Reg Technologies Inc.
(A Development Stage Company)
Consolidated Financial Statements
(Expressed in Canadian Dollars)
April 30, 2010
SUITE 1850
1066 WEST HASTINGS STREET
VANCOUVER, BC V6E 3X2
T: 604.683.3850
ACAL GROUP
F: 604.688.8479
CHARTERED ACCOUNTANTS
PCAOB & CPAB Registrant
AUDITORS’REPORT
To:
the Shareholders of
Reg Technologies Inc.
We have audited the consolidated balance sheet of Reg Technologies Inc. (the “Company”) as at April 30, 2010 and the
consolidated statements of loss, comprehensive loss and deficit, cash flows and shareholders’ equity for the year then ended.
These consolidated financial statements are the responsibility of the Company’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 generally accepted auditing standards (“GAAS”) in Canada and the standards of
the Public Company Accounting Oversight Board (United States) (“PCAOB”). Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the
Company as at April 30, 2010 and the results of its operations and cash flows for the year then ended in accordance with
Canadian generally accepted accounting principles.
The consolidated financial statements as at April 30, 2009 and for the years ended April 30, 2009 and 2008 were audited by
other auditors who expressed opinions without reservations on those statements in their reports to the shareholders dated
August 24, 2009 and August 22, 2008.
“ACAL Group”
Chartered Accountants
Vancouver, British Columbia
August 25,2010
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA – U.S. REPORTING CONFLICT
In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the
opinion paragraph) when the financial statements are affected by significant uncertainties and contingencies such as those
referred to in note 1 to these consolidated financial statements. Although we conducted our audit in accordance with both
Canadian GAAS and the standards of the PCAOB, our report to the shareholders dated August 25, 2010 is expressed in
accordance with Canadian reporting standards which do not require a reference to such matters when the uncertainties are
adequately disclosed in the consolidated financial statements.
“ACAL Group”
Chartered Accountants
Vancouver, British Columbia
August 25,2010
Reg Technologies Inc.
(A Development Stage Company)
Consolidated Balance Sheets
(Expressed in Canadian Dollars)
As at
As at
30 April
30 April
2010
2009
$
$
Assets
Current
Cash
364
1,107
GST and interest receivable
9,882
9,010
Prepaid expenses
1,416
1,776
Due from related parties (Note 8)
28,455
19,537
Advances to equity accounted investee (Note 6)
585,859
536,438
625,976
567,868
Equipment (Note 5)
3,346
6,897
629,322
574,765
Liabilities
Current
Bank indebtedness
494
-
Accounts payable and accrued liabilities
57,861
78,402
Due to related parties (Note 8)
146,741
-
Income taxes payable (Note 11)
10,317
32,379
Share subscription payable (Note 10)
58,877
-
Financial instrument liability (Note 10)
135,816
167,000
410,106
277,781
Shareholders’ equity
Share Capital (Note 4)
12,082,039
11,800,964
Warrants (Note 4)
245,518
167,540
Contributed Surplus
2,133,649
2,115,568
Deficit
(14,241,990)
(13,787,088)
219,216
296,984
629,322
574,765
Nature and Continuance of Operations (Note 1)
Commitments (Note 9)
Subsequent events (Note 14)
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.
(1)
Reg Technologies Inc.
(A Development Stage Company)
Consolidated Statements of Loss and Comprehensive Loss
(Expressed in Canadian Dollars)
For the year
For the year
For the year
ended April 30,
ended April 30,
ended April 30,
2010
2009
2008
$
$
$
Restated
(Note 12)
Expenses
Amortization
3,551
4,042
3,869
Shareholder communication
82,026
140,157
357,949
Consulting fees
16,542
28,094
76,292
Foreign exchange loss (gain)
81,608
(59,268)
27,313
Management and directors’ fees (Note 8)
54,700
50,050
53,500
Mineral property maintenance costs
8,060
8,060
8,200
Office expenses
33,719
55,950
74,914
Professional fees (Note 8)
105,851
145,407
231,973
Research and development
227,402
185,955
276,614
Rent and utilities (Note 8)
10,182
39,972
36,122
Stock-based compensation (Note 4)
1,348
90,736
247,059
Transfer agent and filing fees
26,925
42,541
56,776
Travel and promotion
15,211
29,616
118,663
Wages and benefits
22,541
24,313
194,723
Loss before other items and income taxes
(689,666)
(785,625)
(1,763,967)
Other income (expense)
Gain on sale of investee’s shares (Note 6)
142,815
347,099
261,351
Gain on issue by investee of its own shares (Note 7)
-
-
228,934
Net gain on expiration and modification of financial
6,971
-
-
instrument liability
Interest income
-
-
1,276
Non-controlling interest
-
-
761,463
Unrealized gain (loss) on financial instrument liability
62,916
14,815
(25,386)
Loss before income taxes
(476,964)
(423,711)
(536,329)
Income tax recovery (expense) – current (Note 11)
22,062
(32,379)
-
Net and comprehensive loss
(454,902)
(456,090)
(536,329)
Loss per share – basic and diluted
(0.02)
(0.02)
(0.02)
Weighted average number of common shares
outstanding – basic and diluted
26,123,280
24,849,721
23,849,000
The accompanying notes are an integral part of these consolidated financial statements.
(2)
Reg Technologies Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
For the year
For the year
For the year
ended April 30
ended April 30
ended April 30
2010
2009
2008
$
$
$
Restated (Note 12)
Cash flows used in operating activities
Net loss
(454,902)
(456,090)
(536,329)
Adjustments to reconcile loss to net cash used by operating
activities:
Amortization
3,551
4,042
3,869
Gain on sale of investee’s shares
(142,815)
(347,099)
(261,351)
Gain on issue by investee of its own shares
-
-
(228,934)
Non-controlling interest
-
-
(761,463)
Shares issued for services
-
-
36,722
Net gain on expiration and modification of financial
instrument liability
(6,971)
-
-
Stock-based compensation
1,348
90,736
247,059
Unrealized (gain) loss on financial instrument liability
(62,916)
(14,815)
25,386
Changes in non-cash working capital items:
Bank indebtedness
494
-
-
GST and interest receivable
(872)
(1,990)
4,309
Prepaid expenses
360
3,240
25,325
Due from related parties
(8,918)
(3,046)
-
Accounts payable and accrued liabilities
(20,541)
33,813
96,588
Due to related parties
146,741
-
-
Income taxes payable
(22,062)
32,379
-
(567,503)
(658,830)
(1,348,819)
Cash flows provided by investing activities
(Advances to) repayments from equity accounted investee
(49,421)
(424,126)
166,215
Proceeds on sale of investee’s shares and warrants
240,395
472,730
261,820
Net cash from deemed disposition of subsidiary
-
-
(7,748)
Purchase of equipment
-
(740)
(1,338)
190,974
47,864
418,949
Cash flows provided by financing activities
Proceeds from share issuances, net of issuance costs
375,786
611,815
651,140
375,786
611,815
651,140
Effect of exchange rate on cash
-
-
(15,475)
Increase (decrease) in cash
(743)
849
(294,205)
Cash, beginning
1,107
258
294,463
Cash, ending
364
1,107
258
Supplemental Disclosures
Interest paid
-
-
-
Income taxes paid
-
-
-
The accompanying notes are an integral part of these consolidated financial statements.
(3)
Reg Technologies Inc.
(A Development Stage Company)
Consolidated Statements of Shareholders’ Equity
(Expressed in Canadian Dollars)
Other
Total
Common
Common
Contributed
Warrants
Comprehensive
Shareholders’
Shares
Shares
Surplus
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
–
–
1,808,851
–
–
–
1,808,851
subsidiary
Foreign currency translation
–
–
5,672
–
9,005
–
14,677
adjustment
Net loss (Restated – Note
12)
–
–
–
–
–
(536,329)
(536,329)
Balance – April 30, 2008
(Restated – Note 12)
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
2,655,929
281,075
–
94,711
–
–
375,786
Stock-based compensation
–
–
1,348
–
–
–
1,348
Expiration of warrants
–
–
16,733
(16,733)
–
–
–
Net loss
–
–
–
–
–
(454,902)
(454,902)
Balance – April 30, 2010
28,369,856
12,082,039
2,133,649
245,518
– (14,241,990)
219,216
The accompanying notes are an integral part of these consolidated financial statements.
(4)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended 30 April 2010 and 2009
1.
Nature and Continuance of Operations
Reg Technologies Inc. (“Reg Tech” or the “Company”) is a development stage company in the business
of developing and commercially exploiting an improved axial vane type rotary engine known as the
Rand CamTM/Direct Charge 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 as at April 30, 2010 owns 3.8 million shares of REGI
U.S, Inc. (“REGI”) (a U.S. public company) representing a 13% 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 $14,241,990 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.
Significant Accounting Policies
a) Basis of accounting and principles of consolidation
These consolidated financial statements are prepared using Canadian generally accepted accounting
principles (“GAAP”) and are presented in Canadian dollars.
These financial statements include the accounts of the Company and its 51% owned subsidiary,
Rand Energy Group Inc. (“Rand”), which owns a 2.8% (2009 – 4%) interest in REGI. The
Company also owns a 10.6% (2009 - 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 (Note 6) and
consequently the investment in REGI has been accounted for as an equity investment.
(5)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
2.
Significant Accounting Policies (Cont’d)
a) Basis of accounting and principles of consolidation (Cont’d)
All inter-company accounts and transactions have been eliminated on consolidation.
b) Investments
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.
When the Company’s carrying value in an equity method investee company is reduced to zero, no
further losses are recorded in the Company’s consolidated financial statements unless the Company
guaranteed obligations of the investee company or has committed additional funding. When the
investee company subsequently reports income, the Company will not record its share of such
income until it equals the amount of its share of losses not previously recognized.
c) Comparative numbers
The 2009 and 2008 comparative numbers have been reclassified, where applicable, in order to
conform with the presentation used in the current year.
d) Use of estimates
The preparation of financial statements in conformity with Canadian generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the reporting period.
Significant areas requiring the use of management estimates relate to the useful life and
recoverability of long-lived assets, assumptions used in the determination of the fair value of stock-
based compensation, assumptions used in determining the fair value of financial instruments and
future income tax asset valuation allowances. Actual results could differ from those estimates. 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 and future cash flows would be affected.
e) Equipment
Equipment consists of office furniture and equipment, and computer hardware recorded at cost and
amortized on a straight-line basis over a five-year and three-year period, respectively.
(6)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
2.
Significant Accounting Policies (Cont’d)
f) Research and development costs
The Company carries on various research and development activities to develop its technology.
Research costs are expensed in the periods in which they are incurred. Development costs that
meet all of the criteria to be recognized as an intangible asset, including reasonable expectation
regarding future benefits, are capitalized and are amortized over their expected useful lives. To
date the Company has not capitalized any development costs.
g) Mineral property interests
The Company initially records the acquisition of resource property interests, including option payments
under purchase agreements at cost which does not necessarily reflect market or recoverable value.
Recoverable value is dependent upon the successful funding and development or sale of the mineral
interests and is subject to measurement uncertainty. Exploration and development expenditures are
deferred and capitalized to a property until the project is put into commercial production, sold,
abandoned, or when changes in events or circumstances indicate that the carrying value may be
impaired. Where a resource property interest is abandoned, the accumulated acquisition and deferred
costs relating to that property are written off to operations.
At April 30, 2010 and 2009, the Company’s mineral property interests had been written down to $nil.
h) Long-lived assets and impairment
The carrying values of long-lived assets with fixed or determinable lives are reviewed for
impairment whenever events or changes in circumstances indicate recoverable values may be less
than carrying amounts. Recoverable value determinations are based on management’s estimates of
undiscounted and discounted future net cash flows expected to be recovered from specific assets or
groups of assets through use or future disposition. Impairment charges are recorded in the period in
which determination of impairment is made by management.
Assets with indefinite or indeterminable lives are not amortized and are reviewed for impairment on
a reporting period basis using fair value determinations based on management’s estimate of
recoverable value.
i) Foreign currency translation
(i)
Translation of foreign currency transactions and balances:
Monetary balance sheet items are translated at the rate prevailing at the balance sheet date.
Revenues, expenses and non-monetary balance sheet items in foreign currencies are
translated into Canadian dollar equivalents at the rate of exchange prevailing on the
transaction dates. The resulting exchange gain or loss is included in operations.
(7)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
2.
Significant Accounting Policies (Cont’d)
i) Foreign currency translation (Cont’d)
(ii) Translation of foreign subsidiary balances:
Foreign currency transactions are translated using the current rate method. Assets and
liabilities of non-integrated foreign subsidiaries are translated into Canadian dollar
equivalents at the rates of exchange on the balance sheet date. The foreign subsidiary’s
operating results are translated into Canadian dollar equivalents using the average exchange
rate for the year. Any resulting translation gain or loss is deferred and included as a separate
component of shareholders’ equity.
j) Income taxes
The Company follows the asset and liability method of accounting for income taxes. Under this
method of tax allocation, future income tax assets and liabilities are determined based on
differences between the financial statement carrying values and their respective income tax basis
(temporary differences). Future income tax assets and liabilities are measured using the tax rates
expected to be in effect when temporary differences are likely to reverse. The effect on future
income tax assets and liabilities of a change in tax rates is included in operations in the period in
which the change is enacted or substantively enacted. The amount of future income tax assets
recognized is limited to the amount of the benefit that is likely to be realized.
k) Stock-based compensation
The Company has adopted the fair value method of accounting for all stock-based compensation.
The fair value of stock options granted is determined using the Black-Scholes option pricing model.
Stock-based compensation is expensed over the period of vesting and initially credited to
contributed surplus. Any consideration paid on the exercise of stock options is credited to share
capital. When options are exercised, previously recorded compensation is transferred from
contributed surplus to share capital to fully reflect the consideration for the shares issued.
l) Loss per share
Basic loss per share is calculated using the weighted average number of common shares
outstanding during the year. The Company uses the treasury stock method for calculating diluted
loss per share. Under this method the dilutive effect on loss per share is recognized on the use of the
proceeds that could be obtained upon exercise of options, warrants and similar instruments. It
assumes that the proceeds would be used to purchase common shares at the average market price
during the period. However, diluted loss per share is not presented where the effects of various
conversions and exercise of options and warrants would be anti-dilutive. Shares held in escrow,
other than where their release is subject to the passage of time, are not included in the calculation of
the weighted average number of common shares outstanding.
(8)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
2.
Significant Accounting Policies (Cont’d)
m) Financial instruments
The Company follows Canadian Institute of Chartered Accountants (“CICA”) Sections 3855,
“Financial Instruments – Recognition and Measurement” and Section 3856, “Hedges”. Section
3855 prescribes when a financial instrument is to be recognized on the balance sheet and at what
amount. Under Section 3855, financial instruments must be classified into one of five categories:
held-for-trading, held-to-maturity, loans and receivables, available-for-sale financial assets, or other
financial liabilities. All financial instruments, including derivatives, are measured at the balance
sheet date at fair value except for loans and receivables, held-to-maturity investments, and other
financial liabilities which are measured at amortized cost.
The Company’s financial instruments consist of cash, interest receivable, due from (to) related
parties, advances to equity accounted investee, accounts payable, shares subscription payable and a
financial instrument liability. The carrying values of these financial instruments approximate their
fair value unless otherwise noted.
Cash is measured at face value, representing fair value, and classified as held-for-trading. Interest
receivable, due from related parties, and advances to equity accounted investee, which are
measured at amortized cost, are designated as loans and receivables. Accounts payable, due to
related parties and shares subscription payable are measured at amortized cost and designated as
other financial liabilities. The financial instrument liability, which is measured at fair value, is
classified as held-for-trading.
The Company does not use any hedging instruments.
n) Comprehensive income (loss)
The Company follows the CICA Section 1530, “Comprehensive Income”. Section 1530 establishes
standards for the reporting and presenting of comprehensive income (loss) which is defined as the
change in equity from transactions and other events from non-owner sources. Other comprehensive
income (loss) refers to items recognized in comprehensive income (loss) that are excluded from net
income (loss).
o) Newly adopted standards
On May 1, 2008, the Company adopted new CICA accounting standards related to accounting
changes, capital disclosures, financial instruments – presentation and disclosure, going concern and
credit risk. These standards were adopted on a prospective basis and are primarily related to
disclosures. There were no adjustments recorded to opening balance sheet items or deficit as a
result of the adoption of these standards.
(9)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
2.
Significant Accounting Policies (Cont’d)
o) Newly adopted standards (Cont’d)
Accounting Changes – CICA Handbook Section 1506
This standard establishes criteria for changes in accounting policies, accounting treatment and
disclosure regarding changes in accounting policies, estimates and corrections of errors. In
particular, this section allows for voluntary changes in accounting policies only when they result in
the financial statements providing reliable and more relevant information. This section requires
changes in accounting policies to be applied retrospectively unless doing so is impracticable.
Capital Disclosure – CICA Handbook Section 1535
This section specifies the disclosure of (i) an entity’s objectives, policies and processes for
managing capital; (ii) quantitative data about what the entity regards as a capital; (iii) whether the
entity has not complied with any capital requirements; and (iv) if it has not complied, the
consequences of such noncompliance. The Company has included disclosures in Note 13 as
recommended by this new section.
Financial Instruments – Disclosure (Section 3862) and Presentation (Section 3863)
These standards replaced CICA Handbook Section 3861, Financial Instruments – Disclosure and
Presentation. These standards increase the disclosures currently required, which enables users to
evaluate the significance of financial instruments for an entity’s position and performance,
including disclosures about fair value. In addition, disclosure is required of qualitative and
quantitative information about exposure to risks arising from financial instruments, including
specified minimum disclosures about credit risk, liquidity risk, currency risk, interest rate risk and
market risk. The quantitative disclosures must provide information about the extent to which the
entity is exposed to risk, based on information provided internally to the entity’s key management
personnel. This standard is effective for the Company for interim and annual periods relating to
fiscal years beginning on or after May 1, 2008.
In June 2009, the CICA amended Section 3862, Financial Instruments – Disclosures that includes
additional disclosure requirements about fair value measurements for financial instruments and
liquidity risk disclosures. These amendments entail a three level hierarchy that takes into account
the significance of the inputs used in making the fair value measurements. Additional disclosure has
been included in the Company’s consolidated financial statements (See Note 3).
General Standards of Financial Statement Presentation – CICA Handbook Section 1400
In June 2007, the CICA modified Section 1400 “General Standards of Financial Statement
Presentation” to require management assess the Company’s ability to continue as going concern
over a period which is at least, but not limited to, twelve months from the balance sheet date. The
Company has included disclosures in Note 1 as recommended by this new section.
(10)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
2. Significant Accounting Policies (Cont’d)
o) Newly adopted standards (Cont’d)
Credit Risk and the Fair Value of Financial Assets and Financial Liabilities – EIC 173
In January 2009, the CICA approved EIC 173, Credit Risk and the Fair Value of Financial Assets and
Liabilities. This guidance clarified that an entity’s own credit risk and the credit risk of the counterparty
should be taken into account in determining the fair value of financial assets and financial liabilities
including derivative instruments.
p) 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.
Business combinations, consolidated financial statements and non-controlling interests
In January 2009, the CICA issued Handbook Sections 1582 – Business Combinations, 1601 –
Consolidated Financial Statements and 1602 – Non-controlling Interests which replace CICA
Handbook Sections 1581 – Business Combinations and 1600 – Consolidated Financial Statements.
Section 1582 establishes standards for the accounting for business combinations that is equivalent
to the business combination accounting standard under International Financial Reporting Standards
(“IFRS”). Section 1582 is applicable for the Company’s business combinations with acquisition
dates on or after January 1, 2011. Early adoption of this Section is permitted. Section 1601 together
with Section 1602 establishes standards for the preparation of consolidated financial statements.
Section 1601 is applicable for the Company’s interim and annual consolidated financial statements
for its fiscal year beginning January 1, 2011. Early adoption of this Section is permitted. If the
Company chooses to early adopt any one of these Sections, the other two sections must also be
adopted at the same time.
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.
(11)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
3. Financial Instruments
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:
Advances to
Equity
Related Party
Accounted
Accounts
April 30, 2010
Cash
Receivables
Investee
Payable
$
228
$
13,857
$
585,859
$
15,824
At April 30, 2010 with other variables unchanged, a +/-10% change in exchange rates would
increase/decrease pre-tax loss by approximately +/- $58,410.
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.
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 13.
(12)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
3. Financial Instruments (Cont’d)
Fair Value Measurement
The Canadian Institute of Chartered Accountants (“CICA”) Handbook Section 3862 “Financial Instruments
Disclosures” requires disclosure of a three-level hierarchy for fair value measurements based upon the
significance of inputs used in making fair value measurements as follows:
− Level 1 – quoted prices in active markets for identical assets or liabilities.
− Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly (i.e.: as prices) or indirectly (i.e.: derived from prices).
− Level 3 – inputs for the asset or liability that are not based on observable market data.
At April 30, 2010, the levels in the fair value hierarchy into which the Company’s financial assets and
liabilities measured and recognized in the balance sheet at fair value are categorized are as follows:
Level 1
Level 2
Cash
$
364
Financial instrument liability
$ 135,816
4.
Common Stock
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 April 30, 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.
(13)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
4. Common Stock (Cont’d)
Private placements
On July 31, 2008, 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. The Company incurred finders’ fees of $22,212 in connection with this
private placement, which are included in share issuance costs.
On April 1, 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. The Company incurred finders’ fees of $6,040 in connection with this private placement, which
are included in share issuance costs.
On January 26, 2010, the Company completed a private placement, whereby it issued 1,012,596 units at
$0.15 per unit for proceeds of $151,889. 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 $0.04 using the Black-Scholes option pricing model using the following assumptions: risk free
interest rate of 1.17%, expected volatility of 97%, 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.
On March 28, 2010, the Company completed a private placement, whereby it issued 1,643,333 units at
$0.15 per unit for proceeds of $246,500. 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 $0.03 using the Black-Scholes option pricing model using the following assumptions: risk free
interest rate of 0.87%, expected volatility of 99%, an expected life of 1 year and no expected dividends.
Finders’ fees of $12,068 were paid in connection with the private placement, which are included in share
issuance costs.
(14)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
4.
Common Stock (Cont’d)
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.
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 year ended April 30, 2010, the Company recorded stock-based compensation of $1,348 (2009 -
$90,736) as a general and administrative expense.
On August 1, 2008, 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. During the year ended
April 30, 2010 the Company recognized $nil (2009 - $43,648) as stock-based compensation in relation to
this grant, with $46,990 (2009 - $46,990) to be recognized in future accounting periods as the options
continue to vest.
On April 22, 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 30, 2010 the Company recognized $nil (2009 - $16,502) as stock-based compensation in relation to
this grant, with $37,419 (2009 - $37,419) to be recognized in future accounting periods as the options
continue to vest.
(15)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
4.
Common Stock (Cont’d)
Stock Options (Cont’d)
On April 19, 2010, the Company granted 50,000 stock options from the Plan a consultant exercisable at
$0.21 per share, up to April 19, 2015. 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 2.74%,
expected volatility of 102%, an expected option life of 5 years and no expected dividends. The weighted
average fair value of options granted was $0.11 per option. The Company recognized $1,348 as stock-based
compensation in relation to this grant, with $4,044 to be recognized in future accounting periods as the
options continue to vest.
The following is a summary of options activities during the years ended April 30, 2010 and 2009:
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
1,525,000
0.30
Granted
50,000
0.21
Outstanding at April 30, 2010
1,575,000
0.30
Weighted average fair value of options granted during the year
ended April 30, 2010
0.11
The following options were outstanding at April 30, 2010:
Expiry Date
Exercise
Number
Remaining
price
of options
contractual life
(years)
$
October 20, 2010
0.30
750,000
0.47
August 1, 2013
0.40
400,000
3.26
April 22, 2014
0.21
375,000
3.98
April 19, 2015
0.21
50,000
4.97
Options Outstanding
1,575,000
Options Exercisable
393,570
(16)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
4.
Common Stock (Cont’d)
Share Purchase Warrants
The following is a summary of warrant activities during the years ended April 30, 2010 and 2009:
Weighted
average
Number of
exercise
warrants
price
$
Outstanding at April 30, 2008
-
-
Issued
1,543,168
0.56
Outstanding at April 30, 2009
1,543,168
0.56
Issued
2,655,929
0.20
Expired
(228,000)
0.35
Outstanding at April 30, 2010
3,971,097
0.33
The following warrants were outstanding at April 30, 2010:
Expiry Date
Exercise
Number
price
of warrants
$
July 31, 2010
0.60
1,315,168
January 26, 2011
0.20
1,012,596
March 28, 2011
0.20
1,643,333
Warrants Outstanding
3,971,097
5.
Equipment
Accumulated
2010
Cost
Amortization
Net
Computer hardware
$
7,372
$
6,829
$
543
Office furniture and equipment
8,849
6,046
2,803
Total
$
16,221
$
12,875
$
3,346
Accumulated
2009
Cost
Amortization
Net
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
(17)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
6. 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 April 30, 2010, the Company is owed an aggregate of $585,859 (2009 - $536,438) by REGI. The
amounts owed are unsecured, non-interest bearing and due on demand.
During the year ended April 30, 2010, the Company recognized a gain of $142,815 (2009 – gain of
$347,099) relating to the sale of 621,725 (2009 – 1,394,608) of shares of REGI by the Company and Rand.
7.
Dilution Gain
During the year ended April 30, 2008, prior to the de-consolidation, REGI issued shares to third parties.
These issuances reduced Rand’s interest in REGI, which resulted in a gain on dilution of $228,934.
8.
Related Party Transactions
At April 30, 2010, the Company is owed an aggregate of $28,455 (2009 - $19,537) by related parties and
owed an aggregate of $146,741 (2009 - $nil) to 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 year ended April 30, 2010, $nil (2009 - $5,431) in professional fees were incurred with a law
firm of which a partner of the law firm is an officer and director of the Company.
During the year ended April 30, 2010, rent of $10,181 (2009 - $13,903) incurred with a company having
common officers and directors.
During the year ended April 30, 2010, management fees of $32,500 (2009 - $30,000) were paid to a
company having common officers and directors.
During the year ended April 30, 2010, research and development costs of $63,300 (2009 - $38,465) were
paid to a company having common officers and directors.
During the year ended April 30, 2010, administrative fees, included in miscellaneous office expenses, of
$7,902 (2009 - $14,598), consulting fees of $nil (2009 - $9,967) and management and directors’ fees of
$22,200 (2009 - $20,050) were paid to officers, directors and companies controlled by officers and directors
for services rendered.
The above transactions were in the normal course of operations and are recorded at their exchange amounts.
(18)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 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 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 all 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 Rand CamTM/Direct Charge
Engine Technology.
c) On June 11, 2009, the Company entered into a lease agreement for one additional year for a total of
$13,185.
10. Financial Instrument Liability
Rand’s private sales of REGI shares
On November 9, 2009, Rand sold 238,000 units at US$0.25 per unit consisting one common share of REGI
and one share purchase warrant entitling the holder to purchase one additional share of REGI at US$0.35
per share expiring November 9, 2010.
During the year ended April 30, 2009, Rand sold 40,000 units at US$1.00 per unit consisting of one
common share of REGI and one share purchase warrant entitling the holder to purchase one additional
share of REGI at US$1.50 per share expiring May 6, 2013.
During the year ended April 30, 2009, Rand sold 1,264,933 units at US$0.25 per unit consisting of one
common share of REGI and one share purchase warrant entitling the holder to purchase one additional
share of REGI at US$0.35 per share expiring 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
$17,400 (2009 - $125,632) upon issuance. The fair value of the warrants at the closing date was determined
using the Black-Scholes option pricing model using the following weighted average assumptions: risk free
interest rate of 0.24%, expected volatility of 121%, an expected option life of 1 year and no expected
dividends.
(19)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
10. Financial Instrument Liability (Cont’d)
Rand’s private sales of REGI shares (Cont’d)
During March, 2010, 163,000 warrants issued in March, 2009 were exercised at US$0.35 per share of REGI
shares for total proceeds of $58,877(US$57,050). These shares were transferred by Rand to the purchasers
on May 4, 2010.
On March 12, 2010, 1,101,933 warrants issued on March 12, 2009 expired, of which 894,333 warrants were
extended for one year expiring March 12, 2011. The fair value of the extended warrants on March 12, 2010
was determined using the Black-Scholes option pricing model using the following weighted average
assumptions: risk free interest rate of 0.15%, expected volatility of 117%, an expected option life of 1 year
and no expected dividends.
As at April 30, 2010 the details of the share purchase warrants are as follows:
Closing date of sale
# of warrants
Exercise price
Expiry date
March 27, 2008
80,000
US$ 1.50
March 27, 2013
May 6, 2008
40,000
US$ 1.50
May 6, 2013
March 12, 2009
894,333
US$ 0.35
March 12, 2011
November 9, 2009
238,000
US$ 0.35
November 9, 2010
The fair value of the warrants as follows:
Fair value at
Fair value at
Expiry date
April 30, 2010
April 30, 2009
March 27, 2013
$
6,292
$
11,474
May 6, 2013
3,120
5,873
March 12, 2010
-
149,653
March 12, 2011
86,863
-
November 9, 2010
39,541
-
Total
$
135,816
$
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:
30 April 2010
30 April 2009
Expected dividend yield
0.00%
0.00%
Expected stock price volatility
98% - 115%
108% - 118%
Risk-free interest rate
0.38% - 2.42%
0.43% - 0.64%
Expected life of warrants (years)
0.87 – 3.01
0.87 – 4.01
(20)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
10. Financial Instrument Liability (Cont’d)
Reg Tech’s private sales of REGI shares
On November 9, 2009, Reg Tech sold 280,000 units (2009 – nil units) at $0.25 per unit consisting one
common share of REGI and one share purchase warrant entitling the holder to purchase one additional
share of REGI at $0.35 per share expiring November 9, 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
$21,304 (2009 - $nil) upon issuance. The fair value of the warrants at the closing date was determined
using the Black-Scholes option pricing model using the following weighted average assumptions: risk free
interest rate of 0.31%, expected volatility of 121%, an expected option life of 1 year and no expected
dividends. The fair value of the warrants at April 30, 2010 was determined at $21,373 using the Black-
Scholes option pricing model using the following weighted average assumptions: risk free interest rate of
0.24%, expected volatility of 121%, an expected option life of 0.53 year and no expected dividends.
As at April 30, 2010 all 280,000 warrants were outstanding.
11. Income Taxes
Income tax expense differs from the amount that would result from applying the combined federal and
provincial income tax rate to earnings before income taxes. These differences result from the following
items:
For the year ended For the year ended
April 30, 2010
April 30, 2009
$
$
Net loss before income taxes
(476,964)
(423,711)
Combined federal and provincial income tax rate
29.50%
30.50%
Expected income tax recovery
(140,705)
(129,232)
Increase (decrease) due to:
Non-deductible expenses
4,898
23,970
Change in long-term Canadian tax rate and other
25,191
60,663
Expiry of non-capital losses
27,354
70,418
Change in valuation allowance
80,922
52,380
Non-taxable portion of gain
(19,722)
(45,820)
Income tax expense (recovery)
(22,062)
32,379
(21)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
11. Income Taxes (Cont’d)
The components of future income tax assets are as follows:
2010
2009
$
$
Non-capital losses
678,000
617,000
Intangible assets and other
160,000
141,000
Equipment
50,000
49,000
888,000
807,000
Valuation allowance
(888,000)
(807,000)
Net future income tax asset assets
-
-
The Company has non-capital losses of approximately $2,712,112 that may be available to offset future
income for income tax purposes. These losses expire as follows:
$
2014
145,129
2015
211,935
2026
402,253
2027
316,606
2028
571,468
2029
711,984
2030
352,737
2,712,112
A full valuation allowance has been recorded against the potential future income tax assets as their
utilization is not considered more likely than not.
12. Restatement
During the year ended April 30, 2008, the Company, through its subsidiary Rand, sold 80,000 units to a
third party. Each unit consisted of one REGI share and one share purchase warrant entitling the holder to
acquire one additional common share in REGI for a period of five years at US$1.50 per share. The
warrants are a derivate financial instrument and classified as held-for-trading and initially recorded and
subsequently measured at fair value. However, in preparation of the consolidated financial statements for
the year ended April 30, 2008, the Company did not allocate any of the proceeds on this sale to the
warrants, and the warrants were not subsequently measured at fair value.
(22)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
12. Restatement (Cont’d)
The following presents the effect of the previously issued consolidated financial statements for the year
ended April 30, 2008.
Consolidated balance sheet
2008
2008
As previously
reported
Increase
Restated
Financial instrument liability
$
-
$
56,184
$
56,184
Deficit
13,274,814
56,184
13,330,998
Consolidated statement of operations
2008
2008
As previously
Increase
reported
(Decrease)
Restated
Gain on sale of investee’s shares
$
292,149
$
(30,798)
$
261,351
Unrealized gain (loss) on financial
instrument liability
-
(25,386)
(25,386)
Net and comprehensive loss
480,145
56,184
536,329
13. 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 year ended April 30, 2010.
(23)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
14. Subsequent Events
Convertible Debenture
On June 1, 2010, the Company issued a convertible debenture for total proceeds of $50,000 which bears
interests at 8% per annum payable monthly, is unsecured and due one year from date of issuance. The
unpaid amount of principal can be converted at any time at the holder’s option into shares of the Company’s
common stock at a price of $0.20 per share. The Company has the option to repay principal and accrued
interest before the due date with 30 days’ notice.
Asset Transfer Agreement
On July 20, 2010 the Company signed an asset transfer agreement with its newly incorporated subsidiary
Minewest Silver and Gold Inc. (“Minewest”), a private company incorporated in British Columbia for
acquiring and exploring mineral properties. In accordance with the agreement the Company transfers its
100% ownership in its undivided 50% interest in 33 mining claims situated in the Tootsee River area in the
Province of British Columbia for following consideration:
- Cash payment of $25,000 on or before August 15, 2010 (paid);
- Issuance of 8,000,000 shares of Minewest voting common shares.
Warrants expired
1,315,168 warrants of the Company exercisable at $0.60 per share have expired, unexercised.
15. Reconciliation of United States and Canadian Generally Accepted Accounting Principles (“US GAAP
and “Canadian GAAP”)
These consolidated financial statements have been prepared in accordance with Canadian generally
accepted accounting principles (Canadian GAAP). A description of US GAAP and practices prescribed by
the US Securities and Exchange Commission (collectively US GAAP) that result in material measurement
differences from Canadian GAAP are as follows:
a) Development Stage Company
Pursuant to US GAAP, the Company would be subject to the disclosure requirements applicable to a
development stage enterprise as the Company is devoting its efforts to establishing commercially
viable products. However, the identification of the Company as such for accounting purposes does not
impact the measurement principles applied to these financial statements.
b) Gain on Sale of Shares Issued by Subsidiary
Under Canadian GAAP, the Company recorded a gain on the issuance of shares by a subsidiary outside
the consolidated group. Under US GAAP, these issuances of shares are treated as equity transactions
pursuant to SAB Topic 5.H – “Accounting for Sales of Stock by a Subsidiary”.
(24)
Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
15. Reconciliation of United States and Canadian Generally Accepted Accounting Principles (“US GAAP
and “Canadian GAAP”) (Cont’d)
c) Donated Capital
Under US GAAP, the Company recognizes the value of services provided by management at no charge
to the Company as donated capital. Under Canadian GAAP, no amount is recognized.
d) Recent Accounting Pronouncements
In June 2009, the FASB issued FASB ASC 105, “The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No.
162”. Under FASB ASC 105 the “FASB Accounting Standards Codification” (“Codification”) will
become the source of authoritative US GAAP to be applied by nongovernmental entities. Rules and
interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal
securities laws are also sources of authoritative GAAP for SEC registrants. The Codification became
effective for financial statements issued for interim and annual periods ending after September 15,
2009. On the effective date, the Codification will supersede all then-existing non-SEC accounting and
reporting standards. All other non-grandfathered non-SEC accounting literature not included in the
Codification will become non-authoritative. The Company changed the Company’s references to U.S.
GAAP accounting standards but did not impact the Company’s results of operations, financial position
or cash flows.
In June 2009, the Securities and Exchange Commission’s Office of the Chief Accountant and Division
of Corporation Finance announced the release of Staff Accounting Bulletin (SAB) No. 112. This staff
accounting bulletin amends or rescinds portions of the interpretive guidance included in the Staff
Accounting Bulletin Series in order to make the relevant interpretive guidance consistent with current
authoritative accounting and auditing guidance and Securities and Exchange Commission rules and
regulations. Specifically, the staff is updating the Series in order to bring existing guidance into
conformity with recent pronouncements by the Financial Accounting Standards Board, namely,
Statement of Financial Accounting Standards No. 141 (revised 2007) (ASC Topic 805), Business
Combinations, and Statement of Financial Accounting Standards No. 160 (ASC Topic 810), Non-
controlling Interests in Consolidated Financial Statements. The statements in staff accounting bulletins
are not rules or interpretations of the Commission, nor are they published as bearing the Commission's
official approval. They represent interpretations and practices followed by the Division of Corporation
Finance and the Office of the Chief Accountant in administering the disclosure requirements of the
Federal securities laws.
In April 2009, an update was made to the FASB ASC 820, “Fair Value Measurements and
Disclosures”, that provides additional guidance for estimating fair value when the volume and level of
activity for the assets or liability have significantly decreased. This update is effective for interim and
annual periods ending after June 15, 2009 with early adoption permitted for periods ending after
March 15, 2009. The adoption of this guidance did not impact the Company’s results of operations,
financial position or cash flows.
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Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
15. Reconciliation of United States and Canadian Generally Accepted Accounting Principles (“US GAAP
and “Canadian GAAP”) (Cont’d)
d) Recent Accounting Pronouncements (continued)
In April 2009, an update was made to FASB ASC 825, “Financial Instruments”, which requires a
publicly traded company to include disclosures about the fair value of its financial instruments
whenever it issues summarized financial information for interim reporting periods. This update is
effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for
periods ending after March 15, 2009. The adoption of this guidance did not impact the Company’s
results of operations, financial position or cash flows.
In May 2009, the FASB announced the issuance of FASB ASC 855, “Subsequent Events”, formerly
referenced as SFAS No. 165, Subsequent Events. FASB ASC 855 should not result in significant
changes in the subsequent events that an entity reports. Rather, FASB ASC 855 introduces the
concept of financial statements being available to be issued. Financial statements are considered
available to be issued when they complete in a form and format that complies with generally accepted
accounting principles (GAAP) and all approvals necessary for issuance have been obtained. The
Company has already adopted this policy and its full disclosure is included in Note 14.
e) The net loss for the years ended April 30, 2010, 2009 and 2008 and deficit accumulated during the
development stage as determined under U.S. GAAP is as follows:
2010
2009
2008
(Restated –
Note 12)
$
$
$
Net income (loss), as determined under Canadian GAAP
(454,902)
(456,090)
(536,329)
Gain due to ownership of new assets resulting from subsidiary
shares issued
-
-
(228,934)
Donated services
(161,071)
(171,705)
(153,440)
Net loss, as determined under U.S. GAAP
(615,973)
(627,795)
(918,703)
Loss per share, weighted average basis (excluding escrowed
shares) under US GAAP
(0.02)
(0.03)
(0.04)
Deficit accumulated during the development stage, as
determined under U.S. GAAP
Beginning of year
(22,355,988)
(21,728,193)
(20,809,490)
Loss for the year
(615,973)
(627,795)
(918,703)
End of year
(22,971,961)
(22,355,988)
(21,728,193)
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Reg Technologies Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
For the years ended April 30, 2010 and 2009
15. Reconciliation of United States and Canadian Generally Accepted Accounting Principles (“US GAAP
and “Canadian GAAP”) (Cont’d)
f)
Material effects of the different generally accepted accounting principles on the Company’s balance
sheet as at April 30, 2010 and 2009 are as follows:
2010
2009
$
$
Donated capital, under Canadian GAAP
-
-
Donated services
1,592,736
1,431,665
Donated capital, under U.S. GAAP
1,592,736
1,431,665
Contributed surplus, under Canadian GAAP
2,115,568
2,115,568
Gain due to ownership of net assets resulting from subsidiary shares
issued
7,137,235
7,137,235
Contributed Surplus, under U.S. GAAP
9,252,803
9,252,803
Deficit, ending balance, under Canadian GAAP
14,241,990
13,787,088
Deficit, under U.S. GAAP
22,971,961
22,355,988
Net increase to deficit, under U.S. GAAP
8,729,971
8,568,900
g) There are no differences to the statement of cash flows under Canadian GAAP and U.S. GAAP.
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