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: September
30, 2008
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OR | |
o |
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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Delaware |
72-0888772
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(State or other Jurisdiction of | (I.R.S. Employer | |
Incorporation or Organization) |
Identification
No.)
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610
Jensen Beach Boulevard
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Jensen Beach, Florida |
34957
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(Address of Principal Executive Office) |
(Zip
Code)
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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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Page
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Part I. Financial
Information
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Item
1. Financial Statements
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Consolidated
Balance Sheets September 30, 2008 (Unaudited) and December 31, 2007
(Audited)
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3
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Consolidated
Statements of Operations (Unaudited)
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4
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Consolidated
Statement of Cash Flows (Unaudited)
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5
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Notes
to Consolidated Financial Statements
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6
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Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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9
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Item 3. Quantitative
and Qualitative Disclosures About Market
Risk
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13
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Item
4. Controls and Procedures
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13
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Part
II. Other Information
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13
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Item
1. Legal Proceedings
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13
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Item
1A. Risk Factors
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14
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Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
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15
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Item
3. Defaults Upon Senior Securities
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15
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Item
4. Submission of Matters to a Vote of Security Holders
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15
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Item
5. Other Information
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15
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Item
6. Exhibits
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16
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Signatures
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18
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Assets
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||||||||
September 30,
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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$ | 3,165,937 | $ | 253,566 | ||||
Marketable
securities
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7,198,470 | 9,782,234 | ||||||
Interest receivable,
net of allowance of $644,109
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- | - | ||||||
Other current
assets
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360,636 | 344,539 | ||||||
Total Current
Assets
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10,725,043 | 10,380,339 | ||||||
Property,
plant and equipment, net
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10,242 | 13,117 | ||||||
Investment in
partnerships/LLC
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10,635,767 | 9,563,717 | ||||||
Deferred
tax asset
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1,245,500 | 1,245,500 | ||||||
Other
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1,300 | 1,300 | ||||||
Total
Assets
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$ | 22,617,852 | $ | 21,203,973 |
Liabilities
and Stockholders’ Equity
|
||||||||
Current
Liabilities
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||||||||
Accounts payable and
accrued expenses
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$ | 269,172 | $ | 391,651 | ||||
Income taxes
payable
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16,000 | - | ||||||
Total
Liabilities
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285,172 | 391,651 | ||||||
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 | 486,076 | ||||||
Common stock, par
value $.01; authorized 8,000,000 shares;
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||||||||
issued 3,534,812
shares; outstanding 3,468,544 shares
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35,349 | 35,319 | ||||||
Additional paid-in
capital
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7,281,219 | 7,112,199 | ||||||
Readjustment
resulting from quasi-reorganization at December
1987
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(1,670,596 | ) | (1,670,596 | ) | ||||
Retained
earnings
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16,609,482 | 15,258,174 | ||||||
Note receivable -
sale of stock, net of allowance of $2,440,000
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- | - | ||||||
Treasury stock,
66,268 shares at cost
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(408,850 | ) | (408,850 | ) | ||||
Total Stockholders'
Equity
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22,332,680 | 20,812,322 | ||||||
Total
Liabilities and Stockholders’ Equity
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$ | 22,617,852 | $ | 21,203,973 | ||||
Three
Months Ended
September
30,
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Nine
Months Ended
September
30,
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|||||||||||||||
2008
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2007
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2008
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2007
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|||||||||||||
Net
Sales
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$ | - | $ | - | $ | - | $ | - | ||||||||
Costs
and expenses
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||||||||||||||||
General and administrative
expenses
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534,355 | 516,482 | 1,177,946 | 1,008,978 | ||||||||||||
534,355 | 516,482 | 1,177,946 | 1,008,978 | |||||||||||||
Loss
from operations
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(534,355 | ) | (516,482 | ) | (1,177,946 | ) | (1,008,978 | ) | ||||||||
Income
from equity investment in partnerships
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1,233,922 | 1,017,263 | 2,447,050 | 1,739,247 | ||||||||||||
Interest
and dividend income
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43,309 | 101,211 | 140,693 | 342,670 | ||||||||||||
Other
income
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72 | 1,274 | 72 | 1,847 | ||||||||||||
Income
before income taxes
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742,948 | 603,266 | 1,409,869 | 1,074,786 | ||||||||||||
Provision
for income taxes
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58,560 | 30,275 | 58,560 | 30,275 | ||||||||||||
Net
income
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$ | 684,388 | $ | 572,991 | $ | 1,351,309 | $ | 1,044,511 | ||||||||
Net
income per common share:
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||||||||||||||||
Basic
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$ | .19 | $ | .16 | $ | .38 | $ | .30 | ||||||||
Diluted
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$ | .18 | $ | .15 | $ | .36 | $ | .28 | ||||||||
Weighted
average number of common shares outstanding
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||||||||||||||||
Basic
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3,534,812 | 3,531,540 | 3,533,032 | 3,457,031 | ||||||||||||
Diluted
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3,741,954 | 3,779,640 | 3,752,528 | 3,705,131 |
Nine
Months Ended
September
30,
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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
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$
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1,351,309
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$
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1,044,511
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||||
Adjustments
to reconcile net income to
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||||||||
net
cash used in operating activities
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||||||||
Depreciation
and amortization
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2,875
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2,517
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||||||
(Income)
from equity investment in partnerships
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(2,447,050
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)
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(1,739,247
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)
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||||
Stock
based compensation
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154,200
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197,750
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||||||
Changes
in operating assets and liabilities
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||||||||
Other
current assets
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(16,097
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)
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(7,693
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)
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||||
Accounts
payable and accrued expenses
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(107,629
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)
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(231,641
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)
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||||
Income
taxes payable
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16,000
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-
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||||||
Net
cash (used in) operating activities
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(1,046,392
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)
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(733,803
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)
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||||
Cash
flows from investing activities
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||||||||
Proceeds
received from partnership distributions
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1,375,000
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500,000
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||||||
Purchases
of property and equipment
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-
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(12,589
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)
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|||||
Proceeds
from sales of marketable securities
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60,000,000
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70,400,000
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||||||
Purchases
of marketable securities
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(57,416,237
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)
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(70,405,065
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)
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||||
Net
cash provided by investing activities
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3,958,763
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482,346
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||||||
Cash
flows from financing activities
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||||||||
Proceeds
from the exercise of stock options
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-
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22,275
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||||||
Purchase
of treasury stock
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-
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(88,189
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)
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|||||
Net
cash provided by (used in) financing activities
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-
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(65,914
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)
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|||||
Increase
in cash and cash equivalents
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$
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2,912,371
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$
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(317,371
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)
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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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3,165,937
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$
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295,882
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Nine
Months Ended
September 30, |
||||||||
2008
|
2007
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|||||||
Supplemental
disclosures of cash flow information:
|
||||||||
Cash paid during the period
for
|
||||||||
Interest
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$ | - | $ | 47,862 | ||||
Income taxes
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$ | 103,814 | $ | 32,900 |
·
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A
default in the lease or sudden catastrophe to the property owned by
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;
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·
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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;
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·
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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;
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·
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If
we consummate the Reverse Stock Split and Forward Stock Split 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;
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·
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Royalty
Holdings, LLC (“Royalty”), 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;
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·
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We
do not expect to pay dividends in the foreseeable future;
and
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·
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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.
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3.1(i)(a)
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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).
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3.1(i)(b)
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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)
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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)
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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 December 17,
2008 between the Company and Errol
Glasser. |
10.2+*
|
Amendment to Employment Agreement between the Company and
Laurence S. Levy dated as of
December 17,
2008. |
10.3+*
|
Amendment to Employment Agreement between the Company and Neil
Hasson dated as of December 17,
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.
|
REGENCY AFFILIATES, INC. | |||
Date:
January 8, 2009
|
By:
|
/s/ Laurence S. Levy | |
Laurence S. Levy | |||
President and Chief Executive Officer | |||
Date:
January
8, 2009
|
By:
|
/s/ Neil N. Hasson | |
Neil N. Hasson | |||
Chief Financial Officer | |||
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 December 17,
2008 between the Company and Errol
Glasser. |
10.2+*
|
Amendment to Employment Agreement between the Company and
Laurence S. Levy dated as of
December 17,
2008. |
10.3+*
|
Amendment to Employment Agreement between the Company and Neil
Hasson dated as of December 17,
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.
|