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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 March 31, 2015
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 May 15, 2015 was 23,188,863.

1

 

REGENT TECHNOLOGIES, INC.

 

TABLE OF CONTENTS

 

    Page No.
     
PART I.  FINANCIAL INFORMATION
       
Item 1. Financial Statements   3
       
  Consolidated Balance Sheets at March 31, 2015 (Unaudited) and December 31, 2014 (Audited)   3
       
  Consolidated Statements of Operations (Unaudited) for the Three Months ended March 31, 2015 and 2014   4
       
  Consolidated Statements of Cash Flows (Unaudited) for the Three Months ended March 31, 2015 and 2014   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

2

PART I. FINANCIAL INFORMATION
   
Item 1. Financial Statements

 

 REGENT TECHNOLOGIES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

  

   March 31,   December 31, 
   2015   2014 
ASSETS   (Unaudited)      
CURRENT ASSETS:          
Cash  $139,172   $188,032 
Prepaid expenses and other   55,000    40,000 
Investments (Note 5)   89,884    89,884 
Total current assets   284,056    317,916 
           
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   198,641    198,641 
   Net profits production interest   4,547    4,547 
   Equipment and other fixed assets       74 
Total property and equipment, net   206,268    206,342 
            
Investments (Note 5)   207,422    207,422 
           
TOTAL ASSETS  $697,746   $731,680 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
CURRENT LIABILITIES:          
Accounts payable  $28,740   $31,227 
Notes payable - stockholder   25,000    25,000 
Notes payable - related parties   8,000    8,000 
Accrued interest payable   1,368    623 
Accrued liabilities - related parties   1,630    11,130 
Total current liabilities   64,738    75,980 
LONG TERM LIABILITIES:          
Asset retirement obligation   10,660    10,660 
Total liabilities   75,398    86,640 
           
STOCKHOLDERS' EQUITY:          
Convertible Preferred stock, $.10 par value, 1,000,000 shares authorized, 99,500 shares issued and outstanding, Regent Natural Resources Co.   9,950    9,950 
Convertible Preferred stock, $.10 par value, 30,000,000 shares authorized, 150,000 shares issued and outstanding, Registrant   15,000    15,000 
Common stock, $.01 par value, 100,000,000 shares authorized, 23,188,863 and 23,130,233 shares issued and outstanding, respectively   231,889    231,302 
Paid-in capital in excess of par   3,709,271    3,709,271 
Accumulated deficit   (3,343,762)   (3,320,483)
Total stockholders’ equity   622,348   $645,040 
           
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $697,746    731,680 

 

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

 

3

 

REGENT TECHNOLOGIES, INC. AND SUBSIDIARY 

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014

(Unaudited)

 

   For the Three Months Ended 
   March 31, 
   2015   2014 
         
REVENUES:          
Oil and natural gas revenues  $   $ 
           
OPERATING EXPENSES:          
Lease operating expense   1,050     
Production and other taxes   1,000     
Depreciation, depletion and amortization   74    77 
General and administrative   19,824    17,484 
           
Operating loss   (21,948)   (17,561)
           
OTHER EXPENSE:          
Interest expense   (744)   (725)
           
Total other expense   (744)   (725)
           
Loss before income taxes   (22,692)   (18,286)
Provisions for income taxes        
Net loss   (22,692)   (18,286)
           
Preferred stock dividends   587     
           
NET LOSS  $(23,279)  $(18,286)
           
Net loss per common share:          
(basic and diluted)  $(0.00)  $(0.00)
Weighted average shares outstanding:          
(basic and diluted)   23,140,656    22,360,233 

 

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

 

4

 

REGENT TECHNOLOGIES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014

(Unaudited)

 

   For the Three Months Ended  
   March 31,  
   2015   2014 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(23,279)  $(18,286)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation, depletion and amortization   74    77 
Preferred stock dividends (non-cash)   587     
Increase in prepaid expense and other   (15,000)    
Increase (decrease) in accounts payable   (2,487)   15,372 
Decrease in accrued liabilities - related parties   (9,500)   (3,715)
Increase in accrued interest payable - related parties   745    725 
Net Cash Used In Operating Activities   (48,860)   (5,827)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Proceeds from sale of investments        
Net Cash Provided By Investing Activities        
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Borrowings - related parties       10,000 
Net Cash Provided By Financing Activities       10,000 
           
INCREASE (DECREASE) IN CASH   (48,860)   4,173 
CASH, BEGINNING OF PERIOD   188,032    5,051 
CASH, END OF PERIOD  $139,172   $9,224 
           
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:          
Cash paid during the period for interest  $   $ 
Cash paid during the period for taxes  $   $ 

 

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

 

5

 

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. During 1999, the Company had re-entered the development stage pursuant to ASC No. 915, "Development Stage Activities" ("ASC 915") of the "Financial Accounting Standards Codification ("Codification" or "ASC") and the Hierarchy of Generally Accepted Accounting Principles." As of January 1, 2013, due to our ongoing oil and natural gas development activities and future plans for exploration and production, management has determined that ASC No. 915 is no longer applicable and accordingly, the ASC No. 915 development stage reporting format has been discontinued. In this Form 10-K, 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, 2014. The results of operations for the three months ended March 31, 2015 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, 2014 were prepared by a third party engineering firm. See Note 12 in our Annual Report on Form 10-K for the year ended December 31, 2014.

 

6

 

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 ndividually 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.

 

7

 

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 5).  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 March 31, 2015, 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.

 

8

 

REGENT TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

Recent Accounting Pronouncements

 

During the quarter ended March 31, 2015, 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 2014 Form 10-K. In management's opinion, the accounting policies and estimates presented in the 2014 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, 2014, which was previously filed with the Securities and Exchange Commission.

 

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. Private Placement Memorandum

 

Effective September 1, 2014, the Company approved a Private Placement Memorandum (“PPM”) to raise $1,000,000 through the issuance of 1,000,000 shares of Series A 8% Convertible Preferred Stock at $1.00 per share (the “Offering”). Under the PPM, the Company is selling full Units for $50,000 (“Unit”) with the right to sell half Units. The Company is relying on the federal exemption provided under Rule 506(b) for treatment of the Offering as an exempt offering of securities and filed a Form D with the Securities and Exchange Commission on October 9, 2014.

 

NOTE 4. Series A 8% Convertible Preferred Stock

 

During 2014, we completed the sale of three Series A 8% Preferred Stock Units for $50,000 each pursuant to the PPM. Each Unit consists of 50,000 shares of Series A 8% Preferred Stock and 50,000 Warrants. The Company is continuing to market the remaining 850,000 shares of Series A 8% Preferred Stock under the Offering through 2015. The holders of the Preferred Stock have the right, at any time, to convert each Preferred Share into ten (10) shares of Common Stock. Also, each Unit pays an 8% annual dividend, payable quarterly in shares of Common Stock of the Company for the first 24 months following the sale of the Unit. During the quarter ended March 31, 2015, the Company recognized dividend expense of $587.00 from the issuance 58,630 shares of Common Stock. See Note 8 in the Company's audited financial statements on Form 10-K for the year ended December 31, 2014 for further information about the designations of the Company’s Series A Convertible Preferred Stock.

 

 

9

 

REGENT TECHNOLOGIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 5. Investments

 

As of March 31, 2015, 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 99,950 outstanding shares of Subsidiary Preferred Stock will be partially redeemed with MacuCLEAR common and preferred stock and with common stock of the Subsidiary or the Company. 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. The Company’s Subsidiary is also holding 5,894 shares of MacuCLEAR Preferred Stock currently being marketed 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 $15.25 per share based on sales by MacuCLEAR of new issues of Preferred Stock during December 2014 with the same designations.

 

NOTE 6. Properties

 

In June 2014, the Company engaged Enstream Capital Markets, LLC to provide financial advisory services to the Company on an exclusive basis to assist with the Company’s needs for equity and debt capital for several projects under evaluation. The Company entered into a Purchase and Sale Agreement on November 18, 2014 to acquire certain oil and gas assets in Ohio, Pennsylvania and New York which agreement was terminated on December 15, 2014 due to the Seller’s inability to satisfy certain conditions precedent to closing. The Company is continuing to negotiate the acquisition and has advanced $55,000 toward environmental, engineering and bank fees related thereto.  The $55,000 includes $15,000 advanced during the current quarter.

 

In April 2015, we negotiated a third-party exploratory agreement and earned a 2.50% carried working interest to participate in the first five horizontal wells drilled on 35,000 gross acres in Zavala County, Texas. Drilling was initiated for the first well on April 23, 2015 to test the Buda limestone through an underbalanced horizontal procedure. The leasehold has proved producing oil and gas reserves from the Eagle Ford shale and Buda limestone and is prospective for the Austin chalk and Pearsall shale formations.

 

NOTE 7. 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 8. 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 March 31, 2015, we have no unrecognized tax benefits and there were no significant changes to the calculation since December 31, 2014.

 

NOTE 9. Related Party Transactions

 

During the current quarter, the Company made total payments of $9,500 for accrued liabilities owed to NR Partners and SIG Partners, LC. NR Partners is a partnership comprised of the President and a director of the Company. SIG Partners, LC is an entity owned by the President of the Company and is the operator of the Company’s oil and gas interests.

 

10

 

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, 2014 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 2014, (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 under take 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.

 

11

 

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, 2014.

 

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. On June 24, 2014 the Company engaged Enstream Capital Markets, LLC to provide financial advisory services to the Company on an exclusive basis to assist with the Company’s needs for equity and debt capital for several projects under evaluation. The Company entered into a Purchase and Sale Agreement on November 18, 2014 to acquire certain oil and gas assets in Ohio, Pennsylvania and New York which agreement was terminated on December 15, 2014 due to the Seller’s inability to satisfy certain conditions precedent to closing. The Company is continuing to negotiate the acquisition and has advanced $55,000 toward environmental, engineering and bank fees related thereto.

 

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.

 

Currently we have leasehold rights in two areas of oil and gas activity in Texas:

 

South Texas Eagle Ford Shale Trend

 

We have acquired significant participation rights in prospects in the Austin Chalk, the Eagle Ford Shale, the Buda Lime and the Pearsall Shale. These are considered the primary targets in the stacked oil and gas plays of South Texas. In April 2015, we negotiated a third-party exploratory agreement and earned a 2.50% carried working interest to participate in the first five horizontal wells drilled on 35,000 gross acres in Zavala County, Texas. Drilling was initiated for the first well on April 23, 2015 to test the Buda limestone through an underbalanced horizontal procedure. The leasehold has proved producing oil and gas reserves from the Eagle Ford shale and Buda limestone and is prospective for the Austin chalk and Pearsall shale formations.

 

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 return two wells to production in 2015.

 

Oil and Natural Gas Reserves

 

The following table sets forth our estimated proved reserves, as of December 31, 2014, based on the new SEC rules as defined in Rule 4.10(a) of Regulation S-X and Item 1200 of Regulation S-K:

 

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Category  Net Reserves (SEC Prices at 12/31/14)
   Oil   NGL   Gas   PV-10
   (MBbls)   (MBbls)   (MMcf)   ($m)
Proved developed--Producing  1.4        $30.8  
Proved developed--Non-producing  5.6         176.6  
Proved undeveloped  63.6         1,368.7  
        Total Proved (1)(2)  70.6        $1,576.1  

________________

(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 $1.58 million at December 31, 2014. The commodity prices used to estimate proved reserves and their related PV-10 Value at December 31, 2014 were based on the 12-month unweighted arithmetic benchmark average of the first-day-of-the-month price for the period from January 2014 through December 2014. 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 $79.81 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, 2014 in conjunction with the reserve estimates, both incorporated herein from the Registrant's Form 10-K for the year ended December 31, 2014.

 

Results of Operations

 

For the three months ended March 31, 2015, we reported a net loss applicable to common stock of $23,279 compared to a net loss applicable to common stock of $18,286 for the same period in 2014. General and administrative expenses were $19,824 for the period ended March 31, 2015 compared to $17,484 for the same period in 2014. This increase was primarily due to higher costs for director and officer liability insurance and office rent. Interest expense was $744 for the current quarter compared to interest expense of $725 for the same period in 2014.

 

Liquidity and Capital Resources

 

Regent has funded operations through preferred stock issuances, 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.

 

Net cash flows used in operating activities was $49,447, for the period ending March 31, 2015, compared to $5,827 of net cash used for the same period in 2014. The increase was due primarily to the costs related to the ongoing negotiations for oil and gas assets in North Appalachia which included $15,000 for environmental reviews. Also, the Company paid approximately $12,000 toward accrued liabilities.

 

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.

 

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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, 2014, includes a discussion of our critical accounting policies and there have been no material changes to such policies during the three months ended March 31, 2015.

 

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, 2014.

 

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, 2014, which conclusions are incorporated herein by reference.

 

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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 2014 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

 

None.

 

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**

 __________________ 

* Filed herewith.
** 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.

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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:   May 15, 2015 By: /s/  DAVID A. NELSON  
   

David A. Nelson

Chief Executive Officer

(Principal Executive Officer and Principal Financial and Accounting Officer)

 
       

 

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