2 Kalorama Information, The Worldwide Market for In Vitro Diagnostics Tests, 6th Edition, June 2008, p3

 

2

---

 

 

The following table summarizes the market size and projections of the IVD market and the sub-sectors where our products will compete:

 

Product		2007				2008				2009				2010				2011
IVD  (billions)			42.1				44.5				47.1				49.1				52.9
Immunoassay Testing (billions)			4.185				4.435				4.695				4.975				5.260
POC Testing (billions)			1.625				1.715				1.815				1.910				2.02
Cardiac Marker Tests (millions)			425				471.75				523.64				581.24				645.17

In 2007, 16 top tier IVD companies occupied 78% of the global market ($32 billion).  Since 2005, there has been a trend toward consolidation at all levels of the IVD market.  In 2007, three top tier companies, DPC, Dade Behring and Bayer Diagnostics, merged to become Siemens Medical Diagnostics.

Immunoassay Market

The 2007 world market for all immunoassays, excluding infectious diseases, is estimated at $4,185 million3, and by 2012 the market is projected to grow by 6% annually to reach $5,605 million worldwide. Immunoassays sales for cardiac markers were 785 million in 2007, or 12% of market, and this is expected to increase to 1,050 million (12%) by 20124. The following table illustrates the relationships between the top IVD companies and sales of IVD products.

Revenue History of Leading Immunoassay Vendors, $ million 2005-20075

		2007				2006				2005
Abbott Diagnostics			2,100				1,900				1,800
Siemans/Dade Behring			825				785				750
Siemens/Bayer			750				714				680
Beckman Coulter			596				484				402
Siemens/DPC			595				517				473
Roche			575				509				450
bioMérieux			363				362				353
Fujirebio			299				277				279
Ortho			200				190				160
TOTAL			6,303				5,738				5,347

Immunoassay testing segment of the IVD market is characterized by:

 

·

Expanding opportunities after completion of the human genome project.

 

·

Demand for automated and sensitive POC immunoassay analyzers.

 

·

Search for an ideal POC platform.

 

 

3

---

 

 

·

Increased mergers and acquisition among top tier IVD companies to achieve more complete product lines

 

·

Greater cooperation between test developers and top tier IVD companies.

 

Over the next 5-10 years, the immunoassay business will see:

·

The continued automation of routine immunoassays – thyroid, anemia,  fertility, therapeutic drug monitoring and drugs of abuse; and

·

More new assays and test categories for disease risk evaluation.6

 

Point-Of-Care (POC) Testing Market

Point Of Care (POC) testing refers to a laboratory assay that can be performed outside of a centralized facility, with results available within minutes. POC testing is divided into personal use tests, such as pregnancy tests, and professional use tests, that are administered in a physician‘s office or hospital emergency ward. Our tests will compete in the professional use testing market sector.

The market for professional7 POC immunoassays is estimated at $1,625 million in 2007 and with the 14% projected growth, this market will reach $2,770 million in 2012. It is anticipated that most of the growth will come from increased use of cardiac markers and new assays for cancer markers and diabetes/cardiac disease markers. The market for professional POC tests for cardiac markers is estimated at $425 million in 2007 (11%) and this is expected to increase to $850 million (15%) by 2012.7

There is a wide perception that POC tests are more expensive than lab-based tests and that patient test results are lost to the historical record. There is also the perception that once the patient leaves the acute care area, the baseline POC tests done in that unit are of little value because the POC testing results do not correlate with lab-based systems.

Two critical characteristics are necessary for potential POC test products to become more prevalent; POC testing results must correlate with lab results and the POC devices must be more consistent and robust in delivering those results.

The impact of POC testing on improving patients’ care is clear and has been well documented. Further, the impact of POC testing on saving healthcare resources was also demonstrated by numerous agencies and institutions.

 

Cardiovascular Disease Testing Market

Cardiac markers are proteins released from heart muscle when it is damaged as a result of a heart attack (myocardial infarction), when the blood supply to part of the heart is interrupted. Physicians use cardiac markers in two ways – to diagnose a cardiac event in a hospital emergency room or within the hospital or to evaluate a risk of a cardiovascular event occurring. The routine markers of myocardial infarction – CK-MB, troponin and myoglobin and recently BNP are used in the acute care and tests such as cholesterol are used to evaluate risk.

The world market for cardiac markers is estimated at $740 million in 2007, and with projected annual growth of 5%, will reach $1,050 million in 2012.

Until recently, Troponin and CK-MB were the lead cardiac markers. Brain Natriuetic Pepetide (BNP) was recently introduced to differentiate between a myocardial infarction and heart failure. A number of companies are focused on developing new cardiac markers.

 

 

4

---

 

Magnetic Particles Market

Magnetic particles, or beads, are widely used as the solid phase for binding tests for automating and simplifying the methods for isolation and detection of biomolecules in both research and routine clinical laboratories. Eight of the top 10 IVD companies employ magnetic particles in their fully automated analyzers.

 

An independent 2006 market research report, prepared for CardioGenics by Adventus Research Inc. (the “Adventus Report”) and sponsored by the National Research Council of Canada (NRC), estimated the market for magnetic beads for immunoassays and molecular diagnostics to be approximately $900 million (between $833 million and $1.3 billion). The report of market size did not include magnetic beads produced in-house by some of the IVD test manufacturers or beads produced for research applications. The Adventus Report was conducted using several methods, including interviews with leading particle-manufacturers and the end-users, published industry reports and data from leading IVD manufacturers.

As stated in the Adventus Report, according to Dynal, a leading magnetic beads manufacturer, the largest part of its Molecular Systems’ business is OEM sales of magnetic beads to IVD companies. Dynal stated that “the IVD market is very large, and still growing. However, the magnetic bead-based part of this market is growing at an even higher rate per year”.8 According to Dynal, immunoassays make up more than USD 4 billion of the IVD market, and magnetic beads are now the gold standard for immunoassay testing, as opposed to older technologies such as microtitre plate based tests. Nucleic acid testing makes up a smaller portion of the IVD market, USD 2 billion, but is fast growing. Magnetic beads are also the most common solid phase employed in this market.

 

Furthermore, according to Dynal, as stated in the Adventus Report, end-user business rather than OEM business (referred to as functionalized and naked beads markets respectively) goes to research and routine laboratories within Genomics, Expression Profiling and Proteomics. The market size for Genomics, including DNA and RNA extraction and purification products was USD 300 million in 2001 while the market size of Pharmacogenomics was estimated to be USD 2.3 billion in 2001.

 

 

5

---

 

 

As stated in the Adventus Report, according to Gen-Probe, which is a leading DNA clinical testing company, other markets that are employing magnetic beads as a solid phase are growing also. Further, magnetic particles are used for Separation of Microorganisms in Food and Water Testing and also for HLA testing for organ transplantation.

 

 

Source:   Gen-Probe presentation- May 2006

JAG Notes & Pixaya Markets

 

Internet-Based Financial Information Market

 

The growth of the Internet has changed the way investors seek information and manage their portfolios.  Individual investors are increasingly seeking access to information that was formerly available only to financial professionals.  Professional investors who have traditionally relied on print and other media for information are demanding faster information and greater accessibility.

 

According to tracking surveys conducted by Pew Internet & American Life Project as of September 2007, approximately 36% use the Internet to obtain financial information and approximately 11% use the Internet to buy or sell stocks, bonds or mutual funds. (http://www.pewinternet.org/trends/Internet_Activities_7.22.08.htm). Although this represents a decrease from the 44% and 13%, respectively for these activities, reported by Pew in 2005, the Internet population base has steadily risen during this period as has broadband usage.

 

Mobile & Wireless Market

 

With respect to our Pixaya business unit, the mobile and wireless industries are experiencing significant growth and changing the way businesses operate and people communicate.  Both industries are also giving rise to new forms of mobile entertainment, communication and information not available just a few short years ago.  As of June 2008 there were more than 262 million wireless subscribers in the U.S., reported wireless minutes of use exceeded 2.2 trillion and wireless penetration reached 84% of the total U.S. population (http://www.ctia.org/advocacy/research/index.cfm/AID/10323).

 

In addition, wireless carriers are updating their networks and are in the process of deploying their next-generation high-speed broadband networks, commonly referred to as 3G. Such 3G networks will significantly improve uplink and downlink speeds, thereby providing an enhanced user experience when viewing video, accessing the Internet or working with any large data files.

 

6

---

 

 

OUR PRODUCTS

 

The CardioGenics Products

 

QL Care Analyzer (QLCA)

The QLCA represents a shift in the design of POC analyzers. The QLCA is a small, portable, stand-alone and completely automated point-of-care immunoassay analyzer. The QLCA has successfully miniaturized lab test technology, and combined it with a simplified mechanical design and proprietary triggering mechanism.

The QLCA uses a proprietary self-metering cartridge to perform immunoassay tests at the POC. Each cartridge is pre-loaded with our beads, which have been coated with specific bind reagents and bioluminescent proteins linked to the target marker. A drop of whole blood added to the Cartridge creates the chemiluminescent reaction needed to deliver sensitive and accurate test results. Operation of the QLCA does not require specialized training and testing can be completed in 15 minutes.

POC immunoassay analyzers are not new; however, none of the commercial analyzers can replicate the sensitivity and accuracy of a test done in a medical lab. The QLCA delivers the required laboratory sensitivity and accuracy. The QLCA employs chemical light generation or “chemiluminescence“ (“CL“), the same technology used in the medical labs. The QLCA uses a patented automated electronic process to trigger CL, which enhances light collection, speeds up marker binding and increases sensitivity.

We have rigorously tested the QLCA protocols and have compared our test results against medical laboratory test data. Based on these internal test results, we have consistently met or exceeded the sensitivity standards of medical laboratory immunoassay equipment.

Cardiovascular Tests

To support the use of the QLCA, we have developed four immunoassay tests designed to identify cardiac markers in the blood at the time of a heart attack.

 

Test		Description
Troponin I (TnI)		§	TnI testing is the current routine testing for a heart attack.
		§	TnI is a heart muscle protein, released in the bloodstream shortly after a heart attack (myocardial infarction or MI).
		§	Current laboratory analyzers cannot detect TnI before 4-6 hours after the onset of symptoms, when TnI concentration in the blood reaches its detection threshold.
		§	Our test will take only 15 minutes to deliver quantitative results, allowing physicians to obtain much more rapid results and therefore accelerate patient triage.
Plasminogen Activator Inhibitor Type-1 (PAI-1)		§	This test will help to optimize the performance of a heart drug (“tPA” or tissue Plasminogen Activator), a clot buster used as the first line of therapy for MI patients.
		§	This proprietary whole blood test will quantify PAI-1 levels within 15 minutes.
		§	Forty percent of patients do not respond to tPA, a fact recognized only after the “golden hour” (the time period in which permanent heart damage can be prevented) has passed.
Heart Failure Risk Stratification (HFRS)		§	We have discovered a family of related proteins that are released into the bloodstream during heart failure.

 

 

7

---

 

Test		Description
		§	We are developing a proprietary test, the Heart Failure Risk Stratification or HFRS test to stratify the risk of death in patients with heart failure, thus permitting the initiation of appropriate therapy at an early stage.
Heart Failure Genomics Risk (HFGR)		§	We are developing a proprietary HFGR test that predicts the response of heart failure patients to routinely administered drugs.
		§	The need to measure the precise response to these drugs in a timely manner would minimize the trial and error methods now used by doctors to optimize drugs best suited to each patient.

These tests are designed to be administered in the diagnostic and management process of patients with heart disease. The full scope of our core technology, as well as the know-how we have developed respecting aspects of chemical entrapment in bioassays, are covered under our patent applications.

Upon receipt of FDA approval, we intend to market the QLCA and the Cardiovascular Tests through a major IVD distributor. We have initiated discussions with a number of the Tier 1 IVD companies, and we anticipate that we will select a partner before we receive FDA approval. In accordance with industry practice, we intend to enter into a license agreement with our distribution partner for the manufacture and distribution of our products.

Paramagnetic Beads

Medical laboratories widely use paramagnetic particles as a solid surface in heterogeneous immunoassay tests utilizing the process of phase separation done by magnetic field.  Such tests involve the measurement of light generated on the surface area of paramagnetic beads coated with bio-organic material.

Our Beads represent a significant product advance. Most paramagnetic beads are made of iron oxide, and all are traditionally black or brown. We have developed a proprietary process that coats the beads with a layer of silver, making them white, and more sensitive to light. Our production process is also significantly less expensive than those used by our competitors. We have internally tested our Beads against all commercially available beads, and have found our silver-coated Beads to be five times more sensitive than traditional black or brown magnetic particles.

 

Since the CardioGenics business described above is now our primary business, we intend to examine the possibility of divesting our Pixaya and JAG Notes subscription businesses so we can focus our attention and resources exclusively on our primary CardioGenics business. Consistent with this objective, we have engaged in preliminary discussions with several parties that have expressed an interest in acquiring one or more of these businesses.

 

The JAG Notes and Pixaya Products

 

JAG Notes Subscription Products

 

We have been providing financial and investment information to the investment community since 1989.  In 1999, we began offering our services on a subscription fee basis to the general public for the first time through our website.

 

Our jagnotes.com website consists solely of a subscription-based service. We offer our subscribers two targeted products: The JAGNotes (Upgrade/Downgrade) Report, targeted primarily at institutional subscribers, and the Rumor Room, targeted primarily at retail individual customers. These two products are accessible only to paid subscribers. Subscriptions are offered to individuals at the rate of $9.95 per month, or $99.95 per year. We have offered free trial subscriptions at times in the past and may do so in the future.

 

8

---

 

 

JAGNotes (Upgrade/Downgrade) Report

 

The JAGNotes Report is a daily consolidated investment report that summarizes newly issued research, analyst opinions, upgrades, downgrades and analyst coverage changes from various investment banks and brokerage houses. Each morning we gather this information, then compile and release it in a concise, easy to read format before the markets open. We believe that this report gives early, convenient access to its subscribers of potentially market moving information that was traditionally not available in a convenient format when the market opens. We update this report from time to time during the trading day.

 

Our current strategy involves phasing out retail subscribers for the JAGNotes Report and refocusing on institutional customers and professional traders. We have always maintained our original JAGNotes fax-based service for a limited number of mostly institutional subscribers. Through this service, we provide our subscribers faxed copies of our daily JAGNotes Report, which is provided through installments as information is received every weekday morning before the stock market opens. We also allow our subscribers access to our U.S. website by providing them with a specified number of access codes. The price for this combined service is approximately $1,500 to $2,150 per year. The website contains substantially all of the information provided in the faxed reports, updates of such information and access to the Rumor Room.

 

We intend to continue providing our combined fax/internet service primarily to institutional subscribers.  We believe that some financial institutions are willing to pay a higher price for this combined service because they consider a faxed report to be a more user friendly means of receiving the information even if their employees have direct internet access.

 

While we intend to focus efforts exclusively on offering the JAGNotes Report to institutional customers, we recognize that it remains of interest to some retail customers as well.  However, to avoid the cost of accessing such individuals we expect to do so almost exclusively through strategic affiliations such as our current arrangement with Track Data.

 

Rumor Room

 

Because rumors can move equities, we have established the Rumor Room where we post rumors that have been heard on the street about various stocks.  When we hear rumors, we post the information in the Rumor Room and indicate the date and time of the rumor.  While we realize that rumors are inherently unreliable as indicated by a cautionary note introducing this portion of our website (jagnotes.com), we believe that every trader and investor, both large and small, should have access to this information to determine its usefulness.  The Rumor Room is available to our subscribers and updated whenever we receive relevant information.

 

Although targeted primarily at individual subscribers, the Rumor Room is also made available through our website to institutional investors as described above.  As described below, if we can obtain funding and we can complete development of our Pixaya Mobile software product, which delivers on-demand video/audio clips and text messages to mobile phones, we intend to try to distribute the Rumor Room through mobile phones as well.  We believe such a distribution channel might better access our target audience.  There can be no assurance, however, that such development will be successfully completed or, if completed, that customers will embrace this new mode of distribution.  For the time being, we have stopped further development of our Pixaya Mobile software product in light of our lack of liquidity.

 

Advertising Revenue

 

While we expect the primary source of our revenue for our JAGNotes business to continue to be from subscriptions for our JAGNotes Report and the Rumor Room, we may supplement this with advertising revenue.  Such revenues have, however, not been substantial to date.  We do not expect such advertising revenues to become material until (i) there is a major upturn from current levels in internet banner advertising generally or we are able to offer advertisers various media advertising alternatives to banners, and, (ii) we are successful in increasing the number of unique visitors to our website

 

Pixaya Products

 

SurvayaCam

 

In November 2004, we purchased certain development stage software products and related assets from TComm Limited, a company organized in the United Kingdom.  At the time of acquisition, TComm Limited was in various stages of development of four software products.  One product that we continued to develop is SurvayaCam (previously CCMTV), a mobile surveillance system that consists of software programs and related hardware intended to permit field personnel to send encrypted real-time video streams from the field to a central location (or multiple locations) where they can be viewed. The system can be used as a fixed-in-place or body worn surveillance system. We have only made minimal sales of such product as part of our prior marketing and distribution efforts. In light of our cash constraints prior to the CardioGenics Acquisition and the revised focus of our business as a result of that acquisition, we previously suspended marketing and further development of SurvayaCam and do not anticipate re-engaging in any further development and marketing efforts in connection with this product.

 

9

---

 

 

Pixaya Mobile and Other Pixaya Products

 

Due to our lack of funding, we have for the time being discontinued developing Pixaya Mobile (previously known as TComm TV), which delivers on-demand video/audio clips and text messages to various Java-based and Symbian-based mobile phones. We have also discontinued our support of the other products we acquired through our Pixaya acquisition.  In addition, after the acquisition we first supported and then had to suspend development of a new mobile phone product named “SOS Guides,” which are mobile travel guides deliverable to users through their mobile phones.

 

OUR STRATEGY

 

The success of our business depends on our ability to obtain the requisite financing and be able to:

 

●

complete the development of our QLCA and our cardiovascular tests;

 

●

obtain FDA approval of our QLCA and the cardiovascular tests;

 

●

develop further tests that can be run on our QLCA;

 

●

commercialize our Beads.

 

We will require additional funds in order to implement our full business strategy. Accordingly, we will need to raise additional funds through public or private financing, strategic relationships or other arrangements. We do not anticipate generating any significant revenue until after our first cardiovascular test has been approved by the FDA and our Beads are commercialized by Merck Chimie pursuant to our agreement with them.

 

Since our strength is product development and innovation, our strategy is focused on exploiting this strength. In terms of product development and innovation, we employ our internal resources to develop our products through the various phases of development. We also rely on external service providers to supplement our internal talents in product development.

 

We will outsource product manufacturing. In terms of the QLCA, both the cartridge assembly as well as the analyzer assembly will be contracted out to different OEM providers with the facilities and expertise to deliver quality products. We will maintain a quality control process to ensure that the products meet the predetermined specifications.

 

Product marketing and distribution will by achieved through partnerships with global companies with wide reach. As we have done with our magnetic beads, the QLCA will be marketed by a third party through licensing and distribution agreements.

 

We are also focusing on protecting our intellectual property and know how through maintaining  a patent filing process on a global basis as well as maintaining confidentiality agreements with our staff, employees and service providers under contractual agreements.

 

While we have continued to operate our original JAGNotes subscription business since the CardioGenics Acquisition we have also, during that time, evaluated whether it is in the best interests of the Company and its stockholders to continue to devote resources to operating this business unit. Given our new focus on the CardioGenics business as a result of the CardioGenics Acquisition, we concluded that the Company and its stockholders would be best served by devoting all of our efforts and resources to our core CardioGenics business.

Accordingly, we began considering offers for the purchase of our Pixaya business unit (including our JAGNotes subscription business). On February 10, 2010 we entered into an agreement to sell our 100% membership interest in our Pixaya LLC subsidiary and the transaction closed on February 11, 2010.

 

Although we believe in these strategies, goals and targets, we cannot guarantee that we will be successful in implementing them or that, even if implemented, they will be effective in creating a profitable business. In addition, we are dependent on having sufficient cash to carry out our strategies

 

Regulation

 

CardioGenics Products

Our QL Care Analyzer, Cartridge and Tests are classified as medical devices. Our beads are reagents of medical testing equipment. Accordingly, they are subject to a number of regulations in the jurisdictions where our products will be sold.

 

10

---

 

 

United States

 

The testing, production and sale of IVD products are subject to regulation by numerous state and federal government authorities, principally the FDA.

 

Pursuant to the U.S. Federal Food, Drug and Cosmetic Act (“FD&C Act”), the FDA regulates the preclinical and clinical testing, manufacture, labeling, distribution and promotion of medical devices.

 

Medical devices are classified into three categories, Class I, Class II or Class III. The classification of a device is based on the level of control necessary to assure the safety and effectiveness of the device. Generally, the complexity of the submission and the approval times are based on the regulatory class of the device. Device classification depends on the intended use and also the indications for use of the device. Classification is also based on the risk the device poses to the patient and/or the user. Class I devices include devices with the lowest risk, and Class III devices are those with the greatest risk. Class I devices are subject to general control, Class II devices are subject to general controls and special controls, and Class III devices are subject to general controls and must receive a Premarket Assessment or PMA by the FDA.

 

Before some Class I and most Class II devices can be introduced in the market, either the manufacturer or distributor of the device is required to follow the pre-market notification process described in section 510(k) of the FD&C Act. A 510(k) is a pre-marketing submission made to the FDA to demonstrate that the device to be marketed is as safe and effective, and is substantially equivalent to a legally marketed device. Applicants must compare their 510(k) device to one or more similar devices currently on the US market and support their claims for substantial equivalency. The FDA requires a rigorous demonstration of substantial equivalency. It generally takes three to six months from submission to obtain 510(k) clearance. If any device cleared through 510(k) is modified or enhanced, or if there is a change of use of the device, a new amended 510(k) application must be submitted. According to FDA regulations and our management team’s prior experiences with submissions of similar products, our QLCA and launch product (TnI) will be classified as a Class II device and will be subjected to the 510(K) process. Further, a second test product of ours (HFRS) will also be subjected to the same 510(K) process. As for both tests, predicate devices are commercially available.  For other test products, depending on the claims and with a prior agreement with the FDA, the submissions would be either a PMA or 510(K). We have not yet approached the FDA for that purpose.

 

Canada

 

Health Canada sets out the requirements governing the sale, importation and advertisement of medical devices. These regulations are intended to ensure that medical devices distributed in Canada are both safe and effective. We are also required to comply with certain procedures for the disposal of waste products under the Canadian Code of Practice for the Management of Biological Waste (the “Code”). We believe we are currently in compliance with all required Code provisions.

 

Europe

 

Our products will be subject to registration under the EU Medical Device Directives for in-vitro diagnostic products.

 

Other countries

 

Our products will be subject to the regulations of any country where they are sold, and we will make the necessary applications for approval on a country-by-country basis.

 

JAGNotes and Pixaya Products

 

The securities industry is subject to extensive regulation under federal and state laws in the United States, and companies that provide financial advice to investors are generally required to register as investment advisers at either the federal or state level. We believe that our JAGNotes business consists of a publishing activity for which investment adviser registration and regulation do not apply under applicable federal or state law, and thus we are not registered as an investment adviser with either the Securities and Exchange Commission (the “SEC”) or any of the various states.  The regulatory environment in which it operates is subject to change, however, and we could be required to register as an investment adviser with an appropriate regulatory agency at some point in the future.

 

In addition, we operate in an environment of uncertainty about potential government regulation of the Internet and internet-based service providers.  We believe that our business is not currently subject to direct regulation other than regulations applicable to businesses generally.  However, the Internet is evolving rapidly, and governmental agencies have not yet been able to adapt all existing regulations to the Internet environment.  The United States Congress has passed legislation that regulates certain aspects of the Internet, including on-line content, copyright infringement, user privacy, liability for third-party activities and jurisdiction.  Specifically, with respect to one aspect of copyright law, on October 28, 1998, the United States Congress passed the Digital Millennium Copyright Act (“DMCA”).  The DMCA includes statutory licenses for the performance of sound recordings and for the making of recordings to facilitate transmissions.  Under these statutory licenses, depending on our future business activities, we and our customers may be required to pay licensing fees in connection with digital sound recordings which we may deliver to our customers.  Additionally, federal, state, local and foreign governmental organizations from time to time consider other legislative and regulatory proposals that would regulate the Internet.  The distribution of content to mobile phones is also regulated.

 

11

---

 

 

We cannot predict what new laws will be enacted or how courts will interpret both existing and new laws.  As a result, we are uncertain as to how new laws or the application of existing laws may affect our business.  For example, while we are not aware of any pending laws or regulations that would restrict our ability to disseminate market-based rumors and other information of unsubstantiated reliability, it is possible that such laws or regulations may be passed in the future.  Increased regulation in this area could decrease the demand for our JAGNotes subscription services, increase our cost of operating such business or otherwise have a material adverse effect on that business, its results of operations and financial condition.  In addition, the ways in which Internet companies deal with copyrighted content which appears on their sites are in flux.

 

Competition

 

CardioGenics Competitors

 

Numerous companies provide Point Of Care (POC) products, many with cardiovascular test products. However, in terms of quantitative POC products, few companies operate in this space with marketed devices. These include:

 

●

Biosite Diagnostics Incorporated;

 

●

Response Biomedicals Corp.;

 

●

Roche POC division; and

 

●

i-Stat division of Abbott Diagnostics.

 

The first 3 companies employ fluorescence measurements in their platforms, while i-Stat employs electrochemical testing. We believe that our technology and products in development will offer superior products to the POC market. None of the above companies offer chemiluminescence in its platform, a technology that is well-recognized for its superiority as evidenced by its dominance in the laboratory testing market. We believe that harnessing chemiluminescence in our QLCA will fulfill the clinical demands for fast and accurate quantitative results at patient bedsides.

 

JAG Notes Competitors

 

Providing financial information and analysis over the internet is an intensely competitive business.  A large number of web-based financial information providers are competing for subscribers, customers, advertisers, content providers, analysts, commentators and staff.  In addition, cable television is an increasingly important source of financial news and therefore competition.

 

Our business competes to a different degree with the following information sources, many of which provide their information without charge:

 

●

Online financial news and information providers, such as Yahoo Finance, Marketwatch, TheStreet.com, Forbes.com, Briefing.com, America Online Personal Finance, Reuters and MotleyFool.com;

 

●

Internet portals and search engines such as Google, AOL, MSN and Yahoo;

 

●

Traditional media sources such as The Wall Street Journal, Investor’s Business Daily, The Financial Times, Barrons, CNN/Money, and MSN Money/CNBC, all of which also have an Internet presence;

 

●

Terminal-based financial news providers including Bloomberg, Reuters and Dow Jones; and,

 

●

Online brokerage firms such as TD Ameritrade, E*Trade Financial, Charles Schwab and Fidelity;

 

Because there is not a readily defined market in which we compete, we cannot predict which information source or sources will be our primary competition in the future.  However, we expect competition from each of the above information sources to intensify and increase in the future.  Most of our current and potential competitors have greater name recognition, larger financial, technical and marketing resources, and more extensive customer bases than we do, all of which could be leveraged to gain market share to our detriment.  Such advantages would also permit our competitors to enter new sectors such as distribution through mobile phones, more easily than we would be able to do.

 

12

---

 

It is not difficult for new competitors to enter the market.  Many blogs now provide financial information at no cost.  Much of the information we provide is publicly available and it does not have any patented or otherwise protected technologies that would preclude or inhibit competitors from entering our markets.  Our current and future competitors may develop or offer services that have significant price, content, creative or other advantages over the services we provide.

 

In order for us to successfully compete, we will need to reliably provide valuable services to a greater number of institutional and other subscribers who are willing to pay fees sufficient to support such services.  We believe that over time, if we can obtain sufficient funding, a successful implementation of our business strategy will allow us to compete successfully as a focused provider of timely investment information to institutional and retail customers.

 

Intellectual Property

 

In connection with our CardioGenics business, we have filed seven (7) full patent applications relating to the QLCA and its core technology, the self-metering cartridge, our battery of cardiovascular tests and the Beads.

 

With our intellectual properties, we file an initial application with the Patent Cooperation Treaty (PCT) which is responsible for intellectual property protection globally. Thereafter we file patent applications in individual jurisdictions, once the patent is granted by the PCT.

 

We have filed 3 patent applications covering the core technology, an application covering one of its test products, 2 applications covering the detection technology and a patent application covering the development of a self-metering cartridge for the QLCA. We also choose to maintain some of our intellectual property as proprietary “know-how“, rather than disclosing such proprietary information to the public domain through patent applications.

 

With respect to our JAGNotes business, we are the owner of the trademarks “JAG NOTES — AHEAD OF THE MONEY,” “STREETSIDE” and “STREETSIDE WITH DAN DORFMAN.”  Each of the foregoing trademarks was registered in 2002 and has a duration of ten years, at which time each of the trademarks must be renewed or they will expire.  We do not consider these trademarks to be material to our business.

 

Research and Development

 

Our efforts are focused on the development and commercialization of our products under development.

 

The Company has spent approximately $1,597,000 over the last two (2) fiscal years developing its QLCA and cardiovascular tests to be used therein and its paramagnetic beads

 

Website Technical Information

 

Our CardioGenics website (www.cardiogenics.com) is maintained by us internally and is hosted by DreamHost, which has hosting facilities located in Brea, California.

 

With respect to our JAGNotes business, we lease one web server, which is the computer system on which all of the content for our jagnotes.com website is maintained and through which we operate our jagnotes.com website.  Our U.S. server is maintained by Woodbourne Solutions and is located at their facility in Germantown, Maryland.

 

Our Pixaya website (www.pixaya.com) is hosted by InnoTech.  InnoTech has offices located in southern California and Raleigh, North Carolina. Their Internet data center is located in Orange County, California.  The Pixaya website is maintained by us internally.

 

Employees

 

As of October 31, 2009, we had ten (10) employees of whom seven (7) were full time and three (3) were part-time. Of those employees, only Yahia Gawad, our Chief Executive Officer, has an employment agreement with the Company.

 

Acquisition of CardioGenics

 

On July 31, 2009 we completed the acquisition of CardioGenics by CardioGenics ExchangeCo Inc. (“ExchangeCo”), our Ontario, Canada subsidiary, pursuant to the terms of a Share Purchase Agreement dated May 22, 2009 among ExchangeCo, JAG Media Holdings, Inc., CardioGenics and CardioGenics’ principal stockholder, Yahia Gawad (the “Share Purchase Agreement”). CardioGenics is considered the acquirer in the transaction for accounting and financial reporting purposes.

 

13

---

 

In connection with the acquisition, ExchangeCo acquired all of the outstanding common shares of CardioGenics (the “CardioGenics Common Shares”), excluding 173,869 CardioGenics Common Shares in the aggregate owned by two (2) minority stockholders of CardioGenics (the “Dissenting Stockholders”), in consideration for the issuance of 422,183,610 shares of our common stock to the CardioGenics stockholders at the closing, as further described below (the “Share Consideration”). In consideration for the surrender of their CardioGenics Common Shares, the CardioGenics stockholders had the option to receive at the closing their pro-rata allocation of the Share Consideration in the form of (a) our common shares or (b) “Exchangeable Shares“ of ExchangeCo, which are exchangeable into our common shares in accordance with the terms of a Voting and Exchange Trust Agreement dated July 6, 2009 among JAG Media, ExchangeCo, and WeirFoulds LLP, as trustee and the rights and preferences of the Exchangeable Shares. Those CardioGenics stockholders who elected to receive directly our common shares were issued, in the aggregate, 145,528,195 common shares at the closing and those CardioGenics stockholders who elected to receive Exchangeable Shares were issued 16 Exchangeable Shares at the closing, which are exchangeable at any time into 276,655,415 of our common shares, in the aggregate. The Share Consideration issued at the closing provided the CardioGenics stockholders with direct and indirect ownership of approximately 85% of our outstanding common stock, on a fully diluted basis.

Immediately prior to the closing, all CardioGenics debenture holders converted their debentures into CardioGenics Common Shares in accordance with the terms of their respective debentures, as required by the terms of the Share Purchase Agreement. Accordingly, such former debenture holders became CardioGenics stockholders for purposes of the acquisition and received their pro-rata allotment of the Share Consideration in the form of JAG Common Shares and/or Exchangeable Shares at the closing in consideration for the surrender of the CardioGenics Common Shares they received upon conversion of their debentures.

Also prior to the closing, CardioGenics closed on an equity investment round of financing totaling $2,715,000. These equity investors in CardioGenics became CardioGenics stockholders for purposes of the acquisition and received their pro-rata allotment of the Share Consideration in the form of our common shares.

All of our common shares received by CardioGenics stockholders in exchange for their CardioGenics Common Shares may not be registered for resale and, therefore, shall remain subject to the rights and restrictions of Rule 144. All Exchangeable Shares received by CardioGenics stockholders in exchange for their CardioGenics Common Shares (and any of our common shares into which such Exchangeable Shares may be exchanged) also may not be registered for resale prior to six (6) months following the closing and, therefore shall remain subject to the rights and restrictions of Rule 144 prior to any such registration.

Also at the closing, all holders of CardioGenics warrants entitling the holders to purchase CardioGenics Common Shares at various prices exchanged their CardioGenics warrants for warrants to purchase, in the aggregate, 36,148,896 of our common shares at exercise prices of $0.047 per share, in accordance with the terms of the Share Purchase Agreement and the respective warrants. The terms of these newly issued warrants did not include any registration rights for the warrant holders. CardioGenics had no options to acquire CardioGenics Common Shares outstanding as of the closing.

At the closing, our then current directors resigned as directors of JAG Media and its subsidiaries after appointing their successors and our then current officers also resigned as officers and executives of JAG Media and its subsidiaries. After their resignation and the closing, our former directors entered into consulting agreements with the Company pursuant to which they are rendering various services to assist us in connection with certain transition matters. Each consulting agreement is for a term of 18 months, with each party receiving 500,000 shares of the Company’s common stock, issued pursuant to our 1999 Long-Term Incentive Plan, as compensation for their services under the consulting agreements.

Following the closing, a majority of our stockholders approved, by written consent, an amendment to our articles of incorporation, which provided for (a) a change in our corporate name from “JAG Media Holdings, Inc.“ to “CardioGenics Holdings Inc.” and (b) an increase in the number of our authorized JAG Common Shares from 500,000,000 to 650,000,000.

Financing Arrangements

 

Equity Line of Credit with YA Global

 

In connection with the CardioGenics Acquisition, on March 12, 2009 we entered into a Standby Equity Distribution Agreement with YA Global Master SPV Ltd. (“YA Ltd ”) (the “ SEDA ”) pursuant to which YA Ltd agreed to purchase up to $5,000,000 of our common stock (the “ Commitment Amount ”) over the course of the thirty-six (36) months following the date the registration statement for the shares to be issued pursuant to the SEDA is first declared effective (the “ Commitment Period ”). We will have the right, but not the obligation, to sell common stock to YA Ltd during the Commitment Period. Concurrent with the execution of the SEDA, we also entered into a Registration Rights Agreement with YA Ltd pursuant to which we agreed to register the shares of our common stock to be issued in connection with the SEDA. We have not yet filed such registration statement, in accordance with the terms of the Registration Rights Agreement, and accordingly the SEDA is not currently effective.

 

14

---

 

Increase in Authorized Shares

 

In October 2009 a majority of our stockholders approved, by written consent, an amendment to our articles of incorporation, which provided for, among other matters, an increase in the number of our authorized shares of common stock from 500,000,000 to 650,000,000.

 

Facilities

 

See “Item 2.—Properties.”

 

Legal Proceedings

 

See “Item 3.—Legal Proceedings.”

 

Where You Can Find More Information About Us

 

We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC.  You can read and copy any of this information at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 on official business days during the hours of 10:00 a.m. to 3:00 p.m.  You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  This information is also available from the SEC’s website at http://www.sec.gov.  We will also gladly send any filing to you upon your written request to Dr. Yahia Gawad, our Chief Executive Officer, at 6295 Northam Drive, Unit 8, Mississauga, Ontario L4V 1W8.

 

ITEM 1A.  RISK FACTORS

 

Risks Related to Our CardioGenics Business and Industry

The global financial crisis has had, and may continue to have, an impact on our business and financial condition.

The ongoing global financial crisis may limit our ability to access the capital markets at a time when we would like, or need, to raise capital, which could have an impact on our ability to react to changing economic and business conditions. Accordingly, if the global financial crisis and current economic downturn continue or worsen, our business, results of operations and financial condition could be materially and adversely affected.

The requirements of being a public company may strain our resources and distract our management

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). These requirements place a strain on our systems and resources.  The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls for financial reporting.  We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and in the future will require a report by our independent registered public accountants addressing these assessments via an auditor’s attestation. The auditor’s attestation requirement would be included in our fiscal year end 2010 Form 10-K in the event that the Securities and Exchange Commission does not extend the June 15, 2010 implementation date. During the course of our testing, we may identify deficiencies which we may not be able to remediate in time to meet the deadlines imposed by the Sarbanes-Oxley Act. If we fail to achieve and  maintain the adequacy of our internal controls, as such standards are modified,  supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with the Sarbanes-Oxley Act.

 

15

---

 

In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight will be required. This may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, we may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge, and we cannot assure you that we will be able to do so in a timely fashion.

We have not earned any revenues in our CardioGenics business unit since its incorporation and only have a limited operating history in its current business, which raise doubt about our ability to continue as a going concern.

Our CardioGenics business unit has a limited operating history in its current business and must be considered in the development stage. It has not generated any revenues since its inception and we will, in all likelihood, continue to incur operating expenses without significant revenues until we complete development of our Cardiovascular Tests and commercialize our QLCA and the Cardiovascular Tests. The primary source of funds for our CardioGenics business unit has been the sale of common stock. We cannot assure that we will be able to generate any significant revenues or income. These circumstances make us dependent on additional financial support until profitability is achieved. There is no assurance that we will ever be profitable and we have not yet achieved profitable operations. These factors raise substantial doubt that we will be able to continue as a going concern.

We need to raise additional financing to support the research and development of our CardioGenics business but we cannot be sure that we will be able to obtain additional financing on terms favorable to us when needed. If we are unable to obtain additional financing to meet our needs, our operations may be adversely affected or terminated.

Our ability to develop new test products for our QLCA is dependent upon our ability to raise significant additional financing when needed. If we are unable to obtain such financing, we will not be able to fully develop and commercialize our platform and technology. Our future capital requirements will depend upon many factors, including:

•

continued scientific progress in our research and development programs;

•

costs and timing of conducting clinical trials and seeking regulatory approvals and patent prosecutions;

.

•

competing technological and market developments;

.

•

our ability to establish additional collaborative relationships; and

•

the effect of commercialization activities and facility expansions if and as required.

We have limited financial resources and to date, no cash flow from the operations of our CardioGenics business unit and we are dependent for funds on our ability to sell our common stock, primarily on a private placement basis. There can be no assurance that we will be able to obtain financing on that basis in light of factors such as the market demand for our securities, the state of financial markets generally and other relevant factors. Any sale of our common stock in the future will result in dilution to existing stockholders. Furthermore, there is no assurance that we will not incur debt in the future, that we will have sufficient funds to repay any future indebtedness or that we will not default on our future debts, jeopardizing our business viability. Finally, we may not be able to borrow or raise additional capital in the future to meet our needs or to otherwise provide the capital necessary to continue the development of our technology, which might result in the loss of some or all of your investment in our common stock.

We may acquire other businesses, license rights to technologies or products, form alliances, or dispose of or spin-off businesses, which could cause us to incur significant expenses and could negatively affect profitability.

 We may pursue acquisitions, technology licensing arrangements, and strategic alliances, or dispose of or spin-off some of our businesses, as part of our business strategy. We may not complete these transactions in a timely manner, on a cost-effective basis, or at all, and may not realize the expected benefits. If we are successful in making an acquisition, the products and technologies that are acquired may not be successful or may require significantly greater resources and investments than originally anticipated. We may not be able to integrate acquisitions successfully into our existing business and could incur or assume significant debt and unknown or contingent liabilities. We could also experience negative effects on our reported results of operations from acquisition or disposition-related charges, amortization of expenses related to intangibles and charges for impairment of long-term assets.

 

 

16

---

 

The expiration or loss of patent protection and licenses may affect our future revenues and operating income.

Much of our business relies on patent and trademark and other intellectual property protection. Although most of the challenges to our intellectual property would likely come from other businesses, governments may also challenge intellectual property protections. To the extent our intellectual property is successfully challenged, invalidated, or circumvented or to the extent it does not allow us to compete effectively, our business will suffer. To the extent that countries do not enforce our intellectual property rights or to the extent that countries require compulsory licensing of our intellectual property, our future revenues and operating income will be reduced. Our principal patents and trademarks are described in greater detail in the sections captioned, "Patents, Trademarks, and Licenses."

Competitors' intellectual property may prevent us from selling our products or have a material adverse effect on our future profitability and financial condition.

Competitors may claim that one or more of our products infringe upon their intellectual property. Resolving an intellectual property infringement claim can be costly and time consuming and may require us to enter into license agreements. We cannot guarantee that we would be able to obtain license agreements on commercially reasonable terms. A successful claim of patent or other intellectual property infringement could subject us to significant damages or an injunction preventing the manufacture, sale or use of our affected products. Any of these events could have a material adverse effect on our profitability and financial condition.

We may not be able to adequately protect our intellectual property

We believe the patents, trade secrets and other intellectual property we use are important to our business, and any unauthorized use of such intellectual property by third parties may adversely affect our business and reputation. We rely on the intellectual property laws and contractual arrangements with our employees, business partners and others to protect such intellectual property rights. Filing, prosecuting, defending and enforcing patents on all of our technologies and products throughout the world would be prohibitively expensive. Competitors may, without our authorization, use our intellectual property to develop their own competing technologies and products in jurisdictions where we have not obtained patent protection. These technologies and products may not be covered by any of our patent claims or other intellectual property rights. Furthermore, the validity, enforceability and scope of protection of intellectual property in some countries where we may conduct business is uncertain and still evolving, and these laws may not protect intellectual property rights to the same extent as the laws of the United States.

Many companies have encountered significant problems in protecting and defending their intellectual property rights in foreign jurisdictions. Many countries, including certain countries in Europe, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties (for example, the patent owner has failed to “work” the invention in that country or the third party has patented improvements). In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of the patent. Moreover, litigation involving patent or other intellectual property matters in the United States or in foreign countries may be necessary in the future to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources, and have a material adverse effect on our business, financial condition and results of operations.

We are subject to numerous governmental regulations and it can be costly to comply with these regulations and to develop compliant products and processes.

Our products are subject to regulation by the U.S. Food and Drug Administration (“FDA”), and numerous international, federal, and state authorities. The process of obtaining regulatory approvals to market a medical device can be costly and time-consuming, and approvals might not be granted for future products, or additional uses of existing products, on a timely basis, if at all. Delays in the receipt of, or failure to obtain approvals for, future products, or additional uses of existing products, could result in delayed realization of product revenues, reduction in revenues, and in substantial additional costs. In particular, in the United States our products are regulated under the 1976 Medical Device Amendments to the Food, Drug and Cosmetic Act, which is administered by the FDA. We believe that the FDA will classify our products as “Class II” devices, thus requiring us to submit to the FDA a pre-market notification form or 510(k). The FDA uses the 510(k) to substantiate product claims that are made by medical device manufacturers prior to marketing. In our 510(k) notification, we must, among other things, establish that the product we plan to market is “substantially equivalent” to (1) a product that was on the market prior to the adoption of the 1976 Medical Device Amendment or (2) a product that the FDA has previously cleared.

 

17

---

 

The FDA review process of a 510(k) notification can last anywhere from three to six months, and the FDA must issue a written order finding “substantial equivalence” before a company can market a medical device. We are currently developing a group of cardiovascular tests that we will have to clear with the FDA through the 510(k) notification procedures. These test products are crucial for our success and if we do not receive 510(k) clearance for a particular product, we will not be able to market these products in the United States, which will have a material adverse effect on our revenues, profitability and financial condition.

In addition, no assurance can be given that we will remain in compliance with applicable FDA and other regulatory requirements once clearance or approval has been obtained for a product. We must incur expense and spend time and effort to ensure compliance with these complex regulations. Possible regulatory actions could include warning letters, fines, damages, injunctions, civil penalties, recalls, seizures of our products and criminal prosecution. These actions could result in, among other things: substantial modifications to our business practices and operations; refunds, recalls, or seizures of our products; a total or partial shutdown of production while we or our suppliers remedy the alleged violation; the inability to obtain future pre-market clearances or approvals; and, withdrawals or suspensions of current products from the market. Any of these events could disrupt our business and have a material adverse effect on our revenues, profitability and financial condition.

Changes in third-party payor reimbursement regulations can negatively affect our business.

By regulating the maximum amount of reimbursement they will provide for blood testing services, third-party payors, such as HMOs, pay-per-service insurance plans, Medicare and Medicaid, can indirectly affect the pricing or the relative attractiveness of our diagnostic products. For example, the Centers for Medicare and Medicaid Services set the level of reimbursement of fees for blood testing services for Medicare beneficiaries. If third-party payors decrease the reimbursement amounts for blood testing services, it may decrease the amount that physicians and hospitals are able to charge patients for such services. Consequently, we would either need to charge less for our products or incur a reduction in our profit margins. If the government and third-party payors do not provide for adequate coverage and reimbursement levels to allow health care providers to use our products, the demand for our products will decrease.

Laws and regulations affecting government benefit programs could impose new obligations on us, require us to change our business practices, and restrict our operations in the future.

Our industry is also subject to various federal, state, and international laws and regulations pertaining to government benefit program reimbursement, price reporting and regulation, and health care fraud and abuse, including anti-kickback and false claims laws, the Medicaid Rebate Statute, the Veterans Health Care Act, and individual state laws relating to pricing and sales and marketing practices. Violations of these laws may be punishable by criminal and/or civil sanctions, including, in some instances, substantial fines, imprisonment, and exclusion from participation in federal and state health care programs, including Medicare, Medicaid, and Veterans Administration health programs. These laws and regulations are broad in scope and they are subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or to alter one or more of our sales or marketing practices. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our revenues, profitability, and financial condition.

Our research and development efforts may not succeed in developing commercially successful products and technologies, which may cause our revenue and profitability to decline.

To remain competitive, we must continue to launch new products and technologies. To accomplish this, we must commit substantial efforts, funds, and other resources to research and development. A high rate of failure is inherent in the research and development of new products and technologies. We must make ongoing substantial expenditures without any assurance that its efforts will be commercially successful. Failure can occur at any point in the process, including after significant funds have been invested.

Promising new product candidates may fail to reach the market or may only have limited commercial success because of efficacy or safety concerns, failure to achieve positive clinical outcomes, inability to obtain necessary regulatory approvals, limited scope of approved uses, excessive costs to manufacture, the failure to establish or maintain intellectual property rights, or infringement of the intellectual property rights of others. Even if we successfully develop new products or enhancements or new generations of our existing products, they may be quickly rendered obsolete by changing customer preferences, changing industry standards, or competitors' innovations. Innovations may not be accepted quickly in the marketplace because of, among other things, entrenched patterns of clinical practice or uncertainty over third-party reimbursement. We cannot state with certainty when or whether any of our products under development will be launched or whether any products will be commercially successful. Failure to launch successful new products or new uses for existing products may cause our products to become obsolete, causing our revenues and operating results to suffer.

 

18

---

 

New products and technological advances by our competitors may negatively affect our results of operations.

Our products face intense competition from our competitors' products. Competitors' products may be safer, more effective, more effectively marketed or sold, or have lower prices or superior performance features than our products. We cannot predict with certainty the timing or impact of the introduction of competitors' products.

We depend on key members of our management and scientific staff and, if we fail to retain and recruit qualified individuals, our ability to execute our business strategy and generate sales would be harmed.

We are highly dependent on the principal members of our management and scientific staff. The loss of any of these key personnel, including in particular Dr. Yahia Gawad, our Chief Executive Officer, might impede the achievement of our business objectives. We may not be able to continue to attract and retain skilled and experienced scientific, marketing and manufacturing personnel on acceptable terms in the future because numerous medical products and other high technology companies compete for the services of these qualified individuals. We currently do not maintain key man life insurance on any of our employees.

The manufacture of many of our products is a highly exacting and complex process, and if we or one of our suppliers encounter problems manufacturing products, our business could suffer.

The manufacture of many of our products is a highly exacting and complex process, due in part to strict regulatory requirements. Problems may arise during manufacturing for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with raw materials, natural disasters, and environmental factors. In addition, we may use single suppliers for certain products and materials. If problems arise during the production of a batch of product, that batch of product may have to be discarded. This could, among other things, lead to increased costs, lost revenue, damage to customer relations, time and expense spent investigating the cause and, depending on the cause, similar losses with respect to other batches or products. If problems are not discovered before the product is released to the market, recall and product liability costs may also be incurred. To the extent we or one of our suppliers experience significant manufacturing problems, this could have a material adverse effect on our revenues and profitability.

Significant safety issues could arise for our products, which could have a material adverse effect on our revenues and financial condition.

All medical devices receive regulatory approval based on data obtained in controlled testing environments of limited duration. Following regulatory approval, these products will be used over longer periods of time with many patients. If new safety issues arise, we may be required to change the conditions of use for a product. For example, we may be required to provide additional warnings on a product's label or narrow its approved use, either of which could reduce the product's market acceptance. If serious safety issues with one of our products arise, sales of the product could be halted by us or by regulatory authorities. Safety issues affecting suppliers' or competitors' products also may reduce the market acceptance of our products.

In addition, in the ordinary course of business, we may be the subject of product liability claims and lawsuits alleging that our products or the products of other companies that we promote, or may be incorporated in our products, have resulted or could result in an unsafe condition for or injury to patients. Product liability claims and lawsuits and safety alerts or product recalls, regardless of their ultimate outcome, may have a material adverse effect on our business, reputation and financial condition, as well as on our ability to attract and retain customers. Product liability losses are self-insured.

The international nature of our business subjects us to additional business risks that may cause our revenue and profitability to decline.

Since we intend to market our products internationally, our business will be subject to risks associated with doing business internationally. The risks associated with any such operations outside the United States include:

 

19

---

 

 

•	changes in foreign medical reimbursement policies and programs;

•	multiple foreign regulatory requirements that are subject to change and that could restrict our ability to manufacture, market, and sell our products;

•	differing local product preferences and product requirements;

•	trade protection measures and import or export licensing requirements;

•	difficulty in establishing, staffing, and managing foreign operations;

•	differing labor regulations;

•	potentially negative consequences from changes in or interpretations of tax laws;

•	political and economic instability;

•	inflation, recession and fluctuations in foreign currency exchange and interest rates; and,

•	compulsory licensing or diminished protection of intellectual property.

These risks may, individually or in the aggregate, have a material adverse effect on our revenues and profitability.

Other factors can have a material adverse effect on our future profitability and financial condition.

        Many other factors can affect our profitability and financial condition, including:

•	Changes in or interpretations of laws and regulations including changes in accounting standards, taxation requirements and environmental laws in domestic or foreign jurisdictions.

•	Changes in the rate of inflation (including the cost of raw materials, commodities, and supplies), interest rates and the performance of investments held by us.

•	Changes in the creditworthiness of counterparties that transact business with or provide services to our distributors or us.

•

Changes in business, economic, and political conditions, including: war, political instability, terrorist attacks in the U.S. and other parts of the world, the threat of future terrorist activity in the U.S. and other parts of the world and related military action; natural disasters; the cost and availability of insurance due to any of the foregoing events; labor disputes, strikes, slow-downs, or other forms of labor or union activity; and, pressure from third-party interest groups.

•	Changes in our business units and investments and changes in the relative and absolute contribution of each to earnings and cash flow resulting from evolving business strategies, changing product mix, changes in tax rates both in the U.S. and abroad and opportunities existing now or in the future.

•	Changes in the buying patterns of a major distributor, retailer, or wholesale customer resulting from buyer purchasing decisions, pricing, seasonality, or other factors, or other problems with licensors, suppliers, distributors, and business partners.

•	Difficulties related to our information technology systems, any of which could adversely affect business operations, including any significant breakdown, invasion, destruction, or interruption of these systems.

•	Changes in credit markets impacting our ability to obtain financing for our business operations.

•	Legal difficulties, any of which could preclude or delay commercialization of products or adversely affect profitability, including claims asserting statutory or regulatory violations, adverse litigation decisions, and issues regarding compliance with any governmental consent decree.

Risks related to our Pixaya Business and Industry

We will be managed by a new management team with no experience in our Pixaya business sector.

 

As a result of our acquisition of CardioGenics, our new management may not be able to effectively manage the newly combined business or our Pixaya business. If current or new management is unable to operate the new combined businesses at a profit, it could materially and adversely affect our business, results of operation and financial condition and could cause our stockholders to lose part or all of their investment in our common stock.

 

20

---

 

We may not be able to stop contraction of our subscriber revenues and attract sufficient institutional customers.

 

Our subscriber base has been shrinking and we have determined that we cannot expand our retail subscriber base for our traditional product, the JAGNotes Report. We believe that we must refocus our subscriber base on institutional customers to be successful, but do not have the funding to do so.  Our subscription revenues have leveled off at a level which cannot support our operating costs.  During the year ended July 31, 2008, revenues from our Pixaya business unit were approximately $177,065, and consisted entirely of revenues from subscriptions.

 

Our efforts to refocus our key subscriber base have been ineffective and historically Internet users have only been attracted to subscription websites in limited areas. Our competitors may be more successful than us in attracting customers, or the number of institutional and other professional users seeking or willing to pay for financial information of the kind we provide may not increase or may even decrease.  Any of these would adversely affect the revenues from our Pixaya business unit.  Because there is currently limited potential for Internet banner advertising revenues, if we cannot reverse the current shrinkage of our subscriber base or refocus such base, we will have little, if any, financial success.

 

We have been forced to discontinue our commentators and the free portion of our website, which may cause us to lose subscribers.

 

In order to attempt to reduce costs, we have been forced to discontinue all of our commentators as well as the entire free portion of our website.  Accordingly, we run the risk that existing and potential subscribers may not find our website valuable and our revenues may decline.  Moreover, many of our competitors offer financial information for free and are likely to continue to do so, perhaps at an increasing rate.  Our current and potential subscribers may be unwilling to pay for our service if they feel they can receive comparable information for free.

 

We may not be successful in our attempt to refocus our business strategy of targeting institutional investors for our JAGNotes Report.

 

Our efforts to include individual retail subscribers as part of our strategy to increase sales of our flagship product, the JAGNotes Report, have been unsuccessful, and we have therefore decided to refocus our strategy on offering subscriptions solely to institutional investors and professional traders.  Due to the uncertain nature of this undertaking and our lack of funding, this shift in business strategy may not be executed, or if executed, may not be successful, and we may not realize any benefit from it.

 

We may not be successful at building brand awareness or building strategic relationships.

 

Our growth and success depends in part on our ability to build awareness of the JAGNotes and Pixaya names. The JAGNotes and Pixaya names have only limited recognition within the financial community and little if any recognition among the general public.  We do not currently allocate any of our working capital to marketing and advertising the JAGNotes and Pixaya names but rather rely solely upon strategic alliances to increase our name recognition.  Our ability to refocus our subscriber base, offer new services or otherwise expand the business will be limited if we cannot increase our name recognition.

 

We may experience difficulties in developing new and enhanced services and products.

 

We believe that our website will be more attractive to subscribers if we introduce additional or enhanced services in the future in order to retain our current users and attract new users.  Our first attempt to introduce streaming audio and video was not financially successful and the business was sold. While we may consider various new enhanced services for our website, as well as new products for our Pixaya business unit, adequate financing is not currently available and the new focus of our business in light of the CardioGenics acquisition will likely require that any surplus cash be used to further develop our CardioGenics business unit.

 

21

---

 

In addition, we may experience other difficulties that could delay or prevent us from introducing such enhanced services.  We may encounter technological problems in enhancing our websites and developing new products or enhancements to current products in our Pixaya business unit.  We may need to modify significantly the design of these services on our websites and modify significantly (or discontinue, as we have already had to do) certain products and services being offered through our Pixaya business unit.  Our business could be adversely affected if we experience difficulties in introducing or maintaining new services and products, if these new services and products are not accepted by users or if their cost exceeds the revenue they generate.

 

If we introduce enhanced service on our website that is not favorably received, our current users may not continue using our service as frequently.  New users could also choose a competitive service over ours.

 

Our failure to respond to rapid changes in technology and its applications and intense competition in the mobile services industry could make our services obsolete.

 

If and when funds become available, our Pixaya business unit hopes to again develop software for the mobile phone and wireless environment.  The mobile and wireless services industries are subject to rapid and substantial technological development and product innovations.  To be successful, we must respond to new developments in technology and find new applications of existing technology in our Pixaya business unit for which we currently have no available funds.  In addition, our response may be hindered if we require, but cannot secure, rights to essential third party intellectual property.  We compete against numerous companies offering alternative products and services to ours, most of which have much greater financial, marketing and technical resources to utilize in pursuing technological development.

 

We may not successfully attract or manage our strategic alliances.

 

We currently intend to evaluate strategic alliances, partnerships or joint ventures, as a means of acquiring additional distribution.  Pursuing such transactions will entail a number of risks and difficulties, including a continuing lack of available funds and personnel. We compete with a wide variety of information providers and there is substantial competition for distribution channels. We can offer no guarantee that we will be able to locate suitable candidates for alliances or risk sharing partners. If we are able to do so, we will require a high level of managerial skill to successfully evaluate and implement these transactions.  While we have limited experience in evaluating and implementing transactions of this type, we cannot guarantee that we will be able to successfully pursue this strategy.

 

We may have to defend against intellectual property infringement claims and libel and defamation claims, which may cause significant operations expenditures.

 

Third parties may assert claims against us that our Pixaya business unit has violated a patent or infringed a copyright, trademark or other proprietary right belonging to them. Parties could also bring libel, defamation or similar claims based on the content published on our websites.  Any such claims, whether meritorious or not, could result in the expenditure of significant financial and managerial resources on our part, which could materially adversely affect our business, results of operations and financial condition.

 

Failure to maintain our reputation as a trustworthy provider of financial news may reduce the number of our users, which would harm our business.

 

It is very important that we maintain our reputation as a trustworthy provider of financial news.  The occurrence of events, including our misreporting a news story, could harm our reputation for trustworthiness. These events could result in a significant reduction in the number of our subscribers, which could materially adversely affect our business, results of operations and financial condition.

 

We depend on key people in management and operations.

 

Our JAGNotes and Rumor Room products depend on our former key employees’ contacts within the professional financial community for certain information that we provide to our subscribers.  Although we have retained Mr. Thomas J. Mazzarisi, our former Chairman, Chief Executive Officer and General Counsel, and Mr. Stephen J. Schoepfer, our former President, Chief Operating Officer, Chief Financial Officer and Secretary as consultants to assist us with the ongoing operation of our Pixaya business unit during a limited post-closing transition period, we may also need to attract and retain additional qualified managers, software developers and other key personnel in the future in order to successfully manage our Pixaya business unit.  We may not be able to attract or retain the requisite personnel or have the requisite funding to hire them.

 

22

---

 

 

We face difficulties concerning availability of our sources of information for our products.

 

Our JAGNotes Report and Rumor Room products rely on information from independent third party sources. We do not maintain written agreements with these sources to provide this information, so we cannot guarantee that any of these sources will continue to provide the information necessary to maintain our products.  If information from these sources is altered, curtailed or discontinued this could adversely affect the quality or even the viability of these products, which could decrease the demand for our JAGNotes website and adversely impact our revenues.

 

We may become party to legal proceedings relating to the dissemination of rumors and other information of questionable reliability.

 

Information posted in the Rumor Room consists of rumors and other information received from third party sources that may have no reasonable factual basis. We realize that rumors are inherently unreliable, and provide a cautionary note on this portion of our site reminding subscribers that cyberfraud is prevalent and that rumors should not be relied upon when making investment decisions. There can be no assurance that we will be able to prevent the unlawful posting of misleading, defamatory, fraudulent or intentionally erroneous information or material that infringes on the intellectual property rights of others, and the law relating to its potential liability relating to such activity is currently unsettled. The potential imposition of liability for unlawful activities of subscribers to our site could require us to implement measures to reduce our exposure to such liability, which may require us, among other things, to spend substantial resources and/or to discontinue certain service offerings. In addition, it is possible that we could become subject to various legal proceedings alleging, among other things, that we have intentionally disseminated or have aided and abetted others in intentionally disseminating false or defamatory information or material that infringes on the intellectual property rights of others.  These claims, even without merit, could cause us to expend significant financial and managerial resources, which could adversely affect our business operations.

 

Future government regulation of the Internet may add to our operating costs.

 

Like many businesses engaging in Internet-related activities, we may face unanticipated operating costs because of the current uncertainty surrounding potential laws and government regulation applicable to the Internet and e-commerce.  Laws and regulations may be introduced and court decisions reached that affect the Internet or other online services, covering issues such as user pricing, user privacy, freedom of expression, defamation, libel, access charges, content and quality of products and services, advertising, intellectual property rights and information security.  For example, if the government determines that our website and the types of activities engaged in by visitors and/or subscribers to our website should be subject to new or existing rules or regulations, our business model may be adversely affected and our operating costs may increase.  In addition, as an Internet company it is unclear in which jurisdictions we are actually conducting business.  Our failure to qualify to do business in a jurisdiction that requires us to do so could subject us to fines or penalties and could result in our inability to enforce contracts in that jurisdiction.  Even if we were able to ascertain correctly in which jurisdictions we conduct business, many of these jurisdictions have yet to determine the application of their existing laws to Internet-related activities or develop laws that apply to such activities.

 

We could be deemed to be an investment advisor subject to federal or state regulatory oversight.

 

Companies and individuals that provide financial advice to investors in the United States are generally required to register as an investment adviser at either the federal or state level, and are subject to extensive regulation. We believe that our business consists of a publishing activity for which investment adviser registration and regulation do not apply under applicable federal or state law, and do not believe that we are required to register as an investment adviser with either the SEC or any of the various states. The regulatory environment in which we operate is subject to change, however, and we could be required to register as an investment adviser with an appropriate regulatory agency at some point in the future.  Such registration could adversely affect our method of operation and revenues. For example, if we were ever deemed to be in non-compliance with applicable investment adviser regulations, we could be subject to various penalties, including administrative or judicial proceedings that might result in censure, fine, civil penalties (including treble damages in the case of insider trading violations), the issuance of cease-and-desist orders or other adverse consequences.

 

Our business is currently dependant on the continued public interest in investing in the stock market.

 

The volatility of the stock market in the 1990s generated unprecedented public interest in the stock market and trading. Our success depends upon the continued maintenance or growth of this interest.  The subsequent downturn in the stock market may have been in part responsible for an overall decrease in subscription revenues since the end of the second fiscal quarter of 2001. Even after the market had recovered to some extent, our revenues generally continued to decline. A number of factors that are out of our control, such as the recent turmoil in global stock markets, that could lead to a stagnant or depressed stock market that would likely decrease the public’s interest in stock trading and financial information. If this were to happen, it is likely that we would lose a significant percentage of our then current and potential subscriber base.

 

23

---

 

 

Most of our current and potential competitors have greater name recognition, financial, technical and marketing resources, as well as more extensive customer bases and industry relationships than we do, all of which could be leveraged to gain market share to our detriment.

 

Our JAG Notes website’s primary current competitors provide financial news, commentary and analysis on the Internet such as Yahoo Finance, Marketwatch, TheStreet.com, Briefing.com, America Online Personal Finance, Reuters and MotleyFool.com. Providing financial information and analysis over the Internet is an intensely competitive business. An increasing number of web-based financial information providers are competing for subscribers, customers, advertisers, content providers, analysts, commentators and staff, and we continue to face competition from traditional news and information sources including television and print. We expect competition from both sources to intensify and increase in the future. Many of our competitors have substantially greater financial and other resources than we do.

 

We are an intensely competitive business with low barriers to entry.

 

The barriers to entry into our JAGNotes business are relatively low (i.e., it is not difficult for new competitors to enter the market).  Many blogs now provide financial information at no cost.  Much of the information we provide to subscribers is available and we do not have any patented or otherwise protected technologies that would preclude or inhibit competitors from entering our markets. Our current and future competitors may develop or offer services that have significant price, substantive, creative or other advantages over the services we provide.  If they do so and we are unable to respond satisfactorily, our business and financial condition will likely be adversely affected.

 

We may not be able to adequately protect ourselves against security risks.

 

All Internet businesses are subject to electronic and computer security risks. We have taken steps to protect ourselves from unauthorized access to our systems and use of our site, but we cannot guarantee that these measures will be effective. If our security measures are ineffective, unauthorized parties could alter, misappropriate, or otherwise disrupt our service or information.  If such unauthorized parties were able to access certain proprietary information, of ours or our customers’; including subscribers’ credit card numbers and personal information, we would face significant unexpected costs and a risk of material loss, either of which could adversely affect our business.

 

Risks Related to Our Capital Structure

Our shareholders may experience significant dilution from the exercise of warrants to purchase shares of our common stock.

 

In June 2006, we issued warrants to purchase 12,000,000 shares of our common stock to YA Global Investments L.P. (“YA Global”). To date, we have issued 11,325,000 shares of our common stock upon the exercise of these warrants by YA Global. There are no further warrants available for exercise by YA Global since one warrant exercise made by YA Global was done on a “cashless basis“ resulting in a reduction of 675,000 warrant shares.  In addition, as a result of our acquisition of CardioGenics, former CardioGenics warrant holders exchanged their warrants to purchase CardioGenics Common Shares for warrants to purchase our Common Shares. Currently, the warrants held by such former CardioGenics warrant holders entitle them to purchase up to 36,148,896 of our Common Shares at prices of $0.047 per share.

 

Accordingly, you may experience substantial dilution upon exercise of these warrants. In addition, you may experience substantial dilution if the price of our Common Shares increases to a level greater than the exercise price of these warrants.

 

The resale by YA Global of its shares of our common stock received from us in connection with the exercise of their warrants may lower the market price of our common stock.

 

The resale by YA Global of shares of our common stock that it receives from us in exercise of their warrants will increase the number of publicly traded shares of our stock, which could lower the market price of our common stock. Moreover, the shares that we issue to YA Global, or other warrant holders will be available for immediate resale, subject to the resale restrictions of Rule 144 of the Securities Act. There are no contractual restrictions on the ability of YA Global to offer shares issued to it pursuant to our warrants, other than the limitation that YA Global cannot beneficially own more than 9.99% of our then outstanding shares of common stock. If YA Global continues to resell such shares, the market price for our shares could decrease significantly. In addition, the mere prospect of such transactions could lower the market price for our common stock.

 

24

---

 

 

There are substantial risks associated with the Standby Equity Distribution Agreement with YA Global Master SPV Ltd., which could contribute to the decline of our stock price and have a dilutive impact on our existing stockholders

In order to obtain needed capital, we entered into a Standby Equity Distribution Agreement with YA Global Master SPV Ltd. (“YA Ltd.”) dated as of March 12, 2009. The sale of shares of our common stock pursuant to the SEDA will have a dilutive impact on our stockholders. We believe YA Ltd. intends to promptly re-sell the shares we issue to them under the SEDA and that such re-sales could cause the market price of our common stock to decline significantly with advances under the SEDA. To the extent of any such decline, any subsequent advances would require us to issue a greater number of shares of common stock to YA Ltd. in exchange for each dollar of the advance.  Under these circumstances our existing stockholders would experience greater dilution. The sale of our common stock under the SEDA could encourage short sales by third parties, which could contribute to the further decline of our stock price.

Future Issuance of Our Common Stock Could Dilute Current Stockholder or Adversely Affect the Market.

 

Future issuances of our common stock could be at values substantially below the price paid by the current holders of our common stock. In addition, common stock could be issued to fend off unwanted tender offers or hostile takeovers without further stockholder approval. Sales of substantial amounts of our common stock in the public market, or even just the prospect of such sales, could depress the prevailing market price of our common stock and our ability to raise equity capital in the future.

 

The market for our common stock is limited.

 

Our common stock is traded on the OTC Bulletin Board. Trading activity in our stock has fluctuated and at times been limited. We cannot guarantee that a consistently active trading market for our stock will continue, especially while we remain on the OTC Bulletin Board.

 

Because our common stock currently trades below $5.00 per share and is quoted on the OTCBB, our common stock is considered by the SEC to be a “penny stock,” which adversely affects our liquidity.

 

Our common stock does not currently qualify for listing on any national securities exchange, and we do not anticipate that it will qualify for such a listing in the short-term future. If our common stock continues to be quoted on the OTC Bulletin Board or is traded on the Pink Sheets, and if the trading price of our common stock remains less than $5.00 per share, our common stock is considered a “penny stock,” and trading in our common stock is subject to the requirements of Rule 15g-9 under the Exchange Act. Under this rule, brokers or dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. The broker or dealer must make an individualized written suitability determination for the purchaser and receive the purchaser’s written consent prior to the transaction. SEC regulations also require additional disclosure in connection with any trades involving a penny stock, including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and its associated risks. These requirements could severely limit the liquidity of such securities in the secondary market because few brokers or dealers are likely to undertake these compliance activities. In addition to the applicability of the penny stock rules, another risk associated with trading in penny stocks may be large price fluctuations.

 

Our amended charter contains provisions that may discourage an unaffiliated party to take us over.

 

Without further stockholder action, our Board of Directors could authorize the issuance of additional shares of our common stock as well as preferred stock with special voting rights by class or with more than one vote per share, to a “white knight” in order to deter a potential buyer.  This might have the effect of preventing or discouraging an attempt by a party unable to obtain the approval of our Board of Directors to take over or otherwise gain control of us.

 

Terms of subsequent financings may adversely impact your investment.

We may have to raise equity, debt or preferred stock financing in the future. Your rights and the value of your investment in our Common Shares could be reduced. For example, if we issue secured debt securities, the holders of the debt would have a claim against our assets that would be prior to the rights of stockholders until the debt is paid. Interest on these debt securities would increase costs and negatively impact operating results.

Preferred stock could be issued in series from time to time with such designations, rights, preferences, and limitations as needed to raise capital. The terms of preferred stock could be more advantageous to those investors than to the holders of our Common Shares.

 

25

---

 

Our articles of incorporation do not provide stockholders the pre-emptive right to buy shares from the company. As a result, you will not have the automatic ability to avoid dilution in your percentage ownership of the company.

 

Control of our stock is now held by the former CardioGenics shareholders.

The prior shareholders of CardioGenics own, directly or indirectly, approximately 85% of our outstanding common stock. While their percentage would decline if and to the extent new shares of our common stock are issued, you should expect these persons to exert continuing influence over all matters requiring shareholder approval, including the election of directors. You may have little to no practical control over such matters.

It is not likely that we will pay dividends on the common stock or any other class of stock

We intend to retain any future earnings for the operation and expansion of our business. We do not anticipate paying cash dividends on our common stock, or any other class of stock, in the foreseeable future. Stockholders should look solely to appreciation in the market price of our Common Shares to obtain a return on investment.

Our stockholders ownership of our common stock may be in doubt due to possible naked short selling of our common stock.

 

We believe, but cannot confirm, that speculators may have engaged in a practice commonly known as a “naked short” sale of our common stock, which means that certain brokers may be permitting their short selling customers to sell shares of our common stock that their customers do not own and may have failed to borrow and therefore deliver the shares sold to the purchaser of the shares. We have from time to time been included by Nasdaq on the Regulation SHO Threshold Security List, which is indicative of a significant amount of naked shorting in the stock. Because naked shorting may result in an artificial depression of our stock price, our stockholders could lose all or part of their investment in our common stock. As a result of this naked short selling, there may be a substantial number of purchasers who believe they are our stockholders, but who in fact would not be stockholders since their brokers may never have received any shares of our common stock for their account. In addition, investors who believe they are our stockholders may not have received a stock dividend to which they are entitled or may have been deprived of the right to vote some or all of their shares.

 

ITEM 1B.  UNRESOLVED STAFF COMMENTS

 

Not Applicable.

 

ITEM 2.  PROPERTIES

 

Our executive and administrative headquarters are currently located at 6295 Northam Drive, Units 7 & 8, Mississauga, Ontario L4V 1W8 Canada. We rent this space at a cost of CDN$6,432 per month.

 

The administrative offices for our Pixaya subsidiary are currently located at 6865 SW 18th Street, Suite B-13, in Boca Raton, Florida 33433.  We rent this space at a cost of US$1,450 per month.  The lease for this space expired in June 2009 and is currently on a month-to-month basis.

 

The servers for our websites are housed at separate locations as described above.  See “Item 1.—Business—Website Technical Information.”  We believe that our facilities are adequate for our current needs and that, if our lease is not renewed on commercially reasonable terms, we will be able to locate suitable new office space and obtain a suitable replacement for our executive and administrative headquarters.

 

26

---

 

 

ITEM 3.  LEGAL PROCEEDINGS

 

On April 22, 2009, CardioGenics was served with a statement of claim from a prior contractor claiming compensation for wrongful dismissal and ancillary causes of action including payment of monies in realization of his investment in CardioGenics, with an aggregate claim of $514,000.  The Company considers all the claims to be without any merit, has already delivered a statement of defence and intends to vigorously defend the action.  If the matter eventually proceeds to trial, the Company does not expect to be found liable on any ground or for any cause of action. The statement of claim was filed in Ontario Superior Court of Justice (Court File No. CN09-1728-00).

 

On June 22, 2009 CardioGenics received a letter from Flow Capital Advisors, Inc. regarding a Non-Circumvention Agreement dated July 16, 2004 and a Finder's Fee Agreement dated December 13, 2004 between Flow Capital and CardioGenics. The letter states that CardioGenics has breached these agreements insofar as the transaction between CardioGenics and JAG Media is concerned and advising that Flow Capital is entitled to payment of 8% of the transaction value in accordance with the terms of the Finder's Fee Agreement. CardioGenics' lawyers subsequently wrote to Flow Capital denying any contractual breach and explaining why Flow Capital’s claims are without merit.

 

On January 15, 2010, Flow Capital Advisors, Inc. (“Flow Capital”) filed a lawsuit against CardioGenics, Inc, and another defendant in the United States District Court for the Southern District of Florida, Fort Lauderdale Division (Case No. 10-CV-60066-Martinez-Brown) (“Flow Lawsuit”). The Flow Lawsuit alleges that CardioGenics (i) breached a Finder’s Fee Agreement in connection with the CardioGenics Acquisition; and (ii) breached a non-circumvention agreement.  Flow Capital is claiming that it is entitled to its finder’s fee equal to eight percent (8%) of the JAG Media Holdings shares received by CardioGenics, or the equivalent monetary value of the stock. The Company and its counsel are currently reviewing the Flow Lawsuit and anticipate responding to the Flow Lawsuit in the near future.

On January 14, 2010, Flow Capital filed a lawsuit against JAG Media Holdings Inc. in the Circuit Court of the 17th Judicial Circuit In and For Broward County Florida (Case No. 10001713).  Pursuant to this lawsuit, Flow Capital alleges that JAG Media Holdings breached a Non-Circumvention Agreement it had entered into with Flow Capital, dated January 1, 2004. The Company and its counsel are currently reviewing this lawsuit and anticipate responding to it in the near future.

On June 20, 2002, we, along with our then President and Chief Executive Officer, Gary Valinoti, filed a complaint in the 165th District Court of Harris County, Texas against over 150 brokerage firms, alleging, among other things, a conspiracy among the defendants to short sell our stock.  The original lawsuit was subsequently amended on June 24, 2002 and was removed to the United States District Court for the Southern District of Texas.  The plaintiffs subsequently filed a motion in the United States District Court for the Southern District of Texas to have the action remanded back to the state court where it was originally commenced.  That motion was denied and the action proceeded in the federal district court.  On October 1, 2003, the Court denied various motions to dismiss made on behalf of the defendants.  However, in its ruling, the Court indicated that all motions to dismiss could have been granted in light of the defective pleadings made by plaintiffs and allowed plaintiffs 20 days to file an amended complaint to comply with certain pleading requirements of the Court.  Plaintiffs filed an amended complaint within the required period.  Discovery was stayed while the motions to dismiss were pending.

 

After plaintiffs filed their third amended complaint, 78 out of the total of approximately 150 defendants again filed a motion to dismiss the lawsuit.  On September 6, 2004, the Court entered an order granting the moving defendants’ motion to dismiss the lawsuit, again citing various deficiencies in the pleadings.  The Court did not grant the plaintiffs leave to replead.

 

The plaintiffs and the moving defendants have since stipulated to the entry of a final judgment dismissing the third amended complaint against the moving defendants with prejudice.  Under this stipulation, the parties agreed on entry of final judgment to (a) waive their right to attorneys’ fees or seek sanctions and bear their own costs and (b) not appeal the judgment.

 

On December 3, 2004, we announced that our original counsel had assigned our legal retainer agreement in connection with the lawsuit to a legal consortium consisting of various law firms and other consultants throughout the country, which includes our original counsel.  We have met with our new attorneys and continue to evaluate our options for recommencing an action against certain defendants, and possibly other parties, in light of the court’s order and/or pursuing other strategies.

 

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

In October 2009, following the closing of the CardioGenics Acquisition, our board of directors approved the following amendments to our articles of incorporation, subject to the approval of such amendments by the holders of a majority of our common shares: (a) a change of our corporate name from “JAG Media Holdings, Inc.” to “CardioGenics Holdings Inc.” so as to better reflect the nature of our business following the CardioGenics Acquisition and (b) an increase in the number of our authorized common shares from 500,000,000 to 650,000,000. Subsequent to the approval of such proposed amendments by our board of directors, the holders of a majority of our common shares approved by written consent the amendments to our articles of incorporation approved by our board of directors.

 

27

---

 

Under Nevada law, the written consent of the holders of a majority of our common shares, without convening a shareholder meeting to vote on the proposals, was sufficient to make the above-referenced changes to our articles of incorporation. The applicable stockholders were informed of the details of the approved amendments by an Information Statement filed with the SEC and distributed to the applicable stockholders subsequent to the written consent of the holders of a majority of our common shares, but prior to such amendments taking effect. The approved amendments to the articles of incorporation were filed with the Secretary of State of Nevada approximately ten (10) days after the mailing of the Information Statement to the applicable stockholders.

 

PART II

 

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF SECURITIES

 

For the period covered below, our common stock (other than our class B common stock) is traded on the OTC Bulletin Board under the symbol CGNH. In October 2009, our symbol was changed from JAGH to CGNH as a result of the CardioGenics Acquisition. The following table based on Bloomberg L.P. reflects quarterly high and low bid prices of our common stock from October 31, 2007 through October 31, 2009.  Such prices are inter-dealer quotations without retail mark-ups, mark-downs or commissions, and may not represent actual transactions.

 

Fiscal Year Ending October 31, 2009
Quarter Ended		High $				Low $
October 31, 2009		0.78				0.20
July 31, 2009		0.38				0.37
April 30, 2009		0.17				0.14
January 31, 2009		0.23				0.18
October 31, 2008		0.41				0.38
Fiscal Year Ending July 31, 2008
Quarter Ended		High $				Low $
July 31, 2008			0.79				0.17
April 30, 2008			0.98				0.68
January 31, 2008			1.07				0.66
October 31, 2007			1.10				0.59

On February 10, 2010, the closing bid price for our common stock was $0.117.  A public trading market for our Series 2 and Series 3 Class B common stock has never developed.

 

As of February 10, 2010, there were 218,006,202 shares of our common stock outstanding, 380,931 shares of our Series 2 Class B common stock outstanding and 21,500 shares of our Series 3 Class B common stock outstanding and 3,797 stockholders of record with respect to such shares.  There was also outstanding 1 share of Series 1 Preferred Voting Stock, par value $0.0001, representing 16 Exchangeable Shares, which are exchangeable into 276,655,415 shares of our common stock.

 

In addition, there are 1,325 additional stockholders who did not turn in their shares of prior classes of our common stock in connection with our recapitalizations in 2002 and 2004.  These stockholders, upon presentation of their shares, are entitled to receive shares of our common stock in exchange. As of February 10, 2010 174,099 Series 1 Class B common shares, 1,076,207 Class A common shares and 125,277 original JagNotes.com Inc. common shares remained unconverted.

 

Dividend Policy

 

We have never paid any cash dividends on our common stock and anticipate that, for the foreseeable future, no cash dividends will be paid on our common stock.

 

28

---