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, 2000
-------------
[ ] 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 11, 2000 - 10,217,735
shares of common stock, no par value.
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X].
<PAGE>
INDEX
--------------------------------------------------------------------------------
PART I - Financial Information Page
Item 1. Financial statements 2
------- --------------------
Balance Sheets as of July 31, 2000 (unaudited) and
April 30, 2000 (audited) 3
Statements of Operations for the three months ended
July 31, 2000 and 1999 (unaudited) 4
Statements of Cash Flows for the three months ended
July 31, 2000 and 1999 (unaudited) 5
Notes to the Financial Statements for the three months
ended July 31, 2000 (unaudited) and the year ended
April 30, 2000 (audited) 6-8
Item 2. Management's Discussion and Analysis of Results of
------- --------------------------------------------------
Operations and Financial Condition 9-10
----------------------------------
PART II - Other Information 11
Signatures 12
<PAGE>
PART I Financial Information
Item 1. Financial statements
------- --------------------
<PAGE>
REGI U.S., Inc.
(A Development Stage Company)
Balance Sheets
July 31, April 30,
(unaudited) (audited)
2000 2000
$ $
Assets
Current Assets - -
Fixed Assets (Note 3) 3,841 4,295
Intangible Assets (Note 4) 392,064 394,973
--------------------------------------------------------------------------------
Total Assets 395,905 399,268
================================================================================
Liabilities and Stockholders' Equity
Current Liabilities
Cheques issued in excess of funds on deposit 30,856 4,853
Accounts payable 32,173 51,924
Accrued liabilities 7,890 11,328
Due to affiliates (Note 7) 243,146 98,404
Convertible debentures (Note 5) 5,000 50,000
--------------------------------------------------------------------------------
Total Current Liabilities 319,065 216,509
--------------------------------------------------------------------------------
Stockholders' Equity (Note 6)
Common Stock, 20,000,000 shares authorized without
par value; 10,217,735 and 10,217,735 shares issued
and outstanding respectively. 4,510,249 4,510,249
Stock Based Compensation - Stock Option 15,417 15,417
Deficit Accumulated during the Development Stage (4,448,826) (4,342,907)
--------------------------------------------------------------------------------
Total Stockholders' Equity 76,840 182,759
--------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity 395,905 399,268
================================================================================
(Contingent Liability - Note 1)
(The accompanying notes are an integral part of these financial statements)
<PAGE>
REGI U.S., Inc.
(A Development Stage Company)
Statements of Operations
Three months ended
July 31,
2000 1999
(unaudited) (unaudited)
$ $
Revenues - -
--------------------------------------------------------------------------------
Administrative Expenses
Amortization 454 -
Bank charges and interest 642 398
Finders fee - 12,095
Foreign exchange (800) 539
Investor relations - advertising 529 13,085
Investor relations - consulting 7,645 6,000
Office, rent and telephone 317 7,141
Professional fees 464 3,264
Transfer agent and regulatory fees 302 2,274
Less: interest and other income (1) (41)
--------------------------------------------------------------------------------
9,552 44,755
--------------------------------------------------------------------------------
Research and Development Expenses
Amortization of capital assets 5,753 5,567
Project management 7,500 7,500
Project overhead 4,500 7,562
Prototype design and construction 47,114 1,612
Royalties 6,000 6,000
Technical consulting 25,000 19,500
Travel 500 5,304
--------------------------------------------------------------------------------
96,367 53,045
--------------------------------------------------------------------------------
Net Loss 105,919 97,800
================================================================================
Net Loss Per Share .01 .01
================================================================================
Weighted Average Shares Outstanding 10,218,000 9,348,000
================================================================================
(The accompanying notes are an integral part of these financial statements)
<PAGE>
REGI U.S., Inc.
(A Development Stage Company)
Statements of Cash Flows
Three months ended
July 31,
2000 1999
(unaudited) (unaudited)
$ $
Cash Flows from Operating Activities
Net loss (105,919) (97,800)
Adjustment to reconcile net loss to cash
Amortization 6,207 5,567
Change in non-cash working capital items
Decrease in accounts payable and accrued liabilities (23,189) (12,834)
Increase in prepaid expenses - (849)
--------------------------------------------------------------------------------
Net Cash Used by Operating Activities (122,901) (105,916)
--------------------------------------------------------------------------------
Cash Flows from Financing Activities
Increase in common stock - 172,700
Increase (decrease) in due to affiliates 144,742 (94,724)
Redemption of convertible debentures (45,000) -
--------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 99,742 77,976
--------------------------------------------------------------------------------
Cash Flows to Investing Activities
(Increase) in patent protection costs (2,844) (186)
--------------------------------------------------------------------------------
Net Cash Used by Investing Activities (2,844) (186)
--------------------------------------------------------------------------------
(Decrease) in cash (26,003) (28,126)
Cash (deficiency) - beginning of period (4,853) 82,120
--------------------------------------------------------------------------------
Cash (deficiency) - end of period (30,856) 53,994
================================================================================
Non-Cash Financing Activities - -
================================================================================
Supplemental Disclosures:
Interest paid - -
Income taxes paid - -
================================================================================
(The accompanying notes are an integral part of these financial statements)
<PAGE>
REGI U.S., Inc.
(A Development Stage Company)
Notes to the Financial Statements
1. Development Stage Company
REGI U.S., Inc. herein ("the Company") was incorporated in the State of
Oregon, U.S.A. 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. 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 Rand Energy Group Inc. will fund 50%.
The Company acquired the world-wide marketing and intellectual rights, other
than Canada, to the Air/Vapor Flow System ("AVFS").
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 suffered recurring
operating losses as is normal in development stage companies. The Company
also has a working capital deficit of $319,065. 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
controlling shareholders, and develop a market for its products. There are
insufficient funds to provide enough working capital to fund ongoing
operations for the next twelve months. The Company may raise additional
funds through the exercise of warrants and stock options, if exercised.
The Company receives interim support from its ultimate parent company
($99,763 during the quarter) and plans to raise additional funds from equity
financing which is yet to be negotiated.
2. Summary of Significant Accounting Policies
(a) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the periods. Actual results could differ from those estimates.
(b) Adjustments
These interim unaudited financial statements have been prepared on the
same basis as the annual financial statements and in the opinion of
management, reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the Company's financial
position, results of operations and cash flows for the periods shown.
The results of operations for such periods are not necessarily
indicative of the results expected for a full year or for any future
period.
3. Fixed Assets
July 31, April 30,
2000 2000
Accumulated Net Book Net Book
Cost Amortization Value Value
(unaudited) (audited)
$ $ $ $
Computer equipment 5,452 1,611 3,841 4,295
===== ===== ===== =====
<PAGE>
4. Intangible Assets
July 31, April 30,
2000 2000
Accumulated Net Book Net Book
Cost Amortization Value Value
(unaudited) (audited)
$ $ $ $
Patents - RC/DC Engine 78,857 16,166 62,691 63,315
Patents - AVFS 6,619 444 6,175 3,776
AVFS rights ((d) below) 374,751 51,553 323,198 327,882
------- ------ ------- -------
460,227 68,163 392,064 394,973
======= ====== ======= =======
5. Convertible Debentures
The Company issued three year, 8 % interest, convertible debentures and
raised $50,000. The 8 % interest is paid annually and the debentures are
convertible into common shares at $1.25, $1.50 and $1.75 in years one, two
and three, respectively. In the event the shares are trading below $2.00 per
share during any consecutive ten trading days during the last month of the
third year, the convertible debentures will be exercisable at 20% below the
said ten-day average. The maturity date is June 15, 2000. The Company
subsequently redeemed $45,000 of such debentures on their maturity date.
6. Common Stock
(a) Warrants outstanding
Exercise
Number of Price
Shares $ Expiry Dates
500,000 1.25 September 23, 2000 to December 11, 2000
834,767 1.00 May 3, 2000 to September 28, 2000
(b) Stock Option Plan
The Company has a Stock Option Plan to issue up to 1,000,000 shares to
certain key directors and employees, approved April 30, 1993 and amended
March 30, 1995. On March 30, 1995 the Company registered the 1,000,000
shares for issuance under the Stock Option Plan which was amended
November 1, 1996. Pursuant to the Plan the Company has granted stock
options to certain directors and employees.
The options are granted for services provided to the Company. Statement
of Financial Accounting Standards No. 123 ("SFAS 123") requires that an
enterprise recognize, or at its option, disclose the impact of the fair
value of stock options and other forms of stock based compensation in the
determination of income. The Company has elected under SFAS 123 to
continue to measure compensation costs on the intrinsic value basis set
out in APB Opinion No. 25. As stock options are granted at exercise
prices based on the market price of the Company's shares at the date of
grant, no compensation cost is recognized. However, under SFAS 123, the
impact on net income and income per share of the fair value of stock
options must be measured and disclosed on a fair value based method on a
pro forma basis. As performance stock is issued for services rendered the
fair value of the shares issued is recorded as compensation expense or
capitalized, at the date the conditions are met to issue shares.
The fair value of the employee's purchase rights, pursuant to stock
options, under SFAS 123, was estimated using the Black-Scholes model.
<PAGE>
6. Common Stock (continued)
(b) Stock Option Plan (continued)
The weighted average number of shares under option and option price for
the three months ended July 31, 2000 is as follows:
Shares Weighted Average
Under Option Option Price
# $
Beginning of period 815,000 .80
Granted - -
Exercised - -
Cancelled - -
Lapsed - -
------- ------
End of period 815,000 .80
======= ======
If compensation expense had been determined pursuant to SFAS 123, the
Company's net loss and net loss per share for the three months ended
July 31, 2000 and July 31, 1999 would have been as follows:
2000 1999
$ $
Net loss
As reported (105,919) (97,800)
Pro forma (109,919) (101,225)
Basic net loss per share
As reported (.01) (.01)
Pro forma (.01) (.01)
7. Due to Affiliates
Amounts owing to affiliates are unsecured, non-interest bearing and are due
on demand.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
-------------------------------------------------------------------------
Results of Operations
---------------------
Management's Discussion
-----------------------
REGI U.S., Inc. was incorporated in the State of Oregon, USA on July 27, 1992.
We are 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.
which is our controlling shareholder. We own the U.S. marketing and intellectual
rights and have a project cost sharing agreement, whereby we will fund 50% of
the further development of the RC/DC Engine and Rand Energy Group Inc. will fund
50%.
In fiscal 1998, we acquired the U.S. and world-wide rights (except Canada) to an
Air/Vapour Flow System "AVFS". We will pay to the inventor 8.5% on net sales
derived from the AVFS. The inventor will also receive a minimum annual royalty
of $24,000 per year beginning October 1, 1997, payable quarterly.
As a development stage company, we devote most of our activities to establishing
our business. Planned principal activities have not yet produced significant
revenues and we have a working capital deficit. We have undergone mounting
losses to date totalling $4,449,000 and further losses are expected until we
complete a licensing agreement with a manufacturer and reseller. Our working
capital deficit is $319,000. Our only assets are our intangible assets, being
patents and intellectual property rights, totalling $392,000, which represents
99% of total assets. These factors raise doubt about our ability to continue as
a going concern. Our ability to emerge from the development stage with respect
to our planned principal business activity is dependent upon our successful
efforts to raise additional equity financing, receive funding from affiliates
and controlling shareholders, and develop a market for our products. There are
insufficient funds to provide enough working capital to fund ongoing operations
for the next twelve months. The Company may raise additional funds through the
exercise of warrants and stock options, if exercised.
The Company receives interim support from its ultimate parent company ($99,763
during the quarter) and plans to raise additional funds from equity financing
which is yet to be negotiated.
Results of operations for the three months ended July 31, 2000 ("2000") compared
--------------------------------------------------------------------------------
to the three months ended July 31, 1999 ("1999")
------------------------------------------------
There were no revenues from product licensing during the periods.
The net loss in 2000 increased by $8,000 to $106,000 compared to $98,000 in
1999. The major components of this increase, on a net basis, was due to a
decrease in administrative expenses by $35,000 to $10,000 from $45,000 due to
elimination of certain expenses until we obtain adequate financing.
Ongoing research and development activities took place during 2000. Research and
development increased by $43,000 to $96,000 as compared to $53,000 in 1999 due
to fabrication of the RandCam air conditioning compressor for buses. Paul
LaMarche and Patrick Badgley undertook the majority of development activities
during 2000 and were paid technical consulting fees totalling $25,000 as
compared to $19,000 in 1999. A $6,000 quarterly royalty payment was made for the
AVFS rights.
Liquidity
---------
During 2000, we financed our operations mainly through funding received from our
affiliated companies (common directors) and our controlling shareholder, Rand
Energy Group, Inc. and its 51% shareholder Reg Technologies Inc. These companies
advanced, or paid expenses on behalf of, $145,000 during 2000. These amounts
owing are now $243,000, or 76% of total current liabilities, are unsecured and
repayable on demand. Our affiliated companies have indicated that they will not
be demanding repayment of these funds during the next fiscal year and will
advance, or pay expenses on behalf of, further funds if needed.
We spent $3,000 on patent protection costs during 2000. The loss for the year of
$106,000 included $6,000 of non-cash items being $6,000 for amortization of
capital and intangible assets.
We repaid $45,000 of convertible debentures leaving $5,000 unpaid. We are
attempting to locate the convertible debenture holder.
<PAGE>
As at July 31, 2000 we had a cash deficiency of $31,000 and current liabilities
of $319,000. The Company receives interim support from its ultimate parent
company and plans to raise additional funds from equity financing which is yet
to be negotiated. We also plan to raise funds through loans from a controlling
shareholder (Rand Energy Group Inc.). Rand Energy Group Inc. owns 5,362,700
shares, having a current market value of $3,000,000, and plans to sell shares as
needed to meet our ongoing funding requirements if traditional equity sources of
financing prove to be insufficient.
<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
<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 12, 2000 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)
<PAGE>
