<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended OCTOBER 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-23920
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REGI U.S., INC.
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(Exact name of small business issuer as specified in its charter)
OREGON 91-1580146
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
185-10751 SHELLBRIDGE WAY, RICHMOND, BC. CANADA V6X 2W8
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(Address of principal executive offices)
(604) 278-5996
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(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
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State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: As of December 7, 1998 - 9,248,300
shares of common stock, no par value.
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INDEX
<TABLE>
<CAPTION>
PART I -- Financial Information Page
<S> <C>
Item 1. Financial statements................................................................... 2
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Balance Sheets as of October 31, 1998 and 1997 (Unaudited)...................................... 3
Statements of Operations for the six months ended October 31, 1998 and 1997 (Unaudited)......... 4
Statements of Cash Flows for the six months ended October 31, 1998 and 1997 (Unaudited)......... 5
Item 2. Management's Discussion and Analysis of Results of
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Operations and Financial Condition................................................. 6-7
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PART II -- Other Information.................................................................... 8
Signatures...................................................................................... 9
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<PAGE>
PART I Financial Information
Item 1. Financial statements (Unaudited)
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<PAGE>
REGI U.S., Inc.
(A Development Stage Company)
Balance Sheets
October 31, 1998 and 1997
(expressed in U.S. dollars)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
$ $
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<S> <C> <C>
Assets
Current Asset
Cash 1,737 168,126
Fixed Assets - 1,059
Intangible Assets 411,510 258,700
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413,247 427,885
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Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 86,256 68,400
Accrued liabilities 63,474 25,000
Due to affiliates 113,619 30,886
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263,349 124,286
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Convertible Debentures 50,000 50,000
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Stockholders' Equity (Deficit)
Common Stock, 20,000,000 shares authorized without
par value; 9,248,300 and 8,523,300 shares issued
and outstanding respectively. 3,830,401 3,151,565
Paid for but unissued - 328,000 shares - 328,000
Deficit Accumulated during the Development Stage (3,730,503) (3,225,966)
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99,898 253,599
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413,247 427,885
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</TABLE>
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<PAGE>
REGI U.S., Inc.
(A Development Stage Company)
Statements of Operations
For the six months ended October 31, 1998 and 1997
(expressed in U.S. dollars)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
$ $
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<S> <C> <C>
Revenues - -
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Administrative Expenses
Bank charges 323 257
Foreign exchange (357) 164
Interest on debentures 338 1,640
Investor relations and consulting 69,455 45,364
Office, rent and telephone 8,074 6,276
Professional fees 1,835 2,454
Transfer agent and regulatory fees 7,517 5,766
Less: interest and other income - (1,406)
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87,185 60,515
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Research and Development Expenses
Amortization of capital assets 14,102 4,158
Market development - 100,000
Project management 15,000 15,000
Project overhead 9,445 13,773
Prototype design and construction 24,775 23,521
Royalties 9,000 3,000
Technical consulting 42,000 41,934
Technical reports - 5,000
Travel 1,963 8,478
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116,285 214,864
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Net Loss 203,470 275,379
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Net Loss Per Share .02 .03
========= ==========
Weighted Average Shares Outstanding 9,248,000 (8,254,000)
========= ==========
</TABLE>
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<PAGE>
REGI U.S., Inc.
(A Development Stage Company)
Statements of Cash Flows
For the six months ended October 31, 1998 and 1997
(expressed in U.S. dollars)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
$ $
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<S> <C> <C>
Cash Flows to Operating Activities
Net loss (203,470) (275,379)
Adjustments to reconcile net loss to cash
Amortization 14,102 4,158
Common stock issued for services - 100,000
Change in non-cash working capital items
Increase in accounts payable and accrued liabilities 76,953 (56,051)
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Net Cash Used by Operating Activities (112,415) (227,272)
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Cash Flows from (to) Financing Activities
Increase in convertible debenture - 50,000
Increase in common stock - 105,000
Increase in subscriptions for common stock - 328,000
Increase (decrease) in advances from affiliate 114,700 (20,170)
Increase (decrease) in loan from officer - (7,200)
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Net Cash Provided by Financing Activities 114,700 455,630
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Cash Flows to Investing Activity
(Increase) in patents (1,717) (61,451)
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Net Cash Used by Investing Activity (1,717) (61,451)
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Increase (decrease) in cash 568 166,907
Cash - beginning of period 1,169 1,219
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Cash (deficiency) - end of period 1,737 168,126
======== ========
Non-cash Financing Activity
200,000 shares issued for AVFS rights
at a deemed value of $.7733 per share - 154,665
100,000 shares issued or to be issued for
market development pursuant to a performance
stock plan at a deemed value of $1.00 per share - 100,000
Interest paid 338 1,640
Taxes paid - -
</TABLE>
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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Management's Discussion
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The Company was incorporated in the State of Oregon, U.S.A. on July 27, 1992 and
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%.
In a development stage company, management devotes most of its activities to
establishing a new business. Planned principle activities have not yet produced
significant revenue. The ability of the Company to emerge from the development
stage with respect to its planned principle business activity is dependent upon
its successful efforts to raise additional equity financing and develop the
market for its products.
Progress Report from August 1, 1998 to December 9, 1998
- -------------------------------------------------------
On August 7th, 1998 the Company announced that an agreement was completed with
Trans Air Manufacturing Corporation ("Trans Air") to jointly develop and
manufacture a working prototype compressor for air conditioning for buses. Trans
Air, founded in 1979, has successfully manufactured and supported the highest
quality transportation air conditioning systems in the industry using a single
basic premise, which is to make a quality product and stand behind it.
By News Release dated August 19th, 1998 the Company announced that, pursuant to
a private placement of 500,000 units at a price of $2.00 per unit completed in
1995, the warrants forming part of the units were exercisable at a price of
$2.50 per share, expiring on August 16, 1998. Due to the current market price of
the common stock of the Company, the Board of Directors elected to extend the
term of the warrants for an additional six months. Accordingly, the 500,000
warrants are now exercisable on or before February 16, 1999 at a price of $2.50
per share.
On August 24th, 1998 the Company announced that the current oil pump tests
results were successfully completed by the Company's engineers. The Rand Cam(TM)
oil pump was tested up to 650 psi with no signs of stress. The conventional oil
pump pressures peak at 300 psi with 200 psi as the standard operating pressure.
The Company's engineers have commenced the production design for the Rand
Cam(TM) oil pump for commercialization for automotive use to be completed by
November of this year. The Company believes that this unique patented rotary
design should open a completely new opportunity for all pump applications. The
Rand Cam(TM) pump is an efficient, smooth and quiet running design that will
require very little maintenance due to the simplicity of the design.
By News Release dated October 5th, 1998 the Company issued a progress report on
the Rand Cam(TM) oil pump from its engineer, Paul LaMarche, which states that
the Rand Cam(TM) design oil pump was tested at the Ford Motor test labs with the
following results:
- - The pump showed 10% greater volumetric efficiency than current production
pumps of the same displacement;
- - The Rand Cam(TM) pump was much quieter than the existing pumps used today. By
using a simulated stethoscope the sound from the hydraulic motor completely
masked any sound that the pump could make. The noise factor is the most
important problem with hydraulic pumps.
- - The Rand Cam(TM) pump ran cooler than the existing pumps used today.
- - This particular Rand Cam(TM) pump was designed with four separate pumping
chambers. Each is capable of producing a different pressure in each of the
pump chambers. This is believed to be the only pump in existence to
integrally accomplish this feat. By using an approximate combination of
chambers and pressures, energy waste and undesirable heat buildup are
reduced. For automotive use, increased performance and fuel economy, plus
decreased cooling requirements, all highly desirable attributes, are
achieved.
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<PAGE>
Negotiations are planned with compressor and pump manufacturers to produce the
Rand Cam(TM) oil pump and the compressor for commercial applications.
On October 30th, 1998 the Company announced that it had entered into a
Manufacturing Agreement with T.W. Blasingame Company, Inc., of Boise Idaho
("Blasingame"). Pursuant to the terms of the Agreement, the Company granted to
Blasingame the exclusive world-wide rights to market and sell a steam
expander/hot air version of the Rand Cam/Direct Charge(TM) engine (the "RC/DC
Engine") for locomotive/railway applications. Pursuant to the terms thereto,
Blasingame has granted the exclusive world-wide rights to the Company to
manufacture, market and sell the vane restraint mechanism developed by
Blasingame for all applications of the RC/DC Engine, which vane restraint
mechanism has increased the rotational speed of the RC/DC Engine from 500
revolutions per minute to 1,200 revolutions per minute.
Blasingame and the Company have also agreed to jointly develop the RC/DC engine
for diesel engine manufacturers for locomotive/railway applications and such
other applications as the Company may agree to in writing.
A royalty equal to 10% of the gross sale price for each RC/DC Engine using the
vane restraint mechanism is payable as to 75% to the Company and 25% to
Blasingame.
Results of operations for the six months ended October 31, 1998 compared to the
- -------------------------------------------------------------------------------
six months ended October 31, 1997
- ---------------------------------
There were no revenues from product licensing during the periods.
The net loss in 1998 decreased by $72,000 to $203,000 compared to $275,000 in
1997. Only one full time consultant was hired for investor relations activities
during the period. The Company has accrued $57,000 in favour of three public
relations consultants. The Company will issue 72,000 shares to settle this
liability for services performed during the period. The Company has cost sharing
arrangements with other affiliated companies to keep overall overhead costs to a
minimum.
Basic ongoing research and development activities took place during the six
months ended October 31, 1998. Paul LaMarche and Patrick Badgley undertook the
majority of development activities during the quarter and were paid technical
consulting fees totalling $42,000. The low costs for research and development is
due to more cost effective prototype construction activity than in previous
periods. The Company did not undertake any market development work during 1998
as compared to $100,000 in 1997.
Liquidity
- ---------
During the six months ended October 31, 1998, the Company's operations were
financed through advances from its parent company Rand Energy Group Inc.
("RAND") and other affiliated companies. Rand periodically sells small
quantities of common stock of the Company into the open market and advances the
proceeds to the Company as needed.
Unexercised stock options and warrants, if exercised, could raise $1,163,000 of
additional funds.
The Company continues to finance its operations through funding from RAND and
other affiliated companies. The Company also has a cost sharing arrangement with
RAND for ongoing research and development of the RC/DC Engine. The Company is
solely responsible for ongoing development of the recently acquired world-wide
rights (except Canada) to the Air/Vapor Flow System.
The Company's ability to pay debts as they become due and to finance future
overhead and development is contingent upon receiving funds from RAND which is
dependent upon the ability to sell shares it owns of the Company into the
market.
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<PAGE>
PART II Other Information
Item 1. Legal Proceedings
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None
Item 2. Changes in Securities
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None
Item 3. Defaults upon Senior Securities
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None
Item 4. Submissions of Matters to a Vote of Security Holders
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None
Item 5. Other Information
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None
Item 6. Exhibits and Reports on Form 8K
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None
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<PAGE>
Signatures
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: December 8, 1998 REGI U.S., INC.
By: /s/ John G. Robertson
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John G. Robertson, President
(Principal Executive Officer)
By: /s/ Jennifer Lorette
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Jennifer Lorette, Chief Financial Officer
(Principal Financial Officer)
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-1-1999
<PERIOD-END> OCT-31-1998
<CASH> 1,737
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 459,734
<DEPRECIATION> 48,224
<TOTAL-ASSETS> 413,247
<CURRENT-LIABILITIES> 263,349
<BONDS> 50,000
0
0
<COMMON> 3,830,401
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 413,247
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (203,132)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 338
<INCOME-PRETAX> (203,470)
<INCOME-TAX> 0
<INCOME-CONTINUING> (203,470)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (203,470)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
