UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Fiscal Quarter Ended June 30, 2002
or
[ ] Transitional report under Section 13 or 15(d) of the Exchange Act
Commission File No. 000-26643
Regal Acquisitions, Inc.
------------------------
(Name of Small Business Issuer in its Charter)
Delaware 13-4031421
- --------------------------------------------------------------------------------
State or other jurisdiction of I.R.S. Employer Identification Number
incorporation or organization
317 Madison Avenue, Suite 2310, New York, New York 10017
--------------------------------------------------------
(Address of principal executive office)
Issuer's telephone number: (212) 949-9696
--------------
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) been
subject to such filing requirements for the past ninety (90) days.
Yes X No
---------- -----------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date: As of August 8, 2002, there were
2,545,000 shares of Common Stock, par value $.001 per share, outstanding
Transitional Small Business Disclosure Format (check one):
Yes No X
----------- -----------
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
REGAL ACQUISITIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
December 31, 2001 and June 30, 2002 and 2001 (unaudited)
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Page
FINANCIAL STATEMENTS
Balance Sheet 1
Statements of Operations 2
Statements of Stockholders' Equity 3
Statements of Cash Flows 4
Notes to Financial Statements 5 - 7
REGAL ACQUISITIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
December 31, 2001 and June 30, 2002 (unaudited)
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ASSETS
June 30, December 31,
2002 2001
-------- --------
(unaudited)
Assets
Cash $ 3,062 $ 4,745
Prepaid Expenses 247 909
-------- --------
Total assets $ 3,309 $ 5,654
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accrued expenses 2,400 2,136
-------- --------
Total current liabilities 2,400 2,136
-------- --------
Stockholders' equity
Preferred stock, $0.001 par value
5,000,000 shares authorized
no shares issued and outstanding -- --
Common stock, $0.001 par value
40,000,000 shares authorized
2,545,000 (unaudited) and 2,545,000 shares issued
and outstanding 2,545 2,545
Additional paid-in capital 42,055 42,055
Contributed capital - stock warrants outstanding 2,813 2,813
Deficit accumulated during the development stage (46,504) (43,895)
-------- --------
Total stockholders' equity 909 3,518
-------- --------
Total liabilities and stockholders' equity $ 3,309 $ 5,654
======== ========
The accompanying notes are an integral part of these financial statements.
1
REGAL ACQUISITIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2002 and 2001 (unaudited) and
for the Period from October 6, 1998 (Inception) to June 30, 2002 (unaudited)
- --------------------------------------------------------------------------------
For the
Period from
For the For the October 6,
Three Months Ended Six Months Ended 1998
June 30, June 30, (Inception) to
----------------------------- ----------------------------- June 30,
2002 2001 2002 2001 2002
----------- ----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Operating expenses $ 1,797 $ 1,567 $ 2,609 $ 6,303 $ 46,504
----------- ----------- ----------- ----------- -----------
Net loss $ (1,797) $ (1,567) $ (2,609) $ (6,303) $ (46,504)
=========== =========== =========== =========== ===========
Basic and diluted
Loss per common
Share $ (0.001) $ (0.001) $ (0.001) $ (0.003) $ (0.020)
=========== =========== =========== =========== ===========
Weighted-average
common shares
outstanding 2,545,000 2,490,000 2,545,000 2,490,000 2,328,074
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
2
REGAL ACQUISITIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Period from October 6, 1998 (Inception) to June 30, 2002 (unaudited)
- --------------------------------------------------------------------------------
Contributed Deficit
Capital - Accumulated
Common Stock Additional Stock during the
-------------------------- Paid-In Warrants Development
Shares Amount Capital Outstanding Stage Total
---------- ---------- ---------- ---------- ---------- ----------
Balance, October 6, 1998 (inception) -- $ -- $ -- $ -- $ -- $ --
Issuance of common stock 2,020,000 2,020 2,580 4,600
Net loss (1,238) (1,238)
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1998 2,020,000 2,020 2,580 -- (1,238) 3,362
Issuance of common stock 150,000 150 33,600 33,750
Issuance of stock warrants 2,813 2,813
Net loss (12,320) (12,320)
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1999 2,170,000 2,170 36,180 2,813 (13,558) 27,605
Issuance of common stock 170,000 170 2,280 2,450
Issuance and exercise of stock warrants 150,000 150 2,150 2,300
Net loss (17,753) (17,753)
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 2000 2,490,000 2,490 40,610 2,813 (31,311) 14,602
Issuance of common stock 55,000 55 1,445 1,500
Net loss (12,584) (12,584)
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 2001 2,545,000 2,545 42,055 2,813 (43,895) 3,518
Net loss (unaudited) (2,609) (2,609)
---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 2002 (unaudited) 2,545,000 $ 2,545 $ 42,055 $ 2,813 $ (46,504) $ 909
========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
3
REGAL ACQUISITIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2002 and 2001 (unaudited) and
for the Period from October 6, 1998 (Inception) to June 30, 2002 (unaudited)
- --------------------------------------------------------------------------------
For the
Period from
For the October 6,
Six Months Ended 1998
June 30, (Inception) to
----------------------- June 30,
2002 2001 2002
-------- -------- --------
(unaudited) (unaudited) (unaudited)
Cash flows from operating activities
Net loss $ (2,609) $ (6,303) $(46,504)
Adjustments to reconcile net loss to net cash
used in operating activities
Stock warrants outstanding -- -- 2,813
Issuance of common stock for services
rendered -- -- 3,950
Exercise of warrants issued for services
rendered -- -- 800
Change in
Prepaid expenses 662 1,451 (247)
Accrued expenses 264 (1,006) 2,400
-------- -------- --------
Net cash used in operating activities (1,683) (5,858) (36,788)
-------- -------- --------
Cash flows from financing activities
Cash received for common stock -- -- 39,850
-------- -------- --------
Net cash provided by financing activities -- -- 39,850
-------- -------- --------
Net increase (decrease) in cash (1,683) (5,858) 3,062
Cash, beginning of period 4,745 12,890 --
-------- -------- --------
Cash, end of period $ 3,062 $ 7,032 $ 3,062
======== ======== ========
The accompanying notes are an integral part of these financial statements.
4
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Line of Business
---------------------------------
Regal Acquisitions, Inc. (the "Company") was incorporated on October
6, 1998 in the State of Delaware. The Company is in the development
stage, and its intent is to operate as a capital market access
corporation and to acquire one or more existing businesses through
merger or acquisition. The Company has had no significant business
activity to date. Operating expenses incurred to date consist
primarily of legal and accounting fees.
Basis of Presentation
---------------------
The Company has been in the development stage since its inception on
October 6, 1998. The Company has incurred losses from operations.
These factors raise substantial doubt about the Company's ability to
continue as a going concern.
Start-Up Costs
--------------
Start-up costs include legal and professional fees. In accordance
with Statement of Position 98-5, "Costs of Start-Up Activities,"
these costs have been expensed as incurred.
Estimates
---------
The preparation of the Company's financial statements in conformity
with generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying notes.
Actual results could differ from those estimates.
Loss per Share
--------------
The Company utilizes SFAS No. 128, "Earnings per Share." Basic loss
per share is computed by dividing the loss available to common
stockholders by the weighted-average number of common shares
outstanding. Diluted loss per share is computed similar to basic
loss per share except that the denominator is increased to include
the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if
the additional common shares were dilutive. Because the Company has
incurred net losses, basic and diluted loss per share are the same.
Income Taxes
------------
The Company uses the asset and liability method of accounting for
income taxes. The asset and liability method accounts for deferred
income taxes by applying enacted statutory rates in effect for
periods in which the difference between the book value and the tax
bases of assets and liabilities are scheduled to reverse. The
resulting deferred tax asset or liability is adjusted to reflect
changes in tax laws or rates. Because the Company is in the
development stage and has incurred a loss from operations, no
benefit is realized for the tax effect of the net operating loss
carryforward due to the uncertainty of its realization.
Recently Issued Accounting Pronouncements
-----------------------------------------
In July 2001, the FASB issued SFAS No. 141, "Business Combinations."
This statement addresses financial accounting and reporting for
business combinations and supersedes Accounting Principles Bulletin
("APB") Opinion No. 16, "Business Combinations," and SFAS No. 38,
"Accounting for Pre-Acquisition Contingencies of Purchased
Enterprises." All business combinations in the scope of this
statement are to be accounted for using one method, the purchase
method. The provisions of this statement apply to all business
combinations initiated after June 30, 2001. Use of the
pooling-of-interests method for those business combinations is
prohibited. This statement also applies to all business combinations
accounted for using the purchase method for which the date of
acquisition is July 1, 2001 or later. This statement is not
applicable to the Company.
5
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recently Issued Accounting Pronouncements (Continued)
-----------------------------------------
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets." This statement addresses financial accounting
and reporting for acquired goodwill and other intangible assets and
supersedes APB Opinion No. 17, "Intangible Assets." It addresses how
intangible assets that are acquired individually or with a group of
other assets (but not those acquired in a business combination)
should be accounted for in financial statements upon their
acquisition. This statement also addresses how goodwill and other
intangible assets should be accounted for after they have been
initially recognized in the financial statements. It is effective
for fiscal years beginning after December 15, 2001. Early
application is permitted for entities with fiscal years beginning
after March 15, 2001, provided that the first interim financial
statements have not been issued previously. This statement is not
applicable to the Company. In June 2001, the FASB issued SFAS No.
143, "Accounting for Asset Retirement Obligations." This statement
applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction,
development, and/or the normal operation of long-lived assets,
except for certain obligations of lessees. This statement is not
applicable to the Company.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement
addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. This statement replaces SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," the accounting and reporting
provisions of APB No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual, and Infrequently Occurring Events and
Transactions," for the disposal of a segment of a business, and
amends Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to eliminate the exception to consolidation for a
subsidiary for which control is likely to be temporary. The Company
does not expect adoption of SFAS No. 144 to have a material impact,
if any, on its financial position or results of operations.
NOTE 2 - WARRANTS OUTSTANDING
On April 19, 1999, warrants to purchase 51,000 shares of the
Company's common stock, par value $0.001, were issued to the
placement agent at an exercise price of $0.255 per share. The shares
vest immediately and can be exercised within seven years from the
date of issuance of the warrants. The fair value of the warrants at
the date of issuance was approximately $2,813 based on the fair
value of the placement agent's services, less cash paid. As of June
30, 2002, the warrants were still outstanding.
NOTE 3 - ISSUANCE OF COMMON STOCK
On November 5, 2001, the Company issued 55,000 shares of common
stock valued at $1,500 for certain professional services rendered,
which were not related to raising capital.
On August 8, 2000, the Company issued 170,000 shares of common stock
valued at $2,450 under various agreements with several consultants
in return for certain professional services rendered, which were not
related to raising capital.
6
NOTE 4 - RESTRICTED STOCK
2,170,000 shares of common stock issued to the President and other
stockholders are subject to a Lockup and Registration Rights
Agreement. Under the terms of the agreement, these shares cannot be
sold, pledged, assigned, or otherwise transferred or hypothecated
(a) for a period of six months after the registration of the common
stock and merger and (b) to the extent of 50% of the shares of the
Company, for a period of 12 months following the consummation of the
merger. An additional 44,853 shares of common stock are restricted
securities as defined in The Securities Act of 1933.
NOTE 5 - EXERCISE OF WARRANTS ISSUED
On June 26, 2000, pursuant to a consulting agreement, warrants to
purchase a total of 150,000 shares of the Company's common stock,
par value $0.001, were issued to various consultants at an exercise
price of $0.01 per share. In September 2000, holders of these
warrants exchanged the warrants for 150,000 shares of common stock,
the consideration for which was the fair value of their services,
valued at $800, and a cash payment of $1,500.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company utilizes office space of a law firm owned by its
President/Director. The Company does not pay any rent for such
office space. The President/Director also provides certain
administrative services at no charge to the Company.
NOTE 7 - MERGER
The Company entered into a merger agreement and plan of
reorganization with another entity on May 29, 2002, whereby, the
stockholders of the Company would own approximately 5% of the
combined company. The merger is subject to, among other things, the
other entity completing a Preferred Stock Placement totaling
approximately $17,000,000 by August 30, 2002. The other entity is in
default of certain of the conditions to the merger. Accordingly,
this merger may not consummate.
7
Item 2. Plan of Operation.
Statements contained in this Plan of Operation of this Quarterly Report on
Form 10-QSB include "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933 as amended (the "Securities Act") and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Forward-looking statements involve known and unknown risks, uncertainties and
other factors which could cause the actual results of the Company (sometimes
referred to as "we", "us" or the "Company"), performance (financial or
operating) or achievements expressed or implied by such forward-looking
statements not to occur or be realized. Such forward-looking statements
generally are based upon the Company's best estimates of future results, general
merger and acquisition activity in the marketplace, performance or achievement,
current conditions and the most recent results of operations. Forward-looking
statements may be identified by the use of forward-looking terminology such as
"may," "will," "project," "expect," "believe," "estimate," "anticipate,"
"intends," "continue", "potential," "opportunity" or similar terms, variations
of those terms or the negative of those terms or other variations of those terms
or comparable words or expressions. (See the Company's Form 10SB and Annual
report on Form 10-KSB for the fiscal year ended December 31, 2001 for a
description of certain of the known risks and uncertainties of the Company.)
General
Our plan is to seek, investigate, and if such investigation warrants,
consummate a merger or other business combination, purchase of assets or other
strategic transaction (i.e. Merger) with a corporation, partnership, limited
liability company or other business entity (a "Merger Target") desiring the
perceived advantages of becoming a publicly reporting and publicly held
corporation. At this time, we have no binding agreement to enter into a Merger
with any specific business or company. We will not restrict our search to any
specific business, industry, or geographical location, and may participate in
business ventures of virtually any kind or nature. Discussion of proposed plan
of operation and Mergers under this caption and throughout this Annual Report is
purposefully general and is not meant to restrict our virtually unlimited
discretion to search for and enter into potential business opportunities. While
we maintain as low an overhead as possible, we also have minimal capital that
may not be sufficient to satisfy our cash requirements during the next 12
months.
Our auditors have included an explanatory paragraph in their report for the
year ended December 31, 2001, indicating that certain conditions raise
substantial doubt regarding our ability to continue as a going concern. The
financial statements included in this Form 10-QSB do not include any adjustment
to asset values or recorded amounts of liability that might be necessary in the
event we are unable to continue as a going concern. If we are in fact unable to
continue as a going concern, shareholders may lose their entire investment in
our common stock.
We may seek a Merger with an entity which only recently commenced
operations, or a developing company in need of additional funds to expand into
new products or markets or seeking to develop a new product or service, or an
established business which may be experiencing financial or operating
difficulties and needs additional capital which is perceived to be easier to
raise by a public company. Indeed, our most common merger candidates are often
companies that lack the ability to conduct an IPO, or whose business industry is
not well received by the investment banking community. In some instances, a
Merger may involve entering into a transaction with a corporation which does not
need substantial additional cash but which desires to establish a public trading
market for its common stock. We may purchase assets and establish wholly-owned
subsidiaries in various businesses or purchase existing businesses as
subsidiaries.
Selecting a Merger Target will be complex and involve a high degree of
risk. Because of general economic conditions, rapid technological advances being
made in some industries, and shortages of available capital, management believes
that there are numerous entities seeking the benefits of being a publicly-traded
corporation. Many potential Merger Targets are in industries that have
essentially not presented well in the conventional IPO market, regardless of
their financial success, and suffer from low initial valuations. The perceived
benefits of being a publicly traded corporation may include facilitating or
improving the terms on which additional equity financing may be sought,
providing liquidity (subject to restrictions of applicable statutes and
regulations) for the principals of a business, creating a means for providing
incentive stock options or similar benefits to key employees, providing
8
liquidity (subject to restrictions of applicable statutes and regulations) for
all stockholders, and other items. Potential Merger Targets may exist in many
different industries and at various stages of development, all of which will
make the task of comparative investigation and analysis of such Merger Targets
extremely difficult and complex.
We don't have sufficient capital with which to provide the owners of Merger
Targets significant cash or other assets. We believe we can offer owners of
Merger Targets the opportunity to acquire a controlling ownership interest in a
public company at substantially less cost than is required to conduct an initial
public offering. Nevertheless, we have not conducted any specific market
research and we are not aware of statistical data which would support the
perceived benefits of a Merger or acquisition transaction for the owners of a
Merger Target.
We also believe that finding a suitable Merger Target willing to enter into
a Merger with us may depend on the existence of a public trading market for our
Common Stock. There is presently no public trading market for the Company's
Common Stock and there is no assurance that one can be developed.
We will not restrict our search to any specific kind of Merger Target, and
we may merge with an entity which is in its preliminary or development stage,
which is already in operation, or in essentially any stage of its corporate
life. It is impossible to predict at this time the status of any business in
which we may become engaged, in that such business may need to seek additional
capital, may desire to have its shares publicly traded, or may seek other
perceived advantages which we may offer. However, we do not intend to obtain
funds in one or more private placements to finance the operation of any acquired
business opportunity until such time as we have successfully consummated such a
Merger, if ever.
Selection and Evaluation of Merger Targets
Our management, which currently consists of Mr. Prestiano, will have
complete discretion and flexibility in identifying and selecting a prospective
Merger Target. In connection with its evaluation of a prospective Merger Target,
management anticipates that it will conduct a due diligence review which will
encompass, among other things, meeting with incumbent management and inspection
of facilities, as well as a review of financial, legal and other information
which will be made available to us.
Under the Federal securities laws, public companies must furnish
stockholders certain information about significant acquisitions, which
information may require audited financial statements for an acquired company
with respect to one or more fiscal years, depending upon the nature of the
specific acquisition. Likewise, the Merger Target after the merger will be
subject to similar rules. Consequently, we will only be able to effect a Merger
with a prospective Merger Target that has available audited financial statements
or has financial statements which can be audited. If after a Merger the Company
fails to comply with these rules, the stockholders may be adversely affected
because we may not be able to file registration statements or raise capital
until satisfactory audits are obtained.
The time and costs required to select and evaluate a Merger Target
(including conducting a due diligence review) and to structure and consummate
the Merger (including negotiating relevant agreements and preparing requisite
documents for filing pursuant to applicable securities laws and corporation
laws) cannot presently be ascertained with any degree of certainty. Mr.
Prestiano, our current executive officer and sole director intends to devote
only a small portion of his time to our affairs and, accordingly, consummation
of a Merger may require a greater period of time than if our management devoted
his full time to our affairs. We have engaged third party consultants to assist
us in the evaluation and due diligence review of potential Merger Targets. To
date, these third party consultants have been paid only in securities of the
Company, but we may be required to hire new consultants and/or pay such persons
cash or other securities of the Company to carry out our business plan.
We will seek potential Merger Targets from all known sources and anticipate
that various prospective Merger Targets will be brought to our attention from
various non-affiliated sources, including securities broker-dealers, investment
bankers, venture capitalists, bankers, other members of the financial community
and affiliated sources, including, possibly, our executive officer, director and
his affiliates. While we have not yet ascertained how, if at all, we will
advertise and promote our company, we may elect to publish advertisements in
financial or trade publications seeking potential business acquisitions. Such an
advertisement may only be made pursuant to an exemption under the Securities
Act. While we do not presently anticipate engaging the services of professional
firms that specialize in finding business acquisitions on any formal basis, we
may engage such firms in the future, in which
9
event we may pay a finder's fee or other compensation. In no event, however,
will we pay a finder's fee or commission to our current officer and director or
any entity with which he is affiliated for such service. Moreover, in no event
shall we issue any of our securities to any officer, director or affiliate of
the Company, or any of their respective affiliates or associates, in connection
with activities designed to locate a Merger Target.
In analyzing prospective Merger Targets, management may consider, among
other factors, such matters as;
o the available technical, financial and managerial resources;
o working capital and other financial requirements;
o the current Wall Street and other market and analyst's valuations of
similarly situated companies;
o history of operation, if any;
o prospects for the future;
o present and expected competition;
o the quality and experience of management services which may be
available and the depth of that management;
o the potential for further research, development or exploration;
o specific risk factors not now foreseeable but which then may be
anticipated to impact the proposed activities of the company;
o the potential for growth or expansion;
o the potential for profit;
o the perceived public recognition or acceptance of products, services
or trades; and
o name recognition.
Merger opportunities in which we may participate will present certain
risks, many of which cannot be adequately identified prior to selecting a
specific opportunity. Our stockholders must, therefore, depend on management to
identify and evaluate such risks. The investigation of specific Merger
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require substantial
management time and attention and substantial costs for accountants, attorneys
and others. If a decision is made not to participate in a specific Merger
opportunity the cost therefore incurred in the related investigation would not
be recoverable. To help offset this and minimize expense we have employed
several consultants, who have received stock compensation only, to perform due
diligence and assist us in evaluating Merger Targets. Furthermore, even if an
agreement is reached for the participation in a specific Merger opportunity, the
failure to consummate that transaction may result in our loss of the related
costs incurred.
There can be no assurance that we will find a suitable Merger Target. If no
such Merger Target is found, no return on an investment in our securities will
be realized, and there will not, most likely, be a market for the Company's
stock.
Consultants Retained To Assist In Mergers
In order to assist us in reviewing and evaluating Merger Targets, we have
retained certain consultants. These consultants received only securities of the
Company as compensation and may be reimbursed for certain out of pocket expenses
incurred at our request. We may be required to retain additional consultants for
cash consideration if the need should arise, and we will be limited, by cash on
hand in doing so.
Structuring of a Merger
As a general rule, Federal and state tax laws and regulations have a
significant impact upon the structuring of Mergers. We will evaluate the
possible tax consequences of any prospective Merger and will endeavor to
structure a Merger so as to achieve the most favorable tax treatment to us, the
Merger Target and our respective stockholders. There can be no assurance that
the Internal Revenue Service or relevant state tax authorities will ultimately
assent to our tax treatment of a particular consummated Merger. To the extent
the Internal Revenue Service or any relevant state tax authorities ultimately
prevail in recharacterizing the tax treatment of a Merger, there may be adverse
tax consequences to us, the Merger Target and our respective stockholders. Tax
considerations as well as other relevant factors will be evaluated in
determining the precise structure of a particular Merger.
10
We may utilize available cash and equity securities in effecting a Merger.
Although we have no commitments as of this date to issue any shares of Common
Stock or options or warrants, except for additional securities that we will
issue for certain professional services, other than those already issued in the
offering of our common stock pursuant to Regulation D promulgated under the
Securities Act of 1933 (the "Private Placement"), we will likely issue a
substantial number of additional shares in connection with the consummation of a
Merger, probably in most cases equal to nine or more times the amount held by
our stockholders prior to the Merger. This will leave current stockholders with
approximately 10% or less of the post-Merger company. We also may decide to
issue preferred stock, with rights, voting privileges, liquidation and dividend
preferences that are senior to the Common Stock, in connection with a Merger or
obtaining financing therefore, although we have no present plans to do so. We
may have to effect reverse stock splits prior to or immediately after any
Merger. To the extent that such additional shares are issued, dilution to the
interests of our stockholders will occur. Additionally, in connection with a
Merger, a change in control will occur which may affect, among other things, our
ability to utilize net operating loss carry-forwards, if any.
We may need to borrow funds to effect a Merger. However, our limited
resources and lack of operating history may make it difficult to do so. The
amount and nature of our borrowings will depend on numerous considerations,
including our capital requirements, potential lenders' evaluation of our ability
to meet debt service on borrowings and the then prevailing conditions in the
financial markets, as well as general economic conditions. We have no
arrangements with any bank or financial institution to secure financing and
there can be no assurance that such arrangements if required or otherwise
sought, would be available on terms commercially acceptable or otherwise in our
best interests. Our inability to borrow funds required to effect or facilitate a
Merger, or to provide funds for an additional infusion of capital into a Merger
Target, may have a material adverse effect on our financial condition and future
prospects, including our ability to effect a Merger. To the extent that debt
financing ultimately proves to be available, any borrowings may subject us to
various risks traditionally associated with indebtedness, including the risks of
interest rate fluctuations and insufficiency of cash flow to pay principal and
interest. Furthermore, a Merger Target may have already incurred debt financing
and, therefore, we will assume all the risks inherent thereto.
Merger Target
We are, and may continue to be, subject to intense competition in the
business of seeking a Merger with a Merger Target. Such competition is from
other entities having business strategies similar to ours. Many of these
entities, including venture capital partnerships and corporations, other blind
pool companies, large industrial and financial institutions, small business
investment companies and wealthy individuals, are well-established and have
extensive experience in connection with identifying and effecting Mergers
directly or through affiliates. Many of these competitors possess greater
financial, technical, human and other resources than us and there can be no
assurance that we will have the ability to compete successfully. Our financial
resources will be limited in comparison to those of many of our competitors.
This inherent competitive limitation may compel us to select certain less
attractive Merger prospects. There can be no assurance that such prospects will
permit us to achieve our stated business objectives.
Equipment and Employees
We have no operating business and thus no equipment and no employees other
than our president, who does not receive a salary. We do not expect to acquire
any equipment or employees. We do not intend to develop our own operating
business but instead hope to effect a Merger with a Merger Target.
11
Merger Agreement
On May 29, 2002, the Company entered into a merger agreement with MiNT
International, Inc. ("MiNT"), a Delaware corporation engaged in a manufacturing
business (the "MiNT Agreement"). The MiNT Agreement envisions the closing of the
merger between the Company and MiNT to occur on or before August 30, 2002.
Pursuant to the MiNT Agreement, the shareholders of the Company would retain
approximately five percent (5%) of the equity in the merged entity.
Additionally, in connection with the MiNT Agreement, James A. Prestiano, the
President of the Company, would surrender for cancellation 1,000,000 shares of
the Company's common stock. The MiNT Agreement is conditioned upon, among other
things, MiNT's raising capital in escrow for the merged entity. To date, MiNT
has not escrowed the required funds pursuant to the MiNT Agreement. For this and
other reasons, there can be no assurance that the conditions to the closing of
the merger contemplated by the MiNT Agreement will be satisfied prior to August
30, 2002 or that such merger will be consummated. The foregoing summary of the
transaction contemplated by the MiNT Agreement is qualified in its entirety by
the contents of the MiNT Agreement, which is attached hereto as an exhibit and
is incorporated herein by reference.
Expenses for the Six Months Ended June 30, 2002
Net cash used in operating activities for the six months ended June 30,
2002 was $1,683, as compared to $5,858 for the six months ended June 30, 2001.
The Company did not have other sources or uses of cash during the six months
ended June 30, 2002. Accordingly cash on hand decreased by $1,683 for the six
months ended June 30, 2002 to $3,062. The Company's total liabilities and
stockholders' equity as of June 30, 2002 was reduced by $2,345 to $3,309, as
compared to total liabilities and stockholders' equity of $5,654 at the fiscal
year end December 31, 2001.
Expenses of approximately $2,609 for the six months ended June 30, 2002
resulted primarily from accounting/auditing, legal, and general administrative
expenses relating to the Company's annual and periodic public disclosure and
reporting requirements. As discussed above, the Company will incur substantial
expenses, including expenses for professional and other consulting services,
when it seeks to negotiate and enter into a Merger.
There can be no assurances that the Company will have sufficient funds to
complete a Merger or to maintain its status as a publicly reporting company.
Additionally, there can be no assurances that the Company will be able to raise
additional funds to complete a Merger or to maintain its status as a publicly
reporting company. In the event that the Company is unable to remain current in
the filing of its periodic reports with the Securities and Exchange Commission
then the perceived value of the Company as a capital market access corporation
will be greatly diminished.
12
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit Number Description
- -------------- -----------
2.1 # Form of Merger Agreement and Plan of Reorganization
dated May 29, 2002, by and between Regal Acquisitions, Inc.,
MiNT International, Inc. and, solely for purposes of Section
5.6 and Section 6.1(e), James A. Prestiano.
4.1 Form of Subscription Supplement, Lock-Up and Registration
Rights Agreement executed by investors in the December 1998
Private Placement. (1)
4.2 Form of Subscription Agreement executed by investors in the
Private Placement. (1)
4.3 Placement Agent's Warrant Agreement between Algiers
Resources, Inc., Balstron Corporation, Daliprint, Inc.,
Hartscup Corporation, Mayall Partners, Inc., PSLRA, Inc.,
Regal Acquisitions Inc., Spacial Corporations, Voyer One,
Inc., Voyer Two, Inc. and CMI, dated as of April 19, 1999
relating to issue of Placement Agent Warrants to purchase
$51,000 Shares of Common Stock. (1)
4.4 Consulting Agreement dated as of June 26, 2000, between
Algiers Resources, Inc., Balstron Corporation, Daliprint,
Inc., Hartscup Corporation, Mayall Partners, Inc., PSLRA,
Inc., Regal Acquisitions Inc., Spacial Corporations, Voyer
One, Inc., Voyer Two, Inc. and CMI (the "Consultant"). (2)
4.5 Form of Warrant Agreement relating to warrants issued to
Consultant. (3)
10.0 Placement Agent Agreement between each of Algiers Resources,
Inc., Balstron Corporation, Daliprint, Inc., Hartscup
Corporation, Mayall Partners, Inc., PSLRA, Inc., Regal
Acquisitions Inc., Spacial Corporations, Voyer One, Inc.,
Voyer Two, Inc. and Tradeway Securities, Inc. as Placement
Agent. (1)
- ----------------------------------------
# Filed herewith.
(1) Incorporated by reference from the Company's Form 10-KSB, for fiscal year
ended December 31, 1999.
(2) Incorporated by reference from Exhibit 4.1 to the Company's Registration
Statement on Form S-8 (SEC File No. 333-41916), filed on July 20, 2000.
(3) Incorporated by reference from Exhibit 4.2 to the Company's Registration
Statement on Form S-8 (SEC File No. 333-41916), filed on July 20, 2000.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 2002.
13
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
REGAL ACQUISITIONS, INC.
Date: August 13, 2002 By /s/ James A. Prestiano
--------------------------------------------------
James A. Prestiano, President, Secretary and Chief
Financial Officer
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Form 10-QSB of the Company for the three month
period ending June 30, 2002, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, James A. Prestiano, the
President and sole officer of the Company, hereby certify, based on my knowledge
and solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: August 13, 2002 By /s/ James A. Prestiano
--------------------------------------------------
James A. Prestiano, President, Secretary and Chief
Financial Officer
14
Exhibit Index
Exhibit Number Description
- -------------- -----------
2.1 # Form of Merger Agreement and Plan of Reorganization dated
May 29, 2002, by and between Regal Acquisitions, Inc.,
MiNT International, Inc. and, solely for purposes of
Section 5.6 and Section 6.1(e), James A. Prestiano.
15