REGI U S INC, 10KSB40/A, 1996-08-12

REGI U S INC
10KSB40/A, 1996-08-12
ENGINES & TURBINES

Previous: CASE CORP, 10-Q, 1996-08-12

Next: HVIDE MARINE INC, 424B4, 1996-08-12

<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
Amendment No. 3
to
FORM 10-KSB

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
THE SECURITIES ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 30, 1995

COMMISSION FILE NO. 0-23920

REGI U.S., INC.
(Name of small business issuer as specified in its charter)

OREGON 91-1580146
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

185 - 10751 SHELLBRIDGE WAY
RICHMOND, BRITISH COLUMBIA V6X 2W8, CANADA
(Address, including postal code, of registrant's principal executive offices)

(604) 278-5996
(Telephone number including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act: NONE

Securities registered pursuant to Section 12(g) of the Exchange Act:

Title of each class Name of each Exchange on which registered:

Common Stock, no par value None

Indicate by check mark whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months, and (2) has been subject to such filing requirements for the past 90
days.
Yes /X/

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B is not contained herein and will not be contained, to
the best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this form 10-KSB or any amendment to
this Form 10-KSB. /X/

The registrants revenues for its most recent fiscal year were: nil.

The Aggregate market value of the voting stock held by non-affiliates
of the registrant on July 28, 1995, computed by reference to the price at which
the stock was sold on that date: $2,591,875.

The number of shares outstanding of the registrant's Common Stock, no
par value, as of July 28, 1995 was 6,942,500.

Documents incorporated by reference: none
- -------------------------------------------------------------------------------
This Amended Report filed August 12, 1996
<PAGE> 2
REGI U.S., INC.

FORM 10-KSB

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I Page
<S> <C> <C>
Item 1. Business........................................................................................3
Item 2. Property........................................................................................9
Item 3. Legal Proceedings...............................................................................9
Item 4. Submission of Matters to a Vote of Security Holders.............................................9

PART II

Item 5. Market for Common Equity and Related Stockholder Matters.......................................10
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations..........................................................................10
Item 7. Financial Statements...........................................................................13
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.......................................................................14

PART III

Item 9. Directors and Executive Officers of the Registrant.............................................15
Item 10. Executive Compensation.........................................................................17
Item 11. Security Ownership of Certain Beneficial Owners and Management.................................19
Item 12. Certain Relationships and Related Transactions.................................................20

PART IV

Item 13. Exhibits and Reports on Form 8-K...............................................................23
</TABLE>

2
<PAGE> 3
ITEM 1. 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.

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,

3
<PAGE> 4
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.

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. 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, 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 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

4
<PAGE> 5
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.

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.

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.

3D MACHINE VISION TECHNOLOGY

In June 1994, the Company entered into an option agreement with
Integral Vision Systems Inc. ("IVS") whereby the Company was granted an option
to purchase for $100,000 the exclusive license to market and distribute in
Canada certain Machine Vision Technology. Upon exercise of the option, the
Company purchased said license for an additional $100,000 and a royalty of two
percent (2%) of all net revenue for sales of said Machine Vision Technology in
Canada. The Machine Vision Technology is used in analyzing color in three
dimensions for identification purposes in industrial manufacturing applications.
The market in Canada for machine vision hardware and software used in these
types of applications is estimated, in a study performed by the Automated
Imaging Association, to range between $60 and $65 million annually in 1994 and
is expected to grow at a rate of nearly 15% through 1998.

Originally, the Company believed that this would be a worthwhile backup
business to offer diversification in the event that the RC/DC Engine project did
not develop as anticipated. It was later decided that the Company should
concentrate its efforts and capital on the RC/DC Engine, and subsequent to the
end of the April 30, 1995 fiscal year, the Company sold its interest in the 3D
Machine Vision Technology to Reg Tech for $200,000 and used these funds to pay
down amounts owed to that company.

5
<PAGE> 6
ROYALTY PAYMENTS

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 August
1992 Agreement also 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 revenue
received as a result of its licensing of the Original Engine.

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.

Pursuant to the letter of understanding dated December 13, 1993 among
the Company, REGI, Reg Tech and WVURC, WVURC 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.

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 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 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 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.

6
<PAGE> 7
ENVIRONMENTAL CONTROL FACTORS

At the present time there is no direct financial or competitive effect
upon the Registrant'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

The Company has no key customers at the present time however, 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 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.

7
<PAGE> 8
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 in 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 on Common Stock.

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, 1996.

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.

8
<PAGE> 9
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.

ITEM 2. PROPERTY

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.

ITEM 3. LEGAL PROCEEDINGS

Neither the Company nor its officers and directors are aware of any
legal proceedings to which the Company is currently a party, or which may be
pending.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote by the Company's security holders
during the fourth quarter of its fiscal year ended April 30, 1995.

9
<PAGE> 10
PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Common Stock of the Company currently trades on the NASDAQ 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 on the Bulletin Board as provided by NASDAQ for the
quarters presented.

<TABLE>
<CAPTION>
Bid Bid

High Low High Low
---- --- ---- ---

<S> <C> <C> <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
</TABLE>

As of July 25, 1995, there were 6,942,500 shares of Common Stock
outstanding held by 109 shareholders of record and shares held by 12
broker/dealers on behalf of 97 street name shareholders.

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.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

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
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 $1,643,498 at April 30, 1995, and significant
additional losses since that date. The rate of loss has increased as the
Company's activities have increased and 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.

10
<PAGE> 11
PLAN OF OPERATIONS

During the fiscal year beginning May 1, 1995 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.

RESULTS OF OPERATIONS

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 totalled $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. 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 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

11
<PAGE> 12
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 $26,800 in fiscal 1993 to
$35,689 in fiscal 1994. The most significant of these was shareholder relations
costs which rose from $21,850 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.

LIQUIDITY AND CAPITAL RESOURCES

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 yearend 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. The
balance owing to Reg Tech of $609,873 has been reduced to $171,351 as of October
31, 1995 by selling the 3-D Machine Vision Technology to Reg Tech for $200,000,
by payment of $250,000 in cash and offsetting the $111,000 receivable from Reg
Tech. The Company continues to incur debt payable to Reg Tech pursuant to the
cost sharing agreement.

Management anticipates that the Company will be able to fund continuing
operations from funds currently on hand as well as from additional equity and/or
debt capital infusions as may be required. There is, however, no assurance that
such additional funding will, in fact, be available when required or, if it is,
that 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.

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 $99,357 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.

<PAGE> 13
Item 7. Financial Statements

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
<S> <C>
Report of Public Accountants..................................................................................... F-1

Balance Sheet at April 30, 1993, 1994 and 1995................................................................... F-2

Statement of Operations Accumulated from July 27, 1992 (Inception) to
April 30, 1995 and the periods ended April 30, 1995, 1994 and 1993...................................... F-3

Statement of Stockholders' Equity (Deficit) Accumulated from
July 27, 1992 (Inception) to April 30, 1995............................................................. F-4

Statement of Cash Flows from July 27, 1992 (Inception)
to April 30, 1995, and the periods ended April 30, 1995, 1994 and 1993.................................. F-5

Notes to the Financial Statements ............................................................................... F-6 to F-10
</TABLE>

13
<PAGE> 14
[Elliot Tulk Pryce Anderson Chartered Accountants Letterhead]

Independent Auditors 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, 1995, 1994 and 1993 and the related
statements of operations, stockholders' equity and cash flows for the periods
ended April 30, 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 audit 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 audit provides 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, 1995, 1994 and 1993, and the results of its
operations and its cash flows for the periods ended April 30, 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/ Elliot Tulk Pryce Anderson
------------------------------
CHARTERED ACCOUNTANTS

Vancouver, B.C., Canada
December 7, 1995

F-1
<PAGE> 15
REGI U.S., Inc.
(A Development Stage Company)
Balance Sheets
April 30, 1995, 1994 and 1993
(expressed in U.S. dollars)

<TABLE>
<CAPTION>
1995 1994 1993
$ $ $
Assets
<S> <C> <C> <C>
Current Assets

Cash and cash equivalents 66,442 163,870 7,658
Subscription receivable - - 500
Due from parent 28,436 - 21,550
Prepaid expenses 6,000 6,990 -
---------- -------- -------
100,878 170,860 29,708

Fixed Assets (Notes 3 and 5) 8,996 4,359 -

Intangible Assets (Notes 3, 4 and 5) 227,873 262,333 57,000
---------- -------- -------
337,747 437,552 86,708
========== ======== =======

Liabilities And Stockholders' Equity (Deficit)

Current Liabilities

Accounts payable 34,872 7,500 15,000
Due to parent - 74,455 -
Due to affiliate (Note 6) 609,873 213,352 -
---------- -------- -------
644,745 295,307 15,000
---------- -------- -------

Stockholders' Equity (Deficit)

Common Stock (Note 7), 20,000,000 shares authorized without par value;
6,930,200, 6,500,000 and 6,000,000 shares issued
and outstanding respectively. 1,336,500 560,000 60,000
Paid for but unissued-- 35,200 shares - - 35,200
Deficit Accumulated During the Development Stage (1,643,498) (417,755) (23,492)
---------- -------- -------
(306,998) 142,245 71,708
---------- -------- -------
337,747 437,552 86,708
========== ======== =======
</TABLE>

Commitments (Note 9)

(The accompanying notes are an integral
part of the financial statements)

F-2
<PAGE> 16
REGI U.S., Inc.
(A Development Stage Company)
Statement of Operations
Accumulated from July 27, 1992 (Inception) to April 30, 1995 and
the Periods ended April 30, 1995, 1994 and 1993
(expressed in U.S. dollars)

<TABLE>
<CAPTION>
July 27
May 1 May 1 1992
Accumulated 1994 1993 (inception)
During the to to to
Development April 30 April 30 April 30
Stage 1995 1994 1993
$ $ $ $
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues - - - -
--------- --------- --------- ---------
Administrative Expenses

Accounting and legal 53,891 52,311 1,580 -
Advertising - stock 27,905 27,905 - -
Bank charges 455 425 30 -
Foreign exchange 1,940 963 977 -
Listings application 5,220 1,868 3,352 -
Office 6,610 6,610 - -
Stockholder and investor relations 47,607 21,257 26,350 -
Transfer agent 6,965 3,565 3,400 -
Travel 4,814 4,814 - -
Less interest (6,754) (6,754) - -
--------- --------- --------- ---------
148,653 112,964 35,689 -
--------- --------- --------- ---------
Research and Development Expenses

Intellectual property (Note 4(a) and (b)) 257,000 257,000 - -
Amortization 3,814 (4,664) 8,478 -
Market development 79,384 54,173 25,211 -
Professional fees 66,595 37,307 26,488 2,800
Project management 70,000 30,000 30,000 10,000
Project overhead 44,126 37,282 4,716 2,128
Prototype design and construction 758,215 581,318 174,398 2,499
Technical consulting 46,249 8,360 36,764 1,125
Technical reports 13,664 - 8,724 4,940
Technical salaries 63,863 52,666 11,197 -
Travel 91,935 59,337 32,598 -
--------- --------- --------- ---------
1,494,845 1,112,779 358,574 23,492
--------- --------- --------- ---------
Net Loss 1,643,498 1,225,743 394,263 23,492
========= ========= ========= =========
Net Loss Per Share (.18) (.06) (.01)
========= ========= =========
Weighted Average Shares Outstanding 6,710,275 6,500,000 6,000,000
========= ========= =========
</TABLE>

(The accompanying notes are an integral
part of the financial statements)

F-3
<PAGE> 17
REGI U.S., Inc.
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
From July 27, 1992 (Inception) to April 30, 1995
(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> 18
REGI U.S., Inc.
(A Development Stage Company)
Statement of Cash Flows
Accumulated from July 27, 1992 (Inception) to April 30, 1995 and
the Periods ended April 30, 1995, 1994 and 1993
(expressed in U.S. dollars)

<TABLE>
<CAPTION>
July 27
May 1 May 1 1992
Accumulated 1994 1993 (inception)
During the to to to
Development April 30 April 30 April 30
Stage 1995 1994 1993
$ $ $ $
<S> <C> <C> <C> <C>
Cash Flows to Operating Activities
Net loss (1,643,498) (1,225,743) (394,263) (23,492)
Adjustments to Reconcile
Net loss to cash
Amortization 3,814 (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 34,872 27,372 (7,500) 15,000
---------- -------- -------- ------
Net Cash Used by Operating Activities (1,353,812) (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 1,279,500 776,500 500,000 3,000
Increase (decrease) in advances from parent (28,436) (102,891) 96,005 (21,550)
Increase in advances from affiliate 409,873 396,521 13,352 -
---------- -------- -------- ------
Net Cash Provided by Financing Activities 1,660,937 1,070,130 574,157 16,650
---------- -------- -------- ------
Cash Flows to Investing Activities
(Increase) in computer equipment (11,460) (6,765) (4,695) -
(Increase) in patents (29,223) (15,748) (13,475) -
(Increase) in licence (200,000) (200,000) - -
---------- -------- -------- ------
Net Cash (Used) Provided by Investing Activities (240,683) (222,513) (18,170) -
---------- -------- -------- ------
Increase (decrease) in cash and cash equivalents 66,442 (97,428) 156,212 7,658

Cash and cash equivalents - beginning of period 171,528 163,870 7,658 -
---------- -------- -------- ------
Cash and cash equivalents - end of period 237,970 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-5
<PAGE> 19
REGI U.S., Inc.
(A Development Stage Company)
Notes to the Financial Statements
October 31, 1995 and April 30, 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, and together with cash on hand at April 30,
1995 and additional funds raised to December 7, 1995 should enable the
Company to remain viable to at least April 30, 1996.

3. Summary of Significant Accounting Policies

(a) Year-End

The Company's management has chosen April 30 as its fiscal
year-end.

(b) Fixed Assets

Computer equipment is amortized over 3 years on a
straight-line basis.

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 occurred.

(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-6
<PAGE> 20
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
</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, 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, 1995 April 30, 1994
$ $

<S> <C> <C>
Net Operating Loss 1,007,063 416,218
Statutory Tax Rate 113,900 + 34% 113,900 + 34%
in excess of in excess of
335,000 335,000

Effective Tax Rate - -
Deferred Tax Asset 342,401 141,514
Valuation Allowance (342,401) (141,514)
---------------- ------------------
Net Deferred Tax Asset - -
================ ==================
</TABLE>

F-7
<PAGE> 21
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>
1995 1994 1993
Accumulated Net Book Net Book Net Book
Cost Amortization Value Value Value
$ $ $ $ $

<S> <C> <C> <C> <C> <C>
Computer equipment 11,460 2,464 8,996 4,359 -
======= ===== ======= ======= ======
(b) Intangible Assets
Sublicence (below) 200,000 - 200,000 - -
Patents 29,223 1,350 27,873 13,184 -
Intellectual property
(Note 4(a) and (b)) - - - 249,149 57,000
------- ----- ------- ------- ------
229,223 1,350 227,873 262,333 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>

F-8
<PAGE> 22
5. Fixed Assets (continued)

On October 31, 1995 the Company sold its rights to REG for $200,000.
All obligations pursuant to the sublicense transfers to REG.

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 $609,873 has been paid down to $171,351
subsequent to April 30, 1995. Any balance owing 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.

(b) Private placement - October 31 and November 30, 1994 -
warrants outstanding

A total of $450,000 was received and 200,000 units issued on
October 31, 1994 and a total of $112,500 was received and
50,000 units issued on November 30, 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, 1995.

(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.

(d) Stock options

Certain directors and employees were granted stock options
since inception as follows:

o April 30, 1993 to acquire 387,500 shares at $0.10 per
share expiring April 30, 1998 of which 137,500 have
been exercised subsequently.

o October 29, 1993 to acquire 195,000 shares at $1.00
per share expiring April 30, 1998 as to 50,000 shares
and October 29, 1998 as to 145,000 shares.

o February 9, 1994 to acquire 75,000 shares at $1.00
expiring February 9, 1999.

o October 20, 1994 to acquire 35,000 shares at $2.75
per share expiring October 20, 1999.

o January 15, 1995 to acquire 30,000 shares at $1.50
per share expiring January 15, 2000.

o March 15, 1995 to acquire 10,000 shares at $2.50 per
share expiring March 15, 2000.

o August 11, 1995 to acquire 25,000 shares at $2.50 per
share expiring August 11, 2000.

o September 8, 1995 to acquire 10,000 shares at $2.50
per share expiring September 8, 2000.

F-9
<PAGE> 23
8. Related Party Transactions

(a) A project management fee of $30,000 in fiscal 1995, $30,000 in
fiscal 1994 and $10,000 in fiscal 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 fiscal 1995, $6,000 in
fiscal 1994 and $2,000 in fiscal 1993 were paid to a company
controlled by the president of the Company and are included in
research and development expenses.

(c) A technical salary of $52,666 in fiscal 1995 and $11,197 in
fiscal 1994 was paid to an officer and director and is
included in research and development expenses.

(d) An administrative fee of $4,500 in fiscal 1995 was 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

(a) See Note 4 - royalty commitments in connection with the Rand
Cam/Direct Charge Engine.

(b) The Company is committed to pay $2,910 per month pursuant to
an investor relations contract expiring March 31, 1996.

(c) 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.

(d) The Company has reserved 591,000 shares for the conversion of
warrants (See Note 7(b) and (c)) and 640,000 shares for the
exercise of stock options (See Note 7(d)).

(e) The Company has no long-term lease commitments.

(f) The Company is committed to fund 50% of the further
development of the Engine. See Note 2.

10. Subsequent Events

(a) The Company received $1,000 pursuant to options exercised at
$0.10 for 10,000 common shares.

(b) The Company sold its interest in the Machine Vision Technology
to Reg Technologies Inc. on October 31, 1995 for $200,000.

(d) See Note 7(d) for stock options granted.

F-10
<PAGE> 24

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

14
<PAGE> 25
PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following is a list of the names of all of the 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
and 1995. Except for Mr. Lambo, who resigned as an officer in February 1996,
they will serve until the next annual meeting of the shareholders.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------

<S> <C> <C>
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

Zig Lambo 49 Vice President
</TABLE>

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 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 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,

15
<PAGE> 26
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 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. which is developing a
revolutionary antenna system that uses wireless communication. 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.

ZIG LAMBO was a Vice President of the Company from April 1994 to
February 1996. He resigned as an officer of the Company in February 1996. He
handled certain regulatory matters for the Company on a consulting basis. Since
August 1984, Mr. Lambo has been an independent consultant to and director of a
number of startup and public resource and technology companies, specializing in
the areas of corporate finance and strategy, mergers and acquisitions,
regulatory matters and investor relations. Between August 1984 and December 1987
he was also Vice President of Electra North West Resources Ltd., (now Electra
Mining Consolidated Ltd.) a public company which owns and operates an open pit
gold mine in Nevada and is listed on the Vancouver Stock Exchange. Mr. Lambo
received a B.S. degree in General Engineering from the University of Portland,
and an M.B.A. from Portland State University.

16
<PAGE> 27
ITEM 10. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth the aggregate cash compensation paid for
services rendered to the Company during the last two 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 1995 -0- -0- -0- -0-
President, Chief 1994 -0- -0- -0- -0-
Executive Officer
Patrick Badgley 1995 52,666 -0- -0- -0-
Vice President 1994 11,197 -0- -0- 75,000
</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. 50% of this amount is
paid by the Company and 50% by Reg Tech.

During the fiscal year ended April 30, 1995, 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 1995.
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.

17
<PAGE> 28
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 1,000,000 shares of
Common Stock of the Company to be issued to employees. As of the date of this
annual report, the Company has issued options for approximately 600,000 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, 1995 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>
none -0- N/A N/A N/A
</TABLE>

STOCK OPTIONS HELD AT END OF FISCAL YEAR - APRIL 30, 1995

The following table sets forth certain information with respect to
options exercised during fiscal 1995 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 1995.
<TABLE>
<CAPTION>
SHARES VALUE OF UNEXERCISED
ACQUIRED VALUE NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
ON REALIZED OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END (1)
-------- --------------------------- ----------------------
EXERCISE
--------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John G. -0- N/A 300,000 -0- $663,750 -0-
Robertson
Patrick Badgley -0- N/A 75,000 -0- 98,438 -0-
</TABLE>

- --------------------
(1) The calculation of the value of unexercised options are based on the
difference between the last sale price of $2 5/16 per share for the
Company's common Stock on Friday, April 28, 1995 as reported by NASDAQ,
and the exercise price of each option, multiplied by the number of
shares covered by the option.

18
<PAGE> 29
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of July 28, 1995, 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.

As of July 28, 1995

<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. 5,700,000 (2) 82.4%
1030 West Georgia St.
Vancouver, B.C., V6E 2Y3,
Canada

Common Brian Cherry 425,000 (3) 6.1%
5451 Floyd Avenue
Richmond, B.C. Canada

Common John G. Robertson 6,000,000 (4) 86.4%
4040 Amundsen Place
Richmond, B.C. Canada

Common Patrick R. Badgley 75,000 (5) 1.1%
2815 Franklin Drive
Columbus, IN 47201

Common Jennifer Lorette 30,000 (5) 0.4%
9751 Seagrave Road
Richmond, B.C. Canada

Common Zig Lambo 10,000 (5) 0.1%
1828 SE Elliott Avenue
Portland, OR 97214

Common James McCann 5,700,000 (2) 82.4%
211-107 E. Broadway
Vancouver, B.C.

Common All officers and 6,240,000 94.1%
directors as a group
(five persons)
</TABLE>

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

1. Based upon 6,942,500 shares issued and outstanding and assuming
exercise of options and issuance of 715,000 additional shares under the
Company's Key Employees Incentive Stock Option Plan. 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 Form 10-KSB 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 Form 10-KSB have
been exercised.

19
<PAGE> 30
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 300,000 shares and options on an additional 125,000
shares.

4. John G. Robertson holds an option to acquire 300,000 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. Holds options for these shares.

COMMON STOCK PURCHASE OPTIONS

The Company has entered into Common Stock purchase option agreements
with the following officers, directors and 10% or more voting rights holders
under the terms indicated in the table which follows:

<TABLE>
<CAPTION>
No. of Common Exercise Expiration
Name of Holder Title Shares Price Date
- -------------- ----- ---------------------- ----- ----
<S> <C> <C> <C> <C>
John G. Robertson President & 300,000 $0.10 4/30/98
Director
Brian Cherry Vice President,
Secretary & 50,000 $0.10 4/30/98
Director 75,000 $1.00 4/30/98
Patrick R. Badgley Vice President
75,000 $1.00 2/09/99
Jennifer Lorette Vice President 10,000 $0.10 4/30/98
20,000 $1.00 10/29/98
Zig Lambo Vice President 10,000 $0.10 4/30/98
</TABLE>

ITEM 12. 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.

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.

20
<PAGE> 31
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.

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 previously described. The reason for
this issuance was that the Company did not have available cash, at the time, 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 82.4% 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 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.

21
<PAGE> 32
iii) minimum annual royalty payments as follows:

$
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
transfers to Reg Tech.

22
<PAGE> 33
PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(A) EXHIBITS:

EXHIBIT
NUMBER

2a. Articles of Incorporation *(1)

2b. By-Laws *(1)
c. Articles of Amendment changing name to REGI U.S., Inc. *(2)

3a. Specimen Share Certificate *(1)

3a. Specimen Warrant Certificate *(1)

6. Material Contracts

a. Agreement between Brian Cherry, the Company and Rand Energy Group
Inc. *(1)

b. Agreement between the Company and Patrick Badgley *(1)

c. Agreement between the Company and Access Information Services,
Inc. *(1)

d. Agreement between the Company and Reg Technologies, Inc.**

e. Agreement between the Company and Integral Visions Systems, Inc.**

10a. REGI U.S., Inc. KEY EMPLOYEES INCENTIVE STOCK OPTION PLAN *(3)

27. Financial Data Schedule

Additional Exhibits

Technology Evaluation report on the Rand Cam/Direct Charge Engine
prepared by Adiabatics, Inc. *(1)

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

* Previously filed ** Filed herewith

(1) Previously filed with the Form 10 Registration Statement filed April
26, 1994.

(2) Previously filed with the 10-Q Report for the quarter ended 7-30-94.

(3) Previously filed with the Form S-8 Registration Statement dated April
4, 1995.

(B) REPORTS ON FORM 8-K: None

<PAGE> 34
SIGNATURES

Pursuant to the requirements Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this report or amendment to be signed on
its behalf by the undersigned, thereunto duly authorized.

REGI U.S., INC.

By: /s/ John G. Robertson
-------------------------------------
John G. Robertson, President
Chief Financial Officer and Director

Dated: July 29, 1996

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in-the in the capacities
indicated and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----

<S> <C> <C>
/s/ John G. Robertson President, Chief 7/29/96
- --------------------- -------
(John G. Robertson) Financial Officer
and Director

/s/ Brian Cherry Vice President, 7/29/96
- --------------------- -------
(Brian Cherry) Secretary and
Director

/s/ Jennifer Lorette Vice President, 7/29/96
- --------------------- -------
(Jennifer Lorette) Chief Financial Officer
and Principal Accounting
Officer
</TABLE>

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-START> MAY-01-1994
<PERIOD-END> APR-30-1995
<CASH> 66,442
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 100,878
<PP&E> 240,683
<DEPRECIATION> 3,814
<TOTAL-ASSETS> 337,747
<CURRENT-LIABILITIES> 644,745
<BONDS> 0
0
0
<COMMON> 1,336,500
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 337,747
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,225,743
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,225,743)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,225,743)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,225,743)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.18)

</TABLE>