of long-term temporary
differences between financial reporting and tax reporting for earnings
from the Company's partnership investment in Security Land and
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Development Company Limited Partnership related to depreciation and
amortization and the recognition of income tax carryforward items.
At June 30, 1997, the Company's net deferred tax asset, utilizing a 34%
effective tax rate, consists of:
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<CAPTION>
<S> <C>
Deferred tax assets:
Investment partnership earnings $ 2,016,000
Net operating loss carryforwards 12,200,000
Alternative minimum tax credits 250,000
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Total deferred tax assets before valuation
allowance 14,466,000
Valuation allowance (14,466,000)
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Net deferred tax asset $ -0-
==============
</TABLE>
The valuation allowance was established to reduce the net deferred tax
asset to the amount that will more likely than not be realized. This
reduction is necessary due to uncertainty of the Company's ability to
utilize the net operating loss and tax credit carryforwards before they
expire.
For regular federal income tax purposes, the Company has remaining net
operating loss carryforwards of approximately $39,200,000. These losses
can be carried forward to offset future taxable income and, if not
utilized, will expire in varying amounts beginning in the year 2000.
For the three months and six months ended June 30, 1997, the tax effect
of net operating loss carryforwards reduced the current provision for
federal income taxes by approximately $270,000 and $425,000,
respectively. The Company provided $11,100 for taxes which relates to
the alternative minimum tax.
NOTE 6. ACQUISITION
In March 1997, the Company, through RCI, a newly formed subsidiary,
acquired all of the operating assets including cash, accounts
receivable, inventory, property and equipment and intangibles of Rustic
Crafts Co., Inc. ("Rustic"). The business of RCI involves the
manufacture of wood and cast marble decorative electric fireplaces and
heater logs and related accessories. The Company paid $1,100,000 in
cash and issued 100,000 shares of the Company's common stock and
assumed Rustic's trade accounts payable, bank debt and certain other
accrued liabilities. Total liabilities assumed were $413,600. The
transaction was accounted for using the purchase method. The
transaction resulted in goodwill and intangibles of $678,000. Such
goodwill is being amortized on a straight-line basis over a fifteen
year period.
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The cash purchase price was provided by funds obtained under the
Agreement (see Note 3). The Company advanced $201,000 to retire the
bank debt of Rustic, subsequent to the purchase.
The following unaudited pro forma consolidated results of operations
assume the purchase of Rustic's assets by RCI occurred at the beginning
of 1996:
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 June 30, 1996
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<S> <C> <C>
Net sales $ 1,259,500 $ 842,600
Net income 1,146,500 1,241,000
Net income applicable to common stock 1,101,000 1,218,200
Net income per common share
Primary $ 0.09 $ 0.10
Fully Diluted $ 0.08 $ 0.08
</TABLE>
NOTE 7. MANDATORY PREFERRED STOCK
During the six months ended June 30, 1997, 1,505 shares of Series E
Preferred Stock were converted into 289,300 shares of common stock at a
price equal to 88% of the prior 90-day average bid price of the common
stock on the day of conversion.
NOTE 8. CONTINGENCIES, RISKS AND UNCERTAINTIES
The Company is subject to numerous contingencies, risks and
uncertainties including, but not limited to the following, that could
have a severe impact on the Company:
(i) Prior to the acquisition by RCI, the Company did not generate
positive cash flow and, historically, the Company has had limited
operating activities and its efforts have primarily been devoted
to acquiring or developing profitable operations. The Company's
ability to continue in existence is partly dependent upon its
ability to attain satisfactory levels of operating cash flow.
(ii) The Company currently lacks the necessary infrastructure at the
site of the Groveland Mine to permit the Company to make more
than casual sales of the aggregate.
(iii) As of June 30, 1997, the Company was dependent upon the
investment in Security Land and Development Company Limited
Partnership for a material portion of its reportable income.
(iv) An unsecured default in the Lease or sudden catastrophe to the
Security office complex from uninsured acts of God or war could
have a materially adverse impact upon the Company's investment in
Security Land and Development Company Limited Partnership and
therefore its financial position and results of operations (see
Note 2).
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(v) The Company has significant tax loss and credit carryforwards and
no assurance can be provided that the Internal Revenue Service
would not attempt to limit or disallow altogether the Company's
use, retroactively and/or prospectively, of such carryforwards,
due to ownership changes or any other reason. The disallowance of
the utilization of the Company's net operating loss would
severely impact the Company's financial position and results of
operations due to the significant amounts of taxable income
(generated by the Company's investment in Security) that has in
the past been, and is expected in the future to be, offset by the
Company's net operating loss carryforwards (see Note 5).
Note 9. Employment of Chief Executive Officer
In June 1997, the Company issued 466,700 shares of common stock at a
value of $233,300 to Statesman Group, Inc. ("Statesman"). Statesman owned 23.6%
of the Company's outstanding common stock prior to the issuance of these
shares. The shares were issued to Statesman in order to secure the release of
Mr. William Ponsoldt, Sr. to serve as President and Chief Executive Officer of
the Company.
The balance of this page has been intentionally left blank
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company may, from time to time, issue forward looking statements,
including, but not limited to the statements of future economic performance
contained in Item 2 of this Report, or elsewhere herein. Such forward looking
statements, whether contained in this report on Form 10-Q, or elsewhere, are
subject to the following factors that could cause actual results to differ
materially from those contained in the forward looking statements:
(i) The Company currently lacks the necessary infrastructure at the
site of the Groveland Mine to make more than casual sales of the
aggregate.
(ii) As of June 30, 1997, the Company was dependent upon the investment
in Security Land and Development Company Limited Partnership for a
material portion of its reportable income.
(iii) An unsecured default in the Lease or sudden catastrophe to the
Security West Building from uninsured acts of God or war could
have a materially adverse impact upon the Company's investment in
Security Land and Development Company Limited Partnership.
Liquidity and Capital Resources.
The investment in Security Land and Development Company Limited Partnership
is estimated to provide the Company with management fees of approximately
$100,000 per annum until 2003. In the six months ended June 30, 1997, the
Company's income from its equity investment in the Partnership was $1,925,700.
The Company acquired substantially all the assets and assumed certain
liabilities of Rustic Crafts Co., Inc. ("Rustic") in March 1997, through a new
wholly-owned Delaware corporation, Rustic Crafts International, Inc. ("RCI").
RCI is presently generating approximately $3,000,000 of annual sales. Assuming
that sales and expenses of RCI continue during 1997 at the same rates as are
presently being experienced, the Company projects that RCI will generate
positive cash flow of approximately $350,000 per year, before interest, taxes,
and principal payments.
The Company is continuing to explore opportunities for the acquisition of
companies with operations that will provide additional liquidity and cash flow.
The Company anticipates that such acquisitions would be financed by borrowings
secured by the assets acquired and by the proceeds of its existing Credit
Agreement, or other loans. There can be no assurances that any such acquisitions
or transactions will come to fruition.
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Results of Operations.
In March of 1997, the Company's wholly-owned subsidiary, RCI, acquired
the assets of Rustic. Accordingly, the Company's results for the three months
and six months ending June 30, 1997, include the results of operations of
RCI for the period between March 1, 1997, and June 30, 1997.
Three Months Ended June 30, 1997 Compared To Three Months Ended June 30,
------------------------------------------------------------------------
1996.
----
Net sales increased $678,400 due to the acquisition of RCI; cost of goods
sold relates to these sales. Selling and administrative expenses increased
$479,000 as a result of $169,600 of costs associated with RCI and an increase of
$309,400 in corporate expenses. Corporate expenses in this quarter include
$273,700 of costs associated with the employment of a chief executive officer
and office expenses resulting from the start up of an executive office.
Net income from the Company's equity investment in partnership increased
$21,100. Interest expense increased $171,600 as a result of the Credit Agreement
entered into in June 1996. Interest accrued is added to the principal amount of
the debt on a semi-annual basis.
Income tax expense decreased significantly as a result of the provision in
1996 for under accrual of prior years income taxes. No provision was made in the
second quarter of 1997 as accruals for 1996 were in excess of actual tax
liability.
Net income decreased $232,100 reflecting higher selling and administrative
costs and interest expense which offset the net operating income from RCI and
the reduced income taxes.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996.
--------------------------------------------------------------------------
Net sales increased $795,400 and cost of goods sold increased $498,100
reflecting the acquisition of RCI in March 1997. Selling and administrative
expenses increased $447,600 of which $216,800 was due to the acquisition of
RCI. The remaining increase was due to an increase in corporate expenses
resulting from costs associated with the employment of a Chief Executive
Officer, the start up of an executive office, higher legal fees, and increased
insurance costs.
Net income from the investment in partnership increased $216,100 largely as
a result of a decrease in net interest expense of $584,100 offset by an increase
in depreciation. The partnership is currently renovating and remodeling office
space as required by its lease agreement.
Interest expense increased $352,900 as a result of the Credit Agreement
entered into in June 1996.
Income tax expense decreased $148,600 as a result of provisions for prior
year taxes made in 1996.
Net income decreased $122,100 reflecting net operating income from RCI and
lower income taxes offset by higher corporate administrative costs and higher
interest expense.
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no legal proceedings pending against the Company or any of its
subsidiaries which management believes would have a material impact upon the
operations or assets of the Company.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
There have been no defaults in the payment of principal or interest with respect
to any senior indebtedness of Regency Affiliates, Inc.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to the vote of security holders during the reporting
period ending June 30, 1997.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Report on Form 8-K dated June 13, 1997.
Exhibit 27 - Financial Data Schedule.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
_____________REGENCY AFFILIATES, INC._______________
(Registrant)
August 29, 1997 By: /s/ William R. Ponsoldt, Sr.
- ------------------------------ -------------------------------------
Date William R. Ponsoldt, Sr., President
18
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1,053,000
4,892,000
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