UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 10-Q
___________________________
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2012
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.
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5646 Milton, Suite 722, Dallas, Texas 75206
855-744-7449
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 reports), and (2) has been subject to such filing requirements for the past 90 days. x YES ¨ 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
x 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 definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer ¨ |
Accelerated filer ¨ |
Non-accelerated filer ¨
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Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES ¨
NO x
The number of outstanding shares of the issuer's only class of common stock as of November 14, 2012 was 22,360,233.
REGENT TECHNOLOGIES, INC. PART I. FINANCIAL INFORMATION Page No. Item 1. Financial Statements: Consolidated Balance Sheets
(Unaudited) at September 30, 2012 and December 31, 2011 (Audited) 2 Consolidated Statements of
Operations (Unaudited) for the Three and Nine Months Ended September 30, 2012 and 2011 3 Consolidated Statements of Cash
Flows (Unaudited) for the Nine Months ended September 30, 2012 and 2011 4 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 15 Item 4. Controls and Procedures 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings 15 Item 1A. Risk Factors 15 Item 2. Changes in Securities 16 Item 3. Defaults Under Senior Securities 16 Item 4. Mine Safety Disclosures 16 Item 5. Other Information 16 Item 6. Exhibits 16 SIGNATURE 17 1
PART I. FINANCIAL INFORMATION Item 1. Financial Statements REGENT TECHNOLOGIES, INC. AND SUBSIDIARY The accompanying notes are an integral part of the consolidated financial statements. 2
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY The accompanying notes are an integral part of the consolidated financial statements. 3
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY The accompanying notes are an integral part of the consolidated financial statements. 4
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES The accompanying notes are an integral part of the consolidated financial statements. 5
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY Note 1. ORGANIZATION AND NATURE OF OPERATIONS Organization and Development Stage Activities Regent Technologies, Inc. (the "Company" or "Regent"), formerly Regent Petroleum Corporation, was incorporated under
the laws of the State of Colorado on January 18, 1980. During 1999, the Company's subsidiary companies were divested in the
ordinary course of business and effective January 1, 1999, the Company had re-entered the development stage. Accordingly, all of the
Company's operating results and cash flows reported in the accompanying consolidated financial statements from that date are
considered to be those related to development stage activities and represent the 'cumulative from inception' amounts from its
development stage activities reported 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." Nature of Operations During the third quarter of 2010, Regent restructured its management team and focused its core business objectives and
strategy on energy development. The Company's subsidiary (the "Subsidiary") was approved for a name change on
September 30, 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 producing oil and natural gas properties. Our results of operations
and capital resources are highly dependent upon prevailing market prices of, and demand for, oil and natural gas. These commodity
prices are subject to wide fluctuations and market uncertainties due to a variety of factors that are beyond our control. These factors
include the level of global supply and demand for oil and natural gas, market uncertainties, weather conditions, domestic governmental
regulations and taxes, political and economic conditions in oil producing countries, price and availability of alternative fuels, and overall
domestic and foreign economic conditions. Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation and Presentation The consolidated financial statements include the accounts of the Company and our wholly-owned Subsidiary, Regent NRCo. All
significant intercompany balances and transactions have been eliminated. Our financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America. The preparation of our financial statements requires
management to make estimates and assumptions that affect the reported assets, liabilities, revenues and expenses. These estimates
are based on information that is currently available to us and on various assumptions that we believe to be reasonable under the
circumstances. Actual results could differ from those estimates under different assumptions and conditions. Unless otherwise specified
or the context otherwise requires, all references in these notes to "Regent," "we," "us" or
"our" are to Regent Technologies, Inc. and its Subsidiary. These unaudited consolidated financial statements reflect, in the opinion of our management, all adjustments, consisting only of
normal and recurring adjustments, necessary to state fairly our financial position as of, and results of operations for, the periods
presented. These financial statements have been prepared in accordance with the instructions to Form 10-Q and,
therefore, do not include all disclosures required for financial statements prepared in conformity with accounting principles generally
accepted in the United States of America. Interim period results are not necessarily indicative of results of operations or
cash flows for a full year. Notes to the consolidated financial statements that would substantially duplicate the disclosure contained in
the audited consolidated financial statements as reported in the 2011 Form 10-K have been omitted. Critical accounting policies are defined as those significant accounting policies that are most critical to an understanding of a
company's financial condition and results of operations. 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, could have a material impact on our results of operations or financial condition. 6
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY Revenue Recognition Oil and gas revenue is recorded when production is sold. The Company accrues revenue for oil and gas production sold but
not paid. See Receivables below. Oil and Gas Revenue Receivable Receivables consist of accrued oil and gas receivables due from either purchasers of oil and gas or operators in oil and natural
gas wells for which the Company owns an interest. Oil and natural gas sales are generally unsecured and such amounts are generally
due within 30 days after the month of sale. Dependence on Oil and Gas Prices As an independent oil and gas producer, our revenue, profitability and future rate of growth are substantially dependent on
prevailing prices for oil and gas. Historically, the energy markets have been very volatile, and there can be no assurance
that oil and gas prices will not be subject to wide fluctuations in the future. A substantial or extended decline in oil or gas
prices could have a material adverse effect on our financial position, results of operations, cash flows and access to capital and on the
quantities of oil and gas reserves that we can economically produce. Oil and Gas Properties We use the full cost method of accounting for our oil and gas producing activities. Under this method, all costs
incurred in the acquisition, exploration and development of oil and gas properties, including salaries, benefits and other internal costs
directly attributable to these activities, are capitalized into cost centers that are established on a property basis. Interest expense
related to unproved properties is also capitalized into oil and gas properties. No interest expense has been capitalized through the
current period because the amount is nominal. Other Accounting Policies The remaining significant accounting policies of the Company are described in Note 2 to the consolidated financial statements of
the 2011 Form 10-K. In management's opinion, the accounting policies and estimates presented in the 2011 Form 10-K have not
changed and therefore the unaudited consolidated financial statements herein should be read in conjunction with the Company's
audited report on Form 10-K for the period ended December 31, 2011, which was previously filed with the Securities and Exchange
Commission. There were other accounting standards and interpretations issued in 2010 and 2011, 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, operations
or cash flows. Note 3. 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 these consolidated financial statements. 7
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY Note 4. OIL AND GAS PROPERTIES Property and Equipment Property and equipment, net are comprised for the periods indicated as follows: (1) Because the oil and gas assets and the net profits interest were acquired from related parties (see Note 8), the properties were
recorded at the basis of the related parties in the amount of $85,595 as the capitalized costs. (2) The full cost capitalized costs for 2012 and 2011 were increased by $78,307 and $32,614, respectively, for the construction of
oil and gas flow line and the acquisition and installation of oil production equipment related to the oil interests acquired in 2010. In the
second quarter of 2012, the increase includes $31,153 for the acquisition of a disposal well and related pump equipment (see Note
8). (3) The capitalized costs include $10,400 for asset retirement obligation. Asset Retirement Obligation The Company accounts for asset retirement obligations based on the guidance of ASC 410 which addresses 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 a liability for a retirement obligation be recorded in the period in which it is incurred and the
corresponding cost capitalized by increasing the carrying amount of the related long-lived asset. The liability is accreted to its then
present value each period, and the capitalized cost is depreciated over the estimated useful life of the related asset. 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 increased the amount of our asset retirement
obligations by $5,200 to account for the disposal well. There was no amortization to the Company's asset retirement obligation for the
current period because the amount is nominal. Note 5. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company has adopted ASC 820 which defines fair value and the framework for using fair value to measure
assets and liabilities, and expands disclosures about fair value measurements. The fair value statement applies whenever other
statements require or permit assets or liabilities to be measured at fair value. Fair value is the amount that would be received from the sale of an asset or paid for the transfer of a liability in an orderly
transaction between market participants. A liability is quantified at the price it would take to transfer the liability to a new obligor, not at
the amount that would be paid to settle the liability with the creditor. ASC 820 established the following fair value hierarchy that
prioritizes the inputs used to measure fair value: 8
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY The Company is responsible for the valuation process and as part of this process may use data from outside sources in
establishing fair value. The Company performs due diligence to understand the inputs used or how the data was calculated or derived.
The Company corroborates the reasonableness of external inputs in the valuation process. Cash, accounts payable, and other current
liabilities are carried at book value amounts which approximate fair value due to the short-term maturity of these instruments. We used the following fair value measurements for certain of our assets and liabilities during the current period and for the year
ended December 31, 2011: Level 3 Classification: Investment - MacuCLEAR Preferred Stock As of this quarterly filing, the Company's Subsidiary held 107,986 shares of MacuCLEAR Preferred Stock, of which 95,858 shares
are beneficially held for the holders of the Subsidiary's Preferred Stock and 12,128 shares are available for sale. During the second
quarter, 2012, the Company's Subsidiary sold 8,642 shares of its holdings for $12.00 per share. Under the process defined for Level 3
assets, the Company has determined the fair value for the MacuCLEAR Preferred Stock to be $12.00 per share based on new sales by
MacuCLEAR of Series A-1 Preferred Stock for $12.00 per share throughout 2011 and 2012. The Series A-1 Preferred Stock has the
same designations as the Series A Preferred Stock held by the Company. The Company's beneficial holdings which are not available
for sale have not been increased beyond the original cost of $2.595 per share. The following tables present the fair value measurement of the holdings of MacuCLEAR Preferred Stock, beneficial and direct, as
of September 30, 2012 and December 31, 2011: Note 6. NOTES PAYABLE Pursuant to the net profits production interest acquisition in December 2010, Regent NRCo executed a promissory note for
$81,750 payable to SIG Partners, LC, a related party (see Note 8). The interest rate on the note is 7% with principal payments of
$3,400 per month beginning February 2011. At September 30, 2012, the payment schedule is current and the principal balance
outstanding is $13,800. The promissory note is secured by the oil and gas property interest conveyed. Beginning in 2005, the Company has borrowed various amounts for general corporate purposes under promissory notes to NR
Partners, a related party (see Note 8). The outstanding amount of $1,900 owed to NR Partners at the end of the current period bears
interest at the rate of 5% per annum and is due upon demand. In October 2012, the Company borrowed an additional $5,000 from NR
Partners. All borrowings are for general corporate purposes. 9
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY Note 7. STOCKHOLDERS' EQUITY Common and Preferred Stock The Company's capital structure is complex and consists of preferred stock and a general class of common stock. The Company is
authorized to issue 130,000,000 shares of stock, of which 30,000,000 have been designated as preferred shares with a par value per
share of $.10, and 100,000,000 have been designated as common shares with a par value per share of $.01. As of the date of this
filing, there is no preferred stock outstanding and there are 22,360,233 shares of common stock outstanding. Holders of Regent's common stock are entitled to one vote for each share on all matters submitted to a stockholder vote. Holders
of common stock do not have cumulative voting rights. Therefore, holders of a majority of the shares of common stock voting for the
election of directors can elect all of the directors. Holders of the Regent's common stock representing a majority of the voting power of
Regent's capital stock issued, outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum
at any meeting of stockholders. A vote by the holders of a majority of Regent's outstanding shares is required to effectuate certain
fundamental corporate changes such as liquidation, merger or an amendment to Regent's articles of incorporation. Holders of Regent's common stock are entitled to share in all dividends that the board of directors, in its discretion, declares from
legally available funds. In the event of liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro
rata in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over the
common stock. Regent's common stock has no pre-emptive rights, no conversion rights and there are no redemption provisions
applicable to Regent's common stock. Stock Options No options, warrants or similar rights are outstanding as of this report date. Subsidiary Preferred Stock On April 18, 2007, our Subsidiary accepted purchase agreements in a total amount of $150,000 received from four purchasers of a
private offering of shares of Series A Convertible Preferred Stock at $5.00 per share. The stock was sold under a private placement
offering to sell $50,000 units convertible into 10,000 shares of common stock of the Subsidiary plus 4,800 shares of common stock of
MacuCLEAR common stock. Including the initial sales, our Subsidiary has accepted purchase agreements from investors for $497,500.
If all of the unconverted shares of the Series A Preferred Stock were to be converted to common stock of the Subsidiary, the
Company's ownership of the Subsidiary would be diluted to approximately 90%. Note 8. RELATED PARTY TRANSACTIONS Property Acquisitions On September 29, 2010, Regent RNCo executed a Property Transfer Agreement (the "Transfer Agreement") with
related party SIG Partners, LC ("SIG") and Mr. Nelson, CEO and Chairman of the Registrant. The consideration for the transfer of oil
and gas interests was the forgiveness of a $70,000 note payable and 13,500,000 shares of restricted common stock of the Company.
After the consummation of the agreement, Mr. Nelson controlled approximately 80% of the outstanding common stock of the
Registrant. On December 30, 2010, Regent RNCo purchased a 50% net profits interest from SIG in producing leaseholds located in Hill
County, Texas. The consideration was $91,750, with $10,000 paid upon execution and the balance payable under a promissory note
for $81,750. The Transfer Agreement includes an option to acquire operations from SIG and the related equipment and disposal well
for the market value of the equipment and well. During the second quarter 2012, 10
REGENT TECHNOLOGIES, INC. AND SUBSIDIARY Regent RNCo acquired from SIG the disposal well and related disposal pump equipment plus various oilfield equipment including a
submersible pump for the total consideration of $31,153. Stock Sales During 2011, the Subsidiary completed three sales of MacuCLEAR common stock at $12 per share. Two sales for a total of 3,500
shares were made to a qualified fund controlled by the spouse of the CEO. The sale of 3,000 shares was made to a preferred
shareholder of the Subsidiary. The share price for each sale was based on sales of comparable securities to new investors in
MacuCLEAR Preferred Stock during 2011. During the first quarter of 2012, the Subsidiary completed a sale of 1,725 shares of
MacuCLEAR common stock at $12 per share to a qualified fund controlled by the CEO. Notes Payable and Accrued Liabilities Beginning in 2005, the Company borrowed various amounts for general corporate purposes under a note payable to NR Partners,
a partnership comprised of the CEO and director Dr. David Ramsour. For the current period, the promissory note is an unsecured
demand note in the principal amount of $1,900 and pays interest at 5% per annum. As of the date of this filing, the Company has
borrowed an additional $5,000. In connection with the net profits production interest acquisition in December 2010, the Subsidiary executed a promissory note for
$81,750 to SIG Partners, LC. The interest rate on the note is 7% per annum. The promissory note is secured by the interest conveyed.
As of the date of this filing, the monthly payments have been paid when due and the outstanding principal balance is $13,800. In addition, as of September 30, 2012, the Subsidiary has accrued liabilities of $41,322 to SIG, the operator of our oil and gas
interests, for capital expenditures attributable to our oil and gas interests. This amount includes $3,000 for SIG consulting services for
the second quarter 2012. Note 9. SUBSEQUENT EVENTS We have evaluated events and transactions that occurred after the balance sheet date of September 30, 2012 and
have determined that there is no event or transaction which has occurred that would require recognition beyond the disclosures
herein. 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, 2011 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
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described in (1) Part I, "Item 1A -
Risk Factors" and other cautionary statements in our Form 10-K for 2011, (2) our reports and registration statements filed
from time to time with the Securities and Exchange Commission ("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: 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: Reserve engineering is a subjective process of estimating underground accumulations of oil and gas that cannot
be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data and the interpretation of
that data by petroleum engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates
that were made previously. If significant, these revisions would change the schedule of any further production and development drilling.
Accordingly, reserve estimates are generally different from the quantities of oil and gas that are ultimately recovered. 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. We urge readers to review and consider
disclosures we make in this and other reports. See in particular our reports on Forms 10-K, 10-Q and 8-K subsequently filed from time
to time with the SEC. In this Form 10-Q, references to "we," "our," "us," the "Company," or "Regent" refer to Regent Technologies, Inc., a Colorado
corporation, and Regent's wholly owned Subsidiary, Regent Natural Resources Co., a Texas corporation, is referred to as "Regent
NRCo." General and Business Overview Our revenues, profitability and future growth depend on our ability to find, develop and acquire oil and gas reserves that are
economically recoverable. The preparation of our financial statements in conformity with generally accepted accounting
principles requires us to make estimates and assumptions that affect our reported results of operations and
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the amount of our reported assets, liabilities and proved oil and gas reserves. We use the full cost method of accounting for our oil and gas
activities. Oil and Gas Strategy Our long term oil and gas development strategy is to increase profit margins and concentrate on obtaining producing properties
with low cost operations and with the potential for long-lived production. We also focus on the acquisition of royalties in areas with
exploration and development potential. Reserves. There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves and
estimates of reserve quantities and values must be viewed as being subject to significant change as more data about the properties
become available. The independent engineering firm RCM Engineering, Inc. of Dallas, Texas ("RCM"), has estimated our oil and gas
reserves and the present value of future net revenues there from as of December 31, 2011. Those estimates were determined based
on prices and costs as of or for the twelve month period ended December 31, 2011. The following table sets forth our estimated proved
reserves based on the new SEC rules as defined in Rule 4.10(a) of Regulation S-X and Item 1200 of Regulation S-K. Please read
"Item 1A. Risk Factors -- Our estimates are based on 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". You should
also read the notes following consolidated financial statements for the year ended December 31, 2011 in conjunction with the reserve
estimates. (1) The estimates of reserves in the table above conform to the guidelines of the SEC. These calculations were prepared using
standard geological and engineering methods generally accepted by the petroleum industry. The reserve information shown is
estimated. The certainty of any reserve estimate is a function of the quality of available geological, geophysical, engineering and
economic data, and the precision of the engineering and geological interpretation and judgment. The estimates of reserves, future cash
flows and present value are based on various assumptions, and are inherently imprecise. Although we believe these estimates are
reasonable, actual future production, cash flows, taxes, development expenditures, operating expenses and quantities of recoverable
oil and natural gas reserves may vary substantially from these estimates. (2) The dollar amount is the present value, discounted at 10% per annum of the estimated future cash flows before income tax of
our estimated proved reserves. The estimated future cash flows above were determined by using the reserve quantities of proved
reserves and the periods in which they are expected to be developed and produced based on prevailing economic conditions. The
estimated future production is priced based on the 12-month unweighted arithmetic average of the first-day-of-the-month price for the
period from January through December 2011, using $88.06 per bbl as adjusted for transportation fees and regional price differentials.
Management believes that the presentation of the non-GAAP financial measure of PV-10 provides useful information to investors
because it is widely used by professional analysts and sophisticated investors in evaluating oil and gas companies. 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, 2011 in conjunction with the reserve estimates, both incorporated herein from the Registrant's Form 10-K for
the period ended December 31, 2011. Production. Pursuant to the Regent NRCo oil and gas property acquisitions during the third and fourth
quarters of 2010, we acquired 3 leases which cover 66 gross acres. We also acquired a 50% net profits interest which is the source of
our oil and gas revenues for the current period. We continue to test the Austin Chalk formation in one of the
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acquired wells and during the second quarter, we made improvements to the well pumping equipment and re-drilled the open hole portion of the producing
formation. The well was placed back on pump during April 2012 and pumped about 30 barrels of oil during testing in the first quarter.
Currently, we are reviewing a proposal to stimulate the Austin Chalk with a solvent for the removal of scale, paraffin, asphaltenes, and
other deposits from the formation near the well bore with the expectation that production may be increased 30-50%. Salt Water Disposal Operations. Pursuant to the Regent NRCo oil and gas property acquisitions
during the third and fourth quarters of 2010, we executed our right to purchase the salt water disposal equipment
including related contract rights and permits plus additional production equipment. We produce a significant amount of
water which is very costly to remove in trucks for proper disposal in approved facilities. The disposal well is necessary
to reduce the significant operating burden and costs of water disposal. The disposal system consists of a disposal well
permitted through the Railroad Commission of Texas, high-pressure injection pump and flow line with storage facilities.
During the third quarter, significant downtime resulted due to high pressures from formation blockage following a
procedure to remove wellbore scale. Currently, the disposal system is back in operation. New Prospects. Effective April 5, 2011, Regent NRCo acquired a .17% overriding royalty interest in
153 acres in Coke County, Texas. The initial well on the acreage was drilled during the second quarter to 6,800 feet and
was successful in finding oil in the Strawn sandstone and Strawn reef formations. The operator has plans to continue
exploration with the next phase of drilling in the shallower Cisco horizons based on significant shows during the drilling
of the initial well. In addition, we are reviewing proposals to participate in Eagle Ford shale prospects in South Texas
and Wolfcamp shale prospects in the Permian Basin. The cost of such projects would be funded through borrowings
and, if appropriate, sales of common or preferred stock of the Company or our subsidiary or sales of our investment in
MacuCLEAR Preferred Stock. Financing and Liquidity 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. Crude oil and natural gas prices have fluctuated significantly in recent years. The effect of declining prices on the oil
business can be significant. Lower product prices will reduce our cash flow from operations and diminish the present
value of our oil and gas reserves. Lower product prices also offer less incentive to assume the development risks that
are inherent in our business. The volatility of the energy markets makes it extremely difficult to predict future oil and
natural gas price movements with any certainty. The average oil price received in 2011 for the production under our net
profits interest agreement has ranged from a high in April of $100.90 to a low in August of $79.97. The average oil price
received in 2012 has ranged from a low of $74.50 in June to a high of $98.73 in April. During the first and second quarters of 2012, the Company generated new cash of $20,610 and $83,094,
respectively, from the sale of shares of its direct preferred stock holdings in MacuCLEAR, Inc. The bulk of these monies were used to
re-enter and re-equip one of the wells acquired in 2010 and to acquire the salt water disposal well and refurbish injection pumping
equipment. As of September 30, 2012, the Company had total assets of $599,301 and total liabilities of $82,234, of which $13,800 is
the balance of a promissory note for the 2010 net profits interest acquisition. Accrued liabilities reflect an increase for the period ended
September 30, 2012 from December 2011 by $40,914 due to the acquisition of the salt water well and disposal operations and
additional oil and gas production equipment. 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. 14
Results of Operations The Company had lower revenues for the three and nine month periods ended September 30, 2012 as compared to 2011 due to
production downtime from power shortages and parts delays related to disposal operation repairs and maintenance. We also received
an extraordinary consulting fee of $2,000 in 2011. General and administrative expenses were up $10,310 for the quarter ended
September 30, 2012 compared to the same period in 2011 due to third party consulting and increased travel, both related to prospect
evaluation costs. Also, accounting support expense increased in the second and third quarters due to costs for the implementation of
XBRL reporting regulations under new SEC guidelines. Interest expense was $1,575 for the nine months in 2012 compared to interest
expense of $3,698 for the same period in 2011 and the decrease was due to lower debt in 2012. The depreciation expense for the
period was $87 and the depletion expense was $179 which amounts are comparable to prior periods. Off-Balance Sheet Arrangements As of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any
transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have: (i)
any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in
assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets. 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, 2011. 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 materially affected, or are reasonably likely to materially affect, internal control over financial reporting. 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 2011 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. 15
Item 2. Changes in Securities 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 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 Label 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. 16
SIGNATURE In accordance with the requirements of the Exchange Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized. R Dated: November 14, 2012 By: /s/ D 17
TABLE OF CONTENTS
and for the Period from Inception (January 1, 1999) through September 30, 2012
and for the Period from Inception (January 1, 1999) through September 30, 2012
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
September 30,
December 31,
2012
2011
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash in bank
$
2,409
$
9,300
Oil and gas revenue receivable
1,400
2,085
Investments (Note 5)
145,536
-
Total current assets
149,345
11,385
PROPERTY AND EQUIPMENT (Net of Accumulated Depletion and Depreciation):
Oil and natural gas properties, accounted for using full cost method of accounting
Evaluated property
192,941
114,634
Unevaluated property
3,080
3,080
Net profits production interest
4,403
4,940
Equipment and other fixed assets
780
1,041
Total property and equipment, net
201,204
123,695
Investments (Note 5)
248,752
497,992
TOTAL ASSETS
$
599,301
$
633,072
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable
$
14,405
$
2,637
Notes payable - related parties
12,150
45,800
Accrued interest payable
407
352
Accrued liabilities - related parties
41,322
9,444
Total current liabilities
68,284
58,233
Note payable - related parties, less current portion
3,550
3,550
Asset retirement obligation
10,400
5,200
Total liabilities
82,234
66,983
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
Preferred stock, $.10 par value, 30,000,000 shares authorized, no shares issued
and outstanding, Registrant
-
-
Common stock, $.01 par value, 100,000,000 shares authorized, 22,360,233 shares
issued and outstanding
223,602
223,602
Paid-in capital in excess of par
3,629,141
3,629,141
Accumulated deficit (including $2,373 and $51,395, respectively, of earnings
accumulated since reentering the development stage)
(3,345,626)
(3,296,604)
517,067
566,089
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
599,301
$
633,072
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
AND FOR THE PERIOD JANUARY 1, 1999 THROUGH SEPTEMBER 30, 2012
(UNAUDITED)
Cumulative
For the
For the
For the
For the
Since
Three
Three
Nine
Nine
Re-enterimg
Months
Months
Months
Months
Development
Ended
Ended
Ended
Ended
Stage
September 30,
September 30,
September 30,
September 30,
January 1,
2012
2011
2012
2011
1999
Revenues
$
2,351
$
5,130
$
10,131
$
19,866
$
37,866
Operating expenses:
General and administrative
26,914
16,604
56,780
41,559
457,899
Depletion expense
179
-
537
-
1,292
Depreciation expense
87
87
261
261
877
Operating loss
(24,829)
(11,561)
(47,447)
(21,954)
(422,202)
Other income and (expense):
Net change in fair value measurement
-
-
-
-
262,760
Gain on extinguishment of debt
-
-
-
-
145,340
Gain on sale of investment
-
-
-
-
101,331
Stock grant expense
-
-
-
-
(41,700)
Interest, net
(81)
(1,128)
(1,575)
(3,698)
(43,156)
Total other income (expense)
(81)
(1,128)
(1,575)
(3,698)
424,575
Income (loss) before income taxes
(24,910)
(12,689)
(49,022)
(25,652)
2,373
Provisions for income taxes
-
-
-
-
-
Net income (loss)
$
(24,910)
$
(12,689)
$
(49,022)
$
(25,652)
$
2,373
Net income (loss) per common share
(basic and diluted)
$
(0.00)
$
(0.00)
$
(0.00)
$
(0.00)
Weighted Average Shares Outstanding
22,360,233
22,360,233
22,360,233
22,360,233
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
AND FOR THE PERIOD JANUARY 1, 1999 THROUGH SEPTEMBER 30, 2012
(UNAUDITED)
Cumulative
Since
Re-enterimg
Development
For the Nine Months
Stage
Ended September 30,
January 1,
2012
2011
1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
(49,022)
$
(25,652)
$
2,373
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation
261
261
4,639
Depletion
537
-
1,291
Net change in fair value measurement
-
-
(262,760)
Gain from extinguishment of debt
-
-
(145,340)
Gain from sale of investment
-
-
(101,331)
Note issued for settlement expenses
-
-
20,000
Common stock issued for services
-
-
46,700
Common stock issued in legal settlement
-
-
14,000
Decrease in settlements and note receivable
-
-
4,800
Decrease in other assets
-
-
1,967
Increase in allowance for uncollectible settlements
-
-
79,892
(Increase) decrease in accounts receivable
685
(5,110)
(1,400)
Increase (decrease) in accounts payable
11,768
(2,738)
45,735
Increase (decrease) in accrued liabilities - related parties
31,878
-
41,322
Increase (decrease) in accrued interest payable
55
(379)
25,144
Net Cash Provided (Used) In Operating Activities
(3,838)
(33,618)
(222,968)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in affiliates
-
-
(350,000)
Capital expenditures for oil and gas interests
(73,107)
(25,122)
(115,721)
Capital expenditures for equipment
-
-
(1,656)
Proceeds from sale of investments
103,704
66,000
321,304
Net Cash Used In Investing Activities
30,597
40,878
(146,073)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable - related party
-
22,222
123,225
Proceeds from sale of Preferred Stock
-
-
427,500
Proceeds from note payable - stockholder
-
-
20,000
Repayments of notes payable - related parties
(33,650)
(27,200)
(199,275)
Net Cash Provided (Used) In Financing Activities
(33,650)
(4,978)
371,450
Net Increase (Decrease) in Cash
(6,891)
2,282
2,409
Cash At Beginning Of Period
9,300
24,790
-
Cash At End of Period
$
2,409
$
27,072
$
2,409
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
AND FOR THE PERIOD JANUARY 1, 1999 THROUGH SEPTEMBER 30, 2012 - (Continued)
(UNAUDITED)
Cumulative
Since
Re-enterimg
Development
For the Nine Months
Stage
Ended September 30,
January 1,
2012
2011
1999
Issuance of common stock upon conversion of notes payable
$
-
$
-
$
193,840
Common stock issued for oil and gas interests
$
-
$
-
$
135,000
Cancellation of note payable for oil and gas interests
$
-
$
-
$
(70,000)
Note payable as partial consideration for oil and gas interests
$
-
$
-
$
81,750
Oil and gas assets acquired
$
-
$
-
$
80,795
Asset retirement obligation
$
5,200
$
-
$
10,400
Note receivable as partial consideration for purchase of
preferred stock
$
-
$
-
$
70,000
Repayment of note payable transferred directly
to MacuCLEAR upon sale to GHI, Ltd.
$
-
$
-
$
(150,000)
Partial sale of MacuCLEAR holdings to GHI, Ltd.
$
-
$
-
$
148,500
Issuance of common stock upon MacuCLEAR sale
to GHI, Ltd.
$
-
$
-
$
1,500
Common stock returned in failed consideration and
debt settlement
$
-
$
-
$
510,960
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
September 30, 2012
December 31, 2011
Evaluated Oil and Gas Properties (1) (2) (3)
$
192,941
$
114,634
Unevaluated Oil and Gas Properties (1)
3,080
3,080
Net Profits Production Interest (1)
5,695
5,695
Furniture and Equipment
12,649
12,649
214,365
136,058
Accumulated Depreciation, Depletion and Amortization
(13,161)
(12,363)
$
201,204
$
123,695
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Fair Value Measurements Using
September 30, 2012
Level 1
Level 2
Level 3
MacuCLEAR Preferred Stock at fair value
$
-
$
-
$
394,288
December 31, 2011
MacuCLEAR Preferred Stock at fair value
$
-
$
-
$
497,992
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Category
Net Reserves (SEC Prices at 12/31/11)
Oil
NGL
Gas
PV-10
(Bbls)
(Bbls)
(Mcf)
($m)
Proved developed--Producing
3,250
-
-
$
134.6
Proved developed--Non-producing
4,790
-
-
85.7
Proved undeveloped
62,530
-
-
2,340.9
Total Proved (1)(2)
70,570
-
-
$
2,561.2
Number
(Registrant)
David A. Nelson
Chief Executive Officer
(Principal Executive Officer and Principal Financial and Accounting Officer)
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13A-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, David A. Nelson, certify that:
Dated: November 14, 2012
/s/ David A. Nelson
David A. Nelson
Chief Executive Officer and Principal Accounting Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of REGENT TECHNOLOGIES, INC. (the "Company") on Form 10-Q for the period ended September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned does hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
Dated: November 14, 2012
/s/ David A. Nelson
David A. Nelson
Chief Executive Officer and Principal Accounting Officer