UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D. C. 20549
FORM
10‑Q
x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the quarterly period ended:
March
31, 2008
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OR
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
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For
the transition period from _______________ to
_______________
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Commission
File No.
001-07949
REGENCY
AFFILIATES, INC.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
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72-0888772
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(State or other
Jurisdiction of
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(I.R.S.
Employer
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Incorporation or
Organization)
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Identification
No.)
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610
Jensen Beach Boulevard
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Jensen Beach,
Florida
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34957
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(Address of
Principal Executive Office)
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(Zip
Code)
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(772)
334-8181
(Registrant's
Telephone Number, Including Area Code)
Indicate
by check mark whether 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 Registrant was required to
file such reports) and (2) has been subject to such filing requirements for the
past 90 days.
Yes
o
No
x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act, (Check one):
Large accelerated
filer
¨
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Accelerated
filer
¨
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Non-accelerated
filer (Do not check if a smaller reporting company)
¨
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Smaller reporting
company
x
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Indicate
by check mark whether Registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes
o
No
x
NUMBER OF
SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE
OUTSTANDING
AS OF SEPTEMBER 10, 2008:
3,534,812
REGENCY
AFFILIATES, INC.
FORM
10‑Q
FOR
THE QUARTERLY PERIOD ENDED MARCH 31, 2008
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Page
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Part
I.
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Financial Information
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1
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Item
1.
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1
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1
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2
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3
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4
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Item
2.
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6
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Item
3.
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9
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Item
4.
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9
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Part
II.
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Other Information
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10
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Item
1.
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10
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Item
1A.
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10
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Item
2.
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11
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Item
3.
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11
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Item
4.
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11
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Item
5.
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11
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Item
6.
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11
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12
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Regency
Affiliates, Inc. and Subsidiaries
Condensed
Consolidated Balance Sheets
Assets
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March 31,
2008
(Unaudited)
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December 31,
2007
(Audited)
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Current Assets
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Cash and cash
equivalents
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$
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365,973
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$
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253,566
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Marketable
securities
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9,295,148
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9,782,234
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Interest receivable,
net of allowance of $644,109
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-
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-
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Other current
assets
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338,723
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344,539
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Total Current
Assets
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9,999,844
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10,380,339
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Property,
plant and equipment, net
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12,159
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13,117
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Investment in partnerships/LLC
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10,251,762
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9,563,717
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Deferred
tax asset
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1,245,500
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1,245,500
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Other
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1,300
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1,300
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Total
Assets
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$
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21,510,565
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$
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21,203,973
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Liabilities
and Stockholders' Equity
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Current
Liabilities
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Accounts payable and
accrued expenses
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$
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231,940
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$
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391,651
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Income taxes
payable
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8,000
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-
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Total
Liabilities
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239,940
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391,651
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Stockholders'
equity
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Serial preferred stock Series C
and D, 234,544 shares outstanding,
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not
subject to mandatory redemption (Maximum liquidation
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preference
$21,141,940)
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486,076
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486,076
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Common stock, par value $.01;
authorized 8,000,000 shares;
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issued
3,531,812 shares; outstanding 3,465,544 shares
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35,319
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35,319
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Additional paid-in
capital
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7,112,199
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7,112,199
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Readjustment resulting from
quasi-reorganization at December 1987
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(1,670,596
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(1,670,596
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Retained earnings
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15,716,477
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15,258,174
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Note receivable - sale of stock,
net of allowance of $2,440,000
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-
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Treasury stock, 66,268 shares at
cost
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(408,850
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(408,850
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Total Stockholders'
Equity
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21,270,625
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20,812,322
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Total
Liabilities and Stockholders’ Equity
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$
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21,510,565
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$
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21,203,973
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The
attached notes are an integral part of these financial statements.
Regency
Affiliates, Inc. and Subsidiaries
Condensed
Consolidated Statements of Operations
(Unaudited)
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Three Months Ended March
31,
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2008
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2007
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Net
Sales
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$
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$
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-
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Costs
and expenses
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General and administrative
expenses
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290,449
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207,664
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290,449
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207,664
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Loss
from operations
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(290,449
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(207,664
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Income
(loss) from equity investment in partnerships
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688,045
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(185,658
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Interest
and dividend income
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60,707
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119,057
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Other
income
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-
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1,848
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Net
income (loss)
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458,303
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(272,417
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Net
income (loss) per common share:
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Basic
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$
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.13
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$
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(.08
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Diluted *
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$
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.12
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$
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(.08
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Weighted
average number of common shares outstanding
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Basic
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3,531,812
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3,308,335
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Diluted *
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3,765,107
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3,308,335
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* For
the quarter ended March 31, 2007, common stock equivalents have not been
included in the computation of diluted earnings per share as their effects would
be anti-dilutive.
The
attached notes are an integral part of these financial statements.
Regency
Affiliates, Inc. and Subsidiaries
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
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Three Months Ended March
31,
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2008
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2007
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Cash
Flows from operating activities
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Net income
(loss)
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$
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458,303
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$
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(272,417
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Adjustments to reconcile net
income (loss) to
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net cash used in operating
activities
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Depreciation and
amortization
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958
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816
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(Income) loss from equity
investment in partnerships
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(688,045
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185,657
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Changes in operating assets and
liabilities
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Other current
assets
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5,816
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6,440
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Accounts payable and accrued
expenses
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(159,711
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(213,216
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Income taxes
payable
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8,000
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15,138
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Net cash used in operating
activities
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(374,679
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(277,582
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Cash
flows from investing activities
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Purchases
of property and equipment
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-
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(9,742
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Proceeds from sales of
marketable securities
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28,800,000
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12,000,000
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Purchases of marketable
securities
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(28,312,914
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(11,996,040
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Net
cash provided by (used in) investing activities
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487,086
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(5,782
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Cash
flows from financing activities
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Purchase
of treasury stock
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-
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(60,450
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Net
cash used in financing activities
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-
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(60,450
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Increase
(decrease) in cash and cash equivalents
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$
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112,407
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$
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(343,814
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Cash
and cash equivalents – beginning
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253,566
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613,253
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Cash
and cash equivalents – ending
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$
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365,973
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$
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269,439
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Three Months Ended March
31,
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2008
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2007
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Supplemental
disclosures of cash flow information:
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Cash paid during the period
for
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Interest
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$
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-
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$
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-
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Income taxes
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$
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61,640
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$
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47,862
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The
attached notes are an integral part of these financial statements.
AND
SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note
1. Basis of Presentation
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10‑Q of Rule 10-01 of
Regulation S‑X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the
three-month period ended March 31, 2008 are not necessarily indicative of the
results that may be expected for the year ended December 31,
2008. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on Form
10‑KSB for the year ended December 31, 2007.
Principles
of Consolidation - The consolidated financial statements include the accounts of
Regency Affiliates, Inc. (the "Company"), its wholly owned subsidiaries, Regency
Power, Inc. and Rustic Crafts International, Inc. ("Rustic Crafts"), its 75%
owned subsidiary, Iron Mountain Resources, Inc. ("IMR"), and its 80%
owned subsidiary, National Resource Development Corporation
("NRDC"). All significant intercompany balances and transactions have
been eliminated in consolidation.
Note
2. Related Party Transactions
In
December 2005, the Company’s wholly owned subsidiary, Rustic Crafts, entered
into a stipulation of settlement with RCI Wood Products (“RCI”) regarding
outstanding indebtedness with RCI. Under the terms of this settlement, RCI
agreed to pay to Rustic Crafts the sum of $125,000 with interest at six and
one-half percent per annum, payable in thirty-five (35) monthly installments of
$1,088 each, commencing in January 2006. No payments have been
received since March 2006. RCI defaulted on the note in April
2006. The Company had initiated an action for collection against RCI
and personal guarantor of the note. In June 2008, the Company sold
the above mentioned notes to a collection agency for $1,000 plus 50% of any
amounts received, less expenses of up to $2,500. To date, the Company
has received $1,000 from the collection agency and the collection agency has not
received any proceeds on the notes.
During
the quarter ended March 31, 2007, the Company repurchased 9,300 shares of its
outstanding common stock at a cost of $60,450. The shares were then subsequently
retired from the treasury.
REGENCY
AFFILIATES, INC.
AND
SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note
2. Related Party Transactions, continued
On
February 16, 2007, the Company exercised its right to redeem all of the issued
and outstanding Series B Stock (370,747 shares), payable on March 15, 2007. The
aggregate redemption price of 430,473 shares of the Company’s common stock, at
$6.65 per share, amounted to $2,862,645. As this amount is less than the
original debt obligations exchanged with the preferred stockholders, which
represented their investment in 1991 of $3,707,470, no deemed dividend nor
beneficial conversion feature has been recognized by the Company in the current
period. This transaction resulted in the retirement by the Company of all issued
and outstanding Series B Stock.
Note
3. Uncertainties and Contingencies
During
the preparation of the Company's 2004, 2005, 2006, and 2007 Federal corporation
income tax returns, a dispute arose between the Company and Security Land and
Development Company Limited Partnership (“Security Land”) regarding the proper
amount of taxable income to be allocated to the Company and reported to the
Internal Revenue Service (the "IRS") on Federal Form K-1. This dispute could not
be resolved and the Company reported a different amount of income on its
corporation income tax return than was reported to the IRS by Security Land. The
discrepancy may cause the Company's tax returns to be audited by the
IRS. The Company believes that the outcome of any IRS examination
will not affect the financial statements of the Company as net operating losses
are available to offset any additional income not reported.
In July
2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes” (FIN 48). FIN 48 clarifies the accounting for income taxes by
prescribing a minimum probability threshold that a tax position must meet before
a financial statement benefit is recognized. The minimum threshold is defined in
FIN 48 as a tax position that is more likely than not to be sustained upon
examination by the applicable taxing authority, including resolution of any
related appeals or litigation processes, based on the technical merits of the
position. The tax benefit to be recognized is measured as the largest amount of
benefit that is greater than fifty percent likely of being realized upon
ultimate settlement. FIN 48 must be applied to all existing tax positions upon
initial adoption. The cumulative effect of applying FIN 48 at adoption, if any,
is to be reported as an adjustment to opening retained earnings for the year of
adoption. FIN 48 was effective for the Company’s fiscal year ended December 31,
2007 and no cumulative effects are reported through March 31, 2008.
AND
SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note
4. Subsequent Events
On June
11, 2008, the Company issued 3,000 shares of the Company’s common stock to a
director for payment of director fees for the fiscal year ended December 31,
2006, the fiscal year ended December 31, 2007 and for the first three months of
the fiscal year ending December 31, 2008. .
On August
13, 2008, the Company issued 50,000 options to purchase shares of the Company’s
common stock to an officer of the Company. The stock options are
exercisable a $4.20 per share and expire on August 13, 2018.
On August
13, 2008, the Company’s Board of Directors approved an amendment to the
Company’s 2003 Stock Incentive Plan, as amended, which increased the number of
authorized shares available under the Plan from 500,000 to
750,000. All other terms of the Plan remain in full force and
effect.
During
the quarter ended March 31, 2008 and 2007, the Company paid $31,500 in each
quarter pursuant to a license agreement entered into with Royalty Management,
Inc. (“Royalty”), an entity wholly owned by Laurence Levy, the Company’s
President and Chief Executive Officer, for office space, office supplies and
services.
During
the quarters ended March 31, 2008 and 2007, the Company incurred directors’ fees
of $9,000 and $0, respectively, for services rendered of which $1,500 and
$0 was accrued for the quarters ended March 31, 2008 and 2007,
respectively. As of March 31, 2008 and 2007, $14,500 and $0, respectively,
was included in accrued expenses due to directors for services
rendered.
ITEM 2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Forward-Looking
Statements
Certain
statements contained in this Quarterly Report on Form 10‑Q, including, but not
limited to those regarding the Company's financial position, business strategy,
acquisition strategy and other plans and objectives for future operations and
any other statements that are not historical facts constitute "forward-looking
statements" within the meaning of federal securities laws and the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other important factors that
could cause the actual results, performance or achievements expressed or implied
by such forward-looking statements to differ materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Although the Company believes that the expectations reflected in
these forward-looking statements are reasonable, there can be no assurance that
the actual results or developments anticipated by the Company will be realized
or, even if substantially realized, that they will have the expected effect on
its business or operations. These forward-looking statements are made
based on management's expectations and beliefs concerning future events
impacting the Company and are subject to uncertainties and factors (including,
but not limited to, those specified below) which are difficult to predict and,
in many instances, are beyond the control of the Company.
The
following discussion and analysis of the financial condition and results of
operations of the Company should be read in conjunction with the accompanying
financial statements and related notes included in Item 1 of this
report.
GENERAL.
We are
committed to enhancing the value of our common stock by seeking opportunities to
monetize certain existing assets and by seeking new business opportunities on an
opportunistic basis.
LIQUIDITY
AND CAPITAL RESOURCES.
On March
31, 2008, we had current assets of $9,999,844 and stockholders' equity of
$21,270,625. On March 31, 2008, we had $9,661,121 in cash and marketable
securities, total assets of $21,510,565 and total current liabilities of
$239,940.
The most
significant sources of cash are our equity investment in MESC Capital LLC ("MESC
Capital") and interest and dividends earned from existing cash and cash
equivalents. In the event that cash flows from operating activities are not
sufficient, we could liquidate marketable securities as necessary. We believe
our cash flow from operations and existing cash and cash equivalents will be
adequate to satisfy our cash needs for the next twelve months.
The most
significant uses of cash are for employee compensation and professional fees for
legal and accounting services.
Currently,
there are no plans for external financing of current operations or
holdings.
During
the preparation of our 2004, 2005, 2006 and 2007 Federal corporation income tax
returns, a dispute arose between the Company and Security Land regarding the
proper amount of taxable income to be allocated to us and reported to the IRS on
Federal Form K-1. This dispute could not be resolved and we reported a different
amount of income on our corporation income tax return than was reported to the
IRS by Security Land. The discrepancy may cause our tax returns to be audited by
the IRS. We believe that the outcome of any IRS examination will not affect our
financial statements as net operating losses are available to offset any
additional income not reported.
On
September 30, 2002, our subsidiary, Rustic Crafts International, Inc. ("Rustic
Crafts") sold all of its operating assets subject to the assumption of certain
of its liabilities. Prior to the sale, Rustic Crafts had established a
$1,000,000 line of credit with PNC Bank which was guaranteed by the Company and
expired on May 18, 2002. In conjunction with the Rustic Crafts asset sale,
Rustic Crafts' indebtedness under the line of credit together with its $960,000
mortgage loan from PNC Bank and certain other indebtedness to PNC Bank was
restructured to replace such indebtedness with five notes totaling $2,432,782
and have a ten year amortization schedule. The notes bear interest at the
blended rate of 10.8% per annum. As part of the PNC Bank debt restructuring,
Rustic Crafts was required to pay down the outstanding loan balance with
$200,000 of the purchase price in the Rustic Crafts asset sale, and was required
to make a $540,000 payment in December 2002. A $40,000 payment was made to PNC
Bank in December 2002, but Rustic Crafts and the Company failed to make the
balance of the December 2002 payment. Accordingly, the PNC Bank debt was
subsequently modified to provide for the payment of the remaining $500,000
payment on or before June 30, 2003. On June 30, 2003, we paid all outstanding
principal and interest due to PNC Bank, in satisfaction of the above described
obligations. In December 2005, Rustic Crafts agreed to accept a $125,000 note
from RCI Wood Products, Inc ("RCI") as a restructuring of the above named
obligation. The note bears an interest rate of 6.5% and calls for payments of
$1,088 per month until December 2008 at which time the balance will be due and
payable. Since the quarter ended March 31, 2006, Rustic Crafts has not received
any payments under this obligation. In April 2006, RCI defaulted on the
note. We have initiated an action for collection against RCI and the
personal guarantor of the note. In June 2008, we sold the above
mentioned notes to a collection agency for $1,000 plus 50% of any amounts
received, less expenses of up to $2,500. To date, we have received $1,000 from
the collection agency and the collection agency has not received any proceeds on
the notes.
In
connection with the redemption of our common stock owned by Statesman Inc.
("Statesman"), we acquired from Statesman a three-year option to purchase the
20% stock interest in NRDC held by Statesman. To exercise the option, we were
required to deliver to Statesman for cancellation a $2,440,000 note issued to us
by Statesman in October 2001. As consideration for the option, we (i) paid
Statesman $250,000, (ii) amended the note and related pledge agreement to limit
our recourse under the note and (iii) transferred to Statesman certain office
furniture and equipment that we owned. This option expired in October 2005. As
part of the redemption, we also entered into an agreement with Statesman
providing for (i) an amendment to the Certificate of Designations of the Series
C Preferred Stock for the Company and (ii) certain limitations on the ability of
Statesman to issue or transfer shares or other beneficial interests in Statesman
or to sell, transfer, purchase or acquire any capital stock of the Company, in
each case without first receiving our written confirmation that such issuance or
transfer would not adversely affect our ability to utilize our tax loss
carryforwards. We paid Statesman an aggregate amount of $2,730,000 in
consideration of the foregoing agreements. As of March 31, 2008, through the
date of this Form 10‑Q, we have not collected the $2,440,000 note and accrued
interest of approximately $644,000 due from Statesman. We have sent demand and
default notices to Statesman but we have not received a response to date. Per
the terms of the Agreement, upon event of default, overdue principal and overdue
interest will bear interest, payable upon demand, at a rate of twelve percent
(12%) per annum, and the pledged securities may be transferred into our name, or
sold for proceeds to satisfy the obligation and collection costs incurred. We
have currently reserved the receivable balance in full while we continue our
collection efforts. The reserve adjustment included a charge to impairment of
loans as other expense in the 2006 statement of operations, and an allowance
against the note within equity.
Filing
of Going Private Proxy Statement
On
December 14, 2005, we filed with the SEC a preliminary Schedule 13E-3
Transaction Statement with respect to a going private transaction and a
preliminary Schedule 14A Proxy Statement soliciting stockholders to vote on
amending our certificate of incorporation to provide for a 1-for-100 reverse
stock split (the “Reverse Stock Split”) followed immediately by a 50-for-1
forward stock split of our common stock (the “Forward Stock Split”), which would
result in the reduction of the number of common stockholders of record of the
Company to fewer than 300. This will permit us to discontinue the filing of
annual and periodic reports and other filings with the SEC. Once the
Schedule 13E-3 Transaction Statement and Schedule 14A Proxy Statement are
approved in a definitive form by the SEC, we will mail
copies to
stockholders. We currently intend to effect the Reverse Stock Split and Forward
Stock Split as soon as possible after such distribution.
RESULTS
OF OPERATIONS
2008
Compared to 2007
For the
three months ended March 31, 2008 and March 31, 2007:
No
revenue was generated by the Company in these periods.
General
and administrative expenses increased by $82,785 or 39.9% to $290,449 in 2008
compared to $207,664 in 2007 primarily due to an increase in professional fees
of $65,542 and an income tax expense increase of $12,000.
Income
from equity investment in partnerships increased by $873,703, 470.6% higher than
2007. Our investment in MESC Capital produced income of approximately
$250,000 in the quarter ended March 31, 2008 as compared to a net loss of
approximately $537,00 in the quarter ended March 31, 2007 due to increased
repairs and maintenance MESC Capital performed in the same period in
2007. Our investment in Security Land returned income of
approximately $438,000 in the quarter ended March 31, 2008 as compared to
$351,000 in the quarter ended March 31, 2007 as revenue increased by $23,811
primarily due to rental income increase related to the consumer price index and
expenses decreased by $63,277 relating to a reduction in professional fees,
maintenance costs and interest expense.
Net
income increased by $730,720 in 2008 over 2007 or 268.2% primarily due to the
increase in income from equity investment in partnerships, an increase in
general and administrative expenses and a reduction of approximately $60,000 in
interest and dividend income.
Our
Stockholders' Equity at March 31, 2008 was $21,270,625 as compared to
$20,812,322 at December 31, 2007, an increase of $458,303 which is due to our
net income during the quarter ended March 31, 2008.
Impact
of Inflation.
Although
we have not attempted to calculate the effect of inflation, management does not
believe inflation has had a material effect on its results of
operations.
Off-Balance
Sheet Arrangements
We have
not entered into any off-balance sheet arrangements.
Critical
Accounting Estimates
Accounting
estimates and assumptions discussed in this section are those considered most
critical to understanding the financial statements because they involve
significant judgments and uncertainties. For these estimates, we caution that
future events may not develop as forecast, and that the best estimates
often
require adjustment.
Investments
- These assets
are reviewed for impairment based on criteria that include the extension which
cost exceeds market value, the duration of that decline, and the Company's
ability to hold to recovery. Market research and analysis is performed to
identify potential impairments on a regular basis.
Note Receivable
- These
assets are reviewed for collectibility on an ongoing basis. Any notes deemed
uncollectible have been offset by an allowance and related accrued interest has
been charged to expense.
Income Taxes
- As stated
above, assumptions have been made that taxable income that may result from a
possible IRS examination will be offset by existing net operating losses
generated by the Company from prior periods. Other assumptions have been made
that these net operating losses will not be limited or
disallowed,
which could affect the results of operations in future periods.
The
Company has significant net operating losses available to offset future taxable
income. The losses have been converted into deferred tax assets using an
estimated 34% tax rate. These deferred tax assets have been offset with a
valuation allowance established to reduce the net deferred tax asset to the
amount that will more likely than not be realized. This reduction is necessary
due to uncertainty of the Company's ability to utilize the net operating loss
and tax credit carry forwards before they expire.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
N/A
ITEM
4. CONTROLS AND PROCEDURES
Our
management, with the participation of Our Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of our disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended) as of the end of the period
covered by this report. Based on such evaluation, our Chief Executive Officer
and Chief Financial Officer have concluded that, as of the end of such period,
our disclosure controls and procedures are effective.
No change
occurred in our internal controls concerning financial reporting during the
quarter ended March 31, 2008 that has materially affected, or is reasonably
likely to materially affect, our internal controls over financial
reporting.
PART
II - OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
There
were no material changes to the disclosure made in our Annual Report on Form
10KSB for the year ended December 31, 2007 regarding these matters.
ITEM
1A. RISK FACTORS
We
believe that the most significant risks to our business are those set forth
below.
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·
|
A
default in the lease or sudden catastrophe to the property owned by
Security Land and Development Company Limited Partnership ("Security
Land") or the operating facilities owned by Mobile Energy Services
Company, LLC ("Mobile Energy") from uninsured acts of God or war could
have a materially adverse impact upon our investment in Security Land or
Mobile Energy, respectively, and therefore our financial position and
results of operations;
|
|
·
|
Our
subsidiaries currently lack the necessary infrastructure at the site of
the Groveland mine in order to permit them to make more than casual sales
of the Aggregate located at the Groveland
mine;
|
|
·
|
We
have had significant tax loss and credit carryforwards and no assurance
can be provided that the Internal Revenue Service would not attempt to
limit or disallow altogether our use, retroactively and/or prospectively,
of such carryforwards, due to ownership changes or any other reason. The
disallowance of the utilization or our net operating loss would severely
impact or financial position and results of operations due to the
significant amounts of taxable income that has been, and may in the future
be, offset by our net operating loss
carryforwards;
|
|
·
|
If
we consummate the Reverse Stock Split (as defined below) and Forward Stock
Split (as defined below) and become a privately held company, stockholders
will own shares in a private company and may not have the ability to sell
their shares in the public market. Furthermore, we would not file current,
quarterly or annual reports or be subject to the proxy requirements of the
federal securities laws. Stockholders may therefore find it more difficult
to obtain information about us and our financial
performance;
|
|
·
|
Royalty
Holdings, LLC, an affiliate of our management, beneficially owns
approximately 52% of our common stock. As a result, Royalty has the
ability to control the outcome of all matters requiring stockholder
approval, including the election and removal of directors and any merger,
consolidation or sale of all or substantially all of our
assets;
|
|
·
|
We
do not expect to pay dividends in the foreseeable future;
and
|
|
·
|
There
are many public and private companies that are also searching for
operating businesses and other business opportunities as potential
acquisition or merger candidates. We will be in direct competition with
these other companies in its search for business opportunities. Many of
these entities have significantly greater financial and personnel
resources than us.
|
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
None.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5.
OTHER INFORMATION
None.
ITEM
6. EXHIBITS
(a) Exhibits
3.1(i)(a)
|
|
Restated
Certificate of Incorporation of the Company (filed as Exhibit 3.1(i)(a) to
the Company's Quarterly Report on Form 10‑Q for the period ended September
30, 2002, filed on November 19, 2002, and incorporated herein by
reference).
|
3.1(i)(b)
|
|
Corrected
Certificate of Amendment reflecting amendment to Restated Certificate of
Incorporation of the Company (filed as Exhibit 3.1(i)(b) to the Company's
Quarterly
Report
on Form 10‑Q for the period ended September 30, 2002, filed on November
19, 2002, and incorporated herein by reference).
|
3.1(i)(c)
|
|
Certificate
of Amendment of Restated Certificate of Incorporation of Regency
Affiliates, Inc. (filed as Exhibit A to the Company's Information
Statement on Schedule 14C filed on October 27, 2003 and incorporated by
reference herein).
|
3.1(i)(d)
|
|
Certificate
of Designation - Series B Preferred Stock, $10 Stated Value, $.10 par
value (filed as Exhibit to Form 10‑K dated June 7, 1993 and incorporated
herein by
reference).
|
3.1(i)(e)
|
|
Amended
and Restated Certificate of Designation, Series C Preferred Stock, $100
Stated Value, $.10 par value (filed as Exhibit 99.4 to the Company's
Current Report
on
Form 8‑K filed on October 18, 2002, and incorporated herein by
reference).
|
3.1(i)(f)
|
|
Certificate
of Designation - Series D Junior Preferred Stock, $10 Stated Value, $.10
par value (filed as Exhibit to Form 10‑K dated June 7, 1993 and
incorporated herein by reference).
|
3.1(i)(g)
|
|
Certificate
of Designation - Series E Preferred Stock, $100 Stated Value, $.10 par
value (filed as Exhibit 4.1 to the Company's Annual Report on Form 10‑K
for the year
ended
December 31, 1995 at page E-1, and incorporated herein by
reference).
|
3.1(ii)(a)
|
|
By-laws
of the Company (filed as Exhibit 3.4 to the Company's Registration
Statement on Form S-1, Registration Number 2-86906, and incorporated
herein by
reference).
|
3.1.(ii)(b)
|
|
Amendment
No. 1 to By-Laws of the Company (filed as Exhibit 3.1(ii)(b) to the
Company's Quarterly Report on Form 10‑Q for the period ended September 30,
2002, filed on November 19, 2002, and incorporated herein by
reference).
|
10.1+*
|
|
Stock
Option Agreement, dated as of August 13, 2008 between the Company and
Laurence S. Levy.
|
10.2+
|
|
First
Amendment to 2003 Stock Incentive Plan dated as of October 1,
2003.
|
10.3+
|
|
Second
Amendment to 2003 Stock Incentive Plan dated as of August 13,
2004.
|
10.4+
|
|
Third
Amendment to 2003 Stock Incentive Plan dated as of August 13,
2008.
|
31.1+
|
|
Chief
Executive Officer’s Certificate, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
31.2+
|
|
Chief
Financial Officer’s Certificate, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32.1+
|
|
Chief
Executive Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.2+
|
|
Chief
Financial Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
+
Filed herewith
*
Indicates that exhibit is a
management contract or compensatory plan or
arrangement.
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
REGENCY
AFFILIATES, INC.
|
|
|
|
|
|
|
By:
|
/s/
Laurence
S. Levy
|
|
|
|
Laurence
S. Levy
President
and
Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
Neil
N. Hasson
|
|
|
|
Neil
N. Hasson
Chief
Financial
Officer
|
|
|
|
|
|
|
|
|
EXHIBIT
INDEX
3.1(i)(a)
|
|
Restated
Certificate of Incorporation of the Company (filed as Exhibit 3.1(i)(a) to
the Company's Quarterly Report on Form 10‑Q for the period ended September
30, 2002, filed on November 19, 2002, and incorporated herein by
reference).
|
3.1(i)(b)
|
|
Corrected
Certificate of Amendment reflecting amendment to Restated Certificate of
Incorporation of the Company (filed as Exhibit 3.1(i)(b) to the Company's
Quarterly
Report
on Form 10‑Q for the period ended September 30, 2002, filed on November
19, 2002, and incorporated herein by reference).
|
3.1(i)(c)
|
|
Certificate
of Amendment of Restated Certificate of Incorporation of Regency
Affiliates, Inc. (filed as Exhibit A to the Company's Information
Statement on Schedule 14C filed on October 27, 2003 and incorporated by
reference herein).
|
3.1(i)(d)
|
|
Certificate
of Designation - Series B Preferred Stock, $10 Stated Value, $.10 par
value (filed as Exhibit to Form 10‑K dated June 7, 1993 and incorporated
herein by
reference).
|
3.1(i)(e)
|
|
Amended
and Restated Certificate of Designation, Series C Preferred Stock, $100
Stated Value, $.10 par value (filed as Exhibit 99.4 to the Company's
Current Report
on
Form 8‑K filed on October 18, 2002, and incorporated herein by
reference).
|
3.1(i)(f)
|
|
Certificate
of Designation - Series D Junior Preferred Stock, $10 Stated Value, $.10
par value (filed as Exhibit to Form 10‑K dated June 7, 1993 and
incorporated herein by reference).
|
3.1(i)(g)
|
|
Certificate
of Designation - Series E Preferred Stock, $100 Stated Value, $.10 par
value (filed as Exhibit 4.1 to the Company's Annual Report on Form 10‑K
for the year
ended
December 31, 1995 at page E-1, and incorporated herein by
reference).
|
3.1(ii)(a)
|
|
By-laws
of the Company (filed as Exhibit 3.4 to the Company's Registration
Statement on Form S-1, Registration Number 2-86906, and incorporated
herein by
reference).
|
3.1.(ii)(b)
|
|
Amendment
No. 1 to By-Laws of the Company (filed as Exhibit 3.1(ii)(b) to the
Company's Quarterly Report on Form 10‑Q for the period ended September 30,
2002, filed on November 19, 2002, and incorporated herein by
reference).
|
10.1+*
|
|
Stock
Option Agreement, dated as of August 13, 2008 between the Company and
Laurence S. Levy.
|
10.2+
|
|
First
Amendment to 2003 Stock Incentive Plan dated as of October 1,
2003.
|
10.3+
|
|
Second
Amendment to 2003 Stock Incentive Plan dated as of August 13,
2004.
|
10.4+
|
|
Third
Amendment to 2003 Stock Incentive Plan dated as of August 13,
2008.
|
31.1+
|
|
Chief
Executive Officer’s Certificate, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
31.2+
|
|
Chief
Financial Officer’s Certificate, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32.1+
|
|
Chief
Executive Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.2+
|
|
Chief
Financial Officer’s Certificate, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
+
Filed herewith
*
Indicates that exhibit is a
management contract or compensatory plan or
arrangement.
|
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