|
|
July 31, 2016
|
|
|
April 30, 2016
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
10
|
|
|
$
|
42
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
10
|
|
|
$
|
42
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
178,417
|
|
|
$
|
192,752
|
|
Due to related parties
|
|
|
1,942,094
|
|
|
|
1,916,876
|
|
Total Current Liabilities
|
|
|
2,120,511
|
|
|
|
2,109,628
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit:
|
|
|
|
|
|
|
|
|
Common stock, 100,000,000 shares authorized, no par value, 32,779,298 shares issued and outstanding
|
|
|
10,840,946
|
|
|
|
10,840,946
|
|
Accumulated deficit
|
|
|
(12,961,447
|
)
|
|
|
(12,950,532
|
)
|
Total Stockholders’ Deficit
|
|
|
(2,120,501
|
)
|
|
|
(2,109,586
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Deficit
|
|
$
|
10
|
|
|
$
|
42
|
|
The
accompanying notes are an integral part of these unaudited consolidated financial statements.
REGI
U.S., Inc.
Consolidated
Statements of Expenses
(Unaudited)
|
|
Three Months Ended
|
|
|
|
July 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$
|
11,221
|
|
|
$
|
65,287
|
|
Research and development
|
|
|
-
|
|
|
|
33,767
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations:
|
|
|
(11,221
|
)
|
|
|
(99,054
|
)
|
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
Gain on settlement of accounts payable
|
|
|
666
|
|
|
|
-
|
|
Interest expense
|
|
|
(360
|
)
|
|
|
(360
|
)
|
Other Income (Expense)
|
|
|
306
|
|
|
|
(360
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(10,915
|
)
|
|
$
|
(99,414
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share – basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding – basic and diluted
|
|
|
32,779,298
|
|
|
|
32,779,298
|
|
The
accompanying notes are an integral part of these unaudited consolidated financial statements
.
REGI
U.S., Inc.
Consolidated
Statements of Cash Flows
(Unaudited)
|
|
Three Months Ended
|
|
|
|
July 31,
|
|
|
|
2016
|
|
|
2015
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(10,915
|
)
|
|
$
|
(99,414
|
)
|
Adjustments to reconcile loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Donated services
|
|
|
-
|
|
|
|
30,000
|
|
Gain on settlement of accounts payable
|
|
|
(666
|
)
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Due to related parties
|
|
|
360
|
|
|
|
360
|
|
Accounts payable and accrued liabilities
|
|
|
(13,669
|
)
|
|
|
258
|
|
Net cash used in operating activities
|
|
|
(24,890
|
)
|
|
|
(68,796
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Advances from related parties
|
|
|
24,858
|
|
|
|
68,750
|
|
Net cash provided by financing activities
|
|
|
24,858
|
|
|
|
68,750
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
(32
|
)
|
|
|
(46
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
42
|
|
|
|
491
|
|
Cash and cash equivalents, end of period
|
|
$
|
10
|
|
|
$
|
445
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Income tax paid
|
|
|
-
|
|
|
|
-
|
|
The
accompanying notes are an integral part of these unaudited consolidated financial statements.
REGI
U.S., Inc.
Notes
to Consolidated Financial Statements
(Unaudited)
NOTE
1. BASIS OF PRESENTATION
The
accompanying unaudited interim financial statements of REGI U.S., Inc. (“REGI”) have been prepared in accordance with
accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission,
and should be read in conjunction with the audited financial statements and notes thereto for the year ended April 30, 2016 filed
on Form 10-K with the SEC. In the opinion of management, the accompanying unaudited interim consolidated financial statements
reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position and the
results of operations for the interim period presented herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year or for any future period. Notes to the unaudited consolidated financial
statements which would substantially duplicate the disclosures contained in the audited consolidated financial statements for
fiscal 2016 as reported in Form 10-K, have been omitted.
NOTE
2. GOING CONCERN
REGI
incurred net losses of $10,915 for the three months ended July 31, 2016 and has a working capital deficit of $2,120,501 and an
accumulated deficit of $12,961,447 at July 31, 2016. These factors raise substantial doubt about the ability of REGI to continue
as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of
this uncertainty. As a result, REGI’s unaudited consolidated financial statements as of July 31, 2016 and for the three
months ended have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business.
REGI
also receives interim support from 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.
REGI may also raise additional funds through the exercise of warrants and stock options, if exercised. There is no assurance that
any of these activities will be successful.
NOTE
3. RELATED PARTIES
Amounts
due from related parties are unsecured, non-interest bearing and due on demand. Related parties consist of the President of REGI
and companies controlled or significantly influenced by the President of REGI. As of July 31, 2016, there was $1,942,094 due to
related parties. As of April 30, 2016, there was $1,916,876 due to related parties.
During
the three month period ended July 31, 2015, the President, CEO and director of REGI provided consulting services to REGI valued
at $22,500, which were accounted for as donated capital and charged to expense during the period. $Nil was recorded in the three
month period ended July 31, 2016.
During
the three month period ended July 31, 2015, the CFO, COO and director of REGI provided consulting services to REGI valued at $7,500,
which were accounted for as donated capital and charged to expense during the period. $Nil was recorded in the three month period
ended July 31, 2016.
During
the three month period ended July 31, 2016, we incurred management fees of $3,500 and $2,500 for services provided by the CEO
and CFO respectively. During the three months ended July 31, 2015 management fees of $7,500 was accrued to a company with common
director.
During
the year ended April 30, 2012, the Company issued a promissory note of $24,000 for amounts previously accrued and owed to a company
with common director with the Company. The promissory note bears interest rate of 6% per annum, is unsecured and due on demand.
During the three months ended July 31, 2016 and 2015, there was no change to the principal amount of the promissory note and interest
expense of $360 was recorded each year. The principal balance of the note is included as due to related parties in the consolidated
balance sheets.
REGI
currently utilizes office space in a commercial business park building located in Richmond, British Columbia, Canada, a suburb
of Vancouver, shared by several companies related by common officers and directors. REGI does not pay rent for this office space.
NOTE 4. GAIN ON DEBT SETTLEMENT
During the three months ended July 31,
2016 the Company recorded gain on debt settlement of $666 with a service provider.
NOTE
5.
STOCKHOLDERS’ EQUITY
a)
Common Stock Options and Warrants
During
the three month periods ended July 31, 2016 and 2015, the Company did not record stock-based compensation associated with options
or warrants. At July 31, 2016, the Company had $266,707 of total unrecognized compensation cost related to non-vested stock options
and warrants, which will be recognized over future periods.
A
summary of REGI’s stock option activity for the three months ended July 31, 2016 is as follows:
|
|
Three Months ended
July 31, 2016
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
Options
|
|
|
Price
|
|
Outstanding at beginning of period
|
|
|
1,938,000
|
|
|
$
|
0.15
|
|
Outstanding at end of period
|
|
|
1,938,000
|
|
|
$
|
0.15
|
|
Exercisable at end of period
|
|
|
484,500
|
|
|
$
|
0.15
|
|
Weighted average fair value of options granted
|
|
|
|
|
|
$
|
-
|
|
A
summary of REGI’s common stock warrant activity for the three months ended July 31, 2016 is as follows:
|
|
July 31, 2016
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
Warrants
|
|
|
Price
|
|
Outstanding at beginning of period
|
|
|
200,000
|
|
|
$
|
0.25
|
|
Outstanding at end of period
|
|
|
200,000
|
|
|
|
0.25
|
|
Exercisable at end of period
|
|
|
200,000
|
|
|
$
|
0.25
|
|
At
July 31, 2016, the exercise price and the weighted average remaining contractual life of the outstanding warrants was $0.25 per
share and 0.60 year, respectively. The intrinsic value of “in the money” exercisable warrants at July 31, 2016 was
$Nil.
NOTE
6.
COMMITMENTS
Pursuant
to a letter of understanding dated December 13, 1993 between REGI, Rand 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
with regards to RC/DC Engine technology and will receive 5% of all net profits from sales, licenses, royalties or income derived
from the patented technology. To date, no sales have been accrued and no royalties have been accrued or paid.
Pursuant
to an agreement dated August 20, 1992, REGI acquired the U.S. rights to the original RC/DC Engine from Rand. REGI will pay Rand
and the original owner a net profit royalty of 5% and 1%, respectively. To date no sales have been accrued and no royalties have
been accrued or paid.
NOTE
7.
SUBSEQUENT EVENTS
During
August, 2016, the Company issued senior secured convertible promissory notes (the “Convertible Notes”) for total proceeds
of $140,000. The Convertible Notes are secured against all assets of the Company, mature 90 days after the issuance, bearing simple
interest rate of 10% during the term of the notes and simple interest rate of 20% after the due date, and convertible at any time
on or after ninety days from the issuance date into the Company’s common stock at $0.10 per share.
On August 12, 2016, the
Company adopted its 2016 Stock Option Plan to issue up to 5,000,000 shares to certain key employees, directors, officers and consultants.
Pursuant to the 2016 plan, the Company granted 3,700,000 stock options to certain directors and employees exercisable into the
Company’s common shares at prices between $0.10 and $1.50, expiring July 20, 2021.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking
Statements
Certain
statements contained in this Quarterly Report on Form 10-Q constitute “forward-looking statements.” These statements,
identified by words such as “plan,” “anticipate,” “believe,” “estimate,” “should,”
“expect” and similar expressions include our expectations and objectives regarding our future financial position,
operating results and business strategy. These statements reflect the current views of management with respect to future events
and are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry
results, to be materially different from those described in the forward-looking statements. Such risks and uncertainties include
those set forth in our 10-K for the fiscal year ended April 30, 2016. We do not intend to update the forward- looking information
to reflect actual results or changes in the factors affecting such forward-looking information. We advise you to carefully review
the reports and documents we file from time to time with the Securities and Exchange Commission (the “SEC”), particularly
our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.
All
dollar amounts in this Quarterly Report are in U.S. dollars unless otherwise stated.
Nature
of Business
We
are a development stage company engaged in the business of developing and building an improved axial vane-type rotary engine known
as the RadMax™ rotary technology (the “RadMax® Engine”), used in the design of lightweight and high efficiency
engines, compressors and pumps. The worldwide intellectual and marketing rights to the RadMax™ Engine, exclusive of the
United States, are held by Reg Technologies Inc. (“Reg Tech”). The Company owns the U.S. marketing and intellectual
rights and has a project cost sharing agreement, whereby it funds 50% of the further development of the RadMax™ Engine and
Reg Tech funds 50%.
Reg
Tech is a public company listed for trading on the TSX Venture Exchange and on OTC.BB. Reg Tech holds approximately 10.17% of
our issued and outstanding shares.
Recent
Development
Effective
September 16, 2016 the Company executed Asset Purchase Agreement with Reg Tech to purchase all of Reg Tech’s assets. The
consideration for the purchase is one & one tenth (1.1) shares of REGI U.S., Inc. for each one (1) share of Reg Technologies,
Inc. for a total of approximately 50,596,043 shares of REGI U.S. The transaction is subject to Reg Tech shareholder special meeting’s
approval and review by the TSX Venture Exchange.
Going
Concern
We
incurred net losses of $10,915 for the three months ended July 31, 2016, has a working capital deficit of $2,120,501 and an accumulated
deficit of $12,961,447 at July 31, 2016. Further losses are expected until we enter into a licensing agreement with a manufacturer
and reseller. These factors raise substantial doubt about the ability of the Company to continue as a going concern.
We
may receive interim support from affiliated companies and plan to raise additional capital through debt and/or equity financings.
We may also raise additional funds through the exercise of warrants and stock options, if exercised. However, there is no assurance
that any of these activities will be successful.
Due
to the uncertainty of our ability to generate sufficient revenues from our operating activities and/or to obtain the necessary
financing to meet our obligations and repay our liabilities arising from normal business operations when they come due, in their
report on our financial statements for the year ended April 30, 2016, our registered independent auditors included additional
comments indicating concerns about our ability to continue as a going concern. Our financial statements contain additional note
disclosures describing the circumstances that led to this disclosure by our registered independent auditors. The financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
Results
of Operations for Three Months Ended July 31, 2016 Compared to the Three Months Ended July 31, 2015
We
had a net loss of $10,915 during the three months ended July 31, 2016, decreased by $88,499 from net loss of $99,414 during the
three months ended July 31, 2015.
Research
and development expenses decreased from $33,767 in three months ended July 31, 2015 to $Nil in three months ended July 31, 2016,
due to lack of funds for the current period.
Total
general and administrative expenses decreased from $65,287 in three months ended July 31, 2015 to $11,221 in the three months
ended July 31, 2016, as the company searched for more cost effective ways of managing our operations.
General
and administrative expense comparisons are as follows:
|
●
|
Professional
fees including legal, accounting, audit and auditors’ review expenses decreased from $4,598 during the three months
ended July 31, 2015 to $3,500 during the three months ended July 31, 2016 as we had fewer and less complicated transactions
in the current period;
|
|
|
|
|
●
|
Office
and administrative expenses decreased from $23,189 during the three months ended July 31, 2015 to $1,905 during the three
months ended July 31, 2016 when we were able to be more cost effective during the current period.
|
|
|
|
|
●
|
Consulting
and management fees decreased from $37,500 for the three months ended July 31, 2015 to $7,000 for the three months ended July
31, 2016, as in the current period we did not record donated management service of $30,000 as we did in the previous period.
|
During
each of the three months ended July 31, 2015 and 2016 we recorded interest expense of $360 on the same promissory note issued
to a related party.
We
have not attained profitable operations and are dependent upon obtaining financing to pursue exploration activities. For these
reasons our auditors believe that there is substantial doubt that we will be able to continue as a going concern.
Liquidity
and Capital Resources
During
the three months ended July 31, 2016, we financed our operations mainly through advances from related parties of $24,858.
At
July 31, 2016 total amount owing to related parties is $1,942,094 or 91.59% of total liabilities as of July 31, 2016. This funding
was necessary with a downturn in the financial market to complete the RadMax™ Engine and place us in a position to attain
profit. The balances owing to related parties are non-interest bearing, 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.
During
August, 2016 we raised $140,000 by issuing secured convertible promissory notes. See Item 2 of Part II to this report.
We
plan to raise additional capital through debt and/or equity financings. We cannot provide any assurance that additional funding
will be available to finance our operations on acceptable terms in order to enable us to complete our plan of operations. There
are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing.
If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue the
development of our RadMax™ Engine and our business will fail.
Off-Balance
Sheet Arrangements
We
have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to our stockholders.
Critical
Accounting Policies
We
have identified certain accounting policies that are most important to the portrayal of our current financial condition and results
of operations. Our significant accounting policies are disclosed in Note 1 of the consolidated financial statements for the three
months ended July 31, 2016, attached hereto.
Contractual
Obligations
We
do not currently have any contractual obligations requiring any payment obligation from us.
Item
4. Controls and Procedures
(a)
Evaluation of disclosure controls and procedures
Based
upon an evaluation of the effectiveness of our disclosure controls and procedures performed by our management, with participation
of our Chief Executive Officer and our Chief Financial Officer as of the end of the period covered by this report, our Chief Executive
Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective due to inadequate
segregation of duties.
As
used herein, “
disclosure controls and procedures
” mean controls and other procedures of our company that are
designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules
and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated
to our management, including our principal executive and principal financial officers, or persons performing similar functions,
as appropriate to allow timely decisions regarding required disclosure.
We
are taking steps to enhance and improve the design of our disclosure controls. During the period covered by this interim report,
we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we need to appoint
additional qualified personnel to address inadequate segregation of duties, and adopt sufficient written policies and procedures
for accounting and financial reporting. These remediation efforts are largely dependent upon securing additional financing to
cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be
adversely affected.
(b)
Changes in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting during the quarter ended July 31, 2016 that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.