FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
(X) Quarterly report pursuant to section 13 or 15(d) of the
SECURITIES AND EXCHANGE ACT OF 1934
For the Quarterly period ended June 30, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 for the transition
period from to
Commission File No. 0-17843
REGAL ONE CORPORATION
(name of small business issuer in its charter)
FLORIDA 95-4158065
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
551 Driftstone Avenue, Las Vegas, NV 89123
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (702) 897-5331
Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution
of Securities under a plan confirmed by court.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date:
1,196,875 shares as of September 8, 1998.
REGAL ONE CORPORATION
Form 1O-Q for the quarter ended June 30, 1998
TABLE OF CONTENTS AND INFORMATION REQUIRED IN REPORT
Part I. Financial Information
Item 1. Financial Statements (unaudited): Page
Balance Sheet as of June 30, 1998 3
Statements of Operations for the quarters ended 4
June 30, 1998 and 1997
Statements of Cash Flows for the quarters ended 5
June 30, 1998 and 1997
Notes to the Financial Statements 6
Item 2. Managements discussion and Analysis of Plan of 10
Operation
Part II. Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security 12
holders
Item 5. Other Information 12
Item 6. Exhibits and reports on form 8-K 12
SIGNATURES 14
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
REGAL ONE CORPORATION
Balance Sheet
(Unaudited)
June 30, 1998
ASSETS
Cash $ 115
___________
Total Assets $ 115
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts Payable and accrued expenses $ 109,672
Due to Officer and Shareholder 21,000
___________
Total Liabilities $ 130,672
Stockholders' Equity (Deficit):
Preferred Stock; $.Ol par value, authorized 50,000,000 shares;
Series A Preferred Stock; No shares
Issued and Outstanding -0-
Series B Preferred Stock
Issued and Outstanding 208,965 shares 500
Common Stock; no par value, authorized 50,000,000 shares;
Issued and Outstanding 1,196,875 shares 5,941,138
Accumulated Deficit ( 6,072,195)
-----------
Total Stockholders' Equity (Deficit) ( 130,557)
Total Liabilities and Stockholders' ___________
Equity (Deficit) $ 115
See accompanying Notes to Financial Statements
REGAL ONE CORPORATION
Statement of Operations
(Unaudited)
For the Quarter ended For the Six Months ended
June 30 June 30
1998 1997 1998 1997
---- ---- ---- ----
Revenues $ -0- $ -0- $ -0- $ -0-
Operating Expenses
General and Administrative 32,945 14,903 49,215 32,525
expenses _________ _________ _________ _________
Loss From Operations (32,945) (14,903) (49,215) (32,525)
Other Income (expense): -0- -0- 25,000 -0-
--------- --------- --------- ---------
Income (Loss) Before
Income Taxes (32,945) (14,903) (24,215) (32,525)
Provision for Income Taxes -0- -0- -0- -0-
__________ _________ __________ _________
Net Income (Loss) $ (32,945) $ (14,903) (24,215) (32,525)
========== ========= ========== =========
Net Income (Loss) per
share $ ( 0.01) $ ( 0.01) $ ( 0.02) $ ( 0.03)
========== ========= ========== =========
Weighted average common and
common equivalent shares
outstanding 1,196,875 1,196,875 1,196,875 1,196,875
See accompanying Notes to Financial Statements
REGAL ONE CORPORATION
Statement of Cash Flows
(Unaudited)
For the Six Months ended
June 30
Cash flows from operating activities: 1998 1997
Net Loss $(24,215) $(32,525)
Adjustments to reconcile net loss to net cash
used by operating activities:
Increase (Decrease) in accounts payable 3,275 17,375
and accrued expenses
Increase in due to Officer 21,000 -0-
__________ __________
Total Adjustments 24,275 17,375
__________ __________
Net cash used by operating activities 60 (15,150)
Cash flows from investing activities:
Net cash provided by investing activities -0- -0-
Cash flows from financing activities:
Net cash used by financing activities -0- -0-
__________ __________
Net Increase (Decrease) in cash 60 ( 15,150)
Cash at beginning of period 55 15,150
__________ __________
Cash at end of period 115 -0-
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for
Income taxes $ -0- $ -0-
Interest $ -0- $ -0-
See accompanying Notes to Financial Statements
REGAL ONE CORPORATION
Notes to the financial Statements
(Unaudited)
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
General and Background
Regal One Corporation (the "Company") is a Florida corporation originally
incorporated as Electro-Mechanical Services, Inc. ("EMS") in 1959. In 1974,
Mr. Israel Rubinstein, currently the President, a director and a shareholder of
the Company, acquired the Company, then named EMS, which at the time had no
operations. Pursuant to the merger agreement, Mr. Rubinstein transferred the
assets of Regal Muffler Centers, a franchise network of over 100 muffler shops
that he founded in 1972 and solely owned, into EMS. In March of 1975, EMS
amended its certificate of incorporation and changed its name to Regal
International Holding Co., Inc. In 1976, the Company sold substantially all of
its assets, but Mr. Rubinstein retained control of the Company. In June 1988,
after merging with its wholly owned Nevada Subsidiary, Regal One Corporation,
the Company changed its name to Regal One Corporation, but remained a Florida
entity.
From 1987 to 1992, the Company was engaged in the acquisition and holding
of real estate, primarily in the Western United States. Until the end of 1992,
the Company assets consisted primary of irrevocable options to acquire the
real estate in exchange for shares of the Company's common stock. Generally,
the Company would issue to the Seller of the property shares of its common stock
with a fair value equal to the value of the real estate on the date of the
agreement.
During 1992, due to the protracted depressed national real estate market,
the Company decided to abandon its real estate operations and pursue
opportunities in the pharmaceutical and health fields.
Xechem, Inc.
In January, 1993, the Company executed an agreement to acquire Xechem, Inc.
The total costs incurred by the Company relating to the proposed investment in
Xechem were approximately $1,012,000. On January 14, 1994, the agreement with
Xechem was canceled and a settlement agreement was entered into whereby the
Company received 60,000 shares of common stock of Xechem, $250,000 in cash and
the satisfaction of $131,000 of liabilities at no cost to the Company.
Accordingly, based on this settlement agreement, the net realizable cost of the
Xechem investment was adjusted down to the estimated fair value of $150,000,
resulting in a loss of $142,645 in 1994. The Company then sold 20,000 shares of
Xechem (one third of its investment) for $50,000. In 1995, the Company
distributed the remaining 40,000 shares of Xechem common stock to consultants or
advisors of the Company for services provided to the Company.
Carbonex Systems Corporation
In August, 1995, the Company acquired in a reverse acquisition all of the
issued and outstanding shares of common stock of Carbonex Systems Corporation
("Carbonex"), a development stage Delaware Corporation, owning certain exclusive
rights to a proprietary emission reduction system for internal combustion
engines. To effect the acquisition, the Company issued a total of 464,000
shares of 8.75% convertible, participating voting Series B Preferred Stock (the
"Preferred Stock"). Each share of Preferred Stock is convertible into 100
shares of common stock and has 100 votes for each vote allowed to a share of
common stock.
In June, 1996, the Company entered into a Stock Exchange Settlement
Agreement and General Release whereby the Company exchanged all of the issued
and outstanding shares of common stock of Carbonex for 255,035 shares of
Preferred Stock owned by Gene Bemel and certain members of his family. As part
of the agreement, the Company assumed certain specified accounts payable
totaling approximately $61,000. The net impact of this transaction was a gain
on sale of $295,803, primarily due to the forgiveness of debt and accrued
interest payable (see note 3 to the Financial Statements). As a result of this
transaction, the Company has issued and outstanding 208,965 shares of Preferred
Stock.
Quality Franchise Systems, Inc.
In November, 1996, the Company executed a Letter of Intent to acquire all
of the issued and outstanding stock of Quality Franchise Systems, Inc. However,
a final agreement was never completed, and the Company is no longer pursuing
this acquisition.
Safesight, Inc.
In July, 1997, the Company announced the acquisition of Safesight, Inc., a
development-stage company engaged in the design of vehicle anti-collision
warning products for the automobile, commercial vehicle, recreational vehicle
and motorcycle markets. In August, 1997, the parties elected not to proceed
with this transaction because of the parties' inability to obtain adequate
funding for operations.
Current Operations
In April, 1998, the Company entered into an agreement to merge a newly
formed subsidiary of the Company with Infectech, Inc.("Infectech"). Infectech,
founded In 1989, is a development-stage biotechnology company which owns 15
patents for the rapid identification and antibiotic sensitivity testing of 34
disease-causing bacteria.
On August 5, 1998, the Company announced that Infectech, Inc., had
unilaterally acted to terminate the merger agreement between the two parties.
Infectech stated as its reason that it had not been successful in raising the
requisite $300,000 prior to June 30, 1998. Infectech further notified the
Company that it proposes to arbitrate the return of $56,000 paid by Infectech
for legal fees and certain other merger-related expenses of the Company, as per
the merger agreement.
Basis of Presentation
The unaudited financial statements presented herein have been prepared by
the Company, without audit, pursuant to the rules and regulations for interim
financial information and the instruction to Form 10-QSB and Regulation S-B.
Accordingly, certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted accounting
principals have been omitted. These unaudited financial statements should be
read in conjunction with the financial statement and notes thereto included in
the Company's Annual Report Form 10-KSB for the fiscal year ended December 31,
1997. In the opinion of management, the unaudited financial statements reflect
all adjustments (consisting of normal recurring accruals only) which are
necessary to present fairly the financial position, results of operation, and
changes in cash flows of the Company. Operating results for the interim
periods are not necessarily indicative of the results which may be expected
for the entire year.
Income Taxes
The Company did not provide for income taxes in the accompanying interim
financial statements since the Company does not anticipate generating taxable
income for the full year.
Net Income (Loss) Per Share Computation
Net Income (Loss) per share is based on the weighted average number of
common stock for all periods presented. The outstanding preferred stock and
common stock warrants are not considered in the calculations because they are
anti-dilusive.
NOTE 2 - GOING CONCERN AND MANAGEMENT'S PLAN
For the fiscal year ended December 31, 1997, the independent auditors
report included an explanatory paragraph calling attention to a going concern
issue. The Company has suffered recurring losses from operations and at June
30, 1998, continues to have an accumulated deficit. The accompanying financial
statements have also been prepared contemplating continuation of the Company as
a going concern, which is dependent upon the Company obtaining additional
financing to satisfy the operating needs of the Company and/or completing a
successful merger. In April, 1998, the Company agreed to a reverse acquisition
of Infectech, Inc. (see Note 1). Since that time, the merger agreement has been
terminated, and there can be no assurance that the Company will find a suitable
candidate to replace Infectech or, if a suitable replacement is found, that a
new merger can be structured on favorable terms.
NOTE 3 - STOCK OPTION PLAN
The Company has a stock option plan for its employees, directors, officers,
and consultants or advisors of the Company. In May 1995, 3,000,000 shares were
registered on Form S-8 for this plan.
Managements Discussion and Analysis of Plan of Operation
The following discussion should be read in conjunction with the Company's
financial statements and notes thereto included elsewhere in this Form 10-QSB
report. In addition, the discussion of the Company's expected plan of operation
included in the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997, is incorporated herein in its entirety as the discussion of
the Plan of Operation as required by Item 303(a) Regulation SB.
Plan of Operation
The Company was incorporated in 1959 in Florida. Since that time, the
Company has owned and operated, and subsequently sold off, a number of
businesses. During 1987, the Company pursued a policy of using its common stock
to purchase, either in fee simple or as an irrevocable option to purchase, a
number of parcels of real estate, in the form of commercial, industrial,
residential and development stage land parcels. In 1992, market conditions for
real estate were no longer deemed to be favorable and the Company decided to
abandon its real estate operations and pursue other courses of operation.
In January, 1993, the Company agreed to acquire Xechem, Inc., a
development-stage company engaged in the research and development of
pharmaceuticals from plants and other naturally-occurring sources. However,
the transaction was terminated in January, 1994 pursuant to a settlement
agreement.
In August, 1995, the Company acquired all of the issued and outstanding
common stock of Carbonex Systems Corporation ("Carbonex"). In June, 1996, the
Company entered into a Stock Exchange, Settlement Agreement and General Release
whereby the Company exchanged with its then-principal shareholders, Gene Bemel
and members of his family, all of the issued and outstanding common stock of
Carbonex for 255,035 shares of Preferred Stock of the Company.
In November, 1996, the Company executed a Letter of Intent to acquire all
of the issued and outstanding stock of Quality Franchise Systems, Inc. However
a final agreement was never completed and the Company is no longer pursing this
acquisition.
In July, 1997, the Company announced the acquisition of Safesight, Inc., a
development-stage company engaged in the design of vehicle anti-collision
warning products. However, in August, 1997, the parties elected not to proceed
with the transaction because of the inability to obtain adequate funding for
operations.
In April, 1998, the Company entered into an agreement to merge a newly
formed subsidiary of the Company with Infectech. Infectech, founded in 1989, is
a development-stage biotechnology company which owns 15 patents for the rapid
identification and antibiotic sensitivity testing of 34 disease-causing
bacteria. (See Note 1, "Organization and Significant Accounting Policies").
However, in August, 1998, the merger agreement was terminated because of
Infectech's inability to raise adequate funds.
Liquidity and Capital Resources - June 30, 1998 Compared to December 31, 1997
During the prior year and current quarter, the Company had continuing
losses from operations. There can be no assurances that the Company will be
able to secure long-term borrowings with which to finance its future operations.
The Company does not currently have any established bank lines of credit. The
Company's lack of liquidity is reflected in the table below, which shows
comparative working capital (current assets less current liabilities) which is
an important measure of the Company's ability to meet its short-term
obligations.
June 30, 1998 December 31, 1997
Working Capital
(deficit) $ (130,557) $ (108,752)
The Company's financial condition at June 30, 1998 reflects an immediate
inability to meet its short-term obligations. At June 30, 1998, the Company
had $115 cash on hand. The liabilities of the Company at June 30, 1998
aggregated $109,672, consisting primarily of accounts payable to accountants,
lawyers and other service providers. Accounts payable are due and in default,
and it is possible that persons to whom these obligations are due may seek to
collect the amounts due them.
Since April, 1998, the Company has relied on Infectech for the infusion of
cash to fund basic operations, principally fees due to accountants and lawyers.
The Company Stock Option Plan is for its employees, directors, officers, and
consultants or advisors of the Company. In May, 1995, the Company filed a
registration statement on Form S-8 covering 3,000,000 shares of common stock for
this Plan. Since May, 1995, holders have exercised options to purchase 548,506
shares of common stock. No options were exercised during the quarter ended June
30, 1998, leaving 2,451,494 yet available, with an amended expiration date of
March 31, 1999. (See the Company's 14c, filed April 8, 1998).
Capital Expenditures and Commitments
During the quarter ended June 30, 1998, the Company had no capital
expenditures. In the near term, the Company believes its capital expenditures
will principally be expended for office equipment. The amount of such
additional capital required is uncertain, and may be beyond that generated from
future operations. There can be no assurance that the Company will be able to
obtain any such capital or a merger acquisition candidate on satisfactory terms.
Results of Operations - The quarter ended June 30, 1998 compared to the quarter
ended June 30, 1997.
The Company reported no revenues for the quarter and the six months ended
June 30, 1998 and 1997. During the quarter and six months ended June 30, 1998,
operating expenses were $32,945 and $49,215, respectively, as compared to
$14,903 and $32,525, respectively, for the quarter and six months ended June 30,
1997 (consisting primarily of professional and consulting fees). During the six
months ended June 30, 1998, the Company had other income of $25,000 from
expenses paid by Infectech, Inc. (see Note 1). As a result, the quarter and six
months ended June 30, 1998 had net losses of $32,945 and $24,215, respectively,
as compared to net losses of $14,903 and $32,525, respectively, for the quarter
and six months ended June 30, 1997.
Factors that may affect future results
A number of uncertainties exist that may affect the Company's future
operating results, including the possibility of uncertain general economic
conditions, market acceptance of the Company's planned future operations, the
Company's ability to manage expense growth and the ability to acquire long-term
funding (including costs of the Infectech merger).
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not aware of any litigation either pending, asserted,
unasserted, or threatened.
Item 2. Changes in Securities
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 and Reports on Form 8-K
Exhibits
None.
A copy of any of the exhibits listed or referred to above will be furnished
at a reasonable cost to any person who was a shareholder of the Company on June
30, 1998 upon receipt from any such person of written request for any such
exhibit. Such request should be sent to the Company with the attention directed
to the Corporate Secretary.
Reports on Form 8-K
In April, 1998, the Company entered into a Plan and Agreement of Merger
with Infectech, a Delaware Corporation ("Infectech"). The Company would issue
approximately 26,320,520 Shares of common stock to Infectech's stockholders so
that on the effective date of the merger, the shareholders of Infectech would
own, in the aggregate, 85% of the common stock of the Company. Upon closing,
the Company would change its name to Infectech, Inc., and the shareholders of
Regal One as a group would own 15%. The Board of Directors of Infectech would
become the Board of Directors of the Company. For each share of Infectech's
issued and outstanding common stock, its stockholders would receive
approximately 3.01 shares of Regal One common stock, subject to further
adjustment downward for issuances of securities by Infectech pursuant to stock
options, consulting agreements or other private offerings. The Company must
cause holders of its Preferred Stock to convert their shares into an aggregate
of not more than 3,447,923 shares of common stock, which together with a current
1,196,342 Shares of common stock outstanding, would result in a total of
30,964,785 shares to be outstanding upon closing of the merger. The transaction
is contingent upon the approval of the shareholders of both companies, upon
certain regulatory approvals and other conditions. One condition of the merger
is that the Securities and Exchange Commission must declare effective the
Company's registration of the Shares of common stock to be issued to Infectech.
Another condition of the merger is that Infectech raise a minimum of $300,000
through an offering or other funding source prior to June 30, 1998. On August
5, 1998, the Company announced that Infectech, Inc., had unilaterally acted to
terminate the merger agreement between the two parties. Infectech stated as its
reason that it had not been successful in raising the requisite $300,000 prior
to June 30, 1998. Infectech further notified the Company that it proposes to
arbitrate the return of $56,000 paid by Infectech for legal fees and certain
other merger-related expenses of the Company, as per the merger agreement.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: September 15, 1998
REGAL ONE CORPORATION
(Registrant)
By /s/ Israel Rubinstein
Israel Rubinstein, President