Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014
OR
¨		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________

 

Commission file number:  001-13621

 

REGENT TECHNOLOGIES, INC.

(Exact name of Registrant as specified in its charter)

 

Colorado		84-0807913
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

5646 Milton, Suite 722, Dallas, Texas 75206

(Address of principal executive offices, including zip code)

 

855-744-7449

(Registrant’s telephone number, including area code)

 

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 þ No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

 

	Large accelerated filer   ¨	Accelerated filer   ¨
	Non-accelerated filer    ¨	Smaller reporting company  þ
	(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes ¨ No þ

 

The number of outstanding shares of the issuer’s only class of common stock as of August 11, 2014 was 22,360,233.

 

REGENT TECHNOLOGIES, INC.

 

TABLE OF CONTENTS

 

			Page No.
PART I.  FINANCIAL INFORMATION
Item 1.	Financial Statements		3
	Consolidated Balance Sheets at June 30, 2014 (Unaudited) and December 31, 2013 (Audited)		3
	Consolidated Statements of Operations (Unaudited) for the Three and Six Months ended June 30, 2014 and 2013		4
	Consolidated Statements of Cash Flows (Unaudited) for the Six Months ended June 30, 2014 and 2013		5
	Notes to Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		14
Item 4.	Controls and Procedures		14
PART II.  OTHER INFORMATION
Item 1.	Legal Proceedings		15
Item 1A.	Risk Factors		15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		15
Item 3.	Defaults Upon Senior Securities		15
Item 4.	Mine Safety Disclosures		15
Item 5.	Other Information		15
Item 6.	Exhibits		15
SIGNATURE			16

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements

 

 REGENT TECHNOLOGIES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

 

		June 30,				December 31,
		2014				2013
ASSETS			(Unaudited)
CURRENT ASSETS:
Cash in bank		$	5,520			$	5,051
Investments (Note 4)			244,428				244,428
Total current assets			249,948				249,479
PROPERTY AND EQUIPMENT (net of accumulated depletion and depreciation):
Oil and natural gas properties, full cost accounting
Unproved properties			3,080				3,080
Proved properties			200,021				200,021
Net profits production interest			4,167				4,167
Equipment and other fixed assets			228				381
Total property and equipment, net			207,496				207,649
Investments (Note 4)			207,422				207,422
TOTAL ASSETS		$	664,866			$	664,550
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	27,685			$	43,497
Notes payable - related parties			70,960				57,960
Accrued interest payable - related parties			3,477				1,907
Accrued liabilities - related parties			67,693				26,153
Total current liabilities			169,815				129,517
LONG TERM LIABILITIES:
Asset retirement obligation			10,660				10,660
TOTAL LIABILITIES		$	180,475			$	140,177
STOCKHOLDERS’ EQUITY:
Convertible Preferred stock, $0.10 par value, 1,000,000 shares authorized, 99,500 shares issued and outstanding, Regent Natural Resources Co.			9,950				9,950
Preferred stock, $0.10 par value, 30,000,000 shares authorized, no shares issued and outstanding, Registrant			—				—
Common stock, $0.01 par value, 100,000,000 shares authorized, 22,360,233 and 22,360,233 shares issued and outstanding, respectively			223,602				223,602
Paid-in capital in excess of par			3,545,875				3,545,875
Accumulated deficit			(3,295,036	)			(3,255,054	)
Total stockholders’ equity			484,391				524,373
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	664,866			$	664,550

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

REGENT TECHNOLOGIES, INC. AND SUBSIDIARY 

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2014 AND 2013

(Unaudited)

 

		For the				For the				For the				For the
		Three				Three				Six				Six
		Months				Months				Months				Months
		Ended				Ended				Ended				Ended
		June 30,				June 30,				June 30,				June 30,
		2014				2013				2014				2013
Revenues		$	—			$	—			$	—			$	1,753
Operating expenses:
Lease operating expense			—				1,221				—				2,166
Production and other taxes			—				—				—				81
Depreciation, depletion and amortization			77				211				153				573
General and administrative			17,363				43,872				38,259				56,561
Operating loss			(17,440	)			(45,304	)			(38,412	)			(57,628	)
Other income and (expense):
Net change in fair value measurement			—				181,216				—				181,216
Stock grant expense			—				—				—				(1,000	)
Interest expense			(845	)			(153	)			(1,570	)			(332	)
Total other income (expense)			(845	)			181,063				(1,570	)			179,884
Income (loss) from continuing operations before income taxes			(18,285	)			135,759				(39,982	)			122,256
Provisions for income taxes			—				—				—				—
Net income (loss)		$	(18,285	)		$	135,759			$	(39,982	)		$	122,256
Net income (loss) per common share  (basic and diluted)		$	(0.00	)		$	0.01			$	(0.00	)		$	0.01
Weighted Average Shares Outstanding			22,360,233				22,710,233				22,360,233				22,360,233

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

REGENT TECHNOLOGIES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED JUNE 30, 2014 AND 2013

(Unaudited)

 

		For the Six Months
		Ended June 30,
		2014				2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	(39,982	)		$	122,256
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation, depletion and amortization			153				573
Share-based compensation			—				1,000
Gain from fair value measurement			—				(181,216	)
Decrease in accrued oil and natural gas revenue			—				5,900
Increase (decrease) in accounts payable			(15,812	)			32,814
Increase (decrease) in accrued liabilities - related parties			41,540				(1,093	)
Increase in accrued interest payable - related parties			1,570				435
Net Cash Used In Operating Activities			(12,531	)			(19,331	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investments			—				93,600
Net Cash Provided By Investing Activities			—				93,600
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of note payable - stockholder			—				(10,000	)
Proceeds from notes payable - related party			13,000				11,100
Repayments of notes payable - related party			—				(42,448	)
Net Cash Provided By (Used In) Financing Activities			13,000				(41,348	)
INCREASE IN CASH AND CASH EQUIVALENTS			469				32,921
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			5,051				15,026
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	5,520			$	47,947
Supplemental disclosures of cash flow information:
Cash paid during the period for interest		$	—			$	178
Cash paid during the period for taxes		$	—			$	—
Supplemental disclosure of non-cash financing activities:
Note payable for investment in MacuCLEAR common stock		$	—			$	92,486

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

REGENT TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 1. Description of Business and Significant Accounting Policies

 

Regent Technologies, Inc., formerly Regent Petroleum Corporation, was incorporated under the laws of the State of Colorado on January 18, 1980. Beginning in the third quarter of 2010, the Company refocused its core business objectives and strategy on oil and gas exploration and development. The Company’s subsidiary was approved for a name change in 2010 to Regent Natural Resources Co. (“Regent NRCo”). Regent NRCo is a Texas based independent exploration and production company engaged in the acquisition and development of oil and natural gas properties. In this Form 10-Q, references to “we,” “our,” “us,” the “Company,” or “Regent” refer to Regent Technologies, Inc. and Regent’s wholly-owned subsidiary, Regent Natural Resources Co., a Texas corporation, is referred to herein as, the “Subsidiary,” or “Regent NRCo.”

 

The accompanying consolidated financial statements of the Company should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2013. The results of operations for the six months ended June 30, 2014 should not be considered as indicative of the results to be expected for the full year. Significant accounting policies are defined as those accounting policies which are most critical to the understanding of a company’s financial condition and results of operation. We consider an accounting estimate or judgment to be critical if (i) it requires assumptions to be made that were uncertain at the time the estimate was made, and (ii) changes in the estimate or different estimates that could have been selected and could have a material impact on our results of operations or financial condition. A summary of the significant accounting policies consistently applied by the Company in preparation of the accompanying consolidated financial statements are as follows:

 

Consolidation Principles

The consolidated financial statements of the Company included in this report have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and in accordance with accounting principles generally accepted in the United States (“US GAAP”). The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiary and include all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation. Intercompany balances and transactions have been eliminated in consolidation. Certain data in the prior period’s financial statements have been adjusted to conform to the presentation of the current period.

 

Estimates and Assumptions

 

The preparation of financial statements in conformity US GAAP requires our 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 periods. Actual results could differ materially from those estimates. The accounting policies most affected by management’s estimates and assumptions are provisions for depreciation, depletion and amortization, estimates of proved reserves, impairment of long-lived assets based on estimates of future net cash flows, and asset retirement obligations based on estimates regarding timing and cost of future asset retirements.

 

Oil and Natural Gas Properties

 

The Company follows the full-cost method of accounting under which all costs associated with property acquisition, exploration and development activities are capitalized. We capitalize internal costs that can be directly identified with our acquisition, exploration and development activities and do not include any costs related to production, general corporate overhead or similar activities. Estimates of our proved reserves as of December 31, 2013 were prepared by a third party engineering firm. See Note 10 in our Annual Report on Form 10-K for the year ended December 31, 2013.

 

 

REGENT TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

Proceeds from the sale of properties are accounted for as reductions of capitalized costs unless such sales involve a significant change in the relationship between costs and the value of proved reserves or the underlying value of unproved properties, in which case a gain or loss is recognized. The costs of unproved properties are excluded from amortization until the properties are evaluated. We review all of our unevaluated properties quarterly to determine whether or not and to what extent proved reserves have been assigned to the properties and otherwise if impairment has occurred. Unevaluated properties are grouped by major prospect area where individual property costs are not significant and are assessed individually when individual costs are significant. We review the carrying value of our properties under the full-cost accounting rules of the Securities and Exchange Commission on a quarterly basis. This quarterly review is referred to as a ceiling test. Under the ceiling test, capitalized costs, less accumulated amortization and related deferred income taxes, may not exceed an amount equal to the sum of the present value of estimated future net revenues (adjusted for hedges) less estimated future costs to be incurred in developing and producing the proved reserves, less any related income tax effects.

 

Valuation of Property and Equipment

 

Our long-lived assets, including proved oil and natural gas properties and equipment, are assessed for potential impairment in their carrying values whenever events or changes in circumstances indicate such impairment may have occurred. Estimates of oil and natural gas reserves, by necessity, are projections based on geologic and engineering data, and there are uncertainties inherent in the interpretation of such data as well as the projection of future rates of production and the timing of development expenditures. Reserve engineering is a subjective process of estimating underground accumulations of oil and natural gas that are difficult to measure.

 

Estimates of economically recoverable oil and natural gas reserves and future net cash flows necessarily depend upon a number of variable factors and assumptions, such as historical production from the area compared with production from other producing areas, the assumed effects of regulations by governmental agencies and assumptions governing future oil and natural gas prices, future operating costs, severance taxes, development costs and workover costs, all of which may in fact vary considerably from actual results. For these reasons, estimates of the economically recoverable quantities of oil and natural gas attributable to any particular group of properties may vary substantially. Furniture and equipment are stated at cost.

 

Depreciation and depletion of producing oil and natural gas properties are calculated using the units-of-production method. Proved developed reserves are used to compute unit rates for unamortized tangible and intangible development costs, and proved reserves are used for unamortized leasehold costs. Gains and losses on disposals or retirements that are significant or include an entire depreciable or depletable property unit are included in operating income. Depreciation of furniture, fixtures and equipment, consisting of office furniture, computer hardware and software and leasehold improvements is computed using the straight-line method over their estimated useful lives, which vary from three to five years.

 

Revenue Recognition

 

Oil and natural gas revenues are recognized when production is sold to a purchaser at a fixed or determinable price, when delivery has occurred and title has transferred, and if collectability of the revenue is probable. Revenues from the production of crude oil and natural gas properties in which we have an interest with other producers are recognized using the entitlements method. Differences between actual production and net working interest volumes are routinely adjusted.

 

Asset Retirement Obligation

 

Our asset retirement obligation primarily represents the estimated present value of the amount we will incur to plug, abandon and remediate our producing properties at the end of their productive lives, in accordance with federal, state and local laws. We account for asset retirement obligations based on the guidance of ASC No. 410, “Asset Retirement and Environmental Obligations” (“ASC 410”), which addresses the required accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. ASC 410 requires that the fair value of an asset’s retirement obligation be recorded as a liability in the period in which it is incurred and the corresponding cost capitalized by increasing the carrying amount of the related long-lived asset. Periodic accretion of the discount of the estimated liability is treated as accretion expense included in depreciation, depletion and amortization on our Consolidated Statements of Operations.

 

 

REGENT TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Income Taxes

 

We utilize the asset and liability method to account for income taxes. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured currently enacted tax rates expected to apply to taxable income in the years in which those differences are expected to reverse.

 

Share-Based Compensation

 

We account for equity based compensation under the provisions of ASC No. 718, “Compensation - Stock Compensation” (“ASC 718”). ASC 718 requires the recognition of the fair value of equity-based compensation in operations. The fair value of our stock option awards are estimated using a Black-Scholes option valuation model. This model requires the input of subjective assumptions and elections including expected stock price volatility and the estimated life of each award. In addition, the calculation of equity-based compensation costs requires that we estimate the number of awards that will be forfeited during the vesting period. The fair value of equity-based awards is amortized over the vesting period of the award and we elected to use the straight-line method for awards granted after the adoption of ASC 718 with no forfeitures.

 

Fair Value Measurements

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, whether in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk. In accordance with the requirements of ASC No. 820, “Fair Value Measurement” (“ASC 820”), the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under ASC 820 and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities are as follows:

 

•

Level 1 Inputs – unadjusted quoted market prices in active markets for identical assets or liabilities;

 

•

Level 2 Inputs – quotes which are derived principally from or corroborated by observable market data. Included in this level are interest rate information and commodity pricing data obtained from third party pricing sources and our creditworthiness; and

 

•

Level 3 Inputs – unobservable inputs for the asset or liability, such as discounted cash flow models or valuations, based on the Company’s various assumptions and future commodity prices. Included in this level is the carrying value of our investment in MacuCLEAR Preferred Stock (see Note 4).  None of our investments are held for trading purposes.

 

Earnings per Common Share

 

Earnings per common share are determined under the provisions of ASC No. 260, “Earnings per Share” (“ASC 260”), which requires the Company to report both basic earnings per share, which is based on the weighted-average number of common shares outstanding, and diluted earnings per share, which is based on the weighted-average number of the common shares outstanding plus all potentially dilutive shares outstanding. At June 30, 2014, there are no exercisable common stock equivalents that are potentially dilutive. Accordingly, no common stock equivalents are included in the earnings per share calculations and basic and diluted earnings per share are the same for all periods presented.

 

 

 

REGENT TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

Recent Accounting Pronouncements

 

During the quarter ended June 30, 2014, there were several new accounting pronouncements issued by the Financial Accounting Standards Board ( FASB). Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s financial position or operating results. The Company will monitor these emerging issues to assess any potential future impact on its consolidated financial statements.

Other Accounting Policies

 

The remaining significant accounting policies of the Company are described in Note 1 to the consolidated financial statements of the 2013 Form 10-K. In management’s opinion, the accounting policies and estimates presented in the 2013 Form 10-K have not changed and therefore the unaudited consolidated financial statements herein should be read in conjunction with the Company’s audited financial statements on Form 10-K for the year ended December 31, 2013, which was previously filed with the Securities and Exchange Commission. There were other accounting standards and interpretations issued in 2014 and 2013, all of which have been determined to not be applicable or significant by management and are not expected to have a material impact on the financial position of the Company.

 

NOTE 2. Going Concern Uncertainties

 

As of the date of this quarterly report, there is substantial doubt regarding our ability to continue as a going concern as we have not generated sufficient cash flow to fund our business operations and material commitments. Our future success and viability, therefore, are dependent upon our ability to generate capital financing. We are optimistic that we will be successful in our new business operations and capital raising efforts; however, there can be no assurance that we will be successful in generating revenue or raising additional capital. The failure to generate sufficient revenues or raise additional capital may have a material and adverse effect upon the Company and our shareholders. These consolidated financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying consolidated financial statements.

 

NOTE 3. Share-Based Compensation

 

Effective October 1, 2012, the Company entered into an agreement to grant as compensation certain amounts of restricted common shares for consulting services. The consulting agreement included an immediate grant and additional grants of up to an additional 500,000 restricted common shares, vesting and issued quarterly beginning December 31, 2012. Pursuant to the agreement, the Company advanced $2,950 to the consultant for expense coverage which amount was personally guaranteed by the consultant. On September 30, 2013, the parties agreed that the consulting agreement was voided ab initio in exchange for the cancellation of the $2,950 receivable and the termination of further obligations between the parties. Accordingly, the stock grant recognition and share based expense and equity transactions related to this agreement have been voided from inception with the necessary adjustments to the financial statements.

 

 

REGENT TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 4. Investments

 

As of June 30, 2014, the Company’s Subsidiary is holding 76,590 shares of MacuCLEAR Series A Preferred Stock (“MacuCLEAR”) and 19,268 shares of MacuCLEAR common stock for the partial redemption of the Subsidiary’s outstanding Series A Preferred Stock. The MacuCLEAR preferred and common stock being held for the partial redemption of Subsidiary Preferred Stock is held at cost or basis whichever is less. Also as of June 30, 2014, the Company’s Subsidiary is holding 20,369 shares of MacuCLEAR Preferred Stock for capital reallocation as a current asset. The carrying value for the shares being marketed receive Level 3 Fair Value Measurement under ASC 820 of $12.00 per share based on sales by MacuCLEAR of new issues of Preferred Stock with the same designations in 2013.

 

NOTE 5. Asset Retirement Obligation

 

We have included estimated future costs of abandonment and dismantlement in our amortization base and amortize these costs as a component of our depreciation, depletion, and accretion expense. The Company has not increased the asset retirement obligation for this quarter due to only nominal impact.

 

NOTE 6. Income Taxes

 

The Company recognizes deferred tax assets and liabilities based on estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, future tax benefits, such as those from net operating loss carry forwards, are recognized to the extent that realization of such benefits is more likely than not. As of June 30, 2014, we have no unrecognized tax benefits and there were no significant changes to the calculation since December 31, 2013.

 

NOTE 7. Acquisitions

In December 2013, our subsidiary, Regent Natural Resources Co., entered into an agreement to explore and develop a lease covering 2,400 gross acres in Zavala County, Texas. The leasehold is prospective for oil in the Eagle Ford shale, the Austin Chalk and the Buda Limestone formations. The lease has produced over 140,000 barrels of oil since 1990 from two wells completed in the Austin Chalk and one well continues to produce 3-5 barrels per day. Regent has negotiated a 43% working interest for the re-completion or deepening of two Austin Chalk wells and has the exclusive right to negotiate future exploration.

 

NOTE 8. Related Party Transactions

 

In January 2013, the Company repaid a promissory note to a stockholder in the principal amount of $10,000 plus interest expense of $178 and our Subsidiary paid $15,400 as a partial payoff of the amounts owed to SIG Partners, LC. During the second quarter of 2013, the Subsidiary purchased 19,268 shares of MacuCLEAR common stock from the President for $4.80 per share. The Company entered into a promissory note for the total purchase price. The promissory note bears interest at 5% per annum and is due on or before December 31, 2014. The difference of $83,815 between the purchase price for the MacuCLEAR common stock and the President’s cost basis was applied as a reduction to our Subsidiary’s paid-in capital. During September 2013, the Company borrowed $5,000 from a director under a promissory note due and payable on or before June 30, 2014, which note was increased by $3,000 during this quarter and the maturity was extended to December 31, 2014. In March 2014, the Company borrowed $10,000 from a director under a convertible promissory note with interest at 10% per annum, and effective July 1, 2014, the director converted $5,000 into 100,000 shares of restricted common stock of the Company and the remaining balance of $5,000 plus interest was repaid. As of June 30, 2014, the amount outstanding under promissory notes to officers and directors is $70,960

 

During the current quarter, the Company’s borrowings from NR Partners increased to $67,693. NR Partners is a partnership comprised of the President and a director of the Company and SIG Partners, LC is an entity owned by the President of the Company.

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion is intended to assist in understanding our results of operations and our financial condition. This item should be read in conjunction with management’s discussion and analysis contained in our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission (“SEC”). Our consolidated financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q contains additional information that should be referred to when reviewing this material.

 

The information in this Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical or current facts, that address activities, events, outcomes and other matters that we plan, expect, intend, assume, believe, budget, predict, forecast, project, estimate or anticipate (and other similar expressions) will, should, could or may occur in the future are forward-looking statements. These forward-looking statements are based on management’s current expectations and belief, based on currently available information, as to the outcome and timing of future events and their effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All statements concerning our expectations for future operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties, many of which are beyond our control, and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those described in (1) Part I, “Item 1A - Risk Factors” and other cautionary statements in our Form 10-K for 2013, (2) our reports and registration statements filed from time to time with the SEC, and (3) other announcements we make from time to time. We undertake no obligation to update a forward-looking statement to reflect subsequent events, changed circumstances, or the occurrence of unanticipated events which included, among others, the following:

 

	•	difficult and adverse conditions in the domestic and global economies;
	•	changes in domestic and global demand for oil and natural gas;
	•	volatility in the prices we receive for our oil and natural gas;
	•	the effects of government regulation, permitting and other legalities;
	•	future developments with respect to the reserves on our properties;
	•	uncertainties about the estimates of our oil and natural gas reserves;
	•	our ability to increase our production through development;
	•	drilling and other operating risks;
	•	the availability of equipment, such as drilling rigs and pipelines; and
	•	changes in our drilling plans, related budgets and liquidity.

 

We caution you that these forward-looking statements are subject to all of the risks and uncertainties incident to the exploration for and development, production and marketing of oil and gas. These risks include, but are not limited to:

 

	•	the possibility of unsuccessful exploration and development drilling activities;
	•	our ability to replace and sustain production;
	•	the availability of capital on economic terms to fund our capital expenditures and acquisitions;
	•	our level of indebtedness;
	•	the impact of the past or future economic recessions on our business operations, financial condition and ability to raise capital;
	•	the ability of financial counterparties to perform or fulfill their obligations under existing agreements;
	•	the uncertainty inherent in estimating proved oil and gas reserves and in projecting future rates of production and timing of development expenditures;
	•	hurricanes and other weather conditions;
	•	lack of availability of goods and services;
	•	regulatory and environmental risks associated with drilling and production activities; and
	•	other factors discussed below and elsewhere in this Quarterly Report on Form 10-Q and in our other public filings, press releases and discussions with our management.

 

 

Other unknown or unpredictable factors may cause actual results to differ materially from those projected by the forward-looking statements. Unless otherwise required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For additional information regarding known material factors that could cause our actual results to differ from projected results, please read the rest of this report and Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013.

 

General and Business Overview

 

Our Company is organized as a management company of non-operated oil and gas properties. As such, the Company relies on registered professionals for geological and engineering services. The Company plans to acquire an operating subsidiary in the future as our critical mass grows.

 

Our Properties and Strategies for 2014

 

Our property focus for 2014 is on the development of the leaseholds in which we have an interest in the Eagle Ford Shale Trend and the East Texas Fault-line Fields. We currently have interests, through data acquisition, leasehold interests we have obtained and/or participation agreements we have negotiated, relating to exploratory prospects in the Austin Chalk, the Eagle Ford Shale, the Buda Lime and the Pearsall Shale in South Texas which are considered the primary targets in the stacked oil and gas plays of South Texas.

 

Eagle Ford Shale Trend

 

In December 2013, we entered into an agreement to explore and develop a lease covering 2,400 gross acres in the Pearsall Field in Zavala County, Texas. The gross leasehold has proved oil and gas reserves in the Austin Chalk formation and is prospective for oil and gas in the Eagle Ford shale, Buda Limestone and Pearsall shale formations. The lease produced over 140,000 barrels of oil since 1990 from two wells completed in the Austin Chalk and one well continues to produce 3-5 barrels per day. Regent has negotiated a 43% working interest for the re-completion or deepening of two Austin Chalk wells and has the exclusive right to negotiate future exploration. Ongoing Austin Chalk and Eagle Ford co-development is planned, pending results from our early wells. Co-development will leverage our assets within this Eagle Ford producing area and potentially increase our net acreage to 1,000 acres. We will continue to evaluate the Eagle Ford, Buda and Pearsall formations in 2014 covered by this tract and others in the area.

 

East Texas Fault-line Fields

 

We initiated our production of oil from the Woodbine formation in October 2010 with our purchase of a small non-operated net profits interest in Hill County, Texas. We now hold leases covering 65 gross acres and have tested one well with Austin Chalk formation production. Evaluation of the Woodbine and Austin Chalk formations across our acreage position has led to plans for further leasing in Hill and Limestone counties with plans to re-complete one well in September 2014.

 

Our strategic imperatives include: 

 

	•	Selectively pursuing strategic partnerships with industry partners that may expand or complement our energy technology development operations.
	•	Focusing on reservoirs with known hydrocarbon production primarily in conventional, shallow, low-cost, permeable carbonate reservoirs with decades of production history.
	•	Entering into joint ventures with oil and natural gas operators who have extensive experience and expertise in the areas selected for exploration to allow us to obtain working interests in a number of prospects with minimal overhead.

 

 

Oil and Natural Gas Reserves

 

The following table sets forth our estimated proved reserves, as of December 31, 2013, based on the new SEC rules as defined in Rule 4.10(a) of Regulation S-X and Item 1200 of Regulation S-K:

 

Category		Net Reserves (SEC Prices at 12/31/13)
		Oil			NGL			Gas			PV-10
		(MBbls)			(MBbls)			(MMcf)			($m)
Proved developed--Producing		1.5			—			—		$	46.9
Proved developed--Non-producing		32.0			—			—			1,158.3
Proved undeveloped		101.2			—			36.6			4,354.1
Total Proved (1)(2)		134.7			—			36.6		$	5,559.3

________________

(1)

The present value of future net cash flows from proved reserves, before deductions for estimated future income taxes and asset retirement obligations, discounted at 10% (“PV-10 Value”), totaled $5.56 million at December 31, 2013. The commodity prices used to estimate proved reserves and their related PV-10 Value at December 31, 2013 were based on the 12-month unweighted arithmetic benchmark average of the first-day-of-the-month price for the period from January 2013 through December 2013. These benchmark average prices were further adjusted for quality, energy content, transportation fees and other price differentials specific to our properties, resulting in an average adjusted price of $91.50 per barrel of over the remaining life of our proved reserves. Operating costs were not escalated.

(2)

None of our oil reserves are derived from non-traditional sources.

 

Please read “Item 1A. Risk Factors” — The Company’s estimated reserves are based on many assumptions that may turn out to be inaccurate.  Any significant inaccuracies in these reserve estimates or underlying assumptions may materially affect the quantities and present value of our reserves” and please read the notes following the consolidated financial statements for the year ended December 31, 2013 in conjunction with the reserve estimates, both incorporated herein from the Registrant’s Form 10-K for the year ended December 31, 2013. 

 

Results of Operations

 

For the six months ended June 30, 2014, we reported a net loss applicable to common stock of $39,982, compared to a net income applicable to common stock of $122,256 for the same period in 2013. The net gain in 2013 was the result of unrealized gains of $181,216 due to the fair value measurement of the MacuCLEAR Preferred Stock investment. Our two productive wells have remained shut-in for changes to the injection system and capital needs related thereto. General and administrative expenses were $38,259 for the six month period ended June 30, 2014 compared to $56,561 for the same period in 2013. This higher general and administrative expense in 2013 was primarily due to legal and other expenses related to due diligence for a potential oil and gas property acquisition which did not close. Interest expense was $1,570 for the current six month period in 2014 compared to interest expense of $332 for the same period in 2013 due to two new promissory notes during 2014 and 2013. See Note 4 and Note 8 to the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for the current period.

 

Liquidity and Capital Resources

 

Regent has funded operations through short-term borrowings and equity investment sales in order to meet obligations. Our future operations are dependent upon external funding and our ability to increase revenues and reduce expenses. There is no assurance that sufficient funding will be available from additional related party borrowings and private placements to meet our business objectives including anticipated cash needs for working capital. During the second quarter, the Company engaged Enstream Capital Markets, LLC to assist with funding requirements for the Company’s undeveloped reserves.

 

 

As of June 30, 2014, the Company had total assets of $664,866 and total liabilities of $180,475, of which $142,130 is owed to related parties. Net cash flows used in operating activities was $12,531, for the six month period ending June 30, 2014, compared to $19,331 of net cash used for the same period in 2013, primarily due to deferred payments of current payables. Net cash flows provided by financing activities for the six month period ending June 30, 2014 was $13,000 compared to $41,348 used by financing activities for the same period in 2013. Cash provided was from a related party promissory note and cash used in 2013 included the payment of $10,000 for the payment of a promissory note to a stockholder and partial promissory note payments to related parties. We believe that cash flow from operations and funds available from financing will be sufficient to provide needed liquidity through this fiscal year.

 

The Company is not performing any product research and development at this time and it is not expected to incur significant changes in the number of employees.

 

Off-Balance Sheet Arrangements

 

We do not currently have any off-balance sheet arrangements for any purpose.

 

Critical Accounting Policies and Estimates

 

Our discussion and analysis of our financial condition and results of operations are based on consolidated financial statements which were prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We believe that certain accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements. Our Annual Report on Form 10-K for the year ended December 31, 2013, includes a discussion of our critical accounting policies and there have been no material changes to such policies during the six months ended June 30, 2014.

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

There have been no material changes in market risk from the information provided in our Annual Report on Form 10-K as of December 31, 2013.

 

Item 4.

Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures to ensure that the information we must disclose in our filings with the SEC is recorded, processed, summarized and reported on a timely basis. At the end of the period covered by this report, our principal executive and principal financial officers reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based on such evaluation, such officers concluded that, as of the current period, our disclosure controls and procedures were effective to ensure that information we are required to disclose in the reports that we file under the Act is disclosed within the time periods specified in the rules and forms of the SEC and are effective to ensure that information required to be disclosed by us is accumulated and communicated to them to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

No changes in the Company’s system of internal control over financial reporting occurred during the most recent fiscal quarter that have altered management’s conclusions of inherent limitations within the Company regarding internal controls as of December 31, 2013, which conclusions are incorporated herein by reference.

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

The Company is not aware of any pending claims or assessments, that may have a material adverse impact on Regent’s financial position or operations.

 

Item 1A.

Risk Factors

 

The discussion in Part I, “Item 1A. Risk Factors” in the Company’s 2013 Form 10-K, of the risk factors which could materially affect the Company’s business, or future results, should be carefully considered. The risks described in the Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that currently are deemed to be immaterial also may materially adversely affect the Company’s business, financial condition or operating results.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3.

Defaults Upon Senior Securities

 

None.

 

Item 4.

Mine Safety Disclosures

 

Not applicable.

 

Item 5.

Other Information

 

None.

 

Item 6.

Exhibits

 

The exhibits listed below are filed herewith.

 

Exhibit Number		Description of Exhibit
31.1		Certification of C.E.O. and Principal Accounting Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
32.1		Certification of C.E.O. and Principal Accounting Officer Pursuant to 18 U.S.C. Section 1350
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase
101.DEF*		XBRL Taxonomy Extension Definition Linkbase
101.LAB*		XBRL Taxonomy Extension Labels Linkbase
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase

 __________________ 

*

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

 

SIGNATURE

 

Pursuant to the requirements 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.
Dated:   August 11, 2014	By:	/s/  DAVID A. NELSON
		David A. Nelson Chief Executive Officer (Principal Executive Officer and Principal Financial and Accounting Officer)