SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-KSB (this "Form 10-KSB"), including statements under "Item 1. Description of Business," and "Item 6. Management's Discussion and Analysis", constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 (collectively, the "Reform Act"). Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "should", or "anticipates", or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of HealthRenu Medical, Inc. ("HealthRenu", "the Company", "we", "us" or "our") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. References in this Form 10-KSB, unless another date is stated, are to September 30, 2005.

BUSINESS DEVELOPMENT

HealthRenu was originally incorporated in Colorado as American Merger Control, Inc. on January 6, 1986. In 1990, the Company changed its name to Ultratech Knowledge Systems, Inc., and in 1993 the Company changed its name again to AGTsports, Inc. During the fiscal years ended September 30, 1991 and through September 30, 1998, the Company's business plan was to pursue providing technological and software services to golf and related industries. In 1998, the Company abandoned this business plan. Prior to entering into an exchange agreement, discussed below, and the consummation of the transactions thereunder, the Company was considered a "shell" (or "blank check") company whose sole purpose was to search for and enter into new business opportunities.

On September 4, 2003, the Company merged into AGTsports, Inc., the Company's wholly-owned Nevada subsidiary. As a result of the merger, the Company was reincorporated in Nevada.

On September 26, 2003, AGTsports, Inc., Health Renu, Inc., a Delaware corporation (hereinafter "Health Renu-DE") and the former Health Renu-DE stockholders entered into an exchange agreement whereby Health Renu-DE became a wholly-owned subsidiary of the Company and control of the Company shifted to the former Health Renu-DE stockholders.

The exchange agreement represented a recapitalization of Health Renu-DE with accounting treatment similar to that used in a reverse acquisition, except that no goodwill or intangible asset is recorded. A recapitalization is characterized by the merger of a private operating company into a non-operating public shell corporation with nominal net assets and typically results in the owners and managers of the private company having effective or operating control after the transaction. HealthRenu emerged as the surviving financial reporting entity under the agreement, but AGTSports, Inc. remained as the legal reporting entity.

As a result of the acquisition of Health Renu-DE and a change in business focus, the Company changed its name to HealthRenu Medical, Inc. Hereinafter, a reference to the Company includes a reference to Health Renu-DE and vice-versa unless otherwise provided.

For the last three (3) years, the Company, and since its inception, Health Renu-DE has been in the medical research and development stage, with a focus on creating and improving its skin care and wound care products. During the last three(3) years, the Company had very little production or revenue.

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BUSINESS OF THE ISSUER

The Company is a biotechnology company that develops, produces and distributes proprietary products for personal skin care and wound care under the Health Renu'(R) brand name. The products are all natural and provide nutrients and proteins which may aid the body in its healing process.

We have developed two product lines - our HealthRenu medical line and our BetterSkin consumer line - which consist of the following products:

HEALTHRENU MEDICAL LINE:

DERM-ALL GEL

Used for non-healing wounds, pressure ulcers, diabetic ulcers, and surgical wounds.

SKIN RENU PLUS

Used for diabetic neuropathy, circulation, skin prep for pre-opt surgery patients, used in post-opt surgical wound care for preventive care against possible staph infection and more rapid recovery and scar reduction of the wound site.

SKIN RENU LOTION

Diabetic preventive skin care, preventive skin care for pressure ulcers, dermatitis, eczema, age spots, chronic bruising associated with thin skin, skin condition for thin skin, chronic dry skin, cracked hands, and preventive care against latex allergies.

SKIN RENU

Used for age spots, bruising, and burns. Important for people with serious allergic reactions to insect bites.

RENU CARE

Used as a non-rinse cleanser for bed patients, provides skin protection and can be used for stage 1 pressure ulcers (bedsores).

DEEP RELIEF

Has the transdermal ability to penetrate through skin layers, transferring anti-inflammatory ingredients through muscle tissue to the inflamed joints. Made with a heat action and used for severe arthritis.

HEALTH RENU SPORTS MEDICINE

Has the transdermal ability to penetrate through skin layers, transferring anti-inflammatory ingredients through muscle tissue to the inflamed joints. Made with peppermint oil which gives a peppermint fragrance as well as an anti-inflammatory action. Made with more of a mild heat action.

FACIAL SOAP

Used for facial skin disorders-contains omega 3, 6 & 9 fatty acids as well as vitamins.

BETTERSKIN CONSUMER LINE:

Our BetterSkin scented body lotions and body washes are designed for every day use by consumers. Our BetterSkin products come in the most popular selling scents in the U.S. - vanilla, strawberry, grapefruit, mango, cucumber melon, rose and peach - and contain seven (7) essential oils and vitamins. Unlike a majority of the consumer scented lotion lines on the market today which can damage fat cells of the skin, we believe that BetterSkin products offer a higher quality, healthier and less expensive lotion.

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DISTRIBUTION

The Company distributes its products directly to consumers and to nursing homes, surgery centers, pharmacies and other medical markets throughout the United States. The products are registered for such sale and distribution by the United States Federal Drug Administration (the "FDA"). Most of the Company's sales revenue is from sales of its products directly to consumers. Historically, most of the Company's sales had been to consumers, nursing homes, home health care, pharmacies, smaller medical supply companies, family clinics, and orthopedic surgeons, with some sales to hospitals.

Our current marketing efforts include use of regional medical supply distribution companies, mailings and magazine advertising targeted to older consumers in limited U.S. markets, and internet sales.

COMPETITION

We estimate that the U.S. market for personal skin care products is $10 billion per year, including cosmeceutical (skin care products designed for both cosmetic and health purposes such as suncare, anti-acne and lip care products) and anti-aging products and hand and body lotions and the U.S. market for wound care products is $2.8 billion per year. Our product lines accounts for a less than one-percent (1%) market share of this market. We will depend on marketing and distribution efforts to increase our market share. We believe that with an aggressive marketing campaign, we can distribute our product line on a nationwide basis and generate more revenue.

The personal skin care and wound care industries are served by a number of sources, including major domestic and international medical, pharmaceutical, cosmetic, consumer products and other companies. Most of these companies have financial, technical, marketing, sales, manufacturing, distribution and other resources substantially greater than ours.

Large corporations dominate sales in these industries although we believe many opportunities exist for medium and smaller-sized companies like us to compete. Medical/Pharmaceutical competitors include such large corporations such as Johnson & Johnson, Pfizer, Merck and 3M. The consumer skin care arena includes leaders such as Procter & Gamble and Eli Lilly. The cosmeceutical market is led by such well known companies as Clinique, Lancome and Estee Lauder.

We believe that we compete based upon the effectiveness of our products and upon price. We minimize our product prices by minimizing our expenses, including for product production, inventory, advertising and other overhead expenses. We intend to operate with minimal overhead costs by outsourcing our shipping, receiving, purchasing, and production functions. We also believe that our wound care products work simply, rapidly and effectively thus reducing the average cost of a wound closure to less than that for many or our competitors.

MANUFACTURE OF PRODUCTS

Our products are contract-manufactured by a Texas-based pharmaceutical laboratory which has been approved by the FDA. We do not have a contract with this laboratory. We cannot assure you that this laboratory will continue to maintain its FDA certification or that it will continue to be willing or able to produce our products for us at reasonable prices or at all. If for any reason this laboratory discontinues production of our products, it would likely result in significant delays in production of our products and interruption of our product sales as we seek to establish a relationship and commence production with a new laboratory.

The laboratory owns our product formulas subject to our exclusive use and right to purchase the formulas. The laboratory is responsible for supplying the formula ingredients other than the essential fatty acids which we supply for quality control purposes. We currently have on hand sufficient essential fatty acid supplies to meet our short terms needs and we have developed sources for their supply for the long-term future.

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INTELLECTUAL PROPERTY

We own the registered trademark, Health Renu(R). We do not own any patents or licenses. Our production laboratory owns our product formulas subject to our rights to exclusive use of our product formulas and to purchase these formulas at prices that we believe are reasonable. We claim proprietary rights in various unpatented technologies, know-how, trade secrets and trademarks relating to our products and manufacturing processes. We protect our proprietary rights in our product formulas and operations through contractual obligations with our consultants and vendors. We cannot guarantee the adequacy of these protections, or that our competitors will not independently develop or patent products that are substantially equivalent or superior to our products.

Darrell Good, the founder and principal of Health Renu, has competed against us by posting products similar to ours with the same product numbers on his website for sale. Mr. Good has also attempted to solicit sales from our customers. We have various other claims against Mr. Good including for fraud, breach of contract and breach of fiduciary duty based on Mr. Good's misrepresentation to us that we owned our products' formulas when in fact they are owned by the production laboratory. We filed a lawsuit against Mr. Good in the U.S. District Court for the Southern District of Texas seeking recovery for these claims. Although a final default judgment against Mr. Good was entered in this case, we cannot assure you that we will be able to prevent Mr. Good from continuing to compete with us or solicit our customers. If Mr. Good continues to compete with us or solicit our customers, it could have a material adverse effect on our business.

GOVERNMENT REGULATION

Our products are considered over-the-counter ("OTC") and meet the FDA's requirements for sales directly to consumers and medical related companies. We are currently developing new OTC products for which we will need to meet FDA requirements in order to sell these products to consumers and medical related companies. Any product claims we make on our product packaging or sales literature must comply with FDA requirements. We believe that we are in material compliance with these requirements. We cannot assure you that these FDA requirements will not change, that our products will continue to be considered OTC products, that they will maintain their FDA registrations or that we will be able to obtain OTC classification or FDA registration for any future products that we may develop. All of our product production is outsourced to a FDA certified laboratory.

RESEARCH AND DEVELOPMENT OVER PAST TWO YEARS

The Company continually strives to develop new products to aid in personal skin and wound care for its customers. The Company seeks to conduct research and development on an on-going basis. We plan to bring to market any new products that are successfully developed and tested. We have not incurred any research and development expenses during the fiscal years ended September 30, 2004 and 2005, respectively.

Dr. Daniel Sparks MD-Surgeon, and a director of the Company, is completing a clinical write-up of the use of the products for pre-operative and post-operative surgical wound care. The write-up covers a two-year period of time that has resulted in the design of two new products that will be stated in the write-up. At the present time, Dr Sparks' work is continuing and ongoing.

EMPLOYEES

The Company has four (4) full-time employees. The Company contracts with consultants to assist in numerous areas of the Company's operations and development. Additionally, the Company outsources key functions to control costs and keep its overhead low. The Company will hire other full-time employees on an as needed basis.

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