<PAGE> 1
As filed with the Securities and Exchange Commission on June 21, 1996
REGISTRATION STATEMENT NO. 33-96974
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------------
Amendment No. 3
to
FORM SB-2
Registration Statement
under
THE SECURITIES ACT OF 1933
-----------------------------------------
REGI U.S., INC.
(Name of small business issuer in its charter)
<TABLE>
<CAPTION>
OREGON 3519 91-1580146
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial Number) (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
</TABLE>
10751 SHELLBRIDGE WAY, SUITE 185
RICHMOND, BRITISH COLUMBIA V6X 2W8, CANADA
604-278-5996
(Address and telephone number of principal executive offices and principal
place of business)
-----------------------------------------
James L. Vandeberg, Esq.
GRAHAM & DUNN
1420 Fifth Avenue, 33rd Floor
Seattle, Washington 98101-2390
(206) 624-8300
(Name address and telephone number of agent for service)
-----------------------------------------
Approximate date of proposed sale to the public: AS SOON AS PRACTICABLE AFTER
THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box / X /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE (1) PRICE REGISTRATION FEE(2)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Common Stock 492,500 $3.50 $1,723,750 $586.21
</TABLE>
(1) Based upon the price at which shares were traded on June 12, 1996.
(2) Previously paid.
The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that the registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuit to said Section 8(a)
may determine.
<PAGE> 2
CROSS-REFERENCE OF ITEM NUMBERS IN PART I OF FORM SB-2
<TABLE>
<CAPTION>
<S> <C> <C>
1. Front of Registration Statement and
Outside Front Cover of Prospectus............................. Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus....... Inside Front and Outside Back Cover
Pages of Prospectus
3. Summary Information and Risk Factors......................... Summary: Company; Risk Factors
4. Use of Proceeds............................................... Use of Proceeds
5. Determination of Offering Price............................... Risk Factors: Offering Risks
6. Dilution...................................................... Dilution
7. Selling Security Holders...................................... Sales by Selling Shareholders
8. Plan of Distribution.......................................... Plan of Distribution
9. Legal Proceedings............................................. Business: Legal Proceedings
10. Directors, Executive Officers,
Promoters and Control Persons................................. Management
11. Security Ownership of Certain
Beneficial Owners and Management.............................. Principal Shareholders
12. Description of Securities.................................... Description of Securities
13. Interest of Named Experts and Counsel......................... Legal Matters; Experts
14. Disclosure of Commission Position on Indemnification
For Securities Act Liabilities................................ Management: Indemnification
15. Organization within Last Five Years........................... N/A
16. Description of Business...................................... Business
17. Management Discussion and
Analysis or Plan of Operation................................. Management's Discussion and
Analysis of Results of Operations
and Financial Condition
18. Description of Property....................................... Business: Properties
19. Certain Relationships and Related Transactions................ Certain Relationships and Related
Transactions
20. Market For Common Equity and
Related Stockholders Matters.................................. Dividend Policy; Description of
Securities
21. Executive Compensation....................................... Management
22. Financial Statements.......................................... Selected Financial Data
23. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure........................ N/A
</TABLE>
<PAGE> 3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
<TABLE>
<CAPTION>
<S> <C> <C>
24. Indemnification of Directors and Officers..................... Page II-2
25. Other Expenses of Issuance and Distribution................... Page II-2
26. Recent Sales of Unregistered Securities....................... Page II-3
27. Exhibits...................................................... Page II-4
28. Undertakings.................................................. Page II-5
</TABLE>
2
<PAGE> 4
PROSPECTUS
REGI U.S., INC.
492,500 SHARES OF COMMON STOCK, NO PAR VALUE ("COMMON STOCK"), TO BE
SOLD BY CERTAIN SHAREHOLDERS
Certain shareholders of REGI U.S., Inc., an Oregon corporation (the
"Company"), hereby offer for sale 492,500 shares of Common Stock (the "Shares").
The Shares were issued or will be issued to holders of warrants (the "Warrants")
who elected to exercise those Warrants at $1.25 per share or will exercise
Warrants and purchase Shares at $1.50 per share (the "Selling Shareholders").
The Warrants were issued by the Company as part of a private placement of units
consisting of one share of Common Stock and one Warrant to purchase one
additional Share. The period to exercise the Warrants has since been extended by
the Company pending the effectiveness of a registration statement allowing
holders of the Warrants to resell the Shares issued upon exercise of the
Warrants..
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD NOT BE PURCHASED BY
ANY INVESTOR WHO CANNOT AFFORD TO SUSTAIN THE LOSS OF THEIR ENTIRE INVESTMENT.
PLEASE REFER TO SECTION TITLED "RISK FACTORS" ON PAGES 7-9 INFRA.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE INFORMATION CONTAINED IN THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO PROCEEDS TO
PRICE TO SALES THE THE SELLING
PUBLIC COMMISSION COMPANY(1) SHAREHOLDERS(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE $ 3.50(1) 0 0 $ 3.50
TOTAL $1,723,500 0 0 $1,723,500
- --------------------------------------------------------------------------------
</TABLE>
(1) Based upon the market price of the Common Stock on June 12, 1996.
(2) The Company will pay the expenses of the Selling Shareholders estimated
at $35,000.
THE DATE OF THIS PROSPECTUS IS JUNE ___, 1996
3
<PAGE> 5
PROSPECTUS
REGI U.S., INC.
THE COMPANY INTENDS TO FURNISH ITS SHAREHOLDERS ANNUAL REPORTS
CONTAINING AUDITED FINANCIAL STATEMENTS WITH A REPORT THEREON BY ITS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS AS WELL AS QUARTERLY REPORTS FOR THE FIRST THREE
QUARTERS OF EACH FISCAL YEAR CONTAINING UNAUDITED FINANCIAL INFORMATION.
UNTIL SEPTEMBER ____,1996 (NINETY DAYS AFTER THE EFFECTIVE DATE OF THIS
PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
4
<PAGE> 6
SUMMARY
The following summary is qualified in its entirety by the information
and financial statements appearing elsewhere in this Prospectus.
THE COMPANY
GENERAL
REGI U.S. Inc., an Oregon corporation (the "Company") is engaged
principally in the business of developing and seeking to commercially exploit an
improved axial vane-type rotary engine known as the Rand Cam/Direct Charge
Engine (the "RC/DC Engine"), a variation of the Rand Cam Engine (the "Original
Engine"). A patent has been received on certain features of the RC/DC Engine.
The worldwide intellectual and marketing rights to the RC/DC Engine are held by
Rand Energy Group Inc. ("REGI"). The Company holds the rights to develop, build
and market the engine design in the U.S. under a project cost sharing agreement
entered into with REGI effective May 1, 1993. Under the terms of this agreement
each company will fund 50% of the continuing development cost of the RC/DC
Engine.
The Company was organized under the laws of the State of Oregon on July
27, 1992. The Company is controlled by REGI, a privately held British Columbia
corporation which owns 74.6% of its shares of Common Stock and which, in turn,
is controlled 51% by Reg Technologies Inc., a publicly held British Columbia
corporation ("Reg Tech").
The RC/DC Engine is based upon the Original Engine which was patented
in 1983. Brian Cherry, an officer and director of the Company, has done
additional development work on the Original Engine which resulted in significant
changes and improvements for which a patent was issued and assigned to the
Company. It is believed that RC/DC Engine offers important simplification from
the Original Engine, which will make it easier to manufacture and will also
allow it to operate more efficiently. The Company believes that the RC/DC Engine
holds significant potential in a number of applications ranging from small
stationary equipment to automobiles and aircraft.
The Company intends to pursue the commercial development of the RC/DC
Engine by entering into licensing and/or joint venture arrangements with other
larger companies which would have the financial resources to maximize the
potential of the engine. At the present time no such licensing or joint venture
arrangements have been concluded and there is no assurance that any will be in
the foreseeable future. There are no plans at present for the Company to become
actively involved in either manufacturing or marketing any engine which it may
ultimately develop to the point of becoming a commercial product.
At the present time, several prototype models of the RC/DC Engine have
been tested and additional development and testing work is continuing. The
Company believes that such development and testing will continue for at least
another year before a more or less "final" design is achieved, and it may take
several years before a commercially feasible design is perfected. There is no
assurance at this time, however, that such a commercially feasible design will
ever be perfected, or if it is, that it will become profitable to the Company.
If a commercially feasible design is perfected, the Company does, however,
expect to derive revenues from licensing the technology relating to the RC/DC
Engine regardless of whether actual commercial production is ever achieved.
There is no assurance at this time, however, that revenues will ever be received
from licensing the technology even if it does prove to be commercially feasible.
The Company's principal offices are located at 10751 Shellbridge Way,
Suite 185, Richmond, British Columbia V6X 2W8, Canada. Its telephone number is
(604) 278-5996 and its telefacsimile number is (604) 278-3409.
In order to fully effect its intended plan of operation, the Company
will likely need to raise additional capital in the future beyond any amount
currently on hand and which may become available as a result of the exercise of
Warrants and options which are currently outstanding.
5
<PAGE> 7
Assuming the exercise of currently outstanding Warrants and stock
options and sale of the Shares to the public, the officers and directors of the
Company will control approximately 76% of the Company's Common Stock.
The Company's securities are subject to Rule 15g-9 under the Securities
Exchange Act of 1934, as amended, which imposes additional sales practices on
broker-dealers who sell such securities to persons other than established
customers and "accredited investors". In such case, a broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. This rule may
adversely affect the market for the Company's securities.
The net tangible book value of the Company was $(0.019) per share on
April 30, 1996 and will be $(0.024) after payment of expenses attributable to
this offering. This will result in dilution to the purchasers of Shares greater
than their investment.
The Company has not paid dividends in the past and does not expect to
pay dividends in the foreseeable future.
THE OFFERING
SECURITIES OFFERED: Shares of unregistered restricted Common
Stock issued or to be issued upon the exercise of
the Warrants by the Selling Shareholders.
COMMON STOCK
OUTSTANDING: 7,665,900
TO BE OUTSTANDING
AFTER EXERCISE
OF ALL WARRANTS: 7,863,500
MARKET FOR SHARES: All Shares offered pursuant to this prospectus will
be freely tradeable when issued, on the NASD OTC
Bulletin Board.
RISK FACTORS: The Company has generated no revenues since
incorporation, and there are substantial risks
involved in any investment in the Company at this
time. See "Risk Factors."
SELECTED FINANCIAL DATA
(IN DOLLARS)
The selected financial data set forth below is derived from the
financial statements of the Company included in this Prospectus and should be
read in conjunction with such financial statements, including the notes thereto.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
July 27, 1992 Years Ended April 30
(inception) to ---------------------------------------------
April 30,1993 1994 1995 1996
------------- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales -- -- -- --
Net Income (Loss) $(23,492) $(394,263) $(1,225,743) $(796,905)
Net Income (Loss) per Share (1) $ (0.01) $ (0.06) $ (0.18) $ (0.11)
Cash Dividends Paid per Share -- -- -- --
Weighted Averages Shares used in 6,000,000 6,500,000 6,710,275 7,382,309
per share calculations
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
April 30
----------------------------------------------------
1993 1994 1995 1996
----------------------------------------------------
<S> <C> <C> <C> <C>
Current Assets $29,708 $ 170,860 $ 100,878 $ 2,768
Current Liabilities 15,000 295,307 644,745 191,819
Working Capital 14,708 (124,447) (543,867) (189,051)
Total Assets 86,708 437,552 337,747 44,016
Long Term Debt -- -- -- --
Stockholder's Equity 71,708 142,245 (306,998) (147,803)
</TABLE>
(1) Based on the average weighted number of shares outstanding during the
respective periods.
RISK FACTORS
The Shares of Common Stock being registered hereby involve a high
degree of risk and, therefore, should be considered extremely speculative. THESE
SHARES SHOULD NOT BE PURCHASED BY ANYONE WHO CANNOT AFFORD THE POSSIBLE LOSS OF
THEIR ENTIRE INVESTMENT. Prospective investors should read the entire Prospectus
and carefully consider among the other factors and financial data described
herein, the following risk factors related to the business of the Company:
6
<PAGE> 8
BUSINESS RISKS
1. LIMITED OPERATING HISTORY. The Company was incorporated on July 27,
1992. It has conducted only limited business and has a very short
operating history. The Company is still in the developmental stage and
does not expect to receive any revenues from either licensing or
production of the RC/DC Engine for a minimum of 6 months.
2. NEGATIVE SHAREHOLDERS' EQUITY. The Company had a negative shareholders'
equity at April 30, 1996 and continues to have a negative shareholders
equity as of the date of this prospectus. The Company's ability to
continue as a going business will be dependent upon its ability to
raise additional capital and/or generate revenues from operations.
3. NEED FOR ADDITIONAL CAPITAL. Even if the all of the Warrants
outstanding are exercised, the proceeds available to the Company along
with other possible sources of financing may not be adequate for it to
achieve its business objectives. The Company intends to use the
proceeds from the exercise of Warrants for working capital and for
further research and development work. The ultimate success of the
Company will depend upon its ability to raise additional capital or to
have other parties bear a portion of the required costs to further
develop or exploit the potential market for its products. There is no
assurance that funds will be available from any source, and if not
available, it will be necessary for the Company to limit its operations
to those which can be financed from the proceeds of the exercise of
outstanding Warrants. (See "Business".)
4. DEPENDENCE ON CONSULTANTS AND OUTSIDE MANUFACTURING FACILITIES. Since
the Company's present plans do not provide for a significant technical
staff or the establishment of manufacturing facilities, the Company
will be primarily dependent on others to perform these functions and to
provide the requisite expertise and quality control. There is no
assurance that such persons or institutions will be available when
needed at affordable prices. It will likely cost more to have
independent companies do research and manufacturing than for the
Company to handle these functions if it had these resources.
5. PRODUCT ACCEPTANCE. The profitability and survival of the Company will
depend upon its ability to develop a technically and commercially
feasible product which will be accepted by end users. The RC/DC Engine
which the Company is developing must be technologically superior or at
least equal to other engines which competitors offer and must have a
competitive price/performance ratio to adequately penetrate its
potential markets. If it is not able to achieve this condition or if it
does not remain technologically competitive, the Company may be
unprofitable and investors could lose their entire investment. There
can be no assurance that the Company or potential licensees will be
able to achieve and maintain end user acceptance of its engine.
6. COMPETITION. While not a highly competitive business in terms of
numbers of competitors, the business of developing engines of a new
design and attempting to either license or produce them is nonetheless
difficult because most existing engine producers are large, well
financed companies which are very concerned about maintaining their
market position. There is no assurance that the Company will be
successful in meeting or overcoming competition which currently exists
or may develop in the future.
7. MANAGEMENT AND CONFLICTS OF INTEREST. The present officers and
directors of the Company have other full-time positions or part time
employment which is unrelated to the Company. Some officers and
directors will be available to participate in management decisions on a
part time or as needed basis only. (See "Management"). Management of
the Company may devote time to other companies or projects which may
compete directly or indirectly with the Company.
8. CONTROL BY CURRENT SHAREHOLDERS. If the currently exercisable
outstanding Warrants are exercised and the Shares sold to the public
pursuant to this prospectus, there will be 7,863,500 shares of Common
Stock outstanding of which at least 7,341,000 will be owned by current
shareholders representing control of approximately 93.3% of the total.
Accordingly, the present shareholders will continue to elect all of the
Company's directors and generally control the affairs of the Company.
(See "Principal Shareholders" and "Description of Securities.")
9. GENERAL FACTORS. The Company's areas of business may be affected from
time to time by such matters as changes in general economic conditions,
changes in laws and regulations, taxes, tax laws, prices and costs, and
other factors of a general nature which may have an adverse effect on
the Company's business.
7
<PAGE> 9
OFFERING RISKS
1. LIMITED PUBLIC MARKET FOR COMMON STOCK. At present, only a limited
market exists for the Company's Common Stock on the over the counter
bulletin board and there is no assurance that a more active trading
market will develop, or, if developed, that it will be sustained. A
purchaser of Shares may, therefore, find it difficult to resell the
securities offered herein should he or she desire to do so.
Furthermore, it is unlikely that a lending institution will accept the
Company's Common Stock as pledged collateral for loans.
2. ISSUANCE OF ADDITIONAL SHARES. The substantial portion of the
20,000,000 authorized shares of Common Stock of the Company will remain
unissued even if all outstanding Warrants are exercised. The Board of
Directors has, however, the power to issue such shares without
shareholder approval. Although the Company presently has no firm
commitments or contracts to issue any additional shares, it fully
intends to do so if necessary in order to acquire products, properties,
capital, or for any other corporate purposes. Following this offering,
any additional issuances by the Company from its authorized but
unissued shares would have the effect of further diluting the
percentage interest of investors in this offering.
3. CUMULATIVE VOTING AND PREEMPTIVE RIGHTS. There are no preemptive rights
in connection with the Company's Common Stock. The investors purchasing
Shares in this offering may be diluted in their percentage ownership of
the Company in the event additional shares are issued by the Company in
the future. Cumulative voting in the election of directors is not
permitted. Accordingly, the holders of a majority of the shares of
Common Stock, present in person or by proxy, will be able to elect all
of the Company's Board of Directors. (See "Description of Securities.")
4. SHARES AVAILABLE FOR RESALE. All but 617,500 of the Company's presently
outstanding 7,665,900 shares, are "restricted" securities and could be
sold in compliance with Rule 144 adopted under the Securities Act of
1933, as amended (the "Securities Act"), if certain additional
requirements are met. Assuming the exercise of all of the Warrants and
the registration of the 492,500 Shares, the Company will then have
issued and outstanding 7,863,500 shares of its Common Stock, of which
6,753,500 will be "restricted" securities. Rule 144 provides, in
essence, that after two years from the date of acquisition, a person,
including an affiliate, of the Company (or persons whose shares are
aggregated) may sell an amount up to one percent (1%) of the issued and
outstanding shares within any three month period, provided that certain
current public information about the Company is available. A person who
has not been an affiliate of the Company (or persons whose shares are
aggregated) who has owned restricted shares of Common Stock for at
least three years is entitled to sell such shares under Rule 144
without regard to any of the limitations described above. Thereby, in
each three month period, 78,635 shares could be sold under Rule 144 by
each person having held the securities for at least two years.
Investors should be aware of the possibility that sales under Rule 144
may, in the future, have a depressing effect on the price of the
Company's stock in any market that currently exists or may develop.
5. ESTIMATES AND FINANCIAL STATEMENTS. Some of the information in this
Prospectus consists of and relies upon evaluations and estimates made
by management and other professionals. Even though management believes
in good faith that such estimates are reasonable, based upon market
studies and data provided by sources knowledgeable in the field, there
can be no assurance that such estimates will ultimately be found to be
accurate or even based upon accurate evaluations. Any management errors
in evaluations or estimates could have a significant negative effect
upon the Company's profitability or even its viability.
6. NO FORESEEABLE DIVIDENDS. The Company has not paid dividends on its
Common Stock and does not anticipate paying dividends on its Common
Stock in the foreseeable future.
7. POSSIBLE VOLATILITY OF SECURITIES PRICES. The market price of the
Company's Common Stock has been highly volatile since it began trading
in September 1994 and will likely continue to behave in this manner in
the future. Factors such as the Company's operating results and other
announcements by the Company regarding its development work and
business operations may have a significant impact on the market price
of the Company's securities. Additionally, market prices for securities
of many smaller companies have experienced wide fluctuations not
necessarily related to the operating performance of the companies
themselves.
8. REQUIREMENTS OF SEC WITH REGARD TO LOW-PRICED SECURITIES. The Company's
securities are subject to Rule 15g-9 under the Exchange Act, which
imposes additional sales practice requirements on broker-dealers who
sell such securities to persons other than established customers and
"accredited investors" (generally, individuals with net worths in
excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000
together with their spouses). For transactions covered by this rule, a
broker-dealer must make a special suitability determination for the
purchaser and have received the purchaser's written consent to the
transaction prior to sale. Consequently, the rule may adversely affect
the ability of broker-dealers to sell the Company's securities and may
adversely affect the ability of purchasers in this offering to sell any
of the securities acquired hereby in the secondary market.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the shares
offered hereby and will pay the expenses of the offering estimated at $35,000.
8
<PAGE> 10
DILUTION
At April 30, 1996, the net tangible book value of the Company was
approximately $(147,803) or $(0.019) per share. Net tangible book value per
share equals the Company's total shareholders' equity less intangible assets
(primarily goodwill) divided by the number of shares of Common Stock
outstanding. After giving effect to the sale of the 492,500 Shares by the
selling shareholders at an assumed public offering price of $3.50, the proforma
net tangible book value of the Company's Common Stock at April 30, 1996 (after
deducting estimated offering expenses) would have been approximately $(0.024)
per share. This represents an immediate dilution of $(3.505) per share to new
investors. The following table illustrates this per share dilution.
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed Public Offering Price. . . . . . . . . . . . . . . . . . . . . $ 3.50
Net tangible book value per share
before offering (1)(3). . . . . . . . . . . . . . . . . . . . $(0.019)
Pro forma net tangible book value after
offering (2)(3) . . . . . . . . . . . . . . . . . . . . . . . $(0.024)
Decrease attributable to expenses of offering. . . . . . . . . . . . . 0.005
Dilution to new investors. . . . . . . . . . . . . . . . . . . . . . . $ 3.505
</TABLE>
- ------------------------
(1) The data in the table do not give effect to the exercise of any
outstanding options or warrants nor to any transactions in the
Company's Common Stock subsequent to April 30, 1996.
(2) After deduction of $35,000 estimated offering expenses to be paid by
the Company.
(3) Determined by dividing the number of shares of Common Stock outstanding
into the tangible net worth of the Company. Tangible net worth is
defined as tangible net assets minus liabilities.
SALES BY SELLING SHAREHOLDERS
A total of 492,500 Shares have been registered pursuant to the
registration statement under the Securities Act, of which this Prospectus forms
a part, for sale by the Selling Shareholders. All of the Shares were registered,
at the Company's expense, under the Securities Act and are expected to become
tradeable on or about the date of this Prospectus. The Company will not receive
any proceeds from the sale of the Shares by the Selling Shareholders. Sales of
the Selling Shareholders' Shares or the potential of such sales would likely
have an adverse effect on the market prices of the Common Stock. None of the
Selling Shareholders are officers or directors of the Company.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Amount of Amount and
Amount of Issuer's Percentage of
Relationship with Issuer's Securities Issuer's
Issuer and/or Issuer's Owned Offered As Part Securities to be
Stockholder Affiliates or (Prior to of Current Owned After
Subsidiaries(1) Offering) Offering Offering(2)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aabedi, Ghaleb 1,000 500 500
- --------------------------------------------------------------------------------------------------------
Adolph, David 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Alford, Jay W. 40,000 20,000 20,000
- --------------------------------------------------------------------------------------------------------
Altivilla, Thomas G. 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Anderson, Patricia 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Archibald, Joan 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Atherton, Gregory 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Atherton, Leo L. 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Atherton, Mark V. 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Atherton, Peter A. 4,000 2,000 2,000
- --------------------------------------------------------------------------------------------------------
Begg, G. H. K. 4,000 2,000 2,000
- --------------------------------------------------------------------------------------------------------
Burns Fry & Company 5,000 5,000 0
- --------------------------------------------------------------------------------------------------------
Bernhardt, Alanna 8,000 4,000 4,000
- --------------------------------------------------------------------------------------------------------
Bertin-Maclean, Denise 200 100 100
- --------------------------------------------------------------------------------------------------------
Bettis, Sandra 200 100 100
- --------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 11
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Amount of Amount and
Amount of Issuer's Percentage of
Relationship with Issuer's Securities Issuer's
Issuer and/or Issuer's Owned Offered As Part Securities to be
Stockholder Affiliates or (Prior to of Current Owned After
Subsidiaries(1) Offering) Offering Offering(2)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bickerton, Brian 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Boughen, Lise 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Bowerman, Wes 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Brady, James 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Busby, James 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Butterley, Rhonda 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Butterley, Ron 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Butterley, Sandee 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Campbell, Kent 15,000 7,500 7,500
- --------------------------------------------------------------------------------------------------------
Canaccord Capital Corp. 9,000 9,000 0
- --------------------------------------------------------------------------------------------------------
Carr, Lucille 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Castle, Harry 20,000 10,000 10,000
- --------------------------------------------------------------------------------------------------------
Chernoff, Lawrence 15,000 5,000 10,000
- --------------------------------------------------------------------------------------------------------
Christman, Melvin 4,000 2,000 2,000
- --------------------------------------------------------------------------------------------------------
Clark, Isabelle M. 6,000 3,000 3,000
- --------------------------------------------------------------------------------------------------------
Clark, Lloyd 49,000 7,000 42,000
- --------------------------------------------------------------------------------------------------------
Crandall, John C. 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Cranfield, Kerry G. 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Cranfield, R. G. 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Cutler, Kimberly Ann 400 200 200
- --------------------------------------------------------------------------------------------------------
D'Mello, Clara 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
D'Mello, Elizabeth 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Deeley, Bernadette P. 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
DeMello, Mario 4,000 2,000 2,000
- --------------------------------------------------------------------------------------------------------
Drescher, Katherine B. 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Drescher, Richard 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Edmunds, F. R. 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Egger, Jennifer 3,000 1,500 1,500
- --------------------------------------------------------------------------------------------------------
Emmrich, Dietmund 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Felker, Bob & Marva 5,000 2,500 2,500
- --------------------------------------------------------------------------------------------------------
Fitzgerald, Gary 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Fitzgibbons, Neil 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Flawse, Allen 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Flawse, Barbara 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Forsyth, Walter 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Friesen, Greg 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Gibb, Colin R. 4,000 2,000 2,000
- --------------------------------------------------------------------------------------------------------
Gilstead, Eric 200 100 100
- --------------------------------------------------------------------------------------------------------
Griffiths, Jill 40,000 10,000 30,000
- --------------------------------------------------------------------------------------------------------
Gross, Allen 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
GundyCo. 5,000 5,000 0
- --------------------------------------------------------------------------------------------------------
Guss, A. K. 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Haab, Hans 1,000 500 500
- --------------------------------------------------------------------------------------------------------
Hadden, L. A. H. 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Harder, Robert L. 1,000 500 500
- --------------------------------------------------------------------------------------------------------
Harris, Jeffrey F. 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Harris, Marsha 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Amount of Amount and
Amount of Issuer's Percentage of
Relationship with Issuer's Securities Issuer's
Issuer and/or Issuer's Owned Offered As Part Securities to be
Stockholder Affiliates or (Prior to of Current Owned After
Subsidiaries(1) Offering) Offering Offering(2)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hatcher, William 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Heath, Eustace W. 8,000 4,000 4,000
- --------------------------------------------------------------------------------------------------------
Heath, Wendy C. 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Herman, Louis 7,000 3,500 3,500
- --------------------------------------------------------------------------------------------------------
Hoffman, Andrew 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
How & Company 5,000 5,000 0
- --------------------------------------------------------------------------------------------------------
Hutchison, Thomas 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Jaeb, Lewis 25,000 12,500 12,500
- --------------------------------------------------------------------------------------------------------
Jenkins, Noel 6,000 3,000 3,000
- --------------------------------------------------------------------------------------------------------
Jenkins, Phillis 8,000 4,000 4,000
- --------------------------------------------------------------------------------------------------------
Jetha, Riaz & Michelle 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Johnson, D. 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Kennett, Brent E. 200 100 100
- --------------------------------------------------------------------------------------------------------
Kennett, Linda 200 100 100
- --------------------------------------------------------------------------------------------------------
Keslar, Fred & Clara 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Kimoto, James & Joan 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Kirk, Julia 200 100 100
- --------------------------------------------------------------------------------------------------------
Kocalis, Julie 4,000 2,000 2,000
- --------------------------------------------------------------------------------------------------------
Konnert, Ellen 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Kurtz, Maryann 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Lacroix, Brian 20,000 10,000 10,000
- --------------------------------------------------------------------------------------------------------
Lacroix, Shelly 6,000 3,000 3,000
- --------------------------------------------------------------------------------------------------------
Lim, Keith 20,000 5,000 15,000
- --------------------------------------------------------------------------------------------------------
Longe, Robert 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Macgregor, Elizabeth 6,000 3,000 3,000
- --------------------------------------------------------------------------------------------------------
Maclean, Peter 200 100 100
- --------------------------------------------------------------------------------------------------------
Mainart, David F. 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Marohn, Dieter & Esther 20,000 10,000 10,000
- --------------------------------------------------------------------------------------------------------
Marr, Jack 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Marsh, Neil Thomas 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Mass, Edward G. 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
McArdon, Valerie 200 100 100
- --------------------------------------------------------------------------------------------------------
McBain, K. R. 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
McLeod, James 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Medford, Brian 8,000 4,000 4,000
- --------------------------------------------------------------------------------------------------------
Medford, Gary 30,000 5,000 25,000
- --------------------------------------------------------------------------------------------------------
Medford, Kenneth 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Midland Walwyn Capital 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------
Miller, Ray 9,000 2,000 7,000
- --------------------------------------------------------------------------------------------------------
Mullaly, James & Gene 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Myron, Kandel 20,000 10,000 10,000
- --------------------------------------------------------------------------------------------------------
Olde Discount Corp. 5,000 5,000 0
- --------------------------------------------------------------------------------------------------------
Parkinson, W. D. 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Peter, Terence F. 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Potthoff, Paul 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Quinn, Robert 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Reisner, William 2,400 1,200 1,200
- --------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Amount of Amount and
Amount of Issuer's Percentage of
Relationship with Issuer's Securities Issuer's
Issuer and/or Issuer's Owned Offered As Part Securities to be
Stockholder Affiliates or (Prior to of Current Owned After
Subsidiaries(1) Offering) Offering Offering(2)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richards, Donald 3,000 1,500 1,500
- --------------------------------------------------------------------------------------------------------
Richie, David 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Rosenfield, Norm 6,000 3,000 3,000
- --------------------------------------------------------------------------------------------------------
Schedeen, Brinkley 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
ScotiaMcleod 20,000 20,000 0
- --------------------------------------------------------------------------------------------------------
Self Owned Apartments Ltd. 32,000 16,000 16,000
- --------------------------------------------------------------------------------------------------------
Short, Betty 3,000 1,000 2,000
- --------------------------------------------------------------------------------------------------------
Smith, J. B. 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
Smith, J. N. 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
SMR Investments Ltd. 40,400 20,200 20,200
- --------------------------------------------------------------------------------------------------------
Spady, Larry 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Steeds, Horace Anthony 4,000 2,000 2,000
- --------------------------------------------------------------------------------------------------------
Vandenbrink, Antonie 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Vandenbrink, Jakob 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Warner, Brian & Kelly 4,000 2,000 2,000
- --------------------------------------------------------------------------------------------------------
Weeks, Todd 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Welty, Alison 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Williams, Brady 4,000 2,000 2,000
- --------------------------------------------------------------------------------------------------------
Winkler, John 10,000 5,000 5,000
- --------------------------------------------------------------------------------------------------------
Winkler, Peggy 4,000 2,000 2,000
- --------------------------------------------------------------------------------------------------------
With, Wm. D. 6,000 3,000 3,000
- --------------------------------------------------------------------------------------------------------
Wolverton Securities 5,000 5,000 0
- --------------------------------------------------------------------------------------------------------
Woo, Robert & Carol 2,000 1,000 1,000
- --------------------------------------------------------------------------------------------------------
</TABLE>
PLAN OF DISTRIBUTION
The sale of the Shares may be effected from time to time in
transactions (which may include block transactions by or for the account of the
Selling Shareholders) in the over-the-counter market or in negotiated
transactions, a combination of such methods of sale or otherwise. Sales may be
made at fixed prices which may be changed, at market prices prevailing at the
time of sale, or at negotiated prices.
Selling Shareholders may effect such transactions by selling their
Shares directly to purchasers, through broker-dealers acting as agents for the
Selling Shareholders or to broker-dealers who may purchase shares as principals
and thereafter sell such shares from time to time in the over-the-counter market
in negotiated transactions or otherwise. Such broker-dealers, if any, may
receive compensation in the form of discounts, concessions or commissions from
the Selling Shareholders and/or the purchasers for whom such broker-dealers may
act as agents or to whom they may sell as principals or otherwise (which
compensation as to a particular broker-dealer may exceed customary commissions).
Each Selling Stockholder desiring to sell Shares will be subject to the
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation, Rules 10b-6 and 10b-7, which
provisions may limit the timing of the purchases and sales of Shares by such
Selling Shareholders.
The Selling Shareholders and broker-dealers, if any, acting in
connection with such sales might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act and any commission received by
them and any profit on the resale of the Selling Shareholder Shares might be
deemed to be underwriting discounts and commissions under the Securities Act.
12
<PAGE> 14
DIVIDEND POLICY
To date the Company has not paid any dividends on its Common Stock and
does not expect to declare or pay any dividends on such Common Stock in the
foreseeable future. Payment of any dividends will be dependent upon future
earnings, if any, the financial condition of the Company, and other factors as
deemed relevant by the Company's Board of Directors.
PRICE RANGE OF THE COMMON SHARES
There is a limited public market for the Common Stock of the Company
which currently trades on the NASD OTC Bulletin Board under the symbol "RGUS"
where it has been traded since September 21, 1994.
The following table sets forth the high and low prices for the
Company's Common Stock, as provided by NASD and reported on the Bulletin Board
for the quarters presented. These quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commissions, and may not reflect actual
transactions.
<TABLE>
<CAPTION>
Bid Price Asked Price
High Low High Low
---- --- ---- ---
<S> <C> <C>
Quarter ended October 31, 1994 none reported none reported
Quarter ended January 31, 1995 $3.00 $1.25 $3.375 $2.40
Quarter ended April 30, 1995 $3.00 $1.25 $3.375 $2.25
Quarter ended July 30, 1995 $2.50 $1.75 $2.875 $2.00
Quarter ended October 31, 1995 $2.75 $1.875 $2.75 $2.12
Quarter ended January 31, 1996 $6.75 $2.4375 $6.62 $2.56
Quarter ended April 30, 1996 $6.25 $3.75 $6.62 $4.00
</TABLE>
As of June 14, 1996, there were 7,665,900 shares of Common Stock
outstanding, held by 178 shareholders of record and by various broker/dealers on
behalf of 19 street name shareholders.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
April 30, 1995 and April 30, 1996. This table should be read in conjunction with
the Financial Statements and the Notes thereto included elsewhere in the
Prospectus.
<TABLE>
<CAPTION>
April 30, 1995 April 30, 1996
(Audited) (Audited)
------------------------------------
<S> <C> <C>
Short term debt $644,745 $ 191,819
Long term debt -- --
Stockholders Equity
Common Stock: no par value
20,000,000 shares authorized
6,930,200 and 7,635,900 shares
35,900 shares
outstanding, respectively $1,336,500 $ 2,292,600
Deficit accumulated during the
development stage $(1,643,498) $(2,440,403)
Total stockholders equity $(306,998) $ (147,803)
Total capitalization $(306,998) $ (147,803)
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
INTRODUCTION
The Company, a development stage company, has, since its formation in
July 1992, been engaged almost exclusively in research and development
activities in conjunction with its parent companies, Rand Energy Group Inc.
("REGI") and Reg Technologies Inc. ("Reg Tech"). Reg Tech is a publicly held
Canadian company which owns 51% of REGI. These activities have focused on
developing a commercially viable model of the Rand Cam/Direct Charge Engine
("RC/DC Engine"). The Company has not yet commenced any significant product
commercialization and, until such time as it does, will not generate significant
product revenues. The Company has incurred significant operating losses since
its inception, resulting in an accumulated deficit of $2,440,403 at April 30,
1996. Such losses are expected to continue into the foreseeable future until
such time as, if ever, the Company is able to attain sales and profit levels
sufficient to support its operations. The Company's ability to continue as a
going concern is dependent in part on its ability to raise operating capital
through either equity, debt, joint ventures, other means, or some combination of
these, until such time as it is able to attain profitable operations.
RESULTS OF OPERATIONS
YEAR ENDED APRIL 30, 1996 COMPARED TO YEAR ENDED APRIL 30, 1995
The Company's only revenues for fiscal 1996 were $200,000 received on
the sale of the 3-D Machine Vision Technology to Reg Technologies Inc. which
recovered the Company's investment cost of $200,000. The Company received no
other revenues from operations during fiscal 1996 compared to similar results
during fiscal 1995. During fiscal 1996 the loss totaled $796,905 compared to
$1,225,743 during fiscal 1995.
The significant decrease in the loss from fiscal 1995 to fiscal 1996
was due to lower direct development costs associated with prototype design and
construction which totaled $322,412 in fiscal 1996 against $581,318 in fiscal
1995. Other significant decreases in research and development expenses were
attributed to intellectual property, market development, professional fees, and
travel which together decreased to $37,184 in fiscal 1996 compared to $407,817
in fiscal 1995. There were no significant increases in research and development
expenses from fiscal 1995 to fiscal 1996.
Administrative expenses rose from $112,964 in fiscal 1995 to $303,854
in fiscal 1996. The most significant of these were shareholder and investor
relations which together increased from $49,192 in fiscal 1995 to $189,586 in
fiscal 1996 due to active trading starting in the third quarter of fiscal 1995.
Other significant increases were in office courier and printing and professional
fees which rose from $58,921 in fiscal 1995 to $114,996 in fiscal 1996 due to
the filing of this registration statement and other regulatory filings.
The loss per share in fiscal 1996 was $.11 versus $.18 in fiscal 1995.
YEAR ENDED APRIL 30, 1995 COMPARED TO YEAR ENDED APRIL 30, 1994
The Company received no revenues from operations during the period
ended April 30, 1995 compared to similar results during the 1994 period. During
fiscal 1995 the loss totaled $1,225,743 compared to $394,263 during fiscal 1994.
The majority of the increase was due to higher direct development costs
associated with prototype design and construction which totaled $581,318 in
fiscal 1995 against $174,398 in fiscal 1994. During 1995 the Company also
expensed $257,000 relating to intellectual property acquired in previous years.
The Company acquired the U.S. rights to the original Rand Cam Engine ("Original
Engine") on August 20, 1992 from REGI by issuing 5,700,000 shares at a deemed
value of $0.01 per share and agreeing to pay REGI a 5% net profit royalty. The
$57,000 deemed value was expensed as research and development in 1995. Under 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 RC/DC Engine. On November 9,
1993, in consideration for the transferred technology, Mr. Cherry was issued
100,000 shares of Reg Tech and 300,000 shares of REGI. The shares issued had a
deemed value of $200,000. As part of the agreement, Mr. Cherry was also granted
a 1% net profit royalty on revenues derived from the RC/DC Engine. The deemed
value of $200,000 was treated as an expense paid by Reg
13
<PAGE> 15
Tech 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.
Other significant increases occurred in technical salaries,
professional fees and project overhead which together increased to $127,255 in
fiscal 1995 from $42,401 in fiscal 1994, due also to the higher level of
activity associated with product development.
Administrative expenses rose from $35,689 in fiscal 1994 to $112,964 in
fiscal 1995. The most significant of these were shareholder relations costs
which rose from $26,350 in 1994 to $49,162 in fiscal 1995 and accounting and
legal fees which went from $1,580 to $52,311
Decreased costs were shown in technical consulting and report expenses
which dropped from $44,488 in fiscal 1994 to $8,360 in fiscal 1995.
The loss per share for fiscal 1995 was $0.18 versus $0.06 in fiscal
1994.
YEAR ENDED APRIL 30, 1994 COMPARED TO YEAR ENDED APRIL 30, 1993
The Company generated no revenues from operations during the fiscal
1994 which was also the case during period from inception to April 30, 1993. The
loss for the fiscal 1994 totaled $394,263 compared to $23,492 during the same
period in 1993. The majority of the increase was due to higher direct
development costs associated with prototype design and construction which
totaled $174,398 in fiscal 1994 against $2,500 in fiscal 1993. Other significant
increases occurred in professional and project management fees which rose from
$12,800 in the fiscal 1993 period to $56,488 in fiscal 1994 and technical
salaries and consulting fees which rose to $47,961 in fiscal 1994 from $1,125 in
fiscal 1993. Travel and market development expenses rose from nil in fiscal 1993
to $57,809 in fiscal 1994.
Administrative expenses increased from none in fiscal 1993 to $35,689
in fiscal 1994. The most significant of these was shareholder relations costs
which rose from none during the 1993 period to $26,350 in fiscal 1994. The loss
per share for fiscal 1994 was $0.06 versus $0.01 in fiscal 1993.
14
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES
YEAR ENDED APRIL 30, 1996 COMPARED TO YEAR ENDED APRIL 30, 1995
The Company generated revenues of $200,000 during fiscal 1996 from the
sale of 3-D Machine Vision Technology to Reg Tech which funds were used to pay
down the amount loaned from Reg Tech. Other funds were raised by stock options
exercised to net the Company $75,800, warrants exercised to net the Company
$198,300 and a private offering memorandum to issue shares at $2.00 per share to
net the Company $682,000 for a total of $956,100 raised through issuance of new
shares during the year. The share issuances, together with $200,000 realized on
the sale of the 3-D Machine Vision Technology, allowed the Company to pay down
the loan owing to Reg Tech from $609,873 in fiscal 1995 to $116,750 in fiscal
1996 and to pay for additional research and development during the year. The
Company continues to incur debt payable to Reg Tech pursuant to the cost sharing
agreement.
At year end current assets decreased from $100,878 in fiscal 1995 to
$2,768 in fiscal 1996 while current liabilities decreased from $644,745 in
fiscal 1995 to $191,819 in fiscal 1996. The net increase in working capital
position of $354,816 was due to the raising of cash by issuing new shares.
Management anticipates the Company will be able to fund continuing
operations from additional equity and/or debt capital infusions as may be
required from time to time. There is, however, no assurance such additional
funding will, in fact, be available when required or, if it is, it will be
available on terms which would be economically attractive to the Company. If the
Company is not able to generate cash flows from operations and/or acquire
additional funding as needed, its operations may be adversely affected or may
need to be curtailed. Funding for continued development of the prototypes for
the RC/DC Engine is currently being provided by Reg Tech pursuant to a loan. Reg
Tech has agreed to fund continued assembling and testing development of the
RC/DC Engine which is not expected to exceed $75,000, since the development of
the engine is in its final stages. Reg Tech has sufficient liquid assets to do
so. Additional cash to fund continuing operations will also be provided by Reg
Tech and may be generated from exercise of outstanding stock options and
warrants which have exercise prices substantially below the current market price
for the Company's Common Stock.
YEAR ENDED APRIL 30, 1995 COMPARED TO YEAR ENDED APRIL 30, 1994
As previously noted the Company generated no revenue from operations
during the fiscal year ended April 30, 1995. Working capital requirements were
met by utilizing cash and term deposits which the Company had on hand at the
start of the period and from the exercise of options, warrants and a private
placement of units. Net cash generated from financing activities during the
fiscal year ended April 30, 1995 totaled $776,500.
At year end 1995, current assets decreased to $100,878 from $170,860 at
the end of 1994 while current liabilities increased to $644,745 in 1995 from
$295,307 at the end of 1994. The amount due to the parent company, REGI,
decreased to nil at the end of 1995 from $74,455 at yearend 1994, while the
amount due to Reg Tech, which is the ultimate parent of the Company, rose to
$609,873 at April 30, 1995 from $213,352 at the end of 1994. The amount due to
Reg Tech varies from one accounting period to another based upon the
availability of cash or working capital within the two companies. Reg Tech
periodically pays for research and development expenses on behalf of the Company
and REGI. Reg Tech then charges the Company and REGI on a 50-50 basis for these
expenses, pursuant to the research and development cost sharing agreement.
YEAR ENDED APRIL 30, 1994 COMPARED TO YEAR ENDED APRIL 30, 1993
No revenues from operations were generated during either of the fiscal
years ended April 30, 1993 and 1994. The Company met its working capital
requirements during the 1994 fiscal year partially from the use of cash and term
deposits which it had on hand at the start of the year and from a private
placement of units made during the year which provided $500,000 in additional
capital. An additional $109,357 was provided as advances from REGI and Reg Tech.
At yearend 1994, current assets stood at $170,860, up from $29,708 at
the end of 1993, and current liabilities dropped to $7,500 in 1994 versus
$15,000 at the end of the 1993 period. The amount due REGI was $74,455 at the
end of 1994 to compared to nil at the end of the 1993 period, and the amount due
Reg Tech rose to $213,352 at the end of the 1994 period compared to nil at
yearend 1993.
BUSINESS
GENERAL
The Company was organized under the laws of the State of Oregon on July
27, 1992 as Sky Technologies, Inc. On August 1, 1994, the Company's name was
officially changed by majority shareholder vote to REGI U.S., Inc. The Company
is controlled by Rand Energy Group Inc., a privately held British Columbia
corporation ("REGI"), which, at April 30, 1995 owned 82.2% of its shares of
Common Stock and which, in turn, is controlled 51% by Reg Technologies Inc., a
publicly held British Columbia corporation ("Reg Tech"). The Company is engaged
in the business of developing and building an improved axial vane-type rotary
engine known as the Rand Cam/Direct Charge Engine ("RC/DC Engine"), which is a
variation of the Rand Cam Rotary Engine, an axial vane rotary engine ("Original
Engine"). The worldwide intellectual and marketing rights to the RC/DC Engine
are held by REGI. The Company holds the rights to develop, build and market the
RC/DC Engine design in the U.S. pursuant to an agreement with REGI. Under a
project cost sharing agreement entered into with REGI effective May 1, 1993,
each company will fund 50% of the continuing development cost of the RC/DC
Engine.
The Company's principal offices are located at 10751 Shellbridge Way,
Suite 185, Richmond, British Columbia V6X 2W8, Canada. Its telephone number is
(604) 278-5996 and its telefacsimile number is (604) 278-3409.
In order to fully effect its intended plan of operations, the Company
will likely need to raise additional capital in the future beyond any amount
currently on hand and which may be become available as a result of the exercise
of warrants and options which are currently outstanding.
15
<PAGE> 17
PRODUCTS
The Company is engaged in the business of developing and building an
improved axial vane-type rotary engine known as the RC/DC Engine which is a
variation of the Original Engine. The Original Engine is an axial vane rotary
engine, the worldwide marketing rights to which are held by REGI. A United
States patent was issued for the RC/DC Engine on July 4, 1995, and assigned to
the Company. Since no marketable product has yet been developed, the Company has
received no revenues from operations.
The RC/DC Engine is based upon the Original Engine patented in 1983.
Brian Cherry, an officer and director of the Company, has done additional
development work on the Original Engine which resulted in significant changes
and improvements for which the U.S. patent has been issued and assigned to the
Company. It is believed that the RC/DC Engine offers important simplification
from the basic Original Engine, which will make it easier to manufacture and
will also allow it to operate more efficiently.
Pursuant to an agreement dated October 20, 1986 among Reg Tech, Rand
Cam Corp. and James McCann, Reg Tech agreed to acquire a 40% voting interest in
a new corporation to be incorporated to acquire the rights to the Original
Engine. The new corporation was REGI. Reg Tech acquired the 40% voting interest
in REGI in consideration of the payment of $250,000.
Pursuant to an agreement made as of the 27th day of April, 1993 among
Reg Tech, Rand Cam Corp., REGI and James McCann, Reg Tech acquired an additional
330,000 shares (11%) of REGI from Rand Cam Corp. to increase its investment to
51%.
On August 20, 1992, the Company entered in an agreement with REGI and
Brian Cherry (the "August 1992 Agreement") under which the Company issued
5,700,000 shares of its Common Stock at a deemed value of $0.01 per share to
REGI in exchange for certain valuable rights, technology, information, and other
tangible and intangible assets, including improvements, relating to the United
States rights to the Original Engine. REGI's president is also the president of
the Company and its Vice President and Secretary is also a Director of the
Company. The terms of the agreement were negotiated between the parties and were
deemed to be mutually advantageous based upon conditions and circumstances
existing at the time.
The second part of the August 1992 Agreement calls for the Company to
pay semiannually to REGI a royalty of 5% of any net profits to be derived by the
Company from revenues received as a result of its license of the Original
Engine.
The third part of the August 1992 Agreement calls for the Company to
pay semiannually to Brian Cherry a royalty of 1% of any net profits to be
derived by the Company from revenues received as a result of its licensing of
the Original Engine.
Also in August 1992, the Company sold 300,000 shares of its Common
Stock at $0.01 per share to Brian Cherry.
In an agreement dated April 13, 1993 among the Company, REGI, Reg Tech
and Brian Cherry (the "April 1993 Agreement") and made as an amendment to a
previous Amendment Agreement dated November 23, 1992 between REGI, Reg Resources
Corp. (now Reg Tech) and Brian Cherry and an original agreement dated July 30,
1992 between REGI, Reg Resources Corp. and Brian Cherry, Cherry agreed to: (a)
sell, transfer and assign to REGI worldwide rights except for the United States
of America to all of his right, title and interest in and to the technology
related to the RC/DC Engine (the "Technology"), including all pending and future
patent applications in respect of the Technology, together with any
improvements, changes or other variations to the Technology; (b) sell, transfer
and assign to the Company United States of America rights to all of his right,
title and interest in and to the Technology, including all pending and future
patent applications in respect of the Technology, together with any
improvements, changes or other variations to the Technology. The Company has the
manufacturing and marketing rights for the RC/DC Engine and the Technology in
the United States. Thus uses of the RC/DC Engine or the Technology in the United
States belongs to the Company including manufacturing for export.
Other provisions of the April 1993 Agreement call for the Company (a)
to pay to REGI a continuing royalty of 5% of the net profits derived from the
Technology by the Company and (b) to pay to Brian Cherry a continuing royalty of
1% of the net profits derived from the Technology by the Company. On November 9,
1993, in consideration for this transfer of the Technology, Brian Cherry was
issued 100,000 shares of Reg Tech with a deemed value of $200,000.
A final provision of the April 1993 Agreement assigns and transfers
ownership to the Company of any patents, inventions, copyrights, know-how,
technical data, and related types of intellectual property conceived, developed
or created by REGI or its associated companies either prior to or subsequent to
the date of the agreement,
16
<PAGE> 18
which results or derives from the direct or indirect use of the Original Engine
and/or RC/DC Engine technologies by REGI.
Pursuant to a letter of understanding dated December 13, 1993 among the
Company, REGI and Reg Tech, as grantors, and West Virginia University Research
Corporation ("WVURC"), the grantors agreed that WVURC shall own 5% of all
patented technology and will receive 5% of all net profits from sales, licenses,
royalties or income derived from the patented technology relating to the
Original Engine and the RC/DC Engine. WVURC performed extensive analysis and
testing on the RC/DC engine. WVURC will provide continued support and
development of the RC/DC Engine including research, development, testing
evaluation and creation of intellectual property. In addition WVURC will
introduce the Company to potential customers and licensees. The Company also
will be entitled to all additional intellectual property developed by WVURC
relating to the RC/DC Engine.
Based upon testing work performed by independent organizations on
prototype models, the Company believes that the RC/DC Engine holds significant
potential in a number of applications ranging from small stationary equipment to
automobiles and aircraft. In additional to its potential use as an internal
combustion engine, the RC/DC Engine design is also being employed in the
development of a compressor unit which may find application in automobile air
conditioners.
At the present time, several prototypes of the RC/DC Engine have been
tested and additional development and testing work is continuing. The Company
believes that such development and testing will continue for at least another
year before a more or less "final" design is achieved, and it may take several
years before a commercially feasible design is perfected. There is no assurance
at this time, however, that such a commercially feasible design will ever be
perfected, or if it is, that it will become profitable to the Company. If a
commercially feasible design is perfected, the Company does, however, expect to
derive revenues from licensing the Technology relating to the RC/DC Engine
regardless of whether actual commercial production is ever achieved. There is no
assurance at this time, however, that revenues will ever be received from
licensing the Technology even if it does prove to be commercially feasible.
Two prototypes were built by the WVURC to run on gasoline. Testing on
these prototypes suggested that the concept is fundamentally sound and that with
a program of engine review, design, testing and development, a technically
successful range of engines can be developed. The current prototype design for
the diesel engine was designed by a consortium consisting of Hercules Aerospace
Company (now Alliant Techsystems), WVURC and the Company. Hercules Aerospace was
involved in the design and development including drawings for the RC/DC diesel
engine. In addition Hercules Aerospace performed extensive analysis on the
diesel engine including bearings, cooling, leakage, rotor, vanes, housing, vane
tip heating, geometry and combustion. This engine is being designed as a general
purpose power plant for military and commercial applications. The diesel engine
prototype is being fabricated at a machine shop in El Segundo, CA. The testing
of the Diesel will commence at the El Segundo machine shop and then will be
extensively tested at Adiabatics Inc. in Columbus, Indiana (an experienced
engine research and testing company) by the end of June 1996.
The compressor prototype has been completed and testing has commenced
in the ETL labs in Cortland, NY (an experienced compressor testing company). The
compressor is being built for an automobile air-conditioning unit. The results
of the testing on the compressor prototype should be completed by the end of
June 1996.
A number of rotary engines have been designed over the past 70 years
but only one, the Wankel, has been able to achieve mechanical practicality and
any significant market acceptance. It is believed that a large market would
exist for a practical rotary engine which could be produced at a competitive
price and which could provide a good combination of fuel efficiency, power and
decreased emissions.
The profitability and survival of the Company will depend upon its
ability to develop a technically and commercially feasible product which will be
accepted by end users. The RC/DC Engine which the Company is developing must be
technologically superior or at least equal to other engines which competitors
offer and must have a competitive price/performance ratio to adequately
penetrate its potential markets. If it is not able to achieve this condition or
if it does not remain technologically competitive, the Company may be
unprofitable and investors could lose their entire investment. There can be no
assurance that the Company or potential licensees will be able to achieve and
maintain end user acceptance of its engine.
While market acceptance of a new type of engine could be difficult to
achieve, once accepted, such an engine could have a potential market of hundreds
of thousands of units per year. The Company has not conducted a formal market
survey but statistics available on the aircraft, marine and industrial markets
alone indicate an annual market potential of more than one hundred million
dollars. The two prototypes are being used as demonstrators to prove that the
Technology works and can be used in other engines. For example Hercules
Aerospace looked at all engine applications for the RC/DC Engine. Based on the
market potential, the Rand Cam mechanism is well suited for application to
internal combustion engines, pumps and compressors and expansion engines, such
as turbines and other piston engine applications. The mechanism can be scaled to
match virtually any size requirement. This flexibility opens the door to large
markets being developed. The Company is currently testing prototypes for these
products. The Company's strategy is to develop engines and compressors for low
to medium horsepower applications, then apply the Technology to larger
applications. The Company plans to then license the Technology or enter into
joint venture arrangements for other specific applications. The licensee or
joint venture partners will then provide funding for research and development of
the specific applications.
A "Technology Evaluation" report was prepared on the RC/DC Engine dated
May 19, 1993 by Patrick R. Badgley of Adiabatics, Inc. This evaluation concludes
that the engine concept is sound and has numerous advantages over current
engines. At the time of the report, Mr. Badgley was director of research and
development at Adiabatics, Inc. Mr. Badgley is now a Vice President of the
Company. The Company believes the conclusions contained in the report are still
valid.
17
<PAGE> 19
MARKETING
The Company intends to pursue the commercial development of the RC/DC
Engine by entering into licensing and/or joint venture arrangements with other
larger companies which would have the financial resources to maximize the
potential of the engine. At the present time no such licensing or joint venture
arrangements have been concluded and there is no assurance that any will be in
the foreseeable future. There are no plans at present for the Company to become
actively involved in either manufacturing or marketing any engine which it may
ultimately develop to the point of becoming a commercial product.
The Company's current objective is to complete and test the compressor
and diesel engine prototypes. Based on the successful testing, the prototypes
will be used for presentation purposes to potential license and joint venture
partners. The Company will be making presentations to the military which could
result in additional government funding if the diesel engine prototype meets
with its approval.
The Company expects revenue from license agreements with the potential
end users based on the success of the early test results from the compressor and
diesel engine prototypes. Within six months of successful testing of the
prototypes, the Company expects to have joint venture or license agreements
finalized. These would result in royalties to the Company. However, there is no
assurance that the tests will be successful and that the Company will ever
receive any such royalties.
RESEARCH AND DEVELOPMENT
The basic research and development work on the RC/DC Engine is being
coordinated and funded by Reg Tech.
The Company plans to contract with outside individuals, institutions
and companies to perform most of the additional research and development work
which it may require to benefit from its rights to the RC/DC Engine.
The Company has entered into an employment agreement with Patrick
Badgley, a professional engineer in Columbus, Indiana, and a Vice President and
Director of the Company, to act as Research Project Manager for the RC/DC
Engine. Under the agreement, Mr. Badgley, will receive compensation of $7,700
per month plus reasonable expenses related to the project, of which the Company
will pay 50% and REGI will pay 50%.
Development work on the application of the RC\DC engine design in auto
air conditioner compressors is being completed by Aerotech Driveline, a design
firm in Detroit, Michigan under a contract with Reg Tech.
ENVIRONMENTAL CONTROL FACTORS
At the present time there is no direct financial or competitive effect
upon the Company's business as a result of any need to comply with any federal,
state or local provisions which have been enacted or adopted regulating the
discharge of materials into the environment, or otherwise relating to the
protection of the environment.
KEY CUSTOMERS
Although the Company has no key customers at the present time, it is
expected that if its development work is successful, it will likely become
dependent, at least initially, upon one or very few key customers. Such
dependence could prove to be risky in the event that one or more such potential
customers were to be lost and not replaced.
RAW MATERIALS
Since the Company is not in production and there are no plans at this
time for the Company to enter the actual engine manufacturing business, raw
materials are not of present concern. At this time, however, there does not
appear to be any foreseeable problem with obtaining any materials or components
which may be required in the manufacture of its potential products.
PATENT INFORMATION
U.S. patent No. 5,429,084 was granted on July 4, 1995 to the inventor,
Brian Cherry, Patrick Badgley and four other individuals for various
improvements incorporated in the RC/DC Engine. The patent has been assigned to
the Company. U.S. Patent 4,401,070 for the Original Engine was issued on August
30, 1983 to James McCann and the marketing rights are held by REGI.
The RC/DC Engine is composed basically of a disk shaped rotor with
drive shaft, which turns, and the housing or stator, which remains stationary.
The rotor has two or more vanes which are mounted perpendicular to the direction
of rotation and slide back and forth through it. As the rotor turns, the ends of
the vanes ride along the insides of the
18
<PAGE> 20
stator housing which have wave-like depressions, causing the vanes to slide back
and forth. In the process of turning and sliding, combustion chambers are formed
between the rotor, stator walls and vanes where the fuel/air mixture is
injected, compressed, burned and exhausted.
SEASONALITY AND BACKLOG OF BUSINESS
Since the Company is not yet in production, seasonality of its
potential business is not of present concern. However, at this time it does not
appear that there will be a significant seasonal factor to its potential
business.
The Company has no current backlog of business.
WORKING CAPITAL REQUIREMENTS
Because the Company is not yet producing and selling any products,
working capital requirements relative to production, inventory and accounts
receivable are not relevant. Working capital requirements for day-to-day
operations and the continuation of research and development activities have been
provided from equity capital and advances from related parties including Reg
Tech.
Until such time as the Company is able to obtain revenues from
licensing production rights to the engine or from some related activities it
will most likely need to rely on additional equity capital or debt capital, if
available. There is no assurance that such funding from either or any source
will be available or, if available, that it would be on such terms as will be
economically acceptable to the Company.
The Company believes that it currently has on hand sufficient funds to
cover anticipated expenses relating to this development work and the ongoing
overhead costs of maintaining offices and functioning as a publicly held
company. Additionally, the Company expects that it may receive additional
capital as the result of the sale of shares of Common Stock either through
private placements or public offerings and through the exercise of outstanding
options and warrants.
BUSINESS SUBJECT TO RENEGOTIATION
The Company currently has no business or contract subject to
renegotiation with any agency of the U.S. Government and does not expect to have
any during the fiscal year ending April 30, 1997.
COMPETITION
The Company currently faces and will continue to face competition in
the future from established companies engaged in the business of developing,
manufacturing and marketing engines. While not a highly competitive business in
terms of numbers of competitors, the business of developing engines of a new
design and attempting to either license or produce them is nonetheless difficult
because most existing engine producers are large, well financed companies which
are very concerned about maintaining their market position. Such competitors are
already well established in the market and have substantially greater resources
than the Company. Internal combustion engines are produced by automobile
manufacturers, marine engine manufacturers, heavy equipment manufacturers and
specialty aircraft and industrial engine manufacturers. The Company expects that
its engine would be used mainly in industrial and marine applications.
Except for the Wankel rotary engine built by Mazda of Japan, no
competitor, of which the Company is aware, presently produces in a commercial
quantity any rotary engine similar to that which the Company is developing. The
Wankel rotary engine is similar only in that it is a rotary engine rather than a
reciprocating piston engine. Without substantially greater financial resources
than are currently available to the Company, however, it is very possible that
it may not be able to adequately compete in the engine business. One competitor,
Infinite Engines Corporation, is developing a competitive rotary engine.
However, the Company believes that its engine is dramatically different. The
Infinite Engine is similar to the old Wankel engine which had pollution problems
and was not fuel efficient. The Company's RC\DC Engine is more fuel efficient
and will have fewer emissions.
The Company believes that if and when its engine is completely
developed, in order to be successful in meeting or overcoming competition which
currently exists or may develop in the future, its engine will need to offer
superior performance and/or cost advantages over existing engines used in
various applications.
EMPLOYEES
The Company currently has one full-time and three part-time employees,
only two of which are directly involved in technical development work on the
RC/DC Engine. The Company expects to hire additional employees for those
positions which it deems necessary to fill, as needs arise. Most additional
employees are expected to be in technical and licensing/marketing positions.
PROPERTIES
19
<PAGE> 21
The Company owns no properties. It currently utilizes office space
leased by Reg Tech in a commercial business park building located in Richmond,
British Columbia, Canada, a suburb of Vancouver. The monthly rent for its
portion of this office space is $500.00. The present facilities are believed to
be adequate for meeting the Company's needs for the immediate future. However,
management expects that the Company will likely acquire separate space when the
level of business activity requires it to do so. The Company does not anticipate
that it will have any difficulty in obtaining such additional space at favorable
rates. There are no current plans to purchase or lease any properties in the
near future. Mr. Badgley works out of an office in his home in Columbus,
Indiana. From this office, Mr. Badgley oversees and controls development and
testing of the engine prototypes. Mr. Badgley has also designed several
important improvements to the RC/DC Engine for which patent applications are
pending.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings or litigation, nor
is it aware that any litigation is presently being threatened or contemplated
against either itself or any officer, director or affiliate.
PLAN OF OPERATIONS
During the fiscal year beginning May 1, 1996, the Company plans to
continue development work on the RC/DC Engine in conjunction with work being
done by Reg Tech. If testing work on prototype models continues to be
successful, the Company hopes to enter into implementation type studies with
branches of the U.S. military as well as certain private companies. In
conjunction with such studies, the Company hopes to establish agreements with
one or more industrial engine manufacturers which would wish to participate in
further development and commercialization of the engine.
SEGMENT DATA
The Company currently operates only in one industry and therefore, the
financial statements contained herein describe its operations in this one
industry. All dollar amounts are stated in U.S. funds, unless otherwise noted.
The Company has no foreign operations and has recorded no sales since its
inception.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following is a list of the names of all of the current directors
and executive officers of the Company. Each of the directors listed below served
in the respective capacities during the fiscal periods ended April 30, 1993,
1994, 1995 and 1996.
Name Age Position
- ---- --- --------
John G. Robertson 55 Chairman of the Board and President
Brian Cherry 56 Vice President, Secretary and Director
Patrick R. Badgley 53 Vice President, Research and Development
Jennifer Lorette 23 Vice President and Chief Financial Officer
The directors are elected annually and shall serve until their
successors are elected and qualified. Mr. Robertson and Mr. Cherry have held
their positions since the formation of the Company. The Company intends to hold
its annual meetings on August 4 of each year or on such other later date as may
be set by the board of directors. Additional officers and directors may be added
as the Company's operations require.
There are no family relationships between any director or executive
officer and any other director or executive officer.
JOHN ROBERTSON been the Chairman, President and Chief Executive Officer
of the Company since its formation. For more than the past ten years he has also
been the president of Reg Tech, a public company listed on the Vancouver Stock
Exchange, which he founded, and which has financed the research on the Rand Cam
Engine since 1986. He is also the President and Founder of Teryl Resources
Corp., a public company involved in gold, diamond, and oil and gas exploration.
Mr. Robertson is also President and Founder of SMR Investments, Ltd., the
management company for both Teryl Resources Corp. and Reg Tech. SMR has been in
business since 1979 and owns major share positions in Teryl
20
<PAGE> 22
Resources Corp., Reg Tech and other public companies. He is also President of
Flame Petro Minerals Corp., a private company with interests in oil and gas and
gold prospects, and President of IAS Communications, Inc., which is developing a
new type of antenna system.
BRIAN CHERRY has been Vice President, Secretary and a Director of the
Company since its inception. His family has owned a pump manufacturing company
in Vancouver for a number of years and has made significant contributions to the
improved design of the Original Engine and the development of the RC/DC Engine.
Mr. Cherry has also been a Director of Flame Petro Minerals Corp. From October
20, 1994 through the present he has also served as Vice President in charge of
patents and technology for Rand Cam Engine. From April 1990 through the present
Mr. Cherry has acted as Secretary Treasurer to Reg Tech which initially financed
the research and development for the Rand Cam Engine. His duties include
overseeing technical and patent data on the RC/DC Engine.
PATRICK R. BADGLEY was appointed Vice President, Research and
Development of the Company in February 1994. He is directing and participating
in the technical development of the Rand Cam compressor, gasoline engine and
diesel engine. Previously, Mr. Badgley had been employed for 16 years at
Adiabatics, Inc., in Columbus, Indiana. Between 1986 and 1994, Mr. Badgley was
the Director of Research and Development at Adiabatics, where he directly
oversaw several government and privately sponsored research programs including
the lightweight, quiet 30 kW APU project for ARPA. He was also the Program
Manager for the Gas Research Institute project for emissions reduction of
two-stoke cycle natural gas engines. He was also Program Manger for several
coal fuel diesel engine programs for the Department of Energy and for uncooled
engine programs for a Wankel engine for NASA and for a piston type diesel
engine for the U.S. Army. Mr. Badgley's work has covered all phases of
research, design, development and manufacturing, from research on ultra-high
speed solenoids and fuel sprays, to new product conceptualization and
production implementation of fuel pumps and fuel injectors. Previously, he also
worked at Curtiss Wright and John Deere on Wankel engine development. Mr.
Badgley received his Bachelor of Science degree in Mechanical Engineering from
Ohio State University and has done graduate work at Purdue University. Mr.
Badgley is also a director and officer of IAS Communications Inc.
JENNIFER H. LORETTE has been a Vice President and Chief Financial
Officer of the Company since June 1994. From April 1994 through the present she
has also been Vice President of Administration for Reg Tech. From December 1994
through the present she has acted as Secretary of IAS Communications Inc.
Between December 1992 and June 1994 she was employed in various capacities by
Reg Tech. Ms. Lorette has also been the Vice President and CFO of Flame Petro
Minerals Corp. a private company with interests in oil, diamonds, gas and gold
prospects. Between October 1990 and July 1992, Ms. Lorette was employed by
Nickels Custom Cabinets. Ms. Lorette completed her high school education in
June 1990.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate cash compensation paid for
services rendered to the Company during the last three fiscal years by the
Company's Chief Executive Officer and the Company's most highly compensated
executive officers who served as such at the end of the last fiscal year. No
executive officer had an annual salary and bonus in excess of $100,000 during
such year.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------- --------------
NAME AND OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS (#)(1)
- ------------------ ---- ---------- --------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
John G. Robertson 1996 -0- -0- -0- 300,000
President, Chief 1995 -0- -0- -0- -0-
Executive Officer 1994 -0- -0- -0- 300,000
Brian Cherry 1996 -0- -0- -0- -0-
Vice President and 1995 -0- -0- -0- -0-
Director 1994 -0- -0- -0- 125,000
</TABLE>
21
<PAGE> 23
<TABLE>
<S> <C> <C> <C> <C> <C>
Patrick Badgley 1996 $46,200 -0- -0- -0-
Vice President 1995 $42,000 -0- -0- -0-
1994 $42,000 -0- -0- 75,000
Jennifer Lorette, 1996 $ 6,000 -0- -0- 50,000
Vice President 1995 $ 2,000 -0- -0- -0-
1994 -0- -0- -0- 30,000
</TABLE>
- -------
(1) Represents options granted under the Company's 1993 Key Employees Incentive
Stock Option Plan.
The Company has entered into an employment agreement with Patrick
Badgley, a registered professional engineer, to act as Research Project Manager
for the RC/DC Engine. The agreement calls for Mr. Badgley to be paid $7,700 per
month plus reasonable expenses related to the project. Fifty-percent (50%) of
this amount is paid by the Company and 50% by Reg Tech.
During the fiscal years ended April 30, 1995 and 1996, project
management fees of $30,000 were paid to a company controlled by the president of
the Company and an additional $6,000 of rent and secretarial fee were paid to a
company controlled by the president of the Company.
No other significant compensation has been paid directly or accrued to
any other officer or director of the Company during the year ended April 1996.
On March 31, 1994 the Company entered into a management agreement with Access
Information Services, Inc., a Washington corporation which is owned and
controlled by John G. Robertson, under which the Company retained Access at the
rate of $2,500 to provide certain management, administrative, and financial
services for the Company.
The Company has no other agreement at this time, with any officer or
director, regarding employment with the Company or compensation for services
other than herein described. Compensation of officers and directors is
determined by the Company's Board of Directors and is not subject to shareholder
approval.
STOCK OPTION PLAN
The Company adopted a Key Employees Incentive Stock Option Plan on
April 30, 1993. The Plan authorizes the issuance of up to 2,000,000 shares of
Common Stock of the Company to be issued to employees. As of April 30, 1996, the
Company had issued options for approximately 1,097,500 shares.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants
of stock options made during the fiscal year ended April 30, 1996 to the
Company's Chief Executive and the other executive officers named in the above
Summary Compensation Table.
<TABLE>
<CAPTION>
% OF TOTAL
OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES IN BASE PRICE
NAME GRANTED (#) FISCAL YEAR ($/SHARE) EXPIRATION DATE
- ---- ----------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
John G. Robertson 300,000 83% $3.00 January 3, 2001
Jennifer Lorette 50,000 14% $3.00 January 3, 2001
</TABLE>
STOCK OPTIONS EXERCISED IN LAST FISCAL YEAR AND HELD AT END OF FISCAL YEAR
- - APRIL 30, 1996
The following table sets forth certain information with respect to
options exercised during fiscal 1996 by the Company's Chief Executive Officer
and the other executive officers named in the above Summary Compensation Table,
and with respect to unexercised options held by such persons at the end of
fiscal 1996.
<TABLE>
<CAPTION>
SHARES VALUE OF UNEXERCISED
ACQUIRED ON VALUE NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
EXERCISE REALIZED OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END (1)
-------- -------- -------------------------- ----------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John G. Robertson 163,000 $458,230 437,000 -0- $615,500 -0-
</TABLE>
22
<PAGE> 24
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Patrick Badgley -0- N/A 75,000 -0- $206,250 -0-
Jennifer Lorette 20,000 $47,800 60,000 -0- $65,000 -0-
Brian Cherry -0- -0- 125,000 -0- $388,750 -0-
</TABLE>
- --------------------
(1) The calculation of the value of unexercised options are based on the
difference between the last sale price of $3.75 per share for the Company's
common Stock on Tuesday, April 30, 1996 as reported by NASD, and the
exercise price of each option, multiplied by the number of shares covered by
the option.
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation provide that the Company shall
indemnify to the fullest extent permitted by the Oregon Business Corporation Act
any person who is made, or threatened to be made, a party to any action, suit or
proceeding, whether civil, criminal, administrative, investigative, or otherwise
(including an action, suit or proceeding by or in the right of the corporation)
by reason of the fact that the person is or was a director or officer of the
corporation or a fiduciary within the meaning of the Employee Retirement Income
Security Act of 1974 with respect to any employee benefit plan of the
corporation, or serves or served at the request of the corporation as a director
or officer, or as a fiduciary of an employee benefit plan, of another
corporation, partnership, joint venture, trust or other enterprise. The right to
and amount of indemnification shall be determined in accordance with the
provisions of the Oregon Business Corporation Act in effect at the time of the
determination.
The Oregon Revised Statutes provides for indemnification where a person
who was or is a party or is threatened to be made a party to any threatened,
pending or contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than action by or in right of a
corporation), by reason of fact he is or was a Director, Officer, employee or
agent of a corporation or serving another corporation at the request of the
corporation, against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement, actually and reasonably incurred by him if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interest of the corporation and, with respect to criminal action or
proceeding, had no reasonable cause to believe his conduct unlawful. Lack of
good faith is not presumed from settlement or nolo contendere plea.
Indemnification of expenses (including attorneys' fees) is allowed in derivative
actions except in the case of misconduct in performance of duty to the
corporation unless the Court decides indemnification is proper. To the extent
any such person succeeds on the merits or otherwise, he shall be indemnified
against expenses (including attorneys' fees). Determination that the person to
be indemnified met applicable standards of conduct, if not made by the Court, is
made by the Board of Directors by majority vote of quorum consisting of the
Directors not party to such action, suit or proceeding or, if a quorum is not
obtainable or a disinterested quorum so directs, by independent legal counsel or
by the stockholders. Expenses may be paid in advance upon receipt of
undertakings to repay unless it shall ultimately be determined that he is
entitled to be indemnified by the corporation. The Corporation may purchase
indemnity insurance.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of June 12, 1996, the amount and the
percentage of the Company's Common Stock owned of record or beneficially by each
officer, director and holder, or person known by the Company to own
beneficially, more than five percent of the voting interest in the Company's
Common Stock, and all officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE
TITLE NAME AND ADDRESS OF OF BENEFICIAL OF BENEFICIAL
OF CLASS BENEFICIAL OWNER OWNERSHIP (1) OWNERSHIP (1)
- -------- ---------------- --------------------------- -------------
<S> <C> <C> <C>
Common Rand Energy Group Inc. 5,653,700 (2) 64.8%
</TABLE>
23
<PAGE> 25
<TABLE>
<S> <C> <C> <C>
1030 West Georgia St.
Vancouver, B.C., V6E 2Y3
Common Brian Cherry 390,000 (3) 4.5%
5451 Floyd Avenue
Richmond, B.C. Canada
Common John G. Robertson 6,102,400 (4) 69.94%
4040 Amundsen Place
Richmond, B.C. Canada
Common Patrick R. Badgley 75,000 (6) 0.86%
2815 Franklin Drive
Columbus, IN 47201
Common Jennifer Lorette 60,500 (5) 0.69%
9751 Seagrave Road
Richmond, B.C. Canada
Common James McCann 5,653,700 (2) 64.8%
211 -107 E. Broadway
Vancouver, B. C.
Common All officers and 6,627,900 76.0%
directors as a group (five persons)
</TABLE>
- ------------------
1. Based upon 7,665,900 shares issued and outstanding, and assuming (1)
exercise of options, and (2) exercise of 197,600 warrants. None of the above
are selling shareholders. A person is deemed to be the beneficial owner of
securities that can be acquired by such person within 60 days from the date
of this Prospectus upon the exercise of warrants or options. Each beneficial
owner's percentage ownership is determined by assuming that options or
warrants that are held by such person (but not those held by any other
person) and which are exercisable within 60 days from the date of this
Prospectus.
2. Rand Energy Group is owned 51% by Reg Technologies Inc. and 49% by Rand Cam
Engine Corp. Rand Cam Engine Corp. is a privately held company whose stock
is reportedly owned 50% by The Watchtower Society, a religious organization,
34% by James McCann and the balance by several other shareholders. Mr.
McCann has indicated that he donated the shares held by The Watchtower
Society to that organization but has retained a voting proxy for those
shares.
3. Brian Cherry owns 265,000 shares and options on an additional 125,000
shares.
4. John G. Robertson owns 11,700 shares and holds options to acquire 437,000
shares of the Company's Common Stock. Susanne M. Robertson, the wife of John
G. Robertson, owns SMR Investment Ltd. which holds a controlling interest in
Reg Technologies Inc. Therefore, Mr. Robertson is deemed to also be the
beneficial owner of the shares owned by Rand Energy Group, Inc., which is
51% controlled by Reg Technologies Inc.
5. Ms. Lorette owns 500 shares and owns options to purchase an additional
60,000 shares.
6. Holds options for these shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to an agreement dated August 1992 (the "August 1992
Agreement"), the Company issued 5,700,000 shares of its Common Stock at a deemed
value of $0.01 per share to REGI in exchange for certain valuable rights,
technology, information, and other tangible and intangible assets relating to
the United States rights to the Rand Cam Engine (the "Original Engine"). Reg
Tech's president is also the president of the Company and its Vice President and
Secretary is also a Director of the Company.
24
<PAGE> 26
The Company also agreed to pay semiannually to REGI a royalty of 5% of
any net profits to be derived by the Company from revenues received as a result
of its license of the Original Engine.
As part of the August 1992 Agreement, the Company also agreed to pay
semiannually to Brian Cherry a royalty of 1% of any net profits to be derived by
the Company from revenues received as a result of this agreement.
Also in August 1992, the Company sold 300,000 shares of its Common
Stock at $0.01 per share to Brian Cherry.
In an agreement dated April 13, 1993 among the Company, REGI, Reg Tech
and Brian Cherry (the "April 1993 Agreement"), and made as an amendment to a
previous Amendment Agreement dated November 23, 1992 between REGI, Reg Resources
Corp. (Reg Tech) and Brian Cherry and an original agreement dated July 30, 1992
between REGI, Reg Resources Corp. and Brian Cherry, Cherry agreed to: (a) sell,
transfer and assign to REGI all his right, title and interest in and to the
technology related to the RC/DC Engine, (the "Technology") including all pending
and future patent applications in respect of the Technology for all countries
except the United States of America, together with any improvements, changes or
other variations to the Technology; (b) sell, transfer and assign to the Company
(then called Sky Technologies Inc.), all his right, title and interest in and to
the Technology, including all pending and future patent applications in respect
of the Technology for the United States of America, together with any
improvements, changes or other variations to the Technology.
Other provisions of the April 1993 Agreement call for the Company (a)
to pay to REGI a continuing royalty of 5% of the net profits derived from the
Technology by the Company and (b) to pay to Brian Cherry a continuing royalty of
1% of the net profits derived from the Technology by the Company.
A final provision of the April 1993 Agreement assigns and transfers
ownership to the Company of any patents, inventions, copyrights, know-how,
technical data, and related types of intellectual property conceived, developed
or created by REGI or its associated companies either prior to or subsequent to
the date of the agreement, which results or derives from the direct or indirect
use of the Original Engine and/or RC/DC Engine technologies by REGI.
In November 1993, in consideration for certain technology transferred
to the Company, as described above, Brian Cherry was issued 100,000 Common
Shares of Reg Tech (deemed value $200,000). There was no connection between this
transaction and the transaction involving the acquisition of the Canadian rights
to the Machine Vision Technology described below. At that time the Company did
not have available cash to pay to Mr. Cherry and there was no public market for
the stock of the Company. Based upon his desire for some degree of immediate
liquidity, management agreed to issue shares of Reg Tech to Mr. Cherry and to
treat this as an advance. As previously noted, Reg Tech owns 51% of REGI which
owns 76.7% of the Common Stock of the Company. Both Mr. Cherry and Mr. Robertson
are officers and directors of both the Company and Reg Tech.
The terms of the agreements referenced above were negotiated by the
parties in non-arm's-length transactions but were deemed by the parties involved
to be fair and equitable under the circumstances existing at the time.
In 1995, the Company acquired an exclusive limited sublicense to market
and distribute in Canada for the following consideration:
i) $200,000 (paid).
ii) royalty payments equal to 2% of all net revenue derived from sales
in Canada, to be paid 30 days after the end of each calendar
quarter.
iii) minimum annual royalty payments as follows:
25
<PAGE> 27
$
December 31, 1996 1,000
December 31, 1997 3,000
December 31, 1998 4,500
annually thereafter 6,000
On October 31, 1995, the Company sold its rights to the Machine Vision
Technology to Reg Tech for $200,000. All obligations pursuant to the sublicense
were transferred to Reg Tech.
DESCRIPTION OF SECURITIES
The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock with no par value. As of the date of this Registration Statement,
the Company has outstanding 7,665,900 shares of its Common Stock.
COMMON STOCK
Holders of the Company's Common Stock are entitled to receive dividends
when declared by the Board of Directors out of funds legally available for that
purpose. Any such dividends may be paid in cash, property or shares of the
Company's Common Stock. The Company has not paid any dividends since its
inception and it is unlikely that any dividends on its Common Stock will be
declared at any time in the foreseeable future. Any dividends will be subject to
the discretion of the Company's Board of Directors, and will depend upon, among
other things, the operating and financial condition of the Company, its capital
requirements and general business conditions. Therefore, there can be no
assurance that any future dividends will be paid on the Company's Common Stock.
All shares of the Company's Common Stock have equal voting rights and,
when validly issued and outstanding, will have one vote per share on all matters
to be voted upon by the shareholders. Cumulative voting in the election of
directors is not allowed, and a quorum for shareholder meetings shall consist of
a majority of the issued and outstanding shares present in person or by proxy.
Accordingly, the holders of a majority of the shares of Common Stock
present, in person or by proxy, at any legally convened shareholders' meeting at
which the Board of Directors is to be elected, will be able to elect all
directors and minority shareholders will not be able to elect a representative
to the Board of Directors.
Shares of the Company's Common Stock have no preemptive or conversion
rights, no redemption or sinking fund provisions, and are not liable for further
call or assessment. Each share of the Company's Common Stock is entitled to
share on a prorata basis in any assets available for distribution to holders of
its equity securities upon liquidation of the Company.
STATE LEGISLATION
Upon completion of this offering, the Company will become subject to
certain provisions of the Oregon Business Combination Act that govern business
combinations between corporations and interested shareholders (the "Business
Combination Act"). The Business Combination Act generally provides that if a
person or entity acquires 15% or more of the voting stock of an Oregon
corporation (an "Interested Shareholder"), the corporation and the Interested
Shareholder, or any affiliated entity of the Interested Shareholder, may not
engage in certain business combination transactions for three years following
the date the person became an Interested Shareholder. Business combination
transactions for this purpose include (a) a merger or plan of share exchange,
(b) any sale, lease, mortgage or other disposition of 10% or more of the assets
of the corporation and (c) certain transactions that result in the issuance of
capital stock to the Interested Shareholder. These restrictions do not apply if
(i) the Interested Shareholder, as a result of the transaction in which such
person became an Interested Shareholder, owns at least 85% of the outstanding
voting stock of the corporation (disregarding shares owned by directors who are
also officers and certain employee benefit plans), (ii) the board of directors
approves the share acquisition or business combination before the Interested
Shareholder acquires 15% or more of the corporation's outstanding voting stock
or (iii) the board of directors and the holders of at least two-thirds of the
outstanding voting stock of the corporation (disregarding shares owned by the
Interested Shareholder) approve the transaction after the Interested Shareholder
acquires 15% or more of the corporation's voting stock.
Upon completion of this offering, the Company will also become subject
to the Oregon Control Share Act (the "Control Share Act"). The Control Share Act
generally provides that a person (the "Acquiror") who acquires voting stock of
an Oregon corporation in a transaction which results in the Acquiror holding
more than each of 20%, 33 1/3% or 50% of the total voting power of the
corporation (a "Control Share Acquisition") cannot vote the shares it acquires
in the Control Share Acquisition ("Control Shares") unless voting rights are
accorded to the Control Shares by (i) a majority of each voting group entitled
to vote and (ii) the holders of a majority of the
26
<PAGE> 28
outstanding voting shares, excluding the Control Shares held by the Acquiror and
shares held by the corporation's officers and inside directors. The term
"Acquiror" is broadly defined to include persons acting as a group.
The Acquiror may, but is not required to, submit to the corporation an
"Acquiring Person Statement" setting forth certain information about the
Acquiror and its plans with respect to the corporation. The Acquiring Person
Statement may also request that the corporation call a special meeting of
shareholders to determine whether the voting rights will be restored to the
Control Shares. If the Acquiror does not request a special meeting of
shareholders, the issue of voting rights of Control Shares will be considered at
the next annual or special meeting of shareholders. If the Acquiror's Control
Shares are accorded voting rights and represent a majority or more of all voting
power. Shareholders who do not vote in favor of the restoration of such voting
rights will have the right to receive the appraised "fair value" of their
shares, which may not be less than the highest price paid per share by the
Acquiror for the Control Shares.
REPORTS TO STOCKHOLDERS
The Company has registered its Common Stock under the provisions of
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and has undertaken to continue to maintain such registration. Such
registration will require the Company to comply with periodic reporting, proxy
solicitation and certain other requirements of the Exchange Act.
SHARES ELIGIBLE FOR FUTURE SALE
All but 617,500 of the Company's presently outstanding 7,665,900
shares, are "restricted" securities and could be sold in compliance with Rule
144 adopted under the Securities Act of 1933, as amended, if certain additional
requirements are met. Assuming the exercise of all of the 197,600 outstanding
Warrants and the registration of the 492,500 Shares, and no exercise of existing
options, the Company will then have issued and outstanding 7,863,500 shares of
its Common Stock, of which 6,723,500 will be "restricted" securities.
Rule 144 provides, in essence, that after two years from the date of
acquisition, a person, including an affiliate, of the Company (or persons whose
shares are aggregated) may sell an amount up to one percent (1%) of the issued
and outstanding shares within any three month period, provided that certain
current public information about the Company is available. A person who has not
been an affiliate of the Company (or persons whose shares are aggregated) who
has owned restricted shares of Common Stock for at least three years is entitled
to sell such shares under Rule 144 without regard to any of the limitations
described above. Therefore, in each three month period, 78,635 shares could be
sold under Rule 144 by each person having held the securities for at least two
years. Investors should be aware of the possibility that sales under Rule 144
may, in the future, have a depressing effect on the price of the Company's
stock.
Prior to this offering, there has been a limited market for the Common
Stock as listed on the OTC Bulletin Board and there can be no prediction made as
to the effect, if any, that public sales of additional shares of Common Stock or
the availability of such additional shares for sale will have on the market
prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital through the sale of its equity
securities.
LEGAL MATTERS
The validity of the securities being offered will be passed upon for
the Company by James L. Vandeberg, Esq., Graham & Dunn, 1420 Fifth Avenue, 33rd
Floor, Seattle, Washington 98101-2390. The Company's legal counsel has been
employed on a non-contingent basis.
EXPERTS
The financial statements for the fiscal years ended April 30, 1993,
1994, 1995 and 1996, and included in the Prospectus and in the Registration
Statement have been audited by Elliott Tulk Pryce Anderson, independent
chartered accountants to the extent and for the periods set forth in their
report appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such report given the authority of said firm as
experts in auditing and accounting.
Patrick Badgley, a Vice President of the Company, prepared a Technology
Evaluation Report on the RC/DC Engine for the Company.
All experts and counsel employed by the Company have been employed on a
non-contingent basis.
27
<PAGE> 29
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, DC, a Registration Statement on Form SB-2 (the
"Registration Statement"), under the Securities Act with respect to the Common
Stock offered by this Prospectus. This Prospectus, filed as part of such
Registration Statement, does not contain all of the information set forth in, or
annexed as exhibits to, the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and this offering, reference is
made to the Registration Statement, including the exhibits filed therewith,
which may be inspected without charge at the Office of the Commission, 450 Fifth
Street, NW, Washington, DC, 20549, Copies of the Registration Statement may be
obtained from the Commission at its principal office upon payment of prescribed
fees. Statements contained in the Prospectus as to the contents of any contract
or other document are not necessarily complete and, in each instance, reference
is made to the copy of each such contract or other document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by reference to the applicable document filed with the Commission.
28
<PAGE> 30
INDEX TO FINANCIAL STATEMENTS
Report of Public Accountants.................................................F-1
Balance Sheet at April 30, 1996, 1995, 1994 and 1993.........................F-2
Statement of Operations Accumulated from
July 27, 1992 (Inception) to April 30, 1996 and the periods ended
April 30, 1996, 1995, 1994 and 1993....................................F-3
Statement of Stockholders' Equity (Deficit) Accumulated from
July 27, 1992 (Inception) to April 30, 1996............................F-4
to
F-5
Statement of Cash Flows from July 27, 1992 (Inception)
to April 30, 1996 and the periods ended April 30, 1996, 1995,
1994 and 1993..........................................................F-6
Notes to the Financial Statements............................................F-7
to
F-11
F
<PAGE> 31
[ELLIOTT TULK PRYCE ANDERSON LETTERHEAD]
Independent Auditor's Report
Board of Directors
REGI U.S., Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of REGI U.S., Inc. (A
Development Stage Company) as of April 30, 1996, 1995, 1994 and 1993 and the
related statements of operations, stockholders' equity and cash flows for the
periods ended April 30, 1996, 1995, 1994 and 1993. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the aforementioned financial statements present fairly, in all
material respects, the financial position of REGI U.S., Inc. (A Development
Stage Company), as of April 30, 1996, 1995, 1994 and 1993, and the results of
its operations and its cash flows for the periods ended April 30, 1996, 1995,
1994 and 1993, in conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has not generated any revenues or profitable operations
since inception. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also discussed in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Elliott Tuck
Pryce Anderson
CHARTERED ACCOUNTANTS
Vancouver, B.C., Canada
June 17, 1996
F-1
<PAGE> 32
REGI U.S., Inc.
(A Development Stage Company)
Balance Sheets
April 30, 1996, 1995, 1994 and 1993
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
1996 1995 1994 1993
$ $ $ $
<S> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents 2,768 66,442 163,870 7,658
Subscription receivable -- -- -- 500
Due from parent -- 28,436 -- 21,550
Prepaid expenses -- 6,000 6,990 --
---------- ---------- -------- -------
2,768 100,878 170,860 29,708
Fixed Assets (Notes 3 and 5) 8,684 8,996 4,359 --
Intangible Assets (Notes 3, 4 and 5) 32,564 227,873 262,333 57,000
---------- ---------- -------- -------
44,016 337,747 437,552 86,708
========== ========== ======== =======
Liabilities And Stockholders' Equity (Deficit)
Current Liabilities
Accounts payable 75,069 34,872 7,500 15,000
Due to parent -- -- 74,455 --
Due to affiliate (Note 6) 116,750 609,873 213,352 --
---------- ---------- -------- -------
191,819 644,745 295,307 15,000
---------- ---------- -------- -------
Stockholders' Equity (Deficit)
Common Stock (Note 7), 20,000,000 shares
authorized without par value;
7,635,900, 6,930,200, 6,500,000 and 6,000,000 shares
issued and outstanding respectively 2,292,600 1,336,500 560,000 60,000
Paid for but unissued-- 35,200 shares -- -- -- 35,200
Deficit Accumulated During the Development Stage (2,440,403) (1,643,498) (417,755) (23,492)
---------- ---------- -------- -------
(147,803) (306,998) 142,245 71,708
---------- ---------- -------- -------
44,016 337,747 437,552 86,708
========== ========== ======== =======
</TABLE>
Commitments (Note 9)
(The accompanying notes are an integral
part of the financial statements)
F-2
<PAGE> 33
REGI U.S., Inc.
(A Development Stage Company)
Statements of Operations
Accumulated from July 27, 1992 (Inception) to April 30, 1996 and the Periods
ended April 30, 1996, 1995, 1994 and 1993 (expressed in U.S. dollars)
<TABLE>
<CAPTION>
July 27
May 1 May 1 May 1 1992
Accumulated 1995 1994 1993 (inception)
During the to to to to
Development April 30 April 30 April 30 April 30
Stage 1996 1995 1994 1993
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Revenues -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Administrative Expenses
Advertising - stock 122,624 94,719 27,905 -- --
Bank charges 1,018 563 425 30 --
Foreign exchange 2,237 297 963 977 --
Office, courier, printing and telephone 48,839 42,229 6,610 -- --
Professional fees 126,658 72,767 52,311 1,580 --
Regulatory and filing fees 5,335 115 1,868 3,352 --
Stockholder and investor relations 142,474 94,867 21,257 26,350 --
Transfer agent 11,587 4,622 3,565 3,400 --
Travel 4,814 -- 4,814 -- --
Less interest (13,079) (6,325) (6,754) -- --
---------- ---------- ---------- ---------- ----------
452,507 303,854 112,964 35,689 --
---------- ---------- ---------- ---------- ----------
Research and Development Expenses
Intellectual property (Note 4(a) and (b)) 257,000 -- 257,000 -- --
Amortization 10,330 6,516 (4,664) 8,478 --
Market development 86,346 6,962 54,173 25,211 --
Professional fees 69,815 3,220 37,307 26,488 2,800
Project management 100,000 30,000 30,000 30,000 10,000
Project overhead 73,501 29,375 37,282 4,716 2,128
Prototype design and construction 1,080,627 322,412 581,318 174,398 2,499
Technical consulting 57,499 11,250 8,360 36,764 1,125
Technical reports 16,120 2,456 -- 8,724 4,940
Technical salaries 117,721 53,858 52,666 11,197 --
Travel 118,937 27,002 59,337 32,598 --
---------- ---------- ---------- ---------- ----------
1,987,896 493,051 1,112,779 358,574 23,492
---------- ---------- ---------- ---------- ----------
Net Loss 2,440,403 796,905 1,225,743 394,263 23,492
========== ========== ========== ========== ==========
Net Loss Per Share (.39) (.11) (.18) (.06) (.01)
========== ========== ========== ========== ==========
Weighted Average Shares Outstanding 6,239,073 7,382,309 6,710,275 6,500,000 6,000,000
========== ========== ========== ========== ==========
</TABLE>
(The accompanying notes are an integral
part of the financial statements)
F-3
<PAGE> 34
REGI U.S., Inc.
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
From July 27, 1992 (Inception) to April 30, 1996
(expressed in U.S. dollars)
<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 500,000 500,00 --
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
options 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)
========= ========= ==========
</TABLE>
(The accompanying notes are an integral
part of the financial statements)
F-4
<PAGE> 35
REGI U.S., Inc.
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
From July 27, 1992 (Inception) to April 30, 1996
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
Deficit Accumulated
Common Stock During the
Shares Amount Development Stage
Continued # $ $
<S> <C> <C> <C>
Balance forward from 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 --
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)
========= ========= ==========
</TABLE>
(The accompanying notes are an integral
part of the financial statements)
F-5
<PAGE> 36
REGI U.S., Inc.
(A Development Stage Company)
Statement of Cash Flows
Accumulated from July 27, 1992 (Inception) to April 30, 1996 and the
Periods ended April 30, 1996, 1995, 1994 and 1993
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
July 27
May 1 May 1 May 1 1992
Accumulated 1995 1994 1993 (inception)
During the to to to to
Development April 30 April 30 April 30 April 30
Stage 1996 1995 1994 1993
$ $ $ $ $
---------- -------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Cash Flows to Operating Activities
Net loss (2,440,403) (796,905) (1,225,743) (394,263) (23,492)
Adjustments to Reconcile
Net loss to cash
Amortization 10,330 6,516 (4,664) 8,478 --
Intellectual property 257,000 -- 257,000 -- --
Change in non-cash working capital items
(Increase) decrease in subscription receivable -- -- -- 500 (500)
(Increase) decrease in prepaid expense -- 6,000 990 (6,990) --
Increase (decrease) in accounts payable 75,069 40,197 27,372 (7,500) 15,000
---------- -------- ---------- -------- -------
Net Cash Used by Operating Activities (2,098,004) (744,192) (945,045) (399,775) (8,992)
---------- -------- ---------- -------- -------
Cash Flows to Financing Activities
Increase (decrease) in subscriptions received -- -- -- (35,200) 35,200
Increase in shares issued - cash 2,235,600 956,100 776,500 500,000 3,000
Increase (decrease) in advances from parent -- 28,436 (102,891) 96,005 (21,550)
Increase (decrease) in advances from affiliate (83,250) (493,123) 396,521 13,352 --
---------- -------- ---------- -------- -------
Net Cash Provided by Financing Activities 2,152,350 491,413 1,070,130 574,157 16,650
---------- -------- ---------- -------- -------
Cash Flows to Investing Activities
(Increase) in computer equipment (16,048) (4,588) (6,765) (4,695) --
(Increase) in patents (35,530) (6,307) (15,748) (13,475) --
(Increase) decrease in licence -- 200,000 (200,000) -- --
---------- -------- ---------- -------- -------
Net Cash (Used) Provided by Investing Activities (51,578) 189,105 (222,513) (18,170) --
---------- -------- ---------- -------- -------
Increase (decrease) in cash and cash equivalents 2,768 (63,674) (97,428) 156,212 7,658
Cash and cash equivalents - beginning of period -- 66,442 163,870 7,658 --
---------- -------- ---------- -------- -------
Cash and cash equivalents - end of period 2,768 2,768 66,442 163,870 7,658
---------- -------- ---------- -------- -------
Non-Cash Financing Activities
Deemed value of affiliate shares issued for
intellectual property (Note 4(b)) 200,000 -- -- 200,000 --
5,700,000 shares issued for intellectual
property at $0.01 per share (Note 4(a)) 57,000 -- -- -- 57,000
---------- -------- ---------- -------- -------
257,000 -- -- 200,000 57,000
========== ======== ========== ======== =======
</TABLE>
(The accompanying notes are an integral
part of the financial statements)
F-6
<PAGE> 37
REGI U.S., Inc.
(A Development Stage Company)
Notes to the Financial Statements
April 30, 1996, 1995, 1994 and 1993
(expressed in U.S. dollars)
1. Date of Incorporation
The Company was incorporated in the State of Oregon, U.S.A. on July 27,
1992. On August 1, 1994 the Company changed its name from Sky
Technologies Inc. to REGI U.S., Inc.
2. 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.
3. Summary of Significant Accounting Policies
(a) Year-End
The Company's fiscal year-end is April 30.
(b) Fixed Assets
Computer equipment is amortized over 3 years on a
straight-line basis.
(c) Intangible Assets
Costs incurred by the Company to register and protect patents
are capitalized as incurred. The cost of patent protection is
being amortized on a straight line basis over 20 years or
written off completely should The Engine be determined by
management not to be commercially viable.
(d) Research and Development
Costs to acquire technological rights and design drawings
collectively referred to as intellectual property are treated
as research and development. Research and development is
expensed in the period in which the activities occur.
(e) Cash and Cash Equivalents
The Company considers all highly liquid instruments with a
maturity of three months or less at the time of issuance to be
cash equivalents.
F-7
<PAGE> 38
3. Accounting Policies (continued)
(f) Foreign Currency Transactions/Balances
Transactions in currencies other than the U.S. dollar are
translated at the rate in effect on the transaction date. Any
balance sheet items denominated in foreign currencies are
translated into U.S. dollars using the rate in effect on the
balance sheet date.
(g) Tax Accounting
Research and development is fully deducted in the year of
expenditure. The Company has not earned any research and
development tax credits.
The Company has adopted SFAS 109 as of its inception. The
Company has incurred net operating losses as scheduled below:
<TABLE>
<CAPTION>
Year of Loss Amount Expiration Date
$
<S> <C> <C>
April 30, 1994 416,218 2009
April 30, 1995 1,007,063 2010
April 30, 1996 796,905 2011
</TABLE>
Pursuant to SFAS 109 the Company is required to compute tax
asset benefits for net operating loss carryforwards. Potential
benefit of net income losses have not been recognized in the
financial statements because the Company cannot be assured
that it is more likely than not that it will utilize the net
operating loss carryforwards in future years.
The components of the net deferred tax asset at the end of
April 30, 1996, 1995 and 1994, the statutory tax rate, the
effective tax rate and the elected amount of the valuation
allowance are scheduled below:
<TABLE>
<CAPTION>
April 30, 1996 April 30, 1995 April 30, 1994
$ $ $
<S> <C> <C> <C>
Net Operating Loss 796,905 1,007,063 416,218
Statutory Tax Rate 113,900 +34% 113,900 +34% 113,900 + 34%
in excess of in excess of in excess of
$335,000 $335,000 335,000
Effective Tax Rate -- -- --
Deferred Tax Asset 270,947 342,401 141,514
Valuation Allowance (270,947) (342,401) (141,514)
--------- ----------- --------
Net Deferred Tax Asset -- -- --
========= =========== ========
</TABLE>
F-8
<PAGE> 39
4. 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.
5. (a) Fixed Assets
<TABLE>
<CAPTION>
1996 1995 1994 1993
Accumulated Net Book Net Book Net Book Net Book
Cost Amortization Value Value Value Value
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C>
Computer equipment 16,048 7,364 8,684 8,996 4,359 --
====== ====== ======= ======= ======= ======
(b) Intangible Assets
Sublicence (below) -- -- -- 200,000 -- --
Patents 35,530 2,966 32,564 27,873 13,184 --
Intellectual property
(Note 4(a) and (b)) -- -- -- -- 249,149 57,000
------ ------ ------- ------- ------- ------
35,530 2,966 32,564 227,873 262,333 57,000
====== ====== ======= ======= ======= ======
</TABLE>
In 1995 the Company acquired an exclusive limited sublicence to market
and distribute a "Machine Vision Technology" in Canada for the
following consideration:
i) $200,000 (paid).
ii) royalty payments equal to 2% of all net revenue derived from
sales in Canada, to be paid 30 days after the end of each
calendar quarter.
iii) minimum annual royalty payments as follows:
<TABLE>
<CAPTION>
$
<S> <C>
December 31, 1996 1,000
December 31, 1997 3,000
December 31, 1998 4,500
annually thereafter 6,000
</TABLE>
During 1996, the Company sold its rights to REG for $200,000. All
obligations pursuant to the sublicense transfer to REG.
F-9
<PAGE> 40
6. 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 $116,750 at April 30, 1996 is unsecured,
non-interest bearing and is payable on demand.
7. 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 are outstanding and expire fifteen days after a
registration approved by regulatory bodies.
(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 April 30, 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 April 30, 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 210,500 have
been exercised to April 30, 1996.
- 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 April 30, 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 April 30, 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 April 30, 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 April 30, 1996.
- January 3, 1996 to acquire 350,000 shares at $3.00 per
share expiring January 3, 2001.
F-10
<PAGE> 41
8. Related Party Transactions
(a) A project management fee of $30,000 in each of
1996, 1995 and 1994, and $10,000 in 1993 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 $6,000 in each of
1996, 1995 and 1994, and $2,000 in 1993 were paid
to a company controlled by the president of the
Company and are included in research and
development expenses.
(c) Technical salaries of $53,858 in 1996, $52,666 in
1995, and $11,197 in 1994 were paid to an officer
and director, and are included in research and
development expenses.
(d) Administrative fees of $12,000 in 1996 and $4,500
in 1995 were paid to an officer and director and is
included in research and development expenses.
(e) The exclusive limited sublicense for The Machine
Vision Technology was sold to REG for $200,000 (See
Note 5).
9. Commitments/Contingency
(a) See Note 4 - 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 788,600 shares for the conversion of
warrants (See Note 7(a), (b) and (c)) and 885,000 shares for
the exercise of stock options (See Note 7(d)).
(d) The Company has no long-term lease commitments.
(e) The Company is committed to fund 50% of the further
development of the Engine. See Note 2.
(f) 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.
10. Subsequent Event
The Company received $3,000 and issued 30,000 shares pursuant to stock
options exercised at $0.10 per share.
F-11
<PAGE> 42
UNTIL SEPTEMBER ___, 1996, (NINETY DAYS AFTER THE EFFECTIVE DATE OF THIS
PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Summary 5
Selected Financial Data 6
Risk Factors 7
Use of Proceeds 9
Dilution 9
Concurrent Sales by Selling Shareholders 9
Plan of Distribution 12
Dividend Policy 13
Capitalization 13
Management's Discussion and Analysis
of Results of Operations and
Financial Condition 14
Business 16
Management 21
Principal Shareholders 24
Certain Relationships and Related Transactions 25
Description of Securities 26
Shares Eligible for Future Sale 27
Legal Matters 27
Experts 27
Additional Information 27
Index to Financial Statements F
492,500 SHARES
REGI U.S., INC.
COMMON STOCK
PROSPECTUS
REGI U.S., Inc.
10751 Shellbridge Way, Suite 185
Richmond, BC V6X 2W8
Canada
No dealer, salesman or any other person has been authorized to give any
information or make any representations other than those contained in this
Prospectus in connection with the offer contained in this Prospectus and, if
given or made, such information must not be relied upon as having been
authorized by the Company. Neither the delivery nor any sale made hereunder
shall under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof. This prospectus does
not constitute an offer to sell or the solicitation of an offer to buy any
security other than the shares of Common Stock offer by this Prospectus, nor
does it constitute an offer to sell or a solicitation of an offer to buy the
shares of Common Stock by anyone in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so, to any person to whom it is unlawful to
make such offer or solicitation.
<PAGE> 43
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Page No.
--------
Item 24. Indemnification of Directors and Officers........... II-2
Item 25. Other Expenses of Issuance and Distribution......... II-2
Item 26. Recent Sales of Unregistered Securities............. II-3
Item 27. Index to Exhibits................................... II-4
Item 28. Undertakings........................................ II-5
Signatures............................................................ II-6
II-1
<PAGE> 44
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
It is provided in the Articles of Incorporation of the Company that it
shall indemnify to the fullest extent permitted by the Oregon Business
Corporation Act any person who is made, or threatened to be made, a party to any
action, suit or proceeding, whether civil, criminal, administrative,
investigative, or otherwise (including an action, suit or proceeding by or in
the right of the corporation) by reason of the fact that the person is or was a
director or officer of the corporation or a fiduciary within the meaning of the
Employee Retirement Income Security Act of 1974 with respect to any employee
benefit plan of the corporation, or serves or served at the request of the
corporation as a director or officer, or as a fiduciary of an employee benefit
plan, of another corporation, partnership, joint venture, trust or other
enterprise. The right to and amount of indemnification shall be determined in
accordance with the provisions of the Oregon Business Corporation Act in effect
at the time of the determination.
The Oregon Revised Statutes provides for indemnification where a person
who was or is a party or is threatened to be made a party to any threatened,
pending or contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than action by or in right of a
corporation), by reason of fact he is or was a Director, Officer, employee or
agent of a corporation or serving another corporation at the request of the
corporation, against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement, actually and reasonably incurred by him if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interest of the corporation and, with respect to criminal action or
proceeding, had no reasonable cause to believe his conduct unlawful. Lack of
good faith is not presumed from settlement or nolo contendere plea.
Indemnification of expenses (including attorneys' fees) is allowed in derivative
actions except in the case of misconduct in performance of duty to the
corporation unless the Court decides indemnification is proper. To the extent
any such person succeeds on the merits or otherwise, he shall be indemnified
against expenses (including attorneys' fees). Determination that the person to
be indemnified met applicable standards of conduct, if not made by the Court, is
made by the Board of Directors by majority vote of quorum consisting of the
Directors not party to such action, suit or proceeding or, if a quorum is not
obtainable or a disinterested quorum so directs, by independent legal counsel or
by the stockholders. Expenses may be paid in advance upon receipt of
undertakings to repay unless it shall ultimately be determined that he is
entitled to be indemnified by the corporation. The Corporation may purchase
indemnity insurance.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated costs and expenses to be
borne by the Company in connection with the offering described in the
Registration Statement.
<TABLE>
<S> <C>
Registration Fee........................................... $ 597.46
Legal Fees and Expenses.................................... 15,000.00
Accounting Fees and Expenses............................... 3,000.00
Printing and Engraving Expenses............................ 2,000.00
Blue Sky Fees and Expenses................................. 5,000.00
Transfer Agent's and Registrar's Fees...................... 500.00
Miscellaneous Expenses..................................... 8,902.54
Total...................................................... $35,000.00
</TABLE>
II-2
<PAGE> 45
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Set forth below is information regarding the issuance and sales of
securities of the Company without registration under the Securities Act since
May 1, 1993. No sales of securities involved the use of an underwriter and no
commissions were paid in connection with the sale of any securities.
a. In the period May 1993 through October 1993 the Company sold
500,000 units to individuals who represented that they were accredited
investors. Each unit was sold at $1.00 per unit and consisted of 1 share of
Common Stock and one warrant to acquire an additional share of Common Stock at
$1.25 per share through August 24, 1994 (extended to October 31, 1994) and at
$1.50 per share through August 24, 1995 (extended to November 30, 1995 or
fifteen days after the effective date of this registration statement, whichever
is later). A total of 169,000 warrants were exercised at $1.25 per share and
133,200 warrants were exercised at $1.50 per share. The underlying shares of
Common Stock were issued to the warrant holders. Since the warrant holders were
accredited investors, the issuance of units and Common Stock was exempt from
registration under Regulation D and Section 4(2) of the Securities Act.
b. During October and December 1994, the Company made a private
placement of 250,000 units at a price of $2.25 with two private investors who
were existing shareholders of the Company who represented that they were
accredited investors. Each unit consists of one share of Common Stock and one
warrant allowing the holder to purchase an additional share of Common Stock at
$2.60 during the first year following the issue date, and at $3.00 per share
during the second year following the issue date. The purchasers of these units
were, in the opinion of management, fully informed with respect to the financial
position, business and prospects of the Company and were accredited investors.
These transactions were exempt from registration under the Securities Act by
reason of Section 4(2) thereof.
c. During the period April 15, 1995 to October 15, 1995, the
Company sold 341,000 units at a price of $2.00 per unit. Each unit consisted of
one share of Common Stock and one warrant to acquire an additional share of
Common Stock at $2.00 per share beginning April 15, 1996 through April 15, 1997
or at $2.50 per share beginning April 16, 1997 through April 15, 1998. The
issuance of these units were exempt under Rule 505 of Regulation D and Section
4(2) of the Securities Act since they were sold to fewer than 35 non-accredited
investors.
Each of the foregoing transactions was exempt from registration under
the Securities Act by virtue of the provisions of Section 4(2) and/or 3(b)
thereof. Each purchaser of the securities described above has represented that
he understands that the securities acquired may not be sold or otherwise
transferred absent registration under the Securities Act or the availability of
an exemption from the registration requirements of the Securities Act, and each
certificate evidencing the securities owned by each purchaser bears or will bear
a legend to that effect.
II-3
<PAGE> 46
ITEM 27. EXHIBITS
INDEX TO AND DESCRIPTION OF EXHIBITS
<TABLE>
<CAPTION>
Number Description Page No.
- ------ ----------- --------
<S> <C>
3 ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Articles of Incorporation............................... *(1)
3.2 Article of Amendment changing name to
REGI U.S., Inc.......................................... *(2)
3.3 By-Laws................................................. *(1)
4 INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS
4.1 Specimen Share Certificate.............................. *(1)
4.2 Specimen Warrant Certificate............................ *(1)
5 OPINION OF COUNSEL REGARDING LEGALITY
5.1 Opinion of Graham & Dunn................................ **
10 MATERIAL CONTRACTS
10.1 Agreement between Brian Cherry, the Company and
Rand Energy Group Inc................................... *(1)
10.2 Agreement between the Company and Patrick
Badgley................................................ *(1)
10.3 Agreement between the Company and Access
Information Services, Inc.............................. *(1)
10.4 Agreement between the Company and Reg
Technologies, Inc......................................
10.5 Agreement between the Company and Integral
Visions Systems, Inc...................................
10.6 REGI U.S., Inc. KEY EMPLOYEES INCENTIVE STOCK
OPTION PLAN............................................ *(3)
23 CONSENT OF EXPERTS AND COUNSEL
23.1 Consent of Elliott Tulk Pryce Anderson..................
23.2 Consent of Patrick Badgley.............................. **
23.3 Consent of Graham & Dunn................................ **
27 FINANCIAL DATA SCHEDULE..........................................
99 ADDITIONAL EXHIBITS
99.1 Technology Evaluation report on the Rand
Cam/Direct Charge Engine prepared by
Adiabatics, Inc......................................... *(1)
</TABLE>
- --------------------
* Previously filed documents.
** To be filed by amendment.
(1) Incorporated by reference from Form 10-SB Registration Statement filed
April 26, 1994.
(2) Incorporated by reference from 10-Q Report for the quarter ended
7-30-94.
(3) Incorporated by reference from Form S-8 Registration Statement dated
April 4, 1995.
II-4
<PAGE> 47
ITEM 28. UNDERTAKINGS
A. The undersigned registrant hereby undertakes;
(1) To file, during any period in which offers or sales
are being made, a post effective amendment to this
registration statement:
(a) To include any prospectus required by
Section 10(a) (3) of the Securities Act of
1933;
(b) To reflect in the prospectus any facts or
events which arising after the effective
date of the registration statement (or the
most recent post-effective amendment)
individually or in the aggregate, represent
a fundamental change in the information set
forth in the registration statement; and,
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, as amended, each
such post-effective amendment shall be deemed to be a
new registration statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) That insofar as indemnification for liabilities
arising under the Securities Act of 1933 (the "Act") may be permitted to
directors, officers and controlling persons of the small business issuer
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
II-5
<PAGE> 48
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Richmond,
Province of British Columbia on June 19, 1996.
REGI U.S., INC.
By: /s/ John G. Robertson
-----------------------------
John G. Robertson
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on the 19 day of
June, 1996 in the capacities indicated.
Signature Title
--------- -----
/s/ John G. Robertson President, Chief Executive Officer and Director
- -------------------------------
(John G. Robertson)
/s/ Brian Cherry Vice President, Secretary and Director
- -------------------------------
(Brian Cherry)
/s/ Jennifer Lorette Vice President, Chief Financial Officer and
- ------------------------------- Principal Accounting Officer
(Jennifer Lorette)
II-6
<PAGE> 1
EXHIBIT 23.1
June 17, 1996
Board of Directors
REGI U.S., Inc.
185 - 10751 Shellbridge Way
Richmond, B.C. V6X 2W8
Dear Ladies and Gentlemen:
RE: REGI U.S., INC.
We consent to the use of our report dated June 17, 1996 on the financial
statements of REGI U.S., Inc., as of April 30, 1996, 1995, 1994 and 1993 and the
inclusion of our name under the headings "Selected Financial Data" and "Experts"
in the prospectus.
Yours truly,
ELLIOTT, TULK, PRYCE, ANDERSON
/s/ Don Prest
- --------------
Don M. Prest, C.A.
Partner
Encl.
<PAGE> 1
EXHIBIT 23.2
May 22, 1996
REGI U.S., INC.
RE: CONSENT TO USE THE TECHNOLOGY EVALUATION REPORT - DATED MAY 19, 1993
Dear Sirs:
This is my authorization for the Technical Evaluation Report dated May 19, 1993,
including all references to the said report, to be used by REGI U.S., INC. I
also hereby consent that the report be named in the Registration Statement as a
exhibit pursuant to Rule 438 of Regulation C dated this 22nd day of May, 1996.
Agreed To: Agreed To:
/s/ Patrick Badgley /s/ John Robertson
- ------------------- ------------------
PATRICK BADGLEY REGI U.S., INC.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<CASH> 54,913
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,768
<PP&E> 51,578
<DEPRECIATION> 10,330
<TOTAL-ASSETS> 44,016
<CURRENT-LIABILITIES> 191,809
<BONDS> 0
0
0
<COMMON> 2,292,600
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 44,016
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 796,905
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (796,905)
<INCOME-TAX> 0
<INCOME-CONTINUING> (796,905)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (796,905)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
