UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[ X ] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended May 31, 2010
[ ]Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period ____________ to __________________.
Commission File Number 333-134536
Regal Group, Inc.
(Exact name of Small Business Issuer as specified in its charter)
Nevada Pending
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3723 E. Maffeo Road
Phoenix, Arizona, USA 85050
(Address of principal executive offices) (Postal or Zip Code)
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Issuer's telephone number, including area code: 516-659-6677
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant(1) has filed all reports required
by Section 13 or 15(d) of the Securities 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 day.
[ X ] Yes [ ] 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
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer {square} Accelerated filer {square}
Non-accelerated filer {square} Smaller reporting company {checked-box}
(Do not check if a 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 [X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 46,816,665 shares of common
stock with par value of $0.001 per share outstanding as of July 12, 2010.
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION 3
Item 1.Financial Statements. 4
Item 2.Management's Discussion And Analysis Of Financial Condition
And Results Of Operation 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
Item 4T.Controls And Procedures 11
PART II - OTHER INFORMATION 12
Item 1.Legal Proceedings 12
Item 2.Unregistered Sales Of Equity Securities And Use Of Proceeds 12
Item 3.Defaults Upon Senior Securities 12
Item 4.Submission Of Matters To A Vote Of Security Holders 12
Item 5.Other Information 12
Item 6.Exhibits 12
SIGNATURES 13
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PART I - FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
Index To Financial Statements
Balance Sheets F-1
Statements Of Operations F-2
Statements Of Cash Flows F-3
Notes To The Financial Statements F-4
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REGAL GROUP, INC.
(FORMERLY REGAL LIFE CONCEPTS, INC.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
MAY 31, 2010
(UNAUDITED)
REGAL GROUP, INC.
(FORMERLY REGAL LIFE CONCEPTS, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(UNAUDITED)
May 31, February 28,
2010 2010
ASSETS
CURRENT
Cash $ 113,870 $ 191,699
EQUIPMENT, net 4,580 4,622
$ 118,450 $ 196,321
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 56,402 $ 21,440
STOCKHOLDERS' EQUITY
Common stock
Authorized:
100,000,000 common shares,
par value $0.001 per share
Issued and outstanding:
46,816,665 common shares
(February 28, 2010 - 46,816,665) 46,816 46,816
Additional paid-in capital 891,117 891,117
Deficit accumulated during the development stage (875,885) (763,052)
62,048 174,881
$ 118,450 $ 196,321
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The accompanying notes are an integral part of these financial statements.
F - 1
REGAL GROUP, INC.
(FORMERLY REGAL LIFE CONCEPTS, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OPERATIONS
(UNAUDITED)
Cumulative
from
July 1, 2005
Three Months Three Months (Date of
Ended Ended Inception) to
May 31, 2010 May 31, 2009 May 31, 2010
EXPENSES
Amortization $ 42 $ 43 $ 1,821
Bank charges and interest 131 133 1,456
Filing and transfer agent fees - 500 34,574
Management fees 5,000 10,000 106,884
Office 12,222 7,363 42,311
Professional fees (recovered) 69,676 (6,389) 290,111
Rental expenses - - 4,750
Travel and promotion 25,762 13,521 193,978
Loss before other item (112,833) (25,171) (675,885)
OTHER ITEM
Impairment of loan receivable - - 200,000
NET LOSS $ (112,833) $ (25,171) $ (875,885)
NET LOSS PER SHARE - BASIC AND DILUTED $ (0.00) $ (0.00)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - BASIC AND DILUTED 46,816,665 46,816,665
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The accompanying notes are an integral part of these financial statements.
F - 2
REGAL GROUP, INC.
(FORMERLY REGAL LIFE CONCEPTS, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Cumulative
from
July 1, 2005
Three Months Three Months (Date of
Ended Ended Inception) to
May 31, 2010 May 31, 2009 May 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (112,833) $ (25,171) $ (875,885)
Non-cash items:
Amortization 42 43 1,821
Donated capital - - 20,000
Impairment of loan receivable - - 200,000
Changes in non-cash operating working
capital items:
Prepaid expenses - 2,500 -
Accounts payable and accrued
liabilities 34,962 (37,987) 56,402
NET CASH USED IN OPERATING ACTIVITIES (77,829) (60,615) (597,662)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment - (2,712) (6,401)
Loan receivable (200,000)
NET CASH USED IN INVESTING ACTIVITIES - (2,712) (206,401)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common shares - - 917,933
NET CASH PROVIDED BY FINANCING ACTIVITIES - - 917,933
INCREASE (DECREASE) IN CASH (77,829) (63,327) 113,870
CASH, BEGINNING 191,699 382,749 -
CASH, ENDING $ 113,870 $ 319,422 $ 113,870
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
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The accompanying notes are an integral part of these financial statements.
F - 3
REGAL GROUP, INC.
(FORMERLY REGAL LIFE CONCEPTS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2010
(UNAUDITED)
*-----
1.BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been prepared
in accordance with United States generally accepted accounting principles
for interim financial information and with the rules and regulations of the
Securities and Exchange Commission ("SEC"). They do not include all
information and footnotes required by United States generally accepted
accounting principles for complete financial statements. However, except as
disclosed herein, there has been no material changes in the information
disclosed in the notes to the financial statements for the year ended
February 28, 2010 included in the Company's Annual Report on Form 10-K
filed with the SEC. The unaudited interim financial statements should be
read in conjunction with those financial statements included in the Form
10-K. In the opinion of Management, all adjustments considered necessary
for a fair presentation, consisting solely of normal recurring adjustments,
have been made. Operating results for the period ended May 31, 2010 are not
necessarily indicative of the results that may be expected for the year
ending February 28, 2011.
2.ACQUISITION OF UHF LOGISTICS LIMITED
The Company entered into a Letter of Intend ("LOI") with UHF Logistics
Limited ("UHF") to acquire 100% of the equity of UHF. UHF, a Hong Kong
incorporated holding company, focuses on the development, marketing and
distribution of radio frequency identification products and solutions
through its wholly owned subsidiary in China. The purchase price will be
determined based on the due diligence result and will be paid by the
issuance of restricted shares in the capital the Company. The Company and
UHF have not entered into a definitive agreement as at the financial
statements filing date.
F - 4
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
FORWARD-LOOKING STATEMENTS
This Form 10-Q includes "forward-looking statements" within the meaning of the
"safe-harbor" provisions of the Private Securities Litigation Reform Act of
1995. Such statements are based on management's current expectations and are
subject to a number of factors and uncertainties that could cause actual results
to differ materially from those described in the forward-looking statements.
All statements other than historical facts included in this Form, including
without limitation, statements under "Plan of Operation", regarding our
financial position, business strategy, and plans and objectives of management
for the future operations, are forward-looking statements.
Although we believe that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Important factors that could cause actual results
to differ materially from our expectations include, but are not limited to,
market conditions, competition and the ability to successfully complete
financing.
IN GENERAL
We were formed in the State of Nevada on July 1, 2005 as "Regal Rock, Inc". On
December 3, 2007, we changed our name to "Regal Life Concepts, Inc.," and on
March 31, 2010, we changed our name to "Regal Group Inc."
We commenced operations as a distributor of bamboo wood flooring products
focused on opportunities created by demand in new residential construction and
home improvement activity in North America. However, there was no assurance that
our initial business model was commercially and economically viable and further
marketing of the product in a broader distribution network was required before
a final evaluation as to the economic feasibility of our initial business plan
could be determined. In light of this uncertainty, we decided to review other
potential opportunities in the hospitality and health and wellness sectors. In
2008, we entered into a standstill Agreement with a Thailand corporation,
Amaravati Inc., whose primary asset is a 50-room spa resort located in Chiang
Mai, Thailand, with an aim to open an opportunity in the hospitality sector in
Thailand. Given the geopolitical uncertainty in China, we have put this project
on hold for the time being.
We are now engaged in the business of acquiring private companies based and
operating in China and providing these companies with support, including
administrative, legal, accounting and marketing assistance. We also plan to
provide these companies with an infusion of capital to further their business
plan. We believe that equity investments in China present one of the most
attractive global investment opportunities available in the coming four to seven
years. Accordingly, we plan to focus on growth company acquisitions located in
China and to ensure the viability and solvency of our Company, we have phased
out our business line involving the distribution of bamboo flooring. The local
Chinese equity markets are highly concentrated, serving only a small fraction of
the local corporate market. This fact, taken together with current
international economic uncertainty, presents a unique opportunity to acquire
small, growing and profitable Chinese companies at historically realistic
valuations.
We previously entered into a Capital Increase and Equity Investment Agreement,
along with related agreements and contracts required by Chinese regulatory
bodies, with Guangzhou AWA Wine Co., Ltd. ("AWA Wine") and a US$200,000 loan
installment was advanced to AWA Wine under the terms of this agreement. AWA
Wine was established in 2005 as a wine importer and distributor in China and has
opened retail and corporate whole outlets throughout China. We applied for, but
to date have not yet received the necessary government approvals for the
establishment of the joint venture under the Chinese rules and regulations. As
a result, and in light of a challenging economic environment and its impact on
the financing of companies in the microcap sector in North America, we will
continue to be China-focused but intend to limit our capital investment in AWA
Wine to funds already advanced. In addition, we have written off our loan
advancement to AWA Wine due to collectability concerns. We now intend to
consider new business acquisitions (on a share swap basis or other structure) in
our efforts in 2010 to create value for shareholders.
The Company entered into a non-binding letter of intent with UHF Logistics
Limited ("UHF"), in Hong Kong, to acquire 100% of the equity of UHF in exchange
for approximately 45% of the equity of Regal, subject to confirmatory due
diligence in April, 2010. The purchase price will be paid by the issuance
of restricted shares in the capital of the Company on the date of acquisition.
UHF owns 100% of the equity interests, assets and intellectual property of a
Shenzhen RPD Electronics Technology Co. (RPD) in the People's Republic of China.
The acquisition of the equity interests, assets and intellectual property by UHF
of RPD makes RPD a Wholly Foreign Owned Enterprise ("WFOE"), in compliance with
all governmental regulations applicable to such acquisitions under the laws of
the People's Republic of China.
RPD specializes in the development, production, and sales of RFID UHF (ultrahigh
frequency) hardware, including UHF readers, antenna and tags. The company owns
intellectual property rights to its next generation RFID technology platform and
its RFID products are designed for a broad range of applications that span
personal and property safety and security management, e-ticketing management,
tracking in animal breeding, pharmaceutical product fraud prevention, and
warehouse/inventory control.
We intend to retain one full-time sales and marketing coordinator in the next
six months to handle business development, marketing and promotion aspects of
the China projects. Other than as disclosed herein, we have no plans to
significantly change our number of employees for the next 12 months.
We therefore expect to incur the following costs in the next 12 months in
connection with our business operations:
Marketing costs: $30,000
General administrative costs: $40,000
Total: $70,000
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In addition, we anticipate spending an additional $40,000 on professional fees.
Total expenditures over the next 12 months are therefore expected to be
$110,000.
We do not have sufficient funds on hand to undertake intended business
operations although our cash reserves are sufficient to meet our obligations for
the next twelve-month period. As a result, we will need to seek additional
funding in the near future.
If we are unable to raise the required financing, we will be delayed in
conducting our business plan.
RESULTS OF OPERATIONS FOR PERIOD ENDING MAY 31, 2010
We did not earn any revenues in the three-month period ended May 31, 2010.
During the same period, we incurred operating expenses of $112,833 consisting of
professional fees of $69,676, travel and promotional expenses of $25,762,
management fees of $5,000, office charges of $12,222, bank charges of $131 and
amortization charges of $42.
At May 31, 2010, we had assets of $118,450, consisting of $113,870 in cash and
equipment recorded at $4,580. We have accrued liabilities of $56,402 as of May
31, 2010.
We have not attained profitable operations and are dependent upon obtaining
financing to pursue exploration activities. For these reasons our auditors
believe that there is substantial doubt that we will be able to continue as a
going concern.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4T. CONTROLS AND PROCEDURES.
EVALUATION AND DISCLOSURE CONTROLS AND PROCEDURES
The Company, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Principal
Accounting Officer, has evaluated the effectiveness of the design and operation
of the Company's "disclosure controls and procedures," as such term is defined
in Rules 13a-15e promulgated under the Exchange Act. Based upon that evaluation,
the Chief Executive Officer and Principal Accounting Officer have concluded that
the disclosure controls and procedures were not effective as of the end of the
period covered by this report due to a material weakness identified by
management relating to the (1) lack of a functioning audit committee and lack of
a majority of outside directors on the Company's board of directors, resulting
in ineffective oversight in the establishment and monitoring of required
internal controls and procedures; (2) inadequate segregation of duties
consistent with control objectives; (3) insufficient written policies and
procedures for accounting and financial reporting with respect to the
requirements and application of US GAAP and SEC disclosure requirements; and (4)
ineffective controls over period end financial disclosure and reporting
processes.
Based upon its evaluation, our management, with the participation of our Chief
Executive Officer and Principal Accounting Officer, has concluded there is a
material weakness with respect to its internal control over financial reporting
as defined in Rule 13a-15(e).
We are committed to improving our financial organization. As part of this
commitment, we will create a position to segregate duties consistent with
control objectives and will increase our personnel resources and technical
accounting expertise within the accounting function when funds are available to
the Company: i) Appointing one or more outside directors to our board of
directors who shall be appointed to the audit committee of the Company resulting
in a fully functioning audit committee who will undertake the oversight in the
establishment and monitoring of required internal controls and procedures such
as reviewing and approving estimates and assumptions made by management; and
ii) Preparing and implementing sufficient written policies and checklists which
will set forth procedures for accounting and financial reporting with respect to
the requirements and application of US GAAP and SEC disclosure requirements.
Management believes that the appointment of one or more outside directors, who
shall be appointed to a fully functioning audit committee, will remedy the lack
of a functioning audit committee and a lack of a majority of outside directors
on the Company's Board. In addition, management believes that preparing and
implementing sufficient written policies and checklists will remedy the
following material weaknesses (i) insufficient written policies and procedures
for accounting and financial reporting with respect to the requirements and
application of US GAAP and SEC disclosure requirements; and (ii) ineffective
controls over period end financial close and reporting processes. Further,
management believes that the hiring of additional personnel who have the
technical expertise and knowledge will result in proper segregation of duties
and provide more checks and balances within the financial reporting department.
Additional personnel will also provide the cross training needed to support the
Company if personnel turn over issues within the financial reporting department
occur. This coupled with the appointment of additional outside directors will
greatly decrease any control and procedure issues the Company may encounter in
the future.
A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Because of the inherent limitations in all control systems, our
evaluation of controls can only provide reasonable assurance that all control
issues, if any, within a company have been detected. Such limitations include
the fact that human judgment in decision-making can be faulty and that
breakdowns in internal control can occur because of human failures, such as
simple errors or mistakes or intentional circumvention of the established
process. The company thus hereby conclude that the Company's disclosure
controls and procedures were ineffective at a reasonably assurance level.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There were no changes to the internal controls during the quarter ended May 31,
2010 that have materially affected or that are reasonably likely to materially
affect the internal controls over financial reporting.
PART II- OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding. Management is not
aware of any threatened litigation, claims or assessments.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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
31.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
July 12, 2010
Regal Group, Inc.
/s/ Eric Wildstein
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Eric Wildstein, President, CEO & Director
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