SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

**FORM 10-KSB/A**

**(Amendment No. 1)**

 

x     ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended: December 31, 2004

 

o           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Commission file number: 000-49634

 

**RENOVO HOLDINGS**

(Name of small business issuer in its charter)

 

| **Nevada******                  | ** ** | **88-0475756******  |
|---------------------------------|------------|---------------------|
| (State or other jurisdiction of |       | (I.R.S. Employer    |
| incorporation)                  |       | Identification No.) |

 

| **100 Candace Drive, Suite 100******     | ** ** | ** **    |
|------------------------------------------|------------|---------------|
| **Maitland, Florida******                | ** ** | **32751****** |
| (Address of principal executive offices) |       | (zip code)    |

 

Issuer's Telephone Number:  **(407) 599-2886**

 

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

 

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

 

Common Stock, $0.001 par value

(Title if Class)

 

Check whether the registrant (a) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (b) has been subject to such filing requirements for the past 90 days.  Yes     X      No        

 

Check if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [     ]

 

The issuer’s revenues for its most recent fiscal year ended December 31, 2004.  $-0-.

 

 

----

 

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average bid and ask price, as of March 1, 2005 was $194,521.82 based on a share value of $.00115.

 

The number of shares of Common Stock, $0.001 par value, outstanding on March 1, 2005, was 214,149,409 shares. 

 

Transitional Small Business Disclosure Format (check one):  Yes __  No X

 

**EXPLANATORY NOTE:**

 

This amendment is being filed to include the revised audit report on page 25 that indicates that the audit was conducted in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) and to revise our Statement of Cash Flows on page F-5.

 

 

----

 

 

**RENOVO HOLDINGS**

**(A DEVELOPMENT STAGE COMPANY)**

**FOR THE FISCAL YEAR ENDED**

**DECEMBER 31, 2004**

 

**Index to Report**

**on Form 10-KSB**

 

 

| PART I | Page |
|--------|------|

 

| Item 1. | Description of Business                             | 2 |
|---------|-----------------------------------------------------|---|
| Item 2. | Description of Property                             | 7 |
| Item 3. | Legal Proceedings                                   | 7 |
| Item 4. | Submission of Matters to a Vote of Security Holders | 7 |

 

PART II

                

| Item 5.  | Market for Common Equity and Related Stockholder Matters                             | 7          |
|----------|--------------------------------------------------------------------------------------|------------|
| Item 6.  | Plan of Operation                                                                    | 9          |
| Item 7.  | Financial Statements                                                                 | 16         |
| Item 8.  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |  

16 |
| Item 8A. | Controls and Procedures                                                              | 16         |
| Item 8B. | Other Information                                                                    | 17         |

 

PART III

 

| Item 9.  | Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act |  

17 |
|----------|-----------------------------------------------------------------------------------------------------------------|------------|
| Item 10. | Executive Compensation                                                                                          | 19         |
| Item 11. | Security Ownership of Certain Beneficial Owners and Management                                                  | 20         |
| Item 12. | Certain Relationships and Related Transactions                                                                  | 2          |
| Item 13. | Exhibits                                                                                                        | 22         |
| Item 14. | Principal Accountant Fees and Services                                                                          | 22         |

 

 

 

----

 

 

FORWARD-LOOKING STATEMENTS

 

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.

 

Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words.  These forward-looking statements present our estimates and assumptions only as of the date of this report.  Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.

 

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements.  Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.  The factors impacting these risks and uncertainties include, but are not limited to: 

 

| **•** | increased competitive pressures from existing competitors and new entrants; |
|------------|-----------------------------------------------------------------------------|

| **•** | increases in interest rates or our cost of borrowing or a default under any material debt agreements; |
|------------|-------------------------------------------------------------------------------------------------------|

| **•** | deterioration in general or regional economic conditions; |
|------------|-----------------------------------------------------------|

| **•** | adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | loss of customers or sales weakness; |  
**•**

inability to achieve future sales levels or other operating results;

**•**

the unavailability of funds for capital expenditures; and

 
**•**

operational inefficiencies in distribution or other systems.

 
 

For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see “Factors That May Affect Our Plan of Operation” in this document.

 

In this filing references to “Company,” “we,” “our,” and/or “us,” refers to Renovo Holdings.

 

**PART I**

 

**ITEM 1.**

**DESCRIPTION OF BUSINESS.**

 

**(a) General Business Development**

 

 

1

 

 

 

Renovo Holdings is a development stage company, originally incorporated in the State of Nevada on October 18, 2000 under the name First Impressions.  On July 14, 2003, we amended our Articles of Incorporation changing our name from First Impressions to Fortis Enterprises.  The Board of Directors determined that the name, “First Impressions” was limiting the Company’s ability to pursue the expansion of our business into other marketing arenas and felt that the name Fortis Enterprises was more generic and allowed for more flexibility in the future expansion of business opportunities.  We also increased the total amount of authorized common stock from 50,000,000 shares to 100,000,000 shares.    

 

On July 15, 2003, our board of directors approved the cancellation of 60,000,000 (post split) shares of common stock held by three of our major stockholders. Concurrently we issued 45,000,000 (post split) shares of common stock to Mr. Stephen W. Carnes as consideration for his business expertise and his business concept of establishing a national network of commercial and residential restoration service companies, his serving on the Board of Directors, and assuming the liability of being an officer and director of a publicly trading and reporting Company.

 

Prior to the cancellations and issuances, we had a total of 80,000,000 (post split) shares of common stock issued and outstanding. The canceling stockholders held approximately 75% of the issued and outstanding common stock. The cancellations and issuance resulted in 65,000,000 (post split) shares of common stock to be issued and outstanding with approximately 69% of those shares being held by Mr. Carnes. Mr. Carnes’ percentage ownership of the Company’s common stock and his position as sole director of the Company allows him to exercise control of the Company.

 

On June 14, 2004, we changed our name from Fortis Enterprises to Renovo Holdings, at the behest of a letter from counsel for Fortis (NL) N.V. Corporation received on November 25, 2003, wherein he requested we change our corporate name in order to avoid infringement on Fortis’ trade name.  We also increased the total of authorized common stock from 100,000,000 shares to 500,000,000 shares.

 

**(b) Our Business**

 

**Our Principal Services and their Markets**

 

After completing an analysis of the loss and restoration markets, we believe we can capitalize upon the niche market opportunities within the residential and commercial restoration services markets. We believe that we can achieve revenue growth, by “rolling up” smaller, individually owned restoration companies under our “umbrella” as the parent company. 

 

As we locate potential restoration companies for acquisition, we intend to formulate a business plan that is based upon a loss/recovery/restoration team (LRR-Team) coordinating complex efficient mobilization, which possesses logistic expertise both locally and nationally. The LRR-Team is being designed by us to follow a specific proven process when responding to, assessing, and restoring a damaged property. In our acquisition mode, we are seeking to acquire top industry talent for this team, including individuals with expertise in insurance, claims negotiation, construction, mitigation, and project management. 

 

 

2

 

 

 

With the mobilization LRR-Team which we are attempting to establish, whether the property is a residential, office building, industrial building, or institutional building, we intend to be set up to efficiently mobilize our team to handle a loss, anywhere in the country, at any time. Once we acquire the planned expertise, our scope of services and in-depth knowledge is intended to enable us to restore any type of property, regardless if damaged by fire, water, mold, or any type of natural disaster. We plan to utilize information technology to assist in the evaluation of the loss and determination of the magnitude of the restoration or recovery and create verifiable status reports. 

 

Our plan includes setting up an Information Technology (IT) director to handle the electronic dissemination of information through the Internet and through our own to be developed Intranet site. We intend to be able to provide our clients with real-time electronic information including account information, insurance information, cost estimation, and remedial and restoration updates via the electronic transmission of text and electronic imaging of the restoration project. 

 

Our services will initially focus on the following restoration markets:

 

**•**

*Water* - Water can have devastating consequences if not treated quickly and properly. Typical causes of water damage include fire, weather, burst pipes, and sewage overflow. Damage will occur if the water is not quickly and properly extracted, and the salvageable property thoroughly dried and disinfected. Our LRR-Team will take an organized, phased approach to mitigate water damage, beginning with a thorough assessment, mitigation plan, removal of contents, extraction of standing water, dehumidification, mold inhibitor infusion, and in many cases, reconstruction. 

 

**•**

*Fire* - Residual effects of fire, other than the loss of the burned or smoke damaged area include water damage, and soot. Acidic soot residues stain plastic surfaces, grout, and porous stones. Documents and books that survive a fire, receive additional damage due to discoloration from soot, smoke and water. 

 

**•**

*Technical Cleaning* - Sensitive equipment can be permanently damaged if the right restoration techniques are not utilized. 

 

**•**

*Mold* - Mold is a member of the fungi family and can be found almost anywhere, gradually destroying the very material on which it grows. Molds thrive in damp, dark places, and can be found in, water damaged basements, storage areas, wood, insulation, and carpets. The effects of mold on an individual can range from mild to severe, and may even be toxic. 

 

 

**Distribution Methods of the Services.**

 

Until such time as we complete an acquisition, we do not anticipate the establishment of an independent method for the distribution of our services. Our plan is to distribute our services through acquired businesses. 

 

 

3

 

 

 

**Competitive Business Conditions.**

 

There are many companies that offer loss, restoration, and remediation services.  Our competitors include:

 

**•**

General Contractors, some of which maintain toll-free numbers;

**•**

Subcontractors;

 
**•**

Insurance sanctioned remediation companies;

 
**•**

Specialty Cleaning Services; and

 
**•**

Loss, restoration and remediation companies.

 
 

Each of these categories encompasses a wide range of services and is highly fragmented. 

 

Competition is intense and we expect it to increase. Increased competition could result in:

 

**•**

price reductions, decreased revenue and lower profit margins;

**•**

inability to gain market share;

 
**•**

loss of market share once, and if gained; and

 
**•**

increased marketing expenditures.

 
 

As a result of our competition targeting our same market; individuals and corporate entities interested in our loss, restoration, and remediation services, we will only be able to distinguish our services as the result of our advertising programs and ultimately quality and efficiency of service.  Our goal is to determine methods by which we can maximize contacts with major insurance carriers. We do not anticipate distinguishing our services from other like services available in the market in the near future.  

 

**Governmental Regulations**

 

Many governmental regulations may impact our business, which could affect our ability to conduct business. Any new law or regulation, or the application or interpretation of existing laws, may decrease our ability to conduct business across state lines. We expect there will be an increasing number of laws and regulations pertaining to the use of chemicals in the restoration services area. These laws or regulations may relate to liability for chemical use in violation of the rules promulgated by the Environmental Protection Agency. This could decrease the demand for our services, increase our costs or otherwise adversely affect our business. 

 

In addition, we cannot predict whether new legislation or regulations governing our activities will be enacted by legislative bodies or promulgated by agencies regulating our activities, or what the effect of any such legislation or regulations on our business would be.  

 

**Costs and Effects of Compliance with Environmental Law.**

 

Environmental laws affect the types of chemicals and products utilized in the restoration services that we intend to provide. In most cases the chemicals will be off the shelf types of products pre-approved for the sale in the United States. At this time we do not anticipate utilizing any products not approved for use or resale in the United States. 

 

4

 

 

 

**Intellectual Properties**

 

We regard the protection of our copyrights, service marks, trademarks, and trade secrets as critical to our future success and will rely on a combination of copyright, trademark, service mark and trade secret laws and contractual restrictions to establish and protect our proprietary rights in products and services. We plan to enter into confidentiality agreements with our to be acquired operators, consultants and strategic partners in order to limit access to and disclosure of our proprietary information. These contractual arrangements or the other steps taken by us to protect our intellectual property may not prove sufficient to prevent misappropriation of our technology or to deter independent third-party development of similar technologies. We plan to pursue the registration of our trademarks and service marks in the United States. 

 

**Employees**

 

As of December 31, 2004, we had one employee, Stephen W. Carnes. We anticipate the assumption of an employment base from the companies, which we intend to acquire in the future. In addition to that employment base, we anticipate hiring an executive secretary and chief financial officer. None of such personnel are anticipated to be covered by a collective bargaining agreement. 

 

**Reports to Stockholders**

 

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended. Our securities are registered under the Exchange Act, we file supplementary and periodic information, documents and reports that are required under section 13 of the Securities Act of 1933, as amended, with the Securities and Exchange Commission.  Such reports, proxy statements and other information will be available through the Commission’s Electronic Data Gathering Analysis and Retrieval System which is publicly available through the Commission’s website (http://www.sec.gov).

 

We intend to furnish annual reports to stockholders, which will include audited financial statements reported on by our Certified Public Accountants. In addition, we will issue un-audited quarterly or other interim reports to stockholders.

 

**CORNELL CAPITAL FINANCING**

 

On April 14, 2004, we entered into the following agreements with Cornell Capital Partners, LP (“Cornell”).

 

*Standby Equity Distribution Agreement and Placement Agent Agreement*

 

On April 14, 2004, we entered into a Standby Equity Distribution Agreement with Cornell, wherein we agreed to issue and sell to Cornell $5,000,000 of our common stock.  We have engaged Newbridge Securities Inc., to act as our exclusive placement agent in connection with the sale of our common stock to Cornell.  We agreed to issue 1,490,000 shares of our common stock to Cornell upon execution of the agreement (issued on May 3, 2004).

 

 

5

 

 

 

Pursuant to the Standby Equity Distribution Agreement, Cornell and the Company also entered into a Placement Agent Agreement with Newbridge Securities Corporation, wherein Newbridge will act as our exclusive placement agent in connection with the Standby Equity Distribution Agreement.  Newbridge’s services will consist of reviewing the terms of the Standby Equity Distribution Agreement and advising us with respect to those terms.  We agreed to issue 10,000 shares of our common stock to Newbridge upon execution of the agreement (issued May 14, 2004).

 

*Securities Purchase Agreement*

 

We executed a Securities Purchase Agreement with Cornell, wherein we agreed to issue and sell to Cornell up to $300,000 of secured convertible debentures, which will be convertible into shares of our common stock.  Of the $300,000, $150,000 was immediately received and on July 9, 2004 we received the remaining $150,000 following the date we amended our Articles of Incorporation increasing our authorized shares of common stock to 500,000,000 shares and after we filed the registration statement as agreed in the Registration Rights Agreement discussed below.

 

*Registration Rights Agreements*

 

In connection with the Securities Purchase Agreement and Standby Equity Distribution Agreement, we entered into two Registration Rights Agreements with Cornell, wherein we agreed to prepare and file with the SEC a registration statement on Form SB-2 under the 1933 Act for the registration for the resale by all Investors who purchased convertible debentures pursuant to the Securities Purchase Agreement 9,868,421 shares of our common stock issued upon conversion of the Convertible Debentures and the 1,490,000 shares of common stock issued to Cornell plus enough shares to cover the $5,000,000 equity line.  We agreed to cause the registration statement to remain effective until all of the registrable securities have been sold.

 

*Security Agreement*

 

We executed a Security Agreement with Cornell wherein, in connection with the above financing documents, we agreed to grant to Cornell a security interest in and to the pledged property until the satisfaction of all obligations described in the agreement are performed.  The pledged property includes all goods, inventory, contract rights and general intangibles, all documents, warehouse receipts, instruments and chattel paper, all accounts and receivables, instruments or other forms of obligations and rights to payment, to the extent assignable, all of the our rights under all present and future authorizations, permits, licenses and franchises, and all products and proceeds from the above described pledged property.

 

 

**ITEM 2.**

**DESCRIPTION OF PROPERTY.**

 

Our executive office is located at 100 Candance Drive, Suite 100, Maitland, Florida 32751.  The property is approximately 3,600 square feet.  The term of our lease is for 24 months and began on November 1, 2004 with lease payments of $2,850.00 per month together with applicable Florida State Sales Tax.  

 

6

 

 

 

**ITEM 3.**

**LEGAL PROCEEDINGS.**

 

On November 4, 2003, Suburban Capital Corporation (“SCC”), a Delaware corporation, filed a complaint against us with the United States District Court for the Northern District of Illinois, Eastern Division, alleging that on or about September of 2003, we approached SCC and allegedly entered into an oral agreement for the purpose of hiring them to provide introductions to potential partners, along with other business consulting services.  SCC was seeking $350,000 in damages.  Our management denied the existence of any agreement with SCC and aggressively defended the Company against the frivolous action.  On November 23, 2004, the case was dismissed due to the plaintiff’s (SCC) failure to appear before the judge. 

 

**ITEM 4.**

**SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.**

 

None.****

 

**PART II**

 

**ITEM 5.**

**MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.**

 

**(a) Market Information**

 

Our Common Stock is traded in the over-the-counter securities market through the National Association of Securities Dealers Automated Quotation Bulletin Board System, under the symbol “RNVO”. We have been eligible to participate in the OTC Bulletin Board since April 23, 2003.  The following table sets forth the quarterly high and low bid prices for our Common Stock during our last two fiscal years, as reported by a Quarterly Trade and Quote Summary Report of the OTC Bulletin Board.  The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.

 

 

2004

2003

 

High

Low

High

Low

1st Quarter

0.115

0.017

Not Trading

Not Trading

2nd Quarter

0.062

0.01

0.02

0.015

3rd Quarter

0.0171

0.004

0.54

0.19

4th Quarter

0.041

0.0017

0.23

0.08

 

 

 

 

 

Note: We traded on the OTC:BB from April 23, 2003 through June 21, 2004 under the symbol “FRTE”. 

 

**(b) Holders of Common Stock**

 

As of March 1, 2005, we had approximately 42 stockholders of record of the 214,149,409 shares outstanding.  

 

**(c) Dividends**

 

7

 

 

 

The Board of Directors has not declared any dividends due to the following reasons:

 

1.

The Company has not yet adopted a policy regarding payment of dividends;

2.

The Company does not have any money to pay dividends at this time;

 
3.

The declaration of a cash dividend would result in an impairment of future working capital; and 

4.

The Board of Directors will not approve the issuance of a stock dividend.

 

**(d) Securities Authorized for Issuance under Equity Compensation Plans**

 

**Employee and Consultant Stock Compensation Plans**

 

Effective August 26, 2003, we adopted an Employee and Consultant Stock Compensation Plan.  The maximum number of shares that may be issued pursuant to the plan is 3,000,000 shares.  As of December 31, 2004, 2,564,493 shares have been granted under this plan.

 

Effective May 11, 2004, we adopted another Employee and Consultant Stock Compensation Plan.  The maximum number of shares that may be issued pursuant to the plan is 15,000,000 shares.  As of December 31, 2004, 3,508,207 shares have been issued under this plan.

 

**Equity Compensation Plans Information**

 

We currently maintain equity compensation plans to allow the Company to compensate employees, directors, consultants and certain other persons providing bona fide services to the Company or to compensate officers, directors and employees for accrual of salary, through the award of our common stock.  The following table sets forth information as of December 31, 2004 regarding outstanding shares granted under the plans, warrants issued to consultants and options reserved for future grant under the plans.

 

 

 

 

 

 

 

Plan Category

 

Number 

of shares to be issued upon exercise of outstanding options, warrants and rights 

(a)

 

 

 

Weighted-average exercise price of outstanding options, warrants and rights 

(b)

 

Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in column (a)) 

(c) 

 

 

 

 

 

 

 

Equity compensation plans approved by stockholders

 

 

--

 

 

$                        --

 

--

 

 

 

 

 

 

 

Equity compensation plans not approved  by stockholders

 

 

0

 

 

$                         0

 

11,927,300 (1)

 

 

 

 

 

 

 

Total

 

0

 

$                         0

 

11,927,300

 

 

 

 

 

 

 

(1) Includes: 435,507 shares available for issuance under the 2003 plan and 11,491,793 shares available under the 2004 plan.

 

8

 

 

 

These plans are intended to encourage directors, officers, employees and consultants to acquire ownership of common stock.  The opportunity so provided is intended to foster in participants a strong incentive to put forth maximum effort for its success and growth, to aid in retaining individuals who put forth such effort, and to assist in attracting the best available individuals to the Company in the future.

 

**Recent Sales of Unregistered Securities**

 

Issuances pursuant to the Equity Distribution Agreement and the Securities Purchase Agreement with Cornell Capital Partners LP.

 

On October 18, 2004, we sold $20,000 of secured convertible debentures to Cornell, which converted into 6,250,000 shares of our common stock.  The shares were registered in our SB-2 Registration Statement declared effective by the SEC on July 13, 2004.

 

From October 26, 2004 through December 27, 2004, we issued 61,000,000 shares of our common stock to the Escrow Agent pursuant to the Equity Distribution Agreement, to hold on behalf of Cornell pending receipt of funds, at which time the shares will be delivered to Cornell.  The 61,000,000 shares were registered in our SB-2 Registration Statement declared effective by the SEC on July 13, 2004.  

 

*Subsequent Issuances*

 

From February 1, 2005 through February 25, 2005, we issued 42,526,315 shares of our common stock the Escrow Agent pursuant to the Equity Distribution Agreement, to hold on behalf of Cornell pending receipt of funds, at which time the shares will be delivered to Cornell.  The 42,526,315 were registered in our SB-2 Registration Statement declared effective by the SEC on July 14, 2004. 

 

**ITEM 6.**

**PLAN OF OPERATION.**

 

This report contains forward-looking statements.  Actual results and events could differ materially from those projected, anticipated, or implicit, in the forward-looking statements as a result of the risk factors set forth below and elsewhere in this report.

 

With the exception of historical matters, the matters discussed herein are forward-looking statements that involve risks and uncertainties.  Forward-looking statements include, but are not limited to, statements concerning anticipated trends in revenues, projections concerning operations and available cash flow.  Our actual results could differ materially from the results discussed in such forward-looking statements primarily as the result of insufficient cash to pursue acquisitions and marketing efforts. The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto appearing elsewhere herein.

 

**Overview**

 

 

9

 

 

 

Renovo Holdings is a Development Stage Company that intends to capitalize upon the niche market opportunities within the commercial and residential restoration service markets.  

 

As a company in an early development stage, our ability to proceed with our plan of operation has continuously been a function of our ability to raise sufficient capital to continue our operations. At the end of the fiscal year 2004 we had cash available of $16,075. Our cash requirements on a monthly basis are approximately $4,500, excluding exceptional expenses that are related to capital raising and securities registration expenses. 

 

We have continuously incurred losses since inception. For the year ended December 31, 2003 we had a net loss of $313,527 as compared to a net loss of $1,099,313 for the year ended December 31, 2004.  

 

**Plan of Operation**

 

During the next 12 months we plan to focus our efforts on positioning Renovo to provide complete loss management and restoration services to residential, commercial, industrial, and institutional properties.  Initially, we are seeking to establish Renovo in the Florida market, with the ability to expedite the recovery process, with the eventual capability of responding to loss and restoration across the United States.

 

***Satisfaction of our cash obligations for the next 12 months.***

 

We plan on satisfying our cash obligations over the next twelve months through additional equity and/or third party financing.  We do not anticipate generating revenues sufficient enough to satisfy our working capital requirements within the next twelve months.

 

A critical component of our operating plan impacting our continued existence is the ability to obtain additional capital through additional equity and/or debt financing.  We do not anticipate enough positive internal operating cash flow until such time as we complete an acquisition and can generate substantial revenues, which may take the next few years to fully realize, if ever.  In the event we cannot obtain the necessary capital to pursue our strategic plan, we may have to cease or significantly curtail our operations.  This would materially impact our ability to continue operations.

 

On April 14, 2004, we entered into a Standby Equity Distribution Agreement with Cornell Capital Partners, LP (“Cornell”), wherein we agreed to issue and sell to Cornell and Cornell agreed to purchase from us $5,000,000 of our common stock, par value $0.001 per share.  Additionally, we entered into a secured convertible debenture agreement with Cornell in order to provide us with expedited access to $300,000 of the funding. 

 

In September 2004, we sold $40,000 of secured convertible debentures, which were converted into 7,738,094 shares of our common stock and issued to Cornell Capital Partners.  Additionally in October of 2004, we sold a total of 20,202,020 shares under the Equity Distribution Agreement valued at $200,000.  

 

**Liquidity and Capital Resources**

 

 

10

 

 

 

Our near term cash requirements are anticipated to be offset through the receipt of funds from the Cornell convertible debenture, private placement offerings and loans obtained through private sources.  We filed a registration statement (declared effective by the SEC on July 14, 2004) registering 368,687,500 shares of our common stock for the resale by all investors who purchase convertible debentures and to cover the $5,000,000 equity line under the Equity Distribution Agreement. We anticipate being able to use the line of credit to finance our operations.  Since inception, we have financed cash flow requirements through debt financing and issuance of common stock for cash and services.  When, and if, we commence operational activities, we may continue to experience net negative cash flows from operations, and may be required to obtain additional financing to fund operations throughcommon stock offerings and bank borrowings to the extent necessary to provide working capital.

 

Over the next twelve months we believe that existing capital and anticipated funds from operations will not be sufficient to sustain operations and planned expansion.  However, the line of credit is anticipated to satisfy our working capital needs, but if it is not available, we will be required to seek additional capital in the future to fund our operations through additional equity or debt financing or credit facilities.  No assurance can be made that such financing would be available, and if available it may take either the form of debt or equity.  In either case, the financing could have a negative impact on our financial condition and our Stockholders.

 

We anticipate incurring operating losses over the next twelve months.  Our lack of operating history makes predictions of future operating results difficult to ascertain.  Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development.  Such risks include, but are not limited to, an evolving and unpredictable business model and the management of growth.  To address these risks we must, among other things, locate suitable acquisition targets, obtain a customer base, implement and successfully execute our business and marketing strategy, respond to competitive developments, and attract, retain and motivate qualified personnel.  There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financialcondition and results of operations.

 

**Going Concern**

 

The consolidated financial statements included in this filing have been prepared in conformity with generally accepted accounting principles that contemplate the continuance of the Company as a going concern.  The Company’s cash position may be inadequate to pay all of the costs associated with its intended business plan.  Management intends to use borrowings and security sales to mitigate the effects of its cash position, however no assurance can be given that debt or equity financing, if and when required will be available.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should the Company be unable to continue existence.

 

***Summary of any product and development that we will perform for the term of the plan.*** We do not anticipate performing any significant product research and development under our plan of operation.  In lieu of product research and development, we anticipate acquiring small renovation businesses. 

 

 

11

 

 

 

***Expected purchase or sale of plant and significant equipment.*** We do not anticipate the purchase or sale of any plant or significant equipment, as such items are not required by us at this time or anticipated to be needed in the next twelve months; however, as the result of our plan for acquisitions of renovation businesses, we may acquire equipment, and in some cases plants, which relate to the renovation businesses. 

 

***Significant changes in the number of employees.*** As of December 31, 2004, we had 1 employee.  We are dependent upon Steve W. Carnes our sole officer and director.  We will need to hire full time operational staff as our operations commence and we complete anticipated acquisitions.

 

**Off-Balance Sheet Arrangements**

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

**FACTORS THAT MAY AFFECT OUR PLAN OF OPERATION**

 

***Renovo has historically lost money and losses may continue in the future, which may cause us to curtail operations.***

 

Since our inception we have not been profitable and have lost money on both a cash and non-cash basis.  For the years ended December 31, 2004 and December 31, 2003 we incurred net losses of $1,099,313 and $313,527 respectively. Our accumulated deficit at the end of December 30, 2004 was $1,443,765. Future losses are likely to occur, as we are dependent on spending money to pay for our operations. No assurances can be given that we will be successful in reaching or maintaining profitable operations.  Accordingly, we may experience liquidity and cash flow problems.  If our losses continue, our ability to operate may be severely impacted.

 

***Renovo may need to raise additional capital or debt funding to sustain operations.***

 

Unless we can become profitable with the existing sources of funds we have available and our operations, we will require additional capital to sustain operations and we may need access to additional capital or additional debt financing to grow our sales.  In addition, to the extent that we have a working capital deficit and cannot offset the deficit from profitable sales or the Cornell line of credit we may have to raise capital to repay the deficit and provide more working capital to permit growth in revenues.  We cannot be assured that financing, whether from external sources or related parties, will be available if needed or on favorable terms. Our inability to obtain adequate financing will result in the need to reduce the pace of business operations and the search for acquisition candidates.  Any of these events could be materially harmful to our business and may result in a lower stock price.

 

***We have been the subject of a going concern opinion for the years ended December 31, 2004 and December 31, 2003 from our independent auditors, which means that we may not be able to continue operations unless we can become profitable or obtain additional funding.***

 

 

12

 

 

 

Our independent auditors have added an explanatory paragraph to their audit opinions issued in connection with our financial statements for the years ended December 31, 2004 and December 31, 2003, which states that the financial statements raise substantial doubt as to our ability to continue as a going concern. Our ability to make operations profitable or obtain additional funding will determine our ability to continue as a going concern.  Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.  We expect to be able to continue operations for twelve months with the cash currently on hand, and from the Securities Purchase Agreement and the Equity Distribution Agreement entered into by the Company and Cornell Capital Partners, executed on April 14, 2004.

 

***We are subject to a working capital deficit, which means that our current assets on December 31, 2004, were not sufficient to satisfy our current liabilities and, therefore, our ability to continue operations is at risk.***

 

We had a working capital deficit for the year ended December 31, 2004, which means that our current liabilities exceeded our current assets on December 31, 2004 by $608,161.  Current assets are assets that are expected to be converted to cash within one year and, therefore, may be used to pay current liabilities as they become due. Our working capital deficit means that our current assets on December 31, 2004, were not sufficient to satisfy all of our current liabilities on those dates.  If our ongoing operations do not begin to provide sufficient profitability to offset the working capital deficit, we may have to raise capital or debt to fund the deficit or curtail future operations.

 

***Our common stock may be affected by limited trading volume and may fluctuate significantly, which may affect our stockholders’ ability to sell shares of our common stock.***

 

Prior to this filing, there has been a limited public market for our common stock and there can be no assurance that a more active trading market for our common stock will develop.  An absence of an active trading market could adversely affect our stockholders' ability to sell our common stock in short time periods, or possibly at all.  Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance.  In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to enter the market from time to time inthe belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our stock will be stable or appreciate over time. These factors may negatively impact our stockholders' ability to sell shares of our common stock.

 

***Our common stock is deemed to be a low priced “Penny Stock,” which may make it more difficult for investors to sell their shares due to suitability requirements.***

 

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

 

 

13

 

 

 

**•**

With a price of less than $5.00 per share;

 
**•**

That are not traded on a "recognized" national exchange;

**•**

Whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ listed stock must still have a price of not less than $5.00 per share); or

**•**

In issuers with net tangible assets less than $2.0 million (if the issuer has been in continuous operation for at least three years) or $10.0 million (if in continuous operation for less than three years), or with average revenues of less than $6.0 million for the last three years.

 

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

 

***We could fail to attract or retain key personnel, which could be detrimental to our operations.***

 

Our success largely depends on the efforts and abilities of Stephen W. Carnes, our sole Officer and Director.  The loss of the services of Mr. Carnes could materially harm our business because of the cost and time necessary to find a successor.  Such a loss would also divert management attention away from operational issues. We do not presently maintain key-man life insurance policies on Mr. Carnes. We do not have other key employees who manage our operations.  To the extent that we are smaller than our competitors and have fewer resources, we may not be able to attract a sufficient number and quality of staff, when required.

 

***We may acquire  assets or other businesses in the future.***

 

We may consider acquisitions of other assets or other business.  Any acquisition involves a number of risks that could fail to meet our expectations and adversely affect our profitability.  For example:

 

**•**

The acquired assets or business may not achieve expected results;

**•**

We may incur substantial, unanticipated costs, delays or other operational or financial problems when integrating the acquired assets;

**•**

We may not be able to retain key personnel of an acquired business;

**•**

Our management’s attention may be diverted; or

 
**•**

Our management may not be able to manage the acquired assets or combined entity effectively or to make acquisitions and grow our business internally at the same time.

 

If these problems arise we may not realize the expected benefits of an acquisition.

 

***Our limited operating history makes it difficult to forecast our future results.***

 

As a result of our limited operating history, our historical financial and operating information is of limited value in predicting our future operating results.  We may not accurately forecast customer behavior and recognize or respond to emerging trends, changing preferences or competitive factors facing us, and, therefore, we may fail to make accurate financial forecasts.  Our current and future expense levels are based largely on our investment plans and estimates of future revenue.  As a result, we may be unable to adjust our spending in a timely manner to 

 

14

 

 

compensate for any unexpected revenue shortfall, which could force us to curtail or cause us to terminate our business operations.

 

**Risks Associated with the Standby Equity Distribution Agreement with Cornell Capital Partners, L.P.**

 

***Our obligations under the secured convertible debentures are secured by all of our assets.***

 

Our obligations under the secured debentures, issued to Cornell Capital Partners are secured by all of our assets.  As a result, if we default under the terms of the secured debentures, Cornell Capital Partners could foreclose its security interest and liquidate all of the assets of the Company.  This would cease operations.

 

***Existing stockholders will experience significant dilution from our sale of shares under the Equity Distribution Agreement.***

 

The sale of shares pursuant to the Equity Distribution Agreement will have a dilutive impact on our stockholders.  As a result our net income per share could decrease in future periods, and the market price of our common stock could decline.  In addition, the lower our stock price, the more shares of common stock we will have to issue in order to receive the maximum cash advance allowed under the Equity Distribution Agreement.  If our stock price is lower, then our existing stockholders would experience greater dilution.  

 

***The sale of our stock under our equity distribution agreement could encourage short sales by third parties, which could contribute to the future decline of our stock price.***

 

In many circumstances the provision of financing based on the distribution of equity for companies that are traded on the Over-the-Counter Bulletin Board has the potential to cause a significant downward pressure on the price of common stock.  This is especially the case if the shares being placed into the market exceed the market's ability to take up the increased stock or if the Company has not performed in such a manner to show that the equity funds raised will be used to grow the Company. Such an event could place further downward pressure on the price of common stock.  Under the terms of our Equity Distribution Agreement, we may request numerous cash advances.  Even if we use the cash advances to grow our revenues and profits or invest in assets that are materially beneficial to us, the opportunity exists for short sellers and others to contribute to the future decline of our stockprice. If there are significant short sales of stock, the price decline that would result from this activity will cause the share price to decline more so which in turn may cause long holders of the stock to sell their shares thereby contributing to sales of stock in the market.  If there is an imbalance on the sell side of the market for the stock the price will decline.  It is not possible to predict if the circumstances whereby short sales could materialize or to what the share price could drop. In some companies that have been subjected to short sales the stock price has dropped to near zero. This could happen to our stock.  

 

***We may not be able to access sufficient funds under the Equity Line of Credit when needed.***

 

We are dependent on external financing to fund our operations.  Our financing needs are expected to be partially provided from the Equity Distribution Agreement and the additional 

 

15

 

 

secured convertible debentures to be purchased by Cornell Capital Partners.  No assurances can be given that such financing will be available in sufficient amounts or at all when needed, in part, because we are limited to a maximum cash advance of $200,000 during any seven trading day period.  In addition, based on an assumed offering price of $0.016 per share, we will only be able to draw a total net amount of $3,667,500 under the Equity Distribution Agreement. This net amount will utilize all of the 250,000,000 shares of our common stock registered for the Equity Distribution Agreement under our registration statement filed on June 30, 2004.  If the actual average price at which we sell shares of common stock under the Equity Distribution Agreement is less than $0.016 per share, we would need to register additional shares to fully utilize the funds available under the Equity Distribution Agreement.  Basedon the assumed offering price of $0.016 per share, we would have to issue to Cornell Capital Partners 315,565,566 shares in order to receive the entire $5,000,000 available to us under the Equity Distribution Agreement.    

 

***We may not be able to obtain a cash advance under the equity distribution agreement if Cornell Capital Partners holds more than 9.9% of our common stock.***

 

In the event Cornell Capital Partners holds more than 9.9% of our then-outstanding common stock, we will be unable to obtain a cash advance under the Equity Distribution Agreement.  A possibility exists that Cornell Capital Partners may own more than 9.9% of our outstanding common stock at a time when we would otherwise plan to make an advance under the Equity Distribution Agreement. In that event, if we are unable to obtain additional external funding or generate revenues from operations, we could be forced to curtail or cease our operations.

 

**ITEM 7.**

**FINANCIAL STATEMENTS.**

 

See Index to Financial Statements and Financial Statement Schedules appearing on page F-1 through F-16 of this Form 10-KSB.

 

**ITEM 8.**

**CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.**

 

We have had no disagreements with our independent auditors on accounting or financial disclosures.

 

**ITEM 8.A.**

**CONTROLS AND PROCEDURES.**

 

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods. As of the end of the period covered by this report, Steven W. Carnes, our Chief Executive Officer and Principal Financial Officer evaluated the effectiveness of our disclosure controls and procedures. Based on the evaluation, which disclosed no significant deficiencies or material weaknesses, Mr. Carnes, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect,our internal control over financial reporting.

 

16

 

 

 

 

**ITEM 8.B.**

**OTHER INFORMATION.**

 

None.

 

**PART III**

 

**ITEM 9**

**DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.**

 

The following table sets forth the name and positions of the executive officer and director of the Company.  Directors will be elected at our annual meeting of stockholders and serve for one year or until their successors are elected and qualified.  Officers are elected by the Board and their terms of office are, except to the extent governed by employment contract, at the discretion of the Board.

 

**Name**

**Age**

**Positions and Offices held**

Stephen W. Carnes

41

CEO, President, Secretary/Treasurer and Director

 

**Duties, Responsibilities and Experience**

 

**Stephen W. Carnes****,**age 41**,**is Chief Executive Officer, President, Secretary/Treasurer and Director of the Company.  Mr. Carnes is also the President, CEO and a director of Signature Leisure, Inc., a publicly traded company trading on the OTC Bulletin Board.  From 2000 to 2003, Mr. Carnes was founder and co-owner of a private public relations firm that assisted companies with marketing and public relations. From 1998 to 2003, Mr. Carnes has been self-employed as an independent manufacturers representative acting as an outside sales representative for various companies.   From 1982 thru 1986, Mr. Carnes attended Indiana University at Fort Wayne, Indiana and received a B.S. degree in Business Administration.

 

Election of Directors and Officers.  

 

Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and qualified. Officers are appointed to serve until the meeting of the Board of Directors following the next annual meeting of stockholders and until their successors have been elected and qualified.

 

No Executive Officer or Director of the Corporation has been the subject of any Order, Judgment, or Decree of any Court of competent jurisdiction, or any regulatory agency permanently or temporarily enjoining, barring suspending or otherwise limiting him from acting as an investment advisor, underwriter, broker or dealer in the securities industry, or as an affiliated person, director or employee of an investment company, bank, savings and loan association, or insurance company or from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or sale of any securities.

 

 

17

 

 

 

No Executive Officer or Director of the Corporation has been convicted in any criminal proceeding (excluding traffic violations) or is the subject of a criminal proceeding which is currently pending.

 

No Executive Officer or Director of the Corporation is the subject of any pending legal proceedings.

 

*Section 16(a) Beneficial Ownership Reporting Compliance*

 

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers and directors, and persons who beneficially own more than ten percent of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater than ten percent beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based upon a review of the copies of such forms furnished to us and written representations from our executive officers and directors, we believe that during the year ended 2004, Stephen W. Carnes filed all forms 3, forms 4 and forms 5 on a timely basis.

 

**Audit Committee and Financial Expert**

 

We do not have an Audit Committee, Stephen W. Carnes, our sole director, performs some of the same functions of an Audit Committee, such as: recommending a firm of independent certified public accountants to audit the annual financial statements; reviewing the independent auditors independence, the financial statements and their audit report; and reviewing management's administration of the system of internal accounting controls. The Company does not currently have a written audit committee charter or similar document.

 

We have no financial expert. We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our start-up operations, we believe the services of a financial expert are not warranted.

 

**Code of Ethics**

 

A code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to promote:

 

(1)

Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

(2)

Full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the Commission and in other public communications made by an issuer;

(3)

Compliance with applicable governmental laws, rules and regulations;

(4)

The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and

(5)

Accountability for adherence to the code.

 

We have not adopted a corporate code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons 

 

18

 

 

performing similar functions in that our sole officer and director serves in all the above capacities. 

 

Our decision to not adopt such a code of ethics results from our having only one officer and director operating as the sole management for the Company. We believe that as a result of the limited interaction, which occurs having a sole officer/director for the Company eliminates the current need for such a code, in that violations of such a code would be reported to the party generating the violation.

 

**Nominating Committee**

 

We do not have a Nominating Committee or Nominating Committee Charter. Stephen W. Carnes, our sole director, performs some of the functions associated with a Nominating Committee. We have elected not to have a Nominating Committee in that we are a development stage company with limited operations and resources. 

 

**ITEM 10.**

**EXECUTIVE COMPENSATION.**

 

The following table sets forth the cash compensation of the Company’s executive officer and director during the last fiscal year of the Company. The remuneration described in the table does not include the cost to the Company of benefits furnished to the named executive officers, including premiums for health insurance and other benefits provided to such individual that are extended in connection with the conduct of the Company’s business.

 

***Summary Compensation Table***

 

 

Annual Compensation

Long Term

Compensation

 

Name and Principal Position

 

 

Year

 

Salary

Paid

 

Accumulative

Accrual (2)

Other 

Annual Compensation

 

Restricted Stock (3)

 

 

Options

 

 

Other

Stephen W. Carnes, President (1)

 

2004

 

$-0-

 

$356,706.65

 

-0-

 

-0-

 

-0-

 

-0-

 

2003

$-0-

$107,667

-0-

$67,500

-0-

-0-

 

 

 

 

 

 

 

 

(1)

Mr. Carnes was appointed officer and director of the Company on July 15, 2003.

(2)

Mr. Carnes agreed to accrue such portions of his salary as deemed relevant by the board of directors until such time as the Company is adequately capitalized and able to pay such salary. Total accruals include $11,900 in accrued automobile allowance, and accrued salary of $344,166.65. Additionally, Mr. Carnes has advanced $640.01 to the Company which is not indicated in the above Table, however is an accrued reimbursement. 

(3)

Concurrent with joining the Company Mr. Carnes was issued 45,000,000 (post split) shares of common restricted stock of the Company which were valued, at the time by the Company at $67,500. This issuance is not considered to be a recurring expense. 

 

 

 

**Employment Agreement**

 

 

19

 

 

 

On September 3, 2003, we entered into an Employment Agreement with Stephen W. Carnes, wherein Mr. Carnes agreed to serve as the Chairman of the Board, President and Chief Executive Officer of the Company.  The term of the Agreement is for a period of three years, it commenced on August 1, 2003 and will expire on July 31, 2006.  We agreed to pay Mr. Carnes a salary at an annual rate equal to the sum of $250,000.  A bonus in the amount of $500,000 will be paid to Mr. Carnes upon successfully completing the opening or merger/acquisition of our first operating business unit.  A bonus of $250,000 will be compensated to Mr. Carnes for each additional merger and/or acquisition and/or business unit start-up Mr. Carnes brings to the Company.  Mr. Carnes will also receive an automobile allowance of $700 per month.  Mr. Carnes has agreed to accrue such portions of his salary as deemed relevant bythe board of directors until such time as the Company is adequately capitalized and able to pay such salary.  

 

**Termination of Employment**

 

There are no compensatory plans or arrangements, other than those described above, including payments to be received from the Company, with respect to any person named in Cash Consideration set out above which would in any way result in payments to any such person because of his resignation, retirement, or other termination of such person’s employment with the Company or its subsidiaries, or any change in control of the Company, or a change in the person’s responsibilities following a change in control of the Company.

 

**Compensation of Directors**

 

All directors will be reimbursed for expenses incurred in attending Board or committee, when established, meetings.

 

**ITEM 11.**

**SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.**

 

The following table presents information, to the best of our knowledge, about the beneficial ownership of our common stock on March 1, 2005 relating to the beneficial ownership of our common stock by those persons known to beneficially own more than 5% of our capital stock and by our director and executive officer. The percentage of beneficial ownership for the following table is based on 214,149,409 shares of common stock outstanding.

 

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and does not necessarily indicate beneficial ownership for any other purpose. Under these rules, beneficial ownership includes those shares of common stock over which the stockholder has sole or shared voting or investment power. It also includes shares of common stock that the stockholder has a right to acquire within 60 days through the exercise of any option, warrant or other right. The percentage ownership of the outstanding common stock, however, is based on the assumption, expressly required by the rules of the Securities and Exchange Commission, that only the person or entity whose ownership is being reported has converted options or warrants into shares of our common stock.

 

***Security Ownership of Management***

 

20

 

  

 

 

 

Name of Beneficial Owner (1)

 

 

Number

of Shares

 

Percent

Beneficially

Owned (2)

Stephen W. Carnes

4185 West Lake Mary Blvd., Ste. 137

Lake Mary, Florida 32746

 

45,000,000

 

21%

Director & Officer

 

45,000,000

 

21%

 
(1)

As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security).  

(2)

Rounded to the nearest whole percentage.

 

***Security Ownership of Certain Beneficial Owners***

 

 

Name of Beneficial Owner (1)

 

 

Number

of Shares

 

Percent

Beneficially

Owned (2)

Cornell Capital Partners LP

101 Hudson St., Ste. 3700

Jersey City, NJ 07302

 

10,526,315

 

5%

Beneficial Owner

 

10,526,315

 

5%

 
(1)

As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security).  

(2)

Rounded to the nearest whole percentage.

 

**ITEM 12.**

**CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.**

 

Employment Agreement with Steve Carnes

On September 3, 2003, we entered into an Employment Agreement with Stephen W. Carnes, wherein Mr. Carnes agreed to serve as the Chairman of the Board, President and Chief Executive Officer of the Company.  The term of the Agreement is for a period of three years, it commenced on August 1, 2003 and will expire on July 31, 2006.  We agreed to pay Mr. Carnes a salary at an annual rate equal to the sum of $250,000.  A bonus in the amount of $500,000 will be paid to Mr. Carnes upon successfully completing the opening or merger/acquisition of our first operating business unit.  A bonus of $250,000 will be compensated to Mr. Carnes for each additional merger and/or acquisition and/or business unit start-up Mr. Carnes brings to the Company.  Mr. Carnes will also receive an automobile allowance of $700 per month.  Mr. Carnes has agreed to accrue such portions of his salary as deemed relevant bythe board of directors until such time as the Company is adequately capitalized and able to pay such salary.  

 

Reimbursements/ Salary Accrued

 

As of December 31, 2004, Mr. Carnes had accrued reimbursements of $640.01, accrued salary of $344,166.65 and accrued auto allowance of $11,900. 

 

 

 

 

21

 

 

 

**ITEM 13.**

**EXHIBITS.**

 

(a)

Exhibits

 

31*

Certification pursuant to Section 302 of the Sarbanes-Oxley Act

32*

Certification pursuant to Section 906 of the Sarbanes-Oxley Act

_____

*

Filed herewith

 

**ITEM 14.**

**PRINCIPAL ACCOUNTANT FEES AND SERVICES.**

 

*(1) AUDIT FEES*

 

The aggregate fees billed for professional services rendered by Beckstead & Watts, LLP, for the audit of the registrant's annual financial statements and review of the financial statements included in the registrant's Form 10-QSB or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for fiscal years 2004 and 2003 were $9,500 and $3,500, respectively.

 

*(2) AUDIT-RELATED FEES*

 

NONE 

 

*(3) TAX FEES*

 

NONE

 

*(4) ALL OTHER FEES*

 

NONE 

 

*(5) AUDIT COMMITTEE POLICIES AND PROCEDURES*

 

The Company does not have an audit committee. 

 

*(6)* If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.

 

Not applicable.

 

 

22

 

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

RENOVO HOLDINGS

 

By:/s/Stephen W. Carnes

 
 
Stephen W. Carnes, President

 

Dated: September 1, 2005

 

Pursuant to the requirements of 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

OFFICE

DATE

 

/s/Stephen W. Carnes

CEO/President

September 1, 2005

Stephen W. Carnes

Secretary/Treasurer

 
Chief Accounting Officer

Director

 

23

 

 

 

**TABLE OF CONTENTS**

 

 

 

PAGE

 

Independent Auditors’ Report

F-1

 

Balance Sheets

F-2

 

Statement of Operations

F-3

 

Statement of Stockholders’ Equity

F-4

 

Statement of Cash Flows

F-5

 

Footnotes

F-6 – F-10

 

 

24

 

 

 

**Beckstead and Watts, LLP**

***Certified Public Accountants***

2426 W. Horizon Ridge Parkway

Henderson, NV 89052

702.257.1984

702.362.0540 fax

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We have audited the accompanying balance sheet of Renovo Holdings (the “Company”) (A Development Stage Company), as of December 31, 2004 and 2003, and the related statement of operations, stockholders’ equity, and cash flows for the years then ended, and for the period from October 18, 2000 (Date of Inception) to December 31, 2004.  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 audit.

 

We conducted our audit in accordance with the standards of Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit 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 audit provides 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 Renovo Holdings (A Development Stage Company) as of December 31, 2004 and 2003, and the results of its operations and cash flows for the years then ended, and for the period October 18, 2000 (Date of Inception) to December 31, 2004, in conformity with U.S. generally accepted accounting principles.

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  As discussed in Note 4 to the financial statements, the Company has had limited operations and have not commenced planned principal operations.  This raises substantial doubt about its ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 4.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

*/s/Beckstead and Watts, LLP*

 

May 20, 2005

 

F-1

 

 

 

RENOVO HOLDINGS

(A Development Stage Company)

BALANCE SHEETS

 

 

**December 31,**

 

**2004**

**2003**

**ASSETS**

 

 

Current assets:

 

 

Cash

$        16,075

$          6,285

Total current assets

16,075

6,285

 

 

 

Equipment, net of accumulated depreciation

55,806

-

 

 

 

Total Assets

$        71,881

$          6,285

**LIABILITIES AND STOCKHOLDERS' DEFICIT**

 

 

 

 

 

Current Liabilities:

 

 

Accounts payable

2,516

-

Payroll taxes payable

17,874

-

Accrued interest payable

6,752

-

Accrued auto allowance

11,900

3,500

Accrued reimbursement to officer

1027

540

Accrued salary - officer

344,167

104,166

Secured convertible debenture

240,000

-

Total current liabilities

$      624,236

$      108,206

 

 

 

Stockholders' deficit:

 

 

Preferred stock, $.001 par value authorized 5,000,000; no shares issued and outstanding as of 12/31/04 and 12/31/03

$                 -

$                 -

 

 

 

Common stock, $.001 par value, authorized 500,000,000 shares; 170,133,094 and 65,957,062 issued and outstanding as of 12/31/04 and 12/31/03 retroactively restated

170,133

65,957

 

 

 

Stock subscriptions receivable

(47,000)

-

 

 

 

Additional paid-in capital

768,277

176,574

 

 

 

Deficit accumulated during development stage

(1,443,765)

(344,452)

Total stockholders' deficit

(552,355)

(101,921)

Total liabilities and stockholders' deficit

$        71,881

$          6,285

 

 

The accompanying notes are an integral part of these financial statements

 

F-2

 

 

 

RENOVO HOLDINGS

(A Development Stage Company)

STATEMENT OF OPERATIONS

 

 

 

 

 

 

**December 31,**

**For the Period October 18, 2000 (Inception) to December 31, 2004**

 

**2004**

**2003**

 

 

 

 

 

 

 

 

Revenue

$                     -

$                      -

$                      -

 

 

 

 

Expenses:

 

 

 

General and Administrative

236,025

18,020

269,739

Advertising

247,150

-

247,150

Consulting 

312,200

76,800

389,000

Officer salary

250,000

104,167

354,167

Legal

31,710

40,000

71,710

Auto Allowance

8,400

3,500

11,900

Interest expense

7,958

-

7,958

Depreciation

5,870

-

5,870

Other services - related party

-

67,500

72,500

Other expense

-

3,540

13,771

Total expenses

1,099,313

313,527

1,443,765

Net loss

$    (1,099,313)

$        (313,527)

$    (1,443,765)

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding, basic and fully diluted

86,914,394

65,957,062

 

 

 

 

 

 

Net loss per weighted share basic and fully diluted

$             (0.01)

$              (0.00)

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements

 

F-3

 

 

 

RENOVO HOLDINGS

(A Development Stage Company)

October 18, 2000, (Inception) to December 31, 2004

STATEMENT OF STOCKHOLDERS' EQUITY

 

 

 

 

 

**Common Stock**

**Stock subscriptions receivable**

**Additional Paid-in Capital**

**Accumulated During Developmental Stage (Deficit)**

**Total Stockholder's Equity**

 

**Shares**

**Amount**

October 18, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for services

20,000,000

$       200

$                   -

$        4,800

$                   -

$            5,000

Shares issued for cash

40,000,000

400

-

9,600

-

10,000

Net (loss) October 18, 2000 (Inception) to December 31, 2000

-

-

-

-

(12,849)

(12,849)

Balance December 31, 2000

60,000,000

600

-

14,400

(12,849)

2,151

 

 

 

 

 

 

 

Shares issued for cash

6,200,000

62

-

9,238

-

9,300

Donated services

-

-

-

4,231

-

4,231

Net loss December 31, 2001

-

-

-

-

(7,429)

(7,429)

Balance December 31, 2001

66,200,000

662

-

27,869

(20,278)

8,253

 

 

 

 

 

 

 

Shares issued for cash

13,800,000

138

-

20,562

-

20,700

January 10, 2002 recapitalization 

 

 

 

 

 

 

adjustment to additional paid-in-capital

-

79,200

-

(79,200)

-

-

Donated services

-

-

-

6,000

-

6,000

Net loss December 31, 2002

-

-

-

-

(10,647)

(10,647)

Balance December 31, 2002

80,000,000

80,000

-

(24,769)

(30,925)

24,306

 

 

 

 

 

 

 

Donated services

-

-

-

3,000

-

3,000

Shares Cancelled by majority stockholders

(60,000,000)

(60,000)

-

60,000

-

-

Shares issued for services

45,000,000

45,000

-

22,500

-

67,500

Shares issued for services

957,062

957

-

115,843

-

116,800

Net loss December 31, 2003

-

-

-

-

(313,527)

(313,527)

Balance December 31, 2003

65,957,062

65,957

-

176,574

(344,452)

(101,921)

 

 

 

 

 

 

 

Shares issued for cash

13,988,094

13,988

-

47,191

-

61,179

Shares issued related to equity distribution agreement

82,300,000

82,300

(47,000)

317,700

-

353,000

Shares issued for services

7,887,938

7,888

-

226,812

-

234,700

Net loss December 31, 2004

-

-

-

-

(1,099,313)

(1,099,313)

Balance December 31, 2004

170,133,094

$170,133

$       (47,000)

$    768,277

$  (1,443,765)

$     (552,355)

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements

 

F-4

 

 

 

RENOVO HOLDINGS

(A Development Stage Company)

STATEMENT OF CASH FLOWS

 

 

 

 

 

 

**December 31,**

**For the Period October 18, 2000 (Inception) to December 31, 2004**

 

**2004**

**2003**

 

 

 

 

**CASH FLOWS FROM OPERATIONS**

 

 

 

 

 

 

 

Net loss

$     (1,099,313)

$        (313,527)

$     (1,443,765)

 

 

 

 

Adjustments to reconcile net loss to net cash

 

 

 

used for operating activities:

 

 

 

Stock issued for services

234,700

184,300

424,000

Donated services

-

3,000

13,230

Depreciation

5,870

-

5,870

Increase in accounts payable

1,456

-

1,995

Increase in accrued auto allowance

8,400

3,500

11,900

Increase in accrued expenses

25,266

540

25,266

Increase in accrued salary -officer

240,000

104,167

344,167

Net cash used for operating activities

(583,621)

(18,020)

(617,337)

 

 

 

 

**CASH FLOWS FROM INVESTING ACTIVITIES**

 

 

 

Purchase of fixed assets

(61,676)

-

(61,676)

Net cash used in investing activities

(61,676)

-

(61,676)

 

 

 

 

**CASH FLOWS FROM FINANCING ACTIVITIES**

 

 

 

Issuance of common stock

354,179

-

394,180

Issuance of secured debenture

300,000

-

300,000

Net cash used in financing activities

654,179

-

694,180

 

 

 

 

Net increase (decrease) in cash

8,882

(18,020)

15,167

Cash, beginning of period

6,285

24,305

-

Cash, end of period

$            15,167

$              6,285

$             15,167

 

 

 

 

Supplemental disclosure

 

 

 

Interest paid

$              1,359

$                      -

$               1,359

Taxes paid

$                      -

$                      -

$                       -

 

 

The accompanying notes are an integral part of these financial statements

 

F-5

 

 

 

RENOVO HOLDINGS

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

**Note 1 – Organization and summary of significant accounting principles**

 

Organization

The Company was organized October 18, 2000 (Date of Inception) under the laws of the State of Nevada, as First Impressions. The Company has not commenced significant operations and, in accordance with Statement of Financial Accounting Standards No. 7 *Accounting and Reporting by Development Stage Enterprises*(“SFAS No. 7”), the Company is considered a development stage company.

 

On July 14, 2003, the Company amended its Articles of Incorporation changing its name from First Impressions to Fortis Enterprises. The Company also increased the total amount of authorized common stock from 50,000,000 shares to 100,000,000 shares.

 

On June 11, 2004, the Company amended its Articles of Incorporation changing its name from Fortis Enterprises to Renovo Holdings.  The Company also increased the total mount of authorized common stock from 100,000,000 to 500,000,000 shares.

 

Accounting period

The Company has adopted an annual accounting period of January through December.

 

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ significantly from those estimates.

 

Cash and cash equivalents

For the purpose of the statements of cash flows, all highly liquid investments with a maturity of three months or less are considered to be cash equivalents.

 

Revenue recognition

Sales and related cost of sales are generally recognized upon shipment of products. Cost of goods sold generally represents the cost of items sold and the related shipping and selling expenses.

 

Furniture and equipment - Furniture and equipment are stated at cost less accumulated depreciation.  It is the policy of the Company to capitalize items greater than or equal to $1,000 and provide depreciation based on the estimated useful life of individual assets, calculated using the straight line method.  

 

 

 

 

 

F-6

 

 

 

RENOVO HOLDINGS

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

Estimated useful lives range as follows:

 

**Years**

Furniture and equipment

3 – 5

Computer hardware

3

Vehicles

5

 

Advertising Costs

The Company expenses all costs of advertising as incurred. There were no advertising costs included in general and administrative expenses as of December 31, 2004 or December 31, 2003.

 

Fair value of financial instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2004 and December 31, 2003. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts payable and notes payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

 

Impairment of long lived assets

Long lived assets held and used by the Company are reviewed for possible impairment whenever events or circumstances indicate the carrying amount of an asset may not be recoverable or is impaired. No such impairments have been identified by management at December 31, 2004 or December 31, 2003.

 

Stock-Based Compensation

During 2004, the Company adopted the *fair value based method* of Statement of Financial Accounting Standards No. 123 (“SFAS 123”).  Under the fair value based method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.  Stock-based compensation to vendors is recorded based upon the fair value of the services provided when it constitutes a more reliable measure of fair value than the stock price.

 

Adoption of the fair value provisions of SFAS 123 did not result in a significant change in the financial statements of the Company.

 

Earnings per share

The Company has adopted Statement of Financial Accounting Standards No. 128. *Earnings Per Share* ("SFAS No. 128").  Basic earnings per common share ("EPS") calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year.  Diluted earning per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.  During periods when common stock equivalents, if any, are anti- dilutive they are not considered in the computation.

 

 

 

F-7

 

 

 

RENOVO HOLDINGS

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

Segment reporting

The Company has adopted Statement of Financial Accounting Standards No. 130, *Disclosures About Segments of an Enterprise and Related Information*. The Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.

 

Income taxes

The Company has adopted Statement of Financial Accounting Standard No. 109, *Accounting for Income Taxes* ("SFAS No. 109") for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled.  Deferred income tax expenses or benefits are based on the changes in the asset or liability each period.  If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized.  Future changes in such valuation allowance are included inthe provision for deferred income taxes in the period of change.

 

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes because of differences in amounts deductible for tax purposes.  Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.  Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate.  Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

 

Recent pronouncements

During 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 150 *Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity* (“SFAS No. 150”).  SFAS No. 150 became fully effective for periods beginning after December 15, 2003.  SFAS No. 150 requires financial instruments with the certain characteristics or redemption options to be classified as liabilities in the financial statements.  The Company adopted SFAS No. 150 as of January 1, 2004.  This adoption did not result in a significant change to the financial statements.

 

 

 

 

 

 

 

F-8

 

 

 

RENOVO HOLDINGS

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

In November 2004, the FASB issued SFAS 151, "Inventory Costs." SFAS 151 amends the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) under the guidance in ARB 43, Chapter 4, "Inventory Pricing." Paragraph 5 of ARB 43, Chapter 4, previously stated that "...under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges...." This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal." In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. This statement is effective for inventory costs incurred during fiscal years beginningafter June 15, 2005. Management does not expect adoption of SFAS 151 to have a material impact on the Company's financial statements.

 

In December 2004, the FASB issued SFAS 152, "Accounting for Real Estate Time-Sharing Transactions." The FASB issued this Statement as a result of the guidance provided in AICPA Statement of Position (SOP) 04-2, "Accounting for Real Estate Time-Sharing Transactions." SOP 04-2 applies to all real estate time-sharing transactions. Among other items, the SOP provides guidance on the recording of credit losses and the treatment of selling costs, but does not change the revenue recognition guidance in SFAS 66, "Accounting for Sales of Real Estate," for real estate time-sharing transactions. SFAS 152 amends Statement 66 to reference the guidance provided in SOP 04-2. SFAS 152 also amends SFAS 67, "Accounting for Costs and Initial Rental Operations of Real Estate Projects", to state that SOP 04-2 provides the relevant guidance on accounting for incidental operations and costs related to the sale of real estatetime-sharing transactions. SFAS 152 is effective for years beginning after June 15, 2005, with restatements of previously issued financial statements prohibited. Management does not expect adoption of SFAS 152 to have a material impact on the Company's financial statements.

 

In December 2004, the FASB issued SFAS 153, "Exchanges of Nonmonetary Assets," an amendment to Opinion No. 29, "Accounting for Nonmonetary Transactions." Statement 153 eliminates certain differences in the guidance in Opinion No. 29 as compared to the guidance contained in standards issued by the International Accounting Standards Board. The amendment to Opinion No. 29 eliminates the fair value 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. Such an exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for nonmonetary asset exchanges occurring in periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in periodsbeginning after December 16, 2004. Management does not expect adoption of SFAS 153 to have a material impact on the Company's financial statements.

 

 

 

 

 

F-9

 

 

 

RENOVO HOLDINGS

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

In December 2004, the FASB issued SFAS 123(R), "Share-Based Payment." SFAS 123(R) amends SFAS 123, "Accounting for Stock-Based Compensation," and APB Opinion 25, "Accounting for Stock Issued to Employees." SFAS 123(R) requires that the cost of share-based payment transactions (including those with employees and non-employees) be recognized in the financial statements. SFAS 123(R) applies to all share-based payment transactions in which an entity acquires goods or services by issuing (or offering to issue) its shares, share options, or other equity  instruments (except for those held by an ESOP) or by incurring liabilities (1) in amounts based (even in part) on the price of the entity's shares or other equity instruments, or (2) that require (or may require) settlement by the issuance of an entity's shares or other equity instruments. This statement is effective (1) for public companies qualifying as SECsmall business issuers, as of the first interim period or fiscal year beginning after December 15, 2005, or (2) for all other public companies, as of the first interim period or fiscal year beginning after June 15, 2005, or (3) for all nonpublic entities, as of the first fiscal year beginning after December 15, 2005. Management is currently assessing the effect of SFAS No. 123(R) on the Company's financial statements.

 

**Note 2 – Furniture and Equipment**

Furniture and equipment consists of the following categories at December 31, 2004:

 

Computers

19,153

Office equipment

15,162

Vehicles 

27,361

 

61,676

Less accumulated depreciation

(5,870)

Total

55,806

 

Depreciation expense for the year ended December 31, 2004 totaled $5,870.

 

**Note 3 – Secured convertible debentures**

During 2004, the Company issued secured convertible debentures totaling $300,000 to a securities broker.  These debentures mature in April 2007 and include interest of 5% payable upon conversion or maturity.

 

The holder has the option to convert, at any time, all or part of the principal amount of the debenture, plus accrued interest, into shares of the Company’s common stock at a conversion price equal to the lesser of (a) 120% of the closing bid price of the common stock or (b) 80% of the lowest closing bid price of the Company’s common stock for the five trading days immediately preceding the conversion date.  During 2004, $60,000 of these debentures were converted to 13,988,094 shares of common stock.

 

The Company may redeem a portion or all of these debentures with 15 days notice for 120% of the amount redeemed, plus accrued interest.

 

 

 

F-10

 

 

 

RENOVO HOLDINGS

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

**Note 4 – Income taxes**

Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate.  Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

 

The Company currently has net operating loss carryforwards aggregating approximately $1,029,000, which expire through 2024. The deferred tax asset of approximately $350,000 related to this carryforward has been fully reserved. 

 

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources and tax effects of the differences for the periods presented are as follows:

 

Income tax provision at the  federal statutory rate 

34%

Effect of operating losses 

-34%

 

0%

 

 Net deferred tax assets consist of the following:

 

 

For the years ended

December 31,

 

2004

2003

Gross deferred tax asset 

$      350,000

$      107,000

Gross deferred tax liability 

-

-

Valuation allowance 

(350,000)

(107,000)

Net deferred tax asset 

$                  -

$                  -

 

The Company did not pay any income taxes during the year ended December 31, 2004 or 2003.

 

**Note 5 – Stockholders’ equity**

 

The Company is authorized to issue 5,000,000 shares of preferred stock with a par value of $0.001.  Rights, preferences and other terms of the preferred stock will be determined by the board of directors at the time of issuance.

 

On October 18, 2000, the Company issued 20,000,000 shares of its $0.001 par value common stock for services valued at $5,000. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration "transactions by an issuer not involving any public offering."

 

 

 

F-11

 

 

 

RENOVO HOLDINGS

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

On October 19, 2000, the Company issued 40,000,000 shares of its $0.001 par value common stock for $10,000.00 cash. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration "transactions by an issuer not involving any public offering."

 

On January 4, 2002, the Company completed a public offerings that was offered without  registration  under the Securities Act  of  1933,  as  amended  (The "Act"), in reliance upon the exemption from registration afforded by sections 4(2)  and 3(b) of the Securities Act and regulation D promulgated thereunder. The Company sold 20,000,000 shares of its $0.001 par value common stock for a total amount of $30,000.  Of these shares, 6,200,000 shares were issued during 2001 and 13,800,000 were issued in January 2002.

 

On January 10, 2002, the Company approved a forward stock split on the basis of 100 for 1.  All references to the number of shares issued and outstanding haven retroactively restated to reflect the forward split.

 

On July 14, 2003, the Company increased its authorized common stock to 100,000,000 shares at $.001 par value.

 

On July 17, 2003, the Company cancelled 60,000,000 (post split) shares of common stock held by 3 of its majority stockholders. Concurrent with the cancellation, the Company issued 45,000,000 (post split) shares of its $0.001 par value common stock to its new sole officer and director.

 

On July 21, 2003, the Company effectuated a 4:1 forward stock split. The split was accomplished through the issuance of a 3 for 1 common stock dividend, whereby all of the Company's stockholders on the Record Date of July 21, 2003, received three additional shares of common stock for every share they currently owned, resulting in 65,000,000 (post split) shares of common stock issued and outstanding.

 

On October 30, 2003, the Company issued 67,000 shares of its $0.001 par value common stock valued at $10,000 to Mr. Barr pursuant to a Consulting Agreement entered into on October 27, 2003. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on August 26, 2003.

 

On October 30, 2003, the Company 67,000 shares of its $0.001 par value common stock valued at $10,000 to Mr. Broersma pursuant to a Consulting Agreement entered into on October 27, 2003. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on August 26, 2003.

 

From November 11, 2003 to December 22, 2003 the Company issued 24,881 shares of its $0.001 par value common stock valued at $3,000 to Cynthia Wainwright pursuant to a Consulting Agreement we entered into on October 1, 2003. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on August 26, 2003.

 

 

 

F-12

 

 

 

RENOVO HOLDINGS

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

From November 11, 2003 to December 22, 2003 the Company issued 236,363 shares of its $0.001 par value common stock valued at $30,000 to Loren Brown pursuant to a Consulting Agreement we entered into on October 1, 2003. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on August 26, 2003.

 

From November 11, 2003 to December 22, 2003 the Company issued 118,181 shares of its $0.001 par value common stock valued at $15,000 to Matt Lettau pursuant to a Consulting Agreement we entered into on October 1, 2003. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on August 26, 2003.

 

On December 16, 2003, the Company issued 80,000 shares of its $0.001 par value common stock valued at $8,800 to Florida Catastrophe Corp for consulting services provided to the Company.  The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on August 26, 2003.

 

On December 22, 2003, the Company issued 363,637 shares of its $0.001 par value common stock valued at $40,000 to Donald J. Stoecklein for legal services provided to the Company. The shares issued were unrestricted pursuant to an S-8 Registration filed with the SEC on August 26, 2003.

 

On January 19, 2004, the Company issued 328,481 shares of its common stock to various individuals for consulting services valued at $29,500.

 

On February 10, 2004 the Company issued 140,000 shares of its common stock to Michael Manion for consulting services valued at $10,000.

 

On February 23, 2004 the Company issued 306,250 shares of its common stock to various individuals for consulting services valued at $24,500.

 

On March 30, 2004, the Company issued 970,000 shares of its common stock to various individuals for consulting services valued at $29,200.

 

On May 11, 2004, the Company filed a Form S-8 registering 15,625,000 shares of its common stock under the 2004 Consultant and Employee Stock Compensation Plan.

 

On May 13, 2004, the Company issued 10,000 shares of its $0.001 par value common stock to Newbridge Securities Corporation for placement agent fees in the amount of $200.

 

On May 14, 2004, the Company issued 1,933,207 shares of its $0.001 par value common stock to various individuals for consulting agreements valued at $89,300.

 

On June 14, 2004, the Company amended its Articles of Incorporation to increase its authorized capital to 500,000,000 shares of common stock, $0.001 par value per share.

 

On June 17, 2004, the Company issued 1,575,000 shares of its $0.001 par value common stock to various individuals for consulting agreements valued at $31,000.

 

 

F-13

 

 

 

RENOVO HOLDINGS

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

On June 30, 2004, the Company filed a registration statement, registering 368,687,500 shares of its common stock for the resale by all investors who purchase convertible debentures and to cover the $5,000,000 equity line under the Equity Distribution Agreement. The selling stockholders consist of Cornell Capital Partners, who intends to sell up to 368,687,500 shares of common stock, 250,000,000 of which are under the Equity Distribution Agreement, 117,187,500 are under secured convertible debentures.

 

On August 11, 2004, the Company converted $20,000 of the secured convertible debenture in exchange for 3,571,428 shares of its $0.001 par value common stock.

 

On September 13, 2004, the Company issued 125,000 shares of its $0.001 par value common stock to Cynthia Wainwright in exchange for services valued at $1,000.

 

On September 13, 2004, the Company issued 2,500,000 shares of its par value common stock to a related party in exchange for services valued at $20,000.

 

On September 14, 2004, the Company converted $20,000 of the secured convertible debenture in exchange for 4,166,666 shares of its $0.001 par value common stock.

 

On October 13, 2004, the Company converted $20,000 of the secured convertible debenture in exchange for 6,250,000 shares of its $0.001 par value common stock.

 

During the six-month period ended December 31, 2004, the Company issued 82,300,000 shares of its $0.01 par value common stock to an escrow agent on behalf of Cornell Capital pursuant to the Standby Equity Distribution Agreement entered into on June 30, 2004.  The Company recorded a subscription receivable as of December 31, 2004 in the amount of $47,000.

 

There have been no other issuances of common stock.

 

During 2004, management entered into a Standby Equity Distribution Agreement with Cornell Capital Partners (“Cornell”) in order to fund development efforts.  This agreement calls for Cornell to purchase up to $5,000,000 of the Company’s common stock at a price based upon recent market activity.  Purchases of stock are initiated by the Company as funds are needed in accordance with the agreement.

 

**Note 6 – Going concern**

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business.  As noted above, the Company is in the development stage and, accordingly, has not yet generated revenues from operations.  Since its inception, the Company has been engaged substantially in financing activities and developing its product line, setting up its e-commerce website, and incurring substantial costs and expenses.  As a result, the Company incurred accumulated net losses from October 17, 2000 (inception) through the period ended December 31, 2004 in excess of $1,000,000. In addition, the Company's development activities since inception have been financially sustained through equity financing.

 

F-14

 

 

 

RENOVO HOLDINGS

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues.  The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities.

 

In order to fund development, management has entered into a Standby Equity Distribution Agreement with Cornell Capital as described in Note 5.

 

**Note 7 – Warrants and options**

 

There are no warrants or options outstanding to acquire any additional shares of common stock.

 

**Note 8 – Related party transactions**

 

Amounts due to the Company’s chief executive officer totaled approximately $357,000 and $108,000 at December 31, 2004 and 2003, respectively.  These amounts primarily represent unpaid salary and auto allowance in accordance with an employment agreement.

 

**Note 9 – Commitments and contingent liabilities**

 

Lease commitments - The Company leases certain office premises under a non-cancelable operating leases.  The leases expire in June 2005 and October 2006 and requires the Company to pay real estate taxes, insurance and other costs.

 

Aggregate minimum rental commitments at December 31, 2004 under non-cancelable operating leases are summarized as follows:

 

**Year ending**

**Gross**

**December 31,**

**Rentals**

2005

$ 40,026

2006

31,400

 

$ 71,426

 

Rental expense included in operations totaled approximately $15,000 for the year ended December 31, 2004.

 

Legal matters - The Company is occasionally party to litigation or threat of litigation arising in the normal course of business.  Management, after consultation with legal counsel, does not believe that the resolution of any such matters will have a material effect on the Company’s financial position or results of operations.

 

Employment agreement - The Company has entered into an employment agreement with its chief executive officer.  This agreement establishes bonuses based upon new mergers, acquisitions or business unit start-ups the executive brings to the Company.  

 

 

F-15

 

 

 

RENOVO HOLDINGS

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

 

**Note 10 – Stock-based compensation**

 

During 2004, the Company adopted a consultant and employee stock compensation plan whereby they may issue up to 15,625,000 shares of common stock at the discretion of the board of directors.  The purpose of the plan is to further the growth of the Company by awarding common stock for services provided.  

 

During the years ended December 31, 2004, the Company granted shares to employees, vendors and others as disclosed in the accompanying statement of changes in stockholders’ equity.  Shares granted as compensation to non-employees are recorded at the fair value of the services provided since that provides a more objective source of information.  Expenses included in the accompanying financial statements related to stock-based compensation totaled approximately $234,700 during the year ended December 31, 2004.

 

 

F-16

 

 

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