What changed in this filing

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Item 2. Management’s Discussion and Analysis

2008-08-15 compared with 2008-05-15 · 194 added, 200 removed, 357 unchanged (52% of the section changed)

10 unchanged sentences

Our MD&A is presented in the following

Strategy, Core Philosophies, and Current

Strategy, Core Philosophies, and Current Operations

of Operations

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Off-Balance-Sheet

and Quantitative Disclosures About Market

and Quantitative Disclosures About Market Risk

following discussion and other sections of this Form 10-Q contain

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FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS.

end of the quarter, March 31, 2008, Renewal Fuels, Inc.

end of the quarter, June 30, 2008, Renewal Fuels, Inc.

(“Renewal”) had three

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in Sparks, Nevada.

developing and will manufacture a factory-built biodiesel processing plant that

is designed to produce 350,000 gallons of biodiesel per year, appropriately

scaled for a variety of customers, including small communities, farms, farm

co-ops and trucking fleets.

The design will provide a biodiesel production

system that is continuous, flexible, efficient, affordable, and fully-automated.

The automated control system will minimize labor costs and facilitates remote

BSI’s manufacturing facilities are currently located in Sparks,

Nevada, adjacent to the manufacturing facilities for Renewal

development stage company established to manufacture a factory-built biodiesel

processing plant that is designed to produce 350,000 gallons of biodiesel per

year, appropriately scaled for a variety of customers, including small

communities, farms, farm co-ops and trucking fleets.

The design was to provide a

biodiesel production system that is continuous, flexible, efficient, affordable,

and fully-automated.

The automated control system will minimize labor costs and

facilitates remote diagnostics.

BSI’s manufacturing facilities were located in

Sparks, Nevada, adjacent to the manufacturing facilities for Renewal

As of April 15, 2008 BSI ceased development operations due

to rising input costs and the development of more efficient means of converting

vegetable oil into biodiesel fuel.

Employment agreements for BSI

employees have been terminated as of April 15, 2008.

The Company sold

productive and shop equipment previously used in BSI operations on July 9,

The Company wrote off $396,806 of intangibles, goodwill, and

remainder of the fixed assets.

engaged in the growth of cellulosic feedstock for the biofuels

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trees, which are designed to provide a very high concentration of biomass per

We are currently completing installation of the nurseries and

establishing customers for the products to be produced by RPI.

A Management Service Agreement between RPI and Emerald Energy,

LLC (“Service Agreement”) was consummated on February 11, 2008, providing for

the completion of the greenhouse installation and operation of the

We are establishing customers for the products to be

produced by RPI.

Recently, RPI learned that the root sections

processed and planted by Emerald Energy, LLC in April and May 2008 did not

According to Emerald Energy, LLC, the PH level of the soil

wasn’t proper for the sustained growth of the root sections.

Energy, LLC has already replanted a number of root sections.

root sections appear to be growing normally.

RPI and Emerald Energy,

LLC are in ongoing discussions about how to modify their relationship given

these developments.

Reorganization

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of Renewal Biodiesel:

Shares Received

Group LLC (1)

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was changed from TLBT to RNWF.

of Assets of FuelMeister Business and BSI

of Assets of FuelMeister Business

9, 2007, Crivello Group, LLC (“Crivello”) and its wholly-owned subsidiary,

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notice by Renewal Biodiesel.

As discussed in Note 1 to the financial statements,

we acquired BSI on July 2, 2007, which effectively resulted in termination of

the agreement.

acquisition of the FuelMeister Business was accounted for by the purchase method

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assets acquired

2, 2007, we entered into a merger agreement with BSI, as a result of which we

acquired the remainder of BSI's business (i.e., other than the FuelMeister

Business acquired previously).

BSI is engaged in the business of designing,

manufacturing and marketing processing equipment and accessories, including

personal biodiesel processors and “community scale” biodiesel processor systems,

which convert fresh and used vegetable oils into clean burning biodiesel fuel.

It complements and optimizes Renewal’s ability to design, develop, manufacture

and market both personal and community scale biodiesel processing equipment and

consideration for the acquisition of BSI, we issued an aggregate of 3,333,333

shares of common stock, 1,000,000 new Series B preferred shares of BSI,

initially convertible into 1,333,333 shares of our common stock, options to

purchase 96,400 shares of our common stock and $500,000 in cash.

Preferred Stock is immediately convertible at the option of the holders into

common stock of the Company at a conversion price equal to the greater of (i)

$0.75, or (ii) the average closing price of the common stock during the ten

trading days immediately preceding the conversion date.

Prior to the acquisition

of BSI, the Company loaned $200,000 to BSI under an 8% 180 day secured

promissory note, due November 24, 2007.

Upon the acquisition of BSI, the note

receivable was reclassified as an investment to BSI.

July 2, 2007, we entered into a Securities Purchase Agreement with YA Global

providing for the sale to YA Global of secured convertible debentures in the

aggregate principal amount of $2,700,000, of which $2,000,000 was advanced

The second installment of $700,000 will be funded within two

business days after the Company has unconditionally booked and received at least

a 50% deposit for the sale of at least one BiodieselMaster® unit.

We also issued

to YA Global five-year warrants to purchase 2,250,000 shares of our common stock

at $0.90 per share.

The Debentures bear interest at the prime rate plus 2.75%

(but not less than 10%) and mature two years from the date of issuance (the

"Maturity Date").

The Company is not required to make any payments until the

Maturity Date.

The holder of the Debentures may convert at any time amounts

outstanding into shares of Common Stock at a conversion price per share equal to

the lesser of (i) $0.05, or (ii) 80% of the lowest closing bid price of the

Common Stock during the ten trading days immediately preceding the conversion

aggregate purchase price for the BSI acquisition was determined based on the

fair value of the consideration issued, which consisted of common stock,

preferred shares of BSI convertible into our common stock, options to purchase

our common stock and cash, as follows:

shares of common stock

shares of preferred stock of BSI

common stock options

receivable from BSI reclassified to contributed capital

paid, net of $77,986 cash acquired

purchase price

purchase price was allocated to BSI’s net tangible and intangible assets based

on their estimated fair values as of the date of the completion of the

acquisition and based on a report by an independent, reputable appraiser in

accordance with the professional standards of the American Society of Appraisers

and the Institute of Business Appraisers.

The amount allocated to purchased “in

process research and development costs” was valued at fair value using a debt

free cash flow method.

As required by current accounting literature, these costs

are immediately expensed in the current period’s income statement.

allocation of the total purchase price is summarized below:

capital, net and excluding cash acquired

process research and development

Assets Acquired

described above, under the terms of the Renewal Merger Agreement, we acquired

100% of the common stock of Renewal Biodiesel in exchange for the issuance by us

of 22,907,323 common shares.

Although we were the legal acquirer, Renewal

Biodiesel was considered to be the accounting acquirer and, as such, the

acquisition was accounted for as a reverse merger and recapitalization.

result, the accompanying unaudited consolidated financial statements represent

the results of operations and cash flows of the accounting acquirer and

Successor (Renewal Fuels) for the period ending March 31, 2008.

The FuelMeister

Business acquired by Renewal Fuels constitutes our Predecessor business.

accompanying unaudited consolidated financial statements, as of March 31, 2008

and for the period March 9, 2007 (date of inception) through March 31, 2007, are

those of the Successor.

The statements of operations for the three months ended

March 31, 2007, and the statements of cash flows for the three months ended

March 31, 2007 are those of our Predecessor, the FuelMeister

BUSINESS STRATEGY, CORE

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the biodiesel produced with the FuelMeister II biodiesel production

which was acquired on July 2, 2007, manufactures a complementary product to

FuelMeister called BiodieselMaster®.

This product is a factory-built biodiesel

processing plant that is appropriately scaled for a variety of customers,

including small communities, farms, farm co-ops and trucking fleets.

BiodieselMaster® is a community-scale biodiesel processing unit that is designed

to produce 350,000 gallons of biodiesel per year.

The design provides a

biodiesel production system that is continuous, flexible, efficient, affordable,

and fully-automated.

The automated control system minimizes labor costs and

facilitates remote diagnostics.

engaged in the growth of cellulosic feedstock for the biofuels

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establishing customers for the products to be produced by RPI.

Service Agreement between RPI and Emerald Energy, LLC was consummated on

February 11, 2008, providing for the completion of the greenhouse installation

and operation of the facility.

Root sections were purchased for

$50,000 in 2008.

Due to growing circumstances, the root sections did

RPI is currently in the process of recuperating the

$50,000 invested in the root sections.

the revenue generating activities of the FuelMeister Business, the Predecessor

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discussion that follows of Results of Operations is in the following

of operations for the three months ended March 31, 2008(

Uunaudited)(Successor);

of operations for the period March 9, 2007 (date of inception) through

March 31, 2007(Unaudited)

OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2008

information contained in this section is that of the Successor, Renewal Fuels,

Inc., for the three months ended March 31, 2008 (unaudited).

of operations for the three months ended June 30, 2008 and 2007(

of operations for the six months ended June 30, 2008 and the period March

9, 2007 (date of inception) through June 30,

OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2008 AND 2007

compensation and benefits

transaction expense

and equipment

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Income (Loss)

three months ended March 31, 2008, revenues were $345,862, an increase when

compared with the Successor’s period of March 9, 2007 (Date of Inception) to

March 31, 2007, due to an increase in sales of the Fuelmeister

three months ended June 30, 2008, revenues were $879,973, when compared with the

three months ended June 30, 2007 of $244,087 increase is due to increased sales

of the Fuelmeister product.

of Sales and Gross Profit

sales for the three months ended March 31, 2008 was $221,697 or 64.1% of

revenues for the quarter, resulting in a gross profit margin of $124,165 or

35.9% for the three months ended March 31, 2008.

sales for the three months ended June 30, 2008 was $575,847, resulting in a

gross profit of $304,126 for the three months ended June 30, 2008 when compared

to three months ended June 30, 2007 of $142,342 and a gross profit of $101,745

increase is due to an increase in sales of the Fuelmeister

Compensation and Benefits

compensation and benefits were $263,057 or 76.1% of revenues for the three

months ended March 31, 2008.

These expenses have increased when compared with

the Predecessor’s three months ended March 31, 2007 due to increased engineering

and labor costs associated with the Fuelmeister and BiodieselMaster®

compensation and benefits were $90,044 for the three months ended June 30, 2008

when compared to three months ended June 30, 2007 of $32,696 increase due to the

addition of several employees and officers.

Transaction Expense

transaction expense was $5,131,231 for the three months ended June 30, 2007,

associated with the acquisition of Fuelmeister.

and Equipment

and equipment expenses, consisting of rent, depreciation, amortization, and

other miscellaneous expenses, amounted to $42,984 or 12.4% of revenues for the

three months ended March 31, 2008, an increase when compared with the

Predecessor’s three months ended March 31, 2007 due to facility expansion for

the Fuelmeister and BiodieselMaster ® products.

expenses were $29,523, or 8.5% of revenues, for the three months ended March 31,

2008 and increased when compared with the Predecessor’s three months ended March

31, 2007due to website costs and management’s re-launch of the FuelMeister

fees, consisting primarily of accounting, attorney and valuation fees, were

$119,295 or 34.5% of revenues for the three months ended March 31, 2008 and

increased compared with the Predecessor’s three months ended March 31, 2007 due

to increased costs associated with SEC compliance and related

and equipment expenses, consisting of rent, depreciation, and other

miscellaneous expenses, amounted to $33,020 for the three months ended June 30,

2008 compared with the three months ended June 30, 2007 of $8,257 increase is

due to additional cost of production for the

FuelMeister product.

expenses were $22,251 for the three months ended June 30, 2008 when compared

with the three months ended June 30, 2007 of $43,815 decrease due to less

advertising and website costs.

fees, consisting primarily of accounting, attorney and accountant fees, were

$143,388 for the three months ended June 30, 2008 compared with the three months

ended June 30, 2007 of $317,898 decreased is due to acquisition and merger costs

and Administrative Expenses

and administrative expenses, consisting of administrative expenses, insurance

and other non-manufacturing related expenses were $116,888 or 33% of revenue for

the three months ended March 31, 2008 and increased compared with the

Predecessor’s three months ended March 31, 2007 due to additional costs

associated with the Fuelmeister and BiodieselMaster® products.

and other non-manufacturing related expenses were $207,874 for the three months

ended June 30, 2008 compared with the three months ended June 30, 2007 of

$100,666, increase is due to additional costs associated with the

of Intangible Assets

of intangible assets was $105,056 or 30.4% of revenue for the three months ended

March 31, 2008, primarily due to the amortization of assets acquired in the

acquisition of BSI and Fuelmeister.

Financial (Income) Expense

financial (income) expense, consisting primarily of interest expense of $295,668

and other income of $109, amounted to a net expense of $295,559 for the three

months ended March 31 2008, and increased compared with the Predecessor’s three

months ended March 31, 2007, due to the interest and debt discount associated

with our convertible debenture obligations.

of intangible assets was $87,594 for the three months ended June 30, 2008,

primarily due to the amortization of assets acquired in the acquisition of

Other (Income)

(income) expense, was $775,776 for the three months ended June 30, 2008

consisted of interest expense of $349,134 other expenses of $29,836, and

discounted operation of $396,806, when compared with the three months ended June

30, 2007 of $433,377, increase is due to additional interest and debt discount

associated with our convertible debenture obligations, along with discounted

operations of BSI.

result of the above, we reported a net loss of $1,055,821 for the three months

ended March 31, 2008.

OF OPERATIONS FOR THE PERIOD MARCH 9, 2007 (DATE OF INCEPTION) THROUGH MARCH 31,

information contained in this section is that of the Successor, Renewal Fuels,

Inc., for the period March 9, 2007 (date of inception) through March 31, 2007

ended June 30, 2008 and a net loss of $5,966,195 for the three months ended June

OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2008 and MARCH 9, 2007 (DATE OF

INCEPTION) TO JUNE 30, 2007.

compensation and benefits

transaction expense

and equipment

general and administrative expenses

of intangible assets

Operating Expenses

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Income (Loss)

period from March 9, 2007 (inception) through March 31, 2007, net sales were $0

and decreased when compared with the Predecessor’s three months ended March 31,

2007 due to management’s focus on the acquisition of FuelMeister and

BiodieselMaster® products.

six months ended June 30, 2008, revenues were $1,225,835 when compared with

period of March 9, 2007 (Date of Inception) to June 30, 2007 of

$244,087 increase is due increased to sales of the Fuelmeister

of Sales and Gross Profit

sales for the period ended March 9, 2007 (inception) through March 31, 2007 was

$0 due to management’s focus on the acquisition of FuelMeister and

BiodieselMaster® products.

sales for the six months ended June 30, 2008 was $797,544 resulting in a gross

profit of $428,291 for the six months ended June 30, 2008 compared to $142,342

and a gross profit of $101,745 for March 9, 2007 (Date of Inception) to

June 30, 2007 due to increased sales and production of the Fuelmeister

Compensation and Benefits

compensation and benefits were $0 for the period from March 9, 2007 (inception)

through March 31, 2007 due to management’s focus on the acquisition of

FuelMeister and BiodieselMaster® products.

fees were $0 for the period from March 9, 2007 (inception) through March 31,

2007 due to management’s focus on the acquisition of FuelMeister and

BiodieselMaster® products.

compensation and benefits were $353,101 for the six months ended June 30, 2008

when compared to March 9, 2007 (Date of Inception) to June 30, 2007

of $34,272 increased due to the acquisition of RBI.

Transaction Expense

transaction expense was $5,131,231 for March 9, 2007 (Date of Inception) to June

30, 2007 due to the acquisition of the Fuelmeister product.

and Equipment

and equipment expenses, consisting of rent, depreciation, and other

miscellaneous expenses, amounted to $76,004 for the six months ended June 30,

2008 when compared with March 9, 2007 (Date of Inception) to June 30, 2007 of

8,257 increased due to facility production for the FuelMeister

expenses were $51,774 for the six months ended June 30, 2008 when compared with

March 9, 2007 (Date of Inception) to June 30, 2007 of $43,983 increased due to

increased advertising and website costs.

fees, consisting primarily of accounting, attorney and accountant fees, were

$262,683 for the six months ended June 30, 2008 when compared with March 9, 2007

(Date of Inception) to June 30, 2007 of $349,741 decreased due to acquisition

and merger costs in 2007.

and Administrative Expenses

and administrative expenses were $31,494 for the period from March 9, 2007

(inception) through March 31, 2007 and increased due to management’s focus on

the acquisition of FuelMeister and BiodieselMaster® products.

Financial (Income) Expense

financial (income) expense, consisting primarily of interest expense of $35,654

and a gain on sale of assets of $(71,916), amounted to a net income of $36,242

for the period from March 9, 2007 (inception) through March 31,

result of the above, we reported a net income of $6,768 for the period from

March 9, 2007 (inception) through March 31, 2007.

General and administrative expenses,

consisting of administrative expenses, insurance and other non-manufacturing

related expenses were $324,762 for the six months ended June 30, 2008 when

compared with March 9, 2007 (Date of Inception) to June 30, 2007 of $100,494

increased due to additional costs associated with the

Fuelmeister .

of Intangible Assets

of intangible assets was $192,650 for the six months ended June 30, 2008,

primarily due to the amortization of assets acquired in the acquisition

(Income) Expense

(income) expense, was $1,071,335 for the three months ended June 30, 2008

consisted of interest expense of $644,802 other expenses of $29,836, and

discounted operation of $396,806, when compared with the period March 9,

2007 (Date of Inception) to June 30, 2007 of $435,304, increase is due to

additional interest and debt discount associated with our convertible debenture

obligations, along with discounted operations of BSI.

result of the above, we reported a net loss of $1,904,018 for the six months

ended June 30, 2008 and a net loss of $6,001,538 for March 9, 2007 (Date of

Inception) to June 30, 2007.

LIQUIDITY AND CAPITAL

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assuming we will continue as a going concern.

During the three months ended

March 31, 2008, we had a net loss of $848,197 which included non-cash items

totaling $411,498, consisting primarily of depreciation, amortization of

financing fees, convertible debt, and intangible assets.

During the six months ended June

30, 2008, we had a net loss of $1,904,018 which included non-cash items totaling

$1,267,676, consisting primarily of depreciation, amortization of financing

fees, convertible debt, and discontinuation of operations.

Our existence is

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used in investing activities was $11,264, which is the purchase of depreciable

provided by financing activities was $39,541 which was provided by proceeds from

note payables from stockholders.

provided by financing activities was $257,042 which was provided by proceeds

from note payables from stockholders.

currently do not have sufficient cash reserves to meet all of our anticipated

obligations for the next twelve months and there can be no assurance that we

will ultimately close on the necessary financing.

In addition to any third-party

financing we may obtain, we currently expect that funding from related parties,

debt, or equity may be a continuing source of liquidity to fund our

Accordingly, we will need to seek funding in the

OFF-BALANCE SHEET

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ability to continue as a going concern is dependent on our ability to obtain

additional funds through debt and equity funding as well as increasing

sales of biodiesel units.

With these sales the Company anticipates that it will

become less reliant on short-term financing.

additional funds through debt and equity funding as well as increasing sales of

biodiesel units.

With these sales the Company anticipates that

it will become less reliant on short-term financing.

Concentrations

of Credit Risk

Company has several customers that accounted for the total revenue for the three

months ended March 31, 2008.

Company has several customers that accounted for the total revenue for the six

months ended June 30, 2008.

Company recognizes sales when earned.

18 unchanged sentences

and procedures.

direction of our Chief Executive Officer and Chief Financial Officer, we

evaluated our disclosure controls and procedures and internal control over

financial reporting and concluded that (i) our disclosure controls and

procedures were effective as of March 31, 2008 and (ii) no change in

internal controls over financial reporting occurred during the quarter ended

March 31, 2008, that has materially affected, or is reasonably likely to

materially affect, our internal control over financial

Under the direction of our Chief Executive Officer and Chief

Financial Officer, we evaluated our disclosure controls and procedures and

internal control over financial reporting and concluded that (i) there continue

to be material weaknesses in the Company’s internal controls over financial

reporting, that the weaknesses constitute a “deficiency” and that this

deficiency could result in misstatements of the foregoing accounts and

disclosures that could result in a material misstatement to the consolidated

financial statements for the current period that would not be detected, (ii)

accordingly, our disclosure controls and procedures were not effective as

of June 30, 2008, and (iii) no change in internal controls over financial

reporting occurred during the quarter ended June 30, 2008, that has materially

affected, or is reasonably likely to materially affect, our internal

control over financial reporting;

provided, however, that it is to be noted

that, based on the above described material weakness, our management, including

our CEO and CFO have concluded that we did not maintain effective internal

control over financial reporting as of June 30, 2008.

controls and procedures and other procedures are designed to ensure that

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officer as appropriate, to allow timely decisions regarding required

15, 2008, Bryan Chance, age 38, was appointed as Chief Executive Officer and

Chief Financial Officer of the Company.

Chance is a certified

public accountant and has served as Chief Financial Officer of Titan Global

Holdings, Inc.

since January 24, 2006 and as President and Chief Executive

Officer since August 18, 2006.

Chance also served as Chief

Financial Officer for Aslung Pharmaceutical, a privately held generic

pharmaceutical manufacturing company from 2000 to 2002 and has held financial

and mergers and acquisition leadership positions in companies such as Caresouth,

Nursefinders, Home Health Corporation of America, the Baylor Healthcare System,

Columbia/HCA and Price Waterhouse, LLP.

By appointing someone who is

qualified as a CPA and has considerable experience serving as a Chief Financial

Officer, the Company has endeavored to provide the financial leadership that the

Company requires in order to eliminate the weaknesses in its internal controls

over financial reporting and otherwise design, implement and maintain a

sufficient systems of internal financial controls.

in Internal Control Over Financial Reporting

have been no changes in our internal controls over financial reporting during

the quarter ended March 31, 2008, which have materially affected, or are

the quarter ended June 30, 2008, which have materially affected, or are

reasonably likely to materially affect, our internal control over financial

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis