<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
[ X ]
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended July 31, 1996
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act
For the transition period from ________________ to ____________________
Commission File Number 0-23920
REGI U.S., INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Oregon 91-15801446
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization Identification Number
185 - 10751 SHELLBRIDGE WAY
RICHMOND, BRITISH COLUMBIA V6X 2W8, CANADA
(Address of Principal Executive Offices)
(604) 278-5996
(Issuer's Telephone Number, Including Zip Code)
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________
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 7,716,100 shares common
stock as of July 31, 1996.
Transitional Small Business Disclosure Format: Yes________ No X
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS PAGE
<S> <C>
The following Financial Statements are presented (in U.S. dollars) for
the Registrant, REGI U.S., Inc.
1. Balance sheets for July 31, 1996 and 1995 (unaudited) 3
2. Statement of Operations accumulated from inception 4
(July 27, 1992) to July 31, 1996 and the nine month
periods ended July 31, 1996 and 1995
3. Statement of Cash Flows from inception (July 27, 1992) 5
to July 31, 1996 and the nine month periods ended
July 31, 1996 and July 31, 1995
4. Statement of Stockholders' Equity (Deficit) from inception 6
(July 27, 1992) to July 31, 1996
5. Notes to financial statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11
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 HOLDERS 12
ITEM 5. OTHER INFORMATION 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 12
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS
REGI U.S., Inc.
(A Development Stage Company)
Balance Sheet
July 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
$ $
ASSETS
<S> <C> <C>
Current Assets
Cash 213 529
Cash held in trust -- 498,135
Due from parent -- 43,504
Prepaid expenses -- 6,000
---------- ----------
213 548,168
Fixed Assets (Note 3) 7,347 8,041
Intangible Assets (Note 3) 40,761 227,666
---------- ----------
48,321 783,875
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable 98,226 17,000
Loan payable - officer 12,000 --
Due to affiliate (Note 4) 208,469 689,425
---------- ----------
318,695 706,425
---------- ----------
Stockholders' Equity (Deficit)
Common Stock (Note 5), 20,000,000 shares authorized without
par value; 7,716,100
and 7,056,700 shares issued
and outstanding respectively 2,328,900 1,361,750
Paid for but unissued -- 497,000
Deficit Accumulated during the Development Stage (2,599,274) (1,781,300)
---------- ----------
(270,374) 77,450
---------- ----------
48,321 783,875
========== ==========
</TABLE>
Contingency and Commitments (Note 7)
3
<PAGE> 4
REGI U.S., Inc.
(A Development Stage Company)
Statement of Operations
Accumulated from July 27, 1992 (Inception) to
July 31, 1996 and the Three Month Periods ended July 31, 1996 and 1995
<TABLE>
<CAPTION>
Accumulated 1996 1995
$ $ $
<S> <C> <C> <C>
Revenues -- -- --
--------- --------- ---------
Administrative Expenses
Advertising stock 125,869 3,245 --
Bank charges 1,173 155 148
Foreign exchange 2,148 (89) (182)
Office, courier, printing and telephone 57,977 9,138 6,478
Professional fees 150,084 23,426 3,131
Regulatory and filing fees 5,335 -- 258
Stockholder and investor relations 163,320 20,846 2,196
Transfer agent 11,754 167 --
Travel 4,814 -- --
Less interest (13,079) -- (1,485)
--------- --------- ---------
509,395 56,888 10,544
--------- --------- ---------
Research and Development Expenses
Intellectual property 257,000 -- --
Amortization of capital assets 12,221 1,891 1,322
Market development 89,596 3,250 13,983
Professional fees 69,815 -- 2,751
Project management 107,500 7,500 6,000
Project overhead 80,129 6,628 7,562
Prototype design and construction 1,119,457 38,830 73,321
Technical consulting 80,979 23,480 --
Technical reports 17,120 1,000 --
Technical salaries 129,777 12,056 12,922
Travel 126,285 7,348 9,397
--------- --------- ---------
2,089,879 101,983 127,258
--------- --------- ---------
Net Loss 2,599,274 158,871 137,802
========= ========= =========
Net Loss Per Share (.02) (.02)
========= =========
Weighted Average Shares Outstanding 7,665,900 6,950,800
========= =========
</TABLE>
4
<PAGE> 5
REGI U.S., Inc.
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
From July 27, 1992 (Inception) to
July 31, 1996
<TABLE>
<CAPTION>
Deficit Accumulated
Common Stock During the
Shares Amount Development Stage
# $ $
<S> <C> <C> <C>
Balance - July 27, 1992 (inception) -- -- --
Stock issued for intellectual property at
$0.01 per share August 20, 1992 5,700,000 57,000 --
Stock issued for cash at $0.01 per
share August 20, 1992 300,000 3,000 --
Net loss for the period from
July 27, 1992 to April 30, 1993 -- -- (23,492)
--------- --------- ----------
Balance - April 30, 1993 6,000,000 60,000 (23,492)
Stock issued for cash pursuant to a
public offering of shares issued at
$1.00 per share October 31, 1993 500,000 500,000 --
Net loss for the year ended
April 30, 1994 -- -- (394,263)
--------- --------- ----------
Balance - April 30, 1994 6,500,000 560,000 (417,755)
Stock issued for cash pursuant to
stock option exercised July 1, 1994
at $0.10 per share 10,000 1,000 --
a private placement of shares issued
at $2.25 per share
October 31, 1994 and 200,000 450,000 --
November 30, 1994 50,000 112,500 --
warrants exercised at $1.25
per share October 31, 1994 169,200 211,500 --
warrants exercised at $1.50
per share December 13, 1994 1,000 1,500 --
Net loss for the year ended
April 30, 1995 -- -- (1,225,743)
--------- --------- ----------
Balance - April 30, 1995 6,930,200 1,336,500 (1,643,498)
Stock issued for cash pursuant to
options exercised at $0.10 per share
June, 1995 7,500 750 --
July, 1995 110,000 11,000 --
September, 1995 10,000 1,000 --
November, 1995 10,000 1,000 --
December, 1995 13,000 1,300 --
January, 1996 50,000 5,000 --
</TABLE>
5
<PAGE> 6
REGI U.S., Inc.
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
From July 27, 1992 (Inception) to
July 31, 1996
<TABLE>
<CAPTION>
Deficit Accumulated
Common Stock During the
Shares Amount Development Stage
# $ $
<S> <C> <C> <C>
Continued
options exercised at $1.00 per share
January, 1996 10,000 10,000 --
February, 1996 5,000 5,000 --
March, 1996 2,000 2,000 --
options exercised at $2.75 per share
in April, 1996 5,000 13,750 --
options exercised at $2.50 per share
in February, 1996 10,000 25,000 --
warrants exercised at $1.50 per share
in August, 1995 132,200 198,300 --
a private offering memorandum to
issue shares at $2.00 per share
May, 1995 20,000 40,000 --
June, 1995 35,000 70,000 --
July, 1995 173,500 347,000 --
August, 1995 22,500 45,000 --
September, 1995 50,000 100,000 --
October, 1995 40,000 80,000 --
Net loss for the year ended April 30, 1996 -- -- (796,905)
--------- --------- ----------
Balance - April 30, 1996 7,635,900 2,292,600 (2,440,403)
Stock issued for cash pursuant to
stock options exercised May 8, 1996
at $0.10 per share 30,000 3,000 --
stock options exercised July 31, 1996
at $0.10 per share 30,000 3,000 --
warrants exercised July 24, 1996 at
$1.50 per share 20,200 30,300 --
Net loss for the three months ended July 31, 1996 -- -- (158,871)
--------- --------- ----------
Balance - July 31, 1996 7,716,100 2,328,900 (2,599,274)
========= ========= ==========
</TABLE>
6
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REGI U.S., Inc.
(A Development Stage Company)
Statement of Cash Flows
Accumulated from July 27, 1992 (Inception) to
July 31, 1996 and the Three Month Periods ended July 31, 1996 and 1995
<TABLE>
<CAPTION>
Accumulated 1996 1995
$ $ $
<S> <C> <C> <C>
Cash Flows to Operating Activities
Net loss (2,599,274) (158,871) (137,802)
Adjustments to Reconcile
Net Loss to Cash
Amortization 12,221 1,891 1,322
Intellectual property 257,000 -- --
Change in non-cash working capital items
Increase (decrease) in accounts payable 98,226 23,157 (17,872)
---------- -------- --------
Net Cash Used by Operating Activities (2,231,827) (138,823) (154,352)
---------- -------- --------
Cash Flows from (to) Financing Activities
Increase in common stock 2,271,900 36,300 522,250
(Decrease) in advances from parent -- -- (15,068)
Increase in advances from affiliate 8,469 91,719 79,552
Increase in loan from officer 12,000 12,000 --
---------- -------- --------
Net Cash Provided by Financing Activities 2,292,369 140,019 586,734
---------- -------- --------
Cash Flows to Investing Activities
(Increase) in computer equipment (16,048) -- --
(Increase) in patents (44,281) (8,751) (160)
---------- -------- --------
Net Cash Used by Investing Activities (60,329) (8,751) (160)
---------- -------- --------
Increase (decrease) in cash 213 (2,555) 432,222
Cash - beginning of period -- 2,768 66,442
---------- -------- --------
Cash - end of period 213 213 498,664
========== ======== ========
Non-cash Financing Activity
Deemed value of affiliate shares issued for
intellectual property 200,000 -- --
5,700,000 shares issued for intellectual
property at $0.01 per share 57,000 -- --
---------- -------- --------
257,000 -- --
========== ======== ========
</TABLE>
7
<PAGE> 8
REGI U.S., Inc.
(A Development Stage Company)
Notes to the Financial Statements
July 31, 1996
(expressed in U.S. dollars)
1. Nature and Continuance of Business
The Company is in the business of developing and commercially
exploiting an improved axial vane type rotary engine known as the
Rand Cam/Direct Charge Engine ("The Engine"), which is a variation of
the original Rand-Cam Engine. The world-wide marketing and
intellectual rights, other than the U.S., are held by Rand Energy
Group Inc. ("REGI") which controls the Company. The Company owns the
U.S. marketing and intellectual rights and has a project cost sharing
agreement, effective May 1, 1993, whereby it will fund 50% of the
further development of The Engine and REGI will fund 50%. These
financial statements have been prepared on the basis of a going
concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
Company has not generated any revenues or profitable operations since
inception. The Company's activities are in the development stage and
additional costs for the further improvement of The Engine must be
incurred. There is substantial doubt as to the Company's ability to
generate revenues and to continue as a going concern, as the
continuation of the Company as a going concern is dependent on its
ability to obtain financing and/or the attainment of revenues and
profitable operations. Management plans to raise capital with private
and public offerings of stock, the conversion of warrants and the
exercise of stock options.
2. Acquisition of Rights, Title and Interest
(a) On August 20, 1992 the Company acquired the U.S. rights to
the original Rand Cam-Engine from REGI by issuing 5,700,000
shares at a deemed value of $0.01 per share. REGI will
receive a 5% net profit royalty. The $57,000 deemed value
has been expensed as research and development in 1995.
(b) Pursuant to an agreement with Brian Cherry (a director)
dated July 30, 1992 and amended November 23, 1992 and April
13, 1993, the Company acquired the U.S. rights to the
improved axial vane rotary engine known as the Rand
Cam/Direct Charge Engine. On November 9, 1993, in
consideration for the transferred technology, Mr. Cherry was
issued 100,000 shares of Reg Technologies Inc. ("REG") (a
public company owning 51% of REGI) with a deemed value of
$200,000 and will receive a 1% net profit royalty. The
deemed value of $200,000 was treated as an expense paid by
REG on behalf of the Company and treated as an inter-company
loan. The $200,000 deemed value of intellectual property has
been expensed as research and development in 1995.
(c) Pursuant to a letter of understanding dated December 13,
1993 between the Company, REGI and REG (collectively called
the grantors) and West Virginia University Research
Corporation ("WVURC"), the grantors have agreed that WVURC
shall own 5% of all patented technology and will receive 5%
of all net profits from sales, licences, royalties or income
derived from the patented technology.
8
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3. (a) Fixed Assets
<TABLE>
<CAPTION>
1996 1995
Accumulated Net Book Net Book
Cost Amortization Value Value
$ $ $ $
<S> <C> <C> <C> <C>
Computer equipment 16,048 8,701 7,347 8,996
====== ===== ====== =======
(b) Intangible Assets
Sublicense -- -- -- 200,000
Patents 44,281 3,520 40,761 27,873
====== ===== ====== =======
227,873
=======
</TABLE>
4. Due to Affiliate
REG periodically pays for research and development expenses on behalf of
the Company and REGI and then charges the two companies on a 50/50 basis
pursuant to the research and development cost sharing agreement. The
balance owing to REG, of $208,469 at July 31,1996 is unsecured,
non-interest bearing and is payable on demand.
5. Common Stock
(a) Public offering - October 31, 1993 - warrants outstanding
A total of $500,000 was received and 500,000 units issued pursuant
to a public offering of 500,000 units at $1.00 per unit. Each unit
contained 1 common share, and 1 warrant to acquire an additional
share at $1.25 by August 24, 1994 (extended to October 31, 1994),
and $1.50 by August 24, 1995. A total of 169,200 warrants were
exercised at $1.25, and 133,200 warrants were exercised at $1.50.
A total of 197,600 warrants were outstanding and expire fifteen
days after a registration was approved (July 9, 1996). A total of
20,200 warrants were exercised and the balance expired on July 24,
1996.
(b) Private placement - October 31 and November 30, 1994 - warrants
outstanding
A total of $562,500 was received and 250,000 units
issued in October and November, 1994 pursuant to a private
placement of 250,000 units at $2.25 per unit. Each unit contained
1 common share, and 1 warrant to acquire an additional share at
$2.60 by October 12, 1995 (expired), and $3.00 by October 12,
1996. All warrants issued pursuant to this private placement are
outstanding as at July 31, 1996.
(c) Pursuant to a Private Offering Memorandum dated April 15, 1995 and
expiring October 15, 1995 the Company sold 341,000 units at $2.00
per unit for net proceeds of $682,000. Each unit contained 1
common share, and 1 warrant to acquire an additional share at
$2.00 exercisable beginning April 15, 1996 and ending April 15,
1997 or at $2.50 beginning April 16, 1997 and ending April 15,
1998. All warrants issued pursuant to this offering are
outstanding at July 31, 1996.
(d) Stock options
Certain directors and employees were granted stock options since
inception as follows:
April 30, 1993 to acquire 397,500 shares at $0.10 per share
expiring April 30, 1998 of which 270,500 have been exercised
to July 31, 1996.
9
<PAGE> 10
5. Common Stock (continued)
(d) Stock options (continued)
- October 29, 1993 to acquire 195,000 shares at $1.00 per
share expiring April 30, 1998 as to 50,000 shares, of which
7,000 have been exercised to April 30, 1996, and October 29,
1998 as to 145,000 shares, of which 10,000 have been
exercised to July 31, 1996.
- February 9, 1994 to acquire 75,000 shares at $1.00 expiring
February 9, 1999.
- October 20, 1994 to acquire 35,000 shares at $2.75 per share
expiring October 20, 1999 of which 5,000 have been exercised
to July 31, 1996.
- January 15, 1995 to acquire 30,000 shares at $1.50 per share
expiring January 15, 2000.
- March 15, 1995 to acquire 10,000 shares at $2.50 per share
expiring March 15, 2000 of which
5,000 have been exercised to July 31, 1996.
- August 11, 1995 to acquire 25,000 shares at $2.50 per share
expiring August 11, 2000.
- September 8, 1995 to acquire 10,000 shares at $2.50 per
share expiring September 8, 2000 of which 5,000 have been
exercised to July 31, 1996.
- January 3, 1996 to acquire 350,000 shares at $3.00 per share
expiring January 3, 2001.
6. Related Party Transactions
(a) A project management fee of $7,500 was paid to a company
controlled by the president of the Company and is included in
research and development expenses.
(b) Rent and secretarial fees of $1,500 were paid to a company
controlled by the president of the Company and are included in
research and development expenses.
(c) A technical salary of $12,056 was paid to an officer and director
and is included in research and development expenses.
(d) An administrative fee of $1,500 in 1996 was paid to an officer and
director and is included in research and development expenses.
7. Contingency and Commitments
(a) See Note 2 - royalty commitments in connection with the Rand
Cam/Direct Charge Engine.
(b) The Company is committed to pay project management fees and rent
and secretarial fees totalling $36,000 per annum to a Company
controlled by the president of the Company pursuant to a contract
dated April 1, 1994 and expiring April 1, 1997.
(c) The Company has reserved 591,000 shares for the conversion of
warrants and 825,000 shares for the exercise of stock options.
(d) The Company is committed to fund 50% of the further development of
the Engine. See Note 1.
(e) The Company owes REG, for unpaid invoices rendered by WVURC,
totalling some $203,700 for development work performed during a
project extension period. REG disputes a portion of these invoices
relating to certain unauthorized capital expenditures totalling
some $40,000. Should REG be successful in their dispute amounts
owing to REG and prototype costs would be reduced by some $40,000.
(f) See Note 1 for uncertainties.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations for the Nine Months ended July 31, 1996 Compared to Nine
Months Ended July 31, 1996
REGI U.S., Inc. (the "Company") continued to operate in the development
stage and generated no revenues from operations during the third quarter ended
July 31, 1996. The loss for the 1995 third quarter totaled $158,817 compared to
$137,802 during the same period in 1995.
Administration expenses rose from $10,542 in 1995 to $56,888 in 1996.
The major changes were in professional fees which increased from $3,131 in 1995
to $23,426 in 1996, and stockholder and investor relations from $2,196 in 1995
to $20,896 in 1996.
The net loss per share was $0.02 in both periods.
Liquidity and Capital Resources
As noted above, no revenue from operations was generated by the Company
during the third quarter ended July 31 1996. The Company was able to meet its
working capital requirements from director loans and loans from its parent
company, Reg Technologies, Inc.
At the end of the July 31, 1996, the amount due to Reg Technologies,
Inc. was reduced substantially from $689,425 in 1995 to $208,469 in 1996.
Shareholders' equity decreased from $77,450 in 1995 to $(270,374) in 1996.
PLAN OF OPERATION
As of July 31, 1966 the Company had no cash resources and had current
accounts payable of $108,000 which included a loan from a director, and also
owed Reg Technologies Inc. $220,000, for a total working capital deficiency of
$328,000. The Company is raising $300,000 from the exercise of 200,000 warrants
at $1.50. Of this, a total of $108,000 will be used to pay down liabilities and
$50,000 to repay a portion of the amounts owing to Reg Technologies Inc. Reg
Technologies Inc. will only demand payment of the balance of $170,000 if the
Company is in a favorable cash position. The balance of $132,000 from the
exercise of warrants, will be used for completing the testing of the diesel
engine prototype and compressor as to $75,000, the balance of $57,000 will be
used for monthly overhead to the end of October. Beginning in November 1996, the
Company plans to enter into joint venture agreements whereby the joint venture
partner will provide all the funding for future development.
11
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PART II
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None, other than described elsewhere in this filing
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
27. Financial Data Schedule
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements 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.
REGI U.S., Inc.
(Registrant)
Dated September 13, 1996 /s/ John G. Robertson
------------------------- --------------------------------------
John G. Robertson, President and Chief
Executive Officer
Dated September 13, 1996 /s/ Jennifer Lorette
------------------------- --------------------------------------
Jennifer Lorette, Vice President, Chief
Financial Officer (Principal Accounting
Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 213
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 213
<PP&E> 60,329
<DEPRECIATION> 12,221
<TOTAL-ASSETS> 48,321
<CURRENT-LIABILITIES> 318,695
<BONDS> 0
0
0
<COMMON> 2,328,900
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> (270,374)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 158,871
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (158,871)
<INCOME-TAX> 0
<INCOME-CONTINUING> (158,871)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (158,871)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
