FORM 10-QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 (Mark One) (X) Quarterly report pursuant to section 13 or 15(d) of the SECURITIES AND EXCHANGE ACT OF 1934 For the Quarterly period ended March 31, 1998 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from to Commission File No. 0-17843 REGAL ONE CORPORATION (name of small business issuer in its charter) FLORIDA 95-4158065 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 551 Driftstone Avenue, Las Vegas, NV 89123 (Address of principal executive offices) (Zip Code) Issuer's telephone number: (702) 897-5331 Check whether the issuer (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of Securities under a plan confirmed by court. Yes X No APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: 1,196,875 shares as of September 8, 1998. REGAL ONE CORPORATION Form 1O-Q for the quarter ended March 31, 1998 TABLE OF CONTENTS AND INFORMATION REQUIRED IN REPORT Part I. Financial Information Item 1. Financial Statements (unaudited): Page Balance Sheet as of March 31, 1998 3 Statements of Operations for the quarters ended 4 March 31, 1998 and 1997 Statements of Cash Flows for the quarters ended 5 March 31, 1998 and 1997 Notes to the Financial Statements 6 Item 2. Managements discussion and Analysis of Plan of 10 Operation Part II. Other Information Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Defaults upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security 12 holders Item 5. Other Information 12 Item 6. Exhibits and reports on form 8-K 12 SIGNATURES 14 PART I. FINANCIAL INFORMATION Item 1. Financial Statements REGAL ONE CORPORATION Balance Sheet (Unaudited) March 31, 1998 ASSETS Cash $ 160 ___________ Total Assets $ 160 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Accounts Payable and accrued expenses $ 87,272 Due to Officer and Shareholder 10,500 ___________ Total Liabilities $ 97,772 Stockholders' Equity (Deficit): Preferred Stock; $.Ol par value, authorized 50,000,000 shares; Series A Preferred Stock; No shares Issued and Outstanding -0- Series B Preferred Stock Issued and Outstanding 208,965 shares 500 Common Stock; no par value, authorized 50,000,000 shares; Issued and Outstanding 1,196,875 shares 5,941,138 Accumulated Deficit ( 6,039,250) ----------- Total Stockholders' Equity (Deficit) ( 97,612) Total Liabilities and Stockholders' ___________ Equity (Deficit) $ 160
See accompanying Notes to Financial Statements REGAL ONE CORPORATION Statement of Operations (Unaudited) For the Three Months ended March 31 1998 1997 ---- ---- Revenues $ -0- $ -0- Operating Expenses: General and Administrative 16,270 17,622 expenses __________ _________ Loss From Operations (16,270) (17,622) Other Income (expense): 25,000 -0- ---------- --------- Income (Loss) Before income taxes 8,730 (17,622) Provision for Income Taxes -0- -0- __________ _________ Net Income (Loss) $ 8,730 $ (17,622) Net Income (Loss) per share $ ( 0.01) $ ( 0.01) ========== ========= Weighted average common and common equivalent shares outstanding 1,196,875 1,196,875 See accompanying Notes to Financial Statements
REGAL ONE CORPORATION Statement of Cash Flows (Unaudited) For the Three Months ended March 31 Cash flows from operating activities: 1998 1997 Net Loss $ 8,729 $(17,622) Adjustments to reconcile net loss to net cash used by operating activities: Increase (Decrease) in accounts payable (19,124) 6,172 and accrued expenses Increase in due to Officer 10,500 -0- __________ __________ Total Adjustments (8,624) 6,172 __________ __________ Net cash used by operating activities 105 (11,450) Cash flows from investing activities: Net cash provided by investing activities -0- -0- Cash flows from financing activities: Net cash used by financing activities -0- -0- __________ __________ Net Increase (Decrease) in cash 105 ( 11,450) Cash at beginning of period 55 15,150 __________ __________ Cash at end of period 160 3,700 ========== ========== Supplemental disclosure of cash flow information: Cash paid during the period for Income taxes $ -0- $ -0- Interest $ -0- $ -0-
See accompanying Notes to Financial Statements REGAL ONE CORPORATION Notes to the financial Statements (Unaudited) NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES General and Background Regal One Corporation (the "Company") is a Florida corporation originally incorporated as Electro-Mechanical Services, Inc. ("EMS") in 1959. In 1974, Mr. Israel Rubinstein, currently the President, a director and a shareholder of the Company, acquired the Company, then named EMS, which at the time had no operations. Pursuant to the merger agreement, Mr. Rubinstein transferred the assets of Regal Muffler Centers, a franchise network of over 100 muffler shops that he founded in 1972 and solely owned, into EMS. In March of 1975, EMS amended its certificate of incorporation and changed its name to Regal International Holding Co., Inc. In 1976, the Company sold substantially all of its assets, but Mr. Rubinstein retained control of the Company. In June 1988, after merging with its wholly owned Nevada Subsidiary, Regal One Corporation, the Company changed its name to Regal One Corporation, but remained a Florida entity. From 1987 to 1992, the Company was engaged in the acquisition and holding of real estate, primarily in the Western United States. Until the end of 1992, the Company assets consisted primary of irrevocable options to acquire the real estate in exchange for shares of the Company's common stock. Generally, the Company would issue to the Seller of the property shares of its common stock with a fair value equal to the value of the real estate on the date of the agreement. During 1992, due to the protracted depressed national real estate market, the Company decided to abandon its real estate operations and pursue opportunities in the pharmaceutical and health fields. Xechem, Inc. In January, 1993, the Company executed an agreement to acquire Xechem, Inc. The total costs incurred by the Company relating to the proposed investment in Xechem were approximately $1,012,000. On January 14, 1994, the agreement with Xechem was canceled and a settlement agreement was entered into whereby the Company received 60,000 shares of common stock of Xechem, $250,000 in cash and the satisfaction of $131,000 of liabilities at no cost to the Company. Accordingly, based on this settlement agreement, the net realizable cost of the Xechem investment was adjusted down to the estimated fair value of $150,000, resulting in a loss of $142,645 in 1994. The Company then sold 20,000 shares of Xechem (one third of its investment) for $50,000. In 1995, the Company distributed the remaining 40,000 shares of Xechem common stock to consultants or advisors of the Company for services provided to the Company. Carbonex Systems Corporation In August, 1995, the Company acquired in a reverse acquisition all of the issued and outstanding shares of common stock of Carbonex Systems Corporation ("Carbonex"), a development stage Delaware Corporation, owning certain exclusive rights to a proprietary emission reduction system for internal combustion engines. To effect the acquisition, the Company issued a total of 464,000 shares of 8.75% convertible, participating voting Series B Preferred Stock (the "Preferred Stock"). Each share of Preferred Stock is convertible into 100 shares of common stock and has 100 votes for each vote allowed to a share of common stock. In June, 1996, the Company entered into a Stock Exchange Settlement Agreement and General Release whereby the Company exchanged all of the issued and outstanding shares of common stock of Carbonex for 255,035 shares of Preferred Stock owned by Gene Bemel and certain members of his family. As part of the agreement, the Company assumed certain specified accounts payable totaling approximately $61,000. The net impact of this transaction was a gain on sale of $295,803, primarily due to the forgiveness of debt and accrued interest payable (see note 3 to the Financial Statements). As a result of this transaction, the Company has issued and outstanding 208,965 shares of Preferred Stock. Quality Franchise Systems, Inc. In November, 1996, the Company executed a Letter of Intent to acquire all of the issued and outstanding stock of Quality Franchise Systems, Inc. However, a final agreement was never completed, and the Company is no longer pursuing this acquisition. Safesight, Inc. In July, 1997, the Company announced the acquisition of Safesight, Inc., a development-stage company engaged in the design of vehicle anti-collision warning products for the automobile, commercial vehicle, recreational vehicle and motorcycle markets. In August, 1997, the parties elected not to proceed with this transaction because of the parties' inability to obtain adequate funding for operations. Current Operations In April, 1998, the Company entered into an agreement to merge a newly formed subsidiary of the Company with Infectech, Inc.("Infectech"). Infectech, founded In 1989, is a development-stage biotechnology company which owns 15 patents for the rapid identification and antibiotic sensitivity testing of 34 disease-causing bacteria. On August 5, 1998, the Company announced that Infectech, Inc., had unilaterally acted to terminate the merger agreement between the two parties. Infectech stated as its reason that it had not been successful in raising the requisite $300,000 prior to June 30, 1998. Infectech further notified the Company that it proposes to arbitrate the return of $56,000 paid by Infectech for legal fees and certain other merger-related expenses of the Company, as per the merger agreement. Basis of Presentation The unaudited financial statements presented herein have been prepared by the Company, without audit, pursuant to the rules and regulations for interim financial information and the instruction to Form 10-QSB and Regulation S-B. Accordingly, certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principals have been omitted. These unaudited financial statements should be read in conjunction with the financial statement and notes thereto included in the Company's Annual Report Form 10-KSB for the fiscal year ended December 31, 1997. In the opinion of management, the unaudited financial statements reflect all adjustments (consisting of normal recurring accruals only) which are necessary to present fairly the financial position, results of operation, and changes in cash flows of the Company. Operating results for the interim periods are not necessarily indicative of the results which may be expected for the entire year. Income Taxes The Company did not provide for income taxes in the accompanying interim financial statements since the Company does not anticipate generating taxable income for the full year. Net Income (Loss) Per Share Computation Net Income (Loss) per share is based on the weighted average number of common stock for all periods presented. The outstanding preferred stock and common stock warrants are not considered in the calculations because they are anti-dilusive. NOTE 2 - GOING CONCERN AND MANAGEMENT'S PLAN For the fiscal year ended December 31, 1997, the independent auditors report included an explanatory paragraph calling attention to a going concern issue. The Company has suffered recurring losses from operations and at March 31, 1998, continues to have an accumulated deficit. The accompanying financial statements have also been prepared contemplating continuation of the Company as a going concern, which is dependent upon the Company obtaining additional financing to satisfy the operating needs of the Company and/or completing a successful merger. In April, 1998, the Company agreed to a reverse acquisition of Infectech, Inc. (see Note 1). Since that time, the merger agreement has been terminated, and there can be no assurance that the Company will find a suitable candidate to replace Infectech or, if a suitable replacement is found, that a new merger can be structured on favorable terms. NOTE 3 - STOCK OPTION PLAN The Company has a stock option plan for its employees, directors, officers, and consultants or advisors of the Company. In May 1995, 3,000,000 shares were registered on Form S-8 for this plan. Managements Discussion and Analysis of Plan of Operation The following discussion should be read in conjunction with the Company's financial statements and notes thereto included elsewhere in this Form 10-QSB report. In addition, the discussion of the Company's expected plan of operation included in the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997, is incorporated herein in its entirety as the discussion of the Plan of Operation as required by Item 303(a) Regulation SB. Plan of Operation The Company was incorporated in 1959 in Florida. Since that time, the Company has owned and operated, and subsequently sold off, a number of businesses. During 1987, the Company pursued a policy of using its common stock to purchase, either in fee simple or as an irrevocable option to purchase, a number of parcels of real estate, in the form of commercial, industrial, residential and development stage land parcels. In 1992, market conditions for real estate were no longer deemed to be favorable and the Company decided to abandon its real estate operations and pursue other courses of operation. In January, 1993, the Company agreed to acquire Xechem, Inc., a development-stage company engaged in the research and development of pharmaceuticals from plants and other naturally-occurring sources. However, the transaction was terminated in January, 1994 pursuant to a settlement agreement. In August, 1995, the Company acquired all of the issued and outstanding common stock of Carbonex Systems Corporation ("Carbonex"). In June, 1996, the Company entered into a Stock Exchange, Settlement Agreement and General Release whereby the Company exchanged with its then-principal shareholders, Gene Bemel and members of his family, all of the issued and outstanding common stock of Carbonex for 255,035 shares of Preferred Stock of the Company. In November, 1996, the Company executed a Letter of Intent to acquire all of the issued and outstanding stock of Quality Franchise Systems, Inc. However a final agreement was never completed and the Company is no longer pursing this acquisition. In July, 1997, the Company announced the acquisition of Safesight, Inc., a development-stage company engaged in the design of vehicle anti-collision warning products. However, in August, 1997, the parties elected not to proceed with the transaction because of the inability to obtain adequate funding for operations. In April, 1998, the Company entered into an agreement to merge a newly formed subsidiary of the Company with Infectech. Infectech, founded in 1989, is a development-stage biotechnology company which owns 15 patents for the rapid identification and antibiotic sensitivity testing of 34 disease-causing bacteria. (See Note 1, "Organization and Significant Accounting Policies"). However, in August, 1998, the merger agreement was terminated because of Infectech's inability to raise adequate funds. As per the merger agreement, Infectech paid $25,000 to the legal firm of Resch, Polster, Alpert & Berger LLP to be applied towards legal expenses of the merger. Liquidity and Capital Resources - March 31, 1998 Compared to December 31, 1997 During the prior year and current quarter, the Company had continuing losses from operations. There can be no assurances that the Company will be able to secure long-term borrowings with which to finance its future operations. The Company does not currently have any established bank lines of credit. The Company's lack of liquidity is reflected in the table below, which shows comparative working capital (current assets less current liabilities) which is an important measure of the Company's ability to meet its short-term obligations. March 31, 1998 December 31, 1997 Working Capital (deficit) $ (97,612) $ (108,752) The Company's financial condition at March 31, 1998 reflects an immediate inability to meet its short-term obligations. At March 31, 1998, the Company had $160 cash on hand. The liabilities of the Company at March 31, 1998 aggregated $97,772, consisting primarily of accounts payable to accountants, lawyers and other service providers. Accounts payable are due and in default, and it is possible that persons to whom these obligations are due may seek to collect the amounts due them. Since April, 1998, the Company has relied on Infectech for the infusion of cash to fund basic operations, principally fees due to accountants and lawyers. Additionally, the Company could obtain 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 quarter ended March 31, 1998, leaving 2,451,494 yet available, with an amended expiration date of March 31, 1999. (See the Company's 14c, filed April 8, 1998). Capital Expenditures and Commitments During the quarter ended March 31, 1998, the Company had no capital expenditures. In the near term, the Company believes its capital expenditures will principally be expended for office equipment. The amount of such additional capital required is uncertain, and may be beyond that generated from future operations. There can be no assurance that the Company will be able to obtain any such capital or a merger acquisition candidate on satisfactory terms. Results of Operations - The quarter ended March 31, 1998 compared to the quarter ended March 31, 1997. The Company reported no revenues for the quarters ended March 31, 1998 or 1997. During the quarters ended March 31, 1998 and 1997, operating expenses were $16,270 and $17,622, respectively (consisting primarily of professional and consulting fees). In addition, for the quarter ended March 31, 1998, the Company had other income of $25,000 from expenses paid by Infectech, Inc. (See Note 1). As a result, the net income/loss for the quarter ended March 31, 1998 and 1997 were $8,730 and ($17,622), 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). PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is not aware of any litigation either pending, asserted, unasserted, or threatened. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K Exhibits None. A copy of any of the exhibits listed or referred to above will be furnished at a reasonable cost to any person who was a shareholder of the Company on 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 would issue approximately 26,320,520 Shares of common stock to Infectech's stockholders so that on the effective date of the merger, the shareholders of Infectech would own, in the aggregate, 85% of the common stock of the Company. Upon closing, the Company would change its name to Infectech, Inc., and the shareholders of Regal One as a group would own 15%. The Board of Directors of Infectech would become the Board of Directors of the Company. For each share of Infectech's issued and outstanding common stock, its stockholders would receive approximately 3.01 shares of Regal One common stock, subject to further adjustment downward for issuances of securities by Infectech pursuant to stock options, consulting agreements or other private offerings. The Company must cause holders of its Preferred Stock to convert their shares into an aggregate of not more than 3,447,923 shares of common stock, which together with a current 1,196,342 Shares of common stock outstanding, would result in a total of 30,964,785 shares to be outstanding upon closing of the merger. The transaction is contingent upon the approval of the shareholders of both companies, upon certain regulatory approvals and other conditions. One condition of the merger is that the Securities and Exchange Commission must declare effective the Company's registration of the Shares of common stock to be issued to Infectech. Another condition of the merger is that Infectech raise a minimum of $300,000 through an offering or other funding source prior to June 30, 1998. On August 5, 1998, the Company announced that Infectech, Inc., had unilaterally acted to terminate the merger agreement between the two parties. Infectech stated as its reason that it had not been successful in raising the requisite $300,000 prior to June 30, 1998. Infectech further notified the Company that it proposes to arbitrate the return of $56,000 paid by Infectech for legal fees and certain other merger-related expenses of the Company, as per the merger agreement. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: August 26, 1998 REGAL ONE CORPORATION (Registrant) By /s/ Israel Rubinstein Israel Rubinstein, President