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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, 1999
[ ] 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 6, 1999 - 9,348,300
shares of common stock, no par value.
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X].
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INDEX
<TABLE>
<CAPTION>
<S> <C>
PART I -- Financial Information Page
Item 1. Financial statements.................................................................... 2
Balance Sheets as of October 31, 1999 and April 30, 1999......................................... 3
Statements of Operations for the six months ended October 31, 1999 and 1998...................... 4
Statements of Cash Flows for the six months ended October 31, 1999 and 1998...................... 5
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition...................................................... 6-8
PART II -- Other Information..................................................................... 9
Signatures....................................................................................... 10
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PART I Financial Information
Item 1. Financial statements (Unaudited)
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REGI U.S., Inc.
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
October 31, April 30,
(unaudited) (audited)
1999 1999
$ $
<S> <C> <C>
Assets
Current Asset
Cash 76,595 82,120
Property Plant and Equipment 2,743 -
Intangible Assets 397,521 405,335
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Total Assets 476,859 487,455
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Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 25,878 107,274
Accrued liabilities 2,640 9,875
Due to affiliates 20,123 240,264
Due to officer - 507
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Total Current Liabilities 48,641 357,920
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Convertible Debenture 50,000 50,000
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Stockholders' Equity
Common Stock, 20,000,000 shares authorized without
par value; 9,348,300 and 9,348,300 shares issued
and outstanding respectively. 3,901,447 3,901,447
paid for but unissued (822,100 and 143,333 shares
respectively) 616,575 107,500
Deficit Accumulated during the Development Stage (4,139,804) (3,929,412)
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Total Stockholders' Equity 378,218 79,535
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Total Liabilities and Stockholders' Equity 476,859 487,455
===============================================================================
</TABLE>
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REGI U.S., Inc.
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
Six months ended
October 31,
------------------------
1999 1998
(unaudited) (unaudited)
$ $
<S> <C> <C>
Revenues - -
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Administrative Expenses
Bank charges 565 323
Financing fees 47,608 -
Foreign exchange 599 (357)
Interest on debentures 1,640 338
Investor relations and consulting 24,028 69,455
Office, rent and telephone 15,791 8,074
Professional fees 5,780 1,835
Transfer agent and regulatory fees 4,293 7,517
Travel 5,327 -
Less: interest and other income (999) -
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104,632 87,185
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Research and Development Expenses
Amortization of patents and rights 11,422 14,102
Project management 15,000 15,000
Project overhead 12,062 9,445
Prototype design and construction 11,870 24,775
Royalties 12,000 9,000
Technical consulting 40,500 42,000
Travel 2,906 1,963
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105,760 116,285
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Net Loss 210,392 203,470
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Net Loss Per Share - Basic .02 .02
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Weighted Average Shares Outstanding 9,348,300 9,248,000
===============================================================
</TABLE>
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<PAGE>
REGI U.S., Inc.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Six months ended
October 31,
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1999 1998
(unaudited) (unaudited)
$ $
<S> <C> <C>
Cash Flows to Operating Activities
Net loss (210,392) (203,470)
Adjustment to reconcile net loss to cash
Amortization 11,422 14,102
Change in non-cash working capital items
Increase in accounts payable and accrued liabilities (88,631) 76,953
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Net Cash Used by Operating Activities (287,601) (112,415)
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Cash Flows from (to) Financing Activities
Increase in subscriptions for common stock 509,075 -
Increase (decrease) in advances from affiliate (220,141) 114,700
Increase (decrease) in loan from officer (507) -
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Net Cash Provided by Financing Activities 288,427 114,700
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Cash Flows to Investing Activities
(Increase) in patents (3,359) (1,717)
(Increase) in property, plant and equipment (2,992) -
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Net Cash Used by Investing Activities (6,351) (1,717)
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Increase (decrease) in cash (5,525) 568
Cash - beginning of period 82,120 1,169
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Cash (deficiency) - end of period 76,595 1,737
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Non-cash Financing Activities - None
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Interest paid 4,375 338
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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REGI U.S., Inc. herein ("the Company") was incorporated in the State of Oregon,
USA on July 27, 1992.
The Company is a development stage company engaged in the business of developing
and commercially exploiting an improved axial vane type rotary engine known as
the Rand Cam/Direct Charge Engine ("The RC/DC Engine"). The world-wide marketing
and intellectual rights, other than the U.S., are held by Rand Energy Group Inc.
("REGI") which is the controlling shareholder of the Company. The Company owns
the U.S. marketing and intellectual rights and has a project cost sharing
agreement, whereby it will fund 50% of the further development of the RC/DC
Engine and REGI will fund 50%. The Company acquired the world-wide rights
(except Canada) to an Air/Vapour Flow System "AVFS". The Company will pay to the
inventor 8.5% on net sales derived from the AVFS and pay a minimum annual
royalty of $24,000 per year, payable quarterly.
In a development stage company, management devotes most of its activities to
establishing a new business. Planned principal activities have not yet produced
significant revenues and the Company has a working capital deficit of $196,000.
The Company has undergone losses to date totalling $4,140,000 and further losses
are expected until the Company completes a licensing agreement with a
manufacturer and reseller. The Company's only asset, other than cash, is its
intangible assets, being patents and intellectual property rights, totalling
$398,000, which represents 83% of total assets or 105% of shareholders' equity.
These factors raise doubt about the Company's ability to continue as a going
concern. The ability of the Company to emerge from the development stage with
respect to its planned principal business activity is dependent upon its
successful efforts to raise additional equity financing, receive funding from
affiliates and its controlling shareholder, and develop a market for its
products.
The Company has raised $616,575 and will issue 822,100 units at $0.75 per unit.
Each unit will contain one share and one warrant to acquire one additional share
at $1.00 per share if exercised in year one. The Company may also raise
additional funds through the exercise of warrants and stock options, if
exercised. Warrants with respect to 934,000 shares at $1.25 per share may be
exercised to net $1,167,500 and options with respect to 670,000 shares at $0.75
and 150,000 shares at $1.00 per share may be exercised to net $652,500.
Progress Report from August 1, 1999 to December 6, 1999
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By News Release dated June 21, 1999 the Company announced that the Rand Cam(TM)
rotary diesel aircraft project (1998 NASA SBIR Phase I contract) was completed
and the final report was delivered to NASA on schedule.
Patrick Badgley, senior engineer for the Rand Cam(TM) diesel aircraft project,
reported that under Mr. Badgley's direction, the 125 horsepower diesel engine
successfully completed a short test run on diesel fuel ignited by compression
ignition. Mr. Badgley was directly involved with Global Aircraft in Starkville,
Mississippi in training their personnel on the assembly and testing of the
engine. He also assisted in the design of several important modifications. The
Global/REGI team is currently conducting additional testing.
The 250 horsepower engine designed especially for aircraft operation has been
completed using the Company's new "winged rotor" concept that greatly enhanced
internal sealing and eliminates numerous separate components.
The proposal for a Phase II program for $600,000 to design, fabricate and test a
250 horsepower Rand Cam(TM) engine has been completed and submitted to NASA for
their approval for funding.
By a News Release dated October 15th, 1999 the Company announced that it had
completed a private placement of 851,101 units at a price of $0.75 per unit, for
total proceeds of $638,325. The Company also announced an extension of warrants
for an additional six months pursuant to two private placements; the first for
500,000 units at a price of $2.00 per unit completed in 1995, pursuant to which
the warrants forming part of the units were exercisable at a price of $2.50 per
share, initially expiring on August 16, 1998 and extended to August 16, 1999;
and the second for 500,000 units at a price of $1.00 per unit completed in
November, 1997, pursuant to which the warrants forming part of the units were
exercisable at a price of $1.25 per share, expiring on dates ranging from
September 23rd to December 11th, 1999.
On December 1st, 1999 the Company announced that testing of the first Rand
Cam(TM) oil pump has been completed. A major American automobile manufacturer
notified the Company that the approved evaluation of the production intent
design will be run in the first or second month of year 2000. The Company's
components should be ready for testing and
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evaluating by the automobile manufacturer's Production Transmission Group at
that time. The Rand Cam pump assembly will be ready by late January 2000. The
Rand Cam oil pump tests completed to date by Paul LaMarche indicate that the oil
pump in many areas exceed the spectrum and show to be more efficient in
volumetric performance. These results promoted the oil pump to the next phase of
the evaluation to be run. It is a requirement to calibrate all the benefits to
improve fuel economy over current oil pumps used today in automobile
transmissions.
Discussion on Y2K issue
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In recognition of the Year 2000 risk for information systems, computers,
equipment and products using date sensitive software, the Company has retained a
consultant to assess the risk to the Company, both internally and externally.
However, the Company does not anticipate that its operations will be materially
affected. In the unlikely event that the Company's computers are not Year 2000
compliant, the consultant will remedy any deficiencies.
The Company is monitoring the Year 2000 compliance by external parties to whom
the Company may be dependent, primarily its bank, suppliers and accountants. The
Company is unable to assess the potential damage that may be caused if external
parties are unable to resolve their Year 2000 compliance. If it appears that any
external party to whom the Company is dependent will be unable to resolve its
Year 2000 issue prior to December 31, 1999, the Company has designated personnel
to be responsible for developing a contingency plan to minimize the risk of
business interruption of the Company.
To mitigate any risk to the Company from external parties, the Company has made
every effort to ensure that all current financial, legal and administrative
information on the Company is maintained by the Company, both on paper and on
the Company's computers.
It is not expected that any material costs will be incurred in addressing the
Year 2000 compliance for the Company.
Results of operations for the six months ended October 31, 1999 compared to the
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six months ended October 31, 1998
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There were no revenues from product licensing during the periods.
The net loss in 1999 increased by $7,000 to $210,000 compared to $203,000 in
1998. The increased net loss in 1999 was due to administrative expenses which
increased by $17,000 to $105,000 as compared to $87,000 in 1998. The major
component of this increase was due to one-time financing fees of $48,000 in
connection with the $0.75 unit private placement currently completing. Investor
relations and consulting decreased by $45,000 to $24,000 from $69,000 in 1998.
The Company employs one full time consultant for investor relations activities
at a rate of $2,000 per month and the Company advertises its ongoing development
activities in publications such as Gulf Pacific and Investors Business Daily.
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, 1999. Paul LaMarche and Patrick Badgley undertook the
majority of development activities during the period and were paid technical
consulting fees totalling $40,500 as compared to $42,000 in 1998. The low costs
for research and development is due to more cost effective prototype
construction activity than in previous periods. A $6,000 quarterly royalty
payment ($12,000 year-to-date) was made for the AVFS rights.
Liquidity
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During the six months ended October 31, 1999, the Company's operating deficiency
of $288,000 was financed through a private placement of units at $0.75 per unit
for total proceeds of $509,000. The Company repaid $220,000 of loans received
from affiliates and spent $6,000 on property plant and equipment and patent
protection costs.
As at October 31, 1999 the Company had cash of $77,000 as its only operating
asset and liabilities of $49,000 for a positive working capital position of
$28,000. This working capital position is not adequate to meet development costs
for the next twelve months.
Unexercised stock options and warrants, if exercised, could raise $1,800,000 of
additional funds.
The Company continues to finance its operations through funding from private
placement of its equity securities. The Company also has a cost sharing
arrangement with the company's major shareholder for ongoing research and
development of the RC/DC Engine. The Company is solely responsible for ongoing
development of the Air/Vapor Flow System.
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The Company's ability to manage payables and to finance future overhead and
development is contingent upon receiving funds from selling its equity
securities.
Equity or debt financing may not be available on terms acceptable to the
Company, or at all. The Company will need additional funds, which it may not be
able to obtain.
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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 8-K
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27.1 - Financial Data Schedule
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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 7, 1999 REGI U.S., INC.
By: /s/ John G. Robertson
------------------------------------
John G. Robertson, President
(Principal Executive Officer)
By: /s/ Jennifer Lorette
------------------------------------
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-30-2000
<PERIOD-START> MAY-1-1999
<PERIOD-END> OCT-31-1999
<CASH> 76,595
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 76,595
<PP&E> 471,009
<DEPRECIATION> 70,745
<TOTAL-ASSETS> 476,859
<CURRENT-LIABILITIES> 48,641
<BONDS> 50,000
0
0
<COMMON> 3,901,447
<OTHER-SE> 616,575
<TOTAL-LIABILITY-AND-EQUITY> 476,859
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 208,752
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,640
<INCOME-PRETAX> (210,392)
<INCOME-TAX> 0
<INCOME-CONTINUING> (210,392)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (210,392)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
