SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_____________
FORM 10-KSB
_____________
(Mark One)
[ X ] ANNUAL REPORT UNDER SECTION 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________to____________
Commission File Number: 0-17843
REGAL ONE CORPORATION
(name of small business issuer as specified in its charter)
Florida 95-4158065
(State or other jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
551 Drift Stone Avenue, Las Vegas, Nevada 89123
(Address of Principal Executive Offices) (Zip code)
Issuer's telephone number: (702) 897-5331
Securities registered under section 12(b)
of the Exchange Act: None
Securities registered under section 12(g)
of the Exchange Act: Common Stock, no par
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 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 [ ] NO [ X ]
Check here if the disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this 10-KSB or any
amendment to this Form 10-KSB. [ ]
Revenues for the year ending December 31, 1997 were $ -0-.
The aggregate market value of the voting stock held by non-
affiliates of the Company, based upon the average bid price of the
common stock on May 25, 1998 was approximately $1,128,372. As of
May 25, 1998, the Company had 1,196,342 shares of common stock
issued and outstanding and 208,965 shares of convertible preferred
stock issued and outstanding, each of which is convertible into 100
shares of the Company's common stock.
REGAL ONE CORPORATION
FORM 10-KSB
for the fiscal year ended December 31, 1997
TABLE OF CONTENTS
Part I Page
Item 1 Description of Business 3
Item 2 Description of Property 5
Item 3 Legal Proceedings 5
Item 4 Submission of Matters to a Vote of
Security Holders 5
Part II
Item 5 Market for the Company's Common Equity and
Related Stockholder Matters 6
Item 6 Management's Discussion and Analysis and
Plan of Operation 7
Item 7 Financial Statements 9
Item 8 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 10
Part III
Item 9 Directors, Executive Officers, Promoters
and Control Persons; Compliance with Section
16(a) of the Exchange Act 11
Item 10 Executive Compensation 12
Item 11 Security Ownership of Certain Beneficial
Owners and Management 13
Item 12 Certain Relationships and Related Transactions 13
Item 13 Exhibits and Reports on Form 8-K 13
SIGNATURES 14
<PAGE>
PART I
======
ITEM 1. DESCRIPTION OF BUSINESS
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's 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. The Company will issue approximately 26,320,520
shares of common stock to the shareholders of Infectech. Upon
closing, the Company will change its name to Infectech, Inc. and
the shareholders of Infectech, as a group, will own approximately
85% of the Company. The Company must cause holders of the
Preferred Stock to convert their shares into an aggregate of not
more than 3,447,923 shares of common stock. This transaction is
contingent upon the approval of the shareholders of both companies,
upon certain regulatory approvals and other conditions. The
Company expects to notice a special meeting of the shareholders
prior to the fall of 1998, and anticipates that the merger will be
completed by December 31, 1998. However if it is not completed by
that date the Company or Infectech may terminate and abandon the
merger.
Employees
Mr. Israel Rubinstein has, since June 1, 1996, acted as
President, Chief Executive Officer and a Director. Mr. Rubinstein
served without remuneration until December 31, 1997. The Company
has no full-time employees and no employee of the Company earned in
1997, or is currently earning annually, as much as $50,000. (See
Item 10, "Executive Compensation")
ITEM 2. DESCRIPTION OF PROPERTY
As of December 31, 1997, the Company did not and currently
does not own or lease any real property.
The Company's current street and mailing address is:
Regal One Corporation
551 Driftstone Avenue
Las Vegas, NV 89123
(702) 897-5331
The Company did not and currently does not have any tangible
fixed assets as of December 31, 1997
ITEM 3. LEGAL PROCEEDINGS
The Company has no current legal proceedings pending.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
For the fourth quarter of the fiscal year ending December 31,
1997, there were no matters submitted to a vote of security holders
through the solicitation of proxies or otherwise.
PART II
=======
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Information
The Company's shares of common stock trade on the OTC Bulletin
Board under the symbol "RONE". The following table sets forth the
range of high and low bid quotes of the Company's common stock per
quarter as provided by NASDAQ Trading and Marketing Services (which
reflect inter-dealer prices without retail mark-up, mark-down or
commission and may not necessary represent actual transactions).
Common Stock 1997 1996 1995
High Low High Low High Low
Quarter ended:
March 31: .75 .688 2.25 .375 .30 .25
June 30: 1.50 .500 1.625 .3125 1.25 .25
September 30: 1.23 .583 .75 .375 3.00 .375
December 31: .563 .313 1.3125 .325 1.50 .75
Quarter ended March 31, 1998:
High: 1.25
Low: 0.3125
Shareholders
As of May 25, 1998, there were approximately 608 shareholders
of record, inclusive of those brokerage firms and/or clearing
houses holding the Company's common shares in "street name".
Dividend Matters
The Company has not paid or declared any dividends upon its
common stock since its inception, and does not contemplate or
anticipate paying any dividends in the foreseeable future. Any
future declaration of cash or stock dividends will be at the
discretion of the Board of Directors and will depend upon the
financial condition, capital requirements, earnings, and liquidity
of the Company as well as other factors that the Board of Directors
may deem relevant.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
AND PLAN OF OPERATION
The following discussion should be read in conjunction with
the Company's financial statements and notes thereto included in
Item 7 of this Form 10-KSB report.
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.
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 Item 1, "Description of Business - Current Operations")
Plan of Operation
Through December 31, 1997, the Company had no active business
operations but continued to pursue acquisition candidates. The
independent auditor's report for the fiscal year ended December 31,
1997 will include an explanatory paragraph calling attention to a
going concern issue. The Company has suffered recurring losses
and, at December 31, 1997, has a stockholders' deficit. The
Company's ability to continue as a going concern depends upon the
Company obtaining additional financing to satisfy the operating
needs of the Company and/or complete a successful merger. In
April, 1998, the Company agreed to a reverse acquisition of
Infectech, Inc. (See Item 1, "Description of Business - Current
Operations" and Item 13, "Exhibits and Reports on Form 8-K -
Reports on Form 8-K"). No assurances can be given that the Company
will complete the acquisition of Infectech.
Liquidity and Capital Resources - December 31, 1997 Compared to
December 31, 1996
During the current year, 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.
December 31, 1997 December 31, 1996
Working Capital
(deficit) $ (108,752) $ (56,778)
The Company's financial condition at December 31, 1997
reflects an immediate inability to meet its short-term obligations.
At December 31, 1997, the Company had $55 cash on hand. The
liabilities of the Company at December 31, 1997 aggregated
$108,752, 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 capital to fund basic operations, principally fees due
to accountants and lawyers. Additionally, the Company can expect
a further infusion of capital from the exercise of common stock
warrants from the Company's Stock Option Plan if share prices
increase. The Company's 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 year
ended December 31, 1997, leaving 2,451,494 yet available, with an
amended expiration date of March 31, 1999. (See the Company's 14c,
filed April 8, 1998).
As of December 31, 1997, the Company remains generally
delinquent on most of its accounts payable obligations.
Capital Expenditures and Commitments
During the fiscal year ended December 31, 1997, the Company
had no capital expenditures. In the near term, the Company
believes its capital will principally be expended for accountants,
auditors, attorneys, interim salaries and related office expenses.
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 merger acquisition candidate on satisfactory terms.
Results of Operations - The fiscal year ended December 31, 1997
compared to the fiscal year ended December 31, 1996.
The Company reported no cash revenues for the current or prior
year. During the years ended December 31, 1997 and 1996, the
Company had a net loss of $51,974 and net income of $48,822,
respectively. The net income in 1996 resulted primarily from a
gain on the sale of Carbonex common stock of $295,803 when accrued
interest and amounts due to a former officer of the Company were
assumed by the purchaser of the Carbonex common stock, a former
officer, director and principal shareholder of the Company. During
the years ended December 31, 1997 and 1996, operating expenses were
$67,989 and $30,754, respectively. The increase in expenses in
1997 was primarily due to an increase in consulting and
professional fees. For the year ended December 31, 1997, expenses
were offset by a forgiveness of debt of $16,015. An equity loss on
a subsidiary sold was $246,227 for the year ended December 31,
1996.
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).
ITEM 7. FINANCIAL STATEMENTS
The following financial statements listed in the table below have
been prepared in accordance with the requirements of item 310 (a)
of Regulation SB (see Item 13).
Page
Independent Auditor's Report F-2
Balance Sheet at December 31, 1997 F-3
Statement of Operations for the fiscal years ended
December 31, 1997 and December 1996 F-4
Statements of Shareholders' Equity(Deficit)
for the fiscal years ended December 31, 1997
and December 31, 1996 F-5
Statement of Cash Flows for the fiscal years ended
December 31, 1997 and December 31, 1996 F-6
Notes to the Financial Statements F-8
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements with accountants with respect to
accounting and/or financial disclosure for any periods reported
on in this Form 10-KSB.
PART III
========
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS: COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
The following table sets forth certain information concerning the
current directors and executive officers of the Company:
Name Age Position
Israel Rubinstein 70 President, Chief Executive
Officer and Director
Dr. Malcolm R. Currie 71 Chairman of the Board
Richard Babbit 72 Secretary, Treasurer and
Director
Michael Platt 56 Director
Each director holds office for a one-year term until his
successor has been elected and qualified at the annual meeting of
the Company's shareholders. The members of the Board of Directors
serve without remuneration. Corporate Officers are elected by the
Board of Directors and serve at the discretion of the Board.
Israel Rubinstein has been President, Chief Executive Officer
and a Director of the Company since 1975, except for the period
from August 7, 1995 to June 1, 1996, when Mr. Gene Bemel was
President as part of the Carbonex acquisition. From 1977 to 1984,
Mr. Rubinstein owned and operated several travel agencies and was
also involved in real estate development projects in Southern
California. In 1972, Mr. Rubinstein founded Regal Mufflers
Centers, a franchise network which grew to over 100 muffler shops
by 1976. This network was subsequently merged into the Company.
Previously, in 1961, Mr. Rubinstein formed Lawn-Mat Chemical and
Equipment Corporation, the first Company to utilize automated
mechanical equipment to serve suburban property owners' demand for
landscaping and lawn care services.
Dr. Malcolm Currie was appointed as Chairman of the Board of
Directors of the Company in August, 1995. From 1969 to 1973, Dr.
Currie was the Undersecretary of Research and Engineering for the
Office of Defense. From 1973 to 1977, Dr. Currie was President of
the Missile Systems Group for Hughes Aircraft Corporation. From
1977 to 1988, Dr. Currie started as Executive Vice President and
eventually became Chief Executive Officer and Chairman of the Board
of Delco Electronics Corporation. From 1992 to present, Dr. Currie
has been Chairman Emeritus of Hughes Aircraft Corporation. Dr.
Currie is also on the Board of Directors of Unocal Oil. Dr. Currie
obtained a graduate MBA from the University of California,
Berkeley, and a PhD in Research Engineering at the University of
California, Berkeley.
Richard Babbitt was appointed as the Secretary and Treasurer
and a member of the Board of Directors of the Company in August,
1995. Mr. Babbitt has been the President of the Medical Supply
Company, Bl Industries, American Safety Equipment Corporation, and
Bl Advisors. Mr. Babbitt is an international marketing consultant
to Teikuro Corporation and Cosmo Corporation in Japan. Mr. Babbitt
is also a member of the Board of Directors of Unisyn Biowaste
Technology and Interstate Safety Corporation. Mr. Babbitt obtained
an undergraduate degree from Purdue University.
Mr. Michael E. Platt was appointed as a member of the Board of
the Directors of the Company in August, 1995. Michael E. Platt is
President of Fresh Food Ventures, Inc. Mr. Platt co-founded
Peerless Industrial Group, Inc. ("Peerless") in 1983, and was
responsible for building it to an organization of more than 500
people, raising capital, taking the company public in 1985 and
developing 12 Fuddruckers Restaurants in four Midwestern states.
In 1994, Peerless sold its Fuddruckers Restaurants and in 1995
completed the acquisition of the Peerless Chain Company, a major
domestic marketer of various chain products. Mr. Platt served as
a Director of New Products for Kentucky Fried Chicken Corporation,
and in various marketing positions at General Foods Corporation.
In August, 1995, Edward Wishner and Stephen F. Burg resigned
as members of the Board of Directors.
Compliance with Section 16 of The Securities Exchange Act 1934
To the Company's knowledge, based on a review of such
materials as are required by the SEC, no officer, director, or
beneficial holder of more than five percent of the Company's issued
and outstanding shares of common stock has filed with the SEC any
form or report required to be so filed pursuant to section 16(a) of
the Securities Exchange Act of 1934 during the fiscal year ended
December 31, 1997 or prior thereto (see Item 11 for a list of the
Company's officers, directors and beneficial holders of more than
five percent of the Company's issued and outstanding shares of
common stock).
Based solely on a review of such materials as is required by
the SEC, the Company is not aware of any transactions that were not
reported.
ITEM 10. EXECUTIVE COMPENSATION
There was no cash compensation paid by the Company to the
executive officers of the Company for the fiscal years ended
December 31, 1997 and 1996.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The persons set forth on the chart below are known to the
Company to be the beneficial owners of more than five percent of
the Company's outstanding voting common stock as of April 20, 1998.
Information concerning the number and percentage of shares of
voting common stock of the Company owned on record and beneficially
by management is set forth on the chart below:
Shares of common Percent of
Name and Address of stock beneficially common stock
beneficial owner owned owned
Israel and Ahuva Rubinstein 131,840 10.9%
551 Drift Stone Avenue
Las Vegas, Nevada 89123
Yifal Shaham 60,625 5.0%
9720 Holcolm Street
Los Angeles, CA 90035
All Directors and Officers 131,840 10.9%
as a group (4 persons)
(1) Based upon 1,196,342 shares of common stock issued and
outstanding as of April 20, 1998. This does not take into
account 208,965 shares of Preferred stock representing in the
aggregate 24,296,500 common shares votes. Each share of
Preferred Stock is convertible into 100 shares of voting
common stock. Of the Preferred Stock outstanding, 96,750
shares (46.3%) are held by the Directors of the Company (Dr.
Malcolm Currie, 30,000 shares; Richard Babbit, 30,000 shares;
Michael Platt, 36,750 shares).
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 13. 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 March 31, 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 will 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 will own, in the
aggregate, 85% of the common stock of the Company. Upon closing,
the Company will change its name to Infectech, Inc., and the
shareholders of Regal One as a group will own 15%. The Board of
Directors of Infectech will become the Board of Directors of the
Company. For each share of Infectech's issued and outstanding
common stock, its stockholders will 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, will 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. The companies anticipate that a merger
will be completed prior to year end; however, if the merger is not
completed by December 31, 1998, either the Company or Infectech may
terminate and abandon the merger. The companies are currently
exploring different structures of this transaction which may be
more time and cost efficient.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Exchange Act, the Company has caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
REGAL ONE CORPORATION
Date:_________________ /s/ Israel Rubinstein
Israel Rubinstein, President
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the Company and
in the capacities end on the dates indicated.
Signatures Title Date
/s/ Israel Rubinstein President, Principal ____
Israel Rubinstein Executive Officer and
a Director
/s/ Malcolm R. Currie Chairman of the Board, ____
Dr. Malcolm R. Currie and a Director
/s/ Richard Babbitt Secretary, Treasurer and ____
Richard Babbitt a Director
/s/ Michael E. Platt Director ____
Michael E. Platt
<PAGE>
Albright, Persing & Associates, Ltd.
CERTIFIED PUBLIC ACCOUNTANTS
1025 Ridgeview Dr., Suite 300
Reno, Nevada 89509
Phone (702) 826-5432
FAX (702) 826-5510
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
Board of Directors
Regal One Corporation
We have audited the accompanying balance sheets of Regal One
Corporation as of December 31, 1997 and 1996, and the related
statements of operations, stockholders' equity (deficit) and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Regal One Corporation as of December 31, 1997 and 1996 and the
results of its operation and its cash flows for the year then ended
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared
assuming that Regal One Corporation will continue as a going
concern. As discussed in Note 1 to the financial statements, the
Company's ability to generate sufficient cash flows to meet its
obligations, either through future revenues and/or additional debt
or equity financing, cannot be determined at this time. In
addition, the Company has suffered recurring losses and at December
31, 1997 and 1996, has a stockholders' deficit. These
uncertainties raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to
these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
Reno, Nevada
May 20, 1998
<PAGE>
REGAL ONE CORPORATION
BALANCE SHEETS
December 31, 1997 and 1996
(See Accountants' Audit Report)
1997 1996
ASSETS
Current Assets
Cash $ 55 $ 15,150
======== ==========
55 15,150
Other Assets
Deferred tax asset, net (Note 8) - -
========= ===========
Total Assets $ 55 $ 15,150
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Due to stockholders $ 2,411 $ -
Accounts payable and accrued
liabilities 106,398 71,928
Total Current Liabilities 108,809 71,928
Stockholders' Equity (Deficit) (Note 6)
Preferred stock, no par value.
Authorized 50,000,000 shares;
issued and outstanding 208,965
shares in 1997 and 1996 500 500
Common stock, no par value.
Authorized 50,000,000 shares;
issued and outstanding 1,196,342
shares in 1997 and 1,196,875
shares in 1996 5,941,113 5,941,113
Accumulated deficit (6,050,367) (5,998,391)
Net Stockholders' Equity (Deficit) (108,754) (56,778)
=========== ===========
Total Liabilities and Stockholders'
Equity (Deficit) $ 55 $ 15,150
<PAGE>
REGAL ONE CORPORATION
STATEMENTS OF OPERATIONS
Years Ended December 31, 1997 and 1996
(See Accountants' Audit Report)
1997 1996
Expenses:
Consulting and outside services $ 14,575 $ 10,000
Professional services 48,674 16,694
Research and development - 3,500
Other, selling, general and
administrative expenses 4,417 560
------ ------
67,666 30,754
Operating Loss (67,666) (30,754)
Other income (expense):
Gain on disposal of Carbonex
Systems (Note 2) - 295,803
Non-refundable deposit income - 30,000
Equity earnings (loss) of subsidiary
sold (Note 2) - (246,227)
------ ---------
- 79,576
Net income (loss) before extraordinary item (67,666) 48,822
Extraordinary item - gain on extinguishment
of debt (net of income tax of $0) 15,690 -
======== =======
Net Income (Loss) $ (51,976) $ 48,822
Earnings per common share:
Income (loss) from continuing
operations before extraordinary
items $ (.05) $ .04
Extraordinary items $ .01 $ -
======= =======
Net income $ (.04) $ .04
Earnings per common share - assuming dilution:
Income (loss) from continuing
operations before extraordinary
items $ (.05) $ .00
Extraordinary items $ .00 $ -
======= =======
Net income $ (.04) $ .00
<PAGE>
REGAL ONE CORPORATION
STATEMENTS OF STOCKHOLDERS' DEFICIT
Years Ended December 31, 1997 and 1996
(See Accountants' Audit Report)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net
Stockholders'
Preferred Stock Common Stock Accumulated Equity
<S>
Shares Amount Shares Amount Deficit (Deficit)
Balance, December 31, 1995 464,000 $ 500 1,024,674 $5,801,113 $(6,047,213) $ (245,600)
Return of series B preferred
stock in connection with
sale of Carbonex Systems
(Note 2) (255,035) - - - - -
Warrants exercised for the
purchase of common stock
during 1996 - - 159,901 130,000 - 130,000
Warrants exercised for the
purchase of common stock
during 1996 - - 12,300 10,000 - 10,000
Net Income - - - - 48,822 48,822
Balance, December 31, 1996 208,965 500 1,196,875 5,941,113 (5,998,391) (56,778)
Adjustment to number of shares
for prior stock split - - (533) - - -
Net (Loss) - - - - (51,976) (51,976)
======= ===== ========= ========== ============ ===========
Balance, December 31, 1997 208,965 $ 500 1,196,342 $ 5,941,113 $(6,050,367) $ (108,754)
</TABLE>
<PAGE>
REGAL ONE CORPORATION
STATEMENTS OF CASH FLOWS
December 31, 1997 and 1996
(See Accountants' Audit Report)
1997 1996
Cash flows from operating activities:
Net income (loss) $ (51,976) $ 48,822
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation and amortization - 83,010
Gain on sale of Carbonex - (295,803)
Increase (Decrease) in accounts
payable and accrued
liabilities 36,881 7,973
Total Adjustments 36,881 (204,820)
Net cash used by
operating activities (15,095) (155,998)
Cash flows from financing activities:
Proceeds from issuance of common
stock - 130,000
Repayment of contracts payable - (50,000)
Proceeds from notes payable - 100,085
Repayment of notes payable to
stockholders - -
Net repayments of loans payable
to stockholders - (15,000)
Net cash provided (used)
by financing activities - 165,085
Net increase (decrease)
in cash (15,095) 9,087
Cash at beginning of year 15,150 6,063
Cash at end of year $ 55 $ 15,150
<PAGE>
REGAL ONE CORPORATION
STATEMENTS OF CASH FLOWS
December 31, 1997 and 1996
(See Accountants' Audit Report)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
1997 1996
Cash paid during the year for interest $ - $ -
Cash paid during the year for income
taxes $ - $ -
SUPPLEMENTAL DISCLOSURE OF OTHER INVESTING AND FINANCING ACTIVITIES:
During 1996, the Company issued 12,300 shares of stock in exchange for a
$10,000 account payable.
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Business
Regal One Corporation (the "Company") located in Las Vegas,
Nevada, is a Florida Corporation originally incorporated as
Electro-Mechanical Services, Inc., in 1959 in Florida. The Company
has been involved in a variety of industries including automobile
mufflers, real estate, and the pharmaceutical and health fields.
The Company is currently not in formal business operations, but is
actively seeking a merger candidate.
The Company has not generated significant revenue during the
years ended December 31, 1997 and 1996, and has funded its
operation primarily through the issuance of equity. Accordingly,
the Company's ability to accomplish its business strategy and to
ultimately achieve profitable operations is dependent upon its
ability to obtain additional debt or equity financing, or to merge
with a going concern Company. There can be no assurance that the
Company will be able to obtain additional funding, and, if
available, will be obtained on terms favorable to or affordable by
the Company. The Company's management is currently exploring a
merger option. Ultimately, however, the Company will need to
achieve profitable operations and/or merge with a going concern
Company in order to continue as a going concern.
In addition, the Company has suffered recurring losses and at
December 31, 1997 has a shareholders' deficit. These factors
indicate that the Company's ability to continue as a going concern
is dependent upon the Company obtaining additional financing to
satisfy the operating needs of the Company. The Company is seeking
a merger candidate and believes that a successful merger will occur
in the near future.
These conditions raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements
do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from the
outcome of this uncertainty.
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 disclosures of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
Fair Value of Financial Instruments
Effective July 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" ("SFAS No. 107"). The carrying
amounts reported in the balance sheet for cash and cash equivalents
approximate those assets' fair values. Active markets for the
Company's other financial instruments that are subject to the fair
value disclosure requirements of SFAS No. 107 do not exist and
there are no quoted market prices for these instruments.
Accordingly, it is not practicable to estimate the fair values of
such financial instruments because of (1) the limited information
available to the Company, (2) the significance of the cost to
obtain independent appraisals for this purpose, and (3) due to the
immateriality of such amounts.
Income Taxes
In February, 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"). SFAS No. 109
required a change from the deferred method of accounting for income
taxes of APB Opinion 11 to the asset and liability method of
accounting for income taxes. Under the asset and liability method
of SFAS No. 109, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS
No. 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that
includes the enactment date.
Effective January 1, 1993, the Company adopted SFAS No. 109.
The application of SFAS No. 109 had an immaterial effect on the
Company's financial statements for the periods prior to January 1,
1993 due to operating losses incurred by the Company in 1993 and
prior years.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
credit risk consist primarily of cash in bank. The Company
maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits.
Earnings per share
The Company adopted Statement of Financial Accounting Standard
No. 128, Earnings per Share ("SFAS No. 128"), which is effective
for annual periods ending after December 15, 1997. As provided by
SFAS No. 128, prior earnings per share amounts for the year ended
December 31, 1996 have been recomputed under the provisions of the
new standard, and appropriately restated. The effect of the
restatement was to decrease diluted earnings per share from $.01 to
$.00. There was no effect on basic earnings per share.
NOTE 2 - ACQUISITION OF CARBONEX SYSTEMS CORPORATION
On August 7, 1995, the Company acquired all the outstanding
shares of common stock of Carbonex Systems Corporation
("Carbonex"), in a business combination accounted for as a
purchase. Carbonex Systems Corporation is a development stage
Delaware corporation owning certain exclusive rights to a
proprietary emission reduction system for internal combustion
engines. The results of operations of Carbonex Systems Corporation
is included in the accompanying financial statements since the date
of acquisition. The total cost of the acquisition was $-0-,
because the fair market value of the assets of Carbonex Systems was
equal to the liabilities assumed.
During 1996, the Company entered into a "Stock Exchange,
Settlement Agreement, and General Release", effective June 1, 1996.
The agreement called for the exchange of all the outstanding
Carbonex shares acquired in the above acquisition for 255,035
shares of the Company's Preferred Series B stock issued to effect
the acquisition. The transaction resulted in a gain of $295,803,
which has been included in operations in 1996. The Company's share
of the equity in the undistributed earnings (loss) of Carbonex
Systems for 1996, through the date of sale, was $(246,227), and is
included in other income.
Following is a summary of net assets and results of operations
of Carbonex Systems as of June 1, 1996, and for the periods then
ended:
Cash and cash equivalents $ 70
Receivables 1,960
Patent, net of accumulated
amortization 2,858,738
Total Assets 2,860,768
Accounts payable (66,095)
Contracts payable (2,800,000)
Other current liabilities (762,930)
===============
Net Assets $ (768,257)
Sales and other revenue $ -
Expenses 246,227
Income before income taxes (246,227)
Income taxes -
===============
Net Loss $ (246,227)
NOTE 3 - PATENT RIGHTS
The Company had a license and Patent Assignment Agreement
which grants it an exclusive worldwide license to a proprietary
emission reduction system for internal combustion engines upon full
payment of $3,000,000 plus interest at a rate of 6% per annum
payable over an 18 month period. The patent is being amortized
over its estimated life of 18 years. The following is a recap of
the patent:
1997 1996
Patent cost $ - $ -
Less: accumulated amortization - -
Net Patent Cost $ - $ -
In 1996, the patent was sold along with the sale of Carbonex
(see Note 2).
NOTE 4 - CONTRACT PAYABLE
As a part of the acquisition of Carbonex (see Note 2), the
Company assumed the License and Patent Assignment Agreement between
Carbonex and the patent inventor. The agreement obligates Carbonex
to pay the inventor, who is the brother of the Chairman of the
Board of Carbonex and the Chief Executive Officer of the Company,
$3,000,000 within 18 months, after which Carbonex will own the
issued patent together with all other proprietary rights thereto.
This note was transferred to Carbonex's responsibility on June 1,
1996 (Note 2).
NOTE 5 - STOCKHOLDERS' DEFICIT
The authorized number of shares of preferred stock is
50,000,000. The Company's bylaws allow for segregating this
preferred stock into separate series. As of December 31, 1996, the
Company has authorized 50,000 shares of series A preferred stock
and 464,000 shares of series B convertible preferred stock. At
December 31, 1997 and 1996, there were no outstanding shares of
series A preferred stock. At December 31, 1997 and 1996, 208,965
shares of series B preferred stock were outstanding.
Holders of series A preferred stock shall be entitled to
voting rights equivalent to 1,000 shares of common stock. The
series A preferred stock has certain dividend and liquidation
preferences over common stockholders.
Holders of series B preferred stock shall be entitled to
voting rights equivalent to 100 shares of common stock. The series
B preferred stock is entitled to a noncumulative dividend of 8.75%
of revenues which exceed $5,000,000. At the option of the holder
of series B preferred stock, each share can be converted to common
stock at a rate of 100 shares of common for each share of
preferred.
On various dates during 1996, the Company issued 172,201
shares of common stock for an aggregate amount of $140,000.
As of December 31, 1997 and 1996, no dividends have been
declared on the series A or series B convertible preferred stock.
NOTE 6 - STOCK OPTIONS
On May 3, 1995, the Company adopted a stock option plan to
provide incentives to those individuals who serve or have served
the Company as employees, officers, directors or consultants.
Under the plan, the Board of Directors is authorized to grant
option to individuals who have contributed, or will contribute to
the well being of the Company.
The Company applies APB Opinion 25 in accounting for its fixed
stock option plan. Accordingly, since the market value and the
option price of the Company's stock were equal on the measurement
date, no compensation cost has been recognized for the plan in 1997
or 1996. Had compensation cost been determined on the basis of
fair value pursuant to FASB Statement No. 123, net income (loss)
and earnings per share would have been impacted as follows:
1997 1996
Net Income (Loss)
As reported $ (51,976) $ 48,822
Pro forma $ (663,524) $ (562,726)
Basic Earnings Per Share
As reported $ (.04) $ .04
Pro forma $ (.55) $ (.48)
Diluted Earnings Per Share
As reported $ (.04) $ .00
Pro forma $ (.55) $ (.48)
For purposes of estimating the fair value of each option granted in
accordance with FASB 123, the Black-Scholes Model was used. The following
assumptions were made in estimating fair value:
Dividend yield 0%
Risk-free interest rate 8.50%
Expected life 3 years
Expected volatility 124.42%
Compensation expense that would have been charged to operations had the
provisions of FASB 123 been applied were $611,548 in 1997 and $611,548
in 1996.
Following is a summary of the status of options outstanding during the years
ended December 31, 1997 and 1996:
Year Ended 12/31/97 Year Ended 12/31/96
Weighted Weighted
Number Average Number Average
of Exercise of Exercise
Shares Price Shares Price
Outstanding at January 1 2,451,494 $ .8125 2,623,695 $ .8125
Granted - - - -
Exercised - - (172,201) .8125
Forfeited - - - -
Outstanding at December 31 2,451,494 $ .8125 2,451,494 $ .8125
Options exercisable at
December 31 2,451,494 $ .8125 2,451,494 $ .8125
Weighted average fair value
of options granted during
1997 and 1996 $ - $ -
NOTE 7 - EARNINGS PER SHARE
The following data show the amounts used in computing earnings per share and
the effect on income and the weighted average number of shares of dilutive
potential common stock.
1997 1996
Income from continuing operations before
extraordinary items $ (67,666) $ 48,822
Less: preferred dividends - -
Income available to common stockholders
used in basic EPS $ (67,666) $ 48,822
Income available to common stockholders
used in basic EPS $ (67,666) $ 48,822
Convertible preferred stock - -
Income available to common stockholders
after assumed conversions of dilutive
securities $ (67,666) $ 48,822
Weighted average number of common
shares used in basic EPS 1,196,342 1,169,124
Effect of dilutive securities:
Stock options - 289,326
Convertible preferred stock - 31,522,958
Weighted number of common shares and
dilutive potential common stock used in
diluted EPS 1,196,342 32,981,408
For the year ended December 31, 1997, options on 332,516 shares of common
stock were not included in computing diluted EPS, nor was preferred stock
convertible into 20,896,500 common shares because their effects were
antidilutive.
NOTE 8 - INCOME TAXES
As discussed in Note 1, the Company adopted Statement of
Financial Accounting Standards No. 109 effective January 1, 1993.
One of the provisions of Statement 109 enables companies to record
deferred tax assets for the benefit to be derived from the
utilization of net operating loss carryforwards and certain
deductible temporary differences. At December 31, 1997 and 1996,
the tax effects of temporary differences that give rise to
significant portions of deferred tax assets are presented below:
1997 1996
Net operating loss carryforwards $ 582,779 $ 566,516
Less: valuation allowance (582,779) (566,516)
============ ===========
$ - $ -
Due to operating losses incurred by the Company, the Company
established a related valuation allowance of $582,779 at December
31, 1997.
As of December 31, 1997, the Company has net operating loss
carryforwards of approximately $1,714,057 for Federal income tax
return purposes, which expire through 2012. The future tax
benefits are dependent upon the Company's ability to generate
future earnings.
NOTE 9 - SUBSEQUENT EVENTS
On April 3, 1998, the Company entered into a "Plan and
Agreement of Merger" (the "Agreement") with Infectech, a Delaware
corporation. The Agreement calls for the Company to form a wholly-
owned subsidiary corporation, incorporated under the laws of the
State of Delaware, into which Infectech will transfer and assign
all of its assets. Through the terms of the Agreement, the Company
and its subsidiary, the surviving entities, will acquire all of the
outstanding common stock of Infectech, and Infectech will cease to
exist.
The completion of the merger requires stockholder approval
from both Companies and other conditions which had not been met as
of the date of these financial statements.
<PAGE>
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-END] DEC-31-1997
[CASH] 55
[SECURITIES] 0
[RECEIVABLES] 0
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 55
[PP&E] 0
[DEPRECIATION] 0
[TOTAL-ASSETS] 55
[CURRENT-LIABILITIES] 108809
[BONDS] 0
[COMMON] 5941113
[PREFERRED-MANDATORY]
[PREFERRED] 500
[OTHER-SE]
[TOTAL-LIABILITY-AND-EQUITY] 55
[SALES] 0
[TOTAL-REVENUES] 0
[CGS] 0
[TOTAL-COSTS] 63249
[OTHER-EXPENSES] 4417
[LOSS-PROVISION] 67666
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] (51976)
[INCOME-TAX] 0
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 15690
[CHANGES] 0
[NET-INCOME] (51976)
[EPS-PRIMARY] (.04)
[EPS-DILUTED] (.04)
</TABLE>
