UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 FORM 10-KSB/A-2

(Mark One)

|X|  QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

      For the fiscal year ended September 30, 2005

|_|  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                                         25-1907744
(State or other jurisdiction of                (IRS Employer Identification No.)
 incorporation or organization)

                12777 Jones Road, Suite 481, Houston, Texas 77070
                    (Address of principal executive offices)

                                 (281) 890-2561
                (Issuer's telephone number, including area code)

       Securities registered under Section 12(b) of the Exchange Act: NONE

         Securities registered under Section 12(g) of the Exchange Act:

                    COMMON STOCK, $0.001 PAR VALUE PER SHARE

      Check whether the issuer is not required to file reports pursuant to
                  Section 13 or 15(d) of the Exchange Act. |_|

      Check whether the issuer (1) 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-KSB
or any amendment to this Form 10-KSB. |_|

      Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|

The issuer's revenues for the most recent fiscal year ended September 30, 2005
were $9,785.

The aggregate market value of the issuer's voting and non-voting common equity
held by non-affiliates computed by reference to the closing sale price of such
common equity as of January 31, 2006, was approximately $3,248,025.

As of January 31, 2006 the issuer had 26,094,589 shares of common stock, $.001
par value per share outstanding.

Documents Incorporated by Reference: NONE

Transitional Small Business Disclosure Format: Yes |_| No |X|

<PAGE>

                       Statement Regarding This Amendment

We are amending our Annual Report on Form 10KSB/A to restate our financial
statements for the years ended September 30, 2005 and 2004 and the related
disclosures. We have identified certain accounting errors related to the
recording of our debt arrangements. We have performed an analysis of our
existing debt agreements and have concluded that we incorrectly recorded our
debt obligations and associated warrants. Our analysis determined that the
warrants associated with our convertible notes payable are derivatives as
defined under SFAS No. 133 and EITF 00-19. We also did not appropriately account
for financing costs incurred as a direct result of these debt arrangements.
Accordingly, we are also amending our Form 10-QSB/A for the three months ending
December 31, 2005, our Form 10-QSB/A the six months ending March 31, 2006, and
our Form 10-QSB for the nine months ending June 30, 2006.

As a result of this analysis, warrants issued to consultants and the conversion
features of the convertible notes payable and associated warrants have been
accounted for as derivative instrument liabilities. Additionally, the embedded
conversion features of the notes payable have been bifurcated from the debt and
accounted for separately as derivative instrument liabilities. We have added
footnote 15 to disclose the derivative instrument liabilities and provide
information on subsequent changes.

We are required to record the fair value of the conversion features and the
warrants on our balance sheet at fair value with changes in the values of these
derivatives reflected in the statement of operations as "Loss on embedded
derivative liability." The effect of the (non-cash) changes related to
accounting separately for these derivative instrument liabilities on our
statement of operations for the twelve months ended September 30, 2005, was an
increase in our net loss attributable to common shareholders of $2,082,121.
Basic loss attributable to common shareholders per share for the year ended
September 30, 2005 increased $0.06 per share. The cumulative effect on our
balance sheet as of September 30, 2005 was an additional derivative liability of
$2,630,121.

During our analysis we noted that costs directly associated from our debt
arrangements were originally treated as a reduction in additional
paid-in-capital and as a result of this amendment are now recorded as deferred
loan costs net of applicable accumulated amortization. We have added footnote 5
to disclose the deferred loan costs and provide information on subsequent
changes. The effect of the (non-cash) changes related to accounting for these
deferred loan costs on our statement of operations for the twelve months ended
September 30, 2005 was an increase in our net loss attributable to common
shareholders of $893. The cumulative effect on our balance sheet as of September
30, 2005 was an additional deferred loan cost net of accumulated amortization of
$136,037.

In all other material respects, this Amended Annual Report on Form 10-KSB/A-2 is
unchanged from the Amended Annual Report on Form 10-KSB/A previously filed by us
on April 6, 2006. This Amended Annual Report on Form 10-KSB-2 does not attempt
to modify or update any other disclosures set forth in the Form 10-KSB and Form
10-KSB/A previously filed or discuss any other developments after the respective
dates of those filings except to reflect the effects of the restatements
described above, certain risk factor disclosure and except as otherwise
specifically identified herein. This amendment should also be read in
conjunction with our amended Quarterly Reports on Form 10-QSB/A-2 for the
quarter ended December 31, 2005, Form 10-QSB/A-2 for the quarter ended March 31,
2006, and Form 10-QSB/A for the quarter ended June 30, 2006, together with any
subsequent amendments thereof.


                                        2

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this prospectus.
This discussion contains forward-looking statements.

OVERVIEW

On September 26, 2003, we acquired 100% of the outstanding shares of Health
Renu, Inc., a Delaware corporation to whose business we succeeded ("Health
Renu-DE"), pursuant to an exchange agreement. Since its inception, Health
Renu-DE had been in the medical research and development stage, with a focus on
improving its skin care and developing wound care products. During this period,
Health Renu-DE had nominal production or revenue. As a result of the exchange
agreement, the business of Health Renu-DE became our business, our control
shifted to the former Health Renu-DE stockholders and we subsequently changed
our name to HealthRenu Medical, Inc.

CRITICAL ACCOUNTING POLICIES

The following 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 principles 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 contingent assets and liabilities. On an
on-going basis, we evaluate these estimates, including those related to revenue
recognition, inventories and stock-based compensation. We base our estimates on
historical experience and on various other assumptions that we believe 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.

Of the significant accounting policies used in the preparation of our financial
statements, the following are critical accounting policies, which may involve a
higher degree of judgment, complexity and estimates.

Revenue Recognition

Revenue is recognized when products are shipped and when all of the following
have occurred: a firm sales agreement is in place, pricing is fixed or
determinable and collection is reasonably assured. Sales are reported net of
estimated returns, consumer and trade promotions, rebates and freight allowed.

Inventories

Inventories consist solely of finished goods and are stated at the lower of cost
or market. Cost is computed using actual costs on a first-in, first-out basis.
Since the inventory typically has a very long shelf life, management reviews the
inventory on an annual basis and records a reserve for obsolescence when
considered necessary. As of September 30, 2005, we did not have a reserve for
obsolescence.

Derivative Financial Instruments

We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks.


                                        3

<PAGE>

Derivative financial instruments are initially measured at their fair value. For
derivative financial instruments that are accounted for as liabilities, the
derivative instrument is initially recorded at it fair value and is then
re-valued at each reporting date, with changes in the fair value reported as
charges or credits to income. For option-based derivative financial instruments,
we use the Black-Scholes model to value the derivative instruments.

The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is reassessed at the end of each
reporting period. Derivative instrument liabilities are classified in the
balance sheet as current or non-current based on whether or not net-cash
settlement of the derivative instrument could be required within 12 months of
the balance sheet date.

Stock-Based Compensation

We account for employee stock options using the intrinsic value method
prescribed in Accounting Principles Board Opinion ("APB") No. 25, "Accounting
for Stock Issued to Employees", and have adopted the disclosure-only alternative
of SFAS No. 123, "Accounting for Stock-Based Compensation", as amended by SFAS
No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure".

COMPARISON OF OPERATING RESULTS

FISCAL YEAR ENDED SEPTEMBER 30, 2005 ("2005") COMPARED TO FISCAL YEAR ENDED

SEPTEMBER 30, 2004 ("2004")

We experienced a decrease in sales of $12,021 for the fiscal year ended
September 30, 2005 to $9,785 as compared to $21,806 for the fiscal year ended
September 30, 2004. During the fiscal year ended September 30, 2005, we were
primarily focused on expansion. We would have ordinarily allocated the funds
that it used for the expansion to promote the Company's products. In addition,
approximately $19,000 of the sales in 2004 was made to one of our stockholders
which did not occur in 2005.

Gross profit (loss) for the fiscal year ended September 30, 2005 decreased
$17,827 to a negative $3,673 compared to a negative $21,500 for the fiscal year
ended September 30, 2004. The decrease was attributable to a higher cost of
sales related to inventory adjustments of approximately $15,000 during the year
ended September 30, 2004.

General and administrative ("G&A") expenses were $889,868 and $1,457,701 for the
years ended September 30, 2005 and 2004, respectively. The decrease in G&A
expenses is due to approximately $1,000,000 of stock based compensation expense
recorded in the year ended September 30, 2004 and only approximately $400,000
recorded in the year ended September 30, 2005 offset by additional costs
associated with our expansion efforts. During 2005 we hired two (2) additional
employees to provide support for the anticipated growth.

Gain (loss) on derivative instruments liabilities, net. We recognized a loss on
derivative instruments of $2,082,121 during the year ended September 30, 2005
compared to no activity during the year ended September 30, 2004, an increase of
$2,082,121. The increase is a result of the net unrealized (non-cash) change in
the fair value of our derivative instrument liabilities related to certain
warrants and embedded derivatives in our debt instruments that have been
bifurcated and accounted for separately. These warrants and debt instruments
were issued during August and September of fiscal 2005.

Interest expense increased to $320,460 for the fiscal year ended September 30,
2005 from $430 for the fiscal year ended September 30, 2004. The increase is
primarily related to the recording of a $240,333 beneficial conversion feature
and $55,151 of interest expense related to the convertible notes payable that
were converted as of September 30, 2005.


                                        4

<PAGE>

During the year ended September 30, 2005, we incurred $360,000 of syndication
costs related to the SEDA. Due to the contingencies associated with the
completion of the SEDA, as of September 30, 2005 the syndication costs were
written off as an expense in the statement of operations.

As of September 30, 2005, we had an accumulated deficit of $6,422,987.

LIQUIDITY AND CAPITAL RESOURCES

For the year ended September 30, 2005 we had not generated positive cash flow
from our own operations due to the preliminary nature of such operations, and
our recent expansion. Consequently, we have been dependent on external financing
to fund our cash requirements.

As of September 30, 2005, our cash totaled $163,095 and total current assets
were $184,185. Inventory at September 30, 2005 was $18,188.

As of September 30, 2005, our accounts payable totaled $117,863. Total current
liabilities were $2,969,483 and we have long term convertible notes payable of
$9,324.

We operate with minimal overhead costs by outsourcing our shipping, receiving,
purchasing and production functions. We also contract with consultants to assist
in numerous areas of our operations and development in order to minimize
expenses. We intend to hire additional employees only as needed.

Our immediate financing needs are currently expected to be provided by a private
placement of our convertible debt securities of $600,000 as described below. We
require such financing in order to pay professional fees associated with our
securities and corporate compliance requirements, for registration of our shares
to be issued in connection with the standby equity distribution agreement
("SEDA") described below and to fund our inventory and working capital needs
until the SEDA is available for us to draw upon. Such private placement
financing may not be available on favorable terms, in sufficient amounts or at
all.

Our near term financing needs are currently expected to be provided in large
part from the SEDA described below. Financing under the SEDA may not be
available on favorable terms, in sufficient amounts or at all when needed. We
may not be able to satisfy the conditions precedent to enable us to draw down
upon the SEDA, including the registration of the shares to be issued thereunder.
Furthermore, the amount of financing available will fluctuate with the price of
our common stock. As the price declines, the number of shares we must issue in
order to receive such financing will increase.

If we are unable to obtain financing on a timely basis, upon terms that we deem
sufficiently favorable, or at all, it would have a materially adverse impact
upon our ability to maintain our current operations or pursue our marketing
strategy. Without capital funding, we cannot continue to operate in 2006 and
cannot expand or meet our business objectives. Failure by us to obtain adequate
financing may require us to delay, curtail or scale back some or all of our
operations, sales, marketing efforts and research and development programs. If
we do not receive external financing, our revenue stream cannot expand, would
likely decrease and significant opportunities would be lost which would be a
limiting factor on our growth.


                                        5

<PAGE>

In May 2005, we entered into the SEDA with Cornell Capital Partners, LP
("Cornell Capital"). Pursuant to this agreement, we may, at our discretion for
up to two years, periodically issue and sell to Cornell Capital shares of common
stock for a total purchase price of $10.0 million. If we request an advance
under the SEDA, Cornell Capital will purchase shares of common stock for 97% of
the lowest volume weighted average price on the principal market on which our
common stock is traded as quoted by Bloomberg, L.P. for the five trading days
immediately following the notice date. In addition, Cornell Capital will retain
a cash fee of 5% from the proceeds received by us for each advance under the
SEDA for a total effective discount to the market price of our common stock of
8%. Cornell Capital intends to sell any shares purchased under the SEDA at the
market price. The sale of the shares under the SEDA is conditioned upon us
registering the shares of common stock under the Securities Act and maintaining
such registration. Upon the execution of the SEDA, we issued as compensation to
Cornell Capital 1,465,065 shares of our common stock with a value of $161,157,
including 293,013 shares held by its transferee, and a 12% interest bearing
promissory note in the principal amount of $188,843 from us. We issued to
Monitor Capital, Inc., as a placement fee pursuant to the placement agent
agreement between us and Monitor, 90,909 shares with an aggregate value of
$10,000 in connection with the SEDA.

We issued convertible debt securities in respect of loans in the aggregate
amount of $103,000 made to us by members of our Board of Directors and a
consultant to us in May and June 2005. The debt was convertible into shares of
our common stock at the option of the holders at the rate of $0.03 per share.
The loans accrued interest at the rate of 8% per annum. The convertible debt has
been converted or repaid in full. The convertible debt and related accrued
interest was converted into 2,560,807 shares of common stock and repaid by
approximately $32,000 in cash, including accrued interest.

In August and September 2005, we closed on $548,000 of equity units (the "2005
Units") in a private placement. Each Unit consists of an unsecured convertible
promissory note in the principal amount of $1,000 (the "2005 Notes") and two
warrants for each share of common stock to be issued upon conversion of the 2005
Notes, with each warrant exercisable to purchase one share of our common stock.
The purchase price per Unit was $1,000. The 2005 Notes are convertible at the
election of the holder thereof, at any time commencing from and after their date
of issuance and for a period of three years thereafter at a price equal to 85%
of the average closing price of our common stock for the 10 trading days
immediately preceding the day upon which we receive a conversion notice from the
noteholder. The 2005 Notes are entitled to receive an 8% annual interest payment
payable in shares of our common stock. The per share exercise price of the
warrants is 125% and 150%, respectively, of the conversion price of the 2005
Notes. The warrants are exercisable for shares of our common stock at any time
beginning on the date of conversion of the 2005 Notes and ending on October 31,
2009 and are subject to adjustment for anti-dilution purposes.

GOING CONCERN

Our accompanying financial statements have been prepared on a going concern
basis, which contemplates our continuation of operations, realization of assets
and liquidation of liabilities in the ordinary course of business. Since
inception, we have incurred substantial operating losses and expect to incur
additional operating losses over the next several years. As of September 30,
2005, we had an accumulated deficit of approximately $6.4 million. These factors
raise substantial doubt regarding our ability to continue as a going concern.
Our accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


                                        6

<PAGE>

We have financed our operations since inception primarily through equity and
debt financings and loans from our officers, directors and stockholders. We have
recently entered into the SEDA. The additional capital necessary to meet our
working capital needs or to sustain or expand our operations may not be
available in sufficient amounts or at all under the SEDA or otherwise.
Continuing our operations is dependent upon obtaining such further financing.
These conditions raise substantial doubt about our ability to continue as a
going concern.

RISK FACTORS

FINANCIAL CONDITION RISKS

      o     We have had limited product sales, a history of operating losses and
            may not become profitable in the near future or at all.

We have had limited sales of our products to date. We incurred net losses of
approximately ($6.4 million) from inception in 1997 to September 30, 2005,
including approximately ($3.6 million) of net loss during the year ended
September 30, 2005. We expect to incur substantial additional operating losses
in the future. During the year ended September 30, 2005 and 2004, we generated
revenues from product sales in the amounts of approximately $9,785 and $21,806,
respectively. We may not continue to generate revenues from operations or
achieve profitability in the near future or at all.

      o     We may not be able to obtain the significant financing that we need
            to continue to operate.

We may not be able to obtain sufficient funds to continue to operate or
implement our business plan. We estimate that we will need approximately
$1,000,000 to continue to operate over the next 12 months and an additional
$500,000 in each of the two following years to continue to operate. We will need
approximately $2,000,000 over the next two years in order to commence
implementing our business plan, including increased marketing and product
production. We are dependent on external financing to fund our operations. Our
immediate financing needs are expected to be provided from a private placement
of our debt securities of $600,000 and our long-term financing needs are
expected to be provided from the standby equity distribution agreement, in large
part. Such financing may not be available on favorable terms, in sufficient
amounts or at all when needed. We may not be able to satisfy the conditions
precedent to enable us to draw down upon the standby equity credit agreement
including registration of the shares to be issued thereunder. Furthermore, the
amount of financing available under the standby equity distribution agreement
will fluctuate with the price of our common stock. As the price declines, the
number of shares the investor under the standby equity distribution agreement
must purchase to satisfy an advance request from us will increase, resulting in
additional dilution to existing stockholders and potentially causing the
investor to hold more than 9.9% of our outstanding stock which is prohibited
under the agreement. Other financing may not be available to us on favorable
terms or at all.

      o     The report of our independent auditors expresses doubt about our
            ability to continue as a going concern.


                                        7

<PAGE>

In its report dated January 25, 2006 our auditors, Ham, Langston & Brezina,
L.L.P., expressed an opinion that there is substantial doubt about our ability
to continue as a going concern. Our accompanying financial statements have been
prepared on a going concern basis, which contemplates our continuation of
operations, realization of assets and liquidation of liabilities in the ordinary
course of business. Since inception, we have incurred substantial operating
losses and expect to incur additional operating losses over the next several
years. As of September 30, 2005, we had an accumulated deficit of approximately
$6.4 million. Our accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

We have financed our operations since inception primarily through equity and
debt financings and loans from our officers, directors and stockholders. We have
recently entered into a standby equity distribution agreement. The additional
capital necessary to meet our working capital needs or to sustain or expand our
operations may not be available on favorable terms, in sufficient amounts or at
all under the standby equity distribution agreement or otherwise. Continuing our
operations in 2006 is dependent upon obtaining such further financing. These
conditions raise substantial doubt about our ability to continue as a going
concern.

As is disclosed in the notes to our financial statements, our long-term
viability as a going concern is dependent upon our ability to:

            o     obtain adequate sources of debt or equity funding to meet
                  current commitments and fund the continuation of our business
                  operations in the near term;

            o     control costs and expand revenues; and

            o     ultimately achieve adequate profitability and cash flows from
                  operations to sustain our operations.

      o     We have a working capital loss, which means that our current assets
            on September 30, 2005 were not sufficient to satisfy our current
            liabilities.

We had a working capital deficit of ($2,785,338) at September 30, 2005, which
means that our current liabilities exceeded our current assets on September 30,
2005 by $2,785,338. Current assets are assets that are expected to be converted
to cash or otherwise utilized within one year and, therefore, may be used to pay
current liabilities as they become due. Our working capital deficit means that
our current assets on September 30, 2005 were not sufficient to satisfy all of
our current liabilities on that date.

      o     We face risks related to our accounting restatements.

On July 11, 2006 we publicly announced that we had discovered accounting errors
in previously reported financial statements. Following consultation with our
independent accountants, we concluded it was necessary to restate our financial
statements for the quarters ended June 30, 2006, March 31, 2006 and December 31,
2005 and the year ended September 30, 2005. The restatements relate to the
accounting for certain debt financings we conducted in August 2005 and February
2006 as well as certain warrants issued by us. Further information about these
restatements is contained in our Current Report on Form 8-K filed July 11, 2006
and this Amended Annual Report on Form 10-KSB/A-2 for the year ended September
30, 2005. We are concurrently filing restated financial statements for the
quarters ended December 31, 2005, March 31, 2006, and June 30, 2006.


                                        8

<PAGE>

The restatement of these financial statements may lead to litigation claims
and/or regulatory proceedings against us. The defense of any such claims or
proceedings may cause the diversion of our management's attention and resources,
and we may be required to pay damages if any such claims or proceedings are not
resolved in our favor. Any litigation or regulatory proceeding, even if resolved
in our favor, could cause us to incur significant legal and other expenses. We
also may have difficulty raising equity capital or obtaining other financing. We
may not be able to effectuate our current business strategy. Moreover, we may be
the subject of negative publicity focusing on the financial statement errors and
resulting restatements and negative reactions from our stockholders, creditors
or others with whom we do business. The occurrence of any of the foregoing could
harm our business and reputation and cause the price of our securities to
decline.

      o     If we fail to maintain an effective system of internal and
            disclosure controls, we may not be able to accurately report our
            financial results or prevent fraud. As a result, current and
            potential stockholders could lose confidence in our financial
            reporting which would harm our business and the trading price of our
            securities.

Effective internal and disclosure controls are necessary for us to provide
reliable financial reports and effectively prevent fraud and to operate
successfully as a public company. If we cannot provide reliable financial
reports or prevent fraud, our reputation and operating results would be harmed.
We have in the past discovered, and may in the future discover, areas of our
disclosure and internal controls that need improvement. As a result after a
review of our June 30, 2006, March 31, 2006, December 31, 2005 and September 30,
2005 operating results, we identified certain deficiencies in certain disclosure
controls and procedures which we have addressed as stated below.

We have undertaken improvements to our internal controls in an effort to
remediate these deficiencies through the following: (1) implementing a review of
all convertible securities to identify any securities that are not conventional
convertible securities, (2) engaging the consulting services of an outside
accountant to review our financial statements each month, and (3) improving
supervision and training of our accounting staff to understand and implement
applicable accounting requirements, policies and interpretations. We cannot be
certain that our efforts to improve our internal and disclosure controls will be
successful or that we will be able to maintain adequate controls over our
financial processes and reporting in the future. Any failure to develop or
maintain effective controls or difficulties encountered in their implementation
or other effective improvement of our internal and disclosure controls could
harm our operating results or cause us to fail to meet our reporting
obligations. Ineffective internal and disclosure controls could cause investors
to lose confidence in our reported financial information, which would likely
have a negative effect on the trading price of our securities.

      o     We may be unable to implement our business plan if the investor
            under the standby equity distribution agreement does not fulfill its
            obligations under the agreement.

We will be reliant upon the ability of Cornell Capital Partners, L.P. to provide
a significant amount of funding pursuant to the standby equity distribution
agreement, which it has agreed to do in accordance with the terms of the
agreement. In the event that the investor is unwilling or unable to fulfill its
commitment under the standby equity distribution agreement for whatever reason,
our ability to implement our business plan will suffer.

      o     Sales made under our standby equity distribution agreement may
            adversely affect our stock price and our ability to raise funds in
            new stock offerings.


                                        9

<PAGE>

Even if we are able to obtain the financing we require to implement our business
plan pursuant to the standby equity distribution agreement, sales made under our
standby equity distribution agreement may result in one or more of the following
consequences:

            o     Sales made under our standby equity distribution agreement may
                  adversely affect our stock price.

            o     The sales of our stock under our standby equity distribution
                  agreement could encourage short sales by third parties, which
                  could contribute to the further decline of our stock price.

            o     The investor under the standby equity distribution agreement
                  may sell shares of our common stock acquired under the standby
                  equity distribution agreement during an applicable pricing
                  period for determination of stock price, which could further
                  contribute to the decline of our stock price.

            o     Existing stockholders will experience significant dilution
                  from our sale of shares under the standby equity distribution
                  agreement.

            o     The standby equity distribution agreement prohibits us from
                  raising capital at less than the market price which may
                  severely limit our ability to raise capital from the sale of
                  equity.

            o     We may not be able to access funds under the standby equity
                  distribution agreement sufficient to meet our operating needs.

      o     We may be required to amend our standby equity distribution
            agreement.

As a result of the number of shares that could be acquired by Cornell Capital
upon full utilization of our standby equity distribution agreement, Cornell
Capital could become an affiliate of us and own a majority of our outstanding
common shares. Accordingly, we may be required to amend our standby equity
distribution agreement to substantially reduce the dollar amount available
thereunder. To the extent that we must substantially reduce the amount of
financing available under the standby equity distribution agreement, our
financing plans may be materially adversely affected. Additionally, further
delays could occur with respect to the review and approval of the registration
statement covering the standby equity distribution agreement shares.

      o     A significant amount of our sales in fiscal 2004 were made to a
            single customer who is no longer our customer and such sales must be
            replaced or our revenues will decline.

During the year ended September 30, 2004, we sold approximately $19,000 or 88%
of our total sales to a single distributor, Michael T. McClere, who is a
stockholder of us. We did not make any sales to this distributor in fiscal 2005.
We do not expect to make significant sales to this distributor in the future. We
must replace this customer with one or more customers in order to maintain and
increase our sales revenue.

      o     Since Health Renu-DE became a public reporting company under the
            Securities Exchange Act of 1934 by acquiring us when we were a
            publicly-traded shell corporation, we remain subject to the shell
            corporation's unknown liabilities, if any. If any significant
            unknown liabilities arise, they could materially and adversely
            affect our ability to continue in business.


                                       10

<PAGE>

On September 26, 2003, we entered into an exchange agreement with Health
Renu-DE, a Delaware corporation, and the former Health Renu-DE stockholders
whereby our control shifted to the former Health Renu-DE stockholders. We were
then a non-operating, publicly-traded corporation. The exchange agreement
represented a recapitalization of Health Renu-DE with accounting treatment
similar to that used in a reverse acquisition. Health Renu-DE emerged as the
surviving financial reporting entity but we remained as the legal reporting
entity. We then changed our business focus to skin care and wound care products
and our name to HealthRenu Medical, Inc.

This process is commonly referred to as a "public shell merger" because we
already had achieved public-trading status and were a reporting company with the
U.S. Securities and Exchange Commission and had previously ceased our day-to-day
business. The advantages that we hope to achieve in effecting this acquisition
include gaining access to sources of capital that are generally limited to
publicly-traded entities on an expedited basis since the public shell merger
process can typically be completed in less time than a traditional registered
initial public offering.

The risks and uncertainties involved in this strategy include that we are
subject to the shell corporation's then existing liabilities, including any
undisclosed liabilities of the shell corporation arising out of the shell
corporation's prior business operations, financial activities or equity
dealings. There is a risk of litigation by third parties or governmental
investigations or proceedings. For example, we have been sued by a stockholder
based on alleged equity dealings between the stockholder and management of the
shell corporation. There is also a risk of sales of undisclosed stock into the
public market by stockholders of the shell corporation as we improve our
business and financial condition and stock price, which would result in dilution
to our stockholders and could negatively impact our stock price. In addition,
within certain segments of the financial and legal communities there may be a
negative perception of corporations that have achieved public-trading status by
means of a public shell merger. This negative perception could adversely affect
us in the future including in our efforts to raise capital in certain markets.

RISKS RELATED TO OUR OPERATIONS

      o     If we are unable to successfully compete in the skin and wound care
            industry on the basis of our products prices, effectiveness and
            other factors, our business and financial condition will be
            significantly negatively impacted.

The personal skin care industry and wound care industry is extremely competitive
and consists of major domestic and international medical, pharmaceutical,
cosmetic, consumer products, and other companies, many of which have financial,
technical, manufacturing, distribution, marketing, sales and other resources
substantially greater than ours. We compete against companies producing and
selling medical as well as consumer skin care products. We compete based upon
our product quality and price. Our competitors may introduce more effective or
less expensive products or products with greater market recognition and
acceptance which could compete with our products and have a significant negative
impact on our business and financial condition.

      o     We are dependent upon a third party pharmaceutical laboratory for
            manufacture of our products and would likely experience production
            delays and interruptions in sales if the laboratory discontinued
            production of our products.


                                       11

<PAGE>

Our products are manufactured by Rosel & Adys Inc., a Texas-based pharmaceutical
laboratory which has been approved by the U.S. Food and Drug Administration. We
do not have a contract with this laboratory for manufacture of our products.
This laboratory may not continue to maintain its Food and Drug Administration
certification or continue to be willing or able to produce our products for us
at reasonable prices or at all. If for any reason this laboratory discontinues
production of our products, it would likely result in significant delays in
production of our products and interruption of our product sales as we seek to
establish a relationship and commence production with a new laboratory. We may
be unable to make satisfactory production arrangements with another laboratory
on a timely basis or at all.

Our production laboratory is responsible for supplying our formulas' ingredients
other than the essential fatty acids which we supply for quality control
purposes. We currently have on hand sufficient essential fatty acid supplies to
meet our short terms needs and we have developed sources for their supply for
the long-term future. If however any of these ingredients is not available to us
on favorable pricing terms or at all when they are needed, we may experience
production delays and interruption of sales.

      o     We do not own our products' formulas and if the owner of the
            formulas does not honor its contractual commitment to sell the
            formulas to us if and when requested by us, we could lose use of our
            proprietary products.

We do not own our product formulas. Our production laboratory owns our product
formulas subject to an agreement of indefinite term which provides for our
exclusive use and right to purchase them. It is possible that the production
laboratory may not honor its contractual commitments and may disclose our
proprietary formulas to a third party or refuse to sell the formulas to us in
the event the laboratory ceases to produce products for us, either of which
would materially and adversely affect our business.

      o     We may be unable to protect our proprietary products or prevent the
            development of similar products by our competitors, which could
            materially and adversely affect our ability to successfully compete.

We claim proprietary rights in various unpatented technologies, know-how and
trade secrets relating to our products and their manufacturing processes. The
protection that these claims afford may prove to be inadequate. We protect our
proprietary rights in our products and operations through contractual
obligations, including nondisclosure agreements, with our production laboratory,
employees and consultants. These contractual measures may not provide adequate
protection. Further, our competitors may independently develop or patent
products that are substantially equivalent or superior to our products.

      o     Our founder and former president has competed with us by selling
            similar products and soliciting our customers.


                                       12

<PAGE>

Darrell Good, the founder and principal of Health Renu-DE, has competed against
us by posting products similar to ours with the same product numbers on his
website for sale. Mr. Good has also attempted to solicit sales from our
customers. We have various other claims against Mr. Good including for fraud,
breach of contract and breach of fiduciary duty based on Mr. Good's
misrepresentation to us that we owned our products' formulas when in fact they
are owned by the production laboratory. We filed a lawsuit against Mr. Good in
the U.S. District Court for the Southern District of Texas seeking recovery for
these claims. Among other recovery sought, we sought to recover approximately
8.1 million shares of our common stock from Mr. Good and requested that Mr. Good
cease competing with us and soliciting our customers. A final non-appealable
default judgment against Mr. Good was entered in this case on July 29, 2005 and
the court ordered that the shares be cancelled and returned to us and that Mr.
Good is enjoined from competing with us for one year. The time for appeal of the
order expired on August 28, 2005. We plan to pursue enforcement of the judgment.
The shares have been cancelled on the books and records of our transfer agent.
We may not be able to prevent Mr. Good from continuing to compete with us or
soliciting our customers. If Mr. Good continues to compete with us or to solicit
our customers, it could have a material adverse effect on our business.

      o     We may not achieve the market acceptance of our products necessary
            to generate revenues.

Products we produce may not achieve market acceptance. Market acceptance will
depend on a number of factors, including:

            o     the effectiveness of our products.

            o     our ability to keep production costs low.

            o     our ability to successfully market our products. We must
                  create an advertising campaign to create product recognition
                  and demand for our products.

            o     timely introductions of new products. Our introduction of new
                  products will be subject to the inherent risks of unforeseen
                  problems and delays. Delays in product availability may
                  negatively affect their market acceptance.

      o     We may not be able to generate increased demand for our products or
            successfully meet any increased product demands.

We have had limited sales of our products to date. Rapid growth of our business
may significantly strain our management, operations and technical resources. If
we are successful in obtaining large orders for our products, we will be
required to deliver large volumes of quality products to our customers on a
timely basis and at a reasonable cost. We outsource production of our products.
We may not obtain large scale orders for our products or if we do, we may not be
able to satisfy large scale production requirements on a timely and cost
effective basis. As our business grows, we will also be required to continue to
improve our operations, management and financial systems and controls. Our
failure to manage our growth effectively could have an adverse effect on our
ability to produce products and meet the demands of our customers.

      o     We may face liability if our products cause injury or fail to
            perform properly.

We maintain liability insurance coverage that we believe is sufficient to
protect us against potential claims. Our liability insurance may not continue to
be available to us on reasonable terms or at all. Further, such liability
insurance may not be sufficient to cover any claims that may be brought against
us.


                                       13

<PAGE>

      o     Our business and growth will suffer if we are unable to hire and
            retain key personnel.

Our success depends in large part upon the services of our Chief Executive
Officer. Our Chief Executive Officer is our only full-time employee. We contract
with consultants and outsource key functions to control costs. If we lose the
services of our Chief Executive Officer or key consultants or are unable to hire
and retain key employees or senior management as needed in the future, it could
have a significant negative impact on our business.

      o     If we do not comply with regulations imposed on us by the U.S. Food
            and Drug Administration, we may be unable to sell one or more of our
            products or otherwise face liability.

Our sales of products are subject to regulation by the U.S. Food and Drug
Administration, or FDA. The two most important laws pertaining to cosmetics
marketed in the United States are the Federal Food, Drug, and Cosmetic Act, or
FD&C Act, and the Fair Packaging and Labeling Act, or FPLA. The FD&C Act
prohibits the marketing of adulterated or misbranded cosmetics. Violations of
the Act involving product composition--whether they result from ingredients,
contaminants, processing, packaging, or shipping and handling--cause cosmetics
to be adulterated and are subject to regulatory action. Improperly labeled or
deceptively packaged products are considered misbranded and are subject to
regulatory action. In addition, under the authority of the FPLA, the FDA
requires an ingredient declaration to enable consumers to make informed
purchasing decisions. Cosmetic products and ingredients are not generally
subject to FDA premarket approval authority, however, the FDA may pursue
enforcement action against violative products or companies who violate the law.
We are responsible for substantiating the safety of our products and ingredients
before marketing them.

Over-the-counter (OTC) drugs, however, are subject to FDA approval. Generally,
OTC drugs must either receive premarket approval by FDA or conform to final
regulations specifying conditions whereby they are generally recognized as safe
and effective, and not misbranded. OTC drugs must also be labeled according to
OTC drug regulations, including the "Drug Facts" labeling. Currently, certain
OTC drugs that were marketed before the beginning of the OTC Drug Review (May
11, 1972) may be marketed without specific approval pending publication of final
regulations under the ongoing OTC Drug Review. Once a regulation covering a
specific class of OTC drugs is final, those drugs must either:

      o     be the subject of an approved New Drug Application (NDA), or

      o     comply with the appropriate monograph, or rule, for an OTC drug.

An NDA is the vehicle through which drug sponsors formally propose that the FDA
approve a new pharmaceutical for sale and marketing in the U.S. The FDA only
approves an NDA after determining that the data are adequate to show the drug's
safety and effectiveness for its proposed use and that its benefits outweigh the
risks. The NDA process can be expensive and time consuming for a drug sponsor.

The FDA has published monographs, or rules, for a number of OTC drug categories.
These monographs state requirements for categories of non-prescription drugs,
such as what ingredients may be used and for what intended use. Among the many
non-prescription drug categories covered by OTC monographs are acne medications,
treatments for dandruff, seborrheic dermatitis, and psoriasis and sunscreens.


                                       14

<PAGE>

Our management, with the help of a FDA consultant, has determined that our
currently marketed products are either cosmetics or OTC drugs that may be
marketed without specific FDA approval as they are covered by OTC monographs.
The FDA, however, may disagree with our management's classification of our
products.

The FDA has broad regulatory and enforcement powers. If the FDA determines that
we have failed to comply with applicable regulatory requirements, it can impose
a variety of enforcement actions from public warning letters, fines,
injunctions, consent decrees and civil penalties to suspension or delayed
issuance of approvals, seizure or recall of our products, total or partial
shutdown of production, withdrawal of approvals or clearances already granted,
and criminal prosecution. The FDA can also require us to replace or refund the
cost of products that we distributed. If any of these events were to occur, it
could materially adversely affect our ability to market our products and our
business and financial condition.

The FDA recently required us to change certain of our product classifications,
certain of our package labeling and sales literature, and refrain from making
certain claims about our product uses. We complied and now believe that we are
in material compliance with the FDA's requirements. It is possible that the FDA
will determine that we do not so comply or that its policies, regulations or
interpretations thereof will change such that we no longer so comply, that our
products are no longer considered OTC or cosmetic products, or such that we may
not be able to obtain favorable product classification for any future products
that we may develop. Any of the foregoing could materially adversely impact our
ability to market our products and our business and financial condition.

RISKS ASSOCIATED WITH OUR COMMON STOCK

      o     We do not intend to pay dividends on our common stock so
            stockholders must sell their shares at a profit to recover their
            investment.

We have never declared or paid any cash dividends on our common stock. We intend
to retain any future earnings for use in our business and do not anticipate
paying cash dividends on our common stock in the foreseeable future. Because we
may not pay dividends, our stockholders' return on investment in our common
stock will depend on their ability to sell our shares at a profit.

      o     The market price of our common stock may be volatile, which could
            cause the value of an investment in our stock to decline.

The market price of shares of our common stock has been and is likely to
continue to be highly volatile. Factors that may have a significant effect on
the market price of our common stock include the following:

            o     sales of large numbers of shares of our common stock in the
                  open market, including shares issuable at a fluctuating
                  conversion price or at a discount to the market price of our
                  common stock;

            o     our operating results;

            o     quarterly fluctuations in our financial results;

            o     our need for additional financing;

            o     announcements of product innovations or new products by us or
                  our competitors;

            o     developments in our proprietary rights or our competitors'
                  developments;


                                       15

<PAGE>

            o     our relationships with current or future suppliers,
                  manufacturers, distributors or other strategic partners;

            o     governmental regulation; and

            o     other factors and events beyond our control, such as changes
                  in the overall economy or condition of the financial markets.

In addition, our common stock has been relatively thinly traded. Thinly traded
common stock can be more volatile than common stock trading in an active public
market. We cannot predict the extent to which an active public market for our
common stock will develop.

In addition, the stock market in general has experienced extreme volatility that
often has been unrelated to the operating performance of particular companies.
These broad market and industry fluctuations may adversely affect the trading
price of our common stock, regardless of our actual operating performance.

As a result of potential stock price volatility, investors may be unable to
resell their shares of our common stock at or above the cost of their purchase
prices. In addition, companies that have experienced volatility in the market
price of their stock have been the subject of securities class action
litigation. If we were to become the subject of securities class action
litigation, this could result in substantial costs, a diversion of our
management's attention and resources and harm to our business and financial
condition.

      o     Future sales of currently outstanding shares of our common stock
            could adversely affect our stock price.

As of January 31, 2006, we had 26,094,589 shares of common stock outstanding. Of
these shares, as of January 31, 2006, approximately 22.1 million shares of our
common stock are subject to restrictions on resale pursuant to Rule 144 and
approximately 4.1 million outstanding shares of our common stock are eligible
for sale in the public market without restriction or registration.

In addition, we intend to register under the Securities Act of 1933 the sale by
selling security holders of 1,465,065 shares of common stock issued as a
commitment fee, 90,909 shares of common stock issued as a placement agent fee
and up to $10,000,000 of common stock issuable pursuant to the standby equity
distribution agreement, shares of common stock issuable upon conversion or
exercise of securities issued in our 2005 and 2006 private placements of units
and up to 1,587,237 shares of common stock underlying compensation warrants.

      o     The OTC Bulletin Board has temporarily ceased quoting our common
            stock and although our stock is again eligible for quotation on the
            OTC-BB, it is uncertain as to if or when the reinclusion of our
            share quotation on the OTC-BB will be achieved.

On July 12, 2006, the OTC-BB temporarily ceased quoting our shares because our
Quarterly Report on Form 10-QSB for the quarter ended March 31, 2006 had not
been timely filed. We filed our 10-QSB for the quarter ended March 31, 2006 on
July 12, 2006, and we believe that our stock is again eligible for quotation on
the OTC-BB. We intend to pursue reinclusion of our share quotation on the OTC-BB
in the future. It is uncertain as to if or when the reinclusion of our share
quotation on the OTC-BB will be achieved.

      o     Our common stock is deemed to be "penny stock," which may make it
            more difficult for investors to sell their shares due to suitability
            requirements.


                                       16

<PAGE>

Our common stock is deemed to be "penny stock" as that term is defined in Rule
3a51-1 promulgated under the Securities Exchange Act of 1934. These requirements
may reduce the potential market for our common stock by reducing the number of
potential investors. This may make it more difficult for investors in our common
stock to sell shares to third parties or to otherwise dispose of them. This
could cause our stock price to decline. Penny stocks are stocks:

            o     with a price of less than $5.00 per share;

            o     that are not traded on a "recognized" national exchange;

            o     whose prices are not quoted on the Nasdaq stock market; or

            o     of issuers with net tangible assets less than $2.0 million (if
                  the issuer has been in continuous operation for at least three
                  years) or $5.0 million (if in continuous operation for less
                  than three years), or with average revenues of less than $6.0
                  million for the last three years.

Broker/dealers dealing in penny stocks are required to provide potential
investors with a document disclosing the risks of penny stocks. Moreover,
broker/dealers are required to determine whether an investment in a penny stock
is a suitable investment for a prospective investor.

      o     Our common stock has been relatively thinly traded and we cannot
            predict the extent to which a trading market will develop.

There has been a limited public market for our common stock and an active
trading market for our stock may not develop. Absence of an active trading
market could adversely affect our stockholders' ability to sell our common stock
in short time periods, or possibly at all. Our common stock is thinly traded
compared to larger more widely known companies in our industry. Thinly traded
common stock can be more volatile than common stock trading in an active public
market. Our common stock has experienced, and is likely to experience in the
future, significant price and volume fluctuations that could adversely affect
the market price of our common stock without regard to our operating results.

      o     Our 8% convertible notes have a fluctuating conversion rate which
            could cause substantial dilution to stockholders and adversely
            affect our stock price.

Conversion of a material amount of the 8% convertible notes included in our 2005
and 2006 private placements of units could materially affect a stockholder's
investment in us. As of February 1, 2006, $548,000 of notes issued in our 2005
private placement. The notes are convertible into a number of shares of common
stock determined by dividing the principal amount of the notes converted by
their respective conversion prices in effect.

The 2005 private placement notes are convertible by the holders into shares of
our common stock at any time at a conversion price equal to 85% of the average
of the trading prices of our common stock for the ten trading days ending one
day prior to the date we receive a conversion notice from a 2005 noteholder. In
addition, two warrants to purchase shares of common stock have been issued to
each purchaser of the 2005 notes. The warrants are exercisable for one share of
common stock for each share to be acquired upon conversion of the 2005 notes and
are exercisable until October 31, 2009 at fluctuating prices equal to 125% and
150%, respectively, of the conversion price of the 2005 notes.


                                       17

<PAGE>

Conversion of a material amount of our notes could significantly dilute the
value of a stockholder's investment in us. Also, in the absence of a
proportionate increase in our earnings and book value, an increase in the
aggregate number of our outstanding shares of common stock caused by a
conversion of the 8% notes or exercise of the warrants would dilute the earnings
per share and book value of all of our outstanding shares of common stock. If
these factors were reflected in the trading price of our common stock, the
potential realizable value of a stockholder's investment in us could also be
adversely affected.

Assuming a conversion price of $0.17 (85% of the average of the trading prices
of our common stock on the OTC Bulletin Board for the ten trading days ending on
February 1, 2006 of $0.20), the 2005 notes would convert into 3,223,529 shares
of our common stock (excluding interest) and the related warrants would be
exercisable to purchase 6,447,059 shares.

Set forth in the table below is the potential dilution to the stockholders and
ownership interest of the holders of our 2005 notes which could occur upon
conversion of $548,000 in principal amount of our 2005 notes. The calculations
in the table are based upon the 26,082,089 shares of our common stock which were
outstanding on February 1, 2006 and shares issuable upon conversion of the 2005
notes at the following prices:

<TABLE>
<CAPTION>
                                 Conversion At     Conversion At      Conversion At    Conversion At
                                    Assumed           Assumed          Assumed             Assumed
                                Average Trading   Average Trading   Average Trading   Average Trading
                                 Price of $0.20    Price of $0.15    Price of $0.10    Price of $0.05
                                ---------------   ---------------   ---------------   ---------------
<S>                                <C>               <C>             <C>                <C>
Conversion Price                   $     0.17        $   0.1275      $     0.085        $    0.0425
Shares Issuable on Conversion
  of 2005 Notes                     3,223,529         4,298,039        6,477,059         12,894,118
Shares Issuable on Exercise
  of Warrants                       6,447,059         8,596,078       12,894,118         25,788,235
Percentage of Outstanding
  Common Stock                           27.0%             33.1%            42.6%              59.7%
</TABLE>

ITEM 7. FINANCIAL STATEMENTS

The financial statements of the Company as prepared by Ham, Langston & Brezina,
LLP, are enclosed herein.

ITEM 8A. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures. Our management, including
our Chief Executive Officer, has determined that the effectiveness of
disclosures controls and procedures under Rule 13a-15(e) and Rule 15d-15(e) of
the Securities Exchange Act of 1934 are inadequate as of September 30, 2005. Our
auditors, Ham, Langston & Brezina, LLP have advised us that, under standards
established by the Public Company Oversight Accounting Board (United States),
reportable conditions involve matters that come to the attention of auditors
that relate to significant deficiencies in the design or operation of internal
controls of an organization that, in the auditors' judgment, could adversely
affect the organization's ability to record, process, summarize and report
financial data consistent with the assertions of management in the financial
statements.


                                       18

<PAGE>

Ham, Langston & Brezina, LLP has advised our management that, in Ham, Langston &
Brezina, LLP's opinion, there were reportable conditions during 2005 which
constituted "material weaknesses" in internal controls. The weakness concerned
the interpretation and implementation of various complex accounting principles
in the area of the Company's financing transactions, and resulted from the fact
that the Company needed additional personnel and outside consulting expertise
with respect to the application of some of these more complex accounting
principles to its financial statements. While all of these transactions were
recorded, Ham, Langston & Brezina in their audit work noted instances where
Generally Accepted Accounting Principles were not correctly applied and
adjustments to the Company's financial statements were required. The adjustments
relate solely to the accounting treatment of these financing transactions and do
not affect the Company's historical cash flow.

As a result of the material weaknesses described above, our management,
including our Chief Executive Officer, has determined that our disclosure
controls and procedures were not effective as of September 30, 2005. The Company
has remediated the material weakness in internal control over financial
reporting and the ineffectiveness of its disclosure controls and procedure by
conducting a review of its accounting treatment of its financing transactions
and correcting its method of accounting for such transactions. Additionally, the
Company is considering engaging outside expertise to enable the Company to
properly apply complex accounting principles to its financial statements, when
necessary.

(b) Changes in internal control over financial reporting. There were no
significant changes in our internal control over financial reporting during the
fourth fiscal quarter that materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.


                                       19

<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

Exhibit No.   Exhibit Index
-----------   ------------------------------------------------------------------
2.1           Articles of Merger (2)

2.2           Plan of Merger (2)

2.3           Exchange Agreement (3)

3.1           Articles of Amendment to Articles of Incorporation (1)

3.2           Articles of Incorporation(2)

3.3           Articles of Amendment to Articles of Incorporation(2)

3.4           Articles of Amendment to Articles of Incorporation(2)

3.5           Bylaws (2)

3.6           Articles of Amendment to Articles of Incorporation (11)

4.1           Amended and Restated Standby Equity Distribution Agreement dated
              as of February 3, 2006 between the Registrant and Cornell Capital
              Partners, LP (10)

4.2           Registration Rights Agreement dated May 23, 2005 by and between
              the Registrant and Cornell Capital Partners, LP in connection with
              the Standby Equity Distribution Agreement (7)

4.3           Placement Agent Agreement dated as of May 23, 2005 by and among
              the Registrant, Cornell Capital Partners, LP and Monitor Capital,
              Inc. in connection with the Standby Equity Distribution Agreement
              (7)

4.5           Form of Promissory Note by Registrant in favor of Cornell Capital
              Partners, LP (7)

4.6           Form of 8% Convertible Notes (8)

4.7           Form of 125% Warrant (8)

4.8           Form of 150% Warrant (8)

10.1          First Amendment to Office Building Lease Agreement effective as of
              January 1, 2006 between the Registrant and Denmark House
              Investment, Ltd. ++

10.2          Disclaimer Letter Agreement dated July 22, 2004 between the
              Registrant and Rosel & Adys Inc. (11)

10.3          Consulting Agreement between Robert Prokos and the Registrant (5)

10.4          Employment Agreement between Robert Prokos and the Registrant (6)

10.5          Placement Agent Agreement dated as of July 28, 2005 between the
              Registrant and North Coast Securities Corporation (9)

10.6          Financial Advisory and Investment Banking Agreement dated as of
              July 28, 2005 between the Registrant and North Coast Securities
              Corporation(9)

10.7          Consulting Agreement dated as of July 31, 2005 between the
              Registrant and MultiGrow Advisors, LLC (9)

10.8          Letter Agreement dated as of February 3, 2006 between the
              Registrant and Cornell Capital Partners, LP (exhibits omitted)(10)


                                       20

<PAGE>

10.9          Termination Agreement dated as of February 3, 2006 between the
              Registrant, David Gonzalez, Esq. and Cornell Capital Partners, LP
              (10)

31            Certificate of the Chief Executive Officer pursuant to Section 302
              of the Sarbanes-Oxley Act of 2002++

32            Certificate of the Chief Executive Officer pursuant to Section 906
              of the Sarbanes-Oxley Act of 2002++

(1)   Filed as Exhibits 3.1 and 10.1 to our Form 8-K filed with the Securities
      and Exchange Commission on August 6, 2003, and incorporated herein by
      reference.

(2)   Filed as Exhibits 2.1, 2.2, 3.1, 3.2, 3.3 and 3.4 to our Form 8-K filed
      with the Securities and Exchange Commission on September 15, 2003, and
      incorporated herein by reference.

(3)   Filed as Exhibit 2.1 to our Form 8-K filed with the Securities and
      Exchange Commission on September 29, 2003, and incorporated herein by
      reference.

(4)   Filed as Exhibit 15.1 to our Form 8-K filed with the Securities and
      Exchange Commission on February 19, 2003 and incorporated herein by
      reference.

(5)   Filed as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5 to our Form S-8 filed
      with the Securities and Exchange Commission on November 26, 2003, and
      incorporated herein by reference.

(6)   Filed as Exhibit 10.2 to our Form 10-QSB filed with the Securities and
      Exchange Commission on May 24, 2004, and incorporated herein by reference.

(7)   Filed as Exhibits 10.2, 10.3 and 10.5 to our Form 8-K filed with the
      Securities and Exchange Commission on May 27, 2005, and incorporated
      herein by reference.

(8)   Filed as Exhibits 10.1, 10.2 and 10.3 to our Form 8-K filed with the
      Securities and Exchange Commission on September 9, 2005, and incorporated
      herein by reference.

(9)   Filed as Exhibits 10.5, 10.6 and 10.7 to our Registration Statement on
      Form SB-2 filed with the Securities and Exchange Commission on September
      30, 2005, and incorporated herein by reference.

(10)  Filed as Exhibits 4.1, 10.1 and 10.2 to our Form 10-QSB\A filed with the
      Securities and Exchange Commission on April 5, 2006, and incorporated
      herein by reference.

(11)  Filed as Exhibits 3.6 and 10.2 to our Form 10-KSB/A filed with the
      Securities and Exchange Commission on April 5, 2006, and incorporated
      herein by reference.

++    Filed herewith.

(b)   REPORTS ON FORM 8-K

The Company filed the following reports on Form 8-K during the last quarter of
the fiscal period covered by this report:

Forms 8-K filed on September 28, 2005 and September 9, 2005 to report on the
Company's 2005 Private Placement.


                                       21

<PAGE>

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: October 20, 2006                 By: /s/ Robert W. Prokos
                                            ------------------------------------
                                            Robert W. Prokos
                                            Chief Executive Officer
                                            (Principal Financial and
                                            Accounting 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    October 20, 2006
--------------------------------   and Director
Robert W. Prokos                   (Principal Financial and
                                   Accounting Officer)


/s/ Dr. Dianne Love                Director                   October 20, 2006
--------------------------------
Dr. Dianne Love

                                           Director
                                   ------------------------
David Spencer


/s/ Edward Walter Zieverink, III           Director           October 20, 2006
--------------------------------
Edward Walter Zieverink, III


Dr. Daniel Sparks


/s/ Dr. Daniel Sparks                      Director           October 20, 2006
--------------------------------
Dr. Daniel Sparks


                                       22

<PAGE>

                            HEALTHRENU MEDICAL, INC.

                              FINANCIAL STATEMENTS
          WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                           September 30, 2005 and 2004

HEALTHRENU MEDICAL, INC.

                                TABLE OF CONTENTS

                                                                            Page
                                                                           -----
Report of Independent Registered Public Accounting Firm                    23-24
Financial Statements:
  Balance Sheets as of September 30, 2005 and 2004                            25
  Statements of Operations for the years ended
    September 30, 2005 and 2004                                               26
  Statements of Stockholders' Equity (Deficit) for the
    years ended September 30, 2005 and 2004                                27-28
  Statements of Cash Flows for the years ended
    September 30, 2005 and 2004                                              29
Notes to Financial Statements                                              30-45

             Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
HealthRenu Medical, Inc.

We have audited the accompanying balance sheet of HealthRenu Medical, Inc. (the
"Company") as of September 30, 2005 and 2004, and the related statements of
operations, stockholders' equity (deficit) and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of HealthRenu Medical, Inc. as of
September 30, 2005 and 2004, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.


                                       23

<PAGE>

The accompanying financial statements have been prepared assuming HealthRenu
Medical, Inc. will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has incurred significant recurring losses from
operations and at September 30, 2005 is in a negative working capital position
and a stockholders' deficit position. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
with regard to these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

As discussed in Note 15 and 16 to the financial statements, the Company has
restated its financial statements as of and for the year ended September 30,
2005 to correct errors in its accounting for convertible notes payable and
related warrants to purchase common stock.

Houston, Texas

January 25, 2006, except for note 15 and 16 which is October 10, 2006.


                                        /s/ Ham, Langston & Brezina, LLP


                                       24

<PAGE>

                            HEALTHRENU MEDICAL, INC.
                                 BALANCE SHEETS

                           September 30, 2005 and 2004

<TABLE>
<CAPTION>
                                                                       2005          2004
                                                                   -----------   -----------
                                                                    (Restated)
<S>                                                                <C>           <C>
ASSETS

Current assets:
  Cash and cash equivalents                                        $   163,095   $     7,560
  Accounts receivable                                                      716         2,500
  Inventories                                                           18,188        22,430
  Prepaid expense                                                        2,146            --
                                                                   -----------   -----------
    Total current assets                                               184,145        32,490
                                                                   -----------   -----------
Property and equipment, net                                              9,592         4,048
Deferred loan costs, net                                               136,307            --
                                                                   -----------   -----------
      Total assets                                                 $   330,044   $    36,538
                                                                   ===========   ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
  Accounts payable                                                 $   117,863   $   131,223
  Accounts payable-stockholder                                           2,329         2,329
Notes payable                                                          188,843            --
  Accrued liabilities                                                   30,327        59,661
  Derivative liabilities                                             2,630,121            --
                                                                   -----------   -----------
Total current liabilities                                            2,969,483       193,213
                                                                   -----------   -----------
  Convertible notes payable                                              9,324            --
Total liabilities                                                    2,978,807       193,213
                                                                   -----------   -----------
Stockholders' deficit:
  Convertible preferred stock, Series 2000A, $0.001 par value;
    1,500,000 shares authorized, 1,763 shares issued and
    outstanding at September 30, 2005                                        2             2
  Common stock, $0.001 par value; 150,000,000 shares authorized,
    25,619,589 and 22,454,451 shares issued and outstanding at
    September 30, 2005 and 2004, respectively                           25,620        22,454
  Additional paid-in capital                                         3,748,602     2,581,911
  Unissued Common Stock                                                     --        42,511
  Accumulated deficit                                               (6,422,987)   (2,803,553)
                                                                   -----------   -----------
    Total stockholders' deficit                                     (2,648,763)     (156,675)
                                                                   -----------   -----------
      Total liabilities and stockholders' deficit                  $   330,044   $    36,538
                                                                   ===========   ===========
</TABLE>

                 See accompanying notes to financial statements.


                                       25

<PAGE>

                            HEALTHRENU MEDICAL, INC.
                            STATEMENTS OF OPERATIONS

                 for the years ended September 30, 2005 and 2004

<TABLE>
<CAPTION>
                                                                       2005          2004
                                                                   -----------   -----------
                                                                    (Restated)
<S>                                                                <C>           <C>
Sales                                                              $     9,785   $    21,806
Cost of sales                                                           13,458        43,306
                                                                   -----------   -----------
    Gross profit (loss)                                                 (3,673)      (21,500)
General and administrative expenses                                   (889,868)   (1,457,701)
                                                                   -----------   -----------
    Loss from operations                                              (893,541)   (1,479,201)
Other income (Expense):
Write down of syndicated costs                                        (360,000)           --
Interest and Financing expense                                        (320,460)         (430)
Gain of extinguishment of debt                                          36,688            --
Loss on embedded derivative liability                               (2,082,121)           --
                                                                   -----------   -----------
  Total other income (expense), net                                 (2,725,893)         (430)
    Net loss                                                       $(3,619,434)  $(1,479,631)
                                                                   ===========   ===========
Weighted average shares outstanding                                 27,398,634    19,280,788
                                                                   ===========   ===========
Basic and diluted net loss per common share                        $     (0.13)  $     (0.08)
                                                                   ===========   ===========
</TABLE>

                 See accompanying notes to financial statements.


                                       26

<PAGE>

                            HEALTHRENU MEDICAL, INC.

                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                 for the years ended September 30, 2005 and 2004

<TABLE>
<CAPTION>
                               Preferred            Common     Common  Additional   Unissued      Stock
                                 Stock               Stock     Stock     Paid In     Common   Subscription
                                 Shares   Amount    Shares     Amount    Capital     Stock     Receivable
                               ---------  ------  ----------  -------  ----------  ---------  ------------
<S>                             <C>        <C>    <C>         <C>      <C>         <C>          <C>
Balance at September 30, 2003   1,763      $ 2    15,506,962  $15,507  $  674,830  $ 698,602    $(31,000)
Common Stock issued for cash
  and receivable                   --       --     1,822,000  $ 1,822  $  100,378         --          --
Common Stock issued as
  payment of liabilities and
  additional compensation          --       --       745,587  $   745  $  790,813         --          --
Common stock issued for
  consulting services              --       --       325,000  $   325  $  277,625         --          --
Common Stock issued for
  employee compensation            --       --       275,000  $   275  $   27,225         --          --
Issuance of Common Stock for
  committed stock                  --       --     3,779,902  $ 3,780  $  694,822  $(698,602)         --
Shares committed and issuable
  for employee and directors
  compensation                     --       --            --       --          --  $  42,511          --
Additional Capital
  Contributed upon sales of
  assets and liabilities           --       --            --       --  $   15,468         --          --
Collection of subscription
  receivable                       --       --            --       --          --         --    $ 31,000
Rent contributed by
  stockholder                      --       --            --       --  $      750         --          --
Net loss                           --       --            --       --          --         --          --
Balance at September 30, 2004   1,763      $ 2    22,454,451  $22,454  $2,581,911  $  42,511          --
</TABLE>

                                            Accumulated
                                              Deficit        Total
                                            -----------   -----------
Balance at September 30, 2003               $(1,323,922)  $    34,019
Common stock issued for cash
  And receivable                                     --       102,200
Common stock issued as payment of
  liabilities and additional compensation            --       791,558
Common stock issued for
  consulting services                                --       277,950
Common stock issued for
  employee compensation                              --        27,500
Issuance of common stock for
  committed stock                                    --            --
Shares committed and issuable
  for employee and directors compensation            --        42,511
  Additional Capital Contributed
    upon sales of assets and liabilities             --        15,468
  Collection of subscription receivable              --        31,000
Rent contributed by stockholder                      --           750
Net loss                                     (1,479,631)   (1,479,631)
                                            -----------   -----------
Balance at September 30, 2004               $(2,803,553)  $  (156,675)
                                            ===========   ===========

                 See accompanying notes to financial statements.


                                       27

<PAGE>

                            HEALTHRENU MEDICAL, INC.
                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                 for the years ended September 30, 2005 and 2004

<TABLE>
<CAPTION>
                                 Preferred              Common      Common   Additional   Unissued       Stock
                                   Stock                 Stock      Stock      Paid In     Common    Subscription
                                   Shares    Amount     Shares      Amount     Capital      Stock     Receivable
                                 ---------   ------   ----------   -------   ----------   --------   ------------
<S>                                <C>         <C>    <C>          <C>       <C>          <C>             <C>
Balance at September 30, 2004      1,763       $2     22,454,451   $22,454   $2,581,911   $ 42,511        --
Common Stock issued for cash
  and receivable                      --       --         25,000   $    25   $      725         --        --
Common Stock issued as payment
  of liabilities and
  additional compensation             --       --      2,623,850   $ 2,624   $  349,888         --        --
Common stock issued for
  services                            --       --         25,000   $    25   $    2,475         --        --
Issuance of Common Stock for
  committed stock                     --       --      1,585,563   $ 1,585   $   40,926   $(42,511)       --
  Common Stock issued for
    syndicated costs                  --       --      1,555,974     1,556   $  169,601         --        --
Common Stock issued for cash          --       --      3,274,667     3,275   $  143,175         --        --
Common Stock cancelled                --       --     (8,777,500)   (8,777)       8,777         --        --
Common Stock issued as
  compensation                        --       --        291,777       292       87,241         --        --
Effect on beneficial
  conversion feature                  --       --                            $  240,333         --        --
Common Stock issued upon
  conversion of notes and
  related accrued interest            --       --      2,560,807     2,561      123,550         --        --
Net loss                              --       --             --        --           --         --        --
Balance at September 30,
  2005(Restated)                   1,763       $2     25,619,589   $25,620   $3,748,602         --        --
</TABLE>

                                    Accumulated Deficit      Total
                                    -------------------   -----------
Balance at September 30, 2004           $(2,803,553)      $  (156,675)
Common stock issued as
  settlement                                     --               750
Common stock issued as payment
  for liabilities and additional
  compensation                                   --           352,512
Common stock issued for
  services                                       --             2,500
Issuance of common stock
  committed                                      --                --
Common stock issued for
  syndication costs                              --           171,157
Common stock issued for cash                     --           146,450
Common stock cancelled                           --                --
Common stock issued as
  compensation                                   --            87,533
Effect of beneficial
  conversion feature                             --           240,333
Common stock issued upon
  conversion of notes and related
  accrued interest                               --           126,111
Net loss                                 (3,619,434)       (3,619,434)
                                        -----------       -----------
Balance at September 30, 2005           $(6,442,987)      $(2,648,763)
                                        ===========       ===========

                 See accompanying notes to financial statements.


                                       28

<PAGE>

                            HEALTHRENU MEDICAL, INC.
                            STATEMENTS OF CASH FLOWS
                 for the years ended September 30, 2005 and 2004

<TABLE>
<CAPTION>
                                                            2005          2004
                                                        -----------   -----------
                                                         (Restated)
<S>                                                     <C>           <C>
Cash flows from operating activities:
  Net loss                                              $(3,619,434)  $(1,479,631)
  Adjustments to reconcile net loss to net cash used
    in operating activities:
    Depreciation                                              1,689         7,184
    Rent expense contributed by stockholder                      --           750
    Effect of beneficial conversion feature                 240,333            --
    Accretion of debt discount                                9,324            --
    Amortization of debt issuance costs                         893            --
    Write off of syndicated costs                           360,000           750
    Common stock issued for services                          3,250       277,950
    Common stock issued for compensation                    387,533       800,797
    Common stock issued for interest                         53,111            --
    Gain on extinguishment of debt                          (36,688)           --
    Loss on embedded derivative liability                 2,082,121            --
  Changes in operating assets and liabilities:
      Accounts receivable                                     1,784        (1,994)
      Employee receivable                                        --         5,771
      Other current assets                                   (2,146)        4,936
      Inventories                                             4,242        24,473
      Accounts payable and accrued liabilities               46,506       227,030
                                                        -----------   -----------
        Net cash used in operating activities              (467,482)     (132,734)
                                                        -----------   -----------
Cash flows from investing activities:
  Purchase of fixed assets                                   (7,233)       (8,090)
                                                        -----------   -----------
        Net cash used in investing activities                (7,233)       (8,090)
                                                        -----------   -----------
Cash flows from financing activities:
  Net proceeds from convertible notes                       513,800            --
  Repayment of convertible notes payable                    (30,000)           --
  Proceeds from the sale of Common stock                    146,450        99,700
  Proceeds from collection of subscription receivable            --        31,000
                                                        -----------   -----------
        Net cash provided by financing activities           630,250       130,700
                                                        -----------   -----------
(Decrease)/Increase in cash and cash equivalents            155,535       (10,124)
Cash and cash equivalents, beginning of period                7,560        17,684
                                                        -----------   -----------
Cash and cash equivalents, end of period                    163,095         7,560
                                                        ===========   ===========

Supplemental disclosure of cash flow information:
  Cash paid for interest                                      2,040            --
                                                        ===========   ===========
  Cash paid for income taxes                                     --            --
                                                        ===========   ===========
</TABLE>

                 See accompanying notes to financial statements


                                       29

<PAGE>

                            HEALTHRENU MEDICAL, INC.

                          NOTES TO FINANCIAL STATEMENTS

1. Background and Summary of Significant Accounting Policies

Background

HealthRenu Medical, Inc. (the "Company" or "HealthRenu"), a Nevada corporation,
is headquartered in Houston, Texas. The Company provides raw materials to a
third party manufacturing company who produces various skin care products that
are purchased and distributed by the Company primarily to the home health care
and other medical markets in 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
date of acquisition. The Company assumed all liabilities of the public shell
that remained on the date of the acquisition. The historical financial
statements presented herein are those of HealthRenu Medical, Inc., and its
predecessor, Health Renu, 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, and certain
assets and liabilities of the Company for a return of 25,000 shares of common
stock of the Company (which the Company has not yet received and has placed $-0-
value on due to the uncertainty of receipt of these shares) and exclusive rights
to the formulas to produce its products. The disposition of these assets and
liabilities resulted in the Company recording additional paid-in capital of
$15,468.

Following is a summary of the Company's significant 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.

Restatements

Restatements of 2005 information previously reported were made. See Note 16 for
details.

Revenue Recognition

Revenue is recognized when products are shipped and when all of the following
have occurred: a firm sales agreement is in place, pricing is fixed or
determinable and collection is reasonably assured. Sales are reported net of
estimated returns, consumer and trade promotions, rebates and freight allowed.

Concentrations of Credit Risk

Financial instruments which subject the Company to concentrations of credit risk
include cash and cash equivalents and accounts receivable.


                                       30

<PAGE>

The Company maintains its cash in well-known banks selected based upon
management's assessment of the banks' financial stability. Balances may
periodically exceed the $100,000 federal depository insurance limit; however,
the Company has not experienced any losses on deposits.

Accounts receivable generally arise from sales of various skin care products to
the home health care and other medical markets in the United States. Collateral
is generally not required for credit granted.

Sales of product to a stockholder of the Company comprised approximately 88% of
the Company's revenue for the year ended September 30, 2004. There were no such
sales in 2005.

The Company establishes an allowance for doubtful accounts based upon the aging
of customer balances and the likelihood of collection. As of September 30, 2005,
the Company has determined that no allowance for doubtful accounts is necessary.

Cash Equivalents

For purposes of reporting cash flows, the Company considers all short-term
investments with an original maturity of three months or less to be cash
equivalents.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets, which range
from three to twenty-five years. Expenditures for major renewals and betterments
that extend the original estimated economic useful lives of the applicable
assets are capitalized. Expenditures for normal repairs and maintenance are
charged to expense as incurred. The cost and related accumulated depreciation of
assets sold or otherwise disposed of are removed from the accounts, and any gain
or loss is included in operations.

Inventories

Inventories consist of raw materials, work-in-process and finished goods and are
stated at the lower of cost or market. Cost is computed using actual costs on a
first-in, first-out basis. Since the inventory typically has a very long shelf
life, management reviews the inventory on an annual basis and records a reserve
for obsolescence when considered necessary. As of September 30, 2005 the Company
has determined that no reserve for inventory obsolescence is necessary.

Shipping and Delivery Costs

The cost of shipping and delivery are charged directly to cost of sales at the
time of shipment.

Research and Development

Research and development activities are expensed as incurred, including costs
relating to patents or rights, which may result from such expenditures.

Income Taxes

The Company uses the liability method of accounting for income taxes. Under this
method, deferred income taxes are recorded to reflect the tax consequences on
future years of temporary differences between the tax basis of assets and
liabilities and their financial amounts at year-end. The Company provides a
valuation allowance to reduce deferred tax assets to their net realizable value.


                                       31

<PAGE>

Debt Issuance Costs

Debt issuance costs are deferred and recognized, using the effective interest
method, over the expected term of the related debt.

Loss Per Share

Basic and diluted loss per share is computed on the basis of the weighted
average number of shares of common stock outstanding during each period. Common
equivalent shares from convertible preferred stock and common stock options and
warrants are excluded from the computation, as their effect would dilute the
loss per share for all periods presented. If the Company had reported net income
for the years ended September 30, 2005 or 2004, the calculation of diluted net
income per share would have included 367,919 and -0-, respectively, and 1,763
and 1,763, respectively, of additional common equivalent shares for the
Company's stock warrants and convertible preferred stock.

Impairment of Long-Lived Assets

In the event that facts and circumstances indicate that the carrying value of a
long-lived asset, including associated intangibles, may be impaired, an
evaluation of recoverability is performed by comparing the estimated future
undiscounted cash flows associated with the asset or the asset's estimated fair
value to the asset's carrying amount to determine if a write-down to market
value or discounted cash flow is required.

Fair Value of Financial Instruments

The Company includes fair value information in the notes to financial statements
when the fair value of its financial instruments is different from the book
value. When the book value approximates fair value, no additional disclosure is
made.

Comprehensive Income

Comprehensive income includes such items as unrealized gains or losses on
certain investment securities and certain foreign currency translation
adjustments. The Company's financial statements include none of the additional
elements that affect comprehensive income. Accordingly, comprehensive income
(loss) and net income (loss) are identical.

Stock-Based Compensation

The Company accounts for employee stock options using the intrinsic value method
prescribed in Accounting Principles Board Opinion ("APB") No. 25, "Accounting
for Stock Issued to Employees", and has adopted the disclosure-only alternative
of SFAS No. 123, "Accounting fort Stock-Based Compensation", as amended by SFAS
No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure".

Unissued Common Stock

The Company records unissued common stock when it receives cash or services for
common stock which has yet to be issued. Such unissued common stock is included
in weighted average shares outstanding for the calculation of the loss per share
during the period for which the cash was committed and services provided if
there were no further contingencies associated with the transaction and the
unissued common stock was entitled to participate in dividends.

Reclassifications

Certain amounts included in the 2004 financial statements have been reclassified
to confirm to the current year presentation. Such reclassifications did not have
any effect on the reported net loss or stockholders' deficit.


                                       32

<PAGE>

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow,
market, or foreign currency risks.

Derivative financial instruments are initially measured at their fair value. For
derivative financial instruments that are accounted for as liabilities, the
derivative instrument is initially recorded at it fair value and is then
re-valued at each reporting date, with changes in the fair value reported as
charges or credits to income. For option-based derivative financial instruments,
the Company uses the Black-Scholes model to value the derivative instruments.

The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is reassessed at the end of each
reporting period. Derivative instrument liabilities are classified in the
balance sheet as current or non-current based on whether or not net-cash
settlement of the derivative instrument could be required within 12 months of
the balance sheet date.

Recent Accounting Pronouncements

In December 2004 the FASB issued revised SFAS No. 123R, "Share-Based Payment".
SFAS No. 123R sets accounting requirements for "share-based" compensation to
employees and requires companies to recognize in the income statement the
grant-date fair value of stock options and other equity-based compensation. SFAS
No. 123R is effective in interim or annual periods beginning after June 15,
2005. The Company will be required to adopt SFAS No. 123R in its fiscal year
2006 and currently discloses the effect on net (loss) income and (loss) earnings
per share of the fair value recognition provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation". The Company is currently evaluating the impact of
the adoption of SFAS 123R on its financial position and results of operations,
including the valuation methods and support for the assumptions that underlie
the valuation of the awards.

In November 2004 the FASB issued SFAS No. 151, "Inventory Costs". The new
Statement amends ARB No. 43, Chapter 4, "Inventory Pricing", to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling
costs and wasted material. This Statement requires that those items be
recognized as current period charges and requires that allocation of fixed
production overheads to the cost of conversion be based on the normal capacity
of the production facilities. This statement is effective for fiscal years
beginning after June 15, 2005. The adoption of this statement is not expected to
have a material impact on our financial condition or results of operations.

In December 2004 the FASB issued SFAS No. 153 "Exchanges of Nonmonetary Assets -
An Amendment of APB Opinion No. 29". SFAS No. 153 amends APB Opinion No. 29 to
eliminate the exception for nonmonetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of nonmonetary assets
that do not have commercial substance. SFAS No. 153 is to be applied
prospectively for nonmonetary exchanges occurring in fiscal periods beginning
after June 15, 2005. The Company's adoption of SFAS No. 153 is not expected to
have a material impact on its financial position or results of operations.


                                       33

<PAGE>

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections - A Replacement of APB Opinion No. 20 and FASB Statement No. 3",
which requires retrospective application to prior periods' financial statements
for changes in accounting principle, unless it is impracticable to determine
either the period-specific effects or the cumulative effect of the change. If
such determinations are impracticable, there are other disclosures required
under the standard. This standard is effective for fiscal years beginning after
December 15, 2005 and early adoption is allowed. The adoption of this standard
is not expected to have a material impact on the Company's financial position or
results of operations.

2. Going Concern

During the years ended September 30, 2005 and 2004, the Company has continued to
accumulate payables to its vendors and has experienced negative financial
results as follows:

                                          2005          2004
                                      -----------   -----------
Net loss                              $(3,619,434)  $(1,479,631)
Negative cash flows from operations      (467,482)     (132,734)
Negative working capital               (2,785,338)     (160,722)
Accumulated deficit                    (6,422,987)   (2,803,553)
Stockholder deficit                    (2,648,763)     (156,675)

Management has developed specific current and long-term plans to address its
viability as a going concern as follows:

      o     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.

      o     The Company is also attempting to raise funds through debt and/or
            equity offerings. If successful, these additional funds will be used
            to pay down liabilities and to provide working capital.

      o     In the long-term, the Company believes that cash flows from growth
            in its operations will provide the resources for continued
            operations.

      o     In May 2005 the Company entered into a Standby Equity Distribution
            Agreement with Cornell Capital Partners, L.P., where the Company may
            periodically sell shares of common stock for a purchase price up to
            a maximum of $10 million subject to the completion of the
            registration of the Company's common stock under the Securities Act
            of 1933.

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:

      o     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.

      o     The ability of the Company to control costs and expand revenues.

      o     The ability of the Company to ultimately achieve adequate
            profitability and cash flows from operations to sustain its
            operations.


                                       34

<PAGE>

3. Inventories

Inventories consist of the following at September 30, 2005 and 2004:

                                   2005      2004
                                 -------   -------
Work-in-process                  $    --   $14,000
Finished goods                    18,188     8,430
                                 -------   -------
                                 $18,188   $22,430
                                 =======   =======

4. Property and Equipment

Property and equipment consisted of the following at September 30,2005 and 2004:

                                   2005      2004
                                 -------   -------
Furniture and fixtures           $ 9,314   $ 2,893
Buildings and equipment            5,335     5,552
Software                           1,029        --
                                 -------   -------
                                  15,678     8,445
Less: accumulated depreciation    (6,086)   (4,397)
                                 -------   -------
  Property and equipment, net    $ 9,592   $ 4,048
                                 =======   =======

Depreciation expense for the years ended September 30, 2005 and 2004 was $1,689
and $2,135, respectively.

5. Deferred Loan Costs

In connection with the Convertible Notes Payable described in Note 7 below, the
Company incurred certain direct expenses as a result of these debt agreements.
As of September 30, 2005 the total costs capitalized by the Company were
$137,200. These deferred loan costs are being amortized using the effective
interest method over the three-year estimated life of the related debt
agreements. The Company recorded $893 of amortization expense during the year
ended September 30, 2005 related to these deferred loan costs which are included
in the statement of operations as additional interest and financing expense. The
accumulated amortization of deferred loan costs was $893 at September 30, 2005.

6. Note Payable

In May 2005 the Company entered into a SEDA agreement (See Note 10). In
conjunction with this agreement, the Company entered into a promissory note for
$188,843 to pay for certain of its financing costs associated with this
agreement. The note bears interest at 12% per year and matured on October 3,
2005. This note has been verbally extended and is due on demand. The note is not
collateralized. Due to the contingencies associated with the completion of the
SEDA agreement, this amount has been expensed and included in write off of
syndication costs in the statement of operations for the year ended September
30, 2005.


                                       35

<PAGE>

7. Convertible Notes Payable

During April and May 2005, the Company received $103,000 in the form of
convertible notes payable from certain of its officers and directors. These
notes bear interest at 8% per year, plus contain an additional 8% financing
charge, and are convertible into the Company's common stock at $0.03 per share.
The notes matured on August 31, 2005. Since the conversion price of $0.03 was
less than the fair market value of the Company's common stock of $0.10, which
was determined based on the quoted market price of the common stock, the Company
recorded a $240,333 beneficial conversion feature, which is included in interest
and financing expenses in the accompanying statement of operations for the year
ended September 30, 2005. During the year ended September 30, 2005, 2,560,807
shares of common stock were issued upon the conversion of $73,000 of principal
and $53,111 in interest and financing expense related to the convertible notes
payable. The remaining $30,000 in principal and $2,040 in interest was repaid in
cash during the year ended September 30, 2005.

In August and September 2005, the Company entered into agreements to issue
convertible promissory notes and received proceeds of $410,800, net of $137,200
offering costs. The notes are for a term of three years and bear interest at 8%
per annum, which is payable annually in shares of the Company's common stock.
The holders of the notes have the option to convert the note at any time on or
after the issuance date of the note. The notes are convertible at 85% of the
average of the trading prices of the common stock for the ten days ending one
day prior to the Company's receipt of the conversion notice. The note holders
were also granted two warrants to purchase the Company's common stock to become
exercisable for each share of common stock to be issued upon conversion of the
notes with each warrant to purchase one share of common stock at an exercise
price of 125% and 150%, respectively, of the conversion price of the notes then
in effect. These warrants will expire on October 31, 2009.

Since the number of warrants to become exercisable in connection with the
convertible note issuance is indeterminable, it has been classified as a
derivative instrument based on the guidance of SFAS No. 133 and EITF 00-19 (see
Note 15 below for further discussion).

8. Income Taxes

The Company has incurred losses since its inception and, therefore, has not been
subject to federal income taxes. As of September 30, 2005, the Company had net
operating loss ("NOL") carryforwards for income tax purposes of approximately
$2,455,000 which expire in various tax years through 2024. Under the provisions
of Section 382 of the Internal Revenue Code an ownership change in the Company
could severely limit the Company's ability to utilize its NOL carryforward to
reduce future taxable income and related tax liabilities. Additionally, because
United States tax laws limit the time during which NOL carryforwards may be
applied against future taxable income, the Company may be unable to take full
advantage of its NOL for federal income tax purposes should the Company generate
taxable income.


                                       36

<PAGE>

The composition of deferred tax assets and liabilities and the related tax
effects at September 30, 2005 and 2004 are as follows:

                                            2005        2004
                                         ---------   ---------
Deferred tax assets:
  Net operating losses                   $ 834,701   $ 626,817
  Valuation allowance                     (834,701)   (626,817)
                                         ---------   ---------
    Net deferred tax asset (liability)   $      --   $      --
                                         =========   =========

The difference between the income tax benefit in the accompanying statement of
operations and the amount that would result if the U.S. federal statutory rate
of 34% were applied to pre-tax loss for the years ended September 30, 2005, and
2004 is as follows:

                                     2005                   2004
                            ---------------------   -------------------
                               Amount     Percent     Amount    Percent
                            -----------   -------   ---------   -------
Benefit for income tax at
  federal statutory rate    $ 1,230,608     34.0%   $ 503,075     34.0%
Non-deductible expense       (1,022,724)   (28.3)    (321,783)   (21.7)
Increase in valuation
  allowance                    (207,884)   (5.7)     (181,292)   (12.3)
                            -----------    ----     ---------    ----
                            $        --     --%     $      --      --%
                            ===========    ====     =========    ====

9. Commitments and Contingencies

Leases

The Company leases office space and facilities under an operating lease which
expires in January 2006. This lease required monthly lease payments of $2,115.
The Company renewed its lease effective January 31, 2006. The new lease requires
initial monthly payments of $3,407 escalating each year through the term of the
lease, which expires on January 31, 2009. Future minimum lease payments on this
lease are as follows:

                      Operating
                        Leases
                       --------
2006                   $ 36,797
2007                     41,713
2008                     42,952
2009                     14,455
                       --------
                       $135,917

Total rent expense for the years ended September 30, 2005 and 2004 was $26,173
and $13,525, respectively.


                                       37

<PAGE>

Litigation

In 2004, Cause Number 825,095, "David M. Loev v. HealthRenu Medical, Inc," was
filed against the Company in the County Court at Law No. 4, Harris County,
Texas. The amount of damages sought by David Loev is approximately $16,600 for
nonpayment of legal services he performed for the Company. The amount has been
recorded as a liability as of September 30, 2004 in the accompanying financial
statements. This matter was settled in 2005 with the Company paying $16,600 in
cash.

The Company is from time to time party to certain litigation arising in the
normal course of business. Management believes that such litigation will not
have a material impact on the Company's financial position or results of
operations.

Consulting and Employment Agreements

In March 2004, the Company entered into an employment agreement with its new
chief executive officer. The three-year employment agreement provides for an
annual salary as well as a one-time issuance of 350,000 shares of common stock
of the Company at $0.06 per share, which was the fair value of the common stock
determined based on recent cash sales of the Company's common stock, as payment
of accrued compensation owed to him of approximately $21,214. However, since the
quoted market price of the Company's common stock was $1.60 per share at the
grant date, the Company recorded additional compensation expense of $538,786 in
the statement of operations for the year ended September 30, 2004.

In May 2004 the Company entered into a consulting services agreement with a
member of the Board of Directors to provide management advisory services,
strategic planning, professional introductions and company growth services. The
Company issued 250,000 shares of common stock, which was valued at $0.80 per
share based on the quoted market price of the Company's common stock, to the
board member in consideration for services under the agreement and have agreed
to issue an additional 50,000 shares for each $100,000 in revenues over $300,000
that she generates for the Company up to a maximum of 350,000 additional shares.
The agreement expires on May 1, 2009. As a result, the Company has recorded
$200,000 as consulting expense in the statement of operations for the year ended
September 30, 2004.

10. Standby Equity Distribution Agreement

In May 2005, the Company entered into a Standby Equity Distribution Agreement
("SEDA") with Cornell Capital Partners, L.P. ("Cornell"). Pursuant to the SEDA,
the Company may periodically sell to Cornell shares of its common stock for a
purchase price of up to a maximum $10 million. For each share of common stock
purchased under the SEDA, Cornell will pay the Company 97% of the lowest volume
weighted average price on which its common stock is traded for the five trading
days immediately following the notice date. Subject to the Company completing
the registration of its common stock related to the SEDA agreement, under the
Securities Act of 1933, the Company may request advances until Cornell has
advanced $10 million or within 24 months after the effective date of the
Company's related registration statement, whichever occurs first. The amount of
each advance is limited to a maximum draw down of $350,000 every five trading
days. Cornell will retain a fee of 5% of each advance under the SEDA, resulting
in a total effective discount to the market price of the Company's common stock
of 8%. The Company also issued 1,465,065 shares of its common stock valued at
$0.11 per share which was the fair market value of the common stock when the
number of shares were agreed upon and a promissory note in the principal amount
of $188,843 to Cornell and issued 90,909 shares of its common stock valued at
the fair market value of $0.11 per share to a placement agent, resulting in
total financing costs of $360,000, which was expensed as of September 30, 2005.


                                       38

<PAGE>

11. Preferred Stock

The articles of incorporation of the Company stipulate that the Company is
authorized to issue 5,000,000 shares of preferred stock, $.001 par value. Of the
5,000,000 authorized shares, 1,500,000 shares of preferred stock have been
designated Series 2000A Convertible Preferred stock (Series 2000A Preferred).
The shareholders of these preferred shares are entitled to a preference in
liquidation of ten cents per share. These preferred shareholders also receive
dividends on a pro-rata basis with common stockholders at the election of the
board of directors. No dividends have been declared as of September 30, 2005.
Each share is convertible at the option of the shareholder to one share of
common stock. In addition, the shares will automatically convert to common
shares upon the closing of a firm commitment underwritten public offering with
net proceeds in excess of $2,000,000 or a vote of two-thirds of the preferred
shareholders. As of September 30, 2005, there are 1,763 shares of Series 2000A
Preferred stock outstanding. No other preferred stock is outstanding at
September 30, 2005.

12. Stock Warrants

In September 2005 the Company granted warrants to certain consultants and
placement agents to purchase 1,587,237 shares of the Company's common stock
exercisable at $0.30 to $.50 per share, at which time the trading price ranged
from $0.31 to $0.44 per share. The warrants were fully vested, exercisable at
the date of grant and expire on October 31, 2009.

As a result of the Company's determination that their convertible notes as
described in Note 15 result in an indeterminate number of shares to be issued
the warrant instruments described above and listed below are being valued as
embedded derivatives consistent with SFAS No. 133. The fair value of these
warrants are recorded in the Company's balance sheet as a component of
derivative liability with changes in the values of these embedded derivatives
reflected in the statement of operations as "Gain (loss) on embedded derivative
liability."


                                       39

<PAGE>

A summary of the Company's stock warrant activity and related information is as
follows:

                                                Weighted
                                                 Average
                                    Number of   Exercise
                                      Shares      Price
                                    ---------   --------
Outstanding at September 30, 2003          --   $     --
  Granted                                  --         --
  Exercised                                --         --
  Forfeited                                --         --
                                    ---------   --------
Outstanding at September 30, 2004          --         --
  Granted                           1,587,237       0.46
  Exercised                                --         --
  Forfeited                                --         --
                                    ---------   --------
Outstanding at September 30, 2005   1,587,237   $   0.46
                                    =========
Exercisable at September 30, 2005   1,587,237
                                    =========

Following is a summary of outstanding stock warrants at September 30, 2005:

Number of               Expiration   Weighted Average
 Shares       Vested       Date       Exercise Price
---------   ---------   ----------   ----------------
1,100,000   1,100,000      2009           $0.50
  119,318     119,318      2009           $0.48
  106,875     106,875      2009           $0.35
  121,818     121,818      2009           $0.36
  139,226     139,226      2009           $0.30
---------   ---------
1,587,237   1,587,237
=========   =========

13. Related Party Transactions

During the year ended September 30, 2005, the Company issued 2,000,000 shares of
its common stock as payment of accrued compensation of $40,000 owed to an
officer of the Company. However, based on the quoted market price of the
Company's common stock of $0.17 per share, the Company recorded additional
compensation expense of $300,000 in the statement of operations for the year
ended September 30, 2005.

During the year ended September 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 the
year ended September 30, 2004, the Company issued the chief executive officer
295,587 shares of the Company's common stock to reimburse him for these
transactions. However, based on the quoted market price of the Company's common
stock of $0.75 per share, the Company recorded additional compensation expense
of $192,000 in the statement of operations for the year ended September 30,
2004.


                                       40

<PAGE>

During the year ended September 30, 2004, the Company recognized revenue of
$19,213 from cash sales of product to a stockholder and consultant to the
Company.

14. Non-Cash Investing and Financing Activities

During the years ended September 30, 2005 and 2004, the Company engaged in
certain non-cash investing and financing activities as follows:

                                                       2005       2004
                                                     --------   --------
Issuance of note payable for funding costs           $188,843   $     --
                                                     ========   ========
Common stock issued for funding costs                $171,157   $     --
                                                     ========   ========
Common stock issued for conversion of notes          $ 73,000   $     --
                                                     ========   ========
Issuance of common stock as payment of liability     $ 52,512   $ 60,773
                                                     ========   ========
Transfer of property for reduction in accrued
  liability                                          $     --   $  3,632
                                                     ========   =========
      Sale of common stock for subscription
        receivable recorded
        in other current assets                      $     --   $  2,500
                                                     ========   ========
      Sale of assets for reduction in liabilities:
        Accounts receivable                          $     --   $  1,994
                                                     ========   ========
        Other asset                                  $     --   $     64
                                                     ========   ========
        Fixed assets                                 $     --   $ 50,129
                                                     ========   ========
        Notes payable                                $     --   $(15,403)
                                                     ========   ========
        Accounts payable                             $     --   $(52,252)
                                                     ========   ========

15. Derivatives

HealthRenu evaluated the application of SFAS 133 and EITF 00-19 for all of its
financial instruments and identified the following financial instruments as
derivatives:

            1.    Convertible notes payable ("Notes Payable")

            2.    Warrants to purchase common stock associated with the
                  convertible notes payables;

            3.    Warrants to purchase common stock issued to placement agent
                  ("Placement Warrants")

            4.    Warrants to purchase common stock issued to consultants
                  ("Consulting Warrants")


                                       41

<PAGE>

Based on the guidance in SFAS 133 and EITF 00-19, the Company concluded that
these instruments were required to be accounted for as derivatives. SFAS 133 and
EITF 00-19 require the Company to bifurcate and separately account for the
conversion features of the convertible notes payables and warrants issued as
embedded derivatives.

Pursuant to SFAS 133, the Company bifurcated the conversion feature from the
Notes Payable because the conversion price is not fixed and the Notes Payable
are not convertible into a fixed number of shares. Accordingly, the embedded
derivative must be bifurcated and accounted for separately.

Furthermore, the Company concluded that the exercise price and the number of
shares to be issued under the Placement Warrants and the Consulting Warrants are
fixed. However, since the Notes Payable were issued prior to these warrants and
these debentures might result in issuing an indeterminate number of shares, it
cannot be concluded that the Company has a sufficient number of authorized
shares to settle these warrants. As such, the warrants were accounted for as
derivative instrument liabilities. The Company is required to record the fair
value of the conversion features and the warrants on its balance sheet at fair
value with changes in the values of these derivatives reflected in the statement
of operations as "Gain (loss) on embedded derivative liability." The derivative
liabilities were not previously classified as such in the Company's historical
financial statements. In order to reflect these changes, HealthRenu is
concurrently restating its financial statements for the year ended September 30,
2005 and each of the quarters ended December 31, 2005, March 31, 2006, and June
30, 2006.

The impact of the application of SFAS No. 133 and EITF 00-19 on the balance
sheet as of September 30, 2005 is as follows:

                      Embedded derivative
                       liability balance
                       September 30, 2005
                      -------------------
Notes Payable               $1,933,729
Placement Warrants             213,835
Consulting Warrants            482,557
                            ----------
             Total:         $2,630,121

The impact on statements of operations for the years ended September 30, 2005
and 2004 is as follows:

Gain (loss) on embedded Derivative liabilities:

                                          year ended
                            --------------------------------------
                            September 30,2005   September 30, 2004
                            -----------------   ------------------
Notes Payable                  $(1,516,937)             $--
Placement Warrants                (176,338)              --
Consulting Warrants               (388,846)              --
                               -----------              ---
  Total gain (loss) on
    embedded derivative
    liabilities:               $(2,082,121)             $--
                               -----------              ---


                                       42

<PAGE>

16. Restatement

The Company has restated its annual financial statements from amounts previously
reported on September 30, 2005. The Company previously recorded the convertible
features of its debt as a beneficial conversion feature and reflected such
discount as a reduction in the debt as a discount. The Company has determined
that certain financial instruments issued by the Company contain features that
require the Company to account for these features as derivative instruments.
Accordingly, warrants issued to consultants, the conversion features of the
Notes Payable and associated warrants have been accounted for as derivative
instrument liabilities rather than as equity. Additionally, the embedded
conversion features of the Notes Payable and warrants related to the debt have
been bifurcated from the debt and accounted for separately as derivative
instrument liabilities. Note 15 was added to disclose the derivative instrument
liabilities and provide information on subsequent changes.

The Company is required to record the fair value of the conversion features and
the warrants on the balance sheet at fair value with changes in the values of
these derivatives reflected in the statement of operations as "Gain (loss) on
derivative instrument liabilities." The effect of the (non-cash) changes related
to accounting separately for these derivative instrument liabilities and
modifying the estimated volatility, on the statement of operations for the year
ended September 30, 2005, was an increase in the net loss attributable to common
shareholders of $2,082,121. Basic earnings (loss) attributable to common
shareholders per share for the year ended September 30, 2005 increased $0.06 per
share.

The Company has also determined that costs related to certain debt agreements
were directly related to these debt agreements and therefore are now accounted
for as deferred loan costs net of accumulated amortization rather than as
equity. Additionally the Company has added Note 5 to provide information related
to these assets.

The effect of the (non-cash) changes related to accounting for these deferred
loan costs on the statement of operations for the twelve months ended September
30, 2005 was an increase in the Company's net loss attributable to common
shareholders of $893. The cumulative effect on the balance sheet as of September
30, 2005 was an additional deferred loan cost net of accumulated amortization of
$136,037.

Basic earnings (loss) attributable to common shareholders per share for the year
ended September 30, 2005 increased $0.06 per share for the cumulative effect of
the adjustments.


                                       43

<PAGE>

                            HEALTHRENU MEDICAL, INC.
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

      Restatement, continued

In all other material respects, the financial statements are unchanged.
Following is a summary of the restatement adjustments:

<TABLE>
<CAPTION>
                                                                      As of September 30, 2005
                                                            -------------------------------------------
                                                            As Reported   Adjustments       As Restated
                                                            -----------   -----------       -----------
<S>                                                         <C>           <C>               <C>
SUMMARY BALANCE SHEET
ASSETS
Current assets:
Cash and cash equivalents                                   $   163,095   $        --       $   163,095
Accounts receivable                                                 716            --               716
Inventories                                                      18,188            --            18,188
Prepaid expense                                                   2,146            --             2,146
                                                            -----------   -----------       -----------
  Total current assets                                          184,145            --           184,145
                                                            -----------   -----------       -----------
Property and equipment, net                                       9,592            --             9,592
Deferred Financing Costs, net                                        --       136,307 (a)       136,307
                                                            -----------   -----------       -----------
Total assets                                                $   193,737   $   136,307       $   330,044
                                                            ===========   ===========       ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable                                            $   117,863   $        --       $   117,863
Accounts payable-stockholder                                      2,329            --             2,329
Accrued liabilities                                              27,403         2,924 (b)        30,327
Note payable                                                    188,843            --           188,843
Derivative liability                                                 --     2,630,121 (c)     2,630,121
                                                            -----------   -----------       -----------
  Total current liabilities                                     336,438     2,633,045         2,969,483
                                                            -----------   -----------       -----------
Convertible notes payable                                        10,960        (1,636)(d)         9,324
Total liabilities                                               347,398     2,631,409         2,978,807
                                                            ===========   ===========       ===========
Stockholders' deficit:
Convertible preferred stock, Series 2000A, $0.001 par
  value; 1,500,000 shares authorized, 1,763 shares issued
  and outstanding at September 30, 2005                               2           --                  2
Common stock, $0.001 par value; 150,000,000 shares
  authorized, 25,019,589 shares issued and outstanding at
  September 30, 2005                                             25,620           --             25,620
Additional paid-in capital                                    4,616,672      (868,070)(e)     3,748,602
Accumulated deficit                                          (4,795,955)   (1,627,032)(f)    (6,442,987)
                                                            -----------   -----------       -----------
  Total stockholders' deficit                                  (153,661)   (2,495,102)       (2,648,763)
                                                            -----------   -----------       -----------
  Total Liability and Stockholders' deficit                     193,737       136,307           330,044
                                                            ===========   ===========       ===========
</TABLE>

(a)   To record net deferred loan costs associated with the 2005 convertible
      notes payable.

(b)   To adjust accrued interest to actual based upon previous errors.

(c)   To record the estimated fair value of warrants and embedded derivatives.

(d)   To adjust debt discount to actual resulting from errors in the initial
      establishment of debt discounts resulting from accounting for embedded
      derivatives and warrants.

(e)   To adjust additional paid-in capital for derivative instruments previously
      considered having beneficial conversion features. Included in this
      adjustment is the effect of the prior consideration of convertible notes
      payable previously considered having beneficial conversion features
      ($410,800) and warrants that are now included in the Company's estimated
      embedded derivative liability that were previously recorded as additional
      paid-in capital. ($457,270).

(f)   To close out the adjustments to the statement of operation below to
      accumulated deficit.


                                       44

<PAGE>

                            HEALTHRENU MEDICAL, INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

      Restatement, continued

<TABLE>
<CAPTION>
                                                  For the year ended September 30, 2005
                                              -------------------------------------------
                                              As Reported   Adjustments       As Restated
                                              -----------   -----------       -----------
<S>                                            <C>          <C>                <C>
SUMMARY STATEMENT OF OPERATIONS
Sales                                               9,785            --             9,785
Cost of sales                                      13,458            --            13,458
                                               ----------   -----------        ----------
Gross profit (loss)                                (3,673)           --            (3,673)
General and administrative expenses            (1,347,138)      457,270 (a)      (889,868)
                                               ----------   -----------        ----------
Loss from operations                           (1,350,138)           --          (893,541)
                                               ==========   ===========        ==========
Other income/(expense)
Write down of syndicated costs                   (360,000)           --          (360,000)
Interest and financing expense                   (318,279)       (2,181)(b)      (320,460)
Gain on extinguishment of debt                     36,688            --            36,688
Loss on embedded derivative liability                  --    (2,082,121)(c)    (2,082,121)
                                               ----------   -----------        ----------
  Total other income (expense), net              (641,591)   (2,084,302)       (2,725,893)
                                               ----------   -----------        ----------
Net loss                                       (1,992,402)   (1,627,032)       (3,619,434)
                                               ==========   ===========        ==========
Weighted average shares outstanding            27,398,634            --        27,398,634
Basic and diluted net loss per common share         (0.07)        (0.06)            (0.13)
</TABLE>

(a)   To adjust general and administrative expense as a result of the Company's
      determination that certain equity instruments are to be recorded as
      derivatives. This adjustment represents warrants that were previously
      reported as a component of General and Administrative expense but are now
      considered in the Company's estimated embedded derivative liability.

(b)   To adjust interest expense to actual based upon amortization errors, to
      record current period deferred loan cost amortization, and to adjust the
      accretion of debt discounts

(c)   To record the expense associated with the fair value of warrants of and
      embedded derivatives less the amount recorded as debt discount related to
      the convertible notes.


                                       45

<PAGE>

                                  Exhibit Index

10.1  First Amendment to Office Building Lease Agreement effective as of January
      1, 2006 between the Registrant and Denmark House Investments, Ltd.

31    Certification of the Chief Executive Officer pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002

32    Certificate of the Chief Executive Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002


                                       46