-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kr+84SRcbAZUvQlchTB4U+uE6V793OaVEHGut18oEGStEGuIy6gWUlYct0fOVx6R aD++BIbXUpGEKtRllRUkQQ== 0001094328-06-000065.txt : 20060418 0001094328-06-000065.hdr.sgml : 20060418 20060418165029 ACCESSION NUMBER: 0001094328-06-000065 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20060228 FILED AS OF DATE: 20060418 DATE AS OF CHANGE: 20060418 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RMD Technologies, Inc. CENTRAL INDEX KEY: 0001312112 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 330970212 STATE OF INCORPORATION: CA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-51109 FILM NUMBER: 06765148 BUSINESS ADDRESS: STREET 1: 308 WEST 5TH STREET CITY: HOLTVILLE STATE: CA ZIP: 92250 BUSINESS PHONE: 760-356-2039 MAIL ADDRESS: STREET 1: 308 WEST 5TH STREET CITY: HOLTVILLE STATE: CA ZIP: 92250 10QSB 1 rmd10qsb041706woex.txt 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). EX-31.1 2 rmdex311041706.txt EX-31.1 RULE 13a-14(a)/15d-14(a) CERTIFICATION OF PATRICK A. GALLIHER RULE 13a-14(a)/15d-14(a) CERTIFICATION I, Patrick A. Galliher, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of RMD Technologies, 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 the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [omitted pursuant to extended compliance period] for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [omitted pursuant to extended compliance period] (c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our 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 the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer'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 the small business issuer'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 the small business issuer's internal control over financial reporting. Dated: April 14, 2006 By: /s/ Patrtick A. Galliher Patrick A. Galliher, President EX-31.2 3 rmdex312041706.txt EX-31.2 RULE 13a-14(a)/15d-14(a) CERTIFICATION OF ARTHUR DE JOYA RULE 13a-14(a)/15d-14(a) CERTIFICATION I, Arthur De Joya, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of RMD Technologies, 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 the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [omitted pursuant to extended compliance period] for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [omitted pursuant to extended compliance period] (c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our 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 the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer'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 the small business issuer'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 the small business issuer's internal control over financial reporting. Dated: April 14, 2006 By: /s/ Arthur De Joya Arthur De Joya, Chief Financial Officer EX-32 4 rmdex32041706.txt EX-32 SECTION 1350 CERTIFICATION OF PATRICK A. GALLIHER AND ARTHUR DE JOYA SECTION 1350 CERTIFICATION In connection with the quarterly report of RMD Technologies, Inc. ("Company") on Form 10-QSB for the quarter ended February 28, 2006 as filed with the Securities and Exchange Commission ("Report"), the undersigned, in the capacities and on the dates indicated below, hereby certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to their knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: April 14, 2006 By: /s/ Patrtick A. Galliher Patrick A. Galliher, President Dated: April 14, 2006 By: /s/ Arthur De Joya Arthur De Joya, Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----