<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 July 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to _________________
Commission File No. 0-23920
--------------
REGI U.S., INC.
----------------------------------------------
(Exact 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 No.)
185-10751 Shellbridge Way, Richmond, BC. Canada V6X 2W8
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(604) 278-5996
------------------------------
(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
------- -------
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: As of September 17, 1999 - 9,348,300
shares of common stock, no par value.
<PAGE>
INDEX
- --------------------------------------------------------------------------------
PART I -- Financial Information
<TABLE>
<CAPTION> Page
<S> <C>
Item 1. Financial statements ............................. 2
Balance Sheets as of July 31, 1999 and April 30, 1999 ..... 3
Statements of Operations for the three months ended
July 31, 1999 and 1998 .................................. 4
Statements of Cash Flows for the three months ended
July 31, 1999 and 1998 .................................. 5
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition ............... 6-7
PART II -- Other Information .............................. 8
Signatures ................................................ 9
</TABLE>
-1-
<PAGE>
PART I Financial Information
Item 1. Financial statements
-2-
<PAGE>
REGI U.S., Inc.
(A Development Stage Company)
Balance Sheets
July 31, April 30,
(unaudited) (audited)
1999 1999
$ $
Assets
Current Asset
Cash 53,994 82,120
Fixed Assets 849 -
Intangible Assets 399,954 405,335
- -------------------------------------------------------------------------------
Total Assets 454,797 487,455
===============================================================================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 102,315 107,274
Accrued liabilities 2,000 9,875
Due to affiliates 144,127 240,264
Due to officer 1,920 507
- -------------------------------------------------------------------------------
Total Current Liabilities 250,362 357,920
- -------------------------------------------------------------------------------
Convertible Debenture 50,000 50,000
- -------------------------------------------------------------------------------
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 (373,600 and 143,333 shares
respectively) 280,200 107,500
Deficit Accumulated during the Development Stage (4,027,212) (3,929,412)
- -------------------------------------------------------------------------------
Total Stockholders' Equity 154,435 79,535
- -------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity 454,797 487,455
===============================================================================
-3-
<PAGE>
REGI U.S., Inc.
(A Development Stage Company)
Statements of Operations
Three months ended
July 31,
--------------------------
1999 1998
(unaudited) (unaudited)
$ $
Revenues - -
- -------------------------------------------------------------------------------
Administrative Expenses
Bank charges and interest 398 358
Finders fee 12,095 -
Foreign exchange 539 (357)
Investor relations - advertising 13,085 -
Investor relations - consulting 6,000 6,000
Office, rent and telephone 7,141 4,382
Professional fees 3,264 1,000
Transfer agent and regulatory fees 2,274 2,780
Less: interest and other income (41) -
- -------------------------------------------------------------------------------
44,755 14,163
- -------------------------------------------------------------------------------
Research and Development Expenses
Amortization of capital assets 5,567 7,065
Project management 7,500 7,500
Project overhead 7,562 4,569
Prototype design and construction 1,612 7,431
Royalties 6,000 -
Technical consulting 19,500 21,000
Travel 5,304 1,395
- -------------------------------------------------------------------------------
53,045 48,960
- -------------------------------------------------------------------------------
Net Loss 97,800 63,123
===============================================================================
Net Loss Per Share .01 .01
===============================================================================
Weighted Average Shares Outstanding 9,348,000 9,248,000
===============================================================================
-4-
<PAGE>
REGI U.S., Inc.
(A Development Stage Company)
Statements of Cash Flows
Three months ended
July 31,
--------------------------
1999 1998
(unaudited) (unaudited)
$ $
Cash Flows from Operating Activities
Net loss (97,800) (63,123)
Adjustments to reconcile net loss to cash
Amortization 5,567 7,065
Change in non-cash working capital items
Increase (decrease) in accounts payable
and accrued liabilities (12,834) (9,998)
Increase in prepaid expenses (849) -
- -------------------------------------------------------------------------------
Net Cash Used by Operating Activities (105,916) (66,056)
- -------------------------------------------------------------------------------
Cash Flows from Financing Activities
Increase in common stock 172,700 -
Increase (decrease) in advances from affiliates (96,137) 54,254
Increase in loan from officer 1,413 -
- -------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 77,976 54,254
- -------------------------------------------------------------------------------
Cash Flows to Investing Activity
(Increase) in patents (186) (617)
- -------------------------------------------------------------------------------
Net Cash Used by Investing Activity (186) (617)
- -------------------------------------------------------------------------------
(Decrease) in cash (28,126) (12,419)
Cash - beginning of period 82,120 1,169
- -------------------------------------------------------------------------------
Cash (deficiency) - end of period 53,994 (11,250)
===============================================================================
Non-Cash Financing Activities - -
===============================================================================
Supplemental Disclosures:
Interest paid - -
Income taxes paid - -
===============================================================================
-5-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Management's Discussion
- -----------------------
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 $4,000,000 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
$400,000, which represents 88% of total assets or 259% 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 plans to raise $525,000 and issue 700,000 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. A total of $280,200 was raised as
at July 31, 1999. 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 May 1, 1999 to September 22, 1999
- ------------------------------------------------------
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.
Discussion on Y2K issue
- -----------------------
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
-6-
<PAGE>
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 three months ended July 31, 1999 compared to the
- ------------------------------------------------------------------------------
three months ended July 31, 1998
- --------------------------------
There were no revenues from product licensing during the periods.
The net loss in 1999 increased by $35,000 to $98,000 compared to $63,000 in
1998. The increased net loss in 1999 was due to administrative expenses which
increased by $31,000 to $45,000 as compared to $14,000 in 1998. The major
component of this increase was due to an increase in investor relations
publications and advertising of $13,000 and $12,000 was paid as a finders fee
relating to a private placement of securities. The Company employs one full time
consultant for investor relations activities at a rate of $2,000 per month. 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 three
months ended July 31, 1999. Paul LaMarche and Patrick Badgley undertook the
majority of development activities during the quarter and were paid technical
consulting fees totalling $19,500 as compared to $21,000 in the comparative
period. 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 was made for the AVFS rights.
Liquidity
- ---------
During the three months ended July 31, 1999, the Company's operating deficiency
of $106,000 was financed through a private placement of units at $0.75 per unit
for total proceeds of $173,000. The Company repaid $96,000 of loans received
from its parent company.
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 RAND and
private placement of its equity securities. 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 Air/Vapor Flow
System.
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.
-7-
<PAGE>
PART II Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submissions of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
27.1 - Financial Data Schedule
-8-
<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: September 22, 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)
-9-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1999
<PERIOD-END> JUL-31-1999
<CASH> 53,994
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 53,994
<PP&E> 445,347
<DEPRECIATION> 45,393
<TOTAL-ASSETS> 454,797
<CURRENT-LIABILITIES> 250,362
<BONDS> 50,000
0
0
<COMMON> 4,181,647
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 454,797
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 97,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (97,800)
<INCOME-TAX> 0
<INCOME-CONTINUING> (97,800)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (97,800)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
