<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                                        
                             Washington, D.C. 20549
                        _______________________________
                                        
                                  FORM 10-KSB
                                        
              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           THE SECURITIES ACT OF 1934

                    For the Fiscal Year Ended April 30, 1997

                          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)


                          185 - 10751 Shellbridge Way
                   Richmond, British Columbia V6X 2W8, Canada
 (Address, including postal code, of registrant's principal executive offices)

                                 (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                    None

     Indicate by check mark 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,
and (2) has been subject to such filing requirements for the past 90 days.

Yes X
   ---

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this form 10-KSB or any amendment to
this Form 10-KSB. 
                 ----

     The registrants revenues for its most recent fiscal year were:  nil.

     The Aggregate market value of the voting stock held by non-affiliates of
the registrant on July 24, 1997, computed by reference to the price at which the
stock was sold on that date: $1,600,000.

     The number of shares outstanding of the registrant's Common Stock, no par
value, as of July 24, 1997 was 8,233,300.

     Documents incorporated by reference:  Proxy Statement incorporated by
reference in Part III.
_______________________________________________________________________________
<PAGE>
 
                                REGI U.S., INC.
                                        
                                  FORM 10-KSB
                                        
                               TABLE OF CONTENTS


<TABLE> 
<CAPTION> 


PART I                                                          Page
                                                                ----
<S>                                                             <C>
Item  1.   Business...........................................   3
 
Item  2.   Property...........................................   9

Item  3.   Legal Proceedings..................................   9
 
Item  4.   Submission of Matters to a Vote of Security
           Holders............................................   9
 
PART II

Item  5.   Market for Common Equity and Related Stockholder
           Matters............................................   9

Item  6.   Management's Discussion and Analysis of Financial
           Condition and Results of Operations................  10

Item  7.   Financial Statements...............................  13

Item  8.   Changes in and Disagreements with Accountants
           on Accounting and Financial Disclosure.............  14

PART III

Item  9.   Directors and Executive Officers of the Registrant;
           Compliance With Section 16(a) of the Exchange Act..  14

Item 10.   Executive Compensation.............................  14
 
Item 11.   Security Ownership of Certain Beneficial Owners and
           Management.........................................  14

Item 12.   Certain Relationships and Related Transactions.....  14
 
Item 13.   Exhibits and Reports on Form 8-K...................  14

</TABLE> 

                                       2
<PAGE>
 
Item 1.    Business
-------    --------

General


     The Company was organized under the laws of the State of Oregon on July 27,
1992 as Sky Technologies, Inc.  On August 1, 1994, the Company's name was
officially changed by majority shareholder vote to REGI U.S., Inc.  The Company
is controlled by Rand Energy Group Inc., a privately held British Columbia
corporation ("REGI"), which, in turn, is controlled 51% by Reg Technologies
Inc., a publicly held British Columbia corporation ("Reg Tech").  The Company is
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 intellectual and marketing rights to the
RC/DC Engine are held by REGI.  The Company holds the rights to develop, build
and market the RC/DC Engine design in the U.S. pursuant to an agreement with
REGI.  Under a project cost sharing agreement entered into with REGI effective
May 1, 1993, each company will fund 50% of the continuing development cost of
the RC/DC Engine.

     The Company's principal offices are located at 10751 Shellbridge Way, Suite
185, Richmond, British Columbia V6X 2W8, Canada.  Its telephone number is (604)
278-5996 and its telefacsimile number is (604) 278-3409.

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

Products

     The Company is engaged in the business of developing and building an
improved axial vane-type rotary engine known as the 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 REGI.  A United
States patent was issued for the RC/DC Engine on July 4, 1995, and assigned to
the Company.  Since no marketable product has yet been developed, the Company
has received no revenues from operations.

     The RC/DC Engine is based upon the Original Engine patented in 1983.  Brian
Cherry, an 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 the
Company.  It is believed that 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 among 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 REGI.  Reg Tech acquired the 40% voting interest in REGI
in consideration of the payment of $250,000.

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

     On August 20, 1992, the Company entered in an agreement with REGI and Brian
Cherry (the "August 1992 Agreement") under which the Company issued 5,700,000
shares of its Common Stock at a deemed value of $0.01 per share to REGI 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.  REGI's president is also the president of
the Company and its Vice President and Secretary is also a Director of the
Company.  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.

                                       3
<PAGE>
 
     Also in August 1992, the Company sold 300,000 shares of its Common Stock at
$0.01 per share to Brian Cherry.

     In an agreement dated April 13, 1993 among the Company, REGI, Reg Tech and
Brian Cherry (the "April 1993 Agreement") and made as an amendment to a previous
Amendment Agreement dated November 23, 1992 between REGI, Reg Resources Corp.
(now Reg Tech) and Brian Cherry and an original agreement dated July 30, 1992
between REGI, Reg Resources Corp. and Brian Cherry, Cherry agreed to: (a) sell,
transfer and assign to REGI worldwide rights except for the United States of
America 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.  The Company has the
manufacturing and marketing rights for the RC/DC Engine and the Technology in
the United States.  Thus uses of the RC/DC Engine or the Technology in the
United States belongs to the Company including manufacturing for export.  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.

     A final provision of the April 1993 Agreement assigns and transfers
ownership to the Company of any patents, inventions, copyrights, know-how,
technical data, and related types of intellectual property conceived, developed
or created by REGI 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 REGI.

     Pursuant to a letter of understanding dated December 13, 1993 among the
Company, REGI 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 will
provide continued support and development of the RC/DC Engine including
research, development, testing evaluation and creation of intellectual property.
In addition WVURC will introduce the Company to potential customers and
licensees.  The Company also will be entitled to all additional intellectual
property developed by WVURC relating to the RC/DC Engine.

     In June, 1997, the Company announced that it had reached an agreement with
John Weston to acquire the US rights to his invention, the Air/Vapour Fuel Cell
System.  The objective of this invention is to reduce harmful carbon monoxide
emissions by eliminating unburned liquid fuel in the exhaust.  Initial payment
to Weston was $13,500 plus 50,000 shares of the Company.  A subsequent payment
of $36,500 plus 75,000 shares upon successful completion of tests and the filing
of the patent application.  The Company agrees to pay an 8% net profit interest
on all sales to the inventor.

     Based upon testing work performed by independent organizations on prototype
models, the Company believes that the RC/DC Engine holds significant potential
in a number of 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 also being employed in the
development of a compressor unit which may find application in automobile air
conditioners.

     At the present time, several prototypes of the RC/DC Engine have been
tested and additional development and testing work is continuing.  The Company
believes that such development and testing will continue for at least another
year before a more or less "final" design is achieved, and it may take several
years before 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 to the Company.  If a
commercially feasible design is perfected, the Company does, 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.

     Two prototypes were built by the WVURC to run on gasoline.  Testing on
these prototypes suggested that the

                                       4
<PAGE>
 
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 consisting of Hercules Aerospace Company (now Alliant Techsystems),
WVURC and the Company. Hercules Aerospace was involved in the design and
development including drawings for the RC/DC diesel engine. In addition Hercules
Aerospace performed extensive analysis on the diesel engine including bearings,
cooling, leakage, rotor, vanes, housing, vane tip heating, geometry and
combustion. This engine is being designed as a general purpose power plant for
military and commercial applications. Prototypes of the diesel engine have been
assembled and tested. On October 1, 1996, the Company announced the results of
tests performed at Adiabatics Inc. in Columbus, Indiana (an experienced engine
research and testing company). In general, these results were favorable and led
to modifications of the prototype. Subsequently, the Company reported a
successful Diesel Engine Compression Test in May, 1997. Additional tests and
modifications will be performed.

     Also, the Scooter Rand Cam(TM) Engine prototype required equipment has been
fabricated and acquired.  The Motor Scooter engine will weigh approximately 15-
20 pounds and generate 20 HP.  The Company has received inquiries from
manufacturers regarding the possibility of including the Motor Scooter Engine in
lightweight and inexpensive vehicles.  There is no assurance, however, that the
Company will enter into an agreement with anyone to manufacture the Motor
Scooter engine.  Accordingly, in the event that the Company does not enter into
an agreement to manufacture the engine or in the event the Company locates a
manufacturer that subsequently ceases operations for any reason, serious
financial consequences to the Company could result.  Assembly and testing of the
Motor Scooter prototype began in April, 1997.

     The compressor prototype has been completed and testing has commenced in
the ETL labs in Cortland, NY (an experienced compressor testing company).  The
compressor is being built for an automobile air-conditioning unit.  In April,
1997, the Company announced that the phase I aluminum compressor was rebuilt to
have "Skates" introduced to guide the vanes through the pin track and to have
vane seals to insure sealing during expansion of the housing.  Tests at 2500 RPM
at a pressure of 160 psi indicated that all parts were in excellent.  Additional
tests involving higher RPM will be conducted at the ETL facilities.

     The Company is in the process of purchasing its own test stand to speed up
the development of both the engine and compressor prototypes.

     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.  It is believed 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 and decreased
emissions.

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

     While market acceptance of a new type of engine could be difficult to
achieve, once accepted, such an engine could have a potential market of hundreds
of thousands of units per year.  The Company has 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.  The two prototypes are being used as demonstrators to prove that the
Technology works and can be used in other engines.  For example Hercules
Aerospace looked at all engine applications for the RC/DC Engine.  Based on the
market potential, the Rand Cam mechanism is well suited for application to
internal combustion engines, pumps and compressors and expansion engines, such
as turbines and other piston engine applications.  The mechanism can be scaled
to match virtually any size requirement.  This flexibility opens the door to
large markets being developed.  The Company is currently testing prototypes for
these products.  The Company's strategy is to develop engines and compressors
for low to medium horsepower applications, then apply the

                                       5
<PAGE>
 
Technology to larger applications. The Company plans to then license the
Technology or enter into joint venture arrangements for other specific
applications. The licensee or joint venture partners will then provide funding
for research and development of the specific applications.

     A "Technology Evaluation" report was prepared on the RC/DC Engine dated May
19, 1993 by Patrick R. Badgley of Adiabatics, Inc.  This evaluation concludes
that the engine concept is sound and has numerous advantages over current
engines.  At the time of the report, Mr. Badgley was director of research and
development at Adiabatics, Inc.  Mr. Badgley is now a Vice President of the
Company.  The Company believes the conclusions contained in the report are still
valid.

Royalty Payments

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

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

     Pursuant to the letter of understanding dated December 13, 1993 among the
Company, REGI, 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 Hercules Aerospace Company and Adiabatics,
Inc.

Marketing

     The Company intends to pursue the commercial development of the RC/DC
Engine by entering into licensing and/or joint venture arrangements with other
larger companies which would have the financial resources to maximize the
potential of the engine.  At the present time no such licensing or joint venture
arrangements have been concluded and there is no assurance that any will be in
the foreseeable future.  There are no plans at present for the Company to become
actively involved in either manufacturing or marketing any engine which it may
ultimately develop to the point of becoming a commercial product.

     The Company's current objective is to complete and test the compressor and
diesel engine prototypes.  Based on the successful testing, the prototypes will
be used for presentation purposes to potential license and joint venture
partners.  The Company will be making presentations to the military which could
result in additional government funding if the diesel engine prototype meets
with its approval.

     The Company expects revenue from license agreements with the potential end
users based on the success of the early test results from the compressor and
diesel engine prototypes.  Within six months of successful testing of the
prototypes, the Company expects to have joint venture or license agreements
finalized.  These would result in royalties to the Company.  However, there is
no assurance that the tests will be successful and that the Company will ever
receive any such royalties.

Research and Development

     The basic research and development work on the RC/DC Engine is being
coordinated and funded by Reg Tech.

     The Company plans to contract with outside individuals, institutions and
companies to perform most of the

                                       6
<PAGE>
 
additional research and development work which it may require to benefit from
its rights to the RC/DC Engine.

     The Company has entered into an employment agreement with Patrick Badgley,
a professional engineer in Columbus, Indiana, and a Vice President and Director
of the Company, to act as Research Project Manager for the RC/DC Engine.  Under
the agreement, Mr. Badgley, will receive compensation of $7,700 per month plus
reasonable expenses related to the project, of which the Company will pay 50%
and REGI will pay 50%.

     Development work on the application of the RC\DC engine design in auto air
conditioner compressors is being completed by Aerotech Driveline, a design firm
in Detroit, Michigan under a contract with Reg Tech.

Environmental Control Factors

     At the present time there is no direct financial or competitive effect upon
the Company's 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.

Key Customers

     Although the Company has no key customers at the present time, it is
expected that if its development work is successful, it 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.

Raw Materials

     Since the Company is not in production and there are no plans at this time
for the Company 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.

Patent Information

     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
the Company. U.S. Patent 4,401,070 for the Original Engine was issued on August
30, 1983 to James McCann and the marketing rights are held by REGI.

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

Seasonality and Backlog of Business

     Since the Company is not yet in production, seasonality of its potential
business is not of present concern.  However, at this time it does not appear
that there will be a significant seasonal factor to its potential business.

     The Company has no current backlog of business.

Working Capital Requirements

     Because the Company is not yet producing and selling any products, working
capital requirements relative to production, inventory and accounts receivable
are not relevant.  Working capital requirements for day-to-day operations

                                       7
<PAGE>
 
and the continuation of research and development activities have been provided
from equity capital and advances from related parties including Reg Tech and
REGI.

     Until such time as the Company is able to obtain revenues from licensing
production rights to the engine or from some related activities it will most
likely need to rely on additional equity capital or debt capital, if available.
REGI and Reg Tech have agreed to provide the necessary funds for the development
of the RC/DC Diesel Engine prototype and the other operations of the Company
until joint venture or license agreements can be completed.

     On September 23, 1996, the Company announced that $333,100.00 had been
received by way of a $40,000 private placement at $2.00 per unite and exercise
of warrants.  Each unit consists of one share and one two-year warrant, enabling
the investor to purchase one additional share at $2.00 in the first year, and/or
$2.50 in the second year.  $293,100.00 was received by the exercise of 195,400
warrants at $1.50 per share.

     On April 25, 1997, the Company offered up to $500,000 of 8 3/4 % Senior
Convertible Debentures due June 15, 2000 through a private placement.

     The Company believes  that it currently has on hand sufficient funds to
cover anticipated expenses relating to this development work and the ongoing
overhead costs of maintaining offices and functioning as a publicly held
company.  Additionally, the Company expects that it may receive additional
capital as the result of the sale of shares of Common Stock either through
private placements or public offerings and through the exercise of outstanding
options and warrants.  REGI currently owns over $20 million of Common Stock (at
current market prices) which it has agreed to sell under Rule 144 as necessary
to fund the operations of the Company.

Business Subject to Renegotiation

     The Company currently has no business or contract subject to renegotiation
with any agency of the U.S. Government and does not expect to have any during
the fiscal year ending April 30, 1997.

Competition

     The Company currently faces and will continue to face competition in the
future from established companies engaged in the business of developing,
manufacturing and marketing engines.  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 the Company.  Internal combustion engines are produced by
automobile manufacturers, marine engine manufacturers, heavy equipment
manufacturers and specialty aircraft and industrial engine manufacturers.  The
Company expects that its engine would be used mainly in industrial and marine
applications.

     Except for the Wankel rotary engine built by Mazda of Japan, no competitor,
of which the Company is aware, presently produces  in  a commercial quantity any
rotary engine similar to that which the Company is 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 are currently available to the Company, however, it is very possible that
it may not be able to adequately compete in the engine business.  One
competitor, Infinite Engines Corporation, is developing a competitive rotary
engine.  However, the Company believes that its engine is dramatically
different.  The Infinite Engine is similar to the old Wankel engine which had
pollution problems and was not fuel efficient.  The Company's RC\DC Engine is
more fuel efficient and will have fewer emissions.

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

                                       8
<PAGE>
 
Employees

     The Company currently has one full-time and three part-time employees, only
two of which are directly involved in technical development work on the RC/DC
Engine.  The Company expects to hire additional employees for those positions
which it deems necessary to fill, as needs arise.  Most additional employees are
expected to be in technical and licensing/marketing positions.

Segment Data

     The Company currently operates only in one industry and therefore, the
financial statements contained herein describe its operations in this one
industry.  All dollar amounts are stated in U.S. funds, unless otherwise noted.
The Company has no foreign operations and has recorded no sales since its
inception.


Item 2.    Property
-------    --------

     The Company owns no properties.  It 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 its portion of
this office space is $500.00.  The present facilities are believed to be
adequate for meeting the Company's needs for the immediate future.  However,
management expects that the Company will likely acquire separate space when the
level of business activity requires it to do so.  The Company does not
anticipate that it 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.  Mr. Badgley works out of an office in his home
in Columbus, Indiana.  From this office, Mr. Badgley oversees and controls
development and testing of the engine prototypes.  Mr. Badgley has also designed
several important improvements to the RC/DC Engine for which patent applications
are pending.


Item 3.    Legal Proceedings
-------    -----------------

     The Company is not a party to any legal proceedings or litigation, nor is
it aware that any litigation is presently being threatened or contemplated
against either itself or any officer, director or affiliate.


Item 4.    Submission of Matters to a Vote of Security Holders
-------    ---------------------------------------------------

     No matters were submitted to a vote by the Company's security holders
during the fourth quarter of its fiscal year ended April 30, 1997.


                                    PART II

Item 5.    Market for Common Equity and Related Stockholder Matters
-------    --------------------------------------------------------

     There is a limited public market for the Common Stock of the Company which
currently trades on the NASD OTC Bulletin Board under the symbol "RGUS" where it
has been traded since September 21, 1994.  The Common Stock has traded between
$.875 and $6.75 per share since that date.

     The following table sets forth the high and low prices for the Company's
Common Stock, as provided by NASD and 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.

                                       9
<PAGE>
 
<TABLE> 
<CAPTION> 
                                                           Bid Price                      Asked Price
                                                         High     Low                   High      Low
                                                         ----     ---                   ----      ---
<S>                                                     <C>       <C>                   <C>       <C>
Quarter ended October 31,  1994                         none reported                   none reported

Quarter ended January 31,  1995                         $3.00     $1.25                 $3.375    $2.40

Quarter ended April 30,  1995                           $3.00     $1.25                 $3.375    $2.25

Quarter ended July 30,  1995                            $2.50     $1.75                 $2.875    $2.00

Quarter ended October 31, 1995                          $2.75     $1.875                $2.75     $2.12

Quarter ended January 31, 1996                          $6.75     $2.4375               $6.62     $2.56

Quarter ended April 30, 1996                            $6.25     $3.75                 $6.62     $4.00

Quarter ended July 30,  1996

Quarter ended October 31, 1996

Quarter ended January 31, 1997

Quarter ended April 30, 1997
</TABLE>

As of July 24, 1997, there were 8,223,300 shares of Common Stock outstanding,
held by 161 shareholders of record.

                                DIVIDEND POLICY

     To date the Company has not paid any dividends on its Common Stock and does
not expect to declare or pay any dividends on such Common Stock in the
foreseeable future.  Payment of any dividends will be dependent upon future
earnings, if any, the financial condition of the Company, and other factors as
deemed relevant by the Company's Board of Directors.

Item 6.    Management's Discussion and Analysis of Financial Condition and
-------    ---------------------------------------------------------------
           Results of Operations
          ---------------------

Management's Discussion
-----------------------

The Company was incorporated in the State of Oregon, on July 27, 1992 and is in
the business of developing and commercially exploiting an improved axial vane
type rotary engine known as the Rand Cam/Direct Charge Engine ("The Engine"),
which is a variation of the original Rand-Cam Engine. The world-wide marketing
and intellectual rights, other than the U.S., are held by Rand Energy Group Inc.
("REGI") which controls the Company. The Company owns the U.S. marketing and
intellectual rights and has a project cost sharing agreement, effective May 1,
1993, whereby it will fund 50% of the further development of The Engine and REGI
will fund 50%.

In a development stage company, management devotes most of its activities to
establishing a new business.  Planned principle activities have not yet produced
significant revenue.  The ability of the Company to emerge from the development
stage with respect to its planned principle business activity is dependent upon
its successful efforts to raise additional equity financing and develop the
market for its products.

Director's Progress Report from May 1, 1996 to July 15, 1997
------------------------------------------------------------

On May 23, 1996 the Rand Cam(TM) Compressor was transferred to Cortland, NY from
fabricating facilities in California.  An experienced compressor testing company
and Pat Badgley, Vice President of Research Development, recommended some minor
modifications.  The fabricating facilities in California report that there were
no leaks and the engine rotated freely.

Preliminary testing began to test the compressor as an air conditioning unit for
automobiles. The Rand Cam(TM) Air Conditioning unit is a very quiet and smooth
unit and is one-half the size of existing air conditioning units currently used
in automobiles.

On July 8, 1996 the fabricating of the Rand Cam(TM) Diesel Engine was completed
and assembly started. Testing took place under the direction of the major
designer of the Rand Cam(TM) Diesel Engine, Pat Badgley. Paul Lamarche, PhD,
engineering consultant, has been contracted by the Company to assist in testing
the Rand Cam(TM) Diesel Engine. His experience includes the successful testing
of the Rand Cam(TM) Gasoline prototype in Detroit, in January of 1995, whereas
one hour of testing resulted in positive torque outputs and good throttle
response .

The Rand Cam(TM) Diesel Engine is a demonstrator model to prove that the
technology is feasible. The engine has twelve vanes, continuous injection with
twenty-four power impulses, K-Miller cycle, extended combustion and is designed
to power a 60KW generator.

This demonstration model will be used to attract license and joint venture
agreements for the Company.

On July 15, 1996 the Company agreed to a cooperative agreement to participate
with Global Aircraft Corporation in the NASA GAP program. On November 1, 1996,
the submission was not awarded by the NASA GAP personnel. The NASA GAP program
was awarded to a large aerospace company.

On September 13, 1996 a progress report was received from Paul Lamarche
regarding test results on the Rand Cam(TM) Compressor. The compressor was run at
1,200 RPM, 2,000 RPM, 3,000 RPM and 4,000

                                      10
<PAGE>
 
RPM. The system worked very well as far as keeping the hardware cool. The
compressor remained at room temperature during the test runs. On Test #1 the
compressor was run at 1,200 RPM and 2,000 RPM on Test #2. The data showed the
tests were successful and the discharge temperatures were higher than the
suction temperature which meant the compressor was functioning properly.

On October 1, 1996 the Rand Cam(TM) Diesel Engine commenced testing at
Adiabatics, Inc. in Columbus, Indiana. The Engine was installed in an engine
test cell which had a 50 horsepower D.C. dynamometer which can motor the engine
over a wide speed range as well as absorb power from the Engine. The test stand
had an in-line, strain gage type torquemeter for measuring the power transmitted
in the shaft from the Engine to the dynamometer. The test cell completed
instrumentation to measure speed, temperatures and pressures. The data was
gathered on a computer data logger. Based on the report by Pat Badgley, the
first test was positive and the hardware looked good.

On October 2, 1996 the modifications recommended by Paul Lamarche and Pat
Badgley commenced in Detroit at Five Star Industries, an aerospace components
developer.

On October 28, 1996 an agreement with the Quincy Compressor Division, a Coltec
Industries Company, to build a low pressure compressor for medical applications
had been entered into.

On December 27, 1996 the Company received an outline of the Rand Cam(TM) Air
Conditioning Compressor development test program from Paul Lamarche. An
extensive testing and hardware development program was instituted on November 2,
1996 reaching the performance goals of the specifications set by the automotive
industry to qualify the Rand Cam(TM) Air Conditioning Compressor.  A set of in
excess of twenty tests were performed at various speeds, using various
materials, on two phases of hardware models.  Phase 1 utilized an aluminum
housing with a pin track, guide to dynamically locate the vanes.  Phase 2
utilized a cast iron housing with vanes self-locating against the cams.

On January 17, 1997, a series of programs commenced on the Rand Cam(TM)
Compressor and Diesel Engine as follows:

   (i)   The air conditioning compressor was successfully tested at 3,700 RPM
         with 260 PSI, the best result to date.

   (ii)  The diesel engine prototype testing will commence after an engineering
         analysis is completed in Detroit by Paul Lamarche.

   (iii) The medical application compressor design was completed and the
         fabricating of the prototype model commenced.

   (iv)  Three Small Business Innovations Research (SBIR) program applications
         were submitted by Pat Badgley to the US government for funding. The
         funding is for the US Department of Defence motorcycle, boat and small
         airplane applications.

Several companies in Europe, Asia, and India have expressed interest in license
agreements for the Rand Cam(TM) Engine motorcycle. Engineers will commence a
design for a prototype motorcycle Rand Cam(TM) Engine.

On February 26, 1997 a successful preliminary system function test was
conducted. The test consisted of a simulated vehicle with all the components,
evaporator, condenser, control valves, fan and ducts on the Rand Cam(TM) Air
Conditioning Compressor unit.  The unit performed as designed and met
expectations.  The test was to evaluate the Rand Cam(TM) Compressor cooling
cycle using the non-polluting 134A Freon.

On July 17, 1997 several proof of concept tests to fire the Rand Cam(TM) Scooter
Engine were successfully completed. The engine parts were inspected and found to
be in excellent condition after the series of tests.  Additional tests will be
run in the future.

                                      11
<PAGE>
 
Several meetings with potential joint venture or licensees were concluded in
July resulting in positive interest in its Rand Cam(TM) compressor and pump
applications. Negotiations to work on their applications are now taking place.
The Company's objective is to sign several joint venture or license agreements
with large end users for its Rand Cam(TM) design during fiscal 1998.

During fiscal 1998, the Company plans to raise $500,000 through a three year, 8
3/4% interest, convertible debenture, of which $5,000 has been raised to date.
The 8 3/4% interest is paid annually and the debenture is convertible into Class
common shares at $1.25, $1.50 and $1.75 in years one, two and three,
respectively. In the event the shares are trading below $2.00 per share over a
ten-day average prior to exercising into shares of the Company during the last
month of the third year, the convertible debenture will be exercisable at 20%
below the said ten-day average. The maturity date is June 15, 2000.

The Company will use these funds to pay down accounts payable and to complete
the development of the Rand Cam(TM) Compressor and Diesel Engine prototypes for
demonstration purposes to potential license and/or joint venture companies.

Results of operations for the fiscal 1997 compared to fiscal 1996
-----------------------------------------------------------------
There were no revenues from product licensing during the years.

The net loss in 1997 decreased by $286,721 to $510,184 compared to $796,905 in
1996. The decreased net loss in 1997 was due to administrative expenses which
decreased by $54,606 to $249,248 as compared to $303,854 in 1996. The major
components of this decrease was due to a decrease in advertising of stock and
investor relations activities by $93,060 to $96,526 as compared to $189,586 in
1996; professional fees increased by $30,227 to $102,994 as compared to $72,767
in 1996.  During 1997, research and development costs decreased by $232,115 to
$260,936 compared to $493,051 in 1996. The decrease was due to more cost
effective prototype construction activity during 1997 as compared to extensive
completion of prototypes in 1996.  Prototype costs decreased by $267,352 to
$55,000 compared to $322,412 in 1996.

Liquidity
---------

During fiscal 1997, the Company financed its operations, in part, from proceeds
from two private placements whereby the Company received $40,000 and issued
20,000 shares at $2.00 per share and received $217,500 and issued 145,000 shares
at $1.50 per share.

During the year the Company received $13,700 and issued 137,000 shares at $.10
per share pursuant to options exercised.

A total of $278,100 was received, and 185,400 shares issued, pursuant to
warrants exercised at $1.50 per share.

The Company received a loan of $7,200 from the President of the Company.

The Company's financial resources, including an opening cash balance as at April
30, 1996 of $2,768, totalled $559,268. Cash used, as a result of the net loss
for the period, totalled $428,454, after adjustments to reconcile net loss to
cash. During the year the Company spent $13,901 on patent protection costs and

                                      12
<PAGE>
 
$115,694 paying down an amount owing to an affiliate. After the above cash
outflows the Company was left with $1,219 as at April 30, 1997. These funds
together with the planned convertible debenture issue of $500,000 will be used
for further development of the Rand Cam(TM) Engine, pay off April 30, 1997 net
accounts payable totalling $124,450 and to provide working capital.


Item 7.     Financial Statements
-------     --------------------

                         Index to Financial Statements

<TABLE> 
<CAPTION> 
                                                            Page
<S>                                                         <C>
Report of Public Accountants...............................  F-1

Balance Sheet at April 30, 1993, 1994, 1995 and 1996.......  F-2

Statements of Operations for the years ended
 April 30, 1993, 1994, 1995 and 1996.......................  F-3

Statements of Stockholder's Equity (Deficit)
 From July 27, 1992 (Inception) to April 30, 1996..........  F-4

Statements of Cash Flows Accumulated From July 27, 1992
 (Inception) to April 30, 1996 and for the years ended
 April 30, 1993, 1994, 1995 and 1996.......................  F-6

Notes to the Financial Statements..........................  F-7
</TABLE> 

                                      13
<PAGE>
 
                  [LETTERHEAD OF ELLIOTT TULK PRYCE ANDERSON]


                          Independent Auditor's Report
                          ----------------------------


To the shareholders 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, 1997 and 1996 and the related
statements of operations, stockholders' equity and cash flows for the years
ended April 30, 1997 and 1996. 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 audit.

We conducted our audits in accordance with generally accepted auditing
standards. 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, 1997 and 1996, and the results of its operations
and its cash flows for the years ended April 30, 1997 and 1996, in conformity
with U.S. generally accepted accounting principles.

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. These factors raise 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/ ELLIOTT TULK PRYCE ANDERSON

                                     CHARTERED ACCOUNTANTS

Vancouver, B.C., Canada
July 17, 1997
<PAGE>
 
REGI U.S., Inc.
(A Development Stage Company)
Balance Sheets
April 30, 1997 and 1996
(expressed in U.S. dollars)

<TABLE> 
<CAPTION> 

                                                        1997           1996
                                                          $              $
<S>                                                   <C>           <C> 
                        Assets
Current Asset
 Cash                                                      1,219         2,768
Fixed Assets (Note 4)                                      3,734         8,684
Intangible Assets (Note 4)                                44,007        32,564
                                                      ----------    ----------
                                                          49,020        44,016
                                                      ==========    ==========

        Liabilities And Stockholders' Deficit

Current Liabilities
 Accounts payable and accrued liabilities                149,451        75,069
 Due to affiliate                                          1,056       116,750
 Due to officer                                            7,200             -
                                                      ----------    ----------
                                                         157,707       191,819
                                                      ----------    ----------
 
Stockholders' Deficit
Common Stock (Note 5), 20,000,000 shares
 authorized without par value; 8,123,300
 and 7,635,900 shares issued and
 outstanding respectively.                             2,841,900     2,292,600
Deficit Accumulated During the Development Stage      (2,950,587)   (2,440,403)
                                                      ----------    ----------
                                                        (108,687)     (147,803)
                                                      ----------    ----------
                                                          49,020        44,016
                                                      ==========    ========== 
Commitments and Contingent Liabilities (Note 7)

</TABLE>

   (The accompanying notes are an integral part of the financial statements)
<PAGE>
 
REGI U.S., Inc.
(A Development Stage Company)
Statements of Operations
Accumulated from July 27, 1992 (Inception) to April 30, 1997 and
the Years ended April 30, 1997 and 1996
(expressed in U.S. dollars)


<TABLE>
<CAPTION>
                                                         May 1         May 1
                                         Accumulated      1996          1995
                                          During the       to            to
                                         Development    April 30      April 30
                                            Stage         1997          1996
                                              $             $             $
<S>                                      <C>            <C>           <C>
Revenues                                      -             -             -
                                         ----------     ---------     ---------
Administrative Expenses
 Advertising - stock                        132,589         9,965        94,719
 Bank charges                                 3,543         2,525           563
 Foreign exchange                             2,826           589           297
 Office, rent and telephone                  75,519        26,680        42,229
 Professional fees                          229,652       102,994        72,767
 Stockholder and investor relations         229,035        86,561        94,867
 Transfer agent and regulatory fees          36,925        20,003         4,737
 Travel                                       5,423           609             -
 Less: interest                             (13,757)         (678)       (6,325)
                                         ----------     ---------     ---------
                                            701,755       249,248       303,854
                                         ----------     ---------     ---------
 
Research and Development Expenses
 Intellectual property                      257,000             -             -
 Amortization                                17,678         7,348         6,516
 Market development                          86,346             -         6,962
 Professional fees                           73,904         4,089         3,220
 Project management                         130,000        30,000        30,000
 Project overhead                           109,023        35,522        29,375
 Prototype design and construction        1,135,687        55,060       322,412
 Technical consulting                       115,809        58,310        11,250
 Technical reports                           17,120         1,000         2,456
 Technical salaries                         169,467        51,746        53,858
 Travel                                     136,798        17,861        27,002
                                         ----------     ---------     ---------
                                          2,248,832       260,936       493,051
                                         ----------     ---------     ---------
Net Loss                                  2,950,587       510,184       796,905
                                         ==========     =========     =========
Net Loss Per Share                                           (.06)         (.10)
                                                        =========     =========
Weighted Average Shares Outstanding                     7,887,000     7,382,000
                                                        =========     =========
</TABLE>

   (The accompanying notes are an integral part of the financial statements)
<PAGE>
 
REGI U.S., Inc.
(A Development Stage Company)
Statements of Stockholders' Equity
From July 27, 1992 (Inception) to April 30, 1997
(expressed in U.S. dollars)


<TABLE>
<CAPTION>
 
 
                                                                                 Deficit Accumulated
                                                         Common Stock                 During the
                                                    Shares             Amount      Development Stage
                                                     #                    $               $
<S>                                              <C>                   <C>        <C>
Balance - July 27, 1992 (inception)                      -                   -                -
 Stock issued for intellectual property at
   $0.01 per share                               5,700,000              57,000                -

 Stock issued for cash at $0.01 per
   share                                           300,000               3,000                -
 
Net loss for the period from
   July 27, 1992 to April 30, 1993                       -                   -          (23,492)
                                                 ---------            --------        --------- 
Balance - April 30, 1993                         6,000,000              60,000          (23,492)

 Stock issued for cash pursuant to
   a public offering of shares issued at
   $1.00 per share                                 500,000             500,000                -

 Net loss for the year ended April 30, 1994              -                   -         (394,263)
                                                 ---------            --------       ---------- 
Balance - April 30, 1994                         6,500,000             560,000         (417,755)

 Stock issued for cash pursuant to:
   options exercised at $0.10 per share             10,000               1,000                -
   a private placement of shares issued at
   $2.25 per share                                 250,000             562,500                -

   warrants exercised at $1.25 per share           169,200             211,500                -

   warrants exercised at $1.50 per share             1,000               1,500                -

 Net loss for the year ended April 30, 1995              -                   -       (1,225,743)
                                                 ---------           ---------       ---------- 
Balance - April 30, 1995                         6,930,200           1,336,500       (1,643,498)

 Stock issued for cash pursuant to
   options exercised at $0.10 per share            200,500              20,050                -
                                                 ---------           ---------       ---------- 
Carry forward balance                            7,130,700           1,356,550       (1,643,498)
                                                 ---------           ---------       ---------- 
Balance carried forward                          7,130,700           1,356,550       (1,643,498)
 
   options exercised at $1.00 per share             17,000              17,000                -
   options exercised at $2.75 per share              5,000              13,750                -
   options exercised at $2.50 per share             10,000              25,000                -
   warrants exercised at $1.50 per share           132,200             198,300                -
   a private offering memorandum at
   $2.00 per share                                 341,000             682,000                -
 Net loss for the year ended April 30, 1996              -                   -         (796,905)
                                                 ---------           ---------       ---------- 
Balance - April 30, 1996                         7,635,900           2,292,600       (2,440,403)
 stock issued for cash pursuant to
   options exercised at $0.10 per share            137,000              13,700                -
   warrants exercised at $1.50 per share           185,400             278,100                -
   a private placement at $2.00 per share           20,000              40,000                -
   a private placement at $1.50 per share          145,000             217,500                -
 Net loss for the year ended April 30, 1997              -                   -         (510,184)
                                                 ---------           ---------       ---------- 
Balance- April 30, 1997                          8,123,300           2,841,900       (2,950,587)
                                                 =========           =========       ==========
</TABLE>

   (The accompanying notes are an integral part of the financial statements)
<PAGE>
 
REGI U.S., Inc.
(A Development Stage Company)
Statements of Cash Flows
Accumulated from July 27, 1992 (Inception) to April 30, 1997 and
the Years ended April 30, 1997 and 1996
(expressed in U.S. dollars)

<TABLE>
<CAPTION>
                                                                       May 1        May 1
                                                      Accumulated       1996         1995
                                                       During the        to           to
                                                      Development     April 30     April 30
                                                         Stage          1997         1996
                                                           $             $            $
<S>                                                   <C>             <C>          <C>
Cash Flows to Operating Activities
    Net loss                                           (2,950,587)    (510,184)    (796,905)
    Adjustments to reconcile
     net loss to cash
       Amortization                                        17,678        7,348        6,516
       Intellectual property                              257,000            -            -
    Change in non-cash working capital items
       Decrease in prepaid expense                              -            -        6,000
       Increase in accounts payable                       149,451       74,382       40,197
                                                       ----------     --------     -------- 
Net Cash Used by Operating Activities                  (2,526,458)    (428,454)    (744,192)
                                                       ----------     --------     --------
Cash Flows from Financing Activities
    Increase in shares issued                           2,784,900      549,300      956,100
    Increase in advances from parent                            -            -       28,436
    Decrease in due to affiliate                         (198,944)    (115,694)    (493,123)
                                                       ----------     --------     --------
    Increase in loan from an officer                        7,200        7,200            -
                                                       ----------     --------     --------
 
Net Cash Provided by Financing Activities               2,593,156      440,806      491,413
                                                       ----------     --------     --------
 
Cash Flows to Investing Activities
    (Increase) in computer equipment                      (16,048)           -       (4,588)
    (Increase) in patents                                 (49,431)     (13,901)      (6,307)
    Decrease in licence                                         -            -      200,000
                                                       ----------     --------     --------
Net Cash (Used) Provided by Investing Activities          (65,479)     (13,901)     189,105
                                                       ----------     --------     --------
 
Increase (decrease) in cash                                 1,219       (1,549)     (63,674)
Cash - beginning of year                                        -        2,768       66,442
                                                       ----------     --------     --------
Cash - end of year                                          1,219        1,219        2,768
                                                       ==========     ========     ======== 
Non-Cash Financing Activities
    Deemed value of affiliate shares issued for
       intellectual property (Note 4)                     200,000            -            -

    5,700,000 shares issued for intellectual
    property at $0.01 per share (Note 4)                   57,000            -            -
                                                       ----------     --------     --------
                                                          257,000            -            -
                                                       ==========     ========     ========
</TABLE>

   (The accompanying notes are an integral part of the financial statements)
<PAGE>
 
REGI U.S., Inc.
(A Development Stage Company)
Notes to the Financial Statements
April 30, 1997 and 1996
(expressed in U.S. dollars)


1.   Development Stage Company

     The Company was incorporated in the State of Oregon, U.S.A. on July 27,
     1992 and is in the business of developing and commercially exploiting an
     improved axial vane type rotary engine known as the Rand Cam/Direct Charge
     Engine ("The Engine"). The world-wide marketing and intellectual rights,
     other than the U.S., are held by Rand Energy Group Inc. ("REGI") which
     controls 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 Engine and REGI will fund 50%.

     In a development stage company, management devotes most of its activities
     to establishing a new business. Planned principle activities have not yet
     produced significant revenue. The ability of the Company to emerge from the
     development stage with respect to its planned principle business activity
     is dependent upon its successful efforts to raise additional equity
     financing and develop the market for its products.

     The Company plans to raise additional funds through a $500,000 convertible
     debenture issue (See Note 8 (b)).


2.   Summary of Significant Accounting Policies
     (a)  Fixed Assets

          Computer equipment is amortized over 3 years on a straight-line basis.

     (b)  Intangible Assets

          Costs to register and protect patents are capitalized as incurred. The
          cost of patent protection is being amortized on a straight line basis
          over 20 years or written off completely should The Engine be
          determined by management not to be commercially viable.

     (c)  Research and Development

          Costs to acquire technological rights and design drawings collectively
          referred to as intellectual property are treated as research and
          development. Research and development is expensed in the period in
          which the activities occurred.

     (d)  Cash and Cash Equivalents

          The Company considers all highly liquid instruments with a maturity of
          three months or less at the time of issuance to be cash equivalents.

     (e)  Foreign Currency Transactions/Balances

          Transactions in currencies other than the U.S. dollar are translated
          at the rate in effect on the transaction date. Any balance sheet items
          denominated in foreign currencies are translated into U.S. dollars
          using the rate in effect on the balance sheet date.
<PAGE>
 
2.   Summary of Significant Accounting Policies (continued)

     (f)  Tax Accounting

          Research and development is fully deducted in the year of expenditure.
          The Company has not earned any research and development tax credits.

          The Company has adopted SFAS 109 as of its inception. The Company has
          net operating losses, totalling $2,736.000 as scheduled below:

<TABLE>
<CAPTION>
              Fiscal Year of Loss      Amount     Expiration Date
                                         $
              <S>                   <C>           <C>
                   1994               416,000            2009
                   1995             1,007,000            2010
                   1996               792,000            2011
                   1997               521,000            2012
</TABLE>

          Pursuant to SFAS 109 the Company is required to compute tax asset
          benefits for net operating loss carryforwards. Potential benefit of
          net income losses have not been recognized in the financial statements
          because the Company cannot be assured that it is more likely than not
          that it will utilize the net operating loss carryforwards in future
          years.

          The components of the net deferred tax asset, the statutory tax rate,
          the effective tax rate and the elected amount of the valuation
          allowance are scheduled below:

<TABLE> 
<CAPTION>
                                         1997             1996
                                           $                $
              <S>                    <C>               <C>
              Net Operating Loss        521,000            792,000

              Statutory Tax Rate     $113,900 + 34%     $113,900 + 34%
                                      in excess of       in excess of
                                        $335,000           $335,000
 
 
              Effective Tax Rate              -                  -

              Deferred Tax Asset        177,000            269,000

              Valuation Allowance      (177,000)          (269,000)
                                      ---------           --------
              Net Deferred Tax Asset          -                  - 
                                      =========           ========
</TABLE>
<PAGE>
 
3.   Acquisition of Rights, Title and Interest

     (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
          deemed value of $0.01 per share. REGI will receive a 5% net profit
          royalty. The $57,000 deemed value has been expensed as research and
          development in 1995.

     (b)  Pursuant to an agreement with Brian Cherry (a director) dated July 30,
          1992 and amended November 23, 1992 and April 13, 1993, the Company
          acquired the U.S. rights to the improved axial vane rotary engine
          known as the Rand Cam/Direct Charge Engine. On November 9, 1993, in
          consideration for the transferred technology, Mr. Cherry was issued
          100,000 shares of Reg Technologies Inc. ("REG") (a public company
          owning 51% of REGI) with a deemed value of $200,000 and will receive a
          1% net profit royalty. The deemed value of  $200,000 was treated as an
          expense paid by REG on behalf of the Company and treated as an inter-
          company loan. The $200,000 deemed value of intellectual property has
          been expensed as research and development in 1995.

     (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.   (a)  Fixed Assets     

<TABLE>
<CAPTION>
                                                                            1997       1996
                                                            Accumulated   Net Book   Net Book
                                             Cost          Amortization    Value      Value
                                               $                $            $          $
               <S>                          <C>            <C>            <C>        <C>
               Computer equipment           16,048            12,314        3,734     6,009
                                            ======            ======       ======    ======
     (b)  Intangible Assets
 
               Patents                      49,431             5,364       44,067    44,787
                                            ======            ======       ======    ======
</TABLE>

5.   Common Stock

     (a)  Pursuant to a Private Offering Memorandum dated April 15, 1995 and
          expiring February 28, 1996 the Company sold 361,000 units at $2.00 per
          unit for proceeds of $722,000. Each unit contained one common share,
          and one warrant to acquire an additional share at $2.00 exercisable
          beginning August 15, 1996 and ending August 15, 1997 or at $2.50
          beginning August 16, 1997 and ending August 15, 1998. All warrants
          issued pursuant to this offering are outstanding at April 30, 1997.
<PAGE>
 
5.    Common Stock

      (b)   Stock option activity
<TABLE>
<CAPTION>
             1996         Price    Granted    Cancelled (C)         1997           Expiry
               #            $         #       Exercised(E)            #             Date
         <S>              <C>      <C>        <C>                <C>            <C>
           30,000          2.50          -         30,000C              -                    -
          187,000          0.10          -        137,000E         50,000       April 30, 1998
          178,000          1.00          -              -         178,000       October 29, 1998
           30,000          1.00*         -              -          30,000       September 15, 1997
           75,000          1.00          -              -          75,000       February 9, 1999
           30,000          1.00*         -         25,000C          5,000       October 29, 1999
            5,000          1.00*         -              -           5,000       September 8, 2000
          350,000          1.00*         -              -         350,000       January 3, 2001
          -------                  -------    -----------         -------       
          885,000             -          -        192,000         693,000
          =======                  =======    ===========         ======= 
</TABLE>

            *These stock options were repriced to $1.00.


6.   Related Party Transactions

     (a)  A project management fee of $30,000 (1996 - $30,000) was paid to a
          company controlled by the president of the Company and is included in
          research and development expenses.

     (b)  Rent and secretarial fees of $6,000 (1996 - $6,000) was paid to a
          company controlled by the president of the Company and are included in
          research and development expenses.

     (c)  A technical salary of $51,746 (1996 - $53,858) was paid to an officer
          and director and is included in research and development expenses.

     (d)  An administrative fee of $6,000 (1996 - $6,000) was paid to an officer
          and director and is included in research and development expenses.

     (e)  The amounts owing to an officer and affiliate are unsecured, non-
          interest bearing and have no fixed terms of repayment.


7.  Commitments and Contingent Liabilities

    (a)  See Note 3 - royalty commitments in connection with the Rand Cam/Direct
         Charge Engine.

    (b)  The Company is committed to pay project management fees and rent and
         secretarial fees totalling $36,000 per annum to a Company controlled by
         the president of the Company.

    (c)  The Company has reserved 361,000 shares for the conversion of warrants
         and 693,000 shares for the exercise of stock options. See Note 8(c) for
         subsequent commitments to issue shares.

    (d)  The Company is committed to fund 50% of the further development of the
         Engine.

    (e)  A total of $25,000 has been accrued as professional fees as at April
         30, 1997. The Company is committed to issue 50,000 shares to settle
         this debt.

8.   Subsequent Events

     Subsequent to April 30, 1997, the Company has:

     (a)  received $5,000 and issued 50,000 shares pursuant to stock options
          exercised at $0.10 per share.

     (b)  offered a three year, 8 3/4% interest, convertible debenture to raise
          $500,000, of which $5,000 has been raised to date. The 8 3/4% interest
          is paid annually and the debenture is convertible into Class "A"
          common shares at $1.25, $1.50 and $1.75 in years one, two and three,
          respectively. In the event the shares are trading below $2.00 per
          share over a ten-day average prior to exercising into shares of the
          Company during the last month of the third year, the convertible
          debenture will be exercisable at 20% below the said ten-day average.
          The maturity date is June 15, 2000.

     (c)  acquired the U.S. rights to an Air/Vapour Fuel Cell System "the
          System". The Company paid $13,500 and has caused an officer to
          transfer to the vendor 50,000 shares of the Company owned by the
          officer. Once the agreement has been approved, the Company will issue
          50,000 shares to the officer as a reimbursement. Upon submission of a
          patent application and successful testing of the System, a further
          $36,500 and 150,000 shares are to be paid. The Company will pay to the
          inventor 8.5% on net sales derived from the system.
<PAGE>
 
Item 8.    Changes in and Disagreements with Accountants on Accounting and
-------    ---------------------------------------------------------------
           Financial Disclosure
           --------------------

           None.

                                   PART III

Item 9.    Directors and Executive Officers of the Registrant; Compliance with
-------    -------------------------------------------------------------------
           Section 16 (a) of the Exchange Act.
           -----------------------------------

The information required by Part III (Item 9) will be set forth in the Company's
definitive proxy statement which will be filed pursuant to Regulation 14A within
120 days of April 30, 1997. Such information is incorporated herein by
reference.


Item 10.    Executive Compensation
--------    ----------------------

The information required by Part III (Item 10) will be set forth in the
Company's definitive proxy statement which will be filed pursuant to Regulation
14A within 120 days of April 30, 1997. Such information is incorporated herein
by reference.


Item 11.    Security Ownership of Certain Beneficial Owners and Management
--------    --------------------------------------------------------------

The information required by Part III (Item 10) will be set forth in the
Company's definitive proxy statement which will be filed pursuant to Regulation
14A within 120 days of April 30, 1997. Such information is incorporated herein
by reference.


Item 12.    Certain Relationships and Related Transactions
--------    ----------------------------------------------

The information required by Part III (Item 12) will be set forth in the
Company's definitive proxy statement which will be filed pursuant to Regulation
14A within 120 days of April 30, 1997. Such information is incorporated herein
by reference.


Item 13.    Exhibits and Reports on Form 8-K.
--------    ---------------------------------

(a)  Index to and Description of Exhibits

<TABLE>
<CAPTION>
 
Number                               Description                          Page No.
-----                                -----------                          --------
<C>    <S>                                                                <C>
 3     Articles of Incorporation and By-Laws
       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     Instruments Defining Rights of Security Holders
       4.1   Specimen Share Certificate.................................   (1)
       4.2   Specimen Warrant Certificate...............................   (1)
 
 10    Material Contracts
       10.1  Agreement between Brian Cherry, the Company and
             Rand Energy Group Inc......................................   (1)
       10.2  Agreement between the Company and Patrick
             Badgley....................................................   (1)
       10.3  Agreement between the Company and Access
             Information Services, Inc..................................   (1)
</TABLE> 

                                      14
<PAGE>
 
<TABLE> 

<C>    <S>                                                                 <C>
       10.4  Agreement between the Company and Reg
             Technologies, Inc..........................................   (4)
       10.5  Agreement between the Company and Integral
             Visions Systems, Inc.......................................   (4)
       10.6  REGI U.S., Inc. KEY EMPLOYEES INCENTIVE STOCK
             OPTION PLAN................................................   (3)
       10.7  Agreement with Global Aircraft.............................   (4)
 
  23   Consent of Experts and Counsel
       23.1  Consent of Elliott Tulk Pryce Anderson.....................   ( )
       23.2  Consent of Patrick Badgley.................................   (4)

  27   Financial Data Schedule

  99   Additional Exhibits

       99.1 Technology Evaluation report on the Rand
            Cam/Direct Charge Engine prepared by
            Adiabatics, Inc.............................................   (1)
</TABLE> 
____________________
(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 Form S-8 Registration Statement dated April
     4, 1995.
(4)  Incorporated by reference from Form SB-2 dated July 23, 1996.

(b)  Reports on Form 8-K:
 
     None

                                      15
<PAGE>
 
                                   SIGNATURES

     Pursuant to the requirements Section 13 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:  July 29, 1997

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in-the in the capacities
indicated and on the dates indicated.

<TABLE>
<CAPTION>

Signature                         Title                                  Date
---------                         -----                                  -----
<S>                               <C>                                    <C>                    
 
/s/ John G. Robertson
---------------------             President, Chief                       7/29/97
(John G. Robertson)               Executive Officer                      -------
                                  and Director
 
/s/ Brian Cherry
----------------                  Vice President,                        7/29/97
(Brian Cherry)                    Secretary and                          -------
                                  Director
                
 
/s/ Jennifer Lorette
--------------------              Vice President,                        7/29/97
(Jennifer Lorette)                Chief Financial Officer                -------
                                  and Principal Accounting
                                  Officer
 
</TABLE>

                                      16