Stockholder
Proposals
Pursuant
to Rule 14a-8 under the Exchange Act, stockholders may present proper proposals for inclusion in our proxy statement and for consideration
at our next meeting of stockholders. To be eligible for inclusion in our 2019 proxy statement, your proposal must be received
by us no later than 120 days before April 30, 2019 and must otherwise comply with Rule 14a-8 under the Exchange Act. Further,
if you would like to nominate a Director or bring any other business before the stockholders at the 2019 Meeting, you must comply
with the procedures contained in the bylaws and you must notify us in writing and such notice must be delivered to or received
by the Secretary no later than 120 days before April 30, 2019. While the Board will consider stockholder proposals, we reserve
the right to omit from our proxy statement relating to our 2019 meeting stockholder proposals that it is not required to include
under the Exchange Act, including Rule 14a-8 of the Exchange Act.
All
stockholder proposals, notices and requests should be made in writing and sent via registered, certified or express mail, to our
company, at the address on the first page of this Proxy Statement to the attention of the President.
By
Order of the Board of Directors,
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/s/
“Paul W. Chute”
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Paul
W. Chute
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Director
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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
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[X]
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ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For
the fiscal year ended
April 30, 2018
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[ ]
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TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For
the transition period from _______________________ to _______________________
Commission
File No.
0-23920
REGI
U.S., Inc.
(Exact
name of registrant in its Charter)
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Oregon
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91-1580146
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(State
or Other Jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No)
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7520
N Market St., #10, Spokane, WA. 99217
(Address
of Principal Executive Offices)
(509)
474-1040
Registrant’s
telephone number
(Former
Name, former address and former fiscal year, if changed since last report)
Securities
registered pursuant to Section 12(b) of the Exchange Act: NONE
Securities
registered pursuant to Section 12(g) of the Exchange Act:
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Title
of each class
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Name
of each Exchange on which registered:
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Common
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OTC
Markets
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Indicate
by check mark if the issuer is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes [ ]
No [X]
Indicate
by check mark if the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Act: Yes [ ] No
[X]
Indicate
by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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.
(1)
Yes [X] No [ ] (2) Yes [X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K Yes [ ] No [X]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filed, a non-accelerated filer, or a smaller
reporting company.
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Large
accelerated filer [ ]
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Accelerated
filer [ ]
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Non-accelerated
filer [ ]
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Smaller
reporting company
[X]
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|
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Emerging
growth company
[ ]
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|
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If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
[ ]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No
[X]
ISSUERS
INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not
applicable
APPLICABLE
ONLY TO CORPORATE ISSUERS
The
number of shares issued and outstanding of the issuer’s common stock, no par value, as of August 13, 2018 was 99,838,844.
State
the aggregate market value of the voting and non-voting common equity computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s
most recently completed second fiscal quarter: $12,748,044 as of October 31, 2017.
DOCUMENTS
INCORPORATED BY REFERENCE
None
REGI
U.S., INC.
FORM
10-K
TABLE
OF CONTENTS
FORWARD
LOOKING STATEMENTS
THIS
ANNUAL REPORT ON FORM 10-K, INCLUDING EXHIBITS THERETO, CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A
OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE FORWARD-LOOKING
STATEMENTS ARE TYPICALLY IDENTIFIED BY THE WORDS “ANTICIPATES”, “BELIEVES”, “EXPECTS”, “INTENDS”,
“FORECASTS”, “PLANS”, “FUTURE”, “STRATEGY”, OR WORDS OF SIMILAR MEANING. VARIOUS
FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN THE FORWARD-LOOKING STATEMENTS, INCLUDING THOSE
DESCRIBED IN “RISK FACTORS” IN THIS FORM 10-K. WE ASSUME NO OBLIGATION TO UPDATE THESE FORWARD-LOOKING STATEMENTS
TO REFLECT ACTUAL RESULTS, CHANGES IN ASSUMPTIONS, OR CHANGES IN OTHER FACTORS, EXCEPT AS REGULATED BY LAW.
As
used in this annual report, the terms “we”, “us”, “our”, the “Company”,“RadMax”,
RadMax Technologies, Inc., and “REGI” mean REGI U.S., Inc., unless otherwise indicated.
The
Company files annual reports and furnishes other information with the SEC. You may read and copy any document that we file at
the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of
10 a.m. to 3 p.m. You may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.
The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the Commission at (http://www.sec.gov). The Company also files information with the Canadian
Securities Administrators via SEDAR (www.sedar.com). The Company’s website is located at
www.radmaxtech.com
PART
I
ITEM
1. BUSINESS
General
We
were organized under the laws of the State of Oregon on July 27, 1992 as Sky Technologies, Inc. On August 1, 1994, our name was
officially changed by a vote of a majority of our shareholders to REGI U.S., Inc.
On
July 27
th
, 2016, REGI undertook a reorganization, naming its wholly owned subsidiary, RadMax Technologies, Inc. (“RadMax”)
as its DBA for marketing and technology image.
On
September 16, 2016, REGI entered into an asset purchase agreement (the “APA”) with Reg Technologies Inc. (“Reg
Tech”), a British Columbia public company whose common stock was listed on TSX Venture Exchange to purchase all of the assets
of Reg Tech, a company with a common director and CEO with REGI. An aggregate of 51,757,119 unregistered common shares of our
company were issued as consideration for the asset purchase. The transaction was closed on February 17, 2017 upon TSX Venture
Exchange approval.
Prior
to the APA, REGI and Reg Tech had been 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”) with the marketing and intellectual
rights in the U.S. held by REGI and the worldwide marketing and intellectual rights, other than in the U.S., held by Reg Tech.
Upon closing the APA, REGI owns the worldwide rights to the technologies. We will need to raise additional capital in the future
beyond any amount currently on hand and which may become available as a result of debt and/or equity financing, including the
exercise of options which are currently outstanding, in order to fully implement our intended plan of operations.
Business
of the Company
Overview
and History
RadMax,
is a wholly owned subsidiary of REGI U.S., Inc., based in Spokane, Washington. It is a technology and product development company
that is designing, building and proving the functionality of a family of smaller, lighter and more energy-efficient axial vane,
rotary engines, compressors, pumps and gas expanders for, commercial, residential and government applications. Our focus is on
developing innovative devices that reduce carbon footprint, device size, weight and parts count, while increasing fuel and manufacturing
efficiencies over incumbent technologies. Our proprietary sliding axial vane technology, enables our devices to deliver high output
to weight ratios making them easily scalable from small to very large. We intend to develop and market these devices in cooperation
with our industry, government, and private investor partners. We are initially focused on applications that are new and disruptive,
in that they are more efficient, environmentally friendly, compact and cost-effective while offering a broader operational range
than those currently available.
Our
patented RadMax sliding axial vane technology, has vanes that form chambers on both sides of the rotor, the volume of these chambers
change as the vanes follows along the cam profile. This results in alternately compressing and expanding vapors / fluids at both
cam locations offering the following key advantages over competitive devices:
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Compact
design with high output to size and weight ratios
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Simple
operation, low parts count and fewer moving parts
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The
option of integral electricity generation
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Easily
scalable from small to very large
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Able
to operate at much lower temperatures and pressures than incumbent devices, dramatically broadening the range of potential
market applications
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From
our headquarters in Spokane, WA, we are working with our engineering staff, as well as outside engineering and business consultants,
to design, build, and commercialize these devices. Our goal is to license or sell RadMax technology and/or participate in joint
ventures to manufacture RadMax products for a broad spectrum of industries and applications. Examples of industries and applications
that could benefit from our technology include (but are not limited to); transportation, aerospace, air conditioning and refrigeration,
oil and gas production and distribution, power generation, water desalination and purification, pumps, commercial building dehumidification
/ CO₂ removal, and military markets. In addition to its potential use as prime mover, the RadMax technology design is being
employed in the development of several types of compressors, pumps, and gas expanders.
To
date, several gas expander prototypes have been built and are involved in on-going bench scale testing. Additional prototype development
and testing is underway. This testing is aligned with the specifications provided in several Department of Energy (DOE) / Pacific
Northwest National Laboratory (PNNL) grant proposals, or through discussions with the large A/C, refrigeration Original Equipment
Manufacturers (OEM’s). We plan for this work to continue until a commercially feasible design is built, tested and sold
into a specific market application. However, there is no assurance at this time that such commercially feasible designs will ever
be perfected or will become profitable. If a commercially feasible design is perfected, we expect to derive revenues from licensing
the RadMax technology, selling the rights to specific applications and markets, selling our intellectual property, or selling
the company. However, there is no assurance at this time that revenues will ever be received from any of the aforementioned revenue
paths, even if it does prove to be commercially feasible.
Based
on our prototype testing and modeling we believe that multiple markets exist for RadMax rotary devices. We also believe that these
devices can be produced at competitive prices, and provide a combination of energy utilization efficiency, power density and flexibility
Technology
Overview
RadMax
patented technology is a family of smaller, lighter and more energy-efficient engines, compressors, pumps, gas expanders and combined
devices designed for simplicity, efficiency and power. Our devices are easily configurable to meet the needs of diverse applications
and requirements.
The
RadMax rotary principle is unique. As many as 12 straight vanes reciprocate parallel to the axis of rotation through a rotor and
compress or expand fluids in the same manner as reciprocating piston devices. The rotating, reciprocating vanes follow the sinusoidal
surfaces of stationary cams in the end housings, forming chambers on both sides of the rotor between the rotor, stator walls and
vanes. The chamber volume changes as the vane follows along the cam profile during the rotor’s revolution, resulting in
alternately compressing and/or expanding fluids at both cam locations, depending on the device’s application. The desired
device configuration is achieved by simply changing the cam profile and / or intake and exhaust porting locations in the cam instead
of having to use complicated valve systems.
Unlike
piston devices, a minimum of energy is lost due to reciprocating motion and accelerations. Because the upper and lower faces of
the rotor are 90-degrees out of phase, and the vanes move parallel to the direction of rotation, a RadMax device is always balanced
and exhibits nominal vibration.
Simply
changing the cam profile and / or intake and exhaust porting locations, a RadMax device can be designed as an internal combustion
engine, compressor, pump, gas expander, or a combination of these functions.
A
RadMax device is combination of four distinct sections; two intake and discharge cycles on each cam. This unique design allows
for each of these sections to be independently configured with different combinations of compression and expansion ratios allowing
for such things as multi-stage expansion / compression by porting one section output into and between the different sections.
A
truly unique capability of our technology design is the ability to combine more than one machine function into a single RadMax
device. The RadMax mechanism is comprised of two cams connected by a common driveshaft in a single housing. By using separate
vane actuator systems, it is possible to have two separately functioning cam cycles – for example an engine, pump, compressor,
or gas expander – in the same device. The resulting compact device provides increased flexible functionality and high performance
in a smaller footprint than two separate devices. These characteristics make RadMax combined-cycle devices well suited for applications
with weight restrictions and limited space, such as the RadMax external combustion engine, auxiliary and backup power generation,
waste heat recovery, portable pumps, compressors and generators, and gas system throttling loss recovery.
Additionally,
because of its unique rotary design, it is possible to design electricity generation components directly into and as part of the
RadMax device, thus eliminating the need and space for a separate generator. Incorporating an integrated generator into RadMax
engines and gas expanders allows for the option to utilize all of the device’s power to generate electricity or use some
or all of it to power other devices through its shaft.
As
an engine, RadMax devices provide power through the expansion of gases, which in turn is converted to shaft torque. When configured
as an internal combustion four-stroke engine, combustion occurs within the device’s internal combustion chamber. The hot,
pressurized gases cause the rotor to revolve, releasing energy through expansion as the combustion chamber increases in volume.
Because the RadMax design can have up to 12 vanes, the engine generates an incredible 24 power strokes per rotation, 12 on the
upper side of the rotor and 12 on the lower side. Due to this efficient design, a RadMax internal combustion engine will produce
four times the horsepower per revolution compared to an equivalent-displacement four-cycle piston engine. The RadMax external
combustion engine is a low-pressure Brayton cycle engine that uses a gas expander rather than a traditional turbine. Various prototype
engines for both diesel and spark-ignition configurations have been built ranging from 10 to over 300 horsepower.
Products
and Applications
RadMax
Compressed Gas Expander
The
RadMax compressed gas expander is a positive-displacement device that is uniquely able to capture both kinetic and pressure-volume
energy and convert it to rotational power in compressed gas expansion applications. This power can then be used to drive other
devices such as compressors and electrical generators. Additional efficiency can be gained by incorporating electric power generation
directly into the gas expander.
Key
Advantages:
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Able
to efficiently expand low density gases
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Developed
torque can be used to internally generate electricity or drive an external device
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Variable
expansion ratios possible
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Able
to achieve higher work efficiencies at lower speeds
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Easily
scalable from small to large devices
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Use
can decrease electricity consumption in the USA by $5 to $15 billion.
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Use
can reduce CO₂ emissions by over 100 million tons in the USA alone.
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Applications:
The
RadMax gas expander, when paired with a generator can replace less efficient devices such as the throttling valves in air conditioning
and refrigeration systems. The incumbent free gas expansion valves and mechanical throttling valves are not capable of capturing
available pressure energy. The RadMax compressed gas expander is also used as the turbine component in the RadMax expander engine,
it is used to capture lost energy in natural gas pipelines and throttling stations, and is used to generate electricity from flare
gas, solar, and geothermal sources.
We
are currently focused on designing and building prototype devices targeted for use in the air conditioning / refrigeration and
natural gas distribution industries. When used these devices can significantly reduce electric power requirements and associated
CO₂ emissions. RadMax is currently partnering with the DOE via PNNL on a variety of Solar Energy Technology Office (SETO),
Geothermal Technology Office (GTO), and Building Technology Office (BTO) grant proposals and projects.
RadMax
is also actively soliciting industry leading corporations to evaluate and commercialize these products in their current and future
product designs. Several of these companies are supporting the proof of concept projects underway with the DOE and PNNL.
RadMax
Compressor
The
RadMax positive displacement compressor incorporates the advantages of both positive displacement and centrifugal compressors
by utilizing the volumetric energy of a positive-displacement compressor
and
the kinetic energy of a centrifugal compressor
to pressurize a gas. A combination of four distinct sections, this unique design allows for each section to be configured with
a different compression ratio and allows multi-stage compression in one device.
Key
Advantages
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High
internal compression ratios possible
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High
volume output to size ratio
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Able
to efficiently compress low density gases
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Better
handle entrained liquids in compressed gases (2 Phase)
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Compressors
are easily scalable from small to very large.
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Additionally,
the inherent design of the RadMax sliding vane principle lends itself to better handle two-phase (liquid/vapor) fluids, improved
efficiency for enhanced refrigeration and steam cycle applications all of which are targeted end uses.
RadMax
is also actively soliciting industry leading corporations to evaluate and commercialize these products in their current and future
product designs. Several of these companies are supporting the proof of concept projects underway with the DOE and PNNL.
Applications:
Compressing
refrigerants for industrial, commercial, residential and automotive air conditioning systems; industrial gas compressing; natural
gas field and pipeline gas compression; low density gas to high pressure. The RadMax compressor is being tested in DOE SETO and
GTO projects that use metal Organic Framework Materials (MOF’s) as sorbents for a thermal compressor and for a novel dehumidification
/ CO₂ capture system. The RadMax compressor is used to pull a vacuum on these sorbents which dramatically improves loading
/ unloading efficiency significantly increasing productivity while lowering the cost of the process.
RadMax
Combined Function Devices:
A
unique attribute of the RadMax technology is the ability to combine more than one machine function into a single device. The combined
function device is comprised of two cams connected by a common driveshaft in a single housing. By using separate vane actuator
systems, it is possible to have two separately functioning cam cycles (i.e. engine, pump, compressor, or gas expander) in the
same device.
Key
Advantages:
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Increased
design flexibility and functionality
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Compact
size with high performance
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Reduced
size, weight, parts count and cost
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Rapid
field change-out capability
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Scalable
from small to very large devices
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Can
utilize Brayton, Rankine and Organic Rankine cycles
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Applications:
RadMax
external combustion engines, applications with limited space and weight restrictions such as auxiliary and backup power generation,
waste heat recovery, portable pumps, compressors, generators, and compressed gas system throttling energy recovery for A/C and
refrigeration systems.
RadMax
Pump
The
RadMax positive displacement pump pairs the high-volume capacity of positive displacement pump with the simplicity and efficiency
of a centrifugal pump. A RadMax pump is able to utilize the volumetric displacement energy of the fluid
and
the kinetic
energy of the vane action. This results in an extraordinarily energy efficient pump. A combination of four distinct sections,
this unique design allows for different pumping actions or flow rates/streams in one device.
Key
Advantages
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Creates
high output volume to size and weight ratios
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Better
handling of gas-entrained liquids
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Self-priming
& auto re-priming
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Can
operate as a boost or lift pump
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Multiple
smooth pumping actions per rotation
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Scalable
from small to very large devices
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RadMax
has actively pursued the development of the RadMax pump by offering an exclusive license, to make and sell these devices, in return
for their product development funding.
Applications:
Because
of its efficient, high-volume output, the RadMax pump is well suited for fire protection; water and flood control; irrigation;
marine; water treatment; oil and gas industry down hole and subsea; industrial processes; heavy industry and construction; and
portable pump applications.
RadMax
Internal / External Combustion Engines:
We
believe that the RadMax internal and external combustion engines can achieve improved fuel and mechanical efficiencies when compared
to traditional combustion engine designs, based on the inherently efficient design and thermodynamic characteristics of the engine.
A higher expansion to compression ratio is possible with our internal combustion engine design resulting in increased fuel efficiency.
The
RadMax engine is characterized by high torque, compact size, and a high horsepower-to-weight ratio, making it an ideal option
for various transportation, and power generation applications. Long service life, low power-to-weight ratio, and increasing environmental
concerns and regulations are prompting a second look at the viability of gas turbine engines for more mainstream applications.
A gas turbine engine’s optimized combustion produces fewer total emissions than internal-combustion engines. However, their
lower operating efficiencies and higher operating and capital costs are impediments to their increased use.
A
RadMax “external” combustion expander (turbine) engine incorporating RadMax’s higher efficiency, positive displacement
compressors and gas expanders, coupled with an optimized external combustor, can significantly improve fuel and energy extraction
efficiency over existing gas turbine engines. Having true “multi-fuel” capability, the RadMax turbine engine would
be well suited for hybrid engine and power generation applications. We are seeking co-development partners to move further engine
development forward.
Key
Advantages
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Compact
size & weight
(~25% of comparable hp piston)
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High
power to weight ratio
(>1 hp/lb)
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High
internal expansion ratios possible
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Continual,
smooth rotary motion
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Easily
scalable 20 – 1,500hp
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Low
part count and fewer moving parts; conducive to rapid change-out replacement, reduced maintenance costs and increased reliability
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Applications:
Primary
and backup power generation; automotive & truck, aviation, marine and industrial applications prime mover; hybrid vehicles
Patents
As
at April 30, 2018 and the date of this report, we have the following patents (issued, pending, & provisional:
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REGI
U.S., INC. 2011. “Axial Vane Rotary Device and Sealing System”. Patent No.: 7,896,630, US.
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REGI
U.S., INC. 2013. “Vane Type Rotary Apparatus with Split Vanes”. Patent No: 2,496,157, CA.
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REGI
U.S., INC. 2017. “Electricity Generator and Methods for Generating Electricity”. Patent Application No.: 15/669589,
US.
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REGI
U.S., INC. 2017. “Prime Mover Assemblies and Methods”. Patent Application No.: 15/669,625, US.
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REGI
U.S., INC. 2017. “Rotary Devices Having Variable Compression and Expansion Ratios”. Provisional Patent Application
No. 62/552,287, US.
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REGI
U.S., INC. 2018. “Prime Movers, Pumps and Compressors Having Reciprocating Vane Actuator Assemblies and Methods”.
Patent Application No.: 15/946,147, US.
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●
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REGI
U.S., INC. 2018. “Modified Two Phase Refrigeration Cycle”. Provisional Patent Application No. 62/635,457, US.
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REGI
U.S., INC. 2018. “Modified Two Phase Steam Cycle”. Provisional Patent Application No.: 62/622,735, US.
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Recent
Developments
Grid
Adapting Power, Cooling, and Desalination System for Geothermal Resources:
We
are partnering with PNNL on a water desalination grant proposal as well as a HARP desalination plus power generation grant proposal
from the DOE. These projects utilize RadMax expanders and compressors to increase overall efficiency and lower the Levelized Cost
of Water (LCOW) to approximately half what the average municipality pays in the USA. Such projects allow us to construct a proof-of-concept
device that can then be used to demonstrate the inherent advantages of our technology to OEM’s in the refrigeration, A/C,
cold storage, and natural gas transportation / distribution industries. The expander will be used to power a generator on the
HARP system pilot plant prototype at PNNL. The HARP system uses a low-quality heat source such as solar, geothermal, or waste
process heat to generate electricity to either generate electricity or potable water dependent on market needs and economics.
If
successful with the DOE / PNNL grant proposals we expect to fund the design, construction and testing of two RadMax devices in
a pilot plant demonstration system by the end of 2019.
Oil
and Gas Industry Water Purification Demonstration Project Negotiations
Initial
conversations have begun with a major Canadian oil and gas company to fund the development of a demonstration plant that utilizes
PNNL’s desalination / water purification technology to reduce water purification / desalination costs, improve steam quality
critical for maximizing oil extraction and to efficiently remediate contaminated sources of water for re-introduction into the
environment. If successful, this demonstration plant will be the springboard for launching the technology for similar oil and
gas applications globally.
Natural
Gas Industry Gas Expander Demonstration Project Negotiations
Initial
communications have begun with a major private natural gas production company to develop a demonstration project utilizing the
RadMax expander for generating electricity from pressure letdown points along natural gas pipelines. The RadMax expander is able
to capture some of the energy normally lost by the “throttling” pressure relief valves it is designed to replace and
convert that energy into electricity or shaft power. Replacing the “non-energy generating” throttling pressure relief
valves along global natural gas distribution networks has the potential to generate billions of dollars of electricity and save
millions of tons of CO
2
emissions.
Air
Conditioning / Refrigeration System OEM Collaboration
Collaborations
have begun with leading OEM’s in the refrigeration / cooling / cold storage industry to define specifications, economics
and performance requirements for the adoption of RadMax expanders and compressors into their system designs. A large A/C, cooling
OEM has agreed to donate A/C equipment to facilitate refrigerant based testing at our Spokane testing facility.
Completed
Spin Testing of the RadMax 375 hp Diesel Engine.
Pre-combustion
spin testing of the 375 hp diesel engine was successfully completed. Mechanical and compression test results were all found to
be within expected ranges. Additional components will need to be designed before combustion tests can be initiated. Due to the
expensive and time-consuming nature of introducing and integrating new technologies into the North American automotive industry
all future development efforts have been placed on hold until a suitable co-development partner can be found.
Expanded
Technical Staff
Increased
interest in our products and accelerated product development activities resulted the hiring of two fulltime engineers. These additions
to our staff not only allow for faster product development, but also reduce our reliance on outside consultants and machine shops.
New
Corporate Officers
The
retirement of Paul Chute, our CEO on April 30, 2018 resulted in the promotion on Michael Urso, formerly COO to the position on
CEO. During the same time period the Company replaced our Canadian, contracted CFO with Jeff White, a Spokane based CFO with extensive
experience with local startup companies.
Expander
Performance Modeling
Expander
and compressor configuration, performance and design modelling has been extensively utilized to maximize our resources while reducing
cost and the number of device iterations milled during the product development and testing process. Additionally, comprehensive
modeling has used to design and develop two-phase fluid (vapor / liquid) capability to our expanders and compressors.
Natural
Gas Meter Power Module Proposal
Initial
discussions have been initiated, under a Non-Disclosure Agreement (NDA) with a major, North American based utility metering OEM
about developing a demonstration gen-set device for residential and commercial natural gas meters. Smart gas meters that are able
to remotely communicate gas consumption and meter status are quickly being adopted by global utilities. Current smart meters require
the use of a non-recharging battery to power the meter limiting its functionality and requiring periodic replacement. In the same
manner as at other locations along the natural gas distribution system, a RadMax expander at residential and commercial installations
is able to generate enough electricity from the gas flow through the meter to not only charge the smart meter’s battery,
but also expand the functionality of the meter. In higher gas use residential, commercial and industrial installations, enough
electricity is generated to justify the cost of putting the excess electricity back into the electrical grid, reducing the net
cost of the gas and reducing utility electricity generation requirements.
Generator
OEM Collaboration
Initial
discussions have been made with a global, electrical generator OEM to collaborate on the design and integration of electric power
generation in to RadMax devices. In addition to providing market, economic, engineering and design expertise the OEM will also
provide compatible external generators for use with RadMax expanders.
Competition
and Alternative Technologies
We
currently face and will continue to face pressure from established companies that desire to develop, manufacture and sell products
that offer the same advantages as our devices. While currently, not a highly competitive business, in terms of the number of competitors,
the business of developing innovative lower cost, higher efficiency, and higher performing technologies is nonetheless difficult
because most existing producers are large, well-financed, and have an established market presence that they will aggressively
defend. For these reasons we are more inclined to initially manufacture and sell devices to demonstrate proof-of-concept after
which time we plan to contract manufacture, sell licenses to applications / geographies, and / or sell our IP / company. The development
of our business and its ability to maintain its competitive, and technical position will continue to depend upon our ability to
attract investors and to retain qualified; engineering, financial, and managerial personnel.
Our
guiding business strategy is to develop RadMax technology products for applications that are either looking for a solution, or
where our product offers significant advantages in performance and / or financially over incumbent products. This strategy implies
that our co-development industry partners will be “early adopters” looking for new “green” products to
enhance their market position, broaden their product line, and increase their market share and margins.
Environmental
Matters
Laws
and regulations relating to protection of the environment have not had a material impact on our business.
Availability
of Raw Materials
Since
we only intend to manufacture prototype devices used to demonstrate proof-of-concept, raw materials are not a major concern. That
said, it is important to note that a key responsibility during the design of any prototype is to always consider raw material
function, performance, availability and cost, to ensure that the device performs as designed and achieves projected cost targets.
Once proof-of-concept is achieved it is our intention to contract out manufacturing to increase efficiency and production capacity,
while reducing lead times and material costs. At this time, using current materials of construction, there does not appear to
be any foreseeable problem obtaining any materials or components.
Marketing
Strategy
Over
the past two years we have built prototypes of the compressed gas expander, as well as an internal combustion diesel engine. Since
it is extremely difficult, time consuming and expensive to gain traction in the internal combustion engine markets we have focused
our efforts on producing proof-of-concept gas expanders and / or generators targeted for the air conditioning, refrigeration,
and power generation markets. Specifically, we intend to introduce innovative new devices that capture lost energy that can be
sold back into the grid, used to power Smart devices, used to recharge batteries, or used to power parasitic devices, all of which
significantly reduce energy consumption / operating costs. Our devices capture some of the energy lost in the compression phase
of these cycles by generating electricity or torque during the expansion (let down) portion of the cycle. We are currently collaborating
with the PNNL on several DOE grants that are focused on improving efficiency and / or decreasing operating costs in the refrigeration
and power generation markets. Our goal is to develop a demonstration expander-generator that is compatible with refrigerants used
in air conditioning, refrigeration, and refrigerant based ORC systems. These ORC systems use a low temperature heat source such
as solar, geothermal, or other waste process heat for power to drive a wide variety of power generation, refrigeration, air conditioning,
and water desalination / purification applications. Additionally, slightly modified versions of the same device can extract megawatts
of “lost” power by replacing throttling valves on compressed natural gas pipelines, or significantly improve the efficiency
of steam power plants by reducing fossil fuel consumption and the associated CO
2
emissions.
Our
marketing plan is to develop prototype expanders for the wide range of refrigeration applications, quickly followed by a line
of expanders for the natural gas transportation industry. These devices are very energy efficient as they capture some of the
energy lost in the compression cycle. That captured energy is then used to power Smart and / or parasitic devices or allow for
the sale of the power back to the utility. We plan to manufacture the initial proof-of-concept devices in order to gain traction
in these markets before either moving to a contract manufacturer, licensing the technology for each potential market / geographic
area, or selling the company. In order to continually evolve the technology RadMax intends to design, manufacture and sell custom
devices into specialty, lower volume, high value applications through the use of inhouse and third-party manufacturing.
We
are currently focused on capitalizing on the RadMax expander’s unique capability to capture and covert, to usable work normally
“lost” energy by pressure regulating throttling valves. The use of this energy can contribute significantly to the
overall efficiency and operating cost structure of the host system. We have identified air conditioning/refrigeration and natural
gas distribution applications as high value market targets. We are consequently working with the DOE and PNNL as well as industry
OEM’s in these two areas to develop demonstration projects for our technology.
RadMax
Marketing Objectives are to:
|
|
A.
|
Market
to high volume OEM’s using performance data extracted from a series of pilot plant trials to encourage them to tailor
the design for incorporation into existing and next generation systems / products.
|
|
|
B.
|
Manufacture
our devices in-house for the short-term and as volumes increase through third parties, for sale to OEMs to be incorporated
into their products.
|
|
|
C.
|
RadMax
plans to design and sell directly into niche markets in order to keep evolving and expanding the technology.
|
|
|
D.
|
License
the technology to high volume manufacturers who prefer to manufacture our devices themselves or through their existing supply
channels.
|
|
|
E.
|
Sell
the technology rights to specific markets and / or geographies.
|
|
|
F.
|
Sell
the entire company to a qualified buyer once the technology has traction in targeted markets.
|
Dependence
on Certain Commercial Agreements
We
do not have any material agreements upon which we are dependent.
Royalty
Payments
No
royalties have been awarded in relationship to our currently active patents.
Research
and Development
We
employ and contract with individuals to perform the research and development work.
Employees
During
the year ended April 30, 2018 we had seven full time employees. We also rely on several experienced contractors for engineering,
business and manufacturing support.
ITEM
1A RISK FACTORS
The
risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties may also adversely
impact and impair our business. If any of the following risks actually occur, our business, results of operations, or financial
condition would likely suffer. In such case, the trading price of our common stock could decline, and you may lose all or part
of your investment.
We
face risks related to general domestic and global economic conditions.
We
rely on our ability to raise capital through the sale of our securities. However, the current uncertainty arising out of domestic
and global economic conditions poses a risk to the economies in which we operate. Our ultimate success will depend upon our ability
to raise additional capital or to have other parties bear a portion of the required costs to further develop or exploit the potential
market for our products.
We
are a development stage enterprise
.
We
are a development stage enterprise and are subject to all of the attendant business risks associated with a development stage
enterprise, including constraints on financial and personnel resources, lack of established credit facilities, and uncertainties
regarding product development and future revenues. We will continue to be subject to all the risks attendant to a development
stage enterprise for the foreseeable future, including competition, complications and setbacks in the development program, and
the need for additional capital.
Although
we anticipate receiving future revenues from licensing of our technology or joint ventures. we have received no revenues from
sales of any of the products under development. There can be no assurance as to when or if we will be able to develop significant
sources of revenue or whether our operations will become profitable, even if we are able to commercialize any product. See “Operating
and Financial Review and Prospects,” and Notes to Financial Statements.
We
have no assurance that we will be able to develop a commercially feasible product
.
We
have no assurance at this time that a commercially feasible design will ever be perfected, or if it is, that it will become profitable.
Our profitability and survival will depend upon our ability to develop a technically and commercially feasible product which will
be accepted by end users. The RadMax which we are developing must be technologically superior or at least equal to other devices
that competitors offer and must have a competitive price/performance ratio to adequately penetrate its potential markets. If we
are not able to achieve this condition or if we do not remain technologically competitive, we may be unprofitable and our investors
could lose their entire investment. There can be no assurance that we or potential licensees will be able to achieve and maintain
end user acceptance of our engine.
We
will require additional financing and we may not be able to secure the financing necessary to continue our development and operations
.
There
is no assurance that we will be able to secure the financing necessary to continue our development and operations. Our expectations
as to the amount of funds needed for development and the timing of the need for these funds is based on our current operating
plan, which can change as a result of many factors, and we could require additional funding sooner than anticipated. Our cash
needs may vary materially from those now planned because of results of development or changes in the focus and direction of our
development program, competitive and technological advances, results of laboratory and field testing, requirements of regulatory
agencies and other factors.
We
have no commercial credit facility or other Industry based committed sources of capital. To the extent capital resources are insufficient
to meet future capital requirements, we will have to raise additional funds to continue our development and operations. There
can be no assurance that such funds will be available on favorable terms, or at all. To the extent that additional capital is
raised through the sale of equity or convertible debt securities, the issuance of such securities could result in dilution to
our shareholders. If adequate funds are not available, we may be required to curtail operations significantly or to obtain funds
on unattractive terms. Our inability to raise capital would have a material adverse effect on us.
We
have a history of losses and expect to incur significant losses for the foreseeable future.
We
expect to incur significant losses for the foreseeable future and cannot be certain when or if we will achieve profitability.
Failure to become and remain profitable will adversely affect the value of our Common Shares and our ability to raise capital
and continue operations.
We
have a history of operating losses, and an accumulated deficit, as of April 30, 2018, of $24,063,399. Our ability to generate
revenues and profits is subject to the risks and uncertainties encountered by development stage companies.
Our
future revenues and profitability are unpredictable. We currently have no signed contracts that will produce revenue and we do
not have an estimate as to when we will be entering into such contracts. Furthermore, we cannot provide assurance that management
will be successful in negotiating such contracts.
We
have no assurance that our products will receive market acceptance
.
Our
profitability and survival will depend upon our ability to develop a technically and commercially feasible product which will
be accepted by end users. The RadMax technology which we are developing must be technologically superior or at least equal to
other products our competitors offer and must have a competitive price/performance ratio to adequately penetrate our potential
markets.
Our
officers lack experience to manufacture or market our products
.
Assuming
we are successful in developing RadMax devices, we presently have no proven ability either to manufacture them. There is no assurance
that we will be able to profitably manufacture and market engines.
Our
auditors have indicated that our losses raise substantial doubt about our ability to continue a going concern
.
The
report of our independent auditors with respect to our financial statements for the year end April 30, 2018 includes a “going
concern” qualification, indicating that our losses and deficits in working capital and shareholders’ equity raise
substantial doubt about our ability to continue as a going concern.
We
are dependent upon certain members of our staff, the loss of which could adversely affect our business.
We
are dependent on certain members of our management and engineering staff, the loss of services of one or more of whom could adversely
affect our business. The loss of any of these key individuals could hamper the successful development of RadMax technology. Our
present officers and directors have other full or part-time interests unrelated to our business. Some officers and directors will
be available to participate in management decisions on a part-time or as-needed basis only. We do not have “key man”
life insurance on such officers and currently have no plans to obtain such insurance. Our success also depends on our ability
to attract and retain additional skilled employees and advisors.
We
are dependent upon consultants and outside manufacturing facilities
.
Since
our present limited financial plans do not provide for an increase in technical staff or the establishment of manufacturing facilities,
we will be primarily dependent on others to perform these functions and to provide the requisite expertise and quality control.
There is no assurance that such persons or institutions will be available when needed at affordable prices. It will likely cost
more to have independent companies do research and manufacturing than for us to handle these resources.
Our
business may suffer if we are unable to adequately protect our intellectual property
.
Our
business depends on the protection of our intellectual property and may suffer if we are unable to adequately protect our intellectual
property. The success of our business depends on our ability to patent all our technology devices. Currently, we have been granted
several U.S. Patents. We cannot provide assurance that our patents will not be invalidated, circumvented or challenged, that the
rights granted under the patents will give us competitive advantages or that our patent applications will be granted.
Our
devices and planned applications may contain product errors which could adversely affect our operations.
Our
planned applications may contain errors or defects, especially when first introduced, or when new versions are released. Our products
may not be free from errors after commercial release has occurred. Any errors that are discovered after such commercial release
could result in loss of revenue or delay in market acceptance, diversion of development resources, damage to our reputation, increased
service and warranty costs and liability claims. Any defects in these products could adversely affect the operation of and market
for our products, reduce revenue, increase costs and damage our reputation.
Our
competition possesses greater technical resources and market recognition than us and there is no assurance that we will be able
to compete effectively with these companies.
While
not a highly competitive business in terms of numbers of competitors, the business of developing engines of a new design and attempting
to either license or produce them is nonetheless difficult because most producers are large, well-financed companies which are
very concerned about maintaining their market position. These companies possess greater technical resources and market recognition
than us, and have management, financial and other resources not yet available to us. Existing technology are likely to be perceived
by many customers as superior or more reliable than any new product until it has been in the marketplace for a period of time.
There is no assurance that we will be able to compete effectively with these companies.
Market
prices for our products may decline in the future which would have a material adverse effect on our business, financial condition
and results of operations.
We
anticipate that market prices for our main products may decline in the future due to increased competition. We expect significant
competition among local and international companies, including from new entrants, may continue to drive equipment prices lower.
We also expect that there may be increases in promotional spending by companies in our industry which would also contribute to
increasing movement of customers between competitors. Such increased competition and the resulting decline of market prices for
our products would have a material adverse effect on our business, financial condition and results of operations.
New
technology or refinement of existing technology could render our RadMax Technology products less attractive or obsolete.
New
technology or refinement of existing technology could render our products less attractive or obsolete. Our success depends in
part upon its ability to anticipate changes in technology and industry standards and to successfully develop and introduce new
and improved devices on a timely basis. There is no assurance that we will be able to do so. Accordingly, if we are unable to
adapt to changing technologies and to adapt our product to evolving industry standards, our business will be adversely affected.
Product
liability claims asserted against us in the future could hurt our business.
Product
liability claims asserted against us in the future could hurt our business. If a customer suffers damage from our products, the
customer could sue us on product liability or related grounds, claim damages for data loss or make other claims. We currently
do not carry product liability insurance. While we have not been sued on product liability grounds to date, a successful product
liability or related claim brought against us could harm our business.
Our
success may be dependent on the timing of new product introductions and lack of market acceptance for our new products.
Our
future success may be dependent on the success of our products and services. The success of our business depends on a variety
of factors, including:
|
|
●
|
The
quality and reliability of our products and services
|
|
|
●
|
Our
ability to develop new products and services superior to that of our competitors
|
|
|
●
|
Our
ability to establish licensing relationships and other strategic alliances
|
|
|
●
|
Our
pricing policies and the pricing policies of our competitors
|
|
|
●
|
Our
ability to introduce new products and services before our competitors
|
|
|
●
|
Our
ability to successfully advertise our products and services
|
|
|
●
|
General
economic trends
|
We
may be affected by other factors which may have an adverse effect on our business.
Our
areas of business may be affected from time to time by such matters as changes in general economic conditions, changes in laws
and regulations, taxes, tax laws, prices and costs, and other factors of a general nature which may have an adverse effect on
our business.
Insurance
coverage, even where available, may not be sufficient to cover losses we may incur.
We
seek to minimize any losses we may incur through various insurance contracts from third-party insurance carriers. However, our
insurance coverage is subject to large individual claim deductibles, individual claim and aggregate policy limits, and other terms
and conditions. We cannot assure that our insurance will be sufficient to cover our losses. Any losses that insurance does not
substantially cover could have a material adverse effect on our business, results of operations, financial condition and cash
flows. We cannot assure that we will be able to obtain comparable insurance coverage on favorable terms, or at all, in the future.
We
must successfully maintain and/or upgrade our information technology systems and software licenses, and our failure to do so could
have a material adverse effect on our business, financial condition or results of operations.
We
rely on various information technology systems to manage our operations. Over time, we have implemented, and we continue to implement,
modifications and upgrades to such systems, including changes to legacy systems, replacing legacy systems with successor systems
with new functionality, and acquiring new systems with new functionality. These types of activities subject us to inherent costs
and risks associated with replacing and changing these systems. These implementations, modifications and upgrades may not result
in productivity improvements at a level that outweighs the costs of implementation, or at all. In addition, the difficulties with
implementing new technology systems may cause disruptions in our business operations and have a material adverse effect on our
business, financial condition or results of operations.
We
may not achieve our publicly announced milestones on time.
From
time to time, we may publicly announce the timing of certain events we expect to occur. These statements are forward-looking and
are based on the best estimate of management at the time relating to the occurrence of such events. However, the actual timing
of such events may differ from what has been publicly disclosed. The timing of events may ultimately vary from what is publicly
disclosed. We undertake no obligation to update or revise any forward-looking information, whether as a result of new information,
future events or otherwise, after the distribution of this AIF, except as otherwise required by law. Any variation in the timing
of certain events having the effect of postponing such events could have a material adverse effect on the Corporation’s
business plan, financial condition or operating results.
You
should not expect to receive dividends in the foreseeable future.
We
intend to retain any future earnings to finance our business and operations and any future growth. Therefore, we do not anticipate
paying any cash dividends in the foreseeable future.
ITEM
1B. UNRESOLVED STAFF COMMENTS
None.
ITEM
2. PROPERTIES
We
own no properties.
ITEM
3. LEGAL PROCEEDINGS
We
are not a party to any legal proceedings or litigation, nor are we aware that any litigation is presently being threatened or
contemplated against us or any officer, director or affiliate.
ITEM
4. MINESAFETY DISCLOSURES
Not
Applicable
PART
II
ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market
Information
There
is a limited public market for our common stock which currently trades on the OTCQB Venture Board under the symbol “RGUS”
where it has been traded since September 21, 1994. The common stock has traded between $0.01 and $6.75 per share since that date.
The
following table sets forth the high and low closing prices for our common stock as reported on the OTC Board for the quarters
presented. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not reflect
actual transactions.
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Quarter ended April 30, 2016
|
|
|
0.06
|
|
|
|
0.02
|
|
|
Quarter ended July 31, 2016
|
|
|
0.02
|
|
|
|
0.01
|
|
|
Quarter ended October 31, 2016
|
|
|
0.15
|
|
|
|
0.02
|
|
|
Quarter ended January, 2017
|
|
|
0.11
|
|
|
|
0.06
|
|
|
Quarter ended April 30, 2017
|
|
|
0.25
|
|
|
|
0.06
|
|
|
Quarter ended July 31, 2017
|
|
|
0.20
|
|
|
|
0.12
|
|
|
Quarter ended October 31, 2017
|
|
|
0.20
|
|
|
|
0.13
|
|
|
Quarter ended January 31, 2018
|
|
|
0.29
|
|
|
|
0.11
|
|
|
Quarter ended April 30, 2018
|
|
|
0.17
|
|
|
|
0.08
|
|
|
Quarter ended July 31, 2018
|
|
|
0.13
|
|
|
|
0.07
|
|
The
following table shows the high and low closing prices of our stock traded on the OTC Board during the most recent 15 months, for
each month as follows:
|
|
|
High
|
|
|
Low
|
|
|
|
|
$
|
|
|
$
|
|
|
May, 2017
|
|
|
0.19
|
|
|
|
0.12
|
|
|
June, 2017
|
|
|
0.20
|
|
|
|
0.15
|
|
|
July, 2017
|
|
|
0.19
|
|
|
|
0.15
|
|
|
August, 2017
|
|
|
0.19
|
|
|
|
0.14
|
|
|
September, 2017
|
|
|
0.20
|
|
|
|
0.13
|
|
|
October, 2017
|
|
|
0.20
|
|
|
|
0.15
|
|
|
November, 2017
|
|
|
0.20
|
|
|
|
0.13
|
|
|
December, 2017
|
|
|
0.29
|
|
|
|
0.14
|
|
|
January, 2018
|
|
|
0.20
|
|
|
|
0.11
|
|
|
February, 2018
|
|
|
0.17
|
|
|
|
0.12
|
|
|
March, 2018
|
|
|
0.13
|
|
|
|
0.08
|
|
|
April, 2018
|
|
|
0.12
|
|
|
|
0.08
|
|
|
May, 2018
|
|
|
0.12
|
|
|
|
0.08
|
|
|
June, 2018
|
|
|
0.13
|
|
|
|
0.07
|
|
|
July, 2018
|
|
|
0.13
|
|
|
|
0.08
|
|
Holders
As
of August 13, 2018, there were 99,838,844 shares of common stock outstanding, held by 860 shareholders of record.
Transfer
Agent
Our
transfer agent is Nevada Agency and Transfer Company, 50 West Liberty Street, Suite 880 Reno, Nevada 89501; Phone: 775-322-0626;
Fax: 775-322-5623.
Dividends
To
date we have not paid any dividends on our common stock and do not expect to declare or pay any dividends on our common stock
in the foreseeable future. Payment of any dividends will be dependent upon future earnings, if any, our financial condition, and
other factors as deemed relevant by our Board of Directors.
Securities
authorized for issuance under equity compensation plans.
The
Company is authorized to issue up to 150,000,000 shares of common stock, without par value. Each share of Common Stock is entitled
to one vote on all matters submitted for shareholder approval.
Recent
Sales of Unregistered Securities
During
the twelve months ended April 30, 2018 related party convertible promissory notes of $126,152 and accrued interest of $10,931
were converted into a total of 1,369,964 shares of REGI’s common stock at $0.10 per share, and convertible promissory notes
of $755,185 and accrued interest of $41,173 were converted into a total of 1,054,779 shares of REGI’s common stock at $0.755
per share.
During
the twelve months ended April 30, 2018 non-related party convertible promissory notes of $531,940 and accrued interest of $26,569
were converted into 5,630,543 shares of common stock at $0.10 per share, principal of $3,848 and accrued interest of $623 were
converted into 55,892 shares of common stock at $0.08 per share, principal of $10,000 and accrued interest of $879 were converted
into 99,661 shares of commons stock at $0.12 per share.
During
the year ended April 30, 2018 the Company issued Convertible Notes for cash proceeds of $1,212,849, settled accounts payable from
previous years of $17,436, service debt provided by related parties of $131,577, and service debt provided by non-related parties
of $182,696.
During
the twelve months ended April 30, 2018 the Company issued 3,310,000 shares of its common stock for services provided by the directors,
officers, employees and consultants of the Company with the total value recorded at $562,700 based on the market trading price
as of the issuance date.
Between
May 1, 2018 and August 10, 2018, the Company issued Convertible Notes for cash proceeds of $90,000, service debt provided by related
parties of $27,932 and service debt provided by non-related parties of $16,357. The Convertible Notes are secured against all
assets of the Company, repayable two years 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.
Between
May 1, 2018 and August 13, 2018, a total of 140,261 shares of the Company’s common stock were issued for Convertible Promissory
notes at $0.10 per share
ITEM
6. SELECTED FINANCIAL DATA.
We
are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide
the information under this item.
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
The
following discussion should be read in conjunction with audited financial statements of the Company and the related notes that
appear elsewhere in this annual report.
The
following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could
differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below and elsewhere in this annual report, particularly in the section entitled
“Risk Factors”.
The
audited financial statements of the Company are stated in U.S. dollars and are prepared in accordance with United States generally
accepted accounting principles.
Plan
of Operations
We
are a company engaged in the business of developing and commercially exploiting an improved axial vane type rotary technology
known as RadMax
®
.
Our
early engineering and development work have not yet produced revenues and we have a working capital deficit. We have incurred
net losses to April 30, 2018 totaling $24,063,399 and further losses are expected until we complete a licensing agreement with
a manufacturer and reseller. At April 30, 2018, we had working capital deficiency of $921,824. 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 funds or develop a market for our products.
Results
of Operations
Results
of operations for the year ended April 30, 2018 compared to the year ended April 30, 2017
The
asset purchase agreement with Reg Tech closed on February 17, 2017 is accounted for as reverse merger recapitalization with Reg
Tech considered to be the accounting acquirer. In accordance with reverse merger accounting, results of operations include those
of Reg Tech from May 1, 2016 to February 17, 2017 and those of REGI US from February 18, 2017 to April 30, 2017, the prior year
results of operations are those of Reg Tech.
Management
continues to expanded its research and development efforts and administrative support with the increased success in financing
the required expenditures. As a result, research and development expenses increased from $136,168 in 2017 to $804,035 in 2018,
and general and administrative expenses increased from $158,135 in 2017 to $1,470,917 in 2018.
Our
basic and diluted loss per share was $0.03 for 2018 and $0.01 for 2017.
LIQUIDITY
AND CAPITAL RESOURCES
During
the year ended April 30, 2018 the Company issued Convertible Notes for cash proceeds of $1,212,849, settled accounts payable from
previous years of $17,436, service debt provided by related parties of $131,577, and service debt provided by non-related parties
of $182,696.
During
the year ended April 30, 2017 we issued Convertible Notes for cash proceeds of $258,000 and settled debt of $741,941 with related
parties at a loss of $13,244.
As
of April 30, 2018 and 2017, the total amount owed to related parties was $106,823 and $77,560 representing 10.07% and 26.07% of
our current liabilities respectively. This funding was necessary to complete the RadMax
®
engine and place the Company
in a position to attain future profit.
The
balances owed 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 and will advance, or pay expenses on behalf
of the Company if further funds are needed.
As
of April 30, 2018, we had a working capital deficiency of $921,824. We will raise additional funds from equity and debt financing.
The
audited consolidated financial statements have been prepared assuming that the Company will continue as a going-concern. As discussed
in Note 3 to the consolidated financial statements, the Company has no revenues and limited capital, which together raise substantial
doubt about its ability to continue as a going-concern. Management plans in regard to these matters are also described in Note
3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We
have been successful in the past in acquiring capital through the issuance of shares of our Common Stock, and through advances
from related parties.
We
anticipate that our cash requirements for the fiscal year ending April 30, 2019 will be around $1,100,000. Research and development
costs are identified as Engineer design, prototype fabrication, and labor expense, and are estimated to be $750,000 over the next
12 months.
Off-Balance
Sheet Arrangements
As
of April 30,2018 and the date of this report, we have had no off-balance sheet arrangements, including any outstanding derivative
financial statements, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage
in trading activities involving non-exchange traded contracts.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Pursuant
to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this
Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our
consolidated financial statements are stated in United States dollars and are prepared in accordance with United States Generally
Accepted Accounting Principles.
The
following consolidated financial statements are filed as part of this annual report:
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Shareholders of REGI U.S., Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheet of REGI U.S., Inc. (“the Company”) as of April 30, 2018,
and the related consolidated statements of operations and comprehensive loss, stockholders’ deficit, and cash flows for
the year then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of April 30, 2018, and the results
of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the
United States of America.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but
not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audit provides a reasonable basis for our opinion.
Consideration
of the Company’s Ability to Continue as a Going Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 3 to the financial statements, the Company has an accumulated deficit and intends to fund operations through equity financing
which may be insufficient to fund its capital expenditures. These factors raise substantial doubt about the Company’s ability
to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Fruci & Associates II, PLLC
We
have served as the Company’s auditor since 2018.
Spokane,
Washington
August
13, 2018
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board
of Directors and Stockholders
REGI
U.S., Inc.
Spokane,
WA
We
have audited the accompanying consolidated balance sheet of REGI U.S., Inc and its subsidiaries (collectively, the “Company”)
as of April 30, 2017, and the related consolidated statements of operations and comprehensive loss, stockholders’ deficit,
and cash flows for the year then ended. These consolidated financial statements are the responsibility of the entity’s management.
Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of REGI U.S., Inc. and its subsidiaries as of April 30, 2017, and the consolidated results of their operations and their cash
flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations and
has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management’s
plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
|
/s/
MaloneBailey, LLP
|
|
|
www.malonebailey.com
|
|
|
Houston,
Texas
|
|
|
October
31, 2017
|
|
REGI
U.S., Inc.
Consolidated
Balance Sheets
April
30, 2018 and 2017
|
|
|
2018
|
|
|
2017
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
111,823
|
|
|
$
|
67,818
|
|
|
Prepaid expenses
|
|
|
27,470
|
|
|
|
8,987
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
139,293
|
|
|
|
76,805
|
|
|
|
|
|
|
|
|
|
|
|
|
Furniture and equipment, net
|
|
|
13,004
|
|
|
|
14,279
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
152,297
|
|
|
$
|
91,084
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
315,957
|
|
|
$
|
219,966
|
|
|
Due to related parties
|
|
|
106,823
|
|
|
|
77,560
|
|
|
Convertible promissory notes, net of unamortized discount of $15,959 and $0, respectively
|
|
|
579,976
|
|
|
|
-
|
|
|
Convertible promissory notes - related parties, net of unamortized discount of $2,639 and $0, respectively
|
|
|
58,361
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,061,117
|
|
|
|
297,526
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term Liabilities
|
|
|
|
|
|
|
|
|
|
Convertible promissory notes, net of unamortized discount of $507,699 and $12,944, respectively
|
|
|
417,492
|
|
|
|
636,539
|
|
|
Convertible promissory notes - related parties, net of unamortized discount of $52,177 and $9,888, respectively
|
|
|
84,401
|
|
|
|
877,449
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
501,893
|
|
|
|
1,513,988
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,563,010
|
|
|
|
1,811,514
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
Common stock,150,000,000 shares authorized, no par value, 99,698,583 and 84,850,475 shares issued respectively, 99,698,583 and 84,022,744 shares outstanding, respectively
|
|
|
22,956,578
|
|
|
|
19,641,632
|
|
|
Accumulated deficit
|
|
|
(24,063,399
|
)
|
|
|
(21,058,170
|
)
|
|
Accumulated other comprehensive loss
|
|
|
(358,675
|
)
|
|
|
(358,675
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total REGI U.S., Inc stockholders’ deficit
|
|
|
(1,465,496
|
)
|
|
|
(1,775,213
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest
|
|
|
54,783
|
|
|
|
54,783
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ deficit
|
|
|
(1,410,713
|
)
|
|
|
(1,720,430
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Deficit
|
|
$
|
152,297
|
|
|
$
|
91,084
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
REGI
U.S., Inc.
Consolidated
Statements of Operations and Comprehensive Loss
Years
Ended April 30, 2018 and 2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
Accounting and legal
|
|
$
|
198,165
|
|
|
$
|
-
|
|
|
Consulting and management
|
|
|
236,860
|
|
|
|
-
|
|
|
Stockholder relations
|
|
|
121,374
|
|
|
|
-
|
|
|
Stock-based compensation
|
|
|
764,705
|
|
|
|
-
|
|
|
General and administrative expenses
|
|
|
149,813
|
|
|
|
158,135
|
|
|
Research and development
|
|
|
804,035
|
|
|
|
136,168
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Loss
|
|
|
(2,274,952
|
)
|
|
|
(294,303
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other Expense
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(730,277
|
)
|
|
|
(16,672
|
)
|
|
Loss on settlement of debt
|
|
|
-
|
|
|
|
(13,244
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense
|
|
|
(730,277
|
)
|
|
|
(29,916
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before noncontrolling interest
|
|
$
|
(3,005,229
|
)
|
|
$
|
(324,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Attributed to Noncontrolling Interest
|
|
|
-
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Attributed to the Company
|
|
$
|
(3,005,229
|
)
|
|
$
|
(324,212
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - basic and diluted
|
|
|
89,509,611
|
|
|
|
58,080,545
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(3,005,229
|
)
|
|
$
|
(324,219
|
)
|
|
Translation adjustments
|
|
|
-
|
|
|
|
8,318
|
|
|
Comprehensive loss
|
|
|
(3,005,229
|
)
|
|
|
(315,901
|
)
|
|
Comprehensive loss attributable to non-controlling interest
|
|
|
-
|
|
|
|
(29,365
|
)
|
|
Comprehensive loss attributable to REGI U.S., Inc
|
|
$
|
(3,005,229
|
)
|
|
$
|
(345,266
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements.
REGI
U.S., Inc.
Consolidated
Statements of Stockholders’ Deficit
Years
Ended April 30, 2018 and 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Treasury
|
|
|
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Stockholders’
|
|
|
Noncontrolling
|
|
|
|
|
|
|
|
Shares
|
|
|
Shares
|
|
|
Capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Deficit
|
|
|
Interest
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2016
|
|
|
51,757,119
|
|
|
|
-
|
|
|
$
|
20,835,112
|
|
|
$
|
(20,733,958
|
)
|
|
$
|
(337,621
|
)
|
|
$
|
(236,467
|
)
|
|
$
|
25,418
|
|
|
$
|
(211,049
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(324,212
|
)
|
|
|
-
|
|
|
|
(324,212
|
)
|
|
|
(7
|
)
|
|
$
|
(324,219
|
)
|
|
Foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(21,054
|
)
|
|
|
(21,054
|
)
|
|
|
29,372
|
|
|
$
|
8,318
|
|
|
Recapitalization adjustsment
|
|
|
32,779,306
|
|
|
|
(827,731
|
)
|
|
|
(1,243,757
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,243,757
|
)
|
|
|
-
|
|
|
$
|
(1,243,757
|
)
|
|
Shares issued for debt
conversion
|
|
|
314,050
|
|
|
|
-
|
|
|
|
31,405
|
|
|
|
-
|
|
|
|
-
|
|
|
|
31,405
|
|
|
|
-
|
|
|
$
|
31,405
|
|
|
Beneficial conversion
feature
|
|
|
-
|
|
|
|
-
|
|
|
|
18,872
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,872
|
|
|
|
-
|
|
|
$
|
18,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2017
|
|
|
84,850,475
|
|
|
|
(827,731
|
)
|
|
|
19,641,632
|
|
|
|
(21,058,170
|
)
|
|
|
(358,675
|
)
|
|
|
(1,775,213
|
)
|
|
|
54,783
|
|
|
|
(1,720,430
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,005,229
|
)
|
|
|
-
|
|
|
|
(3,005,229
|
)
|
|
|
-
|
|
|
$
|
(3,005,229
|
)
|
|
Shares issued for debt
conversion
|
|
|
8,210,839
|
|
|
|
-
|
|
|
|
1,507,300
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,507,300
|
|
|
|
-
|
|
|
$
|
1,507,300
|
|
|
Beneficial conversion
feature
|
|
|
-
|
|
|
|
-
|
|
|
|
1,027,441
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,027,441
|
|
|
|
-
|
|
|
$
|
1,027,441
|
|
|
Stock-based compensation
expense
|
|
|
3,310,000
|
|
|
|
-
|
|
|
|
562,700
|
|
|
|
-
|
|
|
|
-
|
|
|
|
562,700
|
|
|
|
-
|
|
|
$
|
562,700
|
|
|
Stock options exercised
|
|
|
155,000
|
|
|
|
-
|
|
|
|
15,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,500
|
|
|
|
-
|
|
|
$
|
15,500
|
|
|
Shares issued for asset
purchase
|
|
|
3,172,269
|
|
|
|
827,731
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Option compensation
expense
|
|
|
-
|
|
|
|
-
|
|
|
|
202,005
|
|
|
|
-
|
|
|
|
-
|
|
|
|
202,005
|
|
|
|
-
|
|
|
$
|
202,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 30, 2018
|
|
|
99,698,583
|
|
|
|
-
|
|
|
$
|
22,956,578
|
|
|
$
|
(24,063,399
|
)
|
|
$
|
(358,675
|
)
|
|
$
|
(1,465,496
|
)
|
|
$
|
54,783
|
|
|
$
|
(1,410,713
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements.
REGI
U.S., Inc.
Consolidated
Statements of Cash Flows
Years
Ended April 30, 2018 and 2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,005,229
|
)
|
|
$
|
(324,219
|
)
|
|
Adjustments to reconcile net loss to net cash from operating activities
|
|
|
|
|
|
|
|
|
|
Amortization of debt discount
|
|
|
510,311
|
|
|
|
773
|
|
|
Amortization of promissory note fees
|
|
|
40,071
|
|
|
|
-
|
|
|
Loss on debt settlement
|
|
|
-
|
|
|
|
13,244
|
|
|
Depreciation Expense
|
|
|
5,853
|
|
|
|
1,198
|
|
|
Service settled with convertible promissory notes
|
|
|
182,696
|
|
|
|
38,442
|
|
|
Service settled with convertible promissory notes - related party
|
|
|
131,577
|
|
|
|
40,000
|
|
|
Stock-based compensation
|
|
|
764,705
|
|
|
|
-
|
|
|
Changes in non-cash working capital items
|
|
|
|
|
|
|
|
|
|
Taxes Receivable
|
|
|
-
|
|
|
|
(396
|
)
|
|
Prepaid expenses
|
|
|
(18,483
|
)
|
|
|
(6,987
|
)
|
|
Accounts payable and accrued liabilities
|
|
|
193,602
|
|
|
|
(21,886
|
)
|
|
Due to related parties
|
|
|
29,283
|
|
|
|
50,535
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash used for Operating Activities
|
|
|
(1,165,614
|
)
|
|
|
(209,296
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
Purchase of furniture and equipment
|
|
|
(4,578
|
)
|
|
|
-
|
|
|
Cash received from reverse merger
|
|
|
-
|
|
|
|
10,753
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash from (used for) Investing Activities
|
|
|
(4,578
|
)
|
|
|
10,753
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
Redemption of convertible promissory note
|
|
|
(14,152
|
)
|
|
|
-
|
|
|
Issuance of common shares for option exercise
|
|
|
15,500
|
|
|
|
-
|
|
|
Issuance of convertible promissory notes
|
|
|
1,212,849
|
|
|
|
258,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash provided by financing activities
|
|
|
1,214,197
|
|
|
|
258,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange effect
|
|
|
-
|
|
|
|
8,318
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents
|
|
|
44,005
|
|
|
|
67,775
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Beginning of Year
|
|
|
67,818
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Year
|
|
$
|
111,823
|
|
|
$
|
67,818
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
|
|
|
|
|
|
|
Cash payments for
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
1,440
|
|
|
$
|
-
|
|
|
Taxes
|
|
|
-
|
|
|
|
-
|
|
|
Supplemental Disclosure of Non-cash items
|
|
|
|
|
|
|
|
|
|
Finder fee for convertible promissory note
|
|
|
66,600
|
|
|
|
-
|
|
|
Discount on promissory notes for beneficial conversion features
|
|
|
1,027,441
|
|
|
|
18,872
|
|
|
Accounts payable settled with convertible promissory noted
|
|
|
17,436
|
|
|
|
-
|
|
|
Shares issued for note conversions
|
|
|
1,507,300
|
|
|
|
31,405
|
|
|
Reverse merger recapitalization
|
|
|
-
|
|
|
|
1,254,510
|
|
|
Related party debt settled with convertible promissory notes
|
|
$
|
-
|
|
|
$
|
741,941
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
REGI
U.S., Inc.
Notes
to Consolidated Financial Statements
April
30, 2018 and 2017
REGI
U.S., Inc. (“we”, “our”, the “Company”, “REGI”) has been engaged in the business
of developing and building improved axial vane-type rotary devices for civilian, commercial and government applications with the
marketing and intellectual rights in the U.S. Effective February 17, 2017 REGI purchased the worldwide marketing and intellectual
rights, other than in the U.S., from Reg Technologies, Inc. (“Reg Tech”), a British Columbia company. No revenue has
been derived to date from REGI’s principal operations of research and development.
REGI
formed a wholly-owned subsidiary, Rad Max Technologies, Inc., on April 10, 2007 in the State of Washington.
Effective
February 17, 2017 REGI purchased all of Reg Tech’s assets including all rights to the technology with the issuance of 51,757,119
shares of REGI’s common stock.
Asset
Purchase Agreement
On
September 16, 2016, REGI entered into an asset purchase agreement (the “APA”) with Reg Tech, a public company whose
common stock was listed on TSX Venture Exchange to purchase all of the assets of Reg Tech, a company with a common director and
CEO with REGI with the issuance of 46,173,916 unregistered common shares of our Company. The APA was amended on February 14, 2017
to increase the consideration shares to an aggregate of 51,757,119 unregistered common shares of our Company and to amend the
list of the assets purchased. The shares are issued as of the date of this report. The Amended APA is attached as an exhibit to
this report. The transaction was closed on February 17, 2017 upon TSX Venture Exchange approval.
The
transaction is accounted for as a reverse merger recapitalization wherein Reg Tech is considered to be the accounting acquirer.
The prior year results of operations and cash flows are those of Reg Tech for all periods presented.
Upon
closing of the asset purchase agreement, all assets of Reg Tech except GST receivable were transferred from Reg Tech to REGI.
In addition, upon closing of the APA, all assets, liabilities, and equity instruments of REGI were incorporated into the surviving
company. The net adjustment to additional paid in capital for the asset purchase was a decrease of $1,243,757. The net cash received
from the reverse merger was $10,753.
The
following table summarizes the assets and liabilities of REGI U.S. on February 17, 2017:
|
Cash
|
|
$
|
10,753
|
|
|
Prepaid
|
|
|
2,000
|
|
|
Furniture and equipment, net
|
|
|
15,477
|
|
|
Accounts payable and accrued liabilities
|
|
|
(217,043
|
)
|
|
Due to related parties
|
|
|
(843,703
|
)
|
|
Convertible promissory notes
|
|
|
(351,586
|
)
|
|
Convertible promissory notes – related parties
|
|
|
(118,874
|
)
|
|
Net assets
|
|
$
|
(1,502,976
|
)
|
The
following table summarizes the assets and liabilities of Reg Tech on February 17, 2017 that were not assumed in the transaction:
|
Accounts payable and accrued liabilities
|
|
$
|
(86,736
|
)
|
|
Due to related parties
|
|
|
(172,483
|
)
|
|
Net Liabilities
|
|
$
|
(259,219
|
)
|
|
2.
|
Significant
Accounting Policies
|
Principles
of consolidation
These
financial statements include the accounts of the Company, its wholly owned subsidiary RadMax Technologies, Inc., and its 51% owned
subsidiary Rand Energy Group Inc. (“Rand”), which ownership was purchased from Reg Tech effective February 17, 2017.
All
significant inter-company balances and transactions have been eliminated upon consolidation.
The
financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles.
Investment
in associates
Investments
in which the Company has the ability to exert significant influence but does not have control are accounted for using the equity
method whereby the original cost of the investment is adjusted annually for the Company’s share of earnings, losses and
dividends during the current year.
As
part of the APA the Company purchased from Reg Tech and owns 26.1% of equity interest in Minewest Silver and Gold Inc. (“Minewest”),
a British Columbia company. Minewest owns a 70% interest subject to a 10% Net Profits Interest in mining property in British Columbia.
As at the date of the asset purchase and the date of this report, Minewest is inactive due to lack of funding. As a result, the
assets were impaired and no transactions are recorded for Minewest during the years ended April 30, 2018 and 2017.
Risks
and uncertainties
The
Company operates in an emerging industry that is subject to market acceptance and technological change. The Company’s operations
are subject to significant risks and uncertainties, including financial, operational, technological and other risks associated
with operating an emerging business, including the potential risk of business failure.
Cash
and cash equivalents
Cash
and cash equivalents include highly liquid investments with original maturities of three months or less.
Furniture
and equipment
Property
and equipment are stated at cost, which includes the acquisition price and any direct costs to bring the asset into use at its
intended location, less accumulated amortization.
Depreciation
of property and equipment is calculated using the straight-line method to write off the cost, net of any estimated residual value,
over their estimated useful lives of the assets as follows: Office equipment 5 years and electronic equipment 2 years. Depreciation
of office equipment is included in general and administrative expenses; Depreciation of research equipment is included in research
and development expense. During the year ended April 30, 2018 and 2017 depreciation of $3,246 and $1,198 respectively was recorded
on the research equipment.
Financial
instruments
Fair
Value
The
carrying values of cash and cash equivalents, amounts due to related parties and accounts payable approximate their fair values
because of the short-term maturity of these financial instruments.
ASC
Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments
held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation
hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels
of valuation hierarchy are defined as follows:
|
|
-
|
Level
1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
|
|
|
|
|
|
|
-
|
Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs
that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial
instrument.
|
|
|
|
|
|
|
-
|
Level
3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
Interest
Rate Risk
The
Company is not exposed to significant interest rate risk due to the short-term maturity of its monetary assets and liabilities.
Credit
Risk
The
Company’s financial asset that is exposed to credit risk consists primarily of cash. To manage the risk, cash is placed
with major financial institutions.
Currency
Risk
The
Company’s functional currency is the US dollar and the reporting currency is the US dollar.
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 US dollars. The Company has not, to
the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency
fluctuations.
For
reporting purposes assets and liabilities with Canadian dollar as functional currency are translated into US dollar at the period
end rates of exchange, and the results of the operations are translated at average rates of exchange for the period. The resulting
translation adjustments are included in accumulated other comprehensive income in shareholders’ equity.
Income
taxes
Deferred
income taxes are reported for timing differences between items of income or expense reported in the consolidated financial statements
and those reported for income tax purposes in accordance with ASC 740, “Income Taxes”, which requires the use of the
asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their
respective tax bases, and for tax losses and credit carry-forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. The Company provides for deferred taxes for the estimated future tax effects attributable to temporary differences and
carry-forwards when realization is more likely than not.
Basic
and diluted net loss per share
Basic
EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares
outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during
the period using the treasury stock method and convertible debt 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 shares if their effect is anti-dilutive.
Stock-based
compensation
The
Company accounts for stock based compensation in accordance with FASB ASC 718 which establishes the accounting treatment for transactions
in which an entity exchanges its equity instruments for goods or services. Under the provisions of FASB ASC 718, share-based payment
compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite
service period (generally the vesting period). The Company accounts for share-based payments to non-employees in accordance with
FASB ASC 505-50.
Use
of estimates
The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures
during the reporting period. Actual results could differ from these estimates. The Company regularly evaluates estimates and assumptions
related to useful life and recoverability of long-lived assets, stock-based compensation and deferred income tax asset valuation
allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors
that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets and liabilities, and the accrual of costs and expenses that are not readily apparent from other sources.
The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent
there are material differences between the estimates and the actual results, future results of operations will be affected.
Research
and development costs
Research
and development costs are expensed as incurred.
Related
Parties
In
accordance with ASC 850 “Related Party Disclosure”, a party is considered to be related to the Company if the party
directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the
Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal
owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly
influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented
from fully pursuing its own separate interests.
Recent
accounting pronouncements
The
Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements.
Reclassifications
Certain
reclassifications have been made to the prior year financial information to conform to the presentation used in the financial
statements for the year ended April 30, 2018.
The
Company incurred net losses of $3,005,229 for the year ended April 30, 2018 and has a working capital deficit of $921,824 and
an accumulated deficit of $24,063,399 at April 30, 2018. These factors raise substantial doubt about the ability of the Company
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, the Company’s consolidated financial statements as of April 30, 2018 and for the
year 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.
The
Company also receives interim support from related parties and plans to raise additional capital through debt and/or equity financings.
There is no assurance that any of these activities will be successful. There continues to be insufficient funds to provide enough
working capital to fund ongoing operations for the next twelve months.
|
4.
|
Property
and Equipment
|
Property
and equipment at April 30, 2018 and 2017 consists of the following:
|
|
|
2018
|
|
|
2017
|
|
|
Equipment
|
|
$
|
7,040
|
|
|
$
|
4,848
|
|
|
Furniture and fixtures
|
|
|
14,213
|
|
|
|
11,827
|
|
|
|
|
|
21,253
|
|
|
|
16,675
|
|
|
Less accumulated depreciation
|
|
|
8,249
|
|
|
|
2,396
|
|
|
|
|
$
|
13,004
|
|
|
$
|
14,279
|
|
Depreciation
expense totaled $5,853 and $1,198 for the years ended April 30, 2018 and 2017, respectively.
|
5.
|
Secured
Convertible Promissory Notes
|
As
of April 30, 2018, REGI has outstanding senior secured convertible promissory notes (the “Convertible Notes”) of $142,762
(net of unamortized discount of $54,816) issued to related parties and $997,468 (net of unamortized discount of $523,658) issued
to non-related parties. As of April 30, 2017, REGI has outstanding Convertible Notes of $877,449 (net of unamortized discount
of $9,888) issued to related parties and $636,539 (net of unamortized discount of $12,944) issued to non-related parties.
As
of February 17, 2017, REGI has outstanding senior secured convertible promissory notes of $118,874 (net of unamortized discount
of $3,278) issued to related parties and $351,586 (net of unamortized discount of $1,455) issued to non-related parties. During
the period from February 17, 2017 to April 30, 2017, the Company issued convertible notes for cash proceeds of $258,000, services
debt provided by non-related parties for $38,442, service debt provided by related parties for $40,000 and recorded loss on settlement
of debt for $13,244 as $741,941 of related payables are settled for $755,185 of convertible notes. As of April 30, 2017, $755,185,
$15,500, $573,635, $60,000 and $132,500 of the promissory notes are convertible at any time on or after ninety days from the issuance
date into the Company’s common stocks at $0.755, $0.12, $0.10, $0.09 and $0.08 per share respectively.
During
the twelve months ended April 30, 2018 the Company issued Convertible Notes for cash proceeds of $1,212,849, settled accounts
payable from previous years of $17,436, service debt provided by related parties of $131,577, and service debt provided by non-related
parties of $182,696 of which $66,600 was finders’ fee and legal fees for cash based Convertible Notes recorded as discount
to the Convertible Notes. $40,071 of the $66,600 debt discount was amortized during the twelve months ended April 30, 2018.
The
Convertible Notes are secured against all assets of the Company, repayable two years 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 with the exception of one Convertible
Note of $150,000 (net of unamortized discount of $11,704) repayable nine months after issuance, bearing simple interest of 2%
during the term of the note and simple interest rate of 15% after the due date. During the twelve months ended April 30, 2018
$60,000 of the Convertible Notes were reclassified from non-related party at April 30, 2017 to related party as a debt holder
became a director of the Company.
As
of April 30, 2018, $17,436, $40,800, $1,500,468, $60,000 and $100,000 of the Convertible Notes are convertible at any time on
or after ninety days from the issuance date into the Company’s common stocks at $0.174, $0.12, $0.10, $0.09 and $0.08 per
share respectively.
The
Company analyzed the conversion option in the notes for derivative accounting treatment under ASC Topic 815, “Derivatives
and Hedging,” and determined that the instrument does not qualify for derivative accounting.
The
Company determined that the conversion option was subject to a beneficial conversion feature and during the twelve months ended
April 30, 2018 the company recorded a total beneficial conversion feature of $1,027,441, and amortization of the beneficial conversion
feature of $510,311 as interest expense. The Company recorded a total beneficial conversion feature of $18,872, and amortization
of the beneficial conversion feature of $773 as interest expense from February 18, 2017 to April 30, 2017.
Amounts
due to related parties are unsecured, non-interest bearing and due on demand. Related parties consist of the directors and officers
and a former director of REGI and companies controlled or significantly influenced by these parties. As of April 30, 2018, there
was $106,823 due to related parties. As of April 30, 2017, there was $77,560 due to related parties.
On
January 6, 2017, the Company’s annual and special meeting of stockholders approved the amendment to the Company’s
articles that increased the authorized common shares from 100,000,000 to 150,000,000.
On
September 16, 2016, the Company entered into the APA with Reg Tech to purchase all of the assets of Reg Tech. An aggregate of
51,757,119 unregistered common shares of our company were issued as consideration for the asset purchase.
During
the year ended April 30, 2017 related party convertible promissory note of $30,000 and its accrued interest of $1,405 were converted
into 314,050 shares REGI’s common stock at $0.10 per share.
During
the twelve months ended April 30, 2018 related party convertible promissory notes of $126,152 and accrued interest of $10,931
were converted into a total of 1,369,964 shares of REGI’s common stock at $0.10 per share, and convertible promissory notes
of $755,185 and accrued interest of $41,173 were converted into a total of 1,054,779 shares of REGI’s common stock at $0.755
per share.
During
the twelve months ended April 30, 2018 non-related party convertible promissory notes of $531,940 and accrued interest of $26,569
were converted into 5,630,543 shares of common stock at $0.10 per share, principal of $3,848 and accrued interest of $623 were
converted into 55,892 shares of common stock at $0.08 per share, principal of $10,000 and accrued interest of $879 were converted
into 99,661 shares of commons stock at $0.12 per share.
During
the twelve months ended April 30, 2018 the Company issued 155,000 shares of its common stock for options exercised at $0.10 per
share for a total of $15,500. Among the 155,000 shares of common stock, 55,000 were issued to a related party.
During
the twelve months ended April 30, 2018 the Company issued 3,310,000 shares of its common stock for services provided by the directors,
officers, employees and consultants of the Company with the total value recorded at $562,700 based on the market trading price
as of the issuance date.
On
November 2, 2017 the Company issued 3,172,269 shares of its common stock to Rand Energy. No value was assigned to these shares,
as Rand Energy did not have any assets. These shares together with 827,721 shares of common stock initially owned by Rand Energy
and recorded as the Company’s treasury shares, were transferred to the 49% shareholders of Rand Energy, as consideration
for purchase of all of the 49% interest in Rand Energy, resulting in the Company owning 100% equity interest in Rand Energy.
Treasury
Shares
At
April 30, 2017, Rand Energy owned 827,731 shares of the Company’s common stock which have been deducted from the total shares
outstanding.
|
|
b)
|
Common
Stock Options and Warrants
|
On
August 12, 2016, REGI granted an aggregate of 3,700,000 common stock options for services. These options vest upon grant, expire
on July 20, 2021 and are exercisable at the following prices:
|
Options
|
|
Exercise price
|
|
|
900,000
|
|
$
|
0.10
|
|
|
600,000
|
|
$
|
0.20
|
|
|
550,000
|
|
$
|
0.35
|
|
|
450,000
|
|
$
|
0.50
|
|
|
350,000
|
|
$
|
0.75
|
|
|
350,000
|
|
$
|
1.00
|
|
|
250,000
|
|
$
|
1.25
|
|
|
250,000
|
|
$
|
1.50
|
|
|
3,700,000
|
|
|
|
|
On
January 1, 2017, REGI granted an aggregate of 3,500,000 common stock options for services. These options vest upon grant, expire
on January 1, 2022 and are exercisable at the following prices:
|
Options
|
|
Exercise price
|
|
|
2,500,000
|
|
$
|
0.10
|
|
|
300,000
|
|
$
|
0.20
|
|
|
300,000
|
|
$
|
0.35
|
|
|
300,000
|
|
$
|
0.50
|
|
|
100,000
|
|
$
|
0.75
|
|
|
3,500,000
|
|
|
|
|
On
March 1, 2018, REGI granted an aggregate of 1,400,000 common stock options for services. These options vest upon grant, expire
on March 1, 2023 and are exercisable at the following prices:
|
Options
|
|
Exercise price
|
|
|
450,000
|
|
$
|
0.10
|
|
|
250,000
|
|
$
|
0.20
|
|
|
125,000
|
|
$
|
0.35
|
|
|
125,000
|
|
$
|
0.50
|
|
|
100,000
|
|
$
|
0.75
|
|
|
100,000
|
|
$
|
1.00
|
|
|
125,000
|
|
$
|
1.25
|
|
|
125,000
|
|
$
|
1.50
|
|
|
1,400,000
|
|
|
|
|
On
April 30, 2018, REGI granted an aggregate of 500,000 common stock options for services. These options vest upon grant, expire
on April 30, 2023 and are exercisable at the following prices:
|
Options
|
|
Exercise price
|
|
|
100,000
|
|
$
|
1.00
|
|
|
100,000
|
|
$
|
2.00
|
|
|
100,000
|
|
$
|
3.00
|
|
|
100,000
|
|
$
|
4.00
|
|
|
100,000
|
|
$
|
5.00
|
|
|
500,000
|
|
|
|
|
A
summary of REGI’s stock option activities for the years ended April 30, 2018 and 2017 are as follows:
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Aggregate
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
Options
|
|
Shares
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at May 1, 2017
|
|
|
9,138,000
|
|
|
$
|
0.31
|
|
|
|
3.61
|
|
|
|
|
|
|
Granted
|
|
|
1,900,000
|
|
|
|
1.17
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(155,000
|
)
|
|
|
0.10
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(1,528,000
|
)
|
|
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at April 30, 2018
|
|
|
9,355,000
|
|
|
$
|
0.52
|
|
|
|
3.67
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at April 30, 2018
|
|
|
9,163,750
|
|
|
$
|
0.53
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Aggregate
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
Options
|
|
Shares
|
|
|
Exercise Price
|
|
|
Contractual Term
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at May 1, 2016
|
|
|
1,938,000
|
|
|
$
|
0.15
|
|
|
|
1.50
|
|
|
|
|
|
|
Granted
|
|
|
7,200,000
|
|
|
|
0.36
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at April 30, 2017
|
|
|
9,138,000
|
|
|
$
|
0.31
|
|
|
|
3.61
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at April 30, 2017
|
|
|
7,684,500
|
|
|
$
|
0.34
|
|
|
|
-
|
|
|
$
|
145,580
|
|
At
April 30, 2017, the Company had $28,740 of total unrecognized compensation cost related to non-vested stock options and warrants,
which will be recognized over future periods. The intrinsic value of “in the money” exercisable options at April 30,
2017 was $145,580.
A
summary of REGI’s common stock warrant activity for the years ended April 30, 2018 and April 30, 2017 is as follows:
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
|
April 30, 2018
|
|
|
April 30, 2017
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
|
Warrants
|
|
|
Price
|
|
|
Warrants
|
|
|
Price
|
|
|
Outstanding at beginning of period
|
|
|
-
|
|
|
$
|
-
|
|
|
|
200,000
|
|
|
$
|
0.25
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
(200,000
|
)
|
|
|
0.25
|
|
|
Outstanding at end of period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Exercisable at end of period
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
The
intrinsic value of “in the money” exercisable warrants at April 30, 2018 and April 30, 2017 was $Nil for both years.
The Company recognized $202,005 in option compensation expense for the year ended April 30, 2018 and $Nil for the year ended April
30, 2017.
The
Company is subject to the income tax laws of the United States and the States of Washington and Oregon, and uses the liability
method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences
between the carrying amounts of assets and liabilities for financial and income tax reporting purposes.
On
December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was signed into law by President Trump. The
Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate
tax rate from 35% to 21% effective January 1, 2018, while also repealing the deduction for domestic production activities, implementing
a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. U.S. GAAP requires
that the impact of tax legislation be recognized in the period in which the law was enacted. The Company does not anticipate that
the “Tax Reform Act” will have any substantial effect on the Company’s financial position in the near future.
During
the post-reverse merger period of February 18, 2017 through April 30, 2017, the Company incurred a net loss, and, therefore, had
no tax liability. The cumulative net operating loss carry-forward is approximately $267,672 for the year ended April 2017 and
will begin expiring in 2037. Section 382 of the Internal Revenue Code generally imposes an annual limitation on the amount of
net operating loss carryforwards that may be used to offset taxable income when a corporation has undergone significant changes
in its stock ownership. The $267,672 estimate of net operating loss carry- forward is calculated after we consider the effect
of Section 382. The Company estimates that the Net operating loss for the year ended April 30, 2018 is $3,005,229 and will begin
expiring in 2038.
Deferred
tax assets consist of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred
tax assets because of the uncertainty regarding its realizability. Deferred tax assets consist of the following:
The
composition of REGI’s deferred tax assets at April 30, 2018 and 2017 is as follows:
|
|
|
April 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carry forward
|
|
$
|
3,272,901
|
|
|
$
|
267,672
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset
|
|
$
|
687,309
|
|
|
$
|
93,685
|
|
|
Less: Valuation allowance
|
|
|
(687,309
|
)
|
|
|
(93,685
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
Management
has determined that the Company is subject to examination of income tax filings in the United States for the 2014 through 2016
tax years.
Management
has evaluated subsequent events from the balance sheet date through the date the financial statements were available to be issued
and determined that no material subsequent events exist other that the following.
Subsequent
to April 30, 2018, the Company issued Convertible Notes for cash proceeds of $90,000, service debt provided by related parties
of $27,932 and service debt provided by non-related parties of $16,357. The Convertible Notes are secured against all assets of
the Company, repayable two years 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.
Subsequent
to April 30, 2018, a total of 140,261 shares of the Company’s common stock were issued for Convertible Promissory notes
at $0.10 per share.
ITEM
9: CHANGES IN AND DISAGREEMENTS WITH ACCOUTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On
January 31, 2018,
MaloneBailey, LLP
of Houston, Texas (“
MaloneBailey
”)
was dismissed as REGI U.S., Inc. (the Company”)’s independent registered public accounting firm.
During
the most recent fiscal years ended April 30, 2017 and April 30, 2016, MaloneBailey’s reports on the Company’s financial
statements did not contain an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit
scope or accounting principles, except that the Company’s audited financial statements contained in its Form 10K’s
for the years ended April 30, 2017 and April 30, 2016 included a going concern qualification.
During
the periods referred to above, (i) there were no disagreements between the Company and
MaloneBailey
on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which,
if not resolved to the satisfaction of
MaloneBailey
would have caused
MaloneBailey
to make reference to the subject matter of the disagreement in connection with its reports on the Company’s financial
statements; and (ii) there were no reportable events as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K.
On
January 31, 2018, the Company engaged FRUCI & ASSOCIATES II, PLLC of Spokane, WA (“Fruci”) as its independent
registered public accounting firm for the Company’s quarter ending January 31, 2018. The change in the Company’s independent
registered public accounting firm was approved by the Company’s Board of Directors on January 28, 2018.
During
the periods referred to above, the Company has not consulted with Fruci regarding either (i) the application of accounting principles
to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s
financial statements; or (ii) any matter that was either the subject of a disagreement (as defined in paragraph (a)(1)(iv) of
Item 304 of Regulation S-K and the related instructions thereto) or a reportable event (as described in paragraph (a)(1)(v) of
Item 304 of Regulation S-K
ITEM
9A: CONTROLS AND PROCEDURES
(a)
Disclosure Controls and Procedures
We
maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports
that we file with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our
principal executive and financial officers, as appropriate, to allow for timely decisions regarding required disclosure. As required
by SEC Rule 15d-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including
our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this report.
Based
upon that evaluation, management has concluded that our current disclosure controls and procedures were not effective as of April
30, 2018. The conclusion that our disclosure controls and procedures were not effective was due to the presence of material weaknesses
in internal control over financial reporting as identified below. Management anticipates that disclosure controls and procedures
will not be effective until the material weaknesses are remediated. Our Company intends to remediate the weaknesses as set out
below:
|
-
|
There
is a lack of sufficient accounting staff due to the size of the Company, resulting in a lack of segregation of duties necessary
for an effective internal control system.
|
|
|
|
|
-
|
There
is a lack of control processes which provide for multiple levels of supervision and review.
|
(b)
Management’s Annual Report on Internal Control over Financial Reporting
Internal
control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and
Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes
in accordance with generally accepted accounting principles, and includes those policies and procedures that:
|
|
(1)
|
Pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of
our assets;
|
|
|
|
|
|
|
(2)
|
Provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with
authorization of our management and directors; and
|
|
|
|
|
|
|
(3)
|
Provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of our assets
that could have a material effect on the financial statements.
|
Internal
control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its
inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and
is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also
can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements
may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations
are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce,
though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over financial
reporting for the Company.
Management
has used the framework set forth in the report entitled
Internal Control-Integrated Framework
published by the Committee
of Sponsoring Organizations of the Treadway Commission, known as COSO (2013 edition), to evaluate the effectiveness of our internal
control over financial reporting.
Based
on this assessment the management concludes that our internal control system is ineffective and material weakness are noted due
to lack of segregation of duties. There is also a lack of control processes in place which provide for multiple levels of supervision
and review in key areas.
(c)
Changes in Internal Control over Financial Reporting
During
the year ended April 30, 2018, there were no changes in the Company’s internal control over financial reporting that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM
9B. OTHER INFORMATION.
None.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors
and Executive Officers
The
following table sets forth the name and position of each of our Executive Officers and Directors as of August 10, 2018:
|
Name
|
|
Position
|
|
Paul
Chute, 69
|
|
Director,
Chairman of the Board
|
|
Michael
Urso, 61
|
|
Director
and Chief Executive Officer
|
|
Paul
Porter, 62
|
|
Director
and President and Chief Technology Officer
|
|
Jeffrey
White, 62
|
|
Chief
Financial Officer
|
Business
Experience, Principal Occupation of Directors and Family Relationships
The
following individuals served as directors and executive officers of our company during the year ended April 30, 2018.
Paul
W Chute
,
Director, Board Chairman
, Mr. Chute has over 45 years of executive experience building or restructuring over
25 private and public companies. He specializes in Governance, Business Plans, Financing, Corporate Structure, Systems and Operational
functionality. A strong believer in team management, Paul believes in cooperative processing with accountability. He served as
CEO and CFO of Acadia National Health Systems. He earned his MBA in Business Management from Husson University and a BS in Accounting
from the University of Maine.
Paul
L. Porter
,
Director, President and Chief Technology Officer
. Mr. Porter has been a hands-on engineer and manager for
over 30 years. Founder and former president of Jetseal, Inc., a manufacturing firm specializing in cutting-edge seal design and
other aerospace technologies, Paul now serves as Managing Partner and Chief Engineer at P.A. Industries, in addition to his work
on the RadMax Rotary Cycle. He has an MBA from McNeese University and BS in Mechanical Engineering from Brigham Young University.
Michael
Urso, Director, Chief Executive Officer
. Mr. Urso is a Senior Executive with over 25 years of experience in the areas of Innovation,
Business Development, Marketing, Operations Management, and Sales with companies ranging from startups to large $50 billion global
corporations. Mike is a skilled leader with an impressive track record of transforming companies with commodity based, or incremental
innovation strategies into innovation leaders. He also has extensive experience mentoring startup companies and successfully guided
many from concept to commercialization, using a combination of tools and personal experience. In 2008 Mike was named “Mentor
of the Year” in the Pacific Northwest region for Cleantech Open, the nation’s largest clean technology startup accelerator
program, whose charter is to find, fund, and foster entrepreneurs with ideas to solve our greatest environmental and energy challenges.
Prior to his current position, Urso served as the Vice President of Product Innovation for Saint-Gobain’s North American
Gypsum business. While in this position he moved Saint-Gobain from a position of innovation follower to being the innovation leader
in the North American gypsum industry. During his career Mike has also held leadership positions as Senior Principal Consultant,
Sirti, a Washington State funded, high tech business incubator with a successful track record of launching new companies or negotiating
successful exits; Vice President of Marketing, Potlatch Corporation, Wood Products and Resource Management Divisions; Global New
Business Development Manager and Global Composite Materials Project Manager, Dow Chemical Company, Emulsion Polymers Division;
Operations Manager, Dow Chemical, Chemical and Metals Divisions; North American Marketing Manager, Dow Chemical, Emulsion Polymers
Division; and Canadian Marketing Manager, Dow Chemical, Emulsion Polymers Division. Mike received a BSc degree from the University
of Calgary, Alberta, Canada, and a MBA degree from Northwood University’s DeVos Graduate School of Management, Midland,
Michigan. He is also a co-inventor on four patents and holds citizenship in both the USA and Canada.
Susanne
Robertson, Director,
Mrs. Robertson was appointed a director of REGI on January 6, 2017. She is also a director of Linux Gold
Corp., Minewest Silver and Gold Inc. and Teryl Resources Corp. On July 20, 2018, Susan Robertson voluntarily resigned her seat
on the REGI U.S. Board of Directors.
Jeff
White, Chief Financial Officer
, Mr. White has over 30 years of experience in finance and business management. Jeff’s
broad experiences in business management and corporate finance include CFO at Scafco Corporation and Spokane Seed Company, and
as President and CFO of Garco Building Systems. He additionally served as Corporate Controller for Metropolitan Mortgage and Securities,
Co. Jeff is a certified public accountant and earned his BS in Business from the University of Idaho.
Victoria
Huang – Chief Financial Officer, resigned on April 30, 2018.
Jina
Liu – Director, resigned on April 30, 2018
Mr.
Shaojun Zhang – Director, resigned on February 7, 2018.
Involvement
in certain legal proceedings
Our
directors, executive officers and control persons have not been involved in any of the following events during the past ten years:
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(1)
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filed
a petition under the federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer
appointed by a court for the business or present of such a person, or any partnership in which he was a general partner at
or within two years before the time of such filing, or any corporation or business association of which he was an executive
officer within two years before the time of such filing;
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(2)
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was
convicted in a criminal proceeding or named subject of a pending criminal proceeding (excluding traffic violations and other
minor offenses);
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(3)
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was
the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from or otherwise limiting the following activities: (i) acting as a futures commission
merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant,
associated person of any of the foregoing, or as an investment advisor, underwriter, broker or dealer in securities, or as
an affiliated person, director of any investment company, or engaging in or continuing any conduct or practice in connection
with such activity; (ii) engaging in any type of business practice; (iii) engaging in any activity in connection with the
purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal
commodity laws;
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(4)
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was
the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority
barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described
above under this Item, or to be associated with persons engaged in any such activity;
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(5)
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was
found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission to have violated
any federal or state securities law and the judgment in subsequently reversed, suspended or vacate;
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(6)
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was
found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated
any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission
has not been subsequently reversed, suspended or vacated;
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(7)
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was
the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated, relating to an alleged violation of: (i) any Federal or State securities or commodities law
or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited
to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent
cease-and-desist order, or removal or prohibition order; or (iii) Any law or regulation prohibiting mail or wire fraud or
fraud in connection with any business entity;
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(8)
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was
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined
in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or persons associated with a member.
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Term
of Office
The
term of office of the current directors are expected to continue until new directors are elected or appointed at an annual meeting
of shareholders.
Committees
of the Board and Financial Expert
Audit
Committee
The
Company adopted a new audit committee charter on June 10, 2018. The Charter is available on the Company’s website at
https://radmaxtech.com/document/news/2018/2018-07-20-audit_committee_charter-317.pdf
Implementation
of the new charter has begun with the active recruitment of two independent members of the Board of Director with the required
background, skills and expertise to be assigned to the Audit Committee.
Code
of Ethics
The
Company’s board of directors is committed to encouraging and promoting a culture of ethical business conduct and integrity
throughout the Company. In order to achieve this objective, efforts are made to the implementation, monitoring and enforcement
of the Company’s Code of Business Conduct and Ethics (“Code”). This is accomplished by: (a) taking prompt action
against violations of the Code; ensuring employees and consultants are aware that they may discuss their concerns with their supervisor
or directly to the Compliance Officer; the Compliance Officer reporting suspected fraud or securities law violations for review
by the Audit Committee and reporting same to the Board of Directors. The Company distributes to each new director, officer, employee
and consultant the Company’s Code.
No
waivers of any provision of this Code of Business Conduct and Ethics may be made except by the Board of Directors. Any waiver
or amendment shall be reported as required by law or regulation. There have been no waivers of the Code since its implementation.
A
copy of the Code is available from the Company on written request, and the text of the code of business conduct and ethics was
filed as an exhibit to our form 10-K for the year ended April 30, 2011.
Assessments
The
board of directors is ultimately responsible for the stewardship of the Company, which means that it oversees the day-to-day management
delegated to the President and Chief Executive Officer and the other officers of the Company. The board is charged with the responsibility
of assessing the effectiveness of itself, its committee(s) and the contributions of individual directors.
The
Corporate Governance Policy was constituted by the board of directors to assist the Board and its officers, employees, and consultants
to fulfill fundamental issues including: (a) the regular assessment of the Company’s approach to corporate governance issues;
(b) ensuring that such approach supports the effective functioning of the Company with a view to the best interests of the Company’s
shareholders and effective communication between the board of directors and management of the Company; and (c) the process, structure
and effective system of accountability by management to the board of directors and by the board to the shareholders, in accordance
with applicable laws, regulations and industry standards for good governance practices. A copy of the Corporate Governance Policy
is available on our website at www.radmaxtech.com.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section
16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of a registered class
of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and
annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive
officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section
16(a) reports that they file.
Based
solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we
believe that all filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied
with.