U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
x
Annual Report
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for
the
fiscal year ended December 31, 2008
o
Transition Report
pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For
The Transition Period From ________ to _________
Commission File
Number
0-21092
OCTUS,
INC.
(Exact
name of Registrant as Specified in its Charter)
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Nevada
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33-0013439
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(State
or other jurisdiction of incorporation
or
organization)
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(IRS
Employer Identification No.)
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719
Second Street
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Suite
9
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Davis,
California
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95616
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(Address
of principal executive offices)
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(Zip
Code)
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(530)
546-0200
(Registrant's
Telephone Number, Including Area Code)
Securities
registered pursuant to Section 12(b) of the Exchange Act: None
Securities
registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.0001 par
value per share
(Title of
Class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes
o
No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes
o
No
x
Indicate
by check mark whether registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes
x
No
o
Indicate
by check mark if disclosure of delinquent filers in response to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendments to this Form 10-K.
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one)
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Large
accelerated filer
o
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Accelerated
filer
o
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Non-accelerated
filer
o
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Smaller
reporting company
x
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act) Yes
x
No
o
As of
April 13, 2009, there were 43,437,072 shares of common stock
outstanding.
The
aggregate market value of the common stock held by non-affiliates of the
Registrant as of June 30, 2008 (the last business day of the registrant’s most
recently completed second fiscal quarter), based on the closing price of the
common stock as quoted on the OTC Bulletin Board of $0.04 per share, was
$481,054.
FORM
10-K
FISCAL
YEAR ENDED DECEMBER 31, 2008
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Page
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PART
I
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11
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Business
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1
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1A.
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Risk
Factors
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3
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1B.
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Unresolved
Staff Comments
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6
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2.
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Properties
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6
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3.
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Legal
Proceedings
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6
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4.
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Submission
of Matters to a Vote of Security Holders
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6
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PART
II
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5.
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Market
for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
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6
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6.
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Selected
Financial Data
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9
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7.
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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9
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7A.
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Quantitative
and Qualitative Disclosure About Market Risk
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11
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8.
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Financial
Statements and Supplementary Data
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12
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9.
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Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure
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23
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9A(T).
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Controls
and Procedures
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23
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PART
III
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10.
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Directors,
Executive Officers and Corporate Governance
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24
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11.
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Executive
Compensation
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26
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12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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28
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13.
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Certain
Relationships and Related Transactions, and Director
Independence
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29
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14.
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Principal
Accounting Fees and Services
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29
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PART
IV
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15.
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Exhibits,
Financial Statement Schedules
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30
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Unless the context otherwise requires,
the terms “we,” our,” “the Company” and “Octus” refer to Octus Inc. and its
subsidiaries.
FORWARD
LOOKING STATEMENTS
Statements
made in this Form 10-K that are not historical or current facts are
"forward-looking statements" made pursuant to the safe harbor provisions of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). These statements often can be identified by the use
of terms such as "may," "will," "expect," "believe," "anticipate," "estimate,"
"approximate," or "continue," or the negative thereof. The Company
intends that such forward-looking statements be subject to the safe harbors for
such statements. The Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made. Any forward-looking statements represent management's
best judgment as to what may occur in the future. However,
forward-looking statements are subject to risks, uncertainties and important
factors beyond the control of the Company that could cause actual results and
events to differ materially from historical results of operations and events and
those presently anticipated or projected. These factors include
adverse economic conditions, entry of new and stronger competitors, inadequate
capital and unexpected costs. The Company disclaims any obligation
subsequently to revise any forward-looking statements to reflect events or
circumstances after the date of such statement or to reflect the occurrence of
anticipated or unanticipated events.
Introduction
Octus was
incorporated in October 1983 under the laws of the State of
California. On December 29, 2001, a majority of the shareholders
voted to change our state of incorporation from California to
Nevada. In December 2003, this change was completed and we became a
Nevada corporation. Currently our Common Stock is eligible for
quotation on the OTC Bulletin Board under the symbol OCTI.
The core
of our technology from our inception until 1991 was comprised of software for
use in controllers for laser printers and related imaging devices. We
incorporated this technology into our own LaserPro(R) laser printer products and
also licensed the technology to third parties. In 1991, because of low margins
and competition, we shifted our primary focus from laser printer controller
technology to the development of the Octus PTA product line. In December 1991 we
changed our name from Office Automation Systems, Inc. to Octus, Inc. In January
1993, we completed an initial public offering. In September 1993, we
sold substantially all of the assets and inventory of the laser printer business
to National Computer Systems, Inc. ("NCS"). In March 1995, we engaged
a third-party distributor, Cintech Tele-Management Systems, Inc. ("Cintech"), to
exclusively manufacture, distribute and sell the retail version of Octus PTA in
North America. In March 1997, Cintech elected not to renew its agreement with
us, thereby leaving us without a current means of distributing our
products. We subsequently ceased operations and have been reviewing
other business opportunities since.
On
February 24, 2009, the Company entered into employment agreements with Christian
J. Soderquist and George M. Ecker pursuant to which Mr. Soderquist will serve as
Chief Executive Officer of the Company and Mr. Ecker will serve as Chief
Financial Officer of the Company. Mr. Soderquist and Mr. Ecker were
also appointed directors of the Company and our former President and sole
director, Mr. David Pere, resigned from all offices on that same
day. Concurrently, the Company executed restricted stock purchase
agreements dated February 24, 2009, with each of Mr. Soderquist and Mr.
Ecker.
Both
employment agreements have a term of three years, through February 24, 2012,
with the term extended automatically for successive one-year terms unless either
party notifies the other in writing at least 90 days prior to the expiration of
the then-effective term of such party’s intention not to renew the agreement.
Pursuant to the employment agreement, Octus has agreed to pay Mr. Soderquist and
Mr. Ecker a base annual salary of $180,000 each, which will increase annually by
the increase in the consumer price index from the prior year (the “Base
Salary”). The officers have agreed for an interim period to defer some or all of
their base salaries based on the outstanding achievements of one or more of the
milestones described below and the Company’s ability to pay salaries. Each
officer will be eligible for an annual bonus of up to 50% of his base annual
salary as then in effect, as determined by the board of directors of the Company
(the “Board”) or the Compensation Committee of the Board. Pursuant to
the restricted stock purchase agreements and the employment agreements, the
Company will issue to each person 15,000,000 shares of common stock in
consideration of services performed.
Under the
terms of the restricted stock purchase agreements, a portion of the shares is
subject to repurchase by the Company if certain milestones are not achieved
before the first anniversary of the date of the purchase agreements. For each of
the following events that are not achieved before the first anniversary of the
date of the purchase agreements, 25% of the shares are subject to repurchase by
the Company at the original purchase price per share. If all four milestones are
achieved, then all of the shares become fully vested. The milestone events are:
completion of sale of equity securities of the Company with proceeds to the
Company of $100,000 or more; execution by the Company of a license agreement or
purchase contract with at least two third-party persons or entities to acquire
or license technologies and/or products related to the Company’s intended
business; receipt of revenues from the sale by the Company of products licensed
or owned by the Company; and execution by the Company of a renewable energy
and/or energy efficiency project contract. In the event of a change in control
of the Company, defined in the agreement to include events such as a merger or
sale of assets transaction which results in more than a 50% change of ownership
of the Company, all restrictions lapse and the shares will become fully
vested.
There are
approximately 43,437,000 shares of common stock outstanding, and therefore the
30,000,000 shares issued pursuant to the purchase agreements represents
approximately 69% of the outstanding shares of the Company after giving effect
to the issuance of the shares.
The
Company seeks to become a leading renewable energy efficiency company that
brings innovative energy efficiency and renewable energy solutions to the
commercial and public sector markets. The Company intends to pursue
and enter into renewable energy efficiency projects involving owning or managing
energy systems, and energy efficiency products that the Company may acquire,
license or distribute. The Company believes that the market demand
for energy conservation and energy creation presents an attractive business
opportunity.
On March
17, 2009 we entered into an agreement with the University of California (“UC”)
that gives us the exclusive right, for a period of six months, to pursue
negotiations with the UC to enter into a license of UC's Wicking Condensate
Evaporator at AC Condenser (Wickool). A Provisional Patent application has been
filed related to the Wickool technology. If we enter into a license
agreement with UC, the agreement is expected to provide Octus with exclusive
worldwide patent rights to Wickool, which was developed and is being
commercially tested by the UC Davis Western Cooling Efficiency Center (WCEC), in
all fields of use, with full rights to sublicense. Wickool, which is being
commercially tested by the WCEC in association with Target Corp. and
Wal-Mart,
is
a retrofit to commercial rooftop air conditioning units. Wickool repurposes,
with no electrical connections or moving parts, the evaporative condensate
created by HVAC systems to improve energy usage.
In March
2009, we entered into a Dealer agreement with SolarNet, Inc. to collaboratively
pursue the development, financing and management of solar energy and energy
efficiency projects for the commercial, non-profit and government
markets. SolarNet facilitates solar energy solutions by combining
contractors, investors, products and energy issuers into solar
networks. SolarNet executes commercial projects by combining and
leveraging products and services from three related businesses: DC
Power Systems, which we believe is the largest privately held distributor of
renewable energy solutions in the United States; Stellar Energy Solutions, which
is a full-scale solar project integrator; and Solar Dawn, which creates and
facilitates power purchase agreement syndications and project
finance. Under terms of the agreement, Octus will serve as an
independent, non-exclusive dealer of SolarNet's renewable energy systems,
construction services, and project financing. There can be no
assurances that the Company will receive any revenues from transactions relating
to this agreement.
Intellectual
Property
We do not
own any patents, trademarks, domain names, copyrights, licenses, concessions or
royalty rights. However, our current intended business plan includes
the active search for intellectual property relating to our core area of
alternative energy for licensing and acquisition.
Government
Regulation
As our
current operations and activities are minimal, applicable government regulations
do not have a material impact on our activities. However, if we
successfully execute on our business plan, we anticipate that federal, state and
local environmental, energy, tax incentive, health, labor relations, sanitation,
building, zoning, fire and safety regulations could have an effect on our
business and on the businesses of the customers to which we intend to sell
products, services and solutions.
Our
Research and Development
We are
not currently conducting any research and development activities and do not
anticipate conducting such activities in the foreseeable future.
Employees
As of
December 31, 2008, we had no employees and as of March 31, 2009, we had two
employees. We did not add to our workforce during the year ended
December 31, 2008 and entered into employment agreements with Mr. Soderquist and
Mr. Ecker on February 24, 2009. None of our employees is currently
represented by labor unions or covered by a collective bargaining
agreement. We believe that relations with our employees are
good.
ITEM
1A. RISK FACTORS
Risks
Related to Our Business
Much of
the information included in this annual report includes or is based upon
estimates, projections or other “forward-looking statements.” Such
forward-looking statements any include projections or estimates made by us and
our management in connection with our business operations. 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 herein. We undertake no obligation to update
forward-looking statements to reflect events or circumstances occurring after
the date of such statements.
Such
estimates, projections or other “forward-looking statements” involve various
risks and uncertainties as outlined below. We caution readers of this annual
report that important factors in some cases have affected and, in the future,
could materially affect actual results and cause actual results to differ
materially from the results expressed in any such estimates, projections or
other “forward-looking statements.” In evaluating us, our business and any
investment in our business, readers should carefully consider the following
factors.
We
have no recent operating history that you can use to evaluate us and therefore
we may not survive if we meet some of the problems, expenses, difficulties,
complications and delays frequently encountered by a start-up company
.
We
essentially ceased active business in 1997 and have been reviewing business
opportunities since. In February 2009, we hired new officers and
directors of the Company but have not yet conducted any substantial business nor
consummated any material business agreements. To date, we have
focused our attention on seeking acquisitions and business opportunities.
Accordingly, you can evaluate our business, and therefore our future prospects,
based only on a limited operating history. You must consider our prospects in
light of the risks and uncertainties encountered by start-up
companies. As a start-up company, we can provide no assurances that
we will be able to make the necessary steps to achieve profitability in the
future, such as expanding our customer base.
We are
subject to all the substantial risks inherent in the commencement of a new
business enterprise with new management. We can provide no assurance that we
will be able to successfully generate revenues or operate
profitably. We have no recent business history for you to analyze or
to aid you in making an informed judgment as to the merits of an investment in
our securities. Any investment in our common stock should be considered a high
risk investment because you will be placing funds at risk in an unseasoned
start-up company with unforeseen costs, expenses, competition and other problems
to which start-up ventures are often subject.
As we
have such a limited history of operation, you will be unable to assess our
future operating performance or our future financial results or condition by
comparing these criteria against our past or present equivalents.
We
will require additional funds to achieve our current business strategy. Our
inability to obtain additional financing will inhibit our ability to expand or
even maintain our business operations.
We will
need to raise additional funds through debt or equity financing to achieve our
current business strategy. The financing we need may not be available when
needed. Even if this financing is available, it may be on terms that we deem
unacceptable or are materially adverse to your interests with respect to
dilution of book value, dividend preferences, liquidation preferences, or other
terms. Our inability to obtain financing will inhibit our ability to implement
our development strategy, and as a result, could require us to diminish or
suspend our development strategy and possibly cease our operations.
If we are
unable to obtain financing on reasonable terms, we could be forced to delay,
scale back or eliminate certain product and service development programs. In
addition, such inability to obtain financing on reasonable terms could have a
negative effect on our business, operating results, or financial condition to
such extent that we are forced to restructure, file for bankruptcy, sell assets
or cease operations, any of which could put your investment dollars at
significant risk.
We
expect to experience significant and rapid growth in the scope and complexity of
our business if our business strategy gains acceptance in the market. If we are
unable to hire additional staff to handle engineering, sales and
marketing of our products and services and manage our operations, our growth
could harm our future business results and may strain our managerial and
operational resources.
If our
business gains acceptance in the market, we expect to experience significant and
rapid growth in the scope and complexity of our business. We will need to hire
staff to market our products and services and perform finance and accounting
functions. We will be required to hire a broad range of personnel in order to
successfully advance our operations. This growth is likely to place a strain on
our management and operational resources. If we fail to develop and implement
effective systems, or hire and retain sufficient personnel for the performance
of all of the functions necessary to effectively service and manage our future
relationships, or fail to manage growth effectively, our business will fail and
you will lose your entire investment in our company.
If
we are unable to hire and retain key personnel, then we may not be able to
implement our business plan
.
We depend
on the services of our officers and directors, Christian Soderquist and George
Ecker. Our success depends on the continued efforts of these individuals to
manage our business operations. The loss of the services of either of these
individuals could have a negative effect on our business, financial condition
and results of operations. In addition, our success in expanding our business
operations is largely dependent on our ability to hire highly qualified
personnel. In addition, we may lose employees or consultants that we hire due to
higher salaries and fees being offered by competitors or other businesses in the
industry.
Our
managers’ control of our company may prevent you from causing a change in the
course of our operations and may affect the market price of our common
stock.
Mr.
Soderquist and Mr. Ecker each beneficially own approximately 35% of our common
stock and together control the majority of the Company’s voting shares.
Accordingly, for as long as they continue to own more than 50% of our common
stock, they will be able to elect a majority or all of our board of directors,
control all matters that require a stockholder vote (such as mergers,
acquisitions and other business combinations) and exercise a significant amount
of influence over our management and operations. Therefore, your ability to
cause a change in the course of our operations may be impeded. This
concentration of ownership could result in a reduction in value to the common
stock you own and could have the effect of preventing us from undergoing a
change of control in the future.
We
may pursue strategic acquisitions and investments that could have an adverse
effect on our business if they are unsuccessful
.
As part
of our business strategy, we intend to acquire companies, and acquire or license
technologies and product lines. There is the risk that our valuation assumptions
and models for any acquired product, business or technology that we may acquire
will be overly optimistic or inaccurate or that customers do not demand the
products or services to the extent we expect, the technology does not function
as we expect, that or the technology we acquire is the subject of infringement
or trade secret claims by third parties.
The
identification of acquisition candidates is difficult and we may not correctly
assess the risks related to such acquisitions and investments. In particular,
our determinations and assessments of technology candidates involve assessments
of the financial performance of the candidates and past financial performance
that we observe may not be indicative of future financial performance. In
addition, acquisitions could be effected on terms less satisfactory to us than
expected. If these risks materialize, the benefit that we derive from
businesses, technologies, products or services that we acquire or license may be
less than we expect, with the result that our operating losses could
increase.
We
have a history of losses and have a deficit, which raises substantial doubt
about our ability to continue as a going concern.
We have
not generated any revenues since we sold our assets in 1997 and we will continue
to incur operating expenses without revenues until we are in commercial
deployment. We currently do not have any operations and we have no income. We
cannot provide assurances that we will be able to successfully develop our
business. These circumstances raise substantial doubt about our ability to
continue as a going concern as described in an explanatory paragraph to our
independent auditors’ report on our audited financial statements, dated that are
included in this Report. If we are unable to continue as a going concern,
investors will likely lose all of their investments in our company.
Our
future is dependent upon our ability to obtain financing. If we do not obtain
such financing, we may have to cease our operating activities and investors
could lose their entire investment.
There is
no assurance that we will operate profitably or will generate positive cash flow
in the future. We will require additional financing in order to proceed with our
business plan. We will also require additional financing to sustain our business
operations if we are not successful in earning revenues. We currently do not
have any arrangements for further financing and we may not be able to obtain
financing when required. Our future is dependent upon our ability to obtain
financing. If we do not obtain such financing, our business could fail and
investors could lose their entire investment.
Because
we may never earn revenues from our operations, our business may
fail.
We expect
to incur losses into the foreseeable future. We recognize that if we are unable
to generate significant revenues, we will not be able to earn profits or
continue operations. There is no history upon which to base any assumption as to
the likelihood that we will prove successful, and we can provide no assurance
that we will generate any revenues or ever achieve profitability. If we are
unsuccessful in addressing these risks, our business will fail and investors may
lose all of their investment in our company.
We have no operating history in the
alternative energy industry and if we are not successful in initiating,
developing or operating our future business, then investors may lose all of
their investment in our company
.
We have
no history of revenues in the alternative energy industry from operations and
have no significant assets. We have yet to generate earnings and there can be no
assurance that we will ever operate profitably. Our company has no recent
operating history and is in the development stage. If our business is not
successful and we are not able to operate profitably, then our stock may become
worthless and investors may lose all of their investment in our
company.
Risks
Associated With Our Common Stock
Trading on the OTC Bulletin Board may
be volatile and sporadic, which could depress the market price of our common
stock and make it difficult for our stockholders to resell their
shares
.
Our
common stock is quoted on the OTC Bulletin Board service of the National
Association of Securities Dealers. Trading in stock quoted on the OTC Bulletin
Board is often thin and characterized by wide fluctuations in trading prices,
due to many factors that may have little to do with the company’s operations or
business prospects. This volatility could depress the market price of our common
stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin
Board is not a stock exchange, and trading of securities on the OTC Bulletin
Board is often more sporadic than the trading of securities listed on a
quotation system like Nasdaq or a stock exchange. Accordingly, shareholders may
have difficulty reselling any of the shares.
Trading
of our stock may be restricted by the SEC's penny stock regulations, which may
limit a stockholder's ability to buy and sell our stock.
The
Securities and Exchange Commission has adopted regulations which generally
define “penny stock” to be any equity security that has a market price (as
defined) less than $5.00 per share or an exercise price of less than $5.00 per
share, subject to certain exceptions. Our securities are covered by the penny
stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
“accredited investors.” The term “accredited investor” refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the SEC which
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer's
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customer's confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.
We do not intend to pay dividends on
any investment in the shares of stock of our
company
.
We have
never paid any cash dividends and currently do not intend to pay any dividends
for the foreseeable future. Because we do not intend to declare dividends, any
gain on an investment in our company will need to come through an increase in
the stock’s price. This may never happen and investors may lose all of their
investment in our company.
ITEM
1B UNRESOLVED STAFF COMMENTS
None.
ITEM
2 PROPERTIES
Since
February 24, 2009, our corporate offices have been located at 719 Second Street,
Unit 9, Davis, CA 95616. These facilities are
approximately
300
square
feet and are leased under a short term lease agreement. Prior to that,
our offices were provided by our previous officer and director.
We also
maintain approximately 400 square feet of office space at 619 State Street, Unit
A, Carlsbad, CA 92011, on a month to month basis. We do not maintain
any other leases for office space and nor own any real property. We
believe these facilities are adequate for our requirements and that adequate
space is available for the expansion of our business in the foreseeable future
should that be necessary.
We are
not currently involved in any legal proceedings and have no legal proceedings
pending.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There
were no matters submitted to a vote of the shareholders during the year ended
December 31, 2008.
ITEM
5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market
for Common Stock
Our
common stock is eligible for quotation on the Over-the-Counter Bulletin Board
under the symbol "OCTI."
Our Common Stock, Units and Warrants
were previously quoted on the NASDAQ Small-Cap Market under the symbols OCTS,
OCTSU and OCTSW, respectively, upon completion of our initial public offering on
January 15, 1993 until February 1, 1995. On February 1, 1995, our
securities were delisted from the NASDAQ Small-Cap Market because we were unable
to meet that market's minimum capital and surplus requirements and our Units and
Warrants were no longer listed or eligible for quotation. Since February 1,
1995, our common stock has been eligible for quotation on the OTC Bulletin
Board. We were listed under the symbol OCTU until our forward split
which we effected in June 2005.
Set forth below are the ranges of high
and low bid prices for each quarter for the Common Stock as reported by the
OTCBB for the periods from January 1, 2007 through December 31,
2008.
|
COMMON
STOCK
|
|
QUARTER ENDED
|
HIGH
|
LOW
|
|
March
31, 2007
|
$ 0.10
|
$ 0.02
|
|
June
30, 2007
|
0.11
|
0.11
|
|
September
30, 2007
|
0.10
|
0.10
|
|
December
31, 2007
|
0.15
|
0.11
|
|
March
31, 2008
|
0.08
|
0.08
|
|
June
30, 2008
|
0.04
|
0.04
|
|
September
30, 2008
|
0.07
|
0.07
|
|
December
31, 2008
|
0.01
|
0.01
|
The
source of these high and low prices was the OTC Bulletin Board. These quotations
reflect inter-dealer prices, without retail mark-up, markdown or commissions and
may not represent actual transactions. The high and low prices listed have been
rounded up to the next highest two decimal places.
It is
anticipated that the market price of our common stock will be subject to
significant fluctuations in response to variations in our quarterly operating
results, general trends in the market for the products we distribute, and other
factors, over many of which we have little or no control. In addition, broad
market fluctuations, as well as general economic, business and political
conditions, may adversely affect the market for our common stock, regardless of
our actual or projected performance. On April 1, 2009, the closing price of our
common stock as reported by the OTC Bulletin Board was $0.06 per
share. Trading on our Common Stock is extremely limited and
sporadic. Therefore, prices are not an accurate indication of the
market value of our Common Stock.
Reports
to Security Holders
We are a
reporting company with the Securities and Exchange Commission, or SEC. The
public may read and copy any materials filed with the Securities and Exchange
Commission at the Securities and Exchange Commission’s Public Reference Room at
100 F Street, N.E., Washington, D.C. 20549. The public may also obtain
information on the operation of the Public Reference Room by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the Securities and Exchange Commission. The address of that
site is
http://www.sec.gov
.
Dividends
We have
never declared or paid cash dividends on our Common Stock and have no
current intention to declare or pay any dividends on our Common Stock in the
foreseeable future. We intend to retain earnings, if any, for the
development of our business.
Description
of Capital Stock
Our
authorized capital stock consists of the following:
-
Common
stock, $0.001 par value, 100,000,000 shares authorized; approximately
43,437,072 shares issued and outstanding;
-
Series
A preferred stock, $0.001 par value, 300,000 shares authorized, no shares
issued or outstanding;
-
Series
B preferred stock, $0.001 par value, 910,000 shares authorized, no shares
issued or outstanding;
-
Series
C 6.0% cumulative preferred stock, $0.001 par value, 250,000 shares
authorized, no shares issued and outstanding; and
-
Undesignated
preferred stock, $0.001 par value, 540,000 shares authorized, no shares issued
or outstanding.
Holders
of shares of our common stock are entitled to receive dividends when and as
declared by our Board of Directors from funds legally available therefor. All
the shares of our common stock have equal voting rights and are non-assessable.
Each shareholder of our common stock is entitled to share ratably in any assets
available for distribution to holders our equity securities upon our
liquidation. Holders of our common stock do not have preemption
rights.
There are
no outstanding shares of our common stock which can be sold pursuant to Rule
144. There are no outstanding options or warrants to purchase, or securities
convertible into, shares of our common stock. We have no agreements in place
register for sale the shares of common stock held by our
shareholders.
As of
April 10, 2008, there were approximately 281 holders of our Common Stock, our
only outstanding class of securities.
Recent
Sales of Unregistered Securities
On
February 24, 2009, we entered into share purchase agreements with our two
officers and directors whereby they each received 15,000,000 common shares.
Other than these transactions we did not sell any equity securities during the
period covered by this report that were not registered under the Securities
Act.
Equity
Compensation Plans
We have a
stock option plan for option grants to our directors, officers, employees and
consultants. Such options are granted at fair value, vest over three
to five years, and expire not more than ten years from date of grant. As of
December 31, 2008, we have reserved a total of 450,000 shares of common stock
for exercise under the stock option plan.
As of
December 31, 2008, there were no options outstanding and there have been no
option transactions during the two years ended December 31, 2008.
Penny
Stock Regulation
Shares of
our common stock are subject to rules adopted by the Securities and Exchange
Commission that regulate broker-dealer practices in connection with transactions
in "penny stocks". Penny stocks are generally equity securities with a price of
less than $5.00 (other than securities registered on certain national securities
exchanges or quoted on the Nasdaq system, provided that current price and volume
information with respect to transactions in those securities is provided by the
exchange or system). The penny stock rules require that a broker-dealer, prior
to a transaction in a penny stock not otherwise exempt from those rules, deliver
a standardized risk disclosure document prepared by the Securities and Exchange
Commission, which contains the following:
-
a
description of the nature and level of risk in the market for penny stocks in
both public offerings and secondary trading;
-
a
description of the broker's or dealer's duties to the customer and of the
rights and remedies available to the customer with respect to violation to
such duties or other requirements of securities' laws;
-
a
brief, clear, narrative description of a dealer market, including "bid" and
"ask" prices for penny stocks and the significance of the spread between the
"bid" and "ask" price
-
a
toll-free telephone number for inquiries on disciplinary actions;
-
definitions
of significant terms in the disclosure document or in the conduct of trading
in penny stocks; and
-
such
other information and is in such form (including language, type, size and
format), as the Securities and Exchange Commission shall require by rule or
regulation.
Prior to
effecting any transaction in penny stock, the broker-dealer also must provide
the customer the following:
-
the
number of shares to which such bid and ask prices apply, or other comparable
information relating to the depth and liquidity of the market for such stock;
and
-
monthly
account statements showing the market value of each penny stock held in the
customer's account.
In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability
statement. These disclosure requirements may have the effect of reducing the
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. Holders of shares of our common stock may have difficulty
selling those shares because our common stock will probably be subject to the
penny stock rules.
Purchases
of Equity Securities
None
during the period covered by this report.
As a
“smaller reporting company” as defined by Item 10 of Regulation S-K, the Company
is not required to provide information required by this Item.
ITEM
7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIS
FOLLOWING INFORMATION SPECIFIES CERTAIN FORWARD-LOOKING STATEMENTS OF MANAGEMENT
OF THE COMPANY. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT ESTIMATE THE
HAPPENING OF FUTURE EVENTS THAT ARE NOT BASED ON HISTORICAL FACT.
FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY, SUCH AS "MAY", "SHALL", "COULD", "EXPECT", "ESTIMATE",
"ANTICIPATE", "PREDICT", "PROBABLE", "POSSIBLE", "SHOULD", "CONTINUE", OR
SIMILAR TERMS, VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE
FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION HAVE BEEN
COMPILED BY OUR MANAGEMENT ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND
CONSIDERED BY MANAGEMENT TO BE REASONABLE. OUR FUTURE OPERATING RESULTS,
HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, OR WARRANTY
IS TO BE INFERRED FROM THOSE FORWARD-LOOKING STATEMENTS.
THE
ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THE
FOLLOWING INFORMATION REPRESENT ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT TO
UNCERTAINTY AS TO POSSIBLE CHANGES IN ECONOMIC, LEGISLATIVE, INDUSTRY, AND OTHER
CIRCUMSTANCES. AS A RESULT, THE IDENTIFICATION AND INTERPRETATION OF DATA AND
OTHER INFORMATION AND THEIR USE IN DEVELOPING AND SELECTING ASSUMPTIONS FROM AND
AMONG REASONABLE ALTERNATIVES REQUIRE THE EXERCISE OF JUDGMENT. TO THE EXTENT
THAT THE ASSUMED EVENTS DO NOT OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY FROM
ANTICIPATED OR PROJECTED RESULTS, AND, ACCORDINGLY, NO OPINION IS EXPRESSED ON
THE ACHIEVABILITY OF THOSE FORWARD-LOOKING STATEMENTS. NO ASSURANCE CAN BE GIVEN
THAT ANY OF THE ASSUMPTIONS RELATING TO THE FORWARD-LOOKING STATEMENTS SPECIFIED
IN THE FOLLOWING INFORMATION ARE ACCURATE, AND WE ASSUME NO OBLIGATION TO UPDATE
ANY SUCH FORWARD-LOOKING STATEMENTS.
Critical
Accounting Policy and Estimates
Our
Management's Discussion and Analysis of Financial Condition and Results of
Operations section discusses our financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements 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
revenues and expenses during the reporting period. On an ongoing basis,
management evaluates its estimates and judgments, including those related to
revenue recognition, accrued expenses, financing operations, and contingencies
and litigation. Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
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. As we did not engage in active business
operations during 2008, the most significant accounting estimates inherent in
the preparation of our financial statements include estimates as to the
appropriate amounts to accrue for accounting and legal expenses. These
accounting policies are described at relevant sections in this discussion and
analysis and in the notes to the financial statements included in this Annual
Report.
Management's
Discussion and Analysis of Financial Condition
This
information should be read in conjunction with the audited consolidated
financial statements and notes contained herein.
Overview
We are
actively seeking business opportunities involving alternative energy
technologies and infrastructure projects, which may include acquisition or
licensing of technologies or becoming involved with the construction and
management of various types of energy producing facilities. We intend to recruit
management, advisors and affiliates with sufficient experience needed to review
and qualify such technologies and projects for our
involvement. Although we are seeking such opportunities, we may not
consummate any such transaction, and even if we complete a transaction it is
possible that we would not generate sufficient revenues to sustain our
operations.
We
anticipate the need for additional debt or equity financing, and if the Company
raises additional funds through equity financing transactions, the issuance of
additional shares would dilute the ownership of existing
shareholders.
We were
incorporated in 1983 to develop a low cost controller for laser printers. In
early 1991, we began shifting our emphasis from laser printer controller
products to the development of a new product line. Since September 1993,
substantially all of our revenues were derived from business activities
involving our laser printer technology and technology licensing agreements. In
September 1993, we sold substantially all of the assets and inventory of the
laser printer business to National Computer Systems, Inc.
("NCS”). After that transaction, we did not generate significant
revenues from sales of our Octus PTA product due to poor product sales and lack
of broad market acceptance. As a result, in 1994 we needed to significantly
downsize our staff and reduce our operating expenses, which continued into 1995.
In March 1995, we engaged a third-party distributor, Cintech Tele-Management
Systems, Inc. ("Cintech") to exclusively manufacture, distribute and sell the
retail version of Octus PTA in North America. In March 1997, Cintech elected not
to renew its agreement with us, thereby leaving us without a current means of
distributing our products, and subsequently we ceased active
operations.
Results
of Operations for the Year Ended December 31, 2008 Compared to Year Ended
December 31, 2007
We did
not realize any revenues during either the year ended December 31, 2008 or the
year ended December 31, 2007.
During
the year ended December 31, 2008, we reported a net loss of $66,865 or $0.00 per
share, compared to a net loss of $56,681 or $0.00 per share for the year ended
December 31, 2007. We expect to incur losses until such time, if ever, we begin
generating revenue from operations.
During
the year ended December 31, 2008, our general and administrative expenses were
$31,866, as compared to $36,069 for 2007. General and administrative expenses
consisted mostly of professional fees incurred to prepare our financial
statements and submit regulatory filings required to maintain our status as a
public company.
Interest
expense for the year ended December 31, 2008 was $34,999 compared to $20,612
incurred during 2007. The increase of $14,387 in interest expense results from
the $17,026 increase in total notes payable from $424,827 as of December 31,
2007 to $441,853 as of December 31, 2008.
As of
December 31, 2008, we had significant tax credits and research carry-forwards
for federal tax reporting purposes that expire through 2009. Additionally, we
have federal and state net operating loss carry-forwards, expiring through 2027.
Because of a substantial change in our ownership resulting from an initial
public offering, an annual limitation of approximately $600,000 has been placed
on utilization of the loss carry forwards generated prior to our initial public
offering.
Liquidity
and Capital Resources
For the
year ended December 31, 2008, we incurred a net loss of $66,865. Cash on hand as
of December 31, 2008 was $0. Our total assets were also $0 as of December 31,
2008. Our current liabilities were $520,715 as of December 31, 2008, including
$32,151 in accounts payable, $46,711 in accounts payable and accrued interest
due to related parties and $441,853 in convertible notes payable to related
parties.
Currently,
we have no cash and are not able to pay our day to day expenses; however, we
anticipate that a related party that has lent us funds will continue to do so
until we are able to commence generating revenue; otherwise we may have to cease
operations. Although we have actively been pursuing new investments
or other business operations, we cannot give assurance that we will enter into
any new investment or agreement to acquire such operations, or that the terms of
any agreements relating to financing or commercial activities will be on terms
favorable to us. During the year ended December 31, 2008, Grupo Dynastia S.A.
loaned us $17,026 to continue operations. We cannot give assurance that we will
enter into any new investment, or that the terms of any such agreements will be
on terms favorable to us. There is no assurance that Grupo Dynastia S.A. or
others will continue to fund us. Should we be unable to obtain revenues or raise
additional capital, we could be forced to cease business activities
altogether.
Our
Plan of Operations for the Next Twelve Months.
As of
this date, we are actively seeking business opportunities pertaining to the
alternative energy and/or energy efficiency areas which may include acquisition
of another company, or obtaining the rights to other products or technologies.
Although we are seeking such opportunities, we may not be able to consummate a
transaction that would generate sufficient revenues to sustain our operations.
We anticipate the need for additional debt or equity financing and if the
company raises additional funds through equity financing transactions, the
issuance of additional shares would dilute the ownership of existing
shareholders.
Since we
have no cash as of December 31, 2008, management believes that without an influx
of significant new funds, we will not be able to sustain our operations through
the rest of 2009. Although we have actively been pursuing new investment, we
cannot give assurance that we will enter into any new investment, or that the
terms of any such agreements will be on terms favorable to us. There is no
assurance that anyone will continue to fund us. Should we be unable to obtain
additional funds, we could be forced to cease business activities
altogether
Because
we have limited operations and assets, we are considered a shell company as
defined in Rule 12b-2 of the Securities Exchange Act of 1934. Accordingly, we
have checked the box on the cover page of this report that specifies we are a
shell company.
Off
Balance Sheet Arrangements
There are
no off balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK
As a
“smaller reporting company” as defined by Item 10 of Regulation S-K, the Company
is not required to provide information required by this Item.
|
|
|
Table
of Contents
|
|
|
|
|
|
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
13
|
|
|
|
|
Consolidated
Balance Sheets
|
14
|
|
|
|
|
Consolidated
Statements of Operations
|
15
|
|
|
|
|
Consolidated
Statements of Changes in Stockholders’ Deficit
|
16
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
17
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
18
|
Shareholders
and Board of Directors
Octus,
Inc.
Davis,
California
We have
audited the accompanying consolidated balance sheets of Octus, Inc. as of
December 31, 2008 and 2007, and the related consolidated statements of
operations, changes in stockholders' deficit, and cash flows for the years ended
December 31, 2008 and 2007. These consolidated financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States.) Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as
a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Octus, Inc. as of December
31, 2008 and 2007, and the results of its operations, and its cash flows for the
years ended December 31, 2008 and 2007, in conformity with accounting principles
generally accepted in the United States of America.
The
accompanying consolidated financial statements have been prepared assuming that
Octus will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, Octus has suffered recurring losses from
operations and has working capital and stockholders’ deficits. These
factors raise substantial doubt about the Company’s ability to continue as a
going concern. Management’s plans in regard to these matters are also
discussed in Note 2. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
|
|
|
|
|
|
|
/s/
GBH CPAs, PC
|
|
|
|
|
GBH CPAs,
PC
www.gbhcpas.com
Houston,
Texas
|
|
|
|
|
April 13,
2009
CONSOLIDATED BALANCE
SHEETS
|
|
|
December
31, 2008
|
|
|
December
31, 2007
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
32,151
|
|
|
$
|
17,312
|
|
|
Accounts
payable - related parties
|
|
|
3,169
|
|
|
|
3,169
|
|
|
Accrued
interest - related parties
|
|
|
43,542
|
|
|
|
8,542
|
|
|
Convertible
notes payable - related parties
|
|
|
441,853
|
|
|
|
424,827
|
|
|
Total
current liabilities
|
|
|
520,715
|
|
|
|
453,850
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIT
|
|
|
|
|
|
|
|
|
|
Series
A preferred stock, $0.001 par value, 300,000 shares
|
|
|
|
|
|
|
|
|
|
authorized,
no shares issued or outstanding
|
|
|
-
|
|
|
|
-
|
|
|
Series
B preferred stock, $0.001 par value, 910,000 shares
|
|
|
|
|
|
|
|
|
|
authorized,
no shares issued or outstanding
|
|
|
-
|
|
|
|
-
|
|
|
Series
C 6% cumulative preferred stock, $0.001 par value,
|
|
|
|
|
|
|
|
|
|
250,000
shares authorized, no shares issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
|
Undesignated preferred
stock, $0.001 par value,
|
|
|
|
|
|
|
|
|
|
540,000
shares authorized, no shares issued or
outstanding
|
|
|
-
|
|
|
|
-
|
|
|
Common
stock, $0.001 par value, 100,000,000 shares
|
|
|
|
|
|
|
|
|
|
authorized,
13,437,072 shares issued and outstanding
|
|
|
13,437
|
|
|
|
13,437
|
|
|
Additional
paid-in capital
|
|
|
22,857,472
|
|
|
|
22,857,472
|
|
|
Accumulated
deficit
|
|
|
(23,391,624
|
)
|
|
|
(23,324,759
|
)
|
|
Total
stockholders' deficit
|
|
|
(520,715
|
)
|
|
|
(453,850
|
)
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
-
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
31,866
|
|
|
|
36,069
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(31,866
|
)
|
|
|
(36,069
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(34,999
|
)
|
|
|
(20,612
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(66,865
|
)
|
|
$
|
(56,681
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per common share – basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding – basic and diluted
|
|
|
13,437,072
|
|
|
|
13,437,072
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
|
|
|
Common
stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
of
|
|
|
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2006
|
|
|
13,437,072
|
|
|
$
|
13,437
|
|
|
$
|
22,857,472
|
|
|
$
|
(23,268,078
|
)
|
|
$
|
(397,169
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(56,681
|
)
|
|
|
(56,681
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2007
|
|
|
13,437,072
|
|
|
|
13,437
|
|
|
|
22,857,472
|
|
|
|
(23,324,759
|
)
|
|
|
(453,850
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(66,865
|
)
|
|
|
(66,865
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2008
|
|
|
13,437,072
|
|
|
$
|
13,437
|
|
|
$
|
22,857,472
|
|
|
$
|
(23,391,624
|
)
|
|
$
|
(520,715
|
)
|
The
accompanying notes are an integral part of these consolidated financial
statements.
OCTUS
, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(66,865
|
)
|
|
$
|
(56,681
|
)
|
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
used
in operating activities:
|
|
|
|
|
|
|
|
|
|
Increase
in accounts payable
|
|
|
14,840
|
|
|
|
3,983
|
|
|
Increase
in accrued interest - related parties
|
|
|
34,999
|
|
|
|
20,612
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(17,026
|
)
|
|
|
(32,086
|
)
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Proceeds
from notes payable - related parties
|
|
|
17,026
|
|
|
|
32,086
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
17,026
|
|
|
|
32,086
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AT BEGINNING OF YEAR
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AT END OF YEAR
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Cash
paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCASH
INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Conversion
of liabilities into convertible note payable - related
party
|
|
$
|
|
|
|
$
|
420,203
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
Notes
to Consolidated Financial Statements
Note
1 – Summary of Significant Accounting Policies
Organization
Octus,
Inc. (“Octus”) was formed as a California corporation in 1983. On
December 29, 2001, a majority of the shareholders voted to change our state of
incorporation from California to Nevada. In December 2003, the change
was completed and Octus became a Nevada corporation. Today Octus is
seeking to become a leading renewable energy efficiency company that brings
innovative energy efficiency and renewable energy solutions to the commercial
and public sector markets. Octus intends to pursue and enter into
renewable energy efficiency projects involving the ownership or management of
energy systems, and energy efficiency products that Octus may acquire, license
or distribute.
Principles
of Consolidation
All of
our subsidiaries are inactive. All significant intercompany
transactions and balances, if any, have been eliminated in
consolidation.
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 amount of assets and
liabilities and 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. Actual results could differ from those
estimates.
Cash
and Cash Equivalents
For the
purpose of the statements of cash flows, all highly liquid investments with the
maturity of three months or less are considered to be cash
equivalents.
Revenue
Recognition
We
currently have no revenue generating operations. We plan to record
revenue when persuasive evidence of an arrangement exists, services have been
rendered or product delivery has occurred, the sales price to the customer is
fixed or determinable, and collectability is reasonably assured.
Income
Taxes
Octus accounts
for
income taxes using the asset and liability method of computing deferred income
taxes. The objective of the asset and liability method is to establish deferred
tax assets and liabilities for the temporary differences between the book basis
and the tax basis of our assets and liabilities at enacted tax rates expected to
be in effect when such amounts are realized or settled.
Fair
Value of Financial Instruments
Fair
value estimates discussed herein are based upon certain market assumptions and
pertinent information available to management as of December 31,
2008. The respective carrying value of certain on-balance-sheet
financial instruments approximated their fair values. These financial
instruments include accounts payable, accrued expenses and notes
payable. Fair values were assumed to approximate carrying values
because these financial instruments are short term, their carrying amounts
approximate fair values, or they are payable on demand.
Loss
Per Share
Basic
loss per common share (“EPS”) calculations were determined by dividing net loss
by the weighted average number of shares of common stock outstanding during the
years. Diluted loss per common share calculations were determined by
dividing the net loss by the weighted average number of common shares and
dilutive common share equivalents outstanding. During the years ended
December 31, 2008 and 2007, common stock equivalents were not included in the
calculation, as their effect would be anti-dilutive.
OCTUS
, INC.
Notes
to Consolidated Financial Statements
Stock-Based
Compensation
Octus
provides compensation costs for our stock option plans based on estimated fair
values. Octus estimates the fair value of each stock option at the grant date by
using the Black-Scholes option-pricing model and provides for expense
recognition over the service period, if any, of the stock option.
Segment
Information
Certain
information is disclosed based on the way management organizes financial
information for making operating decisions and assessing
performance. Octus currently operates in one business segment and
will evaluate additional segment disclosure requirements as it expands
operations.
Recent
Pronouncements
In
July 2007, the FASB issued Interpretation No. 48, Accounting for
Uncertainty in Income Taxes (“FIN 48”). This Interpretation prescribes
detailed guidance for the financial statement recognition, measurement and
disclosure of uncertain tax positions recognized in an enterprise’s financial
statements in accordance with FASB Statement No. 109, Accounting for Income
Taxes. Tax positions must meet a more-likely-than-not recognition threshold at
the effective date to be recognized upon the adoption of FIN 48 and in
subsequent periods. Octus adopted FIN 48 effective January 1, 2008. The
adoption of this interpretation did not have a material effect on the financial
statements.
In
September 2006, the FASB issued FAS No. 157, Fair Value Measurement
(“SFAS 157”). This Statement provides guidance for using fair value to measure
assets and liabilities. Under this standard, the definition of fair value
focuses on the price that would be received to sell the asset or paid to
transfer the liability (an exit price), not the price that would be paid to
acquire the asset or received to assume the liability (an entry price). FAS 157
clarifies that fair value is a market-based measurement, not an entity-specific
measurement, and sets out a fair value hierarchy with the highest priority being
quoted prices in active markets and the lowest priority to unobservable data.
Further, FAS 157 requires tabular disclosures of the fair value measurements by
level within the fair value hierarchy. Octus adopted SFAS 157
effective January 1, 2008 except for non-financial assets and
liabilities. The adoption of SFAS 157 did not have a material effect
on the financial statements.
In
February 2007, the FASB issued FAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities (“FAS 159”). Under this standard, an
entity is required to provide additional information that will assist investors
and other users of financial information to more easily understand the effect of
our choice to use fair value on its earnings. Further, the entity is required to
display the fair value of those assets and liabilities for which Octus has
chosen to use fair value on the face of the balance sheet. This standard does
not eliminate the disclosure requirements about fair value measurements included
in FAS 157 and FAS No. 107, Disclosures about Fair Value of Financial
Instruments. Octus adopted SFAS 159 effective January 1, 2008 except for
non-financial assets and liabilities. The adoption of SFAS 159 did
not have a material effect on the financial statements.
There
were various other accounting standards and interpretations issued recently,
none of which are expected to a have a material impact on our consolidated
financial position, operations or cash flows.
Note
2 – Going Concern
The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which contemplates continuation of Octus as a going concern. Octus
has working capital and stockholders’ deficits of $520,715 and an accumulated
deficit of $23,391,624 as of December 31, 2008. In addition, Octus
has generated recurring losses, aggregating $66,865 and $56,681 in 2008 and
2007, respectively, and currently has no revenue generating
operations.
We are
actively seeking technologies and business endeavors in the alternative energy
sector, which may include the licensing or acquisition of alternative energy and
energy efficiency products or technologies. Although we are seeking
such opportunities, it is unlikely that we will be able to consummate any such
transaction which would generate sufficient revenues to sustain our operations.
We anticipate the need for additional debt or equity financing and if Octus
raises additional funds through equity financing transactions, the issuance of
additional shares would dilute the ownership of existing shareholders.
However, Octus has no commitment from any party to provide additional
capital and there is no assurance that such funding will be available when
needed, or if available, that its terms will be favorable or acceptable to
Octus. Octus is reliant on a related party to provide working
capital. There is no assurance that such related party will continue
to provide working capital.
Notes to Consolidated
Financial Statemen
ts
The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
Octus to continue as a going concern.
Note
3 – Related Party Transactions and Convertible Debt
During
2008, a related party advanced additional funds to Octus under an existing loan
arrangement. The purpose of the additional advances was to provide
working capital so that Octus could continue operations. Advances
under this loan arrangement during 2008 totaled $17,026 and the total
accumulated advances were $441,853 as of December 31, 2008 which are in the form
of convertible debt. The holders may convert any part of the
principal of the debt and any accrued interest into Octus common shares at a
conversion price of $0.10 per share. The total interest payable on
convertible debt as of December 31, 2008 was $43,542.
A former
officer and director paid certain expenses on behalf of Octus for periods prior
to 2007. As of December 31, 2008, amounts accrued and unpaid to
this individual totaled $3,169 and are included in accounts payable - related
parties.
Note
4 – Equity
Preferred
Stock
Octus has
authorized a total of 2,000,000 shares of $0.001 par value preferred
stock. Of the Series A Preferred Stock, 300,000 shares are authorized
and of the Series B Preferred Stock, 910,000 shares are
authorized. The Cumulative Series C Preferred Stock had 250,000
shares authorized. The Series classification of the remaining
authorized preferred shares has not yet been determined and such designation is
at the discretion of the board of directors. There were no Preferred
shares outstanding as of December 31, 2008 and 2007.
Compensatory
Stock Option Plans
Octus has
a stock option plan for option grants to directors, officers, employees and
consultants of Octus. Such options are granted at fair value, vest
over three to five years, and expire not more than ten years from date of grant.
As of December 31, 2008 and 2007, Octus has reserved a total of 450,000 shares
of common stock for exercise under the stock option plan.
As of
December 31, 2008 and 2007, there were no options outstanding and there has been
no option transactions during the years ended December 31, 2008 and
2007.
Note
5 – Income Taxes
A
reconciliation of the tax provision for 2008 and 2007 at statutory rates is
comprised of the following components:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Tax
expense (benefit) at statutory rates
|
|
$
|
(23,000
|
)
|
|
$
|
(19,000
|
)
|
|
Book
to tax adjustments:
|
|
|
|
|
|
|
|
|
|
Valuation
allowance
|
|
|
23,000
|
|
|
|
19,000
|
|
|
Tax
provision
|
|
$
|
-
|
|
|
$
|
-
|
|
OCTUS
, INC.
Notes
to Consolidated Financial Statements
Deferred
tax assets and liabilities represent the future impact of temporary differences
between the financial statement and tax bases of assets and
liabilities. Those items consist of the following as of December 31,
2008 and 2007:
|
|
|
2008
|
|
|
2007
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
Net
operating loss carryforwards
|
|
$
|
5,028,000
|
|
|
$
|
5,005,000
|
|
|
Less
valuation allowance
|
|
|
(5,028,000
|
)
|
|
|
(5,005,000
|
)
|
|
Net
deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
deferred tax assets and the valuation allowance increased by approximately
$23,000 during 2008.
At
December 31, 2008, Octus has tax loss carry forwards approximating
$14,152,000 that expire at various dates from 2008 through 2027. At
this time, Octus is unable to determine if it will be able to benefit from its
deferred tax asset. There are limitations on the utilization of net
operating loss carry-forwards, including a requirement that losses be offset
against future taxable income, if any. In addition, there are
limitations imposed by certain transactions which are deemed to be ownership
changes. Accordingly, a valuation allowance has been established for
the entire deferred tax asset.
Note
6 – Subsequent Events
On
February 24, 2009, Octus entered into employment agreements with Christian J.
Soderquist and George M. Ecker pursuant to which Mr. Soderquist will serve
as Chief Executive Officer of Octus and Mr. Ecker will serve as Chief Financial
Officer of Octus. Mr. Soderquist and Mr. Ecker were also appointed directors of
Octus. Concurrently Octus executed restricted stock purchase agreements dated
February 24, 2009, with each of Mr. Soderquist and Mr. Ecker.
Mr. Ecker
and Mr. Soderquist have indicated that they intend for Octus to seek to
establish itself as a leader in the alternative energy creation and conservation
industries, and that Octus intends to seek to license, acquire and commercialize
industry-leading energy-efficiency solutions, in addition to pursuing the
creation and management of energy creation and conservation projects, with a
focus on deploying and capitalizing market-ready solutions that produce both
short-term and sustainable economic and environmental benefits.
Both
employment agreements have a term of three years, through February 23, 2012,
with the term extended automatically for successive one-year terms unless either
party notifies the other in writing at least 90 days prior to the expiration of
the then-effective term of such party’s intention not to renew the
agreement. Pursuant to the employment agreement, Octus has agreed to
pay Mr. Soderquist and Mr. Ecker a base annual salary of $180,000 each, which
will increase annually by the increase in the consumer price index from the
prior year (the “Base Salary”). The officers have agreed for an interim period
to defer some or all of their base salaries based on the outstanding
achievements of one or more of the milestones described below and Octus’s
ability to pay salaries. Each officer will be eligible for an annual bonus of up
to 50% of his base annual salary as then in effect, as determined by Octus’
Compensation Committee or Board of Directors. The agreements provide
that Octus will issue to each person 15,000,000 shares of common stock for
services rendered and contributed to Octus.
Under the
terms of the restricted stock purchase agreements, a portion of the shares is
subject to repurchase by Octus if certain milestones are not achieved before the
first anniversary of the date of the purchase agreements. For each of
the following events that are not achieved before the first anniversary of the
date of the purchase agreements, 25% of the shares are subject to repurchase by
Octus at the original purchase price per share. If all four
milestones are achieved, then all repurchase rights of Octus will
lapse. The milestone events are: completion of sale of
equity securities of Octus with proceeds to Octus of $100,000 or more; execution
by Octus of a license agreement or purchase contract with at least two
third-party persons or entities to acquire or license technologies and/or
products related to Octus’s intended business; receipt of revenues from the sale
by Octus of products licensed or owned by Octus; and execution by Octus of a
renewable energy and/or energy efficiency project contract. In the
event of a change in control of Octus, defined in the agreement to include
events such as a merger or sale of assets transaction which results in more than
a 50% change of ownership of Octus, all restrictions lapse and the shares will
become fully vested.
There
were approximately 43,437,000 shares of common stock outstanding after the
issuance of the shares in accordance with the purchase agreements, and therefore
the 30,000,000 shares issued pursuant to the purchase agreements represent
approximately 69% of the outstanding shares of Octus. A change in control of
Octus occurred by virtue of the issuance of shares to Mr. Ecker and Mr.
Soderquist and their appointment as directors and officers of
Octus.
OCTUS
, INC.
Notes
to Consolidated Financial Statements
Each
employment agreement provides that if the employment of the officer is
terminated by Octus without cause (as defined in the employment agreement) or by
the officer for good reason (as defined in the employment agreement) or upon her
death, the officer (or his estate) is entitled to receive in cash payment an
amount equal to all previously accrued but unpaid compensation (including
accrued but unused vacation leave) as of the date of such termination, and a
lump sum payment equal to the amount of the Base Salary that the officer would
have earned if the officer had remained employed with Octus during the remaining
portion of the then-current term.
Effective
March 31, 2009, a convertible promissory note with a principal balance of
$306,456 held by Grupo Dynastia SA was sold to another related
party. The terms were modified such that the principle and interest
will be paid over 60 months. The convertible promissory note can be converted
into common stock at a rate of $0.10 per share and bears interest at an
annual rate of 8% until converted or paid. Total interest expense
accrued under borrowings from this related party during 2008 was
$34,999.
None.
ITEM
9A(T).
CONTROLS
AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures; Management’s Annual Report on Internal
Control over Financial Reporting
Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of our
disclosure controls and procedures, as such term is defined under
Rule 13a-15(e) and 15d-15(e) promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the
period covered by this Form 10-K. Based on their evaluation, our
principal executive officer and principal accounting officer concluded that our
disclosure controls and procedures were effective, with the exceptions noted
below.
Management’s
report on the Company’s internal control over financial reporting (as such term
is defined in Rules 13a-15(f) and 15d-15(f) in the Exchange Act), is
included in this Annual Report on Form 10-K. This report shall not be
deemed to be filed for purposes of Section 18 of the Exchange Act or otherwise
subject to the liabilities of that section, unless the Company specifically
states that the report is to be considered “filed” under the Exchange Act or
incorporates it by reference into a filing under the Securities Act of the
Exchange Act.
Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting. The Company's internal control over financial
reporting is designed to provide reasonable assurance as to the reliability of
the Company's financial reporting and the preparation of financial statements in
accordance with generally accepted accounting principles.
The
Company's management has assessed the effectiveness of the Company's internal
control over financial reporting as of December 31, 2008. In making this
assessment, the Company used the criteria established by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in "Internal
Control-Integrated Framework."
The
Securities and Exchange Commission defines a material weakness as a deficiency,
or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the
Company’s annual or interim financial statements will not be prevented or
detected on a timely basis.
Management’s
assessment identified the following weaknesses in the Company’s internal control
over financial reporting as of December 31, 2008:
The
Company is in the process of establishing adequate, formal policies and
procedures designed to provide adequate internal control over the financial
reporting process. This includes the review of procedures performed
by management beyond the initial preparer calculations and estimates and also a
formal control design structure for the review of external financial
data. At December 31, 2008 Octus did not have these procedures established
and further did not have a full-time Principal Financial Officer. On
February 24, 2009 the Company hired a full-time Chief Financial Officer to
implement and oversee internal controls over financial reporting. The
Company’s Principal Executive Officer currently also provides oversight of the
procedures necessary to ensure complete, accurate, and timely reporting of the
Company’s consolidated results of operations. The Company has
concluded that these deficiencies constituted a material weakness in disclosure
controls and procedures as of December 31, 2008, which could result in a
material misstatement to its annual or interim consolidated financial
statements.
Based on
the Company's processes and assessment, as described above, management has
concluded that, as of December 31, 2008, the Company's internal control over
financial reporting may not be effective and there is reasonable
possibility that a material misstatement to the Company’s annual or interim
consolidated financial statements could occur and not be prevented or detected
by its internal controls in a timely manner. As indicated above, the
Company has retained a full-time chief financial officer and is developing
policies and procedures designed to provide adequate internal control over the
financial reporting process.
Management's
assessment of the effectiveness of the Company's internal control over financial
reporting as of December 31, 2008 has not been audited by GBH CPAs, PC, the
Company’s independent registered public accounting firm. Additionally, this
annual report does not include an attestation report of the Company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the SEC that permit the
Company to provide only management’s report in this annual report.
Changes
in Internal Controls
Except as
described above, there have been no changes in the Company’s internal controls
over financial reporting during the last fiscal year that have materially
affected, or are reasonably likely to materially affect, the Company’s internal
controls over financial reporting.
PART
III
The
following sets forth certain information about each of our executive officers
and directors and their current positions with the Company.
As of
February 24, 2009, Mr. Christian Soderquist was our President, Chief Executive
Officer and Director and George Ecker was our Chief Financial Officer,
Secretary, Treasurer and Director. The information set forth below was provided
by these individuals:
|
NAME
|
POSITION
HELD
|
DIRECTOR
SERVICE
|
AGE
|
|
Christian
Soderquist
|
President and Chief Executive Officer;
Director
|
2009
|
40
|
|
George
Ecker
|
Chief
Financial Officer; Director
|
2009
|
49
|
Christian Soderquist
, 40, has
more than 17 years of experience founding, managing, capitalizing and selling
companies. From 2004 to 2008 he served as a Director of Sierra Energy
Corporation. From 2004 to 2007 he co-founded and was Managing Director of
Crescendo, a luxury real estate investment firm that was acquired in 2008 by
Abercrombie and Kent. From 2007 to 2008 he was a business consultant
to companies in a variety of industries. He also created and sold a marketing
strategy firm that he grew to 130 clients, and founded and directed several
software companies. Previously, Mr. Soderquist managed two business
incubators, Technology Development Center and Venture Lab, and served on the
board of directors of the Sacramento Entrepreneurship Academy (of which he was
president for three years), the Sacramento Area Regional Technology Alliance,
and UC Davis Connect. He earned a BS from Cal Poly, San Luis Obispo,
and an MBA from the University of California, Davis.
George Ecker
, 49, has over 25
years of entrepreneurial and management experience in international and domestic
ventures. He is presently the President and Director of Nova Mobility
Systems, a company specializing in the design and manufacture of rugged handheld
mobile computers. From 2002 until 2006 Mr. Ecker was the President of
the Channel Financial Group, a financial services company providing corporate
finance consulting as well as strategic services to international private equity
managers. He holds a Bachelor of Science degree in Finance, with
honors, from the University of the State of New York.
There are
no orders, judgments, or decrees of any governmental agency or administrator, or
of any court of competent jurisdiction, revoking or suspending for cause any
license, permit or other authority to engage in the securities business or in
the sale of a particular security or temporarily or permanently restraining any
of our officers or directors from engaging in or continuing any conduct,
practice or employment in connection with the purchase or sale of securities, or
convicting such person of any felony or misdemeanor involving a security, or any
aspect of the securities business or of theft or of any felony. Nor are any of
the officers or directors of any corporation or entity affiliated with us so
enjoined.
BOARD
INDEPENDENCE
Standard
of Independence
At this
time, the Company is not subject to the requirements of a national securities
exchange or an inter-dealer quotation system with respect to the need to have a
majority of its directors be independent. In the absence of such requirements,
the Company has elected to use the definition established by the NASDAQ
independence rule which defines an “independent director” as “a person other
than an officer or employee of the company or its subsidiaries or any other
individual having a relationship, which in the opinion of the company's board of
directors, would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director.” The definition further provides that
the following relationships are considered bars to independence regardless of
the board's determination:
Employment by the
Company
. Employment of the director or a family member by the Company or
any parent or subsidiary of the Company at any time thereof during the past
three years, other than family members in non-executive officer
positions.
$100,000
Compensation
. Acceptance by the director or a family member of any
compensation from the Company or any parent or subsidiary in excess of $100,000
during any twelve month period within three years of the independence
determination.
Auditor Affiliation
.
A director or a family member of the director, being a partner of the Company's
outside auditor or having been a partner or employee of the company's outside
auditor who worked on the Company's audit, during the past three
years.
Payments to or from an
Affiliated Entity
. A director who is, or has a family member who is, a
partner in, or a controlling shareholder or an executive officer of, any
organization to which the Company made, or from which the Company received,
payments for property or services in the current or any of the past three fiscal
years that exceed 5% of the recipient's consolidated gross revenues for that
year, or $200,000, whichever is more, other than (i) payments arising solely
from investments in the Company’s securities or (ii) payments made under
non-discretionary charitable contribution matching programs.
Service on Compensation
Committee of Another Entity
. A director of the Company who is, or has a
family member who is, employed as an executive officer of another entity where
at any time during the past three years any of the executive officers of the
Company serve on the compensation committee of such other entity.
Based on
the foregoing definition, the board of directors has determined that we do not
have any independent directors.
Standing
Committees of the Board
At this
time, the Company is a small business issuer whose common stock is authorized
for quotation on the OTC Bulletin Board and is not subject to the requirements
of a national securities exchange or an inter-dealer quotation system with
respect to the establishment and maintenance of any standing committees. In any
event, the Company, in February 2008, established a separate standing audit
committee, compensation committee and nominating committee.
The only
members of our audit
committee are
Directors
Christian Soderquist
and George Ecker. The firm is in search of
additional qualified candidates. The audit committee performs the following
functions: (1) selection and oversight of our independent accountant; (2)
establishing procedures for the receipt, retention and treatment of complaints
regarding accounting, internal controls and auditing matters; and (3) engaging
outside advisors. The Company is not a "listed company" under SEC rules and
therefore its audit committee is not required to be comprised of only
independent directors. The members of the audit committee are not independent
directors. The audit committee does not include an independent
director who is an "audit committee financial expert" within the meaning of the
rules and regulations of the SEC. The board has determined, however, that the
members of the audit committee are able to read and understand fundamental
financial statements and have substantial business experience that results in
the member's financial sophistication. Accordingly, the board believes that the
members of the audit committee have the sufficient knowledge and experience
necessary to fulfill their duties and obligations required to serve on the audit
committee.
The only
members of our
compensation committee are
Directors
Christian Soderquist and George Ecker. This committee has two
primary responsibilities: (1) to establish, review and approve CEO
compensation and to review and approve other senior executive compensation, and
(2) to
monitor our management resources, structure, succession
planning, development and selection process as well as the performance of key
executives. It also oversees our Equity Plan and any other compensation and
equity-based plans.
All of
our directors serve on our nominating committee.
Compensation
of the Board of Directors
Directors
are not paid any fees or compensation for services as members of our board of
directors or any committee thereof, but are reimbursed for their out-of-pocket
expenses incurred in connection with attendance at meeting of the board of
directors. We may, in the future, compensate non-employee directors who serve on
our board of directors by paying cash compensation and/or the issuance of
options under an equity incentive plan.
Section
16(A) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Act of 1934 requires our directors, executive officers,
and any persons who own more than 10% of a registered class of our equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. SEC regulation requires executive officers,
directors and greater than 10% stockholders to furnish us with copies of all
Section 16(a) forms they file. Based solely on our review of the copies of such
forms received by us, or written representations from certain reporting persons,
we believe that during the year ended December 31, 2008, that none of our
executive officers, directors, or greater than 10% stockholders were subject to
any applicable filing requirements.
Code
of Ethics
A code of
ethics relates to written standards that are reasonably designed to deter
wrongdoing and to promote:
-
Honest
and ethical conduct, including the ethical handling of actual or perceived
conflicts of interest between personal and professional
relationships;
-
Full,
fair, accurate, timely and understandable disclosure in reports and documents
that are filed with, or submitted to, the SEC and in other public
communications made by an issuer;
-
Compliance
with applicable governmental laws, rules and regulations;
-
The
prompt internal reporting of violations of the code to an appropriate person
or persons identified in the code; and
-
Accountability
for adherence to the code.
In March
2004, we adopted a Code of Business Conduct and Ethics (“Code of Ethics”) that
our employees, officers (including executive officers, which include our
principal executive officer and principal financial and accounting officer and
persons performing similar functions) and directors are asked to uphold. This
Code of Ethics covers all of the above-described standards of
conduct.
A copy of
our Code of Ethics may be
requested
from the Company, without charge, by contacting the Company’s chief
financial officer at the Company’s principal executive offices. We
intend to satisfy any disclosure requirement under Item 5.05 of Form 8-K
relating to any future amendments to or waivers from any provision of our Code
of Ethics that relate to one or more of the items set forth in Item 406(b) of
Regulation S-K by describing such amendments and/or waivers on such website,
within four business days following the date of a waiver or a substantive
amendment; and if we do not make such disclosures on our web site then we intend
to make such disclosures on a Form 8-K within the required time periods.
Information on our Internet website is not, and shall not be deemed to be a part
of this annual report on Form 10-K or incorporated into any other filings we
make with the SEC.
Summary
Compensation Table
There was
no compensation required to be report under this Item paid to our executive
officers or directors for the fiscal years ended December 31, 2007 or for the
year ended December 31, 2008.
Employment
Contracts
On
February 24, 2009, Octus entered into employment agreements with Christian
J. Soderquist and George M. Ecker pursuant to which Mr. Soderquist will serve as
Chief Executive Officer of the Company and Mr. Ecker will serve as Chief
Financial Officer of the Company. Mr. Soderquist and Mr.Ecker were also
appointed directors of the Company. Concurrently the Company executed restricted
stock purchase agreements dated February 24, 2009, with each of Mr. Soderquist
and Mr. Ecker.
Both
employment agreements have a term of three years, through February 23, 2012,
with the term extended automatically for successive one-year terms unless either
party notifies the other in writing at least 90 days prior to the expiration of
the then-effective term of such party’s intention not to renew the
agreement. Pursuant to the employment agreement, Octus has agreed to
pay Mr. Soderquist and Mr. Ecker a base annual salary of $180,000 each, which
will increase annually by the increase in the consumer price index from the
prior year (the “Base Salary”). The officers have agreed for an interim period
to defer some or all of their base salaries based on the outstanding
achievements of one or more of the milestones described below and the Company’s
ability to pay salaries. Each officer will be eligible for an annual bonus of up
to 50% of his base annual salary as then in effect, as determined by Octus’
Compensation Committee or Board of Directors. The agreements provide
that the Company will issue to each person 15,000,000 shares of common stock for
services rendered and contributed to the Company.
Under the
terms of the restricted stock purchase agreements, a portion of the shares is
subject to repurchase by the Company if certain milestones are not achieved
before the first anniversary of the date of the purchase
agreements. For each of the following events that are not achieved
before the first anniversary of the date of the purchase agreements, 25% of the
shares are subject to repurchase by the Company at the original purchase price
per share. If all four milestones are achieved, then all repurchase
rights of the Company will lapse. The milestone events
are: completion of sale of equity securities of the Company with
proceeds to the Company of $100,000 or more; execution by the Company of a
license agreement or purchase contract with at least two third-party persons or
entities to acquire or license technologies and/or products related to the
Company’s intended business; receipt of revenues from the sale by the Company of
products licensed or owned by the Company; and execution by the Company of a
renewable energy and/or energy efficiency project contract. In the
event of a change in control of the Company, defined in the agreement to include
events such as a merger or sale of assets transaction which results in more than
a 50% change of ownership of the Company, all restrictions lapse and the shares
will become fully vested.
Each
employment agreement provides that if the employment of the officer is
terminated by Octus without cause (as defined in the employment agreement) or by
the officer for good reason (as defined in the employment agreement) or upon her
death, the officer (or his estate) is entitled to receive in cash payment an
amount equal to all previously accrued but unpaid compensation (including
accrued but unused vacation leave) as of the date of such termination, and a
lump sum payment equal to the amount of the Base Salary that the officer would
have earned if the officer had remained employed with Octus during the remaining
portion of the then-current term.
Stock
Options/SAR Grants
We did
not grant any stock options to our named executive officer during either fiscal
2008 or 2007. We do not have any outstanding stock appreciation
rights.
Long
Term Incentive Plans
As of
December 31, 2008, we had no group life, health, hospitalization, or medical
reimbursement or relocation plans in effect. Further, we had no pension plans or
plans or agreements which provide compensation on the event of termination of
employment or corporate change in control.
Outstanding
Equity Awards at Fiscal Year-End
As of the
year ended December 31, 2008, Mr David Pere, our sole executive officer and
director, held no unexercised options, stock that has not vested, and equity
incentive plan awards. Mr. Pere resigned these offices on February 24, 2009,
subsequent to the period covered by this report.
Director
Compensation
There was
no compensation paid to our director for his service as director during the
fiscal year ended December 31, 2008. Mr. Pere resigned these offices on February
24, 2009, subsequent to the period covered by this report.
The
following table sets forth certain information regarding the beneficial
ownership of our Voting Stock as of April 10, 2009, by (i) each of our named
executive officers and directors; (ii) our named executive officers and
directors as a group; and (iii) shareholders known by us to beneficially own
more than 5% of any class of our voting securities. The beneficial
ownership of securities is defined in accordance with the rules of the
Securities and Exchange Commission and means generally the power to vote or
exercise investment discretion with respect to securities, regardless of any
economic interests therein. Except as otherwise indicated, we believe that the
beneficial owners of the securities listed below have sole investment and voting
power with respect to such shares, subject to community property laws where
applicable. Unless otherwise indicated, the business address for each of the
individuals or entities listed below is c/o Octus, Inc., 719 Second Street, Unit
9, Davis, CA 95616.
|
Title
of
Class
|
Name
of
Beneficial
Owner
|
Amount
and Nature
of
Beneficial Owner
|
Percent
of
Class
|
|
Common
Stock
|
David
S. Pere
|
610,724
Former
Officer and Director*
|
1.40%
|
|
|
|
|
|
|
Common
Stock
|
Christian
Soderquist
|
15,000,000
common shares
Officer
and Director*
|
34.50%
|
|
|
|
|
|
|
Common
Stock
|
George
Ecker
|
15,000,000
common shares
Officer
and Director*
|
34.50%
|
|
|
|
|
|
|
Common
Stock
|
All
officers and directors
as
a group
|
30,610,724
common shares
|
70.40%
|
*Mr. Pere
resigned these positions on February 24, 2009 and was replaced by Mr. Soderquist
and Mr. Ecker on that date; both subsequent to the period covered by
this report.
Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. In accordance with Securities and Exchange Commission
rules, shares of our common stock which may be acquired upon exercise of stock
options or warrants which are currently exercisable or which become exercisable
within 60 days of the date of the table are deemed beneficially owned by the
optionees. Subject to community property laws, where applicable, the persons or
entities named in the table above have sole voting and investment power with
respect to all shares of our common stock indicated as beneficially owned by
them.
Changes
in Control
There are
approximately 43,437,000 shares of common stock outstanding, and therefore the
30,000,000 shares issued pursuant to the purchase agreements entered into by
Octus and Mr. Soderquist and Mr. Ecker collectively represent approximately 69%
of the outstanding shares of the Company. A change in control of the Company
therefore occurred by virtue of the issuance of shares to Mr. Ecker and Mr.
Soderquist and their appointment as directors and officers of the
Company. Our management is not aware of any arrangements which may
result in "changes in control" as that term is defined by the provisions of Item
403(c) of Regulation S-B outside of these two share issuances.
Equity
Compensation Plan Information
We have a
stock option plan for option grants to our directors, officers, employees and
consultants. Such options are granted at fair value, vest over three
to five years, and expire not more than ten years from date of grant. As of
December 31, 2008, we have reserved a total of 450,000 shares of common stock
for exercise under the stock option plan.
As of
December 31, 2008, there were no options outstanding and there has been no
option transactions during the two years ended December 31, 2008.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Conflicts
Related to Other Business Activities
The
persons serving as our officers and directors have existing responsibilities
and, in the future, may have additional responsibilities, to provide management
and services to other entities in addition to us. As a result, conflicts of
interest between us and the other activities of those persons may occur from
time to time.
We will
attempt to resolve any such conflicts of interest in our favor. Our officers and
directors are accountable to us and our shareholders as fiduciaries, which
requires that such officers and directors exercise good faith and integrity in
handling our affairs. A shareholder may be able to institute legal action on our
behalf or on behalf of that shareholder and all other similarly situated
shareholders to recover damages or for other relief in cases of the resolution
of conflicts in any manner prejudicial to us.
Related
Party Transactions
During
2008, a related party advanced additional funds to Octus under an existing loan
arrangement. The purpose of the additional advances was to provide
working capital so that Octus could continue operations. Advances
under this loan arrangement during 2008 totaled $17,026 and the total
accumulated advances were $193,258 as of December 31, 2008. The total
accumulated interest payable as of December 31, 2008 was $43,542
Effective
March 31, 2009, the convertible promissory note with a principal balance of
$306,456 held by Grupo Dynastia SA was sold to a related party. The
terms were agreed to be modified such that the principal and interest will be
paid over 60 months. The convertible promissory note can be converted into
common stock at a rate of $0.10 per share, bears interest at an annual rate
of 8% until converted or paid. Total interest expense
accrued under borrowings from this related party during 2008 was
$34,999.
A former
officer and director paid certain expenses on behalf of Octus for periods prior
to 2007. As of December 31, 2008, amounts accrued and unpaid to
this individual totaled $3,169 and are included in accounts payable - related
parties.
With
regard to any future related party transactions, we plan to fully disclose any
and all related party transactions, including, but not limited to, the
following:
-
disclose
such transactions in prospectuses where required;
-
disclose
in any and all filings with the Securities and Exchange Commission, where
required;
-
obtain
disinterested directors consent; and
-
obtain
shareholder consent where required.
Director
Independence
Members of our Board of Directors are not independent as that term is defined by defined in Rule 4200(a)(15) of the Nasdaq Marketplace Rules.
ITEM 14
PRINCIPAL ACCOUNTING FEES AND
SERVICES
Our
principal outside auditor is GBH CPAs, PC. Set forth below are the fees and
expenses for GBH CPAs, PC for each of the last two years for the
following services provided to us:
|
|
|
2008
|
|
|
2007
|
|
|
Annual
Audit Fees
|
|
$
|
11,000
|
|
|
$
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit-Related
Fees
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
Fees
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Fees
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Fees
|
|
$
|
11,000
|
|
|
$
|
5,000
|
|
Our board
of directors reviews and approves audit and permissible non-audit services
performed by its independent accountants, as well as the fees charged for such
services. In its review of non-audit service fees and its appointment
of GBH CPAs, PC as our independent accountants, the board of directors
considered whether the provision of such services is compatible with maintaining
independence. All of the services provided and fees charged by GBH
CPAs, PC, in 2008, were approved by the board of directors.
Audit
Fees
The
aggregate fees billed by for professional services by GBH CPA's,
PC for the audit of our annual financial statements and the reviews
of the financial statements included in our quarterly reports on Form 10-QSB for
2008 and 2007 were $11,000and $5,000, respectively.
Audit
Related Fees
There
were no other fees billed by GBH CPAs, PC during the last two fiscal years for
assurance and related services that were reasonably related to the performance
of the audit or review of our financial statements and not reported under "Audit
Fees" above.
Tax
Fees
No fees
were billed by GBH CPAs, PC during the last two fiscal years for professional
services rendered for tax compliance.
All
Other Fees
There
were no other fees billed by GBH CPAs, PC during the last two fiscal years for
products and services provided.
PART
IV
ITEM 15
EXHIBITS, FINANCIAL STATEMENT
SCHEDULES
|
EXHIBIT
NUMBER
|
DESCRIPTION
|
NOTES
|
|
3.1
|
Amended
and Restated Articles of Incorporation
|
(2)
|
|
3.2
|
Certificate
of Determination of Preferences of Series C Preferred Stock of Octus,
Inc.
|
(5)
|
|
3.3
|
Amended
Bylaws
|
(3)
|
|
3.4
|
Certificate
of Amendment to Articles of Incorporation
|
(7)
|
|
10.8
|
Amended
and Restated 1992 Key Executive Stock Purchase Plan
|
(1)
|
|
10.16
|
Form
of Indemnification Agreements entered into by and between Octus, Inc. and
its officers and directors
|
(1)
|
|
10.17
|
401(k)
Plan Document
|
(1)
|
|
10.19
|
Directors
1993 Stock Option Plan, Form of Stock Option Agreement, Non-Qualified
Options, 1993 Directors Stock Option Plan
|
(2)
|
|
10.33
|
Convertible
Promissory Notes dated September 30, 2008 with Sasaima Holdings
SA
|
(8)
|
|
10.34
|
Convertible
Promissory Notes dated September 30, 2008 with Grupo Dynastia
SA
|
(8)
|
|
10.35
|
Restricted
share Purchase Agreement – C Soderquist
|
|
|
10.36
|
Restricted
Share Purchase Agreement – G Ecker
|
|
|
10.37
|
Employment
Agreement – C Soderquist
|
|
|
10.38
|
Employment
Agreement – G Ecker
|
|
|
10.39
|
2009
Loan Modification Agreement
|
|
|
14
|
Code
of Ethics
|
(6)
|
|
31.1
|
Section
302 Certification Annual Report on Form 10-KSB
|
(8)
|
|
32.1
|
Certification
Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of
The Sarbanes-Oxley Act Of 2002
|
|
|
(1)
|
Incorporated
by reference from the Company's Form S-1, as amended, bearing the SEC
registration number 33-51862, which was declared effective January 15,
1993.
|
|
(2)
|
Incorporated
by reference from the Company's Post-Effective Amendment No. 1 on Form S-3
to Form S-1, bearing the SEC registration number 33-51862, which was
declared effective January 6, 1995.
|
|
(3)
|
Incorporated
by reference from the Company's Quarterly Report on Form 10-QSB for the
period ended December 31, 1994 filed with the SEC July 6,
1995.
|
|
(4)
|
Incorporated
by reference from the Company's Form 8-K filed with the SEC November 13,
1995.
|
|
(5)
|
Incorporated
by reference from the Company's Form 8-K filed with the SEC on August 12,
1996.
|
|
(6)
|
Incorporated
by reference from the Company's Annual Report on Form 10-KSB for the
period ended December 31, 1993.
|
|
(7)
|
Incorporated
by reference to the Company’s Form 8-K filed with the Securities and
Exchange Commission on June 16, 2005
|
|
(8)
|
Incorporated
by reference to the Company’s Form 8-K filed with the Securities and
Exchange Commission on June 16,
2005
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
|
OCTUS,
INC.
|
|
|
|
|
|
|
|
|
By:
|
/s/ Christian
J. Soderquist
|
|
|
|
|
Christian
J. Soderquist
President
and Chief Executive Officer
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this Annual Report
on Form 10-K has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/
Christian J. Soderquist
|
|
President
Chief Executive Officer, Chairman
|
|
April
15, 2009
|
|
Christian
J. Soderquist
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
George M. Ecker
|
|
Principal
Financial and Accounting Officer,
|
|
April
15, 2009
|
|
George
M. Ecker
|
|
Director
|
|
|
31