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, 2000
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[ ] 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
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REGI U.S., INC.
(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
(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 December 15, 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 October 31, 2000 (unaudited)
and April 30, 2000 (audited) 3
Statements of Operations for the six months
ended October 31, 2000 and 1999 (unaudited) 4
Statements of Cash Flows for the six months
ended October 31, 2000 and 1999 (unaudited) 5
Notes to the Financial Statements (unaudited) 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
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<TABLE>
<CAPTION>
REGI U.S., Inc.
(A Development Stage Company)
Balance Sheets
October 31, April 30,
(unaudited) (audited)
2000 2000
$ $
Assets
<S> <C> <C>
Current Asset
Cash . . . . . . . . . . . . . . . . . . . . . . . . 1,534 -
Property Plant and Equipment (Note 3). . . . . . . . . 3,387 4,295
Intangible Assets (Note 4) . . . . . . . . . . . . . . 390,754 394,973
Total Assets . . . . . . . . . . . . . . . . . . . . . 395,675 399,268
Liabilities and Stockholders' Equity
Current Liabilities
Cheques issued in excess of funds on deposit . . . . - 4,853
Accounts payable . . . . . . . . . . . . . . . . . . 95,567 51,924
Accrued liabilities. . . . . . . . . . . . . . . . . 3,115 11,328
Due to affiliates (Note 7) . . . . . . . . . . . . . . 309,933 98,404
Convertible debentures (Note 5). . . . . . . . . . . 5,000 50,000
Total Current Liabilities. . . . . . . . . . . . . . . 413,615 216,509
Stockholders' Equity (Deficit) (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. . . . . . . . 28,862 15,417
Deficit Accumulated during the Development Stage . . . (4,557,051) (4,342,907)
Total Stockholders' Equity (Deficit) . . . . . . . . . (17,940) 182,759
Total Liabilities and Stockholders' Equity . . . . . . 395,675 399,268
Contingent Liability (Note 1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REGI U.S., Inc.
(A Development Stage Company)
Statements of Operations
Six months ended
October 31,
2000 1999
(unaudited) (unaudited)
$ $
<S> <C> <C>
Revenues . . . . . . . . . . . . . . - -
Administrative Expenses
Amortization . . . . . . . . . . . . 908 -
Bank charges . . . . . . . . . . . 682 565
Financing fees . . . . . . . . . . - 47,608
Foreign exchange . . . . . . . . . (721) 599
Interest on debentures . . . . . . 224 1,640
Investor relations - advertising . 6,218 15,028
Investor relations - consulting. . 27,090 9,000
Office, rent and telephone . . . . 315 14,792
Professional fees. . . . . . . . . 3,324 5,780
Transfer agent and regulatory fees 1,701 4,293
Travel . . . . . . . . . . . . . . - 5,327
39,741 104,632
Research and Development Expenses
Amortization of patents and rights 11,562 11,422
Project management . . . . . . . . 15,000 15,000
Project overhead . . . . . . . . . 9,000 12,062
Prototype design and construction. 77,341 11,870
Royalties. . . . . . . . . . . . . 12,000 12,000
Technical consulting . . . . . . . 49,000 40,500
Travel . . . . . . . . . . . . . . 500 2,906
174,403 105,760
Net Loss . . . . . . . . . . . . . . 214,144 210,392
Net Loss Per Share - Basic . . . . . .02 .02
Weighted Average Shares Outstanding. 10,217,735 9,348,300
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REGI U.S., Inc.
(A Development Stage Company)
Statements of Cash Flows
Six months ended
October 31,
2000 1999
(unaudited) (unaudited)
$ $
<S> <C> <C>
Cash Flows to Operating Activities
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (214,144) (210,392)
Adjustments to reconcile net loss to cash
Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . 12,470 11,422
Stock based compensation. . . . . . . . . . . . . . . . . . . . 13,445 -
Change in non-cash working capital items
Increase (decrease) in accounts payable and accrued liabilities 35,430 (88,631)
Net Cash Used by Operating Activities . . . . . . . . . . . . . . . (152,799) (287,601)
Cash Flows from (to) Financing Activities
Increase in subscriptions for common stock. . . . . . . . . . . . - 509,075
Increase (decrease) in advances from affiliate. . . . . . . . . . 211,529 (220,141)
Redemption of convertible debentures. . . . . . . . . . . . . . . (45,000) (507)
Net Cash Provided by Financing Activities . . . . . . . . . . . . . 166,529 288,427
Cash Flows to Investing Activities
(Increase) in patent protection costs . . . . . . . . . . . . . . (7,343) (3,359)
(Increase) in property, plant and equipment . . . . . . . . . . . - (2,992)
Net Cash Used by Investing Activities . . . . . . . . . . . . . . . (7,343) (6,351)
Increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . 6,387 (5,525)
Cash (deficiency) - beginning of period . . . . . . . . . . . . . . (4,853) 82,120
Cash - end of period. . . . . . . . . . . . . . . . . . . . . . . . 1,534 76,595
Non-cash Financing Activities
Stock based compensation - stock options. . . . . . . . . . . . . . 13,445 -
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 4,375
Taxes paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
</TABLE>
<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 $412,081. 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 ($145,314
during the first two quarters) 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.
<TABLE>
<CAPTION>
3. Fixed Assets
October 31, April 30,
2000 2000
Accumulated Net Book Net Book
Cost Amortization Value Value
(unaudited) (audited)
$ $ $ $
<S> <C> <C> <C> <C>
Computer equipment 5,452 2,065 3,387 4,295
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
4. Intangible Assets
October 31, April 30,
2000 2000
Accumulated Net Book Net Book
Cost Amortization Value Value
(unaudited) (audited)
$ $ $ $
<S> <C> <C> <C> <C>
Patents - RC/DC Engine. 83,356 17,208 66,148 63,315
Patents - AVFS. . . . . 6,619 527 6,092 3,776
AVFS rights ((d) below) . 374,751 56,237 318,514 327,882
464,726 73,972 390,754 394,973
</TABLE>
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 was 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 December 11, 2000
834,767 .75 December 31, 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)
<TABLE>
<CAPTION>
The weighted average number of shares under option and option price for the six
months ended October 31, 2000 is as follows:
Shares Weighted Average
Under Option Option Price
# $
<S> <C> <C>
Beginning of period 740,000 .91
Granted . . . . . . 25,000 .50
Exercised . . . . . - -
Cancelled . . . . . - -
Lapsed. . . . . . . (5,000) 1.00
End of period . . . . 760,000 .90
</TABLE>
<TABLE>
<CAPTION>
If compensation expense had been determined pursuant to SFAS 123, the Company's
net loss and net loss per share for the six months ended October 31, 2000 and
October 31, 1999 would have been as follows:
2000 1999
$ $
<S> <C> <C>
Net loss
As reported . . . . . (214,144) (210,392)
Pro forma . . . . . . (223,077) (218,392)
Basic net loss per share
As reported . . . . . . . (.02) (.02)
Pro forma . . . . . . (.02) (.02)
</TABLE>
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
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Results of Operations
-----------------------
Forward Looking Statements
----------------------------
This report contains forward-looking statements. The words, "anticipate",
"believe", "expect", "plan", "intend", "estimate", "project", "could", "may",
"foresee", and similar expressions are intended to identify forward-looking
statements. The following discussion and analysis should be read in conjunction
with the Company's Financial Statements and other financial information included
elsewhere in this report which contains, in addition to historical information,
forward_looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from the results discussed in the
forward_looking statements. Factors that could cause or contribute to such
differences include those discussed below, as well as those discussed elsewhere
in this report.
Overview
--------
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 $4,557,000 and further losses are expected until we
complete a licensing agreement with a manufacturer and reseller. Our working
capital deficit is $412,000. Our only assets are our intangible assets, being
patents and intellectual property rights, totalling $391,000, which represents
99% of total assets. These factors raise substantial 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 ($145,314
during the first two quarters) and plans to raise additional funds from equity
financing which is yet to be negotiated.
Progress Report from August 1, 2000 to December 15, 2000
-----------------------------------------------------------------
On October 23, 2000, we announced that we have entered into a 5-year license
agreement with Coltec, Inc. wherein Coltec and us have jointly agreed to
participate in government sponsored research and development programs utilizing
our proprietary Rand Cam technology. We agreed to protect certain government
and military products by granting a 5-year license to Coltec.
In consideration for the license agreement for RandCam technology for certain
military/government use, Coltec agrees to pay us 5% of the gross sales of all
products sold. Coltec also agrees to reimburse us for our labour for phase I and
phase II from the funds received by the government/military grants. It also
agrees that all inventions that are improvements to the RandCam technology
shall be granted to us under a perpetual, no-cost license for its products.
On November 27, 2000, we announced an agreement had been completed with GHM,
Inc., a private company located in Maryland, to jointly purchase the rights to
the H2O Hydrogen Separator Technology consisting of a hydrogen separator based
on a unique system for extracting hydrogen from water. We will own the U.S.
rights and Reg Technologies, Inc. will own the worldwide rights excluding the
U.S. to the Hydrogen Separator Technology.
In consideration for a 50% interest for the rights to the Hydrogen Separator
Technology Reg Technologies Inc. ("Reg") agrees to the following:
The Company shall apply for a patent in the U.S. for the Hydrogen Separator
Technology at Reg's expense.
Reg agrees to build a prototype of the Hydrogen Separator Technology as
designed by GHM, Inc.
We also have an option to purchase an additional 50% interest in the Hydrogen
Separator Technology for US$15,000,000 for a combination of cash and shares and
will assign a 5% net revenue interest to GHM, Inc.
Reg has commenced to build a prototype and will conduct a preliminary in-house
test to confirm that the Hydrogen Separator Technology can economically convert
water into hydrogen and oxygen.
Results of operations for the six months ended October 31, 2000 ("2000")
--------------------------------------------------------------------------------
compared to the six months ended October 31, 1999 ("1999")
-------------------------------------------------------------------
There were no revenues from product licensing during the periods.
The net loss in 2000 increased by $3,000 to $214,000 compared to $210,000 in
1999.
There was a decrease in administrative expenses by $65,000 to $40,000 from
$105,000 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 $68,000 to $174,000 as compared to $106,000 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 $49,000 as
compared to $41,000 in 1999. Two $6,000 quarterly royalty payments were made for
the AVFS rights.
Liquidity
---------
During the six months ended October 31, 2000, we financed our operations mainly
through a cost sharing arrangement and 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, $212,000 during 2000. This included ongoing research
and development of the RC/DC Engine. We are solely responsible for ongoing
development of the Air/Vapor Flow System. The amounts owing are now $310,000, or
75% 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 $7,000 on patent protection costs during 2000. The loss for the period
of $214,000 included $26,000 of non-cash items being $12,000 for amortization of
capital and intangible assets and $14,000 for stock based compensation.
We repaid $45,000 of convertible debentures leaving $5,000 unpaid. We are
attempting to locate the convertible debenture holder.
As at October 31, 2000 we had a cash balance of $1,534 and current liabilities
of $414,000 for a working capital deficit of $412,000. 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 $2,209,000 of
additional funds. 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
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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
-------- -------------------------------------
(a) 27.1 - Financial Data Schedule
(b) There were no Form 8-K's filed during the period
<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 19, 2000 REGI U.S., INC.
By: /s/ John G. Robertson
John G. Robertson, President
(Principal Executive Officer)
By: /s/ Brian Cherry
Brian Cherry, Chief
Financial Officer
(Principal Financial Officer)
