UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                           WASHINGTON, D.C. 20549


                               FORM 10-Q



      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

                       EXCHANGE ACT OF 1934


               For the quarterly period ended June 30, 2014


                          REGAL ONE CORPORATION

            (Exact name of registrant as specified in its charter)


Florida

(State of incorporation)

814-00710

(Commission File Number)

95-4158065

(IRS Employer Identification No.)


P.O. Box 25610

Scottsdale, AZ

(Address of principal executive offices)

85255-0110

(Zip Code)



                (Issuer's telephone number)   (310) 312-6888

-------------------------------------------------------------------------------------

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 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 []


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of accelerated filer, large accelerated filer and smaller reporting company in rule 12b-2 of the exchange act. (Check one.)

    Large accelerated filer  []      Accelerated filer []

    Non Accelerated filer    [X]     Smaller Reporting Company []


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [] No [X]


Indicate the number of shares outstanding of each of the Issuer's classes of stock, as of the latest practical date.


As of August 11, 2014, there were 3,633,067 shares of common stock, no par value, and 100,000 shares of Series B convertible preferred stock, no par value, issued and outstanding. The outstanding Series B convertible preferred stock is convertible into an aggregate of 10,000,000 shares of common stock.











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                            TABLE OF CONTENTS



                   PART I. FINANCIAL INFORMATION

                                                                     PAGES

Item 1. Financial Statements                                          3-9

        Balance Sheets                                                  3

        Schedule of Investments at June 30, 2014                        4

        Schedule of Investments at December 31, 2013                    5

        Statements of Changes in Net Assets                             6

        Statements of Operations                                        7

        Statements of Cash Flows                                        8

        Statements of Financial Highlights                              9

        Notes to Financial Statements                               10-15

 

Item 2. Management's Discussion and Analysis of Financial Condition

         and Results of Operations                                  16-21


Item 3. Quantitative and Qualitative Disclosures about Market Risk     22


Item 4. Controls and Procedures                                        22


                  PART II OTHER INFORMATION


Item 1. Legal Proceedings                                              23


Item 1A. Risk Factors                                                  23


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds    23


Item 3. Defaults upon Senior Securities                                23


Item 4. Mine Safety Disclosures ˑ                                      23


Item 5. Other Information                                              23


Item 6. Exhibits and Reports on Form 8-K                               24


        Signatures                                                     25



















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PART I  FINANCIAL INFORMATION


 

REGAL ONE CORPORATION

BALANCE SHEETS


                                                   June 30, 2014    December 31, 2013

                                                 ------------------   -----------------

                 ASSETS                              (Unaudited)          (Audited)

   

   Investments:

   Investments in non-affiliated companies          $  1,593,393         $    958,040

   Investments in non-affiliated companies   

     pledged to secure note payable officer                  -              181,875

                                                        --------          -----------

     Total investments                                 1,593,393            1,139,915


   Cash and cash equivalents                              37,801               22,771

                                                      ----------          -----------

   Total assets                                      $ 1,631,194          $ 1,162,686

                                                      ==========          ===========


                LIABILITIES and NET ASSETS


   Accounts payable and accrued liabilities          $    16,057          $    15,800

   Accounts payable related party                           50              106,850

   Note payable officer                                      -               13,000

   Accrued interest notes payable officer                  -                  943

   Dividends payable                                         600                  600

                                                      ----------            ---------

   Total liabilities                                      16,707              137,193

                                                      ----------            ---------


NET ASSETS

 

Net assets are comprised of:


   Preferred stock, no par value

     Series A Authorized 50,000 shares,

      None issued or outstanding

     Series B - Authorized 500,000 shares, 100,000

      issued and outstanding at June 30, 2014

      and December 31, 2013                                 500                  500


   Common stock, no par value,

     50,000,000 shares authorized; 3,633,067 shares

     issued and outstanding at June 30, 2014

     and December 31, 2013                             8,184,567            8,184,567


   Additional paid-in capital                            192,126              192,126

   Losses and distributions in excess of earnings     (8,289,457)          (8,416,787)

   Cumulative unrealized appreciation on investments   1,526,751            1,065,087

                                                     -----------          -----------

         Total net assets                              1,614,487            1,025,493

                                                     -----------          -----------

TOTAL LIABILITIES AND NET ASSETS                     $ 1,631,194         $  1,162,686

                                                    ============          ===========

Net asset value per outstanding share of common

   Stock                                             $    0.444         $      0.282



    The accompanying notes are an integral part of the condensed financial statements.




3


REGAL ONE CORPORATION

SCHEDULE OF INVESTMENTS

June 30, 2014

(Unaudited)



Equity Investments:

                                                                         Fair

                                 Description   Percent     Cost of       Market

Company                          of Business   Ownership   Investment    Value  Affiliation


Neuralstem, Inc.(CUR)       Biomedical company    1.1%    $  6,945 (1)  $ 682,796      No

Neuralstem Warrant          Biomedical company    0.0%      50,000 (2)    900,900      No

MS Money Market Trust       Money Market Fund     0.0%       8,497 (3)      8,497      No

Rampart Detection Systems   Manufacturing         0.1%       1,200 (4)      1,200      No

                                                         ---------      ---------

      Total Investments                                   $ 66,642    $ 1,593,393  



(1) As of June 30, 2014 there were 161,800 Neuralstem shares held reported on a fair value basis at the closing market price of $4.22 in fair value applied. 48,200 shares were sold in the first half of 2014.


(2) Regal also has one ten year Neuralstem warrant to purchase 1,000,000 common stock shares at an exercise price of $5.00 per share which is above the present fair market value of Neuralstem shares. As of June 30, 2014 using a Black-Scholes Option Pricing model, a $900,900 value has been assigned to these warrants including a 10% discount assigned by management due to low trading volumes of Neuralstem stock.  There is currently no public market for these warrants carried as an investment.


To calculate the June 30, 2014 value of the Neuralstem warrant Management used the following factors in a Black-Scholes Option Pricing Model:

   Number of shares in option: 1,000,000

   Date option was issued: 9/15/2005

   Remaining term of option in years: 1.21

   Neuralstem Common Stock closing price on 06/30/2014:  4.22

   Annual volatility:  68.134%

   Discount Rate based on Daily Treasury Bills long term rates on 06/30/14: 0.71%

   Management estimated discount applied to fair market value: 10.0%


(3) The company had $8,497 in an investment money market fund as of 6/30/2014.



(4) Regal purchased common stock valued at $1,200 as an investment in Rampart Detection Systems Ltd.






The accompanying notes are an integral part of the condensed financial statements.







4


REGAL ONE CORPORATION

SCHEDULE OF INVESTMENTS

December 31, 2013



Equity Investments:

                                                Percent                    Fair

                               Description      Ownership   Cost of        Market

Company                        of Business                  Investment     Value  Affiliation


Neuralstem, Inc.(CUR)          Biomedical company   1.1%    $  9,014 (1)  $  611,100      No

Neuralstem Warrant             Biomedical company             50,000 (2)     513,000      No

LMP Money Market Trust         Money Market Fund              14,615 (3)      14,615      No

Rampart Detection Systems      Manufacturing        0.1%       1,200 (4)       1,200      No

                                                             ---------      ---------

      Total Investments                                     $ 74,829    $  1,139,915  



(1) As of December 31, 2013, there were 210,000 Neuralstem shares held reported on a fair value basis valued at the closing market price of $2.91 with no reduction in fair market value applied. 70,000 shares were sold during 2013. 62,500 shares have been classified as Investments in non-affiliated companies Pledged to secure note payable - officer.  


(2) Regal also has a ten year Neuralstem warrant to purchase 1,000,000 common stock shares at an exercise price of $5.00 per share which is significantly above the present fair market value of Neuralstem shares. As of December 31, 2013 using a Black-Scholes Option Pricing Model, a $513,000 value was assigned to these warrants including a 10% discount assigned by management due to the low trading volumes of Neuralstem stock. There is currently no public market for these warrants held as an investment.


To calculate the December 31, 2013 value of the Neuralstem warrant Management used the following factors in a Black-Scholes Option Pricing Model:

   Number of shares in option: 1,000,000

   Date option was issued: 9/15/2005

   Remaining term of option in years: 1.7

   Neuralstem Common Stock closing price on 12/31/2013:  2.91

   Annual volatility:  69.210%

   Discount Rate based on Daily Treasury Bills long term rates on 12/31/2013: 1.31%

   Management estimated discount applied to fair market value: 10.0%


(3) The Company had $14,615 in an investment money market fund at 12/31/2013.



(4) Regal purchased common stock valued at $1,200 as an investment in Rampart Detection Systems Ltd.








The accompanying notes are an integral part of the condensed financial statements.








5


REGAL ONE CORPORATION

STATEMENTS OF CHANGES IN NET ASSETS

(UNAUDITED)

 


                                              Six Months Ended    Six Months Ended

                                               June 30, 2014      June 30, 2013

                                              ---------------    ---------------

OPERATIONS:


Net investment loss                               $   (69,621)     $  (58,014)

Net realized gain on investments                      196,950          35,961

Unrealized appreciation of investments                 73,765          68,588

Unrealized appreciation

  of warrant investment                               387,900          21,600

                                                  ------------     ----------

Net increase (decrease) in net assets

 resulting from operations                            588,994          68,135


NET INCREASE (DECREASE) IN NET ASSETS                 588,994          68,135

NET ASSETS:


     Beginning of period                            1,025,493         317,503


     End of period                                  1,614,487         385,638

 

     Average net assets                             1,319,990         351,570

                                                    =========       =========


TOTAL NET ASSET VALUE RETURN                     44.6%          19.4%


Ratios to average net assets:

     

     Net investment loss                          5.3%          16.5%




    The accompanying notes are an integral part of the condensed financial statements.














6


                                    REGAL ONE CORPORATION

                                  STATEMENTS OF OPERATIONS


                                         Three Months   Three Months    Six Months   Six Months

                                            Ended         Ended           Ended         Ended

                                        June 30, 2014  June 30, 2013  June 30, 2014  June 30, 2013

                                         (Unaudited)    (Unaudited)    (Unaudited)    (Unaudited)

                                        -------------  -------------    -----------   -----------


Investment income:                          $      --     $     --      $      --     $     --


Operating expenses:

 Professional services                          24,788       5,315         39,448       11,225

 Accounting fees- related party                 14,100      14,100         28,200       28,200

 Interest expense                                   86         837            250        1,761

 Other selling, general and

      administrative expenses                    1,277       8,207          2,704       16,828

                                             ---------    ---------      ---------    ---------

Total operating expenses                        40,251      28,459         70,602       58,014

                                             ---------      ---------    --------       --------

Net investment loss before tax                 (40,251)    (28,459)       (70,602)     (58,014)


   Income Tax benefit                              981           -            981             -


Net investment loss after taxes                (39,270)    (28,459)       (69,621)     (58,014)


Realized and unrealized gain (loss) on investments


  Net realized gain on portfolio investments   178,771      30,139        196,950       35,961



7


  Net change in unrealized appreciation (depreciation)

     on portfolio investments                 (174,300)     65,573         73,765       68,588

  Net unrealized appreciation (depreciation)

     in warrant investment                    (131,400)     48,600        387,900       21,600

                                              ---------    --------     ---------      --------

     Net realized and unrealized gain

       (loss) on investments                  (126,929)    144,312        658,615      126,149

                                              --------    ---------      --------     ---------

Net increase (decrease) in net assets

    resulting from operations               $ (166,199)   $ 115,853     $  588,994   $  68,135

                                            ==========    =========     ==========   ==========

Per share information:

Weighted average common shares outstanding

        Basic                                3,633,067    3,633,067      3,633,067   3,633,067

        Diluted (1)                         13,633,067   13,633,067     13,633,067  13,633,067

 

Net increase (decrease) in net assets

  resulting from operations per share:

        Basic                               $ (0.046)    $  0.032       $ 0.162      $ 0.019

        Diluted (1)                           (0.046)       0.008         0.043        0.005

                                            =========    ========       =======      =======


(1) Includes Series B Preferred Shares convertible at 100 for 1 are not included in diluted calculation for the three month period ended June 30, 2014 loss due to it being anti-dilutive.




 The accompanying notes are an integral part of the condensed financial statements.










8


                           REGAL ONE CORPORATION

                         STATEMENTS OF CASH FLOWS

   

                                                   Six Months Ended   Six Months Ended

                                                   June 30, 2014       June 30, 2013

                                                      (Unaudited)        (Unaudited)

                                                   ------------------  ---------------

Cash flows from operating activities:

Net increase (decrease) in net assets

   from operations                                       $   588,994       $    68,135

Adjustments to reconcile net increase (decrease)

    in net assets from operating activities:

     Realized gain on sale of marketable securities         (196,950)         (35,961)

     Proceeds from sale of marketable securities             205,137           35,961

     Net change in unrealized appreciation

        of stock investments                                 (73,765)         (67,300)

      Unrealized increase in warrant investment             (387,900)         (21,600)

      Changes in operating assets and liabilities:

        Prepaid expense                                            -           13,625

        Accounts payable and accrued expenses                   (686)           8,162

        Accounts payable - Related parties                  (106,800)               -

                                                            ---------          --------Net cash provided by (used in) operating activities           28,030            1,022


Cash flows from financing activities:


  Increase (decrease) in officer loans                      (13,000)            1,409

                                                           ---------          --------

Net cash provided by (used in)  financing activities        (13,000)            1,409


Net change in cash                                            15,030            2,431

Cash at beginning of period                                   22,771           19,121

                                                           ---------           -------

Cash at end of period                                    $    37,801         $ 21,552

                                                        =============       ==========




Cash paid for interest                                       $ 1,193               $-

                                                           ---------           -------







The accompanying notes are an integral part of the condensed financial statements.















9


                                             REGAL ONE CORPORATION  

                                       STATEMENTS OF FINANCIAL HIGHLIGHTS


Per Common Share Unit Operating Performance


                                         Six Months Ended

                                            June 30          For the Years Ended December 31,

                                              2014       2013      2012      2011      2010     2009

OPERATIONS:

Net investment loss from operations

$(0.019)

$(0.031)

$(0.034)

$(0.340)

$(0.046)

(0.082)

Net realized gain on portfolio securities

0.054

0.032

0.021

0.009

0.018

0.069

Net change in unrealized appreciation

  (depreciation)of stock investments

0.020

0.085

(0.008)

0.123

0.019

(0.067)

Net unrealized appreciation

  (depreciation) of option investments

0.107

0.109

0.006

0.163

(0.046)

0.222

Gain on legal expense settlement





0.017









Net increase (decrease) in net assets

  from operations

0.162

0.195

(0.015)

0.311

(0.037)

0.142








SHAREHOLDER ACTIVITY







    Declared dividend

-

-

-

-

-

-








NET INCREASE (DECREASE) IN NET ASSETS

0.162

0.195

(0.015)

0.311

(0.037)

0.142








NET ASSET VALUE, BEGINNING OF PERIOD

0.282

0.087

0.102

0.413

0.450

0.308








NET ASSET VALUE, END OF PERIOD

0.444

0.282

0.087

0.102

0.413

0.450








TOTAL NET ASSET VALUE RETURN (LOSS)

44.62%

105.4%

(15.2%)

121.0%

(8.5%)

37.4%



The accompanying notes are an integral part of the condensed financial statements.









10


REGAL ONE CORPORATION

NOTES TO FINANCIAL STATEMENTS

AS OF June 30, 2014

(Unaudited)


NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

 

Business

 

Regal One Corporation(the "Company" or "Regal One")and its subsidiary Princeton Capital Corporation located in Scottsdale, Arizona, is a Florida corporation initially incorporated in 1959 as Electro-Mechanical Services Inc. Since inception the Company has been involved in a number of industries. In 1998 we changed our name to Regal One Corporation. On March 7, 2005, our board of directors determined it was in our shareholder's best interest to change the focus of the Company's operation to that of providing financial services through our network of advisors and professionals, and to be treated as a business development company ("BDC") under the Investment Company Act of 1940. On September 16, 2005, we filed a Form N54A (Notification of Election by Business Development Companies), with the Securities and Exchange Commission, which transformed the Company into a Business Development Company (BDC) in accordance with sections 55 through 65 of the Investment Company Act of 1940. The Company has been reporting as an operating BDC since March 31, 2006.


Accounting Policies

 

Basis of Presentation


The accompanying condensed balance sheet as of December 31, 2013 is derived from audited financial statements. The unaudited interim condensed financial statements of the Company reflect all adjustments consisting of normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of financial position and results of operations and cash flows. The results for the six month period ended June 30, 2014 are not necessarily indicative of the results that may be expected for a full fiscal year. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) are condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC), although the Company believes that the



11


disclosures made are adequate to make the information not misleading. These condensed financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in its annual report for the year ended December 31, 2013 filed on Form 10-K with the SEC.


Management Estimates


The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company uses estimates and assumptions in accounting for the following significant matters, among others: the valuation of portfolio investments and the assumptions used as part of the going concern analysis. It is at least reasonably possible that these estimates will change in the future. Actual amounts may differ from these estimates, and such differences may be material to the financial statements.



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The Company periodically reviews estimates and assumptions, and the effects of any such revisions are reflected in the period in which the revision is made.


Net Increase (Decrease) in Net Assets from Operations per Share

 

Basic net increase (decrease) in net assets from operations per share is computed by dividing the net increase (decrease) in net assets resulting from operations amount adjusted for any cumulative dividends on preferred stock (numerator) by the weighted average number of common shares outstanding during the period (denominator). Diluted net increase (decrease) in net assets from operations per share amounts reflect the maximum dilution that would have resulted from the assumed exercise of stock options and from the assumed conversion of the Series B Convertible Preferred Stock.


Diluted net increase (decrease) in net assets from operations per share is computed by dividing the net increase (decrease) in net assets resulting from operations amount adjusted for any cumulative dividends on preferred stock by the weighted average number of common and potentially dilutive securities outstanding during the period. For all periods presented that indicate a net decrease in net assets from operations, the above potentially dilutive securities are excluded from the computation as their effect is anti-dilutive.


Income Taxes

 

The Company has not elected to be a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. Accordingly, the Company will be subject to U.S. federal income taxes on sales of investments for which the fair values are in excess of their tax basis. Income taxes are accounted for using an asset and liability approach for financial reporting. The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the financial statement carrying amount and the tax basis of assets and liabilities and net operating loss and tax credit carry forwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. The Company had a net deferred tax asset which was fully offset by a valuation allowance at June 30, 2014. No provision for income tax expense for the current six month period was recorded. A credit of $981 was recorded for state income tax expense recorded in prior years but reversed this year as not owed.

 

Advertising


No advertising fees were incurred during the periods covered by this report.


Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation


Gains or losses on the sale of investments are calculated using the specific identification method. The Company measures realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation will reflect the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.




13


NOTE 2 GOING CONCERN


The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the creation of assets and the liquidation of liabilities in the normal course of business. The Company does not currently generate operating revenue and must liquidate the Company's investment portfolio to provide cash flow for its operations. The Company is actively seeking sources of revenue for its consulting services but does not have contractual obligations now or in the near future to generate revenue. This fact and the declining amount of shares of the portfolio investment stock it owns due to sales of inventory securities and volatile market conditions has raised substantial doubt regarding Regal's ability to continue as a going concern.  In response, management will continue to liquidate assets as necessary while actively searching out new equity investors and continue to rely upon current shareholders to provide loans or additional investment to meet the Companys ongoing obligations. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.


NOTE 3 - FAIR VALUE OF FINANCICAL INSTRUMENTS


The Accounting Standards Codification (ASC) Section 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:


    Level 1   Unadjusted quoted prices in active markets that are accessible

              at the measurement date for identical, unrestricted assets or

              liabilities;


    Level 2   Quoted prices in markets that are not active, or inputs that

              are observable, either directly or indirectly, for

              substantially the full term of the asset or liability;




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    Level 3   Prices or valuation techniques that require inputs that are

              both significant to the fair value measurement and unobservable

              (supported by little or no market activity).


The level in the fair value hierarchy within which a fair measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.


The carrying value of cash, and accounts payable, note payable officer, and accrued interest approximates fair value due to the short maturity nature of these instruments.






15


Assets measured at fair value on a recurring basis at June 30, 2014:


                                                               Fair

                              Level of       Cost of          Market

Equity Investments:          Investment      Investment        Value  


Neuralstem, Inc.(CUR)          Level 1       $  6,945    $   682,796

LMP Money Market Trust Fund    Level 1          8,497          8,497

Rampart Detection Systems      Level 2          1,200          1,200

Neuralstem Warrant             Level 3         50,000        900,900

                                            ---------      ---------

  Total investments                          $ 66,642    $ 1,593,393



Assets measured at fair value on a recurring basis at December 31, 2013:

                                                               Fair

                               Level of      Cost of          Market

Equity Investments:          Investment      Investment        Value


Neuralstem, Inc.(CUR)          Level 1       $  9,013    $   611,100

LMP Money Market Trust Fund    Level 1         14,615         14,615

Rampart Detection Systems      Level 2          1,200          1,200

Neuralstem Warrant             Level 3         50,000        513,000

                                            ---------      ---------

  Total investments                          $ 74,828    $ 1,139,915


The Company has determined the investment in Rampart is a Level 2 investment as the Company is not publicly traded on an exchange.


Assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are:


Beginning balance as of December 31, 2012                   $ 118,800

Net change in unrealized appreciation

  of warrant investment                                       394,200

                                                            ---------

Ending balance as of December 31, 2013                      $ 513,000

Net change in unrealized appreciation

  of warrant investment                                       387,900

                                                            ---------

Ending balance as of June 30, 2014                       $    900,900




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The table below presents the significant unobservable inputs used to value the Companys Level 3 financial instruments:


Level 3 financial    Significant unobservable inputs    Significant unobservable inputs

      instruments            by valuation technique            as of June 30, 2014


       Warrants    Liquidity discount outside Black-Scholes

                      pricing model                                     10%

                              

All other assumptions used in Black-Scholes pricing model were observable.





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NOTE 4 - EQUITY TRANSACTIONS


The Company has 50,000,000 shares of common stock, no par value, authorized with 3,633,067 issued and outstanding shares. If all outstanding preferred equity were converted to common the outstanding shares would increase to 13,633,067.


The Company's Certificate of Incorporation allows for segregating preferred stock into separate series. As of June 30, 2014 and December 31, 2013, the Company had authorized 50,000,000 total preferred shares with 50,000 shares of Series A preferred stock and 500,000 shares of Series B convertible preferred stock. There were no outstanding shares of Series A preferred stock. 100,000 shares of Series B preferred stock were issued and outstanding.

 

Holders of Series A preferred stock shall be entitled to voting rights equivalent to 1,000 shares of common stock for each share of preferred. 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 for each share of preferred. At the option of the holder of Series B preferred stock, each share is convertible into common stock at a rate of 100 shares of common for each share of preferred. As of the six months ended June 30, 2014 and the year ended December 31, 2013, no dividends have been declared on the Series A or Series B convertible preferred stock.


NOTE 5 - INVESTMENTS


Neuralstem, Inc.


At June 30, 2014, the Company owned 161,800 common shares of Neuralstem, Inc. held as an investment. These shares had a valuation of $682,796 based on the closing market price of the stock. 48,200 shares were sold in the six months ended June 30, 2014 to finance operations. Regal recorded a $73,765 unrealized gain on this investment in the first six months of 2014 due to the increase in the common stock price of Neuralstem, Inc. During the last three months Regal had a $174,300 unrealized depreciation in portfolio investments compared to a $248,065 gain in the first three months of 2014 primarily due to investments sold in the second quarter.




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Regal One also has one ten year warrant for 1,000,000 common shares of Neuralstem at an exercise price of $5 per share which is above the present fair market value of Neuralstem shares. There is currently no market for these Neuralstem stock Options. The price of the underlying publicly traded common stock is used as a significant input in the valuation process.


As of June 30, 2014, using a Black-Scholes Option Pricing model, a $900,900 fair value has been assigned to this warrant including a 10% discount assigned by management due to low trading volume of Neuralstem common stock. Regal recorded a $387,900 unrealized gain on the investment in the six months ended June 30, 2014 due to increase in the fair value as determined by the Black-Scholes model. During the three months ended June 30, 2014, the Company recorded a $131,400 unrealized loss on the investment due to the decrease in the fair value during that time. The market price of Neuralstem, Inc. common stock is the primary reason for unrealized gains and losses.



The Board of Directors is responsible for determining in good faith the fair value of the securities and assets held by the Company. The Investment Committee of the Board of Directors has adopted provisions for valuation of the portfolio as described in Note 3 under Fair Value Accounting through ASC 820. The Investment Committee bases its determination on, among other things, applicable quantitative and qualitative factors. These factors may include, but are not limited to, the type of securities, the nature of the business of the portfolio company, the marketability of and the valuation of securities of publicly traded companies in the same or similar industries, current financial conditions and operating results of the portfolio company, sales and earnings growth of the portfolio company, operating revenues of the portfolio company, competitive conditions, and current and prospective conditions in the overall stock market. Without a readily recognized market value, the estimated value of some portfolio securities may differ significantly from the values that would be placed on the portfolio if there was a ready market for such equity securities.


NOTE 6 - RELATED PARTY TRANSACTIONS


For the three months and six months ended June 30, 2014 Bernard L. Brodkorb, who is a Director of Regal, received $14,100 and $28,200, respectively in fee compensation for providing accounting and financial reporting services, not related to his duties as a Director of Regal One Corporation. He receives no compensation for his Director duties. As of June 30, 2014 and December 31, 2013, Bernard L. Brodkorb has a balance owed in accounts payable of $50 and $106,850, respectively, for services rendered.


The Company had a note payable due to Charles J. Newman which was repaid in full in May 2014. The note accrued interest at 6% per annum and was collateralized with 62,500 shares of Neuralstem common stock held as an investment.


For the six months ended June 30, 2014 the Company recorded $26,098 in legal fees for Dieterich and Associates for services provided by Christopher Dieterich for submission of reports to the SEC and general legal work. Mr. Dieterich is a Director of Regal.


NOTE 7 SUBSEQUENT EVENTS




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On July 15, 2014 the Company filed Form 8-K with the SEC to report the entry into a Material Definitive Agreement. Regal One Corporation and Princeton Capital Corporation entered into an Asset Purchase Agreement with Capital Point Partners, LP and Capital Point Partners II, LP (the Partnerships) whereby the Partnerships have agree to sell equity and debt investments to Regal in exchange for common stock. The agreement is included as an exhibit to the Form 8-K.


The Company and Princeton also signed a Merger Agreement where the Company will merge with and into Princeton and the separate corporate existence of the Company shall cease and Princeton will be the surviving corporation of the merger.


On July 23, Regal filed Form 14-C Preliminary Information Statement informing shareholders of the Merger Agreement including a one for two reverse stock split and Asset Purchase Agreement which includes the issuance of new common shares by Princeton in exchange for investment assets of Capital Point Partners, LP and Capital Point Partners II, LP.



Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

FORWARD LOOKING STATEMENTS

 

In this report we make a number of statements, referred to as "forward-looking statements", which are intended to convey our expectations or predictions regarding the occurrence of possible future events or the existence of trends and factors that may impact our future plans and operating results. These forward-looking statements are derived, in part, from various assumptions and analyses we have made in the context of our current business plan and information currently available to us and in light of our experience and perceptions of historical trends, current conditions and expected future developments and other factors we believe are appropriate in the circumstances. You can generally identify forward looking statements through words and phrases such as "believe", "expect", "seek", "estimate", "anticipate", "intend", "plan", "budget", "project", "may likely result", "may be", "may continue" and other similar expressions. When reading any forward-looking statement you should remain mindful that actual results or developments may vary substantially from those expected as expressed in or implied by that



20


statement for a number of reasons or factors, including but not limited to:


        The type and character of our future investments


        Future sources of revenue and or income


        Increases in operating expenses


        Future trends with regard to net investment losses


        How long cash on hand can sustain our operations as well as other

        statements regarding our future operations, financial condition and

        prospects and business strategies.


These forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.


DESCRIPTION OF BUSINESS

 

Overview

 

We are a financial services company which coaches and assists biomedical companies, through our network of professionals, in listing their securities on the over-the-counter market.


We were initially incorporated in 1959 as Electro-Mechanical Services Inc. in the state of Florida. In 1998 we changed our name to Regal One Corporation. On March 7, 2005, our Board of Directors determined it was in our shareholder's best interest to change the focus of the Company's operation to providing financial services through our network of advisors and professionals. Typically these services are provided to early stage biomedical companies who can benefit from our managerial skills, network of professionals and other partners.





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Our clients' are usually in the early stage of development, typically have limited resources and compensate us for our services in capital stock. Accordingly, although our primary business is to provide consulting services and not to be engaged, directly or through wholly-owned subsidiaries, in the business of investing, reinvesting, owning, holding or trading in securities, we may nonetheless be considered an investment company as defined in the Investment Company Act of 1940 (1940 Act). In order to lessen the regulatory restrictions associated with the requirements of the 1940 Act, on September 16, 2005, we elected to be treated as a Business Development Company (BDC) in accordance with sections 55 through 65 of the 1940 Act.

 

Pursuant to the requirements of the Investment Company Act of 1940, as amended, the Board of Directors is responsible for determining in good faith the fair value of the securities and assets held by the Company. The Investment Committee of the Board of Directors bases its determination on, among other things, applicable quantitative and qualitative factors. These factors may include, but are not limited to, the type of securities, the nature of the business of the portfolio company, the marketability of the valuation of securities of publicly traded companies in the same or similar industries, current financial conditions and operating results of the portfolio company, sales and earnings growth of the portfolio company, operating revenues of the portfolio company, competitive conditions, and current and prospective conditions in the overall stock market. Without a readily recognized market value, the estimated value of some portfolio securities may differ significantly from the values that would be placed on the portfolio should there be a ready market for such equity securities currently in existence.


Strategy

 

Our business operation and strategy will be influenced by the Reverse Merger Agreement announced on July 17, 2014 with Princeton Capital Corporation and affiliated companies Capital Point Partners, LP and Capital Point Partners II, LP. The focus of our efforts has been assisting private biomedical companies with distinctive investment potential and well-defined, near-term applications that address significant and quantifiable markets to become public and  benefit from our network of business professionals. This focus will broaden with the inclusion of other types of investments and industries once the merger is completed. Future business strategy will be determined



22


by the new management team. Regals current investments will represent less than 5% of the new merged company.


Our Investment Committee has adopted a charter wherein these criteria will be weighed against other criteria including:


     Strategic fit,


     Management ability, and


     Incremental value we can bring to the potential client.


The potential client must also be willing to comply with the Company's requirement as a BDC to offer significant managerial oversight and guidance, including the right of the Company to a seat on the client's board of directors.




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To date we have secured our clients through word of mouth or industry referrals from lawyers, accountants and other professionals. In looking at prospective clients, we do not focus on any particular geographic region and would consider clients globally.

 

Portfolio Investments

 

During the six months ended June 30, 2014, we did not add any companies to our portfolio. Our portfolio valued at fair market value is as follows:



Regal One Corporation Portfolio Investments

                                                      Value of Investments

     Name of Company                 Investment       as of June 30, 2014


Neuralstem, Inc. (OTCBB: CUR)       Common Stock                 $682,796

Neuralstem, Inc.                    Warrants                      900,900

Rampart Detection Systems           Common Stock                    1,200

LMP Money Market Trust Fund         Money Market Fund               8,497


Neuralstem, Inc. ("Neuralstem") is a life sciences company focused on the development and commercialization of treatments based on transplanting human neural stem cells. At present, Neuralstem is pre-revenue and has not yet undertaken any clinical trials with regard to their technology.


Neuralstem has developed and maintains a portfolio of patents and patent applications that form the proprietary base for their research and development efforts in the area of neural stem cell research. Neuralstem, Inc. has ownership or exclusive licensing of four issued patents and 13 patent pending applications in the field of regenerative medicine and related technologies.


The field in which Neuralstem focuses on is young and emerging. There can be no assurances that their intellectual property portfolio will



24


ultimately produce viable commercialized products and processes. Even if they are able to produce a commercially viable product, there are strong competitors in this field and their product may not be able to successfully compete against them.


As of June 30, 2014, the Company holds 161,800 shares of Neuralstem, Inc. common stock and warrants to purchase an additional 1,000,000 shares of common stock of Neuralstem at an option price of $5.00 per share.


Employees

 

We have one part-time employee. We expect to use independent consultants, attorneys, and accountants as necessary and do not anticipate a need to engage any additional full-time employees as long as business needs are being identified and evaluated. The need for employees and their availability will be addressed in connection with a decision concerning whether or not to acquire or participate in a specific business venture.

 

Compliance with BDC Reporting Requirements

 

The Board of Directors of the Company, comprising a majority of Independent Directors, adopted in March 2006 a number of resolutions, codes and charters to complete compliance with BDC operating requirements prior to reporting as a BDC.  These include establishing Board committees for Audit, Nominating, Compensation, Investment, and Corporate Governance, and adopting a Code of Ethics, an Audit Committee Charter and an Investment Committee Charter.


Code of Ethics: The Code of Ethics in general prohibits any officer, director or advisory person (collectively, "Access Person") of the Company from acquiring any interest in any security which the Company (i) is considering a purchase or sale thereof,  (ii) is being purchased or sold by the Company, or (iii) is being sold short by the Company.  The Access Person is required to advise the Company in writing of his or her acquisition or sale of any such security. The Company's Code of Ethics is posted on our website at www.regal1.com.


Audit and Compensation Committee: The primary responsibility of the Audit and Compensation Committee is to oversee the Company's financial reporting process on behalf of the Company's Board of Directors and report the result of its activities to the Board.  Such



25


responsibilities shall include but not be limited to the selection, and if necessary, the replacement of the Company's independent registered public accounting firm; the review and discussion with such independent registered public accounting firm and the Company's internal audit department of (i) the overall scope and plans for the audit, (ii) the adequacy and effectiveness of the accounting and financial controls, including the Company's system to monitor and manage business risks, and legal and ethical programs, and (iii) the results of the annual audit, including the financial statements included in the Company's annual report on Form 10-K.


The Company's Audit and Compensation Committee duties are presently assigned to the Board of Directors. The Company is seeking additional independent board members to augment the current Audit and Compensation Committee and improve its controls and procedures.


Investment Committee: The Investment Committee shall have oversight responsibility with respect to reviewing and overseeing the Company's contemplated investments and portfolio companies on behalf of the Board and shall report the results of their activities to the Board.  Such Investment Committee shall (i) have the ultimate authority for and responsibility to evaluate and recommend investments, and (ii) review and discuss with management (a) the performance of portfolio companies, (b) the diversity and risk of the Company's investment portfolio, and, where appropriate, make recommendations respecting the role, divestiture or addition of portfolio investments and (c) all solicited and unsolicited offers to purchase portfolio company positions.


Compliance with the Sarbanes-Oxley Act of 2002

 

The Sarbanes-Oxley Act of 2002 imposes a wide variety of new regulatory requirements on publicly held companies and their insiders including for example:

 

     Our chief executive officer and chief financial officer must now certify

     the accuracy of the financial statements contained in our periodic

     reports;


     Periodic reports must disclose our conclusions about the effectiveness



26


     of our controls and procedures;


     Our periodic reports must disclose whether there were significant changes

     in our internal controls or in other factors that could significantly

     affect these controls subsequent to the date of their evaluation,

     including any corrective actions with regard to significant deficiencies

     and material weaknesses; and


     The Company may not make any loan to any director or executive officer

     and we may not materially modify any existing loans.


The Sarbanes-Oxley Act required us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the new regulations promulgated within the regulations stated in the SOX Act of 2002.  We will continue to monitor our compliance with all future regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we are in compliance therewith.


Financial Condition Overview

 

The Company's total assets were $1,631,194 and its net assets were $1,614,486 at June 30, 2014, compared to $1,162,686 and $1,025,493, respectively at December 31, 2013. The changes in total assets during the six months ended June 30, 2014 were primarily attributable to a gain of $196,950 in net realized gain from the sale of securities, $387,900 in unrealized appreciation in warrant investments, and a gain of $73,765 in unrealized appreciation in investments in portfolio companies. The Company's unrealized appreciation (depreciation) varies significantly from period to period as a result of the wide fluctuations in value of the Company's portfolio securities and the number of shares owned.


The changes in net assets during the six months ended June 30, 2014 were attributable to the same factors attributable to total assets above as there was no shareholder activity.


The Company's financial condition is dependent on a number of factors including the ability of each portfolio company to effectuate its



27


respective strategies with the Company's help. These businesses are frequently thinly capitalized, unproven, small companies that may lack management depth, and may be dependent on new or commercially unproven technologies, and which may have little or no operating history.

 

Result of Operations for the three month and six month periods ending June 30, 2014 versus 2013.


Operating Expenses

 

For the three months and six months ended June 30, 2014, operating expenses were $40,251 and $70,602, respectively compared to $28,459 and $58,014 for the comparable periods of 2013. The increase for the six month period ending June 30 2014 compared to the comparable period of 2013 was primarily due to an increase in Professional Services expenses of $28,223 offset by a $15,635 decrease in other selling, general and administrative expenses, primarily due to discontinuing D & O insurance and less interest expense. There was no change in accounting fees from the prior year.

 

Net Increase (Decrease) in Net Assets


For the three months and six months ending June 30, 2014, our net increase (decrease) in net assets resulting from operations was a decrease of $166,199 and an increase of $588,994, respectively. This is compared to a net increase in net assets resulting from operations of $115,853 and $68,135, respectively for the comparable periods in 2013. Comparing the six month period ending June 30, 2014 to the period ended June 30, 2013 the change was mostly attributable to the unrealized appreciation recorded in the recent six month period for stock warrant investments, the unrealized gain in portfolio investments and the net realized gain from the sale of securities in our portfolio.


Other increases (decreases) in net assets from investments


For the six months ended June 30, 2014, net assets increased by $588,994. This increase is due to the realized and unrealized gain combined of $658,615. This compares to an investment gain of $126,149 both realized and unrealized combined for the comparable six month period in 2013.


Liquidity and Capital Resources



28


 

At June 30, 2014, we had $1,631,194 in Total Assets. This includes the fair value of our warrant investment in Neuralstem at $900,900 and $730,294 in liquid and semi-liquid current assets consisting of $37,801 in cash, a $1,200 investment, $8,497 in money market funds and $682,796 in unrestricted investments (which does not include warrants) at fair market value. For the three and six month period ended June 30, 2014, we primarily satisfied our working capital needs through sales of marketable securities in our investment portfolio.


From inception, the Company has relied on the infusion of capital through capital share transactions and loans. The Company plans to either: (i) dispose of its current portfolio securities to meet operational needs; or (ii) borrow against such securities via a traditional margin account or other such credit facility. Any such dispositions may have to be made at inopportune times and there is no assurance that, in light of the lack of liquidity in such shares, they could be sold at all, or if sold, could bring values approximating the estimates of fair value set forth in the Company financial statements.


If the Company enters into a margin agreement loan using its portfolio securities as collateral, a decrease in their market value may result in a liquidation of such securities which could greatly depress the value of such securities in the market. The Company's average current monthly cash operating expense is approximately $10,000. To fund these expenses, the Company uses our realized revenues and cash generated from gains from the sale of portfolio securities. Consequently, for us to be able to avoid having to defer expenses or sell portfolio companies' securities to raise cash to pay operating expenses, we are constantly seeking to secure adequate funding under acceptable terms.



















29


Item 3.  Quantitative and Qualitative Disclosures about Market Risk

 

Our business activities contain high elements of risk. The Company considers a principal type of market risk to be a valuation risk. All assets are valued at fair value as determined in good faith by or under the direction of the Board of Directors (which is based, in part, on quoted market prices of similar investments).

 

Market prices of common equity securities in general, are subject to fluctuations that could cause the amount to be realized upon sale to differ significantly from the current reported value. The fluctuations may result from perceived changes in the underlying economic characteristics of the Company's portfolio companies, the relative prices of alternative investments, general market conditions and supply and demand imbalances for a particular security.


Neither the Company's investments nor an investment in the Company is intended to constitute a balanced investment program. The Company will be subject to exposure in the public-market pricing and the risks inherent therein.


Item  4. Controls and Procedures

 

    Evaluation of Controls and Procedures

 

The Company's management, under the supervision and with the participation of various members of management, including our CEO and our CFO, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this quarterly report. Based upon that evaluation, our CEO and CFO have concluded that our current disclosure controls and procedures are not effective as of the end of the period covered by this quarterly report.


The Company has not established adequate financial reporting monitoring activities to mitigate the risk of management override. Specifically, there is a lack of segregation of duties as there is only one officer/employee overseeing the finance department. Although the controls are not effective, this material weakness did not result in any material misstatements in our financial statements.




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The Company's operations are controlled by its Principal Executive Officer and the Company's Board lacks a sufficient representation of independent disinterested directors. The Company is seeking to add members to its board and augment its Audit and Compensation committee.


    Changes in Internal Controls


There have been no changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934) that occurred during the three months ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.






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PART II - OTHER INFORMATION


Item 1. Legal Proceedings


As of the date of this quarterly report and subsequent events, there are no additional material pending legal or governmental proceedings relating to our company or properties to which we are a party, and to our knowledge there are no other material proceedings to which any of our directors, executive officers or affiliates are a party adverse to us or which have a material interest adverse to us.


Item 1A. Risk Factors

 

As of June 30, 2014 there are no material changes for risk factors since previously disclosed in the Companys 2013 Form 10-K.



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds


   None


Item 3. Defaults upon Senior Securities

 

   None


Item 4. Mine Safety Disclosures

 

   None.


Item 5. Other Information

 

   None

 



Item 6. Exhibits and Reports on Form 8-K filed during the quarter

 

Exhibits

 

The following exhibits are included as part of this Report on Form 10-Q. References to "the Company" in this Exhibit List mean Regal One Corporation, a Florida corporation.

 

Exhibit Number     Description                                 Filed Herewith


31.1 Certification of the Principal Executive Officer

      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.       [X]


32.1 Certification of Principal Executive Officer

     Pursuant to 18 U.S.C Section 1350.                                [X]



Form 8-K Reports filed during the quarter


None


Form 14-C Reports filed during the quarter


None


Reports filed with the S.E.C. subsequent to June 30, 2014


Form 8-K filed on July 17, 2014 announcing a Reverse Merger Agreement with Princeton Capital Corporation and an Asset Purchase Agreement with Capital Point Partners, LP, and Capital Point Partners II, LP dated July 14, 2014. The partnerships agree to sell equity and debt investments in excess of $50,000,000 to Regal in exchange for common stock.


Form 14-C filed on July 25, 2014 providing an preliminary information statement to stockholders of Regal of (i) the actions by written consent of a majority of the shareholders of Regal as described before such actions take effect in accordance with Section 607.0704 of the FBCA and Rules 14c-2 promulgated under the Exchange Act and (ii) to



32


provide information about the individuals who will constitute a majority of the directors following the closing of the Transactions in accordance with Rule 14f-1 of the Exchange Act.  The closing of the matters described herein and the change in a majority of the Board will not occur until at least twenty (20) days following the mailing of this Information Statement.


Actions include the Merger Agreement, the Asset Purchase Agreement, the Articles of Amendment to effect the reverse stock split, the Articles of Amendment of Incorporation and Bylaws to reincorporate in Maryland, Stockholder Dissenter Rights, and an External Investment Advisory Agreement with Princeton Capital Corporation. All agreements and actions are included in our filing as exhibits and can be viewed at www.sec.gov/filings.





33


SIGNATURES

 

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,

the registrant has duly caused this report to be signed on its behalf by the

undersigned, thereunto duly authorized.

 


       Regal One Corporation

 

       Dated: August 11, 2014

       By:/S/ Charles J. Newman

       Charles J. Newman

       Chief Executive Officer, Chief Financial Officer


 

                          POWER OF ATTORNEY

 

KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below constitutes and appoints Charles J. Newman, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Quarterly Report on Form 10-Q, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.


 

                         OFFICERS AND DIRECTORS

 

      Name                   Title                               Date


/s/ Charles J. Newman                                         August 11, 2014

By: Charles J. Newman     Chief Executive Officer,



34


                          Chief Financial Officer,

                          Secretary, and Director



/s/ Malcolm Currie                                            August 11, 2014

By: Malcolm Currie          Director



/s/ Bernard L. Brodkorb                                       August 11, 2014

By: Bernard L. Brodkorb     Director



/s/ Christopher Dieterich                                     August 11, 2014

By: Christopher Dieterich   Director





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