Attached files

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EX-99 - CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - Oncologix Tech Inc.oclg10k08312014ex99.htm
EX-32.1 - ONCOLOGIX TECH, INC. AND SUBSIDIARIES - Oncologix Tech Inc.oclg10k08312014ex32_1.htm
EX-10.24 - EXECUTIVE EMPLOYMENT AGREEMENT - Oncologix Tech Inc.oclg10k08312014ex10_24.htm
EX-21 - SUBSIDIARIES OF ONCOLOGIX TECH, INC. - Oncologix Tech Inc.oclg10k08312014ex21.htm
EX-32.2 - ONCOLOGIX TECH, INC. AND SUBSIDIARIES - Oncologix Tech Inc.oclg10k08312014ex32_2.htm
EX-31.1 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER - Oncologix Tech Inc.oclg10k08312014ex31_1.htm
EX-31.2 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER - Oncologix Tech Inc.oclg10k08312014ex31_2.htm
EXCEL - IDEA: XBRL DOCUMENT - Oncologix Tech Inc.Financial_Report.xls

 

U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(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, 2014

 

[_] 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 of incorporation or organization   (I.R.S. Employer Identification No.)
     
1604 W. Pinhook Rd. #200, Lafayette, LA   71360
(Address of principal executive offices)   Zip Code
     
     
(616) 977-9933
(Issuer’s telephone number)
     
Securities registered under Section 12(b) of the Exchange Act:
     
Title of Each Class   Name of Each Exchange on Which Registered
Common Stock, $.001 par value   OTC:QB
     
Securities registered under Section 12(g) of the Exchange Act: None

 

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 [_] 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 [X] No [_]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [_]

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K (Section 229.405 of this chapter) 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. [_]

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 [_] Accelerated Filer [_]

 
 

Non-accelerated Filer [_] 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 [_] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class   Outstanding at November 19, 2014
Common Stock, $0.001 par value   146,365,004

 

The aggregate number of shares held by non-affiliates of the registrant at August 31, 2014 was 127,546,434. The aggregate market value of the Common Stock of the registrant held by non-affiliates as of August 31, 2014 was approximately $535,695 based on closing stock price of the registrant’s common stock on that date.

Documents Incorporated By Reference

None

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
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TABLE OF CONTENTS
       
PART I
       
Item 1   Description of Business 3
Item 1A   Risk Factors 19
Item 1B   Unresolved Staff Comments 23
Item 2   Properties 23
Item 3   Legal Proceedings 23
Item 4   Mine Safety Disclosures 23
       
PART II
       
Item 5   Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of  
    Equity Securities 24
Item 6   Selected Financial Data 29
Item 7   Management's Discussion and Analysis of Financial Condition and Results of Operations 29
Item 7A   Quantitative and Qualitative Disclosures About Market Risk 32
Item 8   Financial Statements and Supplementary Data 33
Item 9   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 77
Item 9A(T) Controls and Procedures 77
Item 9B   Other Information 78
       
PART III
       
Item 10   Directors, Executive Officers and Corporate Governance 78
Item 11   Executive Compensation 79
Item 12   Security Ownership of Certain Beneficial Owners and Management and Related  
    Stockholder Matters 83
Item 13   Certain Relationships and Related Transactions, and Director Independence 83
Item 14   Principal Accountant Fees and Services 84
       
PART IV
       
Item 15   Exhibits, Financial Statement Schedules 85
    SIGNATURES 88

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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PART I

 

 

FORWARD LOOKING STATEMENTS

 

This annual report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended that are based on management’s beliefs and assumptions and on information currently available to our management. For this purpose any statement contained in this annual report on Form 10-K that is not a statement of historical fact may be deemed to be forward-looking, including, but not limited to those relating to future demand for the products and services we offer, changes in the composition of the products and services we offer, future revenues, expenses, results of operations, liquidity and capital resources or cash flows, the commodity price environment, managing our asset base, our ability to restructure our existing credit facilities or to obtain additional debt or equity financing, management’s assessment of internal control over financial reporting, financial results, opportunities, growth, business plans, strategies and objectives. Without limiting the foregoing, words such as “believe,” “expect,” “project,” “intend,” “estimate,” “budget,” “plan,” “forecast,” “predict,” “may,” “will,” “could,” “should,” or “anticipate” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements or the industry to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, market factors, market prices and marketing activity, future revenues and costs, unsettled political conditions, civil unrest and governmental actions, foreign currency fluctuations, and environmental and labor laws and other factors detailed herein and in our other filings with the U.S. Securities and Exchange Commission (the “Commission”) filings. Additional Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:

 

·our ability to raise capital when needed and on acceptable terms and conditions;
·our ability to identify and acquire a viable operating business;
·our ability to attract and retain management, and to integrate and maintain technical information and management information systems;
·the intensity of competition; and
·general economic conditions.

 

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. These forward-looking statements speak only as of their dates and should not be unduly relied upon. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All written and oral forward-looking statements made in connection with this Annual Report on Form 10-K that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.

 

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.

 

Item 1. Description of Business

 

OVERVIEW

 

Oncologix Tech, Inc. is a diversified medical holding company that operates and manufactures Class II medical device products, delivers Personal Healthcare Services and distributes Home Medical and Durable Medical products nationally. For its clients, Oncologix provides FDA approved medical devices and products as well as state licensed healthcare services. For its shareholders, Oncologix operates profitable business divisions that build, maintain and nourish shareholder value. The Company’s corporate mission is to be the best small cap medical holding company delivering

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devices, medical products & technologies, and healthcare services in North America.

 

We were originally formed in 1995, and in FY 2000 we changed our name to "BestNet Communications Corp." At that time we provided worldwide long distance telephone communication and teleconferencing services to commercial and residential consumers through the internet, which was disposed of in 2007 due to lack of profitability. In July 2006 we changed our business model to develop medical device products.  In July 2006 we acquired JDA Medical Technologies, Inc. ("JDA") and merged this business into Oncologix Corporation, our wholly owned subsidiary.  On January 22, 2007, we changed our name to Oncologix Tech, Inc., to reflect this new business model. The business at that time was the development of a medical device product for brachytherapy (radiation therapy), called the “Oncosphere” (or “Oncosphere System”), for the advanced treatment of soft-tissue cancers. Due to a lack of funding, we suspended those new product development activities on December 31, 2007. On November 1, 2013, due to the development of the brachytherapy device being several years away, and the indication that the product could not be marketed with no guarantee of FDA approvals, it was determined that continued financial support required by Oncologix Corporation would cost the Company substantial capital beyond its means, therefore the Company’s management and Board of Directors disposed of Oncologix Corporation and its Brachytherapy medical device subsidiary. Furthermore, as part of the disposal, the Company was relieved of over $90,000 in debt.   

 

On March 22, 2013, we acquired all the outstanding stock of Dotolo Research Corporation (“Dotolo”), an FDA Registered, Class II, medical device manufacturer with 25 years of product sales in the hydro-colonic irrigation, bowel preparation market. Dotolo Research Corporation began operations in 1989 and sells hardware and disposable products to a customer base of over 900+ customers both domestically and internationally.  The Company currently operates in a limited, but competitive environment in hydro-colonic irrigation, of which there are only four (4) companies approved by the FDA to manufacture a Class II medical device for colonic-hydro therapy.  Since the acquisition, we have not had significant revenues from sales of our products due to a lack of operating capital needed to procure raw material inventory to currently fill customers’ re-supply and new equipment orders.

 

On August 1, 2013, we acquired the outstanding stock of Angels of Mercy, Inc. Angels provides non-medical, Personal Care Attendant (PCA) Activities of Daily Living (ADL) services, Supervised Independent Living (SIL), Long-Term Senior Care, and other approved health service programs performed by a trained caregiver that meets the health service needs of beneficiaries whose disabilities preclude the performance of certain independent living skills..

 

On December 10, 2013, Angels of Mercy, Inc. acquired the assets of Amian Health Services LLC and Amian Health Services of Alex LLC, herein after referred to as “Amian”.  Amian delivers health-care services that provide routine health and personal care support with Activities of Daily Living (ADL) to clients with physical impairments or disabilities in private homes, nursing care facilities, hospice care settings, and other residential settings. Amian holds both PCA-Medicaid Waiver Provider and Residential Rehabilitation/Supervised Independent Living (SIL), and personal care services for Veterans with licenses issued by the Division of Licensing and Certification of the Department of Social Services, Veterans Administration Social Services and the Louisiana Department of Health and Hospitals.  All administrative personnel of Amian have been merged into AOM to obtain operational synergies. In August 2014, Angels of Mercy, Inc. officially changed its name to Amian Angels, Inc. (“Amian Angels”).

 

On July 21, 2014 we formed Advanced Medical Products and Technologies Inc. to enter into the Durable Medical and Home Medical Equipment markets. The objective is to acquire companies in this space to develop our Medical Products and Technologies Segment.

 

On September 25, 2014, we acquired 100% of the stock of Esteemcare Inc. and its subsidiary Affordable Medical Equipment Solutions, Inc. . Esteemcare, Inc, was established in 1996, is a Durable and Home Medical equipment and supply distributor for respiratory therapy, and is Accredited by the “Joint Commission on Healthcare Organizations”. Esteemcare targets patients with sleep obstructive disorders or related chronic illnesses who are insured by Medicare, Medicaid, third-party insurers, or have the ability to pay for our products from their own private resources.

 

 

 

 

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BUSINESS SEGMENTS

 

We identify our reportable segments based on our management structure, financial data and market. We have identified three business segments: Medical Device Manufacturing, Personal Care Services, and Medical Products Distribution and New Technologies.

 

MEDICAL DEVICE MANUFACTURING

 

Dotolo Research Corporation (“Dotolo”) designs, manufactures and distributes the Toxygen hardware system with disposables speculums and disposable tubing. The company has a valid Registration from the FDA as a Class II medical device, is licensed by Health Canada, a CE mark for Europe, and is in compliance with ISO 9001:2000 and ISO 13485:2003 regulations. Our product’s primary use is for bowel preparation prior to medical procedures such as a Colonoscopy and OB/GYN medical procedures and for individuals seeking health and wellness prevention for good colon health. There are currently over 22 million colonoscopy procedures performed annually within the United States and our strategic mission is to become the preferred choice of colon lavage cleansing and bowel preparation by both patients and medical professionals. Management believes its primary competitive strengths is its 25 year manufacturing history in the market of hydro-colonic irrigation, its on-going development of new product technologies, exceptional quality controls, and world-wide distribution of all hardware and disposable products. The Company utilizes an indirect, re-seller sales force to promote and sell the company products. Management believes that the Company must expand its manufacturing capacity and its’ distribution sales channels to be able to move into medical markets that management believes is a high growth market. The Management’s strategy to acquire Dotolo Research into a publicly held company in the United States is to enhance the Company’s capital raising abilities to fund increased manufacturing capacity, increase current inventory levels, improve payment terms with our core raw material suppliers to reduce our COGS, execution of new product designs on both hardware and disposable products, maintain regulatory compliance, expansion of a sales and marketing team and additional acquisitions of companies within the medical device and healthcare markets.

 

Marketing

 

The Company's overall marketing strategy is to strengthen is current position in the health and wellness markets, leverage its brand reputation and 25 year history as a quality manufacturer of medical device products, and sell directly into the medical space. The direct sales strategy of providing products to health and wellness spas has served the Company’s needs to date and has enabled us to obtain orders while avoiding the costs associated with hiring marketing employees and direct sales representatives. However, future growth will require us to increase our product and brand awareness in the medical markets, hire a full time Quality Assurance/Regulatory Manager, Director of Sales and Marketing, establish additional clinical research on bowel preparations and leverage the existing clinical research performed by Dr. Joseph Fiorito et al. at Danbury Hospital utilizing the Dotolo Research products, increase our brand and marketing, our web presence, and strengthen our domestic and international reseller distribution channels. The Company’s distribution model has resulted in the Company not having a single customer account for more than 10% of its total sales. The Company is seeking to expand its operations so that it can continue to service health and wellness customers but specifically sell products directly to Out-Patient Endoscopy Centers, hospital systems, Veterans Administration Hospitals, Skilled Nursing Homes, and Sterile kit packing distributors which will provide more profitable sales orders.

 

Domestic and International Payment Terms

 

Dotolo Research Corporation records revenue both domestically and internationally through indirect sales channels as products are sold to independent distributors or product re-sellers. Terms on all products sold are 50% of the total order, paid in advance, and the balance due prior to final shipment (FOB). These sales terms, to date, has allowed our company to experience extremely few collection problems on its domestic sales. International sales orders are via wire transfer and we have little to no payable receivable issues. Management believes that once we enter into the medical space we will experience payment terms of Net-45 which will require the company to increase its inventory levels on disposable products up to 30-day inventory supply levels.

 

Manufacturing

 

Dotolo Research Corporation procures raw materials from various sources and performs on-site manufacturing and final sub-assembly operations. The company does not outsource its manufacturing processes. Management believes that the skill level and experience of the Company’s work force as well as the Company’s operations allow it to meet

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current order demand but will need to ramp up skilled bench assembly workers and packaging employees when those orders from the medical markets commence. The Company's principal raw material is injection-molded plastic, medical grade respiration tubing, water-filtration parts, and hardware components such as metal housings, fitting and valves. The Company purchases its injection-molding raw materials from two (2) suppliers and hardware component parts from numerous sources none of which is believed by the Company to be a dominant supplier.

 

Trademarks, Licenses and Patents

 

Dotolo Research Corporation owns numerous patents, with its primary patent on the Toxygen hardware, Patent # 5,788,650, “Colon Hydrotherapy Apparatus”- Ultra Violet Water Filtration System. This Patent is valid through 2018 and protects this product design both domestically and internationally.

 

Management believes that new patents will be granted on our new speculum and hardware designs and in each instance, the patents will, when granted, be sufficient for us to pursue our proposed business strategy.  The grant of a patent by the U.S. Patent Office does not insure that the patent will be upheld in litigation seeking to protect the patent or that the patent will not be found to infringe on patents held by others.

 

Device Approval Process

 

It is anticipated that our new product(s) re-designs will be regulated as a Class II medical device and will be subject to extensive regulation by the FDA and other regulatory authorities in the US.  The Food, Drug, and Cosmetic Act (“FD&C Act”) and other federal and state statutes and regulations govern the research, design, development, preclinical and clinical testing, manufacturing, safety, approval or clearance, labeling, packaging, storage, record keeping, servicing, promotion, import and export, and distribution of medical devices.

 

Unless an exemption applies, each medical device we wish to commercially distribute in the U.S. will require either prior premarket notification, or 510(k) clearance, or premarket approval (PMA) from the FDA.  The FDA classifies medical devices into one of three classes.  Devices requiring fewer controls because they are deemed to pose lower risk are placed in Class I or II. Class I devices are subject to general controls such as labeling, premarket notification, and adherence to the FDA’s Quality System Regulation (a set of current good manufacturing practice requirements put forth by the FDA which govern the methods used in, and the facilities and controls used for, the design, manufacture, packaging, labeling, storage, installation and servicing of finished devices) (“QSR”). Class II devices are subject to special controls such as performance standards, post-market surveillance, FDA guidelines, as well as general controls.  Some Class I and Class II devices are exempted by regulation from the premarket notification, or 510(k), clearance requirement or the requirement of compliance with certain provisions of the QSR. Devices are placed in Class III, which requires approval of a PMA application, if insufficient information exists to determine that the application of general controls or special controls are sufficient to provide reasonable assurance of safety and effectiveness, or they are life-sustaining, life-supporting or implantable devices, or the FDA deems these devices to be “not substantially equivalent” either to a previously 510(k) cleared device or to a “pre-amendment” Class III device in commercial distribution before May 28, 1976, for which PMA applications have not been required.  The FDA may classify our products as class III devices, requiring PMA approval.  A PMA application must be supported by valid scientific evidence, which typically requires extensive data, including technical, pre-clinical, clinical, manufacturing and labeling data, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device. A PMA application must include, among other things, a complete description of the device and its components, a detailed description of the methods, facilities and controls used to manufacture the device, and proposed labeling. A PMA application also must be accompanied by a user fee, unless exempt. For example, the FDA does not require the submission of a user fee for a small business’s first PMA. After a PMA application is submitted and found to be sufficiently complete, the FDA begins an in-depth review of the submitted information. During this review period, the FDA may request additional information, or clarification of information already provided. Also during the review period, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. In addition, the FDA generally will conduct a pre-approval inspection of the manufacturing facility to ensure compliance with the QSR, which requires manufacturers to follow design, testing, control, documentation, and other quality assurance procedures.   

 

Our current products are classified as a Class II device and we do not anticipate we will be required to first seek premarket approval for our products. The FDA will determine based upon the 510(k) submission and may agree if the

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risk is low enough, and safety and effectiveness can be assured with special controls in place, the PMA will not be required.

 

If a PMA is required, the FDA can delay, limit, or deny approval of a PMA application for many reasons, including:

 

• The product may not be safe or effective to the FDA’s satisfaction;

• The data from our pre-clinical studies and clinical trials may be insufficient to support approval;

• The manufacturing process or facilities we use may not meet applicable requirements; and

• Changes in FDA approval policies or adoption of new regulations may require additional data.

 

If the FDA evaluations of both the PMA application and the manufacturing facilities are favorable, the FDA will either issue an approval letter, or approvable letter, which usually contains a number of conditions which must be met in order to secure final approval of the PMA. When and if those conditions have been fulfilled to the satisfaction of the FDA, the agency will issue a PMA approval letter authorizing commercial marketing of the device for certain indications. If the FDA’s evaluation of the PMA or manufacturing facilities is not favorable, the FDA will deny approval of the PMA or issue a not approvable letter. The FDA may also determine that additional clinical trials are necessary, in which case the PMA approval may be delayed while the trials are conducted and the data acquired is submitted in an amendment to the PMA. Even with additional trials, the FDA may not approve the PMA application. The PMA process can be expensive, uncertain, and lengthy and a number of devices for which FDA approval has been sought by other companies have never been approved for marketing.

 

New PMA applications or PMA supplements may be required for modifications to the manufacturing process, labeling and device specifications, materials or design of a device that is approved through the PMA process. PMA supplements often require submission of the same type of information as an initial PMA application, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA application, and may not require as extensive clinical data or the convening of an advisory panel. Clinical trials are almost always required to support a PMA application, and are sometimes required for a 510(k) clearance. These trials generally require submission of an application for an Investigational Device Exemption (“IDE”) to the FDA. If a trial is considered a “Non-Significant Risk” (“NSR”) study subject to abbreviated IDE regulations, a formal IDE submission is not required by the FDA.  An IDE application must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound.  The IDE application must be approved in advance by the FDA for a specified number of patients, unless the product is deemed a non-significant risk device and eligible for more abbreviated IDE requirements.  Generally, clinical trials for a significant risk device may begin once the IDE application is approved by the FDA and the study protocol and informed consent form are approved by appropriate institutional review boards (“IRBs”) at the clinical trial sites. The FDA’s approval of an IDE allows clinical testing to go forward, but does not bind the FDA to accept the results of the trial as sufficient to prove the product’s safety and effectiveness, even if the trial meets its intended success criteria.  All clinical trials must be conducted in accordance with the FDA’s IDE regulations that govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. .  Required records and reports are subject to inspection by the FDA. The results of clinical testing may be unfavorable or, even if the intended safety and effectiveness success criteria are achieved, may not be considered sufficient for the FDA to grant approval or clearance of a product.

 

Although we believe our clinical trials will provide favorable data to support our PMA application, upon evaluation the FDA may conclude differently. Delays in receipt of or failure to receive FDA approval, the withdrawal of previously received approvals, or failure to comply with existing or future regulatory requirements would have a material adverse effect on our business, financial condition, and results of operations. Even if granted, the approvals may include significant limitations on the intended use and indications for use for which our products may be marketed.

 

After a device is approved or cleared and placed in commercial distribution, numerous regulatory requirements apply. These include:

 

• establishing registration and device listing;

• implementing QSR, which requires manufacturers to follow design, testing, control, documentation and other quality assurance procedures;

• labeling regulations, which prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling;

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• medical device reporting regulations, which require that manufacturers report to the FDA if a device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur; and

• corrections and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FD&C Act that may present a risk to health.

 

Also, the FDA may require us to conduct post market studies or order us to establish and maintain a system for tracking our products through the chain of distribution to the patient level.  The FDA enforces regulatory requirements by conducting periodic, unannounced inspections and market surveillance.

 

Failure to comply with applicable regulatory requirements, including those applicable to the conduct of our clinical trials, can result in enforcement action by the FDA, which may lead to any of the following sanctions:

 

• Warning letters;

• Fines and civil penalties;

• Unanticipated expenditures;

• Delays in approving or refusal to approve our applications, including supplements;

• Withdrawal of FDA approval;

• Product recall or seizure;

• Interruption of production;

• Operating restrictions;

• Injunctions; and

• Criminal prosecution.

 

 

Our products are manufactured in compliance with current Good Manufacturing Practices (“GMP”) requirements set forth in the QSR. The QSR requires a quality system for the design, manufacture, packaging, labeling, storage, installation and servicing of marketed devices and includes extensive requirements with respect to quality management and organization, device design, equipment, purchase and handling of components, production and process controls, packaging and labeling controls, device evaluation, distribution, installation, complaint handling, servicing, and record keeping. The FDA enforces the QSR through periodic unannounced inspections If the FDA believes that we are not in compliance with QSR, it can shut down the manufacturing operations, require recall of our products, refuse to approve new marketing applications, institute legal proceedings to detain or seize products, enjoin future violations, or assess civil and criminal penalties against us or our officers or other employees.  Any such action by the FDA would have a material adverse effect on our business.  We cannot assure you that we will be able to comply with all applicable FDA regulations.

 

Non-FDA Government Regulation

 

The advertising of our products will be subject to both FDA and Federal Trade Commission regulations. In addition, the sale and marketing of our products will be subject to a complex system of federal and state laws and regulations intended to deter, detect, and respond to fraud and abuse in the healthcare system.  These laws and regulations restrict and may prohibit pricing, discounting, commissions and other commercial practices that may be typical outside of the healthcare business. In particular, anti-kickback and self-referral laws and regulations will limit our flexibility in crafting promotional programs and other financial arrangements with medical professionals in connection with the sale of our products and related services, especially with respect to physicians seeking reimbursement through Medicare or Medicaid.  These federal laws include, by way of example, the following:

 

• the anti-kickback statute prohibits certain business practices and relationships that might affect the provision and cost of healthcare services reimbursable under Medicare, Medicaid and other federal healthcare programs, including the payment or receipt of remuneration for the referral of patients whose care will be paid by Medicare or other federal healthcare programs;

• the physician self-referral prohibition, commonly referred to as the Stark Law, which prohibits referrals by physicians of Medicare or Medicaid patients to providers of a broad range of designated healthcare services in which the physicians or their immediate family members have ownership interests or with which they have certain other financial arrangements;

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• the anti-inducement law, which prohibits providers from offering anything to a Medicare or Medicaid beneficiary to induce that beneficiary to use items or services covered by either program;

• the Civil False Claims Act, which prohibits any person from knowingly presenting or causing to be presented false or fraudulent claims for payment by the federal government, including the Medicare and Medicaid programs; and

• the Civil Monetary Penalties Law, which authorizes the US Department of Health and Human Services (“HHS”) to impose civil penalties administratively for fraudulent or abusive acts.

 

Sanctions for violating these federal laws include criminal and civil penalties that range from punitive sanctions, damage assessments, money penalties, imprisonment, denial of Medicare and Medicaid payments, or exclusion from the Medicare and Medicaid programs, or both.  These laws also impose an affirmative duty on those receiving Medicare or Medicaid funding to ensure that they do not employ or contract with persons excluded from the Medicare and other government programs.

 

Many states have adopted or are considering legislative proposals similar to the federal fraud and abuse laws, some of which extend beyond the Medicare and Medicaid programs to prohibit the payment or receipt of remuneration for the referral of patients and physician self-referrals regardless of whether the service was reimbursed by Medicare or Medicaid.  Many states have also adopted or are considering legislative proposals to increase patient protections, such as limiting the use and disclosure of patient-specific health information.  These state laws typically impose criminal and civil penalties similar to the federal laws.

 

In the ordinary course of their business, medical device manufacturers and suppliers have been and are subject regularly to inquiries, investigations and audits by federal and state agencies that oversee these laws and regulations.  Recent federal and state legislation has greatly increased funding for investigations and enforcement actions, which have increased dramatically over the past several years.  This trend is expected to continue. Private enforcement of healthcare fraud also has increased, due in large part to amendments to the Civil False Claims Act in 1986 that were designed to encourage private persons to sue on behalf of the government. These whistleblower suits by private persons, known as qui tam relaters, may be filed by almost anyone, including physicians and their employees and patients, our employees, and even competitors. The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), in addition to its privacy provisions, created a series of new healthcare-related crimes.

 

Competition

 

The Company currently operates in a limited, but competitive environment in hydro-colonic irrigation, of which there are only four (4) companies that are approved by the FDA to manufacture a Class II medical device for colon-hydro therapy. The Company's major competitors are located in Phoenix, Arizona, Clearwater Florida, San Antonio, Texas, and in Canada. The Company must design and develop a broader range of speculum and disposable products to maintain and grow its market share in the disposable markets.

 

In a sense, the Company competes with traditional methods of bowel preparation prior to colonoscopy procedures such as Sodium Bi-phosphate and Sodium Phosphate which have general medical acceptance. The Food and Drug Administration (FDA) issued a safety alert regarding Fleet enemas and other related products in 2008. This alert was due to reports of acute phosphate nephropathy which is an acute kidney injury occurring in some patients who had used oral sodium phosphate (OSP) products for bowel cleansing prior to medical procedures. This injury was seen in patients who did not present with risk factors for this condition. We believe that a hydro-colonic irrigation method of bowel preparation will be highly favored by consumers as it does not require a difficult 24 hour fasting period, risk of renal failure, and an often unpleasant 12 hour, overnight bowel preparation.

 

Proprietary Rights

 

We have entered into an Employment Agreement with our Chief Executive Officer, and Non-Circumvent and Non-Disclosure agreements with key employees that require them to keep all of our proprietary information confidential.  We cannot assure that such protections will prove adequate should they be challenged in litigation.  

 

Legal Proceedings

 

The Company is not party to any legal proceedings.

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Inventory Management

 

The Company's ability to manage its inventories properly is an important factor in its operations. Inventory shortages can impede the Company's ability to meet orders on a timely basis. Conversely, excess inventories will result in increased inventory carrying costs that will lower gross margins. If the Company is unable to effectively manage its inventory, its business, results of operations and financial condition will be adversely affected. Dotolo Research Corporation currently operates its inventory management system on MAS-90 (SAGE), and inventory is First In- First- Out (FIFO) and we operate a Just in Time (JIT) system. All raw materials are procured only after receipt of orders and we maintain fifteen (15) day inventory levels to support our top customers with disposable products with those customers that provide the company with Standing Purchase Orders.

 

Suppliers and Service Providers

 

The Company's ability to competitively price its products depends on the cost of raw material components especially petroleum based products, packaging costs, cost of fuel for shipping charges, and its ability to maintain its’ fixed and variable overhead. The cost of materials is subject to annual price increases from our suppliers and the company will enter into long-term pricing contracts to hold pricing levels firm for one (1) year with future increases based upon the Producer Price Index (PPI).

 

Customers

 

The Company's financial success is directly related to the willingness of our customers to continue to purchase its products. The Company does not typically have long-term contracts with its customers however once in the medical market the Company hopes to execute standing re-supply orders with large out-patient clinics and hospital systems. Sales to the Company's customers are generally on an order-by-order basis and are subject to rights of cancellation and rescheduling by the customers. Failure to fill customers' orders in a timely manner could harm the Company's relationships with its customers. Furthermore, if any of the Company's major customers experiences a significant downturn in its business, then these customers may reduce or discontinue purchases from the Company, which could have an adverse effect on the Company's business, results of operations and financial condition.

 

The Company sells its products to our customers from its Published Price List and discounts pricing based on sales volumes. The company does not extend credit. Financial difficulties of a customer could cause the Company to stop doing business with that customer or reduce its business with that customer. The Company's inability to collect from its customers or a cessation or reduction of sales to certain customers because of financial concerns could have an adverse effect on the Company's business, results of operations and financial condition.

 

The target markets and targeted customers for our products include:

·Health and Wellness Spas
·Endoscopy Out-Patient Clinics
·Osteopathic Physicians
·Hospital Systems- Veterans Hospitals
·Skilled Nursing Homes
·Assisted Living Facilities
·Individuals with disabilities such as paraplegic, quadriplegic and obesity

 

Implementation of Growth Strategy.

 

As part of its growth strategy in our health and wellness and medical device markets, the Company will:

·Re-strengthen and expand existing distribution channels s for our medical device products within the United States. Currently these channels have not been active due to a lack of capital for the production of inventor.
·Re-strengthen our existing international distribution and re-seller agreements that we have previously established specifically in the United Kingdom, Saudi Arabia (Middle East), Africa, Mexico, Taiwan and Australia.
·Release new product development on Version 2 of the Toxygen hardware system in 2nd qtr 2015 and release new speculum disposable products.
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·Expand its factory operations to be able to accept large orders that will involve larger production runs that management believes will be more profitable.

 

These initiatives are largely conditioned upon the Company obtaining additional capital, of which there can be no assurance. Any such failures could have an adverse effect on the Company's business, results of operations and financial condition.

 

PERSONAL CARE SERVICES

 

Amian Angels, Inc. (“Amian Angels”) provides non-medical, Personal Care Attendant (PCA) services, Supervised Independent Living (SIL), Long-Term Senior Care, and other approved programs performed by a trained caregiver that will meet the health service needs of beneficiaries whose disabilities preclude the performance of certain independent living skills related to the activities of daily living (ADL).

 

PCA services that are reimbursed to Amian Angels under the waiver:

 

·Assisting with personal hygiene, dressing, bathing, and grooming
·Performing or assisting in the performance of tasks related to maintaining a safe, healthy and stable living environment such as:
·Light cleaning tasks in areas of the home used by the recipient,
·Shopping for such items as health and hygiene products, clothing and groceries,
·Performing activities of daily living inside and outside of the home which require attendant care,
·Assisting with or performing beneficiary laundry care chores
·Assisting with bladder and/or bowel requirements, including bed pan routines
·If indicated on the Plan of Care, assisting beneficiary to clinics, physician’s offices, and other appointments,
·Assisting the beneficiary to receive any service specified in the written Plan of Care, including leisure skills development,
·Assisting in activities which would enhance the individual employability and improve and enhance the beneficiary’s quality of life.

 

 

Supervised Independent Living (SIL) is an alternative program for mentally challenged, developmentally disabled or physically disabled individuals. Amian Angels provides the following personal health services:

 

·Assistance with safety procedures and emergency contacts within the home environment
·Counseling during the transition period
·Assistance in meeting needs with medical management, employment, financial, budgeting, household management, personal care, recreation and transportation
·Accessibility to community resources
·Independence and personal growth
·Freedom from abuse, neglect and exploitation

 

Personal Care Attendant Providers Licensing Standards

 

Pursuant to R.S. 40:2120.2, all Personal Care Attendant service providers and Home and Community- Based Services must be licensed by the Department of Health & Hospitals. DHH establishes the minimum licensing standards and the licensing provisions contain the core requirements for HCBS providers depending upon the services rendered by the HCBS provider. Currently, Angels of Mercy, Inc is in full compliance and good standing with the licensing requirements set forth and established by the State of Louisiana Department of Health & Hospitals.

 

Services and Fee Structure

 

Amian Angels is reimbursed for each approved “Unit of Service” provided, as determined by the Health Care Financing Administration (HCFA), the Department of Social Services and based upon a detailed Case Management, Plan of Care for each beneficiary. A unit of service for PCA services will be one-half hour. At least fifteen (15) minutes of

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service must be provided to the individual in order for Amian Angels to bill for a unit of service. A maximum of 1,825 hours (3,650 half-hour units) per beneficiary, per year can be billed under the Medicaid waiver program.

 

Long Term Care (LTC) - Older population or anyone whose disability occurred after their 21st birthday. Reimbursement rate: $2.89/quarter hour

 

Early Periodic Screening Diagnostic Treatment (EPSDT) – This service is provided from 3 years of age or older until 21 years of age. Reimbursement rate: $2.53/quarter hour

 

Elderly and Young Adult Waiver (EDA) – This service is provided by age 22 and normally up through death of the client. Reimbursement rate: $2.83/quarter hour

 

New Opportunity Waiver (NOW) The longest running Medicaid Waiver program and has the most resources available for the clients.

 

Several programs within the NOW- Title 19.

 

Reimbursement rates:

IFS day program: $3.61/quarter hour

IFS night: $2.17quarter hour

IFS day x2: $2.72/quarter hour

IFS day x3: 2.36/quarter hour

IFS night x2: $1.52/quarter hour

 

Supervised Independent Living (SIL) - Clients live independently but with supervision and assistance from Amian Angels trained staff. Activities of Daily Living skills are taught by staff to clients. Some clients go to day programs, some are employed, and some clients receive 24 hours/day personal care services. Reimbursement rate: 16.93/hour/daily care 24/7

 

Non-FDA Government Regulation

 

The advertising of our healthcare services and medical device products will be subject to both FDA and Federal Trade Commission regulations. In addition, the sale and marketing of our products will be subject to a complex system of federal and state laws and regulations intended to deter, detect, and respond to fraud and abuse in the healthcare system.  These laws and regulations restrict and may prohibit pricing, discounting, commissions and other commercial practices that may be typical outside of the healthcare business. In particular, anti-kickback and self-referral laws and regulations will limit our flexibility in crafting promotional programs and other financial arrangements with medical professionals in connection with the sale of our products and related services, especially with respect to physicians seeking reimbursement through Medicare or Medicaid.  These federal laws include, by way of example, the following:

 

• the anti-kickback statute prohibits certain business practices and relationships that might affect the provision and cost of healthcare services reimbursable under Medicare, Medicaid and other federal healthcare programs, including the payment or receipt of remuneration for the referral of patients whose care will be paid by Medicare or other federal healthcare programs;

• the physician self-referral prohibition, commonly referred to as the Stark Law, which prohibits referrals by physicians of Medicare or Medicaid patients to providers of a broad range of designated healthcare services in which the physicians or their immediate family members have ownership interests or with which they have certain other financial arrangements;

• the anti-inducement law, which prohibits providers from offering anything to a Medicare or Medicaid beneficiary to induce that beneficiary to use items or services covered by either program;

• the Civil False Claims Act, which prohibits any person from knowingly presenting or causing to be presented false or fraudulent claims for payment by the federal government, including the Medicare and Medicaid programs; and

• the Civil Monetary Penalties Law, which authorizes the US Department of Health and Human Services (“HHS”) to impose civil penalties administratively for fraudulent or abusive acts.

 

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Sanctions for violating these federal laws include criminal and civil penalties that range from punitive sanctions, damage assessments, money penalties, imprisonment, denial of Medicare and Medicaid payments, or exclusion from the Medicare and Medicaid programs, or both.  These laws also impose an affirmative duty on those receiving Medicare or Medicaid funding to ensure that they do not employ or contract with persons excluded from the Medicare and other government programs.

 

Many states have adopted or are considering legislative proposals similar to the federal fraud and abuse laws, some of which extend beyond the Medicare and Medicaid programs to prohibit the payment or receipt of remuneration for the referral of patients and physician self-referrals regardless of whether the service was reimbursed by Medicare or Medicaid.  Many states have also adopted or are considering legislative proposals to increase patient protections, such as limiting the use and disclosure of patient-specific health information.  These state laws typically impose criminal and civil penalties similar to the federal laws.

 

In the ordinary course of their business, medical device manufacturers and suppliers have been and are subject regularly to inquiries, investigations and audits by federal and state agencies that oversee these laws and regulations.  Recent federal and state legislation has greatly increased funding for investigations and enforcement actions, which have increased dramatically over the past several years.  This trend is expected to continue. Private enforcement of healthcare fraud also has increased, due in large part to amendments to the Civil False Claims Act in 1986 that were designed to encourage private persons to sue on behalf of the government. These whistleblower suits by private persons, known as qui tam relaters, may be filed by almost anyone, including physicians and their employees and patients, our employees, and even competitors. The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), in addition to its privacy provisions, created a series of new healthcare-related crimes.

 

Competition

 

The Company currently operates in a highly competitive environment in Personal Care Attendant (PCA) services. The Company's competitors are located throughout the State of Louisiana where Personal Care Attendant licenses are authorized by the Department of Health and Hospitals to conduct business.. To provide a competitive edge on the competition, Amian Angels will continue to hire highly skilled company employees,, deliver on-going training, and deliver the highest level of personal care services.

 

Proprietary Rights

 

We have entered into an Employment Agreement with our President, Key Managers and have executed Non-Circumvent and Non-Disclosure agreements with key employees that require them to maintain all of our proprietary information and customers lists confidential.  We cannot assure that such protections will prove adequate should they be challenged in litigation.  

 

Customers

 

The Company's financial success is directly related to maintaining the continued excellence of personal care services we provide to our current clients and the willingness of newly qualified clients to accept our organization as the “Preferred Provider Choice” to provide their loved ones or themselves with the highest level of personal care.

 

MEDICAL PRODUCTS AND TECHNOLOGIES

Esteemcare Inc.

Esteemcare, Inc, established in 1996, is a Durable and Home Medical equipment and supply distributor for respiratory therapy and is Accredited by the “Joint Commission on Healthcare Organizations”.

 

Esteemcare - Company Vision:

 

• Promote excellence in set- up and patient education of Respiratory Therapy, home medical equipment and sleep therapy services.

• Do so through efficient utilization of resources by professionally trained Respiratory therapists.

• To operate under the supervision and medical direction of referring physicians.

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Esteemcare targets patients with sleep obstructive disorders or related chronic illnesses who are insured by Medicare, Medicaid, third-party insurers, or have the ability to pay for our products from their own private resources. Sleep apnea is a serious sleep disorder that occurs when a person's breathing is interrupted during sleep. People with untreated sleep apnea stop breathing repeatedly during their sleep, sometimes hundreds of times. This means the brain -- and the rest of the body -- may not get enough oxygen.

 

There are two types of sleep apnea:

 

• Obstructive sleep apnea (OSA): The more common of the two forms of apnea, it is caused by a blockage of the airway, usually when the soft tissue in the back of the throat collapses during sleep.

 

• Central sleep apnea: Unlike OSA, the airway is not blocked, but the brain fails to signal the muscles to breathe, due to instability in the respiratory control center.

 

 

Sleep apnea can affect anyone at any age, even children. Risk factors for sleep apnea include:

• Being male

• Being overweight

• Being over age 40

• Having a large neck size (17 inches or greater in men and 16 inches or greater in women

• Having large tonsils, a large tongue, or a small jaw bone

• Having a family history of sleep apnea

• Gastroesophageal reflux, or GERD

• Nasal obstruction due to a deviated septum, allergies, or sinus problems

 

What Are the Effects of Sleep Apnea?

 

If left untreated, sleep apnea can result in a growing number of health problems, including:

• High blood pressure

• Stroke

• Heart failure, irregular heart-beats, and heart attacks

• Diabetes

• Depression

• Worsening of ADHD

• Headaches

 

Facilities

 

The Company operates from two (2) administrative locations: Columbia South Carolina, a 1,800 square foot commercial building and in Charleston, South Carolina, a 1,200 square foot commercial building. The business leases are on month-to-month agreements with the monthly lease payments below market average.

 

Employees

 

As of September 25, 2014, Esteemcare has eight (8) full time employees, one (1) Office Manager, three (3) billing personnel, two (2) Respiratory Technicians, one (1) accounting manager, and one (1) delivery person, None of these employees are covered by any collective bargaining agreement. The Company presently considers its employee relations to be satisfactory.

 

Physicians Referrals- Customers

 

The Company's financial success is directly related to maintaining the continued relationships with referring physicians and delivering a high excellence of personal care and services to our clients and the willingness of new physicians and qualified clients to accept our organization as the “Preferred Choice” to provide the CPAP equipment and respiratory supplies with the highest level of personal care.

 

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Medicare Competitive Bidding Areas

 

Esteemcare was awarded contracts in 46 Competitive - MSA Bid Areas.

 

Product Category: CPAP Devices, Respiratory Assist Devices, and Related Supplies

 

Major MSA Markets Awarded By Company:

 

Albany-Schenectady-Troy, NY , Albuquerque, NM ,Asheville, NC ,Atlanta-Sandy Springs-Marietta, GA Augusta-Richmond County, GA-SC ,Baton Rouge, LA , Bridgeport-Stamford-Norwalk, CT ,Bronx-Manhattan, NY ,Cape Coral-Fort Myers, FL , Charleston-North Charleston-Summerville, SC ,New Haven-Milford, CT ,New Orleans-Metairie-Kenner, LA ,North East NY CBA Metro ,North Port-Bradenton-Sarasota, FL ,Northern NJ Metro CBA ,Ocala, FL , Oklahoma City, OK ,Omaha-Council Bluffs, NE-IA , Palm Bay-Melbourne-Titusville, FL ,Phoenix-Mesa-Glendale, AZ ,Poughkeepsie-Newburgh-Middletown, NY Raleigh-Cary, NC ,Colorado Springs, CO, Columbia, SC ,Deltona-Daytona Beach-Ormond, FL ,Denver-Aurora-Broomfield, CO, Greensboro-High Point, NC , Greenville-Mauldin-Easley, SC ,Hartford-West Hartford-East Hartford, CT, Jacksonville, FL ,Lakeland-Winter Haven, FL ,Milwaukee-Waukesha-West Allis, WI, Minneapolis-St. Paul-Bloomington, MN-WI, Nassau-Brooklyn-Queens-Richmond County Metro Richmond, VA ,Seattle-Tacoma-Bellevue, WA ,Southern NY Metro CBA

 

Medicare Competitive Bidding Area Awards

 

Suffolk County, Syracuse, NY ,Tampa-St. Petersburg-Clearwater, FL ,Tucson, AZ ,Tulsa, OK Virginia Beach-Norfolk-Newport News, VA-NC , Washington-Arlington-Alexandria, DC-VA-MD-WV

 

The HME/DME-Respiratory Market

 

The U.S. domestic healthcare spending is expected to increase by approximately $2.3 trillion from $2.7 trillion in 2011 to $5.0 trillion in 2022, according to the Centers for Medicare and Medicaid Services (“CMS”). Revenues for CPAP Therapy to treat sleep disorders are projected to grow at 15%-20% for the next 5 years. No other product line in undergoing this much consistent growth. Continuous Positive Airwave Pressure (CPAP) is a treatment in which a mask is worn over the nose and/or mouth while you sleep. The mask is hooked up to a machine that delivers a continuous flow of air into the nose. This air flow helps keep the airways open so that breathing is regular. CPAP is considered by many experts to be the most effective treatment for sleep apnea.

 

As the baby boomer population ages, CMS estimates that the number of Americans over the age of 65 will increase from an estimated 42.6 million in 2012 to 58.3 million in 2022. The Centers for Disease Control estimates that 80% of older adults have at least one chronic condition and 50% have at least two. Esteemcare is medical distributor providing Durable and Home Medical CPAP products and related supplies. The products that we distribute are classified as Durable Medical Equipment (“DME”). CMS estimates that the national expenditures within the DME market will increase by over $27 billion from $38.9 billion in 2011 to $66.7 billion in 2022. The number of DME companies billing Medicare less than $300,000 per year has been declining, or consolidating, over the last few years according to HME News, primarily as a result of increased Medicare accreditation, bonding requirements and Medicare Competitive Bidding. We have been able to attract new referral physicians and patients looking for new suppliers as a result of consolidation within the DME market over the last few years.

 

Small medical distribution companies can compete against national companies because Home Medical Equipment (HME) and Durable Medical Equipment (DME) pricing is government regulated. Medical Device-network.com in January of 2012 reports, “The market is highly regulated, however, transparent and ‘rules-based’, small and medium enterprises (SMEs) have traditionally played a crucial role in the development of new products in the medical services, biotech and medical device industry. Because of their quick adaptability, ability to identify market niches and considerable innovative potential, these firms form an important component of the healthcare industry worldwide. Accounting for more than 50% of all pipeline products, they have a significant role in the future of the healthcare industry”. According to the U.S. Census Bureau, the generation described as the "Baby Boom" is just now reaching age 65. The United States' National Institutes of Health, National Institute for Aging projects that in the next fifteen (15) years the population aged 65 to 84 years old will grow by roughly 50%, peaking in 2025. The combined U.S. market for home healthcare products is expected to expand annually by nearly 7.0%. The Company anticipates an increased emphasis on medical equipment solutions that reduce the cost of care and improve patient outcomes. Our medical distribution strategy

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is to serve the growing demand for HME by building a national and international distribution network with exclusive rights to products that are positioned to address the changing industry requirements.

 

Key Market Segments Served

 

Skilled Nursing Facilities: There are in excess of 17,000 skilled nursing facilities in US with 1.84 million beds which are projected to grow 10% per annum through 2016. By 2020, a 65-year-old man could be expected to live to the age of 82 and a woman could be expected to live to the age of 85. For those over the age of 65, there is a 41 percent chance that they will spend an average of 2.5 years in a skilled nursing facility. A one-year stay in a nursing home can cost between $30,000 and $80,000.

 

Acute and Critical Care Facilities: Although there has been a decline in the number of hospitals that provide acute care services in the United States, there is an estimated 5,200 medical facilities and the total numbers of acute care facilities and out-patient surgery centers have increased annually. This shift was in part the result of payer pricing pressures, declining physician reimbursements, and this has t created an incentive for acute care hospitals to lower-costs and to establish physician-owned, out-patient surgery centers.

 

Assisted Living Facilities: There are approximately 33,000 Assisted Living Facilities operating in the U.S. today. Nursing home spending is expected to grow 6.6 percent annually by 2018.

Hospitals and Medical Institutions: There are well over 5,000 hospitals in the U.S. with approximately 1,000,000 beds. Although the short-term outlook for hospitals is mixed, a common theme is to reduce the total cost of care, improve efficiencies and allow patients to remain in their home with home based care as long as possible.

 

Federal Agencies: In fiscal year 2008, the Department of Veterans Affairs (VA) spent about $4.1 billion on long-term care for veterans. The VA estimated a budget increase of 165% between fiscal years 2008 and 2015 for institutional and non-institutional care.

 

Home Medical Care Industry: It is estimated that in 2010 there were over 30,000 home health care facilities in the United States. Home health care spending is projected to grow an average of 7.9 percent from 2013 to 2018.

 

Stroke Centers: There are an estimated 500 stroke centers throughout the United States.

 

Burn Centers: There are an estimated 120 burn centers throughout the United States.

 

Physical/Occupational Therapy Centers: There are well over 5,000 physical therapy facilities throughout the United States. The demand for physical therapists is expected grow by 30% over the next decade.

 

Esteemcare revenues are derived from physician referrals, sleep centers, patient referrals, in-service set-ups, and by supplying CPAP products and supplies to meet the growing requirements to combat severe/chronic sleep disorders. Customers meet with company Respiratory Technicians and our therapists provide the appropriate CPAP device to the customer. We market our products directly to referral physicians, insurance payers, and consumers through our direct push marketing efforts. We target consumers with chronic sleep obstructive conditions and who require a continuous supply of medical products that provide attractive gross margins.

 

We receive initial contact from prospective customers in the form of physician prescriptions. These referrals are then qualified and become new customers. Our qualification efforts primarily involve verifying insurance eligibility, obtaining the required medical documentation from the customer’s physician, and explaining our billing and collection processes, if applicable. The majority of the new customers qualified from our process typically place their initial order with us within 24 -48 hours from the time we receive initial contact from the physician and customer. Since our inception, we have demonstrated our ability to attract and retain customers with our unique customer service that generates recurring revenues on supply parts that can last for periods of greater than two years.

 

Accounts Receivable

 

Our accounts receivable are generally due from Medicare, Medicaid, private insurance companies, and our private patients. Accounts receivable are reported net of allowances for contractual adjustments and uncollectible accounts. The collection process is time consuming, complex and typically involves the submission of claims to multiple

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layers of payers whose payment of claims may be contingent upon the payment of another payer. As a result, our collection efforts may be active for up to 18 to 24 months from the initial billing date. In accordance with regulatory requirements, we make reasonable and appropriate efforts to collect our accounts receivable, including deductible and co-payment amounts, in a manner consistent for all classes of payers.

 

The Company has established an allowance to account for contractual adjustments that result from differences between the payment amount received and the expected realizable amount. These adjustments are recorded as a reduction of both gross revenues and accounts receivable. Based on our current billing system, we are unable to directly compare the aggregate estimated allowance for contractual adjustments to the actual contractual adjustments recorded. However, we do analyze the aggregate allowance for contractual adjustments as a percentage of net sales compared to the last twelve months’ actual contractual adjustments as a percentage of net sales to determine that our estimated allowance for contractual adjustments is a reasonable basis for recording our periodic allowance for contractual adjustments.

 

As a result of the Budget Control Act of 2011, or sequestration, effective April 1, 2013, Medicare reduced payments for Part B Medicare claims by 2%, but did not change the published allowable Medicare rates. Allowances for uncollectible accounts (or bad debts) are recorded as an operating expense and consist of billed charges that are ultimately deemed uncollectible due to the customer’s or third-party payer’s inability or refusal to pay. In establishing the appropriate allowance for uncollectible accounts, management makes assumptions with respect to future collectability. We base our estimates of accounts receivable collectability on our historical collection and write-off experience, our credit policies, and aging of our accounts receivable. Changes in judgment regarding these factors will cause the level of accounts receivable allowances to be adjusted.

 

The typical collection process begins with the electronic submission of a claim to Medicare, Medicaid, or other primary insurance carriers, for which a response (and payment) is obtained within 15 to 30 days. Any claim denials are generally acted upon timely following the response and, where applicable, corrected claims are submitted. A response (and co- payment) for amounts billed to secondary payers, including Medicaid, private third-party insurance carriers, and patients, generally occurs within 30 to 60 days of submission of the claim. On a continual basis, the outstanding accounts receivable balances are reviewed by collection personnel, including contacting the insurance company and/or patient in an attempt to determine why payment has not been remitted and obtain payment from the respective responsible party. When applicable, corrected claims are submitted to the insurance carrier. Patient statements are generated and sent out monthly. Outbound calls are continually made to patients with outstanding balances in an attempt to obtain payment. Uncollectible account balances for all payer classes are written off after remaining unpaid for a period of 24 months. Balances that are determined to be uncollectible prior to the passage of 24 months from the last billing date are written off at the time of such determination.

 

We perform eligibility and insurance verification on patients prior to the shipment of products and submission of a claim. As a result, we do not have amounts that are pending approval from third-party payers outside of the typical review process for submitted claims.

 

Accounts receivable are reported net of allowances for contractual adjustments and uncollectible accounts. Contractual adjustments are recorded against revenues. Contractual adjustments result from differences between the payment amount received and the expected realizable amount. Bad debt is recorded as an operating expense and consists of billed charges that are ultimately deemed uncollectible due to the customer’s or third-party payer’s inability or refusal to pay.

 

The Company performs analyses to evaluate the net realizable value of accounts receivable. Specifically, the Company considers historical realization data, accounts receivable aging trends, other operating trends and relevant business conditions. Because of continuing changes in the health care industry and third-party reimbursement, it is possible that the Company’s estimates could change, which could have a material impact on the Company’s results of operations and cash flows. The Company does not accrue interest on its accounts receivable.

 

Revenue Recognition

 

We recognize revenue related to product sales upon delivery to customers provided that we have received and verified any written documentation required to bill Medicare, other government agencies, third-party payers, and patients. For product shipments for which we have not yet received the required written documentation, revenue recognition is delayed until the period in which those documents are collected and verified. We record revenue at the amounts expected

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to be collected from government agencies, other third-party payers, and from patients directly. We record, if necessary, contractual adjustments equal to the difference between the reimbursement amounts defined in the fee schedule and the revenue recorded per the billing system. These adjustments are recorded as a reduction of both gross revenues and accounts receivable. We analyze various factors in determining revenue recognition, including a review of specific transactions, current Medicare regulations and reimbursement rates, historical experience and the credit-worthiness of patients. Medicare reimburses at 80% of the government-determined prices for reimbursable supplies, and we bill the remaining balance to either third-party payers or directly to patients.

 

Esteemcare- Payer Mix:

 

Medicare- 40%

Private Insurance- 26%

Blue Cross/Blue Shield of South Carolina- 17%

Private Pay 8%

Tricare/VA- 7%

Medicaid- 2%

 

Product Mix:

 

Sleep 95%- Oxygen 5%

 

Shipping and Handling Costs:

 

Shipping and handling: Charges/costs are not allowed to be charged to the patients in compliance with Medicare policy.

 

Equipment Leases

 

The Company performs a review of newly acquired equipment leases to determine whether a lease should be treated as a capital or operating lease. Capital lease assets are capitalized and depreciated over the term of the initial lease. A liability equal to the present value of the aggregated lease payments is recorded utilizing the stated lease interest rate. If an interest rate is not stated, the Company will determine an estimated cost of capital and utilize that rate to calculate the present value. For equipment leases, the Company records rent expense and amortization of leasehold improvements on a straight-line basis over the initial term of the lease.

 

Operating Leases

 

The Company leases various software, and equipment under non-cancelable operating leases that expire at various times that extend through April 2016.

 

Proprietary Rights

 

We have entered into an Employment Agreement with our President, Key Managers and have executed Non-Circumvent and Non-Disclosure agreements with key employees that require them to keep all of our proprietary information and customers lists confidential. We cannot assure that such protections will prove adequate should they be challenged in litigation.

 

Legal Proceedings

 

From time to time, we are party to certain legal proceedings that arise in the ordinary course and are incidental to our business. There are currently no such pending proceedings to which we are a party that our management believes will have a material adverse effect on the Company’s financial position or results of operations. However, future events or circumstances, currently unknown to management, will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on our consolidated financial position, liquidity or results of operations in any future reporting periods.

 

 

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ONCOLOGIX TECH EMPLOYEES

We currently employ a total of 191 full and part-time employees. Our Chief Executive Officer operates a business office in Louisiana, our Chief Financial Officer located in Michigan, our Medical Product Division President located in Arizona and our Health Services Division President in Louisiana. Our Medical Device manufacturing segment has 1 full-time employee. Our Personal Care Services segment employs seventeen (17) full time employees and one hundred and sixty-four (164) part-time employees, and Esteemcare Inc has six (6) full-time employees.. None of these employees are covered by any collective bargaining agreement. The Company presently considers its employee relations to be satisfactory.

 

Item 1A. Risk Factors

 

RISK FACTORS

 

Those interested in investing in the Company should carefully consider the following Risk Factors pertaining to Oncologix Tech as well as the risks and uncertainties that are described in the Company's most recent Annual and Quarterly Reports under the Securities Exchange Act of 1934. These Risk Factors are not all inclusive.

 

Going Concern Qualification.

 

Our Independent Accountants have expressed doubt about our ability to continue as a going concern. The ability to continue as a going concern is an issue raised as a result of the material operating losses incurred since inception, and its stockholders' deficit. We expect to continue to experience net operating losses. 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 institutions where possible. The going concern increases the difficulty in meeting such goals.

 

Risk of Issued Series D Convertible Preferred Stock to Common Shareholders

 

In March 2013, our Board of Directors authorized up to 60,000 shares of Series D Convertible Preferred Stock. Each share of Series D Convertible stock has a par value of $0.001 and is convertible into 1,000 shares of common stock beginning after March 1, 2014. In December 2013, our Board of Directors increased the shares designated as Series D Convertible Preferred Stock to 200,000. Each share of Series D Convertible Preferred Stock has a stated value of $80.25. Each shares of Series D Convertible Preferred Stock shall have voting rights as stated next: March 1, 2013 to February 28, 2014, 400 votes per share; March 1, 2014 to February 28, 2015, 800 votes per share; March 1, 2015 to February 28, 2016, 1,200 votes per share; March 1, 2016 to February 28, 2017, 1,600 votes per share; March 1, 2017 and after, 2,000 votes per share.

 

In the event of any liquidation, dissolution or winding-up of the Corporation, the Series D Preferred Stock then issued and outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its shareholders in a position senior to the Corporation’s Common Stock shareholders. The effect of these senior securities could affect the value of our common stock.

 

Our internal control over financial reporting is not considered effective, our business and stock price could be adversely affected.

 

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate the effectiveness of our internal control over financial reporting as of the end of each fiscal year, and to include a management report assessing the effectiveness of our internal control over financial reporting in our annual report on Form 10-K for that fiscal year. Our management, including our chief executive officer and chief financial officer, does not expect that our internal control over financial reporting will prevent all error and all fraud. As of August 31, 2014, the Company identified two material weaknesses: a) Oncologix lacks the necessary corporate accounting resources to maintain adequate segregation of duties; b) In addition, we have a lack of a functioning Audit Committee as we only have one independent director is not considered a Financial Expert within the meaning of Section 407 of the Sarbanes-Oxley Act. We may experience a loss of public confidence, which could have an adverse effect on our business and on the market price of our common stock due to our internal control being ineffective.

-19-
 

 

Financial Condition of Dotolo Research Corporation (“DOTOLO”)

 

Dotolo Research Corporation has limited working capital with little cash on hand at August 31, 2014. Since January 31, 2013, Dotolo has incurred indebtedness of $50,000 to meet its working capital needs. These two notes bear interest at 18% per annum and require minimum, monthly interest payments of $750. Additional financing will be required to get Dotolo to cash flow, break even.

 

Need for Additional Capital

 

We will need substantial funds to procure raw materials for inventory, to complete the redesign of new product introductions, manufacturing, and the sales and marketing of our products at Dotolo. Consequently, we will seek to raise further capital through not only possible public and private offerings of equity and debt securities, but also collaborative arrangements, strategic alliances, and equity and debt financings from other sources. Amian Angels operates with positive cash flow sufficient to service the business operations and debt payment requirements of the acquisition but will need additional funds to complete the audit in addition to the costs for other required SEC regulatory filings. We estimate the need to raise at least $500,000 of additional funding for working capital and inventory procurement for Dotolo. Additionally, we estimate the need to raise at least $1,200,000 for overhead of Oncologix Tech, Inc and debt servicing. We may be unable to raise additional capital on commercially acceptable terms, if at all, and if we raise capital through additional equity financing, existing shareholders may have their ownership interests diluted. Our failure to be able to generate adequate funds from operations or from additional sources would harm our business.

 

Uncertainties Regarding Healthcare Reimbursement and Reform

 

Our ability to execute our strategy in the medical markets depends in part on the extent to which healthcare services and products are paid by governmental agencies, private health insurers and other organizations, such as health maintenance organizations, for the cost of such products and related medical treatments. Our business could be harmed if healthcare payers and providers implement cost-containment measures and if governmental agencies implement cost reduction measures that reduce payment to our customers for their use of our products.

 

Industry Intensely Competitive.

 

The medical device and health services industry is intensely competitive. While we maintain a market share in hardware and disposable products , there is no guarantee we can maintain or re-gain that market share. We will compete with both public and private medical device and pharmaceutical companies that have a greater number of products on the market, have greater financial resources and have other competitive advantages. 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 benefit from significantly greater sales and marketing capabilities or will not develop products that are accepted more widely than ours.

 

Healthcare Service Industry Intensely Competitive.

 

The healthcare service industry is very competitive. We will compete with both public and private healthcare service companies that hold licenses within the State of Louisiana and directly compete with companies that may have greater financial resources and have other competitive advantages.

 

Intellectual Property Risk.

 

Our ability to obtain and maintain patent and other protection for our products will affect our success. The patent positions of medical device companies can be highly uncertain and involve complex legal and factual questions. Future patent rights, if granted, may not be upheld in a court of law if challenged. Our patent rights may not provide competitive advantages for our products and may be challenged, infringed upon or circumvented by our competitors. We cannot patent our products in all countries or afford to litigate every potential violation worldwide. Because of the large number of patent filings in medical device, our 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 issue that would harm our ability to commercialize our products and product candidates.

-20-
 

 

Possible Failure to Comply with Government Regulations.

 

We, and any prospective contract manufacturers and suppliers are subject to extensive, complex, costly, and evolving governmental rules, regulations and restrictions administered by the FDA, by other federal and state agencies, and by governmental authorities in other countries. In the United States, our products are registered as a Class II device and cannot be marketed until they are approved for market by the FDA. Obtaining FDA market approval involves the submission, among other information, may require clinical studies on the product, and requires substantial time, effort and financial resources. The FDA, and other federal and state agencies, as well as equivalent agencies of other countries with whom we will export our products, will also perform pre-licensing inspections of our facility, if any, and our contract manufacturers' and suppliers' facilities. Our failure or the failure of our contract manufacturers or suppliers to meet FDA or other agencies' requirements would delay or preclude our ability to sell our products potentially having an adverse material effect on our business. Even with FDA market approval, we, as well as our partners, contract manufacturers and suppliers, are subject to numerous FDA requirements covering, among other things, testing, manufacturing, quality control, labeling and continuing review of medical products, and to permit government inspection at all times. Failure to meet or comply with any rules, regulations, or restrictions of the FDA or other agencies could result in fines, unanticipated expenditures, product delays, non-approval or recall, interruption of production, and criminal prosecution.

 

Exposure to Product Liability Claims.

 

Our design, testing, development, manufacture, and marketing of products involve an inherent risk of exposure to product liability claims and related adverse publicity. Although we believe that our product liability insurance is adequate, additional insurance coverage is expensive and in the future we may be unable to obtain additional liability coverage on acceptable terms. 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.

 

Reliance on Key Personnel

 

Our success will depend, to a great extent, upon the experience, abilities and continued services of our executive officers and key management personnel. If we lose the services of any of these officers or key personnel, our business could be harmed. Our success also will depend upon our ability to attract and retain other highly qualified Regulatory, Marketing, Sales, and manufacturing personnel and our ability to develop and maintain relationships with key individuals in the industry. Competition to attract qualified personnel and relationships is intense and we compete with other companies in our industry. We may not be able to continue to attract and retain qualified personnel.

 

Uncertainty as to our Ability to Initiate Operations and Manage Growth.

 

Our efforts to market our 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.

 

Compliance with Government Regulations.

 

We, and all healthcare service companies are subject to extensive, and evolving governmental rules, regulations and restrictions administered by the Department of Health & Hospitals, the Bureau of Health Services Financing, by other federal and state agencies, and by governmental authorities.

 

Integration of Newly Acquired Businesses.

 

The Company may make strategic acquisitions in the future and cannot assure that it will be able to successfully integrate the operations of newly-acquired businesses into the Company's current operations. It is Management intent to consolidate various business functions to include Information Technology, Accounting, legal under a central core operation. The failure to integrate newly acquired businesses or the inability to make suitable strategic acquisitions in the future could have an adverse effect on the Company's business, results of operations and financial condition.

 

-21-
 

Attraction and Retention of Qualified Personnel

 

The Company is dependent on the efforts and abilities of its senior executive officers. While the Company believes that its senior management team has significant experience and depth, appropriate senior management succession plans are in place. The Company's future success also depends on its ability to identify, attract and retain additional qualified personnel.

 

Broker-Dealer Requirements May Affect Trading and Liquidity of Our Common Stock

 

Section 15(g) of the Securities Exchange Act of 1934, as amended, and Rule 15g-2 promulgated thereunder by the SEC require broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor's account.

 

Potential investors in the Registrant's common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be "penny stock." Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-22-
 

 

Item 1B. Unresolved Staff Comments

 

None.

 

Item 2. Properties

 

Our Chief Executive Officer operates out of his office in Louisiana and our Chief Financial Officer operates out of his home office in Michigan. Angels operates from two (2) administrative locations: Lafayette, Louisiana, a 2,800 square foot commercial office and also Alexandria, Louisiana, a 1,500 square foot residential home. The business lease in Alexandria, Louisiana in on month-to-month lease agreement and the Lafayette, Louisiana administrative office is on a 5-year lease with both monthly lease payments negotiated below market average.

 

Item 3. Legal Proceedings

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-23-
 

 

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder matters and Issuer Purchases of Equity Securities

 

Market for Common Stock

 

On May 19, 2011, the Company affected a one-for-four reverse stock split. All share and per share information have been restated to retroactively show the effect of this stock split. The reverse split was previously approved by a majority of the Company’s shareholders on March 24, 2011.

 

Our common stock is traded on the OTC:QB under the symbol “OCLG”. 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, 2014    
First Quarter $ 0.0250 $ 0.0071
Second Quarter $ 0.0270 $ 0.0066
Third Quarter $ 0.0088 $ 0.0055
Fourth Quarter $ 0.0090 $ 0.0045
     
FISCAL YEAR ENDED:    
August 31, 2013    
First Quarter $ 0.08 $ 0.05
Second Quarter $ 0.07 $ 0.04
Third Quarter $ 0.08 $ 0.03
Fourth Quarter $ 0.05 $ 0.01
     

 

The closing stock price of our common stock on November 19, 2014, was $0.0042.

 

Issuer Repurchases of Equity Securities

 

We did not repurchase any of our equity securities during the fourth quarter of the year ended August 31, 2014.

 

Holders

 

As of November 13, 2014, the Company had 90 shareholders of record of its common stock. As of November 13, 2014, 1,342 owners of our common stock held them in the names of various broker-dealers.  As of November 13, 2014, the Company had one Unit holder of record.  As of November 13, 2014, the Company had ten owners of Units who held them in the names of various brokers.

 

Dividend Policy

 

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

 

As a smaller reporting company, as defined in Rule 12b-2 promulgated under of the Securities Exchange Act of 1934, as amended, and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

 

Equity Compensation Plan Information

 

-24-
 

The following table sets forth information regarding the number of shares of our common stock that may be issued pursuant to our equity compensation plans or arrangements as of the end of fiscal 2014.

 

2000 Stock Incentive Plan

 

  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                              6,173,750   $0.016                                   559,796
           
Equity compensation plans          
not approved by stockholders                                           -      $0.000                                             -   
           
TOTAL                              6,173,750   $0.016                                   559,796

 

The Company is authorized to issue up to 7,500,000 shares of common stock under its 2000 Stock Incentive Plan. Shares may be issued as incentive stock options, non-statutory stock options, deferred shares or restricted shares. Options are granted at the fair market value of the common stock on the date of the grant and have terms of up to ten years. The 2000 Stock Incentive Plan also provides for an annual grant of options to members of our Board of Directors. For fiscal years ended August 31, 2012, 2011, 2010, 2009 and 2008, our Board of Directors elected to waive the grant of these annual options. We have ,473,293 shares of common available for future issuance under our 2000 Stock Incentive Plan as of August 31, 2014. Under the 2000 Stock Incentive Plan the price of the granted common stock options are equal to the fair market value of such shares on the date of grant. This plan has been approved by our shareholders.

 

2013 Omnibus Incentive Plan

 

  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                                           -      $0.00                                             -   
           
Equity compensation plans          
not approved by stockholders                                           -      $0.00                                8,000,000
           
TOTAL                                           -      $0.00                                8,000,000

 

The Company is authorized to issue up to 10,000,000 shares of common stock under its 2013 Omnibus Incentive Plan to employees, officers, directors and consultants. The issuance adoption of this plan has been approved by the Company’s Board of Directors on May 20, 2013. This plan has not been approved by the Company’s shareholders and consequently, we cannot issue Incentive Stock Options to employees at this time. Any options are granted at the fair market value of the common stock on the date of the grant and have terms of up to ten years. We have 8,000,000 shares of common available for future issuance under our 2013 Omnibus Incentive Plan as of August 31, 2014. Under the 2013 Omnibus Incentive Plan the price of the granted common stock options are equal to the fair market value of such shares on the date of grant.

 

For a description of our 2000 Stock Incentive Plan and 2013 Omnibus Incentive Plan, please see the description set forth in Note 8 of our Consolidated Financial Statements.

-25-
 

Recent Sales of Unregistered Securities

 

The following table contains information regarding our sales of unregistered securities during the past two fiscal years.

 

Date Securities   Underwriters/  
Sold Sold Consideration Purchasers * Notes
         
10/15/2012       1,000,000  $             20,000 Accredited Investor The Company sold 1,000,000 shares of common stock to a non-related accredited investor at $0.02 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
1/6/2013       2,000,000  $             20,000 Accredited Investor The Company sold 2,000,000 shares of common stock to a non-related accredited investor at $0.01 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
2/8/2013       1,024,164  $                     - Anthony Silverman, former CEO Anthony Silverman, our former President and CEO, converted a promissory note in the amount of $10,242 in principal and interest into 1,024,164 shares of common stock at $0.01 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
6/17/2013       2,000,000  $             10,000 Accredited Investor The Company sold 2,000,000 shares of common stock to a non-related accredited investor at $0.005 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
7/17/2013       4,000,000  $             20,000 Accredited Investor The Company sold 4,000,000 shares of common stock to a non-related accredited investor at $0.005 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
8/8/2013       6,000,000  $             36,000 Accredited Investor The Company sold 6,000,000 shares of common stock to a non-related accredited investor at $0.006 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
9/12/2013       1,000,000  $                     - Vendor The Company issued 1,000,000 S-8 shares to a vendor for consulting work.  The Company recorded an expense of $11,500 upon the issuance of those shares.
9/12/2013       1,500,000  $             10,000 Accredited Investor The Company sold 1,500,000 shares of common stock to an affiliated accredited investor at $0.00667 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
10/3/2013       4,000,000  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $15,620 in principal and interest into 4,000,000 shares of common stock at $0.00391 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
12/3/2013       1,891,123  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $9,380 in principal and interest into 1,891,123 shares of common stock at $0.00496 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.

 

-26-
 

 

1/3/2014       2,000,000  $                     - Vendor The company issued 2,000,000 shares of common stock as consideration for services.  The company recorded an expense of $22,000 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/13/2014       3,076,923  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $20,000 in principal and interest into 3,076,923 shares of common stock at $0.0065 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/14/2014       1,000,000  $                     - Vendor The company issued 1,000,000 shares of common stock as consideration for services.  The company recorded an expense of $19,000 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/15/2014         117,436  $                     - Accredited Investor Additional reset shares were issued to a non-affiliated accredited investor in connection with the prior conversion of $9,380 in principal and interest into 117,436 shares of common stock.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/21/2014       3,500,000  $                     - Accredited Investor The company issued 3,500,000 shares of common stock as consideration for  fees.  The company recorded an expense of $45,500 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/21/2014       1,500,000  $                     - Accredited Investor The company issued 1,500,000 shares of common stock as consideration for  fees.  The company recorded an expense of $30,000 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/31/2014       3,472,222  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $25,000 in principal and interest into 3,472,222 shares of common stock at $0.0072 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
2/7/2014       1,000,000  $                     - Accredited Investor The company issued 1,000,000 shares of common stock as consideration for  fees.  The company recorded an expense of $9,000 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
2/24/2014       4,615,385  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $30,000 in principal and interest into 4,615,385 shares of common stock at $0.0065 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
3/12/2014       4,615,385  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $30,000 in principal and interest into 4,615,385 shares of common stock at $0.0065 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
4/7/2014       2,936,314  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $19,086 in principal and interest into 2,936,314 shares of common stock at $0.0065 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
4/7/2014       5,383,007  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $17,764 in principal and interest into 5,383,007 shares of common stock at $0.0033 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
6/2/2014       5,000,000  $                     - Accredited Investor The company issued 5,000,000 shares of common stock as consideration for services.  The company recorded an expense of $30,000 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.

 

-27-
 


6/25/2014       5,138,746  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $25,000 in principal and interest into 5,138,746 shares of common stock at $0.004865 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
7/14/2014       2,500,000   Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $11,000 in principal and interest into 2,500,000 shares of common stock at $0.0044 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
7/24/2014       1,149,425   Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $5,000 in principal and interest into 1,149,425 shares of common stock at $0.00435 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
8/1/2014       3,416,764   Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $8,456 in principal and interest into 3,416,764 shares of common stock at $0.002475 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
8/26/2014       1,200,000  $                     - Accredited Investor The Company sold 1,200,000 shares of common stock to an affiliated accredited investor at $0.00833 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
9/10/2014       1,058,201  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $5,000 in principal and interest into 1,058,201 shares of common stock at $0.004725 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
10/28/2014       1,473,622  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $5,000 in principal and interest into 1,473,622 shares of common stock at $0.003383 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
11/3/2014       1,508,296  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $5,000 in principal and interest into 1,508,296 shares of common stock at $0.003315 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
11/10/2014       1,724,733  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $5,000 in principal and interest into 1,724,733 shares of common stock at $0.002899 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
11/12/2014       6,000,000   Vendor The company issued 6,000,000 shares of common stock as consideration for services.  The company recorded an expense of $24,000 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
         
      87,801,746  $           116,000    
         
*  There were no underwriters associated with any of our Sales of Unregistered Securities.

 

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Transfer Agent

 

Our transfer agent and registrar are American Stock Transfer and Trust Co., 6201 15th Avenue, Brooklyn, NY 11219, Telephone (718) 921-8200.

 

 

Item 6. Selected Financial Data

 

We are a “smaller reporting company”, as defined by regulation S-K and as such, are not required to provide the information contained in this item pursuant to Regulation S-K.

 

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.

 

RECENT ACQUISITIONS AND DIVESTURES

 

In furthering our strategy to be the best small cap medical device and healthcare holding company, we acquired Dotolo Research Corporation (“DOTOLO”) on March 22, 2013, Angels of Mercy, Inc. (“AOM”) on August 1, 2013, Amian Health Services on December 10, 2013, and Esteemcare Inc. on September 25, 2014. These acquisitions are further described in Note 4 – Acquisition Activities, in the Notes to Consolidated Financial Statements appearing in Item 8 of this Form 10-K.

 

RESULTS OF OPERATIONS

 

Comparison of the fiscal years ended August 31, 2014 (‘fiscal 2014”) and 2013 (‘fiscal 2013”)

 

Revenue

 

Revenues increased to $3,677,475 for fiscal 2014, from $244,246 from the comparable period in fiscal 2013. Revenues were driven by sales from Amian Angels Inc.

 

Cost of Revenues

 

Cost of revenues increased to $3,063,064 for fiscal 2014, from $195,699 during the comparable period in fiscal 2013. Cost of revenues for Dotolo were $46,843 for fiscal 2014 and consist primarily of direct labor and minor purchases of materials for our new product development . Cost of revenues for Amian Angels were $3,016,221 for fiscal 2014 and consist primarily of wages paid to personal care service employees who directly provide the PCA and SIL services.

 

Research and Development Expense

 

Research and development expense increased to $30,000 for fiscal 2014, from $0 during the comparable period in fiscal 2013. Research and development expenses consisted of costs for the development of dies and molds for Dotolo’s Toxygen product..

 

General and Administrative Expense

 

General and administrative expenses primarily include officer and administrative salaries, office rent, utilities, legal and accounting services, insurance, public filing costs as well as other incidental overhead costs.

General and administrative expense increased to $1,133,431 during fiscal 2014, from $329,667, an increase of over 100% or $803,764 from the comparable period in fiscal 2013. The primary reason for the increase is due to the general and administrative expenses associated with full years expenses of Dotolo and Amian Angels, whose companies were acquired late fiscal 2013. Payroll and related expenses increased to $305,698 during the fiscal 2014, from $193,029 in the comparable period in fiscal 2013, due primarily to the hiring of our CEO, President of Amian Angels, President of our Medical Products division and administrative salaries at Amian Angels. Legal expense increased to $68,675 fiscal

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2014, from $16,531 in the comparable period in fiscal 2013, due primarily to legal fees incurred in fiscal 2014 related to our acquisition of Amian Health Services and legal fees related to our senior lender borrowing. Rent expense increased to $80,329 during fiscal 2014, from $15,500 in the comparable period in fiscal 2013, as a result of facilities rented by both Dotolo and Amian Angels which were acquired in late fiscal 2013. Insurance expense increased to $67,316 during fiscal 2014, from $14,006 in the comparable period in fiscal 2013, due primarily to workers compensation and facility insurance from Amian Angels. Stock Based Compensation increased to $91,163 during fiscal 2014, from $0 in the comparable period in fiscal 2013, due to the issuance of stock options to the company’s senior management. Investor Relation and press release expense increased to $84,870 during fiscal 2014, from $299 during the comparable period in fiscal 2013 primarily as a result of additional press releases and investor relations contracts entered into during fiscal 2014. Bad debt expense increased to $120,456 during fiscal 2014, from $0 during the comparable period in fiscal 2013 as a result of write offs of uncollectible receivables from Amian Angels.

Depreciation and Amortization

 

Depreciation and amortization increased to $22,819 during fiscal 2014, from $5,455 during fiscal 2013. The increase in depreciation and amortization was the result of fixed assets acquired in our two fiscal 2013 and one fiscal 2014 acquisitions.

 

Interest Income

 

We had no interest income in fiscal 2014 or fiscal 2013.

 

Interest and Finance Charges

 

Interest and finance charges increased to $805,618 during fiscal 2014 from $34,181, an increase of over 100% from fiscal 2013. The increase is primarily attributable to the acquisition of additional non-related party debt and convertible debt incurred during fiscal 2014.

 

Interest and finance charges – related parties decreased to $3,192 during fiscal 2014, from $152,087, a decrease of 98% or $148,895 for the comparable period in fiscal 2013. The decrease is primarily attributable to reclassifying former related party debt as non-related during fiscal 2014.

 

A summary of interest and finance charges is as follows:

 

            For the Year Ended
            August 31,   August 31,
            2014   2013
Interest expense on non-convertible notes  $          264,339    $              4,734
Interest expense on non-convertible notes - related parties                  3,192                       579
Interest expense on convertible notes payable                81,474                  10,000
Interest expense on convertible notes payable - related parties                          -                  14,102
Amortization of note payable discounts              108,325                            -
Amortization of note payable discounts - related parties                          -                            -
Other interest and finance charges              351,480                156,853
                 
Total interest and finance charges  $          808,810    $          186,268

 

Loss on Conversion of Notes Payable

 

Loss on conversion of notes payable increased to $137,505 during fiscal 2014, from $10,242, for the comparable period in fiscal 2013. The increase was due to the issuance of shares of common stock for the conversions of a non-related party convertible promissory notes during the fiscal 2014 at below market value.

 

Income Taxes

 

At August 31, 2014, the Company had federal net operating loss carry forwards totaling approximately $25,100,000. At August 31, 2014, the Company did not have any state net operating loss carry forwards. The federal net

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operating loss carry forwards expire in various amounts beginning in 2018 and ending in 2035. Due to our history of incurring losses from operations, we have provided a valuation allowance for our net operating loss carry forward.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Since March 2013, we have acquired three companies. While these acquisitions greatly increased the value of our Company, we are not fully cash flow positive. Cash flows from the issuances of promissory notes and common stock for cash are not sufficient to meet our working capital requirements for the foreseeable future or provide for expansion opportunities. We incurred $1,407,571 and $653,459 in net losses, and we used $629,942 and $105,817 in cash for operations for the years ended August 31, 2014 and 2013, respectively. Investing activities used $67,232 and $71,226 for the years ended August 31, 2014 and 2013, respectively. Net cash generated from financing activities for the years ended August 31, 2014 and 2013 was $675,222 and $214,568, respectively. As of August 31, 2014, we had a cash balance of $17,504. These conditions raise substantial doubt about our ability to continue as a going concern.

 

We anticipate that we will require approximately $1,500,000 to operate through August 31, 2015. Approximately $1,000,000 will be required to fund corporate overhead including debt servicing with the balance to invest into raw material inventory, manufacturing and product revisions at Dotolo. Additional funding will allow us to meet our current sales demands and expenses of Dotolo, Amian Angels and Oncologix, while keeping our public filings current.

 

As of August 31, 2014, we had total outstanding short-term and long-term debt and liabilities totaling $2,800,176 net of discounts. Please see Note 8 for further information.

 

CRITICAL ACCOUNTING POLICIES

 

“The preparation of financial statements in accordance with accounting standards generally accepted in the United States requires management to make estimates and assumptions that affect both the recorded values of assets and liabilities at the date of the financial statements and the revenues recognized and expenses incurred during the reporting period. Our estimates and assumptions affect our recognition of income taxes, the carrying value of our long-lived assets and our provision for certain contingencies. We evaluate the reasonableness of these estimates and assumptions continually based on a combination of historical information and other information that comes to our attention that may vary our outlook for the future. Actual results may differ from these estimates under different assumptions.

We suggest that the Summary of Significant Accounting Policies, as described in Note 2 of our Consolidated Financial Statements, be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations. We believe the critical accounting policies that most impact our consolidated financial statements are described in Note 3 of our Consolidated Financial Statements.

 

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 for 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

 

We do not maintain off-balance sheet arrangements nor do we participate in any non-exchange traded contracts requiring fair value accounting treatment. The Company has no off-balance sheet arrangements as of August 31, 2014 and 2013.

 

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NEW ACCOUNTING STANDARDS

 

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. For details of new accounting standards, please refer to Note 17 of our Consolidated Financial Statements.

 

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, as defined in Rule 12b-2 promulgated under of the Securities Exchange Act of 1934, as amended, and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

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Item 8. Financial Statements and Supplementary Data

 

Oncologix Tech, Inc. and Subsidiaries

Consolidated Financial Statements

Year Ended August 31, 2014 and 2013

 

Contents

 

Report of Seale and Beers, CPAs, Independent Registered Public Accounting Firm

 

F-1

   
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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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PCAOB Registered Auditors – www.sealebeers.com

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors and Stockholders of

Oncologix Tech, Inc.

 

 

We have audited the accompanying balance sheets of Oncologix Tech, Inc.as of August 31, 2013 and 2014, and the related statements of income, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended August 31, 2014. Oncologix’s management is responsible for these financial statements. 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 audit 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, an audit of its internal control over financial reporting. Our audit included 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 financial statements referred to above present fairly, in all material respects, the financial position of Oncologix Tech, Inc. as of August 31, 2013 and 2014, and the related statements of income, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended August 31, 2014 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 3 to the financial statements, the Company has negative working capital at August 31, 2014, has incurred recurring losses and recurring negative cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 3. 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

December 5, 2014

 

 

 

 

 

 

8250 W Charleston Blvd, Suite 100 - Las Vegas, NV 89117 Phone: (888)727-8251 Fax: (888)782-2351

 

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 ONCOLOGIX TECH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AUGUST 31, 2014 AND 2013

       
   August 31,  August 31,
   2014  2013
       
ASSETS        
Current Assets:          
Cash and cash equivalents  $17,504   $39,456 
Accounts receivable (net of allowance of $9,000)   213,399    108,319 
Inventory   31,271    31,271 
Prepaid expenses and other current assets   9,307    39,176 
Prepaid commissions and finders' fees   3,152    —   
           
Total current assets   274,633    218,222 
           
Property and equipment (net of accumulated depreciation          
of $28,264 and $11,820)   39,967    78,533 
Deposits and other assets   14,582    10,050 
Goodwill   1,781,779    1,696,425 
Patents, registrations (net of amortization of $97,983 and $91,859)   24,497    30,620 
           
Total assets  $2,135,458   $2,033,850 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
Current liabilities:          
Convertible notes payable (net of discount of $99,491 and $0)  $436,308   $360,025 
Notes payable (net of discount of $18,596 and $0)   946,104    138,494 
Notes payable - related parties   51,600    56,200 
Accounts payable and other accrued expenses   732,934    895,664 
Accrued interest payable   148,681    66,969 
Accrued interest payable - related parties   6,342    65,743 
Current portion of long term debt   82,532    —   
           
Total current liabilities   2,404,501    1,583,095 
           
Long-term liabilities:          
Notes payable (net of current portion)   395,675    811,500 
Convertible notes payable   —      —   
           
Total long-term liabilities   395,675    811,500 
           
Total liabilities   2,800,176    2,394,595 
           
Stockholders' Deficit:          
Series A Preferred stock, par value $.001 per share; 10,000,000 shares          
authorized; 129,062 and 129,062 shares issued and outstanding at          
August 31, 2014 and August 31, 2013, respectively   129    129 
Series D Preferred stock, par value $.001 per share; 10,000,000 shares          
authorized; 78,564 and 58,564 shares issued and outstanding at          
August 31, 2014 and August 31, 2013, respectively   79    59 
Common stock, par value $.001 per share; 750,000,000 shares authorized;          
134,600,152 and 74,587,422 shares issued and outstanding at          
August 31, 2014 and August 31, 2013, respectively   134,600    74,587 
Additional paid-in capital   47,565,869    58,560,265 
Accumulated deficit prior to reentering development stage   (48,370,395)   (58,992,296)
Common stock subscribed   5,000    —   
Noncontrolling interest   —      (3,489)
           
Total stockholders' deficit   (664,718)   (360,745)
           
Total liabilities and stockholders' deficit  $2,135,458   $2,033,850 

 

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

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

 

   For the Year Ended
   August 31,  August 31,
   2014  2013
       
Revenues  $3,677,475   $244,246 
           
Cost of revenues   3,063,064    195,699 
           
Gross profit   614,411    48,547 
           
Operating expenses:          
General and administrative   1,133,431    329,667 
Research and development expense   30,000    —   
Depreciation and amortization   22,819    5,455 
           
Total operating expenses   1,186,250    335,122 
           
Loss from operations   (571,839)   (286,575)
           
Other income (expense):          
Acquisition costs   —      (173,864)
Interest and finance charges   (805,618)   (34,181)
Interest and finance charges - related parties   (3,192)   (152,087)
Loss on conversion of notes payable - related parties   (137,505)   (10,242)
Loss on disposal of assets   (28,748)   —   
Other income (expenses)   139,331    3,490 
           
Total other income (expense)   (835,732)   (366,884)
           
Loss from continuing operations   (1,407,571)   (653,459)
           
Discontinued operations          
Operating loss from discontinued operations   (36)   (14)
Gain on disposal of discontinued operations   95,564    —   
           
           
Gain from discontinued operations   95,528    (14)
           
Less loss attributable to noncontrolling interest   —      —   
           
Net gain from discontinued operations   95,528    (14)
           
Net loss before income taxes   (1,312,043)   (653,473)
           
Income taxes   —      —   
           
Net loss attributable to common shareholders  $(1,312,043)  $(653,473)
           
Gain (loss) per common share, basic and diluted:          
Continuing operations  $(0.01)  $(0.01)
Discontinued operations   0.00    (0.00)
           
   $(0.01)  $(0.01)
           
Weighted average number of shares          
outstanding - basic and diluted   102,556,908    61,864,435 

 

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

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 ONCOLOGIX TECH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE PERIOD SEPTEMBER 1, 2013 THROUGH AUGUST 31, 2014

                                  
   Series A  Series D        Additional     Non-  Common   
    Preferred Stock    Preferred Stock   Common Stock    Paid-in    Accumulated      Controlling       Stock          
    Shares    Amount    Shares    Amount    Shares    Amount    Capital    Deficit    Interest    Subscribed    Total 
                                                        
Balance, August 31, 2012   129,062   $129    —     $—      57,563,258   $57,563   $57,697,233   $(58,338,851)  $(3,475)  $—     $(587,401)
                                                        
Issuance of stock purchased for cash   —      —      —      —      15,000,000    15,000    91,000    —      —      —      106,000 
Issuance of stock for fees   —      —      —      —      1,000,000    1,000    7,000    —      —      —      8,000 
Issuance of preferred stock   —      —      58,564    59              585,581    —      —      —      585,640 
Conversion of notes payable   —      —      —      —      1,024,164    1,024    9,217    —      —      —      10,241 
Issuance of warrants for finance charges   —      —      —      —      —      —      159,992    —      —      —      159,992 
Loss on conversion of notes payable -                                                       
related parties   —      —      —      —      —      —      10,242    —      —      —      10,242 
Net loss   —      —      —      —      —      —      —      (653,445)   (14)   —      (653,459)
                                                        
Balance, August 31, 2013   129,062   $129    58,564   $59    74,587,422   $74,587   $58,560,265   $(58,992,296)  $(3,489)  $—     $(360,745)
                                                        
Issuance of stock purchased for cash   —      —      —      —      2,700,000    2,700    17,300    —      —      —      20,000 
Issuance of stock for fees   —      —      —      —      15,000,000    15,000    150,500    —      —      —      165,500 
Stock based compensation   —      —      —      —      —      —      91,163    —      —      —      91,163 
Issuance of preferred stock for fees   —      —      20,000    20    —      —      149,980    —      —      —      150,000 
Acquisition of business assets   —      —      —      —      —      —      —      —      —      —      —   
Conversion of notes payable   —      —      —      —      42,312,730    42,313    174,112    —      —      5,000    221,425 
Loss on conversion of notes payable   —      —      —      —      —      —      137,387    —      —      —      137,387 
Beneficial conversion feature - notes                                                       
payable   —      —      —      —      —      —      140,445    —      —      —      140,445 
Issuance of warrants for fees and                                                       
finance charges   —      —      —      —      —      —      82,192    —      —      —      82,192 
Disposition of subsidiary   —      —      —      —      —      —      (11,937,475)   12,029,472    3,489    —      95,486 
Net loss   —      —      —      —      —      —      —      (1,407,571)   —      —      (1,407,571)
                                                        
Balance, August 31, 2014   129,062   $129    78,564   $79    134,600,152   $134,600   $47,565,869   $(48,370,395)  $—     $5,000   $(664,718)

 

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

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

            
   August 31,  August 31,
   2014  2013
Operating activities:          
Net loss  $(1,312,043)  $(653,459)
           
Net gain from discontinued operations   (95,528)   —   
           
Net loss from continuing operations   (1,407,571)   (653,459)
           
Adjustments to reconcile net loss to net cash used          
  in operating activities:          
Depreciation and amortization   22,819    5,456 
Loss on disposal of property and equipment   28,748    —   
Stock based compensation   91,163    —   
Amortization of discount on notes payable and warrants   108,325    —   
Loss on conversion of notes payable - related parties   137,387    10,241 
Bad debt expense   124,231    —   
Non-cash interest charges   49,093    —   
Issuance of debt for fees   —      65,000 
Issuance of stock and warrants for fees   397,691    145,406 
           
Changes in operating assets and liabilities:          
Accounts receivable   (229,311)   4,031 
Prepaid expenses and other current assets   29,869    9,566 
Prepaid commissions and finders' fees   (3,152)   —   
Inventory   —      69,610 
Deposits and other assets   (4,532)   —   
Accounts payable and other accrued expenses   (106,466)   206,591 
Accrued interest payable - related parties   (59,401)   17,090 
Accrued interest payable   95,637    14,651 
           
Net operating cash flows - continuing operations   (725,470)   (105,817)
           
Net operating cash flows - discontinued operations   95,528    —   
           
Net cash used in operating activities   (629,942)   (105,817)
           
Investing activities:          
Purchase of property and equipment   (878)   —   
Cash acquired with Amian Health Services assets   8,646    —   
Acquisition of Amian Health Services assets   (75,000)   1,653 
Acquisition of Angels subsidiary   —      (72,879)
           
Net cash used in investing activities   (67,232)   (71,226)
           
Financing activities:          
 Proceeds from issuance of convertible notes   250,000    —   
 Proceeds from issuance of notes payable - related parties   —      33,361 
 Proceeds from issuance of notes payable   1,451,628    120,000 
 Proceeds from the issuance of common stock   10,000    106,000 
 Repayment of notes payable   (1,031,806)   (25,917)
 Repayment of notes payable - related parties   (4,600)   (18,876)
 Repayment of convertible notes payable   —      —   
           
Net cash provided by financing activities   675,222    214,568 
           
Net increase (decrease) in cash and cash equivalents   (21,952)   37,525 
           
Cash and cash equivalents, beginning of period   39,456    1,931 
           
Cash and cash equivalents, end of period  $17,504   $39,456 

 

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

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

CONSOLIDATED RESTATED STATEMENTS OF CASH FLOWS (CONTINUED)

 

 

Supplemental disclosure of cash flow information (continued):

 

   For the Year Ended
   August 31,  August 31,
   2014  2013
       
Cash paid during the year for:          
           
Interest  $79,930   $4,822 
Income Taxes  $—     $—   

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 - ORGANIZATION AND DESCRIPTION OF THE COMPANY

 

Oncologix Tech, Inc. is a diversified medical holding company with operating segments in medical device, healthcare services and medical products and technologies. We operate and manufacture Class II medical device products, delivers Personal Healthcare Services nationally and provides Home Medical Equipment (HME) and Durabable Medical Equipment (DME) sales in licensed markets. For its clients, Oncologix provides FDA approved medical devices, State licensed healthcare services and medical product sales. For its shareholders, Oncologix operates profitable business divisions that build, maintain and nourish shareholder value. The Company’s corporate mission is to be the best small cap medical device and healthcare services holding company in North America.

 

We were originally formed in 1995 and in 2000 we changed our name to "BestNet Communications Corp." At that time we provided worldwide long distance telephone communication and teleconferencing services to commercial and residential consumers through the internet, which we disposed of in 2007 due to lack of profitability. In July 2006 we changed our business model to medical device products.  In July 2006 we acquired JDA Medical Technologies, Inc. ("JDA") and merged this business into Oncologix Corporation, our wholly owned subsidiary.  On January 22, 2007, we changed our name to Oncologix Tech, Inc., to reflect this new business model. Our business at this time 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. Due to a lack of funding, we suspended these development activities on December 31, 2007. On November 1, 2013, due to the development of the brachytherapy device being several years away, indication that the product could not be marketed and no guarantee of FDA approvals, it was determined that continued financial support of this product by Oncologix Corporation would cost the Company substantial capital beyond its means and the Company’s management and Board of Directors disposed of Oncologix Corporation and its Brachytherapy medical device subsidiary. Furthermore, as part of the disposal, the Company was relieved of over $90,000 in debt.   

 

On March 22, 2013, we acquired all the outstanding stock of Dotolo Research Corporation (“Dotolo”), a FDA Registered, Class II, medical device manufacturer with 25 years of product sales in the hydro-colonic irrigation, bowel preparation market. Dotolo Research Corporation began operations in 1989 and sells hardware and disposable products to a customer base of over 900+ customers both domestically and internationally.  The Company currently operates in a limited, but competitive environment in hydro-colonic irrigation, of which there are only four (4) companies approved by the FDA to manufacture a Class II medical device for colonic-hydro therapy.  Since the acquisition, we have not had significant revenues from sales of our products, including sales to medical facilities due to a lack of operating capital needed to procure raw material inventory to currently fill customers’ orders.

 

On August 1, 2013, we acquired the outstanding stock of Angels of Mercy, Inc. (“AOM”). Angels provides non-medical, Personal Care Attendant (PCA) services, Supervised Independent Living (SIL), Long-Term Senior Care, and other approved health service programs performed by a trained caregiver that will meet the health service needs of beneficiaries whose disabilities preclude the performance of certain independent living skills related to the activities of daily living (ADL).

 

On December 10, 2013, Angels of Mercy, Inc. acquired the assets of Amian Health Services LLC and Amian Health Services of Alex LLC, herein after referred to as “Amian”.  Amian delivers health-care care-services who provide routine health and personal care support with Activities of Daily Living (ADL) to clients with physical impairments or disabilities in private homes, nursing care facilities, hospice care settings, and other residential settings. Amian holds both PCA-Medicaid Waiver Provider and Residential Rehabilitation/Supervised Independent Living (SIL), and personal care services for Veterans with licenses issued by the Division of Licensing and Certification of the Department of Social Services, Veterans Administration Social Services and the Louisiana Department of Health and Hospitals.  All administrative personnel of Amian have been merged into to gain operating synergies. This company changed its name to Amian Angels, Inc. (“Amian Angels”) in August 2014.

 

On July 21, 2014 we formed Advanced Medical Products and Technologies Inc. to enter into the Durable Medical and Home Medical Equipment markets. We anticipate acquiring active companies in this area to develop our Medical Products and Technologies Segment.

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

BASIS OF PRESENTATION

 

In the opinion of management, the accompanying balance sheets and related interim statements of income, cash flows, and stockholders' equity include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes may differ from management's estimates and assumptions. Interim results are not necessarily indicative of results for a full year.

 

PRINCIPLES OF CONSOLIDATION

 

The consolidated financial statements for the fiscal years ended August 31, 2014 and 2013 include the accounts of Oncologix Tech, Inc. and its wholly owned subsidiaries, Dotolo Research Corporation, Amian Angels, Inc., Advanced Medical Products & Technologies Inc. Dotolo Research Corporation is a Louisiana Corporation. Angels of Mercy, Inc. is a Louisiana Corporation. Advanced Medical Products & Technologies is a Nevada 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 in accordance with Accounting Standards Codification Topic (“ASC”) 605. Accordingly, revenue is recognized when all the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the seller’s price to the buyer is fixed and determinable; and collectability is reasonably assured. Currently, the primary revenue for the Company is derived from its sales in its Personal Care Services Segment.

 

Amian Angels is reimbursed for each approved “Unit of Service” provided, as determined by the Health Care Financing Administration (HCFA), the Department of Health & Hospitals and the Department of Social Services and based upon a detailed Case Management, Plan of Care for each beneficiary. A unit of service for PCA services will be one-half hour. At least fifteen (15) minutes of service must be provided to the individual in order for Amian Angels to bill for a unit of service. A maximum of 1,825 hours (3,650 half-hour units) per beneficiary, per year can be billed under the Medicaid waiver program. Our primary payor sources is the State of Louisiana, the Department of Veterans Administration and Private Pay individuals who reimburse us for the services we provide. We currently experience a two percent claims rejection rate. With the acquisition of Amian, Amian Angels now has private pay clients as well as Veterans Administration Social Services clients.

 

 

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.

 

 

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

ACCOUNTS RECEIVABLE

 

The Company’s receivables in its medical device segment are subject to credit risk, and the Company typically does not require collateral on its accounts receivable. Receivables are generally due within 30 days. The Company maintains an allowance for uncollectable receivables that reduces the receivables to amounts that are expected to be collected. .

 

The lead time for account receivables in our Personal Care service divisions ranges from 14 to 90 days. The majority of the Company’s receivables, approximately 90%, are collected within 14 days. We bill the State of Louisiana on a weekly basis and are reimbursed two weeks later via electronic funds transfer. We are able to resubmit any rejected claims an additional two times to Molina Healthcare, the EDI payment provider for payments within the next twelve months. Currently we maintain an allowance for uncollectible receivables at a rejection rate of 2% of outstanding receivables. We analyze our claim rejection rate on a quarterly basis and make quality improvements to reduce the number of rejected claims. Private pay customers are billed semi-monthly. Generally collections occur within 30 days. Veterans Administration (VA) customers are billed monthly. Generally collections occur within 45 to 60 days. Due to the recent governmental shutdown, the current lead time for payments is approximately 90 days. Upon final rejection of any resubmitted claims, the claims are resubmitted and after twelve months the receivables are written off to bad debt expense.

 

INVENTORY

 

Inventories are stated at costs and are held on a first-in, first-out basis. Currently our inventory consists primarily of miscellaneous parts.

 

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 10 years
Computer equipment 5 years
Equipment 5 to 10 years
Software 3 to 5 years

 

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.

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

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.

 

GOODWILL AND OTHER INTANGIBLE ASSETS

The Company adopted Accounting Standards Update 2011-08 “Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-08”) in the fourth quarter of fiscal 2014 due to its recent acquisition of Dotolo Research Corporation and Angels of Mercy, Inc. ASU 2011-08 permits an entity to first assess qualitative factors to determine whether it is more likely that not that the fair value of a reporting unit is less than its carrying amount. Goodwill represents the excess of the cost of a business combination over the fair value of the net assets acquired and these costs are subject to annual impairment tests.

We accounted for the acquisition of Dotolo Research Corporation and Angels of Mercy, Inc. using the acquisition method of accounting under ASC 805 and ASC 810-10-65. The purchase price was allocated first to identifiable current then fixed assets as well as liabilities assumed. We then earmarked identifiable intangibles, with the remainder to goodwill. We identified patents as our identifiable asset for Dotolo Research Corporation. Amounts allocated to Goodwill for the acquisition of Dotolo are based on expanding our product into the medical market and the potential upside of the sale with a FDA medical device product with a reimbursement code. Dotolo is one of four companies worldwide with this FSA approved medical device product. Amounts allocated to goodwill for Angels of Mercy, Inc. are based on increased clients and future revenues.

The Company evaluates the recoverability of its indefinite lived intangible assets, which consist of Dotolo Research Corporation and Goodwill in Angels of Mercy, Inc., based on estimates of future royalty payments that are avoided through its ownership of the intangibles and patents, discounted to their present value. In determining the estimated fair value of the intangibles and patents, management considers current and projected future levels of revenue based on its plans for Dotolo, business trends, prospects and market and economic conditions. See Note 4 – Acquisitions for further information on the acquisition of Dotolo.

Pursuant to ASC 350-20-35, we have identified three reporting units in our business, our medical device segment which consists of Dotolo Research Corporation, our personal care segment which consists of Angels of Mercy, Inc., and our medical products and technologies segment which consists of Advanced Medical Products & Technologies, Inc. We follow the two step process in ASC 350-20-35 for impairment testing. In the first step we compare the fair value of the reporting unit as a whole to its carrying value, including goodwill. For both reporting units, we have determined that the reporting units’ fair value exceeds its carrying value. We also compare the carrying value of goodwill by itself for both reporting units.

The following explains the results of our impairment testing. We have allocated $564,075 of goodwill to the Angels of Mercy, Inc. reporting unit. As of August 31, 2014 the fair value exceeds the carrying value of goodwill by 50%. We have allocated $1,217,704 of goodwill to the reporting unit Dotolo Research Corporation. As of August 31, 2014 the fair value exceeds the carrying value of goodwill by 38%. In calculating the valuation, we used a discounted cash flow method based on the future 5 years cash flows of each reporting unit. We used a discount rate of 8% which is currently higher that the current long term interest rate. An increase in the overall national interest rate could have a negative impact on our valuation. An additional risk is the possibility of cash flow projections falling short of our 5 year estimate amount.

 

 

 

 

 

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

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 non-controlling interest, changes in a parent’s ownership interest, and the valuation of retained non-controlling 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, 2014, the Company has allocated $3,734 losses to its non-controlling interest. With the disposition of Oncologix Corporation, the Company no longer will have to recognize a non-controlling interest in its subsidiary.

 

ADVERTISING COSTS

 

Advertising costs included with selling, general and administrative expenses in the accompanying consolidated statements of operations were minimal for fiscal 2014 and fiscal 2013. Such costs are expensed when incurred.

 

INCOME TAXES

 

The Company adopted the provisions of FASB 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.

 

STOCK-BASED COMPENSATION

 

The Company has a stock-based compensation plan, which is described more fully in Note 9. 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.

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

RECLASSIFICATIONS

 

Certain prior year amounts have been reclassified to conform to the current year presentation.

 

STOCK INCENTIVE PLANS

 

Share based payment compensation costs for equity-based awards are measured on the grant date based on the fair value of the award on that date and is recognized over the required service period. The fair-value of stock option awards are estimated using the Black-Scholes model. Fair value of restricted stock awards is based upon the quoted market price of the common stock on the date of grant.

 

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. On Basic and diluted earnings per share for the years ended August 31, 2014 and 2013 are as follows:

 

   For the year ended    
   August 31,  August 31,
   2014  2013
       
       
Net gain (loss) attributable to common shareholders          
Continuing operations  $(1,407,571)  $(653,459)
Discontinued operations   95,528    (14)
           
           
   $(1,312,043)  $(653,473)
           
Weighted average shares outstanding   102,556,908    61,864,435 
           
Loss per common shares, basis and diluted          
Continuing operations  $(0.01)  $(0.01)
Discontinued operations   0.00    (0.00)
           
           
   $(0.01)  $(0.01)

 

 

 

 

 

 

 

 

-45-
 

 

ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Due to the net losses during the years ended August 31, 2014 and 2013, 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, stock options, preferred stock and warrants not included the diluted loss per share calculation. Below lists all dilutive securities as of August 31, 2014 and 2013:

 

            As of
            August 31,   August 31,
            2014 2013
           Underlying  Underlying 
Description  Common Shares     Common Shares 
Convertible preferred stock………………………………………………………….                   78,564              58,628,531
Convertible notes payable…………………………………………………………………………..            98,383,460                1,383,460
Options………………………………………………………………………..              6,173,750                   217,085
Warrants………………………………………………………………………..            30,583,333                7,000,000
                 
Total potentially dilutive securities………………………………………………………..          135,219,107              67,229,076

 

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 Company’s Chief Executive Officer and Chief Financial Officer in deciding how to allocate resources and in assessing performance. The Company currently has three business segments; medical device manufacturing, personal care services and medical products and technologies.

 

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.

 

New Accounting Standard

 

In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2012-02 “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” (“ASU 2012-02”). ASU 2012-02 permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. Under the amendments in ASU 2012-02, an entity is not required to calculate the fair value of an indefinite-lived intangible asset unless it determines that it is more likely than not that the fair value of the asset is less than its carrying amount. An entity also will have the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. ASU 2012-02 is effective for interim and annual indefinite-lived intangible asset impairment tests performed for fiscal years beginning on or after September 15, 2012, with early adoption permitted. The Company’s adoption of ASU 2012-02 is not expected to have an impact on its consolidated financial statements.

 

 

 

 

 

 

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 3 - GOING CONCERN

 

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred losses from operations over the past several years and anticipates additional losses in fiscal 2015 and prior to achieving breakeven.

 

During the year ended August 31, 2013 we acquired Dotolo Research Corporation and Angels of Mercy, Inc. In December 2013, through Amian Angels, we also acquired the assets of Amian Health Services. While these acquisitions greatly increase the value of our Company, the combined operations of OCLG are not cash flow positive at this time. Amian Angels, as a stand-alone business unit, is currently cash flow positive but alone is unable to support all the corporate overhead or needs of our other subsidiary, Dotolo. We anticipate that we will require approximately $1,500,000 to operate through December 31, 2014. Approximately $500,000 will be required to fund corporate overhead including debt servicing with the balance to invest into raw material inventory, manufacturing and product revisions at Dotolo Research. Additional funding will allow us to meet our current sales demands and expenses of Dotolo, Amian Angels and Oncologix, while keeping our public filings current.

 

Our Company is not profitable and we have to rely on debt and equity financings to fund operations. There is no assurance that the business activities of Dotolo will achieve breakeven status by the end of 2014. Significant delays in achieving break-even status could affect the ability to obtain future debt and equity funding. These factors raise substantial doubt about the Company’s ability to continue as a going concern. After auditing our financial statements, our independent auditor issued a going concern opinion and our ability to continue is dependent on our ability to raise additional capital. Currently there is a substantial doubt in the Company’s ability to continue as a going concern.

 

 

NOTE 4 – ACQUISITIONS

 

Dotolo Research Corporation

 

On March 22, 2013, the Company acquired all of the outstanding shares of common stock of Dotolo Research Corporation (“Dotolo”), a medical device company. With this recent acquisition, the company continued on its mission to facilitate the controlling interests and acquisition of medical device, health care service, medical distribution and emerging health care technology companies. This business model creates a complete business solution of unlimited marketing and revenues opportunities. Our model combines certain natural relationships of medical device products with related but distinct products, services, markets and opportunities. The combined sales, marketing, and operational synergies will enable the Company and our business units to provide a wide variety of complete technology solutions at significant cost savings.

 

While operations have contnued with Dotolo, the revenues have not been significant since the acquisition. This is primarily due to a lack of monies available to invest into raw material inventory for Dotolo.

 

The acquisition was accounted for using the acquisition method of accounting and the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. Identifiable intangible assets include patents, trade name and customer list. The purchase price consisted of the issuance 58,564 shares of a newly created Series D Convertible Preferred Stock (60,000 shares of Series D Preferred Stock designated). On March 22, 2013, the issued shares had a fair market value of $585,640 based on the fair market value of the underlying common stock shares. The issued Series D Convertible Preferred Stock have a liquidation value of approximately $4,700,000 and are convertible any time after March 1, 2014 into 1,000 shares of common stock each. Please see Note 8 for a further description of the Series D Convertible Preferred Stock.

 

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The purchase price was allocated to assets acquired and liabilities assumed as follows:

 

      
Cash and cash equivalents  $1,653 
Accounts receivable (net)   769 
Inventory   100,881 
Prepaid expenses and other current assets   31,750 
Property and equipment   22,957 
Deposits and other assets   10,050 
Purchased goodwill   1,217,704 
Patents, registrations   33,172 
      
Total assets acquired  $1,418,936 
      
Accounts payable and other accrued expenses  $507,589 
Customer deposits  $78,807 
Notes payable   177,763 
Notes payable - related parties   58,600 
Accrued interest payable   9,743 
Accrued interest payable - related parties   794 
      
Total liabilities assumed  $833,296 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

Angels of Mercy, Inc.

 

On August 1, 2013, the Company acquired all the outstanding shares of Common Stock of Angels of Mercy, Inc. Pursuant to the Agreement, the Owners sold all of the Common Stock of Amian Angels for $650,000 represented by a down payment of $100,000 at closing and a four year Secured Promissory Note for $550,000. The Company also issued the Owners 1,000,000 four year warrants with an exercise price of $0.015 that possesses a cashless exercise option and agreed to pay $65,000 in broker fees related to this transaction.

 

The acquisition was accounted for using the acquisition method of accounting and the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. Identifiable intangible assets include patents and purchased goodwill.

 

The purchase price was allocated to assets acquired and liabilities assumed as follows:

      
Cash and cash equivalents  $27,121 
Accounts receivable (net)   111,581 
Prepaid expenses and other current assets   7,851 
Property and equipment   57,000 
Purchased goodwill   478,721 
      
Total assets acquired  $682,274 
      
Accounts payable and other accrued expenses  $9,688 
      
Total liabilities assumed  $9,688 

 

Amian Health Services

 

On December 10, 2013, our subsidiary Angels of Mercy acquired the assets of Amian Health Services. Pursuant to the Agreement, the Owners sold all the assets for $100,000 represented by a down payment of $75,000 at closing and a one year Secured Promissory Note for $25,000.

 

The acquisition was accounted for using the acquisition method of accounting and the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. Identifiable intangible assets include patents and purchased goodwill.

 

The purchase price was allocated to assets acquired and liabilities assumed as follows:

      
Cash and cash equivalents  $8,646 
Property and equipment   6,000 
Purchased goodwill   85,354 
      
Total assets acquired  $100,000 

 

 

 

 


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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 5 – DISCONTINUED OPERATIONS

 

During October 2013 the Company’s management and Board of Directors determined to dispose of Oncologix Corporation its Brachytherapy medical device subsidiary. On November 1, 2013, the company entered into a settlement agreement with Firetag, Stoss & Dowdell, PC., our former attorneys. Per the terms of the settlement agreement, we exchanged our 90% ownership and executed a $50,000 promissory note payable to Firetag in exchange for the forgiveness by Firetag of $145,522 in prior legal billings. The promissory note bears interest at 4% and requires 12 monthly payments of $4,257.49 beginning on December 1, 2013. Detailed below are the income and expenses related to these discontinued operations:

 

   For the year ended
   August 31,  August 31,
   2014  2013
Operating expenses:          
General and administrative  $36   $14 
Depreciation and amortization   —      —   
           
Total operating expenses   36    14 
           
Loss from operations   (36)   (14)
           
Other income (expense):          
           
Total other income (expense)   —      —   
           
Loss from discontinued operations   (36)   (14)
Gain on disposal of discontinued operations   95,564    —   
           
Loss from discontinued operations   95,528    (14)
           
Less loss attributable to noncontrolling interest   —      —   
           
Net loss from discontinued operations  $95,528   $(14)

 

 

NOTE 6 – INVENTORY

 

We have inventory, on hand in the amounts of $31,271 and $31,271 as of August 31, 2014 and 2013, respectively, as it relates to our medical device manufacturing segment. We do not maintain any inventory for our personal service care segment or our medical products division. Due to a lack of operating capital for procurement of raw material inventory, we have currently suspended manufacturing of our Toxygen hardware system and disposable products and have begun a product redesign to take our Toxygen product into new markets. Currently, inventory on hand is made up of miscellaneous Toxygen hardware parts.

 

 

 

 

 

 

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 7 - PROPERTY AND EQUIPMENT

 

Property and equipment is composed of the following at August 31, 2014 and 2013:

 

   August 31,  August 31,
   2014  2013
Furniture  $12,688   $10,388 
Office Equipment   12,962    10,800 
Computers   22,321    19,905 
Software   3,497    3,497 
Leasehold improvements   —      29,000 
Equipment   16,763    16,763 
           
Total property and equipment at cost   68,231    90,353 
           
Less: accumulated depreciation and amortization   (28,264)   (11,820)
           
   $39,967   $78,533 

 

NOTE 8 - LEASES

 

The Company leases office space in Alexandria and Lafayette Louisiana and in Phoenix, Az. and the Alexandria office lease is on a month to month basis and the Lafayette office location is on a 5-year lease. On March 28, 2014, Dotolo Research moved from its current manufacturing location in Phoenix AZ into E&R Engineer manufacturing facilities located in Tempe, Az. Currently we hold our equipment in storage until a new facility is located. Rent expense for the year ended August 31, 2014 and 2013 were $80,329 and $15,500, respectively. Following are the minimum lease payments:

 

 2015   $51,312 
 2016    51,312 
 2017    51,312 
 2018    51,312 
 2019    8,552 
        
        
 Totals   $213,800 

 

NOTE 9 – GOODWILL, PATENTS AND OTHER INTANGIBLE ASSETS

 

We currently carry our patents and registrations net of amortization. As of August 31, 2014 and 2013, the Company has a capitalized cost of patents and registrations in the amount of $122,479 and accumulated amortization of 97,983. Our patents and registrations are amortized over a 20 year period. Amortization for each of the next 4 fiscal years, assuming no impairment, will be $6,124 per year.

 

 

 

 

 

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 10 — NOTES PAYABLE

 

CONVERTIBLE NOTES PAYABLE:

 

Convertible notes payable consist of the following as of August 31, 2014 and 2013:

 

   August 31,  August 31,
   2014  2013
           
8.0% convertible note due August 31, 2014  $100,000   $125,000 
6.0% convertible note due September 2014   189,025    235,025 
12% convertible note due March 19, 2015 (net of discount)   11,980      
12% convertible note due April 8, 2015 (net of discount)   19,863      
12% convertible note due October 25, 2015 (net of discount)   21,260      
10% convertible note due February 21, 2015 (net of discount)   90,840      
12% convertible note due July 16, 2015 (net of discount)   3,340      
           
           
           
Total unsecured convertible notes payable   436,308    360,025 
Less:  Long-Term portion   —      —   
           
Current portion  $436,308   $360,025 

 

 

The following is a summary of future minimum payments on convertible notes payable as of August

31, 2014:

  Convertible
Fiscal Year Ending August 31, Notes Payable
2015                

$ 436,308

 

 

During May and June 2007, we issued nine Convertible Promissory Notes in an aggregate principal amount of $700,000. Eight of these notes we-+re converted into common stock in fiscal 2009. The remaining Convertible Promissory Note, in the principal amount of $125,000, was extended on January 28, 2010 initially to March 31, 2012, where the conversion rate was reduced to $.60, and then extended to September 30, 2013. In October 2013, the investor sold $25,000 of principal in the note to another accredited investor and currently holds a note representing the remaining $100,000 in principal. At that time, the note was extended to August 31, 2014 and was further extended to February 28, 2015. We are currently working with the investor to extend the note. As of August 31, 2014, the Company has accrued interest in the amount of $60,723.

 

On April 1, 2009, we issued to Ms. Lindstrom, our former Chief Executive Officer, a convertible promissory note in lieu of payment of $235,025 in accrued salary owed to Ms. Lindstrom. This note accrues interest at a rate of 6% per annum and was originally due on March 31, 2012. On March 16, 2012, Ms. Lindstrom agreed to extend the due date of the note to September 30, 2013. There was no beneficial conversion feature recognized upon the issuance of this note. This note is currently past due. As of August 31, 2014, the Company has accrued interest in the amount of $75,927. An outside party has entered into an assignment and settlement agreement with Ms. Lindstrom to purchase the note. In connection with this Assignment agreement, the purchaser has agreed to extend the note to December 1, 2016. During fiscal 2014, the Assignee has converted $46,000 of principal into 8,788,171 shares of stock.

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

On October 2, 2013 we issued a convertible promissory note in the principal amount of $25,000. This promissory note bears interest at a rate of 8% per annum and is due on October 2, 2013. The note is convertible at a 45% discount of the average of the three lowest closing bid prices in the twenty days preceding the date of conversion. At no time may the holder of the note convert the note into shares exceeding 4.99% of the Company’s then outstanding common stock shares. We recorded a beneficial conversion feature of $25,000. On April 6, 2014 the holder elected to convert $17,074 in principal plus $690 in accrued interest into 5,383,007 shares of common stock at a conversion price of $.0033. In August 1, 2014 the remaining principal of $7,926 plus accrued interest of $530 was converted into 3,416,764 shares of common stock at a conversion rate of $.002475.

 

On October 2, 2013, the Company entered into a securities transfer agreement with an accredited investor as well as a current convertible note holder. The agreement called for the accredited investor to purchase $25,000 of the current convertible note holder note. The Company issued to the accredited investor a convertible promissory note bearing interest at 8% and convertible at a 45% discount into shares of the Company’s common stock using a three-day average of the lowest closing bid prices for the twenty trading days immediately preceding the conversion date. On October 3, 2013, the investor converted $15,620 into 4,000,000 shares of the Company’s common stock at a rate of $.003905 per share. On December 3, 2013, the investor converted the remaining principal of $9,380 into 2,008,559 shares of the Company’s common stock at a rate of $0.00467 per share.

 

On March 19, 2014 we issued a convertible promissory note in the principal amount of $26,500 to an unrelated accredited investor. This promissory note bears interest at a rate of 12% per annum and is due on March 19, 2015. The note is convertible at a 38% discount of the lowest closing bid prices in the thirty days preceding the date of conversion. At no time may the holder of the note convert the note into shares exceeding 4.99% of the Company’s then outstanding common stock shares. We recorded a beneficial conversion feature of $26,500. As of August 31, 2014, the Company has accrued interest in the amount of $958.

 

On April 8, 2014 we issued a convertible promissory note in the principal amount of $50,000 to an unrelated accredited investor. This promissory note bears interest at a rate of 12% per annum and is due on April 8, 2015. The note is convertible at a 35% discount of the average 4 lowest closing bid prices in the twenty days preceding the date of conversion. At no time may the holder of the note convert the note into shares exceeding 4.99% of the Company’s then outstanding common stock shares. We recorded a beneficial conversion feature of $50,000. As of August 31, 2014, the Company has accrued interest in the amount of $2,384. We paid off this note on October 2, 2014.

 

On April 25, 2014 we issued a convertible promissory note in the principal amount of $25,000 to an unrelated accredited investor. This promissory note bears interest at a rate of 12% per annum and is due on October 25, 2015. The note is convertible at a 35% discount of the average 4 lowest closing bid prices in the thirty days preceding the date of conversion. At no time may the holder of the note convert the note into shares exceeding 4.99% of the Company’s then outstanding common stock shares. We recorded a beneficial conversion feature of $25,000. As of August 31, 2014, the Company has accrued interest in the amount of $1,052.

 

On May 21, 2014 we issued a convertible promissory note in the principal amount of $115,000 to an unrelated accredited investor. This promissory note bears interest at a rate of 10% per annum. This principal includes a 10% OID in the amount of $10,000, which is being amortized over the term of the note. The note is due in 4 equal installments beginning on the 180th day after the execution of the note. The company may make the payments in common stock. The note is convertible at a $.009 per share. As additional consideration, the Company issued 9,583,333 5 year warrants with an exercise price of $.009. At no time may the holder of the note convert the note into shares exceeding 4.99% of the Company’s then outstanding common stock shares. We recorded a beneficial conversion feature of $38,322 related to the issuance of the warrants. As of August 31, 2014, the Company has accrued interest in the amount of $3,239.

  

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

On July 16, 2014 we issued a convertible promissory note in the principal amount of $26,500 to an unrelated accredited investor. This promissory note bears interest at a rate of 12% per annum and is due on July 26, 2015. The note is convertible at a 38% discount of the lowest closing bid prices in the thirty days preceding the date of conversion. At no time may the holder of the note convert the note into shares exceeding 4.99% of the Company’s then outstanding common stock shares. We recorded a beneficial conversion feature of $26,500. As of August 31, 2014, the Company has accrued interest in the amount of $267.

 

CONVERTIBLE RELATED PARTY NOTES PAYABLE:

 

As of August 31, 2014, there are currently no related party convertible notes payable outstanding. The note related to our former CEO is now classified as non-related convertible debt for all comparable periods.

 

 

RELATED PARTY NOTES PAYABLE:

 

   August 31,  August 31,
   2014  2013
6.0% line of credit (2)  $51,600   $56,200 
         —   
           
Outstanding unsecured related party notes payable  $51,600   $56,200 
           
(1)  Note payable to current CEO.          

 

During the last two years, Wayne Erwin, our President and CEO, has advanced a total of $51,600 directly to Dotolo in an open advance account. Interest is being accrued at a rate of 6% per annum. As of August 31, 2014 we have accrued interest in the amount of $6,342. There is no specific due date on this note.

 

During April 2013, Wayne Erwin, our President and CEO, had advanced a total of $10,675 to Oncologix Tech, Inc. This note bore interest at 6%. This note was paid in full in September 2013 together with accrued interest of $223.

 

The following is a summary of future minimum payments on related party notes payable as of August 31, 2014:

  Related Conv.
Fiscal Year Ending August 31, Notes Payable
2015                

$ 51,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-54-
 

 

ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

OTHER NOTES PAYABLE:

 

    August 31,  August 31,
    2014  2013
12% note payable due May 2014  $—     $ 15,000
6% note payable due August 2015   —       111,500
Time Lease Payment due January 2014   —       3,311
Note payable   15,600     60,600
Note payable - fee reimbursement   —       59,583
18% note payable due January 2015   30,000     30,000
18% note payable due January 2015   20,000     20,000
18% note payable due January 2015   63,640     100,000
6% note payable due October 2017   478,207     550,000
14.5% note payable due January 2015   328,028     -
Bank line of credit loan   43,885     -
Merchant Loan due December 2014   82,737     -
Merchant Loan due January 2015   78,400     -
Merchant Loan due January 2015   150,545     -
18% note payable due November 2014 (net of discount)   8,617     -
18% note payable due November 2014 (net of discount)   8,648     -
4% note payable due November 2014   8,473     -
18% note payable due December 2014 (net of discount)   71,348     -
6% note payable due December 2014   8,500     -
10% note payable due December 2014 (net of discount)   9,644     -
6% note payable due February 2015 (net of discount)   2,742     -
6% note payable due August 2015 (net of discount)   15,297     
            
            
 Subtotal   1,424,311     949,994
            
Less:  Long-Term portion   (395,675)    (811,500)
            
Current portion  $1,028,636   $ 138,494

 

On May 23, 2013, the Company issued a one year note in the amount of $20,000. The note bore interest at a rate of 12% per annum. The Company is required to repay the note at a rate of $1,867 per month, which includes interest, on the 15th day of each month. The note is secured by certain collateral of our CEO. This note was paid in full in May 2014.

 

On August 1, 2011 our subsidiary Dotolo, entered into a note payable agreement to provide funding to its subsidiary in the principal amount of $111,500. In December 2013, this note was assumed by Oncologix Tech, Inc. The note bore interest at 6% and matures on August 31, 2015. During January through August 2014, the Board of Directors authorized the conversions of the entire principal and accrued interest amount. During that time frame, the $111,500 in principal was converted into 18,716,229 shares of the Company’s common stock and is considered paid in full.

 

On September 16, 2013, the Company obtained a merchant loan for additional working capital in the amount of $80,000. The merchant loan bores interest at a rate of 15% and calls for 130 daily payments of $861 for a total repayment amount of $112,000. Out of the net proceeds, the company also paid $20,000 in broker fees and loan fees of $750. This loan was paid in full on January 3, 2014.

 

On October 1, 2013, the Company borrowed 10,000 in principal from an unrelated investor. The note was due January 2, 2014 and bore interest at 22%. Monthly interest payments of $183.33 are due on the first of each month beginning on November 1, 2013. This note was paid in full on January 3, 2014.

 

-55-
 

 

ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

On November 27, 2013, the Company obtained a merchant loan for additional working capital in the amount of $51,000. This loan requires 180 daily payments in the amount of $306 for a total repayment amount of $55,021. We netted gross proceeds of $46,032 after paying loan fees. This note was paid off March 11, 2014.

 

On December 18, 2013, the Company obtained a merchant loan for additional working capital in the amount of $72,000. This loan requires 82 daily payments in the amount of $888 for a total repayment amount of $72,500. We netted gross proceeds of $49,301 after fees of $699. This note was paid off March 11, 2014.

 

During April 2012, our subsidiary Dotolo, entered into a financing agreement to provide up to $150,000 in funding for the subsidiary. The financing agreement was due in January 2013. We entered into a settlement agreement whereby we paid $45,000 from amounts held in reserve by our senior lender and are required to make 10 monthly payments of $1,500.

 

On August 1, 2013, in connection with our acquisition of Angels of Mercy, Inc. we entered into a promissory note to pay $65,000 of broker’s fees incurred in the acquisition. Monthly payments of $5,417 are due and payable beginning on August 15, 2013. This note bears no interest. This was paid in full in July 2014.

 

On February 27, 2013 our subsidiary Dotolo, entered into a note payable agreement to provide funding to its subsidiary in the principal amount of $30,000. The note bears interest at 18% payable monthly on the 15th and is due in full in January 2015. For the year ended August 31, 2014, we made interest payments in the amount of $5,400. As of August 31, 2014, we have accrued interest of $1,365.

 

On March 17, 2013 our subsidiary Dotolo, entered into a note payable agreement to provide funding to its subsidiary in the principal amount of $20,000. The note bears interest at 18% payable monthly on the 15th and is due in full in January 2015. For the year ended August 31, 2014, we made interest payments in the amount of $3,600. As of August 31, 2014, we have accrued interest of $990.

 

On July 26, 2013 the Company issued an 18 month promissory note in the principal amount of $100,000. These funds were used for the cash down payment for the Angels acquisition. The note bears interest at 18% and requires monthly interest payments of $1,200 beginning on September 26, 2013. In December 2013, we modified the loan agreement to make monthly payments of $6,200. As of August 31, 2014 the outstanding balance was $63,640.

 

On August 1, 2013, in connection with our acquisition of Angels of Mercy, Inc. we entered into a promissory note to pay $550,000 for the purchase of Angels of Mercy, Inc. Monthly payments of $9,115 are due and payable beginning on November 1, 2013 with a final balloon payment of $205,705 due on October 1, 2017. This note bears interest at a rate of 6%. As of August 31, 2014, the outstanding balance of the note is $478,207.

 

On January 3, 2014, the Company closed on a 4 million dollar line of credit facility, with an initial draw of $500,000. The Company must meet specific monthly reporting and collateral requirements to further draw on the revolving credit facility. The $500,000 initial draw is secured by a 14.5% promissory note, which is convertible ONLY upon default by the Company. In July 2014, we borrowed an additional $75,000 from the principal we repaid. This note is due in six months with an automatic option to renew after six months. As of August 31, 2014, the outstanding balance is $328,028.

 

During fiscal 2014 we borrowed $45,000 from our line of open line of credit with our bank. As of August 31, 2014 the outstanding balance of the line of credit loan was $43,885.

 

On March 11, 2014, the Company obtained a merchant loan for additional working capital in the amount of $150,000. This loan requires 209 daily payments in the amount of $940 for a total repayment amount of $196,500. We netted gross proceeds of $146,750 after paying loan fees.

 

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

On April 18, 2014, the Company obtained a merchant loan for additional working capital in the amount of $120,000. This loan requires 189 daily payments in the amount of $800 for a total repayment amount of $151,200. We netted gross proceeds of $119,301 after paying loan fees.

 

On July 10, 2014, the Company obtained a merchant loan for additional working capital in the amount of $150,000. This loan requires 132 daily payments in the amount of $1,568 for a total repayment amount of $207,000. We netted gross proceeds of $149,120 after paying loan fees.

 

On November 5, 2013 and November 8, 2013, the Company entered into two, one-year promissory notes with accredited investors to borrow a total principal amount of $20,000. Each promissory note is $10,000 in principal balance, bears interest at 18% and requires monthly interest payments of $150 each. The company also issued 3,000,000 in cashless warrants as finder’s fees for these funds. The Company recorded a discount of $14,805 for the issuance of the warrants.

 

On November 1, 2013, the Company entered into a Settlement Agreement with its former legal counsel. The current balance owed to prior counsel is $145,523. Pursuant to the settlement agreement, the Company agreed to pay $50,000 in the form of a one year promissory note and transfer its 90% ownership interest and all marketing rights of Oncologix Corporation, one of its subsidiaries as full settlement of the current balance owed. The promissory note bears interest of 4% and requires monthly payment of $4,257 beginning on December 1, 2013. As of August 31, 2014 the outstanding balance was $8,473.

 

On December 3, 2013, The Company entered into a twelve month promissory note with an accredited investor to borrow a total principal amount of $75,000. The note bears interest of 18% per annum and calls for monthly payments of principal and interest of $1,375 beginning on January 15, 2014 with a balloon payment due December 15, 2014. The Company also issued as additional finders’ fees to the investor, 3,500,000 shares of common stock and 1,000,000 cashless warrants with an exercise price of $.025. As of August 31, 2014, the balance was $72,892. The Company recorded a discount of $5,992 for the issuance of the warrants.

 

In connection with the acquisition of Amian Health Services, the Company entered into a twelve month promissory note in the total principal amount of $25,000. The note bears interest at $6% and requires monthly payments of $2,152. As of August 31, 2014, the balance is $8,500.

 

On December 20, 2013, the Company issued a 1-year promissory note to a non-related accredited investor. This note bears interest at 10% per annum and matures in December 2014. As additional consideration for the operating capital loan, the company issued 3,000,000 cashless two-year warrants with an exercise price of $0.02. The Company recorded a discount of $7,746 for the issuance of the warrants. As of August 31, 2014 the Company has accrued interest of $837.

 

On February 7, 2014, the Company issued a 1-year promissory note in the principal amount of $15,000 to a non-related accredited investor. This note bears interest at 6% per annum and matures in February 2015. As additional consideration for the operating capital loan, the company issued 1,500,000 two-year warrants with an exercise price of $0.15 and 1,000,000 shares of common stock. The Company recorded an expense of $9,000 for the issuance of the common stock. The Company recorded a discount of $5,151 for the issuance of the warrants. On August 1, 2014 this investor used $10,000 to purchase 1,200,000 shares of common stock. As of August 31, 2014 the Company has accrued interest of $453.

 

 

 

 

 

 

 

 

-57-
 

 

ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

On August 15, 2014 the Company issued a 1-year promissory note to a non-related accredited investor. This note bears interest at 10% per annum and matures in August 2015. As additional consideration for the operating capital loan, the company issued 4,000,000 cashless two-year warrants with an exercise price of $0.065. The Company recorded a discount of $10,177 for the issuance of the warrants. As of August 31, 2014 the Company has accrued interest of $118.

 

The following is a summary of future minimum payments on r notes payable as of August 31, 2014:

  Related Conv.
Fiscal Year Ending August 31, Notes Payable
2015    1,038,997
2016         87,623
2017       314,743

 

NOTE 11 — STOCKHOLDERS EQUITY

PREFERRED STOCK:

 

Series A Convertible Preferred Stock.

 

The Company is authorized to issue up to 10,000,000 shares of preferred stock, in one or more series, and to determine the price, rights, preferences and privileges of the shares of each such series without any further vote or action by the stockholders. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any shares of preferred stock that may be issued in the future.  

 

In January 2003, our Board of Directors authorized up to 4,500,000 shares of Series A Convertible Preferred Stock.  Each share of Series A Convertible Preferred stock has a par value of $0.001 and is convertible into one-half share of common stock in upon a cash payment by the holder to the Company of $0.40 per common share.  The Series A Convertible Preferred Stock is entitled to receive, in preference to the common stock, of noncumulative dividends, if declared by the Board of Directors, and a claim on the Company's assets upon any liquidation of the Company senior to the common stock.  These preferred shares are not entitled to voting rights. There are presently outstanding 129,062 shares of Series A Preferred Stock.

 

On March 30, 2003, the Company completed the private placement of Units pursuant to the terms of a Unit Purchase Agreement (the “Units”) with accredited investors. Each Unit consists of the following underlying securities: (i) three shares of the Company’s common stock; (ii) one share of Series A Convertible Preferred Stock, par value $.001 per share; and (iii) one three-year warrant to purchase one share of common stock at a per share price of $0.30. The warrants expired on March 31, 2006. Each share of Series A Convertible Preferred Stock is convertible into one half share of the Company’s common stock in exchange for $0.40 per common share ($.20 for each Series A Convertible Preferred share converted). The securities underlying the Units are not to be separately tradable or transferable apart from the Units until such time as determined by the Company’s Board of Directors. A total of 4,032,743 Units were issued. As of August 31, 2014 and August 31, 2013, there were 129,062 and 129,062 Units outstanding that had not been separated, respectively. These units are presented as their underlying securities on our balance sheet and consist of 64,531 shares of Series A Preferred Stock and 96,797 shares of common stock which is included in the issued and outstanding shares.

 

 

 

 

 

 

 

-58-
 

 

ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Below is a table detailing the outstanding Series A Convertible Preferred Stock shares outstanding during the last two fiscal years:

 

      Preferred    Number of          Weighted Avg. 
      Shares    Common Shares    Proceeds if    Per Common Sh. 
      Outstanding    Convertible    Converted    Exercise Price 
 Outstanding, August 31, 2012    129,062    64,531   $25,812   $0.40 
                       
 Expired/Retired    —      —      —     $—   
 Converted    —      —      —     $0.40 
 Issued    —      —      —     $—   
 Outstanding, August 31, 2013    129,062    64,531   $25,812   $0.40 
                       
 Expired/Retired    —      —      —     $0.40 
 Converted    —      —      —     $—   
 Issued    —      —      —     $—   
 Outstanding, August 31, 2014    129,062    64,531   $25,812   $0.40 

 

Series D Convertible Preferred Stock

 

In March 2013, our Board of Directors authorized up to 60,000 shares of Series D Convertible Preferred Stock. Each share of Series D Convertible stock has a par value of $0.001 and is convertible into 1,000 shares of common stock beginning after March 1, 2014. Each share of Series D Convertible Preferred Stock has a stated liquidation value of $80.25. Each shares of Series D Convertible Preferred Stock shall have voting rights as stated below:

 

March 1, 2013 to February 28, 2014, 400 votes per share;

March 1, 2014 to February 28, 2015, 800 votes per share;

March 1, 2015 to February 28, 2016, 1,200 votes per share;

March 1, 2016 to February 28, 2017, 1,600 votes per share;

March 1, 2017 and after, 2,000 votes per share;

 

On March 22, 2013, the Company issued 58,564 shares of Series D Convertible Preferred Stock to acquire 100% of the outstanding common stock of Dotolo. On March 22, 2013 the issued shares had a fair market value of $585,640 based on the fair market value of the underlying common stock shares.

 

On January 3, 2014, as payment for $150,000 of banking fees associated with our $4 million line of credit, we issued 20,000 shares of Series D Convertible Preferred Stock.

 

 

 

 

 

 

 

 

 

 

 

  

-59-
 

 

ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Below is a table detailing the outstanding Series D Convertible Preferred Stock shares outstanding during the last two fiscal years:

 

   Preferred  Number of     Weighted Avg.
   Shares  Common Shares  Proceeds if  Per Common Sh.
   Outstanding  Convertible  Converted  Exercise Price
Outstanding, August 31, 2012            $ —     $ —   
                           
Expired/Retired         —       —     $  
Converted         —        $  
Issued    58,564    58,564,000    —     $80.25 
Outstanding, August 31, 2013    58,564    58,564,000   $—     $—   
                      
Expired/Retired    —      —      —     $—   
Converted    —      —      —     $—   
Issued    20,000    20,000,000    —     $80.25 
 Outstanding, August 31, 2014    78,564    78,564,000   $—     $80.25 

 

SUBSCRIBED COMMON STOCK:

 

Below is a table detailing the Common Stock Subscribed during the last two fiscal years:

 

For the period Ended August 31, 2014
   Shares  Amount
Shares issuable upon conversion of convertible notes payable   1,058,201   $5,000 
           
Total subscribed stock   1,058,201   $5,000 
           
For the year Ended August 31, 2013
    Shares    Amount 
Shares issuable upon conversion of convertible notes payable   —     $—   
           
Total subscribed stock   —     $—   

 

COMMON STOCK:

 

On March 7, 2014, the Company increased its authorized shares of common stock to 750,000,000. The increase was approved by a majority of the Company’s shareholders on January 27, 2014.

 

Below are recent sales of unregistered securities:

 

 

 

 

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Date Securities   Underwriters/  
Sold Sold Consideration Purchasers * Notes
         
10/15/2012       1,000,000  $             20,000 Accredited Investor The Company sold 1,000,000 shares of common stock to a non-related accredited investor at $0.02 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
1/6/2013       2,000,000  $             20,000 Accredited Investor The Company sold 2,000,000 shares of common stock to a non-related accredited investor at $0.01 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
2/8/2013       1,024,164  $                     - Anthony Silverman, former CEO Anthony Silverman, our former President and CEO, converted a promissory note in the amount of $10,242 in principal and interest into 1,024,164 shares of common stock at $0.01 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
6/17/2013       2,000,000  $             10,000 Accredited Investor The Company sold 2,000,000 shares of common stock to a non-related accredited investor at $0.005 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
7/17/2013       4,000,000  $             20,000 Accredited Investor The Company sold 4,000,000 shares of common stock to a non-related accredited investor at $0.005 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
8/8/2013       6,000,000  $             36,000 Accredited Investor The Company sold 6,000,000 shares of common stock to a non-related accredited investor at $0.006 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
9/12/2013       1,000,000  $                     - Vendor The Company issued 1,000,000 S-8 shares to a vendor for consulting work.  The Company recorded an expense of $11,500 upon the issuance of those shares.
9/12/2013       1,500,000  $             10,000 Accredited Investor The Company sold 1,500,000 shares of common stock to an affiliated accredited investor at $0.00667 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
10/3/2013       4,000,000  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $15,620 in principal and interest into 4,000,000 shares of common stock at $0.00391 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
12/3/2013       1,891,123  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $9,380 in principal and interest into 1,891,123 shares of common stock at $0.00496 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/3/2014       2,000,000  $                     - Vendor The company issued 2,000,000 shares of common stock as consideration for services.  The company recorded an expense of $22,000 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/13/2014       3,076,923  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $20,000 in principal and interest into 3,076,923 shares of common stock at $0.0065 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/14/2014       1,000,000  $                     - Vendor The company issued 1,000,000 shares of common stock as consideration for services.  The company recorded an expense of $19,000 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/15/2014         117,436  $                     - Accredited Investor Additional reset shares were issued to a non-affiliated accredited investor in connection with the prior conversion of $9,380 in principal and interest into 117,436 shares of common stock.  These shares were exempt from registration under Section 4(2) of the Securities Act.

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1/21/2014       3,500,000  $                     - Accredited Investor The company issued 3,500,000 shares of common stock as consideration for  fees.  The company recorded an expense of $45,500 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/21/2014       1,500,000  $                     - Accredited Investor The company issued 1,500,000 shares of common stock as consideration for  fees.  The company recorded an expense of $30,000 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
1/31/2014       3,472,222  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $25,000 in principal and interest into 3,472,222 shares of common stock at $0.0072 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
2/7/2014       1,000,000  $                     - Accredited Investor The company issued 1,000,000 shares of common stock as consideration for  fees.  The company recorded an expense of $9,000 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
2/24/2014       4,615,385  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $30,000 in principal and interest into 4,615,385 shares of common stock at $0.0065 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
3/12/2014       4,615,385  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $30,000 in principal and interest into 4,615,385 shares of common stock at $0.0065 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
4/7/2014       2,936,314  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $19,086 in principal and interest into 2,936,314 shares of common stock at $0.0065 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
4/7/2014       5,383,007  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $17,764 in principal and interest into 5,383,007 shares of common stock at $0.0033 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
6/2/2014       5,000,000  $                     - Accredited Investor The company issued 5,000,000 shares of common stock as consideration for services.  The company recorded an expense of $30,000 in connection with this issuance.  These shares were exempt from registration under Section 4(2) of the Securities Act.
6/25/2014       5,138,746  $                     - Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $25,000 in principal and interest into 5,138,746 shares of common stock at $0.004865 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
7/14/2014       2,500,000   Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $11,000 in principal and interest into 2,500,000 shares of common stock at $0.0044 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
7/24/2014       1,149,425   Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $5,000 in principal and interest into 1,149,425 shares of common stock at $0.00435 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
8/1/2014       3,416,764   Accredited Investor A non-affiliated accredited investor converted a promissory note in the amount of $8,456 in principal and interest into 3,416,764 shares of common stock at $0.002475 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act.
8/26/2014       1,200,000  $                     - Accredited Investor The Company sold 1,200,000 shares of common stock to an affiliated accredited investor at $0.00833 per share.  These shares were exempt from registration under Section 4(2) of the Securities Act
      76,036,894  $           116,000    
         
*  There were no underwriters associated with any of our Sales of Unregistered Securities.

 

-62-
 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NON-CONTROLLING INTEREST

 

On February 27, 2009, in connection with the Technology Agreement we entered into with Institut für Umwelttechnologien GmbH, a German Company (“IUT”) whereunder the parties have agreed that 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. As of February 27, 2009, the value of the non-controlling interest was $212. 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 for the year ended August 31, 2010. As of August 31, 2014, as a result of the disposition of Oncologix Corporation, we do not have to recognize a non-controlling interest.

 

WARRANTS:

 

The following table summarizes warrant activity in fiscal 2014 and 2013:

 

        Weighted Avg.
    Number Exercise Price
Outstanding, August 31, 2012                          -                               -    
Expired/Retired                          -                               -    
Exercised                          -                               -    
Issued              7,000,000                       0.012
Outstanding, August 31, 2013              7,000,000                            -    
         
Expired/Retired                          -                               -    
Exercised                          -                               -    
Issued            23,583,333                       0.011
Outstanding, August 31, 2014            30,583,333                       0.011

 

The fair value of warrants granted is estimated using the Black-Scholes option pricing model. This model utilizes the following factors to calculate the fair value of options granted: (i) annual dividend yield, (ii) weighted-average expected life, (iii) risk-free interest rate and (iv) expected volatility. The warrants were expensed and accounted for under ASC 718.

 

The fair value for these warrants was estimated as of the date of grant using a Black-Scholes option-pricing model with the following assumptions:

 

        For the Year Ended August 31,
        2014   2013
Volatility  104% - 444%     97.2% to 97.9% 
Risk free rate 0.25%   0.38%
Expected dividends  None     None 
Expected term (in years)  2 to 5 years     3 to 4 years 

 

 

 

 

 

 

 

 

 

 

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Details relative to the 30,583,333 immediately exercisable outstanding warrants at August 31, 2014 are as follows:

 

        Weighted          
        Average          
Date of   Number   Exercise    Remaining    Expiration  
Grant   of Shares   Price    Exercise Life    Date  
                   
Fourth quarter of fiscal 2013              7,000,000    $     0.012    3 to 4 years    July 2017  
                   
Outstanding, August 31, 2013              7,000,000              
                   
First quarter of fiscal 2014              4,500,000    $     0.012    3 years    November 2017  
Second quarter of fiscal 2014              5,500,000    $     0.017    2 to 3 years    Dec 2015 to Dec 2016
Third quarter of fiscal 2014              9,583,333    $     0.012    5 years    May 2019  
Fourth quarter of fiscal 2014              4,000,000    $     0.007    2 years    August 2016  
                   
Outstanding, August 31, 2014            30,583,333              

 

On August 1, 2013, the company issued 1,000,000 four-year cashless warrants as additional consideration for the acquisition of Amian Angels. These warrants expire four years after the date of issuance and have an exercise price of $.015.

 

On August 5, 2013, the company issued 6,000,000 three-year cashless warrants, to a related party, as finder’s fees related to a working capital investment. These warrants expire three years after the date of issuance and have an exercise price of $.012.

On September 11, 2013, the company issued 1,500,000 three-year cashless warrants, to a related party, as finder’s fees related to a working capital investment. These warrants expire three years after the date of issuance and have an exercise price of $.015.

 

On November 8, 2013, the company issued 3,000,000 three-year cashless warrants, to an unrelated party, as finder’s fees related to a working capital investment. These warrants expire three years after the date of issuance and have an exercise price of $.01.

 

On December 3, 2014, the company issued 1,000,000 three-year cashless warrants, to an unrelated party, as finder’s fees related to a working capital investment. These warrants expire three years after the date of issuance and have an exercise price of $.025.

 

On December 20, 2014, the company issued 3,000,000 two-year cashless warrants, to an unrelated party, as finder’s fees related to a working capital investment. These warrants expire two years after the date of issuance and have an exercise price of $.016.

 

On February 7, 2014, the company issued 1,000,000 two-year cashless warrants, to an unrelated party, as finder’s fees related to a working capital investment. These warrants expire two years after the date of issuance and have an exercise price of $.015.

 

On May 21, 2014, the company issued 9,583,333 five-year cashless warrants, to an unrelated party, as finder’s fees related to a working capital investment. These warrants expire five years after the date of issuance and have an exercise price of $.009.

 

On August 15, 2014, the company issued 4,000,000 two-year warrants, to an unrelated party, as finder’s fees related to a working capital investment. These warrants expire two years after the date of issuance and have an exercise price of $.0065.

 

The remaining contractual life of warrants outstanding as of August 31, 2014 was 2.80 years. Warrants for the purchase of 30,583,333 and nil shares were immediately exercisable on August 31, 2014 and 2013, respectively with a weighted-average price of $0.011 and $0.012 per share, respectively.

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

STOCK OPTIONS:

 

ASC 718 requires the estimation of forfeitures when recognizing compensation expense and that this estimate of forfeitures be adjusted over the requisite service period should actual forfeitures differ from such estimates. Changes in estimated forfeitures are recognized through a cumulative adjustment, which is recognized in the period of change and which impacts the amount of unamortized compensation expense to be recognized in future periods.

 

ASC 718 requires that modification of the terms or conditions of an equity award is to be treated as an exchange of the original award for a new award. This event is accounted for as if the entity repurchases the original instrument by issuing a new instrument of equal or greater value, incurring additional compensation cost for any incremental value.

 

2000 Stock Incentive Plan

 

The Company is authorized to issue up to 7,500,000 shares of common stock under its 2000 Stock Incentive Plan. Shares may be issued as incentive stock options, non-statutory stock options, deferred shares or restricted shares. Options are granted at the fair market value of the common stock on the date of the grant and have terms of up to ten years. The 2000 Stock Incentive Plan also provides for an annual grant of options to members of our Board of Directors. For fiscal years ended August 31, 2008 through 2012, our Board of Directors elected to waive the grant of these annual options.

 

On December 13, 2013, the Board of directors authorized the granting of 6,100,000 options to its three officers; 2,400,000 options to Wayne Erwin, our CEO; 2,100,000 options to Michael Kramarz, our CFO; and 1,600,000 options to Vickie Hart, President of Amian Angels. These options vest immediately and have an exercise price $.015, the closing stock price on December 13, 2013.

 

On December 20, 2014, the Company issued 20,000 options as part of its annual grant program to its two directors. These options vest in 1 year and have an exercise price of $.016, the closing stock price on December 20, 2013.

 

We have 485,253 shares of common stock available for future issuance under our 2000 Stock Incentive Plan as of August 31, 2014. This plan has been approved by our shareholders.

 

During the years ended August 31, 2014 and 2013, we granted 6,120,000 and nil options from the stock incentive plan described above, respectively. During the years ended August 31, 2014 and 2013, nil and nil options were exercised, respectively. During the years ended August 31, 2014 and 2013, 163,335 and 80,000 options expired, respectively. During the years ended August 31, 2014 and 2013, $91,163 and $0 was expensed as stock based compensation, respectively.

 

                Weighted Average 
      Number of    Option Price    Exercise Price 
      Options Granted    Per Share    Per Share 
                  
 Outstanding, August 31, 2012    297,085    $0.12 - $5.16   $1.430 
 Granted    —      —     $—   
 Exercised    —      —     $—   
 Cancelled    (80,000)   $1.60 - $5.16   $2.420 
 Outstanding, August 31, 2013    217,085    $0.12 - $2.00   $1.120 
 Granted    6,120,000     $0.015 - $0.016    $0.020 
 Exercised    —      —     $—   
 Cancelled    (163,335)   $1.04 - $2.00   $1.380 
 Outstanding, August 31, 2014    6,173,750    $0.12 - $2.00   $0.016 

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between our closing stock price on the last trading day of the third quarter of fiscal 2014 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on August 31, 2014.

 

Expected volatility is based primarily on historical volatility. Historical volatility is computed using weekly average pricing observations for an applicable historic period. We believe this method produces an estimate that is representative of our expectations of the future volatility over the expected term of our options. We currently have no reason to believe future volatility over the expected life of these options is likely to differ materially from historical volatility. The weighted-average expected life is based upon share option exercises, pre and post vesting terminations and share option term expirations. 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.

 

   Options    Options 
   Outstanding    Exercisable 
Number of options   6,173,750     6,173,750
Aggregate intrinsic value of options  $—     $ —  
Weighted average remaining contractual term (years)   9.23     9.23
Weighted average exercise price  $0.016   $ 0.016

 

2013 Omnibus Incentive Plan

 

The Company is authorized to issue up to 10,000,000 shares of common stock under its 2013 Omnibus Incentive Plan to employees, officers, directors and consultants. The issuance adoption of this plan has been approved by the Company’s Board of Directors on May 20, 2013 and was approved by our shareholders on January 27, 2014. Any options are granted at the fair market value of the common stock on the date of the grant and have terms of up to ten years. Under the 2013 Omnibus Incentive Plan the price of the granted common stock options are equal to the fair market value of such shares on the date of grant.

 

On September 11, 2013, we issued 1,000,000 S-8 shares to a consultant in payment for investor relations work for the Company. On January 3, 2014, we issued 1,000,000 S-8 shares to a consultant in payment for services to be provided for the Company. We have 8,000,000 shares of common stock available for future issuance under our 2013 Omnibus Incentive Plan as of August 31, 2014.

 

 

NOTE 12 - RELATED PARTY TRANSACTIONS AND CONTINGENCIES:

 

FINANCING WITH RELATED PARTIES:

 

During fiscal 2014 and 2013, the Company entered into financing agreements with related parties of the Company. Please see Note 10 – Notes Payable for further descriptions of these transactions.

 

 

 

 

 

 

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 13 – BUSINESS SEGMENTS

 

We identify our reportable segments based on our management structure, financial data and market. We have identified three business segments: Personal Care Services and Medical Device Manufacturing and Medical Products & Technologies

 

Our Personal Care Service segment consists of the services of Angels of Mercy, Inc. This segment provides non-medical, Personal Care Attendant (PCA) services, Supervised Independent Living (SIL), Long-Term Senior Care, and other approved programs performed by a trained caregiver that will meet the health service needs of beneficiaries whose disabilities preclude the performance of certain independent living skills related to the activities of daily living (ADL).

 

Our Medical Device Manufacturing segment consists of the products of Dotolo Research Corporation. This segment designs, develops, manufactures and distributes the Toxygen hardware system with disposable speculums and medical grade tubing.

 

Our Medical Products and Technologies segment will consist of the products of Advanced Medical Products and Technologies and future acquisitions.

 

The accounting policies of the segments are the same as those described, or referred to, in Note 2 - Summary of Significant Accounting Policies. Assets and related depreciation expense in the column labeled “Corporate Overhead” pertain to capital assets maintained at the corporate level. Segment loss from operations in the “Corporate Overhead” column contains corporate related expenses not allocable to the operating segments. Intercompany transactions between operating segments were immaterial in all periods presented.

 

Below are the segment assets as of August 31, 2014.

 

As of August 31, 2014
   Personal Care  Medical Device  Med. Products  Corporate   
   Segment  Segment  Segment  Overhead  Totals
   (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)   
ASSETS                 
Current Assets:                         
Cash and cash equivalents  $9,336   $(110)  $1,000   $7,278   $17,504 
Accounts receivable (net)   213,399    —      —      —      213,399 
Inventory   —      31,271    —      —      31,271 
Prepaid expenses and other current assets   —      —      —      9,307    9,307 
Prepaid commissions and finders' fees   —      —      —      3,152    3,152 
                          
Total current assets   222,735    31,161    1,000    19,737    274,633 
                          
Property and equipment (net)   21,287    17,893    —      787    39,967 
Deposits and other assets   2,082    12,500    —      —      14,582 
Goodwill   564,075    1,217,704    —      —      1,781,779 
Patents, registrations (net of amortization)   —      24,497    —      —      24,497 
                          
Total assets  $810,179   $1,303,755   $1,000   $20,524   $2,135,458 

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Below are the segment assets as of August 31, 2013.

 

As of August 31, 2013
   Personal Care  Medical Device  Med. Products  Corporate   
   Segment  Segment  Segment  Overhead  Totals
                
ASSETS                 
Current Assets:                         
Cash and cash equivalents  $41,985   $(2,742)  $—     $213   $39,456 
Accounts receivable (net)   104,544    3,775    —      —      108,319 
Inventory   —      31,271    —      —      31,271 
Prepaid expenses and other current assets   7,851    30,050    —      1,275    39,176 
                          
Total current assets   154,380    62,354    —      1,488    218,222 
                          
Property and equipment (net)   55,950    21,461    —      1,122    78,533 
Deposits and other assets   —      10,050    —      —      10,050 
Goodwill   478,721    1,217,704    —      —      1,696,425 
Patents, registrations (net of amortization)   —      30,620    —      —      30,620 
                          
Total assets  $689,051   $1,342,189   $—     $2,610   $2,033,850 

 

Below are the statements of operations for the reporting periods presented.

 

For the Year Ended August 31, 2014
    Personal Care    Medical Device    Medical Products    Corporate      
    Segment    Segment    Segment    Overhead    Totals 
                          
Revenues  $3,677,475   $—     $—     $—     $3,677,475 
                          
Cost of revenues   3,016,221    46,843    —      —      3,063,064 
                          
Gross profit   661,254    (46,843)   —      —      614,411 
                          
Operating expenses:                         
General and administrative   487,509    25,371    329    620,222    1,133,431 
Research and development expense   —      30,000    —      —      30,000 
Depreciation and amortization   12,793    9,691    —      335    22,819 
                          
Total operating expenses   500,302    65,062    329    620,557    1,186,250 
                          
Loss from operations   160,952    (111,905)   (329)   (620,557)   (571,839)
                          
Other income (expense):                         
Interest and finance charges   (232,573)   (11,337)   —      (561,708)   (805,618)
Other income (expenses)   73,282    66,049    —      —      139,331 
                          
Total other income (expense)   (188,039)   51,573    —      (699,266)   (835,732)
                          
Loss from operations  $(27,087)  $(60,332)  $(329)  $(1,319,823)  $(1,407,571)

 


-68-
 

ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Below are the statements of operations for the reporting periods presented.

 

 

For the Year Ended August 31, 2013
    Personal Care    Medical Device    Medical Products    Corporate      
    Segment    Segment    Segment    Overhead    Totals 
                          
Revenues  $215,248   $28,998   $—     $—     $244,246 
                          
Cost of revenues   156,708    38,991    —      —      195,699 
                          
Gross profit   58,540    (9,993)   —      —      48,547 
                          
Operating expenses:                         
General and administrative   48,439    49,431    —      231,653    329,523 
Depreciation and amortization   1,049    4,048    —      358    5,455 
                          
Total operating expenses   49,488    53,479    —      232,011    334,978 
                          
Loss from operations   9,052    (63,472)   —      (232,011)   (286,431)
                          
Other income (expense):                         
Interest and finance charges   (10,000)   (1,877)   —      (22,304)   (34,181)
Other income (expenses)   —      126    —      3,364    3,490 
                          
Total other income (expense)   (10,000)   (1,751)   —      (355,133)   (366,884)
                          
Loss from operations  $(948)  $(65,223)  $—     $(587,144)  $(653,315)

 

 

NOTE 14 - JOINT VENTURE

 

Institut für Umwelttechnologien GmbH (IUT)

 

In February 2009, we entered into a Technology Agreement with Institut für Umwelttechnologien GmbH, a German Company (“IUT”). On September 23, 2010, the Company signed a Memorandum of Understanding with Institut für Umwelttechnologien GmbH and IUT Medical GMBH confirming certain understandings among the parties with respect to their future relationships and business activities as originally contemplated in their Technology Agreement of February 27, 2009, which was reaffirmed. On November 1, 2013, with the disposal of the Company’s subsidiary Oncologix Corporation, the company also ended its relationship with IUT and IUTM.

 

 

 

 

 

 

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 15 - RETIREMENT PLAN

 

Currently, the Company does not have a retirement plan in place.

 

NOTE 16 - INCOME TAXES

As of August 31, 2014, the Company has federal net operating loss carry-forwards totaling approximately $25,100,000 and general business credit carry-forwards of approximately $140,000. As a result of the acquisition of Angels of Mercy, Inc.(now “Amian Angels Inc.”), the general business credit carry-forwards are limited to approximately $9,000 per year due to a Section 383 limitation. Currently there are no state net operating loss carry-forwards. The federal net operating loss carry-forwards expire in various amounts beginning in 2019 and ending in 2035. The Company does not have any current state net operating loss carry-forwards. Certain of the Company's net operating loss carry-forwards may be subject to annual restrictions limiting their utilization in accordance with Internal Revenue Code Section 382, which include limitations based on changes in control. Due to our history of losses from operations, we have provided a valuation allowance for our net operating loss carry-forwards and deferred tax assets, net of certain deferred tax liabilities.

 

ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. As a result of the implementation of ASC 740 – Income Taxes, the Company performed a review of its material tax positions. At the adoption date of ASC 740, the Company had no unrecognized tax benefit which would affect the effective tax rate.  As of August 31, 2014 and 2013, the Company had no accrued interest and penalties related to uncertain tax positions. The Company is primarily subject to U.S. and Louisiana income taxes. The tax years 2013 to current remain open to examination by U.S. federal and state tax authorities.

 

 

A reconciliation of the beginning and ending accrual for uncertain tax positions is as follows:

 

    For the Year Ended August 31, 
    2014    2013 
           
Balance, beginning of year  $—     $—   
Decreases in tax positions for prior years   —      —   
Increase in tax positions for prior years   —      —   
Increases in tax positions for current year   —      —   
Settlements   —      —   
Lapse in statute of limitations   —      —   
           
Balance, end of year  $—     $—   

 

The income tax benefit for the years ended August 31, 2014 and 2013 is comprised of the following amounts:

 

    2014    2013 
Current:  $—     $—   
           
Deferred:          
   Federal   (956,000)   (296,000)
   State   —      —   
    (956,000)   (296,000)
Valuation Allowance   956,000    296,000 
   $—     $—   

 

  

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The Company's tax benefit differs from the benefit calculated using the federal statutory income tax rate for the following reasons:

 

    2014    2013 
Statutory tax rate   35.0%   35.0%
State income taxes   —      —   
Change in valuation allowance   (35.0)%   (35.0)%
Effective tax rate   0.0%   0.0%

 

The components of the net deferred tax assets (liabilities) are as follows:

 

    2014    2013 
Deferred tax assets (liabilities):          
Property and equipment  $(1,000)  $(1,000)
Intangible assets   156,000    167,000 
General business credits   140,000    140,000 
Net operating loss carryforward   8,785,000    9,730,000 
    9,080,000    10,036,000 
Valuation allowance   (9,080,000)   (10,036,000)
   $—     $—   

 

ASC 740 - Income Taxes, requires a valuation allowance to reduce the deferred tax assets if, based on the weight of the evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. After consideration of all the evidence, both positive and negative, management has determined that an $9,080,000 valuation allowance as of August 31, 2014 is necessary to reduce the net deferred tax assets to the amount that will more likely than not be realized. The decrease in the valuation allowance for the current year is $956,000.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 17 - 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 on our financial condition or results of operations.

 

NEW ACCOUNTING STANDARD

 

In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2012-02 “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” (“ASU 2012-02”). ASU 2012-02 permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. Under the amendments in ASU 2012-02, an entity is not required to calculate the fair value of an indefinite-lived intangible asset unless it determines that it is more likely than not that the fair value of the asset is less than its carrying amount. An entity also will have the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. ASU 2012-02 is effective for interim and annual indefinite-lived intangible asset impairment tests performed for fiscal years beginning on or after September 15, 2012, with early adoption permitted. The Company’s adoption of ASU 2012-02 is not expected to have an impact on its consolidated financial statements.

 

NOTE 18 – STATEMENT OF CASH FLOWS

 

For the year ended August 31, 2014, these supplemental non-cash investing and financing activities are summarized as follows:

Amount

On September 11, 2013, the Company issued 1,000,000 S-8 shares of common stock in payment for a investor relations consulting contract.   

 

11,500

   
On October 2, 2013, the Company issued a $25,000 convertible promissory note to a non-related party.  We recorded a beneficial conversion feature the in amount of $25,000 related to that transaction.

 

 

25,000

   
On October 3, 2013, the Company recorded a loss on conversion of a convertible promissory note in the amount of $15,620.

 

15,620

   
On November 5, 2013 and November 8, 2013, the Company issued a total of 3,000,000 warrants to a non-related party as additional compensation for an operating capital investment.

 

 

14,805

   
On December 3, 2013, the Company recorded a loss on conversion of a convertible promissory note in the amount of $12,069.

 

12,069

   
On December 3, 2013, the Company recorded a loss on conversion of a convertible promissory note in the amount of $9,720.

 

9,720

   
On December 3, 2013, the Company issued a total of 1,000,000 warrants as additional compensation.

 

5,992

   
On December 20, 2013, the Company issued a total of 3,000,000 warrants as additional compensation.

 

7,746

   
   
   
   
   
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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 
On January 3, 2014, the Company issued 2,000,000 shares of common stock in payment for a services contract.

 

22,000

   
On January 13, 2014, the Company recorded a loss on conversion of a convertible promissory note in the amount of $26,154.

 

26,154

   
On January 14, 2014, the Company issued 1,000,000 shares of common stock as partial compensation for a investor relations contract.

 

19,000

   
On January 21, 2014, the Company issued 3,500,000 shares of common stock as additional compensation for finder’s fees.

 

45,500

   
On January 21, 2014, the Company issued 1,500,000 shares of common stock as additional compensation for finder’s fees.

 

30,000

   
On January 31, 2014, the Company recorded a loss on conversion of a convertible promissory note in the amount of $16,667.

 

16,667

   
On February 7, 2014, the Company issued 1,000,000 shares of common stock as additional compensation for finder’s fees.

 

9,000

On February 7, 2014, the Company issued 3,000,000 shares of common stock as additional compensation for finder’s fees.

 

5,151

   
On February 24, 2014, the Company recorded a loss on conversion of a convertible promissory note in the amount of $2,308.

 

2,308

   
On March 19, 2014, the Company recorded a beneficial conversion feature on the issuance of a convertible note.

 

26,500

   
On March 31, 2014, the Company recorded a loss on conversion of a convertible promissory note in the amount of $30,000.

 

30,000

   
On April 6, 2014, the Company recorded a loss on conversion of a convertible promissory note in the amount of $1,468.

 

1,468

   
On April 6, 2014, the Company recorded a loss on conversion of a convertible promissory note in the amount of $30,683

 

30,683

   
On April 8, 2014, the Company recorded a beneficial conversion feature on the issuance of a convertible note.

 

50,000

   
On April 25, 2014, the Company recorded a beneficial conversion feature on the issuance of a convertible note.

 

12,445

   
On May 21, 2014 the Company recorded a discount for the issuance of 9,583,333 warrants in connection with the issuance of a convertible note.

 

38,322

   
On June 2, 2014, the Company issued 5,000,000 shares of common stock as payments on a services contract.

 

28,500

   
On July 14, 2014, the Company recorded a loss on conversion of a convertible promissory note in the amount of $1,500.

 

1,500

   
   
   
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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 
On July 24, 2014, the Company recorded a loss on conversion of a convertible promissory note in the amount of $4,885.

 

4,885

   
On July 16, 2014, the Company recorded a beneficial conversion feature on the issuance of a convertible note.

 

26,500

   
On August 1, 2014, the Company recorded a loss on conversion of a convertible promissory note in the amount of $16,828.

 

16,828

   
On August 26, 2014, the Company recorded a loss on conversion of a convertible promissory note in the amount of $1,784.

 

1,784

   
On May 21, 2014 the Company recorded a discount for the issuance of 4,000,000 warrants in connection with the issuance of a convertible note.

 

10,177

   
       Total non-cash transactions from investing and financing activities.  $      557,824
   

 

 

For the year ended August 31, 2013, these supplemental non-cash investing and financing activities are summarized as follows:

 

 

On October 31, 2012, the Company entered into a note payable agreement to finance $10,404 of directors and officer’s insurance premiums.  The note bears interest at a rate of 9.27% per annum and was due in ten monthly installments of $1,085, including principal and interest, beginning on November 30, 2012.  

 

 

 

$ 10,404

   
On February 8, 2013, the Company recognized a loss on the conversion of a related party convertible note payable in the amount of $10,241.  

 

10,241

   
On May 13, 2013 the Company issued 1,000,000 shares as additional compensation for the issuance of a one year promissory note.  These shares were valued at $8,000, the closing price

 

 

8,000

   
On August 1, 2013, the Company issued 1,000,000 four year warrants as additional consideration for the purchase of Angels of Mercy, Inc.  The value of these options, calculated using the Black-Scholes method were included in the purchase price of Angels of Mercy, Inc.

 

 

 

22,586

   
On August 5, 2013 the Company issued 6,000,000 three year warrants for finder’s fees in connection with funds raised through a stock purchase agreement.  The value of these options calculated using the Black-Scholes method were recorded and interest and finance charges in our financial statements.

 

 

 

137,406

   
       Total non-cash transactions from investing and financing activities.  $      188,637

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 19 - EMPLOYMENT AGREEMENTS

 

On March 22, 2013, Wayne Erwin, the Company’s Chief Executive Officer, signed a three year employment agreement. The agreement provides for an annual salary of $120,000 along with a monthly auto allowance and health insurance allowance totaling $1,250. Annual increases are to be approved by the Company’s Board of Directors or Compensation Committee. During fiscal 2014 and 2013, $120,000 and 52,500 was expensed as salary, respectively.

 

On April 1, 2013, Michael Kramarz, the Company’s Chief Financial Officer, signed a three year employment agreement. The agreement provides for an annual salary of $58,000 along with a monthly auto allowance and health insurance allowance totaling $500. Annual increases are to be approved by the Company’s Board of Directors or Compensation Committee. On October 1, 2013, the Company’s Board of Directors approved a salary increase to $80,000 per year. During fiscal 2014 and 2013, $80,225 and 80,066 was expensed as salary, respectively.

 

On August 1, 2013, Vickie Hart, the President of Amian Angels Inc., signed a three year employment agreement. The agreement provides for an annual salary of $52,000 along with a monthly health insurance allowance totaling $400. Annual increases are to be approved by the Company’s Board of Directors or Compensation Committee. During fiscal 2014 and 2013, $59,615 and nil was expensed as salary, respectively.

 

On July 16, 2014, Harold Halman, the President of our Medical Products Segment, signed a three year employment agreement. The agreement provides for an annual salary of $85,000, along with a monthly auto allowance and health insurance allowance totaling $1,300 plus bonus allowances. Annual increases are to be approved by the Company’s Board of Directors or Compensation Committee. During fiscal 2014 and 2013, $10,625 and nil was expensed as salary, respectively.

 

NOTE 20 – COMMITMENTS AND CONTINGENCIES

 

On June 6, 2014, the Company and its subsidiary Dotolo entered into a services agreement with E & R Industries to provide the Company with retooling and redesign of some of Dotolo’s parts. The contract calls for periodic cash payments totaling $60,000 along with the issuance of 5,000,000 common stock shares upon meeting certain milestones.

 

On June 6, 2014, the Company and its subsidiary Dotolo entered into a services agreement with Schmitt to provide the Company with redesign of its Toxygen hardware system. The contract calls for periodic cash payments totaling $30,000 along with the issuance of 3,000,000 common stock shares upon meeting certain milestones.

 

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ONCOLOGIX TECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 21 - SUBSEQUENT EVENTS

 

On September 11, 2014, the Company obtained a merchant loan for additional working capital in the amount of $100,000. This loan requires 75 daily payments in the amount of $1,999 for a total repayment amount of $149,900. We netted gross proceeds of $99,295 after paying loan fees.

 

On September 25, 2014, the Company took down a second draw from its 4 million dollar line of credit facility in the amount of $1,200,000. The Company must meet specific monthly reporting and collateral requirements to further draw on the revolving credit facility. The outstanding balance at the time of the draw was $1,528,029 which is secured by twelve month 14.5% promissory note, which is convertible ONLY upon default by the Company. This note is automatically renewable for an additional twelve months. The company is required to pay interest and fees only for the initial 3 months.

 

On September 25, 2014, a closing was held pursuant to a Stock Purchase Agreement, dated as of September 25, 2014, (the “Agreement”) by and among Oncologix Tech Inc. (“OCLG” or “Company”), and Madhu Mathew Mammen and Imad Siddiqui (collectively the “Owners”), for Company to acquire 100 shares of Common Stock of Esteemcare Inc. and its wholly owned subsidiary Affordable Medical Equipment Solutions Inc. (“Esteem”), which represents all of the issued and outstanding shares of Esteem. Pursuant to the Agreement, the Owners sold all of the Common Stock of Esteem for $500,000 represented by a down payment of $400,000 at closing and a one year Secured Promissory Note for $100,000. The Owners own all of the shares of Esteem, a corporation organized under the laws of the State of South Carolina, a medical products and technology company.

 

On October 2, 2014, the company paid off a $50,000 convertible note borrowed from an accredited investor. The Company paid $71,436 which included a payment for principal, accrued interest and a 40% prepayment penalty.

 

Between October 28, 2014 and November 10, 2014, an accredited investor converted $15,000 of principal of a convertible note into 4,706,651 shares of common stock.

 

On November 12, 2014, the Company entered into a consulting contract with a vendor and issued 6,000,000 shares of its common stock. The Company recorded an expense of $24,000 for this transaction.

 

On November 24, 2014, the Company paid its first installment of $34,779 for a convertible note, which included $$6,029 of accrued interest. This convertible note was originally issued May 23, 2014.

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

None

 

Item 9A. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act.”)) and based upon this evaluation, and the engagement of a qualified outside third party review of our disclosure controls and procedures, concluded that as of August 31, 2014, our disclosure controls and procedures were not effective in ensuring that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act, is a process designed by, or under the supervision of, the company’s principal executive officer who is also our principal financial officer and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States and includes those policies and procedures that:

·pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
·provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
·provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and accounting professionals. As we grow, we expect to increase our number of employees and engage outsourced accounting professionals, which will enable us to implement adequate segregation of duties within the internal control framework.

Management of the Company conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework. As part of this assessment management has taken into consideration that we are a small company, and due to the fact that we have a limited number of employees, we are not able to have proper segregation of duties and have limited technical accounting research capabilities. Based on this assessment, management concluded that as of August 31, 2014, we had a material weakness in our internal control over financial reporting because of the lack of segregation of duties and the limited technical accounting capabilities. The board of directors, as part of their review of the quarterly and annual financial statements, has complete access to the detailed

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financial information of the Company for further review and verification of all financial transactions during the reporting periods. Over the next few months, our plan is to increase the number of independent board members including adding a financial expert. Management believes these changes and detailed review by the board of directors enhance our effectiveness over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States.

Attestation Report of Independent Registered Public Accounting Firm

This annual report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal controls over financial reporting that occurred during the three months ended August 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

Item 9B. Other Information

 

None

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

The following table sets forth our directors, and executive officers, their ages and all offices and positions held. Directors are elected and serve thereafter until their successors are duly elected by the stockholders. Officers and other employees serve at the will of the Board of Directors. The information is presented as of October 20, 2014:

 

Name Age Position held with Company
Roy Wayne Erwin 56 Chief Executive Officer, President and Director
Michael Kramarz 45 Chief Financial Officer, Secretary
Victoria Hart 60 President of Angels of Mercy, Inc. Subsidiary.
Harold Halman    
Barry Griffith 46 Director

 

Roy Wayne Erwin- Chairman and CEO, has served as the Chairman/CEO of Oncologix Tech Inc. since March 2013, and played an important role in the acquisitions of Dotolo Research Corporation and Amian Angels Inc. Since 2010, Wayne Erwin has been the Chief Executive Officer of Deep South Capital, LLC., a company with very limited operations. From 2007 to 2010, Mr. Erwin was the co-founder and Chief Operations Officer of Electronic Health Network, a leader in Healthcare and Medical Information Technology. From 2007 to 2004 he was the Chief Operating Officer and Director of New Business Development at Crossroads Regional Hospital, a 68-bed, acute care, in-patient and outpatient psychiatric and Substance Abuse Facility. From 1995 to 2004, Mr. Erwin was the Regional Director of Sales for Centerpulse Orthopedics, Inc, a Division of Sulzer Corporation, a world-wide, $ 3.0 billion Swiss conglomerate specializing in orthopedic total joint reconstruction of hip, knees and shoulder products. Prior to 1995, Mr. Erwin was employed by Valley Lab, Inc., Ball Aerospace and Texas Instruments in various senior management capacities. He served in the US Army, with the rank of Captain, at the 101st Airborne Division, with overseas assignments in Panama and Honduras and has advanced military training in Air Borne, Air Assault, and Jungle Warfare training. Wayne graduated with a Bachelor of Science from Louisiana College- Pineville, Louisiana.

 

Michael A. Kramarz- has served as Chief Financial Officer of the Company since July 15, 2004. Mr. Kramarz was first employed by the Company in September 2002, as its Controller and now has over 18 combined years working for public companies. Mr. Kramarz is responsible for all financial statement, accounting, SEC compliance, payroll and tax functions. From 1995 to 2002, Mr. Kramarz was employed as Accounting Manager for Assurant Group, a 6 billion dollar

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insurance company. Mr. Kramarz was responsible for the accounting, budgeting and payroll functions of one of Assurant Group’s 20+ million dollar call center subsidiaries with offices in Michigan and Oklahoma. In addition, Mr. Kramarz was responsible for quarterly consolidations into the parent company to assist with its SEC and tax filings. From 1992 to 1995, Mr. Kramarz was a staff accountant at VandenToorn & Associates CPA firm where he was responsible for compilations and reviews of financial statements, as well as tax return preparation. Mr. Kramarz holds a Certified Management Accountant Designation (CMA) and a Certified Public Accountant Designation (CPA). Mr. Kramarz holds a Bachelor of Science and Business Administration in Accounting from Aquinas College and a Masters in the Science of Taxation from

Grand Valley State University.

 

Barry Griffith-, Board of Director, Barry been a Director of the company since December of 2004. Mr. Griffith brings 20 years of early stage and upstart medical device company experience to Oncologix. Mr. Griffith has been involved in the introduction of novel medical devices in the Orthopedic, Vascular, Neurological and Cancer markets for companies such as Mitek, Schneider, Novoste and Medtronic. His present position is founder and principal of The Bench which is and executive search firm within the medical device industry based out of Newport Beach Ca. Prior to that, he was Director of Sales with Cardiovascular Systems, Inc., Director of Sales for Calypso Medical Technologies and held the Western Area Director roles with Novoste and Isoray.

 

Vickie Hart- President- Amian Angels Services Division, Ms. Hart is the President of Angels of Mercy and brings over 35 years of senior management and healthcare services experience. Since 2011 through 2013, she was the Owner and President of Triple E Healthcare Services, a healthcare services consulting firm located in Alexandria, Louisiana. From 1992 through 2010, Ms. Hart was an Assistant Principal and teacher in Elementary and Secondary education for the Rapides Parish School Systems. Ms. Hart is active in civic and charitable organizations, recently served on the D.A.R.E. Board of Directors, Central Louisiana Lions Club, and the local United Way. Vickie Hart holds a Bachelor of Science Degree from Louisiana State University and a Master Degree in Management from Northwestern State University, Natchitoches, Louisiana.

 

Harold Halman- President/COO- Medical Product & Technology Division- Mr. Halman brings 20+ years of new business development, medical sales, marketing and operations experience to OCLG. Prior to joining the company, Harold was the Chief Executive Officer for Global Medical located in Phoenix, Arizona, a national provider for home medical equipment. Mr Halman has vast knowledge and direct industry experience in medical devices and home medical products that will accelerate expansion within the company’s Medical Products and Technology Division both domestically and internationally. Prior to Global Medical, Mr. Halman was CEO of his management consulting firm involved in M&A, business turnarounds and business development projects. His direct experience includes bringing forth breakthrough medical products and technologies to the market with aggressive, multi-tiered distribution strategies.

 

Compliance with Section 16(a) of the Exchange Act

 

Directors, executive officers and holders of more than 10% of our outstanding common stock are required to comply with Section 16(a) of the Securities Exchange Act of 1934, which requires generally that such persons file reports regarding ownership of transactions in securities of the Company on Forms 3, 4, and 5. Based solely on its review of such forms received by it, or written representations from certain reporting persons, the Company believes that all Section 16(a) filing requirements applicable to its officers and directors were complied with during the fiscal year ended August 31, 2013.

 

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 for 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.

 

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Item 11. Executive Compensation

 

The following table summarizes all compensation paid for services rendered to Oncologix for the fiscal years ended August 31, 2014 and 2013 by our Principal Executive Officer and our two most highly compensated executive officers other than our principal executive officer. None of the Company's other employees received compensation in excess of $100,000 during the last completed fiscal year.

 

SUMMARY COMPENSATION TABLE
Name             Non-qualified    
and           Nonequity deferred    
Principal       Stock Option incentive plan compensation All Other All Other
Position Year Salary Bonus ($) awards($) awards($) compensation($) earnings($) compensation($) Total($)
                   
Roy Wayne Erwin 2014  $           120,000  $                      -  $                           -  $                           -  $                           -  $                           -  $                           -  $               120,000
Chief Executive Officer (1) 2013  $             52,500  $                      -  $                           -  $                           -  $                           -  $                           -  $                           -  $                 52,500
                   
Michael A. Kramarz 2014  $             80,225  $                      -  $                           -  $                           -  $                           -  $                           -  $                           -  $                 80,225
Chief Financial Officer (2) 2013  $             80,066  $                      -  $                           -  $                           -  $                           -  $                           -  $                           -  $                 80,066

 

(1)On March 22, 2013, Wayne Erwin, was elected the Company’s Chief Executive Officer, signed a three year employment agreement. The agreement provides for an annual salary of $120,000 along with a monthly auto allowance and health insurance allowance totaling $1,250. Annual increases are to be approved by the Company’s Board of Directors or Compensation Committee.

 

(2)Mr. Kramarz was hired by Oncologix as our Controller on September 16, 2002. Mr. Kramarz was appointed Chief Financial Officer on July 15, 2004. Mr. Kramarz salary was set at $76,000 annually on June 25, 2007. From January 1, 2008 to March 31, 2013, Mr. Kramarz has been serving as Chief Financial Officer and was being compensated on a consulting basis. On April 1, 2013, Mr. Kramarz signed a three year employment agreement. The agreement provides for an annual salary of $58,000 along with a monthly auto allowance and health insurance allowance totaling $500. On October 1, 2013 the Board of Directors increased the salary to $80,000.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-80-
 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
                       
  Option awards   Stock awards
      Equity incentive                
      plan awards:           Equity incentive Equity incentive  
  Number of Number of number of           plan awards: plan awards:  
  securities securities securities           number of  market or payout  
  underlying underlying underlying       Number of Market value unearned shares, value of unearned  
  unexercised unexercised unexercised       shares or units of of shares or units units or other shares, units or  
Name and Principal options options unearned Option exercise Option expiration   stock that have of stock that have rights that have other rights that  
Position (#) Exercisable (#) Unexercisable options (#) price($) date   not vested (#) not vested ($) not vested (#) have not vested ($)  
                       
Roy Wayne Erwin            2,400,000                            -                               -  $                   0.015 12/13/23                                 -  $                           -                               -  $                           -  
                  10,000      $                   0.016 12/20/23            
Chief Executive Officer                      
                       
Michael A. Kramarz                 12,750                            -                               -  $                   0.120 01/07/18                                 -  $                           -                               -  $                           -  
Chief Financial Officer            2,100,000                            -                               -  $                   0.015 12/13/23            

 

Options Grants

 

On December 13, 2013, the Board of Directors Granted 2,400,000 and 2,100,000 options to our CEO and CFO, respectively. These options were granted at $.015, the closing stock price on December 13, 2013.

 

Option Exercise

 

There were no other options exercised by the Named Executive Officers and the Company did not amend or adjust the exercise price of any stock options during fiscal 2014 or 2013.

 

 

 

 

 

 

 

 

 

 

 

 

 

-81-
 

 

DIRECTOR COMPENSATION
               
Name         Non-qualified    
and Fees earned     Nonequity deferred    
Principal or paid in Stock Option incentive plan compensation All Other All Other
Position cash ($) awards($) awards($) compensation($) earnings($) compensation($) Total($)
               
Roy Wayne Erwin  $                      -  $                      -  $                      160  $                           -  $                           -  $                           -  $                      160
               
Barry Griffith  $                      -  $                      -  $                      160  $                           -  $                           -  $                           -  $                      160

 

All directors are reimbursed for their reasonable out-of-pocket expenses incurred in connection with attendance of board meetings and advising and consulting with the officers and management from time to time. In addition, each director receives options to purchase 20,000 shares of common stock upon election to the board and annual grants of 10,000 options for each year of service thereafter. On December 20, 2013, the board of directors granted each board member 10,000 options at $.016 as part of the annual option program. The board of directors elected to waive the annual options due for fiscal years 2012, 2011 and 2010. The options vest one year from the date of the grant and terminate upon the earlier of 10 years from the date of grant or six months after the director ceases to be a member of the Board.

 

No compensation has been paid to any members of the Company’s Board of Directors for fiscal 2014 or 2013.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-82-
 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The following table sets forth as of October 20, 2014, certain information with regard to the beneficial ownership of our common stock held by (i) each shareholder known by us to beneficially own 5% or more of our outstanding common stock, (ii) each director individually, (iii) the named executive officers and (iv) all of our officers and directors as a group:

 

  Name and Address Amount and Nature   Percent
Title of Class of Beneficial Owner (2) of Beneficial Owner (1) of Class (1)(3)
     
Common Stock Roy Wayne Erwin 58,474,000 (4) 28.55%
         
Common Stock Michael Kramarz 2,112,750 (5) 1.42%
         
Common Stock Vickie Hart 1,600,000 (6) 1.08%
         
Common Stock Harold Halman 0   0.00%
         
Common Stock Barry Griffith 235,000 (7) 0.16%
         
         
Common Stock Anthony Silverman 6,222,395 (8) 4.25%
  7625 E Via Del Reposo      
  Scottsdale, AZ  85028      
         
Common Stock Donald Schreifels 26,318,570 (9) 17.10%
  6900 Wedgewood Drive, #340      
  Minneapolis, MN  55311      
         
Common Stock All directors and executive officers 62,421,750   29.93%
  as a group      

 

Less than 1%

(1)Unless otherwise noted, the address of each holder is P.O. Box 8832, Grand Rapids, MI 49518-8832.
(2)A person is deemed to be the beneficial owner of securities that can be acquired within 60 days from October 20, 2014 through the exercise of any option, warrant or other right. Shares of Common Stock subject to options, warrants or rights which are currently exercisable or exercisable within 60 days are deemed outstanding solely for computing the percentage of the person holding such options, warrants or rights, but are not deemed outstanding for computing the percentage of any other person.
(3)The amounts and percentages in the table are based upon 135,658,353 shares of Common Stock outstanding as of November 8, 2013.
(4)Includes 56,064 shares of Series D Convertible Preferred Stock, each share convertible into 1,000 shares of the Company’s common stock, and 2,410,000 shares subject to vested options.
(5)Includes 2,112,750 shares subject to vested options.
(6)Includes 1,600,000 shares subject to vested options.
(7)Includes 35,000 shares subject to vested options, direct ownership of 200,000 shares of stock underlying units held.
(8)Includes 3,500 shares subject to vested options, direct ownership of 6,218,895 shares
(9)Includes direct ownership of 18,818,750 shares of common stock and direct ownership of 7,500,000 three-year warrants to purchase common stock.

 

 

Item 13. Certain Relationships and Related Transactions, and Director Independence

 

On September 14, 2012, the Company issued a 90-Day promissory note to Anthony Silverman, its President and CEO, in the principal amount of $10,000. The note bore interest at 6% per annum. This note was further extended to February 11, 2013. On February 8, 2013, this note was paid off together with accrued interest of $242 by the issuance of a convertible promissory note. Please see Convertible Related Party Notes Payable for further information.

 

-83-
 

On October 11, 2012, the Company issued a 30-Day promissory note to Anthony Silverman, its President and CEO, in the principal amount of $5,000. The note bore an interest rate of 6%. This note was paid off, together with accrued interest of $5 on October 17, 2012.

 

On November 23, 2012 the Company issued a 90-Day promissory note to Anthony Silverman, its President and CEO, in the principal amount of $5,000. The note bore interest at 6% per annum. This note was paid off, together with accrued interest of $39 on January 9, 2013.

 

On March 8, 2013, the Company issued a 60-Day promissory note to Anthony Silverman, its former President and CEO, in the principal amount of $2,686. The note bore interest rate of 6% and the due date has been extended to August 31, 2013. This note was paid off on August 16, 2013 together with accrued interest of $71.

 

During the last two years, Wayne Erwin, our President and CEO, has advanced a total of $51,600 directly to Dotolo in an open advance account. Interest is being accrued at a rate of 6% per annum. As of August 31, 2014 we have accrued interest in the amount of $6,342. There is no specific due date on this note.

 

During April 2013, Wayne Erwin, our President and CEO, had advanced a total of $10,675 to Oncologix Tech, Inc. This note bore interest at 6%. This note was paid in full in September 2013 together with accrued interest of $223.

 

Director Independence

 

The board has determined that one of the current directors would qualify as independent director as that term is defined in the listing standards of the NYSE Amex. Such independence definition includes a series of objective tests, including that the director is not an employee of the company and has not engaged in various types of business dealings with the company.

 

Item 14. Principal Accountant Fees and Services

 

The following table sets forth approximate fees billed to us by our auditors during the fiscal years ended August 31, 2014 and 2013 for: (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements; (ii) services by our auditor that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as Audit Fees; (iii) services rendered in connection with tax compliance, tax advice and tax planning; and (iv) all other fees for services rendered.

 

  August 31, 2014 August 31, 2013
     
(i)     Audit Fees $   50,799 $   14,046
(ii)    Audit Related Fees $            -- $            --
(iii)   Tax Fees $            -- $            --
(iv)   All Other Fees $            -- $            --

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-84-
 

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules

 

(a)(1) The financial statements listed in the index set forth in Item 7 of this Form 10-K is filed as part of this report.

 

(a)(2) Exhibits

 

Number Description of Filing Method
2.1 Agreement of Merger and Plan of Reorganization between BestNet Communications Corp, Oncologix Corporation and JDA Medical Technologies, Inc. (9)
3.1 Articles of Incorporation, as originally filed with the Nevada Secretary of State on February 19, 1998, and as amended to date (1)
3.3 Certificate of Amendment to Articles of Incorporation, as originally filed with the Nevada Secretary of State. (6)
3.4 Amended Certificate of Designations, Rights, Preferences and Limitations of Series A Convertible Preferred Stock, as originally filed with the Nevada Secretary of State on November 19, 2003. (6)
3.5 Amended Certificate of Designations, Rights, Preferences and Limitations of Series B Convertible Preferred Stock, as originally filed with the Nevada Secretary of State on November 19, 2003. (6)
3.6 Amended Certificate of Designations, Rights, Preferences and Limitations of Series C Convertible Preferred Stock, as originally filed with the Nevada Secretary of State on November 19, 2003. (6)
3.7 Amended and Restated Bylaws of BestNet Communications Corp. (8)
3.8 Certificate of Amendment of Articles of Incorporation, as originally filed with the Nevada Secretary of State. (11)
3.9 Certificate of Designations, Rights, Preferences and Limitations of Series D Convertible Preferred Stock, as originally filed with the Nevada Secretary of State on April 22, 2013 (13)
4 2000 Incentive Stock Plan (2)
4.1 Form of Unit Purchase Agreement (7)
10.1 Securities Purchase Agreement between Wavetech and the investor and the Placement Agent (3)
10.2 Registration Rights Agreement between Wavetech, the Investor and the Placement Agent (3)
10.3 Registration Right Agreement (3)
10.4 Securities Purchase Agreement (3)
10.5 Product Customization Agreement (4)
10.6 Purchase Agreement by and among Softalk, Inc., Interpretel (Canada) Inc. and Wavetech International, Inc. dated October 25, 1999 (5)
10.7 Amendment No. 1 to Amended and Restated License Agreement (5)
10.8 Amended and Restated License Agreement (5)
10.9 Share Exchange Agreement by and among Wavetech International, Inc., Interpretel (Canada) Inc. and Softalk, Inc. dated November 13, 1999 (5)
-85-
 

 

10.10 Minutes of Settlement between BestNet Communications Corp. and Softalk, Inc. (8)
10.11 Lease Agreement Dated November 1, 2005, by and between Noto’s Properties LLC. and BestNet (10)
10.12 Lease Agreement Dated July 25, 2006, by and between R & J Ventures LLC. and Oncologix Corporation (10)
10.13 Lease Agreement Dated July 12, 2006, by and between Office Suites Plus and Oncologix Corporation (10)
10.14 Form of Note and Warrant Purchase Agreement between BestNet and Mountainview Opportunistic Growth Fund LP (10)
10.15 Form of Note Purchase Agreement Issued July 7, 2006 (10)
10.16 Franco Consulting Agreement (9)
10.17 Kennedy Employment Agreement (9)
10.18 Green Employment Agreement (9)
10.19 Lowe Employment Agreement (9)
10.20 License to Fountain Pharmaceuticals, Inc. (11)
10.21 Erwin Employment Agreement (12)
10.22 Kramarz Employment Agreement (13)
10.23 Hart Employment Agreement (13)
10.24 Halman Employment Agreement *
     
14.1 Oncologix Tech, Inc. Code of Ethics (6)
21 Subsidiaries of the Registrant *
32.1 Section 906 Certification of Roy Wayne Erwin *
32.2 Section 906 Certification of Michael A. Kramarz *
31.1 Certification of Chief Executive Officer *
31.2 Certification of Chief Financial Officer *
99 Consent of Seale and Beers, CPAs *

 

*Filed herewith
(1)Incorporated by reference to the like numbered exhibit to Form 10-QSB for the quarter ended February 28, 1998.
(2)Incorporated by reference to the like numbered exhibit to Form S-8 as filed on May 29, 2001.
(3)Incorporated by reference to exhibit 4.2 to Form 8-K filed on May 16, 2000.
(4)Incorporated by reference to exhibit 10.1 to the Form 10-K for the fiscal year ended August 31, 2000.
(5)Incorporated by reference to the Form 10-KSB for the fiscal year ended August 31, 1999, exhibits 10.6, 10.7, 10.8 and 10.9 were numbered exhibits 10.1, 10.2, 10.3 and 10.4 respectively in the Form 10-KSB for the year ended August 31, 1999.
(6)Incorporated by reference to the Form 10-KSB for the fiscal year ended August 31, 2003.
(7)Incorporated by reference to the Form 10-QSB for the quarter ended May 31, 2003, exhibit 4.4 was exhibit 10.1 in the Form 10-QSB for the quarter ended May 31, 2003.
(8)Incorporated by reference to the Form 10-KSB for the fiscal year ended August 31, 2004.
(9)Incorporated by reference to the Current Report on Form 8-K, dated July 26, 2006.
(10)Incorporated by reference to the Form 10-KSB for the fiscal year ended August 31, 2006.
(11)Incorporated by reference to the Form 10-KSB for the fiscal year ended August 31, 2007
(12)Incorporated by reference to the Form 8-K filed on March 27, 2013
(13)Incorporated by reference to the Form 10-K for the fiscal year ended August 31, 2013.

 

-86-
 

 

 

 

(b)Reports on Form 8-K Filed during the Last Quarter of The Period Covered by This Report are as Follows:

 

None

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-87-
 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  ONCOLOGIX TECH, INC.
   
   
Date:  December 11, 2014 By: /s/ Roy Wayne Erwin
  Name:  Roy Wayne Erwin
  Title: Chief Executive Officer and President
Date:  December 11, 2014 By: /s/ Michael A. Kramarz
  Name:  Michael A. Kramarz
  Title: Chief Financial Officer
   

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By: /s/ Roy Wayne Erwin                                    Date:  December 11, 2014
       Roy Wayne Erwin, Principal Executive Officer  
   
By: /s/ Michael A. Kramarz Date:  December 11, 2014
       Michael A. Kramarz, Principal Financial Officer  
   
By: /s/ Michael A. Kramarz Date:  December 11, 2014
       Michael A. Kramarz, Principal Accounting Officer  
   
By: /s/ Barry Griffith                                    Date:  December 11, 2014
       Barry Griffith, Director