BOARDWALK CAPITAL CORPORATION

Permitted to Resign

MR. LAWRENCE HALES AND HIS REPRESENTATIVE CYNTHIA SHERMAN CONDUCTED PRIMARILY SECONDARY LIMITED PARTNERSHIP TRADING. WE DISCOVERED THAT HE WAS SELLING OR BUYING UNITS IN STATES THAT EITHER THEY WERE NOT REGISTERED IN, OR BOARDWALK WAS NOT REGISTERED IN. MR. HALES WAS GIVEN NOTIFICATION TO CEASE SALES IN THESE STATES; HOWEVER, HE WOULD QUOTE THE "OCCASIONAL SOLICITATION RULE" AND STATE THAT SINCE IT WAS JUST AN ISOLATED TRANSACTION HE COULD SELL IN THAT PARTICULAR STATE. WE IDENTIFIED SEVERAL TRANSACTIONS WHERE HE WAS IN VIOLATION AND DEMANDED A WRITTEN RESPONSE EXPLAINING WHY HE CONDUCTED BUSINESS WITH THESE PARTICULAR CLIENTS, AND THEN ASSURED US HE WOULD GET REGISTERED IN THE STATES IN QUESTIONS. THE VIOLATIONS OCCURED IN THE FOLLOWING STATES: NEW MEXICO, NEW JERSEY, PENNSYLVANIA, AND THE DISTRICT OF COLUMBIA. AT THIS TIME, WE ESTIMATE THAT THE TOTAL NUMBER OF CLIENTS IN THE STATES IN QUESTIONS IS AROUND SIX. SHORTLY AFTER BOARDWALK RECEIVED MR. HALES' LETTER, HE AND HIS REPS (INCLUDING CYNTHIA SHERMAN) RESIGNED FROM THE FIRM. AT THIS TIME, WE ARE STILL CONDUCTING A COMPLETE INVESTIGATION AS TO WHAT TYPE OF PRODUCT WAS SOLD AND TO WHEN IT WAS SOLD. I LIEU OF THE CIRCUMSTANCES WE NOTIFED MR. HALES OF OUR INTENT TO QUALIFY HIS U-5 TO INDICATE THIS INVESTIGATION.