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, 1999
[ ] 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)
(702) 897-5331
(Issuer's telephone number)
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 [X] NO [ ]
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, 1999 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 July 5, 1999 was approximately $436,954.
As of July 5, 1999, the Company had 1,191,217 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, 1999
TABLE OF CONTENTS
Part I
Item 1. Description of Business
Item 2 Description of Property
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of
Security Holders
Part II
Item 5 Market for the Company's Common Equity and
Related Stockholder Matters
Item 6 Management's Discussion and Analysis and
Plan of Operation
Item 7 Financial Statements
Item 8 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
Part III
Item 9 Directors, Executive Officers, Promoters
and Control Persons; Compliance with Section
16(a) of the Exchange Act
Item 10 Executive Compensation
Item 11 Security Ownership of Certain Beneficial
Owners and Management
Item 12 Certain Relationships and Related Transactions
Item 13 Exhibits and Reports on Form 8-K
SIGNATURES
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.
Infectech, Inc.
In April, 1998, the Company entered into an agreement to
merge a newly formed subsidiary of the Company with Infectech,
Inc.("Infectech"). Infectech, founded In 1989, is a development-
stage biotechnology company which owns 15 patents for the rapid
identification and antibiotic sensitivity testing of 34 disease-
causing bacteria. On August 5, 1998, the Company announced that
Infectech, Inc. had unilaterally acted to terminate the merger
agreement between the two parties. Infectech stated as its
reason that it had not been successful in raising the requisite
$300,000 prior to June 30, 1998. Infectech further notified the
Company that it proposed to arbitrate the return of $56,000 paid
by Infectech for legal fees and certain other merger-related
expenses of the Company, as per the merger agreement. On
November 18, 1998, the Company and Infectech, Inc. resolved the
matter subject to arbitration, with the Company issuing 10,000
shares of restricted common stock to Infectech, Inc. on November
24, 1998.
Current Operations
During 1999, the Company had no business activity, but
continued to pursue acquisition candidates.
Employees
Mr. 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. 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, 1999, 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, 1999
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, 1999, 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 National
Association of Securities Dealers' OTC Bulletin Board under the
symbol "RONE". The following table sets forth the range of high
and low daily closing prices 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 1999 1998 1997
High Low High Low High Low
Quarter ended:
March 31: .5313 .25 1.28 .3125 .75 .688
June 30: .5625 .4063 1.4375 .625 1.50 .50
September 30: .4688 .3125 .875 .25 1.23 .583
December 31: .4063 .3125 .375 .25 .563 .313
Quarter ended March 31, 2000:
High: .50
Low: .3125
Shareholders
As of March 31, 2000, 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.
On August 5, 1998, the Company announced that Infectech, Inc.
had unilaterally acted to terminate the merger agreement between
the two parties. Infectech stated as its reason that it had not
been successful in raising the requisite $300,000 prior to
June 30, 1998. Infectech further notified the Company that
it proposed to arbitrate the return of $56,000 paid by Infectech
for legal fees and certain other merger-related expenses of the
Company, as per the merger agreement. On November 18, 1998,
the Company and Infectech, Inc. resolved the matter subject to
arbitration, with the Company issuing 10,000 shares of restricted
common stock to Infectech, Inc. on November 24, 1998. (See Item
1, "Description of Business - Current Operations")
Plan of Operation
Through December 31, 1999, 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, 1999 will include an explanatory paragraph
calling attention to a going concern issue. The Company has
suffered recurring losses and, at December 31, 1999, 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.
Liquidity and Capital Resources - December 31, 1999 Compared to
December 31, 1998
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, 1999 December 31, 1998
Working Capital
(deficit) $ (254,478) $ (187,151)
The Company's financial condition at December 31, 1999
reflects an immediate inability to meet its short-term
obligations. At December 31, 1999, the Company had $8 cash on
hand. The liabilities of the Company at December 31, 1999
aggregated $254,486, 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.
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, 1999, leaving 2,451,494 yet
available, with an amended expiration date of December 31, 2000.
(See the Company's 14c, filed April 8, 1998).
Capital Expenditures and Commitments
During the fiscal year ended December 31, 1999, the Company
had no capital expenditures. The amount of capital expenditures
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, 1999
compared to the fiscal year ended December 31, 1998.
The Company reported no revenues for the current or prior
year. During the years ended December 31, 1999 and 1998,
operating expenses were $67,327 and $134,397, respectively,
primarily consisting of professional and consulting fees. During
the year ended December 31, 1998, the Company had other income of
$25,000, resulting from expenses paid by Infectech, Inc. (See
Item 1, "Description of Business"). As a result, the Company
reported net losses of $67,327 and $134,397, for the years ended
December 31, 1999, and 1998, respectively.
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).
Independent Auditor's Report F-2
Balance Sheet at December 31, 1999 F-3
Statements of Income and Comprehensive Income for the
fiscal years ended December 31, 1999, 1998 and 1997 F-4
Statements of Stockholders' Deficit for the
fiscal years ended December 31, 1999, 1998 and 1997 F-5
Statements of Cash Flows for the fiscal years ended
December 31, 1999, 1998 and 1997 F-6
Notes to the Financial Statements F-8
REGAL ONE CORPORATION
AUDITED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<PAGE>
Albright, Persing & Associates, Ltd.
CERTIFIED PUBLIC ACCOUNTANTS
1025 Ridgeview Dr., Suite 300
Reno, Nevada 89509
Phone (775) 826-5432
FAX (775) 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, 1999 and 1998, and the related
statements of income and comprehensive income, stockholders'
equity (deficit) and cash flows for the years ended December 31,
1999, 1998 and 1997. 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, 1999 and 1998 and the
results of its operation and its cash flows for the years ended
December 31, 1999, 1998 and 1997 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, 1999, 1998 and 1997, and 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.
These financial statements do not include any adjustments
relating to the recoverability and classification of recorded
assets, or the amounts and classification of liabilities that
might be necessary in the event the Company cannot continue in
existence.
/s/ Albright, Persing & Associates, Ltd.
Reno, Nevada
April 12, 2000
<PAGE> 2
<TABLE>
REGAL ONE CORPORATION
BALANCE SHEETS
December 31, 1998 and 1997
(See Accountants' Audit Report)
<S> <C> <C>
1999 1998
ASSETS
Current Assets
Cash $ 8 $ 4,818
--------- ---------
8 4,818
--------- ---------
Other Assets
Deferred tax asset, net - -
--------- ---------
Total Assets $ 8 $ 4,818
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Due to stockholders and officers $ 96,190 $ 54,190
Accounts payable and accrued
liabilities 158,296 137,779
--------- ---------
Total Current Liabilities 254,486 191,969
--------- ---------
Stockholders' Equity (Deficit)
Preferred stock, no par value.
Authorized 50,000,000 shares;
issued and outstanding 208,965
shares in 1999 and 1998 500 500
Common stock, no par value.
Authorized 50,000,000 shares;
issued and outstanding 1,221,213
shares in 1999 and 1,221,217
shares in 1998 5,997,113 5,997,113
Accumulated deficit (6,252,091) (6,184,764)
--------- ---------
Net Stockholders' Equity (Deficit) (254,478) (187,151)
--------- ---------
Total Liabilities and Stockholders'
Equity (Deficit) $ 8 $ 4,818
========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 3
<TABLE>
REGAL ONE CORPORATION
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Years Ended December 31, 1999, 1998 and 1997
(See Accountants' Audit Report)
<S> <C> <C> <C>
1999 1998 1997
Expenses:
Consulting and outside services $ 42,000 $ 51,543 $ 14,575
Professional services 21,880 79,711 48,674
Other, selling, general and
administrative expenses 3,447 3,143 4,417
--------- --------- ---------
67,327 134,397 67,666
--------- --------- ---------
Net Loss Before Extraordinary Item (67,327) (134,397) (67,666)
--------- --------- ---------
Extraordinary item - gain on extinguishment
of debt (net of income tax of $0) - - 15,690
--------- --------- ---------
Net Income (Loss) (67,327) (134,397) (51,976)
Other Comprehensive Income - - -
--------- --------- ---------
Comprehensive (Loss) $ (67,327) $ (134,397) $ (51,976)
========= ========= =========
Basic and Diluted Loss per Share
Before Extraordinary Gain $ (.06) $ (.11) $ (.05)
========= ========= =========
Extraordinary Gain $ - $ - .01
========= ========= =========
Basic and Diluted Net Loss
per Common Share $ (.06) $ (.11) $ (.04)
========= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 4
<TABLE>
REGAL ONE CORPORATION
STATEMENTS OF STOCKHOLDERS' DEFICIT
Years Ended December 31, 1999, 1998 and 1997
(See Accountants' Audit Report)
<S> <C> <C> <C> <C> <C> <C>
Net
Stockholders'
Preferred Stock Common Stock Accumulated Equity
Shares Amount Shares Amount Deficit (Deficit)
Balance, December 31, 1996,
as previously reported 208,965 $ 500 1,196,875 $5,941,113 $(5,998,391) $ (56,778)
Adjustment to number of shares
for reissuance of shares
previously canceled - - 30,000 - - -
Balance, December 31, 1996,
as restated 208,965 500 1,226,875 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 1,226,342 5,941,113 (6,050,367) (108,754)
Stock issued for cash - - 10,000 56,000 - 56,000
Adjustment to number of shares
for share cancellations
never reissued - - (15,125) - - -
Net (Loss) - - - - (134,397) (134,397)
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1998 208,965 500 1,221,217 5,997,113 (6,184,764) (187,151)
Adjustment to number of shares
for share cancellations
never reissued - - (4) - - -
Net (Loss) - - - - (67,327) (67,327)
--------- --------- --------- --------- --------- ---------
Balance, December 31, 1999 208,965 500 1,221,213 $5,997,113 $(6,252,091) $(254,478)
========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 5
<TABLE>
REGAL ONE CORPORATION
STATEMENTS OF CASH FLOWS
December 31, 1999, 1998 and 1997
(See Accountants' Audit Report)
<S> <C> <C> <C>
1999 1998 1997
Cash flows from operating activities:
Net income (loss) $ (67,327) $ (134,397) $ (51,976)
--------- --------- ---------
Adjustments to reconcile net
loss to net cash used by
operating activities:
Noncash consulting fees 42,000 42,000 -
Expenses paid by officer - 814 -
Increase (Decrease) in accounts
payable and accrued liabilities 20,517 31,381 36,881
--------- --------- ---------
Total Adjustments 62,517 74,195 36,881
--------- --------- ---------
Net cash used by operating activities (4,810) (60,202) (15,095)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from sale of stock - 56,000 -
Proceeds from stockholder loans - 8,965 -
--------- --------- ---------
Net cash provided (used)
by financing activities - 64,965 -
--------- --------- ---------
Net increase (decrease) in cash (4,810) 4,763 (15,095)
--------- --------- ---------
Cash at beginning of year (4,818) 55 15,150
--------- --------- ---------
Cash at end of year $ 8 $ 4,818 $ 55
--------- --------- ---------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 6
<TABLE>
REGAL ONE CORPORATION
STATEMENTS OF CASH FLOWS
December 31, 1999, 1998 and 1997
(See Accountants' Audit Report)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<S> <C> <C> <C>
1999 1998 1997
Cash paid during the year for interest $ - $ - $ -
========= ========= =========
Cash paid during the year for income taxes $ - $ - $ -
========= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 7
REGAL ONE CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
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, 1999, 1998 and 1997, 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, 1999 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.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash balances and
instruments with maturities of three months or less at the time
of purchase.
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
In February, 1997, the Financial Accounting Standards
Board issued SFAS No. 128, Earnings per Share. SFAS No. 128
simplifies the standards for computing earnings per share ("EPS")
and was effective for financial statements issued for periods
ending after December 15, 1997, with earlier application not
permitted. Upon adoption, all prior EPS data was restated.
Basic EPS is determined using net income divided by the
weighted average shares outstanding during the period. Diluted
EPS is computed by dividing net income by the weighted average
shares outstanding, assuming all dilutive potential common shares
were issued.
Since the fully diluted loss per share for 1999, 1998 and
1997 was antidilutive, basic and diluted earnings per share are
the same. Accordingly, options to purchase common stock in 1999,
1998 and 1997 of 2,451,494 shares, and 20,896,500 common shares
potentially issuable upon conversion of preferred stock existing
at the end of 1999, 1998 and 1997 were not included in the
calculation of diluted earnings per common share.
New Accounting Standards
In June, 1997, the Financial Accounting Standards Board
issued SFAS No. 130, Reporting Comprehensive Income. SFAS No.
130 establishes standards for reporting and presentation of
comprehensive income and its components in a full set of general-
purpose financial statements. This statement does not, however,
require a specific format for the disclosure, but requires the
Company to display an amount representing total comprehensive
income for the period in its financial statements. Comprehensive
income is determined by adjusting net income by other items not
included as a component of net income, such as the unrealized
gain (loss) on certain marketable securities. During the periods
presented, the Company had no additional components that were not
a part of net income (loss), therefore, comprehensive income and
net income are the same amount.
In June, 1997, the Financial Accounting Standards Board
issued SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information. SFAS No. 131 establishes standards for
the manner in which public business enterprises report
information about operating segments in annual financial
statements and requires that those enterprises report selected
information about operating segments in interim financial reports
issued to shareholders. This statement also requires that a
public business enterprise report financial and descriptive
information about its reportable operating segments. The Company
is currently not in formal business operations and does not have
any reportable operating segments.
In June, 1998, the Financial Accounting Standards Board
issued SFAS 133, Accounting for Derivative Instruments and
Hedging Activities, however, the effective date for this
pronouncement was delayed for one year from the original
effective date of fiscal years beginning after June 15, 1999.
Since the Company does not deal in derivative instruments or
hedging activities, it is anticipated that this pronouncement
will have no impact on the Company's financial statements.
NOTE 2 - PRIOR PERIOD ADJUSTMENT
The accompanying financial statements for 1997 and 1998 have
been restated to correct an error made in 1994 when 30,000 shares
of common stock that had been issued in 1993 were incorrectly
canceled. The effect of the restatement had no impact on net
income for either 1998 or 1997. However, the number of shares of
common stock outstanding for 1998 and 1997 have been adjusted to
reflect the additional 30,000 shares.
NOTE 3 - 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, 1999,
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, 1999, 1998 and 1997, there were no outstanding
shares of series A preferred stock. At December 31, 1999, 1998
and 1997, 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.
As of December 31, 1999, 1998 and 1997, no dividends have
been declared on the series A or series B convertible preferred
stock.
NOTE 4 - 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 1999, 1998 or 1997. 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:
1999 1998 1997
Net Income (Loss)
As reported $ (67,327) $ (134,397) $ (51,976)
========== =========== ==========
Pro forma $ (67,327) $ (338,246) $ (663,524)
========== =========== ==========
Basic Earnings Per Share
As reported $ (0.06) $ (.11) $ (.04)
========== =========== ==========
Pro forma $ (0.06) $ (.29) $ (.55)
========== =========== ==========
Diluted Earnings Per Share
As reported $ (0.06) $ (.11) $ (.04)
========== =========== ==========
Pro forma $ (0.06) $ (.29) $ (.55)
========== =========== ==========
For purposes of estimating the fair value of each option
granted in accordance with FASB 123, the Black-Scholes Model was
used for 1998 and 1997. The following assumptions were made in
estimating fair value:
Dividend yield 0%
Risk-free interest rate 5.50% to 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
$203,849 in 1998 and $611,548 in 1997. For 1999, no options were
issued or vested, and therefore, there would be no compensation
expense.
Following is a summary of the status of options outstanding
during the years ended December 31, 1999, 1998 and 1997:
Year Ended 12/31/99
Weighted
Number Average
of Exercise
Shares Price
Outstanding at January 1 2,451,494 $ .8125
Granted - -
Exercised - -
Forfeited - -
--------- --------
Outstanding at December 31 2,451,494 $ .8125
========= ========
Weighted average fair value
of options granted during
1999 $ -
========
Year Ended 12/31/98 Year Ended 12/31/97
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 - - - -
Forfeited - - - -
--------- -------- --------- --------
Outstanding at December 31 2,451,494 $ .8125 2,451,494 $ .8125
========= ======== ========= ========
Weighted average fair value
of options granted during
1998 and 1997 $ - $ -
======== ========
The following table summarizes information regarding stock options
outstanding at December 31, 1999:
<TABLE>
<C> <C> <C> <C> <C> <C>
Outstanding Options Exercisable Options
- ----------------------------------------- ---------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Contractual Exercise Exercise
Price Range Number Life Price Number Price
- ----------- ----------- ------------ -------- ----------- --------
$ .8125 2,451,494 1.25 Years $ .8125 2,451,494 $ .8125
</TABLE>
NOTE 5 - 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.
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
---------- ---------- ----------
Income from continuing
operations before
extraordinary items $ (67,327) $ (134,397) $ (67,666)
Less: preferred dividends - - -
---------- ---------- ----------
Income available to common
stockholders used in basic EPS $ (67,327) $ (134,397) $ (67,666)
========== ========== ==========
Income available to common
stockholders used in basic EPS $ (67,327) $ (134,397) $ (67,666)
Convertible preferred stock - - -
---------- ---------- ----------
Income available to common
stockholders after assumed
conversions of dilutive
securities $ (67,327) $ (134,397) $ (67,666)
========== ========== ==========
Weighted average number of common
shares used in basic EPS 1,212,610 1,212,614 1,226,342
Effect of dilutive securities:
Stock options - - -
Convertible preferred stock - - -
---------- ---------- ----------
Weighted number of common shares
and dilutive potential common
stock used in diluted EPS 1,212,610 1,212,614 1,226,342
========== ========== ==========
</TABLE>
NOTE 6 - 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, 1998 and 1997,
the tax effects of temporary differences that give rise to
significant portions of deferred tax assets are presented below:
1999 1998 1997
--------- --------- ---------
Net operating loss
carryforwards $ 631,972 $ 627,617 $ 582,779
Less: valuation
allowance (631,972) (627,617) (582,779)
--------- --------- ---------
$ - $ - $ -
========= ========= =========
Due to operating losses incurred by the Company, the Company
established a related valuation allowance of $631,972 at December
31, 1999.
As of December 31, 1999, the Company has net operating loss
carryforwards of approximately $1,825,396 for Federal income tax
return purposes, which expire through 2014. The future tax
benefits are dependent upon the Company's ability to generate
future earnings.
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 ACT
The following table sets forth certain information
concerning the current directors and executive officers of the
Company:
Name Age Position
Israel Rubinstein 72 President, Chief Executive
Officer and Director
Dr. Malcolm R. Currie 73 Chairman of the Board
Richard Babbit 74 Secretary, Treasurer and
Director
Michael Platt 58 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.
Compliance with Section 16 of The Securities Exchange Act of 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, 1999 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, 1999 and 1998.
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 March 31,
2000. 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 March 31, 2000. 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, 2000 upon receipt from
any such person of written request for any such exhibit. Such
request should be sent to the Company with the attention directed
to the Corporate Secretary.
Reports on Form 8-K
In April, 1998, the Company entered into a Plan and
Agreement of Merger with Infectech, a Delaware Corporation
("Infectech"). The Company would have issued approximately
26,320,520 Shares of common stock to Infectech's stockholders so
that on the effective date of the merger, the shareholders of
Infectech would own, in the aggregate, 85% of the common stock of
the Company. Upon closing, the Company would have changed its
name to Infectech, Inc., and the shareholders of Regal One as a
group would own 15%. The Board of Directors of Infectech would
have become the Board of Directors of the Company. For each
share of Infectech's issued and outstanding common stock, its
stockholders would have received 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 was to cause holders of its Preferred Stock to convert
their shares into an aggregate of not more than 3,447,923 shares
of common stock, which together with a current 1,196,342 Shares
of common stock outstanding, would have resulted in a total of
30,964,785 shares to be outstanding upon closing of the merger.
The transaction was contingent upon the approval of the
shareholders of both companies, upon certain regulatory approvals
and other conditions. One condition of the merger was 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 was that
Infectech raise a minimum of $300,000 through an offering or
other funding source prior to June 30, 1998. On August 5, 1998,
the Company announced that Infectech unilaterally acted to
terminate the merger agreement between the two parties.
Infectech stated as its reason that it had not been successful in
raising the requisite $300,000 prior to June 30, 1998. Infectech
further notified the Company that it proposed to arbitrate the
return of $56,000 paid by Infectech for legal fees and certain
other merger-related expenses of the Company, as per the merger
agreement. On November 18, 1998, the Company and Infectech
resolved the matter subject to arbitration, with the Company
issuing 10,000 shares of restricted common stock to Infectech on
November 24, 1998.
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: April 13, 2000 /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.
/s/ Israel Rubinstein April 13, 2000
Israel Rubinstein
President and Director
/s/ Malcolm R. Currie April 13, 2000
Dr. Malcolm R. Currie
Director
/s/ Richard Babbitt April 13, 2000
Richard Babbitt
Secretary, Treasurer and Director
/s/ Michael E. Platt April 13, 2000
Michael E. Platt
Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 8
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8
<CURRENT-LIABILITIES> 254486
<BONDS> 0
0
500
<COMMON> 5997113
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 67327
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (67327)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (67327)
<EPS-BASIC> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
