Brian F. Faulkner
A PROFESSIONAL LAW CORPORATION
27127 CALLE ARROYO, SUITE 1923 . SAN JUAN CAPISTRANO, CALIFORNIA 92675
T: 949.240.1361 . F: 949.240.1362 . C: 714.608.2125
E: BRIFFAULK@AOL.COM
VIA FEDERAL EXPRESS AND EDGAR
July 6, 2006
H. Christopher Owings, Assistant Director
U.S. Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549
Re: RMD Technologies, Inc.
Amendment No. 7 to Registration Statement on Form 10-SB
Filed June 16, 2006
Amendment No. 4 to Form 10-KSB for the Fiscal Year Ended May 31, 2005
Filed June 16, 2006
Amendment No. 1 to Form 10-QSB for the Quarter Ended February 28, 2006
Filed June 16, 2006
File No. 0-51109
Dear Mr. Owings:
This letter is in response to your letter of July 5, 2006 with
regard to Amendment No. 7 to the Form 10-SB registration statement of
RMD Technologies, Inc., a California corporation ("Company"), filed
on June 16, 2006, Amendment No. 4 to Form 10-KSB for the fiscal year
ended May 31, 2005, filed on June 16, 2006, and Amendment No. 1 to
Form 10-QSB for the quarter ended February 28, 2006, filed on June
16, 2006. Each comment point in your letter will be addressed below
and in an amended Form 10-SB, and an amended Form 10-QSB to be filed
on EDGAR:
1. We have revised our calculations for the conversion option using
the Black-Scholes option pricing model using the following
assumptions: stock price volatility of 242%; risk free interest rate
of 3.5%; dividend yield of 0% and 3 year term which resulted in an
embedded derivative liability of $120,762. Additionally we have
revised our disclosure regarding the methodology of valuing the
conversion option of the debt.
We have revised our stock price volatility related to the Black-
Scholes options pricing model for the warrants to 242%. The stock
price volatility of 242% was determined based upon 6 similar publicly
traded companies. As a result, the fair value of the warrants
totaled $77,389.
We have revised our allocation of the principal balance of the
convertible debt resulting in $120,762 allocated towards the
derivative liability and $77,389 towards the warrant liability.
Please see the attached pages, which provide the substantiation
for the above-mentioned changes.
2. As requested, the Company will comply with Item 308(c) in future
filings. The Company confirms that there were no changes in internal
controls over financial reporting that occurred during the last
quarter that has reasonably affected, or is reasonably likely to
materially affect, internal controls over financial reporting.
I have enclosed two marked copies of the filed Form 10-SB/A
(Amendment No. 8) and the filed Form 10-QSB/A (February 28, 2006)
(Amendment No. 2) showing the changes made pursuant to this letter.
Should you have any additional comments or questions, please feel
free to contact me.
Sincerely,
/s/ Brian F. Faulkner
Brian F. Faulkner
cc: Pat Galliher, RMD Technologies, Inc.
SUMMARY
Date of Issue
1/27/2006 2/28/2006
Black-Scholes Warrants $ 77,389 $ 77,389
Calculation BCF 120,762 120,762
Total derivative liability $ 198,150 $ 198,150
Total proceeds $ 100,000
Total (expense) income or
initial debt carrying amount $ (98,150) $ -
income (expense) related to warrants $ -
income (expense) related to other derivatives $ -
Financing Costs in prepaid expenses $ - $ -
Expense using effective interest method $ - $ -
Debt carrying amount $ (98,150) $ (98,150)
Additions to debt carrying amount -
Warrants
See Warrants Tab $ 77,389 $ 77,389
BCF
Total Debt $ 100,000 $ 100,000
# of shares convertible into 12,500,000 2,500,000
Share price $ 0.0100 $ 0.0100
See BCF Tab 120,762 120,762
Black-Scholes Option-Pricing Model
For Conversion Feature Of Host Debt Dated 01/27/06
AT 01/27/06 AT 02/28/06
Input Variables
Number of Shares 12,500,000.0 12,500,000.0
Date Issued 27-Jan-06 27-Jan-06
Stock Price at Grant 0.01 0.01
Exercise Price 0.01 0.01
Term 3.00 3.00
Volatility 242% 242%
Annual Rate of Quarterly Dividends 0.00% 0.00%
Discount Rate - Bond Equivalent Yield 3.50% 3.50%
Intermediate Computations
Present Value of Stock Ex-Dividend $ 0.01 $ 0.01
Present Value of Exercise Price $ 0.01 $ 0.01
Cumulative Volatility 420.00% 420.00%
Call Option
Proportion of Stock Present Value 98.32% 98.32%
Proportion of Exercise Price PV -1.90% -1.90%
Call Option Value $ 0.0097 $ 0.0097
Put Option
Proportion of Stock PV -1.68% -1.68%
Proportion of Exercise Price PV 98.10% 98.10%
Put Option Value $ 0.01 $ 0.01
Number of options valued 12,500,000 12,500,000
$ 120,762 $ 120,762
Black-Scholes Option-Pricing Model
For Warrants Issuance Dated 01/27/06
AT 01/27/06 AT 02/28/06
Input Variables
Number of Shares 10,000,000.0 10,000,000.0
Date Issued 27-Jan-06 27-Jan-06
Stock Price at Grant 0.01 0.01
Exercise Price 1.09 1.09
Term 3.00 3.00
Volatility 242% 242%
Annual Rate of Quarterly Dividends 0.00% 0.00%
Discount Rate - Bond Equivalent Yield 3.50% 3.50%
Intermediate Computations
Present Value of Stock Ex-Dividend $ 0.01 $ 0.01
Present Value of Exercise Price $ 0.98 $ 0.98
Cumulative Volatility 420.00% 420.00%
Call Option
Proportion of Stock Present Value 84.32% 84.32%
Proportion of Exercise Price PV -0.07% -0.07%
Call Option Value $ 0.0077 $ 0.0077
Put Option
Proportion of Stock PV -15.68% -15.68%
Proportion of Exercise Price PV 99.93% 99.93%
Put Option Value $ 0.98 $ 0.98
Number of options valued 10,000,000 10,000,000
$ 77,389 $ 77,389
Accretion of Debt
Convertible Debentures for the 1/27/06 Issuance
Note terms:
Interest rate: 0.08
Maturity date: 8/31/2008
Principal Principal Principal Convertible
Advances Balance Accretion Debt balance
1/27/2006 100,000 0.00 0.00
2/28/2006 32 100,000 8,219.18 8,219.18
TOTAL PRINCIPAL
& INTEREST 8,219.18 8,219.18
Industry Peer Volatility Calculations
Weighted
Average
Volatility
Computed Volatility 480% 560% 8% 323% 64% 20% 242%
Number of Observations 26 26 26 19 26 26
Closing Trading Symbol
Price ARCI CWST ARYC WDWT VRDM ITRO
1/31/2004 2.65 14.1 0.01 0.36 0.2
2/28/2004 2.75 13.03 0.04 0.4 0.18
3/31/2004 3.38 14.54 0.04 0.44 0.16
4/30/2004 3.25 14.5 0.04 0.31 0.13
5/31/2004 2.5 13.98 0.01 0.21 0.11
6/30/2004 2.65 13.15 0.01 0.28 0.1
7/31/2004 2.65 12.21 0.01 0.26 0.08
8/31/2004 3.05 11.49 0.01 3.45 0.12 0.08
9/30/2004 2.75 11.84 0.01 4.3 0.15 0.08
10/31/2004 2.75 12.42 0.01 3.25 0.11 0.07
11/30/2004 3 15.11 0.01 3.55 0.08 0.08
12/31/2004 4.6 14.64 0.01 4.25 0.08 0.06
1/31/2005 3.69 14.23 0.01 3.5 0.1 0.12
2/28/2005 3.7 14.95 0.03 4.65 0.11 0.1
3/31/2005 3 13.23 0.03 4 0.09 0.08
4/30/2005 2.95 11.79 0.05 4.95 0.07 0.06
5/31/2005 3.25 11.41 0.06 4.11 0.05 0.07
6/30/2005 3.26 12 0.035 3.85 0.06 0.07
7/31/2005 3.5 13.51 0.035 3.5 0.06 0.06
8/31/2005 4.5 13.24 0.035 2.7 0.04 0.08
9/30/2005 5.2 13.13 0.035 2.5 0.04 0.07
10/31/2005 4.8 12.72 0.03 2.15 0.02 0.06
11/30/2005 4.2 12.24 0.04 2.85 0.02 0.05
12/31/2005 4.9 12.79 0.025 2.85 0.02 0.05
1/31/2006 4.9 13.36 0.03 3.6 0.03 0.07
2/28/2006 5.76 14.15 0.03 4 0.05 0.05