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**UNITED STATESSECURITIES AND EXCHANGE COMMISSION** Washington, D.C. 20549

FORM 10-KSB

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF 
  THE SECURITIES ACT OF 1934

For the Fiscal Year Ended **April 30, 2004**

COMMISSION FILE NO.**0-23920**

**REGI U.S., INC.**
  
  (Name of small business issuer as specified in its charter)

| | **OREGON**                      | **91-1580146**         | 
| | ------------------------------- | ---------------------- | 
| | (State or other jurisdiction of | (I.R.S. Employer       | 
| | incorporation or organization)  | Identification Number) | 

1103 - 11871 HORSESHOE WAY RICHMOND, BRITISH COLUMBIA V7A 5H5, CANADA


**(604) 278-5996**
  (Telephone number including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act: NONE

Securities registered pursuant to Section 12(g) of the Exchange
  Act:

|**Title of each class**    | **Name of each Exchange on which registered:**
|-------------------------- | ----------------------------------------------
|Common Stock, no par value | NASD Over the Counter Bulletin Board          
|                           | Berlin Bremen Stock Exchange                  

Check whether the issuer (1) filed all reports required to
  be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
  (or for such shorter period that the registrant was required to file such reports),
  and (2) has been subject to such filing requirements for the past 90 days.**x******
  Yes ** ̈******No

Check if disclosure of delinquent filers pursuant to Item 405
  of Regulation S-B is not contained in this form, and no disclosure will be contained,
  to the best of the registrant's knowledge, in definitive proxy or information
  statements incorporated by reference in part III of this form 10-KSB or any
  amendment to this Form 10-KSB. ** ̈******

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State the issuer's revenues for its most recent fiscal year:
  nil.

The aggregate market value of the voting stock held by non-affiliates
  of the registrant on July 26, 2004, computed by reference to the price at which
  the stock was sold on that date: $2,351,018.

The number of shares outstanding of the registrant's Common
  Stock, no par value, as of July 26, 2004 was 22,381,055.

Documents incorporated by reference: See Exhibits.

Transitional Small Business Disclosure Format (Check one):
  Yes ** ̈******
  No **x******

2

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REGI U.S., INC. 
  FORM 10-KSB 
  TABLE OF CONTENTS

|PART I                                                                                                                                | 4 
|------------------------------------------------------------------------------------------------------------------------------------- | --
|ITEM 1.
      DESCRIPTION OF BUSINESS                                                                                                 | 4 
|GENERAL                                                                                                                               | 4 
|BUSINESS OF THE COMPANY AND PRODUCTS                                                                                                  | 5 
|Overview
      and History                                                                                                            | 5 
|PRODUCTS AND PROJECTS                                                                                                                 | 7 
|Rand Cam Technology                                                                                                                   | 7 
|Rand
      Cam Cold Turbine Engine                                                                                                    | 7 
|Gasoline
      and Diesel Engine                                                                                                      | 7 
|Compressor                                                                                                                            | 7 
|Hydrogen Separator                                                                                                                    | 8 
|Ceramic Rand CamTM
      Engine                                                                                                       | 8 
|MARKETING                                                                                                                             | 10
|COMPETITION                                                                                                                           | 11
|RAW
      MATERIALS AND PRINCIPAL SUPPLIERS                                                                                           | 11
|PATENTS, TRADEMARKS, LICENCES, FRANCHISES, CONCESSIONS,
      ROYALTY AGREEMENTS, LABOR CONTRACTS, INCLUDING DURATION                 | 11
|Patents                                                                                                                               | 11
|Royalty Payments                                                                                                                      | 12
|RISK FACTORS                                                                                                                          | 12
|GOVERNMENT REGULATIONS                                                                                                                | 15
|DEPENDENCE ON CERTAIN CUSTOMERS                                                                                                       | 15
|RESEARCH AND DEVELOPMENT                                                                                                              | 15
|COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL
      LAWS                                                                         | 16
|NUMBER OF TOTAL EMPLOYEES AND NUMBER OF FULL-TIME
      EMPLOYEES                                                                     | 16
|ITEM
      2. DESCRIPTION OF PROPERTY                                                                                                 | 16
|ITEM
      3. LEGAL PROCEEDINGS                                                                                                       | 16
|ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                     | 16
|PART II                                                                                                                               | 16
|ITEM
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                                                                | 16
|DIVIDEND POLICY                                                                                                                       | 17
|RECENT SALES OF UNREGISTERED SECURITIES                                                                                               | 17
|ITEM
      6: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS                                                              | 17
|LIQUIDITY AND CAPITAL RESOURCES                                                                                                       | 18
|ITEM
      7. FINANCIAL STATEMENTS                                                                                                    | 19
|ITEM
      8. CHANGES IN AND DISAGREEEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE                             | 19
|PART III                                                                                                                              | 19
|ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
      WITH SECTION 16 (a) OF THE EXCHANGE ACT. | 19
|BUSINESS EXPERIENCE AND PRINCIPAL OCCUPATION OF
      DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES                         | 19
|ITEM
      10. EXECUTIVE COMPENSATION                                                                                                 | 21
|ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                         | 22
|ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                         | 24
|ITEM
      13(a). EXHIBITS.                                                                                                           | 26
|ITEM
      13(b). REPORTS ON FORM 8-K                                                                                                 | 27
|ITEM
      14. CONTROLS AND PROCEEDURES.                                                                                              | 27
|SIGNATURES                                                                                                                            | 28

3

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THIS ANNUAL REPORT ON FORM 10-KSB, INCLUDING EXHIBITS THERETO,
  CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
  SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE
  ACT OF 1934, AS AMENDED. THESE FORWARD-LOOKING STATEMENTS ARE TYPICALLY IDENTIFIED
  BY THE WORDS "ANTICIPATES", "BELIEVES", "EXPECTS", "INTENDS", "FORECASTS", "PLANS",
  "FUTURE", "STRATEGY", OR WORDS OF SIMILAR MEANING. VARIOUS FACTORS COULD CAUSE
  ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN THE FORWARD-LOOKING
  STATEMENTS, INCLUDING THOSE DESCRIBED IN "RISK FACTORS" IN THIS FORM 10-KSB.
  WE ASSUME NO OBLIGATION TO UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT
  ACTUAL RESULTS, CHANGES IN ASSUMPTIONS, OR CHANGES IN OTHER FACTORS, EXCEPT
  AS REGULATED BY LAW.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

We were organized under the laws of the State of Oregon on
  July 27, 1992 as Sky Technologies, Inc. On August 1, 1994, our name was officially
  changed by a vote of a majority of our shareholders to REGI U.S., Inc. We are
  controlled by Rand Energy Group Inc., a privately held British Columbia corporation
  ("RAND"), which, in turn, is controlled 51% by Reg Technologies Inc., a publicly
  held British Columbia corporation ("Reg Tech").

We are engaged in the business of developing and building
  an improved axial vane-type rotary engine known as the Rand Cam/Direct Charge
  Engine ("RC/DC Engine"), which is a variation of the Rand Cam Rotary Engine,
  an axial vane rotary engine ("Original Engine"). The worldwide, exclusive of
  the United States, intellectual and marketing rights to the RC/DC Engine are
  held by RAND. We hold the rights to develop, build and market the RC/DC Engine
  design in the U.S. pursuant to an agreement with RAND. Under a project cost
  sharing agreement entered into with RAND effective May 1, 1993, each company
  funds 50% of the continuing development cost of the RC/DC Engine.

Our principal offices are located at 1103-11871 Horseshoe
  Way, Richmond, British Columbia V7A 5H5, Canada. Our telephone number is (604)
  278-5996 and our telefacsimile number is (604) 278-3409. Our website is www.regtech.com.

We will likely need to raise additional capital in the future
  beyond any amount currently on hand and which may become available as a result
  of the exercise of warrants and options which are currently outstanding, in
  order to fully implement our intended plan of operations.

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BUSINESS OF THE COMPANY AND PRODUCTS

Overview and History

We are engaged in the business of developing and building
  an improved axial vane-type rotary engine known as the Rand CamTM
  Direct Charge ("RC/DC") Engine, which is a variation of the Original Engine.
  The Original Engine is an axial vane rotary engine, the worldwide marketing
  rights to which are held by RAND. A United States patent was issued for the
  RC/DC Engine on July 4, 1995, and assigned to us. Since no marketable product
  has yet been developed, we have not received any revenues from operations.

The RC/DC Engine is based upon the Original Engine patented
  in 1983. Brian Cherry, a former officer and director of the Company, has done
  additional development work on the Original Engine which resulted in significant
  changes and improvements for which the U.S. patent has been issued and assigned
  to us. We believe the RC/DC Engine offers important simplification from the
  basic Original Engine, which will make it easier to manufacture and will also
  allow it to operate more efficiently.

Pursuant to an agreement dated October 20, 1986 between Reg
  Tech, Rand Cam Corp. and James McCann, Reg Tech agreed to acquire a 40% voting
  interest in a new corporation to be incorporated to acquire the rights to the
  Original Engine. The new corporation was RAND. Reg Tech acquired the 40% voting
  interest in RAND in consideration of the payment of $250,000.

Pursuant to an agreement made as of April 27, 1993 among Reg
  Tech, Rand Cam Corp., RAND and James McCann, Reg Tech acquired an additional
  330,000 shares (11%) of RAND from Rand Cam Corp. to increase its investment
  to 51%.

On August 20, 1992, we entered in an agreement with RAND and
  Brian Cherry (the "August 1992 Agreement") under which we issued 5,700,000 shares
  of our Common Stock at a deemed value of $0.01 per share to RAND in exchange
  for certain valuable rights, technology, information, and other tangible and
  intangible assets, including improvements, relating to the United States rights
  to the Original Engine.RAND's president is also our president and its
  Vice President and Secretary is also one of our directors. The terms of the
  agreement were negotiated between the parties and were deemed to be mutually
  advantageous based upon conditions and circumstances existing at the time.

We entered into an agreement dated April 13, 1993 with RAND,
  Reg Tech and Brian Cherry (the "April 1993 Agreement") and made as an amendment
  to a previous Amendment Agreement dated November 23, 1992 between RAND, Reg
  Tech and Brian Cherry and an original agreement dated July 30, 1992 between
  RAND, Reg Tech and Brian Cherry, Cherry agreed to: (a) sell, transfer and assign
  to RAND worldwide rights, except for the United States, to all of his right,
  title and interest in and to the technology related to the RC/DC Engine (the
  "Technology"), including all pending and future patent applications in respect
  of the Technology, together with any improvements, changes or other variations
  to the Technology; (b) sell, transfer and assign to the Company United States
  of America rights to all of his right, title and interest in and to the Technology,
  including all pending and future patent applications in respect of the Technology,
  together with any improvements, changes or other variations to the Technology.
  On November 9, 1993, in consideration for this transfer of the Technology, Brian
  Cherry was issued 100,000 shares of Reg Tech with a deemed value of $200,000.

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A final provision of the April 1993 Agreement assigned and
  transferred ownership of any patents, inventions, copyrights, know-how, technical
  data, and related types of intellectual property conceived, developed or created
  by RAND or its associated companies either to us which results or derives from
  the direct or indirect use of the Original Engine and/or RC/DC Engine technologies
  by RAND.

We entered into a letter of understanding dated December 13,
  1993, with RAND and Reg Tech, as grantors, and West Virginia University Research
  Corporation ("WVURC"), the grantors agreed that WVURC shall own 5% of all patented
  technology relating to the Original Engine and the RC/DC Engine. WVURC performed
  extensive analysis and testing on the RC/DC engine. WVURC provided support and
  development of the RC/DC Engine including research, development, testing evaluation
  and creation of intellectual property. In addition, WVURC introduced us to potential
  customers and licensees. We are entitled to all intellectual property developed
  by WVURC relating to the RC/DC Engine.

Based upon testing work performed by independent organizations
  on prototype models, we believe that the RC/DC Engine holds significant potential
  in a number of other applications ranging from small stationary equipment to
  automobiles and aircraft. In additional to its potential use as an internal
  combustion engine, the RC/DC Engine design is being employed in the development
  of several types of compressors, pumps, expanders and other applications.

To date, several prototypes of the RC/DC Engine have been
  tested and additional development and testing work is continuing. We believe
  that such development and testing will continue until a commercially feasible
  design is perfected. There is no assurance at this time, however, that such
  a commercially feasible design will ever be perfected, or if it is, that it
  will become profitable. If a commercially feasible design is perfected, we do,
  however, expect to derive revenues from licensing the Technology relating to
  the RC/DC Engine regardless of whether actual commercial production is ever
  achieved. There is no assurance at this time, however, that revenues will ever
  be received from licensing the Technology even if it does prove to be commercially
  feasible.

We believe that a large market would exist for a practical
  rotary engine which could be produced at a competitive price and which could
  provide a good combination of fuel efficiency, power density and exhaust emissions.

Based on the market potential, we believe the RC\DC Engine
  is well suited for application to internal combustion engines, pumps, compressors
  and expansion engines. The mechanism can be scaled to match virtually any size
  requirement. This flexibility opens the door to large markets being developed.

We are currently testing prototypes for several products.
  Our strategy is to develop engines and compressors for low to medium horsepower
  applications, then apply the Technology to larger applications. We have licensed
  the Technology for several projects. The licensee's have agreed to fund their
  projects for research and development of the specific applications. To date,
  we have completed a license agreement with Radian MILPARTS for greater than
  10 H.P. for military applications. License agreements to Rotary Power have been
  terminated due to non payment. The Advanced Ceramics agreement has also terminated
  due to the fact that Phase II funding was not approved and received pursuant
  to our agreement

6

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PRODUCTS AND PROJECTS

Rand Cam Technology

Rand Cam Cold Turbine Engine

On May 7, 2003 we announced that Rotary Power International
  has been granted a license agreement for the power generator applications. On
  June 9, 2003 we announced that the license had been extended to December 31,
  2003. The agreement has now lapsed due to non payment of the $100,000

Gasoline and Diesel Engine

Two prototype engines were built in 1993 and 1994 by the WVURC
  to run on gasoline. Testing on these prototypes suggested that the concept is
  fundamentally sound and that with a program of engine review, design, testing
  and development, a technically successful range of engines can be developed.
  The current prototype design for the diesel engine was designed by a consortium
  made up of Alliant Techsystems (formerly Hercules Aerospace Company) ("Alliant"),
  WVURC and us. Alliant was involved in the design and development including drawings
  for the RC/DC diesel engine. In addition Alliant performed extensive analysis
  on the diesel engine including bearings, cooling, leakage, rotor, vanes, housing,
  vane tip heating, geometry and combustion. This engine was designed as a general
  purpose power plant for military and commercial applications. A prototype of
  the diesel engine has been assembled and tested.

In May 2004 the Company completed an amended Rand Cam
  UAV engine license agreement with Radian, Inc. Radian, Inc. agrees to furnish
  REGI U.S., Inc. with a second generation, application specific Rand Cam
  42 H.P. diesel engine at the conclusion of their Phase II study program. The
  Radian, Inc. UAV product development program commenced early this year and the
  UAV prototype fabrication is underway, with application specific testing scheduled
  to start on or before third quarter 2004. Receipt by REGI U.S., Inc. of the
  product development-application specific engine is scheduled to occur during
  4th quarter 2004. The Phase I/ Study Rand Cam 42 H.P. diesel engine demonstrated
  that the engine generates sufficient pressure and temperature to proceed with
  the second generation diesel engine.

Compressor

We contracted Coltec, Inc., a Columbus, Indiana engineering
  firm, to fabricate the Rand Cam (TM) air conditioning compressor for buses.
  The testing is to be conducted by Trans/Air Manufacturing Corporation, one of
  the largest manufacturers of air conditioning units for buses, which has agreed
  to jointly develop and manufacture the working model compressor. The prototype
  compressor was delivered to Trans/Air in January 2001 and is presently awaiting
  testing in a bus.

A special 3.2 SCFM air compressor has been designed and built
  for a large fuel cell customer. The customer has reviewed the design and his
  comments including type of drive motor, inlet and outlet piping arrangements
  and mounting considerations were incorporated and final drawings were prepared.

On January 8, 2004, by way of a news release, the Company
  announced that testing for the air conditioning compressor for buses application
  has commenced by Trans Air Manufacturing. The

7

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new manifold has been installed on the working prototype compressor
  and pressure testing has commenced.

Trans Air Manufacturing will first perform bench testing to
  baseline speed, performance, and power consumption data before designing to
  install on a vehicle for "real world" testing.

Based on the successful completion of the Joint Venture, being
  the development and successful testing of a working prototype of the Bus Compressor,
  Trans Air shall have the exclusive right and shall use its reasonable efforts
  to market, merchandise, sell and exploit the Bus Compressor within the markets
  or geographical areas in which Trans Air, in its sole option and discretion,
  believes such efforts would be appropriate. Currently Brian Cherry, our Vice
  President of Research and Development, is overseeing the testing of the air
  conditioning compressor.

Hydrogen Separator

We purchased the rights to the H2O Hydrogen Separator Technology
  consisting of a hydrogen separator based, which is a unique system for extracting
  hydrogen from water.

In consideration for a 50% interest for the rights to the
  Hydrogen Separator Technology Reg Technologies, Inc. ("Reg") agrees that we
  shall apply for a patent in the U.S. for the Hydrogen Separator Technology at
  Reg's expense; and Reg agrees to build a prototype of the Hydrogen Separator
  Technology as designed by GHM, Inc. We declined the option to purchase an additional
  50% interest. To date, neither patent confirmation nor approval has been received
  by Reg.

Ceramic Rand CamTMEngine

On December 6, 2001 we announced that a U.S. Navy contract
  (SBIR No1-144) has been awarded to Advanced Ceramics Research (prime contractor)
  and REGI U.S., Inc. to build and test a Naval 0.5 horsepower ceramic engine.
  The proposed engine is a four stroke Rand Cam engine utilizing continuous
  injection and combustion in a single combustion chamber. The engine will be
  of all ceramic construction to permit high temperature operation, without cooling,
  to effectively burn heavy oil. This new motor will be developed for powering
  the U.S. Navy's new Smart War-fighter Array of Re-configurable Modules (SWARM)
  low cost unmanned aerial vehicle.

On April 4, 2002 we announced that we signed an agreement
  to grant a license to Advanced Ceramics Research, Inc. ("ACR") for the Rand
  Cam based motors for 10 H.P. or less for the SBIR No 1-144 Navy Contract
  for the remote piloted applications. We agreed that a 5 year contract will also
  be granted to ACR for the Rand Cam concept motors for the commercial and
  military rights for the applications developed under the Navy contract for 10
  H.P or less.

We will receive a royalty fee of 5% of the purchase price
  for the commercial and Navy applications. We also receive 30% of the Navy phase
  I contract and 50% of the phase II contract which is typically $50,000 to $100,000
  for Phase I and $500,000 to $750,000 for Phase II. Phase I has been completed
  by Advanced Ceramics and proposal for additional work in a Phase II project
  has not been submitted or funded by the Government. The agreement was nul and
  void due to the lack of funding for Phase II.

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On February 2, 2004, by way of a news release, the Company
  announced that a REGI licencee for unmanned vehicle system engines has completed
  testing of the prototype 42 H.P. engine. Tests occurred at Adiabatics in Columbus,
  IN and at the U.S. Navy's test facility at Patuxent River, MD. The initial test
  results demonstrate that the first generation prototype engine generates pressure
  and temperature. The licencee has started design of a second generation prototype.
  The documentation and one of the completed 42 H.P. Rand Cam(tm) engines have
  been delivered to REGI U.S., Inc. as part of the license agreement.

Currently the second prototype is being completed for production
  purposes by Radian. REGI will also receive that prototype model for their own
  use.

On August 5, 2003, by way of a news release, the Company announced
  the following announcement on the RadMax TM Engine- The RadMax TM Engine was
  announced July 15th, 2003 at the AUVSI Conference Association for Unmanned Vehicle
  Systems. (AUV) by our licensee Radian MILPARTS.

The July 15th, announcement by Radian MILPARTS states that
  plans are in place to start calibration testing at the Naval Air Systems Command
  (NAVAIR) Patuxent River, MD late in the summer. Procedures are written and in
  place to determine and document the RadMax  Engines horsepower, its vibration
  and noise metrics, and so forth. Following completion of the testing, to be
  conducted by engineers, first production units will generally be available by
  the fall, followed by a full production run next year.

The announcement further states, the RadMax  Engine,
  a heavy fuel engine that is comprised of only 13 moving parts, is completely
  balanced and on all speeds, loads and orientation angles. And best of all, without
  piston valves, a crankshaft or camshaft it's inherently quiet at 60 dB at 1,500
  feet.

REGI U.S. has an agreement with Radian which grants an exclusive
  license for the manufacture of the Rand Cam Diesel Engines within the United
  States, for applications in Unmanned Autonomous Vehicles (UAV'S) over 10 horsepower,
  including non-exclusive rights to the worldwide sales for this application.

Corporate

In April 2004 the Company received an additional listing on
  the Berlin Bremen Stock Exchange (www.berlinerboerse.de) under the symbol RGJ,
  German Cusip Number S7589431045/786692. The Company retains the OTC Bulletin
  Board listing Symbol: RGUS.

REGI U.S., Inc.'s market maker is Berliner Freiverkehr (Aktien)
  AG, which is one of the largest German brokerage firms and acts as market maker
  for the Unofficial Regulated Markets in Berlin and Frankfurt. The main advantage
  for REGI U.S., Inc. to trade on the Berlin Bremen Stock Exchange, is that the
  German investors, including small ones, can buy REGI U.S., Inc. shares in their
  domestic currency, thus making transactions easier and less expensive.

In June 2004 Brian Cherry was appointed Vice President of
  the Rand Cam engine technology projects. Brian Cherry is the inventor
  of the Direct Charge Rand Cam engine patented in 1996 by REGI U.S., Inc.
  and is currently the project manager in charge of developing a Rand Cam
  electric generator for hybrid electric automobiles, and for residential uses
  in family homes. Mr.

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Cherry will also be overseeing and preparing the current submission
  of a new patent application on the Rand Cam technology. The generator
  can run on any fuel including hydrogen and natural gas. The tests are to commence
  within 30 days utilizing an alternator as the electric output, and the Rand
  Cam engine as the power source. REGI U.S., Inc. has signed an agreement
  with Brian Cherry to develop the generator application and other applications
  for a period of two years in consideration for 150,000 treasury shares of REGI
  U.S., Inc.

MARKETING

We intend to pursue the development of the RC/DC Engine and
  the air pump, compressor and other products by entering into licensing and/or
  joint venture arrangements with other larger companies, which have the financial
  resources to maximize the potential of the technology. At the present time,
  we have signed license agreements with Advanced Ceramics Research, Inc., Radian,
  Inc. and Rotary Power Generation, Incorporated. We have no current plans to
  become actively involved in either manufacturing or marketing any engine or
  other product which it may ultimately develop to the point of becoming a commercial
  product.

Our current objective is to complete and test the various
  compressor, pump and diesel engine prototypes. Based on the successful testing,
  the prototypes will be used for presentation purposes to potential license and
  joint venture partners.

We expect revenue from license agreements with the potential
  end users based on the success of the design from the compressor, pump, and
  diesel engine prototypes. Based on of successful testing of the Rand Cam prototypes,
  we expect to have joint venture or license agreements finalized, which would
  result in royalties to us. However, there is no assurance that the tests will
  be successful or that we will ever receive any such royalties.

The following marketing activities are all currently underway:

AIR CONDITIONING COMPRESSOR - An agreement with Trans Air
  Manufacturers has been completed to use the Rand Cam(TM) compressor in air conditioning
  units in bus applications. We have delivered a compressor prototype for testing.
  We are awaiting test results from Trans Air. Currently, Brian Cherry, our Vice
  President of Research and Development, is overseeing the testing of the air
  conditioning compressor.

AIR PUMP  A prototype air pump for a Fuel Cell Application
  has been completed and will be delivered to the Fuel Cell manufacturer and others.
  We plan to build several additional air pumps for demonstration purposes for
  other fuel cell uses.

DIESEL ENGINE  We have signed a license agreement with
  Radian MILPARTS to further develop our Rand Cam Technology for a 42 horsepower
  engine. Our license agreement with Radian calls for a 6% royalty to us and one
  working model 42 horsepower diesel engine for our own use for demonstration
  purposes for the other commercial applications.

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COMPETITION

We currently face and will continue to face competition in
  the future from established companies engaged in the business of developing,
  manufacturing and marketing engines and other products. While not a highly competitive
  business in terms of numbers of competitors, the business of developing engines
  of a new design and attempting to either license or produce them is nonetheless
  difficult because most existing engine producers are large, well financed companies
  which are very concerned about maintaining their market position. Such competitors
  are already well established in the market and have substantially greater resources
  than us. Internal combustion engines are produced by automobile manufacturers,
  marine engine manufacturers, heavy equipment manufacturers and specialty aircraft
  and industrial engine manufacturers. We expect that our engine would be used
  mainly in industrial and marine applications.

Except for the Wankel rotary engine built by Mazda of Japan,
  no competitor, that we are aware of, presently produces in a commercial quantity
  any rotary engine similar to the engines we are developing. The Wankel rotary
  engine is similar only in that it is a rotary engine rather than a reciprocating
  piston engine. Without substantially greater financial resources than is currently
  available to us, however, it is very possible that it may not be able to adequately
  compete in the engine business. One competitor, Rotary Power International,
  is presently producing the first production SCORE rotary (Wankel type) engines.
  Our RC\DC Engine is more fuel efficient, smaller, quieter, costs less to produce
  and will have fewer exhaust emissions.

We believe that if and when our engine is completely developed,
  in order to be successful in meeting or overcoming competition which currently
  exists or may develop in the future, our engine will need to offer superior
  performance and/or cost advantages over existing engines used in various applications.

RAW MATERIALS AND PRINCIPAL SUPPLIERS

Since we are not in production and there are no plans at this
  time for us to enter the actual engine manufacturing business, raw materials
  are not of present concern. At this time, however, there does not appear to
  be any foreseeable problem with obtaining any materials or components, which
  may be required in the manufacture of its potential products.

PATENTS, TRADEMARKS, LICENCES, FRANCHISES, CONCESSIONS, ROYALTY
  AGREEMENTS, LABOR CONTRACTS, INCLUDING DURATION

Patents

U.S. patent No. 5,429,084 was granted on July 4, 1995, to
  the inventor, Brian Cherry, Patrick Badgley and four other individuals for various
  improvements incorporated in the RC/DC Engine. The patent has been assigned
  to us. U.S. Patent 4,401,070 for the Original Engine was issued on August 30,
  1983, to James McCann and RAND holds the marketing rights.

The RC/DC Engine is composed basically of a disk shaped rotor
  with drive shaft, which turns, and the housing or stator, which remains stationary.
  The rotor has two or more vanes that are mounted perpendicular to the direction
  of rotation and slide back and forth through it. As the rotor turns, the ends
  of the vanes ride along the insides of the stator housing which have wave-like
  depressions, causing the vanes to slide back and forth. In the process of turning
  and sliding,

11

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combustion chambers are formed between the rotor, stator walls
  and vanes where the fuel/air mixture is injected, compressed, burned and exhausted.

Two additional patents have been issued for improvements to
  the engine including: U.S. Patents 5,509,793 "Rotary Device with Slidable Vane
  Supports) issued April 24, 1996 and 5,551,853 "Axial Vane Rotary Device and
  Sealing System Therefor) issued September 3, 1996. The Company has submitted
  additional Rand Cam improvements for a patent in the month of July.

Royalty Payments

The August 1992 Agreement calls for us to pay RAND semi-annually
  a royalty of 5% of any net profits to be derived by us from revenues received
  as a result of its license of the Original Engine. The August 1992 Agreement
  also calls for us to pay Brian Cherry a royalty of 1% semi-annually any net
  profits derived by us from revenue received as a result of our licensing the
  Original Engine.

Other provisions of the April 1993 Agreement call for is (a)
  to pay to RAND a continuing royalty of 5% of the net profits derived from the
  Technology by us and (b) to pay to Brian Cherry a continuing royalty of 1% of
  the net profits derived by us from the Technology.

Pursuant to the letter of understanding dated December 13,
  1993, among us, RAND, Reg Tech and WVURC, WVURC will receive 5% of all net profits
  from sales, licenses, royalties or income derived from the patented technology
  relating to the Original Engine and the RC/DC Engine.

No royalties are to be paid to Alliant or Adiabatics, Inc.

RISK FACTORS

You should carefully consider the following risks and the
  other information in this Report and our other filings with the SEC before you
  decide to invest in us or to maintain or increase your investment.

The risks and uncertainties described below are not the only
  ones facing us. Additional risks and uncertainties may also adversely impact
  and impair our business. If any of the following risks actually occur, our business,
  results of operations, or financial condition would likely suffer. In such case,
  the trading price of our common stock could decline, and you may lose all or
  part of your investment.

Developmental Stage Company. We were incorporated on July
  27, 1992. We are a development stage company. In a development stage company,
  management devotes most of its activities to establishing a new business. Planned
  principal activities have not yet produced significant revenues and we have
  suffered recurring operating losses as is normal in development stage companies.
  We also have a working capital deficit of $223,306. These factors raise substantial
  doubt about our ability to continue as a going concern. Our ability to emerge
  from the development stage with respect to our planned principal business activity
  is dependent upon our successful efforts to raise additional equity financing,
  receive funding from affiliates and controlling shareholders, and develop a
  market for our products.

12

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Ability to develop product. We have no assurance at this time
  that a commercially feasible design will ever be perfected, or if it is, that
  it will become profitable. Our profitability and survival will depend upon our
  ability to develop a technically and commercially feasible product which will
  be accepted by end users. The RC/DC Engine which we are developing must be technologically
  superior or at least equal to other engines that competitors offer and must
  have a competitive price/performance ratio to adequately penetrate its potential
  markets. If we are not able to achieve this condition or if we do not remain
  technologically competitive, we may be unprofitable and our investors could
  lose their entire investment. There can be no assurance that we or potential
  licensees will be able to achieve and maintain end user acceptance of our engine.

Negative Shareholders' Equity. We have a negative shareholders
  equity as of the date of this 10-KSB. Our ability to continue as a going business
  will be dependent upon our ability to raise additional capital and/or generate
  revenues from operations.

Need for Additional Capital. We rely on our ability to raise
  capital through the sale of our securities. Our the ultimate success will depend
  upon our ability to raise additional capital or to have other parties bear a
  portion of the required costs to further develop or exploit the potential market
  for our products. REG Tech and REGI have agreed to provide the necessary funds
  for the development of the RC/DC Diesel Engine prototypes and our other operations
  until joint venture or license agreements can be completed.

Dependence on Consultants and Outside Manufacturing Facilities.
  Since our present plans do not provide for a significant technical staff or
  the establishment of manufacturing facilities, we will be primarily dependent
  on others to perform these functions and to provide the requisite expertise
  and quality control. There is no assurance that such persons or institutions
  will be available when needed at affordable prices. It will likely cost more
  to have independent companies do research and manufacturing than for us to handle
  these resources.

Product/Market Acceptance. Our profitability and survival
  will depend upon our ability to develop a technically and commercially feasible
  product which will be accepted by end users. The RC/DC Engine and the AVFCS
  which we are developing must be technologically superior or at least equal to
  other engines which our competitors offer and must have a competitive price/performance
  ratio to adequately penetrate our potential markets.A number of rotary
  engines have been designed over the past 70 years but only one, the Wankel,
  has been able to achieve mechanical practicality and any significant market
  acceptance. If we are not able to achieve this condition or if we do not remain
  technologically competitive, we may be unprofitable and our investors could
  lose their entire investment. There can be no assurance that we or our potential
  licensees will be able to achieve and maintain end user acceptance of our engine
  or the AFVCS.

No Formal Market Survey. We have not conducted a formal market
  survey but statistics available on the aircraft, marine and industrial markets
  alone indicate an annual market potential of more than one hundred million dollars.

Competition. While not a highly competitive business in terms
  of numbers of competitors, the business of developing engines of a new design
  and attempting to either license or produce them is nonetheless difficult because
  most existing engine producers are large, well financed companies which are
  very concerned about maintaining their market position. There is no assurance
  that we will be successful in meeting or overcoming our current or future competition.

13

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Protection of Intellectual Property. Our business depends
  on the protection of our intellectual property and may suffer if we are unable
  to adequately protect our intellectual property. The success of our business
  depends on our ability to patent our engine. Currently, we have been granted
  several U.S. Patents. We cannot provide assurance that our patents will not
  be invalidated, circumvented or challenged, that the rights granted under the
  patents will give us competitive advantages or that our patent applications
  will be granted.

History of Losses. We have a history of operating losses,
  and an accumulated deficit, as of April 30, 2004, of $6,138,563.Our
  ability to generate revenues and profits is subject to the risks and uncertainties
  encountered by development stage companies.

Our future revenues and profitability are unpredictable. We
  are currently have no signed contracts that will produce revenue and we do not
  have an estimate as to when we will be entering into such contracts. Furthermore,
  we cannot provide assurance that management will be successful in negotiating
  such contracts.

Rapid Technological Changes could Adversely Affect Our Business.
  The market for our engines is characterized by rapidly changing technology,
  evolving industry standards and changing customer demands. Accordingly, if we
  are unable to adapt to rapidly changing technologies and to adapt our product
  to evolving industry standards, our business will be adversely affected.

Management and Conflicts of Interest. Our present officers
  and directors have other unrelated full-time positions or part-time employment.
  Some officers and directors will be available to participate in management decisions
  on a part-time or as-needed basis only. Our management may devote time to other
  companies or projects which may compete directly or indirectly with us.

Control by Current Insiders. 12,585,146 common shares, not
  including currently exercisable options or warrants, are owned by current insiders
  representing control of approximately 56.2% of the total voting power. Accordingly,
  the present insiders will continue to elect all of our directors and generally
  control our affairs.

Need for Additional Key Personnel. At the present, we employ
  no full time employees. Our success will depend, in part, upon the ability to
  attract and retain qualified employees. We believe that we will be able to attract
  competent employees, but no assurance can be given that we will be successful
  in this regard. If we are unable to engage and retain the necessary personnel,
  our business would be materially and adversely affected.

Indemnification of Officers and Directors for Securities Liabilities.
  Our Bylaws provide that we may indemnify any Director, Officer, agent and/or
  employee as to those liabilities and on those terms and conditions as are specified
  in the Oregon Business Corporation Act. Further, we may purchase and maintain
  insurance on behalf of any such persons whether or not we would have the power
  to indemnify such person against the liability insured against. This could result
  in substantial expenditures by us and prevent any recovery from such Officers,
  Directors, agents and employees for losses incurred by us as a result of their
  actions. Further, we have been advised that in the opinion of the Securities
  and Exchange Commission, indemnification is against public policy as expressed
  in the 1933 Act and is therefore, unenforceable.

General Factors. Our areas of business may be affected from
  time to time by such matters as changes in general economic conditions, changes
  in laws and regulations, taxes, tax laws, prices

14

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and costs, and other factors of a general nature which may
  have an adverse effect on our business.

Limited Public Market for the Common Stock. At present, only
  a limited public market exists for the Common Stock on the over-the-counter
  bulletin board maintained by the National Association of Securities Dealers
  and there is no assurance that a more active trading market will develop, or,
  if developed, that it will be sustained.

Estimates and Financial Statements. The information in this
  Form 10-KSB consists of and relies upon evaluation and estimates made by management.
  Even though management believes in good faith that such estimates are reasonable,
  based upon market studies and data provided by sources knowledgeable in the
  field, there can be no assurance that such estimates will ultimately be found
  to be accurate or even based upon accurate evaluations.

No Foreseeable Dividends. We have not paid dividends on our
  Common Stock and do not anticipate paying dividends on our Common Stock in the
  foreseeable future.

Possible Volatility of Securities Prices. The market price
  for our Common Stock traded on the over-the-counter bulletin board has been
  highly volatile since it began trading and will likely to continue to behave
  in this manner in the future. Factors such as our operating results and other
  announcements regarding our development work and business operations may have
  a significant impact on the market price of our securities. Additionally, market
  prices for securities of many smaller companies have experienced wide fluctuations
  not necessarily related to the operating performance of the companies themselves.

GOVERNMENT REGULATIONS

Our engine products including the spark ignited engine, Diesel
  engine and Cold Turbine engine will be subject to various exhaust emissions
  standards depending upon the application and the country in which it is produced
  and/or sold. As each product becomes ready for sale, it will be necessary to
  have the engine certified according to the standards in effort at that time.

DEPENDENCE ON CERTAIN CUSTOMERS

Although we have no key customers at the present time, we
  expect that if our development work is successful, we will likely become dependent,
  at least initially, upon one or very few key customers. Such dependence could
  prove to be risky in the event that one or more such potential customers were
  to be lost and not replaced.

RESEARCH AND DEVELOPMENT

The basic research and development work on the RC/DC Engine
  and other products is being coordinated and funded by Reg Tech and funded as
  to 50%.

We plan to contract with outside individuals, institutions
  and companies to perform most of the additional research and development work
  which we may require to benefit from our rights to the RC/DC Engine and other
  products.

During the last two fiscal years, we have incurred a total
  of $101,013 in research and development expenses. During the last year, the
  majority of the costs were paid directly toward

15

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the building of the 42 horsepower prototypes by Radian Milparts
  and by Advanced Ceramics for the 10 horsepower ceramic engine for unmanned aerial
  applied uses.

COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS

At the present time there is no direct financial or competitive
  effect upon our business as a result of any need to comply with any federal,
  state or local provisions which have been enacted or adopted regulating the
  discharge of materials into the environment, or otherwise relating to the protection
  of the environment.

NUMBER OF TOTAL EMPLOYEES AND NUMBER OF FULL-TIME EMPLOYEES

We currently have two full-time contractors directly involved
  in technical development work on the RC/DC Engine. We expect to hire additional
  employees for those positions which we deem necessary to fill, as needs arise.
  Most additional employees are expected to be in technical and licensing/marketing
  positions.

ITEM 2. DESCRIPTION OF PROPERTY

We own no properties. We currently utilizes office space leased
  by Reg Tech in a commercial business park building located in Richmond, British
  Columbia, Canada, a suburb of Vancouver. The monthly rent for our portion of
  this office space is $500.00. The present facilities are believed to be adequate
  for meeting our needs for the immediate future. However we expect that we will
  likely acquire separate space when the level of business activity requires us
  to do so. We do not anticipate that we will have any difficulty in obtaining
  such additional space at favorable rates. There are no current plans to purchase
  or lease any properties in the near future.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any legal proceedings or litigation,
  nor are we aware that any litigation is presently being threatened or contemplated
  against us or any officer, director or affiliate.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There was no matter submitted to a vote by our security holders
  during the fourth quarter of our fiscal year ended April 30, 2004, through the
  solicitation of proxies or otherwise.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

There is a limited public market for our Common Stock which
  currently trades on the OTC Bulletin Board under the symbol "RGUS" where it
  has been traded since September 21, 1994. The Common Stock has traded between
  $0.035 and $6.75 per share since that date.

The following table sets forth the high and low prices for
  our Common Stock as reported on the Bulletin Board for the quarters presented.
  These quotations reflect inter-dealer prices, without retail mark-up, mark-down
  or commissions, and may not reflect actual transactions.

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|                               | Bid Price |  | Asked Price
|------------------------------ | --------- |  | -----------
|                               | High $    |  | Low $      
|Quarter Ended April 30, 2002   | .22       |  | .17        
|Quarter Ended July 31, 2002    | .21       |  | .07        
|Quarter Ended October 31, 2002 | .13       |  | .07        
|Quarter Ended January 31, 2003 | .12       |  | .035       
|Quarter Ended April 30, 2003   | .09       |  | .04        
|Quarter Ended July 31, 2003    | .23       |  | .045       
|Quarter Ended October 31, 2003 | .43       |  | .12        
|Quarter Ended January 31, 2004 | .45       |  | .25        
|Quarter Ended April 30, 2004   | .32       |  | .19        

(Information provided by The Over The Counter Bulletin Board.
  The quotations reflect inter-dealer prices, without retail mark-up, markdown,
  or commission and may not represent actual transactions.)

As of July 15, 2004, there were 22,381,055 shares of Common
  Stock outstanding, held by 240 shareholders of record.

DIVIDEND POLICY

To date we have not paid any dividends on our Common Stock
  and do not expect to declare or pay any dividends on our Common Stock in the
  foreseeable future. Payment of any dividends will be dependent upon future earnings,
  if any, our financial condition, and other factors as deemed relevant by our
  Board of Directors.

RECENT SALES OF UNREGISTERED SECURITIES

Set forth below is information regarding the issuance and
  sales of our securities without registration during the last fiscal year. No
  such sales involved the use of an underwriter. See Note 4(a) to our audited
  financial statements for the fiscal year ended April 30, 2004 for more information
  on recent sales of unregistered securities.

ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

We are a development stage company engaged in the business
  of developing and commercially exploiting an improved axial vane type rotary
  engine known as the Rand Cam/Direct Charge Engine (the "RC/DC Engine").

As a development stage company, we devote most of our activities
  to establishing our business. Planned principal activities have not yet produced
  significant revenues and we have a working capital deficit. We have undergone
  mounting losses to date totaling $6,138,563 and further losses are expected
  until we complete a licensing agreement with a manufacturer and reseller. Our
  working capital deficit is $223,306. Our only assets are our intangible assets,
  being patents and intellectual property rights, totaling $64,865 which represents
  96% of total assets. These factors raise doubt about our ability to continue
  as a going concern. Our ability to emerge from the development stage with respect
  to our planned principal business activity is dependent upon our successful
  efforts to raise additional equity financing, receive funding from affiliates
  and controlling shareholders, and develop a market for our products.

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During the year, we raised a further $25,968 in addition to
  the $194,550 raised in 2002, pursuant to a private placement of 173,120 units
  issued at $0.15 per unit. Each unit will contain one share and one warrant to
  acquire one additional share at $0.20 per share if exercised in year one after
  receipt of funds. These funds raised do not provide enough working capital to
  fund ongoing operations for the next twelve months. We may also raise additional
  funds through the exercise of warrants and stock options, warrants if exercised
  will net $34,624 for the $0.20 warrants and $43,500 for the $0.30 warrants

Results of operations for the year ended April 30, 2004 ("2004")
  compared to the year ended April 30, 2003 ("2003")

There were no revenues from product licensing during 2003
  and 2004.

The net loss in 2004 increased by $388,941 to $609,913 compared
  to $220,972 in 2003. The increase was due to an increase of $277,856 in administrative
  expenses and an increase in research and development expenses of $110,085. The
  increase in administrative expenses was mainly due to an increase in investor
  relations consulting of $96,250, professional fees increase of $35,396 from
  $7,141 in 2003 to $42,537 in 2004, an increase in travel expenses of $14,069
  from $175 in 2003 to $14,244 in 2004 and an increase in stock-based compensation
  of $125,854 from $16,500 in 2003 to $142,354 in 2004. The increase of $110,085
  in research and development was mainly attributed to the increase in project
  management fees and donated technical prototype design consulting fees. The
  majority of prototype construction and testing costs continues to be borne by
  potential licensees and manufacturers. See above progress reports for research
  and development activity conducted during the year.

LIQUIDITY AND CAPITAL RESOURCES

During 2004, we financed our operations mainly through proceeds
  of $106,000 from the exercise of stock options and share purchase warrants as
  well as net advances of $158,185 from related parties.

We received funding in 2004 from our affiliated companies
  (common officers and directors) and our 18% shareholder, Rand Energy Group,
  Inc. ("Rand") and Reg Technologies Inc., the controlling shareholder of Rand
  Energy Group, Inc. The total amount owing to related parties is $136,923 or
  61% of total current liabilities as at April 30, 2004. The balances owing to
  related parties are non-interest bearing, unsecured and repayable on demand.
  In 2004, the Company issued 3,320,000 common shares to settle $166,000 in debt
  owing to related companies. Our affiliated companies have indicated that they
  will not be demanding repayment of these funds during the next fiscal year and
  will advance, or pay expenses on behalf of, further funds if needed.

As at April 30, 2004, we had a working capital deficit of
  $223,306. We receive interim support from our ultimate parent company and plan
  to raise additional funds from equity financing which is yet to be negotiated.
  We also plan to raise funds through loans from a major shareholder (Rand). Rand
  owns 4,079,036 sharesand plans to sell shares as needed to meet our
  ongoing funding requirements if traditional equity sources of financing prove
  to be insufficient.

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ITEM 7. FINANCIAL STATEMENTS

Our financial statements are included and begin immediately
  following the signature page to this report. See Item 13 for a list of the financial
  statements and financial statement schedules included.

ITEM 8. CHANGES IN AND DISAGREEEMENTS WITH ACCOUNTANTS ON
  ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
  PERSONS; COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT.

Directors and Executive Officers of the Registrant

The following table sets forth the name, age and position
  of each of our Executive Officers and Directors:

|Name              | Age | Position                                                                                 
|----------------- | --- | -----------------------------------------------------------------------------------------
|                  |     |                                                                                          
|John G. Robertson | 63  | Director, Chairman of the Board of Directors, President and
      Chief Executive Officer
|                  |     |                                                                                          
|Jennifer Lorette  | 32  | Director, Vice-President                                                                 
|                  |     |                                                                                          
|James Vandeberg   | 61  | Director and Chief Operating Officer and Chief Financial Officer                         
|                  |     |                                                                                          
|Brian Cherry*     | 64  | Vice President, Rand Cam Engine Technology Projects                                     

* appointed in June 2004.

BUSINESS EXPERIENCE AND PRINCIPAL OCCUPATION OF DIRECTORS,
  EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

Mr. Robertson has held his position since our formation in
  July, 1992. All officers currently devote part-time services to our operation.

There are no family relationships between any director or
  executive officer and any other director or executive officer.

The present and principal occupations of our directors and
  executive officers during the last five years are set forth below:

John G. Robertson - Chairman of the Board of Directors, President,
  Chief Executive Officer

Mr. Robertson has been our Chairman, President and Chief Executive
  Officer since our formation. Since October 1984 Mr. Robertson has been President
  and a Director of Reg Technologies Inc., a British Columbia corporation listed
  on the TSX Venture Exchange that has financed the research on the Rand Cam Engine
  since 1986. REGI U.S. is controlled by Rand

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Energy Group, Inc., a British Columbia corporation of which
  Reg Technologies Inc. is the majority shareholder. REGI U.S. owns the U.S. rights
  to the Rand Cam (TM) technology and Rand Energy Group, Inc. owns the worldwide
  rights exclusive of the U.S. Mr. Robertson is President, Principal Executive
  Officer and a member of the Board of Directors of IAS Communications, Inc.,
  an Oregon corporation traded on the OTC bulletin board, which is developing
  a new type of antenna system. Since June 1997 Mr. Robertson has been President,
  Principal Executive Officer and a Director of Information-Highway.com, Inc.,
  a Florida corporation which is currently inactive, and its predecessor. He is
  also the President and Founder of Teryl Resources Corp., a public company trading
  on the TSX Venture Exchange involved in gold, diamond, and oil and gas exploration.
  He is also President of Linux Gold Corp., a public company trading on the OTC
  Bulletin Board. Since May 1977 Mr. Robertson has been President and a member
  of the Board of Directors of SMR Investments Ltd., a British Columbia corporation
  engaged in the business of management and investment consulting.

Jennifer Lorette - Vice President

Ms. Lorette became a member of the board of directors in January
  2001. She has been our Vice President since June 1994, and was also previously
  Chief Financial Officer. Since April 1994 she has also been Vice President of
  Administration and Secretary for Reg Technologies, Inc., a British Columbia
  corporation listed on the TSX Venture Exchange that has financed the research
  on the Rand Cam Engine since 1986. REGI U.S. is controlled by Rand Energy Group,
  Inc., a British Columbia corporation of which Reg Technologies Inc. is the majority
  shareholder. Since February 1995 Ms. Lorette has been Secretary/Treasurer and
  a director of IAS Communications Inc., an Oregon corporation traded on the OTC
  bulletin board. Since June 1997 Ms. Lorette has been Executive Vice President
  and a Director of Information-Highway.com, Inc., a Florida corporation traded
  which is currently inactive, and its predecessor. Since June 1994 Ms. Lorette
  has also been Vice President and Secretary of Linux Gold Corp. Since November
  1997 Ms. Lorette has been Vice President of Teryl Resources Corp., a public
  company trading on the TSX Venture Exchange involved in gold, diamond, and oil
  and gas exploration.. She also became a director in February 2001.

James L. Vandeberg - Chief Operating Officer and Chief Financial
  Officer, and a Member of the Board of Directors

Mr. Vandeberg became a Director and Chief Operating Officer
  in November 1999 and Chief Financial Officer in 2000. Mr. Vandeberg is an attorney
  in Seattle, Washington. He has served as our legal counsel since 1996. Mr. Vandeberg's
  practice focuses on the corporate finance area, with an emphasis on securities
  and acquisitions. Mr. Vandeberg was previously general counsel and secretary
  of two NYSE companies and is a director of Information-Highway.com, Inc., a
  Florida corporation which is currently inactive. He is also a director of IAS
  Communications, Inc. an Oregon corporation traded on the OTC bulletin board
  since November 1998. Mr. Vandeberg is also a director of Linux Gold Corp., a
  British Columbia company traded on the OTC bulletin board. Mr. Vandeberg is
  also a director of Cyber Merchants Exchange, Inc. since May 2001. He is a member
  and former director of the American Society of Corporate Secretaries. He became
  a member of the Washington Bar Association in 1969 and of the California Bar
  Association in 1973. Mr. Vandeberg graduated cum laude from the University of
  Washington with a Bachelor of Arts degree in accounting in 1966, and from New
  York University School of Law in 1969, where he was a Root-Tilden Scholar.

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Brian Cherry - Vice President, Rand Cam Engine Technology
  Projects

Mr. Cherry was Vice President and a Director of the Company
  since its inception in July 1992, until January 2001 when he left the Company
  to pursue personal interests. Mr. Cherry was appointed Vice President, Rand
  Cam Engine Technology Projects in June 2004.

Section 16(a) Beneficial Ownership Reporting Compliance

Based solely upon a review of Forms 3, 4 and 5 furnished to
  us, other than Mr. Vandeberg, who furnished us with no Forms during the year,
  none of our officers, directors or beneficial owners of more than ten percent
  of the Common Stock failed to file on a timely basis reports required to be
  filed by Section 16(a) of the Exchange Act during the most recent fiscal year.

ITEM 10. EXECUTIVE COMPENSATION

No executive officer had an annual salary and bonus in excess
  of $100,000 during the past fiscal year. Mr. Robertson received no compensation
  from us in fiscal year 2003.

|Name and Principal
       Position   | Year            | Annual Compensation                    | Long-Term Compensation              
|------------------------------------ | --------------- | -------------------------------------- | ------------------------------------
|                                     |                 |                                        | Awards                              
|Salary ($)                           | Bonus
      ($) | Other Annual 
       Compensation  ($) | Restricted Stock
       Award(s) (#)
|John G. Robertson, President and CEO | 200420032002    | Nil Nil Nil                            | Nil Nil Nil                         

|(1) | "SARS"or "stock appreciation right"means
        a right granted by US, as compensation for services rendered, to receive
        a payment of cash or an issue or transfer of securities based wholly or
        in part on changes in the trading price of our publicly traded securities.                                                                    
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | "LTIP"or "long term incentive plan"means
        any plan which provides compensation intended to serve as incentive for
        performance to occur over a period longer than one financial year, but
        does not include option or stock appreciation right plans or plans for
        compensation through restricted shares or restricted share units.
|   
|(3) | Access Information Services, Inc., a Washington
        corporation which is owned and controlled by the Robertson Family Trust,
        received or is to receive $2,500 per month from us for management services
        provided to us. Mr. Robertson is a trustee of the Robertson Family Trust.                                                           

On March 31, 1994, we entered into a management agreement
  with Access Information Services, Inc., a Washington corporation, which is owned
  and controlled by the Robertson Family Trust. We retained Access at the rate
  of $2,500 per month to provide certain management, administrative, and financial
  services.

We may in the future create retirement, pension, profit sharing,
  insurance and medical reimbursement plans covering our Officers and Directors.
  At the present time, no such plans

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exist. No advances have been made or are contemplated by us
  to any of our Officers or Directors. Directors receive no compensation for their
  service as such. Compensation of officers and directors is determined by our
  Board of Directors and is not subject to shareholder approval.

The following table sets forth certain information with respect
  to options exercised during the fiscal year ended April 30, 2004 by our Chief
  Executive Officer, and with respect to unexercised options held by our Chief
  Executive Officer at the end of fiscal 2004.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END
  OPTION VALUES

|Name              | Shares Acquired  On Exercise (#) | Value realized ($) | Number of   Unexercised   Options
      at   Years End   Exercisable /   Unexercisable | Value of  Unexercised  Options
      at Year End  (1)  Exercisable /  Unexercisable
|----------------- | -------------------------------- | ------------------ | -------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------
|John G. Robertson | -0-                              | -0-                | 600,000 / 0                                                                            | $18,000/ -0-                                                                       

(1) The calculation of the value of unexercised options is
  based on the difference between the last sale price of $0.23 per share for our
  Common Stock on April 30, 2004 and the exercise price of each option (then $0.20),
  multiplied by the number of shares covered by the option.

We do not have any Long Term Incentive Plans.

We do not have any employment contracts, termination of employment
  and change of control arrangements.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
  MANAGEMENT

The following table sets forth, as of July 20, 2004, our outstanding
  Class A Common Stock owned of record or beneficially by each person who owned
  of record, or was known by us to own beneficially, more than 5% of our Common
  Stock, and the name and shareholdings of each Executive Officer and Director
  and all Executive Officers and Directors as a group. A person is deemed to be
  the beneficial owner of securities that can be acquired by such person within
  60 days from the date of this report upon the exercise of warrants or options.
  Each beneficial owner's percentage ownership is determined by assuming that
  options that are held by such person and which are exercisable within 60 days
  from the date are exercised.

22

---

|Name                                                       |  | Class A Shares Owned |  | Percentage of 
|---------------------------------------------------------- |  | -------------------- |  | --------------
|                                                           |  |                      |  | Class A Shares
|                                                           |  |                      |  | Owned         
|John G. Robertson, Chairman of the Board                   |  | 9,938,506            |  | 44.4%         
|of Directors, President and Director (1) (2) (3)
      (4) |  |                      |  |               
|                                                           |  |                      |  |               
|James McCann(5)                                            |  | 4,079,036            |  | 18.23%        
|                                                           |  |                      |  |               
|Rand Energy Group Inc.(6)                                  |  | 4,079,036            |  | 18.23%        
|                                                           |  |                      |  |               
|Jennifer Lorette, Vice President and Director(7)           |  | 150,500              |  | *             
|                                                           |  |                      |  |               
|James Vandeberg, Chief Operating Officer and Director (8)  |  | 76,000               |  | *             
|                                                           |  |                      |  |               
|Brian Cherry                                               |  | 150,000              |  | *             
|                                                           |  |                      |  |               
|ALL EXECUTIVE OFFICERS & DIRECTORS AS A GROUP (FOUR        |  | 10,315,006           |  | 46.10%        
|INDIVIDUALS) (9)                                           |  |                      |  |               

Except as noted below, all shares are held beneficially and
  of record and each record shareholder has sole voting and investment power.

*Less than one percent of the issued and outstanding on July
  20, 2004, which was 22,381,055

(1) These individuals may be deemed to be our "parents or
  founders" as that term is defined in the Rules and Regulations promulgated under
  the Securities Act of 1933.

(2) Includes 4,079,036 shares registered in the name of Rand
  Energy Group Inc. See Note (5) below for an explanation of the beneficial ownership
  of Rand Energy Group Inc. Mr. Robertson disclaims beneficial ownership of these
  shares beyond the extent of his pecuniary interest. Also includes 600,000 options
  that are currently exercisable. Mr. Robertson's address is the same as the Company's.

(3) Includes 2,673,860 common shares and 73,860 share-purchase
  warrants registered in the name of Access Information Services, Ltd., a corporation
  controlled by the Robertson Family Trust, and 600,000 options that are currently
  exercisable. Mr. Robertson is one of three trustees of the Robertson Family
  Trust, which acts by the majority vote of the three trustees. Mr. Robertson
  disclaims beneficial ownership of the shares owned or controlled by the Robertson
  Family Trust. Mr. Robertson's address is the same as our address.

(4) Rainbow Network is a private Turks and Caicos Island company.
  Mr. Robertson is the President and director of Rainbow Network. Mr. Robertson
  disclaims beneficial ownership of the shares owned or controlled by the Rainbow
  Network. Mr. Robertson's address is the same as our address.

(5) Includes 4,079,036 shares registered in the name of Rand
  Energy Group Inc. See Note (6) below for an explanation of the beneficial ownership
  of Rand Energy Group Inc.

23

---

(6) Rand Energy Group Inc. is owned 51% by Reg Technologies
  Inc. and 49% by Rand Cam Engine Corp. Under Rule 13d-3 under the Securities
  Exchange Act of 1934, both Reg Technologies Inc. and Rand Cam Engine Corp. could
  be considered the beneficial owner of the 4,079,036 shares registered in the
  name of Rand Energy Group Inc.

Reg Technologies Inc. is a British Columbia corporation listed
  on the TSX Venture Exchange that has financed the research on the Rand Cam Engine
  since 1986. Since October 1984 Mr. Robertson has been President and a Director
  of Reg Technologies Inc. SMR Investment Ltd., a British Columbia corporation,
  holds a controlling interest in Reg Technologies Inc. Since May 1977 Mr. Robertson
  has been President and a member of the Board of Directors of SMR Investments
  Ltd. Susanne M. Robertson, Mr. Robertson's wife, owns SMR Investment Ltd. Accordingly,
  in Note (2) above, beneficial ownership of the 5,063,200 shares registered in
  the name of Rand Energy Group Inc. has been attributed to Mr. Robertson. We
  believe it would be misleading and not provide clear disclosure to list as beneficial
  owners in the table the other entities and persons discussed in this paragraph,
  although a strict reading of Rule 13d-3 under the Securities Exchange Act of
  1934 might require each such entity and person to be listed in the beneficial
  ownership table.

Rand Cam Engine Corp. is a privately held company whose stock
  is controlled by James McCann and minor interest by several other shareholders.
  We believe it would be misleading and not provide clear disclosure to list as
  beneficial owners in the table the other entities and persons discussed in this
  paragraph, although a strict reading of Rule 13d-3 under the Securities Exchange
  Act of 1934 might require each such entity and person to be listed in the beneficial
  ownership table.

(7) Includes 150,000 options that are currently exercisable.
  Ms. Lorette's address is the same as the Company's.

(8) Includes 75,000 options that are currently exercisable.
  Mr. Vandeberg's address is 900 Fourth Avenue, Suite 3140, Seattle, WA 98164.

(9) Includes 4,079,036 shares registered in the name of Rand
  Energy Group Inc. whose beneficial ownership is attributed to Mr. Robertson
  as set forth in Note (2) above. See Note (5) above for an explanation of the
  beneficial ownership of Rand Energy Group Inc. Mr. Robertson disclaims beneficial
  ownership of these shares beyond the extent of his pecuniary interest. Also
  includes 825,000 options that are currently exercisable.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to the August 1992 Agreement we issued 5,700,000
  shares of our Common Stock at a deemed value of $0.01 per share to Rand Energy
  Group Inc., a privately held British Columbia corporation ("RAND") in exchange
  for certain valuable rights, technology, information, and other tangible and
  intangible assets relating to the United States rights to the Original Engine.
  RAND is owned 51% by Reg Technologies Inc., a British Columbia corporation listed
  on the Canadian Venture Exchange ("Reg Tech"), and 49% by Rand Cam Engine Corp.
  Reg Tech's President is also our President and its Vice President is also Vice
  President of the Company.

We also agreed to pay semi-annually to RAND a royalty of 5%
  of any net profits to be derived by us from revenues received as a result of
  its license of the Original Engine.

24

---

In the April 1993 Agreement, an amendment to a previous Amendment
  Agreement dated November 23, 1992, between RAND, Reg Tech and Brian Cherry (a
  former officer and director) and an original agreement dated July 30, 1992,
  between RAND, Reg Tech and Brian Cherry, Cherry agreed to: (a) sell, transfer
  and assign to RAND all his right, title and interest in and to the technology
  related to the RC/DC Engine, including all pending and future patent applications
  in respect of the Technology for all countries except the United States of America,
  together with any improvements, changes or other variations to the Technology;
  (b) sell, transfer and assign to us (then called Sky Technologies Inc.), all
  his right, title and interest in and to the Technology, including all pending
  and future patent applications in respect of the Technology for the United States
  of America, together with any improvements, changes or other variations to the
  Technology.

Other provisions of the April 1993 Agreement call for us (a)
  to pay to RAND a continuing royalty of 5% of the net profits derived from the
  Technology by us and (b) to pay to Brian Cherry a continuing royalty of 1% of
  the net profits derived from the Technology by us.

A final provision of the April 1993 Agreement assigns and
  transfers ownership to us of any patents, inventions, copyrights, know-how,
  technical data, and related types of intellectual property conceived, developed
  or created by RAND or its associated companies either prior to or subsequent
  to the date of the agreement, which results or derives from the direct or indirect
  use of the Original Engine and/or RC/DC Engine technologies by RAND.

The terms of the agreements referenced above were negotiated
  by the parties in non-arm's-length transactions but were deemed by the parties
  involved to be fair and equitable under the circumstances existing at the time.

We are controlled by Rand Energy Group Inc., a privately held
  British Columbia corporation ("RAND"), which, in turn, is controlled 51% by
  Reg Technologies Inc., a publicly held British Columbia corporation ("Reg Tech")
  and 49% by Rand Cam Engine Corp. SMR Investment Ltd., a British Columbia corporation,
  holds a controlling interest in Reg Technologies Inc. Since May 1977 Mr. Robertson
  has been President and a member of the Board of Directors of SMR Investments
  Ltd. Susanne M. Robertson, Mr. Robertson's wife, owns SMR Investment Ltd. Rand
  Cam Engine Corp. is a privately held company whose stock is reportedly majority
  owned and controlled by James McCann and the balance by several other shareholders.

25

---

ITEM 13(a). EXHIBITS.

|Number | Description                                                                                                                                                                                                           |    
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---
|3.1    | Articles of Incorporation                                                                                                                                                                                             | (1)
|3.2    | Article of Amendment changing name to REGI U.S., Inc.                                                                                                                                                                 | (2 
|3.3    | By-Laws                                                                                                                                                                                                               | (1)
|4.1    | Specimen Share Certificate                                                                                                                                                                                            | (1)
|4.2    | Specimen Warrant Certificate                                                                                                                                                                                          | (1)
|10.1   | Consulting Agreement, dated December 1, 1999, between Regi
      U.S., Inc. and Patrick Badgley                                                                                                                       | (3)
|10.2   | Special Service Proposal, dated December 21, 1999, between
      Regi U.S. and ColTec, Inc                                                                                                                            | (3)
|10.3   | Agreement between Coltec and REGI dated October 2000                                                                                                                                                                  | (4)
|10.4   | Agreement between REGI and Advanced Ceramics Research dated
      March 20, 2002                                                                                                                                      | (5)
|10.5   | License Agreement between Rand Energy Group, Inc., and Reg Technologies,
      Inc. REGI U.S., Inc. and Radian Incorporated made as of April 24, 2002                                                                 | (5)
|10.6   | Agreement between REGI U.S., Inc. and Rotary Power Generation,
      Incorporated made as of April 22, 2002                                                                                                           | (6)
|10.7   | Amendment to Agreement between REGI U.S., Inc. and Rotary
      Power Generation, Incorporated made as of April 2, 2003                                                                                               | (6)
|23.1   | Consent of Independent Auditors                                                                                                                                                                                       |    
|31.1   | Certification of Chief Executive
      Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 -                                                                                                            |    
|31.2   | Certification of Chief Financial
      Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 -                                                                                                            |    
|32.1   | Certification of John G. Robertson,
      President (Principal Executive Officer), pursuant to 18 U.S.C. Section 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -                   |    
|32.2   | Certification of James Vandeberg,
      Chief Financial Officer (Principal Financial Officer), pursuant to 18 U.S.C.
      Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002 - |    

|(1) | Incorporated by reference from Form 10-SB Registration Statement filed
      April 26, 1994.
|--- | --------------------------------------------------------------------------------------------
|(2) | Incorporated by reference from 10-Q Report for the quarter ended 7-30-94.                   
|(3) | Incorporated by reference from our 10-KSB for the fiscal year ended April
      30, 2000.   
|(4) | Incorporated by reference from our 10-KSB for the fiscal year ended April
      30, 2001    
|(5) | Incorporated by reference from our 10-KSB for the fiscal year ended April
      30, 2002    
|(6) | Incorporated by reference from our 10-KSB for the fiscal year ended April
      30, 2003    

|Independent Auditor's
      Report      | F-1         | 
|--------------------------------------- | ----------- | 
|Balance Sheets                          | F-2         | 
|Statements of Operations                | F-3         | 
|Statements of Cash Flows                | F-4         | 
|Statement of Stockholders'
      Equity | F-5 to F-6  | 
|Notes to the Financial Statements       | F-7 to F-14 | 

26

---

ITEM 13(b). REPORTS ON FORM 8-K.

None.

ITEM 14. CONTROLS AND PROCEEDURES.

(a)
  Evaluation of disclosure controls and procedures

Our Chief Executive Officer and our Chief Financial Officer
  evaluated our "disclosure controls and procedures" (as defined in Rule 13a-14
  (c) of the Exchange Act) as of a date within 90 days before the filing date
  of this annual report. They concluded that as of the evaluation date, our disclosure
  controls and procedures are effective to ensure that information we are required
  to disclose in reports that we file or submit under the Exchange Act is recorded,
  processed, summarized and reported within the time periods specified in SEC
  rules and forms.

(b)
  Changes in internal controls.

Subsequent to the date of their evaluation, there were no
  significant changes in our internal controls or in other factors that could
  significantly affect these controls. There were no significant deficiencies
  or material weaknesses in our internal controls so no corrective actions were
  taken.

27

---

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange
  Act of 1934, the Registrant has duly caused this report or amendment to be signed
  on its behalf by the undersigned, thereunto duly authorized.

REGI U.S., INC.



By: /s/ John G. Robertson 
  John G. Robertson, President 
  Chief Executive Officer and Director

Dated: August 18, 2004

In accordance with the Securities Exchange Act of 1934, this
  report has been signed by the following persons on behalf of the Registrant
  and in the capacities and on the dates indicated below.

|Signature             |  | Title                                |  | Date   
|--------------------- |  | ------------------------------------ |  | -------
|                      |  |                                      |  |        
|/s/ John G. Robertson |  | President, Chief                     |  | 8/18/04
|(John G. Robertson)   |  | Executive Officer and Director       |  |        
|                      |  |                                      |  |        
|                      |  |                                      |  |        
|/s/James Vandeberg    |  | Chief Operating Officer              |  | 8/18/04
|(James Vandeberg)     |  | Chief Financial Officer and Director |  |        
|                      |  |                                      |  |        
|                      |  |                                      |  |        
|/s/ Jennifer Lorette  |  | Vice President and Director          |  | 8/18/04
|(Jennifer Lorette)    |  |                                      |  |        

28

---

|       | EXHIBIT INDEX                                                                                                                                                                                                         |    
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---
|       |                                                                                                                                                                                                                       |    
|Number | Description                                                                                                                                                                                                           |    
|3.1    | Articles of Incorporation                                                                                                                                                                                             | (1)
|3.2    | Article of Amendment changing name to REGI U.S., Inc.                                                                                                                                                                 | (2 
|3.3    | By-Laws                                                                                                                                                                                                               | (1)
|4.1    | Specimen Share Certificate                                                                                                                                                                                            | (1)
|4.2    | Specimen Warrant Certificate                                                                                                                                                                                          | (1)
|10.1   | Consulting Agreement, dated December 1, 1999, between Regi
      U.S., Inc. and Patrick Badgley                                                                                                                       | (3)
|10.2   | Special Service Proposal, dated December 21, 1999, between
      Regi U.S. and ColTec, Inc                                                                                                                            | (3)
|10.3   | Agreement between Coltec and REGI dated October 2000                                                                                                                                                                  | (4)
|10.4   | Agreement between REGI and Advanced Ceramics Research dated
      March 20, 2002                                                                                                                                      | (5)
|10.5   | License Agreement between Rand Energy Group, Inc., and Reg Technologies,
      Inc. REGI U.S., Inc. and Radian Incorporated made as of April 24, 2002                                                                 | (5)
|10.6   | Agreement between REGI U.S., Inc. and Rotary Power Generation,
      Incorporated made as of April 22, 2002                                                                                                           | (6)
|10.7   | Amendment to Agreement between REGI U.S., Inc. and Rotary
      Power Generation, Incorporated made as of April 2, 2003                                                                                               | (6)
|23.1   | Consent of Independent Auditors                                                                                                                                                                                       |    
|31.1   | Certification of Chief Executive
      Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 -                                                                                                            |    
|31.2   | Certification of Chief Financial
      Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 -                                                                                                            |    
|32.1   | Certification of John G. Robertson,
      President (Principal Executive Officer), pursuant to 18 U.S.C. Section 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -                   |    
|32.2   | Certification of James Vandeberg,
      Chief Financial Officer (Principal Financial Officer), pursuant to 18 U.S.C.
      Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002 - |    

|(1) | Incorporated by reference from Form 10-SB Registration Statement filed
      April 26, 1994.
|--- | --------------------------------------------------------------------------------------------
|(2) | Incorporated by reference from 10-Q Report for the quarter ended 7-30-94.                   
|(3) | Incorporated by reference from our 10-KSB for the fiscal year ended April
      30, 2000.   
|(4) | Incorporated by reference from our 10-KSB for the fiscal year ended April
      30, 2001    
|(5) | Incorporated by reference from our 10-KSB for the fiscal year ended April
      30, 2002    
|(6) | Incorporated by reference from our 10-KSB for the fiscal year ended April
      30, 2003    

|Independent Auditor's
      Report      | F-1         | 
|--------------------------------------- | ----------- | 
|Balance Sheets                          | F-2         | 
|Statements of Operations                | F-3         | 
|Statements of Cash Flows                | F-4         | 
|Statement of Stockholders'
      Equity | F-5 to F-6  | 
|Notes to the Financial Statements       | F-7 to F-14 | 

29

---



| | Independent Auditors' Report
      To the Stockholders and Board of Directors 
        of REGI U.S., Inc. 
        (A Development Stage Company)
      We have audited the accompanying balance sheets of REGI
        U.S., Inc. (A Development Stage Company) as of April 30, 2004 and 2003
        and the related statements of operations, stockholders' deficit and cash
        flows for the period from July 27, 1992 (Inception) to April 30, 2004
        and the years ended April 30, 2004 and 2003. These financial statements
        are the responsibility of the Company's management. Our responsibility
        is to express an opinion on these financial statements based on our audits.
      We conducted our audit in accordance with the Standards
        of the Public Company Accounting Oversight Board (United States). Those
        standards require that we plan and perform the audit to obtain reasonable
        assurance about whether the financial statements are free of material
        misstatement. An audit includes examining, on a test basis, evidence supporting
        the amounts and disclosures in the 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. We believe that our audit provides a reasonable basis for
        our opinion.
      In our opinion, the aforementioned financial statements
        present fairly, in all material respects, the financial position of REGI
        U.S., Inc. (A Development Stage Company), as of April 30, 2004 and 2003,
        and the results of its operations and its cash flows for the period from
        July 27, 1992 (Inception) to April 30, 2004 and the years ended April
        30, 2004 and 2003, in conformity with generally accepted accounting principles
        used in the United States.
      The accompanying financial statements have been prepared
        assuming the Company will continue as a going concern. As discussed in
        Note 1 to the financial statements, the Company has not generated any
        revenues or profitable operations since inception and has a severe working
        capital deficit. These factors raise substantial doubt about the Company's
        ability to continue as a going concern. Management's plans in regard to
        these matters are also discussed in Note 1. The financial statements do
        not include any adjustments that might result from the outcome of this
        uncertainty.
      /s/ "Manning Elliott"
      CHARTERED ACCOUNTANTS
      Vancouver, Canada
      August 13, 2004 | 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 

F-1

---

**REGI U.S. Inc.**
  (A Development Stage Company) 
  Balance Sheets 
  (expressed in U.S. dollars)

|                                                                             | April 30,  |   | April 30,  |  
|---------------------------------------------------------------------------- | ---------- | - | ---------- | -
|                                                                             | 2004       |   | 2003       |  
|                                                                             | $          |   | $          |  
|Assets                                                                       |            |   |            |  
|Current Assets                                                               |            |   |            |  
|Cash                                                                         | -          |   | 87         |  
|Amounts receivable                                                           | 3,000      |   | 3,000      |  
|Total Current Assets                                                         | 3,000      |   | 3,087      |  
|Intangible Assets (Note 3)                                                   | 64,865     |   | 63,207     |  
|Total Assets                                                                 | 67,865     |   | 66,294     |  
|                                                                             |            |   |            |  
|Liabilities and Stockholders' Deficit                                        |            |   |            |  
|Current Liabilities                                                          |            |   |            |  
|Bank indebtedness                                                            | 3,133      |   | -          |  
|Accounts payable                                                             | 77,950     |   | 86,264     |  
|Accrued liabilities                                                          | 8,300      |   | 8,175      |  
|Due to related parties (Note
      5)                                        | 136,923    |   | 144,738    |  
|Total Liabilities                                                            | 226,306    |   | 239,177    |  
|Commitments and Contingent Liabilities (Notes 1 and 6)                       |            |   |            |  
|Subsequent Events (Note 8)                                                   |            |   |            |  
|Stockholders' Deficit                                                        |            |   |            |  
|Common Stock (Note 4), 50,000,000 shares authorized without
      par value; |            |   |            |  
|22,231,055
      and 17,687,935 shares issued and outstanding respectively   | 5,610,451  |   | 5,142,299  |  
|Common Stock Subscribed                                                      | -          |   | 25,968     |  
|Donated Capital (Note 5)                                                     | 397,500    |   | 187,500    |  
|Deferred Compensation                                                        | (27,829    | ) | -          |  
|Deficit Accumulated During the Development Stage                             | (6,138,563 | ) | (5,528,650 | )
|Total Stockholders' Deficit                                                  | (158,441   | ) | (172,883   | )
|Total Liabilities and Stockholders' Deficit                                  | 67,865     |   | 66,294     |  

(The accompanying notes are an integral part of the financial
  statements)
  F-2

---

**REGI U.S. Inc.**
  (A Development Stage Company) 
  Statements of Operations
  (expressed in U.S. dollars)

|                                                     | Accumulated from |   |            |   |            |  
|---------------------------------------------------- | ---------------- | - | ---------- | - | ---------- | -
|                                                     | July 27, 1992    |   |            |   |            |  
|                                                     | (Inception)      |   | Year Ended |  
|                                                     | To April 30,     |   | April 30,  |  
|                                                     | 2004             |   | 2004       |   | 2003       |  
|                                                     | $                |   | $          |   | $          |  
|                                                     |                  |   |            |   |            |  
|Revenue                                              | -                |   | -          |   | -          |  
|Administrative Expenses                              |                  |   |            |   |            |  
|Bad debts                                            | 2,792            |   | 2,792      |   |           |  
|Bank charges
      and interest                      | 11,656           |   | 714        |   | 1,279      |  
|Consulting
      services (Note 5)                   | 373,500          |   | 186,000    |   | 187,500    |  
|Foreign exchange
      loss (gain)                   | 3,508            |   | 261        |   | (605       | )
|Interest on
      debentures                         | 12,593           |   | -          |   | -          |  
|Investor relations
       publications              | 323,150          |   | 6,921      |   | 300        |  
|Investor relations
       consulting                | 594,199          |   | 96,250     |   | -          |  
|Office, rent
      and telephone (Note 5)            | 172,163          |   | 6,824      |   | 9,346      |  
|Professional
      fees                              | 393,096          |   | 42,537     |   | 7,141      |  
|Stock-based
      compensation                       | 437,150          |   | 142,354    |   | 16,500     |  
|Transfer agent
      and regulatory fees             | 108,776          |   | 6,231      |   | 4,372      |  
|Travel                                               | 27,141           |   | 14,244     |   | 175        |  
|Less: interest
      and other income                | (16,788          | ) | -          |   | -          |  
|accounts payable written-off                         | (15,818          | ) | (1,264     | ) | -          |  
|                                                     | 2,427,118        |   | 503,864    |   | 226,008    |  
|Research and Development Expenses                    |                  |   |            |   |            |  
|Intellectual
      property (Note 3)                 | 578,509          |   | -          |   | -          |  
|Amortization                                         | 125,241          |   | 4,787      |   | 5,212      |  
|Market development                                   | 93,146           |   | 364        |   | -          |  
|Professional
      fees                              | 73,904           |   | -          |   | -          |  
|Project management
      fees                        | 310,000          |   | 30,000     |   | -          |  
|Project overhead                                     | 211,588          |   | -          |   | 2,000      |  
|Prototype
      design and construction              |                  |   |            |   |            |  
|contracts, net of recoveries                         | 1,355,896        |   | 1,574      |   | (35,028    | )
|Royalties                                            | 93,000           |   | -          |   | -          |  
|Technical
      prototype design consulting (Note 5) | 593,178          |   | 60,000     |   | 21,440     |  
|Technical
      reports                              | 29,050           |   | 4,686      |   | -          |  
|Technical
      salaries                             | 169,467          |   | -          |   | -          |  
|Travel                                               | 177,533          |   | 9,307      |   | 1,340      |  
|Less: accounts payable written
      off             | (99,067          | ) | (4,669     | ) | -          |  
|                                                     | 3,711,445        |   | 106,049    |   | (5,036     | )
|Net Loss for the Period                              | (6,138,563       | ) | (609,913   | ) | (220,972   | )
|Net Loss Per Share  Basic                           |                  |   | (0.03      | ) | (0.02      | )
|Weighted Average Shares Outstanding                  |                  |   | 22,231,000 |   | 11,509,000 |  

(Diluted loss per share has not been presented as the result is anti-dilutive)

(The accompanying notes are an integral part of the financial
  statements) 
  F-3

---

**REGI U.S. Inc.**
  (A Development Stage Company) 
  Statements of Cash Flows
  (expressed in U.S. dollars)

|                                                                      | Accumulated   |   |            |   |          |  
|--------------------------------------------------------------------- | ------------- | - | ---------- | - | -------- | -
|                                                                      | From          |   |            |   |          |  
|                                                                      | July 27, 1992 |   |            |   |          |  
|                                                                      | (Inception)   |   | Year Ended |  
|                                                                      | to April 30,  |   | April 30,  |  
|                                                                      | 2004          |   | 2004       |   | 2003     |  
|                                                                      | $             |   | $          |   | $        |  
|Cash Flows to Operating Activities                                    |               |   |            |   |          |  
|Net loss for the period                                               | (6,138,563    | ) | (609,913   | ) | (220,972 | )
|Adjustments to reconcile net loss to net cash used
      by operating |               |   |            |   |          |  
|activities                                                            |               |   |            |   |          |  
|Accounts payable
      written-off                                    | (102,688      | ) | (5,933     | ) | -        |  
|Amortization                                                          | 125,241       |   | 4,787      |   | 5,212    |  
|Donated services                                                      | 397,500       |   | 210,000    |   | 187,500  |  
|Intellectual
      property written off                               | 578,509       |   | -          |   | -        |  
|Stock-based
      compensation                                        | 437,150       |   | 142,354    |   | 16,500   |  
|Changes in operating assets and liabilities                           |               |   |            |   |          |  
|Amounts receivable                                                    | (3,000        | ) | -          |   | 13,400   |  
|Accounts payable and accrued
      liabilities                        | 197,095       |   | (2,255     | ) | (1,013   | )
|Net Cash Provided (Used) by Operating Activities                      | (4,508,756    | ) | (260,960   | ) | 627      |  
|Cash Flows from Financing Activities                                  |               |   |            |   |          |  
|Proceeds from
      convertible debenture                             | 5,000         |   | -          |   | -        |  
|Subscriptions
      received                                          | 25,968        |   | -          |   | 25,968   |  
|Shares issued                                                         | 4,273,252     |   | 106,000    |   | -        |  
|Increase (decrease) in due
      to related parties                   | 424,769       |   | 158,185    |   | (23,417  | )
|Net Cash Provided by Financing Activities                             | 4,728,989     |   | 264,185    |   | 2,551    |  
|Cash Flows to Investing Activities                                    |               |   |            |   |          |  
|Purchase of
      property and equipment                              | (24,947       | ) | -          |   | -        |  
|Patent protection costs                                               | (198,419      | ) | (6,445     | ) | (835     | )
|Net Cash Used by Investing Activities                                 | (223,366      | ) | (6,445     | ) | (835     | )
|Increase (Decrease) in Cash and Cash Equivalents                      | (3,133        | ) | (3,220     | ) | 2,343    |  
|Cash and Cash Equivalents - Beginning of Period                       | -             |   | 87         |   | (2,256   | )
|Cash and Cash Equivalents - End of Period                             | (3,133        | ) | (3,133     | ) | 87       |  
|                                                                      |               |   |            |   |          |  
|Non-Cash Investing and Financing Activities                           |               |   |            |   |          |  
|Stock-based
      compensation                                        | 437,150       |   | 170,184    |   | 16,500   |  
|Shares issued
      to settle debt                                    | 496,000       |   | 166,000    |   | 305,000  |  
|Shares issued
      for convertible debenture                         | 5,000         |   | -          |   | 5,000    |  
|Shares issued
      for intellectual property                         | 345,251       |   | -          |   | -        |  
|Affiliate's shares issued
      for intellectual property             | 200,000       |   | -          |   | -        |  
|                                                                      |               |   |            |   |          |  
|Supplemental Disclosures                                              |               |   |            |   |          |  
|Interest paid                                                         | 12,593        |   | -          |   | -        |  
|Income tax paid                                                       | -             |   | -          |   | -        |  

(The accompanying notes are an integral part of the financial
  statements) 
  F-4

---

**REGI U.S. Inc.**
  (A Development Stage Company) 
  Statements of Stockholders' Equity (Deficit) 
  From July 27, 1992 (Inception) to April 30, 2004

|                                       |           |  |           |  |            |  |         |  |              |  | Deficit     |   |            |  
|-------------------------------------- | --------- |  | --------- |  | ---------- |  | ------- |  | ------------ |  | ----------- | - | ---------- | -
|                                       |           |  |           |  |            |  |         |  |              |  | Accumulated |   |            |  
|                                       | Common    |  |           |  | Common     |  |         |  |              |  | During the  |   |            |  
|                                       | Stock     |  |           |  | Stock      |  | Donated |  | Deferred     |  | Development |   |            |  
|                                       | Shares    |  | Amount    |  | Subscribed |  | Capital |  | Compensation |  | Stage       |   | Total      |  
|                                       | #         |  | $         |  | $          |  | $       |  | $            |  | $           |   | $          |  
|                                       |           |  |           |  |            |  |         |  |              |  |             |   |            |  
|Balance  July 27, 1992 (inception)    | -         |  | -         |  | -          |  | -       |  | -            |  | -           |   | -          |  
|Stock issued for intellectual property | 5,700,000 |  | 57,000    |  | -          |  | -       |  | -            |  | -           |   | 57,000     |  
|Stock issued for cash                  | 300,000   |  | 3,000     |  | -          |  | -       |  | -            |  | -           |   | 3,000      |  
|Net loss for the period                | -         |  | -         |  | -          |  | -       |  | -            |  | (23,492     | ) | (23,492    | )
|                                       |           |  |           |  |            |  |         |  |              |  |             |   |            |  
|Balance  April 30, 1993               | 6,000,000 |  | 60,000    |  | -          |  | -       |  | -            |  | (23,492     | ) | 36,508     |  
|Stock issued for cash pursuant to a    |           |  |           |  |            |  |         |  |              |  |             |   |            |  
|public offering                        | 500,000   |  | 500,000   |  | -          |  | -       |  | -            |  | -           |   | 500,000    |  
|Net loss for the year                  | -         |  | -         |  | -          |  | -       |  | -            |  | (394,263    | ) | (394,263   | )
|                                       |           |  |           |  |            |  |         |  |              |  |             |   |            |  
|Balance  April 30, 1994               | 6,500,000 |  | 560,000   |  | -          |  | -       |  | -            |  | (417,755    | ) | 142,245    |  
|Stock issued for cash pursuant to:     |           |  |           |  |            |  |         |  |              |  |             |   |            |  
|options exercised                      | 10,000    |  | 1,000     |  | -          |  | -       |  | -            |  | -           |   | 1,000      |  
|a private placement                    | 250,000   |  | 562,500   |  | -          |  | -       |  | -            |  | -           |   | 562,500    |  
|warrants exercised                     | 170,200   |  | 213,000   |  | -          |  | -       |  | -            |  | -           |   | 213,000    |  
|Net loss for the year                  | -         |  | -         |  | -          |  | -       |  | -            |  | (1,225,743  | ) | (1,225,743 | )
|                                       |           |  |           |  |            |  |         |  |              |  |             |   |            |  
|Balance  April 30, 1995               | 6,930,200 |  | 1,336,500 |  | -          |  | -       |  | -            |  | (1,643,498  | ) | (306,998   | )
|Stock issued for cash pursuant to:     |           |  |           |  |            |  |         |  |              |  |             |   |            |  
|options exercised                      | 232,500   |  | 75,800    |  | -          |  | -       |  | -            |  | -           |   | 75,800     |  
|warrants exercised                     | 132,200   |  | 198,300   |  | -          |  | -       |  | -            |  | -           |   | 198,300    |  
|a private offering
      memorandum    | 341,000   |  | 682,000   |  | -          |  | -       |  | -            |  | -           |   | 682,000    |  
|Net loss for the year                  | -         |  | -         |  | -          |  | -       |  | -            |  | (796,905    | ) | (796,905   | )
|                                       |           |  |           |  |            |  |         |  |              |  |             |   |            |  
|Balance  April 30, 1996               | 7,635,900 |  | 2,292,600 |  | -          |  | -       |  | -            |  | (2,440,403  | ) | (147,803   | )
|Stock issued for cash pursuant to:     |           |  |           |  |            |  |         |  |              |  |             |   |            |  
|options exercised                      | 137,000   |  | 13,700    |  | -          |  | -       |  | -            |  | -           |   | 13,700     |  
|warrants exercised                     | 185,400   |  | 278,100   |  | -          |  | -       |  | -            |  | -           |   | 278,100    |  
|private placements                     | 165,000   |  | 257,500   |  | -          |  | -       |  | -            |  | -           |   | 257,500    |  
|Net loss for the year                  | -         |  | -         |  | -          |  | -       |  | -            |  | (510,184    | ) | (510,184   | )
|                                       |           |  |           |  |            |  |         |  |              |  |             |   |            |  
|Balance  April 30, 1997               | 8,123,300 |  | 2,841,900 |  | -          |  | -       |  | -            |  | (2,950,587  | ) | (108,687   | )
|Stock issued for cash pursuant to:     |           |  |           |  |            |  |         |  |              |  |             |   |            |  
|options exercised                      | 50,000    |  | 5,000     |  | -          |  | -       |  | -            |  | -           |   | 5,000      |  
|a units offering                       | 500,000   |  | 500,000   |  | -          |  | -       |  | -            |  | -           |   | 500,000    |  
|Stock issued for acquisition of AVFS   |           |  |           |  |            |  |         |  |              |  |             |   |            |  
|rights                                 | 400,000   |  | 288,251   |  | -          |  | -       |  | -            |  | -           |   | 288,251    |  
|Stock issued for financial consulting  |           |  |           |  |            |  |         |  |              |  |             |   |            |  
|services                               | 125,000   |  | 170,250   |  | -          |  | -       |  | -            |  | -           |   | 170,250    |  
|Stock issued to settle an accrued      |           |  |           |  |            |  |         |  |              |  |             |   |            |  
|liability                              | 50,000    |  | 25,000    |  | -          |  | -       |  | -            |  | -           |   | 25,000     |  
|Net loss for the year                  | -         |  | -         |  | -          |  | -       |  | -            |  | (580,901    | ) | (580,901   | )
|                                       |           |  |           |  |            |  |         |  |              |  |             |   |            |  
|Balance  April 30, 1998               | 9,248,300 |  | 3,830,401 |  | -          |  | -       |  | -            |  | (3,531,488  | ) | 298,913    |  
|Stock issued for financial consulting  |           |  |           |  |            |  |         |  |              |  |             |   |            |  
|services                               | 100,000   |  | 71,046    |  | -          |  | -       |  | -            |  | -           |   | 71,046     |  
|Net loss for the year                  | -         |  | -         |  | -          |  | -       |  | -            |  | (397,924    | ) | (397,924   | )
|                                       |           |  |           |  |            |  |         |  |              |  |             |   |            |  
|Balance  April 30, 1999               | 9,348,300 |  | 3,901,447 |  | -          |  | -       |  | -            |  | (3,929,412  | ) | (27,965    | )

(The accompanying notes are an integral part of the financial
  statements) 
  F-5

---

**REGI U.S. Inc.**
  (A Development Stage Company) 
  Statements of Stockholders' Equity (Deficit)
  From July 27, 1992 (Inception) to April 30, 2004

|                                      |            |  |           |   |            |   |         |  |              |   | Deficit     |   |          |  
|------------------------------------- | ---------- |  | --------- | - | ---------- | - | ------- |  | ------------ | - | ----------- | - | -------- | -
|                                      |            |  |           |   |            |   |         |  |              |   | Accumulated |   |          |  
|                                      | Common     |  |           |   | Common     |   |         |  |              |   | During the  |   |          |  
|                                      | Stock      |  |           |   | Stock      |   | Donated |  | Deferred     |   | Development |   |          |  
|                                      | Shares     |  | Amount    |   | Subscribed |   | Capital |  | Compensation |   | Stage       |   | Total    |  
|                                      | #          |  | $         |   | $          |   | $       |  | $            |   | $           |   | $        |  
|                                      |            |  |           |   |            |   |         |  |              |   |             |   |          |  
|Balance  April 30, 1999              | 9,348,300  |  | 3,901,447 |   | -          |   | -       |  | -            |   | (3,929,412  | ) | (27,965  | )
|Stock issued for cash pursuant to:    |            |  |           |   |            |   |         |  |              |   |             |   |          |  
|a private placement                   | 852,101    |  | 639,075   |   | -          |   | -       |  | -            |   | -           |   | 639,075  |  
|less cash commission
      paid       | -          |  | (47,607   | ) | -          |   | -       |  | -            |   | -           |   | (47,607  | )
|warrants exercised                    | 17,334     |  | 17,334    |   | -          |   | -       |  | -            |   | -           |   | 17,334   |  
|Stock-based compensation              | -          |  | 15,417    |   | -          |   | -       |  | -            |   | -           |   | 15,417   |  
|Net loss for the year                 | -          |  | -         |   | -          |   | -       |  | -            |   | (413,495    | ) | (413,495 | )
|                                      |            |  |           |   |            |   |         |  |              |   |             |   |          |  
|Balance  April 30, 2000              | 10,217,735 |  | 4,525,666 |   | -          |   | -       |  | -            |   | (4,342,907  | ) | 182,759  |  
|Stock issued for cash pursuant to     |            |  |           |   |            |   |         |  |              |   |             |   |          |  
|warrants exercised                    | 4,000      |  | 2,000     |   | -          |   | -       |  | -            |   | -           |   | 2,000    |  
|Stock-based compensation              | -          |  | 18,500    |   | -          |   | -       |  | -            |   | -           |   | 18,500   |  
|Stock to be issued                    | -          |  | -         |   | 72,000     |   | -       |  | -            |   | -           |   | (72,000  | )
|Net loss for the year                 | -          |  | -         |   | -          |   | -       |  | -            |   | (808,681    | ) | (808,681 | )
|                                      |            |  |           |   |            |   |         |  |              |   |             |   |          |  
|Balance  April 30, 2001              | 10,221,735 |  | 4,546,166 |   | 72,000     |   | -       |  | -            |   | (5,151,588  | ) | (533,422 | )
|Stock issued for cash pursuant to a   |            |  |           |   |            |   |         |  |              |   |             |   |          |  
|private placement                     | 1,066,200  |  | 266,550   |   | (72,000    | ) | -       |  | -            |   | -           |   | 194,550  |  
|Stock-based compensation              | -          |  | 3,083     |   | -          |   | -       |  | -            |   | -           |   | 3,083    |  
|Net loss for the year                 | -          |  | -         |   | -          |   | -       |  | -            |   | (156,090    | ) | (156,090 | )
|                                      |            |  |           |   |            |   |         |  |              |   |             |   |          |  
|Balance  April 30, 2002              | 11,287,935 |  | 4,815,799 |   | -          |   | -       |  | -            |   | (5,307,678  | ) | (491,879 | )
|Stock issued to settle debt (Note 6)  | 6,100,000  |  | 305,000   |   | -          |   | -       |  | -            |   | -           |   | 305,000  |  
|Stock issued for services             | 250,000    |  | 16,500    |   | -          |   | -       |  | -            |   | -           |   | 16,500   |  
|Stock issued for convertible          |            |  |           |   |            |   |         |  |              |   |             |   |          |  
|debenture                             | 50,000     |  | 5,000     |   | -          |   | -       |  | -            |   | -           |   | 5,000    |  
|Stock to be issued                    | -          |  | -         |   | -          |   | 25,968  |  | -            |   | -           |   | 25,968   |  
|Donated consulting services           | -          |  | -         |   | -          |   | 187,500 |  |              |   | -           |   | 187,500  |  
|Net loss for the year                 | -          |  | -         |   | -          |   | -       |  | -            |   | (220,972    | ) | (220,972 | )
|                                      |            |  |           |   |            |   |         |  |              |   |             |   |          |  
|Balance  April 30, 2003              | 17,687,935 |  | 5,142,299 |   | 25,968     |   | 187,500 |  | -            |   | (5,528,650  | ) | (172,883 | )
|                                      |            |  |           |   |            |   |         |  |              |   |             |   |          |  
|Donated consulting services           | -          |  | -         |   | -          |   | 210,000 |  | -            |   | -           |   | 210,000  |  
|Stock issued for cash pursuant to a   |            |  |           |   |            |   |         |  |              |   |             |   |          |  
|private placement                     | 173,120    |  | 25,968    |   | (25,968    | ) | -       |  | -            |   | -           |   | -        |  
|Stock issued for cash pursuant to the |            |  |           |   |            |   |         |  |              |   |             |   |          |  
|exercise of warrants                  | 550,000    |  | 86,000    |   | -          |   | -       |  | -            |   | -           |   | 86,000   |  
|Stock issued for cash pursuant to the |            |  |           |   |            |   |         |  |              |   |             |   |          |  
|exercise of stock
      options       | 100,000    |  | 20,000    |   | -          |   | -       |  | -            |   | -           |   | 20,000   |  
|Stock-based compensation              | -          |  | 78,184    |   | -          |   | -       |  | (78,184      | ) | -           |   | -        |  
|Stock issued for services             | 400,000    |  | 92,000    |   | -          |   | -       |  | (92,000      | ) | -           |   | -        |  
|Stock issued to settle debt           | 3,320,000  |  | 166,000   |   | -          |   | -       |  | -            |   | -           |   | -        |  
|                                      |            |  |           |   |            |   |         |  |              |   |             |   |          |  
|Amortization of deferred              |            |  |           |   |            |   |         |  |              |   |             |   |          |  
|compensation                          | -          |  | -         |   | -          |   | -       |  | 142,355      |   | -           |   | 142,355  |  
|Net loss for the year                 | -          |  | -         |   | -          |   | -       |  | -            |   | (609,913    | ) | -        |  
|                                      |            |  |           |   |            |   |         |  |              |   |             |   |          |  
|Balance  April 30, 2004              | 22,231,055 |  | 5,610,451 |   | -          |   | 397,500 |  | (27,829      | ) | (6,138,563  | ) | (158,441 | )

(The accompanying notes are an integral part of the financial
  statements) 
  F-6

---

**REGI U.S. Inc.**
  (A Development Stage Company) 
  Notes to Financial Statements
  (expressed in U.S. dollars)

|1. | Nature of Operations and Continuance of
        Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | REGI U.S., Inc. herein ("the Company")
        was incorporated in the State of Oregon, U.S.A. on July 27, 1992.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   | The Company is a development stage company
        engaged in the business of developing and commercially exploiting an improved
        axial vane type rotary engine known as the Rand Cam/Direct Charge Engine
        ("The RC/DC Engine"). The world-wide marketing and intellectual rights,
        other than the U.S., are held by Rand Energy Group Inc. ("Rand"), which
        is a major shareholder of the Company. The Company owns the U.S. marketing
        and intellectual rights and has a project cost sharing agreement, whereby
        it will fund 50% of the further development of the RC/DC Engine and REGI
        will fund 50%.                                                                                                                                                                                                              
|  
|   | 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 suffered recurring operating losses as is normal in development stage
        companies. The Company also has a working capital deficit of $223,306.
        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.                                    
|  
|   | The Company plans to raise funds through
        loans from a shareholder, Rand. Rand owns approximately 18% of the shares
        of the Company, having an approximate current market value of $1,550,000
        as at August 13, 2004, and plans to sell shares as needed to meet ongoing
        funding requirements if traditional equity sources of financing prove
        to be insufficient. The Company receives interim support from its ultimate
        parent company and other affiliated companies and plans to raise additional
        capital through debt and/or equity financings. There continues to be insufficient
        funds to provide enough working capital to fund ongoing operations for
        the next twelve months. The Company may raise additional funds through
        the exercise of warrants and stock options, if exercised.
|  
|2. | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

F-7

---

**REGI U.S. Inc.**
  (A Development Stage Company) 
  Notes to Financial Statements
  (expressed in U.S. dollars)

|2. | Summary of Significant Accounting Policies
        (continued)
|-- | --------------------------------------------------------------
|  
|   | (e)                                                           
|  
|   |                                                               
|  
|   | (f)                                                           
|  
|   |                                                               
|  
|   | (g)                                                           
|  
|   |                                                               
|  
|   | (h)                                                           
|  
|   |                                                               
|  
|   | (i)                                                           
|  
|   |                                                               
|  
|   | (j)                                                           
|  
|   |                                                               

F-8

---

**REGI U.S. Inc.**
  (A Development Stage Company) 
  Notes to Financial Statements
  (expressed in U.S. dollars)

|2. | Summary of Significant Accounting Policies
        (continued)
|-- | --------------------------------------------------------------
|  
|   | (k)                                                           
|  
|   |                                                               
|  
|   | (l)                                                           
|  
|   |                                                               
|  
|   |                                                               
|  
|   |                                                               
|  
|   |                                                               

| |  |                                                       | Year Ended |  
| |  | ----------------------------------------------------- | ---------- | -
| |  |                                                       | April 30,  |  
| |  |                                                       | 2004       |  
| |  |                                                       | $          |  
| |  |                                                       |            |  
| |  | Net loss - as reported                                | (609,913   | )
| |  | Add: Stock-based compensation expense included in net |            |  
| |  | loss
      - as reported                              | 142,354    |  
| |  | Deduct: Stock-based compensation expense determined   |            |  
| |  | under
      fair value method                         | (149,467   | )
| |  | Net loss - pro forma                                  | (617,026   | )
| |  | Net loss per share (basic) - as reported              | (0.03      | )
| |  | Net loss per share (basic) - pro forma                | (0.03      | )

| |  | The assumptions used are as follows:
| |  | ------------------------------------

| |  |                                 | Year Ended | 
| |  | ------------------------------- | ---------- | 
| |  |                                 | April 30,  | 
| |  |                                 | 2004       | 
| |  |                                 | $          | 
| |  |                                 |            | 
| |  | Expected dividend yield         | 0%         | 
| |  | Risk-free interest rate         | 4.6%       | 
| |  | Expected volatility             | 221%       | 
| |  | Expected option life (in years) | 3          | 

F-9

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**REGI U.S. Inc.**
  (A Development Stage Company) 
  Notes to Financial Statements
  (expressed in U.S. dollars)

|2. | Summary of Significant Accounting Policies
        (continued)
|-- | --------------------------------------------------------------
|  
|   | (m)                                                           
|  
|   |                                                               
|  
|   | (n)                                                           
|  
|   |                                                               
|  
|   | (o)                                                           
|  
|   |                                                               
|  
|   |                                                               
|  
|   | (p)                                                           
|  
|   |                                                               

F-10

---

**REGI U.S. Inc.**
  (A Development Stage Company) 
  Notes to Financial Statements
  (expressed in U.S. dollars)

|3. | Intangible Assets
|-- | -----------------

| |                        |  |        |  |              |  | April 30,    |  | April 30,   
| | ---------------------- |  | ------ |  | ------------ |  | ------------ |  | ------------
| |                        |  |        |  |              |  | 2004         |  | 2003        
| |                        |  |        |  | Accumulated  |  | Net Carrying |  | Net Carrying
| |                        |  | Cost   |  | Amortization |  | Value        |  | Value       
| |                        |  | $      |  | $            |  | $            |  | $           
| |                        |  |        |  |              |  |              |  |             
| | Patents - RC/DC Engine |  | 98,001 |  | 33,136       |  | 64,865       |  | 63,207      



|   | (a)          | On August 20, 1992 the Company acquired the U.S.
        rights to the original Rand Cam-Engine from REGI by issuing 5,700,000
        shares at a fair value of $0.01 per share. REGI will receive a 5% net
        profit royalty. The $57,000 was charged to operations as research and
        development.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | ------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | (b)          | Pursuant to an agreement with a former director,
        the Company acquired the U.S. rights to the improved axial vane rotary
        engine known as the RC/DC Engine. In consideration for the transferred
        technology, the former director was issued 100,000 shares of Reg Technologies
        Inc. ("REG") (a public company owning 51% of REGI) with a fair value of
        $200,000. The $200,000 was charged to operations as research and development.
        A 1% net profit royalty will be due to the former director.                                                                                                                                                                                                                                                                                                                                                             
|  
|   | (c)          | Pursuant to a letter of understanding dated December
        13, 1993 between the Company, REGI and REG (collectively called the grantors)
        and West Virginia University Research Corporation ("WVURC"), the grantors
        have agreed that WVURC shall own 5% of all patented technology and will
        receive 5% of all net profits from sales, licences, royalties or income
        derived from the patented technology.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|4. | Common Stock
|  
|   | (a)          | Private Placement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |              | During fiscal 2003 the Company received proceeds
        of $25,968 ($21,468 from related companies) through a completed private
        placement of 173,120 units at $0.15 per unit. These units were issued
        on July 22, 2003. Each unit consists of one share of common stock and
        one warrant to purchase an additional share of common stock at a price
        of $0.20 per share expiring on July 7, 2004. The common stock offered
        will not be registered under the Securities Act of 1933 and may not be
        offered or sold in the United States absent registration or an applicable
        exemption from registration requirements. The common stock issued has
        not been registered with or approved by any state securities agency or
        the U.S. Securities and Exchange Commission and were sold pursuant to
        exemptions from registration.
|  
|   | (b)          | Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |              | The Company has a Stock Option Plan to issue up
        to 2,500,000 shares to certain key directors and employees, approved April
        30, 1993 and amended December 5, 2000. Pursuant to the Plan the Company
        has granted stock options to certain directors and employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-11

---

**REGI U.S. Inc.**
  (A Development Stage Company) 
  Notes to Financial Statements
  (expressed in U.S. dollars)

|4. | Common Stock (continued)
|-- | ------------------------
|  
|   | (b)                     
|  
|   |                         

| |  |                                                                                                |           |   | Weighted
| |  | ---------------------------------------------------------------------------------------------- | --------- | - | --------
| |  |                                                                                                |           |   | average 
| |  |                                                                                                |           |   | exercise
| |  |                                                                                                | Number of |   | price   
| |  |                                                                                                | shares    |   | $       
| |  | Outstanding, April 30, 2002                                                                    | 1,450,000 |   | 0.20    
| |  | Granted                                                                                        | 560,000   |   | 0.20    
| |  | Cancelled/Expired                                                                              | (160,000  | ) | 0.20    
| |  | Outstanding, April 30, 2003                                                                    | 1,850,000 |   | 0.20    
| |  | Granted                                                                                        | 350,000   |   | 0.27    
| |  | Exercised                                                                                      | (100,000  | ) | 0.20    
| |  | Cancelled                                                                                      | (200,000  | ) | 0.20    
| |  | Outstanding, April 30, 2004                                                                    | 1,900,000 |   | 0.21    
| |  | Exercisable at end of year                                                                     | 1,787,500 |   | 0.22    
| |  |                                                                                                |           |   |         
| |  | Additional information regarding options outstanding as at
      April 30, 2004 is as follows:

| |  |                |  | Outstanding |  | Exercisable 
| |  | -------------- |  | ----------- |  | ------------
| |  |                |  |             |  | Weighted    
| |  |                |  |             |  | average     
| |  |                |  |             |  | remaining   
| |  | Exercise price |  | Number of   |  | contractual 
| |  | $              |  | shares      |  | life (years)
| |  |                |  |             |  |             
| |  | 0.20-0.35      |  | 1,900,000   |  | 1.6         

| |     | The fair value for options granted was estimated
        at the date of grant using the Black-Scholes option- pricing model under
        the Black-Scholes option-pricing model the weighted average fair value
        of stock options granted during the year was $0.23.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (c) | Share Purchase Warrants                                                                                                                                                                                                                                                     
|
| |     | The following table summarizes the continuity of
        the Company's warrants:                                                                                                                                                                                            

| |  |                         |            |   | Weighted
| |  | ----------------------- | ---------- | - | --------
| |  |                         |            |   | average 
| |  |                         |            |   | exercise
| |  |                         | Number of  |   | price   
| |  |                         | shares     |   | $       
| |  |                         |            |   |         
| |  | Balance, April 30, 2002 | 1,896,967  |   | 0.39    
| |  | Expired                 | (1,896,967 | ) | 0.39    
| |  |                         |            |   |         
| |  | Balance, April 30, 2003 |           |   |        
| |  | Issued                  | 973,120    |   | 0.21    
| |  | Exercised               | (550,000   | ) | 0.16    
| |  | Expired                 | (250,000   | ) | 0.30    
| |  |                         |            |   |         
| |  | Balance, April 30, 2004 | 173,120    |   | 0.20    

F-12

---

**REGI U.S. Inc.**
  (A Development Stage Company) 
  Notes to Financial Statements
  (expressed in U.S. dollars)

|4. | Common Stock (continued)
|-- | ------------------------
|  
|   | (c)                     
|  
|   |                         

| |  | Number of |  | Exercise |  |                                                                        
| |  | --------- |  | -------- |  | -----------------------------------------------------------------------
| |  | Warrants  |  | Price    |  | Expiry Date                                                            
| |  |           |  |          |  |                                                                        
| |  | 173,120   |  | $0.20    |  | July 7, 2004 (extended to
      January 7, 2005 subsequent to year end)



|   | (d)                                 | Performance Stock Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | ----------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |                                     | The Company has allotted 1,000,000 shares to be
        issued pursuant to a Performance Stock Plan approved and registered on
        June 27, 1997. Compensation is recorded when the conditions to issue shares
        are met at their then fair market value. There are no options currently
        granted pursuant to this plan.                                                                                                                                 
|  
|   |                                     | Subsequent to April 30, 2004, the Company amended
        the Performance Stock Plan and has allotted 2,500,000 shares.                                                                                                                                                                                                                                                                                                                                                   
|  
|   | (e)                                 | Non-cash Consideration                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   |                                     | Shares issued for non-cash consideration were valued
        based on the fair market value of the services provided. During the year,
        the Company issued a total of 400,000 shares of common stock for consulting
        services. These shares were issued at an aggregate fair value of $92,000
        for services rendered. The Company charged to operations compensation
        expense of $92,000 since all services had been performed as of year end.
|  
|5. | Related Party Transactions/Balances
|  
|   | (a)                                 | Amounts owing to related parties are unsecured,
        non-interest bearing and are due on demand. These companies are related
        through significant ownership of the Company, having common officers and
        directors, and sharing the same office.                                                                                                                                                                                                          
|  
|   | (b)                                 | The value of consulting services of $90,000 (2003
        - $120,000) was contributed by the President, CEO and director of the
        Company and charged to operations and treated as donated capital.                                                                                                                                                                                                                                                                 
|  
|   | (c)                                 | The value of consulting services of $30,000 (2003
        - $30,000) was contributed by the Vice President and director of the Company
        and charged to operations and treated as donated capital.                                                                                                                                                                                                                                                                  
|  
|   | (d)                                 | The value of consulting services of $30,000 (2003
        - $30,000) was contributed by the CFO, COO and director of the Company
        and charged to operations and treated as donated capital.                                                                                                                                                                                                                                                                        
|  
|   | (e)                                 | The value of technical consulting services of $60,000
        (2003 - $7,500) was charged to research and development expenses and treated
        as donated capital.                                                                                                                                                                                                                                                                                                    
|  
|   | (f)                                 | Rent of $3,567 (2003 - $6,000) was paid to a company
        having common officers and directors.                                                                                                                                                                                                                                                                                                                                                                        
|  
|   | (g)                                 | Project management fees of $30,000 (2003 
        $Nil) were paid to a company having common officers and directors.                                                                                                                                                                                                                                                                                                                                                     

F-13

---

**REGI U.S. Inc.**
  (A Development Stage Company) 
  Notes to Financial Statements
  (expressed in U.S. dollars)

|6. | Commitments and Contingent Liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|7. | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   | Potential benefits of income tax losses
        are not recognized in the accounts until realization is more likely than
        not. The Company has incurred net operating losses of $5,133,000, which
        commence expiring in 2013. Pursuant to SFAS No. 109 the Company is required
        to compute tax asset benefits for net operating losses carried forward.
        Potential benefit of net operating losses have not been recognized in
        these financial statements because the Company cannot be assured it is
        more likely than not it will utilize the net operating losses carried
        forward in future years.
|  
|   | The components of the net deferred tax
        asset at April 30, 2004 and 2003, and the statutory tax rate, the effective
        tax rate and the elected amount of the valuation allowance are indicated
        below:                                                                                                                                                                                                                                                                                                                                                                                                                              

| |  |  |                        | 2004    |   | 2003   |   |  | 
| |  |  | ---------------------- | ------- | - | ------ | - |  | 
| |  |  |                        | $       |   | $      |   |  | 
| |  |  | Net Operating Loss     | 258,000 |   | 17,000 |   |  | 
| |  |  | Statutory Tax Rate     | 34%     |   | 34%    |   |  | 
| |  |  | Effective Tax Rate     | -       |   |       |   |  | 
| |  |  | Deferred Tax Asset     | 88,000  |   | 6,000  |   |  | 
| |  |  | Valuation Allowance    | (88,000 | ) | (6,000 | ) |  | 
| |  |  | Net Deferred Tax Asset |        |   |       |   |  | 

|8. | Subsequent Events
|-- | -----------------
|  
|   | (a)              
|  
|   | (b)              

F-14

---