The following unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q/A and Rule 8-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (which include only normal recurring adjustments) considered necessary for a fair statement of the interim periods presented have been included. The year-end balance sheet data was derived from audited financial statements, but does not include all the disclosures required by accounting principles generally accepted in the United States of America. Operating results for the three and six month periods ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.
Condensed Notes to Financial Statements
(Unaudited)
NOTE 1. NATURE OF BUSINESS
Oncolix, Inc., formerly named Advanced Environmental Petroleum Producers Inc (hereinafter the “Company” or “Oncolix” or “we”) was incorporated in the State of Florida in June 2013. We were formed as a consultant to the electric vehicle research and technologies industry. During 2015 we decided to redirect our activities into more direct energy operations through a planned acquisition of exploration properties in Peru. See Note 5. Our management and directors resigned during January 2017, and an existing stockholder was appointed as the sole officer and director (along with his affiliates that own common stock, herein referred to as “Interim Management”). During February 2017, the planned acquisition of the Peruvian exploration properties was terminated because of the failure to complete the terms of the acquisition. Immediately following this termination, the Company had limited or no operating activities and no tangible assets, but had significant liabilities.
During February 2017, in order to prepare the Company for the development or adoption of a new plan of operations, we adopted a plan to exchange our common stock for our outstanding debt. On March 1, 2017, Interim Management was issued 60,000,000 shares of common stock to pay, acquire or reach agreement with our creditors to extinguish all of the existing indebtedness of the Company and eliminate any ongoing financial obligations, including any fees for services rendered. The face value of such liabilities extinguished totaled $266,010, excluding any compensation to Interim Management for services rendered.
On March 6, 2017, Interim Management agreed to sell all of its common stock to Oncolix, Inc. (“Oncolix (Delaware)”), a Houston-based clinical-stage biotechnology company, after the completion of the plan to extinguish liabilities and after certain other conditions were met. Interim Management reached agreement with its creditors for such extinguishment by March 31, 2017. As of such date, the Company had no assets, no operating activities, and no liabilities, and was dependent on Interim Management to fund its corporate activities.
On April 6, 2017, Interim Management completed the sale 61,465,130 shares of common stock (including the 1,465,130 shares previously owned and the 60,000,000 shares received to implement the debt extinguishment plan) to Oncolix (Delaware). Interim Management resigned all positions with the Company, and two officers of Oncolix (Delaware) were appointed as the sole Directors of the Company, resulting in a change in control of the Company.
As of June 30, 2017, approximately 66% of the common stock of the Company was owned by Oncolix (Delaware), and the Company was dependent on Oncolix (Delaware) to advance funds for its continuing activities. See Note 8.
On August 3, 2017, pursuant to a reverse merger, the Company acquired all of the outstanding equity interests of Oncolix (Delaware) and assumed responsibility for the issuance of equity securities under options, warrants and convertible debt of Oncolix (Delaware) as described further herein (the “Merger”). See Note 8. In subsequent financial statements for periods after the closing of the Merger, Oncolix (Delaware) will be treated as the acquirer for accounting and financial reporting purposes while the Company will be treated as the acquired entity for accounting and financial reporting purposes.
On September 28, 2017, the Company changed its name with the Secretary of State of Florida from Advanced Environmental Petroleum Producers Inc to Oncolix, Inc., reflecting the intent of the Company to continue to operate as the successor to the operations of Oncolix (Delaware).
NOTE 2. GOING CONCERN
The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues to cover its operating costs and allow it to continue as a going concern. As of June 2017, the Company had no cash, no tangible assets and no intellectual property, and was dependent on its majority stockholder, Oncolix (Delaware), to fund its corporate activities on a month-to-month basis. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it develops or acquires an operating business and becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. See Note 8 for a discussion of the Merger and the continuing risk that that the Company may not continue as a going concern.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED INTERIM FINANICAL STATEMENTS
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles, for complete financial statements please refer to our 2016 Annual Report on Form 10-K.
In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year.
USE OF ESTIMATES
The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP"), which require 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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents. Cash and cash equivalents totaled $0 at June 30, 2017 and $1,671 at December 31, 2016.
CASH FLOWS REPORTING
The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period.
RELATED PARTIES
The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions.
REVENUE RECOGNITION
The Company follows ASC 605,
Revenue Recognition
. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
The Company had no revenue in the six-month periods ending June 30, 2017 and 2016.
RESEARCH AND DEVELOPMENT
The Company expenses research and development costs when incurred. Historically, research and development costs included engineering and testing of product and outputs. Indirect costs related to research and developments were allocated based on percentage usage to the research and development. The Company did not incur research or development costs in the six-month periods ended June 30, 2017 and 2016.
DEFERRED INCOME TAXES AND VALUATION ALLOWANCE
The Company accounts for income taxes under ASC 740,
Income Taxes
. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as of June 30, 2017 or December 31, 2016.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per share is calculated in accordance with ASC 260, “Earnings Per Share.” The weighted-average number of common shares outstanding during each period is used to compute basic earning or loss per share. Diluted earnings or loss per share is computed using the weighted average number of shares and diluted potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised.
Basic net income (loss) per common share is based on the weighted average number of shares of common stock outstanding at June 30, 2017 and 2016, respectively. As of June 30, 2017, the Company had no potentially dilutive common shares.
RECENT ACCOUNTING PRONOUNCEMENTS
Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the
FASB Accounting Standards Codification™
(“ASC”) is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company. Management has reviewed these rules and releases and believes any effect will not have a material impact on the Company's present or future financial statements.
We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our management and certain standards are under consideration.
On February 25, 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases. ASU No. 2016-02 requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet for all leases of property, plant and equipment with lease terms greater than 12 months. Prior to this accounting standard, only capital leases were recognized on the balance sheet. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, and early adoption is permitted. This ASU must be applied using a retrospective approach upon adoption. The Company believes this ASU will not have a significant effect on its financial statements.
NOTE 4. INCOME TAXES
At June 30, 2017, the Company had a net operating loss carryforward for Federal income tax purposes. As a result of the issuance of shares of common stock in exchange for indebtedness and the sale of shares held by Interim Management to Oncolix (Delaware) (see Note 8), the ability of the Company to utilize this net operating loss carryforward to offset future taxable income may be significantly limited. Accordingly, the potential tax benefits of the net loss carryforwards are fully offset by a valuation allowance.
Deferred tax assets consist primarily of the tax effect of NOL carryforwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability, including the effect if the change in ownership described in the previous paragraph.
NOTE 5. SHAREHOLDERS’ EQUITY
The Company, through approval of its Board of Directors, authorized common shares of 500,000,000 with a par value of $0.0001. The number of authorized shares was increased in September 2017 – see Note 8.
COMMON STOCK
On October 24, 2015, the Company announced that it had entered into an agreement to acquire 100% of the issued and outstanding shares of the company named 1923285 Alberta Ltd (“Alberta”) for 65,600,000 shares of the Company’s common stock. It was agreed that 65,600,000 shares of the Company’s common stock and 100% of the issued and outstanding Alberta shares would be held in escrow until Alberta provided the Company with audited financial statements and until the Company completed its due diligence. Certain shares were released from escrow in 2016. On February 10, 2017, the Alberta agreement was terminated and the remaining 60,680,000 shares of common stock in escrow were cancelled. There were no penalties related to the termination.
During February 2017, in order to prepare the Company for the development or adoption of a new plan of operations, AEPP adopted a plan to exchange our common stock for our outstanding debt. On March 1, 2017, Interim Management was issued 60,000,000 shares of common stock to pay, acquire or reach agreement with AEPP’s creditors to extinguish all of the existing indebtedness of the Company and eliminate any ongoing financial obligations, including any fees for services rendered. The recorded amount of such liabilities extinguished totaled $266,010, excluding any compensation to Interim Management for services rendered. Interim Management reached agreement with its creditors for such extinguishment by March 31, 2017. The 60,000,000 shares issued to Interim Management were recorded at the closing trading price of the Company’s common stock on March 1, 2017, or $0.0085 per share. As a result, a loss on extinguishment of debt of $243,990 (the $266,010 face value of the liabilities extinguished less the $510,000 market price of the common stock issued to Interim Management) was recorded in the three months ending March 31, 2017.
On April 6, 2017, Interim Management completed the sale 61,465,130 shares of common stock (including the 1,465,130 shares previously owned and the 60,000,000 shares received to implement the debt extinguishment plan) to Oncolix (Delaware). Interim Management resigned all positions with the Company, and two officers of Oncolix (Delaware) were appointed as the sole Directors of the Company, resulting in a change in control of the Company.
There are no warrants or options outstanding to acquire any additional shares of common stock of the Company as of June 30, 2017.
NOTE 6. RELATED PARTY TRANSACTIONS
On April 6, 2017, Interim Management completed the sale 61,465,130 shares of common stock (including the 1,465,130 shares previously owned and the 60,000,000 shares received to implement the debt extinguishment plan) to Oncolix (Delaware). Interim Management resigned all positions with the Company, and two officers of Oncolix (Delaware) were appointed as the sole Directors of the Company, resulting in a change in control of the Company. Subsequent to April 6, 2017, the Company has been dependent on Oncolix (Delaware) to fund its activities, including its transfer agent, accounting and legal costs. In addition, Oncolix (Delaware) has changed the Company for a portion of the compensation expense of its employees based on the relative percentage of time devoted to the activities of the Company, and a fixed fee of $1,000 per month for office rent, telecommunications and other occupancy costs. During the three months ended June 30, 2017, the Company incurred a liability to Oncolix (Delaware) of $25,924 for compensation costs and $2,000 for occupancy costs. Oncolix (Delaware) also paid on behalf of the Company $24,297 of transfer agent, accounting and legal costs during the period. The total of these costs, $52,221, is reflected as a liability to Oncolix (Delaware) in the accompanying balance sheet as of June 30, 2017. No amounts were paid prior to the Merger, at which time such amounts became intercompany eliminations.
NOTE 7. COMMITMENTS AND CONTINGENCIES
From time to time the Company may be a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.
NOTE 8. SUBSEQUENT EVENTS
Reverse Merger with Oncolix
On August 3, 2017, pursuant to a reverse merger, The Company acquired all of the outstanding equity interest of Oncolix (Delaware) and assumed responsibility for the issuance of equity securities under the options, warrants and convertible debt of Oncolix (Delaware) as described further herein (the “Merger”). In future financial statements, the Merger will be treated as a reverse acquisition of the Company for financial accounting and reporting purposes. As such, Oncolix (Delaware) will be treated as the acquirer for accounting and financial reporting purposes while the Company will be treated as the acquired entity for accounting and financial reporting purposes.
In the merger, each stockholder of Oncolix (Delaware) received 20 shares of a substantially identical class of the Company’s stock (Common or Series A Preferred, each with a par value of $0.0001) in exchange for each share of Oncolix (Delaware) (par value $0.001). In addition, each option or warrant became exercisable for 20 shares of the identical class of the Company’s stock for each share of Oncolix (Delaware), and the exercise price was adjusted by dividing the price per share of Oncolix (Delaware) by 20. The shares of the Company’s Common Stock owned by Oncolix (Delaware) were cancelled in the merger. After the merger, including shares issued by Oncolix (Delaware) in July 2017 as payment of accrued interest at June 30, 2017, the Company had 103,547,683 shares of Common Stock, $0.0001 par value, issued and outstanding, of which 71,781,180 shares were issued to the former stockholders of Oncolix. In addition, the Company had 62,138,680 shares of Series A Preferred Stock, $0.0001, issued and outstanding, all of which were owned by the former stockholders of Oncolix (Delaware).
As of June 2017, the Company had no cash, no tangible assets and no intellectual property, and was dependent on its majority stockholder, Oncolix (Delaware), to fund its corporate activities on a month-to-month basis. Oncolix (Delaware) also has experienced negative cash flows from operations since the commencement of operations, and we expect these losses to continue into the foreseeable future as we continue the development and clinical testing of Prolanta and seek regulatory approval to market products. As noted in the following section, during July and August 2017 we have raised capital through the sale of promissory notes secured by all of the assets of Oncolix (Delaware) and the Company. See the following section of this Note 8. We expect these funds to support our operations into 2018, and we are currently seeking financing that would fund repayment of this debt and fund operations through at least 2019. Accordingly, our continued operations are dependent on our ability to raise additional capital through the sale of equity or debt securities or through the licensing of the products of Oncolix (Delaware). In the event we are unable to raise sufficient funds, we would have to substantially alter, or possibly even discontinue, operations, or sell assets at distressed prices. The accompanying condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The business and history of Oncolix (Delaware) is more fully described in the Current Report on Form 8-K filed on August 11, 2017.
Sale of July Secured Notes
During July 2017, we sold an $160,000 in principal of secured notes the (“July Notes”) and warrants to acquire 3,200,000 shares of Common Stock at $0.0825 per share. The July Notes are due in February 2018 and the warrants are exercisable through July 2022. The July Notes were secured by all of the assets of the Company and by Oncolix (Delaware). As noted in the following paragraph, the July 2017 Notes were exchanged in a subsequent debt offering in August 2017.
Issuance of Secured Debt in August 2017
During August 2017, in connection with a new financing, all of the outstanding secured debt of Oncolix (Delaware), the July Notes and amounts due under a consulting agreement were exchanged for new Company Notes (the “August Notes”) with aggregate face amount of $1,837,522. In connection with this exchange, warrants to acquire 17,608,280 shares of Common Stock were exchanged for new warrants to acquire 24,500,290 shares of Common Stock (the “August Common Warrant”). Additionally, we sold for cash of $2,000,000 additional Notes with a face amount of $2,352,941 and August Common Warrants to acquire 31,372,547 shares of Common Stock at $0.09 per share.
The conversion rate of the August Notes is subject to adjustment based on the trading price of our Common Stock at certain timepoints. Each holder of the August Notes may convert the principal balance of the note into Common Stock at the lower of (i) $0.075 per share, (ii) 75% of the closing bid price of the Common Stock on the closing date of the Merger, (iii) 75% of the 10-day average closing bid price of Common Stock for the period prior to the filing of a registration statement as described below (subject to a floor of 50% of (ii) herein), and (iv) 75% of the 10-day average closing bid price of the Common Stock for the 10-day period prior to the effective date of the registration statement (subject to a floor of 50% of (ii) herein).
In addition, we will be obligated to file one or more registration statements to register the shares of Common Stock issuable upon the conversion of the August Notes. The August Notes are due in seven installments commencing in February 2018, and bear interest at the rate of 10% per annum, payable quarterly. An additional 10% of the principal balance is due with each monthly payment.
Adjustments to the conversion price of the August Notes and exercise price of the August Common Warrants may result in an anti-dilution adjustment to our Series A Preferred Stock.
Change of Name and Increase in Authorized Shares
On September 28, 2017, the “Company filed an amendment to its article of incorporation (the “Amendment”) with the Florida Secretary of State to change its name to Oncolix, Inc. from Advanced Environmental Petroleum Producers Inc. In addition, pursuant to the terms of its Agreement and Plan of Merger with Oncolix, Inc. as disclosed in August 2017, the Amendment (i) increased the number of authorized shares of common stock, $0.0001 par value, to 950,000,000, (ii) increased the number of authorized shares of preferred stock, $0.0001 par value, to 250,000,000, and (iii) increased the number of shares of preferred stock designated as Series A preferred stock to 150,000,000.
The Amendment was approved by the written consent of the holders of the majority of the voting securities of the Company on August 21, 2017, and an information statement pursuant to Regulation 14C of the Exchange Act was mailed on September 6, 2017, to holders of record of the Company’s common and preferred stock as of August 21, 2017. The shareholder action became effective on September 27, 2017.