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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-KSB (Mark One) þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended September 30, 2004 o
    
    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. 
  NEVADA
    
    84-1022287(State or other jurisdiction of
    
    (IRS Employer Identification No.)incorporation or organization)
 12777 Jones Road, Suite 481, Houston, Texas 77070 
  (281) 890-2561 
  Securities registered under Section 12(b) of the Exchange Act: NONE Securities registered under Section 12(g) of the Exchange Act: COMMON STOCK, $.001 PAR VALUE PER SHARE Check whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes þ No o 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. o The issuers revenues for the most recent fiscal year ended September 30, 2004 were $21,806. The aggregate market value of the issuers voting and non-voting common equity held by
non-affiliates computed by reference to the average bid and ask price of such common equity as of
February 9, 2005, was approximately $3,134,691. As of February 9,2005 the issuer had 28,501,543 shares of common stock, $.001 par value per
share outstanding. Documents Incorporated by Reference: NONE Transitional Small Business Disclosure Format: Yes o No þ




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HEALTHRENU MEDICAL, INC.
FORM 10-KSB
YEAR ENDED September 30, 2004
INDEX Part IItem 1. Description of Business
    
    
    1Item 2. Description of Property
    
    
    1Item 3. Legal Proceedings
    
    
    4Item 4. Submission of Matters to a Vote of
Security Holders
    
    
    4Part II
    
    
    4Item 5. Market for Common Equity and Related
Stockholder Matters
    
    
    4Item 6. Managements Discussion and Analysis or
Plan of Operation
    
    
    5Item 7. Financial Statements
    
    
    9Item 8. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure
    
    
    9Item 8A. Controls and Procedures
    
    
    10Part III
    
    
    10Item 9. Directors, Executive Officers, Promoters
and Control Persons; Compliance with
Section 16(a) of the Exchange Act
    
    
    10Item 10. Executive Compensation
    
    
    11Item 11. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholders Matters
    
    
    11Item 12. Certain Relationships and Related
Transactions
    
    
    12Item 13. Exhibits and Reports on Form 8-K(a) Exhibits
    
    
    13(b) Reports on Form 8-KItem 14. Principal Accountant Fees and Services
    
    
    14SignaturesCertificate of the CEO and CFO Pursuant to Section 302Certificate of the CEO and CFO Pursuant to Section 906




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PART I 
 ITEM 1. DESCRIPTION OF BUSINESS SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements in this Annual Report on Form 10-KSB (this Form 10 KSB), including statements
under Item 1. Description of Business, and Item 6. Managements Discussion and Analysis,
constitute forward looking statements within the meaning of Section 27A of the Securities Act of
1934, as amended, and the Private Securities Litigation Reform Act of 1995 (collectively, the
Reform Act). Certain, but not necessarily all, of such forward-looking statements can be
identified by the use of forward-looking terminology such as believes, expects, may,
will, should, or anticipates, or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy that involve risks and uncertainties. Such
forward-looking statements involve known and unknown risks, uncertainties and other factors which
may cause the actual results, performance or achievements of HealthRenu Medical, Inc.
(HealthRenu, the Company, we, us or our) to be materially different from any future
results, performance or achievements expressed or implied by such forward-looking statements.
References in this form 10-KSB, unless another date is stated, are to September 30, 2004. BUSINESS DEVELOPMENT HealthRenu Medical, Inc. (the Company) was originally incorporated in Colorado as American Merger
Control, Inc. on January 6, 1986. In 1990, the Company changed its name to Ultratech Knowledge
Systems, Inc., and in 1993 the Company changed its name again to AGTsports, Inc. During the fiscal
years ended September 30, 1991 and through September 30, 1998, the Companys business plan was to
pursue providing technological and software services to golf and related industries. In 1998, the
Company abandoned this business plan. Prior to entering into an Exchange Agreement, discussed
below, and the consummation of the transactions thereunder, the Company was considered a shell
(or blank check) company whose sole purpose was to search for and enter into new business
opportunities. On September 4, 2003, the Company merged into AGTsports, Inc., the Companys wholly-owned Nevada
subsidiary. As a result of the merger, the Company was reincorporated in Nevada. On September 26, 2003, AGTsports, Inc., Health Renu, Inc, a Delaware corporation (hereinafter
Health Renu) and the former Health Renu Shareholders entered into an Exchange Agreement whereby
Health Renu became a wholly-owned subsidiary of the Company and control of the Company shifted to
the former Health Renu Shareholders. The exchange agreement represented a recapitalization of Health Renu, Inc. with accounting
treatment similar to that used in a reverse acquisition, except that no goodwill or intangible
asset is recorded. A recapitalization is characterized by the merger of a private operating
company into a non-operating public shell corporation with nominal net assets and typically results
in the owners and managers of the private company having effective or operating control after the
transaction. The Company emerged as the surviving financial reporting entity under the agreement,
but AGTSports, Inc. (which changed its name to HealthRenu Medical, Inc.) remained as the legal
reporting entity. For the last three (3) years and since its inception, Health Renu has been in the medical research
and development stage, with a focus on creating and improving its skin care and wound care
products. During this three-year period, Health Renu had very little production or revenue. As a
result of the acquisition of Health Renu and a change in business focus, the Company changed its
name to HealthRenu Medical, Inc. Hereinafter, a reference to the Company includes a reference to
Health Renu and vice-versa unless otherwise provided. 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 1




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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 all proprietary trademarks, intellectual property rights and formulas to
produce its products. The gain on the disposition of these assets and liabilities was $15,468. BUSINESS OF THE ISSUER The Company is a biotechnology company that distributes proprietary products for personal skin
care and wound care under the Health Renu® brand name. The products are all natural and provide
nutrients and proteins which may aid the body in its healing process. PRINCIPAL PRODUCTS The Company has developed a product line (the Product Line or Finished Products) consisting of the following eight (8) products: DERM-ALL GEL
Used for non-healing wounds, pressure ulcers, diabetic ulcers, and surgical wounds. SKIN RENU PLUS
Used for diabetic neuropathy, circulation, skin prep for pre-opt surgery patients, used in
post-opt surgical wound care for preventive care against possible staph infection and more
rapid recovery and scar reduction of the wound site. SKIN RENU LOTION
Diabetic preventive skin care, preventive skin care for pressure ulcers, dermatitis, eczema,
age spots, chronic bruising associated with thin skin, skin condition for thin skin, chronic
dry skin, cracked hands, and preventive care against latex allergies. SKIN RENU
Used for age spots, bruising, and burns. Important for people with serious allergic
reactions to insect bites. RENU CARE
Used as a non-rinse cleanser for bed patients, provides skin protection and can be used for
stage 1 pressure ulcers (bedsores). DEEP RELIEF
Has the transdermal ability to penetrate through skin layers, transferring anti-inflammatory
ingredients through muscle tissue to the inflamed joints. Made with a heat action and used
for severe arthritis. HEALTH RENU SPORTS MEDICINE
Has the transdermal ability to penetrate through skin layers, transferring anti-inflammatory
ingredients through muscle tissue to the inflamed joints. Made with peppermint oil which
gives a peppermint fragrance as well as an anti-inflammatory action. Made with more of a
mild heat action. FACIAL SOAP
Used for facial skin disorders-contains omega 3,6 & 9 fatty acids as well as vitamins. DISTRIBUTION The Company distributes its products directly to consumers and to nursing homes, surgery centers,
pharmacies and other medical markets throughout the United States. The products are registered
for such sale and distribution by the United States Federal Drug Administration (the FDA).
Historically, most of the Companys sales had been to consumers, nursing homes, home health care,
pharmacies, smaller medical 2




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supply companies, family clinics, and orthopedic surgeons, with some sales to hospitals. COMPETITION The market for healthcare products is estimated at 150 billion dollars, of which the Company has acquired less than one-percent (1%) market share with its Product Line. The
Company will depend on marketing efforts to increase its market share. The Company believes that
with an aggressive marketing campaign it can quickly generate more revenue and establish its
Product Line nationwide. The Company intends to spend approximately 40% of its resources to
increase its market share over the next twelve months. However, if the Company does not receive
additional capital funding it will not have the resources to increase its market share. The Company plans to compete based on the effectiveness of its products. The Company intends to
operate with minimal overhead costs by outsourcing its shipping, receiving, purchasing, and
production functions. SOURCES AND AVAILABILITY OF ESSENTIAL INGREDIENTS The Company has developed multiple sources for the supply of essential ingredients used in its
products. The Company has secured access to these ingredients at all phases of product
development. The Company believes that this access will allow the Company to react quickly to
demand as well as cultivate a long-term, quantifiable supply of its products. DEPENDENCE ON ONE OR A FEW CUSTOMERS During the year ended September 30, 2004, the Company sold approximately $19,000 or 88% of its
total sales to a single distributor who is a stockholder of the Company. INTELLECTUAL PROPERTY The Company owns the registered trademark, Health Renu®. The Company does not hold any patents or
licenses. NEED FOR GOVERNMENT APPROVAL The Company has satisfied FDA requirements with respect to its finished products for sales directly
to consumers and medical related companies. The products are considered over the counter products
(OTC). The Company is currently developing new OTC products for which it will need to meet FDA
requirements in order to sell these products to consumers and medical related companies. All
production of products is outsourced to FDA certified labs. RESEARCH AND DEVELOPMENT OVER PAST TWO YEARS The Company is continually developing new products to aid in personal skin and wound care for its
customers. Research and development is an integral part of the Company and is conducted on an
on-going basis. As new products are developed and tested, they will continually be brought to the
market. The Company estimates that it spent $-0- and $50,354 for the fiscal years ended September
30, 2004 and 2003, respectively, for research and development. Dr. Danny Sparks MD-surgeon, is completing a clinical write-up of the use of the products for
pre-opt & post-opt surgical wound care. The write-up covers a two-year period of time that has
resulted in the design of two new products that will be stated in the write-up. Dr. Sparks began
his work in 2001. At the present time, Dr Sparks work is continuing and ongoing. EMPLOYEES The Company has one (1) full-time employee. The Company contracts with consultants to assist in
numerous areas of the Companys operations and development. 3




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Additionally, the Company outsources key functions to control costs and keep its overhead low. The
Company will hire other full-time employees on an as needed basis. 
 ITEM 2. DESCRIPTION OF PROPERTY The Company has an office at 12777 Jones Road, Suite 481, Houston, Texas 77070. The Company has
entered into an 18 month lease for 1,692 square feet of office space for the Houston office. The
lease provides for monthly payments of $2,115. 
 ITEM 3. LEGAL PROCEEDINGS 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. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Prior to the recapitalization in September 2003, a majority of shareholders of the Company, via
written consent to action without a meeting of the shareholders, approved a name change to
HealthRenu Medical, Inc., an 850:1 reverse stock split, and reauthorization of 50,000,000 shares
of common stock. The number of shares consenting to the action was 77,751,513 out of 113,847,314
pre-split eligible to vote. Prior to the recapitalization in September 2003, a majority of shareholders of the Company, via
signed written consent approved a Plan of Merger whereby the Company merged into its wholly-owned
Nevada subsidiary, and thus, was reincorporated in Nevada. There were 81,797,905 votes for, and
243,900 votes against, the Plan of Merger out of a total of 113,847,314 pre-split votes. 
 PART II 
 ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Bid and asked offers for the common stock are listed on the NASDAQ OTC-Bulletin Board
published by the National Quotation Bureau, Inc. The trading symbol for the common stock was
AGTP and was changed to HRUM in connection with the Companys name change on September 15,
2003. The following table sets forth the high and low bid prices for the Companys common stock for the
periods indicated as reported by the NASDAQ OTC-Bulletin Board. The quotations are believed to
reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not represent
actual transactions. Bid Prices Quarter Ended
    
    High
    
    
    LowSeptember 30, 2004
    
    
    0.11
    
    
    
    0.07June 30, 2004
    
    
    0.80
    
    
    
    0.51March 31, 2004
    
    
    2.75
    
    
    
    1.60December 31, 2003
    
    
    9.00
    
    
    
    2.50September 30, 2003
    
    
    0.65
    
    
    
    0.01June 30, 2003
    
    
    0.65
    
    
    
    0.01March 31, 2003
    
    
    0.01
    
    
    
    0.01December 31, 2002
    
    
    0.01
    
    
    
    0.003September 30, 2002
    
    
    0.005
    
    
    
    0.001
 There were 1,045 holders of record of the common stock as of February 9, 2005. The Company has
never paid a cash dividend on its common stock and does not anticipate 4




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the payment of a cash dividend in the foreseeable future. The Company intends to reinvest in
its business operations any funds that could be used to pay a cash dividend. The Companys common
stock is considered a penny stock as defined in certain rules (the Rules) under the Securities
Exchange Act of 1934. In general, a security which is not quoted on NASDAQ or has a market price
of less than $5 per share where the issuer does not have in excess of $2,000,000 in net tangible
assets (none of which conditions the Company meets) is considered a penny stock. The SECs rules
regarding penny stocks impose additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and accredited investors (generally
persons with net worth in excess of $1,000,000 or an annual income exceeding $200,000 or $300,000
jointly with their spouse). For transactions covered by the rules, the broker-dealer must make a
special suitability determination for the purchaser and receive the purchasers written agreement
to the transaction prior to the sale. Thus the Rules affect the ability of broker-dealers to sell
the Companys shares should they wish to do so because of the adverse effect that the Rules have
upon liquidity of penny stocks. Unless the transaction is exempt under the Rules, under the
Securities Enforcement Remedies and Penny Stock Reform Act of 1990, broker-dealers effecting
customer transactions in penny stocks are required to provide their customers with (i) a risk
disclosure document; (ii) disclosure of current bid and ask quotations if any; (iii) disclosure of
the compensation of the broker-dealer and its sales personnel in the transaction; and (iv) monthly
account statements showing the market value of each penny stock held in the customers account.
As a result of the penny stock rules the market liquidity for the Companys securities may be
severely adversely effected by limiting the ability of broker-dealers to sell the Companys
securities and the ability of purchasers of the securities to resell them. RECENT SALES OF UNREGISTERED SECURITIES In August 2004, we issued 337,500 shares of common stock for services to two individuals, which we
valued at $0.10 per share, with an aggregate value of $33,750. These transactions were exempt from
registration pursuant to Section 4(2) of the Act. In August 2004, we issued an aggregate of 27,000 shares of common stock for cash at $0.10 per share
to two individuals, with an aggregate value of $2,700. These transactions were exempt from
registration pursuant to Section 4(2) of the Act. In September 2004, we issued an aggregate of 1,000,000 shares of common stock for cash at $0.02 per
share to two individuals, with an aggregate value of $20,000. These transactions were exempt from
registration pursuant to Section 4(2) of the Act. 
 ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION This report contains forward looking statements within the meaning of Section 27a of the
Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934. These forward
looking statements are subject to certain risks and uncertainties that could cause actual results
to differ materially from historical results or anticipated results, including those set forth
under Factors that may affect future results in this Managements Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere in this report. The following
discussion and analysis should be read in conjunction with Selected Financial Data and the
Companys financial statements and notes thereto included elsewhere in this report. OVERVIEW On September 26, 2003, the Company acquired 100% of the outstanding shares of Health Renu pursuant
to an Exchange Agreement. As a result of the Exchange Agreement, the business of Health Renu
became the business of the Company, control of the Company shifted to the former Health Renu
Shareholders and the Company subsequently changed its name to HealthRenu Medical, Inc. For the
last three (3) years and since its inception, Health Renu has been in the medical research and
development stage, with a focus on creating and improving its skin care and wound 5




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care products. During this period, Health Renu had very little production or revenue. The Companys management estimates that the wound care industry is a six billion dollar a year
industry. The wound care industry consists primarily of maintaining non-healing wounds (i.e.,
wounds that do not heal). According to the 2000 U.S. Census, someone in the U.S. turns 50 years
of age every seven seconds. The 50 year and older age group is the fastest growing age group in
the U.S. With that age group come various types of skin disorders, non-healing diabetic ulcers,
diabetic neuropathy, pressure ulcers, arthritis, heart disease and surgery. A high number of 50
to 60 year olds have aging parents that live in nursing homes. The elderly are living longer
lives, but at a high cost for medical care. Medicare or Medicaid cover some of the cost of providing non-healing wound care to senior citizens
who are covered by those programs. In the context of non-healing wound care provided by
institutional healthcare providers, the Companys products are currently not specifically
reimbursable by insurance companies, but are classified as costs associated with providing
services to the patient. Approximately 28 million U.S. households have taken on the responsibility to care for aging
parents. Many of the problems they face in taking on this responsibility concern skin care,
circulation and arthritis. Due to aging and poor immune systems, the body loses its ability to
maintain production of certain fatty acids and amino acids that are critical for maintaining
normal body function. Due to this problem, there are very few medical treatments that have any
affect in treating skin diseases of the elderly and many of the treatments that seem to have some
success also have serious side effects. The Company believes that its products have a positive effect in treating certain skin conditions,
especially those of the elderly with little or no known side effects. All of the Companys
products use omega-3, omega-6 and omega-9 essential fatty acids. These fatty acids and the
Companys products are recognized by the body as natural substances. When treating wounds or
providing care of the skin, essential fatty acids increase blood flow to the affected areas. When
blood flow increases, it aids the bodys natural ability to heal, providing a positive response to
the affected area. These fatty acids are readily absorbed by the body. The body uses these
ingredients to aid in healing and does not fight them off as foreign. The Company anticipates
that a clinical study will be published on the positive effects of its products, however, there
is currently no such published report. MARKETING STRATEGY The Companys products are currently used for skin care and wound care. The Companys products
are used for diabetic skin care, diabetic neuropathy, circulation, non-healing wounds, various
types of skin disorders, and arthritis. The Company is aggressively pursuing additional uses for
its products in other areas of the medical field. For example, the Company is researching using
its products as transdermal carriers of other medications into the body, which would result in
many different applications for the Companys products. Historically, most of the Companys sales have been to hospitals, walk-in clinics and nursing
homes in the area of emergency, non-healing wounds of the human body such as staph infections,
diabetic ulcers, and amputations. During the year ended September 30, 2004, 88% of the Companys
sales was to a distributor who is also a stockholder of the Company. The Company intends to
pursue other business opportunities that compliment its products. CRITICAL ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
reported amounts of assets and liabilities, 6




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disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. Revenue Recognition Revenue is recognized when products are shipped. 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. 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 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, 2004 (2004) COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 2003
(2003) The Company experienced a decrease in sales of $4,475 for the fiscal year ended September 30,
2004 to $21,806 as compared to $26,281 for the fiscal year ended September 30, 2003. During the
fiscal year ended September 30, 2004, the Company was primarily focused on expansion. The Company
established its corporate offices in Houston, Texas. The Company used funds to accomplish the
recapitalization discussed in Note 1 to the accompanying financial statements. The Company would
have ordinarily allocated the funds that it used for the recapitalization to promote the Companys
products. Gross profit (loss) for the fiscal year ended September 30, 2004 decreased to a loss of
$(21,500) compared to a loss of $(1,774) for the fiscal year ended September 30, 2003. The
decrease was attributable to a higher cost of sales related to inventory adjustments and write off
of expired inventory items. General and administrative (G&A) expenses were $526,915 and $444,910 for the years ended
September 30, 2004 and 2003, respectively. The increase in G&A is due to the Companys expansion
efforts. The Company hired experienced senior management personnel to provide for the anticipated
growth. The Company equipped the Houston office with additional phone lines, software, office
furniture and computers to handle Company matters nationwide. Interest expense decreased to $430 for the fiscal year ended September 30, 2004 from $698 for
the fiscal year ended September 30, 2003. As of September 30, 2004, the Company had an accumulated deficit of $(1,857,299). LIQUIDITY AND CAPITAL RESOURCES Recent Developments: Going Concern and Liquidity Problems Our auditors have included an explanatory paragraph in their audit opinion with respect to
our consolidated financial statements at September 30, 2004. The paragraph states that our
recurring losses from operations and resulting continued dependence on access to external
financing raise substantial doubts about our ability to continue as a going concern. Furthermore,
the factors leading to and the existence of the explanatory paragraph may adversely affect our
relationship with customers and suppliers and have an adverse effect on our ability to obtain
financing. 7




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We do not have sufficient working capital to sustain our operations. We have been unable to
generate sufficient revenues to sustain our operations. We will have to obtain funds to meet our
cash requirements through business alliances, such as strategic or financial transactions with
third parties, the sale of securities or other financing arrangements, or we may be required to
curtail our operations, seek a merger partner, or seek protection under federal bankruptcy laws.
Any of the foregoing may be on terms that are unfavorable to us or disadvantageous to existing
stockholders. In addition, no assurance may be given that the Company will be successful in
raising additional funds or entering into business alliances. For the year ended September 30, 2004 the Company has not generated positive cash flow from its
own operations due to the preliminary nature of such operations, its ongoing investment in
research and development and its recent expansion. Consequently, the Company has been dependent
on external financing to fund its cash requirements. As of September 30, 2004, the Companys cash totaled $7,560 and total current assets were $32,490.
Inventory at September 30, 2004 was $22,430. As of September 30, 2004, the Companys accounts payable totaled $131,223 of which $41,688 was
payable to a former officer. Total current liabilities were $193,212 as of September 30, 2004. It is imperative that the Company raise capital to implement its business plan. The Company will
require approximately $500,000 of additional financing to implement its business plan. At this
time, no such additional financing has been secured or identified. If the Company is unable to
obtain debt and/or equity financing upon terms that management deems sufficiently favorable, or at
all, it would have a materially adverse impact upon the Companys ability to pursue its aggressive
marketing strategy and maintain its current operations. Without additional capital funding, the
Company believes it cannot continue to operate in 2005 and could not expand or meet its business
objectives. If the Company does not receive external financing, its revenue stream would not
expand, would likely decrease and significant opportunities would be lost which would be a
limiting factor on the Companys growth. In the event that the Company does not receive external
financing, the Companys management would streamline the business to exist on the available cash
flow. The Company is currently exploring all opportunities to raise the capital necessary to develop it
business operations. There can be no assurance that any new capital would be available to the Company or that adequate
funds for the Companys operations, whether from the Companys revenues, financial markets, or
other arrangements will be available when needed or on terms satisfactory to the Company. The
Company has no commitments from officers, directors or affiliates to provide funding. The failure
of the Company to obtain adequate additional financing may require the Company to delay, curtail
or scale back some or all of its operations, sales, marketing efforts and research and development
programs. Any additional financing may involve dilution to the Companys then-existing
shareholders. RISK FACTORS Dependence Upon External Financing. It is imperative that the Company raise capital to expand its
operations and stay in business. The Company requires capital of approximately $500,000 to
implement its business plan. If the Company is unable to obtain debt and/or equity financing upon
terms that its management deems sufficiently favorable, or at all, it would have a materially
adverse impact upon the Companys ability to pursue its business strategy and maintain its current
operations. Even if Product is Successful, The Company May Be Unable to Sell Its Product. In the event that the
Company is successful in completing its product, there can be no assurance that the Company will be
able to sell its products at all, or enough at prices needed to maintain operations. 8




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The Agricultural Research Group (hereinafter ARG), of which Darrell Good, our former President,
was a beneficial owner, is planning to supply the Company with raw materials for the Companys
products. This may impose a conflict as Mr. Good has an interest in both ARG and the Company with
the risk that the Company may not receive the best possible price for such raw materials. 
 ITEM 7. FINANCIAL STATEMENTS The financial statements of the Company as audited by Ham, Langston & Brezina, LLP, are enclosed
herein and their opinion expressed substantial doubt as to the ability of the Company to continue
as a going concern. 
  ITEM 8.
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE For the fiscal year ended September 30, 2002 and 2001, the firm of Brimmer, Burke & Keelan, LLP
(Brimmer) served as the Companys auditors. Effective October 8, 2003, the Board of Directors of
the Company approved the change of accountants. On that date, management of the Company dismissed
Brimmer and engaged Ham, Langston & Brezina, LLP of Houston, Texas as its principal independent
public accountant to audit its financial statements for the fiscal years ended September 30, 2003
and September 30, 2004. Ham, Langston & Brezina, LLP succeeded Brimmer. Brimmers report on the financial statements of
the Company (formerly AGTSports, Inc.) from the date of its incorporation on January 6, 1986
through September 30, 2002 and any later interim period up to and including the date the
relationship with Brimmer ceased, did not contain any adverse opinion or disclaimer of opinion and
was not qualified or modified as to uncertainty, audit scope or accounting principles. In connection with the audit of the Companys two most recent fiscal years
ending September 30, 2002 and any later interim period, including the interim
period up to and including the date the relationship with Brimmer ceased, there have been no
disagreements with Brimmer on any matters of accounting principles or practices, financial
statement disclosure of auditing scope or procedure, which disagreement(s), if not resolved to the
satisfaction of Brimmer would have caused Brimmer to make reference to the subject matter of the
disagreement(s) in connection with its report on the Company financial statements. Since the
Companys incorporation on January 6, 1986, there have been no reportable events as defined in Item
301(a)(1)(v) of Regulation S-K. The Company authorized Brimmer to respond fully to any inquiries of any new auditors hired by the
Company relating to their engagement as the Companys independent accountant. The Company
requested that Brimmer review the disclosure and Brimmer was given an opportunity to furnish the
Company with a letter addressed to the Commission containing any new information, clarification of
the Companys expression of its views, or the respect in which it does not agree with the
statements made by the Company in the Report on Form 8-K filed on October 30, 2003. Such letter
was filed as an exhibit to such Form 8-K. The Company had not previously consulted with Ham, Langston & Brezina, LLP
regarding either (i) the application of accounting principles to a specified transaction, either
completed or proposed; or (ii) the type of audit opinion that might be rendered on the Companys
financial statements; or (iii) any matter that was either the subject matter of a disagreement (as
defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company
and Brimmer, the Companys previous independent accountant, as there were no such disagreements
or an other reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K) from the Companys
incorporation on January 6, 1986 through December 31, 2002 and any later interim period, including
the interim period up to and including the date the relationship with Brimmer ceased. Neither had
the Company received any written or oral advice concluding there was an important factor to be
considered by the Company in reaching a decision as to an accounting, auditing, or financial
reporting issue. Ham, Langston & Brezina, LLP reviewed the Companys disclosure 9




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##### Table of Contents



required by Item 304(a) before it was filed with the Commission and was provided an opportunity to
furnish the Company with a letter addresssed to the Commission containing any new information,
clarification of the Companys expression of its views, or the respects in which it did not agree
with the statements made by the Company in response to Item 304(a). Ham, Langston & Brezina, LLP
did not furnish a letter to the Commission. 
 ITEM 8A. CONTROLS AND PROCEDURES  (a)
    Evaluation of disclosure controls and procedures. Our chief executive
officer and principal financial officer, after evaluating the effectiveness of the Companys
disclosure controls and procedures (as defined in the Securities Exchange Act of 1934
Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this annual report
(the Evaluation Date), have concluded that as of the Evaluation Date, our disclosure
controls and procedures were adequate and designed to ensure that material information
relating to us and our consolidated subsidiaries would be made known to them by others
within those entities.(b)
    Changes in internal control over financial reporting. There were no significant changes in
our internal control over financial reporting during the fourth fiscal quarter that materially
affected, or is reasonably likely to materially affect, our internal control over financial
reporting. 
 PART III 
  ITEM 9.
    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT DIRECTORS AND OFFICERS The Directors and Officers of the Company are as follows: Served as aName
    
    Age
    
    Position
    
    Director Since:Rob Prokos
    
    
    
    CEO,Director and President
    
    March 2004Dr. Dianne Love
    
    
    
    Director
    
    March 2004David Spencer
    
    
    
    Director
    
    January 2005Walt Zieverink
    
    
    
    Director
    
    June 2004Dr. Danny Sparks
    
    
    
    Director
    
    January 2004
 Rob Prokos has served as our President since March 2004. All Directors of the Company will hold office until the next annual meeting of the shareholders,
and until their successors have been elected and qualified. Officers of the Company are elected
by the Board of Directors and hold office at the pleasure of the Board. SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the securities Exchange Act of 1934, as amended, requires the Companys
directors, executive officers and persons who own more than 10% of a class of the Companys equity
securities which are registered under the Exchange Act to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes of ownership of such registered
securities. Such executive officers, directors and greater than 10% beneficial owners are
required by Commission regulation to furnish the Company with copies of all Section 16(a) forms
filed by such reporting persons. 10




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##### Table of Contents



To the Companys knowledge, based solely on a review of the copies of such reports furnished to
the Company and on representations that no other reports were required, no person required to file
such a report failed to file during fiscal 2004. Based on stockholder filings with the SEC, Randy
Mullins and Darrell Good are subject to Section 16(a) filing requirements. CODE OF ETHICS The Company has not adopted a code of ethics that applies to the Companys principal executive
officer, principal financial officer or controller, or persons performing similar functions. The
Company has not had adequate time to adopt such a code of ethics as the Company had a change in
control during the fourth quarter of the fiscal year ended September 30, 2003 as reported on the
Form 8-K filed on September 29, 2003. 
 ITEM 10. EXECUTIVE COMPENSATION Compensation paid to Officers and Directors is set forth in the Summary Compensation Table below.
The Company may reimburse its Officers and Directors for any and all out-of-pocket expenses
incurred relating to the business of the Company. SUMMARY COMPENSATION TABLE LONG-TERM COMPENSATIONANNUAL COMPENSATION
    
    
    AWARDS
    
    
    PAYOUTSSECURITIESUNDERLY-OTHER
    
    
    RE-
    
    
    ING
    
    
    
    
    
    
    ALLANNUAL
    
    
    STRICTED
    
    
    OPTIONS/
    
    
    
    
    
    
    OTHERNAME AND PRINCIPAL
    
    
    
    
    
    
    
    
    
    
    
    
    
    COMPEN-
    
    
    STOCK
    
    
    SARs
    
    
    LTIP
    
    
    COMPEN-POSITION
    
    YEAR
    
    
    SALARY
    
    
    BONUS
    
    
    SATION
    
    
    AWARD(S)
    
    
    (NUMBER)
    
    
    PAYOUTS
    
    
    SATIONRob Prokos
    
    
    2004
    
    
    $
    95,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    CEO, Director and
PresidentRandy Mullins,
    
    
    2004
    
    
    $
    19,782
    
    
    
    
    
    
    
    
    
    
    
    187,500
    
    
    
    
    
    
    
    
    
    
    
    Former CFO and
    
    
    2003
    
    
    $
    3,000
    
    
    
    
    
    
    
    
    
    
    
    450,000DirectorDarrell Good,
    
    
    2004
    
    
    $
    -0-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Former President
    
    
    2003
    
    
    $
    59,575and DirectorCory Coppage,
    
    
    2003
    
    
    $
    38,241
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Former CEO and
    
    
    2002
    
    
    $
    60,000
    
    
    
    
    
    
    
    
    
    
    
    22,500
    
    
    
    
    
    
    
    
    
    
    
    Director
    
    
    2001
    
    
    $
    60,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
  ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth information as of January 13, 2004, with respect to the beneficial
ownership of the common stock by (i) each director and officer of the Company, (ii) all directors
and officers as a group and (iii) each person known by the Company to own beneficially 5% or more
of the common stock: 11




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##### Table of Contents



Name and Address of
    
    Shares Owned
    
    
    % of ClassBeneficial Owner
    
    Beneficially(1)
    
    
    OwnedRobert W. Prokos
    
    
    4,298,985
    
    
    
    15.1
    %16510 Westwego TrCypress, TX 77429Walter Zieverink
    
    
    1,090,415
    
    
    
    3.8
    %4024 Autumn LnBirmingham, AL 35243Dr. Danny Sparks
    
    
    906,664
    
    
    
    3.2
    %1026 Goodyear Ave. Suite 100-BGadsden, AL 35903Dianne Love
    
    
    367,498
    
    
    
    1.3
    %2503 Jasmine RidgeHouston, TX 77062David Spencer
    
    
    939,000
    
    
    
    3.3
    %2078 Edgeview Dr.Hudson, OH 44236Darrell Good
    
    
    8,115,000
    (2)
    
    
    28.5
    %212 Forest Landing RoadGuntersville, Alabama 35976All Officers and Directors
    
    
    7,603,562
    
    
    
    26.7
    %as a Group (5 people)
   (1)
    
    The number of shares of common stock owned are those beneficially owned as
determined under the rules of the Securities and Exchange Commission, including any
shares of common stock as to which a person has sole or shared voting or investment power
and any shares of common stock which the person has the right to acquire within 60 days
through the exercise of any option, warrant or right. As of February 11, 2005, there were
28,501,543 shares of common stock outstanding.(2)
    
    Includes 740,000 shares issued to Agricultural Research Group, of which Darrell
Good the Companys past President is a beneficial owner, 795,000 shares issued to Cheryl
Good, the wife of Darrell Good, and 1,080,000 shares issued to the six children of Mr.
Good and his wife, collectively. CHANGES IN CONTROL The Company does not anticipate any changes in control of the Company. 
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 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 valued at $29,559 to
reimburse him for these transactions. One of the Companys former offices was located in the home of a major stockholder of the Company
during the year ended September 30, 2003 and the period from October 1, 2003, to December 31, 2003.
The stockholder did not charge the Company rent for this space. The fair market value of the rent
has been estimated at approximately $250 per month. Therefore, included in the accompanying
statement of operations is $3,000 and $750 of rent expense for the year ended September 30, 2003
and the period from October 1, 2003 to December 31, 2003, respectively. 12




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##### Table of Contents



Effective April 30, 2002 the Company entered into a lease agreement with the father of the
chief executive officer and major stockholder of the Company to lease 33 acres of land in Alabama
to be used in the production of raw materials. The lease payments are $250 per month for ten years.
As of February 29, 2004, upon the sale of Health Renu, Inc. to a stockholder of the Company, the
$5,500 liability was written off the books and the lease obligation was transferred to the
stockholder. During the year ended September 30, 2004, the Company recognized revenue of $19,213 from sales of
product to a stockholder and consultant to the Company. 
 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K  (a)
    EXHIBITS Exhibit No.
    
    Description of Exhibit2.1
    
    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
    )10.1
    
    Employment Agreement between Randy Mullins and AGTsports, Inc.
    
    
    (1
    )10.2
    
    Employment Agreement between Darrell Good and HealthRenu Medical, Inc.
    
    
    (5
    )10.3
    
    Amended Employment Agreement between Randy Mullins and
Healthrenu Medical, Inc. (formerly AGTsports, Inc.)
    
    
    (5
    )10.4
    
    Consulting Agreement between Rob
Prokos and Health Renu Medical, Inc.
    
    
    (5
    )10.5
    
    Consulting Agreement between Greg
Lemon and Health Renu Medical, Inc.
    
    
    (5
    )10.6
    
    Consulting Agreement between Michael
McClere and Health Renu Medical, Inc.
    
    
    (5
    )10.7
    
    Employment Agreement between Rob Prokos
and HealthRenu Medical, Inc.
    
    
    (6
    )15.1
    
    Letter from Brimmer, Burek and Keelan,
LLP, Certified Public Accountants
    
    
    (4
    )31
    
    Certificate of the Chief Executive
Officer and Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
    
    
    *
 13




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit32
    
    Certificate of the Chief Executive
Officer and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    
    
    *
  (1)
    Filed as Exhibits 3.1 and 10.1 to the Companys 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 the Companys
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 the Companys 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 the Companys 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 the Companys Form
S-8 filed with the Securities and Exchange Commission on November 26, 2003(6)
    Filed as Exhibit 10.1 to the Companys Form 10-QSB filed with the Securities and Exchange
Commission on September 1, 2004.*
    Filed herein(b)
    REPORTS ON FORM 8-K The Company filed the following report on Form 8-K during the last quarter of the fiscal period
covered by this report:  (1)
    Form 8-K filed on March 29, 2004, to report the acquisition of all proprietary
trademarks, the resignation of Darrell Good as Chief Executive Officer and the
appointments of Dr. Dianne Love as Director, Rob Prokos as Chief Executive Officer and
President, and Randy Mullins as Chief Financial Officer. 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES AUDIT FEES The aggregate fees billed for each of the fiscal years ended September 30,
2004 and 2003 for professional services rendered by the principal accountant for the audit of the
Companys annual financial statements was approximately $15,000 and $17,346, respectively. The
aggregate fees billed for each of the fiscal years ended September 30, 2004 and 2003 for
professional services rendered by the principal accountant for review of the financial statements
included in the registrants Form 10-QSB or for services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements for those fiscal
years was $15,000. AUDIT RELATED FEES None TAX FEES None 14




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##### Table of Contents



ALL OTHER FEES The aggregate fees billed for the fiscal year ended September 30, 2003,for products and services
provided by the principal accountant, other than the services reported above was
$3,425. 15




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##### Table of Contents



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: February 10, 2005
    
    By:
    
    /s/ Robert W. ProkosRobert W. ProkosChief Executive Officer andPrincipal Financial 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
    
    February 10, 2005and DirectorRobert W. Prokos
    
    (Principal Financial Officer)




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##### Table of Contents



HEALTHRENU MEDICAL, INC. TABLE OF CONTENTS
__________ Page(s)Report of Independent Registered Public Accounting Firm
    
    
    F-2Financial Statements:Balance Sheet as of September 30, 2004 and 2003
    
    
    F-3Statement of Operations for the years ended September 30, 2004 and 2003
    
    
    F-4Statement of Stockholders Equity (Deficit) for the years ended September 30, 2004 and 2003
    
    
    F-5Statement of Cash Flows for the years ended September 30, 2004 and 2003
    
    
    F-7Notes to Financial Statements
    
    
    F-8
 F - 1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of
HealthRenu Medical, Inc. We have audited the accompanying balance sheets of HealthRenu Medical, Inc. (the Company) as of
September 30, 2004 and 2003, 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, 2004 and 2003, 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. The accompanying financial statements have been prepared assuming that HealthRenu Medical, Inc.
will continue as a going concern. As shown in the financial statements and discussed in Note 2,
the Company has incurred significant recurring losses from operations, is in a negative working
capital and stockholders deficit position at September 30, 2004, and is dependent on outside
sources of financing for the continuation of its operations. These factors raise substantial doubt
about the Companys ability to continue as a going concern. Managements plans with regard to this
matter are also discussed in Note 2. These financial statements do not include any adjustments
that might result from the outcome of this uncertainty. /s/ Ham, Langston & Brezina, L.L.P. Houston, Texas
January 15, 2005 F - 2




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##### Table of Contents



HEALTHRENU MEDICAL, INC. 
 BALANCE SHEET September 30, 2004 and 2003
__________ 2004
    
    
    2003ASSETSCurrent assets:Cash and cash equivalents
    
    $
    7,560
    
    
    $
    17,684Inventories
    
    
    22,430
    
    
    
    46,903Employee receivable
    
    
    
    
    
    
    5,771Other current assets
    
    
    2,500
    
    
    
    5,000Total current assets
    
    
    32,490
    
    
    
    75,358Property and equipment, net
    
    
    4,048
    
    
    
    56,903Total assets
    
    $
    36,538
    
    
    $
    132,261LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Accounts payable
    
    $
    131,223
    
    
    $
    78,004Accounts payable-stockholder
    
    
    2,329
    
    
    
    3,235Accrued liabilities
    
    
    58,660
    
    
    
    600Notes payable to stockholders
    
    
    1,000
    
    
    
    16,403Total current liabilities
    
    
    193,212
    
    
    
    98,242Commitments and contingenciesStockholders equity (deficit):Convertible preferred stock, Series 2000A, $0.001 par
value; 1,500,000 shares authorized, 1,763 shares
issued and outstanding at September 30, 2004 and 2003
    
    
    2
    
    
    
    2Common stock, $.001 par value; 50,000,000 shares
authorized, 22,454,451 and 15,506,962 shares issued
and outstanding at September 30, 2004 and 2003
    
    
    22,455
    
    
    
    15,507Additional paid-in capital
    
    
    1,635,657
    
    
    
    674,830Unissued common stock
    
    
    42,511
    
    
    
    698,602Stock subscription receivable
    
    
    
    
    
    
    (31,000
    )Accumulated deficit
    
    
    (1,857,299
    )
    
    
    (1,323,922
    )Total stockholders equity (deficit)
    
    
    (156,674
    )
    
    
    34,019Total liabilities and stockholders
equity (deficit)
    
    $
    36,538
    
    
    $
    132,261
 See accompanying notes to financial statements. F - 3




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##### Table of Contents



HEALTHRENU MEDICAL, INC. 
 STATEMENT OF OPERATIONS for the years ended September 30, 2004 and 2003   Year Ended September 30,2004
    
    
    2003Sales
    
    $
    21,806
    
    
    $
    26,281Cost of sales
    
    
    43,306
    
    
    
    28,055Gross profit (loss)
    
    
    (21,500
    )
    
    
    (1,774
    )General and administrative expenses
    
    
    526,915
    
    
    
    444,910Cost of recapitalization
    
    
    
    
    
    
    561,982Loss from operations
    
    
    (548,415
    )
    
    
    (1,008,666
    )Gain on sale of assets
    
    
    15,468
    
    
    
    Interest expense
    
    
    (430
    )
    
    
    (698
    )Net loss
    
    $
    (533,377
    )
    
    $
    (1,009,364
    )Weighted average shares outstanding
    
    
    19,280,788
    
    
    
    9,567,894Basic and diluted net loss per common share
    
    $
    (0.03
    )
    
    $
    (0.11
    )
 See accompanying notes to financial statements. F-4




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##### Table of Contents



HEALTHRENU MEDICAL, INC. 
 STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT) for the years ended September 30, 2004 and 2003   Additional
    
    
    Common
    
    
    StockPreferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Stock
    
    
    Subscription
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Committed
    
    
    Receivable
    
    
    Deficit
    
    
    TotalBalance at September 30, 2002
    
    
    
    
    
    $
    
    
    
    
    8,894,807
    
    
    $
    8,895
    
    
    $
    240,822
    
    
    $
    127,600
    
    
    $
    
    
    
    $
    (314,558
    )
    
    $
    62,759Common stock issued for cash
    
    
    
    
    
    
    
    
    
    
    2,317,392
    
    
    
    2,318
    
    
    
    197,682
    
    
    
    
    
    
    
    (31,000
    )
    
    
    
    
    
    
    169,000Common stock issued for
liabilities
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    
    50
    
    
    
    49,950
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000Effect of Exchange Agreement
    
    
    1,763
    
    
    
    2
    
    
    
    59,263
    
    
    
    59
    
    
    
    (379,363
    )
    
    
    379,302
    
    
    
    
    
    
    
    
    
    
    
    Common stock issued for services
    
    
    
    
    
    
    
    
    
    
    4,024,250
    
    
    
    4,024
    
    
    
    399,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    403,324Common stock issued for employee compensation
    
    
    
    
    
    
    
    
    
    
    36,000
    
    
    
    36
    
    
    
    35,964
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,000Issuance of common stock for
committed stock
    
    
    
    
    
    
    
    
    
    
    125,250
    
    
    
    125
    
    
    
    127,475
    
    
    
    (127,600
    )
    
    
    
    
    
    
    
    
    
    
    Shares issuable for consulting services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    274,300
    
    
    
    
    
    
    
    
    
    
    
    274,300Shares issuable for employee
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,000
    
    
    
    
    
    
    
    
    
    
    
    45,000Rent contributed by stockholder
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,009,364
    )
    
    
    (1,009,364
    )Balance at September 30, 2003
    
    
    1,763
    
    
    
    2
    
    
    
    15,506,962
    
    
    
    15,507
    
    
    
    674,830
    
    
    
    698,602
    
    
    
    (31,000
    )
    
    
    (1,323,922
    )
    
    
    34,019
 See accompanying notes to financial statements. F-5




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##### Table of Contents



HEALTHRENU MEDICAL, INC. STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT) for the years ended September 30, 2004 and 2003   Additional
    
    
    Common
    
    
    StockPreferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Stock
    
    
    Subscription
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Committed
    
    
    Receivable
    
    
    Deficit
    
    
    TotalCommon stock issued for cash
and receivable
    
    
    
    
    
    
    
    
    
    
    1,822,000
    
    
    
    1,822
    
    
    
    100,378
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,200Common stock issued for
liabilities
    
    
    
    
    
    
    
    
    
    
    745,587
    
    
    
    746
    
    
    
    60,027
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,773Common stock issued for
services
    
    
    
    
    
    
    
    
    
    
    325,000
    
    
    
    325
    
    
    
    77,625
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77,950Common stock issued for employee compensation
    
    
    
    
    
    
    
    
    
    
    275,000
    
    
    
    275
    
    
    
    27,225
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,500Issuance of common stock for
committed stock
    
    
    
    
    
    
    
    
    
    
    3,779,902
    
    
    
    3,780
    
    
    
    694,822
    
    
    
    (698,602
    )
    
    
    
    
    
    
    
    
    
    
    Shares issuable for employee
and directors compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,511
    
    
    
    
    
    
    
    
    
    
    
    42,511Collection of subscription
receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,000
    
    
    
    
    
    
    
    31,000Rent contributed by stockholder
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    750Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (533,377
    )
    
    
    (533,377
    )Balance at September 30, 2004
    
    
    1,763
    
    
    $
    2
    
    
    
    22,454,451
    
    
    $
    22,455
    
    
    $
    1,635,657
    
    
    $
    42,511
    
    
    $
    
    
    
    $
    (1,857,299
    )
    
    $
    (156,674
    )
 See accompanying notes to financial statements. F-6




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##### Table of Contents



HEALTHRENU MEDICAL, INC. 
 STATEMENT OF CASH FLOWS for the years ended September 30, 2004 and 2003
__________ Year Ended September 30,2004
    
    
    2003Cash flows from operating activities:Net loss
    
    $
    (533,377
    )
    
    $
    (1,009,364
    )Adjustments to reconcile net loss to net cash used
in operating activities:Depreciation
    
    
    7,184
    
    
    
    4,905Rent expense contributed by stockholder
    
    
    750
    
    
    
    3,000Cost of recapitalization-net liabilities assumed
    
    
    
    
    
    
    24,482Cost of recapitalization-stock-based compensation
    
    
    
    
    
    
    487,500Stock-based compensation for services
    
    
    77,950
    
    
    
    190,124Stock-based employee compensation
    
    
    70,011
    
    
    
    81,000Gain on sale of assets
    
    
    (15,468
    )
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,994
    )
    
    
    16,276Employee receivable
    
    
    5,771
    
    
    
    (5,771
    )Other current assets
    
    
    4,936
    
    
    
    (5,000
    )Inventories
    
    
    24,473
    
    
    
    2,771Accounts payable and accrued liabilities
    
    
    227,030
    
    
    
    68,812Net cash used in operating activities
    
    
    (132,734
    )
    
    
    (141,265
    )Cash flows from investing activities:Purchase of fixed assets
    
    
    (8,090
    )
    
    
    (13,179
    )Net cash used in investing activities
    
    
    (8,090
    )
    
    
    (13,179
    )Cash flows form financing activities:Payments on notes payable
    
    
    
    
    
    
    (10,000
    )Proceeds from issuance of common stock
    
    
    99,700
    
    
    
    169,000Proceeds from collection of subscription receivable
    
    
    31,000
    
    
    
    Net cash provided by financing activities
    
    
    130,700
    
    
    
    159,000(Decrease) increase in cash and cash equivalents
    
    
    (10,124
    )
    
    
    4,556Cash and cash equivalents, beginning of year
    
    
    17,684
    
    
    
    13,128Cash and cash equivalents, end of year
    
    $
    7,560
    
    
    $
    17,684Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    
    
    
    $
    698Cash paid for income taxes
    
    $
    
    
    
    $
    
 See accompanying notes to financial statements F-7




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##### Table of Contents



HEALTHRENU MEDICAL, INC. 
 NOTES TO FINANCIAL STATEMENTS
__________  1.
    Background and Summary of Significant Accounting PoliciesBackgroundHealthRenu Medical, Inc. (the Company), 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 throughout the United States.The Company was originally incorporated in Delaware as Health Renu, Inc. in 1997. In
September 2003, upon completion of a recapitalization through acquisition of a non-operating
public shell, the name was changed to HealthRenu Medical, Inc. The public shell had no
significant assets or operations at the date of acquisition. The Company assumed all
liabilities of the public shell on the date of the acquisition. The historical financial
statements presented herein are those of HealthRenu Medical, Inc., and its predecessor, Health
Renu, Inc.The non-operating public shell used to recapitalize the Company was originally incorporated in
Colorado as American Merger Control, Inc and subsequently adopted name changes to Ultratech
Knowledge Systems, Inc., and AGTsports, Inc. In 2003, the Company was reincorporated in the
state of Nevada and subsequently changed its name to its current name, HealthRenu Medical,
Inc.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 all proprietary trademarks, intellectual property rights and formulas to produce
its products. The gain on the disposition of these assets and liabilities was $15,468.Following is a summary of the Companys significant accounting policies.Use of EstimatesThe 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 of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.Revenue RecognitionRevenue is recognized when products are shipped.Concentrations of Credit RiskFinancial instruments which subject the Company to concentrations of credit risk include cash
and cash equivalents and accounts receivable.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. Continued F-8




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##### Table of Contents



HEALTHRENU MEDICAL, INC. NOTES TO FINANCIAL STATEMENTS, Continued
__________  1.
    Background and Summary of Significant Accounting Policies, continuedConcentrations of Credit Risk, continuedAccounts receivable generally arise from sales of various skin care products to the home
health care and other medical markets throughout 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
revenues for the year ended September 30, 2004.Cash EquivalentsFor 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 EquipmentProperty 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.InventoriesInventories 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.Shipping and Delivery CostsThe cost of shipping and delivery are charged directly to cost of sales at the time of
shipment.Research and DevelopmentResearch and development activities are expensed as incurred, including costs relating to
patents or rights. Research and development expense for the years ended September 30, 2004
and 2003 was $-0- and $50,354, respectively.Income TaxesThe 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. Continued F-9




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##### Table of Contents



HEALTHRENU MEDICAL, INC. NOTES TO FINANCIAL STATEMENTS, Continued
__________  1.
    Background and Summary of Significant Accounting Policies, continuedLoss Per ShareBasic 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, 2004 or 2003, the
calculation of diluted net income per share would have included 1,763 and 147 additional
common equivalent shares for the Companys convertible preferred stock.Impairment of Long-Lived AssetsIn 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 InstrumentsThe 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 IncomeComprehensive 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 CompensationThe 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 for
Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure. Continued F-10




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##### Table of Contents



HEALTHRENU MEDICAL, INC. NOTES TO FINANCIAL STATEMENTS, Continued
__________  1.
    Background and Summary of Significant Accounting Policies, continuedRecent Accounting PronouncementsIn January 2003 and as revised in December 2003, the Financial Accounting Standards Board
FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities. This
interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements,
addresses consolidation by business enterprises of variable interest entities. Prior to this
interpretation, two enterprises generally had been included in consolidated financial
statements because one enterprise controls the other through voting interests. This
interpretation defines the concept of variable interests and requires existing
unconsolidated variable interest entities to be consolidated by their primary beneficiaries if
the entities do not effectively disperse the risks among the parties involved. The Companys
adoption of this interpretation in fiscal 2004 did not have an impact on its financial
position or results of operations.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
fourth quarter of fiscal 2005 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.2.
    Going ConcernDuring the year ended September 30, 2004, the Company has continued to accumulate payables to
its vendors and has experienced negative financial results as follows: Continued F-11




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##### Table of Contents



HEALTHRENU MEDICAL, INC. NOTES TO FINANCIAL STATEMENTS, Continued
__________  2.
    Going Concern, continued Net loss
    
    $
    (533,377
    )Negative cash flows from operations
    
    $
    (132,734
    )Negative working capital
    
    $
    (160,722
    )Accumulated deficit
    
    $
    (1,857,299
    )Stockholders deficit
    
    $
    (156,674
    )
 Management has developed specific current and long-term plans to address its viability as a going concern as follows:  
    Effective September 2003, the Company entered into a recapitalization transaction with a public shell to gain access to public capital markets, to increase attractiveness of its equity and to create liquidity for stockholders.
    The Company is also attempting to raise funds through debt and/or equity offerings. If successful, these additional funds will be used to pay down liabilities and to provide working capital.
    In the long-term, the Company believes that cash flows from growth in its operations will provide the resources for continued operations. There can be no assurance that the Company will have the ability to implement its business plan and ultimately attain profitability. The Companys long-term viability as a going concern is dependent upon three key factors, as follows:  
    The Companys ability to obtain adequate sources of debt or equity funding to meet
current commitments and fund the continuation of its business operations in the near
term.
    The ability of the Company to control costs and expand revenues.
    The ability of the Company to ultimately achieve adequate profitability and cash flows
from operations to sustain its operations.  3.
    RecapitalizationIn September 2003, Health Renu, Inc. entered into an agreement whereby Health Renu, Inc.
agreed to exchange 100% of the issued and outstanding shares of its common stock and $50,000
for approximately 99% or 15,447,699 shares of the issued and outstanding common stock of
AGTSports, Inc. (a non-operating public shell corporation). The agreement represented a
recapitalization of Health Renu, Inc. with accounting treatment similar to that used in a
reverse acquisition, except that no goodwill or intangible asset is recorded. A
recapitalization is characterized by the merger of a private operating company into a
non-operating public shell corporation with nominal net assets and typically results in the
owners and managers of the private company having effective or operating control after the
transaction. The Company emerged as the surviving financial reporting entity under the
agreement, but AGTSports, Inc. (which changed its name to HealthRenu Medical, Inc.) remained
as the legal reporting entity. Continued F-12




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##### Table of Contents



HEALTHRENU MEDICAL, INC. NOTES TO FINANCIAL STATEMENTS, Continued
__________  4.
    InventoriesInventories consist of the following at September 30, 2004 and 2003: 2004
    
    
    2003Work-in-process
    
    $
    14,000
    
    
    $
    31,841Finished goods
    
    
    8,430
    
    
    
    15,062$
    22,430
    
    
    $
    46,903
  5.
    Property and EquipmentProperty and equipment consists of the following at September 30, 2004 and 2003: 2004
    
    
    2003Furniture and fixtures
    
    $
    2,893
    
    
    $
    2,427Buildings and equipment
    
    
    5,552
    
    
    
    79,279Less: accumulated depreciation
    
    
    (4,397
    )
    
    
    (24,803
    )Property and equipment, net
    
    $
    4,048
    
    
    $
    56,903
  Depreciation expense for the years ended September 30, 2004 and 2003 was $7,814 and $4,905,
respectively.6.
    Notes Payable to StockholdersNotes payable to stockholders consists of the following at September 30, 2004 and 2003: 2004
    
    
    2003Notes payable to a stockholder, accruing interest
at 10% to 27%, principal and interest due on
demand. These notes are not collateralized.
    
    $
    
    
    
    $
    7,403Note payable to a stockholder, interest due monthly
at 10% per year, principal due on January 15,
2003. This note is not collateralized.
    
    
    
    
    
    
    8,000Note payable to a stockholder, accruing interest at
10%, principal and interest due on demand. This
note is not collateralized.
    
    
    1,000
    
    
    
    1,000Total notes payable to stockholders
    
    $
    1,000
    
    
    $
    16,403
 Continued F-13




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##### Table of Contents



HEALTHRENU MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS, Continued   7.
    Income TaxesThe Company has incurred losses since its inception and, therefore, has not been subject to
federal income taxes. As of September 30, 2004, the Company had net operating loss (NOL)
carryforwards for income tax purposes of approximately $1,843,582 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.The composition of deferred tax assets and liabilities and the related tax effects at
September 30, 2004 and 2003 are as follows: 2004
    
    
    2003Deferred tax assets:Net operating losses
    
    $
    634,638
    
    
    $
    453,346Valuation allowance
    
    
    (634,638
    )
    
    
    (453,346
    )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, 2004 and 2003 is as follows: 2004
    
    
    2003Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentBenefit for income tax at
federal statutory rate
    
    $
    181,348
    
    
    
    34.0
    %
    
    $
    343,184
    
    
    
    34.0
    %Non-deductible expense
    
    
    (56
    )
    
    
    
    
    
    
    (42
    )
    
    
    Increase in valuation
allowance
    
    
    (181,293
    )
    
    
    (34.0
    )
    
    
    (343,142
    )
    
    
    (34.0
    )$
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
  8.
    Commitments and ContingenciesLitigationIn 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. Continued
F-14




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##### Table of Contents



HEALTHRENU MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS, Continued   8.
    Commitments and Contingencies, continuedLeasesThe Company leases office space and facilities under an operating lease which expires in 2006.
This lease requires monthly rent payments of $2,115. Future minimum lease payments on leases
having initial or noncancellable lease terms in excess of one year at September 30, 2004 are
as follows: OperatingLeases2005
    
    $
    25,3802006
    
    
    8,460Total payments
    
    $
    33,840
  Total rent expense for the years ended September 30, 2004 and 2003 was $13,525 and $7,190,
respectively.Consulting AgreementIn August 2001 the Company entered into a consulting agreement with an individual whereby he
was to provide various marketing and other consulting services to the Company for a fee of
$3,500 per month and 653,664 shares of the Companys common stock. The shares were to be
earned and issued only upon the successful completion of the Company becoming a publicly
traded company. The agreement was subsequently canceled and a new agreement was entered into.
The new agreement, effective October 1, 2003, had a term of five years and provided for
$4,500 of compensation per month. In addition to monthly compensation, the consultant would
receive 4% of each closed transaction involving fund raising and completed mergers and
acquisitions. This agreement was terminated and in March 2004, the Company entered into an
employment agreement with this individual who was appointed 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 as payment of accrued compensation
owed to him of approximately $21,214.9.
    Preferred StockAs a result of the recapitalization, the new 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, 2004 and 2003. 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, 2004 and 2003, there are 1,763 shares of Series 2000A Preferred stock
outstanding. No other preferred stock is outstanding at September 30, 2004 and 2003. Continued
F-15




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##### Table of Contents



HEALTHRENU MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS, Continued   10.
    Related Party TransactionsDuring 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 valued
at $29,559 to reimburse him for these transactions.One of the Companys former offices was located in the home of a major stockholder of the
Company during the year ended September 30, 2003 and the period from October 1, 2003, to
December 31, 2003. The stockholder did not charge the Company rent for this space. The fair
market value of the rent has been estimated at approximately $250 per month. Therefore,
included in the accompanying statement of operations is $750 and $3,000 of rent expense for
the years ended September 30, 2004 and 2003, respectively.Effective April 30, 2002 the Company entered into a lease agreement with the father of the
chief executive officer and major stockholder of the Company to lease 33 acres of land to be
used in the production of raw materials. The lease payments are $250 per month for ten years.
As of February 29, 2004, upon the sale of Health Renu, Inc. to a stockholder of the Company,
the $5,500 liability was written off the books and the lease obligation was transferred to the
stockholder.During the year ended September 30, 2004, the Company recognized revenue of $19,213 from sales
of product to a stockholder and consultant to the Company.During the year ended September 30, 2003, the Company issued stock with a value of
approximately $46,000 to a company owned by the former president of the Company for research
and development services.11.
    Non-Cash Investing and Financing ActivitiesDuring the years ended September 30, 2004 and 2003, the Company engaged in certain non-cash
investing and financing activities as follows: Issuance of common stock as payment of liability
    
    $
    60,773
    
    
    $
    50,000Transfer 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
    )
    
    $
    
 F-16