UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2006
OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
COMMISSION FILE NUMBER 1-7949
REGENCY AFFILIATES, INC.
(Exact name of registrant as specified in its charter)
Delaware 72-0888772
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or organization)
610 N.E. Jensen Beach Blvd., Jensen Beach, Florida 34957
--------------------------------------------------------
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code (772) 334-8181
Check whether the issuer (1) has 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 |X| No |_|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| No |X|
As of August 15, 2006 there were 3,103,078 shares of the $.01 Par Value Common
Stock outstanding.
Transitional Small Business Disclosure Form (check one): Yes |_| No |X|
Regency Affiliates, Inc. and Subsidiaries
Index to the Financial Statements
Page
Part I - Financial Information (Unaudited)
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited).............3
Condensed Consolidated Statements of Operations (Unaudited)...4
Condensed Consolidated Statements of Cash Flows (Unaudited)...5
Notes to Condensed Consolidated Financial Statements........6-7
Item 2. Management's Discussion and Analysis or Plan of
Operation..................................................8-11
Item 3. Controls and Procedures......................................12
Part II - Other Information
Item 1. Legal Proceedings.........................................12-13
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.....................................................14
Item 3. Defaults Upon Senior Securities..............................14
Item 4. Submission of Matters to a Vote of Security Holders..........14
Item 5. Other Information.........................................15-17
Item 6. Exhibits..................................................18-19
Signatures.................................................................20-23
Regency Affiliates, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
June 30, 2006
(Unaudited)
Assets
Current Assets
Cash and cash equivalents $ 523,872
Marketable securities 9,481,840
Interest receivables 593,784
Other current assets 96
------------
Total Current Assets 10,599,592
Investment in partnerships 7,404,369
Other Assets 1,300
------------
Total Assets $ 18,005,261
============
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued expenses $ 224,347
Income taxes payable 113,000
------------
Total Current Liabilities 337,347
Deferred credit 98,024
------------
Total Liabilities 435,371
------------
Shareholders' Equity
Serial preferred stock not subject to mandatory redemption
Maximum liquidation preference $24,975,312 1,052,988
Common stock, par value $.01; authorized 8,000,000 shares;
Issued 3,168,412 shares; outstanding 3,130,512 shares 31,305
Additional paid-in capital 9,002,930
Readjustment resulting from quasi-reorganization at December 31, 1987 (1,670,596)
Retained earnings 12,120,429
Note receivable - sale of stock (2,440,000)
Treasury stock, 84,134 shares (527,166)
------------
Total Shareholders' Equity 17,569,890
------------
Total Liabilities and Shareholders' Equity $ 18,005,261
============
The attached notes are an integral part of these financial statements.
Regency Affiliates, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
------------------------------ ------------------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Revenues $ -- $ -- $ -- $ --
Costs and expenses
Selling, general and administrative expenses 887,618 481,741 1,181,055 796,816
----------- ----------- ----------- -----------
Loss from operations (887,618) (481,741) (1,181,055) (796,816)
Income from equity investment in partnerships 368,272 147,832 1,060,034 693,091
Interest and dividend income 61,786 42,894 276,989 81,271
Other income, net 76,275 75,207 84,383 123,529
Income (loss) from operations before income tax (381,285) (215,808) 240,351 101,075
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net Income (loss) (381,285) (215,808) 240,351 101,075
=========== =========== =========== ===========
Net income (loss) per common share:
Basic $ (0.12) $ (0.07) $ 0.08 $ 0.03
=========== =========== =========== ===========
Diluted $ (0.12) $ (0.07) $ 0.07 $ 0.03
=========== =========== =========== ===========
Weighted average common shares outstanding
Basic 3,110,229 3,088,203 3,116,696 3,025,583
=========== =========== =========== ===========
Diluted 3,110,229 3,088,203 3,372,696 3,025,583
=========== =========== =========== ===========
The attached notes are an integral part of these financial statements.
Regency Affiliates, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
-------------------------------------
2006 2005
------------ ------------
Cash Flows from operating activities:
Net income $ 240,351 $ 101,075
Adjustments to reconcile net income to net
cash used in operating activities
Depreciation and amortization -- 1,899
Stock-based compensation 256,100 5,250
Income from equity investment in partnerships (1,060,034) (693,091)
Changes in operating assets and liabilities
Accrued interest receivable (94,550) (69,133)
Other current assets 10,625 16,300
Accounts payable and accrued expenses (1,055,786) (100,018)
------------ ------------
Net cash used in operating activities (1,703,294) (737,719)
------------ ------------
Cash flows from investing activities:
Cash investments in partnerships -- (200,058)
Proceeds from partnership earnings received 250,000 325,000
Proceeds from sales of marketable securities 49,000,000 54,000,000
Purchases of marketable securities (52,489,850) (53,998,474)
------------ ------------
Net cash (used in) provided by investing activities (3,239,850) 126,468
------------ ------------
Cash flows from financing activities:
Purchase of treasury stock (189,371) --
Proceeds from the exercise of stock options 9,600 158,000
------------ ------------
Net cash (used in) provided by financing activities (179,771) 158,000
------------ ------------
Decrease in cash and cash equivalents (5,122,915) (453,250)
Cash and cash equivalents - beginning 5,646,787 1,469,353
------------ ------------
Cash and cash equivalents - ending $ 523,872 $ 1,016,103
============ ============
Supplemental disclosure of cash flow information:
There were no cash payments made for interest or taxes during the periods
presented.
The attached notes are an integral part of these financial statements.
Regency Affiliates, Inc. and Subsidiaries
Notes to Condensed 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 Item 310 of Regulation S-B.
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 and six month periods ended June 30, 2006
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2006. 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, 2005.
Principles of Consolidation - The consolidated financial statements include the
accounts of Regency Affiliates, Inc. (the "Company"), 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. Use of 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 reported period. Actual
results could differ from those estimates.
Note 3. Related Party Transactions
During the quarter ending June 30, 2006, the Company repurchased the shares of
common stock of a former director as part of a legal settlement. The stock was
purchased at a price of $6.50 per share at a total cost of $189,371.
During the quarter ending June 30, 2006, two former officers of the Company
exercised stock options to purchase 3,000 shares of common stock. Two thousand
shares were purchased at an exercise price of $4.00 per share, and one thousand
shares were purchased at an exercise price of $1.60 per share.
Regency Affiliates, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4. Stock Based Compensation.
In December 2004, the FASB issued Statement of Financial Accounting Standards
No. 123R, "Share Based Payments", an amendment of FAS No. 123 "Accounting for
Stock Based Compensation". FAS 123R eliminates the ability to account for share
based payments using Accounting Principles Board Opinion No.25, "Accounting for
Stock Issued to Employees", and instead requires companies to recognize
compensation expense using a fair-value based method. The expense will be
measured as the fair value of the award on its grant date and recorded over the
applicable service period. The requirements of FAS 123R are effective for the
Company beginning in 2006.
During the quarter ended June 30, 2006, our chief executive officer received
50,000 options to purchase shares at an exercise price of $6.27. The fair value
of the options was estimated using the Black-Scholes option pricing model which
requires highly subjective assumptions including the expected stock price
volatility. The fair value of the Company's stock options granted was estimated
using the following assumptions: no expected dividends, risk free interest rate
of 4.87% expected average life of approximately 10 years and an expected stock
price volatility of 70%. The fair value of options granted was $5.00 for total
stock based compensation expense of $250,000 for the quarter.
Note 5. Earnings Per Share
Earnings Per Share - Basic earnings per share is computed by dividing net income
attributable to common shareholders by the weighted average number of common
shares outstanding during the year. Diluted earnings per share computations
assume the conversion of all stock options outstanding that are "in the money".
For the three months ended June 30, 2006 diluted earnings per share do not
assume the conversion of the stock options as their effect would be
anti-dilutive.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Forward-Looking Statements and Associated Risk
Certain statements contained in this Quarterly Report on Form 10-QSB, 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. Such
factors include:
- A default in the lease or sudden catastrophe to the property owned
by Security Land and Development Company Limited Partnership ("Security")
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 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 rock aggregate (the "Aggregate") located at the
Groveland Mine;
Regency Affiliates, Inc. and Subsidiaries
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (continued)
- 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 the Company consummates the Reverse Stock Split (as defined
below) and Forward Stock Split (as defined below) and becomes 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, the Company 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 the Company and its financial performance.
- Royalty Holdings, LLC ("Royalty"), an affiliate of the Company's
management, beneficially owns approximately 60% 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;
- The Company does 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. The Company 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 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.
The Company is committed to enhancing the value of the Company's Common Stock by
seeking opportunities to monetize certain existing assets and by seeking new
business opportunities on an opportunistic basis.
On June 30, 2006, the Company had current assets of $10,599,592 and
Stockholders' Equity of $17,569,890. On June 30, 2006, the Company had
$10,005,712 in cash and marketable securities, total assets of $18,005,261 and
total current liabilities of $337,347.
Regency Affiliates, Inc. and Subsidiaries
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (continued)
During the preparation of the Company's 2004 federal corporation income tax
return, a dispute arose between the Company and 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 as such the Company reported a different amount of income on
its corporation income tax return than was reported to the IRS by Security. 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 effect the
financial statements of the Company in this year as net operating losses are
available to offset any additional income not reported.
In December, 2001 the Aggregate inventory was sold to Iron Mountain Resources
Inc. ("Iron Mountain") at a purchase price of $18,200,000, payable, with
interest of 2.46%, in ninety-six equal payments of principal and interest
scheduled to commence in December, 2003. The intercompany gain on this
transaction has been eliminated in the consolidation process resulting in the
Aggregate inventory being carried at its historical cost. On February 9, 2005,
in lieu of foreclosure, Iron Mountain reconveyed the Aggregate inventory back to
National Resource Development Corporation ("NRDC") and the note was deemed
satisfied. In June 2005, the Company obtained an appraisal of the Aggregate
which concluded that the Aggregate has no value and as such a full valuation
allowance of $832,427 was taken in 2005.
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, the Company paid all
outstanding principal and interest due to PNC Bank, in satisfaction of the above
described obligations. On December 30, 2005 the Company agreed to accept a
$125,000 note from RCI as a restructuring of the above named obligation. The
note, which bears interest at 6.5%, calls for payments of $1,088 per month until
December 2008 at which time the balance will be due and payable.
Management believes that the Company's cash balance and anticipated cash flows
from operations will be adequate to fund our cash requirements for at least the
next twelve months.
Filing of Going Private Proxy Statement
On December 14, 2005, the Company 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 the Company's 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 the Company's 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 the
Company to discontinue the filing of annual and periodic reports and other
filings with the SEC. Once the Schedule 13E-3 Transaction Statement
Regency Affiliates, Inc. and Subsidiaries
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (continued)
and Schedule 14A Proxy Statement are approved in a definitive form by the SEC,
the Company will mail copies to its stockholders. The Company currently intends
to effect the Reverse Stock Split and Forward Stock Split as soon as possible
after such distribution.
Results of Operations
2006 Compared to 2005
For the three months ended June 30, 2006 and June 30, 2005:
No revenue was generated by the Company in this period.
Selling and administrative expenses increased by $405,877 or 84.3%
in 2006 compared to 2005 due primarily to an increase in
professional fees relating to a dispute resolution.
Income from equity investment in partnerships increased by $220,440,
149.1% more than 2005 due to income received from Mobile Energy,
partially offset by increased interest expense incurred by Security.
There was no interest expense by the Company in either period.
Net loss increased by $165,477 in 2006 over 2005 or 76.7%. The
change was primarily due to an increase in selling and
administrative expenses, partially offset by increases in interest
income and income from equity investment in partnerships.
For the six months ended June 30, 2006 and June 30, 2005:
No revenue was generated by the Company in this period.
Selling and administrative expenses increased by $384,239 or 48.2%
in 2006 compared to 2005 primarily due to professional fee's
relating to pending and resolved litigations.
Income from equity investment in partnerships increased by $366,943,
52.9% higher than 2005, primarily due to increases reported by MESC
and Security.
Net Income increased by $139,276 in 2006 over 2005 or 137.8%.
The Company's Shareholders' Equity at June 30, 2006 was $17,569,890 as
compared to $17,822,738 on June 30, 2005, a decrease of $252,848.
Impact of Inflation.
Although the Company has 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
The Company has not entered into any off-balance sheet arrangements.
Regency Affiliates, Inc. and Subsidiaries
ITEM 3. CONTROLS AND PROCEDURES.
The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of the Company's 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, the Company's Chief Executive Officer and Chief Financial Officer
have concluded that, as of the end of such period, the Company's disclosure
controls and procedures are effective.
In connection with the evaluation of the Company's internal controls during the
Company's last fiscal quarter, the Company's Chief Executive Officer and Chief
Financial Officer have determined that there are no changes to the Company's
internal controls over financial reporting that has materially affected, or is
reasonably likely to materially affect, the Company's internal controls over
financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On December 14, 2001, we initiated a proceeding in The Circuit Court of
the Nineteenth Judicial Circuit in and for Martin County, Florida, case number
01-1087-CA against Larry J. Horbach, individually and L.J. Horbach & Associates.
Larry Horbach was a former interim CFO and Board member. We claim that Larry
Horbach, without appropriate authority, borrowed $100,050 from Mid City Bank in
the name of Regency. We further claim that Horbach converted all or part of the
proceeds from the loan for his benefit and breached his fiduciary duties as an
officer and director. Horbach filed a Motion for the Court to determine whether
the claims asserted against him were properly brought in Florida, or whether
they should have been filed in Nebraska. The matter was fully briefed, and the
Florida Court took the matter under advisement. The Florida Court has not yet
rendered its decision on this jurisdictional issue.
On February 7, 2002, a complaint naming Regency as defendant was filed in
the District Court of Douglas County, Nebraska, case number 1012. The Plaintiffs
are Larry J. Horbach, individually and L.J. Horbach & Associates and they are
demanding payment on a loan they purchased from Mid City Bank. The plaintiffs
are requesting payment of $82,512.57 plus accrued interest, costs and attorney
fees. We are vigorously defending this litigation.
On January 20, 2004, a purported derivative and class action lawsuit was
filed by two dissident Company shareholders, Edward E. Gatz and Donald D.
Graham, in the New Castle County Court of Chancery, Delaware (the "Court"),
captioned Gatz, et al. v. Ponsoldt, Sr., et al., (C.A. No. 174-N) naming as
defendants certain current and former directors of the Company, Royalty and
certain of its affiliates, Statesman and, nominally, the Company (the "Delaware
Action"). The complaint alleged various breaches of fiduciary duties by the
former directors and Statesman, and that Royalty and its affiliates knowingly
participated in certain of the alleged breaches. In November 2004 the Court
dismissed all but one claim alleged in the complaint. The Company was not a
defendant with respect to the sole surviving claim, which related to the 2001
sale of a cache of previously quarried and piled aggregate rock by NRDC to Iron
Mountain (the "Aggregate Sale"). On October 16, 2005, the Court dismissed
plaintiffs' sole remaining claim for failure to state a claim for relief. The
dismissal was without prejudice and the plaintiffs were given leave to file an
amended complaint attacking the Aggregate Sale.
Regency Affiliates, Inc. and Subsidiaries
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. (cont.)
On January 30, 2006, plaintiffs filed an amended complaint challenging the
Aggregate Sale and alleging that the Aggregate Sale negatively impacted the
consideration the Company received in connection with the October 2002
restructuring transactions. The Company was not a defendant with respect to this
claim. Plaintiffs sought damages in excess of $5,400,000 with respect to the
claim related to the Aggregate Sale. On May 16, 2006, the Court dismissed the
sole remaining complaint alleged in the complaint determining that the sole
remaining complaint was derivative in nature and could therefore not be
maintained by the plaintiffs. On June 14, 2006, the plaintiffs filed a Notice of
Appeal appealing the Court's rulings. The matter will be briefed in due course.
We are vigorously defending this litigation.
The defendants in the Delaware Action, other than Statesman, are entitled
to be indemnified by the Company for damages, if any, and expenses, including
legal fees, they may incur as a result of the lawsuit, subject to certain
circumstances under which such indemnification is not available. In addition,
the Company's insurance carrier contends that none of the claims contained in
the Delaware Action are covered by insurance on the basis of the "insured vs.
insured" exclusion since one of the plaintiffs, Donald D. Graham, was previously
a director of the Company.
On May 10, 2004, Gary Nuttall, a former President of the Company,
commenced an arbitration proceeding against the Company with respect to certain
claims allegedly arising under his 1995 Employment Agreement with the Company.
Mr. Nuttall sought severance and all other compensation and benefits due him
under the 1995 Employment Agreement in an amount in excess of approximately
$1,650,000 ($1,400,000 of which is a financing bonus), 466,667 unrestricted
shares of the Company (pre-split), options to purchase additional stock of the
Company, punitive damages, interest, fees and costs associated with the
arbitration. On May 4, 2006, the parties settled the disputes between them
without admitting any liability, fault or wrongdoing, and entered into a
settlement agreement providing for, among other things, the payment of $950,000
by the Company to Mr. Nuttall and the purchase by the Company of the 29,134
shares of Company common stock owned by Mr. Nuttall, at a purchase price of
$6.50 per share.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
The Company awarded 250 restricted shares of common stock to each of Errol
Glasser and Stanley Fleishman on April 3, 2006, pursuant to the Company's 2003
Stock Incentive Plan, as amended. Exemption from the registration requirements
of the Securities Act of 1933, as amended (the "Securities Act"), for the
issuance of such shares of common stock is claimed under Section 4(2) of the
Securities Act.
The Company awarded 50,000 options to purchase the Company's common stock to
Laurence S. Levy on April 1, 2006, pursuant to the Company's 2003 Stock
Incentive Plan, as amended. Exemption from the registration requirements of the
Securities Act for the issuance of such shares of common stock upon the exercise
of options is claimed under Section 4(2) of the Securities Act.
During the quarter ending June 30, 2005, two former officers of the Company each
exercised stock options to purchase 1,000 shares and 2,000 shares, respectively,
at an exercise price of $1.60 per share and 4.00 per share, respectively.
Exemption from the registration requirements of the Securities Act for the
issuance of such shares is claimed under Section 4(2) of the Securities Act.
Small Business Issuer Purchases of Equity Securities
-----------------------------------------------------------------------------------------------------------------------------
Period (a) Total Number of (b) Average Price Paid (c) Total Number of (d) Maximum Number (or
Shares (or Units) per Share (or Unit) Shares (or Units) Approximate Dollar
Purchased Purchased as Part of Value) of Shares (or
Publicly Announced Units) that May Yet Be
Plans or Programs Purchased Under the
Plans or Programs
-----------------------------------------------------------------------------------------------------------------------------
April 1, 2006 - April 30, -- -- -- --
2006
-----------------------------------------------------------------------------------------------------------------------------
May 1, 2006 - May 31, 29,134 $6.50 -- --
2006 (1)
-----------------------------------------------------------------------------------------------------------------------------
June 1, 2006 - June 30, -- -- -- --
2006
-----------------------------------------------------------------------------------------------------------------------------
Total 29,134 $6.50 -- --
-----------------------------------------------------------------------------------------------------------------------------
(1) On May 4, 2006, the Company purchased 29,134 shares of the Company's common
stock for an aggregate price of $189,371 in a privately negotiated transaction
as part of a legal settlement with a former director.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The following matters were submitted to stockholders at the Company's June 29,
2006 Annual Meeting of Stockholders:
1. To elect four directors of Regency to serve until the next Meeting of
Stockholders. The vote for the respective nominees for election as directors was
as follows:
DIRECTORS FOR AGAINST ABSTAIN
Laurence S. Levy 2,554,123 125,693 0
Neil N. Hasson 2,554,180 124,636 0
Stanley Fleishman 2,668,370 11,446 0
Errol Glasser 2,668,370 11,446 0
2. To ratify the appointment of Rosenberg Rich Baker Berman & Company as
independent public accountants. The results of the vote to ratify the
appointment of Rosenberg Rich Baker Berman & Company as independent public
accountants was:
For: 2,669,634 Against: 5,467 Abstain: 4,715
ITEM 5. OTHER INFORMATION.
None.
Regency Affiliates, Inc. and Subsidiaries
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS.
(a) Exhibits
Exhibit Number Description of Exhibit
-------------- ----------------------
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).
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 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
*Filed herewith
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
REGENCY AFFILIATES, INC.
(Registrant)
Date: August 21, 2006 /s/ Laurence S. Levy
--------------------- ---------------------------------------
(President and Chief Executive Officer)
Date: August 21, 2006 /s/ Neil N. Hasson
--------------------- ---------------------------------------
(Chief Financial Officer)
EXHIBIT INDEX
Exhibit Number Description of Exhibit
-------------- ----------------------
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).
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 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
*Filed herewith