Reg Technologies Inc.
(A Development Stage Company)
Interim Consolidated Financial Statements
(Unaudited – Prepared by Management)
(Expressed in Canadian Dollars)
January 31, 2010 and 2009
Reader’s Note:
These unaudited interim consolidated financial statements of Reg Technologies Inc. (“the Company”) for the
nine months ended January 31, 2010 have been prepared by management and have not been reviewed by the
Company’s auditors.
Reg Technologies Inc.
(A Development Stage Company)
Interim Consolidated Balance Sheets
(Expressed in Canadian Dollars)
As at
As at
January 31,
April 30,
2010
2009
$
$
(Unaudited)
Assets
Current
Cash
-
1,107
GST and interest receivable
6,317
9,010
Share subscription receivable (Note 5)
45,000
-
Prepaid expenses
3,091
1,776
Due from related parties (Note 8)
26,820
19,537
Advances to equity accounted investee (Note 7)
529,431
536,438
610,659
567,868
Equipment (Note 6)
3,962
6,897
614,621
574,765
Liabilities
Current
Bank indebtedness
13,878
-
Accounts payable and accrued liabilities
254,533
78,402
Due to related parties
148,139
-
Income taxes payable
32,379
32,379
Financial instrument liability (Note 10)
22,885
167,000
471,814
277,781
Shareholders’ equity
Share Capital (Note 5)
11,847,067
11,800,964
Share subscriptions received (Note 5)
12,000
-
Warrants (Note 5)
264,768
167,540
Contributed Surplus (Note 5)
2,147,555
2,115,568
Deficit
(14,128,583)
(13,787,088)
142,807
296,984
614,621
574,765
Nature and Continuance of Operations (Note 1)
Commitments (Note 9)
On behalf of the Board:
“John Robertson”
Director
“Jennifer Lorette"
Director
John Robertson
Jennifer Lorette
The accompanying notes are an integral part of these consolidated financial statements.
Reg Technologies Inc.
(A Development Stage Company)
Interim Consolidated Statements of Loss and Comprehensive Loss
(Unaudited – Prepared by Management)
(Expressed in Canadian Dollars)
For the three
For the three
For the nine
For the nine
months
months
months
months
ended
ended
ended
ended
January 31
January 31
January 31
January 31
2010
2009
2010
2009
$
$
$
$
Expenses
Amortization
820
1,026
2,935
3,016
Advertising and promotion
4,999
4,914
10,358
96,793
Consulting fees
9,563
5,538
13,965
25,126
Foreign exchange loss (gain)
38,836
(1,047)
40,556
(56,992)
Investor relations and shareholder communication
23,736
9,578
51,844
9,578
Management and director fees
13,050
21,800
39,150
44,700
Miscellaneous office expenses
16,606
9,151
44,051
43,516
Professional fees
13,743
10,557
80,347
131,198
Public relations
4,088
8,175
12,263
27,250
Research and development
19,737
29,849
98,200
99,037
Rent and utilities
11,233
8,631
27,562
24,554
Stock-based compensation
-
-
31,987
31,241
Transfer agent and filing fees
8,727
7,971
15,889
33,133
Travel and promotion
4,541
8,856
13,516
14,573
Wages and benefits
7,342
7,185
21,616
23,030
Mineral property maintenance costs
8,060
8,060
8,060
8,060
Loss before other items
185,081
140,244
512,299
557,813
Other (income) expenses
Gain on sale of investee's shares
-
(7,473)
(26,689)
(99,797)
Gain on issue by investee of its own shares
-
-
-
-
Unrealized loss (gain) on financial instrument
liability
(79,229)
-
(144,115)
-
Write down of accounts payable
-
(10,813)
-
(10,813)
Net and comprehensive loss for the period
105,852
121,958
341,495
447,203
Loss per share - basic and diluted
0.004
0.005
0.013
0.018
Weighted average number of common shares
outstanding - basic and diluted
25,768,959
25,164,000
25,732,271
24,726,000
The accompanying notes are an integral part of these consolidated financial statements.
Reg Technologies Inc.
(A Development Stage Company)
Interim Consolidated Statements of Cash Flows
(Unaudited – Prepared by Management)
(Expressed in Canadian Dollars)
For the Three Months
For the Nine Months
Ended January 31
Ended January 31
2010
2009
2010
2009
$
$
$
$
Cash flows used in operating activities
Net loss for the period
(105,852)
(121,958)
(341,495)
(447,203)
Adjustments to reconcile loss to net cash
used by operating activities:
Amortization
820
1,026
2,935
3,016
Gain on sale of investee's shares
-
(7,473)
(26,689)
(99,797)
Stock-based compensation
-
-
31,987
31,241
Unrealized gain on financial instrument
liability
(79,229)
-
(144,115)
-
Changes in non-cash working capital items:
GST and interest receivable
9,001
1,057
2,693
475
Prepaid expenses
11,858
900
(1,315)
3,600
Accounts payable and accrued liabilities
47,294
(30,383)
176,131
15,550
(116,108)
(156,831)
(299,868)
(493,118)
Cash flows provided by investing activities
(Advances to) repayments from equity
accounted investee
(6,412)
(407,734)
7,007
(697,957)
Proceeds on sale of investee's shares and
warrants
-
7,473
26,689
99,797
Purchase of property and equipment
-
-
-
(740)
(6,412)
(400,261)
33,696
(598,900)
Cash flows provided by financing activities
Bank indebtedness
11,939
-
13,878
-
Advances from (to) related parties
(79)
174,891
140,856
219,361
Proceeds from share issuances, net of
143,331
-
143,331
509,283
issuance costs
Subscription receivable
(45,000)
-
(45,000)
-
Subscription received
12,000
389,586
12,000
384,158
122,191
564,477
265,065
1,112,802
Change in cash
(329)
7,385
(1,107)
20,784
Cash, beginning of period
329
13,657
1,107
258
Cash, end of period
-
21,042
-
21,042
Supplemental Disclosures
Interest paid
-
-
-
-
Income taxes paid
-
-
-
-
The accompanying notes are an integral part of these consolidated financial statements.
Reg Technologies Inc.
(A Development Stage Company)
Interim Consolidated Statements of Shareholders’ Equity
(Unaudited – Prepared by Management)
(Expressed in Canadian Dollars)
Other
Total
Common
Common
Subscription Contributed
Comprehensive
Shareholders’
Shares
Shares
Received
Surplus
Warrants Income (Loss)
Deficit
Equity
#
$
$
$
$
$
$
$
Balance – April 30, 2007
23,942,759 11,356,689
–
849,839
–
639,758 (12,794,669)
51,617
Stock-based compensation
–
–
–
247,059
–
–
–
247,059
Deconsolidation adjustment
–
–
– (886,589)
–
(648,763)
– (1,535,352)
Deconsolidation of subsidiary
–
–
– 1,808,851
–
–
–
1,808,851
Foreign currency translation
–
–
–
5,672
–
9,005
–
14,677
adjustment
Net loss (Restated – Note 12)
–
–
–
–
–
–
(536,329)
(536,329)
Balance – April 30, 2008
23,942,759 11,356,689
– 2,024,832
–
– (13,330,998)
50,523
Shares issued for cash
1,771,168
444,275
–
– 167,540
–
–
611,815
Stock-based compensation
–
–
–
90,736
–
–
–
90,736
Net loss
–
–
–
–
–
–
(456,090)
(456,090)
Balance – April 30, 2009
25,713,927 11,800,964
– 2,115,568 167,540
– (13,787,088)
296,984
Shares issued for cash, net of share
–
issue costs
1,012,596
46,103
–
97,228
–
–
143,330
Subscription received
–
–
12,000
–
–
–
–
12,000
Net loss
–
–
–
–
–
–
(341,495)
(341,495)
Stock based compensation
–
–
–
31,987
–
–
–
31,987
Balance – January 31, 2010
26,726,523 11,847,067
12,000 2,147,555 264,768
– (14,128,583)
142,807
The accompanying notes are an integral part of these consolidated financial statements.
Reg Technologies Inc.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management
For the nine months ended January 31, 2010 and 2009
1.
Nature and Continuance of Operations
Reg Technologies Inc. (the “Company”) is a development stage company in the business of developing and
commercially exploiting a new designed axial vane type rotary engine known as the RadMax™ Engine
and other RandCamTM / RadMax™ applications, such as compressors and pumps (the “Technology”). The
worldwide marketing and intellectual rights, other than in the U.S., are held by the Company, which owns
4.5 million (directly or indirectly) shares of REGI U.S, Inc. (“REGI”) (a U.S. public company) representing
a 16% interest in REGI. REGI owns the U.S, marketing and intellectual rights. The Company and REGI
have a project cost sharing agreement whereby these companies each fund 50% of the development of the
Technology.
In a development stage company, management devotes most of its activities to establishing a new business.
Planned principal activities have not yet produced any revenues and the Company has incurred recurring
operating losses as is normal in development stage companies. The Company has accumulated losses of
$14,128,583 since inception. These factors raise substantial doubt about the Company’s ability to continue
as a going-concern. The ability of the Company to emerge from the development stage with respect to its
planned principal business activity is dependent upon its successful efforts to raise additional equity
financing, receive funding from affiliates and controlling shareholders, and develop a market for its
products.
Management is aware that material uncertainties exist, related to current economic conditions, which could
adversely affect the Company’s ability to continue to finance its activities. The Company receives interim
support from affiliated companies and plans to raise additional capital through debt and/or equity
financings. There continues to be insufficient funds to provide adequate working capital to fund ongoing
operations for the next twelve months. The Company may also raise additional funds though the exercise of
warrants and stock options.
There is no certainty that the Company’s efforts to raise additional capital will be successful. These
financial statements do not include any adjustments relating to the recoverability and classification of
recorded asset amounts and classification of liabilities that might be necessary should the Company be
unable to continue in normal operations.
2. Basis of Accounting and Principles of Consolidation
These unaudited interim consolidated financial statements have been prepared in accordance with Canadian
generally accepted accounting principles (“GAAP”) for interim financial information using the same
accounting policies and methods of application as the audited consolidated financial statements of the
Company for the year ended April 30, 2009. These unaudited interim consolidated financial statements do not
include all the information and note disclosures required by GAAP for annual financial statements of the
Company and should be read in conjunction with the audited consolidated financial statements of the
Company as at April 30, 2009.
In the opinion of management, all adjustments considered necessary for fair presentation have been included
in these financial statements. Interim results are not necessarily indicative of the results expected for the fiscal
year.
Reg Technologies Inc.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management
For the nine months ended January 31, 2010 and 2009
2.
Basis of Accounting and Principles of Consolidation (Continued)
These financial statements include the accounts of the Company and its 51% owned subsidiary, Rand
Energy Group Inc. (“Rand”), which owns a 4% (2008 – 9%) interest in REGI. The Company also owns a
12% (2008 - 12%) interest in REGI. Prior to April 30, 2008, REGI was considered a controlled subsidiary
for consolidation purposes by way of control through an annually renewable voting trusts agreement, with
other affiliated companies. This trusts agreement gave the Company 50% control of the voting shares of
REGI. The agreement could be cancelled by the President of the 51% owned subsidiary with seven days’
written notice to the affiliated companies. Effective April 30, 2008, the voting trusts agreement was
cancelled and consequently the investment in REGI has been accounted for as an equity investment.
3. Recent Accounting Pronouncements Not Yet Adopted
International Financial Reporting Standards
In 2006, the Canadian Accounting Standards Board (“AcSB”) published a new strategic plan that will
significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan
outlines the convergence of Canadian GAAP with IFRS over an expected five year transitional period.
In February 2008 the AcSB announced that 2011 is the changeover date for publicly-listed companies to
use IFRS, replacing Canadian GAAP. This date is for interim and annual financial statements relating to
fiscal years beginning on or after January 1, 2011. The Company’s transition date of May 1, 2010 will
require the restatement for comparative purposes of amounts reported by the Company for the year ended
April 30, 2011. In July 2008 AcSB announced that early adoption will be allowed in 2009 subject to
seeking exemptive relief. The Company is currently assessing the financial reporting impact of the
transition to IFRS and the changeover date.
Other accounting pronouncements issued with future effective dates are either not applicable or are not
expected to be significant to the consolidated financial statements of the Company.
4.
Management of Financial Risk
Interest rate and credit risk
The Company has minimal cash balances and no interest-bearing debt. The Company has no significant
concentrations of credit risk arising from operations. The Company's current policy is to invest any
significant excess cash in investment-grade short-term deposit certificates issued by reputable financial
institutions with which it keeps its bank accounts and management believes the risk of loss to be
remote. The Company periodically monitors the investments it makes and is satisfied with the credit
ratings of its banks.
Receivables consist of goods and services tax due from the Federal Government. Management believes
that the credit risk concentration with respect to receivables is remote.
Reg Technologies Inc.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management
For the nine months ended January 31, 2010 and 2009
4. Management of Financial Risk (Continued)
Foreign exchange risk
The Company is primarily exposed to currency fluctuations relative to the Canadian dollar through
expenditures that are denominated in US dollars. Also, the Company is exposed to the impact of
currency fluctuations on its monetary assets and liabilities.
The operating results and the financial position of the Company are reported in Canadian dollars.
Fluctuations in exchange rates will, consequently, have an impact upon the reported operations of the
Company and may affect the value of the Company’s assets and liabilities.
The Company currently does not enter into financial instruments to manage foreign exchange risk.
The Company is exposed to foreign currency risk through the following financial assets and liabilities
that are denominated in United States dollars:
Related Party
Accounts
January 31, 2010
Bank Debt
Receivables
payable
$
4,925
$
13,919
$
11,827
At January 31, 2010 with other variables unchanged, a +/-10% change in exchange rates would
increase/decrease pre-tax loss by approximately +/- $702.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall
due. The Company manages liquidity risk through the management of its capital structure and financial
leverage as outlined in Note 11.
5.
Shareholders’ Equity
Authorized
50,000,000 Common shares without par value
10,000,000 Preferred shares with a $1 par value, redeemable for common shares on the basis of 1
common share for 2 preferred shares
5,000,000 Class A non-voting shares without par value. Special rights and restrictions apply.
Treasury Shares
At January 31, 2010, Rand owns 217,422 (2009 – 217,422) shares of the Company valued at $43,485
that have been deducted from the total shares issued and outstanding. The value of these shares has
been deducted from share capital.
Reg Technologies Inc.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management
For the nine months ended January 31, 2010 and 2009
5. Shareholders’ Equity (Continued)
Private placements
During the year ended April 30, 2009, the Company completed a private placement, whereby it issued
1,315,168 units at $0.40 per unit for proceeds of $526,067. Each unit consisted of one common share and
one non-transferable share purchase warrant, entitling the holder to acquire one additional common share
for a period of one year at $0.50 per share and at $0.60 per share in the second year. The fair value of the
warrants included in the units was estimated to be $0.115 per warrant using the Black-Scholes option
pricing model using the following assumptions: risk free interest rate of 3.10%, expected volatility of
107%, an expected life of 1 year and no expected dividends. Finders’ fees of $22,212 were paid in
connection with the private placement, which are included in share issuance costs.
During the year ended April 30, 2009, the Company completed a private placement, whereby it issued
456,000 units at $0.25 per unit for proceeds of $114,000. Each unit consisted of one common share and
one-half non-transferable share purchase warrant. Two one-half warrants entitle the holder to purchase one
additional share of common stock at a price of $0.35 per share for one year. The fair value of the warrants
included in the units was estimated to be $0.07 using the Black-Scholes option pricing model using the
following assumptions: risk free interest rate of 1.10%, expected volatility of 115%, an expected life of 1
year and no expected dividends. Finders’ fees of $6,040 were paid in connection with the private
placement, which are included in share issuance costs.
During the nine months ended January 31, 2010, the Company completed a private placement, whereby it
issued 1,012,596 units at $0.15 per unit for proceeds of $151,889, of which $45,000 was received on
February 3, 2010 from the shareholder’s RRSP trust account. Each private placement unit consisted of one
common share and share purchase warrant. Each warrant entitles the holder to purchase one additional
share of common stock at a price of $0.20 per share for one year. The fair value of the warrants included in
the units was estimated to be $0.10 using the Black-Scholes option pricing model using the following
assumptions: risk free interest rate of 1.17%, expected volatility of 153%, an expected life of 1 year and no
expected dividends. Finders’ fees of $7,050 were paid in connection with the private placement, which are
included in share issuance costs.
During the nine months ended January 31, 2010, the Company received $12,000 for subscriptions for shares
issued in March, 2010.
Stock Options
The Company has implemented a stock option plan (the “Plan”) to be administered by the Board of
Directors. Pursuant to the Plan, the Board of Directors has discretion to grant options for up to a maximum
of 10% of the issued and outstanding common shares of the Company at the date the options are granted.
The option price under each option shall be not less than the discounted market price on the grant date. The
expiry date of an option shall be set by the Board of Directors at the time the option is awarded, and shall
not be more than five years after the grant date.
Reg Technologies Inc.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management
For the nine months ended January 31, 2010 and 2009
5.
Shareholders’ Equity (Continued)
Stock Options (Continued)
These options have the following vesting schedule:
i)
Up to 25% of the option may be exercised at any time during the term of the option; such initial
exercise is referred to as the “First Exercise”.
ii)
The second 25% of the option may be exercised at any time after 90 days from the date of First
Exercise; such second exercise is referred to as the “Second Exercise”.
iii)
The third 25% of the option may be exercised at any time after 90 days from the date of Second
Exercise; such third exercise is referred to as the “Third Exercise”.
iv)
The fourth and final 25% of the option may be exercised at any time after 90 days from the date
of the Third Exercise.
v)
The options expire 60 months from the date of grant.
Options granted to consultants engaged in investor relations activities will vest in stages over a minimum of
12 months with no more than 25% of the options vesting in any three-month period.
During the nine months ended January 31, 2010, the Company recorded stock-based compensation of
$31,987 (2009 - $31,240) as a general and administrative expense and addition to contributed surplus.
During the year ended April 31, 2009, the Company granted 375,000 stock options from the Plan to two
directors and a consultant exercisable at $0.21 per share, up to April 22, 2014. The fair value of options
was estimated using the Black-Scholes option pricing model using the following weighted average
assumptions: risk free interest rate of 3.19%, expected volatility of 106%, an expected option life of 1 - 5
years and no expected dividends. The weighted average fair value of options granted was $0.18 per option.
During the year ended April 31, 2009, the Company granted 400,000 stock options from the Plan to
employees, directors and consultants exercisable at $0.40 per share, up to August 1, 2013. The fair value of
options was estimated using the Black-Scholes option pricing model using the following weighted average
assumptions: risk free interest rate of 1.69%, expected volatility of 134%, an expected option life of 1 - 5
years and no expected dividends. The weighted average fair value of options granted was $0.31 per option.
Reg Technologies Inc.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management
For the nine months ended January 31, 2010 and 2009
5.
Shareholders’ Equity (Continued)
Stock Options (Continued)
A summary of the Company’s stock options is as follows:
Weighted
average
Number of
exercise
options
price
$
Outstanding at April 30, 2008
1,125,000
0.27
Granted
775,000
0.31
Expired
(375,000)
0.22
Outstanding at April 30, 2009 and January 31, 2010
1,525,000
0.30
As at January 31, 2010, the following stock options are outstanding:
Expiry Date
Exercise
Number
Remaining
price
of options
contractual life
(years)
$
October 20, 2010
0.30
750,000
0.72
August 1, 2013
0.40
400,000
3.50
April 22, 2014
0.21
375,000
4.23
Options Outstanding
1,525,000
Options Exercisable
381,250
Reg Technologies Inc.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management
For the nine months ended January 31, 2010 and 2009
5.
Shareholders’ Equity (Continued)
Share Purchase Warrants
A summary of the Company’s share purchase warrants is as follows:
Weighted
average
Number of
exercise
warrants
price
$
Outstanding at April 30, 2008
-
-
Issued
1,543,168
0.56
Outstanding at April 30, 2009 and January 31, 2010
1,543,168
0.56
As at January 31, 2010, the following share purchase warrants were outstanding:
Expiry Date
Exercise
Number
price
of warrants
$
July 31, 2010
0.60
1,315,168
April 1, 2010
0.35
228,000
Warrants Outstanding
1,543,168
6.
Equipment
Accumulated
January 31, 2010
Cost
Amortization
Net Book Value
Computer hardware
$
7,372
$
6,656
$
716
Office furniture and equipment
8,849
5,603
3,246
Total
$
16,221
$
12,259
$
3,962
Accumulated
April 30, 2009
Cost
Amortization
Net Book Value
Computer hardware
$
7,372
$
5,049
$
2,323
Office furniture and equipment
8,849
4,275
4,574
Total
$
16,221
$
9,324
$
6,897
Reg Technologies Inc.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management
For the nine months ended January 31, 2010 and 2009
7. Equity Accounted Investee
The Company’s investment in REGI has been reduced to $nil as the Company’s share of past losses
exceeded the carrying value of the investment in REGI.
At January 31, 2010, the Company is owed an aggregate of $529,431 (April 30, 2009 - $536,428) by REGI.
The amounts owed are unsecured, non-interest bearing and due on demand.
During the nine months ended January 31, 2010, the Company recognized a gain of $26,689 (2009 -
$99,797) relating to the sale of 84,500 of its shares of REGI.
8.
Related Party Transactions
At January 31, 2010, the Company is owed an aggregate of $26,820 (April 30, 2009 - $19,537) by related
parties. The amounts owed are unsecured, non-interest bearing and due on demand. These parties are
companies that the President of the Company controls or significantly influences.
During the nine months ended January 31, 2010, rent of $11,379 (2009 - $10,890) was paid to a company
having common officers and directors.
During the nine months ended January 31, 2010, management fees of $22,500 (2009 - $22,500) were paid
to a company having common officers and directors.
During the nine months ended January 31, 2010, research and development costs of $32,366 (2009 - $Nil)
were paid to a company having common officers and directors.
During the nine months ended January 31, 2010, administrative and management fees, included in
miscellaneous office expenses, of $20,250 (2009 - $21,048) and directors’ fees of $9,000 (2009 - $6,500)
were paid to officers, directors and companies controlled by officers and directors for services rendered.
These related party transactions are carried out in the normal course of operations and are measured at the
exchange amount of consideration established and agreed to by all the related parties. Amounts due from
related parties are unsecured, non-interest bearing and due on demand.
Reg Technologies Inc.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management
For the nine months ended January 31, 2010 and 2009
9.
Commitments
a) In connection with the acquisition of Rand, the Company has the following royalty obligations:
i)
A participating royalty is to be paid based on 5% of all net profits from sales, licenses, royalties
or income derived from the Rand Cam Technology patented technology, to a maximum amount
of $10,000,000. The participating royalty is to be paid in minimum annual instalments of
$50,000 per year beginning on the date the first revenues are derived from the license or sale of
the patented technology.
ii)
Pursuant to a letter of understanding dated December 13, 1993, between the Company and REGI
(collectively called the grantors) and West Virginia University Research Corporation
(“WVURC”), the grantors have agreed that WVURC shall own 5% of the Rand Cam patented
technology and will receive 5% of all net profits from sales, licenses, royalties or income derived
from the patented technology.
iii)
A 1% net profit royalty will be payable to a director on all U.S. – based sales.
b) The Company is committed to fund 50% of the further development of the RadMax™ Engine
Technology.
c) The Company’s current agreement to lease office premise expired on June 30, 2009. On June 11, 2009,
the Company entered into a new lease agreement for one additional year for a total of $13,185.
10. Financial Instrument Liability
During the year ended April 30, 2009, Rand sold 1,304,933 units (2008 – 80,000 units) consisting of one
common share of REGI and one share purchase warrant entitling the holder to purchase one additional
share of REGI at a specified exercise price. The details of the share purchase warrants are as follows:
Closing date of sale
# of warrants
Exercise price
Expiry date
March 27, 2008
80,000
$
1.50
March 27, 2013
May 6, 2008
40,000
$
1.50
May 6, 2013
March 12, 2009
1,264,933
$
0.35
March 12, 2010
The warrants are a derivative, and the proceeds on the sale of the units were bifurcated between the fair
value of the common shares and the share purchase warrants. The proceeds allocated to the warrants were
$125,632 (2008 - $30,798). The fair value of the warrants at the closing date was determined using the
Black-Scholes option pricing model.
Reg Technologies Inc.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management
For the nine months ended January 31, 2010 and 2009
10. Financial Instrument Liability (Continued)
During the nine month period ended January 31, 2010, the Company received share subscriptions in the
amount of $144,418 whereby the Company will sell 418,000 units consisting of one common share of
REGI and one share purchase warrant entitling the holder to purchase one additional share of REGI at a
specified exercise price. As at January 31, 2010, these subscriptions are included in accounts payable.
The fair value of the warrants as follows:
Fair value at
Fair value at
Expiry date
January 31, 2010
April 30, 2009
March 27, 2013
$
10,071
$
11,474
May 6, 2013
5,166
5,873
March 12, 2010
7,648
149,653
Total
$
22,885
$
167,000
Black-Scholes Option-Pricing Model Assumptions
The fair value of each warrant issued was calculated using the Black-Scholes option-pricing model with
the following assumptions:
January 31, 2010
April 30, 2009
Expected dividend yield
0.00%
0.00%
Expected stock price volatility
110% - 146%
108% - 118%
Risk-free interest rate
0.02% - 1.38%
0.43% - 0.64%
Expected life of warrants (years)
0.11 – 3.15
0.87 – 4.01
Subsequent to January 31, 2010, 1,264,933 warrants expired on March 12, 2010, of which 894,333 were
extended for one year, expiring on March 12, 2011.
Reg Technologies Inc.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited – Prepared by Management
For the nine months ended January 31, 2010 and 2009
11. Capital Management
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue
as a going concern in order to pursue the development of its technologies and to maintain a flexible
capital structure for its projects for the benefit of its stakeholders. As the Company is in the
development stage, its principal source of funds is from the issuance of common shares.
In the management of capital, the Company includes the share capital as well as cash, receivables,
related party receivables and advances to equity accounted investee.
The Company manages the capital structure and makes adjustments to it in light ��of changes in
economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the
capital structure, the Company may attempt to issue new shares, acquire or dispose of assets or adjust
the amount of cash and short-term investments.
The Company expects its capital resources, which include a share offering and the sale of investee
shares and warrants, will be sufficient to carry its research and development plans and operations
through its current operating period.
The Company is not subject to externally imposed capital requirements and there were changes in its
approach to capital management during the nine months ended January 31, 2010.
12. Subsequent Events
On March 24, 2010 the Company the Company completed a private placement, whereby it issued
1,643,333 units at $0.15 per unit for gross proceeds of $246,500. Each unit consisted of one common
share and share purchase warrant. Each warrant entitles the holder to purchase one additional share of
common stock at a price of $0.20 per share for one year. Finder’s fees of $12,068 were paid in
connection with the private placement.
During the years ended 2008 and 2009 Rand sold 1,304,933 warrants entitling the holder to purchase
shares of REGI from Rand. On March 12, 2010, 1,264,933 of these warrants expired, of which 894,333
warrants were extended for one additional year, expiring March 12, 2011.