U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2006
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO ______________
COMMISSION FILE NUMBER: 0-51109
RMD TECHNOLOGIES, INC.
(Exact Name of Company as Specified in Its Charter)
California 72-1530833
(State or Other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification No.)
308 West 5th Street, Holtville, California 92250
(Address of Principal Executive Offices)
(760) 356-2039
(Company's Telephone Number)
______________________________________________________________
(Former Name, Former Address, and Former Fiscal Year, if Changed Since
Last Report)
Indicate by check mark whether the Company (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Company was required to file such reports),
and (2) been subject to such filing requirements for the past 90 days.
Yes X No .
Indicate by check mark whether the Company is a shell company (as
defined in Rule 12b-2 of the Exchange Act): Yes No X
As of February 28, 2006, the Company had 15,002,300 shares of
common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X .
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
BALANCE SHEET AS OF FEBRUARY 28, 2006 3
STATEMENTS OF OPERATIONS FOR
THE THREE AND NINE MONTHS ENDED
FEBRUARY 28, 2006 AND FEBRUARY 28, 2005 4
STATEMENTS OF CASH FLOWS FOR
THE NINE MONTHS ENDED
FEBRUARY 28, 2006 AND FEBRUARY 28, 2006 5
NOTES TO FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
ITEM 3. CONTROLS AND PROCEDURES 16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 17
ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS 18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 18
ITEM 5. OTHER INFORMATION 18
ITEM 6. EXHIBITS 18
SIGNATURES 18
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCAL STATEMENTS.
RMD TECHNOLOGIES, INC.
BALANCE SHEET
FEBRUARY 28, 2006
(Unaudited)
ASSETS
Current Assets
Cash $ 68,888
Escrow deposit 2,000
Accounts receivable 3,842
Inventory 1,071
Total Current Assets 75,801
Furniture and equipment - net of accumulated
depreciation of $25,314 46,919
Other Assets
Security deposits 911
Total Assets $ 123,631
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued liabilities $ 131,392
Current portion - capital leases 8,918
Derivative liability related to convertible debenture 100,000
Advance from La Jolla Cove Investors, Inc. 150,000
Note payable 5,294
Payable to related individuals 121,160
Total Current Liabilities 516,764
Long Term Liabilities
Convertible debenture 8,220
Capital leases payable 8,493
Total Liabilities 533,477
Stockholders' Deficit
Common stock, no par value
100,000,000 shares authorized,
15,002,300 shares issued and outstanding 17,300
Additional paid-in capital 25,000
Accumulated deficit (452,146)
Total Stockholders' Deficit (409,846)
Total Liabilities and Stockholders' Deficit $ 123,631
See Accompanying Notes to Financial Statements
RMD TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended For the Nine Months Ended
February 28, February 28,
2006 2005 2006 2005
Revenues
Sales $ 23,371 $ 24,638 $ 90,275 $ 78,132
Recycling 21,669 36,851 79,578 136,774
Total Revenues 45,040 61,489 169,853 214,906
Cost of Revenues
Cost of sales 15,957 15,859 47,965 46,166
Cost of recycling revenues 59,969 26,049 130,102 97,309
Total Cost of Revenues 75,926 41,908 178,067 143,475
Gross Profit (30,886) 19,581 (8,214) 71,431
Selling, General, and Administrative expenses
Depreciation 1,630 2,510 4,892 6,387
Other selling, general, and
administrative expenses 60,102 37,162 192,848 128,454
Total Selling, General,
and Administrative Expenses 61,732 39,672 197,740 134,841
Total Loss From Operations (92,618) (20,091) (205,954) (63,410)
Other Expenses
Interest expense (11,241) (10,725) (26,206) (12,082)
Other expense -- -- -- --
Total Loss $(103,859) $ (30,816) $(232,160) $ (75,492)
Basic and Diluted Net Loss per
Weighted Average Share $ (0.01) $ (0.00) $ (0.02) $ (0.01)
Weighted Average Number of Common
Shares Used to Compute Net Loss
per Weighted Average Share 15,002,300 15,002,300 15,002,300 13,612,091
See Accompanying Notes to Financial Statements
RMD TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
February 28,
2006 2005
Operating Activities
Net loss $ (232,160) $ (75,492)
Adjustments to reconcile net loss to
cash used in operating activities:
Depreciation 4,892 6,387
Accretion of principal related to
convertible debenture 8,220 --
Changes in operating assets and liabilities:
Change in accounts receivable 10,719 33,117
Change in inventory (871) 186
Change in deposits -- (911)
Change in accounts payable and accrued liabilities 20,853 14,726
Change in accrued interest within notes payable 6,990 --
Net Cash Used in Operating Activities (181,357) (21,987)
Investing Activities
Purchase of equipment -- (881)
Net Cash Used in Investing Activities -- (881)
Financing Activities
Decrease in bank overdraft (2,130) --
Proceeds from stock issuance -- 15,000
Proceeds from notes payable 13,228 30,187
Proceeds from advance from
La Jolla Cove Investors, Inc. 150,000 --
Proceeds from convertible debenture 100,000 --
Payments made on capital leases (10,853) (13,527)
Net Cash Provided by Financing Activities 250,245 31,660
Increase in Cash 68,888 8,792
Cash at Beginning of the Period -- 4,398
Cash at End of the Period $ 68,888 $ 13,190
Interest paid $ 2,249 $ --
Taxes paid $ -- $ --
See Accompanying Notes to Financial Statements
RMD TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited financial statements of RMD Technologies,
Inc., a California corporation ("Company") have been prepared in
accordance with Securities and Exchange Commission ("SEC")
requirements for interim financial statements. Therefore, they do not
include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete
financial statements. The financial statements should be read in
conjunction with the annual financial statements of the Company for
the years ended May 31, 2005 and 2004 contained in its Form 10-KSB, as
amended.
The interim financial statements present the balance sheet, statements
of operations, stockholders' equity and cash flows of the Company. The
financial statements have been prepared in accordance with accounting
principles generally accepted in the United States.
The interim financial information is unaudited. In the opinion of
management, all adjustments necessary to present fairly the financial
position as of February 28, 2006 and the results of operations and
cash flows presented herein have been included in the financial
statements. All such adjustments are the recurring and normal nature.
Interim results are not necessarily indicative of results of
operations for the full year.
Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Because of the use of
estimates inherent in the financial reporting process, actual results
could differ significantly from those estimates.
NOTE 2 CONVERTIBLE DEBENTURE
On January 27, 2006, the Company entered into a Securities Purchase
Agreement ("Agreement") with La Jolla Cove Investors, Inc. Under the
Agreement, La Jolla Cove Investors, Inc. agreed to purchase from the
Company a convertible debenture in the aggregate principal amount of
$100,000. The debenture matures January 27, 2009, bears interest at
7.75% per annum, and principal and interest are due at maturity. The
number of shares into which this Debenture may be converted is equal
to the dollar amount of the debenture being converted multiplied by
110, minus the product of the Conversion Price multiplied by 100 times
the dollar amount of the Debenture being converted, and the entire
foregoing result divided by the Conversion Price (based on an Addendum
to Convertible Debenture and Warrant to Purchase Common Stock Addendum
to Debenture and Warrant, dated January 27, 2006). Under the
Agreement, the Conversion Price is defined as the lesser of (i) 80% of
the average of the 3 lowest volume weighted average prices during the
20 trading days prior to holder's election to convert, or (ii) 80% of
the volume weighted average price on the trading day prior to holder's
election to convert.
In connection with the Agreement, the Company issued a warrant for
10,000,000 shares of common stock at an exercise price of $1.00 per
share. La Jolla Cove Investors, Inc. is required to exercise a
percentage of the warrant that is equal to the percentage of the
debenture being converted. Under the Addendum, the exercise price of
the warrant was changed to $1.09 per share; in addition, the warrant
is to be exercised in an amount equal to 100 times the amount of the
debenture. The warrant is exercisable for a period of three years
from issuance.
The Company has determined the convertible debenture represents an
embedded derivative due to the indeterminate number of shares that may
be issued as part of the conversion feature of the host debt that
would be required to be bifurcated from the underlying debt as
derivative liability in accordance Statement of Financial Accounting
Standards ("SFAS") No. 133. Additionally, the warrant related to the
convertible debenture are considered tainted due to the indeterminate
number of shares associated with the conversion feature of the host
debt that would be accounted for as a derivative instrument ("warrant
liability"). As a result, the entire principal balance of the
convertible debenture has been allocated as a derivative liability
with no amount allocated to warrant liability when initially recording
this transaction. Both embedded derivative and warrant liability will
be adjusted to the fair value of the underlying securities at the end
of each period. The recorded fair values of both the derivative and
warrant liability can fluctuate significantly based upon the
fluctuations in the market value of the underlying securities, as well
as the volatility of the stock price during the term used for
observation and the term remaining for the warrant. The adjustment to
fair value for both the derivative and warrant liability will result
in either an unrealized gain or loss and recorded in the income
statement as a component of Other Income (Expense). The estimated
fair value of the warrant liability has been determined using Black-
Scholes option pricing model using the following assumptions: exercise
price of $1.09, stock price volatility of 1%, risk free interest rate
of 3.5%; dividend yield of 0% and 3 year term. The estimated fair
value of the derivative liability was determined by taking the total
amount advanced from the host debt and determining the potential
number of shares to be converted based upon the terms of the debt
Agreement and arriving at an intrinsic value based upon the closing
price of the underlying securities which was then allocated on a pro
rata basis along with the estimated fair value of the warrant
liability. The Company will accrete principal over the term of the
convertible debenture since the entire principal balance of the
convertible debenture has been allocated between the derivative and
warrant liability. As of February 28, 2006, the Company has accreted
principal of $8,220 with unaccreted principal of $91,780 and
derivative liability of $100,000.
NOTE 3 ADVANCE FROM LA JOLLA COVE INVESTORS, INC.
On January 31, 2006, La Jolla Cove Investors, Inc. advanced the
Company $150,000 against future exercises of the warrant, as discussed
in Note 2. The advance is unsecured, due on demand and bears no
interest.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The following discussion and analysis of financial condition and
results of operations is based upon, and should be read in conjunction
with, the Company's unaudited financial statements and related notes
included elsewhere in this Form 10-QSB, which have been prepared in
accordance with accounting principles generally accepted in the United States.
Overview.
The Company is an electronics waste collector and recycler
dedicated to providing customers a solution to their electronics waste
handling problems. The Company believes it offers customers a
reliable, efficient cost effective means of complying with current and
anticipated government regulations regarding the disposal of
electronic waste.
In June 2001, the Company began providing electronics collection
and recycling services to corporate customers in Southern California.
In April 2004, the Company began to expand its service area to include
Northern California.
The Company believes that its planned growth and profitability
will depend in large part on the ability to promote its services, gain
clients and expand its relationship with current clients.
Accordingly, the Company intends to focus its attentions and
investment of resources in marketing, strategic partnerships, and
development of its client base. If the Company is not successful in
promoting its services and expanding its client base, this may have a
material adverse effect on its financial condition and the ability to
continue to operate the business.
Results of Operations.
(a) Revenues.
The Company had revenues totaling $45,040 and $169,853 for three
and nine months ended February 28, 2006 as compared with the same
period in the prior year of $61,489 and $214,906, a decrease of
$(16,809) and $(45,053) or approximately (27%) and (21%),
respectively. For the three and nine months ended February 28, 2006,
cost of revenues totaled $75,926 and $178,067, compared to $41,908 and
$143,475 in the same period of the prior year, an increase of $34,018
and $34,592 or approximately 81% and 24%, respectively. Overall,
gross profit (loss) totaled $(30,886) and $(8,214) for three and nine
months ended February 28, 2006 compared to $19,581 and $71,431 in the
same period of the prior year, a decrease of $(50,467) and $(79,645)
or approximately (258%) and (111%), respectively. The Company's
revenues and its related cost of sales primarily consisted of sales
and recycling.
Revenue from sales of refurbished and/or working equipment
collected totaled $23,371 and $90,275 for the three and nine months
ended February 28, 2006 as compared with the same period in the prior
year of $24,638 and $78,132, a decrease of $(1,267) and an increase of
$12,143 or approximately (5%) and 13%, respectively. Cost of sales
related to revenue from sales totaled $15,957 and $47,965 for the
three and nine months ended February 28, 2006 as compared with the
same period in the prior year of $15,859 and $46,166, an increase of
$98 and $1,799 or 1% and 4%, respectively. Overall, gross profit from
sales of refurbished and/or working equipment collected totaled $7,414
and $42,310 for the three and nine months ended February 28, 2006
compared to $8,779 and $31,966, an increase (decrease) of $(1,365) and
$10,344 or approximately (16%) and 32%, respectively. The overall
decrease of $(1,365) in gross profit during the three months ended
February 28, 2006 is primarily due to lower demand of refurbished
equipment during December and January of 2006. The overall increase
of $10,344 in gross profit during the nine months ended February 28,
2006 is considered marginal. The Company believes that overall
revenues from sales will continue to increase in demand for the
remaining fiscal year.
Revenue from recycling totaled $21,669 and $79,578 for the three
and nine months ended February 28, 2006 as compared with the same
period in the prior year of $36,851 and $136,774, a decrease of
$(15,182) and $(57,196) or approximately (42%) and (42%),
respectively. Cost of sales related to revenue from recycling
totaled $59,969 and 130,102 for the three and nine months ended
February 28, 2006 as compared with the same period in the prior year
of $26,049 and $97,309, an increase of $33,920 and $32,793 or 130% and
34%, respectively. Overall, gross profit (loss) from recycling
totaled $(38,300) and $(50,524) as compared with the same period in
the prior year of $10,802 and $39,465, a decrease of $(49,102) and
$(86,989) or approximately (455%) and (220%), respectively. The
overall decrease for the three and nine months ended February 28, 2006
compared to the same periods of the prior year is primarily due to
lack of marketing and more focus on developing a more efficient
infrastructure for recycling operations. The Company believes with a
refocused marketing strategy and better-developed infrastructure for
recycling that revenues should increase overall for recycling revenues
to levels similar to the prior year in the next twelve months.
(b) Selling, General and Administrative Expenses.
Total selling, general and administrative expenses for the three
and nine months ended February 28, 2006 were $60,102 and $192,848 as
compared with $37,162 and $128,454 for the same period in the prior
year, an increase of $22,940 and $64,394 or approximately 62% and 50%,
respectively. The overall increase during the three and nine months
ended February 28, 2006 in selling, general and administrative expense
compared to prior year, was primarily due to an increase in
professional fees.
(c) Net Loss.
The Company's net loss totals $(103,859) and $(232,160) for the
three and nine months ended February 28, 2006, as compared with the
same period in the prior year of a net loss of $(30,816) and
$(75,492), an increase net loss of $73,043 and $156,668. This
increased loss was due to the factors discussed above.
Factors That May Affect Operating Results.
The operating results of the Company can vary significantly
depending upon a number of factors, many of which are outside its
control. General factors that may affect the Company's operating
results include:
-Market acceptance of and changes in demand for its services;
- A small number of customers account for, and may in future
periods account for, substantial portions of the Company's
revenue, and revenue could decline because of delays of customer
orders or the failure to retain customers;
- Gain or loss of clients or strategic relationships;
- Announcement or introduction of new services by the Company or by
its competitors;
- Price competition;
- The ability to upgrade and develop systems and infrastructure to
accommodate growth;
- The ability to introduce and market products and services in
accordance with market demand;
- Changes in governmental regulation; and
- Reduction in or delay of capital spending by clients due to the
effects of terrorism, war and political instability.
The Company believes that its planned growth and profitability
will depend in large part on the ability to promote its services, gain
clients and expand its relationship with current clients.
Accordingly, the Company intends to invest in marketing, strategic
partnerships, and development of its customer base. If the Company is
not successful in promoting its services and expanding its customer
base, this may have a material adverse effect on its financial
condition and its ability to continue to operate its business.
The Company is also subject to the following specific factors
that may affect its operating results:
(a) Competition.
The market for collection and recycling of electronic
waste is competitive and the Company expects competition to continue
to increase. In addition, the companies with whom the Company has
relationships could develop products or services, which compete with
the Company's products or services. Also, some competitors in the
Company's market have longer operating histories, significantly
greater financial, technical, marketing and other resources, and
greater brand recognition than the Company does. The Company also
expects to face additional competition as other established and
emerging companies enter the market for collection and recycling of
electronic waste. To be competitive, the Company believes that it
must, among other things, invest resources in developing new products,
improving its current products and maintaining customer satisfaction.
Such investment will increase the Company's expenses and affect its
profitability. In addition, if it fails to make this investment, the
Company may not be able to compete successfully with its competitors,
which could have a material adverse effect on its revenue and future
profitability.
(b) Technological and Market Changes.
The markets in which the Company competes are characterized by
new service introductions, evolving industry standards, and the
changing needs of customers. There can be no assurance that the
Company's existing services will continue to be properly positioned in
the market or that it will be able to introduce new or enhanced
products into the market on a timely basis, or at all. Currently, the
Company is focusing on upgrading and introducing new services. The
Company intends to begin offering training services beginning in the
first of fiscal year 2007. There can be no assurance that
enhancements to existing services or new services will receive
customer acceptance.
Risks inherent in new service introductions include the
uncertainty of price-performance relative to services of competitors
and competitors' responses to its new service introductions.
(c) Key Personnel.
The Company's success is largely dependent on the personal
efforts and abilities of its senior management. None of the Company's
officers and directors currently has an employment or non-competition
agreement with the Company. Therefore, there can be no assurance that
these individuals will remain employed by the Company. Should any of
these individuals cease to be affiliated with the Company for any
reason before qualified replacements could be found, there could be
material adverse effects on the Company's business and prospects.
The Company's success will also be highly dependent on its
ability to attract and retain qualified employees. The Company
intends to recruit in fiscal year 2006 employees who are skilled in
its industry. The failure to recruit these key personnel could have a
material adverse effect on the Company's business. There can be no
assurances that the Company will be successful in retaining existing
personnel or in attracting and recruiting experienced qualified
personnel. The Company believes relations with its employees are satisfactory.
Operating Activities.
The net cash used in operating activities was $(181,357) for the
nine months ended February 28, 2006 compared to net cash used in
operating activities of $(21,987) for the nine months ended February
28, 2005, an increase in cash used by $159,370. The change in
operating activities is attributable to an overall increase in net loss.
Liquidity and Capital Resources.
As of February 28, 2006, the Company had total current assets of
$75,801 and total current liabilities of $516,764, resulting in net
working capital deficit of $440,963. At February 28, 2006, the
Company's current assets consisted primarily of net accounts
receivable totaling $3,842, an escrow deposit of $2,000, and cash of $68,666.
The Company's current cash balance and flow from operations will
not be sufficient to maintain its capital requirements for the next
twelve months. Accordingly, the Company's implementation of its
business plan will depend upon its ability to raise additional funds
through bank borrowings and equity or debt financing. The Company
estimates that it will need to raise up to $1,000,000 over the next
twelve months for such purposes.
On January 27, 2006, the Company entered into a Securities
Purchase Agreement with La Jolla Cove Investors, Inc. (see Exhibit
4.1). Under this agreement, La Jolla Cove Investors, Inc. agreed to
purchase from the Company a convertible debenture in the aggregate
principal amount of $100,000 (see Exhibit 4.2). The debenture matures
January 27, 2009, bears interest at 7.75% per annum, and principal and
interest are due at maturity. The number of shares into which the
debenture may be converted is equal to the dollar amount of the
debenture being converted multiplied by 110, minus the product of the
Conversion Price multiplied by 100 times the dollar amount of the
debenture being converted, and the entire foregoing divided by the
Conversion Price (based on an Addendum to Convertible Debenture and
Warrant to Purchase Common Stock Addendum to Debenture and Warrant,
dated January 27, 2006). Under this agreement, the Conversion Price
defined as the lesser of (i) 80% of the average of the 3 lowest volume
weighted average prices during the 20 trading days prior to holder's
election to convert, or (ii) 80% of the volume weighted average price
on the trading day prior to holder's election to convert.
In conjunction with the debenture, the Company issued to La Jolla
Cove Investors, Inc. a warrant, dated January 27, 2006, to purchase
10,000,000 shares of common stock of the company, exercisable at $1.00
per share (see Exhibit 4.3). Under the Addendum, the exercise price
of the warrant was changed to $1.09 per share; in addition, the
warrant is to be exercised in an amount equal to 100 times the amount
of the debenture (see Exhibit 4.5). The warrants are exercisable for
a period of three years from issuance.
In connection with this agreement, the Company also granted to La
Jolla Cove Investors, Inc. certain rights under a registration rights
agreement, dated January 27, 2006, to the shares to be issued upon
conversion of the debenture and the warrant (see Exhibit 4.4).
The two principals of the Company, Patrick A. Galliher and
Suzanne E. Galliher, issued a personal guaranty for the principal
amount of the debenture (see Exhibit 4.6).
On January 31, 2006, La Jolla Cove Investors, Inc. advanced the
Company $150,000 against future exercises of the warrant, as discussed
above. The advance is unsecured, due on demand and bears no interest.
The net cash provided by financing activities was $250,245 for
the nine months ended February 28, 2006 compared to net cash provided
by financing activities of $31,660 for the nine months ended February
28, 2005, an increase of $218,585. The change in financing activities
is primarily due to new loans in the current year period, including
that from La Jolla Cove Investors, Inc.
Whereas the Company has been successful in the past in raising
capital, no assurance can be given that these sources of financing
will continue to be available to us and/or that demand for our
equity/debt instruments will be sufficient to meet our capital needs,
or that financing will be available on terms favorable to the Company.
If funding is insufficient at any time in the future, the Company may
not be able to take advantage of business opportunities or respond to
competitive pressures, or may be required to reduce the scope of its
planned service development and marketing efforts, any of which could
have a negative impact on its business and operating results. In
addition, insufficient funding may have a material adverse effect on
the Company's financial condition, which could require it to:
- Curtail operations significantly;
- Sell significant assets;
- Seek arrangements with strategic partners or other parties that
may require the Company to relinquish significant rights to
products, technologies or markets; or
- Explore other strategic alternatives including a merger or sale
of the Company.
To the extent that the Company raises additional capital through
the sale of equity or convertible debt securities, the issuance of
such securities may result in dilution to existing stockholders. If
additional funds are raised through the issuance of debt securities,
these securities may have rights, preferences and privileges senior to
holders of common stock and the terms of such debt could impose
restrictions on the Company's operations. Regardless of whether the
Company's cash assets prove to be inadequate to meet its operational
needs, the Company may seek to compensate providers of services by
issuance of stock in lieu of cash, which may also result in dilution
to existing stockholders.
Material Commitments for Capital Expenditures
The Company does not have any material commitments for capital
expenditures. However, the Company has entered into a non-binding
offer to purchase the property currently housing our facilities. The
acceptance of the offer has been delayed because the property is
currently held in probate. If the offer is accepted, we intend to
fund the purchase through a 20 year mortgage, the specifics of which
will be determined as part of the closing process.
Off Balance Sheet Arrangements.
The Company does not engage in any off balance sheet arrangements
that are reasonably likely to have a current or future effect on our
financial condition, revenues, and results of operations, liquidity or
capital expenditures.
Inflation.
The impact of inflation on the Company's costs and the ability to
pass on cost increases to its customers over time is dependent upon
market conditions. The Company is not aware of any inflationary
pressures that have had any significant impact on its operations over
the past three months, and the Company does not anticipate that
inflationary factors will have a significant impact on future operations.
Critical Accounting Policies.
The SEC has issued Financial Reporting Release No. 60,
"Cautionary Advice Regarding Disclosure About Critical Accounting
Policies" ("FRR 60"), suggesting companies provide additional
disclosure and commentary on their most critical accounting policies.
In FRR 60, the SEC has defined the most critical accounting policies
as the ones that are most important to the portrayal of a company's
financial condition and operating results, and require management to
make its most difficult and subjective judgments, often as a result of
the need to make estimates of matters that are inherently uncertain.
Based on this definition, the Company's most critical accounting
policies include: (a) use of estimates in the preparation of financial
statements; (b) revenue recognition; and (c) treatment of property,
plant, and equipment. The methods, estimates and judgments the
Company uses in applying these most critical accounting policies have
a significant impact on the results the Company reports in its
financial statements.
(a) Use of Estimates in the Preparation of Financial Statements.
The preparation of these financial statements requires the
Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an on-going
basis, the Company evaluates these estimates, including those related
to revenue recognition and concentration of credit risk. The Company
bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions.
(b) Revenue Recognition.
The financial statements are prepared based on the accrual method
of accounting. The Company is paid a rate per pound for removing
electronic waste from its customers' facilities. The Company records
revenue when recycling services, consisting of such waste removal, are
rendered.
Sales revenue in connection with the sale of serviceable
electronic equipment directly to consumers and/or other recyclers,
using existing personnel and facilities, is recognized at the time of
sale, with the bulk of collections occurring through credit card
transactions at the time of the sale. All sales are prepaid on an
"as-is" basis, FOB shipping point, and the Company does not accept
returns. Title passes to the customer at the time of sale.
(c) Treatment of Property, Plant and Equipment.
Property, plant and equipment are stated at cost and depreciated
using the straight-line method, based on estimated useful lives of 5
to 7 years for furniture and equipment. Repair and maintenance costs
are charged to expense when incurred, while renewals and improvements
that extend the useful lives of the equipment are capitalized as
additions to the related assets.
Forward Looking Statements.
This Form 10-QSB contains "forward looking statements" within the
meaning of Rule 175 of the Securities Act of 1933, as amended, and
Rule 3b-6 of the Securities Act of 1934, as amended. When used in
this Form 10-QSB, the words "expects," "anticipates," "believes,"
"plans," "will" and similar expressions are intended to identify
forward-looking statements. These are statements that relate to
future periods and include, but are not limited to, statements
regarding the Company's adequacy of capital resources, need and
ability to obtain additional financing, its operating losses and
negative cash flow, and its critical accounting policies.
Forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from those projected. These risks and uncertainties include, but are
not limited to, those discussed above, as well as the risks set forth
under "Factors That May Affect Operating Results." These forward-
looking statements speak only as of the date hereof. The Company
expressly disclaims any obligation or undertaking to release publicly
any updates or revisions to any forward-looking statements contained
herein to reflect any change in its expectations with regard thereto
or any change in events, conditions or circumstances on which any such
statement is based.
ITEM 3. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures.
The Company maintains disclosure controls and procedures (as
defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities
Exchange Act of 1934, as amended) that are designed to ensure that
information required to be disclosed in our periodic reports filed
under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms, and
that such information is accumulated and communicated to management,
including the Company's principal executive officer and principal
financial officer, to allow timely decisions regarding required
disclosure.
As of the end of the period covered by this report, management
carried out an evaluation, under the supervision and with the
participation of the Company's principal executive officer and
principal financial officer, of the Company's disclosure controls and
procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the
Exchange Act). Based upon the evaluation, the Company's principal
executive/financial officer concluded that its disclosure controls and
procedures were effective at a reasonable assurance level to ensure
that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified
in the SEC's rules and forms. In addition, the Company's principal
executive officer and principal financial officer concluded that its
disclosure controls and procedures were effective at a reasonable
assurance level to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the Exchange
Act is accumulated and communicated to the Company's management,
including its principal executive officer and principal financial
officer, to allow timely decisions regarding required disclosure.
Because of the inherent limitations in all control systems,
no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, will be or have been
detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can
occur because of simple error or mistake. Additionally, controls can
be circumvented by the individual acts of some persons, by collusion
of two or more people, and/or by management override of the control.
The design of any system of controls also is based in part upon
certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions; over time,
controls may become inadequate because of changes in conditions,
and/or the degree of compliance with the policies and procedures may
deteriorate. Because of the inherent limitations in a cost-effective
internal control system, misstatements due to error or fraud may occur
and not be detected.
Changes in Disclosure Controls and Procedures.
There were no changes in the Company's disclosure controls and
procedures, or in factors that could significantly affect those
controls and procedures since their most recent evaluation.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None. In addition, there were no purchases of common stock of
the Company by the Company or its affiliates during the three months
ended February 28, 2006.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
Exhibits included or incorporated by reference herein are set
forth in the attached Exhibit Index.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
RMD Technologies, Inc.
Dated: April 14, 2006 By: /s/ Patrick A. Galliher
Patrick A. Galliher, President
Dated: April 14, 2006 By: /s/ Arthur De Joya
Arthur De Joya,
Chief Financial Officer
EXHIBIT INDEX
Number Description
3.1 Articles of Incorporation, dated May 17, 2001 (incorporated
by reference to Exhibit 3.1 of the Form 10-SB filed on
January 7, 2005).
3.2 Certificate of Amendment of Articles of Incorporation, dated
June 21, 2004 (incorporated by reference to Exhibit 3.2 of
the Form 10-SB filed on January 7, 2005).
3.2 Bylaws, dated June 20, 2001 (incorporated by reference to
Exhibit 3.3 of the Form 10-SB filed on January 7, 2005).
4.1 Securities Purchase Agreement between the Company and La
Jolla Cove Investors, Inc., dated January 27, 2006
(incorporated by reference to Exhibit 4.1 of the Form 8-K
filed on February 6, 2006).
4.2 7 3/4% Convertible Debenture issued to La Jolla Cove Investors,
Inc., dated January 27, 2006 (incorporated by reference to
Exhibit 4.2 of the Form 8-K filed on February 6, 2006).
4.3 Warrant to Purchase Common Stock issued to La Jolla Cove
Investors, Inc., dated January 27, 2006 (incorporated by
reference to Exhibit 4.3 of the Form 8-K filed on February
6, 2006).
4.4 Registration Rights Agreement between the Company and La
Jolla Cove Investors, Inc., dated January 27, 2006
(incorporated by reference to Exhibit 4.4 of the Form 8-K
filed on February 6, 2006).
4.5 Addendum to Convertible Debenture and Warrant To Purchase
Common Stock, dated January 27, 2006 (incorporated by
reference to Exhibit 4.5 of the Form 8-K filed on February
6, 2006).
4.6 Continuing Personal Guaranty issued by Patrick A. Galliher
and Suzanne E. Galliher in favor of La Jolla Cove Investors,
Inc., dated January 27, 2006 (incorporated by reference to
Exhibit 4.6 of the Form 8-K filed on February 6, 2006).
10.1 Promissory Note issued by the Company in favor of Steven J.
Galliher, dated July 12, 2002 (incorporated by reference to
Exhibit 10.1 of the Form 10-SB filed on January 7, 2005).
10.2 Promissory Note issued by the Company in favor of Patrick A.
Galliher or Suzanne E. Galliher, dated November 17, 2002
(incorporated by reference to Exhibit 10.2 of the Form 10-SB
filed on January 7, 2005).
10.3 Promissory Note issued by the Company in favor of Patrick A.
Galliher, dated November 17, 2003 (incorporated by reference
to Exhibit 10.3 of the Form 10-SB filed on January 7, 2005).
10.4 Promissory Note issued by the Company in favor of Patrick A.
Galliher, dated December 29, 2003 (incorporated by reference
to Exhibit 10.4 of the Form 10-SB filed on January 7, 2005).
10.5 Promissory Note issued by the Company in favor of Patrick A.
Galliher, dated January 9, 2004 (incorporated by reference
to Exhibit 10.5 of the Form 10-SB filed on January 7, 2005).
10.6 Promissory Note issued by the Company in favor of Patrick A.
Galliher, dated February 6, 2004 (incorporated by reference
to Exhibit 10.6 of the Form 10-SB filed on January 7, 2005).
10.7 Promissory Note issued by the Company in favor of Patrick A.
Galliher, dated February 13, 2004 (incorporated by reference
to Exhibit 10.7 of the Form 10-SB filed on January 7, 2005).
10.8 Promissory Note issued by the Company in favor of Patrick A.
Galliher, dated March 22, 2003 (incorporated by reference to
Exhibit 10.8 of the Form 10-SB filed on January 7, 2005).
10.9 Promissory Note issued by the Company in favor of Patrick A.
Galliher, dated April 26, 2004 (incorporated by reference to
Exhibit 10.9 of the Form 10-SB filed on January 7, 2005).
10.10 Promissory Note issued by the Company in favor of Patrick A.
Galliher, dated May 7, 2004 (incorporated by reference to
Exhibit 10.10 of the Form 10-SB filed on January 7, 2005).
10.11 Promissory Note issued by the Company in favor of Patrick A.
Galliher, dated June 17, 2004 (incorporated by reference to
Exhibit 10.11 of the Form 10-SB filed on January 7, 2005).
10.12 Consulting Services Agreement between the Company, on the
one hand, and De Joya & Company, Inc. and Arthur De Joya, on
the other hand, dated September 1, 2005 (incorporated by
reference to Exhibit 10 of the Form 8-K filed on September
21, 2005).
16 Letter on Change in Certifying Accountant (incorporated by
reference to Exhibit 16 of the Form 8-K filed on January 5, 2006).
31.1 Rule 13a-14(a)/15d-14(a) Certification of Patrick A.
Galliher (filed herewith).
31.2 Rule 13a-14(a)/15d-14(a) Certification of Arthur De Joya
(filed herewith).
32 Section 1350 Certification of Patrick A. Galliher and Arthur
De Joya (filed herewith).