U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Amendment No. 4)
(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 .
The Company, by this Form 10-QSB/A, amends the following: Part I, Item
1, Financial Statements, to make the following changes: (a) the word
"RESTATED" has been inserted at the top of the Statements of
Operations (three and nine months ended February 28, 2006; (b)
paragraph (c) of Note 4 has been amended; and (c) the charts at the
end of Note 4 now cover both the three and nine months ended February
28, 2006 (with the restated numbers clearly marked). Also, by this
Form 10-QSB/A, the Company amended Part II, Item 6, Exhibits, to
include new certifications to the financial statements. Besides these
changes, no other changes have been made to the Form 10-QSB for the
quarter ended February 28, 2006. In addition, the remaining
information in this amended Form 10-QSB has not been changed or
updated to reflect any changes in information that may have occurred
subsequent to the date of the reporting period that this Form 10-QSB relates.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCAL STATEMENTS.
RMD TECHNOLOGIES, INC.
BALANCE SHEET
FEBRUARY 28, 2006
(RESTATED)
(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 120,762
Warranty liability related to convertible debenture 77,389
Advance from La Jolla Cove Investors, Inc. 150,000
Note payable 5,294
Payable to related individuals 121,160
Total Current Liabilities 614,915
Long Term Liabilities
Convertible debenture 8,220
Capital leases payable 8,493
Total Liabilities 631,628
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 (550,297)
Total Stockholders' Deficit (507,997)
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
(RESTATED) (RESTATED)
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
Expense related to adjustment of
derivative and warranty liability
to fair value (98,151) -- (98,151) --
Interest expense (11,241) (10,725) (26,206) (12,082)
Other expense -- -- -- --
Total Loss $(202,010) $ (30,816) $(330,311) $ (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
(RESTATED)
Operating Activities
Net loss $ (330,311) $ (75,492)
Adjustments to reconcile net loss to
cash used in operating activities:
Depreciation 4,892 6,387
Expense related to adjustment of derivative
and warrant liability to fair value 98,151 --
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, 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 and the Addendum, the Company issued
a warrant for 10,000,000 shares of common stock at an exercise price
of $1.09 per share. The holder is required to exercise a percentage
of the warrants that is equal to the percentage of the debenture being
converted. The warrant is exercisable for a period of three years.
The Company has determined the convertible debenture contains a
beneficial conversion feature. However, the beneficial conversion
feature does not qualify for treatment under Emerging Issue Task Force
No. 00-27 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 accounted for as an embedded derivative in accordance
Statement of Financial Accounting Standards ("SFAS") No. 133.
Additionally, the warrant related to the convertible debenture is
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 principal balance of the convertible debenture has been
allocated between derivative and warrant liability in the amounts of
$120,762 and $77,389, respectively. 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 warrants.
The adjustment to fair value for both the derivative and warrant
liability will result in either an expense or income recorded in the
income statement as a component of Other Income (Expense). The
estimated fair value of the derivative and warrant liability has been
determined using 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. 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.
In accordance with SFAS No. 133, the Company will revalue the related
derivative and warrant liability based upon the fair value at the end
of each reporting period. As of February 28, 2006, the Company has
accreted principal of $8,220 with unaccreted principal of $91,780 and
derivative and warrant liability of $120,762 and $77,389, respectively.
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.
NOTE 4 RESTATED FINANCIAL STATEMENTS
Subsequent to the issuance of the Company's financial statements as of
February 28, 2006, management determined that the
following corrections were necessary in connection with the
convertible debenture and warrants issued to La Jolla Cove Investors, Inc.:
(a) Revised the 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,
the disclosure was revised regarding the methodology of valuing
the conversion option of the debt.
(b) Revised the 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.
(c) Since the amount of proceeds of the debenture was $100,000,
then the Company was required to take a charge of $98,151 related
to adjustment of debenture and warrant liability.
Properly accounting of these items in the restated financial
statements has the following effect:
Three Three Restated
Months Months Increase
Ended Ended (Decrease)
February February
28, 2006 28, 2006
(Restated)
Total Loss from Operations $ (92,618) $ (92,618) $ --
Total Other Income (Expense) (11,241) (109,392) (98,151)
Net Loss $ (103,859) $ (202,010) $(98,151)
Basic and Diluted Loss per
Common Share $ (0.01) $ (0.01) $ --
Nine Months Nine Months Restated
Ended Ended Increase
February February (Decrease)
28, 2006 28, 2006
(Restated)
Total Loss from Operations $ (205,954) $ (205,954) $ --
Total Other Income (Expense) (26,206) (124,757) (98,151)
Net Loss $ (232,160) $ (330,311) $ (98,151)
Basic and Diluted Loss per
Common Share $ (0.02) $ (0.02) $ --
PART II - OTHER INFORMATION
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: July 12, 2006 By: /s/ Patrick A. Galliher
Patrick A. Galliher, President
Dated: July 12, 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 Promissory Note issued by the Company in favor of Ann
Morrison, dated August 24, 2005 (incorporated by reference
to Exhibit 10.12 of the Form 10-SB/A filed on May 16, 2006).
10.13 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).
10.14 Amended and Restated Consulting Services Agreement between
the Company, on the one hand, and De Joya & Company, Inc.
and Arthur De Joya, on the other hand, dated February 28,
2006 (incorporated by reference to Exhibit 10 of the Form 8-
K/A filed on May 11, 2006).
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).