-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S52JXxhsaBzzX/iCwRQ0u9br2E8S7M4YYU7obGXTy1ikL8CESoXbkDFhXMcrqozg 4Za2VAsZAyLZraobgzubxA== 0001108890-09-000177.txt : 20091118 0001108890-09-000177.hdr.sgml : 20091118 20091118130247 ACCESSION NUMBER: 0001108890-09-000177 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20081130 FILED AS OF DATE: 20091118 DATE AS OF CHANGE: 20091118 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Oncologix Tech Inc. CENTRAL INDEX KEY: 0000799694 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 861006416 STATE OF INCORPORATION: NV FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15482 FILM NUMBER: 091192751 BUSINESS ADDRESS: STREET 1: P.O. BOX 8832 CITY: KENTWOOD STATE: MI ZIP: 49518-8832 BUSINESS PHONE: 616-977-9933 MAIL ADDRESS: STREET 1: P.O. BOX 8832 CITY: KENTWOOD STATE: MI ZIP: 49518-8832 FORMER COMPANY: FORMER CONFORMED NAME: BESTNET COMMUNICATIONS CORP DATE OF NAME CHANGE: 20001219 FORMER COMPANY: FORMER CONFORMED NAME: WAVETECH INTERNATIONAL INC DATE OF NAME CHANGE: 19980225 FORMER COMPANY: FORMER CONFORMED NAME: WAVETECH INC DATE OF NAME CHANGE: 19920703 10-Q 1 oncologix10q113008.txt PERIOD ENDED 11-30-08 ================================================================================ U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended November 30, 2008. [ ] 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 as Specified in Its Charter) Nevada 86-1006416 ------------------------------ ----------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P.O. Box 8832 Grand Rapids, MI 49518-8832 (Address of principal executive offices) (616) 977-9933 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X] Indicate by check mark 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] As of October 20, 2009, there were 157,150,627 shares of common stock, par value $.001 per share, outstanding. Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X] ================================================================================ ONCOLOGIX TECH, INC. AND SUBSIDIARIES TABLE OF CONTENTS PART I. FINANCIAL INFORMATION IMPORTANT NOTICE........................................................ 3 ITEM 1. Financial Statements Condensed Consolidated Balance Sheets as of November 30, 2008 (Unaudited) and August 31, 2008..................................... 4 Condensed Consolidated Statements of Operations (Unaudited) for the three-month period ended November 30, 2008 and 2007......... 5 Condensed Consolidated Statements of Stockholders' Deficit (Unaudited).. 6 Condensed Consolidated Statements of Cash Flows (Unaudited) for the three-month period ended November 30, 2008 and 2007................. 7 Notes to Condensed Consolidated Financial Statements (Unaudited)........ 8 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................... 24 ITEM 3. Quantitative and Qualitative Disclosure about Market Risk....... 30 ITEM 4. Controls and Procedures......................................... 30 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings............................................... 31 ITEM 1A. Risk Factors................................................... 31 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds..... 31 ITEM 3. Defaults Upon Senior Securities................................. 32 ITEM 4. Submission of Matters to a Vote of Security Holders............. 32 ITEM 5. Other Information............................................... 32 ITEM 6. Exhibits........................................................ 32 2 IMPORTANT NOTICE This Report was required to be filed on January 14, 2009. We were unable to meet that requirement because we lacked funds to pay independent auditors to perform the necessary examination and reviews of our financial statements as required by law. We are now engaged in an effort to return to full compliance by the filing of this Report on Form 10-Q and the preparation and filing of delinquent Quarterly Reports on Form 10-Q for each of the two fiscal quarters following the end of our this quarter ended November 30, 2008. 3
PART I: FINANCIAL INFORMATION ITEM 1. Financial Statements ONCOLOGIX TECH, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS November 30, August 31, 2008 2008 ------------ ------------ (Unaudited) ASSETS Current Assets: Cash and cash equivalents ..................................................... $ 442 $ 9,912 Prepaid expenses and other current assets ..................................... 25,774 6,659 Prepaid commissions ........................................................... 46,810 75,511 ------------ ------------ Total current assets ...................................................... 73,026 92,082 Property and equipment (net of accumulated depreciation of $17,541 and $18,679) ....................................................... 3,729 4,527 Deposits and other assets .......................................................... -- 2,691 Long-term assets of discontinued operations ........................................ 120,832 141,017 ------------ ------------ Total assets .......................................................... $ 197,587 $ 240,317 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Convertible notes payable (net of discount of $217,960 and $125,001) .......... $ 2,369,752 $ 1,372,711 Convertible notes payable related parties .................................... 63,822 63,822 Notes payable ................................................................. 17,986 -- Accounts payable and other accrued expenses ................................... 367,731 268,886 Accrued interest payable ...................................................... 126,201 124,548 Current liabilities of discontinued operations ................................ 95,349 95,349 ------------ ------------ Total current liabilities ................................................. 3,040,841 1,925,316 ============ ============ Convertible notes payable (net of discount of $0 and $279,212) ..................... -- 810,788 ------------ ------------ Total liabilities ..................................................... 3,040,841 2,736,104 ------------ ------------ Stockholders' Deficit: Preferred stock, par value $.001 per share; 10,000,000 shares authorized 295,862 and 295,862 shares issued and outstanding at November 30, 2008 and August 31, 2008, respectively ....................... 296 296 Common stock, par value $.001 per share; 200,000,000 shares authorized; 141,911,034 and 136,117,314 shares issued at November 30, 2008 and August 31, 2008, respectively; 119,528,666 and 113,734,944 shares outstanding at November 30, 2008 and August 31, 2008, respectively ........ 119,529 113,735 Additional paid-in capital .................................................... 52,152,990 51,980,403 Accumulated deficit ........................................................... (55,116,069) (54,590,221) ------------ ------------ Total stockholders' deficit ........................................... (2,843,254) (2,495,787) ------------ ------------ Total liabilities and stockholders' deficit ........................... $ 197,587 $ 240,317 ============ ============ See accompanying notes to condensed consolidated financial statements. 4
ONCOLOGIX TECH, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED NOVEMBER 30, 2008 AND 2007 Three Months Ended November 30, November 30, 2008 2007 ------------- ------------- Operating expenses: General and administrative ................. $ 222,513 $ 224,432 Depreciation and amortization .............. 416 515 ------------- ------------- Total operating expenses ................... 222,929 224,947 ------------- ------------- Loss from operations ....................... (222,929) (224,947) ------------- ------------- Other income (expense): Interest income ............................ -- 229 Interest and finance charges ............... (259,140) (468,780) Conversion expense ......................... (26,457) -- Loss on disposal of assets ................. (382) (3,194) Other income (expense) ..................... (3,465) -- ------------- ------------- Total other income (expense) ............... (289,444) (471,745) ------------- ------------- Net loss from continuing operations ........ (512,373) (696,692) ------------- ------------- Discontinued operations: Operating loss from discontinued operations (13,475) (752,079) ------------- ------------- Net loss from discontinued operations ...... (13,475) (752,079) ------------- ------------- Net loss ..................................... $ (525,848) $ (1,448,771) ============= ============= Loss per common share, basic and diluted: Continuing operations ................... $ (0.00) $ (0.01) Discontinued operations ................. (0.00) (0.01) ------------- ------------- $ (0.00) $ (0.02) ============= ============= Weighted average number of shares outstanding basic and diluted ............. 116,929,837 71,024,909 ============= ============= See accompanying notes to condensed consolidated financial statements. 5
ONCOLOGIX TECH, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT Preferred Stock Common Stock ---------------------------- --------------------------- Shares Amount Shares Amount ------------ ------------ ------------ ------------ Balance, August 31, 2007 ................. 443,162 443 70,975,616 70,976 Stock options exercised .................. -- -- 50,000 50 Stock based compensation ................. -- -- -- -- Issuance of stock for unit conversions ... (147,300) (147) 294,600 295 Issuance of stock for services ........... -- -- 55,102 55 Issuance of stock for interest ........... -- -- 65,707 65 Issuance of stock purchased .............. -- -- 3,000,000 3,000 Conversion of notes payable .............. -- -- 21,400,467 21,401 Conversion of notes payable - related parties ....................... -- -- 17,893,452 17,893 Issuance of warrants for services ........ -- -- -- -- Beneficial conversion feature stock issued for interest ............. -- -- -- -- Beneficial conversion feature and warrants issued - convertible notes payable .... -- -- -- -- Beneficial conversion feature - Induced conversion expense notes payable . -- -- -- -- Net loss ................................. -- -- -- -- ------------ ------------ ------------ ------------ Balance, August 31, 2008 ................. 295,862 $ 296 113,734,944 $ 113,735 ============ ============ ============ ============ Stock based compensation ................. -- -- -- -- Issuance of stock for services ........... -- -- 2,000,000 2,000 Issuance of stock for interest ........... -- -- 793,720 794 Issuance of stock purchased .............. -- -- 3,000,000 3,000 Induced conversion expense - interest paid with stock ....................... -- -- -- -- Net loss ................................. -- -- -- -- ------------ ------------ ------------ ------------ Balance, November 30, 2008 ............... 295,862 $ 296 119,528,664 $ 119,529 ============ ============ ============ ============ 6
ONCOLOGIX TECH, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT Additional Common Paid-in Accumulated Stock Capital Deficit Subscribed Total ------------ ------------ ------------ ------------ Balance, August 31, 2007 ................. 47,805,282 (49,908,557) 6,667 (2,025,189) Stock options exercised .................. 11,450 -- -- 11,500 Stock based compensation ................. 36,267 -- -- 36,267 Issuance of stock for unit conversions ... 29,312 -- -- 29,460 Issuance of stock for services ........... 17,045 -- (6,667) 10,433 Issuance of stock for interest ........... 19,647 -- -- 19,712 Issuance of stock purchased .............. 27,000 -- -- 30,000 Conversion of notes payable .............. 1,132,480 -- -- 1,153,881 Conversion of notes payable - related parties ....................... 876,779 -- -- 894,672 Issuance of warrants for services ........ 4,686 -- -- 4,686 Beneficial conversion feature stock issued for interest ............. 2,320 -- -- 2,320 Beneficial conversion feature and warrants issued - convertible notes payable .... 623,659 -- -- 623,659 Beneficial conversion feature - Induced conversion expense notes payable . 1,394,476 -- -- 1,394,476 Net loss ................................. -- (4,681,664) -- (4,681,664) ------------ ------------ ------------ ------------ Balance, August 31, 2008 ................. $ 51,980,403 $(54,590,221) $ -- $ (2,495,787) ============ ============ ============ ============ Stock based compensation ................. 2,238 -- -- 2,238 Issuance of stock for services ........... 78,000 -- -- 80,000 Issuance of stock for interest ........... 38,892 -- -- 39,686 Issuance of stock purchased .............. 27,000 -- -- 30,000 Induced conversion expense - interest paid with stock ....................... 26,457 -- -- 26,457 Net loss ................................. -- (525,848) -- (525,848) ------------ ------------ ------------ ------------ Balance, November 30, 2008 ............... $ 52,152,990 $(55,116,069) $ -- $ (2,843,254) ============ ============ ============ ============ See accompanying notes to condensed consolidated financial statements. 6(Con't)
ONCOLOGIX TECH, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED NOVEMBER 30, 2008 AND 2007 For the Three Months Ended November 30, November 30, 2008 2007 ----------- ----------- Operating activities: Net loss .................................................... $ (525,848) $(1,448,771) Net loss from discontinued operations.. ................. 13,475 752,079 ----------- ----------- Net loss from continuing operations ..................... (512,373) (696,692) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization ........................... 416 515 Loss on disposal of property and equipment .............. 382 3,194 Stock based compensation expense ........................ 2,238 60,484 Amortization of discount on notes payable and warrants .. 186,253 354,698 Induced conversion expense notes payable ................ 26,457 -- Issuance of stock and warrants for services ............. 80,000 9,599 Beneficial conversion feature - stock issued for interest 39,686 -- Prepaid expenses and other current assets ........... 1,042 3,201 Prepaid commissions ................................. 28,701 (40,071) Deposits and other assets ........................... 2,691 (27,641) Accounts payable and other accrued expenses ......... 98,845 26,764 Accrued interest payable ............................ 1,653 67,798 ----------- ----------- Net operating cash flows - continuing operations ............ (44,009) (238,151) Net operating cash flows - discontinued operations.. ........ (30) (611,103) ----------- ----------- Net cash used in operating activities ....................... (44,039) (849,254) ----------- ----------- Investing activities: Net investing cash flows discontinued operations ........... 6,740 (2,672) ----------- ----------- Net cash used in investing activities ....................... 6,740 (2,672) ----------- ----------- Financing activities: Proceeds from exercise of stock options and warrants ....... -- 11,500 Proceeds from issuance of convertible notes payable ........ -- 1,090,000 Proceeds from issuance of notes payable - related parties .. -- 150,000 Proceeds from purchase of common stock ..................... 30,000 -- Repayment of notes payable ................................. (2,171) (2,027) Repayment of notes payable - related parties ............... -- (25,000) Repayment of convertible notes payable - related parties ... -- (100,000) ----------- ----------- Net cash provided by financing activities continuing operations .. 27,829 1,124,473 ----------- ----------- Net increase (decrease) in cash and cash equivalents .............. (9,470) 272,547 Cash and cash equivalents, beginning of period .................... 9,912 141,691 ----------- ----------- Cash and cash equivalents, end of period .......................... $ 442 $ 414,238 =========== =========== See accompanying notes to condensed consolidated financial statements. 7
ONCOLOGIX TECH, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- ORGANIZATION OF BUSINESS AND BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in the financial statements have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited condensed consolidated financial statements for the periods presented include all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation. The balance sheet at August 31, 2008, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements and have been restated to reflect discontinued operations. For further information, refer to the Company's financial statements, and footnotes thereto, for the fiscal year ended August 31, 2008, included in our Form 10-K for such fiscal year. The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 reported amounts in income and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the carrying value of long-lived assets, deferred income tax reserves, pending or threatening litigation and the allocation of assets acquired and liabilities assumed in acquisitions. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity 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 at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. INCOME TAXES 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. NET LOSS PER COMMON SHARE Basic earnings (loss) per share is calculated by dividing income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated based on the weighted average number of common shares outstanding during the period plus the dilutive effect of common stock purchase warrants and stock options using the treasury stock method and the dilutive effects of convertible notes payable and convertible preferred stock using the if-converted method. Basic and diluted earnings per share for the three months ended November 30, 2008 and 2007 are as follows: 8 Three Months Ended ------------------------------ November 30, ------------------------------ 2008 2007 ------------- ------------- Net loss attributable to common shareholders Continuing operations .................. $ (512,373) $ (696,692) Discontinued operations ................ (13,475) (752,079) ------------- ------------- $ (525,848) $ (1,448,771) ============= ============= Weighted average shares outstanding .......... 116,929,837 71,024,909 ============= ============= Loss per common share, basic and diluted: Continuing operations .................. $ (0.00) $ (0.01) Discontinued operations ................ (0.00) (0.01) ------------- ------------- $ (0.00) $ (0.02) ============= ============= Due to the net losses in fiscal 2009 and fiscal 2008, basic and diluted loss per share was the same, as the effect of potentially dilutive securities would have been anti-dilutive. Potentially dilutive securities not included in the diluted loss per share calculation, due to net losses, are as follows: Three Months Ended November 30, 2008 2007 ------------- ------------- Underlying Underlying Description Common Shares Common Shares - ----------- ------------- ------------- Convertible preferred stock ............ 591,724 886,324 Convertible notes payable .............. -- 14,837,083 Options ................................ -- 203,335 Warrants ............................... -- 7,188 ------------- ------------- Total potentially dilutive securities... 591,724 15,933,930 ============= ============= 9 NOTE 3 - DISCONTINUED OPERATIONS We entered the medical device business at the end of July 2006 through the acquisition of JDA Medical Technologies, Inc. ("JDA"), a development stage company, which was merged into our wholly owned subsidiary, Oncologix Corporation. On January 22, 2007, we changed our name to Oncologix Tech, Inc., to reflect this new business. During June 2007, we moved our principal offices from Grand Rapids, Michigan, to our offices at 3725 Lawrenceville-Suwanee Road, Suite B-4, Suwanee, Georgia, 30024, telephone (770) 831-8818. At that address, our business was the development of a medical device for brachytherapy (radiation therapy), called the "Oncosphere" (or "Oncosphere System"), for the advanced medical treatment of soft tissue cancers. It is a radioactive micro-particle designed to deliver therapeutic radiation directly to a tumor site by introducing the micro-particles into the artery that feeds the tumor tissue. Its first application is expected to be the treatment of liver cancer. Due to a lack of funding, we had to suspend these activities on December 31, 2007, whereupon we closed the offices in Suwanee Georgia. We have previously reported discussions with respect to a transfer of our Oncosphere assets to another company. We are currently attempting to resolve a number of uncertainties in connection with such a transaction, including the obtaining of necessary consents. Accordingly, during May 2008, we determined to dispose of most of the assets of the Oncosphere project and entered into discussions with a prospective purchaser. In February 2009, we entered into a Technology Agreement with Institut fur Umwelttechnologien GmbH, a German Company ("IUT") whereunder the parties have agreed that: (a) The Company has granted an exclusive license to a new IUT subsidiary, called "IUTM", to develop and manufacture products based on the Company's proprietary information. This proprietary information is not based on the technology that had been subject to the Master License Agreement with the University of Maryland - Baltimore. The Company has also transferred to IUTM a number of items of laboratory equipment and inventory useful in connection with the licensed information. (b) The Company retains rights to market products based on such information as well as first consideration for marketing rights for other possible IUTM products. (c) In consideration of the license, the Company has received a 10% equity interest in IUTM, which is organized as a private German limited liability company and IUT has assumed approximately $82,000 of the Company's indebtedness. (d) The Company's marketing rights have been transferred to its subsidiary, Oncologix Corporation and has issued IUTM 10% of the equity ownership of that subsidiary. We have been advised that the group of German companies of which IUTM is a part ("Group") is continuing the development of a brachytherapy device generally as described above but based on proprietary technology not developed by the University of Maryland. We have begun discussions with the Group to determine our future business and financial relationships and plans, including the possibility of developing and commercializing other radiation-based medical products. Our plan is then to seek financing for the implementation of those plans. While our Management is optimistic as to the outcome of those discussions and future success in financing, it is not possible to predict the probabilities of success with any degree of certainty. 10
Net assets related to discontinued operations of our Oncosphere assets are as follows: November 30, August 31, 2008 2008 -------- -------- Current assets of discontinued operations: Prepaid expenses and other current assets ........... $ -- $ -- -------- -------- Total current assets of discontinued operations.. -- -- -------- -------- Long-term assets of discontinued operations: Property and equipment .............................. 120,832 141,017 Deposits and other assets ........................... -- -- Investment in joint venture ......................... -- -- -------- -------- Total long-term assets of discontinued operations 120,832 141,017 -------- -------- Total assets of discontinued operations .................. $120,832 $141,017 ======== ======== Current liabilities of discontinued operations: Accounts payable and other accrued expenses ......... $ 95,349 $ 95,349 -------- -------- Total liabilities of discontinued operations ............. $ 95,349 $ 95,349 ======== ======== Net assets of discontinued operations .................... $ 25,483 $ 45,668 ======== ======== 11
The expenses shown below are part of the discontinued operations of our Oncosphere business. Three MonthsEnded November 30, ------------------------------ 2008 2007 --------- --------- Operating expenses: General and administrative ............... $ -- $ 73,824 Research and development ................. -- 667,824 Depreciation and amortization ............ 9,608 10,448 --------- --------- Total operating expenses ................. 9,608 752,096 --------- --------- Loss from operations ..................... (9,608) (752,096) --------- --------- Other income (expense): Interest income .......................... -- 202 Loss on disposal of assets ............... (3,837) -- Other income (expense) ................... (30) (185) --------- --------- Total other income (expense) ............. (3,867) 17 --------- --------- Net loss from discontinued operations .... $ (13,475) $(752,079) ========= ========= NOTE 4 -- STOCKHOLDERS EQUITY 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. UNITS: 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 two shares of the Company's common stock in exchange for $0.10 per common share ($.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. Our Board of Directors authorized the separation of the Units into their component parts twice, once in July 2004 and again in February 2005. Our Board of Directors again authorized the separation of the Units again in April 2008. On April 11, 2008 holders of 100,300 Units contributed $20,060 to convert 100,300 shares of preferred stock into 200,600 shares of common stock. On June 27, 2008, holders of 47,000 Units contributed $9,400 to convert 47,000 shares of preferred stock into 94,000 shares of common stock. As of November 30, 2008 and August 31, 2008, there were 295,862 and 295,862 Units outstanding that had not been separated, respectively. These units are presented as their underlying securities on our balance sheet and consist of 295,862 shares of Series A Preferred Stock and 887,586 shares of common stock which is included in the issued and outstanding shares. SUBSCRIBED COMMON STOCK: As of November 30, 2008 and August 31, 2008, there were no shares of subscribed stock issuable. 12 COMMON STOCK: Under the terms of our acquisition of JDA, we issued 43,000,000 shares of our common stock to the previous owners of JDA. Of these shares, 29,843,160 were placed into escrow pending the achievement of certain development and operating goals. These escrowed shares were not included in the calculation of the purchase price of JDA and will be included in that calculation if and to the extent that the applicable contingencies are resolved and the shares are released from escrow. The development and operating goals that relate to the release of these shares, and the number of shares to be released at the time the goal is achieved are as follows: (i) 7,460,790 shares upon the completion of the "Development Phase", as defined in the Merger Agreement between the Company and JDA (already released); (ii) 9,325,986 shares upon the completion of the "Pre-Clinical Testing Phase as defined in the merger agreement; and (iii) 13,056,382 shares upon the completion of the Clinical Approval Phase. On September 10, 2009, the remaining 22,382,368 shares in escrow were released back to the Company and subsequently retired. On October 13, 2008, the Company sold 1,500,000 shares of its common stock, to an accredited investor, under a stock purchase agreement at $0.01 per common share. On October 13, 2008, the Company sold 1,500,000 shares of its common stock, to Anthony Silverman, our President and CEO, under a stock purchase agreement at $0.01 per common share. On October 17, 2008, the Company issued 2,000,000 shares of its common stock to the University of Maryland in connection with the extension of the License Agreement. This License Agreement was terminated on April 7, 2009 and the shares were returned to the Company and subsequently retired. On October 29, 2008, the Company issued 793,720 shares of its common stock to holders of convertible promissory notes in lieu of an annual cash interest payment of $39,686. WARRANTS: Details relative to the 5,899,159 outstanding warrants at November 30, 2008 and August 31, 2008, respectively are as follows: 13
Date of Number Exercise Expiration Grant of Shares Price Date - -------------------------------------------- ----------------- ------------ ----------------------- First quarter of fiscal 2002 25,000 $ 2.90 October 17, 2007 Second quarter of fiscal 2002 5,751 1.19 January 30, 2008 Third quarter of fiscal 2002 1,100,000 0.50 April 23, 2007 Second quarter of fiscal 2004 100,000 0.32 January 8, 2007 Third quarter of fiscal 2004 40,000 0.27 April 15, 2014 Fourth quarter of fiscal 2004 10,000 0.29 June 4, 2009 Third quarter of fiscal 2006 200,000 0.35 March 13, 2008 ----------------- Outstanding, August 31, 2006 1,480,751 Second quarter of fiscal 2007 (100,000) 0.32 January 8, 2007 Second quarter of fiscal 2007 2,158,326 0.50 December 4, 2008 Third quarter of fiscal 2007 (1,100,000) 0.50 April 23, 2007 ----------------- Outstanding, August 31, 2007 2,439,077 First quarter of fiscal 2008 (25,000) 2.90 October 17, 2007 First quarter of fiscal 2008 3,633,332 0.50 September 17, 2009 Second quarter of fiscal 2008 (5,750) 1.19 January 30, 2008 Second quarter of fiscal 2008 57,500 0.40 December 3, 2009 Third quarter of fiscal 2008 (200,000) 0.35 March 13, 2008 ----------------- Outstanding, August 31, 2008 5,899,159 ================= First quarter of fiscal 2009 - ----------------- Outstanding, November 30, 2008 5,899,159 ================= 14
STOCK OPTIONS: The Company is authorized to issue up to 4,600,000 shares of common stock under its 1997 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 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. SFAS 123(R) 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. During the three month periods ended November 30, 2008 and 2007, zero and 50,000 employee options were exercised, respectively, zero and 10,000 options were forfeited, respectively and 25,000 and zero options expired. As of November 30, 2008, $2,299 of total unrecognized compensation cost related to employee stock options is expected to be recognized over a weighted average period of approximately 0.18 years. Additional information relative to our employee options outstanding at November 30, 2008 is summarized as follows: Options Options Outstanding Exercisable ----------- ----------- Number of options ................................... 4,337,526 4,334,192 Aggregate intrinsic value of options ................ -- -- Weighted average remaining contractual term (years).. 3.00 2.94 Weighted average exercise price ..................... $ 0.69 $ 0.69 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 first quarter of fiscal 2009 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 November 30, 2008. 15
NOTE 5 -- NOTES PAYABLE CONVERTIBLE NOTES PAYABLE: Convertible notes payable consist of the following as of November 30, 2008 and August 31, 2008: November 30, August 31, 2008 2008 --------------- ---------------- 12.0% convertible note due March 31, 2012 .............................. $ 2,712 $ 2,712 8.0% convertible notes due March 31, 2009 (1) .......................... 200,000 200,000 6.0% convertible notes due March 31, 2009, net of a discount of $5,263 and $125,001 as of November 30, 2008 and August 31, 2008 (2) 1,289,737. 1,169,999 6.0% convertible notes due September 17, 2009, net of a discount of $212,697 and $279,212 as of November 30, 2008 and August 31, 2008 . 877,303 810,788 --------------- ---------------- Total unsecured convertible notes payable .............................. 2,369,752 2,183,499 Less: Current portion ................................................. (2,369,752) (1,372,711) --------------- ---------------- Long-term portion ...................................................... $ -- $ 810,788 =============== ================ (1) $75,000 in principal converted on July 27, 2009 (2) $1,265,000 in principal converted on July 27, 2009 On March 13, 2006, we issued to an accredited investor; a convertible subordinated promissory note in the principal amount of $350,000, originally payable on May 13, 2007 (at the end of fourteen months following the date of issue), accrues interest at the rate of 8% and is convertible into our common stock at a conversion price of $1.00 per common share. The due date under this note was extended until July 15, 2007 and subsequently extended until January 15, 2008. In addition, we issued, to that investor, a two-year warrant for the purchase of 200,000 shares of our common stock at an exercise price of $0.35 per share. We recognized a discount on this Convertible Subordinated Promissory Note of $47,379 related to the fair value of the warrants issued in connection with the note. On May 15, 2007, the accrued interest of $32,649 was converted into 130,718 shares of the Company's common stock at a per share price of $0.25. Accordingly, the Company recognized a beneficial conversion feature of $22,222. On September 4, 2007, as an incentive to extend the note to January 15, 2008, the Company lowered the conversion rate of the note to $0.20 per common share from $1.00. Accordingly, the Company recognized a beneficial conversion feature of $87,500. During fiscal 2008, we expensed $87,500 as interest and finance charges, as a result of amortization of the note discounts. During May 2008, the investor entered into an agreement whereunder the date on which payment is due is extended until December 4, 2008, the price at which amounts due under the notes may be converted to shares of common stock was reduced to $0.15 per share; provided that any conversion effected on or before June 16, 2008 would be at a price of $0.05 per share. On June 11, 2008, the investor elected to convert $380,301 in principal and accrued interest into 7,606,027 shares of common stock at an exercise price of $0.05 per share. The Company recognized $293,678 in conversion expense as a result of the reduction of the conversion price to induce conversion. During October 2006, we entered into note purchase agreements for convertible promissory notes with five accredited investors for financing in the aggregate amount of $250,000. These notes were payable on March 15, 2007, and accrue interest at the rate of 10% per annum and were convertible into our common stock at a conversion price of $0.20 per common share. We recognized a beneficial conversion feature in the amount of $193,750 relative to these notes. During the second quarter of fiscal 2007, holders of notes in the aggregate principal of $100,000 elected to convert their notes, with unpaid accrued interest of $2,774, into 513,869 shares of common stock which were issued in June 2007. On March 15, 2007, investors holding the remaining notes in the principal amount of $150,000 agreed to extend the due date of their respective notes until September 15, 2007. These notes were further extended until December 31, 2007. During December 2007, the holder of a $50,000 note extended the note to June 30, 2008. During December 2007, the holder of the remaining $100,000 note elected to convert that principal, plus accrued interest of $11,808 into 559,041 shares of common stock. During May 2008, the remaining $50,000 investor entered into an agreement whereunder the date on which payment is due is 16
extended until December 4, 2008, the price at which amounts due under the notes may be converted to shares of common stock was reduced to $0.15 per share; provided that any conversion effected on or before June 16, 2008 would be at a price of $0.05 per share. On June 12, 2008, the investor elected to convert $58,164 in principal and accrued interest into 1,163,288 shares of common stock at an exercise price of $0.05 per share. The Company recognized $43,623 in conversion expense as a result of the reduction of the conversion price to induce conversion. During December 2006, we issued seven Convertible Promissory Notes in an aggregate principal amount of $480,000. These Convertible Promissory Notes are due December 4, 2008, bear interest at the rate of 6% per annum and are convertible into our common stock at a rate of $0.30. The Convertible Promissory Notes were issued in a private offering of Units, each consisting of a Convertible Promissory Note and a warrant for the purchase of one half the number of common shares into which each Convertible Promissory Note is convertible. The warrants expire on December 4, 2008 and have an exercise price of $0.50 per share. We recognized a discount of $58,708 related to the warrants and a beneficial conversion feature of $269,541 related to these notes. During the first three months of fiscal 2009, $41,560 was expensed as interest and finance charges as a result of amortizing the discount and beneficial conversion feature. In fiscal 2009, $480,000 of principal plus accrued interest was converted into common stock. See Note 11, Subsequent Events for further information on this conversion. During January 2007, we issued fourteen additional Convertible Promissory Notes in an aggregate principal amount of $485,000 as a continuation of the private offering of Units that commenced in December, 2006. We recognized a discount of $55,446 related to the warrants and a beneficial conversion feature of $300,197 related to these notes. During the first three months of fiscal 2009, $47,241 was expensed as interest and finance charges as a result of amortizing the discount and beneficial conversion feature. In fiscal 2009, $455,000 of principal plus accrued interest was converted into common stock. See Note 11, Subsequent Events for further information on this conversion. During February 2007, we issued eight additional Convertible Promissory Notes in an aggregate principal amount of $330,000 as a continuation of the private offering of Units described above. We recognized a discount of $35,487 related to the warrants and a beneficial conversion feature of $192,820 related to these notes. During the first three months of fiscal 2009, $31,238 was expensed as interest and finance charges as a result of amortizing the discount and beneficial conversion feature. In fiscal 2009, $330,000 of principal plus accrued interest was converted into common stock. See Note 11, Subsequent Events for further information on this conversion. During May and June 2007, we issued nine Convertible Promissory Notes in an aggregate principal amount of $700,000. These Convertible Promissory Notes are due May 7, 2008, bear interest at the rate of 8% per annum and are convertible into our common stock at a rate of $0.25. We recognized a beneficial conversion feature of $501,000 related to these notes. During fiscal 2008, $349,857 was expensed as interest and finance charges as a result of amortizing the beneficial conversion feature. During May 2008, the investors entered into agreements whereunder the dates on which payment is due is extended until December 4, 2008, the price at which amounts due under the notes may be converted to shares of common stock was reduced to $0.15 per share; provided that any conversion effected on or before June 16, 2008 would be at a price of $0.05 per share. On May 30, 2008, holders of two $25,000 notes elected to convert $54,126 in principal and accrued interest into 1,082,522 shares of common stock at an exercise price of $0.05 per share. During June 2008, the three investors holding $450,000 in notes elected to convert $499,479 in principal and accrued interest into 9,989,589 shares of common stock at an exercise price of $0.05 per share. The Company recognized $434,201 in conversion expense as a result of the reduction of the conversion price to induce conversion. Four investors holding the remaining $200,000 in principal notes have extended until December 4, 2008. In fiscal 2009, $75,000 of principal plus accrued interest was converted into common stock. See Note 11, Subsequent Events for further information on this conversion. On September 7, 2007, the Company issued to Stanley Schloz, a former member of the Company's Board of Directors, a convertible promissory note for bridge financing in the principal amount of $150,000. This note bears interest at a rate of 12% and is payable monthly. The principal is due in full on December 15, 2007. On November 30, 2007, the Company repaid $100,000 of the principal. In connection with this repayment, Mr. Schloz agreed to extend the remaining principal until January 14, 2008. The note is convertible into the Company's common stock at a conversion price of $0.20 per common share. During May 2008, Mr. Schloz entered into an agreement whereunder the date on which payment is due is extended until December 4, 2008, the price at which amounts due under the notes may be converted to shares of common stock was reduced to $0.15 per share; provided that any conversion effected on or before June 16, 2008 would be at a price of $0.05 per share. On June 9, 2008, the investor elected to convert $50,000 in principal into 1,000,000 shares of common stock at 17 an exercise price of $0.05 per share. The Company recognized $33,333 in conversion expense as a result of the reduction of the conversion price to induce conversion. Mr. Schloz elected to extend $2,712 in accrued interest until March 31, 2012 which is convertible at $0.15 per share. During September through November 2007, we issued twenty-seven Convertible Promissory Notes in an aggregate principal amount of $1,090,000. These Convertible Promissory Notes are due September 17, 2009, bear interest at the rate of 6% per annum and are convertible into our common stock at a rate of $0.30. The Convertible Promissory Notes were issued in a private offering of Units, each consisting of a Convertible Promissory Note and a warrant for the purchase of the number of common shares into which each Convertible Promissory Note is convertible. The warrants expire on September 17, 2009 and have an exercise price of $0.50 per share. We recognized a discount of $180,330 related to the warrants and a beneficial conversion feature of $318,330 related to these notes. During the first three months of fiscal 2009, $66,514 was expensed as interest and finance charges as a result of amortizing the discount and beneficial conversion feature. On October 29, 2008, the Company issued 793,720 shares of its common stock to holders of convertible promissory notes in lieu of an annual cash interest payment of $39,686. The company also recorded $26,457 in conversion expense as a result of reducing the conversion price from $0.30 to $0.05 per share for this conversion. In November 2009, holders of $1,090,000 in principal and $83,828 in accrued interest converted their notes into 23,476,566 shares of common stock at a conversion price of $0.05. The Company recognized $391,276 in conversion expense as a result of the reduction of the conversion price to induce conversion. See Note 11, Subsequent Events for further information on this conversion. 18
CONVERTIBLE RELATED PARTY NOTES PAYABLE: November 30, August 31, 2008 2008 ------------ ------------ 10.0% convertible note due March 31, 2009 (1) .................. $ 63,822 $ 63,822 ------------ ------------ Outstanding unsecured related party convertible notes payable... $ 63,822 $ 63,822 ============ ============ (1) Note and accrued interest converted July 27, 2009 On June 9, 2008, we issued to Mr. Silverman a convertible promissory note for extended interest expense in the amount of $63,822. this note accrued interest at a rate of 10% per annum and was due, including accrued interest on March 31, 2009. In fiscal 2009, $63,822 of principal plus accrued interest was converted into common stock. See Note 11, Subsequent Events for further information on this conversion. OTHER NOTES PAYABLE: On October 1, 2008, the Company entered into a note payable agreement to finance $20,157 of directors and officer's insurance premiums. The note bears interest at a rate of 9.35% per annum and is due in nine monthly installments of $2,328, including principal and interest, beginning on November 1, 2008 19
NOTE 6 -- COMMITMENTS AND CONTINGENCIES RESEARCH AND DEVELOPMENT AGREEMENTS: During May 2007, the Company entered into an agreement with Saint Joseph's Research Institute (SJRI) in Norcross Georgia to conduct two additional animal studies relating to the pre-clinical testing of the Oncosphere product. The term of the agreement is to continue for the time required to conduct the two studies. The first study, a non-radioactive study, has been completed at a cost of approximately $9,000. The second study began in the second half of the 2007 calendar year and is expected to cost approximately $200,000. We are planning an additional animal study to begin after December 2007 with SJRI at an anticipated cost of $200,000. We conducted a second animal study with SJRI in October 2007. Due to a lack of funding, we were unable to fully complete this study and consequently terminated our study with SJRI. On June 11, 2007, the Company entered into a six-month consulting agreement with a medical doctor. We agreed to pay $2,500 per month for this consulting contract. The doctor will provide inputs for the design and development of our microsphere, and provide us access to clinical facilities for the purposes of reviewing activities associated with the handling, use and administration of microsphere brachytherapy products. This doctor agreed to accept unregistered common stock as payment for his services. Accordingly, 22,689 shares, representing $6,667 in consulting fees are currently listed in subscribed common stock. These shares were issued in October 2007 and valued based on the average market price of our common stock. This contract was completed and never renewed. CONSULTING CONTRACT In September 2008, the company entered into a six month consulting agreement with its Chief Financial Officer, Michael Kramarz. Mr. Kramarz is to perform all his regular duties he had previously performed as Chief Financial Officer including the preparation of the Company's financial statements, SEC Filings, maintenance of corporate records, etc. Mr. Kramarz is to be compensated $50 per hour worked and will turn in weekly time sheets for approval. Mr. Kramarz had previously had a consulting contract for the period of January 2008 through August 2008. During the three months ended November, 2008, we incurred an expense of $23,440 under that agreement. NOTE 7 - LICENSE AGREEMENT The technology underlying the medical device that was formerly being developed by the Company was subject to a certain Master License Agreement ("License"), effective September 16, 2003, between Oncologix's predecessor, JDA, as Licensee, and the University of Maryland (the "University") as Licensor. We assumed JDA's position in our acquisition of JDA. On April 7, 2009, the Company entered into a Termination Agreement with the University of Maryland - Baltimore, The Master License Agreement between the Company and the University has been formally terminated and each party has released the other from all liabilities arising under the Master License Agreement. Below were the details of the License Agreement prior to its termination. NOTE 8 -- RELATED PARTY TRANSACTIONS In connection with the $1,090,000 in financing raised from September through November 2007, the Company paid Anthony Silverman, a former member of our Board of Directors, a finders' fee totaling $66,000. During May and June 2008, the Company issued 4,759,452 and 13,134,000 shares of common stock, respectively, to Anthony Silverman, a former Director of the Company in connection with the conversion of four convertible promissory notes. During June 2008, the Company issued 1,000,000 shares of common stock to Stanley Schloz, a former Director of the Company in connection with the conversion of a convertible promissory note. Please see Note 4 - Notes Payable for a more complete description of these transactions. 20 NOTE 9 - RECENT ACCOUNTING PRONOUNCEMENTS In June 2009, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 166 ("SFAS No. 166") "Accounting for Transfers of Financial Assets - an amendment of SFAS No. 140" which improves the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor's continuing involvement, if any, in transferred financial assets. This Statement has the same scope as Statement 140. Accordingly, this Statement applies to all entities. SFAS No. 166 must be applied as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. We do expect the adoption of SFAS No. 166 to have a material effect on our financial condition or results of operations. In May 2009, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 165 ("SFAS No. 165") "Subsequent Events" establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this Statement sets forth: (1) The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition; (2) The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; (3) The disclosures that an entity should make about events or transactions that occurred after the balance sheet date. In accordance with this Statement, an entity should apply the requirements to interim or annual financial periods ending after June 15, 2009. We do expect the adoption of SFAS No. 165 to have a material effect on our financial condition or results of operations. In May 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 162 ("SFAS 162") "The Hierarchy of Generally Accepted Accounting Principles" which identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of non-governmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States. This statement is effective 60 days following the SEC's approval of the PCAOB amendment to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 160 ("SFAS 160") "Non-controlling Interest in Consolidated Financial Statements - an amendment of ARB No. 51" which improves the relevance, comparability and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require: a) the ownership interest in subsidiaries held by parties other than the parent be clearly identified, labeled and presented in the consolidated financial statements; b) the amount of consolidated net income attributable to the parent and to the non-controlling interest be clearly identified and presented on the face of the consolidated statement of income; c) changes in a parents controlling interest in its subsidiary are to be accounted for consistently; d) when a subsidiary is deconsolidated, any retained non-controlling equity investment in the former subsidiary be initially measured at fair value; and entities provide sufficient disclosures that clearly identify and distinguish between the interest of the parent and the interest of the non-controlling owners. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. We do not expect the adoption of SFAS No. 160 to have a material effect on our financial condition or results of operations. In February 2007, the Financial Accounting Standards Board ("FASB") issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"), which is effective for fiscal years beginning after November 15, 2007. SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. We do not expect the adoption of SFAS 159 to have a material impact on our financial condition or results of operations. NOTE 10 -- 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 2009 and prior to achieving breakeven. Originally, as a result of the acquisition of JDA and the associated License Agreement with the University, the Company was required, under the terms of the amended license agreement to raise substantial funds for the development of the technology associated with the License Agreement. Due to the termination of the License Agreement in April 2009, we will not be required to raise these funds. 21 As of the date of this report, we will need approximately $250,000 to fund operations for the next twelve (12) months, without regard to repaying any short-term convertible or non-convertible notes payable. This funding will allow us to maintain basic operations and to bring our public filings current and keep them current. Our Company has never been profitable and we have had to rely on debt and equity financings to fund operations. Significant delays in the implementation of our plans could affect the ability to obtain future debt and equity funding which may affect or ability to continue as a going concern. NOTE 11 -- SUBSEQUENT EVENTS On December 1, 2008, the company entered into a Stock Purchase Agreement with an accredited investor to sell 1,500,000 shares of common stock at $0.01 per share. In connection with this agreement, the company also issued 150,000 shares of common stock for payment of a 10% finder's fee. The shares were issued in December 2008. On January 13, 2009, the company entered into a Stock Purchase Agreement with an accredited investor to sell 300,000 shares of common stock at $0.01 per share. The shares were issued in April 2009. In February 2009, we entered into a Technology Agreement with Institut fur Umwelttechnologien GmbH, a German Company ("IUT") whereunder the parties have agreed that: (e) The Company has granted an exclusive license to a new IUT subsidiary, called "IUTM", to develop and manufacture products based on the Company's proprietary information. This proprietary information is not based on the technology that had been subject to the Master License Agreement with the University of Maryland - Baltimore. The Company has also transferred to IUTM a number of items of laboratory equipment and inventory useful in connection with the licensed information. (f) The Company retains rights to market products based on such information as well as first consideration for marketing rights for other possible IUTM products. (g) In consideration of the license, the Company has received a 10% equity interest in IUTM, which is organized as a private German limited liability company and IUT has assumed approximately $82,000 of the Company's indebtedness. (h) The Company will transfer its marketing rights to its subsidiary, Oncologix Corporation and issued IUTM 10% of the equity ownership of that subsidiary. We have been advised that the group of German companies of which IUTM is a part ("Group") is continuing the development of a brachytherapy device generally as described above but based on proprietary technology not developed by the University of Maryland. We have begun discussions with the Group to determine our future business and financial relationships and plans, including the possibility of developing and commercializing other radiation-based medical products. Our plan is then to seek financing for the implementation of those plans. While our Management is optimistic as to the outcome of those discussions and future success in financing, it is not possible to predict the probabilities of success with any degree of certainty. On March 1, 2009, Michael Kramarz, the Company's Chief Financial Officer, signed an additional six month consulting agreement. Mr. Kramarz is to perform all his regular duties he had previously performed as Chief Financial Officer including the preparation of the Company's financial statements, SEC Filings, maintenance of corporate records, etc. Mr. Kramarz is to be compensated $90 per hour worked and will turn in weekly time sheets for approval. Mr. Kramarz had previously had a consulting contract for the period of January 2008 through February 2009. An additional six month consulting contract was signed on September 1, 2009, at the rate of $70 per hour worked. On March 17, 2009, the company entered into a Stock Purchase Agreement with an accredited investor to sell 1,000,000 shares of common stock at $0.015 per share. The shares were issued in April 2009. In addition, on April 7, 2009, the Company entered into a Termination Agreement with the University of Maryland - Baltimore, The Master License Agreement between the Company and the University has been formally terminated and each party has released the other from all liabilities arising under the Master License Agreement. On May 12, 2009, the company entered into a Stock Purchase Agreement with three accredited investors to sell 2,000,000 shares of common stock at $0.015 per share. The shares were issued in May 2009. 22 On May 22, 2009, the company entered into a Stock Purchase Agreement with an accredited investor to sell 1,000,000 shares of common stock at $0.015 per share. The shares were issued in June 2009. On June 11, 2009, the company entered into a Stock Purchase Agreement with an accredited investor to sell 1,500,000 shares of common stock at $0.02 per share. The shares were issued in June 2009. In April and May of 2009, convertible promissory note holders elected to convert $1,546,098 in principal and accrued interest into 30,921,961 shares of common stock. The company also recorded $1,621,767 in conversion expense as a result of reducing the conversion price from $0.30 to $0.05 per share for this conversion. By letter dated August 12, 2009, the Securities and Exchange Commission ("SEC") notified us that unless we become current with our required public filings by August 27, 2009, the SEC may cause the Company to be de-registered under the securities laws and that the SEC may issue an order suspending public trading of the Company's securities. As a result of preliminary conversations with the staff of the SEC, the Company believes that additional time may be granted that will be sufficient for the Company to be compliant with its filings. However, there is no assurance of that outcome. Such de-registration and suspension of trading will seriously limit the ability of investors to re-sell any of our shares held by them. In June, 2009, we began an effort to achieve compliance with all reporting requirements and our independent auditors began the process of examining our financial statements with a view to certifying them as required by law. This process was completed as shown by the auditor's report on the Financial Statements included in this Annual Report. In November 2009, holders of $1,090,000 in principal and $83,828 in accrued interest converted their notes into 23,476,566 shares of common stock at a conversion price of $0.05. These convertible notes were originally due on September 17, 2009. The Company recognized $391,276 in conversion expense as a result of the reduction of the conversion price to induce conversion. 23 ITEM 2. Management's Discussion And Analysis of Financial Condition and Results of Operation THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS CERTAIN STATEMENTS WHICH ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE SAFE HARBOR PROVISIONS OF SECTION 27A OF THE SECURITIES ACT OF 1993, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE STATEMENTS RELATE TO FUTURE EVENTS, INCLUDING THE FUTURE FINANCIAL PERFORMANCE OF ONCOLOGIX. IN SOME CASES, YOU CAN IDENTIFY FORWARD-LOOKING STATEMENTS BY TERMINOLOGY SUCH AS "MAY," "WILL," "SHOULD," "EXPECTS," "PLANS," "ANTICIPATES," "BELIEVES," "ESTIMATES," "PREDICTS," "POTENTIAL," OR "CONTINUE" OR THE NEGATIVE OF SUCH TERMS AND OTHER COMPARABLE TERMINOLOGY. THESE STATEMENTS ONLY REFLECT MANAGEMENT'S EXPECTATIONS AND ESTIMATES AS OF THE DATE OF THIS REPORT. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THESE EXPECTATIONS. IN EVALUATING THOSE STATEMENTS, YOU SHOULD SPECIFICALLY CONSIDER VARIOUS FACTORS, INCLUDING THE RISKS INCLUDED IN THE REPORTS FILED BY ONCOLOGIX WITH THE SEC. THESE FACTORS MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENTS. ONCOLOGIX IS NOT UNDERTAKING ANY OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS CONTAINED IN THIS REPORT. This report should be read in conjunction with our Annual report on Form 10-K for the fiscal year ended August 31, 2008. FORWARD LOOKING STATEMENTS This Current Report contains forward-looking statements as that term is defined in Section 27A of the United States Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. These statements relate to future events or future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. Such statements are based on currently available financial and competitive information and are subject to various risks and uncertainties that could cause actual results to differ materially from historical experience and present expectations. Undue reliance should not be placed on such forward-looking statements as such statements speak only as of the date on which they are made. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements are predictions and not guarantees of future performance or events. The forward-looking statements are based on current industry, financial and economic information, which we have assessed but which by its nature, is dynamic and subject to rapid and possibly abrupt changes. Our actual results could differ materially from those stated or implied by such forward-looking statements due to risks and uncertainties associated with our business. We hereby qualify all our forward-looking statements by these cautionary statements. We undertake no obligation to amend this report or revise publicly these forward looking statements (other than pursuant to reporting obligations imposed on registrants pursuant to the Securities Exchange Act of 1934) to reflect subsequent events or circumstances. These forward-looking statements speak only as of their dates and should not be unduly relied upon. We undertake no obligation to amend this report or revise publicly these forward-looking statements (other than pursuant to reporting obligations imposed on registrants pursuant to the Securities Exchange Act of 1934) to reflect subsequent events or circumstances, whether as the result of new information, future events or otherwise. 24 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. GENERAL DISCUSSION We were originally formed in 1995 as "Wavetech, Inc." a New Jersey corporation and changed our corporate domicile to Nevada in December 1997, by merging into a Nevada corporation named, "Interpretel International, Inc." We subsequently changed our name, first to "Wavetech International, Inc." and then, in 2000, to "BestNet Communications Corp." Our business at the time was to provide worldwide long distance telephone communication and teleconferencing services to commercial and residential consumers through the internet. That business was never profitable and we were able to continue it only by repeated equity and debt financings. Accordingly, during December 2006, we determined to dispose of that business and sold it during February 2007. The discontinuation of the telephone business segment has been recorded separately in the accompanying consolidated financial statement. We entered the medical device business at the end of July 2006 through the acquisition of JDA Medical Technologies, Inc. ("JDA"), a development stage company, which was merged into our wholly owned subsidiary, Oncologix Corporation. On January 22, 2007, we changed our name to Oncologix Tech, Inc., to reflect this new business. During June 2007, we moved our principal offices from Grand Rapids, Michigan, to our offices at 3725 Lawrenceville-Suwanee Road, Suite B-4, Suwanee, Georgia, 30024, telephone (770) 831-8818. At that address, our business was the development of a medical device for brachytherapy (radiation therapy), called the "Oncosphere" (or "Oncosphere System"), for the advanced medical treatment of soft tissue cancers. It is a radioactive micro-particle designed to deliver therapeutic radiation directly to a tumor site by introducing the micro-particles into the artery that feeds the tumor tissue. Its first application is expected to be the treatment of liver cancer. Due to a lack of funding, we had to suspend these activities on December 31, 2007, whereupon we closed the offices in Suwanee Georgia. Our new mailing address is P.O. Box 8832, Grand Rapids, MI 49518-8832, telephone (616) 977-9933. During May 2008, we determined to dispose of most of the assets of the Oncosphere project. This information is being presented as discontinued operations for all periods shown. CRITICAL ACCOUNTING POLICIES "Management's Discussion and Analysis or Plan of Operation" ("MDA") discusses our condensed consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate our estimates and judgments, including those related to research and development costs, deferred income taxes and the carrying value of long-lived assets. We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. The result of these estimates and judgments form the basis for making conclusions about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions; changes in these estimates as a result of future events may have a material effect on the Company's financial condition. The SEC suggests that all registrants list their most "critical accounting policies" in MDA. A critical accounting policy is one which is both important to the portrayal of the Company's financial condition and results of operations and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management believes the following critical accounting policies affect its more significant judgments and estimates in the preparation of its consolidated financial statements: The carrying value of long-lived assets, stock based compensation, deferred income tax valuation allowances, pending or threatening litigation and the allocation of assets acquired and liabilities assumed in acquisitions. Carrying value 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 as well as other long-lived assets. We record property and equipment at cost with depreciation 25 provided for on the straight-line method over the estimated useful lives of the related assets. Impairment loss, if any, is measured by the amount which the carrying amount of the assets exceeds the fair value of the assets. Stock-based compensation. Effective September 1, 2006, we adopted the fair value recognition provisions of SFAS 123(R), using the modified prospective transition method. Under that transition method, employee compensation cost recognized in fiscal 2007 includes: (i) compensation cost for all share-based payments granted prior to, but not yet vested as of September 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123 and (ii) compensation cost for all share-based payments granted subsequent to September 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). Results for prior periods have not been restated. Stock-based employee compensation expense is recognized as a component of general and administrative expense in the Statement of Operations. The fair value of options 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. 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. Deferred tax assets. In assessing the realizability of deferred tax assets, management assesses the likelihood that deferred tax assets will be recovered from future taxable income, and to the extent that recovery is not likely a valuation allowance is established. We adjust the valuation allowance in the period management determines it is more likely than not that deferred tax assets will or will not be realized. To date, we have fully reserved for our deferred tax assets based primarily on our history of recurring losses. Reserves related to pending or threatening litigation. We previously had a dispute with Softalk, which is more fully described in the notes to our Consolidated Financial Statements for the fiscal year ended August 31, 2007. This dispute had been dormant and accordingly, we did not recognize a liability for this dispute in fiscal 2006 or fiscal 2007. This matter was resolved pursuant to a Settlement Agreement and Mutual Release dated June 20, 2007 whereunder Softalk paid the Company $10,000 and each party released the other from all prior contractual agreements, made between the parties and agreed to a full settlement and discharge and mutual release of all existing and potential claims. Allocation of assets acquired and liabilities assumed in the acquisition of JDA. Assets acquired and liabilities assumed were recorded at their estimated fair values. The value allocated to the purchased in-process research and development costs requires forward looking, income-based models, in which we utilized the discounted cash flow method to project cash flows. We estimated that positive cash flows from our product would commence in the second quarter of fiscal 2011. If our project gets delayed, this could affect the discounted future cash flow and reduce the value of the acquired in-process research and development. Additionally, projected revenue was derived from amounts currently being reimbursed by Medicare. Should those reimbursement amounts change significantly, this could adversely affect how we value current and future acquired in-process research and development costs. COMPARISON OF THE THREE MONTH PERIOD ENDED NOVEMBER 30, 2008 TO THE THREE MONTH PERIOD ENDED NOVEMBER 30, 2007 General and Administrative Expense General and administrative expenses included in our results from continuing operations include legal and accounting fees, license fees, travel, payroll and related expenses, directors and officers insurance, and public relations expenses. These expenses relate primarily to general corporate overhead and accordingly are segregated from general and administrative expenses that related directly to our telephone business, which are included in the results from discontinued operations. General and administrative expenses that are specific to our telephone business include bad debt expense, agent's commissions, outside services, postage, web-hosting expense and phone licenses. The medical device business expenses have been reported as discontinued operations in this report. General and administrative expense decreased to $222,513 during the three-month period ended November 30, 2008, from $224,432, a decrease of 1% or $1,919 from the comparable period in fiscal 2008. Stock based compensation expense decreased to $2,238 during the three-month period ended November 30, 2008, from $26,548 during the comparable period in fiscal 2008. This decrease was a result to canceling option agreements due to the termination of employees and resignation of directors. Legal and accounting expense decreased to $38,389 during the three-month period ended November 30, 2008, from $68,103 during the comparable period in fiscal 2008 due primarily to reduced legal and accounting 26 services as a result of the suspension of operations as of December 31, 2007 as well as a suspension of our fiscal 2008 audit work. Press Release and board meeting expense decreased to $235 during the three-month period ended November 30, 2008, from $6,244 during the comparable period in fiscal 2008 due primarily to the suspension of operations on December 31, 2007 and holding telephonic board meetings to save on travel expenses. Licenses and fees increased to $83,566 during the three-month period ended November 30, 2008, from $3,567 during the comparable period in fiscal 2008 as a result of the issuance of 2,000,000 shares of stock to the University of Maryland to extend our License Agreement. Depreciation and Amortization Depreciation and amortization decreased to $416 during the three-month period ended November 30, 2008, from $515 in the comparable period in fiscal 2008. The decrease in depreciation and amortization from fiscal 2009 to fiscal 2008 was the result of assets becoming fully depreciated during fiscal 2008. Interest Income Consolidated interest income decreased to nil during the three-month period ended November 30, 2008, from $229, a decrease of $229, or 100%, from the comparable period in fiscal 2008. The decrease is the result of carrying a lower average cash balance in our savings accounts as a result of financing troubles. Interest and Finance Charges Consolidated interest and finance charges decreased to $259,140 for the three-month period ended November 30, 2008, from $468,780, a decrease of 45% or $209,640 for the comparable period in fiscal 2008. The decrease is primarily attributable to conversions of convertible promissory notes at the end of fiscal 2008. A summary of interest and finance charges is as follows: Three Months Ended November 30, --------------------- 2008 2007 -------- -------- Interest expense on nonconvertible notes ............. $ 157 $ 13,130 Interest expense on convertible notes payable ........ 41,339 61,130 Amortization of note payable discounts ............... 186,252 354,698 Other interest and finance charges ................... 31,392 39,822 -------- -------- Total interest and finance charges ................... $259,140 $468,780 ======== ======== 27 Discontinued Operations Loss from discontinued operations for our medical device business decreased to $13,475 for the three-month period ended November 30, 2008, from $752,079 during the comparable period during fiscal 2008 The decreased was a result of suspending operations on December 31, 2007. Three Months Ended November 30, ------------------------ 2008 2007 --------- --------- Operating expenses: General and administrative .................... $ -- $ 73,824 Research and development ...................... -- 667,824 Depreciation and amortization ................. 9,608 10,448 --------- --------- Total operating expenses ...................... 9,608 752,096 --------- --------- Loss from operations .......................... (9,608) (752,096) --------- --------- Other income (expense): Interest income ............................... -- 202 Loss on disposal of assets .................... (3,837) -- Other income (expense) ........................ (30) (185) --------- --------- Total other income (expense) .................. (3,867) 17 --------- --------- Net loss from discontinued operations ......... $ (13,475) $(752,079) ========= ========= LIQUIDITY AND CAPITAL RESOURCES We were unable to obtain the financing necessary to continue operations after December 31, 2007. Consequently, we terminated the employment of all of our personnel, effective as of that date. We anticipate that we will require $250,000 to operate for the next twelve months. These funds are expected to be raised through small private placements, although there is no assurance of any success in doing so. We plan to engage in discussions with IUTM in the next two months with a view to establishing the nature of our future relationships and to develop detailed plans for future operations and for obtaining the necessary financing. Any future operations will depend on our ability to raise sufficient funds from investors. Our operating losses to date have been covered by equity and debt financing obtained from private investors, including certain present and former members of our Board of Directors. We never achieved positive cash flow or profitability in our telephone business because we did not generate a volume of business sufficient to cover our overhead costs. Our financial statements contain explanatory language related to our ability to continue as a going concern and our auditors have qualified their opinion on our Consolidated Financial Statements for the year ended August 31, 2008, included as a part of this Report, reflecting uncertainty as to our ability to continue in business as a going concern. On November 30, 2008, we had cash and cash equivalents of $442. We have historically relied upon the issuance of debt or equity in order to finance our operations. Our operating losses to date have been covered by equity and debt financing obtained from private investors, including certain current and former members of our Board of Directors. 28
Below is a summary listing for the next 12 months, as of November 30, 2008, of our required minimum cash payments including our short-term notes payable, short-term convertible notes payable and their respective due dates. To the extent the convertible notes are not converted, funds for repayment will have to be raised through additional debt or equity financings. Accrued Due Date Interest Rate Amount Interest*** Total Owed Convertible/Non-Convertible -------- ------------- ------ ----------- ---------- --------------------------- 07/27/2009(1) 10.00% 63,822 7,012 70,834 Converted at $0.05 on 7/27/09 03/31/2012(2) 12.00% 2,712 1,237 3,949 Convertible at $0.15 per share 7/27/2009 8.00% 75,000 12,784 87,784 Converted at $0.05 on 7/27/09 12/04/08 (3) 8.00% 125,000 12,548 137,548 Convertible at $0.15 per share 7/27/2009 6.00% 1,265,000 122,481 1,387,481 Converted at $0.05 on 7/27/09 1/22/2010 6.00% 30,000 3,847 33,847 Convertible at $0.30 per share 9/17/2009 6.00% 1,090,000 83,828 1,173,828 Convertible at $0.30 per share ---------------- ---------------- ---------------- $ 2,651,534 $ 243,737 $ 2,895,271 ================ ================ ================ (1) Debt held by Anthony Silverman, our CEO, President and member of our Board of Directors. (2) Debt held by Stanley Schloz, a former member of our Board of Directors. (3) Interest calculated through 08/31/09 *** Interest calculated to maturity or conversion INFLATION AND OTHER FACTORS The Company's operations are influenced by general economic trends and technology advances in the medical industries. Our activities in the development, manufacture and sale of cancer therapy products are, and will be subject to extensive laws, regulations, regulatory approvals and guidelines. Within the United States, therapeutic radiological devices must comply with the U.S. Federal Food, Drug and Cosmetic Act, which is enforced by the FDA. We are also required to adhere to applicable FDA regulations for Good Manufacturing Practices, including extensive record keeping and periodic inspections of manufacturing facilities. Medical devices such as the Oncosphere cannot be used or sold unless they are approved for specified purposes by the FDA. There are two levels of FDA approval. The first is the granting of approval to evaluate use of the device in human subjects (through an IDE); the second is obtaining approval to market the device to the public for the treatment of specified diseases (PMA). Our business involves the importing, exporting, design, manufacture, distribution, use and storage of beta and gamma emitting radioisotopes. These activities in the United States are subject to federal, state and local rules relating to radioactive material promulgated by the Nuclear Regulatory Commission ("NRC"), and states that have subscribed to certain standards and local authorities, known as "Agreement States" In addition, we must comply with NRC, state and U.S. Department of Transportation requirements for labeling and packaging shipments of radiation sources to hospitals or others users of our devices. In order to market our devices commercially, we will be required to obtain a sealed source device registration from Agreement States and/or the NRC, depending on the states in which the device will be distributed. Additionally, hospitals in the United States are required to have radiation licenses to hold, handle and use radiation. Many hospitals and/or physicians in the United States will be required to amend their radiation licenses to include our isotopes before receiving and using them. Depending on the state in which the hospital is located, the license amendment will be processed by the responsible subscribing state department or agency or by the NRC. Obtaining such registration, approvals, and licenses can be complicated and time consuming and there is no assurance that any of them can be obtained. 29
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk We are a smaller reporting company, as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, and accordingly, we are not required to provide the information required by this Item. ITEM 4. Controls and Procedures Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company's principal executive officer and principal financial officer and effected by our 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 and includes those policies and procedures that: o pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; o provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and o 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 may not prevent or detect misstatements. 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. As of August 31, 2008 we conducted an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in "Internal Control -- Integrated Framework," issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based upon this assessment, we determined that there are material weaknesses affecting our internal control over financial reporting. The matters involving internal controls and procedures that our management considers to be material weaknesses under COSO and SEC rules are: (1) lack of a functioning audit committee and lack of independent directors on our board of directors, resulting in potentially ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (4) ineffective controls over period end financial disclosure and reporting processes. The aforementioned potential material weaknesses were identified by our Chief Financial Officer in connection with the preparation of our financial statements as of March 31, 2009 who communicated the matters to our management and board of directors. Management believes that the material weaknesses set forth in items (2), (3) and (4) above did not have an affect on our financial results. However, the lack of a functioning audit committee and lack of a majority of independent directors on our board of directors, resulting in potentially ineffective oversight in the establishment and monitoring of required internal controls and procedures, can impact our financial statements. Management's Remediation Initiatives ------------------------------------ Although we are unable to meet the standards under COSO because of the limited funds available to a company of our size, we are committed to improving our financial organization. As funds become available, we will undertake to: (1) create a position to segregate duties consistent with control objectives, (2) increase our personnel resources and technical accounting expertise within the accounting function (3) appoint one or more outside directors to our board of 30
directors who shall be appointed to a Company audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; and (4) prepare and implement sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements. We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal control over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. However, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. PART II - OTHER INFORMATION ITEM 1. Legal Proceedings None ITEM 1A. Risk Factors No changes since filing of our Form 10-K for the year ended August 31, 2008. ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds - ------------------------- ------------------------------- ---------------------------------------------------------------- Date of Sale Proceeds from Sale Further Description and Remarks - ------------------------- ------------------------------- ---------------------------------------------------------------- October 13, 2008 $15,000 On October 13, 2008, the Company sold 1,500,000 shares of common stock to an accredited investor at $0.01 per share. - ------------------------- ------------------------------- ---------------------------------------------------------------- October 13, 2008 $15,000 On October 13, 2008, the Company sold 1,500,000 shares of common stock to its CEO, Anthony Silverman at a price of $0.01 per share. - ------------------------- ------------------------------- ---------------------------------------------------------------- December 1, 2008 $15,000 On December 1, 2008, the Company sold 1,500,000 shares of common stock to an accredited investor at $0.01 per share. - ------------------------- ------------------------------- ---------------------------------------------------------------- January 13, 2009 $3,000 On January 13, 2009, the Company sold 300,000 shares of common stock to an accredited investor at $0.01 per share. - ------------------------- ------------------------------- ---------------------------------------------------------------- March 17, 2009 $15,000 On March 17, 2009, the Company sold 1,000,000 shares of common stock to an accredited investor at $0.015 per share. - ------------------------- ------------------------------- ---------------------------------------------------------------- May 13, 2009 $30,000 On May 13, 2009, the Company sold 2,000,000 shares of common stock to three accredited investors at $0.015 per share. - ------------------------- ------------------------------- ---------------------------------------------------------------- May 22, 2009 $15,000 On May 22, 2009, the Company sold 1,000,000 shares of common stock to an accredited investor at $0.015 per share. - ------------------------- ------------------------------- ---------------------------------------------------------------- June 13, 2009 $30,000 On June 13, 2009, the Company sold 1,500,000 shares of common stock to an accredited investor at $0.02 per share. - ------------------------- ------------------------------- ---------------------------------------------------------------- September 11, 2009 $25,000 On September 11, 2009, the Company issued a 90-day $25,000 promissory note to Anthony Silverman, its CEO and President. The note bears an interest rate of 6%. - ------------------------- ------------------------------- ---------------------------------------------------------------- September 30, 2009 $25,000 On September 30, 2009, the Company sold 1,250,000 shares of common stock to an accredited investor at $0.02 per share. - ------------------------- ------------------------------- ---------------------------------------------------------------- 31
ITEM 3. Defaults Upon Senior Securities None. ITEM 4. Submission of Matters to a Vote of Security Holders None. ITEM 5. Other Information In November 2009, holders of $1,090,000 in principal and $83,828 in accrued interest converted their notes into 23,476,566 shares of common stock at a conversion price of $0.05. These convertible notes were originally due on September 17, 2009. The Company recognized $391,276 in conversion expense as a result of the reduction of the conversion price to induce conversion. ITEM 6. Exhibits Exhibits. Description --------- ----------- 31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: November 17, 2009 ONCOLOGIX TECH, INC. By: /s/ Anthony Silverman ------------------------------- Anthony Silverman, President and Chief Executive Officer By: /s/ Michael A. Kramarz -------------------------------- Michael A. Kramarz, Chief Financial Officer 33 EX-31.1 2 oncologixexhib311-113008.txt CERTIFICATION OF CEO PER SECTION 302 EXHIBIT 31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER ============================================ PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 ========================================================= I, Anthony Silverman, Chief Executive Officer of Oncologix Tech, Inc. (the "Company"), certify that: (1) I have reviewed this Annual Report on Form 10-Q of Oncologix Tech, Inc. the fiscal year ended November 30, 2008 (the "Report"); (2) Based on my knowledge, the Report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the Report; (3) Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition and results of operations of the Company as of, and for, the periods represented in the Report; (4) The Company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others with these entities, particularly during the period in which this Report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; (c) Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and (d) Disclosed in this Report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter (i.e., the fiscal year ended November 30, 2008) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. (5) The Company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. Dated: November 17, 2009 By: /s/ Anthony Silverman ---------------------------------- Anthony Silverman Chief Executive Officer and President EX-31.2 3 oncologixexhib312-113008.txt CERTIFICATION OF CFO PER SECTION 302 EXHIBIT 31.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER ============================================ PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 ========================================================= I, Michael A. Kramarz, Chief Financial Officer of Oncologix Tech, Inc. (the "Company"), certify that: (1) I have reviewed this Annual Report on Form 10-Q of Oncologix Tech, Inc. the fiscal year ended November 30, 2008 (the "Report"); (2) Based on my knowledge, the Report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the Report; (3) Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition and results of operations of the Company as of, and for, the periods represented in the Report; (4) The Company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others with these entities, particularly during the period in which this Report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; (c) Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and (d) Disclosed in this Report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter (i.e., the fiscal year ended November 30, 2008) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. (5) The Company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. Dated: November 17, 2009 By: /s/ Michael A. Kramarz -------------------------------- Michael A. Kramarz Chief Financial Officer EX-32.1 4 oncologixexhib321-113008.txt CERTIFICATION OF CEO PER SECTION 906 EXHIBIT 32.1 ONCOLOGIX TECH, INC. AND SUBSIDIARIES CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Oncologix Tech, Inc. (the "Company") on Form 10-Q for the three months ended November 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I Anthony Silverman, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Anthony Silverman ------------------------------------------ Anthony Silverman Chief Executive Officer and President November 17, 2009 EX-32.2 5 oncologixexhib322-113008.txt CERTIFICATION OF CFO PER SECTION 906 EXHIBIT 32.2 ONCOLOGIX TECH, INC. AND SUBSIDIARIES CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Oncologix Tech, Inc. (the "Company") on Form 10-Q for the three months ended November 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I Michael A. Kramarz, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Michael A. Kramarz ----------------------------------- Michael A. Kramarz Chief Financial Officer November 17, 2009 -----END PRIVACY-ENHANCED MESSAGE-----