ONCI On4 Communications Inc (PK)

Forward-Looking Statements

This quarterly report contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report. Except as required by applicable laws, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited financial statements are stated in U.S. dollars and are prepared in accordance with generally accepted accounting principles in the United States. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "common shares" refer to the common shares in our capital stock.

As used in this quarterly report and unless otherwise indicated, the terms "we", "us", "our" and "our company" mean On4 Communications Inc., a Delaware corporation, unless otherwise indicated.

Business Overview

We were incorporated as a Delaware company on June 4, 2001 under the name Sound Revolution Inc. On July 2, 2009 we changed our name to On4 Communications, Inc. Our fiscal year end is October 31. Our address is Suite 1704 – 1188 West Pender Street, Vancouver, BC, Canada, V6E 0A2. Our telephone number is (604) 620-6879.

Our common stock is quoted on the Pink Sheets Quotation system under the symbol “ONCI.PK” and on the Berlin Stock Exchange under the symbol O4C:GR.

On June 10, 2008, our company effected a 1 for 42 reverse stock split of the outstanding shares of common stock our company and also increased the number of authorized share capital of our company from 100,000,000 to 110,000,000 shares. 100,000,000 shares out the total authorized capital shall be common stock and 10,000,000 shall be preferred stock. On June 26, 2008, the reverse stock split and the increase in our company’s authorized capital came into effect. As a result of the reverse split, the number of the outstanding shares of common stock of our company was decreased from 10,854,629 shares to 258,444 shares of common stock.

On March 13, 2012, we received written consent from the board of directors and the holders of 52.40% of our company’s voting securities to amend the Articles of Incorporation to increase our authorized capital.

On April 19, 2012, the Delaware Secretary of State accepted for filing of a Certificate of Amendment, wherein, we amended our Articles of Incorporation to increase the authorized number of shares of our common stock from 100,000,000 to 200,000,000 shares of common stock, par value of $0.0001 per share, effective April 20, 2012. Our preferred stock remained unchanged.

On November 1, 2012, our company received written consent from the board of directors and the holders of 78.72% of our company’s voting securities to amend the Articles of Incorporation to increase our authorized capital.

On November 30, 2012, the Delaware Secretary of State accepted for filing of a Certificate of Amendment, wherein, our company amended its Articles of Incorporation to increase the authorized number of shares of our common stock from 210,000,000 to 630,000,000 shares, with a par value of $0.0001, which consists of 600,000,000 shares of common stock and 30,000,000 shares of preferred stock.

Corporate History

On March 12, 2009, we entered into a merger agreement with On4 Communications, Inc., a private Arizona company incorporated on June 5, 2006. We subsequently amended this agreement on April 7, 2009, and on May 1, 2009 we completed the merger with On4, with our company as the surviving entity. Upon the completion of the merger, we had three wholly-owned subsidiaries: (i) Charity Tunes Inc., a Delaware company incorporated on June 27, 2005 for the purpose of operating a website for the distribution of music online; (ii) Sound Revolution Recordings Inc., a British Columbia, Canada company incorporated on June 20, 2001 for the purpose of carrying on music marketing services in British Columbia; and (iii) PetsMobility Inc., a Delaware company incorporated on March 23, 2006 for the purpose of operating the website www.petsmo.com and related business.

On April 29, 2010, we sold our interest in PetsMobility, excluding certain specific assets, to On4 Communications Inc., a private Canadian company and our shareholder (“On4 Canada”), pursuant to an asset purchase agreement in exchange for On4 Canada returning 2,000,000 shares of our common stock to our treasury for cancellation. On October 29, 2010 we amended the asset purchase agreement to clarify certain terms of the purchase and sale.

On March 16, 2011, we sold our interest in Charity Tunes and Sound Revolution to Empire Success, LLC, a private Nevada limited liability company, in exchange for $15,000 and 6,300 shares of Empire’s common stock. As a result, we currently have no subsidiaries.

On November 3, 2011, we entered into a binding letter of intent to acquire 100% of the issued and outstanding shares of NetCents Systems Ltd., a private Alberta corporation engaged in the development and implementation of a unique and secure electronic payment system for online merchants and consumers. The letter of intent provides for a period of due diligence which will lead to a formal agreement whereby we will acquire 100% of the issued and outstanding capital of NetCents. Clayton Moore, an officer and director of our company, and Ryan Madson, an officer of our company, are shareholders of NetCents and Mr. Moore is the president and director of Net Cents.

On December 15, 2011, we entered into a share exchange agreement with NetCents and the selling shareholders of NetCents. Pursuant to the terms of the share exchange agreement, our company and NetCents agreed to engage in a share exchange which, if completed, would result in NetCents becoming a wholly owned subsidiary of our company. The share exchange has not been completed as of the date of this quarterly report and is subject to completion of due diligence by the parties, and to the following material terms and conditions:

Also on December 15, 2011, NetCents received the approval for the share exchange agreement and the share exchange transaction from holders of approximately 76% of its voting securities through written resolution in lieu of holding a meeting.

On February 13, 2012, we entered into a convertible promissory note agreement with Asher for $32,500. Pursuant to the agreement, the loan is convertible into shares of common stock at a variable conversion price equal to the lower of 51% of the average of the lowest three closing bid prices for the common stock during the 10 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on November 15, 2012.

On May 8, 2012, we entered into a convertible promissory note agreement with Asher pursuant to which we received debt financing in the amount of $32,500. Pursuant to the agreement, the loan is convertible 180 days after issuance into shares of common stock at a variable conversion price equal to the lower of 51% of the average of the lowest three closing bid prices for the common stock during the 10 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on February 11, 2013. . During the six months ended April 30, 2013 we issued 22,871,651 shares of common stock for the conversion of $32,500 of the note plus accrued interest of $1,300.

On August 7, 2012, we entered into a convertible promissory note agreement with Asher for $32,500. Pursuant to the agreement, the loan is convertible at a variable conversion price equal to 51% of the average of the lowest three closing bid prices for the common stock during the 20 trading days prior to the date of the conversion notice. The loan bears interest at 5% per year and the principal amount and any interest thereon are due on May 9, 2013. During the six months ended April 30, 2013 we issued 42,062,365 shares of common stock for the conversion of $32,500 of the note plus accrued interest of $1,300.

On September 10, 2012, we entered into a convertible promissory note agreement with Asher for $25,000. The proceeds were received on October 1, 2012. Pursuant to the terms of the agreement, the loan is unsecured, bears interest at 8% per annum, and is convertible into shares of our common stock at any time at a variable conversion price equal to 50% of the average of the lowest three closing bid prices for the common stock during the 10 trading days prior to the date of the conversion notice. The principal amount of the loan and any interest thereon are due on October 1, 2013. During the six months ended April 30, 2013 we issued 35,660,372 shares of common stock for the conversion of $25,000 of the note plus accrued interest of $1,538.

On September 10, 2012, we entered into a convertible promissory note agreement with Asher for $60,000. Pursuant to the terms of the agreement, the loan is unsecured, bears interest at 8% per annum, and is due on September 10, 2013. Furthermore, the note is convertible into shares of our company’s common stock at any time at a variable conversion price equal to 55% of the average of the lowest closing bid prices for the common stock during the 5 trading days prior to the date of the conversion notice. During the six months ended April 30, 2013 we issued 15,329,249 shares of common stock for the conversion of $20,000 of the note and $220 of interest.

On November 13, 2012, we entered into a convertible promissory note agreement with Asher for $20,000. Pursuant to the agreement, the loan is convertible at a variable conversion price equal to 50% of the average of the lowest three closing bid prices for the common stock during the 20 trading days prior to the date of the conversion notice. The loan bears interest at 5% per year and the principal amount and any interest thereon are due on November 5, 2013.

On November 13, 2012, we entered into a convertible promissory note agreement with Asher for $40,000. Pursuant to the agreement, the loan is convertible at a variable conversion price equal to 50% of the average of the lowest three closing bid prices for the common stock during the 20 trading days prior to the date of the conversion notice. The loan bears interest at 5% per year and the principal amount and any interest thereon are due on November 5, 2013. During the six months ended April 30, 2013 we issued 47,892,726 shares of common stock for the conversion of $40,000 of the note and $320 of interest.

On December 3, 2012, we entered into a convertible promissory note agreement with Asher for $32,500. Pursuant to the agreement, the loan is convertible 180 days after issuance into shares of common stock at a variable conversion price equal to 51% of the average of the lowest two closing bid prices for the common stock during the 20 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on September 5, 2013.

On February 10, 2013, we entered into a convertible promissory note agreement with Asher for $27,500. Pursuant to the agreement, the loan is convertible at a variable conversion price equal to 50% of the average of the lowest three closing bid prices for the common stock during the 10 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on February 10, 2014.

On February 20, 2013, we entered into a convertible promissory note agreement with Asher for $37,500. Pursuant to the agreement, the loan is convertible at a variable conversion price equal to 51% of the average of the lowest three closing bid prices for the common stock during the 20 trading days prior to the date of the conversion notice. The loan bears interest at 8% per year and the principal amount and any interest thereon are due on November 22, 2013.

Our Current Business

We are a development stage company, providing wireless communications services to telecommunication companies, consumers and businesses. Our platform comprises global positioning system (“GPS”) device management, location-based services (“LBS”) capabilities, and the broadcasting of proprietary and non-proprietary content. LBS is a term used to describe the delivery of information and entertainment content to consumers with mobile devices based on the geographical position of the mobile device. We intend to deliver LBS via two-way communication tracking devices with applications that are able to track people, pets, assets and inventory. Our solution platform integrates various location-aware devises, such as GPS receivers, and transmits data to a range of devices, including Web browsers, instant messengers, short message service/mail, and mobile phones.

Research and Development Expenditures

We have incurred $Nil in research and development expenditures over the last two fiscal years.

Employees

As of April 30, 2013, our only employees are our directors and officers. We plan to hire additional employees when circumstances warrant.

Results of Operations

Three and Six Months Ended April 30, 2013 and April 30, 2012, and the Period from June 5, 2006 (Date of Inception) to April 30, 2013.

Our results of operations are presented below:

From our inception on June 5, 2006 to April 30, 2013, we did not generate any revenue.

Our total expenses during the three months ended April 30, 2013 consisted of $1,259 in foreign exchange gain, $5,843 in general and administrative expenses and $19,146 in professional fees. During this period we also incurred $72,913 in accretion of discounts on convertible notes payable, $3,409 in amortization of deferred financing costs, $25,644 in interest expenses and $32,723 in loss on change in fair value of derivative liabilities.

Our total expenses during the three months ended April 30, 2012 consisted of $48,750 in consulting fees, $5,085 in foreign exchange loss, $11,544 in general and administrative expenses, $16,706 in management fees and $19,369 in professional fees. During this period we also incurred $25,462 in the form of interest expenses.

Our total expenses during the six months ended April 30, 2013 consisted of $18 in foreign exchange gain, $8,834 in general and administrative expenses, $15,610 in management fees and $41,827 in professional fees, During this period we also incurred $153,037 in accretion of discounts on convertible notes payable, $6,131 in amortization of deferred financing costs, $69,999 in interest expenses and $172,134 in loss on change in fair value of derivative liabilities.

Our total expenses during the six months ended April 30, 2012 consisted of $241 in amortization of property and equipment, $48,750 in consulting fees, $2,399 in foreign exchange loss, $12,980 in general and administrative expenses, $885 in impairment of assets, $27,655 in management fees and $47,498 in professional fees, During this period we also incurred $63,894 in the form of interest expenses.

Our total expenses from our inception on June 5, 2006 to April 30, 2013 consisted of $182,182 in advertising and marketing expenses, $18,138 in amortization of intangible assets, $32,677 in amortization of property and equipment, $2,173,938 in consulting fees, $254,784 in foreign exchange loss, $1,122,838 in general and administrative expenses, $3,274,109 in impairment of goodwill, $2,220,609 in impairment of intangible assets, $1,222,381 in management fees, $29,516 in payroll expenses, $788,790 in professional fees and $318,360 in research and development expenses.

Our general and administrative expenses consisted of travel, meals and entertainment, office maintenance, communication expenses (cellular, internet, fax and telephone), office supplies and courier and postage costs. Our professional fees consisted of legal, accounting and auditing fees.

The decrease in our operating expenses during the three months ended April 30, 2013 compared to the same period in 2012 was primarily due to decreases in consulting fees, foreign exchange loss, general and administrative expenses, management fees and professional fees during the most recent period.

The decrease in our operating expenses during the six months ended April 30, 2013 compared to the same period in 2012 was primarily due to decreases in amortization of property and equipment, consulting fees, foreign exchange loss, general and administrative expenses, management fees and professional fees during the most recent period.

During the three months ended April 30, 2013 we incurred a $23,730 operating loss, and a net loss of $158,419. During the same period in fiscal 2012 we incurred an operating loss of $101,454 and a net loss of $126,916. During the six months ended April 30, 2013 we incurred a $71,485 operating loss, and a net loss of $472,786. During the same period in fiscal 2012 we incurred an operating loss of $140,408 and a net loss of $204,302. We did not experience any net loss per share during the three and six months ended April 30, 2013 and 2012. From our inception on June 5, 2006 to April 30, 2013 we incurred a $13,580,279 loss from continuing operations, incurred a $1,205,782 loss from discontinued operations and incurred a net loss $14,786,061.

As of April 30, 2013 we had $Nil in cash, $136,585 in total assets, $1,862,544 in total liabilities and a working capital deficit of $1,730,205. As of October 31, 2012, 2013 we had working capital deficit of $1,738,670.

During the six months ended April 30, 2013 we spent $38,458 on operating activities, compared to spending of $78,625 on operating activities during the same period in fiscal 2012. The decrease in our expenditures on operating activities during the six months ended April 30, 2013 was largely due to decreases in stock based compensation and amounts due to related parties. From our inception on June 5, 2006 to April 30, 2013 we spent $2,834,582 on operating activities.

During the six months ended April 30, 2013 we spent $54,137 on investing activities, whereas we spent $35,095 on investing activities during the same period in fiscal 2012. From our inception on June 5, 2006 to April 30, 2013 we spent $1,445,538 on investing activities, the bulk of which was in the form of advances for notes receivable of $1,114,182, loan receivables of $132,339 and the acquisition of intangible assets of $182,687.

During the six months ended April 30, 2013 we received $92,435 from financing activities, all of which was in the form of proceeds from notes payable offset by $6,500 in payment of deferred financing costs, whereas we received $115,000 from financing activities during the same period in fiscal 2012. From our inception on June 5, 2006 to April 30, 2013 we received $4,227,129 from financing activities, primarily in the form of proceeds from the issuance of our common stock and preferred stock and proceeds from notes payable and convertible notes payable.

For the next 12 months (beginning May 2013), we estimate our planned expenses to be approximately $1,400,000, as summarized in the table below:

Based on our planned expenditures, we require additional funds of approximately $1,400,000 to proceed with our business plan over the next 12 months (beginning May 2013). If we are not able to obtain additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.

Future Financings

We have not generated significant revenues since inception and are unlikely to generate significant revenues or earnings in the immediate or foreseeable future. We rely upon the sale of our securities and proceeds from related parties to fund our operations. We anticipate that we will incur substantial losses for the foreseeable future, and we are dependent upon obtaining outside financing to carry out our operations.

We will require approximately $1,400,000 over the next 12 months (beginning May 2013) to enable us to proceed with our plan of operations, including paying our ongoing expenses. These cash requirements are in excess of our current cash and working capital resources. Accordingly, we intend to raise funds from private placements, loans or possibly a registered public offering (either self-underwritten or through a broker-dealer). At this time we do not have a commitment from any broker-dealer to provide us with financing, and there is no guarantee that any financing will be available to us or if available, on terms that will be acceptable to us.

If we are unable to obtain the necessary additional financing, then we plan to reduce the amounts that we spend on our operations, our professional fees and our general and administrative expenses so as not to exceed the amount of capital resources that are available to us. If we do not secure additional financing our current cash reserves and working capital will be not be sufficient to enable us to sustain our operations for the next 12 months, even if we do decide to scale them down.

Going Concern

Our financial statements for the three and six months ended April 30, 2013 have been prepared on a going concern basis and contain an additional explanatory paragraph in Note 1 which identifies issues that raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

Inflation

The amounts presented in our financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

Critical Accounting Policies

Our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in Note 2 of the notes to our financial statements for the three and six months ended April 30, 2013. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by management.

Comprehensive Loss

ASC 220, “Comprehensive Income” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As at April 30, 2013 and 2012, our company had no items that represent comprehensive income or loss.

Recent Accounting Pronouncements

Our company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.