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EX-99 - CONSECT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - Oncologix Tech Inc.oncologixexhib99-083110.htm
EX-32.2 - CERTIFICATION OF CFO PER SECTION 906 - Oncologix Tech Inc.oncologixexhib322-083110.htm
EX-31.2 - CERTIFICATION OF CFO PER SECTION 302 - Oncologix Tech Inc.oncologixexhib312-083110.htm
EX-31.1 - CERTIFICATION OF CEO PER SECTION 302 - Oncologix Tech Inc.oncologixexhib311-083110.htm
EX-32.1 - CERTIFICATION OF CEO PER SECTION 906 - Oncologix Tech Inc.oncologixexhib321-083110.htm
EX-21 - SUBSIDIARIES OF ONCOLOGIX TECH, INC. - Oncologix Tech Inc.oncologixexhib21.htm

 
 

 


U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K/A
(Mark One)
  x
  Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended August 31, 2010

  o
   Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934

 
                                                                                                        For the transition period from __________ to __________.
 
Commission File Number: 0-15482
 
ONCOLOGIX TECH, INC.
(Name of small business issuer in its charter)
 
Nevada
86-1006416
(State or other jurisdiction
(I.R.S. Employer
of incorporation)
Identification No.)

P.O. Box 8832
Grand Rapids, MI  49518-8832
(Address of principal executive offices)
 
(616) 977-9933
(Registrant’s telephone number, including area code)
 
Securities registered under Section 12(g) of the Act:

Name of exchange on which registered
Title of Each Class
None
None

Securities registered under Section 12(b) of the Act:
Common Stock, $.001 Par Value
(Title of Class)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes   No   x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.   Yes   o       No   x
 
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No   x
 
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated Filer                           o                                                                   Accelerated Filer                             o
 
Non-accelerated Filer                             o                                                                   Smaller Reporting Company          x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)   Yes   o     No   x
 
The aggregate market value of the Common Stock of the registrant held by non-affiliates as of November 5, 2010 was approximately $5,175,544 based on closing stock price of the registrant’s common stock on that date.
 
The number of shares of Common Stock outstanding as of November 5, 2010 was 190,288,993.
 
Documents Incorporated By Reference
 
None
 
 

 
 

 
 
 
 
EXPLANATORY NOTE

This amendment to the Current Report on Form 10-K filed by Oncologix Tech, Inc. (the “Company”) with the Security and Exchange commission on November 29, 2010 is filed solely to correct two errors: 1) The Company updated Item 9A Controls and Procedures to include information required by Items 307, 308 (a)(3) and 308(c) of Regulation S-K; and 2) To correct the language in certifications 31.1 and 31.2 as required by Item 601(b)(31) of Regulation S-K.
 
 
 

TABLE OF CONTENTS
   
         
PART I
   
         
Item 1
 
Description of Business
2
 
Item 1A
 
Risk Factors
5
 
Item 1B
 
Unresolved Staff Comments
7
 
Item 2
 
Properties
8
 
Item 3
 
Legal Proceedings
8
 
         
PART II
   
         
Item 5
 
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
   
   
Equity Securities
8
 
Item 6
 
Selected Financial Data
11
 
Item 7
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
11
 
Item 7A
 
Quantitative and Qualitative Disclosures About Market Risk
17
 
Item 8
 
Financial Statements and Supplementary Data
17
 
Item 9
 
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
18
 
Item 9A
 
Controls and Procedures
18
 
Item 9B
 
Other Information
19
 
         
PART III
   
         
Item 10
 
Directors, Executive Officers and Corporate Governance
20
 
Item 11
 
Executive Compensation
22
 
Item 12
 
Security Ownership of Certain Beneficial Owners and Management and Related
   
   
Stockholder Matters
25
 
Item 13
 
Certain Relationships and Related Transactions, and Director Independence
25
 
Item 14
 
Principal Accountant Fees and Services
26
 
         
PART IV
   
         
Item 15
 
Exhibits, Financial Statement Schedules
27
 
   
SIGNATURES
29
 
         
 
 
i

 
 

 
 
 
FORWARD LOOKING STATEMENTS

This Current Report contains forward-looking statements as that term is defined in Section 27A of the United States Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. These statements relate to future events or future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. Such statements are based on currently available financial and competitive information and are subject to various risks and uncertainties that could cause actual results to differ materially from historical experience and present expectations. Undue reliance should not be placed on such forward-looking statements as such statements speak only as of the date on which they are made. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Forward-looking statements are predictions and not guarantees of future performance or events. The forward-looking statements are based on current industry, financial and economic information, which we have assessed but which by its nature, is dynamic and subject to rapid and possibly abrupt changes. Our actual results could differ materially from those stated or implied by such forward-looking statements due to risks and uncertainties associated with our business. We hereby qualify all our forward-looking statements by these cautionary statements. We undertake no obligation to amend this report or revise publicly these forward looking statements (other than pursuant to reporting obligations imposed on registrants pursuant to the Securities Exchange Act of 1934) to reflect subsequent events or circumstances.

These forward-looking statements speak only as of their dates and should not be unduly relied upon. We undertake no obligation to amend this report or revise publicly these forward-looking statements (other than pursuant to reporting obligations imposed on registrants pursuant to the Securities Exchange Act of 1934) to reflect subsequent events or circumstances, whether as the result of new information, future events or otherwise.

Throughout this report, unless otherwise indicated by the context, references herein to the “Company”, “Oncologix”, “we”, our” or “us” means Oncologix Tech, Inc.., a Nevada corporation and its corporate subsidiaries and predecessors.


PART I

ITEM 1. BUSINESS

OVERVIEW

We were originally formed in 1995 as "Wavetech, Inc." a New Jersey corporation and changed our corporate domicile to Nevada in December 1997, by merging into a Nevada corporation named, "Interpretel International, Inc." We subsequently changed our name, first to "Wavetech International, Inc." and then, in 2000, to "BestNet Communications Corp." Our business at the time was to provide worldwide long distance telephone communication and teleconferencing services to commercial and residential consumers through the internet. That business was never profitable and we were able to continue it only by repeated equity and debt financings. Accordingly, during December 2006, we determined to dispose of that business and sold it during February 2007.

We entered the medical device business at the end of July 2006 through the acquisition of JDA Medical Technologies, Inc. ("JDA"), a development stage company, which was merged into our wholly owned subsidiary, Oncologix Corporation. On January 22, 2007, we changed our name to Oncologix Tech, Inc., to reflect this new business. During June 2007, we moved our principal offices from Grand Rapids, Michigan, to our offices at 3725 Lawrenceville-Suwanee Road, Suite B-4, Suwanee, Georgia, 30024, telephone (770) 831-8818.  At that address, our business was the development of a medical device for brachytherapy (radiation therapy), called the “Oncosphere” (or “Oncosphere System”), for the advanced medical treatment of soft tissue cancers. It is a radioactive micro-particle designed to deliver therapeutic radiation directly to a tumor site by introducing the micro-particles into the artery that feeds the tumor tissue. Its first application is expected to be the treatment of liver cancer. Due to a lack of funding, we suspended these activities on December 31, 2007, whereupon we closed the offices in Suwanee Georgia.
 
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Our new mailing address is P.O. Box 8832, Grand Rapids, MI  49518-8832, telephone (616) 977-9933.

During May 2008, we determined to dispose of most of the assets of the Oncosphere project.  This information is being presented as discontinued operations for all periods shown.

In February 2009, we entered into a Technology Agreement with Institut für Umwelttechnologien GmbH, a German Company (“IUT”) whereunder the parties have agreed that:

(a)  
The Company has granted an exclusive license to a new IUT subsidiary, called “IUTM”, to develop and manufacture products based on the Company’s proprietary information. This proprietary information is not based on the technology that had been subject to the Master License Agreement with the University of Maryland – Baltimore. The Company has also transferred to IUTM a number of items of laboratory equipment and inventory useful in connection with the licensed information.
(b)  
The Company retains rights to market products based on such information as well as first consideration for marketing rights for other possible IUTM products.
(c)  
In consideration of the license, the Company has received a 10% equity interest in IUTM, which is organized as a private German limited liability company and IUT has assumed approximately $82,000 of the Company’s indebtedness.
(d)  
The Company’s marketing rights have been transferred to its subsidiary, Oncologix Corporation and have issued IUTM 10% of the equity ownership of that subsidiary.

In addition, on April 7, 2009, the Company entered into a Termination Agreement with the University of Maryland – Baltimore, The Master License Agreement between the Company and the University has been formally terminated and each party has released the other from all liabilities arising under the Master License Agreement.

We have been advised that IUTM is continuing the development of a brachytherapy device generally as described above but based on proprietary technology not developed by the University of Maryland. During recent discussions with IUTM management, the prior understandings were reaffirmed. It is now our expectation that we will receive information on at least two potential product lines under consideration and/or development by IUTM. Upon receipt we plan to determine the extent to which we will be able to market them and to finance a marketing organization. While our Management is optimistic as to the outcome of those discussions and future success in financing, it is not possible to predict the probabilities of success with any degree of certainty.

By letter dated August 12, 2009, the Securities and Exchange Commission (“SEC”) notified us that unless we become current with our required public filings by August 27, 2009, the SEC may cause the Company to be de-registered under the securities laws and that the SEC may issue an order suspending public trading of the Company’s securities.  As a result of preliminary conversations with the staff of the SEC, the Company believes that additional time may be granted that will be sufficient for the Company to be compliant with its filings.  However, there is no assurance of that outcome.  Such de-registration and suspension of trading will seriously limit the ability of investors to re-sell any of our shares held by them.  In June, 2009, we began an effort to achieve compliance with all reporting requirements and our independent auditors began the process of examining our financial statements with a view to certifying them as required by law.   In May 2010, we became current with our public filings required by the SEC.
 
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MICROSPHERE PRODUCT
 
 
The following terms which are used throughout this Report have the following meanings:

Brachytherapy” refers to the process of placing therapeutic radiation sources in or near diseased tissue.
 
 “FDA” refers to the United States Food and Drug Administration.
 
 “Investigational Device Exemption” or “IDE” refers to a procedure whereby the FDA grants permission to test a new product with human patients in the United States.
 
“Micro-arterial brachytherapy” refers to the delivery of radiation into or near a tumor through the artery carrying the blood supply to the tumor.
 
Microsphere” refers to a spherical microparticle, approximately one-quarter the width of a human hair, capable of containing or binding a radioisotope for the purpose of delivering radiation treatment directly to a tumor through the system of arteries (vasculature) supplying blood to the tumor. Our product is an innovative version of a microsphere that we call the “Oncosphere.”
 
The Microsphere Product

The product being developed by IUTM is a microsphere intended for use as a means of micro-arterial brachytherapy in the treatment of soft tissue cancer tumors in the liver. Soft tissue tumors are connected to the blood supply and this kind of therapy is administered through the patient’s blood supply system.
 
Soft tissue tumors are among the most difficult forms of cancer to treat. If not cured by initial therapy, these tumors eventually become unresponsive to chemotherapy and spread (metastasize) throughout the body. While there has been some progress in recent years in treating these cancers with surgery and chemotherapy, the five-year survival rates remain less than five percent. We believe that there is a strong demand from patients and physicians confronting this type of cancer for effective, easy-to-use therapies with acceptable side effects. We believe that if and when it is fully developed and approved for use the IUTM product will provide such a therapy if developed.
 
Currently the standard treatment for patients with advanced cancerous tumors is chemotherapy, which is not specific to (that is, does not discriminate as to) various types of cancer and has side effects that damage or destroy many normal cells as well as the cancer cells. Thus, chemotherapy may result in additional illness and even death. High doses of chemotherapy have typically resulted in extended, unpleasant and sometimes life-threatening hospital stays. Patients often require expensive, invasive medical attention before they recover and are discharged to their homes.
 
An alternative therapy, radiation, is most often administered by delivering a beam from outside of the patient’s body (“external beam radiation”) through the patient's body to the cancer tumor. Cells do not become resistant to radiation as they do to chemotherapy. Therefore, radiation delivered to the cell in sufficient doses will cause the death of the cell. However, because the radiation originates from outside the body, the healthy tissues surrounding the tumor and those between the source and the tumor also receive radiation and suffer damage that can cause significant adverse side effects.
 
Micro-arterial brachytherapy is an improvement over both chemotherapy and external beam radiation. In this form of treatment, microspheres bearing radiation are delivered directly through the bloodstream to the site of a cancer tumor, thereby avoiding healthy tissues. Micro-arterial brachytherapy has the additional significant advantage of being administered in an outpatient procedure, with most patients being able to return home the day of treatment.
 
We believe that if and when the development of the IUTM product has been completed and it is approved by the FDA and used in the treatment of patients, it will have significant competitive advantages over microspheres now in the market.
 

GOVERNMENT REGULATION  

All activities in the development, manufacture and sale of cancer therapy products are and will be subject to extensive laws, regulations, regulatory approvals and guidelines. Within the United States, therapeutic radiological devices must comply with the U.S. Federal Food, Drug and Cosmetic Act, which is enforced by the FDA. All those who are engaged in the manufacture of such products are required to adhere to applicable FDA regulations for Good Manufacturing Practices, including extensive record keeping and periodic inspections of manufacturing facilities. Medical devices such as the Oncosphere cannot be used or sold unless they are approved for specified purposes by the FDA. There are two levels of FDA approval. The first is the granting of approval to test the device in human subjects through an IDE; the second is obtaining approval to market the device to the public for the treatment of specified diseases through a PMA.  Separate FDA approval will be required for each such stage.
 
 
4
 
 
 
 

 
 
 
If our discussions with IUTM and subsequent financing are successful, our business is expected to involve the importing, exporting, design, manufacture, distribution, use and storage of beta- and gamma-emitting radioisotopes. These activities in the United States are subject to federal, state and local rules relating to radioactive material promulgated by the Nuclear Regulatory Commission ("NRC"), and states that have subscribed to certain standards and local authorities, known as “Agreement States.” In addition, we must comply with NRC, state and U.S. Department of Transportation requirements for labeling and packaging shipments of radiation sources to hospitals or others users of our devices. In order to market our devices commercially in the U.S., we will be required to obtain a sealed source device registration from Agreement States and/or the NRC, depending on the states in which the device will be distributed.
 
Additionally, hospitals in the United States are required to have radiation licenses to hold, handle and use radiation. Many hospitals and/or physicians in the United States will be required to amend their radiation licenses to include our isotopes before receiving and using them. Depending on the state in which the hospital is located, the license amendment will be processed by the responsible subscribing state department or agency or by the NRC.
 
Obtaining such registration, approvals and licenses can be complicated and time consuming and there is no assurance that any of them can be obtained.
 
COMPETITION

We are aware of several companies that have developed competing products to address soft tissue cancers: DS Nordion a Canadian company whose microsphere product is named "Therasphere”; Sirtex, an Australian company with approximately $11,000,000 in assets, whose microsphere product is named "SIR-Spheres"; and pSivida, a British company.
 
We believe that other companies are capable of developing technology that could, if embodied in a suitable product, compete with the IUTM product. We also believe that one of those companies may have developed specifications for such a product but that its plans for further development are now dormant. As with any technology-based product, there is a risk that other, more advanced, products will appear on the market.

INTELLECTUAL PROPERTY PROTECTION

We have been advised by IUTM that it intends to rely on patent laws, software security measures, license agreements and nondisclosure agreements to protect its products. No patent has yet been granted and there is no assurance that any will be granted or that any part of the technology will be patentable. Even if granted however, any patent may be limited in scope and patents issued to others, or technologies owned by them, may result in competitive products that do not infringe any patent and that may employ software for dose calculation without infringing any patent that may be granted for the Oncosphere technology.
 
EMPLOYEES
 
We currently have two part time employees: our Chief Financial Officer, who is located in Michigan and our Chief Executive Officer who is located in Arizona. We do not anticipate hiring additional employees until we begin the marketing efforts referred to above.

ITEM 1A. RISK FACTORS

Anyone considering an investment in our company should read this report carefully, noting the descriptions of the various risks and uncertainties involved in our business, including but not limited to the following:

Need for Additional Capital. We will need additional funds to continue our corporate existence and maintain our basic functions. We will need substantial funds to finance our marketing activities if and when they commence. Since our inception we have been dependent on obtaining operating capital from private investors, including one present and one former Director. We may be unable to raise additional capital on commercially acceptable terms, if at all, and if we raise capital through additional equity financing, the ownership interests of existing shareholders may be diluted. Our failure to generate adequate funds would severely harm our business. See “MANAGEMENT’S DISCUSSION AND ANALYSIS” below in this Report.
 
5
 
 
 
 

 
 

Reliance on Anthony Silverman’s Financial Assistance. Since October 22, 2003, we have relied substantially on the advice and assistance of Mr. Anthony Silverman, who became CEO and President on April 3, 2009, in structuring our financing, identifying sources of funding and acting as such a source himself.  Mr. Silverman and his affiliates own 17,770,850 shares of our common stock (approximately 9.45% of the voting stock). Although we believe that Mr. Silverman presently intends to continue rendering such assistance, there is no assurance that this assistance will continue as before.

Delinquent SEC Filings.  By letter dated August 12, 2009, the Securities and Exchange Commission (“SEC”) notified us that unless we become current with our required public filings by August 27, 2009, the SEC may cause the Company to be de-registered under the securities laws and that the SEC may issue an order suspending public trading of the Company’s securities.  As a result of preliminary conversations with the staff of the SEC, the Company believes that additional time may be granted that will be sufficient for the Company to be compliant with its filings.  However, there is no assurance of that outcome.  Such de-registration and suspension of trading will seriously limit the ability of investors to re-sell any of our shares held by them.  In June, 2009, we began an effort to achieve compliance with all reporting requirements and our independent auditors began the process of examining our financial statements with a view to certifying them as required by law.   In May 2010, we became current with our required public filings required by the SEC.

Short Term Indebtedness. The following table summarizes our required current outstanding short-term debt as of August 31, 2010, including our short-term notes payable, short-term convertible notes payable and their respective due dates.  To the extent the convertible note is not converted, funds for repayment will have to be raised through additional debt or equity financings.
 
 
Due Date
Interest Rate
Amount
 
Accrued Interest***
Total Owed
 
Convertible/Non-Convertible
 
                   
01/07/2011 (1)
6.00%
 $          25,000
 
 $            1,615
 
 $          26,615
 
Non-convertible
 
01/18/2011 (1)
6.00%
             25,000
 
                  986
 
             25,986
 
Non-convertible
 
       10/26/2010
6.00%
                   25,000
 
               1,237
 
             26,237
 
Convertible at $0.02 per share
 
                   
                   
   
       $          75,000
 
 $            3,838
 
 $          78,838
     
                   
(1)  Note payable to Anthony Silverman, our President and CEO.
         
***  Interest calculated to maturity or conversion
           
                   
 
 
 Technology Uncertainties. Our business is subject to the risks inherent in any new technology company, including that the IUTM product will not function as we expect, that successful commercial development may take substantially more time and effort than anticipated, that IUTM may run out of funds before development is complete and that a competitor’s product may come to the market before we are able to do so. See “MANAGEMENT’S DISCUSSION AND ANALYSIS” below in this Report.

Dependence on IUTM for Information. ALL OF THE STATEMENTS CONCERNING IUTM AND ITS PRODUCT DEVELOPMENT ARE BASED ON INFORMATION RECEIVED FROM OFFICERS OF IUTM. WHILE WE BELIEVE THEM TO BE ACCURATE, BECAUSE OF FINANCIAL RESTRICTIONS, WE HAVE NO MEANS OF VERIFYING ANY OF THE INFORMATION.

Reliance on Key Personnel. Our success will largely depend upon our ability to recruit and retain personnel with suitable marketing and management experience. Competition for these personnel and relationships is intense and we expect to compete with numerous pharmaceutical and biotechnology companies as well as with universities and non-profit research organizations. We may not be able to attract and retain qualified personnel.

Going Concern Qualification. We have disclosed in our financial statements that they were prepared under the assumption that the Company will continue as a going concern. We have incurred losses from operations over the past several years and anticipate additional losses in the future.  Our independent auditors have included language in their report included on our 2010 financial statements that indicates that these matters raise doubt about our ability to continue as a going concern. Our ability to continue as a going concern is subject to our ability to obtain necessary funding from outside sources, including obtaining additional funding from the sale of our securities or obtaining loans from various financial sources where possible. The going concern qualification increases the difficulty of meeting such goals.
 
6
 
 
 
 

 
 

 
Industry Intensely Competitive.  The medical device industry is intensely competitive. We will compete with both public and private medical device, biotechnology and pharmaceutical companies that have been established longer than we have, have a greater number of products on the market, have greater financial and other resources and have other technological or competitive advantages. We also compete in the development of technologies and processes and in acquiring personnel and technology from academic institutions, government agencies, and other private and public research organizations. We cannot be certain that one or more of our competitors will not receive patent protection that dominates, blocks or adversely affects our product development or business will not benefit from significantly greater sales and marketing capabilities or will not develop products that are accepted more widely than ours.
 
Intellectual Property Risk.  The patent positions of medical device companies can be highly uncertain and involve complex legal and factual questions. Patent rights, if granted, may not be upheld in a court of law if challenged. Patent rights may not provide competitive advantages and may be challenged, infringed upon or circumvented by competitors. Products cannot be patented in all countries nor can any small company, such as IUTM and us afford to litigate every potential violation worldwide. Because of the large number of patent filings in the medical device and biotechnology field, competitors may have filed applications or been issued patents and may obtain additional patents and proprietary rights relating to products or processes competitive with or similar to ours. We cannot be certain that U.S. or foreign patents do not exist or will not be issued that would harm our ability to commercialize our products and product candidates.
 
Exposure to Product Liability Claims.  The design, testing, development, manufacture, and marketing of products involve an inherent risk of exposure to product liability claims and related adverse publicity. Insurance coverage is expensive and difficult to obtain and, in the future, we may be unable to obtain coverage on acceptable terms, if at all. If we are unable to obtain sufficient insurance at an acceptable cost or if a successful product liability claim is made against us, whether fully covered by insurance or not, our business could be harmed.
 
Exposure to Environmental Risks.  Our business as contemplated to be carried on involves the controlled use of hazardous materials, chemicals, biologics, and radioactive compounds. Manufacturing is extremely susceptible to product loss due to radioactive, microbial, or viral contamination; material equipment failure; or vendor or operator error; or due to the very nature of the product's short half-life. Although we believe that when we become operational, our safety procedures for handling and disposing of such materials will comply with state and federal standards there will always be the risk of accidental contamination or injury. In addition, radioactive, microbial, or viral contamination may cause the closure of the respective manufacturing facility for an extended period. By law, radioactive materials may only be disposed of at state-approved facilities. If we were to become liable for an accident, or if we were to suffer an extended facility shutdown, we could incur significant costs, damages, and penalties that could harm our business.

Uncertainty as to our Ability to Initiate Operations and Manage Growth.  Our efforts to carry out plans to market medical products will result in new and increased responsibilities for management personnel and will place a strain upon our management, financial systems, and resources. We may be required to continue to implement and to improve our management, operating and financial systems, procedures and controls on a timely basis and to expand, train, motivate and manage our employees. There can be no assurance that our personnel, systems, procedures, and controls will be adequate to support our future operations.
 

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.
 
7


 
 

 

ITEM 2. PROPERTIES

Our Chief Executive Officer works from his home in Scottsdale, Arizona and our Chief Financial Officer maintains all the corporate records at his home in Grand Rapids, Michigan.  Currently we have no lease obligations for premises.

ITEM 3. LEGAL PROCEEDINGS

None.


PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock

Our common stock is traded on the Pink Sheets beginning January 2009 when we were delisted from the OTC Bulletin Board.  Our common shares trade on the Pink Sheets under the symbol “OCLG.PK”.  Prior to January 2009, the Company's common stock was quoted on the OTC Bulletin Board under the symbol “OCLG.OB” The high and low close prices of the Company's common stock as reported for the last two fiscal years, by fiscal quarter (i.e. first quarter = September 1 through November 30) were as follows:

 
 
 
High
   
Low
   
 
FISCAL YEAR ENDED:
             
 
August 31, 2010
             
 
First Quarter
  $ 0.04     $ 0.02    
 
Second Quarter
  $ 0.06     $ 0.02    
 
Third Quarter
  $ 0.06     $ 0.02    
 
Fourth Quarter
  $ 0.04     $ 0.02    
                     
 
FISCAL YEAR ENDED:
                 
 
August 31, 2009
                 
 
First Quarter
  $ 0.05     $ 0.03    
 
Second Quarter
  $ 0.04     $ 0.01    
 
Third Quarter
  $ 0.07     $ 0.02    
 
Fourth Quarter
  $ 0.06     $ 0.02    

The closing stock price of our common stock on November 5, 2010, was $0.03.

Holders

As of November 5, 2010, the Company had 271 shareholders of record of its common stock. As of November 5, 2010, 1,256 owners of our common stock held them in the names of various broker-dealers.  As of November 5, 2010, the Company had one Unit holder of record.  As of November 5, 2010, the Company had ten owners of Units who held them in the names of various brokers.
 
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Dividends

The Company has never declared any cash dividends on any of the Company’s equity securities and currently plans to retain future earnings, if any, for business growth.

Stock Performance Graph

We are a smaller reporting company, as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, and accordingly we are not required to provide the information.

Recent Sales of Unregistered Securities

The following table contains information regarding our sales of unregistered securities during the past two fiscal years.  We have made additional sales of unregistered securities subsequent to our year end.  See “LIQUIDITY AND CAPITAL RESOURCES.” The securities sold were a combination of promissory notes convertible into shares of our common stock, conversion of Unit preferred shares into common stock, and sales of common stock to accredited investors. The principal amount of each Note is equal to the amount borrowed from the investor.


Date of Issuance
Principal Amount of Note(s)
Further Description and Remarks
September , October, November 2007
$1,090,000
During September through November 2007, we issued twenty-seven Convertible Promissory Notes in an aggregate principal amount of $1,090,000.  These Convertible Promissory Notes are due September 17, 2009, bear interest at the rate of 6% per annum and are convertible into our common stock at a rate of $0.30.  The Convertible Promissory Notes were issued in a private offering of Units, each consisting of a Convertible Promissory Note and a warrant for the purchase of the number of common shares into which each Convertible Promissory Note is convertible.  The warrants expire on September 17, 2009 and have an exercise price of $0.50 per share.  We recognized a discount of $180,330 related to the warrants and a beneficial conversion feature of $318,330 related to these notes.  On October 29, 2008, the Company issued 793,720 shares of its common stock to holders of convertible promissory notes in lieu of an annual cash interest payment of $39,686.  The company also recorded $26,457 in conversion expense as a result of reducing the conversion price from $0.30 to $0.05 per share for this conversion.  In September 2009, holders of $1,090,000 in principal and $83,828 in accrued interest converted their notes into 23,476,566 shares of common stock at a conversion price of $0.05. The Company recognized $391,276 in conversion expense as a result of the reduction of the conversion price to induce conversion.
 
December 29, 2009
$25,000
On December 29, 2009, we issued a 60-Day convertible promissory note to an accredited investor.  This note bears interest at 6% per annum and is convertible into the Company’s common stock at a rate of $0.02 per share.
Date of Sale
Proceeds from Sale
Further Description and Remarks
October 13, 2008
$15,000
On October 13, 2008, the Company sold 1,500,000 shares of common stock to an accredited investor at $0.01 per share.
October 13, 2008
$15,000
On October 13, 2008, the Company sold 1,500,000 shares of common stock to its CEO, Anthony Silverman at a price of $0.01 per share.
December 1, 2008
$15,000
On December 1, 2008, the Company sold 1,500,000 shares of common stock to an accredited investor at $0.01 per share.
January 13, 2009
$3,000
On January 13, 2009, the Company sold 300,000 shares of common stock to an accredited investor at $0.01 per share.
March 17, 2009
$15,000
On March 17, 2009, the Company sold 1,000,000 shares of common stock to an accredited investor at $0.015 per share.
March 22, 2010
$2,660
On March 22, 2010, Holders of 13,300 Units contributed $2,660 to convert 13,300 shares of preferred stock into 26,600 shares of common stock.
April 8, 2010
$4,160
On April 8, 2010, Holders of 20,800 Units contributed $4,160 to convert 20,800 shares of preferred stock into 41,600 shares of common stock.
May 13, 2009
$30,000
On May 13, 2009, the Company sold 2,000,000 shares of common stock to three accredited investors at $0.015 per share.
May 22, 2009
$15,000
On May 22, 2009, the Company sold 1,000,000 shares of common stock to an accredited investor at $0.015 per share.
June 13, 2009
$30,000
On June 13, 2009, the Company sold 1,500,000 shares of common stock to an accredited investor at $0.02 per share.
September 30, 2009
$25,000
On September 30, 2009, the Company sold 1,250,000 shares of common stock to an accredited investor at $0.02 per share.
November 3, 2009
$25,000
On November 3, 2009, the Company sold 1,250,000 shares of common stock to an accredited investor at $0.02 per share.
February 1, 2010
$25,000
On February 1, 2010, the Company sold 1,000,000 shares of common stock to an accredited investor at $0.025 per share.
April 16, 2010
$50,000
On April 16, 2010, the Company sold 1,666,667 shares of common stock to an accredited investor at $0.03 per share.
May 13, 2010
$25,000
On May 13, 2010, the Company sold 833,333 shares of common stock to an accredited investor at $0.03 per share.
June 17, 2010
$25,000
On June 17, 2010, the Company sold 833,333 shares of common stock to an accredited investor at $0.03 per share.
August 11, 2010
$25,000
On August 11, 2010, the Company sold 1,666,667 shares of common stock to an accredited investor at $0.015 per share.

                                                                                                                                                               9
 
 
 

 

Issuer Repurchases of Equity Securities

We did not repurchase any of our equity securities during the fourth quarter of the year ended August 31, 2010.

Transfer Agent

Our transfer agent and registrar are American Stock Transfer and Trust Co., 6201 15th Avenue, 3rd Floor, Brooklyn, NY  11219, Telephone (718) 921-8210.

Securities authorized for issuance under equity compensation plans

 EQUITY COMPENSATION PLAN(1)
 
 
Number of Securities
     
Number of Securities
 
 
To Be Issued Upon
 
Weighted Average
 
Remaining Available
 
 
Exercise of Outstanding
 
Exercise Price of
 
For Future
 
 
Options
 
Outstanding Options
 
Issuance Under Plans
 
             
Equity compensation plans
           
approved by stockholders
                             2,933,332
 
$0.50
 
                             8,251,171
 
             
Equity compensation plans
           
not approved by stockholders
                                          -
 
$0.00
 
                                          -
 
             
TOTAL
                             2,933,332
 
$0.50
 
                             8,251,171
 
             
 


 (1) We maintain a 2000 Stock Incentive Plan under which we have 3,726,171 shares of common stock available for future issuance as of August 31, 2010.  Under the 2000 Stock Incentive Plan, the sale price of the shares of common stock is equal to the fair market value of such shares on the date of the option grant.  In January 2007, our shareholders approved an increase in the number of shares authorized for our 2000 Stock Incentive Plan to 7,500,000 from 5,000,000.  We also maintain a 1997 Stock Incentive Plan under which we have 4,525,000 shares of common stock available for future issuance as of August 31, 2010.  The sale price of the shares of common stock available under our 1997 Stock Incentive Plan is equal to the fair market value of such shares on the date of grant.  Both of these plans have been approved by our shareholders.

For a description of our 1997 and 2000 Stock Incentive Plans, please see the description set forth in Note 11 of our Consolidated Financial Statements.
 
10

 
 
 

 

ITEM 6.  SELECTED FINANCIAL DATA

We are a smaller reporting company, as defined by Rule 12b-2 promulgated under the Securities Exchange Act of 1934, and accordingly we are not required to provide the information.

ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and notes appearing elsewhere in this Report.

CRITICAL ACCOUNTING POLICIES

“Management's Discussion and Analysis of Financial Condition and Results of Operations ” (“MDA”) discusses our consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate our estimates and judgments, including those related to research and development costs, deferred income taxes and the impairment of long-lived assets. We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. The result of these estimates and judgments form the basis for making conclusions about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions; changes in these estimates as a result of future events may have a material effect on the Company’s financial condition. The SEC suggests that all registrants list their most “critical accounting policies” in MDA.  A critical accounting policy is one which is both important to the portrayal of the Company’s financial condition and results of operations and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management believes the following critical accounting policies affect its more significant judgments and estimates in the preparation of its consolidated financial statements:  The impairment of long-lived assets, stock based compensation, deferred income tax valuation allowances, pending or threatening litigation and the allocation of assets acquired and liabilities assumed in acquisitions.
 
Impairment or Disposal of long-lived assets.  In accordance with ASC 360 “Impairment or Disposal of Long-lived Assets”, the Company periodically evaluates whether events and circumstances have occurred that may indicate that the carrying amount of such assets may not be recoverable.  If the carrying amount of an asset or group of assets exceeds its net realizable value, the asset will be written down to its fair market value.  In the period when the plan of sale criteria of ASC 360 are met, long-lived assets are reported as held for sale, depreciation and amortization cease, and the assets are reported at the lower of carrying value or fair value less costs to sell.
 
Deferred tax assets. In assessing the realizability of deferred tax assets, management assesses the likelihood that deferred tax assets will be recovered from future taxable income, and to the extent that recovery is not likely a valuation allowance is established. We adjust the valuation allowance in the period management determines it is more likely than not that deferred tax assets will or will not be realized. To date, we have fully reserved for our deferred tax assets based primarily on our history of recurring losses.
 
Use of Estimates. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reportable amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.
 
Convertible Debt.  Interest on convertible debt is calculated using the simple interest method.  The company recognizes a beneficial conversion feature to the extent the conversion price is less than the closing stock price on the issuance of the convertible notes.  The Company also follows ASC 470-50 and ASC 470-20 regarding changes in the terms of the convertible notes and the induced conversion of its convertible debt.
 
11
 

 
 

 


RESULTS OF OPERATIONS

Comparison of the two years ended August 31, 2010 and 2009

General and Administrative Expense

 General and administrative expenses included in our results from continuing operations include legal and accounting fees, license fees, travel, payroll and related expenses, directors and officers insurance, and public relations expenses.  These expenses relate primarily to general corporate overhead and accordingly are segregated from general and administrative expenses that related directly to our medical device business, which are included in the results from discontinued operations.  General and administrative expenses that are specific to our medical device business include primarily storage fees.
 
General and administrative expense decreased to $190,656 during fiscal 2010, from $358,217, a decrease of 47% or $169,821 from the comparable period in fiscal 2009.  Travel and entertainment expense decreased to $0 for during fiscal 2010, from $14,070 during fiscal 2009 due primarily to the elimination of travel expense and conducting telephonic board meetings.  Payroll and related expenses decreased to $80,615 during fiscal 2010, from $182,378 during fiscal 2009, due primarily to ending our former CEO’s salary.  Outside services decreased to $8,857 during fiscal 2010, from approximately $29,174 during fiscal 2009 due primarily to reduced contract payments in fiscal 2010.  Legal and accounting expense decreased to $54,168 during fiscal 2010, from $81,728 during fiscal 2009 as a result of changing our registered accounting firm.
 
Depreciation and Amortization

Depreciation and amortization decreased to $1,418 during fiscal 2010, from $1,668 during fiscal 2009.  The decrease in depreciation and amortization from fiscal 2009 to fiscal 2010 was the result of assets becoming fully depreciated during fiscal 2010.
 
 
Interest Income

We had no interest income in fiscal 2010 or fiscal 2009.
 
12


 
 

 

Interest and Finance Charges

Interest and finance charges decreased to $80,261 during fiscal 2010 from approximately $638,241, a decrease of 87% from fiscal 2009.  The decrease is primarily attributable to conversions of convertible promissory notes at the end of fiscal 2009 and the beginning of fiscal 2010.

A summary of interest and finance charges is as follows:
 
           
For the Year Ended
 
           
August 31,
 
August 31,
 
           
2010
 
2009
 
Interest expense on non-convertible notes
 $              2,973
 
 $                 793
 
Interest expense on convertible notes payable
               29,190
 
             160,149
 
Amortization of note payable discounts
               24,925
 
             391,788
 
Other interest and finance charges
               23,173
 
               85,511
 
                   
Total interest and finance charges
 $            80,261
 
 $          638,241
 
                   
 

We had outstanding convertible notes payable during both fiscal 2010 and fiscal 2009. A discount to those notes was recorded due to the value of warrants and the beneficial conversion terms inherent to these convertible notes.  The amortization of these discounts was recorded as interest and finance charge expense over the life of the notes.  See Note 10 of Notes to Consolidated Financial Statements included in Item 8 in this Report. Cash paid for interest and finance charges increased by approximately 7% from fiscal 2009 to fiscal 2010 because of interest paid related to our financing of our Directors and Officers liability insurance.  The overall decrease in interest expense resulted from conversions of the majority of outstanding convertible notes payable during fiscal 2010 and fiscal 2009.

Conversion Expense

Conversion expense decreased to $413,841 during fiscal 2010, from approximately $1,530,384, a decrease of 73% during fiscal 2009.  The decrease was due the conversion of fewer convertible promissory notes in fiscal 2010, as a result of reducing the conversion price from $0.30 to $0.05 per share for these induced conversions.  See Note 10 for more information on these conversions.

Income Taxes

At August 31, 2010, the Company had federal net operating loss carryforwards totaling approximately $31,800,000.  At August 31, 2010, the Company did not have any state net operating loss carryforwards. The federal net operating loss carryforwards expire in various amounts beginning in 2004 and ending in 2030.  Due to our history of incurring losses from operations, we have provided a valuation allowance for our net operating loss carryforward.
 
13


 
 

 

Discontinued Operations

Loss from discontinued operations for our medical device business decreased to $2,822 for fiscal 2010, from  $32,581 during fiscal 2009.  The decrease was a result of suspending research operations on December 31, 2007 and the disposal of the remaining assets in October 2009.  The value of these assets were determined to be impaired at August 31, 2009.

 
             
For the Year Ended
 
             
August 31,
 
August 31,
 
             
2010
 
2009
 
Operating expenses:
           
 
General and administrative
 $                      255
 
 $                   2,183
 
 
Depreciation and amortization
                      2,669
 
                    28,935
 
                     
 
Total operating expenses
                      2,924
 
                    31,118
 
                     
 
Loss from operations
 
                     (2,924)
 
                   (31,118)
 
                     
Other income (expense):
         
 
Loss on disposal of assets
                                      -
 
                     (4,463)
 
 
Loss on impairment
 
                        (212)
 
                   (22,432)
 
 
Other income (expense)
                   -
 
                          (30)
 
                     
 
Total other income (expense)
                        (212)
 
                   (26,925)
 
                     
 
Loss from discontinued operations
                     (3,136)
 
                   (58,043)
 
 
Gain on disposal of discontinued operations
                 -
 
                    22,116
 
                     
   
Loss from discontinued operations
                     (3,136)
 
                   (35,927)
 
                     
   
Less loss attributable to noncontrolling interest
                        (314)
 
                     (3,346)
 
                     
 
Net loss from discontinued operations
 $                  (2,822)
 
 $                (32,581)
 
                     

Liquidity and Capital Resources

We were unable to obtain the financing necessary to continue development operations after December 31, 2007. Consequently, we terminated the employment of all of our personnel, effective as of that date.  We anticipate that we will require $250,000 to operate for the next twelve months.  These funds are expected to be raised through small private placements, although there is no assurance of any success in doing so.  During recent discussions with IUTM management, the prior understandings were reaffirmed. It is now our expectation that we will receive information on at least two potential product lines under consideration and/or development by IUTM. Upon receipt we plan to determine the extent to which we will be able to market them and to finance a marketing organization.

Our operating losses to date have been covered by equity and debt financing obtained from private investors, including certain present and former members of our Board of Directors. We never achieved positive cash flow or profitability in our telephone business because we did not generate a volume of business sufficient to cover our overhead costs.  Our financial statements contain explanatory language related to our ability to continue as a going concern and our auditors have qualified their opinion on our Consolidated Financial Statements for the year ended August 31, 2010, included as a part of this Report, reflecting uncertainty as to our ability to continue in business as a going concern.

On August 31, 2010, we had cash and cash equivalents of $10,596. We have historically relied upon the issuance of debt or equity in order to finance our operations.  Our operating losses to date have been covered by equity and debt financing obtained from private investors, including certain current and former members of our Board of Directors.
 
14
 

 
 

 
 

 
Below is a summary listing for the next 12 months, as of August 31, 2010, of our required minimum cash payments including our short-term notes payable, short-term convertible notes payable and their respective due dates.  To the extent the convertible notes are not converted, funds for repayment will have to be raised through additional debt or equity financings.

Due Date
Interest Rate
Amount
 
Accrued Interest***
Total Owed
 
Convertible/Non-Convertible
 
                   
01/07/2011 (1)
6.00%
 $          25,000
 
 $            1,615
 
 $          26,615
 
Non-convertible
 
01/18/2011 (1)
6.00%
             25,000
 
                  986
 
             25,986
 
Non-convertible
 
       10/26/2010
6.00%
             25,000
 
               1,237
 
             26,237
 
Convertible at $0.02 per share
 
                   
                   
   
 $          75,000
 
 $            3,838
 
 $          78,838
     
                   
(1)  Note payable to Anthony Silverman, our President and CEO.
         
***  Interest calculated to maturity or conversion
           
 
 
Inflation and Other Factors

The Company’s operations are influenced by general economic trends and technology advances in the medical industries.

Our activities in the development, manufacture and sale of cancer therapy products are, and will be subject to extensive laws, regulations, regulatory approvals and guidelines. Within the United States, therapeutic radiological devices must comply with the U.S. Federal Food, Drug and Cosmetic Act, which is enforced by the FDA. We are also required to adhere to applicable FDA regulations for Good Manufacturing Practices, including extensive record keeping and periodic inspections of manufacturing facilities. Medical devices such as the Oncosphere cannot be used or sold unless they are approved for specified purposes by the FDA. There are two levels of FDA approval. The first is the granting of approval to evaluate use of the device in human subjects (through an IDE); the second is obtaining approval to market the device to the public for the treatment of specified diseases (PMA).

If we are successful in implementing our plans, our business will involve the importing, exporting, design, manufacture, distribution, use and storage of beta and gamma emitting radioisotopes. These activities in the United States are subject to federal, state and local rules relating to radioactive material promulgated by the Nuclear Regulatory Commission ("NRC"), and states that have subscribed to certain standards and local authorities, known as “Agreement States” In addition, we must comply with NRC, state and U.S. Department of Transportation requirements for labeling and packaging shipments of radiation sources to hospitals or others users of our devices. In order to market our devices commercially, we will be required to obtain a sealed source device registration from Agreement States and/or the NRC, depending on the states in which the device will be distributed.

Additionally, hospitals in the United States are required to have radiation licenses to hold, handle and use radiation. Many hospitals and/or physicians in the United States will be required to amend their radiation licenses to include our isotopes before receiving and using them. Depending on the state in which the hospital is located, the license amendment will be processed by the responsible subscribing state department or agency or by the NRC.

Obtaining such registration, approvals, and licenses can be complicated and time consuming and there is no assurance that any of them can be obtained.
 
15


 
 

 


Code of Ethics

Our Board of Directors has adopted a code of ethics that applies to our principal executive officer, principal financial officer and to other persons performing similar functions.  The code of ethics is designed to deter wrongdoing and to promote honest and ethical conduct, full, fair, accurate, timely and understandable disclosure, compliance with applicable laws, rules and regulations, prompt internal reporting of violations of the code and accountability for adherence to the code.  We will provide a copy of our code of ethics, without charge, to any person upon receipt of written request fur such delivered to our corporate headquarters.  All such requests should be send to Oncologix Tech, Inc., P.O. Box 8832, Grand Rapids, MI  49518-8832.

Off-Balance Sheet Arrangements
            
As of August 31, 2010 and 2009, we had no off-balance sheet arrangements.

Recent Accounting Pronouncements
 
                We have evaluated all Accounting Standards Updates through the date the financial statements were issued and do not believe any will have a material inpact. 

In August 2010, FASB issued FASB ASC 2010-21, Accounting for Technical Amendments to Various SEC Rules and Schedules and ASB 2010-22, Accounting for Various Topics.  We do not expect the adoption of ASU 2010-21 and ASU 2010-22  to have a material effect on our financial condition or results of operations.

In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. ASU 2010-06 provides new disclosure requirements and clarification for existing disclosures requirements. More specifically, this update will require (a) an entity to disclose separately the amounts of significant transfers in and out of Levels 1 and 2 fair value measurements and to describe the reasons for the transfers; and (b) information about purchases, sales, issuances and settlements to be presented separately (i.e. present the activity on a gross basis rather than net) in the reconciliation for fair value measurements using significant unobservable inputs (Level 3 inputs). This guidance clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value and requires disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs. The new disclosures and clarifications of existing disclosure are effective for fiscal years beginning after December 15, 2009, except for the disclosure requirements related to the purchases, sales, issuances and settlements in the rollforward activity of Level 3 fair value measurements. Those disclosure requirements are effective for fiscal years ending after December 31, 2010. We do not expect the adoption of this standard to have a material effect on our financial condition or results of operations.

In January 2010, the FASB issued ASU 2010-02, Consolidation (Topic 860): Accounting and Reporting for Decreases in Ownership of a Subsidiary – a Scope Clarification.  The objective ASU 2010-02 is to address implementation issued related to changes in ownership provisions in the Consolidation – Overall Subtopic 810-10, formerly FASB Statement No. 160, Noncontrolling Interest in Consolidated Financial Statements.  Subtopic 810-10 established the accounting and reporting guidance for noncontrolling interests and changes in ownership interests of a subsidiary.  ASU 2010-02 affects accounting and reporting by an entity that experiences a decrease in ownership in a subsidiary that is a business or nonprofit activity.  This guidance applies to the following: 1.  A subsidiary or group of assets that is a business or nonprofit activity; 2. A subsidiary that is a business or nonprofit activity that is transferred to an equity method investee or joint venture; 3. An exchange of a group of assets that constitutes a business or nonprofit activity for a noncontrolling interest in a entity.  The amendment is effective in the first interim or annual reporting periods ending on or after December 15, 2009.  We do not expect the adoption of this standard to have a material effect on our financial condition or results of operations.
 
16
 
 
 
 

 
 

 
ITEM 7A.  QUATATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are a smaller reporting company, as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, and accordingly, we are not required to provide the information required by this Item.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Oncologix Tech, Inc. and Subsidiaries
(Formerly BestNet Communications Corp.)
Consolidated Financial Statements
Year Ended August 31, 2010 and 2009

Contents

                                                 Report of Seale and Beers, CPAs,
                                                     Independent Registered Public Accounting Firm
 
F-1
                                                 Report of Chisholm, Bierwolf, Nilson & Morrill, LLC,
                                                     Independent Registered Public Accounting Firm
 
F-2
   
                                                Audited Financial Statements
 
   
                                                       Consolidated Balance Sheets
F-3
                                                       Consolidated Statements of Operations
F-4
                                                       Consolidated Statements of Changes in Stockholders' Deficit
F-5
                                                       Consolidated Statements of Cash Flows
F-6
                                                       Notes to Consolidated Financial Statements
F-7
 
 
17

 
 

 

SEALE AND BEERS, CPAs
PCAOB & CPAB REGISTERED AUDITORS
www.sealebeers.com


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors
Oncologix, Inc.

We have audited the accompanying balance sheet of Oncologix, Inc. as of August 31, 2010, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the year ended August 31, 2010. These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conduct our audits in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Oncologix, Inc. as of August 31, 2010, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the year ended August 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 15 the Company has never been profitable and has had to rely on debt and equity financings to fund operations, which raises substantial doubt about its ability to continue as a going concern.  Management’s plans concerning these matters are also described in Note 15.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/ Seale and Beers, CPAs

Seale and Beers, CPAs
Las Vegas, Nevada
November 29, 2010


50 S. Jones Blvd. Suite 202 Las Vegas, NV 89107 Phone: (888)727-8251 Fax: (888)782-2351
 
 
F-1
 
 
 
 

 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Stockholders and Board of Directors of
Oncologix Tech, Inc. (Formerly BestNet Communications Corp.)
Grand Rapids, Michigan

We have audited the accompanying consolidated balance sheet of Oncologix Tech, Inc. (Formerly BestNet Communications Crop, the “Company”) as of August 31, 2009 and the related consolidated statement of operations, changes in stockholders’ (deficit) and cash flows for the years then ended.  These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, audits of its internal controls over financial reporting.  Our audits include consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial positions of Oncologix Tech, Inc. as of August 31, 2009, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 15 the consolidated financial statements, the Company has suffered recurring losses from operations and has a working capital deficit as of August 31, 2009. These matters raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 15. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/Chisholm, Bierwolf, Nilson & Morrill
 
CHISHOLM, BIERWOLF, NILSON & MORRILL, LLC
 
Bountiful, Utah
March 12, 2010
 
F-2
 
 
 
 

 
 
 
 
 
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
(FORMERLY BESTNET COMMUNICATIONS CORP.)
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 2010 AND 2009
 
 
 
 
   
August 31,
   
August 31,
 
   
2010
   
2009
 
             
ASSETS
           
Current Assets:
           
Cash and cash equivalents
  $ 10,596     $ 743  
Prepaid expenses and other current assets
    6,163       7,092  
Prepaid commissions
    -       2,691  
                 
Total current assets
    16,759       10,526  
                 
Property and equipment (net of accumulated depreciation
               
of $20,211 and $18,793)
    1,835       2,709  
Investment in IUTM
    -       3,186  
Marketing rights
    -       212  
Long-term assets of discontinued operations
    -       4,795  
                 
Total assets
  $ 18,594     $ 21,428  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
Current liabilities:
               
Convertible notes payable (net of discount of $0 and $12,425)
  $ 25,000     $ 1,107,575  
Notes payable
    -       -  
Notes payable - related parties
    50,000       -  
Accounts payable and other accrued expenses
    131,069       263,736  
Accrued interest payable
    24,276       96,863  
Accrued interest payable - related parties     22,210       5,872  
Current liabilities of discontinued operations
    -       2,000  
                 
Total current liabilities
    252,555       1,476,046  
                 
Long-term liabilities:
               
Convertible notes payable
    127,712       127,712  
Convertible notes payable - related parties
    235,025       235,025  
                 
Total long-term liabilities
    362,737       362,737  
                 
Total liabilities
    615,292       1,838,783  
                 
Stockholders' Deficit:
               
Preferred stock, par value $.001 per share; 10,000,000 shares authorized
         
261,762 and 295,862 shares issued and outstanding at
               
August 31, 2010 and August 31, 2009, respectively
    262       296  
Common stock, par value $.001 per share; 200,000,000 shares authorized;
         
188,622,326 and 178,282,995 shares issued at August 31, 2010 and
         
August 31, 2009, respectively; 188,622,326 and 155,900,627 shares
         
outstanding at August 31, 2010 and August 31, 2009, respectively
    188,622       155,901  
Additional paid-in capital
    57,035,566       55,104,084  
Accumulated deficit
    (57,817,700 )     (57,074,502 )
Noncontrolling interest
    (3,448 )     (3,134 )
                 
Total stockholders' deficit
    (596,698 )     (1,817,355 )
                 
Total liabilities and stockholders' deficit
  $ 18,594     $ 21,428  
                 
 
F-3
 

The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
 

 


ONCOLOGIX TECH, INC. AND SUBSIDIARIES
(FORMERLY BESTNET COMMUNICATION CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
   
For the Year Ended
 
   
August 31,
   
August 31,
 
   
2010
   
2009
 
             
Revenue
  $ -     $ -  
                 
Cost of Revenues
    -       -  
                 
Gross margin
    -       -  
                 
Operating expenses:
               
General and administrative
    190,656       358,217  
Depreciation and amortization
    1,418       1,668  
                 
Total operating expenses
    192,074       359,885  
                 
Loss from operations
    (192,074 )     (359,885 )
                 
Other income (expense):
               
Interest and finance charges
    (63,924 )     (626,808 )
Interest and finance charges -related parties     (16,337 )     (11,433 )
Conversion expense
    (413,841 )     (1,530,384 )
Discounted stock issuance expense
    (123,334 )     -  
Loss on disposal of assets
    -       (382 )
Loss on impairment
    (3,187 )     -  
Cancellation of debt
    73,000       -  
Other income (expense)
    (679 )     (13,659 )
                 
Total other income (expense)
    (548,302 )     (2,182,666 )
                 
Net loss from continuing operations
    (740,376 )     (2,542,551 )
                 
Discontinued operations:
               
Operating loss from discontinued operations
    (3,136 )     (58,043 )
Gain on disposal of discontinued operations
    -       22,116  
                 
Loss from discontinued operations
    (3,136 )     (35,927 )
                 
Less loss attributable to noncontrolling interest
    (314 )     (3,346 )
                 
Net loss from discontinued operations
    (2,822 )     (32,581 )
                 
                 
Net loss before income taxes
    (743,198 )     (2,575,132 )
                 
Income taxes
    -       -  
                 
Net loss
  $ (743,198 )   $ (2,575,132 )
                 
Loss per common share, basic and diluted:
               
Continuing operations
  $ (0.00 )   $ (0.02 )
Discontinued operations
    (0.00 )     (0.00 )
                 
    $ (0.00 )   $ (0.02 )
Weighted average number of shares
               
outstanding - basic and diluted
    182,567,324       129,061,857  
                 


The accompanying notes are an integral part of these consolidated financial statements.
 
F-4
 
 
 
 

 



ONCOLOGIX TECH, INC. AND SUBSIDIARIES
(FORMERLY BESTNET COMMUNICATION CORP.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE PERIOD SEPTEMBER 1, 2009 THROUGH AUGUST 31, 2010
 
 
 
                           
Additional
         
Common
   
Non-
       
   
Preferred Stock
   
Common Stock
   
Paid-in
   
Accumulated
   
Stock
   
Controlling
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Deficit
   
Subscribed
   
Interest
   
Total
 
                                                       
Balance, August 31, 2008
    295,862     $ 296       113,734,946     $ 113,735     $ 51,889,552     $ (54,499,370 )   $ -     $ -     $ (2,495,787 )
                                                                         
Stock based compensation
    -       -       -       -       1,030       -       -       -       1,030  
Issuance of stock for services
    -       -       150,000       150       1,350       -       -       -       1,500  
Issuance of stock for interest
    -       -       793,720       794       38,892       -       -       -       39,686  
Issuance of stock purchased for cash
    -       -       10,300,000       10,300       127,700       -       -       -       138,000  
Induced conversion expense - interest
                                                                       
paid with stock
    -       -       -       -       26,457       -       -       -       26,457  
Induced conversion expense - conversion
                                                                       
notes payable
    -       -       -       -       1,503,927       -       -       -       1,503,927  
Conversion of notes payable
    -       -       29,505,289       29,506       1,445,758       -       -       -       1,475,264  
Conversion of notes payable - related parties
    -       -       1,416,672       1,416       69,418       -       -       -       70,834  
Sale of noncontrolling interest
    -       -       -       -       -       -       -       212       212  
Net loss
    -       -       -       -       -       (2,575,132 )     -       (3,346 )     (2,578,478 )
                                                                         
Balance, August 31, 2009
    295,862     $ 296       155,900,627     $ 155,901     $ 55,104,084     $ (57,074,502 )   $ -     $ (3,134 )   $ (1,817,355 )
                                                                         
Issuance of stock purchased for cash
    -       -       8,500,000       8,500       191,500       -       -       -       200,000  
Discounted stock issuance expense
    -       -       -       -       123,334       -       -       -       198,334  
Conversion of notes payable
    -       -       24,153,499       24,153       1,183,522       -       -       -       1,207,675  
Induced conversion expense - conversion
                                                                       
notes payable
    -       -       -       -       413,840       -       -       -       413,840  
Issuance of stock for unit conversions
    (34,100 )     (34 )     68,200       68       6,786       -       -       -       6,820  
Beneficial conversion feature notes payable
    -       -       -       -       12,500       -       -       -       12,500  
Net loss
    -       -       -       -       -       (743,198 )     -       (314 )     (818,512 )
                                                                         
Balance, August 31, 2010
    261,762     $ 262       188,622,326     $ 188,622     $ 57,035,566     $ (57,817,700 )   $ -     $ (3,448 )   $ (596,698 )
                                                                         

The accompanying notes are an integral part of these consolidated financial statements
 
F-5
 
 
 
 

 
 
 
 
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
 
                                                                                                     (FORMERLY BESTNET COMMUNICATIONS CORP.)
 
                                                                                                      CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
 
 
   
For the Year Ended
 
   
August 31,
   
August 31,
 
   
2010
   
2009
 
Operating activities:
           
Net loss
  $ (743,198 )   $ (2,575,132 )
Net loss from discontinued operations
    2,822       32,581  
                 
Net loss from continuing operations
    (740,376 )     (2,542,551 )
                 
Adjustments to reconcile net loss to net cash used
               
  in operating activities:
               
Depreciation and amortization
    1,418       1,668  
Loss on disposal of property and equipment
    -       382  
Stock based compensation expense
    -       1,030  
Amortization of discount on notes payable and warrants
    12,425       391,788  
Induced conversion expense notes payable
    413,840       1,530,384  
Discounted stock issuance expense
    123,334       -  
Impairment loss
    3,186       -  
Issuance of stock and warrants for services
    -       1,500  
Beneficial conversion feature - notes payable
    12,500       -  
Beneficial conversion feature - stock issued for interest
    -       39,686  
                 
Changes in operating assets and liabilities:
               
Prepaid expenses and other current assets
    20,129       19,724  
Prepaid commissions
    2,691       72,820  
Deposits and other assets
    -       2,691  
Accounts payable and other accrued expenses
    (105,667 )     229,875  
Accrued interest payable
    31,426       120,463  
                 
Net operating cash flows - continuing operations
    (225,094 )     (130,540 )
                 
Net operating cash flows - discontinued operations
    (255 )     (276 )
                 
Net cash used in operating activities
    (225,349 )     (130,816 )
                 
Investing activities:
               
Purchase of property and equipment
    (568 )     -  
Investment in joint venture
    -       (3,186 )
                 
Net investing cash flows - continuing operations
    (568 )     (3,186 )
                 
Net investing cash flows - discontinued operations
    150       6,990  
                 
Net cash used in investing activities
    (418 )     3,804  
                 
Financing activities:
               
 Proceeds from issuance of convertible notes payable
    25,000       -  
 Proceeds from issuance of notes payable - related parties
    50,000       -  
 Proceeds from conversion of units
    6,820       -  
 Proceeds from the issuance of common stock
    200,000       138,000  
 Repayment of notes payable
    (46,200 )     (20,157 )
                 
Net cash provided by financing activities - continuing operations
    235,620       117,843  
                 
Net increase (decrease) in cash and cash equivalents
    9,853       (9,169 )
                 
Cash and cash equivalents, beginning of period
    743       9,912  
                 
Cash and cash equivalents, end of period
  $ 10,596     $ 743  
                 

The accompanying notes are an integral part of these consolidated financial statements.
 
F-6
 
 
 
 

 
 
 
 
ONCOLOGIX TECH, INC. AND SUBSIDIARIES
(FORMERLY BESTNET COMMUNICATIONS CORP.)
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Supplemental disclosure of cash flow information (continued):
 
 
   
For the Year Ended
 
   
August 31,
   
August 31,
 
   
2010
   
2009
 
             
Cash paid during the year for:
           
             
Interest
  $ 738     $ 793  
Income Taxes
  $ -     $ -  
                 

 
The accompanying notes are an integral part of these consolidated financial statements.
 
F-7
 
 
 
 

 
 
 

 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.
ORGANIZATION AND BASIS OF PRESENTATION

The consolidated financial statements of Oncologix Tech, Inc. (formerly BestNet Communications Corp., a Nevada corporation, and also formerly Wavetech International, Inc.) include the accounts of Oncologix Tech, Inc. and its wholly owned subsidiaries, Oncologix Corporation, Interpretel, Inc., Interpretel Canada Inc., and Telplex International Communications, Inc. (collectively the “Company,” “Oncologix,” “we,” “us,” or “our”). The cost method of accounting is used for the Company’s joint venture.  On January 22, 2007, we changed our name from BestNet Communications Corp. to Oncologix Tech, Inc.  On July 26, 2006, we launched a medical device segment through the acquisition of JDA Medical Technologies, Inc. ("JDA"), a development stage medical device company. Since the acquisition of JDA, our principal activities have been primarily limited to research and development activities to continue product development in efforts to obtain government approval for the use of the medical device, and to seek sources of financing for these research and development activities. We entered into discussions to dispose of this business in the 3rd quarter of fiscal 2008.  Accordingly, the Medical Device business is treated as discontinued operations.  We had operated an internet based telephone business (the "Telephone Business") from our inception until it was disposed of during February 2007. The Telephone Business is accordingly presented as discontinued operations. The Company’s fiscal year ends on August 31.  All significant intercompany accounts and transactions have been eliminated in consolidation.  The Company has recorded net operating losses in each of the previous sixteen years.

The preparation of the Company's financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company's management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. The Company makes significant assumptions concerning the amount of the accounts receivable reserve, and reserves related to deferred tax assets.   Due to the uncertainties inherent in the estimation process and the significance of these items, it is at least reasonably possible that the estimates in connection with these items could be further materially revised within the next year.

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION

The consolidated financial statements for the years ended August 31, 2009 and 2008 include the accounts of Oncologix Tech, Inc. and its wholly owned subsidiaries, Oncologix Corporation (90% Owned), Interpretel (Canada) Inc. and Interpretel Inc., collectively the Company.  Oncologix Corporation is a Nevada corporation.  Interpretel Inc. is an Arizona corporation.  Interpretel (Canada) Inc. is a Canadian corporation.  All significant intercompany accounts and transactions have been eliminated in consolidation.

USE OF ESTIMATES

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

REVENUE RECOGNITION
 
Revenue is recognized by the Company when all the following criteria are met:  persuasive evidence of an arrangement exists; deliver has occurred; the sellers price to the buyer is fixed and determinable; and collectability is reasonably assured.  Currently the Company does not have products to sell.
 
 
CASH AND CASH EQUIVALENTS

The Company considers all highly liquid instruments, with an initial maturity of three (3) months or less to be cash equivalents.
 

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost. Depreciation is provided for on the straight-line method over the estimated useful lives of the related assets as follows:

                                                                        Furniture and fixtures
5 to 7 years
                                                                        Computer equipment
5 years
                                                                        Equipment
5 to 7 years
                                                                        Software
3 to 5 years
 
F-8
 
 
 
 

 
 
 
 
The cost of maintenance and repairs is charged to expense in the period incurred. Expenditures that increase the useful lives of assets are capitalized and depreciated over the remaining useful lives of the assets.  When items are retired or disposed of, the cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income.

LONG-LIVED ASSETS
 
     ASC 360 – Property, Plant and Equipment, addresses financial accounting and reporting for the impairment or disposal of long-lived assets.  The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of property and equipment or whether the remaining balance of property and equipment, or other long-lived assets, should be evaluated for possible impairment. Instances that may lead to an impairment include: (i) a significant decrease in the market price of a long-lived asset group; (ii) a significant adverse change in the extent or manner in which a long-lived asset or asset group is being used or in its physical condition; (iii) a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset or asset group, including an adverse action or assessment by a regulatory agency; (iv) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset or asset group; (v) a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group; or (vi) a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.
 
     An estimate of the related undiscounted cash flows, excluding interest, over the remaining life of the property and equipment and long-lived assets is used in assessing recoverability. Impairment loss is measured by the amount which the carrying amount of the asset(s) exceeds the fair value of the asset(s). The Company primarily employs two methodologies for determining the fair value of a long-lived asset: (i) the amount at which the asset could be bought or sold in a current transaction between willing parties or (ii) the present value of estimated expected future cash flows grouped at the lowest level for which there are identifiable independent cash flows.

NONCONTROLLING INTEREST

ASC 810 - Consolidation addresses the accounting and reporting standards for ownership interest in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. During fiscal 2009, the Company issued a ten percent interest in its subsidiary, Oncologix Corporation, to IUTM as required in a technology agreement.  The Company valued this interest at $212.  Through August 31, 2010, the Company has allocated $3,660 losses to its noncontrolling interest.  The Company has adopted ASC 810 to account for this noncontrolling interest.
 
ADVERTISING COSTS
 
                Advertising costs included with selling, general and administrative expenses in the accompanying consolidation Statements of Operations were not for fiscal 2010 and fiscal 2009.  Such costs are expensed when incurred.
 
INCOME TAXES

The Company adopted the provisions of   ASC 740 - Income Taxes provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements.  Income taxes are determined using the asset and liability method. This method gives consideration to the future tax consequences associated with temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The carrying amounts of accounts payable, accrued expenses, and notes payable approximate fair value.
 
F-9
 
 
 
 

 
 

 
STOCK-BASED COMPENSATION

The Company has a stock-based compensation plan, which is described more fully in Note 11.  The Company accounts for stock-based compensation in accordance with ASC 718.  Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period.  The Company estimates the fair value of stock options granted using the Black-Scholes option valuation model.  The fair value of all awards is amortized on a straight-line basis over the vesting periods.  The expected term of awards granted represent the period of time they are expected to be outstanding.  The Company determines the expected term based on historical experience with similar awards, giving consideration to the contractual terms and vesting schedules.  The Company estimates the expected volatility of its common stock at the date of grant based on the historical volatility of its common stock.  The risk-free interest rate is based on the U.S. treasury security rate estimated for the expected life of the options at the date of grant.  If actual results differ significantly from estimates, stock-based compensation could be impacted.

CONVERTIBLE DEBT

Interest on convertible debt is calculated using the simple interest method.  The company recognizes a beneficial conversion feature to the extent the conversion price is less than the closing stock price on the issuance of the convertible notes.  The Company also follows ASC 470-50 and ASC 470-20 regarding changes in the terms of the convertible notes and the induced conversion of its convertible debt.
 
F-10
 
 
 
 

 
 
 
NET LOSS PER COMMON SHARE

Basic earnings (loss) per share is calculated under the provisions of ASC 260 which provides for calculation of “basic” and “diluted” earnings per share.  Basic earnings per share includes no dilution and is calculated by dividing income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period.  Diluted earnings (loss) per share is calculated based on the weighted average number of common shares outstanding during the period plus the dilutive effect of common stock purchase warrants and stock options using the treasury stock method and the dilutive effects of convertible notes payable and convertible preferred stock using the if-converted method.  Basic and diluted earnings per share for the years ended August 31, 2010 and 2009 are as follows:


   
For the Year Ended
 
   
August 31,
   
August 31,
 
   
2010
   
2009
 
             
Net loss attributable to common shareholders
           
Continuing operations
  $ (740,376 )   $ (2,542,551 )
Discontinued operations
    (2,822 )     (32,581 )
                 
    $ (743,198 )   $ (2,575,132 )
                 
Weighted average shares outstanding
    182,567,324       129,061,857  
                 
Loss per common share, basic and diluted:
               
Continuing operations
  $ (0.00 )   $ (0.02 )
Discontinued operations
  $ (0.00 )   $ (0.00 )
                 
    $ (0.00 )   $ (0.02 )
                 
 
 
Due to the net losses in fiscal 2010 and fiscal 2009, basic and diluted loss per share was the same, as the effect of potentially dilutive securities would have been anti-dilutive.  Shares attributable to convertible notes, not included the diluted loss per share calculation for fiscal 2010 and 2009 were 2,101,416 and 4,584,749, respectively.

SEGMENT INFORMATION

ASC 280-10 defines operating segments as components of a company about which separate financial information is available that is evaluated regularly by the chief decision maker in deciding how to allocate resources and in assessing performance. The Company currently has one operating segments: medical device.  Our medical device segment is presented as discontinued operations for all periods presented.
 
F-11
 
 
 
 

 

 
RECENT ACCOUNTING PRONOUNCEMENTS
 
                We have evaluated all Accounting Standards updates through the date the financial statements were issued and do not believe any will have a material impact.

In August 2010, FASB issued FASB ASC 2010-21, Accounting for Technical Amendments to Various SEC Rules and Schedules and ASB 2010-22, Accounting for Various Topics.  We do not expect the adoption of ASU 2010-21 and ASU 2010-22  to have a material effect on our financial condition or results of operations.
 
In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. ASU 2010-06 provides new disclosure requirements and clarification for existing disclosures requirements. More specifically, this update will require (a) an entity to disclose separately the amounts of significant transfers in and out of Levels 1 and 2 fair value measurements and to describe the reasons for the transfers; and (b) information about purchases, sales, issuances and settlements to be presented separately (i.e. present the activity on a gross basis rather than net) in the reconciliation for fair value measurements using significant unobservable inputs (Level 3 inputs). This guidance clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value and requires disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs. The new disclosures and clarifications of existing disclosure are effective for fiscal years beginning after December 15, 2009, except for the disclosure requirements related to the purchases, sales, issuances and settlements in the rollforward activity of Level 3 fair value measurements. Those disclosure requirements are effective for fiscal years ending after December 31, 2010. We do not expect the adoption of this standard to have a material effect on our financial condition or results of operations.

In January 2010, the FASB issued ASU 2010-02, Consolidation (Topic 860): Accounting and Reporting for Decreases in Ownership of a Subsidiary – a Scope Clarification.  The objective ASU 2010-02 is to address implementation issued related to changes in ownership provisions in the Consolidation – Overall Subtopic 810-10, formerly FASB Statement No. 160, Noncontrolling Interest in Consolidated Financial Statements.  Subtopic 810-10 established the accounting and reporting guidance for noncontrolling interests and changes in ownership interests of a subsidiary.  ASU 2010-02 affects accounting and reporting by an entity that experiences a decrease in ownership in a subsidiary that is a business or nonprofit activity.  This guidance applies to the following: 1.  A subsidiary or group of assets that is a business or nonprofit activity; 2. A subsidiary that is a business or nonprofit activity that is transferred to an equity method investee or joint venture; 3. An exchange of a group of assets that constitutes a business or nonprofit activity for a noncontrolling interest in a entity.  The amendment is effective in the first interim or annual reporting periods ending on or after December 15, 2009.  We do not expect the adoption of this standard to have a material effect on our financial condition or results of operations.

F-12
 
 
 
 

 
 

 
3.  DISCONTINUED OPERATIONS
 
                We entered the medical device business at the end of July 2006 through the acquisition of JDA Medical Technologies, Inc. ("JDA"), a development stage company, which was merged into our wholly owned subsidiary, Oncologix Corporation. On January 22, 2007, we changed our name to Oncologix Tech, Inc., to reflect this new business. During June 2007, we moved our principal offices from Grand Rapids, Michigan, to our offices at 3725 Lawrenceville-Suwanee Road, Suite B-4, Suwanee, Georgia, 30024, telephone (770) 831-8818.  At that address, our business was the development of a medical device for brachytherapy (radiation therapy), called the “Oncosphere” (or “Oncosphere System”), for the advanced medical treatment of soft tissue cancers. It is a radioactive micro-particle designed to deliver therapeutic radiation directly to a tumor site by introducing the micro-particles into the artery that feeds the tumor tissue. Its first application is expected to be the treatment of liver cancer. Due to a lack of funding, we had to suspend these development activities on December 31, 2007, whereupon we closed the offices in Suwanee, Georgia.

We have previously reported discussions with respect to a transfer of our Oncosphere assets to another company.  We are currently attempting to resolve a number of uncertainties in connection with such a transaction, including the obtaining of necessary consents.  Accordingly, during May 2008, we determined to dispose of most of the assets of the Oncosphere project and entered into discussions with a prospective purchaser.  In February 2009, we sold our research and development equipment to IUT in exchange for release of amounts owed to them for prior services.  In October 2009, we disposed of the remaining office equipment related to the Oncosphere development activities.  It was determined at August 31, 2009, the value of marketing rights, was impaired.  Accordingly, we recorded an impairment loss in the amount of $212.

ASC 360 – Property, Plant and Equipment, addresses financial accounting and reporting for the impairment or disposal of long-lived assets.  The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of property and equipment or whether the remaining balance of property and equipment, or other long-lived assets, should be evaluated for possible impairment. Instances that may lead to an impairment include: (i) a significant decrease in the market price of a long-lived asset group; (ii) a significant adverse change in the extent or manner in which a long-lived asset or asset group is being used or in its physical condition; (iii) a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset or asset group, including an adverse action or assessment by a regulatory agency; (iv) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset or asset group; (v) a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group; or (vi) a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.  It was determined at August 31, 2009, the value of the remaining assets of discontinued operations, was impaired.  Accordingly, we recorded an impairment loss of impairment in the amount of $22,432.
 
 
F-13
 
 
 
 

 
 
 
Net assets related to discontinued operations of our Oncosphere business are as follows:

 
 
   
August 31,
   
August 31,
 
   
2010
   
2009
 
Current assets of discontinued operations:
           
Prepaid expenses and other current assets
  $ -     $ -  
                 
Total current assets of discontinued operations
    -       -  
                 
Long-term assets of discontinued operations:
               
Property and equipment
    -       4,795  
                 
Total long-term assets of discontinued operations
    -       4,795  
                 
Total assets of discontinued operations
  $ -     $ 4,795  
                 
Current liabilities of discontinued operations:
               
Accounts payable and other accrued expenses
  $ -     $ 2,000  
                 
Total liabilities of discontinued operations
  $ -     $ 2,000  
                 
Net assets of discontinued operations
  $ -     $ 2,795  
                 

F-14
 
 
 

 
 
 
The expenses shown below are part of the discontinued operations of our Oncosphere business.
 
   
For the Year Ended
 
   
August 31,
     
August 31,
 
   
2010
     
2009
 
Operating expenses:
             
General and administrative
  $ 255       $ 2,183  
Depreciation and amortization
    2,669         28,935  
                   
Total operating expenses
    2,924         31,118  
                   
Loss from operations
    (2,924 )       (31,118 )
                   
Other income (expense):
                 
Loss on disposal of assets
    -         (4,463 )
Loss on impairment
    (212 )       (22,432 )
Other income (expense)
    -         (30 )
                   
Total other income (expense)
    (212 )       (26,925 )
                   
Loss from discontinued operations
    (3,136 )       (58,043 )
Gain on disposal of discontinued operations
    -         22,116  
                   
Loss from discontinued operations
    (3,136 )       (35,927 )
                   
Less loss attributable to noncontrolling interest
    (314 )       (3,346 )
                   
Net loss from discontinued operations
  $ (2,822 )     $ (32,581 )
                   

4.  JOINT VENTURE

In February 2009, we entered into a Technology Agreement with Institut für Umwelttechnologien GmbH, a German Company (“IUT”) whereunder the parties have agreed that:

(a)  
The Company has granted an exclusive license to a new IUT subsidiary, called “IUTM”, to develop and manufacture products based on the Company’s proprietary information. This proprietary information is not based on the technology that had been subject to the Master License Agreement with the University of Maryland – Baltimore. The Company has also transferred to IUTM a number of items of laboratory equipment and inventory useful in connection with the licensed information.
(b)  
The Company retains rights to market products based on such information as well as first consideration for marketing rights for other possible IUTM products.
(c)  
In consideration of the license, the Company has received a 10% equity interest in IUTM, which is organized as a private German limited liability company and IUT has assumed approximately $82,000 of the Company’s indebtedness.
(d)  
The Company’s marketing rights have been transferred to its subsidiary, Oncologix Corporation and have issued IUTM 10% of the equity ownership of that subsidiary.

We have been advised that IUTM is continuing the development of a brachytherapy device generally as described above but based on proprietary technology not developed by the University of Maryland. During recent discussions with IUTM management, the prior understandings were reaffirmed. It is now our expectation that we will receive information on at least two potential product lines under consideration and/or development by IUTM. Upon receipt we plan to determine the extent to which we will be able to market them and to finance a marketing organization. While our Management is optimistic as to the outcome of those discussions and future success in financing, it is not possible to predict the probabilities of success with any degree of certainty.  It was determined at August 31, 2010, the value of the investment in IUTM was impaired.  Accordingly, we recorded an impairment loss in the amount of $3,186.
 
F-15
 
 
 
 

 
 
 
5.           PROPERTY AND EQUIPMENT

Property and equipment is composed of the following at August 31, 2010 and 2009:

 
   
August 31,
   
August 31,
     
   
2010
   
2009
     
Furniture
  $ -     $ -      
Research and development equipment
    -       -      
Computer equipment
  $ 8,939     $ 8,939      
Software
    7,876       7,332      
Leasehold improvements
    -       -      
Equipment
    5,231       5,231      
                     
Total property and equipment at cost
    22,046       21,502      
                     
Less: accumulated depreciation and amortization
    (20,211 )     (18,793  )    
                     
    $ 1,835     $ 2,709      
                     

 
For fiscal 2010 and 2009, depreciation expense from continuing operations related to property and equipment is $1,418 and $1,668, respectively.  No amount included in the above accumulated depreciation and amortization balances of $20,211 and $18,793 relates to capitalized software.

6.    COMMITMENTS AND CONTINGENCIES

LEASES:

In an effort to streamline costs, we do not have a main corporate office.  Our Chief Executive Officer works out of him home in Scottsdale, Arizona and our Chief Financial Officer maintains all the corporate records out of his home in Grand Rapids, Michigan.  We maintained our corporate headquarters for the Company in approximately 2,000 square feet of office space at 3725 Lawrenceville-Suwannee Road, Suwanee, Georgia, 30024 until January 31, 2008.  We leased office space there at a monthly rent of $2,567.  We maintained an office in approximately 1,000 square feet located at 2850 Thornhills Ave. SE, Suite 104, Grand Rapids, MI  49546, at a monthly rent of $1,465 under a lease that expired October 31, 2007.  Currently we have no monthly lease requirements.  We had no rent expense under operating leases in fiscal 2009 or 2008.  There are no future minimum lease payments on these operating leases as of August 31, 2010.

EMPLOYMENT AGREEMENTS:

Currently there are no employment agreements as of August 31, 2010.

CONSULTING CONTRACT

In September 2009, the company entered into a six month consulting agreement with its Chief Financial Officer, Michael Kramarz.  Mr. Kramarz is to perform all his regular duties he had previously performed as Chief Financial Officer including the preparation of the Company’s financial statements, SEC Filings, maintenance of corporate records, etc.  Mr. Kramarz is to be compensated $70 per hour worked and will turn in weekly time sheets for approval.  The Company entered into another six month consulting contract with Mr. Kramarz on March 1, 2010 at an hourly rate of $70. During the fiscal 2010, we incurred an expense of $73,920 under these agreements.

In September 2008, the company entered into a six month consulting agreement with its Chief Financial Officer, Michael Kramarz.  Mr. Kramarz is to perform all his regular duties he had previously performed as Chief Financial Officer including the preparation of the Company’s financial statements, SEC Filings, maintenance of corporate records, etc.  Mr. Kramarz is to be compensated $50 per hour worked and will turn in weekly time sheets for approval.  The Company entered into another six month consulting contract with Mr. Kramarz on March 1, 2009 at an hourly rate of $90. During the fiscal 2009, we incurred an expense of $85,928 under these agreements.
 
F-16
 
 
 
 

 
 
 
7.  LICENSE AGREEMENT

The technology underlying the medical device that was formerly being developed by the Company was subject to a certain Master License Agreement ("License"), effective September 16, 2003, between Oncologix's predecessor, JDA, as Licensee, and the University of Maryland as Licensor. We assumed JDA’s position in our acquisition of JDA.

On April 7, 2009, the Company entered into a Termination Agreement with the University of Maryland – Baltimore, The Master License Agreement between the Company and the University has been formally terminated and each party has released the other from all liabilities arising under the Master License Agreement.  
 
F-17
 

 
 
 

 
 
 
 
8.
NOTES PAYABLE

CONVERTIBLE NOTES PAYABLE:

Convertible notes payable consist of the following as of August 31, 2010 and August 31, 2009:
 
   
August 31,
     
August 31,
 
   
2010
     
2009
 
               
12.0% convertible note due March 31, 2012
  $ 2,712       $ 2,712  
                   
8.0% convertible notes due March 31, 2012
    125,000         125,000  
                   
6% convertible note due October 26, 2010
    25,000         0