REGI U.S., INC. Caution Regarding Forward-Looking Information
In addition to historical information, this Form 10-Q contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA). This statement is included for the express purpose of availing the Company. of the protections of the safe harbor provisions of the PSLRA.
All statements contained in this Form 10-Q, other than statements of historical facts, that address future activities, events or developments are forward-looking statements, including, but not limited to, statements containing the words "believe," "expect," "anticipate," "intends," "estimate," "forecast," "project," and similar expressions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services, developments or industry rankings; any statements regarding future revenue, economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. These statements are based on certain assumptions and analyses made by us in light of our experience and our assessment of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. However, whether actual results will conform to the expectations and predictions of management is subject to a number of risks and uncertainties described under Item 1A - Risk Factors beginning on page 20 below that may cause actual results to differ materially. Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by management will be realized or, even if substantially realized, that they will have the expected consequences to or effects on our business operations. Readers are cautioned not to place undue reliance on such forward-looking statements as they speak only of the Company's views as of the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Nature of Business We are an early stage company engaged in the business of developing and building improved axial vane-type rotary devices for civilian, commercial and government applications. We own the worldwide intellectual and marketing rights to the RadMax technology. Our vision is to develop advanced devices that reduce carbon footprint, reduce device size, weight and parts count, and increase fuel and manufacturing efficiencies. We intend to develop and market these devices in cooperation with industry and government partners. We are focused on creating new, disruptive technologies that are more efficient, compact and cost-effective than those currently available. Going Concern We incurred net losses of$996,283 for the nine months endedJanuary 31, 2020 and had a working capital deficit of$1,296,615 and an accumulated deficit of$27,319,678 atJanuary 31, 2020 . Further losses are expected until we enter into licensing agreements of our technologies. These factors raise substantial doubt about the ability of the Company to continue as a going concern. Page 26 of 33 We may receive interim support from related parties and plan to raise additional capital through debt and/or equity financings. We may also raise additional funds when our outstanding options are exercised. However, there is no assurance that any of these activities will be realized. Due to the uncertainty of our ability to generate sufficient revenues from our operating activities and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due, in their report on our financial statements for the year endedApril 30, 2019 , our registered independent auditors included additional comments indicating concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that led to this disclosure by our registered independent auditors. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Reports to Security Holders The Registrant does not issue annual or quarterly reports to security holders other than the annual Form 10-K and quarterly Forms 10-Q as electronically filed with theSEC . Electronically filed reports may be accessed at www.sec.gov. Interested parties also may read and copy any materials filed with theSEC at theSEC's Public Reference Room at450 Fifth Street NW ,Washington, DC 20549. Information may be obtained on the operation of thePublic Reference Room by calling theSEC at (800)SEC -0330. PLAN OF OPERATION
The Company is 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 toJanuary 31, 2020 totaling$26,976,186 and further losses are expected until we complete a licensing agreement with a manufacturer and reseller. OnJanuary 31, 2020 , the Company had working capital deficiency of$1,533,851 . These factors raise substantial doubt about the Company's 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 For the three months ended January 31, 2020 2019 $ Change % Change Revenue $ 37,750 $ 35,000$ 2,750 7.86 % Cost of revenue 18,188 - 18,188 N/A Gross margin 19,562 35,000 20,938 59.8 % Accounting and legal 25,126 30,831 (5,705 ) (18.5 )% Compensation and consulting 232,059 72,296 (3,442 ) (4.8 )% Stockholder relations (357 ) 13,124 (13,481 ) (102.7 )% Depreciation and amortization 7,058 946 6,112 646.1 % Stock-based compensation 19,740 - 19,740 N/A General and administrative expenses 9,692 19,608 (9,916 ) (50.6 )% Research and development (115,675 ) 124,301 (76,771 ) (61.8 )% Other expense (income) 185,411 762,627 (577,216 ) (75.7 )% NET LOSS $ (343,492 ) $ (988,733 )$ 681,617 (68.9 )% Page 27 of 33 For the nine months ended January 31, 2020 2019 $ Change % Change Revenue $ 62,750$ 75,000 $ (12,250 ) (16.33 %) Cost of revenue 18,188 - 18,188 N/A Gross margin 44,562 75,000 5,938 7.9 % Accounting and legal 72,980 76,785 (3,805 ) (5.0 %) Compensation and consulting 395,333 238,833 156,500 65.5 % Stockholder relations 54,849 50,467 4,382 8.7 % Depreciation and amortization 12,061 4,049 8,012 197.9 % Stock-based compensation 217,701 - 217,701 N/A General and administrative expenses 63,366 49,623 13,743 27.7 % Research and development 76,034 365,709 (289,675 ) (79.2 %) Other expense (income) 148,521 1,055,587 (907,066 ) (85.9 %) NET LOSS$ (996,283 ) $ (1,766,053 ) $ (769,770 ) 43.6 %
Management continues to focus its research and development efforts and administrative support with the increased success in financing the required expenditures.
Consulting and management expense for the three months endedJanuary 31, 2020 of$68,854 decreased$3,442 as management continued suspension of its salary accrual. Similarly, research and development expense for the three months endedJanuary 31, 2020 of$47,530 decreased$76,771 from the three months endedJanuary 31, 2019 of$124,301 as certain costs were apportioned to "Cost of revenue" and other expenses were reclassified in the current period to "Compensation and consulting".
For the nine months ended
The Company's basic and diluted loss per share was$0.003 for the three months endedJanuary 31, 2020 and$0.01 for the three months endedJanuary 31, 2019 . For the nine months endedJanuary 31, 2020 and 2019, the basic and diluted loss per share was$0.009 and$0.017 , respectively.
LIQUIDITY AND FINANCIAL CONDITION
WORKING CAPITAL January 31, 2020 April 30, 2019 Current assets $ 154,291 $ 42,402 Current liabilities 1,450,906 2,266,862 Working capital deficit$ 1,296,615 $ 2,224,460 For the nine months ended CASH FLOWS January 31, 2020 January 31, 2019
Cash flow used by operating activities $ (503,510 ) $ (378,611 ) Cash flow used by investing activities (5,601 ) - Cash flow provided by financing activities 593,001 327.355 Net increase (decrease) in cash during period $ 83,891
$ (51,256 ) During the nine months endedJanuary 31, 2020 , the Company issued promissory notes to related parties for cash proceeds of$225,000 and received cash proceeds from convertible promissory notes promissory notes in the amount of$200,000 . The Company repaid debt in the amount of$220,000 and received cash proceeds from the sale of common stock and stock subscriptions in the amount of$392,600 . Page 28 of 33 The note balances owed to related parties are generally interest bearing, unsecured and repayable on demand. Our related parties 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
REGI U.S., Inc. anticipates continuing to rely on sales of its debt and/or equity securities in order to continue to fund ongoing operations. Issuances of additional shares of common stock may result in dilution to the Company's existing stockholders. There is no assurance that the Company will be able to complete any additional sales of equity securities or that it will be able arrange for other financing to fund its planned business activities. The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to obtain additional financing as may be required, or ultimately to attain profitability. Potential sources of cash, or relief of demand for cash, include additional external debt, the sale of shares of the Company's stock or alternative methods such as mergers or sale of the Company's assets. No assurances can be given, however, that the Company will be able to obtain any of these potential sources of cash. The Company currently requires additional cash funding from outside sources to sustain existing operations and to meet current obligations and ongoing capital requirements.
The Company plans for the long-term continuation as a going concern include financing future operations through sales of our equity and/or debt securities.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to its stockholders.
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