UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
REGI U.S., INC.
(Name of Small Business Issuer in its Charter)
Oregon | 91-1580146 |
(State or Other Jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No) |
#1103-11871 Horseshoe Way
Richmond, BC V7A 5H5 Canada
(Address of Principal Executive Offices)
(604) 278-5996
Issuer's Telephone Number
________________________________________________
(Former Name or Former Address, if changed since last Report)
Check whether the Issuer (1) filed all reports required 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 Company was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
(1) Yes x No ¨
(2) Yes x No ¨
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST
FIVE YEARS)
Not applicable
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the Issuer's
classes of common equity, as of the latest practicable date:
December 2, 2004
Common - 22,411,055 shares
DOCUMENTS INCORPORATED BY REFERENCE
A description of any "Documents Incorporated by Reference"
is contained in Item 6 of this Report.
Transitional Small Business Issuer Format Yes ¨
No x
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Financial Statements of the Company required to be filed with this 10-QSB Quarterly Report were prepared by management and commence on the following page, together with related Notes. In the opinion of management, the Financial Statements fairly present the financial condition of the Company.
REGI U.S. Inc.
(A Development Stage Company)
Interim Financial Statements
October 31, 2004 (unaudited)
REGI U.S. INC.
(A Development Stage Company)
INTERIM FINANCIAL STATEMENTS
OCTOBER 31, 2004
(Expressed in U.S. Dollars)
(The accompanying notes are an integral part of the financial
statements)
F-1
REGI U.S. Inc.
(A Development Stage Company)
Balance Sheets
(expressed in U.S. dollars)
October 31, | April 30, | |||
2004 | 2004 | |||
$ | $ | |||
(unaudited) | (audited) | |||
Assets | ||||
Current Assets | ||||
Amounts receivable | 3,000 | 3,000 | ||
Total Current Assets | 3,000 | 3,000 | ||
Intangible Assets (Note 3) | 68,011 | 64,865 | ||
Total Assets | 71,011 | 67,865 | ||
Liabilities and Stockholders’ Deficit | ||||
Current Liabilities | ||||
Bank indebtedness | 1,675 | 3,133 | ||
Accounts payable | 77,710 | 77,950 | ||
Accrued liabilities | 11,950 | 8,300 | ||
Due to related parties (Note 5) | 138,964 | 136,923 | ||
Total Liabilities | 230,299 | 226,306 | ||
Commitments and Contingent Liabilities (Notes 1 and 6) | ||||
Subsequent Events (Note 7) | ||||
Stockholders’ Deficit | ||||
Common Stock (Note 4), 50,000,000 shares authorized without par value; | ||||
22,411,055 and 22,231,055 shares issued and outstanding respectively | 5,640,451 | 5,610,451 | ||
Additional Paid In Capital | 32,572 | - | ||
Common Stock Subscribed | 145,800 | - | ||
Donated Capital (Note 5) | 472,500 | 397,500 | ||
Deferred Compensation | (35,738 | ) | (27,829 | ) |
Deficit Accumulated During the Development Stage | (6,414,873 | ) | (6,138,563 | ) |
Total Stockholders’ Deficit | (159,288 | ) | (158,441 | ) |
Total Liabilities and Stockholders’ Deficit | 71,011 | 67,865 |
(The accompanying notes are an integral part of the financial
statements)
F-2
REGI U.S. Inc.
(A Development Stage Company)
Statements of Operations
(expressed in U.S. dollars)
(unaudited)
Accumulated from | ||||||||||
July 27, 1992 | ||||||||||
(Inception) | Three Months Ended | Six Months Ended | ||||||||
To October 31, | October 31, | October 31, | ||||||||
2004 | 2004 | 2003 | 2004 | 2003 | ||||||
$ | $ | $ | $ | $ | ||||||
Revenue | - | - | - | - | - | |||||
Administrative Expenses | ||||||||||
Bad debts | 2,792 | - | - | - | - | |||||
Bank charges and interest | 12,172 | 355 | 176 | 516 | 284 | |||||
Consulting services (Note 5) | 475,203 | 64,203 | 45,000 | 101,703 | 90,000 | |||||
Foreign exchange loss (gain) | 4,209 | 1,352 | 607 | 701 | 554 | |||||
Interest on debentures | 12,593 | - | - | - | - | |||||
Investor relations – | ||||||||||
publications | 348,735 | 17,853 | 435 | 25,585 | 435 | |||||
Investor relations – | ||||||||||
consulting | 626,636 | 21,671 | - | 32,437 | - | |||||
Office, rent and telephone | ||||||||||
(Note 5) | 182,898 | 5,451 | 2,446 | 10,735 | 3,946 | |||||
Professional fees | 405,906 | 9,068 | 14,866 | 12,810 | 17,134 | |||||
Stock-based compensation | 475,813 | 16,426 | 84,263 | 38,663 | 89,263 | |||||
Transfer agent and | ||||||||||
regulatory fees | 109,805 | 1,009 | - | 1,029 | - | |||||
Travel | 39,406 | 12,265 | 4,458 | 12,265 | 4,458 | |||||
Less: interest and other | ||||||||||
income | (16,788 | ) | - | - | - | - | ||||
accounts payable | ||||||||||
written-off | (15,818 | ) | - | - | - | - | ||||
2,663,562 | 149,653 | 152,251 | 236,444 | 206,074 | ||||||
Research and Development | ||||||||||
Expenses | ||||||||||
Intellectual property (Note 3) | 578,509 | - | - | - | - | |||||
Amortization | 127,734 | 1,254 | 1,173 | 2,493 | 2,339 | |||||
Market development | 93,146 | - | 364 | - | 364 | |||||
Professional fees | 73,904 | - | - | - | - | |||||
Project management fees | 335,000 | 13,949 | 7,500 | 25,000 | 7,500 | |||||
Project overhead | 211,588 | - | - | - | - | |||||
Prototype design and | ||||||||||
construction contracts, net | ||||||||||
of recoveries | 1,355,896 | - | - | - | - | |||||
Royalties | 93,000 | - | - | - | - | |||||
Technical prototype design | ||||||||||
consulting (Note 5) | 605,149 | 6,140 | - | 11,971 | 7,500 | |||||
Technical reports | 29,050 | - | - | - | - | |||||
Technical salaries | 169,467 | - | - | - | - | |||||
Travel | 177,935 | 402 | 2,899 | 402 | 2,899 | |||||
Less: accounts payable | ||||||||||
written off | (99,067 | ) | - | - | - | - | ||||
3,751,311 | 21,745 | 11,936 | 39,866 | 20,602 | ||||||
Net Loss for the Period | (6,414,873 | ) | (171,398 | ) | (164,187 | ) | (276,310 | ) | (226,676 | ) |
Net Loss Per Share – Basic and | ||||||||||
Diluted | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||
Weighted Average Shares | ||||||||||
Outstanding | 22,410,000 | 18,175,000 | 22,375,000 | 17,974,000 | ||||||
(The accompanying notes are an integral part of the financial statements) | ||||||||||
F-3 |
REGI U.S. Inc.
(A Development Stage Company)
Statements of Cash Flows
(expressed in U.S. dollars)
(unaudited)
Six Months Ended | ||||
October 31, | ||||
2004 | 2003 | |||
$ | $ | |||
Cash Flows to Operating Activities | ||||
Net loss for the period | (276,310 | ) | (226,676 | ) |
Adjustments to reconcile net loss to net cash used by operating activities | ||||
Amortization | 2,493 | 2,339 | ||
Donated services | 75,000 | 97,500 | ||
Stock-based compensation | 48,663 | 89,263 | ||
Changes in operating assets and liabilities | ||||
Accounts payable and accrued liabilities | 3,410 | 4,773 | ||
Net Cash Used by Operating Activities | (146,744 | ) | (32,801 | ) |
Cash Flows from Financing Activities | ||||
Subscriptions received | 145,800 | - | ||
Shares issued | 6,000 | 42,000 | ||
Increase in due to related parties | 2,041 | (6,994 | ) | |
Net Cash Provided by Financing Activities | 153,841 | 35,006 | ||
Cash Flows to Investing Activities | ||||
Patent protection costs | (5,639 | ) | (2,252 | ) |
Net Cash Used by Investing Activities | (5,639 | ) | (2,252 | ) |
Increase (Decrease) in Cash and Cash Equivalents | 1,458 | (47 | ) | |
Cash and Cash Equivalents - Beginning of Period | (3,133 | ) | 87 | |
Cash and Cash Equivalents - End of Period | (1,675 | ) | 40 | |
Non-Cash Investing and Financing Activities | ||||
Stock-based compensation | 48,663 | 89,263 | ||
Supplemental Disclosures | ||||
Interest paid | - | - | ||
Income tax paid | - | - |
(The accompanying notes are an integral part of the financial
statements)
F-4
REGI U.S. Inc.
(A Development Stage Company)
Notes to Financial Statements
(expressed in U.S. dollars)
1. | Nature of Operations and Continuance of Business | |
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. (“Rand”),
which is a major 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%. |
||
In a development stage company, management
devotes most of its activities to establishing a new business. Planned
principal activities have not yet produced any 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 $227,299.
These factors raise substantial 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. |
||
The Company plans to raise funds through
loans from a shareholder, Rand. Rand owns approximately 18% of the shares
of the Company, having an approximate current market value of $2,570,000
as at December 16, 2004, and plans to sell shares as needed to meet ongoing
funding requirements if traditional equity sources of financing prove
to be insufficient. The Company receives interim support from its ultimate
parent company and other affiliated companies and plans to raise additional
capital through debt and/or equity financings. There continues to be 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. |
||
2. | Summary of Significant Accounting Policies | |
(a) | Fiscal year | |
The Company’s fiscal year end is April 30. | ||
(b) | Basis of Accounting | |
These financial statements are prepared in conformity with accounting principles generally accepted in the United States and are presented in U.S. dollars. | ||
(c) | Use of Estimates | |
The preparation of financial statements in conformity
with U.S. 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. |
||
(d) | Cash and Cash Equivalents | |
The Company considers all highly liquid instruments
with a maturity of three months or less at the time of issuance to be
cash equivalents. |
F-5
REGI U.S. Inc.
(A Development Stage Company)
Notes to Financial Statements
(expressed in U.S. dollars)
2. | Summary of Significant Accounting Policies (continued) | |
(e) | Intangible Assets | |
Intangible assets represent legal costs incurred
in establishing patents. These costs are being amortized on a straight-line
basis over 20 years. The useful life of the patent is determined by management
and is not to exceed the legal life. No amortization is provided on capitalized
patent costs until such time as the patent has been granted. |
||
(f) | Long-Lived Assets | |
In accordance with Financial Accounting Standards
Board (“FASB”) Statement of Financial Accounting Standards
(“SFAS”) No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets”, the carrying value of intangible assets and
other long-lived assets is reviewed on a regular basis for the existence
of facts or circumstances that may suggest impairment. The Company recognizes
an impairment when the sum of the expected undiscounted future cash flows
is less than the carrying amount of the asset. Impairment losses, if any,
are measured as the excess of the carrying amount of the asset over its
estimated fair value. |
||
(g) | Foreign Currency Translation | |
The Company’s functional and reporting currency
is the United States dollar. The financial statements of the Company are
translated to United States dollars in accordance with SFAS No. 52 “Foreign
Currency Translation”. Monetary assets and liabilities denominated
in foreign currencies are translated using the exchange rate prevailing
at the balance sheet date. Gains and losses arising on translation or
settlement of foreign currency denominated transactions or balances are
included in the determination of income. Foreign currency transactions
are primarily undertaken in Canadian dollars. The Company has not, to
the date of these financials statements, entered into derivative instruments
to offset the impact of foreign currency fluctuations. |
||
(h) | Income Taxes | |
Potential benefits of income tax losses are not
recognized in the accounts until realization is more likely than not.
The Company has adopted SFAS No. 109 as of its inception. Pursuant to
SFAS No. 109 the Company is required to compute tax asset benefits for
net operating losses carried forward. Potential benefit of net operating
losses have not been recognized in these financial statements because
the Company cannot be assured it is more likely than not it will utilize
the net operating losses carried forward in future years. |
||
(i) | Revenue Recognition | |
Product sales are recognized at the time goods are
shipped. System and project revenue are recognized utilizing the percentage
of completion method that recognizes project revenue and profit during
construction based on expected total profit and estimated progress towards
completion during the reporting period. All related costs are recognized
in the period in which they occur. Revenue from licensing the right for
others to use the technology is recognized as earned over time and collection
is certain. |
||
(j) | Research and Development | |
The Company is in the development stage and all
costs relating to research and development are charged to operations as
incurred. |
F-6
REGI U.S. Inc.
(A Development Stage Company)
Notes to Financial Statements
(expressed in U.S. dollars)
2. | Summary of Significant Accounting Policies (continued) | |
(k) | Comprehensive Income | |
SFAS No. 130, “Reporting Comprehensive Income,”
establishes standards for the reporting and display of comprehensive income
and its components in the financial statements. As at October 31, 2004
and 2003, the Company has no items that represent comprehensive income
and, therefore, has not included a schedule of comprehensive income in
the financial statements. |
||
(l) | Stock-Based Compensation | |
The Company accounts for stock-based awards using
the intrinsic value method of accounting in accordance with Accounting
Principles Board Opinion No. 25, “Accounting for Stock Issued to
Employees” (APB 25). Under the intrinsic value method of accounting,
compensation expense is recognized if the exercise price of the Company’s
employee stock options is less than the market price of the underlying
common stock on the date of grant. |
||
Statement of Financial Accounting Standards No.
123, “Accounting for Stock-Based Compensation,” (SFAS 123),
established a fair value based method of accounting for stock-based awards.
Under the provisions of SFAS 123, companies that elect to account for
stock-based awards in accordance with the provisions of APB 25 are required
to disclose the pro forma net income (loss) that would have resulted from
the use of the fair value based method under SFAS 123. |
||
During the year, the Company adopted the disclosure
requirements of Statement of Financial Accounting Standards No. 148, “Accounting
for Stock-Based Compensation — Transition and Disclosure an Amendment
of FASB Statement No. 123” (SFAS 148), to require more prominent
disclosures in both annual and interim financial statements regarding
the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. |
||
The pro forma information is as follows: | |||||
Six Months Ended | |||||
October 31, | October 31, | ||||
2004 | 2003 | ||||
$ | $ | ||||
(unaudited) | (unaudited) | ||||
Net loss - as reported | (276,310 | ) | (226,676 | ) | |
Add: Stock-based compensation expense included in net | |||||
loss - as reported | 48,663 | 89,263 | |||
Deduct: Stock-based compensation expense determined | |||||
under fair value method | (48,663 | ) | (89,263 | ) | |
Net loss - pro forma | (276,310 | ) | (226,676 | ) | |
Net loss per share – basic and diluted - as reported | (0.01 | ) | (0.01 | ) | |
Net loss per share – basic and diluted - pro forma | (0.01 | ) | (0.01 | ) | |
The assumptions used are as follows: | |||||
Expected dividend yield | 0 | % | |||
Risk-free interest rate | 3.11 | % | |||
Expected volatility | 214 | % | |||
Expected option life (in years) | 3 |
F-7
REGI U.S. Inc.
(A Development Stage Company)
Notes to Financial Statements
(expressed in U.S. dollars)
2. | Summary of Significant Accounting Policies (continued) | |
(m) | Basic and Diluted Net Income (Loss) per Share | |
The Company computes net income (loss) per share
in accordance with SFAS No. 128, “Earnings per Share” (SFAS
128). SFAS 128 requires presentation of both basic and diluted earnings
per shares (EPS) on the face of the income statement. Basic EPS is computed
by dividing net income (loss) available to common shareholders (numerator)
by the weighted average number of common shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential
common shares outstanding during the period including stock options, using
the treasury stock method, and convertible preferred stock, using the
if-converted method. In computing diluted EPS, the average stock price
for the period is used in determining the number of shares assumed to
be purchased from the exercise of stock options or warrants. Diluted EPS
excludes all dilutive potential common shares if their effect is anti-dilutive.
|
||
(n) | Financial Instruments | |
The carrying value of cash and cash equivalents,
amounts receivable, accounts payable, accrued liabilities and due to related
parties approximate fair value due to the relatively short maturity of
these instruments. |
||
(o) | Recent Accounting Pronouncements | |
In December 2003, the United States Securities and
Exchange Commission issued Staff Accounting Bulletin No. 104, “Revenue
Recognition” (SAB 104), which supersedes SAB 101, “Revenue
Recognition in Financial Statements.” The primary purpose of SAB
104 is to rescind accounting guidance contained in SAB 101 related to
multiple element revenue arrangements, which was superseded as a result
of the issuance of EITF 00-21, “Accounting for Revenue Arrangements
with Multiple Deliverables.” While the wording of SAB 104 has changed
to reflect the issuance of EITF 00- 21, the revenue recognition principles
of SAB 101 remain largely unchanged by the issuance of SAB 104. The adoption
of SAB 104 did not have a material impact on the Company’s financial
statements. |
||
(p) | Interim Financial Statements | |
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. | Intangible Assets | |
October 31, | April 30, | ||||
2004 | 2004 | ||||
Accumulated | Net Carrying | Net Carrying | |||
Cost | Amortization | Value | Value | ||
$ | $ | $ | $ | ||
(unaudited) | (unaudited) | ||||
Patents - RC/DC Engine | 103,640 | 35,629 | 68,011 | 64,865 |
(a) | On August 20, 1992 the Company acquired
the U.S. rights to the original Rand Cam-Engine from REGI by issuing 5,700,000
shares at a fair value of $0.01 per share. REGI will receive a 5%
net profit royalty. The $57,000 was charged to operations as research
and development. |
F-8
REGI U.S. Inc.
(A Development Stage Company)
Notes to Financial Statements
(expressed in U.S. dollars)
3. | Intangible Assets (Continued) | |
(b) | Pursuant to an agreement with a former director,
the Company acquired the U.S. rights to the improved axial vane rotary
engine known as the RC/DC Engine. In consideration for the transferred
technology, the former director was issued 100,000 shares of Reg Technologies
Inc. (“REG”) (a public company owning 51% of REGI) with a
fair value of $200,000. The $200,000 was charged to operations
as research and development. A 1% net profit royalty will be due to the
former director. |
|
(c) | Pursuant to a letter of understanding dated December
13, 1993 between the Company, REGI and REG (collectively called the grantors)
and West Virginia University Research Corporation (“WVURC”),
the grantors have agreed that WVURC shall own 5% of all patented technology
and will receive 5% of all net profits from sales, licences, royalties
or income derived from the patented technology. |
|
4. | Common Stock | |
(a) | Stock Option Plan | |
The Company has a Stock Option Plan to issue up
to 2,500,000 shares to certain key directors and employees, approved April
30, 1993 and amended December 5, 2000. Pursuant to the Plan the Company
has granted stock options to certain directors and employees. |
||
The following table summarizes the continuity of the Company’s stock options: | ||
Weighted | ||||
average | ||||
Number of | exercise | |||
shares | price | |||
$ | ||||
Outstanding, April 30, 2003 (audited) | 1,850,000 | 0.20 | ||
Granted | 350,000 | 0.27 | ||
Exercised | (100,000 | ) | 0.20 | |
Cancelled | (200,000 | ) | 0.20 | |
Outstanding, April 30, 2004 (audited) | 1,900,000 | 0.21 | ||
Granted | 121,500 | 0.38 | ||
Exercised | (30,000 | ) | 0.20 | |
Expired | (400,000 | ) | 0.20 | |
Outstanding, October 31, 2004 (unaudited) | 1,591,500 | 0.23 | ||
Exercisable at end of period | 1,512,000 | 0.23 |
F-9
REGI U.S. Inc.
(A Development Stage Company)
Notes to Financial Statements
(expressed in U.S. dollars)
4. | Common Stock (Continued) | |
(a) | Stock Option Plan (Continued) | |
Additional information regarding options outstanding as at October 31, 2004 is as follows: | ||
Outstanding | Exercisable | ||||||
Weighted | |||||||
Exercise | average | Weighted | Weighted | ||||
Price | remaining | average | average | ||||
$ | Number of | contractual | exercise price | Number of | exercise price | ||
shares | life (years) | $ | shares | $ | |||
0.20 – 0.45 | 1,591,500 | 2.5 | 0.23 | 1,512,000 | 0.23 |
The fair value for options granted was estimated
at the date of grant using the Black-Scholes option- pricing model under
the Black-Scholes option-pricing model the weighted average fair value
of stock options granted during the year was $0.23. |
||
(b) | Share Purchase Warrants | |
The following table summarizes the continuity of the Company’s warrants: | ||
Weighted | ||||
average | ||||
exercise | ||||
Number of | price | |||
shares | $ | |||
Balance, April 30, 2003 (audited) | - | - | ||
Issued | 973,120 | 0.21 | ||
Exercised | (550,000 | ) | 0.16 | |
Expired | (250,000 | ) | 0.30 | |
Balance, April 30, 2004 (audited) and October 31, 2004
(unaudited) |
173,120 | 0.20 |
At October 31, 2004, the following share purchase warrants were outstanding: |
Number of | Exercise | |||
Warrants | Price | Expiry Date | ||
173,120 | $0.20 | January 7, 2005 |
(c) | Performance Stock Plan | |
The Company has allotted 2,500,000 shares to be
issued pursuant to a Performance Stock Plan approved and registered on
June 27, 1997. Compensation is recorded when the conditions to issue shares
are met at their then fair market value. There are no options currently
granted pursuant to this plan. |
F-10
REGI U.S. Inc.
(A Development Stage Company)
Notes to Financial Statements
(expressed in U.S. dollars)
4. | Common Stock (Continued) | |
(d) | Non-cash Consideration | |
Shares issued for non-cash consideration were valued
based on the fair market value of the services provided. During the year,
the Company issued a total of 150,000 shares of common stock for consulting
services. These shares were issued at an aggregate fair value of $24,000
for services rendered. The Company charged $10,000 to operations for
the pro-rata portion of services performed during the period. |
||
(e) | Private Placement | |
The Company has offered a private placement subscription
for up to 4,000,000 units of the Company at a purchase price of $0.25
per unit. Each unit will consist of one common share of the Company and
one-half non-transferable share purchase warrant. Each two one-half warrants
may be exercised within one year of the date of issuance to the purchaser
at a price of $0.35. As at October 31, 2004, the Company had received
$145,800 in subscriptions. |
||
5. | Related Party Transactions/Balances | |
(a) | Amounts owing to related parties are unsecured,
non-interest bearing and are due on demand. These companies are related
through significant ownership of the Company, having common officers and
directors, and sharing the same office. |
|
(b) | The value of consulting services of $45,000
(2003 - $60,000) was contributed by the President, CEO and director
of the Company and charged to operations and treated as donated capital.
|
|
(c) | The value of consulting services of $15,000
(2003 - $15,000) was contributed by the Vice President and director
of the Company and charged to operations and treated as donated capital.
|
|
(d) | The value of consulting services of $15,000
(2003 - $15,000) was contributed by the CFO, COO and director of the
Company and charged to operations and treated as donated capital. |
|
(e) | The value of technical consulting services of $Nil
(2003 - $7,500) was charged to research and development expenses and
treated as donated capital. |
|
(f) | Rent of $1,978 (2003 - $1,591) was paid to a company having common officers and directors. | |
(g) | Project management fees of $15,000 (2003 - $Nil) were paid to a company having common officers and directors. | |
6. | Commitments and Contingent Liabilities | |
(a) | The Company is committed to fund 50% of the further development of the RC/DC Engine. | |
(b) | See Note 1 for substantial doubt about continuing as a going concern. | |
(c) | On July 27, 2004, the Company entered into a consulting
agreement for online marketing services. The consultant is to receive
$15,000 for services to be rendered. $5,000 is currently due and
has been accrued, $5,000 is due after 30 days and the remaining $5,000
is due after 60 days. |
F-11
REGI U.S. Inc.
(A Development Stage Company)
Notes to Financial Statements
(expressed in U.S. dollars)
7. | Subsequent Events | |
(a) | On November 9, 2004, the Company granted 25,000
stock options to a consultant, exercisable at $0.40 per share and
expiring on November 9, 2009. |
|
(b) | On November 24, 2004, the Company extended the expiry
date of 75,000 stock options exercisable at $0.20 per share from November
29, 2004 to November 29, 2006. |
F-12
Item 2. Management’s Discussion and Analysis of Financial Condition and 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.
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. (“Rand”) 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%.
In a development stage company, management devotes most of its activities to establishing a new business. Planned principal activities have not yet produced any 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 $227,299. These factors raise substantial 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.
The Company plans to raise funds through loans from a shareholder, Rand. Rand owns approximately 18% of the shares of the Company, having an approximate current market value of $2,570,000 as at December 16, 2004, and plans to sell shares as needed to meet ongoing funding requirements if traditional equity sources of financing prove to be insufficient. The Company receives interim support from its ultimate parent company and other affiliated companies and plans to raise additional capital through debt and/or equity financings. There continues to be 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 and other affiliated companies and plans to raise additional capital through debt and/or equity financings.
There continues to be 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.
Progress Report from August 1, 2004 to December 10, 2004
Rand Cam Technology
Gasoline and Diesel Engine
Two prototype engines were built in 1993 and 1994 by the WVURC to run on gasoline. Testing on these prototypes suggested that the concept is fundamentally sound and that with a program of engine review, design, testing and development, a technically successful range of engines can be developed. The current prototype design for the diesel engine was designed by a consortium made up of Alliant Techsystems (formerly Hercules Aerospace Company) ("Alliant"), WVURC and us. Alliant was involved in the design and development including drawings for the RC/DC diesel engine. In addition Alliant performed extensive analysis on the diesel engine including bearings, cooling, leakage, rotor, vanes, housing, vane tip heating, geometry and combustion. This engine was designed as a general purpose power plant for military and commercial applications. A prototype of the diesel engine has been assembled and tested.
On August 3, 2004, we announced that the Rand Cam™ compressor tests were completed under the direction of Brian Cherry, Vice President of Research and Development. The tests have shown encouraging results of up to 25 P.S.I. with only 800 R.P.M., and have exceeded expectations. The testing for the compressor was completed on behalf of Trans Air Manufacturing for air-conditioning in bus applications.
On September 7, 2004 we announced that the unmanned vehicle applications for the Rand Cam™ technology is on schedule, and we expect our licensee to start assembly and subsequent engine testing in the fourth quarter of this year.
On November 3, 2004 we announced that the Canadian Patent was issued for the Rand Cam™ Rotary Engine effective October 5, 2004. The term of the patent is twenty years from the date of the filing on December 11, 1992.
On November 29, 2004, we announced that a world wide license agreement, excluding the rights for the United States of America that are held by REGI U.S. for the Rand Cam™ technology has been successfully completed with Rand Energy Group Inc. Reg Technologies, Inc., our parent company, has agreed to pay a 5% net profit interest and make annual payments of $50,000. Reg Technologies, Inc. will be responsible for 50% of the costs for development and production of the Rand Cam™ technology.
The world wide patents cover Canada and several countries in Europe, namely, Germany, France, Great Britain, and Italy. Reg Technologies, Inc., together with REGI U.S., Inc., is in the process of testing a Rand Cam™ diesel engine for a generator application for hybrid electric cars. Additionally, our licensee for the 42 H.P. production model diesel Rand Cam™ is currently completing the engine for unmanned aerial applications for the U.S. military.
Reg Technologies, Inc. owns 3,320,000 shares of REGI U.S., Inc. directly, and 4,079,000 indirectly through a 51% ownership of Rand Energy Group Inc.
Results of operations for the six months ended October 31, 2004 (“2004”) compared to the six months ended October 31, 2003 (“2003”)
There were no revenues from product licensing during the periods.
The net loss in 2004 increased by $30,370 to $276,310 compared to $226,676 in 2003. Administrative expenses increased by $30,370 to $236,444 from $206,074 in 2003. The increase was mainly due to increased investor relations activity in 2004. Research and development expenses increased by $19,264 to $39,866 compared to $20,602 in 2003. The increase was mostly due to stock-based compensation for a research and development consultant.
Liquidity
During the six months ended October 31, 2004, we financed our operations mainly through funds raised for a private placement offering and the exercise of stock options. The amounts owing to related parties
increased by $2,041 to $138,964, are unsecured and repayable on demand. The related parties have indicated that they will advance further funds if needed.
As at October 31, 2004 we had a working capital deficit of $227,299. Working capital is not adequate to meet development costs for the next twelve months. Unexercised stock options and warrants, if exercised could raise significant additional funds. We receive interim support from our ultimate parent company and plan to raise additional funds from equity financing which is yet to be negotiated. We also plan to raise funds through loans from a shareholder (Rand). Rand owns approximately 18% of the shares of the Company, having an approximate current market value of $2,570,000 as at December 16, 2004, and plans to sell shares as needed to meet our ongoing funding requirements if traditional equity sources of financing prove to be insufficient.
Item 3. Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, as of the end of the period covered by this quarterly report, being October 31, 2004, we have carried out an evaluation of the effectiveness of the design and operation of our company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company's management, including our President and our Chief Financial Officer. Based upon that evaluation, our President and our Chief Financial Officer concluded that our company's disclosure controls and procedures are effective. There have been no changes in our company's internal controls or in other factors, which could significantly affect internal controls subsequent to the date we carried out our evaluation.
Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our President and our Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.
PART II - OTHER INFORMATION
Item 1. | Legal Proceedings None |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds On August 3, 2004 30,000 shares of common stock were issued to the Company’s President pursuant to the exercise of stock options. During the six months ended October 31, 2004, the Company received subscriptions totalling $145,800 pursuant to a private placement of up to 4,000,000 Units. Each unit consists of one share of common stock of the Company and one ½ warrant at $0.35 exercisable for a period of one year from the date of issuance. Two ½ warrants enable the purchaser to acquire one additional share of common stock. |
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 (a) Exhibits: |
|
31.1 |
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
31.2 |
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
32.1 | ||
32.2 | ||
(b) Reports on Form 8-K None. |
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: March 21, 2005 | REGI U.S., INC. |
By: /s/ John G. Robertson By: /s/ James Vandeberg |