FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2004.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
----------- ----------
Commission file number 000-21914
HEALTHRENU MEDICAL, INC.
--------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 84-1022287
------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
12777 Jones Rd Suite 481, Houston Texas 77070
-------------------------------------------------
(Address of principal executive offices)
281-890-2561
-------------------------------
(Registrant's telephone number)
307 South Friendswood Drive, Suite E-1, Friendswood, Texas 77546
-------------------------------------------
(Former name and address)
Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, $.001 PAR VALUE PER SHARE
Check whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
[X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-QSB
or any amendment to this Form 10-QSB. [ ]
As of August 20, 2004, the issuer had 21,454,451 shares of common stock,
$.001 par value per share outstanding.
ITEM 1. FINANCIAL STATEMENTS
HEALTHRENU MEDICAL, INC.
UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND NINE MONTHS ENDED JUNE 30, 2004 AND 2003
HEALTHRENU MEDICAL, INC.
TABLE OF CONTENTS
PAGE(S)
-------
Unaudited Condensed Financial Statements:
Unaudited Condensed Balance Sheet as of June 30,
2004 and September 30, 2003 1
Unaudited Condensed Statement of Operations for the
three months and nine months ended June 30, 2004
and 2003 2
Unaudited Condensed Statement of Stockholders' Equity
(Deficit) for the nine months ended June 30, 2004 3
Unaudited Condensed Statement of Cash Flows for the
nine months ended June 30, 2004 and 2003 4
Notes to Unaudited Condensed Financial Statements 5
HEALTHRENU MEDICAL, INC.
BALANCE SHEET
JUNE 30, 2004 AND SEPTEMBER 30, 2003
JUNE 30, SEPTEMBER 30,
2004 2003
ASSETS (UNAUDITED) (NOTE)
- --------------- ------------ ------------
Current assets:
Cash and cash equivalents $ 12,983 $ 17,684
Inventories 31,814 46,903
Employee receivable - 5,771
Other current assets 12,353 5,000
------------ ------------
Total current assets 57,150 75,358
Property and equipment, net 1,311 56,903
------------ ------------
Total assets $ 58,461 $ 132,261
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 124,939 $ 78,604
Accounts payable-stockholder 3,010 3,235
Notes payable to stockholders 1,000 16,403
------------ ------------
Total current liabilities 128,949 98,242
------------ ------------
Commitments and contingencies
Stockholders' equity (deficit):
Convertible preferred stock, Series 2000A, $0.001
par value; 1,500,000 shares authorized, 1,763
shares issued and outstanding at June 30, 2004
and September 30, 2003 2 2
Common stock, $.001 par value; 50,000,000 shares
authorized, 21,089,951 and 15,506,962 shares issued
and outstanding at June 30, 2004 and September
30, 2003, respectively 21,090 15,507
Additional paid-in capital 1,580,572 674,830
Common stock committed 18,750 698,602
Stock subscription receivable (4,000) (31,000)
Accumulated deficit (1,686,902) (1,323,922)
------------ ------------
Total stockholders' equity (deficit) (70,488) 34,019
------------ ------------
Total liabilities and stockholders'
equity (deficit) $ 58,461 $ 132,261
============ ============
Note: The balance sheet at September 30, 2003 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles in the United
States of America for complete financial statements.
See accompanying notes to unaudited condensed financial statements.
-1-
HEALTHRENU MEDICAL, INC.
UNAUDITED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED JUNE 30, 2004 AND 2003
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
2004 2003 2004 2003
------------ ----------- ------------ -----------
Sales $ - $ 6,468 $ 27,395 $ 21,944
Cost of sales - 3,295 13,353 19,363
------------ ----------- ------------ -----------
Gross profit - 3,173 14,042 2,581
General and administrative expenses 82,604 43,727 392,090 75,860
------------ ----------- ------------ -----------
Loss from operations (82,604) (40,554) (378,048) (73,279)
Gain on sale of assets - - 15,468 -
Interest expense - - (400) -
------------ ----------- ------------ -----------
Net loss $ (82,604) $ (40,554) $ (362,980) $ (73,279)
============ =========== ============ ===========
Weighted average shares outstanding 19,542,667 9,067,070 18,590,192 9,041,913
============ =========== ============ ===========
Basic and diluted net loss per common
share $ (0.00) $ (0.00) $ (0.02) $ (0.01)
============ =========== ============ ===========
See accompanying notes to unaudited condensed financial statements.
-2-
HEALTHRENU MEDICAL, INC.
UNAUDITED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED JUNE 30, 2004
ADDITIONAL COMMON STOCK
PREFERRED STOCK COMMON STOCK PAID-IN STOCK SUBSCRIPTION ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMMITTED RECEIVABLE DEFICIT Total
------ ------- ---------- ------- ---------- ----------- ------------ ---------- ----------
Balance at September 30, 2003 1,763 $ 2 15,506,962 $15,507 $ 674,830 $ 698,602 $ (31,000) $(1,323,922) $ 34,019
Common stock issued for
services - - 75,000 75 52,975 - - - 52,950
Issuance of common stock for
cash or receivable - - 895,000 895 88,605 - (4,000) - 85,500
Payment of subscription
receivable - - - - - - 31,000 - 31,000
Stock issued for committed
stock - - 3,779,902 3,780 694,822 (698,602) - - -
Common stock issued for
employee compensation - - 187,500 187 18,563 - - - 18,750
Common stock committed for
employee compensation - - - - - 18,750 - - 18,750
Common stock issued for
accrued liabilities - - 645,587 646 50,127 - - - 50,773
Rent contributed by stockholder - - - - 750 - - - 750
Net loss - - - - - - - (362,980) (362,980)
------ ------- ---------- ------- ---------- ----------- ------------ ------------ ---------
Balance at June 30, 2004 1,763 $ 2 21,089,951 $21,090 $1,580,572 $ 18,750 $ (4,000) $(1,686,902) (70,488)
====== ======= ========== ======= ========== =========== ============ ============ =========
See accompanying notes to unaudited condensed financial statements.
-3-
HEALTHRENU MEDICAL, INC.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2004 AND 2003
NINE MONTHS ENDED
JUNE 30,
---------------------
2004 2003
---------- ---------
Cash flows from operating activities:
Net loss $(362,980) $(73,279)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 5,150 3,109
Gain on sale of assets (15,468) -
Stock-based compensation for services 52,950 43,000
Stock-based employee compensation 37,500 36,000
Rent contributed by stockholder 750 -
Changes in operating assets and liabilities:
Accounts receivable (1,994) 17,595
Other current assets (1,646) (3,829)
Inventories 15,089 6,843
Accounts payable and accrued liabilities 152,946 (618)
---------- ---------
Net cash provided by (used in) operating activities (117,703) 28,821
---------- ---------
Cash flows from investing activities:
Purchase of fixed assets (3,498) -
---------- ---------
Net cash used in investing activities (3,498) -
---------- ---------
Cash flows form financing activities:
Proceeds from stock subscription receivable 31,000 -
Proceeds from sale of stock 85,500 -
---------- ---------
Net cash provided by financing activities 116,500 -
---------- ---------
(Decrease) increase in cash and cash equivalents (4,701) 28,821
Cash and cash equivalents, beginning of period 17,684 13,128
---------- ---------
Cash and cash equivalents, end of period $ 12,983 $ 41,949
========== =========
Supplemental disclosure of cash flow information:
Cash paid for interest $ - $ -
========== =========
Cash paid for income taxes $ - $ -
========== =========
Non-cash investing and financing activities:
Common stock issued for payment of accrued liabilities $ 50,773 $ -
========== =========
Transfer of property for reduction in accrued liability $ 3,811 $ -
========== =========
Sale of common stock for subscription receivable $ 4,000 $ -
========== =========
See accompanying notes to unaudited condensed financial statements
-4-
HEALTHRENU MEDICAL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
------------------------------
The accompanying unaudited interim financial statements have been prepared
without audit pursuant to the rules and regulations of the U.S. Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted, pursuant to such rules and
regulations. These unaudited condensed financial statements should be read in
conjunction with the audited financial statements and notes thereto of
HealthRenu Medical, Inc. (the "Company") included in the Company's Annual Report
on Form 10-KSB for the year ended September 30, 2003. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation of financial position, results of
operations and cash flows for the interim periods presented have been included.
Operating results for the interim periods are not necessarily indicative of the
results that may be expected for the respective full year.
2. ORGANIZATION
------------
HealthRenu Medical, Inc. (the "Company"), a Nevada corporation, is headquartered
in Friendswood, Texas. The Company produces and distributes various skin care
products primarily to the home health care and other medical markets throughout
the United States.
The Company was originally incorporated in Delaware as Health Renu, Inc. in
1997. In September 2003, upon completion of a recapitalization through
acquisition of a non-operating public shell, the name was changed to HealthRenu
Medical, Inc. On February 29, 2004, the Company entered into an agreement with a
stockholder and former owner of the non-public entity to exchange 100% of the
issued and outstanding shares of Health Renu, Inc., a Delaware corporation, for
a return of 25,000 shares of common stock of the Company and all proprietary
trademarks, intellectual property rights and formulas to produce its products.
The gain on the disposition of these assets and liabilities was $15,468.
3. CRITICAL ACCOUNTING POLICIES
------------------------------
USE OF ESTIMATES
------------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect reported amounts and related disclosures.
Actual results could differ from those estimates.
REVENUE RECOGNITION
--------------------
Revenue is recognized when products are shipped.
STOCK-BASED COMPENSATION
- -------------------------
Stock-based compensation is accounted for using the intrinsic value method
prescribed in Accounting Principles Board Opinion ("APB") No. 25, "Accounting
for Stock Issued to Employees", rather than applying the fair value method
prescribed in SFAS No. 123, "Accounting for Stock-Based Compensation".
Continued
-5-
HEALTHRENU MEDICAL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS, CONTINUED
4. GOING CONCERN
--------------
During the nine months ended June 30, 2004, the Company has continued to
accumulate payables to its vendors and has experienced negative financial
results as follows:
Net loss $ (362,980)
Negative cash flows from operations $ (117,703)
Negative working capital $ (71,799)
Accumulated deficit $(1,686,902)
Stockholders' deficit $ (70,488)
Management has developed specific current and long-term plans to address its
viability as a going concern as follows:
- - Effective September 2003, the Company entered into a recapitalization
transaction with a public shell to gain access to public capital markets,
to increase attractiveness of its equity and to create liquidity for
stockholders.
- - The Company is also attempting to raise funds through debt and/or equity
offerings. If successful, these additional funds would be used to pay down
liabilities and to provide working capital.
- - In the long-term, the Company believes that cash flows from growth in its
operations will provide the resources for continued operations.
There can be no assurance that the Company will have the ability to implement
its business plan and ultimately attain profitability. The Company's long-term
viability as a going concern is dependent upon three key factors, as follows:
- - The Company's ability to obtain adequate sources of debt or equity funding
to meet current commitments and fund the continuation of its business
operations in the near term.
- - The ability of the Company to control costs and expand revenues.
- - The ability of the Company to ultimately achieve adequate profitability and
cash flows from operations to sustain its operations.
5. RELATED PARTY TRANSACTIONS
----------------------------
During the three months ended June 30, 2004, the Company's chief executive
officer directly paid vendors on behalf of the Company in the total amount of
$23,559. In addition, the chief executive officer advanced the Company $6,000
during this same period. During the three months ended June 30, 2004, the
Company issued the chief executive officer 295,587 shares of the Company's
common stock valued at $29,559 to reimburse him for these transactions.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This report contains forward looking statements within the meaning of Section
27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act
of 1934. These forward looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical results or anticipated results, including those set forth under "Risk
Factors" in this Management's Discussion and Analysis of Financial Condition and
Results of Operations" and elsewhere in this report. The following discussion
and analysis should be read in conjunction with the Company's financial
statements and notes thereto included elsewhere in this report and appearing in
our annual report filed in Form 10-KSB for the year ended September 30, 2003.
HealthRenu Medical, Inc. (the "Company"), a Nevada corporation, is headquartered
in Friendswood, Texas. The Company produces and distributes various skin care
products primarily to the home health care and other medical markets throughout
the United States.
The Company was originally incorporated in Delaware as Health Renu, Inc. in
1997. In September 2003, upon completion of a recapitalization through
acquisition of a non-operating public shell, the name was changed to HealthRenu
Medical Inc. The public shell had no significant assets or operations at the
time of the acquisition. The Company assumed all liabilities of the public shell
that remained on the date of the acquisition. The historical financial
statements herein are those of HealthRenu Medical, Inc., and its predecessor,
Health Renu, Inc.
The non-operating public shell used to recapitalize the Company was originally
incorporated in Colorado as American Merger Control, Inc. and subsequently
adopted name changes to Ultratech Knowledge Systems, Inc., and AGTSports, Inc.
In 2003, the Company was reincorporated in the state of Nevada and subsequently
changed its name to its current name, HealthRenu Medical, Inc.
In February 2004, the Company acquired all of the proprietary trademarks and
other intellectual property rights and certain other assets including formulas
to produce the products listed below (collectively referred to herein as the
("Assets") of its wholly-owned subsidiary, Health Renu, Inc. a Delaware
Corporation ("Health Renu"), in exchange for all of the stock of Health Renu,
which stock was subsequently acquired by Darrell Good, the Company's former
President. The Assets had been used by Health Renu for medical research,
development, sales and marketing of personal skin care and wound care products.
The Company continued to use the Assets for the same purposes. Health Renu was
founded by Darrell Good with the help of a Dallas, Texas pharmaceutical firm.
The Company is a processor and manufacturer of products for skin care and wound
care, with a wide range of applications. The Company's products are made with a
heavy concentration of essential fatty acids. Essential fatty acids have been
widely reported to have significant anti-inflammatory effects, and are currently
being used in cosmetics and therapeutic vehicles. A significant amount of
research and development has occurred as well as extensive product testing.
The Company's products are currently used for skin care and wound care. The
Company's products are specifically used for diabetic skin care, diabetic
neuropathy, circulation, non-healing wounds, various types of skin disorders,
and arthritis. The Company is aggressively pursuing additional uses for its
products in other areas of the medical field. For example, the Company is
researching using its products as transdermal carriers of other medications into
the body, which would result in many different applications for the Company's
products.
The Company currently has eight major products in their line, they include:
- - Derm-All Gel Wound Dressing
- - Skin Renu' Lotion
- - Skin Renu' Skin Therapy
- - Skin Renu' Plus Circulation Formula
- - Renu' Care Skin-Care Wash Cream
- - Health Renu' Sport Medicine
- - Health Renu' Deep Relief Pain Reliever
- - Health Renu' Facial Soap
The Company has exclusive usage of the formulas and has the right to purchase
them as well. These products have provided a very simple, cost effective way in
dealing with disorders without side affects and come with a satisfaction
guarantee to the medical field as well as to the household consumer.
The Company was planning on airing TV commercials in the second quarter of 2004,
but the Company has since decided to delay this phase of the Company's business
plan until a later date.
Additionally, The Company has been focusing on the illness fibromyalgia and
believes it has come up with a solution to aid in the relief and possible
prevention of the symptoms that occur from fibromyalgia, a central nerve
disorder.
COMPARISON OF OPERATING RESULTS
THREE MONTHS ENDED JUNE 30, 2004 COMPARED TO THREE MONTHS ENDED JUNE 30, 2003:
Revenues decreased from $6,468 for the three months ended June 30, 2003 to $-0-
for the three months ended June 30, 2004. The decrease in revenues is due to the
fact that the Company had no money to produce finished goods inventory during
the quarter.
Cost of sales decreased from $3,295 for the three months ended June 30, 2003 to
$-0- for the three months ended June 30, 2004.
Gross profit decreased from $3,173 for the three months ended June 30, 2003 to
$-0- for the three months ended June 30, 2004.
General and administrative expenses increased $38,877 (88.9%) to $82,604 for the
three months ended June 30, 2004 from $43,727 for the three months ended June
30, 2003. The increase in general and administrative expenses was due to costs
associated with being a publicly traded company.
The Company recorded a loss from operations of $(82,604) for the three months
ended June 30, 2004 compared to a loss from operations of $(40,554) for the
three months ended June 30, 2003, an increase in loss of $42,050 or 104%. The
increase of loss from operations is principally due to the increased general and
administrative expenses.
Basic and diluted net loss per common share was $(0.00) for the three month
periods ended June 30, 2004 and 2003.
NINE MONTHS ENDED JUNE 30, 2004 COMPARED TO NINE MONTHS ENDED JUNE 30, 2003:
Revenues increased from $21,944 for the nine months ended June 30, 2003 to
$27,395 for the nine months ended June 30, 2004. The increase in revenues was
due to a one time bulk order from one wholesaler for $27,395.
Cost of sales decreased $6,010 (31%), from $19,363 for the nine months ended
June 30, 2003 to $13,353 for the nine months ended June 30, 2004.
Gross profit increased $11,461 (444%), from $2,581 for the nine months ended
June 30, 2003 to a gross profit of $14,042 for the nine months ended June 30,
2004.
General and administrative expenses increased $316,230 (417%), to $392,090 for
the nine months ended June 30, 2004 from $75,860 for the nine months ended June
30, 2003. The increase in general and administrative expenses was due to costs
associated with being a publicly traded company.
The Company recorded a loss from operations of $(378,048) for the nine months
ended June 30, 2004 compared to a loss from operations of $(73,279) for the nine
months ended June 30, 2003. The increase of loss from operations is principally
due to the increased general and administrative expenses.
The Company reported a net loss of $(362,980) for the nine months ended June 30,
2004 compared to a net loss of $(73,279) for the nine months ended June 30,
2003. The increase in net loss is principally due to the increase in general
and administrative expenses.
Basic and diluted net loss per common share was $(0.02) for the nine months
ended June 30, 2004 compared to $(0.01) for the nine months ended June 30, 2003.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $12,983 at June 30, 2004 and
current assets of $57,150. The Company had accounts payable and accrued
liabilities of $124,939 and total current liabilities of $128,949 as of June 30,
2004.
As of June 30, 2004, the Company had negative working capital of $(71,799). The
ratio of current assets to current liabilities was 44.3%.
The Company believes it currently has sufficient raw material to produce
inventory with a retail value in excess of $1,300,000. Lab costs associated with
the production of this inventory are approximately $150,000 for which the
Company will need external financing.
It is imperative that the Company raise capital to implement its business plan.
The Company will require approximately $500,000 of additional financing to
implement its business plan. At this time, no such additional financing has been
secured or identified. If the Company is unable to obtain debt and/or equity
financing upon terms that management deems sufficiently favorable, or at all, it
would have a materially adverse impact upon the Company's ability to pursue its
aggressive marketing strategy and maintain its current operations. Without
additional capital funding, the Company believes it cannot continue to operate
in 2004 and could not expand or meet its business objectives. If the Company
does not receive external financing, its revenue stream would not expand, would
likely decrease and significant opportunities would be lost which would be a
limiting factor on the Company's growth. In the event that the Company does not
receive external financing, the Company's management would streamline the
business to exist on the available cash flow.
The Company is currently exploring all opportunities to raise the capital
necessary to develop its business operations. There is no guarantee that funds
will be available or sufficient to meet the Company's immediate operating needs.
Until the Company has the necessary funds to pay the laboratory costs associated
with the development of its product inventory the Company will realize only
minimal sales. The laboratory process is approximately a four week cycle.
Therefore, when funds are received, inventory will be replenished within four
weeks.
RISK FACTORS
THE COMPANY IS DEPENDENT UPON EXTERNAL FINANCING. It is imperative that the
Company raise capital to expand its operations and stay in business. The
Company requires capital of approximately $500,000 to implement its business
plan. If the Company is unable to obtain debt and/or equity financing upon
terms that its management deems sufficiently favorable, or at all, it would
have a materially adverse impact upon the Company's ability to pursue its
business strategy and maintain its current operations. Because of this, you
could lose your investment in the Company.
THE COMPANY'S PRODUCTS MAY NOT BE SUCCESSFUL. Even if the Company is able to
produce a product line and arrange for marketing and advertising, the Company's
product may still not sell. If the Company spends its revenues producing a
product which it fails to sell, the company may be forced to cease operations
and you could lose your investment in the Company.
EVEN IF PRODUCT IS SUCCESSFUL, THE COMPANY MAY BE UNABLE TO SELL ITS PRODUCT. In
the event that the Company is successful in completing its product, there can be
no assurance that the Company will be able to sell its products at all, or
enough at quantities and prices needed to maintain operations. This may
lead to the devaluation of your shares in the Company or even that they become
worthless.
RELIANCE ON KEY MANAGEMENT. The success of the Company depends upon the
personal efforts and abilities of Robert W. Prokos, a Director of the Company
and the Company's President. The Company's ability to operate and implement its
exploration activities is heavily dependent on the continued service of Mr.
Prokos, and the Company's ability to attract qualified contractors on an
as-needed basis. The Company faces continued competition for Mr. Prokos (or
other key management should the Company desire to attain the same) and such
contractors. The Company cannot be certain that it will be able to retain Mr.
Prokos or attract and retain such contractors. The loss of Mr. Prokos or the
Company's inability to attract and retain qualified contractors on an as-needed
basis could have a material adverse effect on the Company's business and
operations.
IF THERE'S A MARKET FOR OUR COMMON STOCK, OUR STOCK PRICE MAY BE VOLATILE. If
there's a market for our common stock, we anticipate that such market would be
subject to wide fluctuations in response to several factors, including, but not
limited to:
(1) actual or anticipated variations in our results of operations;
(2) our ability or inability to generate new revenues; and
(3) increased competition;
Further, because our common stock is traded on the NASD over the counter
bulletin board, our stock price may be impacted by factors that are unrelated or
disproportionate to our operating performance. These market fluctuations, as
well as general economic, political and market conditions, such as recessions,
interest rates or international currency fluctuations may adversely affect the
market price of our
common stock.
The above factors among others indicate that the Company may be unable to
continue as a going concern, particularly in the event that it cannot obtain
additional financing. The accompanying financial statements do not include any
adjustments relating to the recoverability of recorded assets, or the amounts
and classification of liabilities that might be necessary in the event that the
Company cannot continue in existence.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations
is based upon our financial statements, which have been prepared in accordance
with accounting principals generally accepted in the United States. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of any contingent assets and liabilities. On an
on-going basis, we evaluate our estimates, including those related to
uncollectible receivables, investment values, income taxes, the recapitalization
and contingencies. We base our estimates on various assumptions that we believe
to be reasonable under the circumstances, the results of which form the basis
for making judgments about 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.
Revenue Recognition. Revenue is recognized when products are shipped, however,
the Company does market its products with a satisfaction guarantee. The Company
has not set up a reserve for returns from unsatisfied customers. In the event
that products are returned pursuant to this guarantee, the Company would have to
make an offsetting adjustment to sales revenue.
Stock Based Compensation. Stock-based compensation is accounted for using the
intrinsic value method prescribed in Accounting Principles Board Opinion ("APB")
No. 25, "Accounting for Stock Issued to Employees", rather than applying the
fair value method prescribed in SFAS No. 123, "Accounting for Stock-Based
Compensation".
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Our chief executive
officer and principal financial officer, after evaluating the effectiveness of
the Company's "disclosure controls and procedures" (as defined in the Securities
Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period
covered by this annual report (the "Evaluation Date"), has concluded that as of
the Evaluation Date, our disclosure controls and procedures were adequate and
designed to ensure that material information relating to us and our consolidated
subsidiaries would be made known to them by others within those entities.
(b) Changes in internal control over financial reporting. There were no
significant changes in our internal control over financial reporting during this
fiscal quarter that materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of the date of filing of this report, the Company was not a party to, nor
aware of, any legal proceedings involving the Company.
ITEM 2. CHANGES IN SECURITIES
(c) On May 14, 2004, the Company issued 50,000 restricted shares of the
Company's common stock to an individual in consideration for legal services
valued at $50,000. The Company claims an exemption from registration afforded
by Section 4(2) of the Act since the foregoing issuance did not involve a
public offering, the recipient had access to information that would be included
in a registration statement, took the shares for investment and not resale and
the Company took appropriate measures to restrict transfer.
On June 30, 2004, the Company issued an aggregate of 895,000 restricted
shares of the Company's common stock to 12 individuals, one of which is a
director of the Company who invested $30,000, who paid an aggregate of
$88,500 or $.10 a share to the Company. The Company claims an exemption from
registration afforded by Section 4(2) of the Act since the foregoing issuance
did not involve a public offering, the recipients had access to information that
would be included in a registration statement, took the shares for investment
and not resale and the Company took appropriate measures to restrict transfer.
On July 30, 2004, the Company issued 350,000 restricted shares of the
Company's common stock to the Chief Executive Officer for forgiveness of $21,000
owed to him by the Company, pursuant to an employment agreement signed by both
parties on March 1, 2004. Additionally, the Company issued 295,587 shares of the
Company's common stock to the Chief Executive for monies advanced to the
Company. The Company claims an exemption from registration afforded by Section
4(2) of the Act since the foregoing issuance did not involve a public offering,
the recipient had access to information that would be included in a registration
statement, took the shares for investment and not resale and the Company took
appropriate measures to restrict transfer.
On August 11, 2004, the Company issued an aggregate of 27,500 restricted
shares of the Company's common stock to 2 individuals who paid an aggregate of
$2,750 or $.10 a share to the Company. The Company claims an exemption from
registration afforded by Section 4(2) of the Act since the foregoing issuance
did not involve a public offering, the recipients had access to information that
would be included in a registration statement, took the shares for investment
and not resale and the Company took appropriate measures to restrict transfer.
On August 11, 2004, the Company issued 87,500 restricted shares of the
Company's common stock to the former Chief Executive Officer of the Company
pursuant to an employment agreement between the Company and the Executive. The
Company claims an exemption from registration afforded by Section 4(2) of the
Act since the foregoing issuance did not involve a public offering, the
recipient had access to information that would be included in a registration
statement, took the shares for investment and not resale and the Company took
appropriate measures to restrict transfer.
On August 11, 2004, the Company issued 250,000 restricted shares of the
Company's common stock to a board member of the Company pursuant to a consulting
agreement between the Company and the Executive. The Company claims an
exemption from registration afforded by Section 4(2) of the Act since the
foregoing issuance did not involve a public offering, the recipient had access
to information that would be included in a registration statement, took the
shares for investment and not resale and the Company took appropriate measures
to restrict transfer.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
During the Quarter ended June 30, 2004, Randy Mullins resigned as the Company's
Chief Financial Officer. As a result Robert W. Prokos, the Company's Chief
Executive Officer will serve as both the Company's Chief Executive Officer and
Chief Financial Officer.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit No. Description
10.1 Employment Agreement with Rob Prokos (1)
31 Certificate of the Chief Executive Officer and Principal
Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 *
32 Certificate of the Chief Executive Officer and Principal
Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 *
* Filed herewith as an exhibit.
(1) Filed as Exhibits 10.2 to the Company's 10-QSB filed with the
Securities and Exchange Commission on May 24, 2004, and incorporated herein by
reference.
b) Reports on Form 8-K
There were no Form 8-Ks filed by the Company during the reporting period.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HEALTHRENU MEDICAL, INC.
DATED: August 23, 2004 By: /s/ Robert W. Prokos
------------------------
Robert W. Prokos
Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
NAME TITLE DATE
/s/ Robert W. Prokos Chief Executive Officer, August 23, 2004
- ---------------------- Principal Financial Officer,
Robert W. Prokos and Director
EXHIBIT 31
CERTIFICATION
I, Robert W. Prokos, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of HealthRenu
Medical, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of HealthRenu Medical,
Inc. as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
HealthRenu Medical, Inc. and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under my supervision, to
ensure that material information relating to HealthRenu Medical, Inc., including
its consolidated subsidiaries, is made known to me by others within those
entities, particularly during the period in which this report is being prepared;
b) Paragraph omitted in accordance with SEC transition instructions
contained in SEC Release No. 33-8238;
c) Evaluated the effectiveness of HealthRenu Medical, Inc.'s disclosure controls
and procedures and presented in this report my conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
d) Disclosed in this report any change in HealthRenu Medical, Inc.'s internal
control over financial reporting that occurred during HealthRenu Medical, Inc.'s
most recent fiscal quarter that has materially affected, or is reasonably likely
to materially affect, HealthRenu Medical, Inc.'s internal control over financial
reporting; and
5. I have disclosed, based on my most recent evaluation of internal control
over financial reporting, to HealthRenu Medical, Inc.'s auditors and the audit
committee of HealthRenu Medical, Inc.'s board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect HealthRenu Medical, Inc.'s ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in HealthRenu Medical, Inc.'s internal
control over financial reporting.
Date: August 23, 2004
By: /s/ Robert W. Prokos
-------------------------------
Robert W. Prokos
Chief Executive Officer and
Principal Financial Officer
EXHIBIT 32
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert W. Prokos, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of HealthRenu Medical, Inc. on Form 10-QSB for the quarterly period ended
June 30, 2004 fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 and that information contained in such Form
10-QSB fairly presents in all material respects the financial condition and
results of operations of HealthRenu Medical, Inc.
By: /s/ Robert W. Prokos
--------------------------
Name: Robert W. Prokos
Title: Chief Executive Officer and
Principal Financial Officer
August 23, 2004