Mail Stop 0308 April 22, 2005
VIA U.S. MAIL AND FACSIMILE
Patrick A. Galliher, President
RMD Technologies, Inc.
308 West 5th Street
Holtville, California 92250
Re: RMD Technologies, Inc.
Amendment No. 1 to Registration Statement on Form 10-SB
File No. 0-51109
Filed April 5, 2005
Dear Mr. Galliher:
We have reviewed your filing and have the following
comments. Where indicated, we think you should revise your
document
in response to these comments. If you disagree, we will consider
your explanation as to why our comment is inapplicable or a
revision
is unnecessary. Please be as detailed as necessary in your
explanation. In some of our comments, we may ask you to provide
us
with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review
process is to assist you in your compliance with the applicable
disclosure requirements and to enhance the overall disclosure in
your
filing. We look forward to working with you in these respects.
We
welcome any questions you may have about our comments or on any
other
aspect of our review. Feel free to call us at the telephone
numbers
listed at the end of this letter.
General
1. Please file marked versions of your amendments on EDGAR.
Item 1. Description of Business
Industry
2. We note your response to prior comment 1. We could not locate
the
support for the statements that we identified in prior comment 1
other than the statement set forth in the second bullet point.
Please mark the supplemental material that you provide with your
next
amendment. We also note that you have indicated that you are
"poised
to see explosive expansion." As we noted, the itemized statements
in
prior comment 1 were examples only. Please provide support for
this
statement or delete it. Also, provide support for the statement
that
recycling legislation has been proposed "in many other states, and
at
the federal level" that will cause your market to expand to the
"entire United States."
3. Similarly, please provide marked supplemental support as
previously requested in comment 4.
4. In connection with prior comment 7, we note your reference to
"revenues" of $300,000 per year. However, it does not appear that
you have balanced that amount with a net income amount as we
requested. Please revise.
Item 2. Management`s Discussion and Analysis of Financial
Condition
and Results of Operation
Results of Operations for the Year Ended May 31, 2004
5. In response to prior comment 21 you disclosed the fiscal 2004
total weight collected and average revenue per pound. Please
disclose comparative operational metrics for fiscal 2003. Also,
please help a reader understand the changes in operational metrics
from fiscal 2003 to fiscal 2004 and how those changes affect the
comparability of the measures you disclose.
6. The sales and recycling amounts included in your discussion of
revenues do not agree to the financial statements. Please revise
or
advise.
Results of Operations for the Six Months Ended November 30, 2004
7. The gross profit and expense amounts for the six-month period
ended November 30, 2004 and related percentage changes included in
your discussion of revenues and expenses does not agree to the
financial statements. Please revise or advise.
Operating Activities
8. Consistent with previous comments 25 and 26 please ensure your
discussion and analysis of cash flows is not merely a recitation
of
changes evident from the financial statements. Please provide
analysis explaining the underlying reasons for significant
fluctuations in working capital accounts, for example, accounts
receivable and accounts payable. Refer to SEC Release No. 33-
8350.
Liquidity and Capital Resources
9. It does not appear that you addressed prior comment 27 in your
response or by amending your discussion. Please add discussion on
how you expect current operations to affect liquidity. Refer to
Item
303 of Regulation S-B.
10. It does not appear that you addressed prior comment 28 in your
response or by amending your discussion. Please describe any
material commitments for capital expenditures and the expected
sources of funds for such expenditures. For example, we noted
that
you offered to purchase the property currently housing all of your
operations. Refer to Item 303 of Regulation S-B.
Part II
Item 4. Recent Sales of Unregistered Securities
11. You issued 15,000,000 shares of common stock to two employees,
Pat Galliher and Suzanne Galliher, and an affiliate, John Fleming,
for services rendered. These services were valued at par value,
$0.001 per share or $15,000. In the absence of contemporaneous
transactions in your securities at par value or a third party
valuation of the securities issued, we assume that the fair value
of
the services provided is more readily determinable than the value
of
the securities issued. Please supplementally explain how you
determined the fair value of the securities issued or the services
rendered, as applicable. In this regard, if the transaction was
based on an estimate of the fair value of the services rendered,
please tell us, and disclose the specific nature of the services
provided. It appears the services were provided over a period of
several years since the company`s inception. Accordingly, it
would
appear that the fair value of the services provided by the three
individuals would exceed $15,000. Please reference authoritative
guidance supporting your accounting treatment in your supplemental
response.
Financial Statements for the Six Months Ended November 30, 2004
and
2003
General
12. Please update your interim financial statements through
February
28, 2005 in accordance with Item 310 of Regulation S-B.
13. Please ensure that your updated interim financial statements
include appropriate note disclosure consistent with the
requirements
of Item 310(b) of Regulation S-B and related instructions. In
this
regard, it appears that, at a minimum, note disclosure of the
status
of related party transactions and capital leases is necessary
given
transactions subsequent to your fiscal year-ended May 31, 2004.
With
respect to related party transactions, we would not object to
updated
note disclosure similar to Note 3 to your audited financial
statements for the year-ended May 31, 2004.
Statements of Operations
14. Losses on sales of assets should be included in your
calculation
of total loss from operations. Please revise the presentation.
Refer to paragraph 45 of SFAS 144.
Statements of Cash Flows
15. Please revise your statement of cash flows to reflect capital
lease transactions as non-cash investing and financing activities
consistent with the disclosure requirements in paragraph 32 of
SFAS
95. We assume this will require reducing the investing cash
outflow
line item "Purchase of equipment" by an amount equal to the
"Proceeds
from capital lease" currently reflected as a financing cash
inflow.
Financial Statements for the Fiscal Years Ended May 31, 2004 and
2003
Statements of Operations
16. We reviewed your response to prior comment 40. It appears
that
there was no change in presentation in the amendment. The
response
alone does not satisfactorily respond to our prior comment. The
prior comment is therefore repeated. The line item "cost of
sales"
appears to exclude many costs of providing your services and
selling
your products. Specifically, it appears that you exclude the
allocable portion of rent, depreciation, labor, gas, truck parts,
maintenance, etc. associated with providing your services and
selling
your products. Please revise your filing to reclassify all
applicable
costs of selling your products and services to cost of sales.
17. We reviewed your response to prior comment 41. It appears
that
there was no change in presentation in the amendment. The
response
alone does not satisfactorily respond to our prior comment. The
prior comment is therefore repeated. You disclose revenues from
services and sales separately. Please revise your presentation of
cost of sales to provide disaggregated disclosure that mirrors
your
presentation of revenues.
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies
18. We reviewed your response to prior comment 44. Sales of
serviceable electronic equipment represent $36,953 of revenues in
fiscal 2004. It is unclear whether there is a significant amount
of
refurbishing to prepare the serviceable electronic equipment for
sale. Item 1 states that a secondary source of income for you is
from sales of refurbished and or working equipment. The
definition
of cost as applied to inventories is understood to mean
acquisition
and production cost. We assume, for example, there are personnel
costs incurred in refurbishing equipment, personnel costs incurred
in
sorting and preparing working equipment for sale and
transportation
costs associated with transporting the equipment to your facility
and
to your customers. The exclusion of all direct costs and
overheads
from inventory costs does not appear consistent with GAAP. Please
supplementally explain and disclose how your inventory cost is
determined. Specifically address what personnel, warehouse,
freight
charges, and other general and administrative costs are
capitalized
and why it was determined to include or exclude the costs from
inventory. Refer to Chapter 4 of ARB No. 43.
19. Please revise your disclosure of the specific nature of costs
classified as cost of sales and other selling, general and
administrative expenses in the statements of operations given your
response to the comments above.
20. You disclose that sales of serviceable equipment are
recognized
at the time of sale. Please supplementally tell us and revise
your
filing to disclose:
* Whether your stated shipping terms are FOB shipping point or FOB
destination pursuant to your sales agreements with customers;
* Your customers` rights of inspection, acceptance, and return;
and
* When title passes from you to your customer.
Unless obvious, please explain to us why sales recognition is
appropriate upon shipment, If applicable, rather than upon
delivery
to and acceptance by the customer. Refer to SAB Topic 13:A.
Signature Page
21. Please ensure that future amendments are dated as of the
filing
date.
* * *
As appropriate, please amend your registration statement in
response to these comments. Please provide us with marked copies
of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested supplemental information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
You may contact Adam Phippen, Staff Accountant, at 202-824-
5549
or George Ohsiek, Accounting Branch Chief, at (202) 942-2905 if
you
have questions regarding comments on the financial statements and
related matters. Please contact Anita Karu, Attorney-Advisor, at
202-942-1898, Ellie Quarles, Special Counsel, at (202) 942-1859,
or
me at 202-942-1900 with any other questions.
Sincerely,
H. Christopher Owings
Assistant Director
cc: Brian Faulkner, Esq.
27127 Calle Arroyo, Suite 1923
San Juan Capistrano, CA 92675
Fax: 949-240-1362
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RMD Technologies, Inc.
April 22, 2006
Page 6