10KSB 1 reg10k2003.txt FORM 10-KSB FOR 12-31-2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-KSB (Mark One) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission file number 000-9519 REGENT TECHNOLOGIES, INC. ------------------------------ (Name of small business issuer in its charter) Colorado 84-0807913 --------------- ----------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 6727 Hillcrest Ave., Suite E, Dallas, TX 75205 (Address of principal executive offices) (Zip Code) Issuer's telephone number 214-507-9507 Securities registered under Section 12(b) of the Exchange Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- None None Securities registered under Section 12(g) of the Exchange Act: $0.01 pv common stock (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ] No [X] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] State issuer's revenues of its most recent fiscal year. $0.00 State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.) - $204,223 State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. 20,422,321 shares common stock $.01 par value as of August 15, 2005. DOCUMENTS INCORPORATED BY REFERENCE Form 10-QSB for first, second and third quarter of fiscal year. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] TABLE OF CONTENTS Number Item in Form 10-KSB Page No. ------ ------------------- -------- 1 Description of Business 3 2 Description of Property 4 3 Legal Proceedings 4 4 Submission of Matters to a Vote of Security Holders 4 5 Market for Common Equity and Related Stockholder Matters 4 6 Management's Discussion and Analysis for Plan of Operation 5 7 Financial Statements 6 8 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 18 8A Controls and Procedures 18 9 Directors, Executive Officers, Promoters and Control Persons 18 10 Executive Compensation 19 11 Security Ownership of Certain Beneficial Owners and Management 19 12 Certain Relationships and Related Transactions 21 13 Exhibits and Reports on Form 8-K 21 14 Principal Accountant Fees and Services 21 Signatures 21 2 PART I ITEM 1 - DESCRIPTION OF BUSINESS General The terms "Company" and "Regent" when used herein mean Regent Technologies, Inc. and its subsidiaries. Regent Technologies, Inc., formerly Regent Petroleum Corporation, was incorporated under the laws of the State of Colorado on January 18, 1980. In 1994, new management redirected the Company's core business as an incubator for the development of emerging technologies and the shareholders voted to rename the Company at a meeting held on December 19, 1994. At the shareholders meeting held on March 4, 1998, the shareholders approved a 1 for 6 reverse split of the Common Stock of the Company. On December 19, 1994, the Board approved the acquisition of SSB Environmental, Inc. ("SSBE") for restricted common stock and incentives. SSBE was the Company's entry into the landfill mining business in the State of New York. On September 15, 1996, the Company announced it had initiated highspeed Internet access for home and business using the National Knowledge Networks, Inc. ("NKN") digital network under a Technology License which licenses the hardware and the software necessary for the Company to offer access to the Internet. The License was obtained from NKN Technologies, Inc. ("NKN") for 2,500,000 shares of common stock of the Company, 600,000 registered shares and 1,900,000 restricted shares. On December 7, 1996, the License was assigned to the Company's wholly owned subsidiary, Regent Tel1 Communications, Inc. ("TEL1"). Effective September 1, 1997, Regent acquired ConnecTen, L.L.C. ("ConnecTen") for 100,000 shares of Regent restricted common stock. The focus of ConnecTen was to provide a wide range of Internet services for corporate customers including high-speed access, web hosting, server colocation and web page development. Effective January 1, 1998, TEL1 initiated the offering of wireless products through Regent's acquisition of Channel Services, L.C. which allowed TEL1 to succeed to Channel's status as a preferred customer of AT&T Wireless Services Corp. Channel Services was acquired through the issuance of 1,281,667 shares of restricted common stock and warrants which can be exercised for an additional 80,000 shares of Regent restricted common stock. On March 20, 1998, the Company announced its entry into the digital printing and prepress business through its new subsidiary company, Regent Digital Imaging, Inc. ("RDI"). RDI was incorporated as a Texas corporation and was initiated because of the Company's knowledge of and access to the technologies related to this industry and the Company's belief that the digital printing business can be enhanced through utilization of the Internet. Effective January 1, 1998, the aforementioned Company's subsidiary companies were divested in the ordinary course of business through sales in lieu of foreclosure due to the Company's creditors seeking repayment for delinquent debt and the inability to raise capital due to continuing operating losses. Recent Business Developments From 1999 to 2003, the Company reviewed opportunities without successfully consummating any new business. In 2003, new management initiated the process of reclaiming shares of stock issued in 1999 and 2000 without consideration to the Company. In 2005, management gained control of the necessary information for auditing the books and records of the Company and filing delinquent SEC reports. Employees At December 31, 2003, the Company had no employees. The President serves without compensation. 3 ITEM 2 - DESCRIPTION OF PROPERTY Offices The Company currently does not occupy formal office facilities but uses space on an as needed basis without charge provided by a former officer of the Company and as of 2003 by a business associate. The fair rental value of this space provided was not and is currently not material. Management believes that this will be sufficient for the needs of the Corporation for at the next 12 months. ITEM 3 - LEGAL PROCEEDINGS During 2001, stockholder David Nelson initiated a lawsuit against the Company and management of the Company for issuing shares of common stock without consideration. The case was ordered for mediation and on February 27, 2003, the case was settled with former management concurring that 7,331,504 shares were issued without consideration and should be cancelled. Also, as part of the mediation settlement, it was agreed that certain shares previously owned by the father of the President, Richard Straza and the Straza family members and legal entities (the Straza Shares) would be returned and cancelled and that the Company would be indemnified against claims arising from the issuance of the Straza Shares. As of August, 2005, these shares have not been returned to the Company and management believes legal action will be necessary to retrieve the shares. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were presented for a vote to the shareholders of Regent during the fiscal year. PART II ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded in the "pink-sheets" under the symbol "REGT." The following table sets forth the high and low bid quotations for the Company's Common Stock as reported by security dealers. The quotes represent inter-dealer prices without adjustments or commissions and may not represent actual transactions. Bid Price High Low 2003 1st Quarter .01 .01 2nd Quarter .01 .01 3rd Quarter .01 .01 4th Quarter .01 .01 2002 1st Quarter .01 .01 2nd Quarter .01 .01 3rd Quarter .01 .01 4th Quarter .01 .01 The Company has not declared any cash dividends on its Common Stock since its inception. The Company currently intends to retain any future earnings to finance the growth of the business and, therefore, does not anticipate paying any cash dividends in the foreseeable future. As of December 31, 2003, the approximate number of record holders of the Company's Common Stock was 2,121. 4 ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Forward Looking Statements The following discussion and analysis should be read in conjunction with the financial statements and notes thereto included elsewhere in this report on Form 10-KSB for Regent Technologies, Inc. ("Regent" or "We" or the "Company"). This report contains certain statements that are "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Those statements, among other things, include the discussions of the Company's expectations set forth below. Although the Company believes that the expectations reflected in the forward looking statements are reasonable, management can give no assurance that such expectations will prove to have been correct. Generally, forward looking statements relate to business plans or strategies, projected or anticipated benefits or other consequences of such plans or strategies, or projections involving anticipated revenues, expenses, earnings, levels of capital expenditures, liquidity or indebtedness, ability to raise working capital, or other aspects of operating results or financial position. Although not always the case, forward looking statements can be identified by the use of words such as "believes", "expects", "intends", "projects", "anticipates", "contemplates", or "estimates". Plan of Operation As a development stage company, Regent has funded operations through short-term borrowings and equity investments in order to meet obligations. Our future operations are dependent upon external funding and our ability to increase revenues and reduce expenses. Management believes 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, for a reasonable period of time. As of the date of this annual 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. Financial Condition The Company has not yet made any determination about the future business plans. The Company's Board of Directors is evaluating possible directions, including a possible transaction in which the Company sells or merges its "public shell" corporation to or with a private operating business whereby the Company's shareholders would retain some ownership interest in the surviving public corporation. However, the Board of Directors may not choose to pursue one or more options not yet considered. The Company did not have revenues from operations in each of the last two fiscal years. The Company is not current on its trade payables including amounts owed to stockholders and continues to raise monies as needed through proceeds from the sale of the Company's restricted Common Stock or from short term loans from individuals. The Company is not performing any product research and development at this time and it is not expected to purchase equipment or incur significant changes in the number of employees. 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. 5 ITEM 7 - FINANCIAL STATEMENTS TURNER, STONE & COMPANY, L.L.P 12700 Park Central Drive, Suite 1400 Dallas, Texas 75251 Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders Regent Technologies, Inc. Dallas, Texas We have audited the accompanying balance sheet of Regent Technologies, Inc., (the Company) (a development stage company) as of December 31, 2003, and the related statements of operations, stockholders' deficit, and cash flows for the years ended December 31, 2003 and 2002, and for the period January 1, 1999 through December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Regent Technologies, Inc. at December 31, 2003, and the results of its operations and cash flows for the years ended December 31, 2003 and 2002, and for the period January 1, 1999 through December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has no business operations and has a working capital deficiency, both of which raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Turner, Stone & Company, L.L.P. ---------------------------------- September 8, 2005 6 REGENT TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEET DECEMBER 31, 2003
ASSETS CURRENT ASSETS Cash in bank $ - Settlements and note receivable, net of $79,892 allowance for uncollectible accounts - --------- Total Current Assets - Property and equipment: Furniture and fixtures 8,593 Computer equipment 2,400 --------- 10,993 Less accumulated depreciation (10,993) --------- Net property and equipment - $ - ========= LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable, trade $ 24,634 Accounts payable, stockholder 10,000 --------- Total Current Liabilities 34,634 --------- Note payable 64,000 --------- STOCKHOLDERS' DEFICIT Preferred stock, $.10 par value, 30,000,000 shares authorized, no shares issued and outstanding, no rights or privileges designated Common stock, $.01 par value, 100,000,000 shares authorized, 20,465,197 shares issued and 20,422,321 outstanding 204,652 Paid-in capital in excess of par 3,189,656 Accumulated deficit (including $144,943 accumulated during the development stage) (3,492,942) Treasury stock, 42,876 shares, at no cost - --------- (98,634) --------- $ - ========= The accompanying notes are an integral part of the financial statements.
7 REGENT TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 AND THE PERIOD JANUARY 1, 1999 THROUGH DECEMBER 31, 2003
Cumulative Since Re-entering Development Stage 2003 2002 January 1, 1999 ------------ ------------ ------------ Revenues $ - $ - $ - Operating expenses: General and administrative - - 163,557 --------- --------- --------- Operating loss - ( -) (163,557) --------- --------- --------- Gain on extinguishment of debt - - 18,614 --------- --------- --------- Loss from continuing operations before income taxes - ( -) (144,943) Provisions for income taxes - - - --------- --------- --------- Loss from continuing operations - ( -) (144,943) --------- --------- --------- Net loss $ - $( -) $(144,943) ========= ========= ========= Net loss per common share: Basic loss per common share $( .00) $( .00) $( .00) ========= ========= ========= Diluted loss per common share $( .00) $( .00) $( .00) ========= ========= ========= The accompanying notes are an integral part of the financial statements.
8 REGENT TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 AND THE PERIOD JANUARY 1, 1999 THROUGH DECEMBER 31, 2003
Common Stock Total ----------------------- Additional Stockholder's Issued Paid-In Accumulated Equity Shares Par Value Capital Deficit (Deficit) ------ --------- ------- ------- --------- Balance at January 1, 1999 3,643,693 $ 36,437 $3,148,871 $( 3,347,999) $( 162,691) Issuance of common stock in exchange for services 50,000 500 4,500 - 5,000 Issuance of common stock upon conversion of notes payable 1,800,000 18,000 172,000 - 190,000 Issuance of common stock with failed consideration 50,877,713 508,777 ( 508,777) - - Net loss for 1999 - - - ( 125,005) ( 125,005) Issuance of common stock for settlement of lawsuit 140,000 1,400 12,600 - 14,000 Issuance of common stock with failed consideration returned and cancelled (36,046,209) (360,462) 360,462 - - Net loss for 2000 - - - ( 19,938) ( 19,938) Net loss for 2001 - - - - - ----------- -------- --------- ---------- ---------- Balance at December 31, 2001 20,465,197 $ 204,652 $3,189,656 $( 3,492,942) $( 98,634) Net loss for 2002 - - - - - ----------- -------- --------- ---------- ---------- Balance at December 31, 2002 20,465,197 $ 204,652 $3,189,656 $( 3,492,942) $( 98,634) Net loss for 2003 - - - - - ----------- -------- --------- ---------- ---------- Balance at December 31, 2003 20,465,197 $ 204,652 $3,189,656 $( 3,492,942) $( 98,634) =========== ======== ========= ========== ========== The accompanying notes are an integral part of the financial statements.
9 REGENT TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002 AND THE PERIOD JANUARY 1, 1999 THROUGH DECEMBER 31, 2003
Cumulative Since Re-entering Development Stage 2003 2002 January 1, 1999 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ - $ - $ (144,943) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation - - 3,762 Gain from extinguishment of accounts payable - - ( 18,614) Note issued for settlement expenses - - 20,000 Common stock issued for services - - 5,000 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 payable - - 24,136 Increase in accrued compensation - - 10,000 --------- --------- --------- Net Cash Used In Operating Activities - - - --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: - - - --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: - - - --------- --------- --------- Net Decrease in Cash - - - Cash At Beginning Of Period - - - --------- --------- --------- Cash At End of Period $ - $ - $ - ========= ========= ========= SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES -------------------------------------------------------------------- Issuance of common stock for services $ - $ - $ 5,000 Issuance of notes payable in settlement of accrued compensation $ - $ - $ 170,000 Issuance of common stock upon conversion of notes payable $ - $ - $ 190,000 Issuance of common stock in legal settlement $ - $ - $ 14,000 Common stock returned in failed consideration $ - $ - $ 360,462 Reduction of related party note receivable from direct payment of liabilities $ - $ - $ 34,055 The accompanying notes are an integral part of the financial statements.
10 REGENT TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003 AND 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and business Regent Technologies, Inc., (the Company) formerly Regent Petroleum Corporation, was incorporated on January 18, 1980, in the state of Colorado for the purpose of exploration and development of oil and gas properties in the United States. Activities of the Company up to 1992 were primarily organizational and included the issuance of equity capital and the acquisition of developed and undeveloped oil and gas properties which included the formation of Earth Minerals, Inc. in 1991, which was later renamed Regent Industries, Inc. In 1992, the Company redirected its core activities as an incubator for the development of emerging technologies and the shareholders voted to rename the Company at a meeting held on December 19, 1994. On December 19, 1994, the Board approved the acquisition of SSB Environmental, Inc. (SSBE) for restricted stock. SSBE was organized for the purpose of obtaining waste and landfill reclamation contracts. Effective January 1, 1996, the Company sold 100% of Regent Industries and 81% of its interest in SSBE. In September, 1996, the Company entered into a license agreement for the technologies necessary to offer dialup access to the Internet. During the fourth quarter of 1996, the Company organized Regent TEL1 Communications, Inc. as a Nevada corporation and a wholly owned subsidiary to market its Internet products and services primarily to consumer markets. In the third quarter of 1997, the Company acquired ConnecTen, L.L.C. as a wholly owned subsidiary to market its dedicated Internet access services to professionals and corporations. During the first quarter of 1998,the Company acquired Channel Services, LC, to expand its telecommunications products to include wireless telephone services. The acquisitions of ConnecTen and Channel Services were accounted for under the purchase method of accounting. During the first quarter of 1998, the Company organized Regent Digital Imaging, Inc. to offer digital printing and prepress services with access available via the Internet. Effective January 1, 1998, the Company divested 100% of its ownership in all subsidiary companies and on January 1, 1999 re-entered the development stage (see below). Basis of presentation and going concern uncertainty The financial statements of the Company have been prepared assuming that the Company will continue as a going concern. However, the Company has sustained recurring losses and, as of December 31, 2003, had no business operations and a working capital deficit. These conditions, among others, give rise to substantial doubt about the Company's ability to continue as a going concern. Management is continuing to seek additional equity capital to fund a merger or acquisition or to purchase an ongoing business. Until such time, the Company anticipates its working capital needs to be funded through advances from its major stockholders. Management believes that these steps will provide the Company with adequate funds to sustain its growth and continued existence. There is, however, no assurance that the steps taken by management will meet all of the Company's needs or that it will continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. Development stage activities By the end of 1998, the Company had ceased operations and had divested itself of any interests in subsidiary companies and effective January 1, 1999 had re-entered the development stage. Accordingly, all of the Company's operating results and cash flows reported in the accompanying financial statements for the years 1999 through 2003 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 Statements of Financial Accounting Standards (SFAS) No. 7, Accounting and Reporting by Development Stage Enterprises. 11 REGENT TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS Management estimates The preparation of financial statements in conformity with generally accepted accounting principles requires 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 period. Actual results could differ from those estimates. Cash and cash flows For purposes of the statements of cash flows, cash includes demand deposits and time deposits with maturities of less than three months. None of the Company's cash is restricted. Additionally, no interest or taxes were paid during each of the years ended December 31, 2003 and 2002 and for the period January 1, 1999 through December 31, 2003. Settlements and note receivable and allowances for uncollectible amounts The Company's settlements and note receivable (Note 6) represent remaining principal balances that had not been collected at the balance sheet date. These receivables are considered past due based upon maturity dates stated in the note or other applicable facts and circumstances. At December 31, 2000 and 1999, the balances of these receivables have been reduced by an allowance for uncollectible amounts of $79,892 and $79,692, respectively, so that they are reflected in the accompanying financial statements at their net realizable values of $0 and $5,000 determined from amounts actually collected. Interest has not been accrued on the note receivable because collection is not reasonably assured. Property and equipment Property and equipment is stated at cost less accumulated depreciation. Depreciation of property and equipment is being provided by the straight-line method over estimated useful lives of three to seven years. During the years ended December 31, 2003 and 2002 and for the period January 1, 1999 through December 31, 2002, depreciation expense totaled $0, $0, and $3,762, respectively. Net loss per common share Basic loss per common share amounts are computed by dividing the net loss by the weighted average number of common stock shares outstanding. Diluted loss per common share amounts reflect the maximum dilution that would have resulted from the exercise of stock options (Notes 2 and 6). Diluted loss per common share amounts are computed by dividing the net loss by the weighted average number of common stock shares outstanding plus the assumed exercise of stock options into an equivalent number of common stock shares. 12 REGENT TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS For the years ended December 31, 2003 and 2002 and for the period January 1, 1999 through December 31, 2003, basic loss per common share amounts are based on 20,422,321, 20,422,321, and 24,079,268, respectively, weighted average shares of common stock outstanding. No effect has been given to the assumed exercise of stock options and warrants (Note 6) as the effect would be antidilutive. For the period January 1, 1999 through December 31, 2003, the weighted average number of common stock shares outstanding exceeded the number of shares outstanding at the end of each respective period, because of the weighting factor given to the cancellation of 36,046,209 common stock shares in April 2000 (Note 2). Recent Accounting Pronouncements Through August 18, 2005, there were several new accounting pronouncements issued by the Financial Accounting Standards Board (FSAB) the most recent of which was Statement on Financial Accounting Standards (SFAS) No. 154, Accounting Changes and Error Corrections. 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. In December 2004, the FSAB issued SFAS No. 123R, "Share-Based Payments", revising SFAS No. 123, Accounting for Stock-Based Compensation, and superseding Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees". SFAS No. 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, including obtaining employee services in share-based payment transactions. SFAS No. 123R applies to all awards granted after the required effective date and to awards modified, purchased or canceled after that date. Adoption is effective as of the beginning of the first interim or annual reporting period that begins after December 15, 2005. Management does not believe the adoption of this accounting pronouncement will have a material impact on the Company's financial position or operating results (Note 6). Stock based incentive program SFAS No. 123, "Accounting for Stock-Based Compensation", encourages entities to recognize compensation cost for stock-based employee compensation plans using the fair value method of accounting, as defined therein, but allows for the continued use of the intrinsic value method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees". The Company does not have a formal stock based compensation plan. However, stock options were granted to a director in 1999 and employees in 1998 and were valued using the intrinsic value method, which resulted in no compensation costs for the options granted. The required pro forma disclosures of net loss and net loss per common share amounts as if the fair value method of accounting has been applied are contained in Note 6. Fair value of financial instruments In accordance with the reporting requirements of SFAS No. 107, Disclosures About Fair Value of Financial Instruments, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this Statement 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. The estimated fair value of settlements and note receivable are based on management's assessment of net realizable value and its allowance for uncollectible amounts (see above). The estimated fair values of accounts payable approximate their carrying amounts due to the short maturity of these instruments. The estimated fair value of the note payable also approximates its carrying values because its terms are comparable to similar lending arrangements in the marketplace. At December 31, 2003 and 2002 and for the period January 1, 1999 through December 31, 2003, the Company did not have any other financial instruments. 2. CAPITAL STRUCTURE DISCLOSURES 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, 30,000,000 of which have been designated as preferred shares with a par value per share of $.10, and 100,000,000 of which have been designated as common shares with a par value per share of $.01. In connection with the settlement of an employment agreement in 1999, 42,876 common stock shares were returned to the Company and are being held in treasury at no cost. 13 REGENT TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS In July, 1995, the Company designated 10,000 shares as Series A Redeemable Preferred Stock for which no shares were issued and the designation expired in December, 1998. No other series, rights or privileges have been designated with respect to the preferred stock shares. Each common stock share contains one voting right and contains the rights to dividends if and when declared by the Board of Directors. On March 4, 1998, the shareholders approved a 1 for 6 reverse split of the common stock of the Company. All share and per share amounts have been retroactively restated in the accompanying financial statements. On June 29, 1999, the Company entered into a Stock Purchase Agreement with the Straza Family Limited Partnership, a partnership managed by the father of the Company's President, Richard Straza, for stock options and shares of restricted common stock in exchange for the assignment of notes receivable totaling $1,100,000 to the Company. Although the transaction was never formally closed as provided for in the agreement, on July 30, 1999, the Company issued 36,046,209 shares of restricted common stock. The notes receivable were never assigned to the Company, and on April 5, 2000, the shares were returned to the Company and cancelled. The stock options were not issued at any time and the Stock Purchase Agreement was voided. As of August 15, 2005, 20,422,321 shares of common stock have been certified by the Company's independent stock transfer agent as outstanding, including 7,331,504 shares of restricted common stock that the Company believes were issued without consideration and should be cancelled (Note 3). In addition, Regent believes 7,500,000 shares of restricted common stock were issued without consideration to the Straza Family Limited Partnership and should be returned and cancelled. Management of the Company is currently attempting to reclaim and cancel the certificates for these shares issued without consideration and believes legal action may be necessary. 3. COMMITMENTS AND CONTINGENCIES Leases The Company currently does not occupy formal office facilities but uses space on an as needed basis without charge provided by an officer of the Company and as of 2003 by a business associate otherwise unrelated to the Company. The fair rental value of this space provided was not and is currently not material. At December 31, 2003 and 2002 and for the period January 1, 1999 through December 31, 2003, the Company was not obligated under any noncancelable operating or capital lease agreements. Litigation During 2001, stockholder David Nelson initiated a lawsuit against the Company and management of the Company for issuing shares of common stock without consideration. The case was ordered for mediation and on February 27, 2003, the case was settled with former management concurring that 7,331,504 shares were issued without consideration and should be cancelled. Also, as part of the mediation settlement, it was agreed that certain shares previously owned (Note 2) by the former President's father, Richard Straza and the Straza family members and legal entities (the Straza Shares) would be returned and cancelled and that the Company would be indemnified against claims arising from the issuance of the Straza Shares. As of August 15, 2005, these shares have not been returned to the Company. 14 REGENT TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS 4. NOTE PAYABLE In February 1999, the Company settled an equipment lease obligation and executed a $64,000 promissory note payable to a vendor. The note is non-interest bearing, unsecured and was due March 1, 2004. The Company has not made any payments on this note and it is currently in default and accruing interest from the date of default at 15% per annum. 5. RELATED PARTY TRANSACTIONS Settlements with former officers In June of 1999, the Company executed settlement agreements with the Chairman, President, General Counsel and the Chief Technical Officer to terminate each of their employment contracts and the deferred compensation amounts due thereunder. The Company issued 50,000 shares of restricted common stock to the General Counsel in payment of deferred compensation, $5,000 of which was paid by the Company by the issuance of these shares and the remainder of which was assumed by the former Chairman in connection with the Company's divestiture of its subsidiaries. In addition, the Company released the Chief Technical Officer from his contract in exchange for the stock grant thereunder. Pursuant thereto, 42,876 shares of restricted common stock was returned to the Company and is being held in treasury at no cost (Note 2). The Chairman accepted a $90,000 convertible promissory note for $90,000 of deferred compensation owed. At the same time, the promissory note was assigned to a third party and converted into 900,000 shares of restricted common stock. The President accepted a $100,000 convertible promissory note and an account payable of $10,000 for $90,000 of deferred compensation owed and $20,000 of expense reimbursement for the termination of his employment contract. In addition, the President received an option to purchase 100,000 shares of the Company's restricted common stock at an exercise price of $.25 and expiring on June 30, 2004. At the same time, the promissory note was assigned to a third party and converted into 900,000 shares of restricted common stock. Settlements receivable, former Chairman In connection with the Company's 1998 divestiture through a sale in lieu of foreclosure of its interest in two subsidiaries, the Company received two receivables from its then Chairman of $20,000 and $27,888. The receivables were non-interest bearing, unsecured and due upon demand. The Company received repayments of $4,800 in 2000 and $2,420 and $27,888 in 1999, respectively on such receivables through the payment of Company expenses by the former Chairman. Note receivable, Woody, Inc. (Woody, Inc.) In 1998, the Company received a $67,000 non-recourse promissory note from Woody, Inc., a corporation wholly owned by a stockholder, in exchange for 100% of the shares of the stock of Tel1 Communications, Inc. (Note 1). The note bears interest, which is payable annually on December 28th, at 6.0%, was due on December 28, 2003 and is unsecured. No interest or principal has been paid on this note and it is considered in default. 15 REGENT TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS 6. STOCK OPTIONS AND OTHER GRANTS Stock options In 1998, in connection with a private placement of the Company's common shares, the Company issued 333,333 warrants to purchase restricted common stock at $1.00 per share and expiring on June 30, 2003. In 1999, the Company issued to a director (Note 5) an option to purchase 100,000 shares of the Company's restricted common stock at an exercise price of $.25 and expiring on June 30, 2004. For the years ended December 31, 2003 and 2002, the stock options outstanding totaled 100,000 and 433,333, and the weighted average exercise price was $.25 and $.83, respectively. Other than the above options and warrants, no other options, warrants or similar rights have been granted and all options have expired without execution. In addition, the following information is presented for stock options outstanding at December 31, 2003. Separate pro forma net loss and loss per share amounts are not presented because there are no differences in the amounts that would be presented compared to actual net loss and loss per share amounts reported in the accompanying financial statements.
Number Weighted Ave. Weighted Range of Outstanding Remaining Average Exercise Prices (x 1,000) Contractual Life Exercise Price ------------------ ----------- ----------------- -------------- $ .25 100 0.5 years $ .25
7. INCOME TAXES The Company recognizes deferred tax assets and liabilities based on the 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. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. At December 31, 2003 the Company had a deferred tax asset totaling approximately $545,000, which relates to the Company's cumulative net operating loss carry forward totaling approximately $1,317,000 and the allowance for uncollectible settlements and note receivable, which will expire through 2020. This deferred tax asset has been fully offset by a valuation reserve. The Company does not have any other deferred tax assets or liabilities. 16 REGENT TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS The Tax Reform Act of 1986 imposed substantial restrictions of the utilization of net operating loss and tax credit carry forwards in the event of an "ownership change" as defined by the Section 382 of the Internal Revenue Code of 1986. If the Company has an "ownership change" as defined by the Internal Revenue Code of 1986, the Company's ability to utilize the net operating losses could be reduced. A reconciliation of income tax expense at the statutory federal rate of 34% to income tax expense at the Company's effective tax rate for the years ended December 31, 2003 and 2002 and for the period January 1, 1999 through December 31, 2003 is as follows:
Cumulative Since Re-entering Year Ended Year Ended Development Stage 12/31/03 12/31/02 January 1, 1999 ------------------ ------------------- ----------------- Tax benefit computed at statutory rate $ - $ - $( 49,281) State income taxes - - ( 7,247) Expiration of NOL Carryforward 9,304 - 493,705 Decrease in valuation allowance ( 9,304) - (437,177) --------- --------- --------- $ - $ - $ - ========= ========= =========
The Company uses the accrual method of accounting for income tax reporting purposes. At December 31, 2003 and 2002, the significant components of the Company's deferred tax assets (benefits) and liabilities are summarized. 2003 2002 ---- ---- Deferred tax assets: Net operating loss carry forward $ 513,438 $ 522,742 Allowance for doubtful accounts 31,158 31,158 Less valuation allowance (544,596) (553,900) --------- --------- - - Deferred tax liabilities: Depreciation differences - - --------- --------- Net deferred tax assets $ - $ - ========= ========= 17 ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Effective August 8, 2005, Turner, Stone & Company, L.L.P. ("Turner Stone") was engaged as the independent certified public accountant of Regent Technologies, Inc. (the "Company") as its principal independent auditor to audit the financial statements of the Company for the years ending December 31, 1999 through December 31 2004, and simultaneously the Company dismissed Salmon, Beach and Company, P.C. (the "Former Auditor"). The report of the Company's Former Auditor for the fiscal years ended December 31, 1998 and 1997 contained no adverse opinions or disclaimer of opinion or qualification, except a statement that because of the inadequacy of the accounting records for 1998, they were unable to form an opinion regarding the amounts at which accounts payable were recorded. Also, the Former Auditor's report of the financial statements for the fiscal years ended December 31, 1998 and 1997 did contain a going concern comment in respect of the Company's recurring losses from operations and net capital deficiency. The decision to change accountants was recommended, authorized and approved by the board of directors of the Company. During the period from the engagement of the Former Auditor through the date of the dismissal of the Former Auditor, including the Company's most recent fiscal year and the subsequent interim period, there were no disagreements with the Former Auditors, whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the Former Auditor's satisfaction, would have caused it to make reference to the subject matter of the disagreement(s) in connection with its report. ITEM 8A - CONTROLS AND PROCEDURES We are a development stage company with no revenues and during the period covered by this quarterly report, our board of directors had responsibility for our internal controls and procedures over our financial reporting. Our scope of internal control is intended to extend to policies, procedures, processes, systems, activities, initiatives, and endeavors required of a company with our limited transactions, expenses, and operations. To this end, management has made changes to internal controls and procedures, including corrective actions with regard to significant deficiencies or material weaknesses identified in the Company's audit for the period ending December 31, 2000. As of this date, it is the belief of management that, given the Company's limited operations, our revised disclosure controls and procedures will be effective. PART III ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT The Executive Officers and Directors and their respective ages as of December 31, 2003 are as follows: DIRECTORS Name of Director: Age: Director Since Other directorships held ----------------- ---- -------------- ------------------------ David A. Nelson 55 June, 2003 None Robyn Straza 43 June, 1999 None Brian Layton 43 June, 1999 None EXECUTIVE OFFICERS Executive Officer: Age: Office: Officer Since ------------------ ---- ------- -------------- David A. Nelson 55 President, CEO Robyn Straza 43 President, CEO June, 1999 18 Mr. David A. Nelson has over 25 years in the financial and trust services business. From 1992 to 1999, Mr. Nelson was President of Regent Technologies, Inc. Since 1999, he has worked exclusively with nonprofit organizations regarding charitable gift development, trust administration and investment management, including serving as Chairman and CEO of Concord Trust Company for three years. He is an attorney, licensed insurance agent and Registered Investment Advisor, and holds the Accredited Investment Fiduciary designation. Ms. Robyn Straza and Mr. Brian Layton served as Directors of the Company from June, 1999 until June, 2003. The Company has no additional information about Ms. Straza or Mr. Layton. During the 2003 fiscal year there were no individuals who were required to comply with the reporting requirements under Rule 16A-3 of the Exchange Act and failed to do so. Regent is developing a code of ethics that will apply to its principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions. At present, Regent does not maintain an audit committee, instead the company's board of directors is responsible to review all audit matters. ITEM 10 - EXECUTIVE COMPENSATION The table below summarizes all compensation awarded to, earned by, or paid to the executive officers of Regent by any person for all services rendered in any capacity to Regent for the present fiscal year.
Other Securities Name and Annual Restricted Underlying All Other principal Compen- Stock Options/ LTIP Compen- position Year Salary($) Bonus sation($) Award(s)($) SARs($) Payouts($) sation($) -------- ---- --------- ----- --------- ----------- ------- ---------- --------- Robyn Straza, 2003 $* 0.00 0.00 0.00 0.00 0.00 0.00 President, CEO 2002 $* 0.00 0.00 0.00 0.00 0.00 0.00 David A. Nelson, 2003 $* 0.00 0.00 0.00 0.00 0.00 0.00 President, CEO (beginning June, 2003)
---------- * No compensation. ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Principal Shareholders As of August 10, 2005, there are 20,422,321 shares of Common Stock issued and the following table utilizes this number as the denominator in setting forth information as of the date of this Annual Report concerning: (i) each person who is known by us to own beneficially more than 5% of our outstanding Common Stock; (ii) each of our executive officers, directors and key employees; and (iii) all executive officers and directors as a group. Common Stock not outstanding but deemed beneficially owned by virtue of the right of an individual to acquire shares within sixty (60) 19 days is treated as outstanding only when determining the amount and percentage of Common Stock owned by such individual. Except as noted, each person or entity has sole voting and sole investment power with respect to the shares of Common Stock shown.
Title of Class Name and Address of Amount and Percent of Beneficial Owner Nature of Class beneficial Ownership Common Stock Richard Straza (1) 8,330,504 40.79% %Straza Family Ltd. Partnership 1613 Breakwater Lane Plano, TX 75093 Common Stock David A. Nelson (2) 1,844,960 9.03% 18 St. Laurent Place Dallas, TX 75225 Common Stock Crystal L. Coats III (3) 1,406,664 6.89% P. O. Box 1122 Pell City, AL 35125 Common Stock All officers and directors (4) 1,844,960 9.03% as a group (1 person)
(1) Richard Straza is the managing partner of the Straza Family Limited Partnership. This figure includes: (i) 7,500,000 of restricted shares held by the Straza Family Limited Partnership at December 31, 1999 but which may be cancelled (Item 12); (ii) 305,504 shares of restricted stock held of record in the name of Richard Straza; and (iii) 525,000 shares of unrestricted stock held of record in the name of Richard Straza. (2) David A. Nelson is the President/Chief Executive Officer and director of Regent at the date of the filing of this report. This figure includes: (i) 1,100,000 restricted shares and 263,281 unrestricted shares held of record or beneficialy by David A. Nelson; (ii) 16,667 restricted shares and 70,835 unrestricted shares held of record by spouse Elaine E. Nelson; and (iii) 294,177 held directly or beneficially in brokerage accounts. (3) Crystal L. Coats III is the owner of Woody, Inc. This figure includes: (i) 667,830 restricted shares held directly and (ii) 500,000 restricted shares and 238,834 unrestricted shares held beneficially through Woody, Inc. (4) This figure includes only the shares of David A. Nelson, President, and does not include the effect of the exercise of options or warrants as all have expired as of the date of the filing of this report. 20 ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On June 29, 1999, the Company entered into a Stock Purchase Agreement with the Straza Family Limited Partnership, a partnership managed by the father of the Company's President, Richard Straza, for stock options and shares of restricted common stock in exchange for the assignment of notes receivable totaling $1,100,000 to the Company. Although the transaction was never formally closed as provided for in the agreement, on July 30, 1999, the Company issued 36,046,209 shares of restricted common stock. The notes receivable were never assigned to the Company, and on April 5, 2000, the shares were returned to the Company and cancelled. The stock options were not issued at any time and the Stock Purchase Agreement was voided. In addition, the Company believes 7,500,000 shares of restricted common stock were issued without consideration to the Straza Family Limited Partnership and should be returned and cancelled. ITEM 13 - EXHIBITS, LISTS AND REPORTS ON FORM 8-K (a) Exhibits. The exhibits required by this item are listed on the Exhibit Index attached hereto and are either filed herewith or incorporated herein by reference. (b) Reports on Form 8-K. On October 7, 2003, the Company filed a Current Report on Form 8-K reporting the settlement of a lawsuit through mediation and the change of the officers and directors of the Company. On August 19, 2005, the Company filed a Current Report on Form 8-K reporting an auditor change from Salmon, Beach & Company, P.C. to Turner, Stone & Company, L.L.P. ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES The following information concerns the aggregate fees billed for each of the last two fiscal years for professional services rendered by Salmon, Beach & Company, P.C., the principal accountants for Regent. 2003 2002 ---- ---- 1. Audit Fees $ 0 $ 0 2. Audit-Related Fees 0 0 3. Tax Fees 0 0 4. All Other Fees* 0 0 ---------- * There were no other fees billed to Regent by its principal accountant for the last two fiscal years for any products or services not covered in items 1, 2 or 3 above. Because Regent has only one director, the Company does not maintain a standing audit committee. As such, Regent does not have pre-approval policies and procedures regarding the engagement of an independent auditor for its year-end financial statements. Instead, the engagement of an auditor is approved by the ad hoc audit committee of the Board of Directors prior to the commencement of the audit. The balance of the services described in Items 2 or 3 above were pre-approved only to the extent that discussions were held with the principal independent accountant for Regent prior to the commencement of any services by the accountant, during which time all services to be performed by the accountant on behalf of Regent were outlined. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. REGENT TECHNOLOGIES, INC. By: /s/ DAVID A. NELSON -------------------------------- David A. Nelson President Date: September 12, 2005 ------------------------------ In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ DAVID A. NELSON -------------------------------- David A. Nelson, President, CEO and Principal Accounting Officer Date: September 12, 2005 ------------------------------ 21 EXHIBIT INDEX Exhibit Description of Exhibit No. 3.1 Certificate of Incorporation. Incorporated by reference to the Company's Registration Statement which became effective November 18, 1980 (File Number 2-69087). 3.2 Restated Articles of Incorporation of Regent Technologies, Inc.; Incorporated by references to Regent Petroleum Corporation Proxy Statement for Special Meeting of Shareholders held January 26, 1988, dated December 30, 1987. 3.3 Bylaws of Regent Technologies, Inc. as amended; Incorporated by references to Regent Petroleum Corporation Proxy Statement for Special Meeting of Shareholders held January 26, 1988, dated December 30, 1987. 9.1 License Agreements between Regent Technologies, NKN Technologies, Inc. and National Knowledge Networks dated August 16, 1996 and as modified under the Modification Agreement dated September 30, 1996; said agreements incorporated by reference to Exhibit 9.1 to the Registrant's 10-K for the period ended December 31, 1996. 21 List of subsidiaries - None 31.1 Certification of Chief Executive Officer and Principal Accounting Officer 32.1 Certification of Chief Executive Officer and Principal Accounting Officer